Réflexions de C. S. Venkatakrishnan, chef de la direction du groupe, Barclays

Jo Taylor: Welcome to School of Thought, a podcast from Ontario Teachers Pension Plan, where we speak with global decision makers about opportunities, risks, career journeys and lessons in leadership.

I'm Jo Taylor, CEO of Ontario Teachers Pension Plan. I'm thrilled to have my guest today, C.S. Venkatakrishnan. He's the CEO of Barclays. But more than that, he's a very experienced banker and somebody who's got a fantastic view of the world of finance and what's happening at the moment. And disclosing some of my own points, I’ve been a big fan of Barclays throughout my life. It was my first bank, and it's been a great support for teachers in our investment activities in private companies. So Venkat, welcome.

C. S. Venkatakrishnan: Jo, thank you very much. Thank you for having me. And thank you for being a 40-year customer of Barclays.

Jo Taylor: Well, thank you for looking after me for that long. Thank you. I thought we might start at the beginning, if that's okay. Now, you were born in Mysuru?

C. S. Venkatakrishnan: Mysuru.

Jo Taylor: Mysuru, which probably isn't a town in India that a lot of people know much about. Do you want to just give a bit of a flavour of how you saw it?

C. S. Venkatakrishnan: Well, I was born there, but I didn't spend much time there. It is actually a delightful town in the deep south of India. It's about 100 miles south of Bangalore, which is the big tech capital, but was then a sleepy town. I spent most of my childhood in New Delhi, which was then a beautiful, relatively uncrowded, spacious green city with clear blue skies.

Jo Taylor: A lot of your career really then moved to the U.S.. Now you had a fascinating degree and a wonderful institution, MIT, but it was something to do with, mathematical overview or organizational activity for air traffic controllers, I believe.

C. S. Venkatakrishnan: Yes.

Jo Taylor: What led you to that?

C. S. Venkatakrishnan: Well, I got funding, so that always helps. I went to MIT as an undergraduate and I couldn't quite figure out what I wanted to do. I did a bit of computer science. I did a bit of economics. I did a bit of what they call management science, which was mathematical optimization. I ended up sticking with the last of the three and did a PhD in what's called operations research, which is a combination of statistics and mathematical optimization. But I was very interested in the side in economics. I kept that going. And then I had this interesting problem which had funding, which was how do you sequence airlines aircraft to come into land at a busy airport to get them down as quickly as you can, as safely as you can? And it was really cool because in those days I could go into control towers, I could we had radar that tracked planes as they came into Boston airport. And then in the last couple of miles, the radar lost the tracking and we would watch with binoculars and check timings of landing. And so we had the data of when a plane entered airspace and when it landed, and we had to figure out how to sequence them better. It was a fascinating problem.

Jo Taylor: So should I and everybody else flying these days, be thankful to you that the planes get down safely as well as on time.

C. S. Venkatakrishnan: Well, I think you should thank the air traffic controllers. I had great respect for them then, and it's even greater now because I think traffic is higher.

Jo Taylor: Now you did have a wonderful line in your thesis which we pulled out, which says that, according to Indian thought, the teacher is central to the success of any learning endeavor. I love that line. Thank you. Now we look after teachers. so very relevant to us. We also like to believe we're a learning institution. I tend to ask this of others because, you know, it was certainly true of myself. Has there been an educator in your life that's really been somebody who stood out to you in terms of shaping yourself, your future?

C. S. Venkatakrishnan: There have been a few. And look, it's a great honor to be with the Ontario Teachers program, to work with you and the institution and to be here because I think the teacher is one of the most fundamental people in one's lives who shape one's character, one's profession, one's being. Yeah. When we begin in life, I think we look at teachers as people who give us information. They educate us, they teach us reading, writing, arithmetic, sciences. And you get to a point, I think at some point in life, one starts to realize that teachers not only teach you what to do, but how to do it. And so it becomes from a vocational skill to something about character and about behavior, and about how and resilience and adaptability and all those soft things that help you much later in life. So it's hard to pick out a few, but I'll pick a few. I'll say my parents, first of all. Yeah, who gave in me both a respect for organizations, a respect for respect, if I can say that. Yes. and, and a set of values which I hope I have not disappointed them in, I mean, I tried when I was younger to disappoint them, but I've been better behaved since then. The second was, you know, my thesis advisor at MIT were really very good. They were tolerant of a young man who was trying to do too much, who was trying to do things. He was probably, you know, not fully capable of doing. And but they taught me one very important thing.

