If you invest in Value, do your savings grow?


BLS stats thru May 2018

This past week, the U.S. Department of Labor (DOL) issued its May unemployment report of 3.8%, the lowest since April 2000. Yesterday, DOL announced the productivity of nonfarm workers, measured as the output of goods and services for each hour on the job, increased at a 0.4% seasonally adjusted annual rate in the first quarter.

Allegedly, this healthy gain in jobs and the modest gain in wages inspires investors who turn around and buy technology companies. Its why Wall Street Journal writer Michael Wurshoffer, describes technology investments as  “a popular trade that contributed to much of the nine-year stock rally’s gains.”

Like any pendulum that swings too far in one direction, eventually, it will reach its limit and then swing back.  That’s what typically worries economists and should make others wary too. if you care to think aloud with me, keep reading.

Faster, better, cheaper—increased availability and access to automation achieve all three. These attributes are also shorthand for the means that different business products and services.  The challenge is whether automation and digital technology both hybrid proxies also deliver positive business outcomes.

Personally, I’m not so sure and I’m not alone in my doubts.

There are a few wrinkles in this logical string of associations.

Productivity gains are key to companies’ profit margins, and also the key to wider economic growth which is why DOL tracks and reports the statistic. Without margin, business cash flow suffers and investments necessary to build and sustain a business shrink.

This is where hard costs, context, constraints separate the ability of different businesses not just the means of product/service delivery, sales effectiveness but also end-user satisfaction.

Generally, hard or concrete financial measures reflect the relative success of a business.  It’s why many businesses evaluate potential opportunity in terms of the potential for return.  Will spending on that make us richer?  The faster, better, cheaper paradigm is more familiar and the benefits easier to understand than hybrid automation. Technology too often takes special abilities that exceed the internal know-how or resource capabilities.

Opportunity is often in the eye of the beholder, it’s somewhat serendipitous, right?  A discovery at the right time, at the right place by capable parties who take and then make an opportunity real and tangible, is rare in the business world, but not in life.

In life, what do you do when you find an object of value lying on the street?  Ok, maybe you wonder why it is there; but I’m guessing you feel lucky to find it.  In this case, someone else’s loss establishes your opportunity.

In my consulting practice, I am fully conscious and frequently point out to entrepreneurs their strength and unique value proposition derives from their distinct vision. Everyone sees and interprets the world a little differently which is why it’s difficult for others to steal and realize a concept as you envision it.

In business, there’s only a handful of leaders respected for their visions: Steve Jobs and Warren Buffet.

Steve Jobs stands out for his ability to both spot and transform opportunity into tangible value for himself and all of us too.  After he spotted the Xerox Parc Graphical User Interface, he managed to shape the ability of others to share his vision, and ultimately create his interpretation.

Note, for him better translated into visual and thus simpler. His legacy company produces products that sustain a loyal fan base willing to pay a premium…so no, not cheaper. Speed? The design and internal integration of functions in all Apple designs make them both easier for users to get what they want, wherever they are and often as they want it.  His holistic approach triggered a revolution that we associate with mobility.  That combination lifts Apple stock valuations too.

What about Warren Buffet?

Between DOL announcements this week, Wall Street Journal’s Michael Wursthorn reported on value investors–of which Warren Buffet may be the most famous. Wursthorn reported some strategy shifts among value investors as their portfolio performance trails that of growth investors.Comparing Russell 1000 indices - May 11, 2011 Thru June 1 2018

Strategically,  I too was intrigued by his observation. Not for the reasons other WSJ readers’ comments pointed out –that value investors buy and hold, which meant several value stocks of yesterday are the growth stocks of today.  Apple is one of them.

The definitional debate aside, I focused on the comparative analyses Wursthorn shared and deeper questions than those probed in the article.  It seems that the nine-year rally in US stocks excludes Value stocks –a distinction traditionally linked to shares of consumer-staples companies, basic materials firms, and big manufacturers, among others.

Again, this week’s market rally, as Wursthorn mentions seems to favor “asset-light technology” companies.

I wondered, why doesn’t the automation we associate with advancing tools and systems for data processing match the impact of automation we associate with the aforementioned value companies?  

My ongoing research on advancing technology and automation made me aware that unlike start-ups, established firms are much slower to invest in advancing digital connectivity especially internally across functions.  Is that dragging down their growth relative to other firms more nimbly enabled?

