Recently in Trends to Watch Category

Well I started writing a post about the new year back in January, when the year actually was new. It is now March and themes of the year are becoming more clear. 2007 is shaping up to be quite a year.

Some things to watch over the next ten months of 2007:

• The housing market -- Is there a national bubble? What will happen to the subprime (and prime) mortgage markets? Will consumer spending drop as consumer debts catches up?
• Investor's appetite (and evaluation) of risk is likely to change if the economy slows down. The risk premium has all but disappeared for bonds and bank loans but will there be a backlash? Economic theory says there has to be.
• A sea change in Washington, D.C. may not raise all boats -- A Democratic congress comes on a rising tide, President Bush and his Iraq war head for the rocks, and the 2008 Presidential elections is on the horizon.
• iTunes, Zune, and a host of video download services will forge ahead as the giant media companies face the (growing) reality of an Internetworked world.
• Five years in the making, Microsoft Vista will (finally) do something - flop or sizzle - with enormous impact (or pain) for the PC world, not to mention Seattle itself.
• Global warming is increasingly on the minds of citizens and politicians around the globe. Will nature or politicians be the first to make big changes?
• The iPhone may become the first "smart phone" that anyone cares about.
• Will the "big three" become the "big two" in 2007? Even as global warming grows, there is a global oversupply of cars. Will there be a correction and what will it look like?
• Will the PS3 get some games worth playing and build a base or will Sony be the first to die off, leaving the game market to Microsoft and Nintendo or will consumers (and Sony/MSFT) realize that the Wii is just a peripheral?

Yessir, a lot of interesting things going on this year and the picture should be a lot more clear by Xmas 2007.

While I have been sitting around thinking about this idea and ever so slowly writing about it, other folks are writing about the same thing :) Although I think this short article in Technology Review sees the tip of the iceberg, it misses full threat.

Pardon me if I am skeptical of Microsoft's tests of disruptive technologies that threaten its cash cows. It will be a few years but the day when "the computer is the network" will come eventually. Software as a service is inevitable because it is so useful.

For the past few months, I have been thinking about the evolution towards services and service businesses. Instead of writing one huge post (which I have been trying to do), I am going to try to write several smaller ones. The basic idea is that product-businesses from the Industrial Revolution are evolving into service-businesses for the Information Revolution and that software in particular is ready for this transition.

I plan three articles: 1) Products become a service, 2) Software becomes a service, 3) Software is already a service

Economists look at how pieces of the economy are connected to (and influence) each other, such as the idea of supply and demand. If the demand for labor goes up and the supply goes down, then wages for labor will increase. If wages increase then the cost of goods increase (to cover the wages) which means higher prices. Higher prices is another term for inflation.

The general rule is that if an economy is growing too quickly, we get inflation. The cure for inflation is to slow the economy down which the government tries to do by raising interest rates. By making money more expense (by increasing the cost of borrowing money), businesses slow down and the economy slows down and prices fall again.

At least that is the theory. Rules of thumb like this example build up over time. Economists study the great depression and the stock market crash of the 1920's for decades and eventually rules of thumb about how the economic system works appear. Economies are so complex, you cannot really see all the interactions and understand it so you need rules of thumb that explain things well enough but are simple enough to use.

I just wonder if the game is changing so fast and much that our rules of thumb based on the past century of national economies are no longer appropriate.

the new rules

This morning, I heard a news story about inflation which is what got me thinking about all this. The truth is, I am rather puzzled by inflation. The person being interviewed pointed out that the national inflation rate has stayed around 2% for years, but I dont get it.

How is it that prices for goods never seem to go up much? We pay $3 for a gallon of gas (diesel actually) in Seattle. Our heating bill went up by 4x this winter and housing prices have gone through the roof everywhere. The cost of gold and platinum is at an all time high. In fact, everywhere I look (except for computers), prices are way up so how is the national inflation index only 2%...?

Thinking about inflation, I got to thinking about closed-systems. Economies used to be largely closed systems. Raw materials would be brought into the system from other countries, but the bulk of the value was manufactured in our country. Thus the Fed and businesses only had to worry about the factors within the nation. All those supply and demand rules about wages and inflation were refined in the past century, so they are based on the idea of a closed national system.

But we dont have a closed national system anymore.

the global economy

The economy today has expanded beyond national into a global system which turns rules of thumb, like supply and demand, on their heads. Wages in our nation arent as important to inflation anymore because the jobs can just move to a cheaper country. If manufacturing costs get too high in our nation, prices dont go up but rather those jobs move to China.

Another rule of thumb economists use to judge the economy is the unemployment rate. If too many people are employed (a low unemployment rate), there will be competition for jobs and wages will rise, ie overheating the economy. This is why investors (inexplicably to many workers) like to see a healthy (ie high) unemployment rate but this rule of thumb is being changed by the massive influx of cheap labor coming into this country (like 10 million illegal workers). This supply of cheap labor prevents prices (and incomes) from rising because there is always someone willing to work for less money. And since they are illegal, you can forget about Unions or other groups pressuring for a living wage.

