The Historic Decline in U.S. Productivity

2022 Was a Very Unproductive Year

Productivity is, or at least should be, the most important factor in American financial well-being. So, it’s a big deal when we suffer dwindling labor productivity. Last year, we saw the second largest annual drop in U.S. labor productivity history. I don’t think the media put a lot of effort into reporting it, but productivity shrank by 1.6%, the largest decline since 1974, when there was a similar plummet of 1.7%.

Is annual productivity going to snap back this year? Maybe. After all, it did back in 1975. But the first quarter of 2023 was not at all heartening, with quarterly productivity shrinking by 2.1%! So, let’s hope for good news when data from the second quarter is published on August 3rd.

What Happens If the Bad News Continues?

If that second quarter news is also bad, we can expect to see a lot of hand-wringing in the U.S., especially on the part of economists and business leaders. The debates about return-to-work and quiet quitting will grow more vociferous, and economists will warn that inflation is going to reemerge if things don’t change. After all, prices go up if it costs more to produce things. In the good times, productivity is what helps keep higher prices at bay.

That’s one reason I think a lot about the subject of productivity. It’s not just another economic metric. It’s a grand indicator of whether or not our whole socioeconomic system is working, both in the physical and the financial sense.

But How About that AI Boost?

Of course, many are now predicting that the new generative AIs will soon result in massive increases in productivity. But that’s not a given. For one thing, it often takes workplaces a long time to figure out how to adequately harness new technologies. This happened with everything from electricity to personal computers.

Maybe it’ll be be different this time around. People like Ray Kurzweil argue that AI will speed up the whole process of change. It’s all a matter of exponential rates of increasing returns.

Others are more dubious. Ezra Klein, for example, points out that the Internet should have resulted in a much larger boost in productivity than it did. But what wasn’t accounted for is that the Internet came with a very large dose of diversion. Suddenly people’s computers became distraction machines, and productivity was diluted as a result.

Klein thinks that this could happen with AI. For example, we may end up in deep conversations with our AI companions even as we fall behind on our work. Or, artificial intelligence will become such a major factor in everything from diverting movies to video games to virtual worlds that we will become more distracted than at any other time in history.

Time will, of course, tell. Personally, I make no predictions, but I can imagine several different scenarios. Maybe those will be a subject for a future post.

Generative AI Is Better for Augmentation than Automation … For Now

According to research I’ve helped conduct in the past, HR professionals tend to think that AI will be more widely used for the automation rather than the enhancement of work. But, I think that’s the wrong way to view it. For the most part, these AIs can’t actually take over many jobs. Rather, they help people be more productive at those jobs. So, generative AI is better for augmentation than automation.

Jobs Could Be Lost

This does not mean, however, that jobs can’t be lost. If you can triple the productivity of a nine-person team, for example, then you could potentially lose six of those people and maintain the same production as before. So, yes, jobs could potentially be lost.

On the other hand, it very much depends on the job and how it’s managed. Let’s say that we’re talking about software developers. In a firm that sells software products, the sticking point in the past may have simply been the cost of labor.

But Let’s Be Specific

Let’s assume a team of nine developers creates and maintains a product that brings in $3 million dollars of revenue per year, and let’s assume that the cost of employing this team is $1.5 million per year. Let’s also assume some form of generative AI can triple productivity so that the team can be reduced to just three people. So, yes, the company could save $1 million dollars per year by terminating six of those positions.

Leverage the Wealth-Creation Machine

Or the company could earn many times that amount by keeping them and assigning them to other revenue-earning projects.

Let’s now assume those six developers can be reallocated to create and implement two other products, both of which also can bring in $3 million per year. At this stage, the revenue earned by these six employees will be $6 million dollars, or $1 million per employee.

This is, of course, how productivity works. It’s a system with positive feedback loops that, if harnessed correctly, becomes a wealth-creation machine.

Oh, I know my arithmetic is over-simplified. Salaries, revenues and profits are never that straightforward. But you get the idea. Depending on the job and the business model, generative AI could actually increase the demand for certain skills because it can massively boost productivity, which boosts revenues and profits.

