Don't Send Your Kids to College

Everyone from Occupy Wall Street to those who occupy the White House have noticed the widening of the gap between rich and poor.  It has fueled resentment throughout the country beginning with the TARP bailout of the Too Big To Fail banks and the tone-deaf tendency among its recipients to continue to pay multi-million dollar bonuses to their executives.

There will always be people who get rich on Wall Street. The problem isn’t that bankers make too much money and the solution is not for the government to redistribute wealth. 

The greater challenge is the economic prospects of the middle class.  A new study by the Organization for Economic Cooperation and Development (OECD) concludes, “with manufacturing and certain low-skill tasks increasingly becoming automated… the demand for information-processing and other high-level cognitive and interpersonal skills is growing”.  Throughout the 23 industrialized economies included in the study, “literacy, numeracy and problem solving skills” are lacking.  By now, we shouldn’t be surprised that the United States ranked 21 out of 23 in these critical skills. 

A few weeks ago, I wrote about manufacturing in the United States (The Ford Fusion and How the Media Got It Wrong (Again)).  I cited a study by the Boston Consulting Group (BCG) that projects that the US will again be a global center for manufacturing due to lower costs of labor, energy and transportation.  But, it’s not a bed of roses.  Among the risks cited by BCG is the skills gap among American workers. 

But, what skills are we talking about?  Yes, it’s true that our primary and secondary schools are failing us.  But, would fixing that problem solve the larger problem of a skills gap?

Don’t look to the government, the school board or the teachers’ union for the solution.  If you’re the parent of a school aged kid, the place to look for a solution is the mirror.  Start by second guessing an ingrained assumption.  Sending your kid to a four-year college will not guarantee him or her a good job.  College grads now handle our customer service complaints, check us in at the Marriott and help us setup our iPhones in the Apple Store.  None of those jobs are high paying nor are they the first step on the corporate ladder to the executive suite.  And, they don’t pay enough to raise a family or pay off student loans.

To solve the skills gap, we need to expand our idea of what constitutes an education.

Corporate executives can find all the engineers, financial analysts and marketing professionals they need by sending their recruiters to the top universities.  And, they do.  There is a well-established process by which this type of recruiting has been taking place for the last 60 or 70 years.  So, if your kid is an A student, by all means, send them to the best university you can afford. 

But, finding employees with the skills to support computer networks, assist on a medical research project or operate a CNC machine is a greater challenge.  None of these professions truly require a four-year degree.  They require technical skills coupled with a work ethic and personal habits valued by employers. 

The answer to this challenge will spring bottoms up from companies working with local governments and institutions like community colleges. 

In Texas, Houston Community College provides training and certification to work on oilrigs to satisfy growing demand in the energy industry.  In Minnesota, Anoka-Ramsey Community College works with local manufacturers to provide the specific training needed to work in a modern factory -- geometric dimensioning, process control and measuring tolerances.  A non-profit institution, Corporate Voices for Working Families has developed a set of best practices – a blueprint, if you will – for employers to work with local colleges and community colleges with a goal of increasing employment among graduates.

College tuition is increasing 8% per year, well more than inflation and certainly more than real wages, which have remained flat for more than a decade.  Parents are right to question the value of a degree that leaves them or their children saddled with debt.  But, we shouldn’t expect the solutions to come from Washington or the state capital.  Industry will drive the demand for training and education to close the gap.  Competitive enterprises will develop the programs to satisfy their needs.

It all starts with the students, the job seekers.  They must take responsibility for demanding the skills necessary to get a good job with strong career prospects.  They must have the support of those who pay most of the bills for their education – their parents. 

Blaming institutions of government for their failures will not get your kid a good job.  Taking responsibility for the outcome, discovering what employers want and getting the training and education you need, will.

WHO WILL LEAD?

Occupy… Something… What? I Dunno

Are you making New Year’s resolutions this year? Three years ago was the last time I did so. I worked hard at it too. I created three categories – Healthy, Wealthy and Wise – and made two resolutions in each. It was a serious endeavor. (No one who knows me would be surprised. I have been told I am too serious since I was in the second grade.) It took me two years to achieve them all. I am still tired from the effort.

Despite my exhaustion, I feel compelled to have another go at it. This time, I’ll keep it simple. My resolution is to Occupy something. I am not sure what just yet. But I will do it. I will Occupy something.

Many serious commentators have made Occupy their Word of the Year. Indeed, Ben Zimmer who heads the Word of the Year effort at the American Dialectic Society told NPR that Occupy leads this year’s voting (although he admitted his personal favorite is Humblebrag).

