Now, georgescu has a new mission. Having seen the worst socialism has to offer and what capitalism at its best can mean for those in need, hes urging corporations to return to pursuing the best for all their stakeholders shareholders, workers, customers and society at large. On todays big decisions, Peter Georgescu. Welcome to bloomberg big decisions. Great to have you here. Socialism these days. It strikes me you have a personal experience with socialism going way back in your childhood. Tell us about it. Peter well, i was prepared for socialism by being born in just as the Second World War started and i arrived in 1939 just as the war got to be big and real. I was born from romanian parents, both of them, one educated in london. My father became a petroleum engineer, came to romania, became general manager of the Largest Oil Field in romania which is owned by standard oil in new jersey. Exxon. The germans came into romania and the nazi supervising regime put him in jail. My father worked for the ss from prison. He faced a firing squad but received a lastminute reprieve. Anyway we all survived the war. We got together in 45. I was six years old. My brother, myself, my parents. Normal, wonderful family life. I learned how to ride a bike from my father. A year full of joy and happiness. And then in early 47 my father goes to new york and for what was to be a two week sort of major worldwide Managers Meeting of exxon. And they go but just at the time, the communists took over. David the iron curtain essentially fell. Peter the iron curtain comes down at that moment and it is an iron curtain as we know because thats how socialism work. Total control. While in new york, my fathers friends from war days who started the cia by now tells them in romania the communists have my father, mother on a list to be arrested and exterminated. So they convinced them to stay in new york. Lucky for all of us because in fact during that period in the early communist takeover romania, they gathered some 300,000 business leaders, religious leaders, anybody who was a potential threat or perceived to be a potential threat was rounded up. And within two years they are all dead. My grandfather was one of them. They arrested him almost 80 years of age, put him in prison and murdered him there. Shortly after they arrested him they took my brother, myself and my grandmother to a small town close to the russian border. The guise was when they took us over said youre going to meet your parents. Were taking you to new york. They took us. My grandmother under house arrest. So she stayed there, couldnt move out and didnt for about four years, five years close to five years. And and then my brother and i were taken to work at 6 00 in the morning. We worked until about 6 00 at night. David how old were you at that point . Peter i was just north of ten. I cant remember the exact time and date but i was about 10 or so. David thinking back, why did they do this . Why were you a threat to the communist regime in romania . Peter its interesting you ask the question. It was a reprisal. Reprisal against my parents because in addition to work we also went to interrogation sessions. Brainwashing sessions. Really all it was it was to tell us just how awful our parents were. There are evil people. They are unpatriotic against romania. They are trying to harm the country. They are just indecent people harmful to the nation into the and to the world. David did they make any inroads with you psychologically . They were trying to say they left you behind. They are awful people, right . Peter the irony of saying they are awful people but you have to suffer here. And my job was for the first two years to clean sewers, because i was small enough to fit in the underground passages. And then i worked digging holes for electric poles and walked on high tension wires. But the irony of that didnt seem to turn into reality for them. So we did that six days a week you see. And on sundays you slept because thats all there was to do to be able to survive. David how did you come to the United States given that situation . There was no way out. Peter in new york fate worked in a totally different way. So what happened in new york is that the soviets and the russians particularly send a romanian diplomat to tell my father if you want to see your kids alive again youre going to spy for us. So my father and mother spent a sleepless night, and that morning, my father went to the fbi and told them the story. They said please become a double agent. Dad said ive seen that play before. It never works well. Eventually i cant do something or i dont want to do something. They will kill the kids anyway. Anyway eventually they agreed. They said, go to the press with this story. They went to the press. And they were afraid. The fbi was afraid that maybe the story would take off every little town in america. You find in 1953 theres a story of the boys in the family being blackmailed. One of the people who read this story was a woman. She was an amazing woman. She was a congresswoman not from new york. From ohio. She picks up the phone and says mr. Georgescu ill get your boys out of romania. I am Frances Payne bolton. Im a congresswoman from ohio. She also happened to be not only the only congresswoman i believe in congress, but also the chairperson of the Foreign Relations committee in congress. You can imagine in 1953 what she must have been like. She was a force of nature. And so it took her a year. She ended up in eisenhowers office and said mr. President , and by the way she helped him become president she said, weve got to get the boys out of romania. So they concocted a plan. Some people including the cia to trade us for a bunch of russian spies. So on april 13th, a date i remember, i landed with my father Idlewild Airport with my brother. I was 15 years old. I was kind of skinny but fully grown. I was a young man by then for sure. I didnt speak a word of english other than cocacola. And i hadnt gone to school since fifth grade. David you were famous. Peter my goodness, when i landed at Idlewild Airport now kennedy there were probably 200 reporters and flashing lights. It was a circus. It was unbelievable. We got off the plane and we want on every show you can imagine. We were on the ed sullivan show, good morning