Blog posts on long term thinkingPosts selected fromManagement Blog - Engineering Blog - Investing Blog and other blogs - Improving the 401(k) System
Many people don’t even take advantage of a 401(k) to save for their retirement. From a public policy perspective it creates a huge long term problem. The economy will end up with millions of people that didn’t save for retirement and will be a drain on those who did save for retirement and the rest of the economy.
So Congress actually passed a good revision to the law. Employers will now be required to default to having employees save for their retirement in 401(k) plans. The employee still has the option to decline doing so, but now, without such a choice, they will automatically save for retirement. continue reading: Improving the 401(k) System - Saving for Retirement
Saving for retirement is not complicated, it is just a matter of priorities. Most people care more about a Startbucks coffee each day (or season tickets, or new shoes, or a new car every couple of years or…) today than saving money for retirement. In a capitalist society we believe in letting people make their economic choices. The choices most of us make (in the USA) lead to the results above (few saving enough for retirement).
Savings for retirement is difficult mainly because of our trouble planning for the long term, it is not at all a complex problem. The fable of the ant and the grasshopper illustrates this point very simply and it is really that simple. People need to do a better job of applying the lessons from that story to their retirement savings. continue reading: Saving for Retirement - Lean Manufacturing Success
Not only is this a nice story but it is one small example of the good people working at GM and Ford. The problem is not the individual workers it is management. It is too bad that those companies, that did take great strides in the 1980 and early 1990s to improve (starting with Deming’s Management ideas) let those efforts fade away. continue reading: Lean Manufacturing Success - Dell, Reddit and Customer Focus (2006)
I think most of Dell's users do not notice what Dell is doing, exactly. Reddit readers, however, by and large, do, which is one thing that makes reading Reddit fun. I find Reddit's users can point out, not just problems, but the systemic causes of those problems (so they vote up the links that do exactly this).
Most customers might not see the chain leading to their frustration but the do know they don't like that the computer is slow and they have to wade through all sorts of software (much of which they don't need or want). I think the author was exactly right that the source of the problem is Dell's monetary incentive is to get paid to add more and more stuff not to give the users what they need.
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Mainly I think these critical looks at practices are fun reading, but there is also a management issue to understand. There are many smart people who know how to voice their opinion (and the internet can connect that voice to large numbers of people). In this day and age, if you think your imperial halo with protect you from the masses you had better hope none of these people get a look at what you offer. If you are figuratively naked, they will see, and they will shout that fact from the mountain top. continue reading: Dell, Reddit and Customer Focus (2006) - Our Energy Future (2006)
 Huge price increases will provide incentives to those in the market to innovate to find alternative ways to make money by providing usable energy sources. If the market, overall, chooses to look forward over a long period of time, then investment in alternatives will begin in earnest early and prices of oil will slowly rise. And as prices rise slowly new alternatives (including ways of reducing consumption) will slowly come into the market. Those alternatives will slowly substitute for oil as a smooth transition is made.
If markets actual were efficient and driven by looking far into the future and discounting cash flows to the present this slow and steady model is what would happen. The market can only be efficient if good long term predictions can be reflected in the market. continue reading: Our Energy Future (2006) - Better and Different
The answer, as I see it, is to be better and different (when necessary).
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if you have to choose one, just being better will work most of the time. The problem is (using an example from Deming, page 9 New Economics) when, for example, carburetors are eliminated by innovation (fuel injectors) no matter how well you make them you are out of business.
Often people mistake Deming’s ideas as only about being better. He stressed not only continual improvement (Kaizen, incremental improvement, SPC) but also innovation. He stressed innovation both in the normal sense of innovating new products for customers and also innovation in managing the organization. continue reading: Better and Different - Dell Falls Short
Don’t give management a free pass just because they cave in to short term thinking. Management should know better and has a responsibility to do better. It is predictable that if management fails to setup an effective management system that they will fall victim to short term thinking. Still that doesn’t mean they are not responsible for making decisions. They are the managers of the company not some analyst on Wall Street. continue reading: Dell Falls Short - Toyota Homes
I still am surprised Toyota isn’t doing more with mass transit but they obviously know more than me. Toyota partner robots are a good strategic vision in my opinion.
