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Global Crisis/Innovation Management

When Management Becomes Feminine:  Lessons from Medicine

By Shlomo Maital

 

Meg Whitman who as CEO built eBay, 1998-2008

This blog space has often made the case, supported by evidence, that women are more suited to become business leaders and entrepreneurs than men, because evolution has given them superior skills in communication and collaboration. I’ve even proposed launching an investment fund that invests in businesses led principally by women. 

   Today a modest, page 5 Global New York Times article * gives me added fuel.  Apparently, more and more doctors are women, in the U.S., especially among young doctors; “half of all younger doctors are women and that share is likely to grow”, notes the author, Gardiner Harris.    Why?  Having a private practice in medicine in the U.S. has become a huge hassle, with enormous medical liability insurance bills, endless paperwork and other obstacles.  Little time is left to practice real medicine. Moreover, running a practice is like running a demanding business, and saps energy and time that should be spent with the family.  Women skip this from the outset, so they can be mothers and wives as well as doctors.  The result has been to greatly strengthen hospitals and health care providers (HMO’s), where more and more women doctors choose to work.  For the first time, the powerful AMA American Medical Association supported the Obama health care reforms, when in the past the AMA has fiercely opposed any such reform.   Women seem to be the reason.

    Let us hope that the same phenomenon revitalizes entrepreneurship and management. Let’s hope more women are promoted to become senior managers.  As this happens, working hours will become normal, as women choose to balance work and family.  This will benefit male managers, too.  And we will also see more women entrepreneurs, as female role models show how it is entirely possible to start a business and start a family, at the same time.  This, in turn, will have an echo effect, permitting more men to balance work and life. 

     Generation Y is reluctant to follow in the ruts created by the baby-boomers, who sought wealth at all cost and were left, in many cases, without friends or family.  Generation Y wants to have a life, not just a job.  That creates opportunities for women.  Now, all that is needed is the recognition among the dominant men that women are a key resource. 

      Women are different from men.  Vive la différence.  It’s time we stopped wasting the valuable resources that difference embodies.

* Gardiner Harris, “As doctors’ jobs change, their priorities do as well”.  Global NYT May 31, p. 5.

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Global Crisis Blog 

Is the Arab “Spring” Headed for a Fall?  Why Political Democracy Needs Money

By Shlomo Maital

  A lot of romantic ink has been spilled on the Arab Spring, the incredible outpouring of popular democracy in Tunisia, Egypt, Yemen, Syria, Libya and elsewhere, that has toppled or will topple despots, led by idealistic non-violent young people using social networks.  Here in Israel, there are deep fears that this process will destabilize the whole Mideast and lead to consequences no-one can predict.  But in general, over the long run, the culture of democracy, if it takes root in Arab nations, will be a far more fertile seedbed for peace than despotism and dictators, who use Israel as a distraction for the ruinous way they run their economies, or Islamic fundamentalism, which substitutes religious fanaticism for modern technology and progress. 

   However, there is reason for concern that the Arab Spring may be headed for a fall.  Speaking on BBC, a young Egyptian woman who helped lead the Tahrir Square uprising said forcefully, we do not want American money or interference of any kind.  I’m afraid she reflects general thinking of these young revolutionaries.  They do not understand that in order for political democracy to survive, it will have to be supported by large amounts of foreign investment, to create dynamic growing economies with jobs for educated young people.  Egypt, Tunisia, Syria, Libya, Yemen, these countries cannot even begin to fund the huge infrastructure investments that they need. The World Bank has promised some aid, but it is hugely inadequate.  The G8 leaders meeting in Deauville, France, make promises, but they are usually empty and hollow. 

     The best-case scenario is that the new Arab political democracy will be supported by savvy businesspersons, who will find ways to attract foreign investment.  In Egypt this is unlikely, because the oligarch businesspersons were in bed with Mubarak and have been discredited.  In Yemen it is possible – the main opposition to Yemen’s dictator is its wealthiest businessman.  In Libya, Gaddafi has stowed away billions, which could be used to rebuild the country, but will the Libyan reformers manage to get their hands on them? 

     Somehow, the West must find a way to tell the young Arab revolutionaries that it is time to come down from the clouds, to earth, and find practical ways to build new modern economies.  This will take enormous amounts of money. Where will it come from?

