2019: The Year in Pre-view

Who died?  Who thrived? What happened? Who cares?  It was 2018.  It’s over!  So, let’s take a look at what happens next.

Foreign affairs: All eyes are on Syria and ISIS as we end 2018. But, the country to watch is Turkey. 

It is said that nature abhors a vacuum. Pundits adopted the phrase as an idiomatic description of President Obama’s strategy in the Middle East.  His “Pivot to Asia” intended to leave Middle East wars, terrorism and the refugee crisis for Europe to deal with while the US worked to develop beneficial trade relationships with the fast growing economies of Asia.  It seemed to make sense in the context of a shrinking defense budget and economic competition from China and the EU. President Trump’s decision to withdraw our troops from Syria is another step in this direction.

There’s one big problem with this strategy: the vacuum it creates will be filled by Russia.  It’s fair to say that Russia is not much of a military threat to the US.  Their economy is in shambles and, lacking economic power, they don’t have the military might to challenge our global interests.  But, to understand their motives, you must brush up on your geography because geography is destiny.  

To play a role in the global economy, you need access to the sea.  Russia’s access is limited.  Bounded by China to the East, Europe to the West, the Arctic to the North and the southern Asian countries from the Himalayas to the Mediterranean, they are choked off from global trade.  In that context, it’s easy to understand why they would annex the Crimea, support the Assad regime in Syria and create an alliance with Iran.  Ultimately, they hope to exploit cracks in the NATO alliance. So, I expect them to increase pressure on Turkey, a NATO member, by increasing their troop presence not only in Syria but also in Ukraine.  

Is it any wonder Russia wanted Trump in the White House?

Economics:Both the US and global economies have been pumped up by Central Bank interventions and extraordinary growth in government and corporate debt.  

Is the party over? Well, the US Federal Reserve took the punchbowl away when they stopped buying up bonds and started raising interest rates.  So, construction is slowing and the stock market is taking a hit.  Compound those troubles with the economic inefficiency of a trade war and you have the making of a recession. 

It’s fair to say the new Fed Chair is taking appropriate steps to restore interest rates to their natural level.  My greater concern is that they do so while allowing the Fed’s balance sheet to run off. In other words, they are playing with two independent variables simultaneously.  So, when the economy responds, how will we know the cause of that response?

As rates rise, many corporations will incur permanent damage from too much debt and a drop in consumer demand. Our recession may be brief but the deadly combination of overleveraged companies, shoppers rapidly moving from bricks to clicks, a trade war and the Fed’s actions will have a longer lasting effect. 

Going local:  As a nation, we have ceded too much control to a federal government ill suited to address our needs. Liberals have long argued for federal solutions to problems; and lately, conservatives, from the Tea Party to Trump, making bold promises of federal intervention, have joined them.  Yet, nearly everything we need is generated at a local level.  We need better healthcare, better schools, more new businesses, more innovation, more financing, more giving, more connectedness… In short, we need more local control over the institutions that affect our communities.  

It will begin with our schools. Federal and state mandates have imposed unfunded costs on the last important institution over which we have a modicum of local control.  Here in Rochester, our inner city schools have been rated worst in the nation.  Our progressive governor told our local editorial board that he would support reform if and only if it was initiated at a local level.  He was being politically crafty a la Pontius Pilate. He also created an opening for local initiatives to make a difference. 

I hope it will be the beginning of a trend.

Business: Low unemployment and a workforce lacking the skills demanded by highly technical work environments will accelerate the adaptation of artificial intelligence (AI) to practical uses.  It’s already showing up in marketing, warehousing and machine maintenance.  The next wave will likely affect selling. AI will identify cross-selling opportunities, optimize prices and forecast revenue.  It will improve itself by learning from the results.

Like all disruptive technology, the pioneers in this field will be big corporations that can afford the R&D expense.  And, like all disruptive technology, it will eventually become affordable to smaller businesses and trickle down.

Companies that succeed in this new environment will be those that can best capture data, analyze it and generate actionable insights.  

*********

Predictions are a tricky business.  Will these trends and events take root in 2019?  I’m not sure.  However, I am fairly confident we’ll see them soon enough. 

WHO WILL LEAD? 

