Transcriber: Denise RQ Reviewer: Robert Tucker
(Bell ringing)
(Applause)
Wall Street, we have a problem.
There's a growing sense that the global economy is broken,
that the world is becoming more unfair,
that fundamental changes are required,
and that Wall Street is at the heart of this mess.
Imagine four years ago,
who would have dreamed that a big theme of business books today would be:
"How to save capitalism," or "Is capitalism even saveable?"
And these books are not,
and these articles and so on, are not just coming from Occupy protesters,
although one said, "It's not a crisis of capitalism; capitalism is the crisis."
But rather these books are coming from capitalists,
from "The Economist," the "Financial Times,"
and business writers like Matthew Bishop, business editor of "The Economist."
And to fix Wall Street, to me, we need to do more than tinker;
we need to bring about some very fundamental changes,
because the core modus operandi of Wall Street
almost brought down global capitalism,
and it hasn't changed fundamentally.
To restore long-term health and trust in the financial services industry,
it will require more than individual companies making changes,
or more than just some regulation,
but really a change to the whole operating model of Wall Street,
where the banks, the brokerage companies,
the rating agencies, insurance companies,
even government regulators,
get together and collectively rebuild Wall Street
around three new principles.
These principles are integrity, collaboration and transparency.
And what I'd like to do today is just to tell you a story
to make the case about how Wall Street can change itself.
Let's begin with integrity.
Integrity is really about doing the right thing,
and it has a few values.
One is honesty; you tell the truth, you don't steal, rip off people.
Number two is you're considerate of the interests of others;
you understand, for example, that business can't succeed in a world that's failing.
And you have accountability; you abide by your commitments.
Now, the problem with Wall Street, in my mind,
is not that there are a lot of bad people that lack integrity;
I think Wall Street is mainly full of good people.
My son is one of them.
He is an investment banker on the Street,
and he has a very strong sense of values that drives his life.
He says he wants to live a principled and consequential life.
The problem is something very different.
And let me tell you a story to make the case.
A number of years ago,
Royal Caribbean,
it's a company that's now probably the leading cruise line in the world,
enormously successful,
they had a big problem.
Engineers were found to be dumping toxic waste and oil into the sea.
And this is complicated, and unfortunate,
when all of your marketing material is about the sea
and the beauty of the sea, and come share the sea with us.
It became a huge crisis.
Eventually it was the cover story in "The New York Times,"
the CEO had to resign.
They brought in a new man, a man of great integrity, to run the company.
And he said, "I'm going to find out what happened."
And he did some research, he looked around,
and he spent time with people,
and he stood up before the world and said,
"It's true. We were polluting the sea,
and this is a violation of everything that we believe in as a company,
and we have great integrity.
And I'm here to tell you today this will never happen again."
Four weeks later,
Royal Caribbean was found to be systematically dumping
oil and toxins into the sea.
What's going on here?
Here's a man of great integrity,
they have integrity as part of the value statement of their company,
but they hadn't baked it into their DNA,
into their IT systems, their business processes,
into their compensation system.
Engineers in boats
found that they could bypass the pollution control devices,
and they get compensated for saving money.
They could save hundreds of thousands of dollars
and get bigger bonuses.
So Royal Caribbean had to go back to the drawing board,
and dig deep and figure out: How do we infuse integrity into our bones?
And to me that's what every Wall Street company needs to do:
to dig deep and to look at all aspects of your operation
to ensure that you are doing the right thing.
Compensation, for example, it's hard to ask people to not be bad
when the reward for being bad is to acquire huge riches.
So bake integrity into the DNA.
Theme number two: collaboration.
I'm not talking about a bunch of people getting together in a nice meeting;
I'm talking about collaboration enabled by the Internet
that can now occur on a astronomical scale,
and can lead to profound changes in how we orchestrate capability in society
to innovate, to create goods, and to create financial services,
that are sustainable and that are innovative.
And here's a story for this one.
There's a guy named Rob McEwen, this is actually a picture of him.
The reason I know this story is he moved across the street from me in Toronto,
and he held a cocktail party to meet the neighbors.
And he says, "You're Don Tapscott, I've read some or your books."
So I said, "Great, what are you doing?"
He says, "Well I used to be a banker, and now I'm a gold miner."
He's a funny guy, he introduces his wife Cheryl to the group,
and says, "This is Cheryl, she's a gold digger."
(Laughter)
Fortunately she is an enormously capable person with a sense of humor.
So - and she is not a gold digger - but anyway, he tells me this amazing story
that he's taken over this gold mine,
but his geologists can't tell him where the gold is.
So he gives them more money for more geological data,
they come back, they can't tell him where to go into production.
And he's so frustrated - after a few years he's ready to shut the company down.
But one day he goes to a meeting of young presidents at MIT,
and he hears about this thing called the Linux operating system,
you know, where people put an operating system in a commons,
they're sharing the development of an operating system, and nobody owns it.
And he wonders, if my geologists don't know where the gold is,
maybe somebody else does.
So he does a radical thing.
He takes his geological data,
which in the mining industry is your biggest secret,
it's kept in safes, in high security computer systems.
He publishes it and he holds a contest on the Internet
called the Goldcorp Challenge.
It's basically half a million dollars in prize money
for anyone who can tell me:
Do I have any gold, and if so, where is it?
(Laughter)
He gets submissions from all around the world, 77 of them.
They used techniques that he's never heard of,
and for his half a million dollars in prize money,
Rob McEwen finds 3.4 billion dollars worth of gold.
