The End of Work

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"The use of horse labor used to grow along with the population and the economy. In the United States horse labor grew 6 fold from 1840 to 1900. But then it plummeted as internal combustion engines replaced horses on farms, in factories, for transportation. Does the same fate await humans, or at least some humans?"

 
See http://www.futurepundit.com/archives/009918.html.
 
In ten years, what do you think these young women in Glasgow will be doing to earn a living?
 
The Bureau of Labor Statistics link in the above blog post shows that the work for people will available to those who are more intellectually developed and capable of handling more complex, adaptation oriented work.
 
These stats show that our society and the economy that under girds it is changing dramatically. The push to automate the functions of business is a continued recognition that people are simply components in a system. While the age of production passed a generation ago, the age of information is built upon the same foundation that people are expensive and superfluous in a global economy. This is not just a capitalist development, but also the same outcome that comes from governments that seek to integrate all aspects of society under their control.
 
It is time to admit that the large institutions of business and government, those that I refer to as the forces of global integration, are not going to be the source of new jobs in the future. We need, you and me, to begin to establish a parallel economy based in individual human initiative that does two things.
 
One is to build networks of relationships that provide a communal platform for economic enterprise that supports families and strengthens local communities.
 
Second, we need to establish a culture of initiative where the creative endeavors of individuals becomes the core purpose of an educational system that is preparing people for the realities found in these statistics. This means we must shift the mission of educational institutions away from preparing students to work in systems of production, to being able to create their own businesses and networks of relationships.
 
I’m convinced that every child should have been provided experience in creating a business that monetizes some idea that they have by the time they enter middle school. Repeated attempts to start projects and new businesses at a young age will foster a culture of collaborative independence that is the parallel economy that we need along side a global economy of integration.
 
Let me then ask you the following questions as a way to move you into action.
 
If you had to do one thing in the next year that would make a difference in your local community, what would that be?
 
Is it important enough that you would give up some aspect of your life to do it?
 
Is it the sort of thing that you could find a way to monetize it if you found yourself on January 1 out of the job you currently have?
 
Living with this perspective in mind is how we'll adapt to a world where the global forces of integration have no place for human beings to contribute.
 
Read the whole article linked above, and especially connect to the links of the jobs that are growing and declining.

A Culture of Alternatives

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Some times transitions can be smooth, sometimes difficult. As a global economic community, we are in a difficult transition from the modern industrial age to what will follow. 

Modern organizations share a common assumption. This is true if you are General Motors or the old Soviet Union. Efficiency is the route to an economy of scale and scope.

The problem with efficiency is not what it gives us, the ability to do more with fewer resources. The problem is what it takes from us.

Robust, sustainable cultures are those that have many competing alternatives.

I'm not here writing to advocate for the free market as many conservatives and business people do.  The free market is an ideal, while inviting, it cannot exist while there are powerful institutional structures that can dictate the terms of the market. This is where we are now with the relationship that exists between Washington and Wall Street.

I'm also not here to simply denigrate governments as the overseer of efficiency on a global scale. Governments are important institutions for providing a basis for alternatives to grow and develop.

We are at a transition point because with the elevation of efficiency to its preeminent role, control over the economic and organizational systems of society must also grow.

Over the course of my lifetime, close to 60 years, I've seen the control of society grow to the point where virtually everyone of us is breaking some rule of efficiency every day.

I have been persuaded by Joseph Tainter's thesis that societies collapse when the diversity of alternatives diminish and a one-size fits all culture develops. This is the course our society has been moving along for the past 50 years.

I'm not making a political statement to say the course that the Soviet Union took should be instructive for us today. In many respects, their economy failed because they lacked alternatives. Central planning did not create a robust, sustainable society. It created one of fear, not just fear of impoverishment, but fear of those who control the institutions of society.

The United States is not the Soviet Union. Our histories and founding values are different.

What we do share is a belief in large, supra-national, global institutions guiding the course of society by persons selected by some criteria of elite status.

Whether that control is by law, or political coercion or moral condemnation, the effect is to create a culture of efficiency by removing alternatives that may fail, inconvenience some person or be financially costly.

Our society is no longer robust and sustainable because we are quickly squeezing alternative ways of doing things out of our economic system. As it has done so, it has also squeezed out the benefits of efficiency.

Is there an alternative course?

If Tainter is correct, then we are headed towards an economic collapse. If so, then alternative ways of sustaining society must be developed in parallel with our current system.

I see this, for example, in the rise of local buying initiatives. When farmers are connected personally to those who buy their produce, the relational conditions for an alternative economic culture grow. I hear more and more about bartering between people who have services to provide. And possibly, most importantly, I see it in local efforts to develop cultures of entrepreneurism that create both for-profit and non-profit organizations that provide alternative ways for local economies to function.

The Conditions for a Culture of Alternatives

For an alternative culture to develop three things are needed.

First, individual initiative.

This is what I saw a decade ago as the starting point for all leadership. Individual initiative focused upon creating impact. This initiative is about how people take personal responsibility for their lives and of their families and communities.

Second, community collaboration. 

Consulting with a wide spectrum of organizations over the years I see how institutions force collaboration upon people. It is often seen as a way the old institutional barriers are being brought down. Collaboration can certainly do that, but it must come from the collaborators themselves.

Third, open culture of ideas.

All alternative approaches begin as an idea that needs to be tried. Openness to new ideas, and a willingness to test and fail with those ideas is essential in creating a culture of alternatives.

The End of an Era and The Beginning of a New One

For the past 18 months, I've been writing about the end of an era of industrial capitalism and utopian progressivism. Each was born out of the Enlightenment hope for a better world. Each was a product of, or, reaction to the industrial culture that elevated efficiency as a core societal value.

