The New Rules for Leadership

28:55But, you know, three weeks after we're going out of our job, somebody else is going to be there. We're going to be forgotten. And so I think you don't want to take your job too seriously, but I think you're going to take how you treat your people and your team very seriously. Yeah. You know, and is there a way to, when you have to make this hard decision, Is there a way to cushion the blow or are there things that you live with after knowing that families are, you know, people are going to lose their jobs or whatever? You know, you are responsible for many people and you take that very seriously.

29:29You know, part of our transformation has been about simplifying and reducing the size of our organization meaningfully. And just at the corporate level, in the first three years of my job at the company, in fact, probably mostly in the first two years of my job, we reduced the number of employees from 13 ,500 at the corporate level to 8 ,500. So 5 ,000 job reduction. And of the 8 ,500 people, we rotated 3 ,500 people, almost 4 ,000 people that were new in the jobs. So a lot of transition and a lot of people were impacted and every person matters. So when you make those decisions, you have to think about the individuals and be respectful and mindful and and, you know, and really think about the impact that it has on people's lives.

30:24But at the same time, you have to make those calls. And of course, when you make those decisions to people that you've been working closely with, that were your colleagues, by near your office, it's even harder because it's more personal. But you really do have to separate the personal side of it with what is the right thing for your business in this job. But at the same time, do it in a way that is compassionate and show empathy. and you really do care. You know, going back in my early side of my career, the first time that it dawned on me that you actually have real responsibility over your employees' career in life is that when I was about 31 years old, first company I run, Fox Kids, we were looking to launch a new business that didn't exist.

31:16And I ended up convincing a seasoned executive 50 plus years old with four children to quit his job in a very established, credible, big media company and move countries to work for us in London. And, you know, I just convinced him and he moved. And when he landed, I was thinking, whoops, I just convinced this guy to pick up his family, four kids and a wife, relocate and bet his career on my idea for a new business that we're about to launch. And that was the first time it actually hit me that, wait a minute, this is real like impact you have on people's lives. Luckily, it worked really well. I was afraid you were going to say you fired him a week later.

32:06And he was thankful and grateful and it was a perfect fit. But it was a moment when you realize that you're actually impacting people's lives. But ultimately, you need to have a very clear North Star, be transparent, be, you know, have a clear purpose and be truthful to the mission. And that is always the best way to communicate and explain why you do certain things in the way you do them. Yeah. I mean, I used to, I teach on the side because I like teaching and I used to teach at Yale. I only teach at schools I couldn't have gotten into. And I was teaching Machiavelli's the prince. And he has a line, and there's a very famous line that it's, for a leader, it's better to be feared than loved.

32:49And my college students were like horrified. And then I led a seminar also teaching Machiavelli's Prince to corporate leaders in New York. And they were like, absolutely. It helps to be feared a little. Is that not really the way modern corporations work? Well, I'm not sure I would put those as the only two options, because it's certainly not a popularity contest. And I think it's really important to remember that. But you do need to be able to mobilize an organization. And, you know, when you talk about the role of the CEO, I've never believed in CEOs as superheroes. You're only as good as the quality and commitment and energy and alignment of the people you have around you.

33:38And so I think you have to be able to motivate and focus and inspire people to keep going on the hardest of days through big changes. And so they have to believe in why they're doing what they're doing and what they're doing and be signed up for how the organization is in terms of culture as well. So fear, you know, I'd never have that as an aspiration as a CEO, because you want people to be able to bring you bad news. And if they're scared of doing that, you're going to have a real problem in terms of transparency and pace of decision making. And, you know, I think one of the things you have to be alive to in these jobs is, you know, do you have enough truth tellers around you?

34:31especially as you go through the sort of degenerative disease of being a CEO when it all starts off brilliantly and you know everyone's transparent tells you all the stuff that's going on in the company and then you know at the beginning you can bring all these fresh ideas but you know I always like the idea that year one is really hard but year two is much harder because it's all your fault by then. So I don't think it's fear or love. I think you, by definition, as a leader, should be looking for followership. And how you inspire that is probably unique to each of us in the moment that we're leading our companies.

