What house are you building?

SCIENCE OF BUILDING LEADERS By ROSHAN THIRAN


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Building a solid house can only be done through reflection.

“Keep doing what you're doing, and you'll get what you are getting. If that is good, great. If it's not, you better change.” Ang Hui Ming

A FEW years ago, I heard about an elderly construction worker who wanted to quit. He told his boss of his plans to leave. His boss was sorry to see such an excellent worker go and asked him to build one last house as a personal favour.

The construction worker said yes, but his heart was not in his work. There was no passion left. He resorted to shoddy workmanship and used inferior materials, cutting corners to get the work done.

Finally, when the house was finished, his boss handed him the keys to the house saying, “This is your house. It's my gift to you.” The construction worker was stunned and full of regret as he knew he was sloppy working on it. If he had only known he was building his own house, he would have done it all so differently.

Isn't it the same with us? Often we work hard but after a point in time, we dish out less than stellar performances. Our attitudes differ but we console ourselves by saying it doesn't matter. But in most cases, it does matter.

Each day, we build our lives, one transaction at a time. Each day counts as we build our life's building. When I worked at General Electric (GE), people always spoke about the “house that Jack built.” Jack Welch, painstakingly, for more than 20 years, built the foundation of GE, then its rooms, its roof and finally completed a remarkable turnaround. This took patience, time and years.

When we don't get the promotion we crave, or we fail to get what others get, we are surprised. Could it be because the house we built doesn't have strong foundations or good materials? It's not just last year's performance or last week's deal that counts it is your cumulative effectiveness on a daily basis.

So, how does one ensure that you are effective daily? Based on our research, it requires an equilibrium of action and reflection. While most leaders are biased towards action, the best leader balances contemplation and action, creating daily solitude for effective action.

Ineffective leaders

Most leaders say the resource they lack most is time. But if you really observe managers for a day, you will see them rushing to meetings, constantly checking their Blackberry, dodging fires, believing they are attending to important matters.

For 10 years, Bruch and Ghoshal observed behaviours of busy managers, and their conclusions: 90% of managers squander their time in all sorts of ineffective actions and activities. A mere 10% of managers spend their time in a committed, purposeful, and reflective manner. These 10% are usually classified as great leaders.

Worst still, psychiatrist John Diamond found that 90% of people “hate their work.” They come to work to punch their time clock and can't wait to go home. The difference between leaders who love their jobs and those that don't they take time daily to re-energise themselves and focus through reflection.

Reflection

The practice of reflection goes back centuries and is rooted in numerous institutions including the Japanese samurai. Ben Franklin, one of my leadership heroes, had a rather systematic approach to reflection, which was a fundamental part of his daily life. He developed a list of 13 virtues and each day he evaluated his leadership relative to these virtues.

A sincere examination of ourselves is never easy. It involves the willingness to face and acknowledge our mistakes, failure and shortcomings. Albert Schweitzer, Nobel Prize winner, believes reflection in life is critical to leadership as it allows you to take into “account what you have neglected in thoughtlessness.”

Interestingly, a key step in the Alcoholics Anonymous programme asks participants to make a probing and courageous moral inventory. Steve Jobs went to India to reflect prior to starting Apple.

In business, reflection provides an opportunity to consider the ramifications of the services they provide and how to keep raising the bar. Business grows when they look within.

So, what does one achieve by reflection and contemplation? Productive action relies on a combination of three traits:

1. Focus the ability to zero in on an objective and see the task to completion
2. Energy the vitality that comes from concentrated personal commitment.
3. Learning the ability to correct past mistakes and improve oneself

Focus without energy results in lethargic execution or burnout. Energy without focus leads to aimlessness or artificial busyness. And not learning from your mistakes ensures you repeat them.

All three pieces can only be obtained through reflection. Procrastinators are usually people with low levels of energy and focus. Leaders with high focus but low energy never inspire and generally end up ostracising the troops. Managers with high energy but low focus confuse their employees with chaotic activity.

Reflective managers are purpose-driven with high energy levels, learning from their mistakes. They start their day in reflection to ensure purposeful execution and action.



Focus

Confucius once said, “A man who chases two rabbits catches neither!” In Star Wars Episode 1, Qui-Gon says to the young Jedi Anakin, “Always remember, your focus determines your reality.” There is an ounce of truth in that Jedi wisdom. A focused person usually attains his/her goals.

