Charles Fleetham's Blog
Throw your arms out wide and join me in Leaving Comfortopia!

A successful management consultant, author, speaker, and trainer for over twenty years, Charles Fleetham is founder and president of Project Innovations and author of The Search for Unrational Leadership, Using Rational and Irrational Methods to Change Your Life.


This blog starts with one premise: if everything in the world was rational, nothing would ever change. I believe the fate of our world lies in the unconscious of our leaders. By definition, the unconscious flies in the face of conformity and worn out nostrums. Throw your arms out wide and join me in Leaving Comfortopia!

March 2010
OHM - Advancing Communities: March 2010 - Google Web Alert

Charlie Fleetham, president of Project Innovations, a management and consulting firm for government and business, has been a speaker at every Reengineering ...Read more.

February 28, 2010 Charles Fleetham guides community leaders in Canton, Michigan

Read the article from HometownLife.com

Time for a Blue Economy

Only 2.5% of the world's water is fresh water, and we are running out of it due to increasing population, urbanization, and climate change. The primary driver of increased consumption is agriculture, which uses 70% of the fresh water. Pressures are mounting for more usage. As temperatures rise across the globe, more and more land needs irrigation – arid land has increased 40% since 1970. China, Australia, and the United States are experiencing long term droughts in farming regions. This summer California reduced water allocation by 10% to the Central Valley, the nation's largest producer of fruits and vegetables.

Up to now, national leaders have viewed water scarcity as a regional problem. Business leaders have viewed it as a limitless resource. But after a decade of global warming, leaders are becoming aware of an oncoming water shortage, giving Michigan, whose borders touch 20% of the world's remaining fresh water, an extraordinary opportunity to create a water-based economy, a Blue Economy.

A Blue Economy is the logical successor to Michigan's auto-centric economy, which is collapsing after a hundred year run. A Blue Economy could fill vacant factories with manufacturers of water conservation and treatment equipment. It could erect new factories for water hungry food and beverage processors and semi conductor companies, like Intel and Texas Instruments. These industries will need skilled knowledge workers and Michigan public universities can develop the necessary curriculum and operational training programs. It could build the world's center of water expertise and technological development.

Michigan has more than an abundant supply of clean fresh water to recommend itself for this daunting task. It has a surplus of engineering/manufacturing talent, and it has a largely unemployed auto based workforce hungry for jobs. It is a signatory to the Great Lakes Compact, guaranteeing a secure supply of water for the foreseeable future. Other states have expressed an interest in Michigan's water, but Michigan can bring thirsty people and businesses to its "water wonderland."

There are three big roadblocks in the way of Michigan's Blue future: its reputation for high taxes and high cost labor, a lack of proactive thought leadership, and a lack of capital. But, Michigan shouldn't wait for someone to move these roadblocks – the time is now.

With the sponsorship of the Engineering Society of Detroit Institute (ESDI) and the Detroit Water and Sewerage Department (DWSD), a "Blue Economy" Steering Committee has formed and it includes important state and regional stakeholders. Now, it is time to move beyond dialogue. A practical first step is funding and launching NextWater, a non-profit 501(c)(3) to organize and lead the effort. Its first task is to create a detailed blueprint for a Blue Economy and Michigan's renaissance.

Spring 2009
It Doesn't Take a Nostradamus to See what's Next for GM!

In an article published in the March 2006 issue of the Chartered Financial Analyst, I stood alone among a group of six automotive experts and declared that GM would go bankrupt by the end of 2007. As a resident of Michigan, the home of GM and the US auto industry, I am glad I was off by a year and five months. Clearly, our leaders needed the extra time to prepare for the one state depression that is unfolding now.

In 1978, GM employed more than 482,000 Michigan residents. Today, it's less than 50,000. Yes, in the good old days, GM stood atop the Fortune 500. Today, the US and Canadian governments own 70% of its stock, and American taxpayers will invest almost $50 billion in its rescue plan. President Obama has declared, "I am absolutely confident, if well managed, the new GM will emerge. However, nothing wounded goes uphill and neither will GM, even though it has purportedly "freed" itself by declaring bankruptcy. Unfortunately, the company can't free itself from its history or the oncoming tragedy of its future.

The key to understanding GM's fate rests in the notion of psychological resistance. The term first arose in Sigmund Freud's work in the 19th century. He saw resistance as the process that his patients used to defend themselves from remembering unpleasant memories or recognizing uncomfortable truths – about themselves or their world. GM has been a serial resister for the past fifty years.

