That Used to Be Us: How America Fell Behind in the World It Invented and How We Can

by Thomas L. Friedman

  Seven years ago, when Tom visited the 24/7 Customer office in India, most of the employees there “were entry level,” said Kannan, whose company is actually headquartered in Campbell, California. “They had to stick to a written script, and they were afraid the minute someone got them off of it. A supervisor would randomly listen to the calls of agents and then give them feedback or help them with a customer … Now the software we have is predicting what the consumer is doing, so we don’t need so many supervisors, because technology is now following what our operators are texting, while they are texting! Today what I am most interested in knowing is what else did the customer have issues with, what services did they seem to be looking for. So we ended up transitioning many of our supervisors into new jobs that we created that revolved around analyzing data. These are better-paying jobs, but they require more skill. So we picked out the supervisors who had the science and math degrees to make the transition, and the others we kept as supervisors.

  “A call center never employed Ph.D.’s—now I have an army of them, trying to analyze all this data,” said Kannan. “We started doing this about four years ago, but 2010 was the big crossover year.” Now, instead of looking just for people whose jobs will involve answering the phone or making phone calls—of which Kannan still employs many—he’s also looking for statisticians, psychologists, and Ph.D.’s.

  “What we ultimately are hoping to do is combine in the same person the technical talent to understand what the data is telling them and the service skills to deliver the new services that the data says people want,” Kannan explained. “If we learn from the data that 80 percent of consumers who receive their first bill from a mobile company or cable are going to pick up the phone and call, we also now know exactly how to service them. It means the agent who deals with them is much better prepared.”

  Kannan said, “Everyone in the chain makes more money now because we are able to charge more money, because we are delivering more value to our clients. And people are also much more satisfied with their work. You’re not just calling people hour after hour, trying to sell them a credit card. Now we look for employees who have their own Facebook profiles, who are adept at writing little blogs and have real comfort living and interacting in that online world. The old workers who showed up and just read off a script—a lot of them are gone.

  “We want people who have a completely open mind,” he added, “and then the ability to learn constantly and challenge the status quo—no matter what the level of the company where they are employed. Challenging the status quo is the most critical thing, because if your employees don’t challenge your status quo, someone else’s employees will and they will disrupt the status quo before you do.

  “There is really no such thing as a low-end job anymore,” said Kannan. “If it were really routine, it would have been automated. Every two or three years the skilled thing you are doing is going to get scrapped. The question is whether you are going to scrap it and own the next job, or let someone else do that.”

  Although he is describing a service business, Kannan’s observation points to one of the most important reasons that America needs to keep high-skilled manufacturing at home. So many innovations come from engineers and workers who are actually handling the product, seeing what goes wrong, and anticipating the next breakthrough improvement. “If none of the work is being done in America any longer, that is dangerous,” explained Kannan. “Sometimes my clients say to me, ‘PV, I don’t understand why you are still in the call-center business, a bunch of entry-level jobs. The value we get from you is all these data and analytics. Why don’t you carve that out as a separate business and list it on the stock exchange?’ My answer is that if I don’t do the customer-facing part of the business, I lose touch with reality, and then I am really in the cloud.”

  Kannan explained that though many of his workers are in India, his whole technology platform is run out of the United States on servers based in America; some of the data analytics are done in America, and his experts who help clients interpret that data and what it means for their businesses actually sit in the offices with those clients, side by side. “So, in many ways, the best jobs are here in California, but they also demand the most skill,” said Kannan.

  Obviously we cannot keep every factory in America. But we need to understand that, particularly for the high end of manufacturing, when a factory moves offshore now it takes with it not just the jobs of today but also, perhaps, the jobs of tomorrow. “If all the manufacturing and then more and more of the engineering moves to India and China,” Kannan warned, “it is only a matter of time before the next Google or Facebook comes out there.”

  White-Collar American

  At the worst point of the subprime crisis, Tom asked his friend Jeff Lesk, the managing partner of the Washington office of the international law firm Nixon Peabody, how the legal business was being affected by it. “Heavily,” Lesk said. Everyone was laying off lawyers. Out of curiosity, Tom asked him who was laid off first. The answer was surprising. Lesk explained that it was not necessarily last in, first out anymore. Rather, the lawyers who were getting laid off by most big law firms were those who, when work was booming during the credit and real estate bubbles, took the work, did it, and then handed it back when finished. Some of them were now gone. These were people who were doing nonroutine work but doing it in a routine way—uncreative creators. Those keeping their jobs were the ones who were finding new, more efficient ways to do the old work, with new technologies and processes, or were coming up with entirely new work to do in new ways.

