Imagine the Future; the art of forecasting can be useful not only for corporations but also for individuals

Corporations are used to think about the future. They put effort in understanding the different trends, identify various scenarios and have a concrete plan for each of them.

They usually have a base case scenario (the most likely one to happen) and also consider the best (better than expected) and worst case (worse than expected) . This exercise enables them to do the thinking and planning early, to decide where and how much to invest and then they focus on execution (in other words what they can control).

This technique can be useful at a personal level too. Instead of worrying about the future (especially during these uncertain times), it will be more useful if we channel our energy in imaging it.

This is not an exercise about predicting the future but about thinking what scenarios are probable. (There is an important distinction between probable and possible. Probable is what is likely to happen; possible is what might happen but it is not ce rtain. For example, although it is possible for me to win the lottery, it is not probable.).

Think what is likely to happen and use this as your base case scenario. Then, imagine how the situation could be better than expected and also worse. In this way, you will be better prepared..

In general, this exercise is not about fortune-telling, it is about forecasting.

As an example, let’s imagine when the virus will be under control and life will be normalised (albeit a slight different normal).

It is expected that effective vaccines will be available mid-2021. Hence, many people will be vaccinated by the end of 2021 (at least in the Western world) which will allow us to go back to normal activities (base case scenario). If vaccines are ready by the end of this year, then we might expect the situation to be under control from mid 2021 (better case scenario). If it takes longer to get an effective vaccine or there are manufacturing bottlenecks, then we may have to wait until mid-2022 (worse case scenario).

By imagining these scenarios, we are in better position to prepare for them. Instead of worrying about what might happen, we move to think about what we can do which is within our control.

Get into the habit of imagining how the future would look like. It might feel a bit awkward at the beginning. Like everything else, the more you do it, the better you become at it.

I personally prefer to do this exercise with friends. It is fun (my kind of fun at least!) and the input from others usually helps me to refine my thoughts.

Why you need to care: The forecasting technique that is widely used by corporations can be very useful for you too. The more you learn to visualise the future, the more you learn to focus on what you can control. Fear of the unknown will be replaced by action.

I started the b4iapply blog because I passionately believe in empowering people to make informed decisions about their career, their finances and other societal topics that affect all of us directly or indirectly. I only share my views and I aim to be balanced, constructive and solution-oriented.

I started the b4iapply blog because I passionately believe in empowering people to make informed decisions about their career, their finances and other societal topics that affect all of us directly or indirectly. I only share my views and I aim to be balanced, constructive and solution-oriented.

Posted in b4iapply, Career Advice, Coaching, Self development | Tagged , ,

Should Private Wealth Fund Public Debt?

It is widely reported that 1% of the population owns as much as the poorest 50%.
However, when there are suggestions to increase the taxes of the very wealthy individuals and their corporations, the usual answer is that this will result in lost jobs since there will be no incentive for them to continue investing.

This sounds a reasonable argument at face value. But is it really the case? Or is it a tagline that interest groups are using?


Businesses invest because they expect that the rate of the return of their capital will be higher than the interest rate they will have to pay for the money they borrowed.

Also, although capital investments in the past implied significant creation of new jobs, the situation lately has changed. Investments are primarily technological and fewer people are needed. So, this argument becomes less and less strong.

While I was reading a book called`The Capital` by Thomas Piketty (the chapter ‘Metamorphoses of Capital’ to be specific), I finally understood why governments support private wealth.

(BTW, this is an excellent book and features in the library of anybody who wants to be somebody. If you read it though while you work full time, it will take you between 6 months to 6 years to finish it.).

Most of us are accustomed to the fact that the taxes we pay fund the public services we get (e.g. schools, roads, etc). So, it is natural that if we want more services, we need to pay more taxes (on profits for corporations and income for individuals) for the Government to be able to afford providing them.

The other funding option the Government has is to borrow money instead of increasing taxes.

Gross Domestic Product (GDP) is a key performance indicator for a country. The higher the GDP, the better the creditworthiness of a country. In other words, the country can borrow money at a lower interest rate (and pay for the services that needs to provide).

GDP is the sum of net public wealth and net private wealth. So, if the private businesses of a country are doing well, the GDP will be higher and as a result the better the creditworthiness of the country. Hence, they will be able to borrow at lower rates and fund the services.

This is the economic side. There is also a political one.

