[UPDATE:  I began drafting this post on Tuesday, June 11, largely in response to images of the unrest in Hong Kong as Beijing seems to be reneging on its commitment to that special administrative region’s political autonomy following British transfer in 1997.  In light of Thursday’s overnight news of attacks on two oil tankers in the Gulf of Oman, I realize the message is not solely one of alliances among nations with mutual interests but one of contrast between the haves and have-nots.]

Should Ray Kroc be posthumously nominated for the Nobel Peace Prize?

In his 1999 book The Lexus and the Olive Tree, New York Times columnist Tom Friedman makes the following observation. Since McDonald’s international expansion, there had not been a war between two nations in which local residents could get a Big Mac or Egg McMuffin. It is hard to tell if that is still true, especially when post-1999 expansion includes foreign outlets in places like Iraq, where the Golden Arches marquee appeared in 2006, largely to serve deployed U.S. soldiers.

If this was a causal relationship, our federal government could dramatically decrease defense spending by investing in fast food restaurants in North Korea and Iran (where the last McDonald’s closed in 1979 following the Islamic revolution) rather than new weapon systems. Create a “military/intestinal complex.” Under this strategy, McDonald’s choice of locations is a modern day tribute to Willie Sutton, where banks have become countries where, instead of money, the currency is paying customers.  For the record, the threshold appears to be Andorra where five franchises serve a consumer base of approximately 75,000 residents.

If this theory is more than a “Kroc,” the Dr. ESP corollary states, “The strength of U.S. bilateral alliances should be directly related to the number of Mickey D outlets in the partner nation.”  In which case, China comes in second with over 2,700 franchises compared to #1 Japan, home of the クォーターパウンダー(translated Quarter Pounder) with 2,975 and #3 Germany (1,480),  #4 Canada (1,450) and #5 France (1,419).  [GASTRONOMICAL NOTE: The most popular menu item in Japan is the “satokohda” or “cheese tsukimi burger,” two slices of bacon, over-easy fried egg, ketchup and mayo, cheddar cheese and a chicken patty on a sesame seed bun.]

Of course, one could argue it is just a coincidence the three countries with the highest gross domestic product (GDP) are (drum roll) #1 the United States, #2 China and #3 Japan.  Or look at the imperial behavior of the current G-7 members–Canada, France, Germany, Italy, Japan the United Kingdom and the United States.  Since it’s formation in response to the 1973 oil crisis, none of the members of this “group of seven” have launched a preemptive strike against another sovereign nation with one exception, the U.S. invasion of Iraq in 2003. (American exceptionalism?)

Perhaps, it’s not Mayor McCheese who is keeping the peace.  As mentioned above, the global location of McDonald’s franchise has more to do with disposable consumer income than the tastes or dietary habits of the location’s residents.  In other words, when you have a functional economy which, for the most part, serves both domestic purposes and international financial transactions, why would you put that at risk?  In fact, it would seem to make more sense to develop joint trade and intellectual property agreements which ensure continued stability and success.

Which brings me to the U.S./China trade war.  According to the latest data provided by the International Monetary Fund (IMF), the combined GDP of the United States and China is $37 trillion dollars (US/21.4; China/15.6), more than the sum of the next 17 national economies.  The last thing Americans should want is a major downturn in the Chinese economy, especially at a time when the Chinese government faces a growing political confrontation with Hong Kong.  A wounded China is much more dangerous than a financially healthy one.

There is another option.  The model for future U.S./China relations surfaced in 1975 when Doug Chamberlain, a student at Adrian College coined a word which describes “conflict over how to divide up the benefits produced by cooperation.”  That word was “coopetition.”  Beginning in the 1980’s, it became the modus operandi of the emerging high-tech industry in Silicon Valley.  Representatives from competing firms would meet regularly in formal settings or socially after work.  The topic of conversation?  If we can grow the industry as a whole, there will be plenty of profits for all of us.  In colloquial terms, together we can bake a bigger pie, and everyone will get a larger slice.

Now, take a look at the flip side, the have-nots.  According to the IMF, Russian GDP currently stands at $1.8 trillion, less than a tenth of the U.S.  Iran’s is at $413 billion.  North Korea’s is estimated at $40 billion.  You might call this national income inequality.  And what do we know about behavior when people face desperate economic conditions.  They start to look outside legal sources of income.  They covet what others have and want “their fair share.”  They steal property (Russian appropriation of Crimea).  They extort (Iran threats to close Straits of Hormuz or North Korean development of nuclear weapons).

