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In this episode of The Speaker Show, Sean Pillot de Chenecey interviews Alex Edmans.
Alex is the Professor of Finance at London Business School. He is an expert in corporate governance, responsible business, investment strategy, behavioural economics, time management, and the use and misuse of data and evidence.
Alex has spoken at the World Economic Forum in Davos, testified in the UK Parliament, presented to the World Bank Board of Directors as part of the Distinguished Speaker Series, and given TED talks with a combined 2 million views. He is also Mercers School Memorial Professor of Business at Gresham College.
Alex is frequently interviewed in the media, has written Op-Eds for the Financial Times and Wall Street Journal, and writes regularly for Harvard Business Review. His book “Grow the Pie”, was published in 2020.
In this fascinating episode, we discuss a range of his views on issues including:
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Sean Pillot de Chenecey (00:11): Hello, this podcast is care of Speakers Associates, the global speaker bureau representing a select group of the business world’s finest thinkers and thought leaders. Founded in 1999, today Speakers Associates operate out of nine offices across seven countries covering the UK, Europe, and Middle East. I’m Sean Pillot de Chenecey author of the Post Truth Business and Influencers & Revolutionaries, which are being followed by The New Abnormal. In this series, I interview a range of fascinating individuals, proudly represented by the bureau. These change agents and industry experts give an update on their specialized areas of knowledge, and also on their motivations and viewpoints regarding the future of business.
Sean Pillot de Chenecey (01:07): So today I’m really pleased to be joined by Alex Edmans. Who’s a professor of finance at London Business School is an expert in corporate governance, responsible business, investment strategy, behavioural economics, time management, and the use and misuse of data and evidence. His bio is impressive to put it mildly. So I’ll give you a top-line version of it. Alex has a unique combination of deep academic rigour and practical business experience in a particular ability to communicate complex concepts in a simple, engaging and dynamic manner. Alex has spoken at the World Economic Forum in Davos, testified in the UK Parliament, presented to the World Bank board of directors as part of the distinguished speaker series, given a TED talk, What to Trust in a “Post-Truth” World and a TEDx talk, The Social Responsibility of Business with a combined 2 million views. He’s also Mercers’ School Memorial Professor of Business at Gresham College, giving three public lecture series on How Business Can Better Serve Society, Business Skills for the 21st Century and The Psychology of Finances lecture series on Business Skills for the 21st Century cover topics such as time management, finding purpose in your career.
Sean Pillot de Chenecey (02:22): Public speaking, mental and physical wellness, critical thinking and the growth mindset. He’s also leading authority on reforming business to serve wider society. His book, Grow the Pie: How Great Companies Deliver Both Purpose and Profit, and I have a copy of it on my desk right now was published in March, 2020 and headed the Financial Times list of business books of the month. He’s published over 20 articles in the world’s most elite academic journals and is one of the most cited finance professors of his generation. Prior to LBS, Alex was a 10 year professor at Wharton where he won 14 teaching awards in six years and worked for Morgan Stanley in both investment banking (London) and sales and trading (New York). He’s featured on Poets and Quants Best 40 Professors under 40 and the Thinkers50 Radar. To that, I think all I can say is, Wow! So Alex, hi and how are you?
Alex Edmans (03:16): I’m great. Thanks Sean. And thank you so much for having me on. It’s great to be here.
Sean Pillot de Chenecey (03:18): Well, I mean, after that epic biography is exhausting to even read it. So you’d be the person. So Alex, I know we wanna talk about a lot as we go through this podcast. In particular, your thinking and indeed your writing about how companies deliver both purpose and profit. But before we get to that point, take us through how your career unfolded since you left Oxford. I know Oxford you had a fairly glittering time as well. So off you go.
Alex Edmans (03:42): Yeah. Thanks Sean. So Oxford, I did economics and management. And why did I do that to begin with? Well, when I did my A levels at school, I did a strange combination of both arts and sciences. So some of my friends did maths, physics, chemistry, others did English, history, German, but I did a mix. And why? Because I liked both having some evidence, but also the fact that there was no right or wrong answer. So it’s not perhaps like physics or chemistry, where we can have to finish to prove we can have some evidence and have some theories, but argue about them and have some different viewpoints. So that’s why I looked at, I studied economics at Oxford. And then probably like most people who did economics and management, I went straight to the city. So I was at Morgan Stanley, for a couple of years in London.
Alex Edmans (04:24): And I actually had a really good time there. So you have a lot of ex analysts who got beaten up and really mistreated. I actually really enjoyed the fact that I got to work on really interesting questions with really smart people. But why did I leave then, is that I remember when I did my first deal, it was some probably national, one of the large UK retail banks at the time.
