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The Mintzberg Debate on Executive Bonuses December 30, 2009

Posted by Jeff Fuchs in economy, leadership, workforce.
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One of the most scrutinized causes of the financial crisis in 2008 is executive compensation and bonuses. An analysys at the Evolving Excellence blog of a Wall Street Journal column by Henry Mintzberg spells out a solution clearly and succinctly: Scrap bonuses altogether.

Esteemed social scientist Henry Mintzberg believes that bonuses aren’t necessarily the best way to elicit outstanding business performance. In fact, handing out bonuses can be poison to a company because it places success or failure squarely on the shoulders of a few people. That pushes aside unity and teamwork. Mr. Mintzberg notes:

“A robust enterprise is not a collection of ‘human resources’; it’s a community of human beings. All kinds of people are responsible for its performance. Focusing on a few—indeed, only one, who may have parachuted into the most senior post from the outside—just discourages everyone else in the company.”

A common defense of the bonus system maintains that without bonuses, you won’t get the right person in the CEO’s office. But Mr. Mintzberg asserts that you may get the wrong person in the CEO office with the bonus system:

“At the worst, you get a self-centered narcissist. At the best, you get someone who is willing to be singled out from everyone else by virtue of the compensation plan. Is this any way to build community within an enterprise, even to foster the very sense of enterprise that is so fundamental to economic strength?”

Only engaging employees at every level will the business be a productive community. But do executive bonuses have to be done away with in order to bring together a workforce?

Adam Zak thinks demonizing the executive bonus isn’t the answer. After all, paid-vacation days, base salaries, perks and other benefits might well also be targeted and condemned. Community or not, Mr. Zak makes the point that each individual will be contributing something different to the company, of various values.

If we eliminate bonuses from the compensation package we’re still going to need some way of differentiating the value each individual contributes to the organization. Perhaps this can be accomplished via the salary mechanism, but this just implies a much wider range of salaries. And salaries present the disadvantage of being, typically, fixed for the duration of a year or so.”

How to fix that?

“…we could make salaries variable, adjusting them periodically based on someone’s perception and interpretation of the value contribution for each individual. But if we get to that stage I’m thinking that all we’ve really accomplished is simply engage in word play, creating a fixed and ‘variable’ component for salary. Sounds like a bonus to me.”

Instead of eliminating bonuses –after all, they might well be inseparable from a more demanding job –Mr. Zak suggests “a more accurate and transparent way of measuring and valuing the contribution each individual… makes to the organization, and then rewarding her for that contribution. This is the real challenge which needs to be addressed and, unfortunately, Mr. Mintzberg offers us no guidance in this area.”

 

To read the Evolving Excellence analysis, go here.

To read Adam Zak’s analysis, go here.

To read Mr. Mintzberg’s WSJ editorial, go here.

 

The Mintzberg Debate on Executive Bonuses December 30, 2009

Posted by Jeff Fuchs in economy, leadership, workforce.
Tags: , ,
add a comment

One of the most scrutinized causes of the financial crisis in 2008 is executive compensation and bonuses. An analysys at the Evolving Excellence blog of a Wall Street Journal column by Henry Mintzberg spells out a solution clearly and succinctly: Scrap bonuses altogether.

Esteemed social scientist Henry Mintzberg believes that bonuses aren’t necessarily the best way to elicit outstanding business performance. In fact, handing out bonuses can be poison to a company because it places success or failure squarely on the shoulders of a few people. That pushes aside unity and teamwork. Mr. Mintzberg notes:

“A robust enterprise is not a collection of ‘human resources’; it’s a community of human beings. All kinds of people are responsible for its performance. Focusing on a few—indeed, only one, who may have parachuted into the most senior post from the outside—just discourages everyone else in the company.”

A common defense of the bonus system maintains that without bonuses, you won’t get the right person in the CEO’s office. But Mr. Mintzberg asserts that you may get the wrong person in the CEO office with the bonus system:

“At the worst, you get a self-centered narcissist. At the best, you get someone who is willing to be singled out from everyone else by virtue of the compensation plan. Is this any way to build community within an enterprise, even to foster the very sense of enterprise that is so fundamental to economic strength?”

Only engaging employees at every level will the business be a productive community. But do executive bonuses have to be done away with in order to bring together a workforce?

