Venture for Change
Balancing Social Good with Economic Growth
Change has been the constant theme of Ken Chenault’s life and career.
“I was born four years before Brown v. Board of Education, which outlawed segregation,” he says, “and one of the things that is clear to me is I would not have been able to achieve anything [beforehand].”
The celebrated former chairman and CEO of American Express, Chenault is now at the helm of venture capital firm General Catalyst. There, he operates with the mission to invest in “powerful, positive change that endures,” he says. Chenault is also the co-founder of OneTen, a coalition of leading executives coming together to upskill, hire and advance one million Black Americans over the next 10 years.
Chenault originally envisioned a career in civil rights or politics, which led him to attend Harvard Law and become a practicing attorney for two and a half years before the then-startup energy of Bain Capital brought him to business.
Yet through the diverging turns of his career, his M.O. has remained consistent: “What was central to my life was the Civil Rights Movement, and that is a mentality that I’ve tried to bring into business,” Chenault says. He’s done that through big, transformative idea thinking with technology; through steadfast work to change company culture; through keeping leadership teams engaged and accountable; and, now, through the types of startups his firm is getting behind.
As for the supposed incompatibility of social good and economic returns? Says Chenault: “It’s a false choice to say ‘If you’re going to do good that’s separate from having an economically viable model.’ I would submit that if you really are thoughtful, you should be able to have a better economic model by doing good.”
Chenault joined Greylock’s Iconversations speaker series to talk with general partner Reid about what leadership looks like in times of crisis; the reinventive potential of technology; and some of the most memorable moments of tech adaptations— including making Henry Kissinger get on board with using a computer. You can watch a video of the full Iconversations interview on our YouTube channel here, and listen to the podcast version at the link below or wherever you get your podcasts.
Hi, everyone. Welcome to Iconversations. I’m Reid Hoffman. Our guest is Ken Chenault, who is easily one of the most celebrated business leaders in the world.
Ken is widely recognized as a champion for the advancement of others and has undertaken many projects to ensure equitable access to opportunities in employment, education, and democracy. He is the co-founder of OneTen, a coalition of leading executives coming together to upskill, hire and advance one million Black Americans over the next 10 years. Ken is currently chairman and a managing director of the venture capital firm General Catalyst, where he seeks out fast-growing companies that prioritize responsible innovation in the pursuit of global markets.
Prior to becoming an investor, Ken spent 37 years at American Express. In 2001, he became the chairman and CEO of American Express, making him the third African-American CEO of a Fortune 500 company at that time. Upon Ken’s retirement from American Express — and I cannot think of a higher source of a compliment — Warren Buffet, the company’s largest shareholder, stated: “Ken’s been the gold standard for corporate leadership and the benchmark that I measure others against.”
Ken also serves on the boards of Airbnb, Berkshire Hathaway, Chief, Guild Education, the Harvard Corporation, and numerous other organizations, including the Council for Foreign Relations and the Smithsonian Institute’s Advisory Council for the National Museum on African American History and Culture. Ken and I served together on the Human-Centered Artificial Intelligence Institute Advisory Council at Stanford, and, most importantly, I’m also proud to call him my friend. Anytime he calls about doing something in society he is 100-percent right and I’m always happy to follow him.
Ken, as always, thanks so much for being here today.
It’s always great to be with you, Reid.
Given the timeliness of it — we’re going to go through your career and history, which I think will be really instructive for people — but we’re living in this tragedy going on in Ukraine, and one of the things that the news is replete with is what should business leaders be doing and not doing. And, given that you are one of the people who I think most leads: What is good corporate behavior, good corporate governance, good corporate living [in terms of] missions and ethics and integrity with high performance? What would be your advice for business leaders in these times of crisis?
One of the things, Reid, that is fundamental to me, is that corporations exist because society allows us to exist, and so we have a responsibility. I think what’s very important in the tragedy of Ukraine is that CEOs need to, in fact, communicate and take a stance, because this is not one that you can stay on the sidelines. What are the fundamental values of your company? I don’t know of any company that could say I’m comfortable with what’s happening in the Ukraine. So I think sometimes people over-complicate the issues.
What’s going on in Ukraine is fundamentally wrong and I think therefore it’s important, one, for CEOs to assert: Here’s what we stand for; we’re against what’s happening. I think, secondly: What are you doing for the people of Ukraine? What are you doing if you have employees in Ukraine? Which we certainly [do] in some of our portfolio companies.
