Our backs are against the wall.

And we must turn our paradigm on its head. We cannot fall into the trap of “insanity.”

But it will not be easy because of our instincts. 

Our caste system gives us the license to be perfect, especially in the Philippine elite and chattering classes.

Here’s a quote from an earlier posting: “In the winter of 1848, a 26-year-old Prussian pathologist, upon the authorities' instructions, named Rudolf Virchow, investigated a typhus epidemic raging in Upper Silesia, in what is now mainly Poland.

“After three weeks of meticulous observation of the stricken populace — during which he carefully counted typhus cases and deaths by age, sex, occupation, and social class — he returned with a 190-page report that ultimately blamed poverty and social exclusion for the epidemic and deemed it an unnecessary crisis. ‘I am convinced that the epidemic would not recur if you changed these conditions,’ he wrote.

“Dr. Virchow was only a few years out of medical school, but his report became the foundational document of the new discipline of social medicine. His vision for health went far beyond individuals and the pathogens lurking inside them: He pioneered the careful epidemiological examination of social conditions such as housing, education, diet, and lifestyle, and he denounced the rigid social stratification perpetuated at the time by the Catholic Church.” [“Science Alone Can’t Heal a Sick Society,” Jay S. Kaufman, The New York Times, 10th Sep 2021; Dr. Kaufman is a professor of epidemiology at McGill University. He was recently the president of the Society for Epidemiologic Research.]

Is it surprising that Rizal defined the Catholic Church via Padre Damaso? 

It also explains the tribalism that characterizes US politics. The far-right elements see their faith as the license to be perfect. Unsurprisingly, the far-left takes the opposite claim.

Consider: Christianity has moved beyond the laws of the scribes and Pharisees. And it had to take a Christ to demonstrate it. Yet, habits are hard to break.

That’s why in the Philippines – given our caste system – come hell or high water, and we invoke our license of perfection.

For example, even the international agencies have repeatedly stressed that a 6%-7% GDP growth rate will take a generation to see the light at the end of the tunnel. And with the economy shrinking, that cannot be the be-all and end-all. 

We are yet to recognize the importance of cognitive development. That beyond binary or dualistic thinking is relativism.

Why can’t people see that? It is because of the 1-% phenomenon. It would take an Einstein to edify the world on the relativity theory. And still, take over a hundred years for humankind to demonstrate it.

That’s why the blog argues that our caste system killed our prospects for development. And our elders were prescient and created Juan Tamad and Bondying.

Why can’t we see beyond the 6%-7% GDP growth rate metric? Or beyond the debt ratios?

Because we claim learnedness – aka our license of perfection –  we embrace logical yet linear and incremental thinking.

What did we kill in the process? We can’t drive GDP – or revenue itself – because we see only one perspective.

Here’s a simple business exercise in appreciating the nuance: When a trader buys goods for one peso apiece and sells them at one-and-ten, ten is his markup. But what is his margin for the one-and-ten selling price? It is eleven.

In other words, if the object is to generate a 10-margin, it does not need a 10-markup but a lower one (9.09.) And that matters when the trader scales up the enterprise, i.e., set a lower selling price and be more competitive.

There are such nuances as “markups and margins,” i.e., different perspectives.

And here’s why MSMEs seldom break away from the umbrella of “trivial many.” 

Because they don’t have the scale, their perspective is limited to “markups,” which perpetuates linear and incremental thinking. They can’t imagine that “markups” and “margins” are two sides of the same coin.

But which comes first, the chicken or the egg? 

The concern of MSMEs is occupied disproportionately by the inadequacy of capital that they can’t forward-think. Yet, resources will always be limited. 

And so, most of them can’t become business ventures that they settle and “accept” their fate — to be livelihood efforts. 

Recall that when I first arrived in Eastern Europe, I guided them (my then-new friends) to define and establish where they wanted to be. Despite being an MSME, and not making money for eight years, they wanted to be in the industry, consumer packaged goods.

Unfortunately, Western behemoths control this industry. And they must, at the very least, be equal in size to the median MNC subsidiary, i.e., $100 million. Why? They must be able to stand toe-to-toe in competition; else, they get blown away.

What about MSMEs in the Philippines? To move from a livelihood effort to a business enterprise, they must design the business to compete successfully with the best in their respective industries.

Recall the GPS model, which facilitates forward- and lateral thinking: Where are we; Where do we want to be; How do we get there.

In other words, they must generate revenues approximating the industry leader. If that is $20 million, that must be “where they want to be.”

Sadly, to forward-think is not how our exporters do it per the DTI official I spoke with many years ago. “It is typical when they get their first substantial export order, the first thing they do is go on a European holiday or some grand holiday in the West. And before long, they lose the business to Thailand or Malaysia.” 

But let’s get back to a macro example.

And there are also nuances between GDP growth rates and absolute GDP amounts.

Recall that the blog argues that we don’t know how to drive revenues or the top line because of our oligarchic enterprises. And why our eight top companies – combined – can’t match the output of one Vietnam enterprise, Samsung Vietnam.

And that is why the blog challenged raising GDP by an incremental $200 billion.

Why $200 billion? That is to leapfrog our neighbors – because we are lagging in GDP per capita.

