Words, Wit and Wisdom

Bleeding Edge Technology

2011-11-16T13:15:00.001-08:00

Tempted as I am to join the masses that have forked over their hard earned money to acquire the latest tablets or smart-phones, I think I will stay on the sidelines for the upcoming holidays. I’ve learned enough lessons from past experiences not to fall prey again to the never-ending quest to be “cool” or to appear so.

The increasingly shorter cycle of upgrades means that the cool factor lasts only so long and then you are left with yesterday’s hip - a ‘faded rose from days gone by’. It is not the software upgrades that bothers me; it is the obligatory hardware ‘upgrade’ or, to be more exact, ‘wholesale replacement’ that is most worrisome. What we pay for the shiny and new gadgets upfront belies the fact that there is a huge hidden cost when obsolescence is a mere 12 months away.

Don’t get me wrong, I am not a Luddite. To the contrary, I’m quite in tune and at ease with all things digital. I’m not anti consumption either – if you don’t have a cell phone and you need one, go and buy one that you can afford but make sure it will serve your needs (not your vanity) for a good three years at the minimum. And don’t forget to look for one that comes with an easily replaceable battery. The “smarter” they are, the more you’ll drain down the charge, and the more often you have to recharge, the sooner the battery will exhaust its useful life.

Bleeding edge technology carries with it a huge social cost. To keep us on the upgrade path, companies that design the cool gadgets have to increasingly move more and more of their production to low cost countries with weak labor and environmental regulations where more can be extracted at a lower cost. They know that if each new generation of their product were to cost more, the rate of adoption of the new gadgets would be much lower. With a mobile phone market nearing saturation (i.e. nearly everyone who needs a cell phone has one), the phenomenal number of iPhone 4S sold on the first day it was released was heavily influenced by the unchanged price and the continuing subsidies by the carriers. As consumers, we all like the lower prices or more features for the same old price and what we don’t see, such as the loss of blue collar jobs, we can easily ignore. We want decent paying jobs but we also want our toys cheap.

It is easy to turn and point a finger at China for our economic woes but the social ills resulting from our demand for bleeding edge technology do not just stop at our doors. The lower costs extracted by the manufacturers (or their masters here in the US) has forced suppliers in China to keep wages low and they can only do that by making their workers turn in longer hours and demand more output for the same pay. It took multiple suicide attempts at Foxconn in Shenzhen, China, ending with twelve deaths to bring the plight of those Chinese workers to the world’s attention. Yet, if the Chinese were to refuse to continue production under such poor conditions, the manufacturers could easily turn to another country where labor is still plentiful and life is cheap.

The Earth’s population passed the 7 billion figure very recently and, abstract as that number may seem, it points us to the fact that we are ever closer to the possibility of exhausting the natural resources we’ve been endowed with. Apart from the fossil fuels that are used to generate power for the production plants, bleeding edge technology gadgets often require the use of ‘rare earth’ minerals to produce. The mining, refining and recycling of rare earth minerals have serious environmental consequences if not properly managed – toxic acids are required during the refining process and radioactive tailings are the by-products of the processing of certain rare earth ores.

As strange as it may sound, each new iteration of a bleeding edge technology product is proof that the prior model was imperfect and incomplete. Our readiness to gobble them up despite the short lived sense of satisfaction demonstrates a new form of addiction – a need for speed, a need for yet another toy, another app, another cheap thrill, another bragging right. We don’t buy a new TV or a new home stereo every year so why do we need to buy a new smart-phone every year?

We are not more productive as a result of our new toys but we have clearly become more self-absorbed and more remote from one another. Despite the prevalence of more and cheaper means of communicating with one another, we communicate less. We’ve lost the art of being social and connecting with others. We’ve turned to social media as a cheap substitute to meeting with our friends in person or spending the time necessary to get to know another person’s point of view. We plaster our one sentence views on Facebook and we don’t care if others might disagree – we can always delete unfavorable comments. We no longer seek to honestly discuss or debate the issues we face with the objective of finding common ground solutions. We’re given to sound bites and we don’t take the time to fact check claims and wild accusations before we mindlessly pass it on to our friends.

Unfortunately, there are no magic bullets to put an end to the problems that have been slowly building up through decades of a consumption focused economic model.

The introduction of the concept of a Carbon Tax (which is different from Cap and Trade) is possibly a step in the right direction. At a minimum, it will help make the true cost of any product more evident. However, adoption and implementation of such a concept will take more than a herculean effort to bring about.

Some countries have consumption based tax systems known as either VAT [Value Added Tax] or GST [Goods and Services Tax] which are or can be made into progressive tax systems to help account for and offset the hidden social costs of products and level the playing field. Progressive taxes work if it is put to good use. Singapore is an example that comes to mind. It levies multiple layers and forms of taxes on car ownership (see insert) but that has allowed the country to put into place one of the best road network and public transportation systems in the world.

It is great to have the most up-to-date technology but we must not let ourselves be seduced by it and let it turn into an addiction that will bleed away our future or, more accurately put, our children’s future. It is time to press the pause button on upgrades and reflect on the destructive side of our consumption behavior and our addictions.

Dare to Dream Again

2011-07-13T13:43:00.001-07:00

Like millions of Americans, I sat in front of my TV and watched transfixed as NASA’s space shuttle Atlantis lifted off from Cape Canaveral, FL. on its final mission on July 9, 2011.

In the 30 years since the shuttle program began, the frequency with which NASA has been sending shuttles into space has, not surprisingly, dulled the sense of expectation and excitement around each take-off. Success, after all, when repeated often enough becomes the norm.

The success of NASA’s shuttle missions is probably its biggest thorn-in-the-side as well. Space is no longer as big a mystery as it once was. We’ve landed man on the moon multiple times and we’ve sent unmanned space-crafts to Mars and beyond. We’ve captured images of a billion stars and celestial bodies millions of light years away. We’ve learned enough to demote Pluto and reclassified it as a dwarf-planet, smaller than Earth’s moon. As a consequence of the regularity of our successes and discoveries, we have lost the sense of wonderment and the desire to conquer new boundaries in space. The fantasies of Star Trek like space voyagers and adventures no longer speaks to new generation in the same way as it did to ours. Space adventures, like old playthings and story books, will fade into the past.

Over time, our quest to win the space race (with the Russians) evolved into more than just putting a man into space or landing on the moon. The space program gave our mathematicians, scientist and researchers purpose and opportunity to test new theories, new designs, new materials, and new medical research, and as a result, it allowed America to develop technologies that have given it the leadership position in science and engineering.

No other nation that has sent a man into space has launched a reusable spacecraft as beautifully designed and as versatile as NASA’s space shuttles, and, given the economic uncertainties around the globe, it is quite unlikely that any nation will in any time soon. Sadly, with the US national debt about to hit the $14.29 trillion debt ceiling by August 2, 2011, it is also unlikely that we will come up with a replacement to the shuttle craft anytime soon either. Our political leaders can’t even agree on investing in infrastructures on the ground so it is hard to imagine them getting their minds around something as abstract as space.

When we are told on a daily basis that social programs that have been put into place to benefit the elderly or the poor have to be cut, and raising taxes are out of the question, how can we imagine our political leaders finding the funding to save the space program?

If there is no space program, where will our next generation of new, cutting-edge technologies evolve from? What will happen to America’s leadership in the field of science and technology?

People around the globe send their children to study in US schools in the hope that they will be able to gain some of that scientific knowledge and know-how. They want their kids to be immersed in culture of diversity in America and to soak in the intangibles that make America great – the ability to think outside the box, to come up with unconventional solutions, to push the boundaries of what is possible, and to find success out of failures. More than just the educational credentials, they want their kids to acquire the American daring and belief – the relentless pursuit of faster, higher and better.

The American sense of national pride and shared sacrifice once propelled the nation forward at break-neck speeds but it is quickly being overtaken by a number of developing Asian countries. It is not surprising that they are the ones currently with a strong sense of national pride. With determination, investment and sacrifice, they have put into place superfast trains, ultra-modern airports, and broadband Internet capabilities that far exceeds what we have in the US.

America’s lead position in science and technological advances will continue to ebb unless we dare to dream big again and the American sense of individuality is matched by a sense of unity and strength. Our desire to do well individually should not and must not diminish our sense of need for doing well as a nation, a collection of people with a common purpose.

Great leaders lead the way by setting goals and by being able to inspire the nation into imagining the future and investing in that future. America’s leaders cannot afford to be short-sighted, focusing only on the near term. America’s leaders must dare to dream again. They must be bold enough to imagine what future looks like and they must be able to explain the investment and sacrifice needed for the nation to arrive at that future.

The Best Thing A Teacher Ever Taught Me

2011-05-13T11:47:00.001-07:00

Recently, one of my sisters forwarded me an email with an interesting story about a dinner conversation between a CEO and a teacher. The CEO, trying to make his point that the problem with education is that students are taught by people whose highest aspiration is to end up with such lowly paid jobs, turned to the teacher at the table and asked her what she made. Instead of giving the CEO a dollar figure, she turned the tables on him by listing the things she would ‘make’ her students learn – hard work, sacrifice, responsibility, determination, to have a questioning mind, etc. - and concluded that in doing so, she would ‘make’ a difference in the world when they turned out to be doctors and engineers and even CEOs.

It is a heartwarming story for those who have (or had) a teaching role in schools, at home, or elsewhere, that what they do has a significant impact on the society we live in and in the world of tomorrow.

The story caused me to reflect on my own education, particularly the teachers who made a difference in my life. Teachers who had not only imparted knowledge but also the love of learning as well as an approach to learning that would be useful even after I was done with school.

In high school, I struggled with two subjects: advanced mathematics and the Malay language. I dreaded attending the classes because I could not relate to what the teachers were trying to get across. It seemed to me that my math teacher was talking to the blackboard every time because, if he was talking to me, I had no clue what he was saying. The Malay language teacher would bring up one ancient Malay poem after anther, reveling in the beauty, structure, and rhythm of each when it should have been evident that the class, which was entirely made up of Chinese kids, did not have a sufficient grasp of the language itself. I dutifully took notes of what I did not comprehend, doubting that I would ever get close to understanding the subjects. The following year, I had new teachers for the subjects and suddenly everything that had been seemingly incomprehensible the year before made sense. How did that happen? What changed? The magic of their teaching methods cleared the fog in my brains and I was able to grasp the logic of advanced mathematics and the complexity of prefixes and suffixes in Malay.

When I was in college, one particular lecturer stood out. She told the class that she didn’t want us just to study hard but she wanted us to study smart. She started by teaching us to look for the underlying logic and reasoning behind each topic. She helped us relate what we’ve learned to real world examples so that the lesson wasn’t just purely academic. She taught us to analyze exam questions before attempting to answer them. She taught us to look for the different parts to a question, the total score possible for each part of a question so we didn’t spend too much time on a part that fetched only a few marks. She gave us a feel of the kind of answers examiners would look for and what gets us points and what won’t. More than just the tactics to learning and passing exams, she taught us see the big picture and not be always stuck in the details or waste valuable resources in trying to be perfect. She knew that most of her students were not from rich family backgrounds and we had to be smart about getting through our coursework and exams. She understood that the end goal for us was not just to pass exams but to get a good job that would hopefully help us realize our goals in life.

Once I started working, I quickly learned that whatever I had learned in school and in college was but a tiny dot at tip of the iceberg. I had to learn the business that the company was engaged in. I had to spend long hours pouring through numbers and contracts and processes. It was an exciting time and it was rewarding when I was finally able to apply my knowledge to my work, using it to improve processes, organization and, ultimately, profitability. For all those wonderful experiences, I will forever be grateful to those teachers in my life that taught me everything I know and instilled in me the love of learning new things.

There’s an old Chinese proverb that goes, “Give a man a fish and he will have food for a day. Teach a man to fish and you feed him for a lifetime.” Keeping that analogy in mind, the best thing that a teacher ever taught me was how to fish.

It is unfortunate that teaching and class sizes will be impacted once the Federal and State budget cuts come into effect. We can all try to pass the buck and push the cuts onto someone or somewhere else but there is no denying that we can’t have what we can’t afford. My hope is that the cuts will help spur us towards more intelligent ways of teaching, helping our kids learn how to fish rather than just giving our kids a fish. After all, education does not stop at the school doors.

Budget Battles

2011-04-13T11:04:00.001-07:00

Let’s face it – even if the US is not faced with a looming deficit and at risk of defaulting on its debts if the debt-ceiling is not raised, Congress should still be debating what the nation is spending its revenues and resources on and how to extract the most out of every dollar spent. Congress should never be complacent, as they have been during the years of economic growth and prosperity, about the inefficiencies and bad policies we see at every level of Government.

The results of the 2010 mid-term elections carry with it a clear message: the voters are tired of the same-old, same-old. The Independents, tired of having to choose between two sides that have become so similar that it is hard to tell them apart, voted in a whole new bunch that ran on the message that they want to change Government. Indeed, some of them ran on pretty extreme messages but it seemed that the risk was worth it, if only to stir things up and get the fat cats out of their seats to start doing something to right the ship.

If we could rise above all the rhetoric about the numbers and who would be to blame if the government was shut down because no agreement on the spending cuts, we would realize that the real issue lies in complexities of our laws, layered on year after year, creating bloat and inefficiencies everywhere, sucking up precious national resources. As the saying goes, “a dollar is a dollar”. We want to be spending it in smart ways that generate more economic activity which in turn lead to job growth and revenue, and not in paying for duplicative or unproductive processes and administrative structures.

The National Commission on Fiscal Responsibility and Reform conducted a study and came up with a report in December 2010 which we should all examine and build on if we are truly serious about what needs to be done. It is not a perfect document and dissenting views are clearly enunciated but it is a good start. The report proposes various changes encompassing:

Discretionary Spending Cuts
Tax Reform
Health Policies
Other Mandatory Policies
Social Security
Process Reform

It is a must read for anyone serious about the debate on our nation’s fiscal health. You can access it at http://www.fiscalcommission.gov/

In every area listed by the Commission, we need a ‘Reset’ button to push for rationalization and simplification. Complexities lead to loopholes, creating an unfair advantage for those who cleverly exploit the loopholes and a gross disadvantage for others.

We need a Reset button for our tax laws to account for the shift in economic and political dynamics we are witnessing around the world. Asia is fast becoming the biggest consumer bloc and our survival and success will depend on how adept we are at meeting the challenges ahead. To that end, our tax laws must be redesigned to incentivize job creation, especially in the export of goods and services. We need incentives that will help make the US more competitive in the global market. We already have some of the best institutions of higher learning, a well-trained workforce, excellent design and marketing skills, and fertile entrepreneurial breeding grounds especially in new-age technology. Yet, our existing laws favor the off-shoring of millions of technology jobs to other countries. We need our lawmakers to help bring about the re-creation of those jobs in the U.S.

We need a Reset button for our defense strategy and our national security. We can no longer afford the price of being the world’s sole policeman. Recent events in Africa and the Middle-East have shown us that any change towards a more democratic world must come from within. We need to be smarter about how we screen passengers at security checkpoints across the country. We cannot afford to layer on more and more scanners, personnel, and checks each time that Al Qaeda threatens another attack on the US. The Department of Defense spending has more than doubled between 2000 and 2010, ballooning from $300 Billion to just under $700 billion, and that number excludes Homeland Security and Veterans Affairs costs.

