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model, but you don't know where you're going, there's no focus, and then the change is just sort of haphazardly chosen. If you have the vision and the leadership, but no business model, you have chaos, in fact in the process of implementation, and it gets worse as you go down the list. Interestingly, if you think about the speaker we had last night, Apple, Gil Amelio, Apple really had none of these three, and that's really a serious problem. Apple had, a year ago, and some would argue today, no real vision about where it was taking the company. A business model that was really incoherent, as opposed to coherent, because what you had was engineering, marketing, sales, innovation, manufacturing, not working together, and so what you ended up with was either over-supply or under-supply of products. And thirdly, from a leadership dimension, there was just no buy-in in the organization. Gil talked and as he said, I think he said last night, when a CEO talked, it was viewed as a suggestion by the staff as opposed to any real directive. And interestingly as we even looked more and more at Silicon Valley, we find very big differences among companies in Silicon Valley. Because people tend to think well, everybody's kind of the same in Silicon Valley, it's almost like a monolith, but in fact what you see is some companies that look very coherent across all three of these, like Intel, and you see others that really don't.

Henry Kissinger: When you... only could If you can analyze these failures... I mean, I'm sort of interested in why organizations operate in different countries, in what kind of culture they live. Why couldn't they figure it out? Or why didn't they hire somebody? I mean, what was it that they could not see, that you saw, or could not see, that you saw?

Bruce: I'll let... one of our advisors might want to say something... Bob, why would you think companies don't see some of these things?

Bob Shapiro: It's so easy not to change. It's so easy, if things are going... in anticipation of crisis, or in advance of crisis for... to stay with what you do well. The cause of failure is success in

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a lot of cases, and one of the things I think I saw at Monsanto,
was that we had become over the years, a self-reinforcing culture
that was very, very good at doing the sort of things that were
increasingly irrelevant. But to transcend that requires
extraordinary kinds of insight and courage and willingness to rock
the boat at a time when things aren't bad.

Henry: So it's easier go I mean, to slide down, I guess yes.

Bob: Yeah, I think it is easier. I mean, it goes to the
question of what's a self-reinforcing culture, and what kinds of
limitations does it put on itself? That would be my view. It's not
a subject I would pretend to be authoritative on.

John: I agree with that. I think he said it last night, you
have too big of an agenda. He had a whole bundle of items you want
to focus on, but he didn't prioritize them. He didn't get around to
focusing on those three or four or five that mattered most. He was
trying to deal with 10 or 15 and that takes you nowhere.

Larry Fuller: I don't suppose, Henry, it's any different than
politics. I mean the issue is even if the leaders or leader in an
organization perceive that there is a problem, if there [isn't] a
media crisis, it's visible to everybody. I mean, there may be a
decline, but there isn't... a crisis, it's very difficult if you
have no consensus...

Henry: ...get an agreement that there's a decline. Which in
business, I suppose you... it's easier not?

Oscar Bernardes: ...that's a problem because if you ask companies, they probably believe they have vision, they have architecture, and they have leadership, so most of the time, it's the capacity of self-analyzing yourself in an objective way. I don't believe people don't do some of these things just because they don't believe that it's not important. It's just they don't know how well they're

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doing it.

Bob: ...it isn't the activity itself, because people are doing stuff that is at least nominally responsive to those categories. It's that the connection between what they're doing and what's happening in the world has gotten out of whack. So you keep doing things and they seem like sensible things, but it no longer has anything to do with the reality you're dealing with. And that's a slow process. It doesn't...

Henry: How do you change that? I mean, how did you do it at Monsanto?

Bob: I don't know that we've done it. I think we're aware of this set of issues and we're trying, we're struggling to go through exactly these kinds of issues. We can imagine a future that we'd like, but whether or not we have the consensus and the architecture and the ability to implement that future is not a question I could claim to answer, definitively there.

Larry: Well, the essence of the crisis, it takes, in my experience, a fair number of years.... I sort of call it generational change. Everybody thinks you can do this in six months to two years, and hire anybody you choose from the outside to help you get the concepts if you need that, and then bingo, you're going to change people's way of thinking about life in any organization, family, body politic, you name it, it's all the same game, church, maybe that's even harder in some cases. It's just very hard and I think it takes a relentless approach to the thing. It takes horrendous effort at communication.

Bob: And part of what CEO's do, when they want to do this in a time of success, rather than a crisis, is to create a sense throughout the organization that there is a mis-match between our behavior and what we're going to need to succeed. So people can at least understand there's a problem at a time when you're turning a

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profit.

Henry: How do you even get a judgement of what you need to succeed when you're being successful?

Oscar: Vision of the future.

Cyrus: That is really the toughest. You know, I'm... one of the classic...

Henry: ...educating myself...

Cyrus: One of the classics is the U.S. automotive industry, which went along for decades just fine. You know, and it had it's little slumps but fundamentally it just continued on, and doing very well. And it was really... if you talk to anybody in the industry, they knew that they were at risk, individually. But collectively, the ship just kept sailing on, until it ran into an iceberg.

M: IBM is another classic example. The world was marching in a different direction, intellectually, they had an awareness that that was happening, but emotionally it never hit enough in the belly to really come to grips with the nature of changes. And it took an outsider to do it...

Oscar: ...an idealogy, you can only develop those... when things are well. Because when you are in a dramatic re-structuring, you cannot really think too much about aligning those three. Because if you look at the case of [Boon], I'm very curious about your perception on conglomerates. [Boon] was by far the largest conglomerate in Latin America and almost went busted because of that. The complexities of managing such a diversified conglomerate. And when you go through the re-structuring, it's basically saving the company. You don't worry much about that. You just cut as much as you can, and you keep the financials... you bring the financials back into shape. Then you can start thinking about those. So one

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thing for sure, is you can only do that when things are reasonably
well. Because when you are worried about fires all over, you just
don't have the... you cannot have the luxury of approaching that on
a very systematic way.

M(English accent): Another view... I mean Barry said it a moment ago, that you need a burning platform to do it. So you always, in a crisis... I mean in many cases you can't do it either if you don't have a crisis. You're saying, you can't do it if you have a crisis. You've got to fix the crisis first, like I think you somehow need both.

Bob: It's interesting, because the question that I think Henry was raising earlier about your... it's how do you get people to anticipate problems, far enough in advance to really do something about them? So can you create a sense of crisis about something that hasn't happened yet, based on people seeing a mis-match between the direction we're headed and what's going on out there in the world? That's your chance for leadership.

Henry: ...the trouble in Europe now, though, is that while they know what needs to be done, they just don't know how to do it.

Oscar: Oh, you can compare that with countries, you can compare with Brazil and Argentina, Henry was making his analysis. The Argentineans have seen the face of the devil, so they are much more prepared to make sacrifice than the Brazilians. The Brazilians never saw the face of the devil, with the hyper-inflation and so on. And so the Brazilians always tried to stand... tried to be halfway.

Henry: ...thank God for the Brazilians. [Laughter]

Cyrus: They have the World Cup again, so it's...

M(English accent): ...Europe too. The Germans have seen the face of

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the devil more than some other countries. They have a different attitude about inflation.

Henry: Inflation? Yeah, inflation, they are...

Bob: But doesn't this tie into the question of political leadership in a democracy? These are the same kind of questions. Everyone can respond to a crisis. People usually do that very well. The problem is the range of options that you have when you're dealing with a crisis is constricted and you always wish... in retrospect, you say, well we should have seen that coming ten years earlier, five years earlier, and if we had, we would have done the following things and could have ended up better. Everyone can do that in retrospect. The task of leadership, it seems to me in a democracy, is the ability to... and of corporations, is the ability to mobilize belief and opinion about future danger at a time when you still have some options available to you. And it's a mysterious phenomenon...

Henry: But you cannot prove it needs to be done. But also, I think that in a democracy, this is now, this is not yet true in companies, so that the process of getting into a leadership position is so irrelevant to what you need in the leadership position, that it would be odd if they matched.

M: That's exactly what we're facing in Korea right now, which is trying to do what this... clouds of a crisis, but a lack of emergence of leadership in terms of really...

Henry: ...culture of Korea...

Bruce: Just to... this might be of some interest. We're... you know the government is [pressing] to raise... one of the organizations we're talking to about this very framework right now is the CIA, and the issue of whether... we haven't gotten to the point where... of agreeing with them

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Henry: ...data if you need it...

M: ...that's classified, isn't it?

Henry: And actually, the CIA is sort of [modeled] with them. They never had a chance. Which every two years, they get hit by another wave of... of assault. But now they need it desperately.

Bruce: Yeah. Well, that's the part the discussion about this. The big problem there again is... perhaps this is obviously not for spreading around outside of this room, but the biggest problem there is they can't... Korea, you know... they can diffuse it whether they have a crisis or not. And one of the things...

Henry: ...they've got... real trouble...

Larry: Well, that's one thing you can't tolerate. If you're looking around for consensus as to whether you've got a problem... the hell with that. It's alright to discuss what the nature of the diagnosis is and all that, but at some point somebody's got to say, never mind all that [yahoo]. We've got a problem, here's what it is, or here's what they are... That's been a problem with the CIA as well, they don't have that kind of leadership.

Bruce: One of the things that struck me not too long ago, I was... someone sent me some things... I had forgotten about this, and the history of Booz-Allen, in the early, I think it was in the early 1960's, not that you remember the early 60's, but you might know of this story that, or Cyrus... You were, you were... you were about 20 years at that point...

Cyrus: Right, right. Ha!

Bruce: ...but in the early 1960's there was an article on the cover of Business Week which called Jim Allen a company doctor, a corporate doctor, it was around that time. And I was struck by this

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anarchy.

