Thursday, December 29, 2011

The unromantic Italian

"Premier Mario Monti outlined his austerity package to union leaders and a youth delegation at a cabinet meeting in Rome, after which he said “Italians are to blame for our public debt," reports WSJ, 5th Dec.

Leadership indeed demands 'selling' one's game plan if it is to get ‘buy-in.’ But it also is objective, calling a spade a spade so there is clarity on what the challenge is and its ownership, thus raising the probability of execution. [Execution is the acid test of competitiveness and thus while access to information is democratic, there is only one Apple, for example.] It takes a big person to admit to a big sin; and it takes true leadership to get the people take ownership of a nation’s failings.

But there is a positive dimension to accepting failures, and as Christians we know it as repentance and faith. Yet human as we are, it is not easy to accept half a century of mediocre performance. Should we then lift a page from the playbook of the private sector? Business managers have learned that accepting failure is the first step to redemption; and Europeans are quick to point out that the American bankruptcy law has proved to be an advantage for the US. But then again, redemption has been in the fabric of the American culture – and so to be holier-than-thou is ridiculed – though the hypocrisies coming from some quarters are growing.

How does the private sector do it? To reinvent an enterprise, they pursue the development of a ‘new culture’ that would sustain success. For example, A.T. Kearney, a consultancy, has identified five common culture dimensions world-class organizations possess: (1) achievement, (2) customer, (3) innovation, (4) people and (5) efficiency. They also recognize that the key is to focus on a couple while ensuring that they don’t turn their back on the others. Put another way, no organization can be tops in all dimensions.

Applying this set of dimensions to the Italian challenge, clearly they would want to reinvent themselves and be committed to ‘achievement.’ And that would mean lowering the national debt while investing in innovation in order for industry to be competitive, for example. (And Fiat-Chrysler is showing the way. Chrysler has had a dramatic turnaround from bankruptcy two years ago, accounting for two-thirds of Fiat’s latest quarter profit, with US auto sales up 25% this year, owing to a revamped product portfolio, Reuters, 6th Dec.) Italy could also address the issue of efficiency since many tradition-bound Italian businesses have yet to adopt 21st century practices. “A lot is at stake; we cannot permit ourselves to live the way we did before,” says Monti, [and] “he is facing a power battle — and a culture clash — with lawmakers.” [NY Times, 16th Dec.]

Clearly in the Philippines it is a must we demonstrate a culture of ‘achievement’, recognizing how dismal our economy has been for over half a century. And just like the Italians, we need to in short order pursue innovation to be globally competitive. And it follows we have to be more efficient, starting with the building blocks of power generation, basic infrastructure and strategic industries.

In the meantime the Italian premier is demonstrating that to be an unromantic Italian is in fact what patriotism or nationalism is about? In short, we need to become bigger men and women and admit to bigger failings? We could only reinvent ourselves to the extent that we admit our failures. As social psychology (c/o Kurt Lewin) tells us, we have to unlearn [or unfreeze] so we could provide room to relearn [or change and refreeze].

Our leadership could similarly fine-tune its ‘selling job.’ Beyond pushing ‘daang matuwid’ President Aquino would do the country a big favor if he is able to get ‘buy-in?' And which should give him the ability to lead us to reinvent ourselves by focusing on a couple of culture-like dimensions?

Monday, December 26, 2011

Critical thinking in a soft culture

‘We must undo the damage of a misguided culture perpetuated by corrupt politicians and businessmen, power-hungry and greedy tyrants, the powerful forms of media and the apathy of many citizens (whose disheartening response to the mess around them is to go abroad) who defuse the fervor for genuine social change. It is not the Filipino culture that is damaged!’

That is paraphrasing one of the responses at the one-day Rizal @150 Anniversary Conference on Nation and Culture held last 3rd Dec. [Thanks to Dr. Florangel Rosario Braid.] A couple of issues raised at the conference drew the writer’s curiosity: how to internationalize the Filipino outlook; how to take advantage of the Filipino’s ability to adapt to changing circumstances as it competes in the global economy; and redefining the Filipino citizen as multicultural, multireligious. But do we accept that ours is a soft culture as Lee Kuan Yew says? Do we believe that ours is a hierarchical culture? Could they be behind the ‘misguided culture’ being perpetuated by a few? Is our softness reinforced by how we see ourselves in the social hierarchy, i.e., helpless? And so we tolerate corruption, power-seekers, greedy tyrants, and the powerful in the media because of that helplessness – and going abroad becomes an escape?