35:08Fear is very effective, but it has a ceiling. Yeah. And I think, you know, I have always followed leaders and found the most effective And the way I try to model is to lead with head and heart and to lead with inspiration and compassion. And when you can mobilize thousands of people around an inspiration, I think the ceiling of what you can accomplish together is just so much higher. People will come. They will do what you say in both cases if they fear you or if they love or you created followership. But fear is not sustainable. I love creating teams. That's my favorite thing to do is go into a business, build a team, build a team of folks that are far better than I am.

35:59And this is kind of dumb, simple, but the way I have always done that is come in and create trust. And the only way you create trust is creating vulnerability in the room. And it's only going to happen if I go first. And you create that in a room of terrific people and they can do anything. And it's not about they'll follow the CEO. They'll follow the fact that they believe in what this team is doing. And nothing is more motivating or powerful than that. Fear sustains for a while. Love sustains for a long time. Let me ask you guys, for anybody at the table around time management. My wife just happened to send me a video today of somebody, Wozniak, or somebody talking about Steve Jobs, how he managed his time, how he figured out what to spend time on.

36:44And it surprised me, the strategy. it was find the three things you need to do in the next 18 hours and everything else is just noise so he fixed it seems short term to me frankly but he had to figure out a way to how to portion his time do you guys have formulas practices on how to pay attention to the things that really need paying attention to and not all the noise well um i grew up in a military family so I you know I would say both a strength and a weakness is a degree of discipline and kind of control on diaries and I think just like capital allocation is strategy I think time management or time allocation is strategy for a CEO and so I'm I am I couldn't do it on an 18 month also an 18 hour horizon although I suspect he probably did that in the context of what he was trying to achieve over the long term.

37:38But I'm pretty disciplined around what are the objectives of the company, you know, on a year, three year, and we have to look at a 10 year horizon. What does the CEO uniquely, should you uniquely spend your time on? That has been harder over the years to adjust to. And I, you know, do very obnoxious color coding of my diary, and which meetings I go to, and all of that kind of stuff. I find that quite effective. The issue that I've really struggled with on time management, though, is how as a CEO, you don't screw up other people's time management by your enthusiasm suddenly creating a huge ricochet in the company.

38:22Because you ask an innocent question and suddenly lots of people are working on it. So that's something that I've had to watch out for. Anybody else have a trick? I think, you know, that's interesting. I think all of us write, like, what am I needing to do today? and you know what the critical priorities are, what your strategies are. But, you know, just like when you say, well, is your life balanced? Well, sometimes no, many times no, no, it's not. And so you can kind of feel, I always know, okay, I'm working on this, but you know what, I really need to be out in the country. I need to get out onto some farms.

38:54I need to spend some time because I'm understanding that this is a stressful time. Or I need to be with customers. Or I need to be with teams in the manufacturing facilities. And so this, you know, I think that there's something I do tend to be very disciplined and I'm very structured, but I can feel when, you know, I really have not been present with customers or with farmers or with the members or whatever. And I really need to get out there and I'll say I want to spend this next couple of weeks. I need to be out in the country with them because I'm, you know, I can feel that angst. I can see it coming into my mailbox.

39:32And so I say sometimes it's not about whether you did the task for the day. It's overall, are you touching the things you need to touch, the people that you need to be present with? And should you make an adjustment to be present? Time is probably the only resource we can't make more of. And so we all have an operating system or something we do to manage our time. I think the thing that would probably surprise people the most is how often we say no. I mean, there are opportunities like this or like anything else that could fill up five days every day that are all great opportunities. All great opportunities to spend time with employees, with customers, with potential partners, all over the place.

40:21I say no so often to try to stick to the rigor and the discipline of what is actually most important in the moment right now. I've added a technique more and more over the years, which is going to sound dumb simple. And I had some former CEO mentor friends of mine pushing me on this that I really trust. Because I think when you first start, it's easy to confuse busyness and go into meetings with leadership. And it's not leadership because you've got to focus on what you can do. So I put more and more of my calendar to blank time over the years. I'm trying to in 2026. You're going to you're all going to think I'm crazy is to hold the afternoons of Wednesday to Friday completely open.