Henry: One problem that exists now is that the framework for political thinking and for economic thinking are at variance with each other. If you are head of a multi-national, you must think in global terms, because your economy is global. When you are head of a country, you are driven by local perspectives and it's not always that easy to match them. That's the problem in Europe I think In an important way,

Bruce: Probably two more observations and then we'll start over here... Part of what we're talking about, we've just written up in a book that is coming out this, I think it's going to be January or at the latest, February, published by Simon and Schuster, and one of my partners and I have just been involved in, and the book, the working title of the book is, The Centerless Corporation, which does not mean the leaderless corporation. And it does not mean a corporation that has no core, no heart. But what it's really saying is that there are a set of things that are the essence as we see it, the success of the global company of today and tomorrow is, involves what we call three key enablers. People, knowledge or learning, and this whole concept of coherence. And Oscar to get to your point, you know, one of the most diversified conglomerates out there, and I believe is the most coherent company, probably one of the most coherent companies in the world, is General Electric. Because everything drives off the same basic means, right through to the organization, the way people are taught and developed and the way they're [consented] and paid. But these three are the three enablers, in any corporation, and what we're saying in this model is that, there are several things that actually carry it out, which include a core of a global corporate center, whatever term you want to use for it, the business units, the services that have to be provided, some of which are [valuating] and some of which are not, and then how you govern everything, and what kind of leadership models you put in place. So this is going to be the theme of the book and I'm sure we'll be

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like you know, Catholics, that go to confession. And they just lay
it out, you know the priest says, O.K., $2 billion write-off, you
know, bless you, don't sin no more! [Laughter] And off you go. And
the stock market reacts positively! [Laughter]

Darrin: We did a side study this year, on just that and there are
a whole set of accounting rules which Oscar you'll recognize, are
U.S., companies based in the U.S., that really move against some of
these issues of communication and the like causing the quantity
[for Bostock], which is the multiple re-structuring, which
[accounting rules] actually now provides...

Oscar: ...financial analysts finally caught up with that, so when
you look at some financial analysts' report today, they add that,
all these write-offs, when they never had real performance...

Bob: The EDA analysis says, that's just accounting, you know? I... you still have to earn on the capital, that you invested, even though you're out of that business at this point, and it's true, it's [shareholder's] money. It didn't go away just 'cuz you had a stroke of pen... One thing I wanted to make on that upgrade skills side of it. There are... as far as I can see there are two fundamental approaches to upgrading skills. One is take the people you got, and try to make 'em more effective. The other is to get different people. The first part of it, I don't... you know, I don't have much trouble trying to sell it to the organization. Talking about upgrade skills and O.K., we're going to learn something, but we have a lot of problems when we have situations as we do, where in large areas of the company, we just don't have good enough people. And... if you're going to, on a wholesale basis... good enough is the wrong word, they are good enough, they're not great, and they're not what we're going to need in the...

Henry: ...enough great people around or like he says, as well as you can do at that level.

Bob: Yeah, I think they're enough to... I mean, to keep our

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valuable than getting to necessarily the one right answer. That in
fact, there's a set of... instead of one right answer, there's a
set of let's say, two or three potential answers that are just
about as good.

Henry: Well, what's the difference between the right answer and the right strategy?

Darrin: They'd be the same. So the right answer... the right answer is the right strategy, the one right. But the focus here is meant to be, yes that there is in fact, one absolute true [inaudible].

Cyrus: The point is, is it better that the CEO knows the right answer or is able to get the whole organization coalesced around something that might be 5% less, but gets the organization coalesced?

Darrin: Exactly.

Brian: Well, I think the other part of it is, you know, when I started out as a strategy consultant 15 or 16 years ago, there was a fundamental belief in the profession and in academia that for any given corporate situation, there was a right answer. That you could crack the case, you could crack the code of this by analyzing the market forces and competitive forces and cost patterns and everything else. You could come up with the right answer, and I think that what we're all saying today is that there is not a single right answer, that there's a range of right answers, and it is more important to have the organization coalesce against one within the range...

Henry: They are close to each other? The range of strategies, or what?

Brian: Not necessarily.

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Bruce: They may be close in terms of the outcome, in the results that you get for the company, but they might not be close in terms of their [architecture]...

Henry: How can your people coalesce... I can see if there are three conceivable strategies with 5% variation between them, but what if there's a 30% variation? I mean, then you have different... How can you get coalescence of a theme then?

Brian: Well, as the process of the [team] goes through, it's better to get the team to pick one of the ones within the range of likely successful strategies.

Henry: They have to pick one.

Brian: Yes, yes.

Henry: O.K.

Oscar: I... what I think I believe is also important, is not to have a strategy that is too tight, too rigid. Because at the end of the day, you have to deal opportunistic also. People don't like the term, opportunistic as a negative connotation, but in real life, sometimes being opportunistic is extremely profitable. And so again, you have to have an overall direction. You have to know what you are doing, what you are trying to achieve, but you cannot try to go into the third decimal point in terms of detailing the strategy because that changes very much over time. Because as things... as the world evolves, you may do some shifting also. That may be too much of an emergent market perspective, but in our case it's extremely important to be reasonably flexible, and recognize that's not a horse when it pass in front of you.

Bob: The thing we're struggling with is to what extent can you make explicit in advance, the sorts of things you ought to be looking for in your environment which would cause you to change your strategy...

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research, that one of the most characteristic common points of companies that fail in a strategy, is that it wasn't well accepted among the organization. So the top guy, or few guys are goin' off, thinkin' this, and the bottom of the organization, or the people that are gettin' it done, are thinkin' that. That's the big problem. And that's what this is getting...

M(English accent): I think to tie up to Brian's comment, the reason that the strategy concept [had been humbled], and I used to be one of them too, is that you know, implementability in the [care of the key work], you really had to... it was better to have an 80% right strategy that was at the top of the [Gallis] curve somewhere within the reasonable standard deviation from the perfect answer was [lamentable], than a 100% right one that was just resistant.

Henry: ...you have a controversial strategy... than adopt a controversial strategy. That your subordinates are dubious about... then the first time they come to an obstacle they say, see, this strategy isn't any good. And in my governmental experience, that's the point. You've got to get them over the hump and continue... even though it may look difficult. And you have to... you shouldn't change strategy too rapidly, if you designed it well. Though not maybe, you ought to be flexible on the tactics through it.

Brian: One of the things that we're working on to partially address is that again, strategy is a learning process, it's not... you don't have a strategy, you have a strategic learning process so there's lots of loops in it and part of it is to ensure that the basic assumptions about how the world works that underlie the strategy choices you're making are well understood and even explicitly articulated and that you know that some of those assumptions you cannot be certain about. There's some of them that you just don't know what the outcome will be but if you know what the pivotal assumptions underlying the view of the world on which your strategy is based, and there is an ongoing dialogue amongst the different members of the team are on those things, and when you

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Angeles, and quite often, we choose it. We certainly choose it over
United, because of the quality of service that we get. But often
you will notice on these flights, that a party will break out on
the plane. Everybody loves the flight, everybody's having a good
time, and the stewards and the stewardesses always seem to be
having a good time.

Henry: You mean L.A. and San Francisco? In one hour?

Jim: It's a very short party, but you can... you can do it if you set your mind to it. And the question is, what does Lou [Kelleher], the CEO of that organization do, the closeness of his people, you know, to always be up, to always have this kind of positive thing, to make the party. And those of you who are from Japan, we were very impressed, we learned a lot about Japan in terms of the motivation the Japanese workers have. And they were so far away, the Japanese worker is so far away, particularly if you're working on an assembly line right here in Northern California where we have Toyota workers, they behave in ways, almost as if the CEO of Toyota in Tokyo were sitting right over them, in terms of their commitment to do the right thing, to do exactly what the CEO would do. And so, we ask ourselves, what is it in fact, that the leaders of these great corporations actually do? How do they spend their time? How are they focusing their activities?

After considerable analysis, we basically boiled this down to what
we called the Booz-Allen, the double diamond framework for
leadership. And we're talking about leaders in the plural there.
You notice that we're not talking about a single leader, we're
talking about the top management, the top management teams and
cascading leadership down throughout the organization. There were
basically three categories of activities, that were rather broad
categories albeit, of activities, the things that leaders actually
do. The first is they define the reality of the situation. That is,
creating the vision, the strategy, the values, defining the purpose

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[inaudible] strategy. Because what they did, they forced people to do quick tests that were not very expensive in which they could test right away, and if they made mistakes, they could move forward. If you do not know the answer to something, you [plan] it, you run ahead, and it's a very, very high-risk strategy. But if you only lose... this way they could never lose more than a day, and a few thousand dollars on any one test and they could re-think every single day and move forward.

Henry: But everybody among these 38 had the same assignment?

Jim: Well, they all were working on parts of it. They themselves...

Henry: Each was given a part?

Jim: Yes, because they all brought different skills to it, it's a very complex problem. They managed at the end to reduce delivery from 26 days to 8 days, and they came in, in under 8 months. Now, this is very typical of the way cascading leadership works at Hewlett-Packard. When Lou [Platt] was recently asked about this, they said... they said, is this anarchy? And [Platt] said no, he said because the most important aspect of management of this company is cultural control and self... that's self-control. And that... and when Bruce put up that model a little bit earlier, looking at Samatra's, if I could just show this... he said that he showed this to the head of a large oil company and he said, well of course, you have to do both. In fact what Samantra [Groschal] would say, and what Lou [Platt] would say is no, in fact you are not doing both. What you're doing is you... you have control but the control becomes self-control in this model, and that's what you're looking to... and that's in fact what you're looking to... to treat. It is in fact, a real transition from the left hand side... the left-hand column to the right-hand column.

Well, in doing all this... and this is just very, very

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over-simplified, and this is just one group's look at it, put
together... we put together a group of executives.

Henry: But it... Could I ask you, since I know Barnevik and
[Lindahl] very well, what are they doing? What were their answers?

Jim: Well, the... if you look at this list right here. This
framework...

