[Music]
hello everyone thank you for having me
Thank You TEDx and thank you Carson City
for the opportunity to talk today it’s
it’s it’s it’s very appropriate as my
talk centers around capitalism and the
theme of the talk is the Agora and the
Agora or the Agora marketplace in those
times was the community center where
people shared ideas they shared products
they transacted for goods and services
even back then if you had a space in the
marketplace and you were selling pears
and they were rotten you weren’t going
to sustain that space in the market and
you weren’t going to continue with the
quality product and that certainly is
true today in a much bigger community in
a much bigger marketplace I’m really
here to talk today about transformation
certainly my own personal transformation
from a mild-mannered accountant to
something much less mild-mannered maybe
an industrialist a systemic manager a
systemic thinker but eat but even more
so much more so on the transformation of
business and industry on the
transformation of how we operate
cooperate and inter depend much more
systemically much more scientifically I
actually started my career despite those
good introducing words without very much
guidance I seem to always be just pulled
to the most difficult or largest
challenge frankly sometimes I was just
taking opportunities that no one else
would you know those jobs that you
wouldn’t touch with a ten-foot pole I
somewhat always had you know like an
11-foot pole you know sitting in my
closet and my first experience was was
to be hired to come and work for a
global icon ik industrial company the
company had an over hundred year history
where they invented innovated and
created life-changing
products they actually invented the
first carbon arc lighting technology it
was a carbon in graphite material
science company they created this carbon
arc lighting technology that enabled the
first streetlights in Cleveland Ohio
so I guess before that you know we were
in the dark the first outdoor
streetlights in Cleveland Ohio they even
won an Oscar in Hollywood using a
variation of that lighting technology to
create color in motion pictures the
whole color vision spectravision they
won an Oscar and and more recently they
created a graphite electrode product
that enabled an entirely different way
of making steel in an electric arc steel
furnace which is actually the largest
industrial recycling chain in the world
so this company was amazing but in the
late 90s a private equity firm from Wall
Street came in and they bought the
company by investing 200 million dollars
within a year they sold out and left
with a billion dollars these guys were
heroes
these guys were rock stars these guys
were the kings of Wall Street but they
left tragic destruction in their wake
the company was burdened with 800
million dollars of debt worse eighty
million dollars of annual interest
expense this is a company that invested
over ten million a year in technology
science innovation R&D they couldn’t
handle the weight of that debt their
knees were buckling what did they do
they hired an army of accountants and so
the accountants come in they cut cost
they started first guess where R&D then
they went to marketing then they went to
engineering and sales but it was not
sufficient the company was insolvent and
it was about to be bankrupt
so then they hired me another accountant
brilliant move but they got lucky
because I really never wanted to be an
accountant I went into the company
trying to understand is there a
different way to do this it is without
question I was nowhere near qualified to
do the job that they were hiring me for
well that’s not correct to do the job
that they needed to be done which was to
transform the company and then I got
lucky too I met my teacher and he was a
physicist and he opened my eyes and that
awakening that epiphany is what I want
to share with you now today on how to go
from being a troubled cost-based
non-sustainable company to a pathway an
evolution of you will if you will of how
to do business and how to move forward
and our our society is mired with the
same poor thinking from Wall Street when
you see books that are entitled
inventing money or the big short or
currency wars you know that we’ve lost
our way you know that we’ve lost the
notion of in the meaning of what these
companies what these businesses what
these systems are supposed to do we
don’t have to change survival is not
mandatory and capitals will not survive
if it doesn’t transform or evolve it
scares me because it’s not just in the
business and industry level when the
leader of the monetary system in the
world the the chairman of the Federal
Reserve says hey don’t worry we have a
technology here in the United States
called the printing press we can just
print more money oh my gosh
Einstein taught us with the law
of thermodynamics that you cannot create
something out of nothing our Bibles
teach us that in every transaction in
every action in every engagement we need
to create wealth knowledge abundance we
don’t it’s not ethical to create
scarcity creating scarcity means you’re
taking from someone or you’re taking too
much from someone that’s what that
private equity firm did to that iconic
company it took that’s what the poor
pear farmer did when he gave a spoiled
fruit for money and was willing to take
the money for a bad product those
transactions are not ethical they’re
legal amazingly but they’re not ethical
it’s not unprecedented
almost every civilization from Sumeria
through most of the great ones Egyptian
China even my homeland Rome and the
Roman Empire they started with a one
ounce silver coin four hundred years
later they didn’t have a printing press
but they just had a one ounce coin with
only one hundredth of an ounce of silver
in it and they just kept devaluing their
currencies so the lesson is simple
we’re not innovating we’re not creating
but we think we can make something out
of nothing with a printing press with
the devaluation or debasement of
currency this is why capitalism is not
sustainable not in its current form and
that ethic that notion of never creating
scarcity exists in the Torah exists in
the Bible exists in the Quran in all of
our spiritual writings the ethics are
there do not create something out of
nothing but do not create scarcity so
there’s a new way there’s a new road
there is great thinking that came
primarily in my opinion two men dr.
