The So-called Recovery

Warner Pacific has had an adult education program for over 25 years. I am a firm believer in the power of education, and its ability to help people provide for themselves a better standard of living. I also believe in the power of business to improve the overall health of a community. A combination of large companies that provide the financial backbone and a cadre of small businesses that are built to provide goods and services for this community is a healthy economic system. I think this is the kind of economy that works for average American families. Some would say that this type of economy has not existed since the end of the Clinton administration.

The following is why they make such a statement. According to the U.S. Commerce department the median household income for 2013 was $51,939. This amount is 8% lower than the median in 2007 the year before the great recession. “Households in the middle of the income distribution earned about $4,500 less last year than they had six years earlier.”

The Federal Reserve triennial survey reported that the top ten percent of wage earners in this country, with annual incomes averaging $400,000, did see a slight gain between 2010 and 2013. “Families headed by college graduates eked out a gain of 1%, while those with a high school diploma or less saw declines of about 7%.” The current reports demonstrate the economic recovery has been slow and minimal, even though we have spent an incredible amount of stimulus money to encourage growth.

One of the most telling statistics though deals with the number of workers participating in the workforce. In 2007 there were 108.6 million American fulltime workers, and in 2013, the number had dropped to 105.9 million. “Although jobs are being created, too many of them are part time to maintain growth in household incomes.” According to the Bureau of Labor Statistics the amount of people working part time, but wanting a full time job, “jumped to 7.2 million from 4.6 million.” These are the numbers being reported as job growth. Ultimately we need to recognize two things when it comes to our economic situation. First, wages have stagnated. Second Americans want more hours of work. The question in my mind is why is this happening?

How big is the U.S. economy? In 2013 the world Gross Domestic Product, which is a number used to understand the size of an economy, is $74.1 Trillion. The United States GDP for the same period of time was $16.2 Trillion. The U.S. economy makes up about 22% of the world economy, so we are a wealthy nation. So why hasn’t the “American Economy worked for average families since the end of the Clinton Administration?” I think that is a very important question, but one that is difficult to address.

In 2013 17,487,475 students were attending 4,140 colleges and universities across the United States. Also, 11.57% of Americans have a Masters, and/or Doctorate, and/or professional degree; and 41.5% of Americans have a Associates, and/or Bachelor’s degree. We have a lot of educated people in this country, yet our economy is slipping. So education may not be the problem.

However, a January 19th Economist article may give a clearer picture of why this recovery has been so weak:

“According to a survey conducted by Harvard Business School last year, many firms are still deciding against basing activities in America. Professors Michael Porter and Jan Rivkin asked HBS alumni who were running businesses about their choices of location and found that many of them were deciding to leave because they thought wages abroad were lower than at home. Another important reason, though, was to be near customers in big new markets, which this report does not see as offshoring in the conventional sense. Messrs Porter and Rivkin argue that firms are now ready to reconsider offshoring. They realise that in many cases they overdid it, and are discovering hidden costs in moving production a long way from home. But, the authors argue, America’s government is not making the country’s business environment attractive enough for companies to want to come back.”

They latest indication of this reality is inversion, companies moving their headquarters to other countries to avoid the heavy taxes of the United States. On paper the U.S. corporate tax rate of 35% ranks as highest in the world, but there are so many variables in corporate tax law that it is difficult to identify one number. So it really does come down to a company decision based upon strategy and profit margin. Globalization and American market saturation, as well as lower costs, are the main reasons for much of the offshoring of American work.

The question then what needs to be done? I want you to know I think about this all the time. I want to find another answer than just forcing companies to onshore, or reduce corporate tax rates. Currently, I think the answer lies in the realm of innovation. All of our educated people need to get the innovation religion. Come up with new product and service ideas. This is what entrepreneurship is all about. Come up with ways of doing what these large companies are doing, but doing is cheaper and here in the United States. Through the power of innovation and creativity show these large companies what they are missing by not using American workers to create, build, and provide their product and services.

This may seem simplistic and naïve and maybe it is, but that is how creative destruction works. Maybe it is time to fall in love with creativity again. Then maybe those corporate fat cats will see just what they are losing by racing to the bottom. More detail to come.

And that is my thought for the day!

Corporations, The Bane Of Our Existence?

