RUTHFULLY YOURS

Anybody remember the hype surrounding something called the “IT”? This device was set to revolutionize transportation in the new millennium. It was going to make the car look like the horse and buggy, conjuring images of the Jetsons while promising worldwide transformation in the mold of the PC. In a clever bit of marketing, it even received what sounded like a secret agent codename — “Ginger.”

We all know the end of that story — the Segway is a novelty item big with mall cops.

After a couple of impressive debate performances, Carly Fiorina is the new Segway candidate. Those looking for a constitutional conservative need to know what she can promise vs. what she could actually deliver.

In many ways, Carly’s business track record forms the linchpin in her viability as a candidate and a leader. Given her current “outsider” status, her thin political track record, and her touting of business successes on the campaign trail, her business history has deservedly received considerable scrutiny. It deserves more.

Let’s start at Lucent, where the record becomes troubling — perhaps even more troubling than her tenure at Hewlett-Packard.

Carly rose to president at Lucent on the heels of her successful sales career and her primary role during the Lucent IPO. In the euphoric days of the dot-com boom, Lucent dove headfirst into “vendor financing” deals ^[1] – corporate-to-corporate loans equivalent to subprime real estate loans. Carly, for her part, was reported as having advocating this growth agenda ^[2] on Wall Street, and was credited with authoring vendor financing deals such as PathNet ^[3] – a deal that loaned up to $2.1 billion to a company that had 100 employees and an annual revenue of only $1.6 million.

While former Lucent CEO Richard McGinn ^[4] appears to have been the primary driver behind the bad loans and shady accounting, it strains credulity to the breaking point to think that Carly had no role in the matter, as this New York Times author concluded ^[5] despite his own citation of the PathNet deal. She was a powerful sales force closing deals and a president in charge of the “service provider networks” — the very sector into which these loans were being poured. Indeed, Fiorina cashed-out to the tune of $65 million in performance-linked pay, and Lucent’s soaring and unsustainable profitability performance at the time was primarily driven by these vendor financing deals.

Her timing was good. Leveraging her position at the high-flying Lucent, she vaulted to the top spot at HP. That was 1999. She left in her wake a balance sheet bullet-riddled with bad debt, and when the dot-com bubble burst in 2001, Lucent was bought out before suffering near-death bankruptcy as a result of its paper-engineered growth.

Mostly negative ink has been spilled over her tenure as HP CEO, even landing her on “Worst All Time CEOs” lists ^[6]. She has pushed back against the criticism by citing misleading statistics ^[7], such as revenue growth and the number of patents filed, while ignoring the more relevant metrics ^[8] of substantially increased debt, lower-to-flat income, and a plummeting stock price that significantly underperformed the S&P, the NASDAQ, and her tech rivals. She has also explained away HP’s poor performance as the result of a troubled tech market and clashes among the board members.

This excellent Fortune article ^[9] from 2005 captures the essence of why Carly failed, and why her failure at HP is highly relevant to her campaign. Her Compaq acquisition serves as the focal point, as Carly’s “big bet” would drive HP’s financials for the remainder of her tenure, in addition to touching off a bitter 2001 proxy battle from which she would emerge as the narrow victor.

The promises Carly used to win the proxy fight failed, and failed spectacularly. The growth prospects predicted in the proxy fight did not even come close to meeting their 2003 predictions even by 2004 — not by a long shot — as shown in the Fortune article table and accompanying analysis. In a classic case of good money chasing bad, financing the merger required HP to cash in assets in the highly profitable printing business. Whereas stockholders previously had a 100% stake in the crown jewel printing business, they now had a 63% stake at the price of taking on Compaq’s low-margin PC business. And, as noted above, Carly’s promised growth in the PC business missed targets by a country mile, thus cementing in place HP’s poor income and stock performance throughout her stint as CEO.

Here’s the relevant lesson for her campaign bid: if you make lofty promises, be prepared to deliver — or take responsibility if you don’t. Not only did Fiorina not deliver, she has attempted to explain away the HP failures with faulty metrics and excuses.

In fact, her super PAC has a page lauding the Compaq merger ^[10] with puffery akin to the hype leading up to the Segway unveiling.

The Inside-Out Candidate

In a year of voter rebellion against establishment D.C., Carly has promoted herself as an “outsider,” a status that has largely gone unchallenged. But an examination of Carly’s political history illuminates her alignment with the GOP establishment in both positioning and political views.

