JimPinto.com - Connections for Growth & Success™
No. 293 : 31 March 20110

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

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Invensys CEO fired just before year-end

This Pinto prediction was easy: Invensys CEO Ulf Henrikkson would be booted before too long.

Ulf became CEO in 2004. While the press thought he was good, Invensys Insiders rarely saw him, and he simply flailed around with a series of bad decisions which kept the company spiraling downwards.

There was the debacle of passing up several excellent Foxboro insiders and appointing Paulett Eberhart, who transferred Process Systems HQ from Foxboro to Dallas and was fired a year later with NO explanations. This left the Division dangling in Dallas.

The next new appointee, Sudipta Bhattacharya, transferred India software services to Cognizant. He then merged four units and nine different brands into Invensys Operations Management with a "strategy" too obtuse for me to understand; many wondered how the name-change could be enough of a game-change. But then IOM won contracts with China Nuclear Power; beyond that, there's no big backlog.

Meanwhile, the normally highly profitable Rail Division was in a ton of trouble. Last November Ulf announced publicly that China Southern Rail (CSR) was acquiring Invensys. When it didn't happen, the weblogs suggested that he was simply trying to boost the value of his stock, which did go up on the news.

The Invensys weblogs kept airing a lot of the dirty laundry, presumably from perennial malcontents, but spreading to much more reasonable and articulate bloggers who cited specific problems. Invensys was cratering. Ulf was silent.

The weblogs were packed with a plethora of problems. And yet there was an ominous silence from the top; no changes to company "guidance" for financial results.

Clearly something would break by fiscal year-end (March 31, 2011). A week before, the news spilled in with bursts of blogs. Ulf was gone. There was no real explanation other than the usual sweet-nothings. Board chairman Sir Nigel Ward had evidently woken up and appeared to be in command. Finance director Wayne Edmunds was "interim" CEO.

Ulf has a one-year contract, and is likely to negotiate a "golden handshake". We'll know how much he gets soon enough; it will surely be less than what he'd have got if he had sold the company.

Invensys reassured nervous investors, still claiming that results would be "broadly in line with market expectations". The stock plummeted by about 6%, but then recovered 3.5% the next day with expectations of acquisition by one of the majors. But then again, it dropped sharply this week after analysts said the shares had been driven too high by hopes of a bid.

Clearly the company will be sold. The China Rail noises, plus IOM's nuclear contracts in China, should interest competitors who include Siemens (reported to be ready with a big war chest), ABB, Honeywell, Emerson, and two Chinese firms. No offers yet, but they're all milling around, waiting for someone to start the bidding.

The automation companies won't want Rail, and vice versa. They're looking for someone to buy and sell off the unwanted pieces, else the board will have to sell off piecemeal - whichever tactic yields more for shareholders.

Stay tuned.

Click Invensys tight-lipped after ditching chief executive

Click Invensys climbs on bid reports

Click Read the steady stream of commentary on the Invensys weblog

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Useless college degrees

For a half century or more, Americans have sent their kids to college to prepare them for higher-paying jobs and a better life than their parents. Going to college was the route to success.

Now, a new report from Harvard Graduate School of Education argues that greater emphasis on vocational training, apprenticeships, and technical job training outside of a formal college setting would better serve America's young people. The study, "Pathways to Prosperity: Meeting the Challenge of Preparing Young Americans for the 21st Century", says that going to college is not the right route for many, especially young men.

Going to college works well for affluent students who can draw on family and social connections. But it's becoming increasingly irrelevant. The US now has the highest college dropout rate in the industrialized world. Today, men make up only 43% of enrolled students on American college campuses.

In Europe, and especially Germany which is a model for growth, students move on different tracks, depending on their abilities and inclination. They place more emphasis on vocational training in high school - teaching adolescents how to use their skills in the real world.

We need to fix American education - particularly the inequalities Americans face at the starting line. Bright children from poor families are less likely to get the right education than the much less intelligent children of the affluent. This represents a huge waste of the country's human potential.

College education is not the answer. Having a college degree won't guarantee a good job. Practical knowledge and proficient skills will.

Click NY Times - Krugman - Degrees and Dollars

Click Read the report "Pathways to Prosperity"

Click Redefining "Meaningful Work"

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The Web Is Dead. Long Live the Internet

WIRED magazine has done it again. The cover of the August 2010 issue proclaimed, "The web is dead". This was a seminal piece that points out key trends. Here is my summary.

A decade ago the Web browser was the focus. It seemed inevitable that the Web would replace operating systems and PC software. Scott McNealy of Sun promoted the mantra, "The Network is the Computer".

The "open" World Wide Web was free. But it was out of control. Simpler, more effective "closed" applications, "Apps" are what everyone is using.