Adam Zak thinks demonizing the executive bonus isn’t the answer. After all, paid-vacation days, base salaries, perks and other benefits might well also be targeted and condemned. Community or not, Mr. Zak makes the point that each individual will be contributing something different to the company, of various values.

If we eliminate bonuses from the compensation package we’re still going to need some way of differentiating the value each individual contributes to the organization. Perhaps this can be accomplished via the salary mechanism, but this just implies a much wider range of salaries. And salaries present the disadvantage of being, typically, fixed for the duration of a year or so.”

How to fix that?

“…we could make salaries variable, adjusting them periodically based on someone’s perception and interpretation of the value contribution for each individual. But if we get to that stage I’m thinking that all we’ve really accomplished is simply engage in word play, creating a fixed and ‘variable’ component for salary. Sounds like a bonus to me.”

Instead of eliminating bonuses –after all, they might well be inseparable from a more demanding job –Mr. Zak suggests “a more accurate and transparent way of measuring and valuing the contribution each individual… makes to the organization, and then rewarding her for that contribution. This is the real challenge which needs to be addressed and, unfortunately, Mr. Mintzberg offers us no guidance in this area.”

 

To read the Evolving Excellence analysis, go here.

To read Adam Zak’s analysis, go here.

To read Mr. Mintzberg’s WSJ editorial, go here.

 

Editorial: All Small Manufacturers Need a Lifeline December 30, 2009

Posted by Jeff Fuchs in economy, manufacturing.
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In a letter to the editor of the Detroit Free Press on Christmas Eve, Mark Tomlinson, executive director and general manager of the Society of Manufacturing Engineers, wrote, “The White House’s proposal to add another $5 billion in job-producing tax credits for manufacturers of environmental technology is a nice holiday gift for those who are invited to the party. But what’s under the tree for the 300,000 small manufacturers in industries such as medical devices, aerospace, defense and transportation? They must feel a bit like Tiny Tim standing out in the cold, because they can’t get the support and credit they need to survive.”

Read the full letter here.

Editorial: All Small Manufacturers Need a Lifeline December 30, 2009

Posted by Jeff Fuchs in economy, manufacturing.
Tags: ,
add a comment

In a letter to the editor of the Detroit Free Press on Christmas Eve, Mark Tomlinson, executive director and general manager of the Society of Manufacturing Engineers, wrote, “The White House’s proposal to add another $5 billion in job-producing tax credits for manufacturers of environmental technology is a nice holiday gift for those who are invited to the party. But what’s under the tree for the 300,000 small manufacturers in industries such as medical devices, aerospace, defense and transportation? They must feel a bit like Tiny Tim standing out in the cold, because they can’t get the support and credit they need to survive.”

Read the full letter here.

Planning “End Of Life” for Electronics Could Help Manufacturers December 30, 2009

Posted by Jeff Fuchs in green business, manufacturing.
Tags: ,
1 comment so far

The Chicago Tribune recently reported on Harrison Kim, an assistant professor in the University of Illinois. Kim studied the lifecycles of electronic gadgets and the associated costs, “and found that the time to think about…’end of life’ issues is before the small electronics are even designed.” Specifically, Kim “analyzed how design differences affect product recovery and determined that manufacturers are losing money by not reusing components.” Fewer than 5 percent of retired phones “are recycled or reused.” Kim said, “These are profits currently neglected.” One way manufacturers could benefit, he said, is by designing products that were modular. Such products would also “appeal to the environmentally-savvy consumer.”

Read more here.

Planning “End Of Life” for Electronics Could Help Manufacturers December 30, 2009

Posted by Jeff Fuchs in green business, manufacturing.
Tags: ,
1 comment so far

The Chicago Tribune recently reported on Harrison Kim, an assistant professor in the University of Illinois. Kim studied the lifecycles of electronic gadgets and the associated costs, “and found that the time to think about…’end of life’ issues is before the small electronics are even designed.” Specifically, Kim “analyzed how design differences affect product recovery and determined that manufacturers are losing money by not reusing components.” Fewer than 5 percent of retired phones “are recycled or reused.” Kim said, “These are profits currently neglected.” One way manufacturers could benefit, he said, is by designing products that were modular. Such products would also “appeal to the environmentally-savvy consumer.”

