There is a lot of talk about the upward gyrations in prices and one can easily look for answers in whatever quarter suits one's taste. Here in the US, the loudest voice seems to attribute this to the growth in demand from places like China and India. Across the Atlantic, speculation is considered as source if the problem.
Recently, I wrote the following in response to a question posted on LinkedIn by a fellow professional (Would you agree with these predictions).
In the best case scenario, we are one to two years away from an unqualified uptrend.
Internationally speaking, follow: Iran-Israel-NATO, the ability and willingness of the Chinese to maintain growth in today's terms.
In the US, follow: elections, war(s) cost/debt, interest rates vs. inflation, policy, institutional restructuring, immigration.
Upon deciding which way the above variables are likely to swing, the particular answers to your questions come closer to one's reach. Right now, it is not the intrinsic state of any one economy that creates as much problem as the general level of uncertainty.
boltzmann's brain
A recent NYTimes article on Boltzmann's Brain poses a few problems about our being (self aware as) the result of a stochastic fluctuation in the level of entropy, or the sense of time. Especially in our (en-)lightened cities, where star gazing has become a mere metaphor, such problems are as powerful as disturbing.
a world of change
Amidst the electoral noise, ranging from Ron Paul's ghost state to John McCain's 100-year long involvement in Iraq, Waving Goodbye to Hegemony, a recent NYTimes piece by PARAG KHANNA, makes for a timely and noteworthy change in perspective. Even though business people are not its main target, they would learn a great many lesson, as well. In fact, the aforementioned article, together with works like The 86 Percent Solution: How to Succeed in the Biggest Market Opportunity of the 21st Century
should give business people plenty of food for thought. Indeed, in a recent LinkedIn Q&A exchange, Steve Terry, President with Triact Associates, had to say the following about the The 86 Percent Solution:
Less Can Be More
So let’s play strategy czar. You are a 21st-century Kissinger. Your task is to guide the next American president (and the one after that) from the demise of American hegemony into a world of much more diffuse governance. What do you advise, concretely, to mitigate the effects of the past decade’s policies — those that inspired defiance rather than cooperation — and to set in motion a virtuous circle of policies that lead to global equilibrium rather than a balance of power against the U.S.?
First, channel your inner J.F.K. You are president, not emperor. You are commander in chief and also diplomat in chief. Your grand strategy is a global strategy, yet you must never use the phrase “American national interest.” (It is assumed.) Instead talk about “global interests” and how closely aligned American policies are with those interests. No more “us” versus “them,” only “we.” That means no more talk of advancing “American values” either. What is worth having is universal first and American second. This applies to “democracy” as well, where timing its implementation is as important as the principle itself. Right now, from the Middle East to Southeast Asia, the hero of the second world — including its democracies — is Lee Kuan Yew of Singapore.
We have learned the hard way that what others want for themselves trumps what we want for them — always. Neither America nor the world needs more competing ideologies, and moralizing exhortations are only useful if they point toward goals that are actually attainable. This new attitude must be more than an act: to obey this modest, hands-off principle is what would actually make America the exceptional empire it purports to be. It would also be something every other empire in history has failed to do.
Second, Pentagonize the State Department. Adm. William J. Fallon, head of Central Command (Centcom), not Robert Gates, is the man really in charge of the U.S. military’s primary operations. Diplomacy, too, requires the equivalent of geographic commands — with top-notch assistant secretaries of state to manage relations in each key region without worrying about getting on the daily agenda of the secretary of state for menial approvals. Then we’ll be ready to coordinate within distant areas. In some regions, our ambassadors to neighboring countries meet only once or twice a year; they need to be having weekly secure video-conferences. Regional institutions are thriving in the second world — think Mercosur (the South American common market), the Association of Southeast Asian Nations (Asean), the Gulf Cooperation Council in the Persian Gulf. We need high-level ambassadors at those organizations too. Taken together, this allows us to move beyond, for example, the current Millennium Challenge Account — which amounts to one-track aid packages to individual countries already going in the right direction — toward encouraging the kind of regional cooperation that can work in curbing both terrorism and poverty. Only if you think regionally can a success story have a demonstration effect. This approach will be crucial to the future of the Pentagon’s new African command. (Until last year, African relations were managed largely by European command, or Eucom, in Germany.) Suspicions of America are running high in Africa, and a country-by-country strategy would make those suspicions worse. Finally, to achieve strategic civilian-military harmonization, we have to first get the maps straight. The State Department puts the Stans in the South and Central Asia bureau, while the Pentagon puts them within the Middle-East-focused Centcom. The Chinese divide up the world the Pentagon’s way; so, too, should our own State Department.
