Brand New View

Finishing next book...

My blogs are on 'vacation' until I finish my next book. Hope to be sharing more later this summer...JD

Eurobama-The New Language

Europe is stunned. "The President of the US is listening to us?" they muse. Many European countries agree that they like the new US president, at least for now. Let's hope they continue to keep an open mind as Obama reaches out to the European community in the coming months seeking more substantial involvement on a wide range of issues, from a two-state solution for Israel and Palestine, to disarming Iran's nuclear ambitions, to a more coordinated international set of actions for reigniting economies and regulating financial markets (and more). 

Obama’s popularity in Europe is due to several reasons: he is bright, articulate, hopeful, has interesting ideas, and is able to grasp subtle issues. He is also not Bush.  But that last point has been over emphasized by the press. There were several competent successors to Bush that were not Bush...Hillary Clinton, John McCain, for example. But Obama won. Why? Because he represented substantial change, versus incremental change. He was different in many ways: intellectually, temperamentally, and strategically. And his personal story is compelling. Britain, France and Germany in particular all have different reasons for liking Obama. Many of Obama's qualities that Americans find appealing are equally appealing to these countries. 

But each of these countries also have very different histories with the US....Britain has been the US’s biggest ally for the past 50 years and, more controversially, the past eight years. Citizens there find him refreshing and candid, from what the polls say, and are undoubtedly delighted that their country is not as easily maligned by the rest of the world due to its special relationship with the US. The French, who have historically been as different from the US as they have from their own EU partners, see Obama as someone to believe in and, to their surprise, he is also a US president. This must be an anxiety-inducing paradox for them. And from what political pundits say, Germans like Obama because he is a pragmatic visionary (now if Merkel could only demonstrate greater pragmatism herself by implementing a more aggressive fiscal policy). All perceptions of Obama appear to be accurate.

Europeans also like Obama because he has signaled that the US would no longer ‘go it alone’ in foreign policy, but would engage its partners in Europe and around the world. That was a very important message to send.

But perhaps the biggest issues that captured the hearts, minds, and support of many Europeans were Obama's order to shut Guantanamo Bay within a year and his halting of harsh interrogation techniques of prisoners. These issues also removed key hot buttons that fueled a global backlash against the US the past eight years. Obama is speaking a language that the world, particularly Europe in this case, wants to hear--that he meant what he said and would back up his words with actions. 

100+ Days

I got a kick out of Stephen Colbert's recent show, making light of the public's infatuation with assessing the President's first 100 days. Describing his own arbitrary evaluation, he introduced Colbert's 'First 14 Monday's'. His mocking of political and media pundits continues to be one of the most original and enjoyable creations on TV.

I was recently interviewed again by ChannelNewsAsia to assess Obama's first 100 days through the lens of branding. Successful branding is about building trust, and a country's reputation is really an indication of how much it can be trusted. For over two hundred years the US has stood for a consistent set of values and beliefs, even as different political parties ran the government. These include: constitutional rights, rule of law, human rights, and a larger, far more hopeful notion that the US always stood for opportunity, where anybody could succeed irrespective of their background. This latter point is still, to me, the most compelling, meaningful, and motivating ideal represented by the US. Having lived in Southeast Asia for more than 5 years, even with the spectacular growth, changing political conditions, and improved living standards across most of the region, there is still a strong distinction between the privileged few and all others. One's pedigree and background in this region still matters more than one's potential, although more people are indeed gaining access to opportunity. Nevertheless, many societies here 'select' those with the greatest potential for success, relegating those with less education or economic wealth to secondary status.

Back to my point about the US's values...in the past 8 years, many of these values have been called into question. Of course, the US has faced economic crises before, as well as social crises, and succeeded. But the past 8 years were the first time that a crisis of confidence in the US--a loss of trust if you will--reached epidemic proportions globally.

Obama’s first 100 days signal an aggressive effort to turn this around. To my mind, these efforts should be applauded, irrespective of one’s political affiliation. His administration is handling multiple challenges and crises remarkably well, although I admit it is still far too early to claim victory. But I give Obama an 'A' for effort. The details of how to implement new domestic and foreign policies can and will be debated and negotiated behind the scenes. But as with any successful brand, the public face must match the internal efforts, and both political parties must find greater common ground. Obama must continue to find ways to gain support from more Republicans. This is where Obama has both an opportunity and a big risk. Opportunity in that most people want him to succeed. Risk because a few, vocal (shrill!) people, are actually hoping he fails. Furthermore, the Republican leadership is doing nothing constructive to participate in meaningful change or react to the extreme elements in their party. Instead, they are sticking to outdated slogans and simplistic beliefs.  This creates press and drama, but contributes nothing to making the US better off. 