C. S. Venkatakrishnan: And two gentlemen, Arnold Barnett and Amadeo Odoni, they taught me how to communicate something simply. Great skill. it's a great skill. And, and, and I'll never forget, actually, the first time it was drilled into me was in a six-hour practice session to go to my first academic conference, which was in Canada. I was going to Montreal, and I was taught how to present something in 15 minutes crisply. Moving on, you enter the work life. I spent 22 years at J.P. Morgan towards the latter part, the last 7 or 8 years, I had the privilege of seeing Jamie Dimon up close. And he's a remarkable business leader, a remarkable human being. Made such an impression on me, with his intelligence, with his drive, with his personality, with his ability to communicate. That day doesn't go by when I face a difficult situation, I ask myself, what would Jamie do?

Jo Taylor: Yeah.

C. S. Venkatakrishnan: So he's a person who's made a remarkable impression on me. And then subsequently I would say, there's this English phrase, don't spare their blushes. But I would say being in Barclays, I've been very fortunate to have a very good Chairman of our Board, Nigel Higgins, who has taught me how to be in the UK, who has given me an insight into how you are a CEO and manage the stakeholders. I've learned a lot from him, and then I learned a lot from people who work for me because they first of all, they educate me on newer things. And second, they teach me how the organization gets things done.

Jo Taylor: The other thing I found quite interesting was, you know, with all that, you said, you're hugely successful at J.P. Morgan. And then the transition to Barclays was, I think, initially more in a risk format for the Barclays organization. How easy was that for you to make that transition? I assume quite easy because you've got a lot of risk built into your analysis. But what were some of the challenges? Because I guess it also came with moving away from New York to a different country as well. That must have had some, some issues.

C. S. Venkatakrishnan: Yeah. And this is how teaching continues. I mean, I learned from my wife and my children, who probably know me better than most and know when I am scared to take a risk and they encourage me. And that decision, you know, answering in a full-fledged way when I was called to be CEO, I have to thank my wife who said that, you know, I should take a risk at a different organization. I never thought I'd end up being CEO. So, I was taking not taking much domain risk in terms of the risk organization. But I was, as you say, taking institutional risk and a cultural risk moving from an American organization to a British one, even though one which has a huge U.S. presence.

Jo Taylor: Well, you've gone from strength to strength at Barclays. I mean, Barclays spans many asset classes internationally, huge presence, obviously in Europe and in North America. I guess sitting where you do, you've got a wonderful ability to look out and say what feels like the right level of risk to take, as well as areas to perhaps encourage activity.

C. S. Venkatakrishnan: I think there are and we can talk about risks, both in terms of business and how we do business. The risks which I think are very well rewarded over time are to take exposure to technology, both in terms of technology companies, funding technology companies and adopting and using technology inside the organization. If you do it quickly and you do it well, and you may make mistakes, but it pays off. The second thing is to take risks on individuals as well as businesses, especially small businesses. They all have the drive and they are on an arc of success. Not everybody will, you know, turn out to be a great credit. But by and large, you can understand the numbers well enough to make it work. Then when you come to large businesses, you've got to take risk where you understand the business and see if they're doing the same thing, whether they are themselves investing in their own people in a consumer business and using technology. If all those things come together and it applies just as much to countries as it does to individuals and companies, then I think those are risks worth taking.

Jo Taylor: Okay. So let's stay with risk for a moment. You've had the ability to look at a very senior level at colleagues and organizations in both the US and here in the UK. Does that sort of, I think, adopted thesis that people in the US take more risk than perhaps colleagues do over here. Is that fair? Is that justified?

C. S. Venkatakrishnan: No, I'm not sure that's justified. There's a lot that's very similar between London and New York and there, you know, and it's almost other than driving on opposite sides of the road or different sides of the road. It's virtually indistinguishable in the way in people, which people think in the financial industry. It is absolutely true that there is a culture of venture capital and a depth of venture capital and private equity in the US, which is much greater than in the UK, and therefore there is more money to be, to be had, more people, more capital to be thrown at early stage ventures and a willingness to tolerate failure.

