Good, Better, Best... Never Let It Rest

When I was a kid, my mother taught me a little poem by way of encouraging me to be my best.  It went like this:

Good, better, best

Never let it rest

Until your good is better

And your better, best

My grandparents emigrated here from the old country, Mom reminded us.  We were obligated to take advantage of that opportunity.  We weren’t expected just to be good; we were expected to be exceptional.

Our political discourse is littered with the term “American exceptionalism” these days.  Conservatives like to remind voters of the loss of traditional values and its impact on society and our place in the world.  Liberals point out that our greatness was enabled by government and social structures that were the creation of a central government.   

America is, indeed, exceptional largely because it has some inherent advantages.  One must start with geography.  We are the only country in the world with long navigable coasts on both the Atlantic and Pacific and we have a natural river system that seems to have been designed to deliver goods to seaports for shipment overseas.  Our land is fertile and our climate diverse enough to produce a vast array of agricultural products. 

Our second advantage is cultural.  The earliest English settlers in the 17^th Century were adventurers determined to forge a new world.  The charter for the settlement in Plymouth, Massachusetts from James I permitted the establishment of a republican government independent of the crown.  The founders of the United States were grounded in the philosophy of Locke, Spinoza, Voltaire and Adam Smith.  They gave birth to a nation that thrived on independence and achievement. 

Nineteenth century America was marked by a period of laissez-faire government that enabled entrepreneurs to create railroads and the telecommunications, steel and energy industries.  In turn, these developments enabled America to achieve global economic leadership in the 20^th Century. 

Like any nation, ours was founded by way of bloodshed as the early English, French and Spanish settlers fought with Native Americans and each other.  But, over a 150 year period, American global hegemony emerged from that bloodshed and through the strategic brilliance of American leadership.  Our mainland was secured and our economic future was insured by the Louisiana Purchase in 1803, the Mexican-American War of 1845 and the Spanish-American War of 1898. 

Oklahoma Land Rush

The founders were also keenly aware of the need for a government to provide opportunity for those less fortunate.  James Madison provided for the right to a free education and public land in the Virginia constitution.  The 19^th Century saw an immigrant-driven expansion into the Great Plains enabled by the Homestead Act of 1862 which provided free land to those adventurous enough to claim it.  This egalitarian culture of governance enabled immigrants over our 236 year history to make a better life for their children and in turn drive U.S. economic growth. 

The Industrial Revolution moved bread-winners off their farms and into factories.  That corporations were not the most humane of bosses led directly to the social reforms of the 20^th Century.  Laws protecting the right of collective bargaining, worker safety rules and the development of a “social safety net” were government’s response. 

The U.S. military, which had virtually created the steel industry in the 19^th Century, evolved after World War II into a “military-industrial complex” (a phrase coined by President Eisenhower) which fostered innovation through scientific research and led to space exploration, the development of the internet and the explosion of the electronics industry.

The U.S. education system – public schools and the university system – produced the best educated workforce in the world.  World War II’s destruction of foreign industrial capacity provided a window of opportunity in post-war America to thrive economically and attract vast inflows of capital investment.

Now, many of those trends are beginning to reverse themselves.  Our education system is no longer producing the best graduates.  The shift in our economy from manufacturing to services has motivated our best and brightest to abandon science and engineering in favor of finance and law.

Foreign Direct Investment in the U.S., which peaked at over $300B in 2000, had dropped 50% by 2010.   Meanwhile U.S. multinationals and investors have increased their investment overseas to new record highs – over $400B in 2009 remaining over $350B in 2011. 

How could a country with so many natural advantages come to this point in the 21^st Century?  How is it that our political class sees everything as a battle between two world views as opposed to seeing opportunity to build on our successes of the past?

Today’s political debates over education, immigration, healthcare and the national debt offer no hope of compromise.  There are well thought out solutions to each of these major social and fiscal issues.  They are well documented and understood by leading members of Congress and the Executive branch. Yet, each side of the political divide lives in fear of being "primaried" if they compromise the core principles of the extremes of their respective political parties. 

The political forces at play during our Revolutionary War and its aftermath were marked by fierce philosophical differences as well.  Indeed, there was doubt that the 13 colonies who had defeated the British could sustain as a single nation. Each had its own political philosophy, constitution and currency.  Many in the north advocated for union while many in the south feared the influence of money center banks and a central government.  There are echoes of this debate evident even today.  Yet, with a vision of what our nation could become, the founders compromised for the greater good.

The outcome was an exceptional compromise:  the United States of America. 

WHO WILL LEAD?

Hey, We Had a Deal… Didn’t We?

