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Posts Tagged ‘productivity

“The basic underlying problem does not entail misbehavior or incompetence but rather stems from the nature of the provision of labor-intensive services”*…

Agatha Christie with her daughter Rosalind in 1924 [source]

Why is it that stuff– clothing, electronics, toys– keep getting cheaper, while services– healthcare, education, child care– continue to rise on price?

Agatha Christie’s autobiography, published posthumously in 1977, provides a fascinating window into the economic life of middle-class Britons a century ago. The year was 1919, the Great War had just ended, and Christie’s husband Archie had just been demobilized as an officer in the British military.

The couple’s annual income was around around £700 ($50,000 in today’s dollars)—£500 ($36,000) from his salary and another £200 ($14,000) in passive income.

hey rented a fourth-floor walk-up apartment in London with four bedrooms, two sitting rooms, and a “nice outlook on green.” The rent was £90 for a year ($530 per month in today’s dollars). To keep it tidy, they hired a live-in maid for £36 ($2,600) per year, which Christie described as “an enormous sum in those days.”

The couple was expecting their first child, a girl, and they hired a nurse to look after her. Still, Christie didn’t consider herself wealthy.

“Looking back, it seems to me extraordinary that we should have contemplated having both a nurse and a servant,” Christie wrote. “But they were considered essentials of life in those days, and were the last things we would have thought of dispensing with. To have committed the extravagance of a car, for instance, would never have entered our minds. Only the rich had cars.”…

By modern standards, these numbers seem totally out of whack. An American family today with a household income of $50,000 might have one or even two cars. But they definitely wouldn’t have a live-in maid or nanny. Even if it were legal today to offer someone a job that paid $2,600 per year, nobody would take it.

The price shifts Christie observed during her lifetime continued to widen after her death…

As you can see, cars aren’t the only things that get cheaper over time. In the last 30 years, clothing, children’s toys, and televisions have all gotten steadily cheaper as well—as have lots of other products not on the chart.

It’s one of the most important economic mysteries of the modern world. While the material things in life are cheaper than ever, labor-intensive services are getting more and more expensive. Middle-class Americans today have little trouble affording a car, but they struggle to afford a spot in day care. Only the rich have nannies.

Who is to blame? Some paint the government as the villain, blaming excessive regulations and poorly targeted subsidies. They aren’t entirely wrong. But the main cause is something more fundamental—and not actually sinister at all.

Back in the 1960s, the economist William Baumol observed that it took exactly as much labor to play a string quartet in 1965 as it did in 1865—in economics jargon, violinists hadn’t gotten any more productive. Yet the wages of a professional violinist in 1965 were a lot higher than in 1865.

The basic reason for this is that workers in other industries were getting more productive, and that gave musicians bargaining power. If an orchestra didn’t pay musicians in line with economy-wide norms, it would constantly lose talent as its musicians decided to become plumbers or accountants instead. So over time, the incomes of professional musicians have risen.

Today economists call this phenomenon “Baumol’s cost disease,” and they see it as one of the most important forces driving the price trends in my chart above. I think it’s unfortunate that this bit of economics jargon is framed in negative terms. From my perspective as a parent, it might be a bummer that child care costs are rising. But my daughter’s nanny probably doesn’t see it that way—the Baumol effect means her income goes up…

A thoughtful consideration of a counterintuitive phenomenon: “Why Agatha Christie could afford a maid and a nanny but not a car,” from Timothy B. Lee (@binarybits) in Full Stack Economics (@fullstackecon).

From Baumol himself…

Briefly, the book’s central arguments are these:

1. Rapid productivity growth in the modern economy has led to cost trends that divide its output into two sectors, which I call “the stagnant sector” and “the progressive sector.” In this book, productivity growth is defined as a labor-saving change in a production process so that the output supplied by an hour of labor increases, presumably significantly (Chapter 2).

2. Over time, the goods and services supplied by the stagnant sector will grow increasingly unaffordable relative to those supplied by the progressive sector. The rapidly increasing cost of a hospital stay and rising college tuition fees are prime examples of persistently rising costs in two key stagnant-sector services, health care and education (Chapters 2 and 3).

3. Despite their ever increasing costs, stagnant-sector services will never become unaffordable to society. This is because the economy’s constantly growing productivity simultaneously increases the community’s overall purchasing power and makes for ever improving overall living standards (Chapter 4).

4. The other side of the coin is the increasing affordability and the declining relative costs of the products of the progressive sector, including some products we may wish were less affordable and therefore less prevalent, such as weapons of all kinds, automobiles, and other mass-manufactured products that contribute to environmental pollution (Chapter 5).

