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[MUSIC] We have just about 45 minutes.
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Maybe, 44 minutes because you may have to leave punctually at 1. Am I correct about that?
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So, I wanna, I wanna save most of the time for your comments and questions to which I will do my best to, to respond.
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[COUGH] I wanna talk about three things briefly.
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I was asked to talk about leadership and I will do so.
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I wanna talk about the climate crisis and the solutions to the climate crisis.
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You'd be surprised if I didn't.
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And then, I wanna say a few words on sustainable capitalism, because as B-School students you are focused naturally on the future of business.
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And, I have strong views about the state of business, the state of markets and the future of business.
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First of all on leadership.
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I, thank you for inviting me to speak on the topic.
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I don't hold myself out as a, an expert on leadership, I think that a based on my experience and what I have tried to learn about leadership, I would start with the saying by Loutse.
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Who wrote of truly great leaders, that people will say we did this ourselves. Worth reflection.
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I have studied leadership, I've had the privilege of being in a number of positions where I was called upon to provide leadership to organizations and groups of men and women.
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And, there are obviously many different styles of leadership, and all I can do is speak to you about the style and approach that I think makes the most sense.
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We as human beings are each equipped with our own independent ability to collect information, process it process the feelings and intuitions that we have and to make decisions e, individually and as a part of groups.
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Businesses are groups of people, and success is, at the risk of a cliche, a team sport.
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And the leader of a team has to motivate individuals, but has to be conscious of the reality of the team. How do you do that?
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Let me give you a very arcane analogy that's based on information technology.
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Here we are in Silicon Valley, so maybe that'll be okay.
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In the history of computing, the first computers were based on central processing units surrounded by fields of memory.
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And, as the memory fields grew, and the processing power grew, limitations to that model soon appeared.
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In structural terms, the central processing unit would send out to the field of memory, collect data, bring it back to the center, process it, and then store the answer.
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As the speed requirements advanced, it became clear that this was a limitation both in time and in the generation of energy, which had implications for the size and materials, necessary and design of computers.
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IBM's first breakthrough was called vector processing.
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It's initial success was really based on that advance, which simply meant that the central processing unit, when sending out to retrieve process and then distribute the results of information processing.
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One of these trips could begin while others were in progress.
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And so, that saved time, speed it up, the computer, but all of the processing still had to take place in the central processing unit.
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So, in the early in the 19 80s an architectural design breakthrough took place empowered by the relentless advance of Morris Law, as processors became smaller and more powerful.
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The central processing unit was broken up, and smaller microprocessors were placed throughout the field of memory.
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And, with advances in software design, it became possible to issue the machine a start order at which moment, all of the information that needed to be processed to produce the desired result could be processed simultaneously throughout the memory field, where it was stored adjacent to microprocessors.
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And then, the various fractions of the answer could be brought to the center and assembled.
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So, instead of three trips, there was one trip.
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Faster, less heat energy generated, smaller machines, faster still, a virtuous cycle.
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So, what does that analogy have to say about leadership in organizations?
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If the leader of an organization insists on being provided all of the information necessary to make every single decision, it is like the central processing unit architecture.
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And it is a cumbersome process generating energy taking time.
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And, it does not maximize the assets of the organization in the minds and hears of the men and women who make up the organization.
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So, how do you make it possible for a human organization to process all of the parts of information, of the information available to the organization.
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Simultaneously, in real time, and then assemble the answers, so that the team as a whole can move swiftly and effectively.
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Well, to return to the analogy, in the analogy of, of the transition and computing design from CPU base to massively parallel processing architectures, the key is the software.
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I skipped right through that step very quickly.
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But obviously, in order for the start order to trigger simultaneous processing by multiple processors throughout the memory field.
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And then, direct the parts of the answer towards the center, then assemble the answer.
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That requires very complex software.
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So, a leader in a human organization has to do something analogues to that software, and all simplifications can conceal as much as they reveal.
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So, with that in mind, I'll just offer this simplification, which is hardly original with me, but, and, you may recognize it.
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But, vision, values, and goals.
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The vision of the organization is central.
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And the leader of any human organization has to take primary responsiblity for communicating that vision clearly.
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I say communicating, it has to be shared, not only in words, not only in data, but emotionally, spiritually.