Because of our softness our bias is for inclusion (and miss the imperative to prioritize and focus) and see poverty as our biggest challenge? But isn’t poverty the outcome of underdevelopment? Or is our default-model the US, where they also have to fight poverty (in reality the core of compassionate conservatism to counter the perceived insensitivity of "laissez faire conservatism")? But to compare poverty in an economy where the per capita income is $3,500 (PHL) versus $47,200 (US) is comparing apples and oranges? Shouldn’t we be comparing ourselves with Thailand ($8,700) or Malaysia ($14,700) or any of our neighbors? These countries have reduced poverty substantially by pursuing economic development! Our income of $3,500 is simply too meager to spread around! And worse, the thought perpetuates our ‘crab mentality’?

Taking a page from the playbook of the private sector, when the revenues of an enterprise can’t cover its expenses, the marching order is to drive profitable growth. The writer is reminded of the 9 years he has spent in Eastern Europe. (And why our messed up economy would take a generation+ to fix.) And the one thing they haven’t stopped talking about is the imperative of gross margins. When he arrived, his friends proudly claimed that low-pricing was their advantage over MNCs – “because the people are poor.” Unfortunately they were not making the margins to give them the firepower to compete, and worse, were an unprofitable enterprise. They’ve learned since but are keeping the focus on gross margins. As the organization expands even those coming from MNCs could instinctively see driving sales as the key, unwittingly compromising margins. It’s giving away the store! And to enlarge national economic output or GDP, enterprises must by definition be sustainable!

The solution is simply innovation – not our celebration of monopoly and oligarchic power – to be able to create products (or services) that the consumers will value at a price that generates healthy margins. It is what competitive advantage is about! And competitiveness is driven by investment, technology and innovation, and talent, product and market development! It also applies to the Philippines? Our GDP is dependent on a consumption-driven domestic economy – which makes us proud because we have many successful local enterprises, but the big picture punctures that confidence. We are unable to match our neighbors’ economies especially exports because we are not competitive, and thus have become economic laggards!

Our biggest challenge is not poverty but development. And to get there, we need to focus on competitiveness. And it starts with the building blocks of power generation, basic infrastructure and strategic industries that will develop competitive products. And how could we address our soft, hierarchical and parochial culture? It’s a challenge to our institutions especially the church and education. Adam and Eve were driven out of Eden; Christ was a pain to the hierarchy in his community and beyond, and he embraced the Gentiles, foreigners and sinners!

Saturday, December 24, 2011

Connecting the dots

Two articles on a Sunday morning would remind us about the failure to connect the dots that was blamed for 9/11: (1) Filipino culture, Manila Bulletin; and (2) Manny V. Pangilinan pins down Roberto Ongpin, Philippine Daily Inquirer, 4th Dec.

It appears National Artist for Literature F. Sionil Jose and Sen. Edgardo Angara are connecting the dots – that the common denominator to our woes is our culture, or not exactly? “One generation has come and passed, yet we are still beleaguered by many of these same problems. Underlying all these is our troubling lack of a sense of identity and nationalism,” writes Sen. Angara.

The article about Ongpin confirms the obvious that all the parties involved in the alleged “insider trading” are in the board of the subject company. But reading the article, it is obvious too that Pangilinan has been distanced from the controversy even when the three-way transaction would respond to his pursuit of ownership control? Are at least three elements of our culture, again, obvious? Its informality makes it laughable for David [of DBP] to utter that the subject transaction was arm’s length; Pangilinan deserves deference because he occupies a higher tier in our hierarchy; and that crony capitalism is our “equivalent” of motherhood and apple pie?

The story of Pangilinan has made him a celebrity, the well-known secret, starting with his representation of foreign interests. And having been installed at the highest levels in our hierarchy, we have accepted his genesis like compassionate Christians must; and of course, the investments that his group undertakes are good for the economy. And in fairness we recognize his talents. Yet it fuels our credibility problem with foreign investors: crony capitalism is alive and well! Add that to our restrictive ownership rules, foreign investors won’t touch us with a ten-foot pole. Net, despite the expanding empires of our tycoons, our investment levels remain shabby – and we are missing out on 21st century technology and innovation, thus undermining our competitiveness! Industry needs the platform of technology and innovation if they are to develop the instinct and the confidence to invest in and pursue talent, product and market development – that are critical to a nation’s competitiveness.

