Here is the full transcript of Ken Chenault, CEO of American Express at Stanford GSB View From The Top – Roanak Desai Memorial Talk.
Listen to the MP3 Audio here: View From The Top – Ken Chenault, CEO of American Express at Stanford GSB
Introducing Speaker: And it’s my pleasure to introduce today’s speaker. Before I do that, I want to acknowledge this is our final VFTT for the year. And it’s the Roanak Desai Memorial talk. Roanak was a member of the MBA class of 2010. And we’re joined today by several of his classmates and friends as our special guests.
Roanak was a remarkable and accomplished individual. And as a student leader of the View From The Top series, he was passionate about exploring how prominent leaders who run some of the world’s most influential enterprises can truly impact the lives of millions. He recognized that each of these leaders have their own personal story, their own values and their own ideas about how to make change happen. His desire to learn from these individuals was motivated by a commitment to reflecting on his own personal leadership story. He aimed to leave a positive and significant mark on the world. But he wanted to do so in a way that was consistent with his values. To this end his talent and ambition was always complemented by his extraordinary warm spirit and his gracious good humor.
After Roanak’s untimely death, his classmates asked if we could dedicate one talk each year in his memory. This year we thought it was only appropriate to invite Ken Chenault to give this special talk, as Roanak interviewed Ken when he was last here in 2010. In the spirit of today’s talk, I encourage you to reflect not only on our speaker and the company that he runs but what his experience and the experience of all of the speakers in our series can teach you about your own role and potential as a leader. I hope and I think Roanak would also hope that this reflection helps you set your sights a little farther, challenge yourself a little bit harder and to challenge — and to think a bit more deeply about what it means to pursue a life of meaning and impact while staying true to yourself and the things that you value.
As a tribute to Roanak, before we begin, please join me in a moment of silence.
So now I’d like to welcome and introduce Ken Chenault, the chairman and CEO of American Express. He has been at American Express for more than 30 years, having joined the company in the strategic planning group in 1981. Before this, he worked as an associate at Roger & Wells after graduating from Harvard Law School and worked as a consultant at Bain & Company. He was promoted to President and COO at American Express in 1997 and was named CEO in 2001. American Express or Amex founded in 1850 as a Fortune 100 diversified financial services company with more than 30 billion in revenue. It’s one of the 30 companies that make up the Dow Jones Industrial Average and it’s best known for its credit card, charge card and traveler’s check business. Indeed Amex accounts for roughly 24% of the total dollar volume of credit card transactions in the United States. Much of their success stems not from an individual product, however, but for their longstanding prowess in consumer marketing and I’m sure you’re well aware of — membership has its privileges. Don’t leave home without it. These are just a couple of tag lines that really enter the American cultural lexicon. And as a result American Express is truly one of the best known brands in the world today and is consistently ranked among the world’s top 25 most valuable brands.
Another reason the brand is so valuable is Amex’s commitment and reputation for customer service. In 2012 JD Power ranked Amex highest for customer satisfaction among card issuers for the sixth straight year. Fortune recently listed as one of the 15 most admired companies in the world. Ken Chenault and his team have certainly played a critical role in building and maintaining a strong brand.
When Ken was here in 2010, he talked about leading his 65,000 employees through the many challenges the companies experienced during his time as CEO saying, “Clearly my tenure has been one of confronting some of the most challenging crises that we’ve seen in the last 10 years. I take my motto from Napoleon: Make sure people are grounded in reality and give them strategies to be hopeful”.
Ken’s made an impact well beyond Amex. He is currently co-chair of the Business Roundtable. He serves on the board of IBM as a member of the Council of Foreign Relations and has received many business and civic awards. Every magazine named him one of the 50 living pioneers in the African-American community having been only the third African-American to run a Fortune 500 company. Today Andrew Baldwin, one of our second year student leaders from the View From The Top team is going to interview Ken. And so please join me today in welcoming Ken Chenault to Stanford GSB.
Andrew Baldwin: So thank you very much for coming today. When I found out that I was going to get the chance to interview you, I was thrilled. And it took me back to the first time that I interacted with American Express, the brand. I would just graduate from college. I was moving from Indiana to New York. And when I got to New York I found out that New York’s a little more expensive than I thought. So as any responsible 22-year old, I applied for my first credit card who was a Visa.
