We must turn our paradigm on its head.

Question: We don’t have to go back decades, but where is our head today versus, say, twelve years ago?

The genesis of this blog: “I started writing to engage columnists and newspaper editors at the end of a trip to the Philippines over Holy Week in 2008 – to echo the frustrations expressed by friends and relations that were much louder and more intense than prior trips

“My first thought was: with so many talents and skills, how could the country be the basket case of Asia? Are we too nice as a people?

“Since then I have kept abreast with local news and opinions, and it seems that the views about the economy can be summarized as follows: (a) Our leaders failed us – they are too preoccupied with their selfish interests; despite People Power corruption still reigns and reigns powerfully; (b) Capitalism failed us – capitalists and foreign investors are not unlike our leaders, they have only enriched themselves and exploited the resources of the country; (c) We remain a resilient people – we have created a new and more significant middle class with millions of OFWs and their families, and at home, we can make do with homegrown entrepreneurship.

“Yet, poverty remains our Achilles heel; and hence our Christian compassion has become an advocacy.”

Can we pause – and ponder?

The pandemic has exposed the weakness of our economy. And the recovery will be treacherous and take time, years, per NEDA.

Recall that the blog has repeatedly spoken to the character of this universe: dynamism and interdependence.

Interestingly, here’s how The Economist hypothesizes about America: “Is America Inc getting less dynamic, less global, and more monopolistic?” [The Economist, 16th Sep 2021]

Dynamism and interdependence. Can we Filipinos wrap our heads around that?

It will not be easy, given our instincts: We are parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy that ours is a culture of impunity.

And how should we hypothesize about the Philippines?

“The reference of Oxford Economics to the highest increase in the labor force will remind us that the two most potent engines of growth before and after the pandemic are the remittances from some 10 million Overseas Filipino Workers (OFWs) and the considerable dollar earnings of the BPO-IT sector. These two account for some 12% to 15% of the Philippine GDP, and they would not be possible without our young, growing, and English-speaking population. During the pandemic, these were the two sectors that hardly suffered from the global meltdown.

“The HSBC prognosticated about the Philippines, actually were accomplished during the past five years of the Duterte Administration, especially those about the significant improvement in infrastructures through the Build, Build, Build program.

“What we still need is to reduce restrictions against foreign direct investments that may still happen before the end of the present Administration through the three pending bills in Congress, i.e., the Public Utility Act, Retail Trade Liberalization, and the Foreign Investment Act.” [“Aspiring for high-income status,” Bernardo M. Villegas, Human Side Of Economics, BusinessWorld, 14th Sep 2021]

“The good news is that the data show that the Philippine economy has become more inclusive, and income distribution has improved over time, notably within the last decade. The average income of the wealthiest one-tenth was 12 times the poorest one-tenth in the 1980s, 10.3 times in 2009, and now only 7.6 times as of 2018.

“A study by Dr. Rafaelita Aldaba found that across Philippine manufacturing industries, the top four firms accounted for an average of 81 percent of total industry output in 1998. But ten years before, that ‘four-firm concentration ratio’ was just 71 percent, implying that market concentration rose through that decade. More recently, the Ateneo Policy Center found that in 2012, the top 15 business conglomerates generated the equivalent of 4.7 percent of our total gross value added, aka gross domestic product. By 2018, this share had grown to almost 6 percent.

“These all mean that incomes of the lowest income groups have grown faster than incomes at the top and that in the poorest regions have risen faster than in the traditionally favored areas of Metro Manila and Luzon. Indeed, government policies must have been instrumental, like the Magna Carta for Micro, Small, and Medium Enterprises of 2008 (MSMEs), the Philippine Competition Act of 2015, and the Board of Investments incentives for inclusive business models.

“But with large enterprises contributing an estimated 38 percent of total jobs and 64 percent of total incomes, it stands to reason that they too must have had a role in the observed improvement.” [“Big and bad(?),” Cielito F. Habito, NO FREE LUNCH, Philippine Daily Inquirer, 21st Sep 2021]

Hold it right there.

And let’s get back to The Economist: “Concerns about the health of American business are many and varied. Because of the short-terminism, Chief executives suffer from criticisms. And their companies are berated for fetishizing shareholders over everyone and everything else. Elon Musk, boss of Tesla, a maker of electric cars, grumbles about a surfeit of business-school graduates stifling innovation. President Joe Biden frets as much about American companies losing out to China as Donald Trump (albeit with less bile). He also worries about the concentration of power among America’s most prominent firms.

“All this paints a picture of America Inc that looks stodgier, more parochial, and monopolistic. If true, that would be bad news for the spiritual home of free-market capitalism. But is it? The Economist set out to test all three hypotheses about American business: less dynamic, less global, and more concentrated. The results appear nowhere near as bleak as the doomsayers would have you believe."

Question: Do we see that there are concerns expressed about the health of America, while in the case of the Philippines, the net is that the prognosis is promising?

Here’s a quote from an earlier posting: “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.

Let’s pause once again. 

Do the dots connect? When an enterprise gets a free lunch courtesy of rent-seeking, why would it develop the ability to seek and win revenues? 

