♪ david: she went from working class at st. john's university to the head of a publicly traded bank worth more than $10 billion, one of only three women in the u.s. to reach that level. margaret keane is ceo of synchrony financial, the largest issuer of private-label credit cards in america. general electric turned it into -- turn her to lead the spinoff in a 2014 ipo. under her leadership, synchrony's stock has grown 40%, and wall street's most famous investor, warren buffett last year became one of her biggest shareholders. yet, u.s. retailers are shutting stores at a record pace, and

margaret keane now has to rethink their business strategy helping stores thrive in an online future and diversify her company beyond retail credit. on this addition of "bloomberg big decisions," margaret keane. david: welcome to "bloomberg big decisions." margaret: thank you for having me here. david: you spun out ge capital. looking back now, is your business better off on its own? margaret: i am so excited. one of the things we have been able to do is focus who we are and make the decision from an investment perspective on what is most important to our partners. we can really focus on the most innovative technology out there and change the vision of our company going forward. david: it was more of a conglomerate. where the strength and possible

drawbacks margaret: i think the strengths are we know this is not inside and out. as we know it inside and out. we have been through many cycles. the most important thing is we are a business-to-business company delivering for partners in a specific segment. for us, it is the expertise we can bring. now on our own, the positives are really taking what we know and leveraging that talent and innovation to focus on that for the future. the challenges of being separated, we did get some benefits from the services that ge had provided us, so we had to build all those things out. probably the most interesting part going through the transition out of ge was we had a short timeframe to set the company up because we had to be out to get ready for the ipo. we had to build out everything you can name, payrolls, tax department, i.t. infrastructure.

we did all of that in 15 months. david: many people have not gone through that process, spinning out from a big company like general electric. it could've gone right or wrong. margaret: the name was a big choice. we did a lot of work and research to get the branding right. we felt excited about where we landed on that. the other was thinking through the team i was going to have around me. we needed more resources, so how do i get the right team? what are the skill sets we are looking for? how do we choose who is on the team? the other important decision was how were we going to set up the culture of the company. ge had a strong culture. there were a lot of people who were nervous about the ipo. at that point, we had 10,000 employees. people were not all happy about leaving ge at the time. one of the things my hr leader

and i talked about is how do we keep our employees engaged in the process and what are we going to do as the leadership team to make sure they are coming along with us. we did hundreds of roundtables. we went out to all the sites. david: there is a lot of talk about culture. you said ge had a strong culture. what did you decide to keep and what was ok to leave behind? margaret: i think one of the things about ge is delivering results. we brought that with us. aside from that, we really wanted to create a different feel inside the company. it was interesting because we did the ipo in july, and i brought my leadership team together and said we are all going to work on culture. they were not all looking -- they were looking at me like what? i was like, we have to create who we are as a team. we spent a couple of days together and brought people in from the purpose institute to

think it through. we came up with our values pretty quickly. david: so you listened to a lot of people. inevitably the ceo determines the culture. what values created this culture, from ge, your childhood, parents, brothers and sisters? margaret: people ask me this question all the time, what value is the i lean on. one i think it is the value of caring. i think when you look at our customer base, we deal with customers from all walks of life. we are helping people make decisions to purchase things either they want or need, or for the future. i will give you an example of something i was just extremely proud of just recently. we had the hurricane in puerto rico. we have about 270 employees in puerto rico. the first thing we did was, can we find our employees in puerto rico?

it took a while. everything was down. we had all kinds of calls going on. the second think was, ok, we have to make sure they get paid. how do we make sure they get -- even though we make sure -- we knew they were not coming to work. how do we make sure they get their paychecks? we were having conversations with banks, can they get the cash out of the atm, that whole thing. we did the simplest thing. we had warm meals every night for people to take home to their families. i can't tell you how much water we had. we had lots of water. ice, when i was down there in december, we had employees and every single one of them broke down. they said the ice saved my life. my son needed this medicine and it had to be refrigerated. david: one of the things people talk about often is diversity. what role does diversity play for you or not play for you as you look at your organization? margaret: i think this is one of the most critical things we need to continue to think about in

corporate america. let me start with my board. my board is very diverse. when we went to select certain skill sets, one of the things we wanted to make sure we represented was diversity, and i am proud to say i have one of the more diverse boards of a company our size and one committed to ensure we continue to build out and add a couple of more board members. in terms of our company, we have built out a number of diversity networks. they are i think part of the connection to our culture. we think about diversity broader than diversity. we talk about diversity and inclusion. inclusion is an even stronger word. when you look at the customers -- we serve all customers. i think it is important we look like our customers. david: there was a perception that it tended to be more male dominated. did you have to change the culture away from ge in that respect?

margaret: it is interesting. i came into ge midcareer. i never felt like i was held back because i was a woman. i think one of the good things of ge was always driven by meritocracy. so i never felt like i was held back or my voice was not heard because i was a woman. i would say i mostly did work for men my entire career at ge. i think of one particular situation when i was fairly new to the company. it was a meeting with janet -- jack welch, and it was my early days. just being in the room with jack welch, you are like, wow. my leader at the time, i would tend to sit in the back row. that is what people who are diverse do. maybe no one is going to notice me in the background. the person i work for said, margaret, you belong at this table.

