Lately, a friend of mine has been reading a lot of Drucker. Drucker originated the term “knowledge worker” and knowledge work. I’ve been meaning to learn about and read up on Drucker’s work in this for a while.

The idea of a “knowledge economy” and such concepts are becoming increasingly mentioned in the mainstream US media as the United States faces increasing labor competition on a global scale. It’s been a rallying call to improve education so that middle class Americans will be able to compete on a global scale. The low transportation costs of “information” and “knowledge work” seem to imply significantly more competition in the arena of knowledge as we start competing in Thomas Friedman’s “Flat World”.

Maybe I’ll write about some of those in future blog posts, here though are…

<work in progress>
1) The main product of knowledge work is not physical – it is the answer to a question such as “Who are the top 10 competitors in the industry”

• At a basic level, this could just be sales dollars. Maybe it should be profit? How about expanding profit margin? Get the idea?
• The right answer will depend on the exact purpose for which the knowledge will need to be used. Any and all of the above are correct under different circumstances

2) No task is ever complete and the answer will continually evolve

• Your “Top 10 competitors” list will inevitably change, any slight modification of the original question or new question will challenge the original logic for the initial answer
• In addition, the passage of time will demand that each answer be revisted as market forces, competitors, and bases of competitive advantage change

3) The “rightness” of answer is highly subjective and dependent on each individual

• Very rarely are there objective standards with which to judge an answer
• The more “knowledge-based” a problem is, the more ambiguous the answer will be

4) The fact that a knowledge-based “work product” has a subjective value implies the importance of the relationship between participants of this transaction

• The exchange becomes highly trust-based
• Asymmetry of information is an inherent property of knowledge-based products: the “knowledge worker” will have knowledge of details that will be too difficult for the person paying for the knowledge work to verify… as a result, the person buying the “knowledge product” has to trust the person selling it because the product will necessarily have unverifiable characteristics

5) Multiple ways to create value in the context of “knowledge-based” work: “Objective” and “Subjective”

• There is an “objective” and “subjective” component to all knowledge product
  • Objective part is subject to “basic logic” – your list of “Top 10 competitors in the Automotive” probably will not include McDonalds… In law, since Aristotle, there has been a “reasonable person” standard that declares certain behaviors in accordance or in violation with the law depending on – in the case of laws dealing with obscenity – “a reasonable person” would find it obscene
  • The subjective part is the fact what is “reasonable” isn’t really defined and is changeable
• Communication becomes intricately linked to both types of value of a knowledge-based product
  • Objective value is increased when the knowledge-based product is able to be communicated more effectively – “more easily understandable”, “more rememberable”, “more intuitive”, “more demonstrably correct”, etc…. Anything that facilitates the spread of good logic, its speed, more rapid implementation, etc. makes that logic more valuable
  • Subjective value is increased when the knowledge-based product’s perceived value is increased through adjustment of the “reasonableness” of the person/people judging the knowledge product (in nicest terms, this is the domain of rhetoric and persuasion)

6) All knowledge work involves the constant creation of value along all three dimensions: as with any other product, one attribute of value is substitutable for another

• An objectively good idea communicated poorly can be made into a more valuable knowledge product through better communication; a well-communicated idea that isn’t that logical, holding the “reasonableness” – or subjective – element constant, will improve once its better thought out (its objective value increased)
• A mediocre, objectively good idea that is communicated fairly well will be improved if you can “sell” it to the audience with a smile or over drinks

7) The “free market” or market equilibrium in a knowledge-based economy does not imply that the “objective” portion will grow over time or come to dominate as the predominant type of “knowledge work”

• In other words, producers of “knowledge work” that use larger components of “objective”-ness will not have a competitive advantage over those that use less and they will not beat out their competition and gain share
• That said, producers who utilize different proportions of the several attributes of “knowledge work” will come to dominate different niches of the knowledge economy

Screenshots from my desktop…

In case you can’t read the titles, it’s:
“Criticizing Pastor, Obama Assesses Race in America”
and … “Clinton to Fly to Michigan in Push for Re-Vote”

Whereas Obama responds to soundbytes and divisive attacks by giving the most intelligent and honest speech in our generation, Hillary goes to Michigan to try and steal an election.

