An Unequal World

Nine men own the same wealth as the 3.6 billion people who constitute the poorest half of people on this planet.

At the rate the super-rich is growing, the world may have its first trillionaire in 25 years.

What is a trillion anyway?

Well, assuming you spend a million dollars every day, you would have to be around for 2738 years to spend one trillion.

In 25 years, the incomes of the rich have risen 182 times as much as the incomes of the poorest.

The wealth of the world’s billionaires increased by 12 percent or $2.5 billion per day last year. Between 2017 and 2018, a new billionaire was created every two days.

If current trends continue, we would have to wait 170 years for women to earn the same as men.

Meanwhile, 1 in 10 people on this planet still lives on less than $2 a day. Half the world’s population barely manages to survive on $5 a day. One medical bill is enough to drive this segment into extreme poverty.

A woman working 12 hours a day six days a week in a South Asian country earns less than $1 per hour. The CEO of the company that sells the finished product earns over $200 million a year.

Just allow these figures to sink in for a moment.

Business magazines are fond of publishing lists. They gloat over the youngest billionaires and come out with meaningless data – 30 under 30 and so on.

The notion that the richest are self-made is one of the biggest myths of our time. Over half of today’s billionaires inherited their wealth. The other half have accumulated wealth through businesses and industries where corruption, nepotism, tax evasion, and inversion are rampant. One estimate places the amount dodged by wealthy individuals and corporations in poor countries at nearly $200 billion a year.

Many billionaires pay less taxes than their secretaries. Globally, a mere four cents of every dollar of revenue collected from taxes comes from wealth or inheritance tax.

Wait, you haven’t read the worst part.

In some countries, such as Brazil, the poorest 10 percent pay more taxes than the richest 10 percent.

10,000 people die every day for want of adequate health care.

As a contrast, consider MONDRAGON, a leading Spanish business group with over 74,000 employees, 12 billion Euros in revenue, 261 businesses, 15 technology centers, offices in 41 countries, sales in 150 countries and assets of over 25 billion Euros.

Employees completely own the group.

The ratio of the highest paid employee’s income to that of the lowest paid is a healthy 9 to 1.

The ratio of CEO salary to the median income in the U.S. is 431 to 1.

Of course, you can interpret the data with “alternative facts” and show the ratio to be an egalitarian 4 to 1.

Or face reality, as ugly as one can imagine.

Corporations can do practically anything and get away with it.

Please remember no one had to go to jail for the financial meltdown of 2007.

The law is supposed to be the same for everyone. Has anyone been punished for the financial meltdown of 2007? Or the emission scandal at Volkswagen? Or the spurious claims at Mitsubishi? Or the oil spill in the Gulf of Mexico (BP)? Or the blatant wrongdoings at Wells Fargo? Or the data breaches and alleged cover-ups at Yahoo?

On the contrary, Yahoo’s CEO walked away with over $140 million when the company merged with Verizon. The reason? Yahoo’s clawback provisions were too weak to be enforced. Wells Fargo allowed the top executive allegedly responsible for the mess to walk away with $125 million.

10,000 miles away, in India, the largest democracy in the world, despite the innumerable scandals that have rocked the country, not many politicians or top bureaucrats have been punished in 70 years of independence.

India’s millionaires – the top 1% – have 45% of the country’s wealth.

One person accounted for 11% of the income tax collected in the country last year.

India’s population is 1.3 billion.

Ideally, the percentage of wealth in the hands of millionaires should be less than 30%. If the rich have more than 40% of the wealth, there is no space for a significant middle class. Japan, ranked as the most “equal” country in the world has just 22% of the wealth controlled by millionaires. Doing quite well are New Zealand (26%) and Norway (27%).

Look at the issue from another perspective.

Today, the world’s population is 7.4 billion. 60% of the population is on one continent – Asia. In fact, two countries – China and India – account for 37% of the world’s population. The second largest continent by area – Africa – has a population of 1.2 billion or about 15%. The demographics are changing.

Projections vary. If we assume that the growth in population will follow a middle path, the world population by 2100 is estimated to be 11 billion. Of course, none of us may be around. Here is the frightening statistic. Almost half of the 2100 population will be on one continent – Africa. Give some thought to the implications.

You are probably tired. And rightly so.

Think for a moment. How long can this farce continue? When will the bubble burst? It has already burst in some countries. It is likely to burst in the next year or two in much more. The consequences will not be pleasant for anyone.

What, if any, is the solution?

For a start, we need governments that work for all, not just the 1%. We have documented evidence of the 1% influencing the outcome of elections in several countries. We also have evidence of the 1% getting tax breaks in other countries. In the guise of democracy, what we end up having are governments of a few, by a few, and for a few.

To illustrate how a little change can make a big fifference, let me give you a simple statistic. A tiny half a percent increase in the tax on the wealth of the richest 1 percent can raise enough funds to place all children in school, and provide health care for over 3 million people.

