Fortune Staff

Change the World

Sea is an internet giant in Southeast Asia, running an e-commerce platform, a gaming arm, and a fintech division. To sustain growth, it’s upskilling thousands of customers and partners. In 2021, Sea trained 10,000 rural entrepreneurs and 14,000 farmers and owners of small- to medium-size businesses in e-commerce and digital literacy skills, and taught coding and programming to 13,000 youths.

Sea | 2022 Change the World

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Sea | 2022 Change the World | Fortune

Chris Morris

The sand is so hot in Florida that nearly all sea turtles born there are now female

/2022/08/08/florida-sea-turtles-female-hot-sand/

According to the CDC, Candida auris “presents a serious global health threat.”

What you need to know about the deadly fungal infection Candida auris

Health

What you need to know about the deadly new fungal infection

Sean Kerins says his “foot is on the gas” when it comes to hiring tech talent.

Arrow Electronics' new CEO says supply chain is doing better, but still not back to normal

Leadership

Arrow Electronics' CEO: Supply chain better, but not normal

Sean thank you so much for joining us to talk about arrow electronics. You know, most people probably don't know about the critical role that your company plays if they're looking to buy a car, like an electric vehicle or a smartphone or some high tech home appliance? Tell our viewers exactly what does Well Susie, we're a global technology distributor and that means we help some of the biggest names in technology get their products to market. And that could be everything from semiconductors to data center computers, to cyber security appliances, to software and cloud solutions, You name it. And you know, we like to say an arrow that if a device takes an electronic charge, there's a good chance that we probably played a role in designing it, building it and certainly selling it well last year there was a big shortage of chips, semiconductor chips and we all know that there were long wait times if you were looking to buy any kind of electronic device. What about now is that chip supply crunch over? There's been progress for sure. Are all the issues fully resolved? No. And the way we know that is we see, you know, lead times for all the semiconductor technology that we helped sell are still twice their pre pandemic average. And that means that, you know, if you just bought a car a few weeks ago or if you're still waiting on something you ordered for home automation. I think we got a little ways to go before supply and demand fully normalizes and those lead times can become more predictable. What are you hearing from your other customers? Besides the consumers, you sell components to big companies like Microsoft or IBM Panasonic, what are they telling you? So they're seeing a couple of things. One in fact in places they're still working their way through inventory that built up over the past couple of years while they waited for that, that famous golden screw. And they're also telling us that they're now starting to re evaluate their own supply chain processes, that they get better visibility to semi semiconductor supply going forward. And despite all of that, your company just reported very strong sales. In fact you told investors they were the strongest financial results of any year in the history of the company. So can you keep up that pace or can you do better in 2023, given everything you've told us, I think there's enough uncertainty out there to uh to tell us that, you know, looking much beyond 90 days is going to be a bit of a challenge. Having said that we still believe in the big mega trends over the long term and you know, we want to come out of this year, even if it's more challenging in a position to really hit the ground running in 2024 beyond. So we're gonna stay invested in our our growth priorities as best we can. So what if the U. S. Economy goes into recession, what does that do for your plans? Well, you know, I think this is a time where the phrase uh cautiously optimistic is very appropriate obviously if a recession were to occur more deeply, you know, we're certainly well prepared. I think the big question is you know, are we in for a moderate decline over a reasonable period of time or are we in for something sharper and longer lasting? And there's still I think a number of variables to play out including you know, the question around you know, when does the chinese economy get back up on its feet? Well whatever happens with the economy and the business environment, I understand that you are laser focused on hiring, tell us why what is your thinking on that? Well look, we think beyond this year we think the you know the big technology megatrends are all lining up in our favor. You know, we talk about the electrification of everything, you know, E. V. In the automotive industry is a great example. We talk about, you know, the automation that we're now seeing embraced in the medical device and healthcare industry. We think that's a great future market for us as well. So I think the job of any Ceo and his or her team uh in a more challenging year is to make sure they emerge even stronger uh than when they came into the year. And so we know exactly where we think growth will come from long term and for us that means more sales capacity, that means more engineers. And that means more people to be able to help our big customers and suppliers manage their supply chains. And I really don't want to take the foot off the gas when it comes to those disciplines uh for our prospects down the road. Well, are you finding it easier for Arrow to find top talent given that there are so many talented tech people looking for jobs right now? I wouldn't call it easy. Um and I would say attrition is still higher than it's been historically across the industry. So we've developed a pretty good motion around, you know, constantly looking to replace people that may have left at the same time looking for new talent to fill uh new roles that we're investing in. I think our our HR team does a really good job sourcing from all kinds of places. And um you know, I'd say we're keeping up pretty, respectively, you've also made it a priority to hire and promote more women in leadership positions. You've said we need to do better. How's that going so far? You know, Suzy, I've always believed that, you know, we're going to be most effective when we look like the world around us and so we're making progress, you know, building a more diverse uh workforce, not just in the individual contributor ranks, but also at the top of the house. I'm really proud to say that we now have four women on our executive committee, but don't get me wrong, there's still a lot more for us to do. Well sean, let's talk a little bit about you, you became Ceo of arrow just last summer and this is the first time that you've been Ceo, what's the most important leadership lesson that you've learned so far as you're running a huge fortune 500 company? You know, I'd say two things. The first is learning is paramount as a ceo. You now encounter things that maybe you never did before in your career. So you've got to be willing to probe and learn, uh, each and every day. The second is you've also got to learn how to let go and rely increasingly on others to get the right things done for your company. And I would say I'm making progress with both, but it is a journey. Well you said many times that you learned a lot about team building and leadership from playing basketball at Syracuse University, you are the captain, you were the star player. And what would you say that college sports taught you about leadership? You know, I think sports is a great proxy for what you'll find in the professional and working world. Uh, you just don't happen to know it at the time, but you know, being part of a team means you're part of something bigger than just you. Uh, and there's a lot of reward in that. But great teamwork comes with lots of trust and lots of sacrifice and that's a lesson that stood with me over time. I think the other things you learned from competitive support, competitive athletics at a young age is this idea of overcoming adversity when things don't go well, this idea of persistence and work ethic because you know, you don't get good overnight, you get good over time. Um and that's true of companies and leadership as well. Uh you know, you've got to continue to work on the skill sets that will make you better. Well, your coach at Syracuse University was the legendary Jim Boeheim. What's the best advice you got from him about leadership when it comes to coach Boeheim? He was the one that taught me that as a leader. It's all about the examples you set and the deeds you do not the words you speak. And that's a lot about, it says a lot about how I think about leadership now as the Ceo of Arrow electronics. Well let's talk about that because in the corporate world, the job description for Ceo has changed so much over the past couple of years. The expectations um from customers from employees and from even the public has really increased. So knowing all of that, how would you describe the way that you want to leave Arrow electronics? You know, I think listening is more important than speaking, I think being accessible uh to your leaders and their employees in the right ways at the right times, uh, means a lot to them. I think being able to show them that you'll never ask the organization to do something that you're not willing to take on yourself. And being someone who, everyone understands, uh, will ensure the company always does. The right thing goes a long way to, you know, our character and our values going forward. And I will, you know, remain committed to those thoughts.

