Next Generation CEO

Nelson D. Schwartz wrote a terrific article in the NY Times
this past weekend. It is titled C.E.O. Evolution Phase 3. What is so great
about the article is an identification of the time for CEO change. After the
bubble burst in 2000 many people started seeing the need for a new guard in
2001. It was pretty obvious. What is going on right now isn’t as clear or
apparent as what happened then. But the new guard that came in 2001 isn’t new
anymore and the problems they came to fix aren’t the problems of today.

The current batch of exiting CEOs followed luminaries such
as Jack Welch, Sandy Weill, and Michael Eisner. The problems Charles Prince
and Richard Parsons faced came about from expansion. They made sense out of it.
These guys aren’t the mover and shakers as the men they replaced. But they are
cunning. Years of being in cut throat corporate positions molded them that way.
But being from that style is now burdensome. Key talent is seen as a threat and
now isn’t the time for corporate positioning.

Global growth is now the dominant strategy in every major
company. Why? Because the global economy is taking root in areas that were once
considered non factors. This means two things: 1 – Companies in these areas are
now competing with companies in the US and 2 – These companies employ many
people who now have incomes higher than they did before this expansion. 

So the next batch of CEOs will have to position their
companies in ways never experienced before – a world very open to competition.
This world has new oil players, new educations, new technology, and new entrepreneurial
drive. The American dream has been exported.

So how does the new CEO succeed? By doing what Mr. Schwartz
suggests – by building strong teams. They must hire people stronger than they
are. They must execute beyond the next quarter. They must grow internally and
only acquire truly valuable additions. And finally, they must take risks.

If each era has a different type of CEO then I conclude that
this era will be defined by the 3G CEO. The Green, Global, and Govern CEO. Green
is the next push in handling resources effectively. So many companies will save
by putting their energy utilization on the front of their minds. Being Green
means stop taking things for granted, i.e. electric power or water and start
using every resource to its fullest. Global is the result of technology as the
great equalizer. The more barriers to trade that are torn down (in one example
geography) the greater it is for people to trade their wares. New suppliers
come on board and new markets open up, but competitors evolve as
well. Govern because this CEO will abdicate certain powers to his team and put
in place a governance program to regulate the output. This requires trust and
patience, but inspires creativity and the speed and ubiquity of a decentralized

So as we say goodbye to the baby boomer leadership and bring
in generation X and Y we are also saying goodbye to a thick middle class and
hello to the Divergence Generation. We have a time for CEOs to transform the
corporate world unlike any other leadership group has ever had.

Who are the 3G CEOs?

Thank You Veterans

I would be remiss if I didn’t mention Veterans Day. Veterans
Day is November 11th in the US. Many people honored it today
(November 12th) with a day off of work. Here are some resources for
people interested in finding out more about Veterans Day:

US Department of Veterans Affairs
History of Veterans Day
Wikipedia site for Veterans Day
American Military Personnel Wikipedia site

I’m sure everyone has a friend, a coworker, or a family member that is a veteran. These people are special. I have absolutely no reservations about writing anything I want on this blog because of the freedom they provide. And what is so great, is that the job a person in the military performs can be on the front line or somewhere in New Mexico checking on nuts and bolts on a wing of a jet that might never be flown. All of these jobs are important. Each one ensures our freedoms. So again, thank you to every Veteran.

Teaching Teachers and Kids

The system used to train teachers hasn’t changed much over
the past twenty years (maybe even longer, but I feel confident about twenty
years). But first, let’s look at teachers.

Teachers are some of greatest people on the planet. Many of the teachers I know
love people. Teachers have qualities that other people don’t have – fulfillment
from seeing others succeed despite serious threats to your own manifestation of
patience. To teach is to sacrifice.

But what enables teachers is also disabling. Being people
persons hampers their ability to take hard looks at the system, themselves, and
each other. The result is a routine of getting though each day much like you
did the year before. This serves a great majority of students.

Unfortunately, US culture tends to change at a faster pace.
So as teachers learned a style during their instructive days, the style they
learned probably isn’t as effective as it once was. I’m not trying to imply
that there isn’t training for teachers to improve that situation, but training
isn’t going to dent an approach that was reinforced by years of success.

