We've been interviewing top economists and financial experts about the
outlook for the economy and the stock market.
Today we're speaking with Adena Friedman.
She's the president and CEO of Nasdaq.
Adina thanks so much for talking with us today.
Sure. It's great to be here.
As the CEO of a major company with thousands of employees around the world.
What's been the biggest challenge of working remotely and then now
planning to try to bring people back into the office?
The first challenge was really understanding the situation well enough to
be able to make decisions that were the right decisions for our employees.
And we were very fortunate because we had done a lot of business
continuity planning over the years and we did, in fact have a pandemic
plan. But even though you say you have one, it doesn't mean that if you've
never experienced before, you don't really know how effective it is.
So it was a very challenging time at first, just taking in the information
and trying to make the right decisions for your people and for the
business. I think then making sure that people did adjust to working from
home, since we've never done it as an entire company for more than, let's
say, a day, it really was important for us to understand what worked well,
where do we need to bring some extra support in?
And then, of course, now, having been at home for several months, how do
you work with your clients successfully?
How do you meet new customers when you can't meet them physically?
How do you develop those relationships as well as making sure that we
continue to execute for our clients, on our software business, on our data
business and in the markets?
You have businesses all around the world and each country is in a sort of a
different phase of the reopening here?
So how do you balance the differences in what's happening in Asia versus
Europe versus here today?
Yeah, we are making completely local decisions around each of the offices.
So our senior leadership team, along with our risk management team, we
meet three times a week first thing in the morning to understand what is
the status of all of our offices, what's the state of the virus across the
world? Do we have to change any decisions we're making in terms of having
certain offices be available to our employees?
We've been very methodical about opening offices, very flexible about
managing the state that they're in.
And then we have decided on a global basis to make a completely voluntary
for employees to choose to come in or not, at least through the end of the
year. I have to ask you about the IPO market, because, of course, we know
that's a huge part of your business, obviously sort of froze up in the
initial uncertainty around the pandemic and it seems to be coming back to
life. What's your outlook for that?
Certainly, the IPO market came back more quickly than I would have expected
back in April. But when you look at why so there are a few things.
One is the companies that came out right in the April-May timeframe
leading into June were in the health care biotech.
So leaning in on innovation in biotech as well as technology innovators.
You know, there's a very healthy pipeline of companies looking to tap the
public markets. There's a lot of capital to be put to work right now.
And so we continue to have some optimism that that will continue and then
probably take a pause around the election.
That's the time of uncertainty.
So usually in an election year, we see fewer IPOs around the election.
So we've seen some of these big tech stocks really have a huge impact on
the overall market.
Do you worry that a few companies in those big tech companies have an
outsized impact?
Well, I think it actually, if you think about very large economic cycles
over long periods of time, you see certain if you look in the past, you
had the rise of, let's say, the railroads.
And that was really the railroads were paving the way to a much bigger
economy. They were really changing the economy around them than you had,
of course, the rise of oil and how that really gave rise to a global
industry that really changed the economy and the world around them.
And in both of those cases, the companies that were really leading in
those areas were really became the largest companies in the countries
where they operated or in the world.
And I think now we all know that technology is really driving the future
of our economy.
Things like consumer convenience went from being convenient to being
necessary and software that really powers the global organization and
certainly distributed global organization went from god that's nice to
have to I really need to have that now in order to operate my business.
So I think those global trends will continue.
And as a result, the companies that are really leading those trends are
the ones that are becoming the biggest companies for good reasons.
So no concerns that there is too much hype about this or bubbles like the
dotcom era. If I were to compare it against the 1999 period, you know,
back then the Nasdaq 100 had a price to earnings ratio of 150 times, and
there were companies being brought to market, very immature companies that
really were very, very early on in their life coming to market and getting
very, very high valuations.
Today, the Nasdaq 100 is averaging around 30 times and so and has the five
largest companies in the world included in it, but it also the minimum
market cap for this, for the inclusion in the Nasdaq 100 today is at least
15 billion dollars.
So these are large companies with incredibly strong operations that are
growing and driving the economy forward.
So it is a very different time.
But there are certainly you can see that investors are leaning in.