At the end of a tiring day, if we focus on how tired we are, generally we will remain tired and end up vegetating in front of the TV set. If we re-focus the mind from being tired to needing to be healthy, there is a bigger likelihood we will exercise.

It is easy to stray with all the distractions, TV, Internet and mobile devices that we have today. These distractions can lead us off-tangent, stealing our focusing power. Reflection corrects that.

Energy and passion

Reflection generates passion and energy. Energy comes from passion. Passion is self-generated as you can motivate yourself to be excited about what you do.

Author Bill Strickland writes: “Passions are irresistible. They're the ideas, hopes, and possibilities your mind naturally gravitates to, the things you would focus your time and attention on.”

Strickland believes that only by following your passion will you unlock your deepest potential. “I never saw a meaningful life that wasn't based on passion. And I never saw a life full of passion that wasn't, in some important way, extraordinary.”

Learning from mistakes

Reflection allows us to learn from mistakes. We all make mistakes I have done so spectacularly at times. We have all been in situations where things don't go exactly to plan. But how often do we take the time to sit down to reflect on where it all went wrong?

Plato's great words “know thyself” implies that a lifetime of self-investigation is the cornerstone for knowledge. John Dewey states, “We do not learn from experience, we learn from reflecting on experience.”

In fact, the Kolb Learning Cycle, is based on the belief that learning for real comprehension comes from a sequence of experience, reflection, abstraction, and action. All learning can come only through reflection.

Check your attitudes daily

Living an extraordinary life is done internally through the daily positive alignment of your attitude. Your attitudes and the choices you make today build the house you live in tomorrow. Build wisely! Build with commitment, pride, joy, love and passion.

Your attitude is contagious and sets the mood for those around you. Your employees get excited when you are excited. They are energised when you are.

Plato opened up The Academy in Athens at the age of 40, when life expectancy was 36. He ran this first university, training Aristotle and others, until he was 80. Pursuing focused positive dreams arms one with high energy and leads to an extended, rewarding life.

I don't have time to think!

This is a pretty common reaction: I don't have time to reflect.

Which begs the question: Do you have time to make the same mistakes over and over again? Or to remain unfocused, running around like a headless chicken? Or lack energy to fulfil your dreams?

I remember an old boss once told me that I was not paid to sit around and think. On hindsight, that was probably the worst advice I received. Leaders should spend at least a quarter of their time thinking about the future of their company and reflecting on the past. It may seem ludicrous to spend time reflecting but “real work” can only be done right when you know where you are going and have the energy to get there.

Final thoughts

If we could do things over, we probably would do many things differently. And better. But the problem is, we cannot go back. We are just like the construction worker. Each day we hammer a nail, place a board, or erect a wall in our career, family and lives. Are you doing it with focus and energy? Are we improving ourselves by learning from our mistakes?

If the fire in our eyes has diminished and we are going through life in auto-pilot, with the joy of life seemingly leaked out, it is time to take stock of life and reflect.

Socrates, Ben Franklin and most great leaders believed that reflection led to a productive and fulfilling life. And don't say you don't have time. After all, as Buddha aptly puts it, “All that we are is the result of what we have thought.”

Roshan Thiran is CEO of Leaderonomics, a social enterprise passionate about transforming the nation through leadership development. For more information on leadership programmes for your organisation or youth camps for your kids, call +60122006045 or login to www.leaderonomics.com

China defense transparency

Military open to media scrutiny
By Cheng Guangjin and Li Xiaokun (China Daily)
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Beijing - Increased transparency on China's defense spending is not only a government initiative but also a result of a high level of media coverage, meaning that the claims made by some Western countries that China's military is shielded from public scrutiny are groundless, according to a top expert on military affairs.

"Now China's national defense expenditure is not only an issue dealt with by the government, lots of mainstream Chinese and other media organizations are carrying huge amounts of military information," Chen Zhou, from the People's Liberation Army's Academy of Military Science, also a member of the think tank behind China's White Paper on national defense, said in an exclusive interview with China Daily.

Related readings: Full text: China's National Defense in 2010 China sticks to defensive national defense policy  China issues white paper on national defense

For example, reports on the test flight of China's stealth fighter jet appeared on the Internet minutes after the aircraft's debut.

