Business after the Election
A very long election cycle has ended and the initial reactions of the results have given way to discussions of Cabinet choices. Business owners and CEOs have to sort through the noise to determine how to best navigate their respective companies given the previous comments and current signs of the President-elect.
Clearly, this transition seems a bit different. Markets look for some certainty.
After 8 years of one party and one administration, how will a different party’s philosophies affect business for the foreseeable future? And how will the ideas and words spoken on the campaign trail, unorthodox as they were, translate into policies?
What will be the changes to regulations, tax code, federal spending, employee talent-pools (as it relates to training and visa and immigration laws), health care, etc.?
Two weeks after the election may be too early to fully fathom the broad scope of changes that will take place but here are three key aspects to consider.
Three Business Cases to Consider
1. Perspective of a Large Tech Company CEO
IBM CEO’s Letter outlining 6 ideas sent to the President-elect
There was outreach to a new administration by Ginni Rometty, CEO of IBM, the country’s largest technology employer and leading patent creator, in the form of a letter to the President-elect. She emphasized IBM’s 105 year old American roots reflected in the more than 50 major locations across the country as well as their global presence in more than 175 countries.
More employees were hired last year than in the previous five and new innovation centers and business units are planned for the future.
Despite the fact that there will always differences, she will be looking to collaborate on the ideas where there is common ground, as she said, “I hope the ideas I have offered in this letter represent ways that we can work together to achieve prosperity that is broadly shared in our society.”
Here is a summary of the six key ideas she shared which is likely shared by most technology companies:
“New Collar jobs”
Acknowledgement that relevant skills not a 4-year degree are what matters most for business progress and success. She referred to them as “New collar” jobs, in areas such as “cybersecurity, data science, artificial intelligence and cognitive business.”
IBM’s new-model of education vision of 6-year public high schools “that combine traditional education with the best of community colleges, mentoring, and real-world job experience”. IBM has been hiring the first of these types of graduates in its goal of creating a national corps of skilled workers trained to take the “new collar” IT jobs that are in demand here in America.
Building infrastructure like roads, bridges, buildings, and other public facilities is important, but even more critical is building them smart and secure; and for improved performance.
Increased efficiency could save the federal government $1 Trillion through the use of advanced data analytics, data center consolidation, and the use of cloud technologies to improve the cyber-security of key government systems.
Tax System Reform
A more competitive tax system for companies of all sizes so that billions of dollars in earnings of can be re-patriated here in the US to be reinvested “in their U.S. operations, training and education programs for their employees, and research and development programs.”
Since IBM operates one of the largest employer-sponsored health plans in the United States, it can provide specific recommendations, similar to the ones it provided in 2009, on reforming the healthcare system and save almost a trillion dollars. These included using data analytics to reduce fraudulent Medicare claims, improving the exchange of healthcare information among providers, and leveraging the government’s purchasing power to lower the cost of drugs and care.
Providing the best medical care to the men, women and families who serve our country using the most advanced technical means as possible in order to show our gratitude for their service.
2. Energy Efficiency good for business?
Open letter from 300 corporations concerning Climate Change
More than 300 U.S. companies, including Intel, Hewlett Packard, Starbucks, Staples, eBay, Dannon and Nike have sent an open letter to the President-elect (and members of Congress too), urging him/them not to abandon the Paris climate agreement.
Nearly a quarter of these firms have annual revenues exceeding $100 million.
”We, the undersigned members in the business and investor community of the United States, re-affirm our deep commitment to addressing climate change through the implementation of the historic Paris Climate Agreement.”
“The right action now will create jobs and boost US competitiveness. Implementing the Paris Agreement will enable and encourage businesses and investors to turn the billions of dollars in existing low-carbon investments into the trillions of dollars the world needs to bring clean energy and prosperity to all.”
There could be punitive actions if the US pulls out of the agreement. But there was a good sign after a meeting with the New York Times staff on November 22nd, the President-elect said he would “keep an open mind” about whether to pull the United States out of the landmark multinational agreement on climate change.
Other high-profile organizations signing the letter include DuPont, Gap, General Mills, Hilton, Kellogg, Levi Strauss, Mars, Monsanto, Patagonia, The Hartford, Tiffany and Vail Resorts – plus many others.
3. Tariffs and Supply Chains
Moving Iphone manufacturing to the United States
In June, Apple asked both Foxconn and Pegatron, the two iPhone assemblers, to explore the possibility of making iPhones in the U.S. This may have been, in part, due to a statement the President-elect made in March during the campaign, “I’m going to get Apple to start making their computers and their iPhones on our land, not in China.”
But is this a realistic goal?
“A large part of the reason electronics moved overseas is because of the entire supply chain over there,” says Columbia Economics Professor, Amit Khandelwal in a Business Insider:Tech Insider article. “It may be a lower cost to produce the final product as compared to the US, but there’s also an advantage is that you’re close to your other input suppliers who are other parts of the East Asia supply chain.”
If somehow the political will was great enough to have iPhone manufacturing brought to our shores, “you could end up with a situation where the factory actually comes back to the US but they just figure out how to automate more.”
The cost of an iPhone would most certainly increase if a currently efficient supply chain is disrupted. But what could that mean for other electronics makers if there were more supply chain accessibility domestically?
What about the possibility of tariffs and their effects on the price of goods, especially technology and electronics coming from Asia?
Throughout the campaign, the President-elect called out China for being a currency manipulator and pledged to put 45% tariffs on imported Chinese goods. China could follow suit and do the same, essentially starting a trade war.
Once Trump was elected, the tone appeared to ratchet down, as the Chinese President Xi Jinping told U.S. President-elect, that co-operation was the only choice for relations between the world’s two largest economies. “A clear sense of mutual respect” was the comment and very good sign by the incoming leader.
There are 60 days before inauguration and most of the major appointments to the President-elect’s cabinet and staff, especially as it relates to the economy and finance, are still underway. It remains to be seen what policies will be implemented in the first 100 days and in the first year.
As uncertain as things may appear, during the last administration transition, steady job growth with an unemployment rate under 5% and a stock market breaking 19,000 were not part of the transfer.
It seems clear, the regulatory environment will be lighter as we wait to see what other business opportunities are revealed with the new administration. Hopefully the gains we have seen will expand and allow the innovative and entrepreneurial spirit, especially of small business, to be ignited!