Ready, set, prioritize [MIT Sloan innovation@work Blog]

This is the first in a series of three posts about Bob Pozen’s approach to personal productivity and high performance.

What stands between you and the more productive version of you—the person who meets his or her personal and professional goals on a daily, monthly, and yearly basis? Robert Pozen provides concrete answers to this question in his new course, Maximizing Your Personal Productivity, offered on March 20-21 by MIT Sloan Executive Education.

“It became clear that although I spent most of my adult life working in financial institutions, and had written text books on the financial industry, all of a sudden everyone was interested in personal productivity,” says Pozen. “People were stopping me on the street to ask for advice; calling me to say how my book had changed their entire approach to reading and writing.”

When we asked him how the course begins, Pozen focused on setting and prioritizing goals—one of the three big ideas in his book. “Most professionals have not taken the time to write down their goals and prioritize them. Without a specific set of goals to pursue, many ambitious people devote insufficient time to activities that actually support their highest professional priorities.”  Pozen adds that unless you bill your time by the hour, you probably only have a vague sense of how much time you’ve allocated to various tasks and functions over the last year. This discrepancy between top priorities and time allocations can happen to anyone, in any field, at any level of an organization.

Read more at innovations@work…

Quoted In: James Surowiecki’s “The Cult of Overwork,” The New Yorker

If the benefits of working fewer hours are clear, why has it been so hard for businesses to embrace the idea? Simple economics certainly plays a role: in some cases, such as law firms that bill by the hour, the system can reward you for working longer, not smarter. And even if a person pulling all-nighters is less productive than a well-rested substitute would be, it’s still cheaper to pay one person to work a hundred hours a week than two people to work fifty hours apiece. (In the case of medicine, residents work long hours not just because it’s good training but also because they’re a cheap source of labor.) On top of this, the productivity of most knowledge workers is much harder to quantify than that of, say, an assembly-line worker. So, as Bob Pozen, a former president of Fidelity Management and the author of “Extreme Productivity,” a book on slashing work hours, told me, “Time becomes an easy metric to measure how productive someone is, even though it doesn’t have any necessary connection to what they achieve…

Read the full article at New Yorker.com…

Corporate Tax Reform Part I – The Urgent Problem of “Locked Out” Foreign Profits [Brookings.edu]

Now that Congress has resolved the federal budget for a year or more, it should turn its attention to corporate tax reform. Although many Democrats as well as Republicans talk about reducing the domestic tax rate on corporate profits from 35% to 25%, this is not politically feasible. Instead, Congress should concentrate on the most urgent aspect of tax reform – freeing up almost $2 trillion in foreign profits of U.S. corporations, “locked out” of the U.S. because of perverse U.S. tax rules.

Given the large and growing federal debt, tax reform must be revenue neutral : any reduction in tax revenue from lower corporate rates must be offset by other tax changes increasing tax revenue by the same amount. In specific, dropping the corporate tax rate from 35% to 25% will cost the U.S. Treasury roughly $1.2 trillion over the next 10 years. So to finance this rate reduction, Congress must limit or repeal existing tax preferences of U.S. corporations by roughly $1.2 trillion over 10 years. Can that be done realistically? My emphatic answer is NO.

Politicians have often advocated the closing of small tax “loopholes” such as the special rules for corporate jets and the favorable tax treatment of incentives fees for hedge fund managers. Similarly, academics have called for repeal of tax preferences for specific industries such as credit unions, and specific products such as corporate owned life insurance. However, all these tax “loopholes”, if repealed, would raise less than $100 billion of tax revenues over the next 10 years…

Read the complete article at Brookings.edu…

Corporate Tax Reform Part 2: A Middle-Ground Proposal for Taxing Foreign Earnings [Brookings.edu]

The current U.S. tax rules strongly discourage U.S. corporations from repatriating almost $2 trillion in foreign profits. Such profits cannot be used to build U.S. facilities, pay dividends to U.S. shareholders or acquire U.S. firms—unless the U.S. corporation pays a 35% U.S. tax on such profits (minus applicable foreign tax credits). Congress should be able to change the current tax system for foreign corporate profits since it benefits almost no Americans (other than tax lawyers). The U.S. Treasury receives little tax revenues from these foreign profits and corporate executives are prevented from making sensible decisions about how to deploy those foreign profits.

