Why Education Without Creativity Is Not Enough

Anya Kamenetz has a terrific article about American education and its effect on competitiveness over at Fast Company.  Kamenetz argues (rightfully, I believe) that a focus on simply cranking out more and better STEM graduates (science, technology, engineering, and mathematics) is not the way to compete more effectively with China and India.  She offers the perspective of one leading executive in the Indian outsourcing industry - Phaneesh Murthy, CEO of iGate Patni.  Here is an excerpt from Kamenetz's article:

If we could just tighten standards and lean harder on the STEM disciplines--science, technology, engineering, mathematics--we'd better our rigorous rivals in India and China, and get our economy firing on all cylinders. As with much conventional wisdom, this is conventional in the worst sense of that word.  If you want the truth, talk to the competition. Phaneesh Murthy is CEO of iGate Patni, a top-10 Indian outsourcing company. Murthy oversees 26,000 employees--not the ones snapping SIM chips into cell phones or nagging you about your unpaid AmEx bill, but the ones writing iPhone apps, processing mortgage applications, and redesigning supply chains--in jobs that would be handled in the U.S. by highly paid, college-educated workers. In other words, you. Yet Murthy, a regular bogeyman of outsourcing, believes American education is by far the best in the world. "The U.S. education system is much more geared to innovation and practical application," says Murthy. "It's really good from high school onward." To compete long term, we need more brainstorming, not memorization; more individuality, not standardization.

China, Inflation, and Margins

The Wall Street Journal reports that Yum Brands (owner of the KFC, Taco Bell, and Pizza Hut restaurant chains) has experienced a substantial decline in profit margins in China.  While the company continues to grow sales rapidly in China, inflation has caused its costs to escalate significantly.   Meanwhile, Yum Brands has been offering value-priced meals to attract customers.   In an inflationary environment, value-priced meals may seem quite attractive.  However, if costs rise faster than prices, the firm has a problem.   The story reminds us of the risk that inflation brings for firms operating in China.   A firm that sources components and raw materials in China may be able to raise prices in developed nations in which it sells the finished products. The problem is more severe for firms making and then selling products in China, given the low incomes of average citizens.