41:07And now you're traveling and doing things you can't. But what's it for? It's so that you can work on things you need to work on. You can think about what's important right now. You can call people you need to talk to. You can take care. because what we all find, I'm sure, is there's no time to, quote, work. And you confuse going to meetings with the work. The most important thing that is the work is what you're doing for the company that only you can do. And if you don't create time to do that, you're just grinding. And then you're grinding on the weekends, and you're grinding at night, and next week starts, and next week starts.

41:40So I've put more and more, quote, blank time on my calendar over the years. I've been a columnist of the Times for 22 years. I have never gone to a meeting. and so wow wow wow I admire you my employers watch this but if I open my phone I see one event one interview in the afternoon I think oh this day is so crowded let me ask a couple questions related specifically to industries Pete you're you're in retail and malls have faced some challenges retail as a whole has faced some challenges so does it feel like you've you've been in headwinds for decades How does it feel to be in an industry where so much is changing and so much is challenging?

42:22The answer is yes to the headwinds. But, you know, I think ultimately for all of us, I'm guessing it's all the same thing. You've got to evolve what you do. I mean, you want the values and the practice or the values to stay consistent, but the practice has got to evolve. And that's been particularly true, I think, in our business. And that's been going on for a long time. So it's just part of how we do it. But, you know, we're coming up this next year, our company's going to be 125 years old. And that's a lot to be proud of and celebrate. But, you know, just being old doesn't mean you're good.

42:54And so what we're talking about is we don't want to be known as a heritage brand. We want to be known as a brand with heritage. And that means we've got to spend a lot of energy on trying to be relevant. And how do you do that? Well, I think it's staying close to what customers want. And that's the business. You know, I think if you're getting back to spending time, if you're not really spending the majority of your time thinking about how it is, whatever it is that we do is impacting customers, then you're kind of missing the point. So, I mean, I guess that sounds obvious, but, you know, if you're a merchant at heart, it really, it's really about being connected to the customer and how that all works.

43:38And also kind of what happens at the point of sale and with our people. and those are the most important people in our company. So while I'm not attached to that intimately all the time, I come from that place. I mean, I'm selling shoes when I'm 16 years old and all this and stuff. Those lessons never leave you. And I think as a company in our culture, we have a lot of appreciation for what that takes to nurture and enable that. Because ultimately, you need to talk about your people being successful and there's a lot of value we all get from that. But we've got to set the table so they can be successful.

44:12And our practices and our tactics have to be relevant to how customers want to be served. So I think it's just staying focused on that. I mean, I realize you're now an IP company, but you have been a toy manufacturer. You still are a toy manufacturer. And your company's been doing it for a long time. Have children changed over those decades? Or is one generation of children pretty much the same as the last? Or do they change? You know, the world continues to evolve in so many ways. But people are people. And play is play. And, you know, play begins in childhood, but doesn't end there. And we know that physical play has been growing.

44:54Physical toys have been growing. And over the last 25 years, the industry has grown in 22 out of the last 25 years, even with the advent of screen time and technology. Parents will always prioritize investing in buying product, quality product for their children. And especially when it comes to trusted brands. And we know that we are a unicorn when it comes to the quality of our brands and the quality of our product. When a child goes to the store and they look to buy any product, a toy, they don't say, Mom, I would like to buy an 11 and a half inch on doll or a fashion doll or a die cast car.

45:38They say, I would like to buy Barbie. I'd like to buy Hot Wheels. I'd like to buy American Girl. Because these brands have an emotional connection, an emotional relationship with people who buy product. And, you know, our biggest evolution as a company culturally was to realize that people who buy our product are not just consumers. They are fans. They are fans that have a connection and emotional connections with our product and experiences. Many fans in the aggregate is an audience. So when we speak to the world out there, we're talking to an audience of people. And that's a very different approach and conversation than speaking to individuals and trying to convince them to buy an item off a shelf.

