tv Condoleezza Rice Amy Zegart Political Risk CSPAN June 2, 2018 12:50am-1:52am EDT
with clemson university professor. sunday at 6:30 p.m. eastern and oral histories, dennis haynes talk about his experiences, injuries and recovery during the vietnam war. watch the c-span networks, this weekend. >> former secretary of state, condoleezza rice and stanford professor are co-authors of political risk, a business book of how companies can manage the risk of government actions. this is moderated by nbc news correspondent, andrea mitchell.
>> welcome. my name is adam and i'm a research fellow. it's my pleasure to welcome you for the discussion. this is the johnson center, the outpost in washington, d.c. please silence your cell phones and we will make a few notes to begin. first, this is being recorded. it is on the record. there will be time for questions and answers but to make things fair please keep your questions is synced and on the topic at hand. the topic is political risk, how businesses can anticipate global insecurity. were pleased to be joined by the authors. condoleezza rice was the 66 secretary of state from 2005 - 2009 for george w. bush.
before that she was the national security advisor. now she is the thomas and barbara's evenson senior fellow. a professor in global business and the economy and a professor of political science at stanford. amy seeger is a hoover institution davies family senior fellow and a senior fellow at the institute for international studies. she codirects stanford center and is a professor of political science. she was a professor public policy at ucla and served on president clinton's national security council. the discussion will be moderate by andrea mitchell. she is nbc news chief foreign affairs correspondent. she hosts andrea mitchell reports each day on msnbc. she's covered several presidential, capitol hill and
every presidential campaign since 1980. her achievements are numeral ball which is why she received a lifetime award from international women's media foundation. >> thank you so much. the privilege to be here with two scholars, leaders, public policy experts whom i admire. congratulations on the book. we want to talk about the book "political risk" and then taking questions from all of you. it is great to have doctor rice here. on a day when the new secretary of state has been ceremoniously sworn in, a new chapter in the state department. talk about political risk from your experiences.
what makes political risk different from financial and economic risk? >> the first thing is that you will have to call me connie. i just have to say word about andrea mitchell. andrea was a part of the press corps at the state department that covered me when i secretary. the truth is, if she hadn't been a great journalist she would've been a foreign-policy specialist. thank you for all of your great work. >> those are the days when secretaries of state travel with the traveling press. >> had a white to find and think about political risk. we wrote this book out of a class that amy and i talked together. we talked together in a course called the global context. it was about everything that happens in the world that affects business. we taught it for mbas.
one thing that was not covered adequately were political risk in the way that political scientist think about it. not investment risk. political risk seems to overshadow the way people think about it in the 1960s and 70s. while some dictator will nationalize your industry. today, it's almost unknown to have that be the problem. we talk about teaching a course in which we can systematically talk about political risk from geopolitical factors. recent changes in technology, changes in the multiplicity the number of factors that are involved in foreign policy. whether that civil society or
social media activists. we wanted to identify first students the sources of political risk using government experience to really look at how those agencies and organizations look at risk and help business leaders think in the same way. it was actually her students who said, you should write a book based on the course. >> went taught the class, we taught her for six years. the students wanted to make the class longer. they never say that. the other was that we should write a book. so the other day after class we said we should write a book. we look for things that we could use for reading assignments and cannot find much.