I worked with one Philippine oligarchy for eight years; we did not worry about selling because the market absorbed everything we produced. Zero competition is heaven-sent.

But there’s no free lunch. Use it or lose it. That’s why neuroscience says the brain is like a muscle, and it needs toning.

What about the dollar billionaires that we’ve proudly created because we have a promising economy?

With due respect to Ciel Habito, between OFW remittances and the BPO industry, as pointed out by Bernie Villegas, we generate roughly $60 billion. And that is 169% more than the combined wealth of our dollar billionaires.

In fairness, that is why we celebrate OFWs — and the BPO industry, too — as heroes, and they are the two pillars of our economy.

But do they give the Philippine economy free lunch? Use it or lose it.

On the GINI coefficient, we have the worst index compared to our neighbors.

The bottom line? Are we again falling into the trap of “correct analysis” but missing the “analytics” – the big picture – as we did when we celebrated the uptick in manufacturing in 2015?

And that is why the blog (a) put up the challenge of raising GDP by an incremental $200 billion and (b) leapfrog our neighbors because we lag in GDP per capita.

In other words, that goes beyond 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.

That’s why the blog often narrates the Ph.D. candidate I mentored in her dissertation. Don’t think of the object of the exercise to be a commercial success. Instead, consider that higher education must seek to impact the real world.

Recall that Steve Jobs wanted to make a dent in the universe, and his widow is making good on his aspiration. She is well on her way to disbursing his wealth — all of it — for humanity’s sake.

“The most important lesson from South Korea for the Philippines is the priority to be given to rural and agricultural development in attaining sustainable and inclusive growth. Although South Korea has minimal agricultural resources, Park Chung Hee ensured the focus and importance of rural and agricultural development at the beginning.

Then consider: “It would be of great interest for us to examine closely the experience of South Korea, one of the so-called ‘tiger economies’ which transitioned from low-income to First World status in record time. Among these Newly Industrializing Economies (NIEs), South Korea is the closest model to follow because of its relatively larger population. The other three — Singapore, Hong Kong, and Taiwan — have much smaller populations and may have fewer lessons for us to follow.” [Villegas, op. cit.]

One more time with feeling: That is classic linear thinking. And we should have done that decades ago.

Indeed, we must continue to do the spadework at the rural and agri levels. 

But there must be a parallel effort to leapfrog industrial development so that national income or GDP accelerates at a much faster pace to support rural and agricultural development.

Stop. Look. Listen.

If we have our Zoom groups, is that a topic we want to explore? To explore is a lateral thinking exercise. Among my Eastern European friends, they call it brainstorming to generate the Monday to Sunday versions — a reminder that the story of creation took more than one day.

In the West, they call that “walking and chewing gum simultaneously.”

Beyond learning from the Koreans, we must learn from the Vietnamese. It was Boo Chanco who narrated the sob story from a Korean about how we blew it and lost Samsung to Vietnam.

And at the macro level, we must recognize that the period of the ‘60s and beyond is very different from today, the 21st century. Simply put, the South Korean model worked in the earlier period, but the Vietnam miracle says today is another ballgame. 

Innovation is happening at warp speed. The good news is that even developing countries can tap them via FDI.

For example, when the blog started a dozen years ago, it pointed out that Vietnam was cornering FDIs coming to our part of the world.

Technology development is not linear. Please recall lateral thinking. In fairness, it is counterintuitive. 

Practice. Practice. Practice.

For example, I recall the story of my old MNC-company tapping technology from the outside despite its 1000-strong technology center. [Disclosure: I have been a practitioner for decades that I speak matter-of-factly about the distinction between “analysis” and “analytics.” The world and higher education teach us otherwise; logical yet linear and incremental thinking.]

It works for MNCs, and it works for countries too like Vietnam and China. Again, my old MNC-company, as with many Western MNCs, transferred technology to China via its liberal investment climate.

It works even for MSMEs. My Eastern European friends tapped innovation offered by Western suppliers that recognized their ability to expand their geographical reach. Unsurprisingly, they can compete head-to-head against Western behemoths.

We Filipinos don’t have to settle for and start with R&D 101.

Consider: “It may take ten years [for the economy] to reach pre-COVID-19 trajectory,” per NEDA chief Karl Chua.

We must, therefore, leapfrog and toss linear and incremental thinking.

Here’s a quote from an earlier posting: “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.”

Let’s pause once again.

To turn our paradigm on its head, we must likewise address politics. Again, the blog won’t offer the US as a best-practice model.

It is American dynamism that keeps America enviable. Conversely, American politics today undermines its sworn ideal of freedom and democracy. 

But there is welcome news in the “climate change” debate: The “progressives” are moving a bit away from their dogma. Instead of merely badmouthing “supply-side” economics and prescribing “wealth redistribution” to generate demand, they recognize the imperative of (a) innovation to develop alternative energy sources rapidly, (b) building and scaling up an industry, (c) that will be viable and sustainable because of affordability.

We Filipinos need to learn more about dynamism to counter our parochial and insular instincts. 

And that means we must figure out how to overcome populism in politics.