That efficiency demanded institution control by those who were designated the leaders of the system. It worked as long as the means of production was limited to the industrial plant; as long as advanced education was limited to the few who could afford it; and, as long as the means of communication consisted of the distribution of the information that leaders wanted people to know.

Today, all that has changed. In many ways, the opportunities that we have today are like a return to a pre-industrial era, or as some would call it a pre-modern time. In the past, cultures of alternatives always existed. Today, they are found where people recognized that they must develop new ways of living and working to provide for their families and community. Then, it was understood as the culture of the frontier, today, as sustainable, local cultures. 

The frontier that confronts us now is a world of failing institutions. If we take the perspective of alternatives as a guide, then we'll see that all approaches have a life span. They begin, grow to maturity, and then devolve to extinction of irrelevance. We are in that third stage with the institutions of the modern age.

What will the next stage look like at maturity? It is anyone's guess. I am fairly certain, however, that we will see greater individual initiative, more collaboration and a renaissance of ideas. This is what a Culture of Alternatives will look like.


10 Assumptions about Change

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Change is embedded in everything. It is the subtext of every topic of conversation that I have. It is the core issue of every project that I do.

Our assumptions about change need to change.

First Assumption: Change is bad.

Change is neutral. It is needed in every aspect of life. Without change there is no life. Too much change too quickly can be destructive. Change functions on a continuum between growth and decline, even life and death.

Second Assumption: The Opposite of Change is No Change.

Staying the same isn't a very sustainable strategy. Yet, it seems to be the response I hear most often to the prospect of change.

Third Assumption: Manage Change through Attitudes and Behaviors.

This is a good approach to a point. It assumes that human beings are living in an environment which is changing and their response (attitudes and behaviors) is how we address change. However, I find that this is an inadequate approach to the management of change.

I can understand why these assumptions are the ones I encounter most. They are based on assumptions that are the conventional wisdom of the past century. What are those assumptions?

Fourth Assumption: Large, Global, Transnational Organization is the logical, progressive direction of human civilization.

This assumption is captured most succinctly in the phrase "too big to fail." Yet, we do see failure, decline, possible disintegration and collapse of the world's largest and, at one time, the most progressive and prosperous nations and organizations.

Fifth Assumption: Stability, efficiency and maximumization of resources are the highest values of organizations.

What this perspective actually produces is vocational instability, economic volatility, social dislocation and the concentration of power and resources into the hands of the few.

Sixth Assumption: Urbanization, and the loss of an agrarian socio-economic culture, is the progressive and beneficial outcome of these historic trends.

While I am not an urban sociologist or economist, my on-the-ground observations is that increasing urbanization is more inefficient, is poor ground for the sustainability of inter-generational communal social structures, and increases the cost and demands of daily living. It seems to me that all these factors exist within a continuum where too little and too dense are not ideal for community or socio-economic sustainability.

Seventh Assumption: The above trends have disrupted natural cycles of growth by accelerating the process of change beyond what is now manageable under the assumptions of the past century. 

As an out-of-alignment wheel on a car spins more chaotically as speed and variation increase, so are the cycles of change increasing in speed and variability.

Eighth Assumption: Change is cyclical and we are at the end of a long cycle of the kind of growth in organizations described above.

From a contemporary context, is Greece's economic meltdown the anomaly or is it the canary in the coalmine?  Are we at the end of the era where large, global, transnational organizations can function?

Ninth Assumption: The future will be or should be like the past.

There are two assumptions here. One is if the past is prelude to the future, then what in our past should we have seen that would have helped us to predict the past decade of terrorism, war, political division and global economic recession?

It is helpful to read Professor Carroll Quigley's Oscar Iden Lectures, "Public Authority and the State in the Western Tradition: A Thousand Years of Growth, A.D. 976 - 1976” Quigley was a professor in the School of Foreign Service at Georgetown University for over forty years. His perspective is unique, expansive and, I find, very insightful.

The other assumption concerns our nostalgia for past golden ages as Professor H.W. Brands of the University of Texas describes them. He describes that much of this nostalgia is focused on the decades between 1945 and 1965, the golden age of American political economy as he describes it.

... for Baby Boomers, this is the age of our childhood. There is this tendency of humans to look back to a golden age. If you quiz people, the golden age usually corresponds to their childhood.  They’ll say, life was simpler. Of course, life was simpler, you were 8 years old.

There’s this thinking of, if we could just get back to the way things were in 1950 or 1960, then all will be well. Part of it is this individual nostalgia.

But part of it is this historically anomalous position during this period from 1945 to 1965. Because in a fundamental way, the US was the only victor of World War II. The US was the only country that came out with a stronger economy than it went in. America’s principal industrial competitors were either gravely weakened, like Britain, or absolutely demolished like Germany and Japan. So, it was easy for the US to embrace free trade. Yeah, level the playing field because we’ve already leveled the industrial capacity of all our competitors.

The weakness of this assumption is that underlying it is a belief often held that our best years are in the past, not the future, therefore, what changes we experience today are taking us further away from the golden age of the past.

Tenth Assumption: Change is Structural, and cannot be adequately faced by just changing attitudes and behaviors.

The future is going to be different. The last stage of acceptance of this will be the recognition that many of the above assumptions are declining in validity. Yes, of course, as individuals we adapt to change by modifying our attitudes and behaviors. We also must adapt by changing the social and organizational structures that have led us to this point in history.

The indicators of structural change are already evident. They are awaiting application in theory, design and practice.  I'll write about them in my next posting.


The Future of Trust

Trust

An interesting conversation is taking place about The Future of Money.  A global community is engaged in discovering  alternative ways of viewing the way commerce is conducted. They want to move economics beyond the transactional level to the social. What these bright innovators recognize is that trust must be at the center of all interactions in society. This is why I'm paying attention to this conversation.

