Peter Senge posits the "Laws of Systems Thinking" in Chapter 4 of in his seminal work, The Fifth Discipline: The art and practice of the learning organization. During this show, Ron and Ed will introduce you to the basic concepts of Systems Thinking and discuss the laws by giving specific examples of how they manifest themselves in business today.
“I think we ought to read only the kind of books that wound and stab us. If the book we are reading doesn’t wake us up with a blow on the head, what are we reading it for.” --Franz Kafka
Ron and Ed’s Best Business Books Read in 2017
- “Deep Blue was intelligent the way your programmable alarm clock is intelligent. Not that losing to a $10 million alarm clock made me feel any better.”
- “It was a human achievement, after all, so while a human lost the match, humans also won.”
- “Being remembered as the first world champion to lose a match to a computer cannot be worse than being remembered as the first world champion to run away from a computer.”
- “Essentially, all models are wrong, but some are useful.” --George E. P. Box, mathematician
- A good model that illustrates that organizations are interdependent, and you can’t change or optimize one aspect of a firm without changing—sometimes for the worse—other areas.
Fifty Inventions That Shaped the Modern Economy, Tim Harford
"The Luddites didn’t smash machine looms because they wrongly feared that machines would make England poorer. They smashed the looms because they rightly feared that machines would make them poorer."
"The top 1 percent of musical artists take more than five times more money from concerts than the bottom 95 percent put together."
The Welfare State (and passports)
"These two massive government endeavors—the welfare state and passport control—go hand in hand, but often in a clunky way. We need to design our welfare states to fit snugly with our border controls, but we usually don’t. "
Passports were designed more to keep people IN by not allowing them out!
"Until around 1910, plenty of entrepreneurs looked at the old steam-engine system, and the new electrical drive system, and opted for good old-fashioned steam. Why? The answer was that to take advantage of electricity, factory owners had to think in a very different way."
"What explained the difference? Why did computers help some companies but not others? It was a puzzle. Brynjolfsson and Hitt revealed their solution: What mattered, they argued, was whether the companies had also been willing to reorganize as they installed the new computers, taking advantage of their potential."
Double Entry Bookkeeping
"Someone would be charged to take care of a particular part of the estate and would give a verbal “account” of how things were going and what expenses had been incurred. This account would be heard by witnesses—the “auditors,” literally “those who hear.” In English the very language of accountancy harks back to a purely oral tradition.
So what, a century later, did the much-lauded Luca Pacioli add to the discipline of bookkeeping? Quite simply, in 1494, he wrote the book.10 And what a book it was: Summa de arithmetica, geometria, proportioni et proportionalita was an enormous survey of everything that was known about mathematics—615 large and densely typeset pages. Amid this colossal textbook, Pacioli included twenty-seven pages that are regarded by many as the most influential work in the history of capitalism. It was the first description of double-entry bookkeeping to be set out clearly, in detail, and with plenty of examples."
John M. Dillard started his career at the Central Intelligence Agency (CIA) and has dedicated every working hour since to helping organizations, private and public, uncover secrets to stay ahead of future threats— whether those threats are competitive, operational, or security related. His 15-year career in management consulting has benefited everyone from large players such as Deloitte Consulting to smaller companies such as the one he cofounded, Big Sky Associates. His consulting experience runs the gamut: from commercial strategy to government security operations and large scale IT, from banking administrative flows to analyzing operations at the 9/ 11 recovery site at New York City’s Ground Zero.
- Huge proponent if value-led pricing. Mentions Alan Weiss.
- Mentions “knowledge workers” ten times!
- Ed started creating a list of sentences that could have been written by Ron Baker, but I stopped after I the first dozen of so.
- The new model is a shift away from David Maister’s Trusted Advisor model.
Microslices Defined: The accelerating specialization, compression, and automation of consulting activities. Fully realized it will be the dominant business model of professional services.
Makes major points about big data and data science:
- Collecting lots of data is mostly useless without the ability to design techniques, predictive analytics, machine learning tools, and visualization techniques that provide insight into what it means.
- Data science and technology are not the same thing. Technology enables advanced data science, but data science is not hardware. In some cases, data science is enabled by software, but data science will not be performed by the IT guy in your company.
- Data scientists are not another flavor of computer scientist or technology consultant.
- Data science is just as concerned with masterful inquiry as it is with technical mastery. The art of asking incredible questions, testing hypotheses, validating results, and using the scientific method is at the heart of data science.
- Data science is more about creating the right questions to ask the data than about the technology of how to access the data.
Why is it important:
- First, data science facilitates faster delivery of professional services.
- Second, data science allows deeper specialization of professional service providers.
- Finally, data science is going to provide the basis for the automation of consulting tasks.
From Dillard's Company Manefesto
- Time and value are not equivalent. We will provide maximum value in as little time as possible. The old model of charging on the basis of time is broken. We will never take longer than necessary to deliver a result.
- Work is something you do, not a place you go. Our work culture rejects “presentee-ism” (a belief system based on people being physically present) in favor of presenting killer results.
- Do unto ourselves as we would have our clients do unto us. Big Sky’s relationship with its employees should mirror our relationship with our clients. In other words, we expect our clients to respect us and focus on results, so we should do the same to each other.
- Greatness isn’t for everyone. Some executives really want to pay to see someone sitting in a cube at their facility, no matter how good or bad the work is. Some executives really want to pay to direct the details of how the work is done instead of for a specific result, which requires them to be charged by the hour. We believe that we should prove that our way is better—but that requires clients who accept proof.
Other good ideas:
- "Professional services executives, like executives in previously disrupted industries, make claims that they are “different,” that their model is based on trust, or that their hundred-year-old brand is impregnable. In law, consulting, accounting, and similar businesses that have traditionally been dominated by brand and reputation, executives may claim that too many functions could never be commoditized. They are wrong."
- Every company is becoming a tech company; some just haven’t realized it yet.
- "In my own company, we have moved away from enterprise systems that “do everything” to a collection of connected, niche products like Slack (for communications), Google Drive (for storage), Hubspot (for marketing), Asana (for project management), and Harvest (for expenses). Professional services is evolving in a similar pattern. Instead of hiring a behemoth firm to do everything, you’ll have a “user interface layer” that may be a firm or a tool. And the specialized work—from organizational structure analysis, to strategy, to pricing, to demand forecasting, to process optimization—will be completed by a network of niche specialists delivering together."
- "By using the term “millennial attitude” I am not referring to a specific age range but about cultural norms typified by an age range."
- "Don’t ask general counsel for permission. They’re good people, really. But they are heavily incentivized to insulate you from new ideas."
There are risks and costs to a program of actions. But they are far less than the long range risks and costs of comfortable inaction. —John F. Kennedy
Creativity, Inc.: Overcoming the Unseen Forces That Stand in the Way of True Inspiration, Ed Catmull
- “What makes Pixar special is that we acknowledge we will always have problems, many of them hidden from our view…we work hard to uncover these problems, even if doing so means making ourselves uncomfortable.”
- “My goal is to create a culture at Pixar that will outlast its founding leading—Steve Jobs, John Lasseter, and me.”
- “We start from the presumption our people are talented and want to contribute. …our company is stifling that talent in myriad unseen ways.”
- If you give a good idea to a mediocre team, they will screw it up. If you give a mediocre idea to a brilliant team, they will either fix it or throw it away and come up with something better.
- People trump process!
- [Chefs say: Technique trumps ingredients].
- “Process and efficiency are not the goals. Making something great is the goal.”
Shoe Dog: A Memoir by the Creator of Nike, Phil Knight
- A shoe dog is someone devoted to making, selling, buying, or designing of shoes.
- His Dad asked him: “Buck, how long do you think you’re going to keep jackassing around with these shoes?” “I don’t know, Dad.”
- “The world is made up of crazy ideas. History is one long processional of crazy ideas. The things I loved most—books, sports, democracy, free enterprise—started as crazy ideas.”
- One point of disagreement: Knight writes that “business is war without bullets.” We couldn’t disagree more with this analogy. Business is not war!
Other Resources Mentioned
Basics of Theory of Constraints, by Dr. Eliyahu M. Goldratt, author of The Goal. He criticizes cost accounting in the lecture, with compelling logic.
- Roger Moore
- Adam West
- Glenn Campbell
- Fats Domino
- Jim Nabors
- Erin Moran (Joanie, Happy Days)
- David Cassidy
- Martin Landau
- Mel Tillis
- Tom Petty
- Stephen Furst (Kent Dorfman in Animal House)
- Hugh Hefner
- Chuck Berry
- Roger Ailes
- Joseph Wapner (People’s Court)
- Chuck Barris—The Gong Show
- Don Rickles—check out his autobiography, Rickle’s Book: A Memoir
- Jerry Lewis
- Mary Tyler Moore
- John Anderson (7% of the vote in 1980 presidential election). As a Congressman, he proposed a Constitutional amendment to acknowledge “the law and authority of Jesus Christ.” It went nowhere.
- Charles Manson, 83
- Ron’s dog, Winston, December 22, 2017, R.I.P.
Follow-up to our show: Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays
From The Economist: “Have yourself a dismal Christmas,” December 23, 2017
Listen to the original show: Episode #22
Top 3 TSOE Shows
Favorite Shows, as ranked by our listeners
- 3. Episode #126: Reappraising the Performance Appraisal
- 2. Episode #142: In What Year Were You Born?: Generational Astrology
- 1. Episode #130: Personality Profiles: Helpful or Hokum?
Special mention: Our #1 Ranked Show with guest was Episode #124: Interview with Gary and Jim Boomer.
- 3. Episode #147: Changing Your Mind
- 2. Episode #171: Interview with Johan Norberg
- 1. Episode #166 : Interview with Chris “Elroy” Stricklin, Colonel (Ret), USAF (Ed guessed it!)
Listener Email—HSD: High Satisfaction Day
Ed and Ron received this HSD email the day after Christmas. The author wishes to remain anonymous, but has given us permission to post.
