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tv   The David Rubenstein Show Peer to Peer Conversations  Bloomberg  November 13, 2016 10:00am-10:31am EST

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>> did you feel that there was a glass ceiling? kenneth: there were people that said to me, i do not think a black person could ever become a ceo. >> i said i cared a great deal about them and their families. david: somebody bought a work of art. was that to get points? do you ever leave home without your american express card? kenneth: i never leave home without it. and when i leave home, it is always with me. >> would you fix your tie, please? >> people would not recognize me if my tie was not fixed.
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let's leave it this way. all right. ♪ david: i do not consider myself a journalist, and nobody else would consider myself a journalist. i began to take on the life of an interviewer, even though i have a day job of running a private equity firm. how do you define leadership? what is it that makes somebody tick? you graduated from harvard law school in 1976. and like many people in that , generation, my generation, you went to practice law at a large firm in new york. why did you leave after two years? did you not like to practice la kenneth: i enjoyed the practice of law. i did not have any grand scheme that i would go into business. but i have always been someone who really was energized by new opportunities and challenges.
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and i am very intellectually curious. i was contacted by a company. and when i went up to interview, i was just really impressed with dynamism, intelligence, the other types of activities they were involved in. i really felt they could be an incredible learning experience for me. david: you have to then tell your parents, i went to law school for three years, i am a lawyer, and now i will not be a professional in that area. i will be a consultant. what did they say? kenneth: i must confess that both my parents were, frankly, concerned. they said, you have gone through this training to be a lawyer. that seems like a very good profession. what is it that consultants do? and i said, they advise corporations on strategy. what do you know about
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business? i do not know a great deal, though i have some experience working with corporations, from a legal perspective. well, how are you going to get the training? well, they are going to, in fact put me in a training , program and give me books that i will learn on the job. well could you tell us about the , clients? that is confidential. and to my parents, that sounded very mysterious. so my father finally said, you're young enough that if this does not work out, and the probability is that it will not, you will at least have a career to fall back on and you can go back to becoming a lawyer. well, in my case, -- david: well, in my case my , mother asked me to keep my bar current, i know the feeling. so you went there and you were only there for a short period of time. i was enjoying the job i
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, had no plans to leave. then i was contacted about american express. what really sold me on it was -- who at that time he was president of the major division at american express, travel-related services. and he was forming a very small, strategic playing group. -- planning group. one of the things he said to me that really has a stuck with me throughout my career is i want a , few catalytic agents of change. that concept of being a change agent was very important. david: you went to work for american express travel services and you said you would run it. how did you turn that around? kenneth: the merchandise business was intriguing to me. i first went to the business as head of marketing. lou was not thrilled that i did that. but to his credit, he allowed me to do it.
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and then two months later, we , had a review with lou, and he said, i think i will close down the business. i said, can you give us three weeks to come back to you with a strategy? i really believe this is a business that not only has growth potential, but is a business that can help american express achieve its strategic objectives. and so we presented him with a strategic plan. he accepted that plan. and around eight months later, i was appointed head of the merchandise services group. and we were able to in a period of two and a half to three years, to grow sales, with a range of merchandise products. we sold furniture, jewelry, we sold electronics. it was a fascinating opportunity because i had every aspect of a business to run.
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and so it was a great learning experience. david: in the 1970's, and you are here in the 1980's and 1990's, there were not that many ceos of fortune 500 companies that were african-american. did you feel that there was a glass ceiling, that you could not become ceo, or did the discrimination not exist? kenneth: here is what is important for me and my story. is when i came to american express, my objective was not to become ceo. it was not that i lacked ambition, but it just was not in the realm of possibility, not because of my race. more so because i just wondered if i belonged in a large company. if i would be satisfied, stimulated. overtime, what i found that american express is a company of ideas. and i like the fact that this company has this commitment to service.
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and you can really implement ideas in a relatively short period of time in the marketplace. there were people, frankly, both inside and outside the company who said to me, i do not think a black person could ever be ceo of a company like amex, american express. and my view, taken frankly from my parents, was one that obstacles were to be overcome. and my father had a great saying. focus on the things you can control. and the one thing you can control is your performance. what i found at the company was, a very supportive environment. the mentors i had, the board certainly encouraged me to think about the opportunity and the potential to become ceo. so despite the fact that i did encounter doubters, both
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inside and outside the company, i think that the management team , and the top management team was very encouraging to me. , david: when you became the ceo in 2001, did you hear from all your high school classmates, telling you they knew you would be successful? kenneth: there were some people when i was growing up who thought that my vocation would be more politics than business. but you certainly encounter those people who feel that they knew. i think frankly, there is no way , that someone would have guessed at the time that i grew up that i would have the opportunity that was presented to me. david: no regrets then that you do not go into politics? kenneth: i do not. i do have, though, a strong social conscience. one of the reasons why i did not -- did go into law in the first place is because i felt i could have an impact on society.
