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 risk-

taking––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 Ron@verasage.com. 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.