Saturday, June 16, 2012
R&D Success Not All About the $ Spent
So, it's not all about the R&D spending, you must have good innovators, yeah! China will not swamp us with all their spending.
Friday, June 1, 2012
The Case for Change
Following the 2007-2008 recession, in staving off a total
crash, the economy and some stop gap solutions were handed off from one
administration to the next. We still
lost Lehman Brothers, doesn’t seem like such a big deal now, does it? The bounce back to normal has been very slow,
and the argument now is what should be done going forward and should a new
administration take over the reins. Recently
David Brooks, the rather conservative commentator for the New York Times recently made
a good case for a Romney administration based on the underlying tenets of
Private Equity. But can a private sector
approach be made to solve the current problems with the US economy?
Brooks argues that a Private Equity approach with a focus on
change should be a case for Romney.
Romney seems to be focusing on the Venture Capital side of Bain for his
model on how to achieve job growth. Confusingly for the Romney story, Bain Capital was involved in both
sectors.
First let us distinguish between Private Equity firms (“PEFs”)
and Venture Capital firms (“VCFs”). PEFs
address the market for investment in underperforming companies, usually mature,
with returns pegged to economies of scale, cost cutting, and leverage to
achieve an appropriate risk/return. It has been shown recently that
this activity has a net neutral effect on overall employment.
VCFs address the
market for newer growth companies in need of funds to access customers, build staff
and other resources, and fund working capital needs. The risk here is higher, as many of these
investments will fail, and the resulting expected return is higher. Here “hiring” growth can be explosive, by
some measures netting
some 2% of total US GDP.
If Romney were to tout his PEF experience, this is not an
area to site job growth, rather change management. This might be the smarter play. If he continues to tout his VCF experience,
citing some 100,000 in job growth, then is he planning a targeted investment
strategy in young companies? Isn’t this
what the Communists do? I think the
message is confused, but maybe Brooks has the right approach.
Or maybe a more appropriate comparison should be made to the
Romney tenure running Massachusetts. But
that’s for another post.
Monday, May 7, 2012
Labor Market Efficiency Changing?
In summation, the shift to the right of the data points over time indicates a less efficient labor market. That is, for any one data point, say Feb ’12, a concurrent job vacancy rate in say Nov ’01 shows a much lower U-6 (fully loaded) unemployment rate, here approx. 9.3% versus 15%.
How can this be? Are there so many more folks now looking for a job with the same level of jobs available (vacant)? He does not posit a definite reason for this move, but a recent paper in the Harvard Business Review lends some insight. What if the current ease of travel and taste for independence was driving some of this shift? What if people were taking a trade off in income for flexibility?
In The Rise of the Supertemp, HBR, April 2012, Miller and Miller assert that some 16 million Americans are working independently today (Source, MBO Partners). These include an estimated 3 million managers and professionals, defined as folks with graduate degrees or equivalent who seem to desire the flexibility of temporary work. And what if this group tended to stay independent, given their level of talent and the ability to choose what they work on and with whom to work.
To quote from Miller and Miller, “The only comprehensive survey of U.S. Independent professionals to date, conducted in September 2011 for MBO Partners, found that close to 80% of independent workers are satisfied with their situation, including 58% who are highly satisfied.” Further, only 19% said they planned to seek a traditional job.
The ground rules for successful Supertemp engagements are project oriented and include:
1) Focus on what needs to be done now – this means specifying your most critical objectives
2) Define the work clearly – agree on written deliverables
3) Identifying additional resources required
4) Identifying the internal sponsor – the one who can make things happen internally, in small company cases this is usually the CEO
5) Check in regularly – to reassess goals and objectives.
Hurdles to an efficient market for Supertemps remain, e.g. the difficulty of obtaining healthcare outside traditional employment situations, and tax reform.
Regardless of the ongoing issues, we believe that temporary work is here to stay for the highly talented managers and professionals (think engineers, lawyers, accountants, CFO’s, etc.) and will lead to a continued “inefficiency” in the traditional “Beveridge Curve” for the U.S. Employment market, or should we say to a new level of efficiency based on a permanent Supertemp professional class, working how and when they want to.
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