Author: ken

The Economy Rebounds But Jobs Don’t

Profits are up, sales are stronger, stock prices are rising, and even the pace of construction is picking up – but why not jobs?  As The New York Times put it: “For corporate America, the Great Recession is over. For the American work force, it’s not.”

The Times went on to comment:  “Economists are now engaged in a spirited debate . . . about the causes of the American jobs slump. Lawrence Katz, a Harvard labor economist, calls the full picture ‘genuinely puzzling.’”  (See, “In Wreckage of Lost Jobs, Lost Power.”)

Perhaps I’m not puzzled because I’m not an economist.  The answer to me seems obvious, the clues everywhere.  Employers don’t want to hire workers.  They are “jobs averse.”  They think full time employees are too expensive, too difficult to manage, too hard to get rid of in a downturn – and they have been thinking this way for sometime.

Just the week before, The Times carried a story about the dramatic rise in the hiring of temporary workers. Last November, “they accounted for 80 percent of the 50,000 jobs added by private sector employers.”  All the advantages are for the company, The Times pointed out, as the workers themselves “generally receive fewer benefits or none at all, and have virtually no job security. It is harder for them to save. And it is much more difficult for them to develop a career arc while hopping from boss to boss.” (See, “Weighing Costs, Companies Favor Temporary Help.”)

For years, businesses have been “downsizing” or as they came to prefer to call it “rightsizing.”  They know the “benefits” of outsourcing jobs oversees where labor is far cheaper and easier to control.  Moreover, they have come to prefer automatic systems, robots and computer programs.  Labor just costs too much, and “human resources” are just too erratic and costly.

The trend has been documented for years, but by sociologists, political scientists, historians, and liberal economists outside the mainstream.  Fifteen years ago, the Harvard sociologist William Julius Wilson published When Work Disappears, focused on the new urban poor.  That was followed by Jeremy Rifkin’s The End of Work, documenting how machines were relentlesly replacing workers.  Two years later, James K, Galbraith published Created Unequal: The Crisis in American Pay. Then there are more personal and popular works such as Barbara Ehrenreich’s Nickle and Dimed.  And that’s just the tip of the iceberg.

Mainstream economists must be looking in the wrong place for explanations they never find.  I can’t help but think their blindness is motivated.  No doubt it would be politically awkward to offer the obvious and real explanation for the job crisis.

Is It Ever the Smart Thing To Do?

It’s pretty clear that many of those investors caught by the crash of the credit bubble in 2008 were following the crowd.  Collectively, watching each other, fiercely competing in the pursuit of increasingly unrealistic gains, they ignored the abundant danger signs in the economy.  But what about the short sellers, those saw those danger signs and scored when the bubble burst?  What made it possible for them to keep their eye on the economy and avoid following the crowd?

The Big Short, by Michael Lewis, offers profiles of those contrarian investors – many of whom ended up making hundreds of millions of dollars.

Some of them seemed to suffer from a mild neurological disorder that impaired their ability to read the emotional signals of others.  That had led them to become somewhat reclusive, even anti-social, as they had learned to mistrust those with whom they had difficulty getting along.  Instead, they trained themselves to rely on more objective information, such as charts, mathematical formulas, and the actual behavior of other traders, what they did, not what they said.

Another group of contrarian short sellers were motivated by strong anti-authoritarian feelings.  They viewed successful, establishment figures with hostility.  Disliking all authorities, they were eager to prove them wrong, and searched for ways to expose their weaknesses.  They got pleasure out of their vulnerabilities.

Most of us couldn’t strictly emulate such behaviors, even if we wanted to.  They aren’t great ways to make friends or get along with others on the job.  Still, we can learn some lessons from their example.

We can become more aware of the pull that crowd psychology exerts on us.  Rather than feel reassured that others are thinking the same way we are, we might begin taking that as a potential danger sign, an indication we need to become more skeptical and search out different points of view. Bucking the trend is not a sure sign of greater wisdom, but it can serve as an essential corrective.

And, then, we can be more skeptical about authority.  Just because a stock analyst or highly visible columnist stakes out a position doesn’t mean that they are more reliable guides to market behavior.  To be sure, they spend more time reading about and researching companies in the market, but they also read each others work, and they worry about deviating too far from what others say.  They are not immune from the pressures of crowd psychology – and they can’t actually see into the future.

A good rule of thumb is to pause before you leap.  Talk it over with someone else.  Remember past mistakes.  Worry about your own excitement over a new investment “opportunity.”  Hedge your bets.

(Originally published in in Mindful Money)

What We Need

More ink is spilled on the subject of leadership than almost on any other topic in our culture.  That’s probably a sign of how little we know about it — and how desperate we are to understand the knowledge and skills we lack.

Last year, William Deresiewicz, a former English professor at Yale, gave a talk at West Point on the subject that put together some unconventional and paradoxical-seeming thoughts on the subject.  He started by stressing the importance of solitude, what he called “the very essence of leadership.”

We are all familiar with the idea that it is lonely at the top.  As Harry Truman put it, that’s where “the buck stops.”  Deresiewicz agrees:  “However many people you may consult, you are the one who has to make the hard decisions. And at such moments, all you really have is yourself.”  What he concludes is that leaders don’t need advice, so much as the ability to think.

