Thursday, February 1, 2018

“I Wasn’t Stupid Enough to Say This Could Be Done Overnight”

(Indra Nooyi, CEO/IIP Photo Archive)

Our latest Freakonomics Radio episode is called “I Wasn’t Stupid Enough to Say This Could Be Done Overnight.” (You can subscribe to the podcast at Apple Podcasts or elsewhere, get the RSS feed, or listen via the media player above.)

Indra Nooyi became C.E.O. of PepsiCo just in time for a global financial meltdown. She also had a portfolio full of junk food just as the world decided that junk food is borderline toxic. Here’s the story of how she overhauled that portfolio, stared down activist investors, and learned to “leave the crown in the garage.” (Part 3 of a special series, “The Secret Life of C.E.O.’s”)

Below is a transcript of the episode, modified for your reading pleasure. For more information on the people and ideas in the episode, see the links at the bottom of this post.

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Hey, you. Yeah, I’m talking to you. You — for the purposes of this conversation — are on the board of directors of a large, publicly traded firm. And you’ve just learned that your C.E.O. will be stepping down. So: do you replace them with a company insider, or an outsider? In our last episode, we learned that boards are increasingly picking outsiders, in the hope of shaking things up. You can’t blame them. Just think of all the business-school buzzwords about “shifting the paradigm” and “thinking outside the box,” “pushing the envelope.” But if what you really care about is the firm’s success — rather than just ticking all the boxes on the buzzword menu — then you’ll go with a stable and experienced insider. That’s what the data show.

Jeff SONNENFELD: An objective, smart, honest, intelligent insider is generally a much better pick than somebody from the outside.

On today’s episode, we’ll hear from one such insider who’s been phenomenally successful. She runs a huge and hugely visible company — a company whose products you’ve likely encountered in the last day or two, if not the last hour or two. And yet she herself isn’t hugely visible. Which seems to be just how she likes it. She’s not flashy. Just smart, reliable, forward-looking, and just about any other positive adjective you can come up with. If C.E.O.’s got reviews, like on Amazon, this one would have five stars. From people who shop for C.E.O.’s for a living, like David Rubenstein of the Carlyle Group:

David RUBENSTEIN: I’ve known her for quite a while, and I think she’s done a spectacular job.

From other members of the relatively tiny group of women who’ve run big companies, like former tech C.E.O. Carol Bartz.

Carol BARTZ: Any time we can put up someone like her, hold her up as an example of what females can do. And she did, she did things against the — I don’t want to say advice, but against popular opinion. She’s been very strong.

And from professional C.E.O. watchers, like Jeff Sonnenfeld of the Yale School of Management:

SONNENFELD: She wants to delegate authority for others to grow and allow them to make some mistakes that she knows she could have prevented. Indra doesn’t want to tell you, but she generally is the smartest person in the room.

Today on Freakonomics Radio: Indra Nooyi, the C.E.O. of PepsiCo, on how to deal with … activist investors who want you to split up the company:

Indra NOOYI: At the end of the day we viewed him as free consulting — painful, but free consulting.

On how hard it can be to make your company change with the times.

NOOYI: When people say “culture eats strategy,” I lived it first-hand.

On why you have to accept some people as they are.

NOOYI: Because if we don’t, we’re going to start feeling resentful or angry with whatever’s happening around us.

And: what happens when the C.E.O. — especially the female C.E.O. — goes home at night?

NOOYI: Don’t try to pretend that you’re still the big boss, because you’re not.

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Indra Nooyi grew up in India, and went to college and business school there. She played cricket — and lead guitar in an all-girl rock band. In 1980, she came to the States and got a second master’s degree at the Yale School of Management. She worked for several years in management consulting, then in corporate strategy, and joined PepsiCo in 1994, as chief strategist. Twelve years later, she became its C.E.O., and now oversees 260,000 global employees and a snack empire that includes Frito-Lay chips, Tropicana juices, Gatorade, Quaker foods, and of course lots and lots of soda. We spoke with her not long ago, on a Monday morning.

NOOYI: Hi Stephen, how are you?

