The Prof G Pod with Scott Galloway - How Media Companies Are Staying Relevant + What Makes a Great CEO – With Alan Murray

Episode Date: December 21, 2022

In place of Office Hours this week, we’re sharing our interview with the CEO of Fortune Media, Alan Murray. Alan discusses stakeholder capitalism, what makes a successful CEO, and the evolving digital media landscape. Follow Alan on Twitter, @alansmurray. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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cards, savings accounts, mortgage rates, and more. NerdWallet, finance smarter. NerdWallet Compare Incorporated. NMLS 1617539. Welcome to another episode of the Prop G Pod. We are officially on holiday here at Prop G, so in place of office hours, we are bringing you our conversation with Alan Murray, the CEO of Fortune Media and author of several books, including his latest, Tomorrow's Capitalist, My Search for the Soul of Business. Well, you're not going to find it, Alan. Anyways, he struck us as a thoughtful person, and we trust you'll enjoy hearing his take on stakeholder capitalism, the qualities of successful CEOs, and the state of digital media. We'll be back with our regular scheduled programming in 2023, so please send in your

questions about business, big tech, investing, career pivots, or whatever else is on your mind. You can also do so by emailing a voice recording to officehoursatprofgmedia.com. Again, that's officehoursatprofgmedia.com. Okay, here we go. Here's our conversation with Alan Murray. Alan, where does this podcast find you? I'm in Madison, Connecticut. So you've written a lot about stakeholder capitalism. Give us a state of play here. Well, look, you know this as well as I do, Scott.

I just think as somebody who's covered the relationship between business and society for four decades now, that something dramatically has changed in the way business leaders talk about their jobs and their responsibilities to society, their responsibilities to their employees, to the climate. And in my view, I've spent some time trying to figure out why it was happening, how permanent it was. In my view, it's been growing for over a decade, particularly in the U.S. It kind of really took off after the pandemic hit. I mean, just as one metric, if you look at the number of Fortune 500 companies that have made net zero commitments to the environment, it's probably increased 300% since the pandemic began. So it became clear to me that something very different was going on.

And I wrote the book to try and understand what it was that was driving this and whether it was going to last. last? So just let me, before the thesis can you respond, I think I worry that we see movement in the private sector towards climate change or, you know, net zero. They were throwing on the term stakeholder capitalism. But if we're going to wait on the better angels of corporations to show up, I think that's a dangerous strategy, and government and regulation are required to make any, in my view, kind of the requisite investments or long-term investments in things like climate change. You know, won't corporations be corporations here, and we need regulation to ensure or enforce this change? Scott, I'd flip that on you a little bit. As somebody who spent the first half of my career

covering government, if we're going to wait for government to deal with this problem, we are in big trouble. I mean, take a look at the U.S. Congress. Now, I give the Biden administration and the Democratic Congress some credit for making some progress,

but they did it on a completely partisan basis. If Republicans take sufficient control of Congress, everything they did would probably be immediately reversed. I despair of the ability in the U.S. in particular of government to take credible action. And sure, would it be preferable if you did something like a carbon tax to create a market to make this happen? Yeah, you bet. But it's not happening, Scott. And in that instance, I think it's great that so many big companies have decided that it's important to them, to their employees, to their investors, and to their customers that they take action. So, is it a silver bullet? No. Does it solve all our problems? No. Would it be better if you had public-private partnership? Yes, indeed. But in absence of that, I think what

companies are doing should be applauded. At the end of the day, the corporations, I think, will mostly respond to what consumers want. So, if you've seen a shift in corporations, doesn't that mean there's been a subsequent shift in consumer behavior or preferences? There is some shift in consumers, but the real driver here is not consumers, but employees. And it reflects a change in the value drivers at corporations. There was a study done a couple of years ago looking at the Fortune 500 companies and say, where's the value coming from? And if you did a study of the balance sheets of those companies 50 years ago in the 1970s, more than 80%, inventories on the shelves, stuff that you needed capital to invest in to build. And then if you had that, you could create value. If you do the same exercise today with Fortune 500 companies, more than 85% of the value