George Friedman

While shopping for a car last weekend, we met TJ.  He is one of those guys who really should be a salesman.  He is always happy to see you and always has a smile on his face.  He’s the kind of guy everyone wants to be around.  TJ has been selling cars for 30 years.  “What did you do before that?” I asked.  “I was an air traffic controller,” came the reply with a chuckle. 

Remembering my late 20^th Century history, I observed he must have been one of those guys put out of work by the PATCO strike.  He was.  “I bet you didn’t vote for Ronald Reagan in 84,” I said.  Laughing again, he admitted I was right. 

TJ didn’t know it at the time but his plight was at the leading edge of a strategic shift.  Stratfor founder, George Friedman, has observed that there have been four such shifts in our history.  Each was brought about by a paradigm that had run its course and a crisis that brought about a failed presidency that was followed by a seminal presidency.  These shifts have occurred approximately every 50 years.  The failed presidency of John Quincy Adams was followed by Andrew Jackson.  A half century later, Grant was followed by Hayes.  Then came Hoover and FDR and, one that many of us remember, Carter followed by Reagan. 

The conditions of the Great Depression made it politically feasible for FDR to create programs that supported the poor, the elderly and the working class.  The term "social safety net" was coined by one of the most conservative economists of that time, Friedrich Hayek.  Social Security, unemployment insurance and the Civilian Conservation Corps were seen by many as a way of placating a wave of immigrants who were accustomed to socialist or social-democratic governments.  By offering the safety net, the lower economic classes were less likely to join truly socialist movements.

Friedrich Hayek

During this half century phase, government was designed to plan, regulate and control economic and social outcomes.  The extremely high tax rates of the Truman and Eisenhower years were necessary not only to pay off the debt accumulated by WW II but also to support the regulatory state. 

For two generations following the war, business, government and organized labor worked in concert to create a domestic economy that served our needs.  Our schools and universities turned out students who were well equipped for the economy of that time.   Those who were fortunate enough to go to college joined the management of big companies like AT&T, GM and IBM.  The rest joined unions and worked in the factories.  Everyone expected to be employed for life by the same company and many, if not most, were. 

But, high tax rates took their toll on capital investment; and, by the 1970’s, foreign competition was taking its toll on the union model.  Globalization meant American companies needed to update their factories and had to compete with low labor cost nations like Japan.   

The Reagan revolution would not have happened if the economy were not in shambles.  He sold us on a vision that undermined the model on which the populace had come to rely.  He used the PATCO strike as a public demonstration that the unions could be broken.  In the 30 years since, union membership has dropped from 30% of the workforce to 7%. 

I don’t remember Reagan ever announcing that he was changing the social contract.  But, it certainly changed during his administration.  Fixed benefit pensions were replaced by 401K’s.  To compensate for rising healthcare costs, corporations introduced HMO’s to replace traditional health insurance.  American corporations needed to become more nimble to compete on a global stage.  Lifetime unemployment was out; flexible workforces were in. 

Under this new paradigm, the American economy boomed for three decades on the strength of the wealth effect from the establishment of two income households, the stock market boom of the 1990’s and the rise of home values in the 2000’s.  But, just as FDR’s model of government had started to fray by the 1970’s, the Reagan revolution has started taking its toll on the middle class.  Globalization has flattened incomes, corporations pass on more of the cost of health and pension benefits to their employees and the cost of a college education is skyrocketing. 

The national political debate seems to be a continuation of FDR vs. Reagan.  But, would either of those models work today?

The booming economy of the 1950’s was coincident with the highest tax rates in our history.  But, anyone who has ever taken a course in logic knows that correlation is not causation.  Perhaps if you could create all the other factors at play in the 1950’s – lack of foreign competition, a balanced federal budget, population growth – you could replicate the economic outcomes. 

Similarly, the 1990’s boomed with improvements in corporate efficiency, technological innovation, low tax rates and a balanced budget.  Can we replicate those conditions again? 

At their core, Americans want the same things no matter their political beliefs.  We want security at a national and local level for our families and property.  We want the opportunity to improve our standard of living.  And, we want to fulfill our role on the global stage – international leadership. 

There is an underlying need for financial stability that will provide a platform for achieving our goals in these areas.  And, there are significant challenges to providing that stability. 

Politicians at the local and state level are taking on those challenges.  Republicans like Scott Walker of Wisconsin and the “love-him-or-hate-him” governor of NJ, Chris Christie, make headlines because the media likes conflict.  But, there are significant reforms being made to pensions by Democratic governors in Rhode Island and New York and at the local level in San Jose and San Diego, CA. 

Beneficiaries have a moral right to say “hey, we had a deal, didn’t we?”  But, the hard reality is that they will have to make a sacrifice in order to get something or run the risk of getting nothing. 

