I just received my GRI G3 reporting certification from the course I took last week.  The course was delivered in Colorado for the first time due to the efforts of CORE with support from Deloitte.  Lead, out of Canada, provided the training based on materials from the Global Reporting Initiative.

The instructor was well informed, as were the 26 attendees. Lively discussion, along with some good and some not so good exercises provided us all with a great understanding of the G3 framework and the processes companies should put in place to engage stakeholders, prioritize initiatives, disclose results, share goals and increase sustainability through management processes and transparency.

Global Reporting Initiative
The Sustainability Reporting Framework – of which the Sustainability Reporting Guidelines are the cornerstone – provides guidance for organizations to disclose their sustainability performance. It is applicable to organizations of any size or type, and from any sector or geographic region, and has been used by thousands of organizations worldwide as the basis for their sustainability reporting.

The term “smart grid” is shorthand for a number of technologies intended to automate and digitize management of electrical power. By computerizing the 20th century electrical system, utilities and others in the power industryhope to manage and control electrical output more efficiently and reliably. Though smart grid sounds like it’s a single system, it’s more an array of different tools and technologies, from smart meters to solar power, all designed to reduce costs, waste less energy, and provide better networking and communications between homes and utilities.

Smart-grid spending to hit $200 billion by 2015 | Green Tech – CNET News.

The 45th Annual Event Sponsored by the Business Research Division in the Leeds School of Business and BBVA Compass
The annual forecast of the state’s economy includes snapshots from specific counties and regions around the state, as well as updates on international trade, population, labor force and personal income growth, and a general outlook on the national economy.
December 7
Grand Hyatt Hotel, 1750 Welton Street, Denver
1:00 p.m. Welcome by Leeds School and BBVA Compass
1:15 p.m. Colorado economic outlook for 2010
         Richard Wobbekind, Economist, Leeds School of Business
         John Lymberopoulos, Professor Emeritus, Leeds School of Business
2:00 p.m. Question and answer panel session
2:30 p.m. Keynote address: Nathaniel Karp, Chief U.S. Economist, BBVA Compass
3:15 p.m. Concurrent discussion sessions:
         The Future of Uranium, Renewables, and Coal–Impacts on Colorado’s Economy
         Moderator and Speaker: Vince Matthews–Colorado Geological Survey
         Panel: Jim Burnell–Colorado Geological Survey
                    Bob Burnham–Wood Mackenzie
                     Jeff Lyng–Governor’s Energy Office
4:45 p.m. Networking reception
There is no charge for this event. No RSVP is necessary. Download printable postcard invitation.
More info:

The U.S. Department of Energy (DOE) will provide up to $338 million in funding for the exploration and development of new geothermal fields and research into advanced geothermal technologies.

These grants are directed toward identifying and developing new geothermal fields and reducing the upfront risk associated with geothermal development through exploration and drilling projects and data development and collection.

In total, 123 projects in 39 states will receive funding from these grants.

President Obama set to be in Copenhagen on Dec. 9th with an offer to cut US GHG emissions in the range of 17% from 2005 levels by 2020. 

The DOE is investing up to $1.18 million for a project in Boulder, Colo. to upgrade the 100-year-old Boulder Canyon Hydroelectric Project by replacing two older turbines with a single unit. The new turbine is expected to operate at a wider range of flows and higher efficiency ranges, resulting in an increase in annual generation of 11,000 MWh (30% increase).

Along with 6 other projects the DOE is investing $30.6 million to create an additional 187,000 MWh/year, while replacing turbines that are as much as 90 and 100 years old.  Clean (cutting 110,00o tons of CO2 emissions/year), cheap (adding generation at less than 4 cents per kWh) and lowering operating and maintenance costs.  

NIST released a draft report on the SmartGrid interoperability standards yesterday.  The roughly 80 initial standards and 14 priority action plans are available for public review and comment for 30 days.  Following this comment period the first phase of NIST’s 3 phase approach will be completed with the final release of the NIST Framework and Roadmap for Smart Grid Interoperability Standards, Release 1.0.

McKinsey and Company’s central conclusion from their U.S. Energy Efficiency report says much about the energy efficiency opportunity in the US:

Energy efficiency offers a vast, low-cost energy resource for the U.S. economy – but only if the nation can craft a comprehensive and innovative approach to unlock it.  Significant and persistent barriers will need to be addresses at multiple levels to stimulate demand for energy efficiency and manage its delivery across more than 100 million buildings and literally billions of devices.  If executed at scale, a holistic approach would yield gross energy savings worth more than $1.2 trillion, well above the $520 billion needed through 2020 for upfront investment in efficiency measures (not including program costs).  Such a program is estimated to reduce end-use energy consumption in 2020 by 9.1 quadrillion BTUs, roughly 23 percent of projected demand, potentially abating up to 1.1 gigatons of green house gases annually.

Unlocking Energy Efficiency in the U.S. Economy – McKinsey and Company

2008 proved to be a year of extremes for both the economy and energy around the world.  Not surprising since fuel prices are so closely tied to world economic growth and in 2008 one of the longest periods of sustained economic growth can crashing to a halt.  This sent record oil prices of $140 per barrel plummeting by more than 70%.  See the details in BP Statistical Review of World Energy – June 2009.

Department of Energy Secretary Chu announces $93 million from the Recover Act to support the development of additional wind energy in the United States. The money will support R&D and testing for wind turbine drivetrains, support university and industry consortia focusing on critical wind energy challenges, advanced technology development in the private sector and a National Wind Technology Center in Colorado.

Chu also announced the National Renewable Energy Laboratory will receive $100 million for infrastructure projects. The largest is the development of an energy efficient LEED Platinum certified office, constructed at the same cost as that of a low efficiency commercial office building. The others are to use solar and other green energy sources to reduce the labs carbon use and to upgrade the integrated bio-refinery research facility used to develop commercial scale cellulose to ethanol technologies.

