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U.S. Elections Comments
Barack Obama has won a second term as President of The United States. How will he handle
domestic issues and foreign policy over the next four years? INSEAD Professors Theo Vermaelen,
Charles Galunic, Douglas Webber, Pushan Dutt, Amine Ouazad, and Gianpiero Petriglieri share
their thoughts.
To see and make comments, please go to the manufacturers) and the only winners were private
bottom of the article hospitals (who will get more paying customers
thanks to Obama care) and gun manufacturers. As
Opinion on Intrade, a highly respected betting website, the
odds of an Obama victory were 70 %, the 2.5 %
Obama damage
stock market decline represent only 30 % of the
expected damage of an Obama victory. Hence, the
- By Theo Vermaelen, Professor of Finance -
total damage can be estimated as 2.5 %/0.3 = 8.33
%. Another way to put it: if Romney had been
America has decided to reappoint Barack Obama as
elected the stock market would have risen by 8.33
President of the United States. This is quite
% – 2.5 % = 5.83 %. With a stock market
surprising, considering a number of facts: a $5
capitalization of $ 16 trillion the market’s estimate of
trillion increase in government debt to $16 trillion (a
the Obama- induced wealth loss is $ 1.33 trillion.
higher per capita number than any European
This loss does not simply hurts the “top 1 %” as
country, including Greece); an unemployment rate
more than 50 % of Americans is currently invested
of 7.9 % (higher than when Obama took office) ; 50
in the stock market. They all will be hurt by
million people on food stamps and economic growth
Obama’s intention to let the Bush 2003 tax cuts on
less than 2 %. Winning an election with such a poor
dividends and capital gains expire.
track record is remarkable, considering that
concern about the economy was the main issue for
Evidence of damage on the real side of the economy
voters this year.
became clear as many companies have been
warning of significant job losses if Obamacare
The stock market was surprised as well as it fell by
becomes the law of the land. Under Obamacare all
2.5 % the day after. Although the media and the
companies with more than 50 employees have to
Obama supporters tried to spin it as if the decline
provide health insurance for their full time
was caused by other reasons such as the Euro crisis,
employees, where full time is defined as more than
it is difficult to explain why then the biggest losers
30 hours per week. While this law may well be
were energy stocks (in particular coal
socially desirable, the fact is that there is no free
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lunch so that the cost of labor has gone up as a
result, which will increase unemployment ,
especially in very competitive sectors where
companies can’t pass on the full cost to consumers.
Especially small businesses may be reluctant to
grow as the marginal cost of the 50th employee has
now become very large. Some companies are
already forcing their full time employees to become
part time employees, who are likely to become the
biggest losers: not only will they have no health
insurance, but they will also see their income fall.
Obamacare may well become a classic example of
government intervention: good intentions with bad
results, mainly because bureaucrats who design a
law don’t anticipate how firms and individuals will
respond.
In some ways, America has confirmed it wants to
become like a European country, with bigger
government, more regulation, subsidized
alternative energy, more social spending and
higher taxes on the “rich”. It seems that such a
trend becomes irreversible once a large fraction of
the voting population starts to become net
beneficiaries of government handouts and
subsidies. The Europeans are cheering, but they
may get some second thoughts after realizing that
the European social model is only sustainable if they
can export their products to countries that don’t
adopt their model, countries with high growth.
Moreover, the election also does nothing to help Government and business organizations are
avoid the “fiscal cliff”, i.e. the combined expiration different in important ways (for instance, one of
of tax cuts and spending cuts on January 1. While them is not a democracy), but a political campaign
the 2008 election led to change, this election has has some useful lessons for leaders of any
changed nothing in the balance of power: a organization. While the balance of power in
president who won barely 50 % of the popular vote, democratic governments can lead to deadlock and
and a Congress controlled by Republicans. More painfully slow consensus building (in their steady
than ever America is a divided country. state), the “simplicity” of elections (competing
bodies, a deadline, a vote, a decision) is, in a
Theo Vermaelen is Professor of Finance and The strange way, closer to the reality of business
Schroders Chaired Professor of International Finance organizations (at least those in flux and who face
and Asset Management at INSEAD. choices which cannot be made through pure
hierarchical fiat). Think of political campaigns as
Blog mobilization efforts, to build support within a
Lessons from Obama’s Campaign Victory population/organization, for some direction or
change. Business leaders face this anytime they
- By Charles Galunic, Professor of Organisational push for a new commercial strategy, novel
Behaviour - technology, acquisition, or even some change in
their organizational culture. This is presumably why
topics like change management and leadership are
so popular with executives—formal authority
sometimes can’t cut it in getting things done.
