“The factory of the future may be run by just one man and one dog. The man’s job will be to feed the dog,” says MIT Sloan Professor Erik Brynjolfsson. “And the dog’s job will be to make sure the man doesn’t touch any of the controls.” Brynjolfsson was only half joking when he addressed the MIT Sloan CIO Symposium in May. After all, an increasing number of industries have become almost entirely automated—commercial jets, for example.
Singapore has been testing driverless cars, a pilot program that has been a success so far. In fact, the nation’s transportation planners envision a driverless version of Uber. An executive from Singapore’s Ministry of Transport told an audience at The Road Ahead forum at MIT in November that the country is exploring whether autonomous vehicles could reduce congestion and refocus the city around walking, bicycling, and public transit.
But it’s not just technical functions that are going robotic. Robbie Allen, SDM ’06, CEO of Automated Insights, told CIO symposium-goers that his company’s Wordsmith product was used to write approximately one billion news stories last year. The software crafts data like sports scores and earnings reports into readable prose. Some were run on Associated Press newswires with no editing by human beings.
The inability to adapt to a rapidly changing competitive landscape has doomed many seemingly unstoppable business giants, observes Eric Jones, SF ’05, executive assistant to the Coast Guard’s Deputy Commandant for Operations Vice Admiral Charles Michel.
“Sustaining the effectiveness and agility of a large enterprise is a continuous challenge in any realm,” Jones says, “but a large government organization like the U.S. Coast Guard faces additional hurdles.” While most mariners hope they never need the help of the Coast Guard, he notes, “We must be prepared to perform to our full capabilities at any time of day and every day of the year in unpredictable, and often perilous, conditions.” And that’s before taking into account the continual external forces at play, like terrorism, transnational organized crime networks, climate change, the fossil fuel renaissance, and the need for greater maritime governance because of an expansion in global trade.
Patricia Winand, SF ’13, Senior VP of Sales & Marketing, Americas at Close the Loop, first started ruminating about loops when she studied system dynamics (SD) as an MIT Sloan Fellow. “For me, SD was love at first sight because I am a very spatial person, and my brain responds best to visual stimuli. The graphic explanation of a complex problem makes it so clear.”
The beauty of system dynamics, Winand says, is that it is a wise combination of simplicity and analytical power. But although she enjoyed learning the technique, she wasn’t sure she knew how she might use the tool in the real world. “The professor who taught the course was a master at the subject, but my million-dollar question was: how can a mere mortal do it?”
After graduation, Winand realized that, indeed, system dynamics could be second nature. She found that the course had changed her mindset and that she was using SD automatically when analyzing problems and identifying their root causes. Then she joined an Australian-based company called Close The Loop (CtL), which seemed like kismet, given that it was all about loops—in this case, the recycling loop. CtL turns used printer cartridges into other products.
Lynn Dovey, SF ’02, Associate Deputy Chief Executive at the Ministry of Social Development in New Zealand, is forging a new path in the delivery and funding of social services, and governments around the world are following suit. Dovey’s goal is to create an investment strategy for social services that will ensure that every dollar spent delivers maximum value to constituents.
New Zealand’s social development activities, like those in most countries, are geared toward the care and protection of vulnerable children and young people, employment, income support, social security services, student loans, and social housing assessments.
“We use a significant portion of our discretionary budget to contract services from not-for-profit and for-profit providers,” she says, “and like social services agencies around the world, we haven’t always known how to measure the outcomes for individuals and families. To put it another way, we don’t always understand the return on our investment.”
“When written in Chinese,” John F. Kennedy once said, “the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.”
MIT Sloan Distinguished Professor of Finance Deborah Lucas believes that the 2008 financial meltdown is a case in point, triggering a tectonic shift for policymaking within government financial organizations. “If you’re looking for silver linings in the 2008 crisis,” says Lucas, “the chance to focus attention on financial literacy and transparency in the public sector is a big one. A large segment of the policy community agrees that we must act now to improve the accuracy of our risk assessments.”
Almost one in four working adults in America has a job that pays less than a living wage.