That is beyond linear and incremental thinking.

For example, our economic managers emphasize the imperative to raise agriculture’s productivity to feed into manufacturing and industrial development.

That is classic linear thinking. And we should have done that decades ago.

We must leapfrog and toss linear and incremental thinking.

We in the chattering classes have repeatedly raised the point that Lee Kuan Yew successfully ran Singapore like a business.

In other words, he knew that Singapore had to traverse poverty to prosperity rapidly, and he had to aggressively drive GDP – i.e., Singapore’s revenues or the top line.

That is how a private enterprise thinks, and that the lifeblood of the company is Sales – because they drive revenues.

Recall that in Eastern Europe, while my role would suffice as consulting, I agreed to organize, run, and develop the sales force to show them the ropes of aggressively driving revenues.

Still, they must recognize the imperative to connect the dots. And why they still want me to hold their hands, especially with the pandemic and with me working from home.

And what are the dots to connect? They are the three dynamics of (1) the marketing mix (and its foundation is the product portfolio that must continually respond to the challenge of raising one’s well-being; not the dead-end of “serving the bottom of the pyramid”); and between the portfolio of products and markets is the challenge of analytics: where to sell which products, why, how, and what is the priority as in Pareto — to get the biggest bang; (2) the resource mix (and it includes the access to finance, and banks favor businesses that have credible game plans, and credibility isn’t free; (3) the execution mix: who will do what, when, where, and how.

That’s why the blog raised the challenge – lift GDP by an incremental $200 billion. The Philippines cannot just aspire to be a first-world economy, and it must work its butt off.

What does that mean? It is the difference between “analysis” and “analytics.” 

“Analysis” is why we celebrated the uptick or resurgent manufacturing back in 2015. In contrast, “analytics” says that our premise was shortsighted.

Recall the GPS model: Where are we; Where do we want to be; How do we get there.

Philippine manufacturing is inward, not export-focused, and its output cannot match our neighbors. What is there to celebrate?

Forward-thinking comes with lateral thinking. And how do we get there?

Think of the following as subsets or building blocks in our nation-building efforts: (1) OFW remittances; (2) the BPO industry; (3) our being a consumer market – that we like to call “sweet spot” because ours are young consumers; (4) the 4Ps; (5) the eight top companies; (6) MSMEs that account for almost 99% of registered enterprises.

But why are we still GDP-starved? All those building blocks collectively fall short of lifting Juan de la Cruz from poverty.

And that is why we need another building block. But first, we must recognize how (a) Vietnam did it and (b) Mahathir turned Malaysia into a favored FDI destination.

That means we must (a) become a regional manufacturing hub for techno products and (b) lure the world’s best tech companies and most significant investors to the Philippines.

Sadly, Duterte, being a pariah to freedom-loving people – owing to his war on drugs, aka EJKs – has no credibility to attract investors. Neither has Bongbong – the world knows about Marcos’s unexplained wealth.

That is why the blog was delighted to see Mayor Isko as a potential candidate. He has demonstrated leadership as Manila mayor, and he needs to prove now, beyond “forward” and lateral thinking capability, the abhorrence of corruption.

Recall how my Eastern European friends became a model enterprise for Europe. Beyond commercial success and innovation, they’re a paragon of business ethics.

Those familiar with the blog may recall my message to them when I first arrived in Eastern Europe: (a) Democracy and the free market is not about rules but principles; (b) You must commit to integrity in your conduct of the business, or I am out the door. I represented an American MNC for many years and today the USAID, and I cannot go against my principles.

I did not tell them what my mother drilled into my head: Honesty is the best policy. That is why I have to be true to myself. That’s why I can disagree with the president of my old MNC-company, with the CFO, with the technology community, with the financial function, among others.

That is why I questioned the very makeup of the Philippine economy from the first day of this blog’s existence – over a dozen years ago. And I can disagree with our economic managers.

What we’ve done over decades has proved us wrong. Dead wrong. There’s no way to sugarcoat that.

What did I mean that democracy and the free market are not about rules but principles?

Recall that my Eastern European friends were pumping me for rules because they were untrained in the free market. And this reminds me of Philippine education and its fundamental problem. The good news is that even in the West, they acknowledged the shortcomings of higher education.

Everyone wants to learn about “techniques” – or the “how-to” – as though they’re the be-all and end-all, and it is about the science of “thinking.”

And so, my Eastern European friends were surprised that while conducting workshops, I won’t dish out “rules” and instead break them into small groups to practice and learn problem-solving – i.e., to internalize the principles relevant to the subject.

Let’s get back to the Philippines.

Our backs are against the wall.

If we in the Philippine elite and chattering classes can’t lead Juan de la Cruz to reinvent himself, this country is doomed.

That is because our inward-looking bias won’t desert us. Why?

Our caste system gives us – in the Philippine elite and chattering classes – license to be perfect. Why?  The Catholic Church?

What are we missing? That Christianity has moved beyond the laws of the scribes and Pharisees. And it had to take a Christ to demonstrate it. Yet, habits are hard to break.

That’s why in the Philippines – given our caste system – come hell or high water, and we invoke our license of perfection.

Gising bayan!