Wednesday, May 28, 2014

Jeremy Rifkin on tomorrow's jobs

My weekly book post on s+b:

The End of Work, Revisited

Jeremy Rifkin’s controversial prognostications on topics such as beef, biotechnology, and business have been sparking debate for at least 40 years. Who knows how far back they go? I picture a family dinner at the Rifkin home circa 1955: Jeremy’s dad, Milton (a manufacturer of plastic bags) is sitting at the head of table, his forkful of pot roast frozen midair, as his 10-year-old son tells him that the family business is going to destroy capitalism.

Rifkin the Younger’s new book, The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism (Palgrave MacMillan, 2014), weaves together many of the threads he has pulled over the years. It is the futurist’s most comprehensive inquiry into business and work yet, and it is built on a thesis that we’ve heard before: Capitalism is tottering and will not last out this century, a victim of “the dramatic success of the very operating assumptions that govern it.” Rifkin says that capitalism’s downfall is inevitable because of its ceaseless quest for productivity and the ever-growing sophistication and power of digital technology. The collision of these two forces is driving down the marginal cost of producing additional units of anything and everything to near zero, a process that will squeeze profits until they scream. (You can hear the argument in more detail here.)

This driving down of marginal cost includes the cost of human labor. Reprising the theme of his book, The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era (Tarcher/Putnam, 1995), Rifkin explains that digitization is replacing jobs. This creates a situation that economists once assumed could not happen: Productivity will rise, but employment will fall. 

Twenty years ago, Rifkin’s argument was tinged with foreboding: How, after all, would people survive without jobs? But in The Zero Marginal Cost Society, he is far more optimistic. When I asked him why, he said, “There are a few reasons that I am more optimistic today than I was in 1995. First, the nonprofit sector—the social commons—has been growing even faster than I had envisioned. Between 2000 and 2010, after adjusting for inflation, nonprofit revenues in the U.S. grew by a striking 41 percent, more than double the growth in GDP, which increased by only 16.4 percent. 

“The nonprofit community is also the fastest-growing employment sector, outstripping both the government and private sectors in many countries. There are currently 56 million workers employed in the nonprofit sector in 42 countries, and in many of the most advanced industrial countries—including the United States, the United Kingdom, and Canada—employment in this sector now exceeds 10 percent of the workforce, and its trajectory has been rising year over year since 1995. During the Great Recession (2007–09), the nonprofit sector gained jobs at an average rate of 1.9 percent annually, while the private sector lost jobs at a rate of 3.7 percent.

“Second, the creation of social enterprises, some 35 percent of them nonprofits, has mushroomed in recent years thanks to a new generation of entrepreneurs. There are several hundred thousand social enterprises in the United States that employ over 10 million people and that have revenues of US$500 billion per year. These enterprises represented approximately 3.5 percent of the nation’s GDP in 2012.

“Third, what makes the social commons more relevant today than at any other time in its long history is that we are now erecting a high-tech global technology platform—the Internet of Things (IoT)—whose defining characteristics could support and nurture it. The IoT facilitates collaboration and the search for synergies, making it an ideal technological framework for advancing the social economy. Its operating logic optimizes lateral peer production, universal access, and inclusion, and its purpose is to encourage a sharing culture. The IoT will bring the social commons out of the shadows, giving it a high-tech platform to become the dominant economic paradigm of the 21st century.”

Wednesday, May 21, 2014

Gregory Clark on how we get ahead

My weekly book post on s+b:

Does Capitalism Create Social Mobility?

 The storyline of capitalism—and the technological innovation that simultaneously supports and drives it forward—is almost always one of ever-greater personal freedom and opportunity. Slaves and serfs, whose families had been chained to the plows of noble-born landowners generation after generation, are transformed into wage earners who sell their services in demand-driven labor markets. Wage owners pull themselves up by their bootstraps and educate their children, who then enter the professional ranks. With the liberal application of hard work, inventiveness, or entrepreneurial chutzpah, anyone can rise through the ranks of society. The sky is the limit. Or is it?

