Global Thought Leader

What is the source of thought leadership? Contrary to conventional wisdom, it is not genius, even though in some cases, it can be genial. My experience is that the main source is curiosity and the backbone is intellectual integrity. This constant search to improve and deepen one’s understanding leads to the frequent experience that what is generally considered to be true does not always correspond to the reality.

While in the early years, the young child wants to touch, feel, explore and understand, the adolescent has often experienced a profound disconnect between reality and words. It explains often his opposition to conventions. She has already experienced that what she directly is in contact with is different from what one would like her to believe or admit. This conflagration is the source of conflicts that will make the young adult either a passive absorbent of conventional wisdom or a researcher of the facts and the reality.

However, curiosity, as indispensable as it is to develop that leadership, will not transform a curious individual into a thought leader. The second ingredient is the ability to structure thoughts in a coherent way with intellectual integrity. It does not come easily since it is a form of intelligence that can be developed but not taught. To a very large instance, it is innate.

I only became conscious of this ability over decades. It is when listeners or readers started reacting by saying that my point of view was unusual (some would say original) that I started building self confidence in my ability to cast a different and sometimes paradoxical approach to issues, policies and people.

It is the others who, gradually, told me they considered that I was a thought leader. It is not something one can self-define. That means that an important part of thought leadership is to be humble enough to realize that certainties are not always available.

A Passion for Europe

For better or worse, my generation, (Jean Monnet, Konrad Adenauer and many others), managed to develop the most amazing project in history: a union between nations who battled for more than half a millennium.

Like most of my contemporaneous thought leaders, I remain amazed and proud of this political, economic, social and cultural adventure. At University, “we” were a group of students that shared a common passion for Europe. Our origins and motivations were different, but Europe was, for most of us, the political passion of our lives and a treasure we wanted to save from nationalism by its Member States.

The recent developments of the European Union have been an accumulation of disappointments: migration, international leadership and most recently, Brexit. We can only hope that these circumstances will be the wake up call that Europe needs to understand it must accept the reality: only a small number of Member States are willing to pursue the fiscal and political integration that would create a European Federal State.

The European Monetary Union: The Euro

It is so easy to deride the Euro. It is a stroke of genius and we did it knowing full well that it could not survive without an economic and political integration. It was also clear that we needed to give Europe an irreversible integration engine: a common currency.

However, it has not been followed by the promised fiscal integration and limits its ability to be a united voice.

What is happening today was perfectly predictable: if the Euro did not exist, we would not have rescued Greece, Ireland, Portugal or Spain. It was clear that with a single currency the only differentiating factor would be interest rates, indebtedness and budgetary discipline. This is why the European Growth and Stability Pact was indispensable, and would have taken care of huge deficits, had the Member States had the courage to apply it. I took part a dozens of meetings at all levels to look at the initiatives that needed to be taken. In Belgium, the appetite for bonds denominated in the European Currency Unit (the predecessor of the Euro) put the three largest banks in the leadership of the development of an ECU bond market.

It is also on this topic that I published my first articles for magazines, and made me contribute to what would become the leading financial magazine: Euromoney.

The European Investment Fund

When I became the President of the European Investment Fund, a creation of the European Investment Bank, the European Commission and 76 European banks at the Dublin Summit, it was allocated a capital of two billion euros that served as the basis for the issuance of guarantees backing Trans European Network financing and Small and Medium Enterprises loans.

Transforming it into a business was my task. Mario Draghi and a few other senior officials of the European Member States had landed a concept. It had to become a reality. Something, however, was missing: it was all about debt. We added equity in the form of investment in European private equity funds that remain the only successful equity initiative of the European Union.

It has been a unique opportunity to understand how Europe works, and how difficult it is, sometimes, to make sure that the European Union would be at the cutting hedge of growth.

The initiative of the Capital Market Union requires focus and liquidity to work. As it is proposed, it contains none of the clear conditions.

Global Issues

The main global challenges were still very regional when I began to develop an interest in our planet. Globalization was not a Machiavellian plot of ugly capitalists to pressurize the people. Its birth and growth were natural, sometimes hectic, unplanned and often unpredictable.

Dealing with global issues implies a serious knowledge of local realities. Similarly, operating global businesses is a complex challenge. I focused on global finance. The majority of my working, writing, teaching and speaking commitments relate to or involve elements of global finance. It is at the service of growth and companies and also serves governments.

The financial crisis has been resolved through a number of regulatory initiatives that now, threaten the institutions that are essential to supporting international trade. Is it necessary to have another crisis in order to realize that, without globalization, our world cannot grow, feed populations or employ its people? Globalization also has a serious negative impact: climate change is the biggest threat to our planet.