It's a bit long, but contains lots of great lessons for anyone who is still hesitant about no timesheets. Much gets written on the impact of technology and how it will change the billable hour model. Much less attention is given to the impact on smart people having to account for every six minutes of their day. I still believe talent is a big reason why timesheets have to go, not just technology.
You can't change a business model unless you also change what is measured--that's a historical fact. Here's the email:
Gentlemen – I hope you both had a wonderful Christmas.
I don’t normally give gifts personally, instead I subcontract that work out to my wife. However, I wanted to send something to the two of you that I know you will appreciate. (This may actually be re-gifting, since you directly played a part).
Effective Jan 1, 2018, our firm will cease tracking time for client work. Although the “6 minute daily diary” it is a tradition that spans the near-40 year history of our firm, it is no more.
Just a little background – for our area, we are a mid-sized firm. We provide audit, tax and accounting services, and also investment advisory services through a separate LLC. In the past couple years, we’ve had quite a bit of partner and employee turnover, health issues, and the slow-moving retirement of a still-active founder.
It’s been hard to focus on the working “on“ instead of “in” the business. However, I’ve known for a while that we could get to a place of killing the timesheet. Just thought it would take longer. But, last month, I attended QB Connect and sat in on a few of the sessions with Ron and others. On the way back home, I formulated my plan to move from 6 minutes to 15 minute increments for 2018, then end timesheets in 2019. However, once we started discussing the possibility, it became evident that prolonging the agony served no real purpose, other than to appear superficially cautious and thoughtful. (How, exactly, does one say “Honey, I will stay faithfully committed to you until Dec 31, 2018, then we are getting a divorce”???)
We have, for quite some time, been largely a “fixed price” firm, so the revenue piece was not the barrier. 90% of next years’ revenue is already destiny, as the “hourly rate” is not what it charged out. It really came down using it as a management piece. There was still the lingering feeling that timesheets were some indication of employee value. Your podcasts helped change our mindset, dispel that notion, and accelerate the change.
In the last couple weeks as I had conversations with my people, 2 things stood out to me.
- First, my audit manager, who I’ve worked with for over a dozen years, said “Oh, I’ve always wanted to work in a firm without timesheets”. I was actually worried that this change might make her feel uneasy, but in fact she clicked her heels and did the “no place like home” thing…To be fair, I never asked, but if that was unknown to me, how many partners in firms really know what is going on in the minds of their most experienced people?
- Second, we have an intern that just graduated from college a couple weeks ago and is transitioning to full time. When I talked with her, I realized how little is taught in college about the actual business of a CPA firm. The whole “billable hour” concept is basically non-existent to her. She’s growing into a solid team member, strong values and good work ethic, and I don’t think that it’s overly dramatic to think that avoiding a year of documenting her worth 1/10th of an hour at a time may keep her in the profession. Being part of the value conversation will be something that will accelerate her growth here, or take with her if she decides not to stay with the firm.
Our challenge, for the upcoming year, is to do the hard work of implementing options in pricing and perfecting our value conversations with clients that have been with us for 10, 20, 30 years. The tax law change is actually perfectly timed, and will help winnow out the clients that don’t really need us, and those that do. To that end, I placed an order on Amazon last night for a few copies of the TSOE book and “Implementing Value Pricing.”
As we head into a tax season: we are down one person from where we would like to be, Congress just went full Mad-Lib with tax code, technology is always solving the last problem but creating another one, and the “pay employees in bitcoin” gambit didn’t go well. Yep, I’ve got 99 problems, but timesheets ain’t one…..my only regret is that it has taken this long.
Thank you for the work you do!
Ask TSOE: Listener Question
Greg LaFollette, two-time guest on TSOE, asks the following: Inquiring minds want to know: Bitcoin Cash or Bitcoin (Core)?
There’s a fantastic debate on the Tom Woods Show: Ep. 1064 The Debate Within Bitcoin: Jameson Lopp vs. Roger Ver on Bitcoin and Bitcoin Cash.
82 Reasons Why 2017 was an Amazing Year
Fantastic article: “2017 Was a Year of Amazing Advances for Humanity,” by Marian L. Tupy, December 26, 2017.
Ed's top five
- February 18: Smartphones to become pocket doctors after scientists discover camera flash and microphone can be used to diagnose illness.
- March 3: Terminal cancer patients go into complete remission after groundbreaking gene therapy.
- April 2: Plastic-eating fungus may solve garbage problem.
- September 12: U.S. middle-class incomes reached highest-ever level in 2016, Census Bureau says.
- December 7: Bumper crops boost global cereal supplies in 2017/18.
Biggest Loser and Winner
Ed says: Statisticians/pollsters (losers); and Donald Trump, both winner and loser.
Ron says biggest loser: Mainstream media, Hollywood, the NFL, and universities. Biggest winner: the administration, for achieving:
- Corporate tax reform
- Appointment of justices
- Repeal of Obamacare mandate
- ANWAR drilling
- Keystone Pipeline approved
- Regulations rollbacked
- EPA regulations rollback
- Net Neutrality ended
- Education Title IX rescinded—sex assault cases, due process
- Paris Accord withdrawal
- DOW at 25,000
“Buddha in The C-Suite,” Kevin D. Williamson, National Review, December 18, 2017
Move over Briggs-Myer, Buddha’s coming, a $1 billion industry. Mindfulness is Buddhism without Buddha.
CMO—Chief Mindfulness Officer, Aetna. Google, Goldman Sachs, Intel, General Mills all offer it, and 20% of companies surveyed offer it, while 21% are planning to.
Executives claim an additional 62 minutes per week of productivity, and 80% of executives reported improved decision-making skills.
Scientifically, mindfulness is right up there with acupuncture, homeopathy, personality profiling.
There is a lack of replicable results, design problems, lack of control groups (less than 1 in 10 have control groups), no placebo effect, and other design flaws.
“No Hands, Full Speed Ahead,” Michael Hendrix, National Review, December 18, 2017
Chandler, AZ hosts Waymo (a subsidiary of Alphabet), as of August 2016. In November, the CEO announced test vehicles will operate with no human driver, achieving Level 4 autonomy (Tesla is at Level 2).
A robo-taxi fleet is coming (600 cars operating in Chandler now).
Business friendly Mayor and Governor, ADOT regulation, required no new legislation; it was done via Executive Order. Permissionless innovation
According to The Economist, General Motors will begin testing autonomous cars in lower Manhattan.
“The Open Road,” Charles C.W. Cooke, National Review, December 18, 2017
The government is sure to seek to ban driving sometime in the future.
But what about liberty? Cooke writes, “As usual, the opponents of prohibition will be correct. “Please sir, may I move?”
He proposes a legal prophylactic, now: amend the Constitution. The genius of the Bill of Rights is that it protects broad categories of human conduct. This is not so much about driving, but rather movement.
“Congress shall make no law restricting adults from driving licensed vehicles.”
“Creating Wealth Does More Good than Giving it Back,” Paul H. Rubin, FEE, December 20, 2017
The initial creation of wealth always greatly exceeds the giving back portion.
Henry Ford, who was a vicious anti-Semite, created wealth that benefited the Jewish people, but when he gave back by publishing the Dearborn Independent, an anti-Semitic newspaper that Hitler borrowed heavily from.
See our Episode #38 for a discussion of Henry Ford.
The Koch brothers and George Soros: Impossible for them both to be contributing to the social good since they are diametrically opposed.
John Stossel, “Thankful for Property,” November 22, 2017
Pilgrims nearly starved because they farmed collectively, what economists call the tragedy of the Commons.
He did a video on this experiment:
See our Episode #76 for Lessons from the Trading Game for a similar demonstration of the free-market principles of trade.
The FCC never had legal authority to enact net neutrality (NN) when Congress declined to do so. The FTC still regulates anti-competitive behavior.
iPhone couldn’t have happened with NN (ATT exclusive). TimWu, Columbia Law Professor, called it at the time “iPhony,” because Apple should allow customer to pick the carrier of their choice.
That exclusivity didn’t prevent Android from being world’s largest smartphone operating platform.
George Carlin taught us that FCC regulates content, so if you’re worried about this, the FCC is wrong body to have regulate the Internet.
Article at Stratechery.com?
Thomas W. Hazlett: Economist, Clemson University, has written two fantastic books on this topic:
According to Hazlett: “A truly open Internet allows consumers, investors, and entrepreneurs to choose among many models…The FCC mistakes the benefits of market processes for a planned industrial structure, imposing new rules to protect what evolved without it.”
Marea (Spanish for tide) cable being laid between Virginia and Spain, thin garden hose. Funded by: Microsoft, Facebook, and Telxius.
160 Terabits per minute!
In response to a snarky Facebook post in which the commenter said, "Right, let's get rid of traffic lights," I encountered the above article from Jeffrey Tucker.
Even the folks at VOX seem to agree. Here is a short film link on people driving slower, “Edge friction”
List of self-driving milestones
Tax Bill: Reform or Not?
Ed says it’s not real reform.
Ron says yes it is, but only on the corporate side, not the personal side (though the repeal of the Obama Care mandate is major reform). The corporate reform is mostly due to full expensing—which does expire after 10 years—but also changing to a territorial system, which is a big change.
Also, what about government spending? See Kevin Williamson’s article in National Review on “A Dessert-First Tax Bill.”
What’s going on with Bitcoin?
Are people cashing out at year end? Bitcoin futures market began. First Bitcoin joke: A son asks his father for $10 in Bitcoin. Father replies, “$9.41, what do you need $13.21 for?”
Ron and Ed are thrilled and honored to be interviewing Johan Norberg. Johan is a senior fellow at the Cato Institute and a writer who focuses on globalization, entrepreneurship, and individual liberty. Norberg is the author and editor of several books exploring liberal themes, including the one will will discuss in depth today - Progress: Ten Reasons to Look Forward to the Future. He studied at Stockholm University from 1992 to 1999 and earned a M.A. with a major in the history of ideas. He is also a member of the international Mont Pelerin Society.
Questions by Segment for Johan
Would you explain your transition from leftist anarchist to classical liberal?
Life used to be "nasty, brutish, and short," but you point out that a child born today is more likely to reach retirement than his or her forebears were to live to age five.
