To Tariff or Not To Tariff– The Balance is Shifting: Global Trade Conflict– Free Trade, Fair Trade, Balance Trade, No Trade…

One of the most debated issues in global trade is protectionism; use of tariff, non-tariff measures, currency manipulation… On one hand, most nations believe that certain amount of protectionism is necessary to protect their industries, jobs… On the other, protectionism also invites retaliation from trading partners, blocks free trade. Tariff is essentially a tax; it raises price of imported goods making them more expensive than similar domestic goods…

In most developed countries, average tariffs are less than 10% and often less than 5%… while in lesser-developed countries tariff rates are much higher; ranging from 10% to over 25%, and in Iran at about 28%… In U.S., about 96% of merchandise imports are industrial (non-agricultural) goods, with a weighted average tariff rate of 1.5%… One-half of all industrial goods entering the U. S. enter duty-free… However, tariffs are not the whole story, there are also ‘non-tariff’ measures that countries use to restrict trade…

According to Brent Radcliffe; countries use combination of tariff and non-tariff measures to regulate imports… the non-tariff trade barriers restrict trade through mechanisms, such as; quotas, subsidies, customs delays, technical barriers, other systems preventing or impeding trade... Classical economists like David Ricardo and Adam Smith suggest that since a nation is not a homogenized whole; that free trade, from a political standpoint, actually creates two classes; beneficiaries and victims, i.e.; winners and losers…

In the article Free Trade vs. Protectionism by George Friedman writes: The question of free trade is a pivotal issue and one that transcends ideology… The idea that free trade (trade without tariffs, regulation) is better than protectionism has dominated since WWII… An argument for free trade was made by David Ricardo in early 19th Century– It was based on the theory of comparative advantages… It assumed that every nation has at least one industry in which it has an advantage over other nation;. and with focus on its industry it would maximize the nation’s income…

However, there is no simple solution to the free (non-free) trade debate; each side views trade based on its own interests. Each side shapes the economic landscape for its own benefits… The argument that there is an overall free trade benefit has little value, e.g.; a CEO would oppose a shift in trade policy if it hurt his business, no matter the national good… Also, individuals take the same stand…

In the article Currency Manipulation And Impact On Free Trade by Art Laffer writes: A prosperous economy is created by good economic policy– then just get-out-of-the-way and let companies and citizens work, produce, invest… The perfect pro-growth agenda includes: a low rate tax, spending restraint, sound money, minimal regulation, free trade. The gains from trade come from– differences between countries, not similarities– and greater the differences the larger the potential gains… When a country is not constrained in making products and services to only match domestic demand, then both consumers and producers win…

This is an idea that goes back to Adam Smith, one of the earliest advocates for free, unrestricted trade. As such, Smith was an ardent foe of mercantilism, a system under which the goal of a state was to stockpile gold by exporting as many goods as possible and importing as little as possible… Smith argued that this policy deprived nations of benefiting from skills and abilities found in other nations. Instead he argued, nations benefit better from free and open, not managed, trade.  All nations have unique set of skills and resources that enable them to produce certain goods/services better than others, which is the foundation of trade– taking advantage of unique skill, capabilities, resources…

Smith’s core beliefs remain true but, due to the complexity of today’s interconnected global world, sometimes it creates challenges for a market-based approach; for example, currency manipulation– it’s a potent tool that tempts nations to improve their trade balances, while exporting domestic unemployment to countries that do not manipulate their currencies… According to Peterson Institute for International Economics; more than 20 nations have used currency manipulation policies to keep currencies substantially undervalued, thus boosting their international competitiveness and trade advantage…

In the article Free Trade, Fair Trade, Race to the Bottom by Madeline Madison writes: The free movement of global resources, especially labor… presents serious issues that can potentially devastate not only an economy, but the environment as well– it’s the ‘race to the bottom’ theory, which states; companies are constantly searching for– cheaper wages, lower taxes, weaker environmental regulations… and the theory is that this can produce downward spiral in socio-economic conditions in countries around the world…

A basic view of this theory is that when there are no regulations on trade and no regulatory standards, companies move from country-to-country searching for cheaper resources with less environmental regulations… and over-time this quest for cost-cutting will devastate the economies and the environment of many countries around the world… However, this phenomenon can only occur in the absence of strong trade regulations and restriction on the actions that companies can legally take to lower operating costs… ‘Races to the bottom’ can also occur between administrative regions within nations…

In its early stages a ‘race to the bottom’ can appear to be beneficial to the parties involved as one country sees the benefit of lowered costs and others sees benefit of increased foreign investment… However, the competitive process involved in ‘race to the bottom’ can serves to undermine the ability of governments to improve living and working conditions… and the enforcement of humane labor standards, and funding for social services… The main way to avoid ‘race to the bottom’ is through a policy of ‘fair trade’ with strong regulations and controls that protect an economy and encourage global trade…