Maybe it’s Bob Dylan, not Ray Kroc who should be honored in Oslo.  I know, he already has been.  But this time for economics and peace, not literature.  In his 1962 classic “Like a Rolling Stone,” Bob Dylan laid out the unified theory of economics and militarism, “When you ain’t got nothing, you got nothing to lose.”

For what it’s worth.
Dr. ESP

The title of today’s post is the mantra of the founding director of the entrepreneurship program at Miami University.   We will be honoring him on May 15 when the program is re-branded as the John W. Altman Institute for Entrepreneurship in recognition of his contribution of time, talent and treasure to educate future generations about the risks, rewards and challenges of starting and growing new ventures.

For John, the concept of “skin in the game” is the glue that unites diverse interests to pursue a common goal.  In business, it means that everyone associated with an enterprise from the founders on down have a personal stake in its success.  The most common manifestation of this tenet for start-ups, when cash is at a premium, is when employees are offered a share of the company in lieu of salary or when contractors are offered a percentage of future revenue rather than a fixed price for their work.

Several current events over the past week led me to contemplate whether “skin in the game” might be the defining principle which helps Americans move past the divisions which characterize politics and culture today.  It may also provide a road map which reconciles the tension between those who see pure socialism as an inherent threat to a capitalist-based economy and those who view pure capitalism as antithetical to the public welfare.  Consider the following examples.

Tuition-free college for all is gaining support among the Democratic base and, to a lesser extent, independents.  That is understandable when one sees how the cost of an undergraduate education has grown at 2.5 times the rate of general inflation over the past 17 years. (Source: EdVisors)  As a result, college debt now exceeds $1.3 trillion affecting approximately 44 million Americans with an average outstanding loan of over $37,000.  At the same time students are told a college education is essential to economic survival as the workforce becomes more dependent on brains than brawn.

Clearly, affordable higher education regardless of economic status is a desirable goal.  But that is different from “free.”  Take the most extreme case in the news, Lori Loughlin and her daughter Olivia Jade.  Ms. Jade, by virtue of having been born into a wealthy family, had the equivalent of a “tuition-free” education.  I doubt she ever had to pay for her own room and board or books.  And she would have had no debt upon graduation from the University of Southern California. And how did she respond to this totally subsidized undergraduate education?  By spending her time building her brand and reputation as a celebrity “influencer” on social media.  In response to one follower’s question about her college experience, Jade replied, “I don’t know how much of school I’m gonna attend…But I do want the experience of like game days, partying…I don’t really care about school, as you guys all know.”  If only her followers did not really care about her.

Rather than free tuition, why not create a subsidy which still requires every individual to invest some of their own resources?  Government does that with the Section 8 housing program.  Residents pay 30 percent of their monthly income while the HUD subsidy covers the rest.  Occupants of Section 8 housing have “skin in the game.”  A similar approach where families would pay even a minimal percentage of their monthly household income would ensure students had a stake in their post-secondary educations.

The same principle could apply to national security.  According to FiveThirtyEight.com, only 0.4 percent of Americans presently serve in the military.  I know most of us pay taxes to support the armed services, but a payroll deduction and being in harm’s way are two entirely different things.  It is much like the role of a chicken and a pig in the making of a bacon omelet.  The chicken participates.  The pig literally has “skin in the game.”  I oppose a universal military draft for several reasons, but mandatory national service is one way of leveling the playing field.

And finally, how can anyone not question the fairness of companies such as Amazon or Netflix not paying any income taxes for 2018?  According to CBS News, it was even worse.  These tech giants received tax rebates totaling $4.3 billion.  Meanwhile, the American Society of Civil Engineers reports the U.S. needs to spend in excess of $2 trillion over the next 10 years just to bring roads and bridges up to standard.  Shouldn’t the 60 major domestic companies which paid no taxes for 2018 have some “skin in THIS game?”

Remember how often we hear government needs to run more like a business?  What if government ran more like a start-up?  There are several proposals for an infrastructure bank capitalized through corporate equity rather than taxes similar to the equity versus salary approach for the employees of new ventures.  Every U.S. corporation would contribute a small percentage (proposals range from one to three percent) of non-voting shares to the infrastructure bank.  Such an arrangement would have a dual effect.  Business would want to know they are getting their money’s worth and the public infrastructure bank would have a vested interest in the success of the companies which make up its broad port folio.

As suggested above,  “skin in the game” can be an overarching philosophy which supports a balanced approach to many of the issues which currently divide us.  I am sure, with a little creativity, the ones presented above are just the beginning.  Just ask John Altman.

For what it’s worth.
Dr. ESP