The value sectors historically associated with leveraging hard assets benefit from financial levers that data-rich firms and their soft assets can’t utilize, e.g. securitization. So why are technology firms experiencing dramatic growth and advancing capabilities managing those soft assets by creating more convenient access and delivery of information to their users.

Notice I didn’t mention productivity, and I don’t know how worker productivity between the two types of firms compare.

I do know that digital transformations are closing lots of process gaps. They accelerate both the review and interpretation of data and advance the flow of information to reach the right party in real time.

There’s an art to understanding “use” timetables for different information requests. Just as there’s an art to differentiating wanted from needed information, and the degree price, trust, and safety factor into a buyer’s value equation.

Does the artistry translate into an intrinsic value that an investor would be able to recognize and leverage?

I read with great interest a piece by Chad Syverson, an economist at University of Chicago’s Booth School of business entitled  Why hasn’t technology sped productivity? His analysis challenges the traditional constructs and associations that drive value and growth. He writes:

“Making better things using the same amount of resources, or making the same things using fewer resources, is, in the end, where economic growth comes from. If this phenomenon is taking place, you should see it in the data reflected as productivity growth. The problem is, if you go look for it in the United States, you don’t find it.” 

His analysis also points out how productivity growth has been elusive for considerably longer than the observation window Wursthorn shared in the Wall Street Journal this past week.  Instead, Syverson notes the role played by the diffusion of technology I mentioned earlier. Geoffrey Moore’s Crossing the Chasm differentiates the phases of adoption and their effects on invested capital returns too.

smithhouse-design-digital-marketing-consulting-phoenix-crossing-the-chasm

Now, you can appreciate how Warren Buffet, the quintessential value investor didn’t see any signs of value he would recognize.  His cash pile estimated to be about $110 billion gives him greater flexibility to put the money to work but only if he and his partner spot it. For example, fundamental investor theory doesn’t value Amazon’s capabilities to disrupt the wider retail market. So this company escaped his notice, to which he explained: “I was too dumb to realize what was going to happen,” he said.

It’s actually understandable for a traditional investor using accounting principles to evaluate an opportunity to overlook the newer forms in which value is created. Until recently, few companies data assets were capable of driving outsized growth. And don’t forget, data holdings remain footnotes not assets on balance sheets.

As a researcher and advisor, my job is to find opportunity but also justify its investment value. It’s why I encourage you to notice the methods and sources of data that academics and journalists evaluate, and what is possible for you to collect, acquire and combine.  These methods of analysis,  interconnected automation processes, and sources of data also differentiate digital economy leaders from laggards.

Businessman having a coffee break

Take a moment to picture decision-makers assembled in a board room.  The data generated, repackaged as information and presented likely resembles the charts printed in the WSJ and the Chicago Booth Magazine.  It also varies dramatically from what a retail sales associate needs to process, or an executive landing at the airport in a city they’ve never been where the language and customs are completely foreign.

Oddly, the unity of experience and shared behaviors of each of these individuals when they touch and access the most ubiquitous automation assistant prejudices each of their expectations.  Apple’s recent announcement of the FALL iOS release focuses on enhancing the personal experience and further adoption of productivity applications that compress steps and further simplify adoption and use.  Are these same journeys part of the strategic vision or neglected by CEOs.

The separation of technology to support functional activities in an organization competes with the personal behaviors enabled by mobile technologies.  As Syverson points out the diffusion of new technology within an enterprise slows productivity and its benefits come in multiple waves.

He hopes to see another retrenchment. I’m hopeful too, that organizational productivity will follow the behaviors and experiences using consumer technologies begin to spread across multiple functions at work.  Remember the difference between the specific and deep domain knowledge of these technologies doesn’t come close to the rapidity humans adapt and more importantly learn.

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Thinking aloud or stealing the show?


all-the-eye-rolls-to-the-princeton-mom-who-says-single-women-over-30-are-desperate-man-repellers1

I blew it. I broke my first rule and failed to control my ego.

Not sure what the lovely woman I met at my 35th graduate school class reunion felt, but I’m certain she hadn’t expected the slight and unfiltered commentary that poured out of my mouth.

In my haste to catch up with my classmates, I spotted one across the room standing in a small circle.  Had I interrupted an earlier conversation? I’m guessing that’s why this stranger to me raised the topic, that brought out my less admirable qualities.