is intangibles. It's intellectual property, connection to consumers, all things that are tied to human beings. And so we're in an economy where human beings drive value way more than physical stuff and financial capital. And some of that is definitely customers, but a lot of it is employees. And when I ask CEOs, why are you doing this? When they tell me about some social initiative or environmental initiative, the first answer I always get is

because my employees want me to. That's it. Actually, Alan, that's a really interesting insight. I hadn't thought of that. And that's a great stat. It used to be that GE had patents or Exxon sat on top of oil fields. And now it's the majority of the most valuable companies. It really is the assets go home in the elevator. Do you, and maybe this is the boomer in me, I find some of these walkouts at these tech companies, they're upset about something and they walk out. I always thought that it would probably subside once, that a recession would take care of that. That this was evidence of a strong economy where these employees had the upper hand. You're saying it's a structural shift, that employees are driving a lot of change and that that's not going away. I think so. Look, I'm sympathetic to your argument. I mean, you may remember that there was a bubble of corporate interest in the environment prior to the Great

Recession. Companies like GE, Duke Power had created something called US Cap that was actually advocating for a carbon cap, a national carbon cap. And so there was a growing number of companies. This is like 2006, 2007. And then the Great Recession hit and all that disappeared. And so when the pandemic hit in March of 2020, my first reaction was, oh, I've seen this movie before. We're going to have a recession. Everybody's going to see their profit go to zero. And all this talk about ESG is going to be put on the back burner. Said, we can't afford this social initiative right now. Thank you very much. We got to focus on the bottom line. And what was so interesting about the pandemic was the exact

opposite happened. I think in part because of the nature of the pandemic. I mean, it really was a stakeholder crisis. Your employees were in danger, your customers were in danger. And so it wasn't a time to turn away. Now, it'll be interesting to see if this next recession, if we're going to have one, has a different effect. But I can tell you what our current surveys of Fortune 500 CEOs tell us, which is two-thirds of them think we're headed for a recession. But when you ask them, what's the biggest challenge you face?

You know what they say? They say talent, people. So it certainly hasn't changed yet. And I think going back to those fundamental numbers that you and I talked about, I think that's a reflection of the changing drivers of economic value that isn't going to be reversed. How do you think the attributes or the pillars of what makes a successful CEO have evolved? Yeah, it's a great question. And the nice thing about my job is I have a lot of opportunities to have these conversations with CEOs. And you can't always take them at their word, but at some point when you hear it over and over again, it begins to make sense. I would say the number one thing I hear today that I didn't hear 10 years ago, 20 years

ago, 30 years ago, is the importance of empathy, the importance of, you know, in a world where you take Bob Chapik of Disney as an example, in a world where your success as a CEO can be affected by so many different people, by the creatives who create your movies, by the legislature in Florida, by your shareholders clearly, or by activist stockholders, but so many different forces can affect your future. You've got to listen, you know, and you've got to pay attention and you've got to understand what's driving them and then be able to forge a strategy that's reflective of that. So I think that's certainly one of the big changes. Another big change is driven by social media. It's just that these folks used to be able to hide under their desks when faced with a controversial topic.

These days, they live in a fishbowl. Everything becomes very public very quickly and gets fought out on social media. So I think that's changed the job pretty dramatically as well. So give us some role models of who you would call kind of the modern CEO. And if you're willing, CEOs who you think are going to have trouble

operating in this new world. Yeah, well, I'll tell you one CEO that I'm very impressed with is Doug McMillan of Walmart. I mean, Walmart is not a woke corporation. This isn't a West Coast tech company. This is, you know, an Arkansas company led by a guy who spent his whole life in the South and operate with customers in the reddest of red states. And yet he's made it, he's been part of an amazing transformation of that company on the environment. They're reaching out to their suppliers and working to get their suppliers to take a gigaton of emissions out of the environment. That's powerful. You know,