Read more here.

Planning "End Of Life" for Electronics Could Help Manufacturers December 30, 2009

Posted by Jeff Fuchs in green business, manufacturing.
Tags: ,
1 comment so far

The Chicago Tribune recently reported on Harrison Kim, an assistant professor in the University of Illinois. Kim studied the lifecycles of electronic gadgets and the associated costs, “and found that the time to think about…’end of life’ issues is before the small electronics are even designed.” Specifically, Kim “analyzed how design differences affect product recovery and determined that manufacturers are losing money by not reusing components.” Fewer than 5 percent of retired phones “are recycled or reused.” Kim said, “These are profits currently neglected.” One way manufacturers could benefit, he said, is by designing products that were modular. Such products would also “appeal to the environmentally-savvy consumer.”

Read more here.

How Green is Wal-Mart’s Drive-Through Window? December 30, 2009

Posted by Jeff Fuchs in green business.
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Wal-Mart customers on the outskirts of Chicago, instead of waiting for online orders to arrive at home, can now pick up their orders at a drive-through window. It is an experiment Wal-Mart is trying out, but how green is the idea? Ariel Schwartz, writing at Fast Company, notes that getting a CD shipped to your house instead of going out to buy a CD cuts down on carbon emissions.

That remains the case when ordering the CD online and picking it up at the store. But that isn’t the innovation –the drive-through line is. “Instead of wasting gas by hunting for a parking spot, shutting off the car, and turning it back on to leave, shoppers can zip through the drive-through, presumably only idling for a minute or two,” writes Ms. Schwartz. “That might not sound like big carbon savings, but when millions of Wal-Mart shoppers are taken into account it adds up quickly.”

Check out the article here.

How Green is Wal-Mart’s Drive-Through Window? December 30, 2009

Posted by Jeff Fuchs in green business.
Tags:
add a comment

Wal-Mart customers on the outskirts of Chicago, instead of waiting for online orders to arrive at home, can now pick up their orders at a drive-through window. It is an experiment Wal-Mart is trying out, but how green is the idea? Ariel Schwartz, writing at Fast Company, notes that getting a CD shipped to your house instead of going out to buy a CD cuts down on carbon emissions.

That remains the case when ordering the CD online and picking it up at the store. But that isn’t the innovation –the drive-through line is. “Instead of wasting gas by hunting for a parking spot, shutting off the car, and turning it back on to leave, shoppers can zip through the drive-through, presumably only idling for a minute or two,” writes Ms. Schwartz. “That might not sound like big carbon savings, but when millions of Wal-Mart shoppers are taken into account it adds up quickly.”

Check out the article here.

Why Small Manufacturers are Going Green December 30, 2009

Posted by Jeff Fuchs in green business, manufacturing.
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With the debate around global warming heating up in recent years, companies have modified their processes and products to address consumer concerns over environmental practices. One of the improvements many small manufacturers are making is the investment in clean energy. Whether they are utilizing clean energy or producing the means to make clean energy, like the company Shuttleworth in Indiana, going green is in. The fact that even smaller companies are doing what they can to go green is indicative of the consumer and political environment. Because of that environment, green manufacturing offers a silver lining to an otherwise overcast economy.

For the BusinessWeek article, go here.

Why Small Manufacturers are Going Green December 30, 2009

Posted by Jeff Fuchs in green business, manufacturing.
Tags: , ,
add a comment

With the debate around global warming heating up in recent years, companies have modified their processes and products to address consumer concerns over environmental practices. One of the improvements many small manufacturers are making is the investment in clean energy. Whether they are utilizing clean energy or producing the means to make clean energy, like the company Shuttleworth in Indiana, going green is in. The fact that even smaller companies are doing what they can to go green is indicative of the consumer and political environment. Because of that environment, green manufacturing offers a silver lining to an otherwise overcast economy.

For the BusinessWeek article, go here.

