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IBM chief talks change, and a little politics

Sam Palmisano says we can fix stuff - with IT, of course

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One might argue - and I think a lot more effectively - that the financial institutions were not interested in tracking risk at all, a situation that all the computers in the world can't help. I would further argue that at the very least, financial institutions engaged in any derivatives trading should have been compelled by regulations to track the risk from the beginning. With 20/20 hindsight, we probably would have been better off if investment banks were not allowed to engage in securitizing bad mortgages in the first place, and maybe mortgage companies should have required that people could actually pay their mortgages as well before inking the deal. Risk was separated from responsibility in so many different ways that a lot of people should be going to jail. But, living in a Depression, if it should come to that, will perhaps be punishment enough. Our children and grandchildren will be the judge of that.

In the Q&A session after the speech, Palmisano talked about the credit crunch, and said he was not overly concerned. "The money today - that is a short-term issue. Clearly there are guys that don't have the credit capacity that have had in the past. And I assume that Bob and his colleagues will have fixed that," he said to much laughter. "I mean, I really have a lot of confidence. Then, we're going to get back to the real issues again."

True to his company's name, Palmisano is required by his job title to be a globalist, and he is not entirely happy about the prospect of nationalism and protectionism in the wake of economic downturns around the world. What are companies to do, given the economic climate?

"Let's assume you have a solid business model and a balance sheet, because if you don't, you don't get to play," Palmisano explained. "Assume you have managed yourself reasonably well. You could look at the economic data - we have all seen it - and you could hunker down. I'm not saying everyone is not going to go on a little bit of a diet, because you have to protect your balance sheet, you have to be cost competitive. The other way to play it is to say that these are huge opportunities, because these problems still need to be solved, and they need to be solved."

What Palmisano was referring to were issues with supply chains, energy, healthcare, financial services, and so on - a lot of the same topics that were just discussed in the American election and around kitchen tables the world over. And don't expect Big Sam to be going into politics any time soon, though: "I never will be. I am not that kind of personality," he said jokingly. "You need patience and resiliency and I am just a working guy, four kids, very stable, two dogs..."

But Palmisano, like many Americans, tried to make the case that infrastructure investment was the way to go to dig us out of the financial hole we are in. He explained that the infrastructure investments during the New Deal era and following World War II were "stimulative", but that the infrastructure investments created "the most competitive, resilient economy in the world and the highest standard of living".

This kind of argument ignores the fact that the United States could run the global table and set the terms of economic engagement after World War II, and did so at Breton Woods - a scenario that is hardly plausible today. And maybe, just maybe, not even desirable anyway.

Palmisano said there was no question that there was going to be some sort of additional economic stimulus (presumably in the United States, but he could have meant elsewhere). But he argued, as the chairman and CEO of an IT company, that this time around, instead of investing in bridges and roads to try to attack an unemployment problem, the infrastructure that we build out should be digital.

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