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Former Honeywell CEO David Cote just wrote one of the best guides ever on how to lead a company



Dave Cote just delivered the War and Peace of books on corporate leadership. The former Honeywell CEO’s Winning Now, Winning Later is such a rich, unusual entry in the genre because instead of running through his favorite management maxims, Cote provides a gripping, on-the-scene account of how he deployed a series of bedrock principles to transform a flailing conglomerate. The lessons come to life because the reader witnesses Cote, over 16 years ending in 2018, relentlessly putting them into practice to meet the biggest challenge in corporate America: balancing the short-term success demanded by investors with sowing the seeds for rewards that will only be harvested years hence, but are essential to achieving greatness.

Current and aspiring CEOs should pay close attention, because for Cote, many of America’s big companies are wrestling with how to invest for the future while still generating the quarterly results investors expect. “Businesses are little more than a collection of processes,” he says in the book. “And in most companies, the processes can go a long way towards becoming more efficient and effective.” For Cote, remaking those processes to get maximum results from people and assets requires achieving two seemingly conflicting things at the same time. It’s that 3D thinking that brought the big breakthroughs at Honeywell.

It’s fulfilling these “we can do both” imperatives that lifts enterprises to their full potential. And the most important is simultaneously achieving what many managers find vexing if not impossible, “making the numbers” while at the same time making the daring bets to ensure those numbers will be far higher five years from now. As his book’s title suggests, Cote swears the idea that CEOs must choose between winning now and winning later is wrong: They must find a way to do both. Thinking short- and long-term works since you need today’s profits to fund tomorrow’s hits. He shows how Honeywell succeeded in constantly improving its most lucrative existing products, from airline components to gas detection devices, to increase quarterly earnings, while simultaneously plowing billions into next-generation projects that took five or six years to harvest, then paid off big.

The book is packed with other examples of taking two actions that seem to butt heads and getting them to march arm in arm. While many companies think they need big inventories to ensure fast delivery to customers, Cote shows how it’s possible to both reduce stocks and lower shipment times by expertly managing the supply chain.

Cote also believes that companies should advance not in giant leaps but small agile steps. “It’s survival of the most flexible,” he writes. “Revolutionary change is not the key to short- or long-term performance. It’s a huge risk. Revolutions move in unintended directions. The best change is gradual change.” His goal is to stay just ahead of the market as opposed to betting heavily on future trends that may not play out, or falling behind so that only demoralizing, disruptive restructurings can save the company.

For Cote, it’s best to spread plant closures and layoffs over a number of years. Another tenet: Making lots of small targeted acquisitions is more profitable, and a lot less dangerous, than chasing the transformational whales. His contrarian thinking extends to personnel matters. Forget the “praise in public, criticize in private” maxim, says Cote. When a business head makes an inadequate plan for building his or her business, the CEO should uncork the likes of “This is unacceptable, go back and fix it”––and explain why––in front of the assembled peers to demonstrate that he’s setting a high standard.

The official publication date for Winning Now, Winning Later is June 30. But Cote gave Fortune an exclusive first look. I also interviewed him extensively to glean further insights. The overriding theme from both the book and these conversations is that this son of a rural New Hampshire gas station owner regards leadership as both highly intellectual, and highly hands-on. How many CEOs take full days, sans appointments, to think big and hatch bold new initiatives?

Yet Cote insists that “the idea you focus on strategy and outsource implementation to great people is wrong.” At Honeywell, he personally interviewed all candidates for the top 300 jobs, and for the first 90 days after making every one of its 100 acquisitions held monthly meetings to review their progress and quarterly reviews for the next year. At the same time, as one lieutenant put it, he showed the tenacity of “a big annoying bear threatening the livestock” in constantly monitoring the numbers to ensure that each business was adding sales faster than people, investing sufficiently while reaching the right balance in product enhancements and long-horizon projects, and generating strong and growing cash flow.

