Welcome to the January 2010 issue of IDEAS, Northwood University’s Enewsletter discussing the principles of our founding philosophy, The Northwood Idea, as they relate to enterprise, ethics, life, and liberty.
We are pleased to present the December 2009 commencement address by Dr. David E. Fry, who served our University for over 44 years, coming to Northwood in 1965 as an instructor of Economics. He developed and taught over 20 course titles during his service as a faculty member, and became an administrator, campus dean, a part of the central administration, and served as President and CEO from 1982-2006.
Here, using examples from contemporary society, Dr. Fry expands on The Northwood idea, illustrating the relationship between actions and consequences.
Following Dr. Fry’s speech is a whitepaper on Michigan’s economy and an essay on the dangers of artificially setting interest rates.
We will close this issue of IDEAS with examples of ours students’ exemplary community service projects. Northwood University’s Code of Ethics requires us to act with empathy, spirituality, and responsibility. Our students have already internalized these values and we are proud of them.
by Dr. David E. Fry, President Emeritus
Congratulations, graduates! As you leave this ceremony you will have earned a truly priceless inheritance. Allow me 15 minutes to share what forty-five years of watching it suggests, in nine short lessons.
#1 The world is run by the people who show up. Everything in your experience here is predicated on the importance of action. This graduation is an example of that. Every graduate here is an off-schedule traditional undergraduate, or you returned to an adult degree program in the middle of a career because it needed to be done for you or your family, or you are a DeVos MBA graduate who truly interrupted your life (remember simulation?) for a valuable asset. You showed up. And you learned the skills to do careful analysis of fact before action, but that without the action, the analysis is simply an empty exercise.
#2 Freedom and Free Markets Work. Schumpeter’s observation that “capitalism has fed more people, clothed more people, raised the standards of living of more people than all the other economic systems in the history of the world combined “ is as clearly true as his warning that it will sow the seeds of its own destruction if its proponents do not know how to defend it. You had the opportunity since 2007 to watch, from the inside, the toughest test of capitalism’s strength in eighty years. Capitalism almost failed precisely because, as Schumpeter warned, we didn’t know how to defend it. What did we forget?
#3 Savings to invest for production, if ignored, creates chaos. Our saving rate in the U.S. fell to near zero for a decade while some told us it would be OK because our personal assets, primarily our homes, would fill saving’s role by increasing in value. And, we continued to believe—even as home prices increased by nine per cent a year and household income increased by one per cent – that it would continue indefinitely and the economy would be OK. How foolish. That’s a bubble, and it burst, dragging down a mortgage market that had virtually given up on credit worthiness because of the same assumption regarding home value replacing savings. Huge government action immediately followed. And, it will happen again if we forget it again. Do not let that happen!
There are important examples of that right here at Northwood, and the most current is probably a man who will receive an honorary doctorate here today: our long-term CFO Donald Hunkins. Without his quick action to lower debt and start saving when he showed up twenty-seven years ago, Northwood would not have had the ability to weather the storm of our 500 year flood four years later, in 1986, and the modern Northwood that grew from that day would probably not have been here for you. Less debt, except for earning assets, saved us then and will save you in the future.
#4 Fear, in a market, is lethal. Truly free markets have their own tendencies for self-correction built in. Keep them truly free! We have recovered from several harsh recessions since WWII, but a depression adds paralyzing fear—fear of the unknown so great that consumers, producers and investors simply retreat in panic, hoard cash and cut spending to the bone. The normal self-correcting mechanisms of lower interest rate, inventory resupply and depressed prices are overwhelmed by the fear of everyone in their respective caves, peering out to look for confidence in others. But there are few “others.” While private markets largely self correct, panic feeds on itself. How do we know we were in panic? The Conference Board’s Consumer Confidence Index, after a very bad 2008, was 61.4 just before the September 15 ‘08 crisis, and by February of this year it was 25.3. We forgot saving and producing things and services for others in favor of spending and the use of empty financial devices, even tricks. Then we fell so hard it seemed we might not recover. We came “that close” to the downward spiral that truly defines collapse…because of fear.