We need a Reset button on healthcare and medical tort reform. Healthcare providers today do not want to risk potential lawsuits and higher malpractice insurance and consequently they will often (especially if asked) prescribe all recommended tests and treatments regardless of whether or not they will be beneficial to the patient. We need a rational quality of care that is determined by a panel of experts, not lawyers. We need programs that encourage people to adopt a healthy lifestyle. We cannot afford a growing population of expanding waistlines and higher incidences of obesity, including cases in the very young. Beneficiaries of government assisted programs such as Medicare and Medicaid should be subjected to annual “performance tests”, monitoring their weight and waist measurements. If their deductibles and co-pays for medication increase along with their expanding waistlines, they would quickly join the pound-for-pound challenge on the Biggest Loser.

We need a Reset button on end-of-life care. We cannot afford to confuse compassionate care for the dying with extending life artificially. Trying to postpone the inevitable outcome for the very sick and the very old while denying care to young children which will allow them to grow into healthy, productive lives makes no sense. The notion that we will be ‘killing grandma’ by rationing care is ridiculous when the alternative is to have grandma hooked up to a host of machines and tubes for feeding, breathing, medicating, urinating, etc., because we can’t let go. We’re adults and we must think and act as adults. Advocating the notion that a logical plan for end-of-life care means ‘killing grandma’ is infantile.

We need a Reset button on our energy policies. We need to end our addiction to oil. Our dependence on foreign oil hurts us, making us subservient to oil producing nations and lender countries that have autocratic governments. We need to raise taxes on gas-guzzling vehicles while encouraging more eco-friendly cars. We need to revisit subsidies to big oil corporations. We need to invest in new infrastructure that will help move our energy consumption towards sources that are renewable. We need to expand our electricity grid so that we can bring solar and wind energy from solar and wind farms to the cities and towns across the country. We need to invest in support systems for car-pooling and use of mass transportation. The arrival of hybrid and electric cars are great but they alone will not make a significant enough dent in our total oil consumption.

We need a Reset button on government jobs, civil and military services. We need to flatten organizational structures and end promotion and pay increases based on seniority. We need to eliminate unnecessary paperwork, pencil pushers that add no value to a process, increase productivity through greater automation and move towards a self-service model through modern technology. We need to consolidate departments that overlap in function and we need to eliminate outdated regulations that discourage businesses from setting up shop or expanding their operations in the US. We need enforcement officers that are more attuned to the problems businesses face and who will help them meet regulatory requirements rather than act simply as a deterrent to lapses and failure to comply.

We need a Reset button on our policies on granting visas to bona-fide visitors to encourage in-bound tourism. We have amazingly beautiful cities, national parks, and exciting man-made attractions. We have museums and art collections that are the envy of many. Tourism is a highly labor intensive industry and it will create jobs that will always remain in the US. We need to end the levying of hefty visa fees and, more importantly, we need to end the discrimination against young, single women. The trend, seen first in Japan and now around the world is for more and more single female workers with a disposable income for whom travel and shopping are high on their priority list.

There are many more Reset buttons that can be added to the list. However not a single one will be in place if our politicians continue in their game of ‘chicken’ and care only about their ego and political ideologies rather than the nation’s needs.

We are living in a fast changing world and systems and processes that worked well in the past may not be sufficiently adept in meeting the needs of today. Lengthy budget battles year after year distracts us from looking at what we need to be doing to positively influence America’s economic future and its role in a freer, more global and more democratic world.

A Race To The Bottom

2011-03-01T13:32:00.001-08:00

There is a new paradigm in the halls of power and the best description for it is “austerity”.

In the aftermath of the housing bubble and a near complete meltdown of the global financial system, Federal, State and City governments are faced with a sudden and sharp decline in tax revenues juxtaposed against a surge in prolonged unemployment and an increasing demand for government assistance.

With a sustained recovery still uncertain and debt loads at unprecedented levels, it is not surprising that lawmakers, governors and mayors are clamoring to reduce spending in government programs at every level, especially those categorized as ‘discretionary’. There is no denying it, the prize is bigger than just a balanced budget.

There is no easy answer to what ought to be cut or trimmed and slashing across the board blindly is not a sensible thing to do either. We have to bear in mind that the intent or objective of most government assistance programs are to help those who are most in need. Cutting funding for those programs would deprive the most needy of a lifeline. Whatever we do and however we do it, we must be extremely careful that it does not turn into a race to the bottom where the cuts will affect our country's competitiveness and future.

One target currently in focus is Education spending. While increasing class sizes in public schools will deliver savings in total teachers’ salaries paid, the possible long term impact cannot and must not be ignored. Public schools are where most of the country’s middle income and poorer half send their kids for an education. The cuts would further disadvantage the very ones who need a greater degree of attention to help them climb out of the reaches of poverty and to do better than the generation before them. The gap between these kids and those from well-to-do families who attend private schools will widen, increasing the wealth gap and social class distinction.

We cannot afford a race to the bottom where Education is concerned. Already, Americans kids lag in many areas when compared to test scores of students in other countries.

If we were to be honest about balancing the budget, we need to face the reality that we will be spending over a trillion dollars on defense in 2011. By choice or by default, we’ve become the world’s policemen and we are faced with the hefty costs as a consequence.

The war in Afghanistan is still on-going after nearly a decade and, although the bulk of our troops are out of Iraq, the costs there are continuing to mount. In 2007, the Congressional Budget Office issued an estimate that the total cost of the two wars will reach $2.4 trillion by 2017. Yet, there is and has been no “War Tax” to pay for those costs and that fact is conveniently swept under the carpet in the nation’s budget balancing exercise.

Returning to the topic of “austerity”, a New York times columnist wrote that any cut should ‘make everybody hurt’. I’m not sure how his mind works on that one – the rich do not depend on government help so any proposed cut won’t affect them negatively. If the rich is to share in the pain, they would have to contribute to the revenue side of the equation, i.e., pay more taxes.

Businesses have benefitted from lower wages and interest rates; executives and CEOs of banks have benefitted from the government bailout and low interest rates and are once again reaping six and seven digit bonuses. The value of their stocks and stock options have soared in the last two years. If we have to balance the budget, they should be the first in line to participate in the pain of getting the nation’s finances in order, and be proud of the fact that they did.

Sadly, the opportunity to let the Bush-era tax cuts lapse at the end of 2010 or to roll back cuts that benefitted the rich was swiftly put away for political expediency. As the 2010 mid-term elections have shown, politics is an expensive business and it takes a lot of money to get elected or re-elected. If you think that the amounts spent on political campaigns were indecent then, brace yourself for worse. The Supreme Court’s decision in Citizens United v. Federal Election Commission has, for all practical purposes, removed restrictions on how much corporations (or individuals using the cover of a corporate entity) may spend in advertising to back candidates who are favorable to their causes.

Here again is another potential race to the bottom that is most vile and undesirable. We are at the edge of a pit of cronyism, bribery and corruption. Take a deeper look at the social unrest sweeping across Egypt, Africa and the Arab nations and you will realize that the cause of the uprising is not Facebook or Twitter but the pent up frustrations of a people denied a dream. Ignoring the needs of the underclass while pampering to the rich does not bode well for the type of Democracy we claim to represent or are trying to promote in other parts of the world.

Any program of cut should be targeted at weeding out inefficiencies, mismanagement and waste. There are many systemic inefficiencies in almost all governmental departments. Archaic organizational structures, systems and procedures must be reexamined, eliminated or replaced and resources freed for more productive use. Paperwork, forms, files, processes, etc., must be streamlined and automated. Taxpayers should be encouraged to make suggestions on how the services they need may be delivered more efficiently or to file complaints regarding poor public employee attitudes. Unions should, by law, not be permitted to retaliate against management for taking disciplinary actions against employees for cause. Government departments should be made to bid for the work that they do against independent outside contractors to ensure that they remain competitive and cost efficient. If you have any doubts about how much can be saved, you’ll be reassured to know that the Congressional Budget Office report in 2007 estimated that the cost of mismanagement and waste in the Iraq war alone was some $10 billion.

“Austerity” is a nice word, as are the phrases “balancing the budget” or “living within our means” but they should not mean austerity for some and a ‘get-out-of-jail-free’ card for others.

Blood Money

2011-01-10T10:54:00.001-08:00

I finished the year 2010 feeling a little better about things in general.

The mid-term elections were over and the economy, although still struggling, were showing some signs of picking up. I had done my part by shopping for Christmas presents on-line and at the stores and I had even picked up some ‘savings’ in the process. When the year end retail and on-line sales statistics came out, hope was again in the air that the country was seeing an uptick in consumer confidence and that would lead to increased corporate hiring and spending.

The Congress, in a lame-duck session, was surprisingly able to pass some new laws that led many to believe that the Republicans and Democrats were finally on a new course that would enable them to move the business of the nation forward.

Most encouragingly, the media had returned their focus mundane things such as the weather, a clear indication that nothing seriously bad was happening apart from the acts of nature that were disrupting travel and everyday life in various parts of the country.

Unfortunately, that period of bliss ended quite abruptly last Saturday. One week and one day into the New Year, a lone gunman in Tucson, Arizona, fired into a crowd gathered outside a supermarket, seriously injuring an elected member of the Congress, killing a Federal judge and a number of other innocent victims, including a nine year-old girl who, as fate would have it, was born on 9/11/2001.

It immediately brought to mind my blog last September titled “Dear World – a letter from America” and caused me to re-read it and ponder if there were salient points that I had missed or if I had been mistaken in my take on the vitriolic rhetoric by the various factions that had so troubled the people in the United States as well as in countries around the world as to the level of intolerance and hate that we were showing, in words and in actions that were repeatedly aired on Television, on radio talk-shows and in Blogs on the Internet.

Sadly, “reality TV” has become too real for the families of those victims in Arizona who were injured or killed in this incident. No amount of “could have”, “would have” or “should have” will ever mitigate their loss or bring back their loved ones.

Those who have been employing the language of hate, spurring their followers into a state of frenzy and those who are unstable enough in their minds into acts of violence, are now denying responsibility and quickly removing evidence of their hateful remarks from their web-pages, blogs and Twitter postings.

This latest manifestation of the destructiveness of spiteful words require an immediate re-imposition of civility in our discourse and a civilized approach to reconciling our differences. We must eschew (shun, avoid, turn away from, have nothing to do with) those who employ barbaric words designed to incite others into acting out their anger. We must deny them the reach and effect they desire from planting those words and seeds of hatred in the minds of their listeners.

The Media has a duty to reject and not give air-time or printed space to people who capitalize on their fame and say anything that comes to mind with total disregard of the safety and well being of other. Just as they would refuse to show graphic images of death and destruction, the Media must refuse to give voice to those whose spew hatred and whose words would clearly spur others into acts of violence. It would not be a denial of the right to free speech – instead it would be the Media’s exercising of its duty to prevent the exploitation of free speech by those who clearly intend to cause harm. What the Media carry as “news” must be worthy to be called as such and must pass the test of balanced reporting, and not be a verbatim report of unsubstantiated claims or wild accusations by some attention seeker. If they report on the declarations of a person in the news, they must have a duty to investigate decry the lies and fabrications at the same time.

Clearly, gun laws around the country need to be improved – over the objections of the gun lobbyists and the NRA. Those desiring to buy and carry a gun must be made to undergo psychiatric tests to ensure that they are not unstable in their heads and they are not and will not be a threat to community, both prior to being sold a gun and regularly afterwards. It is no different than drivers having to pass eye-exams to renew their driving licenses. Additionally, they should be required to purchase insurance coverage for victims of their actions, intended or otherwise, so that there is a recurring cost and reminder of the importance of safely handing the weapon they have in their hands. States that permit the carrying of concealed weapons must immediately revoke those laws so that law enforcement and security officers can more easily carry out their tasks with impunity.

Profits that come from the destruction of innocent lives is Blood Money – not much different from the thirteen pieces of silver that bought the betrayal of Jesus.

We All Want To Live The American Dream

2010-11-08T09:45:00.001-08:00

Just when I thought I had read up enough to understand what caused of the financial crisis that led to the actual or near collapse of some the major financial institutions, the Foreclosure Flap reared its ugly head, telling me that the underlying problems could be deeper than we’d realized. We may have put out the fire caused by all the mortgage backed securities (a.k.a. toxic assets) but hot ambers are still smoldering and could break out anytime and burn us again.

What has been most shocking is that the problems are occurring in the United States of America which pride itself as being a nation of laws. A look at the train wreck of the mortgage mess reveals a chain of dishonesty and a disregard of the laws that send shivers up and down the spine. The image of reliability, trustworthiness and enforceability of deals and investments in the US has been severely damaged as a result.

Having laws but not the desire or the means to enforce them renders the laws simply useless. As the former Chairman of the Fed has discovered, expecting the financial industry to self-regulate was a mistake. It is akin to asking a drug addict to take charge of a warehouse filled with drugs. Sadly, the people elected to positions of power AND responsibility took the first and forgot the latter. They eliminated regulations that were designed to protect the average man on the street and they denied funding to those agencies that were set up to ensure adherence to the laws and regulations. By demonizing “government” they chipped away at the rules that had been been carefully crafted to protect the innocent. Corporate profits became their sole obsession and expanding that their only mantra. In essence, they sold out the very people that had elected them into positions of power and opted for corporate welfare instead of helping the average American get closer to achieving their American dream.

For most Americans, the “Pursuit of Happiness” entrenched in the Declaration of Independence translates to ‘living the American Dream’. In the majority of instances, it simply means a decent job, a house, a spouse, two kids (and maybe a dog) and a car. That simple dream is now more remote than ever before. The so called ‘middle class’ is fast shrinking as decent paying jobs and industries have migrated overseas. Graduates with higher degrees (and big student loans to go with them) often find themselves fighting for jobs that barely pay their living costs. Their employers have higher productivity expectations and the longer hours at work often translates into less quality time with family and friends. The wealth gap in America is rapidly increasing and the pendulum must start swinging the other way or something will break very soon.

To turn the tide, our elected and appointed officials cannot continue doling out cash (remember the bailouts?), concessions and tax breaks to the big corporations and banks unconditionally. Yes, we want them here and we want to help them succeed but we want them to be good citizens as well, providing decent jobs and paying their fair share of taxes. Their focus cannot be on the short term profits alone – the longer term well being of the US consumers must be part of their priority too. The US consumers cannot consume unless they have the ability to do so and fundamentally that means a steady job with a decent pay. Flipping burgers and temporary jobs don’t make the cut.

We need to figure out what the appropriate criteria of a good Corporate Citizen should be and start enacting rules to bring that about. Corporations that do not meet those expectations should be taxed at a higher rate or not be allowed access to the same incentives that Corporations that do.

As a start, Companies that do not pass an American Content test (US employment and product component percentages) should be made to pay a penalty in the form of a surtax. All companies closely monitor their employment numbers and their product content makeup so introducing a requirement that they disclose those numbers in their quarterly and annual reports should not result in any additional cost to the corporations. Such a rule should not impact the small and medium sized businesses that have all or the bulk of their production and employment in the US.

