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- Hi, I'm Chris William, moderator for Carolina Business Review.

In this week, we start with part two of a special dialog we did with the Charlotte Regional Business Alliance.

It was done at the Westin Hotel in Charlotte with three CEOs.

They are Marvin Ellison, CEO of Lowes, Brian Moynihan, the CEO of Bank of America, and Duke Energy CEO, Lynn Good.

So we begin with part two of their thoughts on where we might be headed this year.

We start now.

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This is a Carolina Business Review special presentation of the Charlotte Regional Business Alliance 2022 Economic Outlook, featuring Lynn Good.

Chair, president and chief executive officer of Duke Energy.

Brian Moynihan, chair and chief executive officer at Bank of America.

And Marvin Ellison, president and chief executive officer of Lowes.

Now, Chris William.

- Brian, what's the Central Bank gonna do?

(all laughing) What is the Fed gonna do?

- Which one?

(Chris laughing) - Well, I'm glad you didn't ask me that question.

(all laughing) - What's the Fed gonna do about liquidity, about low rates, about unemployment?

- So the question, and you've heard Chair Powell and Humphrey Hawkins or Cares Act Testimony just a couple weeks ago, and we had our Federal Advisory Council meeting with him.

And, you know, he's clear, it's time to start to take accommodation out of the system.

And first is the balance sheet size and then rates.

And the reason why you're doing that is you have to step back.

We have had a heck of a long term problem avoided by really going after the short term.

Fiscally, prior administration, this administration, flooding a lot of money in the system.

Monetary policy, low rates, building the balance sheet, and then, you know, frankly, private America also stepping up and no layoffs here adding.

It just doing a lot of stuff to help our employees stay safe that added to it.

And so you had a 30 percent downdraft in the economy coupled by recovery.

And so what's the Fed gonna do?

To me, it's a fairly straightforward thought process.

In 2019, the economy was excised, it is now as big as it was then.

The unemployment rate was 3.6, it's now 4.2.

Both those are full employment.

If we're not at full employment then we would have a lot less job openings.

Let's just say it's you have full employment, right?

But the reality is the customers are spending money, that 2 million people went through TSA the other day, but et cetera, travel.

So what would the Fed do?

They have to take the accommodation out and they have to slowly take it out because the inflation is in the system.

The question whether the expectations will continue on.

And, you know, what's so that's what they got to do.

Another question is how and when and how they do it, and how they do it without push the economy too hard into recession.

And that's, they've got to do their job, which is to manage that debate and manage that outcome.

And they've been pretty clear and they've got another meeting coming up, I guess, next week, and there'll be more clear about it.

But the first thing to do is start to take the balance sheet down and then second thing is to raise rates.

And the market hasn't raised rates, you know, second quarter, next year, in the third quarter, three or four times, et cetera.

But if you ask me personally, you know, the conditions of the economy are strong enough, absent what this variant does that, you know, it's time for the Fed to move back and let the natural economy take hold.

But it's you don't have to just think about 2019.

We all felt pretty good and the Fed funds rate was two, long term rate was around two, why would it be different than that?

Especially the currency is expect to grow twice as much and the risk as if you don't start doing that you can have inflation.

And you have inflation, you can have continued expectation of inflation.

And that's difficult to manage.

- Lynn, interest rate is sensitive industry, no doubt.

- For sure.

- I know you watch interest rates and monetary policy.

What do you think is coming and how do you prepare for it?

- You know, I would say, Chris, kind of similar to what Brian's comments are, you know, the we live through many economic seasons, right?

And so rising interest rates, some inflation, tight supply chain, tight labor market, are the headwinds that we could point to.

But we also have tailwinds.

We have a growing economy.

We have growing economic development.

We have growing energy use.

We have the demands for transforming the energy industry.

And so I think all of us are trying to figure out how to continue to position our business despite the headwinds to keep going in a way that makes sense for our customers and our investors.

And so, you know, if you were coming out of a pandemic, if we had been sitting here in January of '20, we didn't know pandemic was a headwind, but it was, and we adjusted and adapted and we kept going.

