JimPinto.com - Connections for Growth & Success™
No. 281 : 7 May 2010

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

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Caring & Connected Capitalism

Please permit me to preach a little theory on Capitalism.

Capitalism is based on the Profit motive. The market is the only thing that controls growth and success. The market acts as the stimulant and the restrictor, countering negative capitalist forces with positive capitalist forces, allowing one to make a profit and become stronger as a result. It is survival of the fittest, success for the best.

Capitalism does not demand Ethics beyond what markets tolerate. It was not Capitalism that drove the world into the worst recession since the 1930's - it was greed and unscrupulousness. Goldman Sachs, AIG and others at the pinnacles of financial power did not consider that they were doing anything "unethical". They were simply selling, legally acceptable "derivatives" which others were buying. The market is supposed to recognize that fundamental tenet, "Buyer Beware".

If the market demands "ethical" behavior, then the markets will provide for those ethical concerns. In the purest sense, Capitalism does NOT need governmental controls, or interference.

Capitalism itself has no "conscience"; it's the collective market conscience that makes changes. The "green" revolution is a good example. Plagued by fears of massive tidal waves and planetary destruction, more people are demanding more environmental consciousness, and the markets follow. But still, the markets seem to surge ahead blindly till cataclysmic events occur.

On balance, Capitalism creates much more wealth than it destroys. Because it is organized around maximizing capital rather than maximizing value, it can sometimes lead to wasted resources, or worse, to destruction of value, as in environmental degradation.

In the 1990s, Ben & Jerry's (ice cream) coined the term "Caring Capitalism" to illustrate its corporate stance of maintaining a social conscience. Some 20 years later, others are finally catching onto this concept.

The former chairman and CEO of Coca-Cola is calling for companies to follow a standard of "Connected Capitalism" and many high-profile corporate executives are joining this cause.

Connected capitalism is a simple idea: A company must still turn a profit, but it must also use the weight of its brand, as well as its capital, to be an agent for positive change in the world. The bottom line is connected to a social conscience. Capitalism is the best way to grow the economy, combat poverty and save the environment.

Worldwide, a new phenomenon is emerging, a new kind of "Capitalism with a Heart". Around the globe, this new Capitalism is being pushed by "the new middle class" to move towards having a social conscience. More and more people think it is time for wealth to be distributed "more equally". When more people think that way, markets will move in that direction.

Speaking in front of world leaders, financiers and business executives at the World Economic Forum at Davos, David Cameron, leader of the British Conservative Party, proclaimed:

    "It is time to place the market within a moral framework. It's time to help create vibrant, local economies, even if that means standing in the way of the global corporate juggernauts. It's time to decentralize economic power, to spread opportunity and wealth and ownership more equally through society. That will mean recapitalizing the poor, rather than just the banks."
Well, David Cameron's Conservative Party just won more seats in the British Parliament than it had for 80 years.

Click Bill Gates talks about caring capitalism

Click Neville Isdell is leading the charge for capitalism with a conscience

Click Cameron calls for 'capitalism with a conscience'

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The Sustainability challenge

The lack of definition about what makes a product or process "green" has expanded the concept to included "sustainability" - which means meeting present-day requirements without compromising the needs of future generations.

Some think that sustainability is primarily "social responsibility" but that often gets sidetracked for short-term needs. My contention is that sustainable programs can be successful only if they are profitable. Sustainability must generate competitive advantage - lower costs, higher performance and increased value. Profits will generate growth, beyond which social responsibility can be leveraged to enhance brand equity.

The first Industrial Revolution generated high productivity when the world had fewer people and there were seemingly unlimited natural resources. Today, there is overpopulation, combined with labor-saving automation - but resource scarcity. Now the world is not production limited; it is resource limited.

In their 1999 book, "Natural Capitalism", Paul Hawken and co-authors suggest that competitive advantages and increased profits will result from properly valuing "natural capital". The conventions of the first industrial revolution values that at zero.

Natural Capitalism develops with four central strategies:

  • Resource conservation through effective manufacturing processes
  • Re-use of materials in ways similar to natural systems
  • Change in values from quantity to quality
  • Investing in natural capital; sustaining natural resources.
Today, most disposable consumer goods go to the dump. The solution is Cradle-to-Cradle (C2C) design. Consider how Nature works: material resources continue circulating with healthy, safe metabolic processes. Industrial ecosystems must be designed similarly, to use, protect, enrich and circulate material resources.

C2C responsibility means that manufacturers must be fully accountable for resources used, from design, to manufacturing, to marketplace, to end-of-life disposal and back to inception of new products.

The key to complete sustainability is for end-of-life materials to be diverted back into the market - reusing materials from previous-generation products in next-generation products and processes. The C2C model should apply to all forms of product and packaging waste.

