Back when hedge fund managers were still riding high, Nouriel Roubini’s forecasts of financial collapse earned him the moniker “Dr. Doom.” Turns out that Dr. Doom was eerily accurate in his projections, turning previous snicker-ers to sycophants hanging on his every word. A profile written on him in the NYT Magazine, August 2008, begins with warnings he’d issued two years earlier:
On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.
(read the full article)
Naturally, Roubini now enjoys a new kind of celebrity along with a heavy schedule of speeches, writing, and interviews. Yesterday, he was a guest on MSNBC and warned that the recession will extend into 2010, and that if stronger measures aren’t taken (by the government), that an “L”-shaped stagflation (as happened in Japan) is in front of us, rather than the “U”-shaped recovery we’ve been hoping for. Flattening any illusion that good times will return, Roubini says that the worst is still yet to come.
When presumed financial wizards and experts say that they didn’t see the financial meltdown coming — that no one could — it feels like a deer-lick-size piece of salt being ground into a wound. There’s a whole lot of blame to go around, most of which can be hung on the delusion/ideology/myth that significant leverage will predictably yield significant wealth. I don’t know about you, but a visceral “Are you **!!?* high?” sense of distress screams inside me at such an assumption.
Many describe the “financial instruments” (of mass destruction) engineered in the last decade as too complex to understand, as they were designed, in fact, for opacity. I’m sure that’s true, but like gravity, there are simple principles that govern wealth creation and its management. Creating capital without any tie to a real asset is just crazy — and that’s not hard to understand.
I often say that, like Rodney Dangerfield, futurists don’t get no respect. The human brain just doesn’t accept what’s not in front of it, and rejects even well-reasoned arguments such as Roubini’s when they’re at odds with present conditions. Fear is hard to grasp when one is insulated by the comfort of big cars, houses, and bank accounts. It’s one of the reasons why humans tend to wait for crises to make changes, and why denial can run so deep.
My advice: 1) subscribe to Roubini’s RGE Monitor newsletter, and 2) start paying futurists the respect they’re due.
The Executive Chairman of the Virgin Money Group, Jayne-Anne Gadhia offers four key points on how to keep being “cowboy” when the business world enters the badlands of recession…
1) Strong partnerships
2) Product diversity
3) Efficient marketing
4) Cost management
These are clearly logical and appropriate responses for the times, but I was more struck by Richard Branson’s (Virgin entrepreneur) post directly after hers. “People often wonder what makes Virgin different” he starts off and goes on to elaborate about the caliber and purpose of “Virgin people.”
Cecily has a lot to say about this. “What makes Richard Branson’s company so successful is that he’s not selling airfare, cell phones, or music, he’s selling a ‘territory of meaning’ (her term). When you have a strong identity, such as Virgin does, you can offer almost anything. Branson’s approach to business has been somewhat unorthodox, but he’s proved this strategy time and time again.” She says the ‘territory of meaning’ concept is illustrated beautifully by Virgin: “The very essence of the Virgin brand is its Explorer spirit, restless and always moving into virgin territory. Virgin is brave, at times bawdy and brash, and always, always forward-looking.” But the real genius of this brand, says Cecily, “is its tongue-in-cheek ‘rebel with flair’ attitude that puts the notion of virginal purity on its head. It’s this kind of double-entendre of meaning that’s just so winning: Adventure + Irreverance wrapped around luxurious experiences.”
(Here’s Sir Richard at a press conference in Boston announcing flights to the “Left Coast” — LA, SF)
According to Branson, “Virgin Group enters industries that aren’t well-run and need to be ‘shaken up,’ and the U.S. Airline business is one of them.” People who’ve flown Virgin Air rave about it. That makes them raving fans, by the way, so U.S. Airlines, which tried to keep Virgin out of their markets for 20 years, have reason to be nervous. A look up his sleeve: Branson is reported to have reached out to Captain Sully Sullenberger recently…
In many ways, it all comes back to being a good salesman. It doesn’t matter what you’re selling, it’s whether or not you can actually sell it. Particulary interesting was the point Gadhia emphasized: it’s important not to view costs as fixed and variable, but bad and good. The way you decipher the bad from the good is to make the benefit to your customer priority #1. If it’s at the greatest benefit to the customer, that’s a cost you need to keep.
“Amen!” is Cecily’s response. “Woe to those who start slashing expenses based on dollar amount. Unfortunately, that’s a survival tactic most companies embrace when revenue starts falling, along with squishier ROI such as marketing. No company, no matter its size, can afford to forget that it’s core business is sales.”
“Excellence and customer service is the cost of entry to the market. You don’t get to make it past ‘Go’ if you don’t have those two things in your operation. The game is really about generating loyal fans of your work. To do so, you’ve got to clearly stand for something, you’ve got to mean something to your customers (again, the Virgin example).”
To complement Virgin’s advice to evaluate costs based on benefit to the customer, Cecily recommends businesses go back to the basics:
1) produce something that people want
2) have a clear point of view (territory of meaning)
3) touch people’s lives
4) keep expanding your network
This last point can be addressed by developing/refining a social media strategy. “The high-touch, high-context environment of online social networks is designed to leverage connections exponentially,” Cecily says. “Where else can you find more than 12,000 people added to your network everyday for zero cost? It’s a market you can’t afford to ignore.” She reiterates the importance of creating relationships, “the game isn’t to see how many ‘friends’ you can make, but to leave people better off for having been in contact with you. You create online fans not by selling to them (or giving mundane status updates), but by establishing a point of view and backing it up with content such as opinion/editorial on something of substance, linking to relevant stories, or sharing found ‘delights’ (i.e. music, video, commentary).” It’s not surprising to learn that Richard Branson blogs and Tweets (@richardbranson, 40,400 followers) too.