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It has to be embodied in the way the leader interacts with every part of the organization.
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Secondly, values are central.
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There has to be an agreement as broadly and as tightly as possible among all the individuals in the organization on values and what I mean by values, it is not just what the, the word instantly conveys, but, but but also I mean it in this sense, what ethical and business criteria are suppose to be used in making a decision?
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If there is widespread agreement among all of the individuals in the organization about those criteria, about those values, if you will, then it is more likely than not that any individual in the organization confronted with the same information, empowered by a commitment to pursue the same vision, will make a decision that is quite similar to what anyone else in the organization would make.
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So there is a congruency of vision, a congruency of values, then goals.
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There has to be a time ordered sequence that reflects a sensible priority listing of what goals are most important at any given time.
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And then of course, you know the old cliche, you have to avoid at all cost, letting the urgent displace the important because a sense of urgency is simply not the same as a sense of priority.
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So the role of a leader then begins to be clarified, at least in my mind.
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The leader of an organization has to take responsibility for constantly elevating the vision.
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A rekindling, a commitment to the vision.
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Reiterating constantly, exactly what the vision is.
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What is the purpose of the organization?
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What are we trying to accomplish together?
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Secondly, the leader has to be responsible for constantly reenforcing the values of the organization.
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Not brooking compromise on core values.
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And also translating those values into the practical criteria upon which decisions are supposed to be based.
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And the leader third has to be responsible for keeping track of the ever-changing list of priority goals and the sequence in which they are supposed to be pursued.
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That to me is a formula that works, there're other models, there're other ways to go about it, but for my part that's what I would like to share with you about leadership. Now secondly. The climate crisis.
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Perhaps you know everything you wanna know about it.
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But if you are not personally thinking about and engaged in the development of solutions for the climate crisis, then you haven't thought clearly enough about it.
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Because by the time you are my age, it will be crystal clear that the failures in the early part of the 21st Century to address climate change effectively were catastrophically tragic.
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We still have time to avoid the, the worst unacceptable consequences of the climate crisis.
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But, we have to get busy right away.
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and, and there is a a massive amount of denial.
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You know the old cliche, denial ain't just a river in Egypt.
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Along side that you could say disparaging just a tyre in the trunk.
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There are people that move directly from denial right through the oh my god moment to despair.
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Without pausing to actually solve the problem that needs to be addressed.
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And it seems a forbidding task because the scale of the challenge is so vast.
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In essence we are facing a completely new reality on this planet.
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And it is so new and so unfamiliar that the temptation is to label it implausible.
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Or at least, to search out for any acceptable excuse for doubting whether it is real.
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And, and holding on to those doubts in order to justify waiting before the, the time when it's necessary to really focus on it.
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We don't have the luxury of time anymore.
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Here, here are the basic facts.
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Global warming is simply the largest and by far the most significant manifestation of a deeper underlying collision between human civilization as it is presently organized.
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And the ecological system of the planet which has empowered human beings and nourished the flourishing of human civilization.
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There have been three changes that have coincided to create a radical discontinuity in the historical relationship between the human species. And Planet Earth.
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Number one is population.
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I won't belabor this, but when the scientists tell us that we first, emerged in, roughly, our modern form approximately 200,000 years ago, midway between the second-to-last and third-to-last Ice Age.
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We are a creature for all seasons.
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I'm going to resist the temptation to go too deeply into any of these points.
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But, be that as it may, it has taken 200,000 years before we reached the population of one billion people.
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Sometime around the beginning on the 19th century.
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We added that many people in the first 13 years of this century.
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We will add another billion in the next 14 years.
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And yet another billion 15 to 16 years after that.
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We, we may stabilize global population at nine or ten billion.
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There is a good deal of uncertainty about the projections simply because the base is now so large that fractions of a child, an odd phrase, I know.
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But fractions of a child.
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In the projections make the difference between nine billion and 14 billion or 18 billion we do know well, let me pause and say that this enormous population explosion, they used to call it can be looked at in retrospect.
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By noting that we have quadrupled human population in less than 100 years.
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And that has contributed to this radical change in the relationship between our species and the planet.
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We could have many more people with a completely different lifestyle, different technologies and a different civilization, but given the stickiness of legacy technologies and lifestyles.
