Archive for the ‘economics’ Category

Ten Laws of Constructive Capitalism

Wednesday, February 25th, 2009

I have watched Umair Haque’s presentation on at the Daytona Sessions three times in the last week. Since getting turned on to the thinking of Haque, it’s been a somewhat immersive exercise. I wrote about Haque’s Smart Growth Manifesto just a few days ago. His presentation on Constructive Capitalism, though, has kept me thinking and going back to watch it again. This is because Haque puts together a tight and compelling package that not only illustrates how we have arrived at current state (there’s plenty of that), but also illustrates some incredibly smart thinking on unwinding the challenges we now find ourselves in. I love that this is summed up succinctly in one of his first slides simply as:

The Ten Laws of Constructive Capitalism

  1. Strategy is a commodity
  2. Competition is obsolete
  3. There is nothing more asymmetrical than an ideal
  4. Tomorrow is today
  5. Connections not transactions
  6. People, not product
  7. Creativity, not productivity
  8. Outcomes not incomes
  9. Advantage is in the DNA
  10. The next revolution is institutional

He goes into detail on what is behind each of these, but I believe they are incredibly self-explanatory. Either way, you should definitely free up an hour to hear what Haque has to say on this, his presentation is excellent:

from on .

Credit Crisis Visualization

Monday, February 23rd, 2009


from on .

This excellent visualization is by Jonathan Jarvis from his thesis work in the Media Design Program, a graduate studio at the Art Center College of Design in Pasadena, California. Jarvis lays out the complex mess that is our economic meltdown in a very straightforward, understandable, and well designed manner. Well worth the time to watch this piece.

Which Way is Up? There is No Up.

Sunday, February 22nd, 2009

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Ahhhh… Optimism! The Future is Shiny.

Siting a recent , at HarvardBusiness.org optimistically offers that we may be close to the “bottom” of this economic crisis, and that we should prepare for the upturn. The operative word there is “may”. Actually, he qualifies this by saying whether or not we are approaching bottom, now is the best time to begin planning for an eventual upturn:

“Living through a downturn is not a process of grinning and bearing it; it is a matter of working the objectives toward your goals as well as planning for the good times that will occur someday. And if your organization does succumb, you will have learned valuable lessons that can be applied to future leadership roles.”

John Baldoni

Bottom? There’s No Bottom.

Then there’s the harsh reality offered by , that in the best case is merely the opposite end of optimism. Soros proclaims that the global economic crisis we are immersed in likely has no “bottom”, and therefore no signpost for signaling a return to happy times, and that this crisis is actually more severe than that experienced during the Great Depression, and analogous to the demise of the Soviet Union. He also offers this cheer:

“We witnessed the collapse of the financial system. It was placed on life support, and it’s still on life support. There’s no sign that we are anywhere near a bottom.”

George Soros

Collapse 2.0

Soros went there, drawing a connection between our situation and the demise of the Soviet Union. In a massively interesting presentation from way back in 2006, “Closing The Collapse Gap”, tries to make the case that this is so, and recommends that we look to the unwinding of the Soviet Union for insights into the imminent collapse of the United States. Orlov’s perspective on this analogy:

“I anticipate that some people will react rather badly to having their country compared to the USSR. I would like to assure you that the Soviet people would have reacted similarly, had the United States collapsed first. Feelings aside, here are two 20th century superpowers, who wanted more or less the same things – things like technological progress, economic growth, full employment, and world domination – but they disagreed about the methods. And they obtained similar results – each had a good run, intimidated the whole planet, and kept the other scared. Each eventually went bankrupt.”

And this dark insight:

“Economic collapse is about the worst possible time for someone to suffer a nervous breakdown, yet this is what often happens. The people who are most at risk psychologically are successful middle-aged men. When their career is suddenly over, their savings are gone, and their property worthless, much of their sense of self-worth is gone as well. They tend to drink themselves to death and commit suicide in disproportionate numbers. Since they tend to be the most experienced and capable people, this is a staggering loss to society.”