Stephen DUBNER: Very well, thank you. So, let me ask you this. If we knew, let’s say, 12-year-old Indra Nooyi, in Madras, India, attending an all-girls Catholic convent school, how surprised would we be to know that today, she’s C.E.O. of PepsiCo, in Purchase, New York?

NOOYI: Probably incredulous, because what you would have assumed was that she was going to be a firebrand, she was going to do something that was non-conventional, but she was going to do it in India. Probably happily married with lots of little kids, taking care of all of the older people in the home, and just a little conservative girl around, but somebody who was going to be a firebrand and make trouble. C.E.O. of PepsiCo, in the United States, of such a global company? Absolutely not.

DUBNER: Was there a turning point?

NOOYI: I think it’s been a set of gradual moves. Even the day before they told me that I was going to be C.E.O., I didn’t think that I was going to be C.E.O. So, there wasn’t a plan to become C.E.O. The plan was to just keep doing a very, very good job, and making sure the company was in a good place. I think one thing just led to another.

DUBNER: You once said, “When we become C.E.O.’s, they give us C.E.O. pills, and that allows us to remain strong in the face of all this criticism.” What’s the toughest thing, either that you’ve gone through as C.E.O., or on a routine basis, about being C.E.O. of a company like PepsiCo?

NOOYI: The biggest surprise in becoming C.E.O. was that when you ascend to the number one job, you are “it,” as they say. When you’re president of the company, or C.F.O., you still have a very important job. But there’s always a C.E.O. out there who was on the frontline, who was being focused on. And when you become C.E.O., overnight you are the person calling all the shots, you’re responsible for making sure you get all the information from the company, crystallize it down to, simple ideas, and then tell the organization what to do. It’s a very daunting job to be a C.E.O. Day one, you have to be ready to take on the mantle of being C.E.O.

Nooyi was installed as president and C.E.O. of PepsiCo in October of 2006, and became chairman in May of 2007. The timing turned out to be not so wonderful.

NOOYI People talk about a honeymoon period, but there really isn’t a honeymoon period, because from day one you are the C.E.O. And when I took on the C.E.O. job, the world was a different place because a few months after I became C.E.O. there was a financial collapse. The retail environment changed, the U.S. market slowed down. One had to learn in a hurry how to run this company through extreme periods of adversity. And there’s no book you can read. You have to develop the book as you go along. And that’s what was really, really, really tough.

DUBNER: After you became C.E.O., you spent a lot of time and money essentially reformulating PepsiCo as a food-and-beverage company much more in line with modern ideas about nutrition. I’d like to speak about the upfront costs of that reformulation, including a dip in market share and some very unhappy shareholders.

NOOYI: I think as we looked at consumer trends and we looked at where we thought the markets were growing, we knew we had to retool our portfolio. That was just not even a question. We knew that if we didn’t do it, our future was in jeopardy.

DUBNER: Did you feel that at any point that PepsiCo might come to be seen as tobacco companies came to be seen, as peddling an indefensibly unhealthy product?

NOOYI: It was never that drastic. It was more that consumer tastes change all the time. They change in food and beverage faster than they change anywhere else. And this was a sea change that was happening because  the whole society and their habits, and their lifestyles were changing. My point is, this is a great opportunity. It’s a great opportunity for us to change our portfolio, go where the consumer’s going, and gain market share. But I was not stupid enough to say this can be done overnight. I mean, I knew this journey was going to be long, arduous, and it was going to be filled with pitfalls because it’s not just the desire to change the portfolio. We had to line up the entire company’s innovation, marketing, execution, and budgets to go where this marketplace was going, and then we had to change the culture of this company.

When people say culture eats strategy, I lived it first-hand, because I saw how many people sort of said, “Why should we change our company that’s been so successful for a future we don’t quite understand?” One had to paint the future in a very personal way. I mean, I had to use our own employees to say, “Look, your own eating and drinking habits are changing. If your eating and drinking habits are changing, as evidenced by A, B, C, and D” — which I was observing at work — “why do you believe the rest of the consumers out there, their habits are not changing?”

Once you start to change the culture of the company, everything else happens fast. This whole culture change is what took so long. And through that process, obviously people were impatient, because the way our whole investing works, it’s, “Yeah, you need to make the strategic changes. Yes, we know that the marketplace is changing, and you have to change, but you’ve got to do everything while delivering phenomenal returns in the short term.” I mean, that’s a tough one, because change takes a little longer than investors expect.