We have the same risk at a national level.  Baby boomers will drain the coffers of Social Security and Medicare.  Rising healthcare and education costs are undermining middle class standards of living.  Our infrastructure needs a serious overhaul and modernization.  And, we are competing with the rising economies of Brazil, China, India and others. 

So, why are we still debating 1932 vs. 1982?  Do we really think either of those solutions sets would work today?  The issues of today are structural and strategic.  Compromise and sacrifice are called for.  The leaders who will get us out of this quagmire are those with the vision to craft a solution, the charisma to get the public to embrace it and the political skill to overcome the momentum of special interests.

So, I ask you…  Who will that person be?  WHO WILL LEAD?

Stop Me If You've Heard This One...

A well-heeled man is sitting alone in a hotel bar when a well-endowed young woman walks in and sits nearby.  After having a friendly conversation for a while, the man asks the young woman if she would sleep with him for a million dollars.  She readily agrees.  He follows up by asking if she would do so for a dollar.  “Of course not,” she replies.  “What kind of girl do you think I am?”

“We’ve already established that,” says the man.  “Now, we are just haggling over the price.”

In Michael Sandel's new book, What Money Can't Buy, he posits that capitalist theory has so invaded our culture that our values are now in question.  They have been replaced by the practice of putting a price on everything. 

Residents of the state prison in California can buy cell upgrades for $82 a night.  One can contract for the services of a surrogate mother in India for $6,250.  Doctors have established “concierge” services that provide superior responsiveness to their wealthy patients, denying such service to those less well off.  Lobbyists pay line-standing companies to wait in line so they get a seat at Congressional hearings, denying the public access to the process of governing. 

If everything is for sale, Sandel asks, what does that say about the character of our society?  Is it okay to pay kids to read books or get good grades?  Should good healthcare be available only to those who can afford it?  Good people can disagree on the answers to these questions.  But, almost everyone would agree that a line must be drawn somewhere.  For example, we might all agree that it is not okay to sell a child.

Sandel traces the commoditization of almost everything to the 80’s, a decade during which the Soviet Union crumbled and the market theories of Reagan/Thatcher were vindicated.  (He is not critical of those two leaders or of capitalist theory.  He is just questioning the extent to which the concept has inculcated society.)

In this country, it is a concept grounded in our origins.  The Age of Enlightenment, which gave rise to both the French and American revolutions, espoused the theory that principled behavior arises from the nature of human beings not from the authority of the church.  This philosophy formed the basis of Thomas Jefferson’s secular approach to the Declaration of Independence and the U.S. Constitution.

Thomas Paine

Thomas Paine who authored the Age of Reason was perhaps the most prominent of Americans promoting these beliefs.  Paine criticized the church which he saw as corrupt.  His writing style appealed to the masses and made secular philosophy a part of American culture.  To that time, the crowned heads of Europe derived their authority from the “Divine Right of Kings” granted them by the church.  Coupled with the market theories of Adam Smith, American culture was grounded in the self-reliance of free enterprise. 

It seems logical that capitalist market theory would be embraced the world over in the wake of the Soviet collapse.  But, if Sandel is correct – if everything is for sale and ethical behavior has no bearing – then the pendulum has swung too far in the wrong direction.  It is within this framework that our elected officials must spend vast amounts of time raising money from well-heeled donors and wealthy individuals fund SuperPAC’s that espouse their views.  Is our government for sale too?

During the last thirty years, we have had three two-term Presidents – Reagan, Clinton and Bush – who found a way to galvanize support, not by their policies but rather by delivering a message that voters identified with.  For Reagan, it was that “government is not the solution; government is the problem”.  Clinton pledged a “new beginning” and positioned himself as a New Democrat – liberal on social issues but pro-business.  Bush’s leadership centered on the War on Terror and defeating the “axis of evil”. 

Each of these Presidents was controversial in their time.  They each had their loyal fans and their detractors.  But, love them or hate them, there is no denying their success.  They each had their way with Congresses of the opposite party; and, they did so by delivering a message that resonated with the public.

I am left to wonder which of this year’s candidates will deliver a resonant message – a message that conveys the character of society, a national ethic that people will embrace. Thus far, all we have heard are the attacks intended to mischaracterize the other guy. 

Each candidate has well thought out economic, social and foreign policies, as well they should.  However, pollsters tell us that, in the end, it won’t matter whose policies are most valid.  It will matter whose message the American voting public most identifies with.  That is how elections are won.  The candidate who best defines the national character garners the support of the governed.

If neither candidate can galvanize public support in that way, it will be the Super-PAC’s and big money interests that win.  So, I ask you…  

What kind of nation do you think we are?  Will our character prevail?  Or, are we now just haggling over the price?