This very poised and polished woman expressed her enthusiasm for a storytelling webinar she had heard.  Coincidentally, I too had participated in the same webinar.

The mistake was my response to her comments in which I undid any credibility I hoped or once had.  I blundered in,  may have even tossed my head and rolled my eyes expressing annoyance.  of course, I can’t really explain what happened or why.  For example, I’m guessing that I behaved and acted badly to someone’s eagerness to “learn” how to tell stories–the most natural of human behaviors.

Now in the quiet of my home, the emotions calm, the memory distant, the source of my annoyance is clearer to me.

I’ll admit, I’m lazy when it comes to learning. It’s considerably less work, requires less effort when I ask someone else to tell me the key ideas that will make me successful.

It’s probably why I had bothered to sign up for the storytelling webinar IDEO offered.  And it’s probably why I was so bothered that IDEO had attracted an even wider audience of participants.

When we ask someone else to give us the gist or spare us from sifting, sorting and working out what’s important, we take the magic beans approach to learning. i-072

The magic beans reference is to a fairy tale in which Jack, the main character, is framed as a fool.  Why would I mention a fool’s tale?

Don’t worry if you don’t recall the fairy tale, because the story is only a device to help you remember the message.  I assume, like me, you too take pride in what you know.

Take a moment. Think about the effort, time and attempts you spend acquiring knowledge that pleases you and makes you proud.

By chance, if you’ve got a recorder nearby play along for a moment. Or open the audio or video application on your phone and hit record.

“Repeat after me.”

“Do what I do.”

Let me be clear, I’ve given you an instruction and now your ability plus your will needs to work out a response.  That last bit, the work out? It mixes conscious and unconscious processes.  It coordinates the central nervous system receptors and transmitters that pass on the fight/flight triggers that route, interpret, select and cue whatever you do.

Your decision, answer or activity turns out to be a reactive bundle that rapidly assembled in response to my instructions.

STOP RECORDING

Watch/and or listen to your recording.

Were the phrases the same? what differences, if any did you notice?

I presume that you too are calm reading what I’ve written.  Do you know the reason I asked you to record this little activity and ask you to compare them?  I’m guessing you are also still wondering how any of this relates to magic beans, bonus points if you are beginning to connect all these little messages together.

Congratulations if you are aware of the following:

  1.  The power to learn and adapt is innate in all of us.
  2. Reflection and replay increase our understanding as it invites us to turn our focusing lens on ourselves and notice what we do as well as what we don’t do.
  3. Deeper learning occurs when we expend time and dedicate effort to learning any task or understanding someone or something.
  4. Thinking releases other chemicals and changes how we feel.  Circumstances dictate whether we feel drowsy or anxious and the extent of triggered connections.

Back to the real world

with respect to my own failure, and the story I mentioned at the onset of this post, I now get to the purpose and intention behind this posting.

Personally, I spend more time thinking and less time doing. To think through a problem or even identify its root cause requires different skills than applying the fresh thinking or even deeper understanding.  True, situations and circumstances vary. Social factors, in particular, affect our behavior often ahead of our awareness.

In my social scenario, I reacted emotionally with little or no thought, intention or consideration for others in my presence.  When this happens, I’m less clear and much less effective as I’m reacting to a narrow set of cues.  Of course, this is a considerable improvement over my previous habit of interrupting people before they finished telling me anything.

When does my intention to know differ from my hunger for magic beans? Our behaviors give us away.  What blew my ego’s cover, was my belief that I knew more than what was being said and I was impatient enough to prove it.

What I didn’t do was practice active listening, use my knowledge to ask questions and honor what others may or may not know.  Magic beans are always worth less than you pay for them unless you exercise a little critical thinking.

Earlier I gave you some simple instructions and then used more than the three instructional words to explain what I was doing.  What informed my purpose, my intention and lent credibility to make you consent and participate?

The only way to test what you know is to repeat it, think and then write it out.  It’s why the teacher in me knows that I’ll be better after I’ve had the chance to think things through.  When I just start talking I’m thinking outloud.  In some situations that’s appropriate, as in when you want to collaborate. But if people cut you off, then chances are your learning or recitation isn’t worth much.

The best way to apply what I know is to practice and test it, not by giving a lecture but by applying the learning in a demonstration of its meaning.

What about you, do you have any suggestions or ideas for how I can get out of my own way, be open to more possibilities?