I think that we need to clearly provide services. We need to meet the needs of the people there. And one of the things, frankly, that I’m very proud about is the role, for example, that Airbnb has played in finding housing for a hundred thousand people. So I think, Reid, it’s both making a statement of what you stand for and what the company stands for and, secondly, doing things to help the people of Ukraine.
Yep. I think you’ve said it well, and I thought it was really important we opened with that.
Now we’re going to go back a little bit to your path, because I’ve learned a whole bunch from you about corporate governance and boards and all the rest. And we’ll get to that, but let’s talk about your earliest path. What set you down it? Tell us a little bit about your upbringing and education.
Sure. One of the things that is fundamental in my development is I was born four years before Brown v. Board of Education, which outlawed segregation. And one of the things that is clear to me is I would not have been able to achieve anything. So one of the things I say with some of my African-American friends is we’re Brown Babies, because, by the accident of birth, that provided us the beginnings of opportunity.
I was very fortunate that I had two parents, both college educated, who really talked to us — it was almost daily conversation at the dinner table — about the civil rights struggle and what we needed to do to, in fact, make a difference.
So growing up, Reid, my father was a dentist, and that was not something I decided to pursue, but I admired him tremendously because of the values that he demonstrated to us constantly, and my mother similarly, and I really wanted to be a civil rights leader growing up.
I remember when I was 13-years-old, John Lewis, he probably was in his late 20s, coming to my church, and I was captivated. That’s what I wanted to be. I was an indifferent student in my early years, I tested very well and I read a lot, but I didn’t really pay attention in school really until ninth grade of high school. I sort of started to mature more. And I loved sports growing up. But I would say that what was central to my life was the civil rights movement, and that is a mentality that I’ve tried to bring into business.
I went to Bowdoin College in Brunswick, Maine, which was a great place for me. It’s a terrific school, but I was also isolated, because if I’d gone to a school in a big city I would’ve been
distracted. Then I went to Harvard Law School and I did it, frankly, because I said, “Maybe I’m going to go into civil rights or I’m going to go into politics,” and I didn’t really have a thought of going into business.
I actually practiced law for two and a half years and then serendipity in life, and that’s really been part of my life, is I had a friend who was at Bain & Company, which had been a consulting firm that had been in existence for maybe five years. So it had a startup feel when I think about it, and I thought the people were really bright. I didn’t know anything about business, but I felt this energy and I said, “I want to do this.” And, obviously, when I told the people at the law firm, they thought I was crazy. “What are you doing? This doesn’t make any sense.” That’s sort of a nutshell of my story.
Yep. So the switch to Bain was the energy of the people, the building-stuff-up, not particularly a theory about how that would change your career, the move from being a lawyer to being a strategist and all that. What were the key things that you learned at Bain, and [what] then made you decide to go join Amex?
It was like drinking from a water hose for me. In the beginning, because they hired one other lawyer and two medical doctors, we were handed accounting textbooks, which we studied at night, and it was trial by fire. I initially tried to interview clients and then tried to frame what the issues were that they were dealing with. And then I got very involved in strategy in a range of industries — financial services, manufacturing, consumer products — and I was not looking to leave Bain.
But what fascinated me, and this will really age me, is that 1981 was sort of the early stages of cable, and I was fascinated with the potential of cable and how it could transform the relationship with consumers and customers, and American Express had just entered a joint venture with Warner Cable. There was actually an experiment that they were doing called QUBE, which was selling products and services through the television.
So, for whatever reason, I was absolutely fascinated. And, literally, as I was thinking about, “Boy, this is an unbelievable opportunity,” I get this call from this headhunter who said that Lou Gerstner, who at that time was president of the largest division that housed the card business and everything else, was looking for two or three people to go into a strategy group. So I said let me go down and interview.
Lou said, “Tell me why you want to come to American Express.” And I said, “I’m not sure I want to come to American Express. I love the technology that you’re doing, and I really want to be involved in that.” So I went to American Express and one of the things I tell – particularly people starting off in their career – is that I was just very enamored.
In my first year, Lou put me on an assignment to do strategy for a direct marketing fulfillment house, and I said, “Wait a minute, I want to do cable.” And what was very interesting about this, Reid, is this was the beginning of database marketing for me. So one of the things that I embraced, which positioned me really well, is getting very involved with data analytics. I was excited to see what you could do there. And then I did work on the Warner-Amex part of it, trying to bring some of those capabilities.