And the same is the case now.

We've been watching the interest rate environment for some time.

We finance a lot of debt.

I mean, we spend on capital alone somewhere around 10 to 11 billion dollars a year, half of its financed by debt in a general sense.

And so we kind of dollar average our way into interest rates, we try to take advantage of as much commercial paper and short term rates as we can.

Financing over a 30 year period, interest rates are still very low.

And so finding a way to adapt is just part of the job.

And we will address those headwinds as we do every year.

And also look at the good things that are going on in a way that we can take advantage of that and grow our business.

- Marvin, obviously looking at retail and wholesale sales, it's an important indicator for you.

When you hear what Brian and Lynn just talked about when it comes to interest rates and what's coming, how do you look at it?

What's important to you?

What do you watch to make sure that you are staying where you need to be?

- Well, an interesting statistic, two thirds of the sales at Lowe's are from repair and maintenance activity.

So... - [Chris] And still now?

- Still today.

Still today.

So if you think about an appliance breaking down, your roof leaking, something occurring that requires you to fix it, that's two thirds of our sales.

So we're not necessarily in any new home construction.

So the correlation is very modest.

Meaning interest rates and any type of decline in demand in our business.

What really drives demand and home improvement is what's occurring now.

And that is in the US, 50 percent of the existing homes over 40 years old.

Anything over 40 years old starts to break down.

We all can attest to that.

- [Chris] Speak for yourself Marvin.

Come on.

- 20 years old, Marvin.

(all laughing) - So anytime you have an aging housing stock, that is a great predictor for business demand for us.

And the fact that supply demand for housing versus demand for housing versus supply of existing homes on the market, Charlotte is a classic example what's happening around the country.

You know, I moved here three years ago looking for a new home.

We couldn't find what we're looking for and so we bought an existing home and we remodeled it.

That is exactly, you know, that correlates our business model.

If someone, you know, constructs a new home, Lowe's gets very, very little of that demand in sales just because we're not in a new home construction business.

So, I would say interest rates are important obviously, because it's going to impact the balance sheet of the consumer.

And if they don't feel good about their financial position, or they feel as though that they're gonna be at risk for future earnings or future value in their home, then that may have some indirect, you know, indirect correlation to our revenue and demand.

But overall, historically, is the age of housing stock, is home price appreciation and is a supply demand ratio of existing homes because we want you to stay in your existing home.

And we want you to invest in at home versus going to buy a new home.

- And not looking for a leading answer from any of you on that Brian, but you've seen a lot of, you've all in a lot of markets.

Brian especially you, and you've been now running and head of Bank of America for quite a while, when you look at the southern region like Charlotte, Raleigh and other places Charleston, specifically Charlotte since we're sitting right here, it there is a level of in migration and growth it'll, in my term, bail it out even in a bad economy.

Is that wrong to think that way, and or do Charlotte plan accordingly?

- But I think, you know, this the cooperation of business community with the political side that rules regulations or law, the availability all things Marvin talked about is stellar here and that's why, you know, the world has this community growing faster than the average community in the United States, the United States growth rate and it doesn't mean we're perfect.

And we got lots of issues with trying to figure out, and we got the work, we work on a CLC, and other groups with, you know, the reattaching, you know, the tens of thousands of people who we need to get better jobs and more career path.

All that stuff is worth it.

That's not unique here but I think this community benefits by a great business climate, a great business group that works together with the lines here and all the different groups, and understanding in the governmental sector that, you know, population jobs, companies are linked and they're not unlinked.

And, you know, then tax policy and stuff that's constructive.

And, you know, when you go to other areas, there are other areas are very aggressive right now.

Texas and Florida and places like that, but there are other areas that are just not.

And so I think, you know, we should be careful to keep good thing going.

Now, on top of that, the schools are gotta to be in great shape, they got to be able to see the people.

You know, all the things that we all know about talk about the opportunity question that arose out of the Chady study that got a lot of our attention and got us after something.