5. The declining affordability of stagnant-sector products makes them politically contentious and a source of disquiet for average citizens. But paradoxically, it is the developments in the progressive sector that pose the greater threat to the general welfare by stimulating such threatening problems as terrorism and climate change. This book will argue that some of the gravest threats to humanity’s future stem from the falling costs of these products, rather than from the rising costs of services like health care and education (Chapter 5).

The central purpose of this book is to explain why the costs of some labor-intensive services—notably health care and education—increase at persistently above-average rates. As long as productivity continues to increase, these cost increases will persist. But even more important, as the economist Joan Robinson rightly pointed out so many years ago, as productivity grows, so too will our ability to pay for all of these ever more expensive services.

William J. Baumol, from the Introduction to The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t

* William J. Baumol

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As we interrogate inflation, we might recall that it was in this date in 1933 that United Artists released the animated short “Three Little Pigs,” part of the Silly Symphonies series produced by Walt Disney (though some film historians give the date as May 25). A hit, it won the Academy Award for Best Animated Short Film. In 1994 a poll of 1,000 animators voted it #11 of the 50 Greatest Cartoons of all time.

Its song, “Who’s Afraid of the Big Bad Wolf,” written by Frank Churchill, was a huge hit and was often used as an anthem during the Great Depression.

“People in any organization are always attached to the obsolete – the things that should have worked but did not, the things that once were productive and no longer are”*…

Ed Zitron argues that America has too many managers, and managers misbehaving at that…

In a 2016 Harvard Business Review analysis, two writers calculated the annual cost of excess corporate bureaucracy as about $3 trillion, with an average of one manager per every 4.7 workers. Their story mentioned several case studies—a successful GE plant with 300 technicians and a single supervisor, a Swedish bank with 12,000 workers and three levels of hierarchy—that showed that reducing the number of managers usually led to more productivity and profit. And yet, at the time of the story, 17.6 percent of the U.S. workforce (and 30 percent of the workforce’s compensation) was made up of managers and administrators—an alarming statistic that shows how bloated America’s management ranks had become.

The United States, more than anywhere else in the world, is addicted to the concept of management. As I’ve written before, management has become a title rather than a discipline. We have a glut of people in management who were never evaluated on their ability to manage before being promoted to their role. We have built corporate America around the idea that if you work hard enough, one day you might become a manager, someone who makes rather than takes orders. While this is not the only form of management, based on the response to my previous article and my newsletters on the subject, this appears to be how many white-collar employees feel. Across disparate industries, an overwhelming portion of management personnel is focused more on taking credit and placing blame rather than actually managing people, with dire consequences.

This type of “hall monitor” management, as a practice, is extremely difficult to execute remotely, and thus the coming shift toward permanent all- or part-remote work will lead to a dramatic rethinking of corporate structure. Many office workers—particularly those in industries that rely on the skill or creativity of day-to-day employees—are entering a new world where bureaucracy will be reduced not because executives have magically become empathetic during the pandemic, but because slowing down progress is bad business. In my eyes, that looks like a world in which the power dynamics of the office are inverted. With large swaths of people working from home some or all of the time, managers will be assessed not on their ability to intimidate other people into doing things, but on their ability to provide their workers with the tools they need to measurably succeed at their job.

In order to survive, managers, in other words, will need to start proving that they actually do something. What makes this shift all the more complicated is that many 21st-century, white-collar employees don’t necessarily need a hands-on manager to make sure they get their work done…

The pandemic has laid bare that corporate America disrespects entry-level workers. At many large companies, the early years of your career are a proving ground with little mentorship and training. Too many companies hand out enormous sums to poach people trained elsewhere, while ignoring the way that the best sports teams tend to develop stars—by taking young, energetic people and investing in their future (“trust the process,” etc.). This goes beyond investing in education and courses; it involves taking rising stars in your profession and working to make them as good as your top performer.

In a mostly remote world, a strong manager is someone who gets the best out of the people they’re managing, and sees the forest from the trees—directing workers in a way that’s informed by both experience and respect. Unfortunately, the traditional worker-to-manager pipeline often sets people up for inefficiency and failure. It’s the equivalent of taking a pitcher in their prime and making them a coach—being good at one thing doesn’t mean you can make other people good at the same thing. This is known as the Peter principle, a management concept developed by Laurence J. Peter in the late ’60s that posits that a person who’s good at their job in a hierarchical organization will invariably be promoted to a position that requires different skills, until they’re eventually promoted to something they can’t do, at which point they’ve reached their “maximum incompetence.” Consistent evidence shows that the principle is real: A study of sales workers at 214 firms by the National Bureau of Economic Research found that firms prioritize current job performance in promotion decisions over whether the person can actually do the job for which they’re being considered. In doing so, they’re placing higher value on offering the incentive of promotion to get more out of their workers, at the cost of potentially injecting bad management into their organization.

