CU business summit: Economy on rebound, but world is coming apart

By Linda Myers

At the business summit for alumni and students at Cornell's Johnson Graduate School of Management April 14-15, luminaries from business and politics saw profits and progress, but a Cornell historian sounded a cautionary note.

The two-day event honored the 20th anniversary of the $20 million endowment gift to the school from Samuel C. Johnson and his family.

Sanford I. Weill '55, chairman of Citigroup, delivers the address opening the Johnson School's business summit in Call Alumni Auditorium, April 14. Nicola Kountoupes/University Photography

In his talk in Statler Auditorium, April 15, titled "Globalization and Globalizers," Walter LaFeber, Cornell's Tisch Distinguished University Professor, evoked a post-Sept. 11, 2001, world that sounded dark and dangerous. But the post-World War II era also may have seemed that way to the business school's founders in 1946, who required that political science be part of the curriculum, he said.

LaFeber traced a path from then to now in which he looked at global political and economic change, the clarion calls of those who correctly predicted change and the kinds of skills needed to survive in a highly technical but destabilized world.

Globalization was initially thought of only as a unifying force, bringing the world together economically through trade, said LaFeber. What wasn't foreseen was how it would polarize and fragment the world into ever smaller groups, some of them stateless -- like al Qaeda, which "has used globalization for its own ends," LaFeber said.

Globalization seems to produce a dysfunction between politics and economics that we "are still coming to terms with and that business schools must grapple with," said LaFeber. While "the new economy offers 'awesome rewards,' as Citigroup chairman Sanford Weill observed yesterday, there's also the potential for enormous destruction, as former President Clinton warned," LaFeber said. Hence Central Asia, with its sought-after oil fields, is now becoming a killing field.

Weill '55, who on April 14 in Call Alumni Auditorium told the story of how he rose from a runner on Wall Street to a multimillion dollar deal maker, said that one lesson he learned in attempting to take a business global was that to succeed "you need a very strong balance sheet." When Weill's Travelers Group began steps to unite with Citibank/Citicorp and form Citigroup, it lost $60 million before the deal even closed when Russia defaulted on its debts. The merged company went on to succeed brilliantly, however, with earnings of $18 billion last year. Weill, who stepped down as CEO recently, anticipates it will continue to do well, as will others.

"The financial industry is now at the fulcrum of change, with growth anticipated all over the world," he said. But the world is still an unstable place, and some things that look clear in hindsight couldn't have been predicted, such as the events of Sept. 11, 2001, and the corporate accounting scandals that led to job and revenue losses and a move toward much tighter corporate governance, including at Citigroup, Weill said.

Abby Joseph Cohen '73, managing director at Goldman, Sachs & Co., who spoke in the Statler Auditorium April 15 on "U.S. Companies and Markets: Back in the Global Flow," said that a year ago the U.S. stock market was underpriced because of worry about overvaluing and intense risk aversion following the string of accounting scandals. But "shareholders have demanded cleaner numbers," and companies are now doing a better job of recording performance, with the result that the market is nearly at fair value today.

"I believe that the U.S. economy is past 'the uglies' and into growth," said Cohen to a responsive audience. "Things look good for an extended period of economic expansion coming. We need an extended period so that personal income can rise, raising the standard of living," she said.

Obstacles to U.S. growth, Cohen said, are government policies that inhibit it, a deepening federal budget deficit and far less growth in other areas of the world. For example, unemployment is high in Europe, and economic growth there is less than half that of the United States, partly because of steps to boost the value of the euro. "The Eurozone has its hands tied and can't use fiscal stimulus to get its economies going," noted Cohen. The problem is worsening the U.S. trade deficit with Europe, currently at $100 billion.

Cohen, who was pleased to see U.S. investors, mostly pension funds, investing overseas again starting in 2003, said she believes the best returns are those linked to economic growth. While there is terrific growth potential in places like China, "if the rest of the world does not participate and grow their standards of living, it creates enormous problems for us in the U.S.," she said.

Other speakers included presidential economic adviser Stephen Friedman '59, director of the National Economic Council, who predictably was optimistic about the U.S. economy and the effectiveness of the current administration's policies. Calling for a permanent tax cut and more free trade, he also said: "We have to build our human capital and do a better job K through 12. Young people today will need a skill set far in excess of what their parents had. To address this will take a lot of work."

Most of the speakers at the summit were Cornell or Johnson School graduates. They included Jay Walker '77, founder and chairman, Walker Digital, LLC; Warren Staley, MBA '67, chairman and CEO, Cargill Inc., who spoke on global sustainable enterprises; and a panel discussion on entrepreneurship moderated by Jeffrey Parker '65, M.Eng. '66, MBA '70, chairman and CEO of CCBN, with panelists Peter Knight '77, director of Medicis Pharmaceutical and the Schroder Mutual Fund, and Bill Nye '77, "the Science Guy."

Representing the Johnson family at the anniversary symposium was Samuel C. Johnson's daughter, Helen Johnson Leipold. Among the many tributes to Johnson, who could not be present, was one by Jeffrey Immelt, chairman and CEO of General Electric Co., who delivered the Hatfield address at the summit's end (Read related story). He said: "Sam Johnson has shown us all how to be the leader of a great company and a good company. It's an honor to be here."