Winning Now, Winning Later opens by describing the deep-seated problems at Honeywell. According to Cote, the “short-termism” that plagued Honeywell is an issue many companies grapple with. The best argument that Cote’s formula can achieve the dual objectives in the book’s title is its spectacular success at Honeywell. From 2002 to 2018, Cote lifted Honeywell’s sales from $22 billion to $40 billion, took operating margins from 8% to 16%, and hiked the stock price fourfold, swelling the market cap from $20 billion to $120 billion, while spending $10 billion resolving environmental issues, including resolving asbestos claims, and fully funding the underwater pension plan. Here are five original concepts and strategies that formed the Cote blueprint.

Defeating short-termism

In 1999, Cote left GE after a 25-year career, then served for two years as chief of TRW before going to Honeywell in February of 2002. Cote coveted the ultimate prize of running GE upon Jack Welch’s retirement, but departed when the legendary CEO said that Cote––then heading the appliance division––wasn’t a finalist. Had Cote gotten the nod instead of Jeff Immelt, it’s likely that GE would be a far more successful company than what it became, by constantly restructuring and shedding businesses it vastly overpaid for. The irony is that at Honeywell, Cote found some of the poor practices that he yearned to fix at GE. And it was by overhauling those crippling methods that Cote got Honeywell roaring while his alma mater sputtered.

Cote recalls that at GE, success was all about “making the quarterly numbers” at all costs. Any given year, the outfit where Cote was working would hire 1,000 people to grow sales. Then in October or November, the managers would discover that they couldn’t hit the targets for the following year without laying off 800 of the folks they just added. “Why, I wondered, hadn’t they thought ahead and only hired 200 people instead of 1,000? We didn’t think we had a choice,” he writes. The layoffs were highly disruptive and required big restructuring costs. For Cote, the better practice was what he did at Honeywell: getting his business heads and staff people to plan for the following year’s personnel and other financial commitments early in the current year, avoiding the need for this wrenching cycle of layoffs and rehiring.

At Honeywell, Cote found a mindset of what he brands “short-termism run horribly amuck.” Managers at the specialty chemicals, aerospace, automotive, and controls conglomerate would offer distributors special discounts at the end of a quarter to boost sales, a practice known as “distribution loading,” that enabled them to hit their targets. The businesses had to quickly inflate inventories to make the deliveries, but the shipping department often couldn’t keep up, creating bottlenecks and delays that antagonized customers. And businesses, wrongly guessing in advance what distributors would want, often filled warehouses with product their customers didn’t want.

Often, 25% of the revenues from aerospace, controls, and specialty chemicals businesses would come in the last week of the quarter. Instead of buying at regular prices in the early weeks, customers waited Honeywell out until the last few days, and in managers’ desperation to ramp up sales, the deals would get better as the quarter drew to a close.

To keep hitting the mark, the business heads would resort to more gimmicks such as selling good businesses to book quick profits, or securing one-time cash payments from suppliers in exchange for guaranteed future business. That locked Honeywell into deals with single vendors that forced them to overpay for components or services over long periods. To his horror, Cote learned as much as 20% of Honeywell’s reported earnings were coming from those one-time items known as “specials”: One plant manager in Louisiana even cut down trees in the forest adjoining the factory and sold the lumber to make the numbers––and received a performance reward for getting it done.

In aerospace, managers would compete for new contracts for wheels and brakes by providing the first hundred “ship sets” of those components for free. That’s standard practice in the industry. The difference was that Honeywell was capitalizing the cost of the ship sets and amortizing it over 20 years. “They did it,” says Cote, “because investors are much less alarmed by things that don’t go in the income statement.”

That wasn’t the only case of super-aggressive bookkeeping. Honeywell would capitalize R&D so that it spent the research dollars now, but spread the reported costs into the future. As a result, Honeywell’s reported profits kept rising faster than its cash flow, signaling that its facade of profitability was about to crumble. For the decade prior to Cote’s arrival, Honeywell was generating just 69¢ for every dollar in earnings, a sure sign of trouble.

