EXECUTIVE SUMMARY The Future Ain’t What It Used to Be: Delight & Despair over Disruption The New York Public Library | June 7 - 8, 2016 PRESENTING SPONSORS KEY THEMES SUMMARY Yale CEO Summit June 7-8, 2016 | The New York Public Library The Future Ain’t What It Used to Be: Delight & Despair over Disruption The Yale CEO Summit, led by Yale Professor Jeffrey Sonnenfeld, was held on June 7 and 8, 2016 at the New York Public Library in New York City. This Summit brought together CEOs and other business executives; current and former government officials, including the Secretary of Health and Human Services; and mayors of more than a dozen U.S. cities. Also attending were leading academics, authors, and thought leaders. Participants examined the theme “The Future Ain’t What It Used to Be: Delight & Despair over Disruption.” Sessions looked at whether disruption in politics is good, at disruptions in health care, disruptions in diplomacy and economic policy, disruptions in regulation, and startup disruptions in media and retail. Legendary entrepreneur and business leader Zhang Ruimin, the CEO of Haier Group, was honored with the Legend in Leadership Award and renowned investor Alan J. Patricof was presented the Maverick in Leadership Award. Participants included renowned leaders such as: George S. Barrett, Chairman & CEO, Cardinal Health Peter Orszag, Vice Chair, Lazard; Former Director, Office of Management Richard J. Berry, Mayor, Albuquerque, New Mexico and Budget Byron W. Brown, Mayor, Buffalo, New York Alan J. Patricof, Founder & Managing Partner, Greycroft Partners Sylvia Mathews Burwell, 22nd Secretary, U.S. Department of Health & Mark Penn, President, Stagwell Group; Former Top Clinton Campaign Strategist Human Services Jed S. Rakoff, Judge, Southern District of New York, U.S. District Court William H. Donaldson, 27th Chairman, U.S. Securities and Exchange Stephanie Rawlings-Blake, Mayor, Baltimore, Maryland Commission Ralph Reed, Chairman & CEO, Century Strategies; Founder, Christian Coalition Catherine M. Engelbert, CEO, Deloitte LLP Irene Rosenfeld, CEO, Mondelez David Faber, Co-Anchor, CNBC Stephen A. Schwarzman, Chairman & CEO, Blackstone Greg Fischer, Mayor, Louisville, Kentucky Ruchir Sharma, Head of Emerging Markets & Chief Global Strategist, Carolyn G. Goodman, Mayor, Las Vegas, Nevada Morgan Stanley Brad Katsuyama, President & CEO, IEX Andrew Ross Sorkin, Editor, DealBook, The New York Times; Co-Anchor, Anthony W. Marx, President & CEO, The New York Public Library CNBC Teri Plummer McClure, Chief Human Resources Officer & Senior Vice David J. Stern, Commissioner Emeritus, National Basketball Association President, UPS Myron E. Ullman III, Executive Chairman, JCPenney Company Grover Norquist, President, Americans for Tax Reform Zhang Ruimin, CEO, Haier Group Nels Olson, Vice Chairman, Korn Ferry Disruption in Politics A seasoned political pollster and consultant suggested that candi- Donald Trump (and to a lesser extent, Bernie Sanders) is trying to dates win today not by playing to the middle, but by capturing the disrupt politics. Republican supporters argued that excessive regula- extremes. So few people vote that is it possible to be elected with the tion and taxes hurt innovation, and that labor unions exercise undue support of only a small fraction of the population, if that group is influence in the Democratic Party, which will stifle innovation in edu- energized and mobilized. The media—which focuses on controversy cation. They see Hillary Clinton’s alignment with unions as hurting and dissension—caters to these extremes. The pollster suggested le- the burgeoning gig economy, and support Trump. veraging technology to disrupt how people vote, making it easier and more convenient for the masses to participate in elections. But most business leaders aren’t buying it. In a recent poll of Fortune 500 CEOs, 58% support Hillary Clinton over Trump, and at the most recent Yale CELI Caucus in Washington DC, only 6% favored Trump (other candidates were still in the race at that time). A leading finan- cier explained that the business community wants predictability. Hill- ary Clinton is seen as more predictable; Donald Trump is extremely unpredictable. A Yale professor argued that America’s constitutional system has lasted, while attempts to replicate this model in other countries have failed, because almost always, the United States has had a strong political middle. But the future of this political middle is uncertain. © 2016 Chief Executive Leadership Institute. All rights reserved. 