Of course, economists do take these inflows into account in their models but I have begun to wonder if the magnitude these inflows are now so large that they change the rules of the game. Not only has inflation stayed low because of importing cheap labor and exporting jobs but we have been importing amazing amounts of foreign capital. China, Japan and Korea continue to buy huge amounts of our Treasury Bonds, which keeps the US Dollar and our government out of bankruptcy despite the fact that we borrow more money every year (the national debt is now over $8 trillion dollars!).

So why has the inflation rate in our nation stayed so low? The answer is that globalization has changed the rules of the game and for the moment, the rules are in our favor. We continue to talk about inflation in the old terms, using our old rules of thumb, but globalism has made the picture a lot more complex.

I imagine this is clear to economists but I suspect it is completely UN-clear to citizens. We continue to make decisions on a personal level about household spending and on a macro level about education and infrastructure as if we are the only game in town. People still seem to see things as a closed-national system and that is a dangerous thing for the welfare of our children.

Do you remember that TV show, Survivor? All these people living on an island with nothing to eat but rice and whatever they could catch. They all lost weight. After 40 days of the all-rice diet, that Richard Hatch guy lost a ton of weight. He went from fat to healthy looking.

Why did those people lose weight? They lost weight because they had no choice; they simply had no food to eat. No pork rinds, ice cream, soda, crackers or candy. The external environment forced them to eat less.

What is harder to do? Lose weight because some external force is keeping you from eating or using willpower to force yourself to eat less? If you look at America's ever expanding waistline, I think we can agree that willpower doesnt work so good.

Today I read this great article about our education system. Why do international kids outperform Americans? Because they work harder.

I HIGHLY recommend reading this article. The author hits the problems right on the head.

For once, blame the student

By Patrick Welsh

Wed Mar 8, 7:08 AM ET

Failure in the classroom is often tied to lack of funding, poor teachers or other ills. Here's a thought: Maybe it's the failed work ethic of todays kids. That's what I'm seeing in my school. Until reformers see this reality, little will change.

As one would expect, the middle-class American kids usually had higher SAT verbal scores than did their immigrant classmates, many of whom had only been speaking English for a few years.

What many of the American kids I taught did not have was the motivation, self-discipline or work ethic of the foreign-born kids.

Politicians and education bureaucrats can talk all they want about reform, but until the work ethic of U.S. students changes, until they are willing to put in the time and effort to master their subjects, little will change.

read it

Unlike the author, I blame the parents not the kids. Kids will do whatever is easiest. It is the parents job to force their children to do what is in their best interest. I think this process used to be called "parenting." Today it seems like every parent wants to be their kids best friend, something that used to happen only with divorced parents.

The education system is just another symptom of a larger problem: our wealth and our lack of willpower is causing us to lose touch with reality. A reality in which the world gets smaller and more competitive every year. I think this trend will continue but not for long. On the bright side, things will right themselves again when competition from Asia forces us to live on that all-rice diet whether we want to or not.

Goodness, the number of technologies in development and in use today is simply overwhelming! What's worse, knowing what this stuff is and how it can be used isnt just for geeks and developers anymore. Business people need to understand this stuff more than ever because it affects business models, products and your company.

Even for someone like myself that enjoys tech, trying to keep up with all these innovations is a full time job. Whenever I start to feel like I have a handle on things, I meet someone who makes me feel like a buggy-whip salesman.

Here is a quick list of topics I have run across in the past 2 months.

PHP
I learned old-school computer languages lik C but applications today are often web-technologies and more and more websites are being built with PHP (not to be confused with PGP, which is a type of encryption). For someone wanting to try their hand at web creation, this is one of the tools to pick up early.

AdSense, AdWords
Does Google do search? Not so much. Google made $4B last year by connecting businesses with customers, ie advertising. While it is not obvious to most consumers, Google is an advertising innovator with programs like AdSense and they continue to push their creative business models into other advertising venues including radio, TV and print..

AJAX
Not quite Web2.0 but this technology promises to make websites more interactive. You can see AJAX in action at Amazon and Netflix who already have AJAX features such as mouse-overs that give you product descriptions. I think Google Maps is another example.

Google Maps
Speaking of Google Maps, would you like a free service to present your own data in a map form? How cool is that! I am a map junkie and this is a terrific tool that Google is literally giving away, presumably for the good of the Internet.

"Mashups"
Imagine taking someone's boring text data, combining it with Google Maps and presenting the whole thing on your own website. If you can picture that creation, you understand a 'mashup'. A friend showed me two sites that combine public data to provide an interactive, real-time map of the bus routes and bus positions here in Seattle. Not necessarily a big money maker but expect to see a lot of these mashups because they are very powerful/useful. Power to the people!