Henry: But they wouldn't do it quite that way, would they?

Jim: Oh yes. Very much so. Very much so. Independently,
both [Groschal] and our Booz-Allen-Hamilton team, looked at what's
going on in terms of the transformation of ADP, and we were able to
identify what it was that [Lindahl] did, what it was that Barnevik
did, and then moved down the organization...

Henry: ...how the Swedes have driven out the Swiss.

Jim: Yes. Well, and it's because I believe, because...

Henry: Because of the ethics, the work ethics.

Jim: Well, it's not only the work ethic, but I think also
a deeper and a understanding of management. This is very
fascinating thing on that one, Dr. Kissinger, about the Swedes.
Why... why I think that they were partially so successful and how
many great managers are Swedes today, given the fact, all of the
problems they've had in their country that would seem to mitigate
against entrepreneurial activity. In the 1970's and 1980's, there
was a great amount of... of experiment going on in this country in
many different corporations. I mentioned what was going on in
strategic planning at Monsanto. There were also other things going
on there. And there were consultants and professors who were
monitoring all this activity and trying to learn from it. We were
unable to get large American corporations to accept this learning.

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We couldn't get through and to get it introduced, and we finally did make it by the 80's after there was a crisis, but before that, we couldn't do it. Regularly, teams of Swedes were coming over to this country and they were interviewing the leaders of the corporations that were the most innovative, they were talking to the consultants, they were talking to the managers, taking the learning, and putting it and making it a part of the managerial culture in that country. And I believe that that's why they...

Henry: One thing we had no domestic market. They had to be on the global economy, economically.

Jim: Whatever forced them to do it, they did the right thing, it worked. Now, what we can see is that you can take and look at what it is that someone like Parnevik... what he does, he thinks in terms of what... his values, his philosophy and the definition of the process of the change, the things he says in terms of communicating and what actions he actually takes, and these are an identifiable and [willfully] limited set of activities. But each of these is grouped around the [Bell] framework that Bruce presented earlier. Talk about what is the leadership role at each different level for each of these different activities. And what we find, and it was rather remarkable, is that most people think that the hard thing is getting the vision, that that's the hard part, the hard part is getting the strategy. But in fact, the hardest part is getting people to conform to that strategy, getting people to implement it, getting people to carry it out, getting people to own it and to internalize it. And secondarily, one of the hardest parts of that is setting the measures and rewards to encourage them to move in that reaction. People will behave in the way they're rewarded. That means you have to have the right [metrics]... the right reward system. I want to say, I think at ADB, this is what... where Parnevik is an absolute master in terms of knowing what to measure and how to use the measurement system.

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leadership challenges that you face. And is this framework helpful
in your... in your view?

Bruce: Jim, I've just looked at it...because and this is a very
important test and one reason we're asking for feedback here and
again by the way, this applies to both corporations and to
government, because we're looking at it in both parts of our
business, is you know we think that this is a fundamental change in
the way we're operating with some of our clients and our... and the
companies we serve. Mainly trying to get at some important
questions of... that are really going to effect change and make it
happen, and that is, how do you create this kind of leadership
dimension? How do you create the disciples? How do you cascade
leadership all the way through the organization? And you know, we'd
like some real honest feedback about how you know, whether this
thing sounds like it makes sense or you know, are we on or off
target? So we're anxious to get some reaction.

Henry: Can I make a point about government?

Bruce: Definitely.

Henry: The first question you have to ask in government is, what
are we trying to do? Especially at the CIA, but in almost any
leadership group in government you will find, in my experience that
the biggest problem is that they have not been defined what they're
supposed to be doing (properly) And I think that is the absolutely
key thing, and I think that's even true... I happen to be a close
friend of Bob [inaudible] and that's what he sort of focused on all
the time, and that's why he has seminars on this subject with his top
executives, in which I have participated, in which that's the
question they worry about, they don't have region by region even when
What are we trying to accomplish here? In government, it's
absolutely essential. In the CIA, they don't have a clear mission
today. But even in the State Department, I mean if your mission
must be otherwise you are engaged in a strategy that your day-to-day tactics of answering

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incoming cables, which is the overwhelming temptation in the State Department, you get thousands of cables every day, you can keep busy all the time because they take up your time.

Bruce: It's not that... you know it's interesting because I don't believe... I'm giving some reaction here... I don't believe it's dramatically different. That's the thing that's so powerful to me, and Jim's... with Jim's leadership of our training, we studied lots of great leaders in governments, we studied you know, people like Ghandi, we studied you know, the great leaders' corporations and I think the issues are very similar.

Henry: If you have a clear focus on what you're trying to do, and keep refining it, I think I've said this here before, but I had a group in the State Department that met every morning, and which is similar to what we were talking about that was not permitted to look at cables. And I would ask the question, what are we trying to do, region by region? So that when a crisis did come, we at least had the framework in which to operate, and all of these guys, they have you know, went to Lord [Eagleburg] as scholars, they all wound up in key positions the next 20 years.

Bill: What you're saying, let me try to reinforce that... We did a recent study for the DC police department to look at their effectiveness and mission and whatever, they had to define their mission, to arrest people. We re-defined the mission, to reduce crime, and it changed everything about how they're going about doing their business. So it was just getting you know, the top line right, that started... that enabled a breakthrough in what the Chief of Police... how he decided to deploy his people, what programs they decided to fund and initiate, and what they did, day-to-day. And so I think you're exactly right, that it's...

Henry: Then you have to ask, what should you do? What are you trying to do, and what should you be doing? What is needed? And if you really are going to do the CIA, I don't even know how you're going to do it.

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there's nobody over there who would understand the question. It is really a tough problem...

Bob: I just... building on that, I thought the... that chart that says you know, visions are easy, changing behavior is hard, understates the difficulty of really having a meaningful vision. I think it's easy to come up with some cliché, which is what most people call visions. But I think it's very difficult to come up with something that really precisely states you know, in a realistic and yet inspiring and exciting way, what it is we're here for. It's kind of just... we just list that...

Henry: ...because political leaders are the ones with the vision.

Bob: I mean, it isn't enough to have a vapid vision, or a boring vision, which most visions are. But I think an awful lot of that communication and inspiration task comes out of the inherent value and the inherent worth of the vision that's been defined. And if you have... in fact I would even argue that if you get the vision right, and if it is truly exciting and liberating for people, that that whole task of how you change people, gets to much, much simpler. But if you get it wrong, you say, our vision is to have a 40% market share of business that grows 8% a year. You're not going to... then the task of changing behavior is going to be very hard.

Jim: Just one point of clarity... if you recall, we actually agree with you... when Bruce put up the three concentric circles, he said we're only going to talk about two of the three circles this morning. There is no instance we have found in which an organization was successful that had a bad strategy or did not have a vision. It starts... it starts with all three... we just did not put... we did not give equal time to that. We talked about the architecture and we talked about the leadership. In terms of what the leader has to do, day-to-day, in terms of the effort that they put in, that the hardest... the hardest part day-to-day, was the

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change in behavior... that what... is very much down the... down
the line... with what we found.

Henry: The trick I think is to make your subordinates do things they didn't know they could do. And for this you need... You take [Goodsey Barnaby]... He's really basically boring outside his... he is totally focused on the things he's doing. And there, he's extremely interesting outside of that. Boring... The things he's doing, he does with really great refinement of thinking. I mean he's thinking about them all the time. If you talk to him about those things, he's fascinating. Outside those areas, he sacrifices everything else.

Bruce: When they lived in Paris for awhile, they changed a little bit...

M(English accent): Can I ask... can I ask our CEO friends on the last question? Bob, can you give us help on that? I mean, what about this framework? What about [what happens] working in this area? Does it make sense?

Bob: I just have to see those examples to have an opinion. On the vision side of it... it's helpful to talk to bright people, but I don't notice the kind of thing you do... On the, how do you do it, part, I don't know if there's really a body of knowledge that in fact is applicable. Sure that'd be a very useful role, I'm slightly skeptical, just based on limited experience with it, but I don't know enough to really have an answer to that question.

M(English accent): John, can I ask you?

John: I'm a bit the same [cat]... we've done a fair bit of work in this area. I think it's useful to, and instructive to have these issues out and debated as clearly as they have to. I mean, that helps me think through the issues, and reinforce a certain behavior and... attaches less importance to other behavior. But

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it's very hard to teach it, to a range of people, I don't think
that's possible. So it becomes a very personal consulting activity
rather than a teaching activity for the group that we're trying to
influence.

Yoshio: I'd like to tell the Japanese story. Recently, we have something of many scandals of operations, [inaudible] corporation, [inaudible] and others. The problem we are facing, question I think that why companies could not prevent such wrong-doing by [inaudible]. Something wrong with that arrangement of the... such huge corporation. And [efficiently] of corporate governors is very much under discussion in every quarter. What the best way to govern a corporation in the proper way with the changing [context] of the world. And so far, many people talk about the function of [inaudible] of the corporation, which is primarily composed of the companies employees who have promoted or another promotion and what the stage of [inaudible]. Therefore, the board members are very subjected to the wish of CEO or COO and they can't challenge against us or the CEO. That's the weakest point of the Japanese board management. In the recent time, we've been trying to introduce an outside board, but they are small enough and also they are not carry much power in the whole policy making of the board. At the same time, function of the corporate... the auditors have been measured in definition. That corporate auditors should have much more... much stronger checking responsibility of the corporation's management. But again, this is in theory, but in practice they don't carry much weight so far. But since we have been suffering so many scandals of the corporation, there's a move that something should be done. You know that to influence the corporate governors and one way might be to strengthen... to increase the number of outside board member, so that the board can be very effective in policy formation and the same time checking the wishes of the top leader.

Henry: Well, in the Japanese culture, would outside board members
challenge inside board members, if they're Japanese?

