[music] >> so, it's a great honor to introducedominic barton as part of our global speakerseries today. dominic is the global managing director ofmckinsey. where is has worked for over 25 years serving clients across a range ofindustries and geographies. prior to this position as global managingdirector dominic was head of the mckinsey asia region and head ofthe korea office. in addition to his client work, dominic
has authored numerous articles and, andpublications. on topics of global relevance to businessleaders and policy makers. in addition to that, dominic is also a trustee of the brookings institute, of therhode's trust. and honorary fellow at brasenose collegeat oxford university. please join me in welcoming dominic to thestage. [sound]. >> thanks. >> thank you.
well thank you very much, and, and thanks so much for for coming out, thisafternoon. as, as was mentioned what i'm hoping to doif it's okay is just talk for 20 or 25 minutes until or untilyou throw things at me. and then i would be most interested in anyquestions. on, in, on anything at all. as it relates to mckensey or anything else, any advice, criticism, whatever youlike. so please i'm looking forward to the, thequestions as we go through it.
what, what i wanted to do over the next 20to 25 minutes was just give a overview of some of the big trendsthat we're seeing in the world. and basically it, it's my belief, and ithink many people who are running organizations around theworld would have this view. that we are living in truly historictimes. and by historic times, i don't mean in thelast 20 or 30 years. i mean over a 200 to 300 year time frame. and sometimes i wonder if maybe that'swhat everyone thinks when they're leading, they happen to be leadingin that time that's unusual.
i, i, have, i really do believe this, andnone of you are gonna be around in 300 years, ithink. so you won't know whether what i'm sayingis right or not. but, what i would say is that the amountof time change that we're seeing now is just i think unprecedented on, on many differentlevels. and this page here, the simple page, i'mgonna spend a bit of time going through what we think someof the forces are. and why i think they're historic.
in sort of scale and, and speed with whichthey're happening. many of which your in the center of herein the world. i think here, but, but also your not inthe center of many of the other ones and i think you need to be connectedto where those changes are, are occurring. and, so after talking a bit about that iwanna talk about what the implications are for beinga leader in these times. because i think the definition of whatleadership is and what's being required over the last 20years will not be as relevant as what's gonna berequired over
the next 20 to 30 years as we go ahead. so that's just a bit of the overview. i'm gonna start with one of the biggestforces it's out there. and again i think in many ways we all knowit, but i just wanna dimension it a bit. and we call it the great rebalancing. and to our friends from shinhwa you know,where, you know, china is very much a part ofthat. this is the emerging market, it's china,indonesia, indonesia and africa. where we are gonna see a billion new
middle class consumers within the next tenyears. and one of the ways i, i try andillustrate it is just through photos. i'll show you some facts, but this is aphoto i actually took in shanghai in 1997, and it's a photoof, of pudong. or as many of my new york colleagues inmckinsey call it poo jersey. as you sort of look across the, the water. and if you look at what that looks likein, in 1997 it was a a field. i mean there was a, there was actuallyonions that were being grown. i don't know if any of the, our colleagueshere from
shinhwa were from shanghai, but that'swhat it looked like in 1997. in 2004, that's what it looked like, sortof again seven years later that's the kind of the,the transformation. and that's happening in 200 cities inchina right now, and it's relentless. it's urbanization, and you know, what? that urbanization is happening no matterwhat happens to the euro zone, whether those countries getcoordinated or not. what happens in washington with the fiscalcliff, it doesn't matter. there's always gonna be 1.2 million peoplea week,
in the world going from rural areas tocities. it's like gravity. it's, it's a gravitational force. and that's something that i think is gonnagenerate a huge amount of opportunity. business opportunities, but also a hugeamount of challenge for us in terms of resources. but that's, so this is the big shift is this rural to urban shift, 1.2 millionpeople a week. we're gonna have a billion new middleclass consumers settle about seven years.
we'll have 3 billion new middle classconsumers by 2030. that is unprecedented in human history. we've never seen anything of that, of thatscale. and, just to put it in, and again, rankorder, if you will. if we think about the industrialrevolution. the industrial revolution had about atenth of the people and took about 100 times as long to be able to havea transformation. so the industrial revolution, which isseen as if you think about it in our human history as a major discontinuity is aspeed
bump, compared to what we are seeing here. so again, it's just to give you a sense of the scale of, of what's actuallyhappening. and this is where those 3 billion new middle class consumers are gonna comefrom. we know about china. we know about india. we should not forget about africa. and just to give you a factoid, in nigeriathis year
there will be more babies born than all ofeurope combined. all right? so, we've, we have images, right, ofnigeria? some corrupt, terrible infrastructure,backward place. it is actually one of the youngestpopulations in the world. a dynamic place. a lot of amazing businesses are being bornright now as we, we go through it. if you talk to the ceo of proctor and gamble or glaxosmithkline beecham andso forth.
they will say their future ceo is nowworking somewhere in africa, right? it used to be that was the case in asia,africa's the place, and, i could go, brazil, as well, is alsoa, a big shift. but, there, this again, is somethingthat's there. all i would say on that is, i'll get to this in a minute, as leaders no matterwhat you do, whether you're gonna invent a, a, a newtechnology, or a new business or, whether you're gonna workwith an existing business. that's the world you're gonna be leadingin.
and so, when you think about your networks, and the business people that youconnect with, it's gonna be vitally important thatyou know people in china and brazil andnigeria. it's very important. one of the things i'm trying to encouragevery much in mckinsey is within your first two yearsin mckinsey. i want every single consultant to have meta chinese executive, a russian executive, a brazilian executive,an
indian executive and an nigerianexecutive. and i could, you could, you could pickdifferent people, but i want them to meet theseexecutives. every executive's different. i'm not gonna say representative. but there are differences in terms of howpeople think, in terms of timeframe, how they thinkabout their community. and so it's vitally important to buildthese global relationships. because that's the world that you're,you're gonna be living in.
