Archive for June, 2010

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belated BIO wrap-up

Wednesday 30 June, 2010

I attended the Bio show last month, which returned to Chicago after only 4 years, the fastest it’s ever returned to 1 location.  Despite the changes in the economy since the last time Bio was here, the numbers for this edition were up.  Surprisingly it appears as if the number of exhibitors has increased from 1600 to 1700 & attendees from 16,000 to 17,000.  While the content offered appears to have contracted from 24 Program Tracks down to 17, & 180 breakout sessions to 125, the Business Forums (Fora?) partnering meetings has increased dramatically from 10,000 to 14,000.  I heard Bio will be returning in 3 years to Chicago.  I hope that’s a lucky year for the city.

Four years ago I was blown away by how international this show was.  More than 25 different nations & regions sponsored pavilions, which made it easy to find what was happening on a country-by-country basis, but difficult to find information on specific technologies.  I’m not sure if people are as interested in technologies from particular countries as they are to solutions to their problems, regardless of their origins.  (I’ll comment on why I think the show is organized this way a little later.)  It looks like Chile & United Arab Emirates dropped out while Poland, South Africa, & Thailand  jumped into the fray.  This year, I gathered information from 23 national pavilions.  It seems as if 2 of the national pavilions I visited in 2006 expanded & 1 shrunk.  The Swiss pavilion expanded from 22 to 27, the Austrians from 11 more than doubling to 23.  Iceland dropped out of the Scandinavian Pavilion & other cross border initiatives made it unclear how much that pavilion shrank.  Other than the economic development agencies,  few of the exhibitors from 2006 returned in 2010, but that’s not surprising if they met their objectives 4 years ago.  Poland’s pavilion @  had an interesting promotional twist-they queried attendees about their vision of the future of biotech & made an online video about it.

My $.02-this is a different kind of event for a number of reasons.  It’s biotech, which is an important industry which has a frustratingly long time horizon, which means there are as many government players as there are business participants.  That’s partly why I don’t think it’s a coincidence that the number of attendees is 10 X the number of exhibitors.  If each exhibitor gets 10 attendee passes, that explains the correlation.  My impression is this show is much more incestuous than most.  By that I mean, although there were a number of small service provider exhibits,  this is not a trade show where exhibitors hawk their wares to passersby.  Rather it’s a gathering where government officials from American states & foreign countries try to entice their counterparts to come to their geography & set up shop.   I’m sure there are some attendees who are not exhibitors, but this is as much or more an exhibitor-to-exhibitor show as it is exhibitor-to-attendee show.  I’m not criticizing, simply noting that it’s different from most events of this type.  In some ways it might be a new model for trade shows, because the old model is not working any more.

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japanese high speed rail

Monday 28 June, 2010

I attended this event sponsored by the Japan International Transport Institute High Speed Rail Seminar in Chicago for 400 attendees (& they turned away 100+) @ the Union League Club.  They will make the presentations made available on the website soon, so I won’t rehash what’s contained in them.  Here’s what they had to say otherwise:

Ambassador Ichiro Fujisaki explained that Japanese excels in the 6 e’s of high speed rail:  experienced, exact, economically efficient, environmentally friendly, enjoyment creator, & earthquake prohibitive.  Sathoshi Seino of the Council for Global Promotion of Railway informed us that Japan completed its admittedly shorter transcontinental 3 years after the U.S. completed theirs.  Jiro Hanyu of Institution for Transport Policy Studies let us know that the US has 1 of the most extensive rail systems in the world, twice as big as Russia’s.  China will have only 63K miles when they’re finished.  Japan has only 18K miles & is the only country with privately owned rail systems.  The US is ranked only #17 in high speed rail.

Representative Dan Lipinski led off before he flew back to DC to vote & informed us of all the money he’s won to support high speed rail for the Midwest & Chicago.  He’s earned 100’s of $M’s for his CREATE program to upgrade crossings, etc.  so that existing freight lines can be used for high speed rail.   Some of this money was matched by the railroads, & some was allocated to high speed rail.  Sec. Gary Hannig of the IL DOT let us know of the $1.23B grant that the state of IL won for Union Pacific to build the 110 mph high speed rail line from Chicago to Springfield & on to St. Louis.  This was also novel in getting 4 states to act as 1 region to apply for 4 grants, instigated by IL Gov Pat Quinn’s Midwest Rail Steering Group.  Bobby Ware, Commissioner of CDOT, let on that Chicago’s Union Station hopes to be the centerpiece of the proposed midwestern hub of this burgeoning high speed rail network.    State Rep. (& Michigan law school grad) Elaine Nekritz of IL 57th district related that when the state doubled the rail subsidy, ridership skyrocketed.  She also intimated the challenges:  federal & state funding, political will, candidates who don’t support high speed rail, & the need for more cohesiveness among its proponents.  Richard Harnish, Exec Dir of the Midwest High Speed Rail Assn. set 2 goals for high speed rail in the midwest:   get planning & design for the network underway this year, & get if financed by the end of next year.