DUBNER: You, like most big public companies, have dealt with activist shareholders. You seem to have taken mostly a firm line with them, including Nelson Peltz, who wanted you to spin off Frito-Lay. He eventually exited his position in PepsiCo with a pretty nice profit. I’m curious what you did to celebrate when Nelson Peltz exited that position?

NOOYI: Believe me — and this might sound incredulous — but we didn’t celebrate when he came in, and we didn’t celebrate when he left. Because at the end of the day we’re all activists inside the company. I mean, I own almost 50 times my salary in PepsiCo stock. My entire net worth is tied up in PepsiCo. And if somebody as an activist came into the company and suggested we do things differently, we study every idea very, very carefully. Because if they have an idea for us to run the company better than we are, we will incorporate it. But if their idea has more risks than upsides, then we have to worry about the company. At the end of the day, we are maniacally focused on the success of PepsiCo and our shareholders. And we’re not just listening to ideas. We think about the implementation.

When Nelson Peltz came — and believe me — when he presented his white paper to us, we studied every chart, every idea, and had multiple conversations with him, because at the end of the day we viewed him as free consulting — painful, but free consulting. A lot of little operational things that Nelson opened our eyes to. And I’d say at the end of the day, any activist who has been in PepsiCo stock will tell you that we treated them with great respect, we listened to them, we took in whatever we thought made sense, and where we thought our strategy was in a better place, we stayed firm.

Until the early 1990s, PepsiCo was mostly about selling soda and salty snacks. Then it began to diversify. Under Nooyi, the company now groups its products into three categories: “Fun for You,” “Better for You,” and “Good for You.” “Good for You” products include fruits, vegetables, whole grains, nuts, and so on, with an emphasis on less sugar and fat; this category includes brands like Tropicana, Quaker, and Aquafina, which is water. “Better for You” includes lower-calorie sodas and baked potato chips. And “Fun for You” – well, those are the brands you’re probably most familiar with: Pepsi, Mountain Dew, Lays, and Cheetos.

DUBNER: I understand that men and women eat chips very differently. Can you tell us the differences?

NOOYI: When you eat out of a flex bag — one of our single-serve bags — especially as you watch a lot of the young guys eat the chips, they love their Doritos, and they lick their fingers with great glee, and when they reach the bottom of the bag they pour the little broken pieces into their mouth, because they don’t want to lose that taste of the flavor, and the broken chips in the bottom. Women would love to do the same, but they don’t. They don’t like to crunch too loudly in public. And they don’t lick their fingers generously and they don’t like to pour the little broken pieces and the flavor into their mouth.

DUBNER: So is there a male and female version of chips that you’re playing with, or no?

NOOYI: It’s not a male and female as much as “are there snacks for women that can be designed and packaged differently?” And yes, we are looking at it, and we’re getting ready to launch a bunch of them soon. For women,  low-crunch, the full taste profile, not have so much of the flavor stick on the fingers, and how can you put it in a purse? Because women love to carry a snack in their purse. The whole design capability we built in PepsiCo was to allow design to work with innovation. Not just on packaging colors, but to go through the entire cycle, and say, “All the way to the product in the pantry, or how it’s being carried around, or how they eat it in the car, or drink it in the car, what should be the design of the product, the package, the experience, so that we can influence the entire chain?”

DUBNER: You are known for being really involved, down to the micro level on how the product is in stores, and so on.

NOOYI: I want to be clear on one thing. Our business leaders all run their own businesses. I don’t run their businesses. But what I do do is I’m constantly out there in the marketplace looking to see how our products look on the shelf. Then I come back and I talk to my people about what I saw was good, and what wasn’t really good, to push them to higher levels of performance especially versus competition. We have to look at the product all the way to the retail shelf. Maybe sometimes to the consumer’s pantry at home. And that’s what caused us to even do home visits at times, to really figure out how the consumer stocked the product. Is our package size right? Is it suitable to the refrigerator sizes that people have in their homes in various countries?