Branson’s and Cecily’s strategies are just two of many for making your way through the business badlands, summed up as, “Mean and mind (your) business!”
“Our greatest export has always been the American way of life and nothing is a better symbol of true Americana than McDonald’s and Coca-Cola,” says Cecily. McDonald’s recent $120 million investment into the expansion of its Russian franchises and Coca-Cola’s $1.2 billion commitment to Russia in the next 3-5 years certainly supports this claim. After years of hanging idly in streetside cafes, Europeans are flocking to the idea of fast and tasty food.
Some analysts have argued that the downturn in the economy has assisted in the success of cheap food joints like McDonald’s, but the fact remains that McDonald’s has always had a strong staying power – especially outside of the U.S. In 2008, McDonald’s reported a net income raise of 80% for a total $4.3 billion. 4 percent gains were garnered in the U.S., but the majority of their profit came from Europe and elsewhere. McDonald’s experienced 8.5 percent gains in Europe and 9 percent in Asia/Middle East/Africa.
Cecily explains why Coca-Cola has been equally successful: “Coca-Cola is an enduring icon that has wrapped itself in the idea of wholesomeness (what it stands for, not its ingredient list). Further, as the ‘real thing’ Coke promoted its beverage as a main-stage mediator for world peace, asserting that when people share something in common — a taste for Coca-Cola, for example — the likelihood of living in ‘perfect harmony’ just might be possible. Captured in their “I’d like to see the world as one” commercial (1971), that association is as burned-in to the American psyche as any brand can be. And for that matter, the world’s psyche.”
Russia is an attractive place to expand for many reasons. A growing middle class, with growing appetites for global goods, is a good bet for McDonald’s. And now with the $25 billion China has agreed to pump into Russia, in exchange for an increase in oil supplies (a pact just reached on 2/16/09), the country is a great investment for companies like McD’s and Coke.
Cecily continues, “America and Russia have been at odds recently over security and ideological issues. From their opposition to Bush’s missile-defense program, cozy relations with Iran and China, and their incursion into democratic Georgia last summer, Russia is clearly on the other side of a number of strategic interests for the U.S. Since countries that do business together are less inclined to go to war with one another, serving up Big Macs and Cokes in Russia may help quell the tension. – Now that’s a value meal!”
The Mobile World Congress in Barcelona recently wrapped up shop this past week and some of its exhibits made me positively giddy…
Smart Communications walked away with an award for its Alternative Power for Cell Sites program. This program uses renewable energy sources to power cell sites in off-grid locations. The Phillipines currently holds 68 cell sites. 41 are run on wind energy, 27 use a mix of wind and solar power. Operational savings include lower diesel consumption, less carbon emissions, better community relations and seamless service in off-grid areas. They’ve got the right idea: black is the new green. Instead of Black Friday, we can make it Green and come out just fine.
Secondly, I love, love, love the NTT docomo Samsung nameless projector contraption that was debuted. Confession: I have always wanted to be a secret agent. I’m obsessed with James Bond, yet ironically, I’m not not so technologically savvy. However, I’m working on the latter defect in order to keep up with the times. Ntt docomo Samsung introduced a mobile phone that also doubles as a mini projection screen for films and TV shows. You can see a video demonstration of it here. It’s a bit heavy to handle and I’m not sure the premise is so practical, but it sure looks snazzy.
It’s like the upgraded version of the drive-in movie. I think the oversight here is that it’s a lot easier to carry around a hand-held flatscreen than it is just to have the projection capacity. I can’t exactly see myself being like, “Hey guys, want to watch a movie?!” and then having to find an entire white wall suitable for projection purposes. Maybe, if I was in jail. I think the best market for the projection mobile would be for college professors. Students would definitely sit up and listen to someone who had such a fancy gadget… and if they can design one that fits into a cufflink…professors could appear as they were projecting their lecture notes directly from their hand, probably the closest thing yet to godliness.
In the mean time, while Detroit is figuring out all to get all of its ducks/cars in a row, local communities are not holding their breath. One Californian dairy farmer has rolled out its own survival package in the form of a cow-pie powered 18-wheeler. As a child, I recall visiting my friend who lived on a farm. We would stand outside her holding tank of manure, scratch our heads, hold our noses, and threaten to push each other in if we gave too much sass. I never thought to ask whatever happened to that manure when it finally filled up, but I’m happy to see that there are now more viable solutions than those (literally) stinking hot summer days on the farm. To be more specific, Hilarides Dairy manages the manure made by 10,000 cows to create 226,000 cubic feet of biomethane each day. This will decrease their Central Valley farm’s diesel fuel consumption by 650 gallons a day!
“Money is the most powerful incentive,” Cecily says. “It is certain that gas prices are going to rise to unseen levels again and farmers need to find a way to protect their interests. Rather than waiting to see if car companies to re-organize in a more sustainable manner, farmers are being innovative themselves.”
To me, the best part about this particular plan is that it shows progress from our initial platforms. The sustainability headlines have long been profiling people who have been using leftover oil and grease from local restaurants to power cars and buses. A major drawback to this is that the collection process can be long and tedious – traveling to and from area restaurants and transporting large volumes of grease to an adequate staging area is no easy task. By producing biomethane fuel on factory farms where large amounts of manure are already available will significantly diminish this problem.