I wake up and check email on my iPad - that's an app. During breakfast I read the New York Times, and then my messages on Facebook and Twitter - more apps. I listen to a podcast. From my home in San Diego, I look in on my son's family in Florida via Skype and my grandson shows off his new skills with a saxophone. More apps. During the day (I'm retired, which means I do what I like to do) I listen to background music selected from my favorites by Pandora while I write my eNews. Then I maybe watch a movie on Netflix via my Google TV box. I spend the day not on the Web, but the Internet.

The big shift has been from the wide-open Web to semi-closed platforms that use the Internet for transport, but not the browser for display. This is driven by the rise of the smart-phone model of mobile computing. This is what consumers are choosing because these "closed" apps just fit better. The information comes to them; they don't have to find it. It's easier for consumers to use, and easier for suppliers to make money.

The Web is just one of many applications that exist on the Internet. It uses the IP and TCP protocols to move packets around. This architecture is the revolution. Today the content seen via a browser accounts for less Internet traffic: 25% and shrinking. The applications that account for most traffic are: email, peer-to-peer file transfers, company private networks (VPNs), machine-to-machine communications, Skype calls, online games, iTunes, voice-over-IP phones, iChat, and Netflix movie streaming. Most of these Internet applications are closed and proprietary.

The shift is accelerating. Within 3-5 years, the number of users accessing the Net from mobile devices will surpass access from PCs. Because screens are smaller, mobile traffic tends to be driven by specialty software, mostly apps, designed for a single purpose. For the sake of the optimized experience on mobile devices, people use the Internet, but not Web browsers. Fast beats flexible.

Much as people like freedom and choice, they also like things that just work reliably and seamlessly. And they pay for what they like. Hey, have you looked at your cell phone bill lately?

Click The Web Is Dead. Long Live the Internet

Click Blogging Is Dead Just Like the Web Is Dead

Click Is the web really dead?

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The killer-apps of progress

While we are discussing "Apps", and the super-apps which some call "Killer Apps", here's a concept I like: The "apps" that made America great, but are now being used in other countries to catch up.

The Harvard historian Niall Ferguson has just written a book, "Civilization: The West and the Rest", to be released on November 1, 2011.

Ferguson writes that for several centuries the West had "patented" six killer Applications that set it apart, the secret sauce of Western civilization:

  1. Competition
  2. Science
  3. The rule of law and private property rights
  4. Modern medicine
  5. The consumer society
  6. The work ethic.
Japan was the first to use ("download") those apps and, within a few decades after their defeat in the war, their economy jumped to become No. 2, second only to the US. Now China and India and several others are using the "killer-apps" and growing fast.

America's success has come because of policies and developments of the 1950s and '60s: the interstate-highway system, massive funding for science and technology, a public-education system that was the envy of the world, generous immigration policies.

The US remains the world's largest economy, has the largest military by far, the most dynamic technology companies and an entrepreneurial business climate. But, at the same time, it is diluting the things that made it great and is steadily falling behind.

The following rankings come from various lists, but they all tell the same story. According to studies by the Organization for Economic Co-operation and Development (OECD) and the World Health Organization, American 15-year-olds rank 17th in the world in science and 25th in math, 12th among developed countries in college graduation and 79th in elementary-school enrollment. US infrastructure is ranked 23rd in the world, well behind that of every other major advanced economy.

America is 27th in life expectancy, 18th in diabetes and first in obesity. But too, America has the most guns, the most crime among rich countries, and the largest amount of debt in the world. This slippage is because we are tackling our economic problems politically. American politics is now hyper-responsive to interests that are dedicated to preserving the past rather than investing for the future. Politicians are tuned to those with cash to spend. There are no lobbying groups for the young, for next generation of industries and innovation.

There are no special-interest groups for our children's economic well-being, only for people who get government benefits right now. The whole system is geared to preserve current subsidies, tax breaks and loopholes. When the time comes to make cuts, guess whose programs are first on the chopping block.

America's decades old investments made it great. Today, the country is stuck in a morass of political infighting to preserve the past. This is causing us to slip, while the world is catching up.

Click Harvard's Ferguson Praises West as China Roars Ahead

Click TIME: Are America's best days behind us?

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The 3D Manufacturing Revolution

The industrial revolution of the late 18th century brought the mass production of goods and created economies of scale which changed the economy and society in ways that nobody could have imagined at the time.

Now a new manufacturing technology is emerging which does the opposite. Three-dimensional printing makes it as cheap to create single items as it is to produce thousands and thus undermines economies of scale. It will have as profound an impact on the world as the factory did.

Most of today's manufacturing is "subtractive" - it trims chunks of material to required shapes - cutting, grinding, shaving, trimming. Then the parts are assembled into final products.

3D printing is an additive manufacturing technology. A 3D printer works by using a computer to create a series of cross-section slices. Each slice is then printed one on top of the other to create the 3D object.

The additive approach to manufacturing has many big advantages. It cuts costs by getting rid of production lines. It reduces waste enormously, requiring as little as one-tenth of the amount of material. It enables the production of a single item quickly and cheaply. Parts can be created in shapes that cannot be achieved with conventional techniques, resulting in new, much more efficient designs.

