Wednesday, February 26, 2014

The common good: from the mundane to the extraordinary

We never tire of writing about traffic in Metro Manila. “Been stuck in traffic lately (?),” read a recent column. But then again, what else is new given that our woes indeed run the gamut? One friend narrated the distress of a sister who was bumped off a flight to the US – and it was a confirmed business-class seat in a local airline. The reason given: the seats (there were two of them) were defective. But the “tsismis” that went around was they had to give way to a party higher up in PHL hierarchy. And another friend shared with my wife a similar story about the same airline: that the lavatory wasn't working. But of course, the friend felt that the Pinoy crew members were delightful during the flight to make up for the inconvenience.

We're a Third-World country so it's not unusual to hear, “ganyan talaga” – the sigh of resignation. But aren't the Makati Business District (MBD) and Bonifacio Global City (BGC) our response to Singapore or Hong Kong? And family members showed us how that works. It was just before 5 PM and from Legazpi Village we drove to BGC and in no time we were at Aura, the new SM mall (and their parking facility is better than those in many major city centers of the world.) How did it work when driving between MBD and BGC along McKinley is a nightmare? It was the same trick from 30 years ago – my car had the stickers to get us through (to the delight of Ronnie) the villages and also the military camps. Are we guaranteeing foreign investors the same privileges? And as a pilot-friend would explain then, “that's why we're in the business of flying the beautiful people of Manila by chopper to the helipad atop The Pen from wherever and back.” Indeed, rank has its privileges!

And which explains why we weren't really trained in problem-solving and the common good – we could always pull rank? Asked Cito Beltran, The Philippine Star, 17th Feb 2014: “Elitists or plain incompetent?” Why did they not plan for Skyway Stage 3? Driving from Tagaytay, an in-law who was at the wheel chose to take Daang Hari; and since we were making a right on Commerce Avenue, we did not have to get to the corner of Alabang-Zapote Road – where it's hellish. How can a major intersection be without a traffic light – or traffic cops or even traffic aides? “Ganyan talaga!” We have set the bar so low that anarchy is a way of life? Yet MMDA boasted that MM is to be the model 21st century metropolis? Who will do what, when, where and how? 

If the development around Commerce Avenue and in MBD and BGC is our best shot to move PHL to the 21st century, do we still need the World Bank or the ADB or whoever else to tell us that we're not globally competitive? These are private initiatives supposedly more professional and more attuned to global developments than government – yet we would instinctively cede to oligopoly while unwittingly surrendering competitiveness to our neighbors? “If democracy has not been deeply rooted in our soil, it is because it has often been hijacked by a small but powerful cabal of political and economic elite.” [CJ Puno: Ours not yet a full democracy, Domini M. Torrevillas, From the stands, The Philippine Star, 20th Feb 2014.] And as the priest at a mass my wife and I attended stressed in his homily, Juan de la Cruz must “totally surrender” his life to the Creator (instead?) if we are to be one with Him [in the pursuit of the common good . . . and nation-building.] And where is our aversion to “cuentas claras” – and bias for “crab mentality” – coming from? As the priest explained, a no is a no and a yes is a yes; how come we associate that with the West as opposed to our faith?

How can industry, say, utilities like phone, internet or power, among others, get away with unacceptable service? Can we ever say enough is enough and mean it? We don't want to be the poster boy of incompetence or influence peddling or corruption or greed or all the above – if we aspire to be the next Asian tiger? I am in Singapore as I write. Not that long ago these people would seek the West and tap the latter’s wealth and technology; today, they would simply blow me away. And which is why with my Eastern European friends, we chose Singapore as our first Asian office in order to pick their brains – and piggyback on the competitive advantage inherent in their ecosystem.

“Ganyan talaga!” It also refers to the odd-even days and I would smile when I first heard we did it to ease Metro Manila traffic, because even before MM Athens already experienced the fallacy – “you just buy a second car!” And which is why to prepare for the Olympics, Athens erected their Metro system; and lo and behold, commuting in Athens is world-class. 

We were told that many expatriates prefer Rockwell; they are separate and apart from the madding crowd yet self-sufficient. From their condos they walk through the basement and into the Power Plant mall, where it’s not as dense as Greenbelt. But those living around Greenbelt would protest: “we don’t like to go to Rockwell because driving that short distance would raise your blood pressure.” And to that the Rockwell crowd would say, “Ditto – we don’t like going to Greenbelt . . . And at Rockwell we have Chef Jessie; and at Greenbelt what do you have?” “Have you tried Milky Way and the other restaurants in the same building like Cirkulo or the Japanese or the Thai?” But they would be in agreement where and when their next holiday will be. Who cares about problem-solving – and the common good? Rank has its privileges? And those from Alabang (and they swear that it is less polluted than Makati) could always get a pied-à-terre either at Greenbelt or Rockwell.

The bottom line: we continue to perpetuate our instinct, of being an island unto ourselves – the total, complete and absolute disregard of the common good? Put another way, it blinds us to the imperatives of an ecosystem that can bring about development and turn us into a competitive economy. For example, Singapore or Hong Kong or Switzerland is competitive because “the system” works. It is no different from an orchestra – beyond connecting the dots . . . they make beautiful music together . . . that is pleasing – and in the case of nations, predictable.

