It starts quietly, the defense of the Keynesian failures. Published Wednesday in Global Post – Northwestern economist Robert Gordon opines that “We’ve had a lot of inherent advantages: abundant natural resources, favorable demographic trends, relative political stability supported by the protective benefit of two oceans, to name a few. But from colonial times to the present, our happy economy has also been powered by three separate industrial revolutions:
- the introduction of steam engines and railroads
- the inception and widespread use of electricity and the combustion engine
- the invention of computers, the web and mobile communications.”
“Gordon writes that future growth in consumption per capita — the main engine of the consumer-based US economy — could fall below 0.5 percent a year for what he calls “an extended period of decades.” Yes, that would be a big deal. For some context, between 1860 and 2007 that annual growth rate was 1.9 percent. What’s driving this structural economic slowdown, according to Gordon? He argues that six “headwinds” are buffeting the US economy, and that these factors were in place even before the Great Recession of 2008.
Count ’em:
- changing and unfavorable demographics,
- rising education costs and poor secondary school performance,
- growing economic inequality,
- increased competition due to globalization,
- energy and environmental costs and challenges, and
- high levels of consumer and government debt.
Taken together, these headwinds will slow growth dramatically into the foreseeable future.
Here’s the money quote of Gordon’s paper, which is titled “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds, doubling the standard of living took five centuries between 1300 and 1800. Doubling accelerated to one century between 1800 and 1900. Doubling peaked at a mere 28 years between 1929 and 1957 and 31 years between 1957 and 1988. But then doubling is predicted to slow back to a century again between 2007 and 2100.”
This slowdown is happening because the productivity gains associated with computers and mobility have been far less dramatic — at least so far — than the two previous industrial revolutions, all of which leads Gordon to his depressing theme: “Economic growth may not be a continuous long-run process that lasts forever.”
As Milton Friedman would say – we need to have the freedom to choose for ourselves. Government at times becomes the beneficent uncle and everyone becomes inured to poor performance. The adults are arriving in the room with the convention underway. Choose wisely. The time is now.
Education Step 9
To continue the discussion on education I want to explore curricula and start from elementary school and move up to the end of high school. The last time I looked the tax payers provide the money for the school system at the state level. I am not sure that the educators have a clear grasp on what it is that is expected from them. What is the objective of the education of school age children?
Is the ultimate aim to provide employable people? If that is the case why does the curricula discussion not include employers? The ability to have electives is fine as long as the individuals pay for those electives if they are not considered core requirements of an employable individual.
Similarly why has physical education been dropped from many school systems where there is substantial research that shows physical activity enhances the ability to learn and perform academically?
What do you think on this subject? Should business get involved in developing curricula? Should pre-technical school and pre-college education provide work ready people? The time is now.
Thought of the Day #10
Today will be some thoughts of the day. The Elephants have had their turn now is the time for the Asses.
The time is now.
Education Step 8
The Liberal Arts education that has been the push for the past five decades has not delivered what was intended. Slowly in the halls of academia this is being recognized. There are changes underway to address some of the issues. Internet lectures offered for free is one of them.
I want to explore a different direction. One that is tried and proven and comes from Germany. You have heard me say that the battle of the coming decades will be for talented personnel. I have no idea how long this will exist but it will be for some time as the needs and the resources will be slowly rebalanced.
Peter Drucker once said the brightest future business opportunity for going to be in adult re-education. Retraining people who have had the value of their skills eroded as productivity increases have brought dramatic changes. But that does not address the young people starting out in the work force. How do they get opportunities? When the Universities are too expensive (see student loan debate) and the product (the student) that they deliver doesn’t fit the needs of society something is terribly wrong.
In Germany there is a partnership between schools, business and yes even government. “Germany’s apprenticeship programs and its renown as the standard bearer of quality manufacturing are helping companies rejuvenate their workforce with foreigners eager to escape economic malaise at home” – Bloomberg online.
“Germany’s unique educational approach is rooted in a guild system dating back centuries. Trainees receive a modest salary during their education and most get a job offer once they complete their apprenticeships. The country’s vocational training system combines practical training with classroom sessions and has companies pitching in, offering more than half a million high-school graduate’s annually hands-on education in hundreds of professions as well as a respected alternative to a university degree. With the government paying for the schools, the system has helped keep youth unemployment at 7.9%, the lowest rate in Europe.”