Every time I hear the name Alibaba I think of forty thieves. Today, however, Alibaba is the name of a huge Chinese company that has just experienced the largest initial public offering ever. $22 Billion was just spent by US investors to buy up shares in this company, and the overall value of the IPO was $200 Billion. Not too shabby. But what are the facts that surround this company? How large is its market?

“The value of goods sold” for Alibaba is equal to Amazon and eBay, and with 600 million Chinese now using the Internet the potential market for this company is huge. Its mission is “to make it easy to do business anywhere.” Jack Ma has been quoted as saying “We want to help small businesses grow by solving their problems through internet technology. We fight for the little guy.” The Alibaba business model is very western, but as analysts have stated, “Alibaba’s smart business strategy and charismatic leadership comes with a massive risk.” China bans foreign ownership of companies it deems as strategically important. If this is the case then what did US investors buy with $22 Billion? They bought a “piece of a shell company in the Cayman Islands with a contractual right to a share of the profits.”

The risk associated with this company is immense. The US-China Economic and Security Review Commission has warned against this type of arrangement. “This intricate ruse is a way of making the business appear to be Chinese-owned to Chinese regulators while claiming to be foreign-owned business by foreign investors.” This according to the commission is illegal in China. Will the Chinese government come to a point where Jack Ma is to charismatic for its taste, or will Alibaba be considered too western for the good of China? This will be interesting as we watch this play out on the world stage. This investment may turn out to be completely worthless, or it could turn out to be very profitable. This is what investment is all about.

Alibaba is a huge company, but there are many other companies we invest in. I have a concern with these large global companies whose budgets are greater than many countries. The concern involves how they are managed. Who controls these companies when they are more powerful than the countries in which they operate? It turns out I am not the only one who feels that way.

The first CNBC/Burson-Marstellar Corporate Perception Indicator, resulting from a survey of 25,000 people and 1,800 top executives, tells us there is a disconnect between corporate leaders and the regular joe on the reputation of the corporation in our society. Business leaders view corporations as favorable, while the general publics view is somewhat lower. 82% of leaders see corporations as favorable, while 52% of the general public view them as favorable. These numbers are from leaders and people with the developed world. The results from the emerging world, such as China, are a little different. 72% of the general population see corporations as favorable.

In the United States the general public see corporations as a source of hope (36%) or fear (37%). While 84% of the Chinese people see corporations as a source of hope. More than 51% of the US general public see strong and influential corporations as bad.

There are more numbers that I could display here, but I think we need to ponder what these numbers mean. First, these numbers give an indication of what has occurred over the last two decades. In order the strengthen margins companies have moved a lot of work offshore. Of course the places where this work has moved to will have strong feelings of good for those companies. And the love affair the US general population has with low prices has helped foreign-owned corporations to provide opportunities for their countries. So these numbers don’t surprise me.
Should a CEO be concerned with how the public views their corporations? Or should they disconnect from people and make sure their employees are cowering somewhere? I think they should be concerned with the feelings of the consumer who make up their markets. 70% of these folks say that corporations play a positive role in creating economic growth, and 67% say they drive innovation. The fear that people have about these large entities is the lack of concern for the wellbeing of people. People see these large companies shutting down workplaces, driving high unemployment, and they are concerned. Therefore, CEO’s should pay attention to this.

I agree with Donald Baer’s comment “For business leaders, six years after the financial crisis and amid continuing economic uncertainty, the challenge is to show how they use their positions of power to contribute to the common good.” I know business is about profit, and I get that global risk is a part of the equation, but good business is about good relationships. And good relationships must be exercised with all stakeholders not just the shareholder. If these large companies, that have many resources, get this we can all win.

And that is my thought for the day!

The War On Poverty

I like Thomas Sowell’s economics. Personal initiative, effort, and just plain hard work are important characteristics associated with his economic system. However, sometimes I don’t agree with him. In the “Vision of the Anointed” (1995) Sowell stated, “Among the many other questions raised by the nebulous concept of greed is why it is a term applied almost exclusively to those who want to earn more money or to keep what they have already earned – never to those wanting to take other people’s money in taxes or to those wishing to live on the largress dispensed from such taxation. No amout of taxation is ever described by the anointed as greed on the part of government or the clientele of the government.” There are words in this quote that I agree with and some I don’t.