Sean Pillot de Chenecey (04:45): Yeah.
Alex Edmans (04:46): And the next day it was in the Financial Times that they’d made this great sale. I felt really good about it, but then the next day after that, people just forgot about it. And I thought, well, I’ve spent seven months of my life working on one companies problems at one time. Whereas if you do research as an academic, you could write a paper which is timeless, which perhaps could apply to many companies in different time periods throughout the world.
Alex Edmans (05:12): So I left to MIT Sloan where I did a PhD in finance. And that’s when I first worked on responsible business and now it’s a very popular topic but back in 2005, that was midway through my PhD when I first worked on it. It wasn’t really that popular. But I just thought this is an element of business side. I just personally, I’m really excited about. Then I went to Wharton in 2007 after graduating. I spent six years there. And after getting tenure in 2013, I surprisingly chose to resign tenure from Warton and move to London Business School where I’ve been for the last seven and a half years. And why? It’s because out of the spectrum of academics, I’m very much on the practitioner side. So I’m really excited about putting these ideas into practice. That’s why I love doing podcasts like this one. And Wharton’s a fantastic school. I was so grateful for being there, but it’s in Philadelphia, which was neither DC nor New York. Whereas being in London, you are in the thick of things. And it’s great to be able to speak on responsible business particularly now, given it’s a topic that companies and investors and policymakers are taken seriously.
Sean Pillot de Chenecey (06:21): Yeah, yeah, yeah. Wow. I mean, that’s a fantastic whistle stop tour through there. But in terms of jumping and obviously doing this talk, we will go around a whole series of subjects. But I mean, looking at your book, which is on my desk right now. To start some, I thought, really interesting how you have a series of quotes at the start of the book. And one has to say by the way, the amount of people and the sort of glittering backgrounds and seniority of the people who’ve given you, absolutely superb quotes for the book is a phenomenal. Jumping into a book about purpose and profit being combined here that famous Milton Friedman quote “there’s one and only one social responsibility in business to increase its profit.” So you then mentioned Peter Georgescu, “shareholder activists . . . are more like terrorists who manage through fear and strip the company of its underlying crucial assets . . . extracting cash out of everything that would otherwise generate long term value.” And yet the other straight in there with Hillary Clinton, there’s something wrong when the average American CEO makes 300 times more than the typical American worker.
Alex Edmans (07:28): Indeed.
Sean Pillot de Chenecey (07:28): So just talk us through, you began to look at purpose in real depth, you know, a long time before it became fashionable. Should we say, just at, to unpack your ethos of why one has to, as you say, Grow The Pie, perhaps just take us through that.
Alex Edmans (07:46): Yeah, absolutely. And let me just talk about what I mean by purpose to begin with. So I think the purpose of both a company and of an individual is, not to make money or to be successful. That’s obviously important, right. But to make a difference to the world. And so the French often call letters, la raison d’être, the reason for being. And then when I thought about sort of, why did I choose to leave investment banking, which was clearly very lucrative and has a lot of trimmings attached to it to go and be a poor PhD student. Why? For me, that was the decision driven by personal purpose. The fact that as an academic, you are about the creation and dissemination of knowledge and just being in that environment and doing what I was really passionate about, I thought, well, even though career success was not the driver of my decision to move.
Alex Edmans (08:37): Actually I might ultimately are not expectedly become more successful doing that because had I stayed investment banking, I might not have been as passionate about it as my colleagues and I would not have been at the top of the tree. And so I thought, well, maybe we could have that same approach for companies. So there might be companies who are there purely, deliberately maximizing profit, and you’ve got other companies who think, well, let me try to focus on the social goods. So perhaps what drove Steve Jobs wasn’t how can I become the first company to be valued at $1 trillion and said it would be, how can I push the boundaries of innovation in design? And then as a byproduct to being committed to that for purposeful social reasons, ultimately Apple became profitable. So what I wanted to look at is can indeed you’ve become even more successful, perhaps not for targeting success directly, but instead trying to serve wider society. And then if you do that then success will come as a byproduct.
Sean Pillot de Chenecey (09:40): And then do you also talk about, in terms of the implications of this on a really mainstream, mass everyday level, you know, you mentioned sort in a job search, so, you know, a way should we say from the leading edge thinkers of Silicon valley to everyday life. I was reading a piece again that you wrote a while ago when you say know capitalism in crisis, the consensus among politicians, citizens, and even executives themselves on both sides of the political spectrum and throughout the world is that business just isn’t working for ordinary people. And just much other stats you mentioned there, the 2007 financial crisis costs 9 million Americans, their jobs, the economy has recovered since then, but the gains have largely gone to businesses and shareholders. So perhaps talk us through COVID and how that has also linked into, and perhaps been highlighted by, a lot of the issues that you wrote about there.
