Archive for November, 2010

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Former Intel CEO on education, jobs, & technology

Tuesday 30 November, 2010

I attended this Chicago Council on Global Affairs event ENGINEERING A NEW GENERATION: EDUCATION, JOBS, AND TECHNOLOGY which featured former Intel CEO Craig Barrett.    Craig contributed to the report Rising above the Gathering Storm & it’s revision, which note that the 21st century is the year of the treadmill-either go faster or get kicked off:  the “flat world” has changed with 3B new capitalists.  He suggests we compete 3 ways:

  1. better education to raise our standard of living
  2. create better new ideas with more innovation, technology, & R&D;  some countries invest 5% of their GDP in R&D, while R&D investment in primary R&D in the US has been declining for 30 years
  3. set the right environment to bring together 1 & 2

Since the ultimate source of wisdom is fortune cookies, he offers 3:

cookie #1-the world accepts talent, passion & education…but the younger generation in the US is less well-educated than their parents. We’re #20 in the world in high school graduation rate:  30% of students don’t graduate;  we need to solve the drop-out rate problem.  Of the 2/3 who do graduate, 1/2 of them are not qualified for college.  The US is falling in terms of math & science education-we’re now in the bottom 1/4 of OECD countries.  Math is a serial subject which builds from year-to-year, but the probability of getting a good math teacher 12 years in a row when only 2/3 of all teachers know math is pretty slim.  Although science is not as serial a subject as math, we’re even less well-equipped in science.  We are ceding leadership while at the same time seeding leadership in other countries when 60% of students in our engineering schools are foreign nationals.  Our educational system conflicts with our immigration policies-we might has well staple green cards to PhD diplomas.  Although our universities are still the best in the world, our K-12 system “sucks,” his technical term, 1st mentioned in the A Nation at Risk report.

cookie #2-you can’t win unless you compete…Although the US is still the biggest investor in R&D by virtue of being the biggest economy in the world, the US no longer supports basic research at universities, which has fallen 60% as a % of GDP.  The US is #20 in offering R&D tax credits, which are offered on an on again/off again basis.  The budget of the National Science Foundation remains flat @ $5B.  The result is that venture capitalists take less risk.  Moore’s 2nd law states “You can’t save your way out of a recession-you can only invest your way out of it.”  The government offers many disincentives to invest in the US;  uncompetitive corporate tax rates, Sarbanes-Oxley requirements, expensive health care, etc.  Australia invested its stimulus money in building broadband infrastructure while the US invested in “shovel-ready” projects.

cookie #3-performing a small deed is better than planning a big deed…The National Governors Association together with Achieve, Inc. adopted common core curriculum standards as international benchmarks for 48 states, but only 3-4 states allow competition in education while 11 states don’t allow charter schools.  At the best schools in Arizona, where Barrett lives, only 25% of teachers are certified as educators.  The rest are subject matter experts.

Q&A

  • the most common background of Fortune 500 CEO’s is engineering, so the arts are not as important as math & science in education
  • we need to focus on educating in basic skills;  the best international education Barrett got was the 1st time he lived in a foreign country
  • we need:
  1. good teachers who are subject matter experts & are respected
  2. high expectations
  3. good feedback loops
  • Arne Duncan has taken on the teacher’s unions to reward teachers based on performance & not tenure
  • Good & enthusiastic teachers get women involved in math & science.  Change the Equation helps too.
  • Although technology makes education more interesting, good teachers are the best technology.
  • We need to protect our intellectual property at the World Trade Organization to leverage US innovation.  Intel invests 15% of its revenues in R&D, & earns 90% of its revenues from new products every year.
  • Without investment in R&D years ago, we wouldn’t have developed Silicon Valley.  We need to invest in R&D & let companies run with it.  Microsoft invests $7-8B/year in R&D to fend off threats from start-ups such as Marc Andreeson, Yahoo, & Google.  Ideas can compete-we need to get them our best resources.
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German Windenergy conference, the sequel

Tuesday 23 November, 2010

The German American Chamber of Commerce of the Midwest hosted the WINDENERGY BUSINESS CONFERENCE 2010 .  Videos of the panel discussions & presentations can be found here.  Here’s what they said during their presentations that was not presented on their slides or captured on video:

U. Lohse of Germany’s Renewable Energies Export Initiative just read his slides, so you can consult his presentation to see what he said.