In the meantime we would continue to live with our infrastructure woes and power outages and/or outrageous rates . . . and our pathetic investment rate, etc., etc.? “Ganyan talaga!” Poor Juan de la Cruz – to whom the common good is a myth – he could only watch in awe (or resentment?) as the elite class makes MM their nirvana?

Saturday, February 22, 2014

Overcoming backwardness

How do we overcome what Rizal saw over a century ago when the 21st century world is moving at warp speed? “The reality is that to survive in a fast-changing world you need to be creative,” says Gerard J. Puccio, chairman of the International Center for Studies in Creativity at Buffalo State College, which has the nation’s oldest creative studies program, having offered courses in it since 1967.” [Learning to Think Outside the Box, Laura Pappano, The New York Times, 5th Feb 2014] “That is why you are seeing more attention to creativity at universities,” he says. “The marketplace is demanding it.”

“Critical thinking has long been regarded as the essential skill for success, but it’s not enough . . . Creativity moves beyond mere synthesis and evaluation and is . . . “the higher order skill.” This has not been a sudden development. Nearly 20 years ago “creating” replaced “evaluation” at the top of Bloom’s Taxonomy of learning objectives. In 2010 “creativity” was the factor most crucial for success found in an I.B.M. survey of 1,500 chief executives in 33 industries. These days “creative” is the most used buzzword in LinkedIn profiles two years running.”

“Traditional academic disciplines still matter, but as content knowledge evolves at lightning speed, educators are talking more and more about “process skills,” strategies to reframe challenges and extrapolate and transform information, and to accept and deal with ambiguity . . . On-demand inventiveness is not as outrageous as it sounds. Sure, some people are naturally more imaginative than others. What’s igniting campuses, though, is the conviction that everyone is creative, and can learn to be more so.”

“Just about every pedagogical toolbox taps similar strategies, employing divergent thinking (generating multiple ideas) and convergent thinking (finding what works).The real genius, of course, is in the how. Dr. Puccio developed an approach that he and partners market as FourSight and sell to schools, businesses and individuals. The method, which is used in Buffalo State classrooms, has four steps: clarifying, ideating, developing and implementing. People tend to gravitate to particular steps, suggesting their primary thinking style. Clarifying — asking the right question — is critical because people often misstate or misperceive a problem. “If you don’t have the right frame for the situation, it’s difficult to come up with a breakthrough,” Dr. Puccio says. Ideating is brainstorming and calls for getting rid of your inner naysayer to let your imagination fly. Developing is building out a solution, and maybe finding that it doesn’t work and having to start over. Implementing calls for convincing others that your idea has value.”

Yet in PHL where we value harmony, we are more likely to succumb to “group think” or “shared blind spots? To be sure, we’re not alone. The world still remembers “President George W. Bush’s inner circle and their decision to invade Iraq . . .” as well as “the circles of financial players who fostered the mortgage derivatives meltdown.” [Daniel Goleman, Focus: The hidden driver of excellence, p 72; Harper Collins, 2013]

“[T]his tendency to ignore evidence to the contrary spreads into a shared self-deception, it becomes group think. The unstated need to protect a treasured opinion (by discounting crucial disconfirming data) drives shared blind spots that lead to bad decisions . . . [I]nstances of catastrophic group think entailed insulated groups of decision-makers who failed to ask the right questions or ignored disconfirming data in a self-affirming downward spiral . . . But group think begins with the unstated assumption We know everything we need to.”

But if Juan de la Cruz finds questioning discomforting especially given our bias for harmony – although we matter-of-factly invoke rank – how do we create ideas that are out-of-the-box? Worse is when we take it for granted that “we have infinite wisdom” and discount ideas that aren’t our own?

30 poorest provinces to get more funds–Aquino,” Philippine Daily Inquirer, Michael Lim Ubac, 13th Feb 2014. “At the meeting that mainly tackled the “action plan for poverty reduction,” Socioeconomic Planning Secretary Arsenio Balisacan candidly admitted to the Chief Executive and his Cabinet that the administration had a dismal performance in arresting poverty and creating jobs. The 30 “priority provinces” will be categorized into three: Category 1 aims to create more economic opportunities; Category 2 aims to enhance mobility of labor and goods; and Category 3 aims to increase resilience since they are local government units most vulnerable to disasters. Communications Secretary Herminio Coloma announced this new categorization or prioritization of provinces at a briefing on Wednesday.”

Question: Did we ask why “the administration had a dismal performance in arresting poverty and creating jobs?” If that is the outcome or the effect of PHL’s economic plans and programs, what was the cause? These 30 poorest provinces are likewise not the (root) cause but the effect? Years ago we trumpeted how successfully we set ourselves apart [an island unto ourselves?] from the global economy because we were inward-focused and proud of our consumption economy? Life is about choices and we made ours and we can’t run away from that – not when we are engaged in problem-solving! Reality bites and it hurts but we have to deal with it? The choice we made would have far-reaching consequences – and we ought to be the least surprised why despite being the fastest growing economy, save China, we are the region’s economic laggards? What are these consequences? Our investment rate is the lowest in the region as well as our stock of foreign direct investment . . . and export receipts . . . and savings rate, etc., etc.

We cannot undo our reality overnight – not in this administration and not in the next! “PH seen still lagging behind peers.” [Philippine Daily Inquirer, 24th Mar 2013.] “The Philippines is lagging behind most of the founding members of the Association of Southeast Asian Nations in many economic and development indicators, and without sufficient improvement, it may be overtaken by the newer, less developed neighbors.”

“The major policy challenge the Philippine faces in its Medium-Term Development Plan is improving its infrastructure, access to education and development resources, and ensuring jobs for all. Both road transport and power are critical to a more closely integrated Philippine economy, helping to attract widely dispersed private-sector investment.” [Structural policy challenges - Philippines, Southeast Asian Economic Outlook 2013, OECD]

Clearly, we need something beyond populist pronouncements that may win brownie points over the short-term. To prioritize our efforts is a must yet moving government's limited funds around can’t be our go-to response to challenges when it risks perpetuating the pork barrel system – and thus influence peddling! And that's why we need to keep our eye on the ball of economic development – and enlarge the PHL pie. And in today's highly competitive world (manifested by the ASEAN Economic Community in the region) the key is for economies to be competitive in the strictest sense of the word.

In the case of Europe, The Economist, in their periodic technology series, would conclude that despite Europe’s consistency in generating more ideas, the US continued to come out with more real-world relevant tools as in productivity tools or 21st century lifestyle-relevant gadgets, among others. Why? Modern US R&D was inspired by Edison: “to start with the end in view.” But how would that translate in the case of PHL? If we want a richer economy – which is what economic development is about or the end view for Juan de la Cruz – we need precisely what we lack, i.e., investment, technology, innovation as well as product, people and market development.

Beyond the major policy challenge highlighted by OECD, the foregoing are the building blocks that we in PHL must assemble and pull together in a cohesive fashion, if we are to be a competitive economy and measure up to today's fast-changing world. And that is what our neighbors have done – or why, for example, Malaysia with a more developed auto industry than PHL . . . still wants the major auto brands to come to Malaysia . . . while our own continues to lag the region.
The bottom line: Our worldview is not as straightforward as the Malaysians? Consider: “Phl still SEA’s laggard in FDI flow,” read The Philippine Star. Yet, wrote a columnist: “His [Aquino] government’s refusal to build and strengthen Filipino industries and instead depend on foreign capital is the answer to his question of why the country seems to never generate enough jobs.” In other words, in our heart of hearts we’re neither here nor there. And it explains why for decades we’ve embraced sub-optimization a.k.a. crab mentality?

Tuesday, February 18, 2014

Climbing out of grief: the five stages

“The stages of grief are universal . . . The key to understanding the stages is not to feel like you must go through every one of them, in precise order. Instead, it's more helpful to look at them as guides . . . to help you understand and put into context where you are: (1) Denial and isolation; (2) Anger; (3) Bargaining; (4) Depression; (5) Acceptance.”[]
Grief is not confined to families; in the private sector, enterprises that find themselves unable to sustain their undertakings likewise experience grief – and why, for example, they would pursue restructuring. And even nations do; it is how they deal with grief that matters. For instance, Vietnam needed help during the Vietnam War – and PHL sent a contingent of engineers. Yet more recently, Vietnam's fundamental economic metrics are turning to look more promising than ours. And in the case of China, over thirty years ago, Deng Xiaoping begged the West: we need your wealth and technology if we are to lift our people from poverty.

Clearly, Deng demonstrated that he was not stuck in denial; and the nation's leaders mirrored the same mood of acceptance. They were hard bargainers but stayed true to their goal of embracing Western wealth and technology. And my old MNC regional team experienced it firsthand when we negotiated a couple of joint ventures in two different cities. To be sure, economies go in cycles, but China has already lifted tens of millions from poverty. Sadly, in PHL, as friends would explain in true Pinoy fashion, amid laughter over sumptuous dinner [and I’m paraphrasing but cutting out the expletives]: “Assuming foreigners introduced us to corruption, the reality is we enabled it by giving a wink and a nod while we got a piece of the action – and why elections even at the barangay level mean buying votes. While supposedly restricting them to Pinoys, we’ve sold our forests, our institutions, our laws and our future to the highest bidders. The evidence: look around, who own the pillars of the economy? Pinoys, but not only; call it Pinoy plus.”

And not surprisingly, we’re left with putting a good spin on our woes: PHL has a lot of money; we are not really underdeveloped; etc., etc.? To be able to move beyond denial, individuals have the option to see a shrink. A nation like China needed leadership and found it in Deng Xiaoping. Almost a year ago, the OECD came out with a report that was picked up by the local press: “PH seen still lagging behind peers.” [Philippine Daily Inquirer, 24th Mar 2013.] “The Philippines is lagging behind most of the founding members of the Association of Southeast Asian Nations in many economic and development indicators, and without sufficient improvement, it may be overtaken by the newer, less developed neighbors.”

And with ASEAN integration in front of us, events calling one and all to be prepared abound. But as officials of DTI have been saying, the sky will not fall in 2015 because tariffs have already been coming down over the last two decades. Still, we're like students cramming for the exams. What is reality? The sky may not fall but it really doesn't matter since Singapore, Malaysia and Thailand have already dominated regional trade. And as though to stress the obvious, the OECD came out with the unflattering report.

“The major policy challenge the Philippine faces in its Medium-Term Development Plan is improving its infrastructure, access to education and development resources, and ensuring jobs for all. Both road transport and power are critical to a more closely integrated Philippine economy, helping to attract widely dispersed private-sector investment.”[Structural policy challenges - Philippines, Southeast Asian Economic Outlook 2013, OECD]

How straightforward is that? How could we not be all on the same page reading something we typically call “as clear as mud”? “Both road transport and power are critical to a more closely integrated Philippine economy, helping to attract widely dispersed private-sector investment.” Amen! Behind the criticalness of road transport and power is the reality that PHL lags in investment – which we can’t simply pay lip service to if we are not to be left behind by our neighbors and, as importantly, to narrow the gap between the elite class and Juan de la Cruz. Wrote Raul V, Fabella, Green shoots, Introspective, Business World, 9th Feb 2014: “Our investment rate (Capital formation over GDP) still stands at about 19% in 2013 in a region where 30% is normal.”

This blog constantly talks about the imperative of focus – but Juan de la Cruz can't focus on road transport and power, for instance, and the imperative of FDIs? Do we hope to be lucky because China is losing its luster? It is, but foreign investors have gone to Indonesia, for example. The evidence: Indonesia’s stock of foreign direct investment is now over 6 times more than ours. Will the turmoil in Thailand bring investors to us? We can keep our fingers crossed but that means we have yet to internalize nation building? Luck is always possible but nation building as our neighbors have demonstrated is more deliberate? See below re seven pillars of Western wisdom and how our neighbors figured out what enabled the West to succeed.

But we’re Christians, compassionate and proud of CCT? Yet we have no choice but pursue such a stop gap until we raise our average income? The problem with a habit is inertia . . . and stop gap becomes permanent? The evidence: OFWs and BPOs. And because they’ve kept our economy growing we have contracted our own “Dutch disease"? And it's classic Pinoy abilidad – and so we celebrate sub-optimized outcomes? And as my Bulgarian friends would say, “there is no total happiness in this country.” Until they would realize that even when perfection is not of this world, the future is for them to make. And when they look not that far back, they couldn't even imagine they were in the pits. What changed? For 8 years they were focused on margins. It was a struggle but the hurdles they had to overcome schooled them on the imperatives of the 21st century world. The moral of the story: no pain, no gain – that beyond investment, they had to be committed to technology and innovation as well as product, people and market development.

But we Pinoys are in the tropics and have the luxury of taking it easy, calling it “quality of life . . . to die for”? Hopefully, we’re coming around given the realities of ASEAN integration. Sometime ago, I posted the following: “A Singaporean scholar (Kishore Mahbubani, Dean of the School of public policy at the National University of Singapore and former Singaporean ambassador to the UN, and author) argues that: “China (and most of Asia) has finally figured out the 7 pillars of Western wisdom, which enabled the West to succeed:

1.      Free market economics: the Chinese are deeply committed to free market economics, one reason why China (while still an autocratic regime) was very keen to join the WTO is because they believe that by complying with those standards it will become the most competitive economy in the world. (Russia felt the WTO rules were an imposition on them; the Chinese believed they're a gift to them).
2.      Science and technology: Europe became dominant for centuries because it surged ahead in its mastery of science and tech. But if you extrapolate from what you see on campuses and colleges today, by 2010 70-90% of all new PhDs in science and engineering will be held by Asians.
3.      Meritocracy: why is Brazil a soccer superpower but economically a medium power? Because when it comes to soccer, they look everywhere, they search for the best players in cities as well as in slums; but when they look for economic talent, they only look to the upper or medium class. Asians have discovered that the millions of brains that were not used for centuries are now being used. In India, even the "untouchables" are being given education and are integrated into the economy, it's a silent revolution.
4.      Pragmatism: it's an ancient Western practice. Asians have become the best copycat nations in the world. As Deng Xiaoping said: "it doesn't matter if a cat is white or black, if it catches mice". In most of Asia, the ideological debates are left behind.
5.      Culture of peace: In the region where we saw the biggest war since WW2, the guns are now silent.  Asians have not got to the "zero prospect of war" that Europe has achieved, but it's moving in the right direction.
6.      Rule of law: the country that is producing the largest number of new laws in the world is China.
7.      Education: the hunger for education in Asia is phenomenal. In many ways, the gold standard for education now is being set by Asian countries, starting with Singapore.”

Wednesday, February 12, 2014

Pull rank . . . and kill creativity

“A classic model of the stages of creativity roughly translates to three modes of focus: orienting, where we search out and immerse ourselves in all kinds of input; selective attention on the specific creative challenge; and open awareness, where we associate freely to let the solution emerge – then home in on the solution.” [Daniel Goleman, Focus: The hidden driver of excellence, p. 42; Harper Collins, 2013]

How does that relate to Pinoy creativity? Does it make it a myth given that in our value system rank – with its privileges – takes precedence? Does it also explain why we can't arrive at a consensus especially in our search for the common good? Because he who has the gold rules – i.e., he or she will insist it is either their way or the highway? Think of NAIA 3 or the more current battles of the titans – and why instead of PHL as one nation pushing to catch up in infrastructure development we're seeing protests and challenges? And do they speak volumes as in incompetence or influence peddling or corruption or greed? “The liar's punishment is not in the least that he is not believed, but that he cannot believe anyone else.” [George Bernard Shaw]

Does it explain why we seem unable to home in on the solution to a problem – and why, for example, we can't put the power crisis to bed? “Matagal na itong pinag-uusapan . . . This was taken up a long time ago. We have been holding public hearings at the Energy Regulatory Commission even during the 14th Congress [2007-2010].” [Inquirer, 26th Jun 2012.] “The “real debate,” according to Eastern Samar Rep. Ben Evardone, over the issue of renewable energy was between existing power producers and the proponents of renewable energy, saying that the former were barring alternative energy in order to protect their interests.” And more recently: "Committed power projects still inadequate to meet future demands," Manila Bulletin, 5th Feb 2014.