Ken Chenault: That was the first mistake.
Andrew Baldwin: That was the first mistake — the only mistake that made sense. And they gave me a credit limit of $1500. And I told a friend the story. He said you’re an idiot for not being on American Express. So the next day I applied for American Express. The American Express gave me a credit limit of $25,000. And when I look back I can only think that you personally thought that I was 16 times more valuable than Visa did. So hopefully I can repay some of that appreciation through this time.
Ken Chenault: Thank you.
Andrew Baldwin: I want to start out the interview with a very similar question to what Roanak asked during his 2010 interview. You led Amex through a pretty incredible time right after you joined — right after you became CEO, 9/11 occurred. And then you also were the head of a financial services company during the worst financial downturn in 80 years and kept your job which is no small feat. Can you walk us through the one or two days that were the biggest tests for the largest challenges?
Ken Chenault: Certainly. First, just let me say it’s a real honor to be here. And obviously I remember Roanak very vividly and was just impressed with both his authenticity and his humility. So it means a lot for me to be here. Really appreciate it.
So let me just say that obviously 9/11 and the financial crisis were absolutely incredible. I would say the most horrible obviously was 9/11 from a emotional standpoint, because we lost 11 employees and the loss of human life is always a tragedy. What was most important there was to rally the organization, to understand both the reasons why they should be hopeful but also dealing with the reality that the travel industry was in total disarray. Spending on our credit cards had dropped dramatically. And what I recognized was that we had to transform the company in a relatively short period of time. And that leads me to one of, I think, the real challenges from a leadership standpoint, is how to be decisive and compassionate.
So within 60 days of 9/11 I decided that we had to substantially change our cost structure, which meant that we were going to have to lay off employees. And many people in my top executive team said this is not the time to do it. And from an emotional standpoint, they were absolutely right. The concern that I had was that the future of the company was at stake. And I said we have to do this in a compassionate way with our employees. But we have to do it.
And what I believe very strongly that one of things you’ve got to do in leadership is you need to tell people both the truth and you don’t talk down to people and you explain to people the reasons why. And I’ll cut to the chase just to simplify so we can also talk about the financial crisis, is what I explained to people were the reasons why what was happening to the company. And at that time we always do a employees survey. And a third of our incentive compensation is really based on the satisfaction and engagement of our employees because we really do believe in the service profit chain. And people said, Ken, if you’re going to lay off basically 12% of the workforce, the last thing you want to do is to do a survey on it. And I said not only are we going to survey the employees but we’re going to survey the people that we laid off. Because from a leadership standpoint everyone has to be held accountable.
And I think partially because of the times that we were in with 9/11 but also the leadership in the way that was done, we received the highest employees survey scores that we had in years. So that was very much a turning point for the company. And then frankly one of the most exciting things for me was over the last five to ten years is in fact to see some of those employees come back to the company because of the growth of the company and what was happening.
The financial crisis was very different. On one level, it didn’t have the emotion of the loss of human life. But you really felt that you were falling off the cliff. And in a crisis what I think is very very important and where it really hit me was when Congress voted against TARP. And I vividly remember my son is now a junior in college, calling me and saying, dad, everyone says that the company is going down and you’re going to be fired. And I said, Kevin, it’s not going to be that bad. Don’t worry about it. But the reality is that represented the fear. Because to me when messages permeate the playground, you know this is really serious that there are real problems. And for us where we were impacted is we were very reliant on the wholesale funding model. So we did not take deposits and so literally over a weekend and this goes to the power of a brand, I said we’ve got to get into the deposit business and both inside and outside the company, people said, given what’s going on with financial services companies in the environment, there was no way you’re going to get this up and running. The only way we could do it was in fact to work with third parties. So we, in fact, worked with other financial services companies to see to basically sell our deposit products.
And I then put together a mantra for the company. Because we wanted to have all 60,000 plus employees focused on what we needed to do and it was really simple: Stay liquid. Stay profitable and in the hope for it was selectively invest in growth. So even in the most challenging times, I wanted to reinforce that we were not going to take our eye off the ball of really being focused on growth. But staying liquid was critical.