nobody -- we look tired and cannot find material. so we created our own case material simulation. >> how has social media trends formed the way this world deals with the volatility of velocity? >> it is actors that you would not even think of. if you are united airlines and two passengers have a cell phone and watch a passenger treated badly by a flight attendants. all of a sudden you have experience political risk that you would not have seen coming. now you are testify before congress. the social media and activism has really lowered the barriers for the number and kinds of
actors who can become sources of political risk for business. >> all talk about my favorite. >> i had a cut out about five times in the book because she kept talking about it. >> it's the world. >> i was can ask it if you didn't pick it up. >> one of the early cases with the world is a great example of transforming the risk landscape. this company lost 50% of the shareholder values within 18 months and still hasn't recovered, all because of the $76000 documentary called blackfish. blackfish went viral and there is infrastructure of animal-rights groups that jumped in. then it led to government action of the california coastal commission got into the act
regulating the breeding of orca whales. what started off as a small film ended up having significant impact on a company. racine more of those risks. we say in the book this is not your parents risk landscape anymore. >> when you bring president trump into the mix, what about managing mix when you have a ceo who's on twitter and doing unpredictable things in major policy areas? >> political volatility is an issue for those were trying to manage through political risk. something more structural is going on. not just president trump. something more structural that is raising the risk profile for most companies. if you think about the
international order that was premised on free trade, open markets, increased flows of goods and services, counted on american military power to protect that international order. people took it for granted for years. particularly after the soviet union it look like one international system and economy. everybody was played by the same rules. that system is under pressure from populism and protectionism. . . ot take for granted anymore the system that provided the backdrop in which you are making your investment decisions. you have to recognize the system is under strain. that is a source of volatility. if you come to something,
american presidents have used protective measures for decades. anti- dumping actions against companies, protective measures like tariffs. but they were usually used in a way that there was a wink and a ma non- that had to deal with politics. they promised to protect a certain industry in the state of west virginia because it was important. so everybody kind of understood is about domestic politics but nobody really thought that ronald reagan are george hws that they were protectionists. so everyone understood the constraints on tariffs at that time. >> well now when tariffs are
imposed they definitely take a protectionist thing at was at the beginning or the end? how extensive will this get? so the uncertainty around tariffs which people thought they knew the rules of the gameme how they were used after all the united states was the defender of the little international economic order. now you see it in the market and in response to various countries. the twitter account i would rather we didn't or that congress didn't but the structural change is more important source of volatility. >> there were predictions but the actual vote with the
aftermath and the political difficulties as another cabinet minister residing on monday.. talking about a potential party leader is now out. so we have disorder within the eu and. >> that is an interesting example to anticipate risk. roughly evenly split so it was too close to call piece the political experts did not call it that way then to talk about an example and that is optimistic bias we are all
more optimistic than we should be like the nfl team. [laughter] but there is a range of research that shows we are more optimistic then we should be about investments or policies so how do you guard against that? so one of those intelligence agency experiences is how do we guard against the analytic state? so with the 100th anniversary of richard's birth he famously said this is how we try not to fool ourselves so how do you not go by optimism? >> what is the answer to that? >> youou can try to
systematically put in place people who are supposed to do that we think people should do more stimulation to put yourself in a position actually having to make the decision and certainly you can ask yourself the question why would iay besk wrong? and others who are encouraged to ask that so there are ways to get away fromom it. so now billy people have to make decisions under a lot of uncertainty what does the city of london mean? now it may not be the window to the european union anymore.
recently in london i was a service for a french woman he said the job market is better here for young people than people in my hometown. but i'm not sure that i can stay. so even for the workers what will the divorce mean? by companies and individuals have to make decisions on a daily basis in the highly uncertain environment. >> so with the upcoming summit with king john and he has been honorable so far so how do you go against that bias expectations to the point
there is a real risk? >> first, when i first heard the president had immediately accepted the offer of kim jung-un to meet i thought what is he doing? but then i thought maybe if this works they should try it because maybe they do have an opening but then talking to those who have to manage this but we do know there is a north korean pattern they get in trouble they get isolated sanctions start and then they come to the table they make promises but then they don't live up to them or with us they dose live up to a number of them like dismantling but then
you learn they have highly enriched uranium program they will not admit to. where there are a couple of things that look different this time. kim jung-un is a different leader and i do think because north korea was getting close to a capability to reach the territory of the united states with nuclear weapons that people began to take the american president more seriously. it is one thing to say that from the alliance management standpoint one threat if it's regional it isro different with california or alaska so even the chinese began to take more seriously the threats that the
united states could go to war secondly i actually think i think secretary pompeo will be very good but give rex tillerson credit or the isolation campaign he organized against the north koreans including the expulsion of the north korean workers from 20 countries that was hard currency for the regime. also they started to run out of spare parts military spare parts and by the way some of the luxury goods, one of most effective actions was on brandy and cigars because that is what the regime wanted. so they set the table in a very effective way so the question is how do you deliver? so be very careful not to go around with equities.
take your time. don't be too quick to promise removal of american military forces that is a stable force foror the region but the third point is kim jung-un with that regime never forgets the nature of who you are dealing with. a regime who murdered anf y american less than one year ago, where the leader killed hisle half-brother under chinese protection in malaysia they have death camps for their own people so never forget who you are dealing with here but if you can get inspectors on the ground, do it. i relation is never terribly good but take your time and
don't try to negotiate the back table with kim jung-un let the expertsti do that. >> i will ask about iran because there could be a decision next week that will disappoint the europeans to break out or at least decide not continue to waive those sanctions with a full chance of a compromise to give some time to the europeans to fix the problems. more likely with their instincts on this. >> you work so hard to bring the t5 together that eventually led them coming to the table.