Her foray into politics began by signing on with the RNC and serving as McCain’s principal advisor on economic affairs during his failed 2008 presidential run, a move that would pay off during her failed Senate bid against Barbara Boxer. While the grassroots and Tea Partiers went all-in for Chuck DeVore during the GOP primary, Carly piled up endorsements and money from establishment pillars ^[11] such as John McCain, Lindsay Graham, the RNC, and the NRSC.

In turn, Carly staved off a primary challenge from the more conservative DeVore on the back of that establishment-fueled 3-to-1 money advantage.

After her run against Barbara Boxer that saw her bid undercut by opponents pounding away at her unsuccessful HP tenure, Carly was rewarded with a promotion to vice chair of the NRSC – an organization dedicated to fighting Tea Party challengers and reelecting entrenched establishment incumbents such as Orrin Hatch and Thad Cochran.

One of her first acts as vice chair would be to push back against newly elected freshmen in the House, and to promote compromise between McConnell, Boehner, and Obama during the 2011 debt ceiling standoff ^[12]. McConnell and Boehner would ultimately capitulate to Obama — the first of many in the budget showdowns. This would not be the last time Carly promoted the Establishment line during the budget battles.

In 2013, Carly excoriated Ted Cruz for leading the government shutdown over Obamacare ^[13]. While stating she “felt badly” for Boehner, Carly called Cruz “extreme” and a “flamethrower.” She accused him of pursing the faulty motives of “name recognition” and “money,” and laid blame for the shutdown squarely at his feet alongside Obama.

Given her stance just two years ago, how genuine is her will to follow through on her promise to shut down the government over Planned Parenthood? Consider also that she recently told Chris Wallace that she wants to expand government funding on women’s health issues.

Accompanying Carly’s establishment ties are political views that vacillate between moderate and slightly less moderate ^[14]. Her positions include support for the Gang of Eight pathway-to-amnesty bill, acceptance of the “scientific consensus” on man-made global warming, promotion of increased federal funding in education, and a would-be confirmation vote for hard-left jurist Sonia Sotomayor.

Perhaps most damaging of all, Carly advocated for a scaled-down, Obamacare-lite version of the individual healthcare mandate ^[15], among many other limited government heresies ^[16].

In Fiorina’s defense, some commentators have focused on her conservative positions ^[17], including her reversals on the TARP bailouts, cap-and-trade, and internet taxation. One commentator ^[18] has gone so far as to compare her to Margaret Thatcher, an absurd comparison given Thatcher’s 20-year conservative political track record before being elected prime minister.

But what of Fiorina’s alleged “evolution” at the tender age of 61?

While a candidate’s political positions may oscillate over time, their actual method of thinking is more stable, particularly for a person of Carly’s age. As it turns out, Carly claims to practice Hegelian dialectics as her primary mode of decision-making, as provided in this 2001 speech ^[19]. This method is not MBA pomp aimed at corporate dispute resolution, but rather a rigorous application of the dialectical thinking method, no doubt the result of her BA in philosophy from Stanford.

Hegelian dialectics pits what the practitioner regards as two extremes against each other — the “thesis” and “antithesis.” The thesis and antithesis are not fixed principles, but rather a subjective selection of opposing ideas from which the conflict is resolved through a new “synthesis.” Untethered from any firm principles grounded in reality, each synthesis rests on shifting sands, as one man’s synthesis may be another man’s thesis or antithesis.

And what can we expect from Carly’s application of Hegelian dialectics? Compromise.

As shown in her application of dialectics, government-backed charter schools are the synthetic resolution between public schooling and a pseudo-private voucher program. More government spending on education and infrastructure by foreign countries is the resolution between full debt relief and full repayment of debts by debtor nations. Capitalism and profit-seeking, desperately needed to bring the third world into the modern area, is undercut by anti-globalist attacks on capitalism and resolved with nothing more than rhetoric concerning “social value” and “local” action.

Given the wide array of Carly’s moderate political positions and her unprincipled, compromising method of thinking, is it reasonable to expect her to be a crusader and hardliner for free markets and limited government, as this author has suggested ^[20]? No. Carly’s dialectic approach is not a means to roll back the entrenched leftist ideology of the Obama years, but rather a recipe to compromise with it.

Fiorina may be a candidate of the moment with her slick new Segway sales pitch, but I’m not buying the hype.