So what you hear now is blame; mainly on parents. And there
is truth to that. But teaching has never been a job of ideal circumstances. Potential
teachers know that going in. I know there are many teachers that roll up their
sleeves and embrace the challenge. For instance, there is a group in the San
Francisco area called Reach. They use a team based system to improve teacher
performance and ultimately devotion to the job Reach. What I find great about this is
that the team based approach consistently prods improvement and idea sharing.
Innovative methods can spread much faster this way. Also, failures can be
learned from by many more people. Another byproduct of the team approach is the
limiting harm of loneness. And I mean this twofold: 1) There are X amount of other
people who are going through the same thing you are at the exact same time. 2) Having
uniform tests as a measure of success can undermine what the teacher tries to
achieve day in and day out from a learning perspective. The only people who
understand walking that line between a new teaching method and teaching to the
test are other teachers.

I’m an advocate for trying new ideas. The kids are and they
are changing because of it. The teachers should have that opportunity too.  So take risks and hopefully, you have a team
to help you through them.

Worker Productivity is Strong

Congratulations to the US worker.

The third quarter of 2007 was strong in terms of US productivity. The increase was 4.9% and well ahead of the 2.2% of last quarter. Also important to note is that the wage growth was at 4.7%. When productivity is slightly better than wages it is a win win situation. Basically, it means the standard of living has improved. People are getting paid and producing at a greater rate. It also means that producing the good or service was done more intelligently than before. It wasn’t just brute force. The workers found a better way. Often times this gets lost in the shuffle. Important decisions were made and resources were used more efficiently.

Revision: The Labor Department changed the productivity increase from 4.9% to an increase of 6.3%
Revised again: From 6.3% to 6.0% (2/6/08)

Congratulations to the US worker.

October Job Market Analysis

President Bush was recently quoted as saying “This is now our 50th consecutive month of uninterrupted job growth, the longest in the nation’s history.” 50 months ago is August of 2003. That is quite an achievement. But it isn’t always quantity that is important, quality must be considered as well.

The US job market added 166,000 jobs in October (2007). No one believes that number is realistic. Each month gets revised and this month will as well. The 80,000 prediction by will probably be pretty close to reality. But most analyst agree that the job market is stalling.

There are three areas experiencing true hiring growth. Those areas are the Government sector, the leisure and hospitality sector, and the Professional Services sector.
    The government sector was outlined in a post I called US Government Hiring, but it also should be noted that school is back in session and that usually accounts for a bump at this time.
    I love the fact that the leisure and hospitality sector is hiring. Some of its growth can be attributed to the weak dollar. Canadians, for example, can easily visit anywhere in the US and buy at a “discount” because of the strength of the Canadian Dollar. Not to mention the strength of the Euro, which affords our European counterparts the ability to come to the US at a supremely cheap rate.
    The Professional service sector growth is based on productivity gains and we are currently in a favorable situation for that.

There are several areas with shrinking job markets. Areas like Retail, Construction, and Manufacturing are being hit hard.
    Retail isn’t hiring because the spending of the US is slowing. I documented that in my Peanut Butter and Pasta post. Two retail areas hit the hardest are in automotive sales and home improvement centers. This is significant because it reflects that American’s aren’t buying big ticket items. Everyone knows that home sales are down tremendously, but car sales are down too.
    Construction is down because new homes aren’t being built at the rate they were just a year ago.
Manufacturing is down too, but I don’t necessarily know why.

So why are people not buying big ticket items like they were a year ago? Two reasons. The first is subtle, but the US wage hasn’t increased much over inflation the past year. It is hanging at a 3.8% increase year over year. This is the slowest pace since 2004. So people don’t see their paychecks getting any bigger, but in the recent past, it was made up for with the appreciation rate of the home they are in. You can borrow on that. Well, with the housing slow down, that rate has fallen dramatically. So what have people decided to do? Pay down debt.

The US is paying down debt, but the world isn’t. The global economy is flying high. The growth of places like India and Eastern Europe in addition to China is fueling a run on commodities. The news is broadcasting stories about outrageous oil prices, but in the past the implication was the suppliers were holding it back. Now it is demand that is raising the price. With new parts of the world building factories and offices, the need for oil is increasing faster than ever before. And oil is just one example. Prices of items like gold and wheat are up too. Since the US supplies many commodities, the profits of many US corporations aren’t suffering from a slowdown in the US markets. But the productivity and profitability gains are staying near the executives of these corporations since no one knows how reliable a global expansion is. This is further deepening a US pull back.

I expect to see a third quarter GDP report above expectations tomorrow. I will update this blog with the results.

