Automation – A completely different thinking.

I have been spending some time on thinking about leadership. Recently, I had the opportunity to sit down and listen to an Angel investor, who specializes in life science companies particularly in New York. I was excited because I have heard incredibly fluffy pieces about this individual. But, the moment this individual started to speak, I suddenly realized something. This individual has no interest in the area of work. It reflected in his presentation, where, in-front of a very young and eager bunch of aspiring entrepreneurs, showed up late for the talk and started going through slides of a presentation created nearly two decades back.

This disappointment reminded me of  the recent article I came across. This article was from Harvard Business Review and it portrayed a dismal view of the enterprise where executives are living in a bubble. I realized, it is not just the corporate executives, but, even the investors are living in a bubble. These individuals are speaking words, but, it makes sense only to a raving mad man. The layers and filters, these individuals have created between themselves and the world outside have created an alternate reality for themselves. The recent news cycles of an incompetent CEO is way more common than any other job known to human kind. This points to an interesting point in our social evolution where CEOs have become one of the rare jobs where incompetence is tolerated and yet highly reimbursed.

This brings me to another interesting article on what exactly is a job and how to value a job. This amazing article published by BBC Capital exposes an interesting conundrum of a capitalist economy. The jobs that are absolutely essential for human survival are the lowest paid ones. The jobs that we consider to be completely pointless are the ones that are extremely highly paid. So, the whole question of what is valuable to the society arises here. Do we prioritize nonsense over our own survival. Our current social structure seems to indicate exactly that. According to Peter Fleming, Professor of Business and Society at City, University of London, who is quoted in the article: “The more pointless a task, the higher the pay.”

So, almost all of our low wage employments cluster around human activities that are absolutely essential for the survival of a society. If we apply these two diverse set of thoughts to another interesting question on the future of jobs, then, I believe I have the answer already.  By implementing mass automation on all of the mission critical jobs for the survival of a human society, we eliminate all the low-wage jobs, and individuals who had these jobs previously are moved to a position where they are given a pointless job.

For the sake of argumentative clarity imagine a situation where automation has been implemented in highly important jobs. A great example is the restaurant worker. Imagine a future where all of the restaurant workers who prepare food are replaced by an automated supply chain and a set of robots. The role of individuals are just to manage these automated supply chain and robots. Imagine, our teenage daughters or sons,  who will apply for a job at one of these restaurants. Instead of these young individuals being hired just for cheap human labor, now they will be hired as a manager for the automated supply chain. Instead of years of school and college education to end-up being incompetent and pointless to the society, even a high school graduate will be able to do this job, because the society is run reliably and efficiently by a highly robust and resilient automated supply chain. All the rest of the management hierarchy will remain the same, due to corporate and regulatory reasons.

It seems to me: a highly automated society will create more value than a society that still relies on human labor for its mission critical jobs. This may seem counter-intuitive, but, it is not. The value of human labor is a more abstract idea than the one based on absolutes. In our current system of human labor dependent economies, only a handful individuals are given the free-reign on incompetence and risk taking. In an automated economy, the underlying resilience will help more individuals to take more risks and be unfazed by the outcomes, because none of these activities are absolutely essential for the survival of a human society.

This trend of automation will not only massively simplify our daily life activities, we will have more time in our hands to do what we want to do in the first place, without worrying about thirst, hunger, hygiene or any of the mission critical activities for our life. The friction of human existence is reduced by machines, which help us create more value to the society.

More individuals will have the opportunity to be at an executive level than what exists today, even with minimal training. It will be the democratization of the executive jobs that will happen with the automation, not the loss of jobs. More people can have the freedom to be employed as CEOs and still get highly paid, because, the society is run on a highly reliable automated schedule. It will be a very different society, just like the massive shift of agrarian economy to the industrial economy that happened during the industrial revolution, but a much more highly paid and with less number of unemployed, for sure.

This research on current dismal state of executives and managers in corporate sector is part of our mission to understand the overarching impact of automation and machine-learning in healthcare. It is done as part of our cancer therapeutics company: nanøveda. For continuing nanøveda’s wonderful work, we are running a crowdfunding campaign using gofundme’s awesome platform. Donation or not, please share our crowdfunding campaign and support our cause.

Donate here: gofundme page for nanøveda.

Image caption from top to bottom: 1) A screen shot from the television programme: The Thick Of It with Malcolm Tucker (played by Peter Capaldi) and photographed by Des Willie, a great artistic portrayal of human dysfunction at the core of some of the most point-less, yet, highly coveted jobs. (C) BBC and reproduced under fair usage rights, 2) A satirical portrayal of recent troubles of United Airlines, published by Bloomberg, retrieved from public domain through Google search and published under fair usage rights, 3) A quote that says: “It’s as if someone were out there making up pointless jobs just for the sake of keeping us all working.” posted inside a London tube train car, with the hashtag bullshitjobs, 4) Image of a burger flipping robot in action, obtained from public domain through Google image search and reproduced under fair usage rights.