It didn’t take long for trouble to strike. After Cote had served just a few months, the finance department revealed that earnings for the second half of 2002 would fall 20% below Honeywell’s forecast to Wall Street. “‘What the hell was going on?’ I asked,” writes Cote. “Their response, ‘Well, the financial goals we were trying to meet were never realistic to begin with.’” The finance chiefs brushed off managers’ complaints, telling them to “Just get it done.” Honeywell’s stock price dropped 25%, and an enraged Cote told everyone to drop the tricks––no more aggressive accounting, no more capitalizing R&D and ship sets, no more distribution loading, and no more “make the numbers” meetings hosted by the finance staff that drove all of those dysfunctional decisions.

Producing both long- and short-term profits

Although the “make the numbers or bust” mindset was hammering Honeywell, Cote still believed that achieving regular quarterly gains in earnings––reaping a healthy crop today, no gimmicks allowed––was essential to success. At the same time, Honeywell would need to start investing now in new products, services, and processes, as well as international expansion, to secure its future, by planting seeds for tomorrow.

“We would have to win today and set ourselves up for tomorrow,” he says. “I realized we could do both at the same time. Short- and long-term goals are more tightly intertwined than they appeared. Short-term results would validate that we were on the right long-term path.” What’s more, he added to me in an interview, each goal reinforces rather than contradicts the other.

To get there, Cote vowed to follow three principles. The first was “Scrub accounting and business practices down to what’s real.” Second came “Invest in the future but not excessively” followed by “Grow sales while keeping fixed costs constant.” The theme was to plow current earnings into the long-horizon projects such as next-gen aircraft cockpits and new molecules for refrigeration that Honeywell was shortchanging, but not invest too much.

Honeywell would maintain sufficient quarterly earnings to demonstrate consistent progress. By expanding sales while holding the fixed costs, consisting primarily of labor, constant, Honeywell could generate the savings to keep raising its spending on both big, multiyear systems and enhancements to existing products and services and still generate the short-term returns investors expected. Those practices would get the flywheel spinning, and a “virtuous cycle” would take hold, which would allow Honeywell to generate even more cash to invest, which would lead to further performance gains.

Growing sales without growing fixed costs

Cote’s plan for restraining costs came in two parts. First, he immediately demanded that the four big overhead functions, finance, human resources, legal, and IT, representing about one-fifth of fixed expenses, hold their annual dollar outlays at 2003 levels, forever. “The goal was to double sales, so that overhead would fall by 50% as a share of revenues,” he told me in an interview. As it turned out, the costs of the four functions actually fell by 30% or $1 billion over 15 years, so that spending rose more like 30¢ for each dollar gain in revenues. “We used part of the savings to improve IT for all four functions, so that we needed fewer managers,” says Cote. “For every 10 managers who retired or left, we only had to replace about seven.”

In line with his conviction to achieve two seemingly conflicting things at the same time, he also demanded that the four functions demonstrate better service to their internal Honeywell customers, as determined by anonymous surveys. Cote also taught the Honeywell brass to take on broader roles, so that he could run the company with far fewer leaders. The leadership ranks over 16 years shrank from 740 to 650 even as sales almost doubled. “I did it for two reasons,” says Cote, “to save costs, but most important, because leaders create work for other leaders, and instead of focusing on markets and customers, focus on satisfying each other.”

The second initiative was an epic campaign to boost productivity in manufacturing. “If you can grow output much faster than you add costs, including for payroll and floor space,” says Cote, “you’re bound to generate the savings that both fuel new investment, and increase quarterly earnings.” In 2005, Cote dispatched a team to study Toyota’s celebrated Toyota Production System, at the automaker’s plant in Georgetown, Ky. Over the next decade, Honeywell gradually rolled out its Honeywell Operating System or HOS, largely based on the TPS practices of engaging workers to recommend and implement improvements in their factory-floor tasks that save costs and improve quality.

The initiative was so successful that Honeywell over that period increased its sales per employee by two-thirds. HOS also enabled Honeywell to keep shrinking factory space as it made more and more product. By 2018, Honeywell was producing far bigger volumes in only 70% of the plant footprint it was using in 2002.