This Could Change, Of Course

Of course, this could change if generative AI (or whatever AI comes next) can fully automate most white-collar work, but we’re not there yet and, from what I can see, we’re not that close. These AIs are still prone to hallucinations and mistakes, and they require trained professionals to be able to detect those mistakes as well as engage in more creative and strategic work.

So, my advice for now is to leverage these technologies for augmentation rather than automation. Get while the getting’s good. Ultimately, that’s how economies and labor markets thrive.

The Underhanded Leader

One in a series of posts about management lessons derived from the classic novel Moby-Dick

To get what he wanted, Captain Ahab knew how to manipulate his employers. It’s one of the oldest ploys in the leadership book: act in a stealthy manner to keep the execs off your back so you can more freely reign over your own crew (who, no doubt, are picking up their own cues from you). The underhanded leader is all too common in fiction…and in life.

In Chapter 50, “Ahab’s Boat and Crew. Fedallah,” Melville tells us about how Ahab had been stowing away a private crew of whale killers, tough-guy mercenaries who could man his own personal whale boat so he could stick the barb to Moby-Dick. This bout of hands-on micromanagement from a one-legged man was simply not foreseen by his employers. Melville tells it thus:

[I]s it wise for any maimed man to enter a whale-boat in the hunt? As a general thing, the joint-owners of the Pequod must have plainly thought not. Ahab well knew that although his friends at home would think little of his entering a boat in certain comparatively harmless vicissitudes of the chase, for the sake of being near the scene of action and giving his orders in person, yet for Captain Ahab to have a boat actually apportioned to him as a regular headsman in the hunt — above all for Ahab to be supplied with five extra men, as that same boat’s crew, he well knew that such generous conceits never entered the heads of the owners of the Pequod. Therefore he had not solicited a boat’s crew from them, nor had he in any way hinted his desires on that head. Nevertheless he had taken private measures of his own touching all that matter.

Once safely out of the owners’ scrutiny and reach, Ahab was going  rogue, hijacking their business plans for his own private purposes.

Underhanded? Sure. Mad? No doubt.

But also nicely contrived, Captain! Good job with the prior planning, the holding of cards close to your vest, the crafty coordination of personnel.

Such are the games that leaders may play. It’s often for their own selfish ends, as they use company funds to pad their own accounts, or fly their lovers around, or take their rich and influential friends on all-expenses-paid vacations. But sometimes leaders playing such dangerous games have less selfish goals.

Maybe they’re intent on trying out some radical idea that they know their own bosses would nix but which they believe will serve the company in the long haul. Maybe they want to sell to a neglected market. Or pour R&D funds into a risky innovation. Or try out a new management technique that goes against the grain of the corporate culture.

It’s always a risk. Such leaders could well be hung out to dry if and when they’re found out. But maybe, if their secret gambit pays off, they’ll eventually be honored as a “risk taker,” a “maverick,” a cocky type whistling Sinatra’s “I Did It My Way” all the way to the bank.

Melvillian Leadership Lesson: Such underhandedness is usually a rotten idea. If a leader believes so much in a certain idea, then she or he shouldn’t go behind the boss’s back to pursue it. Instead, if they can’t convince their supervisors that something is a worth a risk, they should take off and do it on their own. That’s what entrepreneurship is for.

In the Cap’s case, of course, his deceit was sheer expediency. He didn’t give a rat’s buttocks about being fair to his employers. Nor did he care about deceiving his own crew. He decided to use the tried-and-not-so-true method of mushroom management: keeping his workers in the dark and feeding them… well, you know. In his own eyes, though, the means would justify the ends. This too is a leadership lesson. When leaders start thinking, “Yes, this is a lousy thing to do, but I’ve got to do it to get to my goal,” they should think twice, maybe even thrice.

Featured image from I. W. Taber - Moby Dick - edition: Charles Scribner's Sons, New York, Wikipedia

The Angry, Arrogant Leader

One in a series of blog posts about management lessons derived from the classic novel Moby-Dick

Shortly after Captain Ahab makes his first appearance in Moby-Dick, we get an insight into one facet of his leadership style: that of the arrogant leader. It’s night time, most of the crew is trying to sleep, and restless Ahab is above pacing the decks with his ivory leg. Ahab is in a mood:

He usually abstained from patrolling the quarter-deck; because to his wearied mates, seeking repose within six inches of his ivory heel, such would have been the reverberating crack and din of that bony step, that their dreams would have been on the crunching teeth of sharks. But once, the mood was on him too deep for common regardings; and as with heavy, lumber-like pace he was measuring the ship from taffrail to mainmast.

