Remarks as prepared for delivery
Good afternoon, everyone.
Thank you for that warm introduction. Dean Lenway, Members of the Board of Trustees, faculty, staff, family, friends and, especially, the Class of 2011—thank you for welcoming me to your campus.
We at The Dow Chemical Company are proud to support this school—and are always eager to recruit here! I am resisting the impulse to hand out my business card.
It is an honor to share this afternoon with so many future business leaders, and to do so at a school named for that great Spartan, Eli Broad. He is not only a giant in business, but a giant in philanthropy. His commitment to causes ranging from public education to the arts to cultivating the next generation of thoughtful, talented, compassionate business leaders right here at MSU, is an inspiration.
There is a reason he has put so much into this school. Your talents… your knowledge… your entrepreneurial spirit… are more in need than ever.
Business—and its unique potential to innovate, to create jobs, to fuel prosperity—is once again this nation’s business. And that is just as true for those of you—those of us—who hail from other countries.
Economic growth. Job creation. The environment. Quality of life. The effect that business leaders have on the world is tremendous. It is felt not only in boardrooms, but in living rooms and dining rooms… in parks and playgrounds… in villages and cities around the world. That is a lot of responsibility.
As populations grow and resources diminish, it is more important than ever for our companies to be deliberate and smart in how we combine sustainability with wealth generation. And as global competition heats up, nations need to be just as deliberate… and just as smart… in making sure their economies grow, and ensure that growth is sustainable.
Today, as you bid farewell to this community and enter the workforce, I want to talk about what all this means in practical terms—not just for the U.S., or for companies like Dow, but for future business leaders like you.
Because we all have choices to make… and choices have consequences.
A GOLDEN ERA OF MANUFACTURING
I am a proud representative of the manufacturing sector, and of one of the biggest manufacturing companies in the U.S. And I have come here today to tell you something you probably have not heard: We are entering a golden age of manufacturing. That’s right—you heard me correctly. I said a golden age of manufacturing.
That statement surprises most Americans when I say it. The U.S.—especially Michigan—has become painfully accustomed to the loss of manufacturing jobs, the closing of plants, the shuttering of main streets.
You have seen this close up in a way that other business school students, elsewhere in the nation, have not. But I know that the Broad College—with the nation’s best Supply Chain Management program—also sees the other side better than most. You see the struggle, but you also recognize the opportunity.
So do audiences in China… or Germany… or Brazil. When I go there and say: “Manufacturing is exciting,” they nod their heads. Because they know it. They see the opportunities. They feel the power of manufacturing as it creates millions and millions of excellent jobs, jobs at the center of their economies, jobs that drive growth.
These countries are building wealth by investing in highly advanced… highly specialized… highly value-added manufacturing. They are building semiconductors and microprocessors; wind turbines and solar cells; lightweight cars, advanced batteries, cutting-edge medical devices.
For example, according to China’s next five year plan—its twelfth—that country could direct about $1.5 trillion to seven strategic emerging industries: biotechnology, new energy, high-end equipment manufacturing, energy conservation and environmental protection, clean energy vehicles, new materials, and next-generation information technology.
These industries together account for 5 percent of China's GDP at present—a ratio that the government wants to triple to 15 percent by 2020.
And the Chinese government will likely support the growth of national champions in areas like advanced nuclear technology, clean-coal technology and battery cell technology for greener vehicles.
These are state-of-the-art industries. Industries of the future. Industries that are changing the world—and the way we live in it.
As these countries understand, manufacturing matters.
Manufacturing creates more jobs outside its own sector than any other economic activity. Even in 2009, when manufacturing experienced its sharpest decline to date, the sector still supported nearly 7 million non-manufacturing jobs in the U.S.—jobs outside the plant. It has the highest multiplier effect of any sector.
And only manufacturing can solve the major challenges the world will face over the next several decades: the rising demand for clean energy, for healthy and abundant food, for drinkable water.
When done right, manufacturing can marry sustainability with profitability.
That is why we at Dow are transforming our company to help meet those challenges. We are creating a 21st century enterprise that does not see sustainability as a noun, but as an adjective—one that applies to everything: sustainable operations, sustainable solutions, sustainable opportunities, sustainable profits, a sustainable future.
And advanced manufacturing is at the center of it all.
THE U.S. IS FALLING SHORT
The countries that get it—the ones that see these opportunities—are creating holistic strategies to compete—and win—in the global market. They anticipate and answer the questions that I and other CEOs have when we are considering a new investment: questions of cost and of market access, questions of risk and scalability.
These countries set rules of the road so that the private sector knows what to expect. They help us manage risk through low-interest loans, reasonable corporate taxes, and easy-to-navigate regulatory regimes. They offer incentives and the prospect of a better return on investment. By doing so, they attract business… and become our partners.
But America doesn’t really do this. America is leaving the big questions unanswered: on energy, on health care, on taxes and regulations. The opportunity cost can be measured by the loss of 5.5 million manufacturing jobs—a third of the sector—in under a decade.
