Work, business & professional services

Why doing nothing is underrated

I was stumbling through some old emails recently when I came across a post on the Fast Company website entitled Hard Work’s Overrated, Maybe Detrimental by Cliff Kuang. I was about to give up reading this when I noticed a link to another article in the Wall Street Journal. The WSJ article essentially makes the point that in a knowledge economy, finding ways to engender creative thinking is essential but it remains elusive. However, work by psychologists such as John Kounious at Drexel University in Philadelphia and Mark Wheeler at the University of Pittsburgh is starting to shed some light on where bursts of mental clarity come from.

Using brain scans shows that people who solve problems analytically, or through methodical reasoning, use totally different parts of the brain than those who solve problems through insight or intuition. EEG recordings revel that ‘insight’ appears to originate from gamma waves coming from the brain’s right hemisphere – the part of the brain associated with joining together individual elements to create patterns and associations. Moreover, when this happens the brain appears to restrict alpha brain wave activity in the visual cortex, much in the same way that some people cut out visual stimuli by closing their eyes when thinking deeply. Takeaways? First of all the researchers found that positive moods make insights more likely. Second one needs to create the time and space to drift and dream. Employers often look upon daydreaming as a waste of time (i.e. brain activity is limited) but it appears that the opposite is the case. Daydreaming is like mental flypaper. It makes the mind sticky so that new ideas and unexpected associations can be trapped for later analysis.

Corporate futurology

How can you tap into the collective wisdom of your organization to foresee the future? One new way is to use prediction markets, not to generate new ideas per se, but to find out what people think of new ideas. Hence, prediction markets can streamline new product development pipelines and, more specifically, predict individual events and occurrences, such as a launch date for a new product or the future price of oil or paper.

The idea of corporate prediction markets isn't exactly new, but the number of large organizations now using web tools to create forecasts and predictions is. For example, the purchasing group at Hewlett-Packard (HP) has used internal prediction markets to forecast the cost of computer memory chips in the future. This has proven so successful that HP is now offering the service to their clients under the acronym 'Brain' - Behaviorally Robust Aggregation of Information in Networks.

Similarly, the electronics retailer Best Buy has used prediction markets to forecast everything from new store opening dates to demand for new electronic devices. Again, elements of this are nothing revolutionary. Focus groups have been trying to use aggregated opinion to predict the results of elections for half a century, but these polls are notoriously unreliable. So what makes prediction markets more accurate? One reason is that polling is ongoing. People can make bets as often as they like right up until the closing of the ‘market.’ Another factor is money – or, more accurately, play money. It appears that predictions tend to be more accurate when people place actual wagers against specific results, although, interestingly, the results are better when the money isn’t real.

So where will such futurology go in the future? In the short-term the answer could be smaller groups. As Bernardo Huberman, director of the social computing lab at HP says: “ We want to reduce the wisdom of crowds to the wisdom of 12 or 13 people.”One way to do this would be to screen employees to remove, or grade, predictions from people that are highly risk seeking or highly risk averse. Beyond this who knows? Maybe future politicians will harness the wisdom of voters to help shape future policies. Government not so much by consensus but government enhanced by prediction.

What’s someone worth?

The economist JK Galbraith once observed that: “The salary of the chief executive of the large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself.” Quite. Back in 1965, the average US CEO was paid 24 times as much as the average shop floor worker. 42 years later (2007), the average American CEO was paid a staggering 225 times as much as the average Joe on the shopfloor. Why?

The answer is relatively simple. Back in 1992, the average CEOs salary in the US was $750,000. So an ‘outraged’ Congress effectively put a $1 million cap on the amount of pay that could be deducted as a legitimate businesss expense. The first unintended consequence of this was that many CEOs not earning a million dollars promptly awarded themselves a pay rise to a million. The second unintended consequence – and this was far worse – was that CEOs and other executives got creative about how they were paid. Stock options were originally intended to rewards to managers that increased a company’s market capitalisation. But companies soon started to issue options for executives to buy shares at a certain price – often way below current value. This was effectively like writing yourself a cheque because it eliminated any form of risk.

In theory a free market would be expected to sort such gross distortions out, but because management had effectively stolen power from shareholders this didn’t happen. CEOs could select a board that largely consisted of their friends and run a company into the ground and still collect huge pay-checks. The shareholders, especially small individual shareholders, could do almost nothing. This race to the moral low ground continues to this day and the separation of risk from responsibility was recently blamed for the whole sub-prime mortgage fiasco (because reward was linked to the quantity of loans rather than the quality of loans).

According to Nell Minow, co-founder of the Corporate Library, a research firm, this amounts to: “a corporate takeover of the capitalist system.” Managers have awarded themselves ownership status and sidelined the real owners. Pay is often disconnected from performance and boards can effectively regulate themselves. This can even happen when boards consist of executives that own relatively little of a company’s stock. So what’s the solution to this financial arms race? One answer is transparency. Full disclosure makes individuals and institutions behave somewhat differently. Another solution might be shareholder awareness and action. Reading between the lines there is a growing thirst for integrity in business and politics and ordinary individuals are starting to look more carefully at issues relating to public responsibility, fairness, ethics and morality. Of course this could all be a knee-jerk reaction to recent events of Wall Street. Time will tell.

