Blog 8 - Polanyi’s Paradox

 Blog 8- Polanyi's Paradox 

In our final week of Business Perspectives, week 8, we learned of Polanyi's Paradox.  Polanyi’s Paradox, named after Michael Paradox, is the theory that, as humans, what we conceive regarding the capacity of the world is far beyond our comprehension (Polanyi's Paradox, 2022). The basic idea behind the theory is that there is so much we instinctively know, yet we cannot explain how we know it. It was in the book “Polanyi's Paradox and the Shape of Employment Growth” that author David Autor coined the theory, adding that "we can know more than we can tell" (Autor, 2014, para. 1). What he refers to is tacit knowledge. Tacit knowledge is information that we unknowingly adopt from experiences and stems mainly from implicit learning. Jasvin Bhasin (2023) explains this as knowing how to balance on a bike but not fully knowing the physics behind balance (Bhasin, 2023).

Is Polanyi’s Paradox a guarantee that AI cannot surpass human ability in the workforce? In the world of AI, David Autor (2022) argues that Polanyi’s Paradox is the very thing that hinders algorithms that try to replace human laborers. Activities are “ever-changing” and “unstructured”, which “presents intimidating challenges for automation” (Polanyi's Paradox, 2022, para. 8). What can be said by this is that AI can only be programmed to anticipate scenarios it has been given, but it cannot intuitively learn to function or determine reactions. In a world striving to implement AI, this paradox will pose a significant challenge.

There are those, however, who argue that AI technologies have surpassed the inhibitions of the paradox and is able to anticipate at a human level. Judgment is being built into AI to enable tacit learning, which helps overcome this hurdle. Proof of this was displayed when a program called AlphaGO, developed by DeepMind, was able to defeat one of the world’s top players in the game Go four times (Polanyi's Paradox, 2022).

What does this mean for employment? Tom Morris (2015) references David Autor, stating, “While workplace technologies may substitute for labor, any labor that cannot be substituted—and there are many examples—is generally complemented by technology (Autor, 2015). To date, this technology has been reserved for blue-collar work in the form of automation. Still, AI is becoming increasingly intelligent and infiltrating white-collar jobs through data analysis, financial reporting, and repetitive administrative tasks. The argument appears to persist over whether AI will be able to surpass the innate human abilities of “experiences, beliefs, and empathy” (Morrison, 2025, para. 10).

AI is just beginning to be integrated into the hospital setting for utilization review and securing payments from commercial payers.  Several programs, such as InterQual, Xsolis, and MCG, are attempting to emerge as a new way to fight denials and automate authorizations regarding medical necessity for status determination.  Currently, one of our sister hospitals has purchased this program. I am excited to see how AI can impact denials by utilizing predictive analytics to attempt to secure full financial reimbursement.  I am skeptical to this process but interested to observe. 

 

References

Autor, D. (2014). Polanyi's paradox and the shape of employment growth [Working Paper Series]. https://www.nber.org/system/files/working_papers/w20485/w20485.pdf

Autor, D. H. (2015). Why are there still so many jobs? The history and future of workplace automation. Journal of Economic Perspectives, 29(3). Retrieved July 21, 2025, from https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.29.3.3

Bhasin, J. (2023, September 3). What makes us human: The AI challenge to Polanyi's Paradox. Medium. Retrieved July 21, 2025, from https://medium.com/@jasvinbhasin/what-makes-us-human-the-ai-challenge-to-polanyis-paradox-cba5083c702b

Morrison, T. (2025, May 22). To fear or not to fear: AI and the future of work. MTI. Retrieved July 21, 2025, from https://www.heattreat.net/news/to-fear-or-not-to-fear-ai-and-the-future-of-work

Polanyi's Paradox. (2022, November 2). Scholarly Community Encyclopedia. Retrieved July 21, 2025, from https://encyclopedia.pub/entry/32479

Blog 7: Operation and Supply Chain Management

 Blog 7

Operation and Supply Chain Management

This week in Business Perspective 501A, week 7, we focused on supply chain management and operations management.  Operations management is internal, producing goods (tangible) and services (intangible).  We learned that many businesses offer a mix of both goods and services, like restaurants.  These businesses typically have higher customer interaction and thus greater variability in output, for example, in quality control (Tilles, 2025).  In operations management, decision-making can be defined in terms of the short term versus the long term.  Short-term decision making involves system operations and day-to-day tasks, such as inventory management, scheduling, and ensuring the day runs smoothly.  However, the long-term operations management involves system design.  This can be more extensive, including location, ensuring appropriate assets are acquired (Tilles, 2025).  Lastly, we learned about competitive priorities in operations management, including cost (production/delivery expenses), quality (products/services), flexibility (modifying to meet customer needs), and speed (delivery of products and services) (Tilles, 2025).  Together, this makes up the basis of operations management and how a company internally plans and manages the goods/services.   