So what can we learn from President Obama’s
campaign victory?
1. It’s not just the “Vision”
In 2008, candidate Barack Obama had a unifying
vision and a big mandate (roughly, restore
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accountability among the “have’s” and ignite instead appeared aloof, tired, and lost. Romney
responsibility and a renewed sense of opportunity tacked to the middle easily. But the Obama
among the “have not’s”, captured well by the organization adapted. You didn’t have to wait for the
ubiquitous “Yes we can” slogan). In 2012, it wasn’t second debate to expect a change in tact- you could
about the vision. It was about reality, trade-offs, and gauge the new tone when Biden debated Ryan in the
math. former President Clinton’s penchant for long Vice-Presidential debate. Adapting is not easy. It is
speeches served the Obama campaign well, as he humbling at best, an admission of a leader’s failings.
went into much needed detail about the reality of the But it may be necessary, and only possible if a
past 10 years, the difficult choices ahead, and why leader is genuinely gauging the audience and
Obama’s math was correct (and why the willing to absorb negative feedback. Leaders can
opposition’s was not). The lesson is that leaders leader from President Obama’s self-deprecation in
need to show the details and talk about the trade- the aftermath of the first debate, but they can learn
offs, they need to offer more than goals, values, and more from the way he adapted.
ambitions. Leaders often fail to do this when talking
about company strategy. They mistake goals for 4. Consistency Matters
plans, ambitions for mechanisms and logics.
Adapting requires carefully discerning what to
2. Define the Alternative change. Changing tact is one thing, changing core
beliefs or propositions is another. Change too often
Detailing the tradeoffs means defining the and people will be reluctant to follow you. Mitt
alternatives, that is defining the problems and Romney was widely and frequently criticized for flip-
threats of alternative choices and directions, or flopping on issues (the “Etch a Sketch” candidate).
perhaps just why they are incompatible (not so Integrity (in the sense of consistency) matters. I
much “wrong”) with preferred directions. To be fair, suspect political candidates, under giant media
the Obama campaign had a lot of help, and long microscopes, face a lot more questioning on
before the head-to-head campaign began. The consistency than business leaders. Business leaders
Republican nomination process was grueling. are more likely to get away with offering grand
Republican candidates did much to paint an visions but not following through with consistent
unfavorable picture of Mitt Romney, questioning his structural actions. But leaders, of any sort, who can
ability to restore economic prosperity (for all) by build consistency (over core ideals, mechanisms,
tying him closely to the economic elites who were and time) should be more compelling to followers.
blamed for the 2008 financial collapse in the first
place. The Obama campaign was relentless in 5. A United Coalition
continuing that process of defining the alternative
(mostly by questioning the math). There is an No political body is perfectly monolithic. Similar
important difference for how this can play out for ideas populate individual minds—even those
business leaders. Business leaders can have belonging to the same tribe—to different extents.
problems “defining” the alternatives because, But it was much easier to see the divides in the GOP,
sometimes, they don’t want to let go of those between the conservative mainstream and the Tea
alternatives (e.g., they want faster innovation and Party movement, than the divides amongst
enterprising managers, but they may be extremely Democrats. The message isn’t that leaders must
tight with resources, timelines, and costs). Defining stomp out any and all divisions but that “schisms”
your strategy may mean relinquishing incompatible are debilitating. Organizational leaders need to
alternatives, telling people what you will not do and build coalitions that are (mostly) united and can
what the organization (or shareholders) cannot authentically represent the central message all the
really have (within a timeframe). Too often, leaders way down the line.
want their cake and eat it too and resist talking
about the hard choices ahead. I suspect both This blog first appeared here.
political campaigns faced this dilemma, but I think
it’s safe to say one was better at defining the trade- Charles Galunic is Professor of Organisational
offs and alternatives than the other. Behaviour and The Aviva Chaired Professor of
Leadership and Responsibility at INSEAD.
