Deficit Panic: Let’s Hope History DOES Repeat Itself

December 10, 2009 in Global Crisis Blog | Leave a comment

Global Crisis Blog

Deficit Panic:  Let’s Hope History DOES Repeat Itself

By Shlomo Maital

Dec. 12/2009

 A Nov. 30 headline in Britain’s   Daily Telegraph reads:

        Morgan Stanley fears UK sovereign debt crisis in 2010

  “Britain risks becoming the first country in the G10 bloc of major economies to risk capital

flight and a full-blown debt crisis over coming months,” according to a client note by Morgan Stanley. 

   Capital flight from Britain?  Want a real nightmare?  How about capital flight from America?  Britain’s debt-to-GDP ratio is growing the fastest, but America’s is much larger, soaring to over 100 per cent by 2013,  a level that triggers IMF alarm bells for countries far less crucial that America.

   There is good reason to panic about levels of government debt in America, UK, Japan and the EU. 

   But history also shows there is a solution.

   Bill Clinton was elected President of the United States in Nov. 1992.  He inherited enormous budget deficits from his predecessor, George Bush Sr.  Together with his key economic advisor Larry Summers, Clinton fashioned a package of measures aimed at slashing the deficit, and getting government borrowing under control. 

    The Deficit Reduction Act:     ¨ created 36 percent and 39.6 income tax rates for individuals.  (28% was the maximum rate up to then). ¨ created a 35 percent income tax rate for corporations.  ¨ the cap on Medicare taxes was repealed. ¨ transportation fuels taxes were raised by 4.3 cents per gallon. ¨ the taxable portion of Social Security benefits was raised.  ¨ the phase-out of the personal exemption and limit on itemized deductions were permanently extended.

Many of these measures were tremendously unpopular politically, especially Medicare, Social Security and income tax. 

   The bill very nearly failed.   It was a ‘squeaker’.  According to Wikipedia:

   “Ultimately every Republican in Congress voted against the bill, as did a number of Democrats.

¨ Vice President Al Gore broke a tie in the Senate on both the Senate bill and the conference report.   The House bill passed 219-213.

¨ The House passed the conference report on Thursday, August 5, 1993, by a vote of 218 to 216 (217 Democrats and 1 independent (Sanders (VT-I)) voting in favor; 41 Democrats and 175 Republicans voting against), and

¨ the Senate passed the conference report on the last day before their month’s vacation, on Friday, August 6, 1993, by a vote of 51 to 50 (50 Democrats plus Vice President Gore voting in favor, 6 Democrats (Lautenberg (D-NJ), Bryan (D-NV), Nunn (D-GA), Johnston (D-LA), Boren (D-OK), and Shelby (D-AL) now (R-AL)) and 44 Republicans voting against).

  President Clinton signed the bill on August 10, 1993.

 Strong economic growth, which both helped (and was helped by) the deficit reduction act, led to booming tax revenues that eliminated America’s federal budget deficit within four years.  From a deficit of $300 b. in 1993 (one fourth the size of today’s US budget deficit!),  the deficit was zero by late 1997, and by the time Clinton left office (with George W. Bush narrowly defeating Al Gore, who had played a key role in getting the deficit reduction legislation through Congress), the deficit had become $300 b. — but a surplus! 

   (See Figure).

   deficits

    Under Bush, the deficit again soared (because of massive irresponsible tax cuts) to $500 b. within three years. 

   Can Obama follow Clinton’s lead?  Can he slash the deficits, reduce America’s borrowing, and save the dollar form collapse, while sending more troops (and money!) to Afghanistan?    

       Remember — Obama’s chief economic advisor is the same Larry Summers that helped shape Clinton’s plan. 

    Let us hope history DOES repeat itself. If it does not,  the world is in trouble.

Reinventing Ireland: How to Build an Innovation Ecosystem:

December 9, 2009 in Innovation Blog | 1 comment

Innovation Blog

Reinventing Ireland:  How to Build an Innovation Ecosystem

By Shlomo Maital

Dec. 10/2009

  Consider Ireland.  Once Europe’s poorest nation, in 1988, Ireland reinvented itself.  Driven by a powerful vision that united government, labor and industry, Ireland attracted multinational companies to build factories, attracted by an educated English-speaking labor force, low tax rates and Ireland’s strategic membership in the European Single Market.  Ireland went rapidly from one of Europe’s poorest nations to its fastest-growing one. 