At this point in the story, Ahab is still a mystery to his crew, including Stubb, the wise-cracking second mate. So, when Stubb ascends to the deck to speak to the captain about the noise, he approaches him in a very Stubb-like way. Using an “unassured, deprecating humorousness,” he hinted to Ahab that “there might be some way of muffling the noise; hinting something indistinctly and hesitatingly about a globe of tow, and the insertion into it, of the ivory heel.”

By the way, the “globe of tow” refers to a batch of flax before it is spun into rope or fabric. In essence, Stubb is trying to ask his new captain to stop his pacing, which is keeping the crew awake below decks. The stuff about the adding some flax to his ivory leg in order to quell the noise is his way of making light of his request. Ahab, however, doesn’t see the humor:

“Am I a cannon-ball, Stubb,” said Ahab, “that thou wouldst wad me that fashion? But go thy ways; I had forgot. Below to thy nightly grave; where such as ye sleep between shrouds, to use ye to the filling one at last.—Down, dog, and kennel!”

Leaders can be tricky customers with which to deal, and the brilliant, crazed Ahab is trickier than most. First, he turns Stubb’s joke on its head, with the allusion to the cannon-ball wadding. Ahab is, after all, a cannon ball of a man with a will of iron and a deadly, combustible nature. “Don’t dare try to quell my thunder,” he is saying to Stubb.

But the next sentence is a crucial one. He simply says, “I had forgot.”

With this, he is admitting his fault, however briefly. In his restless thoughts about how to track down the white whale, Ahab has simply lost track of what time of night it is. We hardly hear his mea culpa because he directly follows it with a couple of whopper insults. First, he compares Stubb to dead man (or a soon-to-be corpse), telling him to go down to his grave and sleep between the shrouds. Then he follows up with the “down, dog” aspersion. Stubb doesn’t take kindly to the insult and speaks up for himself: “I will not tamely be called a dog, sir.”

Ahab only doubles down on the insults: “Then be called ten times a donkey, and a mule, and an ass, and begone, or I’ll clear the world of thee!” Stubb  is no coward, but he retreats before the gale of the infuriated Ahab, barely believing in what has occurred.

So, what lessons can we draw this from scene? First, of course, there’s the standard, “Leaders who are corrupted by their own power can be toxic bullies.” But that’s too pat. Yes, angry and arrogant leaders exist. I think most of us have, at some point, worked for ill-tempered bosses, the kind of people you don’t speak to unless they are in a good mood.

But employees often adjust to these slightly unhinged leaders, figuring out how to negotiate the landmines of their psyches. Stubb still needs to learn how and when to deal with Ahab, and it’s now clear that smart-aleck remarks will not go over well.

It’s more interesting to try to get inside the head of Ahab here. Thinking of him as insane or monomaniacal is also far too easy, an analysis worthy only of lazy high school students.  Ahab is a complicated guy. From his point of view, Stubb is being insubordinate with his mild jape. What’s more, he’s doing it at a time when Ahab clearly has a lot on his mind. At moments like these, leaders are more self-centered than usual. They are often under serious stress and, rightly or not, expect others to accommodate that fact.

A preoccupied, sleep-deprived, maimed and manic Ahab responds in an almost instinctively Alpha-male way to a perceived challenge to his authority. He knows Stubb has a legitimate grievance and expects his tiny mea culpa (which no doubt feels like a large one to him) to suffice. Then, engrossed as he is with morbid matters of mortality, he allows himself to insult Stubb along those lines. He has recently been “entombed” below decks, so part of his insult is directed at himself.

Ahab is crazed, alright, and shows horrendous leadership throughout the scene. Nonetheless, the Stubb/Ahab interplay is an exaggerated version of leader/subordinate conflicts that occur every day in corporate life. They are most likely to happen with leaders who, like Ahab, lack the self-awareness and confidence to keep cool even in the face of perceived challenges or criticisms. These days, some research is discovering (or maybe rediscovering) the value of self-awareness to successful leaders. But even as the data on that comes in, it’s nice to know that we can derive the same insight from one of the world’s literary masterpieces.