we think it's gonna be cities more thancountries that matter. you know, we, we, talking about china, ithink, it's too big of a country to talk about as acountry. it's really cities. and the way we look at it is there areabout 440 cities that are gonna account for 60% ofthe world's gdp growth. many of these cities to be very honestwith you, i've never even heard of, right? with their names, you don't know. and this is our, we have a city databasethat we've
built of these 440 cities and we use itwith clients. so, for example, if you are, if you are inthe, if you are in the diaper business forexample, or in laundry care. the top 20 cities over the next ten yearsof the following, that's where you wanna make sure you're gonna be based,right as you go through it. if you think about again, the young 18 to22 year old consumer group, those are the key citiesthat you're gonna be looking at. again, places like kampala and uganda popup. that isn't sort of a traditional city thatwould show up on someone's strategic map.
but i think its very important tounderstand where these cities are. by the way, in mckinsey, we, we aren'tvery good at taking our own medicine. so we've actually applied this toourselves as well, and its been quite revealing to usabout where we're not and where we should be in, in different parts different parts ofthe world. i'm gonna just skip, skip ahead here justin terms of the second force. so that's the rebalancing is this billionto 3 billion new middle class consumers. we've never seen anything of that scaleever in our history, right?
so that's the first fours. the second one is an aging population. this is just looking at at asia inparticular. but we're gonna have gone from having tenworkers for a retiree in the year 2000 to basically having threeworking adults per, per retiree. if you are a government, in that lookingat those numbers you are gonna be terrified aboutwhat, what that means. cuz it, it's how are you gonna support anaged population like that. and this is a big issue for china.
it's obviously already an issue for japanand korea. but we do have an aging population eventhough there are places like nigeria and indiathat are young. and so how do we deal with a much olderpopulation. it's gonna be a very big shift. not in terms of just the products andservices. but also how we do work. i personally think that one of the new areas of opportunity is in lifetimeeducation.
the idea that you know, we go touniversity you do, you know, undergraduate and thengraduate and you're done. it's just, i think we'll be laughing aboutthat in 15 years in going i can't believe how thoseguys did that. it's gonna, i think we're gonna seeuniversities for people who are at 50. and then who are at 75 because they're,they think about the next wave of what they're gonna do interms of where they move. and so this notion of lifetime educationand retooling is gonna be important. because an older part of the population isgonna have to work.
and we're gonna have to rethink how we doa lot of our social services and so forth as we, aswe go through it. i, i feel a bit nervous talking abouttechnology with this group. i, i actually come here to learn, so i'mnot gonna spend a lot of time on it. but a third force that's out there which i think is one of the most profound istechnology change. what, i, i have a rule in, in my role inmckinsey, i've been doing this rule for about four years and ididn't join mckinsey to do internal work. i didn't wanna, i didn't join mckinsey tomanage mckinsey, if you will.
i like doing external work. so i have a rule which is, i see two ceo'sa day, no matter what, every day. which i've been doing and what i will doin, in, in, many of those instances is ask people what are the, whatare the three top issues on your mind. what keeps you up at night, what excitesyou? always one of the top two is technology. and it's usually, i'm paranoid andexcited. i'm paranoid and excited because it, it is moving at five times faster thanmanagement.
it's how do i keep up. and so if you're mike duke at wal-mart whohas built a very successful business based on, a footprint, a physical footprint, that'sout there. and you see, the dramatic shift in how consumers are buying, online and you knowall that. you have to think about, reinventing yourbusiness. and that's hard when you're a very, verylarge organization. but we see that in every single sector.
there is not a single sector on the planetthat is immune to the technology shift. and i would actually argue that some ofthe most profound changes are going to occurin healthcare. which is a, forgive my language on this, is a completely technology retardedindustry. i've never seen anything as pathetic,except perhaps for education, which i think is also, in that league,just way back. agriculture and food, i'm gonna come tothis in a second, is gonna be a very, very vital industryfor all of us.
the opportunity for technology, improvement, applying technology toagriculture. i think is gonna be a massive, opportunityas, as we go ahead. so technology is, is, is key, everyone'sstruggling to deal with it. we were talking before the session. we have a lot of clients that we are now are keen to actually spend time here,just understanding. it's like, my view of silicon valley islike a different country. it's not coming to the u.s., it's comingto a different country.
and understanding some of the dynamics andwhere things are going. and you're gonna see mining companies,we're gonna see oil and gas companies, ag food companies cominghere to figure that out. one of the, the, the shifts i did, itreally wanted to focus a bit on is the big dataopportunity. that we've created more data as humans inthe last two years than we have in our entireexistence, before two years before. and that's the amount we're generating. the problem is 95% of that data isuseless, 5% of it is phenomenally useful.
and so what are the skills you have tohave to be able to mine that data, to be able to makethings work? and there are some pretty phenomenalthings that are going on on that front. by the way, i think that the leading edgein data is, is not in the silicon valley. i actually think the leading thinking indata right now, is in shenzhen, in china. it's not here. and the reason for that is because thelargest e-commerce market in the world is china,right now. and if you, if you look at what taobao andothers are doing
with the, the data, and what they'removing, there's a lot that's happening. but i think it's gonna be vital for all businesses to learn how to leveragebig data. what are the skills that are required. how can we apply it, so forth. so the technology shift. i'm not even talking about howtelecommunications and mobile, what that's doing to variousbusiness like healthcare. where you're seeing dramatically differenthealthcare services, especially
in emerging markets because of theapplication of technology. you know, we i'll give one example. there's a company in india that has 100doctors in a call center. has 5,000 nurse practitioners that theybasically have eight months education you know in diagnosingthe basic of diseases. that are serving 2 million people at aquality of health that is better than what you get innew york. right? that's a different model.
i don't think that would be approved inthe united states. to have a bunch of call center doctors andeight month nurse practitioners. but in many of these countries we get,we're seeing changes that way. and some other shifts. so there's a lot of innovation on thatside. am i going at an okay pace? guys, seriously if i go, tell me to gofaster you just tell me. i'm gonna skip a head a bit on the, on thedata side. i just say that again opportunity forevery single sector out there is huge.