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one of the things i feel strongly is that people in business have a responsibility and an obligation to make a difference in our society. david: somebody bought a $175 million work of art and he charged that entire work of art through the american express card. was that to get points, or he did not have the money? kenneth: if you want to buy that, i am sure you will be approved. and if you would like to talk after this interview about any other purchases. david: ok. ♪ the david rubenstein show, peer-to-peer conversation, there is opportunity in complexity.
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david: in 2001, you became the ceo. on september 11, tragedy occurred not far from here. you were in salt lake at the time. what was your response and how did you handle that leadership challenge you had?
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kenneth: dallas, david an , incredible challenge at any point in someone's career. but particularly, in my first year as ceo. and one of the first things i was able to do when i was able to get the management team together, is i said to them that it is our job to lead this organization. and what was important through that whole ordeal, as you know, we had several employees who perished. that was emotionally traumatizing. the travel business was in disarray as a result of 9/11. spending dropped precipitously. i decided that, since we could not go back to our building, we were spread out in several
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different locations in the tri-state area. i got all of our employees in the tri-state area to come to an event at madison square garden. david: icy. -- i see. kenneth: i talked to them about what american express represented. i talked to them about the fact that i cared a great deal about them and their families. and that i believed that american express was going to be able to overcome the challenges that we faced because this was a time where, frankly, a number of people were writing off the company. they did not think we would come back. david: why is that? because travel had gone down? kenneth: that is right. david: but you had to lay off 15,000 people? something like that. kenneth: this is very important from a leadership standpoint, is that one of the things i believe very strongly, there is
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a leadership maxim i came across in my 20's. as you may know, i love to read biographies. and napoleon has a quote i paraphrased. that the role of a leader is to define reality and give hope. and that was a constant refrain for me throughout 9/11. it is a term i used several times a week. and what was absolutely important was to be decisive and compassionate. and i was very transparent in explaining the reasons why we had to do the layoffs. it was obviously painful for the organization, people understood the context of the situation we were in. but that was a very, very challenging time. we emerged stronger as a company, but certainly, the
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leadership of this company and my leadership, was tested at the highest level. david: let me talk moment about the company you headed, what was the roots of american express? kenneth: we started in 1850. and i think what is very important it really demonstrates , the power of a brand, and the power of reinvention and transformation. we started out as a freight forwarding company. what does that have to do with the payments business? the heart and soul of american express and our company is our commitment to service. that is what we believe in. that is what has made us a respected brand. there were two other attributes that were important in the beginning. trust, and security. because if we were transporting goods and services across the country and around the world, you had to trust that company. you had to feel secure to
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release your goods to that company. and that was very, very important. and the service commitment was critical. david: the credit card was invented by american express, in 1958. i got mine in 1975. and i have probably used it ever since then. tell me, when i use it, i am supposed to pay off my bills every month. what percentage of people do payoff their bills every month? kenneth: i cannot give you an exact percentage, but a good percentage pays their bills. david: how do you make your money? you charge an annual fee, and you get a fee from the merchant? is that right? kenneth: that is right. david: the essence of the credit card is this. the other cards, your competitors, seem to make money off the interest charges. is that a different business? kenneth: no in fact, what is
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, very important is providing customers with choice. you are absolutely right that we make money from a portion of the purchase that you make at an establishment. there is an annual fee that varies based on the type of card that you carry. and, then also, we charge interest on outstanding balances. so we do offer revolving credit cards. what is different in our model is that, next interest income is around 18% to 20% of our revenues. for a bank card, that is 60% to 80%. david: the credit card is the bulk of your earnings revenue? >> this was a top prize that went for top dollar. david: someone bought a 175 million dollar work of art and
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charged it through the american express card. you have to clear that in advance? kenneth: i cannot acknowledge whether that took place or not, from a privacy standpoint. david: suppose i want to buy a $175 million work of art. kenneth: david, if you would like to buy that, i am sure you would be approved. and if you would like to talk after this interview about any other purchases, we will have that conversation. david: ok. so have you ever used your , american express card and had it turned down? kenneth: that has never happened to me. david: really? kenneth: when i took over the card business in the 1990's, we had a policy for top management that they had an automatic override. and i thought that was absurd. because i wanted our top executives to have the experience that every customer had. and so we did have some executives that were declined for a purchase. david: so, let's suppose you go
