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FEATURE | WINTER 2010/2011 EFFECT

Thinking Twice About Trends

A reporter can transform a few anecdotes into “the latest” trend that everybody simply must know about. So in an effort to cast a critical eye on five (supposed) trends of the 2010 business world, I interviewed some experts. I let them talk first but reserved space for my own last word.

Thinking Twice About TrendsOutsourcing

Thousands of manufacturing jobs have moved overseas in the last 30 years, but what about so-called business process jobs—payroll management, customer service, and IT jobs like software development and data security management? Will we see more white collar jobs moving to Asia?
Yes, we will.
“Y2K was an eye-opener for American industry,” claims Kate Kaiser, associate professor of management at Marquette University in Milwaukee, Wisconsin. “We learned we simply didn’t have enough IT professionals to meet our demand.” The number of American IT workers is growing, says Kaiser, but for the near future, offshore outsourcing will continue to be the only option for many American companies.

A native of India and a professor of risk, information, and operations management at the University of Texas, Prabhudev Konana thinks the primary goal of businesses that outsource offshore is usually strategic, not cost-saving. “Companies need to set up shop in countries like India and China in order to capitalize on the new markets opening up there,” he says. And since growth in such markets isn’t likely to slow down soon, neither will the trend to send jobs there.

No, we won’t.
“Anyone telling you offshore outsourcing is a growing trend is just guessing,” says Rudy Herschheim, professor of information systems at Louisiana State University. There is simply no reliable data about how many jobs are lost (or gained) because of it, he claims. What is clear to Herschheim is that many overseas ventures don’t benefit the company. “Lots of companies offshore reflexively,” he says. “They don’t really think through everything that needs to be in place to make it successful.” After coping with a range of issues from quality control to cultural differences, many of those jobs, then, end up back in the United States.
Verdict
Globalization of business is certainly a reality, so Konana is right: we’re at the beginning of a long-term expansion in overseas markets. Herschheim agrees with Konana on this point and adds that it’s good news: increased prosperity in other countries leads to increased demand for American goods and services, and this benefits the United States in the long run. Barring a cataclysmic shutdown of the global economy, we can expect continued increases in offshoring for years to come.

Invest in gold!

Around the end of August, gold was trading at around $1,200 per ounce, up from $625 at the end of 2007 and $900 at the end of 2009. With pawn shops and “We’ll buy your gold!” ads begging you to part with your grandma’s wedding band, it certainly seems as if a golden investment opportunity is staring us all in the face. Is it?
Yes, gold will continue to rise.
“I advise all my clients to dedicate at least 15 percent of their investment portfolio to gold,” says James DiGeorgia, publisher of the Gold and Energy Advisor newsletter and author of two books on investing in precious metals. Gold has been a standard monetary unit for 5,000 years, DiGeorgia notes, making it a safe bet when governmental currencies are unstable. Between the uncertain status of the euro and the American dollar and the gradual decline in new supply, gold is not just a safe bet but a necessary one, she says.
No, it won’t.
We could also be witnessing the formation of a classic bubble, which would mean speculators have taken a natural rise in the price of gold and driven it well beyond what is reasonable. If this is true, gold prices will tumble quickly in the not-too-distant future. James Altucher, a financial commentator for The Wall Street Journal and DailyFinance and the author of four books on investing, calls gold a “worthless rock.” Over the long haul, he writes, stocks beat inflation, but gold actually has a negative return when adjusted for inflation. “Over the past 50 years, 100 years, 200 years, capital markets grow and gold stays the same or goes down,” he writes. “My guess is the same will happen over the next 10, 50, 100 years.”
Verdict
Will the price of gold rise or fall? What will happen to it if standard currencies collapse? Should we all have a stash of gold to fall back on? I have no idea, and I’m fairly sure no one else does either. You could line up financial professionals with opinions on gold from end to end and you’d never reach a conclusion. So let the buyer of gold beware—and that goes for the non-buyer too.

Social media in businessSocial media in business

McDonald’s has a Facebook page. Starbucks has more than 1 million followers on Twitter. Will every company, even the obscure widget manufacturer, soon have to use social media to survive?
Yes, they will.
Actually, that day is already here, claims Jared Roy, president of Risdall Integration Group, a marketing company in Minnesota. “We can always find a way to use social media to help a business,” he says. According to Roy, helping retailers is easy: establish a reliable and customer-friendly presence on Facebook, Twitter, Foursquare, and whatever new e-vehicles spring up. One application is managing customer relations. “I once had a bad experience at a major retailer and complained about it online,” relates Roy. “Five minutes later, someone from the company called me and apologized. Now there’s a company that knew how to use social media.”

And for the obscure widget manufacturer? Paul Maccabee, president of Maccabee Group, a public relations firm in Minneapolis, says that with social media, “you can do laser-focused marketing at a ridiculously low cost, and you can actually engage in conversations with your customers and let them be a part of the process that makes your business grow.” Even a website can contain an enormous amount of “ridiculously cheap” marketing material, like blogs and sophisticated product demos, adds Maccabee, emphasizing that those who don’t use such tools will gradually find themselves behind the curve.