    But the 2007-9 global crisis hit Ireland hard.  The economy contracted, and unemployment soared.  Now, like other countries, Ireland again is working to reinvent itself — to build a new growth engine to replace the old worn-out one.  I believe they will succeed.  I believe that other countries should carefully study Ireland’s approach, given their past record of success.

    Ireland’s two top universities, University College (Dublin) and Trinity College (Dublin) began a joint project, known as the Innovation Alliance, to work with government, business and venture capitalists.  The aim?  “To develop a world-class ecosystem for innovation that will drive enterprise, development and the creation of sustainable high-value jobs”.  

    The core of this ecosystem is a plan to link angel investors, venture funds, service providers and entrepreneurial mentors, that can help translate a novel idea into successful job-creating businesses.  [1]   Spearheading the effort is Burton Lee, a key member of the Irish Government task force whose mandate is to design the new system.  “There is nowhere in Europe where all the elements of (such an) ecosystem are really functioning”, he notes.  

    Ireland has great universities and top scholars.  Lee’s plan is to “turn Ph.D.’s into savvier businessmen and women.”   I am sure he is aware of MIT Professor Edward Roberts’ finding, that other things equal, a Ph.D. seriously reduces the chances of success for an entrepreneur (in America), compared with an entrepreneur with an M.Sc.  (Ph.D.’s, trained for perfection, take far too long to get to market). 

       I believe Ireland’s approach is validated by a new book, written by Harvard Business School Professor Josh Lerner,  Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed—and What to Do about It.   Lerner’s key point:  government can play and often has played a key role in creating and stimulating entrepreneurial ecosystems, in Israel, Singapore — and even Silicon Valley,  but more often, inept government policies have utterly failed.    “Particularly during the early years, the government played a critical role in shaping Silicon Valley,  especially spending and funding from the U.S. Department of Defense,”  Lerner notes.

       In the post-global crisis era,  the rules of the game have changed radically.  The most important rule change:  Governments today must be part of the solution, rather than be regarded as part of the problem.  It is governments that will lead the effort to redefine and reshape innovative ecosystems.  Countries that recognize this fastest, like Ireland, will reinvent themselves better and faster.   

[1] See:  Yasmine Ryan, “Banking on a Ph.D. ‘ecosystem’ to help the economy bloom”,  IHT, Dec. 2, 2009, page 11 (www.iht.com).

‘KURZARBEIT’: German Bureaucrats as World-Class Innovators

December 9, 2009 in Innovation Blog | Leave a comment

Innovation Blog

‘KURZARBEIT’: German Bureaucrats as World-Class Innovators

By Shlomo Maital

Dec. 9/2009

    As leaders and experts pronounce the end of the global recession worldwide, an army of workers who have lost their jobs and may never regain them are bitter and angry.  In America,  the rate of unemployment fell slightly in November to 10 per cent, but the number of long-term unemployed rose by 293,000 to 5.9 million, and the economy lost jobs for the 23rd straight month.  In the 30-member OECD (Organization for Economic Cooperation and Development), the average rate of unemployment is 8.5 per cent.  In Spain, it is a staggering 19 per cent, and the I.M.F. says it will reach 20 per cent in 2010.

    Jobs continue to lag behind the economy. The reason is simple.  Businesses reacted to the global downturn by shedding workers and boosting productivity.  As the global economy recovers, those productivity gains mean it is not necessary or profitable to resume hiring.   The same workers can produce more stuff.  Why hire more of them?  In America,  in Q3 2009,  non-farm labor productivity rose by a startling 8 per cent (annualized)  — more than half coming from a sharp fall in hours worked. 

   What can nations do to mitigate the bad news — unemployment — that stems directly from good news — higher productivity growth? 

      A surprising source came up with a plan that works — German bureaucrats.  This nation of 80 million is not renowned for creative thinking.  Yet its plan, known as kurzarbeit (shortened work hours), has succeeded.  In this plan, workers whose hours have been cut due to the recession have their pay supplemented by the government.  In the plan,  companies avoid firing workers and instead slash their hours by half;   government supplements these workers’ salaries up to 2/3 of their former level, and more important, pays all the social benefits.   That way, companies save half their wage bill, workers keep their jobs and income, and continue spending, bolstering the economy.  Germany’s unemployment rate is 7.7 per cent, well below the OECD average and far below America’s 10 per cent.   Some 1.4 million workers have benefited, and a recent report states that half a million jobs were saved.

