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Forecast 2019

Tell me what you see

Fortune tellers have long made a shady business of staring into crystal balls and “predicting” the future. But foreseeing actual trends is the job of talented researchers and scholars, experts and geniuses who analyze data points, identify patterns, and do their best to prognosticate about what we can expect moving forward.

As we enter the second month of our new year, Michigan Today offers this series of videos and Q&As from professors in the Stephen M. Ross School of Business. After much thought and consideration, they share valuable insight, wisdom, and more than a few educated guesses about the planet’s future (note the toxic algae oozing along the shores of Lake Erie, above), the power of the gig economy, and whether nice guys really do finish last in the workplace.

So, settle in, folks. Class is now in session, and 2019 is in full effect.

Climate change reality takes firmer hold: Andy Hoffman

Andy Hoffman, professor of management and organizations at the Ross School of Business and professor of environment and sustainability at the School for Environment and Sustainability, studies the relationship between environmental issues and organizations.

Q: How do you expect the public debate on climate change to shift in the coming year?

HOFFMAN: The public debate over climate change is changing right now in some very interesting ways. Until now, the focus has mostly been on the science, and that allows people to create some psychological distance between themselves and the issue: “It’s gonna happen to somebody else, some place else, far into the future.” And the discourse now is starting to shift, saying, “It’s happening to us, and it’s happening right now and here.” The debate has been engaged and it will continue. It will have staying power.

Q: Will the political shift in Congress affect the way that the federal government responds, or doesn’t respond, to climate change in 2019?

HOFFMAN: I don’t see any climate bills coming forward with this administration and this Senate. It’s just not going to happen. I’m very curious to see if this becomes an issue that the Democrats exploit in the next presidential election. Certainly, as more and more people start to accept that climate change is real, the calculus, particularly among conservative Republican politicians, is: “If we come out on this issue, our base is gonna hurt us.” I actually wonder whether that calculus is now wrong and it just requires someone with some courage to test it and find out.

Q: How does the corporate sector fit into all this? Will the market start to make the necessary shifts?

HOFFMAN: Despite what’s happening in Washington, many in the corporate sector are moving forward on these efforts anyway. They recognize the future―that the market will adjust. Inaction will become more costly―driven, for example, by insurance. Insurance payouts are on a steady upward trend. Companies are going to be paying out for that coverage, or changing their practices in order to minimize the need for that coverage. The corporate sector is much more pragmatic than just following the whims of political expediency, and they’re driving this.

Q: Are market shifts going to be enough in the long run to offset major climate change?

HOFFMAN: In many ways, no. They’ll slow the velocity at which we’re running into a brick wall, but they will not reverse direction. That requires a fundamentally different way of thinking about the problem. The system as designed will not get us to address this grand challenge. The system has to be changed, and companies are trying to tackle that now. That’s our great challenge in business sustainability: how to change the system. For example, instead of finding ways to reduce carbon, the challenge that many (such as Toyota, WeWork and others) are taking on is how to go carbon neutral and even carbon negative. That requires a whole new way of thinking, one that involves not just changing one company, but changing the system in which it resides.

We are in the midst of a cultural shift akin to the Enlightenment or the Scientific Revolution. Those took a hundred years to happen, but from beginning to end, there was a fundamentally different shift in how we thought about ourselves and the world around us and how the two relate. We’re in the midst of that shift now.

Gender and the ‘nice penalty’ at work: David Mayer

David Mayer is a professor of management and organizations at the Ross School of Business. He researches and teaches about social and ethical issues in organizations. Much of his current work focuses on gender, especially from the lens of men and masculinity.

Q: How are “nice guys” penalized at work?

MAYER: We know there are stereotypes of men and women at work. When women display behaviors that are inconsistent with the feminine stereotype, they are less likely to be hired and are viewed as less competent. We’ve seen the same type of backlash with men. Some research shows that when men are more agreeable and nice, they earn 18-percent less over their lifetime than men who are more dominant.

Q: That seems like a high price to pay for being nice, but they still make more than the average woman, right? Do both genders have to have certain qualities?

MAYER: This is definitely not a “woe is me” moment for men in organizations. Men are more likely to be represented at high levels of leadership and they make more money on average compared to women. It’s less about being male or female and more that these stereotypically “feminine” characteristics including compassion, humility, kindness and being relationship-oriented are ones that lead to better mentoring and leader effectiveness.

The key takeaway is understanding the qualities of effective leaders and how can we train both men and women to enact those qualities.