If the stimulus package is able to restore some of the economy’s liquidity, sustainability is definitely one of the first realms of promise that private investors could look into. “The auto industry does not have the capacity to re-tool its entire system to work in favor of sustainability. That would be a too daunting of a task in the present moment,” Cecily comments. “But private investors with a view for the future could certainly step up and provide funding for pilot projects that focus on fuel-efficient cars and manage these relationships for the time being. This is an excellent time for innovation.” So yes, shit happens, but the good news is, we can make it sustainable.
Here are a few related links to browse:
The video below is of a farmer in India who has proved that the manure-to-methane process is even effective on a small-scale. He uses one cow to create the cooking gas needed for a family of four.
In my last entry, I practically argued for the end of paid journalism and as Push Institute founder, Cecily Sommers pointed out: I basically shot myself in the foot. “Say you’re a journalist who really believes in her work, who also has a family, and struggles to make ends meet. Then that’s a different set of considerations,” she says. “We need to understand that ‘life is commerce,’ that we constantly e-value-ate the worth of things, activities, people, time whether it’s in numerical terms, or simply opinion-based.”
Cecily launches her argument: “Here’s the deal: change is not inherently good or bad. Change is more like a symptom (but not in the pejorative sense) that has root causes that are constant and predictable: resources, technology, demographics, and social organization.” She continues, “What’s important is to understand how these forces interact (it’s what she calls “Change Literacy”), and then to make good decisions.” She goes on to say that in order to do that, you must first set set aside personal philosophies and belief systems, then study a situation in all its glorious complexity.
“Values matter,” says Cecily, “and are factored into the decisions you ultimately make in the end.” She makes a distinction between values and beliefs (or ideology): “While values tell you what you care about, beliefs are a determination of truth. That’s slippery stuff; beliefs act as an unconscious filter of what and how information is absorbed. As such they can distort or limit real understanding of the situation at hand.”
As an example, Cecily said she grew up in a family that believes business is bad and/or money is evil. “Obviously, it didn’t keep a passion for business from growing in me,” she says, “though it didn’t help either. What I discovered on my own was that business is a wonderfully creative platform. It’s also a pretty powerful social instrument, an actor in the world, a tool for change. Like change itself, business is neither good nor bad, it’s what you do with it.”
As she was talking, I recognized that the attitudes and beliefs Cecily described in her family is a mindset I may have adopted as well. I view mine as a self-defense mechanism. Being raised without much cash flow, I pretended that I was snubbing the allure of business, when in reality, it had been snubbing me from the start. Not only is this childish, Cecily argues that “it is an assumption that limits learning. Worse, it can limit your experience. You need to say to yourself: well, this is the world, given who I am, how can I be the most effective, successful person in this world?” If ‘life is commerce,’ as she says,then ultimately, you need to know both your value and your values, then be responsible to each. If you choose otherwise, you’re thrusting yourself into a cyclical argument with reality. (Basically, in more erudite words, she called me a “dreamer” too. *sigh*)
“Value is dynamic; it is forever shifting,” Cecily says. “The pain of change is a shift in values, whether your own or society’s. For instance, every generation believes, as they grow older, that things are getting worse (she said there’s a word for it: “chrono-centricism”). It’s just that things are different and older people are no longer a part of society’s creative thrust; usually they don’t want to be at the center of things anymore, but neither do they want to feel left out. The way the world used to work makes sense to them, while all the newer stuff doesn’t. Every generation, as it ages, starts to feel anxious about the world, and interprets it as ‘wrong’ or ‘bad’.”
I am experiencing that “pain of shifting one’s values” right now as I write this. Can Walter Isaacson really be my friend? If I want to live in this world, I guess so. Cecily offers hope, however.” It is equally important to have boundaries,” she advises. “You have to understand business for what it is, but it doesn’t mean you abandon your values. You can go to the soup kitchen and help out or give back in other ways to the community, outside of work. It is ineffective when you let these values permeate your business model, however, because then you are not assigning the appropriate worth to your endeavors. If you keep pushing against the fact that the world functions through commerce, you are only impoverishing yourself.”
Walter Isaacson, former Chairman and CEO of CNN and Managing Editor of TIME, is vying for the “re-commoditizing” of the newspaper, but so far, most of his claims are falling on deaf ears. Isaacson makes his argument in last week’s TIME Magazine with his piece, “How to Save Your Newspaper” and is following up with many animated discussions, including my favorite – his appearance on Jon Stewart’s The Daily Show. He is convinced that there is room to move in the decline of the newspaper industry – that if citizens can be hooked hard by the iTunes phenomenon, surely a similar business model can be designed for the news industry. The New York Times scratched their dalliance in this idea in 2007 and the only major newspaper in the U.S. currently operating under an online subscription model remains the Wall Street Journal.
Isaacson warns that “free news” will come at the consequence of quality content. “Charging for content forces discipline on journalist: they must produce things that people actually value,” Isaacson states. He also criticizes the popular method of fostering profit through advertisement dollars. He says, “Publication’s primary duty should be to its readers, not to its advertisers. You will weaken your bond with your readers if you do not directly depend on them.” As a writer, I happen to disagree with both of these statements. As far as free news compromising quality content, this is easily refutable. Do Habitat for Humanity houses fall apart in a year? I don’t think so. In fact, they are probably twice as valuable because they were made not for profit, but for the betterment of the community. They have an inherent worth that is much more powerful than you think. The daily beat reporter has never been a lucrative occupation, but it’s a spot that’s still consistently filled. Why? It’s for the same reason that musicians continue to play at their corner coffee shop even though their chances of making it big are miniscule. It’s out of a love for what they do. If Isaacson is implying that a lack of adequate compensation is going to make a lazy journalist, I argue that they probably shouldn’t be a journalist in the first place – they’re not in it for the right reasons.