Early in Cote’s tenure, Honeywell was manufacturing sensors in 37 small plants. Cote asked the managers to do a “white paper” exercise imagining the ideal footprint if manufacturing could be redesigned from scratch. The answer was more like 12 factories that each produced much bigger volumes. In a classic Cote “go slow to go fast” maneuver, the sensors unit spent 10 years making that blueprint a reality by packing all production into a dozen plants. “We did it laying off just a few workers a year so that we didn’t disrupt customer service,” writes Cote. “It was part of our philosophy of constant restructuring.”

Cote notes he reached his expense targets while still increasing the number of workers in manufacturing. “We started with around 60,000 in 2002,” he said in an interview. “And we hired about 20,000 or 30%-plus over 15 years. The key was that we doubled the size of the company, so the revenues grew much faster than payroll.”

Those cost-savings plans freed the cash for both short- and long-cycle investments. For Cote, the bigger challenge by far was finding the right mega-bets that would swell earnings anywhere from two to six years hence. “We were already getting lots of enhancements on existing products because people wanted to make their numbers for the quarter,” he says. “HOS enabled us to make those improvements a lot faster, but the big one was the seed planting.” He writes that prior to his arrival, Honeywell was spreading investment dollars across a broad spectrum of projects without carefully assessing their potential profitability, hoping that the more bets you made, the more would win. Cote moved to advancing fewer huge platforms that played to Honeywell’s greatest strengths, especially in aerospace, and that promised the biggest payoff.

One major hit was HFO, a new form of fluorine for industrial refrigeration. HFO was a breakthrough molecule that Honeywell developed in a quest to reduce the global warming caused by previous fluorine molecules. “That was really touch and go,” Cote told me. “It took five years, and there were two or three times when we thought it wouldn’t work.” HFO raises global warming 20% less than carbon dioxide and 1,500 times less than the previous molecule, and it has mushroomed into a highly profitable $1 billion business.

Another haymaker: Experion Orion Console, a monitoring system for oil refineries. “It’s like a jetliner cockpit for refineries,” says Cote. “It collects and processes huge amounts of data from the facility, and controls all the flows to ensure the highest possible productivity and safety.” It was Darius Adamczyk, whom Cote mentored and succeeded him as CEO, who shepherded the Experion Orion. Overall, says Cote, Honeywell now captures three-quarters of the big aerospace projects it competes for, up from half in 2002. And by the way, today’s hits are much bigger than yesterday’s.

Overall, says Cote, Honeywell’s strongest growth engine was the payoff from long-horizon projects. Of the extra $18 billion in sales generated from 2002 to 2018, $6.5 billion came from acquisitions, and the remaining $11.5 from its own products. And three-quarters of that organic growth flowed from Cote’s seed planting.

Why it’s good to criticize in public

In Winning Now, Winning Later, Cote relates that in large meetings, he’d listen to the presentations and encourage everyone to talk. And when the open discussion ended, he’d request opinions on how to proceed from everyone in the room. He always asked the lowest level managers to speak first, and as they talked, he’d show no hint of agreeing or disagreeing. “If their bosses spoke first, the lower level folks would be tempted to just parrot what their bosses said,” Cote told me. “I’d never interrupt and wouldn’t express my opinion until the very end.”

For Cote, teamwork consisted not of the usual groupthink but ensuring that everyone in the room cited facts and expressed opinions. Then Cote, as leader, would make a decision and explain his reasoning. Cote wasn’t looking for widespread buy-in. “Consensus was not the goal. A good decision was the goal,” he says. However, Cote always explained his rationale, to guide the organization on how the leader wanted them to think about problems and let the people who disagree understand that he weighed their arguments and respected their viewpoint. Cote says his goal was to be right at the end of the meeting, which might be different from what he thought at the beginning. And the only way to get as close as possible to “right” was to keep participants from knowing what he thought and getting facts and opinions from everybody.

Once again, Cote thinks it’s constructive to call out a leader who presents a weak business plan so that all present understands what the boss accepts. “Organizations need to learn what is acceptable and what is not,” he told me. “If a business head presents a plan that’s not well thought through, or gives me a great story instead of results, I’ll call them to task. Everyone around the table needs to hear that the work product is not acceptable.”