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to buy something at a place and it says, you put down your american express card and a say, we do not take american express. i'm sure you do not like when you hear that. kenneth: i do not. david: i know you do not like it and you can argue with them. what do you do? do you walk out, or use another card? kenneth: i do not have another card. i only use american express cards. david: what happens if they do not take american express? kenneth: i walk out. there are alternatives. the reality is, we'd meet the vast spending needs of our customers, there are other options they have, and it is certainly in my interest to take advantage of those options. david: is your wife allowed to have a visa or mastercard? kenneth: my wife is very independent. she has decided on her own that she only carries our products. david: ok. kenneth: what is very, very
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important is that i studied the competition intensity. -- intensively. we do have people in the company who have other cards who test them, use them so we can find out what is happening in the marketplace. and i think that is very important. david: your largest shareholder , i think is warren buffett. , does he call you up every day to say what you should do to increase the value of stock? kenneth: he is not someone who is on your case about how the stock price is doing every day. he is very focused on making sure you have a unique and differentiated business model. ♪
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david: going forward, what is the biggest challenge for american express? obviously, the world is changing a little bit. there are new ways of payment. there is paypal, apple pay, square, other things. kenneth: what is really exciting in the marketplace right now is the convergence of online and off-line. obviously technology is having a , major impact. mobile is having a major impact. all the factors are changing. so, 10 years from now, i do not know if plastic will be used at
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the same level. but i frankly do not care. because it really is a unique business model that american express has. the services that we have. over the last two years i have spent a lot of time in silicon valley. one thing i do when i get to silicon valley is take those companies through our business model. and a number of those companies want to partner with us because what they say is american express has an integrated business model unlike other participants in payments. and so that is why we have a very good partnership with uber, with airbnb, facebook. we are obviously involved with apple pay, samsung pay, android pay. but what is very important, is not to look at payments as simply facilitating a payment. it is to also look at payments as a platform to deliver services. david: your largest shareholder , i think is warren buffett.
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, does he call you up every day to say, here is what you should do every day to increase the value of my stock? or does he leave you alone? kenneth: i have been really privileged to have warren buffett as an investor. he has been a very strong supporter of the company. a very strong supporter of me. he is not someone who is on your case, how is the stock price doing, every day. what he is focused on, what are you doing for sustainable success? what are you doing to differentiate your products and services? because he is very focused on making sure you have a unique and differentiated business model. but i have enjoyed my interactions with him. i call him. david: hard to get him on the phone? kenneth: he also calls me. he is so easy to get on the phone.
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his character, and the type of person that he is, inspires me to want to do better for the company. david: so do you believe leaders are born or made? how do people become great leaders? kenneth: i think it is a combination of both. i draw the analogy to great athletes. some great athletes are born, but unless you practice your craft, those skills will dissipate. so there are certainly people who have innate leadership capabilities. but i am a strong believer that you have to look at leadership as a craft. today, as an african-american leader in the company you are a symbol of , african-american leadership in the business world. but when you ultimately decide to do something different are , there other diverse leaders in the company you have been able to recruit? do you have a lot of effort -- african-american leaders, women, other people of different ethnic backgrounds? kenneth: what we have been
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very focused on is diversity. we have a cadre of people around the world that i think can move up in this company. and i think that is important. david: outside of american express, you have been involved in some philanthropic things. one i am very familiar with, as -- , is you are a leader to getting people to contribute to that. over $300 million now has been contributed through your efforts. how did you convince people to give over $300 million to that cause? kenneth: first, let me thank you david. , you have been one of those contributors and have made a big difference to not just a museum but the smithsonian. david: you were very persuasive. kenneth: it will celebrate great achievents against great odds. it will remind us of the power of dreams and faith. what was critical in the
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beginning was to emphasize the -- to people that this was not just a museum for black people. >> imagine holding a little hand, telling them those stories. and together we will learn about ourselves. as americans. we will walk away that much more in love with this country. kenneth: this is a museum for america. what people are seeing is, america through the lens of the african-american experience. but what they are also seeing is, this museum really represents the values of this country. david: when you do decide to leave american express, what would you like people to say is your legacy? kenneth: what i would like them to say first and foremost, i believe this is important for any leader, is that, he is a
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person with high integrity. he is a change agent, focused on innovation, he has developed people, and he has left the company stronger and positioned the company for sustained success. david: do you ever leave home without your american express card? kenneth: i absolutely never leave home without it. and when i am home, it is always with me. ♪
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