Well, kind of
Beth LaBreche, the owner of a midsized marketing and branding company in Minnesota, gets a little nervous when a client demands her firm get them up to speed on social media. “It’s not a magic bullet,” she emphasizes. “If a company does not do the standard core work first—identify business objectives, research the customer base, hammer out a marketing budget—it can easily end up with a substandard social media presence, and that will actually harm it.” So she always advises clients to put off big social media decisions until they’ve done the kind of marketing homework successful businesses have always had to do.
Verdict
Of the half dozen PR professionals I interviewed, LaBreche was the most skeptical for this article, but she’s only worried about soft-headed use of social media. It’s safe to say, then, the incorporation of social media into business practice is more than a trend. Social media platforms are, quite simply, the new ways companies interact with their customers, vendors, and even employees. Maccabee is right: companies with little social media savvy need to make changes, or they’ll be looking at the backside of their competition very soon.

But my skeptical side isn’t completely satisfied. If social media is so easy to master, as Jared Roy suggests, how come most companies are mediocre (at best) in applying it to their businesses? Unanimous opinions aren’t right just because they’re unanimous, especially when they’re all from people with a vested interest in the issue, in this case, marketing, PR, and advertising professionals, whose job it is to help the uninitiated get a grasp of social media. Still, I couldn’t find anyone—in person, on the phone, or via the Internet—who would voice much skepticism about social media.

Contracting instead of hiring

I’m a “contract professional.” After I write an article or some web content, I get paid, and the relationship with my “employer” is, technically speaking, over. Are more and more companies, wanting to avoid the hassles and expense associated with hiring an employee, forcing more and more people into contract work?
Yes, it’s a trend.
According to U.S. Department of Labor Statistics, benefits accounted for about 27 percent of employee compensation in 2000 but a bit more than 30 percent in 2010. Most of that rise was due to growing health care expenses. Stephen Barley, co-author of Gurus, Hired Guns, and Warm Bodies: Itinerant Experts in a Knowledge Economy (Princeton University Press, 2004), suspects that such costs, along with the increased mobility of people and information, will lead more employers to contract out work rather than commit to employees for the long term. He adds that because project-based work is spreading, it’s getting easier for companies to employ contract professionals.
No, it’s not.
Debra Osnowitz, author of the recently released Freelancing Expertise: Contract Professionals in the New Economy (Cornell University, 2010), guesses the percentage of contract professionals in the work force will remain steady. “All of the reliable data shows this percentage never changes much, both in good and bad economic times,” she says. She also points out that in Massachusetts, which passed a law in 2006 mandating corporations pay for their employees’ health insurance, has not seen any change in the ratio of contracting to hiring.
Verdict
It’s anybody’s guess. Barley and Osnowitz both lament that the U.S. Department of Labor stopped tracking data on contract professionals in 2000. And even then, adds Osnowitz, “any data we have is obscure at best,” because it’s very difficult to distinguish contract professionals from traditional temporary workers hired through agencies. So nobody really knows.

The new local economyThe new local economy

A future of robust “local, living economies” is not one that excludes globalization, big business, or capitalism. At least, not according to Michael Shuman, author of The Small Mart Revolution (Berrett-Koehler, 2007) and other books on developing local economies. But it’s a future that’s coming, he says, for it’s the only good alternative to the current economic turmoil we’re in. Does the future hold an explosion of local economic growth?
Yes, it does.
“Just look at the numbers,” says Shuman. “The federal stimulus package created or saved jobs at a price of about $250,000 per job. Direct investment in a local business results in jobs that cost about $2,000 each—and most of that money stays in the local community.” He also points out that globalization hasn’t changed local economic landscapes as much as people think. “Thirty years ago, about 55 percent of goods and services came from local producers, and that number is the same today,” he says. Americans are against big-government bailouts and its general favoritism toward big business, says Shuman, and they will start to demand changes that make for a truly competitive marketplace like easing requirements for small businesses to sell stock. “There’s about $26 trillion of investment money out there, and most of it goes to companies that can afford to pay the tens of thousands of dollars in legal fees to go public,” he says. “If investors had the choice, they would include small, local businesses in their portfolio, resulting in real economic stimulus.”
No, it doesn’t.
A study on food production and distribution by George Mason University’s Mercatus Center suggests “locally grown” doesn’t necessarily translate into “better quality,” “cheaper,” or “more environmentally friendly” (Pierre Desrochers and Hiroko Shimizu, “Yes, We Have No Bananas,” October 2008). Shipping bananas from Central America to Michigan, for example, brings more affordable, high-quality bananas to Detroit than would growing them in Lansing. Moreover, nearly all national or multinational companies started out as “local” businesses that were skilled at getting people the things they wanted. Investments in “local” economies, then, often result in the development of the global economy.
Verdict
It’s hard to disagree with Shuman’s complaints about big government’s version of economic development. But structural changes in investment law probably won’t happen any time soon. If a “local economy revolution” occurs, it will happen very slowly—so slowly, in fact, that by the time it’s well established, many “local” successes will have become companies with a national or even a global reach.

Spotting trends

Trend spotters are usually looking forward rather than back, so it’s wise to read them critically. Beware of words like “many,” “some,” “usually,” “often,” and “likely” that allow a reporter to avoid hard data.

In his regular feature “Bogus Trends” on Slate, an online magazine, Jack Shafer dissects weakly framed arguments supporting the existence of questionable trends. Once you get the hang of Shafer’s techniques, try your hand at spotting unsupported assertions and generalizations. Do it often enough and you may discover that the trend of the future might just be fewer real trends.

 

Lotti_MMichael Lotti is a freelance writer and holds a PhD in philosophy from University of Wales, Swansea.
Contact Michael at mlotti68@msn.com.

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