Alex Edmans (10:45): Yeah, so the, obviously the impact of COVID has been extremely devastating, for the economy and wider societies. They both shareholders and stakeholders have lost here. Now there were companies who try to respond to this by thinking, well, how can we make sure that shareholders are protected, that our profits don’t fall too much? And most of the burden is gonna be on everybody else. So you might think of say sports direct, where they try to keep their workers still coming to work. Even though the government has said you shouldn’t come to work, unless your work is absolutely essential. And while I’m somebody here who loves sports, sporting goods are not essential services, right now. And so while they try to focus on profit by making their workers still come to work, that backfired, and they’re just image and reputation suffered tremendously.
Alex Edmans (11:35): Whereas you have other companies which I think have active very well in the pandemic. For example, Unilever is choosing to give a hundred million Euros of food and sanitizer to local communities. They guarantee the jobs of their 150,000 workers, even contractors. So not even direct employees, you’ve got other companies which are really trying to be innovative in this situation. So Mercedes, they normally make Formula One engines and turbines. Obviously that’s not really that useful right now because the Formula One season wasn’t taking place, but they instead use their engineering expertise to make CPAP breathing machines, which is a less invasive alternative to ventilate. So they thought here, like, what is the problem? We’ve got massive problem here of health. We’ve got engineering expertise. Let’s use that expertise to serve society.
Alex Edmans (12:27): They didn’t think, can we monetize it? Can we make money from this? No. No they thought, well, how can we serve the society? And then maybe later on as a byproduct, they will become more profitable because their reputation has been improved. Maybe just employees working for them have just become massive, much more motivated, realizing they can contribute to a national pandemic, sorry, global pandemic. This is a source of pride. And so I think ultimately you will become more profitable. So that’s why I started the book with those seemingly contradictory quotes, which you just mentioned short earlier, is that often people think that purpose is at the expense of profit? So purpose is about being fluffy and saving the dolphins and so on. And obviously that’s important what we do need to care about society, but for the standard hardheaded businessman or businesswoman, right? They might be skeptical because they might think, yeah, but commercially, we still need to make money. Businesses are not charities, we’ve got shareholders, but what I wanna present is, this is not an either or decision you can actually achieve both. And that if you are driven by purpose, ultimately the company might become more successful rather than less. And while that might seem to be too good to be true or wishful thinking, my role as a professor is to look at rigorous research and show that it is indeed possible for both to be simultaneously achieved.
Sean Pillot de Chenecey (13:55): And then you mentioned that there, you know, some fantastic examples, of, you know, for instance, you know, major corporates or major, major brands and businesses and organizations that are, that have shown by their behavior to have to really stepped up. So you talk about, you know, that in leave activity, the Mercedes activity, and again, you talk a lot in the book about, you know, as you say, you know, viewing businesses as them and society as us is an example of the sort of pie between mentality. So it’s not business or society, it’s business and society, which gives us great hope and great responsibility. What about on a sort of a straight level basis? So if you’re not a Unilever or a Mercedes, but if you are a small independent outfit or indeed a medium size business, what is the, what are the actions that one can be taking that are practical and realistic? So again, I know this Frenchy at the end of the book, you have a whole list of actions that can be taken, which I thought is really, really, you know, a real call to action, a real call to arms. Part, just take us through a few of those from the point of view of, yeah. Your action list.
Alex Edmans (15:07): Absolutely. I think this is a really important question, Sean, because when people think about businesses being responsible, they think that’s something you can only do if you are a massive company like Unilever, but you’ve got a hundred million Euros lying around, right. We often think that responsibility has the phrase CSR, right? So that involves spending loads of money by giving a lot of money to charity or giving a lot of food and talents to portray. So that’s a bit like the analogy of having a pie and just splitting the pie differently, giving up part of my pie to somebody else. But as you say, Sean, that’s unrealistic. If you are a small business trying to survive, if you don’t have pie to give, then you can’t really engage in traditional CSR donating money or donating products. So instead what I think you can do as a business leader is create value through innovation.