3. Adapt
On Trans-Atlantic Relations
President Obama’s first debate was universally
panned (even by his staunchest followers). Mitt - By Douglas Webber, Professor of Politcal Science -
Romney came across as confident, tireless, and
capable. Obama presumably tried to give the
impression that he was above the fray and
(supposed) social extremism of his opponent,
cranking the volume on “Presidential tone,” but
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Copyright © INSEAD 2021. All rights reserved. This article first appeared on INSEAD Knowledge (http://knowledge.insead.edu).party needs to improve its image among those
voters.
What the exit polls say
Evidence from exit polls suggests that even those
demographic groups might have held Obama
accountable for the weak state of the economy.
Firstly, support for Republicans increased in the
manufacturing states of the Rust Belt. Secondly,
states that suffered the most during the housing bust
Most Europeans will be (California and Florida) saw marginal shifts in favour
immensely relieved at Obama’s re-election. No of Mitt Romney. The U.S. is now more Republican
matter how many of die-hard supporters on the east than in 2008. But this was not sufficient to give Mitt
side of the Atlantic are disappointed that this has not Romney a victory. It is still very early to draw strong
so far been a transformative presidency, far more conclusions, but such evidence from the exit polls
Europeans preferred Obama to Romney, whose suggests the state of the economy played a smaller
conservative platform revealed a large divergence role than social issues.
between the U.S. political culture and that in most
European countries. For trans-Atlantic relations, the U.S. & Asia: Strategic Pivot
outcome points towards continuity or more of the
same. As the balance of power in the world - By Pushan Dutt, Associate Professor and Chair of
continues to shift away from the North Atlantic Economics and Political Science -
towards Asia, Europe will become progressively
less important for U.S. foreign policy makers.
Europe will be most affected by the economic policy
choices made in the U.S. Here the fact that U.S.
government remains divided, with the Democrats
holding the presidency and the Senate and the
Republicans the House of Representatives, does not
augur well for braking before the “fiscal cliff”,
which, if it is not avoided, will usher in a sharp turn
towards a more deflationary policy orientation.
There will be tense days in Washington DC and the
rest of the world between now and the end of the
year.
Why He Won
- By Amine Ouazad, Assistant Professor of Given that the
Economics and Political Science - political landscape remains unaltered (Republicans
in control of the House; Democrats in control of the
presidency and the Senate) President Obama’s
strategic pivot towards Asia should and will
continue. The presidential debate and the election
in general focused primarily on the Middle East,
with occasional sojourns into China-bashing.
Contrary to reports in the media, the Obama pivot in
Asia is not just about balancing or confronting
China. The U.S. hopes to play a central role in Asia
for decades to come – through enhanced trade and
investment links, creating multilateral organisations
such as the Trans-Pacific Partnership (TPP), and
enhanced security ties and presence in the region.
Of course, the ability of the U.S. to play a bigger role
Barack Obama won a
in the region depends whether the U.S. can get its
clear majority of electoral votes. Does he owe this
fiscal house back in order and continues to recover
victory to the nascent economic recovery (“It’s the
strongly.
economy, stupid”) or to social issues? Mitt Romney
carried the white male vote, and Obama won thanks
The Fiscal Role
to the overwhelming support of female, minority,
and urban voters. That suggests that the Republican
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Copyright © INSEAD 2021. All rights reserved. This article first appeared on INSEAD Knowledge (http://knowledge.insead.edu).When the debt negotiations in the U.S. failed, it Once gained, however, permission to lead doesn’t
damaged the U.S.’s standing in Asian countries. It last forever or only rests on a leader’s symbolic
brought sharply into question the U.S. model of appeal. It lasts as long as the leader proves able to
capitalism and democracy and whether the U.S. help realise that story—to deliver that vision into our
would have the political will and the resources to daily life.
take a bigger role in the region. The current
political climate remains unchanged and may turn When that does not happen—because we had put
more vicious. How will the U.S. negotiate the fiscal unrealistic expectations on a leader in the first
cliff? This not only has the potential to throw the U.S. place, because of intervening factors, because of
and eventually Asia into recession but also raise systematic, relentless opposition—then we often
serious doubts about the efficacy of the U.S. conclude that he or she wasn’t a good leader or
presence in and commitment to the region. For even much of one. This was the backdrop for the
President Obama this remains the biggest short- Obama re-election campaign this year.
term challenge.
