Transcription
[MODERATOR] Thanks everyone for coming to this afternoon breakout session. So the official title of this is Managing Political Turbulence as a Business Leader. But generally, we're going to be exploring topics like the influence of geopolitical risk and uncertainty on business, and I guess that's still relevant today. We'll see. But I think this topic covers a penumbra of issues, like geopolitical shifts, but also shareholder activism, social media amplification, and declining trust in institutions and liberal democracies more generally. So I want to introduce this august panel. We have a great group of people. They're really experts in this topic, both in terms of the theory and practice.
So our first speaker is Nick Bloom, who's the William Eberle Professor of Economics at Stanford, a senior fellow at SIEPR, and the co-director of the Productivity, Innovation, and Entrepreneurship program at the National Bureau of Economic Research. His research focuses on management practices and uncertainty, and he previously has worked at both the UK Treasury and McKinsey.
Our next speaker is John Donahoe. His current role is the chair of the Stanford Athletics Department, where he serves as the director of the Department of Athletics, Physical Education, and Recreation. Prior to helping us rebuild the Stanford football team, he's the former president and CEO of Nike. He served on the board of directors of Nike in 2014 and then took the role of CEO in 2020. And prior to joining Nike, he had a huge executive experience being the CEO of ServiceNow, eBay, and Bain and Company.
And then our final speaker is Chris George. He's a technology and business leader with experience operating at the intersection of advanced computing, AI, and critical infrastructure. He currently serves as a senior advisor to the US government, but most recently was the president of Intel Government Technologies, where he worked at the nexus of technology, innovation, public institutions, and rapidly shifting policy environments.
So really happy to have this group of three people with us. My goal here is just to ask some questions and maybe stimulate a great conversation among the three of you. So I wanted to just kick it off with Nick, and maybe you could kind of frame our discussion by telling us what we know from the academic literature on how uncertainty affects business. And maybe you could, like, kind of help us define what uncertainty means. There's an everyday definition of that term and scientific definitions, and maybe also some things that are counterintuitive that we wouldn't just naturally expect that the research has taught us.
[NICK BLOOM] Great. I just noticed John is in Nike shoes. I shouldn't expect anything less.
[MODERATOR] Stanford colors.
[NICK BLOOM] In Stanford colors, yeah, no less. So, how to measure it? As an economist, I'm gonna give you two answers, like one hand or the other. So there's kind of two main ways to measure. One is look at financial markets and the classic measure is, are markets bouncing up and down? When you think uncertainty is high, they're jumping up and down. You think of what's going on in Iran, trade attacks, various things with immigration. As it happens, currently markets are not particularly volatile. So in fact, today I was looking at something called the VIX. So it's the forward-looking volatility in the S&P 500. The average over the last 40 years is 20, the value today is 19. So it gives you a sense. Stock markets are claiming uncertainty right now, surprisingly, it's kind of average.
Another way to look at it, which I've been working on for quite a while now, is using text. So scraping newspapers, going to the IMF, looking at the Beige Book for the Fed, et cetera. If you scrape text, measures right now are incredibly high. So if you open up The Wall Street Journal, The New York Times, or The Economist, there are a ton of articles talking about uncertainty over immigration, trade, Iran, the political system, the Department of Justice, et cetera. So, you know, how high is it? Weirdly depends on who you ask. These two move really closely together, this tax measure and the market measure. In fact, we have a measure of uncertainty in the newspapers we've created called the Economic Policy Uncertainty Index, and it's used by Bloomberg and Reuters and used by a lot of the banks to price things. So these are great measures. And then since 2025, under Trump, the two have totally diverged. So Wall Street seems to think everything is fine, everything is good, there's no promises. As you know, the S&P 500, I think is almost at an all-time record and the newspapers and anything you read seems to be terrified and claiming uncertainty is incredibly high. My sense is it's somewhere in between.
In terms of what it does, I mean, it's obviously damaging. As you know, in the labor markets now, what's called the Great Hesitation. So I think labor markets always have the Great Something, and you just rotate the word after great. So hesitation is the current word. If you have any... you know, I was talking about—I teach a bunch of undergrads. It's very hard to get jobs now because the hiring rate is very low. I think the bigger— Impact of uncertainty will be on the long run. So I was just saying, I just came back from Princeton. I was giving a talk on Monday, and I've been looking at this now for a decade, which is what is the impact of Brexit? So Brexit, the impact of Brexit looks a lot like what's going on in the US currently now. So there's three similarities. One is kind of anti-immigration, the second is anti-trade, and the third is there is enormous uncertainty from Brexit. So if you remember, there was prime ministers coming and going, and coming and going. It was that lettuce that lasted longer than one of the prime ministers. And so that was, you know, nobody knew what was going on. Looking back now 10 years, we can now put real hard numbers on it. It looks like Brexit has cut UK GDP by 6% to 8%, which is an enormous number. 6% to 8% for the average Brit is something like $3,000 to $4,000 a year. It's about as much as we or they, I guess I'm a dual national now, spend on the NHS. So I think everything that's going on right now, the policy uncertainty and indecision, in the short run is probably not going to be that damaging. But if we keep it up five, 10 years from now, we could have a Brexit Situation.
[MODERATOR] So I want to bring Chris in to respond to that just in terms of this idea of long-term planning, yeah, as a business leader. So one thing we've experienced in the US over the last 10 years is policy whiplash, where administrations will come in and out, and they keep changing the policy regime, sometimes through legislation, but sometimes through executive orders. So then businesses can't really rely on what the government might be subsidizing or taxing. So if you look at the Inflation Reduction Act, There was all these promises to subsidize renewable energy. Now the Trump administration is trying to, you know, ratchet that back. So if you're trying to be an entrepreneur in clean tech or a venture capitalist in clean tech, it's like, what do you do? So, I guess, how do you think about how a business leader needs to respond to the current climate where you can't count on the government having consistent policies?
