Good morning.
Is the economy on the verge of a productivity boom? From a macroeconomic perspective, growth in productivity has been well below historical averages for the past decade, putting downward pressure on growth and wages and upward pressure on inflation. But could that be about to change? Fortune discussed the issue this week in a virtual session with a diverse group of CEOs, held in partnership with McKinsey. All said they see signs of a new, technology-driven unlock in business productivity. Some excerpts:
“From our clients, we are starting to see a much sharper focus and a higher degree of ambition in the last six months than we may have seen before. All of this requires a lot of change…to people, processes, tools, capabilities. But the catalytic moment has really been triggered by generative AI.”
— Asutosh Padhi, managing partner, McKinsey North America
“We have a small content team and sell 0- to 10-year-old cars—hundreds of makes and models. We wanted reviews on all those cars. Its thousands of reviews and would have taken years for our content team to do. With generative AI, we got all those reviews done in about 90 days.”
— Bill Nash, CEO, CarMax
“The consumer world and the enterprise world are colliding. In your personal life, AI is all over everything we do. Things that we never did in the enterprise world are becoming more and more acceptable. Video, augmented virtual reality, AI….That’s becoming very comfortable for the end consumer as well as for employees and clients in the business space.”
— Steve Bandrowczak, CEO, Xerox
“We’re integrating investment management tools, financial planning tools and practice management tools in such a way that it unlocks the efficiency and effectiveness of the financial advisor to spend more time relationship-building with the client. What it will enable us to do is become not just a data-informed organization, but a knowledge-enabled organization…That productivity unlock is about two years away. And it’s going to be explosive.”
— Penny Pennington, managing partner, Edward Jones
“We are embarking on a huge business transformation project…which will touch every single aspect of our business. Our objective is to grow maybe another 30% with no net additions to headcount. It’s really not about eliminating jobs. It’s about freeing our people up from tasks that should be automated or in some cases eliminated in the supply chain.”
— Kathy Mazzarella, CEO, Graybar Electric
“The biggest kind of transformative change we’re really seeing is in the supply chain and in product placement…actually making sure that that item winds up in the right place, whether that’s the right store, the right distribution center, to get it fastest to the customer…The biggest benefit is going to be reducing markdowns, which will really impact profitability and gross profit.”
— Marc Rosen, CEO, JCPenney
“The last decade was the free money decade with zero interest rates…When that happens, people get lazy. The world is obviously changed. Interest rates are much higher today, and that has all sorts of different impacts, in terms of…cost of leverage, cost of capital, and what that means for the future. So I think people are focusing on this because they have to.”
— DJ Deb, CEO, Francisco Partners
Our young workers are productive today, but I worry about the longer term. I worry this virtual workforce, this hybrid workforce will have an impact on productivity and, of course, [on] values and culture.”
— Stan Bergman, CEO, Henry Schein
On that last point, it looks like Labor Day may have been an inflection point in the return-to-office saga. Read more here.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Fresh recession concern
Bank of America strategists have said investors are fleeing stocks at the fastest pace since the end of last year, amid concerns that higher-for-longer interest rates will raise the risk of a recession. In the week to Wednesday, U.S. stocks saw the biggest investor exodus, BofA said, warning that 2024 could bring a hard economic landing and “pops and busts” in financial markets. Bloomberg
Microsoft-Activision deal set to clear last hurdle
Britain’s competition regulator said Friday that Microsoft’s restructured bid to buy Activision Blizzard “opens the door” to the deal's approval. The $69 billion acquisition—potentially the biggest deal in gaming history—was announced in early 2022 but has been beleaguered by regulatory obstacles. Authorities, including the U.K.’s Competition and Markets Authority, raised concerns about Microsoft gaining too much control of the cloud gaming market. Reuters
Murdoch’s successor steps up
Lachlan Murdoch, media tycoon Rupert Murdoch’s eldest son and successor, has been appointed chairman of Fox and News Corp. At one point, it appeared Lachlan had stepped away from his father’s empire for good, leaving News Corp in 2005 following a feud with then-Fox News boss Roger Ailes. He returned to the business in 2014. BBC
‘Game of Thrones’ author sues OpenAI
George R. R. Martin, writer of the hit fantasy novels that were adapted into HBO’s Game of Thrones, is among 17 top authors suing ChatGPT developer OpenAI. Martin and several peers, including Jodi Picoult, George Saunders, and John Grisham, are seeking monetary damages and an injunction to stop OpenAI from using their works to train ChatGPT. OpenAI said it was “working co-operatively” with the Authors Guild and other creators to “discuss their concerns about AI.” Variety
AROUND THE WATERCOOLER
Nearly half of workers regret taking a job within a week of starting it. Many of them have cried about it by Chloe Berger
A millionaire CEO just cut his salary to make sure his staff could all get raises this year (the ones who weren’t laid off) by Chris Morris
Pets are getting fewer treats because of return-to-office mandates, says General Mills by Steve Mollman
Bombshell report claims the 39-year-old Harvard Law prodigy with a historic $110 million CEO pay package quit amid horrific sexual abuse allegations by Orianna Rosa Royle
Commentary: This generation of politicians has killed fiscal responsibility–but millennials and Gen Zers will be the ones who pay the price by Robert Hormats
Ron DeSantis—going against CDC guidelines—advises Florida residents under 65 to avoid getting the COVID booster by Alexa Mikhail
This edition of CEO Daily was curated by Chloe Taylor.
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