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Cheap labor from other countries is not killing your jobs. Lack of skills, is.

Time changes everything. With the help of the great equalizer (technology) what was once the rule, is now the exception.

As business activities expanded during the last decades (let’s say the 90’s and 2000’s to have a point of reference), most of the decisions about where to build production units were based on labor cost. Especially in industries which required labor-intensive production for their goods and services.

But, technology advanced. Today, 82% of global goods trade is not materialized from a low-wage country to a high wage country. [1]

To put it in another way, only 18% of goods that are traded between countries are based on labor-cost arbitrage. What is that? It’s a fancy way to explain exports from a country whose GDP (per capita) is 5 times or more smaller than the GDP of the country receiving those goods.

That’s because consumer demands from manufacturers and service providers have changed. People demand better quality and service. Technology also requires skills to apply it. So, cheap labor is not the answer to most of those requirements. Access to skilled labor, access to natural resources, the quality of infrastructure, and proximity to consumers are among the main considerations of management today.

As the years pass, this effect will become even more profound. The rising wages in developing countries, automation, AI, will present even more challenges both to the employers and the employees. The employers will have to shift from a labor-intensive mindset, to a capital (investment) one. And the millions of employees will need skills to remain employed. Skills they don’t currently posess. It’s easy to blame cheap labor for all of our problems. But, this argument is not relevant anymore. We need to stop demonizing and begin training our current and future workers, employees, professionals, service providers.

The clock is ticking. The next decade will bring big changes to the way we work. We need to be prepared.

[1] McKinsey Global Institute: The future of trade and value chains, Jan. 2019

The delusion of perfection

You are doing well.

Making good money, just got promoted, and you are bringing in new clients every day. Your colleagues love you. Your bosses wish they had more like you. Your parents are very proud of you. And your romantic life is at its peak.

Those around you, start using you as an example. More and more people feel the pressure to deliver results. They just keep looking for ways to get an advantage. That’s how life works today. Deliver, or disappear. So, if you’re doing well, you must have a sound strategy in place. You are someone with a clear vision. A great motivator. A person with excellent orientation, and culturally educated. You must be, right?

Here’s the problem, though. People usually look in the wrong places for those golden nuggets that will give them an edge. They usually turn to books, coaches and lessons that promise to show them the road to El Dorado. Literally devouring books and content that promise a clear blueprint for success. From ordinary, to hero. From competing, to dominating.

Truth be told, all these tools look credible. They base their claims on data. And they have a lot of facts and figures in them. But many of these studies are flawed. They are usually based on questionable results that will eventually lead you to false conclusions. What’s even worse, a lot of times they lead you into believing that in order to be successful in life, all you have to do is follow some “simple steps”. Just think of how many books you have read or saw lying on a bookstore shelf, with that title.

When people claim that you can succeed by following specific steps, they hide (or are ignorant of) a very basic truth. In the real world, your success is most of the times the result of decisions you make under conditions of uncertainty. Moreover, the same success is partly shaped by factors out of your control. Finally, in the real world, good choices don’t always lead to success. Think about it. From your own experience, wouldn’t you say these three statements are true? Maybe it’s time to dig a little deeper than that “5 Steps to Awesomeness” book. What do you say?

Many conclusions we arrive at, are undermined by a phenomenon called “The Halo Effect”. The term was introduced in 1920 by an American psychologist called Edward Thorndike. In simple words, the Halo effect states that people tend to make specific inferences based on general impressions.

So, when something bad happens; when you lose your job or you separate from your partner, people usually think it’s because you made a mistake (or mistakes). “You are to blame”. It’s because you got lazy. Rude. You neglected your responsibilities. You forgot your cultural references. Where you came from.

In reality, you haven’t changed a bit. You work, interact, and behave the same way you did a month ago. But your success creates a “Halo” around you that shapes the way people see and judge your victories and your losses.

Smart people –the ones you really want to keep close to you-  will look deeper. For them, your success doesn’t necessarily mean that you are a visionary, or have excellent social skills. They know success doesn’t last forever, and nobody can be a top performer all of the time.

Your performance is a relative concept. You can be always on time, cut your costs, make more money than last year, and be a very caring and thoughtful partner to your better half. That doesn’t mean that you will succeed. Your success or your failure also depends on the actions of your rivals or competitors. Someone might work longer hours than you. Care more than you. Invest more than you. It’s as simple as that.

It’s the delusion of perfection.

And it doesn’t exist.

Then, there’s the delusion of forever. This one builds upon the perfection fallacy, and makes things even worse. It is the idea that if you keep doing what you did in the past, you will never fail. The theory usually uses examples of people that are successful for decades “because they kept the same job”, or “stayed married with the same person”. I can almost see you smile right now. We’ve all heard those stories, right?

Here’s the thing, though; in life, (just like in nature) perfection and lasting success are a statistical anomaly. A delusion. People work backwards to justify these claims. They look for real-life examples to support their arguments and not the other way around. But that doesn’t make the argument right. It makes it cheap. In fact, if we take those people and look at their lives as a whole, we will easily discover periods of huge success, followed by periods of less success, and a couple of failures somewhere in between.

And it’s ok! We are not perfect. You are not perfect.

The delusion of forever is a serious problem because it makes people think that being perfect all of the time is an achievable goal. The few that have achieved success for long periods of time, did not do it by unlocking the secrets of the universe. They did it by winning consecutive small victories. So win the small battles, and stop dreaming of the forever perfection. It’s not there.

You might think it would be nice to find that formula. A plug-in that guarantees success. But if you think of it, not having that formula is not a disappointment. It is actually a relief. Because if we had such a tool, there would be no need for evolution. You wouldn’t need to do the unexpected, that one thing that would surprise the people around you. You would just need to press the right buttons, check the right boxes, and you would be done. Every time. Now, would you call this a life worth living? I think not.

So, recognize that life is messy and uncertain. I know you like things to make sense. Your brain prefers that. To have instructions and rules that explain your actions and their consequences. But in reality, your choices are an exercise in making decisions under uncertainty. Will those around you accept, or reject your choices? And even if they do accept them, will they pick you and your version from the ones of past and present friends or foes?

Then, look at your life and your decisions through probabilities, not steps. Improve the odds.

Look at what’s going on around you. Observe what are the people you admire or compete with, being doing. Then evaluate your situation, and make the best possible decision. Once you realize you can’t be absolutely perfect, life becomes so much better.

Finally, separate the inputs from the outputs. Good things don’t necessarily come from good decisions, and vice versa. For example, the fact that you failed in your relationship, doesn’t mean you “picked” the wrong partner. You should instead examine the whole decision process that led you to that final choice. This is the sort of thinking that requires an extra step from us. To judge our actions and decisions based on their merits and not just judge ourselves and others by making “after the fact” comments; good or bad. Smart people fight this natural urge we have to pass judgment based purely on outcomes.

I know this is how the world usually works around us.

I also know it’s wrong.

Maybe we can start fixing things. For ourselves, at first. Because if we can’t adjust our thinking, we can’t make our lives better.

Be safe, everybody!