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it, it is fair to assume that we really do need to stabilize population.
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In that regard, we are witnessing a success story unfolding in slow motion.
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Actually, we have seen the development in the last quarter century.
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Of a very powerful and durable consensus worldwide on exactly how to stabilize population. This is a success.
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I doesn't look like it but, but, sometimes, but it is. It's a systems problem.
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Population dynamics is not a single cause, single effect.
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Issue there are multiple factors involved, but here is the distillation of what social scientists have, have, have learned and proven in the field.
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There are four factors, all of which have to be present, but when these four factors are present in any society.
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Population changes from one equilibrium state to another equilibrium state, it's an S curve.
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The first equilibrium state is high birth rates, high death rates, and large families.
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Down the S-curve at the end of the transition, the demographic transition, as they call it.
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There is a second equilibrium state.
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Small low birth rates, low death rates, and small families.
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Small families are actually preferred by people.
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During the agricultural revolution there was a premium on having larger families.
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There are many other factors involved.
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But basically, the challenge has been how to move societies around the world from one equilibrium state to the other.
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That's where these four factors come in. Number one. The education of girls.
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Number two, the empowerment of women.
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Number three, the ubiquitous or nearly ubiquitous availability of fertility management techniques and technologies and knowledge.
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Number four, perhaps most significantly, low child death rates.
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How does that last one fit in?
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If parents have confidence that their children will survive into adulthood.
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And they have the ability to manage fertility.
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They're going to want smaller families.
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If on the other hand, there is a high child mortality rate, then mothers and fathers will want to have large families in order to ensure that some of their children survive.
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Into adulthood, particularly in, in societies where there are not, Social Security, type programs, and family, support is essential, in, in old age.
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Now the good news is we made a lot of progress in educating girls and empowering women. Not nearly enough.
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But we are on the right track all over the world.
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We have also made a lot of progress in reducing child death rates, really quite dramatic progress.
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Where we have lagged behind is making fertility management available, particularly in places like Sub-Saharan Africa, where the replacement rate is still much higher than, than the global average.
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Africa, as a consequence midway through this century, not long from now, will have more people than either China or India.
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And at the end of this century, will have more people than China and India combined.
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But in much of the world, this transition, the demographic transition has taken place in all the developed countries, North America, Europe, Japan, et cetera. Even in in, in China.
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Brazil, the BRICs, the emerging economies. They're, they're all. Mexico.
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They, they, they are all coming down this S curve.
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So this is a good news, it's a, a positive development.
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But those that have, that, that are not getting fertility management, have a right to expect that wealthy developed countries, principally the United States.
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Will actually follow through on the pledges made to help them get access to fertility management, this is the, the one problem there.
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Anyway, that's the first factor, even though it's a success story, the large increase in population has changed the relationship we have to the planet.
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Second, and far more significant, is the technology revolution that took a turn 150 years ago, after the first Industrial Revolution.
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Powered by coal, the first oil well was drilled a century and half ago.
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And in the 20th century, the combination of oil and coal became the basis of energy in the world.
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And today, 85% of the energy used by Earth Inc, the global economy, comes from fossil fuels.
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And as a result, we now put 90 million tons everyday of heat trapping, global warming pollution that's dumped in to the atmosphere every 24 hours.
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As if the atmosphere is an open sewer.
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You know, in the 19th century a, a great doctor in England was dealing with a cholera epidemic, which used to be one of the biggest killers.
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And he innovated a location based data system and mapped all of the cases of cholera in London.
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And overlaid it on the sewer system and found that a single malfunctioning pump on Broad Street was the proximate cause of the cholera epidemic.
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Not long after that Louis Pasteur discovered the bacteria that was responsible for cholera, and the, it is no longer the, the major cause of death in the world that it used to be.
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He connected the dots, an, and it traced to the sewer system.
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We have to connect the dots between the 90 million tons of global warming pollution spewed into the atmosphere every day, the decision to use the atmosphere as a sewer, and the, and the resulting consequences of all that extra trapped heat.
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We're raising the temperature of the planet.
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In fact, the accumulated man-made global warming pollution now traps as much extra energy in, in the, in the atmosphere every day as would be released by 400,000 Hiroshima-style atomic bombs every single day.
