This relationship isn't working out. Its time for us to explore other government opportunities. We've tried to make it work. But it's not us — it's you (really).
I've been thinking a lot about leadership lately. Specifically: why, today, when a wave of crises is sweeping the globe, does leadership seem to be almost totally absent?
The answer I've come to is, ironically enough, leadership itself. I'd like to advance a hypothesis: 20th century leadership is what's stopping 21st century prosperity.
Let's face it. The very word "leader" feels like a relic of 20th century thinking. And it just might be that the case that instead of aspiring to be (or train) more "leaders," we should be seeking to reboot leadership. Why? When we examine the economics of leadership from a 21st century standpoint, we see that:
Leadership was built for 20th century economics. It's a myth that leadership is a set of timeless skills. Is it? Abraham Zaleznik famously defined leadership as "using power to influence the thoughts and actions of other people." Influence is the key word. The textbook skills of the "leader" — persuasion, delegation, coalition — aren't universally applicable. Rather, they fit a very specific context best: the giant, evil, industrial-era organization.
Leaders don't lead. How did this particular skillset emerge? Influence counts because the vast, Kafkaesque bureaucracies that managed 20th century prosperity, created, in turn, the need for "leaders": people who could navigate the endlessly twisting politics at the heart of such organizations, and so ensure their survival. But leaders don't create great organizations — the organization creates the leader. 20th century economics created a canonical model of organization — and "leadership" was built to fit it.
Leadership can be a bad. Organizations are just tools — and leaders are just more proficient users. When would a tool need a more proficient user — a leader — most? When the opportunity cost is greatest: exactly when that tool is about to be outcompeted by a better tool. Leaders are created when organizations are threatened to ensure organizational survival. But sometimes organizational death is the optimal outcome. That's exactly what we see in the real world: leaders unleashing bailout after bailout, horse-trade after horse-trade, to ensure the survival of yesterday's malfunctioning machines. The economics suggest that 20th century leadership lets dysfunctional organizations thrive at the expense of prosperity.
Here's the problem in a nutshell. What leaders "lead" are yesterday's organizations. But yesterday's organizations — from carmakers, to investment banks, to the healthcare system, to the energy industry, to the Senate itself — are broken. Today's biggest human challenge isn't leading broken organizations slightly better. It's building better organizations in the first place. It isn't about leadership: it's about "buildership", or what I often refer to as Constructivism.
Leadership is the art of becoming, well, a leader. Constructivism, in contrast, is the art of becoming a builder — of new institutions. Like artistic Constructivism rejected "art for art's sake," so economic Constructivism rejects leadership for the organization's sake — instead of for society's.
Builders forge better building blocks to construct economies, polities, and societies. They're the true prime movers, the fundamental causes of prosperity. They build the institutions that create new kinds of leaders — as well as managers, workers, and customers.
Who's a Builder — and who's just a leader? Here are some Builders contrasted with mere leaders:
Mahatma Gandhi vs Barack Obama. Keith Olbermann recently took Obama to task for "a lack of leadership". Yet, on the contrary, Obama's problem is that he's too much of a leader — and not enough a Builder. He's mastered the principles of leadership; the result is politics as usual, instead of political reform. Gandhi, in contrast, was no mere leader, but the most awesome kind of Builder. He built one of the most significant institutions in history: nonviolent resistance. Obama's challenge isn't just "leading" Congress, the Senate, or the Executive Branch, by horse-trading better — it's reforming them, to build something even 1/1000th as significant.
Nelson Mandela vs Sarah Palin. Sarah Palin's shaping up to be a great political leader, expert at applying the tenets of leadership, for example, via Facebook, to divide, demolish, and conquer. It is Mandela who is a Builder. His crowning achievement, that altered the very fabric of politics, was a new institution for governance: South Africa's Truth and Reconciliation Commission.
Mohammad Yunus vs Ben Bernanke. Time's person of the year, Ben Bernanke, bailed out yesterday's financial institutions with a vengeance. What he didn't do was build better ones — like Muhammad Yunus, the microfinancial pioneer, did.
