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February 1, 2025
Headlines
- DeepSeek
- Pres. Trump’s Gaza Plan
- The Senate’s Rubber Stamp
- You Should Know:10 Items
- Video: Trump’s Early Days
- Goodwin’s Client Alert
Publisher’s Comment: Friends and advisers have mentioned that we recommend "no discussion of politics in the workplace." Then ,we talk about business risk related to domestic and global politics. The first is related to the mental health of your entire workforce. The second is a senior level responsibility possibly impacting your business operations and sustainability. A simple example: When Russia invaded the Ukraine, numerous US consumer companies decided to shut down, or sold their Russian operations. Looking back 5 or 10 years ago: Hacking, IP theft, government sponsored competition, and China's Belt and Road initiative were not omni-present threats. Today, add to these foreign risks the increasing US regulatory and social obligations. Now, leadership’ s list of corporate responsibility continues to grow. Our intent is quite simple: Assist you in recognizing the relevant risks to your business but not dictate solutions to you.
Surprise, Here Comes DeepSeek Now that you have put the house in the Hamptons and the villa in Tuscany up for sale, hopefully you were able to cancel the contract for the 150-foot yacht we can reflect on this sequence of events more thoughtfully.
The company “DeepSeek”publicly announced its lead AI product called R1 on Monday. In response, the stock market lost almost $1 trillion in valuation with 50% of that attributed to the stock of Nvidia. However, we have great faith in the financial resiliency of this country’s financial markets, and that has been proven over time. However, it is realistic to think that this event will trickle down and impact the value other AI investments and tangential companies and products. These might be in support areas such as electric supply, capital equipment, and real estate investments.
This product must be proven to be legitimate, technically, and financially competitive. Is it competitive with Open AI’s 01, reasoning product, and available at a fraction of the development/installation and thereby user cost? The cost savings seem to be based on the ability of DeepSeek to utilize less expensive computer chips to train the sophisticated systems and related applications.
Some significant questions and discussions relate to the chips, and whether they are in fact new and cheaper. Are they in fact sophisticated chips that somehow bypassed US restrictions on the sale of US designed chips to China? If they are new chips, this brings into question the effectiveness of our intelligence gathering related to Chinese technology. Another more esoteric possibility is that the actual design, not the pirating of our advanced chips, was compromised. As this story evolves the negative impact on the financial community may significantly increase. Perhaps more important is: How did this potentially strategic innovation take place without our knowledge? From an intelligence standpoint, this is a huge failing which has the potential to impact national security impact. If it evolved during the Biden administration, shame on them. If the Trump administration should have been aware of this, shame on them. Stop the political purges. Get those national security appointments in place and up to speed. Hire the best of the best and do it fast. This is not just a Chinese game of product one upmanship. It is more likely a broad-based security test, with the Chinese evaluating US political and financial responses. Our elected officials and business leaders should not be naïve!
Trump’s Gaza Plan Since the beginning of the October 7 war in Gaza we have always reflected on what might be the eventual solution. Pundits and politicians often utilize the term: “Two State” solution. Reading through the omnipresent cloud of rhetoric this appears to be the Palestinians occupying the Gaza Strip and some portion of the East Bank of the Jordan River. A controlling government might be based on the ineffective Palestinian Authority, Hamas, or some combination of Middle East countries cooperating with Israel. A quick look at a map shows existing Israeli territory extending 60 to 70 miles between the 2 projected Palestinian territories (Gaza and West Bank) We are not diplomats and certainly not trade negotiators. However, we are realists. What are the components and circumstances under which this solution is remotely workable?
Recently, Pres. Trump, as he is prone to do, tossed out the idea of neighboring Egypt to the south and Jordan to the southeast of Gaza allowing Palestinians to relocate or at a minimum live within the Gaza/ Israeli borders of their two countries. To date their response was, “No Way.” President Trump to his credit felt he had workable relations with both countries based on our economic strength and friendly retaliation so that talks should continue. Realistically, Gaza is a wasteland of rubble and most likely unexploded munitions. With that in mind, rebuilding Gaza becomes almost an impossible task with 2 million people living on site.