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It's a big planet, but that's a lot of energy, and that's what evaporating much more water vapor from the oceans into the warmer air of the atmosphere, which has an increased holding power.
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Holding capacity for water vapor.
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So when storm conditions release a downpour, the storms reach out 2,000 kilometers off and then funnel these rivers of water vapor in the sky into these massive downpours that are breaking records all over the world, creating these floods.
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The same extra heat is pulling the moisture out of the soil making massive droughts much more widespread and much more frequent.
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The extra heat in the oceans is powering much stronger wind speeds, which makes the storms more destructive, melting the ice, 50% of the Arctic ice cap is now gone, as of last September.
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All of it will be gone in the next 10, 20 years.
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And that's changing the pattern of the jet stream, and the storm tracks.
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It is disrupting the age, the timing of precipitation events and the clockwork of rainy season, dry season alternation in, in developing countries disrupting sustainable agriculture. Not sustainable.
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Subsistence agriculture in countries where that is the principal occupation.
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The melting ice raises sea level. You know the rest.
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Moves disease vectors from the tropics and sub-tropics into the temperate zones.
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And the list of horribles is actually much longer than that.
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The tendency in the face of such evidence is to turn away from it.
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And that is, that leads to the third cause after, population and technology, and that is our way of thinking.
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We are empowered with thought patterns and habits that we have inherited from our ancient ancestors.
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And as has often been the case in the history of civilization, our real challenge is to accelerate the emergence.
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Of wisdom that can be used to deal with new circumstances.
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We're built for that, we are creatures of habit we, we do manifest the legacies of our evolutionary paths but, we also have the capacity to rise above our limitations and to see clearly the changes that need to be made.
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One of the things that needs to change is our vulnerability to short term thinking.
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Now our present culture in business, in media, in politics, in almost every realm of life has now magnified this tendency to focus on the short term.
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And made it a very serious problem.
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So let me use that as a segue to the third topic that I'll cover very briefly, and then open it up to your questions and comments. Sustainable capitalism.
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Short-termism, you, you no doubt have already identified that as a buzzword,.
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It is an extremely serious problem.
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One of our leading business research institutions BNA, conducted a famous study a few years ago in which they asked CEOs and CFOs a whole series of questions.
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One of them was a hypothetical.
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Here's a, an investment you can make in your business, the question began.
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If you make this investment, you're business will become more profitable, stronger, more sustainable, more resilient, it meets your internal investment targets. But there's one, issue.
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If you make this investment, you will slightly miss your next quarter's earnings projection.
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Given those facts, will you make the investment? Eighty percent said no.
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That is functionally insane.
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>> [LAUGH] >> It truly is.
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Because it hurts the shareholders. It hurts the employees.
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it, it hurts the communities where the business is operating.
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But it, it is now a routine decision.
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Because, of course missing a quarterly earnings projection leads to a reduction in market capitalization, and whatever benefits come from focusing on the long term build up of sustainable value, could, can be wiped out given the way financing markets now operate.
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so, what do we need to do to reform capitalism?
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Let me first say, it, it hardly needs to be said particularly in this group, but capitalism's, capitalism is the best way of organizing economic activity ever created.
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It allocates resources efficiently, balances supply and demand is more congruent with higher levels of freedom in human societies.
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And perhaps, most significantly, capitalism unlocks a higher fraction of the human potential.
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With a ubiquitous set of organic incentives that routinely reward hard work, initiative, creativity and, and innovation.
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>> But in spite of those well documented strengths, which had made capitalism the base of every successful economy in the world and there are different varieties of capitalism.
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But in essence, it, it, it is ubiquitous now.
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But in spite of those strengths, capitalism is increasingly being associated with a series of problems. Growing inequality.
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Almost everywhere in the world, the U. S.
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, Europe, Japan, China, India Brazil.
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Almost everywhere in the world, inequality is growing beyond the normal levels.
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Inequality is endemic to capitalism.
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It's good, we should have inequality.
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That's part of the des, that's part of why this system of incentives works.
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But, as with inflation, if you go from a normal level to a hyper level.
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Hyper inflation soaks up so much energy and so many resources that the, the normal functioning comes almost to a halt.
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Hyper inequality is threatening to both ca, both to capitalism and democracy.