DUBNER: I’d like to talk to you about the scientific thrust of the firm. You’ve got a science background yourself. You hired Derek Yach, a former World Health Organization official, to develop your dietary guidelines. I’d love you to talk about the  interface between the scientific method that you grew up as a student appreciating, and how that’s incorporated into a modern food-and-beverage company.

NOOYI: One of the things that my experience has taught me is that if you are trained as a scientist in your youth — through your high school and college — if you stay with the STEM disciplines, you can learn pretty much all of the subjects as you move along in life. And your scientific disciplines play a very important role, and ground you very well as you move into positions of higher and higher authority, whatever the job is. It’s very hard to learn science later on in life. One of the pleas I would have for most young people today is, “stay with STEM as long as you can.” Now, let me get to the question that you asked.

I think one of the big things we realized in PepsiCo is that we were very good at line extensions of our products. We had more development in PepsiCo than we had research. We could do flavor extensions of our products. Occasionally we could buy and build on a new product, but we were not very good at meaningful innovation, or meaningful package transformation, or meaningful ingredient development that could in fact apply to multiple products. We knew we needed to build a very strong R&D capability, because the name of the game going forward was “incremental innovation.” Incremental in terms of top line growth, and incremental in terms of pricing and profitability. And the only way to do that was to have a strong R&D department inside the company. We had very good people, but they were more development-focused than they were R&D focused.

On top of that, as we were shifting the portfolio to more good-for-you products, we realized that we needed products which had functionality claims. Whatever claims we made had to be rooted in science. They couldn’t be flaky claims, because when it comes to nutritious products in particular, people are very sensitive as to exactly what you see on the package. Because the ingredient list has to reflect exactly what you’re suggesting in the front of the product.

I’ll give you an example. When we bought SoBe, one of the SoBe products was called Liquid Liposuction. And that was SoBe Lean: Liquid Liposuction. When SoBe was an edgy, small business, they could use these interesting words to describe their product. The minute PepsiCo bought it, “Liquid Liposuction” had to come off the bottle. And we had to explain what we meant by SoBe Lean in the back of the product. Because as a big company, people hold us to a higher standard than they do small startups. We needed a very very good team that could be very serious about whatever we put on the package, on the label, on food safety, food security, food traceability.

DUBNER: Okay, on that note — your chief research scientist is an endocrinologist with an expertise in diabetes, yes?

NOOYI: I interviewed a lot of candidates, but I have to tell you Mehmood Khan absolutely impressed me, because here was somebody who came from a pharmaceutical background, a medical doctor, but was very interested in the whole food-and-beverage space, and had a attitude, approach, and demeanor that I thought would fit very well within PepsiCo. He didn’t wear his medical credentials on his sleeve, and sort of lecture to us as what we should and shouldn’t be doing. He wasn’t talking down to us. And he was so well-networked and connected in the scientific world that I felt he could come into PepsiCo, build bridges with people in PepsiCo, further our scientific agenda, and bring the right talent into the company.

All that I had to do is a couple of things. One, tell the organization that Mehmood was here to stay. I didn’t want people rejecting him. Two, I had to give him all the resources he needed to get going. And three, I had to understand what he was doing so that if people were to come and say “Why are we investing in this OMEX lab?” or “Why are we investing in a high throughput assay machine?” I could actually explain to people in sort of chicky-ducky terms as to why we were doing what we were doing, so that they understood that this was not just Indra the C.E.O. supporting an R&D head. It was the C.E.O. basically saying, “These are the bets we’re going to take as a company. Because it’s going to get us to a better place.”

This is where the scientific background helped because I could understand what Mehmood was saying, and I could also challenge the R&D department to do things that they enjoyed doing. I mean, very often I’d write them a note saying, “Look, I have six challenges I’d like to give you. And this is why I’m putting these challenges out to you.” And they loved it. Somebody else might say, “God, she’s wasting our time.” But to the R&D people? “Wow, this is great that the C.E.O.’s interested. She wants to use us to move the company to a better place.”

DUBNER: Give me a “for instance” of one of the kinds of challenges you would have put to R&D.

