Ecuador Enchantment

When we were in Panama people told us to expect a far less-developed country. We were even told that we should have gone to Ecuador first to see a backward country and then we would appreciate how far Panama has developed. In fact, we have all been charmed by Ecuador and find the country an attractive developing nation. It does not have nearly the U.S. influence of Panama, and nothing like the Canal, but the streets are pretty clean, the transportation seems to run quite well, and the locals are invariably helpful and welcoming. It is clear why tourism is a developing industry here in the Andean highlands around Quito.

We arrived at the Quito airport on Friday night and split into three groups. One group jumped into a van and headed south for Banos, a charming provincial city with hot springs, water falls and zip lines through the jungle. Another group went off to the Killan cacao bean cooperative. Twelve hundred families belong to a coop that processes their beans into high-end cocoa for export to Switzerland and other premium chocolate manufacturers. That group got to help process fermenting beans and help in the production. They left promising to help the cooperative's financial management practices.

Wil Agatstein and I opted to stay in Quito. We both had some work to do and thought a weekend away from the class was probably a good idea all around. We took off on Saturday and jumped on the "trole" or trolley into the older colonial part of town and walked back stopping at the National Art Museum for a Chagall exhibit, enjoying the numerous public squares, visiting food markets and just generally enjoying Quito. We found a very walkable city.

Today we all resumed out study of Ecuador and the political-business climate with a visit to the U.S. Embassy. The Embassy is new and impressive, a true fortification that houses more than 300 employees. We went through a serious security check and were met by a diplomatic officer whose role is to do outreach into the community. I think we were all amazed to have a series of briefings by top officials who took our visit seriously.

We had our pictures taken and were told that we would see them on the Embassy web site next month. The officials explained that Ecuador is a country squeezed between two large drug-exporting countries, Peru and Columbia, and that its position has made it wary of its neighbors. It has regular skirmishes over borders and refugees, but nothing that compares to the Middle East. One of the big issues now is a dispute with Chevron over degradation of an Amazon region caused by oil drilling. Wil and I had heard about this controversy and a law suite against Chevron from Amazon Watch activists who were staying in our hotel. We were amazed at the very different "facts" we heard from both parties. Indeed the damage was caused by Texaco beginning in the 1970s and the liability has been assumed by Chevron a few years ago after an acquisition of drilling rights. It has started the mitigation and remediation process but apparently the damage is extensive to both the natural and the human environment. There are billions of dollars at stake.

We probably learned as much about life as a diplomat as anything from our visit. The diplomatic corps members we met were constantly rotating between embassies and consulates, from one region to another. One diplomat had been assigned to Mexico, then Jordan, then Ecuador picking up Arabic on a stint in Washington. These rotations keep them from developing deep roots in any one society, and keeps them focused on their ties to the U.S. and its mission. Four of our students talked about taking the Foreign Service Entrance Examination. I could see the wanderlust in their eyes.

Our last visit was to a factory that makes shirts and caps with embroidered logos for businesses such as the local Pepsi distributor and for tourist venues like the Galapagos Islands. Wil and I were expecting perhaps a sweat shop--this is a low-wage country--but the factory was clean and well lit and had little turnover. Again, we were pleasantly surprised by Ecuador.

We Stand at the Center of World Trade

MBA students study world trade in many ways. They study supply chain management—how to efficiently design, source, assemble and distribute goods from around the world. They examine global capital flows and currency exchange rates and learn international finance and tax strategies. Our students learn the impact of trade on labor practices, migration, energy use and economic development. In many ways the students came to Panama knowledgeable about global trade and its impact as a result of their business experience and what they are learning in class.

For two days this week they got to experience global trade in a way we cannot teach them at UC Davis. They saw trade as a material flow, as huge ships carrying goods from one distant place to another. There is nothing quite like seeing dozens of ships queued up to enter the Panama Canal, or standing in the midst of thousands of containers being off-loaded and re-loaded at the Port of Balboa to appreciate the enormity and connectedness of global exchange.

On Wednesday we went to the Panama Canal Authority, the governance and administration office of the Panama Canal, and to visit the Miraflores Locks. The Canal is not the long tube-like passage I had imagined. Rather it is a series of locks that raise ships in a step-wise fashion at one end until they reach the large man-made Gatun Lake which is 85 feet above sea level. They traverse the lake and a series of islands in the middle of the country under the control of one of the Canal’s 300 pilot captains. The ships then step down through another series of locks to the other ocean, either the Atlantic or Pacific depending on the direction of travel.