Alex Edmans (15:59): So this is why I use the metaphor of growing the pie. So rather than giving a greater slice of what’s already there, which you might not have, if you are a smaller company, how can we innovate and solve social problems? The question I like to ask is what is in my hand? So a business leader can ask herself what is in my hand, what are the resources? And what’s the expertise my company has and how can I use this to serve society? Now, that might seem like really nice and abstract. So let me give a concrete example of a small business that I’m a customer of. So, there is this brutal chain of gyms in London called Barry’s Boot Camp. So the likes of David Beckham, go go to this. And I’m also one of the clients. And this gym obviously had a shut down in March of last year because of the pandemic.
Alex Edmans (16:49): So what they did is they thought, well, let’s offer a lot of free online fitness classes through Instagram to people sacrificing at home. Now you might think, well, okay, that’s great, but that’s not hugely innovative, just a fitness company using its fitness expertise, but what was really special was the following. So they had a many desk workers who worked in the gym and obviously those workers had their job because the gyms were shot. But it turns out that many of these desk workers were actors as their main job. But because acting’s a pretty volatile career, they took this gym job to supplement their income. Now, if you are an actor, what is in your hand is you are really funny, right? And you might think, well, you are funny, but how can that help out in a pandemic? Well, what we had was a lot of parents with their children at home because the schools were shot.
Alex Edmans (17:43): So what Barry’s offered was this zoom like program where they would tell stories to children or entertain children to take the load off, they, what the working parents. And so that was just a case of where you had just a small company, didn’t have money to spend, but this involved, no financial expenditure, but simply the mindset shift as to what resources do we have, what are the talents that we have within our workforce and how can we use this to serve wider society? And that was a way which I thought was really special about being innovative in terms of their resources.
Sean Pillot de Chenecey (18:20): Fantastic. And then go to, give us a few more, because I say the action list. I mean, I find again very interesting how, as a sort of slight, actually sort of a side to that question, so I’ll do a two-parter. I mean, I thought it was very interesting in the book, how you give a guide for how to read it, which is really unusual. And that that’s incredibly useful when you’ve got a very, perhaps sort of a mixed audience taking a look at the book for a variety of reasons, or coming back, should say from a, from a variety of disciplines. So, you know, you talk about leaders and define the purpose of the enterprise. You talk about the implication for boards or investors, so yeah. Perhaps just take us through those again, from the point of view of the Speakers Associates, listeners. So yeah, starting with leadership, just the advice you’re giving there.
Alex Edmans (19:07): Yeah, absolutely. And so, the start of the book says, I recognize there’ll be a lot of different readers. Some of them will be leaders, CEOs, or maybe managers of products within a company, some will be investors and some will be ordinary citizens. And those are just people who are just interested in business. And what I wanted to highlight was even with citizens, they can play a major role. We often think companies that say may massive nowadays, if we are not the CEO who can decide to give a hundred million Euros, then we can’t do anything, but I want to emphasize how even ordinary citizens can play a role. But let’s start with leaders because that’s what you highlighted Sean. So what should a leader do if she wants to make a business more purposeful?
Alex Edmans (19:48): And I think the answer here is to think about what the word purpose means to begin with, because we often view purpose as a synonym for altruism, right? A purposeful company is one that serves wider society.
Sean Pillot de Chenecey (20:01): Yep.
Alex Edmans (20:01): But if you think about it, right, the word purposeful means focused and targeted, right. If I was to have a purposeful meeting, that’s one with a clear agenda. If I do something on purpose, I’m doing it deliberately. So I think for a leader to think about the purpose of her organization, yes, it must be one that serves wider society, but it also needs to be one which is focused and targeted. So for Vodafone their purpose is to use their technology to enhance social economic progress. So that does mean they’re gonna do some things outside their core business of telecom services. For example, they launched Empieza this mobile money service in Africa, because that was something which was using their technology.
Alex Edmans (20:52): But that doesn’t mean they’re gonna do things such as building say some schools in the local community or regenerating the rivers or so on. Right? Those are worthy things, but that’s just not what Vodafones focus should be. So, if you are running a purposeful business, right. This doesn’t mean that you need to be all things to all people. Right? Often we think that we need to say something about every situation. So Mr. Floyd is unfortunately unfairly killed. And then every company thinks, oh, let me post a black square. And let me donate loads of money to charity. When in fact for certain companies, maybe the west best way that you serve society is through things like giving financial inclusion in Kenya. Like what Vodafone did made for another company it’s combating climate change. Maybe for other companies, it will be to highlight the importance of diversity and recruitment and so on given what they were doing. But the whole issue here is that the purpose should be specific to a company. Again, using the analogy of a person, your purpose would never be to be an entrepreneur and a doctor and a lawyer and a teacher, what you choose to do one of those things and do that really well.
