[I am taking a break for the holidays but I want to share with you a past issue of the Global Guru I wrote on the eve of Barack Obama's first inauguration in January 2009. Even with the benefit of 20/20 hindsight, there is very little in the piece I'd change today.
And I think the analysis is particularly apt in the context of the aspirations and rollout of Obamacare.
I wish you and yours a Happy New Year.]
The Obama Presidency: The World’s Biggest Mania?
The siren call of manias, financial and otherwise, is difficult to resist. I recall that at one point during the height of the dotcom boom in 1999, out of a total of nine former roommates during my years at Stanford University and Harvard Law School, six had founded or were working for dotcoms. By all standards, these were all hardworking, highly educated and risk-taking people who saw their new ventures as a way to change the world. Had any one of them ended up being a founder of Google, instead of ending up at one of the thousands of dotcoms that flopped, he surely would have been widely hailed by the media as a visionary genius. Sadly, in the end, no amount of hard work and brainpower could resist the tsunami of the dotcom collapse. It was fun while it lasted. But today the whole episode seems more embarrassing than alluring.
I find the parallels between the dotcoms and the incoming Obama administration disconcerting. Almost from Day One, the whole Obama campaign reminded me of an over-hyped dotcom business plan — a cocktail of money, media and the madness of crowds. Obama put together a slick, if deliberately vague, business plan, and he packed his “Advisory Board” with big hitters, ostensibly making the success of his venture inevitable. And much like any mania, the Obama campaign also offered those associated with it the vicarious thrill of participating in something new and exciting that would change the world.
The Obama Presidency: Buckley’s Warning
William F. Buckley once famously observed, “I’d rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard.” I confess the idea of having smart people with big ideas and little experience in a position of power is rather unsettling. I know their ilk well, because as a classmate of Obama’s at Harvard Law School, I was one of them. When you’re too book smart, there is a tendency to come up with intellectually satisfying, but ultimately ineffectual solutions to complex problems. That doesn’t mean you shouldn’t try. But unless you’ve had the real world experience of, say, leading a platoon into battle, you never really internalize the wisdom that the most carefully conceived battle plans never survive the first shot fired. The real world is a gritty, imperfect place populated by people driven by emotions and contradictory agendas. Success is more about adapting to and dealing with unexpected challenges — and a good dose of dumb luck. Sure, intelligence and calm temperament can help. But you can’t learn to surf by reading a book. And as Mitt Romney, fellow Harvard Law (and Business) grad, founder of Bain Capital and former presidential candidate observed: “The Presidency of the United States isn’t an internship.”
Lack of experience, combined with idealism, can lead to a curious admixture of callowness and arrogance. For example, anyone who has ever run a business knows that it’s crucial to manage expectations. In contrast, the Obama campaign made no bones about raising expectations to Olympian levels. In dotcom terms, Obama has promised to out-google Google a thousand-fold — using the most powerful nation on earth as his platform. Once Obama steps into the Oval Office, he and his team will have to work frantically to meet those expectations. And even the most zealous “Obamaniac” would find it hard to argue that our new president subscribes to the time-honored maxim of “Under-promise, over-deliver.”
The Obama Presidency: The Lesson of Macquarie Island
I recently came across a news story that illustrates the dangers of the kind of well intentioned but naïve intervention in American economic life that you can expect to be the hallmark of the Obama Administration.
In an effort to save native seabirds, a few years ago the Australian authorities removed all the feral cats from Macquarie Island. Unexpectedly, this allowed the rabbit population to explode and, in turn, destroy much of the fragile vegetation that birds depend on for cover. The well-intentioned act of removing the cats from Macquarie Island caused completely unanticipated environmental devastation that cost authorities 24 million Australian dollars ($16.2 million). As one observer commented: “It seemed like a good idea at the time.”
With the benefits of 20/20 hindsight, the shortcomings of the plan were clear as day. “What was wrong was that the rabbits were not eradicated at the same time as the cats,” asserted University of Auckland Professor Mick Clout. “It would have been ideal if the cats and rabbits were eradicated at the same time, or the rabbits first and the cats subsequently.”
A committee was formed to mete out blame. Its conclusion? “The unintended consequences of the cat-removal project show the dangers of meddling with an ecosystem — even with the best of intentions — without thinking long and hard.” From now on, “interventions should be comprehensive, and include risk assessments to explicitly consider and plan for indirect effects, or face substantial subsequent costs.”
The experts who put together the original plan probably weren’t stupid and did think “long and hard” about it. Yet examples of misfires like Macquarie Island in the world of environmental protection are far from unique. In fact, substitute any government intervention — whether the Iraq War under Bush or forcing Fannie Mae and Freddie Mac to dole out sub-prime loans to “democratize” the U.S. housing markets under Clinton — and you will get unintended, unforeseeably negative consequences. That’s just the way things tend to work on Planet Earth.
The Obama Presidency: Good Intentions Aren’t Enough
The Obama White House will be bursting at the seams with well-intentioned policies developed by intelligent people. It will also be wracked by big egos pursuing competing agendas. I am skeptical that this cocktail of good intentions and coterie of brainpower can deliver the “change” Obama has promised. Nevertheless, for the sake of the United States, I hope that I am wrong. I hope that Obama can live up to the soaring promises of his dotcom-style campaign and is able to replicate the success of Google in U.S. politics — and that his venture isn’t destined to implode like one of the thousands of other dotcoms launched in 1999 by thousands of talented and well-meaning people, but which are now consigned to the anonymous dustbin of history. So I wish our new president luck. He’s going to need it.
In case you missed it, I encourage you to read my column posted last week about why emerging markets will finally soar in 2014. I also invite you to comment in the space provided below