During his visit to the Golden, CO facility Chu stated that $26 billion of the more than $100 billion in the Recover Act for renewable energy projects had already been authorized with the goal of 70% being authorized by early September. He also discussed streamlining the DOE loan approval process with the goal of reducing the time to getting a loan application approved to a few months. It has been known to take years under the current process.

It is great to see some of this huge spending bill is being directed to innovation and more importantly that this is being coordinated with private industry. There continues to be a gap in funding for the commercialization of proven technologies. Until this gap is filled, the great innovation from the labs and universities will be delayed in helping solve our energy issues.

Bob Metcalfe, using the history of the Internet as a guide, provided his list of things to look for and look out for in the changing energy sector.

Metcalfe gave an optimistic view of the environmental challenge suggesting not only are we in a Global Warming Bubble but that cheap, clean energy will be so abundant, it will easily be squandered.

He suggested the best place for research is in the research universities and not in government labs which are “nothing more than local earmarks”. In this model, professors along with their graduate students, will commercialize innovation with the help of entrepreneurs and venture capital.

Metcalfe warned that energy and environment are two overlapping issues and they should be viewed as two things. Otherwise, we may solve energy without solving the environment or vice-versa. Oh, and he offered a new color for clean energy, blue.

McKinsey’s Matt Hirschland interviewed economist Nicholas Stern in Brussels this past January. You can read the transcript here or click below to watch the video.

Trading activity picks up for carbon financial instruments (CFIs) after the release of President Obama’s budget. Even though the budget does not include revenue from carbon allowances until 2012, future contracts prior to this date moved higher. Some people believe these instruments can be used as early action credits in a federal cap and trade system.

Between 2012 and 2020, nearly $645 billion could be raised from the sale of emission allowances, the budget outline says.

According to Point Carbon (subscription) estimates, that would assume around 80 per cent of the economy would face caps on their greenhouse gas output starting 2012 at 2005 levels, or roughly 7.2 billion tonnes of carbon dioxide equivalent.

This means the budget is banking on carbon prices of nearly $13.70 per tonne by 2012.With the cap declining around 2 per cent per year after 2012, Point Carbon estimates the price of carbon in 2020 would go up to $16.5 per allowance.

So just what is a cap and trade system and how does it work? MSNBC has a Frequently Asked Questions page that answers this question. While President Obama signaled his desires in his budget, congress is required to pass the legislation and the details. Many experts are suggesting legislation is unlikely this, however “Powerful Democrats such as House Energy and Commerce Committee Chairman Henry Waxman, D-Calif., have said they would work hard to get legislation passed by this summer.”

Earlier this week, the White House stated a climate bill passed in 2010 would be fine as long as it included the critical components President Obama included in his campaign promises. This is consistent with President Obama’s budget which includes revenue for carbon cap and trade allowances of $658 billion in total for the years 2012 through 2019. $150 billion of this will be committed to invest in clean energy along with tax credits.

2008 was a bumper year for wind energy investment. The US added 8,300 megawatts (MW) of wind energy to lead the world with 25,170 MW. 42% of the country’s new power-producing capacity came from wind. The 50% increase in wind power generation also created 35,000 jobs bringing the total employee bast to 85,000.

Worldwide over 27 gigawatts (GW) of wind capacity was added. China doubled capacity to 12.2 GW and is on tract to double capacity again in 2009 and may reach its goal of 30 (GW) by 2010, ten years ahead of plan. All of Asia added about 8.3 GW with Europe and North America adding 8.9 GW each.

In the US, the financial crisis hit the wind industry and orders for turbines and components has slowed to a trickle. This needs to be reversed quickly if the US is to stay ahead of schedule to reach 300 GW of wind capacity, or 20% of our electricity needs, by 2030.

Citing lower forecasts in 2009 output along with an increase in the number of firms announcing temporary shutdowns, analysts are scaling back their forecasts for carbon emissions and the price for allowances for those emissions. Societe Generale has cut their forecast for EUAs a third to 17 euros a ton. They went on to say prices could rise to 20 euros by 2012, sharply down from estimates earlier this year that prices would reach 37 euros during this timeframe.

Deutsche Bank believes EU emissions in 2009 could be 10% below 2007 levels. This would push emissions below allowances for 2009. The excess allowances for 2009 can be “banked” for use through 2012 and the forecasted emissions for 2009-2012 remain slightly above the EU carbon allowances. As a result of reduced emissions and smaller shortfall, UN-approved Certified Emission Reductions (CERs) which EU industry can import from developing nations to meet compliance, may be able to meet the entire shortfall. Price estimates for EUAs and CERs clearly indicate analysts believe CERs will set the pricing for EUAs for the next few years.

The good news is EU will be able to meet the allowances under phase 2 with a small “carbon price” in this recessionary period. This is also the bad news, as the lower price reduces the investment per ton of CO₂ available for carbon abatement projects. The net is by 2012, the European Union will have done less and perhaps much less to lower the Green House Gases (GHG) they produce per unit of energy they consume than anticipated when the allowance allocations were set.

This video is worth a few minutes of your time.

The Generation WE movement is the largest generation in history, they are independant – politically, socially, and philosophically – and are spearheading a period of sweeping change in America and around the world. Check it out.

The McCain – Clinton Gas Tax Holiday is a farce and voters are beginning to realize this. Of course, Obama has been correctly outlining the problems all along. There are numerous problems with this approach even if the money would trickle into the hands of the consumers who most need it and therefore spend it on other items. At 18.4 cents per gallon, the family burning two gallons per day would receive a savings of $11 dollars per month or 5% of the cost of gasoline at the current $3.61 per gallon.

And of course, it is a proposal that few in Congress support and President Bush will veto. So, it’s a non-starter and perhaps in the eyes of two candidates a safe proposal aimed to win voter favor without having all the downsides. And there are several.

First of all, the tax generates revenue to pay for roads and bridge maintenance, which if anything is too small for our aging infrastructure. Of the three ways to pay for this, Clinton suggests taxing the windfall profits on Oil Companies while McCain says cut other spending. Let’s start with McCain. Congress has shown little appetite for cutting spending and the Whitehouse seems to agree that deficits matter not to voters. So, he is really offering the third option of borrowing to pay for this when we need to do the opposite.