Sean Pillot de Chenecey (22:03): Yeah. Yeah. And then in terms of the, and I thought this is again, really interesting, a practical guide for boards, and this then comes back to the point you’re making about, you know, it’s not business or society. It’s both. And so you talk there about, for instance, I know you mentioned, you know, so, pay executives with equity that they must hold for the long time, you know, watch out for potential short term behavior. You know, the emphasize complex bonuses based on quant targets, all those things that one tends to read in the media as being typical examples of why there is so much, should we say irritation to put it politely from a lot of the public, towards the leaders of big businesses in particular. And I thought interesting how you offer a very practical guide to how to ensure that you are not gonna be tripping over those problematic behaviors.
Alex Edmans (22:57): Yeah. So this is a very important point is CEO pay. And I think if there’s a one, one part of capitalism that gets ordinary people angry, it’s just the vast sums that some CEOs earned. But that’s based on the price polluting mentality. That’s the idea that why is the CEO being paid so much if only she wasn’t so greedy, then there’d be more to go round for everybody else. For example, even actually, after I completed the book, there was Bob Iger of Disney who, was paid $66 million in 2019. And people said, well, that’s outrageous if he wasn’t paid so much, then there’d be more to go round. But actually when we adopt the pie growing mentality, we realized that his high pay was actually as a result of creating value of growing the pie. So it wasn’t at expense of everybody or of anybody.
Alex Edmans (23:47): In fact, shareholder returns have been 570% since he joined, over the last four years. So that’s long term, whereas with the S and P 500, it was only 140%. And also the company had created 70,000 jobs. So the only reason that he was well paid was he created long term value for both shareholders and society. So I think that’s important because before we criticize, whether a CEO pay us full or not, we wanna ask does he or she deserve it. And so this is why my message to board is to make sure that your CEOs are and to top executive more generally are paid with long term equity so that they’re not being rewarded unless they delivered sustainable performance for five to seven years.
Sean Pillot de Chenecey (24:37): Hmm.
Alex Edmans (24:37): And I think that’s important because when you think about this pie growing idea, that if you invest in stakeholders, if you treat your workers well, if you are responsible students of the environment, you will become more profitable. That is true. But the pie only grows in the long term, right? In the short term, if you treat your workers better, that’s expensive. And so if the CEO’s only being paid accordingly to quarterly earnings targets, she’s not gonna be bothering to invest in her workers, but if she’s paid according to the stock price in five to seven years time, she knows, well, the only way that I am able to deliver performance for so many years is if I take my stakeholders seriously and invest in them rather than trying to exploit them.
Sean Pillot de Chenecey (25:20): Mm mm. Okay. Just a last couple of questions about the book and they’ll move on to something else, although we’re very happy to talk about the book for hours. So when you look at the issues around actions for citizens, just a couple of points that you make there, you’re talking about, you know, seek, win, win outcomes and negotiations or interpersonal dynamics. So, you know, recognize that again, your counterparty or acquaintance need not come at your expense, the point of view, you know, practicing the principles of pienomics in everyday life. I just yet, unpack that, that issue of, or the idea around the, that, again for someone or something else doesn’t necessarily, come on a sort of a zero sum basis.
Alex Edmans (26:02): Yeah, absolutely. Sure. And I think this is important because as I mentioned earlier, we often think about, okay, how can business reform itself? We think you can only do that if you are the CEO and able to control the business. But I’d say even for, for ordinary people, like we have, they have lots of power to achieve huge outcomes, right? Even in the pandemic, we looked at how a single citizen. So Thomas Moore, or just by walking around his garden was able to raise 30 million pounds, but more generally ignite altruism within many other people. So we often view again, as an individual citizen, the world as being zero sum as they’re being a fixed pie. So if our friend gets a promotion, we congratulate him or her, but secretly we are a bit jealous of it because we think, well, their happiness is at the expense of us.
Alex Edmans (26:49): But in fact, if we view sort of happiness or utility or welfare as being expandable, then other people aren’t our competition. And so this leads of a different mindset of, again, thinking about what is in my, how can I use one? I have to help others because if indeed, this is something where the pie can be grown, helping others is not at your expense. So let me give an example of one of my friends who is a lawyer. He, that law is not something which was particularly helpful in the pandemic, but because he is a lawyer he’s financially relatively comfortable. And he decided to advance purchase a hundred coffees from his local coffee store. So what was in his hand was his financial affluence. And so by doing that, he injected them with a couple of hundred pounds.
