Let me start with Bloomberg news on the US-China trade war. They make it sound like the world is changing, because of Trump and his agenda.
Here it is from my perspective:
The total amount of goods that China sells into the US economy is about $557.9 billion with US exports at about $179.3 billion. That is less than 3% of US annual GDP, the imports, exports less than 1%.
Now, is this worthy of headline news? It’s a meaningless distraction, like a mosquito biting somebody in Alabama. No impact on the economy whatsoever.
On a more serious note, I am convinced that life begins at the edge of your comfort zone. It takes discomfort to grow and here is one way to look at it.
Turn the Audi’s four ring symbol by 90 degrees in your mind, and I credit Bill Eckstrom with this idea. The lowest ring represent stagnation – many rules, steps, permissions and politics. It stifles creativity and action and it happens way too many times.
The top one is chaos – defined as having zero predictability or control over inputs and outcomes.
The second one from the bottom is order, and it feels good, like the sleepers beside your bed, it is knowing that what you do leads to a predictable outcome. But science shows that every time you think of something and do it the same way – you stop growing.
The third one up is most interesting - complexity, which is nothing more than a changed order. But when your order is changed, outcomes are no longer predictable. It doesn’t feel nice, but it’s the only environment where sustained growth can occur.
In 1942 Albert Einstein was teaching at the Oxford University, and one day he gave an exam to his senior physics students, and then he was walking through the campus with his assistant and she said “Dr. Einstein, the exam you just gave, weren’t the questions exactly the same like a year ago to the same class? How can you possibly do that?”
“Well,” said Einstein, “the answers have changed.”
And this is even more true today, the questions didn’t change, but the answers have.
If you want to have results that you never had before, you have to start doing things you’ve never done before.
When it comes to high performance the majority is always wrong, but how you can use that to get everything you can out of everything you’ve got?
Looking at data, approximately 3% of people are even inclined to do different things.
Perhaps the question we need to ask ourselves is this - “what is the purpose of thinking?”
If you ask the question to a brain scientist, she will tell you that the purpose of thinking is to stop thinking. We’re all creatures of habit, most of us don’t like to think, which is a scary thought.
Bottom line is this - if you feel like you’re wasting your life potential – you are, and it takes a lot of courage to grow up and become who you really are.
It takes a life journey, and it’s both – the best of times and the worst of times, as Charles Dickens put it in the “Tale of two cities”. And I know exactly what he meant.
Let’s come down to earth.
I was in Schaffhausen for the weekend, by the beautiful waterfalls, trying to park and the sign said “first 15 minutes free, conditions apply”.
“What are the conditions?” I asked the lady in the uniform.
“You have to pay.”
Let’s face it – it’s a beautiful life, the earth moves nicely and since this time yesterday, you’ve been all around the world. And that you didn’t need to pay for.
The consensus is building that the European Union is a failed project – it is even clear from the TED talks and university lectures on the net - most of the speakers seem to be on the same page. Still, the convenience of having a common currency will keep it together for a while. If Italy was to re-introduce the lira, people with money will open an account in a German bank. It would be a massive flight of capital out of the country.
The European currency union is like Hotel California – you can check in, but you can’t check out.
Europe is a diversified number of nations differing in many things but concentrated on a smallish peninsula. With the history of some of the bloodiest wars in human history, it harbours a lot of distrust between the nations.
This is not America. A Texan person will tell you that he is American, but a German fellow will not introduce himself as European.
The risk of EU disintegrating comes at a time when the US is giving up the role as global security guarantor (and NATO is an institution without much meaning anymore). A new order is coming and with it an opportunity. The current economic system has a shelf life – it consists of constant government borrowing without paying anything back. A kid with a calculator can figure out how this is going to end.
Still, just predicting the going back to nation state building and the conflicts this may bring, is really an intellectual laziness, as it leaves something important out.
People adapt, their quest for survival and success is stronger than cultural heritage, my opinion.
But the system needs to change to foster this attitude. We should reject the neo-classic economic thought, and embrace the 21stcentury idea that economies are complex, adaptive ecosystems. They are not efficient at all, but effective when well managed. Capitalism does not work by actively allocating existing resources. It works by actively creating solutions to human problems - its an evolutionary solution finding system. The difference between a rich country and a poor country is the degree to which the society generated solutions for its citizens.
Still, some people just don’t adapt and I have a respect for this attitude.
Some people just leave their life behind in a plastic bag.
The postcard came in on a rainy Monday and I picked it up from the mailbox on my way back from the station. It was from a friend of mine.
“I couldn't stay and face the music”, she wrote, “you hear?”
“So many reasons why.”
I flipped to the other side.
“I won't be sending more postcards from Paraguay”.
