Paul Krugman: Recovery Will Last Long Time

Paul Krugman is a brilliant man with thought-provoking approaches to economic questions; he wouldn’t be a leading New York Times columnist (or Princeton University professor) if he wasn’t. On Wednesday at the World Business Forum, he discussed world trade. Not the sexiest topic, but for a winner of the Nobel Prize in Economics, not a problem either. Some of his more poignant points included comparisons to the Great Depression and predictions on economic recovery:

Great Depression vs. Now. Much has been made of today's economic crisis relative to the Great Depression. Krugman appears to agree with the emerging consensus - that the Great Depression was worse - but that didn't stop him from making comparisons ... or even calling out what was worse about today's crisis vs. Roosevelt's.

1. Run on banks in 2008. What happened during the economic crisis of 2008 was the same as the run on banks in the 1930’s. While mobs didn’t gather outside banks in 2008, they did gather online in the electronic marketplace (to pull their money out of the system) – and with much greater fervor.

2. World trade (or not). World trade has declined more precipitously in this economic crisis than it did at this stage of the Great Depression. Enough said.

Recovery to last long time. Forecasts generally assume economies recover in 5 years – there’s no reason to believe that will be the case this time around. We could be in recovery for much longer. “This looks to be a long siege” for three reasons:

1. No trade surplus. When countries suffer recession from financial crisis, they come out of it by moving into a trade surplus with other countries. The effects of this economic crisis are so widespread and profound that the whole world is in deficit – if the world is in deficit, then it’s that much more difficult for individual countries to get to a surplus.

2. No transportation technology. Steam-engine boats. Containerization of shipping. Airplanes. They all revolutionized transportation, significantly reducing time and cost. Now, there does not appear to be anything like that on the horizon.

3. Higher transportation costs. The cost to transport goods between countries – whether by land or sea or air – will increase as (a) oil prices rise and (b) green policies take effect, taxing emissions of transportation even further.

This last point, we found tremendously telling. Here is a leading Liberal economist making a practical argument against green policies. It became even clearer to us that the depth and intensity of our current economic crisis has affected much more than just world trade.

George Lucas: Rebel, Innovator, Philanthropist

Film great George Lucas closed out the first day of the World Business Forum on Tuesday to an attentive crowd. We learned that his path to filmmaking was accidental and that from the beginning, he was driven by passion not money. He revealed a number of other interesting tidbits, including his take on Hollywood and friendship with Steve Jobs.

Highlights from the conversation with George:

-Accidental filmmaker. After crashing a car at 17 and getting seriously injured, George opted out of car-racing and went to community college. He wanted to be an illustrator. His dad said no - Lucas, the elder, wasn't about to pay for his son to be an artist. Disillusioned and a bit lost, George said yes to a friend who wanted to ride up to a college together to take an entrance exam. George ended up getting in. He thought it was photography school, but when he showed up, he realized it was cinema school. He didn’t know what cinematography really was. His first class was animation, and his very first assignment became an international sensation at film festivals. We all know what happened from there.

-Success and passion. George believes that “success follows passion, not the other way around.” His story evinces his mantra. When making Star Wars, he negotiated a 40% royalty from the studio. This was unheard of at the time. It ended up being a move worth hundreds of millions of dollars to George, but he didn’t do it for money (nobody knew it would make money). He did it to maintain control of “his” movie, to make it the way he intended. He was passionate about the film and had a vision. He wanted to maintain both. With 40% of the rights, he could.

-Hollywood. In a brief exchange about Hollywood, George was very refreshingly clear – he hates it. He believes that for every honest filmmaker trying to get a story out, there are a hundred Hollywood execs ready to tear it down. But channeling Yoda, George was quick to quip, “Be careful what you hate, for you may become it.”

-Good friend. “Steve jobs is a friend of mine…. He knows what he’s doing…. He’s not into buying companies or synergistic this or that. (He’s all about what I do) – ‘Here’s a good idea, let’s do this.’ ”

-Respected peer. “Peter Jackson is genius…. He did something with Lord of Rings that I didn’t think was possible…. The story was so long and complicated.... I didn’t know how the studios would allow it.”