This video captures the scope of this discussion.

The Future of Money from KS12 on Vimeo.

The video was produced as a part of a presentation that Venessa Miemis gave at the Sibos conference of the financial services industry in Europe. In her presentation she said,

There is a class of young, intelligent, creative, passionate people who have become disillusioned with the debt-based monetary system, and are busy creating new infrastructures, right now, that are allowing a commons-based peer-to-peer infrastructure to emerge - in parallel to what currently exists. And the foundation of this economy is based on trust, and on transparency, and on the ability of distributed networks to self-organize.

For the community concerned with the Future of Money to realize a financial system based on trust they will have to address the place of culture.

Social scientist Francis Fukuyama's book Trust: The Social Virtues and the Creation of Prosperity places trust at the center of cultures that prosper.

Trust is the expectation that arises within a community of regular, honest, and cooperative behavior, based on commmonly shared norms, on the part of other members of that community.

Fukuyama describes culture as an inherited ethical habit. 

Trust as an inherited ethical habit produces a culture that is predictable, open, honest and where mutuality is important.  The reciprocity aspect of trust is how it becomes a culture. It is shared and exchanged between people. It creates a value within the culture because trust elevates the possibilities that come from the relationship.

Trust, therefore, has a strategic, developmental, entreprenurial value upon which organizations and communities can create the future.

Over the past few months, I have been writing about the shift that I see taking place. You can download a compilation here.  I see this shift as moving us from a lower-level reality of self-focused individualism to a higher one of a shared community of responsibility and contribution.

This shift is necessary because the time of the imperial self is fading in the wake of its own exhaustion as an ideology and the growing complexity and interconnectedness of our global society. It isn't simply the idea of the influence and impact of one person upon the whole world. Rather, it is the need for higher-levels human interaction to fulfill the opportunities that are being presented each day.  We need each other precisely to fulfill our individual sense of calling to make a difference that matters. It is the matters part that drives us into social arrangements that require us to be better people. It is ironic that as the world shifts from the individual to the social, it is providing a better context for the development of human potential as a result.

At the heart of this shift in human history is the importance of trust as a core condition for human community 

What is the source of trust? 

Trust is an outcome of attitudes and behaviors that we share. When I trust you, it is based on my respect of you and an appreciation of who you are, in other words, of your dignity and value as a person. 

When a person lacks dignity and self-respect, I know that it will be hard from them to treat me with dignity and respect. As a result, it will be difficult for us to trust one another.

If trust is the outcome of mutual respect and dignity, then it is also a recognition of our interdependence upon one another. Our mutual respect means that we can see in the other person strengths and potential that is worth affirming and elevating. As a result at the heart of the experience of trust is the practice of honor.

Honor and Trust

When my Say Thanks Every Day: The Five Actions of Gratitude project first began my perception of honor was that it was about recognizing the accomplishments of people. While I still see that, I've come to realize that there is more to it.

At first, I began to ask some questions

What is it that we are recognizing when we honor people at banquets, awards shows, etc?

We are recognizing their accomplishments, their contributions, their acheivements in life and to specific organizational and social contexts.

Why do we recognize these achievements of these people, and not others?

Because those we recognize represent the values that unite us a group.  They signal to others what it takes to be a fully functioning, contributing member of our society. In essence, our recognition is symbolic of our values and beliefs as a people.

What if we reverse the sequence? Instead of recognizing people after their accomplishments, what if we recognized them, or rather affirmed them, for their potential accomplishments. Why can't we honor the talents and abilities of people in order for them to recognize the opportunity they have to make a difference.

Consider this.

You walk into a room of strangers. You don't know them. They don't know you. You feel a bit intimidated by the experience. Who are these people? Are they important or invisible? Are they interesting or boring? You don't know. Do you wait for someone to start a conversation, or do you take the initiative? If you take the initiative, what are you going to talk about? You're nervous, so you talk about yourself. You try to impress them with your own importance so they think you are important. Yet we know this doesn't really work. We come across as self-important egotists.

If instead we approached this scenario from the perspective of honor, then we walk into the room with the expectation of honoring each person. This means that we must discover what it is that is worth honoring in them. We must, therefore, ask questions about them. And once we find out some noteworthy things, we honor them by affirming and envisioning how they can make a difference.

Since I shifted my perspective to honoring the potential in people, I find it is much easier to trust them. There is a bond that forms.This is so because as soon as I recognize their potential, I become a partner with them in realizing it. Here's an example.

A few weeks ago I was at a conference in the mountains of Virginia, at a beautiful place called Primland. One evening after dinner, we were sitting outside of the Lodge where there was a firepit. A young man named Josh came out to start the fire. We began to talk with Josh about the property, where he was from and what his aims in life were. He was a student at a local community college, and wanted to be a professional writer of poetry and short stories.

So, here is this nice young man, who expresses himself well, talking about his writing. I ask him if he has shown his writing to anyone. He tells us that his father knows a best selling novelist, and wants to connect them up with each other. Good idea. Life is made from connections. He hasn't done this because he doesn't think he can show his work to the novelist yet. He doesn't say it, but he doesn't want to be embarassed if it isn't any good.

Here's an opportunity to honor someone who has not become accoplished in life, but who has potential, and needs both encouragement and some guidance. To honor him, I offer my help to read and critique his writing so he can go see this novelist with the confidence that he has something to offer than can make a difference. A simple offer that requires him to accept and act for trust to be realized.

When we honor someone in this way, we show respect and we establish the basis for trust to be shared between one another. Of course there will be people who reject our honoring of them. But those who do accept it complete the connection required for trust to live in a relationship. Imagine a group or society where this is the practice of the community.