Q: How can nice guys be seen as more competent in the year ahead and what can organizations do?

MAYER: What are implications for men who may be nice guys and also for organizations who want to encourage this behavior from men? A lot of people think about someone like Steve Jobs, who many people said was so effective because of his harsh personality. I think more and more people are concluding that he was successful in spite of that personality. Men and women still have to lead with confidence, but over the long term, behaviors like empathy, morality and supporting gender equality are not only the right thing to do but are also beneficial for male leaders.

There are things organizations can do. What if the type of behaviors you actually wanted were encouraged when managers are trained? Also when we think about who gets promoted, these behaviors are critical to consider. Is this a place where you can act like a jerk and still get promoted? I’ve asked my students about their work experience and about 80 percent of them say, “Yes, that is my lived experience.” I think it’s something we can change as we look into the future.

Q: Women make a lot less than even the nice guys. Do you see that changing at all as men are allowed to take on some of the feminine qualities at work?

MAYER: I think this might be a longer path. I think you will see a lot more male leaders embracing gender equality with regard to pay. But we don’t quite have a societal shift yet on the socialization of boys and girls and men and women. Girls are being encouraged to code and going into STEM fields. We aren’t seeing the same for boys. We aren’t encouraging them to be teachers or go into helping fields.

Women are really leaning in more. Research shows that over the last 40 years, women are becoming more stereotypically masculine and a little less feminine. They are adapting to workplace norms. If you look at men, it’s two flat lines. They don’t seem to be adapting much at all. Part of it is this socialization piece just hasn’t taken off for boys in the same way it has for girls.

Q: Tell me of a male leader who you think really gets it right.

MAYER: I think of someone like Tim Cook from Apple who seems more willing to talk about social issues—even issues related to gender. He seems to have a personality type that doesn’t necessarily fit with this domineering approach, but more like someone who is calm, reasonable and feels comfortable advocating for fairness, anti-discrimination and gender equality.

The trade war’s effect on startup investment: Jim Price

Jim Price is a lecturer in entrepreneurial studies at the University of Michigan Ross School of Business. He is a serial entrepreneur, the author of the recent book “The Launch Lens: 20 Questions Every Entrepreneur Should Ask,” and a contributing columnist for Entrepreneur.

Are there any warning signs on the horizon that might slow the development of new startups in the coming year?

PRICE: Economic uncertainty triggered by the current federal administration’s trade war posture is going to negatively impact more than the stock market, which we’re seeing now. This economic uncertainty will likely have a cascading effect on private capital markets, including venture capital. If venture capitalists see less likelihood of achieving liquidity for their startup investments through IPOs or mergers and acquisitions, they’re likely to become more cautious with their new startup investments.

What’s the single most important question a would-be entrepreneur should be asking right now?
PRICE: That single question has remained pretty constant over the years: Is your product or service meeting a truly burning need for your customers? If your solution is 10 or 20 percent better than their current way of doing things, why would they switch? You need to be solving a burning issue and doing it in a way that’s 10 times better.

Which business sectors do you expect to provide the most fertile ground for startups in the coming year? 
PRICE: This is more of an enabling technology than a business sector, but I’m excited to see what startups will be doing with artificial intelligence and machine learning in the coming year. These technologies are now mature enough to solve specific, vertical-industry problems. And the way the big tech players are making APIs available for their artificial-intelligence engines is opening up tremendous possibilities for third-party developers to come up with powerful solutions in a whole range of industries and applications.

Where else should hopeful entrepreneurs be focusing?
PRICE: When people ask me what I look for in terms of opportunities for starting a hot company, I always encourage them to consider niches. A niche is very powerful because it enables us as entrepreneurs to focus, to solve a specific customer set’s problems very well. And it allows us to avoid going up against the huge players in the first year or two of our startup.

Spending time with failure

Rashmi Menon is a lecturer in entrepreneurship and business administration and an entrepreneur-in-residence at the University of Michigan Zell Lurie Institute. She is a technology industry veteran specializing in product management and strategy, with extensive operating experience in established companies and Silicon Valley startups.

Q: Why is failure so important to success, and why is the business school environment good for teaching this?

MENON: If you think of any important thing you’ve learned in your life, you’ve probably learned it by failing. If you think of a baby learning to walk, a baby doesn’t just get up one day and start walking. The baby falls and falls and falls and then eventually learns to walk and one day may run a marathon. Do we tell that baby the first day that it falls that it was a failure? We don’t, right? It’s the same thing in entrepreneurship.