so what is the downside given how the european companies may react? >> i think it is well-known that i helped t to start the p5 +1 but this isn't a deal i personally would have done i think we had a better deal on the table but that said i probably would have stayed in because of alliance management issues especially when the united states signed the deal i like to carry through with that obligation in the next administration as a matter of smartt policy. but the president do didn't do what he said he was going to do on day number one i will do this and he didn't. so the europeans have known for a long time this president doesn't like this deal and he wants out everybody said no to
what benjamin netanyahu said but it didn't mean anything new but the depth of the deception the iranians were engaged in at i know that baseline of which it was negotiated is the true baseline of where the iranian program was. i think if the president was out people know it's coming and i hope they spend some time talking about how to improve with verification. i don't think it is the end of the world if we pull out. >> one thing that we do learn from the israeli material is. >> with those israeli revelations talking about what happened in the past but that
information of where the program was should inform policy is no surprise that the iranians had a deceptive program. and the question is are we facing the same regime? through three previous presidents is this new opportunity? >> let me asksk you something that has been bugging me the last couple days at the white house put out a statement that said i ran has a robust covert nuclear program. they did not correct it for 90 minutes and it was put out for
the white house press office they only corrected it eventually when we brought it to their attention. on the website on the white housee.gov but then called it a clerical error. >> they do happen. >> is that something that would have been approved? >> in a normal white house it would approve a foreign policy statement of the area nuclear program. >> somebody should have caught that but human beings make mistakes i will not try to judge them but they did ultimately correct it and i think everybody knows according to the iaea the iranians are living up to the spirit ofia the law so i want to repeat if the baseline was
wrong andat now we have some evidence on the dossier it was wrong then the entire agreement is in question i'm less worried about has or has and whether or not we have the righthe baseline work we were deceived then this is not doing what it's supposed to do. >> referring to the baseline do you think they had more centrifuges? >> i think they had a robust program you may remember there was an issue just about to leave office whether or not they had stopped. and that is also at issue so how far have they gotten before this happened to make you raise an important question so now the administration is facing the potential of removing himself from the deal and negotiating with north korea at a time of
unprecedented turnover in the white house a and a large percentage of physicians remain unfilled from the president was to tweet first intimate policy later. the question about process it proceeds over a longer more gradual period of time so diplomats have a chance to work out the details. so there is a question how much can thehe administration handle in a compressed period of time? >> also although i was impressed they were able to get him to pyongyang and we did not know it. [laughter]
him to pyongyang and we did not know it. [laughter] he did not know he was about to be with kim jung-un i don't think the russians knew they would meet with putin supposedly. you know they say i maybe we'll have time for meeting a suspect that is what happened. >> you have a great audience who has a lot of questions i hope some will be focused on political risk because that is a wonderful book of case studies.
>> so china it is interesting with authoritarianism and people tend to stay too long. now the chinese communist party fix that problem institutions by having term limitsng and aging out people with collective leadership. it is a very clever response with the authoritarian regimes because that institutionalize thee things that you think make democracy stronger. but now that has been wracked and china will pay for now having someone who is omnipotent you also have to be on mission to because what
authoritarian regimes do is they are incredibly efficient at making good policy and bad policy if it is bad policy like one child you end up with 34 million chinese men without me so now talk about political risk the authoritarian regime that no longer has any peaceful transfer mechanisms within it. >> i john. [laughter] these are both people i have worked with and for. the whole nature of internationales businesses changing maybe one of the main characteristics is there are no national companies left anywhere for bmws made in north carolina then bulgaria
and 40 different countries contributed parts to the iphone. for a company with that type of profile and dimension and scope how does that change political risk what about 25 years ago? >> others i key variable talking about political scientist or how you can address that what has created the landscape of today first it is changes of politics so those that power those individuals and the third set are the ones that you alluded to that companies are global
in a very long time so supply-chain is longer and leaner and more opaque and what that means is there is a risk that is cumulative that you will have a disruption in one part of your supply-chainf but to have a disruption politically induced or a natural disaster somewhere in the supply chain is quite high see you at that string of events and there is a high likelihood something will go wrong somewhere tomorrow so one of the examples you mentioned the iphone there is a little company in the netherlands that make socially responsible cell phones 27 employees and 39 minerals from around the world this tiny little company has parts that traveled around the world before the user ever turns on
the phone for the first time you don't have to be a big company for that supply-chain so the convergence of thesehe forces of megatrends or changeseg of politics of international security changes in business there were technology. >> and it can in terms of volatility and policy. so if you want to argue for re- nationalization of production and sometimes our president says bring it back to america. if the german automakers we nationalize their production than the unemployment rate and the right to work states south carolina alabama and mississippi would% be 16%. so when people think of
national policy like trade they are not thinking the degree of that phenomenon of veryob few companies just dependent on the national economic infrastructure. when 911 happened within three days nobody could make a car because the supply-chain was in canada. you get national policy or national governments thinking about national policy that where integration and globalization is a fact not policy and you can get great dislocation from that. >> one example is the policy on nafta that was negotiated i was in the east or whatever former living president part of the policy was to stabilize
the economy of mexico for the benefits we would read not with the zero-sum game but the fact is it succeeded for 20 years to do that yes there were losers and to be articulated for to be such an issue in this election but in the last few months former ambassadors are telling me now there is a 20-point spread a rejection of pro- u.s. >> i was in mexico a few months ago they said 30 years ago you told us to regulate the markets and open your economy engage in free-trade and we elected for pro trade capitalist presidents.