This holds true for his advertisement argument as well. If a newspaper makes its profit solely through advertising, Isaacson’s implication is that the paper will be less conscious of its readers. Doubtful. You still need your readers to visit your website, pick up your paper, in order for those advertising dollars to work. You might not directly depend on them, but like most things in life, it is a system, and your readers indirectly influence your survival. You lose your credibility; you lose your advertising investments.
Here’s where my idealism starts to creep in. Why does everything need a price? The growing field of economic anthropology addresses this incredible tension between market and society where a numerical value is the only way we know how to determine the worth of something, yet there are so many aspects of human nature that lie outside of this measuring rod. We put a price on emotions when we award thousands of dollars in “pain and suffering” lawsuit settlements. We put a price on our houses which really, for many people, are a huge part of their individual identity. (This may not be true to the modern-day transient American, but for many people they live where their family has been for generations and feel indelibly connected to the land). American technology writer, Dan Gilmor, tells us that “journalism is shifting from a lecture mode to something that resembles more of a conversation.” So the question is, when did we start charging for conversations?
“A penny for your thoughts” is a colloqualism that’s been around forever and I hate it. It is a metaphor that reduces us to vending machines of information and I don’t think this is true. Personally, I am a heart on my sleeve kind of girl and I will talk to anyone and any animal until my lips turn blue. Some people call this a “dreamer,” implying a sort of otherwordly quality, but on the contrary, I think the ability to share makes you more real.
In conclusion, I am embracing the demise of the newspaper as a form of “creative destruction,” something beautiful will appear in its place. I secretly hope that Isaacson’s ideas get mired in the mist and we start to treat our exchange of information and ideas as something sacred, something above the realm of the market. The internet has done a great job of starting us along that path, so all we need to do is keep on PUSHing.
Okay, so I’m still stuck on this video game track. It’s fascinating to me. As I mentioned in a previous blog, I usually make an annual Northern Ireland pilgrimmage. I always fly Aer Lingus because I can’t wait until I get to Ireland to hear those accents that I love, but now I have a new reason. Their latest airplanes have individual TV consoles where you can choose from over 10 movies, 100 + music videos, TV shows, radio stations, and of course, as many video games as your inner child can possibly dream of. Needless to say, I did not sleep my entire 7.5 hour flight to Dublin.
I think that Aer Lingus, and airlines in general, though, can do better. We should take Suzanne Seggerman’s Games for Change and put those on the in-flight TV consoles. If you’re traveling internationally, my guess is you’re probably already a somewhat worldly person anyway (or you’re accident-prone and on the wrong flight) and you want to know what you can do to make a difference wherever you are traveling to.
Cecily stopped my idealism short for a second (and rightfully so.) “You forget that not everyone is twenty-two, single, and as curious and adventurous as you,” she says. “In-flight social change video games might be an interesting medium to expose people to the culture and realities of the places they are traveling to, but it’s going to take something more than to make them act. I genuinely believe that people do care deeply and they want to change the world positively, but fear and lack of familiarity make it difficult for them to act.” Check mate.
So what if we use the in-flight TV consoles to allow social organizations to advertise humanitarian experiences or short-term social projects? My brother works for Habitat for Humanity in Costa Rica and I would love for him to be on my in-flight movie. “Vacationing in Costa Rica? Want to help build a house for a day? Try it out first!” Then passengers would be invited to complete an in-flight simulation of what their day would be like making a difference, complete with contact information for upon landing.
Even just having small social tourism advertisements would do wonders. An example of this would be Amureci, a Costa Rican women’s collective that makes paper products out of recyclable materials to empower themselves and sustain their environment. By purchasing their materials, tourists can contribute to the empowerment of Costa Rican women in rural communities. Give them a little face time on an in-flight TV console and their efforts could expand exponentially.
I agree with Cecily. The task of making a difference can seem daunting. However, if you have a 4 hour flight or more with nothing, but leg cramps and a crying baby to your left, trust me, you’ve got time. In-flight revolution, please.
President Luiz Inacio Lula da Silva made a powerful statement this past week when he was notably absent from the World Economic Forum. Instead, he remained home, where he attended the ninth annual World Social Forum. The World Social Forum was founded in 2001 as a response to the World Economic Forum. From its start, Lula gave overwhelming support to the World Social Forum and it helped to launch him into the presidential sphere.
The World Social Forum takes place every year in conjunction with the World Economic Forum, but the discussions revolve around social issues, rather than strictly economic concerns. Globalization, sustainability, indigenous rights, and environmental protection are just a few of the topics involved in the lively conferences, interviews, and discussion panels that occur. This years World Social Forum was held in Belem, Brazil – the capital of the Amazon. This was done to bring focus to the endangered homes and lifestyles of the indigenous communities within the Amazon and across the world.
Lula da Silva explained his absence at the World Economic Forum as logical. The economic crisis is clear, capitalism is faultering. If the current system is not working, it seems impractical to consult and look for solutions with the very bankers who created the problem in the first place. Instead, he stood firmly under the World Social Forum banner: “Another World is Possible.”