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Since the, recovery, such as it is, began after the recent great recession, 93% of the additional, income in the United States has indeed gone to the top 1%.
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That's not an Occupy Wall Street slogan. That's a fact.
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And while these flows of income have been channelled to the top, middle income families have been struggling and are increasingly struggling. Okay.
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This is not a political polemic, it is an observation, and the consequences of this, again, are threatening to democratic capitalism. What else?
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A series of disruptions in the global economy, occurring with greater frequency and at higher magnitudes.
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Missile-lined incentives, where not, not just principal agent problems.
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But misaligned incentives that lead to, to allocation, al, decisions and investment decisions that again don't make good rational sense.
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These problems need to be addressed on increasing focus on the short term, as I said earlier. So what should we do?
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I think that there need to be some significant reforms in the design of markets and in the design of capitalism.
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Since this ubiquitous set of organic incentives is the key to unlocking the energy in markets.
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We need to pay careful attention to what the incentives are.
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People will often do what you pay them to do.
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And if you pay them to focus on the short term, they will do that.
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Even if you also signal to them that you want them to tell you that they're focused on the long term, if you reward them and pay them al, to focus on the short term, they will do that. 30 years ago in the U. S.
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the average holding period for public equities was roughly seven years.
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Which is congruent with the buildup of real value in firms.
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Now it's less than six months.
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And on both of the New York and London exchange is more than half of the trades are now made in, by algorithmic computer trading in, in milliseconds.
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So, we need to get rid of this idea that more liquidity is always better.
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We do not have perfect information.
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Markets do not tend toward equilibrium.
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and, and we need to understand that the standard model is now obsolete.
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What will the new model be, I don't know.
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A lot of people think behavioral economics and behavioral investing is the leading candidate.
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I kinda think that, but it's above my pay grade.
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So I will let you all figure that out.
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Let me conclude, and then open it up to you.
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By telling you, just, just one brief story.
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Because the climate crisis can seem daunting.
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The challenge of fixing capitalism can seem daunting.
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But look, look, things can change very quickly.
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I remember as a, a child, as a young guy, and growing up in Tennessee.
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When the civil rights revolution swept the country.
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I remember when the conversation changed.
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Somebody made some racist comment in my circle, and somebody else said, nah, we don't go for that.
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And it, in, in millions of conversations it changed.
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Two months ago, saw an article about two gay men waiting in a long line for pizza.
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Holding hands and some homophobe walked by, made a nasty comment.
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Literally every other person in that line turned on the homophobe and said hey, shut up.
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We don't go for that anymore.
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We're winning that conversation.
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When the culture shifts, when conscientiousness changes, then everything else can change rapidly.
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You may have noticed, countries all around the world are approving gay marriage, getting rid of the discrimination against gays and lesbians.
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If somebody had asked in your age group, you wouldn't have been surprised at all, but in my age group, if somebody had said five years ago we would see this revolutionary change, most people would have said, nah, can't do it.
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We're doing it, because consciousness changed.
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That's what has to happen with the conversation about global warming and sustainable capitalism. Now finally.
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I remember as a boy of 13 when President Kennedy issued the challenge to put a person on the moon and bring him back safely in 10 years.
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And I remember hearing so many say that's a mistake, we can't do that.
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But eight years and two months later, Neil Armstrong set foot on the moon.
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And the moment he did, so there was a great cheer that went up in NASA's mission control in Houston.
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The average age of those systems engineers was 26.
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Which meant when they heard that challenge, they were 18.
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I know that some of you have come here to this great institution.
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To be of, a part of something larger than yourself.
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I would end by challenging all of you to aim in that direction.
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These are times when it is a privilege to have the opportunity to do good things that what will be looked back upon as a turning point for human civilization.
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And business is at the center of the change that has to take place.
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So, we need the will to act, but always remember that the will to act is itself a renewable resource. Thank you very much.
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I will open it up to your questions now.
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>> [APPLAUSE] >> Thank you. Thank you very much. Okay. We don't have much time.
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Don't s, don't waste it on simply applauding.
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>> [LAUGH] >> Where am I going. Okay, yes.
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>> Mister Vice President, thank you so much.
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>> Tell me who you are when you're asking questions. >> Oh sorry.