The Lean Ratio December 30, 2009

Posted by Jeff Fuchs in Lean Thinking, strategy.
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Measuring things seems inescapable, especially in a world that places so much emphasis on numbers and counting. Measuring lean productiveness, specifically, is best expressed as a percentage according to Bill Waddell over at Evolving Excellence. That is the measure of value added expenses to total expenses. Mr. Waddell explains:

If the business spent $20,000, for instance, and $12,000 of it was on value adding things while the rest was on management, supervision, material handling, inspection and generally pushing paper around, the Lean Ratio would be 60%; or it could be expressed as 3:2 if you like looking at numbers that way better.

However, Mr. Waddell also explains that comparing the leanness of companies to one another is useless; what really matters is that each company, individually, is continually improving. The idea is to continually improve the useful ways in which money is spent.

Check out Mr. Waddell’s post here.

The Lean Ratio December 30, 2009

Posted by Jeff Fuchs in Lean Thinking, strategy.
Tags: ,
add a comment

Measuring things seems inescapable, especially in a world that places so much emphasis on numbers and counting. Measuring lean productiveness, specifically, is best expressed as a percentage according to Bill Waddell over at Evolving Excellence. That is the measure of value added expenses to total expenses. Mr. Waddell explains:

If the business spent $20,000, for instance, and $12,000 of it was on value adding things while the rest was on management, supervision, material handling, inspection and generally pushing paper around, the Lean Ratio would be 60%; or it could be expressed as 3:2 if you like looking at numbers that way better.

However, Mr. Waddell also explains that comparing the leanness of companies to one another is useless; what really matters is that each company, individually, is continually improving. The idea is to continually improve the useful ways in which money is spent.

Check out Mr. Waddell’s post here.

The Lean Ratio December 30, 2009

Posted by Jeff Fuchs in Lean Thinking, strategy.
Tags: ,
add a comment

Measuring things seems inescapable, especially in a world that places so much emphasis on numbers and counting. Measuring lean productiveness, specifically, is best expressed as a percentage according to Bill Waddell over at Evolving Excellence. That is the measure of value added expenses to total expenses. Mr. Waddell explains:

If the business spent $20,000, for instance, and $12,000 of it was on value adding things while the rest was on management, supervision, material handling, inspection and generally pushing paper around, the Lean Ratio would be 60%; or it could be expressed as 3:2 if you like looking at numbers that way better.

However, Mr. Waddell also explains that comparing the leanness of companies to one another is useless; what really matters is that each company, individually, is continually improving. The idea is to continually improve the useful ways in which money is spent.

Check out Mr. Waddell’s post here.

“Flexing” Hospital Staff is No Route for Improvement December 30, 2009

Posted by Jeff Fuchs in Lean Thinking, workforce.
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Mark Graban over at Lean Blog has shared his experiences working in the healthcare field, and was surprised to learn that hospitals will use “flexing” –sending home workers when an expected workload doesn’t come in.

Staff workers can contribute to the medical environment every bit as much as professionals, Mr. Graban notes. Flexed workers tend to feel less important and not as valued as professionals. Yet the idea of flexing presupposes that medical staff can do nothing to improve their work environment. Mr. Graban writes,

Toyota never sends hourly workers home early when there are parts shortages or other situations that mean there’s no direct work to do. Supervisors engage their brains in improvement activities. Why can’t we do the same with highly skilled nurses?”

Mr. Graban also relates that overstaffing can be a problem, yet, there has to be some time for improvement –and that requires input from staff.

To see Mr. Graban’s post, go here

“Flexing” Hospital Staff is No Route for Improvement December 30, 2009

Posted by Jeff Fuchs in Lean Thinking, workforce.
Tags: ,
add a comment

Mark Graban over at Lean Blog has shared his experiences working in the healthcare field, and was surprised to learn that hospitals will use “flexing” –sending home workers when an expected workload doesn’t come in.

Staff workers can contribute to the medical environment every bit as much as professionals, Mr. Graban notes. Flexed workers tend to feel less important and not as valued as professionals. Yet the idea of flexing presupposes that medical staff can do nothing to improve their work environment. Mr. Graban writes,

Toyota never sends hourly workers home early when there are parts shortages or other situations that mean there’s no direct work to do. Supervisors engage their brains in improvement activities. Why can’t we do the same with highly skilled nurses?”

Mr. Graban also relates that overstaffing can be a problem, yet, there has to be some time for improvement –and that requires input from staff.