america, you name it. David you didnt speak english when you came here. How did you get from here to exeter . Peter well we arrived in april as i said. The principal of the school reads this story and says, ill keep a place for the young boy. My dad says, but sir you remember he he doesnt speak english. He hadnt gone to school for four years. He said oh i know i read this story but he learned other things there. Help him learn english then come in august to exeter. Lets have dinner and well go from there. So i try. I work hard to learn english. I watch a lot of i love lucy, i tried to imitate ricardos accent which was not difficult at the time. We ended up for dinner with the principal william gurdon saltonstall. He likes me. I dont remember the chitchat of the conversation but whatever it was, he likes me. I remember the punch line at the end of the dinner. He said, young man if you can pass your courses on your own with no consideration for your background, you get to stay. Otherwise, ill find the right school for you. Is that ok . I had no clue what he was talking about. I thought a school was a school, but i was smart enough to say yes, sir. So now i am at exeter and i did pass the courses. Barely, but i did. In three years i was able to get into princeton. David you went to princeton and then stanford. George i went to Stanford Business school as well. How jarring must it have been to go from that existence to now having a stanford mba . How jarring was it . What did it tell you about this country . Peter well i tell you it started the sense of gratitude began to emerge in my mind. Gratitude. I love that word because so many people did so many wonderful things. Why did francis bolton, congresswoman from ohio, reach out to my father . Why did the principle of exeter say, i will keep the place for you . It made no sense. They did it because they could. They did it because they cared and they reached out. It was a culture of reaching out to people to help each other. There was a lot of good things were happening around our time. And i was the beneficiary. Today i can look in the mirror and i know i am the best Peter Georgescu that i can ever be. And only in america can you do that. David you started in advertising . Why advertising . Peter i was intrigued by people. Why advertising . Peter i was destined to be in the oil business. In fact, before i went to stanford, Exxon International because they knew me and knew my father, said just graduate from business school, you got a job. By accident i was in the placement Directors Office as a friend because i already had a job, and he said i was going to go interview this guy. I said why would i do that . Because only one person signed up and we need him to come back to stanford and keep interviewing. [laughter] so youre going to be very interesting. I said, i will do that for you. I asked what business he was in. Advertising. Perfect, i know nothing about it. Anyway, i interviewed with this guy and he convinced me, he said you have to start with research and he described what research meant. You have to understand people, care for people, size them up and make sure that whatever the client or producer offers this customer, it makes sense to them. Take people very seriously. I was intrigued by that. David you climbed up through the ranks becoming chairman and ceo, but most of what we know now about madison avenue in the 1960s comes from mad men. Is it accurate . Peter it is interesting. Mad men, only to this degree i met my wife, who was the head of a portion of the research department. She was a year younger than i, but she went directly to work, and ended up at Young Rubicam in research, so that is where we met. I married my boss. I thought im an immigrant guy, marrying your boss is a good thing. That is how my world really started. David what was it about advertising you came to love . You must have loved it to done as well as she did. Peter the research. The lucky start for me was getting to do the research. I understood that the entire Business World revolves around the customer. Theres always a customer, and i learned to respect the people. I learned to respect the average citizen who is the average customer of american business. David advertising grew and young and rubicam grew. When you were there, but also under your leadership. Acquisitions. You ultimately went public. What was that like . Peter interestingly, Young Rubicam, the Advertising Company was in a sweet spot. The advertising people were really the partners to our clients. We created all kinds of tools. We created the only still today when i was ceo, we began to put together the only really enduring study of what a brand is and how you keep a brand strong and so forth and we created, like, small agencies around the client. It was team ford, team colgate. We went to a client, they never knew who was in the room, but we provided them with an integrated Marketing Communication program, but then we had to go public because in the 1990s, all the agencies were part of conglomerates and holding companies. We were the only private company, and it was clear to me i could not make any acquisitions. We needed to bolster our international presence. I left in 2000. I was 60 years old. And i sold my stock and disappeared. Two years later, what happened to the business was tragic. In the dotcom bust, they had to protect their multiples, so they fired a ton of people. They fired all the intellectual capital that provided the opportunity for people like me to go to the Corner Office and become my clients best partners. David given the way things have gone without algorithms, was it inevitable that you could not invest in the intellectual capital . Peter i dont think it was inevitable at all. It is not what happens to you that defines who you are. It is how you respond, and we responded badly. We should have protected the business. We had a unique advantage. We had a differentiation. After i left, they broke all that apart because it was easy control financial silos stand than an integrated company, which is more difficult to run. David it feels like the large Advertising Companies will have a hard time attracting the Peter Georgescus around the corner. Peter when i was there, y r hired 57 mbas every year. I bet you could hunt the halls of