So we have Joe Wolk joining us, CFO of Johnson & Johnson. He's a lifer as they say. You've been there a long time, right?
Okay. In probably each and every finance function that you can imagine, from running a division to investor relations to everything else. We are super excited to have Joe and Johnson & Johnson here. One of the most admired medical tech and healthcare companies, pharmaceutical companies in the world. Truly has changed, if you think, over the last four or five years, totally changed our lives with the pandemic and coming out of that and steamrolling through that and trying to really deal with that tremendous growth. And then this past year, as hopefully all of you know, Joe helped spin out a small $40 billion business called Kenvue. That's the Band-Aids and the Listerine and the Benadryl and Tylenol, all the things that we use day in day out. And he sits on the board there. So the list goes on and on. I am super excited for today's discussion and dig a little bit further. So go ahead, Simon.
Okay. Thank you very much, Jeremy. So Joe, we talked a little bit and I know but I'd like you to share with the audience that you have a very deep family background in not just J&J but also in northern New Jersey in Edison, New Jersey. So if you want to just introduce yourself and tell us a little bit about your perspective on how the world around you has changed for you and your family as a result of the kind of technology developments that we've been discussing.
Yeah, sure Simon and it's just a pleasure to be here with everyone. I think it's just outstanding that we have 400 plus CFOs in a community getting together. I applaud you for taking the time to network and learn a little bit more about our specific roles which are certainly dynamic and everchanging. Yeah, my history with Johnson & Johnson goes back much further than the 25 years that are on my resume. My dad actually worked on the factory floors as I was growing up as a kid in central Jersey. Johnson & Johnson was one of those employers where if you threw a stone, you were going to hit a Johnson & Johnson location. My parents would go to my little league games, my basketball games. They'd run into people they work with. Actually, one of my most prolific moments is when I first got this role, we had a shareholders meeting, which back in that day was still an event, right? Today, they're mostly virtual. That was facilitated by COVID, and that's a good thing. But they had like red velvet ropes and I was being announced as the new CFO. And at the end of that meeting, there was a little old lady who stood behind that velvet rope and it was a colleague of my dad's who just wanted to say how proud she was that I had made it to that point. Now that was prolific for me because if you know anything about Johnson & Johnson, what I hope you know is about our credo. And our credo was penned by Robert Wood Johnson, the grandson of one of the founders, right before we went public. And he very simply in four paragraphs talked about the responsibilities of being a publicly traded company. Let's serve our patients, let's serve our employees, let's serve the communities we live in, and let's serve our shareholders. And in that document, the word must appears 21 times. So very unequivocal. It wasn't like you can say, 'Well, this one is going to be at the expense of this one.' You had to make a decision. And today, it serves as a guiding document even though it's celebrating its 80th birthday. I looked at that older woman, that colleague of my dad's, and thought, 'Boy, that's the credo living in action.' So, it was really inspirational for me to kind of get this role. Certainly humbled by it. But if you can't jump out of bed and kind of charge each day with a special energy when you see somebody like that, then something was wrong with me.
So if we connect that to the finance function, obviously the focus of today and everybody here, how have these changes that you've seen and from your dad's generation, your generation, all the things that you've seen during this career at J&J, how would you characterize both how the finance function has changed, how it supports the business, but also what you think is coming next? What path do you feel that we're on?