and i, and again, i said mckinsey, we need to take our own medicine on that we'renot. we're actually shifting some of our hiringif you will. we've hired about 500 data analysts in thelast year just to be able to try and keep up withit. the the fourth force i wanted to talkabout. i've talked about the rebalancing, i'vetalked about the big data issue, the aging population inthe world. the fourth one is really around resourcesand what this chart basically
just tries to show is that over the last100 years commodity prices. so this is oil and gas, basic minerals andso forth have been in a 70 year decline. they've been, they've been dropping. as we've been applying technology havebeen much better at, at finding the places where we can lookfor these resources. over the last ten years they've gone upabout 150%. now there are bubbles in that, sometimesit spikes higher, sometimes it's lower. but the long term trend is up, rising commodity price is and that's, it's, it'svery simple.
it's because of the billion new middleclass consumers and then the 3 billion wanting to buy cell phones andrefrigerators and cars and so forth. that takes the resources. and that's gonna be a very big issue thatwe're all gonna have to be able to deal withover time. one small story i'll say is when xi jinping was the party secretary inshanghai. i was in the shanghai office. i had no idea he was gonna be moving up.
i, we have no clue, we were politicallynaive in mckinsey. we had a request from, from the mayorsoffice to see him. and, and believe it or not, no one waseveryone was to busy. no one wanted to go. so i went with the business analyst. and the question we were asked was. can you give us our top 100 articles onsustainability, it was like 100 articles. i said i can't even think of 20, i mean a100. he said i want 100.
and so we wrote a list. i couldn't get 100, we ended up with like63 or 67,and sent it to him. and about two weeks later we got a note back saying if anyone ever asks you forthis again. this is what i recommend you send. don't send the 63 or 67. send 17 and this is my rank order soobviously he read them all which i hadn't no one of ushad. so you got a sense of here's this guyreading this stuff and then about a,
a month and a half later he went up to, tobeijing and i think it's. that's, i think it's quite interestingthat the leader of china is that interested and focused onsustainability. and i don't think that's a gimic, i, i youknow, i think you are either interested in it or you're not,you're not gonna read that stuff. and i think the reason you have to be interested, because if you want the, the,that, those people. that are moving from the rural areas tothe urban areas to have the same quality as life as to what we allup, up, aspire to.
and not melt the planet or have what'shappened in beijing in the last couple of weekshappen. where it's, you know, the pollution levelsare 75 times higher than what a basic safetylevel is. you, we have to deal with that. so there's sustainability issue andthere's actually then just an absolute amount of food requirement;base of, you know? i'm, i'm from canada originally. and what we've noticed is that there's alot of interest
from countries around the world, in buyingland in canada, agricultural land. right. for, for security reasons. how am i gonna get secured supply for soybeans? how am i gonna get, secured supply forgrains? you see this in the ukraine. you see ethiopia is gonna be one of thelargest bread baskets in the world. its got the most, [unknown] viable arable land, 80 million hectares, water and soforth.
and you see again many countries aroundthe world looking at how to secure resources as we gothrough it. so again, the challenges are significanton that front, the one i just wanna point to is water. we, we did some analysis to look at thewater demand and supply, looking at every single waterbasin on the planet. we did this with the ifc, with standard charter bank, with syngenta, withcoca cola. it was basically just a model to look atwhere the
water is, what we think reasonably wouldbe the demand and supply. and the worrying thing is that if you goto 2030 and we use water the way we're usingit today. we will have a 40% excess demand versussupply of water. and, and the problem with water right, itdoesn't follow political boundaries. water doesn't really care who's thegovernment, it just kinda flows where it wants to. and if you're in places in asia, and ifyou're for example vietnam and the main [unknown]source comes from china.
and china wants to do some damming of theriver. or, if you're in iraq, and turkey decidesthey want to dam some of the rivers there. this, this gets into political tensions. and, that's why i think the himalayas area very strategic spot in the world. that's the source of six of the, or seven,of the largest river systems in the world. i don't think it's so much about tibet andother things. those are issues there. i think it's actually about water. and i think this is gonna be a very vitalresource for all, for all of us.
the final one is just on government. i, i think that the fifth force i'd say is that government, especially westerngovernments are under huge pressure. to be able to deal with all thisdislocation and issues. i would argue that the model of westerndemocracy needs a transformation. i think, we all realize that. i was just in davos, in the last fourdays. and, it was interesting in whatever thetopic that was discussed, the issue always came back togovernance, and, saying,.
how can we possible change how governmentworks, to be able to deal with these long term issues and how, andhow we deal with things. and i think especially for western democracy, nuts, we need democracy,democratic systems. but the model by which is works, doesn'tseem to be fit for some of the challenges that wehave. and the problem is the dislocation issuesare gonna get worse. one of the things i worry most about isincoming equality which is rising basically inevery single country on earth.
except interestingly columbia and brazil,and when you have rising incoming equality you get instability andyou get a crisis. so i this us as capitalists and mckensey,we were sorta the running dog capitalists, if you wantto call it that. if we don't think more broadly about inequality and jobs and 75 million youthunemployed. if we don't think about that, the, thesystem is gonna get changed and it won't get changed in the way we'dlike it to work. and so, the idea of business playing abroader role
in society is an extremely important partof what we do. and i'd argue that all business leadershave to take care of the society in which theyoperate. i won't, won't go off piece on this, butif you actually look at what adam smith wrote in his first book,which was the theory of moral sentiments. he said it's the duty of the entrepreneurto you, you could argue that's a fairly leftwing thing to say. it's very different than what ourcapitalist system is really pushing right now, which is a more narrow,short-term model.
and so that, there's gonna have to be some changes, too, in terms of how that, thatworks. this is again just to show you, some ofthe changes over time, and at mckinsey, what we did was forecasta demand and supply for jobs. looking out to 2020, and what you see isthere's gonna be a big, excess demand versussupply for skilled jobs. and there's gonna be an excess supply ofunskilled workers. and that's, that gap causes tremendous,tension. and, if you're in china, that, that cancause more severe issues.