Beijing unveiled a 12.7 percent increase in its 2011 defense budget of 601.1 billion yuan ($91.4 billion) earlier this month.

Chen noted that China's defense expenditure as a proportion of its overall GDP, between 1.4 to 1.5 percent, was below the global average of between 2.5 and 4 percent. Statistics also showed that China's defense expenditure per soldier in 2009 was $30,600, compared with $481,000 in the United States, $410,400 in the United Kingdom and $172,700 in Japan.


"The increase in our defense budget is at an appropriate level. We have two guidelines when planning the defense budget, to meet the needs of both national defense and the national economy," said Chen.

The increase in defense expenditure in recent years is actually to make up for losses in the 1980s and 1990s, when China focused on economic construction at the expense of military development, Chen noted.


China recently allowed more family members of military personnel to join their spouses, which would help end the separation of nearly 100,000 service persons from their spouses.

The military will make efforts to provide housing and employment for family members, which means that young couples, even if living in the most expensive Chinese cities such as Beijing and Shanghai, will get government-subsidized apartments.

China said some Western nations make a habit of attacking China by criticizing its increased defense spending.

"Such accusations are unacceptable. The critics either do not respect the facts, or they do it for other reasons," he said.

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Are Solar Power Incentives A Nasty Regressive Tax On The Poor/Misinformed?

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By GORDON JOHNSON

Image by Getty Images  via @daylife 

Lately, a lot of attention has been given to the solar industry due to the unfortunate set of events which have unfolded in Japan as a result of the earthquake. The prevailing theme among journalists, mis-informed Wall Street analysts’, and investors who have a positively biased view on the solar industry is that due to the problems with the nuclear plants in Japan following the earthquake, this form of renewable power should be abandoned in favor of power sources such as solar.

The fundamental problem with this thesis is that it is impossible to replace distributed (i.e., power this is accessible equally at all times of the day) baseload (i.e., energy produced at a constant rate) nuclear power with intermittent (i.e., energy that is only accessible during certain times of the day) peakload (i.e., power sources that provide the most output at select times of the day) solar power. Furthermore, given nuclear power costs roughly $0.015/kWh, while solar power costs closer to $0.25/kWh, if all of the world’s nuclear plants were to be replaced by solar plants, the cost to the rate-payer would go up by nearly 25x (we do not think this would bode well in countries facing high unemployment – U.S., France, Greece, Spain, Italy, Germany, etc.). Stated more simply, if you were to replace the world’s nuclear power with solar power, you would only have power during the day when the sun is shining the brightest (if a rain storm, or large cloud, happened to pass over, you would suddenly not have power – this could be a problem in less sunny regions). In addition, your cost of electricity would rise by roughly 25x. Under this backdrop, it seems many of the arguments suggesting solar energy can replace nuclear are delusional at their core.

Now, to the question posed in the heading of this entry: Are solar power incentives a nasty regressive tax on the poor/misinformed? Well, first, it may make sense to know what a regressive tax is. More specifically, in terms of individual income and wealth, a regressive tax imposes a greater burden on the poor than the rich – there is an inverse relationship between the tax rate and the taxpayer’s ability to pay as measured by assets, consumption, or income. Stated differently, a regressive tax tends to reduce the tax burden of people with a higher ability-to-pay (i.e., the rich), as it shifts the burden disproportionately to those with a lower ability-to-pay (i.e., the poor).

So, how do solar incentives work? Well, there are a number of schemes in which solar power is “incentivized”. However, the most popular form of solar incentive globally is in the form of a feed-in-tariff (FiT). Under a FiT incentive structure, renewable energy generators (homeowners, businesses, pension fund investors, private equity investors, etc.) are paid a premium by the utility buying the solar power generated by their roof-top system, on top of the cost of generating the solar power. As a point of reference, it is important to remember that while natural gas costs roughly $0.035/kWh, and coal costs approximately $0.05/kWh, with nuclear power at $0.015/kWh, solar currently costs about $0.25/kWh. Thus, if you are using solar under a FiT incentive structure, you are being paid by the utility $0.25/kWh for the solar power you are producing, plus an additional “premium” as high as $0.25/kWh, making the total cost to the utility subsidizing this incentive significantly higher than it would have otherwise paid using more traditional forms of electricity.