It is high time that governments started cooperating with each other on critical issues. The race to be the least taxed nation or to be a tax haven or to have secrecy laws must stop. The race may apparently show some winners, but the ultimate loser will be humanity itself.

Governments should also seek to reward entities that work for society’s and employees’ well-being rather than the well-being of shareholders alone.

As I have pointed out earlier in my posts, the real keys to development are education and health. The countries that come out one top on happiness indicators year after year are also the ones that have near 100% literacy and robust healthcare for all.

Providing a level playing field, equal opportunities, and a genuine concern for those left behind in our quest for success and development is an imperative.

The alternative is a world that nobody wants to imagine.

  • Data Sources:
  • World Economic Forum
  • World Bank / IMF
  • Credit Suisse
  • Oxfam
  • Fortune

Why Do Strategies Fail?

Strategies Fail Due to One or More of the Above

Thomas Edison “invented” the electric bulb.

The company that he founded later became GE.

After 125 years, GE dropped the electric bulb from its portfolio.

GE drops the Electric Bulb

We don’t learn from history – not even from recent history.

The previous CEO famously brought in an acknowledged expert in strategy and innovation. It may be safe to assume that endless meetings were held, senior managers went through intensive training, and new “strategies” were developed.

Frank Vermeulen is a professor of strategy and entrepreneurship at the London Business School. In what is surely a provocative hypothesis, he says that “new strategies” are often not strategies at all. He adds for good measure: “We want to be number one or number two in all the markets in which we operate” is one of those. One wonders whether he was referring to the legendary Jack Welch.

As I have written earlier, GE has been on a downward slide for over fifteen years.

Sure, divesting a business that is not doing well is one of the choices that organizations are required to make.

The conventional electric bulb was disrupted by the LED lamp. The LED lamp consumes less electricity for a given lumen, and lasts several years. Thus, the replacement market for conventional bulbs gradually sank.

Professors Chan Kim and Renee Mauborgne of INSEAD introduced the Blue Ocean concept in 2004. Recently, they have refined the concept to “Blue Ocean Shift.”

Courtesy: Professors Chan Kim and Renee Mauborgne

Traditional competition is like a red ocean. Far too many players fight for market share and kill each other.

The Blue Ocean metaphor requires organizations to identify “uncontested market space.” If that sounds too much, a simpler way of understanding it is to think of catering to non-consumption. Going back to the electric bulb, it is worth remembering that a night-time photograph from space shows that significant parts of the planet have not seen electricity. These represent “non-consumption.” Why couldn’t large companies such as GE tap into these markets with end-to-end solutions: gas turbines to produce electricity and low-cost bulbs to light up the entire planet.

The problem, according to Professor Vermeulen, is that many strategies are in fact goals.

Increasing operational efficiency, achieving six sigma quality, and becoming a global business are goals. They are not strategies.

What is the way out?

While many leaders are great at envisioning a great future, they fail to explain the logic behind their choice. Anything that is thrust down is almost guaranteed to fail.

At the height of NASA’s moon mission, a group of journalists visited NASA. When they came across a janitor mopping the floor, one of the journalists asked, “So what do you do here?” Prompt came the answer: I am facilitating the process of a manned mission to the moon. How many in your organization can provide such an answer?

Stanford Professor Robert Burgelman argues that strategy must be both top-down and bottom-up. It must be top down for resources and support and bottom up for experimentation and innovation. Remember INTEL? The transformation from a DRAM company to a microprocessor company was a bottom-up approach supported by the top. Many of the experiments will fail. The few that succeed become blockbusters.

Leaders should resist the temptation to decide what projects live and die within their firms. They need to embrace the apparent contradiction between centralization and decentralization and resort to what Professor Roger Martin calls “integrative thinking” – the process of finding a creative best from seemingly opposing alternatives.

Courtesy: Professor Roger Martin

An often-overlooked reason for failure is that change requires a significant alteration to well-established behaviors, customs, and traditions. Whether we like it or not, habits are notoriously sticky and persistent. Most organizations cannot make the transition and hence fail. Organizations that embrace change at all levels have a reasonable shot at success.

As CEOs’ guru Ram Charan says: “Execution is the key.”

Space Station Image of Earth at Night – Crowd Sourced for Science

Predictable Irrationality

For over 200 years, economists have argued (and continue to argue) that humans are rational.

Economists would probably be the first to accept that the assumption is far from being perfect. The holy grail of rationality is so deeply embedded in economic theory that any alternative is looked down upon.

Professor Thaler (Nobel Laureate 2017) is a proponent of behavioral economics – a branch of economics that studies human behavior without making lofty assumptions.

Professor Thaler’s basic argument is that humans are not rational.

The argument that humans are not rational by itself is not profound. The practical usefulness of the argument is that certain types of irrationality can be predicted. The predictability of certain types of irrational behavior has significant implications for everything from individual happiness to public policy.

