Marina Gorbis's Blog, page 1452

Is Ukraine a Prize Only Russia Wants to Win?

Russia versus the West is more than a mismatch. From an economic perspective, Russia’s economy is only about an eighth the size of America’s, and also an eighth the size of the EU’s. Taking on a group of adversaries that together are 16 times richer than you is hardly a wise gamble. But Russian President Putin is taking it.

Why does he think he can challenge the Europe and the U.S. on Ukraine and apparently win?

OK, there’s energy at stake. We’ve all heard that Europe is dependent on Russian for natural gas and oil. But is it really? And when is dependency a two-way street? Russia supplies Europe with about a third of its fuel. Looked at from the other side, Europe buys about 70 percent of Russia’s energy. One would think a customer that buys 70 percent of what you make is a pretty important customer. That’s especially true when that customer’s purchases account for 20 percent or so of your GDP, and nearly all of your governmental expenditures. So who exactly is dependent on whom?

Cut the energy pipeline between Russia and Europe and Europe’s massive economy will no doubt slow, perhaps precipitously. But Europe will be able to replace its imports of oil and natural gas a lot faster than Russia replaces the money it earns selling to Europe. The U.S., which recently surpassed Russia as the world’s largest energy producer, can provide Europe with oil and perhaps some natural gas. Norway can provide natural gas, and so can Australia, Canada, Saudi Arabia, and Qatar. If Russia stopped selling energy to the EU, the continent would stumble, but Russia would surely fall.

Here’s another angle on the mismatch: the countries’ sizes. Russia has 143 million people living within its borders while the EU has 500 million and the US has 310 million, meaning Russia is outnumbered again. And what if Russia did take the Ukraine – all of it? That would add 45 million people to the Russian side, but it would also add roughly $20 billion in external debt.

Then there’s the military mismatch. Russia has fewer soldiers than the U.S. military, and many fewer than NATO. And, whereas the U.S. spends roughly $650 billion a year on its fighting forces, Russia spends just $90 billion, a fraction of that amount.

So how can a country like Russia, which is so much smaller than the West on every measure, challenge Europe and the U.S. on Ukraine and apparently win? Is it fatigue on the part of the West? Fear of fighting? Is it choosing prudence over risk?

Or is Ukraine a prize no one but Russia really wants to win?

Editor’s note: Explore the economic connections between Ukraine, Russia, and Europe for yourself with these interactive graphics.

Why Work Is Lonely

There is an old cartoon I often show to the managers I work with. It portrays a smiling executive team around a long table. The chairman is asking, “All in favor?” Everyone’s hand is up. Meanwhile, the cloud hovering above each head contains a dissonant view: “You’ve got to be kidding;” “Heaven forbid;” “Perish the thought.” It never fails to provoke awkward laughter of self-recognition.

I have a name for this cocktail of deference, conformity and passive aggression that chokes people and teams. I call it violent politeness.

I have witnessed it countless times. After some discussion, often labeled “brainstorming,” a group will go along with the most innocuous suggestion and follow it halfheartedly, keeping itself busy to avoid admitting what everyone knows: it is not going to work.

When I probe junior managers about this dynamic, they usually explain that their caution reflects their uncertain status. It feels too risky to raise misgivings, especially if one cannot offer an alternative course of action. It might make them look clueless or disruptive to their boss or colleagues.

Early in my career, I was sympathetic to that analysis. I knew it all too well, the fear of being myself at work—or more precisely, the uncertainty about which self to be.

I thought, and advised reassuringly, that things would improve with time. As young managers became established, they would have more latitude to put their mark on the roles they took—and so would I. It would be easier to find and speak with our own voice.

It took me a few years to realize that I was offering a wishful lie. Time does not summon courage. It only morphs the fear of speaking truth to power into the fear of speaking truth in power. Once I began working with senior executives, I found those hesitations all still there, only stronger in the face of increased visibility and pressure.

Owning one’s defiance feels risky at every (st)age. Speaking up feels even more exposing and consequential, spontaneity more unfamiliar, when we’ve spent much of our careers learning to modulate our silence—and being rewarded for it.

This is why violent politeness often gets stronger the closer one gets to the C-suite. In too many organizations, in too many of our minds, it is still what gets you there.

It is different from “groupthink.” It is not always borne of convenience, cowardice and backside-covering—or evidence of a lack of commitment or malicious intent.

As a personal habit, we often justify it with the wish not to embarrass others or to appear supportive. As a group norm, we reinforce it by endorsing “constructive” cultures that denigrate dissent as a lesser form of participation than enthusiasm.

Violent politeness is such an ingrained custom that we keep making excuses.