madison avenue, you are unlikely to find mbas. David and yet, in this digital world, a brand is arguably more important than ever to try to sort through the multiplicity. Of outlets. Who is doing that work . Peter again, the advertising and pr companies, direct Marketing Companies are part of it, but they are the executioner of the Communication Strategies being developed by someone else. Today, it is the combination of clients working together with consulting companies. The bains, mckinseys david you are concerned about capitalism. Why . Peter we have a crisis. We have great inequality. David you had in many ways a remarkable life, but one particular way is you have seen the extremes of socialism and very, very successful capitalism, the full gamut. You are the author of a book. Capitalists, arise you are concerned about capitalism, why . Peter america built the largest economic engine in the world, which was americas middle class. For the world, enterprise capitalism lifted hundreds of millions of people out of abject poverty to a much more humane standard of living. All you have to do is think about china and india, throughout latin america and so forth. So it works. The question for capitalism is an issue of the choice of governance, and what i mean by governance what do you want capitalists to do . For the first 40 years, capitalism was asked to serve not only the shareholder but the workers and society as well, and society also gave corporations advantages like limited liability and also much preferential treatments on taxation versus ordinary income, and that compact ended in the mid1980s. In the mid1980s, there is a new governance which says the shareholder now becomes prime. It was about maximizing shortterm shareholder value, and when you maximize something, it is a zerosum game. There are winners and everybody else is a loser. In this case, everybody else was the workers. Now we have a crisis. We have great inequality. For 40 years, business made sure that their workers, their employees had flat salaries. For 40 years. Its a tragedy, and that affected what happened in the communities. Education, which was paid by real estate taxes, became horrible and not sustainable. Close to 60 of American Homes have to borrow money to put food on the table. So we have to change. And theres a little bit of hope coming here because we see that business recognizes this issue, and the Business Roundtable, the most Prestigious Organization of capitalism, just months ago, said society has to be taken into consideration. I have worked with the Business Roundtable as an outside consultant and i was thrilled at the courageous thing they did. David you referred to the Business Roundtable with their new statement of principles as courageous. Jamie dimon has talked about this. Other people have talked about it, but is it broadly accepted in the csuite enough that it will actually change . Peter i think that jamie dimon and alex gorsky deserve tremendous credit. The two of them are leaders, and 170 of 180 or so corporations that belong to the Business Roundtable signed up for this. So this is a really serious endorsement of a different version of capitalism, but that is just the beginning of principles. Now, other institutions must come in. One of them is, for example, just capital, and i am the director. We do many things, but importantly, we measure the justness of corporations. We are creating specific areas of what it means, stakeholder capitalism. Example with workers, what do you do . Well, you have to pay more. I dont mean wealth transfer. I mean pay people out of the incremental value of what they produce. Have them share in the value of what they produce. Turn them from a cost, which shareholder primacy says people are a cost, to say people, employees, are the Value Creators of the 21st century. David we have the broad, systemic change you are talking about without the government . Peter government can help a great deal, but what i learned from romania, and i watched them very carefully for a long time, is government cannot manage capitalism. The government cannot legislate justness. Capitalism must adopt justness and fairness, and it must produce the great work and the great results. Capitalists can do that. We need capitalism. We are not going to compete with china by having the government run businesses. We are going to die. David do we have the time to allow the sorts of changes you are describing . You and i both know we are losing a good part of a generation who are coming from broken homes and are not prepared for the 21st century. Peter lets solve the problem. Lets change the governance and say we demand inclusive growth. The Founding Fathers created this vision that said basically all people are created equal, and they said all these people have an inalienable right to the pursuit of happiness. In contemporary terms, what that means is basically each person has one vote and that we have equality not of income but equality of opportunity. We need to think of our problems as americas problems. All of our kids are our kids. We must look after all of them. And that is why inclusive prosperity makes sense. If we want democracy, we have to act as a democracy, so it is up to us as people to do that. We capitalists must commit to doing the right thing. To have the right governance. So myself and lots of other good people are working to say stakeholder capitalism must win. It must capture all of us business. It must capture the imagination of all of our people. It must partner with government to make sure that the guardrails are in place. We must hold business accountable for their actions. David Peter Georgescu, thank you so much. Peter thank you. Francine Minouche Shafik knows the worlds of economics and finance well. She was the youngest ever Vice President at the world bank before becoming director of the imf. At the bank of england, she was responsible for Balance Sheets of nearly 500 billion pounds. Forbes even named her one of the most powerful women on the globe. Now, she is back to the world of academia as the director of the worldrenowned London School of economics. In september, i spoke with Minouche Shafik for leaders with lacqua. There is a huge transformation in technology, society and
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