Saturday in the park (a muddy one to ponder muddy agreements)

The weather report for Saturday is better than our rainy Friday. Even if the sun emerges through the morning clouds, it may leave very muddy walking paths. So, as I take a muddy stroll, join me as I ponder a few muddy things.

Agreements between multiple parties are hard and take work. They are not perfect, but they provide opportunities to improve them. Leaving them when your co-signers ask you not to must be for very important reasons. Under the tutelage of the current US president, previous agreements are “disasters,” primarily because he did not work on them. Another key reason is multiple party agreements require give and take and focus on relationships.

Early on, the US pulled out of an agreement called the Trans Pacific Partnership with Asian countries, the US, Australia and Canada. It was an imperfect agreement, but was defined to better enable competition with China. What is still very underreported is the other ten or so countries went forward without the US and signed a refined agreement, which is now in effect.

Around the first of June, 2017, the US president decided to pull the US out of the Paris Climate Change Accord. We are one of a handful of countries who have decided not to be a part of this historic agreement. Remember the song, “You and me against the world?” That is the US. Ironically, the announcement was the day after Exxon Mobil shareholders voted to require management to share with them progress on addressing climate change (this followed two similar votes for energy companies in May).

Other agreements like NAFTA have been modified and rebranded, but the changes are not as material as the pomp and circumstance promoted. The agreement allowed for change and could have been repurposed a year earlier had the president not interjected last minute changes. This is a good example that agreements allow for parties to make changes at certain times. They need not be thrown out, especially when the throwing out is more optics than substance.

Finally, the Nuclear agreement with Iran and six countries, including the US, was also imperfect. But, it allowed for dialogue, auditing and commerce. Against the wishes of the six other countries and his key advisors in the Defense department, the president pulled out of the agreement. He also chastised the other five non-Iranian partners for not so doing and imposed more sanctions. So, rather than have a better, but tenuous relationship with Iran, we have escalating tensions with “no off ramp” per former Chair of Joint Chiefs of Staff, Admiral Mike Mullens.

Agreements require hard work, collaboration and respect for the relationships. By their nature, they are long term in scope. When they are viewed through a transactional lens, especially one bent on perception than reality, their imperfections can be highlighted. If you have concerns (and all parties have them), the answer is go to your partners and suggest to fix them. Devaluing the relationship is extremely shortsighted and can be dangerous. That last word is on many people’s minds today.

Monday, Monday Redux

Borrowing again from the classic song from The Mamas and the Papas, here are a few Monday musings.

Water from Hurricane Florence continues to plague eastern South Carolina and North Carolina. Rivers are cresting or just past cresting. If the water flooding was not bad enough, the water includes leakage and spills from coal-ash sites, hog-waste pools, chemical plants and maybe superfund sites. This will take a lot of time to remedy.

Kudos to negotiators of Canada, Mexico and the United States for renewing an updated version of NAFTA. The were able to make necessary improvements to the agreements gaining acceptable terms. While the US President is taking a victory lap, these negotiators had to overcome his significant negative influence to the process, which made the process longer and more difficult.

My heart goes out to the tsunami victims in Indonesia. We are such small parts of this vast planet and it reveals such from time to time. Washing away over a thousand people and counting is very troubling. These tsunamis have happened throughout history, but they seem to be more frequent and impactful with the higher sea levels. It is akin to the water coming in from a higher starting point. I am reminded of the recent story of the Cartaret Islands where its inhabitants had to petition a larger island to move to as the sea consumed their island.

Finally, it disturbs me that the Republican led US Senate and President are not taking the time to investigate the veracity of all the accusations of Brett Kavanaugh. This is a lifetime appointment to the Supreme Court. We need to make sure that a Justice is not guilty of sexual assault. This is the opinion of the American Bar Association. The defiance by the so-called leaders is both off-putting and puzzling. It means we should look deeper, not the opposite.

Have a great week. May the force be with you. Let me know your thoughts.

A few painful truths

We are overlooking some very painful truths primarily for short term gain. As I chatted with staff members for several US Senators, I found myself saying “you sound like a young person; you do realize we are leaving this problem for you?” I hope they start thinking more about what I said because of what we are ignoring.