A friend whose overseas career was with a global engineering firm narrated: “Sadly, it is not only about ‘puro daldal, satsat, sitsit.’ You know why? Instinctively we would matter-of-factly invoke rank and/or infinite wisdom. Which I saw at close range in two projects: one in my alma mater to pursue a major undertaking and the other in a government agency that has been hard at work on a roadmap. With my old schoolmates, it was their way or the highway because everyone that had the means to bankroll a project would insist he had infinite wisdom. And the one with government, one would think that we were sending a man to Mars. Keeping it simple is not in our DNA! And later I would read that higher-ups in the department were allegedly tainted with corruption. And so we continue to take one step forward and two steps back.” 

Talking about roadmaps, how much does industry expect government to step in, and defer to Big Brother? It is important that industry's success model not mirror that of a monopoly and/or oligopoly where government as in political patronage is the critical success factor. That’s not what government is about – but committing to good governance and infrastructure and healthy competition, for example, if PHL would have a chance at nation building. Otherwise we would pay the price, if we haven’t yet, as in the collective failure to develop true, honest-to-goodness creativity competency demanded by free enterprise.

Take the electronics industry: How much role is government to play in the effort to move to higher valued-added products? It is important that the industry truly grow up, and understand and accept the realities of the 21st century world where the cost of entry, beyond investment, includes technology, innovation, product development as well as people and market development? There is no free lunch!

In the case of the food industry, it is reported that our national scientists are developing production equipment to support local enterprises. It is important that we don't embark on import substitution which in fact contributed to stunting the development of Philippine industry. It perpetuated the instinct to set a very low bar for ourselves! Will this equipment, for instance, be as efficient as those made in Germany? In other words, if a local PHL enterprise is setting its sight on the local market, this option would work – but not if it would compete beyond our shores. 

What is the object of the exercise? Is it to reduce the costs to a local manufacturer that will market the products locally? Or is it to develop our capability in becoming an industrial equipment manufacturer? But if what we want is for the output or the products to compete in the ASEAN market, then the key is to acquire world-class technology and equipment from wherever. On the other hand, if the object is to be a world-class industrial equipment producer then we better go to school in Germany, for example, and assess if we could leapfrog the process.

Or if we could not foresee the chance of reaching that level then we can focus on a narrower slice of the manufacturing process where we could aspire to be a world-beater. But are there other countries like Taiwan that are already doing that – and hence we must aspire and pursue beating them? How? If indeed we would define nirvana in that respect, then that is where we need a roadmap. Defining an industry starts with the products – not the equipment – that have the promise to win in the marketplace. (That is an example of interpreting “start with the end in view.”) And the choice of the requisite technology and equipment must reinforce the overarching goal of global competitiveness – i.e., it does not have to be homegrown which is why the Malaysians, for example, are seeking foreign partners to further develop their auto industry. And their industry is already more advanced than ours. And as China has demonstrated, it is the quickest way to develop local technology than starting from scratch! And why we need to pick the brains of our neighbors – they've been there and done that! The world has moved beyond linear thinking and into critical and creative thinking. And creative thinking is not Pinoy creativity as we know it.

It is heartening that we have a “select few” surgeons that have done exactly that: “[W]e had no choice but to study abroad,” says Dr. Allen Buenafe, Director of Minimally Invasive Surgery for Cardinal Santos Medical Center's Philippine Center for Advanced Surgery . . . “Their pilgrimage . . . was triggered by the absence of advanced training programs and medical technologies in the country . . . If you compare our hospitals with ones in other countries like Singapore, we are still lagging behind in terms of technology . . .” [Doctors prepare for ASEAN integration, Manila Standard Today, 9th Feb 2014.] Dr. Buenafe would remind me of my high school PE teacher, a doctor, who introduced the principle of cause and effect. And he would add: if you believe you are interested in cause and effect, you may want to pursue medicine. I did not want to be a doctor but realized that the principle applies to problem solving. And today even my Eastern European friends have embraced it. 

But to go back to product development: Should we wonder why Bill Gates, for instance, after decades of being poked by Steve Jobs, has realized that competitiveness is about competitive products that are founded on a value-proposition that responds to a consumer need? And so while stepping down as Microsoft CEO, he would in fact be the product development guru – very much like what Jobs did at Apple.

Yet years earlier, when Steve Jobs unveiled the Apple II, he would acknowledge the team members that worked with him and had them in the front row – with each person singled out in the audio-visual presentation. Not surprisingly, my Eastern European friends, in their commitment to the pursuit of competitive products, have realized that product development is a team effort. And, as importantly, the key to creativity is to stay with the discipline of the thought process.

