Leading to Recovery: Part 2 of 3 - Reform

Leading to Recovery
Part 2 of 3
Reform

I believe that our ability to recover and indeed to lead the recovery requires sweeping reforms in government and the regulation of financial institutions (which I won’t address today), ethics, education, energy and the environment (which are inextricably linked), and health care.

What happened to ethics? How did we create Tom Peters, Bernie Madoffs, and Allen Stanfords? Why would loan originators push families into home loans for which they clearly were not qualified?

We talk about business ethics as if it were separate form any other form of ethics. Why is there any notion that our business ethics should be any different than our personal ethics? Hippocrates established the basis of ethics 2,400 years ago with the oath among other things, to "Above all, do no harm". This applies to everyone and to all endeavors. It is a sad commentary that we need to write policies on business ethics, provide training on business ethics. To be sure there are cases that present dilemmas and require the philosopher’s stone, but those situations bear no relation to the lapses that brought us to where we are today.

What we are experiencing is nothing less that the fruits of a massive loss of personal integrity in leadership. Heraclitus, the Greek philosopher, said, “The soul is dyed the color of its thoughts. Think only on those things that are in line with your principles and can bear the full light of day. The content of your character is your choice. Day by day, what you choose, what you think, and what you do is who you become. Your integrity is your destiny. It is the light that guides your way.”

Leadership cannot be faked and integrity cannot be acquired at a later date. Our deeds are who we are. As Emerson echoed, “What you are speaks to loudly that I cannot hear what you are saying.”

What is needed is nothing less than the expectation that we return to the private virtues that Peter Drucker describes. He said, “In a moral society the public good must always rest on private virtue. To make what is good for the country good for the enterprise requires hard work, great management skill, high standards of responsibility, and broad vision. It is a counsel of perfection. To carry it out completely would require the philosopher’s stone that can translate the basest element into pure gold. But, if management is to remain a leading group, it must make this rule the lodestone of its conduct, must consciously strive to live up to it, and must actually do so with a fair degree of success. For in a good, a moral, a lasting society, the public good must always rest on private virtue. Every leading group must be able to claim that the public good determines its own interest. This assertion is the only legitimate basis for leadership; to make it a reality is the first duty of the leaders.”

Back in 1959 Drucker coined the term “knowledge worker” as distinct from craftsman performing manual work that relied on skills acquired through apprenticeship. Knowledge and skill are different in that skills change very, very slowly. Knowledge changes itself and makes itself obsolete and very rapidly. To stay relevant, knowledge workers must engage in continuous learning throughout their careers.

Knowledge workers rely on substantial formal education and the ability to acquire and apply theoretical and analytical knowledge. Knowledge workers change the nature of work itself and structure of organizations. The ascendance of knowledge and the transition from manual to knowledge work made workers free agents. Information technology has rapidly accelerated this transition and continuously changes the speed and dynamics of knowledge and information exchange in nearly unimaginable ways and has lead to the DIS-integration of the familiar corporate structure, the most visible manifestation of which is currently outsourcing. In today’s global economy, a vast and increasing percentage of work is “knowledge” work. We are in competition daily with the best and brightest knowledge workers around the globe and we are steadily losing our ability to compete.

We need to reform education in order to maintain our leadership position in a knowledge-based world and particularly in one where a paradigm shift has set everyone back to square one. Further, the foundation of any successful reform, any breakthroughs in any field, is education, and in that respect we are in serious trouble. Our schools are not world class, the products of our K-12 education system are high dropout rates and a minority of students actually performing at the level of a high school senior.

Consider as a poster child for reform, a bill before our state legislature. Elimination of GRAD requirement (HF 501, Mariani, DFL-St. Paul/SF 405, Wiger, DFL-North St. Paul): This bill would allow students who cannot pass the GRAD test – Graduation-Required Assessments for Diploma – to still receive a high school diploma.

Here are some things that need to be part of our educational reform.

