In 2019, the California legislature passed Assembly Bill, AB5 “The Gig Economy Law.” It redefined “employee” in an effort to try and dramatically reduce “contract workers.” This law is intended to force people who work to become ”employees” (of someone), and thereby receive more rights. Simultaneously it forces those who pay for work to become “employers” covering additional costs forced onto them by the legal definition of an “employee”. In other words, AB5 attempts to set back the advancement of the Gig Economy 30+ years. Last week, that law was put on hold by a California court, and California citizens will vote in November on whether requirements of AB5 should remain, or be repealed.
Go back to 1900 and there were very few “employees.” Most people just worked. But the industrial economy boomed, and with it the need to put people into factories. Showing up on time, doing a job, was crucial to the industrial economy – whether you were making car parts or pushing invoices around. We’ve all seen pictures of assembly lines in factories making shirts or lawn mowers, and assembly lines of gray steel desks where people manually processed documentation. Being an “employee” meant showing up and was central to developing the industrial economy, where lots of cogs were needed for the machine to work.
There is one thing stronger than all the armies in the world, and that is an Idea whose time has come.
But we’re not in an industrial economy any more. Since 1990 we’ve been transforming into the information economy (or the knowledge economy, pick your preferred term.) Automation has replaced labor, with robots making trucks while computers process documents. People don’t stand in assembly lines – machines do. Work doesn’t happen with our hands, it happens with our brains – and machines do the manual labor. Managers don’t manage people, they manage processes. As a result, companies have been realizing they need a lot fewer people.
No longer can employers consider employees for life. Rather, companies need flexibility to adjust to the fast paced marketplace. Owning resources, including labor, can feel like dragging an anchor along with your business. Yes, people are needed people to do things. But every business leader knows that the brainpower needed today is probably not what was needed yesterday and not what will be needed tomorrow. Businesses need to access the knowledge workers they need quickly and shift their resources fast in order to meet changing market conditions- agility not stability. Relationships are transactional, not societal.
This is actually good for everyone. A hundred years ago studios controlled everything about movie making, including actor salaries. Many actors (i.e. Judy Garland & Mickey Rooney) made dozens of movies, yet had very little money. But that lock was broken, and it allowed actors to sell their services to the highest bidder – leading to today’s “star economy” where actors make what they can get producers to pay. There is a set scale to employment, but every actor is a free agent able to negotiate their terms of “employment” for each project.
Major league sports is the same. Where once club owners dictated pay, today players negotiate across teams for the best contracts. It allows for negotiating the best price for the best service in an open, flexible economy. If you’re good at playing, or coaching, you negotiate with the teams to get your best price for your services.
Uber and Lyft aren’t much different from studios and sports franchisees. Once, taxi companies controlled the market. All of us spent time standing in lines, waiting on cabs, that too often were dirty and broken. Market access was controlled by taxi tokens, and so was pricing. So service deteriorated to as low as possible, while customers stood in line on Friday night hoping to get a cab home from the theatre. But Uber unleashed the market. Resources could be added, or removed, by market participants. Pricing was determined by the buyers and sellers. And pricing variability allowed for quality variations as drivers tried to acquire repeat business. Surge pricing meant you could get a ride on New Year’s eve, meeting the customer needs and with pricing to meet the supplier’s need for expanding short-term capacity.
You might not think of Kim Kardashian, Tom Brady and an Uber driver as gig workers. But they are. And this hasn’t been lost on most of us. As publishers have disappeared, writers now must sell their research and writing independently, no longer expecting a set salary and benefits from newspaper owners. Virtual office assistants abound. For almost 30 years we’ve been building a flourishing economy of “gig workers” who are looking to match their skills with market needs. Uber and Lyft are just platforms created to help match the sellers and buyers (as is FiveRR for graphics and other office services.) Their success has been due to meeting a very real market need.
Uber and Lyft have helped the trend toward individual economic independence grow, not created the trend. When you see managers, who work for a set wage, working 24x7x365 on their iPhone or other mobile device, what’s the difference between them and a “gig worker?” When it comes to getting the work done, nothing. Just how they are paid – and some serious illusions about the employee/employer compact that are wholly out of date. Increasingly, we are recognizing we are better off to maximize the value of our services working independently, and seeking out projects that can use our services as contractors, rather than going through the burden of “hiring” and “firing” across “employers” in a fast changing world. Uber didn’t put people out of work, the knowledge economy redefined work. Uber doesn’t create low pay, it just offers a market that allows for flexible capacity and variable pricing. Uber offers a platform matching buyers and sellers. And that’s something we need MORE as adaptability demands keep rising.
California legislators can see that work has changed. But their approach was backward. They are trying to push everyone – both workers and business people – into an outdated model. An industrial model of employment. That will never work. It won’t work because the economy has changed, the world has changed, needs have changed, and these trends will not reverse. Trying to rewind the clock will only cause employers to abandon markets, as Uber and Lyft did when they said they would leave California. Solutions must address trends for independence and accessibility, not try to apply 100 year old definitions to a modern problem.
Contract work is here to stay. It’s been growing for 30 years. What’s needed are better Gig Marketplace tools to help business people find the resources they need, for workers to find projects that fit their skills and that meet their societal needs.
The old model created the term “benefits” for societal needs comprised of unemployment pay, retirement pay, hazard compensation, health care, etc. and forced those costs onto the “employer.” In much of the world today these costs are born by the government, but in the USA they are still borne by “employers”. In a contractor relationship, no one is required to cover the costs of those benefits. In most businesses now, “employer” is a term with a lot less meaning since businesses need much more agility than they did in an industrial economy. During this transition from industrial to gig economy, those societal needs are not being met effectively, leading to individual suffering and much, much higher costs to society.
New solutions are required to meet these needs – instead of forcing the old model onto a new economy. Legislators and regulators need to recognize that old approaches need to be revamped. All of these problems need new solutions – not some effort to force the industrial model onto platform providers that do little more than match needs with skills.
