Author: Isaac Cheifetz

From my Minneapolis Star Tribune column

An article in last week’s Wall Street Journal described the curious rise of Toronto, Canada rapidly gaining IT jobs from the US. Since 2016, Toronto added more than 81,000 tech jobs, more than any other city in North America.

At the same time, the current US unemployment rate for tech occupations is 1.3 percent, which is essentially a negative unemployment rate for these sectors. What are the root causes here? Why is Toronto attracting tech jobs when it is no lower cost than any other major Western metropolis?

There are several factors at play here:

1. The continued growth and success of remote work for tech roles – the pandemic has decisively shown that remote workers are productive without onsite management, so the jobs can be located anywhere.

2. Nearshoring is still desirable – locating American jobs in Canada is hardly offshoring. There is still a rising desire to have critical workers nearby, and in countries that are stable politically and economically (as opposed to China, Russia, the Ukraine, etc.).

The fact that these jobs are locating in Canada rather than the workers countries of origin speaks to the continued popularity of nearshoring.

3. The race for top intellect is still global – Even if there had been a slowdown in offshoring, the top global talent will still find a way to the top tech companies.

4. The US limits H1-B visas to under 100,000 annually. These numbers haven’t risen since 2005 despite the sharp rise in tech jobs.

 5. Canada, in contrast, has long had a policy of unlimited visas for immigrating tech workers.

How should this challenge be dealt with by the US? Doing everything we can to cultivate our homegrown talent through a focus on STEM education is one part of the solution. 

But ultimately, even if globalization is temporarily slowing down due to the factoring in of geopolitical and supply chain risk factors, the talent market for key knowledge innovators will continue to be global.

We are faced with a choice – We can redesign our visa policies to be more welcoming to the global knowledge elite, or allow countries like Canada who have the same social and economic advantages as us to gain more traction in the most advanced sectors of the economy.

From my Minneapolis Star Tribune column

An article in the Wall Street Journal two weeks ago explored how many blue collar workers took advantage of time off during the pandemic the past two years to explore, secure and attain high tech, knowledge based jobs.

According to the article, “ As the labor market reorders, more Americans are making the leap from blue-collar jobs and hourly work to “new collar” roles that often involve tech skills and come with better pay and schedules. More than a tenth of Americans in low-paying roles in warehouses, manufacturing, hospitality and other hourly positions made such a switch during the past two years, according to new research from Oliver Wyman, a management consulting firm.”

Why is this transition taking place, and what are the implications for hiring organizations, individuals and higher education?

Driving the trend is is the huge ongoing adaptation of digitalization, and the availability of free or relatively inexpensive training in digital technologies which allow companies to quickly train smart motivated new workers to add value. 

The implications for the stakeholders mentioned above are as follows:

1. Workers – It bodes well for society that the barriers to advancement in the knowledge based economy are being broken down. It mitigates against the formation of class barriers based on formal education.

2. Organizations – Whether for profit or not for profit, it serves hiring organizations to not require four year degrees for professional jobs, and to hire for ability, motivation, and customer service experience. 

3. Higher Education – for colleges and universities, the forecast is mixed, but substantially negative. Community colleges, with their low tuition and practical focus, ought to be well positioned to cater to individuals who want a narrowly focused professional digital certification.

But for four year institutions, the outlook is potentially catastrophic. The modern college has evolved into an administratively top heavy, fearsomely expensive institution that is substantially relaxant on the availability of student loans.

But the hard ROI on four year degrees is increasingly being questioned, as so many of the degrees do not smoothly translate into well paying jobs.

Things change. It has only been the past couple of generations that a college degree became first preferred and then required for professional work. The best universities will survive, and even thrive. But it serves the interests of society to reduce the barriers of entry to the well paying work of the future.

My column in yesterday’s Minneapolis Star Tribune – “Sharing” On LinkedIn 

Lately on LinkedIn, more people are sharing their personal challenges or expressing opinions about current events. Still a small minority of posts, these still stand out. 

LinkedIn, after all, is a business networking platform, and traditionally in business settings, personal information and opinions are shared with friends and close coworkers, at most. Broadcasting personal information to the world, a la Twitter, feels new — and different.

What is behind this trend? And will it last?

First, there’s a generational divide about what boundaries mean. Baby boomers were exposed to the slogan, “The personal is political.” Today, many, particularly in the millennial cohort, see the personal, political and work worlds as being integrated, and seek to express and gain support for their beliefs at work as well as in their personal lives.

Also, I have seen some social media experts recommend that LinkedIn posts that are perceived as controversial get better engagement and more clicks.