We keep forgetting that our closest relationships are not those where tension is glossed over but those where it can be aired and worked through safely enough.

We keep telling ourselves that speaking up is costly and ignoring the price of silence. Perhaps because the price of speaking up—being ignored, judged, labeled a poor team player or worse—is paid immediately and by those who speak first. The price of silence, on the other hand, is exacted later and paid by the group—when the bubble of false harmony bursts, relationships crumble or projects fail.

We keep ignoring that by censoring ourselves in order not to appear vulnerable, we are often complicit in being misunderstood. Silence is easy to fill with suspicions and assumptions about what others do not know about us.

We keep fooling ourselves that we need to wait and time will make us more open, as if time alone did anything more than harden tentativeness into superficiality. And in the meantime, violent politeness corrodes collaboration, problem solving and decision-making. It kills enthusiasm and drags learning to a halt.

We cast it carelessly, this stone that kills two birds we claim to cherish—our voice and our relationships. And when we have done it long enough that we have lost hope to speak or hear the truth, to truly care and be cared for, we tell ourselves…

It’s lonely at the top.

Of course it is, and not just there. It’s lonely everywhere you feel that you must give up your voice to stay in the room. It’s lonely everywhere relationships are brittle.

Violent politeness is tied to loneliness in a vicious cycle. Once you tolerate the former you worsen the latter, and vice versa. Neither is a property of “the top,” a necessary evil, or, worse, a badge of honor.

They are choices.

They are choices to keep commitments often made unconsciously, early on and far from any top. Commitments to look strong, caring, and in control. Commitments to keep our groups looking harmonious. Commitments we care so much about keeping that we are prepared to sacrifice learning, effectiveness, freedom, and intimacy.

It is to honor these commitments that we betray ourselves as much as others.

When I show that cartoon, most managers readily recognize themselves in the self-censoring team members pretending to agree. Few identify first with the meeting’s chairperson. No wonder. When I ask them to do so and guess how they would feel, the laughter usually stops.

Lonely, is the most common answer. Burdened, blinded, mistrusted, clueless, are frequent answers too.

Violent politeness keeps leaders stuck in the very place we say we least want leaders to be—carrying the glory if things go well and the blame if they don’t. Stressed out, alone, and handsomely rewarded for it.

Some argue that we unconsciously like it that way. Because applauding or rejecting leaders feels easier than sharing the burden of leading. Because isolation feels safer than admitting doubt or asking for help. Because at one time or other we have all been hurt by leaders who ignored us or took our dissent as an attack and retaliated.

All that may be true. But most of all we do it to keep bolstering airbrushed images of leadership and teamwork—at the expense of the messier work both take.

We can’t break violent politeness or end loneliness at the top, or anywhere else, until we are ready to sacrifice those idealized images and stop hiding in plain view. It is a tiny step that takes a lot of courage. The courage to take our work seriously and ourselves less so. The courage to be both vulnerable and generous—and to stop outsourcing shame to those who can’t afford to hide.

‘The top,’ in that way, is no different than anywhere else. We need good friends to thrive and be ourselves. Real friends, that is. The kind who would rather be ruthlessly honest than violently polite.

Thriving at the Top

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Visualizing the Economic Ties Between Russia, Ukraine, and Europe

As the situation between Ukraine and Russia continues to unfold, Europe and the U.S. are mulling what effect economic sanctions may have — not only on Russia, but on their own vulnerable economies. This economic interdependence is particularly apparent with respect to energy, and can be visualized by the The Observatory of Economic Complexity, from the MIT Media Lab Macro Connections group, which charts the flow of imports and exports around the world. Here, for instance, are the nations Russia exports to (the data displayed below is from 2011, but the charts are interactive — so play around with them to explore more data):

A significant share of Russian exports end up in Europe, and a large share of Russian imports come from Europe. But while Europe is hence clearly very important to Russia, the flip side is that Russia is much a smaller player from Europe’s point of view. For instance, only 3.2% of German exports end up in Russia, and only 4% of German imports hail from there. The figures for the U.K. and France, Europe’s other two largest economies, are even smaller, under 2% in some cases. It would be tempting to conclude that Russia, then, has more to lose from economic isolation.

But of course, it’s not that straightforward. Complicating matters (as always seems to be the case in international disputes) is energy; Russia supplies 30% of Europe’s natural gas and is the world’s largest exporter of it, as visualized below:

Then there’s Ukraine. Just as it’s geographically sandwiched between East and West, it’s economically caught in the middle too.  This balancing act is easily seen in this visualization of where Ukraine imports from:

Ukraine’s complex relationship with its neighbors goes far beyond trade, of course — the ouster of president Viktor Yanukovych, which in turn sparked the Crimea crisis, was more about his flagrant corruption than any immediate desire of Ukrainians to join the EU. And as the world’s policeman/banker, the United States is now getting involved as well (Russia is canceling Ukraine’s discount on its natural gas, and U.S. Secretary of State John Kerry has pledged economic assistance to offset the resulting increase in energy costs).

