In Lehmann's Terms

Buzzwords 3.0

Back before the Y2K switch, many of my fellow Xers sought to transcend the  brick-and-mortar bottleneck by leveraging their core competencies and pushing the envelope in one particularly burgeoning field of virtual enterprise management: the fine art of buzzword creation.

You see, in mission critical tasks, you had to be capable not only of seeing the bigger picture, but of thinking outside the box and spotting the synergistic value-add in any given paradigm shift. In other words, what was important was not just brainstorming about scalable turnkey back office solutions with seamless interface, but actually getting in there to see where the bodies are buried.

Those who succeeded…became best of breed. It was a win-win, I tell ya.

Then, thankfully, the Nasdaq tanked, Silicon Valley became overrun with stampeding herds of programmers set free by all the bankrupt venture capitalists who opened the pens on their Asperger farms, and, best of all…people started talking like human beings again.

What a glorious thing a recession can be.

Alas, it couldn’t last. The bulls are back, and they’ve brought a whole new lexicon of gibberish with them. So pull out your mission statements, as I present you with Buzzwords 3.0: Seven Cliches of Highly Gag-Inducing Consultants.

1. Disruptive Technology – This is the Bigfoot of buzzwords, in that it gets an awful lot of attention for something no one’s ever seen. In theory, a “disruptive” technology is a substandard but nonetheless affordable product or service that draws critical market share away from some competitor that, left to its own devices, would have presented the better option (for whom?) in the long run. Making this term particularly cringe-worthy are the long-discredited notions about “path dependence” used in association with it to justify rent-seeking, such as the pleas for ridiculously broad application of patent, or for monopoly privilege granted by way of regulatory fiat.

2. Google Play – As in “what’s the Google play on this?” Most commonly, it’s used to refer to a firm’s entire Internet marketing strategy, and not just the parts that deal with Google. Having already become a verb, Google is now fast becoming a proprietary eponym, as ubiquitous as Band-Aid, Kleenex, or Jell-O.

3. Infosnacking – This one could have been a ‘Sniglet. It describes employees’ brief bursts of dicking around on the Web and e-mail, just taking a sampling of slacker hors d’oueuvres, rather than gorging on a full banquet of uselessness. The ascendant H.R. theory is that some degree of infosnacking should be tolerated, as the ill will engendered by a crackdown tends to be more destructive than the mild productivity losses of just leaving them to eBay in peace here and there.

4. Unfair Advantage – The first time I heard this one, it struck me as akin to the straight white guy’s version of the “queer rights” movement, or black folk calling each other “niggaz” – inverting a derogatory term into a badge of pride. Yes, an ordinary advantage is apparently no longer sufficient, because God forbid anyone actually have to engage in honest-to-goodness competition. Today, investor relations directors all want to brag about their company’s “unfair” advantage. That is, unless Eliot Spitzer happens to be on the line.

5. Take(ing) Accountability -- ©Every contestant in the history of The Apprentice. In some ways, this is a descendent of the dot-com cliché “take(ing) ownership,” but really… it’s just an old-fashioned malaprop that, for whatever reason, has spread like wildfire. Just as it is physically impossible for anything to “center around” anything else -- a bastardized mash-up of “center on” and “revolve around” – you can either take responsibility, or you can be accountable. You can’t “take accountability” for anything.   

6. Skin in the Game – Not a new phrase, technically, but I’ve been seeing and hearing it with mind-numbing frequency of late. It just means “to show a commitment by bearing risk.” When Warren Buffett first used it, oh, 30 years ago, it was clever. It was witty. Now, it’s just yet one more chalk dust torture.

7. Granularity – It takes a special kind of hubris to a) import an obscure term from the statistician’s lexicon and then to b)widely misapply it to mean something that c) can be easily described using the regular old English word “detailed.” But this is exactly the sort of hubris that buzzword originators possess in spades.

Now, if you’ll excuse me, I have to go finish up my next best-selling opus, Chicken Soup for the Chicken’s Soul: A Daybook of Comfort and Cannibalism.

Peter F. Drucker, 1910-2005

Peter F. Drucker -- the Austrian-born management svengali who successfully incorporated the Misesian emphasis on the primacy of the entrepreneur, the Hayekian notion of distributed information networks, and, most of all, Schumpeterian concept of "creative destruction" into an overarching theory of organizational behavior that proved to be one of the most influential intellectual developments of the 20th Century -- has died at age 95.

