JimPinto.com - Connections for Growth & Success™
No. 165 : 15 October 2004

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

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E-Voting raises serious concerns for US 2004 election

You know, if ATM machines randomly erased the accounts of just a small fraction of customers, banks would quickly take them out of service. Yet the touch-screen electronic-voting machines that recorded NO VOTE for thousands of voters in Florida's Democratic primary in March 2004 are expected to be used again in nearly 25% of Florida's 67 counties. How can that be explained?

Florida is hardly alone in switching to untested technology. About 20% of America's 3,114 counties will use electronic voting machines on November 2, 2004. That is causing many people great concern.

In Florida, no one will ever know for sure if the machines were at fault, since they produced no paper trail or independently auditable record. And that's one of the biggest concerns about electronic voting.

Can you believe this? Most electronic voting machines run proprietary software, which the manufacturers are reluctant to release to anyone except their own testing staff. So, there is no independent verification that the machines work without flaws. But, it's already too late to replace or modify the equipment that will be used in this election.

To who can you complain? A storm of protest is having no immediate impact. An avalanche of lawsuits are threatened, but they are being pooh-poohed as partisan, political interference. The US elder statesman, former President Jimmy Carter, who has monitored more than 50 elections worldwide, has warned that voting arrangements in Florida do not meet "basic international requirements" and could undermine the US election. But, electronic voting moves forward like an unstoppable freight-train.

My advice: Find out (from your local Registrar of Voters) if you'll be voting electronically, with no paper trail. If finding that out is too difficult and long-winded, just vote (on paper) with an absentee ballot.

Click MIT-Tech Review - Concerns Grow over E-Voting

Click Electronic voting too flawed, unreliable for use

Click Wired: Activists Find More E-Vote Flaws

Click Will your vote count in the next election? How will we even know?

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Technology innovation will continue to change the world

In the last century, the world was transformed by technological innovations - antibiotics, jet travel, telephone, television, computers, the Internet. Man has walked on the moon and decoded the human genome. Life expectancy has soared. Agriculture has advanced to where the world can feed a global population that has more than tripled. Productivity in the US has multiplied 5 or 6 times, an average increase of 2% a year. Most countries are catching up fast.

The march of technological progress has been uneven. More recently, change has been far more rapid in information processing and health care than in energy, transportation, and manufacturing. In many industries we still depend on older technologies that date back to the 19th and early 20th centuries. The internal combustion engine was invented in the 1860s, commercial electric power started in 1882. Changes are overdue in these important arenas, as problems multiply with conventional energy resources and transportation.

Will this next century bring the same exciting and radical innovation? Where is the Innovation Economy heading? Business Week has a complete section on that topic in their latest issue (Oct. 11, 2004).

Indeed, innovations are now brewing that could revolutionize our lives. Nanotechnology - engineering at the scale of atoms and molecules - is leading to vastly faster computing based on carbon nanotubes, miniature medical probes, new types of lights and solar cells.

There are signs that energy technology will soon leap ahead, with the promise of efficient fuel cells, new approaches to solar power, and safer nuclear plants. Such advances have the potential to overturn the economics of energy, making the world less dependent on oil and other fossil fuels. In the biological sciences, the current limits on health and mortality are moving ahead rapidly.

Today, innovation is not just in the so-called developed countries - it is spreading worldwide, fast. Scientific research has increased in just the last decade or two, with the gains spread around the world. And many countries in Europe and Asia are devoting more money to higher education, which produces educated workers, the keys to innovation.

The US is still the leading engine for innovation, and is still strong. There is concern America could eventually fall behind its global rivals, but that is simply a perception caused by the recognition that others are moving strongly. The US still has the best graduate programs in science and engineering, and the kind of economic system and capital markets that support the exploitation of technological innovation.

The rapid pace of financial innovation (like Venture Capital in the US) have translated into more innovation and growth. The invention of the credit card, introduced by Bank of America 1958, gave middle-class Americans access to easy and immediate credit. And the creation of the mortgage-backed securities markets in the 1970s transformed the way that housing was financed, enabling homeowners to tap into their home equity.