But in a sense, Ukraine’s economic tug-of-war mirrors the political and cultural balancing act it faces in deciding how to align itself between Russia and Europe. As an economic matter, it cannot give up access to one without needing much more from the other. And with $16 billion in debt due by the end of 2015, the country needs all the revenues it can get.

Why Uber Needs Clearer Pricing

The way a company sets price is an integral component of its brand. Think about your favorite merchants – what associations of price do you have? Do you think of them as premium, middle-of-the-road, or a value player? Just as prices drive brand perceptions, pricing surprises can damage a company’s brand. Remember the uproar when Apple discounted its iPhone from $599 to $399 just 68 days after introduction?

Uber’s biggest challenge today is customers don’t understand – and have not accepted – the role of price in its brand. The fast growing ride share service varies its prices based on demand. Consumers love the regular prices, which typically are significantly lower than the relevant competition (taxis or car services offering sedan, luxury car, or SUV service). The backlash has been over the “surge” fares charged during peak demand periods – which can be as high as eight times the normal price. Uber has done a poor job of “spinning” these surge prices and hasn’t been clear about its pricing strategy.

I’m a pricing consultant and a frequent Uber user, and even I am confused by Uber’s conflicting messages:

Is it a low cost service? In Boston, for instance, its discount uberX service is marketed as being 30% cheaper than taxis. This release completely neglects to mention the real possibility of surge pricing (even going so far as to state “uberX is now an even more cost-effective ride – 24 hours a day”).


Is it a market-maker? In explaining its surge prices, Uber claims it uses higher prices during peak times simply to equate demand with supply. Premiums incent more drivers to provide service.


Does it charge what the market will bear, as most companies do? Uber recently admitted to deliberately restricting supply in San Diego on Valentine’s Day – leading to prolonged surge pricing. Uber explained it wanted drivers (and hence, the company) to earn more money.

This lack of clarity is frustrating customers, resulting in damaging publicity that is threatening growth.

So what should Uber do now?

One solution would be to follow rock musician Kid Rock’s concert ticket pricing strategy.

Last summer, Kid Rock announced a game-changing pricing strategy – all of his concert tickets were priced at $20 except for 1,000 of the best seats in the house. These “platinum seats” ranged in price from $60 – $350. This strategy was a great success and described as an “unbelievable money maker” by concert promoter Live Nation. He played, for instance, before 28,000 fans in Chicago (his previous appearance in the area sold 15,000 tickets). Just as important, this strategy bolstered Kid Rock’s image as a musician who is fair about ticket prices. What a winning trifecta: more profit, higher attendance, and a stronger brand.

What’s most fascinating is fans accepted the premium priced platinum seats. Rock music fans are notoriously sensitive to both high prices (quick to scream, “The man is ripping us off”) as well as the notion that only the well-heeled sit in the best seats (often opining, “True fans should be in the front rows”). Kid Rock was upfront about and did a masterful job of explaining that high priced seats cross-subsidize, thus make possible, $20 tickets for most.

When you think about it, Uber’s regular and surge prices are akin to Kid Rock’s $20 and platinum tickets. Surge pricing is very limited — Uber claims that during Valentine’s Day week, only 5.6 percent of trips were at surge prices. Uber needs to be both vocal and succinct about its value proposition: great service (as a regular rider, I can attest to this) with low prices most of the time. During peak periods, surge prices allow Uber to maintain service standards as well as cross-subsidize lower priced rides. “Cross-subsidize” is more consumer friendly than the cold-hearted economic rationale of “let the market rule.” Uber shouldn’t go into too much detail about the mechanics of surge prices. Explaining a pricing strategy is akin to a legal deposition – the more you explain, the more open you are to criticism. Keep it simple.

This explanation also keeps Uber nimble in case it needs to change its driver strategy. Currently, drivers don’t have a schedule and work whenever they want. This is likely to lead to what economists call “cream skimming” — some drivers will work only when prices are high. An uberX driver recently grumbled to me that it’s demoralizing to hustle for $5 fares. To keep its best drivers and maintain service, Uber may eventually opt to restrict the opportunity to reap high fares during surge price periods to drivers who also work during off-peak times (thus deliberately curb supply). It’s like being a waiter at a restaurant – you work the lousy shifts in order make big money on weekends.