Our job is to insure that what we know freedom can do, we allow it to do, and not to fall prey to the notion that because government can soften a problem short term, it is a long term substitute for freedom and the responsibility that comes with it. We must responsibly remember the vital role of savings, investment and character. And we must teach it. Constantly. To everyone who will listen.
#5 Real confidence comes from sustainability supported by stewardship. Make these words your mantra. Do not let others too easily define them for you.
Not that the common definition of sustainability is wrong. No less an authority than Amway, with which we share a 50th anniversary this year, founded by the revered free enterpriser Rich DeVos, in a full page ad in the October 5th Newsweek , asserts, “take care of your environment and it will take care of you … if you want to make the best products on Earth, it’s best to be good to her.” Not wrong at all, yet the definition is even larger.
Sustainability is the true and believed notion that a trajectory we pursue can be maintained far into the future, if we carefully husband our resources, our energy and insistently show our character. Stewardship is the true and believed notion that we will act honestly, without deceit or trick, not to favor only ourselves in the short run, but rather to work in the long run for ourselves,and by extension for others with whom we compete and cooperate, to insure steady progress for the polity at large. If sustainability and stewardship are at work, markets self correct and the result is confidence, not fear. A confident market offers credit to those who demonstrate the staying and growing power of their business idea, multiplied by management’s careful use of its finite resources in support of profitable endeavor. Of course there are cycles, but not collapse.
#6 Do not throw money at the past; invest money in the future. Just as the military often uses peacetime to prepare for re-fighting the last war, we often try to correct a crisis by re-fantasizing our last economic strategy for success. In both cases we just throw money at the past. The information technology explosion, more efficient manufacturing processes, more skillful marketing, use of finite resources in smaller amounts for bigger results, the creation of global enterprise, have all been at the core of America’s incredible 20th century success. If information technology was our most recent revolution, what is our next leap forward? There are several obvious candidates, but none are redoes. As science progresses we now have sophisticated ways to measure the limitations of our natural resources, and also the impacts created by our use of them. Recently, clear calls for sustainable business practices regarding both supply of resources and probable effects to environment are very insistent. Virtually every Fortune 100 company now has an office of sustainability management with real power. The curve is nearly identical to the growth of CIA (chief information officer) positions in the late ‘80s and ‘90s. There is also controversy. While 95% of scientists concur with the general findings regarding environmental degradation and global warming, some aren’t yet convinced and many non-scientists haven’t carefully studied it. So what, for you? Well, science WILL sort this out soon, and regardless…massive behavior change is already underway by governments and enterprises here and around the world in anticipation of new realities. When has there ever been mass behavior change on the supply and demand sides that has not offered extraordinary business opportunities? Never! Graduates, this is an enormous opportunity for you, and you don’t have to be a green god or goddess to benefit. The new firms that make this market will also hire lots of accountants, business managers, marketers and every other form of current business skill. So will other businesses forming in the new reality. But the opportunity for a Northwood graduate entrepreneur, to invent a new process, or a new product, or a new service, holds truly great promise for you. Pursue it!
And by the way, giving the same way you invest…in the future…is a very, very good idea. Just last month President Pretty announced another terrific gift, the Naegele Scholars Society, a new endowed scholarship program that will eventually reach millions of dollars…all focused on the future…Northwood students future. The donor, Dr. Patricia Naegele, invests in the future and she will change it for the better. In your own way, follow that path, and you’ll not regret it!
