 And now we turn to a seasoned CEO who has been in the C-suite has done the job through good times and bad. He is Sam Palmosano, former head of IBM. So Sam, great to have you back here with Wall Street Week. Thank you, David. It's good to be with you this morning. Okay, so the CEO always has a challenge or two in front of him or her. But right now things may be turning a little different. We're seeing real inflation for the first time in a very long time. We're seeing increased interest rates. Give us your perspective of what the CEO today has to do in 2023 that maybe didn't have to do in the past. Well, you're right, David. The conditions have changed dramatically and I think there's some off-site, some misleading indicators out there because some people actually believe perhaps there's going to be a soft landing. Now I'm not smart enough to know whether it'll be a soft landing or a recession, but I think the circumstances that the CEO is dealing with are the same regardless of market conditions. And why do I say that? I think you mentioned the points. Macroeconomic slowdown. No doubt about that. Whether it's a recession or not, that's just how you measure things. But it's a slowing environment. Pressure on consumer spending because of the economic environment, obviously, right? Labor costs, energy costs, material costs, all going up because of inflation. So these are the operational issues that you deal with through on top of that supply chain issues associated with decoupling and whatever China does or does not do going out into the future. So fundamentally, it's a very complicated equation. And my perspective, if I was still doing the job, like we went through an 08, you'd have an alternative plan. You would, you could say, okay, these are the positive assumptions that would be perhaps the soft landing case. Well, let's have another case that says that these factors go on longer than people are forecasting. That inflation continues, slow growth environments continue, let's say for 18 to 24 months. Then it's a different scenario that you have to plan for. So as you suggest, we don't know what's going to happen. So you have to have more than one plan. Exactly. But take the perhaps downside or more modest case, which is lower growth. We have had really robust growth. Yes, similar in part by fiscal and monetary policy, frankly, lower growth, higher costs of capital, higher interest rates. How is your plan different? What is the different way you look at your job as a CEO? Yeah, we have to do two things, which is at the same time, which sometimes it's hard to do because none of the current people have had to do it. Some old guys like us have had to do it, right? But what you have to go do what's necessary to maintain strategic growth and drive productivity at the same time. You have to be very anti-dictators. Why is that complicated? Because if you were running a strategy was growth growth growth and you rewarded for that in the past decade, quite honestly, because although interest rates are free money, etc. and markets rewarded you, you have a culture in the management system in your company that says that's all about top line growth. That's changed. And so now you have to drive cash flow, margin expansion, all the old things we used to have to do that now comes into play because you have to do both. You have to get whatever revenue you can get in this environment. And you can't be don't be deluded by the growth because of inflation. I mean, real organic revenue growth, and then adjust your cost structures to maintain profitability and cash flows in that period. As in everything, there are going to be some people better at this and some people worse at this. On Wall Street week, we're trying to speak to the C-suite, but also to the investors in the companies. If you're an investor and you're looking around, how do you determine which CEOs are more likely to be able to deal with this new world that you described? Well, I think if I'm an investor, I mean, I look at it quite honestly as they have their calls, their earnings calls are coming out. And you'll hear them talk about what they're doing as far as driving the strategies on revenue as well as productivity. And if they're balancing those two and those discussions, then you kind of make a bet on whether you believe they can execute that or not, right? That's a track record. But I mean, I'm an investor today more than I'm a CEO, either in startups or market conditions and those sorts of things. But I'm looking at the experience of the management team as to where we reallocate our portfolios on their ability to do these things. Some, I think, have the ability or the experience to do that. And others have to learn. So I would factor that into my decisions and I'd therefore advice I'd give to an investor. You have to size up the management team. In the past, it was always about the business model, their segment, the growth, the great revenue at the foregoing issues around cash flow and balance sheet and those kinds of things. Go out and do a big deal when I say those things. That's I think that is over. You're not going to be rewarded for go do a big deal. The devaluations were off the chart on it's hard to say whether you ever get those returns that were in your models versus the world we find ourselves in today. That's reallocating portfolios. What about allocating capital as a CEO? Because one of the challenges and certainly I've seen is it's easy to cut costs across the board and that's almost always wrong. Wrong. Yes. Always. 100% of time. So how do you make those decisions about what are the long term strategic investments you have to keep making as opposed to where we can afford to cut back? Well, let's start with the top line. For example, I mean, you're going to have strategic investments that you've allocated capital to in the top line. If those cases are still valid and giving the circumstances of change, you have to continue those investments because you're investing for multi-year periods of time. So just you can't really you can maybe adjust them, but you can't really you should not I should say stop them. I mean, every doubt every downturn in IBM, we took up R&D because that we had to balance you to do so and we believe that we could stay ahead of the competition if we accelerated the R&D. The other side of this thing though is just capital allocation around productivity. There's so many technology tools out there that you can allocate to you to get more productivity in the workforce that you should invest in. Having said that, we've all learned and all the CEOs, my colleagues, would say the same thing. There are lots of things that are going on in the company itself that you could put in a very low capital allocation priority. I mean, you can kill them. Sometimes you should just kill them quite honestly because they really aren't making a big difference. But if if for some reason you want to keep them going, but really give them marginal kind of investment just to kind of stay the course, let's say. But I would start with strategic revenue. I 08, we announced Smarter Plan. I had a billion dollars in this thing called Smarter Plan. I'm not to tell you an IBM story. That's the top line thing. And then productivity at the same time we drove three or four billion of productivity by using digital technology to globalize the back office of IBM. You mentioned technology a couple of times there. Let's have finished here on specifically the challenges for a tech CEO right now. The Bloom sort of came off the rose on big tech and investments actually in 2022. What are the challenges faced by a tech CEO and particularly how big a factor does China play in that? Because it's not clear to me at least what President Xi's policy toward tech is right now. You hit the nail on the head. So what is his policy? I mean, such stuff back in China is the largest or second largest technology market in the world. I mean you can measure it different ways. You can say U.S. is number one, but they're very, very close. When I was working U.S. was a little bit ahead, they're very, very close. There's a massive market and you have no one can forecast. I don't believe with confidence we can predict Xi Jinping's strategy when it comes to tech. He just seems to be moderating versus he was very aggressive for the past couple of years. But if you're a CEO in tech and you're looking at this opportunity for the technology as well as the growth in the marketplace itself, there's no consistency in the policy. So it's it's it's hard. I mean, it's hard to discern what you should do. My advice would be is quite honestly, if you can, don't get in the middle of these arguments. If you can, you know, I mean, and by that, I mean government officials will try to drag you into the debate to help their side of the case. One side or the other isn't the point. You never want to be in the middle of two girls that are fighting. You just can't win that. You can't win in that fight. So if you can stay out of that, try to stay out of the fight. I would have a contingency plan. I mean, guys, I'm working with today as to how they start with supply chains. How do you de-risk your supply chain? Because you really don't know what's going to happen. Semiconductors are a big issue in the tech industry. You need to de-risk that. You hear them talking about moving their supply chains out of mainland China. And I think that's prudent to do that. Sam, it's always great to have it all. Certainly. Thank you so much for being here. That's Sam Palmasano. He is former chairman and CEO of IBM. Coming up, we'll re-