IBM's CEO: A Stealth Obama Supporter?

Sam Palmisano sounds bullish on the next president.

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CEOs don't wait in line very often. But on Election Day, IBM's Sam Palmisano got in the queue with hundreds of other voters in suburban New York and waited for his turn to pull the lever. "I'm not used to that," the IBM chief executive said last week. But he seems to feel it was worthwhile: "There seems to be acceptance that there's a need for change."

Palmisano won't say whom he voted for. But in a recent address at the Council on Foreign Relations in New York, he sounded enthusiastic about President-elect Barack Obama. After outlining some of the nation's intractable problems, Palmisano said, "I think we've found a very good salesperson who could sell the case that we need to solve these problems."

If it sounds like faint praise to call the next president a salesperson, consider that Palmisano himself is one of America's top sellers. Unlike many companies, IBM's third-quarter earnings were on target, thanks to a diversified line of strong products and services worldwide. Palmisano's customers include some of the biggest companies in the world. And so far, the $100 billion tech giant seems to be riding out the turmoil that has led to big layoff announcements at companies like Merck, Dell, and Goldman Sachs.

So it might be worth considering some of Palmisano's thoughts on how we got into the mess we're in, and how we might get out:

Why the financial crisis happened. IBM doesn't really sell computers anymore—it sells end-to-end technology "systems" that disseminate, track, and analyze far-flung data. So Palmisano views the meltdown of mortgage-backed securities and other derivatives as a system failure: "The financial institutions knew how to spread risk. But they couldn't track the risk." Superfast computers may have provided some investors an advantage, but they jeopardized the overall system. "Capacity and speed," he says, "made it more difficult to control once it began." As a possible fix, Palmisano cites "smart systems" that feed information back to users, allowing them to adjust their decisions in real time.

Restricting trade would be a mistake. IBM does business in about 100 countries, so it's no surprise that Palmisano feels that limitations on trade, which Obama has hinted at, would undermine many U.S. companies: "We could put up barriers to trade because unemployment's going to hit 7 percent. But if you want your standard of living to go up, you have to defend your competitiveness."

Building infrastructure is important— if it's the right kind. Palmisano points out that the New Deal in the 1930s and the interstate highway system in the 1950s were two major government investments in America's future. The equivalent today? Big spending on digital infrastructure. That obviously would benefit IBM, which Palmisano acknowledges. But he sees that as more progressive than restricting trade or trying to protect an aging industrial base. He points out in the 1980s and '90s, IBM lost its edge—and axed 200,000 jobs--because it defended its old mainframe business for too long. "I'd much rather be part of defending the future than defending the past," he says.

Fixing our problems shouldn't be as hard as it seems. To hammer out solutions to big problems like the economy, healthcare, and trade, here's what Palmisano would do: "I'd bring together all the people with the expertise, and leave the policy advisers outside. Tell them, 'You can't come.' Then we'd put together something that actually solves the problem. This goes on in the private sector every day." He also acknowledged that maybe it's a bit easier to order up solutions when you're a CEO: "Of course, I'm naïve. I've never worked in government."

TAGS:
IBM
Obama, Barack
2008 presidential election
  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.

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