NOOYI: One of the things I told them was that I wanted to take the waste from orange peels. When you squeeze an orange, you have all of the peels, and the flesh from the orange after you take out the juice, that’s converted to animal feed. I wanted to extract the fiber and figure out a way to put it back into the orange juice, because orange juice doesn’t have fiber. Yet that orange pulp has so much of the fiber. How do you extract the fiber from that, and put it into the juice? They’ve now accomplished that. And the list goes on and on.

DUBNER: I guess I have two things I’d love to know about the future of PepsiCo. One, more specific, and then one broader. The specific one is about working with nontraditional proteins, whether from insects, or plants, or fungi, or whatnot. Maybe related to that, I’m really curious to hear your thoughts on personalized nutrition, and where you see PepsiCo playing a role in that eventually.

NOOYI: Many of these areas are new, emerging areas, Stephen. And in some areas they have progressed quite far, and in other areas, on a mainstream basis, they’re still new and emerging. Remember, there’s a lot of startup companies in Silicon Valley that are playing around with personalized nutrition, playing with new sources of protein. They haven’t yet come to the big companies, and into the mainstream. We have bets that we’re making with lots of little companies to think about personalized nutrition for athletes, through Gatorade. We are working through other V.C.’s to see how we can place bets on a group of companies working on nontraditional protein sources.

The thing we have to be careful about is not trying to accelerate, into the big leagues, something that is still on the edge, and something that people are still getting comfortable with. We are very judicious in making sure that when it comes to PepsiCo, it’s ready to be scaled up. I mean an example is Kevita. When we first invested in Kevita and kombucha it was still an emerging trend. But the way we struck the deal with Kevita was when we felt this was becoming a mainstream trend, we could buy it, and scale it within the PepsiCo system.

DUBNER: If you look at the history of American industries, American companies over the course of, let’s say, 50 or 100 years, most of the big firms disappear. Because times change, and it’s really hard to change a company to keep up. Keeping that in mind if indeed the global appetite for the kinds of food and beverages that you make were to decline substantially, could you imagine PepsiCo repositioning itself as a very, very, very different  company, maybe a personalized nutrition company, per se?

NOOYI: Yes and no. I think we have to understand very clearly the core competencies of our company. And clearly, we will do what it takes to keep our company successful. I mean there’s no pride of authorship here. All that we want to do is to make sure that this entity called PepsiCo — in whatever shape or form, on our own, in combination with others — remains a vibrant company that is growing, that’s creating shareholder value for the short and the long term. That’s what we are singularly focused on. If it means changing our business model but doing it in a way that doesn’t take us way off our core competence so we don’t fall flat on our face, absolutely we will do it. But we have to do whatever transformation keeping in mind that there are things that we’re good at. There are things we are not good at. If a start-up company is better at doing personalized nutrition, the question, is how do we partner with them to best deliver personalized nutrition?

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Pepsi-Cola was invented by a North Carolina pharmacist in the late 19th century. In the early 21st century, PepsiCo has more than 100 brands and trademarks, including 22 that each do more than $1 billion in annual sales. The company has a market cap of around $170 billion. We’re speaking today with the C.E.O. of PepsiCo, Indra Nooyi.

DUBNER: You are known for working hard — 20 hours a day, seven days a week, I’ve read. I don’t know if that’s even possible. Is that true?

NOOYI: Mm, close.

DUBNER:. I’m just curious what you actually do in a given day, considering there is probably no given day in your job. But maybe today. Just give us a sense of what your work day is actually like.

NOOYI: Today I woke up at 4 a.m. and I read the balance of the stuff I hadn’t read over the weekend from my mail. Then I played tennis for an hour. Then I came to work at 8:30 this morning, and I go ‘til about 10:00 tonight. I have back-to-back meetings, then I go to the design studio this evening, and I spend the evening with all the designers of PepsiCo, then I take them to dinner, all of them. And over dinner they get to ask me any questions they want on any topic. That’ll probably last for two or three hours, and then I’ll get home by about 10:30 or 11:00 tonight. I’ll probably read whatever mail came from today, ‘til about midnight. Go to sleep, and be back up at 4:00 a.m. tomorrow. And that’s a normal routine.

DUBNER: Most important question out of all that: Did you win tennis this morning?