Deming and dr. Goldratt and some of
their writings show us that there is a
different way to operate there is a new
way to think about the economy there is
a way out of the crisis and so do we
want to be short-term do we want to be
transactional do we want to create
scarcity do we want to let greed I’ve
heard some of these Wall Street Titans
express their philosophy is soundly
based proudly based on fear and greed or
do we want to be courageous we want to
grab that 11 foot pole do we want to
take the long hard road to create wealth
to create value to innovate to sustain a
whole new way and a whole new way of our
life so dr. Deming in 1950 1950 took a
napkin and drew his view of what an
enterprise should look like and it
looked like a system it showed suppliers
it showed activities and then it showed
customers and it was all interconnected
to this day the best Japanese companies
most covet the Deming award to reflect
quality systems
he revolutionized quality in the world
from Toyota to Ford and beyond about 30
years later another physicist Deming was
an American physicist dr. Gould rat was
an Israeli physicist and he came up with
a theory as well and his theory was
simple he said a system can only move as
fast as its slowest part so if a system
you know a system can only be a system
if it has a goal but it can only move
and generate units that goal based on
its slowest part he called it constraint
said wow this is great thinking my
teacher dr. lepor I took the notions of
Deming and the notion of Goldratt and
put them together
and said we can think much more
systemically in our world today we can
be much more innovative we could be much
more focused towards a common goal more
dramatically he identified ways to
identify those conflicts that were
blocking us from moving to this new
direction he was baffled because as he
explained what he did to people they all
said this has to be right it’s too
logical it’s too sound
but nobody would do it and he couldn’t
understand why and so he identified
three monster reasons why three core
embedded paradigms conflicts that we
just can’t seem to get out of and I just
want to tell you what they are how we
organize ourselves how we measure
ourselves and our notions of controlling
it all we’re stuck in a box we’re stuck
in a paradigm we’re stuck in a mental
model we make assumptions all of those
words are synonymous
when when we think about these things
first the organizational design the
system how are we organized as a
hierarchy do we want to be organized in
a command-and-control way do we want to
be siloed do we want to be functional do
we want to design our activities that
don’t include the other pieces of our
chain our suppliers our customers and
everything around it including the
community or do we want to just be
hierarchical really the hierarchy was
almost first implemented by Moses and
then perfected by the military and
corporate America has gone nuts with it
we we have to break the notion of
function and hierarchy and become much
more systemically organized we also have
to have the right kind of people to work
systemically you know hierarchy there’s
often ego and power in steam there’s
selflessness
there’s subordination to the common goal
there’s reliability and inner dependency
to your team
these are the characteristics that make
a system work more interdependently more
effectively shockingly when you talk to
people about it it’s obvious or isn’t it
obvious but when asked to do it it’s
very very different Trust reliability
camaraderie common goal then how do we
measure it it’s remarkable to me as a
certified accountant as a subject matter
expert in generally accepted accounting
principles that we understand the system
can only move as fast or but we refuse
to use time in any measurement dr.