But the biggest opportunity for me was a business we had that sold merchandise through the mail — think about pre-Amazon. The business was losing money, and the head of the business asked me if I would be head of marketing. I went to Lou Gerstner and I said, “I’m going to do this.” He said, “You should go into the card business. That’s really the core business of the company. This business is losing money. It’s really sort of a dog.” And I said, “I want to do it.” Well, my boss got fired after six months. I then took it over, and it was just an unbelievable experience.
One of the things that I say to people is: My background is building businesses and creating products, and I loved it. We grew a business from $100 million in sales to $700 million in sales in two and a half years, and then I tried to buy the business from the company. I got it all the way up to the top, and Lou Gerstner said no, and I quit for 48 hours. And he called me and said, “Come in, let’s talk,” and he said, “That was very immature.” And I said, “Lou, I love this business.” And he said, “Look, at the end of the day, I really do think that you could play a major role at the company.” He didn’t say I was going to be CEO, but he said, “Look, I think you need to give this a chance.” The way I think about it is: I don’t know if it could have been Amazon, but we had big dreams for the business.
Yep. If you had a phone back to your younger self, is there any advice that you would’ve given yourself about things to do differently? I mean, obviously everything worked out really, really well, but what would be your lifeline to your younger self?
I think, to my younger self, what I would have said is: Be even more entrepreneurial. So while I think I was very entrepreneurial, the reality is [about] thinking really big.
I do think that we’re all captives of our imagination or the limits of our imagination, so what I would’ve said to my young self is: You’ve got to expose yourself more. As I said, I didn’t know a lot about business, I wasn’t that sophisticated, and what I would’ve said at that time is, “Ken, there is a big world out there. You don’t have to just focus on one thing or one company. You’ve got a range of opportunities.” That’s what I would’ve said to my younger self.
"I do think that we're all captives of our imagination or the limits of our imagination, so what I would've said to my young self is: You’ve got to expose yourself more. "
Yep. One of the things I think that you were also bringing to Amex was this focus on technology as the reinvention, technology as the amplifier — we need to be doing that, whether it’s database marketing, whether it’s [whichever of the] different things. So clearly 48 hours later you decided to not quit, right?
What was your strategy then? Was it like, I’m going to grow this business more. I’m going to go bring more pieces of technology into Amex? What was the thought?
Yeah. I became obsessed with data analytics and the impact it could have on a company like American Express. I started to have this vision of American Express being a service platform and the ability to, in fact, develop a range of products and services to meet customer needs.
That really was something that was incredibly motivating to me.
And then I went into the card business. I first was running our gold card, platinum card products. We developed the Centurion Card, and so I was very involved in that. And then I came up with this idea to develop a loyalty program.
At that time, most of the loyalty programs were just with one airline, and what I thought is: Why not have a variety of redemption options and never have points expire? And what I feel terrific about is that capability for American Express — they are continuing to innovate, and it’s become probably the most successful loyalty program, certainly of any major card company, but I think in general.
One of the things that I saw was we needed to change our risk management analytics, we needed to change our customer service. Technology could be a great enabler. I really focused on driving this digital transformation in the company. And one of the things I would talk to people about is American Express has these incredible sets of data and the ability that we have, both because we have data on the end user consumer or customer and we have data from the merchant, that the opportunities are endless.
So part of what I was fighting in the company was, in the beginning, [the belief that] we should only focus on T&E and, as sort of a sideline, we’ll offer spending opportunities in other categories. And I said, “No, we need to focus on share of market and share of spend for all types of spending for our customers. Why would I just want to have one category of spending? I want it all because we’ve got to build that relationship.”
Yep. So in 2001, this led to your becoming CEO. What was that process like? This is well before you and I knew each other, so I’ve never really asked you this question: Were they interviewing a bunch of internal candidates? Were you a handpicked successor? How did that process go, and what was your going-in theory to say: Here’s what I’m going to do as CEO?
Right. So I would say, Reid, five years before I became CEO, that was when I started to really think — and I was told — that I had the potential to be CEO. Really, up until that point, that was not my sole objective. And I said, “Look, if it doesn’t work out, there are other things that I can do.” Because I started to have a broader view. But both in the company and on the board, there were a number of people who were incredibly supportive and encouraging of me. And then, frankly, there were people, CEOs that I dealt with at other companies, who in fact would say, “Ken really has the capabilities to be CEO of the company.”