Those who are in bed with the big corporations would decry this proposal as being protectionist. We must peel away the rhetoric about protectionism and see that not all such rules are necessarily bad – lawyers, doctors and accountants from other countries can’t legally practice their profession in the US unless they have the necessary US training and certification. Take away those protections and their jobs would quickly be outsourced to lower cost countries as well.

We’ve tried the carrot without the stick approach and we know that it does not work. Corporations took full advantage of the system and did all they could to make their profits private and their losses public.

However the winners or the losers of the mid-term elections choose to frame it, the exit polls point out that the real anger at Washington is about bailing out the big corporations at the expense of the American people. We’ve saved the mega banks, the insurance companies, and the auto-manufacturers and we’ve pumped cheap cash at them but where are the jobs? US Corporations are reporting higher sales and bigger profits but where are US based jobs? Retirees who depend on income from their savings have seen interest rates plummet to near zero and they have had to rethink their retirement but where are the jobs for their grandchildren who are entering the workforce?

The late Ted Sorensen, who helped compose JFK’s inaugural address and the exhortation “Ask not what your country can do for you”, once wrote: “Government must give priority to the needs of ordinary citizens, workers, consumers, students, children, the elderly, and the ill, the vulnerable and the underdog, and not to the needs of those already sufficiently powerful and affluent to afford their own lobbyists.”

We all want to live the American Dream. It should not be an impossible dream or one that is reserved for only the elite and the rich. Take away the American Dream and you take away the hope of a nation.

Dear World – a letter from America

2010-09-10T09:14:00.001-07:00

Dear World,

Despite what you’ve seen or heard on the news lately, America is not what some fanatics would make it out to be. Yes, there are the few loose nuts who made the headlines lately with their rants and the rather frightening and unreasoned blabbering. Please just ignore them.

Unfortunately, our media (notably our TV media) is constantly and desperately seeking to outdo each other in being the first to air the latest exciting news. In doing so, some networks have opted for sensationalism and have forgotten what journalism is all about – informing the public of worthwhile news and analyzing, printing or airing topics that are important for the welfare of the nation and the general public. Topics get old very quickly on a 24-hour TV news cycle and there are insufficient breakthroughs in medical research, weather and climate changes, development of new technologies, etc., to fill up the air time. In their desperation to stay exciting in order to grab a bigger viewership and more advertising dollars, they have resorted to giving voice to attention seekers of all sorts. Consequently, more and more TV “news” programs have taken on a tabloid characteristic. If you are not one to fall for the “exposés” in supermarket tabloids, you shouldn’t fall for all the sensational news items on TV channels either.

Please, look beyond the obvious. I am a hundred percent sure that if you take a closer look, you will find that there are, in reality, many times more sane people than the insane ones. It is just that the sane ones aren’t as vocal or they find it harder to get the media’s attention. On TV, sane and normal are not as audience captivating as the wild and unbelievable. TV show producers love the “exotic” acts - those who would do anything to get their five minutes of fame in front of a camera. What’s better for the networks’ bottom line than if they don’t have to pay for those acts?

The early settlers in America had left their homeland for the new world so that they could practice their faith free from the oppressive powers that controlled Europe back then and, when America became an independent nation, the founding fathers of the nation followed that same instinct and spirit of freedom and the authors of the US Constitution entrenched in it certain fundamental rights for all Americans, including the freedom of religion, freedom of speech, freedom of the press, freedom of assembly and the freedom to petition. As a result of such freedoms, we can express our dissent without fear of arrest and incarceration. Those freedoms, as you may have noted, are essentially freedoms of expression and do not extend to include acts of violence.

We can’t really silence the few individuals who are vocal and whose incantations are welcomed by the media. We can only seek to expose their falsehood and lies by speaking out (or writing) against them, arguing our case with facts and good logic. Exercising those same freedoms, some Americans voice their opposition to the offensive speeches through counter demonstrations and marches. Sadly, there are also those who are in positions of influence and responsibility who choose to remain silent instead of bringing a reasoned voice to the debate.

Freedom has a price and democracies are messy but the alternatives are oftentimes worse.

America has shown and continues to show its true heart and compassion when disasters strike in other countries. With little hesitation, Americans jump in to help rescue and treat victims of earthquakes, Tsunamis, floods, AIDS, and other disasters. Because we’re essentially a mixed bag of immigrants from all over the world, anytime a disaster happens in some corner of the world, we feel it and we feel engaged and involved. Although we are American citizens, we treasure the heritage and culture of the countries that we or our parents or their parents came from.

We are a nation of workers and our lives are not very different from yours. We love our children like you do yours: we clothe and feed them, we send them off to school and we hug them and kiss them goodnight when bedtime comes. We make mistakes (hopefully not too often) and we try to remedy them. We do our best to learn from our mistakes and we try not to repeat them. Sometimes we succeed and other times we fail but we don’t give up on trying. When we fail, we laugh at ourselves and we try not to take ourselves too seriously. We cry over the loss of a loved one and we sympathize with others who have experienced a personal loss. We are excited at the success of someone we know and we root for the ‘underdog’ who is trying to beat the odds and come out on top.

Our hope is that you will not listen to the few fanatics and false prophets who would exploit the sensitivities of others for their own glorification. Don’t give credence to them or use the mindless words of the few crazies against all Americans. Our appeal to you is to tune them out, just as you would tune out those among you who seek only to provoke and to incite others to no good.

Remember: not everything you see on TV or read on the Internet is real. Be sure that there is a hidden plot or lots of clever editing to keep the viewers or readers enthralled. Just as you have learned to discern what’s real and what’s not on “Reality TV” shows, you must apply the same thought logic to what you see or hear on the news.

“Finally, whatever is true, whatever is honorable, whatever is fair, whatever is pure, whatever is acceptable, whatever is commendable, if there is anything of excellence and if there is anything praiseworthy-keep thinking about these things.”

Your friend,

America

[Quote taken from the letter of Paul to the Philippians]

The Power of Perception

2010-08-13T10:50:00.001-07:00

A friend recently forwarded me a short story that has probably made its way around the Internet a few times but is nevertheless refreshingly poignant each time I get to read it.

It goes like this:

A young couple moves into a new neighborhood. The next morning while they are eating breakfast, the young woman sees her neighbor hanging the wash outside.

"That laundry is not very clean", she said. "She doesn't know how to wash correctly. Perhaps she needs better laundry soap."

Her husband looked on, but remained silent.

Every time her neighbor would hang her wash to dry, the young woman would make the same comments.

About one month later, the woman was surprised to see a nice clean wash on the line and said to her husband:

"Look, she has learned how to wash correctly. I wonder who taught her this."

The husband said, "I got up early this morning and cleaned our windows."

The moral of the story was summed up as follows:

And so it is with life... What we see when watching others depends on the purity of the window through which we look ...

(In the interest of fairness, the roles in the story can be switched.)

What fascinates me about the story is that it is so appropriate in this “Information Age” which, unfortunately, is filled with an equal or greater amount of Misinformation – distortion of the truth that is designed to mislead. The Internet has enabled the explosive spread of all types of misinformation, of distorted half-truths and, worst of all, hate speeches – cleverly disguised so that they are not perceived as such, but rather as ‘shocking revelations’, some cross-referenced to external sources to make them appear authentic.

It is easy for anyone with an agenda to put his or her thoughts up on a Blog and it is even easier to forward an email on a topic that is crafted in a way that pushes across a viewpoint that we favor. Very easy and, sadly, too dangerous.

We don’t see or hear the word “propaganda” being used much these days. The specialists prefer the more updated and less derogative term “spin”. Either word means the same thing: publication and dissemination of distorted information with the objective of misleading. In Propaganda and Persuasion, the authors Garth Jowett and Victoria O'Donnell defined it as “the deliberate, systematic attempt to shape perceptions, manipulate cognitions, and direct behavior to achieve a response that furthers the desired intent of the propagandist”.

Paul Joseph Goebbels, the Minister of Propaganda in Nazi Germany, once said, “If you repeat a lie often enough, people will believe it”. A similar quote “A lie told often enough becomes the truth” is attributed to Lenin, the Father of the Soviet Union.

The intent of spin or propaganda is not simply to change your perception. The ultimate goal is to get you to act based on those perceptions. Therein lies the danger of blind faith – believing everything that we read or hear is true WITHOUT taking the time to do some fact finding and weighing the plausibility of the information before us.

Not all of us are born skeptics and we have a natural inclination to believe that other people are, in general, truthful. That perception of honesty is what scammers and con artists base their schemes on. They take an element of truth or fact, embellish it with touches of exaggeration and arrive at a story that is believable to the naive and those who, for one reason or another, need those fabrications to be reality. Look at the supposedly sophisticated individual and institutional investors that put millions of their savings with Bernard Madoff. Look at the billions lost in the supposedly Triple A rated (investment grade) securities based on sub-prime mortgages and over-inflated asset values.

A decade of economic growth tilted our perception on real-estate values and we ignored the probability that an explosive growth in values is unsustainable and is indicative of a bubble. Those who came out against the cuts in interest rates as real estate values became over inflated were decried as doomsayers who are anti-American and anti-business. More spin and lobbying led to loosening of bank regulations and Investment banks were able to take their leverage ratios to uncharted areas, and when that was not enough, moved the risky assets off their balance sheet so that they could go for broke. Unfortunately, they did and had to be bailed out with taxpayers money. What about those bonuses that were paid out of the banks’ so called “profits” before they went bust? The spin they want you to believe is that they earned it and there is no way to for the taxpayers to recover those bonuses – not even if they were based on fraud…?!?!

Beware of the Power of Perception. The only tool against being misled (yet again) is to spend time evaluating the spin and to research the facts.

Bring out that power-washer and clean your window….!!

The S.S. USA

2010-07-08T09:20:00.001-07:00

While searching for a new topic for my blog, one thought that struck me over the Independence Day weekend is that this historic event that we celebrate each year is all about Choices. The founding fathers of this great nation chose to be free from the oppression of the colonial masters and to be able to set off on the pursuit of equality, life, liberty and happiness. Generations later, those pursuits continue and the ideals have not faded.

As we try to find our way through the present period of economic uncertainty, high unemployment, soaring budget deficits, two drawn out wars, and a whole financial mess brought about by the housing bubble and unbridled greed, we are faced with choices that we must make. Some of the choices will be hotly debated by people on both sides of the political and economic spectrum. A healthy debate is always good but we must not let it turn into a mud-slinging match or allow ugly words and unfounded accusations tear us apart. None of the choices will be easy and some will, with certainty, be painful but inevitable. What is key to the success in our march forward is for everyone to grasp that we’re all in it together – we can either sink or swim. As in generations past, we will need calm hearts and cool minds to make the balanced set of choices that will bring us safely back into harbor.

To understand the dilemma we’re in, we need only to imagine that all of us are passengers aboard an ocean liner, the "S.S. USA". There is a big gash on the side of the ocean liner and the ship's crew is fighting to keep the ship afloat. We can opt to vent and scream at what the crew members are doing about the situation but that would clearly be not helpful. Neither would throwing all of them overboard. Running a ship, let alone saving one, is not a simple task. Blocking others from acting or doing nothing or simply hoping for a passing ship to come to the rescue are not the smartest moves either. What we need are calm heads, constructive ideas (not rhetoric), and healthy debates that lead to smart choices.

Justifiable anger has been and continues to be vented against those who had helped create the financial mess and at the corporate executives at those ‘too-big-to-fail’ entities that had to be bailed out with taxpayers’ money. To be clear, I don’t like government bailouts of private enterprises any more than the person next to me and I can’t agree more that none of the bail out moneys should have been used to pay bonuses to the same people whose callous actions helped bring about the crash. That being said, the financial crisis called for quick thinking and difficult ‘on-the-spot’ choices had to be made. Failure to act fast as the events were unfolding would have resulted in dire consequences and collateral damages too frightful to even ponder. Imperfect as they were, TARP and the bailouts helped steady the S.S. USA so that it can be navigated back to shore.

I recently finished reading the book “Too Big To Fail” and it was an eye-opener on the behind the scenes dealings and decisions once the sequence of events that led to the collapse of Bear Stearns and subsequently Lehman Brothers started. The heavy and momentous choices that the (then as well as the present) Treasury Secretary, the Chairman of the Federal Reserve, Congress, and the CEOs of the many financial institutions had to make at short notice, were mind numbing. With hindsight, some might criticize those decisions but the reality was that time was a luxury they did not have. Events with potentially disastrous outcomes were happening at a rapid clip on a twenty-four hour clock cycle. If nothing was done immediately, the destructive forces could have accelerated and spread across the globe in a more catastrophic manner.

What brought about the near financial crisis was a series of poor choices. Homebuyers chose to borrow more than what they could reasonably repay even when they had jobs. Mortgage brokers chose to falsify records or ignore sound financial requirements in order to close the deal and get their commission. Investment banks chose to buy up those mortgages, repackage them as mortgage based securities - masking the high risk of default behind those mortgages - and sold them off to investors, earning a hefty fee in the process. We could go on but I think the point has been made – poor choices can only lead to ruinous ends.

The frightening thing is that most of us will continue to make poor choices for selfish reasons and short term rewards. Recent examples: We chose to punish those who are unemployed in this current economic downturn by cutting off their unemployment benefits. We chose to rail against regulations and controls that are meant to better ensure we won’t have a repeat performance of the recent financial meltdown. We chose to demonize healthcare realities and the inevitable end-of-life decisions we must all make. We continue to choose to close a blind eye to the cost of unfunded programs and wars.

We can change the direction of the ship and steer it into a safe harbor by making choices that will shift the balance back towards a greater focus on the American people. Our elected officials must make choices that will ensure that small and medium sized enterprises that form the backbone of the US economy have every incentive necessary to hire, train and retain staff. Our appointed official must negotiate more balance trade agreements with other nations and ensure adherence. As consumers, we must leverage our consumption power and choices to help keep good paying jobs in the US.

Choice, after all, is what “Government BY the people and FOR the people” is all about.

Remember, we are all aboard the S.S. USA.

Putting People First

2010-06-09T07:58:00.001-07:00

One of the most inspirational moments in my career happened when I was just a young accountant, starting off on a professional journey that lasted many years and eventually landed me in the United States.

I was thrilled to have been invited to the company’s global seminar, held that year in Vittel, France, and I was totally wowed by the events and speeches but the special moment happened rather unexpectedly one afternoon when the founder and chairman and I were passing each other in a busy hallway. He stopped to smile at me, reached out to put an arm on my shoulder and spoke with me for a few short minutes, asking me with an utmost sincerity how I was doing and assuring me that he appreciated my work and how important it was to the success of the group.

Imagine, the chairman of a global corporation stopping to give a moment’s attention to a little known employee from somewhere across the world !! I did not get a pay raise but I was absolutely motivated to do more as a result of that encounter. Maybe I didn’t or couldn’t work any harder after that but I have no doubt that the experience taught me how to be a more caring, approachable and effective leader.

As we enter a new era of challenges as the economy slowly recovers from its dramatic downturn, corporations, executives and political leaders will have to learn new motivational skills. If, as some economists have predicted, the rate of unemployment will remain stubbornly high for some years to come, wages will fall and that will in turn demoralized the workforce. As their pocketbooks shrink, it will feed into the negative spiral downwards - corporations will attempt to boost profit margins by cutting costs, one of which may be through a greater exodus of jobs to countries with cheaper labor. To break that vicious cycle, political and corporate leaders (the people with the means and the ability to influence the outcomes) will have to value the workforce in ways that they have not done in a long time. Budgets will be tight (if they aren’t already so) and higher paychecks or benefits are harder to justify. Absent those financial incentives, they will have to win their constituents’ trust, loyalty and hard work by demonstrating more of their humanity and show greater empathy and appreciation of their contribution to the company profits and to the country’s economy. In short, they must learn to put their people first.

