Outdoor inspiration from an unusual source

My family and I went back to Chicago for a wedding over the Labor Day weekend, so many messages were waiting for us when we arrived back in Lafayette last night.  One in particular was special: it was from one of my older son's new friends, and he had just returned from hiking Half Dome at Yosemite with his family.

If you're not impressed with that accomplishment, then have a look at this photo to get an idea of what the twelve hour, 15 mile Half Dome day hike actually involves.  There's also a good video about the hike on the National Parks website. Pay close attention to the final cable climb to the summit, and then then imagine an eleven year-old kid making his way up to the top. 

We expected to see boating and beach sports throughout California.  But we are happily surprised that running, cycling, hiking and camping are also very popular.  Perhaps it's the mild weather, or maybe it's the plentiful parks and open spaces, but the prevailing lifestyle is quite outdoors-oriented. We're lucky to have at least twenty parks, beaches and forests within driving distance of Lafayette.

Inspiration comes in many forms.  Thanks to my son's middle-school buddy, Carolyn and I have found a new goal for ourselves and another thing to like about California.

The "Me Party" 10-point plan, Part 2: Buy Cradles, Not Graves

Last week I began posting The "Me Party" 10-point plan for American Renewal.  In Part 1, I talked about why it's important to shift from "consumer" to "producer" thinking.  In this installment, I'll share more thoughts on what a producer economy should look like.

Part 2. Buy cradles, not graves.

Despite Joe Biden's rampant enthusiasm, I read that about one of every six dollars spent on the American Recovery and Reinvestment Act - the stimulus bill - actually went to industries where we hold a technical lead, or into nascent industries where funding might generate immediate jobs and huge long-term rewards. The rest, a vast sum, went toward redundancy, bureaucracy and bailouts. I'm impressed by GM's revival and impending IPO, but the money we spent bailing out inefficient smokestack industries and investment banks might just plug a few holes in sinking ship.  Will slowing the decline of lagging industries create the long-term jobs we need, or could that money have made a bigger difference elsewhere?

I contend that the American economy needs vision and leadership to sustain innovation, and a national industrial policy to prioritize investments. Among the many countries with successful industrial policies are China, India, Brazil, Germany and Italy. In fact, the United States employed its own form of industrial policy through NASA, DARPA, and a host of federal agencies for over half a century until the Cold War ended. The result was global leadership in computers, aerospace, communications, materials sciences, e-commerce, electronics, data management, and a host of other industries. Our industrial policies created millions of high-paying jobs and defined the modern world.

So why didn't these successful programs continue? Because without an external enemy, such forward-looking government investment soon becomes unpopular with politicians. Laissez faire conservatives oppose any kind of intervention into free markets, and would rather see Boeing, HP and other companies go it alone against heavily subsidized Airbus than risk increased taxes and regulation. Meanwhile, left wingers range from merely skeptical to openly hostile toward for-profit ventures, and would use tax dollars to subsidize labor but not businesses that create jobs. Lacking some greater purpose -- the Cold War or the Great Recession -- neither side would spend tax money on business.

Lost in that reasoning is the realization that our nation's defense, diplomacy and prosperity all rely on a healthy domestic economy. In a capitalist society, business is the greater purpose.

So does a workable policy look like?

First, the policy must eliminate international barriers to trade and level the playing field. To prevent countries from dumping products into the United States, we must establish fair and reciprocal trade relationships whereby we mirror the market access policies of our trading partners. If a foreign market is open to American products, then ours should be open to theirs. If a trading partner imposes tariffs and duties on our products, then we should do the same. Likewise, we must create a mechanism to penalize currency manipulations.

Secondly, our industrial policy must focus on long-term national goals like energy independence, a secure and efficient power grid, commercialization of space, sustainable food and water, improving public health and expanded communications infrastructure. We should funnel grants, loans and contracts into these industries and their supporting technologies, and encourage commercial applications of basic technologies. Investment in these and similar segments can create entire new industries while playing to our scientific and technological strengths.

For the most important and promising programs, we must create actual programs -- like Apollo and the Interstate Highway System -- using federal dollars to spur development. These programs will create jobs in key industries, accelerate commercial viability of emerging technologies and lead to private investment.