-Likes and dislikes. What George does most and what he loves most are almost in reverse order: … does most (in order): Writing, Buinsess, Edit, Direct, Camera … loves most (in order): Edit, Camera/Direct, Writing, Business

-Family business. George’s dad owned a small office supplies business. He wanted George to take it over. George said no - he vowed never to go into business.

-Education. George started the George Lucas Education Foundation which aims to influence how students learn, using a variety of techniques including digital media.

-Writing. “Scripts are not about writing. It’s about telling a story.” Perhaps that’s what explains the discrepancy between his panning critics and his wooing audiences. And separately (but related), George still writes longhand. Of it, he says, “I’m not very technical, believe it or not.”

-Delegation. George finds it difficult to delegate the writing of scripts to others. In fact, he can't. The times he's tried in the past, he's ended up discarding others' work for his own. "Others can write (but) I'm the only one who knows the story."

-Art. Art is not literal, it’s about emotional connection... a way of telling stories in a meaningful way. And to create art, there’s a huge amount of technological advancement involved… whether it’s evolving from early SciFi effects to CGI or figuring out how to paint a masterpiece on the ceiling of the Sistine Chapel in the early 1500’s.

-Destiny. Originally, George wanted to do documentary films. But he ended up in feature films. George believes – with striking genuineness – that even if he’d become an illustrator after community college, he would have ended up where he has. With this, and equally as striking, George implies that not only are fate and destiny real, but that his passion drove him there. The force is strong with him.

Kevin Roberts: It's about Emotion, not Reason

Krass in style and powerful in message, Kevin Roberts, CEO of the one of the world’s leading creative organization, Saatchi & Saatchi, took the stage at the World Business Forum at Radio City Music Hall in New York on Tuesday, dawned in all-black, traditional zen garb with a keen interest for The Rockettes and a strong Scottish-versioned New Zealand accent. Needless to say, he made an impression. I can’t explain it very well. But that’s exactly the point of his presentation. He’s in the business of eliciting an emotional response from us in a way beneficial to his clients (e.g., Procter & Gamble, Toyota, General Mills, Visa to name a few). Say what you will about his style and his purpose, but his talk at the Forum was entertaining, edgy, and most importantly thought-provoking, with frequent use of his firm’s ads to make his point.

One ad was an affected amateur style video. The scene: Balcony view of modern-day Liverpool train station in England. People rushing to their trains, meeting loved ones, or simply lost. Hundreds of them. Suddenly, music blasts over the loud speaker. Good music. Confusion ensues. A few people stop what they’re doing and dance – clearly professional dancers, young hipster types. Many others are confounded. As the music continues, more dancers – likely professional still. As time passes and the music mix varies, even more dancers – but this time, innocent by-standers moved enough to join in. The crowd grows. As the songs change, more and more people join in… even the ones who are on their phones in disbelief, watching, mouth agape. Grandmas, dads, singles. Black, white, brown. It’s incredibly engaging. And you can’t explain why at this point even you are caught up in the moment, dare we say, emotional. Everyone in the train station is now dancing. Incredible. You are emotional and vulnerable - ripe for impression. Then, the company logo flashes on the screen: T-Mobile. The connection to T-Mobile doesn't make sense to us, rational sense anyway. Perhaps it’s about human connection and using T-Mobile to share in life’s random moments. Perhaps it’s simply a brilliant idea executed flawlessly to engage the viral generation. Either way, it touched us - and got over 10 million hits online in just three days.

I will always remember this ad. I might not switch my telecom provider, so perhaps the genius of it is misapplied. But what’s clear is that we are moving into what Kevin calls a participation economy which is driven by inspiration, unlike today’s attention economy which is driven by information. Heading into tomorrow, it’s not about marketing but a movement. Kevin explains that while reason and rationale lead to conclusion, emotion leads to action. In fact, he shared this insight as pretext for his seven ways to win in this new world we’re entering, a world in which companies and entrepreneurs need to drive “loyalty beyond reason.”