   And by the way – don’t count on the oil-soaked Saudis, Qataris, Bahreinis and other oil-rich nations.  They’re too busy buying English Premier League teams and building useless skyscrapers and artificial islands.   Why would the rich Arab nations even think of investing their huge resources into building new lives for the poorer Arab nations?     

Innovation Management

Are We Crippling Our Kids’ Creativity?  The Dilemma and a Solution

By Shlomo Maital

  Everybody knows the most creative nation in the world is the nation of five-year-olds.  Small children have not yet learned the ‘rules’, what is possible and real, and what is not. So in their world, everything is real, everything is possible. As a result, their imaginations run wild.  Then we send them to Grade One – and methodically we stamp out their imaginative powers. And we buy them games and toys and show them TV shows and movies where everything is incredibly real, in each detail, leaving no room for the imagination.

    Here is what one of my blog readers, Anne Marie, from Singapore, notes about her own childhood:

    I actually grew up in the Philippines, and growing up with just the basics, as a child I didn’t have the privilege to have so many toys and technology before in a third world country is not even starting. But I am glad I did (and not even spoiled by my parents with all these toys) – it is because, I could clearly recall that I was only given a ball, a stick and some elastic bands, and from these three I was able to create hundreds of games with my   playmates. I remember my childhood was so much fun. Now, I can see my nieces and nephews stuck in their computers, playing in a virtual world, but not an ounce of creativity at all! I sometimes shut their computers to test, and give them the basics… but how very minimum is the number of games that they can think of! But I am not giving up. A young mind is easier to train, so we will wait and see….

Thanks Anne Marie! There is a solution.  Purposefully choose your children’s toys and games and spare-time
activities, to foster imagination.  There are still many such games available.  If you wish, make your own toys, out of cardboard and paper and sticks.  Challenge them to create things, rather than prefer things that are already created.  And when your child comes home and says he or she solves an arithmetic problem in an unusual way, and got a big red X on it from a rigid teacher – tear a strip off the teacher and the teacher’s principal, and tell them about why you think children should be encouraged to be creative, rather than have their creativity doused by thoughtless in-the-box taskmasters.

    It is not inevitable that kids should lose their creativity in school.  This process can be stopped. But to do so it not easy.  Take up your responsibility as a parent, and spring into action, before it is too late. 

Innovation Blog

Rewarding Entrepreneurs Who Leave School:  Why “Stopping Out” Beats “Dropping Out”

By Shlomo Maital

 

  

 Goethe:  ..but doing is best of all

 College student:  Do you have a business idea that can change the world?  Want to get to work and tackle it?  But, wait, you have a pressing exam in Medieval Shoelaces 101 and then another in Philosophy of
Navel-Staring in Ming Dynasty China?   Oh well…you’ll have your degree in another two years of desperate boredom.

   But wait!  There is a solution.  Facebook investor Peter Thiel has a foundation that gives grants of $100,000 to innovators – provided they leave school!   Well, not exactly ‘leave school’ – that’s not a great idea.  But ‘stop out’,
leave temporarily, for two years, to build a business idea, rather than ‘drop out’, forever.    The story about Thiel
appears in Douglas  MacMillan’s ‘top story’ in Bloomberg Business Week, May 25 issue. 

Last fall, Princeton University sophomore Eden Full began to consider taking a break from school to turn her side project—a solar panel that rotates without using electricity—into a business.  In April, Full got all the motivation she needed when she was told she had won a $100,000 grant. The catch: She has to leave school for at least two years. “It’s time for me to go out and try things in the real world and make mistakes and learn from those mistakes,” says 19-year-old Full.  Full is one of two dozen young entrepreneurs named today to the 20 Under 20 Fellowship. 

Naturally, educators hate the idea.  Says Brian Rosenberg, President of Macalester College in Minnesota,  “Mr. Thiel’s program seems not unlike luring college athletes out of degree completion with the promise of a career
in the NFL or NBA.”     Ever heard of Lebron James, Mr. Rosenberg? 