The dynamics that lifted Barak Obama to the office of
Pushan Dutt is Associate Professor and Chair of U.S. president in 2008 as a steward of change had all
Economics and Political Science and teaches the the marks of idealisation. Our timeless propensity,
following Executive Education programmes at in times of distress, to seek leaders larger than life
INSEAD: Asian International Executive Programme; who ignite unbridled hope with promises of
Advanced Management Programme; Transition to salvation or renewal. That is the audacious kind of
General Management; Management Acceleration hope that Obama stirred in 2008 and, while getting
Programme. him elected, contributed to making his first term an
uphill struggle.
Opinion
Steward of Hope
Obama’s Victory: A Lesson In Resilient Hope
Back in 2008, Obama embodied the vision of a
- By Gianpiero Petriglieri, Associate Professor of society that may transcend its most painful divisions,
Organisational Behaviour - where opportunity was alive and well for those with
talent, courage and the willingness to work hard.
Obama was a living reminder of the best that
America had to offer at a time when the world had
become accustomed to seeing America’s worst. To
vote for him meant putting one’s hand on the arc of
history to help bend it towards justice.
Since then, he helped avoid another Great
Depression, rescued the domestic automotive
industry, reformed healthcare and rid the world of
Bin Laden. The U.S.’ standing in the world has
improved and its economy appears on the road to
recovery, albeit a slow one. Those achievements
pale, however, in comparison to the transcendence
that never materialised in American politics and
society at large.
Far from embracing his calls to bipartisanship, the
opposition spared no effort to obstruct his work. In
the aftermath of the financial crisis it became easy,
Leaders gain the not just for his opponents, to portray the inspiring
right to represent their people by articulating and senator who had stood against the Iraq war as the
embodying a story of possibility—pointing towards disappointing president who turned a blind eye to
a future that others want to be part of. This is why we Wall Street while inequality continued to soar.
follow and trust them—or oppose and mistrust them
if their story does not spell promise and feel our Hope Still
own. An election, in that respect, is a contest of
stories. A choice of who embodies best what we We may never be able to tell to what extent, in
hold dearest and which possible future we want to winning re-election, Obama benefited from the
see realised. This is how candidates earn permission positions of his opponent and by his administration’s
to lead. management of the hurricane Sandy emergency. At
a crucial moment, the latter undoubtedly helped him
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Copyright © INSEAD 2021. All rights reserved. This article first appeared on INSEAD Knowledge (http://knowledge.insead.edu).be cast less as a disconnected leader, and more as a
quietly competent manager who takes care of
business. Grateful for all the help he can get. Asking
for patience and hard work. Rejoicing if the
numbers look better each month.
That President Obama was able to withstand the
disappointment that follows idealisation, however, is
hardly the product of chance. Nor does it mean he is
no longer a symbol. He may have rather become a
symbol of a more humane kind of leadership, whose
success is not just the product of extraordinary
brilliance but of a competent and loyal team.
Leadership that promises no salvation, that
acknowledges difficulties and asks for involvement
to craft a path ahead.
Such leadership may be more broadly appealing
and better suited to our day and age. It may inspire
less ecstatic hope—but more resilient, and harder to
displace. I am curious to see what will happen once
Obama reorients his administration’s efforts from
the goal of earning four more years to that of
building its legacy.
He once claimed that he would rather be a “really
good” one-term president than a “mediocre” two-
terms one. He can’t be the former any longer. With
much support and a little luck he may well go down
in history as an excellent two-terms one. There still
is, as that iconic poster put it, hope.
Gianpiero Petriglieri, MD (@gpetriglieri) is Associate
Professor of Organizational Behavior at INSEAD, the
Business School with campuses in France, Singapore
and Abu Dhabi. He is an expert on the psychology
underpinning the exercise and development of
leadership, and the director of the Management
Acceleration Programme, INSEAD’s flagship
executive program for emerging leaders.
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