Dmitry Orlov

Nothing like predictions of nervous breakdowns, rampant alcoholism, and mass suicide to instill confidence in us as we face these challenges. Given the range and diversity in opinions regarding the financial crisis I think it would be a safe bet to assume that everyone is both right, and wrong, and that nobody has a clear idea on how exactly to fix this mess. My advice?  Get busy and plan for both the bad and the good.

Thanks to @andrewkorf for pointing me to the Soros and Orlov articles.

Umair Haque’s Smart Growth Manifesto

Saturday, February 21st, 2009

umair-haque

Over the past couple weeks I’ve been pointed several times to check out the perspective of Umair Haque, pictured above, on his blog at (a big thanks to ). Umair is Director of the , as well as founder of , both worth checking out. He’s written several articles that are required reading, but it was his piece, , that was a kick in the head for me. This is because it wraps together so many of the changes we are seeing in our society, culture, economy, and business in ways that relate these changes to each other, and their relevance to our own business and the economy at large. Umair makes the point that the situation we confront today demands a rebooting of capitalism, and a departure from the now irrelevant capitalist growth principles of the post-WWII economy. He calls the post-WWII economy “capitalsim 1.0″, and you know where that’s gotten us.  So, we face a rebooting of capitalism, and this reboot is itself being driven by the reality that interaction, and subsequently community formation, has exploded in exponential ways and fundamentally changed the way we form institutions, and in the ways we exert influence and can inform growth. Despite the efforts of governments, companies, media, and everybody, there will not be a return to situation normal as we knew it before, to capitalism 1.0. Whether we know it or not we’ve just jumped off a cliff together, and some get this and others don’t. This is the chasm that now exists between relevancy and irrelevancy in the global economy today, explained simply as the difference between old ways of thinking and new ways of thinking. New principles have changed capitalism and how we compete, and are themselves formed from this revolution in interaction. Think about your own business, and how the concepts of strategy, competition, and creativity have altered the ways in which you work, compete, and engage. This has happened in a very short period of time. Haque refers to this change, to capitalism 2.0, as , and provides more detail in a talk he gave recently.

It’s from these principles we get Haque’s four pillars for smart growth, concepts that any company desiring relevancy in the modern marketplace should give serious consideration to (I edited down Haque’s explanations for each one, so please refer to his article for full text). Together, these are a paradigmatic shift in how we look at business:

  1. Outcomes, not Income: Dumb growth is about income. Smart growth is about people and how better or worse off they are. Smart growth measures people’s outcomes. Economics that measure financial numbers, we’ve learned the hard way, often fail to be meaningful, except to the quants among us. It is tangible human outcomes that are the arbiters of authentic value creation.
  2. Connections, not Transactions: Dumb growth looks at what’s flowing through the pipes of the global economy: the volume of trade. Smart growth looks at how pipes are formed, and why some pipes matter more than others: the quality of connections. The goal isn’t just to trade, but to co-create and collaborate.
  3. People, not product. Smart growth isn’t driven by pushing product, but by the skill, dedication, and creativity of people. People not product means a renewed focus on labor mobility, human capital investment, labor market standards, and labor market efficiency. Smart growth isn’t powered by capital dully seeking the lowest-cost labor — but by giving labor the power to seek the capital with they can create, invent, and innovate the most.
  4. Creativity, not productivity. Smart growth focuses on economic creativity – because creativity is what let us know that competition is creating new value, instead of just shifting old value around. What is economic creativity? How many new industries, markets, categories, and segments an economy can consistently create. Think China’s gonna save the world? Think again: it’s economically productive, but it’s far from economically creative. Smart growth is creative — not merely productive.

This is all pulled together quite well, touching on so many things we face as we think about the sustainability of our businesses and our relevance to the markets we operate in, by this quote from Haque:

“Smart economies are driven by smart growth. The four pillars of smart growth are design principles for next-generation economies. 20th century economies are limited to unsustainable, unfair, brittle, dumb growth. Smart growth is more sustainable, equitable, and resilient.