Those are serious questions that you want to deal with.

But nice thing is we're starting from an expanding pie, you know, when I go to other parts of country and talk about the idea that we're, you have to plan in the schools the growth here.

You know, most there's a lot of the places the school system just keeps shrinking and that's a harder management task.

And so I think, let's just take advantage of what we have and not worry about the rest of the country and just do a good job and we'll just keep attracting people.

- Is there, Charlotte heads a wind in it's back clearly, are there things though that we could loose sight of if we don't address around growth and development in Charlotte?

Are we checking all the boxes that we need to be checking?

- You know, Chris, I would say a couple of things.

This is a terrific place to live and work.

I think we all appreciate that.

I think it's important when it comes to attracting talent.

When we attract businesses I know, the Charlotte Business Alliance has a big role to play in that.

But I think another thing that is important about the region's is civic leadership.

Brian talked about it.

I think the civic leadership and maintaining that civic leadership so that the community is addressing issues that are important to our customers, our employees, our community leaders.

Whether it's education, workforce development, racial equity.

I think all of those things require our attention.

And as we think about Charlotte, I'm proud of the fact that the business community is so closely involved with that.

There's always more work to do though.

And I think maintaining that focus on civic engagement at the same time we're enjoying the benefits of the region is important.

And I would also say that continuing to invest around education, continuing to invest in infrastructure, so that we're keeping pace with our population growth, continuing to look ahead and plan for what 10 years, 15 and 20 years look like, it's important for all of us to do.

At the rate of population growth and other things that we see this region is just gonna continue to blossom.

So let's enjoy the good things and let's work on keeping the the civic leadership and the strength of the community, education system, et cetera, going.

- Would you characterize it that way?

Is it servant leadership?

Is there one thing that you look at Mr. Ellison that you say, well, we gotta get this one right?

We got to do this?

- Yeah, I think so.

Look, I look at the Mayor's Racial Equity Initiative.

You know, Malcolm called me lead that Mayor Lyles vision around it.

Many of us in this room, as companies supported it in a large way.

I think that's important because that's, that is something that we have to address, you know, within the city.

You know, we've talked in the business community about a lot about mobility and how we can improve the mobility in Charlotte and some of the things we can do as business leaders to work, you know, with the city and with the county in various, you know, degrees to try to help move these initiatives forward.

I think that's a big part of it.

But I agree with what Brian said.

I've lived in a lot of major cities and I would say that the business community in Charlotte works better together and works better with the city and the city officials than any place I've ever lived before.

And so and I think that's a credit to the mayor.

(audience applauding) That's a credit Mayor Lyles, I think it's a credit to her administration.

I think it's a credit to a lot of the business organizations and the the CEOs and the leaders in the city has taken a lead, you know, both Lynne and Brian have both lead, you know, large business groups here in the city and I think that means a lot.

So I think it's all of those things.

I don't think it's just one thing.

But the city is moving in the right direction.

I think we should feel good about that.

But we can't rest on our laurels.

We have to be aggressive, we have to address the issues that need addressing and it's gonna take a team effort and a collaboration between all of us to make this a really a positive story.

- So five years ago, whenever the charity work came out and the opportunity and, and so when I'm, you know, when we travel around and I'm sure Lynn and Marvin have some the same thing, the approach this community took to take it head on and say, "We don't want to be there, what are we gonna do?"

And is it all perfectly fine, but it's action.

It's not debating, it's not in the clear mindedness, which, you know, Andrea and others had brought to the table, and then all of a us said, okay, let's try to figure out what we can do.

And, you know, we are ahead of a lot of places figuring that out.

And, you know, how do we know that?

Well, we're involved in, we're all involved in a 110 Initiative, for example, and they're using the patterns that we did here, the straightforward thought process, which is how do we create opportunity for people, because employers can promise jobs and you go from jobs to, jobs to skills to programs not the other way around.

So we, you know, we're hiring people and that doesn't exist in other communities.