that's why in the, if you look at the 12five year plan, as you guys well know. what it, the very first objective iscreate 43 million jobs. it's not gdp growth, it's not. it's create 43 million jobs a year becauseif we don't, you get you get challenges. the infrastructure requirements are gonnabe huge volatility with when you have these five forces goingup. the volatility in the world is gonna behigher. the thing that's also we, we shouldrealize. the number of natural disasters that we'vehad, and natural challenges
that the world's faced, has actuallyincreased at a significantly higher rate. there has actually been a change. so the world has gotten more volatilebecause you, i think you have these five forces comingtogether. and then we have the natural world hasbecome more volatile. so dealing with a, with, is you prollyheard that boring phrase vuca. the, you know, volatile, uncertain,complex, ambiguous, that's, that's the new normal for everyone as they lookahead. and this is the last page i'm gonna, i'm,i'll shut up.
up here it's i, i hope i've given you abit of a sense of the world. this is a time of, tremendous change ofthese big five forces, each one of which i think is, significant enough tomake this a time of, historic change. you put all five together, and thevolatility you've got, you've got a lot of shifts to do, goingon. it's my view and i say this, i'm actuallyjealous, of you. i'm very jealous of you, because you guys are going to lead, in this incredibletime. you, i think there's, i think i'm anoptimist.
i think there'll be massive opportunities. just to get in, in the consumer goods area, given that billion new middle classconsumers. there's a need for 76 proctor and gamblesto be created over the next seven years. just to, just to even satisfy. so the, that's a small smidgen of what,the business opportunities are massive. and, and, and all over the world and inevery sector. but the final page, i, i think i wanted totalk about is, leadership requirements are gonna bedifferent to
be able to deal in that world. we've had a model which i think is being focused on ceo sorta riding on a whitehorse. a kinda jack welsh be-all, know-all, kindaset the direction for five years. and i'm, i'm not, i'm not disparaging ofjack welsh, he's been a great leader. but i think that model of the, of whatwe've had in our, in the books, and the many thingsthat have been written about,. the single person with a clear view fiveyears out of where they're going is completely irrelevant towhat's gonna happen as we go ahead.
and the way we're, we're looking at thisand we, we've been spending a lot time talking withleaders who are leading now. in terms of, of what they're doing especially since the financial crisis andso forth, is we actually think you have tolook at leadership in two parts. there's what leaders do, the role and thenthere, i think is more importantly who the leaderis, your character. and i think we focus too much in places like mckensey and in business schools onwhat leaders do.
what, how you spend your time, what you should focus on, what decisions you shouldmake. and we don't spend enough time on who youare, the character. and we would argue that the character is amuscle. it, it actually something that can bebuilt. you're not born with it, you learn theseskills as you go through it. and i just wanna focus on a couple ofthem. on the maybe the what to do it might bedifferent. i maybe i'll just i'll pick on two.
one is the telescope and microscope. and i've heard this from many leaderstoday that say basically in this world, that's very volatile, yetthere's these big secular trends going on. and i, i learned this actually from, theminister of finance, in canada, jim flaherty, duringthe, the, the financial crisis. and he said, i need to, be use to have atelescope in one eye, and a microscope in the otherwithout getting a headache. and it, i don't know if anyone's triedthat. you put a microscope in one eye.
it's not a very pleasant experience. you can't focus. but the point is you need to because youhave to have a short term microscopic view becausethere's so many volatile things happening. you could be out of business. you could, you, because of risks. because of a new competitor or whateverthat you want to say, that you have to manage for the veryshort term. the reputational issues, there is so manyissues going on.
but at the same time you have to thinklong term about where you want to be. and so if i translate that just tomckensey. we are finding out in the work we do weare doing a lot more literally, 30 dayscenario plans for companies. like what are we gonna be able to do tomake sure we're agile as a company. cause you, if you're a big institutionlike a wal-mart, or a procter and gamble, or aglaxosmithkline beecham. you have to, you have to be able to runlike hell as an elephant. you can't sort of trundle.
you have, how do you move very quickly. because you literally can be out ofbusiness in a six month period if you're not careful enough.i canregister the stories you know well. look at best buy, which i think is, isdoing well now, but look at the challenge. and they were the darling of the industryonly two years ago. you look at, you look at the you look at what's happening with nokia, apple,samsung and so forth. and the paranoia that's in there about howquickly. so the short term is important, but we'realso doing
not those 30 day views, we're also doing2020 views. which is, that may be the case, but wheredo we want to be in 2020? what should our footprint look like? what should our talent look like? if you believe that billion new middleclass consumers in three billion, what, how many of those peopleshould be on my board? you know, how many chinese, nigerians,brazilians, do i have on my board as a multinationalcompany? how, what percent of my top 100 comes fromthat area?
what proportion of my investments arebeing done in that area? so you need the short term and the longterm at the same time. the other one i'd say is tri sectorathlete. i think again if i could do my career overin mckinsey, i wished i had more experience working inthe public sector and the social sector. if you want to be a private sector, hardcore, capitalist, business, shareholder valuedriven person, that's all you wanna do. you will not be successful in my viewunless you've had experience with the public sector and the social sectorand if you wanna be a very
successful public sector leader, i thinkyou have to have experience in the private sector and the social sector, andthe same goes for the social sector. if you want to be a great social sectorleader you need that, and that's this tri-sector athlete notionwhich joe and i has has come up with, before. and that's something that we've actually 3mckenzie people have left the firm to set up a tri-sector athlete, forum,that they're running out of washington. and, the notion here is just to get experiences working in these differentplaces
because you have to understand themindset, of the challenges that are going on. i would and, i could go on, on and on and on that, but, i think, thinking ofthose experiences. so in mckinsey, for example, our public sector practice and social sector practiceare absolutely critical in my view for our leadership development, right, for people to havethat experience. and we're very encouraging of peopleleaving to go do
that for a couple of years, and then comeback. if, you know, we'd like them to comesometimes and they stay and go to, we need much more, circulation ifyou will that's that's gong on. so those are just two comments i'd make onthe, on the, on what is it that people do and thecapabilities they have. and the other part i would just say is onpersonal attributes. this is the character and the strong senseof purpose, the calm in the, in the eye of the hurricane justmaybe two stories on that. on sense of purpose, what one thing we'vediscovered, is a
lot of ceos saying, we notice there's moreright vs right decisions. right, at, these are the decisions whereit, it's if you, both decisions are good outcomes the problem isone is negatively effects the other. so how do you, it's easy to make adecision when you go i can make more money by doing thisversus that. what happens if their situations whichthey are about your culture, or your values and i'll give you anexample, howard shultz. you know, he was thinking about what hewas doing at starbucks and he had the view we need to have the nextgeneration of leadership.