[CHRIS GEORGE] Yeah, so, maybe a little more background on some of the stuff I'd worked on at Intel. So my background is on the semiconductor side, so things like CHIPS Act that was passed. Had spent a lot of time on that and trying to make sure that it was constructed in a way that would actually help. Advance the technology objectives for the country. And now I work more on the defense and national security world for the government, helping advise them on how to work with industry in order to build the types of capabilities that they want to have.
So to answer the question, It's hard to navigate the policy whiplash, but one of the tried and true methods is to find the structural trends that will persist across administrations. So as an example, we will need more semiconductors. That will just happen. We're seeing a big crunch right now. During COVID, we saw a huge crunch, in part because of some planning, the planning whiplash actually there that happened where, there were expectations from folks like automakers saying, "I don't need as many chips." TSMC scaled back some of the production. Then they said, "Actually, I need everything that I said I was going to need before, and more." They said, "Well, we don't have those chips." He had a bunch of F-150s sitting around without $2 microcontrollers, not being able to be sold as an example. So those sorts of general trends of I need more chips, I need more compute, AI will be something that impacts a lot of functions across multiple industries. Those are the things to kind of latch onto. The things not to latch onto is to say, I'm going to pin my entire business's hopes on that single grant from that single, you know, vehicle. So if you were betting your entire company on receiving a CHIPS R&D grant and you're a startup, it's like, hey, life got real hard when the new administration came in and they totally revamped the CHIPS office. And on top of that, they revamped how they're handing out some of those R&D grants. So figuring out how do you align with these bigger secular trends, and something I think I'll talk about more a little later as well is How do you align with not just what's beneficial for your company, but how do you align with what's going to be beneficial for the country later on? Like, those are the things that people will get behind and aren't as subject to some of those things. I mean, there is still whiplash in terms of the policy. The government goes slower than you want it to. But if you can match up with those sort of long-term. Directions, then it typically goes better.
[MODERATOR] So John, I'm not sure if you have any thoughts on this, especially, you know, Nike is very dependent on things like tariffs, supply chains, et cetera. So I don't know if you have any thoughts on kind of, you know, if you're the leading organization, how you deal with these external political factors, especially in an era where some neoliberal consensus is maybe dying.
[JOHN DONAHOE] You know, I graduated from the GSB 40 years ago this spring. In fact, a classmate's here somewhere, I think. We were both 11 when we graduated. But I took a class on strategy through uncertainty, and one of the things you learn is how to think in a somewhat dynamic way. And I agree with what both Chris and Nick said, which is identifying what are the things as you think forward that you think are structural and are gonna see their way through whatever administration, fad, exogenous shift like COVID is gonna happen. And then what are the things that are more temporal? And you never know if you have it right. But trying to separate those things, paying more attention to the structural things, understanding the temporal things that you've got to deal with, but, as you said, don't bet your future on them. Be ready for them. I learned that here, and I actually think I use that throughout my career because there's a lot of uncertainty now, but frankly, 15 years ago on the internet and felt like a lot of uncertainty and Five years ago with COVID, it felt like a lot of uncertainty. And so I think uncertainty is here to stay. It's driven by different things. This one happens to be driven by a president that's a little bit all over the map and geopolitics that's highly uncertain. But I think that skill of separating those two things is at least one way to try to be able to have a dialogue with your teammates and others on it.
[MODERATOR] So just to kind of stay with you, so one source of political turbulence and uncertainty are leadership decisions, that elected officials or bureaucrats can make. But one thing we've noticed over the last 10 years is that the social environment can also create turbulence, that regular people, for good reasons and bad reasons, have a lot more power of affecting the reputation of companies, through things like social media, et cetera. So I was wondering, if you don't mind, maybe if, John, you could take us through the mindset of a case study I actually teach in my class, I'm interested to hear your thoughts on it, which was when Nike decided to kind of back Colin Kaepernick. In 2018. So people who don't know, this was an NFL star who spoke out against police brutality and was essentially blackballed from the league. And I talk to people in the NFL about this, and they said, "If we hire this guy, our season ticket numbers will decrease by 30%." Like, they had data on that. And Nike, a major figure in athletics, took a very interesting social stand, having this very controversial person as an endorser. So I'd always thought that the... Athletic endorsers, many of whom are African American, were a key stakeholder group in this that Nike relies on. But I'm interested to hear your thoughts on, what were the discussions within Nike, why most companies would've just stayed silent and just avoided it. So how do you think about this?
[JOHN DONAHOE] Yeah. Well, Neil, I was on the board when the Kaepernick thing happened, not in the CEO seat. So I got to see the outputs of it, but I was CEO when George Floyd happened. And so it was, let's say, an analogous situation. And, you know, as you said, there's just enormous pressure. In fact, my entire time there, there was enormous pressure to speak up on immigration, speak up on Israel-Palestinian, speak up on racial relations. And I think the thing that when, at least I had to learn to do, and I think most CEOs or leaders of organizations have to do, I'm sure John Levin's got to think about this, which is Separate your personal views, where you may say something, from, and tell your employees they need to separate their personal views from where is appropriate for an organization to speak up or speak out on a topic. And there, I think you have to think about what are the very few things that are core to your purpose. And so let me use a couple examples. When I was in technology at eBay and ServiceNow, immigration was very core to our purpose. So immigration policy mattered, and we would have been more willing to speak up on that. When I got to Nike, immigration wasn't a top 10 issues. I cared about it personally, but I wasn't going to speak out on behalf of Nike on immigration. Gun control is a topic that I feel strongly personally about. I think it's at the root cause of a significant number of problems in our society. And yet at Nike, gun control wasn't something you could speak up on. But Doug McMillon at Walmart is the largest gun distributor, or Ed Stack at Dick's Sporting Goods did, because it was core to their business models. Racial relations is not exactly the first thing you want to be speaking out on, because it's not a topic where you're going to get a lot of positive feedback over time. But I know when we faced George Floyd, I had to reflect on the fact that, as you said, Neil, Nike's brand In many ways was built in partnership with some of the greatest Black and brown athletes in history. And Nike's core consumer base skewed quite heavily to urban Black and brown consumers. And so our athletes, we held our athletes out to be our heroes, and they cared a lot about this topic. And so it wasn't that hard a decision to say Because it is core to who we are and what we stand for, we're going to speak up on it. So in the George Floyd example, we ran a campaign that week that said, "Just don't do it." And then I spoke out on Black Lives Matter. And I was the enemy in Fox News for months and years afterwards for being a woke CEO in a woke company, but it was core to who we were. And therefore our employees, I think, felt that the culture and values of a company get reinforced when you speak up. I think the harder times is telling those employees we're not gonna speak up on another topic, Israel-Palestine, or we're not gonna speak up on immigration, although you're welcome to have your own personal point of view. So separating those things and figuring out what's core, I think, is challenging, but I think it's a really important thing that all leaders face now.