This is the question that Gregory Clark, economics professor at the University of California, Davis, seeks to answer in his new book, The Son Also Rises: Surnames and the History of Social Mobility (Princeton University Press, 2014). Clark has a predilection for investigating interesting questions, as well as for literary puns. His last book, A Farewell to Alms: A Brief Economic History of the World (Princeton University Press, 2007), sought to explain why the Industrial Revolution sparked and caught fire in England, and not in other parts of the world. His Darwinian answer was that England was peopled by descendants of the upper classes, who over hundreds of years had survived at higher rates than people in the lower classes. As a result, English upper class values, such as hard work, rationality, and education, which were conducive to an industrialized society, also survived.

Clark figured this out by collecting and analyzing data on the English economy from 1200 to 1870. In The Son Also Rises, he uses a similarly data-driven approach. This time, he uses uncommon surnames, such as Pepys, “to track the rich and poor through many generations in various societies—England, the United States, Sweden, India, Japan, Korea, China, Taiwan, and Chile.” Specifically, he matches up the wealth of parents and that of their offspring. The more correlation, the less social mobility.

Just as Thomas Piketty’s Capital in the 21st Century (Belknap Press, 2014), calls into question the role of capitalism in wealth creation, Clark calls into question the role of capitalism in social mobility. But both conservatives and liberals will find justification for their views in the facts uncovered in The Son Also Rises. Clark, who rightfully opens his preface with the words, “This book will be controversial,” found to his surprise that intergenerational social mobility cannot be taken for granted. Industrialization did not move wealth to the wider population, at least not as freely as the prevailing free enterprise storyline would suggest. (Clark basically says that “a hundred years of research by psychologists, sociologists, and economists” into social mobility has all been incorrect.)

Instead, Clark’s research reveals that the global level of social mobility is basically unchanged over the past 800 years. In England, for instance, he finds that the level of social mobility was the same after the Industrial Revolution as it was before it. “The rich beget the rich, the poor beget the poor,” Clark concludes. “Social status is inherited as strongly as any biological trait, such as height.”

But Clark does not say that mobility doesn’t exist, or that social positions never change. Indeed, his research reveals that upward and downward mobility are both continuously at play in human society. One critical factor is the intermarriage between rich and poor, which over time creates a constant regression to the mean. “In the end, the descendants of today’s rich and poor will achieve complete equality in their expected social position,” explains Clark. “This equality may require three hundred years to come about,” but it will inevitably come, unless a family takes dramatic steps (for example, through its choice of marriage partners) to maintain its position in society.

For me, the salient point is that social mobility is being driven by “innate inherited abilities,” not by the ascendancy of capitalism or democracy or any other economic or political ideology. People born rich may go on to be successful, but wealth is not the most important thing they inherit. Far more important are nature and nurture: the genetic abilities they get from their parents (which they will only pass on if they marry people as capable as themselves), and the confidence, education, and connections their families provide.

This is a difficult message for the unlucky people born to less capable parents; they have high barriers to social mobility, as they have throughout history. Capitalism may make it easier for some individuals to realize their potential, but it does not create that potential in the first place. That’s an insight worth remembering when you hear claims to the contrary.

Tuesday, May 20, 2014

Killer quotes #7

"Formula for success: Rise early, work hard, strike oil"

                                         --J. Paul Getty

Christine Bader on Corporate Idealists

My Q&A with Christine Bader is up on s+b's website:

Christine Bader’s Tales of a Corporate Idealist
The former BP policy development manager and U.N. business and human rights advisor on the nuances of promoting social responsibility and sustainability within companies.