Yeah, it's funny because I thought about this question thinking that when we're talking about the evolution of the CFO, a lot of the more the things change the more they stay the same. You think about your book and you talk about progress at very critical moments in time and we still have the same struggle each time there's significant advancement, right? How do we democratize it or keep it in the power of a precious few to optimize that advancement? The role of CFO is kind of very steady, right? We have to have integrity around our financial statements, we've got to be stewards of compliance, we have to bring objectivity to the discussion around investment. Right? We want our research and development people to think they can invent anything in the world. We want our commercial people to believe they can sell anything in the world. But then we also need to bring it back with I think good financial discussion and well-grounded assumptions. How you go about doing those things more proactively going forward has changed. Right? So when you think about how do you recruit for your accounting teams, they have to be bilingual now. It's not just knowing debits and credits. You need them to know that. And that's actually one of my fears I think going forward is if people are just getting reports out that we know to be accurate, are they going to understand and do the T-accounts to understand well what's really going on here, right? I do think technology is great and that it will enable better compliance. It should make much more efficient the process of collecting our results. It should enable us, I know there's a panel today on cash is king, it should enable us to be better at working capital. Right? We should know when, at least in Johnson & Johnson's business, a medical device leaves the supply room from a hospital or a drug or biologic leaves the pharmacy that needs to be replaced, right? We should know that real time. And those are some of the great great benefits. If you think about what AI is doing now, most people probably don't think Johnson & Johnson is a tech company. We employ about 3,000 data scientists. We've got a thousand different people writing code for new medical devices that will either help with robotic assisted surgery or monitor knee replacement systems and how they're doing five years after the fact after they've been installed. There's a lot going on. It provides for diagnosis, right? You can take an electrocardiogram, put in the profile of the patient and maybe uncover things that were beyond what the electrocardiogram was designed to do. With discovery, we're now able to run simulations, millions of simulations within about a six-week time frame. Just three years ago, those six weeks took about a year and a half, right? So that leads to better advancement. And then personalized medicine, too. You have genetic codes. And Dr. Bill Hait, who's one of our top research folks at Johnson & Johnson, said to me about 10 years ago, you give me a zip code and a genetic code, I'll be able to tell you in 95% accuracy what type of ailment that person may come down with. Right? That's the way we can kind of use AI, but I was so heartened to hear you say it doesn't replace humans, right? You can diagnose things, but unless you have somebody looking over that chart, that medical chart, something could get missed. There could be a wrong diagnosis. So, I think we're always going to have to balance that. There's a lot of progress that can be made, but it provides more opportunity than I think downside.
So perhaps we would say a few things about Kenvue and the split off in particular, the role of the finance function in that, and without getting too much into the weeds, what kind of lessons or perspective you'd like to share with this audience on that experience.
Yeah. So I don't know if Paul Ruh, who's the CFO of Kenvue, I know he was on the list to make it. I don't know if he made it. He did a tremendous job. I would be remiss if I didn't call him out. But it was really somewhat of a fun project. We actually started looking at this about 6 months after I started this role. So that was about 2018. COVID hit, so that slowed things down. But a couple of things that I think that were important. We didn't start with a financial justification. We started with strategically, is this the right thing to do? And if you think about medtech and pharmaceuticals, it has become a very different business than even science-based consumer products. Consumer products are now very much influenced by a celebrity endorser, right? So a Kim Kardashian says, 'Hey, this face cream worked for me' or Jennifer Aniston. People like Jennifer Aniston, they like Kim Kardashian. They're going to go and buy that. It's very very different and much more data oriented with a medtech solution or a pharmaceutical solution where you need to prove to the healthcare providers that these actually make a difference, right? So very different there. You need a different level of agility. So from a strategic point of view, it just made tremendous sense. And then we looked at the financials and I think when you think about capital deployment, as a CFO I was faced with potentially returns of mid-teens on a pharmaceutical product that maybe had a lot of risk because it was only through phase two or an 8% return on capital for a consumer product that was already marketed and was a matter of just commercial execution. That's a tough place for a consumer leadership team to win, right? So I think we did them a service by letting them kind of go their own path. What I will say is we were very militant about ensuring folks would not get project fatigue. And by that I meant we did a separation of a $40 billion market cap company, 15 billion in revenue, about $3 billion in free cash flow. We did that in about 17 months. That was pretty fast. If you talk to JP Morgan, Goldman Sachs, EY, people who do this regularly. The reason we did it that quickly doesn't mean we had a playbook ready to go. We never planned to do this. And we don't plan to do it again. But you make quick decisions. You get the responsible people in the room. I think we learned some of that during the pandemic. I was telling you earlier, Simon, we left our offices March 13, 2020 with a pending first quarter close beginning on April 1st. If you would have asked me on March 12th, hey, you're going to close your books next quarter and your whole team's going to be remote, I would have said, I'm not signing up for that, right? None of us would have. But we got it done, right? And I think there's something that I took away from the pandemic. I took away from Kenvue that moving with speed and agility, you may not get it exactly right, but you're going to be much better off than trying to wring your hands and figuring out what is exactly right because many times you don't know anyway, especially for things you haven't ventured into.