I recently stumbled across an ancient Chinese philosopher as I was doing some personal research work. Mozi (墨子) lived sometime between 470 and 391 B.C. and his teachings were quite startling and refreshing. I was never much of a student of Chinese history when I was growing up so the discovery of other Chinese philosophers besides Confucius was a revelation of sorts. If, like me, you’ve not heard of Mozi or his teachings before, it is quite fascinating to read. The Stanford Encyclopedia of Philosophy has a write up about Mozi’s teachings. [For a Cliffs Notes style summary of his teachings look up Mohism on Wikipedia.]

While imperfect, Mozi put forward certain thoughts that are worthy of further examination. Among other things, Mozi taught that a leader’s role is to live up to a set of high moral standards that are inclusive and indiscriminate – and his followers would then emulate his example. Failure to follow that principle would result in chaos and the loss of the leader’s mandate.

In a section titled “Critical Assessment”, the author of the Stanford Encyclopedia’s entry wrote: “Model emulation is indeed a powerful educational process, as any parent knows, and many of our values and judgments are in fact learned by following the example of admired role models. Social coherence, peer pressure, and the approval of superiors are important motivational factors even for critical, reflective adults.”

If business leaders want to overcome the general perception that they are solely focused on profits and personal enrichment; and political leaders want to inspire their constituents to do greater good; they would do well to get down from their ivory towers and walk among the people and occasionally put an arm on a shoulder and offer that someone words of appreciation and encouragement. As they see more of what the everyday man or woman has to go through to put a meal on their family’s dinner table, to put clothes on their kids and to send them off to school, they might regain their humanity and find it harder to justify the increasingly huge gap between their own paychecks, bonuses, stock options, etc., and the wages of the average workers. They will find it difficult to explain, to the people they have touched and connected with, why their jobs have been or will be sent overseas and they might even reverse the tide by bringing those jobs back to the US. They will recognize that with a concerted effort by all, unemployment will ebb and consumer confidence and spending recovers, sales and profits will quickly grow again.

Half a century after Mozi’s teaching on inclusive care, Jesus taught his followers that there is no credit for loving only those who love them (Luke 6:32) and he gave us the “do as you would be done by” rule. Our job on earth is to leave it a better place and we can only do that by putting people first. Nothing is as important as how our actions (or a lack thereof) impact and affect other peoples lives.

Laws and Moral Obligations

2010-04-29T07:54:00.001-07:00

Just because there are no laws about certain acts, it should not be interpreted to be a free-for-all, do as you please, wild-wild-west playground where the strong and the quick are allowed to prey on the less nimble and the weak.

Laws, rules and regulations cannot be (and we should not expect it to be) so comprehensive that it fully protects against every possible scam or scheme concocted by some clever guy who knows the rules and the loopholes. Clearly, any rule that is comprehensive and complete would be so voluminous that it would be too costly for individuals and businesses to keep tab of and to adhere to. It would be equally costly for the government to ensure compliance.

Even the Ten Commandments are merely broad, basic tenets to live by. “Thou shalt not kill” does not prescribe the ways that one can commit murder. It wasn’t and it shouldn’t be necessary. The intent is clear and we are expected guided by our conscience, our inner moral selves.

Where the law is silent, the unwritten moral code must come into play. The question that we must always ask of ourselves is: “Is it morally correct to do this?” It is hard to codify morals. Even so, it is our duty to ask that question and apply the standard of moral that is appropriate, acceptable and expected of us. The more power we exercise over others and the more our actions impact the lives of others, the higher that moral standard becomes.

The image of America and Americans in the eyes of the world suffers when, as a result of our actions (or inactions), a global crisis ensues. Our struggle against terrorism will fail if the world perceives us to be worshippers of greed and gold, ready to sacrifice the well being of others for personal gains. Capitalism without morals erodes the very foundation of our country, our unity, our strength.

The founding fathers of the United States of America, in crafting the Constitution, began it with a short preamble that is just as important, if not more so than all the articles of the constitution that follows it.

“We the People of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United Sates of America”.

It is an emphatic summary of the overarching goals of the Constitution, the law of the land. It underscores the moral objectives behind each article of the Constitution. It brings out the need to apply the ‘spirit of the law’ – captured in the preamble itself - where the ‘word of the law’ is absent or silent on a particular issue.

The success of America on the world’s stage stems from its willingness and ability to think and act for the common good of everyone; its generosity when calamities befall others; and its willingness to stand up and fight for freedom and the basic rights of ALL people, as if we are ONE people.

When we look back at history, the defining moments of greatness and success are always associated with what one has done to establish justice… promote the general welfare of all people… and secure the blessings of liberty to ourselves and our posterity. It is not “all about ME” and it certainly is not all about the millions in profits and bonuses that some would brag about.

The success of an individual is measured not by his/her wealth but by his/her legacy of deeds that has benefitted others. We can inherit wealth but we cannot inherit greatness.

The goodness of our actions is not defined by whether it is legal but by whether it is moral.

Worst Case Scenarios

2010-04-07T13:05:00.001-07:00

The best CEOs in the world – whether they run multinational corporations or small, growing businesses – are those who possess, among other traits, the ability to understand what the ‘worst case scenarios’ could be for their businesses and they keep a keen eye over those risks and exposures. Like a hawk watching over its prey, they’ll swoop in with lightning speed and remove the threat preemptively.

Sounds like paranoia? Sure, but that is what it takes to successfully run a company and prevent the business from being overtaken by the competition and the ever-changing business landscape. In almost every analysis of failed or failing businesses, the result will inevitably show that the managers and executives had taken their eyes off the risks.

Everyday, businesses (and investors) take risk and they expect to be rewarded for doing so. Risks are a normal part of business – whether it is in the form of new investments (assets, manufacturing plants and equipment) or inventory (stocking up ahead of the holiday season) or in granting credit (facilitating customer purchases), there are risks. However, service and product pricing can only assume that there will be certain reasonable risks – otherwise, few people will be able to afford to buy the service or product. The impact of a ‘worst case scenario’ (and varying degrees of that) must therefore be evaluated and avoided (where possible) or hedged against where the likelihood of it occurring is more probable than not.

Consider the car-manufacturing business. For decades, fuel costs were low (some might even remember when a gallon of gas cost less than a bottle of Coke) and manufacturers had no worries about what could happen to their business model if the cost of gas doubled or tripled. Despite the Clean Air Act of 1963 and the public’s support of the electric car, manufacturers that had leased fully working production models to the public removed them from the market. They could not and would not imagine that the ‘worst case scenario’ would happen – that gas prices could go so high so quickly.

When gas prices in the US started its fast track upwards and broke the $4 per gallon mark in the summer of 2008, gas guzzling SUVs and fancy big cars weren’t selling anymore and a paradigm shift occurred. Hybrids cars went from being a fashion item to being a necessity and the return of the electric car became inevitable, sending those same auto-manufacturers scrambling back to their drawing board to come up with a product.

Just as suddenly, automakers were faced with a credit crunch (thanks to the near collapse of the financial markets due to property speculation, sub-prime mortgages and collateralized debt obligations) at a time where declining sales resulted in a burgeoning inventory of unsold units on the dealers lots all around the country. To make the whole thing worse, an increasing burden of pension obligations began to appear on their books (thanks to new financial reporting regulations) and forced those that were ill prepared or undercapitalized to file for bankruptcy protection. The ‘worst case scenarios’ that they did not or would not permit themselves to worry about became a reality. Lesson learned: one can only put off dealing with problems for so long - they will not go away and the consequences can and will likely become increasingly severe the longer we hold out.

The age-old adage “don’t put all your eggs in one basked” pretty much sums up what business need to be doing to stay ahead of the ‘worst case scenario’. If and when the ‘worst case scenario’ happens, the business must not be found wanting.

Even in our personal lives, we need to always have an ‘exit strategy’ – just so that if ever the ‘worst case scenario’ happens, we know where we’ll end up and we have a ‘Plan-B’ that we can put into action.

In learning how to ski, what stuck with me the most was the instruction I received on how to fall without incurring avoidable injuries and how to slow the fall or the slide down a slope and to get up and get going again.

Parents have a tendency to be overly protective of their children. Instead of teaching them how to anticipate problems and to cope in the event that bad and undesirable events took place, many parents do everything they can to put their child into ‘safe’ spaces so that their young would never have to deal with the disappointments in life. In reality, they are only trying to spare themselves of the heartache and pain of ever seeing their own flesh and blood in a bad spot.

My parents did not have the means or luxury of weaving protective cocoons around their children so they taught us the best way to cope, to fill our bellies when the rice jar was running low, to spice up the curry when there’s little to go with the rice on the table. Although illiterate themselves, they taught us to study hard so we could have a better life than they did. We learned what the ‘worst case scenarios’ could be and we learned enough to steer clear from them.

When you have only one egg in the basket, you’ll quickly learn never to let the basket fall. And if it should fall, you have done everything you could to keep the floor clean so you can still make a meal out of the broken egg.

Healthcare Matters

2010-03-18T11:06:00.001-07:00

A week ago, I was going through my files to find a form I needed in order to fax a prescription over to an online pharmacy when I stumbled upon a stack of monthly health insurance bills starting in May 2001 when I first obtained an Individual HMO plan with Empire Blue Cross Blue Shield. I became self-employed at about that time.

Before I go further, it is important for me to state that I am a healthy individual. I don’t smoke and I don’t drink, except for maybe a glass of wine about once a week. I live a healthy lifestyle, I am physically active and I don’t consume sweetened beverages and I avoid foods that are loaded with sugar. Apart from the seasonal allergies I get in Spring, I am hardly ever sick (my health records will attest to that) and the only times I have ever been hospitalized was once when I broke an arm back when I was a young 7 year old and a second time when I had my appendix taken out when I was still in my teens. I probably see my Primary Care physician once a year when I have an annual physical check-up to be sure I’m doing OK and nothing is out of the ordinary.

That first month back in May 2001, my premium was $337.65 which worked out to be $4,051.80 per year. I flipped over the stack of bills to August 2006 – the last month for which I remained on that plan - and the premium for that same coverage had gone up to $616.82 or an annualized $7,401.84, a whopping 183% of what I was paying back in May 2001.

Out of curiosity, I went online to get a quote for the same plan today and the premium has shot up to $1,549.30 a month or $18,591.60 annualized. That works out to 251% of what I paid back in 2006 (less than 4 years ago) or 459% of what I paid back in 2001.

If the premiums keep increasing at that pace, the monthly premium for an Individual HMO plan would cost about $7,800 in another 10 years time when I will qualify Medicare. I know I can’t afford that in-between period – I don’t think any self-employed or unemployed individual can.

As unemployment soared and as the duration of people staying unemployed increased with the latest recession, it has become abundantly clear that an employment-linked health insurance is not the solution. COBRA has its limitations and is more costly for the individual as the former employer no longer picks up any part of the premium.

Even if one is fortunate enough to remain employed or is able to get a new job thanks to the job stimulus bill that was recently passed, rising health insurance premiums would force employers to shift more of the burden of healthcare plans over to their employees.

The claim that “we have the best healthcare system in the world” is misleading – it confuses availability with affordability.

We need healthcare reform AND MORE. We need a “medical tort reform”, defining what is the standard of care that should be expected so that doctors are not over-prescribing tests and treatments that serve only to enrich the pharmaceutical companies and medical equipment companies. We need a “prescription drug reform”, making medications more affordable – there should be no reason why Americans pay more for the same drugs than in other countries. We need reforms that encourage healthy lifestyles and more physical activity for both the young and the old.

We need to continue the debate about what healthcare should or should not be but not let it hold us back from enacting what should be the first of all the necessary reforms. As we gain experience from the present reforms, we need to refine those provisions that prove to be less than satisfactory. Nothing will be perfect from the get-go and we need to be mature enough to keep working at it and make it better.

Bringing Jobs Back

2009-12-07T09:51:00.001-08:00

Despite a drop in the number of newly unemployed, the dismal real unemployment numbers in the US point to a need for drastic measures that will help stimulate job creation. The Obama Administration recently held a Jobs and Economic Growth Forum to garner ideas that would help kick start a new phase of economic growth. That effort is to be applauded and given full support by every concerned citizen. However, grand schemes and efforts to reverse job losses stemming from the years of relentless exporting of manufacturing and all kinds of back office work to lower cost offshore centers will take time. Congress will need to put aside partisan politics and dig deep for the courage and good sense necessary to pass laws and investment incentives that will smooth the passage for recovery without jeopardizing the future.

In the meantime, we cannot just sit by and hope that things will change. We cannot wait another year to replace ineffective members of Congress and put new ones in there that will do the will of the People who elected them rather than the will of the lobbyists and the people that employ them for their own selfish gains. We cannot wait another year and see continuing job losses, even if it is at a reduced pace. Clearly, those who have lost jobs since 2007 and are still unemployed or underemployed cannot wait another year, hoping that their unemployment checks (if they are collecting one – most self employed people do not even have that luxury) will continue and fearing the worst should any unexpected illness befall them as they lose their health insurance coverage.

As good as tax credits and new hiring incentives sound, they won’t immediately create or bring back jobs. Corporations and businesses will not hire unless there is a demand for their products and services. Tax credits are only good if they make a profit – if there is no profit, they won’t be paying taxes in the first place.

As concerned citizens, what can we do that will help turnaround the economy and will do so with an immediacy that the lawmakers can’t? You might not think that as individuals, you’ll have much influence but you’d be wrong not to take into account the effect of critical mass – if there are enough of us who are prepared and willing to do something about it, WE can help turn the tide.

Starting with this holiday season, think “American” in all the things you buy and in the gifts you are planning for your friends and family. Here’s a list of gift ideas that have a high American content and will help keep or create more American jobs:

Tickets to Broadway and Off-Broadway or any local theatrical and orchestral productions. Attend a “Messiah” concert to get into the holiday spirit and bring a friend with you. The Arts are hurting as corporate donors slash costs that do not help with their bottom line and as individual donors are faced with real or possible unemployment.
Tickets on domestic airlines to domestic destinations for that winter break. Airlines are very labor intensive (despite their automated reservation system) and they have the ability to quickly bring back capacity and jobs as demand increases. Hotels, resorts and theme parks at your destination are also highly labor intensive and your patronage is a key driver.
Gift baskets filled with domestic products (wines, cheeses, fruits, jellies, crackers, etc.). It may be chic to have imported gift items but they don’t create American jobs to the same extent. American products are world class and, in most cases, less expensive than imported ones.
Gym / Sports Club Memberships. Register yourself and your friends for a trial membership at a local gym or at a Yoga or Tai-Chi class. If you like the experience enough (going with a friend always help), you might sign up for a more permanent membership. These are again service oriented industries and quickly creates employment opportunities as class sizes are normally limited and each new class will require new instructors and support staff. You’ll do yourself and your friend a world of good and you can work off the extra pounds from the many holiday parties and keep you fit for the challenges in the days and years ahead. Think of your positive contribution towards reducing healthcare costs as well.
Sign yourself and a friend up for a class to learn new culinary skills, a new language or pick up defensive driving credits. You’ll be a better cook and you and your family will eat healthier OR you’ll be better qualified for jobs that look to exporting American goods and services to overseas markets with your new linguistic skills OR you’ll save a few bucks on your car insurance.
Invite your friends from other countries to come visit America. It is a beautiful country and there is so much to see and do and they can take advantage of the weaker dollar. Sales taxes in America are very low compared to the VAT or GST levied in many countries. Tourism is a big employer of labor and every direct job created has a multiplier effect, creating further (indirect) sales and jobs.