    The cost of the plan:  a modest 5.1 b. euros a year.  Compare that with America’s $ 1.2 trillion fiscal stimulus plan, that funneled $180 b. to bail out AIG alone, and which had very little impact on jobs.  President Obama is now desperately searching for ways to create jobs. 

     The kurzarbeit  plan is vital for Germany, because as the world’s largest exporter (now tied with China), Germany’s economy is built on mid-sized industrial companies with skilled experienced labor.  Dump that labor, in a recession, and you may not get it back in the upturn. 

     Will it work for other countries, like America?

     Probably not.   In order to save industrial jobs, you have to have them in the first place. America shipped its industrial jobs to Asia in the 1980’s and 1990’s.  Getting them back, a vital goal, will be a thousand times harder than it was giving them away to China.   

Creating Radical Change With Baby Steps: 10 Incremental Innovations Create a Revolution

December 6, 2009 in Innovation Blog | Leave a comment

Innovation Blog

Creating Radical Change With Baby Steps:  10 Incremental Innovations Create a Revolution    —     Case Study: Singapore’s Schools

By Shlomo Maital

Dec. 6/2009

 Singapore schoolchildren  

Innovators love sweeping radical inventions that change the world.  But sometimes, radical change occurs only through patient, plodding incremental improvements, many of them, that together add up to a revolution. 

      In the West, addicted to instant gratification (see my blog, “Marshmallow”, Nov. 27),  baby steps are too slow.   We search for a magic bullet.  But, usually there are none.  In the East, in Asia, with far longer time perspective, slow incremental changes are de rigeur, compulsory. And they create force-multiplying change.

      Here is an account of how Singapore used incremental change to build a world-leading school system, written by Lars Qvortrup (Dean of a leading Danish School of Education) and supplied to me by my friend Bilahari Kausikan,  First Permanent Secretary of Singapore’s Foreign Affairs Ministry.    Qvortrup notes that Singapore ranks #1 in the world in quality of education (according to IMD’s World Competitiveness rankings), and is consistently in the top five countries in the world in reading, math and science. 

   Qvortrup recently made a best-practices benchmarking visit to Singapore schools.  Here is what he learned.

1.   Vision:  “Singapore decided in 1997 its future was to be a knowledge society” (a slogan many countries, incuding Israel, mouth, but few implement).  “They focused on innovation, creativity and entrepreneurship.”  These core goals remain the central focus, within a highly disciplined system that measures performance through results and tests.

2.  School is work.  “School is a workplace, where it is expected each student will do his or her utmost”.   Pupils stand up when the teacher enters, and say, “Good morning sir (madam)”.  The teacher says, “Are we ready?”.  The children answer, Yes!”

 3.  Class management.  “What works?”,  “why does it work in one context but not another?” are questions constantly repeated.  Teaching has a clear structure:  “problem, analysis, method, solution.  Work is done collectively.  “Class sizes are very high,  30-40 students per class.”  All classrooms have a projector, “so that teaching can be supported by PowerPoint”. 

4.  Sport and health:  Many children arrive as early as 7 a.m., and have fun,  play ball, and do “wushu”, a Chinese gymnastics program; for the overweight, there is jogging between 7:30 and 8 a.m.  St. Margaret School has a huge cafeteria, with five different cuisines, and low prices, because food venders are private small businesses.  

5.  Testing:  As early as 2nd grade, a test is implemented, and 30-40 students are put into a special class, where they are stimulated in different ways and encouraged to develop their abilities.  A comprehensive exam given at the end of primary school (end of 6th grade) provide feedback for teachers, and comparison between schools.

6.  Physical facilities:  Schools are big and perfectly maintained.  Averaging 1,000-1,500 students, classrooms are bright, well-maintained, well-designed and spacious.  Quality and cleanliness support respect for education.

7.  Teachers’ work is organized uniquely.  Primary teaching ends at 1:30 pm.  Children then go to after-school programs.  Teachers do not go home.  They each have a laptop computer and a desk (and very small office).  They work until 5 or 6 pm.   The principal sends the last teachers home at 6:30 pm.

8.  Parents are involved — and kept out.   There are Saturday workshops for parents, where math and science are reviewed, so parents can understand the teaching principles and help their children with homework.  But the boundary between home and school is clear. “Now you are in school”, children understand. 

9.  Teaching is prestigious.  All Singapore teachers study for five years at the National Institute of Education (NIE).  Instruction is research-based.  There are ten times as many applicants as there are student openings.  “Teachers are well-educated and have professional pride.”

