Friedman's best editorial?

The Coffee Shop
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Basically saying what nobody in the administration is willing to say: Learning From Lance
By THOMAS L. FRIEDMAN Published: July 27, 2005

There is no doubt that Lance Armstrong’s seventh straight victory in the Tour de France, which has prompted sportswriters to rename the whole race the Tour de Lance, makes him one of the greatest U.S. athletes of all time. What I find most impressive about Armstrong, besides his sheer willpower to triumph over cancer, is the strategic focus he brings to his work, from his prerace training regimen to the meticulous way he and his cycling team plot out every leg of the race. It is a sight to behold. I have been thinking about them lately because their abilities to meld strength and strategy - to thoughtfully plan ahead and to sacrifice today for a big gain tomorrow - seem to be such fading virtues in American life.

Sadly, those are the virtues we now associate with China, Chinese athletes and Chinese leaders. Talk to U.S. business executives and they’ll often comment on how many of China’s leaders are engineers, people who can talk to you about numbers, long-term problem-solving and the national interest - not a bunch of lawyers looking for a sound bite to get through the evening news. America’s most serious deficit today is a deficit of such leaders in politics and business.

John Mack, the new C.E.O. at Morgan Stanley, initially demanded in the contract he signed June 30 that his total pay for the next two years would be no less than the average pay package received by the C.E.O.'s at Goldman Sachs, Merrill Lynch, Lehman Brothers and Bear Stearns. If that average turned out to be more than $25 million, Mr. Mack was to be paid at least that much. He eventually backed off that demand after a howl of protest, but it struck me as the epitome of what is wrong in America today.

We are now playing defense. A top C.E.O. wants to be paid not based on his performance, but based on the average of his four main rivals! That is like Lance Armstrong’s saying he will race only if he is guaranteed to come in first or second, no matter what his cycling times are on each leg.

I recently spent time in Ireland, which has quietly become the second-richest country in the E.U., first by going through some severe belt-tightening in which everyone had to sacrifice, then by following that with a plan to upgrade the education of its entire work force, and a strategy to recruit and induce as many global high-tech companies and researchers as possible to locate in Ireland. The Irish have a plan. They are focused. They have mobilized business, labor and government around a common agenda. They are playing offense.

Wouldn’t you think that if you were president, after you had read the umpteenth story about premier U.S. companies, such as Intel and Apple, building their newest factories, and even research facilities, in China, India or Ireland, that you would summon the country’s top business leaders to Washington ask them just one question: “What do we have to do so you will keep your best jobs here? Make me a list and I will not rest until I get it enacted.”

And if you were president, and you had just seen more suicide bombs in London, wouldn’t you say to your aides: “We have got to reduce our dependence on Middle East oil. We have to do it for our national security. We have to do it because only if we bring down the price of crude will these countries be forced to reform. And we should want to do it because it is clear that green energy solutions are the wave of the future, and the more quickly we impose a stringent green agenda on ourselves, the more our companies will lead innovation in these technologies.”

Instead, we are about to pass an energy bill that, while it does contain some good provisions, will make no real dent in our gasoline consumption, largely because no one wants to demand that Detroit build cars that get much better mileage. We are just feeding Detroit the rope to hang itself. It’s assisted suicide. I thought people went to jail for that?

And if you were president, would you really say to the nation, in the face of the chaos in Iraq, “If our commanders on the ground say we need more troops, I will send them,” but they have not asked. It is not what the generals are asking you, Mr. President - it is what you are asking them, namely: “What do you need to win?” Because it is clear we are not winning, and we are not winning because we have never made Iraq a secure place where normal politics could emerge.

Oh, well, maybe we have the leaders we deserve. Maybe we just want to admire Lance Armstrong, but not be Lance Armstrong. Too much work. Maybe that’s the wristband we should be wearing: Live wrong. Party on. Pay later.

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The problem when people complain about our eroding education system is that some others will take advantage of it by suggesting they are simply un-American. It is not in vogue to be critical of American systems. It is more acceptable to wave a flag and talk about how great we are. I think the Romans and Brits did that too, and look how their empires turned out.

