Using First Principles to Enable Human Capital Interactions at Scale

I spend a fair amount of time reading and thinking about disruptive innovation because I need to understand the past failures to enable interactions that place ability at right-fit and bring better careers to life. Here’s a great post by Ketan Jhaveri that dissects Elon Musk’s approach to disruptive innovation which is based on reasoning from first principles.

So, here’s the problem: According to Gallup, 53% of American workers are “not engaged” and 19% are “actively disengaged” at work. In The Coming Jobs War, author Jim Clifton writes:

The 53% of not engaged workers are not hostile or disruptive, and they are not troublemakers. They are just there, killing time with little or no concern about customers, productivity, profitability, waste, safety, mission and purpose of the teams, or developing customers. They’re thinking about lunch or their next break. They are essentially “checked out.” Most importantly, these people are not just part of a support staff or sales team. They are also sitting on executive committees.

And then there are the 19% of actively disengaged employees who are there to dismantle and destroy employers. They exhaust managers, they have more on-the-job accidents and because more quality defects, they contribute to “shrinkage” – as theft is politely called, they are sicker, they miss more days, and they quit at a higher rate than engaged employees do. Whatever the engaged do, the actively disengaged seek to undo, and that includes problem solving, innovation, and creating new customers.

I’ve come to realize that designing solutions around first principles might allow for looking at a problem from a more foundational level—where the seed of disruptive innovation can be planted.

Musk is quoted as saying:

“First principles” is a physics way of looking at the world…what that really means is that you boil things down to the most fundamental truths…and then reason up from there…”

The utility about Musk’s approach is that it provides a framework with which to do this. Breaking a problem down to its core components and then building back up from there helps me arrive at very different designs than relying solely on analogs.

The other really nice benefit of reasoning from first principles is that it can get me out of the “it can’t be done” mentality. And that’s especially handy when I’m trying to understand the failures in the human capital services industry. If I reason by analogy and I can break the problem down to its core first principles, then I can logically state “If all of these things are true, then there’s a problem that can be solved.”

I’ve identified the following first principles that will lead to the improvements we are looking for to place ability at right-fit and bring better careers to life.

Abundance: Every abundance creates a new scarcity. For example, a wealth of information creates a poverty of attention. Attention can be monetized.

Information: Scarce information wants to be expensive. That is, the price of context is valued at marginal utility—what it’s worth to customers. Scarcity can be monetized.

Context: Context is embedded with experience, license, proxy, credential, or reputation and the like and is distributed far down into the long-tail of ability placement markets. Context can be monetized.

Search & Influence: The advice and counsel of a trusted and liked advisor is always searched for when a placement process decision is important enough. Search and influence can be monetized.

Goodwill: Enlightened self-interest motivates goodwill. There are enough people who want to help others gain a commitment at best-fit in their community* if only to improve their status. Reputation can be monetized.

Less is More: As technology reduces coordination costs it enables more small placements and interactions—monetizable actions, reactions, and transactions—that had been previously dismissed below the economic fringe. In aggregate the monetized value of these small placements exceed that of high-dollar placements.

When a problem is broken down to it’s component parts at a fundamental level it becomes possible to see how seemingly disparate themes, when connected, can be part of the solution. Placement Loop is a platform forged from these first principles for solution providers on the supply-side to solve problems for talent seekers and candidates on the demand-side.

Which of these ‘first principles’ resonate with you?

*Community can be defined geographically, by industry or by common interests.

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The Enterprise and Placement Improvements

My previous posts titled Evaluating Placement Information (Parts 1 – 3) prompted a request for me to read an article by Don Fornes, CEO of Software Advice which sponsors The New Talent Times blog. I was asked by Software Advice to opine on the article.

The article, titled “The Psychological Profiles of the Dream Team”, was published on BusinessInsider and refers to a commissioned project by Mr. Fornes to analyze the high-performers at his company, to see what drives and motivates them. The research concluded with four distinct personality profiles which describes what makes their top players tick, the management style they respond best to, and how to identify and hire more people like them.

The following is my opinion about the problem the article addresses but in a more expansive view.

First, let’s define the problem. The problem is that an increasing number of people in the world are miserable, hopeless, suffering, and unhappy because they don’t have a good job—one that is a best-fit. The United States is no exception and, in fact, may be the poster child for workplace unhappiness.

Second, in almost all the content relating to ability placement there always seems to be an embedded assumption that we need to rely on the enterprise to make improvements. What if that assumption is wrong? What if the future of work is more about coordinating distributed work activity versus aggregated? Then, as solution providers, I think we need to design for the individual as a work network node, rather than designing for the enterprise as the work center, to realize the improvements we are looking for.

