April 2015 – STIMS Institute

Stop being nice to your boss?

The news item “BlackRock’s Chief, Laurence Fink, Urges Other C.E.O.s to Stop Being So Nice to Investors” appeared in the recent NYT Dealbook segment.

In a letter sent recently by Mr. Fink to the top 500 CEOs in the country, he suggests, “Too many of CEOs have been trying to return money to investors through so-called shareholder-friendly steps like paying dividends and buying back stock. These maneuvers, often done under pressure from activist investors, are harming the long-term creation of value and may be doing companies and their investors a disservice, despite the increases in stock prices that have often been the result. The effects of the short-termist phenomenon are troubling both to those seeking to save for long-term goals such as retirement and for our broader economy …… such moves are being done at the expense of investing in innovation, skilled work forces or essential capital expenditures necessary to sustain long-term growth. This move sends a discouraging message about a company’s ability to use its resources wisely and develop a coherent plan to create value over the long term ……. with interest rates approaching zero, returning excessive amounts of capital to investors isn’t helpful because they will enjoy comparatively meager benefits from it in this environment”.

In our opinion we need such bold leadership also among professionals to stop bowing to the pressures of the boss or organization that demands “fire fighing” on short term problems at the expense of time and resources necessary to dedicate to the long term needs and success of the company and the organization.

You can stop bowing to investors if you know who they are! The problem is that the “Investors” today are those who make money off of money. They pay everyone else for doing their work to get that result. This stratification of work between the investors and the rest is the insidious problem that has been evolving for the past three decades. You and I who invest in mutual funds – which can be local or global – are also the investors! The issue may be: Can the CEOs sell the value of their long term vision and goals to the “investors”? Once convinced can they deliver the long term value as promised? These are the questions that need to be addressed by every one – from the CEO to the lowest level employee in every company. We call these as the Transformational Skills.

Today the hedge fund managers, day traders, arbitragers, financial analysts and the fund managers are increasingly isolated from the main stream business. In this new model Finance, Professional work, Information work and Physical work are in stratified impermeable silos. In this scenario, the CEOs are just like any other professional (who gets paid for their work) as opposed to Finance (where money is made off of money!). Hence the CEOs have to learn new skills – Transformational Skills – to get the “investor driven finance” do what the CEO needs (long term business focus). The question is “Should the CEO quit bowing to investors? or “Should the CEO learn skills necessary to get the investor driven Finance bow to him/her?”

The question is also identical for many professionals where they say that their boss and organization is forcing them to focus on short term projects and quick results. Do these professionals have the necessary “Transformational Skills” – which is beyond academic education and industry/sector know-how that will make their boss and organization sit up and listen to them?

Where is the real “Skill gap” ?

In his recent opinion page, Mr. Paul Krugman writes the following in the NYT: Most people would surely agree that stagnant wages, and more broadly the shrinking number of jobs that can support middle-class status, are big problems for this country. But the general attitude to the decline in good jobs is fatalistic. Isn’t it just supply and demand? Haven’t labor-saving technology and global competition made it impossible to pay decent wages to workers unless they have a lot of education? …. And the evidence that technology is pushing down wages is a lot less clear than all the harrumphing about a “skills gap” might suggest.

In the above referenced citation on “Technology”, Mr. Mike Kanczal writes: When we think of the economic malaise of the past 30 years, we should probably think of it as a combination of technology, globalization, sociology, and public policy.

In all of the discussion, the word “Technology” is used with out a clear common understanding. If you are a Mechanical Engineer, your knowledge in applied mechanics, materials science and physics are not counted as “technology” in the above discussion by these eminent scholars. Same goes for Electrical Engineers, Chemical Engineers, Civil Engineers, Chemists and Biologists and their knowledge or know-how. Even a Robotics expert and his/her knowledge of mechanical design, path planning and fixturing are not counted in the above “technology” reference.