For some time now, it has been fashionable in some quarters to denigrate Drucker's contributions as, at best, self-evidently intuitive psycho-babble (which raises the at least equally self-evident question of why so few of the underlying principles he championed were evident in the structures of mid-20th century businesses) or, at worst, as propaganda that has served primarily to enable a parasitic caste of consultants.

It is not doubt true that, with or without a Drucker to popularize the concepts of "privatization" and "outsourcing," decentralization -- both in the public and private spheres -- would nonetheless have progressed as the unavoidable unwinding of command-and-control decision structures that grown positively sclerotic in their inability to react to change. Similarly, the "information economy" would have become ascendant, even if Drucker hadn't thought to give it a name. And, of course, the transition to objectives-based management was arguably already underway in many firms even before Drucker had developed the concepts of "benchmarking" or "mission statements" that would later provide invaluable fodder for a huge number of Dilbert strips.

But then, this probably misses the most important point about the man. As Drucker himself put it in this 1984 interview with the Claremont Review of Books, "I'm clearly not a scholar, I am a writer. I've never pretended to be a scholar." And as a writer focused mostly keenly on chronicling the human animal -- his many strengths and foibles -- Drucker was without parallel.  His was the kind of wit that could respond off-the-cuff, as he does in the Claremont Review article:

CR: Your interests seem to range everywhere, and one question is, how are these interests organized?
PD: You make an assumption that I'm organized, which totally lacks any evidence.

In tribute, then, I urge you, fair reader, to experience Drucker for yourself by perusing this brief guide to his original pieces on the web:

• "Modern Prophets: Schumpeter and Keynes?"
• "The Age of Social Transformation," from the November 1994 issue of Atlantic Monthly
• "The New Pluralism," from the Fall 1999 issue of Leader to Leader
• "What Business Can Learn From Non-Profits," from the July-August 1989 issue of Harvard Business Review
• "Management's New Paradigms," from the Oct. 5, 1998 issue of Forbes

Or, alternatively, just enjoy this sampling of some of my favorite Druckerisms:

• Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for. A product is not quality because it is hard to make and costs a lot of money, as manufacturers typically believe. This is incompetence. Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality.
• So much of what we call management consists in making it difficult for people to work.
• Suppliers, and especially manufacturers, have market power because they have information about a product or a service that the customer does not and cannot have, and does not need if he can trust the brand. This explains the profitability of brands.
• Too many mergers resemble the marriage of two cripples who become twice as old, twice as bureaucratic and twice as undynamic.
• Teamwork is neither 'good' nor 'desirable'. It is a fact. Wherever people work together or play together they do so as a team. Which team to use for what purpose is a crucial, difficult and risky decision that is even harder to unmake. Managements have yet to learn how to make it.
• No decision has been made unless carrying it out in specific steps has become someone’s work assignment and responsibility.
• Management means, in the last analysis, the substitution of thought for brawn and muscle, of knowledge for folkways and superstition, and of cooperation for force. It means the substitution of responsibility for obedience to rank, and of authority of performance for the authority of rank.
• There is nothing so useless as doing efficiently that which should not be done at all.

Rest in peace, Mr. Drucker.

It's leaked internal memos week

In comparison to the Wal-Mart health insurance memo, this one from Microsoft Chief Technology Office Ray Ozzie is far less likely to inspire Congressional inquiries or self-righteous invective on the nation's editorial pages. But as a glimpse inside the thought processes of a major titan of U.S. industry finding itself at a crucial crossroads, it makes similarly fascinating reading for those trying to read the tea leaves on whether it can remain the dominant force it has been.

Ozzie on where Microsoft has gone wrong (IOW...."gentlemen, we've been scooped"):

We should’ve been leaders with all our web properties in harnessing the potential of AJAX, following our pioneering work in OWA. We knew search would be important, but through Google’s focus they’ve gained a tremendously strong position. RSS is the internet’s answer to the notification scenarios we’ve discussed and worked on for some time, and is filling a role as ‘the UNIX pipe of the internet’ as people use it to connect data and systems in unanticipated ways. For all its tremendous innovation and its embracing of HTML and XML, Office is not yet the source of key web data formats – surely not to the level of PDF. While we’ve led with great capabilities in Messenger & Communicator, it was Skype, not us, who made VoIP broadly popular and created a new category. We have long understood the importance of mobile messaging scenarios and have made significant investment in device software, yet only now are we surpassing the Blackberry.