Here are Roberts’ gems, in his fragmented staccato style:
1. Face the truth. World is ugly now. Need to get along with less. Consumer research is worthless because consumer is in a different place. Deliver priceless value, not just price. “What are you giving me that’s emotionally priceless?” Purpose-inspired, benefit-driven brand.
2. Reframe beliefs about value. “When you buy a prius… it’s not about better MPG or reliability… you’re making the world a better place!”
3. Measure only what matters. Advertising – only two questions matter: “Do I want to see it again?” and more importantly, “Do I want to share it?” Don’t sell by yell. “Consumer is not a moron, she’s my wife.” Consumer has become the biggest medium.
4. Participation vs. Attention economy. Consumers are now their own medium, they’re their own creator. 14-17 yr-olds call themselves “Creatives”… they’re creating their own medium, their own world. Today, we’re in attention economy – it’s about information. Return on investment. Tomorrow, we’re in participation economy – it’s about inspiration. Return on involvement. Not through marketing, but movement. Not a brand, but a lovemark. Not price, but priceless value.
5. Let emotion rip. Rationale leads to conculsion. Emotion leads to action. We’re in the business of action.
6. Brands vs. Lovemarks. Brands are owned by companies; Lovemarks are owned by people. Brands built on respect; Lovemarks built on respect and love. Brand – for a reason. Lovemarks – beyond reason. Lovemarks drive loyalty beyond reason. Make brand irresistible, not irreplaceable (everything now is irreplaceable). Brands are about performance, reputation, trust. Lovemarks are about mystery, sensuality, intimacy.
7. Be true blue. Blue oceans, blue skies, be sustainable. Role of business is to make world a better place for everyone. Move from green to blue. Green is about fear; Blue is about optimism. Green is about “what is there to be done?” Blue is about “What can I do?” DOT – do one thing.

Roberts closed with another ad, perhaps the 7th or 8th of his presentation. The ad was for a New Zealand telecom company, but don’t let that off-put you, it was moving. Home video of son and dad over the past 30-40 years – first steps, fishing triumphs – grainy colored moments frozen to black-and-white stills marking the passing decades. Fine skin to wrinkles and white hair. Slow motion in parts, pleasant music throughout, strong bond clear. The last image goes up, full of color but also despair. It’s just the son, all grown up, standing on the front lawn. Sun is up but head is down. What’s missing – rather, who’s missing – is palpable. The music stops. On the screen appears: “Keep in touch.”

With an audience moved, Roberts closed his time with just one more line, “When this is done, don’t call your office, call your dad.”

David Rubenstein: Investments and Life Lessons

David Rubenstein, Co-founder and Managing Director of The Carlyle Group, was incredibly informative if not a bit robotic here at the World Business Forum. We forgive his fast-paced monotone for the gems of information and insight he provided. Before we go into what he said, let us give you a better sense of The Carlyle Group, so you understand the weight of his words.

Today, The Carlyle Group is one of the largest private equity firms in the world. The group has about $100B under management. They’ve experienced a 33% annual return on their investments since inception, which is simply jaw-dropping (if you invested just $1,000 thirty years ago, you would have $4 million today). The firm is one of the most influential (very much behind-the-scenes) forces in the world of business and politics. They’re not market leaders, they’re market movers.

Here’s where David would invest right now:
a. Distressed investments… beaten down companies… likely turnarounds
b. Industries with support of US government
c. Energy – traditional and alternative energy
d. Healthcare – “Boomers will spare no expense for fake hips.” Healthcare will continue to grow more than its fair share, as a percentage of GDP.
e. Natural resources – oil and water… water in particular
f. Emerging markets – China, Brazil, India, … “If you don’t think of China all the time, you’re not living in the real business world.”
Of course, not all companies in these areas will represent good investments, but as a core principle, David believes in focusing investments in high growth areas and avoiding even normal levels of leverage (particularly now).