NOOYI: I don’t play competitive tennis. I have a pro, and I just hit with the pro because at this point I have no time to go play in the league.

DUBNER: Let me ask you — this is a standard question we ask a lot of people. I’m very curious to know how you’d answer it. What’s something, Indra Nooyi, that you believed to be true for a long time, until you found out that you were wrong.

NOOYI: Huh. Huh! I’m going to say something which you might actually chuckle about. For a long time, especially given my cultural upbringing, I thought you just listen to your parents and you did whatever they asked you to do. Until I had my own kids. And they told me, “No, we are people too. We have our own mind, we do our own thing.” And I learned the tough way, that the rules that applied to me, from my parents to me — I mean, I was a very dutiful kid in many ways. And if the parents said, “Jump over this line,” you jumped over the line, and you didn’t ask questions. As I had children here, and my husband and I, we learned that they’re people too. They have their own thoughts and ideas, and we have to jointly evolve a point of view, as opposed to, “You will listen to me.” In life I’m learning a lot of lessons that are different from my own cultural upbringing.

DUBNER: Talk for a second about being a mother and a daughter to your mother, to your parents, and being C.E.O.

NOOYI: I think we grew up in a culture where our parents basically said, “Don’t let these jobs get to you, whatever your job is, because at the end of the day your first priority is being sort of a wife, and a mother, and a daughter, and a daughter-in-law,” and all those roles we have to play. I have a mother who, in particular, believes that fiercely, and believes that these jobs give you crowns, and leave those crowns in the garage. When you come home, don’t try to pretend that you’re still the big boss, because you’re not.

DUBNER: Does that seem a little unfair, because if you were born male, that — she probably wouldn’t say that to you?

NOOYI: That’s correct, but I can’t change her. I can either spend my time trying to change her, or just say, “You know what? Let her think whatever she wants.” All the times that she’s with me, I leave the crown in the garage. The rest of the time I at least bring it and leave it on the front door or somewhere, or a table sort of in the garage. You know something Stephen, I think we all have to develop adaptation strategies, because if we don’t, we’re going to start feeling resentful or angry with whatever’s happening around us. From my perspective, my mom says “Leave the crown in the garage?” Fine, I left it in the garage. I’ve been married 37 years to the same guy. I don’t think I could have balanced all of this, had I brought my crown into the house every day. There’s no way it would have worked. And would I have liked to have brought it in? No, not at the expense of my marriage and my children. I’m married to a great guy, but it required constant, sort of, adjustments to make sure that we both were equal versus each other, and to our children we both were parents, and one was not C.E.O. and one is not C.E.O. I don’t think that works at home at all.

DUBNER: Do you think that one reason there are relatively few female C.E.O.’s in the States, and elsewhere, is that there’s a standard model for what we think of as a C.E.O.? And that standard model is someone who never takes off the crown, not even at home. Is that an issue, do you think?

NOOYI: I don’t think that’s the issue. I think the issue is that we get a lot of women in at the entry-level positions. As you get to middle management, women rise to those positions, and then that’s the childbearing years. And when they have children, it’s difficult to balance having children, your career, your marriage, and be a high potential out-performer who’s going to grow in the company, in an organization that is a pyramid. It starts to thin out as you move up. We have to solve for that. How are we going to attract women who are more than 50 percent of all the college graduates who are getting all the top grades? How are you going to attract women to the workforce, where we need them, but allow them to balance having a family and taking care of aging parents, because they’re all part of a sandwich generation today, and still allow them to contribute productively to the workforce? I don’t have an answer to that. It’s got to be a concerted effort on the part of governments, societies, families, companies — all of us coming together.

I was lucky because I had lot of extended family that all chipped in to help us take care of our kids. My husband and I worked in partnership with each other to make sure that our schedules didn’t keep us both out of the office at the same time. But then our families all chipped in to help take care of the kids, or supervise the nannies, if you want to call it that. And in turn, we take care of our aging parents today. I think this Asian model of having extended family co-exist with the young people today may have to be imported in so that we can take care of our children and take care of the aging parents at the same time.