Jo Taylor: Yes.

C. S. Venkatakrishnan: If you then come to an institution like a bank. Which operates in a different part of the risk return curve. I don't think it's that different. That's right. I think the UK has been for many, many years taken extraordinary amounts of risk. It didn't become the global power it did without taking risk. perhaps some of that we can talk about it later in terms of managing equities, managing their own investments. There can be more of today.

Jo Taylor: Let's do that now. maybe we should start in a different area. I mean, we're clearly a pension plan. You know, we have to have a risk threshold, which really keeps us within boundaries. The worst thing we can do is actually have a situation where the members can't draw their pension when it's coming due. How do you see the pension world in here in the UK versus say, what you've seen from organisations like ourselves in Canada and wider perhaps in North America?

C. S. Venkatakrishnan: So I think over the last 30 to 40 years, the biggest difference you notice is the culture of equity. Risk taking in the UK has declined. Now, I think lots of academic studies have shown that a broad and high exposure to the equity markets, 60% or more is roughly right for people through their lives. It will change at different points in their lives. When I looked at your portfolio, at your year end results, I mean, I get this roughly wrong, but, you know, you've got a fairly high exposure to risk assets. You've got, I think, 40 ish percent to begin with in public equities. And then if you add privates and if you add commodities, you know, it gets much higher and then there's a little bit of leverage. And so I don't know what your equity beta is to the public market, but I imagine it's as if it was a 70, 75% equity portfolio. If you look at your typical UK pension plan, it is about 40%, which is, in my opinion, less than it should be. And I think when you take individuals, it is probably even a lower number if you take their personal balance sheet and add what's their indirect exposure through pensions. And I think that has cost the UK its cost individuals in terms of foregone return. In Barclay's we talk about it, we talk about hundreds of billions of pounds in checking accounts and current accounts which could be invested. It's cost UK companies in terms of a lack of investment in the companies and capital formation, especially of smaller companies. And you can see it in the way in which people talk about the UK equity markets, Right. They have 330-year-old dividend paying banks like us, you know, which is fine. We are happy to be here, but there should be a lot more tech companies in there.

Jo Taylor: Absolutely.

C. S. Venkatakrishnan: Yeah.

Jo Taylor: One thing I should do as we're going around the world is try and get your perspective on the great nation of Canada. Yeah. I know there's been a bit of back and forth of are we the 51st state or something else? But where does Canada fit into Barclays view of the world? Maybe just share a little bit of that because I'm sure the viewers would find that interesting.

C. S. Venkatakrishnan: Yeah. You know, we've been in Canada for over 90 years and, and had many distinguished people serve as our chairmen in Canada, including Michael Wilson, who was a former finance minister of Canada. and we've got an investment banking presence in Toronto and, and we've got a business investment banking business out in Alberta, in Calgary. And so we've covered Canada for a very, very long time, both out of London and Toronto and of course, New York. Look, Canada is, in my opinion, sort of not only one of the great nations of the world, but a great place in which to do business. You have companies that span the very traditional economy, from minerals and natural resources to the very modern economy, including some very interesting tech companies, as well as a robust financial sector. Right. Which is itself a force in the world, by which I mean you and the great Canadian pension funds, as well as the great Canadian banks and insurance companies. The so Canada, as it looks to diversify from the United States. Will look either through direct means or indirect means to attract more companies into Canada and to move Canadian and Canadian assets across the world. We think that's a great opportunity for Canadians. We think Barclays can help. And so as a business matter and as a personal matter, that's very, very important. And I would say the other thing is, I mean, you've had a change in government relatively recently. Prime Minister Carney, of course, knows the UK extremely well, having been governor of the Bank of England. Yes, having studied here many years ago. But you've also had a relative stability in your approach to the world. Right. We can always say relations with country X or Y have changed a little, but looking over a long period, Canada has been one of the most open societies economically and in terms of immigration. And that's your great strength.

Jo Taylor: Pleased that you're saying actually that you look favorably on Canada. I know it's a big agenda for the federal government to sort of try and help find, inward capital to support nation building projects. That is an important feature to try and build our economy and actually also deal with some of the trade negotiations are likely to come up where there'll be sort of some industries where there'll be some transition or probably tariff changes, which will need to be worked through. Yeah. Yeah.