Tags
That computer from Star Trek, the one that answers questions in English, is still the stuff of science fiction not science fact. In human terms, computers are still pretty stupid; they simply cannot read or understand things the way we do. One way to help computers make "sense" of data is to mark or structure that data and one of the ways to do this organization that is getting popular is tags. Take a photo of angel cake and tag it <cake> so that people searching for faeries and angels wont find it while searching. Expect to see more tagging..

podcasts
This technology has been around for a long time but it seems to be taking off, thanks in large part to Apple's iTunes store. A podcast is simply a recording you can download and listen to on a computer or iPod. One interesting note is how podcasts are taking off in China, where the media is highly censored (and podcasts are hard to sensor because computers cannot understand recordings they way they can words).

iTunes (PPV video)
$60+/mo for cable TV or $2/episode for your favorite TV shows? People have been talking about downloadable music and video for some time (and running 'pilot' programs in mass-market hotspots like Idaho) but iTunes is the first successful mass-market product of this type. Whether it is a song, a TV show, movie or podcast, pay-per-view content is only going to get bigger. There are a lot of companies trying to get into this space, including Disney and Google, but iTunes seems to have the lead.

Maybe it is the book I just finished, but I keep thinking of a comment Richard made to me at one of the Confabs. "We are living in a golden age and we dont even know it."

Perhaps it is a bit melancholy but is it true? Is this a golden age? Is it about to end?

Sadly they dont provide streaming video but tonight's story about the environment on 60 Minutes has me thinking about the end of a golden age. While we party in our Escalades and our coal-powered apartments, Rome is burning although this time Rome is not a city, it is the planet.

I hope I am wrong, but I think the world we will face when my first child turns 20 will be a very different place from today. For starters, there wont be any wild polar bears left and there will be a whole lot fewer people.

A Global Warning

60 Minutes

Feb. 19, 2006

(CBS) The North Pole has been frozen for 100,000 years. But according to scientists, that won't be true by the end of this century. The top of the world is melting.

While we continue to piss our tax dollars away on bridges to nowhere in Alaska and nation-building in Iraq, the pressures on the health care system continue to build. If your employer pays for your health care, you may not know that a family of 3 can easily spend $700-$1,000 per month on health care premiums alone.

Everyone needs access to health care. As I have said before, it just doesn't make sense to make businesses bear that burden. I hope its only a matter of time before voters figure that out.

Today's headlines show the big boys continue to crumble.

Pressured GM Slashes Pay, Benefits

Dividend Is Cut in Half, As Costs, Competition Gang Up on Auto Giant

Toyota's U.S. Investment Push

By JOSEPH B. WHITE and LEE HAWKINS JR. Staff Reporters of THE WALL STREET JOURNAL

February 8, 2006

GM's move yesterday caps salaried retiree health benefits at 2006 levels starting in January 2007, affecting roughly 100,000 white-collar retirees and about 25,000 employees who have yet to retire. The company said it will freeze the accrual of pension benefits for salaried workers next month, and that it probably will replace GM's traditional defined benefit plan with a cash-balance plan or a 401(k) plan that would put more of the burden for retirement saving on workers. GM already had stopped offering retiree health coverage to salaried workers hired after Jan. 1, 1993, and it reached agreement last year with the United Auto Workers to pare union workers' health benefits.

As Americans we blather on about individual responsibility. Note that as employer-based retirements dwindle, the Federal systems need to pick up the slack unless individuals save enough on their own. Since our savings rate went NEGATIVE last quarter, dont hold your breath for any individual savings.

GM's Decision to Cut Pensions

Accelerates Broad Corporate Shift Benefits Curb Follows Path of Other Companies On Worker Guarantees

The End of Retirement?

By DAVID WESSEL, ELLEN E. SCHULTZ and LAURIE MCGINLEY Staff Reporters of THE WALL STREET JOURNAL

February 8, 2006

"Our employer-based social-welfare system is collapsing," says Alicia Munnell, director of Boston College's Center for Retirement Research. "GM itself is not a big deal. It's GM on top of Verizon and IBM" -- which both recently froze some of their pension plans -- "and then there's everything that's happening in weak companies like airlines."

GM, which previously had stopped offering retiree health coverage to salaried workers hired after Jan. 1, 1993, said it would cap health-care spending for all other salaried retirees and their families at 2006 levels, forcing them to shoulder all future increases in health costs. The company said the move will save it $900 million a year, before taxes. It follows an agreement last year with the United Auto Workers to pare union workers' health benefits.

Alternative health-care plans arent exactly taking off. For a lot of us, that much-mocked Canadian system is starting to look pretty good (ie affordable).

Few Uninsured Workers Opt For Employers' New Health Plans

By VANESSA FUHRMANS Staff Reporter of THE WALL STREET JOURNAL

February 8, 2006

A bold initiative to bring health-care coverage to more than a million uninsured working Americans has gotten off to a rocky start.

A year ago, a coalition of 60 of the country's largest employers -- including General Electric Co., Avon Products Inc., International Business Machines Corp. and Sears Holdings Corp. -- announced a novel plan to sell affordable health-care coverage to as many as three million of their part-time, temporary and contract workers who weren't eligible for the companies' existing health insurance plans.

By pooling a large, diverse group of participants, the companies said, they'd be able to offer coverage at premiums lower than what workers could buy on their own.

But last month, when the National Health Access program went into effect, only 10 of the 60 employers were on board for the initial round. And just a fraction of possible participants -- 5,726 employees, with their dependents -- had signed up, 4,000 of them from one company alone.