46:25And that continues to define how we think about the journey. Toys clearly evolved. You know, the way you used to reach children, you know, 10 years ago, even, is you put a spot, you buy an advertising spot on television, and you reach your audience. Linear television between broadcast and cable is down between 90 and 95 percent in the last 10 years. And the world is much more fragmented and, you know, with the proliferation of distribution platforms, competition for share of mind is getting harder and harder and harder to reach the consumer. And I'm sure it's true for everyone here. It's just harder to aggregate consumers.

47:11So the fact that we have quality brands that attract fans and people are proactively looking to engage with what we do is a huge advantage. So we see an exciting opportunity to grow within toys. But given that we own the underlying portfolio of brands, we can play and participate across different categories that are all driven by big IP and big brands. and in the entertainment world, the game is all about big brands, big franchises that everybody knows that rise above the rest of the market and draw the audience. And this is what we bring to the table when we look to grow our business in film and television and location-based entertainment, parks, consumer product, publishing, digital games.

48:05These are all industries that are driven by big brands that everybody knows. And that's the approach we're taking. It's like a recipe for longevity because Grim Fairy Tales have been around for hundreds of years, and that's a brand everybody knows. M &M's. Exactly. So these brands really matter, and everyone around the table is trying to create brands and build us that relationship that eminates from the brand and creates that connection, that emotional connection with your customers, with your fans. Okay. Now this question is for whoever wants take the hot potato and it's what CEO pay. So I do not believe that if I don't know what your salaries are, I'm sure that must be public, I think.

48:49I do not believe that anybody around this table would work less hard if your salary was a million dollars less than it is right now. So why these numbers? Like the numbers do arouse a lot of popular hostility, angst, anger, gets Bernie Sanders a career. So why are the numbers as high as they are? Depends which part of the world you're looking at. Well, it's materially different in the US to Europe.

49:18I'm sure you're right that what motivates most people to do these jobs is not just the rewards because it's just such a privilege to be able to have the impact that we can have through the work. You know, the standard answer you will always get to that question is the pay is the board decision. And, you know, we are all in the talent business. And certainly when you come to hiring the best talent that you can possibly find, I think in my experience, Pay is usually an important hygiene factor where people want to feel that they are fairly compensated, you know, relative to whatever their alternatives are.

50:12But what really motivates people is the environment they're in, whether the work is worthwhile and purposeful. and you know people leave companies because usually because they think they've got a better opportunity for personal development or because they particularly don't like their boss so those are the main reasons that motivate people and I think they're probably that's probably true for a lot of CEOs. It's not just the board I mean the CEO A you take the money would be there must be a demand side to this question where people want the number. Well, but that's what I'm saying. I think people, in my experience, these things are often relative to whatever the alternatives are.

50:57Yeah, I think you, you know, the table got kind of quiet when you asked the question. But I think you can go to the easy answer, which is it's a market, which is your talent comment. If you want to hire somebody, you have to pay the market. You know, we've hired external senior resources recently. And if you don't pay, you're not going to get them. They are going to go somewhere else. So you sort of start with that practicality. I think what's most important is that CEOs' pays are aligned with the outcomes that reward customers, reward their employees and reward their shareholders. I think in my case, I don't remember, but I believe 92 plus percent of my pay is completely at risk and only shows up if our shareholders do well as an example.

51:44So, and it often doesn't. And sometimes it does and sometimes it doesn't. And that's exactly the way it should be. And so I think it's as important as the number is, what's really important is making sure that you're only paid if you do your job and your stakeholders are rewarded. Alex, you're a tech CEO. Does it feel different being a tech CEO than being a CEO of more, well, I don't know what the other kinds of CEOs there are, but non-tech. Like, it seems tech CEOs are a lot more opinionated, but that just be... Well, what's your answer? I may be checking from a small sample there. I have opinions, and I don't know what being a CEO of a non-tech company is like.

52:32So, you know, I'll tell you what I think is unique about being a tech CEO, I think is unique is just the pace of change and the pace of disruption in the industry that we're in. Every day I wake up and see startups that are new competitors, that are incredibly well-funded, that are trying to compete with us. The technology changes every day. If I think about the last 12 months, crypto and stablecoins went from something that was on the out to all of a sudden front and center. Agentic commerce, being able to buy with an AI agent wasn't even a thought. We just went through Black Friday and had purchases online being done by agents through PayPal.