And this requirement for change applies to labor representation as well. The Department of Labor is an industrial era dinosaur that has little to no value in a world of work-from-home employees, outsourced manufacturing plants and easily available offshore production. Industrial era labor unions make no sense when we don’t work on assembly lines. Yet, unions are a very important part of entertainment and professional sports. Because in the latter markets leaders have adapted the union’s services to meet modern needs. Whether they realize it or not, gig workers need help with representation. But that representation must be a lot more sophisticated at helping workers than the throngs of attorneys at the AFL-CIO.
Californians would be suffer negative impacts if Uber and Lyft leave the market. And they realize that. But the solution is not the blunt axe of AB5. Thus, the law will almost surely be reversed in the next election. Then, hopefully, California will step up to the challenge of leading the country with new approaches that meet gig worker needs – expanding their markets and opportunities while building social solutions to every day needs.
TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business (https://adamhartung.com/assessments/)
Give us a call or send an email. Adam@Sparkpartners.com
In my recent “Rebooting Business” on-line conference I was asked if Black Lives Mattered and other protests should affect strategy. I said “of course!!” These demonstrations clearly show a segment of the marketplace with unserved and under-served needs. Needs so badly served people have taken to the streets!
Every organization needs to assess its strategy to determine if it is on this trend toward inclusion. Are you sensitive to the needs of these under-served segments? Or are you sloppily still out there with old stereo-tropes like the Aunt Jemima syrup – which Quaker Oats finally pulled. Do you know if your organization, products, suppliers, customers and communities are meeting market needs for inclusion? Or are you just assuming you’ll be OK?
Amazingly one of the biggest trend creating companies has demonstrated the cost of missing trends. Facebook is a remarkable company. Where MySpace failed, and countless others never created a marketplace, Facebook used its initial platform, then added Instagram, then Messenger, then WhatsApp to take an enormous lead in social media. Facebook built on trends in our desire to be mobile, and to communicate asynchronously, to attract billions of people to its platform – and as a result advertisers.
But…. Inexplicably…. the CEO Mark Zuckerberg and his leadership team have been tone-deaf to the events since George Floyd was killed. And they were remarkably blindsided, showing they truly weren’t prepared. Zuckerberg has long refused to even look for false information on Facebook – and never really considered removing it. Lies, falsehoods, misstatements – Facebook let people of all stripes (good, and very often bad) say anything they wanted on the platform. This wasn’t inclusion, it was allowing loud voices to present harmful content – and it was clearly disturbing a whole lot of people.
Now is the comeuppance. Advertisers have decided not to advertise on Facebook. They realize that their ads, presented next to false, and sometimes truly hateful, content gives the impression that they support this content. So, in droves, they have said their ad dollars will go somewhere else. Giant consumer goods companies Honda, Unilever, Proctor & Gamble, Coca-Cola, Diageo and Hershey as well as one of the world’s largest mobile providers Verizon, and mercantile suppliers North Face and Patagonia have joined retailers like Starbucks and REI as just some of the larger boycotters – out of over 100 on the growing list. So serious is this problem that some advertisers are “pausing” social media ads all together, suggesting another possible trend
Nobody can fight trends and hope to win. Nobody. No matter how big. And this is a sharp rebuke for one of the trendiest companies on the planet. That the leadership team didn’t see this coming is astonishing. In a late reversal, Facebook has made new efforts to identify hate content (including harmful posts by politicians), but that they didn’t react much quicker is just absurd. That they appeared to think they could platform political ads, and political content, and not have viewers associate Facebook with politics is downright bizarre. This has been the dumbest self-inflicted move by a big company in a very long time. And all they had to do to avoid this nightmare was admit that inclusion was a very big global trend that they had to build into their offering.
But don’t lose sight of the lesson. TRENDS MATTER. If you align with trends your business can do GREAT! Like Facebook. But if you don’t pay attention, and you miss a big trend (like demographic inclusion) the pain the market can inflict can be HUGE and FAST. Like Facebook. Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business https://adamhartung.com/assessments/
Americans take it for granted that all currencies are measured against the US Dollar. It’s been that way since WWII, so they just expect it will always be that way. But, things have a way of changing.
In this pandemic the US Federal Reserve is printing money as fast as possible to help prop up the economy. That’s better than the alternative, which would be another Great Depression. But, eventually we have to create value via goods and services to put value in those dollars, or they will be worth a whole lot less. In other words, if we don’t change our fiscal policy to improve production of goods and services, the US Dollar will fall in value – maybe a lot – and it could even lose its status as the world’s “reserve currency.”
Back in 2008, I wrote that there was no inherent reason the US Dollar would be the benchmark for all currencies. It gained that position as the dominant economy after WWII. American’s like to assume superiority, and therefore the US Dollar will always reign supreme. But as I also said in 2008, that’s an assumption that can easily be changed – especially regarding currencies. Lots of factors could cause the US Dollar to suddenly lose a whole lot of value – creating inflation rates that make the 1980s (>18%/year) seem tame.
Since WWII, a lot has happened. Economies in Europe grouped into the Economic Union (EU) making the Euro more powerful. And the economy of China has grown enormously. (China’s economy will be bigger than the USA economy sometime in 2020 or 2021.) Simultaneously, isolationism has hurt growth in America, and caused the EU to lose the UK. What’s rapidly happening is a shift in economic power away from the US and Europe to China.
Additionally, the largest holder of US debt is China. As I pointed out in 2009, this policy of supporting US debt has aided China’s desire to grow. But, as China becomes larger it will no longer need to prop up the US Dollar by purchasing Treasuries. Once bigger than the USA, China could demand that its trade be in Yuan and the value of the dollar could fall very far, very fast.
China has developed enormous inroads into the global economy, across dozens of countries, with its “Belt and Road Initiative” created in 2013. China has quietly become more important to the economy of 70 countries than the USA. Instead of supplying countries guns, China gave them infrastructure and facilities – and jobs – and economic growth. In most of these countries, the USA is more feared than adored, while the Chinese are seen as a very good friend. Meanwhile, the USA “put America first” policies, including trade wars and social justice, have isolated the USA from not only rivals but its global friends – including Europe (threats to kill NATO, for example.)