I could see why cruise ships take this trip. Not only is it a bird’s eye view of an engineering marvel, it is a trip through a lush tropical landscape. The whole trip takes 24 to 48 hours and the crossing fee can be well over $100,000. The largest tariff ever was more than $300,000.

The Panama Canal is being expanded to accommodate larger ships. “Panamax” ships – the maximum size vessel currently accommodated in the Canal, are now dwarfed by newer container ships. In order to compete successfully with the Suez Canal, the Panamanians are developing a third series of “post-Panamax” locks. This is a $5+ billion investment by the Panamanian people in the future of the Canal.

Because the Canal is not being used by the U.S. as a strategic military asset, but by Panamanians who see it as an economic and development asset, they are investing in it as a business. It is extremely well run—something we learned from engineering consultants back in California—and is now a place that Panamanians can learn management techniques. We saw a troop of maritime engineer students who were on internships at the Canal.

Through a couple of well-placed phone calls we were invited to stand, literally, on a swaying bridge atop the Miraflores Locks. I may travel through the Canal some day, but I suspect that this was the only time I will ever stand on the Panama Canal.

Lessons Learned about U.S. While in Panama

Our ostensible purpose in traveling with MBA students abroad is to give them the opportunity to understand business conditions in another part of the world and to encourage them to develop the perspectives and skills useful in doing trade in a non-U.S. setting. Most are already experienced travelers and speak several languages among them. We are fortunate in having four students fluent in Spanish on the trip although none are native speakers.

But even experienced travelers have much to gain by meeting people in their own settings and asking them about their world and how it operates.

Perhaps less obviously we learn who we are when we discover who others are. We learn about the U.S. when we are immersed in a non-U.S. country. Those things that we take for granted are put in relief when we don’t see them.

At dinner last night, at Casa de Marisco, a wonderful seafood restaurant, I asked the students who were with Wil Agatstein and I what they were learning about their own country while in Panama.

Here’s some of what we talked about.

• They learned, as expected, that petty corruption is rampant in dealings with government officials in Panama and business people are very open in discussing it. Panamanian business elites believe government corruption is an impediment to development. The students have been surprised to be asked in return about our corruption. The U.S. is seen as an equally corrupt society by Panamanians and we have been asked about Bernie Madoff, AIG bonuses, the former Illinois governor, and the elite corruption of powerful business and political officials.
  
• The U.S. ran the Canal Zone as a strategic military asset for almost 100 years with little concern for the welfare of the Panamanian society. Panama has among the largest differences in wealth between the rich and poor in the world. Under Panamanian control the very professionally run Panama Canal Authority is producing billions of dollars for the local society, but more importantly is being used to teach management skills, environmental science, and engineering to the citizens. Why did the U.S. not take the opportunity to support its own interests in the Canal Zone while contributing to the local population in meaningful ways?
  
• The U.S. is complicated and bureaucratic in comparison to Panama. Personal connections – with and without bribes attached – is a quick way to get things done. One phone call lead to a quick chain of connections that allowed us to literally walk on the Canal locks. The official procedure would have taken weeks. A Panamanian corporate lawyer who works regularly with the global legal community said that “Americans like to complicate things, but then again they get paid by the hour.” In comparison the lawyers of other companies are more direct, less concerned with interpretation and more concerned with outcome for clients.
  
• Americans are too busy. We have all been astounded by the amount of time that important people have given to us, just to make sure we understand what we are seeing. They have clearly enjoyed the interaction with us, too. At dinner the table was ours for the evening. As one student said, “If this had been the U.S. the waiter would have invited us to sit at the bar and enjoy a free dessert if we would leave the table.”
  
• We do not use very much color. Houses and clothes are much more colorful here in comparison to the dominance of beige, grey and taupe in U.S. public life.

From the Pacific to the Atlantic by Bus in Two Hours

Panama’s geography has been simultaneously its great fortune and the source of its violent and often tragic history. Shaped like a bending salamander, the Panamanian isthmus today connects democratic ecotourism haven Costa Rica to the north, with Columbia and its illicit drug trade to the south. Panama is a long, skinny country with a history of outsiders controlling its fortunes.

Panama is an economically viable nation because of a canal that allows the transshipment of huge container ships and easy passage for cruise liners between Asia and North America. This accident of geography—a tiny waist that separates the Pacific Ocean and the Caribbean Sea—makes Panama a valuable piece of real estate in the global economy.