And fortunately within around 30 days we’d raised around 8 billion in deposits. We now have over 40 billion in deposits. That gave me a lot of hope and gave the organization and the company a lot of hope. Because I said why would people be putting money in with us if they thought we were going out of business, number one. Number two, we were able to stay profitable. And that was critical. Third, was what I also looked at as far as customer health was how many customers traded down from our more expensive products to less priced products. And the reality is almost zero. And we had hardly anyone who left the franchise. That gave me a lot of confidence.
Then the third thing that we were able to do, back to the mantra, is we were very clear to people in the company where we were investing. And that allowed us to come out of the crisis frankly really roaring. So the momentum of the company was very very strong. And my experience frankly over thirty years is what you see with companies is it really is what happens during a crisis is how the companies act, how balanced they are. The majority of companies, in fact, hunker in the bunker — don’t really have a broader perspective, don’t focus on growth. And then generally two to three years after a crisis you start to see this demarcation that’s caused and that’s exactly what happened for us. Fortunately we were on the positive side of that.
Andrew Baldwin: And speaking on a lighter note, over those 30 years and even maybe more specifically over the last 12 as CEO, is there one day that you look to and you’re like, man, that is the day why — that’s the reason why I do this. This is a great day, this is kind of what gets me excited and just passionate about the business. Is there one day you’ll look back to?
Ken Chenault: I would say literally there are fortunately hundreds of days. Because my view in business is, if you’re not having fun, it’s not worth it. But I’ll give you one example that again was a tragedy but gave me a lot of pride is, I think everyone certainly remembers the tsunami. And you’ve got the problem — and the reality was that our employees around the world with literally no instructions from top management did incredible things to serve people. And that just gave me incredible pride because when people feel empowered to make a difference and literally make up policies on their own. But it was because they really believed in the service mission and the service ethic of the company. That’s where I felt great but fortunately I have literally hundreds of examples like that that make me feel great about being in the company.
Andrew Baldwin: You are making my transitions really easy to the next question. So the next question is actually about customer service. When I think about American Express, I think it’s the gold standard of service. And in fact, you’ve taken a really boring piece of plastic and turned it into a club that has a cult following. This room is full of aspiring entrepreneurs or managers who want to build equally great brands, equally great service cultures. How did American Express do it and what would you — what knowledge or advice would you provide to them?
Ken Chenault: Yes, here is what I think is very very important in building a brand is, if you think about what are the attributes of the most powerful brands — brands are really about bringing a rational and emotional connection. Because the best brands have a personal engagement and the best brands and the brands that are really long term are those brands that in fact have, what I call, a higher purpose. That it’s more than just selling a product, that you’re changing people’s lives, you’re impacting people’s lives, you’re allowing people to have fun. And when you have a brand that combines that rational value proposition with an emotional connection, it’s really powerful.
What people forget, because the card has been so successful, is the company started off as a freight-forwarding company. And what’s critical is the reinvention of the company over 163 years. One was that commitment to service was really critical. The point I make about our traveler’s check business is that it had no income requirement. Anyone could get it. It was used all over the world. That helped build the brand allowing us to offer a card. Right now part of what I do particularly with the partnerships that we have with a number of digital companies, I say the form factor is irrelevant. The reality is think about the card as a platform to deliver service. So what’s important is that you’ve got to understand, to create a brand you need a core mission. And for us we want to be the most respected service brand. Trust of the brand is very critical. Service is very critical. Security is very critical.
And then what you’ve got to do is constantly innovate. Because if you want to be a leading brand, you’ve got to innovate in the marketplace all the time. And what I would also emphasize with respect to service is what I found is, and I say this publicly, and certainly I’m very competitive, I want to win. So I don’t foolishly give out secrets. But the reality is that most companies don’t want to make a commitment to service. One is, because it’s a long term investment. Two is, they don’t have the right metrics in place to know they’re getting the returns. We, in fact, know what service interactions will generate levels of spending. We know what will drive retention and loyalty of our customers.