Uber has a great pricing strategy that can truly transform the private car industry. Like most new companies, there’s always room to improve on its initial rollout. Justifying its surge pricing – which has been a public relations nightmare – should be its top priority.

How Much Do Companies Really Worry About Climate Change?

Are managers particularly concerned about the impacts of climate change on their businesses? If we believe the results of a recent MIT Sloan and BCG survey, the answer is no. But it may not be that dire.

First the sobering survey results: Only 27% of respondents agreed strongly that climate change is a risk to their business — which is frightening when you think about what that says about companies’ level of readiness for the significant changes that are upon us already (extreme weather, disruptions to operations and supply chains, and the changing expectations of customers and employees). Additionally, only 11% ranked climate change as a very significant issue.

In a good overview of these survey results published in the MIT Sloan Management Review, editor Nina Kruschwitz voices a legitimate concern that their findings don’t jibe with other reports lately, in particular an article in The New York Times titled, “Industry Awakens to the Threat of Climate Change.” That story focuses on how the World Economic Forum, and some specific companies like Coca-Cola and Nike, are taking the issue seriously.

Although the two stories seem at odds, they may be describing versions of the same reality. Part of the disconnect stems from what’s said by company leaders versus what a broad selection of managers think. A growing number of companies are publicly declaring support for strong climate policy — Apple just signed onto the Climate Declaration, joining Nike and many others. But within the ranks of these leading companies, I’m sure there are wide-ranging views, from supportive to skeptical or even hostile.

But the bigger gap is likely a perception of what “climate change” means to survey respondents. Many may think of the issue narrowly as rising temperatures, or as something their companies should manage only for philanthropic, good-for-the-planet reasons.

What Nike and Coca-Cola leadership get is that the climate issue is a systemic problem, not easily defined in one single way, and it directly and profoundly affects their business. Water availability, for example, is in the process of shifting, sometimes dramatically, which means more water and rains in some areas, and much less in others. Extreme weather brings unpredictable dangers for physical assets or massive disruptions to supply chains (like auto and hard drive companies found out with floods in Thailand in 2011).

Most survey respondents probably miss these systemic issues. And very few would consider the much softer elements of risk and value around climate change — like whether employees and customers believe the company is doing enough on the issue.

Nonetheless, companies’ understanding of climate change is in fact shifting subtly as more understand the problem as one of risk to be managed — not a scientific or political debate about absolute certainty, but a conversation about possible futures. When risk officers and smart business leaders look at climate this way, they can have productive conversations about how to build more resilient enterprises.

So the real issue of concern that the survey uncovers is not a lack of belief in climate change per se, but a gap in readiness for volatility: Only 9% of respondents thought their organizations were really prepared.

On the one hand, there may not be too much to worry about in this finding. The same perception gap about defining climate change may make managers blind to how much their companies are already doing to reduce carbon and energy use, and thus reduce one element of risk — reliance on volatilely priced fuels. A fleet efficiency project, which many would just call good business with a good payback, is a carbon and climate action. So are a lighting retrofit, a boiler overhaul, innovation to reduce energy use of your products, and much more.

That said, the respondents might be right in the larger sense that companies are unprepared for systemic and longer-term challenges. In my experience, most companies are risk-averse and like to fashion themselves as great “fast followers.” But Kruschwitz makes an important point: “Being a fast follower on climate change…may be more complex and require longer lead times than most companies are anticipating.” That’s exactly right. You can’t re-arrange supply chains to avoid droughts or storm risk quickly, or flood-protect or move your facilities on the fly.

Companies are in general bad at thinking long-term and preparing for multiple contingencies (it goes against being lean and maximizing short-term earnings). I believe we need fundamentally new modes of operating that create more resilient enterprises, or what I’m calling “the big pivot” in my forthcoming book.

Companies will, among other things, need to fight the short-termism that plagues business, set goals based on science to drastically cut carbon fast enough, innovate in heretical new ways, and collaborate with friends and enemies alike.

So does it matter much if your company’s managers think about “climate change” as a problem in and of itself? In a sense, no, since there is so much a company can do without everyone agreeing on that issue. But the companies that do get it will be able to set their sights and goals differently, and rally passionate employees to really change how they operate. Those more engaged organizations will be more innovative and have a leg up in a hotter, scarcer world.

Are You Too Afraid to Succeed?

Tim had been on the fast track. An Ivy League graduate, he had joined one of the premier consulting firms as an associate. He went on to take an MBA at INSEAD, graduating at the top of his class. Recruited by a pharmaceutical firm he rose quickly through the ranks, joining the executive team in record time. Within just eight years after joining the company he was appointed its CEO.