it's very important that we go down ageneration, get young people to be able to drive to the place and move it forward, ifeel very strongly about how that moves. and what happens when this current youngceo's not performing very well and he reinsertshim self? that's a right versus right, cause he'sbreaking the cultural norm he wanted to set, but for the business hethinks it's critical. and i'm not, it's probably not a very goodexample, but i'm just trying to, there are example, wherethere are more moral examples. i'll give you another example fonterrawhich is the dairy
is one of the largest dairy producers inthe world. what if your researchers come to you andsay, our, our cows can produce more milk if we abort fetuses on a regular basis,and you could say well they're animals. i mean, so what? we just sort of move that, we, we just,that's a good way, it's a way to get more milk productionthat's a good thing to do. and, actually, there is, actually a littlebit of that's not a decision that you just jumpinto. and if you talk to the ceo of fonterra,
he'll say, i'll get one of those a week,right? they're slightly, they're not justdecisions where you move, they're right versus rightdecisions. more moral decisions that one has to thinkabout, and what you're doing. and so it's very important to think in your organization about what you standfor, and how you base yourself and where you'removing, or you could find yourself moving, offcourse. the, last wanna just say calm in the
eye of the hurricane, because of all thesevolatility. this is the last story i'll end up withthis. when i meet many ceos, and there's one fellow running a very large globalinsurance company. i remember meeting him and i said, i said,i always ask them what do you wish you'dlearned at the beginning of your career that you knownow, after sort of ten years being a ceo, what do you wishyou learned? what this guy said was i wish i'd learnedabout compartmentalization.
and i said what does that mean? and he said well, if i'd met you in my first few days as being ceo, i would havekicked you out of my office within 5 minutes and, isaid does it, why did i offend, is it somethingabout me? and he goes no, cuz in my first few dayson the job i, my general console had come inliterally when i was meeting i was actually someone from goldman sachsand they said we've been sued for six and a half billion dollars, and we'reprobably gonna lose it, the lawsuit.
and he said that, i couldn't concentrateany more after that, like i, oh, i said, it was, my god, how are we gonna deal withthis, and so i became obsessed. he goes, when i'm talking to you rightnow, i have six of those types of things that are likeplates spinning behind my head. they're big issues, but, i'm focused onyou, i'm not, i'm not distracted by those 6things. and, that takes that takes some agility inyour brain, to be able to stay focused and, then handle someweird things that are going on. that's kind of the, the way it is.
i asked, i asked him, how do you learnthat? i said, is that, how could you learn tobe, compartmentalized and resilient, and hesaid i, i don't know. he said, but i'll tell you something wherei have learned about it is at west point. and i said really? the military, and he goes yeah, he goeswhat they do with the plead class, or at least it was onesession that he went to, is they would say, we're gonna giveyou an engineering problem, which is how to build a bridge that's beendestroyed, you've got 30 minutes.
it's more a mathematics problem but at thesame time you do that you're gonna be crawling underbarbed wire with what the cadets think is live machinegun fire, so you don't kind of want to raise yourhead. so while you are solving the math problem,you got to crawl under the barb wire. and i was thinking i'd probably put thatinto a mckenzie training program so we getpeople going. but these notions of, again, of characterthat sort of what's your, your purpose. again, i would urge, we were talking aboutthis before.
read clayton christianson stuff. not about innovation, but about how onemeasures one's life. it's a very worthwhile, his hbr article orthe actual book that he's just written, just on, if you wanna learnmore about that just on purpose. but there's a lot around character,resilience. and, the last thing i'll say, and ipromise i'll shut up, is, one thing we've learned inthe mckinsey. and we look at people in mckinsey, whohave more successful careers that's by the way, outside mckinsey,
not just inside mckinsey, versus theircohorts. what we found is, the more successfulgroup has had more bad luck, than the lesssuccessful group. and, that seems a bit counter-intuitive,right, how could that be the case, the more successfulpeople have more bad luck than less successful and thereason is as you know they've taken more swings atthe bat. they've taken more risks and they failed. they've actually failed more but they getup off their ass and
they keep moving, they don't stop, they,they keep they keep moving. and one of the things i think that's veryimportant on the character side is how can we givepeople many chances to try things, recognizingthat they're gonna fail and then allow them to, to keep, to keepmoving forward. we found that in other industries and, andprofessions as well. so, a time of historic change a time for new type of leadership and, in what you'redoing. cuz as i said again, i'm jealous for youguys because
you're gonna be leading in this, in these historic times, i'll shut up rightthere and why don't we go to questions. [noise] there's one here, i think. >> dominic, thanks for coming today. my name is federico, i'm a second year mbahere, and i'm from italy. so in all these big changes that arehappening and will continue in the future, where do you see a lot ofthe growth coming? will it just be big companies gettingbigger or will it also be entrepreneurship and how does that impact the model of aconsulting firm helping those clients.
so what are the big challenges andopportunities for a firm like mckinsey in the future. >> sure, well i, i think there's gonna bea huge number of new companies growing. if you, if you look at the, the, the, in the 1930s the averagelifetime of a snp 500 company was about 90 years, right,that's how long they would last. today it's about 17 years, right? so if it sounds negative, the death rateof companies is actually quite high. by the way, i worry about that in mckinseytoo, right?
we're not immune, you have to keepchanging. if you don't, if your clock speed isn't atwhere the market is, which is going faster andfaster, you will be gone. there is no way, but, and i think, in thatvain, we're going to see, just because of that, more newcompanies that are being created. but if i looked at those sectors, thatare, are going on, if i, again, if i looked at agfood, i think is going to be one of the single largest, businessopportunities in the world.