The small numbers reflect the coalition's struggle to create a workable program, as it learns more about the pool of employees it has targeted and how to market and explain the products it is offering. These efforts underscore the challenges in selling commercial insurance products to the uninsured.

Voters around the world seem to have one thing in common: They want a change.

Canada, Egypt, Bolivia, Palestine... Voters are tired of the status quo and are voting in new parties. In Canada that party are social conservatives like our President but in most of the other countries, the new leaders are decidedly anti-American.

What will we do if Hamas and like-minded parties are elected into office in this "democratic" Middle East we keep talking about creating? What lengths will our President go to to make sure that never happens?

This is another story to watch.

Stephen Colbert had an amusing interview with George Stephanopolus this week. One of his statements was that he was glad the US doesnt have a system where the voters pick the president. Presumably he was referring to the supreme court in 2000 and the electoral college in 2004 but it was an interesting comment, albeit tongue-in-cheek.

To support his nation-building campaign, President Bush has talked on and on about the virtues of democracy but what do we do when people elect leaders that we dont like? Is it fair for the US to tell other countries that they can have an election but only if they vote for the people we like?

Across the globe from Mexico to Palestine, people are increasingly unhappy with the status quo and voting to change governments that have been in power for decades. The US has helped create many of these reviled governments and championed them in the name of economic globalization. Unfortunately, millions of people no longer believe that globalization is floating all boats and they are showing their displeasure in the voting booth.

This week Hamas not only won a few seats in the Palestinian Authority (they dont really have a country as we know it), they swept the elections. Voters there are sick of the status quo and who can blame them?

We see Hamas as a "terrorist" group but we only see a slice of any organization on Television. Voters on the ground also see the schools and the relief efforts and they see the most important thing: change. Many people are tired of the corruption and lack of economic progress, and at this point, many may feel that any change is better than more of the same.

As I have written before, if people have nothing to gain from the status quo and nothing left to lose but their life, they will react with violence. This may be hard for people like us, with so much freedom and wealth, to picture, but it is only common sense. (And we see it in our own ghettos.) By creating such a desperate situation for the Palestinians year after year, the US and Israel have created a mess for themselves.

The lesson from Israel is not the one Bush regularly mentions vis-a- vis Iraq, that to "win" the war, you have to be meaner and more ruthless than the enemy. The lesson in Israel is that you cannot "win" the cycle of violence, you have to break the cycle of violence.

What is the right thing for the US to do now? What will the Bush Administration actually do (Im confident those two answers wont be the same)? What will this growing movement of Anti-American democracies mean for Iraq, us and the rest of the world?

Stay tuned.

China finds oil in Saudi Arabia while gas prices rise (again), Ford shrinks and Iran tells us to stick it. Quite a Monday.

Ford Posts 19% Profit Rise, Unveils Restructuring Plan

A WALL STREET JOURNAL ONLINE NEWS ROUNDUP

January 23, 2006

Ford Motor Co., the No. 2 U.S. auto maker, said Monday that it will cut 25,000 to 30,000 jobs and idle 14 facilities by 2012 as part of a restructuring designed to reverse a $1.6 billion loss last year in its North American operations.

The cuts represent 20% to 25% of Ford's North American work force of 122,000 people. Ford has approximately 87,000 hourly workers and 35,000 salaried workers in the region.

The plant closings, which affect seven assembly plants, will eliminate capacity of 1.2 million vehicles. Ford currently can build 4.5 million vehicles a year in North America using 43 parts, stamping and assembly plants.

China Will Strike An Energy Deal With the Saudis

By SHAI OSTER Staff Reporter of THE WALL STREET JOURNAL

January 23, 2006

BEIJING -- China and Saudi Arabia are expected to sign a wide-ranging agreement today on energy cooperation amid Beijing's quest to secure more energy resources vital to fuel its fast-growing economy.

China, the world's second-biggest consumer of oil, has been seeking to tighten economic and political partnerships with its major oil suppliers across Central Asia, Africa and Latin America. Its quest has taken on added urgency since 2004, when the country's oil demand surged about 15%, helping underpin the biggest rise in international oil prices in a generation.

China's oil imports from Saudi Arabia have roughly doubled in recent years, from 12.5 million tons in 2002 to 22 million tons for the first 11 months of 2005.

West Talks Tough With Iran, Treads Lightly

U.S., Europe Seek a Security Council Role, But Too Much Pressure Could Backfire

By CARLA ANNE ROBBINS Staff Reporter of THE WALL STREET JOURNAL

January 23, 2006

WASHINGTON -- As U.S. and European officials press to have Iran brought before the United Nations Security Council, they are also promising that Tehran won't face serious punishment there -- for quite a while.

Iran has few friends left after deciding to resume efforts to enrich uranium, a process that could advance it a big step closer to being able to build a nuclear weapon. But there are reasons the move toward international penalties might not be swift. As the Organization of Petroleum Exporting Countries' second-largest producer, Iran has considerable economic leverage. It also may benefit from the "Iraq effect." There is widespread anxiety that any U.N. action -- unless carefully constrained -- could open the door for another U.S.-led war.