Now, we are in a pandemic. The Chinese are very determined to control its impact. Meanwhile the USA, UK and many other democracies are being far less careful. If this plays out with a full pandemic recession in the USA, China could stop buying American bonds and the value of the dollar could disintegrate in weeks. Disintegrate as in $1 could be worth 1 penny. It would take bushels of dollars to buy imported goods in stores.
In this election year, the biggest concern is, do those leading the USA realize the peril? Do business leaders? Do you?
LANDOVER, MD – SEPTEMBER 24: Washington Redskins players link arms during the national anthem before their game against the Oakland Raiders at FedExField on September 24, 2017 in Landover, Maryland. (Photo by Patrick Smith/Getty Images)
A recent top news story has been NFL players kneeling during the national anthem. The controversy was amplified when President Trump weighed in with objections to this behavior, and his recommendation that the NFL pass a rule disallowing it. This kind of controversy doesn’t make life easier for NFL leaders, but it really isn’t their biggest problem. Ratings didn’t start dropping recently, viewership has been declining since 2015.
NFL ratings stalled in 2015
NFL viewership had a pretty steady climb through 2014. But in 2015 ratings leveled. Then in 2016 viewership fell a whopping 9%. During the first 6 weeks of the 2016 regular season (into early October)viewership was down 11%. Through the first 9 weeks of 2016 ratings were down 14% before things finally leveled off. Although nobody had a clear explanation why viewership declined so markedly, there was widespread agreement that 2016 was a ratings crash for the league. Fox had its worst NFL viewership since 2008, and ESPN had its worst since 2005.
Interestingly, later analysis showed that overall people were watching 5% more games. But they were watching less of each game. In other words, fans had become more casual about their viewership. People were watching less TV, watching less cable, and that included live sports. And those who stream games almost never streamed the entire game.
And this behavior change wasn’t limited to the NFL. As reported at Politifact.com, Paulsen, editor in chief of Sports Media Watch said, “it’s really important to note the NFL is not declining while other leagues are increasing. NASCAR ratings are in the cellar right now. The NBA had some of its lowest rated games ever on network television last year… It’s an industry-wide phenomenon and the NFL isn’t immune to it anymore.” So the declining viewership problem is widespread, and much older than the recent national anthem controversy.
Live sports is not attracting new, younger viewers
Magna Global recently released its 2017 U.S. Sports Report. According to Radio + Television Business Report (RBR.com) the age of live sports viewers is scewing older. Much older. Today the average NFL viewer is at least 50. Similar to tennis, and college basketball and football. That’s second only to baseball at 57 – which was 50 as recently as 2000. But no sport is immune. NHL viewers are now typically 49. They were 33 in 2000. As simple arithmetic shows, the same folks are watching hockey but few new viewers are being attracted. Based on recent trends, Magna projects viewership for the Sochi Olympics and 2018 World Cup will both decline.
I’ve written before about the importance of studying demographic trends when planning. These trends are highly reliable, even if boring. And they provide a lot of insight. In the case of live sports watching, younger people simply don’t sit down and watch a complete game. Younger people have different behaviors. They watch an entire season of shows in one day. They multi-task, doing many things at once. And they prefer information in short bursts – like weekly blogs rather than a book. And they are more interested in outcomes, the final result, than watching how it happened. Where older people watch a game play-by-play, younger people simply want to know the major events and the final score.
To understand what’s happening with NFL ratings we really don’t have to look much further than simple demographics — the aging of the U.S. population — and the change in viewing behavior from older groups to younger groups.
Unfortunately, according to a recent CNN poll, while 56% of people under age 45 think the recent demonstrations are the right thing to do, 59% of those over 45 say the demonstrations are wrong. In its “core” NFL viewership folks don’t like the kneeling, so it would appear the NFL should heed the President’s advice. But, looking down the road, the NFL won’t succeed unless it finds a way to attract a younger audience. With younger people approving the demonstrations NFL leadership risks throwing the baby out with the bathwater if they knee-jerk control player behavior.
Understanding customer demographic trends, and adapting, is crucial to success
The demonstrations are interesting as an expression of American ideals. And they are gathering a lot of discussion. But they are not what’s plaguing NFL viewership. Today the NFL has a much bigger task of making changes to attract young people as viewers. Should leaders shorten the game’s length? Should they change rules to increase scoring and create more excitement during the game? Should they invest in more apps to engage viewers in play-by-play activity? Should they seek out ways to allow more gambling during the game? Whatever leadership does, the traditions of the NFL need to be tested and altered in order to attract new people to watching the game if they want to preserve the advertising dollars that make it a success.
When your business falters, do you look at long-term trends, or react to a short-term event? It’s easy for politicians and newscasters to focus on the short-term, creating headlines and controversy. But business leaders have an obligation to look much deeper, and longer term. It is critical we move beyond “that’s the way the game is played” to looking at how the game may need to change in order to remain relevant and engage new customers.
Note how boxing recently brought in a mixed martial arts fighter to take on the world champion. The outcome was nearly a foregone conclusion, but nobody cared because it brought in people to a boxing match that otherwise would not have been there. If you don’t recognize demographic shifts, and take actions to meet emerging trends you risk becoming as left behind as cricket, badminton, horseshoes, bocce ball and darts.
Photo: NEW YORK, NY – FEBRUARY 19: Writers and crew of ‘The Late Show with Stephen Colbert’ attend 69th Writers Guild Awards New York Ceremony at Edison Ballroom on February 19, 2017 in New York City. (Photo by Nicholas Hunt/Getty Images)
The Late Show hosted by Stephen Colbert is now the #1 program in late night television. This come-from-far-behind change in market leadership, overtaking The Tonight Show hosted by Jimmy Fallon, is not about politics. It is about understanding trends and using them to create value.