Occupy has several meanings, of course. I don’t mean that I will Occupy something in the conventional sense. If I Occupy my Lazy Boy recliner, that won’t count. It’s doubtful I could Occupy it any more next year than I did this year anyway. Taking up residence somewhere else doesn’t count either. I could plop myself in a first class airline seat on my way to the capitals of Europe or Occupy a suite at the Four Seasons; but, that wouldn’t capture the essence of the resolution either.

Nor, do I mean Occupy in the military sense. The US military Occupied Iraq for eight plus years. It’s not what I mean.

Occupying my time with something would not require much resolution either. I already occupy my time writing this blog and reading about this and that.

The real resolution to Occupy something requires that I embrace and idea or concept and immerse myself in it. The folks who Occupied Wall Street made a serious commitment to an idea. They physically and visibly took up residence in a downtown NY park. Their idea – and their attitude – were picked up throughout the western world and went viral (that phrase – went viral – must have been the word of the year sometime in the past).

In my professional career, I have found that for change to be effective in any institutional setting there must be a physical and visible manifestation of it. If the CEO wants a realignment of functions to be effective, he should move people’s offices around. Preferably this should happen during the work day so that everyone can see it.

I have a good friend and colleague, Larry Litowitz, who, as CEO of a manufacturing company, moved his desk to the factory floor to make sure everyone knew he was serious about getting in touch with his workforce and the need to improve equipment and safety.

That’s how you Occupy something!

So, I must decide. What will I Occupy? Maybe you can help. Any suggestions?

Greedy or Simply Needy?

I lived in Denver for a few years, back in the 1980s. It was a great experience for a guy who grew up in NY and I wouldn’t mind going back someday. I worked in a national credit card business at the time so the local economy didn’t affect me too much. Others weren’t so lucky.


Colorado is a boom or bust state. In the 80s, it boomed early on high oil prices. It went bust later on the collapse of oil prices. Big Oil closed all their Denver operations when it became economically infeasible to explore for oil in the Rockies. The contractors, most of whom were geologists and engineers went bust along with them. Many left town leaving a declining real estate market and failed regional banks and S&L’s behind.

Sound familiar? It was a microcosm of our national banking crisis. The difference? The banks weren’t too big to fail. The Federal Deposit Insurance Corporation (FDIC) spent about $900B to take over failing banks (an amount which they later recovered by raising rates on its member banks), the banks’ shareholders lost all of their stock, none of the executives walked away with multi-million dollar severance packages and no one occupied Denver.

Too bad it didn’t work that way in the financial crisis of 2008.

Last week, the press reported on an Organization for Economic Cooperation and Development (OECD) study that concluded that the wealth gap between young and old is growing. The report went further in concluding that economic mobility from lower to upper income strata was more evident in Canada and many European countries than it is in the US.

Naturally, this information is used as fuel for those sympathetic to the Occupy Wall Street movement (OWS). I wonder how many of those who reported on the OECD study actually read it (which you can do by clicking HERE).

What the report actually said was that upward mobility was primarily a function of parental influence on education starting in early childhood and extending through college. The gap between young and old, rich and poor is the result of how well educated you are.

To quote directly from the report: “Parental or socio-economic background influences descendants’ educational, earnings and wage outcomes in practically all countries for which evidence is available.”

Many pundits have speculated that the fervor behind OWS will peter out when the weather turns too cold to camp out in city parks. Even if that happens, the underlying problem – young adults who have worked hard and played by the rules can’t find jobs – will not vanish with the first snow. However, over time something must change.

Here’s my prediction: in the absence of jobs, many will start businesses. Yes, comrades, they will become capitalists. They will go from being needy to being greedy. As one pundit put it, their Plan B will become Plan A. And, there’s an app for that. "Start Your Own Business" will set you back $.99 in the iTunes store.

I have sat in on many presentations on how the Internet – Google, Facebook, Retargeter.com, Tumblr.com, YouTube, etc. – are changing the way business is done. When they are over, the middle aged listeners in the audience usually remark that they don’t get it. If I were 25 today, I would see those folks as too fat, dumb and happy to stand up to the competition I can offer.

Those too sluggish to adapt to the new world will end up like the last buggy whip manufacturers. We live in a world where $600 can buy a disk drive that would store all of the world’s music, where 5 billion mobile phones are in use and 30 billion pieces of content are shared on Facebook every month (according to the McKinsey Global Institute).

Creative entrepreneurs have figured out how to use technology to destroy old business models in healthcare, music, journalism, libraries, education, travel, supply chain management and the credit card industry – among others. Just as the transition from an agricultural to an industrial economy caused economic disruption – lost incomes among those whose skills weren’t adaptable – the transition to a global information/Internet based economy is doing the same right now.

And, just as the OECD study concluded, education is critical to making the adjustment.