Alex Edmans (27:41): And that could have been the difference between them surviving and them closing. And then even though that was a decision made out of altruism, ultimately he will benefit because if that coffee store, stays around after the pandemic, then he’s obviously better off because that’s his favorite coffee store. And so that was just him asking himself, it wasn’t that the coffee store went to him and said, can you help us out? It was him practically thinking, how can I use the resources that I’m blessed with, which is his financial resources to help others. And so that’s what we did. And what happens if you, even, if you don’t have financial resources, it might be something as simple as volunteering to do, some shopping for your neighbors. So, another friend he’s in his twenties, so not hugely financially wealthy, he was furloughed so that he works for professional service firm, but now is only being paid for four days a week because they were making some cutbacks.
Alex Edmans (28:37): So on his fifth day, he signed up with spare hand, which is, an organization to put people in touch with others who need help such as their groceries being bought for them. And so that was a way of him also giving back to his local community. So I think if obviously the pandemic has been really, really devastating, but if there’s one small silver lining from it, it’s that we think the notion of responsibility, it’s not something that you have to be a massive company to do. Small companies like Barry’s Boot Camp can do this and individual citizens, like my friend to advance purchase the coffees or the other one who’s working, helping out with spare hand can also play their part.
Sean Pillot de Chenecey (29:17): Yeah, yeah. Again, I think it’s interesting how you and the main bit of the book by saying, it’s up to all of us to create a form of capitalismthat works all of society. We have the evidence to back us, the examples to inspire us and the tools to put it into practice. Let’s make this vision a reality, say in a book really is, well, I mean, as I say, don’t believe me, believe there, there’s like sort of Will Hudson, former editor-in-chief of the Observer, who said the implications are radical and far reaching, read it, it’ll change how you think. You’ve got people like Adam Grant saying that you’ve, that, Edmans has produced rigorous evidence, that the choice between people and profits is a forced dichotomy. Now he makes his work accessible to a broader audience and explains how it’s possible to overcome the tradeoffs that hold so many, many leaders and companies back.
Sean Pillot de Chenecey (30:06): I’ll just get one more quote from Dominic Barton, the global, or former global managing partner McKinsey, who said, this is a must read book for anyone interested in reforming capitalism, particularly in its role of serving wider society. The book is granted in academic evidence, but the ideas are highly practical. Now I know that, moving on, certainly I know that you talk on a whole range of different areas and, you know, as you say, I mean mentioned earlier on your Ted talks, TEDx talk has received over 2 million views. Now, just wanna talk about something else. And that is in terms of where we are now and how the impact of COVID has, or hasn’t changed everything, or has certainly changed some things in some sectors more than others. Naturally the future of work is one of those topics that I think is being debated now on a, on an almost continual basis. So I know you talk a lot about Business Skills for the 21st century, but just talk us through some of the issues that you talk about when you are giving your advice and perhaps your consultancy on yeah. Just what are those business skills that are needed as we look forward?
Alex Edmans (31:23): Yeah, so I, the most important business skill I think is time management. And that was something which is important even before the pandemic. Why, because we’ve got so much digital distraction, we’ve got emails which sit in our inbox and are really urgent. And so the idea of doing the work, which for me, was writing the book. When I wrote the book, I had to black out everything else. I actually went to the public library, close to me in order to do that. Why? Because I didn’t have my computer with me. I was away from all my devices. I just basically would take maybe a hard copy of my book and then would start to mark it up. Now you might think, well, that’s something which seems great, but it seems a bit idealistic right. For me as a professor writing a book, it’s easy for me to ignore my emails, but if you are an investment banker with some clients or with bosses, you can’t just ignore them.
Alex Edmans (32:13): So what I wanted to put, what I wanted to give in my Gresham College lectures was, well, how can we focus on these long term deep work issues? Let’s say an Excel model where we’re valuing a company, but also not lose sight of the short term demand. And so there’s some techniques that I mentioned there in order to try to balance that. And if any lessons are listeners, are interested. It’s the Gresham College website Business Skills for the 21st Century. If they don’t know, Gresham is a very unusual institution, so you don’t do degrees there, so you don’t pay any money. The only thing they have is free lectures to the public because their mission is to make knowledge publicly available to everybody. So I’m sure many people will know Chris Whitty, the Chief Medical Officer. He’s the current Russian Professor of Medicine.
Alex Edmans (33:04): And I’m the Russian Professor of Business. So we’re speaking about our respective disciplines. And then I think time management is even more difficult in the pandemic because with working from home, we’ve got a lot of distractions with being at home. Sometimes officers are not perfectly set up for home working, but again, I think there’s a lot of payoff to trying to make sure that you are blacking out other things. So perhaps if you are living at home with your husband or wife or partner and they’re working as well. Even for that to have rules as to, we will be focused purely on our own work at these times, and then will allow specific times from when we can chat to each other and catch up and have lunch and so on, but to have certain boundaries of time to work and times not to work, that’s, I think really important in order to be able to keep focusing in this new world of working from home.