But we’re Christians, says Ateneo? [With due respect.] Or is it simply that hierarchy and parochialism are indeed second-nature to us? Plagiarism even in a premier educational institution could be forgiven – and it was not him, it was a lowly speechwriter! Is it another element of our culture, the absence of accountability, which brings us full circle to how high we value hierarchy especially within our own backyard? It is indeed unfortunate but not surprising that the rankings of our educational institutions against the rest of the world are on a downward trend. And it mirrors our economy, governance and competitiveness; the net of which is nagging poverty in the midst of oligarchy!

What about Ongpin? I am simply a smart businessman? And David? I made money for my bank? And they represent our movers and shakers? Should we start dissecting authenticity as it relates to our instincts or why we struggle with the rule of law and why we tolerate delayed justice – which in fact is no justice? Or should we step up political maturity demanded by a democratic system?

Is our soft culture – which values deference – at the core of our wretchedness? And which explains why a Marcos could last 20 years, only to be followed by one, if not two more? But beyond our shores it doesn't cut, thus while hardworking Filipino women hold their heads up high, many have been stopped at foreign borders – profiled as coming from a backward, oligarchic and corrupt nation? And how do we muster the motivation to engage in broader issues when our comfort zone is parochial, if not narrow? Unsurprisingly we are the ‘silent group,’ whether in the majority or minority, at home and abroad?

Tuesday, December 20, 2011

Play-by-play, ‘groupthink’ and myopia

“My father told me not to believe in authorities or celebrities – that society tends to imagine them as superhuman. It's good advice. People are snowed by celebrities all the time. In academia people have this idea of achieving stardom – publishing the best journals, being at the best university, writing on the hot topic everyone else is writing about. But that's what my father told me not to do. He taught me that you have to pursue things that sound right to you. In 2004, when I wrote the second edition of my book Irrational Exuberance, I said in the preface I was worried that the boom in home prices might collapse, bring on bankruptcy in both households and businesses, and lead to a world recession. I remember thinking that this sounds kind of flaky – nobody else is saying this, I can't prove it, this could be embarrassing. But I had learned from my father not to care what other people think. This was my book, and I believed this, so I just said it.”

That’s from the 12th Dec. issue of Fortune magazine, “The best advice I ever got,” from Robert Shiller, Yale University economist. And it seems just yesterday when Shiller was on TV discussing his book, and like most US residents (half of whom are invested in the stock market) the writer and wife were glued to the financial channel, enjoying the play-by-play (of the stock market) from their favorite anchors, effectively dismissing Shiller. And so it’s not surprising that Filipinos are critical of Americans for their short-term orientation. But aren’t we falling into the same trap; and beyond the focus on the play-by-play is the manifestation of groupthink if not myopia?

We have all become economists dissecting GDP numbers by the fraction and by the quarter? The Aquino administration (and even Obama) went through a learning curve, and still struggles to get the PPP initiative going. And if reports are accurate, they found a government that ‘sucks’ – corruption was a way of life! Did Mar Roxas find it too? The DOTC is notorious for big time corruption as the World Bank complained about?

In fairness, doing a play-by-play is important, except that in the case of our economy much of the hurdles we face go deeper. And in the private sector, a similar challenge would call for restructuring! Is Juan de la Cruz predisposed to restructuring? For example, even a 7% growth in GDP unless sustained over a generation+ does not mean economic liberation for Juan de la Cruz – which we conveniently forget! And we’re hyperventilating over one quarter or one year? (And instinctively we don’t ‘start with the end in view,’ which also explains why despite their artistry, Europe is behind the US in product idea commercialization.) We are dealing with a dilapidated structure that must be razed to the ground? Half a century of failure to build the requisite foundation – e.g., power, basic infrastructure, strategic industries – is akin to building a house upon the sand? But human nature takes the easier path, confirmed by the work (intuitive heuristics) of Nobel laureate Daniel Kahneman.

And given our soft culture, how many Filipinos would accept the advice Robert Shiller got from his father? And while we now appreciate the imperative of investment, we have yet to overcome the bias for oligarchy – despite our ambivalence – over foreign investment. And it also goes with professional services. The Philippine elite – including professionals – like its oligarchy, influence the directions of the country; and in both cases, parochialism has triumphed under the guise of nationalism and patriotism? Unfortunately, parochialism has effectively starved us of technology and innovation. How much damage has been done over decades is not easy to quantify, especially with something that is second nature to us?

And it’s never easy to accept a national failure; but it is ‘painless’ to do the play-by-play, and succumb to groupthink if not myopia? In the case of the US, the damage was so severe it triggered the global recession that the world is yet to overcome. Robert Shiller was a lone voice in the wilderness? [Shiller reminded the writer of ‘groupthink’: “It is the mode of thinking that happens when the desire for harmony in a decision-making group overrides a realistic appraisal of alternatives . . . The majority of the initial research on groupthink was performed by Irving Janis, a research psychologist from Yale University, 1972,” Wikipedia.]

Thursday, December 15, 2011

Beyond meaning well

Given where we are as an economy and as a nation, it’s not surprising every Pinoy wants to offer our two cents. And we all mean well! And it appears Mar Roxas is acknowledging that with his clarification on the renovation of NAIA 1. He probably needed sufficient time – rather new to the job – to get a good handle on the challenge. Early on he was for focusing on Clark. And it wouldn’t be surprising (given all the hoops the government has had to go through with NAIA 3) that there was a school of thought that we ought to start with a clean slate, and Clark offered that option.

Not knowing Mar Roxas, it appears that in tapping the expertise of the folks behind Singapore Changi Airport, he was benchmarking not parochially but globally – which is bound to ruffle feathers! When do we start to learn to be outward-looking? Haven’t we been punished enough – becoming economic laggards – by our inward-looking bias? It cannot be overemphasized that we are competing not only for tourists but in the bigger global investment and trade arena. It’s noteworthy that the cabinet’s economic cluster is well aware of the challenge and raised the issue of our airport woes. And since they impact our competitiveness efforts, the NCC has rightly taken the initiative as they focus on upgrading our airport and elevating our image.

Defining a challenge means identifying both the soft and hard elements of the problem. And again, Mar Roxas seems to remind people about this: we must put priority on the structural issues of NAIA 1, i.e., the hard elements. The aesthetic obviously is among the soft.

Applying the same yardstick, the challenge to raise our image has its soft and hard elements. The soft elements start with the fight against corruption that President Aquino is pursuing. And, of course, we’re not just about beautiful tourist attractions but more important is the beauty and hospitality of the Filipino. We also have been home to foreign companies and that our financial and commercial infrastructure is fairly well-developed. Yet, one of the biggest turnoffs to foreign investors is our oligarchic culture nurtured by political patronage and crony capitalism – the latest being the Senate investigation on the alleged insider trading that allowed the Pangilinan group controlling interest over Philex. Foreign investors are well aware that the chips are stacked against them – until they indulge in our game! And that is reflected in the meager foreign investment levels that we generate. What are we doing to truly level the playing field? Have we internalized that beyond our cacique orientation, progressive investors bring along technology and innovation that we sorely need to raise our competitiveness? We have for decades been indulged in self-flagellation, and wonder why neighbors continue to outdo us in exports?

It will do us a world of good when presenting and communicating the image we want to the outside world, that we are able to address these soft factors. And we should do the same with the hard elements. For example, what are we doing with power generation? That is something we must address in our image-building initiative. That we have a high-level effort (from the top of the house?) to fix the problem and make our industry cost-competitive, for instance? How much have we integrated manufacturing zones with infrastructure and logistics? In short, how efficient and cost-effective is our manufacturing environment? Again, it is something we must include in our image-building communication campaign. In a word, even advertising must pass the test of transparency! And transparency comes from authenticity!

Communication in marketing or advertising has to satisfy the hurdles of rational, emotional and experiential benefits. Enormous resources can be wasted if communication is not world-class, and cannot appeal to the human senses – or what marketers call 360-degree marketing. And just like Mar Roxas is benchmarking globally in raising the yardstick to measure NAIA 1, efforts to communicate and elevate our image must likewise be benchmarked globally. Consumers especially in this day and age are well-informed – and so smart marketers do, and indeed must, have a lot respect for them.

Monday, December 12, 2011

Competitiveness is measured beyond local

Though they are the exception, it is truly encouraging that some of our enterprises are venturing outside the country. It is by so doing that we would develop the wherewithal and the confidence to be world-class. Practice makes perfect.

The writer and his Eastern European friends were recently in Barcelona where 110 European enterprises were honored in the annual European Business Awards. Indeed it was a great accolade for this select group: the field that met the parameters of the awards started at 15,000, delivering over a trillion dollars in revenues and employing 2.7 million people. In short, the best of Europe’s industry were represented. As the European trade commissioner enthused, he was very proud of all 110 businesses for demonstrating excellence despite the global economic crisis (for which, unfortunately, Europe is as much to blame.)

The writer's friends – and deservedly so – had to be very proud given that barely 9 years ago they were a cottage industry in the middle of nowhere, best described as a fledgling business out of a dilapidated ex-communist facility.

To venture overseas, Philippine enterprises will have to shed our mental model of monopoly power. We may not realize it but our backwardness is magnified for the rest of the world as we keep celebrating oligarchy. It is as bad if not worse than our underdeveloped infrastructure. And one could just sigh when some of our best thinkers blame President Aquino for our inability to attract foreign investors. We have as a people and as a nation more than convinced the rest of the world – many times over – that we are a parochial nation! And so they don't want to touch us with a ten-foot pole! We are to blame, not the president!

And we can complain how hostile global trade could be – and it is especially if we expect handicapping to benefit us. But the reason the writer committed to assist his friends is precisely because they had no qualms about unfriendly competition and markets – and yet they're ex-socialists! It is the same principle great teachers adhere to: if the student hasn’t learned the teacher hasn’t taught! Put another way, a business no matter how small is worthy of global competition if they stand on their own two feet! Of course, they must have a positive and a confident, forward-looking bias. They must be committed to investment – no matter how small at first – and as importantly, invested in technology and innovation, and talent as well as product and market development!

To narrow one’s perspective (even in a poor country where the conventional wisdom is only cheap, so-so quality products would sell) will from the get-go undermine innovation thus the competitiveness of the enterprise. This was the first reality that the writer’s friends had to confront – and with great difficulty. For example, they had to learn the nuance between value and price, margins versus costs. Ergo: investment, technology and innovation can’t be taken for granted. Philippine businesses need to fully comprehend what they truly mean – and as importantly leverage them – in a globalized and highly competitive world!

Unfortunately, our comfort zone – of monopoly power – robs us of the hunger to be truly globally competitive. Hierarchy allows us to lord it over, blinding us to the reality that competition is egalitarian! Crony capitalism, as we know, rewards rent-seeking oligarchy with plum enterprises and access to capital! In the end Juan de la Cruz pays a heavy price: (a) directly like the coconut farmers; and (b) even more profoundly given that this lopsided economic structure does not advance Philippine competitiveness, nor does it raise national wealth for the common good – as demonstrated by the last half century.

We don’t want the slogan ‘Backward, Oligarchic and Poor’ associated with the Philippine brand? That will indeed isolate us – be admired but dismissed as ‘just an exotic South Pacific archipelago!’

Saturday, December 10, 2011

Peeling the veneer

The global economic uncertainty has shaken even self-confident France. ". . . Dreams are unraveling . . . according to a Pew Research Center survey only 27% of the population now believes that 'our people are not perfect, but our culture is superior," NY Times, 21st Nov.

Russian-born author Elena Gorokhova, in her memoir (A mountain of crumbs) about growing up into young womanhood, describes the lectures she attended while training to be a tourist guide: "Leningrad – the cradle of the Great October Socialist Revolution. The rules are simple: They lie to us, we know they're lying, they know we know they're lying but they keep lying anyway, and we keep pretending to believe them.”

People go through self reflection. Should we, Filipinos, define our challenge as the imperative of inclusion? For half a century our economy was growing at 1.4% while our neighbors did as much as 6%! This bit of news hit the writer like a ton of bricks since it was the referenced period (1960-2008) that he thought defined him. Put simply, he is very much part of our failings as an economy and as a nation. It is a very telling point if we are to understand why in the 21st century we are the economic basket case of the region! We have to peel off our romanticism, call a spade a spade! There is absolutely no way to be inclusive doing a measly or a frail 1.4% for half a century! As we know in problem-solving, fallaciously defining the challenge puts us on the wrong path! [And fallacy comes from intuitive heuristics, e.g., rule of thumb as expounded by Nobel laureate Daniel Kahneman in ‘Thinking, fast and slow.’]

Economists say we must grow at 7% and even at that rate it will take more than a generation for us to be a developed economy! But our bigger challenge is masked by that impressive number – in reality another form of romanticism if we don't deliver sustainable growth! The bottom line: Our challenge is bigger than President Aquino. But he is part of why we are what we are – we are all in the same boat that we created! Our challenge is not about the imperative of inclusion. It is about the imperative of development. And development requires erecting the building blocks that will make growth sustainable. But we won’t even get the first floor up if we stick to tooting our individual horns – we badly need to toot our horn as a nation! The JFC has provided a model via ‘Arangkada’ – which unfortunately will take ‘eons’ for us to internalize. To undo 48 years of mediocre economic performance will more than bruise the ego of Juan de la Cruz. It will shake his spirit more than currently felt by the French!

We have yet to demonstrate it, but we must learn to focus and prioritize – e.g., power, basic infrastructure and strategic industries. We can’t simply be rooting for our favorite oligarchy; they have contributed to a very large extent to our cellar-dwelling performance. They reinforced our mistaken belief – poor as we are – that capital puts them at the top of the pyramid. Capital employed to perpetuate a lopsided economy is the unwise – beyond self-serving – use of God-given resources. And with their cohorts in politics – and with our acquiescence – they shut out foreign investments, technology and innovation, the wise use of God-given talents. But they also had been aided by our own education mindset. Education is meant to be inquisitive, expansive and by definition outward-looking.

And thus parochialism must be addressed and overcome by education? But our outlook was influenced by our parochial religious orientation, which treated us like juveniles? Christianity is about maturity, not about being holier-than-thou, which we perpetuated via our sheltered culture. Unfortunately, tyranny thrives when people are shielded as the Arabs have realized. But the good news is Christianity is about embracing the Gentiles and foreigners and sinners. And so how do we begin to fix ourselves? Should we try authenticity?

"We don't have sex in the Soviet Union," said a woman from the Ministry of Culture, when a French reporter asked a provocative question about Lelouch's film 'A Man and a Woman.' Is it possible that . . . sex had been successfully eradicated by the Great October Socialist Revolution, along with social inequality and decent shoes? . . . In spite of my country's taboo or my mother's silence, or maybe because of it, I've taken the initiative to investigate the subject on my own." [ibid]

Wednesday, December 7, 2011

Competition is egalitarian

We can easily intellectualize the connection between competition and equality? Yet in our heart of hearts we value hierarchy? And we’re not alone. Many Eastern Europeans migrated to the West only to return – it’s just not the kind of culture we’re comfortable with. ‘It’s the quality of life, stupid!’ [Who would not want to be chauffeured around by Stefan or Stani or Hristo?] And now the new world order demands competition? “Better collect and hide the ID cards of our grandparents – so they can’t vote – and save the country.” It’s the running joke heard from Eastern Europeans. Their elders despite the dark ages they went through under communist rule could not imagine themselves in a world that demanded competition.

It is not surprising that people who see themselves within a hierarchy but not the leadership would behave as such: “You have to tell me what I must do. When you tell me to jump, I want to know how high!” It’s one of the unfortunate characteristics of hierarchy. The reality is competition, which is what the 21st century is about, presupposes that nations would see themselves paddling their own canoe. But we commiserate with relatives living in the West: “Our quality of life is much better and more desirable that yours!” Eastern Europeans feel the same way, and they are horrified when they watch German TV, for instance, and hear that 18-year olds are expected to be on their own!

It is encouraging that we are in serious studies figuring out the resolutions of nagging challenges – from electricity to mining to car manufacturing to name just a few. Yet, the fact that for practically half a century we were growing at a pathetic 1.4% would explain why we’re still troubled by these problems – especially when neighbors did as much as 6%! It’s painful but we have to face up to this sad reality! By German standards, we’re way pass being an 18-year old! And even Adam and Eve were driven out of Eden – expected to be on their own!

For almost half a century we were proudly tooting our quality of life! But what is even more frightening is if we’re still in la-la land – and don’t recognize the 18-year old rule? Which means that another half a century can elapse and we would still be blaming everyone and his uncle instead of paddling our own canoe?