Consider his phenomenal 1985 paper on mental accounting and consider this example:

“Mr. and Mrs. J have saved $15,000 toward their dream vacation home. They hope to buy the home in five years. The money earns 10% in a money market account. They just bought a car for $11,000 which they financed with a three-year car loan at 15%.”

From an economic perspective, this does not make any sense. Why can’t Mr. and Mrs. J use part of their savings to pay cash and buy the car? After all, the interest on the car loan is higher than the earnings on the saving. Rational behavior would suggest that the couple would be better off paying $11,000 in cash and setting aside what they would be paying as the monthly installment on the loan toward their vacation home. A simple calculation will show you this is the better of the two options.

In Professor Thaler’s view, this is not how we make decisions. We tend to make economic decisions by budgeting certain amounts of money for certain purposes. In other words, the $15,000 in savings is not just $15,000. It is the money set aside for the vacation home down payment. Using the amount (or a part of it) to buy a car amounts to pilferage (in our minds). The behavioral part of the decision stems from the fact that we are conscious of our limits at self-control. We are more confident in our discipline to pay the monthly installment on the loan (otherwise the bank will take away the car) than in our willingness to save a certain amount month after month.

This has important implications for analyzing people’s behavior.

Let us start with a simple example. Assume that gasoline prices go down. Rationality would say that people would use the resulting saving to buy something more important than gasoline. In one experiment after another, researchers have shown that people switch to premium gasoline even though there is no evidence to suggest that premium gasoline is good for your car. Thus, we have in our minds what may be called “gasoline money” and we are unlikely to spend it on anything else.

Other illustrations of irrational behavior include:

  1. Suppose the vehicle registration department sends out letters to car owners reminding them that the due date for making the next payment is approaching. The response is nothing to write home about. Include a picture of the car in the letter. The response goes up dramatically. Why?
  2. Reminders sent for paying a municipal tax evoke practically no response. Just include a statistic – 90% of the people have already paid the tax in your community (or zip code). The rest promptly respond with the payment. Why?
  3. Appeals for organ donation typically go unnoticed. It is amazing to see one country with a 28% volunteer rate and a very similar neighboring country having a 100% volunteer rate. The answer is in the wording of the appeal. In countries with low rates, you are required to check a box to “opt-in” if you wish to be a donor. Most people do nothing. In countries with high rates, you are required to check a box if you wish to “opt-out” of organ donation. Most people overlook to check this box as well!

A second aspect of Professor Thaler’s work is referred to as the endowment effect. In simple terms, we are more sensitive to incurring losses than we are to feeling good about gains.

For example, assume that you have been to a place where a new virus has been detected and if the disease is contracted, painless death is certain within a week. The probability of your having the disease is 0.1%. What would you be willing to pay for a cure?

Tweak the above example a little. Volunteers are required for research to find a cure. You would be required to expose yourself to a 0.1% chance of contracting the disease. What is the minimum amount you would require to volunteer for the program? (you cannot purchase the cure).

Through the prism of classical economics, the answer to both questions should be the same.

Professor Thaler proves the assumption to be wrong – by a long shot.

He has found that while people were willing to pay $200 for a cure, they would demand $10,000 to participate in the study. The endowment effect is so powerful that people are willing to pay 50 times more to preserve their current level of health than to get a little healthier.

The endowment effect is useful in explaining why retail outlets cannot suddenly increase the price of umbrellas in a thunderstorm, why concert organizers cannot increase prices significantly even when the demand is high, and why a car dealer who expects a premium of $200 for a car that has a long waiting list is viewed as more unfair than a car dealer who traditionally gives a $200 discount but merely withdraws the discount when there is a waiting line. Think about it. If a dealer has been selling a car at list price and increases the price by $200 to cope with demand, people find that unfair. If the dealer has been selling at a $200 discount and stops the discount to cope with demand, people are fine with it. How do you explain this anamoly?

Perhaps the most important implication of Professor Thaler’s work can be found in retirement savings. The “Save More Tomorrow” concept has had a profound effect on savings. When people are asked to save more (affecting their take-home earnings) they resist. The same people, when told that a small portion of their raise would be transferred to a retirement account, are fine with it. In other words, by merely relating increased savings to increased pay (thus never resulting in a lower take-home earnings) people willingly cooperate.

For more on Professor Thaler’s work, please read his books: Nudge, The Winner’s Curse, and Misbehaving.

Does Collaboration Stifle Creativity?

The creativity myth

For decades, we have been exposed to the virtues of collaboration, cooperation, and coordination – or team work.

Scholars have built models to explain team performance and team effectiveness.

Organizations spend millions to get to the notion of the “ideal team.”

The foundational concept in team work is synergy – the idea of the whole being greater than the sum of the parts.

How real is this notion?

