Posts tagged ‘Tom friedman’

Curing Our Ills with Innovation

Fareed Zakaria thoughts have blanketed both traditional and internet media outlets, spanning everything from Newsweek to Time, and the New York Times to CNN. With an undergraduate diploma from Yale and his PhD from Harvard, Dr. Zakaria has built up quite a following, especially when it comes to foreign affairs.

In his latest Time magazine article, Can America Keep Pace?, Zakaria addresses the role of innovation in the U.S., “Innovation is as American as apple pie.” The innovation lead the U.S. maintains over the rest of the world will not evaporate over night because this cultural instinct is bred into our DNA – innovation is not something you one can learn directly from a textbook, Wikipedia, or Google (GOOG). With that said, the innovation gap is narrowing between developed and developing countries. New York Times columnist Tom Friedman captured this sentiment when he stated the following:

“French voters are trying to preserve a 35-hour work week in a world where Indian engineers are ready to work a 35-hour day.”

 

The fungibility of labor has pressured industries by transferring jobs abroad to much lower-cost regions like China and India, and that trend is only expanding further into countries with even lower labor cost advantages. Zakaria agrees:

“America’s future growth will have to come from new industries that create new products and processes. Older industries are under tremendous pressure.”

 

The good news is the United States maintains a significant lead in certain industries. For instance, we Yankees have a tremendous lead in fields such as biotechnology, entertainment, internet technologies, and consumer electronics.

The poster child for innovation is Apple Inc. (AAPL), which arose from the ashes of death ten years ago with its then ground-breaking new product, the iPod. Since then, Apple has introduced many innovative products and upgrades as a result of its research and development efforts, including the recently launched iPad.

The Education Engine

Where we are falling short is in education, which is the foundation to innovation. In a country with a high school system that Microsoft Corp.’s (MSFT) founder Bill Gates calls “obsolete,” society is left with one-third of the students not graduating and nearly half of the remaining graduates unprepared for college. In this instant gratification society we live in, the long-term critical education issue has been pushed to the backburner. Other emerging countries like China and India are churning out more college graduates by the millions, and also dominating us in the key strategic count of engineering degrees.

Government’s Role

With the massive debt and deficits our country currently faces, an ongoing debate about the size and role of government persists. Zakaria makes the case that government must place a significant role when it comes to innovation. Unfortunately, the U.S. wastes billions on pork-barrel projects and suboptimal subsidies while dilly-dallying in political gridlock over critical investments in education, infrastructure spending, basic research, and energy policies. In the meantime, our fellow competing countries are catching up to us, and in certain cases passing us (e.g., alternative energy investments – see Electric Profits).

Zakaria makes this point on the subject:

“The fastest-growing economies are all busy using government policy to establish commanding leads in one industry after another. Google’s Eric Schmidt points out that ‘the fact of the matter is, other countries are putting a lot more money into nurturing new industries than we are, and we are not going to win unless we do something like what they’re doing.’”

 

As a matter of fact, an ITIF (Information Technology & Innovation Foundation) study measuring innovation improvement from 1999 to 2009, as it related to government funding for basic research, education and corporate-tax policies, ranked the U.S. dead last out of 40 countries.

Not All is Lost – Pie Slice Maintained

Source: Carpe Diem

Although the outlook may sounds bleak, not all is lost. In a recent Wall Street Journal interview with Bob Doll Chief Equity Strategist at the world’s largest money management company (BlackRock has $3.6 trillion in assets under management),  he makes the case that the U.S. remains the leading source of technological innovation and home to the greatest universities and the most creative businesses in the world. He sees this trend persisting in part because of our country’s relative demographic advantages:

“Over the next 20 years, the U.S. work force is going to grow by 11%, Europe’s going to fall by five, and Japan’s going to fall by 17. This alone tells me the U.S. has a huge advantage over Europe and a bigger one over Japan for growth.”

 

So while emerging markets, like those in Asia, continue to gain a larger slice of the global GDP pie, Mark Perry at Carpe Diem shows how the U.S has maintained its proportional slice of a growing global economic pie, over the last four decades.

Growth is driven by innovation, and innovation is driven by education. If America wants to maintain its greatness, the focus needs to be placed on innovation-led growth. The world is moving at warp speed, and our neighbors are moving swiftly, whether we come along for the ride or not. The current, sour conversations regarding deficits, debt ceilings, entitlements, wars, and unemployment are all essential discussions, but more importantly, if these debates can be refocused on accelerating innovation, the country will be well on its way to curing its ills.

See also Our Nation’s Keys to Success

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

www.Sidoxia.com

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, GOOG, and AAPL, but at the time of publishing SCM had no direct position in MSFT, or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

June 5, 2011 at 8:19 pm 2 comments

Friedman Looks to Flatten Problems in Flat World

Perhaps Friedman could use Gallagher's "Sledge-O-Matic?"

Thomas Friedman, author of recent book Hot, Flat, and Crowded and New York Times columnist, combines a multi-discipline framework in analyzing some of the most complex issues facing our country, from both an economic and political perspective. Friedman’s distinctive lens he uses to assimilate the world, coupled with his exceptional ability of breaking down and articulating these thorny challenges into bite-sized stories and analogies, makes him a one-of-a-kind journalist. Whether it’s explaining the history of war through McDonald’s hamburgers, or using the Virgin Guadalupe to explain the rise of China, Friedman brings highbrow issues down to the eye-level of most Americans.

In his seminal book, The World is Flat, Friedman explains how technology has flattened the global economy to a point where U.S. workers are fighting to keep their domestic tax preparation and software engineering jobs, as new emerging middle classes from developing countries, like China and India, steal work.

The Flat World

In boiling down the recent financial crisis, Friedman used Iceland to explain the “flattening” of the globe:

“Fifteen British police departments lost all their money in Icelandic online savings accounts. Like who knew? I knew the world was flat – I didn’t know it was that flat…that Iceland would become a hedge fund with glaciers.”

The left-leaning journalist hasn’t been afraid to bounce over to the “right” when it comes to foreign affairs and certain fiscally conservative issues. For example, he initially full-heartedly supported George W. Bush’s invasion of Iraq. And on global trade, he has a stronger appreciation of the economic benefits of free trade as compared to traditionally Democratic protectionist views.

Calling All Better Citizens

In a recent Charlie Rose interview, Friedman’s patience with our country’s citizenry has worn thin – he believes government leaders cannot be relied on to solve our problems.

When it comes to the massive deficits and foreign affair issues, Friedman comes to the conclusion we need to cut expenses or raise taxes. By creating a $1 per gallon gasoline tax, Friedman sees a “win-win-win-win” solution. Not only could the country wean itself off foreign oil addiction from authoritarian governments and create scores of new jobs with E.T. (Energy Technologies), the tax could also raise money to reduce our fiscal deficit, and pay for expanded healthcare coverage.

It’s fairly clear to me that government can’t show the leadership in cutting expenses.  Since cutting benefits for voters won’t get you re-elected, taxes most certainly will have to go up. Wishful thinking that a recovering economy will do the dirty, debt-cutting work is probably naïve.  If forced to pick a poison, the gas tax is Friedman’s choice.  I’m not so sure the energy lobby would feel the same?

Political gridlock has always been an obstacle for getting things done in Washington. Technology, scientific polling, 24/7 news cycles, and deep-pocketed lobbyists are only making it tougher for our country to deal with our difficult challenges. Regardless of whether Friedman’s gasoline tax is the silver bullet, I welcome the clear, passionate voice from somebody that understands the challenges of living in a flat world.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: Sidoxia Capital Management (SCM) owns certain exchange traded funds (BKF, FXI) and has a short position in MCD at the time this article was originally posted. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

November 30, 2009 at 2:00 am 3 comments

Green Loses to Greenback

Dollar

We are currently in a political environment that sees no gray, but rather only sharp contrasts in black and white. As it turns out, these three colors are not the winners or losers – the winner is the almighty “greenback” and the loser is the “green” movement. The so-called environmentally friendly Obama administration recently approved the Alberta Clipper project – a 1,000 mile pipeline being built by Endbridge Energy that is designed to carry 800,000 barrels of fuel from Canada to the U.S.

As our reliance on what New York Times journalist Tom Friedman calls the “petro dictators” has not gone away, the recent decision seems very rational in securing supplies from friendlier neighbors. However, environmental constituents like the Sierra Club feel differently:

“At a time when concern is growing about the national security threat posted by global warming, it doesn’t make sense to open our gates to one of the dirtiest fuels on earth.”
-Carl Pope (Executive Director of the Sierra Club)

 

As far as I’m concerned, we still import about 2/3 of our oil and until alternative energies become more cost effective, we have little choice but to explore a multitude of strategic supply agreements. Canada is a neighbor and ally, therefore the U.S. should not walk away from any similar future agreement that will bring a stable and reliable source of supply. The scarcity of the critical resource and other commodities is evident by strategic deals and acquisitions being made by China and its government (See previous Investing Caffeine article, “The China Vacuum, Sucking Up Assets”).

 As economic hungry emerging markets seek expansionary policies, I expect to see even more of these international types of deals.

The oil-sands region in the Athabasca region (about the size of Florida) of Alberta holds great promise. If you believe famous oil investor/speculator T. Boone Pickens and other pundits, the oil-sands region holds the equivalent amount of reserves as world supply leader Saudi Arabia – about 250 billion barrels.

 Oil-Sands

I concur with recent comments Financial Times article that says the Endbridge Energy deal meets a number of U.S. strategic interests, including:

“Increasing the diversity of oil supplies for the U.S., amid political tension in many major oil-producing regions; shortening the transportation path for crude oil supplies; and increasing crude oil supplies from a major non-Organization of Petroleum Exporting Countries producer.”

 

I am not a believer in damaging our environment for the pure sake of profits, however in this competitive global economy I think we need to seek an aggressive dual-source supply of energy (alternative energy AND traditional petroleum/coal products). The fact of the matter is that we have been pursuing solar, wind, nuclear, and other alternative energy resources for decades with very limited success. More financial resources and subsidies must be thrown at these alternative resource possibilities, while we simultaneously seek strategic supplies like this Canadian oil-sands deal.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: Sidoxia Capital Management and its clients have direct investment exposure in companies investing in Canadian oil-sand projects (SU) at the time the article was published. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

September 2, 2009 at 4:00 am Leave a comment


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