Thus, the cost to the utility appears to be significant, right? Well, it’s not that simple. That is, what the utility does when it pays the person who is using the renewable energy under a FiT program is simply redistribute the difference in what it is paying the renewable energy user (i.e., $0.35-$0.55/kWh) and what it pays for more traditional forms of energy (i.e., $0.045/kWh) to all of its ratepayers; in essence, the utility is not paying the exorbitant cost of incentivizing solar, but rather the collective ratepayers in any region which implements solar incentives are. This begs the question… can’t everyone equally share in the benefit of this structure? Well, unfortunately, due to the high cost of solar, the answer to this question is no. What do we mean? Well, when considering at present, the cost for a solar system is approximately $5.50/watt, and the average home installation is 5.5kW, the cost to anyone considering such an installation is $27,500 up front. Furthermore, given a solar system is a 20-year investment (meaning the returns on these systems are calculated over a 20-year period), the first 5-to-10 years of your investment in a home solar roof-top system, you will be cash flow negative. Admittedly, for those ratepayers in a FiT area who have a spare $27,500 to invest, which they don’t need access to in 5-to-10 years, an investment in solar makes a lot of sense (you are paid to use power). However, for the bulk of Americans who do not have a “spare” $27,500 to invest over a 20-year period, for which they will be cash flow negative for 5-to-10 years, solar is not an option. Despite this, however, because the utility redistributes the cost of solar to all ratepayers, whether you are using solar or not, you are paying if you live in a state that has significant solar incentives (i.e., California, New Jersey, Florida, North Carolina, etc.). As such, despite you not being able to afford putting solar on your roof, you are effectively being forced to subsidize your “rich” neighbor who does have the resources to put solar panels on their roof. Stated differently, a solar incentive is a form of a regressive tax on the “poor”. This begs the question… do many of the “poor” people in the States who have passed solar legislation understand this dynamic? Likely not.

When you add to this dynamic the fact that the majority of solar modules are produced in China, with U.S. solar module makers First Solar (FSLR) and SunPower (SPWRA) producing the majority of their panels in Malaysia, Germany, and Vietnam, the idea that solar installations in the U.S. create American jobs is another mistruth (this is an understatement). In fact, First Solar’s 290MW Agua Caliente Solar Project, which will receive nearly $1.5 billion in tax-payer funded money from the U.S.

government, and is being supplemented, for the most part, by modules produced in Malaysia (thus, effectively, creating jobs in Malaysia using U.S. taxpayer dollars), being constructed in Yuma County, Arizona, will only create 15-to-20 full-time U.S. jobs (a cost to the U.S. taxpayer of nearly $85.7 million per full-time job; this does not appear like a good return on investment for the U.S. taxpayer).
Another form of incentive, more widely used in the U.S., comes in the form of a loan guarantee, or tax credit. While these differ from FiTs, they are effectively the same thing… money taken from the taxpayer used to subsidize high-cost solar power.

In short, the way solar incentives work is by taking money from the poor to subsidize the rich homeowners, businesses, and investors who can afford the high upfront costs of installing solar power (a reverse Robin-Hood structure), which is among the most expensive forms of energy available today. While the solar industry has grown considerably, increasing its lobbying power globally, which in-turn has allowed for a massive expansion in marketing (with the key selling point being you must support solar to stop global warming), it remains among the most costly and inefficient forms of electricity available when observing: (1.) cost/kWh compared to other forms of electricity (i.e., wind, hydro, geothermal, nuclear, etc.), and (2.) usage (solar power is only available when the sun is shining, and declines in output with less intense sunrays and cloud coverage).

While it goes without saying that many of the same people who support solar in the U.S., and other countries, don’t fully understand this dynamic, as they see material spikes in their electricity bills, despite limited job creation associated with the massive solar plants being constructed in their backyards, this could become more of an issue.

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TNB in Limbo-Legal notice shocks landlord!

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Surprised: Sien showing the legal notice which he received for “stealing electricity”.

By QISHIN TARIQ qishin.tariq@thestar.com.my

Landlord perplexed over TNB’s demand to pay RM3,500 for ‘electricity theft’



KUALA LUMPUR: A landlord who settled about RM5,000 in electricity bill arrears chalked up by his errant Tenaga Nasional Bhd (TNB) tenant thought that would be the end of the matter.

Stanley Sien, 51, said he was irked with TNB's inaction against its staff, despite several complaints that they had run up the arrears.

