Chaos, Order, and Music

One of my favorite quotes about the epistemology of music comes from Dr Anthony Storr’s book, Music and the Mind (1992, p. 64):

Language does not emanate from the Earth, but from the human brain. So does music. The universality of music depends upon basic characteristics of the human mind; especially upon the need to impose order upon our experience… Languages are ways of ordering words; political systems are ways of ordering society; musical systems are ways of ordering sounds. What is universal is the human propensity to create order out of chaos.

Higher Education, Experience, and Skills

One of the questions I regularly pose to my economics students is whether a college education is a contributor to productivity. Intriguingly, what I get in response often parallels the views of Greg Ip of the Wall Street Journal (2008, “The Declining Value Of Your College Degree”), who argues “college-educated workers are more plentiful, more commoditized and more subject to the downsizings that used to be the purview of blue-collar workers only. What employers want from workers nowadays is more narrow, more abstract and less easily learned in college.” In essence, the value of a college degree is said to be “not what it was.”

Nonetheless, a college education remains an important predictor of productivity (and earnings) in the marketplace. Even Ip concedes that “the average American with a college diploma still earns about 75% more than a worker with a high-school diploma and is less likely to be unemployed.” Given these facts, how can it be that students are so vexed by the value proposition of their education?

I have previously written about our new economy, the need for good people in our society, as well as the importance of polyvalence in the workplace. I argue here that there exists today a crying need for people with versatile skills sets in what is a transforming global economy and that the university offers the best opportunity to acquire the knowledge required to succeed in this environment.

This leads to the next contention I often hear from students, that “experience counts more than education?” My response to this view is, “not really,” because what is paramount is neither experience nor education, but skills, and if one is complacent in acquiring new skills experientially, embedded knowledge eventually becomes obsolete. The good news is that experience often translates into new more refined skills. The bad news is that breadth and depth of knowledge are not assured through experiential learning. Hence, attention is required to ensure one’s career track includes a multiplicity of experiences in organization and management across a diversity of functions, and eventually industries. In my view, the university offers the most efficient place to acquire breadth and depth of knowledge, as opposed to the workplace, where resources and opportunities for the same are typically limited. Experience that does not result in additional skills has little value in the workplace.

Finally, there is the matter of college graduates who are anomalously incompetent. This happens, and when it does, these people are released for cause. Those who finish a college degree program while somehow avoiding skill acquisition, do so at their peril. Acquiring new skills is the responsibility of all workers who wish to enhance or expand their careers, but especially college graduates. To attend a college or university and not acquire new knowledge along the way is a bewildering and perplexing outcome that defies good judgment.

Concluding, a college education is the most reliable track to improving skills, productivity, and earnings. And while experience can certainly result in new skills, the typical worker will find acquiring the breadth and depth of knowledge necessary to enhance or expand a career through experience alone, challenging. A college degree is still the most profound symbol of embedded knowledge available in our society today.

Competing on Analytics

Now that analytics have come into vogue, we are seeing the beginnings of what might be called “quantitative showmanship” whereby companies leverage their analytic capacities in the marketplace seeking competitive advantage. Still, it is difficult to “fake” analytic reasoning, which might explain why competing on analytics is so powerful. In truth, while some companies are truly taking the lead in analytics, others may be deluding themselves into believing their analytic capabilities are greater than they are.

Companies seeking to become analytically competitive should first assess the current state of their extant capabilities. Prof Thomas Davenport and Jeanne Harris in their book, Competing on Analystics (Harvard, 2007), present a framework of five stages of analytic development (see below). "These stages can describe the path that an organization can follow from having virtually no analytical capabilities to being a serious analytical competitor." But, while many companies fancy themselves to be analytic competitors, many possess only localized capacities, and some are simply analytically impaired.

Source: Adapted from Davenport & Harris, Competing on Analytics (2007), p. 35.