WHO WILL LEAD?

Kodaktown and the Two Bobs

Kodak Brownie Camera

Our vacation home in Canandaigua, NY is near Rochester, once nicknamed Kodaktown after the erstwhile great company that was its largest employer in a bygone era.  The company, founded by George Eastman, filed for bankruptcy protection since we last visited.  Eastman’s legacy is preserved in his estate on East Avenue, now a museum.  He is credited with democratizing photography with the invention of roll film and the Brownie camera.  The production and sale of small inexpensive cameras supported Kodak’s cash cow – film – for decades.  The company also invented digital photography but ignored its potential.  You know the rest of the story. 

Eastman wasn’t unique among 19^th Century entrepreneurs but he was, perhaps, unique in Rochester.  It is estimated that his philanthropic donations exceeded $100 Million.  He founded the Eastman School of Music at the University of Rochester and was also the prime mover and contributor to the establishment of the dental school there.  The Rochester Institute of Technology has a building named after him in recognition of his donations to that institution as well. 

His legacy is evident in Rochester although most residents take it for granted.  It’s always been a white collar town.  Its well educated workforce gave rise to other companies famous for their intellectual capital, Xerox and Bausch & Lomb. 

Eastman created a paternalistic corporate culture that emphasized the security of its employees.  For nearly a century, Kodak was the employer of choice for the locals.

My brother in law went to work for Kodak right out of school.  He was a lifer.  He took an early retirement package about 20 years ago.  For most of his career, he worked on a Top Secret program that he couldn't talk about.  When the program was declassified last year, we learned that his division made lenses and other apparatuses for the U-2 spy plane.  He is rightfully proud of his work at Kodak and truly bummed out by its bankruptcy filing.

I asked the Two Bobs about the impact of Kodak’s bankruptcy.  They both gave me the same answer:  no impact.  Rochester’s economy has been adjusting to the loss of Big Yellow’s job growth engine for 20 years.  By the time the company went into bankruptcy, it was expected – overdue even. 

Eastman School of Music

Who are the Two Bobs?  Well, one is my niece’s husband.  He is an electrical contractor who grew up here.  Over the last few years, any discussion of the economy started with his head shaking from side to side.  His work was coming from school construction.  Once it ran out, he didn’t know where the work would come from. Now, he knows.  He has moved on to commercial construction.  Xerox and Paychex are among Rochester’s other big companies that are expanding their facilities. 

Bob reiterated his comment of last year.  He doesn’t think that the economy is humming but he believes it’s not as bad as the pundits make it out to be.  In other words, it would be better if everyone wouldn’t talk it down so much. 

The other Bob is my old school chum, Bob Cannan.  His company, Eagle Productivity, is booming.  Once a regional company, he has now gone global.  He specializes in innovative training solutions.  Are you implementing a new business process?  Rolling out globally?  Expecting your Salesforce to embrace some new technology?  Eagle guarantees – that’s right – guarantees 90% adoption of the new program.  Eighteen of the twenty largest pharmaceutical companies are his clients.  His global expansion is driven by their global presence.  He now has over 130 employees and an office in Germany to support rollout in the EU and Russia. 

The economy be damned.  The Eagle is soaring. 

Bob and his team at Eagle have developed expertise in “human factors”.   This is a sometimes overused term when describing the interaction between people and technology.  In the 80’s, we called it “user friendliness”; in the 90’s, it was “usability engineering”.  But, the study of human factors is a much broader field that encompasses psychology, engineering and industrial design.  Human factors describe the cognitive abilities of people interacting with their environment. 

Human factors and its use in training is not a patentable process like Eastman’s invention of roll film in the 1880’s.  So, the key to Eagle’s growth is the passion with which the concept is applied to their process and the excellence of their implementation with their customers. 

Bob and I were in the Navy before it was co-ed.  So, I got a big chuckle when he told me that 70% of his staff is female.  “How’s that going for you?” I wondered aloud.  “Great” came the reply.  Women are very concerned about their community at work, says Bob.  What is the culture?  How do they relate to their co-workers?  Their clients? 

I know it’s a bit sexist to generalize in these matters; however, his experience squares with mine from the days when I was managing big call centers largely populated by women.  So, the management culture and the client engagement are as much driven by human factors as are the products, services and implementation projects. 

I am delighted at my good friend’s success.  I am also pleased to see the positive evolution of Rochester’s community and economy.  While George Eastman fostered a paternalistic culture that was well suited to the industrial revolution and became THE place to work through most of the 20^th Century, Bob Cannan and hundreds of other entrepreneurs have created a new economy culture well suited to the 21^st. 

I usually close by asking, “WHO WILL LEAD?”  In this case, the question answers itself.