1. Stop social promotion – students need to perform at grade level. This does not mean that a student needs to be at a uniform grade level in all subjects. Some kids are gifted or challenged in certain areas.
2. Establish uniform standards for subjects at each grade level. These standards must compete with world class standards in place in other (even developing) countries. Local communities can choose to exceed these standards but they set a competitive floor on expected knowledge. When a student graduates there needs to be a uniform understanding across the country about the level of mastery achieved.
3. Establish a system that rewards excellence in teaching and prepares teachers to effectively present world class learning opportunities
4. Assure that teaching is of uniform quality regardless of where it is delivered.
5. Assure that our schools focus on teaching. It is not possible for schools to solve social problems that result in kids who are not ready to learn or see no value in learning.
6. Create a system that uniformly funds schools so that schools in Hector are as equipped to deliver a 21st century education as those in the Hamptons.
7. Fund programs that help prepare kids for school and keep them in school. Kids don’t learn when they are hungry, or afraid, or tired from working to support their families, or associated with gangs that disparage academic achievement.
8. Assure that higher education is available to those who are prepared. This implies two things. First that those going on to college are indeed prepared to master work at that level. Too many resources are expended within our state college system trying to remediate problems that should have been addressed in high school. The increasingly scarce funds for higher education need to be focused on higher education – not continuation of high school. Second it implies that higher education is affordable. Just as we as a country decided that government sponsored K-12 education was necessary to complete in an industrial society we need to recognize that a college education or similar advanced training is now the entry level standard to succeed in a knowledge-based, global economy.

The March 26th, 2009 Minnesota Public Radio’s MidDay program at noon had an excellent discussion relevant to needed educational reforms. I suggest you access it online and listen to it. http://minnesota.publicradio.org/display/web/2009/03/26/midday2/

For the above to be judged a success, and indeed to measure the success of any effort, metrics and criteria for success must be established.

Drucker observed, “In any social situation of the kind we deal with in enterprise, the act of measurement is neither objective nor neutral. It is subjective and of necessity biased. It changes both the event and the observer. Events in the social situation acquire value by the fact that they are being singled out for the attention of being measured. The fact that this or that set of phenomena is singled out for being “controlled” signals that it is considered to be important. Controls in a social institution such as a business are goal-setting and value-setting. They are not objective. They are of necessity moral. Controls create vision. They change both the events measured and the observer. They endow events not only with meaning but with value. And this means that the basic question is not “How do we control?” but “What do we measure in our control system?”

Drucker has essentially restated the Heisenberg uncertainty principle that essentially says that the very act of measurement itself changes the system. What you measure is what you get so care must be taken in choosing the metrics to avoid harmful distortions as people predictably try to game the system.

For sure these are drastic and potentially costly changes, but they are necessary for our competitiveness and indeed our security. Consider the payback on investing in 16 years of education and 50 years of productive work, paying taxes, and leading in production and delivery of the goods and services needed in the post investment banking economy. Consider the costs of continuing as we are where dropout rates are high, many “graduates” are ill prepared for higher education, and those that are cannot afford it. Consider the costs of more crime, more jails, more social programs, teen pregnancy, health care for the indigent, and ever shrinking tax revenues in the face of ever increasing need.

There is nothing with a higher return on investment than education. It is an investment we simply cannot afford NOT to make.

In the sixties our educational system was devoted to math and science so that we could put a man on the moon before the decade was out. Today, our efforts in the sciences face a no less daunting challenge – the remaking of our energy system to avoid catastrophic climate change.

To be sure there are people who do not believe that climate change is real or if it is that it is manmade. There are also those who believe that we did not go to the moon, that the earth is flat, and that Elvis is not dead. I don’t believe any amount of rational discourse is going to alter these people’s minds. But even if global warming is not real surely it is still better to not pollute. It surely will not harm us to develop sources of clean energy that will not be depleted. Given that virtually the entire world’s scientific community agrees on the causes and effects of global warming, that changes are happening even faster than they have predicted, and given the magnitude of the social and economic effects – I think we are better off accepting that global warming is real and that we had better deal with it NOW.

