Bruce Mehlman bruce@mc-dc.com @bpmehlman April 12, 2018 Q2 18 Washington Update EMPOWERED AMERICA Photo by Ted Eytan, Wikimedia Commons Photo by Mark Dixon, Wikimedia Commons Why the Age of Disruption May Usher in an Era of Reform
CONTENTS Q2 2018 THESIS & CONTENTS: Reform movements succeed when the methods, motivation & moment converge. We are reaching such a time. THE METHODS Slides 3-6 Revolutionary Tools Enable Revolutionary Times THE MOTIVATION Slides 7-13 Why Citizens Increasingly Demand Change THE MOMENT... Slides 14-21 New Leaders Emerging to Challenge Washington / Fill the Vacuum WHAT S NEXT Slides 22-30 Where We Go From Here
THE METHODS Revolutionary Tools Enable Revolutionary Times 1517 Protestant Reformation Printing Press 1963 Civil Rights Movement Television 2017 #MeToo Movement Social Media / Smart Phone Photo by Chris Brown, Creative Commons License
Methods: icensed from AP EMPOWERMENT, 2018 Everyone s a Witness
Methods: Source: Statista, 2018 EMPOWERMENT, 2018 Everyone s a Publisher 2167 (Total Global Users, Millions) 1500 1300 980 843 800 794 568 376 330 300 260 255
Methods: EMPOWERMENT, 2018 Everyone s an Activist
THE MOTIVATION Why Citizens Increasingly Demand Change CHANGE
Motivation: Source: Pew (2017) WE DON T TRUST OUR GOVERNMENT % Who Trust Government Most of the Time
Motivation: Source: Gallup; Media (1976) OUR INSTITUTIONS LET US DOWN MEDICAL ESTABLISHMENT THE CHURCH WALL STREET HOLLYWOOD POLICE CONGRESS Licensed from AP Licensed from AP % Great Deal / Fair Amount of Trust In Medical System Mass Media Church Banks Public Schools Congress 1977 80% 72% 64% 60% 53% 40% 2017 37% 41% 41% 32% 36% 12%
Motivation: WE BELIEVE WE RE ON THE WRONG TRACK It s Not Unique to America WRONG TRACK 100 90 80 70 2015 2016 2016 & 2017 2017 2017 2017 2018 2017 2015 2017 2017 2016 2017 60 50 40 2016 30 2015 RIGHT TRACK 20 2016 10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 And Keep Voting for Change (5 of the last 6 elections) 0 2017 2006 2008 2010 2014 2016
Motivation: CHANGES COMING TOO QUICKLY FOR SOME AVs Blockchain AI Gene Editing 3D Printing PREVIOUS ECONOMIC DISRUPTIONS How long for wages to return?... 19 th Century: 6 decades 20 th C: 4 decades VR Robots
Motivation: Source: Wikipedia based on Financial Times Global 500 THE PACE OF CHANGE IS ACCELERATING 2003 MARKETS: Data is the New Oil (Largest Global Companies by Market Cap) 2008 2013 2018 2003 2008 2013 2018 GE Exxon Mobil Apple Apple Microsoft PetroChina Exxon Mobil Amazon Exxon Mobil Wal-Mart Microsoft Google Pfizer China Mobile Google Microsoft Citigroup Procter & Gamble Berkshire Hathaway Facebook Wal-Mart I&C Bank of China GE Tencent
Motivation: THE PACE OF CHANGE IS ACCELERATING Sources: GDP, Internet, Internet, Defense, Supercomputers (2017), Supercomputers (2000) GEOPOLITICS: China Rising (Rising Share of Global Totals) USA CHINA 50.0% 45.0% 40.0% 35.0% 30.0% GDP (PPP) 50.0% 45.0% 40.0% 35.0% 30.0% Internet Users 29.4% Top Supercomputers GDP (PPP) 50.0% 51% 45.0% 40.4% 40.0% 35.0% 30.0% 28.6% 50.0% 45.0% 40.0% 35.0% 30.0% Defense Spend 39.0% 36.1% 25.0% 20.0% 15.0% 20.6% 18.3% 15.3% 25.0% 20.0% 15.0% 21.1% 25.0% 20.0% 15.0% 25.0% 20.0% 15.0% 12.7% 10.0% 5.0% 0.0% 7.4% 2000 2017 10.0% 5.0% 0.0% 8.4% 5.4% 2000 2017 10.0% 5.0% 0.0% 0.6% 2000 2017 10.0% 5.0% 0.0% 4.0% 2000 2017