and then you say nevermind. an old-time socialist. and when you start to engage in populist rhetoric to find the echo in other countries hopefully the mexicans defined the right out of this. >> i know both of these people to so living here in washington it comes as a surprise to hear we have optimism bias.
[laughter] o so you both did address if you are doing an assessment right now about political volatility specifically what risk you see especially to the republican party in this very difficult. in this very difficult. >> with this polarization is just political there are number of contributorssd to blame our leaders in washington but there is underlying things going on we watch the oakley -- the brinkley report every night but thee fact is we saw the samee moonshot and vietnam war
and that is what these intermediaries did between rawme data and of the story. my aggregator my cable news chancel one -- channels they do look different that is both sides of the spectrum not just on one side or theum other. to be reflected in our politics in washington. at a know how to get back to that point of understanding knowledge. identity politics has had a devastating effect because the united states is a country whereng being american isn't nationality religion or blood. you could come from humble circumstances and do great things it didn't matter.
but now we have gotten ourselvess into a situation where every identity group has its own grievance and merits and by the way there is a hierarchy my are higher because my ancestor suffered more and i am pretty high up on the ladder. i think there are a lot of things going along not just politics of the moment and the reason that worries me is you can take away the current political volatility and you will still be stuck with the underlying unraveling of these andrea hass mentioned nobody has talked about the people who lost in globalization. global risers are like all speaking to somebody who
doesn't speak the language that you speak they only speak german if i just speak louder they will understand me. that's how it sounds if i just keep telling you globalization is good for you then you are better but that is causing a divide in the elites and the rest of us so there are multiple divides even if we could fix bipartisanship when he has some big underlying social divisions manifesting themselves. >> it is a story of mistakes
and is there a positive example of a distribution feeling? >> think about a company in renoal several. >> we talk about it's good to learn from your mistakes but better to learn from others so how do you learn from a near miss? yours or somebody else's so the example that we teach is johnson & johnson that gold standard responding to a crisis tylenol which was before you were born so when johnson & johnson is they pulled all the bottles from the shelf a cost of around a billion dollars they got out in front they went on the media the ceo carried the message we don't know who is responsible but we care and we will pull the product people
thought it was the end of johnson & johnson or tylenol but it turns out it went against all conventional wisdom at the time that you circle the wagon and don't get in front of it but within one year they had rebounded in for many years the gold standard but over time we say organizations we remember what they should forget and they got distant they put public health first and took it seriously got more global. and then of course the course correction you see the company started top of the gold standard struggle to remember those lessons and then recover.