He also shared his career learnings, many of which surprised us because of how human they are:
Persist. Don’t take no for answer. Keep pushing. Take entrepreneurial risk. If you don’t, you’ll sit at your desk for 20 years.
Persuade. Improve your skills of persuasion.
Partner. You can’t build a business by yourself, so find a partner (or several) whom you can trust.
Passion. If you don’t love what you’re doing, do something else, your wasting your time and your career. You’re good at what you love. You’re not good at what you don’t.
Think about activity, not money. Money will flow.
Think like a leader, not a follower. If you think like follower, you will be a follower. If you think like a leader, you’ll be a leader. In related advice, Rubenstein implores you to think like an owner, not an employee. It has been the most important quality he’s learned in all his experience.
Luck. Everyone makes their own.
Deathbed. You never say “I wish I worked harder,” on your deathbed. You say, “I wish I could have given more to my family, to my community.” He urged the audience to “Give back to your community. Don’t just think about your business career.”

It’s worth noting that David had failed three times in his career before striking it out on his own and becoming a huge success. This is a recurring theme among the industry luminaries at this year’s World Business Forum. The Popped Kernel does not believe it’s a coincidence and plans to write more on it – and other broad themes of the Forum – in the coming days.

Bill George: A Lesson in Authentic Leadership

Bill George, former CEO of Medtronics, current Harvard professor and best-selling author of the game-changing leadership book True North: Discover Your Authentic Leadership, was the opening speaker at the World Business Forum. His style, while reserve, exudes experience and drips professorial. He shared a number of stories with the 4,000+-strong crowd here at the Forum, highlighting signs of authentic and lasting leadership – CEO accountability in the cases of Mattel and JetBlue, Bold decision-making at Goldman Sachs before the Great Recession. But what struck us most came at the end of his speech. It wasn’t about case studies of respected companies or the company boards on which he sits. He shared his personal story with an unusual, and much appreciated, amount of vulnerability.

Bill taught us a lesson about ego and how he overcame his to become a leading expert and thought-shaper on leadership. He told us about being “The Number Two” at Honeywell, in line to become CEO of one of the world’s largest and most respected companies. Bill had been at Honeywell for 10 years. He was trying to impress his colleagues and his board. He wanted them to choose him as the next CEO. But something didn’t feel right. He even wore cuff links (which he didn’t like). He would talk to his wife about it at home. A relatively small biotech company, Medtronics, approached him several times to run their company, but they were too small. He kept saying no. His ego wanted to run a large company.

Finally he met with Medtronics. He was surprised by his reaction. He felt at home and loved the mission of their work. He left Honeywell to lead Medtronics, taking the $1B company to $60B in market value in 10 years. Now, he’s on the board – or has been on the board – of several corporate stalwarts (Goldman Sachs, Exxon Mobil, Target, Novartis) and is an international powerhouse in the field of leadership.

It’s unclear whether Bill made the move to Medtronics because he wasn’t going to make CEO at Honeywell or because Medtronics just felt like a better fit for him. But we do know that he shared with us a piece of his personal story that not many CEOs would have shared. And more importantly, his story proves that when you leave that which doesn’t feel right for something that does, good things will happen. It all comes back to passion. Follow it... by definition, it’s right.

World Business Forum: Starting with a Bang

It’s lunch time right now at the 6th Annual World Business Forum. Titans of industry are dining. Some internalizing the morning talks; others right back to the pre-Forum grind. There are a number of highlights from this morning’s session – which we’ll write about in forthcoming entries – but first, context.

The Forum opened with a bang. After the lights dimmed in the main hall of Radio City Music Hall, a booming Hollywood-style short dramatically shot up on screen. The film ranged from alarming to uplifting. It began with a stark image of space to a doomsday score. A slathering of headlines from one year ago filled the screen. The clippings morphed quickly into a large ball, a planet, then froze for an instant. The music too. Nothing. Then, just as dramatically, hope filled the auditorium with a charge of instrumentals and images of great leaders espousing the timeless values of leadership, decision-making, the long-term view. As the music crescendo-ed, so too did the wisdom and stature of the leaders. It ended simply and directly with a narrator's voice, “We want (you) to start growing again.”

The message at this year’s World Business Forum is clear: The storm is over. As we get up, dust ourselves off, and look around, there’s devastation. But there’s also opportunity… opportunity to learn, move on, and apply. The possibility that it may be harder to do than surviving the storm itself is real, but it does not minimize the magnitude or value of that opportunity. Perhaps it makes meeting the challenge that much sweeter.