my $.02:  The purpose of this seminar was to highlight the capabilities of Japanese high speed rail manufacturers & I’m sure they’re all very well-qualified.  Let me be the 1st to say I am a staunch advocate for public transportation generally & rail specifically, high speed or otherwise.  The implication of this conference is if you build it, they will come, but it’s far from that simple.  Americans are culturally ingrained to avoid taking trains.  America’s automotive manufacturers have brainwashed Americans on the virtues of the freedom inherited by car ownership.  The supporters of high speed rail will need to create a massive educational public relations campaign to convince the American public of the virtues of rail transportation.  High speed rail is simply a bigger & better Amtrak, so unfortunately any new rail system will suffer with Amtrak’s current lowly reputation.  Finally, typically public transportation is supported by government, either at the local or federal level elsewhere in the world.  For this to be affordable in the U.S., some subsidies will be necessary, but congress is reticent to hand these out & will demand that this program pay its own way.  I doubt whether this is possible.  The best thing to happen for this project to succeed is for the price of gasoline to rise to $4+/gallon. Then it might stand a fighting chance.

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end of the free market?

Friday 25 June, 2010

I attended a talk on THE END OF THE FREE MARKET? given by Ian Bremmer, President of Eurasia Group, who’s written a book entitled The end of the free market:  who wins the war between states and corporations? This event was organized by the Chicago Council on Global Affairs.  Here’s the summary:

It’s a different world after 21 months of turmoil.  There is less growth & it’s more volatile.  The state is becoming the principal actor in growth economies & their leaders have different ideas how economies should be run.

There have been 2 knee-jerk reactions to his book:

  1. the right admits Bremmer gets the problem & incorrectly points to Obama as the next state capitalist
  2. the left believes he’s gotten it right, really, but Bremmer doesn’t fully buy it, as his book title is rhetorical.

Bremmer met a very high-ranking Chinese official who had seen his new book & posed the question, “Now that the free market has failed, what is the role of the state?”  Bremmer’s considered response was; even though self-regulation of banking didn’t work, ruling without the rule of law is no better.

This uncertain economy has leaders of free-market economies on their heels & in indefensible positions.  With lower economic growth, politics have much bigger effects.  There are more wars between corporations and states, so corporations have the choice to fight or leave.  So far, it’s China-1, Google-0.  Only 2 of the top 15 oil companies are privately owned-the rest are all owned by states.  China no longer needs foreign capital & only needs the highest levels of technology.  They recognize an export-led economy is no longer sustainable.  So they are diversifying away from exports to the west to ensure that profits stay within the country & are committed to growing locally.  They still need someone to blame for their problems, so relations are getting politicized, which makes relations more difficult.

The free market is a global phenomenon.  State capitalism is determined by states.  China is locking up commodities, but not on a global scale.  India is competing with China for those commodities & it’s going to get more contentious.  Russia is opening up more to the U.S.

re: the environment, is growth sustainable?  State capitalism only exacerbates these problems.

It’s volatile now as the American way of life is getting squeezed, but Bremmer still places his bets on the U.S.  The U.S. still has the educational system, infrastructure, etc. to solve its problems.  The problems of the other developed nations of the world are far greater & they have more limited means to address them.

