Old Dogs Don’t Create New Tricks
by
Ron Baker
Almost everything that is great has been done by youth.
––Benjamin Disraeli
It’s an age-old question: Can you teach an old dog a new trick? We’ve all heard, ad
nauseam, how CPAs despise change. How many CPAs does it take to change a light
bulb? Ten. One to change it and nine to talk about how great the old one was.
Jokes aside, this supposed endemic resistance to change is not exactly accurate. The
CPA profession has undergone and adapted to constant change since its establishment in
the late 19th century; some of those changes were driven from within, most imposed
from the outside. There is nothing surprising about this, since people have always been
willing to change if it brings hope of a better future.
Consequently, old dogs can learn new tricks, as they find more effective ways to
adapt and leverage new technology, methods, processes, ideas and social networks in
order to increase the return on their human capital. This is why older knowledge
workers earn more than younger ones, since their earnings are not based on physical
exertion––which is at its apogee in youth––but rather intellectual and social capital,
which tends to increase with age. Mind trumps muscle.
Creating New Tricks––Bet On Youth
That said, there is another dynamic to the new trick, old dog question, which is this:
Can we expect an old dog to create a new trick? This is a totally different question, one
of innovation and creativity rather than incremental improvements to the status quo, and
the historical evidence is overwhelming in providing the answer: It’s not likely.
The remaining analysis will, no doubt, cause discomfiture for a great many of you,
but facts are stubborn things, and the fact is most of us simply live and die within the
same paradigm. The reality is, if we are in our late 40s or 50s the chances are very low
of creating a groundbreaking innovation. People who hear this for the first time
challenge it, deny it, some even get offended by it. We are all entitled to our opinions
but not our facts. Consider a modest sampling of the historical evidence:
•
Nicolaus Copernicus posited his heliocentric theory in 1514, age
41.
•
Isaac Newton, in 1687, developed the law of gravity and the laws
of motion, age 45.
•
In 1905, Albert Einstein introduced the special theory of relativity,
age 26.
•
The average age of the scientists on the Manhattan Project was 25.
•
Louis Pasteur gained acceptance for germ theory of disease,
transforming the course of medical research and practice in 1862,
age 40.
•
In 1881, William Halsted conducted the first known human blood
transfusion, age 29.
•
James Watt, in 1764, invented the steam engine, age 28.
•
The average age of the signers of the Declaration of Independence
was 45, the oldest being Benjamin Franklin––skewing the average
at 70––and Thomas Lynch, Jr. (South Carolina) the youngest at 27.
•
The average age of the delegates to the Constitutional Convention
was 43, the oldest being, again, Benjamin Franklin at 81 and the
youngest Jonathan Dayton at 26.
•
Alexander Bell was 29 in 1876 when he invented the telephone
and Thomas Edison was 30 when he invented the phonograph and
the incandescent bulb in 1877 and 1878.
•
Carl Benz of Germany invented the first true automobile in 1885,
age 41.
•
The Wright Brothers were 32 when they achieved their historical
flight at Kitty Hawk in 1903.
•
Walt Disney was 27 when he introduced Mickey Mouse to the
world in 1928.
•
Frank Whittle of England invented the jet engine in 1930, age 23.
•
Steve Jobs was 21, and Steve Wozniak 26, when Apple Computer
was founded in 1976, and they were 29, and 34, respectively, when
the Macintosh was launched in 1984.
Charles Murray, Bradley Fellow at the American Enterprise Institute, wrote an
absolutely fascinating book, Human Accomplishment: The Pursuit of Excellence in the
Arts and Sciences, 800 B.C. to 1950, wherein he identified 4,002 individuals who
basically invented, developed, or proved the most consequential ideas and technologies
in the history of the world, from 800 B.C. to 1950. Murray writes:
It is a fact that takes some getting used to, but the evidence for it is
overwhelming: When you assemble the human résumé, only a few
thousand people stand apart from the rest. Among them, the people who
are indispensable to the story of human accomplishment number in the
hundreds. Among those hundreds, a handful stand conspicuously above
everyone else.1
The average age of these individuals was 40.
A Free Lunch
There is irrefutably such thing as a free lunch, and we all dine on one everyday,
sitting on the shoulders of these giants, without paying anywhere near the full value of
the intellectual capital they created.
As the Austrian economist Joseph Schumpeter so poetically phrased it,
entrepreneurial innovations make up the “perennial gale of creative destruction,”
whereby entire industries have been eliminated due to this dynamism, propelling our
economy forward to the next frontier. Businesses are the ultimate change agents in
society, ushering in new products, services and ways of conducting our affairs, yet it is
rare to see the status quo foster revolutionary change.
It took an 18 year-old college student, Shawn Fanning, to revolutionize the ossified
music industry by creating Napster, which by October 2000 had 32 million registered
users and in the first three months of 2001, 2.5 billion files a month were being
downloaded. When an industry has that many customers downloading its product for
free, it is not suffering from a crime wave––it has a marketing problem. Fanning paved
the way for the Apple iPod––over 50 million sold––and iTunes music store, which has a
70% market share on legal downloadable music, thus proving Mark Twain’s comment,
“History doesn’t repeat itself––but it does rhyme.” Once again, under Steve Job’s
leadership, the young iPod team at Apple was able to transform emergent technology into
value for millions. Additionally, his young Pixar team (most in their 20s and 30s)
revolutionized animated movies––far surpassing the “nine old men” from Disney––with
its string of animated Oscar-winning hits.