Economists say that ‘free trade’ allows countries to take advantage of the ‘comparative advantages’ offered by each country… The ‘comparative advantage’ exists when one country can do something better than another country, e.g.; Central and South America grows bananas better than U.S., and U.S. grows wheat better than them; so trading wheat for bananas makes sense… But, economists also say that low-labor costs and low-environmental protection costs are a ‘comparative advantage’, as well…

They say it’s good for companies to take advantage of countries with governments that exploit labor and the environment, because they offer lower-costs for making things… According to Dave Johnson; buying goods from countries that are low-wage, low-environmental protection means other countries are impacted with trade imbalance; hence, factories close, people laid-off, wages stagnate… In world of free trade– this is a ‘comparative disadvantage’…

Hypocrisy Is Deep-Rooted in Most Organizations: Its the Greatest Threat to Effective Leadership…

In many organizations, hypocrisy is deeply rooted and entrenched as acceptable behavior… According to Jim Clemmer; hypocrisy is the practice of professing beliefs, feelings, or virtues that one does not hold or possess; falseness... The word has roots in part from a Greek word meaning, ‘to play a part, pretend’… I have come to believe that there are two types of hypocrisy: 1. Deceiving or being untrue to others… 2. Deceiving or being untrue to oneself… The first type of hypocrisy is detestable: It’s an intentional attempt to fool others… The second type is sad: it’s an unintentional to fool oneself…

Hypocrisy has been called; the compliment that vice pays to virtue… According Francois de La Rochefoucauld; this means that when you are being hypocritical you are in essence acknowledging that a virtue is worthy of emulating, and you want to appear virtuous, even though you aren’t actually acting virtuously… This seemly innocent connection accepts hypocrisy as a necessary part of social exchange that takes place in workplaces… According to Ken Byler; most people are quick to recognize the empty talk of hypocritical leaders: Do as I say, not as I do! Research suggests that many organizations encourage hypocrisy not only as a pragmatic virtue, but as a prescriptive one…

In the article Hypocrisy and Business by Bob MacDonald writes: Hypocrisy has become ingrained in business because it’s such a handy tool that makes one appear to be honest, fair, high-minded and moral without having to make the effort to be so. Those who practice this intellectual dishonesty fight hard to hide it, because when the contradiction between what was professed and what is performed is exposed, it becomes a cauldron of humiliation…

So why is so little of it exposed? For one thing, the reward for those in business who attempt to resist or expose hypocrisy is to end up on the ‘outs’ with the ‘ins’. Sure, exposing hypocrisy is easy, but if you want to keep your job or earn a promotion, it’s easier and certainly better to keep your mouth shut; to go along to get along, regardless of the kind of hypocrisy being practiced…

In the article Hypocritical Leadership by Art Markman writes: Hypocrisy doesn’t just undermine a leader’s authority, it can also directly threaten how the group functions. Psychologically, people need to trust that the organizations they belong to have their long-term interests at heart… Otherwise they become unwilling to make an effort on the group’s behalf… When employees feel an organization doesn’t value their contributions or isn’t committed to their growth or well-being, they start to distance themselves from it… Anyone who’s been in a toxic work culture knows what this feels like… And it isn’t always apparent when leaders are part of the toxicity– especially the most hypocritical of them…

In the article Don’t Be Hypocrite About Failure by Justin Brady writes: If you’re interested in human creativity and the invention process, you’ve heard it a thousand times, e.g.; fail fast to learn faster, failure is necessary to innovate, you must fail to succeed, blah blah blah... It’s time for leaders to open up about failure; act now, and don’t fail at failure… The truth is that majority of leaders are failure hypocrites; consider:

  • If you can’t admit failure, you cannot connect with your teamWhile it’s true that employees won’t want to discuss their own failures, they are more likely to connect with leaders who do… After all, a leader who has never failed is either a human anomaly or a liar…
  • If you can’t admit failure, you won’t learn from it: Failure is only positive when you learn something important from it and then make the necessary adjustments…
  • If you can’t admit failure, you won’t tolerate it from others: As much as leaders will openly say that failure must happen for innovation to be present… many will get upset at staff who fail or struggle…
  • If you can’t admit failure, you’ll find your own future failures tough to handle: Ignoring past failures makes moving on so much harder, when your next failure comes (and you know it will)…

In the article The Hypocrisy by Chuck Gallagher writes: Ordinary decency is boring; it’s more entertaining when hypocrites on moral pedestals fall from grace. Who doesn’t giggle when a moral authority gets caught? But you ought not to laugh too long. The smug satisfaction people get from watching hypocrites fall is just a short-step away from hypocrisy… Even members of the decent majority have moral blind spots…