Being someone who works with analysts from around the world on a regular basis, I have a unique vantage point from which to assess how companies and governments are doing. Here are some lines that epitomize what I see more often than not:

Leaders who “don’t get it.” There is nothing more discouraging for an analyst than the leader who listens to an analytical proposition, and then asks something like, "is this experimental?” Leaders who are not versed in financial risk analysis might consider reviewing these subjects with a statistics coach in order to reacquire their poise and confidence with quantitative reasoning.

People who “hate” numbers. Let’s face it, not everyone is an analyst, which is fine. Still, some people truly despise thinking quantitatively. As companies foray deeper into analytical competition, it is necessary that we begin to recognize and advance the people who in fact “love” to think quantitatively.

Processes that “swirl” in support of conjecture. For example, many IT installations are premised on false hopes and promises, and implementation of technology solutions in isolation cannot affect analytic advantage. It is important that we begin to discipline IT departments to ground technology projects upon facts that are validated by hard rather than soft evidence.

Technology that fails to capture, sort, and make sense of data. For example, companies have reached the point where fancy office applications alone do nothing to add value. What is needed are better analytical tools that have the capacity to acquire, encode, modulate, and output information arrays in a form that is useful and actionable for creating and sustaining competitive advantage.

While I am delighted to see analytics moving into the limelight, we have a long way to go before companies across America can honestly claim to be analytic competitors.

From Populism to Pluralism

With presidential elections underway in the US, it seems a new electorate stands ready to participate, not just as voters, but as purveyors of power. By this, I mean that today’s voters seem less interested in the presence and content of who a candidate is, than in reshaping the nature of the presidency itself, regardless of who eventually fills the office.

Indeed, we live in exciting times as populist values, myths, and mores come face-to-face with the forces of pluralism. Evidence of a new economy is now indisputable as we head deeper into the third millennium. But, what of a new politic as well? I ask this recognizing that historically, political reform tends to lag economic upheaval.

If it is true that universal suffrage solidified populism in the modern age, it now appears that America is once again restless as it agitates for reform of the presidency as an institution, away from its modern function as the podium of populist pundits, into a fulcrum from which the voices of pluralist reason are leveraged, of and for the people.

The peoples’ call for change is not simply about electing a new president, but about changing the very nature of the presidency as society navigates its way through populism toward pluralism in the new century. Perhaps we will see democracy reborn in our time.

IT Implementation Failures

An alarming number of information technology (IT) projects fail. The oft-cited statistic is that greater than half of all IT implementations are out of variance with one or more critical requirements or specifications.

Of particular concern is that value-added resellers dressed up as "independent" consultants are frequently behind these failures. The troubling pattern is that the problem or opportunity to be solved is never validated by hard evidence. Hence, the client buys the "wrong" solution, while the "real" problems and opportunities remain out of scope. To be fair, not all value-added resellers focus on aligning specific IT solutions with any and every problem. Other problem-solving approaches such as evidence-based management and consulting are gaining traction in response. In the mean time, more and more firms are seeking some "fix" for a failed or failing IT initiative.

How do you know when your IT project is "going bad?" Here are some warning signs offered by CIO Magazine (2007):

• Project team lacks substantial buy-in and interest in the project’s success
• Poor communication between stakeholders and project team members
• Few interim deliverables, so tangible progress is not demonstrated
• Bad news isn’t allowed to be shared, meaning denial is pervasive
• Project team works lots of overtime, suggesting the schedule is slipping
• Project resources are frequently diverted to other activities
• Interim milestones are often missedReducing project scope is viewed as an acceptable means to meet budget and schedule requirements

ESL International (2006) offers this list of flags:

• No one has a firm idea of when the project will be finished and most people have given up trying to guess
• The product is laden with defects
• Team members are working excessive hours—20 or more hours per week of involuntary overtime
• Management has lost its ability to control progress or even to ascertain the project’s status with any accuracy
• The customer has lost confidence that the project team will ever deliver the promised goods
• The team is defensive about its progress
• Relations between project team members are strained
• The project is on the verge of cancellation
• The morale of the project team has hit rock bottom
• The customer is threatening legal action

I recently had a career IT professional say to me that most of the IT projects he had been involved with over the years were, in his words, "experimental." The remark stunned me, but perhaps explains why so many IT implementations fail. Many IT professionals started their careers as programmers, network administrators, and installation specialists. In each of these roles, "trial and error" problem-solving techniques prevail, so it is not surprising to see the same cohort of IT experts continuing to rely on these same methods. What is changing however is that IT projects now undergo continuous scrutiny for return on investment, and many IT professionals are unprepared for this reality by either training or temperament.