#7 Understanding business requires understanding the character necessary to succeed in it. Dr. V. Orval Watts, in Northwood’s first Northwood Idea textbook from 1967, said exactly that. Because this was crucial, in the early ‘90s your entire university--students, faculty, administration, trustees, outside supporters and friends--jointly engaged in the project to explicitly write the Northwood Code of Ethics. We all promised to be guided by our code, here and elsewhere forever. Integrity. Respect. Honesty. Responsibility. Freedom. Empathy. Spirituality. Achievement. Each is presented with eloquent definition. If you want to see how different ours are, call up the website of other well-known universities, enter Code of Ethics in the search box, and read. You will be astounded how shallow many are. Ours are the characteristics necessary to succeed in business. How do we know? Imagine working for a new boss without any of them, say a person who cannot be trusted, who disrespects colleagues, who ducks obligations, orders others blindly, doesn’t seem to understand how his actions make others feel, or doesn’t care. Would you be easily guided by him? Imagine the other division with a boss who radiated all the ethics of our code. Would she be easier to follow? By extension, then, these are the attributes you need to gather willing teammates under your leadership. You know the character necessary for success. We become our habits. Make a conscious habit out of every element in our Code of Ethics and watch your team form behind you.
#8 If you give a starving man a fish, he will be fed for a day; and if you teach him to fish, he will be fed for a lifetime. Furthermore, he’ll learn how to catch enough fish for a community and very soon he will be a successful merchant leader, freeing others to apply their skills to create wealth within the community, aiding others’ happiness along with his own. And he’ll grow from there. But what larger lesson does it contain? It means that time spent learning is often the most valuable time spent; something you obviously believe and are just about to prove in Technicolor with your own lives. It implies that if society does a good job teaching its members to fish, it is unlikely to be faced with the need for massive fish give-a-ways. It also suggests that society may wish to separate the job of giving away fish and teaching people to fish, because the temptation to act short-term often confounds the long term benefit. Too many would take the single free fish; two few would spend the day learning to fish and the rest-of-life building the fish business. Perhaps government ought to be the only provider of free fish, and the gift ought to be clearly less satisfying than what can be expected the day after a man learns to fish. And, perhaps only business should teach fishing?
Perhaps we should also think carefully of how we do what we do. For example, our U. S. health care costs, per capita, are the highest in the world and we are the only developed nation whose corporations must include the cost of health care for current and retired employees in products they sell against international competition that does not include those costs in their prices. Many people—working and not—have no health insurance coverage. Further, we provide health care to people with no insurance in the most expensive possible way: in emergency rooms where, by the time sick people show up, preventative actions are inapplicable and the cost for crisis action is at its peak…then all the rest of us pay for it through our devices. One of my Texas colleagues, Associate Professor Evgeniy Gentchev, has demonstrated that the dysfunctional system we have comes from the absence of competitive price efficiencies in an opaque market and reinstituting a free market would itself be solutional. Read his article “MISSING THE FOREST FOR THE TREES” for a stunning explanation of what is occurring.
And we certainly do not need to tolerate Socialism to accommodate the solution, regardless of what the Senate did three days ago. Check out Taiwan or Switzerland for two great examples. What are we thinking?
#9 The questions are never written on the wall. Undergraduate learning is usually textbook based. Read the chapter, answer the questions at the end of the chapter, show up to hear the lecture and discuss, pass the test, move on. One chapter, one topic, at a time. That’s how textbooks are turned into learning devices, it is not how business life is lived. As a business person there are no questions at the end of the chapter. They never helpfully appear on the wall every morning. In fact, the chapter is simply what you learned from your experiences that day before you walk into your business every morning to discover what challenges need to be addressed next. Effective leadership is identifying—detecting—challenges, marshalling facts, finding strategies and putting them to work. And every day you are in the middle of ten of more of these processes, simultaneously
That’s your life. Questions never on the wall. Detect the questions, find the challenges.
If you are a little frustrated with the obviousness of these nine observations…CONGRATULATIONS!...you have internalized your Northwood inheritance. Maybe, in that case, you can help us deliver the messages to others? Just what you needed, another obligation.