And one of the things that we did in our service despite the fact that for years we had great service, around 10 years ago, we said we’re going to revamp it. We’re going to reinvent the way we do service. We think people are too robotic. We think there were too-rule focused and we want to empower the people who are serving our customers, whether that’s online or offline. And we literally changed fundamental aspects of our service. And that leads to a very important point, which I believe in strongly is you always want to create the company that will put yourself out of business. That’s the way you constantly need to think, and if you believe that you are successful, and you get arrogant about that success, that success becomes a rut.
Andrew Baldwin: Specifically on one service point, I love your customer service representatives so much so that I probably confide in them more than my own parents sometimes. And they are consistently and always friendly. What’s the secret training or recruitment process that you use to always have that consistency, because I actually view that as a pretty big competitive advantage?
Ken Chenault: It’s a big advantage — here’s the simple answer to that. And it took us a while to get there, is attitude makes a difference. Because actually hire people who like to serve people. That is a stunning insight. I mean, give me a break. And so you in fact can interview people. You can test people, you can assess people who really do have the attributes and have the desire to serve and really enjoy it. There are some people — in fact, when I talk to even senior people and I interview them, I talk about service as a higher purpose, I get some people say, hey, that’s not a purpose for me. It’s not a higher purpose for me. That’s fine. And I don’t want to hire you. Because at the end of the day you’ve really got to believe in what the core mission is. But attitude really does make a difference and you can interview, you can assess for it. You can empower people. But sometimes companies get so bogged down in policies and rules that for us, as terrific as we were historically as a service company, we did not explicitly enough focus on the attitude of people that we were hiring.
And now over the last 20 years, our retention rates, our customer SAT scores are off the graph and our service levels are really strong. Because we have people who really enjoy serving people. And that everyone does.
Andrew Baldwin: A couple weeks ago Jack Dorsey was on the stage here. And he was talking about kind of the shift in almost commerce and payments that everything from, how we buy, where we buy, what we used to buy is going to change, and talked about Square’s e-wallet. How does a company that’s been around for 163 years kind of fit in with this model? And are we going to stop carrying credit cards?
Ken Chenault: We could. And frankly I don’t care. Because it’s really what spurring the cards. So Jack actually talked too, before he started Square. We work with Square. They acquire a lot of merchants for us. What I think is absolutely terrific is that Jack is empowering small merchants and really helping small business. We’re the largest provider to small business. So the synergy is really strong.
What. I think is important and the way you change is, I believe commerce is changing dramatically. And the way I talk about our company now is that part of our objective is bring buyers and sellers together. And the advantage that we have, and this is an advantage that Jack recognizes, and I give him a lot of credit for, is Square is built off an existing payments infrastructure. That’s a real advantage. So he has been innovative, what he hasn’t done is to say I’ve got to change everything. That’s one of the reasons why I like the mobile app Uber, because they’re building off an existing platform and they’re innovating and changing the payments experience.
So for us, what we’ve said is we have a major major advantage in that we are the most integrated payments platform of anyone. So we acquire merchants. We process merchant transactions. We are an issuer and we authorize transactions all over the world. There is no other card company, no one in payments who has a fully integrated payments model; we’re the only one.
Now what that does is we talk about a close loop. And that means we have information on the end-user customer and the merchant. And the ability to do modeling and algorithms with that data is going to give us frankly an even bigger advantage going forward than in the past. Because the convergence of online, offline unleashes the assets and capabilities that we have in the platform. So part of what we started to do almost a decade ago was to say, we really are going to embrace the digital transformation. And what we’ve done is with existing people in the company, people have really been able to change. Those who weren’t, are no longer with the company. Because the reality is that they had to keep up with the change.
What I’ve also done is bring in people from outside the company and have a mix and match. So we promote probably 60% to 65% of our people from within. But we also bring in people from the outside. I’ll give you one way that I dramatize this to our board, is I had a voice-over of someone talking about what the brand meant to them. And they talked about Amex and trust, security, service, reinvention. And then as you pan down you saw the nose earrings, the earrings and the tattoos. And I said welcome to the new American Express. Because the point is this reinvention is critical. So I think that the assets are there, the partnerships. I’ll just mention one that I’m excited about with Twitter where we’re using our closed loop platform where you can do tweet to buy. We’re the only ones that can do that with Twitter. So when it was announced all these folks were calling up Twitter and saying we would like do the same thing. And Twitter responded the problem is, Amex is the only one that has the platform.