Goldratt is on record saying that cost
accounting in GAAP accounting is the
single most disruptive most destructive
impact on productivity in our businesses
today understand that every one of our
businesses use these measurements to
measure themselves it’s so indoctrinated
and I shut down a plan using cost
accounting conventions and I cried when
I drove home because I don’t I didn’t
feel like it was right but the numbers
were telling me that it was right we’re
taught a different way measured the
speed at which things move reliably
through the system and lastly because
we’re organized hierarchically and
because we use accounting conventions
budgets are our controls I’ve been in
companies that’s budget endlessly they
budget for three months then as soon as
they’re done they start budgeting again
they budget budget budget do they work I
don’t know but they budget dr. Deming
showed us that this reliably write
liability of a system controlling a
system not with budgets but with
statistical control will confirm to you
that it’s 99.9% reliable and if it’s not
you know it the minute it’s not so we go
from hierarchical command and control
cost accounting budget nightmare based
worlds into a new foundation built on
system and quality process and then we
can start to envision how companies
might change
we start to think about how they might
become interconnected and oh yeah let me
finish my story about my first company
we did end up cutting cost initially 200
million in the first two years but then
we got reorganized and we learned I had
my awakening and we reorganize ourselves
systemically we eliminated the budgeting
nightmare we grew our revenue we hired
scientists we hired marketing managers
we hired engineers we grew our revenue
from 600 million to a billion we cut
that debt from 800 million to 400
million we started to connect the system
up with our suppliers our customers our
community our trading partners and
created a whole different supply chain a
whole different view of the world more
remarkably in the last five years so the
private equity firm took one year to
destroy it it took us eight years to fix
it
the first three were brutal in the last
five years we filed 700 new patents we
created two new businesses and five
years in a row we were recipient of our
d100 award the top 100 new inventions in
the world and so with that experience we
start to envision a completely different
world and an evolution of capitalism
that is sustainable thank you
[Applause]
hello everyone thank you for having me
Thank You TEDx and thank you Carson City
for the opportunity to talk today it’s
it’s it’s it’s very appropriate as my
talk centers around capitalism and the
theme of the talk is the Agora and the
Agora or the Agora marketplace in those
times was the community center where
people shared ideas they shared products
they transacted for goods and services
even back then if you had a space in the
marketplace and you were selling pears
and they were rotten you weren’t going
to sustain that space in the market and
you weren’t going to continue with the
quality product and that certainly is
true today in a much bigger community in
a much bigger marketplace I’m really
here to talk today about transformation
certainly my own personal transformation
from a mild-mannered accountant to
something much less mild-mannered maybe
an industrialist a systemic manager a
systemic thinker but eat but even more
so much more so on the transformation of
business and industry on the
transformation of how we operate
cooperate and inter depend much more
systemically much more scientifically I
actually started my career despite those
good introducing words without very much
guidance I seem to always be just pulled
to the most difficult or largest
challenge frankly sometimes I was just
taking opportunities that no one else
would you know those jobs that you
wouldn’t touch with a ten-foot pole I
somewhat always had you know like an
11-foot pole you know sitting in my
closet and my first experience was was
to be hired to come and work for a
global icon ik industrial company the
company had an over hundred year history
where they invented innovated and
created life-changing
products they actually invented the
first carbon arc lighting technology it
was a carbon in graphite material
science company they created this carbon
arc lighting technology that enabled the
first streetlights in Cleveland Ohio
so I guess before that you know we were