Click here to listen to Obama’s speech.

… the first indication was when I saw Mean Girls and had to remind myself that Lindsay Lohan was not legal ( I was only 2 years older, but still).

The latest indication is the fact that Ashley Alexandra Dupré is also younger than me (she’s 22). In case you don’t recognize the name, she is the prostitute known as “Kristen” who by having Elliot Spitzer as a client brought down the great “ethics crusader”.

Among Spitzer’s accomplishments – besides going after Wall St. – included the prosecution of a sex tourism agency that arranged for Americans to go to Asian countries to pay for sex. He was the first one to prosecute such a case where the arrangements are made in the US, but the prostitution takes place overseas. He also cracked down on human trafficking for sex slavery. His work against corruption and sexual exploitation should be lauded, despite the great irony of his hypocrisy.

In case you’re interested, Ashley also has a myspace page: http://www.myspace.com/ninavenetta …

A final question: will this help her business?
Probably not (at least not through prostitution). Unlike other businesses where winning over famous or notable clients might attract others, I’m having trouble imagining that would work here.

If she can get a book deal, however, she might consider a career change.

… analysts on the Clinton campaign!

Everyone knows that if management consultants were to quit their jobs and join political campaigns that they could “add a lot of value”. A former Associate who started with me at BCG and my old roommate who was also in strategy consulting did just that. They both currently work for Obama. Although I don’t think I’m going to quit my job and join the Obama campaign, I have to admit that sometimes I’m quite jealous of my old roommate. He has the chance to bear everything he’s learned as a consultant within the data/analytic group of Obama’s campaign. Instead of maximizing profits for an unnamed corporation, he’s maximizing votes for the best politician of our generation.
Now it’s obvious how consulting skills could come into play in a political campaign. Many of the same skills that get honed in the consulting world are have analogues in the political campaign world. Instead of “customer segmenting”, there’s “voter demographics”. Instead of “sales force effectiveness”, there’s the question of how to manage an army of volunteers and training them to do functions like voter registration, caucusing, and mobilizing voters to get to the polls on election day. The list goes on…

In terms of quality of life, there are many similarities but also several key differences. Campaign volunteers, like consultants, often travel or even re-locate on a moment’s notice to different parts of the country. Iowa, rural Texas, Ohio, etc. Naturally the activities are slightly different. Any consultant in Ohio is probably visiting factories for headcount reductions, whereas an Obama campaign staffers would likely be publicizing a union-organized event where Obama argues for NAFTA reform. And, of course, most campaign workers don’t have expense accounts where they stay at $200/night hotels with 2 king-sized beds while ordering sushi and filet mignon. The rare exception being if it’s just before Iowa or Super Tuesday, in which case if you work for the poorly managed Hillary campaign, you can spend $100,000 on subs and snow shovels and rock salt to clear the way to the Iowa caucus (note: it never ended up snowing).

Getting back to the original question of why i-bankers should join Hillary’s campaign and this isn’t just based on the fact that Hillary staffers work ~100 hour weeks (Obama’s staffers do the same). The reason i-bankers would have a special place on Hillary’s campaign has to do with Hillary’s latest finagling and underhanded manipulation of delegate counts which bears a striking resemblance to something known in the i-banking industry as league tables.

Johnathon Knee, in his expose of Wall St. describes the job of an investment banker, and their creation of league tables as follows,

“Many an analyst has spent many a sleepless night cutting and recutting the data to come up with the least ridiculous ways to demonstrate No. 1 market share,” he writes, explaining that the footnotes on league tables often include such tortured language as “includes transactions over $500 closed since January 1, XXXX” or “excludes transactions over $500 closed since January 1, XXXX.”