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Name's Alex [UNKNOWN] MBA 1 here.
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I wanted to ask you more specifically about the inequality thing that you were mentioning. . >> Yeah.
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>> I've heard a lot, or you hear often people mention that maybe that's just the way the economy is moving.
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That, you know, the way as it goes to a more advanced information economy that is the nature of where the jobs are.
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That inequality is a natural progression.
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A, do you agree or disagree with that?
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Assuming you disagree with that, how do you get it to the point where you close that inequality gap?
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>> Well I, I, I do disagree with it I, I think that there are obviously some very broad structural factors involved, since it's nearly a global phenomenon.
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There are a few countries in South America that don't manifest it, in the words of the song, they have been down so long it looks up to them.
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But, in the rest of the word it's, it's pretty ubiquitous.
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I think there a lot of factors involved.
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I think the emergence of Earth Inc, with a combination of outsourcing and robosourcing advanced automation is a big part of it.
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So that businesses operating with global supply chains and the ability to outsource with the transportation revolution and the internet.
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Now a routinely look at labor as the first place to to cut and and in contrast to the industrial revolution when people standing on assembly lines were making good money and buying the products coming out of the factories.
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Now the increasing levels of automation that now extend not just to our physical capacities but, also our cognitive functions, are really creating a, a, a very big systemic change.
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The so called Luddite fallacy that's been accepted for, since Ned Lud lead his revolt, may no longer be a fallacy.
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That's controversial to say, but an increasing number of really good economists are, are coming to that conclusion.
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And I think that has an impact.
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Here in the United States I think the tax policy has had a major impact on inequality.
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I think that our democracy is in, in trouble.
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That's another topic and not the one that I'm talking to you about here, but I think that elites now have outsized power.
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I, I think there's been a big structural change in the way we communicate.
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the, the, the revolution of the printing press really lead to the enlightenment and the emergence of representative democracy.
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The shift in the last third of the 20th century to a television based ecosystem really changed that.
40:03
There's a, a bottleneck through which you can gain access to the public's mind only if you have huge amounts of money.
40:11
So corporate special interests now dominate the messaging that comes into everybody's living room and on their screens.
40:20
And the average American in spite of the internets rise still watches television five hours per day.
40:27
Now as the internet gains momentum and scale.
40:30
Television will sink into the digital universe, you're seeing it begin to happen now.
40:35
And the architecture of the internet based eco, information ecosystem is similar to the print ecosystem, in this sense, individuals have very low entry barriers and once again reason can be lifted up as a substitute for wealth and power.
40:51
And then changes in labor markets and tax laws and political systems can, once again, begin to reflect the public interest.
41:01
But, one way or another, this these levels of hyper-inequality are unsustainable, and they're very dangerous as I said, both to democracy and capitalism.
41:13
>> Hi my name is Bronca MBA2 I'm from Brazil.
41:15
I'm curious about your point about increasing focus in the short term.
41:19
And I hear a call to action to future business leaders, and I just wanted to understand what do you, how do you think about the public sector and the private sector, at least here in the U. S.
41:27
, and how these two should like, coordinate to make sure that like, we can change that mentality?
41:36
>> Yeah, well, [UNKNOWN] I, I think that the, the the dividing line between private goods and public good, goods, is in need of clearer focus and a, and, and attention now.
41:48
Democratic capitalism has ideological hegemony in the world and has at least since the Berlin wall fell in 1989.
41:58
but, that engendered a kind of triumphalism among market fundamentalists and the, the internal dividing line between, in democratic capitalism, between those who are primarily rooted in the democracy sphere and those who are primary, or half sphere.
42:17
And those who are primarily rooted in the market hemisphere.
42:21
That line began to shift and power is now being pulled from political systems into markets.
42:28
a, a, and both capitalism and democracy, by the way, are manifestations of this massively parallel processing of information that I began by describing in the context of leadership. Think about it.
42:45
And, and both were invented same year, 1776.
42:47
That's when Thomas Jefferson wrote the Declaration of Independence, that's when Adam Smith published the Wealth of Nations.
42:55
and, and in both systems you see the, the, the independent decisions of multitudes of people collected to to harvest the wisdom of crowds and democracy and the invisible hand in markets.
43:14
Both systems have been hacked.