   Among the grant recipients: 

  • Eden Full,   “who will use her grant money to move to SanFrancisco in August and speed up the process of patenting and licensing her solar panel technology. Years of tinkering in science had led her to come up with a contraption for increasing solar panel energy collection by up to 40 percent, partly by removing the electricity commonly used to rotate panels toward the sun.”
  • Gary Kurek, “a 19-year-old in Alberta, Canada, who was awarded a Thiel Foundation grant. “After
    graduating from high school last year, Kurek was offered a full engineeringscholarship at the University of Calgary. Instead, he decided to take a year off and build his business, a maker of motorized walkers for the elderly called GET Mobility Solutions.   Kurek plans to move to San Francisco in September and invest some of the $100,000 in testing and refining his walker product. Then he hopes to begin selling models to hospitals and assisted-care facilities.”

 I like to think of Thiel’s program not as ‘stopping out’ but enrolling in Innovation University, a school where you learn hands-on, by doing innovation, where the lessons are sometimes tough and bitter, the rewards huge, and the learning?  Well, which is a richer learning environment, a classroom, or the real world?  Which is better, thinking, memorizing, or doing?  As Goethe said:  Thinking is  better than knowing – but doing is best of all.

Global Crisis Blog

The European Central Bank is a Logic-Free Zone: A EUlogy for the EUro

By Shlomo Maital

  

Writing in today’s New York Times (May 22), Nobel Laureate Paul Krugman, whose creative thinking made all of us rethink trade and geography, tears a strip off the European Central Bank (ECB) and its retiringhead Jean-Claude Trichet.  

   Krugman notes how in the U.S., a fierce debate rages between those who think government spending should be maintained,as the only prop under a flagging economy characterized by uncertain consumers who fear for their jobs,  and those who think government spending should be slashed, to halt the implacable rise in stifling debt.  But in Europe?  It’s all about austerity:

In Europe … the pain caucus has been in control for more than a year, insisting that sound money and balanced budgets are the answer to all problems. Underlying this insistence have been economic
fantasies, in particular belief in the confidence fairy — that is, belief that slashing spending will actually create jobs, because fiscal austerity will improve private-sector confidence.

   Despite a total lack of evidence on behalf of the “pain caucus”, Trichet continues to back it.  The result is catastrophic for Greece,  as well as Portugal, Ireland, and perhaps Spain.  Greece desperately needs debt
relief.  But under Trichet, backed by Merkel and Germany, it will never get it.

….. the E.C.B. is acting as if it is determined to provoke a financial crisis. It has started to raise interest rates despite the terrible state of many European economies. And E.C.B. officials have been warning against any form of debt relief — in fact, last week one member of the governing council suggested that even a mild
restructuring of Greek bonds would cause the E.C.B. to stop accepting those bonds as collateral for loans to Greek banks. This amounted to a declaration that if Greece seeks debt relief, the E.C.B. will pull the plug on the Greek banking system, which is crucially dependent on those loans.

  I believe Greece has no alternative. Faced with a stubborn, unyielding Central Bank (remember, the ECB is also Greece’s Central Bank, not just Germany’s),  Greece has no choice but to withdraw from the euro system, return to the drachma, devalue the drachma by half, and relaunch its economy, while restructuring its debt burden unilaterally, with the government assuming much of the bank debt and repaying it over an extended period.
This will involve much short-term pain, but long-term gain.  There is no time to lose; the longer Greece waits, the harder it will be.  And don’t count on Trichet’s replacement to be any different;  he too will be a pro-pain pro-austerity advocate. 

   Krugman concludes:

    If Greek banks collapse, that might well force Greece out of the euro area — and it’s all too easy to see how it could start financial dominoes falling across much of Europe. So what is the E.C.B. thinking?  My
guess is that it’s just not willing to face up to the failure of its fantasies. And if this sounds incredibly foolish, well, who ever said that wisdom rules the world?

   When a central bank makes a region with some 380 million people a “logic-free zone”, the whole world is put at risk.   Prepare your EUlogy for the EUro.

Innovation Blog

Get On the Lady Gaga Bus – Now!   What We Can All Learn from Stefani Germanotta

By Shlomo Maital

  Lady Gaga’s ‘meat’ dress

   If you believe the phenomenon known as Lady Gaga is not serious – think again!  We can all learn a great deal from her.  [See Jon Parels, “Lady Gaga’s Roaring Retort”, NYT May 21/22/2011, p. 17]. 