Why is greed applied mostly to the rich? Historically I think it appropriate. Even Warren Buffet recognizes that some people just cannot live on $500 million, or so they think. Therefore, I disagree with Sowell’s point here. However, I also think it is just as bad to apply greed to all people rich. I know many well off people that give away millions of dollars to people who need a hand up, not a hand out.

I do agree with Sowell when he ponders why the government is not seen as greedy. The government has never taken a dollar that it doesn’t spend and then some. So I agree with him there. However, I also disagree because there are those marginalized folks that just don’t have the same opportunities as those who live in the more affluent areas of our nation.

In this age of growing economic inequity we as a society must recognize we are our brother’s keeper. As such we need to figure out a way to help those that are trapped in poverty to “move from dependency to self-sufficiency.” The question is how do we do this?

The first question needed to be asked, is our current actions working? According to the New York Times there are currently 14.3 percent of American living in poverty. This equates to about 46 million people. The Federal government operates around 122 different antipoverty programs “ranging from Medicaid to the tiny Even Start Program for Indian Tribes and Tribal Organizations.” According to Gary McDonald this number is 126 programs. He also reports that these programs, along with state run programs, are spending $1 trillion dollars per year. Yet no matter how much we pay for these programs there doesn’t seem to be any change. The number of people locked into an impoverished life style is stagnant.

I do agree with Paul Weyrich, a conservative activist, when he says that “poverty is the Achilles heel of capitalism,” however just because it is a weakness doesn’t mean we through the baby out with the bathwater. We deal with it. Let me give you an example of how this is happening. I had a recent graduate come visit me yesterday. He is now working at Fritolay. He has done well for himself, but he told me that the company feels very strongly about Corporate Social Responsibility. He said he was surprised at how ingrained it was within the workforce and company culture. Thus, just because poverty is the weakness of a system, donesn’t mean we can’t use the system to mitigate the weakness.

Nobody disagrees with the importance of a safety net to help those who need a hand up. However, what are we getting for the $1 trillion we are currently paying? If we divide $1 trillion by 46 million, we get the number $21,700 per person. For a family of four that is about $87,000. That value is well above the poverty line. Giving a family locked in poverty this amount of money may not seem practical, but would it be more effective than what we are doing now?

If the current system is inefficient, then what do we do? I am a huge proponent of social entrepreneurship. Therefore, I think we need more entrepreneurial activities that help people move from dependency to self-sufficiency. The government can provide opportunities to fund those businesses that are training people stuck in poverty to work in the new environment.

I think another important part of the puzzle is not punishing those who work harder to get ahead. The current social net takes support away when a person makes too much money. Subsequently the person, or family, suffers because they have gone above a threshold. The system needs to award those that want to improve themselves. Figuring out a process that allows a hand up to get to the next level is critical. Work needs to pay enough to live on and save.

I do think whatever we do, we need to focus on creating a system that provides equal opportunity. The conservatives always say that people stuck in poverty just don’t want to work. I totally disagree with them on this. The system is skewed to one side of the social spectrum. We need to ensure that the economic system awards all who work hard and take innitiave, we do not need a system that forces equal outcomes.

I do agree with those who think government programs are hugely inefficient. These programs should be looked at as a system and redesigned for effectiveness and efficiency. But even more important, results should be measured. The government should be held accountable for how they transform its inputs, tax dollars, into results. And if its not getting what we think it should produce then we need to adjust the system.

Those who think that we need to shut down the safety net are wrong. Those who think the safety net should focus on handouts are wrong. Usually the truth lies somewhere in the middle, and this situation is no different. We have some smart people in this country. It is time to think outside the box.

And this is my thought for the day!

Revitalized On Sunday!

Wow what a morning! I slept well last night, had a good morning of reading, and went to church. I did go to church this morning for a specific reason. I was looking for guidance. There are many difficult and complex issues associated with modern living, some of which are very confusing, and I went to church this morning looking to the One who I knew has the answers. He did not disappoint. I have a renewed sense of peace and action.

This process of growth got me thinking about the challenge from Dr. Luke Goble to identify my top ten books. I have read several thousand books and wondered what I would consider my top ten. So I sat down and looked at my Ipad and my bookcases to see if I could narrow it down. I have read books from a plethora of genres that have impacted me over the years. Shakespeare, Durkheim, Kant, McIntyre, and others have influenced me. But what are those books that have made me who I am today? That was an interesting thought process especially after my revitalization this morning at church.