Capitalism 2.0 cannot be powered by growth.1.0: that’s why the race for smart growth is inevitable. The economic pressure — the potential for value creation, in a world being ripped apart by value destruction — is simply too great.”

Umair Haque

To Haque’s point, getting smart is indeed a preferred option to staying dumb.

The Sport of Commerce

Tuesday, February 3rd, 2009

The Bird's Nest at night

I’ve not been able to confirm this elsewhere, but is reporting that only six months after opening for the Beijing Olympics, the Beijing National Stadium, or “Bird’s Nest”, is now going to meet the inglorious end of anchoring a shopping mall. This is apparently driven by the high costs of maintaining the stadium, and by the fact that there is only one event scheduled to be held there for all of 2009.

Somebody needs to send a couple very strong drinks about now. I cannot imagine that this is a desired end for this project of theirs.

I had written about the design of this building a few times previously. I have greatly enjoyed the many incredible pictures taken by during her time in Beijing.

Denial Is a Bitch

Tuesday, January 6th, 2009

Abort. Abort. Abort.

I read a great post by , himself building on a post by , that neatly ties together many things that I’ve been thinking and writing about. Together they talk about how the crisis we are experiencing is a catalyst for a fundamental restructuring in a number of industries. More specifically, and to my own perspective going back more than a year, this crisis is forcing tremendous change by shaking out irrelevant business models and challenging the depth of relevance in others. We are quickly learning what matters, and what does not. The obvious markers of this struggle are the American automobile industry, airlines, and the newspaper publishing business, these being shaken to their very core and with the very distinct possibility that they could go away altogether as we know them.  They probably will, and as much as that hurts it might be necessary. At some level, though, all businesses are being challenged, and there are countless other companies, as well as entire industries, that are coursing the abyss. It’s scary, and for those that stand to lose their jobs it is indeed sad, but this is happening because events have changed the realities that these businesses operate in faster than they have been able to manage, anticipate, or address. In many cases, this is the result of avoidance on the part of leadership in the hopes that things would improve, that they would be relevant again. It ain’t gonna happen. Denial’s a bitch.

This is not all bad, though. Yes, companies without connections to customers, without a compelling message and value to their audience, and with antique business models are realizing that their days are actually coming to an end. This is the cost of stasis, of the inability to change, or to innovate. But to Bruce Nussbaum’s point, we all face a call to transform business, industry, and our very activities. Fortunately for all of us there are many companies who are, and have been, doing just that. They’ve been transforming and changing how business is being done. They’ve been changing what matters. As Jeff Jarvis states, out of the economic downturn will come a focus on companies that can build “networks atop platforms”. Presently, many people are the victims of circumstance, and that is definitely an awful place to be, but there are countless others who are hard at work in spite of events, and very determined to be successful. This gets me pretty excited as I know that the result is going to be some astounding innovation and opportunity. That’s motivating. The challenges of this crisis have changed the things that get our attention, focused organizations on reinvention, and created an alignment that has thrust new business models and ways to think about business out into the open to serve as positive indicators for the future, and the very real reality that we’re going to make it through this and be all the stronger for doing so. Stronger companies, stronger business models, and stronger industries.

You can substitute relevant for stronger.

Ten Years. Leadership. Get it Done.

Thursday, November 20th, 2008

The video above is a very effective summation of by oilman-gone-good . Using a whiteboard as a prop, he clearly communicates his rationale for investing so deeply into wind farms, and how his wind farms in Texas are prototypes for explanding wind energy collection throughout the wind corridor of the United States, one of the largest such wind resources in the world. Doing this may lessen our dependence on the importing of foreign oil by as much as 38% in the short term (potentially in under 10 years), and we can begin immediately to see results. Watch the video, he ties everything together as a formidable spoke in the nation’s energy strategy very, very well.