It is no secret what created the West – i.e., the Protestant or Christian work ethic! Of course as the world now knows, they have forgotten the reason behind Thanksgiving, i.e., to be grateful for the fruit of their labor. Like the Golden Calf, the fruit became the be all and end all – the virtue of hard work was supplanted by the “value” of avarice.

But that does not give us license to be ‘holier-than-thou?’ In fairness, the West took the parable of the talents seriously? But did the church fail us or are we simply the referenced ‘not good soil?’ In fairness too, we have been doggedly addressing the elements of our dismal competitiveness rankings. But our competitiveness rankings simply reflect the outcomes of our economic, industrial, political, education, social and other institutional efforts. Put another way, they are a reflection of our values and our culture. And as long as we take our values and culture for granted – that they are in fact hard and fast and are a given – we would not be able to reinvent ourselves. Half a century of pathetic economic and human development simply points to the imperative: to reinvent Juan de la Cruz?

But what are we talking about – same old, same old? With our meager GDP person and no sustainable economic engine, we are back to our comfort zone – local consumption! We have grown the local economy to over $100 billion – comparably better than our neighbors – principally owing to OFW remittances. Unsurprisingly our basic industries (the favorite of oligarchy given that their bare bones equate to rent-seeking) will continue to prosper and reinforce our lopsided economy while Juan de la Cruz goes hungry! Aren’t we supposed to be smarter than that?

Sunday, December 4, 2011

Beyond entrepreneurship

Friends often proudly tell the writer that Filipinos are entrepreneurial and they don’t necessarily have to be big but they thrive. And the writer remembers a pretty recent trip he took from SLEX all the way to Antipolo and around Laguna Lake and back to SLEX. Indeed, in every other corner if not every, one would see business activity – not exactly like Chinatown but still dense. And decades ago the writer had travelled the country a few times representing his employer and worked with SMEs – aside from having already put up a family business.

In far away Italy, WSJ (14th Nov) reports: “Italy's economy today is only about 3% bigger than a decade ago. Many factors have contributed to the country's stagnation—from its rickety education system to its low rates of employment among women, youths and older workers. But a central reason, say economists, is that its private sector consists mostly of small mom-and-pop businesses that seem unable to grow . . . Unions, meanwhile, are opposed to government proposals to loosen Italy's labor laws. They have vowed to paralyze the country with strikes if the government attempts to pass such measures.

Behind the country's stunted businesses lie the habits and fears of a long line of family entrepreneurs who cling to control of their companies late into life. Hemmed in by a thicket of regulation and legal restrictions, many of these families have learned to survive by doing business within networks of trusted customers and suppliers, rather than taking risks by dealing with outsiders . . . These firms have less propensity to innovate, engage less in research and development and rarely penetrate emerging markets," said Mario Draghi, ECB President and former Bank of Italy head, in a recent speech.

There is something beyond entrepreneurship. When the writer first arrived in Eastern Europe, he saw two very different entrepreneurs. And it is not difficult to figure out why he committed to assist one but not the other.

The bigger one had friends amongst a group of former communist rulers and was out to leverage the relationship and get into different businesses, having already acquired one. [And so the writer simply grins when he hears socialist-leaning Filipinos romanticize the purity of socialism.] But he wanted his first business sold to a Western MNC because he really did not understand the business; and was not prepared to spend time nurturing it. But he had hoped to make a killing – make hay while the sun shines, and get into other businesses. His connections were pointing him supposedly in the right directions – even when he did not understand the other businesses too! Fast-forward: the first business shrank to a mere shadow of its former self, and could not attract buyers – not MNCs, not locals. Not even the writer’s friends, who earlier considered it, would buy the business.

The smaller one, only a fraction of the business of the other, had the desire to grow the business. “Our country is small and we need to learn to do business in a bigger market, like the region.” (In the Philippines, our big population, on top of our parochial instincts, spoils us – i.e., we focus on the local market and don’t develop the wherewithal to compete in less friendly markets. And that’s not how Olympians are made!) But with a new found motivation following the collapse of communism, they wanted to dip into other businesses too. And the writer urged them to focus (in order to attain ‘nirvana’ a.k.a. competitive advantage) on two core businesses, one each for the two brothers. With that caveat, they made minor investments in other businesses. Fast-forward: with the global recession these other investments went south. But they now have two very much larger businesses; and these two – each is into several but related businesses – more than compensated for their bad bets.