What happened is, when the board decided I would become CEO, Harvey Golub and I — and Harvey did a terrific job as CEO before me — part of what we did was we worked out, in the transition, what were going to be the responsibilities that I would have in this transition, and what would be the responsibilities of Harvey.
And I would say one of the lessons here, Reid, is that in CEO successions, both parties are often passive aggressive and they don’t talk about, well, How will it feel to transition? It’s a very emotional movement.
Part of what I did with Harvey is I said, “Harvey, we need to go away for two days, just you and me, and let’s talk through how the transition is going to take place. Talk to me about some of the things that I’m going to do that I think will irritate you. Let’s talk about how we’re going to handle that.”
And frankly, as a result of being very direct, open, honest, transparent, we worked through those things. There were some things that I did that annoyed Harvey and vice-versa, but we knew it was going to happen, and we could talk about it to each other.
When I became CEO, one of the first things I did was I decided that there were some behaviors and there were some aspects of the culture that needed to change at American Express. One was I thought we had a passive-aggressive culture. It was a very service-driven culture, but, in American Express speak, if someone disagreed, they would say, “I don’t mean to disagree, but…” That meant they violently disagreed, and they would fight you at every step you were going to take.
So I said, “I want what I call constructive confrontation in the company to be very direct, very transparent.” I wanted people to understand they needed to do it respectfully, but this constructive confrontation was important.
One of the things we did in the company was (before I presented these values and attributes) we went out and talked to our people all over the world, and, fortunately 95-percent of the people agreed with what I was going to articulate. That was fortunate. But it really caused a focus in the company on values and behaviors and outcomes. Because the other attribute I wanted was for everyone to feel a level of personal accountability — that what they did was really important. We needed to treat people very well, but they had an accountability to perform and behave according to our values. That was important.
The second thing I did, which I think is critical in managing the short and long term, is every year I would put out [a list of] headlines I wanted to read about the company. Some of the headlines were headlines I’d like to read in 10 years, sometimes five years, sometimes six months and a year, and that helped galvanize people.
The third thing that I talked to people about was [that] we had a responsibility to manage the company for the long term but — and this is where accountability is critical — we had to perform and have a high sense of urgency in the short term, and I was going to have markers, signposts, of performance. That was critical. There is some tension [between short and long term], but if done the right way, you got to hit those signposts.
Well, in particular, part of how you ultimately get the long term is winning short term. It doesn’t mean that you should run quarter-by-quarter, as you know, but you have to win some short term.
Absolutely right, Reid. That’s, frankly, one of the misconceptions that people have, is some people think, Well, that means I have a long time. No, you don’t. You can execute in the short term.
Yeah. It’s a marathon but you have to sprint as well. The headlines, I think particularly, are a good way of encapsulating. Was there a particular headline or two that you remember throwing out and saying, Here is the kind of thing that I want to see us working toward?
There were two or three headlines. One is, I said, “I want the American Express brand to be one of the most respected and admired brands in the world.” And I said, “Here are metrics and outcomes that we need.”
A second headline was, “I want American Express to be the first card out of the wallet.” A third headline was, and we had it in the U.S. and two years ago they crossed the line, “I want us to be at parity merchant-acceptance with Visa and MasterCard.” People said, “That’s ludicrous. There’s no way it can happen.”
I think what’s important there is: Headlines have to be aspirational, but then putting the measurements in place [to see] that we’re achieving [them] is absolutely essential. And then, frankly, I had a major headline around our digital transformation as a company.
I’m going to come back to the digital transformation, because that technology reinvention is I think one of the things that’s particularly important to the audience and group here.
We’ve already sketched some of the bold, think-big parts of leadership that are really important that you were doing. Another part is how you manage crisis. It’s part of the reason why we opened with a moment thinking about how terrible this stuff was happening in Ukraine. But part of the thing is, you become CEO and then 9/11 happens pretty soon, there’s a recession, and so forth. What were some of these key moments, and then how did you orient American Express in your leadership? What did you learn about managing crisis?
I think one of the things that’s very important in managing a crisis is, again: You’ve got to deal with the issues at hand, but you also need to think through: How can we emerge stronger?
