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Rex Tillerson and Putin Aren’t Friends

Dec 16, 2016

Lessons for leaders in today’s news:

-The questionable value of personal relationships in top-level leadership. The astounding Henry Kissinger, sharp, wise, and insightful at 93, contributes a valuable perspective on the debate over Exxon CEO Rex Tillerson’s nomination to be secretary of state. “I pay no attention to the argument that he is too friendly to Russia," Kissinger told the Committee of 100, a non-profit focused on U.S.-China relations. "As head of Exxon it’s his job to get along with Russia. He would be useless as the head of Exxon if he did not have a working relationship with Russia.” Then he made his point: "We should not think about these relationships as the personal relationships of individuals."

Kissinger is invoking a principle that has guided his entire career: Personal relationships in politics and international relations are greatly overrated; power is what counts. In contemplating interaction between Tillerson and Vladimir Putin, that idea is worth remembering. The two may have been friendly, but they weren’t friends. Tillerson will leave Exxon on Jan. 1, and he must sell his Exxon shares and put his assets into a blind trust. He’ll be working for the United States, not Exxon, and to suppose that he or Putin imagines their new relationship will be conducted on any basis other than power and national objectives is to underestimate both.

-Fragile cartels. In all the chatter over OPEC’s recent agreement to reduce oil production in order to raise the price, it’s easy to forget that such agreements always collapse. The only question is when. Each member of a cartel faces powerful incentives to cheat by producing more than the agreed-upon amount. That’s why OPEC agreements in the early 2000s were ineffective and why the OPEC-induced energy crisis of the 1970s ended. Now experts are already speculating on when this new agreement will fall apart. The world needn’t quake with fear when OPEC reaches one of these agreements, especially today, when oil is a declining factor in global GDP. Just be patient.

-The courage to bet long-term. Instagram announced yesterday that it has 600 million active monthly users, of whom 100 million were added in the past six months. Such stupendous growth prompts us to recall when Facebook’s Mark Zuckerberg at age 27 bought Instagram in 2012. He paid $1 billion for a company with 12 employees, and many people thought he was crazy. Turns out he was extremely shrewd.

Facebook competes increasingly with Snapchat, which teaches its own lesson in long-term thinking. Three years ago Snapchat founder Evan Spiegel, at age 23, turned down a $3-billion cash offer for the company from Zuckerberg. His decision was widely viewed as youthful idiocy. But Snap, as it’s now known, is considering an IPO next year that would reportedly value the company at $20 billion to $25 billion.

Maybe thinking long-term is easier when you’re young. Or maybe it’s easier when you’re not publicly traded.

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What We're Reading Today

Verizon demands Yahoo price cut
Lowell McAdam's Verizon has demanded "major concessions" from Marissa Mayer's Yahoo after a second, major data breach was disclosed. Yahoo argues that its value has remained strong despite a hack into 1 billion user accounts. Verizon has threatened to go to court to end the $4.8-billion merger deal if Yahoo doesn't cut the price. Fortune

Facebook tries to fight fake news
Using crowdsourcing, third-party fact checkers, and tweaks to its algorithm, Mark Zuckerberg's company is taking its first steps into editing content. Users will be able to mark a story as fake. If flagged articles appear to come from a real news source, they will be sent to third-party fact checkers. Wired

Nike, Adidas race for sub-two-hour marathoner
Mark Parker's Nike and Kasper Rorsted's Adidas are racing to produce the shoe worn by the first sub-two-hour marathoner. Nike says three of its runners will attempt to beat that time in the spring. Adidas is working on its own shoe for that purpose and currently sponsors the world record holder. WSJ

Minnesota football team threatens to boycott bowl game
Ten University of Minnesota football players were suspended Tuesday, disqualifying them for the Dec. 27 matchup against Washington State in the Holiday Bowl. After a players-only meeting and an hour-long talk with coach Tracy Claeys, the team announced it will not play unless the ten players are allowed to join them. Claeys backs the players' decision. The suspensions were imposed by athletic director Mark Coyle, but no reason was given. USA Today

Building Better Leaders

We're twice as likely to delegate decisions...
…when the consequences will negatively affect others. That means leaders often delegate to weaker decision makers. Quartz

The key to any startup's success...
...is creating something that customers want -- easier said than done because many entrepreneurs assume customers want their idea but don't test that assumption. Fortune

Trump's tax plans...
…would benefit top CEOs. The left-leaning Institute for Policy Studies says that if the highest marginal tax rate is reduced to 33%, the CEOs of the Fortune 500 companies would cumulatively pay $180 million less in taxes. Bloomberg

World Affairs

White House vows retaliation against Russia
White House spokesman Josh Earnest said only the top rungs of Russian government could have approved actions to undermine Hillary Clinton's campaign. Another adviser went further, saying Vladimir Putin was responsible. Earnest added that president-elect Donald Trump must have known what was happening. In a separate interview, President Obama said that the U.S. will "take action" against Russia. Fortune

Brexit could take a decade
European Union officials warned U.K. Prime Minister Theresa May that negotiating a trade deal could take ten years. Even then, such a deal could be voided if any of the E.U.'s 27 member parliaments rejects it. The Guardian

French prosecutor calls case against Lagarde "very weak"
IMF head Christine Lagarde faces up to a year in prison for negligence in approving a $425-million payment to a businessman when she was French finance minister. But after the four-day trial, prosecutor Jean-Claude Marin said the testimony did not prove wrongdoing and doesn't warrant a conviction, calling the case "very weak." NYT

Up or Out

Priceline Group has named Glenn Fogel CEO. Fortune

Oracle co-CEO Safra Catz has joined president-elect Donald Trump's transition team as a member of the executive committee. WSJ

Fortune Reads and Videos

Trump's company ranks 48th among private businesses
The Trump Organization was the 62nd-largest private company last year. The new ranking, by research firm PrivCo, will likely amplify calls for Trump to give up ownership in order to avoid potential conflicts. Fortune

Solar has become the cheapest form of new electricity
The main reason for the sudden decline in prices is China's massive deployment of solar projects. Fortune 

Royal Bank of Scotland uses brain scanners...
…to assess job seekers. Applicants' brains are scanned while they watch a series of videos and images. Software then determines which area of the bank might best fit the candidate. Fortune

McDonald's to test delivery
Customers in Orlando, Tampa, and Miami will be able to order food via  UberEATS. Fortune

Happy Birthday

Pope Francis turns 80 tomorrow. Biography

Merck CEO Kenneth Frazier turns 62 tomorrow. The History Makers

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@ryanderous
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