Clinton wants to tax the Oil companies with a Windfall Profit tax which would do two things. First of all, it would diminish the expected returns on oil production and over the long term would decrease supply. It would in the short term put higher price pressure on Oil and with more demand coming during the summer driving season, it is more likely this added tax expense would be passed on to consumers.

If you want to help consumers and the retailers they visit, there are better ways to insure the money get to the right people. The stimulus package aims (many would argue aims poorly) to get $600 to those who need it most and are most likely to use it. The gas tax suspension would do no such thing.

And now here is the real catch. The realities of market economics cannot be suspended. Demand will increase to a point where it meets supply. Fiddling with the gas tax will not change this and the US Fuel Retail system has very little slack capacity. Therefore, supply is relatively inelastic and prices will move with demand. Bottom line, the gas tax will be eaten by the Gasoline Value Chain and consumers will be left with little in their pocket other than a higher debt and nothing done to solve the longer term energy issues. It’s bad policy, bad economics and it is time for us to show politicians, that pandering for votes is bad politics.

The New York Times reports that Venture Capitalist invest in 922 deals in the first quarter of 2008, compared to 861 in the same period last year. The total amount invested was down 5% causing the times to lead with the headline Venture Capitalists Invest Less In First Quarter – New York Times.

“We do not expect to see significant declines in investment levels in the coming year,” said NVCA President Mark Heesen.

Is this additional evidence that media outlets lean toward a doom and gloom outlook or are they just following the current sentiment of their readership? Just be sure to read past the headlines.

Now you can generate energy and pump clean water by just being a kid.

Developed by Daniel Sheridan, now a British student at Coventry University, the Springwise: See-saw power for schools generates electricity while kids play on it. Brilliant!

The Regional Greenhouse Gas Initiative (RGGI) has set the rules for the first allowance auctions to take place on September 10, 2008 and December 17, 2008. This is the first mandatory CO2 emissions reduction program auction in the United States. Quarterly auctions will take place after these first two. These companies have won the right to work with RGGI on aspects of the program: World Energy Solutions, Inc., Perrin Quarles Associates, Inc., ICF International, and the Greenhouse Gas Management Institute.

The basic design of the auction has received some criticism. Mike Giberson at Knowledge Problem wrote about this last November and believes the issues may easily be corrected. He cites Peter Cramton’s report on behalf of North East power markets that recommends a simultaneous ascending clock auction design.

Technorati Tags: carbon credits, energy, environment, auction, RGGI

Berkshire Hathaway’s Shareholder Letter

is a must read and this one is no exception.  Continuing last year’s scolding of the sub-prime mortgage banking industr, my favorite lines included these:

John Stumpf, CEO of Wells Fargo, aptly dissected the recent behavior of many lenders: “It is interesting that the industry has invented few ways to lose money when the old ways seemed to work just fine.”

You only learn who has been swimming naked when the tide goes out – and what we are witnessing at some of our largest financial institutions is an ugly sight.

Chris Anderson’s at Wired discusses where, why and how free products make sense today and will make make even more sense (and cents) in the future.  Starting with the story of Gillette and bringing us to the plummeting cost of computing and networking, Anderson argues that the traditional cross-subsidy model is not required when incremental costs approach zero.  This opens the way for numerous value creation models when a product is given away and allows companies to avoid the “penny gap” or the difference between cheap and free as coined by Josh Kopelman.

“People think demand is elastic and that volume falls in a straight line as price rises, but the truth is that zero is one market and any other price is another. In many cases, that’s the difference between a great market and none at all.

“The huge psychological gap between “almost zero” and “zero” is why micropayments failed. It’s why Google doesn’t show up on your credit card. It’s why modern Web companies don’t charge their users anything. And it’s why Yahoo gives away disk drive space. The question of infinite storage was not if but when. The winners made their stuff free first.”

Speaking of the TXU purchase, Mr. Bonderman said the company was adept at running a profitable company and equally bad at politics from price increases to ecology to labor relations. These shortcomings lead tothe opportunity which focused on addressing these public concerns.Opportunities for private equity include exploiting public investorsfocus on short term focus, their dislike for debt or leverage, fixingbroken companies and putting companies together that changes thecompetitive landscape.His advice to students wondering which classes to take for a career inprivate equity, which job to take this summer, which classes to takenext year is to “Just relax”.In looking at the public policy of the US, Bonderman says ourlawmakers are thinking like it is 1975 when the US represented 50% ofthe world’s GDP. Now that we are less than 30% and falling the rest ofthe world has choices and will not play by any US tax code.Best run companies are those which build value over long periods oftime. However, fund managers often are looking for short term gains.This makes creating proper incentives for publicly traded companies’managers sub optimal if not downright harmful.

The 4 hour work week is an interesting and educational book, even for those who would not choose to work only half a day each week.  It pushes you to think about different ways to get your job done and to think differently about which activities you keep inside and which you push to others.  And at the same time think differently about careers, yours and that of other workers in your company.

Tim Ferris asks you to consider these questions as he recommends helping to make the world a better place through access to books in LitLiberation: How to Travel the World–and Get a Personal Assistant–for Free
Envision the 5 books that have most impacted your life. How would your life be different if you’d never read them?

Where might you be today if you’d never met the most influential teachers in your life, past and present?

How would your options be affected if you could never again read a book, menu, or sign?

Check out LitLiberation: Scalable Education Revolution

Technorati Profile

Even though the most likely outcome for a successful technology company is via an acquisition, I have never liked the idea of planning for it.  Plans and actions then often go away from what will help our customers and help us succeed in the market to what would ABC Inc. like to see in an acquisition target.  Rarely do the two line up and even then the focus goes away from key items required to build long term sustainable value.

Guest blogger Will Price offered a sound plan for building value in a post on Ask The VC.  Responding to a question regarding how to prepare for an acquisition exit, Will provided details around these three items.