According to Robert Kurzban; we readily detect hypocrisy in others but rarely see it in ourselves. We excuse our own moral failings while we condemn others. Moral self-deception is a coping mechanism and moral blame of others is a fun social activity… Most of people never commit felony, but many are guilty of indiscretions and busy judging others, e.g.; harbor unspoken animosities and minor lusts, let grudges fester, nurse secret resentments, turn blind eye to the needy, often laugh at those who need compassion… Hypocrites are those who are so busy judging others that they ignore their own moral failings… 

Genesis for corporate hypocrisy is the ubiquitous ‘mission statement’…   Full of lofty ideals, principles and objectives, the mission statement sounds wonderful and promises inviolate ethics, fairness and value for both customers and employees… According to Bob MacDonald; mission statements are hypocritical, and rarely do most managements adhere to their basic ideals and promises… More often than not, leaders tend to freelance the organization’s mission and just do what they feel is in best interests of the organization, irrespective of a mission statement.

Far too often corporate management embraces hypocrisy as a virtue and not a vice, because most managers lack courage to trust honesty or to exhibit real openness… Hypocrisy allows them to say one thing, knowing full well that they will do something else when it’s in their best interests to do so…  According to Jim Clemmer; it’s too easy to get confused by the images and appearances of leadership…

Too often we see leadership as doing and having. At that level, we can easily become leadership hypocrites… True leadership is being and becoming. Authentic leadership is from the inside out. When we are true to ourselves and actively blaze your own leadership pathway, it’s impossible to be a leadership hypocrite– despite how others think…

Changing World of Think Tank Firms– Think Tanking is Billion Dollar Industry in Decline: Aged Business Model, Strategy…

Most citizens have no concept on what a ‘think tank’ is, or its purpose. In simple terms; think tank is an ‘ideas industry’, and like other ‘ideas industries’, i.e.; journalism, entertainment, academia… these industries are changing… The original purpose of think tank firms were to offer nonpartisan, independent analysis– they were ‘ideas factories’ that perform research, analysis, made expert recommendations on topics such as; social policy, strategy, economics, technology, military…

Most think tanks are 501(c)3 non-profit tax-exempt organizations, and at last count there are about 6,800 think tanks worldwide, and about 1,984 in U.S… According to study by Transparify; in 2013, the total annual revenue for largest 21 think tanks amounts to US$1.077 billion, employed total of 7,333 people, including part-time employees, and their total net assets grew 8% to US$ 2.65 billion… The median think tank had a revenue of US$39 million, expenditures of US$32 million, assets worth US$ 87 million, and 211 employees…

In the article Think Tank: New Brand of Lobbying by Alan Crawford writes: Think tanks are losing their intellectual independence and integrity… According to James McGann; role of many think tanks is global where they are engaged in critical transnational policy-makers issues, such as; global warming, pandemics, terrorism, education… Although what constitutes a think tank varies by country, some governments create so-called think tanks, which are designed to appear as independent research organizations, but they are in fact just another propaganda arm of the government…

Also, the traditional function of think tanks is changing due to the emergence of the Internet, social media, increase in social activism… Which means that more organizations and private foundations are limiting their funding to think tanks, since they have access to other expertise… and individual donors are moving the support from analysis to activism, and from think tank to advocacy groups…

In the article Devaluing the Think Tank by Tevi Troy writes: Think tanks were highly influential in politics and social issues, and their research and scholars were heavily consulted and relied on by many leaders…  But in these times with daunting policy challenges and highly polarized political debates– think tanks, especially the new and more advocacy-oriented institutions founded in the past decade or so, risk becoming both more conventional and less valuable… At a moment when there is too much noise in politics and too few constructive ideas, these organizations are simply become part of the intellectual echo chamber of politics, rather than providing alternative sources of policy analysis and intellectual innovation…

The proliferation and politicization of new think tanks has, perhaps ironically, tended to weaken the ability of all think tanks to influence policy debates… According to Andrew Rich; the known ideological proclivities of many think tanks, especially the newer ones and their aggressive efforts to obtain high profiles have come to undermine the credibility with which think tanks are generally viewed by many public officials… According to Karlyn Bowman; politicization of think tanks limits their ability both to provide new and innovative policy solutions and to get them implemented…

It ‘s important not to overstate the independence and the value of the original think-tank model… The value of the original model came from its ability to bring serious, original, expert research to the task of analyzing policy issues and proposing creative solutions… It sought to expand the range of options under debate, and to ground that debate in hard facts and figures… Instead, many of these organizations avoid the difficult task of pursuing creative policy ideas and solutions, and are giving politician and others different ways to persist in failed courses… There are exceptions in the think-tank world but these are increasingly have trouble being heard over the din…

In the article Virtues of Virtuality by Enrique Mendizabal, Stephen Yeo writes: Changing global realities are causing some think tanks to consider reshaping themselves as ‘think-nets’ or ‘virtual think tanks’, which are cheaper to run and more conducive to open innovation... Think tanks are under increasing pressure to reinvent themselves in the age of technology, and to secure new forms of funding… Many are exploring different strategies and one such paths is recreating themselves as ‘think-nets’ or’ virtual think tank’…