We’re sort of devolving into a not-look forward type of culture, for a number of reasons. Part of it is just a desire for instant gratification. Another is a general reliance on the market economy to dynamically figure out a way to manage issues as they occur, which discourages both financially and intellectually those who would look too far forward. Nobody is too keen on investment in things that don’t have reasonably certain payoffs relatively soon. I think part of this is driven in a sort of religious and ideological zeal to be blind to pure capitalism’s weaknesses, and a kind of blind faith in its ability to resolve. It’s like when economists talk about the eventual end of our oil supplies - prices will rise enough to justify the creation and use of alternative energy sources. That is all fine and good, but they ignore the enormous short-term pain and expense that come along with making this sort of switch under duress, which it inevitably would. My concern is not the end result, which would be the same, but the way of achieving it with as little suffering as possible.

But what these people miss is that while private industry is not particularly good at the long view, government can be. Obviously the best example is the internet, derived from DARPA and university work. Only a few entities can afford to fund large scale pure research projects with yet undefined commercial applications. But those projects are the ones that yield quantum leaps in technology and quality of life. If we simply let the market dictate, I don’t think it will ever have the vision or risk tolerance to make these things happen.

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Friedman’s main thrust is agreeable, but his weak analogies make me cringe. Bike racers, like CEO’s, are paid salaries according to their accomplishments, potential, and the going rate. The same with everyone else in most professions. What irks me is that the ‘market’ for CEO’s is so small and insular that CEO’s can practically band together to determine their going rate…With little incentive for success and a verrry cushy pad for failure.

(I’m a little bitter about this because I just got my one-week notice on Monday. Engineers don’t get severance packages and I’ll be without insurance as of Friday evening.)

I’d like to wander from Tom’s main talking point and say that professional endurance athletes are paid waaaaaay less than most any athletic (or other) profession for the amount of work they have to do. Endorsements aside, Lance probably makes only about 7 figures salary-wise. His top assistants, like hincapie, probably make six figures (endorsements aside) and he’s been at it for years!!! And they have to be able to do everything almost as well as Lance does…Except win.

What’s the starting rookie salary in the bigs? a cool million?

I think the point I’m trying to make is that some people aren’t worth as much as they think they are…

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I read this this morning too. I agree for the most part. We are living in a sweet, fat land and that most certainly makes us more lazy and so many Americans are just sure we’ll all be OK. We are not planning for the future as we should, simple as that. Much like a cocky athlete who just assumes his natural talent will take him all the way and that preparation involves just going through the motions.

This a Friedman-esque theme I agree with: Reducing our dependence on foreign oil … Here’s something rather interesting: I am hearing more and more conservatives starting to support much more progressive and future-thinking energy policies. Could just be the $3 gallon gas, but I think its a growing trend. In the pop culture/faux news realm, Jackass O’Reilly comes to mind (He’s such a jerk: Last night he blamed the homeless who are dying of heat stroke in the SW for their own demise) … But he does think the Bush energy policy sucks.

This may be the one area people on all sides can get together to agree on: Spending tons more on R&D and forcing auto makers and the energy sector to make some drastic changes. SOON! Energy companies and some unions will scream but I bet the public will back drastic changes if they are gradual and we start now.It may make us less competitive with China in the short term but in the long run we will have the upper hand.

I disagree with Friedman in many ways. His theory is that American security involves selling the American dream to the rest of the world. Yes its better to open Walmarts all over than to set up coups to topple dictators and whatnot. Billions of dollars of trade between China and the U.S. will go a long way to averting future conflicts. Still I’ve never been comfortable with the whole idea of pushing our ways on the rest of the world in the ways Friedman espouses.

Here’s a decent op-ed on China’s proseprity from the L.A. Times:

http://www.commondreams.org/views05/0726-22.htm

cheers,

-TB

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I’d be curious to hear how you think our education system can be improved? Personally, I think there is too much emphasis on promoted a nebulous term like “self-esteem” and not enough on learning material. I find it sad that I hear nice catch phrases like “We need to teach students how to think” and not enough “a^2 + b^2 = c^2.” I’m no expert on education so take that for what its worth.