Business schools provide so many resources for students looking to start businesses. We have mentoring and teaching resources and courses and workshops. We have a number of places where people can raise money for their business. There’s also a network for students to contact alumni to launch their business. The other thing is kind of a psychological benefit. A number of people when they’re going to start a business they have a fear of failure. They worry “How is this going to look on my resume if I fail and I have this big gap?” Those kinds of risks are limited when you try to launch a business while in school, because your main goal at that time is to graduate. If you come out with a successful business as well, that is a bonus.

Q: For 2019, what are some of the industries that are hungry for entrepreneurs?

MENON: We are at a unique time for entrepreneurship. We obviously have had a big startup boom in the last few years. We are also seeing big tech that is bigger than ever before. Trying to launch a business that Amazon or Google would be interested in is harder now because those companies have tremendous amounts of funds, customers and customer data.

Silicon Valley is often criticized for focusing on problems of convenience versus of problems of necessity. For example, there may be 15 startups trying to get food to your house in a quicker way. But do we really need that? People are asking: Can we focus more startup attention on really critical problems that need to be solved? I think those critical problems can be more difficult to solve, but once you solve that you can be tremendously successful. It would be great to see  more startup work in areas such as climate change or opioid addiction or student loan debt.

Q: How is entrepreneurship in the real world different from what is taught in business schools?

MENON: There are a number of differences. For example, if a student turned in a presentation to me that was a rough draft, their grade would reflect that. However, in the real world we want to encourage entrepreneurs to iterate and learn. So you put a minimally viable product out in the market and you iterate and it gets better. We don’t go for perfection in the first release of a product.

A second thing that’s different is the type of deliverables. By nature in a class, you are going to be writing a plan to acquire customers. But in the real world, you actually have to go acquire customers, and there is a big gulf between those two things. The third thing is where we rely on information from. In the classroom we rely on the written word, such as analyst reports and articles. In the entrepreneurial real world you have to go talk to people. It’s really important that you interview real live customers and talk to experts in the field you are entering.

Mastering the gig economy

Sue Ashford is a professor of management and organizations at the Ross School of Business. Her recent research focuses on the changing world of work, leadership and managerial effectiveness and self-management. Ashford’s research on the gig economy is featured in the book The definitive management ideas of the year from Harvard Business Review 2019.

Q: The gig economy expands every year with some forecasts indicating gig jobs will represent 40 percent of all jobs by 2020. What do you think is driving this?

ASHFORD: It certainly is prevalent: Over 50 percent of millennials are already working in this style. Economists report that all of the net job growth between 2005 and 2015 was in this type of work.Two factors seem to be enabling this trend. One is companies are cutting costs wherever they can and it’s cheaper to have contract labor than full-time employees. The second is technology. More and more people can work from anywhere doing jobs that used to require an office and equipment that was only in the office.

Q: We’ve always had gig workers—musicians, writers, actors and other creative workers—but with the large expansion of workers in technology and service industries, it’s drawn more attention. From your research, what is the experience of a gig worker like today?

ASHFORD: It’s definitely true that some people in some types of work have worked in this style always. In our research, we interviewed everyone from independent consultants, graphic designers all the way to novelists, painters, and sculptors. The psychological experience is pretty consistent across those two groups. There are a few things that characterize the experience. One is what we call precariousness…that people work closer to the economic edge, closer to possibly not making it. And that insecurity and anxiety always are present in this work to some degree.

The second is that the work is much more personalized in the gig economy than for people in organizations. Here, individuals make the choices about what to produce, what kind of novel to write, what kind of consulting to do, and if their choices aren’t successful in the market, the reaction feels very personal. In addition to financial consequences, there are personal ones as well (for example, for the ego).

Q: How can gig workers cope with many of the extreme highs and lows associated with such work?

ASHFORD: The result of the conditions of gig work is a lot more emotional highs and lows and a lot more oscillation between them. Those emotions, we found, are very tied to what is an ongoing preoccupation in this work…being productive, staying productive, staying on task, not getting diverted. If you are productive, it creates highs. If you are procrastinating and getting diverted into other things, it creates a lot of anxiety.

How do people cope? We found that to cope, the more people could create and manage four connections the better off they were. These four came up across all our interviews.

The first is connection to people to combat the aloneness that goes along with working in this way, to get advice, to share and dispel the emotion.