1) Plan for Independence

"The company’s operating plan, technology road map, and executive team should not focus on unnatural acts, in the hopes of attracting a buyer, but rather on building a company with the potential for independence. Companies built to "flip" often flop."

2) Be prepared for acquisition

"…acquirers tend to believe that successful partners make the best acquisition targets. "

3) Keep the house in order

"good record keeping makes for good diligence and good diligence makes for expedited outcomes."

Maximize your "best alternative to a negotiated agreement" (BATNA) and your will be well on your way to delivering value to all your stakeholders.

Why are private boards putting more value on the efforts of top managers than comparable public companies?  With no doubt there have been compensation structures for CEOs that were neither aligned with the interest of the shareholders or other stakeholders in the corporation.  However, the comparison between the pay at the top of the organization and that at lower levels really misses the mark.  This comparison just happens to be simple to calculate, easily understood and highly contentious.

The true value of a CEO is her ability to improve the value of the company.  The best way to measure this is to compare the value increase to other similar companies in order to remove the value increase or decrease that impacted all companies in the sector.

The cost of the CEO should be market driven with significant portions based on performance.  What is the market rate for a CEO with these skills and necessary experience?  Just as the top performers in movies or baseball games are paid many multiples the salary enjoyed by their peers due to the short supply of “stars”, CEOs are short in supply as well.

What is surprising here is that private companies with active investors on their boards are offering higher compensation for these talents than the generally less active boards of public companies?  I would suggest that the backlash of the “compensation scandals” have the compensation committee of public companies swinging too far in the conservative direction. The swing was needed, let’s hope it does not continue so that public companies become the minor league training camps for CEO destined to play in the private company major leagues.
Public CEOs take to private firms in order to get top dollar as shown in Private Firms Lure Chief Executives With Top Pay – New York Times

Ta-Da! Cheaper Stock Options! Are stock Betas, volatility, really going down as fast as stock option valuations suggest. This article suggest they are not.

Look, the only reason any investor wished companies to expense options is to reduce the number of options granted. An appropriate goal, perhaps, I question the approach.

There is limited value to investors by adding another non-cash item to earnings. Especially, one so difficult to value or in other words so easy to manipulate. Future cash flow per share is the metric investors desire and the information needed is how many options will vest over time and what is the dilutive impact on cash flow per share. Oh, and make sure you are getting our money’s worth when you grant future cash flows to employees via stock option grants.

The excellent series on the History Channel, 10 Days that Unexpectedly Changed America, continues to be very educational and quite entertaining. Watching these 10 events, I feel compelled to add and question if perhaps other unexpected events would be in my top 10. Their events are:

• Massacre at Mystic
• Shays’ Rebellion: America’s First Civil War
• Gold Rush
• Antietam
• The Homestead Strike
• Murder at the Fair: The Assassination of President McKinley
• Scopes: The Battle over America’s Soul
• Einstein’s Letter
• When America Was Rocked
• Freedom Summer

After reading the list, I could not help notice the lack of inclusion of events drawing the US into a war. The sinking of the Lusitania, the attack on Pearl Harbor, and the Gulf of Tonkin. While all of these lead to war and perhaps one could predict it, the total cost and impact to the country could not have been known by anyone.

Nothing on this list leads to the US declaring its independence from England. I’m not sure I can point to a single day that led the founding fathers to make that decision and the country to make the required sacrifice. The events that come to mind fill today’s elementary school books. The Shot Heard Round the World, seems to fit the bill. However, this was in volatile New England and may have meant little to a New Yorker or Georgian. Bunker Hill (Breed’s Hill) is another event following the Boston Massacre that could have set the country on a direction of succession.

Economic events include The Federal Reserve, going off the gold starndard and, my favorite, the invention of the semiconductor which has to rank very high in terms of impact to the US and the world.

or overstepping the boundaries of government? Which of these best describes the recent “Healthcare for All” bill supported by an overwhelming majority of the Massachusetts Legislature (154 to 2 in the House and 37 to 0 in the Senate) and Govenor Mitt Romney? The plan’s objective is one shared by all concerned about the unisured, responsible quality healthcare for all. It differs from many other universal plans in several ways.

The bill requires individuals to provide personal coverage, just like the state’s laws on auto coverage. Massachusetts is the first state requiring individuals to have health insurance or prove they can self-insure.

In addition, the bill provides funds to make sure those eligible for Medicare and Medicaid are enrolled. It subsidies healthcare insurance for those who don’t qualify for government programs and can’t afford insurance. The state expects to pay for the subsidies out of a $1 billion fund set aside for providing healthcare for those who can’t afford it.

The bill currently requires employers to pay $295 per unisured employee. “That’s likely to be adjusted by me,” stated Governor Romney. Will he wield the line-item veto pen?

Joe Klein at Time Magazine describes the Romney Healthcare plan this way:

Massachusetts now spends about $1 billion a year to provide emergency health care for at least 500,000 uninsured citizens. About 200,000 of those are young people, predominantly male, who are making enough money to buy health insurance but figure they don’t need it. They would be required to buy a relatively inexpensive health insurance policy, with higher deductibles and co-pays—that’s where the “mandate” comes in. Another 100,000 are extremely poor people who are eligible for Medicaid; a concerted effort would be made to bring them into the system. The remaining 200,000 are the people who have been most neglected by the system in the past: the working poor, people who have low-end service jobs or work part time for employers who don’t offer health coverage.

According to USA Today, Mass. Gov. Romney’s health care plan says everyone pays , other healthcare proposals have focused on expanding government healtcare coverage for the poor and have largely failed. Romney put distance between his proposal and the Clinton plan, saying “we don’t need Hillary-care.”

In an article by The Washington Post, Mass. Bill Requires Health Coverage, the plan goes much farther than any other state but is by no means finalized. It leaves the task of determining exactly how much some low-income residents will pay for their new, more affordable policies to a new agency that would serve as a liaison between the government, policyholders and private insurance companies.