Jo Taylor: Let's change back a little bit. Now at Teachers’, we feel really strongly that having the right values are important. we try to make sure as an institution, as well as investing in good companies that can grow, thrive and help their local communities. We back businesses in the right way. So, if you were looking within Barclays, which values are you trying to emphasize for colleagues? You said, you know, you can learn from those colleagues as well as you can help them to sort of grow and develop. But how would you pull out as values you would say are important for your institution?

C. S. Venkatakrishnan: So I think there are a couple. I mean, look, we are a bank, so we must always have integrity. We must always have or operate with ethics. We also serve millions of customers. So the thing I always say is offer products that are suitable to customers that they can understand and that serve a purpose for them. And would you want your grandmother to buy to take a mortgage from you. Would you want your grandmother to take a credit card from you? It's those things. Yes. You have to be transparent in your dealings. And then internally, you have to work with your colleagues in an open and ethical way. And the most important thing there is to take responsibility.

Jo Taylor: Yep.

C. S. Venkatakrishnan: Right. You have to. And especially to take responsibility when things go badly. And you are not the one who had full accountability for what went wrong, but take it and fix it. And, you know, coming back to the equity thing, one is a public equity issue about how much equity should you own as part of your portfolio. But for the last two years, we've given every employee in Barclays £500 worth of shares. Right. And in the company. Now, thankfully, the stock has done well. But part of it is to make them understand that their values and their behavior affect the bottom line, and they themselves identify with it.

Jo Taylor: That's a great idea. Yeah. It's a genuine stakeholder engagement.

C. S. Venkatakrishnan: Genuine stakeholder.

Jo Taylor: So it'd be remiss of me not to ask you the Jamie Dimon question. So let's get that one out, which is to say, you know, credit's had its moments recently where people have said, is it really giving us what we need? Yeah. How do you see credit and particularly this point about how you understand well enough what you're investing in? Yeah.

C. S. Venkatakrishnan: So I think it's two things. First of all, I've grown up in the fixed income markets, so I've had to deal with credit in good days and bad days. There is inevitably risk in credit because no matter how much you study a company or a country or an individual, circumstances change. You lend for a long time. You try to make provisions for those changes of circumstances. You hope that the pooling effects of portfolios help you. So there are only a few bad eggs, and that's what gives you the return for the risk you're taking. And those processes you have to adhere to. I sort of have two rules of risk management. Rule number one is you should never lose more money than you thought. And if you do, that's a problem. And you should never lose money in a way you had not anticipated. So you should understand the risks. And I think most forms of lending allow you to understand the borrower and the borrower circumstances, whether it's a company or an individual, and make reasonable forecasts for what happens if you're dealing with more opaque companies or opaque business models, and especially in parts of technology where you're making assumptions about technological growth. It is harder, in which case you should be compensated for the risk. The most important thing is when can you not understand the risk. Yes. And then you have to be really careful. So, you know, we've had in the book exposure to a couple of frauds. And the interesting thing about those two frauds. One was in the US, one was here in London. The interesting thing about those frauds was from the point of suspicion that there might be a fraud to understanding it, it took forensic accountants many days to actually figure out what happened. So if that's the case, especially for smaller companies with weaker business models and financial controls, which are not, you know, to the highest levels of highest standards, it's very hard for a lender to know in advance. Right. So you sort of say there be dragons. I'm not going nearby. Okay. Right. And I think every generation in credit is doomed to sort of learn those lessons again. And I've watched it. I entered this industry in 1994. I watched it in the emerging markets in 94, again in 97, the.com in 2001, the financial crisis in 2008, Europe, Covid. It goes on.

Jo Taylor: Right. Great analysis. So let's go back to one of the things. You mentioned it a few times. Again, be remiss of me not to get your perspective on this big topic, which is technology. And inevitably within technology, the discussion of the day is still AI. I think a lot of debate about how best to use AI. So is it essentially a way of actually making your business more efficient? Is it a way of actually making your business more effective and within the more effective, how much can you use AI to really make decisions that are human probably is less well suited or able to consider? So where do you sit on that continuum? Because there's a range of views here, and I think a lot of the more immediate benefits we've seen have probably been in the cost out efficiency side than actually the latter point, which is can we make better choices?