And it will not be easy given that Juan de la Cruz suffers from abject poverty.

That’s why we in the Philippine elite and chattering classes owe it to Juan de la Cruz to demonstrate how we can shift paradigms. 

For example, we cannot define leadership as we did in endorsing Duterte. He – and Juan de la Cruz that he represents – is now a pariah to freedom-loving people.

We know that we must attract FDIs the way our neighbors did. 

And that’s why the blog pointed out Duterte and Bongbong’s lack of credibility to attract foreign investment. Should that be the yardstick we must use to decide whom to endorse this time? 

In other words, we must commit to overturning our culture of impunity.

The Philippines needs more than OFW remittances and the BPO industry, and the three pending bills in Congress.

We need the equivalent of an ecosystem – best exemplified by the photosynthesis phenomenon. See above; our building blocks in nation-building fall short and cannot lift Juan de la Cruz from poverty.

Should we pause — and ponder?

Consider: Our neighbors built their respective ecosystems rapidly to the amazement of the world.

We must turn our paradigm on its head. 

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

Where we want to be is to traverse poverty to prosperity rapidly. It is beyond addressing poverty.

That explains why despite borrowing tons of money for the 4Ps, we can’t arrest poverty while Vietnam did – and our other neighbors before them.

For example, we need another building block in our nation-building.

Consider: Apple is the most valuable enterprise ever, and Vietnam latched into the industry via Samsung.

This industry is in continual innovation; we cannot predict its demise. Look at how Vietnam lured Apple AirPods too.

There is no one bright idea to figure this challenge. See above; brainstorm the Monday to Sunday versions.

And when brainstorming, look out for the nuances between “drivers” and “enablers.” That is why there is much professional jealousy in the education field because no one will accept that they could be offering “enablers” but not “drivers.” And that is why “photosynthesis” is a great mental model – it reconciles conflicts and, even more, visualize how the “dots connect.”

Consider this quote from an earlier posting: “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.”

The challenge we face is not a cakewalk.

That’s why the imperative to brainstorm.

For example, innovation is not a one-person entity but the power of group dynamics — as in the common good. And Steve Jobs and Apple demonstrated that and why Apple is up in the stratosphere — way beyond any enterprise. 

And why our caste system has killed our prospects for development. 

Similarly, we cannot be entertaining the power of authoritarianism over freedom and the free market. Nor is there a perfect system – systems being mere human constructs.

Consider: “Empowerment is the idea that an enterprise is most productive when all its people are empowered to make and take decisions on their own when authority devolves down to all levels of the organization. It is a feel-good idea that seems to prove what all sensitive, liberal folk believe should be the case.

“The idea was most closely associated with Rosabeth Moss Kanter, a Harvard Business School professor who also edited Harvard Business Review, and it was central to her influential book ‘When Giants Learn to Dance.’ 

Kanter argued that companies need to liberate their employees from stultifying hierarchies if they can ‘dance’ in the flexible, fast-changing future. Too many employees still needed ‘the crutch’ of ‘hierarchy.’ These ‘powerless’ people ‘live in a different world; they may turn instead to the ultimate weapon of those who lack productive power—oppressive power.’

“The idea harks back to Douglas McGregor’s Theory X and Theory Y but gives McGregor’s framework a new spin by adding information technology (IT.) That IT can put into the hands of Theory ‘Yers’ (self-motivating individuals) the raw material (knowledge, or power) that they need to act responsibly and make decisions for themselves.

“Ten years after Kanter’s book was published, another Harvard Business School professor, Chris Argyris, wrote an article in Harvard Business Review entitled ‘Empowerment: The Emperor’s New Clothes.’ 

“Everyone is talking about Empowerment, but it is not working. Chief executives subtly undermine it. On the other hand, employees are often unprepared or unwilling to assume new responsibilities.

“To understand why it was not working, Argyris set Empowerment in the context of commitment, an individual’s commitment to their place of work. He said that there are two types of commitment:

“External commitment, or contractual compliance. It is the sort of commitment that employees display under the command-and-control type of structure when they have little control over their destiny and little idea of how to change things.

“Internal commitment. It occurs when employees are committed to a particular project or person for their reasons. Internal commitment, said Argyris, is closely allied with Empowerment.

“Argyris argued that the problem with many corporate programs designed to encourage Empowerment was that they created more external than internal commitment. For example, programs were riddled with contradictions and sent out mixed messages, such as ‘do your own thing—but do it the way we tell you.’ Thus, employees felt little responsibility for the program, and people throughout the organization felt less empowered.

“Empowerment has its limits. It should not be a goal in itself; it is only a means to the ultimate goal of superior performance. Organizations should then set out to establish working conditions that will encourage their employees’ internal commitment, clearly recognizing how this differs from the external variety.” [“Empowerment,” The Economist, 27th Oct 2008]

Superior performance must be the measure of governance and nation-building.

Consider: Duterte’s term is almost at its end. Why are the Philippine elite class and chattering classes piling on him today? Who endorsed him in the first place?

Our caste system — that informs our instincts — will elect the wrong candidate and — worse — kill our prospects for development. 

Gising bayan!