We must follow an up-or-out policy for mature industries. There is no such thing as "too big to fail" in a robust economy. Rather than subsidizing old, inefficient or broken business models, government should provide large tax incentives for private investment in productivity and adoption of key technologies. Likewise, we must allow the market to penalize failures to prevent artificial "bubble" economies.

Finally, we must create a healthy environment for businesses to grow and flourish throughout the United States. We must simplify and standardize business taxes and regulations. We must create consistent and enforceable zoning and licensing. Most importantly, we must improve the efficiency of the domestic labor market.

Industry has been the backbone of our society for almost one hundred and fifty years, but individual businesses can't go it alone.  We must protect our golden goose, even if it farts sometimes.

Coming next: Part 3: Quit Subsidizing Big Labor.

The "Me Party" 10-point plan for American Renewal, Pt. 1

Summer is coming to an end, and all over America the midterm election races are heating up.  Like most recent years, there are clear choices between the incumbent democrat majority and the republican minority candidates, and neither choice is very appealing.

If I haven't already told you, all the Democrat-sponsored handouts, bailouts and deficit-funded largesse are appalling and wrong-headed. Instead of helping people, this misguided spending only contributes to a death-spiral of joblessness, consumerism and crushing debt. For all the hand-wringing and rhetoric over job creation, there's been little concern as to why a trillion dollars in deficit spending hasn't stemmed unemployment.

The Republican party faces what might be the largest internal schism in a generation as old-guard conservatives are challenged by the upstart Tea Party. Personally, I consider this a sign that the GOP is reinvigorating its platform after conservatives lost their roadmap and much of their leadership through the Bush years.  However, beyond railing against taxes and big government, Tea Party leaders offer little in the way of practical solutions. And to add insult to injury, conservatives insist on defining America as a white, Christian nation despite millions of good Americans who are neither. Thus, the Republicans continue to be more of an opposition force than a truly viable alternative to the democrats.

Lost in headlines about Obama's religious beliefs and Tea Party campaign gaffs are mountains of public debt, endless corruption and a growing sense that our stature in the world is quickly eroding. While most of us regular folks realize that a new operating system is needed, our elected leaders blythely ignore the problem while fixating on the same old partisan issues.

So with that in mind, I offer a "Me Party" 10-point plan for an American Renewal, beginning with Part 1 below.

1. Stimulate production, not consumption. Check the label on nearly any WalMart product and you will see one of the two primary benefactors of our economic stimulus. China has become the workshop of the world, so it shouldn't surprise anyone that nearly every dollar we spend goes straight into creating jobs -- in China.

So why do our leaders on both sides focus on boosting consumption? Because many adhere to John Maynard Keynes' "prime the pump" economics, where spending drives production and production creates jobs. Unfortunately, Keynes lived in an era when nearly everything we bought was made here in America, so stimulating consumption naturally created American jobs. In fact, the effect of this stimulus was "multiplied" as demand flowed from producers through their suppliers. Henry Ford used the same logic in reverse when he increased hourly wages for his workers; he knew many of those extra dollars would be spent on his Model T.

Times have changed. America is no longer a "closed system" economy; most of our jobs are in service industries and today we import most consumer products. Stimulating consumer spending creates jobs in countries that produce, but few of those jobs are here in the Unites States.

Our leaders need to understand that spending won't create many American jobs, but innovation and domestic production will. Those of us who remember when a single factory supported an entire town won't be surprised by the sheer number of jobs a single production facility can generate.  It's not merely the number of bodies employed by the factory, but instead a far wider ecosystem of supplier plants, transporters, professional services to support the businesses and personal services to support the workers. I heard one estimate that every dollar spent on a finished product generates 7 dollars in spending. In a producer econony, those dollars generate jobs.

But America is no longer a low-cost producer, and every industry eventually becomes so well-understood as to be a commodity.  Therefore, we must also rely on innovation -- creativity and productivity -- to compete with low-wage nations.  Only by continually creating and recreating industries, products and services can we remain at the forefront of production.

Fortunately, in this we have tremendous advantages.  In America, expertise and money can easily flow into new opportunities.  Nascent businesses can thrive in our economic system without the regulations or restrictions that are pervasive in other parts of the world.  Our colleges provide fertile fields for research and incubation of ideas, and we have many rich sources of capital to realize concepts.

More than anything, America needs enough private sector jobs at all levels to support our standard of living, or we risk leaving fewer opportunities for our children.  The important thing to note here is that only innovation and production can create jobs in America.  We must finally put aside the notion that spending will heal our economy, and focus our attention on building the future rather than buying it.