Sean Pillot de Chenecey (33:56): Fascinating. Okay. Something else that, what, one of your talks earlier on, with regards to the reliability of evidence. So just in the point of view of that, I mean, on a really macro scale, one has to say, that, well, probably ask, we have a new president in town. So, with regards to, discussions about being, living in a post truth environment and your advice on what, how one deals with that, perhaps just to take us through some of your insights there.
Alex Edmans (34:28): Yes. So, first you might think well, why is it that a finance professor chose us to get into this idea of evidence? Isn’t that something for maybe a statistics professor, but why I chose to do this is that I, as I mentioned at the start, I try to do a lot of involvement with policy makers on issues like responsible business. And, if I was to provide some evidence, which confirmed what people would like to be true, they would say, oh, this is fantastic. This is the best academic evidence in the world. And if I provided some evidence that people just didn’t like, because it contradict to them, they would say you are only an academic with no understanding of the real world. So people’s reaction to me would be purely based on the message that I’d be giving, whether they liked it or not rather than its scientific rigor.
Alex Edmans (35:14): So what I did in my TED talk is I explored this issue of confirmation bias, where people will accept some evidence, even if it’s flimsy, if it confirms what people would like to be true. And I think this is very important in the idea of responsible business, because people would like to believe that purpose of companies always do better. So if there was even some really weak evidence showing that purpose pays off, people will lap it up. For example, let’s take the book, Start with Why by Simon Sinek and this is absolutely not to bash him. I am certainly very aligned with his importance of purpose, but there, the evidence is a little bit flimsy because he just takes one company which is Apple and says, well, Apple has been successful because it has a why, but actually there could have been tons of reasons for Apple being successful.
Alex Edmans (36:06): Maybe Steve Jobs was just really innovative, really charismatic, had great contacts. How do we know it was the why? But that story has been sort of so popular because people would like to believe. It’s due to the why, because I think anybody can come up with a why. So the idea that just come up with your why, and you’ll be successful, that’s being really compelling. So what I wanted to do in my book is to look much more deeply than just some stories and look at really rigorous evidence in order to find out, is there something which stands up to scientific scrutiny? And so when I go into the TED talk is to help, sort of readers who are perhaps outside science, who might not have the time to scrutinize the methodology of a paper and get into the weeds. How can they figure out what are the reliable sources of information and what are the ones that we should be a bit more skeptical.
Sean Pillot de Chenecey (37:00): Obviously. Fantastic. I know that’s been a hugely popular talk and yeah. I find it absolutely fascinating to you, to view. Okay then. So, I mean, here we are then, so, the book is out, I’m sure it’s doing incredibly well, certainly deserves to, so what’s, what’s next for you then Alex? What’s coming up?
Alex Edmans (37:16): Thanks for asking. And I think to put more of the book into practice. So, what’s been really great is the attention that it’s got and from actually from both sides of the political spectrum. So you mentioned Will Hutton earlier and he would be more identifying with the left, former editor of the Observer, Dominic Barton, that McKinsey who’d be more associated with the right and capitalism. And so what’s great is I think it’s a message that both types of audiences have resonated with. And what I’m now trying to do is, is just basically get the message out there and help companies to put it into practice. So this is why I love doing podcasts like this to spread the message of responsible business being good business. I do a lot of talks with individual, companies and investors on how they might be able to implement the principles of the book.
Alex Edmans (38:05): So I think, the publication is not the end of the research process. I think even after publication, there is trying to help people to get the ideas into practice. And obviously the book was written for a general audience. It’s not sometimes immediate that somebody can take it off the shelf and apply it to, oh, I am a company which happens to be in the fitness industry. What does it mean for this? And so what some of the stuff I do is to translate, how the ideas of the book can be applied to one particular company situations. And I think another important thing is to make sure that this demo disseminates across students, because most of the textbooks that you will read, if you’re at business school or if you’re an undergrad will be about the only purpose of a company is to make money and how to evaluate projects with net present value.
Alex Edmans (38:55): And if this is what is said in the main textbooks, then it’s no surprise that unfortunately, some people who become at leaders might not be acting with the moral and the ethics that society would like. So I think, one of the important things is to change the mindset of people who study business. So this is why it’s a massive privilege to be at London Business School to teach some of the hopefully future leaders of this world. And to highlight that actually there is a different way of, of running business and that different way is not actually less effective but be more effective. So I’m giving a lot of talks to LBS but also to other students at other universities, because some professors at other schools are currently invited me to give a guest lecture on a responsible business to their students. And one of the nice silver linings about the move to an online world is that does give me great bandwidth to give talks to other places, which I wouldn’t be able to, if it was requiring some travel and carbon footprint.