So, just a couple more questions for me and then we will go to the audience so people can get ready with their questions. We talked a little bit about data science at J&J as a whole. What about within the finance function going forward? What use cases are you interested in exploring and understanding?
Yeah, so right now I think as we look to optimize our legacy landscape, which I imagine for many of you in this room is pretty clunky. Same at Johnson & Johnson. But we're making great progress around data integrity, cleaning up the data. We're in 170 countries worldwide. You can imagine the different type of accounting that goes on. My CIO after he started about a year after I started this role, he says, 'How do you sleep at night?' And I says, 'Well, what are you talking about, Jim?' I go, 'Everybody's got a tough job and we're all stressed.' He says, 'No, how do you sleep at night? It's really tough to close the books.' And I'd be worried for you. That was a good wakeup call for me. Like, we better get moving on this, right? Because I didn't want to be that CFO. So I think it's certainly helping with compliance. It's certainly helping with data integrity. It should free up time for people in the finance function to be better influencers of decisions. At Johnson & Johnson, in the finance function specifically, we have a little mantra in that we're business leaders with a finance expertise. That's it's only words, but it's important words because we want to make sure we understand the business. The finance expertise is secondary to helping the business solve problems, right? And so in order to do that, you have to spend more time understanding how that biology is going to work, how it's going to play in the commercial space, how do payers look at a particular solution in healthcare. And so that's very important to free up that time. Where I'd like to see AI evolve for us is getting much more into the predictive side of things. I think most CFOs in the room could say, 'We're pretty good at looking in the rearview mirror. How do we start looking more at the windshield to not only be more informed about the decision but influence those decisions so that there's better outcomes.
So speaking of outcomes, let's go from the specific and focused part of your role to the broad, let's understand what's happening in the world, geopolitical, China trade politics. How do you, what framework do you have to understand that and how do you keep yourself informed and update yourself and your colleagues particularly through that CFO lens?
Yeah, I think it's really staying in touch with all the colleagues at these different locations. Last week we were in Asia Pacific. It is important to get out to the regions. I know we have gravitated to a little bit more of a bias towards remote interaction. There's something that is lost when it's not eye to eye face to face. So we found that out. If I think about the pandemic itself, our colleagues in China were on the forefront of informing us as to how we should be approaching work protocols, what to look for, how to keep people safe and healthy. So I think there's a lot to say about that. You know, it's being in tune. So being at a corporate headquarters, you've got to be very cognizant of not becoming complacent that well, yeah, we know what's going on because we sit in the ivory tower, so to speak, getting out, understanding what's going on in the businesses, what their concerns are. How can you, at this level, it's really about eliminating barriers and hurdles. You spoke about empowerment of the worker. That's why America has succeeded. That's why individual companies succeed. A lot of those great ideas are coming from different parts of the organization, usually not the higher ends of the organization.
So last question for me and then we're going to go to the audience. What do you think, you're going to pick one, only one key challenge facing healthcare CFOs in our post-pandemic geopolitically uncertain world over the next decade? What's your top number one thing?
So I think it is the potential for overregulation, right? I think it's very much a, what's the right word, a political tagline the way health care is thrown around and we have to do a better job as health care CFOs articulating the benefits of some of the solutions that we bring as people live longer there's a lot of cost that go along with that. We're talking about not just treating multiple myeloma, we're talking about curing it, right? We're talking about Alzheimer's now with the potential there. I do believe in the next 10 years most cancers will be curable. Right. So people are not just going to live longer, they're going to live a high quality life longer. If we could do the same with Alzheimer's, I think that would be great.
Well, just what so I'm obviously very much about AI right now. That's the current book, but I'm thinking also about the next book and I'm thinking about drivers of global events. I do think life extension of longer, healthier lives and also the inequality or reducing the inequality of life expectancy in various, I think those are going to be really central topics and business topics.
Well, you can't have a healthy economy if you don't have a healthy society, right? And so you think about what AI and technology is enabling us to do around access because that's really what we're talking about in remote parts of Africa. We now have surgeons probably from Mass General or some of the best institutions in the world guiding those surgeries, right? So, we're creating access through very virtual means which is going to lead to better health outcomes.
Great. Absolutely. Very inspirational. All right. So, let's take a few questions from the audience. Yes, please.