We shouldn’t romanticize short working hours in the past: people didn’t have enough caloric intake to work long enough hours to produce a surplus of food.
Who is Norman Borlaug? And, why should we know about him?
Your book is very balanced, always pointing out the negative side effects of the progress made. Please comment on that.
Your book, Progress: Ten Reasons to Look Forward to the Future (2016, 2017) is a treatise of factual optimism. You point out we’ve made more progress over the last 100 years than in first 100,000! In the last 50 years, poverty fallen more than preceding 500 years.
You deal with 10 major areas:
- Life expectancy
- The environment
- The next generation
With respect to food, would you discuss the virtual disappearance of famines, and how the almost never take place in a democracy?
With respect to life expectancy, you write that before 1800, not a single country had a life expectancy above 40 years. Today it is 71, while the population from 1950 to 2011 increased from 2.5 billion to 7 billion. But life expectancy increased “not because people bred like rabbits but because they stopped dying like flies.” How did that happen?
Infant mortality declined from 154 to 35 per thousand between1960 and 20156, even in Haiti. This is an untold story.
Would you discuss the myth that the native Americans lived in a utopia, here and in Canada, until the Europeans came along?
Your chapter on violence talks about causes of war can be relatively petty. What do you think of the current dispute in the NFL of players not standing for the national anthem and respecting the flag? Would that have caused a war in the past?
You write about the importance of creativity, which is the theme of this show, and the opening quote from Ronald Reagan. You say that “humans are pleasantly reproducible.”
Even though the end of world poverty might not be within reach, do you believe it is within sight?
In your Next Generation chapter you discuss the decline of child labor and tell the story of a 12 year-old girl’s hands from an Indian village. Would you tell that story, because it is incredibly poignant.
In the Epilogue, you point out that humans tend to be naturally pessimistic, and that most people fail questions regarding the progress you so well document in the book. You give an interesting explanation: things that happen in an instant are mostly bad! But reducing poverty, increasing life expectancy, etc., happens slowly over very long periods of time, which tend to go unnoticed.
Your book is not Pollyannaish. Do you see trends that could derail this progress? Are you optimistic?
We loved the quote from Franklin Pierce Adams: “Nothing is more responsible for the good old days than a bad memory.”
In The Experience Economy, B. Joseph II and James H. Gilmore, (2011, 1999) lay out the Progression of economic value:
- If you charge for stuff, you are in the commodity business (fungible)
- If you charge for tangible things, you are in the goods business (tangible)
- If you charge for the activities you execute, you are in the service business (intangible)
- If you charge for the time customers spend with you, you are in the experience business (memorable)
- If you charge for outcomes the customer achieves, then you are in the transformation business (effectual)
Buying experiences makes people happier than just buying products—the best things in life are not things! A common mistake is thinking experiences are mere entertainment. It’s really about engaging customers.
Any shift up to a new, higher-value offering entails giving away the old, lower-value offering. The authors give the example of a birthday cake:
- Mom makes it from scratch in the 1920-30s: .10¢
- Betty Crocker cake mix in the 40-60s, $2
- Bakery slate cake in the 70s and 80s, $10-20
- Chuck E. Cheese, $100-$250 party, the cake is free
The Easiest way to turn service into an experience: provide poor service! Go from: “How’d we do,” to “What do you remember.” For instance, 90% of car buyers say they are satisfied, yet, only 40% buy next car from same manufacture.
Three industries are ripe: Those that focus on making us healthy, wealthy, and wise.
The customer is the product. When you customize an experience you get a Transformation. While Experiences are personal, Transformations are Individual.
Examples: Fitness coaches, psychiatrists, plastic surgeons, CPAs, lawyers, religious excursions, Promise Keepers, GSK Committed Quitters program (50% greater likelihood you’ll quit smoking).
The London Business School: we’re not in education business. We’re in the transformation business. All other economic offerings have no lasting consequence beyond their consumption.
We want to transform ourselves to become different (A New You), which is why Pine and Gilmore call such buyers ASPIRANTS.
There are three separate phases in offering transformations:
- Diagnosing aspirations (from-to statements—flabby to fit, sick to well, single to married, grief to normal living)
- Staging transforming experiences
- Following through (AA)
At end of day: You are what you charge for.
What do you want to be?
What is beyond transformations? Here’s how Pine and Gilmore answer:
“According to our own worldview, there can be no sixth economic offering because perfecting people falls not in the domain of human business but under the province of God.”
“Scam or substance?” The Economist, November 11, 2017
Bitcoin has risen 700% this year.
ICOs—Initial Coin Offerings have attracted $3.2 billion this year, approaching internet startups Venture Capital funds. Investors expect to be at the birth of another Bitcoin.
The SEC brought first charges against an ICO, and China and South Korea banned them.
The Dotcom boom brought us Amazon and eBay, and ICOs could bring new form of firm, such as crypto co-operatives with lower transaction costs, aggregation of capital, and a decentralized structure.
The Economist writes it’s wrong for regulators to ban ICOs, citing how Quebec invites ICOs into a regulatory sandbox with less strict rules.
“What Most Americans Don’t Know about Extreme Poverty,” FEE, Jeremy Horpehahl, September 18, 2017
766,010,000 people live in extreme poverty today, defined as $2 per day, or less.
That means 6,412,820,000 are not living in extreme poverty.
In 1981, 88% of China, or 878 million lived in poverty. Over time:
- 61% in 1987
- 41% in 1999
- 15% in 2008
- 1.85% in 2013
“Damage Control,” The Economist, October 14, 2017
Trauma hospitals are war zones. The new KPI: “critical mortality,” the share of those admitted to hospital with life-threatening injuries who die. It’s more meaningful than the ratio of fatalities to injuries.
Between 2001-2017: after terrorist attack this KPI was 15-37%.
On June 3rd in the UK London Bridge attack, eight died at scene, but all 52 who were admitted to a hospital survived. None died in the hospital after the Boston terrorist attack in 2013.
In the Las Vegas mass shooting, out of 104 admissions, only four died.
In World War II 30% wounded died; in Korean and Vietnam wars it was 20%, and in Iraq and Afghanistan it was less than 10%.
They debrief and capture Lessons Learned. It is critical for Drs to admit their mistakes!
“Cuban Doctors Revolt: ‘You Get Tired of Being a Slave’”, Ernesto Londono, September 29, 2017, The New York Times
Thousands Cuban doctors work abroad, and are Cuba’s most valuable export. Brazil pays Cuba millions every month, with the doctors receiving approximately 25%.
Brazil pays Cuba $3620 per doctor per month, for around 8,600 doctors. The doctors receive $908/monoth, which is greater than the $30/month they’d earn in Cuba.
150 doctors filed suit Brazilian courts (some won, some lost).
This article made Ed recall one of his favorite Bible passage, Luke 12:13:14, which is the preamble to the parable the rich fool:
Someone in the crowd said to him, “Teacher, tell my brother to divide the family inheritance with me.” But he said to him, “Friend, who set me to be a judge or arbitrator over you?” - Luke 12: 13-14
I believe our Lord wants us to help the poor and indigent. However, the question is, should the government be the "judge or arbitrator" of how this is done?
From the Catechism of the Catholic Church:
Socialization also presents dangers. Excessive intervention by the state can threaten personal freedom and initiative. The teaching of the Church has elaborated the principle of subsidiarity, according to which "a community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view to the common good. CCC-1883
Sadly, the "lower orders" have been all but abandoned, especially in the United States.
What is time?
Listener Todd asks Ed: Time referred to as a commodity, but is it a resource? Here is Ed's reply.
"One thing is clear about today's leadership model. It's NOT working!" So says, Howard Hansen, cofounder of Healing Leaders.
Howard chose “Healing” in his company name to describe a new kind of leadership that he proposes. He sees the present problems in organizations and civilization at large, to be rooted in the destructive "story" we are now living. In the story of humankind, he believe we have moved from living in harmony with the world to having complete control over the world.
Hierarchical leadership has caused great damage and even threatens the very existence of our species. If we are to change the story we are living from one of conquest to one of harmony, a call for a new kind of leadership is required. Healing Leaders embody that call.
As you may know Ron Baker is a founder of the VeraSage Institute, a think tank for professional firms; and that Ed Kless is a senior fellow.
The Institute holds a biennial conference during which the fellows and some friends are invited to gather share their knowledge in a symposium atmosphere.
The event took place in Ed's hometown of Allen, TX. This episode is a live broadcast from the Symposium and featured Guest conversations from other VeraSage Fellows:
- Michelle Golden
- Greg Kyte
- Kirk Bowman
- John Chisholm
- Adrian Simmons
- Paul Kennedy
- Tim Williams
- And special Guest appearance by Ron's Dad, Sam Baker
We hope you enjoy this peak into the gathering.
Chris “Elroy” Stricklin is a combat-proven Air Force Leader, and executive consultant at Afterburner. His unique range of experience combines service as a USAF Thunderbird, multiple N.A.T.O. assignments, White House and DARPA fellowships, and command-experience in the United States Air Force. He brings rich experience in leading, management, negotiations, continuous improvement and positive change. In addition, Stricklin’s military tenure includes Pentagon-level management of critical Air Force resources valued at $840B, Stricklin is also a Certified Manager with degrees in Economics, Financial Planning, Strategic Studies and Operational Art and Science.
“Elroy” was his call sign in the Air Force, named after his resemblance to Elroy on The Jetsons.
Chris ejected from his Thunderbird plane (F-16) during an air show at Mountain Home, Idaho, with 85,000 people in attendance. He was 40 feet above the ground, one-half second from impact, landing in the fireball on his feet. The entire flight was a total of 25.5 seconds long, and as a result of the ejection, his spine was compressed by 2.5 inches. Because of temporal distortion that 25 seconds felt over three hours long.
Chris credits being alive to his training; especially the Debrief process.
The Debrief and Lessons Learned
Leaders are characterized by focused energy, effective action and benevolent compassion. The true measure of a leader is not just measured by success of their organization, but by the measure of leaders they influence and develop to follow in their footsteps. -Chris R. Stricklin
The Debrief is the most amazing thing we do, ensuring we grow tomorrow from today. Not just lessons experienced, but lessons learned (and shared). It’s a learning device, not a personal blame game.