There's Little Margin for Error

Fuel Pressures Keep Prospects For Economic Growth in Limbo As Investors Begin to Seek Cover

By E.S. BROWNING Staff Reporter of THE WALL STREET JOURNAL

January 23, 2006

Now, with oil back near $70 a barrel, Mr. Herrmann is beginning to hunker down again. So are a lot of other investors. That helps explain why the Dow Jones Industrial Average fell 213.32 points Friday for its biggest one-day percentage decline since 2003. With the current bull market now more than three years old, the question is whether the economy can improve enough to get people like Mr. Herrmann to feel good enough to start buying stocks again.

"We don't have much margin for error," Mr. Herrmann says. "We can't afford to lose two million barrels a day being exported out of Iran."

What worries him is that the problems weighing on the economy "won't go away real soon." It isn't just that expensive oil serves as a tax on consumers and businesses alike. Interest rates have been rising as well, and the two together are damping growth. "I don't think $70 oil translates into a huge economic problem," he says. "But who says it can't go to $80? Who says it can't go to $90?"

The Internet is an American phenomenon. The addresses are in English characters. 10 of the 13 root mirrors are in the USA. The standards board that makes all the decisions is in the US with no international members... What should a "global" Internet look like?

In what would be a historic first, Vaitkadamas might have spotted a bona-fide trend here. This concerns in this article are about political control not technical issues, like spam and fraud, but expect to see more news on this topic over the next few years. It is a bit amusing to hear the US government say that they need to control the Internet because other governments, like the United Nations, is too bureaucratic. I wonder how many voters would agree that our government is the pillar of efficiency?

In Threat to Internet's Clout, Some Are Starting Alternatives

Rise of Developing Nations, Anti-U.S. Views Play Role; Pioneer Sounds the Alarm

A 'Root' Grows in Germany

By CHRISTOPHER RHOADS Staff Reporter of THE WALL STREET JOURNAL

January 19, 2006

More than a decade after the Internet became available for commercial use, other countries and organizations are erecting rivals to it -- raising fears that global interconnectivity will be diminished.

German computer engineers are building an alternative to the Internet to make a political statement. A Dutch company has built one to make money. China has created three suffixes in Chinese characters substituting for .com and the like, resulting in Web sites and email addresses inaccessible to users outside of China. The 22-nation Arab League has begun a similar system using Arabic suffixes.

The Internet, developed by U.S. government agencies beginning in the 1960s, uses a so-called domain-name system, also called the "root," that consists of 264 suffixes. These include .com, .net, .org and country codes such as .jp for Japan. The root is coordinated by a private, nonprofit group in Marina del Rey, Calif., called the Internet Corporation for Assigned Names and Numbers or Icann. This body works under the auspices of the U.S. Department of Commerce, which set up the organization in 1998.

As the Internet's role grows around the world, some are uneasy with the notion that a U.S.-based body overseen by the U.S. government has sole power over what domain names are used and who controls each name. Other countries such as China also say Icann is too slow in forming domain names in non-Roman languages, hindering the development of an Internet culture in those countries.

Concern about U.S. oversight increased last summer when the Commerce Department persuaded Icann to postpone the approval of a new domain-name suffix to be used for pornographic Web sites, .xxx. The department said it had received letters of complaint from Christian groups. While other countries also opposed the name, critics cited the incident as evidence of Washington's influence.

The matter of control came to a head last November at a United Nations summit in Tunis, where the U.S. delegation fought off demands from more than 170 countries to give up unilateral oversight of Icann.

More than half of the Internet's users today are outside the U.S. Governments increasingly are interested in how the Internet works. Brazil, for instance, collects much of its tax revenue online. "The Internet has become a critical part of our lives," says Abdullah Al-Darrab, Saudi Arabia's deputy governor for technical affairs. "These policies should not be left to a single country or entity."

Some countries with non-Roman alphabets are also taking matters into their own hands. China has created three domain names in Chinese characters -- .zhongguo, .gongsi and .wangluo -- and made them available for public and commercial use inside China only.

Similarly, Arab countries have in the past 18 months experimented with country code domain names in Arabic, distinct from the Icann system, says Khaled Fattal of Surrey, England. Mr. Fattal is head of Minc.org, a nonprofit organization dedicated to making the Internet multilingual.

"There is no such thing as a global Internet today," says Mr. Fattal. "You have only an English-language Internet that is deployed internationally. How is that empowering millions of Chinese or Arab citizens?"

Been thinking about ethics today and how much easier it is to preach than it is to practice what you preach...

At the end of WW1, the Kurdish people were split into 4 pieces, one each in Iraq, Iran, Turkey and Syria. Understandably, the Kurdish people have wanted to reunite ever since.

The President has talked a lot about the joy and wonder of Democracy and freedom. As is often the case, he seems to have gotten part of it right but it isn't clear if he has thought it through or understands the consequences. The "countries" of the middle east are an arbitrary collection of borders drawn by the colonial powers less than 100 years ago and those borders often conflict with much older (and stronger) ethnic and religious ties. Preaching freedom and democracy in our country is good for pep-rallys but rather benign; preaching these ideas in the middle east could be volatile.