Wall Street, GM, Bush and Baby, It's Still Cold Outside

Just a few snide remarks to wrap up 2018…

Keeping women at arm’s length

An executive recruiter first told me about New York’s law requiring businesses to have all employees sign a legal agreement to abide by sexual harassment policies.  Just between us guys, we agreed the likely unintended consequence of this new law would be fewer women getting hired.  On the heels of this conversation, Bloomberg reported on the unofficial rule now guiding Wall Street during the #MeToo movement: avoid women at all costs.  

A year ago, I expressed dismay that the #MeToo dragnet was catching some dolphins along with the tuna. There’s a vast difference between coerced sex and an unwanted pass, I suggested. I was having a discussion on this topic in a meeting where half the participants were women.  One told me now was not the time to make such distinctions. Shoot them all and let God sort them out, she seemed to be saying. 

Well, ye reap what ye sow.

Yes, Baby, it’s still cold outside

The news that a Cleveland radio station gave in to protests that the old song “Baby, It’s Cold Outside” is too “rapey,” banning the song from its playlist, didn’t surprise me though it should have.  First of all, what the hell does “rapey” mean? Are we really creating cutesy words to describe violent crimes? 

The Frank Loesser song, like nearly all from the Great American Songbook, is intended to be romantic. In an era (1940’s) when extramarital sex was looked down upon, the song is about the conflict between desire and societal standards.  Its clever lyrics are simply a reflection of the times in which it was written.  Contrast them to misogynist popular songs like Taylor Swift’s “Better than Revenge” or Robin Thicke’s “Blurred Lines” and tell me why those songs haven’t attracted the same protests. 

Of course, the generation that objects to these lyrics is one that needs the State of New York (among others) to define what is and isn’t rape.  To those of us who know the difference, the song is simply one of the many romantic tunes to have been preserved from that era.  It’s not about rape.  It’s about permission.  Or to put it another way, it’s not about #MeToo; it’s about #WillSheWon’tShe?

The good is oft interred with their bones. 

The recent funeral of George HW Bush provided some nostalgia for that same era gone by – an era when politicians often set aside their differences for the sake of the nation. I confess that I have never been a Bush fan. (When I lived in Florida, I used to say, “I have never voted for anyone named Bush.”) Nevertheless, I found myself mourning with the rest of the nation, not so much for the man but rather for the era when the Greatest Generation (GG) was in charge.

Forged in the Great Depression and WWII, the GG paid off its war debt during the 1950’s, a decade of unprecedented prosperity.  It’s a generation that had the political courage for landmark Supreme Court rulings (Brown v. Board of Education and Roe v. Wade), extraordinary legislation (The Civil Rights Act and The Voting Rights Act), and a treaty that reduced the threat of nuclear war – all while facing down the Soviet Union.

Yes, I miss those guys. We’ve had four boomer presidents since, none of whom have lived up to the standards of their parents’ generation. 

My admiration is not unbridled however. According to some, the era of political divisiveness began when Bush v. Gore went to the Supreme Court or perhaps when Republicans took control of Congress during the Clinton administration. To my mind, it started earlier during the win-at-all-costs Bush campaign of 1988 when we were introduced to Willie Horton.

What’s good for General Motors is not good for the USA

A couple of social media memes popped up in the wake of GM’s announcement of layoffs and plant closures. One, posted by a liberal friend, suggested people would buy more cars if incomes were more equal.  Another, posted by a conservative friend, implied GM’s government bailout created a moral obligation they abandoned. 

Neither perspective makes much sense.  GM’s 2009 bankruptcy was made inevitable when former Chairman & CEO Bob Stempel negotiated an egregious contract with the UAW in the early 1990’s.  Unable to layoff workers producing cars no one was buying on the cusp of the Great Recession, GM ran out of cash.  Through its bankruptcy, GM shut unprofitable divisions and expunged debt it took decades to accumulate.  

They also shed a management culture that got them in trouble in the first place.  New CEO Mary Barra seems determined not to lead the company down the same path.  Faced with $1 Billion in unanticipated tariffs (enough, by one account, to hire 25,000 workers), a faltering economy and major shifts in consumer tastes (from cars to SUV’s); she did what any good CEO should do.

Her alternative was to keep employing an underutilized workforce, to wait for the next bankruptcy and to seek another taxpayer bailout.  That’s what would happen in socialist America.

WHO WILL LEAD?