This is exactly what Hillary’s latest strategy is to win the campaign. She’s failed to out-organize Obama by inspiring an army of volunteers and by hiring a cadre of young professionals to work on her campaign. She’s only really managed to hang on to the women over 65 category (no offense to any woman over 65). Now if she can convince everyone that she, in some ridiculously construed way, has the No. 1 market share of their votes, it won’t be nearly as underhanded when she and her husband erase Obama’s lead in pledged delegates (representing actual votes) by tilting the superdelegates (party insiders) in her favor.

Obama has more of the popular vote and, therefore, more pledged delegates. He’s also won twice as many states and is also the clear leader among independents who will actually be deciding the election (since most everyone who votes for Hillary or Obama would vote for the other come November). Nevertheless, she has the audacity to suggest that he concede and be her vice-president.

Instead of the the simple obvious ways to measure who leading (all of which Obama wins), be on the lookout for Hillary’s attempts to create new and ridiculous ways of measuring how people voted which she will try to overturn at the Democratic National Convention:
* Instead of pledge delegates, Hillary has tried to sub-divide and has start speaking of “caucus” and “primary” pledged delegates
* Obama doesn’t win any “big states”… this is somewhat true, the only logical conclusion therefore is that if Obama is the nominee, California and New York will go Republican
* Although the list could go on indefinitely (Hillary will add more), the only reasonable ones are the simple ones

Anytime she comes up with new ways of slicing and dicing the data, don’t be fooled. Just think back to the intuitively simple metrics of popular vote and pledged delegates. Even if she did find some ridiculous way to show she was ahead, so what? Just because she has “No. 1 market share” doesn’t mean you should hire her to be President — look at her character and record and then decide the kind of president she would be. Finally, ask yourself why she started hiring unemployed i-bankers to figure out such ridiculous ways of “proving” she’s ahead instead of working to make the case for her own candidacy

Way back in the early days of the campaign when John Edwards was giving his extremely populist speeches and going on his “poverty tour” I remember thinking about his message and wondering if it would resonate. Now with Hillary and Obama trying to woo Ohio voters, there’s been a resurgence in populist rhetoric. Barack is criticizing Hillary for her support of NAFTA and both candidates are criticizing free trade.

According to an article I read today, Ohio and Michigan have lost 90,000 jobs due to NAFTA and many people there blame free trade for the decline of Midwest manufacturing jobs. Therefore, it makes good sense as a political strategy for Obama and Hillary to use this rhetoric… It also prompted me to think about a few questions I’ve had floating in my mind:

Will the US ever develop a “critical mass” of people disillusioned with their economic position and globalization that we end up with a president like John Edwards?
Various countries across Latin America and much of the developing world have large parts of the population that are in such poverty and without “hope” that they elect leaders who bring about redistribution and populist economic policies ultimately to the detriment of the country. I like to think of this situation as one where a populist leader has the ability to “turn-off” the spigot of globalization if it’s benefits don’t get distributed evenly enough. If a country fails to distribute evenly enough the benefits of globalization and economic liberalization and leaves a sizable enough proportion of the population in poverty and without hopes of advancement, it becomes easy for populist candidates to come into power.

Daniel Ortega of Nicaragua and Hugo Chavez of Venezuela as examples of such leaders. Both countries have a large percentage of people who do not believe they have good prospects in their economies. Moreover, they see globalization as something that either works against them or does not help them at all. They can become impatient and then elect a populist leader who wins on the promise of giving them tangible benefits (be it more schools, improved medical care, or job creation). These candidates may succeed in transferring assets to the electorate that votes for them, but oftentimes it will come at the expense of populist programs that undermine the country’s commitment to liberal economic policies, trade, etc. In developing countries, international investors harbor fears of expropriations, they get spooked, and as a result foreign investment plummets.

Using Venezuela as an example, Chavez DID succeed in building more schools and getting healthcare to some of the poorest Venezuelans. At the same time, Chavez’s policies have destroyed the country’s industry to the point that basic food commodities such as eggs and milk can’t be bought legally. Domestic producers, to avoid price controls, put their available quantities on the black market. The rest of the black market goods come from neighboring Colombia. After an increase in Chavez’s populist actions foreign investment is now lower than it’s been in a long-time, reversing a previous trend of increasing investment.