I expect this trend to continue for six months. By then the real estate vultures will have scooped up great value in homes and the US economy will get back into a competitive expansion race with the global one. I also expect to see a convergence of green technology and Web 2.0, pushing productivity up again over the next 12 to 18 months. These technologies will disrupt some commodity prices.  I expect President Bush to reach 64 straight months of job growth, regardless of if it really happened or not.

October Job Report Statistics

Last month I pulled the monthly government job report stats out of some news stories and bulleted them out. The simplicity of it garnered a favorable response, so it will be an on running post.

Here are the job market and compensation numbers for October of 2007:

166,000 job gain in October 2007

  • Twice as many workers in October as economist expected
  • Fastest pace in five months 
  • Most economists believe downward revisions in the reading are likely

September has a revised 96,000 increase in jobs

  • Originally reported as 110,000 job increase

Unemployment rate stayed at 4.7%

  • Highest since August 2006

Wages were up 0.2%

  • Wage is up 3.8% compared to a year earlier
  • Payrolls are increasing at the slowest annual rate since June 2004

$17.58 is the average hourly wage

Average work week is 33.8 hours, staying flat

Specific Segment Job numbers:

Construction lost 5,000 workers

Retail businesses cut 21,500 employees from their payrolls

  • Most in residential construction jobs but other sectors of the building industry grew

Manufacturers lost 21,000 jobs in October

  • Their 16th consecutive decline

Lenders trimmed nearly 5,000 jobs

Financial sector gained 2,000 jobs overall

Retailers showed a 22,000 job decline

  • Most of retail losses occured in auto dealerships and building supply stores, but other areas declined too

35,000 increase in jobs in the public school employment in October

  • These are probably catch up numbers from schools

Temporary workers in business services gained 20,200

  • This is after about the same amount lost in September

Other information:

Separate survey: labor force shrank by 211,000 jobs, and 465,000 Americans said they were no longer working or seeking work

More people stopped looking for work, therefore they are not in the government report as unemployed

Cloud Computing

Those that are in IT have known about this idea for years. For those that aren’t in IT, it is having most of your computing needs on servers somewhere in a “cloud” instead of installed on the hard drive. The cloud idea keeps them distributed or spread out, so if something happens to one server it isn’t disabling to what you are trying to do. So suppose you want to run a program that tabulates mortgages if you change payment structure. Instead of opening a program that is installed on your home computer, the installed program is on a server that you access over the internet. Because Broadband is pretty widespread in the US, the speed of traveling over the internet isn’t a problem.

Most people are familiar with idea of using web based email (hotmail and yahoo), but aren’t as keen to the idea when it comes to office tools like Excel or PowerPoint.

But now is the time for it. Why?

  • computing storage devices are getting smaller
  • wireless internet is getting easier, cheaper, and more available
  • being mobile is preferred, not just for travel, but because there is no reason to have a desk
  • the adoption of server based programs is growing and the programs are getting better

Check out this old story (Aug of ’06) by Eric Schmidt of Google called Google CEO’s new paradigm: ‘cloud computing and advertising go hand-in-hand’ to see what direction Google is pushing their weight.

But what has me really excited is the Eee PC by ASUS. It skimps on things that aren’t needed in a Cloud Computing world. It forces you to adopt the paradigm. It is fairly cheap at $399. It really focuses on the basic essentials and nothing more. Since Christmas is coming, I see it as a great gift for a Grandmother who is new to email or for the kids that are just old enough to not be into toy versions of computers but aren’t really responsible enough to get on the family computer.

I don’t have any reason to promote this product and if another better product comes along I will probably highlight that too.

Age and Risk

It is a long held notion that youth takes more risks. It has something to do with invincibility. But a science field known as neuroeconomics is growing. It combines neuroscience, economics, and psychology to study how we make choices.

What this field is finding is that as you age your brain changes how it deals with risk. Two areas particularly change – the insula and the amygdala. Insula is where your brain processes repulsive input from your senses. As you age, it gets smaller. The amygdala, which controls your fear reflexes and some of your survival instincts like generating adrenaline, also becomes less active.

What this means is you are more willing to take risks as you get older. Now, I would divide risk into two forms here, physical and psychological. This field is talking more about psychological.

There is a story on that depicts the investment changes because of this. The story is by Jason Zweig and it is called Inside the Mind of the Older Investor.

But what the story doesn’t go into is how the brain came to this result. Is it from being worn down or is it from exposure to situations? Does experience change perspective? Does being aggressive and successful change an outlook? There are many personality traits that need discussing too. If we can come to understand these questions then we can create a path for people that have certain goals. It still won’t be any sure things, but there will be a map with many routes to take.