Only 33% of organizational objectives are achieved, an incredible waste of effort, resources, etc. “We learn from the school of hard knocks,” which results in improvement of less than 5%.
However, if you go through even an unstructured Debrief, you improve performance by 28%. With a structured Debrief, it goes to 38%. With a competent facilitator, performance can increase by 300%!
Jim Murphy wrote Flawless Execution in 1988. Here is the Air Force’s Debrief acronym STEALTH:
- Set the time of the Debrief
- Tone—nameless and rankles, start with inside/outside criticism
- Execution vs. objectives—Did we meet or objectives? Yes or no.
- Analyze—ask why, why, why?
- Lessons Learned—Capturing root causes of what went right and wrong
- Transfer the lessons learned to the organization, and its knowledge bank
- High note—always finish on a high note
A Debrief after a Thunderbird air show (approximately 28 to 32 minutes long) could be two hours.
For businesses, Chris recommends a Debrief be conducted within one week of an engagement.
It’s all about building a culture of improvement.
Advantages of Debriefs
- Closes the loop on the project; draws the line between past and future project; and puts the path behind us
- Effective learning, improving future performance, and developing people
- Catalyst for change and innovation
- Cause vs. root cause
- Generates specific and actionable lessons learned
- Develops a culture and learning
- Leadership development
Chris’s tips for your first few Debriefs
- Start with why, why, why?
- You have to have objectives; a brief on who does what, when.
- Don’t debrief a failure; debrief a win.
- “It’s not just debriefing, it’s a culture of debriefing”—a way of thinking. It’s not who’s right, it’s what’s right.
Chris’s LinkedIn Blog Posts
An epiphany at 50,000 feet: The secret to success is Lessons Learned!
How does the military take a young college graduate and turn them into a fighter pilot? Using the Debrief and the resulting lessons learned, an experiential learning accelerator
Teams that Debrief outperform those that don’t by 25%.
There’s been 325 Thunderbirds, serving two-year tours, and 50% of the team is new each year. It takes four months of training to become a skilled Thunderbird. Most companies have teams that have been together for years, and can’t reach the same level of performance.
VUCA = Volatility, uncertainty, complexity, and ambiguity
Spoiler alert: Communication + Value
Episode #15: The Best Learning Method Ever Devised: After Action Reviews
Ed’s interview with Chris on the Sage Advice Podcast
“Mind over matter,” The Economist, September 23, 2017
Can Entrepreneurship be taught? Researchers at the World Bank, National University of Singapore and Leuphana University in Germany conducted a Randomized Controlled Trial (RCT) for 2 ½ years from 2014 to find out.
They selected 1,500 businesspeople in Togo, West Africa. A typical firm had 3 employees and profits of $173/month. Interestingly, only 1/3 of them kept books.
Three groups of 500 were divided into:
- Control group, nothing done
- This group got conventional business education in accounting, financial management, marketing, HR, etc.
- This group got courses inspired by psychological research, such as setting goals, dealing with feedback, persistence in the face of setbacks, etc.
After 2.5 years, sales in the 3rd group were up 17% (and profits were up 30%) over the control group. Also, the 3rd group had more innovations.
There was no effect in the second group.
The Economist concludes that aspiring entrepreneurs should skip the business shelf and head over to the psychology section.
“Pay-per-risk,” The Economist, September 23, 2017
174,000 commercial drones were sold around the world last year. 2.8 million consumer drones were sold.
Insurance4drones, a British specialist, offers a $1,000/year insurance policy on the DJI Phantom, the best-selling drone.
October Flock, a London start-up, insures flight-by-flight at £5/hour. It considers the topography, whether hospitals, schools, airports, nearby, traffic levels on roads, etc.
Verifly, a USA start-up offers insurance on drones as well.
Selling insurance on annual basis is too inflexible. Offering insurance on-demand, in real time can better forecast risk.
“Dark Humor from the socialist hellhole of Venezuela,” Daniel J. Mitchell, FEE, September 26, 2017 and “The war on cuteness,” The Economist, September 23, 2017
In Venezuela, 11,000 babies died last year and infant mortality is up 30%. 11.4% of children under age 5 are suffering moderate to severe malnutrition. ¾ of adults have lost an average of 19 pounds on the “Maduro diet.”
The number of women working in brothels has doubled, and the ages have dropped to 12 and 13.
One joke circulating that you don’t need toilet paper if there ain’t no food.
Groceries have been rationed by day of the week, based on your social security number.
So the government has declared, “Let them eat rabbits.” The problem is, kids are treating them like pets, putting bows on them and even taking them to bed.
The Economist calls it a “hair-brained” scheme.
“If it’s broken, you can’t fix it,” The Economist, September 30, 2017
If you can’t open it, you don’t own it. The battle cry of a movement that decries the fact that you can longer easily fix that which you own, such as an iPhone, or John Deere tractor.
About a dozen states are considering “right to repair” laws. These laws would require firms to provide consumers and independent repair shops with same documentation and parts available to authorized service providers.
Tesla, for example, forbids its owners from using the car to offer Uber, Lyft, for example. This is because Tesla wants to start its own ride-sharing service, Tesla Network. This prohibition has yet to be legally challenged.
“Joe Biden is Right about Universal Basic Income,” Daniel J. Mitchell, FEE, September 25, 2017
See our show on the Universal Basic income (Episode #95).
The skeptics of UBI don’t believe meaning and purpose can come from a handout. Biden says it’s the job that is important, not just the income.
Ed's blog post arguing that Joe Biden was right on another topic.
FEE article “Schooling is for the industrial era” by Kerry McDonald
Pull quote: "Enclosing children in increasingly restrictive schooling environments for most of their formative years, and drilling them with a standardized, test-driven curriculum is woefully inadequate for the Imagination Age. In her book, Now You See It, Cathy Davidson says that 65 percent of children now entering elementary school will work at jobs in the future that have not yet been invented. She writes: 'In this time of massive change, we’re giving our kids the tests and lesson plans designed for their great-great-grandparents.'"
Pull quote: "Zuckerberg’s address to his nation, carried on Facebook Live, showed a corporate CEO announcing decisions that will govern an important aspect of public elections, including campaign finance, spending and election integrity issues. The new policies have been crafted by a private company with no public input and no democratic mechanism for discussion. Facebook has essentially taken on part of the role of the Federal Election Commission through self-regulation ― which worries some people."
This site tracks the number of times Bitcoin has been reported to be dead. Hat tip to listener Hector Garcia.
This week with Ed
- My wife and I, for our anniversary Monday, got Apple watches. Expect to hear more on this soon.
- I had the opportunity to Lunch with TSOE listener BJ from Germany who was visiting family here in north Texas.
- For birthday, did a Facebook fundraising goal of $500 for the Acton Institute, reaching already $250. Cool stuff!
- Began meditating, based on FEE article, “Why knowledge workers should meditate.” There’s an App called Headspace that helps you.
After the Civil War, corporations grew to unprecedented size. The public was suspicious of this concentration of economic power, and politicians responded in 1890 by passing the first antitrust law, the Sherman Antitrust Act. Over the years, antitrust policy has evolved through further legislative acts and amendments, regulatory guidelines and judicial interpretation, which have implications for pricing strategies. Join Ed and Ron as they discuss some of these laws, as well as the economics of price signaling to competitors, which is not a violation of antitrust laws.
The following are excerpts from Ron’s book, Pricing on Purpose: Creating and Capturing Value
Monopoly had become as popular a subject in economics as sin has been in religion. There is a characteristic difference: Economists are paid better to attack monopoly than the clergy are to wrestle with sin. —George J. Stigler, Memoirs of an Unregulated Economist
After the Civil War, with the development of better transportation systems that integrated a host of local markets into a national market, business corporations grew to unprecedented size in order to take advantage of economies of scale. As this process unfolded, many small and undercapitalized businesses went bankrupt or were purchased by larger concerns, and the term robber baron gained currency.
The public was suspicious of this concentration of economic power, and politicians responded in 1890 by passing the first antitrust law, the Sherman Antitrust Act. The act was thought the perfect remedy to stop any business from monopolizing its market and to restore efficient competition to the economy.
Over the years, antitrust policy has evolved through further legislative acts and amendments, regulatory guidelines and judicial interpretation, which obviously have implications for various pricing decisions. Although services are not subject to certain provisions of these laws—for instance, price discrimination—many businesses are affected, and the laws need to be taken into account when formulating pricing strategy.
Sherman Antitrust Act, 1890: Made acts in restraint of trade illegal.
Standard Oil and American Tobacco Cases, 1911: Broke up both firms (each of which accounted for more than 90% of their industry) into smaller companies.
The Federal Trade Commission Act (FTC Act), 1914: Established to investigate unfair practices and issue orders to “cease and desist.” In addition, it established the Federal Trade Commission.
Clayton Act, 1914: Outlawed unfair trade practices. Restricted mergers that would substantially reduce competition.
Robinson-Patman Act, 1936: Strengthened provisions of the Clayton Act, outlawing price discrimination.
The Sherman Antitrust Act, 1890
Sections I and II of the Sherman Antitrust Act read, in part:
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal . . .
Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty . . .
A 1974 amendment to the Sherman Act made violations felonies rather than a misdemeanor as in the original law.
The Justice Department initiated a number of legal actions against large corporate holdings, none of which were as important as the one filed in a St. Louis Federal Court on November 15, 1906, against the Standard Oil Company of New Jersey.
By 1880, John D. Rockefeller was the king of the industry, with his Standard Oil Company holding the dominant market share, which grew between 1870 and 1879 from 4 to 90 percent. How did he achieve such a dominant market position?
“Between 1870 and 1885, the price of refined kerosene dropped from 26 cents to 8 cents per gallon. In the same period, the Standard Oil Company reduced average costs per gallon from almost 3 cents in 1870 to 0.452 cents in 1885.”