THE MOMENT New Leaders Emerging to Challenge Washington / Fill the Vacuum
Moment: NEW LEADERS ARE SEIZING THE INITIATIVE Challenging Washington / Filling the Vacuum CEOs STATE LEADERS FOREIGN LEADERS INNOVATORS NGOS
Moment: FOREIGN GOVERNMENTS OUT IN FRONT REGULATING THE INTERNET FINANCING EMERGING MARKETS EXERTING GLOBAL INFLUENCE EXPANDING GLOBAL TRADE
Moment: STATE LEADERS FIGHTING WASHINGTON NET NEUTRALITY (36 states attempting to thwart FCC action via state laws, executive orders or lawsuits) SANCTUARY CITIES (~500 jurisdictions decline to help Feds ascertain residents immigration status) Source (& color key): https://www.digitalmusicnews.com/2018/03/19/us-states-net-neutrality-resistance/ Source: CIS 34 AG s BRINGING MULTISTATE LAWSUITS (Dem AGs going to courts to stop Trump Admin efforts just as GOP AGs did vs Obama Admin) 3 3 7 6 6 4 6 4 3 2 2 3 1 1 2 2 3 5 2 1 2 5 1 10 4 7 5 4 8 2 11 4 7 7 4 13 12 6 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Moment: INNOVATORS OFFERING ALTERNATIVE SOLUTIONS Innovators Now Leading in Historically-Government Roles
NGOs ON THE MARCH Philanthropy is set to surpass government in its ability to shape society s agenda. David Callahan, The Givers SAVE THE WORLD IMPROVE OUR NATION REMAKE OUR POLITICS There are more than 90,000 private foundations in the US with assets over $700B. 30,000 new Foundations established in past 15 years
Moment: CEOs INCREASINGLY ENGAGING ON SOCIAL ISSUES Society is demanding that companies, both public & private, serve a social purpose. Larry Fink, Blackrock, $6T under management LITIGATE ADVOCATE 76% of Americans say that CEOs have a responsibility to bring about social change on issues facing society. MARKET POWER PERSONAL ENGAGEMENT
NEW C-SUITE IMPERATIVE: WHEN TO ENGAGE? SUCCESSFUL NOT SUCCESSFUL RELEVANCE: Is the issue central to our business, customers or employees? COST / BENEFIT: Will we boost our brand or generate backlash among stake holders & policy makers we most care about? NONPARTISAN: Can we stick to policy and avoid partisan politics? Does our engagement clearly reinforce our values?
WHAT S NEXT? Where We Go From Here
DISRUPTORS ARE FIRMLY IN CHARGE We re Only 30% Through Trump s First Term 1015 Days 446 Remaining
Sources: Partnership for Public Service (confirmations thru 4/5); K.D. Tenpas, Brookings (WH turnover) TRUMP TEAM REMAINS FLUID Staffing the Disruptor-in-Chief SLOWER-ARRIVING ***Confirmations*** PRESIDENT FASTER-DEPARTING ***Turnover (change jobs or leave)*** # Confirmed (15 mo) Avg. Days Cabinet (15 mo) WH Sr. Staff (Yr 1) WH Sr. Staff (Yr 2) 387 84 TRUMP 6 34% 15%* 548 65 OBAMA 0 9% 15% 615 43 GW BUSH 0 6% 27% 619 50 CLINTON 1 11% 27% 520 53 GHW BUSH 0 7% 18% Data unavailable REAGAN 1 17% 40% * Thru 4/12 of 2 nd year vs. full-year for others.
