“If we can’t figure out how to take advantage of this, we should be ashamed.”
I’ve written about John Doggett before [pictured here with wife Patty Tang]. Senior lecturer in the department of management at McCombs, Doggett is known for his penetrating gaze, sharply defined opinions, and forthright presentation style. Here are highlights of his recent remarks to alumni about the rise of China and what it means to business people in the United States.
“We are in the eye of a strategic inflection point hurricane, and it is a category 7 hurricane,” he said on his first slide. “All hell is about to come together on top of your head. When the eye of the hurricane hits, it is going to hit you hard.”
Learning from History
Doggett started with a review of history, going back to the end of WWII, when most factories of our industrialized competitors had been destroyed. For a brief period, American manufacturing firms were the only game in town. “We started to believe that was because we were better than anyone else. We assumed that Third World Countries would always be dirt poor colonies, and would not be able to produce innovative products that could compete with our products. And the most dangerous word in the language is assume.”
One assumption was that there were a handful of countries that could never rise to our level, like China, India, and Brazil that would always be poor. Along the way, the U.S. actively told the world that our life was better than communism or socialism, and eventually they started to believe the message. Doggett classified that as a “Be careful what you wish for” scenario, because other societies decided to pursue the “American dream.” In 2001, Goldman Sachs predicted there were four countries that would be the Axis of the Future, Brazil, Russia, India and China (known today as the BRICs). All of these countries had serious economic problems, but they were all large-population countries, and they accounted for almost a quarter of global gross domestic product.
Market Realities Today
China is now the second largest economy in the world, and India is the fourth largest. GDP in both countries is on “steriods” according to Doggett. In 2007 China had more cash reserves than the entire G7 (US, Japan, Germany, France, Britain, Italy and Canada).
Goldman Sachs says that China can become the largest economy in the world by 2035 by growing by 5% a year. They are growing faster than that now, claimed Doggett, and by 2050 the China economy will be 9x bigger than it is today. The India economy could be 12x bigger by 2050.
“What opportunities does this represent for American entrepreneurs?” asked Doggett. “This is like the California gold rush days. Never before have we seen the addition of 750 million new members of the middle class in one decade. Think about what happened to Japan after WWII. Japan is a midget compared to China and India. If you can’t figure out how to make money in markets like that, please let us know and we’ll take back your degree,” Doggett challenged the assembled business school alumni.
Maintaining Faith in Free Enterprise
“It is time for us to stop playing games,” Dogget said. “We’ve been saying we believe in the free market, so let’s engage in the free market with China and the rest of the BRICs. These are countries that have bought into our philosophy, are competing against us by our rules, and now we are in the process of abandoning free market principles in our country. This is real, serious stuff. It isn’t time for us to be questioning about whether the free market system works.”
Doggett ended his remarks with a simple statement. “If we can’t figure out how to take advantage of this, we should be ashamed.”