Governments need to win elections. So, they will choose the policies that will get them elected.

Increasing taxes is unpopular. Poor people don’t want to pay taxes. Rich people don’t want to pay taxes either. Hence, many Western governments prefer to borrow money instead of increasing taxes.

Until recently, it was a relatively good solution given the low interest rates. As a result, jobs have been created. Even if a few people have disproportionally benefited, the overall impact was positive.

During the last few years, the environment has significantly changed. The companies that fare better are the ones in the technology which don’t require many employees. For example, let’s compare Facebook and Pfizer. The market cap for Facebook Inc is around $760bn and employs 52,500 whereas, Pfizer’s market cap – a pharmaceutical company – is $200bn and it has 88,300 employees.

(By the way, Amazon’s market cap is $1.6 trillion and it has 840,400 employees – this is a significant bigger number than Facebook because Amazon needs many to work at their warehouses. Note though that most of these jobs are part-time and earn minimum wage.).

So, although governments benefit by having a strong private sector (which improves the GDP and as a result the interest rates at which a country borrows), it is also realistic to assume that from now on the growth will mainly come from technological advancements and only a small number of additional (and highly skilled) individuals will be needed. Hence, we need to prepare for this new norm and adjust our tax systems accordingly.

On reflection, it seems that the question of this post needs to be changed. It is not an either/or answer but at what degree the private wealth will fund public debt.

Why you need to care: We are at a turning point. The foundations of the social order of the past are changing. Tech companies in particular will create significant value but will employ only a small number of employees. Hence, although the governments benefit by having a strong private sector, they also need to consider the wider impact to the many. Our tax systems need to be adjusted for the new realities.

I started the b4iapply blog because I passionately believe in empowering people to make informed decisions about their career, their finances and other societal topics that affect all of us directly or indirectly. I only share my views and I aim to be balanced, constructive and solution-oriented.

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Working from Home: Output Matters

The Covid-19 pandemic forced many people to work from home. Working habits that have developed for years suddenly were not applicable anymore.  You don’t commute to the office. You don’t sit next to your co-workers. Chats around the water-cooler is not an option. Your manager is not around to watch every move you make.

All you need is a computer and a good internet connection. If you want to work in your pyjamas or be nicely dressed is up to you. If you want to work from the kitchen table or have your own office space is up to you (depending on your negotiations with other members of your household of course unless you live on your own).

On the one hand this newly-found flexibility is very much appreciated. At the same time, many people are afraid that if they are not visible, they will be forgotten. They are obsessed to be by their computer all the time, answer emails immediately as they land into their inbox and set up unnecessary  TCs just to prove that they are working.

Managers are anxious too. They are uncertain how to manage their teams. Their challenge is not only to ensure that people are actually working and not spending their time watching Netflix but most importantly how to recreate the ‘virtual space’ for collaboration.

How can we ensure that this ‘new working norm’ is both productive and fulfilling in the long-run?

It will help to start focusing more on input instead of output. In other words, what matters is the value a person adds and not how busy he/she is. (By the way, this concept has been discussed for years in the corporate world but with mixed results.)

The big question is how to assess output.

We have been used to measure the hours that a person puts into a project (and frankly it is easier!) than the quality of the work he/she produced. Also, we usually work in teams. For example, one person might have a great idea that somebody else will built on. Both contributions are valuable although very different.

Companies will need to experiment with metrics they use to measure performance. A combination of both input/output measures will be a good start.

Also, those in senior positions  will have to lead the change. Since most of them though have spent their careers based on the model defined by the industrial revolution, they will have to overcome their own biases first. Time and trust will be key for the transition to take place.


The bottom line: A mindset shift is required in order to adjust to the new working norm. We need to focus more on output and less on input. Time and trust will be key.

Korina Karampela is the founder of b4iapply. She passionately believes in empowering people to  make informed decisions about their career and their finances. She is a senior executive in the pharmaceutical industry and has an MBA from MIT Sloan. In her limited spare time, she wants to join forces with others to help everybody to be a better version of themselves.

 

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Focus on What You can Control

Many things that happen to us are simply outside our control, even when we put a lot of energy and hard work to influence the outcome.

How we react though to the new circumstances, it is within our control.

epictetus1-2x

Sounds ok you might say but what does it really mean?