In the 60's, GM resisted Ralph Nader's accusation that its rear engine Corvair was unsafe. In Nader's book, Unsafe at Any Speed, he asserted that the Corvair was prone to "tuck under" in certain circumstances. GM not only refused to acknowledge the veracity of Nader's claim but also conducted a harassment campaign against him. It hired private detectives to shadow him, tapped his phone, and conducted a long investigation into his personal life (including his sexual habits). Nader eventually won an invasion of privacy suit against GM and used the money to launch his lobbying work.

GM has resisted several oil crises, refusing to dedicate itself to building a small fuel efficient car that could compete with Japanese automakers. When the first oil crunch came in the 1970's, it responded by fielding a fleet of ugly front-wheel-drive shoeboxes. Who can forget the Oldsmobile Omega and the Pontiac Phoenix or that brand destroyer, the Cadillac Cimarron, a clone of the far less expensive Chevy Cavalier? In 1999 GM bought the Hummer line from AM General, while Toyota prepared for a 2000 launch of the Prius. Even in 2006, after Hurricane Katrina had turned Peak Oil into a household term, GM re-launched gas guzzling SUVs like the Chevy Suburban and the Cadillac Escalade. Decisions like this make one wonder if they had economists who could understand an oil price trend line.

In the 80's, GM launched its Saturn line (a recent bankruptcy victim) and a joint venture with Toyota in California. Unfortunately, its corporate culture resisted the very expensive and hard earned knowledge gained from these bold innovations: female friendly dealers build brand loyalty (Saturn) and lean manufacturing reduces cost and improves quality (Toyota). Also in the 80's, GM Chairman Roger Smith acquired EDS, and EDS founder Ross Perot joined the Board of Directors. Smith and Perot had a deep falling out about the company's change-proof culture. Said Perot about GM, "When they're in a crisis, the first thing they do is hire a consultant. Then, they have meetings to define the crisis. Afterward, they appoint a committee to talk about the crisis."

One could go on and on about GM's resistance, but no article about GM's current and future demise is complete without a mention of its relationship with the United Auto Workers (UAW), the second biggest shareholder in the new GM. The UAW was born out of fire in 1937 when the UAW bested GM in a sit down strike in Flint. Over the decades the two organizations have danced together like in-laws at a shotgun wedding. The 1999 contract could have been called a mutual suicide pact. Despite warnings from analysts about escalating health care and retirement benefit costs, GM gave away the house with increased wages, health care benefits, and lush perks like tuition reimbursement for UAW dependents (up to $1500/year). But the corporation couldn't escape the math of its largesse and the UAW's greed. By 2005 GM had lost its investment grade credit rating and its ability to make a profit.

The fault for GM's downfall lies within its leaders. A psychologist might look at GM's post World War II history and wonder if its leaders were sabotaging themselves, driven by some insidious unconscious force. From Chairman James P. Roche's 1966 apology to Nader in front of the Senate to Rick Waggoner's woeful beggary in his appearance before Congress at the end of 2008, GM's leaders have failed to solve problems. Sometimes they failed to anticipate problems before it arrived (Japanese competition). At other times they failed to solve problems that stared them in the face, like the 2001 decision to roll out the Pontiac Aztec, a vehicle which became a symbol of GM's inept product development.

The big question is: will the past be prologue for GM's future? A big clue has already surfaced. In June, shortly after declaring bankruptcy, its financial advisor (Evercore Partners) predicted a rosy future in court filings. According to Evercore, a lean, debt free GM will make a $3 billion profit before taxes in 2011. This figure will rise to $7.8 billion in 2014. These profit forecasts are based on U.S. total vehicle sales increasing from 10 million this year to 16 million by 2012. This rising tide will allow GM to expand its sales from 3.8 million to 6 million by 2014! One hates to keep returning to the psychology, but these forecasts seem delusional at best.

Over the long term, you can't resist demographics. The US population is aging. The number of people over 65 will probably double in the next 30 years. It's an industry maxim that older people buy fewer cars. The US economic collapse is also shifting the demographic math against GM. The destruction of $10 trillion in household wealth in the U.S. and the transformation of 401Ks into 201Ks will make it difficult to GM to retain its aging customer base - let alone increase it. In 2007 the average new vehicle purchaser was 43. In 2008, this figure rose to 48. Obviously, people are choosing a mortgage payment over a car payment. Worse yet, two of the GM's four brands, Buick and Cadillac are locked into a dying generation. In 2008, the average Buick buyer was 68 years old, while the average Cadillac buyer was 56 years old.