New research (Campbell et al.; Hot shots and cool reception? An expanded view of social consequences for high performers; Journal of Applied Psychology, 2017) suggests that collaboration may, in fact, stifle creativity by imposing social costs on high performers. The authors argue that cooperative contexts prove to be socially disadvantageous for high performers.

In other words, the innovators and hard workers may feel miserable and socially isolated in a typical team environment.

Social Isolation

A team has people who bring different skill sets to any situation. Empirical evidence suggests that mediocre employees, rather than rising to the challenge, in effect drag team performance downwards by isolating top performers, spreading nasty rumors, sabotaging the total effort, and even stealing credit for the high performers’ work.

Still Skeptical?

Here are the top reasons for high performers leaving organizations – from a study involving over 5,000 executives:

  1. Rapidly changing priorities – it is very tempting to catch on to the latest fad; the bolt from the blue; the “aha’ moment – the reality is that lasting progress requires loads of patience and perseverance. If you keep the goal post moving all the time, it is unlikely that anyone will score a worthwhile goal. The lesson that we can learn from organizations that consistently outperform their peers is to have clear short-term, medium-term, and long-term goals, and to avoid being distracted for any reason.
  2. Tolerance of mediocrity – while it is true that all employees cannot be high performers, one of the fatal sins of leadership is to condone mediocre performance. Sure, honest failure needs to be accepted, indeed encouraged, but when leaders don’t spot the difference between laxity and hard work, trouble cannot be far away. The “democratization” of incentive schemes is a flaw frequently reported in the literature. If high performers perceive that their efforts are in vain, they will walk away.
  3. The absence of fit between job and person – most organizations try to find people to fit into jobs. They would do well to identify critical jobs and identify the best person to perform the job. The analogy is that of having a custom-built sports car and using it as a golf cart. When high performers find they are being used to do something that practically anyone can, they are frustrated – and leave.
  4. Poor utilization of available talent – study after study indicate that organizations rarely use more than 50% of their potential. Imagine an organization chasing linear growth when the entire industry is moving exponentially. Can you realistically retain your best people?
  5. Nepotism – this invariably touches a raw nerve. Let us face it. We are humans. We are fallible. We have our likes and dislikes. Much as we might want to think otherwise, nepotism is hard to hide. High performers prefer organizations that are fair and square.

It appears that individual talent no longer counts for much. Susan Cain (Quiet: The Power of Introverts in a World That Can’t Stop Talking; Crown; 2012) calls this the New Groupthink – the notion that great ideas can be generated only in an exuberant, boisterous workplace where the loudest voices prevail. The rapid transformation of the workplace into “open office” plans with little or no privacy is a telling example of this concept of “collaboration.” Thank you, star performers, we don’t need you. We can do much better with ordinary folks collaborating all the time.

New Groupthink (Cain)

Step back for a minute. Think of some of the greatest ideas that have emanated through history and think of some of the most acclaimed people in any domain:

Start with Galileo and Copernicus and the Solar System.

Look at Euclid’s theorem.

Or Newton and Gravity.

Or Einstein and Relativity.

Or Edison and his inventions.

Or Picasso and Michaelangelo and their paintings.

Or Beethoven, Mozart, and Chopin with their masterpieces.

Or think of the philosophers – from Sankara (who propounded non-dualism), Aristotle, Jesus, Buddha, Marx, Sartre, Russel, Descartes, Kant, Nietzche, Cicero, Dewey, or Johannson.

How large were their teams? Who were their collaborators?

I am not for a moment suggesting that each one of us could have done what the souls above gave to humanity. Nor am I suggesting that collaboration per se is harmful.

All that I am respectfully submitting is the virtues of collaboration are vastly overrated. Great insights often require solitude, not noise. We will seriously undermine the efficacy of collaboration if we choose to ignore or overlook the limitations inherent in groups.

The Virtues of Solitude

As I have written earlier, some of the great corporations of today have altogether abandoned the deeply ingrained models. Holacracy and Teal are the new paradigms. Jobs are no longer relevant. Roles are critical.

Beyond structure, we can make collaboration work by following a few simple rules:

  1. Brainwriting – a new concept which in simple terms is the written version of brainstorming. No member of a team can speak. Everyone writes ideas on post-it notes or another convenient medium. If you wish to eliminate bias, you can insist on printing – everyone uses the same font and size. Each idea is written on a separate note. All the notes go into a basket and then displayed in random order. People have time to study, understand and vote for the three top ideas. The idea that gets the most votes (and by default the greatest buy-in) gets the first shot. As an intermediate step, we can also have a window for developing on others’ ideas.
  2. Defining roles instead of jobs – a person may perform an activity related to marketing in the morning and accounting or finance or service activity in the afternoon. The transition can be during a day, a week, a month, or any convenient time frame.
  3. Air Cliché – list a few clichés (Bark up the wrong tree, Beggars can’t be choosers, Fish in troubled waters) and ask team members to write down possible ideas tied to a cliché that may solve the problem on hand. When complete, ask members to make paper airplanes and toss them to another team. Repeat till you have a consensus on the best course of action. Avoid hierarchy. The process is based on the premise that many of the best ideas come from a fun-filled, playful environment. (for more on this, please refer: James Rogers: The Dictionary of Clichés; Ballantine; 1985).