To see Mr. Graban’s post, go here

Is Bottled Water Really That Bad? December 30, 2009

Posted by Jeff Fuchs in green business.
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Ever get one of those emails from friends where you scroll down for the punchline?  This graphic kind of works like that.  It details facts that challenge bottled water’s green cred.  Reading the stats, I picked up a water filter and aluminum water bottle for ten bucks while Christmas shopping.  It should pay for itself in the first month I use it and avoid much of the wastefulness I generate in the future.

See the data on bottled water here.

Is Bottled Water Really That Bad? December 30, 2009

Posted by Jeff Fuchs in green business.
Tags:
add a comment

Ever get one of those emails from friends where you scroll down for the punchline?  This graphic kind of works like that.  It details facts that challenge bottled water’s green cred.  Reading the stats, I picked up a water filter and aluminum water bottle for ten bucks while Christmas shopping.  It should pay for itself in the first month I use it and avoid much of the wastefulness I generate in the future.

See the data on bottled water here.

DIY Solar Panels for Homeowners at California Lowe’s December 30, 2009

Posted by Jeff Fuchs in green business.
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21 Lowes stores in California are now carrying solar panels produced by Akeena Solar. Meant for installation by homeowners, the solar panels would be installed on the roofs of homes and use inverters to plug them into electrical outlets. At a cost of $893 ($625 after federal tax credits), “shoppers get a 175-watt panel that provides enough energy to power a 42-inch flat screen TV.” According to Akeena, Californians paying 44-cents per kilowatt hour would save $132 a year per panel; however, it would take longer for residents of California to recoup their losses.

For the Fast Company article, go here.

DIY Solar Panels for Homeowners at California Lowe’s December 30, 2009

Posted by Jeff Fuchs in green business.
Tags:
add a comment

21 Lowes stores in California are now carrying solar panels produced by Akeena Solar. Meant for installation by homeowners, the solar panels would be installed on the roofs of homes and use inverters to plug them into electrical outlets. At a cost of $893 ($625 after federal tax credits), “shoppers get a 175-watt panel that provides enough energy to power a 42-inch flat screen TV.” According to Akeena, Californians paying 44-cents per kilowatt hour would save $132 a year per panel; however, it would take longer for residents of California to recoup their losses.

For the Fast Company article, go here.

Quit Groveling and Get Lean December 30, 2009

Posted by Jeff Fuchs in economy, government, Lean Thinking.
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President Barack Obama is attempting to convince banks to loan to small businesses to jumpstart the economy. And some small businesses are saying they need to take out loans to get going. But Bill Waddell over at Evolving Excellence will have none of it. He points to Henry Ford, $50,000 in capital, and the empire that Ford built –all without ever borrowing another dime. Mr. Waddell also points to the empire Toyota built in post-World War II Japan –all without a loan because there were no loans to be had.

Lean can solve the problems. Instead of a retailer doing business in China and “then blaming everyone else when you can’t finance a supply chain that takes months to get your goods from some factory 9,000 miles away… start looking for a closer, lean supplier with shorter cycle times, and therefore shorter lead times…”

Businesses do not have to rely on outside help to help themselves. Continual improvement can come on the inside. It doesn’t require banks or the government to create business. Mr. Waddell summarizes his position by saying, “I don’t want the government bailing out a non-lean company with my money because it is run by some guy who is unhappy that his 1970′s business thinking doesn’t work any more.”

Check out Mr. Waddell’s post here.

Quit Groveling and Get Lean December 30, 2009

Posted by Jeff Fuchs in economy, government, Lean Thinking.
Tags: , ,
add a comment

President Barack Obama is attempting to convince banks to loan to small businesses to jumpstart the economy. And some small businesses are saying they need to take out loans to get going. But Bill Waddell over at Evolving Excellence will have none of it. He points to Henry Ford, $50,000 in capital, and the empire that Ford built –all without ever borrowing another dime. Mr. Waddell also points to the empire Toyota built in post-World War II Japan –all without a loan because there were no loans to be had.

Lean can solve the problems. Instead of a retailer doing business in China and “then blaming everyone else when you can’t finance a supply chain that takes months to get your goods from some factory 9,000 miles away… start looking for a closer, lean supplier with shorter cycle times, and therefore shorter lead times…”

Businesses do not have to rely on outside help to help themselves. Continual improvement can come on the inside. It doesn’t require banks or the government to create business. Mr. Waddell summarizes his position by saying, “I don’t want the government bailing out a non-lean company with my money because it is run by some guy who is unhappy that his 1970′s business thinking doesn’t work any more.”