Much has been written about how bankruptcy will damage GM's brand image, not to mention the loss of GM customers through shedding the Pontiac and Saturn brands. But little has been written about the decline of one of GM's most important customer cohorts: GM employees, families, retirees, and suppliers. In prior years, this "internal" customer base has provided nearly 50% of GM's US sales. As GM slashes employees, suppliers, and retiree benefits, this cohort will be less and less able to purchase GM products. To date, despite billions spent on marketing and vehicle discounts, GM has not been successful in attracting enough foreign car buyers to replace its dying internal base. Again, there is the resistance problem. People don't want to give up their Hondas and Toyotas for a GM product, and that won't change soon.

Now that the US Treasury Department is calling the shots at GM, one wonders about the real game plan. Ostensibly, they plan to make GM profitable and make a return on their $50 billion investment. But, government officials can read the demographic charts, too. If the US auto industry continues to flounder, a likely outcome given the continuing decline in housing values and rising unemployment, Ford will go bankrupt too. Unless Ford can best the Toyota/Honda machine, Ford will be at a competitive disadvantage against a government owned, debt free GM. It's likely that the government has already spoken to Ford about easing the company into bankruptcy. As the Obama regime has put its prestige on the line for a GM recovery, an uncontrolled Ford bankruptcy is a distraction it can't afford.

There is a promising model for a long term recovery. In the 1960's, the US railroad sector collapsed. Much like the US auto industry, the railroads were burdened with high labor costs, union conflicts, a declining customer base, deteriorating infrastructure, stifling regulations and excessive debt. In 1970 Penn Central Railroad went bankrupt, an event which threatened to destroy the entire railroad sector. It was the largest bankruptcy in US history, shocking the nation much as GM's bankruptcy did.

In 1973, Congress created Conrail to save the railroads. Through the 70's and 80's, it poured billions of dollars into the company to keep it alive, while management right sized it. In 1983, Conrail turned a profit and in 1987, the government sold Conrail to the public in a stock offering. In 1997, the Northern Suffolk and CSX railroads agreed to purchase Conrail's stock, and today the company lives on as switching and terminal railroad for its owners. Given the prospect of Peak Oil and escalating oil prices, Conrail might have been one of the best investments the US government made in the last thirty years. Hopefully, we will be able to say about General Motors someday.

Spring 2009
If You're Bankrupt and You're Happy Raise Your Hand

In Michigan, we have too many bankrupt ideas. As too many of us know, when you declare bankruptcy, your creditors divide up your property like Romans at the foot of the cross. And so it goes with this long crucifixion in Michigan. The more bankrupt ideas in our possession, the more property our creditors will get. Think of the real property that Chrysler and/or GM will lose. But also think of the loss of mental freedom as we become more and more dependent on outsiders for energy, funds and ideas.

Bankrupt ideas are harder to get rid of than sweaty armpits. Like stocks falling to zero, we don't want to give up on them. I once sold a stock at seventeen cents. I don't want to tell you what I lost, but that's the point, isn't it? A colossal failure to recognize reality.

And when it comes to deadbeat ideas that squat like flat tires on our culture, we have squadrons of leaders and their public relations shills driving us to pump up these lifeless ideas with our money.

Now you might think I'm going to complain about our taxes or about our ridiculous marijuana laws (is there any teenager left in Michigan who hasn't been arrested for weed or tried it?) or the terrible conditions of our roads. No, I'm after bigger monsters, the ones we positively must kill if we want to rise again in Michigan.

  • Let's stop thinking about expanding our vaunted health care system ... it already consumes 17% of our gross national product and our leaders want us to pay more and more of our taxes to support it. Really? I and my insurance company have paid more than $80,000 in the last three years to treat my daughter's psoriasis, and her condition has actually deteriorated since she got treatment (at my urging) from our health care system. You were right, Chelsea. You didn't really need a doctor.
  • Let's stop thinking about our project to grow our suburbs from lake to shining lake ... our leaders tell us that we need more subdivisions, more convenient shopping, more Class A office space, more tax breaks for developers and more roads to make commuting faster. Really? If there is a commercial office building left in Farmington Hills that isn't at least 20% empty, someone from the CIA, DIA, INS or IRS needs to investigate it for criminal activities. If there is a school district in Oakland County that isn't laying off or thinking of laying off teachers, audit their financial statements quickly. And finally, if there is a union in Southeast Michigan that is willing to make the contract concessions necessary for its community to survive the oncoming budget bloodbath, please make your leadership known to this blogger for you are true American heroes.
  • Let's stop thinking about our futile efforts to put back things the way they used to be ... long ago our leaders and their non-profit networks turned this hopeless enterprise into a series of noble rescue operations that smack of emotional blackmail. There's a radio commercial in which a Hollywood star pleads with his listeners to "save" the national parks. The last time I looked, the federal budget exceeded a trillion dollars. I already paid my taxes, Mr. Hollywood Star. If you want to save the National Parks, convince Obama and Congress to stop bailing out the banks. You party with them. I don't.