Back in February, 2014 there was real concern about the future of late night television. Audiences had peaked decades before, when Nightline was huge and competed with The Tonight Show hosted by legend Johnny Carson. By 2014 many wondered if American programming after the late news was all shifting to cable TV as audiences continued shrinking. Producers replaced Jay Leno with Jimmy Fallon in order to revitalize viewers. Jimmy Kimmel was moved up in time as ABC killed Nightline, hoping he could carve out a growing niche. And David Letterman, late night’s senior statesman, was about to be replaced by cable satirist Stephen Colbert. But these changes gathered little industry interest, because the time slots simply were not doing well for broadcasters – or advertisers.
Fallon maintained a dominant lead in the time slot as Colbert’s first year was a yawner.
As TheWrap.com reported in September, 2016
, despite the fanfare of Colbert taking over hosting, he “posed no threat whatsoever to Jimmy Fallon.” Fallon’s show maintained a huge lead. With 3.65 million viewers it bested The Late Show
by over 800,000. Colbert, with 2.82 million viewers seemed mostly trying to keep a lead over Kimmel’s 2.3 million viewers.
ANDREW LIPOVSKY/NBC/NBCU PHOTO BANK VIA GETTY IMAGES
Meanwhile the producers at The Late Show kept their eyes on the mood of the electorate.
They had largely let Colbert promote Democrat Clinton, and even though she lost the election noted she had won the popular vote. As Colbert continued to criticize the President, his audience grew. Soon, Colbert was beating Fallon in total audience – something nobody predicted just a few months earlier. It was quite a surprise when the 2016-2017 September to May season drew to a close and it was discovered that Colbert actually won the time slot, producing a larger total audience than Fallon. It was only about 20,000 – but it was a win few saw coming.
The Late Show writers and producers noted the historic and growing unpopularity of President Trump, and the public interest in ongoing investigations, and built the headlines into the show. Variety headlined on 7/25/17 “Stephen Colbert’s Russia Week Lofts Late Show to Biggest Weekly Win Ever.” Using audience trends The Late Showdevoted a week to a comical look at Russia, which saw it generate a 2.87million total audience in comparison to The Tonight Show‘s 2.42million – a beat of a whopping 450,000 viewers.
All of this is very good news for CBS.
NBC (NBC/Universal is a division of Comcast) is not losing money on The Tonight Show. And in the desirable segment of those age 18-49 Fallon still has the largest audience. But, it is a good thing for CBS to have so many new viewers. It brings in more advertisers, and higher revenues for each ad. This leads to more profits.
One might say that this is all about the hosts, and their political leanings. Maybe the content is driven by host opinions. But CBS is winning viewers because it is following trends, and matching its programming to trends. This is growing its late night audience, while NBC’s is shrinking.
Steve Burke, chief executive of NBC Universal was quoted in the New York Times saying “I think the answer is for Jimmy to be Jimmy.” Sounds like what a father might say about his son when the boy finds himself in a rough patch. But I’m not so sure its the position a company CEO should take regarding a very expensive employee in the lead of a major project.
Maybe NBC’s producers should spend more time looking at trends, and figuring out how to program content that will improve The Tonight Show‘s competitiveness. The show was upended in just one year. What will total audience look like next May when the 2017-2018 season ends? Will revenues and profits be unaffected if NBC’s audience keeps falling while CBS’s keeps growing?
For the rest of us, the lesson should be clear. Nobody is relegated to always being #2. Regardless the leader’s size, if you study trends and figure out how to leverage them you can grow, and you can become #1.
Understanding trends and applying them to your business is the best way to invigorate growth and improve your competitiveness.
Leaders like to be deciders. Most leaders think of themselves as decision makers. In 2006 President George Bush, defending Donald Rumsfeld as his Defense Secretary said “I am the Decider. I decide what’s best.” It earned him the nickname “Decider-in-Chief.” Most CEOs echo this sentiment. Most leaders like to define themselves by their decisions.
But whether a decision is good or not is open to interpretation. Often immediately after a decision things may look great. It might appear as if that decision was obvious. And often decisions quickly make a lot of people happy.
As we enter the most intense part of the U.S. presidential election, both candidates are eager to tell potential voters what decisions they have made – and what decisions they will make if elected. And most people will look no further than the immediate expected impact of those decisions.
AP Photo/Chuck Burton, File
It takes time to determine the quality of any decision.
However, the quality of most decisions is not based on the immediate, or obvious, first implications. Rather, the quality of a decision is discovered over time, as the consequences are revealed – intended and unintended. Because quite often, what looked good at first can turn out to be very, very bad.
The people of North Carolina passed a law to control the use of public bathrooms. Most people of the state thought this was a good idea, including the governor. But some didn’t like the law, and many spoke up. Last week the NBA decided that it would cancel its All-Star game scheduled in Charlotte due to discrimination issues caused by this law. This change will cost Charlotte about $100 million.
That action by the NBA is what’s called unintended consequences
. Lawmakers didn’t really consider that the NBA might decide to take its business
elsewhere due to this state legislation. It’s what some people call, “Oops. I didn’t think about that
when I made my decision.”
Often unintended consequences are more important than first reactions to decisions.
Robert Reich, Secretary of Labor for President Clinton, was a staunch supporter of unions. In his book Locked in the Cabinet, he tells the story of visiting an auto plant in Oklahoma supporting the local union. He thought his support would incent the company’s leaders to negotiate more favorably. Instead, the company closed the plant. Laid-off everyone. Oops. The unintended consequences of what he thought was obvious support led to the worst possible worker outcome.
President Obama worked Congress hard to create the Affordable Care Act, or Obamacare, for everyone in America. One intention was to make sure employers covered all their workers, so the law required that if an employer had health care for any workers he had to offer that health care to all employees who worked over 30 hours per week. So almost all employers of part time workers suddenly said that none could work more than 30 hours. Those that worked 32 (four days per week) or 36 suddenly had their hours cut. Now those lower-income people not only had no health care, but less money in their pay envelopes. Oops. Unintended consequence.