Supply chain management is separate but works in tandem with operations management. The supply chain encompasses the entire organization and activities involved in producing, delivering the product, and serving the customer (Stevenson, 2025). Supply chain management can reduce storage costs/inventory, increase productivity, and enhance profit through improved integration with partner companies (Stevenson, 2025).

An article in the Wall Street Journal by Shih (2022) defines the supply chain and how the “supply chains can break down under stress and the more complex they are, the more likely they are to have problems” (Shih, 2022, Figure 1).  The article summarizes seven key principles of a supply chain.

1.      Complex Networks: linking supply chain to consumers from production to distribution.  This process is vast, often involving thousands of parts and multiple tiers of suppliers (Shih, 2022).

2.      Bullwhip Effect: sudden spikes in demand can be misconstrued as long-term trends, causing overordering in inventory and inventory swings leading to increased demand signals and inventory (Shih, 2022).

3.      Just-in-Time Production: Designed to reduce waste and lessen inventory costs through communication (Shih, 2022).

4.      Overordering Worsens Shortages: overordering to avoid losing market share will result in a surplus of inventory and then financial strain for the company (Shih, 2022).

5.      Long Chains are Fragile: The longer the supply chain the more vulnerable to delays (Shih, 2022).

6.      Congestion Reduces Capacity: More ships and containers does not mean faster delivery, ports can slow and bottleneck transit (Shih, 2022).

7.      Limited Visibility: Most companies have difficulty with an internal view. Unable to view beyond their immediate suppliers (Shih, 2022).

This article ties key concepts from week 7, outlining the supply chain in a defined sequence of steps. The article reinforces the delicacy and interconnectedness of the supply chain, as each step is completed to ensure that the next step can proceed. 

References

Shih, W. (2022). Seven Things You Should Know to Understand the Supply Chain. Wall Street Journal. Retrieved July 19, 2025, from https://www.wsj.com/business/logistics/what-to-know-supply-chain-11658152794?gaa_at=eafs&gaa_n=ASWzDAjr34sZEaR5x1n2asbQqnFH3_Dc8_dmMcolDuqprsZGGEx2CFxIhmjj6ltflFI%3D&gaa_ts=687c41d5&gaa_sig=HEbHCyiH1YzTUYaqMohZ7wCK3DZBDviHm4eIKb8KzrD24P-JFcIbSYE91ABz0h8MhM6cvBZ1heRKf5HOt9CgKw%3D%3D

Stevenson, W. (2025, July). Supply chain management [PowerPoint]. University of Illinois Springfield. https://uispringfield.instructure.com/courses/17974/files/2548878/download?download_frd=1

Tilles, O. (2025, July). Operations management Bus 501 [PowerPoint]. University of Illinois Springfield. https://uispringfield.instructure.com/courses/17974/files/2548867/download?download_frd=1

 

 

Blog 6: Finance Applications

 Blog 6: Finance Applications

                In week six of Business Perspectives, we focused on financial applications in the context of business decision-making. One of the areas of focus was identifying relevant cash flows, learning how to determine cash flows concerning capital investments, and inflation.  Another area of focus was evaluating operating cash flow. We were able to make financial calculations to understand the project's financial visibility.  Overall, this week laid the foundation for me in terms of finance applications to real-world business scenarios, particularly in relation to investment decisions. 

                The Wall Street Journal published an article that asserts “cash flow is a critical indicator of a company’s current health as well as its future. Free cash flow—the amount left over after commitments to capital expenses, employees and other obligations are met—are often directly tied to a company’s ability to grow, compete and attract new investors” (Improving Cash Flow Process Can Bring Surprising Benefits, 2025, para. 1).  A second article published in the Wall Street Journal mirrors this message, stating, “while there are several strategies organizations can deploy to buffer their business against uncertainty, improving cash flow forecasting can be particularly effective (Why an Emphasis on Cash Flow Forecasting Remains Critical, 2025, para. 1).  When cash flow is improved, it can lead to improved efficiencies and a competitive edge.  The pandemic emphasized the significance of cash flow forecasting.  Many companies had to quickly obtain cash reserves due to an abrupt drop in revenue.  This has put a spotlight on forecasting cash flows (Why an Emphasis on Cash Flow Forecasting Remains Critical, 2025).  “It is important from a governance perspective to have a formalized approach in which cash and liquidity levels are discussed with key stakeholders so decision-makers can analyze and understand the trends and drivers of cash—a critical prerequisite to forecasting and managing cash” (Why an Emphasis on Cash Flow Forecasting Remains Critical, 2025, para. 6).