Because of that uncertainty, some still worry that the residents required to buy insurance would not be able to.

In any event, a creative approach which does not unduly burden employers or tax payers. As long as it does not place too great a burden on the poor, then it is a very good start.

During the next few years, western countries will face a more intense labor shortage than last felt in the first two years of this century. Very few companies are prepared for this with hardly any looking to utilize the aging workforce to fill this shortage. Initially, offshore workers will be able to handle some of the shortage. However, India and China are only a few decades from reaching a neutral or negative growth in trained workers.

A survey in America last month by Ernst & Young found that “although corporate America foresees a significant workforce shortage as boomers retire, it is not dealing with the issue.” Almost three-quarters of the 1,400 global companies questioned by Deloitte last year said they expected a shortage of salaried staff over the next three to five years. Yet few of them are looking to older workers to fill that shortage; and even fewer are looking to them to fill another gap that has already appeared. Many firms in Europe and America complain that they struggle to find qualified directors for their boards—this when the pool of retired talent from those very same firms is growing by leaps and bounds.

Why are firms not working harder to keep old employees?

Lawrence Kudlow calls the concerns over a United Arab Emirates company winning the bid to manage six America ports as nothing other than bigotry. His name for this, Islamaphobia, will not likely be added to our daily lexicon. The actions it describes are simply wrong headed.

Going private. Hotshot managers are fleeing public companies for the money, freedom, and glamour of private equity.

“It isn’t only CEOs who are making the move to private-equity firms. Fast-rising midcareer folks are lining up, too. ‘The interest has really gone through the roof,’ says Anthony Lando, partner and director of Benchmark Search Group, a financial-executive recruiter in Stamford, Conn. Newly minted MBAs are joining them. Back in the 1980s most B-school students wanted to be investment bankers. In the 1990s it was tech-related venture capital and dot-coms. Now, private equity is hot.”

Chad Dickerson puts it simply and directly. Tactical execution is critical in today’s business environment.

I’m not saying that strategy isn’t important, just that strategy directly combined with tactical skill is the real killer combo. “Strategy” in the absense of tactical engagement is a loser’s game. If you’re a manager who gets down in the muck to make things happen (not to be confused with “micromanagement”), take heart: tactical is the new strategic.

In Web start-ups snub the big money, the International Herald Tribune suggests web start-ups will continue to use less capital. This is a trend that should be expected to continue for a few if not spread to many companies in the space.”By then, Meebo was being courted by venture capitalists, but it decided to take a modest $100,000 from three angel investors, people who typically contribute small amounts and make few demands.

“We had a bunch of VCs talking to us about potentially putting more money in,” Sternberg said. “We said no. A lot of things happen when you raise a VC round, and they really slow you down.”

Eventually, Meebo did raise money from venture investors – about $3.5 million from Sequoia Capital. But that was after the company was well on its way to showing that its service was a hit with consumers. At the time, Meebo had about 200,000 daily log-ins.”

- Original Nov. 2006 post updated
Is the recent news of tech and media startups needing less capital a trend or a passing fad? There have been some noteworthy articles in recent weeks suggesting it is a combination of the two. I recommend reading both Tom Evslin’s Web 2.0 – Greater Initial Investments Required and Fred Willson’s that the technology cost will remain low, both covered in the Random Connections Web 2.0 – A Bubble, Hype, for the Lucky Few?

The McKinsey Quarterly: Intensive care for Medicaid:

“Every US policy maker knows that Medicaid presents vexing budget challenges, but a new analysis suggests that its costs are becoming truly unsustainable. McKinsey estimates that even after economic growth returns to a steady pace, this government health insurance program, which primarily serves the poor, will consume more than 75 percent of all new state revenues in 10 states, including Georgia, Indiana, and Oregon, by 2009. Medicaid will cost 11 other states, including Florida, New York, and Pennsylvania, from half to 75 percent of their incremental revenues (Exhibit 1). In an additional 22 states, this one program will consume 25 to 50 cents of each new tax dollar.”

The McKinsey Quarterly

The US recession officially ended in late 2001, and ever since, despite recent gains, aggregate job creation has been extremely weak—weaker even than during the “jobless recovery” that followed the 1990–91 recession (Exhibit 1). Contributing most to the overall number of US jobs lost since 2000 has been the manufacturing sector, which shed 2.85 million of them from 2000 to 2003, notwithstanding the relatively mild nature of the recent downturn in the economy as a whole.

NCPA – Social Security – Facts About Social Security

Social Security reform has emerged as one of the defining issues of the 2000 election, but a number of myths and half-truths have clouded the dialogue.

Fact #1: The System Is in Trouble. Social Security is structured as a pay-as-you-go system. That means today’s workers pay the benefits for today’s retirees. In 1940, there were 42 workers per retiree; today there are three. By 2040 there will be only two (see figure). This means higher taxes for future workers.

Fact #2: The Social Security Trust Fund Cannot Pay Benefits. The trust fund only exists to perform a record-keeping function. Technically, it holds interest-bearing bonds that represent the accounting surplus of payroll taxes collected minus benefits paid. But the only way the Treasury can redeem them is if it first collects taxes or borrows money.

Fact #3: Benefits Are Not Guaranteed. In two major cases, Helvering v. Davis (1937) and Flemming v. Nestor (1960), the Supreme Court ruled that individuals have no legal claim to Social Security. As a result, Congress can reduce Social Security benefits at any time. Indeed, it already has by raising the retirement age (leading to fewer benefit checks) and imposing a special tax on benefits. Workers have no projected right in Social Security benefits simply because they have paid Social Security taxes.

Fact #4: Social Security Is a Poor Investment. In general, workers born before World War II paid significantly less in taxes than they will receive in benefits – and can expect a higher rate of return than subsequent generations. By contrast, baby boomers can expect a rate of return of less than 2 percent, and Generation Xers can expect less than 1 percent. Children born today can expect a rate of return from Social Security of almost zero, assuming that the program can pay full promised benefits.