Ozzie on where Microsoft need not go (IOW..."know your enemies from your potential partners"):

Google is obviously the most visible here, although given the hype level it is difficult to ascertain which of their myriad initiatives are simply adjuncts intended to drive scale for their advertising business, or which might ultimately grow to substantively challenge our offerings. Although Yahoo also has significant communications assets that combine software and services, they are more of a media company and – with the notable exception of their advertising platform – they seem to be utilizing their platform capabilities largely as an internal asset. The same is true of Apple, which has done an enviable job integrating hardware, software and services into a seamless experience with dotMac, iPod and iTunes, but seems less focused on enabling developers to build substantial products and businesses.

Ozzie on where it's all heading (IOW..."hold on to your butts"):

Only a few years ago I’d have pointed to the Weblog and the Wiki as significant emerging trends; by now they’re mainstream and have moved into the enterprise. Flickr and others have done innovative work around community sharing and tagging based on simple data formats and metadata. GoToMyPC and GoToMeeting are very popular low-end solutions to remote PC access and online meetings. A number of startups have built interesting solutions for cross-device file and remote media access. VoIP seems on the verge of exploding – not just in Skype, but also as indicated by things such as the Asterisk soft-PBX. Innovations abound from small developers – from RAD frameworks to lightweight project management services and solutions.

Many startups treat the ‘raw’ internet as their platform. At the grassroots level, such projects actively use standards such as vCards and iCal for sharing contacts and calendars. Most all use RSS in one way or another for data sharing. Remixing and mashing of multiple web applications using XML, REST and WS is common; interesting mash-ups range from combining maps with apartment listings, to others that place RSS feeds on top of systems and data not originally intended for remixing. Developers needing tools and libraries to do their work just search the internet, download, develop & integrate, deploy, refine. Speed, simplicity and loose coupling are paramount.

To what extent Messrs. Gates and Balmer (or the company's board) are ready to embrace this comprehensive transition to a services-based model, I wouldn't pretend to know. And, of course, the Google-led brain drain may render many of Ozzie's more grandiose visions unpracticable. The company may just simply not have the human capital they need to make it happen. But I certainly wouldn't bet against them.

Adverse selection on aisle two

Wading into Wal-Mart's latest memogate over its efforts to control health care costs, Alex Tabarrok opines that the company is suffering from that most dread of insurance-related malladies -- "A.S.":

Wages for low-wage workers have been flat in recent years but health care costs have been increasing.  For a company like Wal-Mart, which pays many of its workers modest wages but does offer a reasonable health insurance plan, this is an invitation to adverse selection.  As the value of the wage component of the Wal-Mart benefit package has declined relative to the value of the health insurance component Wal-Mart has attracted more workers who want the job for the health benefits, i.e. sicker workers.

Though I may have trouble keeping many friends if I constantly subject their health care posts to nit-picky criticisms, I have to say I think the good Dr. T. is a bit off in his analysis, in part led astray by the N.Y. Times article that sparked his post.

Without question, Wal-Mart draws its labor pool from among the least desirable demographics, in a health care cost sense. Thanks in large part to a greater propensity for obesity, the working poor are disproportionately likely to suffer a variety of malladies -- high blood pressure, high cholesterol, Type II diabetes, acid reflux, hypertension, sleep apnea, respiratory problems, liver and kidney problems...you name it. They are also more likely to be smokers, more likely to be victims of violent crime, and have disproportionately more children -- leading to big bills both for obstetrics and for infant and childhood health care.

All of this contributes to what I'd call the "unfortunate selection" the company faces, but this is true of pretty much all large retail operations. The Times quotes Diane Rowland of the Kaiser Commission on Medicaid and the Uninsured saying that the company faces a disadvantage competing against retailers who offer no health benefits at all, but this is a radical overstatement. The number of retail jobs that don't offer SOME coverage is vanishingly tiny, by and large limited to those mom-and-pop operations that can't qualify under the federal ERISA law to be exempt from state-level benefits mandates. For those that are exempt, there is a tremendous advantage to offering compensation by way of benefits rather than wage salary -- both are fully deductible for the employer, but health benefits, unlike salary, are not subject to income and payroll taxes.