“Most companies don’t develop a working-capital strategy and unknowingly squander many opportunities to improve their use of working capital” (Improving Cash Flow Process Can Bring Surprising Benefits, 2025, para. 4).  The article referenced an indirect vs direct method to evaluate cash flow forecasting.  The indirect method utilizes the profit and loss statement and the balance sheet.  This method adjusts net income by reviewing working capital to estimate cash flow. This method lacks detail and may not accurately predict future cash flow (Why an Emphasis on Cash Flow Forecasting Remains Critical, 2025). The direct method appears to give a more detailed view of cash flow, looking at ground-up transactions (Why an Emphasis on Cash Flow Forecasting Remains Critical, 2025).

We learned in week 6 about cash flows and how to estimate operational cash flows (OCF).  OCF = EBIT (earnings before income taxes) – Taxes + Depreciation. (The McGraw-Hill Companies, 2008).  We also learned of other methods for calculating operational cash flows that were parallel to the article, including Bottom-Up and Top-Down approaches: Bottom-up approach (OCF – NI + Depreciation), the top-down approach (OCF = Sales – Costs – Taxes), and the tax shied approach (OCF = (sales – Costs)(1-T) + (Depreciation * T)) (The McGraw-Hill Companies, 2008, PP slide 22 section).

In summary, we learned that cash flow refers to the movement of money in and out of a business (Understanding Cash Flow: A Key to Financial Stability, 2024).  We learned that accounting income includes non-cash items like depreciation.  I enjoyed the slides covering depreciation: “Consider depreciation expense.  You never write a check made out to depreciation” (The McGraw-Hill Companies, 2008, PP slide 5 section).  When evaluating a project, the goal is to convert accounting figures into cash flows.  “Much of the work in evaluating a project lies in taking accounting numbers and generating cash flows” (The McGraw-Hill Companies, 2008, PP slide 5 section).  Ultimately, we learned to make a viable financial decision; it is essential to focus on actual cash flow.

 

References

Improving cash flow process can bring surprising benefits. (2025, June 9). Wall Street Journal. Retrieved July 9, 2025, from https://partners.wsj.com/keybank/doing-more-with-more/improving-cash-flow-process-can-bring-surprising-benefits/?gaa_at=eafs&gaa_n=ASWzDAgiLf_BqsLYTp2CvgTTIwypZ9lK7ij-vh3tFQbvu1dSPZeQNSLOlujECTvYKRI%3D&gaa_ts=686e793c&gaa_sig=JQdbzbh-K4P4GBytEzAMwX7ISh4HM8bvk3wA4dHKl81JI2plC5OmituQta2Vr84MID0A0uLbcGJVf1kp18bx3Q%3D%3D

The McGraw-Hill Companies. (2008). Making capital investment decisions [BUS 501, Dr. Tilles, PowerPoint MOD 6]. https://uispringfield.instructure.com/courses/17974/pages/module-6-lecture-materials-npv-capital-investment-decisions?module_item_id=841570

Understanding Cash Flow: A Key to Financial Stability. (2024, April 17). richdelivery. Retrieved July 12, 2025, from https://richdelivery.com/understanding-cash-flow-a-key-to-financial-stability

Why an emphasis on cash flow forecasting remains critical. (2025). CFO Journal. Retrieved July 9, 2025, from https://deloitte.wsj.com/cfo/why-an-emphasis-on-cash-flow-forecasting-remains-critical-01675711952?gaa_at=eafs&gaa_n=ASWzDAi6PGu3A-e_jxjdGe2e0fu0ua21Z5xpOSGcT4rH7VDsR3nCQCnTIZhJtRT4cS0%3D&gaa_ts=686e793c&gaa_sig=dQEnvNQ-VPNLmEbeml7bgkbSX5t7zZiWkhHsgdUMUt5y-V1GbsoowrVXrZyQfkSe84XBFXkEAgx4Ff7zl6we-w%3D%3D