In large part, the situation persists because the corporate marketplace has long labored under the conventional wisdom that paying the lowest echelon of workers minimum wages is a bottom-line necessity. But is that economic truth or myth? Are low wages, minimal benefits, and inhumane schedules the most prudent way to keep costs down and prices low?
Absolutely not, says MIT Sloan associate professor Zeynep Ton. In her influential book The Good Jobs Strategy Ton contends that stranding employees in low-paying dead-end jobs is an organization’s choice, not a necessity—even in low-revenue settings. She has dubbed it “the bad jobs strategy.”
Ton draws on more than a decade of research to show how operational excellence makes it possible for companies to offer low prices to customers and superior results to their investors while still paying their employees a living wage. She points to four model retailers—Costco, Mercadona, Trader Joe’s, and QuikTrip—to illustrate how investing in workers has a positive impact on the bottom line. All four companies have parlayed a generous investment in personnel into lower costs, higher profits, and greater customer satisfaction.
For Martin Capriles, SF ’05, there is something almost magical about the Beer Game, a management simulator developed in the late 1950s by Jay Forrester and his students at the MIT System Dynamics Group. The game famously puts teams of students in charge of four components of a distribution chain. Players within each component—retailer, wholesaler, distributor, and factory—receive shipments of beer, fill as much of their customers’ orders as possible, and place new orders for beer with suppliers. As students make operational decisions and review the impact of past decisions, they inevitably are dismayed by the unintended side effects of their actions.
After leaving MIT, Martin Capriles headed back to Venezuela, his home country, where he was responsible for all commercial operations for the Venezuelan subsidiary of CEMEX. Almost immediately on arriving back at the office, he realized he needed to put the Beer Game into play—this time, with real world consequences.
When the alliance first formed in 2001, many investors were bullish about BRIC, the association of what were then considered four burgeoning economies—Brazil, Russia, India, and China (South Africa joined in 2010). BRICS nations represent 40% of the world’s population and account for almost $16 trillion in GDP. The idea was that BRICS would create an international financial network that would rival the prevailing western-dominated system. But 15 years out, how much of a threat to the status quo does BRICS actually constitute?
Andrew Lo, Charles E. and Susan T. Harris Professor of Finance, believes that when it comes to BRICS, much depends on political factors. “The stability and credibility of BRICS governments is vital. If they can manage the volatility, including the threat of hyperinflation, and implement more disciplined monetary policies, it could be just a matter of time before they play a more important role.”
Autonomy is so 20th century—at least in terms of governing nations. A half century ago, governments were relatively independent entities. They could make fairly autonomous decisions about their nations’ economic futures. MIT Sloan Senior Lecturer Otto Scharmer, a noted economist, sees a new world order today in which individual governments no longer enjoy the same kind of economic independence they once had.
A world economy, Scharmer explains, is one in which capital accumulation proceeds throughout the world, while a global economy has the capacity to function as a single unit “in real time on a planetary order.” A world economy has existed for five centuries, he points out, but a global economy has been in place for only the last two decades, driven by new infrastructures built on advances in information and communication technologies.
On the surface of it, obesity can be misunderstood as a rich nation’s disease. After all, a glance at the World Obesity Map shows that in historically famine-stricken Ethiopia, obese women account for 1% of the population, while that number skyrockets to 35% for women in the United States. But obesity is every bit as much a cultural indicator as it is an economic indicator. In Sweden, undeniably a prosperous nation, the obesity rate among women is closer to 14%.
Professor Hazhir Rahmandad, MIT Sloan School of Management Visiting Professor, is using system dynamics (SD) to create a model to track and predict U.S. adult obesity trends and recently published his findings in the American Journal of Public Health. In the article, Rahmandad and his colleagues examine the energy imbalance gap (EIG)—an individual’s average daily excess energy intake minus the total daily energy expenditure. Rahmandad believes that the EIG is at the heart of understanding obesity. It’s an essential step, he says, toward the design of obesity prevention and intervention programs targeted at specific population groups.