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Christmas 2005

October 21st, 2005 was, of course, the 200th anniversary of the battle of Trafalgar. Trafalgar, you will remember, was where an English fleet led by Admiral Horatio Nelson demolished a larger French and Spanish force, thus dooming Napoleon's plan to cross the channel and invade England. The event was commemorated in grand style in England with a series of events, the highlight of which was a dinner on Nelson's flagship, HMS Victory, still on active service (in dry dock) in Plymouth.

Your scribe and fellow Navy Academy grad Kevin Sharer were among the few "inevitable Americans" who boarded Victory for the historic event. We toasted Lord Nelson, and reflected on the applicability of his leadership lessons today. Nelson was not given to subtle strategy. For him it was all audacious dash and close quarter action. He was definitely a hundred percent market share kind of leader.

Closer to home, our economy muddled through a surprisingly strong year, mostly thanks to a continued housing boom and China's willingness to buy U.S. Treasuries. Given the current administration's short-sighted fiscal formula of ever increasing spending and additional tax cuts, I remain bearish.

In last year's letter I quoted Peter Drucker. His passing in November at age 96 ended a remarkable career. Drucker almost single-handedly invented modern management. He started back in 1945 by giving us a framework for managing, The Concept of the Corporation. His notion of decentralization "Those closest to the problem are closest to the solution" and of treating workers as a resource and not simply a cost were as revolutionary then as they are routine now. He was talking about the Knowledge Economy and its implications about the time Thomas Friedman graduated from grade school. More recently, he devoted much of his energy to talking about "managing oneself" in a way that was true to his style of being both simple and profound. Questions like "what are my values?", "How do I work", and "where do I belong" helped many of us take stock of our place in the knowledge economy.

It also helped prepare us for what Drucker called "The Second Half of Your Life". He pointed out that the knowledge worker is not worn out from forty years of work but "merely bored". Therefore it is important to think about how to engage "one's second half". He particularly encouraged developing a parallel life in the non-profit community as a way to re-energize oneself. Through all he showed practical insight not just on business, but rather on what we need to be a better society. He will be missed.

Turning to books, Thomas Friedman's The World is Flat has created quite a stir. The message is simple: China and India are developing vast numbers of the best and the brightest. They can easily connect to the world economy. They will eat our lunch in the 21st century. Though Friedman breaks no new ground here, he is at his best in framing uncomplicated themes about complicated issues. He gets people to pay attention. His book is a wake-up call for U.S. education, one we sorely need.

Let me share a few scary statistics. At public universities in this country the graduation rate (using six years from matriculation) is only slightly higher than 50%. For men the graduation rate is even lower, in the 40% range. Moreover, fewer and fewer students are taking math, science, or engineering related courses. Last year the majority of doctorates in engineering in the U.S. went to foreign students. Check in with your local university President about his or her plans for meeting this 21st century challenge.

I will close with a word about George Kennan, another giant of the 20th century who left us in 2005. Kennan was the State Department's man in Moscow in 1946 who first articulated the doctrine of containment of the Soviet Union. His famous Foreign Affairs article laid the groundwork for a policy that was remarkably successful in providing forty years of peace and the conditions that allowed Western Europe to rise again. Kennan was one of those wise, thoughtful, and largely underappreciated people to whom we owe a great debt.

May the New Year bring excitement, even if you aren't Nelsonian enough to get to 100% market share.