2B or Not 2B

by Colin Berkshire

I have worked the majority of my career from various executive suites. As a part of senior management I see many corporate leaders. I am unusual in that much of my early career was not climbing the corporate ladder through successive management ranks. I was an engineer who was happy doing engineering until some unusual events moved me into senior management.

Senior management can be very eye opening.

I have met senior executives from many telephone companies including AT&T as well as famous personalities, and even heads of state. So I have started to form some general opinions. These are generalities, of course.

Let me approach this topic tangentially…

We Americans tend to want to ask actors their views on public policy topics. We relate to actors through the roles that they have played. So acting out a strong leadership-type fictional character leads us to look off-stage to the actor for leadership. The problem should be apparent: actors are reading a script and acting. It is not their words, not their decisions, and not even their thoughts. Yet, we listen to actors as if they were as capable as the roles that they play.

Our instinctive human ability to judge other people gets scrambled when what we are viewing is acting, or public relations fodder, or sound bites. We are forgetting the difference between the persona and the person.

I think many people miss this fundamental point. It is one of the most important ones in life.

It is exceptionally rare that I meet a senior executive in a major corporation where that executive is technically proficient, impressively knowledgable, or a visionary. At a major American corporation an executive is more likely to not even know the products they sell or how to use them. Indeed, they likely abhor getting tangled into the details of what their products are.

And, this is a second fundamental point: our leaders are leading with blindfolds.

What makes a Steve Jobs, Walt Disney, Henry Ford, or Thomas Edison so profound is that they intensely cared about and knew about the products and services their company offered. They obsessed in details, and wanted things done wonderfully. All of these leaders paid attention to the details and helped large teams accomplish what was important. There is a pattern here, folks.

Can you imagine the chairman of AT&T sitting down and drilling his customer service team about mundane things like what the telephone voice menus are to reach Customer Service? Of course not…he has his staff take care of his problems and he never calls his own customer service department. I bet you can imagine Steve Jobs personally picking the voice of the person you hear on the Apple telephone menu system!

In my experience, major corporate executives are very much like actors. They know how to read script. They understand about power, and of appearances, and they are always agreeable in person. But when you get into what the company does, and into their products, they are blanks.

How can a Carley Fiorina ever lead a company like HP? History says that she cannot. HP was based upon great products, not about politics and illusion. Yet, she became CEO and during her tenure HP nearly fatally collapsed. I would have loved to watch her install a toner cartridge and as for her wanting to see the inside of a printer…that very thought is humorous.

This problem is so endemic in our system that every sector suffers from this cancer. Our political leaders don’t understand economics…or even diplomacy. Our corporate leaders cannot tell one type of plastic from another. How can they make smart decisions if they cant tell the difference between polypropylene and PVC or ABS plastic? (I personally knew Steve Jobs knew the differences.) We turn to corporate actors for corporate policy decisions. It’s largely a broken system because “we the people” are looking in the wrong places for what is great leadership.

I’ll assert that the solution is right before our eyes: look for people who profoundly understand a lot of things. All of the major corporate metamorphosis have happened by these people. The Bill Gates, the Steve Jobs…those types. Politically, the guy who really really gets cultures should head foreign diplomacy rather than the generals (who only understand war and force.)

I believe this is also why China is so successful. Their Chairman is an engineer. In fact, the majority of the communist party leadership consists of engineers. I can sit down with a top political leader and they can discuss physics, structural engineering, economics, and chemistry. When you possess the ability to ask intelligent questions and reach clear conclusions you can provide vision and direction.

I think we often infer from our own leadership what the leadership is like in places like China or Hong Kong. It isn’t like that. Their success comes from some brilliant technical maneuvers. Here is an example:

I was sitting in an Onsen in Japan in an exclusive resort. (An Onsen is essentially a hot tub in a beautiful setting.) Not being Japanese I wasn’t entirely accepted. After a while, some Chinese came in and we outsiders naturally started talking. One was a fund manager handling a small government fund. (By “small” I mean it had over $300 Million dollars in it.) We started talking and it became apparent that this man knew his stuff. He knew his investments, specifics, and economic theory.

After a while I asked him: What happens to China once their labor costs rise up to where they are no longer the cheapest source of manufacturing labor. His clear response was not like the vague answers you would expect from our political leaders. He stated:

We have been working on that problem for a long time. Already, countries such as Vietnam have lower labor costs than China. We know as Chinese become middle-class that we must offer more than cheap labor.

China is solving that problem in several ways:

First, China offers management skills that are not available in places like Vietnam. He made a strong point that many Chinese managers are better than American managers. China produces more PHDs than the US does.

Second, China is securing rights to vast natural resources. When Venezuela nationalized its oil production and bought out the oil companies it was China that masterminded and funded that transition. China now gets that oil. Iraq will soon be the largest oil producer in the world and 70% of Iraq oil will go to China, who secured the oil contracts while the US was waging war. From iron to Thorium, China is busy locking in resources. So, when a company wants to manufacture something they can do it domestically or can go to cheap places like Vietnam. But where will they get the materials? If you go to China they will supply them as part of a package deal.

Third, China has built up its infrastructure. Despite cheap labor, China is advanced. The port in Shanghai is fully automated. Ships are loaded and unloaded by computers. Only Hamburg Germany is more advanced. China has rail networks, ports, and Internet capability that is world class. The reason China has an automated port in Shanghai is not to save money but instead to offer faster and more reliable materials handling!

In America we think China is competing against us on cheap labor. But China thinks it is competing against us on logistics, raw materials, and end-to-end manufacturing.

When you ask top Apple executives why the iPhone isn’t manufactured in the US the reason they privately give is not cheap labor. It is because only in China can they get reliable, predictable manufacturing capability. You just cannot manufacture in the US like you can in China because in the US manufacturing is an endless series of fire drills, apologies, and accidents.

And, that brings me back to the executive suite. Our political and corporate leaders pretty much mostly worry about their careers and perqs. They aren’t Steve Jobs or Bill Gates and the leadership they usually provide is more accurately called “care taking.”

When Ray Kroc built the Mc Donald’s chain he was deeply involved in every product decision. He checked the bathrooms for cleanliness. He insisted that customers see into the cooking area of the kitchens through windows. He insisted on the highest quality of beef. He intensely cared about the product. Today in most McDonald’s they do not even grill the burgers in the restaurant! They are centrally cooked in a factory and are steamed when you order a burger. Ray Kroc must be rolling in his grave.

By the way, the McDonald’s culture was not just one man. I knew a lawyer who was hired by McDonalds. He was an established, high-powered lawyer. Immediately after being hired he was assigned to a restaurant and the manager trained him on how to flip burgers and clean a toilet. That lawyer quit after a couple of days. His dignity simply would not allow him to clean a toilet. McDonald’s believed that unless you knew what the business was you had no business running it. Everybody in management–and I do mean everybody–had worked a tenure in a McDonalds restaurant and probably had cleaned a toilet.

Today that culture is lost at McDonalds. Ray Kroc has passed away. So McDonalds no longer grills burgers in the stores, the food is all steamed, and KFC is by far the leader in Asia. Times change.

There is a pattern here, folks: leadership is deeply caring about what your business produces. All great companies have micro-managing nit-picking detail oriented leaders. Every single president of the Bell System knew how to wire and install a telephone. I knew three AT&T presidents in the old Bell System and they knew that the red wire was the Ring and the Green was the Tip.

I’ve had enough Carley Fiorina’s, frankly. Please don’t ask actors their opinions on world problems, they are actors.


[Editor’s note: Any telecom CEO knows that 2B refers to the two bearer channels of an ISDN BRI connection]