you were talking about, geez, shouldn't we leave this to the government? Well, let me tell you, if you're a supplier to Walmart, they are the government. If they tell you you need to pay attention to the environment, you pay attention to the environment. It's the biggest retailer in the world. And also the change in the way that the company has approached its employees. I mean, they're obviously still not the best paid people in the world, but I'm pretty sure Sam Walton's view was that labor was like every other input and you push the price down as far as you possibly could. That's not the approach they take today. They really have changed the direction and the way they set wages in order to try and ensure that their associates have a better life. So I'd cite him as one example. I'll give you another example,

and we can argue over whether she was being proactive or reactive. But when Mary Barra, the CEO of GM, said in January of last year, we will only make electric vehicles by 2035. That was a profound statement. I mean, you have long lead times on investments at GM. I can tell you everything they're doing at GM these days is influenced by that statement. It was not justified by what was happening in the market at the time or what's happening in the market even now. There's not enough demand for electric vehicles to justify that transition. And maybe it'll turn out to be a bad bet on her part, but that's a pretty

significant big bet on where the future of society is headed or needs to head. So there are a couple of examples. Those are the good examples. Bad examples, I think Bob Chapik at Disney stands loud and strong. He didn't listen to the creatives who make the magic at Disney. He didn't understand them. When he got into the Florida mess, he thought he could get away by hiding under his desk and not saying anything. And those people who create the value at Disney said, you can't do that. And then he did sort of the worst possible thing, which was not say anything for two weeks and then come out against the bill, which got the Florida legislature mad. So I think that's a sort of a perfect example of someone who, and I'm not saying this is easy. I'm not saying I could have

done it, but somebody who clearly didn't understand the new sources of power in his job and mishandled it and now is out. We'll be right back. The Capital Ideas Podcast now features a series hosted by Capital Group CEO, Mike Gitlin. Through the words and experiences of investment professionals, you'll discover what differentiates their investment approach, what learnings have shifted their career trajectories, and how do they find their next great idea? Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc.

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Go to ConstantContact.ca for your free trial today go to constant contact dot ca for your free trial constant contact dot ca uh so i can't resist give us your evaluation of the ceos of tesla spacex and twitter so elon musk is of course the great example because the S&P kind of amazed me when they came out and said he failed our ESG test. And you can easily understand how he failed their test. If you're doing a check the boxes exercise, Elon Musk is, you know, he paints outside the lines. He's not going to check the governance boxes, et cetera. But I don't think there is any CEO or any company around that has done more to drive the climate transition than Elon Musk has. In fact, Mary Barra probably wouldn't have said

what she said in January of last year if Elon Musk hadn't already led the way and gotten, you know, seen a soaring stock price that made her say, well, I'm not going to be beat out by him. So I think as annoying as he may be, you have to give him a lot of credit. In terms of democracy and civil conversation, Twitter, Facebook have really been terribly bad influences on our society. And again, I don't think it's easy to fix, but I don't see Musk doing anything there that's going to help us in that regard. Yeah, look, I'm a big critic of Musk, but I think you're right. I think we just wouldn't be where we are with respect to EVs without Musk's leadership and inspiration. I think you're

100% right. So let's pivot and talk about the state of digital media. I'll ask you just a very blunt question. How does Fortune stay relevant? because that was the way Time Warner and Time Inc. were running. For a while, I was chief content officer for all 24 Time magazines, and most of them were still getting 70% of their revenue from the print magazine. Remember that? Remember? So, by the way, Jeff Bukas is a role model and a mentor of mine, and I just remember the days when that was a very profitable unit at Time Warner, the magazines. It was, but, you know, they ring fenced it. So Fortune, when I got there, Fortune had never had a website because Jeff Bukas's company had basically said, we're going to give all the digital assets to CNN money.

And Fortune wasn't creating video because Jeff Bukas said, we're going to let the Warner Brothers handle video and your job time is to make print magazines. Well, that was a death sentence. I mean, print magazines have been declining on a revenue basis, 10% a year for 20 years. So how does Fortune stay relevant? We want to keep putting out a print magazine for a long time, but that's now 20% of our business overall.