We have some schools leading the way with advanced degrees in Industrial Distribution, or partnerships between equipment dealers/distributors and manufacturers of construction equipment and State Universities. But much more needs to be done. The image of vocational schools has been besmirched with the message from colleges and universities over the years that vocational school was a code word for education for the low skilled workers. Nothing could be further from the truth but it fit nicely into the political messages pronounced over the decades. This self-aggrandizing approach from politicians and ivory tower educators has badly hurt two generations, so far hopefully it is going to change soon. The time is now.
Thought of the Day #9
There are some simple definitions that are very important at this time in our history what with people making decisions on elected officials and referendums and initiatives all across the country.
Ignorance can be defined as not knowing what to do.
Stupidity can be defined as knowing what to do and not doing it.
Insanity is continuing to do what you have always done while expecting different results.
Which one will we choose to be in our votes? The time is now.
Thought of the Day #8
“Long-term Treasury bond yields are an excellent barometer of economic activity. If business conditions are better than normal and improving, exerting upward pressure on inflation, long-term interest rates will be high and rising. In contrary situations, long yields are likely to be low and falling. Also, if debt is elevated relative to GDP, and a rising portion of this debt is utilized for either counterproductive or unproductive investments, then long-term Treasury bond yields should be depressed since an environment of poor aggregate demand would exist. Importantly, both low long rates and the stagnant economic growth are symptoms of the excessive indebtedness and/or low quality debt usage.
This line of reasoning also provides an important corollary. If the effects of excessive indebtedness (low growth and low interest rates) are addressed by additional debt, or by debt utilized for investments that cannot produce an income stream to repay the obligations, then this even higher level of debt will serve to perpetuate the period of slow economic growth and unusually low bond yields.”
This is a short abstract from and investment company Hoisington letter for the 2nd quarter of 2012. The arguments presented are from academic studies. The real problem it is clearly too much debt caused by government officials. There is a lot of evidence to this end yet the media does not share it with the public for whatever reason. Curiosity is rewarded with knowledge. Become more curious. The time is now.
Service Statement v1.6
Customers want certainty. They want to know the price of the job before they give you authorization to proceed. They want to know when you will be finished, a completion date before you start. They tell us this is every survey that I have seen in the capital goods industries. If they tell us what they want why don’t we deliver it?
No guts no glory used to be the saying in place for things like this. Today I say no systems and no structures no glory.
Then you can give a GUARANTEED completion date. I mean GUARANTEED. You will provide a reduction in price, a penalty, if you don’t meet your completion date. For instance you will credit the job with a day of labor for each day that you have missed the completion date. Are you ready to stand up and make a difference for your customer? Needs statements from the customer require that we deliver, not just talk. The time is now.
Parts Pondering v1.8
The parts business is in a rut. We have been doing the same thing for decades now. Isn’t it time to put a fresh face on the parts business and offer customers improved service and convenience?
Start with the tired counter. The stand-up counter has been dead for a long, long time. Some of you just don’t recognize that. Put in a sit down work area. Make it pleasing for your customers AND your employees. Do any of you remember why it is that we have a high stand up counter? Well it is for all of those books we used to have to have as parts catalogues and service manuals. They are now gone the way of the dinosaurs for most significant suppliers.
Move to a self service station in your instore merchandising area. Allow the customers the convenience to price items and place orders themselves. Think of the gas station. They have completely redone their business with their self-service gas pumps and the “service” station. This is not your grandfather’s gas station.
Move to strip malls that are more convenient for your customers. Put is a small fast moving item, supply items, convenience items inventory. Operate like a “NAPA” store. The closer you are to the customer work site the more convenient you are. You might even consider putting a trailer on the customer work site. Make it convenient for them. Make it easy.
Move to the internet. The customer has been purchasing things on the internet now for a few decades. They look for information. They check out different suppliers. They check prices. Are you in the game? You will be left behind if you don’t get in the game.
You are in the retail business in the parts business. I wouldn’t know that from walking into many of your stores. You will both adapt and participate in the market or you will be left behind. The time is now.
Friday Filosphy #27
Do not confine you children to your own learning, for they were born in another time.
Chinese Proverb
Every heart sings a song incomplete, until another heart whispers back.
Plato
Fear makes the wolf bigger than he is.