I’ve planted a few easy ideas on what you might do to help turn around the economy. I’m sure that as you put your mind to it, there will be plenty more you can think of to add to the list. The important thing is to ACT NOW and THINK AMERICAN. Focus on the American Content factor (read my previous post) in what you consume and you will be instrumental in bringing jobs back the way your politicians can’t.

As I began to write this blog, I was reminded of a very short rhyme that I learned in grade school:

Little drops of water, little grains of sand

Makes the mighty ocean, and the pleasant land.

YES WE CAN MAKE A DIFFERENCE !!!

Spread the word – share this blog with your friends.

Reforming Government

2009-10-21T11:13:00.001-07:00

It does not surprise me that so much of the negative sentiments over health care reform stems from a general sense of distrust in “Government”. The corruption we see reported in almost every State where elected officials abuse the position of trust and power GIVEN to them by their constituents feeds into that distrust and, over time, it has eroded our confidence that anything labeled as “Government” can be of any value or do any good. As the title of a Tyler Perry movie goes, “I can do bad all by myself” – we certainly don’t need to elect or pay anyone to abuse us.

Things have been so bad in New York that a New York Times editorial (Oct 18. 2009) titled “Fed Up with Albany” recommended voting out every incumbent member of the state’s legislature if nothing is done within one year to clean up the mess (click here to view the NYT editorial). Readers from outside of New York chimed in with their comments and left stinging remarks about the disgraceful and shameful behavior by their own state’s elected officials, voicing their agreement with the idea of voting out every incumbent simply because they are an incumbent.

Unfortunately, we often have an innate tendency to generalize issues and things and, in doing so, we destroy the good that is overshadowed by the bad. Identifying the real issues and dealing with them may be more time consuming but clearly more civilized and less damaging. In the Biblical story of Sodom and Gomorrah, even an angry God was prepared to spare the lives of the Lot and his family before he rained fire and brimstone upon those cities. We have a duty to separate the good from the bad; the wheat from the chaff.

In fairness to the New York Times, their editorial included a promise to outline the ways that the existing inbred system allows for abuse and what Albany could do to change its ways. I will watch for their recommendations with great interest – New York is the only home I’ve known since coming to the United States.

The purpose of my posting here is to go one step further because “Government” is not simply made up of elected officials sitting in the halls of power inside the Capitol buildings. It includes Public Services that are run by the Government, funded by tax-payers’ dollars. The people employed by these Public Services are often the only faces most of us will see in our dealings with the Government.

Whenever I have had to avail myself of the services they provide, I make it a point to smile and be friendly, hopeful that in doing so, I will make their day a little brighter and in exchange, what I need done will be achieved with some dignity and expediency. Happily, my tactic works better than 50% of the time so it isn’t a wasted effort.

Unfortunately I can also say from experience that often times the faces I see are dour and the attitudes appalling – almost as if by my being there with a need which only they could service, I have become an unwelcomed intruder in their plans for the day. I’ve had employees of public services disappear on me while I was standing at the service counter because it was their lunch time or a personal call came in on their cell-phone and they didn’t want me to listen in on their private conversation. I’ve watched in amazement as they would stop working on my case because colleagues nearby had started a conversation about something outside of work and they felt a need to be part of that conversation. I’ve had to fill in a tri-fold, 4-color pre-printed form simply because it was standard procedure – despite the fact that all information I had to provide is already in their computer system and unchanged – only to see the form tossed into a trash bin moments later. I could go on…

Public Service is where we clearly need reform as well if we want to improve on the image of Government. Standards of efficiency and quality of service must be set and independently audited to ensure compliance and there must be accountability where the standards are not met. Pay increases must be matched by better performance and increased efficiencies so that they are self-funded and no new taxes are required. Public Service employees must be treated as private sector employees are treated – lifetime employment should not be guaranteed and they should be subject to the same possibility of termination for poor performance and for cause. Outside expertise should be brought in to improve work-flow, eliminate unnecessary processes and costs while enabling greater automation and efficiency. Performance of Public Services employees can and should be bench-marked against performance of employees in the private sector and made public so that there is transparency and necessary actions be taken to weed out the inefficiencies.

There is no reason why public services cannot be just as efficient as the private sector. If virtual monopoly exists, find ways to break up that stranglehold. Private schools co-exist and compete with public schools and private parcel delivery companies co-exist and compete with the US Postal Service. Similarly, private transportation services compete with public transportation services.

If politicians, elected officials and public service employees are keen to keep their jobs, they need to do a better one. The nation is suffering from the cumulative and simultaneous effects of the bursting of the housing bubble, the near meltdown of financial services, and technologies and policies that have enabled the relocation of many of the so-called ‘middle-class’ jobs to lower cost countries. Policies of the past no longer serve the needs of the present or the future and changes must be made from the very top to the very bottom of “Government”. Failing that, we should start looking at outsourcing or off-shoring Government jobs.

Venturing into a “No-Fly” Zone

2009-09-25T09:20:00.001-07:00

According to The Associated Press, British Airways (BA) announced that with effect from October 7, 2009, it will start charging passengers who want to chose their seats in advance – 10 pounds for an economy class flight within Europe; 20 pounds for a long-haul economy flight and a whopping 50 pounds for an exit row seat. Even business-class passengers are not spared, having to pay 20 to 60 pounds depending on whether it is a short or long haul flight.

I expect BA to reverse its decision soon enough – it is plain dumb and reflects a desperation on its management’s part to raise revenues at all costs, even at the risk of losing customers. It is fascinating (and frightening) that BA’s management should even contemplate that their loyal customers will be happy to part with more of their hard earned money at a time of economic uncertainty, simply for the privilege of flying on BA.

I can understand charging more for seats based on the amount of leg-room or the degree a seat can recline (both clearly class related), even if those seats are in the same economy cabin – that is what most US airlines are already doing - but charging a hefty fee for the “privilege” of picking seats in the less desirable section of the cabin is clearly over-reaching.

All is well if enough passengers are prepared to fork out the extra dough to pick their own seats in advance, but what if that scenario does not play out? Imagine the anguish and the anger when a family with an infant are assigned seats that are spread around the cabin – who will tend to the child when he/she cries?. Imagine the annoyance when a couple leaving on a honeymoon are assigned seats that are far apart – great way to begin a life of togetherness. Imagine an elderly person susceptible to incontinence being assigned to a seat away from the aisle and the bathrooms.

Oh, sure, the gate-agents can reassign seats to accommodate those with special needs but should there be enough cases of those same special needs on a single flight, it will be a nightmare for the gate agents as each seat reassigned may raise a whole new set of problems and consequences. Expect take-off delays or having to arrive at the airport hours in advance to beg or fight for seat reassignments.

Thanks to the Internet, Airlines were able to push the task of seat selection to the consumers thereby cut down staffing at the gate and saving millions in payroll costs. By allowing passengers to pick their own seats, they also end up with customers who are generally happier, especially on flights that are not filled to the capacity. Passengers will almost always chose to spread themselves out (leaving the middle seats empty, etc) and their overall flying experience is enhanced with no further effort by the airline.

BA’s decision effectively reverses that and it will be interesting to watch what happens. I would very much doubt that they would be able to greatly raise their revenues because of that decision, especially on the short-haul flights and as long as there is stiff competition from other airlines. Without a doubt, BA’s competitors will use BA’s newly announced seat-selection-charge as a leverage to snap up all the disgruntled BA customers.

Clearly, the latest business decision by BA is questionable at best and destructive to its customer base and loyalty at worst. It is venturing into a “no-fly” zone as far as customer tolerance is concerned. Airline passengers are already bullied into cramped seats, checked baggage charges and no free-meal service on board. What’s next, charging for the ‘privilege’ of being able to breath on board a flight?

Go American

2009-09-02T13:06:00.001-07:00

“Caveat Emptor” was one of the first Latin phrases I learned in law. Quite simply, it means “let the buyer beware” – the purchaser has to take a certain degree of responsibility for ensuring that the property he/she is purchasing is fit for the purpose it was intended before closing on the deal. As an example, home buyers will have their lawyers conduct a search on the property’s title, purchase title insurance, and hire an engineer to inspect the condition of the home before closing on the transaction.

The “Caveat Emptor” doctrine works well with big ticket items (as in the example of the home purchase) but is more cumbersome and off-putting for the lower cost consumer items. Hence most stores will have consumer friendly return policies that allow a hassle free return of items that are defective or do not meet the consumer’s requirement within a reasonable time after the date of purchase.

Because of the ease of buying and returning such consumer items, most of us do not think twice before acting on our urge to buy something. We wanted it (because some clever advertisement or a ‘cool’ friend convinced us we “need'” it) and we went out and bought it because we could afford it. Simple. We rarely, if ever, think of the social and economic impact of our actions beforehand.

Yet everything we buy has an impact. The stores make a profit; the sales person makes a commission; the truckers bringing the goods to the store were paid for their services; and so on. In turn, we have to go to work daily so that we have an income to pay for the things and services that we consume.

In short, our consumption creates jobs and, conversely, we can consume because we have jobs. It is a dependency that has grave consequences should the link be broken.

This recession is especially severe because job losses started in those industries that have a high degree American labor or content – housing, finance and auto-manufacturing. Each job loss has a multiplier or cascading effect. When those workers lost their jobs, their consumption pattern suddenly ceased and retail and sales of non-essential consumer products dropped precipitously, sending more workers to the unemployment lines.

The lessons learned from this downturn have to be put to good use if we want to recover from it and protect ourselves from yet another economic disaster of a similar magnitude. Like the green-movement or awakening that brought ecological-consciousness to the forefront, we need a second green-movement that will bring economic-consciousness into every US Citizen’s thinking.

Here are a few starter thoughts:

1. Go American

Buy products that are high in American content. Start with buying local produce:- fruits, vegetables, wines, cheeses, meats, processed foods that are locally produced. Shop at your local farmers’ market. Write to your local grocery store / chain and ask for more local products and dedicated American product aisles. American produce is world-class and competitively priced - there is no reason to buy foreign.

Vacation locally – there are many affordable American vacation products and places to visit. They create jobs in America.

2. Demand transparency and accountability

Write to the CEOs of the companies that benefit from your consumer dollars and ask for transparency into their practices – percentage of their jobs and production located in foreign countries; percentage of their product that have foreign content; etc.

It is important to include the CEOS of foreign producers or importers of foreign products – they can create an impact by increasing the percentage of American content or labor used in their product.

3. Lobby your representatives

Write to the congressmen representing your district or state and demand that economic-impact reporting become standard in every publicly listed companies annual report and filing.

Ask about fair trade practices of the countries America deals with – what is the imbalance of trade with each country and how they plan to address that. We want our creditor nations to be buying American products and services, not just US Treasuries.

I’m not recommending a boycott of any sorts over foreign products – I’m merely pushing for a greater awareness of the need for a higher percentage of American content in the products we buy, and what other countries buy from us in return.

Yes, just like it has become hip to buy ‘organic’ products, it can become hip to buy ‘American’ products too. And it will be more expensive to go ‘American’ as it was to go ‘organic’ but the end result will be worth it.

Some of us laughed at the ‘organic’ movement but it has taken root and become a settled part of our social consciousness. We can make the ‘Go American’ movement work too. It will take a conscious effort by every American concerned about his/her future or that of the next generation. Sitting by idly or ignorantly and doing nothing is clearly not a solution.

YOU ARE AN AMERICAN; BE PROUD TO BE AN AMERICAN.

Quality Matters

2009-08-06T11:25:00.001-07:00

I’ve been shopping for a vacuum cleaner for my apartment in the city. The Hoover “Futura 390” that I purchased some 16 years ago still works, but parts of the wand have been breaking off due to age and I cannot find replacements – apparently the future in “Futura” has come and gone. The vacuum’s suction is still strong although the noise it generates is close to that of an engine of a jet plane coming in for a landing. It is hard to part with such a loyal worker but I’ve come to the decision that the aggravation I get each time I vacuum is too stressful and it is time to move on.

I made a mental list my requirements (quiet, good suction power, automatic cord rewind, nozzle for hard floors, etc.) and went to Lowes one Saturday morning and toyed around with a few models. I eliminated the big, bulky upright models more suited for cleaning plush carpeted floors. Besides, storage space is always at a premium in a city apartment and I don’t have any to spare. Conversely, I also eliminated the tiny ones that are real space savers but are underpowered and more suited for light work over a small area. I’ve had one of those before – it pretty much stayed in storage till I disposed of it.

Two models from Motorola on display attracted my attention and I decided to do some research on them – to get a sense of how other customers rated the machines and to see how well they compare to those made by other manufacturers. At this point, I was prepared to go for the more expensive $500 model from Motorola if the reviews were good. Unfortunately, what I read (on different websites) was a real put off - warnings of breakdowns and hassles with getting replacements were prominent.

OK, I told myself, let’s try another American manufacturer – why not Hoover – the same maker as the vacuum I have owned for so long? I went browsing and found a Hoover model in the same price range and specs but, sadly, it had the same bad reviews.

Disappointed, I finally decided to look at other brands, including those made by foreign manufacturers and a model by Miele (a German manufacturer of household appliances) stood out with raves and excellent recommendations. For the same $500, I could get it with the deluxe nozzle package with separate specialized nozzles for carpeted and hardwood floors. For $100 less, I could get it with a less sophisticated ‘combo’ nozzle. I’ve used a Miele vacuum before at a friend’s place and I already knew that it was quiet and worked well but I had thought that it would be more expensive, being an European ‘import’.

I have put the word ‘import’ in parentheses because I know most American products are likely imports as well, made in some faraway country where labor is cheap enough to more than compensate for the cost of shipping it all the way back to the US and leave enough margin for the retailers and manufacturer to make a profit. What surprised me though is that, for the same price, a German made product can beat out their American counterparts in terms of quality, reliability and user satisfaction. Isn’t labor not equally or more expensive in Germany? Even if the Germans also outsourced their manufacturing, how did they end up with a better product?

American manufacturers must take responsibility for quality control – simply slapping their name or logo on a product doesn’t automatically make it good. Their name and brand is at stake and to put shoddy, poorly made products on the market is nobody’s fault but their own. Destruction of a brand is very costly and managers cannot lose sight of it. Managers must not sacrifice quality for short term gains – billions of dollars in commercials cannot restore a lost trust in a product.

A first-time buyer is important. Consumer satisfaction is important. The user’s experience sets the tone for his/her next purchase and any upgrade path is smoother if the experience is an excellent one. I was ready and happy to buy an American branded vacuum to replace my existing one but now that I am armed with more information, it is highly likely that I will not .