But to say that Wal-Mart's demographic problem amounts to truly adverse selection, one must ignore a rather crucial fact about Wal-Mart employees. That is, while most large firms that offer group health coverage typically see take-up rates (the proportion of those eligible for coverage who actually elect to purchase it) of 75% to 90%, at Wal-Mart, the rate is only about 50%. So, if the argument is that some large number of Wal-Mart employees sought their jobs solely to get access to health insurance....then why aren't they buying it?

To answer the question, it's important to keep in mind some other facts about Wal-Mart employees. Namely, that they are disproportionately likely to work two or more jobs (and thus draw coverage from some other employer source); disproportionately more likely to be women and/or "secondary" sources of household income (and draw coverage from their spouse's plan); disproportionately more likely to be minors or students (and draw coverage from their parents); disproportionately more likely to be seniors and/or retirees (and draw coverage from Medicare or a pension package); and, most crucial of all, precisely because of the very low wage rate at Wal-Mart, its employees are far morely likely than those at most firms to be eligible for Medicaid and other public health programs.

This last fact is the one that has done the most to engender public scrutiny of the company (and no small degree of public embarrassment.) According to a study of Wal-Mart's California employees by Ken Jacobs and Arindrajit Dube of the Labor Center at U.C. Berkeley, families of Wal-Mart employees utilized 40% more in public health care (such as that state's MediCal and Health Families programs) than did those of all large retailers. In response to such figures, the state in 2003 passed a "pay or play" health care initiative -- narrowly repealed by way of a Schwarzenegger-backed ballot referendum in 2004 -- that would have, among other things, defined the percentage of premium costs for which large employers would be responsible. Similar measures have since passed in Maryland and New Hampshire, and are gaining ground in a number of other states, helped along by big labor's ability to sell the notion to fiscal conservatives that -- with or without anything resembling Clintoncare -- Wal-Mart is already sloughing off its employee health costs onto the taxpayer.

And so, the company now increasingly finds itself between the rock of rising health care costs, and the hard place of government fiat, which the much-discussed "secret memo" from Wal-Mart's Susan Chambers to the company's board rightly recognizes is driven by some valid criticisms:

Healthcare is our most pressing reputation issue because well-funded, well-organized critics, as well as state government officials, are shining a bright light on Wal-Mart's offering. Moreover, our offering is vulnerable to at least some of their criticisms, especially with regard to the affordability of coverage and associates' reliance on Medicaid.

In total, the memo marks a brilliant strategy of counter-attack that looks to address both problems simultaneously. Moving toward high-deductible plans would lower costs to the company, lower premiums to employees, and likely increase take-up rates of the offered plans (and lower Medicaid take-up rates among employees.) As a sweetener to offset employee dissatisfaction, the high deductible plans would be coupled with HSAs for those who have been enrolled in a company plan for at least one year (giving the HSA benefit right off the bat would likely increase take-ups a little TOO much, and contribute to the rising cost problem.)

The 12-page memo, which I urge any interested parties to read in full, also offers a host of other strategies for addressing the company's labor and health care problems. Cutting cross-subsidies to spouses would decrease the job's attractiveness to older, costlier applicants, while making it easier for part-time associates to gain coverage (moving toward an average of one year for eligibility rather than two) increases its attractiveness to younger applicants. The company also would respond to employee demand for benefits that aid them in obtaining education and home ownership -- both of which not only prove to be more stable than health care costs, but also help attract higher income and higher educated workers, with more attractive health demographics.

But the real question is this: at what point do health care costs, and the relative unattractiveness of the low-income demo, combine to lead Wal-Mart to the seemingly counter-intuitive conclusion that the best way to control its labor costs would be to RAISE salaries?

Don't forget to trackback, my Dark Lord

First the immortal Posner and Becker get a blog. Now, even Darth Vader himself has one. What legend will be next?

Darth on efficient project management:

Due to the haste with which we are proceding through the latter phases of this battle-station's construction we have been forced to employ scores of civilian contractors from across the galaxy in addition to our own Imperial Corps of Engineers. This had led to a certain clash of working cultures.

For instance, this morning I critiqued a tragically sub-par piece of workmanship on a tractor-beam repulsolift inversion assembly by snapping the neck of the site supervisor and throwing his limp corpse down a disused elevator shaft.

Imperial engineers would have snapped to crisp attention, of course, but all these civilian contractors did was give me was grief. "Oy, you do that again and I'll have the union on you!" barked one red-faced buffoon.

"It is vital that you enhance the inter-departmental syngergies of your operation," I said. And then I killed him.