Former CEO of Lockheed Martin on Competitiveness of Developed Nations

Today, Norman AUGUSTINE, former CEO of the main US Defense Company LOCKHEED MARTIN, came to give a talk at NUS on the challenges that Developed Nations are facing.

After introducing with the fact that the technological advances recently have suppressed a lot of distance between people, he went on saying that a lot of work in developed nations is being outsourced.

If outsourcing reduces costs for a given company in a developed country, it also means that labour is cheaper overseas, in countries like India or China. Indeed, a good metric to visualize this is to compare the basic salary at McDonalds across the world, what we call McWages. You’ll find a 12-fold difference between extreme wages. So these countries with cheap labour are ferocious competitors. How to compete with them?

He acknowledged that education in the US is a disaster (thank you!!!) and blamed the early grade teachers for not being qualified in many cases. A solution could be to valorize teachers proportionally to their level of performance. However he mentioned the immense power of the teachers union lobbying against such measures, thus putting all levels of competence subject to the same salary and advantages.The current generation is the first in the US’s history in which the kids are dumber than their parents. The US have one of the lowest scores in pre-baccalaureate results, while , ironically, hosting many of the best universities in the world. Moreover, many of the PhD and master degrees are owned by international students, and it is often the case that, at this level, there is more non-US citizen in a class than there is US citizens.

The solution, according to Norman, is to capitalize on innovation by retaining talents in the US. How exactly? Cause having been in Singapore, which has exiting conditions as compared to France, there’s just about NO WAY I can live and work in France again. So I went to ask him directly and his answer was “You retain talents and innovation by offering some sort of prestige to people able to bring innovation. You need to fund what they find exiting“. Coming from him, that answer did obviously not fully satisfy me and I wish he didn’t have to rush for a bus waiting for him…

It is also important to invest in research. It is not easy however to raise funds for that matter since most CFOs of major companies in the US are interested in research that can have an impact in the figures of only the few coming quarters. He suggests encouraging R&D investments by applying a tax that would decrease with how long your assets are held for the research intended. Not a bad idea, although I am interested in seeing what it would yield in practice.

A particularly interesting question during the Q&A question was whether another Moon race could remotivate innovation and create some sort of positive competitition. He is not sure Space Conquest is the way to go but somewhat agreed that the US need a major competitor to fight with, so as to drive innovation as it did in the past.

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