Quality matters, especially in the Information Age where the consumers are able to share their experiences, both the bad ones and the good ones. Viral marketing works both ways – good news and bad news travel equally fast and far.

American auto-manufacturers suffered from years of inattention to quality control and some are, at long last, resurfacing and catching up with their Japanese and European counterparts. American industries, whether big or small, from making jetliners to vacuum cleaners, must make quality a first priority if they want to continue their dominance or retake the world. American workers must take pride in the “American” brand.

Climbing Up A Greasy Pole

2009-07-07T09:10:00.001-07:00

Historically, stock markets climb ahead of an economic recovery and, applying that logic, the recent climb in the various stock market indices should point towards a recovery in the US economy in the not too distant future. However, hope can trick us into seeing things that are not there – like a mirage of an oasis in the desert.

Remember, all stock markets are pretty much like casinos – calculate your odds, place your bets and hope that you will come out a winner. Investment experts and stock analysts who will tell you anything you want to hear – we get to watch them pitch their thoughts daily on CNBC or Fox Business News – take everything they say with a good pinch of salt. They are masters of using obscure language that could be interpreted to mean different things to different people at different times. If they were such ‘experts’ how did they all (with possibly a few exception) fail to forewarn investors of the near collapse of the financial industry?

Unless the authorities come up with the right solutions, an economic recovery from this downturn will be painful and long, like trying to climb up a greasy pole.

Continuing trends that hamper recovery or indicate that all is not well:

Oil prices have crept above the $70 mark – we’re halfway back to the peak reached in July 2008, more than double the lows in the mid-$30’s that it hit in December 2008 and again in March of 2009. Consequently, average regular grade gasoline prices nationwide have climbed from under $1.60 a gallon in December 2008 to over $2.60 in June 2009 – that is a 62% increase – while the recession is still deepening. Speculative investors in oil are back and that is bad for recovery.
Unemployment has continued to climb although the pace appears to show signs of slowing. It will take a solid few months after the trend reverses for consumers to even begin to regain confidence enough to spend on things other than necessities.
Despite the all-time low interest rates, credit is still tight and consumer patterns are changing as they veer towards a higher rate of savings (if they still have a job) from the glory days of spending what they did not possess or have not earned.
State, local and regional governments are scrambling to compensate for shortfall in tax revenues by cutting services or increasing tax rates, both of which will hurt the average consumers even more, driving them to spend even less on non-essentials and sometimes cutting into even the essentials.
Dysfunctional state governments such as those in California and New York (numbers 1 and 3 in terms of the size of their GDP in relation to the overall GDP of the US) will further hamper the speed of recovery as necessary budgets and laws are not passed.
Five months after its passage in Congress, only a small fraction of the money from the $789 billion stimulus package has hit the ground and promised spending on infrastructure will take a while yet to come on-stream to have any visible impact on the unemployment numbers. As of July 16, only $183 billion has been allocated to state agencies and, of that, only $63 billion has been spent (source: Recovery.gov) - less than 10% of the total stimulus passed.
To make matters worse, some states will not be getting the stimulus money as Republican governors in those states have rejected the stimulus funds (source: Fox News. com).
The TARP money that was used for bailing out the failing financial institutions and automotive giants only helped to stabilize the system but will not generate new jobs, income or consumer spending.

The administration has done well to stabilize the situation but it must quickly move towards actions that will stimulate the economy in the right way. Interestingly, a guest on CNBC on the morning of July 7 highlighted the way the Chinese government has succeeded in stimulating its economy and they way they have done it reminded me of the idea I posted on my blog back in December 2008 titled “To B or Not to B”.

The US needs to stimulate consumption but giving away money, whether directly or via tax breaks, is not going to do the trick in the current environment. A more cautious population will simply stash the money away in fear of a deeper and longer recession. Time to focus on ideas and actions that will pull us out of this hole.

A Thing Called Freedom

2009-06-30T10:40:00.001-07:00

Way back when I was in my early teens, I was taught that freedom can only exist within a framework of rules. Without rules, freedom would run amok and result in more harm than good. Clearly defined rules and good enforcement help build trust in a system and ensure that it is functioning properly for the benefit of all.

As an analogy, anyone with a valid driver’s license may drive a car provided that he or she is prepared to respect all traffic signs and rules posted. If the rules are not obeyed, there would be total chaos on the streets and innocent pedestrians and other drivers would be at risk of harm and injury. Traffic rules are built on logic (reaction times, road conditions, etc.) – they are not there to impede progress but to keep order so that everyone can get to their destination safely in due time.

The notion of absolute freedom cannot exist in any society because the good of the larger community must prevail. The driver’s right is not prejudiced by the traffic rules – he/she is free to drive so long as the rules that applies to everyone is followed.

Why am I writing about freedom and rules? Quite simply, in the light of the financial debacles we have recently witnessed, it is clear that the degree of freedom that was accorded to the financial industry led to abuses and ultimately a crash that hurt many innocents and retirement egg-nests’ values were destroyed or, in the worst of cases, completely wiped out. In the light of what has happened, it is clear that we need a fresh look at how to prevent similar crashes in the future and we need to write smarter rules.

For far too long, we have relied too heavily on the word of the law and not the spirit of what was intended by those laws. This trend stems from the fact that it is easier to apply a prescribed set of do’s and do not’s than to leave it to the interpretation of the authorities. The problem with that thinking is that as new processes and technology is adopted, hard coded rules must be revised to keep up and we end up with volumes and tomes of legal prescriptions that no lay man can hope to fully grasp or understand anymore. At the same time, the ‘pros’ exploit the gaps in the rule books to profit from the unwary and uninformed.

The recent meltdown of what were once giants in financial institutions and insurers, the investment fraud perpetrated by Madoff point clearly to the need for a more comprehensive and intelligent way of ensuring compliance and reliability of the system.

Post Enron, Tyco, and WorldCom, the Sarbanes-Oxley Act of 2002 imposed more stringent rules and yet failed to prevent the current crop of failures and disasters. Clearly, this point to a lack of enforcement and, even more alarming, the lack of understanding or knowledge necessary for a proper examination of the underlying risks in the newly minted derivative financial instruments, even in the reputable credit rating agencies. If they claim to have the necessary competence, then it raises questions on their independence and ability to voice their concerns, given the fact that they are paid by the very organizations and transactions that they are rating.

The question before us then is: Do we need more intelligent rules to govern financial reporting, trading in securities and derivative instruments OR, more importantly, do we need better enforcement of those rules?

Prior administrations have increasingly weakened the enforcement arm of the SEC by defunding and deregulating the financial industry on the basis that regulations impede business and profits as well as the ability of the US exchanges to compete internationally. That is hogwash and serves only to promote the false notion that the market will regulate itself. The problem with that self-regulation notion is that it fails to take into account the human factor we know as ‘greed’.

The consequence of the latest round of financial fiasco was a near total collapse in faith and trust in the system worldwide by all players, including the banks themselves – demonstrated by the sudden credit freeze when banks feared to lend to other banks. Had it not been for the massive intervention by the government here in the US and in the UK and elsewhere, things could have been worse. The problems seen in Iceland and Ireland could have been spread across the globe faster than the latest strain of the flu virus and caused more devastation in its wake.

I’m not advocating that businesses or profits are bad – far from it. Businesses exist for a profit motive and I strongly believe in industry and reward. However, businesses should not dictate its own rules and business lobbyists should not have such a strong hold on the government that it can. Capitalism should not mean freedom for the strong to prey on the weak nor for the present generation to pass the mess on to future generations. We have a responsibility as good citizens to ensure that the soul and strength of the nation is not destroyed by the greed of the few.

A Rising Tide

2009-05-19T10:18:00.001-07:00

I’ve been receiving emails with copies of opinion pieces that were forwarded to me by people who think I should get an insight into the viewpoint of those who are strongly opposed to any government intervention that they fear will become the foundations of what would be the end of Capitalism.

While I respect the concerns expressed, I’m equally cautious about the depth of the negative sentiments expressed based on what they project or perceive to be the ultimate goal of the current administration.

From a personal standpoint, I would hope that the government intervention that we’ve been witnessing of late is more akin to and can be likened to the air-bag in an automobile - it doesn't prevent an accident from happening and it shouldn't deploy until one happens. Like the air-bag, the government actions should help to cushion us from the full impact of the economic downturn. Similarly, just as it isn't advisable to drive around with a fully inflated air-bag, the interventions should not become permanent crutches that we become reliant on. Safe, defensive driving is always the better way to go.

Some notes of frustrations expressed in the emails were more pointed and pushed for the elimination of taxes (and thereby the government’s ability to spend or to intervene) and the adoption in its place a “user pays” system where the real tax payers are not forced to subsidize the cost of services rendered to those who don’t pay taxes. They argue that (i) American workers and industries are not competitive on an international level because of unnecessary regulations and taxes, and (ii) one half of the American population do not pay any taxes and they are the ones that take advantage of the services paid for or subsidized by the government through taxes imposed on the other half of the American population.

There is certainly merit to their claim that some of the recent government interventions have unfairly given the failing institutions a competitive advantage at the expense of others – why should any of the tax dollars paid by the innocent be used to save those who had lived vicariously and spent lavishly? In a free-market economy and in a true capitalistic environment, those institutions should be left to fail so that the laws of nature can prevail and others can come in and take their place.

Unfortunately, we have corporations and industries that have been allowed to grow so big that their executives can command remuneration levels that are sky-high while their failure have created a crater so big that it may cause other parts of the economy to implode. We also have been equally guilty of allowing unions to become so massive and powerful that the profits and resources that should have been reinvested into Research and Development to make better products to make our industries competitive have been diverted to fund benefits schemes that are way out of step with what the competition is paying.

If we truly believe that small businesses drive a major part of the US economy, we have to ensure that the laws favor them over the big corporations – or, at the very least, they are not at a disadvantage.

If we truly believe that executive compensation should be in line with the profits they are able to add to the bottom line each year, we have to ensure that a full assessment of the risks they have taken on are accounted for (and is transparent so that all investors are cognizant of their magnitude) and that the compensation is in tandem with obligations that stretches out for years beyond that in which the profits are reported.

If we truly believe that workers’ rights are trampled upon (with no unions to protect workers), we should enact laws that make them easily identifiable and punishable and leave the negotiation of wages and benefits to the dictate of the free market. If industry or a business underpays and is not competitive with other industries, it will so find itself with few qualified employees. What are elected government officials for if they surrender their duty and responsibility towards their constituents?

Government policy and intervention is a fact of our daily lives and are not all bad.

Monetary and interest rate policies affect businesses and individuals at every level but not everyone benefits at the same time. Businesses sure aren't complaining about the near zero interest rates of late but retirees depending on their savings for income are sure hurting.

The rich, in general, do not send their kids to public schools but millions of American families benefit from them. If only those who use public schools have to pay for those services, there would be a lot fewer Americans who can afford an education and that would be detrimental to the competitiveness of American employees and corporations.

Not everyone can afford the quality of healthcare that the insured, working population have access to thanks to the private medical insurance plans paid for (in full or in part) by their employers but it should not mean that the poor and those who are struggling and are uninsured should be denied even the very basic level of care. A healthy population can only be a good thing for the American economy. Anyone who says that the poor and uninsured can get medical attention by going to the Emergency Rooms at hospitals is in denial and ignoring the harsh realities of what that means. One can only wish on them the same ‘bad luck’ as they wish on the less fortunate.

A population that is continually progressing up the economic ladder can only be good for American industries and businesses. America needs a healthy, educated and progressively affluent consumer base. That’s what the economic growth in the last decades were based on.

These are exceptional times and we need exceptional solutions. We need to learn from history and not behave like Marie Antoinette who reputedly said “Let them eat cake” when told that the common, starving people on the streets of France had no bread to eat. Her head ended up on the floor of a guillotine.

These are times when the hard hit need the help of the more fortunate ones even more intensely. We can’t let the water drain from the lake and not be parched ourselves. After all, a rising tide lifts all boats.

Getting Back On Track

2009-05-07T14:01:00.001-07:00

The U.S. economy is in the doldrums and, although the pace of job-loss appears to be slowing, the number of Americans claiming unemployment benefits is still at record levels – 6.35 million as of April 25. Further job losses can be expected in the months ahead as consolidations and reorganizations continue. Examples include:

- GM and Chrysler’s plant and dealerships closings. Suppliers to the auto companies that will be impacted will also shed jobs as a result.
- Production capacity cuts at Boeing, one of the last bastions of the American manufacturing industry, as both U.S. and foreign airlines opt to push back the delivery dates of aircrafts on order.
- Continuing declines in employment rolls in banking as the recent voluntary and forced acquisitions move forward and duplicate positions are eliminated.

Many analysts expect the jobless rate will hit 10 percent by the end of this year.

Despite all these troubling signs, the U.S. dollar has stayed strong, regardless of how many interest rate cuts we’ve witnessed and how big the deficit has grown and how much more money the U.S. Treasury has printed. As a matter of fact, the U.S. dollar grew stronger as the global economic environment became more unpredictable. Why? Simple – it is the world’s reserve currency.

Unfortunately the status of being the reserve currency works against America’s interest in such difficult times. The artificially strong dollar continues to make it cheaper to import goods from foreign countries than to manufacture locally. While it may be true that American businesses’ productivity is higher, cheaper labor and lax controls (on things such as environmental impact) in developing countries make it hard for American manufacturers to compete on a cost basis. Fiber optics, high speed networks, and expanded bandwidth that enabled and accelerated the migration of technology and back-office jobs to lower costs countries will remain in place and keep those jobs out of the U.S.

To get back on the track of economic growth, we need to see a gradual but significant decline in the value of the U.S. dollar. Here are some reasons why:

- A weaker dollar will make imports and foreign labor more expensive, reversing the trend of both manufacturing and service job migration to off-shore locations.
- Conversely, a cheaper dollar would also make American made products more competitive in the world market.
- Foreign businesses (especially those in the EU) would want to invest in the U.S. to take advantage of a highly trained and productive work force.
- Subsidies to the agricultural sector would no longer be required as U.S. agricultural products are more competitively priced on the world market.
- Tourism would boom as visitors from other countries find U.S. destinations more affordable.

The counter argument is that America has become so dependent on imports that the higher prices on imported products will result in inflation and will ultimately hurt consumers. That may be true in the short term and for certain products – in the longer term, the U.S. can be largely self sufficient in many areas. Inflation is less of a threat until the unemployment numbers have declined significantly and liquidity has returned to normal. Beyond that, the Fed has plenty of room to aggressively raise interest rates to prevent run-away inflation.

Sure, we won’t be buying as many imported toys and gadgets but that’s not a bad thing. We’ve become overly reliant on toys (children and adults alike) to make us happy. The growing rate of obesity is not just from junk food and over-eating – it is also from a lack of exercise and time away from toys that do not help us burn up all those extra calories.

The best part of a cheaper currency is that businesses will not have to cut wages or staffing to be cost competitive. Consequently, the bleeding of jobs to offshore locations will stop. As American products, priced in U.S. dollars, become more attractive in the world markets, manufacturing and other jobs in the U.S. will grow again.

Crude oil and gasoline prices will likely go up as oil producing nations demand more dollars for each barrel of oil they pump out of the ground. However, the higher prices will have a positive long term impact as it will provide us with a greater impetus to move forward with the drilling for new oil-fields in addition to using alternative fuel and energy sources that are cleaner, greener and more sustainable.

Strange as it may sound, we may not have to take more specific action to bring the value of the U.S. dollar down. The yield on U.S. dollar Treasuries is practically down to zero and the massive amounts of money that the U.S. government has injected into the economy to help soften the impact of the downturn and to stimulate growth and job creation will, in the long run, deflate the value of the U.S. dollar. Diabolical…!

What we need to see happen is a resurgence in the markets’ confidence that the economy has bottomed out and a recovery is likely, albeit somewhat in the distance. Hopefully, the trend of the Dow in the past two months is a sign that the present administration has done the right things to calm a nervous market and to rebuild a confidence that had been badly shaken by the sub-prime mortgage meltdown and by Madoff’s multi billion dollar Ponzi scheme.

SIDEBAR

If you’ve been watching both the DOW and the currency markets, you’ll have seen the dollar’s strength moving in the opposite direction – each time the U.S. stock market is doing well, the U.S. dollar is weaker. Just as investors flock to the U.S. dollar in their “flight to safety” during uncertain times, they become less risk adverse in a more upbeat market and invest in currencies with the expectation of a higher rate of return.

Illustration 1 below shows that between September and December 2008, the drop in the Dow was closely mirrored by the drop in the exchange rate of the Australian Dollar (meaning that the U.S. Dollar got stronger). As the Dow began its recent climb starting in March, so has the value of the Australian dollar.

Illustration 2 below show the same movements in the Dow versus the Euro. The trends mirror each other but the relationship is not as tight as in Illustration 1 above as the Euro is less of a “speculative” currency.

Health Care

2009-04-30T12:52:00.001-07:00

A friend forwarded me an email with amusing cartoons about the “Golden Years” and appended at the end of all the email was the following poem (author unknown):

A row of bottles on my shelf
Caused me to analyze myself.
One yellow pill I have to pop
Goes to my heart so it won't stop.
A little white one that I take
Goes to my hands so they won't shake.
The blue ones that I use a lot
Tell me I'm happy when I'm not.
The purple pill goes to my brain
And tells me that I have no pain.
The capsules tell me not to wheeze
Or cough or choke or even sneeze..
The red ones, smallest of them all
Go to my blood so I won't fall.
The orange ones, very big and bright
Prevent my leg cramps in the night.
Such an array of brilliant pills
Helping to cure all kinds of ills.
But what I'd really like to know
Is what tells each one where to go!

Funny and yet scary thoughts at the same time. I certainly don’t want to have to be popping all those pills just to keep going.

As medical advances come up with all kinds of drugs and medication which permits us to live longer, the question we are all forced to face is whether or not the ends justify the means. How much of a burden are we leaving to the next generation as the cost of healthcare sky-rockets and tax the Medicare and Medicaid systems?

As the United States push forward to adopt a more universal health coverage, it is inevitable that the quality of care will drop off unless the government is able to fund the added costs. It is like a triangle with one of its angles representing “Scope”, the second angle representing “Quality of Care” and the third angle representing “Costs”. By expanding the “Scope” angle to bring more people into the healthcare system, the “Quality of Care” angle will tighten, unless, of course the “Costs” angle is expanded at the same time.

In order to keep the costs down so that more people can benefit from the universal health coverage without an increased tax burden on everyone, Americans will have to be taught how to take better care of themselves. It is not an impossible task – a popular TV show has demonstrated to the world that it is possible for even the grossly obese to lose weight and become healthy enough to get off their blood pressure, diabetic and other medication.

Millions of dollars are spent every year to encourage smokers to quit and to dissuade young people from taking up the habit. What we need is a similar push to get people off their couches and to start exercising and to rid themselves of eating habits that are detrimental to their long term health. Schools should have compulsory “healthy living” classes so that the next generation grows up armed with all the knowledge they need to stay away from poor eating habits and bad diets. Parents can set the example for their children to follow by adopting a more active lifestyle, getting their kids away from computers and video games and onto the playing fields, or their bicycles or scooters, and onto the path of a better and healthier life.

Despite the very vocal objections, cities have successfully banned smoking in public places, pubs and restaurants, realizing that an unhealthy public is a drain on the cities’ resources. They need to take similarly drastic actions to force restaurants to serve healthier food as the city authorities themselves strive to provide more parks, facilities and occasions for their residents to get moving. To fund these new healthy-living programs, they should implement a “Fat Tax” and make it applicable across the board for all sales of food / drinks that are high in empty cholesterol and fat.

Lifestyle changes are the hardest but the most effective way to trim health-care costs.

Herd Mentality

2009-04-08T12:09:00.001-07:00

In every age, culture and religion, people have a tendency to follow the crowd in the hope that somewhere at the front of the line is a leader who knows what he/she is doing.

When I was a lot younger, my older brother would suggest that we try walking along a busy avenue while pointing our fingers up at the sky or the side of a building as a prank. He was convinced that in no time at all we would have a crowd of on-lookers who would stop to stare at the same spot that we were pointing at.

If there are enough people in a crowd moving in a certain direction, the sheer force of the number of bodies going in that direction would move everything else along with it. This phenomenon of “momentum” and “critical mass” is understood by everyone who handles or has studied marketing. That is how market moves – up or down.

When enough people believed that the good times were rolling, there was an endless stream of investment, capital, credit, development, and spending, and everyone made money from their investments and felt good about it although not everyone managed to cash in on their paper profits. Few dared or wanted to challenge the status quo or the riskier bets that could upset the apple cart. Those that dared to suggest that greed has overtaken good-sense were quickly ostracized and ridiculed. After all, it is hard to imagine that so many people could be wrong at the same time.

When the size of hedge funds became significant (we’re talking about billions of dollars in some of the hedge funds) and when they, along with short-sellers and day-traders, began placing bets against the likes of Lehman and other publicly traded institutions, the sheer magnitude of their combined actions wiped out billions from the market valuations of their targets.

When corporations started to outsource jobs as a cost cutting measure, sending the jobs to cheaper off-shore locations while laying off American employees, others followed just to be cost-competitive, forgetting that by delivering better services and products and creating awareness that they help maintain US jobs, they can ‘turn the tide’ and effectively compete for the minds and wallets of Americans.

My rant here is not just about the herd mentality or the number of people going down the same path. My point is that there are not enough independent thinkers. There are not enough people who take the time to understand or to simply ask the questions: who, what, where, why, when, and, more-importantly, what-if?

True, some of us already have too many distractions and responsibilities to handle and, for good or bad, we hope that someone in a leadership position actually knows the answers and they are good ones. After all, that is what the ‘leaders’ have been paid or elected to do. We simply can’t do everything ourselves and we have little choice but to trust in the professionals to do their job. That having been said, I can’t think of a good reason why we are not asking the right questions or what prohibits us from asking those very simple questions.

Alas, some in the news media have stopped asking the necessary questions while others have lost their independence and ability to challenge the elected officials, the powerful, the rich and the popular thinking. For this reason, I applaud the New York Times and other web-enabled news media for allowing the masses and the thinking people to voice their feelings and to comment on various issues and topics of concern that we are faced with everyday so that “We the People” are heard. This new form of expression is at once liberating and empowering. While contributors and columnists continue to express their opinions and thoughts, their writing is enriched by the counterpoints and thoughts of their readers from around the world.

Popular thinking is an incredible force that one has to reckon with on a daily basis. What is popular may not be what is right - it is simply what the majority believes in at a given point in time – and as it is with all things, can change. I’ve always maintained that in many cases, the only difference between right and wrong is the belief of the majority over that of the minority. In a society where more people are left-handed, the right-handed ones would be considered as ‘goofy’.

Hang up on the ‘herd mentality’ and start asking questions.

A Market on the Rebound?

2009-04-02T14:50:00.000-07:00

The stock market has been on the rise. Yippee!

On March 9, the Dow (DJIA) hit a new low, closing at 6,547 – its lowest mark in a long, long time. Less than a month later, the same index hit an intra-day high of 8,075 on April 2. Hurrah! Hurrah! We’re up by over 23% since we hit that low.

We all heave a sigh of relief. Better days must be ahead, surely…?!?! Or are they?

Should we abandon all caution and start betting whatever’s left of the family home and the kitchen sink into new investments in the stock market and hope to recoup some of what we had lost in the downturn which began over a year ago? Should we take the risk now in order to be early to the game – after all, the early bird catches the worm?

Like you, I have been tempted. I like to be optimistic but I am hesitant. I’m not sure if the extended market uptick of late is based on solid evidence of improving performance or if it is the beginning of another round of “irrational exuberance”?

The trouble with looking at stock indices as a guide for how well the economy is doing (or is projected to be doing) is that the stock markets take into account forward looking estimates which are purely conjectures – assumptions based on other assumptions which in turn are based on further assumptions.

Lest we forget, faulty assumptions were essentially what brought about the dramatic economic downturn. There were too many untested and unrealistic assumptions:

- The assumption that bankers and builders took, that home prices can continue its spectacular rise although the take home pay of the average worker has stayed flat or that it has decreased in real terms or that job growth has been dismal.

- The assumption commodities traders took, that crude oil and gasoline prices can hit new highs everyday with no impact to the end products or services costs and the consumers’ ability to consume.

- The assumption that credit default swap insurers took, that the risks attached to mortgaged based securities are more hinged on the issuing party’s credit rating rather than the ability of the consumer to service the underlying mortgages.

- The assumption that executives at various corporations took, when they sent all kinds of jobs overseas to improve their bottom line (and to get a bigger profit based incentive bonus), never considering the impact that the loss of jobs en masse have on the ability of Americans to consume those very same products or services they produce.

- The assumption that the authorities took, that regulations are unnecessary and that the markets will regulate themselves as the market players will act wisely.

We were all too seduced by the idea of fast money and instant wealth that we lost sight of the risks and consequences of faulty assumptions and the need to understand and manage them.

Despite the outcry and objections of some, the government has (wisely or unwisely) poured in trillions to stave off economic disaster and to bolster confidence. The players are coming back into the market and credit is ‘loosening up’ but that does not mean that the economy is well. It will take time to heal.

Credit is only useful if consumers have the means or ability to borrow and that depends on their capacity to repay which in turn depends on their income, which in most cases, depends on them having jobs.

Similarly, corporations will borrow to invest in production capacity only if they believe that there will be a demand on their goods or services and that again will depend on consumers having the capacity to spend which again depends on whether they have jobs.

Until you hear that new jobs are being created and the employment trend is on the upswing, don’t believe everything you see or hear about the market on the rebound. The job creation effect of the multiple stimulus packages will take time to make its way through the system before the economic recovery can be on a steady path.

Keep your eyes open and your ears pinned to the ground to watch out for significant projects and events that create a demand for workers or raw materials. When you do, that will be the time to put your money into investments that will benefit from the positive impact.

In the meantime, if you “play” the market as an individual, know for sure that you are putting your money at risk, betting blindly that the index will go one way or the other. It is like rolling the dice and hoping for the best.

I guess I’ll never be filthy rich because I am inherently not a speculator. It is OK with me. I sleep better at night not having to worry about the bad assumptions or the risks.

[Addendum: The above was posted on April 2. On April 3, the Bureau of Labor Statistics reported that unemployment climbed to 8.5% in March (up from 8.1% in February) with the US economy shedding another 663,000 jobs in the month. The Bureau also adjusted the January newly unemployed numbers from from 655,000 to 741,000.]

The Economy is Bad – So Beware!!

2009-03-07T13:50:00.000-08:00

Yes, we already know the economy is in a poor shape – we hear or read about jobs lost or shops and factories closing with a frightening frequency. Based on what is counted alone, unemployment has reached 8.1 percent in February 2009 and the trend is not encouraging. A total of 12.5 million people are unemployed, an increase of 5.0 million in the last twelve months alone (source: US Dept of Labor - http://www.bls.gov/news.release/empsit.nr0.htm).

We are so inundated by the endless streams of bad news that some among us would like to tune it out altogether, especially if it has not impacted us in a direct way. We’d go crazy with fear if we gave in to the media’s relentless drive to get the same bad news across every day. We cling on to every bit of good news we can, hopeful that things will eventually turn around.

The point of this note is not to give you more bad news on the economy. It is to warn you and to have you warn those around you of the many scams that are proliferating via email. Recently, I’ve come across an incident where the scam artists even used regular mail to send out a very genuine-looking-fake-check with a letter encouraging the intended victims to actually take it to their bank and deposit it. The clear giveaway, of course, was the condition that the victims not tell anyone about it before the whole transaction was complete. I would likely have brushed it off if I had not come across another incident where a retiree I know lost money to a different variation of the same con game.

The recession does not mean that the con artists, the scammers and the opportunists are going to give up and walk away. To the contrary, they are taking full advantage of the situation and putting their best game forward to milk the unwary. What is worse is that they are employing hooks that will pull in those who genuinely need help the most.

Think of it – when times are good, and you have a job, you are less likely to fall for the “work-at-home” schemes or “you’ve won a foreign lottery” claims.

When you are out of a job, an email or a flyer telling you that you can earn a few hundred dollars a week sitting in-front of your computer, you’ll be more than a tad tempted to take a look and see what it is all about. It is exactly what the con artists are relying on – your willingness to take a chance.

When you are no longer able to or when you no longer have work, you’ll understand what it means to be afraid – of living with no health insurance, of not having food on the table, of not being able to pay the rent, and, worst of all, of having to tell your loved ones of the very things you had never imagined you would have to say to them. In your desperation, you might just try anything and you’re a clear target for the con artists to prey on.

When banks were paying a fair interest on deposits and corporations were distributing dividends to their shareholders, the elderly could live off the income from their investments and not worry about eating into the capital they have set aside. Until the banks and corporations return to health, every elderly person is revisiting their retirement plans, funds, and income and scrimping to avoid that horrible possibility of being destitute before their days on earth are done. They are the easiest of victims and a gold mine for the con artists.

Take a few minutes and talk to siblings, your friends, your parent and your grandparents about such tricks now – it is your duty! If you care at all about their well-being and about their financial security, now is the time to do it. You may not be able to do anything about improving what they have set aside for their silver or golden years but you can, at the very least, do something to protect their nest-egg.

Remember, they may not be as well informed as you are about the treacherous tricks that exist today. The older generation grew up in an age where the tools to reach the masses with the same con schemes were not as readily available. Today, a 1-800 number can be routed to anywhere in the world to a genuinely sounding ‘account officer’ in a country where laws do not exist to put such con men away.

If ever there is a time for everyone to be more vigilant, it is now.

When The Going Gets Tough, The Tough Goes Shopping

2009-02-17T07:58:00.000-08:00

It is probably shocking that I should cite (read “promote”) this oft quoted, sassy saying at a time when unbridled spending leveraged on paper gains in asset values appears to be the root cause of what ails our economy. We are in the throes of a big hangover after an all night party, an orgy of booze and whatever else that had added to the fun when it all happening, but, when the clock rang in the new day, has turned out to be yet another case of misbegotten self-deception and ignorance of the consequences of our uncaring actions.

Congress has just passed a $787 billion package of economic stimulus and the President will be signing it into law later today. It is great that something is being done but the reality is that however big it appears to be on paper, it is not quite enough and, echoing the sentiments of the more pessimistic economists, will only help stave off the onset of an economic depression. Extended unemployment benefits is only a temporary relief, barely enough to cover the true cost of living of those who have lost jobs involuntarily. Those who were self-employed do not even have the benefit of unemployment insurance. What we need in addition to job creation is job preservation. We should not keep infusing more blood into the patient if we don’t take the necessary steps to stop the bleeding.

I've been passing on the same message to my friends and acquaintances who have 'recession proof'' jobs and who have been wise to avoid the many ills that led to this recession - go out and spend some money. Forget about buying gold or putting your money away in an offshore account to protect your wealth. If the US and World economies do not recover, there is nowhere truly safe for one to disappear to. What we have seen in terms of collateral damage around the world as a direct or indirect reaction to the problems facing the US demonstrates the tight integration of the world’s economies. We may be living in different countries but we are not isolated from each other’s ills.

Why do I preach the need to spend to the more fortunate ones who have planned and saved for a rainy day? The smart ones spend counter-cyclically - work and save when jobs are plentiful and the pay is good, buy when things are cheap and demand is weak (you get the best picks). If you don’t do your part to help, you may someday conclude that you are not that smart after all.

Here are some suggestions on what you might do that can help the economy recover:

- Go out to dinner. If you can, invite someone you know who have lost a job - it will cheer them up and keep the restaurants running and a long line of direct and indirect jobs going. For one thing, these jobs cannot be outsourced to a foreign country.

- Go on a vacation at a domestic resort. Ski, bathe in the sun, kayak, ride a bike, etc. These industries employ the highest ratio of workers to customers. Keeping jobs going is easier than having to 'create' new jobs. You won’t be getting a tax credit for this under the stimulus package but do it anyway.

- Go shopping. Buy the pair of running shoes you have been meaning to but have not had the time because you were busy working. Buy that tie-dyed T-shirt or hand-made costume jewelry that you’ve always wanted from the local artists. Buy from your local farmers and grocers. While you are at it, give a go at haggling over the price – you’ll be pleasantly surprised if you do ask. You’ll enjoy the whole experience and you’ll be back for more – your ego needs to know that you can do better the next time. If possible, favor the small businesses - they are generally higher in the employee to customer ratio than the big chains. Don't fret over whether the item you buy is 100% local - bringing the item to your local store employs many, many people. Think of the jobs involved in the shipping and warehousing process. Even the task of displaying them on shelves and taking your money at the checkout desk involve people. A big portion of what you pay for any item goes towards these value-added services.

- Trade in you gas guzzling SUVs for the more eco-friendly vehicles - it does not have to be a hybrid that go 50 mpg. You'll be saving the earth and keeping yet another long line of jobs going - from the people in the assembly lines to the salesmen and to the garages that service your cars. Take advantage of the tax incentives in the stimulus package. You'll be treated like gold and you'll get deals that you could not have dreamed of during the boom years. Besides, you'll be better prepared for when oil and gas prices shoots up again.

It takes someone with the right combination of brains and guts to take the right actions. Now is the time for the tough to go shopping.

When the economy is on the road to recovery, you can revert to saving and putting money aside for the next ‘rainy day’. Be smart.

Invest Wisely

2008-12-30T15:31:00.000-08:00

It may be a surprise to you if I were to tell you that we (you and I) make investment decisions daily – we don’t have to be a player in the stock market to make investment decisions.

Don’t believe me? Just think of what you had to do today.

Most likely, you woke up to the sound of your alarm clock – that reliable bedside gadget that greets you each morning with a loud jarring noise or, preferably, with some soothing sounds to ease you into your day. It was a tiny but necessary investment and, in addition to the cash you had to spend, you probably had to invest some time to test the ring tones on a number of alarm clocks before you found the one that you liked.

Having rubbed the last bit of sleep from your eyes, you headed for the showers and invested time in prepping your body for the day. You took care of your oral health, the way your hair looks, and, if you like to deepen the mystique, the ‘je ne sais quoi’ or the ‘something in the air’ about you, your daily routine ended with your dabbing on some cologne, after shave or eau de toilette.

Your decision on the clothes you wore was likely influenced by your knowledge of the type of meetings or occasions you have on your schedule for the day. If a meeting or an occasion was important enough, you would choose to put on an outfit with matching accessories – an ensemble that would make a statement - for which you had invested a handsome amount of money and set aside for just such events.

I think you get the drift. We are always investing – consciously or subconsciously – and if we think of our daily actions as such, we would most likely be smarter about our choices because we would be forced to think about the payback.

Investing in a healthy, balanced daily diet will yield us years of good health and fewer visits to the doctors for all kinds of preventable ills. Investing in our continuing education and awareness of the changes in the world around us will keep us one step ahead of our competitors and prepare us for the challenges ahead. Investing time with family, friends, colleagues and social networks (religious, professional, etc.) will enrich our lives together and our ability to interact and react, and to accept each other, warts and all. Investing in cleaning up and keeping our environment healthy will allow us and future generations to live and breathe on this earth for many, many more years. Investing in teaching love and respect for ourselves and for others who are less fortunate and in need of a helping hand will help counter the actions of those who chose to teach fear, hate and bigotry, perpetuating wars and needless killing.

If we learned anything in 2008, it is clear that we cannot afford to sit idly and quietly, and hope that the near collapse of the financial, insurance, auto and other industries due to weakened controls and accountability will not happen again. As investors in the many companies that the government has bailed out (whether or not we were for it), we have a duty to require of those in whom we have put our trust to give a clear accounting of their actions and results. Our economy, our country and our future depend on us being wise investors.

When I was in my early teens, I had a plain looking poster that had an image of an apple with a good chunk bitten off the top right corner. Beneath the picture were the words “Today is the First Day of the Rest of Your Life”. It conjures up the image of Adam and Eve taking a bite from the fruit of the tree of knowledge of good and evil and forever lost their innocence. I think that sums it up nicely – what we chose to do today will have a bearing on the rest of our lives and the lives of those around us.

As we head into the New Year, it is my hope that we can and we will think of our decisions and actions as investments in the future and that we will do so wisely. We all had a bite of that bitter fruit in 2008 and we are no longer innocent.

To B or Not To B

2008-12-18T14:49:00.000-08:00

High on everyone’s minds these days is the question of whether or not the government should bailout (the "B" in the title of this piece) the big three US auto-manufacturers. Everyone has some sort of an opinion, and arguments have been put forth from both sides of the aisles as to what is good and what is necessary and what is fair.

It amazes me that some opinion leaders would summarily dismiss bailing out the automakers without offering any alternative suggestions at all; opting to cling to the purest capitalistic dogmas (let them fail and go into bankruptcy) and ignoring the social responsibility that we have towards one another, especially in such difficult times.

Without a doubt, a bailout composed purely of injecting cash into the US auto-manufacturers will not work other than as a temporary fix to stem the bleeding. The single biggest factor behind the current crisis they are facing is the sharp drop in demand for new automobiles. This is evidenced by an escalating number of new vehicles sitting in inventory - you can see the gleaming new vehicles in the ports and in the parking lots of automakers - and the dismal sales numbers reported by all auto manufacturers, including the foreign owned ones. We don't hear of the foreign automakers going to Congress for a bailout only because they are foreign owned, not because they are not hurting, probably just as badly.

The decline in demand stems from problems we are experiencing around the country where significant job cuts are being announced almost on a daily basis. Until there is a turnaround in the economy and the spate of bad news and worrisome layoffs ends, the auto industry has little hope of surviving (even if it were to enter into an orderly bankruptcy) if help is not forthcoming. The danger that we face as a nation is that the livelihood of countless numbers of families that are tied to the auto industry directly and indirectly will be lost.

While cost cuts can be achieved through restructuring, stimulating demand for new cars in a drawn out economic recession is a whole different ball game. Consumers who would be in the market for a new car under normal circumstances will, in these uncertain times, defer the purchase till they see some silver lining on the economic horizon. Further complicating the problem is the hesitation of banks and financial institutions to provide credit or to lend money – consumers needing a new vehicle are hamstrung by the new and higher credit score requirements they need to show in order to get a loan.

Even with the proposed bailout money, production will have to be cut significantly till the excess inventory of unsold cars is absorbed by a recovery in demand and, like it or not, further production cuts will mean more lost jobs.

A better option may be for the government to issue vouchers to subsidize the purchase of vehicles – with conditions attached of course, including for example, a requirement that the new vehicles must be manufactured in the US and must meet certain gas-mileage standards. If the subsidy is attractive enough, there will be a renewed demand and the industry will have the breathing room they need to retool and renegotiate costs to be more competitive.

Divide the proposed bailout of $14 billion by whatever makes sense as the subsidy value of each voucher and you get the answer to how many new, US made vehicles that can be sold as a result of the stimulus. Just as an example, at $5,000 per voucher, it could generate a demand for 2.8 million new vehicle sales. Using the rule of thumb that a new vehicle loses 20% in value the minute it leaves the car dealer’s lot, the subsidy should be capped at 20% of the price of the vehicle so that any temptation to abuse the system by using the vouchers to buy new vehicles and reselling them at a profit is eliminated.

With the assurance of a resurgence in demand for new vehicles, banks and financial institutions that are currently hesitant to lend to the US auto-manufacturers will be more willing to step back into their role as lenders.

The vouchers would also benefit consumers as they will need less credit to complete the purchase and the risk exposure for the lending institutions will be equally reduced as a result. Of course, not all taxpayers will be able to benefit from the vouchers unless they are in the market for a new vehicle and are prepared to pay for the remaining price of the vehicle that the vouchers do not cover. In the broader picture, everyone will benefit from the fact that more people remain employed and they, in turn, will consume goods and services that will keep more people employed. We are all inter-connected – what goes around comes around.

Part of the cost of the vouchers can be borne by the auto-manufacturers and dealers themselves – they already are offering the kitchen sink to lure potential buyers into their showrooms. They have nothing to lose by participating in a scheme designed to keep them afloat.

Until the new administration can start to put into place whatever package they have planned to stimulate job growth and spending, it is hard to see how else the auto-industry can recover. The vouchers are effectively still a bailout but a more palatable one, helping not just the US auto-manufacturers but taxpayers who are prepared fork out the money to buy a new vehicle.

It is time to think ‘outside-of-the-box’ and to come up with more intelligent solutions.

Challenging? Yes. Impossible? No.

This is America. This is the land of ideas and creative thinking.

Ignore At Your Own Peril

2008-12-11T08:47:00.000-08:00

Lest it be misunderstood, the crux of my previous posting titled ‘Pointing Fingers’ was not to absolve those people in positions of power. By their callous and careless actions, they have created the gigantic sink hole we are witnessing – a crater filled with lost jobs, foreclosed homes and wiped out retirement savings. History will judge them for what they have done. Their reputation will turn out to be less-than-flattering when the book is closed on this chapter of our history.

The point is that we need to take responsibility for our individual actions because collectively ‘We the People’ have the power to determine the course of how things turn out. By our daily decisions on what we do and what we consume, we have the power to determine which services or products and, by extension, which companies succeed and which fail. Because what we can expect in the future is determined by what we do today, we have a duty to ourselves and to future generations to be more thoughtful and less ignorant of the longer term impact and benefits of our decisions.

If we had not ignored the possibility that a finite supply of fossil fuels would result in ever increasing energy costs, we would have more aggressively pursued the development of technology to tap into alternative and renewable energy sources. We would not have abandoned the idea of the electric car and we certainly would not have bought into the deceiving appeal of gas guzzling SUVs. We would have severely restricted or discouraged suburban sprawl requiring longer commutes.

If commodity traders and hedge fund managers had not ignored the fact that oil prices above a certain threshold would have the impact of a sudden and massive reduction in consumption, companies would not have had to cut back production and factories would not have had to close or to lay off workers.

If executives in corporations had not ignored the impact (to the very consumers they rely on) of their relocating all types of jobs overseas, there would have been a less of a drain on the US consumers’ power to spend and there could have been fewer home foreclosures.

If bankers and housing developers had been less speculative and had not ignored the possibility of the housing bubble bursting, fewer new homes would be on the market and fewer sub-prime mortgages would have existed and fewer foreclosures would have resulted.

If home buyers had carefully weighed their income against their mortgage obligations and considered the effect of a change in circumstance such as illness, loss of job, decline in property values, they would not have taken risks they can ill afford or fallen prey to predatory lending practices.

A progressive society is one that has a conscience and does not chose to ignore the future consequence of its actions today. Ignoring tomorrow does not make it go away. We need leaders that are forward thinking and who understand that we can’t mortgage our children’s future for our own short term enjoyment.

We can learn to say “NO” and we can learn not ignore the danger signs. Some did and are surviving the present crunch. It was encouraging to hear on the news today that a small bank in Kansas stuck to its policies by not making risky loans in exchange for higher profits. In addition to remaining financially sound, it helped its customers by discouraging speculative borrowing.

Survival is a long-term game and ‘We the People’ are all in it together.

Pointing Fingers

2008-12-09T09:52:00.000-08:00

The economy is in trouble and everyone is pointing fingers – well, almost everyone. I’ll make an exception for the children who are too young to know and for those who came through the firestorm with a handsome profit as well as those who had the foresight to anticipate the collapse of the markets and are likely to remain relatively unscathed by the troubles that are yet to come.

Find any man or woman on the street and ask, “Who is responsible for this mess?” and you’ll be bound to get an earful of that person’s thoughts and, I might dare add, venom for those whom they strongly feel have mismanaged and upset their hopes and dreams.

The list of the ‘guilty’ is long. The favorites (not in any particular order) include: overpaid top executives asleep at their jobs; unionized labor with guarantees and benefits that make American products un-competitive in the marketplace; the Administration and Congress for allowing the deregulation of the banking industry; the Fed for not raising interest rates early enough or high enough to nip the housing bubble in the butt, the Treasury Secretary for allowing one of the world’s biggest issuers of commercial papers to fail; commodity traders for pushing the world’s oil prices up to unsustainable levels; mortgage brokers for pushing loans to people who can ill afford home ownership; hedge funds and short seller for their bets for or against a company or a trend; corporations that looked only to short term gains and resorted to the mass-relocation of jobs to developing countries to the detriment of the consumer based US economy; and a media that is too tame to challenge the status quo.

There is no doubt that we're in a perfect storm that has been long in the making – all elements contributing to the disaster coming together at the same time while everyone at the wheel was caught sleeping.

What many commentators will fail to acknowledge is that when we point a finger at others, there are three other fingers on that same hand that point back at ourselves. We, as a whole, are equally to blame – we wanted more for less, we wanted the benefits without considering the consequences and, rather naively, we wanted to believe those who tell us that all that is possible.

Whether or not we agree that we are part of the cause, we cannot stand aside or do nothing and say, “Not I” or “Not on my dime”. While that would be a natural reaction, it is a self-centered one – the same type of “Me First” thinking that led us down this hole in the first place.

Knowing we are in a hole and we are in it together is the first step of the twelve step program to recovery. Kicking the addiction to short term gains requires acknowledgment that the habit is self-destructive.

When we next feel the urge to point fingers, we should look in a mirror. Hopefully, the face staring back at us is a wise one – one that has learned enough and has done enough so that pointing fingers won’t be necessary.