[MODERATOR] So just a quick follow-up. You know, now we have very tight labor market, especially with white collar employees, so maybe employees don't feel like they can say, "Oh, we're gonna quit if you don't take this social stand." But, you know, in a low interest rate environment like 2021, 2022, many young employees Were demanding their CEOs and management take these positions. So like if you had to go back to 2021, 2022, like what is the message you tell a young group of employees who maybe have organized and said, "You better take a stand on X issue," whether it's Israel or Ukraine or whatever that's not core to your business?
[JOHN DONAHOE] You know, I think it gets back to the same thing. The burden shifts a little bit on the leader to say, "Here's what we're doing and why." And that may or may not fit with what your interests are, and we respect that. So I'll take two small examples. We mandated getting vaccinated. And boy, you would've thought 80% of the company was gonna quit. But out of 80,000 employees, at the end, less than 1,000 did. But the week, days beforehand, thousands and thousands were gonna quit. We mandated returning to work. Three days a week initially, then four. You would've thought half the company was gonna quit. We had to explain why we were doing it, why we thought these actions were in the best interest of the collective whole. And there may be some people that make different choices and go elsewhere. So I think the amplifiers of social media are ahead of the reality of people willing to take action, even in tight labor markets. And so, but it puts the burden of responsibility on saying, "Why are we saying..." You can't no longer say it, "We're back to work" because we want to be." Actually, no, we're back in the workplace because this is why we think it's in our collective best interest. I understand that everyone's circumstances differ. For some of you, this may not work for you. But for our collective whole, here's the decision we're going to make. Actually, I think President Levin and Jenny made that decision at Stanford, right? Explaining why it's in the best interest of the collective whole. And by and large, I think people, they also self-regulate a little bit, and you can't get too driven by the noisy tails. 'Cause the noisy tails are the ones that get amplified in the current communication platforms. I'm facing this right now with athletics. There are some people that have really strong opinions, and the question is, is this a collective opinion or is this the opinion of a few people that have a megaphone? And are willing to use it, and that's, you know, that's one of the delicious challenges of being a leader these days.
[MODERATOR] So, Chris, I want to get your thoughts from a different perspective. So, you know, Nike's a B2C company. It's always confused me whether Intel's a B2C or B2B company, but let's just claim it's a B2B company for now. Um, you know, a lot of it is like, okay, well, we might have to take a stand on Kaepernick because we have key consumer constituencies that might care, but Intel might have a different perspective. So we actually teach a case on Intel as well about when your former CEO, Brian Krzanich— Decided to not have Intel involved with conflict minerals, so going conflict-free in their production of their microprocessors. And the students and I, we debate on whether—what's the business purpose of this, since Intel's customers are OEMs generally. So I'm kind of curious from Intel's perspective: how do they decide what social stands they take and what social interest they choose to get involved in?
[CHRIS GEORGE] Yes, so maybe I'll speak a little bit about experience at Intel and then a bit more broadly. And I'd probably start, and I wrote it down 'cause I like the way you said it, John, that figuring out the issues that are actually core to business model. And so for Intel, it was about... So, you know. Similar to your experience working at eBay, and in the tech world, it's like immigration, that is a core business model issue because you need to be able to get the talent required from a lot of these countries, and you need to make sure that when you have people coming over, they don't feel like they're under the gun and that their life could be totally disrupted. It's like folks need to be able to come and settle in the country, and we wanna have all the absolute smartest people from every other country in the world coming here and staying here, and working for our technology companies to make them the best in the world. Then we can export our technology. So the way that Intel would approach it is there were a lot of things, again, similar to what John said. It's like, "Hey, that's just not part of our core, that's not core to our business." People have opinions, and sometimes people would choose to express them, but it was always clear at the leadership level. That what the company stood for were issues that actually would move the needle for us from a business point of view. And I think on the, whether it's conflict minerals, whether it's immigration, whether it's certainly export policy and tariff policy, which is super, super applicable for a company like Intel or Nvidia or a host of other folks, that's where you weigh it out and you say like, "All right, exactly what do we think the business impact will be?" And the business impact could just be in terms of straight revenue. It also could be in terms of employee engagement or brand value and weighing out and saying, "Is this—" How essential is this to us? And the other challenge is if you take a stand on 50 different things, it kind of diminishes what you're taking a stand on. So you kind of got to pick some winners, so to speak. You got to pick what you want to be loud about. Otherwise, it's like, oh, I guess Intel cares just as much about, say, DEI as it cares about immigration. It's like, no, they care way more about... or they care a lot about immigration because that is dramatically impacting the business. Not to say that the DEI piece isn't important, it's just that you can't speak out about everything. And so that was another, as we would go through the comms policy and the comms strategy as a company, that's something that we weighed really heavily was how do we make sure that our message is clear, easy to understand? Because when you're talking to policymakers- If you come with a long list of every single thing that you know you want to talk about, they get nothing from it at the end. They're like, \"All right, well, I met with Intel,\" or, \"I met with AMD,\" or, \"I met with Google, and I don't know what they want.\"
[MODERATOR] So, Dick, I want to give you a chance to chime in. And primarily, you mentioned that economists look at things like the VIX as a measure of uncertainty, but our discussion so far has been that there's A much more broad view of uncertainty, including, you know, concerns to companies, reputational risk from different constituencies. So yeah, curious to see if you [NICK BLOOM] have any thoughts on what you've heard.
[NICK BLOOM] I was actually gonna do something that's kind of unusual. I was actually gonna ask the moderator a question.