The next time you form a team, I do hope you can realize synergy.

Transportation 2030

Transportation 2030

As of yesterday, GM’s market capitalization was about $51 billion. Ford and Tesla were very close to each other at $41 billion. Remember that Tesla had overtaken both GM and Ford in market cap in 2017.

Let us try to place this in perspective. Last year (2018) Ford sold nearly 25 million vehicles, GM sold 8.4 million, while Tesla reportedly sold 200,000 (and lost more than $1 billion in the process).

Investors seem to view Tesla more favorably than either GM or Ford.

Beyond the sensational headlines, it is worth noting that if we consider enterprise value instead of market capitalization, we get a different picture:

Tesla’s enterprise value (debt + equity – cash) is about $56 billion.

Ford’s enterprise value is about $160 billion.

GM’s enterprise value is about $140 billion.

One way to understand Tesla’s valuation is to realize that equity constitutes 74% of assets, while the corresponding figures for Ford and GM are 18% and 22% respectively.

A different, perhaps disturbing way of understanding the valuations is to look at the future of transportation.

Enter Tony Seba, Stanford University economist, and futurologist.

According to Seba, clean disruption projections, based on technology cost curves, business model innovation, and product innovation) show that by 2030 (that is right, just eleven years away):

Solar or the wind will be the sources of all new energy.

All new mass-market vehicles will be electric.

All these vehicles will be autonomous (self-driving) or semi-autonomous (minimal human intervention).

Autonomous Car (Illustration)

The car market will shrink by 80%.

Gasolene will be obsolete. Natural gas and coal will be obsolete.

The concept of individual car ownership will be obsolete.

The taxi industry will be obsolete.

The car insurance industry will undergo massive disruption, with rates falling as much as 90%.

This scenario (that will make Tesla very happy and cause anxiety to others) rests on a fairly simple premise: electric vehicles (EVs) will be ten times cheaper to run than fossil fuel-based cars, with a near-zero marginal cost of fuel and an expected lifespan of 1 million miles (1.6 million kilometers).

Mr. Seba adds for good measure: “We are on the cusp of one of the fastest, deepest, and most consequential disruptions of transportation in history. Internal combustion engines will enter a vicious cycle of increasing costs.”

The “tipping point” will likely occur in the next two to three years. EV battery ranges surpass 200 miles, and electric car prices in the US will drop to $30,000 with low-end models available at $20,000. The ensuing avalanche will sweep all before it.

What the cost curve says is that by 2025 all new vehicles will be electric. All new buses, all new cars, all new tractors, all new vans, anything that moves on wheels will be electric, globally.”

“Global oil demand will peak at 100 million barrels per day by 2020, dropping to 70 million by 2030. The long-term price of crude oil will be $25 per barrel, with fossil-based fuels in use only in certain chemical industries and aviation. Certain high-cost countries, companies, and fields will see their oil production entirely wiped out. Leading companies in the oil sector today will see 50% of their assets being useless.”

You may not agree with the dire predictions.

Other experts disagree not on the core message but on the timeline.

The trends are clear if one is willing to take the blinkers off.

China, the most populous country in the world, is aggressively pushing “new energy” vehicles, a euphemism for electric and hybrid vehicles.

Wang Chuanfu, the head of Chinese electric car maker BYD, backed by Warren Buffet’s Berkshire Hathaway, says “The Trend is irreversible.”

India, the second most populous country in the world, plans to phase out all petrol and diesel cars by 2032. The approach is a mix of subsidies for electric vehicles and car pooling, and a cap on fossil-based cars.

Global shipping rules are clamping down on dirty high-sulphur oil used in shipping, a move that may lead to the industry switching to liquefied natural gas.

Even the leading OPEC countries seem to believe the inevitability of it all. Why else would one of the largest state-funded oil companies in the world sell-off chunks of its equity to fund diversification away from oil?

At the heart of this unprecedented disruption is elegant simplicity.

The Tesla S has 18 moving parts, compared with nearly 2,000 for a traditional car.

Maintenance is nearly zero. No wonder Tesla is offering infinite-mile warranties.

EVs are four times more efficient than petrol or diesel cars, which lose 80 percent of their power in heat.

“What changes the equation is the advent of EV models with the acceleration and performance of a Ferrari costing ten times less to buy, and at least ten times less to run.”

The effect will not be confined to cars. Trucks will switch in tandem. Over 70 percent of US haulage routes are already within battery range, and batteries are getting better each year.