Forced errors – Lessons from an accounting scandal.

In 2015 Toshiba corporation based in Minato, Tokyo, Japan, disclosed to its investors of a major corporate accounting malpractice. The accounting scandal dated back to the 2008 financial collapse. When the market forces became unfavorable, Toshiba resorted to the terrible art of creative accounting practices a.k.a cooking the books.

Toshiba created a very interesting mechanism to cook the books. Instead of a direct order to restate revenue and profits, the top level executives of the firm created a strategy called “Challenges”. The “Challenges” were quarterly financial performance targets handed over to the managers of various divisions. These targets were handed over just a few days ahead of the submission due dates for the quarterly financial reports. The system was designed specifically to pressure various division heads to finally embrace the incredibly stupid act of creative accounting practices, instead of aiming at real improvements in corporate performance. The top level executives were extremely confident that the performance pressure created by their “Challenges” system would eventually lead the mid-level managers of  the company to resort to these despicable accounting practices.

I am amazed by the level of top level executive creativity in implementing a pressure cooker situation to do all the wrong things. The fiscal situation would have leveled-off if Toshiba started making money after the financial crisis. But, the problem was, the ingeniously devious top-level executives also started to believe in these cooked books. Now, armed with extremely brilliant, yet fake profit results, the company unleashed their ambitions upon the world.

Toshiba went ahead with their ambitious, capital intensive endeavor of expanding the nuclear power generation in North America. Toshiba had already purchased the North American nuclear power generation behemoth Westinghouse. In 2006, two years before the impending global economic disaster that originated in North America, Toshiba purchased Westinghouse Electric Company, a manufacturer of nuclear power, from British taxpayer funded company: British Nuclear Fuel Limited (BNFL). At the time, economists and analysts questioned the wisdom of BNFL selling their supposedly profitable nuclear power generation business to Toshiba. These were due to the then widely held belief that the market for nuclear power generation was poised to grow rapidly in the next decade. These projections were based on growing global demand in electricity mostly from rapidly growing Asia, especially China and India.

The reasons for the sale were multi-factorial. Being a UK tax-payer funded operation, BNFL had very little leverage in Asian markets like China and India. The then British government was unwilling to take extreme financial, marketing and operational risks of continuing the operations of BNFL. Also, a few years later the biggest secret was out: BNFL was in huge financial mess and its operations were in turmoil, albeit invisible from the public eye back in 2006.

Behind the sale of Westinghouse, another key market force was in play too. Even in 2006, the emerging pattern in the world of power generation was the slow shift away from complex solutions like nuclear power to simpler and more reliable solutions like natural gas fired power-plants and solar-energy. Also, the business of building nuclear power has always been riddled with extremely high risks, including large scale cost-overruns and unanticipated delays.

Even before the 2008 North American financial crisis, the appetite for large-scale capital intensive risks like funding nuclear power plants were coming to a crawling stop. The companies that operate these plants return a profit only after forty years of commercial operation. The operational life of the plants are approximately sixty years. Therefore, for almost two thirds of a nuclear power plant’s life-cycle, it is operating at a loss. Very few investment firms have the resources and the expertise to handle such a complex long-term operation. In such a tough economic situation, an UK taxpayer funded operation like BNFL had limited options to survive: either sell its then widely considered to be lucrative nuclear power business or to significantly scale down the operations by limiting its interests only in the UK and lose a huge amount of market valuation in the process.

In conclusion: market realities, complexities of operating a nuclear power-plant and a risk averse UK government at the time, led to the sale of Westinghouse to Toshiba. In hindsight, BNFL exiting UK taxpayer funded nuclear power generation business was one of the best business decisions ever. BNFL made over 5 times the money it paid for to buy Westinghouse Electric Company in 1999. Sadly the sale of Westinghouse division and the fire-sale of its other assets that followed didn’t save the company. BNFL became defunct in 2010.

At a time when nuclear power has slowly fallen out of favor around the world, Toshiba energetically and optimistically forged new deals in North America. After a flurry of  new orders, it seemed like Toshiba acquired a winner with the Westinghouse Electric Company. Then, in 2011, the bad news hit the nuclear power industry in the form of Fukushima disaster. The Westinghouse Electric Company’s most advanced reactor design called the AP1000 shared similarities in design with the GE developed reactor at Fukushima. The US regulatory scrutiny that followed, revealed design flaws in its core shielding system, particularly the strength of the building structure that holds the nuclear reactor core.