What I’m talking about here is a fundamental shift in how we view talent in the workplace. Usually, when someone is good at their job, they are given a soft remit to mentor people, but rarely is that formalized into something that is mutually beneficial. A lack of focus on fostering talent is counterintuitive, and likely based on a level of fear that one could train one’s own replacement, or that a business could foster its own competition. This is a problem that could be solved by paying people more money for being better at their job. Growing talent is also a more sustainable form of business—one that harkens back to the days of apprenticeships—where you’re fostering and locking up talent so that it doesn’t go elsewhere, and doesn’t cost you time and money to have to recruit it (or onboard it, which costs, on average, more than $4,000 a person). Philosophically, it changes organizations from a defensive position (having to recruit to keep up) to an offensive position (building an organization from within), and also greatly expands an organization’s ability to scale affordably…

The problem is that modern American capitalism has equated “getting the most out of someone” with “getting the most hours out of them,” rather than getting the most value out of them. “Success,” as I’ve discussed before, is worryingly disconnected from actually succeeding in business.

Reducing bureaucracy is also a net positive for the labor market, especially for young people. Entry-level corporate work is extremely competitive and painful, a years-long process in which you’re finding your footing in an industry and an organization. If we can change the lens through which we view those new to the workforce—as the potential hotshots of the future, rather than people who have to prove themselves—we’ll have stronger organizations that waste less money. We should be trying to distill and export the talents of our best performers, and give them what they need to keep doing great things for our companies while also making their colleagues better too.

All of this seems inevitable, to me, because a remote future naturally reconfigures the scaffolding of how work is done and how workers are organized. The internet makes the world a much smaller place, which means that simple things such as keeping people on task don’t justify an entire position—but mentorship and coaching that can get the best out of each worker do.

Hopefully we can move beyond management as a means of control, and toward a culture that appreciates a manager who fosters and grows the greatness in others.

The pandemic has exposed a fundamental weakness in the system: “Say Goodbye to Your Manager,” from @edzitron.

* Peter Drucker

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As we reorganize, we might recall that it was on this date that Henri Giffard made the first first powered and controlled flight of an airship, traveling 27 km from Paris to Élancourt in his “Giffard dirigible.”

Airships were the first aircraft capable of controlled powered flight, and were most commonly used before the 1940s, largely floated with (highly-flammable) hydrogen gas. Their use decreased as their capabilities were surpassed by those of airplanes- and then plummeted after a series of high-profile accidents, including the 1930 crash and burning of the British R101 in France, the 1933 and 1935 storm-related crashes of the twin airborne aircraft carrier U.S. Navy helium-filled rigids, the USS Akron and USS Macon respectively, and– most famously– the 1937 burning of the German hydrogen-filled Hindenburg.

The Giffard dirigible [source]

Written by (Roughly) Daily

September 24, 2021 at 1:00 am

“Nothing is less productive than to make more efficient what should not be done at all”*…

In the early two-thousands, Merlin Mann, a Web designer and avowed Macintosh enthusiast, was working as a freelance project manager for software companies. He had held similar roles for years, so he knew the ins and outs of the job; he was surprised, therefore, to find that he was overwhelmed—not by the intellectual aspects of his work but by the many small administrative tasks, such as scheduling conference calls, that bubbled up from a turbulent stream of e-mail messages. “I was in this batting cage, deluged with information,” he told me recently. “I went to college. I was smart. Why was I having such a hard time?”

Mann wasn’t alone in his frustration. In the nineteen-nineties, the spread of e-mail had transformed knowledge work. With nearly all friction removed from professional communication, anyone could bother anyone else at any time. Many e-mails brought obligations: to answer a question, look into a lead, arrange a meeting, or provide feedback. Work lives that had once been sequential—two or three blocks of work, broken up by meetings and phone calls—became frantic, improvisational, and impossibly overloaded. “E-mail is a ball of uncertainty that represents anxiety,” Mann said, reflecting on this period.

In 2003, he came across a book that seemed to address his frustrations. It was titled “Getting Things Done: The Art of Stress-Free Productivity,” and, for Mann, it changed everything. The time-management system it described, called G.T.D., had been developed by David Allen, a consultant turned entrepreneur who lived in the crunchy mountain town of Ojai, California. Allen combined ideas from Zen Buddhism with the strict organizational techniques he’d honed while advising corporate clients.

