The Business of Running America

Today is January 20, 2017. This is the day Donald John Trump is sworn into office. A consistent theme throughout the primaries and general election has been his unpredictability. Traditional norms have had a difficult time sticking to President Trump, and if we all can agree on nothing else about him, we can say that he has kept us guessing. Not only has he left the public guessing about his motivations and what he intends to do and not say, but he has thwarted the predictive power of the financial markets too.

In this environment of guesswork and uncertainty as to what the Trump presidency will look like and do, I thought to write about Trump as a businessman and what that might portend for the executive branch of the United States. Namely, as a businessman who has not served a day of public office prior to his inauguration, how will he run his new cabinet? How will decisions be made within the Trump White House?  Finally, and maybe most importantly, who does Trump consider his key stakeholders?

To begin with I will say that I’m drawing from organizational theory because I enjoy the “big picture” perspective of analysis. There are those of you who might say: “gee Derrick that seems like a cute way of saying you don’t want to do a bunch of research and get really detailed, which makes your analysis lazy”. To those people I would respond: “….dad?”. I will in fact get as least detailed as possible to answer the questions I posed above not because I am lazy, but because I don’t find Donald Trump’s past particularly novel or interesting.

It’s already the fourth paragraph and I haven’t said anything of substance yet, so my imaginary critics might be onto something. Let’s begin:

1280px-porter_value_chain
I remember learning about this when my professor described it in the  form of a ship. However, upon trying to google ” Executive Management Ship” all I got were pictures of Yachts.

The above diagram is called ” Porter’s Value Chain”. It shows the components of a company which intends to deliver a particular product or service to a market. I haven’t worked in “business” for very long and so I needed somewhere to start if I was going to get into the “professional” mindset of President Trump. As I now know,working in business does not in fact mean that I should “shuffle papers” and “stare blankly at spreadsheets until lunch”. In any case, the value Trump has delivered to the market is the Trump brand, and it makes me wonder what value he intends to deliver to his constituents if instead of the Trump brand it will be the public good he is providing.  I will return to this diagram as we move further in the analysis.

If Trump is now the CEO of America, we should first look at how a CEO restructures his company. One of the first orders of business for an incoming CEO would be to replace the executive staff with a more “loyal” crowd. Also, a crowd that he (a businessman) understands. Let’s take a look at some of his cabinet picks:

Secretary of State: Rex Tillerson

CEO of Exxon-Mobil from 2006 to 2016.

Senior Advisor: Stephen Bannon

Served as executive chair for “Breitbart” an alt-right news outlet.

Secretary of Treasury: Steven Mnuchin

Former partner of Goldman Sachs and hedge fund manager.

Secretary of Commerce: Wilbur Ross

Wilburn “King of Bankruptcy” Ross is an American investor whom restructures failing companies.

Secretary of Labor: Andrew Puzder

Former chief executive of CKE Restaurants (Carl’s Jr. and Hardee’s).

Secretary of Health and Human Services: Tom Price

Physician and U.S. congressional representative for Georgia’s 6th district.

Secretary of Energy: Rick Perry

Fashionable 80’s icon who sang with Lionel Richie and The Alan Parsons Project. Also father of contemporary superstar Katy Perry. Failed 2012 GOP presidential candidate. On the board of the energy company trying to install the Dakota access pipeline. Pisces. 

With the exception of Tom Price, these are all captains of industry. Referring to the”Porter’s Value Chain” diagram above, let’s see if we can point out where some of these people go. I see a marketing and sales person in Bannon – a media magnate; a firm infrastructure person in Ross – restructures failing companies and “trims the fat”; an operations person in Mnuchin; an outbound logistics person in Tillerson – who has expanded the reach of Exxon to all continents and has extensive foreign relationships with both Russia and China; an inbound logistics person in Puzder- known for acquiring and turning around failing companies and paying low wages;  Price actually seems like he belongs in his position as he is a physician – this seems bizarre; and not sure where to place Perry as he forgot his new post was one that he wanted to abolish in 2012. Please feel free to speculate wildly.

This comparison is not meant to be a 1:1 link between a standard business organizational model and Trump’s cabinet; I’m inserting his picks into the chart speculatively. Rather I use it to illustrate one possible mindset Trump may have had when choosing the people to surround him.

What’s Wrong With Running America Like a Business?

Let’s pretend for a moment that my thought experiment proves true and Trump steers the executive branch in the same fashion as Porter’s Yacht. Why is this a bad thing? I believe that those who support the supremacy of market forces in government and believe the invisible hand always knows best, misunderstand two things:

  1. Market failure already exists and does serious damage to both private and public services.
  2. The stakeholders and their rights are very different for private business and public government.

It is clearly evident that privatized health care as a market has failed millions of Americans. Even with the Affordable Care Act, premiums have skyrocketed and care quality has gone down. Insurance carriers have left the market. Either we have not created the market conditions to make good health care affordable, or health care should not be a privatized market from which to draw a profit. We as citizens have decided that a number of other things should not be subject to market forces such as the postal service, public education, fire protection, police protection, and national defense. Imagine for a moment if any one of these were restricted only to those who could afford it. For complicated reasons, and lobbying, the healthcare market has stayed privatized, and has not joined the others as a fundamental right accessible by all.

The stakeholders for a business are its shareholders and executive board. The object of a business is to increase its shareholder’s value. Businesses are not expected to make their communities better, nor serve the public good unless that is what their function is. In the public sphere, the stakeholders are tax-payers. The tax-payers who have rights to public goods funded by their tax dollars. Those goods or services that are funded by tax dollars are implicitly supposed to be accessible equally by all citizens of that constituency, regardless of income. To increase stakeholder’s value, a government sometimes must not attempt to turn a profit, and sometimes take a loss which will be covered by other governmental revenue generating activities. It would be a serious misstep to think that every governmental program should be earning a profit, and the programs we love the most (I like NASA) often get criticized for producing abstract, rather than concrete value.

So, will the Trump White House operate like a business? In the shift from businessman to public servant, how much of his business acumen is he going to employ? Does Trump have the capacity to convert his mental paradigm from businessman to public servant? I realize I am channeling Socrates here and have probably asked more questions than I’ve attempted to answer. I do, however, think it is important to ask questions and be wary of business in politics as it relates very directly to the types of legislation Trump will sign off on as well as the executive orders he directs.

 

 

 

 

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One thought on “The Business of Running America

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  1. Derrick, I get where your going and the idea of (affordable) healthcare for all seems to be the critical issue of our time, but I’ve yet to see a plan that feasibly illustrates how that is provided and paid for by the citizens and their government….. in concert with all the other important issues on the table. How do we tax less but pay for more? How do we “give” citizens more while eating away at our crushing debt? I also would like more analysis focused on “why” or healthcare is so expensive. Are we addressing symptoms or underlying issues. A better understanding of the core economics or healthcare pricing might lead us to a different starting place for our “affordable healthcare” journey.

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