L. Velser  of German Wind Energy Assn:

  • Enercon, Germany’s largest wind energy producer, is expensive but offers good service.  The owner is not a friend of the US, so he focuses on Europe & is building a manufacturing facility in Canada
  • world leader Vesta is having problems with the foundations of its turbines, which must be replaced, which is quite expensive.  Their customers have lost trust & are moving to Enercon
  • 35% of energy comes from renewables in the North & only 25% further South, so they need to promote wind more in the South
  • Baltic Park started up in August with 21 turbines from Siemens.  Installing turbines in the Baltic is tough because there is only a 3 month summer window to get it done
  • Onshore wind generation is most efficient & higher hub heights raise efficiency, pardon the pun
  • Germany’s goal is to get 25% of all energy from wind by 2020
  • 100K demonstrated against nuclear energy, but there is much cross ownership in the energy sector, including between wind & nuclear.

K. Rohrig of Frauenhofer Institute for Wind Energy & Energy System Technology

  • to reduce emissions per capita is unrealistic:  we need to transform our energy supply system & avoid unused heating systems
  • power duration requires energy storage & management, which will require a smart grid in the future
  • weather forecasts must be improved to better provide data on solar & wind potential
  • wind farms need to be managed more like other power plants (wcm=windfarm cluster management)
  • Europe needs to upgrade its power grid (double capacity) for 100% renewables.

K. Lloyd of PNE Wind USA

  • do we have a geographic transmission policy problem in the US?
  • PNE is agnostic to which turbines they use
  • 1500 MW are in the pipeline now
  • JV’s take 2-3 years to put together, greenfield investments take 5 years
  • the political issue is money & jobs
  • 2010 has been 1/2 of 2009
  • the wind tunnel in the US extends from North Dakota to Texas
  • the production tax credit is 1 of the top tax incentives in the US
  • 61% of the voters in California voted not to repeal their commitment to renewables.

E. Weston of the Great Lakes Wind Network

  • GLWN is a group of manufacturers & wind farm construction contractors
  • Canada feels like the US in 2008
  • 87% of the population of Americans want wind power
  • 29 states have enacted wind energy programs
  • we should achieve 20% wind energy production by 2030
  • many gray market turbines infiltrated the market in 2008-9
  • there have been structural changes in sourcing for wind energy:  supply chains are becoming more domesticated as components that were barged over by boats are now being assembled on the Plains
  • successful manufacturers are taking a ruthless approach to cost pressures to become lean while still focusing on service, speed, & responsiveness with a relentless long-term commitment
  • maintenance is a different market focused more on speed than cost:  1/2 of the 20K turbines installed in the US are out of warranty & need spare parts
  • wind farm construction is picking up, but the future depends on Washington
  • Californians voted to sustain goals of 20% renewable energy by 2010 & 33% by 2020.

S. Spethman of Suzlon Wind Energy Corp.

  • Suzlon’s North American headquarters is based in Chicago with assembly in India & has Chinese suppliers nearby & key suppliers in Germany
  • India, China, & Brazil are driving growth
  • 2 year warranties on turbines sold in the US are being negotiated up to 5 years
  • GE had 50% of the market on installations in 2009
  • the huge surplus of natural gas keeps its price down
  • Suzlon spent $70M on logistics moving stuff around
  • technicians can reset systems remotely within 1 hour with real-time monitoring systems
  • customer service levels have dipped 15-20%
  • his advice:
  1. join AWEA
  2. network with your supply chain members
  3. promote US legislation.
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AT Kearney & DuPont on government’s role in markets

Friday 19 November, 2010

The Chicago Council on Global Affairs put on this event EXPANDED GOVERNMENT ROLE IN MARKETS which featured Erik Peterson of A.T. Kearney & James Romine of DuPont.  Peterson took the lead indicating the potential for paralysis in Washington as a result of the recent elections over whether states or markets should determine economic outcomes.  Economies swing in cycles & the developing economies of the world have grown through a belief in open markets.  The question now is “Where are we in the economic cycle?”  A private sector failure led to the financial crisis, so regulation is the natural outgrowth of that.  Peterson sees 7 key issues over the next 5 years:

  1. exit from recession threatened by unemployment
  2. rise of developing economies (6.4% growth) in production & consumption (vs. 2.2% growth for mature economies)
  3. rise of state enterprises (4 of Forbes Top 25)
  4. demographic changes-slowing rate of growth (in Japan & Russia) & aging, creating workforce decompression (China will have more people aged 60+ than the whole US population by 2050)
  5. resource crunch like the 2008 food riots
  6. role of international organizations need to be transformed
  7. changes in debt/leverage forecasted by Deutsche Bank to grow from 135% to 155% by 2030

We’re at an inflection point where business can no longer continue as usual.  We need more discipline in business & government.

Romine described how DuPont’s history is intertwined with government & suggested C’s reflect it’s relationship with business:

  • complex-with 90K governmental units & 40K NGO’s, who is accountable & liable for value/supply chains?
  • consumers-are defacto regulators
  • collisions-as a result of regulations, e.g., there is little harmonization with Europe
  • challenge-to create sustainable growth & enable a 9B world population live well in 2050
  • collaboration-required for better regulation
  • creativity-is both a threat & opportunity

panel Q&A

  • Government has a role to play, but in the US has played too small a role.  The private sector is more agile & reacts more quickly to change.  Walmart is a regulator by what they allow to be put on their shelves.
  • A systemic crunch for commodity resources creates a long term challenge.  Energy demands are unsustainable.
  • Our public debate is uninformed, so we need to get beyond parochialism & partisanship, & rebuild trust.

open Q&A

  • It’s remarkable & questionable how fair it is that so much money was spent in this last campaign season as a result of the lack of limits on campaign spending
  • Because consumer groups are now just a tweet away, government needs to write good rules to respond to consumer needs
  • Getting out of the recession & better government-government cooperation are the most important changes required by 2015.
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Does microfinance reduce poverty?

Wednesday 17 November, 2010

The short answer is “yes,” of course it does.  Why else pose the question?  The topic was explored @ this event “‘Does Microfinance Reduce Poverty?” sponsored by the Grameen Foundation & Bankers without Borders.  Bill Daley, brother of Chicago Mayor Rich & Chair of J.P. Morgan Chase Bank’s Corporate Social Responsibility group, welcomed guests by letting us know Bankers without Borders has worked on 41 volunteer projects as a partner of the Grameen Foundation.

Most of the content of the event centered around an update by Kathleen Odell, “Taking another look,” to this report “Measuring the impact of microfinance.”   She explained the 2 main changes were:

  1. moving beyond just loans into offering savings plans & insurance, &
  2. using randomized controlled trial methodology (RCT).

There are many problems to confront when addressing this issue.  How does 1 define poverty?  There are both economic & social measures of income.  How does 1 separate cause from effect?  Do incomes rise as a result of microfinance or are borrowers simply the most entrepreneurial?  RCT creates a control group to make comparisons more relevant.  Coverage of 3 2009 studies in India, Philippines, & Kenya were inconclusive specifically related to income, but mentioned many positive effects, such as increased investment, employment, & more children attending school.  The conclusions were:

  • avoid oversimplification & generalizations because contexts differ
  • effects were encouraging re:  ownership, business investment, & savings
  • long-term horizons are required

There are a couple of questions which still beg exploration:

  • do increases in incomes lead to increased savings?
  • what are the macroeconomic effects of microfinance?

Alex Counts, Pres. of the Grameen Foundation, explained a bit more about his organization.  Grameen now has 3000 volunteers who spend varying degrees of time in various countries.  They’ve built 50 organizations which address structural issues in the world’s poorest countries which are home to the world’s poorest 1B people.

Beth Houle of Opportunity International, a Chicago-area based organization which does microfinance world-wide & about which I’ve written, talked more practically about the cost of market research in these countries.  They surveyed 5500 clients over the last 5 years & found they wanted savings products & regulated microfinance banks.  They have a client retention rate of 55-75%, but there are few other good metrics, which begs for more research.  They’ve asked donors for funding, but need to clarify the cost/benefit ratio to determine how helpful this information is.