53:18And so just the pace of change, the pace of disruption, the pace of what we have to deal with from competition or new technology every day may be unique. Again, it certainly is exciting and a fun fun place to be in. On the opinionated side, I think there are a lot of opinionated tech CEOs that I think probably could keep some of their opinions to themselves as well. But look, I think the competition is pretty strong. So I understand why being vocal sometimes helps. I told myself I wasn't going to ask an AI question because everybody asks AI questions, but I just have one, and it's for you, Emma.

54:00Right now, as we speak, are LLMs accelerating your research? Yes. Yes. Yeah, I didn't know. Do you want a longer answer? I was hoping for at least a second. So, look, I think it's probably fair to, and I've been on the board of Microsoft for six years, so I've had a bit of a ringside seat to what's going on in tech. And I am a deep believer that it's going to change everything in healthcare. There's a reason why healthcare is the number one use case. I think a third of the world's data is somehow related to it. There's enormous inequity, and not just in the developing world. I think this country, we also know there's a lot about the system that's unsustainable and unfair, and that's why some reform is necessary.

54:50but for our side um you know we believe deeply that the way you bend the demand curve on the cost of health care is by innovating more to find solutions earlier uh to with with diagnostics as well so we intervene earlier in a more tailor-made way and keep people out of hospital um and uh it's incredibly hard, takes a decade. Most of it doesn't work. But we know already that like every industry and every company, we're looking at all the cost saving uses of AI and Gen AI and Argentic AI. And a lot of that is going to be off the shelf. But the most exciting thing is when you turn a 10 % success rate into a 20 % success rate, or you turn 10 years into eight years or five years.

55:39And, you know, there are a lot of changes going on inside our companies, whether it's in biological target identification, molecule design, the way you segment patients because of all the genetics data as well, to be able to be more precise in the kind of clinical trials that you design, but then also how you execute them. And then you track the data. And then on the outside of the companies, you're going to see regulators starting to change with real world evidence that will actually change the process of clinical trials so that we can shorten that and make it cheaper. And so I think the economics of healthcare are one of the great promises of this technology.

56:19And, you know, it's incredibly exciting to see what's going to come in the decade ahead. Your question on, you know, are LLMs changing? I think, you know, we talk a lot about the sovereignty of countries with technology. I think there is a question on the sovereignty the sovereignty of companies. And, you know, cost saving is one thing, but it's when you augment the capability of the company to deliver more top line. And how much do we build these LLMs in-house? And we're doing that in specific disease areas, which means we can then have, we have an agent that we call AI scientist, which I'm sure we could brand that better, but, you know, which is like having a PhD that's serving, that can work 24-7, doesn't need any cultural training and can speed our time from a hypothesis to being in formal testing, we'll reduce it by half by next year, I think.

57:10So there's an enormous amount going on, but it will take some years to really change. What's exciting is to see these totally in silico design pharma companies coming through. And this is where the US has led the world. We need to watch what's happening in China very, very carefully. Well, let's go there. You all deal with China, I assume. And as just someone who watches the news, it seems they're ahead of us in one academic field after another, and in one technology field after another. And you look what's happened, say, to German autonomy. And does it feel that way in your industries, that we're being leapfrogged?

57:50Or does it feel different than that? You know, even in the food system, they have a very significant playbook they are following. And they have, of course, a lot of control to do it. Seventy percent of the gene edited patents in the food system come from China. They are investing, I think it's five times what the United States is investing in terms of technology. And when I say technology, you know, agriculture is big technology. We're a big partner with Microsoft. We have a small language model, Oz, which works with agronomists on the farm. So everybody's a tech company these days. China is not only investing heavily, but they also control, for instance, say the mids, what we call the mids, for our own food system.