there's, it is a very fragmented, unsophisticated value chain, it's likemining was 30 years ago, i think we're going to see ahuge amount of innovation. companies that we don't even know aboutthat are going to be very significant companies over time,that's going to be a very big area. i think in as i said on the wholeinformation services related businesses that we're going to see form,they're gonna be mammoth. it's a new service sector if you will ifyou just think about, even you know, even the businesses that provide information onused car sales,
right, it seems like a pretty boringbenign business. i think that's gonna become one of themost significant businesses that, that's out there because of, of, of justhow people use technology. that's one, in china, for example, whichis a, a huge, a huge opportunity. i think the, also the form of businesswill change. i, i just, i think retail will be, will beonline. it already basically has become that wayin china, much more so than us. in fact, we've got entrepreneurs thatwe're working with in china that are now focused onbuying
land where they think warehouses will bebuild to supply their online, that's sort of theirbusiness model. they're trying to, because of just thescale of where that's going. i think education is gonna be a massive business because of this lifetimea learning. i think the transformation about howeducation is done, especially at the junior levels. we were talking about german gref fromsberbank, if you get a chance to hear him. his view is that the bulk of oureducational money
should be focused on preschool, cuz hethinks that, he, he believes in a lot of the science that isthe, you know, your brain is basically formed bythe time you're six. so that's where we should be putting 80%of our money. and, and he's actually building businesseson, on this side of it. i don't know whether the science isexactly right or not but i'm just saying that that's achange. healthcare, which i said again is abackward business from a consumer side. i, i could, i could list off 50 differentbusinesses.
if i get fired from mckinsey, i just,there's so many opportunities just on the health care sideof what could be done. so i think it's a time of hugeentrepreneurial opportunity. and for mckinsey i think the issue is we need to make sure that were working notwith the existing large players and by the waythey're important because they're changing they're notdying, they're trying to move. bu it's very important that we work withsmall players. so when i was in davos for example i madeit a point this time, i'd
basically met with organizations that hada market capital of less than $200 million dollarsright? and if i look at some of them in africafor example, i met a bank ceo, this was a little larger, theyput a billion dollar market cap. they remind me of indian banks in the mid1990s. so what we're ready to do is work with smaller institutions that are morefaster paced. we also have to be able to work with largeorganizations to help them basically build their attackersright, in terms of how they're operating.
and the way we work with clients i don't,our clients don't just want a project teams of people to just come in and serve them, sometimes they just want data,right? so we're doing a lot of work in healthcareright now. where the hospital group wants ourbenchmark data which is proprietary proprietary thatwe built and then have some people look and help, advise them on how to use thatinformation. so we're now, we probable acquired i guessfour data, proprietary
data companies in the last year as webuild that out. and i, l don't think we're moving fastenough on, on that side. so i, i think there's, i think there's atime of huge opportunity and change in terms ofthe businesses to be build. yeah. go here and then. >> thanks for the interesting talk. how do you see the government structurechanging in organizations? do you still see hierarchy in 2050 or any
thoughts on that and then also the incomegap. so today the ceo is 300 x of the averageworker in the us in terms of do you see that shifting orwill remain the same? >> yeah i, i think we're definitely gonna see flatter organizations, ormultileader organizations. one of the last books that marvin bower'sreally the founder of mckinsey, was called theleadership organization. his view was that a partnership model because in mckinsey, i'm not really theleader.
i'd like to say i was no one, none of thepartners would really believe that. everyone is a partner is out there doingwhat they wanna do. in fact, the reason i joined mckinsey is ididn't want to be told what to do, and if someone did tellme what to do, it's kinda like the hair on the back ofyour neck goes up because i wanna have the freedom to buildwhatever practice i wanna do. and i think in, as i mentioned in theseorganizations where there was this model of the one ceo that has allthe views. with that complexity one person can't,there's no way you can handle that.
so i think we're gonna see much broaderleadership groups where you have more ownership together in,in the organization. and we're seeing that happening inorganizations where you have more leaders that they may have an area of specialization but they have a common ownership of, of what they need todo. so i think we're going to see flatter,broader leadership structures, in terms of, of companies andwhere they are. and related to that, too, i do think theincome gap is gonna shift.
i think that if there are some, vitalparts of organizations that may be six levels down,in the organization. and again, i don't want to speak forapple, but if you're the person who, is buildingthe curves, on the tablets, and so forth,that's a pretty critical, they're doing thetechnology on that side, that. that may be creating a huge amount of the value that's actually occurring in theorganization. i think people are gonna recognizespecialty and
capability more, so that you're gonna seemore variation. in, in many views it's kinda like, well i think investment banking is goingthrough a major transformation, it, it's, it, thebanking industry as whole, as a whole is going through it. one of the things that was alwaysinteresting in, investment banking, and you could argue that,compensation has been out-of-whack and so forth, that the top person in theinvestment bank very rarely was the most highly paidperson, right.
i mean you had, you just had widevariation. so i think you'll see a broader view aboutthat. my own personal view and this is more a political view is i, i actually thinkwe're gonna see i, i think the excess's are gonna have to come be, be, be taken back either byredu. i think it's very difficult to say youcan't have more than 300 times, i don't believe in forcing it but i, i'mactually a believer in tax. i, i actually think we should pay moretax, may seem like a non, but i,
i think you, someone has to pay for that dislocation of job, government can'tdo it. and, and so someone's gonna have to payfor it, and so i think either way that the net if you will, is gonna, is gonna come closer together for it to be more vibrantsystem. you know, that's a, that's a personalview. yeah. >> how do you see the the, kind of the,overcoming the scarcity mentality around the resource issues thatyou
pointed out with water and other things? how do you see that evolving? i mean, hopefully it doesn't come towarfare but, how can we get ahead of that? you know as nations or communities towhere, you know, both land, arable land being brought up and water resources,how do you see that playing out, is there a good scenario that this couldturn out to be a happy ending rather than some of thenegative paths that it could go down? >> yeah i'm, i'm hope, i'm hopeful andhoping that we're gonna actually add another dimension toour metrics which is natural capital.