The bottom line: there is something beyond entrepreneurship. And the writer’s friends are now committed to building an institution not a fiefdom. And they educated their children to respect the vision and its requisite values. In the 21st century, could they really afford otherwise knowing what nirvana is? But which tradition-bound – e.g., inward-looking, values family, monopoly and oligarchic power instead of technology and innovation power – Filipinos or Italians would struggle to accept?

Thursday, December 1, 2011

Of MNCs and economic analyses

It’s not surprising that the JFC (Joint Foreign Chambers) are the ones behind “Arangkada” – which spells out the vital few industries that can raise our economic output. Nor is it surprising if nationalists would not be enamored. “Here are these foreigners again, directing our economic downfall!” What is reality? These people are doing business in the region and are able to compare countries. If the country manager of an MNC in the Philippines is viewed by his or her regional office as being behind the peers from Thailand or Vietnam, for example, he or she would want the local environment to be competitive – like the Philippines fixing the power supply and cost issues, among others.

If the MNC has expansion plans, the Philippine country manager would want a fighting chance that the expansion would be in the Philippines. And, of course, they will invest in technology, innovation as well as talent, product and market development – the building blocks progressive MNCs are committed to given their drive to attain competitive advantage. An MNC can come from anywhere, not just the West – like the writer’s Eastern European friends. Just because we don’t know (how to be an MNC) makes them evil? Of course there is always a bad apple – even in a place where corruption is a way of life like ours? Our challenge is to learn (how to be an MNC) ASAP! Or we can choose to be out of sync with the rest of the world – remain an island unto ourselves, cling to hierarchy and oligarchy and the attendant massive poverty!

Industry impacts the economy directly – i.e., GDP is simply the aggregate output of the products and services generated by a country. If booming economies in the region are growing 8%-10%, for instance, and we are doing a slower 4%-5%, clearly we have work to do. (The reality would make us cry: “from 1960-2008 our neighbors did 3.6%-6.0% against our 1.4%,” Manila Standard, 17th Nov.) Yet posting and celebrating a high growth rate is empty when the building blocks that will sustain it are not present. And worse is when it makes us celebrate ‘a flash in the pan’ instead of focusing on problem-solving thus nation-building! Our unreliable and uncompetitive cost of electricity is not new – and our efforts to date are feeble and unacceptable, in this day and age, of competitiveness!

We need to focus on industrialization, and in producing truly competitive products and services that can be marketed beyond our shores. The more competitive they are, the greater our ability to overcome economic slumps. And which explains why MNCs strive to maintain a portfolio, not only of products, but of countries; and balance out their risks and opportunities. And the writer talks often about his Eastern European friends – supposedly amateurs compared to us in the free-market system – because they adopted the exact model: A few years ago, 100% of their revenues came from their local market; today it accounts for less than 50%, and will continue to come down by design – i.e., they’re not about rent-seeking monopoly and oligarchic power. And despite the economic slowdown in Europe, they continue to grow and step up investments in the building blocks of competitive advantage. And they’re not even in the high-tech industry. But they are not parochial either!

Our latest dismal export performance simply reflects our nagging deficiencies in infrastructure, and the imperative to develop and produce compelling and competitive products. Yet we can’t simply pursue infrastructure projects without a clear priority and focus. But ‘priority’ and ‘focus’ are not instinctive to us – i.e., crab mentality wins out? For example, we know that of the 86 airports around the country, 46 are white elephants. The JFC identified 7 big winners or industries that can generate $75 billion in investments and over $100 billion in incremental GDP. The key is to focus and prioritize the infrastructure projects that will support these strategic industries. It’s counterintuitive, to be inclusive starts with not being inclusive! And like the Pharisees and the scribes who struggled with the Greatest Commandments, our soft culture – which could be at the heart and why we’re progress-challenged – struggles with the phenomenon. And which explains why we’re anti-MNCs/foreigners, i.e., to prioritize and focus is second nature to them? In the vernacular, “mga suplado sila.” If true, we must be alarmed about our future!

To take our eye off the ball and proudly profess optimism is ‘bahala na’ or ‘que sera, sera’ all over again! Unfortunately, we assume it’s patriotism? We are decades behind the times – we need more than ‘a flash in the pan!’