Honoring others is a pathway to trust. Now pair this with my post of a few weeks ago, Honor and the Lost Art of Diplomacy. Here's part of what I wrote.

To live with honor and to practice diplomacy in our daily lives is not easy. It is countercultural, even prophetic in its application to our world today. It means that while we may disagree with another person, we can also honor them with respect, even if their behavior is a demonstration of a lack of their own self-respect.

I understand, therefore, that as we enter this new Presidential election campaign season, that your candidate is dishonored when you treat his or her opponents and supporters with dishonor.

I understand that your reasons for not voting for your candidate's opponent are not the same as having positive reasons for voting for them.

I understand that while pollsters say that negative campaigning wins votes, that it also poisons the well of respect that is required for the diplomacy that civic leadership demands.

I understand that dishonor in any context easily finds it way into others. Consider carefully what kind of atmosphere you want in your social and organizational life. The line between politics and the rest of life and work is razor thin.

I understand that to be honorable and diplomatic does not mean you give up your values and principles. It means that you do not win by destroying the other person. You lose by dishonoring your own values.

To practice honor and trust in this way is transformational. It sets up conditions in organizations and communities where people can discover their true contribution to society, and form the relationships that are needed to realize that calling.

To look objectively upon our world is to see a world where trust, respect, honor and mutuality are in great demand. When we treat others with disrespect and dishonor, we act without dignity.  The effect is destructive and toxic. It divides, isolates and creates inequities, poverty and war. I'm no optimistic Pollyanna who believes that we should all just get along. I'm a realist in understanding the competitive ground upon which we walk each day. There is more to trust that just respect and honor.

The Trust Connection Structural Hole

Over a decade ago I first read Ron Burt's Structural Holes: The Social Structure of Competition. Then, I had a beginning confirmation of what I knew intuitively. That the person who is able to establish relationships of trust is the one who will have a greater competitive advantage in a disruptive, rapidly changing world. In the diagram here, Mr Blue has a competitive advantage over Mr. Green and Mr. Red. His advantage is in brokering a relationship between them.  His ability to connect them together advances each of their opportunities to make a difference.

From the Burt's introduction ...

My argument is that much of competitive behavior and its results can be understood in terms of player access of “holes” in the social structure of the competitive arena.  Players are connected to certain others, trusting of certain others, obligated to support certain others, dependent on exchange with certain others….the holes in social structure, or, more simply, structural holes, are disconnections or nonequivalencies between players in the arena.  Structural holes are entrepreneurial opportunities for information access, timing, referrals, and control.  ...

But their individuality is the key to understanding competition.  The substantive richness of competition lies in its imperfections, the jostling of specific players against one another, each looking for a way to make a difference.  In the substantive details of imperfect competition lie the defining parameters of competition.  They are the parameters of player individuality.  Competition is imperfect to the extent to which multiple players together dominate a market, is an insufficient answer.  The central question for imperfect competition is how players escape domination, whether it is domination by the market or domination by another player.

This is the focus of the structural hole argument – a theory of freedom instead of power, of negotiated instead of absolute control.  It is a description of the extent to which the social structure of a competitive arena creates entrepreneurial opportunities for certain players to affect the terms of their relationships.

Competition is one way of understanding the social relations of people.We see it most destructively in predatory business practices and divisive, dishonorable politicing.

Its complement is collaboration.  If at the heart of competition is the competitive advantage that one brings because the other person, then at the heart of collaboration is the recognition of the advantage that another person brings to an endeavor. The most enlightened industries are ones where members become collaborative competitors.

I venture here because trust is essential to both competition and collaboration.  Structural Hole 2 Let's look at this expanded version of the diagram above.

Originally, Mr. Blue brokered a relationship between Mr. Green and Mr. Red. Now we see a network of relationships that is much different. Mr. Green now is the principal broker of relationships by simply bringing two rather than one new relationship into the network. As this network grows in complexity, the key to its healthy functioning is the quality of the relationship that exists.

Healthy competition strengthened by respect, trust and honor elevates the network beyond a transactional relationship, centered upon how to secure one's own benefits from the network. Instead, the network is transformed from a collection of individuals to a collaborative community that shares common values, goals and benefits.

The Future of Trust

Trust is developing as a strategic, emergent reality that transforms relationships of acquaintance into a communities of respect, honor and mutuality. It is the basis for the kind of economic system that is being explored by The Future of Money community. It is the kind of attitude and behavior that we should expect from elected leaders. It is what we should expect from ourselves.  This is the future of trust.


Taleb on Skepticism

Smart people many times outsmart themselves because they are confident about their intellectual ability. I place all politicians in this classification. The result is not an expansive mind open to truth or reality, but rather a closed mine of opinion and suspicion. When our minds become closed, we treat our opinions as personal statements, and we treat those who oppose us as threats or even enemies.

This is what I thought of when I watched this interview with Nassim Nicholas Taleb, author of The Black Swan. Here they are discussing David Cameron, UK Conservative Party leader who may well be the next Prime Minister. In this instance there is no difference between the politics of Britain and of the US. The difference is between kinds of liberalism and conservatism.

The key here is skepticism. Taleb is making a differentiation within the traditional economic ideology of both the left and the right. They are talking about conservative economic approaches, but the point applies to liberal/ progressives as well.

Skepticism isn't a tool applied to other people's ideas. It is applied to one's own decisions. It recognizes that every free decision holds risk. The question is how to mitigate the more disastrous consequences related to risk.

At the heart of Taleb's point is the need for politicians to be circumspect and humble about their own ideas. Their confidence and the public's declining confidence in them should be a sign that something is amiss.

I find no evidence of this kind of intellectual integrity by the politicians in Washington. This concerns me as it should every person on the planet. What happened a year ago is possible again. Where's the skepticism by the news media, by academics, by the public? There is evidence of it, but it is written off as disloyalty. In essence, check your brain at the door. Just be a good citizen and think as your are told.