10.  Talented teachers:  “All teachers in Singapore have a right to 100 hours of continuing education a year — a right they are expected to utilize”.  Commonly, 50 hours are used for professional development and subject-area specialization, and the other 50, for common, educational development.

     What works well in Singapore may not work well elsewhere.  But the main lesson from the above is clear and simple.  Education is about schools and teachers.  Make each excellent, in a hundred different pragmatic ways, and accept nothing but excellence.  Reject excuses (such as, no budget, bureaucracy, poor teacher education, bulging classes, crumbling schools).   Keeping making changes until excellence is achieved, and then reinforce it by redoubling innovation.  And always, every day, benchmark best practices, within your own country and abroad. 

     

HuaWei – Case Study – “Created in China” Is Real, Imminent – and a Major Threat To Your Business

December 2, 2009 in Uncategorized | 3 comments

Innovation Blog

HuaWei – Case Study  –    “Created in China” Is Real, Imminent – and a Major Threat To Your Business [1]

By Shlomo Maital

Dec. 2/2009

 技 有限公司    Huawei Technologies Co. Ltd.

“Their (HuaWei’s)  technology is innovative, and their bid provided the lowest cost of ownership for us.  In our business, the lowest cost of ownership is key.”      – Morton K. Sorby,  head, business development,  Telenor

    A Personal Note: Two years ago, I helped lead a best-practices benchmarking trip to China, for 30 senior  Israeli high-tech managers doing a TIM executive program.   During our visit to a huge science park near Beijing, we heard the Director tell us:  “Today, Made in China.  Tomorrow:  Created in China.” 

     Loose translation:  Today China achieves phenomenal economic growth by low-cost manufacturing of products invented and designed in the West.   Tomorrow it will move up the economic ‘food chain’,  and invent and design its own products — and then make them, too.  Can you compete with that?  

     This strategy is a direct threat to the U.S., Europe and Israel, because if China replaces them in the food chain, they will by definition be below China — and the implications for economic growth, wellbeing and GDP per capita are sweeping.

     Do we see widespread awareness in the West of this strategic threat? Do we see national industrial policies designed by panels of experts to meet the challenge?  Or does the West continue to believe that China will remain where it is — a low-cost manufacturer. 

      HuaWei Technologies Co. Ltd., global producer of network solutions for telecoms,  is a concrete example of a major success of “Created in China”.    This is why I have written this brief case study narrative.   There are many more HuWei’s in China now gaining in strength and self-confidence.  You will doubtless soon meet them in the marketplace.  Are you ready?

     Basic Facts:   HuaWei was established 21 years ago, in 1988, by Ren Zhengfei, a former People’s Liberation Army officer.  He remains its CEO.  HuaWei began as an importer of PBX phone systems. It quickly began developing its own.  In 1993 it began selling its own digital telephone switch, beginning with rural areas in China and expanding into major cities.  HuaWei won its first overseas contract in 1996.  By 2004 its sales abroad exceeded its domestic sales.  In 2009 the World Intellectual Property Organization WIPO reported that   Huawei was ranked as the largest applicant under WIPO’s Patent Cooperation Treaty (PCT), with 1,737 applications published in 2008, replacing Philips Electronics.  In Dec. 2008 Business Week ranked HuaWei 3rd, after Apple and Google, in its World’s Most Influential Companies list.

   HuaWei is privately owned.  HuaWei marketing director Edward Zhou says the company is owned by its 87,502 employees.    The U.S. thinktank RAND Corp. claims HuaWei “maintains deep ties with the Chinese military”, as a customer, political patron and R&D partner.  HuaWei denies it.  Its headquarters are in Shenzhen.

   HuaWei’s revenues in 2008 (a bad year for network infrastructure companies) was $23.3 b., up 43 per cent from a year ago,  and generating $1.15 b. in net income (up from $957 m. in 2007).   Foreign sales account for three-quarters of its revenue, up from 43 per cent a year ago.  (See Figure).

    HuaWei supplies gear to China’s three largest operators — China Mobile, China Telecom, China Unicom — and has doubled its share of the $38 b. global mobile equipment market to 20 per cent in 3Q 2009, up from only 11 per cent a year earlier.  It thus replaced Nokia Siemens (19.5 per cent) but trails Ericsson (32 per cent).  