A think-net is an Internet-based, collaborative business model where human capital is a network, e.g., individual researchers, supporting resources… that focus on policy-specific issues… Here the traditional think tank model remains the same– independent, original, quality research and analysis, that create spaces for nonpartisan political and scientific debate… key advantages of think-net are; learning from others, more flexibility, and more adaptable to rapid policy changes…

In the article Rethink the Think Tank by Anne-Marie Slaughter and Ben Scott writes: Objective research from think tanks can still play an important role in social and political policy-making. But the think tank as a policy organization has not adapted fast enough to escape the dysfunction of the political environment… Even superb policy analysis seldom results in policy change. One reason is that expert positions in many debates are alien to the mobilized bases of both parties…

Another is that the desire to score partisan points trumps the effort to get something done irrespective of whether the ‘right answer’ is served up on a silver platter. Meanwhile, a plethora of specialized research organizations funded by trade associations, corporations, and partisan donors on both right and left have led many to question the objectivity of the policy positions adopted… It’s time to rethink the think tank to meet the evolving challenges. The central mission is the same– to help solve public issues– but the form and function of the work must adapt… Today, that model is too elitist, too narrow, and too slow.

According to Daniel Betekhtin; think tank flourished in 20th century for two reasons; governments were expanding everywhere hence there was lots of demand for policy expertise… and the arrival of 24-hour news created an insatiable appetite for informed-experts… Yet the world may have reached– ‘peak-tank’… Researchers at University of Pennsylvania; found that in 2014 the number of new tanks declined for first time in 30 years. Think tanks are no longer only organizations engaged in public policy analysis and research… in fact, think tanks are increasingly being caught in a squeeze…

There is an emergence of many so-called independent experts, such as; academics, journalists, grassroots organizations, political parties, bloggers, interest groups, media consultants, spin doctors, and other distinct voices that combine to provide citizens and leaders with a broad range of information, perspectives, ideas…

Adding to this smorgasbord of thought and discussion is government’s shrinking funding for research, as well as leading foundations becoming more like advocacy groups… Hence, perhaps the traditional think tank should rethink their strategy, business model, relevance. Or perhaps the traditional think tank is just a dying breed…

 

 

 

Impact of a Consumer Boycott That Target Business or Group of Businesses: Righteous Anger is Wildly Over-Rated…

A consumer boycott is organized, nonviolent, disruptive efforts that targets an organization, company or group of companies, country or group of countries… to bring significant change in behavior… The target entity is often about individual policies, practices, products… and signifies social or political causes, e.g.; environment, inequality, civil rights… But research shows that in most consumer boycotts there are no winners– it seems for every boycott there is a counter-boycott from the opposite-side… hence, a boycott target is minimally affected; and the activists, from both-sides, are in stale-mate…

What factors determine whether a boycott can succeed in changing the behavior of its corporate target? According to Brayden King; activists seeking to create corporate change are partly dependent on conditions of the company they’re targeting… the company or entity must be vulnerable to change to have any transformative effect… A consumer boycott has been described as the weapon of the weak… But if by chance a boycott actually does damage to a company; ironically, those most likely get hurt the worst are workers, not the executives, employed in the business…

In the article Does Consumer Boycott Really Work? by Bruce Watson writes: Boycotts have become the preferred tool for consumers hoping to make their feelings known. But how effective are they– and what separates an effective boycott from an ineffective one? A quick search reveals that, at any given time, a seemingly endless list of companies, e.g.; movies, TV programs, actors, business executives, events… are shunned by consumers for many different reasons…

The basic narrative of boycotts is familiar, i.e.; group of consumers are angry about an issue, event, person… and refuse to spend money and buy a company’s product or service, they enlist like-minded consumers, and the boycott grows, and presumably the target suffers and changes behavior… While these sorts of campaigns are useful for expressing displeasure, they aren’t all that successful when it comes to changing behavior or company’s policy…

In a 2011 study that compared successful boycotts to unsuccessful ones, it was suggested  that every day in which a company’s boycott was in the news, its stock price declined. But while companies want to resolve boycotts quickly, activists often have opposite aim… For many activists, the goal is not to change behavior or policy but rather to change public opinion… They often regard the target as a visible, public stage that they use to draw interest, and they change and evolve tactics to keep the spotlight on their cause as long as possible…

In the article Does Consumer Boycott Work? by Daniel Diermeier writes: Internet and social media has created a broader platform for activists, and making it more difficult for companies, groups, people to maintain control of their own messaging… Activists have given-up on government and focus instead on boycott targets as main engine of social change… And as expectations are raised for better corporate behavior, such as; pay equality, fair labor standards, the environment… more businesses are put-in the cross-hairs of frequent boycotts…

