As an American expat of 10 years, I would like to state for the record that I am a tremendous fan of the USA’s democratic model of capitalism, warts and all. The more time I spend overseas, the more special I realize the United States system of relatively free market capitalism truly is. It is not perfect and, as someone that spends significant time in Europe, there are other models that have their attractions. However, as the US economy’s relative comeback from the global financial crisis and particularly the recent growth demonstrates, it is quite hard to bet against the USA model. However, there is a giant economy that has arrived in full force with a very different model. 

I had not visited China since 1994 and what I saw on a recent visit completely blew me away. As all parties know, unless you live in a cave (which is not a bad option depending on the cave), the USA and China, are in the middle of a battle of ideas, trade, global influence, soft, and to some extent hard power. As anyone reading this that has been to China recently knows, our friends in China are truly making it happen. The Chinese model too is imperfect; however, it is a real challenge to our model in many ways. With consistent economic growth of an average of 9.07% over the past twenty years, perhaps a moment of reflection is necessary. In particular, and in my opinion perhaps most urgent, what type of leader is necessary to lead free world economies and the largest one, the good old USA? In the US Constitution, our founding fathers only outlined three requirements to become president: 35 years of age, a resident of the United States for at least fourteen years, and a Natural Born Citizen. In 2020, is this enough? 

 

Leaders of the Democratic Capitalistic Model – Do We Need a Checklist?

 

Purpose of This Newsletter

Our goal in this newsletter is to have a discussion about democratic capitalism as a governance model with a cool head but also with an awareness, similar to that famous scene in The Wizard of Oz, that “we are not in Kansas anymore.” The economic order has a new kid on the block, and it is a serious player. As with all organizations, leadership and management matter. But perhaps it is more basic than this. Would a simple thing such as a checklist help our democratic capitalistic model to shine? Is there anything to learn from our friends in Beijing?

 

My First Trip to China

My first job out of college was with a Japanese company in Tokyo where I was an engineer. I went to China on business. In 1994, I know I am aging myself, a visit to China was going backwards in time. I remember the airport in Beijing was quite primitive and the cars you would see were similar to the 1979 Chevy Nova my Mom offered me to drive to Palo Alto when I wanted a car (this car had been immobile for years with my Dad’s intention to “fix it”). 

The number of bikes in Beijing was simply incredible. Literally, outside my window in Beijing there was a haze of pollution and what seemed like a million bikes. It was an image I will never forget. Compared to Tokyo, where I lived at the time, Beijing was a time capsule going backwards decades. It was a wonderful experience, but China was not a global competitor. The country was quite poor and somewhat backwards. As many readers may remember, the large majority of Chinese students at top universities, at least during my time at Stanford, were from Taiwan or of Taiwanese descent. As another example of how different things were, and I am not joking, the young Chinese engineers who worked with me in Tokyo for three months never left the dorm (at the time, often single men lived in corporate dorms in Japan) in order to save money. In fact, when we all decided to go to Ginza one night, I have no idea how but this group of Chinese interns was so motivated to save money that they biked, instead of using the subway, from an incredible distance to simply see this unique area of Tokyo. This was then…. China was darn poor. The Donald, in a very non politically correct fashion, has a word for countries that are in such situations. 

In contrast, our team at InDev and I returned to China several times this year, 25 years later. The change in wealth, GDP growth, infrastructure, education, and number of people out of poverty literally and figuratively blew me away. Obviously, The Donald thinks China is quite a big deal. I say that high-level universities and even high schools have a radically different perspective on which country exports students.  It is arguable that Australia’s 28-year period without a recession is largely due to being a resource rich nation and having a very large customer directly due North (China). Australia’s twenty plus year growth spurt largely follows China’s huge twenty year expansion and demand for resources from its Aussie friends. The question is, what creates this type of change, how does it happen, what type of leadership is required?

 

The Donald

Admittedly, there are strong emotions about The Donald. However, regardless of your feelings about our President, one must give him credit for thinking big. I am unsure if anyone has taken over or reformed an organization, namely the Republican Party, of which they were not a part, in their image at this level in modern political history.  Anyway, when The Donald won the election, I made a foolhardy joke that based on Trump’s celebrity status and uniquely different set of experiences and qualifications for the job, I saw no reason why Kanye West could not be the next president. I was 1000% joking. Well, Mr. West appears to have expressed interest in running for president in 2024. Kanye, I would love to get a beer with you but I really was joking Big Guy…

Let’s be clear, both Donald Trump and Kanye West are very successful in what they do. They are both extremely successful at their personal brand and, while I have not seen tax returns, are quite economically successful. Kanye West in particular appears to have come from a very humble background, he has made a tremendous amount of money, he has a wife who is perhaps more famous than he is, a sister-in-law that is a billionaire at 22…  This is very impressive stuff. Both The Donald and Mr. West are icons of pop culture. Heck, Trump has over 67 million followers on Twitter and I do not even have an account. These are successful people with followings, independent ideas, and without question they fit the requirements outlined in the Constitution. They are both over 35 years old, US residents for over fourteen years, and natural born citizens.  