How Obama responds to the opposition will be a key test in the next 100 days, and beyond.

The Complexity of a Brighter Future

As an American living in Singapore for over 5 years, it is interesting to see how other parts of the world view the US. Obama is proving to be an important catalyst for reshaping international opinion about the US for now, and hopefully for the better over the long-term. But this goodwill will be short-lived if the economy staggers along due to insufficient fiscal stimulus. Here in Asia there is a great deal of enthusiasm about China’s future prospects, and many regional economies are running at a different (higher) energy level than their more developed counterparts in the west. Many people here so far find Obama refreshing and a departure for the better from Bush. But the US is increasingly discussed in past-tense terms. However, our complete demise is not desired because, more than any other reason, it would destabilize regional economic growth. At the same time, a resurgent US is increasingly viewed as less important than having a more confident and politically stable China. For the US to have a chance at recapturing some or all of its credibility and influence, Obama has to succeed at more than international PR, and his economic policies are currently the area that will determine his ultimate success. While I am impressed with his ambition to tackle several problems simultaneously (a US President that can actually multi-task!), I am worried his fiscal policies are not ambitious enough. 

Overseas, ‘Brand US’ has taken a painful and punishing beating, not just economically, but politically and even at the individual business level, which is making the day to day pursuit of business a very different challenge for US companies than it was in years past. US CEOs and their companies are viewed as suspect (rightly so in many cases), despite the majority of global brands being US-based, and regional business assertiveness here in Asia is on the rise. Hopefully, this will motivate US companies to reconsider how to compete. But they cannot do it alone...US policies must demonstrate that we ‘get it’ and that, as a country, we can be responsible. This is going to take far more than a few years, political charisma, and a patched-together economic recovery. The psychological damage is deeper than the US acknowledges, very real, and harder (if not impossible) to undo in the short-term. 

Challenges in Asia are of a different sort: while there is increasing economic transparency, there is still poor political transparency and inconsistent business transparency. Many countries in Asia, despite enthusiasm for their various economic futures, will struggle if the political institutions are not more accountable to the public. As long as people depend on the state for the answers, a more vibrant, problem solving culture will never fully develop--and this is more than just a government issue. It also permeates many regional education systems. Lateral thinking is in short supply, and inquiry is often stalled. People are educated to solve problems efficiently with maximum data (deductive reasoning), rather than thinking about effectiveness, making decisions despite minimal data, and potential implications (inductive reasoning).   

The US faces another challenge: Asian governments have spent the past decade quietly yet purposefully investing in industry and infrastructure, creating the foundation for long-term economic prosperity (regional airports, ports, highways, and city-downtowns are almost uniformly amazingly modern, even spectacular—imagine someone saying that about JFK, LAX, and many US bridges). If Asian governments solve the political transparency issue, they will have far greater impact in guiding global affairs, which is not necessarily a bad thing. But if the US does not redouble its efforts to reinvest in industry and infrastructure, then its political transparency will carry little weight.  This highlights a different problem in the US: fear of government authority. And soap box posturing from the right saying that nationalizing banks is the beginning of socialism only fuels this fear. It also completely misses the point: temporary government rescue, even ownership, can help restore confidence, allowing the private sector to think about and develop innovative ways to create real value for the future-rather than freezing operations while awaiting freer capital markets. Ultimately, the US will never be a country that depends on the state for all the answers, which is an important cultural distinction and a potential long-term competitive advantage. But only if the US government is more aggressive in the short-term. Such an interesting dilemma the US faces! 

The US, and everyone within, must continue to thoughtfully challenge existing assumptions and authority, and more fully consider the implications of US economic and political policies, despite imperfect information. There is far more at stake economically than just finding a quick fix for the banking system-- a wide range of economic sectors are in need, and US leadership is at stake as a consequence. 

Toward a Better Future

What a stunning 12 months it has been, with the last 2 months particularly unnerving. Temptation toward panic is one response. Or temptation toward a better future is another. More specifically, we cannot quickly undo the economic mess or magically make asset values return to pre-September 2008 levels. But we can make important steps that produce sustained progress. Let's look at the US. As Tom McCabe, a friend of mine and highly respected business leader here in Asia said recently, Asian economies have invested over $2 trillion in infrastructure development since the start of this decade that have raised living standards and produced millions of high value jobs, while the US invested in financial trading services that did little or nothing to support the capital investment and growth needs of companies. We now know the outcome of these divergent investment strategies. Interestingly, President Obama has presented a budget to Congress that invests heavily in infrastructure, healthcare, energy and education--long overdue sectors of the US economy. Predictably, Washington DC is gearing for a fight as many conservatives are apoplectic at the size of the government spending proposals and the deficits. I am concerned that pork barrel spending is still a problem in the current budget. But endless debate and ideological paralysis will not be productive. We have learned that the past decade of unreported Iraq spending, coupled with inconsistent domestic investment, tax cuts, poor regulatory oversight, and a generally directionless set of economic priorities have produced the present meltdown that is affecting markets everywhere. Paul Krugman, the Nobel Prize winning economist has been a vocal proponent of even larger fiscal stimulus than that proposed by Obama, because the US faces a $2-3 trillion GDP gap. While the news currently is bad and likely to get worse, the US appears to be planting the seeds for a far stronger economic future, albeit one that is a decade away from hitting on all cylinders. In the meantime, we should avoid panic and look toward a better future.