    HuaWei as Innovator:   HuaWei’s value proposition is based on “cost of ownership” i.e., the total lifetime cost of their equipment, rather than the price.  HuaWei is not always the lowest-priced competitor.  “Our focus has been on lowering the total cost of ownership for the network as a whole,”  Edward Zhou notes.  In an era when telecom’s ARPU (average revenue per user) is falling, cost of ownership is crucial.  For instance, HuaWei’s SingleRAN multipurpose wireless network that transmits in 2G, 3G and LTD (long term evolution) signals saves operators money, because they can buy a single grid rather than install separate ones for each technology.   HuaWei is apparently the first to deploy, on a large scale, the new 4G technology, LTE,  in base stations. 

     Another Personal Note:   My reliable inside sources at HuaWei tell me this:  HuaWei is regarded in China as its most prestigious high-tech global company.  HuaWei’s salaries for engineers are significantly higher than those paid by other Chinese high-tech firms, though they are still much lower than in the West.  So, Chinese engineers, when they graduate, compete fiercely for HuaWei jobs, both for prestige and for money.  What HuaWei demands in return?   Twenty hour (20) work days.  This is not an exaggeration.  Twenty hour workdays out of 24.  Four hours of sleep, etc.    Because HuaWei gets the very top talent among the hundreds of thousands of graduating Chinese engineers,  it has enormous innovative ability and enormous ability to scale up rapidly and deploy globally. 

     To prepare itself for global expansion, HuaWei engineered an enormous transformation of its business processes, using leading consultants.  They now employ best practices in management innovation, gleaned from top companies all over the world.

    And if this is not sufficient…..:    China’s second largest networking equipment firm is ZTE.  Its sales, too, rose 43 per cent in 3Q 2009, to $2.2 b. ($8.8 b. annual).    In our benchmarking trip, we visited ZTE, which is now supplying China’s mobile operators with its own home-grown 3G technology. We observed that  ZTE is no less dynamic and menacing, as a competitor, than HuaWei.   And both have become highly self-confident, following marketplace success.

     If you believe that China’s mobile market is the world’s fastest growing (rivaling India’s), and if your company is in the industry, you may eye that market enviously.  As you do, think about meeting HuaWei and ZTE head-on, in China or in Asia in general.   Think of meeting them in more stagnant markets in Europe.  Think of matching their scale, innovativeness, infinite bank credit and speed.  

     If you are happily not in the network infrastructure business, picture a version of HuaWei in your own industry.  If there is none right now, there will soon be.  Believe me.

     Valium, anyone? 

 

 

 

 

[1] This case study is based in part on material in www.huawei.com, and Kevin J. O’Brien, “Newcomer from China roils mobile network field”, New York Times, Nov. 30 2009, www.nyt.com.

America and the Marshmallow: Obama’s Real Dilemma

November 29, 2009 in Uncategorized | 2 comments

Global Crisis Blog

America and the Marshmallow: Obama’s Real Dilemma

                                                       

America today faces the same choice that psychologist Walter Mischel presented to a group of American four-year-olds in the 1960’s. 

     In a famous experiment, Mischel offered the pre-schoolers a tasty marshmallow, in full view and ready to pop into their mouths, or two marshmallows if they could wait for 20 minutes. 

      Some kids grabbed the ‘instant gratification’ marshmallow.  Some waited.

      In a follow-up study, Mischel showed that the kids who could defer gratification were better adjusted, more dependable, and got SAT (scholastic aptitude test) scores that were 210 points higher than kids who wolfed down the tempting marshmallow, when graduating from high school.

       Later, Daniel Goelman featured this experiment in his book on Emotional Intelligence.

       Today,  America as a country confronts a similar dilemma.  After years of small or zero personal saving, with rundown infrastructure, inadequate human capital investment and staggering public debt,  Americans are looking at a tempting “marshmallow” on their tables.  With the economy struggling to emerge from recession, and with job creation anemic,  Americans are asked in various ways to resume their old habits of spend/spend/spend (marshmallow NOW!). 

    But what America needs is a bit of improved deferred gratification.  It needs to increase saving, in order to pay off huge debts, rebuild infrastructure, modernize its factories and revamp its failing schools. 
     How in the world can this occur?  What will bring Americans to wait for the two marshmallows?  When an enormous bloated monster exists — advertising, marketing, sales — whose sole purpose is to get Americans to spend, when not even a ‘mouse’ organization exists to encourage saving, and when Americans no longer trust banks, brokers or investment funds, after losing half their pensions and life savings —  why would Americans suddenly become good at deferring gratification?

     Two years ago, scientists discovered the physical location in our brains, where the ‘marshmallow’ decisions are made. [1]   Americans do have brains.  They do have the medial-frontal cortex capability of waiting for the two marshmallows.  It just needs some exercise, after withering from disuse.    Perhaps an adult version of the grade-school program “Stoplight” (see box)  might be in order.