What if you’re not an A student and can’t figure out how to disrupt an old business model? Dilbert cartoonist Scott Adams wrote of his experience creating new businesses for himself while in college in an Op-Ed piece in the Wall Street Journal last April. Titled "How to Get a Real Education", he outlined the real world skills required to make a business work – any business. Not just those that are disruptive.

Free market capitalism has been the basis for American prosperity since our nation’s founding. Successful business people act in their own self-interest. It doesn’t result from greed; it results from need. That one man’s success can cause another man’s failure is part of the natural order. Those who seek to change it must consider that our prosperity will suffer.

Back in Denver, one enterprising geologist opened a micro-brew pub in an old industrial part of town called LoDo (Lower Downtown). Wynkoop Brewery became a popular restaurant in a bad part of town. His Plan B became Plan A.

Today that successful entrepreneur is governor of Colorado.

Greed Is Still Good

True confession: I used to work at Goldman Sachs. Yup, the evil empire, the scourge of the Occupy Wall Street (OWS) protesters. So, I have a bias.


So many pundits, editorials and reporters have made the obvious observations about this now national (or maybe global) movement that I find it difficult to add any new thoughts. They are righteous… they are wrongheaded… they should be marching on Washington…. Maybe they just want jobs… Or, maybe they just want to get laid. (Well, this last observation is mine. But then I am old enough to remember the anti-war demonstrations of the 60s.)

I’m in the camp that thinks they should be marching on Washington. But where specifically? The White House? The Capitol? The Fed? The Department of Treasury? Too complicated. Let’s just occupy Wall Street.

Another obvious observation: they have worked hard and played by the rules and feel screwed by the system. They need jobs.

But, here’s the problem. The jobs aren’t coming back and it has nothing to do with Wall Street. It has to do with technology and the Internet in particular.

Have you been to an airport lately? If you have, you probably checked in to your flight at a kiosk which spit out a boarding pass and directed you to your gate. Remember how many people it used to take to check you in? Do you think those people are getting their jobs back?

This is just one of the examples of “The Second Economy” identified by the McKinsey Quarterly (you can get a free copy by clicking HERE and creating a login). The Internet has disrupted a lot of old methods of doing business. Thousands, if not millions, of jobs have vanished by way of the use of RFID technology, websites that have replaced travel agents, retail stores, schools and data centers. Yes, even Info Tech professionals have been affected. Our data is moving to “the Cloud”. We don’t know where it is and, apparently, we don’t care.

What server holds your Facebook page and all your photos? Don’t know? Neither do I.

Speaking of Jobs, lots of comment about the adoration among the OWS of the recently departed billionaire, Steve Jobs. It’s easy to focus on the contradiction. After all, Apple wouldn’t exist if it weren’t for junk bonds, hedge funds, IPOs, secondary offerings, derivatives and the like.

I find it more interesting to look at Apple as a microcosm of the global economy. Think of it this way. Apple creates the product – the design, the engineering, the operating system, etc. The products, the iPod, iPhone or iPad, are manufactured primarily by Foxconn in China. In the industrial economy that started to vanish from these shores about 20 years ago, the manufacturer would be a very valuable company in stock market terms. Yet, Apple is the most valuable (or second most valuable behind Exxon Mobil) company in the world. Not Hon Hai, parent company of Foxconn, which has over 400,000 employees worldwide.

I don’t think the OWS protesters are focused on Steve Jobs the billionaire or on Apple, the company. They are just turned on – like the rest of us – by all the power that the iPhone places in the palm or our hands.

Michael Douglas as Gordon Gekko

Which brings me to Gordon Gekko and the “Greed is Good” speech from the movie Wall Street. In context, the famous Gekko speech was an interpretation of Schumpeter’s Law of Creative Destruction. Here is what Gekko said, in part:

“The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.”

Here’s a quick overview of Schumpeter’s law cribbed from Wikipedia: “In Schumpeter's vision of capitalism, innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies and laborers that enjoyed some degree of monopoly power derived from previous technological, organizational, regulatory, and economic paradigms. Schumpeter also elaborated the concept, making it central to his economic theory.”

It wouldn’t make a very good movie script, would it?

But, whether you prefer Gekko’s version of it or Schumpeter’s, the fact is that email destroyed the Post Office, Netflix destroyed Blockbuster and the guys who invented that airport kiosk destroyed all those airport jobs. And, all of us are willing participants.

Oh, and by the way, if you have an iPhone, you can even skip the airport kiosk. How’s that for power in the palm of your hands?

So, here’s the real problem. To replicate the success of Apple Computer and Steve Jobs, we need to train more engineers and designers. And, we aren’t? According to a Kaufman Foundation study, more than half the students in technical masters programs are foreign. And, now they don’t have to stay here to find jobs in their field. They can go back to China, India, Korea or South Africa to find meaningful work.

So, maybe the protesters should be marching on the Department of Education.

What do you think?