Although these tactics have been around forever, boycotts are still unfamiliar territory for many executives who lack an understanding of how activists operate and what makes boycotts successful… In most cases companies are well-advised to stay out of polarized issues, if at all possible. Being in a political dog-fight is rarely good for anyone’s reputation… Public debate is likely to create more media coverage, which may lead to severe internal tensions among employees, who may ask themselves whether the company is still a welcoming place to work…

But the if you cannot stay out of the fight, how can you assess the likely success of a consumer boycott? The first thing to note is that while a boycott can be effective, most fail to have any noticeable impact… And among the factors that determine a boycott’s success, the following are most important:

  • Customers must care passionately: For customers to participate in a boycott they must passionately care about an issue. The main driver is moral outrage…
  • Cost of boycott participation must be low: Smart activists make it easy for customers to participate in a boycott. They target a single company so that customers have plenty of alternatives…
  • Boycott Issues must be easy to understand: Activists often fail to communicate objectives in an effective and simple manner…
  • Mass media is essential for consumer boycott success: While social media platforms have made it easier for activists to gain support, activists need coverage in the mass media for a boycott to be successful. Such coverage can then steer viewers to the relevant social media sites… Media coverage requires strong audience connection with issues customers passionately cares about…

Consumer boycott has played an important role in U.S. History– they are form of protest and technique to bring about significant economic, social, political… change. In a recent nationwide survey, business leaders said boycotts have more impact on business than any other consumer action including; class action suits, letter writing campaigns, lobbying… The thing to remember is that the threat of a boycott can’t be ignored; and any response must be– well-thought out and sharply focused on the allegation. Remember– it’s a reputation issue, not financial… 

The approach must be the same as any other issue that threatens the well-being of the brand image… According to Ashlee Kieler; the key is being proactive with a crisis plan, in place, and a team that is ready to deal with whatever reputation threats may arise. Like any threat to a brand’s image or reputation, the sooner you address it and move on, the less damage that can be done…

According to Brayden King; there’s no disputing the media’s role in a boycott’s success or failure.. in a study of 188 boycotts it was found that companies that were more likely to give-in to a boycott’s demands is when the controversy generated a lot of press… And the research also found that fear of damage to a company’s ‘reputation’ was a greater determinant of caving into a boycott than the fear of financial loss…

Also, when a boycott reflects real public anger about serious social issue, a well-organized and funded boycott can become a strong wind and do real damage… Hence the threat of consumer boycott must be taken very seriously… According to Stephen J. Dubner; evidence suggests that a typical boycott is more smoke than fire and, in most cases, it does little damage… Does a consumer boycott make a difference? Short answer: Probably not…

Lesson From the Edge– Stop Over-Thinking When Managing Organization: Under-Thinkers Are More Productive…

When in doubt, Google it; but this unlimited access to information often leads to greater fear of over-thinking… and that in turn leads to the spinning of wheels in a seemingly inescapable progression of analysis paralysis, and all the while getting nowhere… According to Barry Schwartz; although increased choice provides opportunity to achieve objectively better results, it also leads to greater– anxiety, indecision, paralysis… A study at Stanford University suggests that over-thinking not only impedes the ability to perform cognitive tasks, but also limits creative potential as well…

But what do people mean when they say; Stop over-thinking? To anyone deep in the creative process there is nothing more frustrating than to be accused of over-thinking… According to Mike Michalowicz; it’s a paradox; success requires a clear vision– the more you can see it, the more likely you are to achieve it… But sometimes you can get too fixated on the vision, and over-think it… According to Carl Harvey; again and again message is clear: Don’t over-think. Forget perfection. Stop judging. Trust inspiration. Take action…

In the article Don’t Over-Think, Make Decision Go With It by Stephen Key writes: Organizations spend too much time weighing options. Yes, studying and debating alternative is essential for good decision-making, but at some point leaders must take action… Leaders cannot afford to obsess over everything… at some point they must shut-off the brain, and make the decision… 

The reality is over-thinking about the next move when you haven’t even taken the first move yet doesn’t make sense… Attempting to account for everything inevitably means making assumptions, and more often than not assumptions are wrong… You will never have all the answers, hence focus-on; instincts, common sense, consider risk, lessons learned… above all, don’t let fear of making mistake cause you to be inert…

In the article Over-Thinking Decisions by Robert Harris writes: The decision-making process is very basic: Many decision-makers often seek much more information than required to make a good decision… The quantity of information that can be processed by the human mind is limited… When too much information is sought and obtained, one or more of several issues can arise:

  • A delay in the decision occurs because of the time required to obtain and process the extra information. This delay could impair the effectiveness of the decision or solution…
  • Information overload occurs. In this state, so much information is available that decision-making ability actually declines because of information over-load, and it cannot be managed effectively…
  • Selective use of information, i.e.; decision-maker will choose from among all information available only those facts which support a preconceived solution or position…
  • Decision fatigue is when the decision-maker becomes– tired, confused, over-loaded… from making decisions. And often the result is carelessness or no decisions at all…
  • Important to realize that every decision affects the stream of other decisions… over-thinking just one decision can have far-reaching consequences down stream…

In the article Don’t Over-Think Do It by Phoebe Luckhurst writes: The best way to over-achieve is to under-think– those who really get ahead turn things upside-down: Under-thinking is the new over-thinking… According to Dr Michael Sinclair; the brain has evolved as the ultimate problem-solver… and it has capacity to endlessly analyze and over-think just about anything so as to protect itself from making bad decisions… the brain can actually get into its own way, a vicious cycle of over-thinking and that impedes productivity..