Big Oil seems like an odd place for a social responsibility and environmental sustainability advocate to pursue her career, but after Christine Bader heard then CEO of BP John Browne speak at Yale, that was exactly where she went. Browne’s strong message about the social responsibility of corporations—a highly unusual statement from the leader of a major energy company in 1998—intrigued the first-year MBA student. It prompted Bader to intern with BP’s chief policy advisor and then to join the company full time in 2000. Over the next eight years, she was assigned to the development of a natural gas field and plant in West Papua, the planning of a massive ethylene production complex outside Shanghai, and finally BP’s London headquarters—“an MBA working on social issues in a company of engineers,” as she puts it.

In 2006, BP enabled Bader to work part-time, on a pro bono basis, with Harvard professor John Ruggie, who had been appointed by Kofi Annan as the United Nations secretary-general’s special representative on business and human rights. Two years later, not long after Browne resigned and Tony Hayward took over as BP’s CEO, Bader left the company and joined Ruggie full time, helping create the U.N.’s Guiding Principles on Business and Human Rights.

In 2011, after the adoption of the Guiding Principles, “Team Ruggie” split up and Bader began writing The Evolution of a Corporate Idealist: When Girl Meets Oil (Bibliomotion, 2014). The book is a thoughtful memoir of her experiences and a nuanced guidebook with many lessons for aspiring corporate idealists. Bader, who is currently a part-time human rights advisor to BSR (Business for Social Responsibility) and a visiting scholar at Columbia University, recently talked with strategy+business about how dedicated people can guide their companies to protect human rights and the the rest here

Wednesday, May 14, 2014

Selling after the unsuccessful close

Here's my weekly blog post on strategy+business:

What Part of No Don’t You Understand?

I have no idea who first snapped off the classic putdown, “What part of no don’t you understand?”
It’s not Shakespeare, but the sentiment is timeless. And I’ll bet that first barb was aimed at a salesman, probably a graduate of Glengarry Glen Ross University.

Until now, I’ve always thought that the correct response to this rhetorical question was to retreat. However, I may be wrong about that.

In their new book, When Buyers Say No: Essential Strategies for Keeping a Sales Moving Forward (Business Plus, 2014), sales consultants Tom Hopkins and Ben Katt parse “no” and find that it has a number of possible meanings. It might indicate that the buyer has unanswered questions and concerns about the salesperson’s offering, or might not be sure how it compares to the alternatives in the marketplace. Or the buyer might not be clear about the benefits of the offering. Or perhaps, the salesperson hasn’t properly qualified the buyer. Or the buyer doesn’t like the timing or features. Or maybe, the buyer just doesn’t like salesperson—a big factor in any sales arena that requires an ongoing relationship.

The upshot of all this, according to the authors, is that if you’re a sales professional, you better figure out exactly what the prospective buyer means by “no” before you head for the door. To paraphrase the great Yogi Berra, the sale ain’t over till it’s over.

The challenge is how you manage a “no.” If you treat it like an objection, and try to overcome it, chances are good you’ll get handed your hat. As the authors explain it, being asked to make a decision at the end of the close creates discomfort in the buyer. And too often, salespeople compound that discomfort by becoming unlikeable in response to a negative answer. “How do salespeople become unlikeable after the close?” they write. “They become tense. Their facial expressions reflect unhappy feelings of disappointment or impatience. Even worse, they become subtly belittling, implying with their nonverbal communication that anyone with commonsense would have said yes by now.”

This jives with something I just read in another new book, titled Conversational Intelligence: How Great Leaders Build Trust (Bibliomotion, 2014), by Judith E. Glaser. “Most people assume meaning is embedded in the words they speak,” Glaser writes. “But according to forensic linguists, meaning is far more vaporous, teased into existence through vocalized puffs of air, hand gestures, body tilts, dancing eyebrows, and nuanced nostril flares.”

When Glaser observed pharmaceutical reps making sales calls, she found that if doctors raised concerns about the products being sold, the salespeople usually communicated their displeasure with nonverbal cues, such as stiffened bodies, pained facial expressions, and tense tones of voice. The doctors, in turn, responded by stiffening up themselves and trying to end the sales calls. By now, it shouldn’t come as a surprise that the company where these reps worked was ranked 39th among 40 pharmaceutical firms in terms of sales effectiveness.

