Rex Tillerson and Putin Aren’t Friends

December 16, 2016, 3:16 PM UTC

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
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Produced by Ryan Derousseau

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