    Most albums are recorded in soundproof high-tech studios, where electronic wizardry shapes
songs to perfection. This is how it is done. This is the rule.  Rent time in a studio and make your
album. 

   But not Lady Gaga.  She has just released her new album, “Born This Way”. Released in February, reached No. 1.  She made it while on tour, in her Studio Bus.  This is an extra bus filled with equipment and comprising a recording studio on wheels.  Her engineer and two producers travelled with her on tour for a whole year.  “Basically, after the shows [back-breaking energy-draining two-hour shows], I would go on the Studio Bus and I would work all night.  Then we would pull the buses over and I would get back on my bus and go to sleep.” 

    Of course all the experts argued with her.  “We can’t do your vocals now!”, because of the sound of the bus and the reverberations.  Said Lady Gaga:  “turn on the mike and let’s do this!  I get so inspired and ready to go and I’m not the kind of person that can hold in my creativity. … Because of the thrill of the show and the crowd’s energy…I get so many ideas looking out into the crowd, like:  I know what you want to hear. I know what you need.” 

    Lady Gaga is a powerful innovator.  Have you noticed that music videos are choreographed to move on the 2nd and 4th beats of 4/4 time?  Like – da DAH, da DAH…   Not Lady Gaga. She moves on the 1st and 3rd beats,  DAH da,  DAH da.  Partly for that reason, radio stations refused for six months to playher first single, Just Dance.  But she
won. 

    Make no mistake.  Stefani Germanotta is a 24-7 performer.  She says her very life is “performance
art”.  But at bottom she is an innovative musician.  She never lip-syncs.  And she writes her songs to meet what she understands her fans want and need – and she knows what they want, because she interacts with them almost every single night.
    For innovators, a major lesson from Lady Gaga is to create the equivalent of her Studio Bus.  Get your R&D people out of their sterile labs and into the real world.  Get them to interact with the people who might or will use the stuff they create.  Get them on the Lady Gaga bus.  And, for a start, play one of her albums for your innovators.  Despite what you think when you look at her fantastic costumes (like the famous ‘meat’ dress), beneath them there is the heart of a true passionate musician.        

Global Crisis Blog

Stop the Hypocrisy: The Emperor Has No Dollars (Clothes)

By Shlomo Maital

 

The famous Hans Christian Andersen’s story “the Emperor’s New Clothes” is about two weavers who promise the emperor a new suit of clothes invisible to those who are stupid or incompetent.  Only a small child is honest enough to call out, “but he isn’t wearing anything at all.”

   The modern-day equivalent of that child is economist Cristina Romer, formerly head of President Obama’s Council of Economic Advisors.  Cut the bull, she says.  America’s current fiscal and monetary policy are both aimed squarely at depreciating the dollar.  And it has worked. The dollar has dropped sharply.  However, for political reasons,everyone from Obama, to Geithner (Treasury Secretary) to Bernanke (Fed Chairman), to Republican Members of Congress, to Democrat Members of Congress, all bleat the same refrain, like sheep:
American wants a strong dollar!  America wants a strong dollar! 

    It gets worse. America insists that China revalue its currency and let it appreciate relative to the dollar.  That means, necessarily, a lower value of the dollar.  But if this is a good idea for U.S.-China trade, notes Romer, why not for America’s trade with all nations?  Why not let the dollar drop relative to all currencies?  Why
isn’t a WEAKER dollar good for America, rather than a strong dollar? 

     The hypocrisy of U.S. appointed and elected officials is increasingly unbearable.  Economics at Grade One level says:  If you dump huge amounts of dollars into the marketplace, through enormously expansive monetary policy and so-called ‘quantitative easing’ (printing money), and through huge unprecedented fiscal deficits, then the supply of dollars will ultimate lower the price and value of dollars.  It’s that simple.  Yet Americans consistently support this policy while denying its implacable result – a lower dollar.

    Cut the bull!  America needs a cheaper dollar to dig itselfout of the current economic hole. Everyone knows it.  Admit it.  Stop the hypocrisy.  But also admit that a weakened dollar will hurt other countries, export some of America’s economic woes, and possibly help create a new global crisis, because the global economy cannot run well with an unstable world currency (the diving dollar). 