Concurrent to these set-backs, the accounting wizards at Toshiba were creating an alternate reality in corporate finance and accounting. It became increasingly clear early on to the executives, that Toshiba had ruinously overpaid to acquire Westinghouse Electric Company. To mitigate the financial blow of having unknowingly bought a lemon and having to deal with a global financial meltdown, from 2008 onward Toshiba started the practice of misstating its revenue and deferred expenses.

Some of the accrued and real expenses were shown as assets instead of liability and also led to constant misstatement of profits across all of its divisions. Since the accounting malpractice was so sophisticated, extremely well engineered and spread over its sprawling business interests ranging from semiconductors to healthcare to social infrastructure, it took nearly a decade to reveal its ugly face. It makes me wonder, what if Westinghouse Electric Company turned a profit and didn’t encounter all the cost over-runs and delays. We may never have heard about this scandal at all.

The ingenuity behind this large scale corporate malpractice is based on human psychology. The C-suites at Toshiba, instead of handing over direct orders of misstating the profits, created a new system: a system of impossible expectations, where deceitful behavior was the only way to remain employed, run the business and climb the corporate ladder inside Toshiba. The bet made by these executives were one that was cynical: human ethics will fail to intervene if the entire management system surrounding everyone forces them to behave unethically.

It reminds me of the brilliant work on human psychology by Stanley Milgram on obedience and authority. In Toshiba’s case, they used it to create an alternate corporate financial reality. The problem with this behavior is: sometimes unforeseen business risks will expose the quick sand upon which a false empire is built. Here is the movie “The Experimenter”, based on Stanley Milgram’s groundbreaking work on human behavior under authority. I recommend this movie to anyone interested in understanding the complex human behavior of obedience and authority.

It became exceedingly clear by late 2016, that both Westinghouse Electric Company and Toshiba were in deep financial mess. All this creative magical thinking and accounting practices couldn’t solve the financial mess of dealing with regulatory issues, construction problems, constant delays, cost escalations, increasingly frustrated operators and suppliers.

The profit making healthcare and semiconductor business couldn’t carry all of the financial burden of supporting a clearly failing corporate parent company. The profitable healthcare division was sold to Canon corporation in a hurry to prevent rapid loss in its value due to a future bankruptcy of the parent company. It is very likely that even this sudden yet, large infusion of cash from their healthcare division sale came too late to prevent an imminent catastrophic collapse of Toshiba. The next in line for the fire-sale appears to be Toshiba’s semi-conductor division.

I have learned three lessons after studying about the imminent collapse of Toshiba due to its terrible accounting practices. I am sharing those three lessons:

  1. Always question the corporate culture and create an environment where employees, partners, suppliers and anyone directly or indirectly involved with the business is free to ask questions. In other words embrace nanøvedas philosophy of radical openness.
  2. Remember Murphy’s law: anything that can go wrong, it will go wrong, and the scarier cousin of Murphy’s law, the Finagle’s law: Anything that can go wrong, will—at the worst possible moment.
  3. Businesses are a human enterprise, which means businesses have a built in optimism bias. Always be aware of this bias. When things go wrong, human psychology will direct us to hide it rather than share it. Therefore cultivate a culture of sharing mistakes, such as a reporting session every month on all the SNAFUs or a satirical evening of profanity riddled tirade against the management overlords. Comedy is the best way to reveal the ugliest of our secrets.

This is an honest and heartfelt research on a corporation that I once admired and how it all fell apart. This is part of my journey to create a better healthcare and cancer therapeutics company, here at nanøveda. For continuing nanøveda’s wonderful work, we are running a crowdfunding campaign using gofundme’s awesome platform. Donation or not, please share our crowdfunding campaign and support our cause.

Donate here: gofundme page for nanøveda.

(Image captions from top to bottom: 1) Toshiba TC4013BP microprocessor on a printed circuit board, obtained through Wikipedia, 2) A painting that accurately depicts fraud and deceit discussed in this blog post. The painting is William Hogarth‘s The Inspection, the third canvas in his Marriage à-la-mode (The Visit to the Quack Doctor), obtained through Wikipedia, 3) Double-sided Westinghouse sign that was once located at the intersection of Borden Avenue and 31st Street on the north side of the Long Island Expressway in New York City, dated 1972 from the collection of Richard Huppertz, obtained from Wikipedia, 4) A cutaway section of the pressurized water reactor that was used in Fukushima Daiichi, obtained from Wikipedia, 5) Image of an English toast with Murphy’s law engraved on the jelly, obtained from public domain and reused with permission through Flickr.)

Failure Mode Effects – What I learned from a failed car engine:

The 2010 Dodge Charger HEMI is the epitome of a modern muscle car. It is powered by an absolute monster of an engine. The V8 engine displacement is at 6.1L, produces 317kW of power and 569Nm torque. The engine is manufactured at Saltillo engine plant and has a great track record for being low maintenance high displacement naturally aspirated North American engines. In-fact, there is nothing to complain about the engineering or quality of the engine. This is the same with almost all modern cars and car engines. All the cars in the market right now are very well developed and mature products.