Michigan knows this all too well. In the three years since many of you arrived here, the state has lost almost 400,000 jobs—Lansing alone has lost 13,600 jobs. And one-quarter of them were in manufacturing.
Now, recent headlines paint a slightly different picture. They will tell you that manufacturing is surging, with corporate profits reaching records.
As with any sector, there will be ups and there will be downs. But we know that the recent rise of manufacturing has not led to meaningful job creation here in the U.S. A four-month rebound has not put a dent in a ten-year decline.
And please keep in mind: these improvements have not come because of national policy. They have come in spite of it.
INNOVATION FOLLOWS PRODUCTION
Now, some argue that it is natural for the U.S. to lose these jobs, because wages are cheaper in the developing world. Besides, why should it matter that my iPad says “built in China,” when it also says “designed in California”?
But it does matter—it matters a lot.
First of all, labor costs in advanced manufacturing technologies are only a small percentage of the total cost. So these U.S. job losses are not inevitable. They’re not driven by factors outside our control. And second, the big problem is that where production goes, innovation inevitably follows.
Take the electronics industry. If you outsource it, other countries of course start making devices. And then they will build R&D centers and universities around that industry to generate the human and intellectual capital to sustain it, upgrade it, and then design the next generation of devices. So you start by outsourcing production… and end up outsourcing creativity.
In fact, of the ten U.S. companies that spend the most on R&D, eight of them have R&D facilities—meaning high-tech labs—in China and India. That is one reason that Dow has 500 well-paid Chinese scientists working in China, who are already generating more patents per scientist than our other locations
Now, the U.S. is still the largest economy in the world. It has critical mass, and scalability. It still has a first-class university system—schools like Michigan State—turning out creative thinkers and high-skilled workers. AND it still has a flexible, mobile, productive workforce, with a still decent immigration system.
So multinational corporations like Dow still see the U.S. as a hub. But over time, the hub might shift… because we cannot sustain innovation in locations without a production base.
This is a genuine crisis, and it requires an immediate response.
Part of that response needs to come from government.
Perhaps some of you will go into public service—hopefully after some time in the private sector. We need women and men of your caliber in those positions. We need more officials who understand business… who see that the global economy is not a level playing field… and will not level itself.
Let me be clear—I am a firm believer in free markets. But we have learned in recent years that for all the wisdom of markets, they can never be a substitute for the kind of long-range, strategic thinking that is the responsibility of government.
Only governments can create policy frameworks that allow business to create value. Create jobs. Create prosperity.
I am certainly not calling for bigger government. I am calling for a smarter government—one that gives companies a degree of predictability and certainty when they invest in the United States.
I am calling for a true partnership between business and government. For the greater good. For the national interest. History shows that public-private partnerships, infused with unique American character, have limitless potential. From space exploration to the Internet, time and again government has engaged with business to unleash that spirit… and spur the creation of industries that have truly changed the world.
I remain inspired by America’s enormous, unseen assets. There is something here that is wired in the DNA—a love of freedom. A spirit of entrepreneurship. A faith that you really can make it in America, in both senses of the phrase.
THE NEW GENERATION OF BUSINESS LEADERS
It can happen again—and it must. But we have to make hard choices.
Part of the challenge, as I said, is a policy one. But another part is cultural.
And this, especially, is where you come in.
Today, most of our top business talent seeks to be in finance and capital markets.
By all means, we need providers of capital and credit, and that is a role the U.S. should play. But if that’s the only role we play… providing capital to other nations… sooner or later they are going to cut out the middle man.
The world of finance is changing, and at some point during your professional lives, China is going to develop capital institutions that rival ours. Countries can and must do both: finance and build. Germany does.
And if America does not find a way to do both, we will all feel the consequences.
So, yes, we need smart people to focus on financial services. But we also need you to focus on value-added innovation. We need bold entrepreneurs and courageous corporate leaders. We need astute policymakers to establish frameworks to harness that boldness and courage.
What we need, more than anything, is you.
There is no question in my mind that Broad College graduates have the knowledge—and the know-how—to find extraordinary success in every aspect of manufacturing and industry.
Should you choose to help usher in a Golden Age in Manufacturing, it will be a statement of your identity… a statement that you want to become a driving force behind job creation, community revitalization, world-problem solving and business growth.
But whatever path you choose, know this: if your generation of business leaders commits to corporate responsibility… to using business as a tool for sustainable solutions… then your generation can improve the lives of many millions of people, and create prosperity at levels never seen in human history.
That, I believe, is what this next century needs. It is what this state and this nation need. It is a responsibility—and an opportunity—that rests with you.
So today, celebrate with your friends and families. Be proud of all you’ve achieved.
And tomorrow, wake up as a graduate… ready to take your great gifts…
And build something that lasts.
Build something for America… the country that gave you this great education… the country that has countless opportunities in store for you all. Be part of the generation that truly “makes it in America,” and restores this vast economy to greatness and strength.
Thank you again. Congratulations to all.