Righting GM’s ship will take more than plant closures – Steve Spear

Steve Spear, Senior Lecturer, MIT Sloan School of Management and Engineering Systems Division

From The Hill

General Motors (GM) shutting five factories and cutting 14,000 jobs reflects poorly on a legacy approach to managing. Big shots making transactional decisions — buy or sell this, open or close that, hire or fire them.

What is required is a dynamic approach of building capabilities to be agile and resilient, learning quickly how to bring value into the marketplace with speed and responsiveness.

CEO Mary Barra’s announcement set off a firestorm of criticism and praise. President Trump led the barrage, saying the company was making a “big mistake” and that GM “ought to stop making cars in China and make them here.”

Furthermore, he took Barra to task, saying he was “disappointed” in her. Similar outrage was voiced by those advocating for the clock-punching working class.

But other commentators praised her “hard decisions” in the face of declining demand. The stock market agreed, with GM’s shares rising 7 percent.

Apparently, if you’re do something poorly and you promise to do less, then your valuation increases. It’s like relatives who are lousy cooks. If they say, “I’m not preparing the next holiday meal,” you cheer.

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Beyond Polarization – Jason Jay

MIT Sloan Senior Lecturer Jason Jay

MIT Sloan Senior Lecturer Jason Jay

From Technology Review

This past June, I attended a conference in New York City with colleagues from around the world. After our three days together, my European, Indian, and Latin American friends were a bit vexed. The conversation kept getting pulled into the lightning storm of American politics. We struggled to pay attention as our phones flooded with alerts about congressional primaries, Supreme Court decisions, executive orders, and the flurry of terrified, furious, indignant, or despairing comments ping-ponging between political extremes.

Over beers, a few of us “coastal liberal elite” academics and journalists huddled and commiserated about our extended family members in South Dakota, North Carolina, Florida, and Indiana. How could they deny the reality of Sandy Hook, climate change, and science in general? I suspect those same relatives are similarly confused—why are we so eager to support illegal immigrants, anti-police protests, and lawlessness in general?

This polarization is only increasing as we head to the midterm elections. With our country split into factions like anti-fascists, progressives, moderates, libertarians, evangelicals, and Trumpists, it’s increasingly difficult to know how to engage with others who don’t share our views.

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Trumponomics is failing on growth – Simon Johnson

MIT Sloan Professor Simon Johnson

From Project Syndicate

WASHINGTON, DC – US President Donald Trump and his Secretary of the Treasury, Steven Mnuchin, have promised an economic miracle. They argue that when the United States adopts their policies, it will consistently achieve annual economic growth above 3%, or even above 4%. After a year of being in charge, pushing hard on deregulation, and getting what it wanted in terms of tax cuts, how is the Trump team doing?

We are still in the early days, but the results so far have been disappointing. And the US’s medium-term prospects for sustained growth could be endangered if Trump pursues the policies he claims to want.

Trump has repeatedly argued that America’s overall economic performance in 2017 should be seen as the direct result of his policies, and he has made a big deal out of the third-quarter growth rate, which was initially reported as 3.3%, then revised down to 3.2%. Yet, in the fourth quarter, growth was down to 2.6%, and initial estimates suggest that overall growth for the year will not surpass 2.3%. That is lower than what was achieved under former President Barack Obama in 2014 (2.6%) and 2015 (2.9%).

In fact, under Obama, the quarterly growth rate surpassed 3% seven times, and even reached 4.6% on two occasions. From the third quarter of 2009, growth was positive in every quarter, save two. But not only was headline growth sturdy under Obama; his administration also presided over considerable job growth – the economy added more than two million jobs annually in seven out of his eight years in office – as well as falling unemployment and higher labor-force participation. Read More »

Public companies are about to be flooded with cash, how will they spend it? – Robert Pozen and Robert Steel

MIT Sloan Senior Lecturer Robert Pozen

MIT Sloan Senior Lecturer Robert Pozen

From Fortune

U.S. companies will soon experience a tsunami of free cash flow. Because of the new Trump-GOP tax plan—the Tax Cuts and Jobs Act—we estimate American companies will have over $2.6 trillion of additional cash over the next five years. This will come from three sources: repatriated overseas cash, future foreign earnings, and lower corporate taxes on domestic profits. The critical question is: What will companies do with this inpouring of cash?

For years, many CEOs of public companies have complained of pressure by analysts and activists to focus on short-term profits rather than long-term growth. Now each CEO has a great chance to put their money where their mouth is.

CEOs have two main alternatives for this incremental cash flow; they can boost short-term returns to shareholders through higher dividends and share repurchases, or they can augment long-term growth by investing in plants, people, research, and technology acquisitions.

For the sake of their credibility and the American economy, we urge CEOs to invest in long-term growth, and not in share buybacks as they did in 2004.

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The Case for Evidence in Government – Doug Criscitello

Doug Criscitello, Executive Director of MIT’s Center for Finance and Policy

Doug Criscitello, Executive Director of MIT’s Center for Finance and Policy

From Government Executive

Although the U.S. government presides over what collectively must be one of the world’s largest data repositories, its capacity to use that data to build citizen trust and make informed, evidence-based decisions is severely constrained. As explained in an enlightening report recently issued by the bipartisan Commission on Evidence-Based Policymaking (CEP), the mere existence of data is a necessary but not sufficient condition for creating empirical evidence to inform decisions throughout the full lifecycle of public programs—enactment, funding, operation, reform, termination.

The digitization of many facets of various activities the government funds through its $4 trillion annual budget has resulted in a data explosion at federal agencies. But that data needs to be synthesized into actionable information to satisfy taxpayers’ demands for better results and greater transparency. The CEP report makes clear that much remains to be done to achieve that goal and provides a comprehensive plan to improve access to federal data, strengthen privacy protections and expand the public, private and academic research communities’ capacity to analyze data.

CEP provides an insightful list of recommendations such as establishing a National Secure Data Service to enable and leverage capabilities across government, addressing statutory impediments that obstruct smart data use, and streamlining processes used to grant researchers access to data. The report appropriately emphasizes strong privacy protections and advocates for comprehensive risk assessments for publicly released data and for the use of better technology and greater coordination across government. To prioritize efficient evidence building, CEP points out the need to coordinate statistical activities, evaluation and policy research within and between departments and across levels of government.

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