Public Lecture of Sandi Cesko: "Trends and Threats in the Global World Market"

I didn't understand it at first but it was a fantastic model with no side effects. We will return the money, no risk, no dissatisfaction — if these effects don't materialize. So the business model seemed to be in order. I put something on the side business and I get my income from the company. My wife actually ran that company. Around that time, we decided to establish Studio Moderna. We took our whole family friend and started with selling whenever I said. My wife was running and growing it as fast as a computer PC, so I sat down and joined the winners. I signed the letter to donate the company — my wife pushed me into it. So the company started in our kitchen, in a small office. Today it's a group of seven thousand people without our distribution network across Eastern Europe, and companies in at least eight countries, and selling products like Cinnabon and others globally — from Asia to the United States.

So I will share some of my experiences doing business globally. I think that today's world has four major characteristics shaping the world completely upside down. One is globalization, of course. Then digitalization, ecological and climate issues or changes, and the new social dynamics completely reshaping the political scene we were used to dealing with.

Globalization has brought huge benefits for businesses, large and small. All of them — whether big or small — are reaching out to extend globally. Doing business on the global scene is much easier than before. Despite the crisis we're seeing in some areas, global GDP has grown much faster than in previous histories since the Second World War, because of the huge growth in emerging markets.

For companies and countries which have taken advantage of globalization and seen the opportunities in exports, there's a clear advantage. For example, take Germany — until literally since the Second World War, France was the largest trading partner for Germany. But ten years ago, the BRIC countries made more trade. So for German companies and many others, what's going on in Asia, in China, and what's going on in Europe is changing the focus. The UK market for Ukraine — historically the largest market — presents a bigger market for Ukraine now than all of Europe together.

The second thing is digitalization. Education is actually eliminating genetic distances as a key barrier for doing business. Thomas Friedman wrote a book called 'The World is Flat,' and we know today that we live in a world where distance doesn't exist anymore. It's actually the only barrier in the modern world. The three dinosaurs which are unreachable — perhaps something will be invested, maybe with singularity.

Digitalization is heavily impacting business. On one hand, it allows companies to do business globally and enter markets which were inaccessible for smaller players like Studio Moderna. It enables us to increase efficiency significantly. We would never have been able to do this from this scale so fast if we didn't digitize our business processes inside and outside the company. We did this so well that today we have a seat on the Customer Advisory Board of Microsoft, because they want to learn about our experiences.

Digitalization will be one of those technological trends which completely changes how we do business. Digitalization has already changed entire industries significantly — let's just mention the publishing business done by Amazon, or the music industry. Digitization has wiped out everybody who was in those supply chains between producers and publishers. The same is happening in the music industry and with all industries which can be completely disrupted — not just mentioning, let's say, education, retail, et cetera.

You will see significant changes which will bring us to the complete restructuring of business. The principle is that the winner takes it all — the one with the best-performing servers, who is most productive in digitalizing their business, takes all the market. There is no space for smaller companies and their own strengths anymore. The middle class is under huge pressure. This concept is well described in the book 'Who Owns the Future' by Jaron Lanier, and this is the biggest event and challenge for our society as we know it today.

Take the example of Facebook — Slovenia presents the first largest market or country per capita in the world because we have over one million members. It's bigger than all other countries except China and India. And what happens today on Facebook? The rules and regulations which Facebook implements are more relevant for our children and the younger generation than what our national parliaments adopt for local countries. Because we are all operating and doing business inside these digital networks, this model impacts our world more than what happens at the local political level.

But on the other hand, this is also a potential future opportunity for all — for innovators who understand that this is still a game to participate in, no matter what the rules are. Today, the distance — whether you live here in Sofia or Ljubljana or in Silicon Valley — is not a major barrier to doing business.

Take Talking Tom's application, which was made in Slovenia — it's the third largest by number of downloads. Angry Birds was created in Finland. New innovations will come from different pockets of the world, but then all the knowledge and innovative talent is located in that pocket. This is the opportunity we have to explore. We should not be impressed just by the desires of the big players and how fast Silicon Valley is going in this area of innovation.

