mdia p3-05-productivity-150420

MULTI DIMENSION IMPACT ACCOUNTING

File: MDIA-p3-14-PRODUCTIVITY-150707.odp Peter Burgess (c) All rights reserved

MDIA

PRODUCTIVITY


WORK-IN-PROGRESS.SLIDESET STILL IN DEVELOPMENT.UPDATES WILL BE POSTED OVER THE NEXT SEVERAL WEEKS

PRODUCTIVITY has been enabled by technology not so much by information technology, but by machinery and equipment that uses data to make production productive.


PRODUCTIVITY is measured by comparing output to the amount of labor that is used in producing the output.

This is a metric that had utility when production was constrained by a limited supply of labor valid until around 1970 but since then not a significant constraint on amount of production.


However using money as a measure of SOCIO-ENVIRO-ECONOMIC ECONOMIC PERFORMANCE creates an unacceptable level of distortion.


Note: Households are earning a lot more money but when discounted for the reduced buying power of money the income is almost the same as it was 50 years ago


SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunTHE MONEY ILLUSION

One thread of history suggests that most factory owners have ALWAYS made investments to improve their own profits. Nothing else!

These owners did not embrace the idea that impact on SOCIETY (PEOPLE) is an important part of business purpose.

Nor did they consider ENVIRONMENTAL matters to be of any concern for the business.


Another thread of history is that some combined investment for PROFIT with the idea that workers could live in decent conditions and be able to live a quite good life.

Lord Leverhulme who started the company that is now Unilever built a factory and community at Port Sunlight.

The Cadbury brothers did much the same, building Bournville to be a factory in a country atmosphere.



SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunWORKERS' HOUSING AT PORT SUNLIGHT

There were impressive improvements in PRODUCTIVITY in the 19th century. Individual production was replaced by the factory system which produced much more with less labor.

Mechanical energy replaced purely human energy.


Manufacturing 100 years ago was already quite mechanized quite organized



SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSPINNING COTTON MORE THAN 100 YEARS AGO


SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunFACTORY SCENE FROM THE 1920S

TECHNOLOGY is part of the reason for increased PRODUCTIVITY since the 1970s

Another part is the fact of GLOBALIZATION, which itself has been enabled by technology.


CONCRETE

PRODUCTIVITY improvement in pouring concrete from wheelbarrow to very versatile concrete pumping systems.



SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunCONCRETE USING WHEELBARROW


SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunCONCRETE USING A BUCKET SYSTEM


SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunCONCRETE USING A PUMPING SYSTEM

SHIPPING

PRODUCTIVITY improvement in shipping has been enabled by containerization and very much larger ships.



SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunCARGO SHIP STEVADORING CIRCA 1950


SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunCONTAINER SHIP LOADING CIRCA 2010

AUTOMOBILE ASSEMBLY

PRODUCTIVITY improvement in the assembly of automobiles has been enabled by robotics and very much finer tolerances in the production of sub-assemblies.



SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunAUTOMOBILE ASSEMBLY CIRCA 1950


SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunAUTOMOBILE ASSEMBLY CIRCA 2014

PAVING



SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSun

MACHINE FOR LAYING BRICK

The ability of LABOR to have a bigger share of the incremental gains from productivity has been gutted in the past 40 years


In this graph the growth of corporate profit (green) is on a log scale while the growth of household income (blue) and real output per hour (red) are on a standard scale.



SunSunEOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunSunSunBOPFinancialCapitalHumanCapital Man BuiltCapitalNaturalCapitalSunTHE MONEY ILLUSION

Part of this has been a systematic push back on the right of workers to unionize and have collective bargaining.

Part of this has been the reduced demand for labor as a result of productivity improvement.

Part of this has been the relocation of jobs through outsourcing to other locations where workers are available at lower wages.


All of this has been possible because the metrics being used do not inform decisions makers of the facts in a way that results in better decisions.


Recalling the PC paradox

The PC was the productivity tool of the 1980s. It brought computer power to everyone and the commercial world invested heavily in PCs to improve office performance. After a decade, little improvement in productivity could be observed. Behavior change was slow.


Post PC productivity

By the early 1990s the technology used for the PC was being used to drive machines in the factory (numerical control) and then to streamline design, prototyping and manufacturing. Less people and significantly better production.


The start of data everywhere

In the 1990s PC technology started to be connected to the Internet. Data flows became automated with customized Personal Digital Assistants (PDAs) and in turn this enabled massive improvements in supply chain management. All of this was use of data to improve real economy performance.


The downside of productivity

The modern economy has some critical circularity. Consumer demand is driven by spending power.

Aggregate wages determine sustainable spending power.

Lower wages and in due course there is reduced spending power and reduced consumer demand.


The impact of lower spending power on aggregate demand can be offset to some extent by enabling credit.

This has been done in many creative ways over the last thirty years.

Excessive use of this was one of the root causes of the great recession of 2008.


Policy makers have not yet understood the many systemic problem that have to be faced.

Full employment in an era of rapid increase in productivity will result in too much production and not enough demand.

High production and high consumption also means dangerous impact on resource depletion and environmental degradation


CLOSING OBSERVATIONS:

Productivity has changed the profile of demand for labor;

Productivity has made higher profit margins possible;

Wages down, profits up;

High energy use also means a high impact on the environment


Policies to enable a smooth transition to a high productivity, high quality of life and low impact on the environment world have not been formulated;

and money metrics alone make doing this virtually impossible IMPACT metrics are also needed for decision makers.


NEEDS that go unaddressed are huge!

In many 'rich' countries, infrastructure needs massive upgrading to suit the 21st century rather than the 19th century.

In 'poor' countries, much of the population lacks essential infrastructure and access to services.


The technology innovation that is going on at this time is impressive.

The challenge is to use it in a manner that delivers progress for people without doing further damage to the environment in fact to achieve substantial remediation of the damage already done.


Up to now, PRODUCTIVITY has delivered good results for OWNERS but has been an unmitigated disaster for ordinary people.

This has to be changed and a key part of making this change is going to be making some fundamental changes in the way we do the metrics.

Money metrics on their own are not enough!


Follow up: Request for Feedback

Getting these ideas fleshed out into a clear, simple but comprehensive structure is a big job and remains a work-in-progress. Many organizations are making progress with this, but there is no broad universal framework yet that will enable all the pieces to come together and work efficiently.

I would like to get feedback from anyone and everyone to help move this initiative forward. While I have some clear concepts about much of this architecture, there are many details that I do not know enough about and need help. So, please feel free to contact me ([email protected]). Please put something relevant and catchy in the subject line.


Some links and contact information:

Peter Burgess [email protected]

Peter Burgess LinkedIn profilehttps://www.linkedin.com/in/peterburgess1

Link to TrueValueMetrics.org websitehttp://www.truevaluemetrics.org/

Link to navigation for MDIA slidesetshttp://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0200-Burgess-p3-Slidesets


mdia p3-05-productivity-150420

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