     Tell the truth, America.  A weaker dollar is good for America, bad for the rest of the world.  Guess which America will favor — while, all the while, denying it?   

*Cristina Romer, “It’stime for frank talk on the dollar”,  Global NY Times, May 21/22, 2011

Innovation Blog

Innovating Economics: How to Do Research on Alleviating Poverty the RIGHT Way! Or

 How to Keep Poor Kids in School with only a Few Pennies.

By Shlomo Maital

MIT Professor Esther Duflo   

Many people have been inspired by Greg Mortenson’s book Three Cups of Tea, about how he stumbled into an Afghan village after failing to summit K2, leading him to launch a huge project that built many schools in Afghanistan.   The CBS program 60 Minutes attacked Mortenson, debunking many of his claims and claiming misuse of his funds, and he later responded.  

  In his New York Times Op-Ed column Nicholas Kristof, who covers the developing world, says the Mortenson affair raises a deeper issue – “how best to make an impact”.  Increasingly Generations Y (the generations that followed the baby-boom generation) want to change the world as their life mission. But how best to doit?  Do we know? 

    In my blog, I’ve been highly critical of my fellow economists for their narrow, greed-ridden detached-from-reality view of the world, shown in their mathematical equations that portray no recognizable human societies.  But there is an exception.  Today young economists are getting out into the field, applying the rigorous methods of scientific research (randomized sampling, control groups) to study how best to alleviate poverty.  The two leading proponents of this approach are MIT Professors Abhijit Banerjee  and Esther Duflo.  Their new book *   documents how their Poverty Action Lab uses randomized trials in countries from  from Chile to India, Kenya to Indonesia, to show how to use resources efficiently to change the lives of the poor.  A second new book, by Dean Karlan (a behavioral economist) and Jacob Appel (an aid workers),  More Than Good Intentions: How a New Economics Is Helping to Solve Global Poverty, tackles the same topic.

Among Duflo’s key findings:   microfinance, the poverty-reduction solution du jour, isn’t all it’s cracked up to be;  the value of foreign aid is greatly overblown;    entice parents to get their kids immunized by giving them free food.  All these findings are tested in carefully-controlled experiments. 

   Karlan  and Appel use psychology  to assess aid  initiatives .  They recommend “small fixes with outsized payoffs”: “commitment” savings accounts that make depositors accumulate a fixed amount before they can
withdraw;
well-side chlorine dispensers to purify water; paying parents to take kids for checkups; increasing the application rate to a microloan program by putting photos of  beautifulgirls on the brochure. 

  Kristof supplies another powerful example: Deworming. “Prof. Michael Kremer, a Harvard economist, helped pioneer randomized trials in antipoverty work. In the 1990s, Kremer began studying how to improve education in Africa, trying different approaches in randomly selected batches of schools.  One intervention he tried was deworming kids — and bingo! In much of the developing world, most kids have intestinal worms, leaving them sick, anemic and more likely to miss school. Deworming is very cheap (a pill costing a few pennies), and, in the experiment he did with Edward Miguel, it resulted in 25 percent less absenteeism. Even years later, the kids who had been randomly chosen to be dewormed were earning more money than other kids.  Kremer estimates that the cost of keeping a kid in school for an additional year by building schools or by subsidizing school uniforms is more than $100, while by deworming kids, the cost drops to $3.50. (In a pinch, kids can usually go to “school” in a church or mosque without a uniform.)”

    Bill Gates has put billions of his wealth dollars into health initiatives for the poor. He would do well to speak to
these researchers.  Why not apply the same standards to philanthropy that are used in scientific research?  The aid dollars would go much farther if we did.

 * Abhijit Banerjee  &  Esther Duflo,  Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty.  PublicAffairs (2011). 

** Dean Karlan and Jacob Appel . More Than Good Intentions: How a New Economics Is Helping to Solve Global Poverty.   Dutton (2011)

Innovation Blog

Innovation That Shoots Blanks

By   Shlomo Maital

 

  Blank Cartridge

 

 

 

 

 

 

Despite America’s ongoing economic crisis, weak currency and massive debt, the U.S. comforts itself that it is still the world’s most innovative, entrepreneurial nation.  Most of its hopes for emerging from the crisis are pinned on its innovation.