This intimate CFO Collaboration dinner in partnership with Workday and Deloitte will gather some of the Bay Area’s top finance leaders to examine the capital allocation future over the next five years, with a lens on how digital capabilities and multi-cloud platforms support new ways to model, measure and improve returns on invested capital. 

CFO Dinner: Generative AI and the Future of Finance

Michael Schrage, Research fellow, MIT Sloan School of Management 
Interviewer: Michal Lev-Ram, Editor-at-Large, FORTUNE


Generative AI and the Future of Finance

Good evening. Welcome to Fortunes CFO collaborative. Uh I'm Geoff Colvin, senior editor at Large at Fortune. People ask me what that title means. No one actually knows. Okay. It's my pleasure to welcome you here. It is, it's great. Uh it's my pleasure to welcome you here tonight with my colleagues um uh editor at Large and Cheryl Estrada, who must be right in the middle someplace there. Yes, there. Uh senior writer of the very popular CFO daily newsletter. Uh Fortune CFO collaborative has been building a community of finance chiefs to help you navigate the changing landscape. We've covered lots of ground in the past couple of years, from the economic shock waves of the pandemic to digital transformation talent challenges, E S G. And many other major issues facing CFOs today, we're delighted to bring you tonight's dinner session with our founding partner, Workday and our sponsor Deloitte. Our theme tonight is another critical one for C E O s across every sector and that's the future of capital investment. We will explore how the impact of digitization and transformation across companies, financial markets and industries globally is changing both the meaning and measurement of capital allocation. Over the next couple hours, we'll hear from experts and finance leaders that would be you about how best to support new ways to model measure and improve returns on invested capital. Lastly, a brief reminder, before we begin this opening interview tonight is on the record for fortune purposes, but when we dig into the dinner conversation later, that is totally off the record. Nothing will be reported so cut loose. All right. Uh let's get right to it. It's my pleasure to hand things over now to Fortune's my hologram together with Michael Schrag research fellow with the M. I. T. Sloan schools initiative on the digital economy. Please welcome both of them. Thank you so much. All right, well if if Jeff doesn't know what senior editor at large actually means, I certainly don't know what editor at large means. But I will do my best here tonight. Um Michael. We are thrilled to have you here. Those of you who have heard Michael speak or lecture or know him know that my job is gonna be very easy. I just have to wind him up and he goes um but I'm of the manage expectations down. All right. But that's just a little bit of context. You know, it is interesting. We're all sitting here in san Francisco this week. There's been a lot in the news on chat. Gpt generative ai very exciting stuff. And so I'm gonna just open with that Michael. I know you've got a lot of thoughts but how should or could the cfos in the room be thinking about this technology and how it impacts their their role, their function. Their companies. What are your thoughts? Well I want to be really careful on the M. I. T. And stanford and of course open ai the whole notion of not just chat. GPT three and chat. Gpt four and so called large language models. Very, very interesting. But the fundamental issue is that of what's called generative ai generative machine learning and the fundamental aspect there is depending upon how you pre train things. You can instead of optimize something, you can generate a variety of choices, a variety of options. So with dolly and stable diffusion you can generate all manner you can use it, give me an image that does such and such. So basically what we're really moving to is the notion of how do we want to collaborate with generative intelligence? Do we want to coach it? Do we want to tutor it? Let me say that one of the things I always you know, part of my research things, I always listen to what people don't say. I think chad GPT is very interesting for chatbots are very very interesting for how do you write a paper? I just saw something in my my feed today about how warden M B. A professor you know has had has published a paper that he didn't write but the bot wrote it for him which says something about both the quality of generative ai and warden tenure but that's it separate issue, apology, cheap shot. But the notion of what does this kind of collaboration, what are people not talking about? They're talking about collaboration with language, They're talking about collaboration with imagery. I think increasingly we're going to be seeing these kinds of generative ai generative machine learning being used for financial forecasts, scenario generation etcetera. I'm going to be doing a workshop with a group of chief with apologies here strategy officers for these kinds of generative technologies because you know the famous um what was it called? The shell scenarios they used to be, they had Pierre, Pierre the scenario group, what's the best case, Worst case? Most likely case and they would gain things because people would always pick the middle one. Okay. I think what we're going to increasingly see our finance people, people doing financial planning, use these kinds of generative tools to challenge the fundamental assumptions of their numbers. And the last thing I'm going to say on this is as important and as significant and as