58:4170 percent or actually it's 90 percent of animal vitamins. I mean, a lot of things come in from China. So are they leapfrogging us? They're certainly investing heavily in the food system. Food self-sufficiency is their primary goal. And they're investing accordingly, not only in their own country, but with relationships, especially with Brazil. And are they investing intelligently? line? Well, again, the patents, now we could argue whether the patents are viable or not. Yes, they are. They're getting closer. I think, really, you know, and there's, of course, a lot of news about soybeans and things like that.

59:26Soybeans are an area they don't have self-sufficiency on, and that is used for feed for their hog population. And as people move to the cities, Their diet changes. They want more protein. And, you know, hog population is significant in China. They buy 60 percent of the world's beans. So they're not self-sufficient there. The balance of it, they're moving pretty aggressively and they're consolidating at farm level. So they can have a farm that has, you know, 100 ,000 animals on it. and they have the technology that allows them to have the expertise taking care of those animals. So, you know, it depends on how you're looking at it.

1:00:12If their goal is self-sufficiency or developing partnerships and they're investing in technology, I'm telling you they are moving pretty quickly. Mr. Bob, is this your experience? You know, we're a primarily U.S.-based company that are beginning to serve other parts of the world, So I probably have the least knowledge at the table. So we have direct industry impacts around aircraft that's being developed, sometimes with U.S. technology in China. I think that's probably years behind at this point. But I agree. I think they're putting a lot of money into this. They're highly, highly organized. They don't think short term.

1:00:50They think long term. And if anything, I think that's probably the thing that is the biggest difference in focus is learning to think about 5 and 10 and 15 and 20 years from now as a horizon rather than six or nine months as a horizon, because you'll just make different decisions. But I think everybody around the table is probably more knowledgeable on this than I am. We actually went the other way. China historically has been a place where between 80 to 85 percent of toys that are being made, manufactured for the world. At the start of our transformation, we said that this is simply too much concentration in any one country.

1:01:30It wasn't about China per se, but rather concentration in any one country. So we practically have been diversifying our supply chain, whereby China today represents approximately 35 % of our global manufacture. Industry average is still in the 80s. And we are in a much more diversified position, but we make product in seven different countries. Such as? Including, so Vietnam, India are the newcomers, but Indonesia, Malaysia, Thailand, Mexico. So just having a diversified footprint over your manufacturing. But the point, it wasn't about China and obviously well before any, you know, geopolitical issues were on the table.

1:02:14It was just about diversification and having a well-balanced supply chain. Now, when I was 21, my mentor was a guy named Milton Friedman. And he taught me that a country that involves politics too much in their firms is going to have rent-seeking, political interference, inefficiency. That style of capitalism is just not going to work. what does it say about our capitalism that their version seems to be doing okay or is it can you look at me like i have an answer for that one i don't know i i don't really have an answer for that um i mean our our exposure in china is a lot of what we sell comes from there um but we don't directly you know do business in china but it you know Well, this isn't really answering your question, but I mean, you know, our issue is we're just not agile, agile enough to be able to pivot if all of a sudden tariffs are really high and it's something is impacted there in the supply chain.

1:03:22um yeah so i mean i when i think about how what happens in china against largely chart head to things like tariffs and where we procure the brands that customers want to buy from us and having to you know create agility for ourselves so that we don't get exposed because we just can't move that fast i mean it takes us a year or so to source things from different places i mean i uh lived in China and ran L 'Oreal's consumer business there in the early 2000s. And I really agree with the comments that setting political models aside, there is an approach to long-term industrial strategy, which has served the extraordinary acceleration of their progress very, very well, With a particular focus right from structurally from education being focused on STEM.

1:04:17And some, you know, many countries, including mine, talk about having an industrial policy, but it can move in our democratic systems to being pretty short term and even into the latest news cycles. And I think when you look at the pharma industry, you know, resilience is a common word we all use these days. And I'm very we do not manufacture in China. We have a relatively small share of our revenue there, although there's still plenty of opportunity. But what we are doing more and more of is business development. So buying early stage assets that are being discovered and developed in China, then picking them up after all the appropriate due diligence and deploying them through our supply chain and then clinical trials in the West.