So clearly there will be people and there’s a lot going on, there’s more innovation going on right now in commerce and payments than almost any place else. But we’re not standing still.
Andrew Baldwin: Staying with the theme of innovation, I want to pivot to policy. You are on the President’s Council for Jobs and Competitiveness.
Ken Chenault: I was. It’s no longer – but I was.
Andrew Baldwin: If you were to treat the President of the United States as one of your customers who is over levered hypothetically, what advice would you give on kind of current deficit levels, how to manage, you know, increasing debt levels over time?
Ken Chenault: So obviously with the proper service training I’d do it in a very polite but forceful way. But in all seriousness I think what is most important and from my experience on the jobs council, I went in questioning how much of a difference could be made in creating jobs. I actually believed that the jobs issue is a solvable issue. We did a lot of work identifying different industry areas where we can drive growth, putting together both short and long term strategies. Obviously you get down to politics and getting that through on both sides of the house.
But the reality is that I think there are several things that need to be done. One is, we do have to promulgate some pro-growth policies. When I look at the infrastructure in the U.S. there are major improvements that have to be made, that can help stimulate job growth but also can make us a more productive and competitive economy.
Secondly, we have to deal with entitlements. That’s just the reality. And so back to your analogy of someone who is having credit problems, you’ve got to sit down and you’ve got to say here’s the spending that has to stop.
But thirdly, I think what’s very important is that tax reform in a comprehensive way both personal and corporate. We’ve got to really bring about a set of fundamental changes. And I think that what is required is not just an issue of being focused on what the President, the Senate and the House does. I think we need to put more public pressure on. And I look at this frankly as almost like a social movement that your generation, the next generation, your lives are in jeopardy. If you really felt that on a social issue, I think you would have a much different attitude and approach. And I think we need a far more engaged electorate that is going to put real pressure. Because the existing approach is not driving change fast enough.
Andrew Baldwin: That’s great feedback and from what I understand about American Express’ culture, you have a culture of constructive confrontation and transparency. And here at the GSB, we have a euphemism that feedback is a gift. Could you share with us a story when you had to give or receive one of these gifts that’s not so pleasant?
Ken Chenault: Sure, sure. I think I would say probably half-way three quarters through my career, things are going really well. I thought I was getting terrific feedback which in general I was. And we had this process where you got feedback and there were always 10 things that you did really well. And then ten things that you needed to improve. And it didn’t matter who you were, you always had 10 things that you needed to improve. Because the view was no matter what your station, you should always focus on being a good leader. So it was always depressing particularly if you’re really focused on saying I want to be the best, to confront that there are things you’ve got to focus on.
Then we start to say, well, what are one or two things that you need to focus on and in our feedback process, you had to talk to your team about, here are the things, here are things that are positive, here are the things that are negative. And so one thing that came out with me is that I didn’t listen well. And I actually thought gees, I am respectful for people, I sit in meetings. I listen to people and the feedback I got was, Ken, you know, your mind’s always racing. And if you don’t think someone is saying something that’s really smart, you literally will just turn off. You won’t frown but we know that you are not there.
Andrew Baldwin: That’s not what’s going on here, between –
Ken Chenault: I’m not at all, not at all. And that really hit me. I mean I didn’t fully realize I was doing it and didn’t really realize, not just the impact that was having on the person that I was talking to, but obviously the impact that had in the entire room. Because at that time I wasn’t president, but I was a pretty senior person. And almost the phrase was, this is one of Ken’s zone-outs. And he’s thinking about something else.
And one of the things that I clearly learned from that feedback was that I was missing out. It doesn’t mean that every time someone was talking to me, I thought they were saying something that was really terrific. I would certainly let them know, I don’t think that’s a great idea. Here are the reasons why. But I was actively engaged and you’ve got to have that two-way street. And if you listen some more those ideas can come out, so the ability to be what I call an active listener can actually empower that person who you’re talking to. That was a real learning for me, and it was incredibly helpful. And it took several years before I got the recognition that I was an active listener. Now people say, boy, Ken is a really good listener. Someone who has been in the company a long time said, well, let me tell you back Ken, 10 or 15 years ago he wasn’t such a great listener. So that’s — but I think for anyone, one of the things that I try to do really every year is think about two or three areas that I want to improve going forward in my own leadership.