Legend has it this was predatory pricing: the act of deliberately underselling competitors in certain markets in order to drive them out of business. Once they are gone, the monopolist raises the price in the absence of competition. History books have immortalized this view of Standard Oil, and predatory pricing has been a major concern of government antitrust lawyers, politicians, and the general public then and now.
However, like most conventional wisdom, this theory is more conventional than wisdom, as explained by Dominick T. Armentano in his indictment of antitrust laws, Antitrust and Monopoly: Anatomy of a Policy Failure:
Unfortunately for lovers of legends, this one has been laid theoretically and empirically prostrate. In a now classic article, John S. McGee theorized that Standard Oil did not employ predatory practices because it would have been economically foolish to have done so. In the first place, McGee argued, such practices are very costly for the large firm; it always stands relatively more to lose since it, by definition, does the most business.
Second, the uncertainty of the length of the forthcoming battle, and thus its indeterminate expense, must surely make firms wary of initiating a price war.
Third, competitors can simply close down and wait for the price to return to profitable levels; or new owners might purchase bankrupt facilities and ready them to compete with the predator.
Fourth, such wars inevitably spread to surrounding markets, endangering the predator’s profits in his “safe” areas.
And last, predatory practices already assume a “war chest” of monopoly profits to see the firm through the costly battles; firms apparently cannot initiate predatory practices unless they already possess monopoly power. But if this is true, firms cannot gain initial monopoly positions through predatory practices.
It is important to note that most antitrust cases are filed by one business against another (customers have no standing to sue). The treble damage provisions also provide an incentive for harmed competitors to call attention to the government of violations.
Even though the government won its case against Standard Oil, and tobacco trusts, supporters of antitrust, were still not satisfied with the narrow interpretations by the court, Congress began work on two additional legislative initiatives designed to prevent further anticompetitive business practices.
The Federal Trade Commission Act, 1914
The Federal Trade Commission was established in order to enforce the provisions of the Sherman Antitrust Act in a more rapid manner than could be achieved by judicial law.
The first sentence of the FTC Act reads, “Unfair methods of competition in commerce are hereby declared unlawful.” Section 5 of the FTC Act reads, “The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations . . . from using unfair methods of competition in commerce.” The FTC could ban a business practice merely because of the suspicion that it promoted unfair competition, without the permission of a court.
Also, the FTC has the authority to subject pricing practices to administrative review, not in order to punish past wrongdoing, but to make new law. The FTC is empowered to order a business to cease and desist from any practice it deems unfair, even if that practice would not necessarily be deemed unfair or anticompetitive in a court of law.
The Clayton Act, 1914
The Clayton Act was passed to correct various defects and omissions of the Sherman Act. Specifically, it prohibits anticompetitive mergers, tying arrangements, exclusive dealing agreements, interlocking directorates, and the acquisition of stock in competitor companies. The antimerger provisions were further strengthened in 1950 when Congress passed the Caller-Kefauver Antimerger Act. Also, Section 2(a), as amended by the Robinson-Patman Act, prohibits predatory price discrimination, but only in tangible products (it does not cover real estate, services, technology licenses, lease of facilities, or contract rights and privileges).
The Robinson-Patman Act of 1936
After the passage of the Clayton Act in 1914, chain stores grew rapidly and increased their buying power, and this type of price discrimination was thought to threaten the survival of independent wholesalers and retailers. Therefore, in 1936, Congress passed the Robinson-Patman Act in order to strengthen the Clayton Act.
This was in the middle of the New Deal, and protecting small businesses was viewed as a legitimate goal of antitrust policy. During the Great Depression, government policymakers were averse to price competition, believing it to be a major cause of the economic stagnation of the 1930s. Small business interest groups, in fact, were the impetus behind the passage of the Act, which was actually drafted by the U.S. Wholesale Grocers’ Association.
The foregoing acts are the major foundation of antitrust policy today. They have been amended many times by later legislative acts and special exemptions have been granted to various interest groups, such as labor unions, insurance companies, and farm cooperatives.
Criticisms of Antitrust Policy
Here is how Stigler summed up his opposition to the Robinson-Patman Act in 1969, before the Subcommittee on Small Business and the Robinson-Patman Act of the House Select Committee on Small Business:
. . . The Robinson-Patman Act is opposed by virtually all economists. I hope the Subcommittee will reflect upon the fact that if all the prominent economists in favor of the Robinson-Patman Act were put in a Volkswagen, there would still be room for a portly chauffeur.
Even Adam Smith was suspicious of any law advocated by groups of businessmen. Despite conventional wisdom, Adam Smith was no apologist for business people. In fact, he did not have many nice things to say about them, always calling into question the motives of their behavior. Smith was apprehensive of any meeting among businessmen, writing in Wealth of Nations:
People of the same trade seldom meet together, even for merriments and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
Seminal management thinker Peter Drucker also contributes to the antitrust debate:
Antitrust is an obsession of American lawyers, but I have no use for it. Any monopoly holds an umbrella over the newcomers, to be sure, but I am not afraid of monopolies because they eventually collapse. Thucydides wrote years ago that hegemony kills itself. A power that has hegemony always becomes arrogant. Always becomes overweening. . . . It becomes defensive, arrogant, and a defender of yesterday. It destroys itself.
Indeed, studying the history of antitrust cases and policy, one is left with the conclusion that almost any type of pricing behavior by a company is in violation of the law. If a company raises its prices above its competitors, it must be a monopoly. If a company lowers its prices below that of its competitors, it is obviously engaging in predatory behavior. If a company maintains its prices for any period of time, it must be colluding with its competitors to fix prices.
The Problem with Antitrust Laws—The Wrong Theory
Any first-year microeconomics student is taught the perfect competition model, which rests on many assumptions as delineated in this microeconomics textbook, including:
- Firms and individuals take market prices as given—each is small relative to the market so that their decisions do not affect the market price.
- Individuals and firms have perfect information about the quality and availability of goods, and about the prices of all goods.
- Actions by an individual or firm do not directly affect other individuals or firms except through prices.
- Goods are things that only the buyer can enjoy—if I buy and eat a slice of pizza, it is no longer available for you to eat; if you buy a bike, we both cannot use it at the same time.
There are several problems with this model. In a world of perfect competition there would be no need for advertising; yet Proctor & Gamble alone spends $5 billion on advertising its products, and we surely cannot make the argument that Proctor & Gamble is irrational.
The perfectly competitive model that posits all sellers are price takers would be, in reality, a world of no competition, no innovation, no market power, and no dynamism. It is emphatically a market no developed country’s people would want to live in.
Yet, it is the ideal model used by antitrust economists and lawyers to benchmark anticompetitive behavior, and it is contrary to how the real world works. Competition, by its very nature, is not a level playing field. All businesses are striving for monopoly profits, but even when attained they are not long sustained.
No market reflects the assumptions of the competitive model, which is why the majority of economists agree that the extreme cases of monopoly (no competition) and perfect competition (where no firm has any effect on market prices) are rare. Most markets are characterized by imperfect competition.
George Gilder wrote the following eloquent indictment of the beloved perfect competition model in Wealth and Poverty:
Because there is no demand for new and unknown goods, no demand for the unforeseeable fruits of innovation and genius, preoccupation with demand fosters stagnation.
The notion of perfect competition—a prime image of classical theory—is extremely useful in depicting the behavior of particular markets for existing goods. But it has little to do with the central activity of capitalism, which is the turbulent process of launching new enterprise. As has been often observed in academic analyses, perfect competition actually comes to mean no competition at all: an equilibrium in which all participants have perfect information and in which companies can change neither prices nor products and can essentially affect neither supply nor demand.
Perfect competition thus excludes most supply-side behavior: all the acquisition and manipulation of knowledge that is the main activity of real entrepreneurs. Free men and creative enterprise—all the secrets and surprises of actual competition—are banished in favor of a mechanism by which savings are automatically invested, supplies and demands are simultaneously reconciled, and the entrepreneurial role could be best performed by modern computers.
Antitrust has a rich and fascinating history, rooted firmly in the development of economic theory as well as the emotional appeal among the public, politicians, and the media. The robber barons have an infamous reputation among American culture, even though many would argue it is a misapplied name for entrepreneurs who brought needed goods and services—at constantly lower prices—to the masses.
In any event, executives in charge of pricing need to be cognizant of the law and its implications for devising pricing strategies and tactics. And although the laws do not apply to services, if your company is engaged in manufacturing, or deals with distributors and suppliers, then appropriate legal advice needs to be obtained to ensure you are complying with all applicable federal and state antitrust laws.
What should pricers do when they are confronted with naïve competitors attempting to engage in a price war? Begin by attempting to ascertain—through gathering of competitive intelligence—why they are dropping prices; it may not be to start a price war but rather to simply clear out inventory or utilize excess capacity.
Successful companies tend not to spoil the market, the ones offering inferior value propositions do, and thus have the most to gain from initiating price wars. If you find yourself in the unfortunate position of having to offer a price discount, do not announce it publicly, as this will provide a signal to your competition and they may intensify the war. The risk in lowering prices is to signal to customers that you have been overcharging them in the past, while giving legitimacy to your competitor’s offerings.
Examine ways to offer more value at the same price—quicker deliveries or lead times—rather than match the price discount. Offer more favorable payment terms, or longer contracts. Rather than discounting planned price increases, delay them. If you are going to provide a discount to match a competitor, consider doing it only on incremental volume. Consider offering other value-added benefits—co-op advertising, loyalty programs, and so forth—that will maintain the integrity of your “list price” and shift the discounts off-invoice.
Pricers need to consider the total cost of engaging in a price war, not just one battle. You may gain marginal market share by undercutting your competition, but the risk is that you will lower prices throughout the entire industry, which are very difficult to return to prewar levels. Customers, like elephants, have excellent memories, especially at remembering the lowest price they ever paid, which is why grandpa constantly regaled you with stories of how candy used to cost five cents in his day. Price wars can desensitize customers to value, making them focus more on price.
If the competitor should return to more rational behavior with a price increase, immediately follow, so as to reward smart pricing. It is always better to let competitors maintain an advantage based on a higher price than a lower one, since this makes it more costly for them to cut prices in the future.