Sri Lanka's Cricket Team

Today's ambush shooting of Sri Lanka's cricket team is sad and horrifying. 7 cricket team members and an assistant coach were injured, and at least 1 police officer escorting the team was killed. I really don't understand the mentality of a group of people thinking that such a cruel act makes sense and is justified. I can't imagine what possible outcome the attackers envisioned, but it is fortunate that there weren't more people killed. This is inexplicable and beyond comprehension.

The Moment is Here

At times the journey from Obama's announcement 2 years ago to run for the Presidency to the inauguration seemed like it might never end. But the inauguration came and went. The spectacle was heightened by expectation. "This is Obama's moment" was among the sentiments. What would his equivalent of Kennedy's "Ask not what your country can do for you..." or FDR's "We have nothing to fear but fear itself" grand rhetoric be? As it turns out, his speech was less electrifying than anticipated, but (from my point of view) perfectly tuned to the times. With 2 wars, Guantanamo, chaos in the Middle East, Iran and North Korea flaunting their nuclear ambitions, a global economy run off the rails, major environmental issues, and host of domestic challenges, soaring statements filled with lofty ideals would have been out of place. What has impressed me about Obama the past 2 years has been his steady, consistent, "no drama Obama" style that conveys confidence. He has used his oratorical gifts wisely over the past year, giving arguably his finest speech last Spring when he discussed race in response to the Reverend Wright flare-up (I thought this speech more attuned to reality than his remarks at the 2004 Democratic convention), yet also showing us that sweeping emotion is not required in all instances. Sometimes we just want to see that the guy at the top is in touch with reality. When I watched his inaugural speech, I will admit that there was a tiny part of me that wanted a more emotionally stirring call to cause. But as the speech progressed, what I heard was something more important--a call to action. By telling us that we must adjust to the world around us, he was also telling us that we can no longer live in an American cocoon, ignorant of the challenges confronting those beyond our shores. In effect, he was politely yet pointedly telling Americans to pull our collective heads out of the sand and become active participants in solving the challenges that confront us. I haven't felt this good about the future of the US in years.

Obama's Current Economic Plan

Paul Krugman, the Nobel Prize winning economist from Princeton and columnist for the New York Times (NYT)/International Herald Tribune (IHT), wrote a piece the other day about the disappointing size of Obama's economic rescue plan. Calling it the 'Obama Gap', Krugman asserts that despite Obama's strong rhetoric, his plan falls short of what is needed. With estimates that every $1 of public investment increases GDP by $1.50, only 60% of Obama's $750 billion+ plan is for public spending. The reason this is not enough is that we may face a potential economic shortfall of $1-$2 trillion (or more). Krugman argues that even with a multiplier effect, Obama's plan is insufficient (Paul Krugman: The Obama Gap). This is partly because part of Obama's plan, in an effort to court Republican support, includes tax breaks. Yet many economists agree that every dollar in tax relief produces less than a dollar in stimulus spending. In another article in the IHT (No Consensus on Whether Obama's Plan Will Work), the authors contend that tax relief works only under certain conditions (individuals use the money to save and/or pay down debt, thereby limiting in the impact on economic activity that leads to growth) and that the current global challenges are anything but certain, or normal. In an interesting related article (US Debt Losing Its Appeal in China), China's own economic woes are reducing their appetite for US debt, usually in the form of massive investments in short-term US Treasury securities. This is important for a couple of key reasons. First, because China's short-term Treasury purchases support the debt that funds long-term deficit payments. With reduced demand from China for short-term US Treasury securities, interest rates may rise (i.e. high demand boosts Treasury prices and reduces interest rates whereas low demand does the opposite), which affects a wide range of debt-holders, from government borrowers to home buyers. The impact? Well, with the potential for rising interest rates, the consumer appetite for housing will be reduced further, which will affect the economy negatively, beyond the already severe impact of the recent housing woes. However, there is an important consideration in all this. The housing crisis that precipitated a good chunk of the US's current economic problems was partly the result of loan programs that enabled, even encouraged, consumers to buy homes they could not afford, creating lower-quality debt. So while China's reduction in US Treasury purchases may well cause interest rates to rise, the long-term affect may help correct the US housing market by 'forcing' home buyers to purchase only those homes within their means. Ultimately, this means the quality of the debt will rise, since there will be higher confidence that borrowers will be able to repay their loans. As for Obama's economic plan being too small--Krugman makes important points. In normal times, enormous deficits are problematic for future generations. But in abnormal times, such as those we currently face, we need larger public spending to spur job creation, improve infrastructure (which is an important long-term capital investment) and improve overall confidence. An important question is how the debt, even in Obama's 'undersized economic plan', will be funded. The even larger question of whether Obama's plan will even work remains unknown. But at least the emphasis is on the right component for now: increased public spending. Let's hope that politics take a back seat to economic necessity.