Third, deploy the marchmen. Europe is boosting its common diplomatic corps, while China is deploying retired civil servants, prison laborers and Chinese teachers — all are what the historian Arnold Toynbee called marchmen, the foot-soldiers of empire spreading values and winning loyalty. There are currently more musicians in U.S. military marching bands than there are Foreign Service officers, a fact not helped by Congress’s decision to effectively freeze growth in diplomatic postings. In this context, Condoleezza Rice’s “transformational diplomacy” is a myth: we don’t have enough diplomats for core assignments, let alone solo hardship missions. We need a Peace Corps 10 times its present size, plus student exchanges, English-teaching programs and hands-on job training overseas — with corporate sponsorship.
That’s right. In true American fashion, we must build a diplomatic-industrial complex. Europe and China all but personify business-government collusion, so let State raise money from Wall Street as it puts together regional aid and investment packages. American foreign policy must be substantially more than what the U.S. government directs. After all, the E.U. is already the world’s largest aid donor, and China is rising in the aid arena as well. Plus, each has a larger population than the U.S., meaning deeper benches of recruits, and are not political targets in the present political atmosphere the way Americans abroad are. The secret weapon must be the American citizenry itself. American foundations and charities, not least the Gates and Ford Foundations, dwarf European counterparts in their humanitarian giving; if such private groups independently send more and more American volunteers armed with cash, good will and local knowledge to perform “diplomacy of the deed,” then the public diplomacy will take care of itself.
Fourth, make the global economy work for us. By resurrecting European economies, the Marshall Plan was a down payment on even greater returns in terms of purchasing American goods. For now, however, as the dollar falls, our manufacturing base declines and Americans lose control of assets to wealthier foreign funds, our scientific education, broadband access, health-care, safety and a host of other standards are all slipping down the global rankings. Given our deficits and political gridlock, the only solution is to channel global, particularly Asian, liquidity into our own public infrastructure, creating jobs and technology platforms that can keep American innovation ahead of the pack. Globalization apologizes to no one; we must stay on top of it or become its victim.
Fifth, convene a G-3 of the Big Three. But don’t set the agenda; suggest it. These are the key issues among which to make compromises and trade-offs: climate change, energy security, weapons proliferation and rogue states. Offer more Western clean technology to China in exchange for fewer weapons and lifelines for the Sudanese tyrants and the Burmese junta. And make a joint effort with the Europeans to offer massive, irresistible packages to the people of Iran, Uzbekistan and Venezuela — incentives for eventual regime change rather than fruitless sanctions. A Western change of tone could make China sweat. Superpowers have to learn to behave, too.
Taken together, all these moves could renew American competitiveness in the geopolitical marketplace — and maybe even prove our exceptionalism. We need pragmatic incremental steps like the above to deliver tangible gains to people beyond our shores, repair our reputation, maintain harmony among the Big Three, keep the second world stable and neutral and protect our common planet. Let’s hope whoever is sworn in as the next American president understands this.
Additional material: "Global trends," a McKinsey paper by Ivo J. H. Bozon, Warren J. Campbell, and Mats Lindstrand
should give business people plenty of food for thought. Indeed, in a recent LinkedIn Q&A exchange, Steve Terry, President with Triact Associates, had to say the following about the The 86 Percent Solution:I think the biggest challenge is for product marketing pros in the wealthy nations to get their minds wrapped around the daily concerns of folks with very litte money. Things we take for granted (reliable utilities, quality medical care, cheap transportation) are top-of-mind for the 86% of humanity.And now, here's an excerpt with Parag Khanna's recommendations. See what's in them for you and your business.
If western companies don't change their mindset, or create subsidiaries to address these markets, the consequence is that producers in India and China will clean up. While we may think of China as the manufacturer for the (rich) world, their local talent is better able to imagine and design products for the 86% market than the industrial giants of the west.
Less Can Be More
So let’s play strategy czar. You are a 21st-century Kissinger. Your task is to guide the next American president (and the one after that) from the demise of American hegemony into a world of much more diffuse governance. What do you advise, concretely, to mitigate the effects of the past decade’s policies — those that inspired defiance rather than cooperation — and to set in motion a virtuous circle of policies that lead to global equilibrium rather than a balance of power against the U.S.?