By the way, we're trying to populate other communities.

And that's one of the things we're trying to do is because we think the business community owes as to every community but a lot of their communities, you know, it kind of goes on around you.

And I think that clear minds which this community took that on and then even before that with the, you know, the shootings and riots we had around some of this stuff over policing and thinking about it and just sit down and saying we got to figure this out.

Yet that is, you know, extremely constructive place to visit too but you have to be careful because the brand here is, you know, you always got to keep your brand moving forward, cause a lot of people have to.

You know, there's a lot of aggressive communities out there that promise a lot of things to companies that we have to be mindful of that, you know, it's you got to have good schools, communities have to be safe, you got to have a good relationship between the government and the private sector.

And the private sector has to be able to tell the tale, that it's all good.

It's good and growing because if they don't, it's not the people leave that's the mistake many politicians make.

Is that people don't start.

So you're in a search to locate a thousand employees, people just go off the list.

Because the people looking at it say it's too hard to figure that out.

That's what you lose.

You don't lose people, for us to pull up out of here wherever the companies, that'd be impossible.

But the real question is, you lose the next company.

And I think the recovery we had from those issues, I think showed that we're willing, and that's why you continue to see the influx.

- You know, we've talked about the mayor a couple of times, I want to make sure, is the mayor here by any chance?

Just want to give her an opportunity.

(audience applauding) Where?

There?

Mayor Lyles.

Thank you.

I wanted to make sure we're talking about you in the third person and I knew she was very emotional, rightly so, when it came to the amount of money that was was initially pledged, 250 million.

And I want to spend just a little bit of time on this.

How much time do we have Bob Jones, by the way?

Yeah, I can't read that.

That's Oh.

Oh, that's the countdown clock.

Oh, my gosh.

- It stopped four o'clock in the afternoon.

(all laughing) - I worked for Wellsfargo... - They may they may feel like that.

- Marvin, what, five years from now with $250 million pledge for the Mayor's Racial Equity Initiative.

Five years from now, what does success look like?

How how does that deployed?

- Well, I think success is progress.

And we just want to see forward movement.

You know, there's a lot that needs to be done, but there's a lot that needs to be done in a lot of cities.

I give the mayor credit for at least having a vision to have this initiative in place and then to get the business and the civic support around it to make it a reality.

So I think this is a great starting point.

And as long as we work together, collectively and we support the initiative, and we do our part, I mean, this is a collective effort not waiting for someone to get something done but to take the initiative.

The message I gave to my team in the midst of all of the social unrest, and in all the flurry of activities that companies were motivated to do, because of the issues we were dealing with.

I just told them talk less and do more.

We don't have to tell everything we're doing.

Let's let our actions speak louder than our words.

There are a lot of press releases, a lot of speeches being given, the question is what are you actually doing?

And so I'm confident with the leadership of Mayor Lyles and her team in this business community that will get things done.

So in five years I'm very confident that we'll feel great about the results.

- We didn't get a chance to really unpack this and I hate we didn't.

We tried to put 10 pounds of information in a five pounds bag.

Lynn you're gonna get the last question diversity, equity and inclusion.

Tragic death of George Floyd and those things that followed awakened and re-awakened for many people, what DEI really does mean.

It's not just a silo.

How have you embraced what DEI means?

What value does it bring to an organization like Duke?

And what does it mean to you personally?

- You know, Chris, we have had a long standing commitment to diversity and equity at Duke.

And I would say to you, the business that we run although it looks easy to all of you, you flip the switch and here it goes.

It's a very complicated business.

And you have to have diverse points of view at the table, diverse backgrounds in order to solve big complex problems.

So we've been a believer in diverse points of view for a very long time.

I do think 2020 and the murder of George Floyd was a catalyst for us to really step back and say we believed it for a long time but have we really made the progress that a company of our scale should be making?

And it's given us encouragement to spend more time with employees, more conversations, more leadership development, more sponsorship, more reaching out to develop a pipeline.

It's also had us speaking very directly to our suppliers.