Melvillian Management Lesson: Empathy tends to be a key attribute of a good leader. In this scene, Ahab utterly lacks it. He is self-absorbed and unaware of how he’s affecting others. This makes him act in disproportionate ways to the most meager of challenges to his authority. As a leader, if you find yourself frequently snapping at others or belittling them, then it’s time to pull back and try to look at the bigger picture. How would you perceive yourself if you were looking at things objectively? Are you being fair? Do you bear, even in small ways, some semblance to Captain Ahab?

Featured image: A Post Medieval cast iron cannon ball, photographed by Jen Jackson, Kent County Council,  2008-12-11

The Disappointing Sojourn of Prince Queequeg

We can learn a variety of leadership lessons from Queequeg in Moby-Dick

Although Captain Ahab was named for a wicked king, there is only one leader of actual royal blood in the Melville’s great novel: the cannibal Queequeg.

Queequeg, we learn in Chapter 12, wanted to be a great leader to the people of the island-nation Rokovoko, where his father was High Chief. To accomplish that, he strove to learn more about Christendom, having been exposed to a whaling ship that had taken harbor on Rokovoko. After all, the people aboard that great whaling ship seemed to have powerful ways and technologies. Prince Queequeg wanted to draw lessons from these foreigners, educating himself in “the  arts whereby to make his people still happier than they were; and more than that, still better than they were.”

But the captain of the whaling refused to take Queequeg aboard, stymieing the ambitious prince. So, like any good leader, he demonstrated boldness and ingenuity in the face of obstacles.

Alone in his canoe, he paddled off to a distant strait, which he knew the ship must pass through when she quitted the island. … Hiding his canoe, still afloat, among these thickets, with its prow seaward, he sat down in the stern, paddle low in hand; and when the ship was gliding by, like a flash he darted out; gained her side; with one backward dash of his foot capsized and sank his canoe; climbed up the chains; and throwing himself at full length upon the deck, grappled a ring-bolt there, and swore not to let it go, though hacked in pieces.

After much ado, stubborn Queequeg was made a member of the crew, where he did indeed learn the ways of the Christians. “But, alas!,” writes Melville, “the practices of whalemen soon convinced him that even Christians could be both miserable and wicked; infinitely more so, than all his father’s heathens.” Things were no better when he got to places such as Sag Harbor and Nantucket, so Queequeg gave up his quest for wisdom among these strange peoples: “Thought he, it’s a wicked world in all meridians; I’ll die a pagan.”

Poor Queequeg’s sojourn is sad but not so uncommon among leaders. They frequently go to great lengths to gain valuable insights from outside their enterprises. They devour business books on airplanes, seek out the “best practices” of their competitors, and hire many a well-groomed and pricey consultant. Sometimes it pays off.

But sometimes it’s a bloody waste of time. The grass isn’t always greener just beyond. A company can twist itself into a pretzel trying to imitate a best practice from another company, only to later find that the company in question abandoned that stupid practice a year or two ago. Or employees can run screaming from the conference room after a CEO announces a major new initiative based on some best-selling business book written by yet another fashionable weirdo — maybe a dog-training Buddhist priest raising lamas in the Andes.

Melvillian Management Lesson: So, what is the leadership lesson to be learned here? First, it’s okay be bold in the quest for knowledge. Queequeg’s ambitions and instincts are wonderful and courageous. But the leader must also avoid being a sucker over the long haul. When Queequeg found out that the foreigners, despite their huge and impressive whaling canoes, knew even less about the art of happiness than his own peoples, “poor Queequeg gave it up for lost.”

In fact, he realized he needed to “unlearn” some of the weirdness in which he’d been indoctrinated. Only then could the chastened prince return home and take his rightful place as a wise leader. May we all have his wisdom to know when to be bold in our learning, when to ignore the BS, and when to actively try to unlearn stuff that is holding us back.