World Business Forum: Countdown

Hi Kernels. Are you ready to pop? Just two more days until the 2009 World Business Forum. The headliners this year are impressive. Be sure to check in for real-time insight and inspiration from:

President Bill Clinton - Embracing our Common Humanity

George Lucas - A Conversation with George Lucas

Paul Krugman - The Future of the Global Economy

T. Boone Pickens - A Conversation on Energy Dependence

Patrick Lencioni - Building Winning Teams

Gary Hamel - Management Innovation

Irene Rosenfeld - Leading Transformational Change

Jeffrey Sachs - Economics for a Crowded Planet

Bill George - Leadership in Time of Crisis

Bill Conaty - Talent Management

David Rubenstein - Global Economic Crisis

Kevin Roberts - Branding

Antoine Van Agtmael - International Insights

Peter Voser - International Insights

Dennis Nally - International Insights

Morris Chang - International Insights - Taiwan

Francisco Gonzalez - International Insights - Spain

Roger Agnelli - International Insights - Brazil

Patrick Lencioni: Let Passion be Your Guide

Patrick "Pat" Lencioni, author of best-selling book The Five Dysfunctions of a Team and founder of organizational management consultancy The Table Group, embodies what The Popped Kernel is all about - follow your passion, even in the face of risk, to reach your full potential. We interviewed him recently to understand who he really is and what's behind his success. Here are a few takeaways from our conversation (we plan to post the audio interview soon).

Pat is a faithful family man. He makes it very clear that family comes first. Knowing his priorities early on allowed him to set up his company and manage his time in a way that affords him both professional success and personal fulfillment.

He insists that his success - or at least the degree to which he's realized it - was not planned, but simply a side effect of doing what he loves. He genuinely believes that if you do what you're passionate about, then everything else will fall into place (and then some). His experience has proven it.

He remembers facing several risks as he contemplated jumping from secure corporate gig to starting his own firm - his savings, his reputation, the careers of four founding employees. With knowledge of the risks, strong faith, and lots of support from his wife, he said no to two corporate job offers - one from Steve Jobs and the other from Eric Schmidt (now CEO of Google) - in favor of opening his own firm. He started very small, remained positive in outlook, and focused his energy on simply making it work.

When making the jump to do your own thing, Pat's view bucks conventional wisdom. He does not believe that it makes sense to pursue your passion part-time to test the waters, while maintaining your corporate gig. Rather, if you're passionate about something, let that passion work to your advantage. Don't hold it back.

Pat's view of failure is real and comforting - don't fear it, embrace it. It will help you find your path. For Pat, that failure happened early in his career at Bain & Company when he realized number crunching wasn't for him. That realization led to an interest and pursuit of organizational management. Today, he is one of the most widely recognized forces in the field of organizational management.

Pat is living proof that if you follow your passion, then good things will happen.

Check out the audio interview here:

Welcome

Welcome to The Popped Kernel.

Here you will find success secrets of industry luminaries. From business and politics to arts and entertainment, The Popped Kernel aims to bring you the inspiring stories you don't know behind the people you do. We hope that you find in them the motivation to follow your passion and make a real difference.

And what better way to launch The Popped Kernel than covering the World Business Forum in New York City, Oct 6 & 7, 2009. Headliners of past World Business Forums have included Richard Branson, Alan Greenspan, Colin Powell, Jim Collins, Rudy Giuliani, Muhammad Yunus, Tony Blair, and Jack Welch. This year, headliners include Bill Clinton, George Lucas, and Patrick Lencioni. Visit us here for live updates and incisive interviews.

For a preview of what you can expect, come back tomorrow. We will post highlights from our recent interview with Patrick Lencioni, best-selling author of The Five Dysfunctions of a Team and "A Top Ten Guru You Should Know" according to Fortune magazine. He turned down offers from Steve Jobs and Eric Schmidt to pursue his passion and reach the pinnacle of success. Find out the secret ingredients that got him there.

Are you ready to pop?

World Business Forum - Taste it here: