Keynote Insights

Ian Bremmer and Simon Sinek share their views of the current “political recession” and the core purpose behind our firms and our lives.

Not every session at ENGAGE (see previous article) was technical.  Two years ago, the AICPA made the strategic decision to group its various conferences together, all together in the same building, which means that the financial planners were on one floor attending their sessions, the tax planners on another floor with theirs, estate planners and auditors in different parts of the building and so forth.  Everybody would come together for keynote sessions and, because of the increased economies of scale, the conference could afford some of the most popular business-related speakers on the circuit.

This year, that included Ian Bremmer, President and founder of the Eurasia Group, who is one of the world’s most thoughtful commentators on how political issues are affecting our investing environment.  In this speech he explained why politics around the world are becoming so contentious and (in many countries) irrational.

Bremmer started out by admitting that talking about global politics these days is not pleasant.  “It drives families apart,” he said.  “It is unnerving.”  And he said off the bat that what is happening in today’s political environment is not about Donald Trump.  “It’s so much deeper than that,” he said.  “And it is not just happening in the United States.  It is happening in a lot of other countries.”  He listed the UK and Brazil as having messier political situations than what the U.S. is experiencing.

Big picture, Bremmer said: the world is experiencing a “geopolitical recession,” a period when a stable, long-standing global order is unwinding, and there is no clear replacement to hang onto.  “For many years we had a U.S.-led global economic order in trade, led by political and economic institutions driven by the U.S.,” he said.  Now that order is falling apart.

Why is this significant?  Because it reduces the chances of a concerted solution to global crises.  “In 2008-9, when global leaders got together, they knew they had to do something about the global economic recession,” Bremmer told the group.  “The Americans, the Europeans, the Japanese and Chinese all banded together at the G20 Summit in 2009 in London and said: we all have to ensure that we avoid a global depression.”  After 9/11, all of those countries offered their unqualified support.  Even the Russians provided bases for the Americans to use with its allies in Central Asia to make it easier to fight the war in Afghanistan.

Now, Bremmer said, if there is a new global crisis, he would not expect that unified front to mitigate it.  If, for example, there were to be a cyberattack on critical infrastructure, or another European debt crisis, or a new emerging market debt crisis, Bremmer expects different countries to blame each other and squabble, and elected officials in the United States to lash out against their political opponents.  The political recession would prevent an effective, timely response.

“This country, and the world, is massively more divided than it was a few years ago,” Bremmer told the group.  “Whatever the next crisis actually is, you don’t have the resilience in the political system.  And that is the principal economic concern that we should have going forward over the next five to ten years.”

Why are we in this situation?

First, Bremmer said, in the advanced industrial democracies, a surprising number of citizens are convinced that the system is rigged against them.  “They believe,” he told the audience, “that their elected officials are not actually telling them the truth; that they don’t actually want to make life better for them.”  In addition, he said, they feel this way about the CEOs, the bankers, the mainstream media and the intellectuals. 

Why?  The chief reason is economic inequality.  “The U.S. economy is doing well right now,” Bremmer told the group.  “Unemployment is quite low, wages have come up a bit.  But inequality is actually at a higher level today than at any point since the Great Depression, and the average American feels like all of the benefits of the booming economy are going to the top 1%.  And further, that those people who say they want to help actually have no interest in doing so.”

He said that the same dynamic explains the new populist regimes in Mexico, Brazil and the UK.  “The voters were not stupid people,” Bremmer said.  “They know what they were voting against: all those bankers, CEOs, political officials and the media with their fancy facts and science.  They said: we know that you’re lying.  You’re not going to help us.  So we’re going to vote against you.”

Bremmer added that failed wars and immigration issues, where so many suffering people in war zones and distressed countries want to enter the economically strong democratic states, are adding to the anger and frustration. 

Finally, he said that social media has disenfranchised the traditional sources of news.  “You are being productized,” Bremmer said.  “And the way to maximize that productization is to only make sure they are giving you things you continually like.”

The interesting exception is Japan.  “In Japan, there is none of this sense that the system is rigged,” said Bremmer.  “Why?  You don’t see economic inequality in Japan because the population is shrinking really fast.  The pie is the same size, but everybody gets bigger slices.  The working class actually feels like they’re doing considerably better today than they were 20 or 40 years ago.”

There is no anti-immigration sentiment in Japan because there is no actual immigration.  “They let in eight Syrian refugees last year,” Bremmer told the group.  There is no backlash against the military in Japan because the country hasn’t fought any wars in a really long time.  And finally, only 39% of Japanese citizens are on social media, and those who are on it don’t spend much time there.  Japan has strict regulations against using social media for political campaigns, which means most Japanese people get their news from the newspapers and TV.  Therefore the roots of populism have nothing to grow in.

Bremmer then talked about how China rose to be an economic super power while somehow managing not to embrace democratic ideals, and said that increasingly there will be two tech infrastructures (think 5G) for global utilities to tap into.  Companies will have to choose between China’s (and buy from its state-owned enterprises) or America’s. 

“The new global economy will not be a free market any more,” said Bremmer.  “It is going to be a fractured hybrid system, with one piece driven by China and the other piece driven by the West.  Some of America’s most important companies—Amazon, Google, Facebook—have almost no access to the Chinese market.”

Finally: Russia.  “Russia is not going well, and they blame us, with some justification,” said Bremmer.  “We said we wanted to include them in NATO [after the collapse of the Soviet Union] but we had no intention of letting them into NATO.  They dangled EU membership when in reality Russia was never going to have a shot.”

The problem is that  even though Russia’s economy is not ascendent, the country’s cybercapabilities are on a par with the United States.  Its military capabilities are quite significant.  And the country has an interest in dividing and weakening the Western democracies.

“Russia supported Brexit,” Bremmer told the audience.  “The Russians supported the National Front in France.  The Russians want a weaker Europe and a more divided America.  They are the one major country in the world that is willing to take larger risks and wants to break things.”

Bremmer concluded that America is not broken.  “The American political system still works,” he said.  “It is more captured by special interests, more captured by money, but the political institutions are 90-95% of what they were before Trump.”  He feels the same way about Germany and Japan.  He expects that a Brexit agreement will eventually be worked out.  “In other words,” Bremmer said, “for all of the headlines, we are actually going to survive the insanity, and in the end it won’t affect things very much.”

Good to know.

The ‘why’ of us

A second keynote presentation featured Simon Sinek, author of “Start with Why” and “Leaders Eat Last.”  Sinek said that all of us, and our organizations as well, should take some time to figure out our purpose, why we exist.  “That is the valuable foundation for every organization and individual,” he said.

The “why” cannot be about you; it has to be something in service to others.  “When I hear organizations or companies tell me: Our ‘why’ is to be the biggest and most profitable firm with the highest value—that is an egocentric goal,” Sinek told the audience.  “It is not inspiring.  A true ‘why’ has to be of value to the person who receives whatever it is you’re doing.”

Some of the highlights included a discussion of middle management, where the company’s top leadership might be awesome, but middle management is incompetent, and as a result the company flounders.  How does that happen?  Because too often, when you get good at your job, you’re promoted with no leadership training. 

“Why on earth do we think we can promote someone to a leadership position and expect that they know what to do without showing them how to do it?” Sinek asked.

On the other side, he has seen middle managers who have taken the time to get leadership training on their own, who read the same books and discuss them together, and management really doesn’t care.  Sinek told the story of a small group within a large tech company, which got training on its own and started doing very well within a poorly-managed organization.  “Their numbers were better and the group expanded—all the things you would expect to happen,” said Sinek.  “But one thing we DIDN’T expect is that the phones started ringing off the hook from other people in the firm, asking: can I get a job in your group?