Without technological breakthroughs, it will be difficult to solve the most pressing long-term problems. The fast-growing energy needs of emerging economies such as China and India will impact world supplies of limited oil resources. This can only be solved with new sources of energy.

Providing affordable health care to aging populations around the world will be a major challenge, requiring medical productivity to improve dramatically with health-care technology advances such as robotics.

It will not be possible to generate enough good jobs for American workers in the future without new innovative industries. A technology breakthrough, like Nanotechnology or new energy sources, will create whole new categories of occupations - just as automobiles and railroads have done in the past.

More than ever, America's prosperity depends on its ability to remain the global innovation leader. Innovation is good for America and good for the world. The benefits trickle down to reach every corner of the globe. Innovation can conquer poverty, hunger, disease, ignorance.

And perhaps too, this will bring reason and understanding to humanity at large.

Click Read this Business Week Special - The Innovation Economy

Click Business Week - This way to the future

Click The future... where does it come from anyway?

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Knowledge-based jobs must replace manufacturing jobs

Donald Grimes, a University of Michigan economist, and Lou Glazer, of Michigan Future, have written an excellent paper which was brought to my attention by regular eNews reader, Dick Thompson - thanks!

"A New Path to Prosperity? Manufacturing and Knowledge-Based Industries As Drivers of Economic Growth" compares Michigan's economic performance with those of other states from 1969 to 2001. Manufacturing is also compared as an engine of economic growth with high-paying, knowledge-based industries such as information, financial activities, professional and technical services, and management of companies.

According to the study, Michigan's per capita income from 1969 to 2001 grew nearly 12% slower than the national average - only four states had a worse performance. Specifically, the study found that:

  • Twelve of the 13 states with employment earnings shares from high-paying, knowledge-based industries greater than the national average had 2001 per capita income above the national level.
  • Of the 15 states with per capita income greater than the national average in 2001, all had a greater share of employment earnings from high-paying, knowledge-based industries than from manufacturing.
  • Of the 25 states with employment earnings shares from manufacturing greater than the national average, 21 had 2001 per capita income below the national average.
  • All of the 15 states where the share of employment earnings from manufacturing is greater than from high-paying, knowledge-based industries had 2001 per capita income below the national average.
  • Knowledge-based industries and young professionals will be the most important drivers of future economic growth, with communities having high concentrations of both likely to be more prosperous.
Clearly, policy-makers and politicians should devote their time and attention regarding the economy might to developing new agendas on how best to grow a knowledge-based economy.

Click "A New Path to Prosperity?" Read or download the 18-page report

Click The Knowledge based economy

Click Science, Technology & Innovation for the 21st. Century

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Global Shifts in a new age - ISA Expo 2004 Keynote

I presented the keynote speech at ISA, Houston, Texas, on October 6, 2004. This was the 2004 edition of "The Rimbach Lecture Series", presented to honor the memory of Richard Rimbach, Sr. (1888-1979), considered by many to be the "father of ISA".

Here are extracts from the news coverage written by Jim Strothman for ISA TODAY, the daily newspaper distributed at the show:

    Keynoter: Global Skill-shifts Killing off Automation 'Dinosaurs'

    Predicting the 12 largest suppliers in the industrial automation industry will shrink to five during the coming decade, ISA EXPO 2004 keynoter Jim Pinto had a simple explanation why: In the midst of a downturn, dinosaurs die and new leaders emerge.

    The largest automation suppliers, the ones which do more than $1 billion in annual revenue, include Schneider, GE, Honeywell, Emerson, Tyco, Yokogawa, Omron, Eaton, Danaher, and Invensys. There are very few in the $ 100 million to $ 1 billion range, mostly Europeans and Divisions of conglomerates. About 90% of the industry consists of smaller companies doing less than $10 million a year.

    As the larger companies consolidate and parts are sold off, the good parts will live. A prime driver is the fact that instruments and products considered cutting edge thirty years ago, have become commodities. The only advantage competitors can offer is price, which makes for low margins and stiff competition. There's a recession, and it's brutal.

