Friday, March 20th 1998

Don - Hello and welcome back to the gateway to China, the city of Hong Kong. A city that aspires to be the London or the New York of Asia in its sophistication and its architecture and its cosmopolitan atmosphere. My impression after my sixth or seventh visit to Hong Kong in the past 20 years is that it is succeeding. I've seen the city of Hong Kong go from a bustling port city where anything was possible to a very sophisticated city with a skyline that rivals New York or Los Angeles. It's really been quite impressive to be here in Hong Kong. Despite our perception of Asian economic woes, which dominate our news and impressions/perceptions of this region, and probably will continue to do so, but it's necessary to understand, as I've explained before, how those woes are confined to specific regions within this vast part of the world. We've succeeded in finishing four days of intense education, social activity, interaction with our peers from 18 countries throughout the world, all CEOs of business enterprises, graduates of YPO. For Terri and I being here is sort of like a graduation in that YPO is a group of business people who tend to be between 30 and 50 years of age and the CEO group tends to be between 50 and 70 years of ago. For our college age family members, it's like being in adult graduate school. We work just as hard as any of you who are in school, our days here average between 16 and 18 hours a day. We start with programs at 7 o'clock in the morning and then end with social activities at 11-12 at night. When you get up an hour earlier and you go to bed an hour later, that makes for almost a 19 hour day and when you do that for almost 4 days in a row, it's very demanding, but very worthwhile. We want to tell you about some of the content and conclusions that have come from our most recent experiences.

For me, yesterday involved the opportunity to hear about technology from a professor at the MIT Institution in Boston, Cambridge. We heard about trends in areas of information technologies. We had much to share with many of our associates with whom we ourselves work on a number of projects in that segment of business development. We also had an economic briefing from an economist from a German bank who is based in Japan, which was really quite revealing and thought provoking. We also had a presentation about philanthropy, the use of Foundations and the use of creative gifting in local communities and how that is being done. One of the CEOers from Connecticut had some real wonderful case studies about inventive uses of philanthropy which is part of our own activity. Social and entrepreneurial philanthropy is something we devote a fair amount of time to at this stage in our life. I'm going to lapse into my dissertation about some of the pieces of knowledge and learning, but before I do that, I'm going to ask Terri to give her update. We're scurrying about early this morning to get our packing organized for the next leg of our trip. Our day is just beginning on Friday as yours in North America is just winding down. We want to acknowledge some communications that we received. It is really quite fun to get up in the morning and to open your electronic E-mail box and see who has sent along a message. Terri will have some comments about that. We want our friend John Waller to know that we've enjoyed hearing that he's moving back to New York from the countryside of Connecticut and he tells us that that is a major development in his life with his two young children. We have a message from EZ Pete about what he's doing and Terri's going to comment about that. Our son Joseph gave us a call from St. Norberts. We have not heard or received an E-mail from Carol or Mary. We're just not sure how they're getting along, but we want them to know we're thinking about them. Let me have Terri come to the phone. She's filling up suitcases. We're going to have to go on another international flight, that means you have to get to the airport two hours before the departure, and it's a five hour flight to Singapore. That's what our day is all about today, relocating and traveling. Terri's been great to be with because as you have these shared learning experiences grow together which, I think, is one of the real bonds and cementing aspects of a marriage and a personal relationship. Here's Terri.

Terri - Well Don's talked a little bit about the business side and the professional side that we've seen of Hong Kong. Also we do want to acknowledge the wonderful E-mails we've been receiving from many people around the world. Specifically we would like to say that it's a little puzzling that we received such a wonderful E-mail from Melissa McCormick and Curt and Debbie, her parents with such great wishes and fun and exciting things to say about friendships and those types of things. But then we also received from that same area of the country, messages that things are pretty quite there and it's kind of nice. So we sort of wonder, Peter, what that says about you. Maybe it really isn't us. Maybe you should take that into consideration.

It's been a wonderful experience here. Yesterday I had occasion to be in the central business district and had a nice conversation at lunchtime with a Chinese man who has a business here and he was giving some of his insights as to the development of circumstances over the last few months after the Chinese takeover. I think they're very, very unsettled in the business community about what's going to happen with the Communist regime taking over and just exactly what that means to them. While we see a lot of things on the surface, I'm not sure we get to see exactly what really is happening from a social and human rights type of circumstance. That's a concern and obviously an important one here.

The days have been fast paced, as Don said, and exciting, dynamic, and all the things you're looking for to be enthused about this part of the world. So we're going to leave here with a little bit of sadness and some new awareness, which exactly is what we all like to bring with us when we go somewhere in the world other than our own areas we're familiar with. I think both of us are certainly very enthused about going onto Singapore and Malaysia because those are places that we haven't been and the group that we'll be traveling with seem to be a very different mix and with the small number of people, I'm sure those are friendships that we will cement and look forward to seeing again on later CEO trips. Again, I'd like to wish everybody a very healthy and happy time until we talk again. And now, I'm thinking since we've done these updates that maybe I could put Don on the road with different tour groups and that could be his new professional challenge, to travel around the world with different groups and simply be a sort of Lowell Thomas of his time. With that I will put him back on and say good-bye to you from Hong Kong and look forward to talking to you from Singapore.

Don - Well Terri's come a long way with her commentary capabilities. I'm in touch with a number of people who listen to these updates and they chuckle at how we're able to get together on the phone and pull this off. Terri's gone from not sure she wanted to do this to liking it a lot.