When it became clear that Kanye West was really potentially running for president, I said to a professional colleague of mine that Kanye may run against Lady Gaga for president in 2024. Her response was, “why would you insult Lady Gaga by putting her on the same level as Kanye?” She then proceeded to rattle off several of Lady Gaga’s differentiating factors that would make her a decent candidate. Once again, to be clear I was joking. Nothing against Lady Gaga, I believe that she went to NYU, she is obviously very talented, I presume a self-made millionaire etc. She is over 35 years old, a US resident for over fourteen years, and a natural born citizen. Per our constitution, she too is inherently qualified to become President of the United States. Why not?

 

Meanwhile in Brazil…

In the Sao Paulo Congressional elections of 2010, a new candidate received the most votes. An outpouring of support and enthusiasm for his candidacy was palpable, his campaign slogans were crazy and catchy. His unique campaign slogans included “What does a Member of Congress do? I don’t know, but vote for me and I’ll tell you” and “It won’t get worse than it already is.” This candidate won the most votes of any congressman in Brazil that year, and remains the fourth most voted congressman in Brazilian history. His name is Francisco Everardo Tiririca Oliveira Silva.  He is still in office today. His profession prior to entering politics was literally a clown. Per Brazilian’s constitution, the qualifications to become a congressman are to be a natural born or naturalized citizen and at least 21 years of age.

Democracy is beautiful and there is no specified checklist of qualifications to become a leader of the Free World.  In a world of Twitter, Facebook, Instagram, and who knows what else – is this all that is needed? Let’s continue. 

 

Back to China

On a recent trip to China, I had a conversation with a very successful entrepreneur in Shanghai. The entrepreneur and his family had built a very successful business, a multi-billion dollar operation in little less than three decades. This company was not a market cap billion dollars or a Unicorn with lots of revenue with no profits. No, it was an old school business with tens of thousands of employees and mid single billion dollars in sales!  He said something that really struck me. He said democracy has its theoretical attractiveness, however, often he questioned whether many leaders, at least in his opinion, have competence in what they were doing. Have their leadership skills been tested in similar roles? He said, “Look, I’m a business person in China, I’m not a politician, but one can’t argue that the Chinese Communist party is extremely competent.”

 

“A Tale of Two Political Systems” – Ted Talk in 2013 – Eric Xi

There is a great talk by Eric Xi via Ted Talk. Eric, who I will forgive for going to UC Berkeley during his time in the USA, is a venture capitalist in Shanghai.  While we can debate many of the points he made during this talk, around minute 7:30 into the discussion he provides unique exposure to what appears to be a quite effective leadership training program for the CCP leaders. Effectively, he lists off the skills and experiences required before a person reaches the top of the party. Many of the CCP leaders have managed regions of 150 million or more people before reaching the top of the party. In more sophisticated terms, over thirty years, a CCP leader has gone through a specific checklist of skills and experiences. Again, not arguing that we should become members of the CCP, I am a simple person from a small town in North Carolina, but transforming a country from a poor agricultural nation 30 years ago to the world’s second largest economy takes leadership, a management team, and serious execution. This is not done through luck. Is there something for Western democracies to learn in this “checklist” system for its leaders? 

 

The Cheese Has Moved – Big Time!

However everyone feels about China’s success and their competitive nature with the United States, one will struggle to argue with the competence of the Chinese Communist party. So what does this mean? Well, the cheese has moved and, to some extent, a lot of the economic growth that will happen in the world over the next twenty to thirty years is likely to take place in Asia and perhaps in a Chinese-led ecosystem. In addition, there is a growing sense of decoupling or at least a re-evaluation of globalization. I am not here to argue these merits.  However, perhaps just perhaps in this complicated global environment where leadership really matters, even more so than likes and followers and campaigning ability, perhaps just perhaps it is time to look into a checklist of qualifications for our democratic leaders. What do you think? What should the list include? Should this be the conversation more so than impeachment? Until then, who are you backing in 2024, Kanye West or Lady Gaga?  

I hope that you enjoyed this intellectual journey. I would love to hear your thoughts. I am certain that specific friends will write back with some comments. I have thick skin. Tomatoes are hard to throw via email 🙂

HAPPY HOLIDAYS and HAPPY NEW YEAR!!!!!!!!