Q&A

  • National resilience is broken, along with many bureaucracies.  Japan has no National Security Council & no training facilities for public policy.  The U.S. needs a Minister of Trade & Economy to organize a national industrial policy.  Obama can drive issues, as he did with health care, but the question is:  can he focus on the right things?  There is little faith in the $, but China can’t diversify away from it & the € is a disaster.
  • The EU governments will never turn away an opportunity to subvert the interests of its peoples, but the € will stay because of the massive bureaucracy built around it.
  • Brazil is on a good trajectory as long as they are consistent with their fiscal policy.  Others will move more towards state capitalism if they can’t compete in their own space.
  • China is building ports in Kenya with Chinese workers & the Kenyans don’t like it.
  • The Chinese are more happy with their government than Americans are with theirs because the Chinese have benefited from 10% annual growth for the last 30 years, which has bought them time, but China is still a bubble.  Russia is more likely to unravel because its wealth is so resource dependent.
  • Free market advocates don’t really want free markets-they want monopolies for themselves, so regulations are returning.  The question then becomes will they render us less competitive.
  • Natural gas is getting over-invested, but it’s cyclical & becomes more important as it becomes a national security issue.
  • 75% of the PhD’s in the hard sciences in the U.S. today are from China & we’re sending them home.  We need to get them to stay & contribute here.  The educational crisis 2 lower levels is creating a 2-tiered system.  The educational system in India is rising, while it’s falling apart in Russia.
  • Take Russia out of the BRIC countries.  Indonesia is a growing frontier economy.  It’s politically stable & fiscally competent.  South Africa has great greenfield & JV opportunities with locals.  Neighbors Vietnam & Cambodia are growing along with China.
  • Companies can’t stiff-arm authoritarian states like Google tried to do in China.  Technology will become more security conscious, so Microsoft will become more like Northrup Grumman, with security clearances required for much more than is now.  We’ll sell secure products only to the U.S. & less secure products to the rest of the world.
  • All free traders have some elements of protectionism.  We just need to whack down invalid political claims.
  • The government of Turkey has gone after private businesses, but Turkey focuses on Turkey.  Turkey is tilting ever more towards the Middle East & will never become a member of the EU.

my $.02-I’d love to see a face-off between Bremmer & Marvin Zonis

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climate economics

Tuesday 22 June, 2010

I caught this presentation offered by the Chicago Council on Global Affairs CLIMATE, ECONOMICS, AND THE FUTURE featuring Bill McKibben, of Middlebury College & 350.org, who was 1 of the 1st to write about climate change 21 years ago.  We didn’t know then how quickly the problem would accelerate & now the scale of the problem may be too great.  Hydrological cycles of droughts & floods are being disrupted.  A thin layer of acid is spreading over the oceans like an oil slick as we speak.

Water is the 1st to be threatened.  Water tables are dropping in China & they’re diverting 3 rivers to compensate for that drop.  Rising temperatures are leading to more evaporation, which means we need more water for crops.  The rise of global sea levels is resulting in the Pearl River delta becoming a flood plain.  The Tigress, Euphrates, & Jordan rivers are all dropping.

Growth occludes the problem.    A book which came out of MIT which focused on the limits of growth was scoffed at when it was published, but now we are running into those limits.  Unfortunately the Chinese see part of the solution, for now at least, as burning cheap coal to fuel their economic growth.  China is the world’s largest carbon emitter, (although not on a per capita basis) & tar sands are the most inefficient way to extract oil.

The Midwestern U.S. is in hock to the big industries, subsidized industrial farms, & vested interests that made it money in the past.  Midwestern politicians have a bipartisan record of doing nothing for the last 20 years.  Ethanol is the best solution they could come up with to date.

In analyzing the problem of climate change, “too big to fail” simply means these firms have become too big, which applies to energy companies too.  Agriculture only works now with large infusions of oil, but for the 1st time in 150 years, the # of farms is rising, which is an indicator of locally grown produce & a good sign.  We need to move from our centralized model of energy distribution to a more distributed model where people can generate their own energy & return some to the grid from their solar panels, wind turbines, geothermal pumps, or whatever.  America thrived on national projects years ago, but now these issues must be solved locally.  350.org started with 7 students (1 student/continent) & blossomed into an organization that organized 5200 demonstrations in 181 countries.

Setting the price of energy is a fundamental political act, so Washington D.C. holds the key.  No other country will sign an international treaty until the U.S. does.

Q&A

don’t take the energy chapter in the SuperFreakonomics book seriously.  Technology will lead to more dispersed energy, but there are no silver bullets, only buckshot.  Oil, gas, & coal are cheap & relatively easy to get, so they’re not going away soon.  Western Europeans use 1/2 as much energy & are more happy.

World population will grow to 9B by 2050 & then decline, so our best hope is better education & lowering the cost of energy, but that will be a huge political battle unlike any other.  There is no clash of values, only humans vs. physics & chemistry, & the sciences are take-it-or-leave-it negotiators.  The problem is Barak Obama is too patient:  we don’t have 50-75 years to solve the problem.

Cap & trade is the wrong terminology, but a bipartisan Senate proposal is touting a cap & dividend rebate.

NIMBY-(not in my back yard) works against energy dispersion-1/3 of communities are prohibited from using clothes lines to save energy by drying clothes in the sunshine.

This is similar to the slow food movement-you need to invest close to home & expect slow & stable returns rather than quick hits.

my $.02-the rest of the world taxes gasoline @ the pump multiples more than the U.S. government does.  The U.S. should increase taxes to discourage gasoline use & raise revenues to fund other alternative sources of energy.  I also wish McKibben would have mentioned success stories from other countries so that we can learn from others-we don’t have a corner on ideas on how to solve these problems.

