Global Economic Watch

Making the World More Efficient, One Office at a Time

02-09-2010 4:35 PM with no comments

The Planet Money folks talked to an efficiency expert today.  Normally Matt LeBlanc, who bills himself as a "lean expert," helps companies figure out how to trim wasteful costs.  He gives David Kestenbaum and Caitlin Kenney some examples of how his job works, and explains just how much time can be saved by making things more efficient.  And it turns out it is very hard for LeBlanc to turn off his efficiency-seeking radar.   Take a listen by clicking here. 

Posted by Graham Griffith

Chris Anderson on the Rising Power of Small Manufacturers

02-09-2010 12:07 PM with no comments

DIY--Do It Yourself--long the domain of the craft and hobby world, is now breaking through to be a meaningful part of the larger business world.  Wired Magazine Editor Chris Anderson, who marked important shifts in the new economy in his books The Long Tail and Free, has an extensive cover story in the January edition of his magazine titled In the Next Industrial Revolution, Atoms Are the New Bits. In it, he profiles some interesting new businesses that are able to bring out bold new products without having to build much significant infrastructure (like factories).  Instead, they utilize digital tools and even some crowd sourcing to design products and efficiently connect with places that can build parts.  As a result, according to Anderson, entrepreneurs and small businesses now have access to the same manufacturing capacity as do the largest corporations in the world.

Anderson uses his own company, DIY Drones, as an example of how manufacturing can be "democratized" to allow the little guys to succeed.  He explains how it works in this video:

A model like this may just help US manufacturing matter in the coming years.  Anderson writes:

Although it’s shrinking, America’s manufacturing economy is still the world’s largest. But China’s growing production sector is predicted to take the number one spot in 2015, according to IHS Global Insight, an economic-forecasting firm. Not all US manufacturing is shrinking, however — just the large part. A Pease Group survey of small manufacturers (less than $25 million in annual sales) shows that most expect to grow this year, many by double digits. Indeed, analysts expect almost all new manufacturing jobs in the US will come from small companies. Ones just like ours.

How big can these small enterprises get? Most of the companies I’ve described sell thousands of units — 10,000 is considered a breakout success. But one that has graduated to the big leagues is Aliph, which makes the Jawbone noise-canceling wireless headsets. Aliph was founded in 1999 by two Stanford graduates, Alex Asseily and Hosain Rahman, and it now sells millions of headsets each year. But it has no factories. It outsources all of its production. And though more than a thousand people help to create Jawbone headsets, Aliph has just over 80 employees. Everyone else works for its production partners. It’s the ultimate virtual manufacturing company: Aliph makes bits and its partners make atoms, and together they can take on Sony.

Read the full article here.

Posted by Graham Griffith

Dutch Small Business Motoring Thanks to Micro-lending

02-09-2010 9:27 AM with no comments

Radio Netherlands has an interesting series on small businesses around the globe getting a boost through micro-lending.  The series was set up to mark the five year anniversary of "The Year of Microcredit," and it profiles Moroccan beekeepers, a small textile business in Ghana, and this interesting moped rental business in the Radio Netherlands' home country:

Follow the whole series here.

Posted by Graham Griffith

Daniel Gross Finds Paulson, Investment Bankers Guilty of Looking Forward Without Looking Back

02-09-2010 8:58 AM with no comments

Former Treasury Secretary Henry Paulson continues to make the rounds with his new book, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System.  Here he is telling Charlie Rose about how difficult it was for him emotionally when he knew that Lehman Brothers was going to collapse in September, 2008:

Paulson is being candid and open about what he went through, as he does in much of the book.  But Daniel Gross, in his review of the book at Slate, finds that Paulson comes up short when it comes to analyzing the responsibility some investment bankers had for the crisis based on their decisions in the early 2000s. One of those bankers was , of course, the CEO of Goldman Sachs--Henry Paulson:

As the narrative lurches from crisis to crisis—TARP, AIG, GM—the reader, and Bush, are continually presented with bailout moves as unavoidable faits accomplis. Bush was "visibly shocked" when Paulson told him in November 2008 that Citigroup was in big trouble. "I thought the programs we put in place had stabilized the banks," the president said.
The main problem with this fast-paced book was the main problem with Paulson's tenure—a surprising inability to see the big picture. And as tough as he is on congressional Republicans, Paulson lets some people off much too easy. If many smart, highly regarded people had simply carried out their responsibilities with a bit more diligence—Bernanke, EC Chairman Christopher Cox, Wall Street bankers—much of the catastrophe could have been avoided. "As first responders to an unprecedented crisis that threatened the destruction of the modern financial system, we had little choice," Paulson writes. But the first responders assembled the bonfire and helped light it. Paulson was among the Wall Street chief executives who, in 2004, lobbied the SEC to allow them to use much larger amounts of debt—a move that set the stage for the debacles of Bear Stearns and Lehman.

Read Inside Job: What Henry Paulson's new memoir misses about his own responsibility for the global meltdown, here.

Posted by Graham Griffith

Bob Garfield Rates the Super Bowl Commercials

02-08-2010 9:38 AM with no comments

"If we can't depend on Anheuser-Busch at the Super Bowl, what can we depend on?" So asks Advertising Age's Ad critic Bob Garfield.  Garfield was underwhelmed by the ads in yesterday's big game.   In lamenting the quality of ads for this year's Super Bowl, he says there was a lot of "meh."  Not a lot of bad, not much good.  Just a lot of so-so.  He says Anheuser-Busch's best ad was its simplest.  He gave three stars for a Budwesier Select 55 15 second spot:

No horses, no babies, no jokes. Just 15 seconds of interesting news: "The lightest beer in the world." The brewer's best spot of the game.

The only ads to get more stars were from Audi, Chrysler, and Qualcomm (for its new FloTV).  All garnered 3.5 stars from Garfield.  You can read his full ratings by clicking here.  And Garfield also breaks down the ads in a video over at AdAge.  Click here to watch.

Posted by Graham Griffith

Simon Johnson: 'Europe is again entering a serious economic crisis'

02-08-2010 8:13 AM with no comments

At a meeting of G7 leaders this weekend, European ministers promised to keep pressure on Greece's government and make sure that country's debt problems won't spread and create larger financial problems around the continent.  Simon Johnson, for one, is not calmed, and thinks that European leaders are "not being careful," and that the stronger eurozone nations--France, Germany--need to do more to fight off serious financial crisis.  Here's Johnson writing at The Baseline Scenario:

The IMF cannot help in any meaningful way.  And the stronger EU countries are not willing to help – in part because they want to be tough, but also because they do not have effective mechanisms for providing assistance-with-strings.  Unconditional bailouts are simple – just send a check.  Structuring a rescue package that will garner support among the German electorate – whose current and future taxes will be on the line – is considerably more complicated.

The financial markets know all this and last week sharpened their swords.  As we move into this week, expect more selling pressure across a wide range of European assets. 

As this pressure mounts, we’ll see cracks appear also in the private sector.  Significant banks and large hedge funds have been selling insurance against default by European sovereigns.  As countries lose creditworthiness – and, under sufficient pressure, very few government credit ratings will hold up – these financial institutions will need to come up with cash to post increasing amounts of collateral against their derivative obligations (yes, the same credit default swaps that triggered the collapse last time).

Read Europe Risks Another Global Depression here.

Posted by Graham Griffith

Stiglitz on Global Regulation of Financial Markets

02-08-2010 7:58 AM with no comments

Joseph Stiglitz seems to think that pursuit of a global regulation of financial markets is a bit of a sham.  At the World Economic Forum in Davos, he argued that nations need to establish their own new regulatory structures:

Stiglitz was speaking as part of a panel discussion on the "consequences and lessons" from the financial crisis.  Watch the full discussion at Fora.tv, here.  