[MODERATOR] As long as it's polite. Go ahead.
[NICK BLOOM] I'll give you a fact, I'll skip your question, actually bounce back to John. So in fact, I was at a seminar the other week, and as backdrop, once a quarter, publicly listed companies are on earnings calls. You must have done a bunch of these earnings calls. So just to be clear, an earnings call normally have typically the CEO would talk For about 20, 30 minutes, and then investors will fire questions at the CEO from the pub, head of, corporate, you know, the CFO or investor relations.
[JOHN DONAHOE] They're a lot of fun. Yeah. They're really a lot of fun.
[NICK BLOOM] As John said, they're a lot of fun. I'm sure you prepped for them, I'm sure, in advance, right?
[JOHN DONAHOE] Yeah. Yes. I did 60 of them.
[NICK BLOOM] You, you can... Okay. So the reason I raise this is we have thousands of these earnings calls a quarter, and what folks have done of text-to-data is look at how much of this discussion is about politics And one thing you can probably guess is the amount of app politics is kind of moderate, but it's dropped by about fifty percent under Trump. So what we're seeing is quite deliberately firms. And as we asked about the training thing, are clearly deliberately, it's both the first half and the second half, staying away from discussing politics because they're worried about some tweet or some pushback. Question, you know, for Neil and for John. Does that surprise you? Is that things you've seen? And is that-
[MODERATOR] Well, we were discussing this in the discussion room. I'll respond quickly, since it's not my job to respond to questions here, but nonetheless.
[NICK BLOOM] No, let's flip this surplus.
[MODERATOR] It's okay.
[NICK BLOOM] So what- Deal with uncertainty.
[MODERATOR] Yes. So John, fair enough. So John had mentioned he'd taken over Nike during COVID. So one of my COVID activities was reading shareholder proxy documents. So I read every shareholder proxy document in 2020, 2021, and on. And this is Fortune 500. And most Fortune 500 companies you haven't heard of. They're like these warehouse companies. They're making ball bearings. They're just, like, random companies. And all of them in 2021 are talking about DEI, ESG, being good social citizens, all of this stuff. You read all the shareholder proxy statements from last year, they disappear. And remember, the point of a shareholder proxy statement is just to say, like, "Here's these five people we want on the board of directors. Trust us, like, just vote for them at the proxy meeting." And my takeaway is that a lot of companies don't lead. They're kind of following what the legitimate social trend is. And, you know, economists and sociologists have different views of what companies do. And I always used to believe that economists were right, that it's all about markets and capitalism. But the more I kind of live in this world, the sociologists believe that the world is about legitimacy, that it's about entering a world where you're seen as a legitimate entity or person and at least reading these proxy statements, it's basically everybody doesn't want to seem like the weird person and so in 2021, writing your proxy statement one way made you seem weird, but in 2024, 2025, it's very different. So that was my takeaway.
[NICK BLOOM] John, is that your sense that CEOs have backed away from talking about politics?
[JOHN DONAHOE] Oh, I think, I don't know. I think it's somewhere in a mix of the two. Certainly there's issues of the day, but also shareholders ask you. I mean, I was... See, shareholders asked about DE— perversely, shareholders asked a lot about DEI back in that era, as did our employees. And now I think any CEO has to think about risk. Don't pick an unnecessary fight if you don't have to, and I think that's what you were talking about. There's a practical dimension that if something's core to your business, you've got to talk about it. But if it's not, let's not venture an opinion that creates a distraction. Yeah.
[MODERATOR] Okay, I'm gonna take control of the panel once more.
[JOHN DONAHOE] So it's employee activism.
[MODERATOR] Where were we? Well, this is also more uncertainty in the panel because it's not a prepared question. But one thing that John and Chris had talked about was the core of immigration to the eBay and Intel businesses. And I'm kind of curious everyone's thoughts, just that it seems that- There is a populist backlash against issues around globalization, immigration, and trade. And if you talk to people in the business community, these are things that are consensus, that trade is very mutually beneficial. Immigration is very crucial for innovation and R&D, yet regular people seem to be less convinced of this, and it really does seem like two ships passing in the night. And I remember actually an interesting-- I talked to Mitt Romney's campaign chairman, manager in 2013 after they had lost, and she was explaining, you know, why immigration was good. And I was listening to her being like, "I don't think you understand your own party." And it ended up being very prescient because she was saying, "Oh, like we have to become much more moderate on immigration. That's how we're gonna win the 2016 election." And the exact opposite happened. So I'm kind of curious, you know, you mentioned how important these globalization issues are. Well, how do you convince regular people that these are the proper policies?
[CHRIS GEORGE] So I'll jump on that one first.
[MODERATOR] Sure. Yeah.
[CHRIS GEORGE] I think it's— and I just, I don't know who else was in the panel on China right before this one, but it is hard. It is easier to reframe some of these topics when you have an actual competitor that you're saying, like, "If I don't do this, I'm gonna get my butt kicked." Then all of a sudden it's like, oh, now it's not about sort of internal bickering and fighting, but I have a real competitor Who is exceeding the United States in a number of areas that are really critical to the longer term, I would argue, position that the US holds. And when you can frame it in the terms of, and there was some interesting stat from the panel over there about the percentage of Chinese-born AI researchers in the frontier labs, like 20, I think, was the number they quoted. It's easier to argue for the importance of immigration when it's like, well, if we don't do this, what happens? And it's the same thing true in my current role advising on the kind of defense and national security. They're like, "Why do I need all this AI and all this compute infrastructure?" It's like, because they're already doing it. They're already embedding these models into the apparatus that they have as part of the whole machine. And if you don't do it, you're behind. And so we found that framing was helpful if you can kind of have a shared sense of like, this is the real competition that's out there as opposed to some of the internal back and forth.
[MODERATOR] John, or either of you guys, thoughts?