One of my leadership maxims, which I think we’ve talked about, is a phrase I borrowed from Napoleon: The role of a leader is to define reality and give hope. So one of the things in a crisis is defining it for people, giving them context and, particularly, giving them the context for actions that you think you will need to take to also address their feelings.
"...one of the things that's very important in managing a crisis is, again: You've got to deal with the issues at hand, but you also need to think through: How can we emerge stronger?"
Because if I take 9/11, for example: That was emotionally gut-wrenching. Thousands of lives were lost. At American Express, we lost 11 of our colleagues. And one of the things that I decided to do a week after 9/11 was to pull all of our people who were in the headquarters area of American Express, and then we tried to do some satellite with people who were elsewhere in the world, to talk to them so that they could see me. I had to demonstrate empathy and authenticity. And one of the things that I said to people and spent time on is not only why I thought American Express would be able to survive. One of the points I made was: While our building was damaged, the reality is that we represented more than the building. It was really the people. That’s what really defined what American Express was.
And then, very importantly, having that emotional connection. I also told them that we were going to have to take some tough actions. One of the things I did a month after was I made the decision, because of changes that I believed were going to happen in the travel sector, to reallocate areas of investment. And the progress, frankly, we had made in moving things more online [meant] I ended up deciding we had to in fact, reduce 15-percent of our workforce.
So here you say, “Ken, wait a minute, you were going for empathy, connection, and then you took this ruthless action.” Part of what I communicated to people was context for what was happening in the economy at large, what were the changes. I made the point that we gave the most generous severance benefits we could to people, and we in fact helped people find jobs, but one of the things is I didn’t hesitate.
In leading through a crisis, you have to be both compassionate and decisive. People get those two things confused.
Thirdly, though — which is important — is you have to have the ability to engender trust. So despite the actions that I took, people reacted in a positive way. And part of it was not just my leadership, but the fact that I communicated we were living in a very challenging world.
In the financial crisis, that was also bone-chilling in a different way.
In 9/11, we reinvested, also, and we emerged stronger. In the financial crisis, I said, “Let me be real clear, we have to stay liquid. Let me define what it means to stay liquid. I think it’s important for us to stay profitable and here are the reasons why. And third we are going to selectively invest.”
So you can imagine people saying, “Well, wait a minute Ken, you’re going to invest and you’re saying we got to stay liquid?” I said, “Absolutely, we got to do all three things: stay liquid, stay profitable, selectively invest.” And then I gave them a pathway against each simple objective and then gave them signposts, and we came out like a rocket in both cases. That’s what I think you’ve got to do in a crisis.
It makes total sense. And part of the thing is to say, even when there are some trade offs, you can actually make both objectives.
We are getting questions from people in the audience. I’m going to stream them in as we go to the relevant areas. Here’s one, which is: ”How did you personally make it clear that constructive communication was an OK behavior? How did you model the behavior? What were the challenges in shifting Amex’s culture there, and what kinds of things could you give as signposts to other leaders perhaps trying to manage a similar change?”
That’s a great question. So, we did several things. One was we put it first to the leadership team, like 200 people, then we moved it through the organization. A leadership training module of: Here are behaviors, here’s a way to demonstrate those behaviors. And one of the things that we did, which has really been impactful, and exists to this day, is, for our leadership team, part of your incentive compensation is how you do with employees. So we in fact modeled and got feedback on behaviors, and then we were able to go to areas and leaders where we needed to improve.
In meetings, one of the things that I did, Reid, is I would purposely disagree with someone and give a good rationale for that disagreement to be confrontational, because I knew that if I didn’t exhibit that behavior frankly, in the beginning, in the extreme, people wouldn’t follow. And then what I would say for my team is, “With your teams, you need people to see you disagree with another leader. That’s really constructive.”
So part of what I think needs to happen is you can train people in behavior, but you also need to measure them and tell people this is a journey. The reality is it took several years to really get this seeded in the organization, but boy, did it make a difference.
One of the points that I would make to people is: Look at the amount of time we’re wasting because of this type of behavior. We’ve got to have a sense of urgency. If we’re really customer-centric and the focus is on the customer, we’ve got to have the sense of urgency that we’ve got to do right by the customer, which means you’ve got to be honest and transparent. So, reinforcing a bigger mission, connecting it to the mission, measuring the behavior, having your leaders role model, training them — it can be done and it makes such an incredible difference.