That was when things started to fall apart. Colleagues soon noticed that Tim seemed oddly reluctant to take important decisions. He would put off big projects and spend an inordinate amount of time on minor problems. As a result, the company missed out on some big opportunities.

His behavior became increasingly worrisome. He would turn up visibly drunk for important meetings. Although the board cut Tim some slack at first, his shortcomings quickly became too obvious to be to be ignored and within two years of his appointment the board dismissed him.

What went wrong?

Tim came to ask me that very question after he had lost his job. Listening to his story, I realized that its origins stretched back to his childhood. Tim seemed to have unconscious feelings of guilt about his success. I discovered that he was consumed by the idea (crazy as it may sound) that his being too successful would upset his father, who had repeatedly failed in his business endeavors and had become embittered by it.

He had taken out these emotions on Tim, constantly telling him that he (Tim) didn’t have what it took to be successful. As the years went by, Tim had internalized these criticisms. But his debasing sense of self remained dormant until he became CEO.  With nowhere further to go, he revealed the inadequacy he had been so anxious to conceal, perversely sabotaging his own career in order to fulfill his belief that he wasn’t up to the top job.

This fear of success is a more common dynamic than you might think. Many years ago, Sigmund Freud tried to explain it in an essay called “Those Wrecked by Success”, published in his 1916 work Some Character Types Met With in Psycho-Analytic Work.   He noted that some people become sick when a deeply rooted and long-cherished desire comes to fulfillment. He gave as an example a professor who cherished a wish to succeed his teacher. When eventually the wish came true and the professor succeeded his mentor, depression, feelings of inadequacy, and work inhibition set in. It was as if this professor felt he had not deserved his success in some way and that it was a manifest travesty to step into his mentor’s shoes.

I’ve encountered many high-flying executives like Tim who function extremely well as long as they aren’t in the number-one position. But the moment they’re placed in the spotlight, they are in uncharted territory and can no longer hide behind someone else. As President Truman used to say, “The buck stops here.” CEOs — whoever they are in whatever organization — have to make crucial decisions. They can’t pass the buck to anybody else. In that extremely visible role, they become highly vulnerable. Their effectiveness diminishes as they succumb to self-destructive behaviors. Some of them feel like impostors. Most also fear that the higher they climb, the further they’ll fall when they make a mistake. There’s also the constant worry that rivals will take their success away. As the writer Ambrose Bierce said in The Devil’s Dictionary, “Success is the one unpardonable sin against one’s fellows.”

The first step towards getting over the fear of success is to recognize it. Think back to your childhood.  Did a parent, another family member, or a teacher, or a sports coach keep telling you that you weren’t very capable or likeable, or never seem to be satisfied with your work, no matter how well you performed?  To overcome his fears, I had to get Tim surface his associations around success. He needed to better understand the sources of his fears and discard his secret self-image as an unsuccessful, undeserving person.

During the coaching process, Tim came to realize how busily he had engaged in self-sabotaging activities that held him back from achieving his goals and dreams—including in his personal life. What he found particularly helpful was being asked questions that challenged his internal narrative of success. For example, how did he envision success? Could he do a “cost-benefit analysis” of what it meant to be successful?

Tim was lucky; he got a second chance at another company.  And thanks to his voyage of self-discovery he was able to overcome his fear of success. As boards consider promising executives for promotion it’s probably worthwhile engaging some coaching help to make sure that the young star they have such high hopes for does not get extinguished by some hidden and unjustified sense of unworthiness.

Forget GDP — We Need Numbers That Matter for the Questions We Have

No single number has become more central to society in the past 50 years than GDP — Gross Domestic Product. Throughout the world, it has become a proxy for success and for failure. It is a profoundly important indicator. It is also a profoundly flawed one.

This past Friday, the U.S. government released its revised estimate for GDP for the last three months of 2013. That showed growth to be less than was initially reported last month, with the figure falling to 2.4% from 3.2%.

That is a considerable difference, yet such revisions are hardly unusual. The number will be further revised in the coming months, and may be subject to alteration years, even decades later, as final bits of data get assimilated and as methods of assessing the nation’s output change over time. Last July, after years of work, the Bureau of Economic Analysis declared that the U.S. economy was, in fact, hundreds of billions of dollars larger than previously reported because of changes in the way intellectual property and research were counted.

The variability of these numbers should be a hint that they do not capture some sort of absolute reality. They describe this thing we call “the economy,” but the economy is not a physical entity with a set topography. It is itself a product of man-made numbers and statistics, and its contours change and morph. GDP very purposefully excludes whole swaths of human existence, from domestic work to volunteer activities to cash transactions not recorded by the government.

