JustinIdea - Justin Ricaurte's Personal Blog

The Next Four Years

It's great to see a barrier fall in America by Barack Obama being elected the first black President in our nation's history.  Although, many people have what will turn-out to be unrealistically high expectations of what will happen over the next four years, no matter how good their reasons are - the Law of Unintended Consequences still lives.  While Obama is great in some areas he falters in others, and just because an issue wasn't across every news screen during the election season doesn't mean that it isn't important.  I wish him the best as President of the United States and making the best decisions possible considering the circumstances our country is in.  The issues:

Very Excited About

• Obama's energy policy.  I'm hoping he picks Al Gore as Energy Secretary and has T. Boone Pickens head a panel of industry advisors.  Energy determines our foreign policy, so making a smart pick here will be his most important decision.
• A cap-and-trade carbon market where all carbon credits must be bought by private industry.  Allocating them among participants for free would create loads of corruption.  Also, if Democrats want to make sure our company's aren't at a competitive disadvantage to those in nation's with more lax environmental standards, they can make any company that produces or sells products in the United States buy carbon credits.
• The closing of Guantanamo Bay prison and hopefully all the other secret prisons the U.S. has.  We should not deny any person on earth their right against cruel and unusual punishment and to a fair and speedy trial by jury of the peers, not to mention access to a lawyer.
• The ending of the war in Iraq.  We shouldn't have been there in the first place.
• Hopefully the end of most rhetoric from the White House being about terrorism.
• America's world image being repaired as we stop Bush's use of "Cowboy Diplomacy"
• Stem Cell research using federal funds being legalized.  It's about time we started taking the lead further in this very important field of research.
• Federal investment in basic research increasing, so that the pace of innovation in our country picks up again.
• Intelligent Design not being given the same standing as Evolution in schools, because it is not a sound scientific theory.

Excited About

• The ability for Obama to make the R&D tax credit permanent.
• Greater potential investment in education.

Lukewarm About

• Obama's ability to hold government programs accountable.  With rock-solid majorities in the House and Senate, he won't be under as much pressure to find what should be given more money and what should be cut.  This was the one good thing Bush started, while he was in office: The President's Management Agenda.
• Ability of the Supreme Court to contain the Democrats with their majorities to overextending the government's role in the economy as long as Obama doesn't turn into a tyrant like FDR, when he tried to pack the Supreme Court.  Currently the Supreme Court is leaning slightly conservative with a 4-1-4 break-down, so any attempt at overstepping their bounds should hopefully be struck down.
• The Democrats being able to re-privatize the banking system in short order.  The government has no place running the banking system and further destroying the balance between risk-and-reward in the financial marketplace.

Concerned About

• Corporate taxes.  If Obama closes the tax loop holes and does not lower the corporate income tax rate, businesses will be forced to lay-off workers or raise prices in order to stay profitable, especially given the current circumstances.
• Health care.  Moving towards a single payer system will not make our health care better.  If you think government-run health care will work well, how well does government-run infrastructure work?  Oh yeah, that's why our government has underfunded our infrastructure by $2 trillion, which is why our infrastructure is degrading to the point of being a developing nation.  The only way to cut costs dramatically is to cut access.  If you want to check out the future of health care, check out Qliance 
• Personal income taxes.  Raising taxes never helps the country as government is less-efficient than the private sector at using the money it has, which is also why government workers are paid less.  Not only that, but Obama wants to raise taxes on those citizens that make more than $250,000.  At a time when the United States desperately needs investment in the country in order to create jobs and get out of the financial crisis, Obama wants to tax the group of people that invest most of their money back into the economy.  If you want to pay more taxes, you should voluntarily mail the extra amount of tax burden you would like to take to the Department of Treasury as a gift.  Here's the mailing address, so it is easier for you to increase your own tax burden. 

  Gifts to the United States

  U.S. Department of the Treasury  

  Credit Accounting Branch

  3700 East-West Highway, Room 622D

  Hyattsville, MD 20782

• Fannie Mae and Freddie Mac.  The Democrats will want to keep these institutions alive, but no company in America should be given an unfair, government-endowed advantage in the marketplace.  They helped to create the problem we're in today by creating excess liquidity in the financial markets due to their implicit government-guarantee, and now we're paying for it.
• Excessive Regulation.  Regulation in its current form is unnecessary.  We have already bestowed police powers on the Federal government, so it can prosecute companies and their officers for fraud and other crimes.  The Democrats will be tempted to over- regulate the markets, especially the financial ones, but hopefully they can't add too much regulation, or innovation will slow.
• The Government bailing out the auto industry.  The Democrats will be tempted to help the voters in Detroit that helped put them in power, but government intervention in industry only delays the inevitable.  If the companies are not able to quickly adapt to the market, they should be allowed to die, so that they stop draining resources from the economy.  If they want to invest in job re-training for these voters, then they should invest in job re-training instead of bailouts.

Very Concerned About

• America's future trade policy.  It doesn't matter if the economists voted Democrat or Republic, 95% support free trade.  Why?  Because, free trade brings prosperity to all parties involved and has created more jobs than it has destroyed.  Yes, we should hold other countries to our environmental standards, but the best way to bring about this would be to make companies that produce or sell products in the United States to join our future cap-and-trade system and by permits.
• The deficit.  Government spending needs to be kept in check, and it should stop mortgaging the future for the present.  No amount of stimulus will help revive the economy, because consumers and the federal government are over-leveraged and need to cut back on spending.  Democrats being able to control spending?  I don't think this has ever happened, and the Republicans haven't done much better.  They need to get Keynes's influence out of there.
• Monetary policy.  The government has put $5 trillion into the monetary system in the last two months, which is completely unsustainable and will most likely over time as it has time to sit create massive amounts of inflation.  Again, they need to get Keynes's influence out of there.
• Entitlement Programs.  The Democrats will want to raise taxes to cover these, but no matter what they try, they are sitting on a demographic time-bomb.  Entitlements will eat-up our economy if the system isn't reformed.