Since the first Gulf War, the Kurds in Iraq have had their own region with their own government. We protected them from Saddam and they gained over a decade of experience with self-rule. They also have oil.

When Bush/Cheney invaded Iraq, some experts that said the country would fracture into three separate regions. The White House has publicly disallowed this outcome as an option but can they make it so? What if the Kurds democratically vote for their own independence? Do you really have a democracy if a third party (the US) tells you what you can and cannot vote for?

Take an oppressed ethnic group, the desire for a country of their own, and the money to pay for it and you get a lot of trouble. Kurdish Iraq could be the stable center of a new Kurdish state but Syria, Turkey and Iran are not happy about giving up their land or about Kurdish rebels that find aid and comfort in Iraq.

What should we do about it? Can we preach freedom and democracy and not support a Kurdish state? How can we tell the Kurds that they cannot have their own country when we helped create and support the ethnic/religious homeland we call Israeli in the very same region? How can we enforce the idea of a unified Iraq without forcing the Kurds to stay in Iraq? Even without the ethical ramifications, this is quite a pickle.

We dont hear much about Kurdistan here but our invasion of Iraq (twice) puts us right in the middle of this issue. In the world of ideas, there are few that are felt more passionately or intensely than those of ethnic identity, independence and freedom. (Something we should well know from our own national experience.)

We are popular in Kurdish Iraq today because we have helped them so far but how long will that last as our goals increasingly diverge?

First music, then movies, then books. The genie is out of the bottle with digital technolgy. IF you can make a copy to use it, there doesnt seem to be any way to keep people from making illegal copies.

Digital media is a thorny problem where someone will have to think out of the box to create a system that balances freedom and ownership.

Repro Man

Meet the 21-year-old Norwegian who defied Hollywood to help the world copy DVDs -- and beat the studios in court. Now, he's liberating your iPod.

By STEVE STECKLOW Staff Reporter of THE WALL STREET JOURNAL

October 15, 2005

Jon Lech Johansen dropped out of high school after just one year. He lives alone most of the time, except when he stays with his parents in his native Norway. The 21-year-old doesn't drive, rarely goes to parties and says he has no close friends, except his father. He spends about nine hours a day in front of his computer screen.

Yet this reclusive young Norwegian is the man who may be the entertainment industry's worst nightmare. Mr. Johansen, Hollywood executives claim, has done more than almost anyone in the world to ignite the explosion of movie piracy on the Internet, costing them billions of dollars in lost sales. He scoffs at that.

Jon Lech Johansen says people should be able to use legally bought digital entertainment however they like.

At the age of 15, Mr. Johansen wrote a computer program that allowed users to copy DVDs. Then he posted it on the Internet. A Norwegian private school awarded him a prize for making an outstanding contribution to society. The Norwegian government indicted him.

Mr. Johansen may not be a household name in America. But he is lionized by people who, like him, believe that when they legally buy digital entertainment they should be free to use it as they please; fans have downloaded more than a million copies of his free software programs.

Piracy of copyrighted entertainment isn't new. For years, people copied record albums onto cassette tapes and traded them, a violation of copyright law that was generally overlooked because the quality of the copies wasn't great. But with the advent of digital entertainment on compact discs and more powerful personal computers, perfect copies could be made easily. The music industry initially took no technological steps to prevent copying from CDs. When DVDs were introduced in 1997, the film industry encrypted their content to try to avoid the piracy then already beginning to plague the music business.

In the past i wrote about US control of domain names and how the system may annoy other countries. Remember: The USA is the only country that does NOT need a country code in the domain name - we get Amazon.com not Amazon.com.uk or Amazon.com.tw. I happen to feel this system is inconsistent and confusing and said as much on Confab.

Today the issue is the GPS system, another American product that the rest of the world depends on. What i didnt know was that Bush threatened to suspend GPS functionality (in the name of terror of course) and that this threat understandably made the Europeans uncomfortable.

So they packed up their Freedom Fries and are building their own GPS system. Hmmm.

These issues make me think that this is a global world and national systems just wont cut it. What is even worse is taking a national system global and then pulling it back, or threatening to

Going global means your global stakeholders are just as important as your national stakeholders. If that isn't true then you arent a global system, and people have every right to desire and to build their own system.

EU Satellite Fuels Rivalry With U.S. Over Navigation

Associated Press

December 29, 2005

PARIS – A European satellite shot into space, launching the European Union's €3.4 billion ($4 billion) planned rival to the U.S.'s Global Positioning System.

"Galileo is made in Europe by Europeans," European Space Agency spokesman Franco Bonacina said. "If the Americans want to scramble GPS, they can do it whenever they want...whereas our system is a civilian-based system run by a civilian authority and would be completely autonomous."

Galileo -- which is interoperable with GPS -- will more than double existing GPS coverage, providing navigation for people from motorists to pilots to emergency-rescue teams. It is expected to improve coverage in high-latitude areas such as northern Europe, and in big cities where skyscrapers can block signals.