Do not fall prey to what economists call coordination failure—a situation in which each firm is reluctant to be the first in its industry to announce a price change. This industry-wide hesitation produces price stickiness.
Imitating competitors’ prices is known as conscious parallelism, which is lawful in the United States and the European Union as long as there is not explicit agreement among the companies. Of course, as with all antitrust laws, there is an enormous gray area between illegal collusion and lawful conscious parallelism, and it is always wise to engage legal counsel for guidance.
Also weigh the benefits and costs of offering a price match guarantee to your customers, a way to engage in tacit price collusion among competitors. This strategy can result in less competition and higher prices, although this effect is not assured.
Executives need to constantly speak and write about the importance of value and the perils of price wars in industry and trade publications. Be sure not to engage in speculative pricing declarations, since you can only announce what your company actually intends to do with prices in the future.
In the final analysis, the best way to avoid price wars is to avoid the commodity trap by offering more value to your customers; but if you are caught in one, these strategies can help to ameliorate the effects and shorten the length of these self-destructive practices.
This show was dedicated to the possibility that innovation goesbeyond just technological developments. Technology is important, but it is only a small part of innovation.
For innovation to be more fully complete we must look at other areas including the internal processes of the organization and most importantly the very language we use.
Innovating like this is hard work and not for everyone because it requires deeper thinking than usual. If you believe you can attain this level of thinking, you are invited to listen to this show.
Other Resources and Books Mentioned
The Grid: The Decision-Making Tool for Every Business (Including Yours), by Matt Watkinson, 2017.
“The Grid provides you with a simple way to look at the complex system which is your business. With the possible exception of Warren Buffett, everyone needs to read this book.” - Rory Sutherland, Vice-chairman, Oglivy Group
“Matt Watkinson distills strategic know-how into nine ingenious perspectives and, with the use of clever examples, shows us how to apply this technique of thinking to any business problem or market opportunity. An extraordinarily powerful book.” - Dr.Jules Goddard, author Uncommon Sense, Common Nonsense
Innovation and Entrepreneurship, Peter F. Drucker, 1985
Only the Paranoid Survive, Andy Grove, 1999
Our show with Professor Deirdre McCloskey on the Bourgeois trilogy.
Our show on Innovating Your Business Model.
Rory Sutherland’s Zeitgeist talk
Is Hourly Billing Ethical?
Ethics—originating from the Greek word ethos, meaning habit—is a branch of philosophy that explores and analyzes moral problems, concerned with questions such as: What kind of moral principles and values should guide our actions? What do we mean by right and wrong?
Immanuel Kant proposed broad principles to provide a framework for making moral decisions, described as categorical imperatives:
- Act only on that maxim by which you can at the same time will that it should become a universal law (e.g., no stealing).
- Act so that you treat humanity whether, in your own person or in that of another, always as an end and never as a means only (people are to be respected because they have dignity. Moral agency is what gives humans dignity).
- Kingdom of Ends formulation: You should act as if you were a member of an ideal kingdom of ends in which you were both subject and sovereign at the same time.
If you apply this test to hourly billing, you find it fails miserably on all the questions, especially the first and third.
Would you want hourly billing to become universal? Would you want all businesses to utilize it?
If the Golden Rule is true—treat others as you yourself would want to be treated—how can one defend the morality of hourly billing? Would you accept that method of pricing from a hotel, an airline, or a grocery store?
Aristotle wrote, “It’s not easy to be a good citizen in a bad society.”
Hourly billing creates a bad culture, focused almost exclusively on the convenience of the seller, not the customer.
It is not how you purchase anything else in your life. You would not tolerate it for one minute if any other business tried to price this way. Hence, it is unethical. We think Kant would agree.
Is Hourly Billing Unprofessional?
“A professional is someone who is responsible for achieving a result rather than performing a task.” - Michael Hammer
The billable hour (and timesheets) are unprofessional as they keep the professional focused on the tasks, not the result.
Day laborers are paid for performing tasks. Professionals should create results. Yet the empirical evidence from nearly a century of the billable hour regime proves it has deleterious consequences on professionalism.
William Ross states the following in his book, The Honest Hour:
Most dishonest billing is the perfect crime. Because there is no practical manner of verifying the accuracy of most time records, every attorney who has billed time knows that hourly billing creates tempting opportunities for fraud.
Ross ends his book The Honest Hour by saying, “Despite its potential for abuse, time remains the best means of billing clients. Hourly billing therefore ought to be reformed rather than abandoned.”
Misalignment in interest
The American Bar Association and courts have opted for imposing standards on hourly billing.
Here’s a partial list of where its brainpower is being applied:
- Double billing—billing two customers for different work performed at the same time. A lawyer who flies for six hours for one client while working for five hours on behalf of another, has not earned eleven billable hours. A lawyer who is able to reuse old work product has not re-earned the hours previously billed and compensated when the work product was first generated.
- Recycled work—billing customers by the hour for work that was created at another time for another customer. The ABA Opinion suggests that the lawyer is reaping a windfall from “the luck of being asked the identical question twice,” just as the attorney who is able to bill two clients for work performed at the same time is receiving an unfair advantage.
- Overstaffing of lawyers—assigning too many lawyers to a case or project to fulfill billable hour quotas.
- Excessive research.
- Attorneys performing clerical and administrative tasks and billing at their hourly rates. Surgeons piercing ears. Michelangelo should not charge Sistine Chapel rates for painting a farmer’s barn.
- Charging for travel time. Slippery slope: Shower time?
- Attorney conferences—chitchat on the customer’s dime or valuable timesaving devices?
- Charging for small units of time—rounding up to the quarter hour or charging for every minute?
- Overhead expenses—charging (and possibly marking up) general overhead expenses such as copies, faxes, phone calls, secretary time, and overtime.
There is some sanity. The New York State Bar Association had this to say with respect to alternative pricing methods, "Indeed, subject to the economic realities of the situation an attorney’s professional obligations, virtually any billing method that attorney and client can both agree upon and abide by will result, almost by definition, in a fair fee.
Listener Twitter Comments
In situations where scope of work is impossible to define, uncertainty gets overpriced under fixed fee arrangement. Far from optimal.— Max Fonarev, CFA (@SorbusValuation) October 6, 2017
Chris Marston’s Concentric Circles
Listen to Chris explain his circles, from the Art of Value Podcast.
See Ron’s blog post on using Chris’s circles.
Other Resources Mentioned
Moores, a law firm in Melbourne, Australia offers Moore’s Guarantee
We can’t guarantee outcomes but like price, the quality of our service is another thing we can guarantee up front. If you think the quality of our service didn’t match what was agreed, let us know and tell us how you think that should be reflected in the price you pay.
Economist Bart Wilson explaining the concept of fairness
Donald Rumsfeld on Unknown Unknowns
Anti-Price Gouging Laws Make as Much Sense as Anti-High Temperature Laws, Mark J. Perry, American Enterprise Institute
Kevin Williamson, National Review’s economics reporter called price gouging “a public service.”
Robert Wood, TSOE’s Scifi Contributor asked Ron if he’d sell his generator to a rich person offering $10,000—to run his air conditioner—or to a family who needs it to keep a member alive on oxygen?
Free market prices don’t mean that allocations are made to the most worthy cause, otherwise the Kardashians would not be rich.
Self-driving cars update
In an article from Washington Post by Elizabeth Dwoskin, Silicon Valley startup Atrium is looking to replace lawyers with computers. It has raised $10.5 million in capitalization, and it’s not going to bill by the hour!
Decentralized Predication Market
Check out www.augur.net, a decentralized (read can't be shut down) prediction market based on the Etherium blockchain.
In the 1919 document, Mussolini called for: universal suffrage; proportional representation; formal councils for experts; a minimum wage; reorganization of railway and transport sectors; reduction in retirement age from 65 to 55; a strong progressive tax on capital; outright seizure of 85% of profits on companies manufacturing military goods. Not exactly what you think of when you hear people say someone is a "fascist."
Ford and GM are at the bottom of the price-earnings ratio in the S&P index; the walking dead.
Terrifying signal: $18 billion combined profit last year, but a combined market value of $98 billion. Profits will half or worse in coming years.
Uber, Tesla, and Waymo are all worth more, yet all lose money and bring in little revenue.
Detroit execs sniff that Silicon Valley no idea how to make millions of vehicles safely. Tesla’s production is 1% of GM’s.
Both Ford and GM are making investments in the future, GM owns 9% of Lyft and Ford has invested $1 in Argo, AI for autonomous vehicles.
Investors don’t seem to care.
We may be at Peak Auto.
New strategy: ring-fence autonomous divisions, New Ford, New GM, for example, but the income statements won’t be pretty, nor have none of Tesla’s pixie dust (or subsidies). This is a typical incumbent’s dilemma.
Listener Jim Borchers, a lawyer in St. Charles, MO sent us this.
From a Texas Bar ethics committee opinion: The word “officer’ indicates the person has the power to control either the entire law firm or significant areas of the firm’s operations.
Nonlawyers cannot direct or control the professional judgment of a lawyer.
Also, you can’t pay bonuses based on revenue or profit targets. Ethical guides ban sharing legal fees with a nonlawyer.
Firms can take revenue and profits into account for bonuses.
“American Men, Quit Your Whining,” John Tamny, Foundation for Economic Education, May 23, 2017
The last people to rate our compassion is men without work.
The rest of the non-English world working feverishly to learn English. American males already know the language.
Is the USA the land without opportunity? “Men without work”?
The per capita income of Shanghai, China’s richest city, $7,000. Aliquippa, PA, over $20,000.
Feminism has neutered men. Right, Tom Brady, Jeff Bezos, Derek Jeter curl up in the fetal position each night. By this logic, men wouldn’t be thriving in professions of all kinds.
This is a certain sign that the USA is so rich it must find problems to invent as opposed to solving real ones.
The book Hillbilly Elegy, J.D. Vance makes the same point about social capital, and argues we need to stop the blame game.