I was in Northern Ireland for the holidays and the air of unrest was just as palpable as in the rest of the world, but with a few unique facets. Northern Ireland is a part of the UK, but most of its citizens identify themselves as Irish. They look strongly towards the Republic of Ireland and lately, they have become increasingly unnerved as the roar of the Celtic Tiger gets harder and harder to hear.The Northern Irish are not unfamiliar with the term “recession.” They have been more or less living in it since the onset and aftermath of the Troubles, a period of civil strife that lasted from the 1980’s up until the millennium. The ongoing political unrest served to deter foreign investors, who flocked eagerly to the south of Ireland from the 1990’s on. (For an interesting explanation of the Republic of Ireland’s economic boom, check out this blog). Consequently, Northern Ireland’s economy remains small and primarily based on shipbuilding and service industries.
For many, the simple solution to a lack of work was to travel south into the booming Irish Republic. Dublin was becoming a major metropolitan area and major U.S. technology firms such as Dell and Microsoft were arriving in hordes due to the country’s attractive corporate tax rates. Ireland’s relatively small population also ensured that jobs were plenty. However, that was before. This is now. Given the global nature of our current recession, economic turmoil is proving more difficult to escape and smaller countries such as Iceland, Ireland, and Norway are among the hardest hit.
In my hang-out of Derry, the second largest city in Northern Ireland, I often had the surreal notion that I was witnessing the death of consumerism. Five of my favorite stores in the local shopping centre were permanently shut and nearly all of the remaining stores were advertising 75% off or more sales. Zavvi’s, (formerly Virgin Megastores and a subsidiary of Woolworth’s who has since gone under), announced the closure of 18 stores and cut 353 jobs while I was over. At the Derry shopping centre Zavvi’s, employees were working on a volunteer basis. CDs and other entertainment merchandise were being sold at prices as low as one pound (USD1.50).
We have been warned that it will take time to feel the effects of the economic decline, but as a subsidiary of the UK, Northern Ireland has been one of the first to fall. Locals are worried that the Republic of Ireland may be next. If US companies falter and withdraw, such as is happening with the UK in Northern Ireland, Ireland’s labor force will be left stranded. Furthermore, Ireland will be left wondering what exactly it has to offer the rest of the world in order to support itself.
This is a question that perhaps the United States should be pondering as well. It is clear now that our economy of information and lending is neither sustainable nor reliable. It is a “house of cards”, to put it in terms most often used. We need to move away from finance and information and into more tangible modes of production. Alternative energy, infrastructure, technology, and manufacturing appear to be the most viable options. Yesterday’s steelworkers are now today’s code-crunchers and wind farm manufacturers.
In Northern Ireland, the mood is cynical, but the Irish humor still remains. “Aye,” my friend, Conor, reflected over the world’s current state of affairs. “They say nothing is permanent, but change.” Digging into his pockets, he came up with a few coins and added, “Ahk, look, and what do you know? They don’t lie. I’ve four pence! A good day, so it is!”
Jeff Immelt, CEO of General Electric, was on MSNBC’s Morning Joe (GE owns NBC, MSNBC, CNBC…) today. Some pearls (paraphrased):
- The U.S. graduates just 4% of our engineers.
- The “service economy” was a delusion. It’s time to make things again (especially for export, help reduce trade deficit)
- Advice for Obama: invest in #1: Infrastructure, and #2: Technology
- Set a goal for U.S. exports and work backwards, including educational needs (see “We Shall Overcome” post)
- Solve the health care crisis not by cutting medical research, but by solving access (a hornet’s nest of influence from insurance and pharmaceutical industries and malpractice costs: good luck!)
- Letting the market sort it out is yesterday’s playbook. These times call for investment.
Immelt’s taken some heat for GE’s worse-than-expected earnings (from his predecesor, Jack Welch, no less). Welch made efficiency Job #1 at GE, making a gold standard out of the (originally Motorola’s) Six Sigma practice. He also generated huge earnings, quarter after quarter, for GE and is credited with creating the obsession with shareholder value, stock options, and excessive executive compensation.
This emphasis on short-term returns, combined with a deadly lack of accountability and loss of real value (i.e. production), ultimately fueled the financial meltdown that’s made our economy so sick.
Immelt’s direction has been different. Since becoming CEO, Immelt has emphasized investment in technology and emerging markets. In other words, GE has invested in the future with a strategy that’s focused on growth and resilience. He’s looked for new niches that are ripe for innovation, and invested in these opportunities as well.
Most CEOs have bowed to the pressure to play to next quarter’s earnings, a pressure so intense that it commands most of a company’s resources, at the expense of long-term investment. It doesn’t take much to hold the future open, but it does take courage. It takes a leader that’s can tell the board and stockholders that investment in future profitability is worth taking a slower rate of growth today. That investment should be captured in a diversified innovation portfolio: short-,mid-, and long-term products that optimize brand position and resources.
The concept of diversification isn’t new to the financial industry, it’s just that short-term plays got greater rewards than long-term. We need to incent innovation; if Wall Street doesn’t provide it, then it has to be generated as a part of the business model. This is what Immelt’s done at GE, the third largest company in the world.
A segment on 60 minutes this week explored the “dark markets” of oil trading (investment in commodity futures) that functions out of sight of the U.S. regulators. Fascinating and scary, it explained that oil prices are not driven by supply and demand, but by speculators.
Economic realities trump ideology asserts Roger C. Altman, Deputy Treasury Secretary, 1993-94, in his article, The Great Crash, 2008: A Geopolitical Setback for the West
Summary: The financial crisis has called into serious question the credibility of western governments and may precipitate an eastward shift of power.