In the next installment, I will talk about how can we stimulate innovation and production.
Coming next: Part 2: Buy Cradles, Not Graves.

Life has a soundtrack

This list was circulating on Facebook a while back.  I liked it so here it is again.  Feel free to add your own in the comments.

Think of 15 albums, CDs, LPs that had such a profound effect on you they changed your life. Dug into your soul. Music that brought you to life when you heard it. Royally affected you, kicked you in the wasu, literally socked you in the gut, is what I mean. Then when you finish, tag 15 others, including moi. Make sure you copy and paste this part so they know the drill. Get the idea now? Good. Tag, you're it!


I may have been too gassed at the time to remember the right fifteen, but here goes:

Blow By Blow  - Jeff Beck

Captain Marvel  - Stan Getz

Sticky Fingers - The Rolling Stones

Wish You Were Here - Pink Floyd

Eat a Peach - The Allman Brothers

Kind of Blue - Miles Davis

Jar of Flies - Alice in Chains

Born to Run - Bruce Springsteen

Queen II - Queen

Magical Mystery Tour - The Beatles

Fear - Toad the Wet Sprocket

Moanin' - Art Blakey & The Jazz Messengers

Boston - Boston

My Favorite Things - John Coltrane

Physical Graffiti - Led Zeppelin.


Trouble is, if you're over 40 years old the list should be 25 instead of 15. I had to leave too many great discs off. Aja, The Captain and Me, In the Court of the Crimson King and Armed Forces were near misses.

Sharpening the saw

Since my last post, I have been getting back to doing project work. For the last several years I've directed our consulting engagements and interacted mostly with client executives; project teams would report to me from the field. Now I'm leading a Lean improvement project in rural Minnesota while also negotiating a contract on some operations initiatives on the west coast and in Asia. Like everything else, this arrangement has its good and bad points.

On the downside, the travel stinks. Flying around to clients and racking up Hilton points was pretty cool when I was in my 20's and had no kids, but at this stage the Monday-Friday trips are a drag. I miss Carolyn and the boys, I miss my house and my bed. Fortunately there's Skype, so my family and I have a free nightly video conference to do homework and catch up on the day's events. It's not the same as being there, but it's better than nothing.

On the upside, apart from the airplane commute and long drive, the work itself is fun. The folks in Minnesota are open to new ideas and eager to improve. They value our ideas and facilitate our progress, so we can roll up our sleeves, dig deep into the toolbox and design big improvements to all aspects of their workplace. The plan will address workflow, materials and scheduling, management processes and departmental layout improvements all at the same time. Usually we don't get such latitude at the outset, so this is a great opportunity to do some things fundamentally right. That alone makes the work very rewarding for us and beneficial for our clients.

Later I'll probably write something describing the work itself, but that's not the point of this post. My point is that these back-to-basics assignments are exercising essential career skills that get rusty as management duties take up more of my time. It brings all the high concepts back down to a practical level, while reminding me of the daily challenges our project teams face.

And maybe best of all, as Steven Covey said, sharpening the saw reminds me of why I do this for a living, and what I hope to gain by continuing in this field. It's nice to be reminded this stuff can be fun.

Repealing the Rubber Stamp Act

On Monday evening, a certain former school board member chastised us for delegating deliberations over facilities expansion and land acquisitions to our Finance and Facilities Committee. Citing the "classic battles" between John Adams and Thomas Jefferson on the "Kentucky Purchase" and the Alien and Sedition Acts, this individual argued that these matters should be taken up by the entire board in a public forum.

I won't repeat my arguments for curtailing facilities and land discussions until the economy straightens out. But the accusation that we are removing important matters from the public scrutiny is entirely inaccurate. In fact, this board has done more to make public our conversations on finance and facilities than any prior board that I can recall. We deliberately chose to hold these committee meetings entirely in public, with written minutes and audio records available to anyone, so any question of transparency sounds suspiciously like posturing. If a previous board was so concerned with airing these discussions, they could very well have done so.

If I'm not mistaken, John Adams was back on his farm in Massachusetts when Andrew Jackson purchased part of Kentucky in 1818. I do know, however, that the Alien and Sedition Acts came to represent Adams' preference for centralized federal authority against Jefferson's promotion of individuals' and states' rights. While as a libertarian I generally prefer Jefferson's position, I also realize that this whole topic has absolutely nothing to do with our responsibility as school board members.