His technique isn’t to personalize the problem. “I won’t call them an idiot,” says Cote. Instead, he’ll ask the executive to start over and come back with a much better proposal. “The leader will walk out thinking, ‘That wasn’t a good meeting,’” says Cote. “But it creates a good dynamic. It builds respect for you when you tell them what’s wrong. They may panic, but they’ll come back with something a hell of a lot better.” Cote adds that he would always suggest ways the executive could improve his or her plan. “I’d always say, ‘Here are four or five things you need to think about,’” he recalls. “I worked for bosses who’d give you no idea what was wrong and just say, ‘Do better.’ When your people respond to positive suggestions, their business gets better.”

In managing through a downturn, plan how you’ll spring back stronger

During the financial crisis, Cote focused just as much on ensuring that Honeywell could roar back in the recovery as on lowering costs to preserve investment and profits. “An economist said that you’ll most likely come out of a downturn the inverse of the way you went in,” he relates in the book. “That made a tremendous amount of sense to me. If your sales fall 20% in the first six months of the recession, they’ll probably jump by 20%-plus to the same level when the economy bounces back.” Cote orchestrated his response to ensure that Honeywell could handle a huge surge in orders to capitalize during the inevitable recovery.

Cote laid off 3,000 workers, moving up reductions already planned. But for the rest of the 125,000-person workforce, he deployed furloughs to keep everyone employed at the same time his rivals were axing a big chunk of their workforces. Employees were furloughed without pay for four weeks a year. That move saved $200 million, but it wasn’t enough. Cote also reduced the 401(k) match by 50%, used HOS to keep trimming operating costs, and forced management to take some of the pain by scrapping bonuses for 2009. “We performed in line with our peers, with two big differences,” he writes. “We didn’t cut our long-term investment plans, and for the most part, we didn’t cut people. Recessions don’t have to destroy your foundation. It’s best to keep calm while everyone else is panicking.”

Cote pushed ahead with two key acquisitions: One of them, the purchase of bar code scanning specialist Metrologic, landed its leader Adamczyk. He also made special deals with suppliers to ensure that Honeywell got first priority on supplies in the recovery. “If airline hours decline 6%, you go down three levels in the supply chain for parts, and the suppliers cut their capacity by 50%,” he said in an interview. “Then when flights pick up, this avalanche of orders pours in, and you can’t get supplies.” Cote’s solution: Make advance payments to vendors in exchange for a commitment to serve Honeywell first when good times return, and guarantee big future volumes providing the suppliers give Honeywell first dibs.

The strategy proved a winner when sales took off in 2011 and 2012. His workers were ready to go, while rivals struggled to quickly rebuild their workforces and keep pace with orders, and stood in line behind Honeywell for supplies. Over those two years, its sales of aerospace parts soared 30% above pre-crisis levels, largely because the ever-agile Honeywell stole orders from its flat-footed competitors.

Believe it or not, this review only scratches the surface of this book, brimming with original strategies that actually worked. Cote swears that part of being a successful CEO is being a good teacher. Now, readers from around the globe can absorb his lessons.

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Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Radio host ‘annoys’ her Tesla thieves



Through an application, the woman was able to locate her car and recover it.

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Democracy is trending: How big consumer brands are boosting voter turnout in 2020



Democracy is trending. Politics—and the upcoming election—is showing up in our social media feeds, in our music, on television, at work, and when we shop. We’re seeing historic numbers of public-facing activations of civic responsibility from consumer brands helping drive record voter turnout

In the case study that the two of us published in June 2019 for the Harvard Kennedy School, Civic Responsibility: The Power of Companies to Increase Voter Turnout, we predicted that brands would need to find unique, authentic, and nonpartisan ways to engage in the conversation about the 2020 election—and to respond to calls to help drive increased civic participation in the United States. The challenges and threats COVID-19 presents to the election accelerated this need, as employees and consumers needed help navigating the changes caused by the pandemic. 