Economic inequalities give impetus to populist leaders who can use redistributive platforms as a way to gain election. Ultimately, society as a whole may be worse off as the majority of gains to the poor come at the expense of bankrupting the middle class, defying the rule of law, and destabilizing the investment environment or liberal trade policies.

The United States, unlike Nicaragua and Venezuela, does not have a large enough fraction living under $5/day that they’ve become restless and willing to elect someone who will throw away its institutions. Nevertheless, there is an increasing feeling among many academics that the “middle class” in America is disappearing and that “ordinary workers” can’t pay for healthcare and college tuition or for their own retirement. More and more people fear – especially given the current economic environment – that America’s standard of living may stagnate or even decline. The declining middle class, though suffering only from a “relative poverty”, may come to resemble the people of Venezuela who see the status quo as doing nothing for them and may opt to elect populist leaders that will ultimately harm the US as a whole.

When I first thought about John Edwards, I remember thinking, “nah, not this time around… but in 20 years if things go as they will, he could very easily become our President.” Now it seems that the populist messages may actually hold the key to this years presidential election – unfortunately for John Edwards, he won’t be the one able to ride them to the presidency.

For all the rhetoric, I don’t think that Obama or Hillary will take actions that will be comparatively detrimental to the US economy. That brings me to my next current question which is…

Is Obama becoming more like a status quo candidate? where did his core-”Washington outsider” credentials go?

First, it’s important to say that I still think Obama is the best candidate by far and that I have volunteered, donated, and will continue to do so until he’s in the White House. That said, in light of all this populism, I criticize him on several points. He’s not “telling the American people what they need to hear” when he cuddles up so close to the iconic “displaced factory worker”. What people in Ohio need to really hear is that the days of $40/hr jobs to do basic assembly in America are gone. Of course, that’s a very harsh reality. There’s news that unionized Ford workers are receiving over $100,000 in buyouts… unless these jobs go overseas, it will simply be impossible for “American” car companies to continue to compete. I put quotes on “American” because some of the Big-4 are actually selling more cars abroad than here in the states… in addition, were it not for the “American” labor costs, they’d actually be profitable.

My final Obama disappointment is that today there was an article about how unions have plowed millions of dollars into Obama’s campaign in the form of PAID canvassers, commercial advertisements, etc. In fact, one of the unions used to support Edwards before they started supporting Obama. Obama once criticized Edwards for accepting this same support that the union now showers on him. To be fair, the campaign states that they would prefer that the union members get involved directly, rather than through the union… but with such a tight race, I’m sure he’s happy for all the support he can get.

Piecing it all together… Populist rhetoric is helping to win this election. Obama’s populist rhetoric, which stands contrary to his rhetoric of “telling the American people what they need to hear”, pays off handsomely as he gets their support. Let’s just hope that if Obama wins, he won’t follow through on all of his populist rhetoric in a way that hurts the economy.

*Note on my blogging: Next time, I’ll try not to be lazy and to include links. That’ll probably make my blog much more interesting as people can follow along with what I’m talking about.

This blog is my first foray into blogging.

I’m still uncertain how my blog will break down along the following lines:

• intelligent commentary that a general reader could find interesting versus a journal that is only useful/interesting to me
• topical vs. general - the difference being driven by how large a percentage of my posts fit into how few topics
• posts written in english vs spanish

That isn’t even to mention tone or anything stylistic considerations. Will i write a bunch of boring posts with bullet lists that could just as easily be powerpoint presentations? Will i write stream-of-consciousness-style? or will i use the “old school” building blocks of sentences and paragraphs? I have yet to develop my blogging identity, but welcome anyone to watch as this project progresses.

P.S. Kudos to Sean Harper for telling me about WordPress and sharing his blog which finally provided me with the impetus to start my own.

—–
Dana