Galileo will also be more exact than GPS, with precision of one meter, compared with five meters with GPS technology, Mr. Bonacina said. With Galileo, for example, rescue services will be able to tell ambulances which lane to use on a highway, he said. For average users, like bikers or motorists, the precision will be three meters.

Three non-EU nations -- China, Israel and Ukraine -- have signed on to the program set up by the European Commission and European Space Agency, the EU says. Discussions are under way with India, Morocco, South Korea, Norway and Argentina.

You said it, brother!

One generation gets rich and then they mercilessly spoil their own kids. Those kids grow up with everything including huge expectations and little motivation. When it comes time to work, they decide the couch is more comfortable than a boring office.

This trend happened here years ago. This article shows it happening in Japan now. Watch for it in China in 20 years. Maybe we can shrink the trade deficit then?

This is another long but interesting article.

In Aging Japan,
Young Slackers
Stir Up Concerns

Changing Attitudes Prompt People to Quit Job Search; A Demographic Time Bomb

Mr. Isozaki's Lack of Urgency

By GINNY PARKER WOODS Staff Reporter of THE WALL STREET JOURNAL

December 29, 2005

TOKYO -- Japan needs Yuta Isozaki in the work force. With the number of young workers shrinking, it's crucial to get the 23-year-old -- and every other Japanese youth -- toiling away in jobs to stave off a looming labor shortage.

Mr. Isozaki, however, doesn't feel that urgency. Last year, he dropped out of engineering college. He failed to land part-time jobs at electronics and convenience stores. Discouraged, he spent his days playing videogames and watching cartoons on television, living off his parents and wondering what to do.

A year and a half later, he's still in limbo. An ideal job is one "that feels like going to the park and having a good time," says the pudgy Mr. Isozaki. "I'm not someone who can fit into a rigid framework."

...

But Japan has also experienced a quiet revolution in work attitudes. Many Japanese in their 40s and 50s who sacrificed their lives for stable but grueling corporate jobs don't want their children to do the same. As a result, they're encouraging them to pursue dream jobs -- even seemingly unattainable ones -- and are willing to support them in the process. Compared with the U.S., the pressure on parents to push grown children out of the nest is low in Japan, where families have traditionally housed and financially supported children until marriage.

A few weeks ago, I talked about the slow death of GM and the people who depend on US manufacturing. This week we have similar news from Ford.

While I am very pleased to see the decline of the SUV, I am less happy to see the further decline of our auto industry. I grew up in Michigan and it's already a much bleaker place than it was in my childhood with little hope of improvement. (Although i was intrigued by the idea of Toyota, a thriving car company, opening its next plant in Michigan.)

Ford Looks to Close Plants, 
Shed Jobs in Overhaul

Moves Seen as One Element Of Broader Strategy Review Amid Losses, Falling Sales

By JEFFREY MCCRACKEN Staff Reporter of THE WALL STREET JOURNAL

December 2, 2005

Weeks after rival General Motors Corp. announced plans to eliminate 30,000 jobs next year, some details are starting to emerge about job cuts and plant closings at the U.S.'s other big auto maker, Ford Motor Co.

Though Ford's plan, dubbed the "Way Forward," is still being formulated and is subject to change, the nation's second-largest auto maker is likely to shutter assembly plants in St. Louis, Atlanta and St. Paul, Minn., according to two people familiar with its product plans. Also slated for closure are an engine-parts plant in Windsor, Ontario, and a truck-assembly plant in Cuautitlan, Mexico, said these people.

Together, the plants employ about 7,500 workers, roughly 6% of the company's total North American work force. A Ford spokesman declined to comment on the plan, which is expected to be unveiled in January.

...

Yesterday, the company said U.S. sales fell 15% last month -- the worst of any auto maker -- and cut production targets for both the fourth and first quarters. (See related article1.) Especially hard hit were sales of trucks and SUVs. Ford Explorer sales have collapsed this year, falling nearly 52% in November from a year earlier despite an extensive redesign of the vehicle.

Ford once sold as many as 400,000 Explorers a year and ran two Explorer plants on overtime. This year, it will do well to sell more than 240,000 -- a single plant's worth.

"Gone are the days when we are going to sell 400,000 Explorers [a year] without incentives," said Ford sales analyst George Pipas, commenting on November's results. "It's sayonara."

Putting concern for citizens aside and thinking in economic terms however, we have an major oversupply of cars. I recently read someone's comment: "If GM stopped making cars, would anyone not have a car?" And of course the answer is no, they would just buy someone else's car.

If Ford and GM cannot make money and we have an oversupply of cars, would the industry be better off without one of them? (This is the same question the airlines are facing.) We talk a lot about our "free market" but we keep a lot of dying companies around on life support because its too hard to let go but that isn't necessarily the best thing to do.

Behind the Labor Shortage-Layoff Paradox: Lack of Skilled Workers




December 1, 2005

One story in The Wall Street Journal last week reported1: "Difficulty in finding enough skilled workers is hampering the ability of many U.S. manufacturers to serve their customers." On a facing page, another story2 said, "General Motors Corp. ... raised its job-cut target by about 5,000 to a total of 30,000, and said it will close operations at nine North American factories."