Interestingly, the authors of both books also offer similar solutions to negative buyer responses. Hopkins and Katt say that you should run through the “The Circle of Persuasion” again. That’s their generic four-step sales process: establishing rapport, identifying needs, presenting solutions, and closing questions. So, the first step after hearing “no” is to reestablish rapport by letting the buyer “know that it is okay that he didn’t immediately say yes.” In Glaser’s case, she taught the pharmaceutical salespeople to reframe buyer resistance as “simple requests for more information,” which shifted their focus “to relationship before task” and significantly bolstered sales.

The bottom line: When it comes to sales, whether a buyer’s no really means no depends first and foremost on how you respond to the word.

Wednesday, May 7, 2014

Hoist a mug to craft brewers

My latest book post is up at strategy+business:

A Toast to Industry Disruption

I believe that brewing beer is one of the great humanitarian professions. If you agree, you already know that it’s a terrific time to be a beer drinker. Even the most committed among us are hard-pressed to keep up with the burgeoning numbers of high-quality beers being produced by small, independent breweries from near and far.

Steve Hindy traces the heady explosion of craft brewers in the U.S. over the past 40 years in his new book, The Craft Beer Revolution: How a Band of Microbrewers Is Transforming the World’s Favorite Drink (Palgrave Macmillan, 2014). Hindy is an expert guide: He was a Middle East correspondent in Beirut for the Associated Press when he became interested in home brewing. In 1988, when he was back in New York, he and Tom Potter founded The Brooklyn Brewery, which is now ranked among the top 20 breweries in the U.S. in sales volume—and that’s including the big brewers, like Anheuser-Busch Inc. and MillerCoors. 

The stories of the craft brewers—such as Fritz Maytag of Anchor Steam and Jim Koch of Sam Adams—featured in the book are engrossing, but what I find most interesting about this story is the evolution of the beer industry, and the lessons it might hold for the big players in other industries. Historically, beer was a local product. According to the Brewers Association, there were 3,200 U.S. breweries in the 1870s. Then, over the next 100 years, technological advances and the drive for economies of scale changed all that; by 1978, there were only 89 breweries owned by 42 companies in the United States. Local beers were few and far between, and supermarket beer coolers were boring as well as cold. Now fast-forward to 2013—more than 2,800 breweries were operating in the U.S., 98 percent of which were owned by local brewers.

The big brewers and their now-global brands are still dominant in the U.S. marketplace, and they are fighting over fractions of a point in added market share with US$3 million Super Bowl ads in a market that is slowly shrinking. Meanwhile these pesky craft brewers have grabbed a 10 percent share of market. Their share is growing, and more and more of them are entering the fray every day.

It’s reminiscent of the process described in Clayton Christensen’s book, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Harvard Business School Press, 1997). In this case, however, technology didn’t play the primary role in the disruption of the beer industry. In the 1970s, at the peak of Big Brewing, the U.S. government reduced the excise tax for small volume brewers and legalized home brewing for the first time since Prohibition.

“At the time,” writes Hindy, “I don’t think any of the players involved imagined that these measures would pave the way for the craft beer revolution. But they did.” The reduction in tax gave a respite to small brewers, who couldn’t compete against the scale and marketing might of the big players. Home brewing eventually brought new brewers into the market as entrepreneurially minded home brewers started new businesses. The stage was set for a “back to the future” scenario, in which the number of breweries in the U.S is approaching levels that haven’t been seen in about 140 years.

The best part is that this process of industry disruption has created a sort of golden era for beer drinkers. Although at the risk of incurring Brooklyn’s wrath, I admit that I haven’t yet acquired a yen for Hindy’s beers. Maybe that’s because I’ve only tried a couple of them, bought in bottles hundreds of miles from the brewery. But I’m a big fan of the packaging, designed by Milton Glaser—and I’ll keep tasting.