in the dark the first outdoor
streetlights in Cleveland Ohio they even
won an Oscar in Hollywood using a
variation of that lighting technology to
create color in motion pictures the
whole color vision spectravision they
won an Oscar and and more recently they
created a graphite electrode product
that enabled an entirely different way
of making steel in an electric arc steel
furnace which is actually the largest
industrial recycling chain in the world
so this company was amazing but in the
late 90s a private equity firm from Wall
Street came in and they bought the
company by investing 200 million dollars
within a year they sold out and left
with a billion dollars these guys were
heroes
these guys were rock stars these guys
were the kings of Wall Street but they
left tragic destruction in their wake
the company was burdened with 800
million dollars of debt worse eighty
million dollars of annual interest
expense this is a company that invested
over ten million a year in technology
science innovation R&D they couldn’t
handle the weight of that debt their
knees were buckling what did they do
they hired an army of accountants and so
the accountants come in they cut cost
they started first guess where R&D then
they went to marketing then they went to
engineering and sales but it was not
sufficient the company was insolvent and
it was about to be bankrupt
so then they hired me another accountant
brilliant move but they got lucky
because I really never wanted to be an
accountant I went into the company
trying to understand is there a
different way to do this it is without
question I was nowhere near qualified to
do the job that they were hiring me for
well that’s not correct to do the job
that they needed to be done which was to
transform the company and then I got
lucky too I met my teacher and he was a
physicist and he opened my eyes and that
awakening that epiphany is what I want
to share with you now today on how to go
from being a troubled cost-based
non-sustainable company to a pathway an
evolution of you will if you will of how
to do business and how to move forward
and our our society is mired with the
same poor thinking from Wall Street when
you see books that are entitled
inventing money or the big short or
currency wars you know that we’ve lost
our way you know that we’ve lost the
notion of in the meaning of what these
companies what these businesses what
these systems are supposed to do we
don’t have to change survival is not
mandatory and capitals will not survive
if it doesn’t transform or evolve it
scares me because it’s not just in the
business and industry level when the
leader of the monetary system in the
world the the chairman of the Federal
Reserve says hey don’t worry we have a
technology here in the United States
called the printing press we can just
print more money oh my gosh
Einstein taught us with the law
of thermodynamics that you cannot create
something out of nothing our Bibles
teach us that in every transaction in
every action in every engagement we need
to create wealth knowledge abundance we
don’t it’s not ethical to create
scarcity creating scarcity means you’re
taking from someone or you’re taking too
much from someone that’s what that
private equity firm did to that iconic
company it took that’s what the poor
pear farmer did when he gave a spoiled
fruit for money and was willing to take
the money for a bad product those
transactions are not ethical they’re
legal amazingly but they’re not ethical
it’s not unprecedented
almost every civilization from Sumeria
through most of the great ones Egyptian
China even my homeland Rome and the
Roman Empire they started with a one
ounce silver coin four hundred years
later they didn’t have a printing press
but they just had a one ounce coin with
only one hundredth of an ounce of silver
in it and they just kept devaluing their
currencies so the lesson is simple
we’re not innovating we’re not creating
but we think we can make something out
of nothing with a printing press with
the devaluation or debasement of
currency this is why capitalism is not
sustainable not in its current form and
that ethic that notion of never creating
scarcity exists in the Torah exists in
the Bible exists in the Quran in all of
our spiritual writings the ethics are
there do not create something out of
nothing but do not create scarcity so
there’s a new way there’s a new road
there is great thinking that came
primarily in my opinion two men dr.