As representatives of the public, school boards are responsible for governance over the public school organizations. These organizations are not granted any constitutional rights; they merely work for the people as directed by their school boards. In this sense, public schools are not different than any private sector service provider, despite an unusually heavy burden of regulations and mandates. Schools must operate and school boards must govern in much the same way as any corporation and board of directors. The school boards may delegate, but must never transfer, and should be ultimately responsible for, performing their fiduciary public duty.

If this seems obvious, then why is weak governance so critical a problem in U.S. public school systems? Unlike boards of directors in the private sector, school board members are usually unpaid and are often not elected for their management acumen. Lacking resources and expertise, board members must rely to an extraordinary extent on the judgment of their superintendent and administration with few opportunities for external management reviews. Administrations have become adept at managing their boards within an established public education industry operating model, and school boards have become rubber stamps for the organizations they govern.

None of this matters until the established system fails, and unfortunately that's what is slowly happening in many local school districts. The rapidly increasing property values that drove decades of revenue increases seem to be over, economically stressed communities resist new taxes, and in many cases state funds are also at risk. If nothing changes, expenses will eventually exceed revenues, creating deficits and draining reserves. However, the usual solutions are no longer viable options. Increasing taxes isn't going to happen in a bad economy, and personnel cuts will postpone deficits but won't solve the core problem.

This is where our school boards must engage in constructive intervention. Instead of allowing the system tom follow the old playbooks, we must raise expectations and guide districts to better processes. We must change the system before it fails.

Transforming Your Business with Lean Operations

Transforming Your Business with Lean Operations Here's a link to my December 21, 2009 presentation to the University of Chicago Booth School of Business Entrepreneurial Roundtable. I look like my front teeth are missing.

Does innovation create happiness?

I am in the innovation business, leading our clients through Lean Six Sigma improvement projects, occasionally running parts of their businesses, and even teaching them to do these things for themselves using our techniques. Our work exists because our clients rely on innovation, and Lean is a proven tool. We also innovate our own work by examining our performance, adjusting our methods, learning and improving. Like our clients, we must continue to build better mousetraps before somebody else does.

Whether you realize it or not, you are in the innovation business too. Unless you're oblivious to the outside world, you opportunistically adapt to change and adopt new habits in every aspect of your life. You might use a computer in your work; your parents can tell you about typewriters and slide rulesComputers are better, even if they do pose a whole new set of problems. You probably use a mobile phone, and if you still have a home phone it's not likely to have a curly cord connecting the base and handset. You might lust for a new HDTV, or a new hair style, or the latest Times best seller (or a Kindle to read it.) Every habit broken serves a common purpose: better, faster, cheaper.

Innovation is in our DNA. Better products and processes. Faster, cheaper transportation. New systems for communicating and collaborating. Cleaner energy. Cures for disease, and softer pillows on hospital beds. Billions of humans reaching for a better life. Untold million minds recombining knowledge in novel ways to create new industries overnight. If knowledge is power, then innovation is wealth.

But what is the nature of this wealth? Adam Smith speaks of marginal utility, the unending question of what an idea can do for us. Psychologists and philosophers debate the relationship between material wealth and happiness. As the juggernaut of innovation rolls across the world, many ask whether human happiness is a function of wealth and power. Are we really better off? Do we lead happier, more fulfilling lives? Is all this innovation good for us?

Technology is neither a blessing nor a curse, but merely a set of tools. The determinant of good and evil is what we do with our tools. We may all possess the same creative spark, but one person will use it to attack cancer while another creates the Improvised Explosive Devices that turn Iraqi roads into killing fields. We may indeed create toys too dangerous to entrust to our own childish hands. This reveals no inherent truth about innovation per se, but much about our species.

Any talk of progress must include a comparison of human suffering. Any assertion, for example, that American life in the 1850's was happier than present times must also address sticky details like dentistry, where modern innovation has surely reduced the average person's pain. So that seems like a good thing.

On the other hand, those 1850's folks had to depend on each other in different ways than we do nowadays. In fact, sometimes it seems that our rush toward convenience is leading us into an ironic state of hyper-connected isolation. We have 4-door cars, but most of the time we drive them by ourselves. We have 24/7 email access, but we seldom meet face-to-face. We can download movies to our phones, but we watch them alone. Isolation is the "i" in i-Tunes. Why? Because we can. Self-service gas stations weren't invented because people dislike interacting with others, but that's why they flourished.