We believe deeply in supplier diversity, but we want them to believe as deeply as we do and we expect them to show us what their efforts are in order to embrace diversity, equity and inclusion.

And then building on what Marvin talked about, we've been very active not only in the mayor's very clear vision for the future, but in trying to take our view of equity inclusion into the community.

And I think one of the things the mayor has drawn our attention to is Johnson C. Smith.

Quarters of opportunity, the digital divide that exists in our area and we are putting specific funding and volunteer and leadership into those initiatives.

And my hope is that in five years, we have a stronger, historically black college in our community, we have quarters of opportunity that have created jobs and investment in parts of our city that have been left behind.

And that we don't have a digital divide.

The next time we need to send young people home for remote schooling, they go with ease and it all works beautifully.

So we are a believer at Duke Energy in diversity and inclusion.

And our work is never over but we are committed to keep going.

- Chris, if I could just add one thing.

And I'll just the one thing that we tried to do with the onset of the George Floyd murder and tragedy is we just have to create a comfortable environment to have uncomfortable conversations.

And that's not a play on words.

We have to have environments where supervisors and leaders can feel confident and comfortable that they can talk to a teammate, an employee that maybe have a different religion, a different ethnicity, a different gender, and not be so afraid of offending.

Cause sometimes we saw we're so afraid of offending, we don't even talk to each other and so we're not learning.

And I think that's one of the things that we tried to facilitate, is let's just teach people how to have a proper conversation with their team to understand how they're feeling and what they're frustrated about, and just have a form of discussion and not be so concerned that you're going to ask the wrong question in the wrong way and you gonna offend someone.

And that was a huge issue within our company that we're trying to continue to figure out ways to make it less burdensome.

(audience applauding) - So in the in the weekend after the George Floyd killing, I received two or 3000 emails from a company and that asked, why can't people the conversations we have in our company outside our company?

And we build a platform with an outsider called Courageous Conversation Starting on 70 years Ago.

It's a trademark name, believe it or not, because it's in this was all about the, you know, ethnicity, race.

We had black executive talk about, you know, driving more black and having kids drive and getting stopped and the issues of over policing stuff.

That was already going on and 3000.

And that's why among in our billion in a quarter dollar program which has private equity investments, and MDI investments and all this sort of stuff, we went to the Smithsonian and Mani Bunch who ran the National Museum African American history, culture now runs also Sony and we gave them a foundational gift of 25 million immediately and said, you got to build a platform because when I was talking to other business leaders around this, they said, "We don't have a platform."

I said, "We'll build a platform for people."

To have those conversations Marvin's talking about.

And that kind of understanding that comes from big companies and just the willingness to take on and scratch the scab off and let the conversation roll and you need some professional substructure around it to make it work is as important I think what's come out of this, you know, horrible situation in the George Ford killing and a double pandemic and all the words between use anything else.

And I felt it when I took a walk with somebody at a house and Keel and colleague was there who is on the board with me.

And after two hours of walking, you know, I could understand better as a successful black CEO what he was feeling and understood the difference and said, "You know what, we got to help other companies push this harder."

Because and that's a piece that we can't forget when we go through all this.

Is that, you know, we need and that's a little bit what we found out in this community and the opportunity and thinking about that, that you asked me anything that destroys the fabric if we worry about is to make sure that we're seen as a leader and all this in this community, not a laggard.

And that's just something we just got to stay on all the time in the Mayor's Initiatives and JCSU and the opportunity stuff that we've created in Pre K and advocating for digital vide enough.

This is all part of that but also don't forget the conversation is just as important.

- You know, this is gonna sound patronizing.

It's not.

It's genuine and I and I think I speak for everybody in this room.

Thank you for your leadership.

Truly, all of you.

(audience applauding) - [Narrator] Major funding for Carolina Business Review provided by, High Point University, Martin Marietta, Colonial Life, The Duke Endowment, Sonoco, Blue Cross Blue Shield of South Carolina and by viewers like you.

Thank you.

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