The Real Danger of Campaign Rhetoric

Mario CuomoFormer New York Governor Mario Cuomo once said you campaign in poetry but you govern in prose.  The implication being that candidates may wax eloquent and use all sorts of haughty language about pie-in-the-sky ideas and fringy ideologies while running for office, but all that rhetoric and all those empty promises and ideologies invariably come crashing to the ground whenever the winner places his campaign rhetoric his rear view mirror and assumes the day-in and day-out responsibilities of the job.

And whatever truth Cuomo’s words held when he said them has only been ramped up this election; in fact, to an almost unprecedented degree. This year’s unlikeliest of presidential campaigns has tapped into a level of pent-up populism and displaced workingman anxiety that we’ve not seen since the Great Depression.

One particular candidate on the far left and another on the far right are not only not going away, they’re threatening to change politics forever in this country. And in the process they’re taking their respective party’s longstanding status quo and power structure and turning them on their head.

Donald TrumpBut all that populism, while so real its downright palpable, has proven to be a slippery slope.  Because it has emboldened candidates across the board to say things that, while making headlines and drawing roaring howls of approval, are at their best economically unlikely, and at their worst economically dangerous.

Listen to the rhetoric.  To hear them say it, Bernie Sanders and Hillary Clinton would ban fracking yesterday.  Donald Trump would impose broad and sweeping tariffs and (for all practical purposes) seal us off from the world.  And Ted Cruz would make it his business to deport millions of American workers.

Such ideas are insane and would end up inflicting far more damage to U.S. businesses like mine than the “problems” they’re designed to target. Don’t believe me?  Consider: the strength of my business is directly tied to the price of oil. Not only that, but I have developed a customer base that now represents the four corners of the globe. And finally, not too long ago I lost a valued, dedicated and long-term employee to a random, capricious, and entirely unnecessary overreach by the U.S. State Department.

I’ve lived, in other words, the realities of so much of this year’s very pointed campaign rhetoric.

Ted CruzBut it’s not just me.  It’s the bankers.

For better or for worse (and like it or not), banks – and not businesses – are the drivers of this economy.  The bankers believe in you, they have confidence in your company, and they detect a level of certainty and predictability in the marketplace, they will open the spigot and dispense their cash to job creators.  Look at what’s happening in Detroit. The banks, after so many years of refusing to lend money to entrepreneurs, small businessmen, and homeowners, have started to see the Motor City as a now-stabilizing and now-intriguing growth opportunity — and, as a result, they have begun doling out their money accordingly.  That’s why so many economists finally, and at long last, feel there may be substance to all those Detroit-has-turned-the-corner stories.

Bernie SandersBut if any of the crazy campaign ideas now being bandied about were to ever take root, if only for a month, an almost seismic amount of damage would be inflicted on the economy. Ban fracking, wall us off from the rest of the world, tax my customers so much they start looking elsewhere, or deport a few million of our economy’s hardest working and lowest paid workers, and watch what happens.  The banks will get antsy, they’ll close their pockets, and we’ll see our changing-but-still-healthy economy come to a halt so quickly and so abruptly we’d not only face the prospect of a recession, we’d likely suffer whiplash.

Look, empty campaign promises are nothing new.  In fact, they’re as much a part of winning office as kissing babies. But this year in particular, all those empty promises and pithy sound bytes have managed to achieve a level of traction rarely before seen on the American campaign trail.  And the danger is, because of their populist appeal those promises have emboldened those making them to actually be foolish enough to drink their own Kool-Aid.

And while most successful candidates have always been wise enough to park the poetry at the door and  govern in prose, this year – as we’ve seen time and time again – is almost without precedent.  The candidates feel more likely (and emboldened) than ever to attempt to actually institute their wacky, populist, touch-a-raw-nerve ideas.

LendingWill it happen? Who knows?  But I know this; as a small business owner who relies heavily on (and is deeply invested in) the global marketplace, I sure as hell will be waiting with bated breath to watch what unfolds.

And, at least in that regard, I won’t be alone. Because as sure as you’re reading this, there will be any number of bankers right there with me.