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Yoshio: There the system should have changed. So far they are not such a... as a...

Henry: But if you had outside board members, would they...

Yoshio: Not for increase a number and also try to introduce American systems. American models...

Henry: So they'd have to be all outside board members.

Yoshio: Not all of them. Some of them.

Henry: I spoke to a Japanese board once, and I wanted to have a question period, and I was told they had to assign the questions in terms of a hierarchy, otherwise nobody would ask a question.

Yoshio: The current world is just a formality. There no... no discussion.

Henry: Yeah.

Yoshio: So they are possibly decided among a very small number of say, senior executives and defer to the board, simply for [inaudible].

Larry: I would despair frankly, if the... I mean if there's a certain disciplinary aspect that outside board members can create but I think the basic job of the outside board is to get rid of the leader and [can] and [cultivate] values within the organization. We haven't talked about values here much. What the hell, I mean it's off the subject but it's... it's like vision in a sense, I mean it's all part of the same thing. That leaders in the organization can't get across... I mean the board's not going to be able to get across values to the leaders, don't know how they go about it. I mean it's not fundamentally... having a [inaudible] ...what the rules are. [inaudible] ...scandals that do that. But the main thing

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one doesn't follow from the other, but my point is that this is essentially a behavior of leaders and disciples and what have you, sort of thing. Which we try to change all the time, by the way, and it's... sometimes we're...

Henry: Also what you said Bob, I think the interplay between CEO's and consultants is particularly complicated at that level, because you don't have a [good] CEO without a very strong, and consultants, not at Booz-Allen, but most of the time, they have a tendency that if you don't give them too much unpopular advice, they're not going to get re-hired. So, unless there's a greatly felt need to begin with, it's going to be an intense relationship that really tries to change things.

Larry: Well, I suspect you're going to find, that you'll find very few CEO's who will agree that a consultant ought to be able to tell him, and come out and tell them how to run things. That was just said down here. You might find some who will say, help me with how I get the troops, if you will, to do what I know damn well... other than in detail, telling him day-to-day, what to do, which is, I find, physically impossible. That, you might... and undesirable, and I also know intellectually, it isn't going to work for very long, and so on. But again, it's a behavioral issue, and if you can show empirical results, and furthermore go farther than you normally would in terms of, here are our recommendations for how you alter behavior, I don't know, conceivably you could have something on it. But I think probably the only thing you could do, it sounds like you are, is try it.

Bruce: So you know, it's interesting, I was thinking... Jim and I have had a lot of discussions about this, we... one of the things we've talked about, is if the... there probably would be nothing less... nothing more frustrating than going out, knocking on a door, and saying to a CEO, we're going to help you with leadership. Because it is... every study we've done, all the interviews we've done with CEO's tells us that part of the thing that makes a CEO is the... is the confidence that and the ego, and the competency to

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try to deal with these kind of issues. You've...

Henry: ...otherwise they shouldn't be CEO's...

Bruce: Yeah, and so going in and saying, we can help you with leadership, is you know... would be like when I tried to sell magazines door-to-door in Brooklyn when I was a kid. I mean, I didn't do very well. So the... the real... the real question is, and I guess, this maybe gets back to my doctor analogy of you know, understanding the symptoms and trying to figure out what the real problem is, is can you, and can we as consultants, if we combine the strategic aspects with the leadership aspects, try to help an organization both re-define the roles of management at various layers in the organization and then work with the company to get to both measure what needs to be done, diagnose the problem in effect, measure what needs to be done, and help you get there faster. That's... that's at least the image of what we're trying to develop.

Larry: I would sure like to think so. And somebody that was said earlier, implied earlier on that maybe didn't mean to, that... that TQM was dying out or something. At least there are people that have written about that, and that only X percent say it's 20 or whatever the number is, of TQM or whatever you call it, that processes really, [work], quote, unquote, what... directionally I believe, but the issue there is again, one of not intellectual construct, the issue is execution and change in behavior and institutionalizing the process. That's what you're... that's what you're after.

Oscar: Avoiding the bureaucracy that came together with it...

Larry: Yeah.

Cyrus: Let me make a comment here Bruce, because I think this has really been a very valuable and instructive session. What I take

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the focus is on what do you have to do, what do people in the
positional... the various positions, the leadership positions, what
do they have to do to... to enhance their effectiveness? To improve
the odds from being 4 to 1 against getting the... the change
implemented to 9 to 1 in favor. Those things can be identified.

Henry: I think Bob, I'd make a distinction. I don't see how a CEO can ask the question of what do I have to do to be a leader, because that's his job. But I think to read case histories can be... if you can create case histories, I think that could be a very successful exercise. And certainly it's in... in the foreign [culture], if the [Plutard] won't help you much because the situations are... but if you can find roughly comparable situations, I think you see how other people have handled it, is a way of training your mind to it. That, I think, is helpful.

Bob: I agree, but the only question is that, the kind of thing consultants can really...

Cyrus: There's a method of delivery issue here.

Henry: Consultants can create the case histories, but you then have to make the transfer.

Oscar: What you probably should do Brian, and Jim, map the Booz-Allen transformation process, and you will clearly see the sequences that have been gone through and the leadership change was only a small component of that, but you had a number of things behind it that led to the need of re-thinking leadership style and so on, but Booz-Allen decided to go with global practices, Booz-Allen decided to go with full partnership type of model, and a number of decisions were made much before Booz-Allen started investing in thinking about leadership. And you also had your back and forth. At one time you killed the geography, and you found that that was a bad mistake, and then how you balance the geography with the global practices. And I don't believe you still have the

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Cyrus: O.K., Bill?

Bill: Yeah, let me just say two or three words. I recognized that time was constrained so I just took the opportunity to send you folks a preliminary draft of the speech we made yesterday to members of the national assembly, sort of outlining, sort of the framework of some of our thinking in conjunction with other discussions in and around this subject. And really, what we have focused...

Henry: ...when you say the national assembly, whom do you mean?

Bill: They were members of the legislature and some members of the government.

Henry: Of the governing party?

Bill: The legislature was both, O.K.? And as well as various technocrats and things in and around the subject of what...what should happen going forward. I think there've been some analogues here to some of the things we've talked about today. We talked earlier about some of the conglomerate I see we're doing in Asia, and one of the flip side of the problem is what to do with... in Korea, given an economy that has been government-led and given the creation of these large business enterprises, the [chaibols], who have been their engine of growth in the past. I'm curious to see from Oscar's point of view, living in a... in an economy that's also going through... through change, what of any analogues, or perspectives he has from the Latin American side. And basically what we would like to do is in the three questions we've put forward, is to get your own perspectives based on your own business activities. One, how important is Korea to you? It is the third largest economy in Asia, behind Japan and China. There are others that have a higher GDP, per capita, that are smaller or others that are much larger like India, but have a much smaller GDP per capita, so the net is, Korea is the third largest economy. You know, what

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to be at your plate, ~~and you~~, and he could do nothing for any of us. ~~And~~ We did it really out of courtesy to him, and I knew him when he was an opposition leader, living in a wooden shack, and as soon as he got to be... Then he was a great democrat, as soon as he got to be president. But John, you may do business there, and ~~may~~ you may have a different impression.

John: I agree with everything you say. [Laughter]

Henry: They're the most ruthless people that I have ever encountered. And... They're so ruthless, I personally do not take any clients... I advise clients, I do not take any responsibility for what happens to them there, by having ~~established~~ Ed the contact, and so forth. Now, as a nerve center, their relations with Japan are impossible, their attitude towards Japan are impossible. Their relations with China are pretty good, but the Chinese are ~~essentially~~ the Chinese are using them. The Chinese are very worried that at some point, they're going to start raising hell about the Koreans in Manchuria. Russians, I don't know, I'd be amazed if the Russians would... so this concept of Korea as a nerve center for North Asia, I find it very difficult to believe. I think For that, Japan is much better situated, and I don't see that Korea has a huge geographic advantage. Korea's marginally better off than China, but not much. So that's my concern, and all these attitude changes that you want in Korea, I just don't see how... how they can happen, and who would institute them and by what mechanism. The so-called democrats, as soon as they get into office, will be just as hierarchical.

Yoshio: ...same concern about the [Mao center]. Another idea of closely insulated economic zone, in Northeast Asia. In the 21st century, China will be much stronger, and much more influential center of that area. And instead Korea, China will occupy such crucial importance. Therefore, this is a paper worked out in cooperation with Korean leadership, naturally, Korea is greatly emphasized, [that much by] Korea, but at the same time, in the

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objective view of the situation in the 21st century, Korea cannot
be the center.

Henry: I agree.

Yoshio: ...China. And most of this very much well-prepared
paper, I have some question to [seek your advice.] One is that,
when Bill mention Korea, on many occasion, at the same time you...
[use the run] with South Korea occasionally. When you use Korea, do
you visualize a unified Korea in the 21st century, and do you
specify use along with South Korea, in separation with unified
Korea or not? That is my first question. The second question is
that, do you emphasize entrepreneurial, individual effort of the
[privacy] staff? At the same, and in that [direction], you
emphasize smaller government in Korea, but on some occasions, you
emphasize the role of that government. In order transfer the
coming... very difficult and complicated system in Korea. There to
seem to be something contradiction of emphasis of the governmental
role as compared to smaller government. These are the two major
point which I found... I'd like to you, clarification. And the
Korea problem seem to be, they have been suffering four major
high... the so-called, four [highs]. The high wages, high interest
rate, high [land price], and high [distribution] cost. How do they
take care of these... the high prices of essential element of
industrial activities? This is a very difficult, and yet very
essential policy consideration for them to take care of. And you
mentioned a lot of action to be considered, but there are
[mentions] of in parallel, but the important thing is, from what
action, that they should start doing in order to improve the basic
social programs with their community. With... so far, it's so good,
but they have problem [inaudible] and program are very weak...
ranking systems and basic program for all, but designed too heavy
on export for that... They have to rely on import of intermediate
goods from other sources, including United States and Japan. They
are bound to have trade surplus, that is, deficit all the times.