    Outsourcing was a major focus of Pinto's keynote. America does not have the birthright to be the [technology] leader. Whoever makes things cheaper, faster, better, wins.

    Both the U.S. and Europe are rapidly losing their technology advantage to "hungrier" nations. Far Eastern countries like China and India are growing faster than North America. US and European-based manufacturers save costs by moving factories and process plants closer to customers - closer to raw materials.

    Government regulations, environmentalists and zoning restrictions also are driving business away from the US. America resists manufacturing. We put up roadblocks, with communities resisting building new plants for environmental and other reasons. In Ireland, on the other hand, they'll give you a tax holiday, and the mayor of the city welcomes you.

    China, meanwhile, is simply outgunning the U.S. in numbers of engineers becoming available. In China, they produce 700,000 engineers a year - 37% of all college graduates. The pay typically starts very low, compared to US, with salaries in the range of $4,000 to $8,000 a year.

    Even so, outsourcing is only responsible for about 300,000 US job losses - about 15% of the total. Productivity is the problem. Automation has reduced the headcount in all industries - not just in the US, but worldwide, including China. How should U.S.-based businesses cope in this highly competitive global environment?

I closed my speech with suggestions for "Keys for Success" in the new business environment, and an assessment of future global challenges. You'll find a weblink to the outline (and .pdf of the complete Powerpoint presentation) of my speech below.

Click Global Shifts in a New Age - Outline of Pinto presentation

Click Read Jim Strothman's ISA TODAY news coverage

Click Automation World news coverage: Global Shifts in Automation

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ISA 2004 Panel Session: Outsourcing - debunking the myths

At ISA 2004 in Houston, a couple of hours after my keynote presentation, we convened again in the same auditorium for a panel session which turned out to be dynamic and stimulating. The compliments and kudos are still coming in.

Debunking the Myths: The Good, the Bad, and the Future of Outsourcing


  • Jim Pinto - Chair
  • Dick Morley - Industry guru
  • Walt Boyes - Editor, CONTROL magazine
  • Jim Teegarden - Valpers Partners
Here is a summary of the ISA TODAY news coverage by Jim Strothman:
    Outsourcing panel sees Jobs 'Going Down the Silicon Hole' - Not Lost to Cheap Labor

    Delivering a wake-up call to some in the audience who seemed convinced cheap labor overseas was the reason behind US manufacturing job losses, outspoken ISA EXPO 2004 panelists Dick Morley and Jim Pinto were quick to rebut that "myth."

    "The reason jobs are going down [in number] is because jobs are going down everywhere. Jobs are going down the silicon hole, not the outsourcing hole," said the colorful Morley. Best known as the inventor of the programmable logic controller (PLC), Morley is a futurist and venture capitalist who has helped start more than 100 companies in the New Hampshire area, his home base.

    Responding to a question one of several hundred show goers attending the forum, Pinto and Morley produced figures to support their contention that productivity resulting from automation - not outsourcing - was the biggest culprit behind most US manufacturing job losses. Only 300,000 US job losses - about 15% - resulted from offshore outsourcing, Pinto said.

    Morley said he was at a meeting on outsourcing at the Massachusetts Institute of Technology (MIT) also attended by representatives of industry giants GE and IBM, among others. While there, figures were produced showing all industrialized countries are losing manufacturing jobs - including China. According to the MIT study, about 11% of China's manufacturing jobs have disappeared.

    Walt Boyes, the outspoken editor of CONTROL magazine told the large audience bluntly, "Outsourcing is here to stay. Get used to it!"

    Another panelist, Jim Teegarden, a longtime senior manager at Fisher Controls who co-founded intervention management consulting firm Valpers Performance Partners, approached outsourcing from a pragmatic viewpoint. Teegarden underscored that global sourcing should be a strategic decision, not a short-term cost saving. Senior management needs to be very involved because of potential risks and pitfalls.