The Lifetime Potential of Creativity Has Shrunk
Benjamin F. Jones, assistant professor, Management & Strategy at the Kellogg
School of Management, Northwestern University, published “Age and Great Invention”
in April 2005, wherein he studied the age distribution of great achievement, concluding:
The largest mass of great innovations in knowledge came in the 30s (42%), but
a substantial amount also came in the 40’s (30%), and some 14% came beyond
the age of 50. …only 7%...at or before the age of 26.2
And while Jones found the average age of great achievement has increased by 8 years
over the course of the twentieth century, he finds no concomitant increase in innovation
at middle age, which means a shrinking lifetime potential of creative contribution. In
other words, innovation remains a young person’s domain. Consider this graph included
in his paper depicting this reality3:
Implications for the Profession
The last truly new service offering produced from the ground up in the CPA
profession was the Statement on Standards for Accounting and Review Services
(SSARS), effective in 1978. All of the other new services the profession has offered to
the marketplace since then are merely extensions of services offered by others, such as
consulting and financial services, or regulatory requirements from Congress, the SEC,
PCAOB, IRS, and other government agencies. The profession has a 27-year––and
counting––innovation curve.
According to PCPS, 60% of accounting firms have principals in the 55-62 age
bracket. Moreover, 62% of AICPA members are over the age of 40. I recently spoke at
a partner conference, eerily reminiscent of an AARP assembly. The participants were
bemoaning the same old issues of attracting and retaining talent, leadership, billable
hours, productivity, and profitability, while the speakers offered the same stale solutions,
most of which date back to the Eisenhower administration––such as increasing billable
hours, leverage, and productivity, completely ignoring the new realities of a knowledge
organization.
If firms, not to mention the profession as a whole, want innovation and dynamism in
tandem with attracting the best and brightest talent, they will have to give more authority
and responsibilities to their youthful team members. Organizations, like arteries, tend to
calcify with age, and young team members––far more prone to adventure and risktaking––can keep the blood pumping at an extra vigorous pace. No doubt they will
make more mistakes and incur more failure, yet risk is where profits come from. The
alternative is continued irrelevance of a once proud profession, more and more
dependent on regulatory revenue rather than wealth creating innovations that add value
to its customers. Ossification is not an option.
As Steve Jobs once said regarding Apple Computer: “It doesn’t make sense to hire
smart people and then tell them what to do; we hire smart people so they can tell us what
to do.” Still, in far too many firms today, the old dogs are stifling the young ones by
remaining hysterically historical, clinging to obsolete dogmas of a business model based
on an Industrial Era command-and-control hierarchy no longer relevant in an intellectual
capital economy.
That’s the Way We’ve Always Done It
A 30 year old junior economist working at the Treasury Department in the 1940s
suggested taxes be withheld directly from employee’s paychecks, a pay-as-you-go
system, as opposed to the once a year payment as was then traditional. The biggest
opponent of this new idea was the Internal Revenue Service, validating the first law of
bureaucracy––the only feasible way of doing anything is the way it is being done. They
believed it was simply not possible, even though the young economist had brought them
evidence of other countries that had successfully adopted this system. Today, when
economists suggest the elimination of tax withholding as part of major tax reform
proposals, the IRS is the biggest opponent of the change, claiming it is not practicable to
have taxpayers voluntarily comply any other way. History, indeed, does rhyme. The
young economist? Milton Friedman, who to this day regrets being part of implementing
this new scheme in the brashness of his youth.
The question for today’s firm leaders is will they allow their young team members the
opportunity to create path-breaking services and experiment with new approaches for
the benefit of the firm and the profession as a whole, or will they continue to reject too
much and adventure too little, remaining satisfied with a settled mediocrity of success
and the illusion of security. The posterity of our profession depends on letting the new
dogs create new tricks. History proves no one else will.
Ron Baker is the best-selling author of Professional’s Guide to Value Pricing, Sixth Edition
(CCH, Incorporated.); The Firm of the Future: A Guide for Accountants, Lawyers, and Other
Professional Services; Pricing on Purpose: Creating and Capturing Value; and the forthcoming
Measure What Matters to Customers: Using Key Predictive Indicators (John Wiley & Sons,
Inc.). Ron Blogs at www.verasage.com. You can reach him at (707) 769-0965, or e-mail at
[email protected]. Copyright © 2006 Ron Baker. All Rights Reserved.
1
Murray, Charles. Human Accomplishment: The Pursuit of Excellence in the Arts and
Sciences, 800 B.C. to 1950. New York: HarperCollins Publishers Inc., 2003. Page 87.
2
Jones, Benjamin F. “Age and Great Invention.” Kellogg School of Management and
National Bureau of Economic Research. April 2005, Page 4. Available at:
http://www.kellogg.northwestern.edu/faculty/jones-ben/htm/Research.htm
3
Ibid. Page 36.