In profiling the efforts of BlueCross and BlueShield of Minnesota, Endeavor, Gap Inc., Patagonia, Snap, Spotify, Target, and Twitter to drive voter turnout, particularly among young people, we provided a roadmap for how companies could play a unique role in advocating for a healthier democracy.

We also demonstrated that consumers and employees actually want them to. According to one survey, almost 80% of consumers believe companies should take positions on social and political issues—and are actively seeking to reward companies that do so with their business or positive social media attention. It is precisely this benefit of action—and the risk of inaction—that we reported in 2018, and many more companies are feeling now, driving record numbers of businesses to engage in 2020. 

These factors have also helped companies overcome the fear of being seen as partisan or disingenuous, a fear that previously held them back from engagement, especially in the current, polarized political climate. But the early adopters proved—by leaning into sharing resources like voter registration forms, polling place information, and key deadlines—it was possible to inspire people to make their voices heard at the ballot box without getting “political.”

The roadmap these early adopters provided has given newcomers the leverage and safety they need to launch their own campaigns. These companies—and others—are finding authentic, nonpartisan ways to communicate with their consumers and employees about the democratic process, through efforts such as product offerings, shareable social outputs, in-app activations and editorial mediums. But why are they doing it? And what does it mean?

Where marketing and voting align

By our count, over 2,200 companies have stepped up their civic responsibility efforts, embracing their power to drive increased voter participation. Those with longstanding civic programs like MTV, Patagonia, Snapchat, Spotify, and Uber have expanded their programs dramatically, climbing the ladder of engagement beyond encouraging voter registration through social media posts and emails to leveraging their platforms for ongoing registration, early/absentee vote promotion, and time off for voting. Popular retail brands like Glossier, Madewell, and Stuart Weitzman are finding creative, direct-to-consumer ways to promote voting. Companies like Gap’s Old Navy, Target, Levi Strauss and Warby Parker are giving employees time off to volunteer as poll workers. And hundreds of brands—from United Airlines to McDonalds, Milk Bar to Major League Baseball—are jumping into the conversation. 

These brands—and hundreds more—feel they cannot be left out of critical activation moments in the 2020 cycle. According to a recent Morning Consult survey, staying silent risks a brand “appearing to be shirking its civic duty”: 46% of consumers view companies involved with voter registration more favorably, and 58% say the same for companies that give employees the day off to vote. Some brands are seeing real business benefit for their efforts. 

More than 500 companies have joined the newly launched Civic Alliance (formerly the TurboVote Challenge), which this week released a powerful statement calling on public officials to protect election integrity. Another 1,600 companies have signed the Time to Vote pledge. More than 150 companies helped Power the Polls sign up 650,000 people to serve as poll workers. Hundreds of brands helped National Voter Registration Day register 1.6 million people this year. Hundreds of companies celebrated the inaugural Vote Early Day on October 24th to raise awareness around voting options and how to request a ballot or vote early in-person. And, throughout early voting and on Election Day, dozens of companies like UberEats, Shake Shack, and Milkbar will be working with Pizza to the Polls to deliver food to polling places with long lines. 

A challenge from COVID

COVID-19 has necessitated changes to election administration in 2020 and amplified the need for brands to step up their civic engagement efforts. For example, the global pandemic has caused a shortage of people to work at polling locations; required greater education about early voting options; and increased demand for safe vote-by-mail exponentially. Companies were called upon in an urgent way by nonprofit advocates, election officials, and peer business leaders to help ensure that voters understand the voting process and have access to all of the information they need to cast a ballot safely and securely in 2020. 

Moreover, the United States lags behind the majority of developed democratic nations with regard to voter turnout: upwards of 60 percent of the eligible population doesn’t vote in midterm elections and around 40 percent sit out presidential elections. In fact, the U.S. ranks 26th out of 32 developed democracies in percentage of eligible voters who participate in elections, according to the Pew Research Center. This highlights how critical it is for every brand to recognize the role they have to play here.