Q&A

  • A Bankers without Borders volunteer spoke about her experience when she spent 2 weeks working in Tunisia.
  • some outcomes of long-term research are unforeseeable because cultural shifts take time & it’s difficult to maintain control groups over extended periods of time
  • 70% of the GDP of Africa is related to agriculture, so assisting farming is important & a focus of OI.  To be able to eat rice raised on their own land is an achievement
  • triple bottom lines increase environmental awareness, but create dilemmas in whether or not to encourage the use of fertilizers.  30K solar panels have been installed in the 3rd world
  • HIV/Aids is a business issue because loan repayment is at risk if people die
  • Governments & the Center for Financial Inclusion are creating codes of conduct the last 2 years to fight predatory lending.

In sum,

  • there are waves of studies out there, but all have limits & value
  • microfinance is not just about loans, rather also about who is the fastest & most efficient as well
  • real accountability is needed for more social change.
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Brazil according to Baker McKenzie

Monday 15 November, 2010

I had breakfast with the attorneys @ Baker & McKenzie to attend BRAZIL TAKES OFF: OPPORTUNITIES AND STRATEGIES FOR SUCCESS They opened with the Consul General from Brazil in Chicago, who was most proud of Brazil’s recently completed online elections.  They had the results of their election by 6:00 p.m. & the politicians were making their speeches by 7:00 p.m.

re: investment :

  • politically stable
  • investment ratings positive
  • Brazil was LIFO in the financial crisis, last in & first out
  • the economy is growing faster than the average of even emerging economies
  • foreign direct investment is expected to grow until 2014
  • the Real has gained 6.3% vs. the $US in the last 3 months
  • inflation is under control

re: the 2014 World Cup & 2016 Olympics set deadlines which must be met

  • Sao Paulo is getting $20B investment, which is about equal for the rest of the country, for the World Cup
  • opportunities are in building arenas, airports, hotels, &  urban mobility ($22B in trains, subways, highways)
  • tax incentives are being granted to ensure completion

Target industries are oil & gas, power, real estate, mining, steel, stock exchange.

re: real estate & infrastructure, major projects are in power plants & transmission, pipelines, water.

  • the real estate market is stimulated by growth of the middle class & an increase in credit offers
  • there is a national deficit of almost 8M houses in Brazil
  • the government is investing & providing incentives to reduce the housing deficit
  • shopping malls are growing 10+%/year in gross sales

The Brazilian stock & derivatives markets are the largest in Latin America & the Omega Project seeks to become 1 of the world’s largest in 5 years

re: taxes, Brazil’s system is complex @ federal, state, & municipal levels with indirect (VAT), & overlapping taxes

re: managing the workforce, labor rights are defined by law & collective bargaining, & may not be waived

  • labor contracts/job offers are of indefinite duration for 8 hours/day, 44 hours/week
  • remuneration must include annual inflation adjustments, bonus rights can not be withdrawn
  • employees can be terminated with & without cause without & with severance, respectively
  • all employees are represented by a union, including top management, with mandatory contributions, depending on jurisdiction
  • common disputes include:  overtime, outsourcing, liability, harassment, damages, pay equality, asset seizures

re: environmental protection, polluters pay, for preventive measures too.

  • information provided to public authorities is public
  • natural resources must be sustainable & not exhausted
  • trends include increased identification of contaminated areas, climate change laws at all levels, Superfunds, mandatory self-disclosure, Forestry code modifications for enforcement

Baker McKenzie’s new Chairman of their Executive Committee, Eduardo C. Leite, hails from Brazil, where the firm has 4 offices.

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invest in Lithuania?

Friday 12 November, 2010

I lunched with this group hosted by the International Trade Association of Greater Chicago INVEST IN LITHUANIA: YOUR BUSINESS ADVANTAGE IN THE EUROPEAN UNION Here are the presentations that were given:

Here’s the video they showed.  Here are the 10 most important points I pulled out of their presentations:

  1. Chicago has a sizable Lithuanian population
  2. 10% of Lithuania’s population is in college
  3. Lithuania’s macro fundamentals are strong due to the participation of Swedish banks
  4. They’ve maintained the value of their currency & now teach austerity measure to others
  5. Lithuania seeks to be northern Europe’s service hub by 2015 & innovation center by 2020
  6. Lithuania has a geographic advantage being in the Baltics (pop 110M), near the Commonwealth of Independent States (pop 200M), & is a part of Europe (pop 340M)
  7. Lithuania has high mobile penetration @ 147%
  8. R&D projects can receive grants to cover up to 70% of the cost
  9. Lithuania offers “super-accelerated” depreciation
  10. Foreign direct investment requests can be reviewed & confirmed within a matter of weeks
  • D. Kurowski of Strategic Staffing Solutions noted that 90% of Lithuania’s population speaks a foreign language.
  • A.K. Dutta of CSC was able to open their European near-shore servicing center in the Nordics within 6 months.
  • B. Davis of Phillip Morris praised the Lithuanians for the open & transparent privatization of industry there.

my $.02-I’ve visited Lithuania & I think the most important point is they are embedding themselves into the fabric of the region, which has tremendous benefits for everyone.  For all of the small countries in the Nordic region to band together, they add a lot more clout to otherwise minuscule markets.  Adding the Baltic states of Lithuania, Latvia, & Estonia to the already strong Denmark, Sweden, Norway, & Finland creates an area that’s bigger than the sum of it’s parts.  Plus the Scandinavians are good business people.  When I spent 6 months in Sweden, I was impressed with the general level of technology to which everyone was accustomed & expected.  Sometimes it’s difficult to get the Danes & Swedes to work together, etc., but when they realize it’s to everyone’s benefit, they fall into line.

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Chinese delegation in Chicago

Wednesday 10 November, 2010

The Minority Business Development Authority (MBDA) hosted a delegation from Zhejiang, China @ the MBDA Globalization Business Forum – Meet China Businesses which seemed to be organized by MeetChinaBiz.org    Chicago was their 1st stop on a tour of New York City, Philadelphia, & Washington, D.C.  George Mui, of MBDA noted that there are 5M minority businesses in the US which generate $700B in revenue.  The MBDA’s China program was created 2 years ago & featured a trip to China last December.

Gao Yingzhong, Dir Gen of Zhejiang SME Bureau, informed us about his homeland.  Zhejiang province is #4 in GDP in China with a population of 51M in 100K km2.  A couple of features of Zhejiang’s GDP are

  1. 75% of all companies are privately-owned.
  2. the province has 2.6M SME’s, which comprise 99.9% of all companies, employ 90% of all employees, & generate 82% of exports of the province.

Zhejiang is going through some growing pains.  The province lacks technology, human resources, industry structure, & management know-how.  This event was organized to enhance their competitiveness.

Mary Roberts, Deputy Dir of IL Dept of Commerce & Econ Opportunity, let us know Illinois has had a presence in China for almost 40 years.  It opened its 1st office in Hong Kong in 1974 & 1 in Shanghai in 2000.  China is Illinois’ 3rd largest trading partner & trade is up 40% through the 1st 2 quarters of 2010.  30 Chinese companies have established operations in Illinois, led by BYD, China Cargo Air, & Cosc0.

Elizabeth Harrington, Exec Dir of Chicago-China Economic Development Center (CEDC), highlighted 2 of China’s most successful companies which were established in Chicago, BYD 11 years ago, & another 15 years ago.  She believes that Chicago is 1 of the most Chinese cities in the U.S.  Chicago copied the Chinese model of economic zones & the CEDC is similar to many Chinese organizations.

Lucy Kruse of Mesirow Financial, let us know they’ve started a Chinese Financial Market Initiative in investment banking for Chinese companies coming to America.  They provide due diligence, research, insurance, & risk management services in this area.

After the speeches concluded, we were led to 1on1 meetings for the Chinese with  41 mostly Chicago, IL based companies @ tabletop exhibits.  For some reason, they erroneously included my company, gata, in the list of companies.  The Program Guide said that an appendix would include a directory of the Chinese companies attending-I believe they’re listed here.

My $.02-My impression is this event was targeted more @ the visiting Chinese than locals.  There seemed to be more Chinese attendees than Chicagoans, & relatively few minority business owners.  Bob Mravinac, Program Dir of MeetChinabiz did not do a very good job as Master of Ceremonies.  He appeared quite unorganized & simply did not present himself well.  Shawn He, Chairman of MeetChinaBiz had a fever, so he said only a few words to save his energy so that he could make it through the day.