The Time Value of Trading Off: Derek Yach's Opening Keynote

Dr. Derek Yach, SVP of Global Health and Agriculture Policy at PepsiCo, gave a riveting keynote address to open up the conference. A key question he asked was “How do we trade off today’s tangible pleasures and profits against tomorrow’s possibly greater but uncertain rewards?” How do we weigh 15 more minutes in our warm bed against the potential health benefits from a crisp jog in February? Maybe it’s all the discounting analyses we’ve been doing in Corporate Finance, but I’ve been thinking a lot lately about the social psychology of time and the opposition companies and individuals and governments face when they make decisions that leads to a little pain right now in exchange for uncertain outcomes in the future. Dr. Yach pointed out that the
real challenge lies in not allowing the urgent to crowd out the important. Culprits include today’s digital information overload, increasing pressures for constant growth, and a lack of executive accountability thanks to short tenures. Dr. Yach was able to draw a lot of provocative analogies from his experience in public health: how do hospitals and our healthcare system, with limited
financial resources, weigh the value of today’s “curative load” with preventative health measures? How does a clinic team in Africa weigh the treatment of one car wreck victim with vaccinating a village of children? These translate so clearly into climate change – how do we, as individuals, forego the convenience of bottled water and plastic bags when we have no idea what benefit will come to us from carrying a Sigg or reusable bags around? As an executive, how do you make the choice to take a hit on this quarter’s profit – on which your compensation depends – when it is unclear that your efforts to reduce your company’s carbon footprint will make an impact?

The Holy Grail, if you will, is to be innovative and find the solutions that allow you to increase profits now while having a positive social or environmental impact that allows those profits to remain sustainable. PepsiCo’s “Performance with Purpose” seeks to do just that. In Ethiopia, PepsiCo works with local chickpea farmers to improve their yield and productivity of their land. The increased chickpea yield goes toward ready-to-use local food supplements that is used nourish children during food emergencies, and Sabra brand hummus! Just think – when you snack on Sabra from Byrne, you’re eating chickpeas that are from the same farms as those that feed hungry children all the way across the world in Africa. PepsiCo benefits from a steady agricultural source for their products while the community benefits from improved farming and childhood nutrition … and of course I, the consumer, benefit from delicious, delicious Sabra.

There will be instances, however, when we aren’t always able to attain that Shangri-La of the triple bottom line, and tradeoffs will be necessary. I believe our experience at Tuck empowers us to make conscious, responsible decisions in these circumstances. At Tuck we are well accustomed to trading off present pleasures in exchange for the potential for greater future rewards. Just think of all the time you spend on corporate recruiting – unsure of whether you’ll land that job at Goldman or McKinsey – when there’s always a birthday to be celebrated at Murphy’s, or a goal to be scored in hockey. Remember in your future corporate life that there is value in foregoing quick, easy profits in exchange for the good it may do for your world, or your childrens’ world, or even your childrens’ childrens’ world and always keep an eye out for the idea that doesn’t force you to make that tradeoff.

Sarah Stern T'13