I think it is time for a great deal more skepticism. Remember that on election day Tuesday.

If you have not read Taleb's books Fooled By Randomness and The Black Swan, I suggest you do. He is an excellent tonic to the optimism that passes for reason in Washington.


Is Small Business at a Crossroads

In my browsing this morning, I came across this article from the Federal Reserve Bank of Atlanta - Prospects for a small business-fueled employment recovery.  Here is a quote from a speech given by William Dudley of the Federal Reserve Bank of New York. 

"For small business borrowers, there are three problems. First, the fundamentals of their businesses have often deteriorated because of the length and severity of the recession—making many less creditworthy. Second, some sources of funding for small businesses—credit card borrowing and home equity loans—have dried up as banks have responded to rising credit losses in these areas by tightening credit standards. Third, small businesses have few alternative sources of funds. They are too small to borrow in the capital markets and the Small Business Administration programs are not large enough to accommodate more than a small fraction of the demand from this sector."

Whether you work in a small business or patronize one, it is an important article to reflect upon. Look at this chart that I've posted from the article and especially the results from 2007-2008.

Distribution of net gain-loss in employment

Job losses from late 2007 through 2008 were 43% from businesses with less that 50 employees.

Let me pose a question. What if 43% of the stimulus money went to these small businesses. What do you think would have happened? Do you think those dollars would be sitting in a bank? I don't think so either. They would have been spent, and real stimulus and real economic strength would have been built.

Having spent the last fourteen years working with small businesses as an organizational consultant, my perspective is different than Washington's. I take a micro, localized view of the economy. Global businesses are not really global, but a collection of local economic operations. There maybe a global headquarters, but it nothing but a building with offices. The real economic engine of those companies is local. The global nature of them makes them efficient. But they are still localized operations where people go to work, pick up their pay check, deposit it in the bank and pay their mortgage, bills, insurance and buy food and other necessities for their families.

We live in a networked age. A local jewelry maker in Indonesia can sell her product line to customers in the US or Europe. She can because of the internet and the global reach of package companies like UPS and FedEx. Here a smart business person on one side of the world can have a successful company selling to people in a nation where 43% of the job losses in one 15 month period were from businesses virtually the same size as her's. What does this tell you about the business climate in the US today?

Linked is a New York Times article - Are Medium-Size Businesses the Job Creators? - that suggests that we should change the way we look at business size. Look at this chart from the Bureau of Labor Statistics that was included in the article.

NYT job creation chart.chart

Source: Bureau of Labor Statistics (Numbers do not total 100 percent due to rounding.) Job Creation by Firms of Different Sizes, 1992-2008

What should those of us who are small business owners and serve small businesses take away from these two articles?

1. Scale matters. The most productive small companies in regard to job creation are those between 50 and 500 employees. If you are starting a business today. You should consider as a part of your business planning process what it would take to reach that threshold of 50 employees. In a number of client situations, the idea came to me that many of their problems would be solved by being just a little bit larger. Then the scale of costs would be more favorable for them.

What if you don't want to grow that large? What are you alternatives?


2. Collaboration leverages size for small businesses. Becoming a collaborative partner with other business provides a way to be big while remaining small. The skills and perspective required to be a good collaborator are not the same as being good at running a small business. 

What if you feel like you've reached a crossroads, a transition point, in both your business and professional life?


3. Impact determines what business you are in rather than the activities that you do.  To be successful today requires a change of mind about what business you are in. If you are in the business of providing the same products and doing the same services over and over again for customers, then you may find yourself irrelevant and out of business. However, if you understand the impact you want to create, then you can change your business and/or employment status to put yourself in the best possible position to achieve that impact. If this means that you close your small business and go to work for a medium size one, then that is what you do. In so doing we become a mission-driven workforce, rather than a job activity driven one.

My main concern is the lack of recognition by Washington of the situation of small business. This isn't a Democrat/Republican, or Bush/Obama issue. It is a national issue that is impacting people, families and communities across our nation. 

What if these are not my issues? What can I do to make a difference?


4. Support local small business groups in your local community. In most communities there is an economic development agency. Check with them and offer support to helping attract and support new business. Check and see if there is a local chapter of SCORE where you live. Offer to teach a class on some aspect of being a small business. Check and see if there is a micro-enterprise organization in your community. Each of these organizations provide help and support to small business. Get involved and you'll be strengthening your community.

Is small business at a crossroads? Based on these job numbers, I'd say yes. Support your local small business while we learn to make the changes that are necessary to survive in a very tough climate for business.


The Israeli Example

In the fall of 1981, I saw George Gilder, author of Wealth and Poverty, debate Lester Thurow, author of the Zero-Sum Society. Their discussion was about whether supply-side economics popularized during the Reagan years or Keynesian economics popularized during the Roosevelt years and now again in the Bush/Obama years were the route to economic growth and the alleviation of poverty. I left that evening convinced that Gilder was right and Thurow wrong; convinced that economics is not just about numbers but also about our philosophies about human nature and society. Nothing in the intervening 28 years has changed my mind.

Reading Gilder's essay - Silicon Israel - on the Israeli capitalist resurgence takes me back three decades. As a young guy in his twenties during the 1970s, I remember race, Vietnam and Watergate being the defining issues of my college years. I remember the lack of opportunity as high inflation made it difficult to find jobs. I remember the Carter years as lacking opportunity, of hope and a reason to believe that better years are ahead. Our time, now, reminds me of those days.

Some Context

Recently, I reflected on this with a friend in his mid-twenties. He started a business at the age of 18. He is in the process of selling it to another company, and is preparing the next chapter in his life. I have other friends in their twenties and thirties who have their own businesses. When I was their age I didn't know anyone in my peer group who had their own business. They were either still in school, worked for the family business or gone to work in a corporation. What changed this?