Panama was already important to maritime trade before the French started building the Panama Canal in the late 19th century. The U.S. Army Corps of Engineers finished the job in the early 20th century after the death of 25,000 laborers and soldiers from disease and accidents.

The region was favored by European explorers and traders as a way station for trade moving between South America and Europe. Panama’s location and fine harbors made it a favorite place to exchange goods and money, and often slaves from Africa as early as the 16th century.

On our first day in Panama we loaded into a rental bus for a trip to the Caribbean—a two-hour drive to the other coast. Panama has a tropical climate, but this season it is less humid and rainy than most of the year. We stopped at a roadside stand to try fresh coconut milk and buy a couple of watermelons. We inspected the plantains and taro roots, and the homemade condiments packaged in old Heinz ketchup bottles. The local stray dog sniffed about.

We stopped at Portobelo which lives up to its name "beautiful port." It is a lovely harbor surrounded by steep green hills and is a naturally defensible place in which to drop goods traveling up the coast. Portobelo is now a World Heritage Site whose museum and buildings preserve the memory of the region as a site of piracy, plunder, and the slave trade in addition to its role in merchant shipping between the Old and New Worlds.

The remnants of that world remain in the Custom House, the fortifications, and poignantly in the Panamanians of African descent who live simply, and in some cases in obvious poverty, in exactly the same place their ancestors were bought and sold.

Panama was, and remains, a country blessed and cursed by geography.

Continue to follow our travels on the trip's Web site >>

We're Off to Panama and Ecuador!

There was a time—and I remember it well—when we actually taught a course in international business at UC Davis. The idea was that there was business, and then there was that exotic version, international business, that dealt with trying to open markets in places that did not speak English as a first language. Mostly that meant tips on doing business in European capitals.

The rise of Japan as a major manufacturer forever changed our view of the U.S. as the only country that could export large amounts of goods, and even innovate management practices. We spent a decade studying Edward Deming, Theory M, and Toyotism as we tried to move away from domestic management practices we could trace to the era of Henry Ford in favor of lean manufacturing and continuous improvement.

More recently we accepted the idea that American goods made by U.S.-based companies such as The Gap and the Chrysler Corporation might have some foreign components, even a majority of them sometimes. We realized those really well-priced goods at Wal-Mart are often sourced from countries we have trouble placing on a map, and even that the Chinese government is ostensibly our banker.

What's the world coming to?

We are linked, for good and for ill. We design in one place, source in another, and sell everywhere it makes business sense.

At the Graduate School School of Management we began teaching an International Study Practicum, which focuses on a specific country or region and culminates with a 10-day, first-hand learning experience. I’m on this journey to Panama and Ecuador with 16 UC Davis MBA students, and Wil Agatstein, the executive director of our Center for Entrepreneurship Executive Director. We have spent 10 weeks planning the trip and making contacts with law firms, political officials, construction companies, tourism developers, agribusiness firms, and a variety of for- and not-for-profit organizations. We’re here to learn about what it is like to be a business person in this region, to understand the opportunities and challenges of these countries in the global economy.

The students, who come from all three of our MBA programs, chose this region because they wanted to learn about developing economies where the possibilities for new markets are great and where market development is not already dominated by established firms. They are motivated by curiosity, concern for the developing world, and by the chance to develop their own savvy about global business processes. By sampling different parts of these societies we hope to get a well-rounded, if initial take on business practice in Panama and Ecuador.

You can follow our travels on the Web site that one of our students, Sonny Johl, has created. We're sharing blogs, photos, comments >>

Teachable Moments

I lived next to an elementary school teacher who had an amazing collection of t-shirts and coffee mugs presumably given to her by students. I would join my neighbor for a cup of coffee and out of her kitchen cabinet would tumble bright cups with saying like “You can’t scare me, I teach 6th grade,” “Teachers do it with Class”, and “Cutie π”.

I was recently reminded of one of her t-shirts which said “To Teach is to Touch the Future.” That’s rather a grand saying, but the recent Cal Aggie Alumni Awards dinner was wonderful evidence that those of us who educate really have an opportunity to shape lives in profound ways.

I know faculty don’t always think of long-term profundity as we try to construct meaningful tests or coming up with a good example to make a point. But this year’s six alumni awardees gave ample evidence that their time at UC Davis had a deep effect on them. These effects spread through our society – and far beyond – in ways their teachers could never have imagined.