Sean Pillot de Chenecey (39:55): And, as you on that last point about literally the word, the travel. So I just interested in, you know, looking back over your, you know, over the last, suddenly last couple of years, from the perspective of when you are giving your talks and when you are doing your consulting, what about the situation by, how your advice lands in different parts of the world to different audiences? So it’d be either in different sectors or indeed different territories. Do you find that your advice is taken up more readily by some audience than others?
Alex Edmans (40:39): Yeah, so that’s interesting. I haven’t actually found that much of a difference in terms of the receptivity. So there are some messages you might think, okay, that will matter more for certain industries or certain jurisdictions than others, but I don’t think so, because I think the idea of companies having a purpose in society, what’s so powerful about that is that nearly every company can adopt it, right? Because we often might think, okay, if you are a pharmaceuticals company, then you can be purposeful because it’s clear how you can serve society. You can have a coronavirus vaccine, or you can cure river blindness, which is one of the examples that happened in chapter one. But I think even if you go to like Unilever, right? So they, I know the, Sue Garrard, who used to run the sustainable living program.
Alex Edmans (41:24): She said, we are a company that makes soup and soap, right? Two think a soup and soap company can actually be a lead, a personal leader. Absolutely. It did because it said, no, we’re gonna be really purposeful. Even if our products are not hugely curing diseases, we could be really purpose on how we treat our workers and how we think about the supply chain and the impact on the environment. And other company that I’ve dealt with is Network Rail. You might think, well, just, running the train tracks, that’s not hugely purpose or that’s plain vanilla, but actually an excellent rail network. That’s a huge impact in society, right? It connects people with their jobs and their friends and families. So the wider purpose beyond this is really powerful. So I think, the idea of social purpose and service in society is so uniting and not part of that, because it’s something where different companies around the world can play their part.
Alex Edmans (42:17): And indeed, what, one of the, again, the silver linings of this move towards a virtual talks is that I’ve been able to give the talk to say Australia, China, Japan, South Korea, Latin America and the US. And so those are countries with maybe different cultures and different challenges. But I think the message has been resonant in all of those areas. I wish I could say there was one sector, which absolutely loved it more than everybody else, but I, so I think it’s been pretty even in terms of the receptivity.
Sean Pillot de Chenecey (42:50): Okay. Well, absolutely fantastic. I know time is now against us, Alex. I know, you’re an extremely busy individual, so just so, the listeners are aware of where they can track you down readily, go on then. How can they find you?
Alex Edmans (43:03): Yeah, thanks. So there’s multiple channels. So there’s my website, alexedmans.com and the book’s website growthepie.net. So the book’s website is specifically on responsible business issue. And then my website has things beyond responsible business that I work on, and that has a lot of materials there for free. So I will often take some complicated academic paper and then make it accessible in simple language for a practitioner audience that will have things like my Gresham talks as well. So the websites are based on the idea of disseminating academic knowledge for free to a general audience. I’m also, on Twitter and on LinkedIn, Twitter is @aedmans and the same with LinkedIn. And with that I try not to just present my own views, but also just to put, research by a lot of other people. So one thing that I just tweeted earlier today was, the impact of climate risk, and how to think about climate risk, which was done by three academics in the US, but because it was a great paper, I wanted to make other people aware of that.
Alex Edmans (44:03): So those are the various channels.
Sean Pillot de Chenecey (44:06): Okay. Absolutely fantastic. Well, in that case, what can I say? But, so to Alex Edmonds, a Professor of Finance at London Business School, he’s an expert in corporate governance, responsible business, investment strategy, behavioral economics, time management, and the use and misuse of data and evidence. Thank you very much, indeed.
Alex Edmans (44:26): Thanks so much, Sean. Its a pleasure to chat to you.
Sean Pillot de Chenecey (44:38): Thank you for listening to The Speakers Show Podcast. Please leave a rating on iTunes. We’d really appreciate it. And also it be great if you could subscribe to the podcast itself. You’ll find it also on Google podcast, SoundCloud or your favorite podcast app. Thank you.
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Foresight strategist, author and podcast host Sean Pillot de Chenecey is an inspirational speaker, who’s also consulted for some of the world’s biggest brands.
Sean has a very deep level of knowledge regarding the genuine issues impacting brands from a cultural, social and business perspective.