What's the relevance of anything that we've seen or heard here to our life in America and North America? How does anything that you might find 8,000 miles around the world affect us? I'd thought I'd try to illustrate that to you and let you come to conclusions on your own, given some of the knowledge that I'll share with you. For example, the price earnings ratio of public equities and stocks in the United States right now are double digit, 20 times price earnings, 40 times price earnings. The price earnings of companies listed on the Hong Kong Stock Exchange currently are 5 and 6 times price earnings. In another remarkable statistic, the market caps of companies in this region of the world are only 5% of what they were 18 months ago. To put it another way, there's been a 95%, on average, devaluation or diminution of market cap value of public equities. One has to look at the United States, given this sort of teeter totter economic effect, the tidal wave/flow of capital and ideas and wonder if the profile of the United States is such that we are vulnerable. The New York Stock Exchange, which we are able to follow daily here by our Internet connection, keeps setting a new record high, now nearing 9,000 and in sort of a macro ideology sense, you have to wonder if success doesn't lead to failure and that the US, while we have enormous prosperity, might be a big vulnerable. There are also some alarming economic statistics that were pointed out by the economist from the German Bank. The US interest rate on its debt is $10 billion a day. I'm going to go back and check that statistic because it is so incredible, but I know that was what was said. It's also a fact that the US needs to raise a billion dollars a day to fund our economy and that's done be managing the US dollar. Our current trade deficit, which no one in the US seems to be paying any attention to, is running $250 billion a year. So there are some very fundamental troubling trends that one wonders if they're out of balance as it affects the United States. South Korea, on the other hand, just couldn't be worse off and the fact that it is worse off and given the cultural nature of South Korea, the estimates are that South Korea will survive and that the US could be the beneficiary with things like $7,000 cars and $500 personal computers. Koreans are about to expand their work week to 70 hours, while the French are reducing their work week to 35 hours, so you can almost see who are going to be the winners and losers in the battle of economics. Adversity and pain does give, I think, an advantage to some of these economies and countries and their populations who are going through hard times. The Japanese who have had good times are in paralysis right now. There is an article in the March 19th Economist Magazine that explains five reasons why Japan is paralyzed and cannot do anything. What's the importance of that? In Indonesia, 45% of its national debt is held by Japanese banks. It was reported to us yesterday that 500 out of 800 bureaucrats in the Department of Ministry and Finance in Japan are under investigation for corruption. So one looks for these fundamental tell tale signs as to what might be wrong or what might be right in the seesaw battle between greed and fear in these economic systems. We try to say well what does that mean to us? There's a real curious local news item here that we would never hear about in the United States. The country of Macau, which is about the size of one US county, bought a surplus aircraft carrier from the Russians for $20 million. It seems that this aircraft carrier was under construction and the Russians abandoned completing it and Macau, which is a very sinister Portuguese colony, which is to be handed back to China in 1999, has purchased an aircraft carrier and the comments here are that they probably did it on behalf of China, which does not have an aircraft carrier. Macau, from a political point of view, in terms of what does that mean for the US, the Bank of Macau was 50% owned by the Stevens Investment Bank Firm of Little Rock, Arkansas and the Lipole Investment Group of Asia. The Lipole Group are the people who are under investigation in the United States for illegal campaign contributions to the Clinton presidency. In fact, one of the donors of $500,000 recently photographed with the President is from Macau. So there are connections and one has to understand a little bit about what they might mean for us, although, you do come to the reality that you cannot understand everything and you just kind of look at things as a puzzle and do your best to figure out what seems to be meaningful and what isn't. So it's a constant quest in order to do that.

Keep your eye on the new premier of China, Mr. Zhu Rongji. He has assumed office this week and I can assure you that's one of the most significant developments in this part of the world. He is like a GORBACHEV figure, he's like a Margaret Thatcher. He will, over the next 3-5 years have a lot to say about the destiny of China. What does that mean to the US? Well the president of the New York Stock Exchange is in China this week and Richard Grasso is saying that 10 Chinese mainland companies will be listed on the New York Stock Exchange by the end of this year. We've told you a little bit about the state owned enterprises in China, there are 2000 of them, that have to be privatized. They employ 100 million people. 1000 of those state owned companies are likely to be privatized and they will need capital from the United States and the rest of the world. They will be coming to the public equity markets for that. When we think about China and we hear the kind of conversations that we've had this week and you say to yourself, what does that mean to me? I think, over time, it will potentially mean a great deal. Those are some insights and I think I'll not put out anymore because if I do, I'm sure our children are going to hang up and say enough of that from Dad. Although there are many of my associates in the business professional life who find this information not only important, but strategically vital to their business judgements.

Let me end by making the observation that young people really need to know what they're up against as a result of what's going on in these cultures because it is going to effect your life. Business owners really need to know about huge horses that are at work against you and what the implications might be as you make judgements and bets about the use of capital and resources. Certainly entrepreneurs need to know what they're up against in a very competitive world. No question that the internationalization of business is a fact of life. The question is what does it mean to us and how can we deal with it in a positive way. In my lifetime, military conquest was the news of everyday. I would make the observation that no longer is military conquest the way of the world, rather economic conquest is now, I think, the focus of humankind. And the importance of that is that it affects the standard of living of people - food, housing, education. The struggle to lead balanced and purposeful lives. We in North America have been blessed and graced and given so many riches and there are so many people in the rest of the world who would like to have the opportunity and to have the quality of life that we have. I think that's a very good way to describe to you what's going on here. I think I'll conclude there. We've enjoyed getting E-mail and all the feedback and we have more to say. I think the nature of our trip is now going to change from this intense learning to some experiences as we move on down the south China sea to another region. Terri's giving me signs here in the background to say good-bye. Gosh, when you're talking to family and friends, that's hard to do, Terri. We're glad you came along with us and we'll see you in another 24 hours. Don and Terri ending our report from Hong Kong, China.

Back to CEO Page

Voice: (920) 923-6336
Fax: (920) 923-4369
info@spiritenterprise.com