Andrew Baldwin: So I want to lean in for this next question. I know that you are very close friends of Sheryl Sandberg and a big fan of her philosophy, Lean In but the facts are in kind of unfortunately so that inequality is still exists. You’re one of six African-American CEOs. There are only 20 female Fortune 500 CEOs. Why is the pass so difficult for African-American females and other minorities at very senior levels within corporate America?
Ken Chenault: I think there are several reasons. I mean I think clearly what you can’t deny is that bias and prejudice still exists. And the legacy of bias and prejudice has a major impact. That just doesn’t go away. And I always go back if I could rewrite history and say in just, pick an era, in the 1920s there was full equal opportunities by all that happened historically, I think we would be so far ahead. But that didn’t happen. And so I think you’ve got to deal with that issue.
I think second is — and this is part of what Sheryl is talking about, we can all analyze the reasons why we can’t get ahead. And we should be very focused on that and we should all feel a collective responsibility to change that. But one of the points when I was growing up, that my father emphasized with me was, focus on what you can control. And the only thing you can control is your performance. There are several ways you can look at that. He was not saying that to limit me. What he was saying was that opens up a range of opportunities and from a accountability standpoint, don’t, in fact, run away from that problem or a challenge or a barrier. Figure out a way to jump over it.
And so what Sheryl was certainly not saying is that there are not a set of major issues and big issues and institutional issues that women have to deal with. But that women clearly can take increasing ownership for what they need to do, that a support structure is very helpful because we all need a support structure. And that’s important. And that we’ve got to take it very personally. I think at the end of the day what’s most important is this is a surprising phenomenon that happens. And it’s not really surprising.
When you get people in positions who look different and are different, all of a sudden several years later you get more people who look like them. And so the representation issue is a big issue, is an important issue. And it is at some point — and this is where I go to these business metrics, if someone is simply saying each year, Ken,. I’m going to grow; this business is really going to do well. Here are my strategies. And each year nothing happens. That’s a problem. So if there is a real commitment and a real focus, then there need to be measures and there needs to be accountability so that those things happen.
And I think that a business mentality around that can bring about some very important social change.
Andrew Baldwin: I’d love to open it up to questions from the audience. And right before I do, I just want to say one quote that I found particularly inspiring from you. In the 2008 commencement address at Howard University, you said, “It’s your responsibility to the larger African-American community, to face prejudice and to make progress, to face history and to make history”, that I really enjoyed reading and was inspired by, so I just want to share that feedback in a public setting.
Ken Chenault: Thank you.
Andrew Baldwin: But I’d love to open up the audience to Q&A and let the tough questions roll.
Audience: Hi, my name is [Nikki Jordeno] and I am a second year MBA student here. We’re really glad that you’re able to join us today. So I have a two-part question related to sort of those very tough decisions that you were talking about, going into the deposits business et cetera. One, when you make those tough decisions, would you say it’s more of a intuition, gut feeling that you have or more consensus-driven from the people and your really senior advisers? And the second part of that is, it is more gut in what you think is the right decision, then what is your process for bringing people on board and really rallying people behind really tough decisions?
Ken Chenault: It’s a good question. I think one, what I’m a firm believer in is that you have to apply what I call situational leadership. That you can’t just follow one style. Sometimes you have to have a directive style, sometimes you have to have a consensus building style. There have to be some attributes from a leadership standpoint, one of those that I talk a lot about is integrity. Because that’s the only way you’re going to build trust and that’s for me the consistency of words and actions. But in some cases, I have relied on my gut but backed up with some analysis. I think it’s very very rare. Sometimes on creative issues, I’ll look at a piece of advertising. And you sort of know this is it. And you can’t totally explain why. But in a lot of situations I think you can analyze and you should. But then judgment is really important. But judgment should be based on what’s the criteria that you’re using to make that judgment. What are the values that you’re applying to make that judgment? So what I don’t believe in is making blind judgments. I think you always need to have some criteria. And you always need to have that balance by what values are important.