A Perspective On How We Got Here, And Where We Might Be Going

Sunday, November 9th, 2008

View SlideShare or your own. (tags: )

, an internet analyst at Morgan Stanley, gave her annual view of the world and the technology industry at the in San Francisco last week. Flipping through the slides I found them enlightening, and the indicators she highlights paint a somewhat ominous reality for the coming year. She points out the connection between technology and advertising spending and GDP growth, and growth is obviously trending down. No surprises there, though.

You can view the slides from Mary’s presentation above or download them .

via

Understanding Millennials

Friday, October 24th, 2008


from on .

Another learning opportunity for the misguided university president that I posted about earlier. Generation Y, the millennials, generation WE… start getting to know them now as they are going to be a force to be reckoned with for all of us that came before. I loved this video.

Where Does Our Oil Come From?

Tuesday, October 21st, 2008

Really interesting piece at that looks closely at where the United States imports its oil from. We are constantly told that the largest exporters of oil to the U.S. are Canada and Mexico. But, we also export refined petroleum products back to both nations, and when you net out exports Mexico falls down to the fifth largest exporter of oil to the United States, presently just ahead of Iraq.

Anything Times Zero is Zero

Saturday, October 11th, 2008

Last evening I watched the recent discussion about the economy and financial crisis between . Warren Buffet, who talks about the opportunities that this crisis presents to those with their money and wits about them, provides an incredibly succinct breakdown of how we got to this place, to the decisions that were made that resulted in such instability in the global markets.

The Three “i’s”

Buffet describes a progression to how good ideas can go bad. He called this progression the “three i’s,” with the first “i” being the innovators, those who originate new ideas having identified the opportunities that others had not seen. The next “i” would be the imitators, or those who attempt to replicate the successes of the innovators. Lastly, we have the idiots. The idiots, driven by greed and avarice, ultimately unwind innovations through blind determination to get rich. With regards to the global financial crisis, the issue is not with innovation, but with the rampant idiocy that followed that innovation. To Buffet’s point, the innovation in the financial system was very much about value creation, and the profit that results from this. The idiots sought to massively exploit the profitability piece of the equation, but this had the result of shutting off the creation of value, and ultimately created the financial bubble. This is an interesting and informing explanation on how we have arrived at the present. I suppose the challenge in moving beyond this is to get better at identifying the difference between the innovation and the immitation, and to subvert the potential influence of those who seek to exploit. Good luck to us all.

At about 22 minutes into the interview, Buffet starts talking about the danger of leverage and how much of what we face now has been caused by the collective abuse of leverage. On this, he points out:

“You can do smart things, but if you use leverage and you do one wrong thing it can wipe you out because anything times zero is zero.”

Warren Buffet

Preparing For The Worst.

Friday, October 10th, 2008


We’ve got a little bit of a financial struggle on our hands, no doubt about it. How things will resolve themselves is still very unclear to just about everybody. This is affecting confidence, planning, and decisions at every level of government, business, and society. Forget about the stock market for now, that’s been reduced to nothing but a moment-to-moment measurement of overreaction and rampant emotions. Wait, I guess the stock market has always been like that.

Given the intensity of the mess we find ourselves in, many of the venture capital firms have been calling “CEO all hands” meetings for those who lead the companies in their portfolios. The meeting of Sequoia Capital’s CEO group was earlier this week, and the presentation for that meeting, shown above with its dark humor intro slide, is making its way around because it succinctly drives home the need for one very important strategy: Prepare for the worst.

“My attitude is batten down the hatches… it is going to be a rough ride.”

Douglas Leone of Sequoia Capital

When events are fluid, unpredictable, and at best volatile the appropriate strategy is to secure what you can, make the hard decisions, prepare for a worst case scenario, and ready yourself to take advantage of when situations begin to improve. The appropriate strategy is to do what is required right now to ensure your company is around on the other side. Prudent advice, indeed. What is important here, though, is not so much the practical reality of that advice as much as how well Sequoia Capital’s presentation above provides such an effective situation analysis to justify it. Next step, focus on the facts and remove emotion from our collective thinking on these matters.

