Sunday, September 8, 2013

The ability to predict

Finding meaning in work remains the challenge for organizations and their managers – and which my Eastern Europeans friends have learned in spades, and yet they’ve recognized that they’re far from perfect. And in my presentation to the European culture-management community explaining the struggles in their journey, I wrote: “All throughout the planning and budget process, the company now drills down to the critical demands of execution. This is in sharp contrast to that of the past when the company would be satisfied with simply setting target numbers [sounds like PHL export targets?] and with no rigid timelines – a practice that through experience suffered from great uncertainty and unpredictability. Clearly, unlike now, the enterprise in those days did not meet global competitive standards in, say, efficiency or cost-effectiveness, thus often delivering inconsistent financial outcomes.”
 
“Having learned from experience, they now make a concerted effort to minimize uncertainty or mistakes by making business plans truly cognizant of the imperatives of a successful selling and marketing effort – which is to come up with the right product, pricing, placement, and promotion. And to heighten the probability of execution, they now duly factor-in all the major resource requirements – people, machinery and equipment, materials, operating budget, and systems and methods – as well as the mechanics of execution itself – the who will do the what, when, where, and how. Thus, the company now delineates authority and responsibility not as an extraneous, slap-on effort but builds them into the planning and budgeting process itself" [which throughout must satisfy Pareto's 80-20 rule; but which we Pinoys seem unable to internalize owing to crab mentality, but which euphemistically we label holistic or inclusive or comprehensive, as in our failed comprehensive agrarian reform program? Or take East Germany where "social programs devoured billions [of euros], including a [job] creation program, which was later dropped".]
 
“Simply put, the company now gets everyone in the organization engaged in how the business is conducted – from how a product idea is developed all the way to how a product is produced, marketed and sold, and its sales proceeds accounted for. Likewise, information technology and management is no longer confined to producing periodic financial statements; now it also monitors on a daily basis the company’s sales in its various markets or countries, matching them with several performance yardsticks like forecasts by brands and by business units. As this gives everyone a sense and feeling of ownership, each of them develops a strong commitment to the business plans. What’s more, the process is very transparent, so the “What’s in it for me” question is now quickly and judiciously answered through the bonus system.”
 
And given that this blog is about economics, specifically the Philippine economy, an article from The New York Times on 24th Aug 2013 would attract my attention: “What Is Economics Good For?” [By Alex Rosenberg and Tyler Curtain] “When we put a satellite in orbit around Mars, we have the scientific knowledge that guarantees accuracy and precision in the prediction of its orbit. Achieving a comparable level of certainty about the outcomes of an economy is far dicier . . . The fact that the discipline of economics hasn’t helped us improve our predictive abilities suggests it is still far from being a science, and may never be. Still, the misperceptions persist. A student who graduates with a degree in economics leaves college with a bachelor of science, but possesses nothing so firm as the student of the real world processes of chemistry or even agriculture.”
 
“It’s easy to understand why economics might be mistaken for science. It uses quantitative expression in mathematics and the succinct statement of its theories in axioms and derived “theorems,” so economics looks a lot like the models of science we are familiar with from physics. Its approach to economic outcomes . . . recalls the way atomic theory explains chemical reactions. Economics employs partial differential equations . . . that look remarkably like ones familiar from physics. The trouble with economics is that it lacks the most important of science’s characteristics — a record of improvement in predictive range and accuracy . . . Moreover, many economists don’t seem troubled when they make predictions that go wrong. Readers of Paul Krugman and other like-minded commentators are familiar with their repeated complaints about the refusal of economists to revise their theories in the face of recalcitrant facts. Philosophers of science are puzzled by the same question. What is economics up to if it isn’t interested enough in predictive success to adjust its theories the way a science does when its predictions go wrong? SO if predictive power is not in the cards for economics, what is it good for?” And especially in PHL where we’ve suffered from “Dutch disease” (i.e., championing OFWs/call centers instead of fixing our real economic fundamentals?) when the disease has long before been discovered? The fallout: persistent underdevelopment and endemic poverty?

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