Fact #5: Reform Works. A system that divorces us from the pay-as-you-go system, such as one with personal retirement accounts, could provide future retirees with a benefit that could provide them choice, control and security in their retirement, while protecting the government’s long-term solvency.

Source: Matt Moore, “Facts about Social Security,” Brief Analysis 341, September 26, 2000, National Center for Policy Analysis.

The Role of Social Security in Your Financial Planning

“Fact 1: Social Security is the guaranteed part of your retirement plan.

There have been lots of questions raised about Social Security lately. And granted, it isn’t perfect. We at AARP know that it was never intended to be the sole solution to financial security in retirement. But it has been the guaranteed component of retirement. And that hasn’t changed.

The fact is, with no change at all, Social Security will be able to pay 100% of promised benefits that keep pace with the cost of living until the year 2042. After that, it will still be able to pay three-quarters of promised benefits.

Getting three-quarters wouldn’t be okay today and it won’t be fair tomorrow. At AARP, we want to be sure you reach your retirement goals. And we know that Social Security plays an important role in getting you there. Think about the role of Social Security in your own retirement planning. Then let’s start thinking about ways to fill that one quarter gap to make sure your financial security goals are within reach when you retire.

Fact 2: With Social Security in your retirement plan, you’re starting at about midfield.

Financial planning for retirement is like a football game. And you’re the one who has to go the distance and carry the ball. Only you’re not starting at zero. Thanks to the years you’ve worked, when you retire, you’re starting with about half the field already behind you.

That’s because Social Security isn’t based on your future prospects, but on your past performance. No matter who you are, Social Security is there for you because it’s based on your work history—and that just won’t change. Social Security promises that when you stop working, you’ll still have a guaranteed stream of income that, for most people, is about 40 percent of the pay you received when you were working.

One nice thing to know is that Social Security follows you wherever you go. It’s not tied to a specific job, again making it something you can count on when you retire.

Plus, it’s protected against inflation. Year after year, Social Security rises with the rising cost of living. And when you choose to retire, Social Security will continue to keep pace with the times, preventing erosion of your purchasing power. That’s why there’s a cost of living increase every year—so 20 years from now, you aren’t stuck trying to make up for the fact that what used to cover a mortgage doesn’t even cover a car payment.

You may outlive your savings, but your Social Security is always there. It gives you a safe, unshakable financial base to complement a private pension, an IRA, a 401(k), or other savings, all of which, together, put you solidly in the scoring position when you retire.

Fact 3: Social Security is on the sidelines, backing you up, while you’re working.

If you’re still working, you probably don’t realize Social Security is protecting you right now. Thanks to Social Security, you have disability and survivor insurance for you and your family. No one likes to think about the unexpected realities life can bring, but we all know bad things can happen to good people. In the event of a worker’s death or disability, Social Security is there to step in and provide for that worker and his or her family.

With Social Security, you’re that much closer to your goals and that much more secure. Today. And every day.”

The 6.2 Percent Solution: A Plan for Reforming Social Security:

“For the past several years there has been a growing consensus about the need to reform Social Security. Now, however, the debate has advanced to the point where it becomes important to move beyond generalities and provide specific proposals for transforming Social Security to a system of individual accounts. The Cato Project on Social Security Choice, therefore, has developed a proposal to give workers ownership of and control over their retirement funds.

Under this proposal:

* Individuals would be allowed to divert their half (6.2 percentage points) of the payroll tax to individually owned, privately invested accounts. Those who chose to do so would agree to forgo all future accrual of retirement benefits under the traditional Social Security system.
* The remaining 6.2 percentage points of payroll taxes would be used to pay transition costs and to fund disability and survivors’ benefits.
* Workers who chose the individual account option would receive a ‘recognition bond’ based on the accrued value of their lifetimeto- date benefits. Those bonds, redeemable at the worker’s retirement, would be fully tradable in secondary markets.
* Those who wished to remain in the traditional Social Security system would be free to do so, accepting a level of benefits payable with the current level of revenue.”

The full text of the argument Tanner makes for this proposal can be found in
SSP No. 32.

FactCheck.org Bush’s State of the Union: Social Security “Bankruptcy?”:

FactCheck.org MoveOn.org Social Security Ad

The folks at FactCheck.org are equally critical of Bush’s use of agressive projections and language as he pushed his plan to revamp Social Security in his State of the Union address and MoveOn.org’s use of false claims regarding cuts in benefit payments.

“In his State of the Union Address, President Bush said again that the Social Security system is headed for ‘bankruptcy,’ a term that could give the wrong idea. Actually, even if it goes ‘bankrupt’ a few decades from now, the system would still be able to pay about three-quarters of the benefits now promised.

Bush also made his proposed private Social Security accounts sound like a sure thing, which they are not. He said they ‘will’ grow fast enough to provide a better return than the present system. History suggests that will be so, but nobody can predict what stock and bond markets will do in the future.”

Moveon.org
“MoveOn.org launched a false TV ad in the districts of several House members, claiming through images and words that President Bush plans to cut Social Security benefits nearly in half. Showing white-haired workers lifting boxes, mopping floors, shoveling and laundering, the ad says ‘it won’t be long before America introduces the working retirement.’”

Do Pharmaceutical Companies Have an Effective Business Models?

Has the Pharmaceutical Blockbuster Model Gone Bust?
Bain & Company Press Release 12/8/2003

Rebuilding Big Pharma’s Business Model
In Vivo 11/1/2003
by James Gilbert, Preston Henske and Ashish Singh
The blockbuster business model that underpinned Big Pharma’s success is now irreparably broken. The industry needs a new approach.

IT investment trends for 2004 via a few key articles.

CIOs Still Have A Cautious Outlook For 2004 IT Budgets
Forrester Business Technographics
November 7, 2003

Outlook for 2004 App Budgets: Conservative Growth
Forrester Business Technographics
December 1, 2003

Tech Resurrection Will Be Accompanied by Significant Structural Change, According to IDC Predictions 2004
09 Dec 2003
See full report. Registration is required.