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Could Toyota’s efforts beyond automobiles create problems over the long term? Yes. But Toyota’s solid management system is built with the knowledge that change is inevitable (Toyota’s Early History – Toyota was a loom maker before moving into the automobile industry). If Toyota wants to prosper in the future it needs to contoinue to grow and adapt and take risks. continue reading: Toyota Homes - Quality and Innovation
I really don’t understand how people can talk about innovation as if it were some new discovery. Yes I understand we can bring a different focus to innovation. We can reconfigure management structures to encourage and support innovation. That is good. And new ideas are being developed, but the innovation fad is silly. And accepting the notion that this innovation stuff is some new idea will make managers less effective than if they understand the past.
New Economics by W. Edwards Deming, published in 1992, page 7:
Does the customer invent new product of service? The customer generates nothing. No customer asked for electric lights… No customer asked for photography… No customer asked for an automobile… No customer asked for an integrated circuit.
Innovation has long been important to those interested in management improvement. continue reading: Quality and Innovation - Gladwell (and Drucker) on Pensions
The most influential management theorist of the twentieth century was Peter Drucker, who, in 1950, wrote an extraordinarily prescient article for Harper’s entitled “The Mirage of Pensions.” It ought to be reprinted for every steelworker, airline mechanic, and autoworker who is worried about his retirement. Drucker simply couldn’t see how the pension plans on the table at companies like G.M. could ever work.
Pension plans did work well for a short period of time. But recently they (along with the attached retiree health care) are one of the big problems facing large old companies: like GM. Gladwell talks about the dependency ratio for an economy and the dependency ratio of companies. Worsening dependency ratios can cause pension plans to kill companies (if they are not funded when the obligation is incurred) – as the company is forced to pay for more and more retirees with fewer and fewer workers. continue reading: Gladwell (and Drucker) on Pensions - Amazon Innovation
In my view Amazon is doing some very interesting innovation...
I continue to believe they have a good shot at doing so going forward (and their core business is doing very well I think). Innovation often involves taking risks. Bezos is willing to do so and willing to pursue his beliefs even if many question those beliefs. That means he has the potential to truly innovate, and also means he has to potential to fail dramatically. continue reading: Amazon Innovation - 3M CEO on Six Sigma
...the adoption of a newly branded management fad (from MBO to TQM to BPR to Six Sigma to Lean Six Sigma…) as the “solution” to this problem is doomed to fail (just like the last 5 times it was done) and rightfully make managers adopting such a re-branding solution the subject to ridicule by Dilbert readers. Adopt a management system. Make it yours. Incorporate good ideas from the outside but incorporate them into a long term management system that remains stable. continue reading: 3M CEO on Six Sigma - Long Term Thinking at Toyota
- Google Website Optimizer
- Historical Global Economic Data and Current Issues for Globalization
China and India/Pakistan accounted for 73% of the world manufacturing output in 1750. They continued to account for over half of global output even as later as 1830. By 1913, however, their share had dropped to 7.5%.
That shows how quickly things changed. The industrialization of Europe and the USA was an incredibly powerful global economic force. The rapid economic gains of Japan, Korea, Singapore, China and India in the last 50 years should be understood in the context of the last 200 years not just the last 100 years.
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I believe he is onto something. I have for years been seeing the strains of “comparative advantage” in our current world economy. That doesn’t mean I am not mainly a fan of freer trade. I am. I don’t think complex trade deals such as TPP are the right move. And I do think more care needs to be taken to consider current economic conditions and factor that into our trade policies.
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The complexity of the economic consequences of international trade require knowledge, skill, patience and practical thinking to create economic gains going forward. I am worried about the foolish leaders we are electing in many of the rich countries recently. They do not appear to understand complexity or value the importance of expertise, uncertainty and implementation of economic policy. The complexity today requires more understanding, study, learning and care than was required last century but instead we are electing people with less wisdom than ever (and we were not electing incredibly wise people very often in the past). continue reading: Historical Global Economic Data and Current Issues for Globalization
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