To someone with Mann’s engineering sensibility, the precision of G.T.D. was appealing, and the method itself seemed ripe for optimization. In September, 2004, Mann started a blog called 43 Folders—a reference to an organizational hack, the “tickler file,” described in Allen’s book. In an introductory post, Mann wrote, “Believe me, if you keep finding that the water of your life has somehow run onto the floor, GTD may be just the drinking glass you need to get things back together.” He published nine posts about G.T.D. during the blog’s first month. The discussion was often highly technical: in one post, he proposed the creation of a unified XML format for G.T.D. data, which would allow different apps to display the same tasks in multiple formats, including “graphical map, outline, RDF, structured text.” He told me that the writer Cory Doctorow linked to an early 43 Folders post on Doctorow’s popular nerd-culture site, Boing Boing. Traffic surged. Mann soon announced that, in just thirty days, 43 Folders had received over a hundred and fifty thousand unique visitors. (“That’s just nuts,” he wrote.) The site became so popular that Mann quit his job to work on it full time. As his influence grew, he popularized a new term for the genre that he was helping to create: “productivity pr0n,” an adaptation of the “leet speak,” or geek lingo, word for pornography. The hunger for this pr0n, he noticed, was insatiable. People were desperate to tinker with their productivity systems.

What Mann and his fellow-enthusiasts were doing felt perfectly natural: they were trying to be more productive in a knowledge-work environment that seemed increasingly frenetic and harder to control. What they didn’t realize was that they were reacting to a profound shift in the workplace that had gone largely unnoticed.

The knowledge sector’s insistence that productivity is a personal issue seems to have created a so-called “tragedy of the commons” scenario, in which individuals making reasonable decisions for themselves insure a negative group outcome. An office worker’s life is dramatically easier, in the moment, if she can send messages that demand immediate responses from her colleagues, or disseminate requests and tasks to others in an ad-hoc manner. But the cumulative effect of such constant, unstructured communication is cognitively harmful: on the receiving end, the deluge of information and demands makes work unmanageable. There’s little that any one individual can do to fix the problem. A worker might send fewer e-mail requests to others, and become more structured about her work, but she’ll still receive requests from everyone else; meanwhile, if she decides to decrease the amount of time that she spends engaging with this harried digital din, she slows down other people’s work, creating frustration.

In this context, the shortcomings of personal-productivity systems like G.T.D. become clear. They don’t directly address the fundamental problem: the insidiously haphazard way that work unfolds at the organizational level. They only help individuals cope with its effects…

From Georgetown professor Cal Newport (@CalNewport2), a history of personal productivity– how it transformed work… and at the same time, utterly failed to: “The Rise and Fall of Getting Things Done.”

* Peter Drucker

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As we tick our to-do lists, we might recall that it was on this date in 1810 that Baltimore jeweler Peregrine Williamson was issued the first patent for a metal writing pen.  (His patent, #1168, is among the “X Patents,” those lost in the Patent Office fire of 1836.)

OLYMPUS DIGITAL CAMERA

source

“Only when the clock stops does time come to life”*…

 

Swiss Reformation scholar Max Engammare claims that the Calvinists fundamentally changed how we think about time. They replaced the Medieval Catholic conception of time, which was cyclical and based on recurring seasons and holidays, with a linear view of time, as something which was always essentially running out – and this, apparently, led to the requirement that we start arriving to things on time, which he claims did not exist previously…

“As Calvin constantly reminded his followers, God watches his faithful every minute. Come Judgment Day, the faithful in turn will have to account for each minute,” reads this summary. And John Balserak put it this way: “European Calvinists — who dispensed with the liturgical calendar and still today do not celebrate Christmas and Easter as religious holidays…introduced during the 16th and 17th centuries a view of time that was linear and finite. With this came an appreciation of time as precious [emphasis mine]. People learned to be on time for appointments, which had previously not been a concern.”

So then, if we cannot blame Calvinists for the rise of capitalism specifically, we may attempt to blame them for a much larger malady: That religious philosophy is responsible for that feeling that we are constantly losing time, as we hurtle ever-closer to death…

As we all mark the passage of 2017 and the advent of 2018, we might contemplate Vincent Bevin‘s amusing– and insightful– reminder of the origin of the self-improving impulse that one typically feels around now: “Productivity is dangerous.”

Happy New Year!

* William Faulkner, The Sound and the Fury

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As we rethink our resolutions, we might recall that it was on this date in 1908, at one second after midnight, that the Times Square Ball first descended.

In 1903, The New York Times newspaper was about to open their new headquarters, the city’s second tallest building, in what was then known as Longacre Square. The paper’s owner, Adolph Ochs, decided to commemorate their opening with a midnight fireworks show on the roof of the building on December 31, 1903. After four years of New Year’s Eve fireworks celebrations, Ochs wanted a bigger spectacle at the building to draw more attention to the newly-renamed Times Square. An electrician was hired to construct a lighted Ball to be lowered from the flagpole on the roof of One Times Square. The iron Ball was only 5 feet in diameter! The very first drop [celebrated] New Year’s Eve 1907, one second after midnight [so, on this date]. Though the Times would later move its headquarters, the New Year’s Eve celebration at One Times Square remains a focal celebration for the world.

For the evolution of the ball-drop over the years, see here.

The 1908 ball

source

 

Written by (Roughly) Daily

January 1, 2018 at 1:01 am

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