we, we don't actually measure that if you,if you will. i mean, it's an externality. so this is a, and, and what i mean by that is our, you know, the carbon that we'reputting into the air or how efficiently we're using water,how much water we have, i think there's a notion of naturalcapital, that isn't there. and what i think is very interesting indavos, i was in a working session with some peoplefrom standard and poor and the united nations, a guynamed hawken
steiner, who's doing a lot of work on, onnatural capital. and how can we put that into bond ratings,right? so we, we look at a country let's say,like canada where i'm from and we would actually lookat the supply and demand of water or resources that are,that are critical and that actually gets factored into thebond rating, if you will. i'm, i'm, i'm not giving the detailsenough and it's not worked out but there's a sense of pricingthat into things. right, on the natural capital side and ithink.
i think we're gonna have to go that way. the other one, the other piece of workthat i'm very excited about is work done by ellenmacarthur, you know the woman who sailed around the world in thevendee globe, she's got this foundation and they're calling itthe circular economy, right. which is basically requiring businesses,especially manufacturers. to think more deliberately about what proportion of that material will berecycled. so if you, if you're making a cell phone,you
actually have a standard that says thatthose parts are made such that when you finish using thecell phone, you return it to the people you bought itfrom. and it's those parts are, 85% of thoseparts are used again even if it's in some newtechnology. and today i'm, i'm giving you a verygutball view because it depends by metal and bynatural resource. we're, we're, we're recycling about 5% ofwhat we do, so there's a huge upside and i think, that's again where someregulation may
come in, so there's pricing and there'sregulation. and i think we'll have to get there, because if we don't, the con, consequencesaren't good. my, again from a very personal point ofview, i think a lot world war ii, and you look at what washappening with japan. and they, they were going through theirown version of urbanization and a growth in the middle class that hadto be fed. they had resource problems in asia, andthere were tensions around where to find that rubber and oiland so forth.
and i'm not saying that's the reason whywe had that, that conflict but it certainlyplayed the part. and i think if, if you are leading acountry and you've got 500,000 people coming intoshanghai every year and those people need to be fed, and you don't have enoughfood to be able to feed them, you want to findsecurity of supply. and so i think it's a, i don't think we'll get to that outcome but that if we don'tthat's the unintended consequence, i think we'll geta lot of tension
because there just wont be enoughresources to, to do it. oh sorry, why don't we go up there andthen to you, is that, yeah. >> name is colin supco, thank you verymuch for being here. so i wanted to talk to you and ask a question about the personal attribute sideof your circle here. as a world class consulting company, whatare you doing to address the personal attribute situation other thantalking to executives about, hey, this is, this is the type of new leadersyou need to bringing up in order to survive in thisboot cat environment?
and have you seen any models that havebeen successful in in making that happen? >> great question and i, i think, whatwhat, what we are definitely, we're and i wouldn'tsay we're there yet. but we've just done a complete review ofour people development side of things. i just say one thing we, in mckinsey ithink, mckinsey alum, there are 192 ceos of billion dollar pluscompanies that come from mckinsey. and i, and, i, that's a very important metric for me, that if we actuallygenerate ceo's. i'd like people to stay in mckinsey, butthe fact
of the matter is that 90% of the peopleleave. probably the good people, actually, theygo. i'm not that good, so i stay, but, andthey go on and they build. so i'm very keen, what, what is it thatwe're going to do to ensure we're producing more ceos and otherleaders if you will as we go through it. what we've done is we revamped our people process we done a number of differentthings. when i mentioned this tri-sector athletepiece, what we're doing is we've, that's why
it's vital for us in having a social sector practice and a public sectorpractice. there, there's important work to be donethere but frankly the reason, the big reason why wehave that is cuz we want people to haveexperience and working with those institutions, withleaders in their place. it's part of i could think of many othersectors we could focus even more on but it's very important in my viewthat those are, each of those sectors is at least ten to 15%, eachof them themselves of what
we do to ensure that everyone has a chanceto, to work in it. the second thing we've done is we'veopened up our model on [unknown] it used to be the case we weren't allowedto do so on [unknown]. when i was in asia cause i was far awayfrom everyone i had the view i asked for forgiveness not permission, so i did them withoutpermission. i got in trouble a few times, but sohaving people go and work at an ngo, right, for a year andthen come back. i have people go and work in thegovernment at many different levels.
sometimes it's in a delivery unit orworking with a prime minister or, or actually even goinginto a cabinet. so we wanna ensure people, have thoseopportunities for the [unknown] and we talk about them. in terms of of what we're doing and wherewe are. and the third thing is what we're calling take time, which is more the personalside. and that's something i'd wished i had wheni joined, which is that, besides your vacation period, welet, anyone up to a
partner level, can spend four weeks oreight weeks beyond that and do whatever they want outside of mckinsey,except start a new business. we're not that keen on, i mean, we like people doing, but not, probably, we're notan incubator, so. we, but, what we do is and some people the way just wanna spend time with theirfamily. or they wanna do music, or they wannaclimb the mount everest. i mean, there's people who've done, butothers are actually, i couldn't believe we've gota, we've
got a group of nine associates that havegot together from around the world that areactually helping. they're basically running a telecomcompany in afghanistan. and they're doing it on four week andeight week efforts as they go through. it's their own thing. they decided they wanted to do it. the only thing i worry about is riskmanagement that, that we, you know, they don't get, they don't get kidnappedor whatever and how we deal with that. but they've just decided they wanna dothat and so giving
people more freedom, if you will, in termsof what they do. cuz, the thing i worry about, in, inmckinsey and other places, we work hard, i'm not, idon't wanna, people work very hard, and there's adanger that all you do is work, and then you become aboring idiot. if all you do is work, and you don't havehobbies, or you don't have, you, you're not gonna be avery effective leader. and so that's another, i'm just saying an element that, that, that that we've putin.
the other thing that we're doing is wehave an effort going on with four of our clients, where we'reexploring what we think new leadership is. and we're taking, we took a combined groupof people to normandy. this may seem like a strange thing to doand say. what, what would you have done if you weregoing onto normandy beach. and you don't have, there isn't actually abattle plan for some. and how do you, how did those guys thinkabout what they're actually gonna do. we took the group to the fukushima, youknow if you think about the earthquake that'sgone on there.