Gartner Sees IT Spending Rebound
November 11, 2003
By Roy Mark

Some IT Purse Strings May Be Loosened Next Year
DECEMBER 01, 2003 ( COMPUTERWORLD )

IT Spending to Rebound in Early 2004, Says SIIA Survey; Web services, Security, Wireless to Benefit from Recovery

SIIA Technology Spending Horizons Survey
October 2003
Acrobat

Tech spending ‘to surge in 2004′
BBC

and on the whole they are all a good thing. The NY Times had an interesting article in the most recent Week in Review, titled The Bright Side of Sending Jobs Overseas. The article takes a hard look at the current political rhetoric around the transfer of jobs outside the US and throws a lot of cold water on it. Economists from both sides of the aisle are in agreement that productivity improvements are good for the long term health of our economy. This includes the movement of jobs offshore where they can be done cheaper. The politicians would have us believe the loss in jobs over the last 3 years primarily went to lower cost locations, but the facts do not support this. In the 1990s the movement of jobs to offshore locations happened at a much faster pace that it is today and the US increased jobs. From 1999 to 2003, business and financial services added 600,000 jobs in the US while researchers argue this area is prime for offshore outsourcing. Computer and mathematical occupations added 150,000 in another area considered to be ideal for moving offshore. Many jobs moving offshore could just as easily be lost to automation.

Let’s face the facts. Productivity improvements displace workers. In the US, in Europe and around the world the displacement of workers will continue. It will even accelerate. The issue is not should you prevent this or slow it down, it is how do you best deal with the postive and negative effects of this.
We should not be talking protectionism but agresively preparing to train employees for a career of change. We can no longer expect career changes to evolve over several generations but must prepare for the reality that many workers will need to learn new skills in order to take advantage of the effects of global trade.

We should not be talking protectionism but building free and fair trade across the globe. The economies and lives of those trading with us should and will improve.

Here are a few of my own observations:

• OUTSOURCING · It looks like a hit-or-miss business but every company wants to do it. The key for the provider is getting to scale quickly enough to be able to provide services superior to in-house folks at a cost effective price. Also the expertise needs to be the biggest differentiator. Its all the same model as Law Firms, CPA’s etc… and it was the same with Viant. Like any other product or service, you need to differentiate on Cost or Quality … you either need to manage/train/hire a workforce in a “LCR” or low-cost region (China, India, Mexico) or have in-house expertise that business can’t develop cheaply on their own.

• INCREASED IT SPENDING · I’ve heard a lot of chatter about it in the press, but I didn’t start seeing it until last quarter when orders started coming in and folks started complaining about being swamped. But that’s just a microscopic view … will it last? will it improve? It’s anybody’s guess and there are a lot of things that could change it: world events ( Terrorism, Iraq, Afghan, SARS); the Fed (raising rates); and the election.

• NEW TECHNOLOGY · There’s a lot of buzz about Nanotechnology these days but I think it needs a “killer app” to get everyone to spend money on it. I don’t know anything about how to get into it but its something that offers the promise of disruptive technology (like computers, the internet, biotech).

Offshoring – Relocating the back office
Dec 11th 2003 From The Economist print edition

The Organizational Implications of Offshore Outsourcing
24 October 2003
Diane Morello
Acrobat Version

Offshoring: Is it a Win-Win Game?
McKinsey Global Institute
August, 2003

The Irony of Outsourcing
By Kevin Laws on November 18, 2003 09:03 PM supports the argument that economic activity flowing to the most efficient provider creates the greatest total value and in the long run the greatest value for each country involved. He points out the engineers who “thought” manufacturing workers out of jobs are now seeing their own jobs reduced and sent offshore.

This posting by Kevin Brancato suggest that our view of healthcare cost in the US is distorted. While the data seems to lead to the conclusion that we’re buying much more healthcare at sky-high prices, economists doubt the validity and applicability of the offical data because it does not appropriately adjust for quality.

Technology Review unveils its annual selection of hot new technologies about to affect our lives in revolutionary ways—and profiles the innovators behind them.

Universal Translation
Synthetic Biology
Nanowires
Bayesian Machine Learning
T-Rays
Distributed Storage
RNA Interference
Power Grid Control
Microfluidic Optical Fibers
Personal Genomics

TM Lutas provides an alternative economic analysis of the Internet to those provided by Adam Thierer at Cato, Howard Dean’s Principles for an Internet Policy, David Weinberger’s analysis of the Cato article, and Lawrence Lessig’s commentary on same.

The top 12 topics of interest to our readers in 2003 as seen by the editors of Portals Magazine:

1. Consolidation
2. Outsourcing
3. Mid-Market Grind
4. Portals
5. Integration Evolves
6. Supply Chain Gains
7. BI/Analytics
8. CRM Crossroads
9. Offshore
10. IT meets Business
11. RFID
12. Business Process Management

Rob Greenlee, Host WebTalk Radio, predicts:
1. The decline of the web browser usage on the desktop as a way to get to web content
2. The growth of Internet applications – the executable Internet
3. All things wireless
4. Digital media enters the living room
5. Professional journalistic weblogs are syndicated through RSS
6. Microsoft mobile platforms
7. Voice over IP (VoIP) makes mainstream calls
8. Internet radio growth and revenue
9. Online search extends beyond web
10. How online popularity is creating world wide celebrities

Stephen Downes in his predictions for 2004 suggest that a form of “non-blog blogging” will begin to emerge. He describes this as a way to tap into the views and opinions held by the vast majority of people who will not write publicly.

Downes also predicts that 2004 will be the year of personalization. He focuses this personalization around topic based feeds, which deliver only the content that is of interest to that user.

Bill Gurley outlines the future trends in VC investing via the ever present 2 x 2 matrix (Accurate vs. Inaccurate x Conventional vs. Non-conventional). Of course, we can all agree that inaccurate predictions are worthless. Gurley suggests the Conventional/Accurate predictions are also worth very little. The market prices the high expectations into a marketable security while the early stage investors fund too many companies for the market.