With only respect that even Facebook had to pay twenty billion for WhatsApp. Before that, they were looking to buy Snapchat. Why? Because Facebook, on one hand, is a young company — under ten years old. But from another hand, it is a very old company, because all of the Facebook applications were built on technology based on PCs and notebooks. And as you know, today the younger generation is not using those devices anymore. Everyone in Stockholm and everywhere — the philosophy has changed so fast that today, if you don't live your life through smart applications, if you're not playing the new game, so they had to invest. And they bought WhatsApp.

We know where the climate changes are — we are feeling them daily. And the businesses and the governments are simply not reacting to this. I will not explore the social changes I said before. The new technologies and urbanization have unleashed fantastic opportunities, but benefits were not distributed as it was expected. In the past, because proportionally not everybody participated by recommending technologies — but lately, with the winner-take-all philosophy, wealth is concentrated at the top and the middle class is under huge pressure and under future uncertainty.

For the first time since the Second World War, parents cannot expect that their children will have a better life than themselves. Governments within the parties and the social state were completely unprepared for all these changes. At this moment, instead of being focused to create a new role, they are stuck in denial and finger-pointing. Growing unemployment, decreasing perspectives and future, and impacted inflation are making people look for alternatives, and the results have been seen in recent elections.

A lot of analysts today are saying and commenting that nationalistic, populist parties, extreme right parties are the biggest threat to Europe. But this kind of populist parties are not only something emerging from Europe — there are only fourteen such states apparently, and also in the rest of the world we see trends going away from globalization, back to national economy, state economy.

I think we should not focus too much and create big panic about the rise of those populist parties, because the political landscape is going to change and there will be a new division. This will not go between left and right, but among the parties which represent the establishment — left and right together — against the populist parties. This is what will happen for some time, but it will not stop the process unless all parties face the problems in reality.

The only solution I see is to find a new social balance and show everybody the light at the end of the tunnel — not refuse others and blame other countries or businesses for the problems we're facing. The only way to approach this is: the challenges are too big to be dealt with only by government alone, by business alone, or by civil society alone. It can only be solved through cooperation between government, NGOs, and businesses. They would all have to come together and search for new solutions which will provide answers to the current issues.

Also, businesses have to take a different role. It's not enough anymore to produce more and more — quantity is not the issue anymore, but quality. And it's not important anymore just how something is produced, but how it is distributed. Companies cannot hide anymore behind their balance sheets and profit margins. They need to be transparent — show how they are producing, how they are acting, what are their business values, what are their social values, and how they are addressing social challenges.

Companies which will not be able to show this clearly will have no focus to exist in the future. Because just delivering more — waiting for the next cycle — is not anymore the way to grow the business.

I think that the United States is providing a good example. We see in the USA — with its incredibly powerful financial power through its economy — global poverty is declining. But doing business in the States for more than ten years, I see huge efforts being made which are not available between the civil society, organized through NGOs, among government, non-partisan organizations, and businesses — which are all trying to find solutions. They are very much involved in the changes and finding solutions for today's world. The same is happening in some Asian countries.

Now what about the US, what about the European Union? We are on one hand very critical about the European Union and where we are. But let me put it this way: if you find a project which was launched in the sixties by establishing the European Economic Community — a project which was delivered. The founders were limited. Today we have one market, the worst is away, and the corporates are doing well because this was actually a corporate project as a whole.

Still, we need to see how business — big corporates — will be able to work together more efficiently without natural barriers, and how they will try to prevent them. Today Europe is in one of the longest economic slumps, and people's expectations require work. But with this project, somehow the people were left out a lot of ways, and this is today's problem. That's why the people across Europe will never be united if today the corporates have never seen such profit, never had such problems — because they took advantage of globalization, but this didn't trickle down directly to the employees, to the people, to civil society.

We know that the social state is a big challenge to exist and to deliver the benefits that were delivered after the Second World War. But political infrastructure and establishment hasn't changed in one hundred years — it's basically the same business models. Look how much our life has changed, look how much technology has changed — but politics is protecting the old way which we have been doing for fifty years. And here is the effort we need to make, to change — not only in one country, and this is the big challenge for the European Union.