The question is who am I? I am a Christ follower first and foremost. Therefore, what were those books that have influenced my walk with Christ the most? Secondly, I am a thinker who doesn’t follow the left or right path, but one that usually falls in the middle, which means I have the opportunity to make both sides of the social and political spectrum upset. I am a selfish individualist who at times drives my wife and children crazy because of my drive to accomplish things. Lastly, I am a man who has come to believe that business can be done in a way that economic equality can be gained through hard work and tenacity. However, I also believe that the system is skewed to the rich, who need to see their responsibility to help those that do not have the same opportunities. So what are those books that have helped me get to this point in my life?

The most important book in my life is the Bible. I am not ashamed of this, nor will I apologize for this. Those who say that Christians are haters, have no idea who this guy Jesus Christ is. I met Him in the pages of the book, and I intend to walk with Him for the rest of my life.

The second most influential book that has made me who I am today, is the book “With Christ in the School of Prayer.” Andrew Murray’s books have had a huge impact on my thinking and ability to meditate and reflect on my relationship with God.

The third book, The Pursuit of God, by AW Tozer has had an incredible impact on my life. This was a book that, along with Murray, helped me to cultivate an inner life that hungers and thirsts for God. It has helped me to accept the grace of God.

The fourth book is actually two short stories in one book. “Father Sergius” was the story of an ambitious man who became a monk. However, his ambition follows him into this new role and almost destroys him, but he eventually finds the path of service. “Master and Man” is a short story about a businessman who though his impatience puts he and his servant in jeopardy. They are traveling to another city and get stuck in a blizzard in Russia. The master learns humility by keeping his servant warm through the night, but dies in the process. The businessman’s lessons were incredibly instructive for me.

The fifth book was Habits of the Heart. It was written by Bellah, Tipton, Sullivan, Madson, and Swidler. This book taught me about the complexities associated with modern living. It also convinced me that success is never just an individual effort. There are people who have supported us, counseled us, and helped us have the strength to attain our accomplishments. I don’t think there is such a thing as bowling alone.
The sixth book was a recent read. Niall Fergusson’s book “The Great Degeneration: How Institutions Decay and Economies Die” explores the economic stagnation of the west due to increasing debt, and the lack of economic mobility. Low wages and the ability of a corrupt and monopolistic elite to exploit the system to their own advantage are considered socially regressive. This book has helped me to see what the major cause of a stationary economy is, one that is characterized by the rich exploiting the poor. It is the result of laws and institutions. In other words entrenched systems that favor one group over another. I am a firm believer in personal initiative, but if a system has been established that does not allow each individual to prosper through initiative and innovation, then Houston we have a problem.

The seventh, and the most related to my current position as department chair, “Rethinking Undergraduate Business Education: Liberal Learning For Professions,” by Colby, Ehrlich, Sullivan, and Dolle. This book has helped me to see how important engagement in the classroom is, and how important practice is in the community. It has convinced me that there is no better place to study business then in a liberal arts institution.

The eighth book was written by one of my favorite modern authors, Phillip Yancey. “The Jesus I Never Knew,” helped me to think outside of my western evangelical box to see a Jesus that is closer to the real one. A companion to this book would be “Imaginary Jesus” by Matt Mikalatos. Often we create our own Jesus’s to fit our own selfish desires.

The ninth book on my list probably should be a little higher on the list. “The Making of a Man of God,” by Alan Redpath is one of those books that transformed my life. When I was younger I was very insecure, and I was afraid to try anything because I was afraid of failing. By looking at the life of David through the words of Redpath my life was truly transformed.

The tenth book was written by Malcolm Gladwell. David and Goliath was a timely book in my life. It helped me to confront those giants I was facing. “David and Goliath is a book about what happens when ordinary people confront giants. By giants, I mean powerful opponents of all kinds.”

So there you have it. This is not by any means an exhaustive list. I am sure I have left many books off the list that have impacted me, but for who I am right now, these are the big ten.

And that is my thought for the day!