“Human capital: The People’s Champion,” The Economist, August 5, 2017, Six big ideas
Gary Becker and human capital, RIP 2014. 1992 Nobel winner, pushing economics into new spheres of human behavior.
In 2004, a panel of German linguists deemed “human capital” the “most offensive word of the year.”
Why do families in rich countries have fewer children? Because they invest more in each one’s human capital.
Why do companies in poor countries provide meals to workers? To keep them rested, well-fed, makes them more productive.
Why each new generation spent more time in school than one before? Because a longer life expectancy raised profitability and ROI of education.
Why have earnings of highly skilled workers risen even as their numbers have also increased? The increasing returns from human capital.
Human Capital is defined as: the abilities and qualities of people that make them productive.
Economist Arthur Pigou coined the term.
America’s GI Bill, post WW II, is usually believed to be the dawning of the knowledge economy.
Becker did distinguished between specific and general human capital.
¼ rise in per-person incomes from 1929-1982 is due to increases in schooling. Much of the rest is harder to measure.
Two interpretations: government should invest more in education; or 2) returns so big to individuals, they should pay for it themselves.
Becker distinguished between bad inequality and good inequality. Doctors, scientists, programmers, etc., motivated to tackle tougher subjects, thus pushing knowledge forward.
According to The World Bank, human capital is 80% of the developed world consists of human capital.
Ron and Ed interviewed the dynamic Magatte Wade. Magatte is the founder and CEO of Tiossan, a high-end skin care products line based on indigenous Senegalese recipes and ingredients. Tiossan products are distributed via www.tiossan.com, as well as through selected boutiques and Nordstrom. Tiossan commits at least ten percent of profits to the creation of entrepreneurial schools in Senegal designed to develop the next generation of Senegalese genius. Previously, Magatte founded Adina World Beverages, with African-inspired drinks sold throughout the United States at retailers including Whole Foods and Wegmans. Prior to her departure from Adina, she assembled an executive team featuring a co-Founder of Odwalla, CEO of SoBe, and ex-co-Chairman of PepsiCo. Her latest company is www.SkinIsSkin.com, the purpose of which she explains during the show.
She came to Ron and Ed's attention due to her role in the documentary film, Poverty Inc. We interviewed Father Robert Sirico about the movie on Show #134, March 17, 2017.
Questions We Asked Magatte
Your background, how did you become an entrepreneur?
You upset the president of Senegal in your FEE talk, would you tell that story?
Near the beginning of the movie Poverty, Inc., you took on the 1984 Band-Aid song, “Do They Know it’s Christmas,” performed in response to the famine in Ethiopia. You say:
It perpetuates false image of Africa as barren, and a sentimental image of Africans as helpless and dependent. Africa has no rain, no river, and they don’t know it’s Christmas. One critic said "It was the most self-righteous platform ever in the history of popular music."
You then met Bono at a TED talk. Did you get through to him, because seven years later he admitted commerce and capitalism take more people out of poverty than aid? In the same speech he says, “But, we still need aid! Deny this and you’re brain-dead and heart-dead.”
Do you still believe Bono will leave Poverty industry? He seems to have one foot on each side.
The late Christopher Hitchens said: Mother Theresa was not a friend of the poor, but a friend of poverty. I don’t think he was right about Mother Theresa, but when it comes to the entire poverty industry exposed in the movie—foreign aid, NGOs, social entrepreneurs, celebrities, etc.—it seems to apply nicely. Do you agree?
One my favorite sayings is the German Proverb: If you want equality, visit a cemetery. Do you worry more about inequality or poverty?
The World Bank's list measuring the ease of the ability to do business in each country.
- Tiossan (Tee-oh-sahn), high-end skin care products, sold in selected boutiques and Nordstrom (www.tiossan.com)
Magatte on solutions to poverty
Join Ed and Ron for their insightful interview with Daniel Bennett, Senior Behavioral Strategist with Ogilvy Change in the UK. He works with Rory Sutherland, who we also interviewed on Episode #9. Daniel shares his insights and experience on how behavioral science and economics can be used in business, enhancing both customer loyalty and profitability. Don't miss this fascinating discussion.
Dan is a Practitioner, Speaker and Writer on the application of Behavioural Science to Marketing. The World's first 'Choice Architect' (until proven otherwise) joining Ogilvy Change in 2012 working on over 50 of the worlds major brands across retail, health and nutrition, organisational change, and society. His proudest achievements have been delivering behavioural interventions that deliver millions of pounds of revenue for some of the world's biggest brands such as Unilever, Nestle, Public Health England, Fox, ITV, the Times, British Airways, Unilever, Adobe, the EU Parliament, Comic Relief and many more. And winning a range of awards from the Creative Circle, Cannes Lion to the Nudge awards. He's been lucky enough to speak to audiences in over 15 countries about the unseen opportunities behavioural science brings. Some highlights have been the Super Yacht congresses, National Security summits, Marketing and Social Media conferences, financial conferences, and academic institutions.
Calculating needed sample size
This episode is dedicated to the possibility that the majority of leadership thinking is wrong as it is ultimate based on manipulation - trying to “get someone to do something.” Coming to terms with this idea is difficult and not for everyone because it requires us to examine some of our most deeply held beliefs and either dismiss them or at least think differently about them. If you are interested in hearing a conversation about healing leadership, you are invited to listen to this episode with Ron Baker and Ed Kless.
This material is based on the work of Howard Hansen and Steve Geske, who have appeared previously on The Soul of Enterprise - Episode # 11.
For more visit the Healing Leaders website.
- Healing Leadership: A Survival Guide for the Enlightened Leader, by Steven J. Geske and Howard R. Hansen
- A Failure of Nerve: Leadership in the Age of the Quick Fix, by Edwin H. Friedman
- Leadership BS: Fixing Workplaces and Careers One Truth at a Time, by Jeffrey Pfeffer, Professor of Organizational Behavior at Stanford Graduate School of Business
Ron's Notes on Leadership BS
Most conventional wisdom on leadership offers more hope than reality; wishes rather than data; beliefs instead of science; and is filled with fables, not facts.
He calls it “lay preaching,” like religion it offers a false sense of control.
Leaders fail with unacceptable frequency, and the leadership industry has failed in its 40-year history to improve the human condition.
Most people look for an “inspiring leadership course,” yet how manymedical schools advertise as “inspiring?” Inspiration does not produce change.
Leadership industry obsessively focused on the normative—what leaders should do and how things out to be—whiling ignoring what is true, and what is going on, and why.
Pfeffer debunks the five Leadership Attributes
- Modesty—this is rare among most leaders; most are narcissists
- Authenticity—not true to themselves, rather true to what the situation calls for (in sports, “play through the pain”). Anthony Weiner was authentic! Nelson Mandela, Martin Luther King, Jr. inauthentic? Who cares? True to which self? We are constantly changing.
- Truthfulness—leaders frequently lie and face few consequences
- Trustworthiness—notable mostly by its absence.
- Concern for welfare of others—Officers eat after enlisted men. Yet CEOs earn 330x the pay of average worker, receive severance packages when they screw up, which is certainly not taking care of others first.
It is more helpful to understand why and how people who don’t have the above attributes reached such powerful positions.
His recommendations for improving leadership
- Measure and hold people accountable—what gets inspected gets affected (he admits that measuring the wrong things is worse than measuring nothing; e.g., student evaluations ≠ learning)
- Acknowledge the different interests of leaders and their companies (align career success with organizational success)
- Use more scientific methods and worry about credentials
Did You Pray?
The Book That Started It All
Henry Hazlitt (1894-1993) was one of the greatest economic journalists of the 20th century. He is the author of Economics in One Lesson, among twenty other books; was a chief editorial writer for the New York Times; and wrote weekly for Newsweek. He was a founding board member of the Foundation for Economic Education, where he served in an editorial capacity at The Freeman. We discussed the nine chapters included in the FEE’s free book, "The Essential Henry Hazlit," the last of five books in this Memorable Mentor series.
1. The Lesson (Economics in One Lesson, 1952)
“Economics is haunted by more fallacies than any other study known to man.” As Thomas Sowell says: It’s not the economics that’s complicated, it’s the fallacies. Why is economics bedeviled by these fallacies?
- Not in physics, mathematics, or medicine do you find self interested individuals
- Economists who only look at the immediate effects of a policy
2. The Early History of FEE (The Freeman, March 1984)
Leonard Read was the General Manager of the Los Angeles Chamber of Commerce. In 1947 he organized a conference in Vevey, Switzerland, with 43 libertarian writers, which was the beginning of Mont Perelin Society.
FEE opened March 16, 1946, Irvington, New York. In mid-1954 FEE took over The Freeman publication, one of Ron’s favorite (now available only online).
FEE published Roofs or Ceilings, by Milton Friedman and George Stigler, and Planned Chaos by Ludwig von Mises. Neither publication had a direct effect on legislation but even Adam Smith’s book, The Wealth of Nations, took time to influence policy.
3. Understanding “Austrian” Economics (commissioned by the Silver and Gold Report, 1981)
Three prominent Austrian economists are discussed: Carl Menger (1840-1921), Friedrich von Wieser (1851-1926), and Eugen von Bohm-Bawerk (1851-1914).
Menger (and Stanley Jevons and Leon Walras) came up with marginal utility (Wieser coined the term), between 1871-1874.
Goods have no inherent value; they only have value because they help to satisfy some human want or need.
There are goods of the first order (consumption), the goods of the second order (machinery, labor, etc.) used to produce first order goods.
What a good has cost cannot determine its value. What it will cost determines how much gets made. Whether you mined a diamond or found one on street is irrelevant to its value.
Money is not a measure of value—it’s a measure of transactions at an agreed upon price.
After these three economists passed on, economics went to the mathematics of general equilibrium, which Austrians don’t believe. Balance is for tires and ballerinas, after all. Equilibrium doesn’t exist in capitalism because it is in constant dynamic disequilibrium. Austrians speak of a market process, not market equilibrium.
4. The Problem of Poverty (The Freeman, June 1971)
The history of poverty is the history of mankind. The Encyclopedia Britannica identifies 31 major famines from ancient times to 1960.