Obviously, the first reason is the more important of the two.

As far as if the trend will last, it seems that once these boundaries have been eroded, they are unlikely to be extended again. The old style of keeping a stiff upper lip and not sharing anything about one’s personal life seems to be history.

As for sharing one’s opinions about current events, companies are far more likely these days to take a public stance on public debates. I know CEOs who have been criticized by young employees if they don’t express an opinion.

But ultimately, over time, taking strong stances on ideological issues on a business-centric platform such as LinkedIn will result in people making moral, even moralistic judgements of their peers.

The purpose of business is to make money. Don’t kill the messenger, it’s true. Therefore, those who expect their work life to align perfectly with their personal or political beliefs will inevitably feel betrayed.

The recent events at Netflix are instructive. Corporate leadership ultimately told protesting employees: “Depending on your role, you may need to work on titles you perceive as harmful. If you’d find it hard to support our content breadth, Netflix may not be the best place for you.”

Please repost and comment! Would love to know what you think.

One of the key drivers, and enablers of globalization the past generations has been Just In Time (JIT) manufacturing, a key element of total quality control and other quality methodologies.

At the most basic level, JIT entails keeping the minimum amount of components available at the manufacturing site, relying on process optimization to keep the supply chain “lean and mean”. 

But over the decades, the principles of JIT have spread across all aspects of the global economy, as companies sought to implement continuous improvement across their operations and business partnerships. Over time, certain patterns emerged, with increasingly smaller numbers of key suppliers for critical components.

In the short term, cost reduction drove these decisions. But the system it produced was efficient, not resilient. Its benefits assumed a world without disruptions, whether natural disasters or geopolitical unrest.

Now, in 2022, it is very clear that our global economy requires not just efficiency but resiliency to cope with these disruptions. Whether Covid, China threatening Taiwan (the major producer of advanced microchips), or a freighter blocking the Suez Canal several months ago, a strategic supply chain will consider resiliency a cost of doing business, like insurance.

It has long been understood that JIT and other quality methodologies are a tactical methodology, not a panacea for running a business with an eye towards long term viability, as opposed to short term success.

An article several weeks ago in the Wall Street Journal described the rise of “Supply Webs”, as opposed to traditional supply chains, whose design take into account t the necessity for multiple component vendors, in multiple locations around the globe. 

Implicit In these changes is an acknowledgment of the limitations of mindlessly offshoring critical components, and a partial return to emphasizing manufacturing critical advanced components locally.

This is not the end of globalization by any means, but the evolution of a wiser, more sophisticated global business ecosystem, which accounts for and does not ignore the inevitable disruptions which can overwhelm a system constructed by short term thinking over the long term.

What are the lessons to be learned from current events about the synergy of commerce and democracy? For the past generation, the global economy has proceeded on the theory that success in the knowledge-based economy is dependent on increasing democracy. According to this thinking:

• The Soviet Union and its satellite countries could not compete against the democratic West (plus the Asian tigers like Japan and South Korea) in the knowledge-based economy. That was a big factor in its collapse a generation ago.
• Integrating capitalist economies into China, even at the cost of domestic jobs, was worth it to give China financial incentives to open up its society. It was assumed that as China moved up the value chain into more knowledge-based work, freedom of expression would logically infuse into civil society from the freedoms necessary to run global integrated businesses.
• No two countries with McDonald’s franchises have ever fought a war. In New York Times columnist Thomas Friedman’s colloquialism, any society that had advanced far enough down the path to global integration and conspicuous consumption would find ways other than war to resolve their disputes.

With Russia’s invasion of Ukraine, these assumptions have been proven wrong, or at least incomplete:

• Whatever Vladimir Putin’s concerns are about NATO countries creeping up to Russia’s borders, it makes no sense to Western minds to destroy his economy and long-term viability by invading the Ukraine. Yet he did, for reasons that make no sense to a spreadsheet mindset.
• China spent much of the past few decades expanding its economy and its connections to the West, but its policies now are making the country more insular economically while expanding its political influence globally. It has explicitly stated multiple times that it will invade Taiwan if the island moves toward independence. Again, this would not serve the interests of China economically.
• Sadly, the McDonald’s theory of foreign relations does not hold true with the current state of affairs. And now McDonald’s has closed all its Russian restaurants. 

Capitalism is still a force for logic and openness, but historical drivers and the conceits of autocratic leaders are still capable of disrupting what seemed to be the inevitability of peaceful global competition

From my Star Tribune column

As an executive recruiter, I am often asked for interview tips by candidates. Here are two of the most important ones I emphasize in coaching candidates:

1. Be proactive, but don’t sell – it is sometimes difficult to resist the temptation to go into an interview and aggressively sell yourself, especially if you are a salesperson with strong persuasive skills. But what’s the point of selling if this isn’t the right job for you? 