From a consensus standpoint, there are some issues that I know where I want to go. But I know that I’ve got to get everyone involved and I give you one example. When I took over as CEO, I said I want to change actually some of the core attributes of our culture. I didn’t think we were focused explicitly enough on winning in the marketplace. I didn’t think we engaged enough in constructive confrontation. So I literally put here are the values that I’d like for the company on a piece of paper for myself.
And then I said, what we’re going to do is we’re going to do sessions all around the world. And I want teams that are to come up with the values and I’d say very honestly, I don’t know what I would have done if the values hadn’t pretty much matched what I had on the sheet of paper. But fortunately they did. The benefit of that was the buy-in was almost instant because people knew it was a consensus-driven process. It wasn’t me mandating that.
So I think there are certain issues where you mandate. I’ll give you an example where from the standpoint of having to decide, was – and this goes back to 9/11. I decided that we were going to return to our headquarters. The majority of the organization would have voted against it for very understandable reasons. I thought it was important for us to go back and explained the reasons why. And it was accepted. So there are some things that you can’t do by consensus and that was more of a gut belief feeling. But it was based on a set of values, beliefs of why we should go back.
So I think you want to make sure that you adapt your leadership style to the situation, which means you’ve got to assess and the lingo that we use at our company, you’ve got to assess the readiness of your group to accept certain leadership. So there are some situations where you know you’ve got to be very directive. There are other situations where you can be more consensus-driven.
Audience: Hi, my name is Chander Chawla and I’m a happy Amex customer. Thanks for sharing your thoughts. My question is regarding the new markets that are coming up now or emerging. So, for example, there are 2.5 billion people who don’t have access to banking. Is Amex planning to do something in that area? And if you are, what challenges do you see given that lack of brand in those countries and the US relations with those countries?
Ken Chenault: So here’s what I think is interesting. One is, I think a number of the emerging developing markets obviously represent tremendous growth opportunities. What we’ve seen from a brand standpoint, whether it’s China, India, a range of markets that our brand doesn’t limit us. And people find that strange but I think one of the reasons why our brand is viewed as a more open brand is because of the heritage of the travel business that we really cut across borders. And so people don’t look at us as a U.S. only company alone. It really has not hurt us. So even in a place like Russia, the brand is really powerful.
But I think the key part of your question is, how do we open the brand, so back to the importance of this convergence of online offline, the implication of that of what I’ve said to our people is scale has been redefined. So it’s not enough to say, well we’ve got 100 million cards when Facebook has a billion customers. Google has 1.7 billion customers. And the fact that to your point, there are many people that don’t have access to credit and debit products. So we’re very focused on it.
So I’ll talk to you about two things we’re doing. One is, we’ve come out with what’s called a reloadable prepaid card which – a reloadable prepaid card is you deposit money into the card. The reality is that this was first launched in the U.S. But we also are going to be launching in a number of markets around the world. And in the U.S. alone there are 34 billion households that are unbanked or under banked. So that means if you don’t have a checking account, you pay $800 to $1000 to in fact have access to your own money, right? So if you want to cash your paycheck, you pay cash your paycheck. You want to send money to someone, someone in LA from here, it could cost you $10 or $11 to send 80 bucks. So the reality is that there is a tremendous need.
So we came out with a product that is in fact on a digital platform. And it is — you can operate it totally on mobile and as you know the penetration of smartphones is as high or higher in non-affluent sectors than it is affluent sectors. Because they can’t afford a laptop, they can’t afford broadband services. So this is a product that people initially said to me, well, Amex, you’ve got these high end cards, how can you offer this product? And I said, back to the future. The reality is the travelers check business, freight forwarding business, was that a prestigious business that in fact enhanced the brand because we were focused on service. The question is creating the right value proposition with the right economics to that segment. We think this is going to be a very exciting product. Since we launched it in October, 85% of the customers coming in are new to the franchise. Almost 50% are under 35. So we have a lot of hope there.
