american business: from efficiency to certainty

America’s industrial revolution generated economic and social gains unparallelled in recorded human history. Vast supplies of natural resources including fossil fuels, low-cost labor, and the inventiveness of 19th century businessmen served to ignite and drive industrial development.

Efficiency was the goal and men the likes of Gillette, Hoover, Hughes, Ford and Otis invented devices and processes that helped people become more productive in their daily lives. People could travel farther in less time, first by train, then by car and then airplane. People spent less time performing hard monotonous routine work [Gillette – safety razor, Hoover – vacuum, Otis - elevator].

The concept of efficiency was applied to the manufacture of the goods themselves when Henry Ford invented the automotive assembly line. By producing more goods in less time, Ford was able to pay his workers enough that many of them could afford to purchase an automobile. Ford expanded the market for automobiles by creating a market out of Ford employees and implementing a franchise system that put a dealership in every city in North America. Ford focused on maximizing efficiency, leaving quality to be determined as a function of cost.

Increasing efficiency meant increasing profits and personal leisure time. The entertainment industry emerged and flourished alongside audio recordings, radio and moving pictures. No longer limited to the local newspaper, ideas quickly reached mass audiences seated in family rooms and movie theaters across the country. Forward thinking companies accordingly increased their advertising budgets and the modern-day advertising age was born.

Today, industrialized societies stand atop this foundation of fecundity and fossil fuel. Knowledge management companies mine data instead of coal, and sell services rather than goods. Yet when one looks beyond this shift from the physical to the intellectual, one finds that the fundamental intention remains the same, increase efficiency – increase profit. With all their intellectualizing, today’s great business minds do little more than sing the praises of those upon whose shoulders they stand. The recording, however, is well-worn.

Inventiveness includes two underlying concepts, imaginativeness and resourcefulness. Since the start of the industrial revolution, American entrepreneurs have exercised an inventiveness primarily comprised of imaginativeness rather than resourcefulness. Plentiful supplies of fossil fuels, lumber, fertile soil, water and cheap labor afforded industrialists the luxury of freely exercising their imaginations, insensitive to the uncertainties that would arise from the reliance on fossil fuels and an unwavering belief in the power of the human imagination. In essence, American entrepreneurs experienced a tipping point, a shift from an inventiveness comprising near equal measures of imaginativeness and resourcefulness to an inventiveness relying almost solely on the imagination.

In contrast, the earlier European industrial revolution was driven mainly by waterwheels and windmills. As such, European entrepreneurs had to address the uncertainties accompanying such a reliance (i.e. drought, flooding, lack of wind, high winds). American industrialists, by relying almost exclusively on fossil fuels, avoided having to address the difficulties faced during the European industrial revolution.

The unionization of Americas industrial workers foreshadowed the resource-related problems that exist today. As various industries became more efficient, workers became more sensitive to work related uncertainties. The battles over unionization were in fact battles over managing uncertainty. Corporate management was averse to the uncertainties associated with satisfying worker demands. Management was also uncertain that they could convince the investment community that paying higher wages, affording benefits and workplace protections was in fact a path to sustained profit growth. In hindsight, the answers to such questions was obvious.

Employee loyalty became a watchword for nearly sixty years, at which time American companies began to employ lower-cost labor, usually in lesser-developed countries. The pendulum had swung again, as the gains in efficiency (cost savings) outweighed the value of the certainty afforded by American workers.

Increasing efficiencies associated with America’s industrialization and informationalization have resulted in 1) the populace’s increased sensitivity to uncertainty, and 2) the depletion of finite natural resources such as fossil fuels. America now relies heavily on oil and natural gas from other countries to fuel continued economic growth and prosperity. Unlike the seemingly endless supply of cheap labor abroad, however, a reliance on fossil fuels is limited both in availability and utilization. As demand for oil increases, one finds that supplies will begin to diminish. At the same time, the scientific community has concluded that the utilization of all fossil fuels including oil, coal and natural gas, contributes significantly to global warming.

Where is a nation to turn as it faces increasing uncertainty with regard to primary energy supply and utilization? American inventiveness, and its reliance upon the imagination, seems ill prepared to solve the problems associated with our imprudent reliance on fossil fuels. While politicians and scientists remain hopeful that technology will solve the underlying problems, pragmatists realize that one cannot spin gold from wool. As such, we will see resourcefulness overtaking imagination as the predominant constituent of inventiveness, and entrepreneurship.

In certain markets, the value of increasing efficiency, while still greater than the cost of associated capital investment, is now exceeded by the value of decreasing uncertainty. It is now more profitable to decrease market uncertainty rather than increase efficiency. Specifically, American’s sensitivity to the uncertainty associated with diminishing oil reserves, increasing disruptions to supply chains, and the harmful effects of fossil fuel use on the environment is such that people may be tending towards a more anxious outlook. Either businesses will package and sell the certainty required to ease the discomfort, or people will change behavior and beliefs thereby reducing such feelings.

It is no longer a question of efficiency, but rather uncertainty. The solutions to the difficult situations facing humanity today and into tomorrow require less in the way of imagination and more in the way of practiced resourcefulness. The American public will become more and more accepting of change as people’s sensitivity to uncertainty increases. Such change will offer new market opportunities for resourceful entrepreneurs aiming to reduce uncertainty. More than optimistic thinking, such an approach is the new frontier to profitability. It’s a certainty.