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standards, and that is the... the lever that we have been starting
to pull on that side. On the issue of the government and the size
of the government, I think, and I hope we have tried to state it
clearly in the draft, and obviously this is going to be refined for
some time, but to emphasize that the role of the government, is
merely to set up the playing field, not to direct the economy.
And...

Henry: That's totally against their grain.

Bill: I understand that, but they ask us as outsiders to
help take a stake...

Henry: ...I know...

Bill: ...to take some stakes in the ground about what has
happened. And that is clearly one. Now, in that process, there are
some things that the government will have to do, and we have
studied other cases of deregulation, in the UK, and New Zealand and
in other parts of the world, and that doesn't mean that the
government just steps back and throws its hands up and does
nothing. It has to shift from one emphasis to another. And in
Korea, the particular problem that they're struggling with, is
right now, because for decades they have favored by access to
capital and people and the right to do business, these large
[chaibols]. That if they just pulled all the rules off on day one,
and walked away, that those [chaibols] would... are already in a
very strong position.

Henry: But who do you think would do this? I mean, how would it get done with a strong president, or through the [party]...

Bill: There is no doubt that as we talk here about corporate
transformations requiring leaders, that there has to be some
political leadership. The issue here, was to attempt to put a
program together of what it would be... what program could a leader

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follow, but a leader is obviously necessary, and at this point...

Henry: That's the governing party? They haven't picked their
candidate yet.

Bill: It is happening within the next... it's imminent...

Henry: Yeah.

Bill: Yeah.

John: In September, perhaps?

Henry: No, no. Now it's scheduled in July.

Bill: ...originally scheduled in July. Scheduled originally
for later in July.

Henry: And the other one is Kim [Dai Jung] he won't do this if he
gets elected.

Oscar: Well, I know almost nothing about Korea. I can only relate
to other emerging markets, the ones I know in Latin America. And I
was [torn] into Dr. Kissinger. If I had to start a major reform, in
Brazil and Argentina, I would start by political contributions,
just like Dr. Kissinger was talking today. That's an area that
people don't pay enough attention, but is extremely critical if you
want to introduce drastic change in the way things work. Because
not having the political contribution system very well established,
clear, no black money and so on, it's impossible for you to avoid
the power of the key groups, because that's where the money is,
that's what finance all the political campaigns, all the [Jacks]
who take people around the country campaigning and everything else.
So, we see that in Brazil and Argentina and that's the kind of
thing that in some way has close correlation with corruption and
[the tempo's the full dominant]. So a suggestion I will give to you
is if the Koreans really want to change they should start looking

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at the political contribution issue very [inaudible], and defining
the rules very precisely. Because that's the cornerstone for
introducing drastic change. If you don't change that, you don't
introduce drastic change.

Henry: The political contest in Korea is not about reform, it's
about seizing power. And...

Oscar: ...and that requires money.

Henry: Yeah, but I don't know any... I know most of the
politicians, I haven't heard any say this is a desirable
program. Am I wrong on that John?

John: No, I...

Henry: There be an intellectual belief that...

John: ...starting point's a little different. I think the
starting point is that the present system's going to collapse.

Henry: Yeah, that could happen.

John: And it is collapsing, I think.

Henry: That could easily happen.

John: That's... so, the point you're making about how
difficult it will be, doesn't come out in the paper, but it will be
extremely difficult for all the reasons that you mentioned.

Henry: Yeah, after it collapses, but then there'll be a
blood bath, then I mean it would really be awful.

Larry: I would wonder whether reunification wouldn't head in
that direction, because of... and Henry and others would be way

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ahead of me on this but, I would assume it would be a hell of a
burden on the Republic of Korea, just using Germany as an
example...

Henry: ...if they did it like Germany today, it would be great...

Larry: ...the do it like Germany

Bill: As a matter of fact, the German example I think, has
made the Republic of Korea want to push that as far out in the
future as they can, and yet at the same time, there's emotional
links and things that would want to have that happen. And I think
the... what people would like to see is a gradual process with some
economic ties to open up...

Henry: But they can't control it... What happened in Germany was
that the East German [street] collapsed and there was nobody strong
enough to affect the situation. I don't think China would be
indifferent to a rapid unification, nor would Japan be indifferent
even though they would do it more carefully... certainly not.

Yoshio: Couldn't be.

Henry: Couldn't be. So you'd have two of the major countries... Nor
would Russia be totally indifferent, but Japan and China, will
surely arrange that a sudden unification is
certainly between them... very difficult for me to foresee. What you could have is a
different regime in North Korea, separate from the South Koreans.
You could have a total collapse in North Korea, that is
conceivable, but even then, I don't think the Chinese will tolerate
a unified Korea at their border, with no restrictions on it. What
do you think? I don't think the Japanese would welcome it...

Yoshio: No. In northeast China, they have already about 2 million
Korean [tribes], already there are quite a few Koreans are
migrating illegally, from Korea to northeast China and the Chinese

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are really worried about such influx of migration.

Henry: I was in [Bodisdallion], what used to be [Bodasa]. Yeah, up there, I was there last year and the governor was very worried about the Koreans.

Bob: There's a sense in which, if you step back from this, Korea has been an over-achiever. If you look at it's natural advantages and disadvantages, it's accomplished what it's accomplished by ruthlessness and determination and very hard work, excessively hard work, and so on.

John: And pollution.

Bob: What?

John: Pollution.

Bob: Yeah, no, right. Lot of other... there is a kind of cost there to pay to in order to accomplish what the [chaibol] have accomplished, and they've accomplished a great deal, but the question, how... I mean you're obviously suggesting, and I think I don't everything I know is true, it's not sustainable. The question of whether there is a natural role for a country in that situation, that meets the aspirations that I think they probably had at least at one point, seems to be highly problematical. I...

M: They still have... have no fear. The way that LG aspires to be a $400 billion...

Henry: If you could make Korea a Switzerland, so that it's perceived as neutral... I mean if the other people around it didn't find it so objectionable...

Bill: Well, then that's one of the words we've used and one of the models we've used, just to help contrast how far away they are...

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Bob: The disadvantage in a whole series of ways, it seems to me the only real advantage they have is people who are prepared to work in a very disciplined kind of way that's useful, but... It seems to me, there are real limitations on what you could aspire to if you were in Korea, and perhaps some reconciliation between the means and the ends.

Henry: They don't know that.

Bob: I'm sorry?

Henry: They don't know that.

Bob: Yeah, I don't know if I'm right about it, it's... this is a...

M(English accent): When they look at Taiwan, when they look at Japan you know, why wouldn't they aspire to the same economic pace as these countries?

Yoshio: ...when say, they agree to [inaudible] law, they could competing in the international export market regionally... and the [chaibol] play a very important rule, but now, they rely too heavily on certain [chaibol], and some of them are now... they're very... facing collapsing or bankruptcy in recent times. Therefore this is a time when Korea has hit some very difficult set of stages, because of high wages and other high prices, they can't and they are losing international competitiveness, instead of going to say, advanced markets like the United States and Japan, they're trying to go to Southeast Asia, and East Europe and others. Otherwise they can't...

M(English accent): Because they're higher, by saying that...

Henry: Also, I tell you, when you talk to Korean... when you talk to Japanese political leaders, they have... I mean the Japanese culture is also insular, but they are related to the rest of the

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world. I mean, what they say makes some sense, makes sense. But what the Koreans say about the rest of the world... it's really as if they were living on the moon. They have no... I mean, I'm talking about the political class, the foreign minister, the president, the economic minister, they are not... they thrive from permanent hostility with Japan, that's where it starts. Then they have notions of reunifying Korea. Then they talk about the Chinese in a way that the Chinese would totally find, would find unacceptable, so it's... I think Japan can play a better role in China than they can. Even though the Chinese are not wild about Japan, but it's a... it's a strange situation.

Yoshio: The problem for us is that we can talk to Chinese much better than to Korea.

Henry: Yes.

Yoshio: Because education, they have been very much hostile view about Japan. Officially...

Henry: They have no real sense of their capabilities. They have no sense of what they are supposed to be... of what the limits are of even a reunified Korea.

Yoshio: ...the members of OECD last year, big help to international Korea, and Korean economy. It was a very hard decision on their part because [Raban] and others are very much against such members of OECD, because it mean that they have to change. But now that they have brought the membership, dramatically, they have to change, and that would...

Henry: If they want to reduce wages in Korea, don't you think it would lead to a bloody fight? If this... you can't talk about re-... if you want to re-structure Korean industry, you'll have to have blood on the streets. That's no...

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John: Their technology's pretty good, Henry.

Henry: No, that I think is good.

John: It's got a long way to go.

Henry: No, the technology is good.

John: Well, if you take the steel industry or the automotive industry or the chemical industry, they've actually got pretty good plants. But because they haven't been at it as long as the Japanese, or the Americans or the Germans, or someone, they're not getting the utilization out of that plant, that the best operators in the world get, and so they've probably got 30% of upside normalized industry without much capital expenditure in those industries.

Henry: But in a funny way, they don't have the national discipline for re-structuring that you have... in some other countries.

John: ...people have got in their paper. I'm happy to put it on the table so people can criticize it or...

M: What Myer's been trying to...