If your IT project appears to be in one or more of the states described above, it may be time to bring in another set of eyes to see just what is going on, and perhaps consider an entirely different approach to your firm’s needs.

The Future of Work

Polyvalence is the future of work, and therefore management. Whereas the previous economy bred specialization, today's economy invites "workers" to enjoin knowledge. Work itself is instructive: taskings are non-delegable; production happens without supervision; communications and information are ubiquitous; and attention is a commodity.

For management, the "where" of work is incomprehensible. Yet, the topography of the new workplace has shape and form: space is supplanting place; companies compete on analytics; evidence-based thinking is in vogue; jurisdictions are morphing; metal and flesh are fusing; cyberspace seems to have a conscience; the human genome is technology; and the symbolic is now menial.

These modern times are embedding a transformed image of economics onto our society in what is now a new age. The challenge for the future will be how to connect enterprise to the new economic landscape.

Create a Personal Board of Advisors

This advice comes from Dale Winston, CEO of Battalia Winston International, an executive-search firm. "Identify two to three professionals you can regularly go to for career consultations, much like check-ups at the doctor’s office." She goes on to say the “board” should meet on an "as-needed basis," but "no less than three times a year" (WSJ, 2008).

The truth is we all have support needs. We might turn to our significant other, a family member, a close friend or colleague, an elder, or even a stranger, depending on the situation. Recruiting and forming a team of trusted advisors makes good sense, especially for busy executives with tough issues to confront. Of course, it remains your responsibility to make your own decisions. It is also important to trust your advisors while demonstrating to them how they can trust in you. Nevertheless, a personal advisory board may be just the thing to help shape your future.

The Need for Good People

I believe there is always a crying need for good people. My father passed these words to me following one of my adolescent tirades about the apparent lack of opportunity in my life – that was almost forty years ago. Today, while attractive opportunities seem scarce to many in society, the need for good people is as great as ever.

My own career has taken me through both highs and lows in advancement and success. My work history spans three decades and includes public and private sector roles that have taken me around the world. I have worked in tents, factories, offices, camps, hangers, barracks, warehouses, restaurants, vans, kiosks, aircraft, and classrooms, as well as on stage, behind podiums, on telephones and radios, and of course, online. Each of these workplaces was a vantage point from where I could watch and learn how opportunity presents itself to people. The result of these experiences is my deep conviction that opportunity abounds in our world, and that what is in short supply are good people.

Choosing to believe that opportunity is abundant is not an easy path for anyone, including me. It means taking risks and accepting responsibility. It means lifetime learning. It means practicing integrity in my affairs, keeping promises, and exercising compassion for those less fortunate. Ultimately, it means living life centered on the ideals and virtues that lift humanity, while becoming the best person, I can be.

My father understood this very well. He grew up a depression child, joined the Marines during World War II, earned an accounting degree after the war, and raised a family on a salary thereafter. He has since passed away, but his legacy to me are his words that find their way into my beliefs and values, and while I am now on my own course through life, what is clear for me is that opportunity is abundant, and that the search for more good people goes on, just like it always has. Choosing to live life abundantly is a choice I hope I can realize in who I am and will become. Life’s opportunities are as great as ever, and the choice of becoming the person who can fulfill society’s need is mine to make everyday. My father was right; there is always a crying need for good people, now and in all times. This I believe.

More at This I Believe

My Mission

Dr Stephen Covey makes the point that "the key to the ability to change is a changeless sense of who you are, what you are about, and what you value." Hence, "who am I, what am I all about, and what do I value?" These are all good questions.

