~synthesis~

motility

Tyler Cowen co-authors Marginal Revolution with Alex Tabarrok - it is a fantastic blog; I read it every day. In a recent interview, Tyler said that one of America’s biggest problems is a lack of economic mobility. People are stuck in their economic stratum because they don’t have access to better schools, particularly in their K-12 (primary & secondary) years. Sure excellent people will succeed no matter their background or school, but the vast majority are immobile because the only education available to them is not good enough to help them rise.

They’ve also written that the US government’s approach to stimulating the economy (spend $trillions) is ineffective. I agree, and think it’s for the same reason - immobility.

Effectively executing the latter, might also give us the answer to the former:

When an economy falters, we must increase the flow of money -- get people and businesses to spend, this creates monetary mobility. That movement of money causes goods to flow, inventories to be replenished, and people to be hired. It’s not just about increasing the money supply, the added money must actually do work -- if it is put in the bank or invested, the effect is diluted or eliminated. So, who is most likely to very quickly spend every penny they get? What also is the most efficient approach - where there is little or NO leakage of funds to bureaucracy or other interests?

First who: In a shrinking economy, businesses will lower operating costs (layoffs, other efficiencies), grow profits through savings, and ONLY spend if they see sustained proof that customers are buying. They will not (and should not) create capacity when there is no demand. The result is profitability growing much faster than employment. Companies are NOT spending. They will only act when people buy. So not business.

People? If you already earn enough to meet your needs, any incremental income may not all get spent - you might save, pay down debt, or invest it instead. The richer you are, the less likely it is that a new dollar is spent. This money is least mobile. Poor people on the other hand, can’t afford to save money; they will spend whatever they have to subsist, if they get a bit more, it means they can afford to buy more necessities, not save more. There is also no overhead to their spending; they don't commission research, or conduct needs analyses, or consult McKinsey, they just buy food or clothing or whatever.

A thousand dollar bonus to someone earning $20K or less represents at least a 5% increase in income. If this person were the sole breadwinner of a family of four, they would still be $1,350 below the 2011 poverty line, and every cent would be spent. At that income, savings is not an option. There are 82.6 million people in the USA who earn $20K or less; giving each of them a $1K bonus would require a stimulus of $82.6 Billion.

When the lowest wage earners are spending money, their inertia creates a ripple effect that accelerates money flow, drives capacity creation and reinvestment, and thankfully (!) also enables the not-so-poor to buy new cars and drink mojitos in the Hamptons.

Then, how: Fighting the urge to form a task force, hold 735 meetings over three years, and create a 3,000-page manual, filled with absurd crap, let's just issue a $1,000 check to everyone who whose total W2 income (box #1) was less then or equal to $20,000.

In a commitment to failure, Presidents Bush and Obama chose and continue to choose a trickle-down approach with their stimuli, believing that giving $$$ to bigger companies will cause them to invest to create more infrastructure (manufacturing and service capacity), and in turn employ more of the middle/lower class.

Why? Perhaps because America doesn't like the idea of giving people a handout (though we have food stamps, welfare, jails, etc.). It is more palatable to give a business money because that feels less like charity.

But I don't think of this as charity as much as low-overhead-high-efficiency investment.This same view applies to education - the goal is simple, but instead of acting, we analyze; instead of inspiring students, we measure them; instead of empowering teachers, we oppress them.

This is not an argument against business, or the rich, or for charity; it is instead a plea for us to learn from nature, which teachers that the nimblest, most efficient, and most directly-aimed things prevail, ...and perpetuate.

bondage

I spent a few weeks during December/January visiting West Africa - it was a wonderful and enlightening experience. One day while driving on a beautiful road alongside the ocean approaching Luanda (in Angola), we noted how quickly the city is growing (we were stuck in traffic, looking at tons of cranes); how much opportunity there is; and how odd it is that one of the most expensive cities to live in in the world is actually in Africa. Who would’ve thunk it!

This led us to contrast the differences in how business is done in Luanda vs the West. I recall this same phenomenon across much of the rest of Africa, in the Middle East, and some parts of Asia as well. For someone from America, business takes soooo much longer to get going, it moves at a glacial pace, and we feel totally out of the loop. It’s just plain “wrong,” and uncomfortably difficult to “manage.”

We long for the bang-bang-bang cadence so familiar in America.

Hearkening to my days in Microsoft’s HQ, there was an “indicator” that was used to measure process and progress; it doesn’t exist so much outside the West, which seems to throw many “Westerners” for a loop when they are over “there.”