Larry: Well Bob, I was going to say, I could give you a long saga of our partnership with Samsung in Korea, in a major chemical venture, Mitsui's actually another partner, and to make a long story short, it's been very painful part... we were ordered to be partners of theirs, and this wasn't something that we decided to do. Had trouble with dividends, they tried to steal our technology, we had to bring our own... our government and the Japanese government, bring pressure to bear on them to keep from creating a separate company, taking the technology from our joint venture away. I mean that, the only point of all this... and then furthermore, the... that's for serving the textile industry. The

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textile industry in Korea has been... is in terrible shape. I mean, contrast that one with Taiwan where we've got a partnership over there where we've built six plants of the same sort, only one in Korea, two actually. And the Taiwanese business people are going all around the world creating these textile ventures, and we're following them wherever they're going, like Malaysia and places like that. The Koreans are not doing that. So I just do not see... I... it's hard for me to be optimistic about some of the things you say in there. About well, let's have partnerships with western companies... most western companies that ask me anyway, and other people about the kind of partnerships you might have, say, only if that's what you have to do, and only for Korea, if that's what you have to do, but don't... don't think you're going to go paddling off into the sunset with Samsung around the world, 'cuz that's just never gonna' happen, and have you be happy with it. It's frightful. We made a lot of money, parenthetically, been hard to get it out of them, but that part's been O.K., in Korea. But gosh, I find it hard to see that any of those... I mean, what they really ought to do is, do what we did in 1911 with oil and tobacco, and that is, to split up those damn [chaibols] and give the money to the founding partners and create smaller, more entrepreneurial companies, but that'll never happen. I don't know about never, but at least in the foreseeable...

Henry: I think this is...

Bob: The question about reputation and I think Larry kind of summarized that one pretty well...

Larry: Well, maybe everyone else has had a happy experience there, but that's just my own...

Bob: We had a pharmaceutical joint venture that was a disaster. It's...

M: With whom?

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constructive discussion with anyone but the most senior people, because the rest are just driven by propaganda and ideology, that's not really what you want to hear. They're not going to make the progress that is advocated in the paper. The paper says this, without much more domestic involvement of foreign companies, and the removal of the obstacles to the anticipation, and the attempts to destroy any joint venture that is created. And they will, as Larry said, the experience that... we've not seen a single experience of people forming a joint venture with them and that having any longevity under peaceful conditions, they try to tear 'em apart, pinch the technology, it's a pretty unpleasant experience, and... It's... it may be a basis for military consensus or consensus about military things, but not even going into business, or business things. The specific questions, yes, it's a major market for us, and they've done well. For their industries have done... have really done quite well, but their reputation suffers in the international free trade arena for a whole bundle of reasons. Significant barriers to trade, the significant barriers to foreign investment, their ethics, and the different standards that they expect other countries to apply to them, they don't apply at home. Again, it's ideology and propaganda, and restricted access. They'll need a lot more transparency in dealing with others to develop as a center of operations, and they'll need more depth of stability in their joint venture relationships. But, is there going to be a need for what you're recommending, undoubtedly. I mean, you talk about a big bang in Japan, there's potential for a real big bang in Korea. And if you've just got the detail, you're advocating a pretty substantial change in the financial sector, I'd caution you as to how much of a problem it's going to create, because it's going to create... if you dismantle the artificial arrangements on which their interest rates are based, and their financing is based, and the corporations have been funded, that is going to really unwind a whole chain of events that are pretty ugly, I think.

Henry: In the political field, they're not creating a really warm feeling either. I mean, there isn't that... that people have a huge

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incentive to go to bat for them when they... I mean, you know,
intellectually...

Bill: Lots of good news.

Cyrus: What would happen, in that context, if they had a big bang, you know that John has referred to, that they made some changes in the financial system and the system was near collapse. What would happen?

Henry: Well, we have a strategic interest in not letting South Korea collapse. And there I think even everybody would help. But it isn't people don't feel about South Korea the way they do say, about Taiwan, where people do have some better experiences. And...

M: Given the way it's going Henry, the next thing, they'll be members of NATO.

Henry: South Korea. It's...

Bruce: Before the Swedes...

Cyrus: That's for sure.

Henry: When I was in Sweden, they were passionately in favor of the Baltics going into NATO so that they can stay out. [Laughter]

Cyrus: They'll be surrounded. Yeah, they like that.

Bob: You know, at the time you sent this question out, if I recall correctly, the Thai crisis had not developed to the point...

Bill: It was similar in timing but...

Bob: So what I'm thinking about, I mean this... probably a tangent but, there's one scenario that says the Thai crisis turns

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out to be far more serious and far more extensive throughout Asia,
than is currently...

Bill: That it's an analogue, tip of the iceberg, sets off in other countries...

Bob: That it sets off a devaluation wave, that increases austerity and so on. It slows down economies, and all those kinds of things. I don't know whether that... A, what likelihood of that happening or, but B, what impact it has on Korea. But my guess is, it would have impact on Korea, but I...

Yoshio: Well, it would certainly have an impact on Korea, because Korean export are being directed to Southeast Asia, much more than before. Therefore, when Thai economy collapse, it's already impacting on Malaysia, Philippines, Indonesia, Asian countries, so this a... setback of the economy of Asian. Also would impact on the export situation in Korea.

Bob: ...forced devaluation of...

Yoshio: Already Thai [bots] went down about 15%, and Malaysia [binge] and Philippine [peso], already had went down.

Henry: And Indonesia.

Bill: Indonesia also.

Bob: Does that affect the [wan]? How does that...

Yoshio: Already Thai [wan] has been very weak.

Bill: It has been easing down. I happen to have not been there the last two weeks. I don't know...

Henry: And as soon as the Indonesian election is over, a secession

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crisis will start. Because nobody... you know, everyone knows, half the people have to... and the additional attention that the New York Times is giving Indonesia, actually is not good for it because it will mobilize in this country all the people with the [Puritan] tendencies which they're not very able to handle right. So I mean, just supporting viewpoint about...

Bill: I would like to thank everyone.

Larry: Positive view... [Background conversation]

Bill: One of the things we are... seriously, one of the things that we need to do is to put bite into this, and some of the bite comes from the views of the international community, more than the views of the domestic community, O.K.? And there are many voices in the domestic community about the need to change, but I think a few anecdotes will have made their way to our next meeting next Friday.

Larry: Well, nobody's arguing with what ought to be done, it's... or at least the feasibility of doing it well and all that...

Bill: We have not signed up for the implementation program. But again, thank you very much.

Cyrus: I don't see that there's a rousing view of that... at least this group is going to be investing next week in Korea.

Henry: ...new office in Pusan.

Cyrus: Well, we have an office in Seoul.

M: Bill's been there at least twice.

John: We'll be happy to continue to sell them iron ore,

CJA

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coal, manganese and copper, so...

Cyrus: But what, cash on delivery?

John: No, they pay alright.

Larry: They'll pay.

Cyrus: O.K.

Oscar: We sell a lot of grain to them, never had a financial problem but...

Henry: Who, Korea?

Cyrus: We did have... we do have, as Larry suggested, we do have 15 minutes left, which we could devote to the topic... if any of you had a comment to make on the Hong Kong-China situation. If you're... if not, we can... John is... Here, it's already done.

Larry: ...what we could say about the Hong Kong situation that hadn't already been written. So far, so good.

[Background conversation]

Larry: The big issue is Taiwan and what's going to happen. It's not the only issue, but it's a big one.

[Background conversation]

Henry: I tell you, if we don't sit on the Taiwanese a little bit they're going to get a goddamn war. They're going to get us into a war with China. They're totally ruthless in maneuvering us into... and they're masters at doing this which drive Beijing up a wall, which we don't even understand. For example, Taiwan, there used to be a government in Taiwan for 50 years, and a province of Taiwan

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Yoshio: ...for their advantage. This is the thing that we...

Henry: If China adopts a policy of forcing everybody to choose, it will... they will not necessarily win but we will almost certainly lose. Because everyone will then move into a middle position and... And if you look at the policy of... if you listen to the combination of right and left-wingers in Washington, we would be taking on Indonesia, China and to some extent, Japan, simultaneously.

Cyrus: Don't they realize we're outnumbered?

Henry: They think we can beat the Russians, we can beat anybody.

Larry: Well, we've carried on a halfway decent foreign policy before without... with still having noise from the right and the left, but the issue...

Henry: But this is worse now. I've never seen it this way. I mean, we've had this noise before, but this administration, when they're attacked, they agree with the critic, and say, we're doing it already. And that will [atone] the [inaudible] only so long...

Larry: My point was going to be, we need to have an administration with a foreign policy that has some back bone, has some [elegance] to it. I'm a little bit worried about whether... the present or foreseeable foreign policy is liable to do any good.

Henry: That's a real problem, because we... and we need also, with the... I'm more worried right now about the Republicans. If you read the Republican Standard, there's no reason to read it, the Weekly Standard which is... well the only reason to read it is because they are the opinion makers for all these congressional committees, and everybody reads it and knows things, and they are very anti-business. They're populist. They're attacking big business, they're against the Fortune 500. And you may not read it, but I promise you, every congressional... every congressman reads

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Larry: Once we get into a confrontation with China, it'll take a hell of a long time to get out of it, I would...

Henry: That's what I mean, it won't end.

Larry: It's not going to be handled instantaneously.

Henry: No, no, you can't touch [Turn], they won't turn with us. And I'm really frightened about this visit of [Chung Kae Min] here.

Bob: Has Jim [Sasser] learned anything?

Henry: No he's not... he's been O.K. I thought it was a bad appointment, but he's been good actually. No he's... he's not the problem. The problem is the opportunists and the administration is totally frivolous. I've never seen people like this. They think they can talk themselves into and out of anything. But they have no strategy. But [Rupert] is a serious man, I mean if you talk to him.

M: What about Albright?

Henry: Albright is... very public relations oriented. Nice lady but very public relations... [inuadible] strategies at all.

M: ...over to Bosnia, puts the helmet on and...