Stanford Prison Experiment and Swarm Intelligence

Guy Kawaski recently conducted an interview with Dr. Philip Zimbardo, the person who created the Stanford Prison Experiment.  I've been fascinated with this experiment, because of how the situational factors of it could turn good college students into sadistic guardsmen.  Dr. Zimbardo recounts it in the interview and also in his recently published book, The Lucifer Effect: Understanding How Good People Turn Evil.

Although the interview talks a lot about Abu Ghraib, I thought it would be interesting to apply the experiment to corporate cultures.  In the experiment, the night watchmen were given nearly complete authority over what they did, with little oversight and a management team that does not care about the lapses.  Each little lapse will compound over time, until the entire system is enveloped in unethical behavior.  In corporate America, how do you get rid of ethical lapses when people are given much more autonomy?  Some argue you need rigorous internal controls and a great degree of oversight over the employees.  By creating the controls, you can get rid of the behavior quickly.

There is just one problem with having lots of controls...they inhibit system performance.  Swarm Intelligence deals with this area, describing systems of behavior where there a couple of general rules followed by everyone involved.  Researchers found that when you run a simulation with dumb robots and they have a plethora of rules, the dumb robots will collectively act in a simple, dumb manner.  Although if you keep the number of rules to no more than four or five simple ones, the dumb robots as a collective will exhibit complex, intelligent behavior.  Given human beings are an intelligent complex species by nature, giving us a lot of rules to live by will probably make us take simple, dumb actions for fear of breaking one of the rules.

There was on example in the pdf linked to, but what other ways could you implement this to make sure that everyone acted in an ethical and efficient manner?

HBR - Globalization and Summit Syndrome

I've been trying to catch up on the stack of magazines I've accumulated recently.  Here are summaries for two of the articles I enjoyed from March's Harvard Business Review. 

The first was on "Managing Difference: The Central Challenge of Global Strategy".  Ghemawat proposed the AAA Triangle framework to tackle global challenges: adaptation, aggregation, and arbitrage.  With adaptation, companies seek to boost revenues and market share by maximizing local relevance.  With aggregation, they focus on building economies of scale by creating regional/global operations.  And with arbitrage, they exploit differences in national or regional markets by locating different parts of their supply chain in different places.  Although all companies use all three A's to some extent, the A's can be used to create further global differentiation and to exploit competitor weaknesses. 

The second was on the crises gifted performers have at each peak of their success.  This article resonated with me, because I thrive on encountering new challenges and get bored when I no longer seemed to be challenged as much.  Summit syndrome, when gifted performers become dissatisfied at the peak of their success, has three phases.  In the approach phase, the person puts in a lot more effort with marginal gains in improvement, trying to recreate the adrenaline rush of the climb.  Plateauing then occurs when virtually all of the challenges have been conquered.  These individuals continue to produce stellar results but become much more dissatisfied with the work they're doing.  The final phase is descent.  In this phase, performance will slip noticeably and sometimes wrecks havoc on relationships and personal morale. 

To be able to keep this syndrome at bay, it needs to be recognized early on, which can be difficult to do for both an on-looker and the individual.  When it is recognized though, these four steps can be taken to dispel the confusion and set the stage for the next stage of productive growth:

1. Understand your "winning formula" and the vital part it plays in feeling stale or losing your edge.
2. Reconnect with your core purpose in life.
3. Recast your current, or future, job to better align your internal aspirations with external requirements.
4. Create a developmental path by honing a handful of core leadership competencies.

I'm going to keep this in mind the next time I start to feel bored over an extended period of time. :)

“I work when I want”

That’s the essence of the experiment Best Buy has been running for the last 12 months.  First at its corporate headquarters in Minneapolis, Best Buy is starting to expand its program, nick-named ROWE (Results-Oriented Work Environment), to let employees choose when they work, so long as all of their work gets done.  More than 60% of the company’s employees at its corporate headquarters are part of the program, and it has experimented with the concept in five of its stores to see if it works in the retail setting.  Could this help to drive down the employee turnover of more than 100% at its stores?  Best Buy states it costs $102,000 in recruiting, training, and loss of operational time for each employee that leaves, or 250% of their salary. 

A couple of important issues arise with this type of system.  What if there are no employees at the store during a busy time of day?  How do you get employees there?  Cell phone alerts could work really well, but seeing as Best Buy’s tend to be located in suburban communities, it could take their employees up to 30 minutes to get to work.

As Don Loper pointed out, ROWE will only work if the people at Best Buy are rewarded for getting their work done fast by either free time or a pay increase.  If an employee has the option of working 8 hours each day at a fast pace or an easy pace, they will naturally choose the easier pace, unless they get paid more to work faster.

I know many tech companies don’t care when their employees work, but it seems that in an industry such as retail, you are going to have a well-made alert system with incentives tied to import metrics, such as profit or cash flow, to make ROWE work the best.  Scott Berkun made this point clear when he analyzed the difference between work and progress.

It would be awesome if Best Buy could make ROWE work in their retail stores as it could make working in the stores a much better experience, by giving power to its employees over their work schedule, and also driving down the high cost of replacing its employees.  Given the correct structure, this concept will take off and over-turn the retail industry’s current scheduling model.