Instead, what is counted as “Technology” is the automation in the collection, processing, analysis and dissemination of information of any kind and in any place and for any reason. This is the automation of human centered capability in any and all aspects of our life. Instead of calling this as “Technology” we should call it as “Information work”. People, described as labor can be engaged in four sets of work:

Finance – make money off money
Professional Work – create and deliver a stream of new solutions each and every day (like a carpenter who makes and sells furniture, a plumber who fixes the leaking pipe and get paid for it, a cardiologist who fixes broken hearts (literally), etc.)
Information Work
Physical Work

The “Skill gap” mentioned above – which is seen as the major impediment against good paying jobs truly involve the following:

Recognizing that the work has indeed stratified into these four impermeable layers and only one of the four is available as a source of good wages (unless you are born with a silver spoon)
Recognizing that the Physical work and Information Work – which employed a large majority of the labor force with or with out higher education – will both be automated and what is left will only lead to low paying – “service” – jobs. Number of these jobs may grow, but their wages will hover around the minimum wage.
Only a narrow window of “Professional” work exists where there will be decent wages and opportunities to nudge into the middle class.
Finance – making money off the money – work is for a select few and these are the affluent 1%. If you can make it there great. Or if you are lucky to be born with a silver spoon, then you can count your blessings!
But, the better bet for the large cross section of the people may be to acquire skills that deliberately place them in the “Professional Work” category.
Such professional skills are not merely higher “Academic” education or Industry specific trade skills.
Instead the true skill gap is the blend of Academic, industrial specific skills together with System Thinking and Transformational Skills.

For details Contact us.

STEM Professionals: Here is some music to your ears?

Irrespective of the political spectrum one belongs to, the recent announcement of global energy policies by USA, China, Russia and other countries, must be the music for the ears of all STEM Professionals.

The recent announcement from the White House on the new energy policy is noted as follows: Obama’s Strategy on Climate Change, Part of Global Deal, Is Revealed http://www.nytimes.com/2015/04/01/us/obama-to-offer-major-blueprint-on-climate-change.html?ref=energy-environment&_r=0

The White House on Tuesday introduced President Obama’s blueprint for cutting greenhouse gas emissions in the United States by nearly a third over the next decade…. Mr. Obama’s new blueprint brings together several domestic initiatives that were already in the works, including freezing construction of new coal-fired power plants, increasing the fuel economy of vehicles and plugging methane leaks from oil and gas production. It is meant to describe how the United States will lead by example and meet its pledge for cutting emissions.

There are four key areas of focus described in this policy: https://www.whitehouse.gov/energy/securing-american-energy

Carbon Capture and Sequestration Technologies
Make solar energy cost-competitive with traditional energy sources by the end of the decade.
Energy efficiency in our vehicles and homes
Developing Clean Fuels

Each is an ambitious goal in itself. For example: New Clean energy standards for cars require automakers to raise the average fuel efficiency of new cars and trucks to 54.5 miles per gallon by 2025. http://www.usnews.com/news/articles/2012/08/29/545-miles-per-gallon-for-all-cars-by-2025-not-exactly

Irrespective of the political spectrum one belongs to, the above must be the music for the ears of all STEM Professionals. Over the past three decades with a relentless emphasis on cost cutting, standardization, automation and off shoring and out sourcing, there has been little if any emphasis on development of NEW SOLUTIONS that exploit the physical phenomena of nature. Of course exceptions to this generalization do exist particularly in the areas of IT, biology, genetics, etc. But, there are plenty of Mechanical and Electrical engineers, Physicists and Chemists and many other professionals in the STEM professional community, than there are computer scientists, biologists and geneticists. These professionals cannot be gainfully engaged unless there are big challenges posed in front of them. Government funded projects always follow the mission set by National policies. Recall the spurt in space technology after the call by the President Kennedy to “land on the moon”? Private sector, despite their professed desire for risk taking, will always place their bets on “safe” opportunities for cost reduction – milking the same old cow – rather than push new pastures and there are plenty of old cows to milk for decades to come. This leaves all the STEM professionals waiting in the wing for their opportunities, while they see steady erosion in their standard of living. Chances are, the new policies and the mandates on the industry will also spur more demand to find better ways to burn coal, make solar energy more competitive, make the homes more energy efficient, and cars that can indeed generate 50+ MPG on an average. All of these will require serious and sustained new solutions developed and perfected by STEM professionals.

Of course there is also an onus on the STEM professionals as well. They cannot simply wait in line and be told what they should do every step of the way. These are the traditional task oriented technical professionals. Instead, they need to become system thinkers and solution providers with a constant emphasis to Discover, Develop, Deploy and Exploit a stream of new solutions. We call on all STEM professionals at every level – from technicians to engineers to managers to senior managers – for this End to End Innovation. Contact us.