Completely agree. Part of the thing that is implicit already in the stuff you’re saying is showing people that they already have the capability of doing it, they just need to focus on doing it. It is already who we can be, it just needs [us] to do the walk.
Right. And one of the things that I feel strongly about — this goes back to respect for each other — is it is disrespectful to, in fact, not tell people the truth of how you feel. And if you are focused on a higher purpose in your company, then you’ve got to be all-in, which being all-in means you got to tell people, Here’s how I feel. And then, obviously, When we agree that a decision has been made, we all get behind it. Because one of the other bad qualities that we had to change is — there was a saying: Sometimes at Amex when you agree and you think that a decision has been made, that’s when the debate begins. That all has to change.
It’s part of the speed and decisiveness, which is actually, in fact, part of how you enable compassion, from your earlier [example].
So let’s shift a little bit to technology. I think one of the things that people were really impressed with, watching the guidance of the evolution of Amex, was [the] focus not just on the culture, not just on: What is the iconic place that we’re playing in society and people’s lives?, but also: Let’s focus on the reinvention through technology. So talk a little bit about that digital transformation.
What were the key things in leading a very large, very traditional, storied company in embracing technology?
One of the things that was very, very important was our senior leadership team was bringing people in, like you, to talk to our leadership team about the impact that technology is having in the world. And then, very importantly for us to do at American Express, one of the things I talked about was, Here are the assets that we have as a company: We have an incredible brand, we have this service ethic, this platform, we have an incredibly rich data base. And what are things that we need to change?
One is: Think about how much we can do if we shift a range of transactions online. Both the improvement in customer service, what the savings can be. Reducing the friction for our people, for our customers, is really impactful. Understanding, frankly, we were one of the early adopters of AI and machine learning, and the impact of that in our marketing, in our risk management, and in our customer service was incredible.
And then, very importantly, way in the beginning, one of the things I remember telling our board, this was probably in 2003, was that I wanted all of them to become more literate in how to use a computer. I wanted them to, in fact, use different services.
So, literally — I don’t think he would mind me saying this — I sent one of our young people to see Henry Kissinger, and Henry calls me. I said, “Henry, you’ve got to learn how to do this,” and he said, “Ken, at this stage, can I have someone do it for me?” And I said, “No, Henry.” I wouldn’t say Henry was an expert, but what I think was important about that was that we told that story, and those stories, in the company: that everyone had to have ownership.
I will tell you, in the very early days, one was — and this sounds like ancient history — but only communicating with people by email. And I had a senior leader who said, “I don’t use email.” I said, “What are you talking about? You’ve got to use email.” “But I’m not used to it.” So one was to be really insistent that everyone had to adopt and understand what their responsibilities were in this digital transformation.
One of the things I did with my successor — Steve Squeri, who’s doing a terrific job — I said to Steve, “I’m putting you as head of technology.” And Steve said, “I’m not an expert in it.” I said, “Steve, American Express is a technology company. You have to become an expert in it.” And what was terrific was he really internalized that and really drove that.
I think in bringing about a transformation, you need to tell people how important it is to the future of the company. You need to tie it into the core mission of the company, which is: We’re a service company. That’s what we do. So we’ve got to be at the forefront if we’re going to be servicing our customers.
Secondly, you’ve got to have your leadership team be accountable. You’ve got to push it down through the organization. That’s why I gave the example of the board, because how can they help and advise me if they don’t know what’s going on? So you’ve got to have that accountability at every level of the organization.
I completely agree. Two personal examples: I was one of the people who bought one of the first Tesla model S’s, and the moment that I drove it, I literally started loaning it out to everybody because it was like, “Drive it, see what the future looks like.”
And then, similarly, being on the board of Aurora, I was like, “OK, fly down, get in the truck and see how it works in the truck. Watch it. You have to have tactile familiarity with it, you don’t have to be expert on everything.”
I couldn’t create a self-driving truck, but I need to understand what vision of the future is possible from that, and that all companies are becoming technology companies. So I think that’s exactly right.
Yeah. And one of the things I think is very important, I will say, is there are CEOs who I call “presiders,” what they do is preside over the organization. To be an effective CEO today, you have to get into the product, you have to get into understanding how the platform works, and you can’t preside anymore if you want to be a real innovator.
Yes. By the way, it’s a bit like The Shawshank Redemption, “get busy living or get busy dying.” It’s either be innovating or not, right?