One of the kind of side effects of this pandemic has been that companies
and countries are looking inward and thinking about whether they should
have supply chains closer to home or move technology closer to home.
What's your view on this sort of globalization idea?
Is that really going to happen?
On the one hand, there's this desire to try to bring certain critical
manufacturing back to the domestic countries.
And on the other hand, you face the reality of what is it really take to
do that? And it is we have established over decades a global ecosystem
that works well up until now.
So then it's a matter of, well, what's the long term need versus the short
term need? And if it's really a long term need, then I guess people will
start planning to do some more, you know, bringing things back back closer
to home. I also think that it's it's a shame if we if we really abandon
the global ecosystem we created because it is actually created jobs all
over the world. It's lifted a lot of economies around the world.
It's made us a more global citizens.
And in many respects, up until recently, I would say that it's it's really
allowed the world to operate in a more unified way.
You've been a big defender of capitalism and how the free marketing and
markets allocate capital.
And one of the questions being raised now is if there's been too much
intervention, too much money flooding the system, is that something that
you worry about in general going forward?
Well, it is a great question, and I think it's going to be that Monday
morning quarterbacking and three or four years, we're going to look back
and say, do we do it right?
We've done it differently. And I think that's absolutely the right
evaluation to do in three or four years.
But right now, as we're managing through this, we again have to use the
information we have in front of us and and try our hardest to stave off a
long term economic crisis.
And so having the government be strong, having them be swift and having
them commit the capital that we think we need right now I think is really,
really the most important task.
We have seen in this crisis, just enormous amounts of inequality.
How can capitalism help address some of these inequalities?
What's your solution to that?
I know you've talked about this term cooperative capitalism.
Companies have a responsibility to play a role.
The government clearly has a huge responsibility in playing a role in
trying to eradicate this level of inequality.
But I don't believe that the answer is to try to have the government play
the entire role. I think that it's a cooperative role between the private
sector and the public sector.
And when you think about what what is the private sector do really well,
the private sector innovates really well.
The private sector comes out with new ideas, new products, new services
very quickly and nimbly because they have access to capital quickly.
They can capture the imagination of investors quickly and they can put
people to work very quickly.
And so you want to that's a great engine and you want to keep that engine
running. I actually think another thing that companies can do is equity
ownership. A lot of companies for a period of time, equity ownership was a
really wonderful wave that was coming through corporate America and then
suddenly it didn't.
Part of that was actually because the accounting rules changed to
discourage the use of equity as a form of compensation to their employees.
And it really did change companies decisions.
So at Nasdaq, we are proud of the fact that almost all of our employees
are equity owners. But if you do that across all companies, then that that
spreads that opportunity for wealth creation to a much broader part of the
population. And then, of course, then the public sector.
The public sector has the benefit of having massive resources, being able
to set education policy and make fundamental different changes in how we
educate our our citizens.
What have you thought about the private sector bringing that innovation
and the public sector bringing this policy changes together.
Imagine how much change we can affect.
So that's the idea of cooperative capitalism.
Plenty of companies have made pledges about tackling inequality.
What does it take to make it actually come into place?
Well, if I were to say if what's the number one way to make sure that I
focus on the long term, on how to continue to make a positive difference
for our community, our employees and the community around us is having
investors ask me about it every quarter.
So, you know, the investors have an enormous amount of influence.
And I think investors today the ESG Movement and the investor population
has made a difference and will continue to make a difference, if anything,
the momentum behind that is increasing.
So I do think investors can continue to use their voice to say to
companies, this matters.
Any kind of bright spot that you're really looking forward to going
forward. I certainly think that the biggest bright spot that we could
create for ourselves is a more as a society that has more equality, that
addresses some of these deep seated and very longstanding social justice
issues. And I really mean that.
I think that I am as optimistic as I've been in a long time that we can
actually effectuate change and we can have a pretty consistent view of
that over time.
So that's to me, the biggest hope.
I think the second thing is that if we actually find new ways to work and
be more flexible as employers and I'm not, I think we have to be careful
and finding the right balance.
But if we can find more balance, then I think we can also create a
different work life balance for our employees over time that can be more
sustainable. So I think those are the two things that I'd like to see and
then I am hopeful about.