You wouldn’t know that, however, from most popular debates and discussions. While the creators of the national accounts that gave us GDP and Gross National Product understood that these numbers were inventions not intended to measure happiness, well-being, or all aspects of material life, that distinction has inexorably been lost as the number become the primary marker of political success and national greatness.

The limitations of GDP have long been recognized. In 1968, just before his assassination, Robert Kennedy made a passionate plea to stop using GNP (GDP’s older cousin) as an absolute measure of national greatness. As a metric of how much stuff a country makes, it performed its task.  But “it does not allow for the health of our children, the quality of their education, or the joy of their play….It measures everything except that which makes life worthwhile.”

In the more than 45 years since that speech, there has been a steady chorus pointing out the limitations of GDP. The Kingdom of Bhutan was the first — and still the only — country to reject GDP as its primary measure and instead developed a Gross National Happiness index. The United Nations, drawing on the work of Nobel economist Amartya Sen, created a Human Development Index that weighted other factors such as education and life expectancy. In 2008, the president of France, Nicolas Sarkozy, convened a commission to go beyond GDP that recommended a broader “dashboard” of variables to measure the health of a nation.

Academics have also joined the post-GDP party. Innovative economists such as Erik Brynjolfsson of MIT have drawn attention to how the information technologies and services that now contribute substantially to economic dynamism just aren’t adequately captured by GDP. These “free goods of the Internet,” as Brynjolfsson and others have called them, may contribute hundreds of billions to national output but are essentially invisible in our calculations.

And finally there are the endless revisions and tweaking of the number itself. As British economist Diane Coyle has so astutely observed, GDP may often be treated as if it were a natural phenomenon, but it is not. It is an invention, created by all-too human economists and politicians in the crucible of the Great Depression and World War II. It shed light on what had been too mysterious, namely the output of a nation, and it helped the United States and Great Britain fight and win World War II by devoting massive amounts of domestic industry to making machines of war without unduly imperiling domestic economic life.

The largest problem with GDP, however, is not its limitations (however considerable they are) but the maximalist use of it by economists, politicians, and the general public who use it as a stand-in for national success. That is not the fault of the indicator. It is the fault of those who demand that it carry more weight than it can or should bear.

Few if any businesses will see their forward strategy meaningfully determined by GDP. Even large industrial companies such as Caterpillar and GE will find pockets of strength even when GDP is weak, and they will encounter issues even when it is strong. The traditional relationship between GDP and interest rates, inflation, and now employment has clearly broken down. A factory today might employ 500 people and 20 robots and add substantially to GDP, whereas the same factory 40 years ago would have employed thousands. Basing future plans based on those 20th century patterns is likely to be a grave mistake.

It would be an even bigger mistake for disruptive companies such as Amazon or Google. GDP might be weak, and overall advertising spending contracting with it, yet Google can still see massive growth as it disrupts a traditional industry. The same goes for Amazon, which can thrive even if GDP and consumer spending sag as long as that spending shifts away from malls and toward the mailbox.

In short, we are all becoming less dependent on this number called GDP. In an age of big data, companies have a wealth of information at their fingertips. That information — about customers and their behavior, about what clients need and where — matters far more than broad-brush national numbers like GDP.

It’s not that we need new national indicators. We need numbers that matter for the questions we have. No one will win a Nobel Prize for such bespoke indicators, but we will all prosper by using GDP less and using the other numbers around us more.

Established Companies, Get Ready for the Collaborative Economy

As more and more startups like Airbnb, Etsy and Kickstarter crowd into the space of the collaborative economy, big brands are starting to get in on the action, too.  Staples sells products developed on Quirky; Avis has acquired Zipcar; Walgreens has partnered with TaskRabbit for delivery.

And those ventures are likely to be just the beginning, given how many people are already participating in the collaborative economy, and how much that’s likely to grow over the next year. There are now 113 million sharers in the US, the UK and Canada: 40% of the adult population. Those figures come from a survey of 90,112 people that we conducted for Sharing is the New Buying, a just-released report that I co-authored with Jeremiah Owyang of Crowd Companies and my Vision Critical colleague Andrew Grenville.

While the most established and widespread form of sharing consists of buying and selling pre-owned goods on sites like eBay and Craigslist, our survey revealed that a quarter of the population is now using the most recent generation of sharing services. These include peer-to-peer transportation and housing services like Uber and Airbnb, crowdfunding services like Kickstarter, product rental services like Rent the Runway, custom craft shops like Etsy, and task sites such as elance and Taskrabbit. Participation in every one of these emergent categories is poised to double within the next year.

No wonder big brands want in on the action: the growth of the collaborative economy promises to disrupt the conventional marketplace, as customers buy from one another — instead of from them.