Rajesh Jain’s tech talk states, “… I will offer my picks for the 10 technologies and trends that either showed promise, made the news and/or made a difference in 2003.”

As I look at predictions for 2004, one area where consensus abounds and debate increases is “Offshore Outsourcing”, the movement of knowledge worker jobs offshore. There is abundant agreement that this will continue, even accelerate.

At the same time there is widespread disagreement as to whether this is a good thing for US and European economies. Here are some articles and papers on the issue.

In this paper, McKinsey estimates for every dollar of US work outsourced to India, the return to the US is between $1.12 and $1.14. India stands to increase their GDP by $0.33.
Offshoring: Is it a Win-Win Game?
McKinsey Global Institute
August, 2003

India and Software
A number of articles in the Wall Street Journal and New York Times on the Indian software industry.
Emergic.org

Offshoring – Relocating the back office
Dec 11th 2003 From The Economist print edition

The Organizational Implications of Offshore Outsourcing
24 October 2003
Diane Morello
Acrobat Version

The Irony of Outsourcing
By Kevin Laws on November 18, 2003 09:03 PM
Supports the argument that economic activity flowing to the most efficient provider creates the greatest total value and in the long run the greatest value for each country involved. He points out the engineers who “thought” manufacturing workers out of jobs are now seeing their own jobs reduced and sent offshore.

The World Economic
Forum’s Technology
Pioneers 2004
I saw this on Rajesh Jain’s Weblog, EMERGIC.org.

Connections: The Impact of Schooling
December 2003 – Jay Cross

Cross writes, “Most learning is informal; a network approach makes it easier, more productive and more memorable to meet, share and collaborate. Emotional intelligence promotes interoperability with others. Expert locators connect you to the person with the right answer. Imagine focusing the hive mind that emerges in massive multiplayer games on business. Smart systems will prescribe the apt way to demonstrate a procedure, help make a decision or provide a service, or transform an individual’s self-image. Networks will serve us instead of the other way around.”

This last sentence is critical. The individual taps into the network in the way she prefers. Yes, she is a part of the network, but she is not compromised by the thinking of others in the network. Not only does she not have to agree with others in the network, she does not have to “agree to disagree” with others in the network.

Let’s compare this to “brainstorming” sessions. We’ve all been party to “group think” sessions where one or two people have dominated or controlled the actions and outcomes of the group. Often resulting is sub-par results. (Remember those survival exercises where one member of the group scores better than the group collectively. Where two heads are worse than one?) It can be due to the person’s personality, debating skills, authority relative to others in the session or knowledge of the subject. It may be, but does not have to be intentional.

These “group think” sessions, usually corporate sponsored, have a limitation that the learning network does not have. They have to come to a single conclusionn. In the learning network, each member has the opportunity to take the network information and come to her own conclusions.

So just maybe two heads are better than one, and four heads are better than two and eight heads are better than four and so on and so on…

I’d like to see that happen here.

At a time when offshore IT companies continue to post excellent results, these firms seem to confirm there is a requirement to have good solid account relationships based near the customer. The Economist November 20, 2003 “Bangalore, Texas”

A study of the value chain suggests this is a very intelligent move by the offshore firms. The standardization of IT development processes reduces the development time and improves the quality of the code and for all players. It is clear the only sustainable superior position is to be the low-cost provider. With operating margins often in the 20% range, there is plenty of room for other offshore firms in the same region or in lower cost regions to offer lower prices.

As the process standardization has moved from programming processes to design techniques, these activities have also moved to the low-cost provider. Will this continue right up the value chain to business strategy and financial advisors? Not likely. Oh, it will happen in a few isolated situations and there will be parts of the process, such as research and graphics production capabilities, which will move to lower cost providers.

The activities from business strategy through business rule verification will continue to be provided locally with lots of interation with the client. Offshore companies must develop this capability before their current business becomes a pure commodity. Local organizations should develop offshore capabilities or build relationship with several smaller offshore firms in order to provide a range of application development alternatives for their clients. There are numerous offshore companies seeking just such relationships.

Local companies will have difficulty moving from a fully integrated model to one based on development partners, as it means slow or negative growth for their local application development capabilities. An unenviable position at best. This opens the opportunity for a new breed of IT strategy consulting which provides application development through several relationships with local and offshore firms.

Offshore IT Article
IT Careers Caught in a Cross-Current
November 10, 2003
By Sharon Gaudin

Let us begin analyzing the investment trends for 2004 by reviewing the predictions for IT spending in 2004. What better way to begin a discussion around the near term performance of technology companies than with near term IT spending?

Here is a summary of common themes from the articles listed here. It is by no means inclusive of all the predictions.

IT spending growth returns in 2004 with growth in the 4-8% range
Computer sales growth is higher than software growth
Infrastructure growth is higher than applications growth
Suites continue to be winners in the application battle
Business Intelligence bucks this trend with pure plays beating suite purchases
IT vendors struggle to adapt their marketing strategy toward solving business needs
Pricing pressure continues, as cost controls remain a high priority
IT services does not enjoy spending growth as movement to offshore providers doubles in 2004

CIOs Still Have A Cautious Outlook For 2004 IT Budgets
Forrester Business Technographics
November 7, 2003

Outlook for 2004 App Budgets: Conservative Growth
Forrester Business Technographics
December 1, 2003

Tech Resurrection Will Be Accompanied by Significant Structural Change, According to IDC Predictions 2004
09 Dec 2003
See full report. Registration is required.

Predicts 2004: IT Management and IT Services & Outsourcing
Gartner
24 November 2003 Acrobat

Gartner Sees IT Spending Rebound
November 11, 2003
By Roy Mark

Some IT Purse Strings May Be Loosened Next Year
DECEMBER 01, 2003 ( COMPUTERWORLD )

IT Spending to Rebound in Early 2004, Says SIIA Survey;
Web services, Security, Wireless to Benefit from Recovery

SIIA Technology Spending Horizons Survey
October 2003 Acrobat

Tech spending ‘to surge in 2004′
BBC