President Reagan and his First Lady launched the “War on Drugs.” How could that be a bad thing? Illegal drugs are dangerous, as is the supply chain. But now, some 30 years later, the Federal Bureau of Prisons reports that almost half (46.3% or over 85,000) of inmates are there on drug charges. The U.S. now spends $51 billion annually on this drug war, which is about 20% more than is spent on the real war being waged with Afghanistan, Iraq and ISIS. There are now over 1.5 million arrests each year, with 83% of those merely for possession. Oops. Unintended consequences. It seemed like such a good idea at the time.
This is why it is so important leaders take their time to make thoughtful decisions, often with the input of many other people. Because the quality of a decision is not measured by how one views it immediately. Rather, the value is decided over time as the opportunity arises to observe the unintended consequences, and their impact. The best decisions are those in which the future consequences are identified, discussed and made part of the planning – so they aren’t unintended and the “decider” isn’t running around saying “oops.”
Think hard about the long-term complications of any decision.
As you listen to the politicians this cycle, keep in mind what could be the unintended consequences of implementing what they say:
- What would be the social impact, and transfer of wealth, from suddenly forgiving all student loans?
- What would be the consequences on trade, and jobs, of not supporting historical government trade agreements?
- What would be the consequences on national security of not supporting historically allied governments?
- What would be the long-term consequence of not allowing visitors based on race, religion or sexual orientation?
- What would be the consequence of not repaying the government’s bonds?
- What would be the long-term impact on economic growth of higher regulations on banks – that already have seen dramatic increases in regulation slowing the recovery?
- What would be the long-term consequences on food production, housing and lifestyles of failing to address global warming?
Business leaders should be very aware of the long-term consequences of their decisions. Every time a decision is necessary, is the best effort made to obtain all the information available on the topic? Are inputs and expectations obtained from detractors, as well as admirers? Is there a balance between not only what is popular, but what will happen months into the future? Did you consider the potential reaction by customers? Employees? Suppliers? Competitors?
There are very few “perfect decisions.” All decisions have consequences. Often, there is a trade-off between the good outcomes, and the bad outcomes. But the key is to know them all, and balance the interests and outcomes. Consider the consequences, good and bad, and plan for them. Only by doing that can you avoid later saying “oops.”
(Photo by Olivier Douliery-Pool/Getty Images)
There is a lot of excitement about President Donald Trump’s planned new executive order on immigration. Before the order is even public, the press has been grilling White House Press Secretary Sean Spicer about its contents. People are preparing to object before the document is even read.
Given that we know the order deals only with immigrants from seven countries, and that people from those countries do not constitute anywhere near a meaningful minority of immigrants (or tourists), one could make a case that in and of itself the executive order should not receive anywhere near this much attention.
But simultaneously, President Trump’s secretary of state and secretary of homeland security are visiting Mexico on Thursday — which is creating its own a firestorm of media coverage. The Mexican government leadership has already come out swinging, before the meeting, saying that the Trump administration policies are unacceptable. Not only is the wall construction unacceptable, but plans to deport illegal immigrants to Mexico — including illegal immigrants that are not Mexican — will not be tolerated. They want to know why should Mexico be forced to take Guatemalans, Hondurans and other non-Mexicans?
All of this controversy is being driven by the U.S. leadership, the president and his cabinet, failing to offer a clear policy on immigration. These executive orders, impending demands and vitriolic statements from the administration are like rifle shots aimed at something. But because nobody has a clue what the administrations real immigration policy is, it is impossible to understand the context from which these shots are fired. Nobody really knows what these shots are aimed at achieving.
So everyone, including the media, is left guessing, “what is the target of these actions? What is the overall goal? What is the administration’s immigration policy into which these actions fit?”
The administration says these actions are driven by “national security.” But it is impossible to understand that claim lacking any context. How are these specific actions supposed to improve national security, when every day people come to the U.S. from Europe and Asia with Muslim backgrounds and training? People cross the Canadian border daily who started in another country, yet they are not seen as the same threats as those who cross the southern border — why not?
Thus, each rifle shot looks an awful lot like an attack against the narrow interest being targeted — specifically middle eastern Muslims and Mexicans. And a lot of people are left scratching their heads as to why these folks are being attacked, other than they are simply easy targets for a part of the U.S. population that is horribly xenophobic.
Everyone — and I literally mean everyone — knows that America is a nation of immigrants. Last Labor Day I wrote about the benefits America has enjoyed by opening its doors to immigration. Recently Ryan McCready of Venngage put together a detailed infographic describing how over half of America’s billion dollar start-ups were founded by immigrants, how 33,000 permanent jobs were created by immigrants, how 76% of patents from top universities were filed by immigrants, and how 100% of America’s 2016 Nobel Prize recipients were immigrants. Nobody really doubts that immigrants have been good for America.
But, everyone also knows all immigrants are not the target of the Trump administration rhetoric, travel restrictions or executive orders. On January 28, in an editor’s pick column, I detailed how the border wall does not even address the problem of illegal immigrants that might be stealing jobs or committing crimes. If it was easy for me to produce the data that it is not illegal Mexican immigrants stealing jobs or creating crime, no doubt the people atop our government have even better data.
Another, possibly more obscure, example of an unaddressed immigration issue was brought to my attention in a recent BBC column (thanks to my cousin Susan Froebel from Austin, TX). Developers are planning for a large migration of retired Chinese to the U.S. These Chinese will enter America with no income, and no job prospects. They are escaping China, where the aged population is growing so fast there is great concern the workforce cannot care for them. They will increase the aged population in American, putting greater strains on all social services — housing, food, medicine. This will increase demands on the remaining American workers, as the U.S.’s own baby boomer generation retires, creating the worst imbalance of non-workers to workers in American history.
If there is any demographic you do not want immigrating to the U.S. it is a bunch of retired people. As I pointed out in my September 16 column, as any country’s population ages it creates a demand for more young immigrants to create economic productivity, growth and the resources to take care of the non-productive retirees. Rather than retirees, what America needs are young, productive immigrants who create and fill jobs — growing the economic base and paying taxes to support the rising retiree class.