Meetings.

Here in America, if you walk past a person’s office a few times and note that they’re always there and alone, you conclude they’re disconnected, ineffective, and not a team player.

This perception and the corresponding meeting-primacy-sensibility is modeled by the entire executive leadership (GMs/VPs and above) who are ALWAYS in meetings. Scheduling just 30 minutes requires at least two months’ notice - they’re that “busy.” (Doing what, I wonder?)

How much real estate might Western companies save by eliminating all the offices, and “storing” everyone in meeting rooms?? ‘Cause let’s face it, if you’re any “good,” you’re never in your office anyway.

My first job in the Middle East was for an American company. Before leaving the US, I was told that it is different "over there"; things were going to take much longer, business wasn’t going to close anywhere near quickly, and I was not be fooled, because even if progress was made in the first meeting, it wasn’t going to stick.

My first couple of meetings in the Middle East reflected this - the customer didn’t ever want to “get to it” or talk business. I kept looking at my watch, worried that our time would run out. I declined his offer of tea (not wanting to impose), and he seemed upset. My much vaunted Effective Meeting Skills were for naught. Being a good Western worker, I had another meeting scheduled right after, and had to depart abruptly, leaving an important customer with zero progress.

I reflected on this afterwards, recalling that the two customers I had met were much happier when I arrived than when I left. I also noted that “local” executives were much more available than expats, and that the locals seemed to have much lower stress levels that “we” did. Those who’d been around (particularly the locals) were much more effective despite hardly being in meetings at all, and the meetings they did have seemed mostly social and not “business,” but despite all this, their “numbers” were really good.

I reconnected with that first customer, keeping the rest of the afternoon free. We talked not at all about business, instead we drank awesome Turkish coffee and shared school and travel stories - I never once looked at my watch, instead just focused on getting to know him, and helping him get to know me. We met again a few days later, this time over food and did more of the same; we also talked about our families, and about our hopes and dreams for them.

A few days later, he invited me to his home for dinner - I was honored. I met his family, we ate amazing food and just (!) enjoyed each others company. After dinner, when the two of us were alone drinking coffee, he said this:

“Shafeen, we have gotten to know each other, you have met my family, I have learned about yours [I had no family there], and we are now brothers. We have a bond of trust, and I seek success for you just as you seek success for me.

“I also know that you’ve spent time learning my business, know what we are doing, how we are doing it, and how your company can help us do better.

“So my brother, tell me how should we do business, and let us make it so.” 

That last sentence left this unsaid: “because I know you have my best interests at heart and will only do what helps me, for we are family, and I trust you.”

An agreement was struck, hands were shaken, a partnership was forged. When stuff hit the fan, I was on it, and make sure we did right by our partner. We hardly met to check progress, etc., trust replaced that.

More than 15 years have passed, much has changed, but when he calls, I do take that call, enjoy hearing news of his family, share the same of mine. If the conversation includes a request, it will be done. Ours is not (and never was) a business affiliation, it was and is a relationship, one I hope will endure for many moons to come.

Returning to America was weird - meetings were about doing work, and most rooms had more than one clock. Process people drove the agenda, and people left with action items. “Effectiveness” was key, and a “productive” meeting was marked with dense slides, many charts, tables, follow-up activities, and, yes, the promise of more meetings. People are actually measured on how well they “show up” at meetings (not whether the business or customers were benefited, but whether they do good meetings)!!

It is said that matrixed management (still the vogue in the West) is a more efficient [I wonder if we really understand the meaning of that word] way to run a large organization. But fragmentation and zero-sum employee compensation models that come with it perpetuate mistrust among leaders and workers and across organizations. Meetings are the way to ensure your interests are protected.

Accountability, responsibility, and relationships have become corporate collateral damage.

The measurement model for most large organizations intentionally flaunts team performance for comparative individual achievement. I gain strength only if my teammates are weaker; my success requires them to fail; there is no “us.”

Driving along that road as we approached Luanda, I saw once more that the non-Western approach, while seemingly frivolous and hopelessly inefficient, created relationships and trust and built bonds of accountability that resulted in success. It is unthinkable to betray the trust of a brother or sister.

Today I live in Seattle; my work requires me to inhabit a Western business fabric. I have more meetings than I’d like, and sometimes experience a sense of sadness as I realize how little this/our culture values us as people, and how much it values what others can do for us.

I think of my times in the "3^rd world," and wonder how long it will be before we 1^st worlders finally evolve...