 

What Happened to Dreaming Big?

SennAs many of you know, I live in Chicago.   But what many may not know is that my hometown is home to some of the most remarkable high school structures in the country.  I drive around, look at such sprawling, stately building such as Lane Tech, St. Ignatius and Senn High, and I find myself simply amazed at their physical grace, their stunning detail, and for lack of a better term, their architectural majesty.

But what’s most amazing about the majority of these high schools is that they were constructed at the most unlikeliest of times to commit so much capital, so many man-hours, and such mountains of resources to their construction. Some were built during World War I, others during the Depression, and almost all of them when America was still a fledgling, teetering and largely agrarian economy.

Hoover DamYet back then, our grandparents and great grandparents were bound and determined to build the best schools possible because they knew that education was going to be the key to a better life for their children and their children’s children.  It was the key that promised to unlock the untapped and still-slumbering greatness that lied buried deep within the soul of this country.

They may just have been farmers and factory workers.  And they may have had their life savings not in things like T-bills, mutual funds or IRAs, but in cookie jars and cigar boxes.  But they were willing to do something that it now seems we’ve stopped doing in this country.

Empire State constructionThey dared to dream big.

Why do I say we’ve apparently stopped dreaming big?  Look no further than the still-unresolved issue of America’s decaying infrastructure.  Look, we know our infrastructure has been slowly rotting away for a while.  Heck, I’ve been screaming about it fact for years.

And even if a word had never been written about the issue, the eye test alone could have told you our infrastructure was rotting.  (Plus, there’s been all the decay we couldn’t see, as evidenced by Flint, Michigan’s network of water pipes that we now know is slowing but surely killing its residents).

Decaying InfrastructureAnd we know too that (literally) trillions of taxpayer dollars are going to be needed to either repair or replace so many of this country’s bridges, tunnels, power and water lines.

But even if we didn’t know any of that, and even if we’d had our head buried in the sand for the past two decades, all we would have had to have done is look at the 2013 Infrastructure Report Card that issued by the American Society of Civil Engineers that gave the very backbone of our nation’s economy an embarrassingly low grade of D+.

Golden Gate constructionSure at some point over the past eight years I would have loved to have seen the Obama Administration propose a New Deal-like program that would have put thousands of men and women back to work rebuilding our infrastructure, while at the same time teaching countless un- and underemployed Americans critical job skills and instilling in them a real sense of purpose, work ethic and achievement.

But that’s not the point of this essay.

Palm IslandsThe point is this:  American manufacturers are competing in a global economy and selling to a 21st Century global marketplace.  Why, in god’s name, are we still operating with a 20th Century mindset and why do we continue to nickel-and-dime over what remains a 20th Century infrastructure?

Why aren’t we dreaming bigger?  Why aren’t we thinking bolder?  Where, for example, are the plans for this century’s Hoover Dam, this century’s Golden Gate Bridge or this century’s Tennessee Valley Authority?

China infrastructureThat previous generation of Americans reached for the stars and dared to try the impossible.  Sure, they sometimes failed.  But dammit, they tried.  What’s more, they did all that dreaming knowing that the benefits of their labors and sacrifice would create a rising economic tide that would float all boats – not just their own.

Want to feel ashamed about the state of America’s infrastructure? Look what China is now doing. Look what India is doing.  Look what Brazil is doing. For all their economic missteps – and, believe me, they continue to make more than their share – they are doing one thing very right.  They are all re-imagining the very idea of infrastructure.  Each is designing and building 21st bridges, tunnels, roads, ports and networks, and each is embracing and harnessing 21st Century energy sources — all with both eyes fixed squarely on the 21st Century global marketplace.

China HS RailNow is not the time for us to rant and rave about things like small government and balanced budgets.  Now is not the time for us to nickel-and-dime one another or to place our personal politics ahead of the common good.

Now is the time to invest – and I mean invest collectively.  And now is the time to put our government to work doing what it does best: taking care of its people.

Now, more than ever, is the time for Washington to hire this country’s dreamers and to unleash them to do what they have always done best. Dream big.