This damage has put the American model of free-market capitalism under a cloud. The financial system is seen as having collapsed; and the regulatory framework, as having spectacularly failed to curb widespread abuses and corruption. Now, searching for stability, the U.S. government and some European governments have nationalized their financial sectors to a degree that contradicts the tenets of modern capitalism. Much of the world is turning a historic corner and heading into a period in which the role of the state will be larger and that of the private sector will be smaller. As it does, the United States’ global power, as well as the appeal of U.S.-style democracy, is eroding. Although the United States is fortunate that this crisis coincides with the promise inherent in the election of Barack Obama as president, historical forces — and the crash of 2008 — will carry the world away from a unipolar system regardless.
Read full article in Foreign Affairs
I love this PPT presentation that my good friend and colleague, economist Karen Gulliver, sent me. Beneath the complicated financial tools devised by the banking and investment industry, lie extremely simple principles, explained here in fun, comic style.
Read the Subprime Primer here.
Last night we received a notice that one of the tenants in our office building had gas stolen out of their car in the parking lot.
If gas is now more valuable than the CDs, loose change and various easy-access items found in most parked cars—not to mention the more-commitment-required sound systems and docking stations that can be hawked for good money—it’s a sure sign that commodities are trumping goods on back-streets as well as Wall Street.
We’re all very aware of our economic woes: the soaring price of oil, war, and a crisis in the financial sector, depicted by the crumbling of Countrywide Financial, Citigroup, and now Fannie Mae and Freddie Mac. We’re feeling it in decreasing income against mounting expenses and debt in both business (layoffs==>unemployment) and at home (foreclosures==>homeless), not to mention stolen gas. Roll it all up with a shrinking dollar, and we’ve got ourselves a stinking, bad mess.
The worst of it is that all of it—energy costs, war, and financial crisis—was preventable. U.S. imports of oil started to eclipse domestic production in the 1970s and, along with demand, has been growing ever since. Those facts alone, projected out over time (say 40 years or so), should have been enough incentive to invest in alternative energy sources then. Instead, we literally pumped money (oil is valued in dollars, after all) into our economy and enjoyed the short-term rewards of a spending spree. To the auto and energy industries, Congress, regulatory agencies and American public: What were we thinking?!
The same jaw-dropping lack of foresight and planning brought us into war.
Again, no surprises. Only a lack of outrage.
The bailout housing bill goes to the President today.
The limited-government, deregulation, no-taxes, free market idealogues (hello Mr. Greenspan) cheered as our economy moved from production of real goods to a gambler’s den of financial innovation (e.g. risky mortgages) and trading, all based on the accumulation of debt (2nd mortgages). You don’t have to be an economist or policy expert to see that our economy was being restructured as a house of cards, that the game was rigged, and that it could only bear disasterous consequences down the road. Again, What were they thinking?!
That road has stumbled upon a dead-end, one in which the only quick-fix is one that deepens national debt in order to prop up the very institutions whose greed and bad judgment created the mess, which is exactly what the Housing Bill will do. Looks like the invisible hand of the market made an awfully bad play here.
In the meantime, all the campaign rhetoric of whether to raise or cut taxes masks what’s really going on. Even worse, it intentionally subtracts the consequences of either choice from the equation, driving voters to choose ideology over strategy.
Given the Push Institute’s mission to “Stamp-Out Shortsightedness”, we believe thinking things all the way through is the greatest hedge against future challenges, as well as a charge of What were they thinking?! All of our programs and consulting are focused on cultivating change literacy (understanding and anticipating the forces that govern change and their implications) and strategic foresight. It looks like we have a lot of work to do…
Rwandan-American Antoine Bigirimana, co-founder and managing director of Thousand Hills Venture Fund (THVF), kicked-off the technology section of PUSH 2008 by discussing how technology has started to advance Rwanda into the 21st century.
After the Rwandan genocide in 1994 when 1.2 million people were killed in 100 days there was an incredible opportunity for technology advancement throughout the country.
Starting in 2001, anything was possible for Rwanda. The economy was destroyed after the genocide. A virgin economy was available, offering opportunities across the nation that were ready to be embraced.
“Every time there is a problem there is an opportunity,” said Bigirimana.
In 2003, Rwandan President Kagame decided to reinvent the future using technology, with a vision of making Rwanda the technology hub of Africa. The early increase of technology created Rwanda’s first chance at a democratic election.
Vision 2020 was also developed. This idea was that by 2020 Rwanda would be a middle-income country – an idea that all Rwandans could base their future around.
Rwanda offered ample opportunities for entrepreneurs and businesses. People came to the country to work, but credit was a major issue in Rwanda. In 2004, Bigirimana co-founded THVF. It allowed people to get a variety of loans, some interest free, and investments to start these businesses.
As businesses and wealth come to Rwanda, it will continue to get closer to reaching the goal of Vision 2020.
Looking into the future, Rwanda is creating 1000 telecenters. There will be a variety of services offered including: literacy, computer literacy, job listings and information on commodity prices for all national markets.
THVF is looking to bring in 1.2 million One Laptop Per Child (OLPC) computers, and hoping to have this localized by August 2008. The social impact of OLPC will be huge; the young will teach the adults how to use the OLPC, bringing access to information and knowledge that was not accessible before.
The access to information and technology needs to be available to 100 percent of the people in Rwanda, thus eliminating inequality and preventing another genocide.
Posted by Melissa Turtinen
Nate Garvis, Vice President of Government Affairs for Target Corporation, spoke in the political section of PUSH 2008 about leadership in reverse.
He is responsible for political, legislative and regulatory affairs at the international, federal, state and local levels of government. He is recognized as a thought leader in the areas of integrated public engagement strategies and emerging trends in the interrelationships between multi-national corporations, non-governmental advocacy groups and governmental institutions.