Many of the eight participants in our original case study pointed to seeing this increased interest from employees as well. One company shared in 2018 that it hadn’t planned to promote the election, until one day the CEO saw that employees had set up their own voter registration table in the lobby and that the table was getting a lot of traffic. Multiple case study participants shared surprise at the number of emails from employees they received, thanking them for taking initiative and describing how proud they were to work for an organization that values these civic campaigns— whether it was the CEO sending an internal email about registering or a social media post from the brand’s handle encouraging voter participation.

We hope that this historic corporate civic engagement will result in historic voter turnout. Every company has the power to affect change in democratic participation in ways native to their brand—their ability to do so, inspiring their consumers and employees to engage, will help change the fabric of democratic participation in this country. Most importantly, because their consumers and employees want it, civic responsibility is not only good for democracy, it is good for business.

Ashley Spillane is the former president of Rock the Vote and is a former Roy and Lilah Ash Fellow at Harvard Kennedy School’s Ash Center. She is the founder and president of Impactual.

Sofia Gross is a former Technology and Democracy Fellow at Harvard Kennedy School’s Ash Center. She is a public policy manager at Snap.

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Moon time for central bank digital currencies? ‘We’re believers,’ says Mastercard’s CEO



Bitcoin’s star has been rising lately. The pioneering cryptocurrency bottomed out around $5,000 at the beginning of the pandemic in March, but this week traded above $13,800.

Helping to spur those moves is increasing corporate bullishness on cryptocurrency—as evidenced by Square’s recent $50 million Bitcoin buy and last week’s announcement that PayPal will offer Bitcoin and other crypto trading. Even J.P. Morgan is now predicting a coming liftoff for Bitcoin.

Cryptocurrencies like Bitcoin remain controversial, but their growing acceptance is likely also accelerating the arrival of their well-hyped cousin: Central bank digital currencies.

That was clear yesterday as I hosted the Fortune Global Forum, where I interviewed fintech leaders including Mastercard CEO (and soon to be executive chairman) Ajay Banga; Visa Europe CEO Charlotte Hogg; and Sebastián Kanovich, co-founder and CEO of dLocal, a Latin American payments startup that recently became Uruguay’s first billion-dollar unicorn.

While Bitcoin is too volatile for mass usage, said Banga, it’s “central bank digital currencies we’re believers in.” Mastercard is now “one of the largest patent holders in the space of central bank digital currencies,” he added.

“I believe that fiat currencies, if they were to go digital, would they be helpful in cross-border trading flows and improving the efficiency of those?” explained Banga, “Yes, for sure.”

Hardcore Bitcoin purists are bound to insist that any currency issued by a central bank is not a true cryptocurrency, because it’s not decentralized. But the CEO of Binance—the world’s largest Bitcoin exchange—Changpeng Zhao, better known as CZ, disputed that view when we spoke with him last week on our show Balancing the Ledger.

“People will probably argue about the semantics of it and different definitions of it, but I think that that’s not super important,” Zhao said. “What’s important is what will people use at the end of the day, and how much adoption each different currency will get?…I think there could be centralized versions of cryptocurrencies that will get high adoption.”

He added: “I think as long as people use it, it will have value.”

Indeed, even in emerging markets where local currencies can be volatile and less reliable, people still aren’t turning as much to cryptocurrencies as proponents perhaps thought they would.

Kanovich, whose company dLocal operates largely in Latin America and other developing countries, didn’t think cryptocurrency would matter much to his business until central banks got on board with the technology.

“We are super bullish at the personal level; we don’t count on it at the company level,” he said. “We need to make sure that the central banks are feeling comfortable.”

Besides, he added, even among the current fractured landscape of cryptocurrencies, with Bitcoin and its thousands of younger siblings, none has really caught on yet with consumers. “We need to make sure that users are paying the way they want to pay. And yet, they’re not choosing crypto,” Kanovich added. “We would love to see it happening, but we haven’t seen it happening yet, and we do believe we have other fights to fight than driving adoption in the crypto world.”

Maybe a digital currency backed by a central bank would change that.

Jen Wieczner


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