First, channel your inner J.F.K. You are president, not emperor. You are commander in chief and also diplomat in chief. Your grand strategy is a global strategy, yet you must never use the phrase “American national interest.” (It is assumed.) Instead talk about “global interests” and how closely aligned American policies are with those interests. No more “us” versus “them,” only “we.” That means no more talk of advancing “American values” either. What is worth having is universal first and American second. This applies to “democracy” as well, where timing its implementation is as important as the principle itself. Right now, from the Middle East to Southeast Asia, the hero of the second world — including its democracies — is Lee Kuan Yew of Singapore.
We have learned the hard way that what others want for themselves trumps what we want for them — always. Neither America nor the world needs more competing ideologies, and moralizing exhortations are only useful if they point toward goals that are actually attainable. This new attitude must be more than an act: to obey this modest, hands-off principle is what would actually make America the exceptional empire it purports to be. It would also be something every other empire in history has failed to do.
Second, Pentagonize the State Department. Adm. William J. Fallon, head of Central Command (Centcom), not Robert Gates, is the man really in charge of the U.S. military’s primary operations. Diplomacy, too, requires the equivalent of geographic commands — with top-notch assistant secretaries of state to manage relations in each key region without worrying about getting on the daily agenda of the secretary of state for menial approvals. Then we’ll be ready to coordinate within distant areas. In some regions, our ambassadors to neighboring countries meet only once or twice a year; they need to be having weekly secure video-conferences. Regional institutions are thriving in the second world — think Mercosur (the South American common market), the Association of Southeast Asian Nations (Asean), the Gulf Cooperation Council in the Persian Gulf. We need high-level ambassadors at those organizations too. Taken together, this allows us to move beyond, for example, the current Millennium Challenge Account — which amounts to one-track aid packages to individual countries already going in the right direction — toward encouraging the kind of regional cooperation that can work in curbing both terrorism and poverty. Only if you think regionally can a success story have a demonstration effect. This approach will be crucial to the future of the Pentagon’s new African command. (Until last year, African relations were managed largely by European command, or Eucom, in Germany.) Suspicions of America are running high in Africa, and a country-by-country strategy would make those suspicions worse. Finally, to achieve strategic civilian-military harmonization, we have to first get the maps straight. The State Department puts the Stans in the South and Central Asia bureau, while the Pentagon puts them within the Middle-East-focused Centcom. The Chinese divide up the world the Pentagon’s way; so, too, should our own State Department.
Third, deploy the marchmen. Europe is boosting its common diplomatic corps, while China is deploying retired civil servants, prison laborers and Chinese teachers — all are what the historian Arnold Toynbee called marchmen, the foot-soldiers of empire spreading values and winning loyalty. There are currently more musicians in U.S. military marching bands than there are Foreign Service officers, a fact not helped by Congress’s decision to effectively freeze growth in diplomatic postings. In this context, Condoleezza Rice’s “transformational diplomacy” is a myth: we don’t have enough diplomats for core assignments, let alone solo hardship missions. We need a Peace Corps 10 times its present size, plus student exchanges, English-teaching programs and hands-on job training overseas — with corporate sponsorship.
That’s right. In true American fashion, we must build a diplomatic-industrial complex. Europe and China all but personify business-government collusion, so let State raise money from Wall Street as it puts together regional aid and investment packages. American foreign policy must be substantially more than what the U.S. government directs. After all, the E.U. is already the world’s largest aid donor, and China is rising in the aid arena as well. Plus, each has a larger population than the U.S., meaning deeper benches of recruits, and are not political targets in the present political atmosphere the way Americans abroad are. The secret weapon must be the American citizenry itself. American foundations and charities, not least the Gates and Ford Foundations, dwarf European counterparts in their humanitarian giving; if such private groups independently send more and more American volunteers armed with cash, good will and local knowledge to perform “diplomacy of the deed,” then the public diplomacy will take care of itself.
Fourth, make the global economy work for us. By resurrecting European economies, the Marshall Plan was a down payment on even greater returns in terms of purchasing American goods. For now, however, as the dollar falls, our manufacturing base declines and Americans lose control of assets to wealthier foreign funds, our scientific education, broadband access, health-care, safety and a host of other standards are all slipping down the global rankings. Given our deficits and political gridlock, the only solution is to channel global, particularly Asian, liquidity into our own public infrastructure, creating jobs and technology platforms that can keep American innovation ahead of the pack. Globalization apologizes to no one; we must stay on top of it or become its victim.
Fifth, convene a G-3 of the Big Three. But don’t set the agenda; suggest it. These are the key issues among which to make compromises and trade-offs: climate change, energy security, weapons proliferation and rogue states. Offer more Western clean technology to China in exchange for fewer weapons and lifelines for the Sudanese tyrants and the Burmese junta. And make a joint effort with the Europeans to offer massive, irresistible packages to the people of Iran, Uzbekistan and Venezuela — incentives for eventual regime change rather than fruitless sanctions. A Western change of tone could make China sweat. Superpowers have to learn to behave, too.