Thomas Robert Malthus (1798), author of Essay on the Principles of Population as it affects the Future Improvement of Society, was a pessimist who influenced Ricardo and even Darwin.
Hazlitt writes that this essay led British journalist Thomas Carlyle to coin economics as “The Dismal Science.” But this is not true (Hazlitt is wrong).
Carlyle was a racist who believed in slavery. The economists of his day, all of them from Adam Smith to David Ricardo, were against slavery. Hence, Carlyle’s epithet for economics.
Malthus posited his theories just as the Industrial Revolution was about to falsify them.
The population of England and Wales in 1700 was 5.5 million; in 1750, 6.5 million; in 1801 9 million (1st census); and by 1831 it was 14 million [due mostly to a continuous fall in the death rate, not an increase in birth rates].
Not one Famine since end of 18th century fell in a single country in the industrialized Western world.
5. False Remedies for Poverty (The Freeman, Feb 1971)
Hazlitt identifies the chief evil from the left’s perspective is inequality, not poverty. There are several remedies proposed.
Land reform, guaranteed income, which destroys incentives at both ends of economic scale.
Unions and strikes, overtime rules that obliged employers to hire additional workers (more dues-paying members). Minimum wage laws, but we can’t mandate productivity. As Thomas Sowell points out: The real minimum wage is always zero. Price and Wage Controls. And outright socialism.
6. On Appeasing Envy (The Freeman, March 1972)
“Your levelers wish to level down as far as themselves; but they cannot bear leveling up to themselves.” Samuel Johnson
Justice Holmes: “I have no respect for the passion for equality, which seems to me merely idealizing envy.”
Helmut Schoeck wrote Envy, 1966.
Societies engage in redistribution to prevent a supposed actual revolution. But this is the opposite of the truth. Appeasing envy provokes more of it. We should never try to buy off a revolution.
7. Planning vs. The Free Market (The Freeman, December 1962, originally a lecture at the 1962 Mont Pelerin Society)
The question is not having a plan or no plan? The question is: whose plan?
Planning always involves compulsion.
8. Can We Keep Free Enterprise?
No defense of capitalism will ever be generally accepted. Hazlitt identified give main impulses inherent in human nature to explain why this is true:
- Genuine compassion
- Impatience for a cure
- Envy (graduated income tax)
- Propensity to think only of the intended or immediate results, overlook secondary and long-term results
- Propensity to compare any actual state of affairs, and its inevitable defects, with some hypothetical ideal
“Each of us is as free to practice what he preaches as to preach what we practices.”
Yet, as Charles Murray writes in his book, Coming Apart, the upper class is not preaching what it practices.
9. The Lesson Restated (Economics in One Lesson, 1952)
The Forgotten Man of William Graham Sumner, essay in 1883:
Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for X…What I want to do is to look up C…I call him the Forgotten man…He is the man who never is thought of.
Amity Shales book The Forgotten Man is an excellent history on The Great Depression.
The forces of self interest exceed forces of altruism. This is because our sphere of altruism is smaller.
We interact with many more people when we purchase goods and services in the market than we do in personal and social institutions. We couldn’t rely on altruism alone for food, automobiles, and the many other items we purchase in the free market.
Changes in tastes and preferences cause harm too, just like technology. If we increase sobriety, we reduce bartenders. If we increase male chastity, we decrease the world’s oldest profession.
Other Resources Mentioned
- “12 Venn Diagrams that Show the Intellectual Inconsistency of the Left,” by Mark J. Perry.
- To manage your Kindle highlights, check out: www.clippings.io
- Rules for Living, by Henry Hazlitt, making the utilitarian case for ethics.
“The Myth of Technological Unemployment,” Deirdre N. McCloskey, July 11, 2017, Reason
Lot’s of economists think we’ll lose jobs due to technology:
- Robert Gordon, The Rise and Fall of American Growth
- Tyler Cowan, Average Is Over
- John Maynard Keynes and David Ricardo believed it, too
They were all wrong.
Walter Reuther, long-ago president of the United Auto Workers, touring a factory with newly installed robots with Ford:
- How are you going to get them to pay union dues, Walter?
- How are you going to get them to buy your cars, Henry?
This is a fallacious argument according to McCloskey because employees of car companies are a trivial share of the car buying public.
The point of an economy is production for consumption, not protection of jobs.
McCloskey writes, “If the nightmare of technological unemployment were true, it would already have happened.”
Each month in the USA, out of 160 million jobs, roughly 1.7 million vanish! That’s over 1%, each month.
In just a few years, at such rate, one-third of the labor force would be standing on street corners. We need flexibility in labor force mobility, not government programs, according to McCloskey.
“Hot Stuff,” The Economist, August 12, 2017
Flying at Mach 5 burns hot—3,000° C, which could take you from Britain to Australia in about two hours. This is above the melting point of most materials.
Two researchers, one at the University of Manchester, England, and one at the Central South University in Changsha, China, have created a novel substance: a ceramic, that contains strong bonds between their atoms: a carbon-carbon composite.
Infused in the composite with a liquid mixture of zirconium, titanium, carbon and boron.
The world’s Air Forces would love it, and so would commercial passengers.
1843, Aug & Sept, 2017, “Turn On, Tune In, Drop By the Office”
Remember Timothy Leary’s “Turn on, tune in and drop out”?
Well, Nathan, age 27, a venture capitalist in San Francisco, ingests 15 micrograms of LSD, every three days. A normal dose to get high is 100 micrograms.
He does it because it makes him feel more productive and creative, calling it “my secret vitamin.”
Americans age 30-34 are the most likely group to have tried LSD, even though drug use has dropped across board; LSD risen a little.
Researchers have traced the development of the personal computer industry through the 1960s counter culture.
One research center in Menlo Park (Xerox PARC?), observed 350+ scientists, engineers and architects, in experiments with psychedelics—how it affected their work.
Tim Ferris, an angel investor, says “billionaires I know, almost without exception, use hallucinogens on a regular basis.”
Steve Jobs: “Taking LSD was a profound experience, one of the most important things in my life.” He use to joke that Microsoft would be a more original company if Bill Gates had dropped acid.
Today, groups of friends rent a place in the countryside, take LSD or Mushrooms and go for a hike: a “hike-a-delic.”
Popular among technologically aware individuals because they are interested in science, nutrition, and their own brain chemistry.
It can also reduce social awkwardness!
Data on the number of people doing this is non-existent, but a group on Reddit has 16,000 members, up from 2,000 a year ago (most use 10 micrograms every 3 days).
LSD is not thought to be addictive.
Since there is a lack of medical research on microdosing, it’s touted as a panacea for depression, menstrual pain, migraines, impotence, etc.
Yet compared to America’s opioid epidemic, and 3.5 million children prescribed drugs for attention disorders, LSD doesn’t seem as threatening as it once was.
“The New Old,” The Economist, Special Report, July 8, 2017
During the 1940s, society coined the label “teenagers,” which was recognized to be a big market for goods and services.
Today, we need a new name for those 65 and older, but who are not yet elderly (by 2100, the 65+ group compared to working age folks ratio will triple).
In 1950, 65+ were 5% of the world’s population; in 2015 it’s 8%; and by 2050 it’s projected to be 16%. The share in OECD countries, is 16% in 2015 to 25% by 2050.
Today, in the rich world, 90% of people will celebrate their 65th birthday!
The UN estimates between 2010-2050, the 85+ group will grow two times as fast as the 65+ group, and sixteen times everyone else labeling it a silver time bomb, or grey tsunami.
Doomsayers predict economic stagnation, asset-market meltdown, dearth of innovation, public spending increases, etc.
The Economist Report argues the opposite: this can be a boon if societies turn them into more active participants.
The financial industry needs to update its life-cycle models.
The so-called gig (or sharing) economy seems to help the 65+ group participate in the economy:
- ¼ of Uber drivers are 50+
- ¼ of those who work in the sharing economy are over 55 (according to PWC)
- Wahve (Work at Home Vintage Experts)
- Airbnb, the 60+ are the fastest growing group and have the highest ratings
- The 65+ group does a lot of unpaid work, volunteering 3.3 billion hours in 2016
- They may be slower at jobs, but they make fewer mistakes
According to the Kauffman Foundation, the 55-65 age group are 65% more likely to startup new companies than are 20-34 olds.
The 50+ age group have 70% of the disposable income in America. Global spending by the 60+ is projected to be $15 trillion by 2020, two times the 2010 amount, much of it on leisure.
So-called “Silver splits” are soaring: the 60+ are divorcing at twice the rate from 1990, and in Briton it’s three times the rate. 25% of Match.com users are between 53-72, growing faster than any other group.
Long-term care: 47 million people worldwide suffer from dementia, which could grow to 132 million by 2050 without a medical breakthrough.
Proposed new labels fro the 65+ group:
- Nyppies (Not Yet Past It)
- Owls (Older, Working Less, Still earning)
- Hopskis (Healthy Old People Spending Kids’ Inheritance)
- Indy: I’m Not Dead Yet?
Life stages are social constructs, triggering deep changes in attitudes.
Rock stars used to rely on royalties but due to the digital revolution they are back on tour.
Lloyd’s has “Non-appearance products.” For example, Disney had it on Carrie Fisher, who died at 60 before completing Star Wars, resulting in a $50 million claim.
Keith Richards of the Rolling Stones, 73, has his hands insured for $1.6 milliion.
Underwriters are ready to accept their clients’ lifestyle and work hazards, arguing that where there’s risk, there is reward—if the price is right.”
They do have exclusions for pre-existing conditions, alcohol abuse, failing livers, etc.
Ron asked Ed to take a look at this browser based on blockchain technology. It is okay, but not ready for primetime. Plug ins do not work.
Ed ran through them with Ron and predicted eight of nine correctly.
Fascinating conversation about how language is never static. Give it a listen and see if you change your mind about some of your pet peeves.
Understanding this word takes not a fluency in the language but rather a fluency in Mexican culture.
The VeraSage Symposium and Art of Value Conference are coming up in November. For more information visit - http://thesoulofenterprise.com/verasage