Matt Taibbi & Nick Kristof vs Tom Friedman & Maureen Dowd. Tom and MoDo are textbook examples of leaders in journalism; churning out column after column that challenge the conventional wisdom and set the agenda. Yet, that's not nearly enough to save journalism — let alone the New York Times. Matt and Nick, in contrast, are (re)building the institution of journalism for the 21st century, by utilizing the power of the Internet to reconstruct relationships with readers, publishers, and sources.
Jacqueline Novogratz vs Wall Street. Wall Street's leaders spearheaded an assault on staid banking as usual: the future, it was said, lay in slicing, dicing, and trading. But they never built new institutions to ensure their trades were socially useful. Jacqueline Novogratz did: her Acumen Fund is a new type of investor entirely, built from the ground up to invest for the common good.
Evan Williams vs Bill Gates. Ev isn't just a serial entrepreneur — he's a serial Builder. First, he spearheaded the building not just of Blogger, the company, but of blogging, an entirely new medium. Today, he's spearheading the creation not just of Twitter, the company, but of microblogging — yet another new medium. Both are new institutions that have changed how the world interacts. Bill Gates, in contrast, was just a leader. He led just another run-of-the-mill corporation to yet another monopoly — a total black hole of Buildership. Today, ironically enough, Gates is trying to redress the balance, by sparking a debate about how to (wait for it) build a better capitalism.
Elinor Ostrom vs Econ 101. Ostrom — winner of last year's Economics Nobel Prize — wasn't just a leading theorist, like, for example, Ben Bernanke. While most leading economists improved canonical models, Ostrom built a new way to study econ: by hitting the field and understanding how people actually manage resources locally. It was her methodology that led to her profound — and profoundly challenging — insights.
Today's builders are igniting the distant grandchild of yesterday's industrial revolution: an institutional revolution for a post-industrial world. They are forging the new building blocks — from ethical investment, to deep journalism, to socially useful finance, to universally accessible communication — that a rusting economy, society, and polity so urgently demand.
The 21st century doesn't need more leaders - nor more leadership. Only Builders can kickstart the chain reaction of a better, more authentic kind of prosperity.
How can you become one? Here are the ten principles of Constructivism (contrasted with these principles of leadership).
They're not the only principles, and perhaps not even the best ones. But they begin to help us think constructively about how to build a better tomorrow. And that is, ultimately, what it's all about.
Builders put the "Constructive" in Constructive Capitalism. Constructive doesn't just mean "to improve on yesterday." It also means "to build for tomorrow."
So the question is this: are you merely managing an organization, just leading an organization — or are you building an institution? 99.9% of the world's leaders are, well, just leaders. But today, leadership alone can't get you from the 20th century to the 21st.
Of course, everyone has their own definition of leadership — and that's why it's a tricky subject to discuss. The "leadership" I'm challenging is of the orthodox, B-school 101 one, that has to do with motivation, influence, and power. But your take on leadership might be closer to my definition of Constructivism. Have a think about that before you comment. And fire away with your own examples of Builders — or comments, thoughts, and questions.
Bonus: The 100 Best Videos Of 2009… In 135 Seconds
Todd Hale
Gloom or Boom?
While consumers around the world are more confident about the year ahead, Americans still seem relatively unconvinced there will be drastic improvement. And they have good reason to be leery. The "jobless" recovery—like government bailouts—hasn't yet touched consumers. Banks remain skittish about extending credit. Home foreclosures will likely hit hard in the first quarter of 2010 as banks work through an incredible backlog. And smaller community banks with exposure to commercial loans will be acquired should they not have the reserves to cover the losses. While economic indicators point to a technical recovery, a fair number of looming issues have yet to be addressed.
With these mixed messages, what will the American consumer do? Nielsen research reveals that consumers' fundamental spending adjustments are likely to last in the next year. Either by choice or necessity, their new-found thriftiness will continue. Almost one-third of consumers (30%) say that they will use credit less even when conditions improve with 19% saying that they intend to save more money.