Taken together, all these moves could renew American competitiveness in the geopolitical marketplace — and maybe even prove our exceptionalism. We need pragmatic incremental steps like the above to deliver tangible gains to people beyond our shores, repair our reputation, maintain harmony among the Big Three, keep the second world stable and neutral and protect our common planet. Let’s hope whoever is sworn in as the next American president understands this.
Additional material: "Global trends," a McKinsey paper by Ivo J. H. Bozon, Warren J. Campbell, and Mats Lindstrand
Revival of US based manufacturing/assembly plants?
Not that I am suspecting the US government to lead a de-facto low dollar policy to encourage US-based manufacturing, but sooner or later "Made in USA" or "Assembled in USA with foreign and domestic parts" may become again/more financially sound. Moreover, a Democratic Party electoral victory in 2008 will likely bring protectionism front and center, while war-related fiscal liabilities will be part of our national balance sheet for many an electoral cycle.
For more, check out this link with LinkedIn Q&A.
For more, check out this link with LinkedIn Q&A.
Wall Street: How good of an approximation it makes?
... for market-based capitalism?
Hence, how sound is it to rely on Wall Street to sort out most society decision-making needs--from pensions to child-care, from environment to efficient allocation of resources, from war to peace?
Yes, this was another LinkedIn question, and the argument went as following:
The Great Depression also resulted in a series of regulations and institutions that have been held responsible for many an ensuing development--ranging from the WWII to a progressive and modern society/state. After the Cold War, especially during Clinton's/Rubin's time, many of the post-Depression era regulations had come undone. The new idea in town has been "self regulation" of the private actors. In the light of the several bailouts, critics of "self regulation" say that in fact we only socialized loss and privatized gain. In the light of the ever renewed debate, triggered by the sub-prime events, loss of pension and health-care benefits through bankruptcy, and the '08 elections' messages, an evaluation of all previous assumptions and statements is as timely as ever. So, what do you think, is self-regulation the way to go, assuming that market capitalism is here to stay?
For other perspectives, follow this link.
Hence, how sound is it to rely on Wall Street to sort out most society decision-making needs--from pensions to child-care, from environment to efficient allocation of resources, from war to peace?
Yes, this was another LinkedIn question, and the argument went as following:
The Great Depression also resulted in a series of regulations and institutions that have been held responsible for many an ensuing development--ranging from the WWII to a progressive and modern society/state. After the Cold War, especially during Clinton's/Rubin's time, many of the post-Depression era regulations had come undone. The new idea in town has been "self regulation" of the private actors. In the light of the several bailouts, critics of "self regulation" say that in fact we only socialized loss and privatized gain. In the light of the ever renewed debate, triggered by the sub-prime events, loss of pension and health-care benefits through bankruptcy, and the '08 elections' messages, an evaluation of all previous assumptions and statements is as timely as ever. So, what do you think, is self-regulation the way to go, assuming that market capitalism is here to stay?
For other perspectives, follow this link.
What has happened to Drucker's "knowledge worker?"
A while back, in the Q&A section at LinkedIn, I asked: Had Drucker gotten it wrong?
I have a great deal of respect for Drucker's multi-dimensional approach to problem-solving. I also think of the days when access to the largest dynamos of economical power in the US was as open as the one enjoyed by the late Drucker. Moreover, Drucker's (and Toffler's) heralding of the knowledge worker has made for many a hopeful among the sons and daughters of the industrial (cog-)man. However, in this day and age, more are coming to question what happened to the knowledge worker as described by Drucker.
Is there something missing in:
For a discussion on the above, you may follow this link to LinkedIn.
I have a great deal of respect for Drucker's multi-dimensional approach to problem-solving. I also think of the days when access to the largest dynamos of economical power in the US was as open as the one enjoyed by the late Drucker. Moreover, Drucker's (and Toffler's) heralding of the knowledge worker has made for many a hopeful among the sons and daughters of the industrial (cog-)man. However, in this day and age, more are coming to question what happened to the knowledge worker as described by Drucker.
Is there something missing in:
- Drucker's view;
- Today's workers' knowledge; or
- In today's economic system as re-defined by globalization?
For a discussion on the above, you may follow this link to LinkedIn.
The potion of today's money managers
li·quid-i·ty?