Innovation and Speed in 2009

The words for the coming year are 'Innovation' and 'Speed'. From new government programs around the world designed to mitigate the effects of the current financial meltdown to investment in green technology to businesses doing more with less as they attempt to grow with smaller budgets, innovation will be key. We've seen the early stages already. Since the financial crisis hit, governments everywhere were put in the unexpected position of determining how best to improve liquidity and free up the credit markets. Because of the rapid-fire nature of the crisis, there wasn't the luxury of months or years to plan, making speed another key element. Decisions had to be made and signals had to be sent to nervous markets that governments would step-in to provide stability and reassurance. As obvious as these needs are, the sheer suddenness of the combined actions around the world (with the exception of Germany, which remains one of the few holdouts) compelled governments to act quickly, in the absence of complete information. While these are not ideal conditions to spur innovation, crisis often produces surprisingly positive side-effects, which we will hopefully see unfold in 2009 as governments focus on stabilizing the world economy. 

In the U.S., innovation looks to take many forms as well, including Obama's plans to invest in new technologies designed to address multiple environmental and energy-related issues, development of a more cohesive national education structure emphasizing the critical stage of early childhood education, new healthcare initiatives, and domestic infrastructure projects. With most of these issues, the private sector is already reshaping itself to encourage additional innovation. Some venture capitalists in Silicon Valley (and elsewhere) are redirecting capital toward green innovation and education initiatives. Businesses are gearing up in anticipation of the domestic infrastructure investments. Regulators are focusing on designing better and more innovative approaches to oversight of financial markets. None of these innovations and potential changes will come easily. To succeed, the tendency of bureaucrats and business leaders to protect their territory needs to change, embracing open and honest discussion instead. New initiatives and plans need to be vetted by the passionate forces of debate. But the debate itself must not succumb to typical analysis/paralysis, otherwise innovation will stall, the economy will continue to suffer, and progress overall will halt. Just as the events from September 2008 forced leaders from government and the private sector to think and act with extraordinary rapidity (and yes, there were still patches of uneven response--but that is typical in innovation-driven situations), the effort to solve the many crises confronting us must be pursued with similar urgency. There will never be a perfect plan to solve each of the various challenges, so we should not wait for one. Instead, having a general sense of direction, an innate optimism, and rapid-fire execution, are the right combination of factors to get us going. To make this all happen will require an open dialog that encourages multiple points of view, each with an eye toward a future of transformation. 

There is a painfully obvious and very recent lesson that should serve to guide government and private sector leaders in the months ahead: do not do what the former Big 3 automakers have done. As these companies teeter on the edge of failure, they have been neither innovative or speedy. Their recent problems are merely the manifestation of decades of bad decisions that have finally come back to haunt them. Their leaders have been stunningly blind to conditions around them, evidenced most egregiously by the CEOs' disastrous first meeting with Congress several weeks ago when each of them flew on corporate jets to beg for government loans-symbolic of their detachment from reality. And in this instance, perception was reality. The Big 3 automakers are perceived to be out of touch (and almost out of time) and lo and behold, their leaders reinforced this view. Almost comically, after being raked over the coals by Congress for their insensitivity (and lack of sensible turnaround plans) these same CEOs returned a couple of weeks later, each having driven from Detroit to Washington DC in a hybrid car, as if to say "now we get it". Unfortunately for them, the hybrid car gesture smacked of insincerity and it was clearly too little, too late. To make innovation and speed work to our advantage will require leaders in all sectors of society to actually 'get it' the first time. I am optimistic this will happen. But don't wait for perfection.

Happy New Year!

As we roll into the New Year, I am optimistic. Despite the challenges 2008 threw at us, there are many reasons for hope, and I'll discuss them in the New Year. For now, best wishes to all and I hope that everyone has a great year ahead.