But, I’d bet almost nobody who reads this column even knows about the impending explosion of retired Chinese planning to permanently enter the U.S. Even though the economic impact could be disastrous — far, far worse than a few million undocumented workers from Mexico or the middle east. Instead the focus is on two very targeted groups — Muslims and Mexicans.
The Elephant In The Room
Unfortunately, we all remember the infamous voter who attended a John McCain rally in 2007 and said that then-candidate Barack Obama was a Muslim born in Africa. In that moment that woman put forward the fears of so many Americans — that you cannot trust a dark skinned person. You cannot trust anyone who is not Christian. You cannot trust anyone who is not born within the U.S. Everyone else is someone to fear.
Lacking a well drafted, and at least somewhat comprehensive immigration policy, the immediate actions of the U.S. president sound a lot like, Stop the Muslims. Stop the Mexicans. After all, everyone knows they cannot be trusted. They are bad hombres.
Does the U.S. need more border protection? Does the U.S. need to crack down on illegal immigrants?Does the U.S. need to limit immigration? Perhaps yes — perhaps no. And if so, by how much? Right now nobody knows what the Trump administration immigration policy is. All the administration has put forward are rifle shots that appear to be pointed at the easiest targets of hatred in America today — Muslims and Mexicans. Whether these groups deserve to be targeted, or not.
Good leaders develop their vision first. The leadership team puts together the vision, mission and goals for the organization. Then this is developed into a strategy which guides investment and decision-making. The policy platform provides the context so the leaders, and all constituents, can identify the goals of the organization and the planned route to achieve those goals. After that is in place independent actions (decisions) can be evaluated as to their fit with the vision, mission and overall strategy.
As business leaders, President Trump and Secretary Tillerson (former ExxonMobile CEO) should know these first principles of leadership. Yet, they have failed to provide this vision. They have failed to describe their strategy to accomplish their mission. They have failed to tie their words and actions to a plan for achieving their goals (goals which are also still quite vague — such as “a safer America” or “a greater America”). So their actions are being interpreted by their constituents from each constituent’s perspective.
No wonder everyone has an opinion about what’s happening — and no wonder so many people are full of angst. There is a reason leaders take time in their early days to put develop their platform, and discuss it with constituents. Successful leaders make sure the people they depend upon know their vision, goals and strategy (in this case not only voters but Senators, members of Congress, the judiciary, law enforcement, military and regulators). Only after this do they take action — action clearly aligned with their vision, supported in the strategy and directed at achieving their goals.
For now, lacking the proper context, most Americans are interpreting short-term immigration actions as attacks on Muslims and Mexicans. Those who like these actions do so thinking it is proper, and those who dislike these actions think it is unfair targeting. But people will continue to make their own interpretations until a comprehensive policy is offered that explains a different context. As long as that policy is unclear, these poorly explained actions are examples of bad leadership.
(Photo: NICHOLAS KAMM/AFP/Getty Images)
“Get the assumptions wrong and nothing else matters” – Peter F. Drucker
President Donald Trump made it very clear last week that his administration intends to build a border wall between the U.S. and Mexico. And he intends to make Mexico pay for it. He is so adamant he is willing to risk U.S./Mexican relations, canceling a meeting with the Mexican president.
Unfortunately, this tempest is all because of a really bad idea. The wall is a bad idea because the assumptions behind this project are entirely false. Like far too many executives, President Trump is building a plan based on bad assumptions rather than obtaining the facts – even if they belie his assumptions – and developing a good solution. Making decisions, and investing, on bad assumptions is simply bad leadership.
The stated claim is Mexico is sending illegal immigrants across the border in droves. These illegal immigrants are Mexican ne’er do wells who are coming to America to live off government subsidies and/or commit criminal activity. The others are coming to steal higher paying jobs from American workers. America will create a h
Unfortunately, almost everything in that line of logic is untrue. And thus the purported conclusion will not happen.
1. Although it cannot be proven, analysts believe the majority (possibly vast majority) of illegal immigrants enter America by air. There are two kinds of illegal immigration. President Trump’s rhetoric focuses on “entries without inspection.” But most illegal immigrants actually arrive in America with a visa – and then simply don’t leave. These are called “overstays.” They come from Mexico, India, Canada, Europe, Asia, South America, Africa – all over the world. If you want to identify and reduce illegal immigration, you need to focus on identifying likely overstays and making sure they return. The wall does not address this.
3. More non-Mexicans than Mexicans were apprehended at the U.S. border – and the the number of Mexicans has been declining. From 1.6 million in 2000, by 2014 the number dwindled to 229,000 (a decline of 85%). If you want to stop illegal border immigrants into the U.S., the best (and least costly) policy would be to cooperate with Mexico to capture these immigrants as they flee Central America and find a solution for either housing them in Mexico or returning them to their country of origin. It is ridiculous to expect Mexico to pay for a wall when it is not Mexico’s citizens creating the purported illegal immigration problem on the border.
4. In 2015 over 43,000 Cubans illegally immigrated to the U.S. – about 20% as many as from Mexico. The cost of a wall is rather dramatically high given the weighted number of illegal immigrants from other countries.
5. The number of illegal immigrants living in the U.S. is actually declining. There are more Mexicans returning to live in Mexico than are illegally entering the U.S. Between 2009 and 2014 over 1 million illegal Mexican immigrants willingly returned to Mexico where working conditions had improved and they could be with family. In other words, there were more American jobs created by Mexicans returning to Mexico than “stolen” by new illegal immigrants entering the country. If the administration would like to stop illegal immigration the best way is to help Mexico create more high-paying jobs (say with a trade deal like NAFTA) so they don’t come to America, and those in America simply choose to go to Mexico.
6. Illegal immigrants are not “stealing” more jobs every year. Since 2006, the number of illegal immigrants working in the U.S. has stabilized at about 8 million. All the new job growth over the last decade has gone to legitimate American workers or legal immigrants working with proper papers. Illegal immigration is not the reason some Americans do not have jobs, and blaming illegal immigrants is a ruse for people who simply don’t want to work – or refuse to upgrade their skills to make themselves employable.