I am in Makati as I write and have been away for over two months, yet I was grinning from ear to ear viewing photos of new products that my friends emailed the past couple of days. And beyond products they also shared the progress of experiments we’ve embarked on as we continued to challenge elements of our business model. Why? Change is the only thing constant especially in the 21st century highly competitive globalized world, but to us Pinoys it’s still same old, same old? Do we expect creativity to be nurtured in such an environment? Does it explain why we want Big Brother to take the lead in the pursuit of product competitiveness?

Saturday, February 8, 2014

Free enterprise: the ABC

Every time I read comprehensive, holistic, inclusive, etc., I would remember my wife’s objection: “Why are we in this God-forsaken place?” It is simply about the dynamics. I am getting ahead of myself. But that was my wife’s knee-jerk the first time we were driving into a town in Bulgaria, 400 km northeast of the capital, Sofia, and 80 km west of the Black Sea. Comprehensive, holistic, inclusive, etc., were supposedly the virtues peddled by the Soviets to their satellite states. But these people chose to move on instead of being hostage to their past. People have the choice to either cling to the past or muster the courage to move on and play the cards they were dealt with? And so the first lesson my Bulgarian friends had to learn was margins – the platform we had to establish if indeed we wanted an enterprise that is comprehensive, holistic, and inclusive, etc. to our ever expanding constituencies – beyond our employees and including partners that were supporting us. It takes a village!

[N.B. The late Bernard Lonergan, S.J. is renowned for his contributions to economics: Journal of Macrodynamic Analysis 5 (2010), pp. 107, 109; Eileen de Neeve, Interpreting Bernard Lonergan . . . “What needs to be understood is that the extraordinary profits of the surplus expansion or boom are temporary, to be saved and invested in capital goods to extend the production of consumer goods . . . Lonergan's general theory of dynamics explains innovation and growth that result from “new ideas, new methods, new organization.”]

The prerequisite or the imperative of margins in free enterprise is something we Pinoys take for granted because we've been schooled in democracy? Yet by being parochial we've ceded a lot of ground to oligarchy and surrendered to our neighbors in today's highly globalized and competitive 21st century? It brings to mind Francis denouncing ideologues as narcissists suffering from leprosy, for misunderstanding our faith?

The imperative of margins sounded logical to my Eastern European friends until one day they came back rather distraught: “But we’re poor Bulgarians, we can only sell products at 50 euro cents.” It is simply about the dynamics. It was a simple lesson that took 8 years to largely sink in and 11 years to embrace. It is simply about the dynamics. Recall that President Ramos, trained as a soldier but at the core an engineer, talked about enlarging the pie. In other words, in the case of PHL, we did not have enough wealth to spread around and thus the need for a larger pie.

Still, years later, the church, for example, continues to preach comprehensive, holistic, inclusive, etc., without the context of an enlarged pie?

It is irrelevant but it needs to be swept away because it bugs Juan de la Cruz no end. We are reading too much about the US; but the character of their poverty has no semblance to ours. We are an underdeveloped economy thus a very miniscule pie, while the US is a fully developed economy and the world’s largest pie. And they are two different pies. Ours is Colette’s buko pie from Tagaytay, if you will, and theirs are macaroons from Ladurée. In other words, their ingredients are premium grade and thus expensive. Their poverty is largely driven by their costs structure (which is why they had to invent outsourcing only to be bitten by its collateral damage, i.e., decline in manufacturing and employment) while ours simply is a function of a very small pie.

What we ought to be talking about and learning from are the words of Lee Kuan Yew and Mahathir re how they embraced Western wealth and technology – and thus developed their economies faster than we did. Thus Malaysia has a bigger pie, roughly 4 times our average income, not to mention Singapore, being a First-World state! We don't have to reinvent the wheel but instead send people to these countries and pick their brains like what Deng Xiaoping did. But Juan de la Cruz wouldn't? Why? We may have the brains yet the test of the pudding is in the eating?

Wrote Val Araneta, Business Mirror, 30th Jan 2014: “The problem with subsidies, as can be discerned from the cases of Thailand and Indonesia, is that it entails the reallocation of resources from one sector of the economy to another sector in a manner that goes against the flow of market forces and cannot be sustained without eventually affecting other economic variables . . . This leads to the current debate on why electrical power cost in the Philippines is believed  to be among  the highest in East Asia and as to whether the government should subsidize it or not.”

“[T]he Epira law is the core of a whole process of transferring the business of power generation and transmission to the private sector, because the government and government-run corporations failed not only in operating the business of power generation and transmission profitably but worse it failed to put up the generating capacity needed by the economy . . . The government’s role is to bring down the barriers for entry into the business by capable investors to expand capacity and to regulate the industry to ensure optional competition and prevent monopolistic practices.”

But the hurdle doesn’t end there! If PHL is to attain regional, and ideally global, competitiveness industry or the private sector must be able to develop and market competitive products. And that means that at the enterprise level, it must be recognized that a competitive product, because it responds to a consumer need, while may cost more to produce given the requisite value proposition, can command a bigger market – and with economies of scale will generate a surplus. 