Here's a challenge to chew on: Americans purchase nearly three billion dry-cell batteries every year and, in spite of regulations, recycle only about 2%. This means that thousands of tons of toxic waste ends up in landfills. The real value of batteries is the power they generate for a short time - the "usage." But depleted, used batteries still look new, with packages designed to outlast the products' useful life. Major growth and success awaits developers of disruptive technologies to solve this problem by extracting materials from spent batteries for re-use in other products.

Cradle-to-cradle design and manufacturing is the beginning of Natural Capitalism, a new paradigm of clean technologies and resource conservation.

Click Automation World April 2010 - The Challenge of Sustainability

Click New Life for Old Tires

Click Jim Pinto video - Green is good for business

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Joel Kotkin's book - America in 2050

In his new book, "The Next Hundred Million: America in 2050", Joel Kotkin forecasts the continued success of America at mid-century. He expects US population will increase to 400 million people in the next 40 years and is optimistic that, despite current difficulties, the US will emerge as the most affluent, culturally rich, and successful nation in human history.

Europe will be constrained by aging populations, shrinking work force and rapidly proliferating social welfare commitments. Demographic trends give America the advantage. The US will continue to be nourished by immigration. The eclectic mix of many cultures will continue to make it adaptable and resourceful. Strongly Capitalist policies will remain a source of continued prosperity.

In my view, Joel Kotkin glosses over the challenges that come from the rise of India and China, and the competition over diminishing energy resources.

The presence of 100 million more Americans by 2050 will reshape the nation's geography. Scores of new communities will have to be built to accommodate them, creating massive demand for new housing, as well as industrial and commercial space. Present trends are extrapolated to guess that, in an increasingly Internet-connected world, people will move to the suburbs, small towns and rural areas. Joel Kotkin anticipates revitalization of older suburbs and repopulation of the vast, still sparsely populated regions of America's heartland.

To accommodate the next 100 million Americans, new environmentally friendly technologies and infrastructures will be developed. Commuting will be reduced by bringing work closer to, or even into, the home. More energy-efficient means of transportation will emerge.

The suburbs of the 21st century will incorporate aspects of pre-industrial villages. They will be compact and self-sufficient, providing office space as well as expanding home-based work. Well before 2050, 20-25% of Americans will work from home.

The growth of the suburbs does not mean that America's urban centers will shrink. The US will remain a nation of great cities, engines of social, cultural and economic activity. The market for dense urban living will remain small, compared with suburbs. But still, there will be big opportunities to provide for the roughly 15-20 million new urban dwellers by 2050.

This optimistic scenario rests on the historical precedent of America's muddling through crises and then creating new waves of innovation with new products and services. And too, it postulates the presence of a large labor force - people who are willing and able to work; the innate American sense of we-can-do-it.

The big question: Are the American people ready to do with less today to build a better future for the next generation?

Click America in 2050 - Where and How We'll Live

Click An Optimistic view of the United States future

Click Review and buy 'America in 2050' on Amazon.com

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Engineers - re-engineer yourself

Engineering has an image problem. Surveys show that most people are not aware of what engineers do, beyond being involved in construction of machines and gadgets, rather than people. Actually, those ideas start with engineers themselves. It is their self-image.

Engineers tend to focus on nitty-gritty details, rather than the overall, broad picture - which limits their potential. Engineers usually don't want to be managers because that involves many things beyond the technical stuff they enjoy. They feel they should stick with what they know rather than branch off into the grey goop of people interface. Or even worse, marketing or sales, which they jokingly call "the dark side."

Did you know very few company chief executives are engineers? Even in technology companies, the top gun is usually a marketing person, followed (in order of probability) by finance, then sales, then operations (manufacturing), and last engineering. Especially in engineering companies, this is strange because, in my opinion, it is easier to teach an engineer about marketing than it is for a non-technical sales or marketing person to learn engineering.

Engineers who advance to executive leadership can make a big difference. If you're an engineer and want to move ahead in your management career, you need to be constantly re-educating yourself in other disciplines. Here are some positive ideas on what you can do to re-engineer yourself.

  • Re-invent yourself. Start digging into things that affect your company, beyond just engineering. If you are proud of the products you helped develop, find out what it takes to make those products successful.
  • Read the corporate business plan. Make an effort to understand other departments' goals and objectives. Don't get stuck on narrow details. Go beyond your own projects; see how everything contributes to the company's goals.
  • Become more proactive by selling others to implement changes. Take time to talk with marketing on product requirements; work with manufacturing to optimize production methods and costs; be pro-active with your product specifications.
  • Get to know customers, people inside or outside your company. Go with sales people to find out what customers are buying and why. Help make your products, and your company, successful.
Re-engineer yourself. You will enjoy the growth and success that this brings.