Unlike yesteryear’s car models, like the 90’s Mercedes with moody electronics or Lanicas that rot away faster than unrefrigerated cheese or Triumphs that leak oil like a rain soaked umbrella and Jaguars that hibernate whenever there is a light shower; cars these days are reliable, reliable like an appliance. The reliability masquerades another interesting problem; the problem of ‘what if something goes wrong’.

I have known folks who obsess about tire pressure. The same individuals who pop open the engine-bay to check the oil dipstick to see if there is enough engine oil. These are the folks who had the reluctant and unpleasant experience of living with one of the yesteryear’s unreliable vehicle engineering samples. They know very well that things can go wrong and they will go wrong. So, their life’s journey has made them curious and cautious about every single little mechanical clatter.

As for me, I am the nineties kid. My first vehicular experience was on a universal Japanese motorcycle or commonly abbreviated as the UJM. It was a bright red Yamaha. It was a reliable, fun piece of engineering which has made me a Yamaha fan for life. My first car was a Hyundai. Again, reliable piece of Korean engineering and a sensible one too. Some might say soul-less, but I had great fun with it. Even though the car I had was stereotypically reliable, recent history suggests Hyundai has some serious issues with their engines. Recently Hyundai issued a recall of 1.2 million vehicles, which covers both of its brands Hyundai and Kia motors in North America. So, I am fortunate that at no part of my life did I ever experience the horrible vehicular gremlins of electrical issues, oil leaks or anything of sorts.

The story is similar to almost everyone whom I grew up with or for any of those who had their early adult driving years with a well engineered car. This brings to attention, the problem of what do we do when things go wrong. The reason I talked about the HEMI is because one my friends own one. He got the car from his dad. So there is a family connection and major emotional value to it. The problem was a rogue oil pressure sensor. It happens even to the best of us. When we see a rogue oil pressure sensor, we are optimistic that we won’t have any oil issues. We procrastinate to fix the wonky sensor.

But, the problem is, even-though, being optimistic in life is a brilliant quality, it is not so much when it comes to dealing with engineered systems. The oil pressure sensor is there for a reason. It is a two layer protection. The first layer is to engineer something that works great in the first place. The second layer is to prepare for the malfunctions. Most of the time even I, ignore the oil pressure warnings. I know it is a bad thing, but at the same time, I also know the odds of it being something really bad is very low. Also, all the advertisements about how reliable all the modern cars are; add to our sense of highly optimistic thinking.

There are occasions when these non-zero odds turn out to be something really bad. Something like the oil line had a leak and the engine has no oil. This is exactly what happened to my friend. The one time he decided to ignore a warning light that was going off for months on his dashboard turned out to be something really really bad. While he was cruising along, the HEMI engine shuts down, since it has no oil to lubricate all the moving part. The optimistic us, whose life experience has been with reliably engineered devices, suddenly become flummoxed. It is not a pretty sight when an engine runs out of oil. Here is a video of a mechanic describing the horrors of dealing with an engine that ran out of oil.

I really admire the folks who are meticulous with their cars. Those who take the warning lights seriously every single time. It is an approach that will prevent disasters like engine running out of oil. But, then I realized, this story has more to it. When we are dealing with any systems, warning signals need to be taken seriously. Especially when it comes to engineered systems. These warning lights are there for a purpose. Our optimistic self and the modern life we are surrounded with are filled with highly reliable devices. It has subconsciously taught us to ignore these warning signs. But, one day one of these warning signs flashing in front of us can turn it into a really messy problem.

So, how can a regular person like you and me, avoid a situation similar to the HEMI engine running out of oil from happening? My idea to solve this important issue is to create better reminders and warning signals for cars. Since we are all addicted and tethered to our smartphones, a simple way will be to connect the sensor readings from the engine to an app. The app warns us through a notification event, may be periodically, perhaps every time one starts a car. A simple LED light flashing on the dash isn’t enough for me or anyone I know of, to be motivated to see a mechanic and figure-out what is wrong with the car engine. Since, most of my decision makings are surrounding the phone, the computer and everything linked to the internet, I am firmly in support of a better car: a better internet connected car. It will make the warning lights appear more serious and also well prepared for the #applife.

I am confident the next car of mine will be a connected car, that sends notifications to my phone.

The Dodge HEMI Charger has been very important for our continued work on cancer research as part of our startup project nanøveda. For continuing nanøveda’s wonderful work, we are running a crowdfunding campaign using gofundme’s awesome platform. Donation or not, please share our crowdfunding campaign and support our cause.

Donate here: gofundme page for nanøveda.