China’s Buying Spree

According to Liu Kang, a professor of Chinese Studies at Duke University: “China is like an adolescent who took too many steroids. It has suddenly become big but finds it hard to coordinate and control its body. To the West, it can look like a monster.” A good example of such ‘bigness’ is the fact that China is currently sitting on US$2 trillion + of capital reserves and is looking for places to park this money.

Top of China’s shopping list are natural resources, especially oil. China has 21% of the world’s population but only 1.8% of its oil supply, so the hunt is on for oil to power its economy. But that’s just the beginning. China also needs natural gas, iron ore, copper ore, even water. Recent acquisitions have included almost $1 billion for an 11% stake in an oil and gas company in Kazakhstan, $14 billion for a 9% stake in Rio Tinto and a $10 billion in loans to Petrobas to help fund deep sea oil exploration off the coast of Brazil. China has also bought a 10% stake in Morgan Stanley, the US investment bank, a 20% stake on Standard Bank in South Africa and is currently attempting to acquire no less than 1/6th of Nigeria’s total oil output. Simply put, China is buying up the world. Between 2000-2009 China has spent an estimated $115 billion on foreign acquisitions and in 2008 alone China spent $25 billion on foreign investments – excluding the purchase of US Treasury debt (T-Bonds).

So what’s next? First, China will continue to spend big on foreign resources. In some instances this will mean buying contracts for the supply of raw materials, while in other instances it will mean the partial or full acquisition of whole companies. This will undoubtedly spark-off resource nationalism in some countries, with politicians claiming that it is unfair for opaque state-owned corporations to buy strategically important assets.Western companies can’t, after all, buy a stake in a state owned company in China. Rules will, in all probability, eventually emerge but at the moment nobody has much of an idea of what will be allowed in the future and what won’t.

Second, China will continue to buy real estate and acquire other assets ranging from banks to computer companies. This will fuel counter-trends such as re-sourcing (bringing outsourcing back home) and industrial reparation (moving factories back home).
Third, China will start to buy foreign brands. In other words, rather than making shoes for Nike in Chinese factories, China will seek to become Nike. In theory this could be achieved by growing domestic brands, but I suspect that an easier route will be to acquire established foreign brands. Lastly, China will start to grow domestic consumption. Currently, China saves too much and spends too little so some kind of macro-economic adjustment is on the cards. Indeed, if there isn’t an adjustment there could well be another GFC-style event. One of the causes of the last GFC was Chinese capital pouring into the US, which resulted in low-cost loans going to people they shouldn’t. Of course, all this could all be a repeat of what happened with Japan in the late 1980s and early 1990s. In all probability though, China will soon become the world’s leading exporter of capital. This is problematic on many levels. China isn’t exactly an enemy of the US and the West but isn’t exactly a supporter either. In banking circles the term concentration risk refers to having too many eggs in a single basket. Perhaps that’s what’s happening here, although the basket, ultimately, is state owned.

Jobs of the Future

I do talks to school kids every so often and one of the questions I’m frequently asked – as you’d expect – is around the future look and feel of work. Specifically, which will be the growth industries of the future and which industries will be in long-term decline.

A recent article in the Futurist magazine picks up on this thought. The top line is that most of the trends driving the future of work are already in plain sight. Globalisation, outsourcing, automation, demographic shifts (especially ageing), digitalisation, mobility, artificial intelligence, networks and so on will continue to re-shape the industrial landscape. The article highlights healthcare, especially the automation of healthcare, as a key area but I’d add a few other thoughts.

For me, the key issues around the future of work are around shifting demographics, globalisation and connectivity and CSR/Corporate governace. However, the first issue to consider when thinking about the future world of work is not the question of what work will be in demand, but the question of why? And I think the answer to this question is pretty simple – anything that can’t be done well by an intelligent machine or outsourced easily to a lower-cost country. If you then add trends like ageing, or the demand for a flexible and highly educated workforce, then, I think, you end up with a list of jobs that require physical presence, right-brain thinking and/or empathy.

So what are the jobs of the future? On my list I’d place healthcare in the top spot (especially aged care and home-based monitoring), closely followed by teaching. I’d also add anything related to ideas (librarians spring to mind), anything using maths, anything around data security or physical security, computer software and vets (to look after all the animals that single person households will generate). I’d also add third age travel consultants (a personal service to advise third age travellers on places to see before they die) and anything in the creative or cultural industries. That’s unless you want to get really sci-fi about it, in which case I’d also add robot technician, immersive gaming developer, predictive marketing consultant and sleep scientist. Futurists? They have a limited shelf life. Being an historian would be a much better bet. That’s unless the world continues to be highly volatile and uncertain, in which case I’d predict a healthy future for futurists.