CHANGE IS COMING TO CONGRESS Record # of House Chairmen Leaving, 2 nd Most Overall Retirements 70 60 House Retirements GOP DEM 50 42 18 40 30 20 23 36 31 21 19 9 19 11 10 28 29 17 8 14 12 10 6 18 23 17 17 39 10 21 16 18 14 21 14 22 14 17 24 20 21 17 24 22 19 18 26 20 19 26 25 0 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 DEPARTING COMMITTEE CHAIRS 6 1 2 2 3 2 5 7 4 2 5 3 2 8 3 5 2 4 3 10
WAVE ELECTION INCREASINGLY POSSIBLE Senate GOP Everyone s a Publisher DEM WAVE Dems Defending 26 States (10 Trump states) GOP Defending 9 States (1 Clinton state) Generic Ballot (D+7.5) Trump Net Approval (-13) Enthusiasm Gap (D+18) Recruiting (52% more candidates) House GOP (Competitive Seats Defended: 51 GOP, 5 DEM)
Source: S&P 500, calculations by Annaliese Yukawa, MCR&T, thru 4/9/18 TRADE WAR TALK RATTLING INVESTORS % Days With Intraday Trading Swings of at Least 2% in the S&P 500 GREAT RECESSION 52.6% 50.0% 9/11 & 2 ND GULF WAR 45.2% 40.0% 40.1% 30.0% TECH BUBBLE 32.5% 29.7% 26.2% 20.0% 12.6% 14.2% 14.3% 22.2% 21.0% TRADE WAR? 1 st GULF WAR 15.9% 12.4% 16.7% 30-year avg = 13.7% 19.7% 10.0% 0.0% 7.5% 7.5% 6.7% 4.3% 4.4% 4.8% 3.6% 0.8% 1.6% 1.6% 2.5% 0.8% 1.2% 0.8% 0.8% 0.0% 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
IN THE MONTHS AHEAD Congress Will Do What It Must in 2018 MUST ADDRESS VERY LIKELY POSSIBLE LONGER-TERM FAA (9/30 deadline) Farm Bill (9/30 deadline) FY19 Spending (9/30 deadline) National Defense Authorization (12/31 deadline) Flood Insurance (7/31 deadline) Animal Drug User Fees (9/30 deadline) Intelligence Reauthorization Judges & Nominations (watch State Dept., CIA, VA) Opioid Bill VA Choice Dodd-Frank Reform Tax Extenders / Technical Bill Corrections Balanced Budget Amdmt / Appropriations Recission (both unlikely to pass) Oversight (Trade, Facebook, Cyber, election security, Mueller report, China, Iran deal, Russia, Tax implementation) CFIUS Reform DACA - Border Security Showdown / Deal Honest Ads / Autonomous Vehicles Bills Water Resources Development Act (WRDA) Data Breach Notification Cosmetics Modernization Infrastructure Data Privacy / Online Bill of Rights Welfare Reform Comprehensive Immigration Reform Ethics Reform (Post-Manafort foreign lobbying, sexual harassment in Congress, zombie campaign accounts) ACA Stabilization Drug Pricing & 340B
IN THE YEAR(S) AHEAD Will the Tools Suffer When Disruptors Are Disrupted? GOP (Conservative Voices) EU (Privacy & Antitrust) DEMS (Fake News, Antitrust) STATE AGs (Data Protection) VICTIMS (Bullying, etc.) AUTOCRATS (Too much free speech) MEDIA (Copyright, ad competition) TECH COs (Competition)
IN THE DECADE(S) AHEAD 1 ST GILDED AGE MODERN REFORM ERA POLITICAL REFORMS Banned corporate political $$ Clean up $$$ in Politics Limit outside group $$$? Enfranchised Women Expand the Franchise Redistricting reform? Direct election of Senators / Weakened power of Speaker More Direct Democracy ECONOMIC REFORMS Filibuster reform? Trust Busting; RR regulation More Competitive Markets 21 st Century Antitrust? Food safety laws Consumer Protection Online rights & responsibilities? Rights to Unionize & Worker safety / Child labor laws Worker Empowerment SOCIAL REFORMS Health / pensions for gig workers? Affordable child care? High school for all More Universal Education Lifelong Learning? Prohibition; National Parks Healthier Communities Opioid limits? Gun controls? Media (Muckrakers) Government (professionalized) More Trusted Institutions Better news accreditation? Institutional reforms?
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