Monday, October 18, 2010

How To Kill The Golden Goose

While watching the recent economic blight that has struck America, I am often reminded of the Aesop's fable about the goose that laid golden eggs. There was a farmer who had a goose that laid a golden egg each day, the story goes, which the farmer sold to support his modest living. Until one day, the farmer got greedy and killed the golden goose thinking he will find a stash of eggs inside, only to end up with no golden eggs, and no goose that would have laid them either.

While there may be a lot of morals and interpretations of the tale, the one that appeals to me in the current context is that we have a lot of people around who would like to make a quick killing (no pun intended) rather than find a sustainable way to build wealth. And I don't mean "sustainable" from an ecological perspective, but an economic one. To get into a sustainable, long term growth mode needs long term thinking. And I see the long term thinking being continuously sacrificed for quick, short term gains. That is where, I think, countries like China outdo us consistently. Let me elaborate.

A reporter once asked former Chinese premier Chou En-Lai (Zhou Enlai) what he thought was the effect of the French Revolution, of 1789, on the rest of the world. He is said to have replied (sic) "It is too soon to say", meaning it was too early to tell. It was nearly two centuries after the incident that he made the comment! In my view, what he was exhibiting was a perspective that only someone whose feet are firmly entrenched in thousands of years of Chinese history could show. Also implicit in his response, in my opinion, was that the leadership of China took a much longer term view of the future when it came to decision making. They would, for example, forgo today's return if it meant much better returns ten years, or even fifty years. They focused on educating their young in the most rigorous math and science classes, even though their families could barely afford a decent living. They created a pseudo capitalistic system where individuals can create small businesses focused on export. They backed bright ideas with capital to take to market, even if it did not produce quick gains. Using these and many other longer term strategies, China went from being the begging bowl of the world, to the industrial giant that now has the world's largest automobile market, makes almost ten times the steel compared to the US, exports everything from toothbrushes to air conditioners to practically every country in the world, and has the world's largest standing army. The US owes a Trillion dollars (that is 1 followed by 12 zeroes) to the Chinese government, and there is very little we make that the Chinese want to buy. It is said that 600 of 800 suppliers for Wal Mart, an "American" retailer, are from China.

Going back, it has been nearly half a century since Premier Enlai said those famous words, and he is long gone. But thinking like his, I contend, has shaped China into a giant that every nation has to take seriously, including the United States. The funny thing is, it is not just China that has used this trick. Many nations that rose out of the ashes of WWII used the same recipe to race past us economically, in less than two generations. Germany and Japan were the earliest, followed by the Asian Tigers Korea, Taiwan, Hong Kong, and Singapore. If this strategy has worked for them, it should work here as well, right? Perhaps - if we thought like they did. The big question is, how to get such thinking ingrained into the psyche of the American people so that we too can dig out of this hole?

One possible way is to look to our so called leaders, and see how they think. Maybe there is some hope that a group of them will suddenly snap to a new grid called "long term thinking", and start role modeling it. Then the followers will follow, and the rest will be written in the annals of history. Right? Right. So which one of multiple breeds of leaders are thinking this way? Let us do a quick status check:

Political Leaders: The behavior of political leaders, I am led to understand, is shaped by the election cycles. Deny as they may, getting elected has become so dependent on money that the moment someone gets elected, they get busy raising funds for the next election. Out with the long term focus, and in with reelection tactics. When the focus goes to fund raising, unfortunately, special interests with deep pockets move in to garner influence - often to make quick gains. After all, there is no guarantee the politician will get reelected anyway. Legislation often ends up in short term window dressing, and a lot of pork to keep the deep pockets happy. So, there does not appear to be any cheese at the end of this tunnel.

Business Leaders: Ostensibly, businesses are supposed to be in there to create value by inventing new things and making lives more convenient. They are also supposed to compete in an open market and make manufacturing efficient. But once a business grows large enough to edge out competitors, it behaves more like a monopoly. The leaders, at least in my observation, tend to look towards the next quarterly profits. Often, a long term investment gets shoved under the rug while making the next quater's results look better. Efficiency comes via finding cheaper places to make things (China!) while cutting labor in the US. It has taken retired executives like Bill Gates and Craig Barrett to see the light, but they are quite in the minority, and don't wield the same influence as they did when they were at the helm of their respective companies. Most of the time, I see there is no cheese to be found here either.

Union Leaders: Unions started out with a noble mission of protecting the exploited workers and giving them a steady wage and protection from "the greedy capitalist". In the last half century, however, the collective bargaining agreements have had the contrary effect, of "killing the goose". One example - GM and Chrysler had to declare bankruptcy because they could not afford the $70 an hour total compensation, and pensions, guaranteed by the union contracts. All this while, the transplants like Toyota, Honda, Hyundai etc. employed non union labor at $40 per hour and sold quality cars at competitive prices. In another example, recent movies like "Waiting for Superman" (see my previous blog) have hammered on the teacher's unions for being inflexible when it comes to allowing meaningful reform that actually benefits students. But the actions, as depicted by votes in union elections, have not budged from time worn, ineffective practices. Even though there are a small number of excellent teachers, it seems nearly impossible in the current system to have every teacher be excellent (deny as they may). Hmm, the cheese is getting pretty elusive.

Community Leaders: I have been involved in volunteering in schools and the community for several years now, and most of the time, the so called community leaders are forced into the role of the safety net. When everything else fails, community volunteers tutor minority kids, keep them busy and out of danger after school, mentor at-risk students, and so on. This is one group that probably sees what needs to be done, but is stretched too thin cleaning out today's mess to do anything for tomorrow. After all, there is already a flood of unemployed and underemployed people with families to feed TODAY. Who has time for TOMORROW? Sorry, no cheese here.

So who is left now? That's right, you and I. We have numbers on our side, but no organization. Because the organizations that we created to look out for us have morphed into what I consider unrecognizable entities. It is up to the average person to get into the long term thinking mode. To value education in schools (duh!) and de-emphasize sports. To get real academic competition into our schools, not the fuzzy "cooperation" that has failed to produce results. To goad our politicians to create venture funds to bring good ideas to market instead of sprinkling printed money indiscriminately. To build more science and technology schools, and pay a differential to teachers with scarce skills. To ask our political candidates what their long term goals are for their constituency, instead of spending millions on TV ads telling us how rotten their opponent is. Perhaps then it will start something that will produce results, maybe a little slower than in the past.

Hey, it only takes a couple of generations!

No comments: