Brian Bell (00:01.006) Hey everyone, welcome back to the Ignite podcast. Today we're delighted to have Frank Lavin on the program. He spent his career at the intersection of power, markets, and statecraft. He served in the Reagan White House, later became became a U.S. ambassador to Singapore, and then served under the Secretary for International Trade, where he worked on trade policy and markets across China, India, and other global markets. After the government, he moved into banking, advisory work, and entrepreneurship, founding Working to help international brands enter China through e-commerce. He's also an author, Forbes columnists, and served as a fellow at the Hoover Institution, at the USC Dornsight Center, and the Asia Foundation trustee. and many other things that I could go on for probably three more minutes. But Frank, thanks for coming on the program.
Frank Lavin (00:49.554) Brian, thanks for having me on. Look forward to a good chat today.
Brian Bell (00:52.194) Yeah, me too. So I'd love to start with your origin story. What's your background?
Frank Lavin (00:55.656) Well, grew up in a small town in the Midwest, Canton, Ohio, and had the chance to go away to school, went to the school of foreign service at Georgetown, went to boarding school, then to University, but I was just intrigued with international activity and America's role in the world. Initially more from a policy side than from a business side, but the business side was very intriguing and appealing as well. Georgetown School of Foreign Service was a terrific way to get into it. And I wanted to work. I wanted to work international. So did that in government and did that in the private sector. And it's it's challenging, but anything that's challenging also has an educational development, and it's just fascinating. to me that some sometimes people do it really well and and have extraordinary role in foreign markets and sometimes companies really fall short or the whole thing blows up.
Brian Bell (01:47.694) Yeah, so most people who enter government say they want to serve, right? but the answer is usually too clean. What actually pulled you towards politics, diplomacy, and international affairs?
Frank Lavin (01:51.284) Yeah.
Frank Lavin (01:56.325) Well, there was there was one central issue. I started to come to political maturity in the 1970s, and the political issue for me that said, you know, America's role in the world is not just a learning experience or an enjoyable or curiosity, but it is central to our security because this was still the the Cold War was rage waging. And the 1970s was a period of sort of weakness for the United States in that. We went through Watergate and Nixon's resignation. We went through the US failure in Vietnam. And this was sort of the first time in modern American history that we had been sort of beset by this these problems. And you know, you think Yeah, and oil crisis and and stagflation. So we we it was sort of the tail end of this post-World War II economic boom, and we could, I think, properly say with some validity after World War II, well, we're the good guys.
Brian Bell (02:34.018) Yeah. Demonetization of the currency in the seventies too, from I think seven seventy one to eighty one, fifty percent. Yeah. Yep.
Frank Lavin (02:52.049) And we always win. And our job as the largest economy, the most powerful nation, is to help work with other democracies to push back against Hitler and Imperial Japan and and to build a better world. And then the Cold War in some respects is an analog to that. Push back against Stalin and then Khrushchev and Brezhnev and the so so if that's your starting point, Vietnam is is quite a bloody nose, it's quite an embarrassment. And I think we had an enormous amount of introspection and i i in in D C in the US during the nineteen seventies about look are we always the good guys and do we always win and what's wrong or right about US foreign policy. So it was a period of some readjustment and some turmoil and some recalibration. I thought I thought I had something to add to that discussion and I wanted to be part of the foreign policy process.
Brian Bell (03:41.038) So when did you first realize that politics is not about ideology, but about incentives, timing, and human psychology? Frank Lavin (03:48.69) Well, I I think it's both. I think you need overarching principles. What do you stand for? What kind of society do you want to see? But I think you'd say, look, ideology as a standalone activity is just philosophy class. If it's just you're just cheerleading something on the basis of your your personal likes or dislikes. But you'd say, Well, what works and what doesn't work? And you have to have some recognition of data and of reality. So it's okay to start with idea. For example, I would say market economics gets you the best results. Market economics allows for the greatest amount of prosperity, the greatest amount of good news, the most people to participate in the economy, and whatever we can do to protect economic growth and protect private property and so forth is going to get you very good outcomes. But where when doesn't it work? Or when might you want to move away from that? Well, we ought to have a conversation about that. But I wouldn't be so ideological rigid that you know, you're sort of a pure, 100% pure libertarian, or to say there's no role at all for the government. But let's be disciplined and thoughtful about what the role for government. should be. So I think you do need a combination of pragmatism and ideology, but I would definitely start by saying your ideology helps you understand how a successful society is supposed to work, what is a fair society, what allows everybody to participate, what provides the most amount of social stability, and that's not a bad starting point.
Brian Bell (05:08.558) So you actually served in the Reagan White House, which is quite amazing. Well, you know, one of the best presidents, you know, in in history, a lot of people think anyway. what did that teach you, that era, you know, the working under that leadership, about leadership and that founders and CEOs still misunderstand?
Frank Lavin (05:27.345) Well, it was very much analogous to your previous point, which is to say you need a vision. I would say leadership has two attributes, two pillars. You have to one, you have to articulate a vision. And because we're democracy, you have to articulate it publicly. I mean you have to tell the public here's the kind of country I see, here's where I'm trying to go, here's a country in which I think all Americans can have a better life. And you have to be able to sell that. That's you have to be so one is articulate the vision, two is you have to be able to create a consensus for action. You have to be able to get Congress to go along with you. You have to get the American people to go along with you. And if that starts to fade, well then you don't have latitude for your program. Your program is depends on popular support. So you've got to be able to you're always you you sort of say in government or in politics, your job interview begins after you have the job. That you have to be able to you so you're always sort of in sales mode, so to speak, trying to explain people what you're doing, why you're doing it, why it's going to work, if there's a bump of the road or a twist, what's really going on. And a little bit of patience, and we're going to have a better society. So Reagan went through those tax cuts, enormous economic boom out of those tax cuts. and and it was also sort of blowing the whistle on a lot of the New Deal programs or Great Society programs, meaning we had a a majority consensus in America from the New Deal, from the 1930s, to say, look, if there's a problem in America, if there's a problem in our society, in our community, there should be a government program to deal with that problem, which makes sense, which has a certain logic to it. But but I'd ask the same question I mentioned a minute ago about private sector about market economics. Okay, that might be true, but is it a hundred percent true? And when is it not true? And does the validity of that program begin to taper at some point? where you say, look at very expensive cities. I live in Los Angeles now, very expensive city. The one thing I think would be hard to make the case for is that Los Angeles government needs more money and needs to be bigger and more expensive. And if anything, you say some of these programs might be counterproductive, some of these programs might be disincentives for employment or business creation or start up or growth. And so and so some of the societies that have smaller governments, Dallas or Miami or Phoenix, have lower unemployment than cities like Los Angeles where they have you know expensive job creation program. Right, right.
Brian Bell (07:36.726) Or San Francisco for that matter. Yeah. Yeah. what's interesting about the United States, I guess, is we are kind of, you know, because we have states, states, counties, municipalities, is we have these little micro and macroeconomic experiments running all the time. Frank Lavin (07:54.45) No, exactly right. You get a range of tax rates, you get a range of unemployment. I mean you can just go and Google and say r rank the states by unemployment rate, rate the states by high school matriculation rate. You could say, boy, there are quite significant differences in this and it doesn't correlate with taxes or size of government. In fact you could say in some respects it's inversely correlated that states like Texas and Florida that have no state income tax have a lower unemployment rate than states like California, which has a very high state income tax.
Brian Bell (08:23.298) Yeah. so you've worked in the east and and l and looked at China. What is, you know, I'd love to get to China a little bit and talk about, you know, what do they get right? Because they've they've sort of harnessed a little bit of, you know, entrepreneurs entrepreneurship and economics, but they also have this totalitarian kind of government that controls everything. What do they kind of get right and what do they get wrong over there that that we can learn from?
Frank Lavin (08:49.575) Yeah. Well, yeah, they did something, they did something, Brian, that no other communist government did, which is they moved away from communism. They moved away from Marxism and state ownership and gave space to private enterprise. This was Dung Xiaoping. Mao dies, there's a caretaker for two years, and then Dung comes in. And Dung had lived in France. Dung had gone to Europe in World War One, he'd lived and worked in France for eight years, so he was broad more broad gauge than most communist leaders. He knew that market economics actually delivers and communism has a pretty consistent track record of not delivering. So he moved he liberalized the economy, allowed you start with letting farmers have private plots and grow crops and so forth. Of course, that works like crazy. and then you allow for private enterprise and you allow for investment. So they did a think a very impressive job of moving out of communist doctrine to allow for private sector work. And the other attribute more recently is they embraced tech. They said the future is definitely tech. And any any app we've got out there, any attribute we've got out there that we can put onto a tech platform, we want to embrace it and we're gonna have a better society. So those were both kind of laudable directions for the government. What they did not do, where they really fell short was on the political side or or democracy side, which is say they still are a Leninist party. They're still a one party government, there's still no freedom of speech, there's no freedom of religion or assembly. So it's it's still a dictatorship in that sense. so it's still that that's still in the traditional communist mode. But on the economic side, they liberalize. And I'll make one other difference with a lot of people compare that with the Soviet Union because the Soviet Union didn't liberalize on either. They they kept a one-party dictatorship and they kept a you know national steel industry and a national rail industry and a national Even the their supermarkets were all national. I mean everything was run by the government. It just didn't work. but the other difference is they do allow more space for personal liberty in China, meaning you can travel wherever you want. If you want to go to see the World Cup in the US, go to the World Cup. There's no barriers to travel. There's no barriers to going overseas to study. So you have enormous amount of international travel, international educational activity out of China, and you've got that wealth now from the private sector that can
Frank Lavin (11:11.636) allow it to take place. And the Soviets never had those elements. They just kept it really a police state, a very buttoned down society.
Brian Bell (11:18.007) Mm. So you have a a USC seminar called Statecraft, How Leaders Drive Policies and Policies Drive Outcomes. what is one policy decision most people think about, in principle, but actually it's really about execution.
Frank Lavin (11:36.168) Well, I try to I I begin this that seminar with the discussion of populism because we're in somewhat of a populist moment now. I would say both Donald Trump has attributes of populism and people on the left, Mamdanmi and some of the the squad members are populist too. But I said, What are the attributes of populism? and how does it manifest itself? But I said the core attribute that I see with populism is that it's grievance-based, grievance-based messaging. there's something wrong out there. You've been treated unfairly, and I'm going to get in government, we're going to fix it. and I'd say that by the way, there's always again truth to that, but is it one percent true or fifty percent true, or maybe it's you know really not that true at all, but it's pleasing to hear because paired up with grievance-based messaging is that it's exculpatory. It tells the audience none of the problems you face in your life are your fault. You are the victim across the board. Somebody else has done something to you. If you're on the left, you say, Well, rich folks did it to you. The reason Los Angeles has declining high school matriculation and it's been going down for decades, even as the budget goes up, the reason is Jeff Bezos. And what we all need to do is get mad at Jeff Bezos and be mean to Jeff Bezos and yell at Jeff Bezos and take some of his money, and then we're going to have higher high school graduation rates. So boy, that's exculpatory and that's grievance based. And I and but but my observation is You know, we all have our decisions in life about do we organize our life around a grievance-based view of what we're doing or an aspirational view? Do you organize your life around here's what I want to accomplish this year, here's where I'm trying to go, here's what's going to make me happy this year, successful this year, or do you want to litigate problems in your life and say, Boy, this was somebody did something wrong to me last year or ten years ago or whatever, and I'm going to organize my life about getting back to that person or suing that person or un being unhappy about that person. I said I I don't believe in history there is a successful country that has adopted a grievance-based approach and ended up ultimately being successful. To say, but if you're aspirational, if you say, How far can I go? How far can I go in education and income and helping others and in learning and building, you can be aspirational, right? That's a ticket to buy my better success. So what you're trying to tell kids is think about where you want to go. Think about what kind of society you want, what kind of life you want, what kind of family you want.
Brian Bell (13:45.538) Right.
Brian Bell (13:56.867) Yeah.
Frank Lavin (14:01.265) And and how do you build toward that outcome? And if you define your life by what's wrong or bad or your worst day, that becomes an anchor. That and that limits you. So so that that's my discussion of populism. Brian Bell (14:11.15) Yeah. Brian Bell (14:14.72) I I love that and I love contrasting that with some of the other great political figures of in our history, like JFK, you know, asked not what you can what your country can do for you, but what you can do for your country or or Obama's message of hope. you know, th those are more a aspirational messages.
Frank Lavin (14:22.674) Yeah.
Frank Lavin (14:28.689) Yeah. Well, absolutely. And if think of these enormous moments of trial that occasionally come up in US history, the Great Depression most recently, but Franklin Roosevelt said, you know, the only thing we have to fear is fear itself. Meaning, don't be so trapped, don't be so imprisoned by what's wrong that you're not able to have a productive life, right? But it would have been perfect for him to demagogue and to say, the Great Depression's here because rich people hate you and we gotta hate them, and you know, it could have been class warfare. But he showed Calm and an upbeat view and the sort of optimism about American character. Lincoln and the Civil War, I think, had very much the same temperament. Lincoln, I think, enjoyed jokes, enjoyed telling jokes. And say, well, this is a pretty bleak moment for America. We're embroiled in this terrible war. But that sense of humor is reassuring. And I think that's a responsibility of leaders as well. You've got to be able to send some kind of a signal to the general public thing, look, no matter how bad things are, you know, I've got a joke for you, is a is a message. That I'm taking it all in stride. You need to take it all in stride as well.
Brian Bell (15:30.605) Yeah. I think about that too. you know, some of the best political leaders can tell tell some good some great jokes. I've heard that about Trump too, right? Like he like if you get him one on one for an hour or hour and a half, which obviously I haven't been, but I know people have and or hurt you know, Bill Bill Maher is a good example, or there's been lots of people, like guys on the All In podcast. You actually sit down with him and he's he's funny and he's humorous and he's cracking jokes and stuff like that. But yet he still comes from a populist kind of
Frank Lavin (16:00.561) Yeah, yeah. I think his public persona we we we just had news reports on what you just said about the NATO summit in Ankara last week, meaning that his public remarks up to it were bluster and friction and unhappiness. But people said, Look, at the meeting, he was actually kind of positive, engaged, and he he didn't go around the room chastising people, but he was, you know, a good guest, so to speak. So he does have those two personas, I guess.
Brian Bell (16:24.024) So what you know, bringing it back to startups and business, because that's very much this podcast. We're not very much a politics podcast, as much as I like I like to talk about it, but and you know, my my my father in law we sit there on the couch and watch a lot of YouTube videos and politics. But you know, what do what do business people misunderstand about government?
Frank Lavin (16:30.137) Yeah.
Frank Lavin (16:39.218) That's great.
Frank Lavin (16:43.793) Well, I'll say this, it is the sea in which we swim. And usually if you're just in your home market and you're sort of in a conventional area of operations or production or services, you don't have to think much about it. You know, if you're making a lip balm and you've been making it for 50 years, you'd say, well, there's probably not a huge amount of issues. You've got to pay taxes, there might be some labor issues and so forth, but you're sort of in a conventional space and there's not day-to-day issues. But if you're in the tech space, you could be really cutting edge, and there could be security issues or privacy issues or misuse issues that you need to be intelligent about. And you need to my view is join the conversation. Let me say it the other way around. There already is a conversation taking place about your brand, your product, your company. And the only question is, are you going to be part of that conversation or not? But because we're in this digital era, this communications era. Any person in the world has the right and ability to say, here's what I like about Brian Bellett, here's what I don't like about him. And I think he did a really good job here, and I think it was really unfair to me here. And and people are out there doing these things. And they might be you know, mature and reasonable, or they might be less mature, less reasonable, but the more you can contribute to that, the more at least you pull the center of gravity towards some kind of reasonable discussion and you're playing a role in defining your product and your brand. So I would say every company ought to devote some resources to at least participating in that conversation, at least making sure the consumer, the other stakeholders, whatever government regulators might be, have some kind of understanding of familiarity with your company and what it does. And what I would tell anybody, this is particularly true in new markets, Brian, because I think in your home market you've got goodwill and familiarity from usage. And people say, well my cousin spent a summer internship there. People have some idea of what you do in your lip balm company. But if you go to Thailand, people say, we never heard of these guys. We have no idea what they do. So I would say be a little forward leaning in new markets. And what you don't want to be is in a situation where the very first time you're meeting the government regulator or the person who's got a an issue with you is is in the moment when you have a problem. It's like saying the very first time I met that you know, fellow in the DA's office was when he indicted me or something. You say, No, I want to make sure I know those folks. If I'm if I'm doing something that might be controversial, might have legal implications, I want to make sure all the all the stakeholders know what I'm doing.
Frank Lavin (19:00.551) And have some kind of understanding of my logic and my side of the story. Brian Bell (19:03.95) And maybe that's what's happened with tech recently, right? Because tech was always this West Coast phenomenon, sort of divorced from politics, or at least at least a coast away. And I definitely feel in the last 10 years, tech has become part of the part of the, you know, the the power they've become power brokers. You know, you kind of see them at all the presidents, you know, events. And maybe you could talk a little bit about that shift in tech over the last, you know, 10 or 15 years.
Frank Lavin (19:32.914) Well, if we go back to earlier, I think you're exactly right. If we go back more than ten years, you'd say these tech apps, very clever, very widely used, but they're really apps that helped us do things we're doing anyhow, but we now did them better, simpler, cheaper, faster. A Amazon being a great example to say, you know, it's not I'm not doing anything new with Amazon, but I'm just doing it better with Amazon. So it's not threatening or it's not a problem. And indeed I it makes my life a little simpler, a little easier to do it. Now we have tech platforms where you're doing things you never could have done before with AI. there's security implications. There's definitely exposure of minors. So there's societal questions about kids who spend so much time on the screen, they're not reading the way they did. Then there's a similar set of questions on AI about are you are you so enthralled with AI that you're not developing your own creative skills and creative sense? By the way, I think these are all very fair questions. I think we want to be thoughtful how we move ahead. Let's take full advantage of tech. Let's do do it in a way that benefits us and we don't use it as a crutch or a default, and we don't do it in lieu of taking a hike in the woods or playing softball or reading a book, right? So you have a a a more balanced life.
Brian Bell (20:40.526) also spent a lot of time in in Singapore. And, you know, maybe for the audience who's not familiar with a little bit of their history and what they got right in terms of free trade, maybe you could talk a little bit about how they set up sort of this, you know, free trade hub and with with their policies there.
Frank Lavin (20:43.985) Yeah.
Frank Lavin (20:50.235) No.
Frank Lavin (20:56.829) Right. Yeah. Well, and look, there's one huge advantage Americans have when they get to Singapore, if you have a chance to get out there, which is it also is a former British colony. So so English is the dominant language, Chinese is widely spoken, but English is the dominant language, and British commercial code, which is very similar to American Commercial Code, is is the normal business operating environment. So basically any successful business in the US can be successful in Singapore. not I mean you still have to deal with competition, you still have to deal with normal market dynamics. But the point is there's no intrinsic reason why that model wouldn't work. the same way we would say any any successful US business could be successful in Canada, because very, very similar society, economy, government policies, and so forth. So that's sort of the good news. And as you just mentioned, it is a free trade country. It has more or less free trade with the world, not a hundred percent, but it does have a formal free trade agreement with the United States. And because it's a small country, it's only six million people, but it's very wealthy. But being that small, six million means there's not the indigenous protectionist lobbies or interest groups. There's no Singapore auto industry or steel sing steel industry. There's no Singapore coal mine. So they have to be able to say if you're only six million people, they have to be able to say, look, if you've got you know something we could use, we'll bring it in and we'll and we'll be happy to buy it. So so it's very much a free trade because of that, free trade. DNA, then it becomes a regional hub because people then park their regional offices there and they service the rest of Southeast Asia the ASEAN nations out of Singapore. So warehousing, finance, corporate management, leadership, legal, and so forth tend to be based in Singapore, even if they're servicing, you know, ten countries, seven hundred million, and you have a very prosperous middle class, upper middle class society. So you have a great, you know, American school there and other kind of attributes where twenty thousand Americans live in Singapore. So I I'd encourage people to take a look. The joke is it's Asia for beginners because it's so similar to the United States. You don't need to learn a foreign language or learn you know, exotic cultural attributes and you can just sort of parachute in and get going.
Brian Bell (23:11.298) Really fascinating. and contrast that with China, right? Because we have lots of famous examples where American companies have tried to go into China, Uber, you know, you know, failed. Google obviously had to pull out. LinkedIn pulled out recently as well in the last you know five to seven years. Tesla seemed to have captured a foothold. What did Tesla get right? you know, they that other American companies just just failed at.
Frank Lavin (23:15.623) Yeah. Yeah.
Frank Lavin (23:21.095) Yeah.
Frank Lavin (23:32.145) Yeah.
Frank Lavin (23:37.576) Yeah, it's uneven. It's uneven. And I should in the interest in the spirit of so dis full disclosure, I should reveal that my wife worked for both Google and for Uber, and so I got indirect exposure to both of those developments. I think you'd say China is most sensitive to national network offerings and tech. Brian Bell (23:49.89) Yeah. Yeah.
Frank Lavin (23:59.304) Where you'd say a cumulative use of Facebook or Uber gives a foreign country some kind of role in society they're just not comfortable with. It still has that communist pedigree. but if you're simply selling an item, if we go back to the lip balm company, if you say I'm simply just selling lip balm, they say that's fine. You're competing with everybody else, we don't mind. We don't mind if you have thirty percent market share or seventy percent market share. That's sure.
Brian Bell (24:22.786) Yeah. Like KFC has been very successful there. It's a a big chain. You're just ch selling chicken, that's that's fine. It's just chicken.
Frank Lavin (24:29.213) Sure, right, right. Consumer goods, Americans do very well. Hospitality, F and B food and beverages, you say do very well. also those international services, US education institutions, market heavily in China, do very well. China health, upper end health management, we do well. China, you know, the affluent Chinese who say I I'm not a hundred percent satisfied with my in-country retreat. I want to go overseas for some kind of specialist treatment. Go out and go to the Mayo Clinic, the Cleveland Clinic, and so forth. do very well. So there's going to be certain attributes where American firms do well and the Chinese government welcomes competition and there's going to be other attributes where it's going to be very, very tough. And that and the Chinese view is we think we can do this ourselves and we think for our own national industrial development we need to do it ourselves. So there's still a state role in the economy when you get to upper end industrial goods and you get into the tech sector, you're going to run into that kind of pushback.
Brian Bell (25:24.088) So what do most startups get wrong when they they say, you know, when they expand internationally? you know, what when is the right time to do it? what are some of the right markets? I mean, we talked a little bit about why Singapore is a a a good place to start if you're going to Asia. But yeah, maybe you could talk a little bit, you know, we invest in a lot of early stage startups. So when should they start thinking about it? Yeah.
Frank Lavin (25:33.938) Yeah.
Frank Lavin (25:39.698) Yeah. Yeah. Now this is a yeah, this is a fascinating topic because there's such a range of experiences in tech or US corporate behavior, Brian. If you if you had five companies in front of you that were identical, five snack food companies, and each of them were five US snack food companies, each of them five hundred million dollar in sales, and you asked each of those five, well, what's your international activity, you'll get five radically different answers. You'll have one guy say, Well, look, over half of our sales are outside the US. And next person will None of our sales. We're 500 million, 100% in the US. And say, Wow, that's a that that that sort of goes against everything we learned in business school that everybody's rational and everybody's looking at the same data and everybody should come up with some kind of similar strategy. So it's a range of behavior and performance that I think has more to do with attitudes inside the company. Meaning International expansion is going to be a bit of a J-curve, different than domestic activity, where you see much more quickly cost-benefit results. But but you could say we are going to go to Vietnam, it's 80 million people or whatever it is. And but it might take three years to build. It might take three years to build to $10 million. And you say, Well, that might that's kind of appealing, but if I'm a $500 million domestic company. And I can grow 10% a year in my home market. What in the world am I doing going 12 hours away to go to Vietnam for $10 million a year? So you'd say I I that's a that's a very logical analysis. But if there's a way to get the cost of that down or get the resource allocation down, it still might be worthwhile. But I take it for there's opportunity cost in going abroad. So you'd say at any given moment, Maybe staying in your home market is the right answer, but cumulatively over time, watch out because your competitors are in that new market, or there's a local brand that's in that new market, and you have a window of activity when your product is sort of fresh or new or exciting where there's a global appeal. So I would say don't
Frank Lavin (27:45.714) Don't wait for a perfect moment or you're going to face perfect competition. And and be and understand that J curve to say you're going to get weaker numbers, so to speak, when you say we've got to get a have a Mexico strategy, we better get to Mexico. All right, you're Mexico's not simply a different sized America. So it's going to take a while to build, you're going to have to do Spanish language social media, you're going to have inefficiencies because you won't fully fully be at scale for warehouse operations and staff and so forth. so there's gonna be extra cost until you get to some level of maturity. But boy, if you don't take that leap, somebody else is going to take that leap. so I would say it has never been easier for a US company to go to a foreign market. It's never been easier for a foreign country to come to the US market. So the the the it's hard to give specific country advice in a discussion like this, but the one thing I'd say is don't stand still. Don't stand still. The world's not standing still. Your competitors aren't standing still. And maybe all you can do in early stages is to say, I can't get to Vietnam, but I'm gonna find a distributor in Vietnam. And I don't mind giving him a slice of the pie, because at least I'll have a market presence and a footprint in Vietnam. And I don't mind giving him a 10-year contract because he's ten years building this thing out. So that was sort of always a proctor and gamble strategy to say we're not and they they've been at this longer than anybody, they've been at this over a hundred years, right?
Brian Bell (28:52.814) Mm-hmm.
Frank Lavin (29:07.485) So to say we're not going to get to these markets, but there's somebody in that market, there's drug stores in France, there's drug stores in Poland. They all need toothpaste. So let's find a way to get to these guys and sell our toothpaste. Brian Bell (29:18.86) Yeah, and that's an interesting question as well, because we you know, we invest in a lot of software and AI companies. How should they think about entering new markets? Is it is it find a local partner or do g does it kind of depend on the country or how how do you think about that?
Frank Lavin (29:32.006) I think it depends on the country. And I'd say this about software, particularly if it's B to C, particularly if it's ultimate consumer use. Sometimes it's just a language interface. Sometimes, you know, if I'm Facebook, all I need is a button on on the front tab that says, you know, English or Spanish or French, whatever. Right. And so you say that's that's fabulous that Facebook can do that because you don't really need budget pretzels. Now you still want a sales and marketing operation in Mexico. You still want other things going on there. There's still gonna be regulatory issues and you have to have Some kind of government affairs interface that, but you don't need to reinvent your machine. The product, Facebook works pretty darn well. What you need is just a Spanish language front-end interface for it. You have a real blessing. If it's B2B, you've got a more complicated undertaking because you're you're meeting with Mexican businesses and you're selling them on approaches and you've got to get more directly involved in that.
Brian Bell (30:23.234) What is a geopolitical risk that is underpriced today by founders and and companies?
Frank Lavin (30:29.969) Well, I would say this risk is always out there. So I would say on an upfront basis, you want to do two or three things. One is I'd say move incrementally. The mistake some people make is to say, look, it's a perfect world, the sun is always going to shine, there's never bad weather, and everybody loves me. To say, well, I don't know if everybody loves you or not, but you've never been to an exotic market where somebody can use you as a punching bag for some domestic political issue. But in your home market, People tend to like you. But I'll tell you it's never perfect weather. It's never sunny forever. There's going to be a rainy day, and I don't know what people can say about rainy days, but about you during rainy days, but you're going you're going to hear about it. So I'd say I'd almost ask the question the other way around. What is the smallest footprint you need to have a legitimate presence in this new market? If you're not sure about this market, you don't need to start with an A to Z product slate or offering. You can start with some kind of shrunk-down approach. And what is the minimal capex you need because we've got companies I work you know for Citibank in China I worked for Bank of America and Southeast Asia we had companies that say look we've got a rather elaborate business model with warehouse operations and trucking operations and final assembly operations and you know so we want we want 300 million dollars of investment in Indonesia in order to get going Indonesia I said that that all makes sense but but what which of those activities can you outsource or defer or JV or or just procure locally? I mean you do not need to be fully integrated day one, especially if your first year revenue is gonna be five million dollars. Why are you putting in three hundred million dollars worth of debt? So you almost ask the opposite question, what's the least amount I need to do on the ground in order just to sell and market and build and develop and meet people and and establish my brand in that market? So I'd say have an incremental strategy and have a scale down strategy and be careful about leverage because you might have to go through some disruption.
Brian Bell (32:26.201) Fascinating. and you know, related to that, you know, how should founders think about selling into governments, defense adjacent markets or or regulated sectors?
Frank Lavin (32:38.503) Yeah, I'm all for it, but you need to be mindful of US guidelines and US protocol and US law. But I'm all for that. And I would tell people, and and by the way, you would know this. If you're saying I'm selling aviation systems that are dual use aviation systems, fantastic. But but you're already under US government scrutiny precisely for that reason. They're saying there's only certain people you may sell this to for certain reasons. So you've got to work within those US that US government architecture. and my guess is you're already in discussions with DOD about foreign military sales and so forth. And so you know, there's and there's lists. There's a list posted on the wall. So if the Indonesian National Airline says we need to say, do we sell military technology or military adjacent technology in Indonesia? The answer is yes. friendly, positive relations with these folks. So go ahead. But but that's all demarcated. All I would say is by the way, this is where trade associations can really be helpful. And and I don't mean just a tech association, but I'm saying there's gonna be military contracts association, there's gonna be foreign military sales, there's gonna be annual conferences in DC, you're gonna hear these presentations. So you need to sort of get your game up at sort of a graduate school exercise and saying, I need to make sure I'm on the right side of the law here, and if I'm doing this financing to Egypt, then everybody's gonna be happy. And I'm I'm the good guy in this picture, not the bad guy. this so so join join that military. Technology Trade Association and and get somebody from your team showing up at those D C conferences to take notes.
Brian Bell (34:06.489) Yeah, back to your previous advice, you know, get to know the people. be be in the room. you don't want to meet the DA when he's prosecuting you. I love that. so you've you've participated in humanitarian missions in Ukraine?
Frank Lavin (34:10.237) Yeah. Yeah. Yeah. Yeah. Yeah.
Frank Lavin (34:21.297) Yeah, I got a chance to go there twice. I think, look, I I again I come from this philosophical background that says US security is better off if we work with other democracies, allies, like-minded nations. And we have our superpower is we're the most inviting partner because we have a rules-based society and market, because we're open to ideas and tech and innovation. And so if you come from Europe or Asia and you've got an idea, we'll bring it to the US. So we are so to speak the best partner, the most fr friendly collaborative, whether it's business, politics, economics, investment, education, health, be you know, think of the US. So that that's been a very powerful place to be in in the market. But that to my mind also carries with it some obligations, which say, boy, we need to be able to work with other like minded nations about matters such as international stability, meaning don't go starting a war, be careful about invading your neighbors, be careful about launching these kind of conflicts. and so when Putin did this, I thought it was very important the US respond and push back against it. and I was just I'm just a volunteer working for a charity that provides ambulances to Ukraine. But you go there drive the ambulance. I just did two two different one week assignments. but I found it very useful, very meaningful and whatever we can do to help those brave people in Ukraine we should think about doing.
Brian Bell (35:47.331) Yeah. Yeah, and if you're following the news on the ground, it it appears Ukraine's starting to kind of repel Russia a little bit. Frank Lavin (35:54.3) Yeah. They they're doing more than holding their own. They're raising the cost. And if I may just add an ancillary point, Brian, you know, I spend a lot of my life looking at China and China's foreign policy. And one of the dangers of when international norms decay or collapse, and one of the dangers when one country says, Guess what? It's not a rules based world anymore. It's a smash and grab world. And guess what? You can just smash and grab something your neighbor's got and get away with it, and you're gonna be better off if you do that. Well, that induces bad behavior. If if if if Putin gets away with it says, I it wasn't that bad. I grabbed Ukraine and you think about what you want to grab. Well they will.
Brian Bell (36:29.827) Well started with Crimea, you know, ten ten, twelve years ago, right?
Frank Lavin (36:33.277) Crimea, parts of Georgia, and then parts of mainland Ukraine. But what we don't want is China getting that disease. We we don't want is China changing their behavior to armed conflict, going to a hot war. And I tell my friends who work on China issues, our goal our goal as Americans is however Ukraine mess is settled, six months after it's over, the following the subsequent Polarbureau meeting, Central Committee meeting in Beijing, Xi Jinping looks at his deputy and he says, You know. Putin is an idiot, isn't he? So, yeah, Putin's an idiot. That the the cost to him far exceeded the benefit. Yeah, the cost to him far exceeded the benefit, which is a polite way of saying, look, we're not going to mimic this guy. Why go ahead and have a discretionary conflict with your neighbors if you end up with a bloody nose, you end up with a million plus casualties and end up with all these other kind of economic problems. So so I think it behooves us to raise those costs to say, however, this ends up, Mr. Putin, however this ends up. cost to you are going to exceed the benefit. And you're gonna have a majority of Russian opinion say, why the hell did we ever do that?
Brian Bell (37:37.327) Right. Get into the psychology of Putin a little bit. I mean, what do you think is going through his mind? Is it is it legacy? Is it just greed? Is it i i is somewhere deep down he's just trying to make Russia better off by smashing and grabbing? What what is what is in that psychology there?
Frank Lavin (37:54.898) Well, I I think it is the difficulty of coming to terms with the defeat and it and it to me it's a vocative of nationalist Germany in the nineteen twenties on the def on the back of World War One. On the back of this defeat, when you could have said Germany going into World War One was arguably the most advanced democracy, the most advanced industrial power, made enormous contributions to literature, art, music. and so the Germans would have certainly for themselves had a sense of saying we are the leading nation and we've been beaten by these other. We've been humiliated and and those guys took Alsace and Lorraine away from us. So they stripped us of God. I think this is very similar to Putin saying Russia, the Soviet Union was the greatest or one of the two superpowers, somehow the United States prevailed or won, somehow we lost, but it was all sort of through chicanery. They'll sort of tricked us or cheated us. And what I'm gonna do is cobble, reconstitute that Soviet empire again, and I'm gonna do it piece by piece by grabbing by grabbing parts of Georgia, grabbing Crimea, maybe grabbing his original plan was take all of Ukraine, but I'm gonna put it back together again. And there's no reason in the world Russia should play second fiddle to Germany or France. Those guys are flat, decaying economy, bureaucratic states. We Russia are a great nation, we are a global superpower, and the world needs to listen to us. So it's that sense of loss and that sort of perverse sense of nationalism and it's almost a kind of revenge narrative that propels them into this. And Putin's got one other huge problem that Xi Jinping does not have, which Putin had zero background in economics, in business, in job creation, and economic growth, and middle class prosperity.
Brian Bell (39:23.513) Mm-hmm.
Frank Lavin (39:44.604) In trade or finance, zero career KGB colonel who is only looking through this thing through his narrow nationalist lens. Xi Jinping is an engineer. Xi Jinping says, look, I've got this middle class. I have right now China is the wealthiest it has ever been in history. I've got people on phones, they own cars, they want to go to university, they want to travel abroad. I don't want to throw all that in the trash. I've gonna protect and enhance my middle class. I still have international goals. But I should do so in a very measured way that doesn't lead to a hot war, because then I put all my all my success at risk. But Putin saw none of that cost. It was all benefit, no cost. So an extraordinary miscalculation on his part.
Brian Bell (40:27.875) Yeah, and really weaken weakens him politically and potentially sets you know, sows the seeds for disruption in in his government.
Frank Lavin (40:35.513) I I think so it's hard to see a happy ending for him because these costs are so pronounced, so severe that even if he gets out with some degree of dignity, I I I don't see him getting a round of applause. I don't see how people say, Well, thank God we did that, you really showed him. He ends up with just a just you know, over a million casualties and Russian demographics are so bad they stop publishing their annual population numbers.
Brian Bell (40:39.437) Right.
Frank Lavin (41:02.673) So and and we are told that something like one million Russians have left the country and gone overseas because obviously if you're an engineer or medical professional or even you know a history professor, you say, what do I want to hang around in this kind of environment? This thing's gone on six years. I mean, I can go to London and be a history professor and have sort of a normal life. So yeah, he's made a mess of it.
Brian Bell (41:24.503) When I know we could talk another hour or two about this, but I wanna get back to your you know, inside the Reagan White House, the book. You know, what do what do you want to correct about how Yeah, yeah, it's right there on the I love that. what do you wanna correct about how Reagan is r remembered?
Frank Lavin (41:30.887) Yeah. There we are, by the way. There we are. If I might say that's the book that's the book check. There we go. Thanks.
Frank Lavin (41:44.158) Well, I think over time history tends to be more and more kind to presidents. Meaning in the immediate aftermath of their time in office, the public opinion almost without exception simply parallels your personal opinion. If I for any public figure, if I say to you, Hey, did Hillary Clinton do a good job as Secretary of State? Overwhelmingly your response to that question is not to answer the question, but you're really saying, Well, I either kind of liked Hillary Clinton or I kinda didn't like Hillary Clinton, right? So so you're just giving your personal impression of the individual. But after twenty or thirty years, you're able to say, and historians are able to say, look, here are the three or four real high points of her tenure, and here are the three or four real problems, we're able to have a more balanced assessment. So the good news for Reagan is we're outside that immediate window of snap judgment and into the long term view. And I think people would say on on at least Two or possibly three attributes of his presidency, there was validity. You could say maybe he didn't get as far as he wanted, but he sort of had the right instinct. His mo his greatest success, I think, was pushing back against the Soviet Union. That that free societies and open economies were morally better and provided better outcomes, and the Soviet Union was bad news and represented a threat to the free world. So we need to find a way to push back, and we don't want a war. We've got to raise the cost of bad behavior to these guys. We've got to keep the West together to push back, but we never want to be so outrageous in what we're doing that it provokes some kind of military response. So that I think is viewed as a v generally a very strong, very successful set of outcomes. The other area where he tried and I think had partial success was this economic policy of saying, be careful about the size and scope of government, because at some point the benefits really taper off and they might be counterproductive. And if you look at examples in our federal system, as you reference, you'll find very light touch societies with better outcomes than very heavy touch societies. And allowing a restraint on government spending and lower taxes and the maximum amount of sort of individual freedom, individual liberty might give you better outcomes than a very expensive site. But he only had limited success with that. He ha he got his national tax cuts in.
Frank Lavin (44:06.289) But it's very, very hard to reduce government programs. You know, whenever you have a policy initiative that says, let's make some near-term sacrifices and maybe trimming some programs, and we're gonna have longer-term benefits in terms of reduced deficit and higher rates of growth, that's a hard sell. That's a hard sell because we all all of us as human beings have some kind of immediacy in our time horizon. So if somebody, if a president comes in and says, Look, I see three to five years of a tight budget, that's gonna give us a you know, three tenths of a percent lift in growth rates after five years. People say, I don't like that bargain. I'd rather I'd rather keep spending now. And so what if five years from now I don't have a high rate of growth? So that that's a tough sell.
Brian Bell (44:46.755) Yeah, and you know, what do you think would if he were alive today, what would he say? What would surprise him and disappoint him the most?
Frank Lavin (44:55.013) I think the most surprising bit would be our international behavior where Reagan, you know, we had from from Eisenhower through Bush 41, from 52 through 92, we had eight US presidents in a row, all of whom served in uniform or in World War II. Not not all of them in combat, but all of them were directly involved in the war. So all of them came out of that. view of US has to provide international leadership, has to cultivate friendships, has to work with other democracies, has to always kind of keep the moral high ground and stand for human rights. And everybody to some extent pursued those sets of goals in their foreign policy agenda. We seem to move sharply away from that, where we are criticizing other democratic nations, we're getting in arguments with people who've been longtime friends and allies. And something that always differentiated US From the Europeans was with with one exception the exception being the Philippines, but with one exception US history, we never had territorial aspirations. We had no real colonial DNA, we were not a colonial power, an imperial power, and we could properly tell the third world as they're in the nineteen fifties and nineteen sixties, they're going through anti-colonial, they're going through their own independence movements, we can be your friend. We can be a friend. We don't want the Brits or the French to stay there. We want we want self-determination. We want democracy. We want you to enjoy the same benefits that we have. And that had enormous credibility. So I would tell any US president, be careful about territorial seizure, aspirations, or claims, because that might hurt you more than it helps you. And when you're doing it against a friend, in this case it's Denmark, you know, I I don't see that helping us. I see that just creating ill will. So I just think that's a huge misdirection for US foreign policy.
Brian Bell (46:44.673) Do you think do you subscribe to the the theory of generational history of, you know, good times create weak men and weak men create bad times, and so forth?