  There is new evidence this hope is misguided. America’s innovation cannon is firing blanks.  This is the view of 2001 Nobel Laureate Michael Spence, from Columbia U., who in a new study with a colleague has explained why American innovation creates no gains for American working people.*  The syndrome he describes afflicts Israel as well.  The gains from Israel’s innovative high-tech sector accrue to a very small fraction of the work force. 

   It is not true that the U.S. economy fails to create jobs.  Some 27 million jobs were created between 1990 and 2008 (the year the global crisis began).  The problem is, all but two per cent of those jobs were in services.  And most of service jobs were low-paying ones, such as Wal-Mart clerks, hotel maids or low-paid government jobs.  

   Almost no job growth at all occurred, according to Spence, in manufacturing, where high-paying jobs for workers once existed.  The reason: outsourcing.  And the few remaining American manufacturing jobs are threatened, because emerging markets are moving up the value chain.   Moreover, though America has cut its trade deficit by half between 2007 and 2009, all of that gain came from import reduction, not from a rise in exports. The weaker dollar makes U.S. exports cheaper and more attractive – the problem is, America makes very few goods for export, at any price.

   In 1979 manufacturing made up more than one out of every five U.S. GDP dollars.  Today, it is about one in every ten GDP dollars, or proportionately half.  The result has been disastrous for the average American worker, whose weekly pay peaked in 1974 at $709 (in 2010 dollars) and fell to only  $649, a drop of 8.5 per cent,  by the end of 2010.  This means that an American, working at exactly the same job as his or her father, earned less, even though in the same 37-year period U.S. GDP per capita almost doubled. The cause is mainly America’s myopic transfer of its manufacturing jobs to China and South Asia. 

   Let us all learn America’s bitter lesson – innovation is fruitless if you only create ideas and let other countries make the products.  You create a handful of billionaires, through massive exits, but no well-paying jobs.  Moreover, innovation joined with on-site manufacturing is far more powerful than R&D isolated from production.

* Michael Spence, Sandile Hlatshwayo, “The Evolving Structure of the American Economy and the Employment Challenge”, Council on Foreign Relations, March 2011.

 

Innovation Blog

Nice Societies Finish First – Why Evolution is About Collaboration, Not Competition

By Shlomo Maital

  Baseball manager Leo Durocher [Brooklyn Dodgers] said in 1939 about an opposing team, “Take a look at them. They’re all nice guys, but they’ll finish last. Nice guys. Finish last.”

  “Nice guys finish last” is also a way to sum up Darwin’s Theory of Evolution.  Survival of the fittest – those best able to compete, to kill, maim and injure, to overcome others in tooth-and-fang battle, they survive to procreate and pass on their genes.  Nice genes finish not only last but disappear. Combative genes survive.  This theory has been used as a metaphor for capitalism.  Companies best able to destroy their competition endure and prevail, it is said, an idea promoted down to the level of the individual by Herbert Spencer. 

   Wrong.

   Today’s Int. Herald Tribune carries a David Brooks Op-Ed, titled “Nice Guys Finish First”, citing powerful evidence that “we have an incentive to establish a reputation for niceness, so people will want to work with us”.   For years, he notes, the “selfish-competitor model fostered the utility-maximizing model that is so prevalent in the social sciences, especially economics.”  But there is a new view, the collaborative-cooperative one.  In society, groups (like companies) that are more cohesive, more collaborative, will endure and prevail far better than groups of selfish people out for their own gain.  This new view of evolution is supported by strong new evidence. 

     Evidence?  Well, try Lehman Brothers, Fannie Mae, AIG, Goldman Sachs, 2007-9…!

     Brooks notes that “for years, people tried to devise a rigorous ‘scientific’ system to analyze behavior divorced from morality.  But if cooperation permeates our nature, then so does morality, and there is no escaping ethics.”

    There is no escaping ethics.  We need to build a new economics, one based on moral markets and permeated, soaked, with ethical values.  Because, as we speak, the same selfish rapacious people who brought you the 2007-9 financial collapse are hard at work, creating the conditions that will generate the next collapse.   Not until capitalism is run by truly nice guys and gals, will we finish, as a cohesive society, in first place.

  • David Brooks. “Nice guys finish first”.  IHT May 16.

 

Blog entries written by Prof. Shlomo Maital

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