Found the slideshow above via .

Iraq War Estimates: Getting it Wrong

Sunday, October 5th, 2008

An excellent graphic visualization of information from that depicts how the war in Iraq has reached the cost level of about $3 trillion. Yes, that’s right, $3 trillion. I’ll let the piece above speak for itself, so watch it, but suffice it to say that when you think back to all of the bad, false, and misleading information that pointed our nation in this direction the complete and total misunderstanding and misrepresentation of this war’s cost to the American taxpayer is right up there.

Anyway, frustration with the cost of this war aside, this is an excellent information visualization.

Found this visualization via .

How Bad Architecture Ruins Lives

Saturday, October 4th, 2008

The word “McMansion” has entered the common vernacular. They are ubiquitous in America, representative of an era that appears to be drawing to a close. Increasingly, these are the homes that have been foreclosed on and are sitting empty as monuments to conspicuous consumption and thoughtless, careless, irresponsible building practices. The trailer above is for a documentary that I have not yet seen, but given the prevalence of the story of McMansions these days, do you really need to? I seriously doubt that in 75 years there will be any trace of these homes left to remember them by.

via

An Energy Protection Force

Wednesday, July 23rd, 2008

I have been reading and researching more intensely about and the intricacies and intrigues of U.S. energy policy. I found an excellent resource in the comprehensive blog , as well as , and the . It was at The Oil Drum that I came across this video of Bill Moyers from June of this year. Moyers ties a few things together, and makes some assertions that are worth serious consideration:

Oil Power Contrasted Against Human Power

Monday, July 21st, 2008

put together a really interesting piece for that captures a number of perspectives on the value of human labor power as compared to the power generated by a barrel of oil, and goes some distance in explaining why oil is such an efficient energy source, and why we are addicted to it. The post is fascinating, especially as the conversation gets increasingly complex, so definitely read it. Here’s a quick overview of some of the calculations that inform the comparison:

  • One barrel of oil is equivalent to about 25,000 hours of human labor, which is about 12.5 years at 40 hours of labor per week.
  • The average American uses about 60 barrels of oil or oil equivalent (coal and gas) per year. This is about 360 billion joules of energy.
  • For a human to generate labor equivalent to the energy created by a barrel of oil would take an average of 10,000 hours would cost about $200,000 at $20/hour.
  • A barrel of oil generates 1,700 kwh. A human averages 150 kwh per year.

I suppose a subtext of this discussion is the hard reality that we are still very challenged to offer serious, viable alternatives to oil as an energy source. This reality, coupled with a history that has seen industry, and by extension our economy, establish and refine an oil based energy infrastructure over most of the last century, perhaps explains why we still struggle with energy policy and change. Oil has become an integral, integrated part of not only our economy, but also our culture and society. Creating change in this situation is analogous to turning the proverbial freight train.

The Changed Landscape of Influence

Saturday, July 12th, 2008

Matt Dickman recently conducted a really interesting over at his blog Techno//Marketer to get a sense of what people felt the most influential medium might be. The results are presented in the graph above. I believe it is a safe bet that his readers skew massively to the internet, but I believe they are still representative of the paradigmatic changes that have occurred in the greater media landscape. The broader theme here, that the ways in which people interact with information is changing, is something I am actively exploring myself. What is absolutely not surprising from Matt’s survey is the incredibly low performance of newspapers and radio. The of newspapers has been trending down for years, and many historically prominent rags are facing irrelevancy to their audiences. Audience preferences and expectations with regards to how they engage information is changing, this interaction is very fluid, and while some struggle to adapt to this reality others have been slow to respond and are suffering the consequences of a dwindling subscription base and shrinking advertising revenues. That spells doom for those newspapers. The same is happening in radio, and the is tracking similarly to that of newspapers. At the heart of this is the reality that we are increasingly moving away from having things pushed at us, and increasing moving toward technologies and mediums that allow us to engage media and information in ways that are dynamic and customizable to our preferences. Also, there is an informational frequency issue and newspapers, especailly, have struggled to compete with the 24/7 nature of the informational engagement model of the web. Those that have moved to a comprehensive web strategy have struggled to find an appropriate revenue model, especially one that can scale. We are watching media evolution and the survival of the fittest, of the most innovative.