I could go on with my list, but I think you get the point. Unfortunately, even if you do admit to carrying around a bankrupt idea or two, they are very difficult to discard. You sort of have to chop it out of your head. For example, in 2008 I believed that Peak Oil had doomed our civilization. The end of the world looked like a good bet when gas topped four dollars a gallon, but when gas plunged below two dollars at Christmas; I reran the spreadsheet in my head. Yet, falling gas prices didn't blast out the idea entirely. Only when I read a blogger complaining of depression because he was sick of waiting for the final, bloody chapter of the Oil Age did I get rid of Peak Oil.

I'm sick of being checkmated by both kinds of bankrupt ideas: false hopes (the uptick is coming, it always does) and rosy tales of doom (Peak Oil will force us to trade in our nasty polluting cars for horses). Lately, I've found myself wanting the world to go on, wanting the economy to grow again, wanting to hear stories of start-ups and inventions, and wanting to see young people staying in Michigan because they believe in a profitable future. In my next post, I'll offer a set of powerful ideas to put Michigan back in the black. Stay tuned.

Spring 2009
Time for a State Owned Bank

It's time for Michigan to leave Comfortopia. In our 2009 post meltdown, post Chrysler bankruptcy, oncoming GM bankruptcy state, Comfortopia has the look and feel of a closed auto dealership with weeds and small trees upending the pavement and surrounding a parking lot of unsold cars. It's a general rule of life that nothing can be put back the way it used to be. And, that is the way it is with our auto industry. For one hundred years we ruled the industrial world. But now, the game is up. The arms of change have locked around our neck, squeezing the very life out of our state.

When it comes to renewing our broken economy, our leaders have talked for decades about the same old problems: high taxes, our lack of regional cooperation, our inability to create a successor to our automotive industry, etc. But they never talk about our central problem: the rivers of dollars flowing out of our state into the hands of Wall Street bankers.

According to recent financial reports (available online), the State of Michigan, the City of Detroit, the Detroit Water and Sewerage Department, the Wayne County Airport, the Detroit Public Schools, the University of Michigan, and Michigan State University pay over $800 million a year in interest on long term debt. If you add interest paid by Michigan cities, school districts, and public utilities, the cost to our taxpayers easily tops a billion a year. What does Wall Street do with our billion plus dollars? They decorate their offices like kings.

We have heard that our state budget is busted again. The state raised business taxes last year (mine went up 400%), but we might have $1 billion deficit in 2009.

What if our one billion dollars in interest payments went into our own bank? What if we used the money to reduce our taxes?

North Dakota has been doing it for almost one hundred years. It has the only state owned bank in the nation. The state legislature established the Bank of North Dakota in 1919 to free farmers and small businessmen from the clutches of out-state bankers and railroad men. The state guarantees the bank's deposits, and by law, the state must deposit all of its funds in its bank. Three elected officials oversee the bank: the governor, the attorney general, and the commissioner of agriculture.

The bank's stated mission is to deliver quality, sound financial services that promote agriculture, commerce and industry in North Dakota. Operating as a bankers' bank, it partners with private banks to loan money to farmers, real estate developers, schools and small businesses. It loans money to students (over 184,000 outstanding loans), and it purchases municipal bonds from public institutions.

In 2007, with a loan volume of $2 billion, the bank earned a net profit of $51 million. Each year, the state legislature decides how to use the bank's profits. For example, in 1993, the Legislature transferred $52 million to the General Fund, $28 million from bank capital and $24 million from earnings.

North Dakota is a sparsely populated state of less than 700,000, known for cold weather, isolated farmers and a hit movie - Fargo. Yet, for some reason it defies the real estate cliché of location, location, location. Since 2000, the state's GNP has grown 56%, personal income has grown 43%, and wages have grown 34%. This year the state has a budget surplus of $1.2 billion!

Last year, Michigan citizens paid over $5 billion dollars in personal income tax. With a state bank like North Dakota's we could reduce this burden, fund new businesses, and restore our crumbling water and sewer systems. And we don't have to feel sorry about Wall Street losing our business. They didn't "earn" the money they lent us. They created it in computers and charged us interest to boot. Let's follow North Dakota's lead and get free from Wall Street's web.

The first step is to change our laws. Call your state representatives today and ask him or her to keep Michigan dollars in Michigan with a state owned bank.