Parts and assemblies can be made of several materials with different mechanical and physical properties in a single build process. It's as cheap to create single items as it is to produce thousands, so it undermines economies of scale. It may have as profound an impact on the world as the factory did more than a century ago.

3D printing is already competitive with plastic injection-molding for runs of up to 1,000 items, and this number will rise as the technology matures. Because each item is created individually, each one can be made slightly differently at almost no extra cost. Mass production could give way to mass customization for all kinds of products.

Today, the 3D process is possible only with plastics, resins and some metals, with a precision of around a tenth of a millimeter. It is currently used just by hobbyists and in a few academic and industrial niches.

Since 2003 there has been large growth in the sale of 3D printers. A basic 3D printer, also known as a fabricator or "fabber", now costs less than a laser printer did in 1985. But 3D printing is spreading fast. The technology will improve and costs will fall.

The beauty of 3D technology is that it does not need to happen in a factory. Small items can be made by a machine like a desktop printer, in the corner of an office, a shop or even a house; of course, big items need a larger machine.

Nobody could have predicted the impact of the printing press in 1450, the steam engine in 1750, or the transistor in 1950. It's impossible to forecast the long-term impact of 3D printing. But the technology is coming, and it is likely to cause a significant disruption. This will be a major inflection point of progress.

Click How a new manufacturing technology will change the world

Click The Economist on 3D Printing

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Responding to the last eNews issue about technology eliminating factories, David Bell [dbell.greyskies@shaw.ca] sent these insights:
    "I think when we talk about 'manufacturing' we're invoking the 'factory' metaphor. Factories are gone; replaced by a global ecology of designers, subcomponent (automated) producers, distributors, systems integrators, brand mangers and service providers.

    "Why do we want to foster manufacturing (as a factory) here again? We usually assume that this would bring 'high value' employment. Statistics over the last 30 years overwhelmingly indicate the opposite. So it wouldn't bring back jobs.

    "I'd like to propose a different answer. We want 'manufacturing' (not necessarily factories) because we want to design and create our own future, to build a world around us that we're proud of, a world that affirms our values and aspirations. Manufacturing is powerfully human and creative.

    "So we might say that what we really want is to focus on (become dominant and provide leadership) is the creative dynamics in that same old ecology. But factories are not the objective.

    "The objective is to design and create a more successful world for ourselves. That's something to take pride in, something to work and sacrifice for. That's how we started, out there on the beach trying to get that plane in the air because we wanted to prove that we could fly. If we've lost that, if that's gone, then that's the problem. Not factories.

    "I worry that we've lost our way."

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Andrew Bond [andrew@abpubs.demon.co.uk] from the UK insists that automation won't eliminate jobs:

    "It's not often I don't agree with you but, while I go along with your analysis of the impact of the extension of automation into areas beyond manufacturing, I don't believe you're right about the long term consequences.

    "This is the same argument as the one they had about what would happen when the Spinning Jennie replaced the Spinning Wheel; or the Power Loom and Flying Shuttle replaced the Hand Loom. You and I are both old enough to remember the dire predictions in the mid-to-late '70s of the impact of microprocessors.

    "In the UK currently, despite the impact of automation, the current recession, the export of manufacturing jobs to the Far East and the worryingly high level of unemployment, in particular youth unemployment, there are more people employed than there have ever been. Many, if not most of them, are doing things that weren't even heard of 20 years ago.

    "Whoever thought, for example, that you could make a business out of washing cars by hand in preference to by machine. Yet today there are literally thousands of outlets in the UK doing just that.

    "Just because we can't imagine where the new jobs will come from doesn't mean that they're not coming."

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Ken Heywood [KHeywood@processcontrolservices.com] is worried about the disappearing middle-class:

    "Yours is a dire view of a middle-class future. As the middle-class goes, so goes society. We see a widening gap between the wealthy and everyone else.

    "Will the economy reach equilibrium or implode? The wealthy continue to increase productivity with more automation and fewer workers. With fewer workers employed, the economy will reach a point where there are not enough consumers with sufficient means to purchase all the products produced. Can I conclude that companies producing those products would eventually implode for lack of revenue? So, what is the long term outcome?

    "The discretionary products market will tumble unless the wealthy realize Henry Ford's 1914 industry wakeup call. Henry doubled what was then the industry standard wage for factory workers. Popular belief has it that he wanted his workers to be able to afford to buy the cars they built. My point is that even the average worker at the time, much less the unemployed, could not afford a car. What's the answer? Something must give. Government welfare? How about industrial welfare? Is that institutional socialism?

    "I suspect that there will be a return to localization, at least for the basics of life. I can see some of that already in the small enclaves of America. Whether main street economy or a barter system there will be an increased reliance on the local 'farmers markets'. Small business and entrepreneurship will keep the fabric of society from tearing apart. Is small business seeded and supported by industry itself? Or is it going to be by government?"

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