A hedge fund manager has recently asked the LinkedIn community the following: Do you have faith in Mr. Bernanke regarding the fate of the markets? I for one sure miss Mr. Greenspan. To which I replied:
Greenspan had developed an instinct for the markets that, together with his language and our cult for him, made him look larger than life. In fact, one could point to several directions he took the fiscal policy that were politically motivated. From his earlier time, recall the decision not to lower rates for Bush 41st. He paid back to the Bushies though, when he offset the .com bubble with the housing bubble.
Bernake will either give us another bubble or will have to manage our paying the price for Greenspan's exuberance.
At a different level, considering the world of the investment professionals, it's obvious why Greenspan is that much better. However, in the face of the laws of economics, Greenspan failed big time. Bernake still has the chance of his professional life ahead of him as the subprime story unfolds.
P.S. Worth remembering is also the fact that a great deal of the economic rationale in communist/totalitarian regimes was to abolish the economic cycle...
Greenspan had developed an instinct for the markets that, together with his language and our cult for him, made him look larger than life. In fact, one could point to several directions he took the fiscal policy that were politically motivated. From his earlier time, recall the decision not to lower rates for Bush 41st. He paid back to the Bushies though, when he offset the .com bubble with the housing bubble.
Bernake will either give us another bubble or will have to manage our paying the price for Greenspan's exuberance.
At a different level, considering the world of the investment professionals, it's obvious why Greenspan is that much better. However, in the face of the laws of economics, Greenspan failed big time. Bernake still has the chance of his professional life ahead of him as the subprime story unfolds.
P.S. Worth remembering is also the fact that a great deal of the economic rationale in communist/totalitarian regimes was to abolish the economic cycle...
The no more private in Private Equity
Should you have some ties in your typical US public corporation, the type whose stock value has traded sideways and below some high point, you also know how one of the hopes espoused by the staff whose stock-option plan is underwater is that the white knight would come embodied by a hedge/private-equity fund.
That a large number of the hedge-funds or private equity groups are mere conduits into funny deal-making, which may already be the effect of too much regulation meant to outlaw stupidity, will be verified sooner rather than later. Give or take a mishap in the money supply and there we have the proof.
That a great number of your typical CEO in public companies has neither had business-compass nor found one puts some of the folks in private equity in real demand. Indeed, they have connections, are not hindered by much business-correctness, have IQs and cash above the standards, enjoy all the benefits associated with the cachet of exclusivity, and appear to be able to make things happen.
All the above being considered, not all funds are created equal. Those that enjoy the most their positions have come to a point where they offer (parts of) themselves to the publicly traded markets. Some view this as the ultimate sign of the liquidity bubble, for others it is an opportunity to invest--see China goes to BX. I, for one, raised the following question:
Other similar topics (I) covered at LinkedIn are:
That a large number of the hedge-funds or private equity groups are mere conduits into funny deal-making, which may already be the effect of too much regulation meant to outlaw stupidity, will be verified sooner rather than later. Give or take a mishap in the money supply and there we have the proof.
That a great number of your typical CEO in public companies has neither had business-compass nor found one puts some of the folks in private equity in real demand. Indeed, they have connections, are not hindered by much business-correctness, have IQs and cash above the standards, enjoy all the benefits associated with the cachet of exclusivity, and appear to be able to make things happen.
All the above being considered, not all funds are created equal. Those that enjoy the most their positions have come to a point where they offer (parts of) themselves to the publicly traded markets. Some view this as the ultimate sign of the liquidity bubble, for others it is an opportunity to invest--see China goes to BX. I, for one, raised the following question:
BX, FIG, LAZ--hedges against a downturn, or vehicles to chase a dream?For some great answers from the LinkedIn community of professionals, click here.
+: track record, talent, access, connections, speed, cash...
-: change in tax regime in the US, increased protectionism/oversight @ national levels, public perceptions, founders cashing out, crowded space, excess...
Other similar topics (I) covered at LinkedIn are:
- Any idea(s) about how the world will look like in the aftermath of the current private equity frenzy
- BX to buy HLT--WHY?
- What will be the ultimate effect of leverage within the financial services market?--I only answered to this one;
- Hedge fund regulation -- what's next?--I only answered to this one.
And, for another set of views, have a look here: Behind the Buyouts: First Data It's interesting and necessary to learn the views of the labor unions as well. Since Hilton has a unionized workforce and Blackstone got the approval of the involved unions for its taking HLT private, what does this indicate?
Nota Bene: All the links provided here take you to LinkedIn, a professional network where access is based on a free membership. Should you have a problem with this yet still want to read through, just let me know. fCh
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