But for those companies, engaging with this nascent market must go beyond latching onto a few hot collaborative startups by buying them or partnering with them. Established companies must grasp the core drivers behind this new economy, and understand how those drivers fit into their already established models. These core drivers are:

Less buying, more sharing. Big brands need to stop measuring success in terms of units sold, and think in terms of units used. The collaborative economy is shifting us from a consumerist economy to one in which people buy less because they’re sharing more. Instead of five families buying five cars, five families can share the equivalent of one car (using a combination of loaner vehicles and transportation-on-demand), reducing the overall number of products purchased. (Not incidentally, this also reduces the environmental footprint of all that car manufacturing.)

Companies that have traditionally relied on selling goods need to think about offering those goods on an access model, too – for example, as Daimler AG has done by providing by-the-minute car sharing through Car2Go. And those that offer services need to think about further offering their customers access to products well outside their traditional spheres, as with Westin’s partnership with New Balance to offer fitness gear rental for their guests.

Less consuming, more producing. The emergence of the collaborative economy is closely tied to the growth of the maker movement, in which individuals can become producers and sellers thanks to technologies that support small-scale production (like 3D printing) as well as those that facilitate peer-to-peer distribution (like online marketplaces).  As we found in our survey, on some kinds of sharing sites, such as those that share professional services or pre-owned goods, more than half of participants have been sellers or providers (and not just buyers and consumers) at some point in the past year.

To succeed in the collaborative economy, companies will need to integrate crowd-produced goods into their supply chain, as West Elm has done with Etsy. In fact, our data suggests that attracting small-scale producers and sellers is one area where any player could still find a competitive edge: while 79% of buyers are “very” or “extremely” satisfied with the value they got from their latest sharing transaction, only 60% of sellers were as satisfied with their earnings.

Less working, more freelancing. As a number of observers have pointed out, one effect of the collaborative economy may be to increase self-employment in place of full-time employment.  This means that companies will have new ways to source labor, but at a social cost: some argue that the ability to outsource via elance and TaskRabbit gives companies a (lower-wage) alternative to creating full-time positions. Meanwhile businesses that depend on skilled labor means that they’re not only competing with other employers to hire the best workers — they’re competing with the increasingly viable option of web-enabled self-employment.

Rather than engaging in a race to the bottom (on wages) or a fight to the top (competing for skilled labor), these companies would do well to focus on offering new value-added services enabled by the collaborative economy, as Home Depot did by partnering with Uber for Christmas Tree delivery.

Less regulation, more risk. One challenge that has bedeviled sharing startups is the emergence of regulatory efforts aimed at limiting sharing activity — or tapping it for tax revenue. Partly in response to pleas from established players like taxi and hotel companies, municipal governments have tried to corral the Wild West of sharing.

Yet the involvement of bigger companies in the sharing economy itself could instead strengthen the hand of those who would preserve currently low levels of regulation. Either way, unless big companies want to see their breakfast eaten by collaborative startups that profit by flying under the regulatory radar, they will need to tune into their customers with co-innovation initiatives that help them understand how they can play in this space, too.

The competitive pressures of the collaborative economy – and the ever-growing list of companies rising to meet them — attest to the urgency and inevitability of the entrance of big brands into this space.  It’s a disruption that big companies must not only address, but accelerate, unless they want to stand by and watch while their own business models and revenue streams are disrupted instead.

The U.S. Immigration Debate Isn’t Left vs. Right

I sometimes find it hard to believe that America’s current immigration systems weren’t designed by our enemies. More liberal policies and streamlined procedures would bring technical talent and entrepreneurial energy at a time when we clearly need them. Yet these reforms remain out of reach.

Overwhelmingly, the best and brightest in the world still want to come here to study, work, and start companies; a worldwide 2012 Gallup poll revealed that the US “holds the undisputed title as the world’s most desired destination for potential migrants.”

We make it overwhelmingly difficult for them, however. As Darrell West of the Brookings Institution summarized, “For many immigrants, it is virtually impossible for them to afford the fees, handle the paperwork, and navigate a complex bureaucratic process…. American immigration is a 19th century process in a 21st century world.”

We’ve made some small progress recently but a recent bipartisan attempt at comprehensive reform, which includes such great ideas as a separate ‘startup visa’ category to foster entrepreneurship, is languishing in the house after passing the Senate last year.

There’s a belief in some quarters that this reform will hurt low-wage American workers (who are already hurting enough) by exposing them to more competition from immigrants and thus lowering their job prospects and wages. But the evidence is mounting that this threat is at worst pretty small, and most likely nonexistent. As the American Enterprise Institute (among many others) has found, immigrants tend to take different jobs than natives, and so are not rivals.