Emerging Markets

Ever since I landed in Jeddah (Saudi Arabia) in the middle of the Hajj pilgrimage in 1976, while thousands of white-robed pilgrims were waiting for planes to land them to Mecca, I have been involved in emerging markets and experiences lots of the plagues that come with them. By and large, the infrastructure has improved in Asia, Eastern Europe and the Middle East. Africa remains difficult to work with.

The future of our economies is intertwined with the future of emerging markets. On the other side, emerging markets need global markets to ensure their survival and feed their population. That “objective” interconnection has to become “subjective” and help us deal with immigration, development and climate change.

Working in or for emerging markets requires a different approach: building trust is sometimes a challenge and takes time. It also requires a deep personal involvement since relationships are not just a matter of business, but involve personal connection. It makes working in emerging markets challenging but very rewarding.

They have long memories about the way we mislead and sometimes abused them. It is up to us to find ways to go beyond those initial apprehensions.

Financial discipline and restructuring

It is exceptional to find companies in emerging markets who have developed the right risk management, financial discipline and transparency necessary to inspire confidence. Yet, they are taking risks and running balance sheets and businesses that are essential to their countries. Their complex political issues also add to the challenges they are facing. Even large groups who aspire to be Asian multinationals of the future remain surprisingly unaware of their sustainability risks.

  • Foreign currency borrowing carries a huge foreign exchange risk that companies ignore by preferring lower interest rates, that unscrupulous international bankers continue to sell them as the solution to their problems
  • Interest rates are high in emerging markets. It is due to a combination of weak creditworthiness and high inflation. However, they constitute the benchmark for the cost of financing of local operations.
  • Liquidity risks always takes institutions, including central banks and governments, by surprise and generate huge volatility of asset prices. It makes investments in those countries volatile with a tendency to move massively in and out.
Equity markets, governance and liquidity

I spent a considerable time interacting with stock exchanges over the world when I was at the NYSE and afterwards as an advisor. Emerging markets have evolved impressively. The number of listed companies and their size have made the Shanghai, Bombay and Sao Paolo exchanges among the leading markets in the world.

It has, in turn, allowed some of those companies to raise equity on foreign markets such as New York, Hong Kong and London who remain the leading global equity markets in the world. That move has had a critical virtuous role in imposing to emerging companies reporting, transparency and governance standards that were not the rule in their home country.

Investing in emerging market equities remains a challenge and is not for faint heart. Their level of liquidity remains irregular. The domestic sources of institutional or retail money are limited since pension funds, investment trusts and other financial instruments do not provide a regular flow of investment and foreign investors have a tendency to invest erratically.

International Regulation

The financial crisis of 2008 has exposed the greed, betrayal and irresponsibility of the banking world. ( insurance companies did not resort to those aberrations except for AIG). This transatlantic crisis (Asia was largely unscathed) has led to a flurry of regulation. I have decided to make it one of my fields of expertise that culminated in the course I teach at Columbia Law School on European Banking and Finance. It has also exposed some key weaknesses of these efforts and the mindset of bankers is still pretty much the same, without consideration for social and ethical roles.

  • The remuneration system continues to attract executives that are focused on short term remuneration and cash. The fact that the United States did not even regulate this issue except for the banks they bailed out as long as they were bailing them out, made the European, British and Swiss efforts difficult to implement without risks of losing the global competitive battle.
  • New regulations penalize long term loans or investments by financial institution. Their role at the service of the economy is impaired by those provisions, especially in infrastructure financing. This is true especially for insurance companies who have been wrongly targeted by regulators using banking risk tools for a totally different industry.
  • No efforts have been made to make top executives accountable. Board Members have not even been looked at. There is no accountability at the top: only at the bottom of the pyramid. Some CEOs fight to remain Chairmen while their equity is being decreased by fines for wrong doing in the tens of billions of dollars.
  • The level of competence and seniority of parliaments, governments and regulators remains well below the necessary level to address the complexity of the “unintended consequences” of their actions. The fire administrative measures that are ineffective while they do not touch the core of the problems. Corporate lobbying makes sure that they will not be threatened by the legislative and regulatory proposals. Sometimes they even write the legislative proposals. This level of incest between finance and governments has been sufficiently demonstrated, but the FIFA crisis certainly demonstrates the impotence of the public sector to promote ethical behavior.

International Finance Regulation: the quest for financial stability was an attempt to indicate directions that would ensure that new regulation would provide financial stability.