How do you get leadership training?  Sinek told the audience about how smaller firms, which don’t have a big training budget, can do it.  They can create a library, where people read the key books about leadership in management.  They can start internal book clubs where everybody reads a chapter, and every week they discuss it.  “I have also seen it done with TED talks,” he said, “where somebody gets to choose one they like, and they watch it for 18 minutes, and then spend the rest of that hour talking about it.  They share articles within the group.  And,” Sinek added, “for people who are really interested in the subject, often you can volunteer to put together a small curriculum.”

Another highlight was choosing leaders.  Sinek said that he worked with Navy SEALs, who said that they map all their soldiers on a grid.  You can draw it yourself: the X axis is performance, from low to high, and the Y axis is trust, whether you have the back of your team members, from left to right, low to high.

This divides into quadrants.  “Of course, nobody wants the person in the bottom left quadrant, who is a low performer and low trust,” Sinek told the group.  “And everybody wants the people in the upper right quandrant, the high performers with high trust.”  But, he said, the SEALs learned that the high performer with a low trust factor (upper left quadrant) is actually a toxic team member.  And yet most organizations value those high performers, and welcome them on the team and coddle them. 

“We have a million metrics to measure an individual’s performance,” said Sinek, “and we have minimal to no metrics to measure someone’s trustworthiness.”  The result is that these toxic members of the team are often promoted to become toxic leaders.

What’s the alternative?  “It is so easy to identify these people,” said Sinek.  “Go to any team, ask them who the asshole is, and they will all point to the same person.”  Then, he said, you can ask the same team: who has your back?  When the chips are down, when you’re struggling, which team member will always be there for you?  And they will point to a different team member, who may not be your highest performer.”

The point is that sometimes high performers are rising in the ranks at the cost of the team’s performance.  When something breaks, or they quit, or the company finally gets rid of the toxic high performer, the team’s overall performance rises.  Sinek said that a better approach is to try to coach toxic high performers, and a lot of them can grow out of toxicity.  “The only time I think you absolutely have to remove somebody from your organization,” he said, “is if they are uncoachable.”  And consider promoting to leadership roles the people who have decent but not outstanding performance, but who score high on the trust side.

A broader point, Sinek said, is “we tend to overvalue skill and undervalue humanity, trustworthiness, loyalty, empathy and patience—all of these skills that we want in good parents, good teachers and good leaders.”

Another highlight came when Sinek discussed the challenges of merging several ‘whys’ in a partnership arrangement.  “Every partnership is going to have people who have different ‘whys,’” Sinek admitted.  “The question is: why did they start this firm?  What is the firm’s origin story?  What is its just cause?  What is its vision?”

Later he said: “When a firm has a vision, when you want to attract people and their ‘whys,’ then share your vision.  You want to combine your ‘whys’ to that common purpose.  That’s why it’s very important for organizations to clearly express to the world what they will commit their efforts to build.”

More highlights?  Sinek talked about finite and infinite mindsets.  “Infinite mindsets embrace surprise and change as opportunity,” said Sinek.  “The finite mindset sees change as being challenging to your business.  An infinite mindset sees change as an opportunity to grow.” 

A company can encourage an infinite mindset when it allows people to try new things, knowing that they won’t lose their jobs if those new things don’t work out as expected.  “Every single one of us has fallen a bazillion times,” Sinek told the group.  “The only reason we are here today is because somebody said: all right.  You’re okay.  Get back up.  Try again.”

Related to that, Sinek talked about innovation, which he said some firms avoid because it is the opposite of efficiency.  “Innovation is trial and error,” Sinek said.  “Innovation is experimentation.  It is testing.  It is doing something that fails and fails and sticking with it.” 

Later he added: “If somebody has unbelievable passion for something that they think could help the firm or change the industry, why would we stand in their way?”

At the end, Sinek downplayed the value of his presentation and, really, all the presentations at the conference.  Not that they weren’t valuable, but that they weren’t the center of gravity of value for the attendees.  “The benefits of a meeting like this is not what is happening on stage,” he told the group.  “It is your opportunity to meet people.  It is the relationships.  I cannot overestimate the importance of human connection,” he added, “and the responsibility each of us has to work hard on building an extension of our personal and professional lives, to turn to our colleagues and call them a friend.”