Watching Obama’s speech last night it struck me again that he is a charismatic CEO. He has all the soaring syntax and passionate pleas. He can inspire and pull us around by the heart strings. He makes you want to believe in a better future. The trouble is apparently he has no real world, technical experience of his own and has had no sage Chief Financial Officer (CFO) to balance some yin to his yang.
Every successful company in the world needs a visionary leader and a realistic financial manager. Sometimes they are one person. The most successful restaurants that thrive through years of good times and bad are most often run by owners who are also chefs. Chefs that know how to wine and dine us and also watch the bottom line to control waste and run an efficient, profitable kitchen behind the scenes. To say that a person or leader doesn’t care about money is not a good thing in this context. For effective leadership someone has to do the math and balance the books. When the visionaries start to spend too much, someone has to pull them back to the numbers. No one has been doing this for a long time in most countries including the US. Certainly not the Republicans who talk like fiscal conservatives but act like suicidal spendthrifts on their own pet projects and tax cuts.
The root of the problem has been credit availability. When one does not have access to a line of credit, one is forced to live within one’s income. For the past 20 years, the governments and their leaders have been increasingly advised and populated not by conservative CFO’s but by credit sales representatives from the financial sector. The dominant agenda has been to sell debt to promote and scale their own profits. They have recommended it to individuals and countries as a way to afford everything without having the actual excess savings to pay for it. In the past 10 years this “add debt” formula went to historic extremes and fulfilled its inevitable conclusion: insolvency and the downfall of our global economy.
Recently I have been reading the Stock Exchanges Practices Report of 1934 following the Pecora Commission investigation into the practices of financial firms buying, selling, borrowing and lending listed securities. This is the investigation that finally afforded the government enough momentum to enact the Glass-Stegall Act in 1933 and other key legislation that was needed to de-tangle the tentacles of the finance sector which had asphyxiated the US economy during the 1920’s. Here we are again 78 years later. You can read the testimony and conclusions here at this link. The deja vu to our present time is overwhelming to say the least.
There is a tendency to put great weight on which CFO a country hires. And yes a strong, inspirational visionary is helpful to galvanize followers. But whether its Obama or Romney, the most important question today is who will have the tenacity and wisdom to act as the pragmatic CFO’s? In order to be useful in this crucial roll, the CFO’s will have to be committed only to the financial health and sustainability of the nation’s finances over the longer run. To do this they will have to cut off all allegiance, obligation and later career prospects in the financial services sector. They will need to declare debt the cancer not the treatment. It is simply not possible to serve allegiance to one’s country and to the financial sector at the same time. For Romney this may well be impossible–financial services after all, is from whence he comes. But Obama too will have to step back from his cozy counsels with the debt-salesmen and surround himself with a team of conservative CFOs if he is to be any use at all to his country. He has done a very disappointing job at this in his first term. If he continues in this vein a second term, history will doubtless judge him very harshly indeed.