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  • Econbrowser: Rise in Capital Good Exports, and Overall Manufacturing Output, Since 2009

    Menzie Chinn has a collection of useful charts at Econbrowser illustrating the state of manufacturing in the US. Here's one, showing "cumulative changes in real exports vis a vis 2009Q2." Chinn writes: Clearly, export growth is decelerating -- not surprising given the collapse in trade volumes that took place during the great recession. Nonetheless, I find it interesting how much capital goods exports have increased. Now, as I mentioned in an earlier post, vertical specialization means that it’s unclear how much value added is incorporated in particularly the goods exports. Still, I think there is evidence for a manufactured exports rebound. Finally, there has been substantial skepticism that manufacturing employment will rebound strongly, even if the President’s initiatives outlined in the State of the Union are implemented. [4] I think that skepticism is largely warranted, given rapid productivity growth in that sector. However, that doesn’t mean that manufacturing value added won’t necessarily rebound. BEA only released data up to 2010 last month, so one can’t be sure. So while we have seen some marked improvement in U.S. exports and a a trimming of the trade imbalance, the question remains whether we will see sustained growth, and the sort of recovery-driving rebound of the manufacturing sector that President Obama has been calling for. Read Net Exports, Exports, Real Exchange Rates and Manufacturing here .
  • Carnegie Council Slide-show Raises Key Questions About the Revival of U.S. Manufacturing Sector

    This Global Ethics Corner from the Carnegie Council does a nice job of laying out the core questions we should be asking about the bipartisan push in Washington for a revival of manufacturing in the U.S.: "Is the rebirth of America's manufacturing industry necessarily a good thing?" This, and the other questions raised in the slide-show about factories and innovation, should be good conversation starters for a class discussion on the role of manufacturing in the U.S. economy today.
  • Giving Inventiveness its Due

    There are those who think that GDP is limited as a measure of a nation's progress. Bhutan, for example, has its GNH: Gross National Happiness. Could there be a way to measure inventiveness? If there were, Nathan Myhrvold would surely get on board and push that measure as a way to forecast future economic health. In a column for Bloomberg , Myhrvold--former chief strategist and chief technology officer at Microsoft, and founder and chief executive officer of Intellectual Ventures--argues that inventiveness and innovation are difficult to measure, and therefore get short shrift by economists. The economy of the world is not based on the simple interplay of capital and labor. Sure, these are involved. But they are secondary characteristics, not fundamental ones. Macroeconomists are often said to have their fingers on the pulse of the economy, and that’s an apt analogy. A pulse is a decent secondary indicator of life because blood flow is one prerequisite for the body’s survival. But the pulse is a weak and incomplete measure of life. A brain-dead patient, after all, may have a pulse even though the person’s life is over. Conversely, a machine can drive a pulse without giving life. So while it’s all well and good to measure the flow of capital and the markets for labor, don’t mistake this data for the forces that really drive growth, which are inventions (or, if you prefer, ideas) and the ways that they are made real. In response to these forces, capital is deployed and labor is expended. Physics is obsessed with conservation laws; mass and energy can be neither created nor destroyed. Economics, on the other hand, obsesses about growth and recession, in which economic value is explicitly created and destroyed. Invention is, directly or indirectly, a primary source of the value we call growth. Yet economists give invention short shrift. That is partly because they are still hazy about the origin of inventions. I find talking to economists about invention’s role in the economy a bit like talking to fourth graders about where children come from. A smart fourth grader can tell you all about how kids progress through elementary school. They can even tell you about infants, and that mommy’s belly gets big before one appears. But how and why the spark of conception occurs may be a mystery. Read Invention Is the Mother of Economic Growth here .
  • Radio Boston: Does Reliance on Private Funding Harm Innovation in Science Research?

    Our friends Meghna Chakrabarti and Anthony Brooks of the WBUR program Radio Boston , featured a compelling discussion with Phillip Mirowski yesterday. Mirowski is professor of economics and the history and philosophy of science at the University of Notre Dame, and author of Science Mart — Privatizing American Science . "Science is always organized by somebody," Mirwoski says. Today science is largely organized by the private sector. And that has Mirowski concerned that innovation is being squelched. He cites "patent degradation" as but one of the results of market-driven science research. Take a listen and see if you find the argument compelling. Click here .
  • Innovation and Unintended Consequences