Here's the focus — not for the corporate project, which has many other benefits, but how we grow the economy, how we create jobs within the state. The most important duty is not about debt — it's about who creates what kind of wealth. Let me just conclude with one quote.

I recently had an argument with one of the most powerful European CEOs at an event with one hundred European CEOs and one former president — a very charismatic leader of a large European country. He talked about the United States mainly in terms of how big they are, their military strength, their nation — and completely ignored this week and how everybody needs to follow Germany and France in Europe, and unless everything goes well, we should go back. And what I argued with him was: as much as I know, the first goal of the American president is not how to keep the different forces united or the strongest — it's not how to protect the connection. The first duty and responsibility of every president is to keep the American Dream going. If the American Dream is the biggest asset, the biggest power — and I think Kissinger wrote twenty years ago that America will be a leading power as long as people in America and around the world believe in American democracy, the most experienced, the most open society. These are intangible assets which are extremely important today.

But in Europe, we are only sticking to the visible, tangible area. Everything we have to — education, culture — these are not exactly tangible. So what I mean with it: I think that Europe will only be able to prosper, will only be able to compete in today's world, actually in one market — not a divided market, not the European Union which has its center and periphery. One market with one set of rules. And as this president said, the mission of European policy today would have to be to create a new European fairy tale which I will be able to tell again to my children before they go to bed. If we won't have it, if we don't understand the power of this dream, of these intangible components, our productivity will not be enough to make people happy.

Thank you. Thank you very much.

You're absolutely right, it's dangerous. But there are no readings that help, no vocation of anything that can just be opened for the masses — like in the Colosseum, it was much cheaper to feed the people in the Colosseum by watching other people die than just giving them bread. I think people need more than bread.

Those are pretty interesting questions. I don't know whether I have all the answers for them, but let me just try from the experience of doing business around the globe today. Regarding the European Dream — let's say the rational approach: Europe, we are used to thinking — we disrespect what comes first, we try to fix things to save the system. I don't think the dream is just about another plan in the bed. Dreaming is about believing. Everything starts with a dream — with the dream we wish to achieve, and you believe that it can be done. In this sense, America is an island of how people under pressure — they believe they can do it, they believe in this thing, even though it's only for a small minority, but it's possible and they make changes. Just look how many New York startups became big operations — these people, they see that it can be done.

And we don't have such cases unfortunately in Europe. So this is the passion, energy — with roughly a lot of people — that create the changes despite the odds. I really see and believe that America is going through tremendous changes. And where is the dream needed? In America, it's the source of this attitude. When I go to European conferences, they ask: where are you from, what is your position, how big is your company? In Eastern Europe you fit in one box, in the Nordic countries another box. When I go to the States, nobody asks that. They ask only one thing: what do you have for me? What is useful to me, the market solution? Nobody's product — do you have something for me? And if I have some innovation, the sky is the limit.

I will just tell you one thing. We have cutting-edge technologies for bed linen. I go to Germany, I get a word — it's the best design, the best information. But no business, because it's a cartel which was prosecuted last year. Everything is controlled. I entered North America — the United States and Canada — with more than one thousand shops. My crush line is not in genius weapons, et cetera. They don't care — the corporate corporations, the level of skills that are communicated. From the best perspective, we should be known, but when we develop, talking to Western Asian countries, these guys are just a small fish. Somebody there who should wait for the opportunity for the next ten years, and then maybe if we are good, those will open. From this perspective, we are locked in until the national logic — and here, the small guys, we don't have a chance.

He asked me: do I believe in the American Dream? I will go into the rest of the States. In Europe, the Chamber of Commerce ranks third on the technology list — first is somatic, second is seizure, and then issue tokens. I met with one guy — an oceanography hundred-million-dollar CEO — and he had the same experience: he is not opening a factory in the United States, not because of the cost, but because it's easier in the United States than in Germany. So in a way, America is the most inclusive. You need to believe — if you don't believe, it will not happen. If you cannot dream it, this might help. It's maybe Hollywood, but I can tell you it translates to energy, which translates to efficiency. Americans are changing business — nobody has any respect for the government. The only role the government has is to collect taxes. They don't expect anything from the government except that they have to pay taxes so they find them to do it themselves. We have too much waiting for what the government provides.