I can agree with your view about taking the long view with some reservations. Why should we expect the government, which is composed of people elected for relatively short time frames, to take the long view? Now if you’re talking about funding versus actually generating ideas, I think the U.S. is in pretty good shape. We’re in the top 5 in terms of public funding of R&D at .77% of GDP (Finland, Sweden, France and Germany are the other four). We rank 7th in total R&D spending at 2.5% of GDP which I’m sure puts us at the top in absolute terms. The U.S. is 4th in R&D personel at 4100 per million people (the top three are Iceland, Japan, and Sweden). On a more qualitative note, the “Global Competitiveness Report” ranks the US #2 behind only Finland. I point these stats (from nationmaster.com) out because I think all this hand wringing is overblown.

The point about the internet is good, but I can find a lot of innovations that came out of the private sector (Bell Labs for instance). You can call it blind faith, but I think the historical record of capitalism is pretty impressive.

I’m just thinking out loud here, but I’d also wager that the R&D spending that went into DARPA wasn’t outrageous. When I think expensive, I think about the Manhattan Project or something along those lines. Its also interesting to note that projects like this (and DARPA to a certain extent) stem from military applications. Who says our military spending is a complete waste?

Back to Friedman’s article, Ireland is attracting investment through business tax incentives (I’ve seen tax rates in the 10% to 15% range vs. 20%+ in the U.S.). Should we cut taxes for corporations in the same way? I’m not knocking Ireland at all, they’re doing a great job but I’d argue they’re doing it by promoting a very pro-business agenda.

How’s that for a disjointed post?

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I see his point, but Friedman’s incessant masturbation is wearying.

That man loves himself so much it is difficult to read what he writes. He has gotten so much worse in the last few years it is amazing.

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I like that article on China linked above. It’s refreshing to see a piece from the progessive community that doesn’t attempt to vilify globalization as a force for impoverishing the world.

As an investor, China is fascinating and frightening. Its growing so damn fast, but corruption and back-scratching are so rampant its like the lottery. The winners tend to be people on the ground with an extensive network of contacts, particularly low-level government types. The losers are those investing in their public equity market (so far at least) or investing from afar.

Here’s a prediction, the Chinese economy will experience a crisis some time in the next five years. I always find it interesting that those predicting the rise of China underestimate the length to which China is dependent on the U.S. for their growth right now. When the U.S. grows, China does too but when the U.S. slows I think its going to be ugly in China. Unless they can stimulate domestic demand, all those exports will have no where to go. Their banking system is pretty opaque (ala Japan circa 1980’s), and the amount of bad loans are thought to be pretty substantial. This needs to work itself out, and hopefully it takes less time than it has in Japan.

One other prediction: we’re going to see a social crisis of substantial proportion in China in the next decade . While some are making large fortunes, government labor restrictions do not allow equal access to the opportunities found in the more affluent coastal regions. This is already pissing off a lot of people. I think this will ultimately be the cause of the Communist party’s demise.

Anyone else willing to speculate on China?

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The point about the internet is good, but I can find a lot of innovations that came out of the private sector (Bell Labs for instance). You can call it blind faith, but I think the historical record of capitalism is pretty impressive.

Great example. Which side of this discussion are you on? Pure research within AT&T (which will soon disappear completely) and Lucent is gone. Explicitly so within AT&T while I was still there.

My pet theory: reducing the capital gains taxes has shortened the window of expected returns so much that executives at corporations have necessarily taken a “quarterly” (short term) view of profits, to the detriment of non-applied research.

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GEEK ALERT!!!

Sorry, I couldn’t help myself. Your last sentence got precariously close to going over my head (and yes I just used precarious after calling you a geek).

I have no notion of how the capital gains tax has impacted CEO focus, but I whole heartedly agree that there very little long-term focus (if you count high-level “strategies” as focus), merely meeting the quarterly Street estimates.

Can you explain your theory at all so I can understand it better?

Pure corporate research is gone entirely to my knowledge, which is why there needs to be non-profit or government funded research into those things that businesses deem not relevant to the bottom line. I think we have a relatively decent mix of this in the US, the Norwegian countries are very very good at this (I think it is Finland who is amazing at this).