or to ochaya and said you guys are now leading the response to actuallywhat's happened. what would you actually do? and then we've created scenarios wherethere's disasters that we, you know, that we, we, we made up. what if someone, what if there's aterrorist attack on the visa data center? and if you think about what the creditcard information, and what that, that would create a disaster from aneconomic point of view. well, so, what is it, you guys have twodays to be able to figure it out.
and then we have them actually make a presentation, to, you know, the head ofthat organization, to the national security council, just tosome different people, so we're trying, we're learning ifyou will. and what are some of the skills that wouldmake you better at that and, and how you do it? and so this is, i'd say that's theexploration side, and then the commitment is we got to then rewirewhat it is we do. what are we training people to do?
how many different experiences do we givepeople? i'm in the mode now with, we have to, i,i'm in the mode of we should be dropping people in more pools,even if we don't think they can swim, right. so i'll give one, one specific example. i met with president of azure, bajan. who's a very interesting guy, wants to turn this country into all sorts ofthings. our normal process of opening up an office
there, we'd take a senior person frommckinsey. we'd have them be flying in and talking topeople and so forth. what we're gonna do is take a three year mackenzie person who's there and said, youknow what? you're moving to baku. sorry, that's, you're, gonna be your homefor the next couple of years. and your job is to build a practice, builda network. you can bring the people in you wanna do. you do it.
you're going for two years. go for it. right and get, we're, we're doing thisactually in, in ghana. i mean there's, and, again, i'm not tryingto show, well, for the emerging countries we don'tcare so we'll. it's more about, these are the greatestgrowth opportunities to be able to do it. and so i think we gotta, if you will, if icould call it, fling people into the pool more with, andthen discover if they can swim. we, we'll obviously try to help them ifthey can't, but i, that's the.
>> [laugh]>> yeah. probably, one more question. i think it was, yeah, here. >> so we talked about china quite a bit and, and, you know, also resourceconflict. you know, when you look at the currentconflict with, with japan in the east china sea, you know, maybe not purely rationally explained byresource conflict. how do you, like, how do you see thatthrough
the lens of all the time that you've spentthere? why should i look here and i should deferto my colleagues but i'll tell, i, i am, that's a conflict that i actually really worry about on thegeopolitical side. i mean there's lots of thing, you couldworry about iran, we could, we could worry about you know,north africa and what's going on. i actually do worry about the, that, thatconflict, and i think it is, to your point, it's morethan just the natural resources that are aroundthose islands and i,
i think what we can't forget is some ofthe history. and this is probably going to be very politically correct, and i've got mycolleagues here, can throw something at me, or say it'swrong, and i'll just give you one story. i've, i've had a, which is, i think theemotional side that's there. and i think that the, the need to be ableto kinda build more bridges at all sorts of different levels especially between china and japan is veryimportant. because of the history that's going on.
and the story, i'll just tell you thisquickly and then i, it's probably not a very goodstory. we had a summer associate conference in singapore. and we had, there were two chinese summer students, students from there, fromharvard, actually. there were two from taiwan and two fromjapan. we were having dinner together, and ilooked at the chinese friends and i said, what would you do if taiwan seceded, saidwe're not gonna be part of china?
what was probably politically incorrect,but what the hell, well so, what, what if, what would you do iftaiwan seceded? and there's one, chinese woman who wasworking with us, said, we go to war. i mean they're part of the motherland, isaid come on you, you would go to, she goes,absolutely, that's, they're part of the, they are partof china and, that, she goes, i like thesetwo guys. they're my friends. they're from taiwan.
i like them, but that's the situation. i went oh okay, that, that's interesting. and i said what about japan? and this one particular woman said i, ihate the japanese. and i went holy god, i said now hate is probably too harsh of a, that's anenglish word. you don't, that's not really a word. she goes, now i know exactly what thatword means. now, i like those two guys, they're great.
but i don't like what's being done beforeand where it is. and that, that to me, this is not a verygood example. it's too anecdotal, but i'm just saying,there, i think there's a lot of emotion and, and i think it'sgoing to be very important that there be multipleconnection points between, you know its high, the high school level, thebusiness level, the social level. so people can really get to know eachother. and we don't get the nationalism on allsides. and again ch, maybe you guys could give mea thumbs down or whether.
>> [laugh]>> you think i'm right on how you feel. but i think there's, i don't think we should underestimate the emotionalissues that are there and that they have to be dealt withas we, as we go through it. and i, it's interesting because i lived inkorea for six years. i would say that there's less tensionsbetween korea and japan, i think there's actually quite a good relationship over time and how that'sworked. i don't think it's as developed betweenchina and japan.
so i think we have to be careful aboutthese conflicts. and the, what i would, what's interesting,right. and i don't mean to sound, this soundslike, i don't want to end on a down note but if you, we're coming up tothe anniversary of world war one. and i don't know how many historians arehere. but if you think about how that warstarted, the, there were accidents, a series of accidents insome ways that occurred. and what i worry about in geopoliticalside is what if a us naval boat runs over, runs,
you know, runs over six north koreanfishing boats somewhere near those islands when, youknow what i mean? you just can, and that's why i thinkcommunications is gonna be key. and that's why i think it's wonderful whenwe have at the university level and high schoollevel, much more interaction. so there's a deep social linkage. so people can say, i understand that isn'thow those people are. and you know, probably, i didn't wanna end on a emotional thing like that, on theconflict.
but i do think we have to realize thatwith a world that's more volatile, and there willbe scarcities and so forth. and also in equality, there are very very rich people and there are very very poorpeople. and the very, very poor people with technology now know how the very, veryrich people live, and some of them aren'texactly happy to see how that, that works. and so i think as business leaders we need to play a broader role in working withthat.
that's not up to the government to fix. i think we should, we should play a rolein it. anyhow, i'll stop at that point. >> [sound]. >> [noise] thanks, thank you. [sound]