If you are looking at the dynamic from a long-term perspective, the goal is not to sell the interviewer on hiring you. Rather, the goal is to perform needs analysis with high positive energy, so as to determine whether this job and company are a good fit for your skills and career path.

Conducting the interview this way accomplished two things: first, most importantly, it raises the odds you will be happy and successful in your job eighteen months from now. Secondly, it actually raises the chances of your getting an offer. By changing the dynamic from sales to needs analysis, you are helping the interviewer do their job of assessing your fit for the role and organization, and easing the productivity of the time spent interviewing for all involved.

2. Try not to talk for more than 30 seconds at a time. In 1985, Milo Frank wrote a book (and created an audiobook) titled “How to Get Your Point Across in 30 Seconds”. It influenced me personally as a person prone to going off on talking jags. 

Simply, Frank’s point is to think of a conversation as a tennis match, with the goal of returning the ball over the net, rather than a sprint (or worse, a marathon). You might wonder, how is it possible to answer a complex question in thirty seconds or less?

The secret is to answer the specific question asked in a succinct fashion and give the questioner the opportunity to drill down for more information. Sure, there will be occasional questions that demand a sixty or ninety second answer, and rare questions that require five minutes. 

But to create that desired back and forth dynamic, thirty seconds is actually a lot of time to answer a direct question. The added benefit is that this gives discipline to those of us whose minds are racing ahead, anticipating the next logical question and answering it without it being asked.

Six months old, but still quite relevant to daily events

Facebooks stock may have cratered the past several weeks, but Amazon is in fine shape, as its stock price hit near record highs following its quarterly earning announcement beating expectations. Amazon beat expectations on quarterly earnings, reporting $137 billion, with corporate operating income of $3.5 billion.

But an article several weeks ago in the Wall Street Journal dug beneath the surface of those numbers and showed how reliant Amazon is on Amazon Web Services (AWS) for its profitability, and the implications for anti-trust.

The Wall Street Journal article goes deeper and shows how AWS is an immensely profitable business that is producing the bulk of Amazons profitability. The latest earnings report “most notable trend is the large and growing gap between the company’s cloud-computing division, Amazon Web Services, and everything else it does. AWS reported $5.3 billion in operating income on only $18 billion in revenue. That means that non-AWS businesses lost $1.8 billion during the quarter.”

Amazon has a long history of deferring short term Profitability in pursuit of long term market share. But undercutting competitors pricing and selling at a loss, coupled with Amazon’s 40% market share of US eCommerce, presents a potential violation of anti-trust law. “A store that sells everything and is able to price everything below market price – including the logistics of inventory and delivery – has a much greater ability to recoup profits than a standalone business” which is not being subsidized by an entity like AWS.

There is a second reason to consider splitting AWS from its eCommerce operations. According to activist investor Daniel Loeb, the market is failing to recognize the full value of Amazon’s two core businesses. Specifically, AWS has an estimated “enterprise value” of more than 1.5 trillion dollars, almost as much as the companies current total market value of 1.6 trillion dollars. Amazons retail business has an estimated enterprise value of approximately 1 trillion dollars. So from a shareholder value standpoint, splitting Amazon into two would increase its value considerably.

This is the beginning of one of the great business stories of our time. As I have written before, antitrust law is based on the concept that it does not serve a healthy society to be dominated by a handful of giant firms. It may take a decade or two, but the logic of splitting Amazon up is very slowly gaining traction.

Several outages the past several weeks on Amazon Web Services (AWS), demonstrated how critical “the Cloud” has become for business and society.

A recent article in The Economist on state of the cloud computing dug in depth on the competitive landscape of the cloud. It detailed how startups are spending a large percentage of their funding, often a majority, on Cloud computing, due to the ease of use of adding computing power for growing businesses with a mouse click, rather than the old style buying and configuring of additional physical servers.

In this, The Economist said, the Cloud is becoming to our current economy what electricity became a century ago – the foundation of advanced work, with as needed computational availability, just as electricity became available from utilities on an as need basis

The principal cloud providers are Amazon AWS, Microsoft Azure and Google Cloud Platform. AWS and Azure are the dominant market players, with Google rapidly growing as well.

Many others are competing as well. Oracle, for example, is expanding its own Cloud offering, and looking to make it central to its Health Care platform, now that it has acquired Electronic Health Records giant Cerner.