Lessons On Life And Business

Today was an interesting day. We had a Faculty meeting on campus that ended with a student panel. I would have to say the student panel was the most interesting and most disconcerting event of the day. My take away from the conversation was that we as an institution need to focus on our value proposition. In other words know who we are and what value we are providing to our customers, the students. We can never be everything to everybody, and if we try we will water down our message we will lose our way. Mission drift is a devastating event.

The Chick-fil-A founder Truett Cathy died on Monday at the age of 93. He has received a lot of bad press because of his position that marriage is between a man and a women. He has been called a hater, simply because of his faith. That really does concern me. Those that say he is a hater actually hate him. Seems counter productive to me, and seems problematic. Why can’t we have differences of opinions and still respect and even love one another?

I personally don’t think Truett Cathy was a hater. I have been to Chick-fil-A restaurants in Virginia and I saw diversity and excellent customer service represented. However, what tells me that Truett was not a hater is how he ran his business. He was a principled man who tried to be the best Christ-follower he could, even in how he ran his business. He even shut down on Sunday’s to allow families to go to church.

In today’s paper I learned a lot about him. I learned that he believed in himself. He only had a high school education, yet he started and ran a multi-billion dollar company. He was an optimist, and believed he could make something of himself. He did, and so can we. The second thing I learned was about his work ethic. He was an incredibly hard worker. “He saw work as a privilege and made a point of enjoying it.”

The third thing I learned about him involved his culture of service. “He was devoted to serving others, from his customers and employees to young people and others in his community. He understood, like few others, what it meant to steward a great brand.” And related to this was the forth thing I learned, Truett never stopped innovating.

But here is where it gets interesting. The fifth thing I learned about Truett was how generous he was. “In 1984 he founded the Winshape Foundation, named for its mission to shape winners.” Through his foundation he provides foster homes for children, which currently houses about 150 children. He has also launched a scholarship program for restaurant team members. This scholarship program has awarded over $30 million in scholarships.

The last thing that I learned today was that Truett Cathy was a humble man. He and his wife have lived in the same home for decades, and as Muhtar Kent, SEO of Coca-Cola, stated “ he never took himself seriously.”

Truett Cathy didn’t have horns, he wasn’t spewing out fire and brimstone, but he did believe in traditional marriage based on his understanding of the Bible. So does that make him a hater? Others don’t see it that way. I really don’t think we are going to agree on everything, but instead of hating why don’t we serve, innovate, work hard, and maybe just maybe we will make a better world. I for one, am going to follow Jesus and He can deal with all you haters.

And that is my thought for the day!

A Common Growth

I remember years ago reading books that discussed the common good. Usually the authors were looking for common values that transcend cultural differences. Kidder, wrote about shared values in a troubled world, and others wrote about categorical imperatives so important for the social adjustment of our society.

Currently I am reading articles and books that are exploring a common economic growth. The argument, as Pitney proposed in his book on Capital in the 21st Century, is when a society’s economic growth is substantially related to the holding of capital and not through income, we have a widening gap between the haves and the have nots. Although I don’t agree with all of what Pitney discusses in his book, I do agree with this premise. I believe for a society to prosper all of its participants need to have a growing piece of the pie. This is an issue, because how does society accomplish this, yet not fall into a socialist trap?

William Galston has an editorial column entitled “Politics and Ideas.” I find it enlightening and centrist. Yesterday’s column began with a review of Kissinger’s new book and describing America as a problem-solving nation. Galston states that this skill can be used to create a growth that works for everyone, not just a favored few. I tend to agree with this.

Our political system is broken. Democrat or Republican parties are held in the pockets of their rich cronies, which is undermining our republic. As a nation we’ve forgotten how to be innovative and creative, leading to human beings taking initiative. The number of people on government transfer payments continues to grow. These are just two symptoms of our social problems that I think are critical, but what does Galston say?

“Recent reports underscore the extent of the challenge.” His challenge, an economic growth that works for all! Galston reports that unemployment has ticked down to 6.1%, but “the employment to population ratio is lower than it was at the official end of the great recession.” Our labor force participation rate is the lowest it has been since 1970. Galston makes a good point, “The aging of the population accounts for some of this decline, but it cannot explain why participation among prime-age workers between 25 and 54 stands at only 81%, two points below its level in 2007.”