Volvo’s Autonomous Truck (Illustration)

The Telegraph of London quotes Mark Carney, the Governor of the Bank of England and Chairman of Basel’s Financial Stability Board:

Fossil energy companies are booking assets that can never be burnt under the Paris agreement. The energy revolution is moving so fast that it may precipitate a global financial crisis. It took a small shift in demand for coal to bankrupt three of the four largest coal-mining companies in short order. There will be losers. Whole countries will spin into crisis. The global geopolitical order will be reshaped almost overnight.”

It is worth remembering that the Stone Age did not end because we ran out of stones. It ended because a disruptive technology ushered in the Bronze Age.

In the last two decades, we have seen the complete disruption of entire industries – mainframe computing, publishing, landline telephony, and information access.

The forthcoming disruption will be quick and brutal.

Chart Courtesy: PWC

Digital Minimalism

Tech expert Cal Newport’s new book

According to Nielsen, the average American spends three hours a day on phones and tablets. According to one study, the average Indian spends nearly four hours on phones and tablets. If you add up computer and TV time, you are staring at a screen nine to ten hours a day.

In the last four weeks, I have maintained a journal detailing what I observe in public places – offices, hospitals, bus and rail stations, and airports. I am amazed at people’s predilection to keep tapping away messages or talk. Hospital waiting rooms with prominent signs about not using phones are blissfully ignored. More than once, I have felt like an alien – am I the only odd person not using a digital device while waiting for my turn? I am baffled by the statistic – in four weeks, observing over five hundred people, I could come across just one other person not using a digital device. I am tempted to suggest that we have a new form of addiction – digital addiction.  

In his latest book, Digital Minimalism, technology expert Cal Newport offers suggestions to use the time better for professional and personal gain.

Newport suggests scheduling work into two-hour uninterrupted blocks. According to Newport, focusing on work to the exclusion of everything else facilitates the mind operating at full capacity.

Next, Newport refers to “solitude deficit” – the inclination to pull out our phones at the first sign of boredom. Newport advises to practice productive meditation – doing something physical or focusing on a single problem. This would tame our screen-check impulse and improve concentration.

The Radicati Group says that the typical worker sends or receives 125 emails a day. The result: many hours wasted in low-quality communication. Newport’s advice is to ignore mails that don’t require a response and for those that do, provide thoughtful, specific responses.

Digital interaction is not a substitute for face-to-face conversation. Newport advises against the use of social media for everything. Even if you can’t meet someone, Newport says, give them a call. You will feel better.

Newport recommends a 30-day break from any digital tool that is not essential to your work. When the detox is complete, set productivity and relationship goals, and re-introduce only those tools that help you to achieve them.

Signs of Digital Addiction?

As you scale back on your digital compulsions, make time for a hobbymusic, painting, or anything that requires creativity and the use of your hands. That will help you forget what may be happening on your phone.

The Ambidextrous Leader

Conference Board (https://www.conference-board.org) reports an alarming churn at the top of the largest corporations. In the first fifteen years of this century, almost 25% of CEO departures from the Fortune 500 companies have been reported as being involuntary.

A PwC report on the 2,500 largest companies denotes the huge cost of forced turnover – a mind-boggling $112 billion loss in market value annually.

Leaders today are under enormous pressure to perform. Short-term orientation is all pervasive, and no one appears to have the time to think about the long-term. Activists and major investors want to see the performance daily. Even a little deviation from the projections can have catastrophic consequences. Whistleblowers appear to have found a new voice and also the media to spread the message like wildfire. Sometimes, the distinction between the messenger and the message is blurred to the point of irrelevance. Add to all this the constant search for breaking news, the ever-expanding reach of social media, and the propensity for alternative facts to spread faster than the speed of thought, and you have the perfect recipe for disaster at every step.

Charles O’Reilly and Michael Tushman wrote in 2004 (HBR, April 2004) about the ambidextrous organization – an organization simultaneously capable of exploiting the present and inventing the future.

Today, there appears to be a dire need for ambidextrous leaders.

On the one hand, leaders need to be decisive – about everything from disruption to diversity to sexual harassment. If you look at classical decision-making models, they have many steps involved. Information gathering, analyzing alternatives, and thinking through the consequences can all consume precious time. Snap decisions based mostly on intuition may be fashionable but can have serious repercussions.

On the other, leaders need to be good listeners. You can never predict where good news (or bad news, for that matter) is likely to emanate. Even harder to predict is the impact of time on how you respond to the news.

Here is the paradox. With honorable exceptions, decisive leaders are not good listeners. Those who have the patience and the attitude to listen, and to filter out the noise, tend to be ambivalent, waiting for any extra bit of information that might improve the outcome. In other words, listeners are not expected to be decisive in ways that many stakeholders seem to interpret the trait.

In their excellent HBR article (What Sets Successful CEOs Apart; HBR; May-June 2017), Elena Lytkina Botelho et al. suggest four guiding principles:

Deciding with speed and conviction – 12 times more likely to be high-performing CEOs.

Engaging for impact – deftly engaging with stakeholders results in success being higher by 75%.