I think this is really the most important question. And then one more person — what I feel, this is what I see in action. I have joined this integrated environment between America, the body, and people — this is to the good in terms of social outlook. I met quite some big companies. One CEO — his first nightmare was: his product is not productive to the bottom line. He said, how can we justify its existence and position in the market? Tomorrow sending a product which is not the most profitable. And look where Coca-Cola invested its money — all on the social side. Trying to invest locally into water resources, cleaning water. Maybe how to say, in a philanthropic way — and just to change the face and effect in society. Something here is necessary. They can give these funds away, but it's true they want to change, they want to be different.

Those companies which will not be able to show how they are economically sound, different, socially responsible — they have no future. Because everything can be produced, everything will fit — these qualities are in our company. We try to blend certain things together into the business model when we try to integrate social initiatives. And this is the biggest trend, because this will be what differentiates in the future.

This is what I believe, what I see. Maybe I'll just give a reflection on the last question — if the exhibition is populist? I mean, sometimes they are, but they are far away from what you can expect. These new populist parties — because they only run by pointing at others, saying somebody else is irresponsible — and going backwards into nationalistic, protecting markets. I don't think that is the answer in today's world. The wrong thing will be if existing left-right parties try to take this language to compete with them, or just competing by establishing unnatural alliances in left and right, which happened in the previous elections in France — when Le Pen made it to the second round. And it's happening more and more everywhere. So I hope that some kind of wake-up call will prompt parties to try to improve solutions — not just explaining problems to people and telling them to pay more taxes and get fewer benefits. I see the solution as intensive dialogue between politicians, civil society, and business — this is the triangle in which progress can be shown. But politicians have to be able to listen.

In terms of Bulgaria — it's an open area with a lot of natural resources which are not maybe exploited at the moment as they were before. I'm looking forward to meeting some entrepreneurs here, to try to find some local resources and create some partnerships. One important thing: Studio Moderna is sourcing — we started with importing, but now it's not a reselling company. About forty percent of our brands and ninety percent of all brands — pots and pans, a lot of other products — are all produced and made in Europe, mainly. Our largest sourcing platform is Italy.

Now, here in Bulgaria, there is a lot of innovative potential and we need quality. We work better essentially when the price is not the key differentiator among the product — but we have to explain the benefits and justify why it's smarter to buy a product from us than from others. We are currently in a flexibility which is given much more in Europe than in sourcing across Indonesia. So there is a lot of potential, and I believe the tops will start to come back.

The different questions are really connected — young people and that lady. So first of all, what we have to create are jobs. So far we have created two hundred and thirty jobs in Bulgaria at the moment. This is the number of employees that they forget, because we don't act from one center. We have a full structure functioning in every market. Secondly, as I mentioned before, I met with one Bulgarian investor who has a very good product — not mentioned at the moment — and we are looking to take this product globally, at least at the beginning in all of Eastern Europe. The innovation is very attractive and perfect for our portfolio. We will invest in the promotion of the product. It will create many, many new jobs.

I said we always do more and more work with businesses in Europe, because we believe in innovation, in quality, and fast delivery. If something was wrong, we need translation or content into our local networks. Even here, the director of the company — he explained to me — we will try to finish this in the future. The opinions and criticism of the customers are very important for us. We have our customer advisory boards where we invite customers — the people who tell us where we are not good enough, where we are weak, and things that we don't see.

Now, here we have strictly questions about young people — inspirational messages — and also what the older generation can do to help. So, what is the opportunity for young people and why is there reason to believe and be optimistic? I believe this crisis which we are facing today — described as a financial crisis — was originated by the financial transactions. But I don't think the crisis was caused by that; it was an accelerator, the end stage of a certain process. At the end of the day, all financial institutions and banks are pulling money away from the real economy. What is going on is one of the biggest shifts in human history — a shift that could be compared with the Agricultural Revolution or the Industrial Revolution. And again, the shift is happening on a much bigger scale because the whole world is going through the same process at the moment.