China BridgeBecause dreaming big and dreaming bold is how we are going to erect a 21st Century infrastructure in this country, my friends — one that will be able to withstand the pressures and the promise of the 21st Century marketplace.  And that, I promise you, is America’s last best hope to remain the leader of this new global economy.

 

 

VW Makes a Mistake for the Ages

Beelte 2My company has a small office in Germany. I travel to the country regularly. And my respect for German manufacturing and engineering takes a back seat to no one.

But I have to tell you, the people at Volkswagen behind the decision to install software that allowed the company’s diesel engines to beat emissions tests in the U.S., while allowing them to then spew large quantities of pollutants (up to 40 times more than the federal standard) under normal driving conditions, made a decision that in a best case scenario might merely result in few hundred million dollars in fines. But in reality, those German execs so outsmarted themselves, and so proved to be tone deaf to the American market, they may just have literally killed their company in the process.

VW TDIBecause now, we’re no longer looking at an executive decision that may take down VW. According to the latest reports, the scope of the EPA probe has been expanded to include both Audi and Porsche diesel engines as well (both of which are manufactured by VW). As a result, this horribly calculated gamble may end up being responsible for doing irreparable harm to not one, but three, iconic car brands.

And should you think I’m just overreacting or simply blowing smoke, consider. Many people forget that VW is a car with its roots in, of all places, Nazi Germany, or that the company was launched under a personal directive from Hitler himself. All most know is that in the 1960s the VW Beetle emerged as a marketing phenomenon, if not a cultural icon. And while some of that was a result of that funny looking little car being embraced by the counter culture, the bulk of it owed to the fact that the Beetle became the centerpiece of what the editors of Advertising Age once called the single most brilliant and successful ad campaign in the history of Madison Ave.

VW NazisSo it’s not, in other words, like VW in an U.S. company with its roots squarely planted in the early days of American industry, much less the American psyche. To the contrary, its roots trace back to a guy we equate with evil. As a result, all the brand equity VW has spent nearly 60 years creating could be taken away like that.

And as far as Audi and Porsche go, while terrific cars and status brands, in this country both remain niche products for niche audiences. For that reason, their demise, while making an impact on the world economy, would likely only cause a whimper up and down Main Street America.

Estimates are that, since the diesel engine in question cannot be effectively retrofitted, a total recall could cost VW anywhere between $7.5 billion and $40 billion – and those were the figures that industry experts were bandying about before the news about Audi and Porsche broke this past week.

greenwashingConsider this immediate fallout, all of which has happened within a few weeks of the scandal breaking:

  • VW’s stock priced has dropped almost 10%.
  • Citing the company’s betrayal of the public trust and its corresponding loss in consumer confidence, Moody’s has downgraded VW, which will further hamper its ability to secure the kind of credit necessary to execute the extensive recall undoing this mess would require.
  • While VW sales figures actually rose 1% in September from the year prior, most auto manufacturers saw double-digit growth following the news, with the industry average for all manufacturers being just north of 16%.
  • Even though it is only weeks after the news broke, already dozens of lawsuits have been filed against VW, most of them class action suits, whose cause range anywhere from the environmental damage being done by cars driven by people who bought them under the premise they’d offer up to 97% fewer emissions to the fact that the average resale value of a VW diesel vehicle has deceased over $5,000 in a month’s time.

Time will tell how this will play out, but a few things seem clear even at this early juncture.

VW ProtestFirst, American consumers are a lot greener than many manufacturers want to believe.

Second, for all the talk about bureaucracy and inefficiency, it is clear the U.S. federal government still carries a ton of weight in the marketplace and can be relentless when it unearths something that seems even slightly fishy. (And, for what it’s worth, the EPA has notified all carmakers it intends to extend its probe into emissions and mileage figures to other models and companies.)

Piech WinterkornAnd finally, as important it is for us manufacturers to understand our products, it’s equally as important we know our customers. In fact, for years Ferdinand Piech, a VW advisory board member had been telling his fellow members now-ousted CEO posed a liability for the company.

Why? Because as Piech said to the VW advisory board time and time again, “He doesn’t understand the U.S. market.”