[NICK BLOOM] I mean, the same question came up honestly a lot with Brexit. So just to be clear, Brexit was like very anti-trade, very anti-immigration, and the Brexit folks were claiming it's going to be good for the economy, and they're like completely wrong. I mean, it's been an absolute disaster economically, but the electorate didn't seem to get in. The odd thing, there was a discussion about economists in the UK. If you polled economists, there was like 100 of them that were against it and one that was in favor of Brexit. And every time there was a debate, the BBC would call one from each side, and guess who got very good at debating? So the one pro-Brexiteer was super slick and amazing, and the other 100 of us were terrible. And I don't know, there's kind of common soul-searching 10 years later: why did we make such a bad job? Because everyone predicted if you cut down on trade and stop immigration... I mean, another factor that's interesting: if you look at Stanford undergrads, about 10% are immigrants and non-US born. If you look at grads, at least I know economics, so I was just chairing the grad admission. 70% of our grad students are not US-born. I mean, you can hear my accent. I'm not US-born, but well, hopefully you can. And it's not Australia, by the way. I get that a lot. So I think, you know, as with science and research, but I agree. There's kind of a mass... Failure of academics, the media, politicians. And again, it's not a US thing. As we were just talking, in the UK, the two most popular parties right now are Reform, which is hard, kind of hard right, and the Greens. I was like, "Oh my God, if I was there, who would I vote for?" I know it's not a very appealing choice, and the middle has kind of collapsed, and one is very anti-immigration, and one is very anti-growth. And so I don't know. It's more than (unintelligible). It's kind of a push out to the extremes, which is a problem. And I don't know that John has any thoughts on this, but-
[JOHN DONAHOE] Yeah, I'm gonna use my time to break the rules again and ask you a question. Totally unrelated. The thing I'm gonna remember tonight is your comment about Brexit, the impact of Brexit on UK growth. I hadn't I hadn't realized how significant it is, and your point that 10 years later things can have cumulative effects. So as maybe Neil, you have a perspective as well as world-class, two of the greatest economists in the world, what are the topics you think today that we're seeing could have that kind of impact in our success 10 years from now? Or maybe from a foreign policy standpoint too?
[NICK BLOOM] Isn't it better? I mean, the, the, the-
[JOHN DONAHOE] So we all try to grab control of it, but-
[MODERATOR] I'll let you guys answer that. Go ahead.
[NICK BLOOM] I was gonna- I'm gonna quickly pass on because I... There's a saying, there's a guy, Robert Lucas, who won the Nobel Prize in Economics, who sadly passed away, but he had this famous saying is, "Once you start thinking about growth, it's hard to think about anything else." But if you replace the word growth with AI, you're kind of where you're at. It's just AI for economics is just everything. It dominates teaching, it dominates grading. I was just over lunch with my colleagues talking about, just to give you another example, grading. How do you grade? I mean, you must have the same thing. How do you grade students? Because any coursework or take-home stuff is now done by AI. And so we're falling back on Two things really, which is in-class grading, like class participation, but if you have a class of 100 people, that's impossible, or exams. But for exams, if they have a laptop, they have access to AI, so you don't have to do it for pen and paper. And we've now got this ridiculous situation that we're asking people who probably have never written in English before on pen and paper to write exams, and they're very upset. Not surprisingly, if you're, you know, you're Spanish and you're used to spell-checking. So, but AI seems to be the dominant theme, and it's just... I've been an economist for 30 years, and I've never seen a theme that's just so kind of fracturous as AI.
[CHRIS GEORGE] Maybe just to weigh in quickly on it. I think some of the... This goes back actually to one of the earlier questions about how do companies make long-term investments in the same way the government, how do you make long-term policy decisions that will probably outlast whatever tenure your party has? And then how do you try to proof it enough so it's not going to get shredded by the next administration that comes in? But to me, some of the things that stand out from a, you know, technology perspective, certainly. You know, electric grid build out. Like, those are things that take a really long time to do, and the types of companies that do that, if you're an investor in a utility, you're not necessarily seeking the types of returns if you're an investor in a tech company, right? So if the board or the CEO then says, "Hey, this is an amazing investment. We're gonna make so much money." Like, I don't actually care. I want my dividend check at the end. That's why I invest in you, not because of all this other stuff that you could be doing. And so I think from a policy perspective, you've got politicians who are trying to figure out how to balance. They can see like this is probably the right answer to get to, but then I have a set of constituents just like companies do and boards do with their investors. I've got a set of constituents who maybe have a different set of priorities or a different timescale that they care about. They care about the problem that's happening next week, and you're trying to solve a problem that's going to be out there 10 years from now. And I don't know that there's a— Well, clearly there's not an amazing answer, otherwise, you know, things would probably look a little different than they do. But You know, being able to, and this is where companies play a unique role, being able to help build that consensus and inform policymakers effectively can go a long way. This actually goes back to an earlier discussion we were having outside as well about some of the value of not having political appointees so far down into organizations, but having people kind of stick around organizations longer to bring that memory throughout these big agencies so that even when you do get new people funneling in, you're like, "All right, there is something happening." Trust me, it's good, even if you don't totally understand it."
[MODERATOR] Excellent. So, John, I want to maybe ask you about your current role. I think people might be interested, especially if you have a lot of Stanford alumni in the audience. Now, I agree with Nick that teaching during AI is challenging, but I would say, managing an athletic department or university in this NIL area is more challenging. So I'm just kind of... And it's actually a very political topic because the court system has a lot of power in how this NIL is going to go. Tommy Tuberville, who is... Both a US senator and a former football coach is trying to introduce legislation to regulate NIL in college athletics. So you have to make all of these decisions with all of this legal uncertainty, regulatory uncertainty. So maybe you can discuss, tell us how you're going through it and how you're thinking about it, given that you're leading this major department on campus.