But what is the difference with all previous changes? These days, the changes are not driven by tangible assets. It's not important who owns the land — what matters is the know-how, the service. For the young generation, it's important that the power of intangible assets — information, relationships, speed — which we can use to make changes, is much more important than what you currently own. No more player in the world is safe and can be sure it will exist forever. Facebook — I don't know why everybody is focused on that and not talking about smaller guys.

This is opportunity — this is beautiful for the younger generation. For those who can fix the problems, because if the world continues working as we have done before, it will not change the outcome. So we have to change. And being part of the new knowledge is easier for the young than for those who have been working for ten, twenty, thirty years. The power of knowledge has never been such a weight — because before, what affected how much practice you had in the factory, you were good for generations. Today, WhatsApp was created by twenty guys and sold for twenty billion. This is the opportunity for young people.

This is where I invest my time typically now — and don't forget I'm not doing it because I don't have hopes, but to make a major impact where I see a possibility: working with young people, with organizations. I mentor — I spent about one hundred hours mentoring young entrepreneurs, young guys, because they are the ones who are going to change things.

In terms of what the older generation, the senior guys like me, could say or do: it's interesting — I talked recently with a German CEO and he said that now the new exciting customers are the older generation, the technology generation who doesn't want to be left out, and they're learning. Today it's important — age doesn't matter. I'm here in the States and I'm meeting the same people. One of my suppliers is eighty years old — he owns his own company, which is brilliant, with revenues of three hundred million, net profit. He is eighty years old and on email every week. He has small bars but he sees the pieces which we have — he sees the market in the States growing. This guy is going to open a factory in the United States. He understands what is a game-changer.

They invented the daily changes. Your generation should be this big changer. You have this opportunity and you have to seize those opportunities that exist — opportunities that didn't exist before.

I don't have expertise on cryptocurrencies personally, but I recently read an article that in Silicon Valley, a lot of start-ups are built around digital currencies, challenging the old keywords and the banks on the East Coast. For sure, change is coming. But I would like to talk about the world of opportunities.

What we can do if we add a little — first, on companies, this was the question about products. All these changes which are happening are not such a big surprise. Four major transitions facing today were written in books to read many years ago. But because we had a great pace of growth, nobody wanted to change until they hit the wall. One book was written by a professor in Vancouver — I think it's called 'Voices of Rome: From One Dimension to Many Other Companies' — I think like this. It's about evolution. I will recommend you look at this book, especially for smaller companies. It says the basic shift from the previous business world to what multinational companies did — the old business model was: you became a leading company in your local market, and then you copy-paste exactly the same model globally. Like IBM, General Motors — at the same time, the new business model uses speed and creates a lot of alliances. It's a metanature — which means that a company good at technology in Tel Aviv combines with a company good at exhibition in Germany, and they join forces in each sector.

Nobody there are trusted by certain innovative, less structured players. This is maybe the model we will have to implement. Studio Moderna is like this — we don't vertically integrate all production. We are just looking for innovative companies. We are good at marketing and distribution. We put visibility behind the brand, and we let it be present. Let me say: last year, about thirty percent of ceramic-coated pots and pans produced in Italy were distributed globally by us. Thirty percent of Italian production — approximately. We just saw the opportunity.

We are always focused on the runner and always a bit pessimistic on things — the two drivers. And we should, instead of dividing Europe into center, periphery, the most productive and the less productive — the most advanced countries have to take a little step back. Let everyone in Europe achieve the same level and come to the same level as they have done — and not build barriers between nations, and not divide within them north-south. Between the better and worse — this is the wrong direction. It's a difficult task, but I believe this is the only way we can become a united market and achieve what we started. Because pragmatic Europe leads to this. I was told that we shall borrow some of the best teachers from the American system. We have a ready trade agreement which promotes creativity as the United States. But I was also reminded of the cultures, and I truly believe that up to our spot we agree with the visionary — those who do the work versus those with no indication of just not being qualified. We are ready for harvest. This is about Christina Saravana — life is a spectacle. Russia is involved — bigger than ever. We are bogus those officers who do not already. As a de facto conducted inquiry — proceeding inconsistent, trusted again. Language by SAMAC, both places that reduce — connected water is going to have to do.