Adapting proactively – 6.7 times more likely to succeed than those who focus only on the short-term.

Delivering consistently – those who scored high on reliability were 15 times more likely to succeed as CEOs than those who could not keep the promise.

Or look at it another way.

HBR publishes an annual ranking of the best performing CEOs in the world. The model uses a combination of sustained performance (total shareholder return and market capitalization) and sustainability measures (environmental, social, and governance performance). Long-term financial performance is weighted at 80% and ESG performance at 20%.

Guess who were the top three in 2018?

  1. PABLO ISLA, INDITEX, Spain.
  2. JENSEN HUANG, NVIDIA, USA.
  3. BERNARD ARNAULT, LVMH, France.
INDITEX, Spain


NVIDIA, USA

If you are wondering why these star performers are not in the news, you are not alone.

Perhaps it is time for the leaders of unicorns to take a closer look at what they are trying to achieve, beyond short-term gains.

The Decline of Legitimacy

The relationship between power, authority, and legitimacy

News services reported that a young lady officer of the government was shot dead allegedly by someone who had transgressed the law by storing illegal drugs and was about to be proceeded against by the officer, in accordance with the law of the land.

You may be excused for asking: What’s new? This is the new norm.

A section of anthropologists and social scientists, after extensive studies, has concluded that violence is built into our DNA. Over millions of years of evolution, our (human) systems have evolved in a way as to protect ourselves at one level and to attack at another level.

Sure, there is a contrarian view as well. This column is not about violence is part of our DNA. It is about the question of legitimacy – of us as a species, as individuals, groups, societies, institutions, and nation-states.

The concept of legitimacy is complex. Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions. Legitimacy is a generalized rather than a event-specific evaluation and is “possessed objectively, yet created subjectively.” (Suchman, 1995, pp574).

Max Weber was the first social theorist to emphasize the importance of legitimacy. In his formulation of types of social action, he gave attention to those actions guided by a belief in the existence of a legitimate order: “a set of determinable maxims,” a model regarded by the actor as “in some way obligatory or exemplary for him (Weber, 1924/1968).

One model of legitimacy looks at the three pillars of institutions – regulative, normative, and cultural-cognitive. The basis of legitimacy for the regulatory pillar is that it is backed up by legal sanction. For the normative pillar, it is morally governed. For the cultural-cognitive pillar, it is recognizable, comprehensible, and culturally supported.

Other scholars have tried to simplify these abstract constructs in ways that ordinary people can understand.

Malcolm Gladwell quotes one such explanation in his book David and Goliath.

“…legitimacy is based on three things. First, the people who are asked to obey authority must feel like they have a voice–that if they speak up, they will be heard. Second, the law must be predictable. There must be a reasonable expectation that the rules tomorrow is going to be roughly the same as the rules today. And third, the authority must be fair. It can’t treat one group differently from another.” (I have slightly re-written this part).

Let us consider the three pillars as simplified in the paragraph above.

Why do we lack self-discipline?

As ordinary people, do we have a voice? The answer is a resounding no. Who listens to us? Are empty slogans and ear-catching promises driven by peoples’ voices or driven from the top to get into the seats of power?

Let me give you an example. On a busy street in the city of Bangalore, a high median separates the lanes. What was considered not to be a part of Bangalore at the turn of the century is the hub of commercial activity today. Two-wheelers are parked in the space meant for pedestrians. And yet, at any time of the day, you can see people driving two-wheelers on the remaining pedestrian space and in the direction opposite to the flow of traffic. The experience makes you wonder whether we have even an iota of self-discipline as a society. Wait, you haven’t heard the worst part. At the corner, half a dozen policemen are busy stopping vehicles for all kinds of reasons. When they can impose hefty fines on the spot on those driving without a helmet or without documents, what prevents them from seizing the vehicles of those driving on the space meant for pedestrians? I have witnessed elderly people pointing out to the insanity of what they see to the authorities. Does anyone listen? Do you still maintain we have a voice?

If laws are not predictable, how can we survive?

Is the law predictable? Again, the answer is no. The tax laws in the USA were slightly modified last year – after more than 25 years. The IRS does not conduct raids and make it into the front pages of The New York Times. In fact, to raid someone’s place, the IRS must obtain a court order. All their communications are sent by ordinary post. If you have a grievance, there is someone to listen to you and help you. The Reserve Bank of India, in its wisdom, makes an order on February 12 relating to “stressed assets.” The highest court in the land, in its wisdom, promptly strikes the order down. Those of you who were around in 1975 know that the internal emergency was declared at midnight. Major policy decisions, that have far-reaching consequences, are announced without any application of mind. Just read the analysis in a periodical published just this morning. One scheme announced by a major political party will swallow more money than the total revenue of the government in a few years. Since economics is all about trade-offs, would someone care to explain which other scheme will be chopped to make way for the grand announcement? Where is predictability in law-making when you can impose taxes retro-actively?

