Two days ago the President of the European Commission - Jose Manuel Barroso (possibly a distant relative ... he and I have connected via social media and the family tree detective work is underway) spoke to an audience in Hungary about the role of universities in an innovative, globalized market. The commission is planning to introduce a new initiative to modernize European higher education to help keep pace with workplace demands for skills (which suggests to me that they hope to keep up with innovation elsewhere vs. driving innovation ... but maybe both if I am misinterpreting their aims).
In this clip (http://ec.europa.eu/commission_2010-2014/president/index_en.htm), President Barroso said "We want to free up the reservoir of talent, energy and knowledge that universities represent." This comment suggests a recognition that a relevance-gulf has emerged between what is being taught in European schools vs. what is required of young European adults in the real world ... now being influenced from beyond the EU's borders more than ever.
I see a common thread between what this EU Commission initiative is targeting to address and the challenges the US economy and society face. Roughly 3 decades ago a tide of deregulation was unleashed in the USA. A rising tide of magnificent innovation and fundamental life style changes resulted as artificial barriers were dismantled and policy decisions were made to open up new frontiers to development (i.e.: wireless spectrum). Opportunities came into focus for inventors, innovators, pioneers and of course investors. In parallel, the companion investor demand of ROI performance put increasing c-level pressure and focus on cost reduction. While formally regulated enterprises were organizationally bloated from guaranteed rates of return that instituted inefficiencies, over the ensuing deregulation decades, a cost-reduction paradigm emerged as a leading tactic for more 'easily' addressing investors' aggressive ROI demands. I say 'easily' pejoratively as contrasted with making the tougher decisions to pursue and commit to innovative, new revenue generating initiatives that almost always have out-year break even projections. With top officers eventually demanding business unit/line of business heads to cut into bone to meet investor demands, who could afford to make speculative investment decisions?
Just about everything I can think of evolves (including a mountain or even a rock exposed to the elements). European higher education gradually evolved based on environmental factors it faced within, but beyond Europe new competition emerged from evolving environments elsewhere. Certainly Europe's education system was aware of the evolving environments elsewhere, but possibly had institutional constructs that prevented it from adequately adapting. President Barroso's announcement shows that the EU Commission recognizes that Europe's education systems required fundamental structural changes that will facilitate more effective adaptability (that could also have evolved/resulted from too insular, parochial thinking).
Concerning the US business environment, beyond regulatory and taxation matters (a huge and separate issue), the 'easy' cost-reduction decisions by c-levels happen because their financial compensation incentives are focused on annual (and quarterly) performance ... derived from investor expectations and demands.
Over the last 3-4 decades, has the US investor-culture (and thus this c-level reward system) evolved from a balance of short and long term, to short term excessive? My opinion is that the Baby Boom generation has gravitated the US investor- culture in the direction of being more focused on bigger and faster returns (vs. patient, longer haul investing that I saw as a more common investor-trait of prior generations).
While the USA's post-deregulation era has unleashed technological innovation that has also opened up vastly lower cost manufacturing markets in nations like China and Vietnam, as well as highly skilled and again vastly lower cost services markets in India and elsewhere, the US is facing a perfect storm of 'now-what?' after 3+ decades of post-deregulation, cost-reduction investor demands that logically influenced c-levels to outsource, offshore, move and shutter-up a significant percentage of the USA's onshore business base. Most oversized businesses have exhausted their annual dance of reorganize-downsize-repeat. Coinciding with this trend has been the downward trend in the USA's relative position on scholastic performance from elementary aged through collegiate aged students. These fundamentals cannot be changed overnight.
President Jose Manuel Barroso's announcement suggests more than recognition/acknowledgment, but commitment to making meaningful structural change. Beyond the obvious importance of sensible regulatory and taxation policy that facilitates US business' global competitiveness, and similar to the EU ... a need to close the relevance gap of the US education system, I still sense that some core structural aspects of our investor community's expectations and investment behavior (and the resulting c-level compensation-reward packages) needs attention - but that may be a cultural, evolutionary-thing that may only change out of necessity as the ebb and flow of consequences are fully understood. Survivors evolved because they evolved to survive.
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