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From (Taiwan Business Weekly). Translated by Kang Louis Fan 02/02/09. All right reserved.
Trend Master –
Japan’s trend master Kenichi Ohmae, witnessed oil crisis and Japan’s bubble economy, comment on how to survive in the next ten years of instability. In face of change, he recommend people not to react too soon to ‘appearance’, wanting to find answers, there should be a ‘systematic thinking’ find the root cause of the problem, then you can spot opportunity and strength, and find business opportunities.
Ohmae point out, the financial crisis make the international situation changeable, USA is no longer the country it used to be. Since Taiwan is a “handler economy”, in the past it has used China’s cheap labour and export, but has not establish a strong foundation, so it is easily affected by the current credit crunch, it must ‘think’ from the crisis, what can be relied on, what to hold on to, so it won’t get washed out.
He also thinks, even though China’s growth rate is now only 4-5%, this giant economy will not go away, Taiwan can still use the interval while China is readjusting it’s economy, learn something from it.
For individuals facing lay off or unpaid work, Ohmae suggests “don’t cry over a bottle of spilled milk”, people should actively seek learning, challenge personal abilities. For fresh graduates, he suggests using internet and your two feet to verify facts, develop your communication, analytical, and discovery skills, develop un-replaceable DNA. The following is the interview
Q: Japan in the 1990 after the bubbling of its economy, went through 10 years of misery. How long do you think Japan will take to rise again?
A: Ten years, maybe worse, because every government are promising what they can’t deliver. You have to recognise all financial crisis goes through three stages. The US credit crisis in Oct 2008 was phase 1. The second phase is banks encounter difficult in accessing credit, because of its low stock share values, it cannot secure additional fund from the share market. Third phase is closing down of business. Only when three problems are solved, there can be resurrection of the economy.
Q: But every government is trying to save the economy, will it really take ten years?
A: Dealing with financial crisis has three principles. First you have to see it as a systematic problem, not one of individual banks. Second, understand what will be the consequence, so you can find the answer at first instance. Third is to establish international bodies to prevent this from happening again.
Spending is not the only answer, because someone has to pay it back
The above three point, US failed them all. The American treasurer Hank Paulson put personal benefits into his financial decisions, reacting only to single phenomenon. He allows Lehman Brothers to fall, but save Citi group, only because his old boss Robert Rubin was Citi’s ex-CFO, it’s all personal. US government, organisations and scholars, until now has only panicked, even Paul Krugman, or other scholars is telling people to spend, spend, spend, we have to learn from “Roosevelt Junior ” policy , this is laughable. This is not the most important task, because reckless spending needs to be paid back.
Q: So, the root cause of the problem is from US, the drive to solve the problem is also in US?
A: This is US’s mistake; it is the same as blaming China for spreading virus, poison milk. US spread viral financial product, set the world in fear and chaos, just like China’s poisonous dumplings. Freddie Mac and Fannie Mae sold 5 trillion securities to the world because S&P says it’s an AAA product, they let the financial risk spread the world.
Nobody know what is in these financial derivatives, it’s like the China’s dumpling, nobody knows what is inside, it might be port, beef, rabbit or cat meat. They have to understand, this is US who committed the biggest crime of history, US must admit its mistakes.
Q: If it take tend years to revive the economy, will Taiwan follow Japan’s footstep of 15 years prolonged decline? At the moment Japan has awaken from its decline?
A: Welcome to the club (smile). But if you are like Japan you count yourself lucky, Japan has strong base support, not like a sponge bouncy and unstable (moves his hand up and down as if he is patting a sponge). Japan has huge savings, strong technological and financial support.
Taiwan has not, Taiwan’s economy is “pass through” economy, buy component parts worldwide, assemble in China and sell to the rest of the world. There is nobody who start from the component parts, except for TSMC or UMC, nobody really manufacturer anything, that is why you are eager to use China’s labour and market.
Q: Taiwan’s economy, how does business and individual face?
A: Relax a bit, your problem is not serious as Guangdong, go to Guangdong and see, their main export is US, they are affected worse, so is India because their technology product sell to US financial services, now these financial services don’t want it anymore.
In this time Taiwan to think about its root. When crisis strike, what can we rely on, what should we hold on so we don’t get washed over?
China is undergoing a big readjustment; you should focus on China’s readjustment. If I am a Taiwanese, I will use China’s readjustment to find business opportunities.
Q: Like what you mean?
A: Economy like China will not disappear, it will only change its core qualities, change by itself is very difficult, but if the Chinese people lose jobs, they will open up job training classes, retrain the Chinese people. If China lose job they will need to raise their abilities, Taiwanese will set up training schools. You don’t need to worry; I believe Taiwan will find opportunities from China’s problems.
You can also look more deeply into China’s internal demands, transfer product and services to China. This is what Europe and US and Japan wanted to do, but Taiwan understand China better than no one else. Taiwan speaks Japanese, Chinese and English. This is “golden combination”. Nobody else can do that: only person who understand the three main markets is Taiwanese.
Q: You are not worried about China’s housing market setting China’s economy in decline?
A: China’s real estate agents should worry, but not for other people. China’s economy has grown 11% in the past years, even if it lowers 1-2%, it is still a very good economy, and it is beyond what you can have. Even if China’s economy only grows 4-5%, Taiwan can still adjust its pace and redefine the Chinese market and gain from it.
Q: What about the future of other Asian countries?
A: Be aware of Korea. Korea is focusing on GDP growth. Many years ago Japan has given up on focusing on GDP growth, now we are #20, we no longer talk about economy growth, this implies GDP is no longer important, but Korea continues to emphasise that they have 7% growth, GDP as world’s 7th largest economy etc
Every time they grow, they all know its bubble economy, then get pulled back to reality. Putting emphasis on GDP is a big problem because their economy growth has no base support. They have no talent, basic infrastructure, no component manufacturers, and no equipment design. They go to China to manufacture and sell them to other places. This is very empty. Now they are pulled back to reality and discover they haven’t grown much in the past 15 years.