Discretionary spending cutbacks continue to change the way consumers shop. Consumers now use coupons with an enthusiasm not seen in many years—for the first three quarters of 2009, Inmar reported that manufacturer coupon redemptions were up 26%. Food departments outperformed non-food, health and beauty and general merchandise departments as Americans returned to cooking and eating at home—boosting grocery channel shopping trips in the process. Store brands grew becoming an acceptable alternative—or even preferred brand—for many. Meanwhile, consumers "traded down" across categories, preferring chicken, turkey and pork to beef and seafood. While value channels such as supercenters, club and dollar stores, as well as online retailers, drove shopping trips to their stores, discretionary retail channels (home improvement, office supply and pet stores) saw declines.
Top Five Consumer Goods Spending Trends in 2010:
1. Restraint remains the new normal.
Americans' confidence has been slower to rebound compared to other parts of the world. The need to save money, unemployment and other economic issues continue to be top of mind, suggesting that any return to past behavior may take some time—if at all.
2. Value is a top priority.
With no signs of readiness to open wallets, a focus on low prices at the expense of all other variables threatens margins. Value messaging must also include some point of differentiation beyond pricing. Manufacturers and retailers that "drive the recession wave" and take an active role in innovation and ad spending are likely to be the big winners.
3. Store brand growth continues.
Even with year-end 2009 softness in store brand dollar share growth as retailers cut prices across the store to be more competitive, unit share growth continues and retailer focus has never been stronger.
4. Grocery consolidation intensifies.
Local and regional players, unable to drive profits in the soft economy, will become acquisition targets and some larger national and regional grocers will divest unprofitable formats and banners to strengthen investments behind their winning formats and banners.
5. Assortment wars escalate.
Retailer efforts to simplify the consumer shopping experience by eliminating aisle and shelf clutter will cause market share land grabs for small and medium-sized brands in pursuit of elusive revenue growth. Retailers may lose sales as they shift away from in-store merchandising that drove impulse buying and built shopper baskets. Look for brands caught in the trap of greater store brand focus and assortment optimization to forge alliances with key retailers, enter or step-up efforts as store brand suppliers, and/or explore direct-to-consumer sales.
Nielsen Business Media
Tagged: Brandweek
BARBARA ORTUTAY, AP Technology Writer Barbara Ortutay, Ap Technology Writer Thu Dec 17, 3:54 pm ET
NEW YORK – Over the past week, Facebook has been nudging its users — first gently, then firmly — to review and update their privacy settings.
You may have procrastinated by hitting "skip for now," but Facebook eventually took away that button and forced you to update your settings before continuing to use the site.
After finally accepting Facebook's recommendations or tweaking the privacy settings yourself, though, you might have made more information about you public than what you had intended.
At the same time, Facebook has given users many granular controls over their privacy, more than what's available on other major social networks.
So if you want to stay out of people's view, but still want to be on Facebook, here are some things to look out for as you take another look at your settings.
1. Some of your information is viewable by everyone.
Everyone can see your name, your profile photo and the names of work and school networks you're part of. Ditto for pages you are a fan of. If you are worried about a potential employer finding out about a quirky fetish or unorthodox political leaning, avoid becoming a Facebook fan of such groups. You can't tell Facebook you don't want those publicly listed. Your gender and current city are also available, if you choose to specify them. You can uncheck "Show my sex in my profile" when you edit your profile if you don't want it listed, and you can leave "Current City" blank.
2. Your list of friends may also be public.
Facebook also considers your friends list publicly available information. Privacy advocates worry that much can be gleaned from a person's list of friends — even sexual orientation, according to one MIT study. But there is a way to hide the list. Go to your profile page and click on the little blue pencil icon on the top right of your box of friends. Uncheck "Show Friend List to everyone." Either way, those you are already friends with can always see your full list.
3. You can hide yourself from Web searches.
There is a section for "Search" under Facebook's privacy settings page, which is accessible from the top right corner of the Web site under "Settings." If you click the "Allow" box next to "Public Search Results," the information that Facebook deems publicly available (such as photo, fan pages and list of friends), along with anything else you have made available to everyone, will show up when someone looks up your name on a search engine such as Google. The stuff you've limited access to in your profile will not show up.
This is useful if you want people you've lost touch with, or potential work contacts, to be able to find your Facebook page. If you'd rather not be found, uncheck this box.