For years now, I've tried to guide my actions and decisions based upon an integrated and comprehensive understanding of my beliefs, values, knowledge, experiences, motives, and drives -- what some might call a "mission statement." Here is my mission as it appears in a framed version that stands on my desk:

• I am MY OWN MAN. I choose how to LIVE my life. I take RISKS and accept RESPONSIBILITY. I have a right to be HAPPY.

• I am a LEARNER. I seek to UNDERSTAND life and the universe. EXISTENCE is instructive.

• I make INTEGRITY a guiding principle in my affairs. I am impeccable to my WORD and strive for ACHIEVEMENT. I avoid taking things PERSONALLY, and resist making ASSUMPTIONS about people.

• I respect POWER and understand how KNOWLEDGE, WEALTH, and VIOLENCE affect me. I practice INNOVATION, IMPROVISATION, and ADAPTABILITY.

• I match PROFIT to PRINCIPLE in the conduct of business. I promote ENTERPRISE amongst STAKEHOLDERS. I foster and nurture COLLEGIALITY within my domains.

• I am FRUGAL. I seek to get the most VALUE from my time and the things I have the use of. I invest for my ESTATE and use it to pursue a LIFESTYLE of fitness and growth.

• I practice CHIVALRY. I have COMPASSION for the innocent. I MENTOR deserving talent along the way and give the CREDIT to those who deserve it.

• I live in the LIGHT and fear the darkness. I understand the difference between REALITY and delusion. I believe TRUTH prevails over lies.

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Ternary Capital Structure

In this occasional paper, I discuss the emergence of structural capital as the ternary equivalent to human and financial capital. The paper describes the current state of structural capital as part of a larger intellectual capital framework.

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About Vantage

Executives activate enterprise by vectoring human, financial, and structural capital resources through operating, investment, and financing decisions. The quantum resultant of these vectors is generally reported through proxy measures such as profitability, capability, capacity, market share, influence, and perspective. The ternary interrelationship of human, financial, and structural capital to their whole can be depicted influentially as shown below, and requires from management ever more advanced concepts and methods in order to achieve and sustain competitive advantage in the global marketplace. The stakes in these decisions are high. For individuals, such decisions generally affect financial freedom, which in turn leads to time and relationship freedom. Organizationally, they determine the fulfillment of stakeholder needs, wants, and expectations. The essence of enterprise lies within the topography of this framework.

Financial capital is the sum of the depreciation, amortization, depletion, rent, interest, and maintenance expenses associated with holding or using commoditized financial assets (both tangible and intangible). Human capital is the sum of wages, benefits, commissions, and other expenses associated with employing people (i.e., those who go home at night). Structural capital is what remains after accounting for the financial and human capital of the firm.

While the competition between financial and human capital has been the subject of classical and neoclassical economic debate, ad nauseam, it is the emerging recognition of structural capital as the ternary equivalent to these traditional capital forms that provides the vantage point for visualizing the topological landscape which stands guard before the vista of strategic success.

Patterns of Beauty in Finance

This is an occasional paper I released arguing that there is beauty in the patterns discovered by financial economists that transcends symbolism and nominalism in what only the mind can understand within its conceptual space.

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Towards Matching Profit to Principle: Pricing Matters

This is a short editorial essay I submitted to We > Me in March 2007, arguing that capitalism must seek to match profit to principle if the world community and global enterprise are to thrive together in our modern times.

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Critical Modeling Strategy

In this occasional paper, I promote critical thinking by modelers in finance and accounting. In particular, I argue that reliability and validity checks are integral to the business modeling process.

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New Approaches to Finance and Accounting

In this occasional paper, I discuss the issues affecting accounting reform from the perspective of the stakeholders, including investors, management, regulators, academia, and the accounting profession itself. My conclusions argue for future reforms in accounting and finance, irregardless of the untimely nature of such reforms on all stakeholders.

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