I was holed up in a villa in the province of Algarve, about 300 km south of Lisbon, really hopping to stay away from the world for a bit. I was sitting in my room watching the movie “Frantic” by Roman Polanski, which is a story of a troubled man in the heart of Paris with nobody willing to help him, or even to take seriously.
He just flew in with his wife from San Francisco and she disappeared as he was taking a shower, but police and the US embassy think that she is just having an affair in Paris.
They’re giving him dirty jokes. Finally he says to the diplomat: “you’re talking about my wife here, but it sounds like you’re thinking about yours!”
And then he is on his own in the foreign city.
The story is fascinating, and notice this – Polanski is the master of close ups and the use of light which make the message remarkable.
I’m convinced that this movie is Harrison Ford’s life performance.
Also - the music selection: from Ennio Morricone to Grace Jones, with Paris in the background, is intoxicating.
There are some Polish people who can really tell a story, no?
Polanski has these boyish looks, to the point that back in the day they wouldn’t let him into theaters to watch his own movies.
Just see him in “The Tenant” with Isabelle Adjani, it will rock your world.
On that note, it is the importance of individual performance that makes me distrust the “teamwork” buzzword.
For me, the idea of “teamwork” is not right, for it translates into “joint effort”.
A great movie or a brilliant painting is not a joint effort, a great company isn’t either.
Back to Algarve - it is important to note that Portugal is the world’s former capital. This is the nation that first unlocked the secrets of deep-water navigation. It was Portugal that figured out how to master ship and wind and wave to make landfall anywhere in the known world. From that access, the Portuguese were able to trade anything they wanted.
Shipyards on the River Duoro built the fleets that dominated global trade, with the commercial traffic ultimately flowing to Lisbon. More than any other location in the world, Portugal is a monument about how a change in technology can change everything.
Now the Portuguese economy is booming again, in part because of its aggressive attraction of courting foreign investors. Portuguese citizenship is available after six years of residence, or three years if claiming citizenship by marriage.
There was a massive expulsion of Jews from the Iberian Peninsula in the 15thand 16thcentury, and an interesting initiative was announced just a few years ago. The Spanish and Portuguese governments said that they want to make amends for their past sins, and they’re also in need of productive people to restore their economies. They now offer citizenship – full passports – to the descendants of families expelled from their countries. The governments regard the expulsion as tragedy, or – in the words of Spain’s justice minister – “a historical error”. I guess what goes around, comes around.
Now the Jewish descendants of those expelled can claim a passport, which would allow them to travel freely in 28 EU countries.
I was sitting on the Saturday evening at a small train station under sapphire tinted skies typing this essay and waiting on the last train to Albufeira, where my villa was.
I was thinking how I got where I am in my life, and then it occurred to me: we have two lives, and the second one starts when we realize that we only have one.
I am with Confucius on this one.
Montenegro is a tiny Balkan country with rugged mountains, medieval villages and a narrow strip of beaches along its Adriatic coastline.
The place is a hidden treasure, located roughly opposite the sea from Bari, Italy, and the ferry ride takes about 10 hours, if you are interested in an all night party on the ship.
Famous as the most relaxed and chilled Balkan country, it is a touristy place even though the traveling Germans don’t come here much, you hear some English around, but the huge majority of visitors are Russians.
There are some splendid hotels, especially in Budva, with prices going up to a grand per night, and that’s in Euros, the currency they use here, even though they are not a part of the EU.
Accordingly, the properties are pricey, certainly not for salaried employees from Mother Russia. Whoever is buying them is getting capital out and is permitted to do so. Some 6000 Russians are permanent residents in Montenegro
Accumulated Russian investment reached $1.3 billion in 2016, and this in a sparsely populated country of about 600 thousand, which makes Montenegro’s foreign investment per capita the highest in Europe.
Sign of new times, in my view.
It is clear that what happened in the world in the last 10 years shows how everything works together and is interconnected. The financial crisis of 2008 slowed down the buying power of Europe and US from China, which then weakened so much that they appointed a dictator for life (Xi). Note that strong countries don’t need dictators; they can rely on their political system.
As Chinese demand for raw materials and energy slumped, it destabilized Russia and Saudi Arabia, which is now encircled by Shia countries, led by Iran and has appointed a 34 year old prince with the task to manage. One of his first moves was to gather the rich Arabs under house arrest in a Ritz hotel in Riyadh and shake them down for money. Guess that’s how business is done over there.
In Russia, Putin is still holding to power, but we don’t know what is going on inside the Kremlin and who is in the shadows. So Russia is the wild card.
What we know is that their budget is blown due to the collapse in energy prices.
There is one more domino that has yet to fall – as manufacturers weaken, the orders for industrial machinery drop.