Yeah. One of the things that I said in the company is “innovate or die.” As I always say, if you stand still you fall back, and so that focus on innovation [has to be that stark].
One of the things I would always say for us is: Become the company that will put us out of business. Obviously, we’re focused on the customer, but one of the things you should think about is what would you do to really go against American Express?
"There are CEOs who I call “presiders,” what they do is preside over the organization. To be an effective CEO today, you have to get into the product, you have to get into understanding how the platform works, and you can't preside anymore if you want to be a real innovator."
So this naturally gives some of the answer already about why, after stepping down from Amex and the board positions at P&G and IBM, you joined General Catalyst. But say a little bit about that transition, and what you’ve learned from coming over and exchanging your blue lightsaber for one of our VC red lightsabers.
One of the things of serendipity is that I was very fortunate around 22 years ago to meet David Fialkow and Joel Cutler. One of the things, as you know, that I did is meet with a lot of different people, and it became increasingly important for me to meet with people in the venture community. That’s how we first met, and really finding out: What are you working on? What are you doing? What are some of the exciting ideas? And we developed a strong personal relationship.
And then I met Hemant Taneja, who’s now the managing partner at General Catalyst, a terrific investor. One of the things that we talked about was: What’s the role of technology in our society? What do we want to do? We discussed the focus on building enduring companies and, at the same time, that there needed to be a higher level of intentionality of companies being built.
So the reason why I went into venture, and the reason why I went to General Catalyst, was: one, I thought there was a real alignment of values for me; two, there was agreement that we needed to move from just doing some of the right things to saying, Let’s be far more intentional.
One of the things I focused on when we joined, in addition to investing, was creating a mission, and the mission was: We’re going to invest in powerful, positive change that endures. And we’re introducing a concept we call responsible innovation. And what we mean here is when you’re building a company you’ve got to have a higher level of intentionality. Certainly with AI/machine learning, we have the capability to think through different scenarios and so part of what we’re thinking – and this is evolving Reid – is, one, What do we value going forward?
The key point, at the end of the day, is: It’s a false choice to say, “if you’re going to do good, that’s separate from having an economically viable model.” I would submit that, if you really are thoughtful, you should be able to have a better economic model by doing good.
And part of that is, as you’re building your products and services, think about: How are you advancing what I call inclusive prosperity? How is it impacting different segments? This doesn’t mean that one company, one product is going to solve everything, but think about: Who is this helping? Who’s being left out? What are some of the unintended consequences? How can we build sustainably? How will our products and services empower people and communities? Are we committed to championing diversity, and what does that mean? And then, very importantly, How will this lead to a more healthy society?
It doesn’t mean that the company’s not going to be sold. What it does mean is we can think about those things and still have high standards on the economic return of these entities.
Yep. Yep. This is a natural place for another question we have from the audience, who is commenting that part of the notion for economic justice within racial justice and advancement is making sure that the wealth gap for African Americans and others is closed.
The VC & PE industry is a great source of equity and wealth correction. We’re working with such amazing people as management leaders and other folks who are really helping us with this.
What are the things that we need to be doing as an industry — the venture-capital, the private-equity industry — to ourselves advance the ball here?
That’s great. One of the things I would say, and not just because we’re talking, is from really our first meeting, Reid, you’ve been very consistent in talking about the impact of technology on society more broadly, and so I would say several things that need to be focused on.
First, what I would say is, what’s to me really exciting about venture is the audacious ambition that we have and this belief that we can really bring about significant change.
We’ve got to bring some of that same passion in an integrated way to what we can do to impact our society. And we accept the status quo. So the reality is, yes, there are a host of reasons why we haven’t made progress in diversity. Let’s assume people are well meaning. Would we accept that from an investment standpoint? We wouldn’t accept it. We would say, “We’re going to drill down on this and we’re really going to make a difference.” And I would say, at the end of the day, there’s too much of an acceptance of the status quo. We can’t accept it. Yes, it’s hard, but there are steps that we can take.
Secondly is, with our founders, understanding what the impact is of products and services on different groups.
And then, frankly, I think what’s really exciting to me — I’ll give you a few examples of some things I’m working on, both at General Catalyst and outside General Catalyst. One is I think there is an exciting opportunity to help people on their career pathway. And, in fact, to help people who have been disadvantaged. So if you take our population and say: We want to help people who did not go to college and we want to have them in family-sustaining jobs. There are now — in our portfolio, Reid’s portfolio, some of your portfolios — there are companies in fact that are advancing that, that are doing it. So how do we get to scale?
I’m working with an entity right now, OneTen, to find a million jobs for Black Americans in 10 years. And the reality is, people have said, “Boy, that’s a pretty audacious target.” I think it should be a multiple of that as we go forward.
And we’re saying to companies: Part of what you need to do is you need to change your job specifications so there’s skill first, versus credential. There are a number of jobs, like jobs $70,000 and above, 70-percent of which require a four-year college degree. That’s crazy. It’s not related to outcomes. It’s not related to skills. But then we have a major challenge to create an ecosystem on training and development, re-skilling, etc., that can help close that wealth gap.
As we develop our financial services products, as FinTech expands, clearly we’ve got to focus on: Who are we helping? Who’s being left out? What are products that we can create? Put that innovation to work.
Another entity that I’m working on in the nonprofit side is an organization called Concordance, a camp which is focused on reducing the recidivism rate. And they have a sample of 1,200 people in St. Louis over a four-year period where they have reduced the rate by 50-percent. I got involved with them and I said, “You guys have got to scale. We need to be in 25 states in three years, because that can be transforming.” And I told them, “You got to be like a startup in this.”
So I fundamentally believe part of what General Catalyst and Hemant have really been leading is in healthcare, to change the healthcare experience. There’s a company called Cityblock that is focused on delivering healthcare services in low-income communities, and it’s a for-profit entity.
So we can do this, but we’ve got to have the resolve. We have to have the commitment that in the venture community we are going to make a fundamental difference in our society, we are going to raise the standards. It’s not just about economic return, but let me be very, very clear: The companies that we’ve invested in, we want to generate significant returns, and we believe by pursuing this approach we will do that.
"We have to have the commitment that in the venture community we are going to make a fundamental difference in our society, we are going to raise the standards. "
Yep. 100 percent. Echoing the things that you were just saying, I tend to tell people that if you’re not part of the solution on these kinds of things, you’re part of the problem. So always be thinking [of] what you’re doing to be helpful as part of it. Own the problem just as your leadership.
Also, very similar to hiring on skills, not degrees, LinkedIn’s doing that. I know you know Byron from Opportunity@Work, which, I’m the chairman there, doing that as well. Similar thing. It’s like, “No, no, no, do not accept not fixing this problem. Just keep working. You cannot fail. You just keep working at it.” So I think it’s very inspirational.
Maybe for like a 60-second last thing, what would be your couple of tips as a gold-plated standard of corporate governance?
One of the things, very simply, Reid, is: On your board you want people who are aligned with the mission of the company and, in fact, want the company to win in the marketplace.
Second is: You want people, as I said, who you can trust but in fact will push you. That’s hard to find, because sometimes when I was interviewing people, I would say, “Do you want the company to win?” And some people would say, “Look, my job is to be totally independent.”
Look, I’m all for independence, but I want you to really want this company to win, and I want you to challenge me. But at the end of the day, if I’m doing the things to move the company forward, I need your support. I need you to commit.
One is: Every board needs a few wise heads. I want board members who will give me ideas that I can think about. I don’t want people just nodding their head and saying, “Ken, this is really great.” I want them to be in [it] with me.
[Another] one of the things I think that’s very, very important is everybody should focus on having directors that they trust. You want to have intensive conversations so you understand their values and their motivations, and then you want to think about: What are the capabilities that I need as CEO that will help me be a more effective leader and will help the company win in the marketplace?
One other thing that is totally unrelated, but when I called Reid to help out in voting rights, which I think is a big, big problem in this country, it took Reid five seconds to say yes and to call people. And one of the things that is important is Reid has always been someone who stands up for things, who expresses his point of view, and I just want to say I really value, Reid, our friendship.
Likewise. That was what I was gesturing at at the very opening, which is I will always take your call and I will always follow you because I know it’s on a mission for a greater society. So the answer for you is always yes. Of course, doubly important on voting rights. It’s fundamentally, as you articulated at the time, just being good Americans.
So this brings us to the end of our session today. Ken, thanks so much for joining us. It’s such a privilege to have you here today. We so appreciate you being here with us.
Thank you, Reid. Thank you very much.