Polyvalence Defies Commoditization

One of the tacit objectives of commoditization is to disembed knowledge from humans in order to reembody that knowledge into technology (Giddens, 1990). The impact of commoditization on knowledge workers is a well-understood facet of post-modernization and the new economy.

The success of the commoditization movement has been particularly discouraging for professional services as the public sector is increasingly unwilling to pay premium fees for services, and the private sector is too distrustful of professionals to engage them even when doing so is arguably prudent. Joan Capelin's (2005) expressed sentiments are commonplace:

It is cold comfort to realize that all the professions are experiencing this race to the bottom. We tend not to see the effects of commoditization — nor even feel sympathetic — when lawyers, accountants, and management consultants find they are being squeezed for lower fees by their marketplace. They are far more rewarded for their time, to begin with. But I can tell you that there is much handwringing going on across all the business-based professions.

Nevertheless, as the forces of commoditization continue their forays into the realm of human knowledge in search of latent technologies, critical issues are emerging about how and if certain human specific functions can feasibly be transferred into machines. In particular, the expert handling of polyvalent information and data seems to defy commoditization.

Polyvalence denotes something that has multiple values, meanings, or appeals. Polyvalence (which is a synonym for multivalence) is a state or the way something is with respect to its main attributes, as in “the current state of knowledge,” “the state of one’s health,” and “the state of the economy.” Polyvalent symbols and metaphors carry multiple (often esoteric) meanings and can fulfill expressive, transactional, and interactional functions concurrently.

Prof Daniel Bell (2003) first used the term polyvalent to describe human activities that are difficult or impossible to delegate, let alone commoditize. Examples of polyvalent human functions include surgery, piloting an aircraft, coaching a professional sports team, and representing a client in court. Thus, the professions are often associated with polyvalence.

If technology can displace a particular human activity, then the displaced activity is no longer truly polyvalent.

More to follow about polyvalence in future posts.

Sources:

Capelin, J (2005, September 8), Confronting Commoditization, DesignIntelligence.

Cohen, D (2003), Our Modern Times: The New Nature of Companies in the Information Age (S Clay and D Cohen, Trans), Cambridge, MA: MIT Press.

Giddens, A (1990), The Consequences of Modernity, Stanford, CA: Stanford University Press.

Related Posts:

Financial Management Requires Polyvalence

The Topological Landscape between Automation and Expertise

The Topological Landscape between Automation and Expertise

Over the ages, the topological space occupied by automation and technology has continued to expand its domain such that humanity has had no recourse but to seek refuge in discovery and innovation. Of course, the innovations of today become the technology of tomorrow, and so humans are continuously driven deeper into the unknown in search of new knowledge and ideas that might somehow ensure the survival of the human race in what is apparently a hostile universe. The chart below illustrates how automation encroaches upon expertise. Note that value and complexity are the drivers of the isoquantal relationship between automated and expert decisions.

I have previously written that the domain of expert decisions is also where polyvalence reigns supreme. The question before us is not how to thwart the growth of automation, but rather how to expand the realm of polyvalence, which has always been the refuge and safe haven for human existence.

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Polyvalence Defies Commoditization

Financial Management Requires Polyvalence

Financial Management Requires Polyvalence

A frequent problem in advanced financial management is the task of interpreting (and understanding) probabilistic forecasts. The following exercise illustrates the essence of the problem.

Suppose that the following (very simplistic) financial projection for the “next” period arrives in your hands:

The financial analyst who handed you the report then comments “…the projection is based on historical data…” You focus your attention on the positive net profit number and conclude that the projection looks reasonable based on your “gut.” Having reached your conclusion, you head home to enjoy your life.

Unfortunately, a forecasted numerical value is rarely accurate, because the projected “number” is inevitably “off” by some (often significant) amount.

Contrast the above with this second story. In this instance, the analyst hands you a financial projection for the same next period; the report begins again with the worksheet displayed above. However, the report continues with additional information as shown in the tables and graphs that follow:

After looking over the report, you listen as the analyst interjects that a lognormal distribution was used to model gross revenues based on a fitting of available historical data, and the analyst confides that your feedback regarding that decision would be helpful. The analyst also expresses concern about net profitability for the coming period by predicting “…there appears to be a significant chance that we won't be profitable…” (see the last histrogram projecting a 30% chance of losses). With this information, you call your spouse with a message that you will be working late in the office to “deal with some problems…”

The moral of the story is that a “number” in itself is rarely sufficient information and justification for financial decision-making. In many ways, financial managers must be able to “hear” and “feel” the meaning of probabilistic reporting much like the conductor of a symphony orchestra must hear and feel the meaning of a musical score. Effective financial managers maintain a polyvalent sensitivity toward a complexity of factors and dependencies in order to transcend numerics as guidance for decisions. In this manner, the art of financial economics embraces its science.

Financial managers might take comfort in these words by Nobel Laureate Prof Robert J Aumann (2000, p. 141):

The best art is something that strikes a chord with the viewer or listener. It expresses something that the viewer or listener has experienced himself and it expresses it in a way that enables him to focus his feelings or ideas about it. You read a novel and it expresses some kind of idea with which you can empathize, or perhaps something that you yourself have thought about or experienced. Take a sculpture or a cubist painting. It expresses some reality, some insight, in an ideal way. That is what the best mathematical economics does. It is a way of expressing ideas, perhaps in an ideal way.

By the way, probabilistic (stochastic) reasoning is now integral to finance, so if any of the reporting above is a challenge (for you or your staff), please consider my training and software offerings here.

Source: Aumann, R J (2000). Economic Theory and Mathematical Method: An Interview. In Collected Papers (Vol I, pp. 135-144). Cambridge, MA: MIT Press.

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Polyvalence Defies Commoditization

The Topological Landscape between Automation and Expertise

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.

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.