All six of the awardees were inspirational but I was especially moved by John Landers, recipient of the Emil M. Mrak International Award. John received a master’s degree in agriculture from UC Davis 44 years ago, in 1965, and has spent his long career in South America where he continues to have impact.

Under John’s leadership, Brazilians are embracing a zero tillage (ZT) soil conservation strategy that is preventing erosion and reducing greenhouse gases. Instead of upending the soil between plantings, seeds are sown directly into uncultivated ground with native grasses still in place. After harvest leftover plant materials such as stalks are left to compost and animals can graze between plantings. This is not only good for the environment, but ZT allows poor growers to succeed without resort to the financial risk of expensive tractors.

Last night I spoke to a group of our students and I wondered what they will do with their management skills. Our MBA students bring backgrounds and ideas garnered through an average of five years of work experience, so we are hardly reforming them in dramatic ways. We teach and provide valuable business skills to students who already know a great deal—they already have degrees, work experience, and well-formed understandings. I have, however, observed how a suggestion, an encouragement, or a reading assignment can open a possibility, build confidence, and reframe an opinion. As that pedagogical scholar Harry S. Truman once wrote: “It’s what you learn after you know it all that counts.”

I think I need a t-shirt.

Where Do We Go From Here?

UC Davis has a festive air this year as we celebrate 100 years of transforming the world, serving as an engine for innovation and for ideas that have improved the quality of life for people everywhere. Looking at early pictures of the campus, one is struck by the formal dress and simple technologies used by students and faculty. But 1908 was actually a period of great technological and social ferment, of innovation and exploration, the impact of which we can still feel.

The Wright brothers patented their plane in 1908, the first long-distance radio broadcast was emitted from the Eiffel Tower in Paris and Robert Peary sailed off for the Arctic in successful search of the North Pole. The first Model T was built by Henry Ford, and Albert Fisher’s new carriage company produced bodies for both horse-drawn buggies and the new automobiles. General Motors also was formed in 1908.

It was also an era of new ideas. Under the leadership of Theodore Roosevelt the conservation movement gained political traction and several national parks and monuments were dedicated, including Natural Bridges, Muir Woods and the Grand Canyon Museum. The women’s suffrage movement was growing in fits and starts around the world, but it wasn’t until 1911 that the men of California voted to allow women—but not Asians—the right to vote. Women’s participation in sports was on the rise, and they were admitted to the Olympic Games in 1912.

Commerce was exploding with new industrial machines and processes, and more reliable transportation distributed goods far beyond the areas of their manufacture. Increasing the geographic size of markets increased awareness of and the demand for goods. Frederick Winslow Taylor’s monograph, The Principles of Scientific Management launched an era of time-and-motion studies and spurred on management as an area of study in universities. Harvard Business School, founded in 1908, was only the seventh U.S. college of commerce, but 40 more would open by World War I.

Today mass manufacturing and mass consumption have made life materially comfortable for many of us. We enjoy a much longer life-span than the 47 years a U.S. adult could expect a century ago. Modern medicine and a less physically strenuous work life make it common for people to live into their 70s and 80s now. But we can also see the toll that conveniences have taken on our lives, our bodies and our world. We consume massive amounts of cheap, empty calories and many of us are obese and suffer from diabetes. We use a huge amount of energy, too, in our homes and vehicles, much of it from fossil fuels that pollute our air and water. However, many do not have access to the products, food and services we take for granted. Distrust of the West is, in part, a product of this disparity.

As I write this in late 2008, I feel the tempest of new technologies, certainly, but perhaps, more importantly, of new ideas. MBA students today are truly global citizens with wide-ranging skills and understandings. Many at UC Davis are using their knowledge to “fix” the problems of pollution, end unsustainable manufacturing practices and address the issues of underdeveloped communities. They are marrying the scientific and medical knowledge of campus colleagues with an understanding of the market to bring promising technologies to society more quickly.

What will business and society look like in 100 years? Despite the formidable social and environmental problems we face today, I am an optimist. I expect that the university—and the knowledge and alumni we produce—will be part of the process that brings us back into a sustainable balance. I know that business will be an important mechanism for delivering the goods.

I announced in September that this academic year will be my last as dean. I look forward to a sabbatical leave next year to continue my study of technology and the global economy. Then I will be back in the classroom with the terrific students we have at the UC Davis Graduate School of Management.