Third, we can look at the financial services industry for an analog to better understand how psychological profiles are used to help place capital at best-fit. After all ability is human capital. My experience tells me that psychological profiling of investors to facilitate the placement of financial capital at best-fit is more art than science. This is because the ongoing decision-making environment is extremely dynamic with very many variables. More specifically, in this space, best-fit knowledge may depend on tacit information held by individuals, distributed in a community network. If you accept this as a constraint and embrace it as such then you’ll be able to see the futility of trying to optimize the art of placing capital at best-fit.

So, in my opinion, psychological profiles can not be relied upon with a high degree of confidence to complete the job-to-be-done successfully. This is not to say that they are not an improvement but rather should be viewed as a sustaining innovation. It is my belief that to make the improvements we are looking for we need disruptive innovation.

The Sin of Higher Ed Business Models

Recently, I read Amit Mrig’s (President of Academic Impressions) white paper titled “The Other Higher-Ed Bubble” in which he describes a “denial bubble” in academic leadership. Specifically, he outlines and describes four assumptions that are “rooted in past practices and experiences, that no longer hold true and that often hold leaders back from taking a new and different approach” to meet current challenges facing the industry. He makes the point that these are “false-assumptions” now, in today’s environment, in addition to a popular understanding of a financial bubble for the middle tier of educational institutions. This is really a good white paper as a call to action for higher ed leadership but it doesn’t go far enough in opening up eyes to the industry’s most harmful embedded assumption relating to why the market (i.e. the consumer) is interested in paying money to attend higher ed institutions in the first place.

Also, I read an article at Forbes by John Tamny in which he writes that there is not a higher ed financial bubble because parents and students have always and will always pay up for the experience (e.g. career networking) that college provides. In fact, he writes that employers don’t really care about the knowledge learned by the student, at say Yale or Stanford, but rather use attendance at prestigious schools as a signal that the student “is smart, probably hard working for having been accepted, and in possession of [attributes], that the individual can likely learn the skills necessary to achieve on the job”. After reading this article the reader is left thinking about the motivations, quality of education, and price sensitivity of higher ed market participants affiliated with non-prestigious schools.

Is it not obvious that a student’s greatest pain point relates to placing his/her ability at best-fit and at best-price of process? Is it not obvious that education, career guidance, and life-design are merely key activities in support of placement at best-fit? And reducing friction* is critical to best-price of placement process?

As a Global Career Development Facilitator and startup entrepreneur in this space what is particularly interesting to me is that both authors can relate to the challenges facing higher ed today but each misses the deeper critical problem in the industry. Amit sheds light on baked-in assumptions that he feels need to be questioned and John sheds light on bottom-line motivation from the market’s perspective, albeit at the top-end of the market. However, each author seems to miss the critical baked-in assumption and bottom-line motivation that applies to the mass market, the long-tail of the market.

Any business model that is interested in viability and sustainability needs to get as close to the solution provider (or be the solution provider) who is reducing or eliminating the market’s greatest pain point more efficiently and effectively than competing alternatives. The sin of higher education business models is a failure to design for or very closely around placement of ability at best-fit and at best-price of process. I can not identify one business model in higher education that even attempts, none-the-less succeeds, to design for such.

As a result, the disruption we are witnessing today in higher ed is just the beginning. The disruption will destroy every higher ed business model including online education models that do not focus on placement at best-fit at best-price for the mass market. The reason the prestigious school’s business model will eventually be destroyed as well is because the solution provider successfully serving the mass market will eventually have access to cheaper capital to create solutions to satisfy the top-end of the market at a lower cost. I think that ALL (save for niche ability development) higher ed business models that do not reconstruct their value proposition to deliver placement at best-fit are going to fail because  that is the greatest pain point in the mass market.

Frustratingly, most leaders don’t care enough to reconstruct the higher ed business model today. I believe it is because they are towards the end of their careers and they know how slow change occurs in higher ed. So, the vast majority of leaders are less inclined to support risks associated with reconstructing the value proposition. However, the disruption being leveled from the “outside” will continue in the interim and the harm to younger higher ed stakeholders will be greater as a result of the lack of current leadership to reconstruct today.

Personally, I think that the higher ed industry will be viewed twenty years from now as the greatest mechanism ever to aggregate ability but failed at designing a viable and sustainable business model because it thought its core sustainable deliverable was academic credential rather than placement at best-fit.

For further reading on how leadership in higher ed may be screwing up a great business opportunity similar to how the music industry leadership screwed up in the face of innovation read Clay Shirky’s prior blog post titled, “Napster, Udacity, and the Academy“.

What do you think?

* Friction is everything that slows down making better placement decisions quicker. Examples of “hard” friction include voice mail, phone tag, text tag and travel. And then there’s email which is the worst collaboration tool ever used on a wide scale! Examples of “soft” friction include the lack of transparency, relevant content, knowledge, and intelligence. All friction inhibits getting through a placement process efficiently (speed/cost) and effectively (accuracy).