“Thinking means concentrating on one thing long enough to develop an idea about it. Not learning other people’s ideas, or memorizing a body of information, however much those may sometimes be useful. Developing your own ideas. In short, thinking for yourself.”  (See “Solitude and Leadership,” in The American Scholar)

This is a switch from our typical emphasis on inspiration and charisma, the fostering of outsized personalities or larger than life poses of confidence.  Leaders do not lead through compulsion or persuasion, but by having better thoughts

Deresiewicz goes on:  “solitude can mean introspection, it can mean the concentration of focused work, and it can mean sustained reading. All of these help you to know yourself better.”  He adds:   “Introspection means talking to yourself, and one of the best ways of talking to yourself is by talking to another person. One other person you can trust, one other person to whom you can unfold your soul.”

In short, to think clearly and effectively, a leader needs others he or she can trust to engage them in refecting deeply and truly.  It’s not a set of attitudes or, even, behaviors.  It’s a way of connecting with reality.

Does Anything Really Work?

We all have our personal theories about what helps and what hinders our mind’s capacity to think.  And our culture is rife with fads.  There is probably no more engaging question for us to ask ourselves than how we can enhance our mental powers.  But there is little hard evidence about what actually works.

Some are convinced in the power of vitamins, aspirin, anti-oxidents, or certain foods like blueberries and olive oil.  Others put their faith in mental exercises.  But it now seems clear that if we practice any skill — like solving crossword puzzles — we will get better only at that particular skill.  There is little evidence that practicing any one skill will transfer to other skills.  Practice doesn’t produce overall cognitive improvement.

Sharon Begley, the Science Editor if Newsweek, recently reviewed what scientists do know about enhancing cognition and came up with some interesting observations.  One of the most disturbing was the power of nicotine: “scientists at the National Institute on Drug Abuse . . . found [it had] ‘significant positive effects’ on fine motor skills, the accuracy of short-term memory, some forms of attention, and working memory, among other basic cognitive skills. The improvements ‘likely represent true performance enhancement’ and ‘beneficial cognitive effects.’” (See, “Can You Build A Better Brain?”)

There are too many arguments against using nicotine, of course.  But that’s not the only solution.  According to Begley, there are three additional and benign possibilities for enhancing the mind:  physical exercise, meditation, and some video games.  If we stop to think about these three points, they make a kind of sense.

The value of exercise reminds us that the mind is essentially a part of the body.  Like the heart, the liver and other organs, it responds to improved general maintenance and care.

Meditation may work because it enhances the mind’s “default” functioning.  Recent research shows that when the brain is not actively engaged in problem solving, it is busily reminiscing past experiences, day dreaming, and anticipating future events.  Such SITs (Stimulus Independent Thoughts) are analogous to what psychoanalysts call free association or reflection, the state of mind that facilitates new connections and new thoughts.

Video games are a form of play, a simulation of exciting fight and flight activities that require constantly changing adaptations and multiple, shifting forms of attention.  Good players must invoke unconscious and intuitive processing to keep abreast of the action.

I have no hard evidence to show that any of these thoughts explain how the brain’s capacity is enhanced, but I am intrigued that all of them are forms of activity that are outside the brain’s usual focused, problem-solving activities.  They all get our unconscious minds engaged, using our brains in ways we don’t typically use them.

This suggests that the brain will normally do its work of guiding us through our daily lives, but if we want it to grow, we have to approach it indirectly.  The brain makes things happen for us, but we can’t make it grow through our consciously willful efforts.

And What To Do About It

The savings rate among workers has dramatically declined over the past few decades.  In many countries it’s now lower than the rate of borrowing.  No surprise.  It takes two wage earners in most family to make ends meet, and the families are still deeply in debt.

The recession we are still struggling to recover from was in part the consequence of encouraging workers to take on debts they had little chance of repaying.  And when they defaulted, as so many of them inevitably did, the whole superstructure of securitized investment instruments based on those debts collapsed as well — along with many of the highly over-leveraged financial firms that couldn’t sell enough of them.

In this context, it doesn’t make much sense to believe that families should strive to put aside money for savings, or even to think that they could if they wanted to.  Where will the extra money come from?  To be sure, it’s hard to disagree with the logic of saving for a rainy day, particularly in a society that has such fragile safety nets as ours.  But what will get people to squeeze the lemon harder when it’s already dry?

The easiest way is simply to make it automatic.  If people have to think about putting money aside, no doubt, they won’t do it.  Each month there will be another bill to pay off, another necessity to buy.  But even with an automatic payment plan, you have to agree to it initially.  When might that seem appealing — or, even, possible?

Cass Sunstein and Richard Thaler, two behavioral economists, offer an approach to such problems in their book Nudge.   They call it “choice architecture,” a means to encourage people to make choices that are in their own interest.  They suggest employees be offered the opportunity to sign up for automatic savings when they get raises. That way, it appears to cost them nothing, as it comes out of income they never had before.  Nothing lost, something gained.

But what to do if you are self-employed, or your employer is not enlightened enough to offer you such a plan?

You need your own choice architecture, your own attractive reasons to save.  One possibility is having goals that really matter.  If you can outline specific things you want — a vacation trip, some new furniture, a degree, a gift for your children — you will be thinking of ways to enhance your life.  With such goals in mind, each deposit in your savings account will have a positive meaning.  The balance will not be abstract, a matter of negative cash flow.  And, of course, you can change your goals as you see that you are actually getting somewhere.

This may seem like a mental trick, and to some degree it is.  But that doesn’t mean it can’t work.  It’s using your imagination to gain a greater degree of control over your lives.  It’s playing at engagement rather than indulging in escapism.

THIS ARTICLE WAS ORIGINALLY PUBLISHED ON MINDFUL MONEY.COM