The reason for my question is Congress has passed one Tax bill and is debating another that will increase our $20.5 trillion debt by at least $1.5 trillion. Yet, not only are we ignoring the $20.5 trillion debt, we are ignoring that the Congressional Budget Office projects that figure to grow by $10 trillion without the Tax bill impact. So, in 2027, the debt could be $32 trillion if the Tax bill is signed into law. This is beyond poor stewardship – it is malfeasance. We would be screwing those young staffers I spoke with.

Unfortunately, there is more. Our leadership has decided to make the US the only country in the world to not support the Paris Climate Change Accord. Not only are we denying hard truths and overwhelming scientific evidence, we are shooting ourselves and planet in the foot. Renewable energy is passed the tipping point and we risk getting left behind as other nations invest in Innovation for the new economy. Fortunately, cities, states and businesses are carrying the banner dropped by our leadership, who is being relegated to the kids table at Thanksgiving. At the next post-Paris event, the US may not be invited at all. If we don’t deal more decisively with climate change, we will be screwing those young staffers and their children.

A final issue to mention, but not the final problem we are ignoring, is the US is retrenching from our global leadership role to the delight of China and Russia and chagrin of our western allies. The President gave a speech in Vietnam this month similar to the one made in Davos earlier in the year. America will retrench to a nationalistic country seeking bilateral agreements. On each occasion, his speech was followed by Xi Jingping who gave the global leadership speech the US normally gives. What our President fails to understand is globalization lifts all boats and our economy benefits more than if we look to maximize only our share. This concept has been called the “Nash Equilibrium” in honor of the Nobel Economics prize winner who developed it, John Nash. If we retrench, we will be harming our future growth and screwing those young staffers.

As I mention, these are not the only things we are ignoring – poverty, job losses due to technology advances, healthcare costs, environmental degradation, infrastructure, better gun control, etc. Yet, should we not alter our path set by these leaders, this path will be defined in the future as the period when the US gave up its global leadership role. And, the world will be a lesser place because of it. Sadly, I have witnessed these words spoken by more than a few global financial and security experts.

 

 

You cannot shrink to greatness

I often borrow the¬†phrase “you cannot shrink to greatness,” which I first heard when companies downsized to make their numbers. When leaders don’t know how to grow revenue or if market conditions do not support revenue growth, they cut staff. Lately, I have been using it to define the goal of nationalist thinkers who believe by restricting global trade, they can make things great.

On the whole, global trade is accretive to growth. Yes, we need to constantly review trade agreements to protect workers, but even trade agreements like NAFTA add value and jobs. If NAFTA were done away with, the state of Texas and the US would suffer, as would our key trading partners on our continent.

A venture capitalist said it succinctly. “Do you know what creates jobs? Customers.” The more trade, the more customers. It is that simple. As for the job losses which subtract from trade related gains, we do need to review the causes and effects. Many jobs have been lost dating back to the 1980s. Companies chase cheap labor, always have. So regardless of trade agreements, the companies were offshoring just as our President has done with his clothing lines and ball caps.

Also, where we are losing more jobs is to technology gains. We do much more manufacturing here, but with far fewer workers, than we did in the 1980s. These technology improvements will continue. So, before we blame trade agreements and throw the baby out with the bath water, we need to understand the metrics. What jobs are created, which ones are lost and why?

The other factor that does not get enough airplay is just as US companies are building products closer to customers, so are foreign companies here. Think of all the foreign cars and trucks made here in Tennessee, Kentucky, South Carolina, Alabama, etc. and think of foreign companies like Doosan, Mitsubishi, Michelin, Husqvarna, to name only a few, who have facilities here in the states. These are additive jobs to our economy.

Reducing trade is not conducive to growth. If you recall the movie “A Beautiful Mind,” about the schizophrenic John Nash, who won the Nobel Prize for Economics, ask yourself why he won? His theory called the Nash Equilibrium proved very useful in global deals in growing the pie bigger. The Nash Equilibrium says if we look to maximize only our own gain, while others do the same, the competition squashes trade. Yet, if we work together to make everyone benefit, the economic pie gets larger.

Reducing trade is also not conducive to greater security. The more commerce you do with countries that may not be an ally, the more you both will work to keep the commerce successful. So, military interventions would be harmful to that trade.

So, retrenching from the global markets, would not only be dilutive to growth, it would make us less secure. This is the argument that should be very visibly discussed as we look to improve agreements. Because no agreement is not a good course as it will cause a shrinking effect. And, you cannot shrink to greatness.