Deming and dr. Goldratt and some of
their writings show us that there is a
different way to operate there is a new
way to think about the economy there is
a way out of the crisis and so do we
want to be short-term do we want to be
transactional do we want to create
scarcity do we want to let greed I’ve
heard some of these Wall Street Titans
express their philosophy is soundly
based proudly based on fear and greed or
do we want to be courageous we want to
grab that 11 foot pole do we want to
take the long hard road to create wealth
to create value to innovate to sustain a
whole new way and a whole new way of our
life so dr. Deming in 1950 1950 took a
napkin and drew his view of what an
enterprise should look like and it
looked like a system it showed suppliers
it showed activities and then it showed
customers and it was all interconnected
to this day the best Japanese companies
most covet the Deming award to reflect
quality systems
he revolutionized quality in the world
from Toyota to Ford and beyond about 30
years later another physicist Deming was
an American physicist dr. Gould rat was
an Israeli physicist and he came up with
a theory as well and his theory was
simple he said a system can only move as
fast as its slowest part so if a system
you know a system can only be a system
if it has a goal but it can only move
and generate units that goal based on
its slowest part he called it constraint
said wow this is great thinking my
teacher dr. lepor I took the notions of
Deming and the notion of Goldratt and
put them together
and said we can think much more
systemically in our world today we can
be much more innovative we could be much
more focused towards a common goal more
dramatically he identified ways to
identify those conflicts that were
blocking us from moving to this new
direction he was baffled because as he
explained what he did to people they all
said this has to be right it’s too
logical it’s too sound
but nobody would do it and he couldn’t
understand why and so he identified
three monster reasons why three core
embedded paradigms conflicts that we
just can’t seem to get out of and I just
want to tell you what they are how we
organize ourselves how we measure
ourselves and our notions of controlling
it all we’re stuck in a box we’re stuck
in a paradigm we’re stuck in a mental
model we make assumptions all of those
words are synonymous
when when we think about these things
first the organizational design the
system how are we organized as a
hierarchy do we want to be organized in
a command-and-control way do we want to
be siloed do we want to be functional do
we want to design our activities that
don’t include the other pieces of our
chain our suppliers our customers and
everything around it including the
community or do we want to just be
hierarchical really the hierarchy was
almost first implemented by Moses and
then perfected by the military and
corporate America has gone nuts with it
we we have to break the notion of
function and hierarchy and become much
more systemically organized we also have
to have the right kind of people to work
systemically you know hierarchy there’s
often ego and power in steam there’s
selflessness
there’s subordination to the common goal
there’s reliability and inner dependency
to your team
these are the characteristics that make
a system work more interdependently more
effectively shockingly when you talk to
people about it it’s obvious or isn’t it
obvious but when asked to do it it’s
very very different Trust reliability
camaraderie common goal then how do we
measure it it’s remarkable to me as a
certified accountant as a subject matter
expert in generally accepted accounting
principles that we understand the system
can only move as fast or but we refuse
to use time in any measurement dr.
Goldratt is on record saying that cost
accounting in GAAP accounting is the
single most disruptive most destructive
impact on productivity in our businesses
today understand that every one of our
businesses use these measurements to
measure themselves it’s so indoctrinated
and I shut down a plan using cost
accounting conventions and I cried when
I drove home because I don’t I didn’t
feel like it was right but the numbers
were telling me that it was right we’re
taught a different way measured the
speed at which things move reliably
through the system and lastly because
we’re organized hierarchically and
because we use accounting conventions
budgets are our controls I’ve been in
companies that’s budget endlessly they
budget for three months then as soon as
they’re done they start budgeting again
they budget budget budget do they work I
don’t know but they budget dr. Deming
showed us that this reliably write
liability of a system controlling a
system not with budgets but with
statistical control will confirm to you
that it’s 99.9% reliable and if it’s not
you know it the minute it’s not so we go
from hierarchical command and control
cost accounting budget nightmare based
worlds into a new foundation built on
system and quality process and then we
can start to envision how companies
might change
we start to think about how they might
become interconnected and oh yeah let me
finish my story about my first company
we did end up cutting cost initially 200
million in the first two years but then
we got reorganized and we learned I had
my awakening and we reorganize ourselves
systemically we eliminated the budgeting
nightmare we grew our revenue we hired
scientists we hired marketing managers
we hired engineers we grew our revenue
from 600 million to a billion we cut
that debt from 800 million to 400
million we started to connect the system
up with our suppliers our customers our
community our trading partners and
created a whole different supply chain a
whole different view of the world more
remarkably in the last five years so the
private equity firm took one year to
destroy it it took us eight years to fix
it
the first three were brutal in the last
five years we filed 700 new patents we
created two new businesses and five
years in a row we were recipient of our
d100 award the top 100 new inventions in
the world and so with that experience we
start to envision a completely different
world and an evolution of capitalism
that is sustainable thank you
[Applause]
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