I attribute it to Ronald Reagan. His optimism and the embracing of supply-side economics raised the small business entrepreneur to a status equal to the large corporations. Then in the mid-80s, Peter Drucker published his influential Innovation and Entrepreneurship, and the personal computer revolution began to take root, and the world changed. Large corporations like Microsoft, Intel, IBM and General Electric created products and services that elevated the ability of a small business owner to create a successful, sustainable business. Add to this the rise of venture capitalism, and an economic revolution took place that made the Clinton years the mirror opposite of the Nixon/Carter years.

Was there "irrational exuberance" and the creation economic bubbles that eventually burst? Yes, of course. But just as in the 1950s when the economy grew dramatically in large part because of the impact the G.I. bill that made it possible for World War II veterans to get a college education that previously many could not afford. So, took the 1990s were a time where to be an entrepreneur meant a world of opportunity at your doorstep.

Today, we have returned to the questions of the late 1970s. The debate between Gilder and Thurow still raises the questions that we must answer. What kind of society do we want. What is the nature of freedom, and the role of government in our lives?

Reflections

In reflecting on Gilder's article and the years since I heard him, here are some of my conclusions.

1. Our current financial crisis is not a failure of capitalism, but of the corrupting influence of politics into business. Where capitalism has been allowed to be practiced without government intrusion, it has been highly successful in transforming lives and communities for the good.

2. Government has a role in business, but a minimal one of creating trust, not insuring the financial survival on individual businesses. The actions of both the Bush and Obama administrations display a certain lack of faith in the system, a lack of clarity about the boundaries between business and government and is producing a delaying effect on recovery. People don't see economic recovery as represented by government action. What they see as recovery is new shops opening. New buildings going up. There family and friends getting new jobs. These are not developments that can be lead from Washington, but more from the state and the local level.  Specific micro-loans make a difference in creating the conditions for wealth to be created.  It is virtually impossible for this to be done at the macro-level of the nation.  

3. The lessons from the Reagan years are simple. Low taxes increase tax revenues through a growing economy. Higher government costs suppress economic growth because it removes capital from the system. This especially true in the relation between federal and state governments to local governments.

For example, the federal stimulus package is being used where I live to repair roads. Maybe the roads needed repair, maybe they didn't. The point is that this is a temporary stimulus. Once the roads are paved. It is back to where things were. The stimulus isn't building new roads to create new centers of economic life.

4. Small, entrepreneurial businesses are the life-blood of any healthy economy. It isn't because there are more of them. It is because these are the people who are taking risks to meet new market needs.  New ideas get tested in small businesses because the risks are lower. Governments discourage the creation of small businesses through higher taxes and intrusive regulations. 

The course we are on is a return to the 1970s, and not the future that Gilder outlines in his article on Israel. Real hope and change came to that nation. Read all of Gilder's article. It is an instructive study for how a nation can change. It should give us all hope that the same can happen here again as it once did.


The Coming Deficits Crisis

Raise your hand if you would run your household finances or your business like Congress and the White House manage theirs?

Of course, all us understand that we live with limited financial resources. We balance our check books and work hard at keeping positive cash flow from month to month.  Now the numbers coming out of Washington are not just big, but predict a looming disaster ahead.

John Fund in the Wall Street Journal writes about David Walker, a CPA who served in a variety of government positions since the Reagan administration.

"We suffer from a fiscal cancer," he tells a meeting of the National Taxpayers Union, the nation's oldest anti-tax lobby. "Our off balance sheet obligations associated with Social Security and Medicare put us in a $56 trillion financial hole—and that's before the recession was officially declared last year. America now owes more than Americans are worth—and the gap is growing!"

If you looked at your bank account and you owed more than your worth, you'd have to declare bankruptcy. Let's assume that we are now at that point at a nation. Just for conversation's sake. We are our of money. So, how do we then address this statement floating through Facebook status updates?

No one should die because they cannot afford health care, and no one should go broke because they get sick. If you agree, post this as your status for the rest of the day.

This only makes sense if you are not responsible for paying for the health care of the nation. Just pass it off to someone else, and feel pleased about your compassionate nobility.The thought that came to mind when I read it was to imagine what it would require to put 300 million people on life support because the aim of health care is for no one to die.

Now here's the real issue that no one in Washington is willing to address. Listen to what Walker has to say.

"We have four deficits: a budget deficit, a savings deficit, a value-of-the-dollar deficit and a leadership deficit," he tells one group. "We are treating the symptoms of those deficits, but not the disease."

Mr. Walker identifies the disease as having a basic cause: "Washington is totally out of touch and out of control," he sighs. "There is political courage there, but there is far more political careerism and people dodging real solutions." He identifies entrenched incumbency as a real obstacle to change. "Members of Congress ensure they have gerrymandered seats where they pick the voters rather than the voters picking them and then they pass out money to special interests who then make sure they have so much money that no one can easily challenge them," he laments. He believes gerrymandering should be curbed and term limits imposed if for no other reason than to inject some new blood into the system. On campaign finance, he supports a narrow constitutional amendment that would bar congressional candidates from accepting contributions from people who can't vote for them: "If people can't vote in a district not their own, should we allow them to spend unlimited money on behalf of someone across the country?" (emphasis mine.)

We can wring our hands about health care and climate change, but if we don't address the crisis of spending in Washington, there will be nothing left to do anything. 

Walker makes an important point about the sequence of change.

"President Obama got the sequence wrong by advocating expanding coverage before we've proven our ability to control costs," he says. "If we don't get our fiscal house in order, but create new obligations we'll have a Thelma and Louise moment where we go over the cliff."