The second connection is to routine. Routines really help people. Even if they aren’t into their day, if they get up and do the first three steps of their day that are their routine, pretty soon they are into their day and productive.

The third connection is to place. Each of the people we talked to had a certain place where they did their work. For some it was an office they set up in a particular way.
What’s important is how you set up your place and what it evokes in you.

Lastly was a connection to purpose. To the extent people could articulate a broader purpose of why they are doing what they are doing, it helped them to get out of bed, get going and stick with it when times were tough.

Q: What are the top ingredients for success for independent workers in the coming year?

ASHFORD: In the coming year if you are starting out in the gig economy, the most important thing to remember is that the cavalry isn’t coming. You really are on your own in making this kind of worklife work. You can get help and you should seek it out, but ultimately, your success depends solely on you. Your productivity is your lifeline. That is the way you are going to be successful in this kind of work—but maintaining it takes some active effort to support yourself in the tasks you’re doing. Trying to establish the four connections found in this research is an excellent starting point.

Brexit uncertainty takes its toll

Kyle Handley, assistant professor of business economics and public policy at the Ross School of Business, is an expert on how trade policy, geography and uncertainty affect firms.

Q: What do we know about Brexit based on your research about how it’s impacting trade before the break even happens?

HANDLEY: What the research we’ve done shows is that exporters and firms in the United Kingdom and European Union do respond to changes in the likelihood of Brexit. They respond to how bad the worst case could be. What that tells us is there is this ongoing uncertainty about whether they’ll be able to come up with a deal by March 29, 2019. Firms are responding to this right now. The uncertainty about what kind of trade policy regime they’ll be in actually matters and is changing the decisions firms are making as we speak.

Q: What do you think could be resolved in 2019 with Brexit?

HANDLEY: I think they will come up with some kind of deal because both Theresa May and the government in the U.K. want to kind of close on something. It may not be perfect. But it will be better than the potential chaos that will ensue if they have nothing. What the U.K. and EU have right now is sort of a threat point. We’re always in this environment where we take everything up to the brink, and then we work it out. Businesses don’t like that. They don’t like brinkmanship. It’s not going to be very good for the economy if we continue to extend this and end up in a perpetual Brexit situation.

Q: How did we get to this point?

HANDLEY: I think what happened in the United Kingdom is very similar to what’s been going on in the United States. So after the financial crisis, employment responded fairly slowly. People were upset with not having jobs, wages being low. Trade in many cases was the scapegoat for this. Brexit was motivated in large part by sort of a backlash against globalization, a backlash against international trade. It may take them some time to work out what their new relationship is going to be. And while they’re doing it, it’s problematic for businesses trying to make investment decisions about exporting, about where to build factories and how many workers to hire. That’ll probably go on for some time.

Q: After the March deadline does the uncertainty go away if there is a deal?

HANDLEY: I think after March 2019 the uncertainty doesn’t necessarily go away because the deal they’ve struck so far is really a preliminary agreement. It’s a deal to finish a deal in the future. We don’t know exactly what shape the next stage is going to take. In some respects, you could argue that if they run up to 2019 and Parliament rejects the deal, that would resolve the uncertainty.

Q: Is this similar to the situation the U.S. may be creating with NAFTA renegotiation?

HANDLEY: The value of trade agreements is they have these permanent policy commitments that promote business investment and exports. When they become temporary agreements, they aren’t as valuable as they once were. That’s one thing that worries me. Whatever relationship the U.K. has with the EU may not be as stable as it once was. What concerns me with respect to the U.S. is that we are renegotiating NAFTA. We are threatening from time to time that we will leave the World Trade Organization. When you do that, it undermines those organizations and they aren’t as effective as they once were. If the new international world order is one where these international trade agreements are not as respected, then we are in an environment that is not as favorable to business and economic growth overall.

Comments

  1. John Korstad - 1980 (PhD in Zoology)

    Thanks for this excellent article. I plan to share it in my Global Development & Sustainability class this semester.

    Reply

  2. Henry Lowendorf - 1964

    Re. interview with Andy Hoffman:

    The private oil companies are making record profits. They are behind the drive for the US military and CIA to invade countries – Venezuela is the latest – to ensure that oil remains or is placed in their hands. They cannot make money on oil unless it is burned. They will continue to drive climate scorching until there is enough public will to remove their power. The Pentagon itself is the world’s greatest single polluter. Catastrophic climate change can only be contained if, together, the military industrial complex, which undergirds big oil, and the oil companies themselves are stopped.

    Reply

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