I spoke recently at two events in California organized by FWD.us, a tech industry advocacy group that has to date been squarely focused on immigration (FWD.us covered my travel expenses, but did not pay me anything). At the events themselves, and at the meals and other gatherings around them, the accents varied greatly but the stories didn’t. They were all about enthusiasm and love for America, a deep desire to build a life and make contributions here, and intense frustration at how hard it was to do this.

My favorite quote from the trip was from a very successful (US-born) technologist who said that immigration reform was “not about the right vs. the left; it’s about smart vs. dumb.”

Which side are you on?

Meet the Fastest Rising Senior Executive in the Fortune 100

Jill Hazelbaker has advanced faster than any other senior executive in the Fortune 100, according to research in the March issue of HBR—and she’s the youngest leader in that exclusive data set. She cut her teeth in electoral politics, quickly developing the skills and confidence there to thrive at a high-octane company like Google, where she’s now director of communications, internal communications, and government relations for Europe, the Middle East and Africa. In this brief interview with HBR, Hazelbaker attributes much of her career success to mentoring from “some real greats,” relentless preparation, and a willingness to pick up and move for the right growth opportunities.

HBR: What experiences have had the greatest impact on your career trajectory?

John McCain took a big chance on me when he named me as his national communications director at a pretty pivotal moment in his primary campaign. We were dropping like a rock in the polls, running out of money, and at that point a number of my friends had left the campaign. When McCain offered me the job, I doubled down. I also grew quite a bit working for Mike Bloomberg in his final campaign for New York mayor, alongside Hillary Clinton’s former communications director, Howard Wolfson—in no other world would Howard and I have come together on a campaign but for Mike Bloomberg. There I learned real lessons about understanding other people’s perspectives. I’ve had the chance to work for, and with, some real greats, from McCain to Bloomberg to Eric Schmidt at Google. Early in my career, an adviser to Rudy Giuliani gave me some great advice: “Act like a sponge and soak it all up.” That always stuck with me.

What obstacles have you had to overcome on your way up?

Well, I moved 10 times in 10 years. I’ve become a very skilled packer. You know, politics can be a bit lonely at times. My friends were living out their twenties in New York and LA and San Francisco, and I was packing up for the next race in the swing states. I had a lot of fun, and certainly it was the right decision for my career, but personally, it wasn’t always the easy decision.

You’ve advanced very quickly. Why do you think that is?

I think life generally rewards risk takers, and I’ve always been willing to take risks and move for the right opportunities. Fearlessness is important, too. There’s only so much training you can do before you go for a live interview on TV or give advice to a politician. I think the best way to learn is to just go for it. I’ve always been confident—confidence is different from arrogance—and I’ve always felt like I could do anything that I put my mind to. Work ethic matters a lot, too. I learned that from my parents early, early on. They modeled that behavior for me, and it certainly stuck with me.

How has your youth helped or hurt you along the way?

I don’t really think of it as a “young” or “old” thing. People are simply more or less experienced. As a manager of people who are my peers, I’ve always tried to remember that. And at this point in my career, I’m fortunate to have had a lot diverse experiences. Certainly there were times, especially in politics, when I was aware that I was the youngest person in the room by a long shot. I remember once during the ’08 Campaign, when I was tapped to give a “state of the race” update to then–Vice President Cheney and a number of the major donors and party big wigs who were in this long, wood-paneled room. And I was not only the youngest person in the room, but the youngest person by about 25 years. So of course, in those moments, you can be intimidated. But I’ve learned to conquer fear by working harder and being relentlessly prepared. When I’ve done my homework and researched my arguments, I’ve stayed confident. And when I’ve had setbacks, I’ve learned from them and moved on. You just have to keep going.

Have your experiences differed markedly from those of your male colleagues?

I don’t think so. At every step in my career, I have had really fantastic role models. In my first job in politics, I worked for a wonderful, strong woman who taught me so much about how to conduct myself in a professional environment. And the same thing goes for when I worked for Bloomberg, and now for Google. A great female executive at Google is my mentor and my boss. I think it’s really important for women to have other great women to turn to when the sea gets rough.

Were there any key “crossroads” moments in your career, when you could have seen yourself taking a different path?

Well, sure. I could have stayed in politics, which was interesting and exciting to me. After the McCain campaign, I briefly thought about running for office myself. Thank goodness I had the foresight to recognize that was probably not a great idea for me at the time. Public service is really important, but you need real life experience in order to contribute in a meaningful way. The Google experience—the Google opportunity—was a real curveball. Working in tech was not something I had previously considered. It’s been a great ride, and a profound learning experience.

Thriving at the Top

An HBR Insight Center




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