Featured image: Image from the 1930 edition of Moby-Dick, illustrated by Kent Rockwell

The Spellbinding Leader

One in a series of blog posts about leadership lessons derived from the classic novel Moby-Dick

We know how bloody horrible Captain Ahab could be as a leader: ornery, self-absorbed, arrogant, insulting and oblivious to the needs of his crew. But if he were just a caricature of a bad leader, Moby-Dick would not be a classic. Ahab could also demonstrate some astonishing qualities, such as being a spellbinding leader, as occurs in Chapter 36:

He ordered Starbuck to send everybody aft. “Sir!” said the mate, astonished at an order seldom or never given on ship-board except in some extraordinary case. “Send everybody aft,” repeated Ahab. “Mast-heads, there! come down!”

Ah, the all-company meeting! In a big corporation, these are typically few and far between. We all know it means something is afoot. The CEO is about to make a grand pronouncement of some sort. Very often the words are intended to reassure the troops. Very often, they do just the opposite.

But Ahab is a pro. He knows well how to warm up his audience and wind up his troops. We are about to see what makes Ahab a leadership star:

“What do ye do when ye see a whale, men?”
“Sing out for him!” was the impulsive rejoinder from a score of clubbed voices.
“Good!” cried Ahab, with a wild approval in his tones; observing the hearty animation into which his unexpected question had so magnetically thrown them.
“And what do ye next, men?”
“Lower away, and after him!”
“And what tune is it ye pull to, men?”
“A dead whale or a stove boat!”

These men are whalers, by Jove. They know this litany. It excites them. It’s their life’s blood. Ahab knows that. He’s been one of them. “More and more strangely and fiercely glad and approving, grew the countenance of the old man at every shout; while the mariners began to gaze curiously at each other, as if marvelling how it was that they themselves became so excited at such seemingly purposeless questions.”

Ahab is the penultimate charismatic leader, the great catalyst that galvanizes them all. Only when they are properly entranced does he reveal what he really wants from them. In one of the most famous scenes in all literature, Ahab pulls out a large Ecuadorian doubloon made of a full ounce of gold. Then, with great drama and flair, he nails the magnificent object of avarice to the main-mast after crying out, “Whosoever of ye raises me a white-headed whale with a wrinkled brow and a crooked jaw; whosoever of ye raises me that white-headed whale, with three holes punctured in his starboard fluke—look ye, whosoever of ye raises me that same white whale, he shall have this gold ounce, my boys!”

Now this is an incentive program, my friend — the kind that makes most fancy offerings by HR departments pale in comparison. Because this isn’t just gold worth a small fortune to these men. It represents danger and challenge, passion and adventure, adulation and acclaim — and, perhaps most important of all, it represents the approval from the great man, the one who has somehow lit their hearts with the flames of his own, private passion.

Ahab’s great goal may be monomaniacal, but look at how he wins them over! It’s masterly. Yes, we realize, showmanship counts in the art of leadership! It makes us wonder if maybe he isn’t so crazy after all. Isn’t many a leader utterly dedicated — obsessive even — about achieving his or her dreams? Is Ahab really so different?

There is one man in the clamorous crowd who thinks so, keeping a cool head amid these flaming passions. And that man has leadership responsibilities of his own. In the next post, we’ll get to see Ahab and his second-in-command Starbuck go mano-a-mano. It’s a beautiful, terrible thing. Stay tuned.

Melvillian Leadership Lesson: Never underestimate the power of charisma. It is an awesome leadership tool, one that can be used for good or ill.  And never underestimate a leader who you think is a “bad” one. Just because you don’t respect them doesn’t mean they can’t wind up winning the day via many of the skills we associate with “good” leadership. You can be a terrible person and yet show great leadership prowess. Life is complicated.

Featured image: Ecuadorian doubloon described in Moby Dick. Photographed by User:Pottewa

Leaders Hanging on Like Grim Death in Moby-Dick

One in a series of blog posts about management lessons derived from the classic novel Moby-Dick

Those who haven’t read Moby-Dick for a while often forget how uproariously funny the book can be. That’s partly because, like Shakespeare, Melville can turn on a dime, making you guffaw one minute and pulling you into dark drama the next. The way he discusses the prideful leader is especially hilarious.