Precisely what my Eastern Europeans learned despite the struggle . . . And so from doing business in their one small country they are now in over 30 countries and counting. But is that model universal? Which is why in an earlier blog, I discussed the Malaysian auto industry, quoting from a article by Chong Pooi Koon and Manirajan Ramasamy, 20th Jan 2014:

“Malaysia will selectively seek foreign investments that bring advanced technology and offer customized incentives to attract companies . . . This is a big deal because previously we didn't issue any licenses for the manufacture of small cars . . . Effective immediately, the new policy further opens up the national maker Proton . . . to foreign competition . . .

“Malaysia wants to position itself as a manufacturing hub for energy-efficient vehicles to differentiate the country from Thailand, where foreign automakers have invested to produce pick-up trucks and other vehicles . . . By focusing on energy-efficient vehicles, we are also at the same time making Malaysia a center of excellence for technology.

“Vehicle prices may fall in Malaysia by as much as 30 percent by the end of 2018 as a result of local production by global automakers and other government incentives . . .

And thus my reaction: “Wow! That is the kind of thought process one would read in the Harvard Business Review or a Fortune 500 company's business-review minutes. It reveals decades of experience in successful global competition. It is real-world expertise that cannot be gained overnight . . . It is characterized by the imperatives of 21st century global competition – i.e., technology, innovation, product development, among others – that will command a market – with a clearly differentiated product portfolio – and generate a surplus given economies of scale and pricing advantage.”

We can’t expect to appreciate and embrace the ABC of free enterprise overnight especially given that PHL has been an oligopoly for decades. And so our mindset is either for or against oligopoly? But it does not follow that we are measuring our challenge against the imperatives of free enterprise especially in a globalized, highly competitive economy – because it is foreign to Juan de la Cruz? The evidence: three of our neighbors control regional trade to the extent of 70 percent! What are we waiting for – why haven't we picked their brains? Que sera, sera?

Tuesday, February 4, 2014

The hubris of Ballmer et al.

“Microsoft's chief executive, Steven A. Ballmer, shrugged off the shift Thursday morning. “No technology company on the planet is more profitable than we are . . .” [Apple passes Microsoft as no. 1 in tech, The New York Times, 26th May 2010] “Michael S. Dell, the founder and chief executive of Dell computer, went so far as to suggest that Apple should shut down and return any money to shareholders. (The computer maker is now worth about a tenth of Apple.) Around the same time, Microsoft’s chief technology officer called Apple “almost dead.”

“Wall Street has called the end of an era and the beginning of the next one. The most important technology product no longer sits on your desk but rather fits in our hand. The moment came Wednesday when Apple . . . shot past Microsoft, the computer software giant, to become the world’s most valuable technology company. This changing of the guard caps one of the most stunning turnarounds in business history for Apple, which had been given up for dead only a decade earlier, and its co-founder and visionary chief executive, Steven P. Jobs.

“Microsoft depends more on maintaining the status quo, while Apple is in a constant battle to one-up itself and create something new . . . Microsoft [a hugely powerful and profitable company in the tech world] . . . [and] a component of the Dow Jones industrial average, has lost half of its value since 2000.”

What happened to Ballmer? “[T]he new [Microsoft] CEO is coming soon enough to replace outgoing leader Steve Ballmer. While his tenure has been marked by improvements in profits and sales, it is now too contrasted by a glacial — even willfully resistant — pace of innovation around key emerging products, most especially mobile devices . . . Thus, it’s long past time for him to move along and end this slo-mo exit that many investors and employees have found excruciating.” [Kara Swisher,, 19th Jan 2014]

What lesson can we in PHL learn? We can’t afford the hubris of Ballmer et al. despite PHL enviable GDP growth over the recent past . . . given laundry list of sustainability issues that we have yet to address. Note the operative word re Microsoft, i.e., maintaining the “status quo.” We can’t say that we are a hugely powerful economy while Microsoft once upon a time was the biggest tech company – and the most profitable on the planet. And more to the point, is Juan de la Cruz wedded to the status quo? In a hierarchical system and structure as in an oligopoly, the thought of breaking the status quo is to hope against hope?

“These latter-day oligarchs, many of whom have built vast business empires on the back of long standing connections . . . are part of a political tradition that dates back to the rapid expansion of the Grand Duchy of Muscovy in the 1400s . . . the conspiracies, secrecy and power politics of the Muscovite czarist court will be readily recognizable to viewers of "Game of Thrones" . . . [which] punctures the myth of an all-powerful czar . . . [It was] a system dominated by elite groups of boyars (the top rung of aristocracy and the forebears of today's oligarchs) and bureaucrats, who imposed constraints on the country's ruler, [and] became so entrenched in the political culture.” [Andrew S. Weiss, Russia’s Oligarchy, Alive and Well, The New York Times, 30th Dec 2013.]

“Eventually, the day will come when Mr. Putin is no longer in power. Yet it seems highly unlikely that his informal style of rule will be replaced by a rule of law system based on strong institutions and checks and balances. Rather, the West must brace itself for the possibility that the oligarchic system itself, with its deep roots in Russian political culture, will outlive its current master.”