43:18
And I, I don't know if you've seen the, the work of a, he, he's long since dead, but Mancur Olson is one of several theorists who has described how elites over time during long periods of stability, tend naturally to accumulate more power and influence.
43:36
That's happened in the political system, it's happened in, in the market system.
43:41
I do think that one of the solutions to inequality and growing structural joblessness is going to be to put new emphasis on the generation of public goods.
43:53
Now let, let, let, let me say one other thing briefly.
43:56
The dashboard, the compass, the, the, the, the, the metric system that we're using to guide economies, it is completely whacked.
44:07
GDP, and the national accounts that are derived from GDP, and business accounting.
44:14
In 1937, the creator of gross domestic product, Simon Kuznets, was honored for it, and he said, thank you very much.
44:22
It, I know it's in advance, really, you know, it was it really was.
44:26
But he said, please do not use this as a guide for national economic policy. Why?
44:33
Because, it's a heuristic.
44:35
You know a $10 work that means shortcut.
44:37
But a little more than that.
44:38
A shortcut that, that becomes embedded in our thinking and we think it's the whole thing. But it's a shortcut. GDP leaves out a lot. What does it leave out?
44:48
Does not take into account pollution flows, environmental externalities.
44:53
Does not mether, measure the distribution of income, so inequality doesn't show up on the dashboard.
44:59
If we get an increase in national income, and 93% of it go, does go to the top 1%, that's a big win for all of us, right? Well, no.
45:08
But on the dashboard it looks like it's, it's, it's a big win. What else is left out?
45:12
Well, depletion of natural resources.
45:13
But, here's the one that I'm getting to.
45:15
In addition to negative externalities like pollution, positive externalities are, are, are left out.
45:22
So that if a community or a nation, invests in education, mental health care, community building etc.
45:31
That shows up as an expense.
45:34
But the positive benefits that come flowing back into society are not measured.
45:41
They're not put on the balance sheet.
45:43
And so when we face a fiscal challenge to, to you know, rebalance the books, you wanna cut that spending without, but if you have no knowledge that you're also eliminating all of those benefits, you know.
45:58
I mean, infrastructure people understand that that's a public good, because it, it's measured derivatively from the stuff that is on the the balance sheet that depends on the infrastructure, but education, mental health care, these other things, they're not measured.
46:14
So we really do have to take a close look at this.
46:18
Now let me say we're gonna run out of time, but I wanna challenge all of you to use the skills and talents that you're acquiring here.
46:27
And congratulations on being accepted here, on being able to stay here, on doing what you're doing.
46:32
>> [LAUGH] >> But to whom much is given, much is required.
46:36
That's another cliche, but, but I wanna leave you today.
46:39
I know that they're gonna, I don't know if you ring a bell or blow a whistle or, or what, but I don't wanna be caught standing while everybody gets up and leaves.
46:48
So, so let, let me just conclude by thanking you for the opportunity to spend this time with you. I'm very, very grateful.
46:56
But I want to conclude by challenging you. We need your help.
47:01
This is really and truly a moment not only unlike any other, it's, it's different in kind.
47:09
This is a, a moment when all of us really have to rise to an unprecedented challenge, and years from now when you're my age, your kids, you know, will look around them at the world that they live in and they'll ask one of two questions.
47:27
You know if there are hundreds of millions of climate refugees and failures of governance in countries around the world at rising seas, and stronger storms, and deeper droughts, and bigger floods and a collapse of of, of, of, of civilized norms in different places.
47:44
Challenges to the food supply and the water supply.
47:46
They'll look, they, they would be justified in asking you why didn't you do anything about this?
47:54
But if they look around them and see a world in renewal, with a massive shift to renewable energy and efficiency and a whole systems thinking and a sense of hope in people's hearts and a regeneration of the life and vitality of the earth and of human populations.
48:11
They will ask you, how did you rise to this challenge.
48:14
And you have to decide which of those questions you want to answer while you're here.
48:19
And equip yourselves to be apart of given, and part of the answer will be that you went to Stanford Business School, you got the skills and knowledge and then you decided to use them in an effective and appropriate way.
48:32
Thank you very much for having me here today. >> [APPLAUSE]. >> Thank you, thank you. [MUSIC]