      Somebody (President Obama?) needs to tell Americans that the party is over.  It is time to tithe — set aside ten per cent of everything for future marshmallows.   When this happens, we will know America is serious about remaining a First World power, rather than sinking into Third World mediocrity.       

                                   

                        ===========================================

                                                                        “STOPLIGHT”                               

     In school lessons in social/emotional learning,   posters on school room walls remind kids, that when they get upset, they should remember:

      Red light – stop, calm down, and think before you act.

     Yellow light – think of a range of things you should do (not just your first impulse)

      Green light – pick the best one and try it out.

What about an adult version?   Spread similar posters all over shopping malls, Macy’s,  supermarkets, Wal-Mart…?   Red light — do you really need this shmata?  Will it really make you happy?  Yellow light —  think of other ways you could invest that money, and how much more good it could do, either for yourself, your family, or for others.   Green light — pick the instant marshmallow, or the delayed one — after using your medial-frontal cortex, which daily grows stronger and stronger.   

[1] Marcel Brass and Patrick Haggard,   “To Do or Not to Do: The Neural Signature of Self-Control ”  Journal of Neuroscience, August 22, 2007, 27(34):9141-9145.

 

 

 

  

“M” Stands for Murdoch, Microsoft &….Monopoly (But It Won’t Work!)

November 25, 2009 in Uncategorized | 1 comment

Innovation Blog

“M” Stands for Murdoch, Microsoft &….Monopoly

By Shlomo Maital

Nov. 25/2009

   Microsoft is like the famous racehorse Silky Sullivan — the greatest come-from-behind racer in the history of the world.  

          Ridden by jockey Willie Shoemaker,  Silky once galloped along in a race until the field was 41 lengths in front of him—and still won by three lengths.  To  accomplish this, he had to clock the last quarter in 22 seconds flat.   

    Microsoft never misses an opportunity to miss an opportunity. Then, using their muscle, cash and aggressive marketing,  they blow smarter faster competitors out of the water. Anyone remember Netscape — the browser that invented browsers, before Internet Explorer?   Microsoft leveraged its Windows monopoly to stuff Internet Explorer down our throats;  bye bye Netscape. 

    Microsoft’s CEO Steve Ballmer is at it again. (Bill Gates is busy giving away his money, rather than trying to make more).  Microsoft missed the search-engine/advertising boat.  So, Microsoft is negotiating a deal with News Corp. founder Rupert Murdoch, giving Microsoft’s new search engine Bing exclusive rights to news from Murdoch’s newspaper (New York Post, Wall St. Journal,  The Sun, Times of London and others).  Exclusive — meaning, the news from those papers will not appear in Google.   Microsoft will pay Murdoch substantial sums in return.[1]    

     Murdoch is a hardnosed businessman.  He hates leaving money on the table.  Why give news away for free?    he says.   But guess what, Mr. Murdoch?  Infinite amounts of news are available for free on the Internet.    If you try to limit access,  people will read their news elsewhere.  They have oodles of alternatives.   The BBC, a great source of news,  already announced they will continue to provide their content for free.

     “I’d rather have fewer readers who pay, than many readers who don’t”,  Murdoch says. 

      Microsoft’s attempt at creating monopoly restrictions is not surprising.   What is surprising is Murdoch.  He is known as an implementer of modern technology.  Why does he not understand that the rules of the news game have changed forever and irrevocably?   Monopoly by definition rests on there being no alternatives or substitutes.  When there are infinite substitutes,  monopoly is impossible. 

     Nice try, Microsoft. Nice try, Murdoch.  In your case,  “M” stands not for Monopoly, but Mistake — a Big Mistake.

 

[1] International Herald Tribune, Nov. 25/2009, “Big changes in offing for news media and the Web?”, p. 14

Lifeline Express: 400,000 Lives Changed in India – Should America Follow Suit

November 24, 2009 in Uncategorized | Leave a comment

Innovation Blog

Lifeline Express:  400,000 Lives Changed in India –  Should America Follow Suit

By Shlomo Maital

Nov. 24/2009

   How can one bring medical care to remote villages in India?  Often, children and adults in India have medical problems that can be cured easily with surgery or other care, things like cleft palate or cataracts — but suffer with them for their entire lives, because they cannot afford medical care in the cities, or even get to the cities, where hospitals and clinics exist.