i use that example a lot because it is so important that people who lead people are sensitive to those types of things. he gave me the permission to come up to the adult table, as i like to say, and be part of the conversation. my confidence level went way up. david: to state the obvious, you are a woman and ceo. it is a big issue why there are not more women ceos. what is your take? margaret: i do think it is a matter of time. if you look at who is coming up the ranks, there are talented women who will take over as ceo. at the same time, we need more women asking for the role and being confident enough to say i can do this. when i first got told i was going to be the ceo, i took a step back and i happen to be talking to someone and saying, i have never done this.

how do i do this? the person who said this to me was a man. he said, you know, margaret, everyone is a first-time ceo at one point. i was like, i can do this. i think there is an opportunity for us to help women think more broadly about what they can really achieve. david: you had at least two strong ceos, jack welch and jeff immelt. what did you learn from jack and jeff? margaret: both of them i think spent a lot of time on strategy. when we were splitting out, we knew, we work so hard to get through the spinoff and all of that, but we could not just sit still, right? we had to say, ok, what are we going to do from the future perspective of our company? in both cases, both of them were real strategists. the two areas, three areas, i spend most of my time on is

strategy, talent, and then part of that strategy, which is a big part of innovation. ♪ david: synchrony financial is identified with credit. how dependent are you on the health of retail? ♪ ♪

david: synchrony financial is identified with retail credit. how dependent are you on the health of retail? there is talk of retail going to fundamental transformation in this country. margaret: i think it is an exciting time is the way i would position it. it is an evolution or revolution, but the most important part for us is since we have been through many different cycles in retail, we really knew coming out of ge that the most important thing for us was to jump onto the technology aspect of where we are going. we invested in mobile and digital and have been doing that for three years. one of the interesting things for me when i was still part of ge, i had an opportunity to spend some time out in silicon valley. it was very eye-opening for me.

i saw how i'm a particularly at stanford university, students were working in the engineering school and coming up with new ideas on how they were working. if you look at how we used to do our programs, you would go into a cubicle and we would say sit in that cubicle. take a 21-year-old, that is how we told them to work. i came back from that visit before we split off from ge and said we have to change the whole way we are thinking about leveraging talent and technology. we created something called the innovation station, which we started in stamford, connecticut 100% focused on digital. we have been able to accelerate what we would not have been able to do under ge because this became an area where we said in order for us to be part of the future of retail, we have to help our retailers get up to speed on technology, and we can play a role in that. david: your business can only be

as strong as your customers, both people borrowing money to buy things, but people who are selling things. there has been a deflationary effect because of amazon and other digital advents. does that put pressure on you on margins? margaret: it doesn't. if you think about how customers shop, even in cases where we are seeing a reduction in brick-and-mortar, the reality is most of the stores are not generating the volume retailer wanted, and we are capturing them volume online. for us, it has help us become -- it has helped us become more laser focused on what we needed to do from a technology perspective. in addition to digital, the other big area we have invested heavily on has been analytics and data and really getting the effort structure right around that so that we can help our partners combat some of what amazon has been able to do in terms of how they have this virtuous circle when you shop.

they know what you are looking at and can see how you are purchasing. we can help our partners do the same thing. david: talk about the data, because data is very tribal am -- very valuable. maybe even more valuable than we realize. how do you make the decision about what you keep for synchrony as an asset and what you share with your partners? margaret: it has changed over the last couple of years. our retailers weren't always willing to share their information with us. we have seen a transformation where we are partnering together to figure out what is the best way to share information. an example, we do a lot of sales online. one of the things we are concerned about is fraud. if a retailer can share with us that that was a address that they have already shipped two, that makes the process more say for us in terms of how we are shipping a product out. so i would say there is more synergy now with our partners in terms of how we use it -- information together. david: how do you address fraud

and hacking? margaret: probably the biggest area of focus right now is around authentication. as more and more people shop online and as more identities have gotten stolen, it puts pressure on us to make sure that when you are using your card, it is you. we have been investing in new technology that really is state-of-the-art in terms of better authentication. we have a group called synchrony ventures who helps us look at areas where we can infest come -- invest in and we just invested in a couple of companies helping us do better authentication using databases aside from what we traditionally use to make sure this person is who we think it is. david: we have a tendency to focus on big retailers, macy's, home depot. you have a broader sense of retail. is it true that we are using -- losing retail establishments? margaret: i think the amount of

individual brick-and-mortar stores, yes. i do think as, honestly we were over-retailed in the u.s. if you compare the number of retail stores versus europe. it is a lot. what you are seeing is a combination of a merge in demographics because you have more millennials coming in comfortable shopping online, and the fact that we were over retailed. i am still bullish on retail. people are still going to shop. there has been this overhang of doom and gloom and people like the reality of shopping. there are still stores that people will go into. they may be different, smaller, formats may be different, but people will still shop. ♪ david: you have a big shareholder, one of your top 10, in warren buffett and berkshire hathaway. how did you learn they were investing i think investing something like $750 million. ♪ ♪

