Steve Forbes: Our Pendulum is better than Europe's Stagnation

In advance of Steve Forbes' presentation at this month's ProMat 2013 Exposition in Chicago, MH&L had the opportunity to ask Forbes for a preview—both of his remarks and of the year ahead for supply chain professionals.  As you'll see in the following Q/A, this two-time candidate for the Republican Party's presidential nomination and current CEO of his own publishing company is optimistic the economic pendulum will swing back in business's favor—at least those businesses that plan for its return.
 
What challenges will supply chain professionals face in the coming year and how important will supply chain strategy be to companies?
The whole trend of economics is toward more and more sophisticated and extensive supply chains. You see it in everything, including  iPhones, which come into this country with $171 worth of parts. It's assembled in China, but out of that $171 worth of parts, only $6.50 of them are actually manufactured in China and the rest come from around the world, including Japan, Malaysia and Germany. Ten dollars worth of those parts come from the U.S. Those parts go from the U.S. to China then come back to this country in the iPhone. These chains are becoming unimaginably complex. So even though the New Year will be difficult economically and politically, the trend is toward greater sophistication in making things happen, and that will grow.

Are the people coming into this field getting the education they need to do the job?
The challenge is that we don't know how things will unfold, we just know it will happen. The nice thing about marketplaces is most people will get what they need in terms of knowledge. Thanks to the web that knowledge will be easier to get. But even in manufacturing which we tend to think of as related to labor costs, more and more in the future it will depend on brain power, just as in other areas of the economy. What we did five or ten years ago will not be what we'll be doing tomorrow. We see that in the media industry. Whole models of 150 years have been shattered.

We're hearing that the whole concept of digital manufacturing will change logistics, including the need to move products digitally rather than physically. Is that a game changer?
It certainly will be, but what people have to keep in mind is even as things are moved differently, the volume will grow. What we've been through since the financial crisis four years ago, what they call the new normal is really the new abnormal. It won't last, even though next year it will feel like it's lasting. The fever will break, policy changes will be made and the number of things happening in the world will grow exponentially.

That sounds like both a threat and an opportunity for supply chain managers.
Yes, as it always is. Those who can step back and start to immerse themselves in things that are starting to unfold in manufacturing in terms of new materials, especially if entrepreneurs can take a proactive approach instead of waiting for something to happen, try to anticipate the thing happening, they'll be ahead of the game. People are looking for solutions. We saw in the early part of the last decade when people knew the web was a big deal but didn't quite know how, and did a lot of things they normally wouldn't have and shouldn't have just to look like they were up to date. You don't have to feel you need to be active just to be active. The marketplace will tell you pretty quickly what needs to be done if something new comes along.

How can companies find the talent they need to react quickly and appropriately?
With today's economy, when you face a shortage of certain kinds of workers they get training very quickly. People apply and get what they need to get. The biggest educators in this country in many ways are not our schools and colleges, but the workplace. That's where you learn, because it's either that or you don't work. You see this in the legal profession. Most experts will tell you that of three years of law school, one and a half are useless. You could do it in a year and a half. The real education begins when you go to work. But given the uncertainty out there, you don't find as much educating as you normally would. It's a commitment. This is where an outsider can come in and supply that education for the company, determining its needs. You see this in the energy industry. People figure that will be around for a long time, so you have kids going to North Dakota and they learn very quickly and get paid very well.

How does this apply in the supply chain space?
Take the finance industry, which has grown enormously since the 70s. That's a peculiar thing. The only reason it happened is because of the turmoil and turbulence revolving around the U.S. dollar. The finance industry should be a fraction of the size it is today. When we start to get normalcy again in monetary policy, which is the most boring subject in the world, and that will happen, because this craziness cannot continue, you'll see labor—people who get six-figure salaries, and not just the blue collar workers—you'll see a shift in terms of job creation. You're starting to see it already on Wall Street. Most of the time you hear about layoffs, not big hirings. That means the field of supply chain management will be competitive for talent again.

Is that what you'll be addressing at ProMat?
We'll be in the first part of 2013, and the economy will be slower and turbulent, and that will finally generate a new debate on how to get real economic growth. This whole thing about the fiscal cliff—which will thankfully be over by the time we meet, we hope—is ridiculous. This idea of how much we raise taxes and on whom is preposterous, given the fact that Europe and Japan are in recession and we're slowing down. You don't bleed a patient who is losing strength. [The fiscal cliff debate] was akin to asking how much poison we should administer to the patient.

So does surviving this process bode well for businesses?
It bodes well for those who advocate real substantive, major reforms. Reagan put in major reforms because of circumstances and the economy rebounded. From 1983 to 2007, although we had two minor recessions compared to this one, we had an extraordinary period of expansion. It will happen again, it's just a matter of when. We shouldn't forget that in the late 70s we had the Prop 13 Movement in California, which presaged Reagan's reforms, you had a capital gains tax change in the late 70s with Democrat support, so things were stirring before the big change actually happened. Jimmy Carter came out in favor of deregulation of the airlines and trucking.

It sounds like you're saying we live with a pendulum, where if things threaten to go too far one way then forces will bring it back. Is that how things will always go?
Yes, in this country. In Western Europe the pendulum hardly swings at all, which is why until the financial crisis our average real growth rate was 50% higher than Western Europe's. They grew at 1.8% or 2% and we grew at about 3.3 or 3.5% and we had the largest developed economy in the world.

So it's better to live with a pendulum economy?
Temporary stagnation is better than permanent stagnation.

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