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Friedman does some good articles sometimes, but this isn’t one of them.

In one paragraph he talks about getting major companies on board to some common policies. In the next paragraph he talks about jacking energy prices through the roof. I doubt the CEOs would support his energy policy.

His comments about Ireland are on target, but he doesn’t say why. They have modeled their economy after ours, and rejected the model of the rest of Europe.

Gee, poor US. We have by far the fastest growing industrial economy in the world. If we are at risk, why doesn’t he tell us about Europe.

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Not sure what you mean by “which side am I on”. I think the government certainly has a place in funding research. And, as I pointed out, the U.S. ranks pretty high in public funding of R&D. I don’t think, however, that its true that private industry is uninterested in doing it as well. One example would be GE which appears to have a Bell Labs-like department. Pfizer also provides substantial resources to universities as well as in-house.

Can you elaborate on your pet theory a bit? I’m unclear on what you mean by it. Do you mean corporate taxe rates instead of capital gains tax rates?

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Can you elaborate on your pet theory a bit? I’m unclear on what you mean by it. Do you mean corporate taxe rates instead of capital gains tax rates?

Only at the risk of proving my stupidity, but I’ll try. With short term capital gains tax rates so low, investors are more willing to buy/hold stocks for shorter periods of time, thus putting pressure on corporations to produce shorter term results, thus forcing short-term goals and plans. Executives can’t sacrifice the profits of the next couple of quarters in order to maximize profits next year(s), as they might have done knowing that investors were more willing to hold stocks for longer periods of time. If they did that now, the value of the stock would drop, and they’d be screwed (if you can call receiving a golden parachute “getting screwed”).

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“Here’s a prediction, the Chinese economy will experience a crisis some time in the next five years. I always find it interesting that those predicting the rise of China underestimate the length to which China is dependent on the U.S. for their growth right now. When the U.S. grows, China does too but when the U.S. slows I think its going to be ugly in China. Unless they can stimulate domestic demand, all those exports will have no where to go. Their banking system is pretty opaque (ala Japan circa 1980’s), and the amount of bad loans are thought to be pretty substantial. This needs to work itself out, and hopefully it takes less time than it has in Japan.”

And vise versa: When China slows (and it will. 9 percent growth for 10 years is not sustainable) the U.S. economy will slow too. High oil prices are already having an impact. On China especially. And I bet it will take longer than in Japan, just because China is still very much a developing country.

“One other prediction: we’re going to see a social crisis of substantial proportion in China in the next decade . While some are making large fortunes, government labor restrictions do not allow equal access to the opportunities found in the more affluent coastal regions. This is already pissing off a lot of people. I think this will ultimately be the cause of the Communist party’s demise.”

If those in power have brains they will plan ahead sock it away and get out while the gettings good. Then hand it over to others … Otherwise it could be like in Russia where there is a backlash against those who made so much so quickly. This can lead to ethnic tensions and internal strife which can really slow down the economy.

China is a huge reason the U.S. needs to start seriously developing alternative energy: If we start investing in solar, wind, clean coal and gas, making cars way more efficient and even get going on hydrogen (for 30-40 years in the future), we will suffer in the short term but we will stay years ahead of China in a couple decades when the oil is used up. The Chinese boom is based on cheap oil and hydroelectric and coal, all of which are causing havoc in terms of environmental degredadation and pollution. Way worse than anything rich, less-populated countries have experienced.

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From the big corporations (read: Big 3) I’ve had the pleasure or displeasure to work with, pure research doesn’t happen unless it is at least partially funded by the federal government. RnD departments at those companies are quite small today compared to 10-20 years ago.

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Thanks for clarifying. I bet there’s some academic research out there supporting this type of theory and vice versa. As a counterpoint, I think the market as a whole is sophisticated enough to understand that increased R&D is a good thing but your point is well taken.