david: as ceo, you are concerned with your customers and shareholders. you have a big shareholder, one of your top 10, in warren buffett berkshire hathaway. i think investing something like $750 million. margaret: we learned when the market learned. we did not know ahead of time. we were extraordinarily excited about the fact they took the opportunity to invest in us. i think they are looking at the stability of the business, the fact we have been able to grow, that we are investing for the future. i think they see we were giving opportunity to invest in us. good returns to our shareholders. i think that is the reason. i have not had a personal conversation with warren about the investment, but obviously excited to have them as shareholders. david: i think there are a lot of ceos who would not mind warren buffett investing in their company.

he says he invest in management. have you had further contact with berkshire hathaway? margaret: we met with them after they invested and did make a visit to omaha to visit with them. that was after they invested. david: has it changed your life, your company? have other people invested because of warren? margaret: we saw an uptick for sure. i think he gives a seal of approval, and again, i think they liked the business model we have and the fact that we are focused on a particular segment. i think hopefully he will invest more. david: as the ceo, there are some things you can control and some things largely outside your control. how do you plan, manage, have a strategy for those things you can't control? interest rates have to affect your business. how do you plan for the various possibilities on interest rates?

margaret: i think any good company will sit back and say as they are doing planning and strategy what are the things that could impact the company. interest rates for us being one, or retail transformation going on. i think what we do, or i do with my leadership team, is say how will we protect ourselves from those changes and what role do we play in helping to at least minimize any disruption that could happen in the company. let's stay focused on him again, the position and strategy we are trying to achieve. david: do high interest rates help you like a bank, or not? margaret: we try not to take interest rate risk. we try to balance that out. we are not too worried about interest rates rising as we manage our book to minimize interest rates. david: the flipside is credit risk. where are we in the credit cycle

and is credit risk increasing? margaret: i start with the consumer is still strong. the economy is strong, employment is good, factors that play into credit challenges or credit risks. i think that what we are seeing is more homeless asian. -- is more of a normalization. if you go back to 2014, 2015, and part of 2016, it was an unprecedented credit environment. what you are seeing now is normalization where the consumer is getting more confident and revolving a little more, but we don't say there is some big crisis coming. we don't see it at least 12 months ahead. we are not seeing anything concerning us. i think it is normalization. david: the consumer seems to be drawing down their savings. are you seeing delinquencies and defaults going up? margaret: we saw a little bit of that in 2017. we see it more as normalization

and not some big change in the economy causing it. david: do you increase reserves as a practical matter? margaret: of course. david: what does that do to your margin? margaret: anytime you increase reserves it comes into effect the overall company. we look 12 months forward, so we are good at knowing what we have to do and control that. david: what about tax cuts, are they good for your business? is donald trump as president a good thing? margaret: i will talk about the taxes. taxes we think are good for us because of the fact that it is putting more disposable income into consumer's hands. there are two things they can do with the extra dollars. they could pay down debt or shot more. we think it is positive. david: you are early on in your tenure. what do you want your legacy to be? margaret: my legacy, i want to make sure i am setting this company up for another 80 years.

i wanted to be a company that -- i want it to be a company that people love to come to work to every day, but feel like they are part of a transformation and innovation that we try to generate as we have come out of ge. one of the things i think is great is we are a fair cross -- very cross functional organization that is really on the forefront of technology in the space we are in, and that makes it an exciting place to work. as i depart from here some day i hope people look back and say it was because of the innovation and changes we made coming out that allowed us to continue on for another 80 plus years. david: innovation is a great word and everybody wants it. you can't have too much innovation, because with it comes some risk. how do you make sure you are moving fast enough, but not too fast? we have seen companies make big mistakes in innovating. margaret: that is a good question.

we partner with retailers to help us think about innovation. we are also working externally, working with companies like plug and play, incubators of thinking. we can test things and try things out. we partner with external vendors to help us think about where we are going, like willow tree and pivotal in terms of mobile, and data. we try not to get too far ahead, but one good example that we are playing around with right now is virtual reality. virtual reality will become part of the shopping experience. it is not there yet, but think about you are looking at a floor in lowe's, could you go online and look at how that floor would look in your kitchen because you are using some type of virtual reality. i do think that is the fun stuff, and that is a little out there yet, but we cannot ignore it.

we have to keep looking. david: thank you so much. margaret: thank you. david: it was really a great pleasure. ♪ retail.

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it's a drone! i know. find your phone easily with the xfinity voice remote. one more way comcast is working to fit into your life, not the other way around. ♪ coming up on "bloomberg best," the stories that shaped the week in business around the world. trade closing politics and all causing commotion in the global market. >> there seems to be a three-dimensional chess game going on here. >> we just don't know who's going to be premier. what's important when you are trying to form a government. julia: meeting officials discuss the path forward. >> i would take it as a bearish signal for the u.s. economy. >> we generally can see that markets have been reading out reaction function quite well. >