A second setting, controlling searches within Facebook, lets you refine who can find you once that person has logged on. Limit searches to friends only if you think you have all the friends you need and don't want anyone to find you when they type in your name to Facebook.
4. Beware of third-party applications.
Quizzes and games are fun, but each time you take one, you first authorize it to access your profile information, even if you have made that available only to your friends. You're also letting the app access some information on your friends.
Under "Application Settings," Facebook lists all the apps you have opened your profile up to. If you no longer want to authorize access to "Which Golden Girl Are You?" you can always remove it by clicking on the "X" next to its name. Apps you use regularly, such as Facebook for Android if you update your status from your mobile phone, should stay.
Next, by clicking on "Applications and Websites" on the privacy settings page, you can edit whether your friends can share your birthday, photos and other specific information. Remember that applications can access your "publicly available information" no matter what.
The security firm Sophos recommends users set their privacy settings for two of Facebook's own popular applications, notes and photos, to friends only.
5. Go over your list of friends.
The average Facebook user has 130 friends. But many people interact with a much smaller group when commenting on status updates, photos and links. So it doesn't hurt to occasionally review your list of your friends to get an idea of just who can view your status posts, vacation photos and funny links you've shared over the years. Don't feel obligated to add anyone as a friend, even if that person adds you first. For professional acquaintance you don't want to snub, send them to a LinkedIn profile you can set up. Some workplaces and schools have rules about Facebook interactions between bosses and employees or students and teachers.
6. Create custom friends groups.
If you have friended a lot of people, sort them. Think of the groups you interact with in real life — co-workers, college buddies, girlfriends, grandma and grandpa — and organize your Facebook friends in these groups, too. Go to "All Friends" under the "Friends" button up top, click on "Create New List" and fire away. Then decide what aspects of your profile, and which status posts and photos, these people will have access to. Or, simply create a "limited" list for acquaintances or distant relatives and limit their access.
7. Customize your status posts.
Type "I'm hungry" into your status update box. Click on the little lock icon. You'll see a range of privacy controls pop up, letting you either allow or limit access to the post. If you want, you can even hide it from everyone by clicking "Only Me" under the custom settings. Click on "Save Setting." Repeat with each post, or create a default setting for most updates and increase or decrease privacy as you see fit.
8. Let your friends know you have boundaries — in person.
Many of us have woken up on a Sunday morning to find that an overzealous friend has posted dozens of photos from that wild party we barely remembered — the good, the bad and the hideous. Chances are, they didn't do this to embarrass you, though if they did you have bigger problems. Rather, they probably don't know that you don't want these photos posted. Sure, tweak your photo privacy settings on Facebook. But if someone starts snapping pictures of you at a party, ask them to check with you before posting it anywhere.
9. Never assume complete privacy.
Even for the most tech-savvy person, unflattering photos, incriminating text messages or angry status posts about work have a way of worming their way out in the open. Just saying.
Tagged: AP
Becker's analysis is impressive, but I hesitate to state with confidence that China would be better off to revalue its currency. As Becker points out, China has pegged its currency to the dollar at a rate of exchange that greatly undervalues its currency relative to ours. As a result China sells goods to U.S. producers and consumers at very low dollar prices and buys goods from U.S. producers at very high prices. In consequence it exports a lot to the U.S. (and to other countries as well, for its currency is undervalued relative to other currencies besides just the dollar, notably the euro) and imports little. Since it receives more dollars than it pays, it has accumulated huge dollar reserves--accumulated them rather than giving them to its people. It has more than $2 trillion in foreign reserves, mostly U.S. dollars. The dollar has been falling lately, and the value of China's dollar reserves with it.