    Underscoring how extensive outsourcing has become, Pinto said giant retailer Wal-Mart buys $12 billion worth of goods overseas each year and, in effect, is a direct US outlet for Chinese goods.

    Looking at potential future ramifications, Pinto said China could put a satellite into orbit at a fraction of what NASA would charge. The militaristic and political problems are enormous.

Click Jim Strothman's ISA TODAY news coverage of the Outsourcing Panel

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Perry Marshall [perrymarshall.com] feels that his personal experience mirrors our views on manufacturing jobs vs. entrepreneurship:
    "3 years ago I left my job as a sales manager in the industrial market to start a marketing consulting firm. My focus was generating sales leads and publicity for hi-tech industrial companies, and it was successful at the outset. I still have three clients in this market.

    "However, my business has gradually shifted towards catering to startups and small businesses in many other industries, where the "real" action is going on. Now two thirds of my business is outside the industrial sector.

    "Nobody really talks about it, but there IS an entrepreneurial boom taking place in the world of very small companies. New businesses are where all the economic growth is, especially on the Internet. On the web, people mostly talk about Amazon and Google and Yahoo, but the vast majority of the success stories are companies too small to show up on anyone's radar.

    The web is actually dominated by tens of thousands of very small operators. The front page news talks about Google going public, but the REAL story is all the small businesses who use Google successfully to find new customers.

    "I would go even further and say that because the Internet and email are such personal, highly niched mediums, very few big companies even 'get it' at all. Take a room full of MBA's and pit them against an experienced web marketer working from his basement office, and the guy in the basement will win two times out of three. Why? The MBA's may know 'marketing' but the entrepreneur knows his market. The MBA's are spending someone else's money, but the entrepreneur is spending his own. Your own money is always smarter than someone else's.

    "As a side note, I would say that *most* tech companies in our industry probably rank a 2 or 3 on a scale of 1 to 10 in terms of marketing and entrepreneurial savvy. There are a few notable exceptions, but I just don't see a lot of ambition here."

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Jan Johnston [JanJ@johnston-vere.co.uk] from the UK on Manufacturing:
    "We in the UK have seen all what you write before. We have managed to denude our manufacturing to the point where - there is little point. The US - has to decide can it compete or does it need to shift its emphasis. The West, in general, is having the same problem.

    "The only way forward is to change our mentality - shed mundane manufacturing and re-skill our people for the intellectual challenge ahead. Turn ourselves, US and UK, into the 'intellectual manufacturing' power house. Be first mover on new technology - de-skill the manufacturing process as fast as possible and ship it out east - (Europe or China) - my preference is Eastern Europe - let China try and copy - but keep the pace up so fast that they are always behind.

    "We also have to release border control and attract the brains to our respective countries - take as many Indian Masters and PhD's as possible - it will require a huge shift in attitude but without doing something as radical as this we are going to offer the Chinese global superiority in 15 years or less.

    "I think it is worth trying to engage some industrial leaders in this type of forum - because without changing our stance on profit and shareholder return there will be no chance of protecting the long term interests for short term gain.

    "Added to this the army of long lived pensioners is weighting this process considerably. There is a lot of non-productive money chasing short term gain It might be a good thing to start thinking in terms of the Siemens mentality to shareholders. You buy the share for its investment value not the dividend.

    "I doubt if Bush or Kerry or for that matter Blair have the strength to implement change that drastic or leadership that strong!"

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Doug Bailey [dougncheryl@npgcable.com] is concerned about electronic voting:
    "Electronic voting is a disaster waiting to happen. There have been voting frauds throughout our history - although most have been anecdotal in nature - common sense dictates that 'if it walks like a duck and quacks like a duck, it probably is a duck'.

    "Without a paper trail, or some irreproachable verification method, I think we should stay with what has worked in the past. There have been issues, certainly, but not on the scale which is possible, even probable, here. Sometimes in our zeal to make things easier, faster, smarter we overlook or ignore our own intuitions and common sense.

    "I will continue to demand a paper ballot."

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