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Speaking of China, this was on /. yesterday: “According to a working paper of the National Bureau of Economic Research, rapid development of a science and technology base by populous Asian countries soon may threaten the economic position of the United States. Not only is the U.S. losing ground in high technology exports, but its very capacity to develop new technologies is declining rapidly with respect to the rest of the world. According to Richard Freeman, the paper’s author, the sheer population of Asian countries may allow them to train more scientists and engineers than the U.S. while devoting a smaller share of their economy to science and technology.” From the article: "The phenomenal growth of China’s industrial base has been widely publicized, but Freeman focuses on what is perhaps the more important long-term indicator of a nation’s prosperity - its re-investment in science and technology education. "

Interesting read.

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I don’t how the education system can be improved. While I agree that this promotion of “self-esteem” can be a little cloying, my impression is that this is not a prevalent issue, but rather a conservative bugaboo that can be picked on, while avoiding the main question. Easier to scapegoat than anything else. More specifically, I suspect that we are simply not forcing the issue when it comes to math and science. I suspect that our grad requirements for both have either been reduced or relaxed a bit over the last 25 years, and I think this would explain a bit of our seeming slide in technical ability. And frankly, while this may be a liberal bugaboo, I don’t think this “controversy” over evolution and biological sciences helps much either, as we politicize science by trying to delegitimize it, which is the last thing we need.

The problem with that is that the market doesn’t seem to encourage people towards the sciences. Rather, they seem better off going into business consulting or law, two areas (myself included) which are nice, but I suspect don’t do much for maintaining our technological advantage. But that’s where the money is, so what do you do?

Assuming your stats about research are correct, I wonder what the longitudinal analysis of that puts us. More specifically, where were we 10 years ago, and where was Korea and the rest of Asia relatively speaking, and where are they today? And I wonder what percentage of that research figure is NASA? Not to bash NASA, but if it’s a big percentage, I’m not sure there’s not a skew effect here.

In terms of Bell Labs, I think they’ve done great things (and I grew up quite literally next to it), but much of that was based in the time when Bell was a monopoly, so that pure research was not dangerous to their continued existence from a financial standpoint. I used to drive by the Telstar site every day. In terms of capitalism overall, I’m not saying it’s record is bad. But I think there are certain types of research it is not well suited for, simply put. For solutions that have relatively immediate market applications, there’s no question that capitalism will get you there. But if you’re going to take the long view, I don’t know a lot of CEOs who have the wherewithal to put a couple of percentage points of sales into research without a definable product at the end of the rainbow.

We can rely on the university system, but where does that money come from? Much from the government, I would guess.

I don’t know enough about Ireland’s tax situation to comment intelligently. All I know is that they were specifically quite aggressive with the pharma and chemical companies, which is why many of them have plants over there. I don’t have a problem with tax incentives, but it does come down to overall prosperity and making sure that it pays for an appropriate public service level. I object to blindly throwing out tax incentives without understanding the math behind them, which I think sometimes reflexively happens, especially here.

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Friedman does some good articles sometimes, but this isn’t one of them.

In one paragraph he talks about getting major companies on board to some common policies. In the next paragraph he talks about jacking energy prices through the roof. I doubt the CEOs would support his energy policy.

His comments about Ireland are on target, but he doesn’t say why. They have modeled their economy after ours, and rejected the model of the rest of Europe.

Gee, poor US. We have by far the fastest growing industrial economy in the world. If we are at risk, why doesn’t he tell us about Europe.
What are you talking about? We’re not growing faster than China or India, last I checked, in either industrial production or GDP, so I don’t know where you get this.

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When I say “self-esteem,” I’m using it as a catch all for an apparent unwillingness to allow kids to fail. My mom was a grammar school teacher, and it amazed me to hear what she had to put up with from parents when little Johnny or Jane got a bad grade. Instead of pushing their kid to try harder, the parents complained that my mom wasn’t being fair. Its all anecdotal, but those are my impressions.

Here’s an interesting question then. What is it that countries like China, Singapore and S. Korea are doing right? Why can’t we emulate them?

All those research stats were from a data aggregator and they don’t have, or I can’t find, time series data.

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China and India do not qualify as industrialized countries, though clearly that could change over the next few decades should they continue to grow at their current rates.