Check out Mr. Waddell’s post here.

Taking the Nano Pulse: Who’s Afraid of the Big, Bad, Nano? December 30, 2009

Posted by Jeff Fuchs in green business, new products and technologies.
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Although the riskiness of nanoparticles needs more scientific research, hype won’t help the situation. A recent article about a situation in China read, “Trail of Death Leads Doctors to Nanoparticles.” Seven women suffered permanent lung damage, and two died after working with nanoparticle-infused spray paint. A small amount of nanoparitcles were found in their lungs.

But upon examination, the women worked in an 8′x10′ room with no windows, a door kept closed during the five months just prior to their illness, a broken sprayer vent that had accumulated dust particles and were evident in the exhaust vent. “They had only gauze masks for respiration protection, and wore them only rarely,” writes Scott Rickert at IndustryWeek.

Basic worker safety –such as it is practiced in the United States –makes the difference. Worker safety standards in the United States are updated as research continues on nanotechnology –research that is funded by the National Science Foundation, National Institutes of Health, Environmental Protection Agency, the National Institute for Occupational Safety and Health, the Departments of Energy and the Department of Defense. It all comes down to genuine scientific research –not speculation or selling stories.

Check out the IndustryWeek article here.

Taking the Nano Pulse: Who’s Afraid of the Big, Bad, Nano? December 30, 2009

Posted by Jeff Fuchs in green business, new products and technologies.
Tags: ,
add a comment

Although the riskiness of nanoparticles needs more scientific research, hype won’t help the situation. A recent article about a situation in China read, “Trail of Death Leads Doctors to Nanoparticles.” Seven women suffered permanent lung damage, and two died after working with nanoparticle-infused spray paint. A small amount of nanoparitcles were found in their lungs.

But upon examination, the women worked in an 8′x10′ room with no windows, a door kept closed during the five months just prior to their illness, a broken sprayer vent that had accumulated dust particles and were evident in the exhaust vent. “They had only gauze masks for respiration protection, and wore them only rarely,” writes Scott Rickert at IndustryWeek.

Basic worker safety –such as it is practiced in the United States –makes the difference. Worker safety standards in the United States are updated as research continues on nanotechnology –research that is funded by the National Science Foundation, National Institutes of Health, Environmental Protection Agency, the National Institute for Occupational Safety and Health, the Departments of Energy and the Department of Defense. It all comes down to genuine scientific research –not speculation or selling stories.

Check out the IndustryWeek article here.

The Downside of Nanotech: Do Tiny Particles Spell Big Trouble? December 30, 2009

Posted by Jeff Fuchs in biotech, product development.
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Nanotechnology has improved medical treatments, made possible stronger and lighter materials, and has improved energy production, storage, and transmission –among other things. A nanometer is one-billionth of a meter, and nanotechnology deals with particles that measure 1-1000 nanometers in size. At such an incredibly tiny scale, chemistry isn’t chemistry as normal because the particles do not behave as larger particles do. The unpredictability of these particles causes challenges. Darren Quick over at Gizmag explains:

“Once nanoparticles enter the food chain are organisms able to excrete them or do they remain and accumulate inside the organism – and if they do, how do they behave? Do they affect natural processes and do they pose a threat? Can nanoparticles pass through biological barriers such as skin, mucous membranes or cell membranes to inadvertently enter our bodies? Currently these questions have no definitive answer. But that hasn’t stopped a great deal of money being spent developing nanotechnology, while comparatively little is being put into its potential consequences.”

 Among the problems, and potential problems nanotechnology poses, are those with respect to the immune system. Silver “comes into contact with human skin via jewelry all the time and isn’t hazardous,” writes Mr. Quick. Yet silver nanoparticles are bactericidal –like antibiotics –and are used on surfaces and products where germs are not desired –from refrigerators to baby bottles. But research indicates that silver nanoparticles can materially alter a person’s immune system, taking away in some instances, its ability to handle pathogens. More genuine scientific research is needed.

Check out the article here.

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