We have all read the reports that state the top 10% of our society have flourished in this new economic, while “family incomes in the 40th to 90th quintiles have stagnated.” We’ve also read how the bottom 10% has actually lost significant ground. Recent reports have also stated that those with a college degree have had their incomes stabilize, while those without a college degree lost 10% of their income. Polls now show that only 16% of Americans think that job opportunities will be better for the next generation.

The Global Strategy Group conducted a survey between January and March of this year. They found that 78% of us think that Congress should promote an agenda that ensures economic growth is fair. The responders also felt that for everyone to flourish the middle class needs to thrive, which right now is not the case. The question one must ask, is how do we do this?

Many believe there needs to be an expansion of apprenticeship programs. Others feel the colleges need to be more affordable. I think both of these are an important start. Millions of jobs that require technical skill are not being filled each year due to a lack of people with the necessary skills. I think a thriving apprenticeship program can help there. Machinists, plumbers, and electricians are trades that pay livable wages and are respected. Seems to me we need to develop those skills.

It also seems to me that we will need doctors, professors, managers, philosophers, and others that require college educations thus we need to make our schools more affordable. The school I teach at has attempted to accomplish that, as well as carve itself a niche by creating a remedial system to help first generation college students.

These are two specific actions that can work if we build the right support systems with strong financial foundations. By doing this we can have a positive impact on our society, but do we have the will? This is a very simplistic way of describing solutions, but for those of you who are watching the PGA Tour Championship occurring at Eastlake Golf Course, do a little search on the Eastlake Foundation. You’ll be amazed at what has occurred in the neighborhood surrounding that golf course. You’ll see a community that came together and transformed that community from an underperforming, crime-ridden community, to one of the best in Atlanta.

And that is my thought for the day!

Business And Philanthropy

The more I study business, and the more I teach it, the more I see that corporate philanthropy is important. In other words those who have should share with those who have not had the same opportunities. Much of what is being discussed about corporate philanthropy would fall under the heading of Corporate Social Responsibility, but I also see this as a part of the Social Entrepreneurship movement. This could also be categorized as philanthro-capitalism. It has become so important that Laura Arrillaga-Andreessen, who is a philanthropist, has been hired to teach it at Stanford.

Laura is actually very excited about the subject. “I think this whole convergence of philanthropy and technology is so exciting I can’t stand it, and it’s the reason I never seem to be sleeping and always seems to be drinking Taster’s Choice and yelling when I talk.” She has been teaching philanthropy at Stanford since 2000, and recently has started her own foundation that she describes as a innovation lab for giving. Her goal is to “democratize giving by providing online resources and programs to make donating more accessible to people at all levels of wealth.”

Another woman, in Portland, Oregon, is accomplishing something similar. Sandra Morris, with her company, CafeGive, has created a web platform that helps small to midsize companies organize their giving processes to allow employees to practice philanthropy. Both Laura and Sandra are successful business people, who see the importance of giving back.

Even though many corporations are including philanthropy in their business plan, I don’t think we have seen anything yet. Laura states, “The Millennials have more social consciousness than any other generation,” illustrated by the fact that, “72% of college students in a 2012 said that working for a firm that creates some sort of social impact is important to their happiness.”

Ms. Andreessen has had many opportunities that others haven’t. She is the daughter of a billionaire, who earned his billions in real estate, and is married to Mark Andreessen who co-founded Netscape. However, just like her father she has decided to be a philanthropist, and has chosen to teach others how to be philanthropic too. She has worked with Mark Zuckerberg , who gave $100 million to the Newark, New Jersey public schools in 2010.

Why does she doe this? I think her father’s example helped, but she also attributes it to another experience. “Her enthusiasm for philanthropy came from her late mother, who was active in nonprofits throughout her life. When Ms. Arrillaga-Andreessen was in her early 20’s, she took care of her mother while she had cancer.” For the first time in her life she said,” I had to live completely outside of myself and live for the purpose of another human being. Right before she passed, I made a commitment to her and to God and to myself that I would carry on her work…and hopefully one day take it to a greater level.”

I have come to the conclusion that wealth is not the problem, but the love of wealth is. When we grab, amass, and horde wealth for our selfish pleasure we lose the purpose of wealth. It is only as we see wealth as an opportunity to do good that we see the real purpose of wealth.

I believe that efficient business creates wealth, but I also believe that as we do efficient business we need to do it is a humane manner that is economically, socially, and environmentally sound.

And that is my thought for the day!