7. Illegal immigrants in the U.S. is not a rising group – in fact most illegal immigrants have been in the U.S. for over 10 years. In 2014, over 66% of all illegal immigrants had been in the U.S. for 10 years or more. Only 14% have been in the U.S. for 5 years or less. We don’t have a problem needing to stop new illegal immigrants (the ostensible reason for a wall). Rather, we have a need to reform immigration so all these long-term immigrants already in the workforce can be normalized and make sure they pay the necessary taxes.
8. The states where illegal immigration is growing are not on the Mexican border. The states with rising illegal immigration are Washington, Pennsylvania, New Jersey, Virginia, Massachusetts and Louisiana. Texas, New Mexico and Arizona have seen no significant, measurable increase in illegal immigrants. And California, Nevada, Illinois, Alabama, Georgia and South Carolina have seen their illegal immigrant population decline. A border wall does not address the growth of illegal immigrants, as to the extent illegal immigrants are working in the U.S. they are clearly not in the border states.
Good leaders get all the facts. They sift through the facts to determine problems, and develop solutions which address the problem.
Bad leaders jump to conclusions. They base their actions on outdated assumptions. They invest in the wrong places because they think they know everything, rather than making sure they know the situation as it really exists.
America’s “flood of illegal immigrants” problem is wildly overblown. Most illegal immigrants are people from advanced countries, often with an education, who overstay their visa limits. But few Americans seem to think they are a problem.
Most border crossing illegal immigrants today are minors from Central America simply trying to stay alive. They aren’t Mexican criminals, stealing jobs, or creating a crime spree. They are mostly starving.
President Trump has “whipped up” a lot of popular anxiety with his claims about illegal Mexican immigrants and the need to build a border wall. Interestingly, the state with the longest Mexican border is Texas – and of its 38 congressional members (36 in Congress, 2 in the Senate and 25 Republican) not one (not one) supports building the wall. The district with the longest border (800 miles) is represented by Republican Will Hurd, who said “building a wall is the most expensive and least effective way to secure the border.”
Good leaders do not make decisions on bad assumptions. Good leaders don’t rely on “alternative facts.” Good leaders carefully study, dig deeply to find facts, analyze those facts to determine if there is a problem – and then understand that problem deeply. Only after all that do they invest resources on plans that address problems most effectively for the greatest return.
(Photo by Shawn Thew-Pool/Getty Images)
Professor John Kotter (Konosuke Matsushita Professor of Leadership HBS) penned Power and Influence (1985, Free Press) after teaching his course of the same name at the Harvard Business School. The one thing he found clear, as did his students (of which I was one), was that a person can be powerful and have influence, but that does not make them a leader. Leaders understand how to create and use both power and influence. But merely having access to either, or both, does not make a person a leader.
One of my mentors, Colonel Carl Bernard, famed leader of U.S. Special Forces in Laos and Vietnam during the 1960s, met an executive at DuPont in the mid-1980s who had been given a large organization but was struggling. Col. Bernard was asked to review this fellow and offer his leadership insights so this fellow’s peers could help him be a better corporate leader. After a few meetings with this exec, alone and in groups, Col. Bernard concluded, “DuPont can give him resources, and access to the CEO, but that man could not lead a Boy Scout troop. Best they close the business now before he causes too much trouble. There’s nothing I can do for him.” Two years later, and tremendous turmoil later, DuPont did close that business, fired him and wrote off everything the company had invested.
Last Friday, Donald Trump was sworn in as president of the United States. He now has the most powerful job in the free world and unparalleled influence. But, he’s not yet proven himself a leader. His accomplishments to date have all been executive orders – issued unilaterally. To achieve the title “leader,” he has to prove people will follow him.
President Trump did not win the popular vote, and he assumes his new job with the lowest approval rating of any first-term president ever elected. Numbers alone do not imply that the country is ready to call him its leader.
Historically, a president has had to screw up in office to have such low popularity. But on Saturday millions of demonstrators took to the streets of Washington, Los Angeles, Chicago, Minneapolis and other cities to protest a president who had yet to do anything in his new role. Far more demonstrated than attended the inauguration, which had about half the attendees as Barack Obama’s first inauguration. It took Lyndon Johnson years to create the animosity which lead to demonstrators chanting, “Hey, hey LBJ, how many kids did you kill today?” (referencing his escalation of the Vietnam War).
Business school thought leaders, and business executives, have been studying leadership for at least six decades, and they have discovered there are consistencies in how to encourage followership. Roger Ferguson, CEO of TIAA-CREF, said leadership is about inspiring people
. He teaches that this is done by
• demonstrating expertise – which Trump has yet to do as a politician,
• making yourself appealing – which Trump has missed by deriding those who speak out against him,
• showing empathy for others – a trait so far missing in Trump’s tweets, or comments about detractors
• and showing the fortitude of being the calm in the storm – the opposite of Trump, who’s fiery rhetoric creates more storms than it calms.
In 2013, fellow Forbes contributor Mike Myatt offered his insights into how one should lead those who don’t want to follow, tips that should be very interesting to the unpopular President Trump:
• Be consistent. This seems the antithesis of Trump, who favors inconsistency and campaigned that as President he intended to be inconsistent.
• Focus on what’s important. Reading Trump’s tweets, it is clear he struggles to separate the important from the meaningless
• Make respect a priority. Should we talk about Trump’s references to women? Or his comments about war heroes like John McCain?
• Know what’s in it for the other guy. Trump likes to brag about taking advantage of others in his business dealings, and showing blatant disregard for the concerns of others. Recommending African-Americans vote for him because “what have you got to lose” does not demonstrate knowledge of that constituency’s needs.
• Demonstrate clarity of purpose. Firstly, what does it mean to “make America great again?” It would be nice to know what that slogan even means. Second, if Trump is the President for “those of you left behind,” as he referenced in his inauguration speech, can he tell us who is in that group? Am I included? Are you? How do you know who’s in this group he now represents? And who’s not?