1:05:09And what is absolutely clear as China has gone from a very low single digit percentage share of first in class medicines for the world to overtaking Europe now. and the US is still leading the way but China's deliberate ambition and I'm not sure it's a zero sum game actually because we should all be trying to invest in innovation in healthcare but but China's deliberate position to deploy technology alongside the advances in biology to deliver great leaps forward is extremely deliberate and heavily invested. And that's also why we need to keep protecting and investing in innovation that comes out of this country, which has for many decades led the world.

1:05:55One last China question for Alex. When you go to Stanford or Miami, Chicago or Yale, so many of the science PhD students are Chinese nationals. And they're obviously very smart and doing very well. In your firm, do you experience Chinese nationals? Have you seen them begin to go back to China where they feel there's more opportunity? Has there been a talent issue you've faced because of that? We haven't seen that folks moving back. We actually have a business in China. We actually enable small businesses in China to sell around the world. We've connected some of the largest wallets like WeChat in China to the rest of the PayPal and Venmo ecosystem.

1:06:34So we're enabling commerce back and forth, and we employ Chinese nationalists to be able to run the Chinese business. But we haven't seen a lot of back and forth, at least not recently. But just to the previous comments in terms of STEM, and you look at some of the LLMs and new AI models coming out of China, they're incredible. And it's something that I think we all just have to make sure we're paying attention to because the investment is high. And at the end of the day, in a market, the best technology is going to win. Yeah. Now, I want to talk a little about politics without being explicitly political, because I know you guys are not going to condemn Donald Trump the way I want you to, but we'll let that be.

1:07:20And it's about tariffs. And I guess, Beth, I'll start with you. Your industry is very prominently. What? What are you talking about? I guess on Liberation Day, were you happy or sad? No. I really want to know what it was like to be you over, and really all of you, over this period when a tariff regime that we did not expect, or at least I did not expect 10 years ago, is suddenly back. And has it been extremely challenging, manageable? Well, the situation now, it really is about export markets for the food system. Okay, yes, there is, from an inbound perspective, from crop protection items, chemicals, yes, there has been an elevation and increase in costs.

1:08:06But it's really about the rewiring of trade lanes and the implication for the American farmer. The American farmer and the food system requires exports. It's critical. One in four roads of corn, one in three roads of beans are exported. And without that, the profitability for the American farmer is challenged. challenge and so what you have right now is a very significant um weak system now this is not just this year and I try to be very clear about this this has been going on for a while farmers have lost money especially if you're a grain farmer the last three years so this is not a new thing and it's the strength of the dollar it's the rise of Brazil they can double crop They're huge.

1:08:52They've got massive production. They've got different opportunities. We didn't have a real trade agenda in the previous administration, and we're paying for it right now a bit. But this is, again, it's not one administration. This has been going on. I think what I would say is, is it challenging? Yes. Right now, farm bankruptcies are the highest since 2020. many. Farmers, less than 5 % will make money. Less than 5 % will make money. Consolidation is occurring. There are more farmers over the age of 75 than there are under the age of 32. And why is that? Land price continues to rise. And you can say, well, that's good news because they could collateralize an operating loan.

1:09:36But the problem is that nobody can get into it. And you know who the buyers are. It's financial buyers. There was a farm, you know, being sold in Northern Iowa, For instance, one of my staff, it was near a family farm they had, and there were 400 bidders and 399 were financial buyers. One was a local farmer. So what's happening, I said, well, we're stepping towards contract farming. I mean, if we are not, you know, and then there's the collapse of the rural communities around them because, you know, the hardware store, you know, the school and everything is sustained by these, and these communities are sustained by the work that's going on on the farm.

1:10:17So is this a challenging time? This is a dramatically difficult time. It is incredibly emotional. Right now, we are in the heart of it. And the reason I say this is because they're going to the banks now to get their operating loans for next planting season. So this December, January, February timeframe is important. Now, there's a real gratefulness by the farmers that there is a discussion of trade and there's hope. There's announced trade deal with China. We're waiting to understand a little bit more. We're starting to see some things move. Certainly the markets reacted favorably. but you know what is the durability of that arrangement of that agreement don't know yet we have to get more information and more detail but it's it's painful it's emotional and you have to realize these are folks they may be sixth or seventh generation farmers on that same farm and they feel such responsibility for their family's legacy their ability to hand it over to their children and so it's not just well boy their way of their their livelihood it's their way of life This is what they have done their entire lives.