...

Two answers: One, manufacturers aren't investing enough in training. The National Association of Manufacturers survey found only 50% are spending more on training than they did three years ago. Two, manufacturing has earned a bad reputation, as it responds to globalization, competition and stockholders. Mention factory jobs to an American high-school student and he or she thinks about layoffs, benefit cuts and bare-knuckle union bargaining. No wonder so few want to grow up to be machinists.

While I agree that the skill-gap (and lack of training) is part of the problem, I think globablism is also playing a big part.

After all, if workers were really scarce, manufacturing wages would be rising rapidly -- and they're not.

This is a classic economics argument which I no longer think holds true. Wages dont rise from a shortage anymore because the economy is no longer a national game.

While there may be a national shortage of workers but there is no global shortage. If the costs of an end product cannot rise because of low-cost foreign competition, then the costs for making the product have be kept low. If domestic wages wont allow this, the company has to go to a global solution and by moving the work to less expensive countries.

In other words, in order to enjoy the cheap products we like, companies have to move our jobs to cheaper nations. While this trend has been going on for decades in the manufacturing realm, I think we have been seeing just the tip of this "global economy" iceberg. I fear a tipping point is getting near.

The flow of goods, services and people is much more complex that our politicians let on during elections. No one wants our manufactured goods but it seems our retirees are in high demand.

Developing Nations Lure Retirees,
Raising Idea of 'Outsourcing'
Boomers' Golden Years

By JOEL MILLMAN Staff Reporter of THE WALL STREET JOURNAL

November 14, 2005

Costa Ricans like to say theirs is the only country in Latin American, and perhaps the world, boasting a greater number of Americans -- as many as 20,000 retirees are here from the U.S. and Canada -- than the number of its own émigrés abroad. That may be a stretch, since it requires counting some of the 1.4 million tourists who come here each year, an average of 30,000 Americans on any given week. Yet it gets at an important economic phenomenon.

Thanks to a decades-old policy of offering tax incentives and other perks to attract English-speaking retirees, Costa Rica has pioneered what is fast becoming a popular economic-development tool for the small, largely impoverished nations of the Caribbean basin: importing a high-spending consumer class unencumbered by school-age children, with the expectation that their dollars will quickly follow.

In Costa Rica's case, retirees contribute significantly to the $1.4 billion a year in direct spending by Americans here, the government says. (It doesn't differentiate between retirees and long-term visitors.) The multiplier effects -- salaries in health care, construction, retail and other services -- could bring the total benefit to $4 billion, nearly 25% of Costa Rica's gross domestic product. Moreover, the retirement wave is synergistic: early pensionados invested in second careers -- running bed-and-breakfast hotels near the beach, or operating travel agencies -- which attracted more tourists and more retirees.

With the prospect of more than 30 million Americans starting to retire next year, many developing countries expect a windfall. Which raises the question: Should the U.S. "outsource" baby boomers' golden years?

Consider one cost of retirement: labor. The U.S. depends heavily on immigrants to serve retirees, in the many kinds of services they need. According to the 2000 Census, more than one million U.S. hospital, nursing-home and other health-care workers were born abroad; nearly 350,000 of them are immigrants from Mexico, Central America and the Caribbean. Sending U.S. retirees abroad represents one step toward closing that intractable labor gap.

This weekend i heard an interview with students who were visiting the USA from China. They were very positive about the US and clearly thought highly of life here. One comment struck me: "American's see life as adventure. In China, life is a struggle."

Whether or not the schools are too narrowly focused, the coming global economy is going to be very competitive. In just two generations, i fear, we have gotten too used to being "America #1" and have lost our edge. If White kids cannot compete in high school, how will they compete in the job market? Time will tell.

This is an excellent article with a taste of things to come.

The New White Flight

In Silicon Valley, two high schools with outstanding academic reputations are losing white students as Asian students move in. Why?

By SUEIN HWANG

November 19, 2005

CUPERTINO, Calif. -- By most measures, Monta Vista High here and Lynbrook High, in nearby San Jose, are among the nation's top public high schools. Both boast stellar test scores, an array of advanced-placement classes and a track record of sending graduates from the affluent suburbs of Silicon Valley to prestigious colleges.

But locally, they're also known for something else: white flight. Over the past 10 years, the proportion of white students at Lynbrook has fallen by nearly half, to 25% of the student body. At Monta Vista, white students make up less than one-third of the population, down from 45% -- this in a town that's half white. Some white Cupertino parents are instead sending their children to private schools or moving them to other, whiter public schools. More commonly, young white families in Silicon Valley say they are avoiding Cupertino altogether.

Whites aren't quitting the schools because the schools are failing academically. Quite the contrary: Many white parents say they're leaving because the schools are too academically driven and too narrowly invested in subjects such as math and science at the expense of liberal arts and extracurriculars like sports and other personal interests.

The two schools, put another way that parents rarely articulate so bluntly, are too Asian.

Pressures have been building for a long time and big changes seem close at hand in the auto industry, a bell-weather indicator of US manufacturing.