C. S. Venkatakrishnan: The honest answer is, I don't know. what I think I do know is that it will give you benefits by making operations better and by improving the way you serve your customers. And I think there are three elements of this. One is how do you get adoption? So do you provide the tools to your organization? Do you train them in the using of the tools? And are you actually seeing them use it? Yeah. Right. And one of the, one of the interesting things, mystery even, is people are using this much more in their personal lives than they are in their corporate lives.

Jo Taylor: Yes.

C. S. Venkatakrishnan: Right. you know, you always click on the AI thing in Google to get your answer. So adoption is one. The second thing is infrastructure, right. Are you getting the data in the right way, in the right format, with the right compute platforms, etc., to be able to use it? And the third and larger organizations is, can you genuinely find high value use cases where you throw out the old and you use the new and you trust it? That's the hardest part. We are trying to do all three.

Jo Taylor: Right.

C. S. Venkatakrishnan: Now. We are finding cases where you just do a job better. For instance, we have a way now of monitoring the transcripts of all of our customer service calls to give feedback to our customer service agent instead of just sampling 2 or 3 calls. That doesn't reduce the number of people, but it actually hopefully makes for a better customer service experience and a customer service process because we can look at everything.

Jo Taylor: Well, I think we also have the, anxiety a little bit at the moment, which is given the power and the sophistication of AI models, how can you make sure that your software is secure from third parties or even partners you're working with where their platform actually has vulnerability? So, you know, I'm sure most Boards in their governance looking at either of our businesses will be saying, you know, how quickly can we get an answer to that pretty important question.

C. S. Venkatakrishnan: Look, it's a very deeply important question. But basically, just as the work you do can be getting faster. The work that people can do against you is getting faster, which means your defenses have to become faster, better. The important thing here is to use the tools we have available, and there'll be newer tools. But I think to try to understand our own vulnerability, curiously, what it seems to be pointing out, is one of the areas of greater vulnerability is open source code, which is one of the things that has made programming much more efficient in the last few decades.

Jo Taylor: That's right.

C. S. Venkatakrishnan: Because the ability to go and use standardized code, borrow it from websites and so on. But those are the places where if a vulnerability is found, it can impact the greatest number of people. So does it then make people turn more inwards to their own programming as a form of defense? Right. And then coming back to your previous question, does that therefore mean you need more coders?

Jo Taylor: Yes.

C. S. Venkatakrishnan: Right. Yes. The reality is all companies today are interacting with their customers much, much, much more digitally than they ever did. Whether it is to sell their products, whether it is to accept payments, and therefore the digital defenses are that much more important. And I think these things are very worrying, and it's important for companies to react quickly for us to cooperate in safe ways. In the banking system, we feel this. But it is probably going to be even more important in Board discussions going forward.

Jo Taylor: And certainly, we see that with our members because they do a lot more digitally now, and we're trying to make sure that they're comfortable, safe and able to get good quality answers to their issues. Probably to conclude, if I could, for a bit of fun, probably to help everybody get to know you a bit, a bit better. I thought I'd ask you a few rapid fire questions.

C. S. Venkatakrishnan: Oh my.

Jo Taylor: So just say the first thing that comes to your mind. Which of these two you would, you would choose if you had the choice. So some of them very easy. So cat or dog?

C. S. Venkatakrishnan: Cat.

Jo Taylor: beach or city.

C. S. Venkatakrishnan: Beach.

Jo Taylor: Beer or wine.

C. S. Venkatakrishnan: Beer, non alcoholic.

Jo Taylor: Theatre or cinema.

C. S. Venkatakrishnan: Cinema.

C. S. Venkatakrishnan: Jo Taylor: And last one is pub or karaoke.

C. S. Venkatakrishnan: Pub any day.

Jo Taylor: Great. Now look, I should say thank you so much for joining the podcast today. It's been fascinating listening to your views. You have a very, insightful perspective of the financial industry. And you're leading a really important establishment, particularly in the UK, but certainly internationally as well. We've said it both to each other, but we've had a great working relationship together and that's really appreciated by, by our team. And wish you well as we go out into the future. Thank you for joining today, and I do hope that you'll be able to join us again soon on another one of our podcasts.

Jo Taylor: We hope you enjoyed this episode. Please subscribe and follow us wherever you get your podcasts.