With all of that going on, when do you get time to “think?” Good question. The answer is, when you plan for it, force yourself to do it. If you really think it is important that you be smart, you will need to organize yourself to get smart. It is not automatic and it doesn’t simply come from the turmoil of repeated experiences. You have to force the time for reflection. You will. Northwood grads do. And one thing you’ll do when you find yourself in a company of people who seem to have been educated in a very different way than you; you’ll stop to consider what was different about your education…and the color and the three-dimensionality of the Northwood experience will jump out at you. What I hope you do THEN, is call Northwood! Offer to be a guest speaker to students. Tell them what you have experienced. They will hang on your words, because as an alumnus you have special authority … and IF YOU TEACH THEM TO FISH, they will help save the world.
I have loved watching you, and those before you, grow. Now, go fish!GODSPEED!
by Timothy G. Nash and Keith A. Pretty
The following is a public policy position paper on the Michigan economy written for the Ash Institute at Harvard University. This is one in a series of papers published by the Ash Institute regarding potential public policy solutions to the economic and political problems facing key states across the country.
Five Policy Suggestions
2. Michigan has the highest unemployment rate in the country at 15.2% and was ranked last in economic performance by the American Legislative Exchange Council for 2009. Michigan needs to encourage labor policy that gives those employed the right to decide whether to financially support or join a union while giving employers more freedom to hire employees that best fit their needs. This is imperative given Michigan has lost more than 750,000 jobs since 2000 and needs to create a more entrepreneur friendly environment.
3. The state has 637,000 people holding public sector jobs making government the largest single source of employment in Michigan. The Michigan economy will lose more than 291,000 jobs in 2009 with most coming from the private sector. A 10% reduction in public sector jobs would fuel increased innovation in government while providing substantial cost savings to the state economy.
4. The Detroit Regional Chamber of Commerce has argued for more than a year that the Michigan state government can realize more than $800 million dollars in savings annually by a) privatizing prison functions like food services and b) normalizing sentencing and parole guidelines to those of other Midwest states.
5. Change the retirement system for Michigan K-12 public school teachers from a defined benefit plan to a defined contribution plan. Under such a system the state would match teachers’ contributions at a set rate with the pensions owned and controlled by the teachers and managed by a private company. Over time, the state would exit the pension business for teachers and not have to back-fund the pension program.
By Dr. Richard M. Ebeling
On December 16, 2009, the Federal Reserve Open Market Committee announced that it was planning to maintain a Federal Funds rate between zero and a quarter of a percentage point. The Committee said that it would keep interest rates “exceptionally low” for an “extended period.”
Dr. Richard Ebeling is an expert on Austrian economics and a professor on the Michigan campus.
The two essays above can be accessed at Northwood University’s blog: http://defenseofcapitalism.blogspot.com
Our students take community service seriously and stand up to support numerous local causes. Here are just a few examples of their efforts.
In Texas, $1,560 was collected for the Cedar Hill Food Pantry, which is enough to buy 6,240 meals. Hundreds of items which were donated to a local second-hand store, such as clothing, furniture and office supplies, were also collected.
Florida Campus students participated in The Polar Express Festival, a volunteer holiday outreach program presented by the West Palm Beach Library. The program provided a perfect setting for Northwood students to assist the library staff during an evening of interactive family activities highlighting the classic story of The Polar Express. Over 1,000 people attended this event.
In Michigan, 200 students provided food and activities for over 60 children at the annual Salvation Army Christmas Party. Highlights of this event, which has been a Northwood tradition for over ten years, are a visit and gift from Santa for every child. The Sharing Tree program is also well supported by faculty, staff and students who take the 100 tags and buy gifts for people in need. The gifts are taken to the United Way of Midland County and distributed throughout the community. And three groups of student organizations including sororities, Circle K and the Northwood choir performed at the Dow Garden’s Christmas Walk. Luminaries lit the walkways while groups of volunteers sang carols and people strolled through the snow covered garden enjoying hot chocolate and cookies.
This concludes our January 2010 issue of IDEAS. If you prefer to receive a printed copy of this newsletter, please call the Advancement Office at 989.837.4356.
As usual, your comments and suggestions are most welcome and appreciated.
Keith A. Pretty, J.D.