Shipping can learn from the Korean mess

Shipping can learn from the Korean mess

When one looks at the current problems between the Democratic People’s Republic of Korea (DPRK) and the United States of America along with the Republic of Korea, dismay is the natural reaction. Here is a war put on hold by an armistice over six decades ago when it should have been ended by a peace treaty. And the situation is probably in far worse shape than policy analysts realize. Let’s look at lessons that can be learned for shipping executives. Three come to mind: Procrastination, unknown unknowns, and picking people.

First is procrastination. This is the easiest to examine. Every US administration has kicked the can down the road with respect to the Korean situation. In addition, US presidents have used North Korea as a punching bag to display their anti-communist bona fides with US voters. Why settle things when it is easier to put a solution off especially if standing up to a little country is great for domestic politics. The periodic war games and shows-of-force contribute nothing to the peace or stability on the peninsula. US policies toward North Korea began as part of an anti-communism fever. Things have only gotten worse. The world is now faced with the possibility of a war killing millions. But even if no war breaks out there is a good chance that US relations with China concerning trade will suffer. The result will affect shipping, probably all sectors.

Interestingly, China didn’t kick the can down the road when it anticipated trade issues with the US after President Obama put forth his Pivot to Asia policy. China began its One Belt, One Road initiative and set up the Asian Infrastructure Investment Bank.

Second is the unknown unknowns, facts that are not anticipated at all. In the current tension between North Korea and the United States, no one has mentioned nuclear artillery. A handful of 10 to 15 kiloton nuclear shells among the hundreds, if not thousands, of conventional shells lobbed at Seoul would be devastating. Millions of people would be killed and the fallout would leave lasting radiation. Remember the two wartime bombs dropped on Hiroshima and Nagasaki were fused to detonate at altitude; hence, local fallout was less for technical reasons not important for this discussion. Sadly this artillery barrage is an unknown not considered by planners in Seoul or Washington. Similarly in shipping, after the financial collapse of 2008, managements should have seen the huge problem on the horizon, overcapacity helped by the Federal Reserve System’s policy of lowering interest rates to minuscule levels. This became a horrible combination. And these, in fact, were knowns. Yet the cheap money and lower newbuild prices werer too great a temptation to shipping executives.

Finally, third is the people. This is by far the problem that has caused most mistakes in international relations and business management. In the US over the last 50 years the type of people filling certain government positions has changed. For example the repeated miscalculations of the DPRK’s nuclear design capabilities might be traced to changes in the expert advice given to the Secretary of Defense. The Assistant to the Secretary of Defense (Atomic Energy) is gone. The position no longer has that name and covers other threats in addition. The individual no longer reports to the Secretary of Defense directly. And, the person is no longer a technical specialist; he or she often has a non-scientific degree in a field such as foreign affairs or law. Previously they would have been someone from one of the nuclear design laboratories. When one hears generals, admirals, or Defense Department officials speak lately, it is clear they are not getting advice from knowledgeable sources; they appear to be getting information from other generalists at lower levels that has been passed up the chain of bureaucrats. This could end up being very ugly. These changes were made in the mid-1990s. In particular recent incumbents providing advice on nuclear warheads do not have the knowledge of the various scientific paths abandoned in the US. Historically, certain technologies have been examined but not pursued for economic or political reasons which may not be of concern to foreign nuclear weapons programs. But this in-depth information does not rise above layer upon layer of policy analysts who are touted as experts, but are not directly knowledgeable in scientific and technical fields.

In shipping, are leaders at all levels getting real expert advice? Are these technical positions filled by people who are really interested in the problems, or are they people who are just climbing the corporate ladder? And does a company’s compensation package value the worker who actually is excited about their current projects rather than looking to move on? Does management favour workers who have real competence, or ones who chase advanced degrees and awards? Shipping must learn lessons in order to pull out of the decade-old slump.

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