Garvis started by asking an unanswerable question, “What is the meaning of life?” No one knows the answer, but finding the meaning of life is the path of humanity, it’s what public policy has always been about.
Public policy is measured in outcomes. Too often things are discussed by inputs, but at the end of the day we experience outcomes.
Our dilemma is mobility- the mobility of information. Right now, we live in an age of storytelling. It has never been easier to get your story out there, and that is what is needed in the consumer world – consumer input to get the outcomes you want.
Garvis gave the example of a toolbox: it isn’t about one tool, it’s important to have the entire box. These tools are how people get what they want. The first tool in the box is being literate, not how well you read, but how you know the authentic qualities of that technology or institution – institutions such as government, business or NGOs/ non-profits.
The next tool in the box is the “how” not the “what.” It is important to know how institutions or technologies do what they do, not what they do. Institutions, such as the Target Corporation, need to listen to the consumer and know what they want, everything they want.
The consumer is in command. Be literate. As the consumer, express what you want and be a conspicuous consumer.
“It used to be, I’m rich and famous and I drive a Ferrari, you can’t,” said Garvis. “Now it is I’m rich and famous and I drive a Hybrid, why don’t you? No one said boycott the Ferrari, it’s that more people want the Hybrid.”
We need to practice a reward culture. Institutions are playing not to lose. We need to live in a world where we want to win, and where as many people as possible win. We need to enable these institutions, be clearer about what we want and reward good behavior.
We should look at the whole tool box of institutional energy that is capable of doing so much good, but also capable of many screw ups.
“As a consumer we owe it to these folks to tell them exactly what we want. Our job [as the institution] is to be better listeners than ever, to provide as much value as possible,” said Garvis.
Doing this is “leadership in reverse.” The consumer is leading the institution to get the right outcome.
Posted by Melissa Turtinen
Greenblatt began speaking about the “economy of integrity,” individual social action and potential. Globalization and the immediacy of technology mean that more people are more aware than ever before. There is as much potential for entrepreneurial corruption as there is for entrepreneurial authenticity as businesses vie for new markets in the arena that pits the “haves” against the ”have-nots.”
This fertile arena has the potential to spawn ethical and socially responsible new ventures to which consumers want to respond. In creating models for such companies, entrepreneurs and executives must seize the opportunity to leverage the consumer appeal of credibility and carry a socially responsible ideology throughout the entirety of their product and product identity to prohibit it from deteriorating into corporate spin or just good PR.
Greenblatt’s first venture, Ethos Water (which he co-founded with Peter Thum), and current endeavor at GOOD Worldwide (where he serves as CEO) represent the technological and ideological response to global inequalities. As ethical brands, they start with intention, are rooted in authenticity and transparency, demand competition-trumping performance and deep commitment to an issue, and engage consumers and vendors in their cause.
The concept behind Ethos Water sprung from the aspiration to help eliminate water shortages in the developing world. As an ethical brand, Ethos does not just satisfy the body’s basic need for water or the ego’s desire to hold a fancy bottle, but satiates one’s need for a brand that incorporates these elements and more, making the product meaningful.
Noticing a void on the newsstand, GOOD Magazine was developed by Ben Goldhirsh as a bottom-up, question-asking publication, designed to engage and inspire its readers. It asks the basic question “what’s good?” and inspires the authentic promise that the world can be.
Posted by Anna Wool
Internationalist Chandran Nair opened the economics section of PUSH 2008.
He is the founder and chief executive of the think tank, Global Institute for Tomorrow (GIFT), based in Hong Kong. His work is defined by the questions he asks himself and others. Known for being challenging,
thought-provoking, constructive and sometimes uncomfortable, Nair advocates a sustainable approach to growth in Asia, and the rest of the world, seeing it as part of how nations deal with each other.
“Behind the Scenes: a Peak at reality” is the title of his presentation about the challenges the world is going to face in the future because of growing populations and the needs of Asia and other low-income regions.
Nair explained that we live in an unfair world – 20 percent of the world population accounts for 85 percent of the world’s consumption.
Asia is changing and expanding rapidly. 800 million Chinese people live on two dollars a day, but they are starting to become wealthier. What do they do when they get wealthier?
“They want to buy seafood. If they do the oceans will be empty, but who can say that they can’t have what you and I take for granted?” said Nair.
That is just one example is the growing number of countries wanting what countries like the United States have. But if these growing nations start using these resources there will be less for the big consumers, like the U.S.
There is unprecedented economic growth that is going to occur. People have to be aware of the new reality – by 2050, 3 billion people will be added to the world, mostly in low income countries. This means that fossil fuel consumption, and other non-renewable resource consumption, is only going to go up.
The challenge of our times is to alleviate poverty, increase economic prosperity for all, halt the destruction of the natural world, manage and conserve natural resources for human well being. We need to be aware of the threat of climate change, decrease the destruction of the natural world, increase cultural and religious tolerance and create a new business leadership.
“The giants have awakened. How will they sustain themselves?”
Posted by Melissa Turtinen
Beijing (8/16-8/30/08) + Olympics + Leadership Training + Sustainable Business Project = GIFT to Yourself
If you can do it, or send a group from your organization, I highly recommend the Global Institute for Tomorrow (GIFT)’s Leadership Training in Beijing this August. If you’re interested, contact Chandran Nair [cnair AT global-inst DOT org] by the end of March.
The YLP is designed for anyone with leadership potential, is interested in globalisation and development issues, and wants to work for positive solutions, regardless of his or her nationality, industry or subject discipline. Normally, participants are from 28 to 45 years of age.
