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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When Technology doesn’t work


If like me, you have a fairly stable morning routine. The usual sequence of activities from the time you step out of bed until you step out the door, or in my case step into your home office. Each takes different amounts of time but nothing is too complicated that you need to do any active thinking. The result is your mind is free to wander in any direction, alight on any object or thought that it finds interesting.

Technology likely plays a supporting role, whether its the alarm that goes off to wake you, make your coffee, or the phone that connects you to the world through email or news sites. The support role isn’t supposed to hijack but rather simplify, and reduce unnecessary steps.

For example, I used to have an all in one grinder-coffeemaker. I merely added the beans and the water, and set the timer. Its automation saved me a little effort.  It spared me a few steps: hitting the button to grind the coffee ,empty the grounds into the coffee filter, press start. (Remember either way I added the water, and the beans.) It saved me maybe a minute or two, when it worked.

The key to support? It’s got to be reliable. In this case, more elaborate automation increased chances of breakdown as well as mechanisms that needed cleaning. When it didn’t work, the few minutes I saved daily, and some were taken back.

Worse I couldn’t anticipate when the breakdown would occur, and inevitably the disruption to the expected regularity of my routine proved intolerable. So, I changed back.

I’m at that point with MS Word and close to the edge with everything about Microsoft’s operating environment. I’ve not been an Apple user, until the iphone was part of an irresistibly good offer years ago.

Today, I am using an older version of an open source program called OpenOffice. Oracle bought them, but I never had to pay Oracle. The application sits on my desktop, it isn’t linked to the cloud and it doesn’t pop up with assistance when my fat, less accurate fingers hit the wrong keys. BEST of all it doesn’t stop my train of thought as I’m typing by doing me the favor of saving. Or if it does it still doesn’t stop me from continuing typing.

This past week I was very busily writing a rather complex article. Because I’m not that organized, I like to synthesize my ideas in real time using the blank page in front of me surrounded by lots of other open documents, and websites. After the first draft was out of my head , I saved it. Sounds simple enough, right? Saving, now becomes a more complicated choice than simply titling it and placing it in a folder for future retrieval. I had too many choices, partially my own fault—I did admit to disorganization right?

I have an account on DropBox that one of my client prefers I use because we share lots of big documents and images, and it’s just easier for version control.

Microsoft in its competitive wisdom, now offers its own cloud and that too becomes an open office option…presuming I remember the password or have the OS remember it for me, on every device I use.

Lest I forget there are the different drives on my computer, I could save to a portable thumb drive device? Or the hard drive on the computer or the home network that allows me to save to my home office desktop.

Of course the different options come with different advantages. At the moment none of them were relevant, as I was just in draft mode and operating under a self-imposed deadline to preserve my sanity.

So I decided save to the cloud, its safer and I won’t have to worry about what drive it’s on?

That turned out to be a bad move.

Remember the coffeemaker story and the trade-off on time savings that went upside down on me? The same happened with this project.

In full disclosure, the topic which had owned me for a few weeks was the notion of readiness and positioning with respect to technology advantages.

I don’t know of a single writer who doesn’t find themselves pausing every now and then to gather their thoughts before continuing to organize the words. I’m older and still use long hand and then transcribe my own scribbles, which means there are lots of fits and starts due to difficulty deciphering my own handwriting. Then again, I may also decide to put my typing skills to work as I’m doing now, looking at the screen while trying to organize my thoughts.

Again, it’s the natural fits and starts in the writing process that Microsoft’s engineers seeking to support the task, or simplify and anticipate got completely wrong.

Ok, I just saw open office do the same thing. It tried to anticipate what I wanted to type. Perhaps yo too have experienced these new features. I begin to spell a word only to have it suddenly appear in its full form highlighted in blue. I have no idea how to do something with this information. Am I supposed to use it to avoid spelling errors? Or (yep the system just corrected the o and capitalizing it for me) ignore it. If I’ve managed to describe the problem well at all you too should feel a bit irritated and frustrated, or at least empathize with mine.

You see I really want to focus on my own thoughts and getting them out. I don’t want more distractions or suggestions popping up at me. It’s why I still prefer long hand and the absence of automation. Sure I can save myself some time by typing my drafts directly into the computer, they may even be more readable. But I can’t afford the distraction or disruptions…even if as I just noticed the suggested words appear relevant.

Again, I’m not looking for a collaborator when I type. I’m merely trying to express myself. Did you get that? I want to express MY thoughts, MY ideas, MY word choices.

When I need an alternative I am happy to take the extra time to open up the thesaurus, or do a google Define to get other ideas. I want my dumb typewriter back, PLEASE.

WHEN I’m ready for your assistance, I’ll ask.

I Business I keep hearing the phrase to best to go ahead and ask to be forgiven later then to wait for permission.

The biggest offense Microsoft made, was having a ridiculous inefficiency set of tools. Rather than allowing me to type and save the document in the background, it froze the screen and swapped the cursor for its spinning wheel to tell me to hold on. So after fighting with this for a few days, I re-saved the document to my hard drive. Guess what it didn’t stop the problem. Worse the document would literally jump, when it was finished. The contents on the screen would shift sometimes a few pages.

How exactly they do that I don’t want to know, that it happens and that I can’t stop it, well that’s why I’m saying bye bye.

I have been typing continuously for a good hour and other than the few annoying word suggestions and auto grammar fixes, I’ve not been stopped once by a spinning cursor.

Thank you Oracle and Open Office. I’m grateful

Now I’m going to paste and post to word press. If something surprises me over there, I will let you know.

[PS, wordpress took the pasted text beautifully. Identified my spelling mistakes ad in a few minutes I was at the bottom of this input, ready  to post. SEE Technology can be well designed for the user.]