[JOHN DONAHOE] Here we go from geopolitics to college football. The first thing I'll say: I'm having fun. You know, that's the biggest question I get, like, "Are you having fun?" And... you get to... You know, you guys do this for a living. You get to be around these students and these student athletes, and these coaches, and these professors at Stanford. It's just, I pinch myself, 'cause it is, it's just a remarkable place. And these students and student athletes are just crazy how- How impressive they are. So, you know, Neil, I'll tell you this, and it goes back to your question about uncertainty. When faced with uncertainty, I think the important thing is in the face of the uncertainty, just have a point of view, have a stake in the ground for yourself that may or may not be right, and you may have different alternatives, and then work your way backwards, and then stay nimble. So for instance, in college athletics today, my simple framing, and I'm a total outsider coming in, that's a blessing and a curse. Is that we're going through a period of disruption, and I've spent a good part of my career in disruptive industries. And what happens in disruption is that you have a rule set that has often been in place for a while. So think about media, right? Linear TV and then cable. Or think about commerce, right? Retail. All of a sudden, in those cases, technology, in this case, court, comes in and it feels like all the old rules get thrown out. So you go from these very predictable set of rules to now it's like, holy cow, there's no rules. And you know ultimately there's got to be another set of rules, right? Every industry, every society does ultimately want a set of rules. And I believe in college athletics, we will have a set of rules. That's my stake in the ground. And I think we can even guess what some of them are gonna be. But you have to live in the lawless middle, in the middle, where rules are being proposed. It's not clear if they're going to stick. It's not clear who's going to enforce them. There's all these abuses. And so I think our perspective at Stanford is there's going to be a logical set of rules. The student athlete is going to be brought back to the center. Right now, the student athlete's getting lost. They're getting exploited. It's getting a little bit crazy. You're going to have rules around eligibility, around transfers that are a little more. In the interest of the student athlete, there'll be some rules about how you pay athletes. And when you're in the middle of it, so we're working, and Condi, Condi, we're blessed with Condi. I guess she was doing one of these panels. Condi is leading the effort across college athletics to advocate through rules. John Levin's very involved. I'm, I'm somewhat involved. We will get there. I just don't know when or through what path. And in the middle, you've gotta not get too... You've gotta deal with the reality that we're in the basketball portal right now. Any of you that are following college athletics, it's just crazy. And basically you have a bunch of schools saying, "Yeah, there are rules. We don't believe they'll be enforced, so we're gonna do whatever we want." And you can't waste emotional energy. About being outraged about that, or being, "All right, we're in this period." How are we as Stanford gonna navigate our way through? Andrew and David have done a great job of navigating through football. We're trying to navigate our way through basketball right now. The Olympic sports are a little bit less impacted by those, and let's carry ourselves in a way we're proud of in hindsight, and have confidence and faith and try to influence that there will be a common sense set of rules. They'll be different than these rules were, but we'll get back to them. So having that point of view versus, "Oh my God, it's lawless, it's gonna be this way forever," is sort of what we're at least trying to do. And what's interesting, Neil, is I think people are looking to Stanford. Like, they want to know. It's funny, we're getting drawn in these conversations, and Connie says sometimes, "That's because they're not afraid of our football team." But people are looking for someone to stand up on principle, and so we're trying to stand up on the right principles and set an example, and it may hurt us in the short term, I don't know, but I think ultimately it will serve us.
[MODERATOR] Excellent. So, Nick, I want you to actually respond to something that John just said to broaden this concept beyond athletics a bit, because I was very interested that John just said it's an example of kind of disruption. And sometimes disruption leads to creative accretion, but incumbents oftentimes suffer from that. So, you work with McKinsey and all these other things in your research, and so I'm curious here what we generally know about how incumbents and incumbent business leaders deal with these disruptive forces and elements that come from the outside.
[NICK BLOOM] Well, that is a tough question. Am I gonna take that? Well, I was actually gonna riff off what John was saying actually.
[MODERATOR] Okay. That's fine too.
[NICK BLOOM] At this point, we might as well start walking around. Yeah. Let's go.
[JOHN DONAHOE] Um, we're in the lawlessness.
[NICK BLOOM] I was gonna say, we're talking. I have quite a few. I mean, I'm struck by the athletics thing. Two comments. One is I had lunch, we were saying earlier, with Gerhard Casper about 15 years ago, just after you stepped down as being president. I remember him saying that, you know, managing Stanford is just, it's really odd and it's very challenging, because you have these three different parts of it. You've got this university, you've got this massive medical complex, which revenue-wise is actually more than the university. Then you've got this sports franchise, which is growing very fast. I kind of say because I have an undergrad class where I have Probably have, it's capped at 50, but it's I have about 20, 25 athletes. I'm not exactly sure because I don't precisely know all of them, but I talk to the students. The athletes have just an incredible schedule. I was talking to one of the swimmers because this swimmer would come into my class with wet hair, and my class is 9:30 to 11:20, and I was like, "You know, tell me about your training day." And he was saying basically he trains for two hours, then comes to class and has another two hours, and then I think it's time off. And then I think you're allowed six hours a day, is it?
[JOHN DONAHOE] Four.
[NICK BLOOM] Four. Well, I think he said yes, four, but something like changing doesn't count and weights in my room doesn't count. And then he said, "The season is two quarters." And I said, "Oh, so you get two quarters off?" And he said, "Well, no, 'cause there's a third quarter. And to be honest, if you're a serious swimmer, you swim in the third quarter." And I said, "Do you get the fourth quarter off?" And he said, "Well, no, serious swimmers also swim in the fourth quarter." It's like... But, and as we know from our undergrads, they're under
enormous pressure to, you know, to do other stuff. So I can kind of see the athletics, the level is just so high." That it's very hard for the student athletes. When you were talking earlier about some of the Stanford, there was just something in the news, the first ever female soccer player that was transferred for more than a million dollars, so it's kind of record-breaking globally, was a former Stanford undergrad about five years ago. So these are people who are kind of, you know, elites in two divisions. I see this to be very hard to- You're kind of having people who want to be a full-time student. We know how hard it is to get into Stanford, and also expected to be basically professional level in athletics, and it's just becoming very hard. And as a professor, you see, I'm getting all these notes because now in the ACC, people are traveling away for quite a few days and coming back, and I kind of feel sorry. I mean, the thing I've heard is just how challenging it is for the students, and you see the other side of it.
[MODERATOR] So I have one more question for Chris, and then I'm going to open it up to the audience. We're going to have a roving mic. So just wanted to end like on, you know, part of this is like how you deal with government. I know you're currently involved with government at Intel. You dealt with a lot of politicians, bureaucrats, both political and non-political employees. What would you say if you had to say one framework for the best ways business leaders can interact with government officials? What would be your kind of clear framework on that?