Ed Note: No pun intended, but the President is an experienced real estate dealmaker and has a strong hand of cards at his disposal. From our perspective as neophyte negotiators, at least this plan makes some sense from a diplomatic, political, and geographic standpoint. The military risk with the number of terrorist players involved with Iran in the background is unsettling. The suffering on all sides has gone on long enough. Actions speak louder than words. We wish Pres. Trump the best of luck in this challenging and critical endeavor.
The Senate’s Abdication We have chosen our words carefully with this opening phrase. It refers to the Senate’s recent confirmation of Peter Hegseth as Secretary of Defense. Our comments are not based on politics, but rather on the disservice the Senate has done not only to the American public but to Pres. Trump as Commander-in-Chief. The Constitution clearly states that in their capacity as Senators they provide advice and counsel to the President regarding nominees for his/her cabinet. In this case, they did not provide advice and counsel but instead took an unprofessional but perhaps safe position aggressively supporting the candidate he nominated. Being committed to the Directors Letters mission, our comments relate to their impact on business. The appointment of Sec Hegself will have an impact on business on a global basis and potentially be a threat to national security, which obviously involves our businesses.
In terms of background, for 30 years I did executive search and extensive reference checks on a national basis for CEOs for VC- financed startups. Later in my career, I did all the senior candidate reference checks for Gov. William Weld in his first administration. My goal was to advise and protect the integrity of the individual or organization to whom I reported. It was not to make them happy or curry their favor. Regretfully, the latter appears to be the primary motivation of the majority of the Republican senators voting for Mr. Hegseth.
I followed his nomination carefully and will share my analysis with you. I do not know who initiated his candidacy. It may have been Vice President Vance. Soliciting strong references is where any competent selection process begins. His early experience was in the US Army after Princeton where he did not graduate from an ROTC program. His tenure in the Army was credible but was described as having been in combat. He regularly uses the term “warrior describing a quality that would enhance our military. A laudable goal and an appropriate term, but I never was able to ascertain what he had done in combat, basically, where and when. There are many great leaders both in the military and in private life that have never experienced combat. That experience can be an asset or liability but is not used casually. To his credit, he received 2 bronze stars and an Army commendation medal. The basis for receiving these awards was never made clear. Whether they were combat related or for meritorious service sends a different message. No negative is implied, but the level of experience reflected in these awards can differ significantly. During his confirmation hearings, he was supported by 100 Navy SEALs. The reason for their appearance in Washington would have been interesting to know. I do not understand how someone in his army positions would be involved with Navy special operations. If he did work with the Seals and merited their active support, that is a strong endorsement.
After his active-duty service, it was reported that Mr. Hegseth was involved in several veterans’ organizations, which encountered significant financial difficulties and resulted in his departure. I was involved for 10 years as chairman of the board of the New England Center and Home for veterans. With a group of outstanding men and women, we were able to move it from bankruptcy to become one of the leading and largest providers of housing and services to our veterans both men and women. Later Sec. Hegself spent several years as a TV personality on a Fox News broadcast.
In my comments, I have avoided anything regarding his character, which seemed to be the cornerstone of the Senate discussions. However, character is critically important for any position of leadership. In my comments, I have tried to demonstrate and document that his employment qualifications and experience do not justify his selection to run one of the largest organizations in the world let alone one focused on national security and global safety.
The Senate, despite their aggressive questioning, did an unsatisfactory job evaluating his experience relative to his qualifications to lead the Department of Defense. The hackneyed defense of his selection was that “we needed a change” is childlike.
Ed Note: I repeat that the Department of Defense has massive implications for the business community in terms of the purchase and utilization of products and services. In addition, the Sec. of Defense decides where, when and who goes in “Harm’s Way.” How the global business community sees this massive defense operation has international business implications. Going forward, the Senate and Congress must do a far more professional job selecting, advising and counseling. We deserve it
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