Henry: Bosnia is a typical example. We are creating a situation in Bosnia. Why do we want to unify Bosnia? These are three ethnic groups that have been murdering each other for hundreds of years. If you say that Serbs are criminals, it depends when you start counting. They're all criminals. [Laughter] There are no innocent people in Bosnia. It depends on when you start counting, and if we now pick up these... I'll tell you what is going to happen. If we pick up these major war criminals, the Moslems are going to attack into the Serbian areas, ethnic cleansing will start again. And the Serbs will start sniping at Americans. The Moslems may actually win that war, but it will be then a blood bath on the other side, and

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Americans will get killed and ~~whatever you [think].~~ And the
Croatians don't want to live in a unified state either, but we
~~have~~: this is a ~~this is~~ sort of a domestic issue I've got to
go.

Cyrus: On that... on that last happy note, not that you have to go, but the other... let me just conclude for a minute. I want to thank each of you for coming, we really appreciate it. This is as always, a very valuable input to us and how we think. The next meeting, Henry's going to host it... you're going to... Henry's going to host the next meeting at the World Cup, July 10th, and we hope each of you...

Henry: The final is July 12th...

Cyrus: I know. Well, what we'll do... we have the meeting planned for July 10th, which is a Friday, and that evening will be the semi-final, and that's the game we'll probably try to get. If... I'll send you a note, and if I can organize tickets for any of you that want for the finals...

Henry: ... the semi-final, I hate to tell you is Thursday night.

Cyrus: Is it Thursday night? O.K., well then we'll go to the semi-final Thursday night and have the meeting on Friday. Paris. July 10th is the meeting in Paris, and so if Thursday night is the semi-final, we'll go to that game. And then, I will try, if you let me know, that you would like, I'll try to get tickets for you on the final as well, if you...

Oscar: I can promise you Brazil will...

Cyrus: Brazil, I know. Well, of course Brazil's going to be in the finals! Yeah.

Henry: The World Cup I want to see is the one which the Koreans

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FIFA corrupted Divas into sharing between Korea and Japan... Now the hell that is going to work, jointly in Korea and Japan... But they corrupted...

Cyrus: What we'd like to do also... between now and then, Brian told you about the Beyond 2,000 study we're doing and our own strategy, and a couple of us would like to visit with each member of the advisory board over the next probably, six months or so, and we'll schedule it. We'd like to have what, an hour or so? Is that about... so we'll come to you and visit you, to get your views, and we'll give you something in advance of that to stimulate your thinking. But this would be very valuable to us. It was... when we did the Vision 2,000 last time, I think the advisory board's input was really critical. And I thought it just helped us a lot, because we get good, straight, you know, no bullshit answers out of you guys, and that's good. So, the trip for those, I think John and Yoshio, you're going to come along with us to... out to Silicon Graphics. And Oscar, excuse me. And Martin, and you, and Brian and me... wow, we've got a lot of us! Sure you don't want to change your mind Larry?

Larry: Well, I'd like to but I think I'd better get back...

M: Show us an oil platform, Larry...

Larry: Boy, if I ever see...

Cyrus: Thank you very, very much [Recording ends]

END OF DOCUMENT

Henry Kissinger: When you... if you can analyze these failures... I mean, I'm sort of interested why organizations or countries decline. Why couldn't they figure it out? Or why didn't they hire somebody? I mean, what was it that they could not see, when you could see it so clearly?

Henry: So it's easier go... I mean, to slide down, I guess, yes.

Henry: ...get an agreement that there's a decline. Which in business, I suppose you... it's easier or not.

doing it.

Larry: Well, the essence of the crisis, it takes, in my experience, a fair number of years... I sort of call it generational change. Everybody thinks you can do this in six months to two years, and hire anybody you choose from the outside to help you get the concepts if you need that, and then bingo, you're going to change people's way of thinking about life in any organization, family, body politic, you name it, it's all the same game, church, maybe that's even harder in some cases. It's just very hard and I think it takes a relentless approach to the thing. It takes horrendous effort at communication.

profit.

Oscar: Vision of the future.

Henry: ...educating myself...

Oscar: ...an ideology, you can only develop those... when things are well. Because when you are in a dramatic re-structuring, you cannot really think too much about aligning those three. Because if you look at the case of [Boon], I'm very curious about your perception on conglomerates. [Boon] was by far the largest conglomerate in Latin America and almost went bust because of that. The complexities of managing such a diversified conglomerate. And when you go through the re-structuring, it's basically saving the company. You don't worry much about that. You just cut as much as you can, and you keep the financials... you bring the financials back into shape. Then you can start thinking about those. So one

Henry: ...the trouble in Europe now though, is they know what needs to be done, they just don't know how to do it.

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Henry: But you cannot prove it needs to be done. But also, I think in democracy, this is now, this is not yet true in companies, is that the process of getting into a leadership position is so irrelevant to what you need in the leadership position, that it would really be odd if they matched.

Henry: ...culture of Korea...

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Cyrus: Right, right. Ha!

anarchy.

Henry: One problem that exists now is that the framework for political thinking and for economic thinking are at variant with each other. If you are head of a multi-national, you must think in global terms, because your economy is global. When you are head of a country, you are driven by local perspectives and it's not always that easy to match them. That's the problem in Europe I think, in an important way.

Darrin: Exactly.

Henry: They are close to each other? The range of strategies or what?

Brian: Not necessarily.

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Henry: How can your people coalesce... I can see if there are three conceivable strategies with 5% variation between them, but what if there's a 30% variation? I mean, then you have different... how can you get a coalescence of a theme then?

Henry: They have to pick one.

Brian: Yes, yes.

Henry: O.K.

Henry: ...you have a controversial strategy. ...than adopt a controversial strategy. That your subordinates are dubious about... then the first time they come to an obstacle they say see, this strategy isn't any good. And in my governmental experience, that's the point. You've got to get them over the hump and continue... even though it may look difficult. And you have to... you shouldn't change strategy too rapidly, if you designed it well... not maybe, ought to be flexible in the tactics, through it.

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Henry: But everybody of these 38 had the same assignment?

Henry: Each was given a part?

Jim: Yes, because they all brought different skills to it, it's a very complex problem. They managed at the end to reduce delivery from 26 days to 8 days, and they came in, in under 8 months. Now, this is very typical of the way cascading leadership works at Hewlett-Packard. When Lou [Platt] was recently asked about this, they said... they said, is this anarchy? And [Platt] said no, he said because the most important aspect of management of this company is cultural control and self... that's self-control. And that... and when Bruce put up that model a little bit earlier, looking at Samatra's, if I could just show this... he said that he showed this to the head of a large oil company and he said, well of course, you have to do both. In fact what Samatra [Groschal] would say, and what Lou [Platt] would say is no, in fact you are not doing both. What you're doing is you... you have control but the control becomes self-control in this model, and that's what you're looking to... and that's in fact what you're looking to... to treat. It is in fact, a real transition from the left hand side... the left-hand column to the right-hand column.

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Henry: But it... Could I ask you since I know Barnevik and
[Lindahl] very well, what are they doing? What were their answers?

Henry: One thing is, they had no domestic market. They had to be on
the global economy.

Jim: Whatever forced them to do it, they did the right thing, it worked. Now, what we can see is that you can take and look at what it is that someone like Barnevik... what he does, he thinks in terms of what... his values, his philosophy and the definition of the process of the change, the things he says in terms of communicating and what actions he actually takes, and these are an identifiable and [willfully] limited set of activities. But each of these is grouped around the [Bell] framework that Bruce presented earlier. Talk about what is the leadership role at each different level for each of these different activities. And what we find, and it was rather remarkable, is that most people think that the hard thing is getting the vision, that that's the hard part, the hard part is getting the strategy. But in fact, the hardest part is getting people to conform to that strategy, getting people to implement it, getting people to carry it out, getting people to own it and to internalize it. And secondarily, one of the hardest parts of that is setting the measures and rewards to encourage them to move in that reaction. People will behave in the way they're rewarded. That means you have to have the right [metrics]... the right reward system. I want to say, I think at ADB, this is what... where Barnevik is an absolute master in terms of knowing what to measure and how to use the measurement system.

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Bruce: Definitely.

Henry: The first question you have to ask in government is, what
are you trying to do? Especially at the CIA, but in almost any
leadership group in government you will find, in my experience that
the biggest problem is that they have not defined what they're
supposed to be doing properly. And I think that is the absolutely
key thing, and I think that's even true... I happen to be a close
friend of Bob [inaudible], that's what he sort of focused on all
the time, and that's why he has seminars on this... of his top
executives, in which I have participated, in which that's the
question they worry, they don't... region by region even, what...
what are we trying to accomplish here? In government it's
absolutely essential. In the CIA, they don't have a clear mission
today. But even in the State Department, I mean... if your mission
strategy or if your mission, day-to-day tactics of answering

incoming cables, which is the overwhelming temptation in the State
Department, you get thousands of cables every day, you can keep
busy all the time because... and take up your time.

Henry: If you have a clear focus on what you're trying to do, and keep refining that, I think I've said this here... I had a group in the State Department, that met every morning, and which is similar to what... that was not permitted to look at cables. That asked the question, what are we trying to do region by region? So that when a crisis did come, we at least had the framework in which to operate and all of these guys that have you know, went to Lord [Eagleburg] scholars, they all wound up in key positions the next 20 years, so...

Bill: What you're saying, let me try to reinforce that... We did a recent study for the DC police department to look at their effectiveness and mission and whatever, they had to define their mission, to arrest people. We re-defined the mission, to reduce crime, and it changed everything about how they're going about doing their business. So it was just getting the you know, the top line right, that started... that enabled a breakthrough in what the Chief of Police... how he decided to deploy his people, what programs they decided to fund and initiate, and what they did, day-to-day. And so I think you're exactly right, that it's...

Henry: Then you have to ask, what should you do? What are you trying to do and what should you be doing? What is needed? And if you really are going to do the CIA, I don't even know how you're...

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there's nobody there who would understand the question. Really a
tough problem...