German Proverb
Thought of the Day #7
It starts quietly, the defense of the Keynesian failures. Published Wednesday in Global Post – Northwestern economist Robert Gordon opines that “We’ve had a lot of inherent advantages: abundant natural resources, favorable demographic trends, relative political stability supported by the protective benefit of two oceans, to name a few. But from colonial times to the present, our happy economy has also been powered by three separate industrial revolutions:
“Gordon writes that future growth in consumption per capita — the main engine of the consumer-based US economy — could fall below 0.5 percent a year for what he calls “an extended period of decades.” Yes, that would be a big deal. For some context, between 1860 and 2007 that annual growth rate was 1.9 percent. What’s driving this structural economic slowdown, according to Gordon? He argues that six “headwinds” are buffeting the US economy, and that these factors were in place even before the Great Recession of 2008.
Count ’em:
Taken together, these headwinds will slow growth dramatically into the foreseeable future.
Here’s the money quote of Gordon’s paper, which is titled “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds, doubling the standard of living took five centuries between 1300 and 1800. Doubling accelerated to one century between 1800 and 1900. Doubling peaked at a mere 28 years between 1929 and 1957 and 31 years between 1957 and 1988. But then doubling is predicted to slow back to a century again between 2007 and 2100.”
This slowdown is happening because the productivity gains associated with computers and mobility have been far less dramatic — at least so far — than the two previous industrial revolutions, all of which leads Gordon to his depressing theme: “Economic growth may not be a continuous long-run process that lasts forever.”
As Milton Friedman would say – we need to have the freedom to choose for ourselves. Government at times becomes the beneficent uncle and everyone becomes inured to poor performance. The adults are arriving in the room with the convention underway. Choose wisely. The time is now.
Marketing Missiles v1.7
My good friend Jay Roszell just posted to his blog – Growth without Pain – “What is the True Cost of Sales Training.” In it he lists off the costs of the training which includes the usual suspects but he goes further and touches on “opportunity costs.” The cost of any activity cannot be measured in a vacuum. You have to recognize that there is a opportunity that will be lost when the employee is not out on the job while they are at training.
This is the same as a “redo” work order. We charge the time of the technician to the job a second time which is applied to an internal expense account. But do you charge that at the man’s wage? The Man’s rolled up personnel cost? or to the customer retail price? or to the retail price and the rolled up employee cost. There is an argument here to be made isn’t there?
Of course this is true about training in general. How much it costs to send employees to outside training events. Whether they be Industry supported such as the AED Foundation classes and webinars and special meetings or to University or Community College extension classes, or a technical or vocational school. I want to go to Jay’s point that without ongoing training and coaching all training will fail.
Too many people graduate from school and decide that – “phew that is over with.” I am sorry to be the one to burst their bubble. I am afraid that is where learning truly begins. As you know I taught “Education” to prospective teachers at McGill University in Montreal – a long, long time ago. The object was to teach techniques to be used in the teaching of a skill or a subject. BUT the most important skill that I thought should be taught was the skill that would enable each student to be able to teach themselves. That would be a life skill that would be theirs forever. It worked with many but not all. That is my failure as a teacher.
But the point I want to arrive at in this blog is that LEARNING is a differentiator for your business. There are customer service measures everywhere that talk to different measures ofr customer satisfaction. Such as “how many different equipment salesman in a year covering your customer caused the customer to be dissatisfied with that company?” Why can’t you keep a salesman in your company? The same is true for instore personnel and Field Service Technicians. In fact it is true for all customer contact personnel.
So why do employees leave? Usually it is dissatisfaction with their boss, or the Company, rarely about money. But I want to suggest there is something else at work here. The employees will leave if they do not feel that the Company is giving them an opportunity to grow. That’s right – the opportunity to grow. How does an employee get ready to take on a more challenging job? Is it all learning as you go or is there some training involved. I know you know that training is involved, and training is expensive. But just think how much more expensive it is to have dumb employees doing the jobs at hand.
So make the investment in training your employees. The AED Foundation used to ask for 40 hours a year. I now want 80 hours each year for each employee. That is right nearly 5% of the employee paid year. But I want more. I want the involvement in the management to ensure that the training “took” and not just blame it on the employee if they revert to old ways a couple of weeks after the training has been completed. That is a cop out. It is MANAGEMENT that must ensure the proper behavior from the employees and learning is just one more of those responsibilities. The time is now.