January 14, 2012

The future of success - Robert B. Reich

The future of success - Robert B. Reich

[A scholarly book from a Rhodes Scholar].

In the preindustrial era, craftsman made almost everything to order but this was expensive. Then came mass-production as the scale of production increases, the cost of each item produced plummeted. But the logic of mass production dictated sameness. In order to ensure a profit, mass producers had to invest up front and then predict how many identical items could be sold and at what price. All this effort to quarantine a large and stable market for what was mass-produced, consumers got many more things, more cheaply. Mass production begot mass marketing which whetted appetites for more mass consumption which in turn enlarged the system of mass production. But choices were limited in order to reap the full efficiencies of large scale and products did not change much from one year to the next.

The emerging system is starkly different. Increasingly digital technologies now enable sellers to tailor products to particular buyers while still keeping production costs down. There is no need to guarantee a large stable market for every item. Economies of production scale still matter, but less than they did. Nimble businesses now jump into new markets, because they don’t need large production scale to succeed. The age of the terrific deal comes with a catch; here lies the dilemma of our time.

As societies become richer and as technology makes all sorts of things more affordable and accessible, an ever-larger portion of personal income will be spent on insatiable wants that extended infinitely beyond bare needs. It is in the domain that you can expect the economy to grow and future jobs to multiply.

Types of Job fields that will increase
Health related jobs
Attractiveness to others
intellectual stimulation
Contact (Social networking)
Contact Family well-being
Financial security

Jospeh Alois Schumpeter was a professor economics (during WWI) and in his ‘Theory of Economic development, he conceived of a world in which entrepreneur played crucial role. Unless entrepreneur feel threatened by new competition, they will have no incentive to continue to innovate. Economies, therefore cannot progress without the gales of creative destruction.

Consider that you are selling your product well in the market which will soon have comparative competition and in order to keep up the market share, what are the usual strategy.
1. Cut costs, but it has its limits
2. Improve product that require R/D
3. Replace with a new product which is the costliest and riskiest option.
If you do well at this game - keeping price down, adding value and keep inventing - you can keep up the market share. You need to do non-stop efforts the economy is brimming with innovation.

In this new economy, customers have vast choice that keep widening and it is easier for buyers to switch and a get a better deal.

Need for Geeks and Shrinks

At the core of innovation lay two distinct personalities, representing different inclinations, and talents. The first is that of the artist’s or inventor – a Geek. In short, a person who is capable of seeing new possibilities in a particular medium and who takes delight in exploring and developing them.

(When the geek bestows his highest accolade on some software - that is cool. It is cool because it is original, authentic, beautiful; it has crossed a conventional boundary and solved problem or it can perform an operation that no one had previously thought of etc. When more people wanted this cool solution, it become a hot thing as the demand is more than supply can provide)

The second personality is a person who can identify people’s possible wants and latent desires - desires that even those people may not have been fully aware of possessing, desires for products that even do not yet exist.

The geek draws on his endless fascination with a medium and the shrink by contrast draws on her fascination with people - their aspirations, and fears, their yearning and needs, their unexamined assumptions. The shrink is empathetic where the geek is analytic. Geeks understand ‘it’ and shrink understand ‘them’.

The greatest threat to freedom of speech in many modern societies comes not from overt controls by oppressive regimes but from a more fiercely competitive market in which buyers can so easily switch to whatever they find more satisfying. Such a marketplace dictates with increasing ferocity what will be written, broadcast, and researched. The public, deluged with what delights it and protected from what may cause it discomfort, is thus armored against what it may need to know.

The demand for creative workers - both geeks and shrinks- will continue to grow because they are the masters of innovation and innovation lies at the heart of the new economy. As these competition increases, it is fueling even greater demand for the services of such creative workers. These jobs therefore are likely to pay increasingly well. They also are likely to be intellectually or artistically engaging, emotionally absorbing, personally satisfying and sometimes boundlessly frustrating.

Since the early nineties, the income of people at or near the top have grown twice as fast as of people in the middle. These changes have large consequences. The rich and the middle class are now living in parallel universe and the poors are almost invisible to both.

(Milton Garland who at the age of 102 was America’s oldest known wage earner who had worked for the same firm - Frick Company of Waynesboro, PA- for 78 years since joi9ning it in 1920)

It is very often there are only two tracks - fast and slow. for professionals managers and geeks/shrinks of all kinds, keeping up to speed is now a necessity. Markets and technologies are changing so rapidly that you need to be totally involved in order to keep up. If you are on a slow track, you fall further and further behind. You may have a difficult time ever getting back on the fast track. In short, the new economy that compels people to work harder.

Business looking to hire are placing greater reliance on referrals from people they trust for the same reason that trustworthy brand portals are becoming more important to buyers who are drowning in information and need guidance as to what is good. The vast powerful network of Ivy League college is a supplement to those referrals.

Money does corrupt politics and the current system stinks, but to think about it in terms of purchasing specific policies or pieces of legislation misses the real corruption.

