Thursday, January 26, 2017

“Begin with the end in mind”

“The national government is keen on growing farm production by 2.5 percent to 3.5 percent annually starting this year until 2022, when the President steps down from office, according to the draft of the Philippine Development Plan (PDP) 2017-2022.” [Piñol eyes 10-year agriculture road map, Jasper Y. Arcalas, Business Mirror, 18th Jan 2017]

That’s the conventional approach to development planning, which is a product of linear thinking. And is consistent with how we measure economic performance. For example, we believe we can be growing at 7% and move up to a high-income nation. At constant prices that means it will take us a generation to get there.

The problem with major undertakings derived from linear thinking is while it may serve the purposes of analysts, it doesn’t put a fire in the belly of a farmer, for example, to fight and win with energy and determination. That is why in this day and age of Big Data and analytics, there is data visualization beyond data analysis.

And successful global enterprises do it all the time – “the how to and the why” – they are able to get the organization singing from the same hymnal. It is called a sense of purpose. And here is an example that can inspire our MSMEs: the writer’s Eastern European friends, when they were an MSME, needed a fire in the belly to believe that they can be a $100 million-dollar enterprise; and then be a $1-billion enterprise.

In other words, an MSME need not limit its worldview to being a livelihood undertaking. Which is not surprising given how we have defined our challenge: jobs . . . and poverty. Instead, try: a competitive economy that produces competitive products and generates increasing wealth. In short, our challenge is to become a wealthy economy.

And then comes “thinking in reverse” which the blog has discussed as the GPS model: Where are we? Where do we want to be? How do we get there?

Where are we? Let’s look at PHL’s economic profile versus our neighbors.

The latest available information says our GDP is in the $300-B range, similar to Malaysia but behind Thailand and ahead of Vietnam (including GDP per person.) And our economy is growing faster than our neighbors. But any positives stop there.

With due respect to analysts that keep giving us credit for our strong economic fundamentals: they are attributable to the free money we get from OFW remittances – and, of course, the contributions of the BPO industry.

Still, the numbers confirm why we’re the regional laggard. It is well-established that our accumulated FDI is a mere fraction compared to our peers. And everything goes downhill from there – after we ceded advantage in investment and technology and, by extension, innovation. We are the only one among the referenced countries that imports more than exports, a stark reminder of our inability to develop and produce competitive products. Yet we can’t seem to recognize the disconnect?

Not if we are bound by linear thinking – which undermines creativity. Recall Steve Jobs defined creativity simply as connecting the dots. And he demonstrated this by pointing out the failure of PARC-Xerox – and by extension IBM – to capitalize the power of the (concept of) the “mouse” that PARC was working on and yet the world will see it first in the Mac.

For many years we gave ourselves credit for an inward-looking consumption economy, that sadly we are still paying a heavy price – for short-sightedness and stunting PH development. All because we very narrowly defined our challenge as “jobs” – and promoted the OFW phenomenon as our mantra.

And not surprisingly, we have the least invested in fixed capital. Without a portfolio of competitive products to market – and export – we have no compelling need to invest in fixed capital. And it explains why we have the least in industry contribution to GDP.

A perfect storm that we brought upon ourselves. And the bottom line is unmistakable: we have the highest unemployment rate and the highest poverty rate. Yet the national conversation is same old, same old. It’s insanity, so says Einstein?

Where we are speaks volumes – that we must step up to the plate and undo our instincts: Parochial. Insular. Hierarchical. Paternalistic. Political patronage and dynasties. Oligarchic. Culture of impunity.

Instead, our instincts must be characterized as: Open. Egalitarian. Free market. Rule of law.

And it starts with the value of transparency. And why the blog maintains that Marcos plus Duterte equals disaster! Transparency is not FOI – which is compelled. Transparency is intrinsic like old-world values – a.k.a. honor system. If Juan de la Cruz cannot internalize transparency, community and the common good will be beyond our reach, ever. Consider how many of us still haven’t figured out how Marcos has wrought this nation.

And why in America more people protested the inauguration of Trump than those who celebrated it. Not surprising given the fluke of the American Electoral College system. Deal-making and brinkmanship go together, and where transparency is not an imperative. It is Trump’s world. Leadership in a democracy is something else, where check-and-balance reigns otherwise it smooths the way for autocracy, and undermines freedom and democracy. And GOP senators like Graham are expressing alarm.

But let’s get back to visualization. 

60% of our GDP comes from services to the tune of $186-B. We want to preserve that and, clearly, to build upon it. Agriculture contributes 10% of GDP which translates to $30-B in income. While industry delivers $95-B at a-31% share.

Where do we want to be? Here is one way to visualize our way forward. In agriculture we can benchmark against Indonesia where the sector contributes 14% of GDP. Which translates to $43-B in income at current PH GDP of $312-B. That means raising agriculture output by 141%.

How do we get there? How do we raise agriculture output from $30-B to $43-B?

Enter Pareto: we must prioritize our plans and efforts according to the potentials of the agriculture subsectors and support them with the requisite investment levels. That is a major caveat, which again means connecting the dots: from understanding market needs, and more precisely human need, to drive product development and R&D, man’s wellbeing being the North Start; to technology and innovation; to people development, education and training, if you will; to market development.

Again: Prioritize. Prioritize. Prioritize. To simply say we must mechanize without visualizing what the endpoint must be is why socialism failed, for instance. Sub-optimizing investments by spreading scarce resources thinly is a race to the bottom – a.k.a. “crab mentality.”

We can do a similar exercise with industry. If we benchmark against Vietnam, we must then drive industry output from 31% to 39% to generate $122-B or an increase of 128%.

If that sounds logical, then we must be . . . an open economy . . . an egalitarian culture . . . a free market . . . committed to the rule of law. It is what freedom and democracy is about, it opens the eyes of Juan de la Cruz to limitless possibilities.

Not the very limited narrow view of, say, inclusion. But even in the developed Western world the mantra is inclusion? That is precisely the point. We want to compare apples and oranges. Being underdeveloped, we should not be comparing ourselves against wealthy nations. They have the means to spread wealth. And we don’t. And think of the tons of money we borrow for CCT, and where are we?

Our dire need is – and what our mantra must be – development. To become a wealthy nation. And we can beat the West in their own game if we leapfrog and rapidly acquire the skills where their educational system failed them: communication, teamwork, critical thinking.

Communication must be qualified as embracing community and the common good and that is facilitated via a sense of purpose. Communication is not false advertising. Or false claims and fake news. They are divisive as demonstrated by the “world” that has been created upon the arrival of Duterte and Trump into the political scene. They are anathema to teamwork. While critical thinking is facilitated by the mantra, begin with the end in mind.

Visualization is forward-looking. It is lateral thinking. It connects the dots . . . it is creative. It puts a fire in the belly.

Sadly, that is not Juan de la Cruz? Where are we? Where do we want to be? How do we get there? Begin with the end in mind!

“Why independence, if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted, for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]

“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]

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