      India’s rail network is one of the largest in the world.  It transports 18 million passengers yearly, has 1.4 million employees and has a route covering nearly 40,000 miles. 

       In 1991,  Indian Railways and the Indian Health Ministry joined forces to provide a simple solution to providing basic medical care for remote poor villagers.   They called it Lifeline Express, or Jeevan Rekha Express.   Equip a train with modern medical equipment and operating theatres.  Staff it with volunteer doctors and surgeons.  Run the train through the length and breadth of India, to more than 7,000 stations.  Inform the villagers in advance,  examine them quickly and choose those best suited for the Lifeline Express care.    The project is supported by Impact UK (a charitable foundation), Indian businesses and individuals.  Some 400,000 Indians have benefitted so far.   A second train has now been added. 

  

Lifeline Express focuses on:

* Orthopaedic and surgical intervention for correction of handicap and restoration of movement, especially those as a result of polio.

* Opthalmological procedures and interventions, eg cataract surgery and intraocular lenses.

* Audiometry and surgical interventions for restoration of hearing.

* Surgical correction of Cleft palate.

    Other countries, such as China, have begun imitating Lifeline Express.  But why, I wonder, should Lifeline Express be implemented only in poor countries?  Why not in America?

    United States has some 48 million persons without health insurance.  What about an American Lifeline Express, travelling to remote areas and cities alike, bringing badly-needed medical care to those who cannot afford it because they are uninsured?    America, like India, has a rail system and a large number of people who need medical care but cannot afford it.  Indian found a partial solution.  Why should not America imitate it?  Funding should come from the pharmaceutical companies, whose obscene prices for lifesaving drugs generate many billions of dollars in profits.   

 

“Wall Street Recruiters Trawl Online Poker Circles for Talent”

November 22, 2009 in Global Crisis Blog | 4 comments

Global Crisis Blog

“Wall Street Recruiters Trawl Online Poker Circles for Talent”

or

Why We Should Lose Sleep

By Shlomo Maital

Nov. 22/2009

   

    Do you lose sleep, like me,  because America will pay, in 2015,  some $533 b. in interest on its public debt, debt equal to an entire year’s worth of GDP ($15,000 b.), where the interest alone will consume a third of all federal income taxes paid that year?  

    Do you lose sleep because, like me, you believe America is endangering the global economy because its currency, the dollar, has been dangerously overprinted and its impending collapse undermines  global capital markets?

     Do you lose sleep, like me,  because while political leaders and central bankers declare the global recession over,  global managers see no sign that ordinary people are spending more or that business are investing more, and a significant minority fear another recession soon? 

     If that is not enough, here is another reason to lose sleep.   The title headline is genuine, though it appears to come from Comedy Central, or MAD magazine.  It is from the International Herald Tribune, taken from Mason Levinson’s piece for Booomberg News. 

    Here is the gist of Levinson’s report:   “an increasing number of hedge funds and brokerage firms are scrutinizing professional poker to find talent and analytical tools.”  Levinson reports that a recruiter got a request from a hedge fund for online poker players with “no financial experience”, after the World Series of Poker in Las Vegas four months ago. 

    Let me get this straight.  It is widely agreed that a core cause of the global crisis 2007-9 was the utter breakdown in risk management models of banks and investment funds.   So, the solution is to recruit poker players?  The people who bluff, conceal, and deceive, who bet the whole pot on a single card?

       Global capital markets are apparently being rebuilt as enormous poker games with daily pots of $3.2 trillion (two-thirds of that derivatives).   Some of the better players, like Goldman, Sachs are profiting enormously.  In the past 90 days (the 3rd Quarter, July – Sept.), Goldman Sachs made $100 m. or more on each of 36 days from trading profits alone.  Why would they not want to return to the Great Global Poker Game? 

        Let’s see if we can figure out an optimal way for the financial services industry to build back the public’s trust.   How about, say, hiring a thousand star poker players?  Yes — that will do it.  That will certainly make ordinary people put their money back in banks and keep it there. 

 

Innovation in Cities: “Remove One Zero, Two Zero’s, from the Budget” — The Case of Curitiba

November 21, 2009 in Uncategorized | 2 comments

Innovation Blog

Innovation in Cities:   “Remove One Zero, Two Zero’s, from the Budget” — The Case of Curitiba

By Shlomo Maital

Nov. 21/2009

   This is the story of the world’s most innovative city, Curitiba, in Brazil.  Curitiba is the capital of the southern Brazilian state of Paraña,  with some 3.5 m. people in metro Curitiba.  Every mayor and city council in the world should have made at least one trip here to benchmark the innovations led by the incredible Jaime Lerner.  Most have not. 