Indeed over-thinking leads to stagnation, whereas under-thinkers are more selective about– priorities, sharpen focus,  decisiveness… Acting on impulse is the purest type of thinking… When things get circular go with; intuition, instinct, lessons learned, gut… and work-out the decision that achieves the desired or best possible outcome… 

In the article Stop Over-Thinking by Gayle Lantz writes: In the world of ever-changing business there comes a time when over-thinking can limit an organization’s options… According to Albert Einstein; you cannot solve a problem by using the same kind of thinking used when the problem was created… Leaders are responsible for making tough decisions… but some leaders get bogged down in their own thinking or/and over-loaded with information… and paralysis sets in… When you find yourself over-thinking? Here are few tips:

  • Put your thoughts in writing:  Capture ideas,  concerns, solutions and put them in writing: Ah clarity! No rules; just write. It can be cathartic…
  • Identify a new focus: Step-back and give yourself a break from the difficult issues, e.g.; when worried about competition, instead focus on client results… when concerned about poor performers, spend more time with peak performers…
  • Reframe the issues: Instead of thinking about losing an account… Ask; What action can you take to keep the account? Keep focus on how to get positive outcomes…
  • Find a thinking partner: Engage other people, inside/outside the organization, to discuss, debate, think through the issue… Talking with other people can help you gain new insight…

In the article Over-Thinking Gets in Way of Business by Borja Obeso writes: Keeping an eye on the prize is good advice, but be aware that the road to winning it isn’t always a straight one… Over-thinking, like over-planning, can lead to a state of inertia and ultimately gets in the way of doing business. The key to a successful organization is to find the right balance between– thinking and doing. Managing an organization is an action-oriented process often dictated by external factors, e.g.; market trends, technology, shifting priorities… Over-thinking elements of a business plan can only lead to confusion and failure… 

Sustaining an organization requires a special brew that includes; part plan, part intuition, part opportunity, and a dash of luck… Thinking is good but over-thinking leads to paralysis… Even the most critical over-thinker must learn to loosen-up and follow their instincts… Organizations must act decisively and that means– having foresight, being prudent but fearless, being agile and adaptable… and having recognition that over-thinking important issues in rapidly changing world is a death trap…

Age of Globalization is Unraveling– Changing Business Landscape: New Normal is– Retreat or Reset…

The world is losing its taste for global business, and the golden age of globalization is unraveling… global companies must rethink strategy– they either must retreat or reset in order to stay relevant… According to McKinsey Global Institute Report; after 20 years of rapid growth, traditional trade flows of goods, services, and finance have declined relative to GDP… Many analysts contend that these are short-term effects and trade will resume and even accelerate…

But many companies are struggling to find the most productive global business model. Several approaches have emerged, e.g.; reshoring, or relocating manufacturing operations to the companies domicile, is one option… According to Simon Jack; global companies clearly are in retreat, but to suggest some more general theory of economic decline is perhaps pushing the theory a bit far…

In the article Unraveling of Globalization by Jeffrey Rothfeder writes: Globalization is the tantalizing but perilous business principle that has quietly counted among its casualties some of the world’s largest companies... Indeed, multinational executives avoid talking about it publicly, since profits in global markets are underwhelming, and doing global business is full of unanticipated risks… And that is a far cry from way globalization was pitched as the strategic imperative ‘du jour’, nearly two decades ago…

It was supposed to act like– rising tide, lifting all boats in poor and rich countries alike… Buoyed by thousands of new assembly line jobs courtesy of multinationals in emerging nations, the middle class would swell, which in turn would propel local consumption… More factories needed to meet the demand, and further raising local standards of living and handing the largest non-domestic companies a vast and enthusiastic new customer base…

Yet despite all the activity and enthusiasm hardly any of the promised returns from globalization have materialized… and now there are urgent, if still hushed, discussion in many global businesses: Should they reconsider, or even rein in, their global growth strategy? According to Dan Ammann; companies have come to believe that a large global footprint is critical to success… but given recent events, many wonder if they should be a little more hesitant, less eager and more discerning about where they invest their efforts…

According to Bhanu Baweja; globalization is beginning to be seen as international trading patterns with increasingly protectionist attitudes rather than as golden age of open borders… Between 1986 and 2005, global trade volume increased at rate of about 2 to 3 times that of GDP growth, but since then the ratio has fallen dramatically and is now close to 1…