Click ISA InTech March/April 2010 - Engineers Re-engineer your self

Click Entrepreneurship - Why Engineers Struggle with Marketing

Click Importance of Marketing Skills for Engineers

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How to improve your memory

In this age of distractions and information overload, it's hard to remember the names of new acquaintances, their phone numbers, and the sometimes overwhelming streams of information. How do you cope?

There are many relatively easy mental exercises and strategies that can help you improve your short and long-term memory. Indeed, they can make the difference between feeling overwhelmed and confidently on top of things. Here are some tips and tricks that make me seem smarter than I really am.

Use images and word associations to help remember names. Pick out the visual characteristics of someone you're meeting for the first time and use that mental image to help the name stick. The more creative and playful the image, the easier it is to remember.

You probably already use a few tricks to boost your memory. For example, "How many days in May?" You use the mnemonic, "30 days in September, April, June and November..." Find more mnemonics for more things to help your memory.

How do you remember numbers? You'll notice that telephone numbers are grouped in sets of 2 or 3 - which helps remember them a lot easier than a long string. Instead of remembering a string of 10 digits, it's easier to group them to remember smaller groups of 2 or 3 digit numbers. Telephone numbers are groups of 3-4 digits. Different groupings in other countries can confuse - for example, the French group phone numbers 2 digits at a time. But still, it's better than remembering a long string.

The key idea is that you can reliably code both information and the structure of information. Train yourself, make the effort and you'll find that you really do have a good memory. I've included some web links, with memory tips and tricks.

Click Mnemonic Techniques and Tricks to improve memory

Click Ten simple ways to recall anything

Click Memory Improvement Techniques

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Stanley Abbot [sjabbot@juno.com] thinks my reference to the focus on short-term profits as "The Achilles Heel of Capitalism" is outdated. Says Stan:
    "When I worked for The Foxboro Company in 1974 and we were asked, 'What do we make?' the answer was 'process control equipment.' A few years later, the answer was 'a profit for the stockholders.' When I left Foxboro (and Invensys) a few years ago, it seemed that the answer was 'bonuses for the executives.'

    "Paying bonuses actually encourages inferior ideas. People go for the idea that will get them the bonus rather than the one that is better for the organization.

    "Bonuses are often based on criteria that are easy to measure in the short run, not necessarily beneficial in the long term.

    "Thoughtful and effective planning, innovation, and problem-solving does not come from everybody in an organization. Each person has their own strengths (as evidenced by Meyers-Briggs scores), and each is motivated differently. In my experience, management and co-workers listening to and responding to ideas was more motivating than anything else. Not that this is a new problem. I think we've been getting into it deeper and deeper over the years.

    "Wall street seems to have come up with ideas that bring bonuses. Detroit seems to have ignored what people want in a car.

    "And then there's Congress. Can we really observe that they are 'faithful to the interests of their shareholders?' Unless shareholders are defined as something other than the good of the people. And so it goes...."

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Bob Fritz [rfritz@avtron.com] CEO of Avtron, a US manufacturer, writes about why manufacturing jobs are leaving the US:

    "The tax against manufacturers is higher in the USA than in any other first world country, and it's going higher. Manufacturers will only invest capital if they think they might get a reasonable return. Tripling the taxes on dividends, raising capital gains taxes, and upping income taxes on 'the rich' only makes it harder to make a return on investment. The result is that some investments simply will not get made in the USA.

    "Add to this the deliberate long-term destabilization of the US deficit so that yet even greater taxes will be needed in future years, and it becomes less worthwhile to be an entrepreneur.

    "Further, the US refuses to allow foreign engineers and scientists to immigrate into the US. This is one reason why several large companies are exporting their R&D facilities.

    "I don't think we'll ever get to the point that we 'can't afford' to import essentials from China. Long before that, China will inform us as a matter of courtesy that their army is invading Taiwan, and perhaps Los Angeles, to protect their interests."

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Alan Corcoran [alan.corcoran@siemens.com] discusses the easy route of firing people to maintain profits:

    "Kudos to Southwest - for not laying off anyone, and achieving major success (market-cap equals all other US airlines combined).

    "Any idiot can invoke the flawed 'Shrink to Greatness' theme. It does not require any specialized skills or experience; it is easy. The real leaders hunker down, roll up their sleeves, and fight/sacrifice for their employees. They do actual work, hard work, to navigate turbulent economic times.

    "Ironically, the people who implement big layoffs are often recognized as being able to make the tough decisions; go figure.

    "I work for a good leader and we will stand shoulder to shoulder to tackle whatever comes our way. As for the other crowd, I'll sit back and watch them walk off a cliff."

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