Could China have sensible reasons for such an odd, old-fashioned policy ("mercantilism"--the maximization of a nation's cash or cash-equivalent reserves--famously attacked by Adam Smith more than two hundred years ago)? It could. The immense exports that China's skewed exchange policy has fostered provide employment for a large number of Chinese. Their wages are low, but at least they have jobs. Of course they might have jobs if the dollar were cheaper relative to Chinese currency. China would import more and export less. It would manufacture less, because many workers would be required for the expanded system of domestic distribution that would be necessary if domestic consumption (both of Chinese manufactures diverted from export to internal markets and of imported goods). It would manufacture a different mixture of goods, because of competition from imported goods, but above all it would need a much more elaborate system of wholesale and retail distribution, and perhaps a different commercial culture. The transition to a modern consumer society with its credit cards and product warranties and malls and the rest would be difficult. In the interim there might be widespread unemployment; shifting employees from manufacturing to distribution, or from one type of manufacturing to another, doesn't happen overnight. And China doesn't have the kind of social safety net that we do, to catch the unemployed before they reach the bottom. Because of the limitations of domestic consumption, Chinese are great savers, and this relieves the pressure the government would otherwise feel to provide social services. That provision might strain the government's administrative abilities.
China has a long history of political instability, and there is tension between its dictatorial communist government and its largely free-enterprise economy. It is naturally reluctant to take chances on changing its economy from one of producing manufactured goods for export to one of manufacture and distribution primarily for domestic consumption.
And there is value to China in those trillions in foreign reserves that it has accumulated. They magnify its global power. China is our major creditor. It finances our deficit. Like any dependent debtor, we must be very careful not to offend our major creditor. It is true that our relation with China is one of bilateral monopoly: if we devalue the dollar (which we may be doing) in order to lighten our debt burden, we hurt China; but if China in retaliation stops buying our Treasury bonds, we are badly hurt.
For all these reasons, while China is likely to abandon mercantilism in the long run, it probably is sensible for it to do so gradually.
Would we benefit from China's abandoning mercantilism? As Becker points out, our consumers benefit from the artificially low prices at which Chinese goods are sold in this country. At the same time, our dependence on China's financing our public debt weakens our ability to influence Chinese policy on issues of urgent concern to us, such as the threat of nuclear proliferation posed by North Korea, Iran, and Pakistan, and the need to take effective steps to limit global warming.
Then too it seems that the only way in which we can buy those cheap goods from China is to borrow from China. We buy more from China than we sell to it and so China accumulates dollars to bridge the gap, dollars that it then lends to the U.S. Treasury. The effect is to reduce pressure on our government to pay down our immense and growing public debt either by raising taxes or by cutting spending. We cannot continue along the path of ever-growing debt unless our economy grows very rapidly, which is not assured. So I am not sure that I agree with Becker that China's policy is good for us and bad for it. The reverse may be truer.
By all accounts, President Obama's visit to China last week was pretty much a failure on all the major issues, which include China's contributions to climate change, nuclear weapons, and various aspects of the world economy. I will concentrate my discussion on two of the most important and closely related economic issues: the valuation of the Chinese currency, the renminbi, and the huge assets accumulated by China that are mainly held in the form of US Treasury bills and other US government assets.
The Chinese central bank held the value of the renminbi fixed relative to the US dollar at a little over 8 renminbi per dollar during the 1990s, and until 2005. It then allowed the renminbi to appreciate gradually to less than 7 per dollar until 2008, when it again fixed the rate of exchange between these currencies at about 6.9 renminbi per dollar. This exchange rate is considerably above a free market rate that would be determined in a regime of flexible exchange rates. So there is no doubt that China is intentionally holding the value of its currency below the rate that would equate supply and demand.
The dollar has depreciated substantially relative to other currencies since May of 2009. Since the renminbi is tied again to the dollar, the renminbi has depreciated by the same amounts, including 16% against the euro, 34 % against the Australian dollar, 25% against the Korean won, and 10 % against the Japanese yen. This substantially depreciation of the Chinese currency has made many other countries angry at China's policy of locking it to the US dollar.
President Obama apparently complained to Hu Jintao, President of the People's Republic of China, about the low value of the renminbi, and urged China to allow it to appreciate substantially. The US and other countries worry that the undervaluation of the Chinese currencyi increases the demand for Chinese exports, and reduces China's demand for imports from countries like the US because China keeps the dollar and the currencies of other countries artificially expensive relative to their currency. America and other countries hope that greater demand from China for their exports resulting from a higher value of the renminbi will help these countries resume sizable economic growth as they recover from this severe recession. They especially want to help reduce the high levels of unemployment found in many of these nations.