Another thing we’re doing in China is we have done a joint venture with a company called Lianlian. You’ve heard of mobile top up. So you go in, you want to top up your minutes on your phone in China, you go to a kiosk. What we’re doing is off of a mobile phone, you’ll have the access to do P2P, we’re in three provinces now. We’re expanding. This company has 300 million customers. So I wouldn’t mind getting a nice percentage in penetration of that customer base.
So what’s important is that we have redefined the scale. And then we’ve said there are also opportunities to bring buyers and sellers together around the world. Why? Because we have a global authorization system where literally we can basically decide every single transaction, what that credit limit is going to be instantaneously. Well, if you think about a global marketplace from the ability cross border for goods and services, that presents a tremendous opportunity. So the traditional card business is changing dramatically. We’re not walking away from that business but we’re expanding dramatically into other areas. And if we don’t dramatically grow in those markets, we’re not going to be a growth company. So we have a strong focus there.
Andrew Baldwin: I think we have time for one more question from the audience.
Audience: One of the benefits of defining yourself in terms of a higher purpose is that it doesn’t confine you to a particular product or service or category. How far do you think you can and how far do you want to push the Amex brand? Do you think there will come a time where our relationship with Amex occurs in something that’s completely removed from financial transactions or financial services?
Ken Chenault: Already if you think about it, your relationship with us is I think more than just a financial transaction. We are and always have been far more involved as a lifestyle product. So when people ask me about competition, I’m competing with almost every lifestyle provider in the traditional business, because if I’m reduced to facilitating a payment, that doesn’t make me special at all. So I think that where you’re going to see us spread out more is in commerce. So the things we’ve done with Twitter and Facebook where you can take what we call our spend graph and connect it to the interests and preferences of Facebook customer and connect them is pretty powerful, and we can do that with a closed loop. So I think that certainly we’re going to spread out more in commerce. Travel gives us a tremendous opportunity of what we’re doing from a lifestyle standpoint.
The last thing I want, where we will have a problem is if we’re positioned more and more as just a financial services company. What has helped us tremendously from a brand standpoint is the customer looks at us more as a service company than a financial services company. I want to make sure I keep that demarcation.
Andrew Baldwin: So we’ll do one last question because – we will repeat it if you just say.
Audience: [Question Inaudible]
Ken Chenault: I think what’s very very important is, one, which I feel strongly is, I think it’s a mistake and a number of people do it is they get their person confused with the job they hold. I don’t get — I try not to get that confused. I like being CEO. But that’s not where I’d take my self-worth from the fact that I’m CEO. One of the things that I do in a very very aggressive way is I seek out feedback and input both inside and outside the company, is really to talk to people who have very different perspectives from mine, to try to find out, and to build a network both inside and outside the company that will talk to me. Because the reality is, doesn’t matter who you are, people will be well meaning and they’ll say I don’t really want to talk to Ken about this. I just don’t want to worry him. Well, the reality is sometimes when that’s done, I’m missing a big issue that can impact the company, and that’s not helpful.
It’s my job, then, to make sure that I’m very aggressive from an outreach standpoint. And so I really am throughout the company through hierarchy people who know me know that, if you report directly into me it’s not that I am going to be checking on you with other people. But I’m going to call people five or ten levels down in the company. I’m going to have meetings with people. It’s not going to be based on title. It’s based on learning about what the issues are, what the problems are.
And then outside what I want to ask people is, what do you think we’re doing wrong? What do you think we need to do better? What are the issues? And that goes back to the constructive confrontation. So you really want to create a climate where you’re being pushed and in fact, I don’t think I’m really getting the true word unless I go through periods where I’m feeling uncomfortable. And I think that’s a good state for people to be in periodically, not permanently but periodically uncomfortable. Because that is a leveler. And that’s important, particularly when you’re CEO to be in those situations where you can be in a more level place.
Andrew Baldwin: In closing, we always ask our View From The Top speakers the same question that we all have to answer on the GSB application. What matters to you most and why?
Ken Chenault: Well, things change over time. What I would say is what matters to me most is really my wife and my two sons. From a public policy standpoint, what matters to me most is income inequality. And third for me personally, what matters to me most is maintaining my integrity and authenticity.
Andrew Baldwin: Thank you very much.
Ken Chenault: Thank you.