Going back perhaps a decade, many newspaper publishers failed to appropriately survey the landscape for strategic risk to their organizations. As a result, they missed important opportunities to substantively investigate and innovate their business models. The web has moved incredibly quickly and efficiently in becoming pervasive in our society, in our culture, and many publishers now face the incredible challenge of trying to change a business model when it is absolutely too late.

Where Did All The Cement Go?

Thursday, June 26th, 2008

As evidenced from the graph above (via ), it goes to China. 50% of the cement produced last year was produced and ultimately used by China, which equates to 1.3 gigatons of cement. China only exported 33 million tons of cement out of that 1.3 gigatons. Just as an FYI, a gigaton is one billion tons. India was a distant second at .3 gigatons. With the growth and expansion of the nascent infrastructure that has been underway in China, especially in preparation for the Olympics, this probably is not too surprising, but the enormous gap between China and the entire rest of the world is definitely noteworthy. Additionally, something startling that I learned is that each ton of cement produced also produces a ton of the greenhouse gas CO2. In 2007 cement consumption in China produced 1.3 gigatons of CO2, which I’m guessing is a helluva lot of CO2 to be produced by one industry in one nation.

Putting these numbers into context, and perhaps as an explanation for the relatively small production of cement in the United States, is the reality that we invested in and built up our infrastructure during the 1940’s, 50’s and 60’s. That effort also required massive amounts of cement, tonnages that I am guessing are comparable to China’s recent production totals. With our infrastructure largely in place the requirement for massive quantities of cement in the U.S. just is not there, relative to the demand for cement in support of growth in China. That is, until the escalation in the crumbling of our streets, highways, bridges and interstates begins to necessitate more comprehensive replacement and expansion, something that certainly seems to be gaining more momentum nationwide as our national infrastructure moves into its sixth decade of intense use.

I very highly recommend subscribing to if you have any interest in energy policy, peak oil, and the social, political, and economic implications of our dependence on foreign oil. The coverage on this blog is comprehensive and the writing is excellent.

The Lonely Road of High Gas Prices

Thursday, June 19th, 2008

Our little family is definitely feeling the pinch of higher gas prices, to the tune of a couple hundred dollars a month more than we were paying about a year ago. Yet, my wife and I are ok with this and are adjusting our lifestyle and schedule to allow us to drive less. We know that these high gas prices may be what it takes to change not only the habits of Americans as individuals, but of society at large. The net of that will be a very good thing. So we are beginning to drive much less, and be much more thoughtful in our destinations. We are clearly not alone.

A Department of Transportation study (via ) has revealed that in April of this year Americans drove 1.4 billion fewer miles on highways than they did in April of 2007, a 1.8% reduction. So far for 2008 Americans have driven 20 billion fewer miles than they did in 2007. What is interesting, though, is that while those numbers may sound large they are not yet a significant percentage reduction over 2007, though the April numbers continue a six month trend in declining miles travelled. I would anticipate that miles driven will continue to decline and while 1.8% may not seem like a large decline it is my guess that this is a trend that will continue for some time to come. If the high gas prices last as long as many are saying they will, those declines in driving may become permanent lifestyle changes.

Gas Prices? High? Think Again.

Wednesday, June 11th, 2008

International gas price comparison

Here in the United States we are definitely feeling the pain of higher gas prices, but that pain is only a result of our expectations being unreasonably set by unrealistically suppressed gas prices for… well, forever. The graph above compares the gas prices of several nations over the last year. The average price in the United States for a gallon of gasoline would be the bluish line at the bottom, the one far below the cluster of lines.

This perspective brought to you by our friends at .