In our capitalistic world (including China, Russia, India, - virtually all but the most failed, totalitarian states) nothing will happen until the cost of doing something are outweighed by the costs of doing nothing. Only advances in technology and supporting government policies are going to make that happen. No single company can make the necessary long term investments in basic R&D in alternative (clean) energy nor can companies create policies that encourage commercialization and adoption. This is the role of government. We have the talent available, we know the need, there are many technologies to develop. We need to act NOW!

Why is it important to make these investments? Other than not toasting the ice caps, it will be hugely PROFITABLE - IF we are in a position to lead. Currently the largest producers of photovoltaics are in China and Germany. Of the 10 leading wind turbines manufacturers one, only one, GE, is a U.S. company. Will we invent, license, and sell worldwide or will we be buying someone else’s technology, sending them our money instead of reaping the rewards.

Consider the global market for technologies that reduce consumption, reduce emissions, remediate existing contamination, recycle existing resources (anyone for mining our landfills?) and provide renewable energy resources. Consider that China is in fact recognizing the impact of pollution on its economic wellbeing and the wellbeing of it citizens. Consider the fact that as soon as the economy recovers the demand for energy will rebound and again drive prices sky high increasing our security risks as we compete for scarce resources and trigger another economic slowdown.

In setting policies we must be much more aware of unintended consequences of well intended actions. Ethanol is big – but we didn’t fully understand the energy efficiency of its entire life-cycle nor did we foresee the global impacts of burning food for fuel. When considering the next generation of biomass incinerators and cellulosic ethanol plants we must think about the implications of burning or fermenting everything that grows, leaving nothing left in fields and forests to return to the soil, increasing erosion and the need for more petroleum-based fertilizers.

Our new challenges are long term, the solutions are long term, and the investment required is long term. The problem is that we have an exceedingly short memory.

Thanks goodness for the economy that we again have cheap gas – right?? Just a few months ago when gas was $4 a gallon you couldn’t give SUVs away. If you bought a high mileage car dealers would throw in a SUV for $50. All we heard about on the news was high mileage cars, hyper-mileing, alternative energy sources we hadn’t even heard of – algae, new photovoltaic, bio-diesel from coffee grounds, hydrogen comes back every time, and now even salt power. Now that gas is $2 a gallon we don’t hear about these anymore. Trucks are selling again and cars that get good mileage sit on dealer’s lots.

There is no single solution to the world’s energy needs. The solution will involve every imaginable energy source standardized for delivery into transportation fuels and smart electrical distribution systems. Our future lies not in the rumble of Hummers but in the hum of electric vehicles and the swoosh of wind turbines – but these are today’s technologies and can only be the start.

In order to recover sustainably and to our full potential will require finally addressing the issue of health care. I don’t pretend to have answers but I would suggest that you have a cup of coffee with my sister, a physician who still believes that her first duty is to her patients, not the bottom line of some health care giant.

As I said, I don’t have answers but I do have questions. When did the practice of medicine shift from the physician’s office to a call center cube in an insurance company staffed by a high school dropout telling doctors what they can and cannot do? When did health care’s customers cease being the patient and become the insurance companies?

I remember a different era in health care. It was a time when the statue of Chief Kandiyohi was on the bank at the corner of 5th street and Litchfield Avenue In Willmar, MN. It was a time when, if I walked with my Mom from my grandparent’s apartment above Shorty’s hardware and she took at right at the statue, the entire city of Willmar knew from the skid marks from tennis shoes and wailing for the next one and a half blocks that I was being taken to the clinic where I would be punctured with HUGE needles. It was a time when doctors practiced medicine, not insurance companies. The doctors provided the care needed without ordering all possible diagnostics in order to defend against lawsuits. Aside from the needles, I think it was the golden age of medicine.

Education, energy and the environment, and healthcare - these are government level issues. Only the government can set policies and bring sufficient resources to bear. Our role is to become engaged in the discussion, communicate with facts, provide our elected representatives workable solutions, and demand fiscally responsible, effective, programs with accountability for success. The resulting policies and programs must direct investment to areas that will provide both a short term boost and long term value.