  This is indicative of the new labor trends in the hyper-connected world. While the jobs of lawyers—and others like them—may in theory fall into the category of nonroutine creators, that does not make them immune from the pressures of globalization and the IT revolution. Sure, at the height of the credit bubble, firms signed up whoever came out of the best law schools and were generous with bonuses. But today globalization, IT, and the tight economy are prompting more and more big companies to put their legal work out to bid whenever they can—treating it as a commodity. So law firms that want to continue to pay high bonuses need to offer something extra to justify high fees.

  That is why, in the winter of 2011, Nixon Peabody created a new position: chief innovation officer.

  Say what? A chief innovation officer? Why would a law firm need a chief innovation officer?

  “We are in business to help other businesses,” explained Lesk, an expert in putting together real estate transactions involving tax credits to generate financing for community-oriented developments, such as low-income housing. “And what we are finding is that the core of American business is changing—the repeat deals, involving similar structures, are fewer and farther between. There is more competition, barriers to entry are lower, our clients are reaching out to us for new ideas now much more frequently.” His law firm therefore has to be more creative and nimble in every way.

  For instance, says Lesk, his firm was a pioneer in putting together low-income housing credits with solar-energy credits in order to finance affordable housing for low-income people that would also come with solar-powered energy.

  “A few experienced practitioners in the industry were looking at the base product that we had used for years—the Low-Income Housing Tax Credit—and at the same time we were learning about renewable-energy tax credits,” explained Lesk. “We wondered what would happen if we combined the two. So together with some clients and colleagues we put these financing tools side by side, looking at the rules and requirements and conflicts between these two complex government programs, and then we thought about how to overcome those conflicts.” Then they did some financial modeling, made some assumptions on pricing, and came up with a model that showed “we could build an affordable housing project with solar panels that would utilize tax credits for both of these important programs—and at a minimal or negligible cost,” said Lesk. “So you end up with people having affordable housing with lower ene
rgy bills, financed by private investors who can use those tax credits. We were among the first to work through all the issues and come up with a product that could meet governmental requirements, attract private capital, and, most important, scale.”

  But no sooner did Nixon Peabody help to open that path than competing law firms and accounting firms followed suit, turning it into a commodity. As a result, said Lesk, “we constantly have to find ways to improve and adapt our products. Now we’re putting together affordable housing with geothermal energy and drafting projects utilizing fuel cells. How about a community wind project? You have to look for original combinations and approaches to stay one step ahead of the competition.”

  Lesk continued: “Necessity is the mother of invention and we are in the age of great necessity because little that was given in the past is given today—whether it is fees, types of projects, the structure of deals, or availability of financing. I have worked with tax credits and affordable housing for twenty-five years. It was a specialized field and for a long time it had a reasonably limited number of players. Today it changes frequently and the barriers to entry are so low that we have all kinds of new competitors, and not only law firms.”

  His firm’s new chief innovation officer will lead a program to recruit, coach, and inspire lawyers so that they will not only do today’s standard legal work but also invent tomorrow’s. Those qualifications are already being taken into consideration when the firm determines annual pay and bonuses for its lawyers.

  “For this year’s partner reviews,” said Lesk, who also heads the firm’s tax-credit finance practice group, “I asked each partner in my group specifically what was his or her best innovative idea for the past year and what does he or she have on the drawing board to invent this year … We are a partnership and we have to share the profits in a way that recognizes past contributions and predicts future performance, and in a way that fairly compensates each partner.” The best predictor of the future is not necessarily just how someone has performed in the past, he said. It’s also how much the person has adapted, created, and innovated. “If I have to make tough compensation choices between lawyers, a significant factor now for me is their ability to invent,” said Lesk. “And my challenge, for the lawyers who don’t come by those skills naturally, is to find ways to teach them.”

  Critical thinking alone just doesn’t buy what it used to buy, Lesk concluded. “Critical thinking has become the basic price of admission. If I had to choose who else I would elect to help assure the continued success of this law firm, one of the most important qualities I would be looking for is proven ability to innovate, because with change coming this fast, that is the only thing that will save us.”

  Green-Collar American

  General Martin Dempsey is the Chairman of the Joint Chiefs of Staff—America’s top military officer—but earlier in his career he commanded the First Armored Division in the Iraq war that took Baghdad from Saddam Hussein in 2003; served as acting CENTCOM commander, in charge of all American forces throughout the Middle East; and from 2008 to 2011 was commanding general of the U.S. Army Training and Doctrine Command, where he oversaw boot camp—the training and education of American soldiers for twenty-first-century warfare. He remembers the exact moment when the light started flashing in his head, saying, “We need to train and educate our soldiers and leaders differently.”

  “When I was acting commander at CENTCOM,” said Dempsey, “I went to visit a young U.S. Army captain stationed on the border with Pakistan, inside Afghanistan. It was the summer of 2008. Out at his base he described to me his task and purpose there and the recent engagements he had had with Taliban trying to infiltrate. I think he was twenty-five kilometers from any other base. Yet from his little forward base he had access to intelligence and information from the lowest tactical level right up to the national level and he had the authority to order joint fire from air and artillery. I am guessing he was probably twenty-six years old. At one point I said to him, ‘You have more capability at your fingertips than I had as division commander in Baghdad in 2003.’ The technology had improved that much … The type of threats we face today are decentralized, networked, and syndicated. They are not massed threats but threats at the edge. To confront a network you have to be a network, and to confront a decentralized foe your power needs to be decentralized.”