Indeed, in good part due to the low value of its currency, China has run substantial surpluses on its current trade account as it imports fewer goods and services than it exports. The result is that China has accumulated enormous reserves of assets in foreign currencies, especially in the form of US government assets denominated in dollars. As of September of this year, China had the incredible sum of over 2 trillion dollars in foreign currency reserves, such as US Treasury bills. This is by far the highest reserve in the world, and it amounts to the enormous ratio of more than one quarter of China's GDP of about $8 trillion (purchasing power parity adjusted).
I am dubious about the wisdom of both America's complaints about China's currency policy and of China's responses. On the whole, I believe that most Americans benefit rather than are hurt by China's long standing policy of keeping the renminbi at an artificially low exchange value. For that policy makes the various goods imported from China, such as clothing, furniture, and small electronic devices, much cheaper than they would be if China allowed its currency to appreciate substantially in value. The main beneficiaries of this policy are the poor and lower middle class Americans and those elsewhere who buy Chinese made goods at remarkably cheap prices in stores like Wal-Mart's that cater to families who are cost conscious.
To be sure, US companies that would like to export more to China are hurt by the maintenance of the Chinese currency at an artificially low value relative to the dollar. As a result, employment by these companies is lower than it would be, so that this may contribute a little to the high rate of US unemployment. But I believe the benefits to American consumers far outweigh any loses in jobs, particularly as the US economy continues its recovery, and unemployment rates come back to more normal levels.
Since the opposite effects hold for China, I cannot justify their policies from the viewpoint of their interests. Their consumers and importers are hurt because the cost of foreign goods to them is kept artificially high. Their exporters gain, but as in the US, that gain is likely to be considerably smaller than the negative effects on the wellbeing of the average Chinese family.
I reach similar conclusions about China's accumulation of their excessive reserves. The US has little to complain if China wants to hold such high levels of low interest-bearing US government assets in exchange for selling goods cheaply to the US and other countries. China's willingness to save so much reduces the need for Americans and others to save more, but is not differences in savings rates also part of the international specialization that global markets encourage? To be sure, why China is willing to do this is difficult to understand since they are giving away goods made with hard work and capital for paper assets that carry little returns.
One common answer is that China hopes to increase its influence over economic and geo-political policies by holding so many foreign assets. Yet it seems to me just the opposite is true, that China's huge levels of foreign assets puts China more at the mercy of US and other policies than visa versa. China can threaten to sell large quantities of its US Treasury bills and other US assets, but what will they buy instead? Presumably, they would buy EU or Japanese government bills and bonds. That will put a little upward pressure on interest rates on US governments, but to a considerable extent, the main effect in our integrated world capital market is that sellers to China of euro and yen denominated assets would then hold the US Treasuries sold by China.
On the other hand, the US can threaten to inflate away some of the real value of its dollar denominated assets-not an empty threat because of the large US government fiscal deficits, and the sizable growth in US bank excess reserves. Inflation would lower the exchange value of the dollar, and also of the renminbi, as long as China keeps it tied to the dollar. That would further increase the current account surpluses of China, and thereby induce China to hold more US and other foreign assets, not a very attractive scenario to China.
So my conclusion is that the US in its own interest should not be urging China to appreciate its currency- countries like India have a much greater potential gain from such an appreciation. On the other hand, I see very little sense at this stage of China's development in maintaining a very low value of its currency, and accumulating large quantities of reserves. Paradoxically, President Obama and President Jintao should each have been arguing the others positions on these economic issues.
The sharp rise in unemployment is perhaps the biggest problem facing the US economy. Like the UK, the rise in unemployment has been muted by a fall in working hours and increase in temporary employment. The bad news is that the forecast for unemployment in 2010 and 2011 is for a continued period of high unemployment.
Unemployment rates in 2010 and 2011 - source: P.Krugman
Many people might be a little surprise at how much the dollar rallied from the summer of 2008. But, this year, the dollar has regained its downward momentum, and it is hard to see a reversal in the dollar fortunes given state of economy.
