The Keating Files: management

Showing posts with label management. Show all posts

Friday, December 31, 2021

What's the Supply Chain Anyway?

Free Enterprise in Three Minutes with Ray Keating – Episode #132: What’s the Supply Chain Anyway? – Ray Keating provides some supply chain basics, including that there in fact is a vast number of supply chains for particular industries and businesses. Listen here!

Thursday, March 31, 2016

Throwback Thursday: Creators, Conspirators and Monopolists, Oh My!

by Ray Keating

Prominent businessmen don’t always understand how the economy actually works. That’s been evident on the presidential campaign trail this year, with Donald Trump leading the Republican field and Michael Bloomberg’s brief flirtation with jumping into the race as an independent. Trump and Bloomberg clearly are clueless on a host of issues – such as Trump on trade – regarding how the economy functions and how policy impacts the economy. But, of course, there are many business leaders who understand how the economy works, and even offer some rather unique insights. That’s the case with Peter Thiel and his book “Zero to One: Notes on Startups, or How to Build the Future.” The following review ran as a Long Island Business News column of mine in October 2014 …

I recently headed west to Silicon Valley for a gathering focused on technology policies. At the start of that journey, standing in an airport bookstore, I decided to get the full Silicon Valley techie experience, and picked up Peter Thiel’s new book “Zero to One: Notes on Startups, or How to Build the Future.”

It’s a valuable, quick read that provides fascinating insights on thinking about entrepreneurship and the economy, and what’s needed to start up a business.

Thiel was a co-founder of PayPal, and has been an investor in a variety of startups, including Facebook. His perspectives on how businesses function in the economy are drenched in a refreshing economic reality.

The central theme of Thiel’s message is the need to create new things. He points out, “Doing what we already know how to do takes the world from 1 to n, adding more of something familiar. But every time we create something new, we go from 0 to 1.” He warns, “Unless they invest in the difficult task of creating new things, American companies will fail in the future no matter how big their profits remain today.”

One would expect Thiel to declare that the word for “0 to 1 progress is technology.” However, he quickly adds that it’s not all about computers: “Properly understood, any new and better way of doing things is technology.” Another word for that is innovation.

For Thiel, building the future and creating new things is accomplished by monopolies. What? How can that be? Well, he has a better grasp on how the economy actually works than many economists. Thiel correctly rejects the concept of “perfect competition” that is taught in all Economics 101 classes, whereby undifferentiated firms and homogeneous products sell at the market price, and economic profits are competed away. That’s not how the economy works, nor quite frankly, does it help students to understand the market process.

But what about this monopoly thing? Thiel writes: “To an economist, every monopoly looks the same, whether it deviously eliminates its rivals, secures a license from the state, or innovates its way to the top. In this book, we’re not interested in illegal bullies or government favorites; by ‘monopoly,’ we mean the kind of company that’s so good at what it does that no other firm can offer a close substitute.”

While he does not put it exactly this way, what entrepreneurs and businesses are doing within a competitive environment is investing and innovating to create what effectively are temporary monopolies that allow profits to be maximized. And the longer a firm excels at providing something that consumers cannot get elsewhere, the longer the business can maintain that temporary monopoly. That’s quite different from the government-protected or created monopoly, for example, that grows fat, lazy and rips off consumers.

As Thiel proclaims, “Creative monopolists give customers more choices by adding entirely new categories of abundance to the world.”

Thiel’s subsequent advise and ideas for those looking to start up new businesses spring from this basic understanding of what entrepreneurs and businesses need to do – that is, to create something new and better – if they seek bold success. And he offers many valuable insights on that process. But among my favorite bits of wisdom tie in to how to think about business and career – one has to do with chance and the other secrets.

On business success being all about chance, Thiel counters that if that were the case, we would not see the successful serial entrepreneurs that we obviously do. He adds: “Learning about startups is worthless if you’re just reading stories about people who won the lottery.”

And on creative secrets, he provocatively but accurately writes, “The best entrepreneurs know this: every great business is built around a secret that’s hidden from the outside. A great company is a conspiracy to change the world; when you share your secret, the recipient becomes a fellow conspirator.”

So, here’s to those creative, conspiratorial monopolists who change the world.