  Dempsey returned from Afghanistan to Central Command headquarters in Tampa, Florida, saying to himself, “We have empowered our soldiers to be effective in this new kind of battle. We have given them the capability and authority and responsibility to function in distributed operations, semiautonomously. But we have not changed the way we trained them to accept this responsibility.”

  As soon as he took over the army’s training and education systems, that became his primary focus. “We say that a leader’s responsibility is to visualize, understand, decide, and direct,” said Dempsey. “And yet we used to spend the vast majority of our time providing the knowledge skills and attributes to allow a commander to decide and direct and almost no time on how to visualize and understand.”

  The changes the U.S. military is undertaking now start with recruitment. Thirty years ago, said Dempsey, “we would have said we want men who are physically fit, educated, and disciplined. Now, what we say is that we want someone who wants to belong to a values-based group, who can communicate, who is inquisitive, and who has an instinct to collaborate—and we will take care of the rest.”

  Dempsey began reforming army training by asking that all-important question: What world are we living in? The military, he concluded, was living in what he called “a competitive learning environment.” By that he meant a world in which military capability is diffusing into the hands of non-state actors, terrorists, and criminals. Nation-states no longer have a monopoly on competitive military capabilities.

  “It is a fool’s errand,” Dempsey said, to chase every new capability emerging from your adversary—whether it is new roadside bombs or devices that confuse GPS signals. “We cannot be oblivious to these things, but we cannot be consumed by them in isolation. What we should be consumed by is developing leaders in our own military who can adapt to whatever future they will find and innovate to create a future that is more favorable to us.” You need people who can constantly adapt and innovate because the technology and how the enemy is using it are constantly changing.

  Thirty years ago, noted Dempsey, the experiences a person had in the local high school, the experience in basic training, the experience in the army unit to which the new recruit was assigned, and the experience a soldier had on the battlefield “were not so different.” That made training easy, but it simply isn’t true anymore. Now, even traditional armies will confront America on the battlefield in a “hybrid” decentralized manner. So the army has to train its soldiers to reflect that prospect. It has to empower them to respond to the unpredictable experiences they will have in a village in Iraq or Afghanistan.

  Fighting decentralized enemies, said Dempsey, is like “dropping a bowling ball into mercury.” So sometimes you need to inject chaos deliberately into the classroom. “When I say we want to inject chaos, foster creativity, and leverage technology to create a different learning model,” explained Dempsey, he means that drill instructors have to change, too. “What we have right now in many cases are instructors who want to be the sage on the stage: ‘I have the knowledge and you know nothing, so pay attention to my PowerPoint presentation and take notes. And then on the last day maybe we will get around to problem-solving exercises.’ The new model is for the classroom to provide a kind of warehouse of tools and applications that the students can download and deliver themselves.”

  Army manuals are changing accordingly. “We have roughly four to five hundred doctrinal manuals that we are migrating to a Wiki format,” said Dempsey. “We have done about fifty already—how do you operate a forward base, a manual for bridge crossings, how to manage IEDs [improvised explosive devices], how to conduct a key-leader en
gagement in Iraq or Afghanistan, how to make best use of an unmanned aerial system. Let’s say you had a manual on how to organize a forward operating base in Afghanistan. In the past, the community responsible for doctrine would publish it. That would take three or four years to do, with a steering committee or review boards, and then it would take five to seven years to permeate the army schoolhouse. Now we are putting that all up in a Wiki that allows the community of practice to edit it constantly and contribute to it from their battlefield experiences. So it is always up-to-date, self-correcting, and adaptable in real time by the soldiers in the field. It is a living doctrinal textbook, with officers assigned to watch over and manage each doctrinal Wiki site.” (Don’t worry, they are protected so al-Qaeda cannot read them as well!)

  The new recruits coming into the military today, said Dempsey, have an almost insatiable appetite for information, access, and connectivity. “They want to be by themselves sitting in the middle of the football field but connected to the rest of the world,” Dempsey said, adding: “They come in much less physically fit than previous generations because of lack of exercise. They come in with a mixed bag of values.” That is, he explained, they come with a genuine sense of purpose and patriotism and general desire to belong to something, but it is often not much more developed than that. “So we have made major changes to the physical-fitness training and we have made major changes in how we inculcate values,” he said. “I am not suggesting they have bad values, but among all the values that define our profession, first and most important is trust. If we could only do one thing with new soldiers, it would be to instill in them trust for one another, for the chain of command, and for the nation.”