Moreover, the recovery in world trade volume is much slower in this post-recession period than prior ones… Part of the problem is that the G-20 countries (i.e., big economies and trade partners) added more than 1,200 restrictive export and import measures since 2008– 12% more in just the past year– despite a so-called standstill agreement…

Still, the most tangible metric that belies the pollyannaish depictions of globalization is corporate financial performance, which is also a window into the fundamentals of local economies. Although most companies don’t separate out geographical earnings, but revenue comparisons provide an apt picture– and few multinationals can boast big returns in global markets…

Given the failures of globalization, virtually every major company is struggling to find the most productive international business model. According to Chuck Robbins; globalization is very dynamic situation, in today’s world… Instead of flat and seamless, globalization is full of hurdles and obstacles, and multinationals must rethink their strategy… Simply put, globalization today is barely profitable and developing the right strategy is very perplexing for most companies…

In the article Globalization Goes Into Reverse by Noah Smith writes: There is backlash against globalization in many developed countries. Although the public is mainly positive about international trade and immigration, political candidates have much support for opposing what was unthinkable a decade ago… and by many measures, globalization has been in full retreat since the crisis of 2008…

First, it’s trade: For many decades, up until 2008, global trade had been increasing at a healthy clip. But the recession stopped trade growth in its tracks, and it hasn’t recovered… 2008 was the all-time peak of world trade as a percent of global gross domestic product…

Second, it’s immigration: Globally, the number of migrants living in other countries has continued to increase… In U.S., the big immigration boom is over… Immigration to U.S., the subject of so much political hand-wringing, has gone into reverse… From 2008 through 2014, the population of immigrants living in U.S. declined by more than 1 million… The reason? Undocumented immigrants are leaving in large numbers…

Third, it’s finance: According to Izabella Kaminska; cross-border financial flows remain well below the pre-crisis peaks and cross-border bank claims have actually declined… In other words, the great global boom that marked the end of the 20th century and the beginning of the 21st is unwinding...

In the article Retreat of the Global Company by The Economist writes: Companies were obsessed with internationalizing– customers, production, capital, management… But body of evidence suggests the trend has slowed significantly. In 2016 cross-border investment fell by about 10-15%… The proportion of sales that global companies make outside their domicile is shrinking… Their profits are falling and flow of new investment is declining relative to GDP: Global companies are in retreat…

According to study by McKinsey; in 2007, the global companies operating in U.S., accounted for 19% of private-sector jobs, 25% of private wages, 25% of profits, 48% of exports, 74% of research and development… However, the mood changed after the financial crisis, 2008, when these companies were seen as agents of inequality, i.e., they created jobs abroad but not at home…

Between 2009 and 2013 only 5%, or 400,000, of jobs created in U.S. were created by global companies domiciled there (although figures suggest that job creation picked up in 2014). The profits from these companies were pocketed by shareholders in the form of dividends, buybacks elite… As result, the tapestry of rules designed to help global companies is fraying… Global companies must rethink competitiveness again. Some of the old arguments for going global are now obsolete…

There is no denying that the world finds itself in new era: technology drives innovation, politics drives globalization… But absent some truly cataclysmic event, the best bet is that globalization will still march on... This is reinforced with significant advantages that are ingrained in global companies, e,g,; enforceable patents, technology, innovation, management, supply chains, financial leverage, economies of scale… However, these advantages are less than they were…

Corporate U.S. in Decline– Number of Corporations is Shrinking– Hits Lowest Level in 40 Years: Creative Destruction, or Crisis…

Corporate U.S. is shrinking– at least by one important measure: In five of six quarters to June 2016, across the S&P 500, share buy-backs and dividends exceeded retained earnings… From around 60% in 2009, the ratio of payouts and buy-backs to earnings grew inexorably, passing 100% at the beginning of 2015 and reaching a staggering 131% in the first quarter of 2016… According to Sir. Martin Sorrell; if you imagine the S&P 500 as one company, then that company ceased to grow at the start of 2015 and shrank by nearly a third in the first three months of 2016…

And, while the FTSE 100 may not have gone into reverse, a similar trend can be observed. The dividend-payout ratio has climbed from less than 40% in 2011, to over 70% in 2016… Unsurprisingly in this context, corporate investment as a proportion of GDP has continued to decline. Companies are choosing to return funds to shareholders rather than invest into operations… Yet there is no shortage of cash to invest. Companies are estimated to be sitting on more than $7 trillion of net cash worldwide– a form of corporate inertia that will continue into 2017 and beyond…

In the article U.S. Shrinking Corporate Sector by William McBride writes: The U.S. now struggles with corporate tax inversions, but this is only one of many ominous signs of a long-term decline in the U.S. corporate sector… According to a Tax Foundation Report; U.S. loses about 60,000 corporations per year and about 1 million corporations since the Tax Reform Act of 1986. IRS data shows that there were 1.6 million C-corporations in 2011. This is lowest number of traditional corporations since 1974 and 1 million fewer than there were at the peak in 1986…