Americans frequently confuse position with leadership. Many CEOs are treated laudably, even after they have destroyed shareholder value, destroyed thousands of jobs, stripped suppliers of money and resources, doomed local economies with shuttered facilities and left their positions with millions of dollars despite a terrible performance. These CEOs demonstrated they had power and influence. But many are despised by their former employees, investors, bankers, suppliers and community connections. They did not demonstrate they were leaders.
Despite his great wealth, which has bought him substantial power and influence, Americans have yet to see if President Trump can lead. He has never been a commissioned or non-commissioned officer in a military organization. He has never led a substantial corporation with large employment. He has never led a substantial non-profit or religious organization. Contrarily, he has largely been the head of hundreds of small businesses (by employee standards) many of which he has closed or bankrupted, often leaving people unemployed, his investors losing money and communities (such as Atlantic City) worse off from his real estate dealings.
I prefer to write about corporate leaders and market leaders. But for a while now, almost all the news has been about Mr. Trump. Now President Trump, who has not previously led even a Boy Scout troop. One wonders of Col. Bernard would think he could.
“The greatest leader is not necessarily the one who does the greatest things. He is the one that gets the people to do the greatest things” – Ronald Reagan
Trend analysis is the most critical part of planning.
Some trends are hard to spot, because people think they are just a fad. Many folks think electric cars fit that category.
Other trends are hard to accept because they imply a big shift in how we live or work – or how we run our business. Scores of IT people who have written me over the years saying mobile devices on common networks (telecom to AWS) will never replace PCs connected to server farms. The implications of this trend are severely negative related to demand for their skills, so they ignore it.
But every plan should be built on trends, because these forecasts are critical for decision-making. It’s the future that matters, not the past. Too often plans are built on history, when trends clearly indicate that things are going to change, and old assumptions are outdated.
Demographic trends are easy to forecast, and important.
While some trends are hard to forecast, some trends are really easy to spot and forecast. And the easiest trend to understand is demographics. If you don’t use any other trends in your planning, you should have demographic trends at the core of your assumptions.
Take for example the movement of people across the United States. Ever since the wagon train people have been moving west. And, like my friend Buckley Brinkman (executive director and CEO of the Wisconsin Center for Manufacturing and Productivity) likes to say, “ever since the invention of air conditioning people have been moving south.” Yet, I’m startled how few organizations plan for this shift and adjust their strategies and tactics to be more successful.
From July 1, 2015 to July 1, 2016 the seven fastest growing states were western. And of 50 states, only eight lost population.
Growth is sublime, decline is disastrous.
Bruce Henderson, founder of the Boston Consulting Group, used to say that if you want to hunt or farm you’re far better off in the Amazon than you are in the Arctic. Basically, where there are resources, and lots of growth, it’s a lot easier to succeed.
For business, this means that if you want to grow your business – whether you’re installing HVAC systems or building a state-of-the-art battery manufacturing plant – you’ll find it relatively easier in faster growing states. It doesn’t mean there is no competition, but it does mean that growth makes it easier for competitors to succeed.
Contrastingly, there were eight states that lost population in this same 12 months.
This means that competition is intensifying in these states. As people move out there are fewer customers to buy what each business sells, so these companies have to fight harder, and price lower, to grow – or even maintain. As the population declines taxes have to go up because there are fewer taxpayers to cover government costs. These states become less desirable places for business.
The businesses in Illinois, for example, are in the middle of a bare-knuckle brawl over the state budget that has gone on for two years. The Governor and the legislature cannot agree on how to manage costs, or revenues. Bond ratings have been slashed as costs to borrow have gone up. Several services have been shut down, and student costs at universities have gone up while programs have been gutted or discontinued.
Governor Rauner (R – IL) has repeatedly said he wants Illinois to be more like Indiana, its neighbor to the east. Perversely people apparently are listening, because Illinois is shrinking, while Indiana grew a healthy 0.31%. For residents remaining in Illinois this worsens a host of maladies:
• the state’s jobs situation struggles as the number of paying jobs declines, making it harder to recruit new talent, or even keep its own university graduates;
• Illinois’ pension problems worsen, as there are fewer people paying into the pension funds while those drawing out funds keep increasing;
• Illinois is unable to fund schools properly, especially Chicago, due to less income – forcing up property taxes;
• taxes keep rising due to fewer people and businesses (when adding property taxes, sales taxes and income taxes Illinois is now the highest tax state in the country);
• new highways are being built with federal funds, but other infrastructure is in trouble, as city, county and state roads are pothole ridden. Trains and subways become outdated and fall into disrepair. And one-time budget Hail Mary’s, like Chicago selling its parking structures and meters in order to balance the budget for one year, strip citizens of future revenues while they watch parking (and other) service costs skyrocket;
• and Chicago has suffered the lowest real estate recovery rate of the top 30 major U.S. cities –not even returning to prices in 2008.
Growth solves a multitude of sins.
Just like a rising tide raises all boats, growth creates more growth. More people increases demand for everything, which increases business sales, which increases jobs and wages, which increases the value of real estate and household wealth, which increases tax revenue, which allows offering more services to make a state even more appealing.
On the other hand, shrinking can become like the whirlpool over a drain. As the problems increase more people decide to leave, making the problems worsen. As more people go, there are fewer people left behind to make things better. Jobs go away, wages fall, demand drops, real estate prices drop, infrastructure projects stop, services stop and yet taxes have to be raised on the fewer remaining residents.
Few trends are more important for planning than understanding demographics. Demographics affect demand for everything, and planning for changes offers businesses the opportunity to be in the right place, at the right time, to be more successful. And, demographic trends are some of the easiest to predict:
• population size
• average age, and sizes of age groups
• average income, and sizes of income groups
Plans should be based on trends, not history. Understanding trends, and their trajectory, can help you be in the right market, at the right time, with the right product in order to succeed. There are lots of trends, but one that is fairly obvious, and incredibly important, is simply understanding demographics. Is this built into your planning system?