Frank Lavin (46:55.239) Well, I think there's something to that in this sense that Cold War architecture was successful. And and we won. And after it's over, so it's over, you could say, more or less around 1990, the Berlin Wall falls, the Soviet Union collapses, Eastern Europe, I think without exception, maybe Belarus, integrates into the EU. Half those guys actually join NATO as well. they all move towards democracy. Again, Belarus is the exception. so there's an enormous amount of success and goodwill, and you could properly say, well, what's all this architecture for? What's this expense for? Why do we have troops in Europe? That's a reasonable response. and so we did have a considerable drawdown in US security footprint in Europe. We went down from 1990 to 2020, we went down about 90 percent from 300,000 to 30,000. And by the way, that might have all made sense because the premise is. it's a sunny day and it's never going to rain. And if it's a sunny day and it's never going to rain, you don't need to f you're not going fight a war in Europe. No, who in Europe is going to start a war? Part of the part of the logic of market economics was it's open architecture. Any country or any business from any background can participate and earn and build and grow and share and become prosperous so there's no need for war. If you you know if you go back to that World War I architecture If you had a German restaurant at El Saint-Lorraine, well, you lost your restaurant. Now, if you say I represent the largest German worst chain and I want to open up 20 restaurants out, they'll say, well, go ahead. I mean there's no barriers or limitations and people go eat whatever they want to eat. So so there's a strong argument to say that the the logic of the marketplace is so strong that it really reduces any impetus for war. And I think that held across the board, except for Vladimir Putin. So it's one of these theories that could be 99% right and 100% wrong. Because all it takes is one guy to say, I don't buy it. I do not buy it. You guys have cheated me and I'm going to come back and get you. So so we are, in your sense, I do agree with you, in that we are sort of a victim of our success, and it did in your US and Europe to saying we just don't need to have the security commitment. So Barack Obama reduced US participation in NATO across the eight years he was president. But but again, if you were giving him advice at the time, you might have said, Mr. President, there's no threat.
Frank Lavin (49:21.607) There's no threat or no problem, and everybody's well behaved, and it is just an expense, and maybe we can do without that expense. so it's hard to say he called it wrong, but obviously we undershut the market undershot the market and it provided an incentive or induced Vladimir Putin to go ahead and and be be the bad guy and put Europe into turmoil. So we paid a price, I think, in Europe. Europe was far worse than the United States. Europe really paid a price for not having a a ready defense and ready commitment and that credibility with Vladimir Putin.
Brian Bell (49:54.766) Yeah. So, you know, it's kind of fitting. We're recording this, you know, roughly a week after our, you know, quarter millennial celebration. You know, America's two hundred and fifty years old. And and if you believe Ray Dalio, we're kind of heading towards this economic reckoning, right? With with kind of the monetary situation. So we're we're we're facing as America this you know drastically a lot of headwinds and a lot of things pol political. politically and and economically. How do we, you know, set up our nation for the next two hundred and fifty years going forward?
Frank Lavin (50:30.513) Yeah, I look, I'm always kind of an optimist, as you suggest. Maybe that optimism is overstated. But I mean same way I I'm saying that what's what's right about America, what works in America, outweighs, I think, dramatically what is wrong or what needs to be fixed. Meaning the fact that there is economic growth and participation, there is that open architecture where anybody can participate. There's a fair amount of mobility and a fair amount of educational opportunities. So you can come from a very modest background and still participate in the economy, still learn something, still get a job someplace and have some kind of a a decent life. So there's a lot of good news out there. There's also bad news. There's also industries that are declining. There's also societal changes that come with tech. There's going to be stratification, which is unsettling. And I would say some element of stratification just comes with progress. Meaning a successful society is one that allows people to go as fast as they can, as far as they can. That's not all. That's not 100% of what you want, but that's sort of my starting point of what you want is to get you allow people to live the kind of life they want to live. But if you say that, then some people are going to be able to run faster. By the way, you could have seen this phenomenon, Brian, if you looked 130 years ago, if you said, What when electricity is introduced into your city in the 1880s, what happened? Well, people more or less had their act together. could run faster and people never had their act together. Meaning if you were ill literate, which a big part of America was in the eighteen eighties, the advent of electricity wasn't going to help you anyhow. maybe indirectly, maybe the shops opened later or something because of light bulbs. But if you were literate and you were functioning, you were part of the economy, electricity could really help you go even further. The light bulb, the telegraph, you could go faster. So I'd say tech empowers. Tech empowers, but your ability to use that empowerment is going to
Frank Lavin (52:24.509) Drastically diverge. So you're going to have stratification. Now I I don't view that financially as intrinsically a problem or upsetting or off putting. And the fact that you know, Elon Musk makes a boatload of money or Jeff Basil's makes a boatload of money, I'd say, well that to my mind in some way reflects a successful society, successful outcome. and and that's not what caused somebody stuck at the bottom to be stuck at the bottom. but boy, there are some people take enormous umbrage at that stratification and say, This is just really terrible that the upper end of these folks are getting wealthier faster than I'm getting wealthier. which I I don't think it's a healthy way to look at it, but that does have a hold on some people's imagination. If you're looking at pure financial equality, I think you're we're gonna see that deteriorate a bit. But if you're looking at prosperity and mean income, I think you're gonna see that improve over time, where everything you need to have a happy, successful life is more readily available to you in an era of prosperity.
Brian Bell (53:26.319) Well Frank, I really enjoyed the conversation. I wish we had another hour or two to t to chat. where where can people find you online, find find the book and
Frank Lavin (53:32.499) I'm on I'm on LinkedIn, pretty active. I'm on Twitter too, a little more active on LinkedIn. Be very happy if you get to LA, give me a call. I'll be glad to catch up with you. I love what you're doing, Brian. I love that V C space, the tech space. And I think it does power the country. It powers our industry. So God bless you in what you're doing.
Brian Bell (53:49.783) Thank you so much, Frank. Appreciate it.
Frank Lavin (53:52.027) Thank you. And and I hope you like the
Brian Bell (53:55.949) I will. Yeah. Thank you so much.