In Chapter 53, “The Gam,”  Ishmael goes for the wry humor, satirizing the details associated with “the gam” — that is, the meeting between two captains of whaleships.  The idea is that one captain must make the trip over to the other captain’s ship in order to have a conversation (“the gam” in question). The tricky part is that whaleboats of the era didn’t have any extra “seats” because they hosted a full crew of rowers and no tiller at all. So the captain was forced stand up in the boat as it carried him to the other ship.  Being cargo was no easy task, as Ishmael relates:

[O]ften you will notice that being conscious of the eyes of the whole visible world resting on him from the sides of the two ships, this standing captain is all alive to the importance of sustaining his dignity by maintaining his legs. Nor is this any very easy matter; for in his rear is the immense projecting steering oar hitting him now and then in the small of his back, the after-oar reciprocating by rapping his knees in front…[I]t would never do…for this straddling captain to be seen steadying himself the slightest particle by catching hold of anything with his hands; indeed, as token of his entire, buoyant self-command, he generally carries his hands in his trowsers’ pockets… Nevertheless there have occurred instances, well authenticated ones too, where the captain has been known for an uncommonly critical moment or two, in a sudden squall say — to seize hold of the nearest oarsman’s hair, and hold on there like grim death.

You’ve got to love this image of a leader jealously guarding his dignity even if it means tugging the tresses of some poor schmuck just trying to do his job.

Have things changed so much? Oh sure, there is (one likes to think) less literal hair pulling now, but maintaining dignity remains a high priority for your average leader, even at risk of metaphorically mangling an employee or two. I hear tell of an exec who, when speaking to the organization or even in front of groups of clients, would make fun of one of his high-level direct reports. The stories were often of how bumbling the other was, making that person look like the clown of the company. In this case, the exec wasn’t exactly trying to protect his own dignity (I imagine he thought it was good-natured ribbing), but he seemed to be trying to make himself look clever, both by his talent as a raconteur and by pitting himself in stark contrast with the purported clown. It was (reportedly) pretty awful. Even as that direct report chuckled along with the joke like a bullied kid in high school, others would just wince. A hair pull might have been preferable.

Sometimes the hair-pulling is more of a bus-throwing. When the infamous bridge closure scandal rocked the world of Governor Chris Chistie, the New York Daily News editorialized with this headline: “Gov. Chris Christie’s load of bull: Fired aide Bridget Kelly merely a patsy in attempt to shelter Port Authority cronies, himself”. If true, that goes well beyond the innocent if arrogant hair-pull. On the other hand, it would also be a classic case of a leader looking for somebody to take the heat off him, allowing him to stand again with dignity during a major squall. The News put it bluntly:

Christie needed blood to express his outrage to the public, so he drew it from deputy chief of staff Bridget Kelly for the sin, the governor said, of lying to him. Perhaps Kelly did lie, although it seems incredible that anyone would flat-out attempt to deceive an intense, emergency inquiry.

Christie is hardly the first or last leader to throw a direct report under the bus. Consider how many former employees one of our recent presidents tossed under a wide array wheels.

Sometimes, of course, the hair-pull is far more innocuous. How many of us have seen the example of a leader who, making some technology-related or other mistake during a presentation (or otherwise showing some area of ignorance), growls at some poor underling/handler who has been tasked with keeping him or her out of trouble? The inference is always that someone, anyone, is to blame for the hitch, certainly not the leader his or her self.

Then there’s the leader who goes out of his or her way to avoid any hair-pulling, preferring to stumble publicly than to grab at the nearest available head. Those leaders deserve a lot of credit, though I wonder how often they get it. Do they look weak as a result of allowing themselves to stumble? Do we, in fact, expect our leaders to be able to get away with a little hair-pulling now and then? Perhaps it’s all part of the leadership aura.

At any rate, Ishmael casts no particular blame in Moby-Dick. His is an amusing observation, not a sense of outrage. He indicates that like everyone else (and probably more so), leaders play their comic roles on life’s grand stage.

Melvillian Leadership Lesson of the Day: As a leader, try to avoid the hair pull. It does, in fact, make you look nearly as absurd as the stumble it is intended avoid. If you do wind up metaphorically pulling hair, be sure to apologize after the fact. If you’ve pulled hair literally, well, get a good attorney.

Featured image by Samuel Calvert (1828-1913) after sketch by William McMinn