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Henry: The trick I think is to make your subordinates do things they didn't know they could do. And for this you need... you take [Goodsey Barnaby], he's really basically boring, outside his... he is totally focused on the things he's doing, and there, he's extremely interesting, outside of that boring... The things he's doing, he's doing... with really... great refinement of thinking. I mean he's thinking about them all the time. If you talk to him about those, he's fascinating. Outside those areas, he sacrifices everything else.

Henry: I spoke to a Japanese board once, I wanted to have a question period and I was told they had to assign the questions in terms of hierarchy, otherwise nobody would ask a question.

Henry: Yeah.

Henry: Also what you said Bob, I think the interplay between CEO's and consultants is particularly complicated at that level, because you don't have a [good] CEO without a very strong... and consultants, not at Booz-Allen, but most have a tendency, that if they give too much unpopular advice, they're not going to get re-hired. So, unless there's a greatly felt need to begin with, it's going to be intense relationship it really tries to change.

Larry: Yeah.

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Henry: Consultants can create the case histories, you then have to
make the transfer.

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Cyrus: O.K., Bill?

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are your perspectives on Korea as a respected member of the
international trade community or not? And thirdly, what are some of
the actions you think Korea could take in order to become more
attractive, or to have a more prosperous future as an economy
moving forward. And I'd really like... we have just about enough
time, so maybe everybody could say something and we could do it in
order. I would thank John a lot for the preparation of his multiple
memos on the subject, which is very helpful. But... and Henry, I
heard you say something about a cultural problem, earlier...

Henry: Yeah, I just don't think any of this can happen... in the
Korea that I know. I mean, maybe there's a huge, dramatic change
possible. But first of all, I don't... have people who do business
there. I just see them... I know the political side of [inaudible]
...I know one of the companies, [Sabu], very well, but I don't know
the others very well. With [Sabu], that is a very international
company already, and they operate very effectively, in my
observation, wherever they can do it with this very hierarchical
leadership that they have. The ability... and frankly, I think
they'd stop at nothing to have their way, and... But the idea of
building a consensus with other societies, and making yourself felt
as far as a partnership, this is so foreign to them. Wherever I've
seen them operate, they've bulled their way through, probably by
bribery, I don't want to know how they do it, but I... I won't
touch any of their activities. I confine myself strictly to
advising top people on political content. But I have never... I
know all the top people in [Beirut], and I know some of them in
the other companies. So this idea of a regional nerve center and of
a cooperative thing, I find... it would be interesting to see what
their reaction is, it's not the way they operate. I've never seen
them operate this way. They're so hierarchical. I had breakfast the
other day with the president of Korea, who's actually under near
indictment, and who is going to be finished in six months, and he
had advised a group of top New York people like, David Rockefeller,
Paul [Borgan], he made it as if he was being received as the
imperial court. You had to be there 15 minutes before, and you had

to be at your plate, and you... and he could do nothing for any of
us. And we did it really out of courtesy to him, and I knew him
when he was an opposition leader, living in a wooden shack, and as
soon as he got to be... then he was a great democrat, as soon as he
got to be president. But John, you may do business there, and I
may... you may have a different impression.

Henry: They're the most ruthless people that I have ever
encountered. And... they're so ruthless, I... I personally do not
take any clients... I advise clients, I do not take any
responsibility for what happens to them there, by establishing
contact and so forth. Now, as a nerve center, their relations with
Japan are impossible, their attitude towards Japan are impossible.
Their relations with China are pretty good, but the Chinese are
very... the Chinese are using them. The Chinese are very worried
that at some point, they're going to start raising hell about the
Koreans in Manchuria. Russians, I don't know, I'd be amazed if the
Russians would... so this concept of Korea as a nerve center for
North Asia, I find very difficult to believe. I think for that,
Japan is much better situated, and I don't see that Korea has a
huge geographic advantage. Korea's marginally better off than
China, but not much. So that's my concern, and all these attitude
changes that you want in Korea, I just don't see how... how they
can happen and who would institute them and by what mechanism. The
so-called democrats, as soon as they get into office, will be just
as hierarchical.

Henry: I agree.

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Henry: ...I know...

Henry: But who do you think would do this? I mean, how would it get done, with a strong president, or through the [party]...

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Henry: Yeah.

Bill: Yeah.

John: In September, perhaps?

Henry: And the other one is Kim [Dai Jung], he won't do this if he
gets elected.

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Henry: Yeah, but I don't know any... I know most of the
politicians, I haven't heard anyone say this as a desirable
program. Am I wrong on that John?

John: No, I...

Henry: Yeah, after it collapses, then... but then there'll be a
blood bath, then I mean it would really be awful.

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Henry: But they can't control it in... What happened in Germany was
that the East German [street] collapsed and there was nobody strong
enough to affect the situation. I don't think China would be
indifferent to a rapid unification, nor would Japan be indifferent
even though they would do it more carefully, certainly not.

Yoshio: Couldn't be.

Henry: Couldn't be. So you'd have two of the major countries... nor
would Russia be totally indifferent, but Japan and China, will
certainly between them, will arrange that a sudden unification is
very difficult for me to foresee. What you could have is a
different regime in North Korea, separate from the South Koreans.
You could have a total collapse in North Korea, that is
conceivable, but even then, I don't think the Chinese will tolerate
a unified Korea at their border, with no restrictions on it. What
do you think? I don't think the Japanese would welcome it...

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Henry: I was in [Bodisdallion], what used to be [Bodasa]. Yeah, up there. I was there last year and the governor is very worried about the Koreans.

John: And pollution.

Bob: What?

John: Pollution.

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Henry: They don't know that.

Bob: I'm sorry?

Henry: They don't know that.

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Henry: Yes.

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Henry: I think this is...

M: With whom?

Henry: In the political field, they're not creating a really warm feeling either. I mean there isn't that... that people have a huge

incentive to go to bat for them, when they... I mean, you know,
intellectually...

Bill: Lots of good news.

Henry: Well, we have a strategic interest in not letting South
Korea collapse. And there I think even, everybody would help. But
it isn't... people don't feel about South Korea, like they do say,
about Taiwan, where people do have some better experiences. And...

Henry: South Korea. It's...

Bruce: Before the Swedes...

Cyrus: That's for sure.

Henry: When I was in Sweden, they're passionately in favor of the
Baltics going into NATO. So that they can stay out. [Laughter]

Henry: And Indonesia.

Bill: Indonesia also.

John: No, they pay alright.

Larry: They'll pay.

Cyrus: O.K.

Henry: Who, Korea?

[Background conversation]

[Background conversation]

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that symbolized that Taiwan is a province of China. They've now
abolished the provincial government, which means that Taiwan is
independent. I mean that's just simple.

M(English accent): They did that exactly when the spotlight was on
Hong Kong. Very, very... astute timing.

Larry: ...expressing their point of view.

Henry: Yeah, but it's noticed in Beijing, you know, they keep adding
little weights... if we can have a say, five to ten year [quiet]
with China on Taiwan, if we can bring about a standstill in the
independence, I saw [Chung Kae Min] right after our carriers were
in the straits, and I said to him, the last time I saw Mao, he
said we can wait for Taiwan a hundred years. I said, is that still
true? He said, no, it isn't true. I said, why not? He said, because
that was 23 years ago, now we can only wait 77 years. [Laughter]
And that's basically... they will not force the issue in the next
period because they have made good relations with America, the key
element of the [Chung Kae Min] period. Because they are more afraid
of Japan and Russia and India. If we drive them to it, and re-think
our [principles] then we're going to have a tough time, I think in
Asia. And Taiwan is trying to do that.

Jim: Following on with this question, may I ask both Dr. Kissinger and Mr. Okawara the same question. As China becomes stronger economically in real terms which is likely... the trend is likely to continue, does that mean necessarily stronger ties between and the United States? Does that force Japan and the U.S. closer together, or is the U.S.-Japan relationship not linked to the... to the economic and military power of China?

Yoshio: Japan has been saying that in the Asian, U.S. and Japan, triangle... but this is not... this triangle should be... this kind of triangle meaning that... based, I'm not sure... based on the strongest alliance [inaudible] between Japan and the United States,

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and if only we maintain such alliance [inaudible] with the United
States, we can't develop proper relationship with the United
States. At the same time, for that purpose, we do need very correct
relationship between the United States and China. This is a... our
basic... point...

Henry: Exactly... I must say exactly my view. If our relations with China deteriorate, that is likely what these fools in Washington don't understand, if our relations deteriorate, our relations with Japan will deteriorate also. And because... we will then be perceived as not being able to [mask] the situation. If we want to contain China, we need good relations with China. So it's helpful to have good relations with China, it's a paradox. I agree that... the relations with Japan, should be the key element, probably because it also worries China a little bit. It keeps them under restraint. On the other hand, just as I said we have to restrain Taiwan, we have to restrain those elements in Japan, who might want to use this relationship to reconstitute the... I mean this is a minority element, but assuming that the alliance is conceived as defending Japan, and defending areas around Japan, like Korea, that are of key interest to Japan, I think it must be the key element of our foreign policy. But we do need good relations with China to make it really operate. Do you agree with that?

Yoshio: I do.

Henry: This is why it's a very tricky business, and why all these
right-wingers and left-wingers who are maneuvering us into
confrontation with China are also ruining our position in the
countries around China.

Yoshio: We should be very careful so that not China will intend to
put the [which] between Japan and the United States.

Henry: Exactly.

Henry: That's a real problem, because we... and we need also, with the... I'm more worried right now about the Republicans. If you read the Republican *Standard*, there's no reason to read it, the Weekly *Standard* which is... well the only reason to read it is because they are the opinion makers for all these congressional committees, and everybody reads it and knows things, and they are very anti-business. They're populist. They're attacking big business, they're against the Fortune 500. And you may not read it, but I promise you, every congressional... every congressman reads