    Historian Edward Tenner wants us to take a positive view of unintended consequences. In a speech just made available by TedTalks , Tenner runs through all the remarkable innovation that came about somewhat accidentally. We've made a point here at The Watch to note all the successful companies that were born during economic downturns, and Tenner makes sure to highlight some of these examples as well. But this is a much longer view of important shifts in culture, development, and business.
  • Innovation and Making the Case for Big Ideas

    So maybe IBM, Google, Apple, and other big dogs get the bulk of the patents. Small firms can also drive innovation. G. Michael Maddock and Raphael Louis Vitón of Maddock Douglas say the key is not the size of the firm, but the size of the idea. And, writing at Businessweek , they argue not to waste anybody's time with small ideas: So when it comes to industry-changing ideas, the size of the ideas and the resolve behind them really do matter. We believe leaders should talk about big ideas. Big ideas get your company attention. They demand a higher price. They increase loyalty. They demonstrate that you know how to listen, invent, and take risks. Great leaders know how to recognize, promote, and successfully launch big ideas. Small ideas do just the opposite. With all your big talk, you may get someone to look at them, but in the end they will cost you your reputation, your team’s loyalty, and your customer. Far too often, leaders make the mistake of talking about big ideas that are really embarrassingly small. Read Innovation: Size Matters here .
  • John Abele on Managing Collaboration

    Successful companies depend on successful collaboration: employees working together whether they like each other or not. If the collaboration is not working, don't blame the employees. Blame the leader. So says John Abele , cofounder of Boston Scientific . Abele writes about managing successful collaborative efforts in the Harvard Business Review article, Bringing Minds Together . Abele discusses managing collaboration in this HBR IdeaCast interview:
  • Steve Jobs: 'Stay hungry. Stay foolish.'

    We went on the hunt for some of Steve Jobs 's top public moments, and we have selected two. First, this grainy old video from when he introduced the Macintosh personal computer to the world: Steve Jobs demos Apple Macintosh, 1984 from Vincent on Vimeo . And this is Jobs's speech at Stanford University's 2005 commencement. The message here is very personal. Jobs was speaking one year after he was diagnosed with pancreatic cancer. His closing line to the graduates: "stay hungry, stay foolish":
  • David Pogue: Three Reasons Apple Might Still be Apple Without Steve Jobs, One Reason it Might Not

    Steve Jobs stepped down as CEO of Apple yesterday . From his resignation letter : I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come. I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee. While Jobs had been on medical leave, and it seems clear that his ongoing battle with pancreatic cancer and the effects of that battle (this was Jobs's third medical leave from Apple, according to the New York Times), is not going well. So our first thoughts are focused on the health of one of the most innovative leaders in American business. As for the future of Apple, the company now has a significant challenge: remaining an industry leader without its leading visionary. David Pogue presents three reasons to expect Apple will continue to be Apple: The good news: First, Mr. Jobs isn’t leaving Apple. He’ll remain as chairman of the Apple board. Tim Cook, who’s been Apple’s director of operations for seven years, will take over as chief executive. (He’s been acting C.E.O. since January.) You can bet that as chairman, Mr. Jobs will still be the godfather. He’ll still be pulling plenty of strings, feeding his vision to his carefully built team, and weighing in on the company’s compass headings. Second, the tech world doesn’t turn on a dime. Apple’s pipeline is already stuffed with at least a couple of years’ worth of Jobs-directed products. In the short term, you won’t see any difference in Apple’s output of cool, popular inventions. Third, even if Mr. Jobs isn’t sitting at every design meeting, ripping apart or heartily embracing each idea presented to him, his tastes, methods and philosophies are deeply entrenched in the company’s blood. But Pogue says that these reasons may not trump the potential damaging affect of Apple losing Jobs's "personality." Read Steve Jobs Reshaped Industries here .
  • Planet Money: Costs of the 'Patent War'

    Alex Blumberg and his colleagues at Planet Money have been spending a lot of time lately looking into patents for software and Internet tools. First, they went to East Texas, one of the frontlines in what they say is a "war waging right now," that involves developers, tech companies, and so-called "patent trolls." They aired their findings on This American Life : This week the Planet Money team asked the larger question that these patent battles brings to mind: what is the intended role of patents and is that role being undermined by the behavior of people in the tech industry? Or, we should say, the Planet Money team asks and answers that question. Take a listen: For more on Planet Money's ongoing coverage of patents in high tech click here .
  • Thinking Like an Innovator