[CHRIS GEORGE] Relationship matters. I know it's kind of like obvious. You're like, "Oh, of course, relationships matter in DC," but it's like hard to overstate. How much relationships matter in DC. It's part of the reason I uprooted my family from Portland, Oregon, where we had lived. As a funny aside, Beaverton is the headquarters of Nike, and sometimes the Intel and Nike interns would play each other. Let's just say, maybe unlike the B2C, B2B thing, there was never confusion of who was Intel and who was Nike, playing volleyball against each other for the interns. I moved my family out to DC because there's recognition, like you just have to live and be in community with people. That's the sort of connection that actually moves the needle with people in that world. And until I lived there, I would've been like, "Oh, sure, I can take some trips out there, you know?" Once a month, and we'll figure it out. But then when your kids are going to school, when you're going to church with people, when you see them at the grocery store, when you're playing sports with them, it's just a different environment. And a lot of the trust that needs to be built gets established. DC on average, and I'm sure it's true to other big government centers, there's lots of people who- You know, have their own motivations and ambitions and will say things and not do them. And so, figuring out who you can trust and who you can partner with and who will do the hard thing when it's right, even though it's disadvantageous to them, that just matters a tremendous amount. And so, figuring out how to build those kinds of relationships, unlike on the business side where it's like, all right, like, You know, if it's economically advantageous to you or financially, you will probably do it. On the political side, the incentives can be wildly different and hard to predict. And people, getting people to be able to talk effectively between industry and government is not always straightforward. And that's where, when you can sit down with folks and they're like, "Oh, I know you." Like- We've had this shared experience. We have a relationship that's been established. There's a sense of at least, even tenuously, some sort of community that makes a huge difference. And really, it all comes down to the trust factor.
[MODERATOR] That's actually very fascinating to see. This is a little anecdote. Like, one argument some people make for why Congress doesn't really work anymore is that very few congressmen—
[CHRIS GEORGE] Mm.
[MODERATOR] ...live in DC.
[CHRIS GEORGE] Mm.
[MODERATOR] And all this was caused in ads in the 1980s and '90s when they said, "Your guy was never in your district—"
[CHRIS GEORGE] Yeah.
[MODERATOR] So you should vote him out." And it used to be that people's kids played on the Little League team together. The wives were on the PTA together. They— this is people across parties, right? Because they all went to the same DC schools. And they say that these relationships have fractured. So these are just people you work with. They're not people in the social communities.
[CHRIS GEORGE] These last thoughts, you know, there were comments about, you know, coming to drain the swamp. One of the government affairs people for Intel, Bruce Andrews, after kind of that was going around, he was like, "We're swamp people, but we're friendly swamp people." We all live in the swamp together, and we get along. And DC, it's similar to a lot of communities. It's a lot smaller than people think. Everybody remembers each other. People remember when you've done things that are dishonest, and it has a long-term impact. And they also remember when you're a trusted person and you're one of the swamp people. So, yeah.
[MODERATOR] Excellent. Well, I think we're going to now include the audience, see if people have any questions they've been dying to ask me. Great, we already have a couple. So we have our microphone roving around. So just then please speak into the microphone. Feel free to introduce yourself, too.
[AZITA ARANI] Sure. Hi, I'm Azita Arani. I'm a GSB grad, 1999, and I'm also on the Stanford Women on Boards, the AI Accelerator program. I have a lot of questions, but the one that sticks out is, you all talked about how if you want to voice your opinion about a topic, it has to be something that's core to the business. So how do you define that core to the business? 'cause, like, some years ago, we said business is not just about shareholders, it's also about the customers, the partners, society, employees, and shareholders. So now- When you think about what's core to the business, how do you look at it? Is it just the shareholders because we forgot about ESG?
[CHRIS GEORGE] I'll give a quick thought about, like, kind of tactically how we did it. So in addition to running the government business, and I've been chief of staff for a number of the CEOs, so I was deeply involved in the corporate strategy and corporate communications and the exact process of determining, like... And really, it was like we made a list. We were like, "These are all the issues that we think people care about or that we care about." Um, and then you're absolutely right. I mean, it was one of the Business Roundtable, statement on the purpose of a corporation, and it's, you know, the different constituencies that are served. And, you know, people were kind of philosophically asking, "What is a corporation about?" Like, what is its purpose, particularly as confidence in different public institutions were coming down. The confidence in companies, at least at the time, was, you know, still strong. So I think that the way tactically that we did it is like we can't have more than, I don't know if it was three or four. And sort of rank-ordered them. And we're like, "All right." Exactly across the constituencies, we're like just... And it's very Intel or tech-like. It's like make a spreadsheet, assign values to these things, and see what bubbles to the top, and then look at it and say, "Does that feel about right?" So that's the way that we had handled that.
[MODERATOR] Okay, another question?
[NICHOLAS] Yes, hi. This is Nicholas from Mexico. And I was wondering, in many developing countries, we have large businesses that have a strong say on the economy and on the future of the country. And many of these countries are falling into autocracy, as it is the case in Mexico. So businesses tend to have the dilemma either to speak up and try to prevent the rule of law eroding and face a purge by the government or not to speak up, make great deals with the government, but once the rule of law is gone, the law won't be there for you. So what would you tell businesses facing this dilemma, this conundrum? Thank you.
[JOHN DONAHOE] That's a really hard question. What do you think, Nick? (unintelligible)
[NICK BLOOM] That is very good.
[MODERATOR] No, well, I mean, I- If you want to read an interesting book on this, it's by Levitsky and Ziblatt called When Democracies Die. It was on, like, Biden and Obama's bookshelf. And so one interesting thing it talks about is that there, after, between the interwar period, there's like four countries that could have become Nazi Germany. And Finland was a classic example of this. Like Finland was very, very close to becoming like a fascist autocratic state. And one thing that stopped it is that you have business elites that stand up against the autocratic movement. And in Nazi Germany, that didn't happen, that the business elites were like, "Well, we should just go along because that's kind of best for our short-term shareholder value." So that's kind of one lesson we know. A lot of lessons from the interwar period, and if you're interested, that book has a lot of the compare and contrast.