Source: IMF and OECD

The most worrisome is the third pillar. On the one hand, non-performing-assets of banks are at an all-time high. Major public sector enterprises are bleeding. As indeed are many high-profile private sector companies. Billionaires who have allegedly misused and abused the system roam in swanky suits in the capitals of the world. Meanwhile, hundreds of thousands of people languish in jails for a decade or more without a trial. Their incarceration is several times the punishment they might have received if a trial had been completed. How can you say the system is fair? If you have the resources, you can get a hearing in an hour. If not, you can rot for years.

Thus, in democracies across the world, you can witness a visible decline and, in some cases, the death of legitimacy.

Courtesy: izquotes.com

Where do we go from here?

The Three-Box Solution

Professor Vijay Govindarajan (VG) is one of the world’s leading experts on strategy and innovation. He is the Coxe Distinguished Professor at Dartmouth College’s Tuck School of Business and the Marvin Bower Fellow at Harvard Business School. 

Professor VG’s book “The Three Box Solution” is the outcome of 35 years of research, teaching, writing, and consulting.

The Three Box Solution is a metaphor for management’s approach to innovation. Shorn of technicalities, Box 1 represents the present – the core that is responsible for current revenue and profit streams. Box 2 represents the past – something that might have worked well in the past but is no longer relevant either because of changes in industry structure or technology or new business models or any other reason. Box 3 represents the future – one that is full of possibilities and opportunities, but one that entails considerable risk as well.


Professor VG argues that for organizations to succeed in the long-term, they need to constantly strengthen the present – the core – concepts that he readily attributes to other scholars like Gary Hamel and C K Prahalad. In other words, Box 1 is all about performance improvement – Six Sigma, Kaizen, TQM, Zero Defects, Service Quality Excellence, Human Productivity – the list is limited only by our imagination. Professor Clayton Christensen has used the term “Incremental Innovation” for such processes – something that a vast majority of organizations are happy to invest in hoping to reap the benefits of doing everything a little better but without investing a lot and without having a concern for the long-term.

Boxes 2 and 3 represent the biggest challenges for management and especially to leaders. How many companies can you think of that have consciously dropped a product line or service offering, or that have got out of geographies that are clearly non-profitable, or segments that cannot be reached efficiently and effectively? Not many. For one thing, organizations do not want to or cannot calculate all the costs, visible and invisible, associated with a process or activity. Thus, there is a tendency to continue with products or services that are no longer relevant because status-quo is very comforting. There is also a kind of emotional bond that prevents organizations from getting out of businesses even when they see there is no future. Box 2 which is about “forgetting the past that is no longer relevant” is a particularly painful decision for organizations and leaders.

Box 3 is about inventing the future. Box 3 involves risks. Many ideas fail. Leaders and organizations need to develop a tolerance for failure. Even with the best of intentions, the best of ideas, and the best of efforts, some failure is inevitable. Instead of throwing good money after bad money, organizations need to develop the courage to jettison projects after significant investments have been made if warning signs appear that the results may be far removed from the projections. Empirical evidence seems to suggest that if an organization pursues ten possibilities, one or two may be very successful, another one or two may not result in any significant value creation, and the rest would have to be jettisoned or else would lead the organization to catastrophe. Box 3, in sharp contrast to Box 1, is about “Radical Innovation” or “Disruptive Innovation.” There is substantive evidence to suggest that many of the OECD countries have neglected this despite capital being available at zero or little cost and the lack of investments in innovation have led to slowdowns, recessions, and even deflation in some countries. (For more on this, please read “The Capitalist’s Dilemma” by Professor Clayton Christensen).

As examples, consider Microsoft’s obsession with Windows even when it became clear that enhancements to the operating system could not be of a breakthrough nature. The iconic company’s fascination with Box 1 inevitably led to missed opportunities in mobile computing, applications, analytics, the internet of things and a host of emergent technologies that have successfully been exploited by smart competitors.

Consider also, as an example of the difficulty in embracing Box 2, Kellogg’s refusal to quit or even adapt to markets such as India. Nearly two decades after its foray into the second most populous country in the world, the company has still not realized that the breakfast eating habits of a billion people are radically different from that of some other countries. It is not surprising at all that the company’s efforts at “incremental innovation” have been a disaster.

Now consider the example of Google for a Box 3 application. The company routinely “kills” projects after investing tens of millions of dollars on ideas that initially show promise but turn out to be not feasible due to a variety of reasons. Yet, the head of innovation is fond of saying that failures are a must when you pursue “moonshot” opportunities and hence no idea is out of bounds for the company.

Professor VG cautions particularly about trying to deal with Boxes 2 and 3 within existing structures and hierarchies. The only way to succeed with Box 2 and Box 3 is to have dedicated teams that are insulated from traditional power centers and still have the unconditional support of top management.

Are you ready for The Three-Box Solution?