So maybe progress is both a blessing and a curse. Where we might gain convenience and ease suffering, we may also lose our close connections to others and perhaps breed extremism. But that's not a matter of innovation, but of human character and frailty. In the end, for better or worse, we will be judged for what we are as people.

Shopping with the children

Happy New Year! I hope everyone had a great holiday. For many people, last year was like the bad hangover that follows an all-night binge, so I'm certainly looking forward to a brighter 2010. But before we turn the page on 2009, I have one last story to relate from last month.

A few weeks before Christmas, I took my two boys shopping for gifts. We stopped at Best Buy and they immediately took off for the video game aisles. When I went to find them a little while later, they began asking why we couldn't buy ourselves some games. So I tried doing the dad thing and patiently explained that Christmas is about sharing with others, not getting stuff for us, et cetera. Besides, I told them, we can't just spend all our money on treats or we might get caught short if something bad happens.

My 10 year old son, who can talk a rabid dog out of a stew bone, wasn't about to give up on a new Wii game so easily. He told me he'd heard a news station encourage people to spend money and help the economy. "You do care about the economy, right Dad?"

I was immediately glad to discover he pays more attention to current events than I thought. However, this new tack disturbed me, so I asked him how spending money would make the economy better. He replied that if everybody bought lots of things, then people would get jobs making the stuff we buy. I told him to look closely at a nearby box of earphones, and he read "Made in China" on the back. I asked him who would get jobs if we bought that. He thought about it and replied that the Chinese would get jobs, but we might get some too. Fair enough. So I asked him where we would get the money to buy the earphones, and he smirked and said we have enough to cover the $27 price. I said ok, but one $27 set of earphones won't create enough work to fix the economy. How do we get enough money to buy stuff so everyone has a job?

Now he was closing in for the kill. He arched his eyebrow and replied, "that's why you and Mom have credit cards." He stood there, smug, waiting for my capitulation. See, the lad had sass.

I mentioned that we'd have to buy a few thousand boxes of earphones to pay for a single new job. Who would pay $27,000 back to the credit card company when all we created was one job? He looked at me quizzically and asked, "We have to pay them back?" Checkmate.

I shouldn't have been surprised that society is prompting my kids to spend money. Politicians, columnists and even some otherwise reasonable economists enjoy reminding us that consumer spending accounts for about 70% of the U.S. economy. CNBC regularly rants about how retail sales affects the S&P 500. Now, that's all technically true; Gross Domestic Product is the value of all the goods and services we create, and bigger GDP means more wealth. Economists will tell you that the easiest and best way to measure that value is by counting all the dollars we spend on stuff. They reason that if you buy it, somebody had to make it and that's what it's worth. That makes sense, sort of.

But as most parents must eventually explain to our kids, what we produce and what we consume are two very different things. Production, the value we create, puts money into our pockets. Consumption is the opposite of production, and takes money out. (You might argue that some spending is really investment, but few of us would successfully argue that their new 54-inch flat screen HDTV "investment" is creating anything except a bigger Visa bill.)

Calling the wealth we create in a given period equal to what we spend is like assuming that we bought a new house with last week's paycheck - it's simply not realistic. We don't just spend the cash in our pocket. What we have available to spend relates not only to what we created in any single year, but also to wealth accumulated from the past and to loans we take that are payable into the future.

And that's where the whole idea of stoking consumer spending to increase GDP gets hairbrainy. Spending versus making will prop up GDP in the short run, but spending anything more than the real value created eventually dissipates wealth and leaves a pile of bills to pay. So by mortgaging our homes to buy HDTV's, we make the economy look good today but deplete our assets and future wealth. In short, GDP only looks at the income statement without checking the balance sheet. Managing a household on that basis would put us onto the street; managing the whole country that way is bad policy leading to bankruptcy.

So with that in mind, how does a few points of GDP growth look against the $1 Trillion of new debt we spent to get it? Are you any more confident in your job prospects? Are you better off financially?

Like my kids, sometimes even reasonably intelligent adults will trade reason for immediate gratification. But perhaps we'd be less inclined to spend if someone reminded them that the trillion dollar credit card must eventually be paid.