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an update from São Paulo, Brasil

Wednesday 16 June, 2010

I spent last week in São Paulo, Brasil meeting with potential partners of a nanotechnology client of mine.  Without divulging anything proprietary about either side, here’s what we learned:

Brasil hasn’t suffered much from the global recession & has maintained growth, if just a bit slowed, over the past few years.  Brasil is still very protective, with 60% import duties on some products.  We’d even heard of an import embargo, but were not able to corroborate it.

Given Brasil’s level of development, cost is still an issue when dealing with products from developed countries, but Brasilian companies that focus on service in addition to sales are able to differentiate themselves considerably.  Servicing Brasilian accounts from Brasil, as opposed to from the U.S., can be important for American companies.  Some Brasilian companies are setting up offices in the U.S. so that they can buy & sell as a local & handle the export/import paperwork internally rather than work through other brokers/forwarders, etc. Smaller Brasilian companies may prefer Cash against Documents instead of more expensive letters of credit.

São Paulo comprises ~45% of all of Brasil’s economy, & together with Rio de Janiero comprises well over 1/2 & perhaps 2/3 of Brasil’s economy.  A big part of the reason for that is the São Paulo state government is a leader in implementing new & progressive policies, which other states then mimic.  Government funding of research can take anywhere from 6 months to 3 years, which can stretch out sales cycles that long.  However, we were told 10% of the GDP of the state of São Paulo goes to education and research, so that’s another indicator of their national leadership.

Lula’s term is coming to an end, which means there’s an election coming up.  Lula’s successor from his party won’t necessarily just continue to follow his policies, so there is some risk even with a candidate from his same party.  Of the businesspeople with whom we spoke, some were planning on little growth in 2011, while others were planning on continuing along the same growth curve.  The election & change in government could lead to appreciation of the Brazilian currency, the Real.  Corruption was mentioned as a problem by most of the firms with which we met, mostly of the federal government bureaucrats with their hands out variety.

On a lighter note, the day we arrived, we happened to come across this: or here’s the short version .

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Venezuelan governor confronts Chavez

Tuesday 8 June, 2010

I attended this event organized by the Chicago Council on Global Affairs VENEZUELA: A COUNTRY WITH MORE FUTURE THAN PAST which featured Henrique Capriles Radonski, Governor of the state of Miranda in Venezuela, (in Spanish with an interpreter) who was awarded the Gus Hart Fellowship focused on Latin America.  He opened with a video that was fairly critical of Hugo Chavez.  Radonski beat Chavez’ candidate in the race for governor of the 2nd largest state in Venezuela, which contains 1/2 of the capital city of Caracas.

His speech was continuously peppered with phrases like “not to place blame,” while at the same time pushing his agenda of creating new opportunities, inferring that the current administration is not.  He couched his battle as a generational struggle (3/4 of all Venezuelans are under 40 years old) of fear & threats (Chavez’ platform) vs. hope (Radonski’s platform).  He seeks progress while not placing the blame on anyone for existing problems.  Radonski claims the current government serves itself rather than its constituencies.  His hope is to be the enemy of the privileged & create opportunities for all.  Chavez argument is to pit the poor vs. the rich, but this can’t work.  Chavez falsifies truths & conducts politics based on lies, but if 70% of the country lives below the poverty line, who supports that?

Radonski’s plan to offer progress for all includes focus on:

  • education that is accessible,  offers quality, & is relevant to all
  • a new health network not confiscated by the government
  • security in the form of safe spaces with permanent activities
  • a new housing program which focuses on bringing needed repairs to existing housing stock to minimize the use of resources
  • employment fairs which do not destroy private enterprise

In closing, he spoke of the struggle of communism vs. opportunism.  Radonski said Chavez is obsessed & attacked him for wanting to become president.  Whereas Chavez lives by the credo “Motherland, socialism, or death,”, Radonski counters with a more positive message of opportunity & progress for all.

Q&A (in English)

Venezuelan problems will be solved by the Venezuelan people rather than depending on other (US State Dept) governments

Venezuelan states do not collect their own taxes & are funded by transfers from the federal government.  Radonski’s issue is “how can there be no money when the federal government spends $6B on military equipment?”

Since 80% of people are poor in Venezuela, the problem of poverty must be solved.  The US doesn’t understand this problem fully.  He is fighting for education because that is the path out of poverty & “paths are made by walking.”  He does not mean to be ideological, right wing, or pitch the rich vs. the poor.  He simply want progress & opportunities.