The cloud ecosystem is also composed of cloud management systems that complement the actual cloud providers, optimizing the flow and costing of information on and off platforms like AWS and Azure.

The AWS outages of the past month, infrequent though they may be, once again raise the question of whether it is in the economy and society’s best interest to have several giant vendors controlling such a critical function of the economy.

As usual, there are antitrust issues here as well. In the long term, it may be easier from an antitrust perspective to support Oracle retaining its cloud, which supports its vertical offerings, such as the Health Care example above. In contrast, AWS would be an obvious target if Amazon is eventually seriously challenged by the govt to split up.

Secondarily, if Cloud computing is becoming the Electricity of the 21st century, should the vendors be treated as a regulated utility rather than an independent for-profit business? My first reaction is that regulating the Cloud ala electricity would inhibit innovation. But that supports the argument of not letting these vendors become too big. After all, utilities are regulated because they are de-facto monopolies.Report this

In October, Microsoft announced that it is shutting down its business social network, LinkedIn, in China, saying having to comply with the Chinese state has become increasingly challenging. It comes after the career-networking site faced questions for blocking the profiles of some journalists. LinkedIn will launch a jobs-only version of the site, called InJobs, later this year. But this will not include a social feed or the ability to share or post articles.

This leaves Github, also owned by Microsoft, as one of the few Western software platforms still accessible in China. What is GitHub? GitHub is the world’s largest open-source coding platform. Here, software developers host their code in public for all to see, and benefit from others around the world combing it over for errors. The code can be used for free, as long as enhancements are added back to the repository for others to use.

In 2020, nearly 10% of GitHub’s 56 million contributors came from China. GitHub has been a triumph there for parent company Microsoft, which bought the platform for $7.5 billion in 2018. With the departure of foreign social networks like Facebook and the rollback of Microsoft-owned LinkedIn’s services there, GitHub is now the last major foreign-owned platform accessible in China that hosts user-generated content — an unpredictable set of information that would normally be at risk of censorship, screening, and even summary blockage.

Can China successfully stay on GitHub? Its narrow engineering focus gives it the best chance of avoiding China’s onerous censorship of user comments across its social platforms. But there are powerful reasons why Github may also be retracted from use in China:

China’s long term lack of respect for intellectual property rights is well known and egregious. But the rule of law and respect for intellectual property still matters whether formally between company’s or informally in a coding repository. Over time, based on its past and current behaviors, it is likely China will pressure its own developers not to share innovations with the Github open-source repository.

One of the disappointments of the past decade is China’s demonstrating that a successful knowledge-based economy does not requires democracy. If you are accustomed to using your institutional power to enforce lies and hide the truth, why respect something as amorphous as open source?

Last Tuesday, General Electric Corp. announced it would spin off its health care division in early 2023 and its energy businesses a year later. That would leave its aviation unit as its remaining business.

To a generation that reveres digital giants like Amazon, Apple and Google, it’s hard to convey how high and positive a profile GE had for the 20th century.

For the longest time, GE was a conglomerate – the term popularized in the 1960’s for giant companies that were composed of a portfolio of businesses that were not logically related to each other. Financial engineering was what kept these businesses afloat, such as ITT, Gulf Western, and Allied Signal. The limits of financial engineering is what led to the downfall of nearly all conglomerates following their peak in the sixties and seventies.

GE was different. Its management competencies were held to be so superior that they were seemingly able, decade after decade, to add new divisions, grow their current businesses and have outstanding profitability.

As described in a NYTimes article last Tuesday, the company seemingly peaked in the last two decades of the 20th century. “Under Jack Welch, who led G.E. for two decades until 2001, revenue jumped nearly fivefold, to $130 billion. The value of its shares on the stock market soared to more than $410 billion from $14 billion. Fortune magazine named Mr. Welch the “manager of the century,” and in 2000 The Financial Times named G.E. “the world’s most respected company” for the third straight year. Under Mr. Welch, G.E. became a training ground for a growing cadre of star managers. They were developed and moved from one business to another every few years.”

Unfortunately, once Welch left his role in 2000, the firm stagnated. As I wrote in this column in 2020 at the time of Welch’s death, Welch’s successes were substantive and real. But the remarkable consistency of GE’s earnings under Welch was a phenomenon unnatural for a large company, and would be nearly impossible to achieve today. Welch accomplished this feat leveraging financial tools, which though entirely legal at the time, would be derided as gimmicks today.

The market responded favorably to Tuesdays announcement – its logic was clear. And the DOW Jones had already delisted GE in 2018, to reflect its awkward balance as a business.