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Mr. Keating is an economist and novelist who writes on a wide range of topics. His Pastor Stephen Grant novels have received considerable acclaim, including The River: A Pastor Stephen Grant Novel being a finalist for KFUO radio’s Book of the Year 2014, and Murderer’s Row: A Pastor Stephen Grant Novel winning Book of the Year 2015.

The Pastor Stephen Grant Novels are available at Amazon…

Murderer’s Row: A Pastor Stephen Grant Novel

The River: A Pastor Stephen Grant Novel

An Advent for Religious Liberty: A Pastor Stephen Grant Novel

Root of All Evil? A Pastor Stephen Grant Novel

Warrior Monk: A Pastor Stephen Grant Novel

Thursday, February 18, 2016

Throwback Thursday: Learning from a Classic Business Thinker

by Ray Keating

One of the best things about writing and researching in your career is that the learning never stops. This column, which originally ran in Long Island Business News in December 2014, serves up some insights learned from Peter Drucker on managing one’s career…

An anniversary snuck up on me the other day. It turns out that 2014 marked a quarter century of my writing on the economy, policy, business, and more.

That includes being a weekly newspaper columnist for the now-defunct “New York City Tribune,” then for “Newsday,” and for nearly seven years now with “Long Island Business News.” Toss in seven-plus years of teaching in the business school at Dowling College, serving as an economist in the policy world for nearly two-dozen years, and writing ten books, and I’ve been at this knowledge worker thing for a long time.

One of the best parts of these gigs is that the process of learning has never stopped. I always learn when I write. Also, teaching management classes provides assorted lessons or refreshers for my career. That occurred this semester as I turned to one of the classic business thinkers of the past 75 years – Peter Drucker.

Drucker, who died in 2005 at the age of 95, provided insights on management, in the broadest sense of the word, from the late 1930s into the twenty-first century. “BusinessWeek” once referred to him as “the man who invented management.”

Regarding his contributions, the website of the Peter Drucker Institute sums up: Drucker “predicted many of the major developments of the late 20th century, including privatization and decentralization, the rise of Japan to economic world power, the decisive importance of marketing and innovation, and the emergence of the information society with its necessity of lifelong learning. In the late 1950s, Drucker coined the term ‘knowledge worker,’ and he spent the rest of his life examining an age in which an unprecedented number of people use their brains more than their backs.”

I appreciated Drucker’s plain talk that innovation is just as much about hard work, persistence, analyzing opportunities and focus, as it is about inspiration and ingenuity. He wrote about “systematic innovation” and the “discipline of innovation.” Most people default to innovation being mysterious and ethereal. But innovation is grounded in the real world; after all, it is the act of bringing a new or improved product or process to the marketplace. Drucker summed up, “If diligence, persistence, and commitment are lacking, talent, ingenuity, and knowledge are of no avail.”

This semester, I introduced students and myself to Drucker’s Harvard Business Review article “Managing Oneself.” It’s a fascinating piece focused on managing, developing and preparing yourself in order to stay “engaged over a 50-year working life.” He offered a systematic process of assessing your own strengths, preferred working and learning styles, values compared to the firm’s values, and coming to understand how and where you can make the best contributions.

Interestingly, though, for both my much younger students and me, what seemed to hit home was Drucker’s discussion of preparing for and launching an eventual second or parallel career. He noted that most midlife crises are about boredom, as even those who are very good at their jobs still eventually might find a lack of learning, contribution or challenge, despite having another 20-25 years of work ahead.

The students were interested in Drucker’s advice to start preparing for a second career long before entering the second half of your career. I found it interesting that I already had undertaken this process when I started writing novels a few years ago. The students became interested in planning ahead, while I reflected on managing in the midst of the second/parallel career.

I’ve always taught students that your career will be more satisfying if you think of yourself as an entrepreneur, that you are your own small business. Drucker put it just a bit different: “In effect, managing oneself demands that each knowledge worker think and behave like a chief executive officer.” Thinking this way offers a different perspective on your career, whether you own a business or have one boss. As your own CEO or small business, you both have control and must work to make your customers (such as your boss) happy. That’s business, including managing yourself.