>> i left everybody on the all-female panel and with the bipartisanship the business model is to blame the other side both parties do this because if you work with the other side that makes you toasting your primary and there are a lot of ways to fix this. but the business model for trade deficits it seems to me i have listened to wilbur ross at length and he has a lot of information at his fingertips but i think the business model for trade deficits is one-dimensional. this country gets more this gets less ago doesn't link any
country to a context and approaching it that way it seems to dig a bigger ditch so should we think about trade deficits in a different way or a better way of investment savings in a more complicated matrix thatt i think not make it out to be the big loser because they are all buying more from us but the big winner because this is the way we build more jobs even in trump land. >> why don't we ever hear talk about the armed services surplus? trade deficit is only manufacturing but it seems to be nearsighted. >> a think your comments will tell you first of all rarely are they a reflection of unfair trade normally it is
invest women's or saving rate and investment in a positive way everybody wants to invest here and has in his head and it is true of chinese policy including favoring national champions is part of the problem. and to applaud the fact it within the international system given that china was admitted under special
circumstances because everybody saw the freight train coming down the track and we did admit china as a developing country and it really isn't. but the problem is for me the narrative that surrounds all of this. the american system because it took place after world war ii decided the was not a zero sum game international economy could be competitive but positive sum game not a zero-sum game to be a correction for after world war i with competition over resources and currency manipulation leading to the depression. so the narrative is what bothers me. i can see some of the policy
elements that are there are not in and of themselves so bad but to take a zero-sum approach everybody also take a zero-sum approach writing something bigger is going on. >> i want to ask the question now that those are truly globalal with the national security apple for example is a true multinational company headquartered here but it could pose a major cyberthreat
that puts it in conflict with the chinese market so it isn't as clear as it could have been with otherar manufacturers in the past how much help they will provide i spend a lot of my time thinking about the next big war what do we have to do to mobilize the industry in that event dealing with companies with logistics lines across the globe could be mobilized? so what is the risk for the government of these dynamics you have explored in your book? >> one of the issues we have been working a lot on in silicon valley is the trustry deficit the suit and hoodie divide and how do we deal with that? you are right that the premise of the question facebook has more users than any country has citizens you have google
and apple with global customers and investors with a fiduciary responsibility to return value to their investors so there is a natural tension what do you do to make good on your responsibility to investors or a patriotic american company that was exasperated from edward snowden and the fbi case. i will share one example the level of distrust through the hoover institution at the cyberboot camp some of the alumni are here today we went to a a tech company you'd all recognize the name with the senior executive's age of the staffers i thank you people
just like i do the people liberation army i try to protect my systems from you as well as china that was the aha moment that this issue is much deeper than we see from the outside. that is getting better. i will try to be an optimist but the silver lining on the dark question of interference and our democracy is you see it changing attitude in the valley that we need to take more responsibility and more of an active approach that this is an unprecedented challenge with private industryo and u.s. government and work together. >> and one other thing in china that has people nervous the chineseation
have stated to control the frontier technology like quantum computing. and i understand the concern of those security implications for the united states but we have to be careful how we respond i will bet on american innovation any day if we continue to find through the national science foundation like we did in the old days when they put innovations on the table. but i have been reading things about getting more involved and may be not allowing chinesee researchers to research certain topics. let's try not to out china china in responding to the
chinese threat because we will lose that game. and with globalization is an ever larger part of the past. >> thank you as the ambassador of columbia to the united states i just want to put forward one question, i have a feeling in columbia or latin america the existing with so many years of work and energy
and resources and we can identify many risks and among them i would say immigration or populism and if you put all that together you have a rather dire scenario. in the very boring near future for many countries. do you give a priority to those risks? where must we start? we try the hardest. thank you.
>> going to one in particular populism nativism and protectionismm they are the antithesis of international order but not the zero-sum game to say we were that they were coming into the own countries if it was a failed state and to be very strong. so i believe in the system but what is the root cause and to
be callous of those who were not winners to say i know why you're not doing well it is the immigrants especially the illegals or the chinese. so until you go to the root cause if you continue to get the division in society between those who are capable or not you will not feel the lack of confidence that has allowed the united states to do extraordinary things in defense to build a free trading system despite the fact we decided not to protect it. and now to take pledges when the soviet union was building the soviet weapon to come to
the defense of japan. so it came out of the confidence of the viability and the validity of the american political fabric. and if you have a human potential approach in those who don't have job skills? then you have to retrain 35-year-old but has to they will benefit they will continue to pull away from the system. in that sense america first the phrase that i hate but
it's not wrong that the united states needs to attend to its own social fabric because without that that would cause the continent to go into the international community and i think populist unfortunately play on the fears but to talk about italy and brexit do you hear me now election people said he didn't hear us in the past you hear me now? >> i think that's our time i cannot thank yous enough we are so appreciative of all of your knowledge and wisdom and experience. thank you. [applause]
secretary i say to all you and those who have labored so hard for this moment my warmest personal thanks. [inaudible conversations] good evening. bruce jentleson prof. of policy and political science at duke university where he previously served as director the public school policy with a bachelors degree in the masters degree froco