Consider this recent piece of news from Bloomberg:
Thyssenkrupp AG, the steel giant and one the pillars of German economy, looks set to be kicked out of DAX, Germany’s main equity benchmark. The industrial conglomerate has halved its market value during the past twelve months and it is failing to fulfill index membership criteriaof the exchange.
Thyssenkrupp CEO wants to float the company’s elevator unit to generate cash needed to cover unfunded pension liabilities and fix its operations.
Thyssen’s problems demonstrate what ultra low interest rates do to the markets – overinvestment with cheap money and no returns enough to pay out pensions.
The Americans call it a double-whammy.
Montenegro, along with Serbia, has been for a long time in the Russian sphere of influence. The country lies in the region where there are always security challenges, but in stark contrast to, say, Poland, which is easier to conquer with it’s wide-open plains, Montenegro has rugged mountains where only some valleys can be taken, mountains bombed, but that’s it.
During the Balkan war in the 1990’s Montenegro joined Serbia in attacks on Dubrovnik, a city just north along the coast, in Croatia. Subsequently, it was bombed by the US forces flying out of Brindisi, but not as heavily as Serbia.
And you have to be careful in conversations with the locals (and people speak good English here) – you mention the wrong neighboring nation and its bound to send a chill going through the room.
Another problem is the terrible traffic along the coast. I was having a morning coffee on a patio watching a guy with a bag maneuvering between moving cars on a busy street. And it reminded me of a Kevin Hart stand up routine – “I was carrying a bag of chicken and got hit by a car”, he said. “But I never dropped the chicken. If they tell you that these KFC commercials don’t work – don’t believe it.”
The Nissan car company profits are down 99 percent,and this is not a typo - they plunged in the first quarter to $21.25 million, which amounts to a rounding error, really.
A near-total wipeout – which triggered the wiping out of 12,500 jobs, the immediate suspension of manufacturing in Indonesia and Spain and an announcement that Japan’s second-largest car company will reduce its model lineup by at least 10 percent by 2022. It is quite possible there won’t be a Nissan by 2022 if they continue on this road. And it’s already starting – I called a dealership in Schwyz looking for a deal and I got a marijuana shop instead. And they said they’re cool with whatever.
What’s caused the downfall, of course, is all the money being spend on electric cars, for which there is no market. Or rather, there’s no money to be made from making them.
Nissan committed billions to development of electric cars they won’t be able to sell – unless the ability of people to buy them somehow increases by 30-50 percent or more. Besides, the market for electric cars is really confined to Europe because of the regulations, and China where electricity prices are the lowest.
And none of this is healthy and sustainable economics.
And Nissan is not alone in this – for Tesla, in their most important US market the plunge in registrations has been huge. In the second quarter registrations of the Model X plunged by 40% compared to a year ago, registrations of the Model S plunged by 54%, to just 1,205 vehicles. This type of drop is devastating for any automaker, unless it plans to discontinue the model soon.Then it gets wild in the EU with their constant drive for regulations and taxes that can be extracted from it. Keep in mind that taxes from cigarette products are declining and something needs to make up for the drop. From 2020 only 95 grams of CO2 emissions per kilometer driven are permitted per car produced. If the output is higher, there will be drastic fines, like half the price of the car. For car companies this means the consumption of fuel must be around four litters per 100 kilometers. But there are no combustion engines that can comply with this standard, except for the smallest ones. So, the European car manufactures have no choice but to produce electric cars, for which there is no market to speak of. BMW just announced that it is accelerating its electric car plans by two years, they aim to have 25 electrified models in 2023. It will be interesting to watch their bottom line by then, unless they can somehow suspend reality. Their CEO Harald Krüger already said that he will not seek another term with the company.
Another problem is, the governments have completely failed to take into consideration the availability of electricity to fuel cars.
If every car is plugged into the power grid, then the concern becomes – will we just simply shift the CO2 emissions from cars to power plants?
And consider this - when it gets cold, the battery will lose on average 20-25% of its charge. The idea that electric cars will replace fossil fuels is really a dream. That will maybe work in warm territories, but when it gets cold, they will require more energy production to service them. And this comes at a time when power plants also have increased demand to keep people warm.
Now I slow down for the Electric Love part, and obviously I refer the song by Serena Ryder. And there is a line in it I don’t fully get, but these are the best ones because you can get your imagination fly.
“Our love's electric and now, babe
So close to water that we'll never know.”
Finishing on the subject of cars, I like the ones that roar. Last month we took delivery in Toronto of a new M BMW sedan. I asked my younger son how fast does this thing go off the line. He said: “the power hits you like a sock full of quarters”.
Now, that’s how guys talk.
Tom Kubiak is the author of The Traveler