Here is how it works: A wealthy individual receives an invitation to be with powerful politician and that connection will be then extended to wealthy business friends and in the long turn, politicians spend more time with wealthy people than common people. The access that the politician provides the wealthy and the access that the politician thereby gains to the ever-expanding network of money reinforce each other. Increasingly politician hears the same kinds of suggestions, the same voicing of concerns and priorities.

In the old economy, you got ahead by being well liked. Self-help books solemnly advise on how to win friends and influence people and the successful ‘organization man’ was accepted by all. Arthur Miller’s ‘Willy Loman advises his sons how to success: “Be liked and you will never want”, he says. “The wonder of this country is that a man can end with diamonds on the basis of being liked:” Davis Riseman - the eminent sociologist of midcentury American- said” Thus all power... is in the hands of the actual or imaginary approving group”.

The new Divide: If you or your children don’t have the right innate talents, education and connections to make it into the creative sector of the economy - devising and selling designs, concepts, plans, strategies, deals and insights - chances are that you will end up selling personal attention, because that’s the other arena where job growth is occurring. But those jobs unproductive and are not so rewarding due to many reasons. It is given one-on-one service where as a software engineer’s creation can be sold to many people and hence more rewarding. Secondly, these jobs are not valued in the society.

Community as commodity: Local services in private residential communities are supported by membership dues. Private residential communities exclude large families that need a lot of schools and social services and whose children may be noisy or engage in pretty crime, by charging hefty prices for homes and high membership fees and by strictly limiting the number of bedrooms in each unit. Citizens movement against state and local taxes have been spearheaded by private homeowner associations whose members see no reason why they should pay to support families outside the gates when members are getting everything they need inside through their dues.

In the emerging economy, success will depend most on talent, ingenuity, the ability to sell oneself and connections. The quality of a child’s early education and the character of the child’s community are centrally important in these respects.

The old job of leadership was to make decision and the new job of leadership is to attract (and keep) money and talent. This is because money and talent are more mobile than ever. Private-sector executives no longer make big strategic decisions. Their time is spent reassuring stock analyst, VC and institutional investors about the enterprise’s rosy future and persuading valued individuals to come or to stay by enticing them with stock options and interesting projects.

Same in government sectors: Governors and mayors must also persuade business to come and to stay by providing tax reduction and other subsidizes. Worse, the tax breaks and subsidies offere3d to business come at the expense of public services needed by many of these areas ‘less fortunate people, like good schools. Owner of Yankees is demanding that NYC build the team new multimillion-dollar stadium (otherwise, they will leave) and the mayor obliged to their demand at the expense of poor schools and communities where they starved of funds. When the Yankee team leave, they leave with all other revenues that it generate to the city and the poor inner-city kids will never go as they have no way to go.

How changes in technology and the economy are alerting how work is organized and rewarded which in turn influence how you lead your life.

1. Your earnings are less predictable than they were before. You work harder when the work is available against the risk that your income may drop in the future.

2 If your skills are in great demand, you are likely to be paid more than were people near the top of the income ladder in the old system. Some of the work is satisfying, perhaps even ennobling; much of it is difficult or frustrating.

3. If your job is not rewarding you have to work harder to prop up your family’s income and your spouse may be working long hours as well. If your job is rewarding category, you may want to work longer and harder too - you’d be giving up far more than you’d have given up making the same choice years ago.

4. Even if you are doing well, you’ve got to continue to hustle. The market and technology is changing very fast and you need to keep up the fast changing landscape

5. You are no longer in a big organization that will steadily promote you up the ranks because you do your job completely and well. You have got to attract and keep customers and increase your market value.

6. You will have less time to spend with your loved ones as you will be busy to keep up your fast job life.

The sorting mechanism is becoming even more efficient. If you work hard, sell yourself effectively and do well, you will be able to pool your winning with others who have done well.

Old job type is not coming back rather debate the large trade-offs, we are engaged in at least three separate conversations.

1. The first is breathlessly enthusiastic one about the wonders of the new economy. That economy’s terrific deals are real and will vastly improve those aspects of our lives that can be enhanced by what we buy.

2. The second conversion is a fearful one, about the dangers and depredations of unfretted capitalism, the power or greed of global corporations and international finance and sometimes the encroachments of immigrants, foreigners and ethnic minorities

3. The third conversation is private one, about the difficulties of achieving a balanced life in this new era. As we work harder and sell ourselves more intensely as we adopt the market -directed (have the courage to be rich) ethos of our age, many of us are anxious about what’s becoming of our families our friendships, our broader communities and even more innermost selves.

These three separate conversations are different responses to the same set of phenomena. Some of us might even be engaged in all three conversations simultaneously without seeing the connections between them. We may delight in the terrific deals we can obtain while we also fret about what seem like encroachments by global corporations’ trade and immigrants, and at the same time worry about personal demands our work is exacting from the rest of our lives. But if we are to deal effectively with the larger trade-off before us, we must understand the connections between these three conversations.

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