He then paid up the arrears, repaired his badly maintained terrace house in Puchong for RM16,000 and signed a new tenant in 2009.

Then came the shocker last October a legal notice from TNB demanding Sien to pay up RM3,452.49 for “stealing electricity”.

 

“After I paid the outstanding arrears, there was an understanding with TNB that the file would be closed and there would be no more extra charges.

“However, despite the mutual agreement, I was shocked to receive the legal notice later,” he said.
“It was their own employee who stole the electricity, so why should I pay?

“I had so much problems with the TNB tenant who did not even pay my rental for more than a year.”
Sien said the TNB worker concerned had been able to reconnect power supply on his own whenever it was disconnected.

“I don't know how he did it,'' he said, adding that he had filed several complaints to TNB to contest the initial arrears amounting to RM5,000 but was told nothing could be done since his tenant had reconnected the supply himself.

When contacted, TNB said it was investigating the complaint.
TNB chief operating officer Azman Mohamed was unavailable for comment as he was overseas.

China’s five-year plan and global interest rates

COMMENT By MARTIN FELDSTEIN


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CHINA'S new five-year plan will have important implications for the global economy. Its key feature is to shift official policy from maximixing gross domestic product (GDP) growth toward raising consumption and average workers' standard of living. Although this change is driven by Chinese domestic considerations, it could have a significant impact on global capital flows and interest rates.
China's high rate of GDP growth over the past decade has, of course, raised the real incomes of hundreds of millions of Chinese, particularly those living in or near urban areas. And the funds that urban workers send to relatives who remain in the agricultural sector have helped to raise their standard of living as well.

But real wages and consumption have grown more slowly than China's total GDP. Much of the income from GDP growth went to large state-owned enterprises, which strengthened their monopoly power. And a substantial share of China's output goes abroad, with exports exceeding imports by enough to create a current-account surplus of more than US$350bil over the past year.

China now plans to raise the relative growth rate of real wages and to encourage increased consumer spending. There will also be more emphasis on expanding service industries and less on manufacturing. State-owned enterprises will be forced to distribute more of their profits. The rising value of the yuan will induce Chinese manufacturers to shift their emphasis from export markets to production for markets at home. And the government will spend more on low-income housing and to expand healthcare services.

All of this will mean a reduction in national saving and an increase in spending by households and the Chinese government. China now has the world's highest saving rate, probably close to 50% of its GDP, which is important both at home and globally, because it drives the country's current-account surplus.

A country that saves more than it invests in equipment and structures (as China does) has the extra output to send abroad as a current-account surplus, while a country that invests more than it saves (as the United States does) must fill the gap by importing more from the rest of the world than it exports. And a country with a current-account surplus has the funds to lend and invest in the rest of the world, while a country with a current-account deficit must finance its external gap by borrowing from the rest of the world. More precisely, a country's current-account balance is exactly equal to the difference between its national saving and its investment.


The future reduction in China's saving will therefore mean a reduction in China's current-account surplus and thus in its ability to lend to the United States and other countries. If the new emphasis on increased consumption shrank China's saving rate by 5% of its GDP, it would still have the world's highest saving rate. But a five-percentage-point fall would completely eliminate China's current-account surplus. That may not happen, but it certainly could happen by the end of the five-year plan.

If it does, the impact on the global capital market would be enormous. With no current-account surplus, China would no longer be a net purchaser of US government bonds and other foreign securities. Moreover, if the Chinese government and Chinese firms want to continue investing in overseas oil resources and in foreign businesses, China will have to sell dollar bonds or other sovereign debt from its portfolio. The net result would be higher interest rates on US and other bonds around the world.

Whether interest rates do rise will also depend on how US saving and investment evolves over the same period. America's household saving rate has risen since 2007 by about 3% of GDP. Corporate saving is also up. But the surge in the government deficit has absorbed all of that extra saving and more.

Indeed, the only reason that America's current-account deficit was lower in 2010 than in previous years is that investment in housing and other construction declined sharply. If Americans' demand for housing picks up and businesses want to increase their investment, a clash between China's lower saving rate and a continued high fiscal deficit in the United States could drive up global interest rates significantly.

Martin Feldstein, professor of economics at Harvard, was chairman of President Ronald Reagan's Council of Economic Advisers and is former president of the National Bureau for Economic Research. - Project Syndicate