    Jeff Dyer , professor at Brigham Young University's Marriott School of Business , studies "disruptive innovators." And he says other business leaders can learn a lot by studying the ways in which these innovators come up with disruptive ideas through experimentation. In this Harvard Business Review IdeaCast , Dyer discusses techniques to introduce more innovative thinking in the workplace:
  • How the Big Get Bigger: Innovation at P&G

    P&G has some ambitious growth goals. As Scott Anthony , Managing Director of Innosight Asia-Pacific , points out, P&G aims to grow about $4 billion in revenue. Growth of that size is hardly possible without constant innovation. And Anthony argues that P&G is one of the most innovative companies in the world. But, as Anthony points out in an article at Harvard Business Review, P&G's hit rate with new innovations was not very good. So they made some changes. They are developing a "new growth lab," and it has already started to pay dividends. Anthony discussed P&G's new approach in this brief interview:
  • Federal Regulations and the Need for Better Cost/Benefit Analysis

    Michael Greenstone finds the debate between proponents and opponents of government regulation "tired." Greenstone, director of the Hamilton Project at The Brookings Institution . Greenstone argues that regulation has both costs and benefits. What we need to do, he says, is to come up with better ways of measuring which regulations work . And by work , he means simply that the benefits of the regulations outweighs the costs those regulations place on business. He discusses the need to better evaluate potential regulations, across federal agencies, in this @Brookings interview:
  • Helsinki Tops Monocle's 2011 Most Liveable City Index

    We woke up this morning to find out that Monocle has named Helsinki the winning city in its most liveable city index for 2011 . Being in Helsinki at the moment, this made perfect sense. As Finland spent the latter half of the 21st Century working to make the transition from a rural nation with an economy driven by timber and manufacturing to a more dynamic economy that placed value in innovation and design, Helsinki grew to become an important urban center. Today, Helsinki is a vibrant, highly efficient city. And Monocle's index ranking reflects the cultural wealth of the place, but it is also a result of the growth of small businesses, many that fall within the city's core design-driven creative economy. In an interview with Monocle, Helsinki's mayor, Jussi Pajunen , talks about how his country is building and growing at a time when others are cutting back. Take a listen, here . Also, take a look at Monocle's short video about Helsinki and why it was picked as the most liveable city. Click here .
  • IBM at 100: Staying Power Based on Ability to Change

    IBM is marking the 100th anniversary of its incorporation. And far from being a relic, IBM seems to have caught its stride once again in the last decades. Take a look at the company's market capitalisation compared to its young competitors in the tech sector (from The Economist ): It is a remarkable feat for any company, but especially so for a high tech company. IBM operates in a field where the basic foundation of business products changes rapidly. But, as The Economist details, the company has survived by doing what so many companies across a variety of fields fail to do. Its business was based on punch cards, but it did not allow itself to become a dinosaur when punch cards started to fade in favor of the early calculating machines. As leadership of the company passed from Thomas Watson, Sr., to Thomas Watson, Jr., IBM became the global leader in computing. From The Economist: Under the younger Watson, IBM became by far the world’s biggest computer-maker. He did the trick by betting the company on the System/360, IBM’s first family of mainframe computers, which took years and $5 billion (in 1960s dollars)—more than the Manhattan Project that led to the atomic bomb—to develop. Launched in 1964, the System/360 became the first dominant computing platform, mainly because all the family’s machines, big or small, were “compatible”, meaning they could run the same software. By 1969 IBM’s market share had grown to 70%. It thus became the first IT company to be called an “evil empire” and aroused the ire of America’s antitrust authorities. The Reagan administration eventually dropped the case in 1982, asserting that it had been “without merit”. The second platform shift—from costly mainframes to “distributed” computing systems, including PCs—was a much closer shave. Even while the antitrust case was dragging on, technological progress had begun to undermine IBM’s near-monopoly and, more importantly, its business model of renting its expensive machines to customers. Since this was highly profitable, IBM was very slow to deliver cheaper and distributed computing systems, made possible by new processors. When these systems took off in the early 1990s, IBM’s business collapsed. Mainframe revenues dropped from $13 billion in 1990 to $7 billion in 1993 and losses of $16 billion piled up. “Only a handful of people understand how precariously close IBM came to running out of cash,” wrote Lou Gerstner, who was brought in to turn the company around, in “Who Says Elephants Can’t Dance?”, his book about the revival. He fired 35,000 employees to cut costs. The lesson of the story appears to be that companies that develop a strong sense of what the company is rather than being simply a vehicle for a certain product or certain type of product stands a better chance at long term success. Read IBM: 1100100 and counting here .
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