1:11:28And so it is powerfully difficult. Anybody else around the table facing similar challenges or lesser, but also serious challenges? You know, I think the thing, it's not probably an exact answer, but the biggest issue, at least I feel a lot of times, is that the politics come and go, administrations come and go. and because priorities flip back and forth every four or so years, sometimes more often, the country, you can't get unified focus on the things that really matter because a lot of things take longer than that cycle to work on and invest in. Especially if it's private investment, you're not gonna invest in something that's a 15-year project if you don't know if the politics are gonna switch in three years, four years from now.

1:12:12So we focus on the things that are really important in the industry. For us, it's modernizing the skies in air traffic control because a lot of what is in the system today is four decades old, five decades old technology, and it takes years to fix that. And so you've just got to stay focused and sort of rise above the politics and unify on the investments that are important and live administration to administration because it's going to change on you. For those of you who have, some of you are people on the table are in extremely regulated industries and some are in moderately regulated industries.

1:12:50Have you found this administration, you can deal with them? Like there's somebody to call and talk to and get an answer. Have you found that to be generally the case? I mean, there's definitely engagement. Yeah. I mean, I think the administration wants to focus on deregulation, things that are, they want to enable businesses. I think that that is absolutely true and agenda. Yeah, there's absolute access. Yeah, you can. You can talk to folks. Okay. Yes. Okay. Well, that's good news. Now, this country is changing demographically and economically. Pete, I'll throw this to you. Has the client base changed for how you think about what you're going to sell and at what price point you're going to sell it?

1:13:37And how do you think about the evolution of our population and who you guys are? Well, I would say if you just looked over the last several years, our average unit retail has gone up, and that's really been chasing demand. So I would have to say at least where we operate in the market, customers are more affluent. And, you know, they're willing to spend money on really nice things. You know, we've got a pretty broad assortment, but, you know, we're not in a position where we're trying to serve 80 % of America. That's just not really where we are. So I would say, again, for most of the businesses that we do, customers are willing to spend.

1:14:18But that gets tested. I mean, you know, you're seeing it right now. I mean, like in the luxury business, there's been a lot of discussion about they've raised prices like crazy. And I think you've seen how that negatively impacted the business. And then just you talk about tariffs, which kind of hits everywhere. And if you're in a business like ours, you know, we're not a large margin business. We can't absorb that stuff. Those costs get passed along to customers. That's just a fact. Um, and price is a hugely important consideration for anything that people are buying, even, you know, when we're operating in with more affluent customers.

1:14:50So, you know, that stuff's a bit out of our control. Um, and we try not to get involved with the politics, but what we do try to, we do, we try to let it be known how it's going to impact us and try to give an unfiltered view. Like, like we're not taking a position on this, but this is the consequence of that decision how it's going to impact our business. I bought an overcoat from Nordstrom's over the weekend. Was it expensive? No. I came back after the 30 % Black Friday discount. It was like$279. I called my wife. I sort of wanted to spend more. We're here to help. We can do that. I want to thank you guys for the 70 minutes we've shared.

1:15:32It's been a pleasure. One thing I was confident in, the one bit of social psychology I know is that CEOs are almost all extroverts. And so I want to thank you for being extroverted and conversational. Thank you. Thank you. Thank you. Thank you.

1:15:51Deal Book Summit is a production of The New York Times. This episode was produced by Evan Roberts. Mixing by Kelly Piccolo and Katie McMurrin. Original music by Daniel Powell. The rest of the Deal Book Events team includes Julie Zahn, Hilary Kuhn, Melissa Tripoli, Beth Weinstein, Angela Austin, Haley Hess, Dana Prukowski, Matt Kaiser, Chantal Rainier, and Yanwei Liu. Special thanks to Sam Dolnik, Nina Lassam, Christina Josa, and Maddie Maciello.