A few years ago, Nooyi was interviewed by David Bradley, chairman of The Atlantic, at the Aspen Ideas Festival. She was asked whether women can indeed, “have it all” — a career, family, etc.

NOOYI: I’ll tell you a story that happened when my daughter went to Catholic school, Convent of Sacred Heart. Every Wednesday morning they had class coffee with the mothers. Class coffee with mothers for a working woman — how is it going to work? How am I going to take off 9 o’clock on Wednesday mornings to go for class coffee? So I missed most class coffees. My daughter would come home and she’ll list off all the mothers that were there and say, “You were not there, mom.” The first few times I would die with guilt. But I developed coping mechanisms. I called the school and I said, “give me a list of mothers who are not there.” When she came home in the evening she’d say “You were not there, you were not there.” And I said, “ah ha, Mrs. Redd wasn’t there, Mrs. So-and-So wasn’t there. So I’m not the only bad mother.” You have to cope, because you die with guilt. You just die with guilt. My observation, David, is that the biological clock and the career clock are in total conflict with each other. Total, complete conflict.

DUBNER: PepsiCo is the biggest company by market cap with a female C.E.O. — what kind of responsibility, if any, does that come with that isn’t present for a male C.E.O.?

NOOYI: I don’t know about the market cap, and the size of the company, but I will tell you that where we have female C.E.O.s today, women are searching for role models. They want to talk to people who’ve made it to the C.E.O. suite, or to the C-suite I’d say more generally, to learn from them as to how they’ve operated in a more male setting. How did they trade off having families and their job? And trying to learn some lessons so that they can apply it in their own life. There’s that challenge of being a role model to women at large. Then, a lot of diverse people turn to me to say, “Tell me, as a immigrant woman, how did you move forward in an American business context?” Then I have a lot of demands from Indian-American people, men and women alike, who say, “Can you tell us how Indian-Americans can move forward in a global business environment.” It’s interesting that I get the tug and pull from all three constituencies.

I’d say that when you become a C.E.O. and you’re a woman you are looked at differently. Whatever you say people do — they say things like, “Well a guy C.E.O. wouldn’t have said that. Or a guy would have said it differently.” You are held to a different standard, there’s no question about it. It’s not that you’ve become C.E.O., and now you get a hall pass. You don’t. Everything you say, you do, gets analyzed a different way. But in any industry, in any profession, in any part of society, trend-setters went through this sort of scrutiny, and criticism, and commentary. I think this group of women C.E.O.s, all of us are going through that right now. Hopefully as the numbers get bigger — and I hope they do — nobody’s looking at us as women C.E.O.s, but just as leaders of big enterprises. I hope that day comes sooner than later.

DUBNER: It’s a cliché, but is it lonely at the top? I mean, when you’re president — as you were previously — if you’re a vice president, if you’re in any other executive capacity, you know that you defer ultimately to the judgment of the C.E.O., and they’ll take the heat, and the glory. When you’re it, though, at the top, what do you do about that, and really, yeah, is it lonely?

NOOYI: Incredibly lonely. But again, as you said it’s a cliché. What you’ve got to do is talk to a lot of people, especially other C.E.O.’s that you trust, to learn from them in terms of what they did when they were faced with similar situations. There’s no question it’s lonely, but you’ve got to create your own ecosystem, and your own kitchen cabinet, so you can sort of alleviate some of the loneliness without giving away any confidential information. I remember that we had a group of five C.E.O.s that we would meet every quarter. There was Jeff Immelt from G.E., there was Ken Chenault, Sam Palmisano, and then Ginni Rometty. And we had the J&J C.E.O., it was Alex Gorsky. And the five of us would get together every quarter — we tried to get together every quarter — to talk about issues that were on our mind. And it was a good safe group for us to sort of bounce ideas off of each other.

DUBNER: That is really interesting. I’m curious, what are the kinds of issues that might have come up there that outsiders wouldn’t expect?

