Taiichi Ohno, the great Japanese innovator, once pointed out that while fools are wrong 70 percent of the time, and normal people wrong half the time, even the wise are wrong 30 percent of the time. It is therefore useful from time to time to review that things that we know—for sure—that just ain’t so.1. More drilling will lower gas prices
Republicans know that removing restrictions on drilling for oil and accelerating the Keystone pipeline will ease pressure on oil prices. The reality is that oil production in the US over recent years is up and consumption is down. The price of oil is established internationally, and the contribution of the US economy over recent years has been to lower oil prices which are established internationally. Moreover given the lag time between drilling and production, even a massive expansion of drilling in the US would take many years for production to start, and even then would have insignificant effects on the global oil price.
2. The US economy is in a recovery
Democrats know that an economic recovery is under way and we are slowly getting back to our once-vibrant economy; the recovery is slow because the economic stimulus wasn’t big enough. The reality is that the economy is in a phase change from an industrial economy to something different. One possibility as to what the “something different” is is a Service Economy, in which the US economy mainly services things made in other countries, with sharply lower personal incomes for all but the very rich. Another possibility isthe emergence of the Creative Economy, in which the talents of the workforce are unleashed in a torrent of innovation, with steadily rising prosperity for most. The option of recovering” and returning to a prosperous industrial economy is simply not an option.
3. Manufacturing has collapsed in the US
Most people know that manufacturing collapsed in the US, as jobs were shipped to China, with devastating effects on the once-productive Rust Belt. Thus in 1969, manufacturing accounted for 26% of national employment but accounts for only about 9% today. In reality, manufacturing output in the US is as high as it have ever been. One part of what happened to manufacturing was higher productivity. The decline in U.S. manufacturing employment is explained in part by rapid growth in manufacturing productivity over the past 50 years. Just as agriculture which once employed a third of the workforce now feeds the nation and more with only 2 percent of the workforce, so manufacturing simply needs much fewer people to produce the same output. Like agriculture, manufacturing didn’t’ die: it changed. At the same time, foreign outsourcing has also caused serious erosion of domestic capabilities to turn inventions into high-quality, cost-competitive products, undermining America’s ability to retain a lead in many sectors. The future of the economy depends in part on whether this erosion can be stemmed and even in some cases reversed, to lead to the Creative Economy.
4. The private sector is becoming steadily more productive
Over the last four and half decades, a massive study by Deloitte shows that the rate of return on assets and the rate of return on invested capital in 20,000 US firms have declined by around three-quarters. Why? Modest gains in productivity per unit of output have been more than consumed by losses on the one side to customers, owing the shift in balance of power from producers to customers and on the other side, by larger payments to “talent”, particularly top executives and financial intermediaries.
5. Most new jobs will come from big firms
Most people know that because big firms employ more people, we must look to big firms to create the jobs that will grow the economy. The reality is otherwise. A study by the Kauffman Foundation showed that in the quarter century between 1980 and 2005, around 40 million net new jobs were created. Almost of these jobs were created in firms less than five years old, i.e. start-ups. Firms older than five years created almost zero net new jobs. In the emerging Creative Economy, young firms are likely to be even more important.
6. Executives from big business know how to fix the economy
Executives from big business like to present themselves as “masters of the marketplace” with particular insights on how to manage the economy. However the economy that they know how to manage is for the most part the industrial economy of yesteryear, not the coming Creative Economy. What executives from big business understand is how to grease the skids for big business, which is of declining relevance for the future economy. Until executives become aware of the truths signaled in paragraphs 4 and 5 above, they are ill-equipped to be our guides for the economy of the future.
7. We can fix education by insisting on better teachers
We know that the quality of education is related to the quality of teaching that students receive. However stricter evaluation of teachers, by gearing the evaluation of teachers to test scores—however well intended—actually results in more “teaching to the test” and a lowering of the quality of teaching, and somakes the education system worse.
8. Containing health care costs means paying less for health care
Americans pay more than any other country for health care and the outcomes in terms of indices such as infant mortality or life expectancy are worse than in other countries. While prices are higher in the US for equivalent care than in other countries, efforts to control costs for acute care by attacking prices will not significantly lower overall costs. What is needed is better preventive care so that less acute care is needed.
9. Having more money will make us happier
Being strapped for cash can make us miserable, but does having more money make us happy? Studies show that the unhappiest people are in the workforce are those who have advanced up the management ladder and are well paid. The happiest people include those who are among the worst paid but who have greater freedom to exercise their talents.
Shedding the beliefs which we know to be true but which are in fact false is the most strenuous intellectual challenge that we face as human beings. Humility, an ability to listen and a willingness to expose ourselves to thoughtful viewpoints very different from our own are keys to success.
________________________
Follow Steve Denning on Twitter @stevedenning
Want to get inside radical management and delight your customers through continuous innovation?Innovative three-day workshops in Washington DC on Apr 18-20 and May 21-23, 2012
Also: join the Washington DC Leadership Breakfast–an informal forum to discuss challenges, trends and solutions
No comments:
Post a Comment