[NICK BLOOM] I was gonna make a kind of Neil-type comment, which is this comes up in some of the teach I've taught in the business school, and that we used to teach about something called the Foreign Corrupt Practices Act. So I don't know if people, so basically the Foreign Corrupt Practices Act, I mean, you must if you can— So yeah, roughly speaking is. In the US, you're allowed to make facilitating payments to companies abroad to kind of speed things up. You're not allowed to pay bribes. And the rules vary across countries. In Britain, there's tighter rules, and in the US it's been slowly relaxing them. And it's a good question. So imagine you're an American company trying to win a tender, say, out in China, and you know you're competing against domestic country companies and other companies, and they're paying bribes. What should the American company do? And on the one hand, you know, this was the case we go through in class. Some people say they should pay bribes too, but it kind of erodes Uh, you know, the rule of law within the country and others said they shouldn't, they should lose the business. And I mean, this is a, this is a general issue actually, not just for developing countries, but... But and I know, I think that the current administration in the US has been weakening the Foreign Corrupt Practices Act. I think it happened under actually Trump one, and it's not clear where to go, but it is a, it is a live issue actually. And right now businesses cannot do illegal activities abroad, but they can do things that are kind of in a gray area. And I have the MBAs argue with each other. It's great, you know. Whenever you teach MBAs, you want them to kind of, you know, as I guess the former MBAs here know, butt heads. The less speaking you do and the more speaking they do, the better, basically.
[JOHN DONAHOE] You know, and we talked about speaking up in social issues before. I think the heart... In this country, CEOs are trying to figure out what political issues, 'cause it's really hard to look the other way on some of what's happening around rule of law and other things. And your employees are looking at you saying, like, "Is this what we stand for?" And it's less around the company, it's more about the society and the way you talk about the political system. And I think those are... I'm so glad I'm not in that chair right now. I just worry about football. But it's, in all seriousness, I think it's a hard It's a hard time to be a leader about what you speak up on politically.
[NICK BLOOM] It's also hard for us. We were talking about this earlier. It's also hard for Stanford. I'm a huge fan of John Levin. I've known him for many years, but when he came, he— when he was made pres— He's from the economics department. So when he was appointed president, it was a small internal event in economics, and we kind of celebrated, and he was being asked questions by people who, like me, are his colleagues, who've known him for kind of 20 years. And someone asked him about the Israel-Palestine— You know, one of my colleagues, I'm not sure why they asked that question, and he just went very quiet. And it was... You could see it's a really difficult thing to deal with. And as the leader of university, you're expected to talk about it.
[JOHN DONAHOE] Yeah.
[NICK BLOOM] But it's something that is, you know, there are other topics, and so there are some things You know, I was kind of waiting to see what he said, and he kind of treaded... He didn't say much. He spoke very slowly and trod a very careful path, and I think that's often the best advice.
[MODERATOR] Okay, we have five minutes left. I think two people have questions. So I want to do like two quick questions and then very two quick, really quick answers. So we'll have you and then one other person I know has had her hand up, so go ahead.
[BELINDA NIXON] Thank you. I'm Belinda Nixon, a Stanford undergrad class of 1990, and a proud swamp, a friendly swamp person. I live in DC.
[MODERATOR] Yeah.
[BELINDA NIXON] I'm also taking part in the Stanford Women on Boards AI Accelerator, and with that in mind, I was wondering, what is the role of the board in helping companies manage the political turbulence?
[MODERATOR] So John, if you could give me a quick response since you were on the board of Nike.
[JOHN DONAHOE] You know, I think the board, not a lot on one way. It's to be a sounding board, because I think it's very hard for a board to be able to understand the full dynamics inside of a company. And so I think I would bring to my board, "Here's how we're thinking about it. Push back or let's have a debate." And they can be very helpful because they aren't in the day-to-day. But a board's job is not to shape policy on those things.
[MODERATOR] Okay, our final question.
[KRISTEN JACOBSON] Hi, Kristen Jacobson, 1995. I just wanted to follow up a little more on the difficulty that, like, Jon Levin is in, in terms of how do you decide when to respond and when not to respond, and sometimes you respond because the expectations are there, and whether it's core And sometimes Stanford chooses to respond publicly, and sometimes—and I've heard John Levin talk about why he didn't say on the NIH funding, which is truly core to Stanford. And it's like balancing the pick-a-fight versus when you're expected to speak up. But there, I know that there was a lot of discussion among alumni that weren't happy with the lack of a public response on something that was core, and I'm just— Like, no one would want to have to make those decisions, but I'm just curious in this context, like, how, how is something core and then something not core, and how do you decide? Or are you weighing sort of the cost of picking a fight versus not? Anyway,
[JOHN DONAHOE] maybe I'll just say one comment, because I've been blessed to, the last six months, to sit on John's staff. And the first thing I'll tell you, I think being a university president is the hardest job in the world right now. Second, I think we are so blessed. This, this, he is so impressive. In his intellectual honesty and objectivity to think those things through. And what I've observed is he can think about what's core to Stanford's mission and should we speak up on it? And then second, will speaking up advance the cause or not? And there are some times where actually, even if it's core to your mission, NIH being one, speaking up will make the circumstance worse, not better. And his ability to logically be very open to input, very open to different points of view, and then think his way through to a point of view that he can then explain is very impressive. I keep telling him, "You're the first boss I've had in 25 years," and I am so impressed by, And I think we're so lucky at Stanford to have him as our president at this particular time.
[MODERATOR] Terrific. I agree with that 100% too. So I would say that I've learned a lot about uncertainty on this panel. One thing I'm certain of, though, is that we've been very lucky to be blessed with these insights from these three people, and hopefully you've enjoyed the discussion and had some good takeaways. Obviously, this is a very tough topic that we're not going to fully resolve in one hour. But I believe that we made a lot of progress in thinking through it. So please give a round of applause for our panelists. (applause)