Consider the scenario below:

You expect your employer to announce some redundancies soon. What do you do?

A) Adopt a ‘wait and see’ approach

B) Explore options for different career paths that are more suitable in the ‘new norm’

C) Do online courses and acquire news skills

D) See it as a sign for you to start the business that you always dreamt

E) Do volunteer work

F) Connect with friends and family and share with them that you are looking for a new challenge

G) _________________________    (Fill the blank with your own idea)

H) A combination of the above

There is no right or wrong answer. The point is that you have options. If you find yourself in a similar situation, it is up to you to decide how you want to respond. Whatever you decide to do will open the door to a new path.  ‘A journey of thousand miles start with a single step’, as the Chinese proverb says.

The bottom line: Next time something big happens in your life, take time to explore your options. How you respond to any situation is within your control.

Korina Karampela is the founder of b4iapply. She passionately believes in empowering people to  make informed decisions about their career and their finances. She is a senior executive in the pharmaceutical industry and has an MBA from MIT Sloan. In her limited spare time, she wants to join forces with others to help everybody to be a better version of themselves.

 

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Do you have a Growth or a Fixed Mindset?

Do you believe that your  important abilities (e.g. intelligence, creativity, empathy, leadership skills, etc) are fixed traits and cannot be changed or that they can grow and improve? Are you focusing more on ‘how smart you are’ or on ‘how you can get better’?

There is a a lot of research undertaken about the impact of the different ways of thinking about the goals we pursue. When you think in terms of I am good at X or I cannot do Y, this behaviour represents more the fixed mindset. When you  believe that you can further develop an ability with effort and hard work, then this attitude reflects a growth mindset.

In other words, fixed mindset focuses on performance whereas, growth mindset focuses more on learning. 

The big difference in behaviour arises when performance is challenged. When the performance is not as good as expected, the people who are more concerned about validating their abilities (fixed mindset) become defensive, get easier demotivated    and may even give up. On the other hand, those with growth mindset take the feedback (irrespective how painful it is) as an opportunity to work  to further develop their skills. This inner motivation manifests because they believe that their abilities can change with practice and effort.

So next time you give feedback to somebody for a job well done, reflect whether you want to praise them for putting the effort, their determination, their persistence or for their ‘innate’ abilities (e.g. you are so ‘smart’, or a very ‘talented’).

There was an experiment done with children. Those who were labelled ‘smart’ were less resilient when they faced more difficult problems to solve because they thought that they not that smart anymore. The others who were praised for their effort, they thought that they were not there yet but they were engaged and keen to develop their abilities . For more information, check the TED talk by Carole Dweck.

Neuroscientists are hugely in favour of the growth mindset and they are in a position to provide numerous references to justify their stand.

I believe that both mindsets have their advantages. People with a fixed mindset are usually more  competitive and they are more keen to prove that they can perform better than others. This attitude is definitely needed in many highly competitive settings (e.g. in business or politics) especially with short term objectives.

However, when the results of their actions are not the desired ones, then they find it more difficult to build on the learnings in order to become more capable in the future. Also, they maybe more resistant in learning new skills. In the current fast changing environment, this might be a significant obstacle to realise their potential in the long run. This is the reason why the growth mindset has gained so much support.

Let’s go though back to the question of this post; do you have a fixed or a growth mindset?

What do you think?

Growth_FIxed_mindset

 

I tend to believe that we all have both mindsets embedded in our brain even if some of us may lean to one more than the other. For example, Elena may have a growth mindset in how she takes feedback into consideration in order to advance her career. On the other hand, she might be completely disinterested or feel afraid in mastering anything to do with technology or she may not put effort in improving her personal relationships.

Hence, the first step is to become aware of which mindset you use for a specific situation. Then,  depending on what you want to achieve, you may consider making some adjustments in order to use the qualities of the mindset you need. (These adjustments will probably be small at the beginning. But soon the many small incremental changes may have a significant positive impact.)

The bottom line:

It is definitely important for us to learn to identify whether the fixed or the growth mindset is in the driving seat in each situation and reflect whether this is the optimal one.

 

Korina Karampela is the founder of b4iapply. She passionately believes in empowering people to  make informed decisions about their career and their finances. She is a senior executive in the pharmaceutical industry and has an MBA from MIT Sloan. In her limited spare time, she wants to join forces with others to help everybody to be a better version of themselves.

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