2 Created by BullsEye Resources, www.bullseyeresources.com. Other participants offered differing arguments including: • Changing how health care is delivered to be more integrated. • Building a bipartisan coalition. One participant is leading an orga- Mandating payment changes like bundled payments will drive in- nization focused on specific, practical goals such as create 25 million tegration and coordination, as payment penalties are doing in areas jobs, preserve Social Security and Medicare, and have a balanced such as unnecessary readmissions post-hospital discharge. budget. More than 80 members of Congress from both parties have • Using of data and information. Data can identify when variation signed on to support this agenda—after the election, of course. occurs, what are the best treatments in specific situations, which • Divisiveness is ok. A leading political thinker asserted that having providers are performing best, and much more. Data can help two parties moving in very different directions is good. The parties improve quality, drive efficiency, and make better decisions. are strongly divided, represent strong ideologies, refuse to compro- While there is a long way to go, over the mise, and appeal to their bases. It works for both parties. past two years, at the same time that access • Checks on power are working. Another leading political thinker to health insurance has increased, real per put forth that the constitution is not about “government working.” capita Medicare spending has declined. It is about protecting freedoms. By having a Democratic president HHS has signaled the market and is begin- and a Republican Congress, the public is voting to check the presi- ning to drive change. Efforts are also under dent’s power. way to measure and pay based on qual- ity, but defining and measuring quality is Peter Orszag, Vice Chair, Lazard; Mayors get things done. • Despite all of the extremely difficult. Initial efforts focus on Former Director, Office of Management and political bickering at the federal level, may- areas where there is reasonable agreement. ors are apolitical and pragmatic, and roll up their sleeves to get things done. They inter- Despite the controversy surrounding the ACA, 64% of CELI partici- act frequently and directly with constituents pants believe the U.S. health care system is better off since the pas- and focus on things that affect people’s lives sage of the ACA and only 33% believe the ACA should be repealed. every day. Stephanie Rawlings-Blake, Mayor, Baltimore, Maryland Disruption in Health Care The health care system was not sustainable as it was, explained the CEO of a huge health care business. It had to change, this CEO ar- gued. Demographic changes, cost challenges, delivery system issues, and access problems all made the system prior to the passage of the ACA unsustainable. Joseph C. Papa, Chairman & CEO, Valeant Pharmaceuticals International, George S. Barrett, Chairman & CEO, Cardinal Health, and Irene Rosenfeld, CEO Mondelez Secretary of Health and Human Services Sylvia Burwell said that policy changes were needed to make fundamental changes with regard to access to health care, the quality of health care, and the cost of health care. Since the ACA was passed, access has increased dramatically, An area of consensus is the belief that far with more than 90% of the population Catherine M. Englebert, CEO, greater effort is needed to educate the public Deloitte LLP and Sylvia Mathews about value-based health care—what it is, having health insurance. Major steps are Burwell, 22nd Secretary, U.S. Dept. of also being taken to address affordability Health & Human Services how it works, what the benefits are—and to and cost. These include: drive changes in consumer behavior, which is extremely difficult and will take time. • Changing how health care is paid for. HHS has set a specific goal that 50% of Medicare payments will be value based by 2018. Also, Teri Plummer McClure, Chief in many major markets, Medicare is paying providers who perform Human Resources Officer & SVP, UPS hip or knee surgery a “bundled payment” instead of traditional fee- for-service. This is a fixed fee to cover all costs of this episode. © 2016 Chief Executive Leadership Institute. All rights reserved. 3 Created by BullsEye Resources, www.bullseyeresources.com. Disruption in Diplomacy and Economic Policy • A growing belief that too many Americans are in jail for non- violent crimes. Currently 2.2 million Americans are in jail, which Extensive concerns were expressed about China, both diplomatically is the highest number and percentage of the population of any and economically. China was termed as repressive, increasingly auto- country. It represents a 500% increase over the past 40 years, even cratic, and less welcoming. There is increased censorship and a grow- though the crime rate has declined every year for the past 25 years. ing climate of fear. Pollution is high, affecting approximately 60% of When someone is sent to jail, it destroys families and communities. the population, income disparity is increasing, and there is risk of a brain drain, with about 300,000 college students in the United States. A reason for the increase in incarceration is mandatory sentencing for The legitimacy of the government is based on economic growth; with drug crimes, with sentences based on the weight of the drugs. Par- a slowing economy the government is feeling tremendous pressure. ticularly troubling is the inequity of those These factors raise concerns about China. who are in jail, with minorities accounting for 60% of the 2.2 million in jail.