The course is ideal for individuals who:
• Are poised for rapid career progression
• Have demonstrated leadership ability and need international exposure
• Have worked in demanding management positions in a global organisation
• Are at the stage in their careers where a posting to an overseas location under unusual circumstances is likely
• Have worked in a multi-disciplinary and multicultural team
• Are proficient in English and have a working knowledge of one or more other languages
• Have a growing understanding of the role of business in society in a globalised world
• Have an interest in how leadership in Asia will need to evolve to meet the challenge of the next 25 years
• Desire to complement formal business training such as an MBA with experiential immersion learning
• Are flexible and adaptable, with a curiosity for the different
Chandran Nair, Founder and Chief Executive of the Global Institute for Tomorrow (GIFT), is one of our speakers for PUSH 2008: The Fertile Delta. GIFT is based in Beijing, and its work is focused on sustainable business (and, by definition, social and environmental) for Asia, offering “Honest Inquiry. Asia’s World View. Ideas to Action.”
GIFT has an inspiring program for training Global Young Leaders, which had its beginning at the Clinton Global Initiative in 2005. Its next project takes students and executives to business opportunities in Cambodia:
Cambodia Rural Agricultural Enterprise Project
March 3-15, 2008
The programme taking place from March 3-14, begins with an MBA-style classroom module in Hong Kong during which GIFT facilitators and guest speakers from corporate and civil society groups will focus on the challenges of being effective in a rapidly changing business environment. In their first week, participants will examine topics such as: globalisation, civil society, role of government, business ethics, diversity and corporate social responsibility. They will then apply these concepts in a seven-day experience on-site in Phnom Penh, Cambodia, where they will work closely with community members in the surrounding rural vicinity and a local NGO partner, the Cambodian Centre for Study and Development in Agriculture (CEDAC), to produce a robust business plan for a Cambodian social enterprise.
Ignore the impact of environmental concerns on the marketplace, and you’ll risk the same fate as that of the poor snowman. Consider the following:
- A survey released this month by the Economist Intelligence Unit shows that sustainability strategies provide the ultimate feel-good dividend: improved share price performance by at least 50%.
- But be authentic or beware: consumers are watching for greenwashing, and will hold you to account.
The good news is that new incentives are moving sustainability strategies from reputation enhancement and “sentimental shoulds” to market mandate, including:
- Wal-Mart pressures suppliers to adopt sustainable practices and is looking for ways to reduce non-renewable energy sources
- Taxes on greenhouse gas emissions and penalties for not using renewable energy sources may be passed in California
- Consumers want to participate! Check out Carbon Hero, the new cell phone GPS system that calculates the carbon footprint of the user’s daily travel, going into open beta testing this April (in the UK).
Leave a comment and share any behaviors, practices, research or innovations that are a part of your sustainability strategy.
Leading Global Academics Create New Corporate Sustainability Approach to Build Innovation and Global Collaboration
Recommended approach balances needs of investors, society and the environment
“O”vercoming “O”bstacles to lead a full and “O”wesome life is the mission to which Oprah Winfrey has dedicated herself, for “O”verybody.
The Queen of Daytime TV has parlayed her ever-growing corporate influence from book sales to Broadway, from education to U.S. presidential politics, and from newsstands to Primetime TV. All in the name of changing the world.
Or, in the name of touching as many people on the planet with her light. She does indeed conduct herself as a prophet of sorts, an enormously profitable balance between being just like you and an enlightened being. However you cut it, the Oprah brand is a staggering success.
In a December, 2006 announcement of two new Reality TV shows, two exec VPs at Harpo’s (Oprah’s privately-held production company) TV development group, stated their goals very succinctly:
“We’re open for business in any area that’s within the mission statement for Harpo and the Oprah brand.”
“We want to build relationships everywhere”
The first project, “Oprah’s Big Give” begins airing on March 2, 2008.
Watch the drama and emotion unfold in this unprecedented competition as determined contestants from all walks of life transform the lives of others. Millions of dollars are given away in this intense cross-country adventure that twists and turns in ways that test the nerve, passion and stamina of each contestant. Each week, a mystery challenge is unveiled, and in order to win, contestants must out-give one another. Big-name stars join “Oprah’s Big Give”™ as the stakes get higher and the emotions intensify in every episode. The judges continue to make the tough call of who will go home before the final episode, when the Biggest Giver is named and the surprise ending is revealed.
And for devotees who hang on Oprah’s every move, a countdown clock is posted on the ABC site as well.
Oprah’s terrific intelligence, hard work, talent, and her own personal “Hero’s Journey” story met the culture with exquisite timing. A convenient convergence of factors breda zeitgeist to which she is particularly matched, including a message that taps into the always-powerful American creed of “Yes, We (you, I) Can!”; the enormous wealth and be-your-own-mogul ethos granted by the 1990s Internet Rush; infiltration of ubiquitous media and messaging; and a secular-cum-spiritual movement all conspired to bring on the age of Celebredom with full force. And Oprah was there to catch it.
She caught it, and then leveraged it like crazy. Oprah’s business savvy – one of the few things she keeps private – packaged her identity into a brand that could be parlayed into any number of brand extensions, increasing audience and advertisers at every turn. She’s built a commercial pulpit from which she sermonizes, extoles the virtues of “her favorite things (product endorsements) and conducts shows as if they were revival meetings.
Oprah shields her enterprising mojo from public view, a calculated reinforcement of a kind of spiritual populism she sells. Pay attention to the last verb – sell; Oprah’s true dominion is her muscular advertising and PR machine, which is engineered for power. I’d digest her self-help diet better if she was more transparent about this, and included it in her “teachings.”