    To my knowledge, the mayors of Jerusalem and Tel Aviv (past and present, including former Israeli Prime Minister Ehud Olmert) have not been here.  The result:  expensive, over-budget, bungled projects for light-rail or subway systems,  in both Tel Aviv and Jerusalem, that, at least in Jerusalem, are making inhabitants’ lives miserable (owing to torn-up streets) and will do so for years to come.  In contrast, in my city Haifa, a dedicated bus lane is zipping residents from the southern end of the city to the northern end in next to no time. 

   What are Jaime Lerner’s innovations?   Choosing to run for mayor in Curitiba, Brazil, in 1988, only 12 days before the election, and winning a surprise victory, Jaime Lerner  did the following, using creativity and common sense, and a lot of independent thinking:

  *  Speedybus:  Used Federal money earmarked for a subway to build instead a Speedybus system — long ‘accordion’ buses carrying up to 300 people, built specially by Volvo, owned and run by private companies, with dedicated bus lanes.  Bus stops board passengers in one minute (you pay in advance of boarding), buses run frequently, and housing is planned so most people are within walking distance of a bus, making cars unnecessary or even inconvenient.  The Speedybus system costs one per cent of a subway and does the same job.  Curitiba’s bus system carries 2.3 million passengers daily — more than Rio de Janeiro’s subway!

      “What is a subway?”  Jaime told the BBC.  “Speed, comfort, reliability, frequency!  We provide these with Speedybus, because we designed it for these four qualities.”

  *  Sheep:  According to Wikipedia,  “Curitiba is bordered by floodplain. While wealthier cities in the United States such as New Orleans and Sacramento, have chosen to build expensive, and expensive-to-maintain levee systems to build on floodplain. In contrast, Curitiba purchased the floodplain and made parks. The city now ranks among the world leaders in per-capita park area. Curitiba had the problem of its status as a third-world city, unable to afford the tractors and petroleum to mow these parks. The innovative response was “municipal sheep” who keep the parks’ vegetation under control and whose wool funds children’s programs.”

     Jaime told the BBC, “the sheep are the best public servants!  They never go on strike!”

*   Food for garbage:  Like many Brazilian cities, Curitiba has barrios, slums.  They were once jammed with garbage; the streets were too narrow to permit access for garbage trucks.  Jaime Lerner told the people:  Bring me your bags of garbage to collection centers, and I will give you in return a bag of food.   One bag of garbage, one bag of food.  It was cheaper than garbage collection.  The barrios residents responded.  Within three months, the barrios were   clean. 

*  Recycle:   Many cities are drowning in garbage.  Curitiba is not.  Curitiba citizens recycle.  How?  Jaime Lerner had the schools teach children how to separate organic and non-organic garbage.  Organic garbage goes into compost piles.  The children taught their parents. Now, 70 per cent of all garbage is separated, one of the highest ratios in the world.  Curitiba has a lovely nearby bay.  Once it was a garbage dumping ground. Lerner began to pay fishermen by the pound for retrieving garbage from the bay.  Now, fishermen fish for fish, when they can, and when they cannot, they fish for garbage. Curitiba saves many millions of reals in this way.

* Schools:   Lerner has a program where poor kids who don’t want to go to school  can be apprenticed to city employees.  As a result Curitiba has many fewer gangs than does, for instance, Rio.   

* Bikes:   There are 62 miles of bike routes in Curitiba, used by 30,000 bikers daily.  

  But what is Jaime Lerner’s biggest idea — the truly revolutionary innovation?

  How often do we hear public officials and politicians say this sentence:

       Yes, we would like to do good things, solve problems, make citizens’ lives better — but, we lack the money.

   Here is Jaime Lerner’s ‘take’ on this statement.

   “Do you want to change things quickly?”  he asks.  “Remove one zero from the budget.   Do you want to change things even more quickly?  Remove TWO ZERO’s from the budget.”

      He did it.  If you have no money, you have to invent, create, innovate, improvise.  How often do we throw money at a problem (or accept the problem because of lack of funds),  rather than throwing energy, creativity and start-from-scratch innovation at it?  

      If the world’s mayors do not visit Curitiba, perhaps Jaime Lerner can visit them. 

      But will they listen?

Blog entries written by Prof. Shlomo Maital

Shlomo Maital

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