pervasive as I believe, generative ai ml is going to become the issues of interpret a ble explainable and transparent algorithms become even more important because the notion that we're going to become particularly finance people are going to become dependent upon black box issues. I don't see that at all. So I think it's going to be a very, very interesting thing how you get your quote unquote bright young things to bring you scenarios, Bring you projections, yes. Bring you spreadsheets and bring you forecasts that that force you require you to engage in a way you didn't expect that you don't feel it's a waste of your time in any way, shape or form. How's that for a long winded filibuster answer. Um you didn't even look at your notes. So okay, I know you really wanted to talk about this cutesy acronym you came up with. Okay, today Raro Kpi. So so so what I'm holding in my hand are not really my notes, they're actually the notes from an executive class that I ran a fortnight ago. And one of the, you know, my quote unquote leading indicator for a successful executive session is do people do the pre work? And so one of the sessions I teaches on future of KPI machine learning KPI and I asked the attendees, the participants to answer, you know, very briefly, because you can't get people in executive to spend more than 20 minutes on homework. Um what's the most what KPI provokes the most insight, what KPI provokes the biggest argument what KPI should you stop using right now? Because it's counterproductive and what key performance indicator does your organization need to adopt in the next 12 to 18 months to reinforce and and to to affirm the strategic direction that you're on and this as you might imagine, leads to very interesting feedback and very interesting breakout groups in this regard. And you know, just to put my markers on the table, I think one of the political organizational and please don't hiss at the use of this word epistemological challenges that cfos faces? Are you going to be partners and collaborators around KPI s throughout the organization? Or are you just going to own the financial KPI. And this is why I like the way Jeff introduced this. It's not just about capital as financial capital digitalization forgive me is a universal solvent, it dissolves everything you you get to deconstruct things into all manner of data streams. So I am curious about and what I want to hear in the questions in the comments and the follow up is to what extent our chief financial officer is going to be concerned about not just financial capital. Human capital intellectual capital social capital. Okay. Those are the kinds of issues. Are you going to be peers and partners? Are you going to be senior partners? Are you just going to go along with how your chr oh defines return on human capital investments. Are you just going to go along with the lawyers on I. P. And licensing stuff or is there going to be are there going to be shared KPI S that you play a direct role in that regard? And so my joke about are a risk adjusted return on KPI s. Is that every organization I've worked with advisory or an executive has KPI some organizations manage those KPI s portfolios. Some of those organizations manage those KPI s. Silos. Two separate companies that didn't know each other. They were b two B companies. We were having a discussion of C. L. V. What is C. L. V. And they had done some in my opinion serious descriptive statistics, serious descriptive analytic research on Cl B, what did they observe? They observed that there were certain reference clients that if those clients were used to close the deal, the deal got closed. And here was the debate. How do you change the C. L. V. Of the reference clients that close the deal? How much more valuable are they to you? How is that reflected in your CLD calculations and you know what their answer was? They hadn't a clue. They had no clue. I'm hoping to be invited back to at least one of those companies. But I will say this that was very very constructive conversation and I was grateful to be a part of it. I was also grateful to play a role in provoking that conversation. The CFOs and both of those organizations took that issue very seriously. And my last point is one of them said you know what there's probably a difference between cl v customer lifetime value and CLM customer lifetime monetization. Is that semantics or is that actually something really interesting? Again, I don't know. But I'm very interested to your reaction on that. So, Michael is a little bit of an instigator on top of his other credentials. Um Talk a little bit more about KPI key performance instigator and that's right. We'll talk a little bit more about KPI you we talked before about KPI is that not only data rich but that are are learning learning from each other. What does that look like? So if you were. So the research that I'm doing in collaboration with others at M. I. T. And you'll forgive me for saying this. I think this is pretty bloody obvious. And there is a multi billion dollar industry, multi $100 billion dollar industry based on this. And for the people who disagree with what I'm about to say, I would encourage you to speak up on this. So the view is KPI s are seen as metrics a way of measuring. But let's look at what KPI s also KPI s and and the beauty of this. I looked at the attendees here. You all this is a I'll be sycophantic and suck up for a moment. This is a pretty sophisticated crowd on this. Everybody in this room understands software agents. So the Duncan experiment, the thought experiment I'd like you to consider is what if the KPI