NOOYI: As a group you might talk about the problem of doing business in emerging markets, and how do you judiciously balance developed markets versus emerging markets. Or it might be something to do with how you groom succession — because the day you become C.E.O., you have to think about grooming a successor. How do you take people and give them bigger assignments? Especially at a time when the economy is so tough, you want safe hands, sitting in safe jobs. But to really develop succession, you want safe hands in uncomfortable jobs to see if they can do more. You have to constantly think about taking the risk versus retreating to safe positions. You talk to your fellow C.E.O.s, and say “How did you do it? How did you accomplish the same challenge in your own way?” — those kinds of things. We’d talk about everything, ranging from big broad portfolio bets, to, “how do you articulate an investor story?” to “how do you think about people development?”

DUBNER: I see that you recently gave a very large gift to Yale which will go to the School of Management, which will name its deanship after you. I see that your sister — she and her husband — are behind the naming of Tandon School of Engineering at NYU. Talk for a minute about the kind of experience, of you coming from an immigrant family and becoming, in the space of really a half a generation, so thoroughly ensconced in not only the business community here, at the highest level, but the educational community, just what that’s been like for you.

NOOYI: In many ways we’re all just grateful for what the United States has given us in terms of education and opportunities, and we want to make sure people after us benefit from those opportunities. But at least in my case my giving is gone beyond the schools in the United States. I just redid all the science labs in my high school, and redid all the science labs in my undergraduate college in India. And I’m in the process of rebuilding the women’s lounge, which was not in very good shape. At the end of the day, we’ve been privileged to have enough resources. But you don’t take your resources with you when you pass on.

DUBNER: Not yet, at least. Not yet.

NOOYI: The best thing you can do is to pay it forward. Putting the money to work for the next generations is critically important.

DUBNER: When you — this was in association with your gift to Yale — you were quoted as saying that “Business issues are never just business issues. And my most ardent hope is that this endowment will teach future generations of leaders that the most successful companies of tomorrow will do more than make money.” I’d love to hear what you mean by that. “Business issues are never just business issues,” especially when you’re in a business of making food and beverages that not all of the world — especially the public-health people and the nutrition people — love.

NOOYI: Our company’s business was developed and grown in a different time. As society became more sedentary, for whatever reason, the offering of food and beverages to that society, to the sedentary society, has to change. It’s not a “or” game, it’s an “and” game. There’s a time and place for the fun products, but now increasingly we have to develop good-for-you products that are suitable for an increasingly sedentary population. From our perspective, clearly you’ll make a lot of money just focusing on, the products of the past. But we’d be growth-constrained. What I wanted our company to do is think about societies, think about communities. Think about how we can evolve a business model that takes into account changing societal trends, whether it be our product portfolio, whether it be environmental issues, whether it be issues related to diversity and inclusion. I wanted to make sure that we looked at all of these issues holistically, and made sure we did the right things as a company so that we would remain successful into the future.

At the end of the day, companies like ours are little republics. PepsiCo’s market capitalization makes us bigger than many countries around the world. And we have access to lots of technology. We have access to big distribution systems. We have access to capabilities that many countries don’t have. And we have it on a global basis. We can actually move it across the world seamlessly. Companies like ours have not only got to run the company for the benefit of shareholders. We’ve got to do it in a way that’s very sensitive to societies and communities around the world. And that’s my sincere hope: that every company views their place in society that way, and modifies the business model to be more sensitive to these countries, societies, and communities in which they operate.

DUBNER: If you weren’t Indra Nooyi, but maybe a marketing executive working for Indra Nooyi, or maybe a food scientist at PepsiCo, or maybe even an intern, what would you say about Indra Nooyi as a boss?

NOOYI: I’d say somebody who has very high standards, who holds us to high standards, but helps us get to these higher standards. Somebody who is very demanding but also very caring. Somebody who works as hard as we do — doesn’t just delegate and go off to play golf, or have a relaxing life — but is there alongside us, helping us get to a better place, but also pushing us and herself to be a better person and a better executive. I think that’s what they’d say about me.

Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode was produced by Max Miller. Our staff also includes Alison Hockenberry, Merritt Jacob, Greg Rosalsky, Stephanie Tam, Vera Carothers, Harry Huggins and Brian Gutierrez; the music throughout the episode was composed by Luis Guerra. You can subscribe to Freakonomics Radio on Apple Podcasts, Stitcher, or wherever you get your podcasts. You can also find us on Twitter, Facebook, or via email at radio@freakonomics.com.

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