In PHL there is the world of the elite class and there is Juan de la Cruz? Will our oligarchic system likewise outlive the presidency and guaranty the longevity of the former? And so when the Central Bank, for example, is patting ourselves on the back (thanks to OFW remittances!), we have to ask which world is that? And when our expectations are raised amid persistent poverty and outdated infrastructure especially power, among others, and that we’re the next Asian tiger that has to be taken with a grain of salt? As my Eastern European friends would remind themselves, it was not that long ago when they “had to live with Soviet propaganda . . . and they matter-of-factly took us for fools!”

“Even without the foreign investments, [Philippines has a lot of money]. The reason we need them [foreigners] is because of their expertise, not the money . . . Are we underdeveloped? Not really . . .” [Weak FDI equals poverty – Oxford, Manila Times, 28th Jan 2014.]  . . . That’s serious news, not the comic section . . .

Indeed PHL has a lot of money: “It is urgent to stop corporate greed in the state bureaucracy. Those people help themselves to outrageous allowances and bonuses as if the government is an enterprise for profit. That is a sclerotic view of public service,” the feisty former trial judge fumed.” [Senators take home P1.4M a month–Santiago, Philippine Daily Inquirer, 29th Jan 2014] . . . And in town for our annual homecoming, my wife and I are getting an earful about PHL culture of impunity. We could only wonder who else could be trusted. Up and down the state bureaucracy – as far down as the barangays – and across the different branches, we've heard repeatedly, “don't bet on good governance – not in the simple enforcement of traffic rules as in jeepneys and buses clogging and obstructing traffic or sidewalks being appropriated by vendors or uncivilized land use or land grabbing that has been perfected to an art form . . . etc. etc... sadly, the rule of law is just a figment of the imagination in your pathetic country.” Wrote Mon Abrea [If the price is right, Manila Bulletin, 2nd Feb 2014]: “As Fr. Albert Alejo puts it, corruption in the Philippines is family-based, school-based, fraternity-based, law school alumni-based, and even Jesuit-based. As someone who used to work in government, I can say that, indeed, corruption is in our culture. It is a common mindset to tolerate corrupt practices for the protection of our personal and family interests.”

What else is new? “Some lawmakers reckoned that the insertion of a phrase, which would make the Constitution more accommodating to foreign investors, would finally crack the stranglehold of the “1 percent” of Filipinos who control most of the country’s wealth” [Cha-cha’ train starts rolling again but Palace not keen, Philippine Daily Inquirer, 29th Jan 2014] . . “Competition is absolutely necessary in every endeavor. Monopoly does not benefit the public. Sometimes the public interest is sacrificed because of corporate greed most especially if the monopoly pertains to vital industries of the country . . . Amending the economic provisions to make them flexible to the times is a way of dismantling monopolies, oligopolies and cartels that have become a common characteristic of our major vital industries . . .”

“In an economic forum attended by foreign economic leaders last March, former Socioeconomic Planning Secretary Cielito Habito presented data in 2011 that showed that the combined fortune of individuals and families on Forbes’ 40 richest Filipinos accounted for 76 percent of the country’s gross domestic product (GDP) growth . . . [T]his was more than double the share of the Forbes 40 in other countries like Thailand (33.7 percent), Malaysia (5.6 percent) and Japan (2.8 percent).”

And do we approximate, if not mirror, a banana republic? Wikipedia: “[A] politically unstable country . . . It typically has stratified social classes, including a large, impoverished working class and a ruling plutocracy that comprises the elites of business, politics . . . This politico-economicoligarchy controls the primary-sector of productions and thereby exploits the country's economy.”

“San Miguel currently has long-term and short-term debt of $14.8 billion . . . making the company the nation’s most-indebted. San Miguel and its units have 60.8 billion pesos of debt and interest falling due this year, of which 42 percent are in dollars. Cash and near cash items total $4.12 billion . . . With interest rates on the rise and the peso’s continued weakness against the dollar, San Miguel may have to start refinancing its debt now . . . Once capital markets start closing, the company may be forced to sell its assets at a discount.” [Bloomberg, SMC gets $6.6-B offers for stakes, Manila Bulletin, 30th Jan 2014]

“Some . . . noted that the BSP’s moves [to examine the material transactions between a bank and other entities within the conglomerate it belongs to] seem to be in reaction to the IMF’s warnings, with the global lending institution also asking the BSP to investigate if the loans by the conglomerate purportedly for oil purchases or public-private partnership (PPP) projects were being diverted into other ventures . . . [T]he IMF is reportedly set to issue a stronger warning, noting the increase in the country’s corporate debt . . . Despite IMF warnings about the possible debt problems of the conglomerate saying a recapitalization should be ordered to prevent credit contractions, the Bangko Sentral insists there is no need to tighten SBL (single borrower limit) regulations, saying the debts are well managed. Let’s just hope the IMF will not have occasion to say, “I told you so.” [Babe G. Romualdez, Over-leveraged conglomerate, SPYBITS, The Philippine Star, 28th Jan 2014]

Will PHL ever elect a leader that can transcend our parochial bias and inability to raise the bar – that is visionary to boot so that we could learn that there is such a thing as the common good and an egalitarian society? Or does leadership rightly belong to PHL’s elite class because Juan de la Cruz values a cacique hierarchical system and structure that is paternalistic and populist and nurtures crab mentality – “to protect our personal and family interests” – and why “daang matuwid” never had a chance?