After Katrina, it was clear that the problem with federal government programs was their organizational systems. For example, last year the federal government determined that the FEMA trailer program would end and the people who had been given them would have to move into new housing. This decision seemingly was made without any assessment whether there had been sufficient recovery of the housing based. It was a bureaucratic decision instead of one of based on human need.

I agree with Walker. We need to change the functioning of the government before we create a crisis that will paralyze the nation.

An Additional Thought

The impact of these rising deficits has been impacting state and local governments for years. Indiana Governor Mitch Daniels writes about what is happening with state tax revenues in a Wall Street Journal opinion piece.

State government finances are a wreck. The drop in tax receipts is the worst in a half century. Fewer than 10 states ended the last fiscal year with significant reserves, and three-fourths have deficits exceeding 10% of their budgets. Only an emergency infusion of printed federal funny money is keeping most state boats afloat right now.

Most governors I've talked to are so busy bailing that they haven't checked the long-range forecast. What the radar tells me is that we ain't seen nothin' yet. What we are being hit by isn't a tropical storm that will come and go, with sunshine soon to follow. It's much more likely that we're facing a near permanent reduction in state tax revenues that will require us to reduce the size and scope of our state governments. And the time to prepare for this new reality is already at hand.

The coming state government reset will be particularly wrenching after the happy binge that preceded this recession. During the last decade, states increased their spending by an average of 6% per year, gusting to 8% during 2007-08. Much of the government institutions built up in those years will now have to be dismantled.

If this is happening to state governments, you can be sure that it is happening to your local municipal ones.

During the early part of the decade, I had several projects working with local governments and organizations supporting them. At that time, a sales tax revenue conflict emerged in several states. In essence, locally generated sales taxes went to the state to be distributed back to local municipalities. In a number of states, the state held onto those revenues, putting a huge burden upon city and county governments. Then good times returned and local and state governments began to expand.

Governor Daniels is right to be concerned. This is what happens when politics and class warfare, from both sides of the political spectrum replace leadership and wisdom in public office. Nothing that I see in happening in Washington gives me hope that this pattern has changed.  State and local governments are beginning to understand this. They must operate within their financial means. Washington just prints more money. 

I don't know what the answer is from a policy perspective. I do know that at the heart of this deficits crisis is an ethical crisis. And until we address the issues of power, wealth and influence in Washington, the rest of the nation is going to be at risk.

Be sure to read all of Fund's article and share it with family and friends.


Kids get Philanthropy

Acumen Fund Fund Day for Kids

Oh, to be a kid again with the whole world opening up to you as you get exposed to people like those at the Acumen Fund. Watch this video of Fund Day at the Acumen Fund.

And how cool to hear a kid say,

My favorite part of the day was creating a business.

Share the video with kids that you know. Influence them to see that they can make a difference in the world.

This week's The Economist has a article - The Patient Capitalist - on the Acumen Fund. I also encourage you to read founder and CEO Jacqueline Novogratz book, The Blue Sweater. I posted my review of her book here.

RandomKid/ Sustainable Cambodia/ Green Valley School (PA) water project

If you children want to get involved in social enterprise opportunities, check out RandomKid, a place where kids can get the mentoring to take their own ideas for helping and making a difference and change the world.

Yesterday, I received a report from RandomKid president Anne Ginther about one of their projects. Here's what she wrote.

Recently we partnered with a group to put a windmill in Cambodia that will provide the energy to water gardens for 40 families. The cost for the project was $4500, and the funding was donated to us by Exelon Nuclear for this purpose, in partnership with a RandomKid school in Pennsylvania. The cost included the windmill materials, catchment, seeds-- everything needed from start to finish. It's being built as I write this.

These kinds of projects are taking place all over the world. Just as the Acumen Fund needs investment funds, so does RandomKid, and a host of other organizations that help kids become social philanthropists. If you can help financially do so, if you can, pass along this post to those who can. Your influence just may make the difference for a child.

Thought you'd like to see one of the children from the village that  received the well. Her name is Sreyvin. Here's her letter of thanks.Nou - Mong Village Cambodia - RamdomKind

My name is Sreyvin, I am a 12 year old girl. I have four sisters, and no brothers. My family and I eat fish for dinner. I live in Mong village, Svay Att commune, Pursat town. I am in grade 4 at Chhom Monny primary school. I like to read books in my free time. I know a little English.

They built a basin next the pond. There will be a fan about the basin to suck water into the basin. There are water tubes to share the water from the pond.

Because of you, I am able to go to study on time and regularly. You have provided me with enough water to use daily, and to cultivate my plants. My community has become a very green community. Because of you, my family will have a better life.

Here's a drawing of their village by one of the children. 

Mong Village drawing - RamdomKid

The children, with RamdomKid's assistance, worked with Sustainable Cambodia on the water project.

Richard Allen describes their organization.

As volunteer CEO and co-founder of the Rotary-supported nonprofit
organization Sustainable Cambodia, I invite you to explore the work our staff is doing in Cambodian villages. We are a working to help the residents of these rural villages create a sustainable quality of life through wells, irrigation systems, schools, training and empowerment. By our founding principles, only native Cambodians may be employed as paid staff, and all international officers, directors and consultants must be unpaid volunteers, ensuring that 100% of funding goes directly into the rural village programs. Please explore more about Sustainable Cambodia at www.SustainableCambodia.org 

These are projects that children through their schools, congregations and other organizations can support. Acumen Fund and RandomKid are doing different things, but they are complementary. Acumen Fund addresses poverty through "patient capitalism" through investment in the establishment of micro-enterprises. RandonKid is a catalyst for children's interest in making a different in the world by connecting with projects suited to their commitments and abilities.

These are the kinds of organizations that will be the media structures for the emerging global society. Stay in touch and support their efforts. They are the real change agents of the future.