In other words, in every year since 1986, roughly 40,000 U.S. corporations have disappeared from the tax rolls. And the losses have accelerated since 2006 to a rate of about 60,000 per year… Many have gone to the pass-through business sector, where profits are passed through to owners and taxed at individual tax rates that are often lower than the corporate tax rate and where there is no additional double-taxation for shareholders…

Pass-through business is subject to just one layer of tax– individual income tax; while C-corporations face double taxation due to corporate tax and shareholder taxes on dividends and capital gains… Pass-through business have grown dramatically since 1986, such that more than 90% of U.S. business are now pass-through entities. The Tax Reform Act of 1986 reduced statutory corporate tax rate and reduced the individual tax rate further, but ultimately raised taxes on corporations in other ways…

Additionally, the Act changed S-corporation and partnership rules to make them more attractive… And it appears that the Tax Reform Act of 1986 was the decisive factor that marked the start of the decline of U.S. C-corporations and beginning of an upward trend for pass-through business. S-corporations grew from 800,000 in 1986 to 4.2 million in 2011, and partnerships grew from 1.7 million to 3.3 million…

As a result, more than 60% of U.S. business profits are now taxed under the individual income tax code rather than the corporate tax code. This explains why the U.S. collects a relatively small amount of tax revenue from corporations despite having the developed world’s highest corporate tax rate… Key findings from the Tax Foundation’s Report are:

  • U.S. loses about 60,000 corporations per year and has lost about 1 million corporations since the Tax Reform Act of 1986…
  • Over time, more business have structured themselves as ‘pass-through’ entities. This allows profits to be passed through to owners and taxed at individual tax rates, which are often lower than corporate tax rate and eliminates double taxation…
  • More than 60% of U.S. business profits are now taxed under the individual income tax code rather than the corporate tax code, which explains why the U.S. collects a relatively small amount of tax revenue from corporations despite having the world’s highest corporate tax rate…
  • Outside of taxation, the traditional form of corporations often provides the most efficient business structure for large-scale projects and investments. Excessive corporate taxation and the subsequent decline of the corporate sector artificially limits this important aspect of the economy…
  • U.S. should do what the rest of the developed world has done; reduce corporate tax rate, integrate corporate and shareholder taxes to avoid double taxation, and limit corporate taxation to profits earned domestically…

In the article Risk-Aversion is Shrinking Corporate World by Sir Martin Sorrell writes: The past eight years have been an era of low inflation, low pricing power and low growth, with disruption coming from all directions– from tech startups to activist investors and zero-based budgeteers… At the same time, a great flock of geopolitical grey swans (known unknowns) clouds the horizon, draining confidence, e.g.; global rise of populism, ever-greater mistrust of institutions and corporations, intractable conflicts, i.e., migrant crisis, terrorism... In addition, slowing of major economies, potential fiscal-deficit issues, reversal of policy on quantitative easing, low-interest rates… all prey on the minds of business leaders…

This cocktail of pressures and uncertainty is not conducive to long-term strategic thinking… and the financial world’s obsession with quarterly results doesn’t help, e.g.; survey revealed that nearly 80% of executives admit that they would take actions to improve quarterly earnings at the expense of long-term value creation. Risk-aversion and short-termism is the rule in most corporate boardrooms, and although this attitude is understandable, it’s entirely wrong. Calculated risk-taking, in the form of investment, is the lifeblood of any business that wants to be successful in the long-term…

Indeed, some economists can imagine a future where even the most valuable companies will opt-out of public markets… According to Kathleen Kahle, Rene Stulz; not only is number of public corporations  in decline, there is growing inequality in economic wealth of those that remain, e.g.; in 2015, 35 corporations accounted for 50%  of all assets of public corporations and 30 accounted for 50% of all net income… While in 1975, numbers were 94 accounted for 50% and 109 accounted for 50%…

Another striking change: In 1980, institutional ownership of public corporations averaged 17.7%; today it’s over 50%. Also, average age of public corporations increased from 12.2 years in 1995, to 18.5 years 2016… This reflects an increasing unwillingness of companies to go public, and there are very good reasons, e.g.; capital investment is easily available, and companies feel no need to put up with the extra regulation and scrutiny that come with being publicly listed…

Overall there seems to be a loss in the sense of purpose for being a public company… According to Kahle and Stulz; public corporations appear to lack ambition, proper incentives, opportunities… They are returning capital to investors and hoarding cash rather than raising funds to invest more… Hence, shrinking numbers of public corporation is not just problem for business leaders but also one for world at large…

Subtle Shifts in Business, Leadership, Management, Organization, Strategy, Innovation– Bring Big Results…

Translate »