it's a software agent clb data flow. How do reinforcement learning, how does the C. L. V. Optimize things? Oh wait we'll go back to what I said a few moments ago about portfolios. Let's take these as your KPI customer lifetime value employee experience. Ebitda or free cash flow sales growth. What what does it mean to optimize individually collectively that portfolio of KPI s. What kind of role should the CFO the ceo the chr oh the board play in how those KPI s learn to optimize themselves, learn gee I'm prepared to trade off this gee there seems to be a positive correlation indeed, causal inference between include improved employee experience and customer lifetime value and you you define Nps as one of your sub components in this regard. So again, what aspects of human capital, financial capital, social capital, intellectual capital are the P. C. A. You know, principal component analysis attributes that contribute to maximizing slash optimizing those KPI s. I'll go right back to the way I set this up. Is that going to be you something that CFOs are leaders in partners in or enablers in the good meaning of enablers? Not in the codependent meaning of that is the researchers point that what was that multi $100 billion business that's already doing that kind of software agent around KPI ad tech customer supplier, customer bidding for conversion rates etcetera? What do we want to optimize around this? So Martek, I would argue programmatic advertising, I would argue is a canary in the mine for learning KPI KPI that learn? I believe quite strongly because I do advisory work in this area, we will see those kinds of KPI S that learn in supply chain. What's the great obvious medium for doing this in doing this with digital twins. You test your hypotheses. Are you focusing on, optimizing or testing innovation hypotheses, that's what digitalization enables, that's the conversation we literally couldn't have had a decade ago. Um I want to ask you to drill down into one of the areas you talked about which is the talent side and again very topical and in the news, you know, we've seen many waves of, of layoffs on the tech sector side especially um talk a little bit about, I know you're, you're affiliated with the M. I. T. Sports analytics conference for years, lots of transformation and evolution there on how analytics is used to inform talent. So what, what can we learn from that? W A. R. Stands for wins above replacement. And I have a friend, I'll name drop Daryl Morey who's the general manager of the philadelphia 76 ers he was with with Houston Rockets. He was a co founder with Jessica gelman of the M. I. T. Sports analytics conference which began in the Sloan school classroom and now takes over the hinds arena in in in in boston pretty interesting. And by the way, you know, beauty of this is don't take my word for it is a wonderful chapter by Michael Lewis in the undoing project on Darrell's efforts at Houston, which is well worth reading. So what does win above replacement. Why did it emerge because you have all of these talented athletes that get paid literally millions or if you're really good tens of millions or if you're Lebron James hundreds of millions of dollars. So what is win above replacement when above replacement is a statistical analysis that gives it an indication of if if this player wasn't there and somebody else was. You know you guys can explain it to your your your your end of the table here that basically this is the added value shapely values. This is the added value that this player provides in this regard. I am increasingly seeing in talent oriented organizations performance analytics incorporating win above replacement sensibilities. If this software development manager, if this project manager, if this process manager is involved, how much more value do they add than our typical than our average? So I think you're going to increasingly see a mash up in integration between human capital management people analytics and contribution to economic value added to the firm. Is that under the rubric and under the aegis of the CFO or is that under the CHr oh I think the answer to those sorts of questions are up to the people sitting at this table. You like C. H. R. O. S. Right? You're not. I do you know in the in the spirit of full disclosure Cfos are not my natural my background is more innovation. Um I am not a CFOs are not my natural constituency here as my tax accountant would would would tell you. Um But whenever I work with organizations it's very very interesting that Cfos almost as much as corporate counsel are the ones who either veto or enable interesting new ways of analyzing how value is created, shared and understood throughout the enterprise I. E. To what extent do you want CFOs to become C. C. O. S. Or C. C. A. O. S. Chief capital allocation officers. The go to team. You don't want data. Yes, you need data analytics. But to what extent do the CFO does the CFO's office is in a position to analyze. Are the different parts of the organization using the right kind of KPI s to assure on a risk adjusted basis a good return on financial capital, human capital etcetera. Okay, well hopefully this has given you plenty of food for thought. Michael has lots of other acronyms if you would like. My meantime the acronym is the KPI for me but we'll let you eat your actual food now please enjoy your dinner. We're going to continue the conversation at the dinner table and again this portion will be off record. Um So thank you so much Michael for setting setting the stage here and I look forward to your off the record responses. Thank you very much.