The Blue Sweater - by Jacqueline Novogratz - A Leading Questions review

Our perception of things when we lack physical proximity is often determined by the media we consume. When we come face-to-face with the reality that our perceptions are wrong, and possibly destructive, we need to change the way we think, and what we expect. This truth I believe is at work in our American perceptions of Africa.

Blue Sweater

For many people in my generation (over 50 years old) our perception of Africa was first formed by watching Tarzan movies that were produced during the 1930s and 1940s. The notion of the noble savage became a staple of Western perception. Africa was a land of romance and adventure and Western colonialism. Today, our perception is far more determined by news accounts of war, poverty, famine and genocide.  The one counter to this perception, at least for me, has come from hearing stories and having interaction with missionaries and African citizens who talk about their work and lives there. It is still a place of romance and adventure, but now, creating a place of hope and health with self-determination is the focus. 

It is from this perception that I came to Jacqueline Novogratz's fascinating book, The Blue Sweater: Bridging the Gap between Rich and Poor in an Interconnected world. Novogratz is the founder and CEO of the Acumen Fund. Her book is both a memoir and a manifesto. It should be read by everyone who has any sense of connection to places on our planet where people lack the opportunities that you and I take for granted everyday.

She begins her story this way.

They say a journey of a thousand miles begins with a single step. I took mine and fell flat of my face. As a young woman, I dreamed of changing the world. In my twenties, I went to Africa to try and save the continent, only to learn that Africans neither wanted nor needed saving. Indeed, when I was there, I saw some of the worst that good intentions, traditional charity, and aid can produce: failed programs that left people in the same or worse conditions. The devastating impact of the Rwandan genocide on a people I'd come to love shrank my dreams even further. I concluded that if I could only nudge the world a little bit, maybe that would be enough.

But nudging isn't enough. The gap between rich and poor is widening across the world, creating a dire situation that is neither socially just nor economically sustainable. Moreover, my work in Africa also taught me about the extraordinary resilience of people for whom poverty is a reality not because they don't work hard, but because there are too many obstacles in their way.

The Blue Sweater is a book of stories. To tell you one is to possibly miss the importance of the flow of ideas and impressions that build a perception about how to address poverty in the world. She writes early on her experience in Africa,

I finally understood: In order to contribute to Africa, I would have to know myself better and be clearer about my goals. I would have to be ready to take Africa on its own terms, not mine, and to learn my limits and present myself not as a do-gooder with a big heart, but as someone with something to give and gain by being there. Compassion wasn't enough.

I think that was the moment when humility in its truest form - rather than an easy but false humbleness - began to creep in. Until then, I'd been too vested in knowing the answers and in being right. For the first time in my life, being right had nothing to do with being successful or effective. I also began to be more honest about what was happening around me - I couldn't stand all talk without action, and too many expatriates and elite Africans seemed to revel in it. I wanted to work directly with poor women themselves.

The Blue Sweater is the story of her growing into this person. The stories are vivid and engaging. We understand because she is an excellent story teller. And she understands that her own transformation is part of the story, and can become our story.

Jaqueline Novogratz's story is also about the kind of leadership that is needed now in our time.

After more than 20 years of working in African, India, and Pakistan, I've learned that solutions to poverty must be driven by discipline, accountability, and market strength, not easy sentimentality. I've learned that many of the answers to poverty lie in the space between the market and charity and that what is needed most of all is moral leadership willing to build solutions from the perspectives of poor people themselves rather than imposing grand theories and plans upon them.

This is true for all people working in all organizations. Big ideas that are impractical and are not shared by the people who implement them are doomed to failure. Rather, what is needed is leadership that understands how to facilitate the process of idea creation within the context of relationship building. Only from this foundation can the appropriate organizational structures be created to facilitate their success. This is what Acumen and other groups are now doing in Africa and other parts of the world.

The organization that Jacqueline Novogratz created is the Acumen Fund. Here's a brief description of their mission.

Acumen Fund is a non-profit global venture fund that uses entrepreneurial approaches to solve the problems of global poverty. We seek to prove that small amounts of philanthropic capital, combined with large doses of business acumen, can build thriving enterprises that serve vast numbers of the poor. Our investments focus on delivering affordable, critical goods and services – like health, water, housing and energy – through innovative, market-oriented approaches.

They call this "patient capital." It is so because it is built around quarterly reports, but the sustainability of small centers of commerce and change.

The Blue Sweater is a book about leadership, the kind that is needed today, and what will be known as 21st century leadership in the future.

The entrepreneurs who will help us create the future for all people are individuals who exist in every country on earth. ... They are the ones who see a problem and don't stop working on it until it is solved. They refuse petty ideologies and reject trite assumptions.They balance their passion for change with an ability to get things done. Mostly, they believe fundamentally in the inherent capacity of every human being to contribute.

At the same time, today's most effective leaders have a pragmatic bottom-line orientation that results in focusing on measuring what they accomplish, building institutions that can sustain themselves long after their founders are gone.  They world will not change with inspiration alone; rather it requires systems, accountability, and clear measures of what works and what doesn't. Our most effective leaders, therefore, will strengthen their knowledge of how to build organizations while also having the vision and heart to help people imagine that change is possible in their lives.

Jacqueline Novogratz's story is one of perceptions. What we perceive becomes our reality. What is your perception? Are you open to having it challenged and radically altered? I hope so because if you let yourself be open to a different perception about charity, poverty, Africa, Asia and leadership, you may find your own life deeply enriched and impacted by her story. I highly encourage each of you to read her book and begin to imagine what you can do to encourage this kind of development.

Finally, here is Jacqueline speaking at the TED conference in 2007. It will give you a flavor for what you'll find in the book.