 

 

Blog Post 5: Fundamentals of Finance

 Blog Post 5

Fundamentals of Finance

During week 5 in Business Perspectives, we focused on the fundamentals of finance.  A significant portion of this week was spent projecting financial statements.  In the YouTube lecture, Houston (2020) asks, “What questions do we face in finance? How do we maximize wealth, what projects should we invest? How do we raise funds?” (Houston, 2020, 0:2).  Inversely, financial executives need to think of how to mitigate risks.  These questions are relevant to all firms, regardless of their size.   “One of the roles of the financial managers in the firm is to determine the appropriate allocation of money to various projects, investments, and accounts” (Houston, 2020, 0:17).  In the Wall Street Journal Article, Boughton (2025) stated, “financial executives are stressing the importance of a steady hand in the C-suite and a clear eyed view of business risks as their companies confront a thicket of unknowns on tariffs and other policy changes under the Trump administration” (Broughton et al., 2025, para. 1).  We learned in lecture, “the top financial manager within a firm is usually the chief financial officer (CFO), this role is similar to treasurer and controller” (Houston, 2020, 8:45).  CFOs and finance teams are viewed as experts and trusted to ensure the stability of the business's financial outcome, particularly in light of the uncertainty surrounding the multitude of tariffs.  Significant work is being done on the backend, focusing on predicting tariffs and the consequences across supply chain management and risk planning.   

The financial team attempts to prepare for the unknown certainty by increasing risk planning and proceeding with caution due to the unpredictability of the tariffs.  “Finance chiefs said they were wrestling with whether to take action now to offset tariffs-for instance, diversifying supply chains, working with suppliers to trim costs or passing through higher prices to consumers” (Broughton et al., 2025, para. 6).  We learned from module 4 there are several ways companies can pass on prices to their customers without the customers knowledge.  This would include unbundling services, shrinkflation, deals, memberships, and higher quality goods.  (Dholakia, 2021).  

We learned in lecture that financial decisions must be made regarding capital budget, long-term investments, capital structure, and capital management (Houston, 2020).  The finance team will make financial projections. “You want to be very methodical, very thoughtful in how you change direction (Broughton et al., 2025, para. 13). The CFO may need to slow financial management decisions, including mergers and acquisitions, and the capital budget and structure. CFO cannot afford to be distracted, “focusing on what is going to drive the business forward” (Dholakia, 2021, para. 8) and being transparent with factors out of scope to board members. 

On a personal note, my husband works for a Fortune 500 company within the financial sector.  One of his prominent roles is predicting the outcomes of the tariffs.  He has made numerous projections and intensified risk planning, often working through sleepless nights to anticipate the next move and ensure the company's financial security.   

 

References

Broughton, K., Maurer, M., & Williams, J. (2025, March 6). Finance executives seek stability amid erratic tariff shifts. Wall Street Journal. Retrieved July 1, 2025, from https://www.wsj.com/articles/finance-executives-seek-stability-amid-erratic-tariff-shifts-6d0ddd90?gaa_at=eafs&gaa_n=ASWzDAgOVlKWIcvM4Kn_zj81n7Un0xeUXE3P_2Tv1KzeY5hB0M3aidvAh-WoQek80Vg%3D&gaa_ts=68646981&gaa_sig=csW812UdqFReAa0_sCRMGY8kRvxMwHnLzXff5Pt3rMnk0Gs8PKwJkNh5LvbJh0rOXuMrplUM0elBZ0rw9GuN-A%3D%3D

Dholakia, U. (2021, November 21). How companies raise prices without raising prices. Wall Street Journal. Retrieved June 24, 2025, from https://www.wsj.com/business/retail/how-companies-raise-prices-without-raising-prices-11637490602?gaa_at=eafs&gaa_n=ASWzDAh7TyCs7N11ENxfEY2t-5025UNZ3IJULsOAJ9igMyEvFl11o18jkueceCZ2R8w%3D&gaa_ts=685abb5d&gaa_sig=HzAvWzwe4LxN-KZ77Soa2CHn236vmcgwpjTLJp-KwOtva3qIjKjoFGM7n69VdGFZzcBoo7hNl1gJpk3WtSzksw%3D%3D

Houston [Reza]. (2020). Chapter 1 part 1: What is finance? [Video]. https://www.youtube.com/watch?v=nG8seDzxT_w