For years, celebrities have held director seats and provided expertise within boardrooms.

Are celebrities valuable to boardrooms?

there are some growing trends in terms of celebrities that come into the boardroom, I'm here sitting on this board because I love the brand, I love the story, I love the people, I love the lives that you guys change. We see so many examples these days, you know, I always need to be a kodiak fan, I know how valuable it is to maintain a ritual focused on staying well. They want to have celebrities that their directors or even investors or even angels to their, it has been shown that it can generate some positive responses from external stakeholders, such as investors, given that they decided upon this particular celebrity and they decided to appoint them to the board. How does the stock market react when they publicly announced? I'm really excited, join Passmark because it really speaks to my core values and we basically find a positive reaction to that. It's even more favorable when the individual has what we call related business experience, it's not like just a flash in the pan where bang, we announced the appointment of celebrity to the board. The market likes that there's an uptick in stock price, we find that there's some sustained growth and sustained returns provided to the firms. In these modern corporations, boards are like the centerpiece of corporate governance mechanism, you know, these directors are appointed to act on behalf of shareholders and they served several roles right, monitoring the executives, they have to provide advice or resources through their networks um or expertise to the management and they are involving in important strategic decisions. So some of those celebrities can be, you know, business people um like Margaret Whitman formal ceo at HP who was serving as a director at Ebay. We know that Oprah Winfrey is also a director at weight watchers. Maybe you have a celebrity director that helps increase awareness of the company, You have a good finance person, you have a good accounting person, you have a good HR person, you have some with industry skills, that's a portfolio of skills, I suppose everyone having the same skills in papa, john's O'neill is appointed as director which had a significant impact and really, you know, when these celebrities are appointed um they can be a better ambassador almost um because um communicating strategic decisions, it's not always easy consumers or investors, they want to hear those strategic decisions, but you know, it would be better communicated through celebrities rather than through say, annual reports. You are able to do investor attention, invest their interest to the company, you're able to increase its visibility. That is an important contribution to the firm, but also at the same time, you know, appointing these celebrities is a little tricky in terms of effectiveness. The celebrity factor on the board may create a culture within the board that becomes ultimately dysfunctional. Start factor has a certain aura that may Intimidate other directors from really the full discharge of their fiduciary responsibilities. There is that attendance issue for example, J. M. Smucker noted that their celebrity director Nancy Lopez is a professional culture is the only director to attend less than 75% of the all board meetings in 2018 and similarly should kill O'Neill also attended less than 75% of board meetings at Papa John's in the year after joining the company. And so there are definitely more room for these celebrities to be part of corporate America. You're putting context without the other business people, other leaders that may open up opportunities in directions that you don't normally have or would be engaged with. And by bringing in those celebrity individuals as directors, it can signal that, you know, these firms are capable of bringing in those individuals and also there could be some positive spillover effect or halo effect coming from that.

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