The value of his company goes from 90 million to 10 billion dollars.
He merged with another company and sold his interest:
The value of Goldcorp today is over 35 billion dollars,
and I can tell you, because he's my neighbor,
Rob McEwen is a happy camper.
(Laughter)
He thought very differently
about the boundaries of the firm, and about collaboration.
We could apply this to financial services.
So here's a huge problem,
not just for Wall Street but for America.
Today the banks have 2 trillion dollars
of so-called toxic assets on their balance sheets.
Actually, it's 2 trillion plus or minus 2 trillion,
because nobody knows what these things are worth.
It's the hangover from the whole subprime mortgage mess.
And how are we going to figure what the value of these assets are
so the banks can get rid of them?
Why not create a Linux of risk management data?
Take information about all these assets,
place it into a commons,
and hold a challenge
and bring all of the world's leading modelers, 5-6,000 of them, together,
to determine, essentially, value at risk.
In doing so, we can value the assets,
get them off our balance sheets -
and this is really important, because 80% of new jobs
come from companies that are 5 years old or less,
but the banks aren't lending money to companies or entrepreneurs,
because of this problem.
So we have this so-called jobless recovery. Right?
An oxymoron if I ever heard of one.
There is no recovery unless it's inclusive.
The key to fixing the problem of employment
comes all the way back to figuring out
how to get these assets off our balance sheets,
and we could collaborate like Rob McEwen and Goldcorp did to do that.
Theme number three is transparency.
Now here's my story here.
Back in 1947 the troops came home from the war,
and they hadn't had a raise for a long time.
And so what happened was
that the biggest strike in American history took place.
The workers of the United Auto Workers
against America's largest corporation, General Motors.
And the workers put forward these demands, and GM said,
"We just don't have the money."
So Walter Reuther, this head of UAW, the old fox,
he put forward, as the main demand of the strike,
he said, "OK, you don't have the money, then open the books."
The main demand of the biggest strike in American history
was a demand for transparency.
And I found in this obscure transcription of the negotiations,
what the head of GM said to Walter Reuther.
And I paraphrase, he says,
"Open the books? No bleeping way.
We don't even open the books to our stockholders."
Sixty years ago, the stockholders of GM didn't know how they were doing.
It wasn't until the SEC act of 1934
that public companies were even required to tell their shareholders anything
about how they were doing.
Well, imagine how the world has changed today.
Transparency has become this powerful new force.
And people think that it's about WikiLeaks; it's not.
WikiLeaks is the tip of the iceberg.
People have at their fingertips the most powerful tools ever
for finding out what's going on and informing others,
organizing collective responses.
And corporations are becoming naked.
And if you are going to be naked, there are some corollaries to that.
One is that fitness is no longer optional.
Or if you're going to be naked, you'd better be buff.
(Laughter)
Now, by buff I mean you'd better have good value,
because value is evidence like never before.
Say you have good products and services - they'd better be good.
But you also need to have values,
you need to have integrity as part of your bones,
because if you don't, you'll be unable to build trust.
So, WikiLeaks announces next:
We're going after the financial services industry.
And what do leaders of some banks do?
They set up SWAT teams to be able to take these leaks,
and be able to spin them and manage the communications and so on.
This is the wrong thing to do.
Rather, sunlight is the best disinfectant,
and sunlight and transparency is a powerful force
that could help Wall Street companies build a sustainable business model.
And every company on Wall Street should sit down
and think through for all these different classes of stakeholders:
What could we be telling our customers?
They should be able to fly over and drill down
into these complex financial institutions and instruments,
so that they can really understand what's going on,
and investors would be enormously helped by that.
Every company needs a transparency strategy,
and right now we default towards opacity.
Why not default towards being open?
So three new principles:
baking integrity into your DNA as a company;
collaborating, using the Internet
to build new business models to solve complex problems in new ways,
like risk management;
and opening the kimono - you can undress for success,
and through transparency build trust,
lower transaction and collaboration costs.
This is the new paradigm that I outline.
And when you get a shift like this,
you get a crisis of leadership,
vested interests fight against change,
and leaders of the old have great difficulty embracing the new.
How will we find leadership for change?
It won't necessarily come from the top,
it'll come from people like you,
self-selected, to come out today.
And leadership can come from anywhere.
The stakes are high for Wall Street.
There are movements under way to move money away
from Wall Street banks.
And furthermore, there will be movements in society,
if this problem doesn't get fixed, to revoke the license.
We give banks a license to do things in our economy,
and when they violate that license as a society,
eventually societies become unhappy and start to do radical things.
And we need to avoid that.
And the stakes are also high for America, too, you know:
21% youth unemployment,
the middle class is being wiped out,
we can't seem to afford to invest in basic infrastructure,
and in core government services or our schools.
We need to fix these problems.
So basically it comes down to door number 1 and door number 2.
We can go the old route, but there's a new route that we can take,
and I've tried to describe it today.
There was a great philosopher, George Santayana, who says,
"We should welcome the future for the sin that will be the past,
but we should respect the past,
for it was once all that was humanly possible."
It was possible to build an industry that we built,
but it's now possible to go forward.
And another Frenchman, Victor Hugo, says,
"There's nothing so powerful as an idea whose time has come."
And the time has come to rebuild Wall Street,
and hopefully the time has come for each of you
to find that leader within you to do this,
and in doing so, to change the world.
Thank you very much.
(Applause)