I recently read the best-selling book How Google Works by Eric Schmidt and Jonathan Rosenberg. It is one of the best books I have read, in any genre, in quite some time. Although the book focuses on technology companies, it also provides useful insights to other industries, like ours. One key insight from the book is the importance of “smart creatives” to the actuarial profession.
One of the first subjects the book tackles is differentiating between traditional “knowledge workers,” a term coined by management consultant Peter Drucker in 1959, and “smart creatives.” Simply put, knowledge workers work in information-based jobs and think for a living. Schmidt and Rosenberg reflect much of Drucker’s research, writing:
The most valuable knowledge workers are the ones who thrive in the straitjacketed world of corporate process, by building deep expertise in a narrow set of skills. They don’t seek mobility … As a result, most knowledge workers in traditional environments develop deep technical expertise but little breadth, or broad management expertise but no technical depth.
Sound like anyone you know?
In contrast, smart creatives are “multidimensional, usually combining technical depth with business savvy and creative flair.” Smart creatives are first and foremost smart; but this means far more than book smart. They are analytically smart (data driven), business smart, competitively smart (market aware) and end-user smart, but they are also creative. That is, they are curious, risk takers, self-directed, open and collaborative, and communicative.
At Google, smart creatives:
- Are open to all tasks, not confined to specific ones.
- Have unlimited access to company information and computing power.
- Take risks — they are not punished or held back in any way when risky initiatives fail.
- Exercise their ideas and are encouraged to do so.
- Speak up when they disagree with something.
Google uses innovative interviewing techniques and interviewee evaluations to ensure they attract as many smart creatives as possible. Many elements of Google’s culture encourage smart creatives to succeed. These include:
- Their mission and values, e.g., “The need for information crosses all borders.”
- A work environment that encourages collaboration and in which employees enjoy working long hours.
- A decision-making approach that not only encourages disagreement, but requires it when there’s disagreement over a decision or approach.
- Internal communication strategies, e.g., voting buttons for the firm-wide Friday call to signal the effectiveness of an explanation.
- Ways to encourage innovation.
Google views smart creatives as nothing less than “the key to achieving success in the Internet century.” I couldn’t agree more. Both our profession and our employers are in pitched battles to attract and retain as many of the best smart creatives as possible.
For the last 25 years, I’ve had a front row seat in the battle for smart creatives. Numerous companies have been extremely successful largely from the efforts of their smart creatives, not only in data-driven leadership, but in specific developments such as predictive analytics and enterprise risk management (ERM).
In the 1980s, Progressive decided that actuarial training was not necessary for their product managers. Instead, they actively recruited smart creatives (albeit not called this at the time) who were often recent MBA graduates with strong data analytics skills.
The best product managers have shown many of the characteristics of smart creative, including:
- Data smart — shaping some of the most important early successes in predictive analytics and data driven in their decision making.
- Market and user savvy — very aware of all significant developments in their markets and how insureds were responding to them.
- Interdisciplinary — equally comfortable doing pricing, underwriting, marketing, agency management and other tasks with technical proficiency.
- Creative — a number of the rating characteristics and coverage innovations developed at the time were truly paradigm shifting.
Progressive’s ongoing success using this model is indisputable. Maybe the strongest measure of the success of Progressive’s product management model is the number of insurers who have emulated it. Many of these companies also realize that smart creatives with actuarial training thrived not only in product management roles, but also in executive roles, contrary to Progressive’s view of actuaries. Conversely, the insurance industry is littered with companies that did not embrace technology and data-driven decision making soon enough to keep up with their data-driven competitors.
In more recent years, a similar battle has been fought in the dynamic financial analysis and ERM arenas. Chartered financial analysts, actuaries through the chartered enterprise risk analyst designation and other financial professionals are all seeking preeminence in the ERM arena on the strength of their abilities to attract and educate smart creatives with the training they need to thrive in this data-driven and interdisciplinary practice area.
Can an insurance company survive without an emphasis on smart creatives? Yes. Can the company thrive? No. Sooner or later a competitor with a data-driven, risk-taking group of smart creatives and leadership that encourages them will realize an opportunity presented by the non-innovating competitor, and the innovative competitor will target that book of business, with good data supporting it.
In that same vein, the actuarial profession can survive without attracting and training smart creatives, but it cannot thrive.
However, there is a solution: By having more smart creatives become actuaries, we can greatly enhance the perceptions of our employers and customers regarding the value of our profession. When I look at the actuaries who have moved into C-level executive positions, they are often, if not always, smart creatives. They have the analytical smarts all actuaries possess, but their business skills, communication abilities and creativity allow them to distinguish themselves in executive roles. Many of the CAS’s most important development efforts are focused on attracting smart creatives to the profession at the college level, providing them with the educational materials and opportunities they need to succeed professionally and keeping them engaged with the CAS throughout their careers.
Traditional knowledge workers, what I think of as the “stereotypical actuary,” are a foundational element of our profession. The actuary who has done workers compensation pricing at the same company for 20 years, for example, plays an important role to his or her employer and in our profession. But everything the CAS can do in the coming years to attract and develop smart creatives is the key to the CAS achieving success in the Internet century.
Robert J. Walling III, FCAS, MAAA, CERA, is a principal and consulting actuary for Pinnacle Actuarial Resources, Inc. in Bloomington, Illinois.
