The Real Gold of Our Economy Is in Our Hands | Salvatore Cali | TED

Recently, I renewed my daughter's passport.

I had to go to the police office three times.

Wait for hours in long queues.

Pay cash to the post office

and fill out tons of forms of repetitive data.

And why?

Why did I waste so many hours of my life,

when just a few years ago, I went to renew my own passport,

but since I need it immediately for business reasons,

they proposed me the magic solution,

the fast track.

Once I demonstrated urgency and paid the extra,

miracle, I got my passport in five minutes.

Whenever I see a fast track,

I know there is a slow process,

and the slow process often means a lot of wasted time.

But what is the impact of all this waste?

With simple calculations,

if every single person would waste one of their 200 working days

to renew their passport every five years,

that's 0.1 percent of GDP.

In a country like Italy, this is 2 billion euros of missed GDP,

and that’s only for passports.

Now imagine the impact of the waste

from ID and license requests, work permits, tax declarations.

That's several points of GDP.

Solving this problem of waste

would have a greater impact [than] what lawmakers achieve

through a typical financial act.

For the last 25 years,

I've analyzed how companies create value for their customers,

and my research shows that, on average,

only five percent of labor really creates value.

Five percent.

Can you imagine? Most of our time is wasted.

Five minutes to issue a passport is enough.

Companies must analyze their value streams --

which is the sequence of activity to create value for their customers --

and dig inside of each tiny activity,

questioning its purpose.

Which activity really matters and what is just a legacy?

Are you wasting your labor by overcontrolling,

executing redundant tasks or fixing issues?

By rethinking the true purpose of each task,

you will discover what is waste

and what is the real gold of your company,

the creation of value.

Here is an example.

What is the difference between a bunch of ears of corn,

200 grams of flour and a pizza?

Organically, not much,

but they have different value.

Labor and know-how can transform 20 cents of corn

into two euros of flour

and then into a 20-euro pizza.

We act like the economy is this big, complicated thing.

But income, dividends,

the stock of the private equity who owns the pizzeria,

their futures, forwards, swaps, long and short options,

their cost of capital,

even the interest rate of the central banks,

they are all derivatives of the real gold,

which is the human labor which transformed cheaper corn

into expensive pizza.

Without that human labor, none of it exists.

And when you add up all the value created by the people in a country,

that's the GDP.

Unproductive labor has no real impact on GDP.

So here is the exciting part.

If five percent of the labor generates today the entire GDP,

imagine if we could increase it just to 10 percent.

10 percent of your workday is what?

Forty-five minutes?

With these 45 minutes we could double the GDP.

The challenge is first to discover this real gold

because it is hidden in an ocean of wasted labor.

Where do we look first?

Well, one of the best places to find waste is in company's processes,

because they usually reflect your company's past

more than its present or future.

These legacies are massive waste generators.

[An] accountant matching purchase orders with the invoices

is a legacy of offline transactions.

Submitting your time sheet online

is a legacy of punching into work with a physical stamp.

My bank keeps sending me account balances as a PDF,

so not only I waste my time by logging in, downloading, opening the PDF,

but searching a specific transaction

is as difficult as it was 40 years ago, on paper.

Instead of carrying these legacies into the future,

we should take a step back.

When a company analyzes each and every activity of their value streams,

they should ask,

"Why am I doing this?

Is it still necessary?

Can I use today's technology to make it more efficiently?"

Another consequence of this legacy

is that we spend a large portion of our life

filling out the same useless data over and over again.

To buy a plane ticket online,

some airline companies require name, family name,

date of birth, ID number, expiration date,

country, gender,

with the distinction “Miss” and “Mrs.”

For what?

So someone with my same name cannot use my ticket?

So my wife can't give her boarding pass

to another lady with her same name,

born on her same date, but still unmarried,

so “Miss” and not “Mrs.“?

And today you shouldn't need the gender in the passport or a ticket.

This is a legacy of a time

where men and women didn't have the same rights.

So take a closer look at the data you collect.

For each piece of information, consider

is it really necessary?

And do we already have it?

I remember one company's database showing

that 30 percent of their customers were Afghan accountants.

What are the odds of that?

Why so many accountants from Afghanistan?

Obviously the first job listed alphabetically in the drop-down menu

was accountant

and the first country was Afghanistan.

But what this tells me is that the company didn't need this information,

and the customer didn't want to spend the time filling it.

Another likely source of waste is overcontrollership.

I worked with a company whose procurement process

required 23 control checkpoints.

Now, how many of these 23 people were looking closely, do you think?

And is it more likely that none of them were paying careful attention,

assuming that at least one of the other 22 were?

Too often overcontrollership kills controllership

because it kills accountability.

I was listening to a legal department complain

that in addition to checking every contractor for compliance,

they were fixing grammar and spelling

because people drafting the contract knew that the lawyer would fix it.

But come on, a lawyer to check spelling?

That's expensive, isn't it?

Instead, we should ask ourselves,

is that control check really necessary?

The answer is quite simple, just math.

Does it cost more to do the check or to fix the mistake if it occurs?

This gets tricky with very low probability,

very high cost of failure event.

People tend to overmitigate.

And in many cases this creates even more problems.

In the UK, all commercial fire alarm systems must be tested weekly,

and you often see inside the building signs like,

“Fire test every Tuesday at 3pm.”

Now, if you were a criminal,

at what time and which day would you commit your crime

without worrying too much about alarms?

Overmitigation creates also a lot of waste.

First, because of false positives,

like a credit check continuously blocking orders

with no real risk on payment.

Second, because of pure overprocessing.

My cinema app requires I change my password every three months.

Six to eight letters, uppercase, lowercase,

special signs, numbers.

Whenever I need to use it,

I spend ten minutes to log in.

But this is to avoid what?

That a hacker goes to the cinema [in] my place?

If they go, I hope they enjoy the movie,

because the real risk to the cinema company

is that I buy fewer tickets.

Logging in was so inconvenient that I stopped using the app.

Companies should not sacrifice their customer journey

for the sake of over-risk mitigation.

And by the way, making something difficult for your customers,

it does not mean it'll be difficult for a professional hacker.

More likely, it'll mean less sales and less value created.

Altogether, these small changes to your company's processes

can have a profound effect.

Entrepreneurs and managers

should refocus their priority into the real gold.

Attract talent.

Help them grow, channel their energy

into the real value creation.

But there is another reason, arguably more important.

A world with less waste and more time dedicated to true value creation

is a more sustainable world,

where people can enjoy their work more.

Free from time-wasting frustration and distraction,

they would have more time with their family and friends.

They would enjoy more art, more entertainment.

The real gold of our economy is in your hands.

Please, for a better world, strive to create more value.

Thank you.