Posted by Graham Griffith

NewsHour Reports on Stand-up Economists

02-05-2010 12:40 PM with no comments

It's never a bad idea to share some laughs heading into a weekend.  Especially when the subject is economics.  So here's a NewsHour report on stand-up economists.  We're not sure which is funnier: the jokes in this piece, or the NewsHour's insistence at sticking to its formula for stories, and in turn coming across straighter than the squarest of straight men.  (Is it possible that journalists have a much harder time with humor than academics?).

(Hat tip to Greg Mankiw, who also introduced us to Yoram Bauman a year ago.)

Posted by Graham Griffith

Menzie Chinn Takes a Macro Look at Doubling Exports

02-05-2010 9:13 AM with no comments

Commerce Secretary Gary Locke introduced the National Export Initiative yesterday.  The new plan calls for increasing the amount of export financing available to small and mid-sized businesses to $6 billion in the next year--up from $4 billion.  The goal is to double exports over the next five years.  Sounds like quite a task, but as Menzie Chinn points out, it is not without historical precedent.  And he shows us this graph at Econbrowser:

Chinn shows us that nominal exports have doubled twice in the last forty years, and almost doubled twice more (1990 and 2008).  He writes that the key factors, "from a macro perspective," are "(i) the price level of exports, (ii) the quantity of exports."  Chinn analyzes these factors further in his Econbrowser post.  Read it here.  

Posted by Graham Griffith

Today's 'Freelance Economy'

02-04-2010 2:35 PM with no comments

Jobless claims keep going up, according to the latest reports from the Labor Department.  And Peter Cappelli, director of the Center for Human Resources at Wharton, says workers may need to accept that the best job in today's economy may be a temporary job.  And while these types of jobs tend to cost employers more than hiring people full time (as much as 25-30% more, Cappelli estimates), the uncertainty of the business climate today means employers take on less risk with temporary hires.  Here's Cappelli speaking about how the recession has changed the job market (from Knowledge@Wharton):

Posted by Graham Griffith

Harvard Business Review: What Really Motivates Workers

02-04-2010 9:38 AM with no comments

The latest edition of the Harvard Business Review has a list of "breakthrough ideas."  The list is the result of a partnership with the World Economic Forum.  And it gets off to a strong start.  The very first idea (hat tip: NYT Economics Editor Catherine Rampell) debunks some conventional wisdom that managers have long held to be true. Most managers surveyed by a Harvard Business/World Economic Forum believed that workers are motivated by "recognition for good work."  And while it appears that recognition is never a bad thing, what really motivates workers is doing good work:

Having just completed a multiyear study tracking the day-to-day activities, emotions, and motivation levels of hundreds of knowledge workers in a wide variety of settings, we now know what the top motivator of performance is—and, amazingly, it’s the factor those survey participants ranked dead last. It’sprogress. On days when workers have the sense they’re making headway in their jobs, or when they receive support that helps them overcome obstacles, their emotions are most positive and their drive to succeed is at its peak. On days when they feel they are spinning their wheels or encountering roadblocks to meaningful accomplishment, their moods and motivation are lowest.

This was apparent in vivid detail in the diaries we asked these knowledge workers to e-mail us every day. In one end-of-day entry, an information systems professional rejoiced that she’d finally figured out why something hadn’t been working correctly. “I felt relieved and happy because this was a minor milestone for me,” she wrote, adding that her efforts to enhance a specific version of software were now “90% complete.” A close analysis of nearly 12,000 diary entries, together with the writers’ daily ratings of their motivation and emotions, shows that making progress in one’s work—even incremental progress—is more frequently associated with positive emotions and high motivation than any other workday event. For example, it was noted on 76% of people’s best days, when their reported moods were most buoyant, and on only 25% of their worst. 

Read the full HBR List of Breakthrough Ideas here.  

Posted by Graham Griffith

Robert Reich: Beware Bubbles in 2010

02-04-2010 8:53 AM with no comments

Robert Reich, professor of economics at the University of California, Berkeley and former Secretary of Labor, is not optimistic about the pace of recovery.  For one, he expects the unemployment rate to remain in double figures for the next year.  But he's also concerned that we have not learned our lesson about the danger of bubbles.  He spoke about the state of the US economy at large, and of Califronia's economic challeneges specifically, as the Commonwealth Club.  Here's an excerpt in which he talks about commodities and China:

Watch the full speech here.

Posted by Graham Griffith

Seth Godin: Hunters and Farmers

02-03-2010 1:24 PM with no comments

Seth Godin believes there are hunters and there are farmers in every group of people--even if they aren't exactly hunters and farmers.  And, he writes, we would all be well served to recognize that treating both groups the same is a mistake--especially in business:

Marketers confuse the two groups. Are you selling a product that helps farmers... and hoping that hunters will buy it? How do you expect that people will discover your product, or believe that it will help them? The woman who reads each issue of Vogue, hurrying through the pages then clicking over to Zappos to overnight order the latest styles--she's hunting. Contrast this to the CTO who spends six months issuing RFPs to buy a PBX that was last updated three years ago... she's farming.

Both groups are worthy, both groups are profitable. But each group is very different from the other, and I think we need to consider teaching, hiring and marketing to these groups in completely different ways. I'm not sure if there's a genetic component or if this is merely a convenient grouping of people's personas. All I know is that it often explains a lot about behavior (including mine).

Read Hunters and Farmers here.

Posted by Graham Griffith

McDonald's Marks Twenty Years in Russia, and a Turn Toward Local, Private Enterprise

02-03-2010 9:05 AM with no comments

McDonald's first entered the Russian market in 1990.  Now, the company is marking two decades of success, and, as Andrew Kramer writes in the New York Times, "celebrat[ing] a different milestone earlier this year by outsourcing the last product — hamburger buns — it had made at a proprietary factory outside Moscow called McComplex."

Today, private businesses in Russia supply 80 percent of the ingredients in a McDonald’s, a reversal from the ratio when it opened in 1990 and 80 percent of ingredients were imported.

Starting with pickles, which now come from the farm of Anatoly M. Revyakin, every item has been spun off from the nine production lines at McComplex, spawning dozens of new businesses, some now among the most successful in the Russian food catering industry.

Buns and pies are still made at the McComplex site, but by an independent contractor; the building is for sale.

“Our goal is to put the business in the hands of independent suppliers,” Jim Skinner, the global chief executive of McDonald’s, said in an interview.

Read Russia’s Evolution, Seen Through Golden Arches here.  

Posted by Graham Griffith

Pres. Obama on Small Business and Job Creation

02-03-2010 8:42 AM with no comments

President Obama went public with his administration's goal of jump-starting job creation through thawing the credit freeze that many small businesses have been struggling with over the last two years.  In a town hall meeting in Nashua, NH, Obama pushed the idea that small businesses are responsible for creating "roughly 65% of all new jobs over the past decade and a half..."

...So we need to make it easier for them to open their doors, to expand their operations, to hire more workers.  That's why I've already proposed a new tax credit for more than 1 million small businesses that hire new workers or raise wages -- and a tax incentive for all businesses, large and small, to invest in new plants and equipment.  And while we're at it, we should eliminate all capital gains taxes on small business investment, so these folks can get the capital they need to grow and create jobs.  And when they start making a profit, they can put those profits back into the business.

Now, that's particularly critical right now, because bank lending standards have tightened since the financial crisis and many small businesses are still struggling to get loans.

And that's why today, I'm announcing a proposal to take $30 billion of the money that was repaid by Wall Street banks, now that they're back on their feet, take that $30 billion and use it to create a new Small Business Lending Fund that will provide capital for community banks on Main Street...

You can read an outline of the small business plan here.  And watch yesterday's town hall meeting below:

Posted by Graham Griffith