We have a very successful and profitable executive convening business that is a third of our revenue and probably more than that of our profit. And we're creating some new platforms. We have something called Fortune Connect, which I'm super excited about. We created it during the pandemic. It's a platform for training the next generation of business leaders in the principles of purpose-driven leadership, in the principles of stakeholder capitalism and the principles of inclusive leadership. And finally, I'll just say part of the way we stay relevant and successful, we're having a very good 2022, is by standing for something. We are in this to make business better. We have a clear view of what, a clear-eyed view of what that means. We do believe companies driven by leaders who have a purpose

beyond profits make better companies. We do think we live in a complicated world where we're having ambitions that go beyond just making money matter for the company and for the world. And we do believe that companies that take an inclusive approach to their employees and to their leadership are gonna have a better stake in the future. So part of the way we stay relevant is by having a clear purpose and point of view and working with partners who share that.

From a revenue standpoint, what is the fastest growing piece of the business? What do you look to as the growth part of the business? In the past year, the fastest growing piece of the business? What do you look to as the growth part of the business? partnerships with a handful of companies like Salesforce, Workday, Accenture, BCG. There are 15 or 20 of them that I could tell you about. I love them all. But it's deep partnerships with companies that share our values. I'd love to just hear your view, big picture, any thoughts you have around streaming, social media, like any bets you would make or not make? I guess the answer for anyone in media is two things. One is know what you stand for and find the people who are

willing to support you because they agree with what you stand for. That gets back to what I was saying we're doing with our partners. And two is, man, you better diversify revenue sources because the traditional ones are just getting weaker every day. And final question, a piece of media you would recommend? Anything you've binged recently? I read lots of books and I read lots of email newsletters. You know, I like what Jessica Lesson is doing with the information. But again, that's not, it doesn't suit democracy because it costs a lot of money, but it's good information. Any others? Do you do Puck or do you do Semaphore, your go-to other magazines you read? I'm watching Semaphore. In terms of traditional magazines, I read The Economist, I read The New Yorker, I read The Wall Street Journal, I read The New York Times. And then like everybody else, I read a ton of stuff online. So it's disaggregated and you find different bits and

pieces in different places. Just like you, I have learned over my career to judge what's good information and what's bad information and whether it's coming from a place that has standards and whether it's coming from a place that corrects its errors and whether it's coming from a place that has standards and whether it's coming from a place that corrects its errors and whether it's coming from a place that tries to find both sides of the story. And you can discern that pretty quickly with a practiced eye. But sadly, most people don't have practiced eyes and aren't being very discerning in what they consume. Alan Murray is the CEO of Fortune Media, where he oversees the business and editorial operations of the independent media company and is known for expanding its digital and conference franchises. Alan also writes a daily newsletter for Fortune called CEO Daily. I actually refer to your newsletter on a regular basis, Alan.

He's authored several books, including his latest, Tomorrow's Capitalist, My Search for the Soul of Business. He joins us from his home in Madison, Connecticut. Alan, we appreciate your good work. Thank you, Scott. Great to be with you. Love what you do. So glad to join you today.

That's all for this episode. Our producers are Caroline Chagrin and Drew Burrows. Sammy Resnick is our associate producer. If you like what you heard, please follow, download, and subscribe. Thank you for listening to the Prophecy Pod from the Vox Media Podcast Network. We will catch you next week. Hey, it's Scott Galloway, and on our podcast Pivot, we are bringing you a special series about the basics of artificial intelligence. We're answering all your questions. What should you use it for? What tools are right for you? And what privacy issues should you ultimately watch out for? And to help us out, we are joined by Kylie Robeson, the senior AI reporter for The Verge, to give you a primer on how to integrate AI into your life. So, tune into AI Basics, How and When to Use AI, a special series from Pivot sponsored by AWS, wherever you get your podcasts. used to do it. So what is enterprise software anyway? What is productivity software? How will

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