To change the current tax system, however, both political parties will have to seek a middle ground on tax rates. Liberal Democrats should not insist on taxing foreign corporate profits at 35% regardless of whether they are brought back to the U.S. The immediate application of a 35% rate to foreign profits of U.S. corporations would put them at a tremendous competitive disadvantage to foreign firms. In most countries, foreign competitors to U.S. multinationals are paying effective corporate tax rates between 10% and 25%.

On the other hand, Republicans should not insist on moving to a pure territorial system for taxing foreign profits of U.S. corporations. Under such a system, foreign profits would be subject to tax only in the foreign jurisdictions where they were legally “earned”. In practice, such a system is open to considerable manipulation through clever lawyering. In a pure territorial system, most foreign profits of U.S. multinational would be “relocated” to foreign jurisdictions with minimal corporate tax rates.

What is a reasonable middle ground? In my view, Congress should enact a global competitiveness tax, totaling roughly 17% on all foreign profits of U.S. corporations. This tax should be due and payable every year—with no more deferral of corporate taxes. But the U.S. should give credits in this new system for any foreign taxes paid by U.S. corporations on their foreign profits to foreign countries…

Read the complete article at Brookings.edu…

What Don’t You Like About Yourself [WLRN.org]

Between our finances, fitness, beauty, working — even our souls. We can spend thousands of dollars on making ourselves better. The self-help business is booming: from personal trainers to plastic surgery, how are we spending money to help ourselves? This is the question that radio host Tom Hudson and I discuss tonight on Miami’s WLRN “Sunshine Economy”…

Check out the full radio interview at wlrn.org…

China Must Reform For Life After The Iron Rice Bowl [Financial Times]

Co-Authored with Theresa Hamacher

The new leaders of the Chinese Communist party recently announced that the market would play an expanded and “decisive” role in allocating China’s resources. Yet the same announcement reaffirmed the continued “vitality” of the state-owned enterprises that dominate the country’s economy.

While these two goals appear to be in conflict, they could both be advanced by allocating substantial blocks of shares of such enterprises to the National Social Security Fund, a Chinese manager of pension assets. This approach would have the added virtue of strengthening the pension system by increasing pre-funding of retirement benefits.

In China, a small group of state-owned enterprises hold a near monopoly of power in key sectors – such as banking, energy and transportation – and pay little or no dividends. If China’s economy is to become more productive, they must become more responsive to market forces, with lower customer prices and lower operational costs than competitors. As a result, China has begun negotiations with Europe and the US on investment treaties, which would allow foreign companies to compete in some of the sectors dominated by state-owned businesses.

Chinese leaders should also adopt another strategy to make them more responsive to market forces: establishing a large institutional shareholder that could put pressure on the state-owned enterprises to run more efficiently and pay more dividends. Although most of the large examples have sold shares to public investors, these investors are widely dispersed throughout the world, and have little influence on the corporate strategies of state-owned businesses or their dividend policies.
Read the complete article at FT.com…

Boston Must Rein In Retiree Health Plans [Boston Globe]

While the problems of Detroit have highlighted the large deficits in municipal pension plans, less attention has been given to the even larger unfunded obligations of cities to pay the health care benefits of their retired employees — called retiree health care plans, or RH plans.

Most recently, in 2011 Boston reported an unfunded deficit of $3 billion for its RH plan, an ostensible decrease from $4 billion in 2009. In fact, if Boston had not raised by two full percentage points its assumed expected returns on current and future plan assets, its unfunded RH plan deficit would have increased from $4 billion in 2009 to approximately $5 billion in 2011.

That change in assumptions is particularly dubious because Boston’s RH plan in 2011 held assets of only $111 million. To pay billions in health care obligations as they become due, Boston will have to rely mainly on future tax revenues.

Read the complete article at bostonglobe.com…