June 2005 Archives

The sharecropper society grows

| 1 Comment

From the BEA News Release this morning:

The U.S. net international investment position at year end 2004 was -$2,484.2 billion (preliminary) with direct investment valued at current cost, as the value of foreign investments in the United States exceeded the value of U.S. investments abroad (table 1). At year end 2003, the U.S. net international investment position was -$2,156.7 billion (revised). The -$327.5 billion change in the net investment position from yearend 2003 to year end 2004 was largely due to substantial net foreign purchases of U.S. Treasury securities and U.S. corporate bonds. The impact of these net purchases was partly offset by appreciation of most foreign currencies against the U.S. dollar, which raised the dollar value of U.S.-owned assets abroad, especially of U.S.-owned foreign stocks. In addition, increases in stock market prices raised the value of U.S. holdings of foreign stocks somewhat more than they raised the value of foreign holdings of U.S. stocks.

That debt substantial reflects investments in financial assets (US stocks, bonds etc). In direct investment, the US position is positive (we own more physical assets in other countries than foreigner own in the US). According to my calculations, that direct investment jumped from $476.65 billion in 2003 to $658.51 billion in 2004.

This could be good or bad, depending on how you look at it. The good part is that direct investment helps to offset some of the debt we own the rest of the world. The bad is that it shows that we continue to invest a large portion of our resources in hard (productive?) assets abroad. Unclear, however, whether this jump is due to currency changes (see above), investment in non-productive assets (second homes) or in foreign plant and equipment.

Earlier this year, BEA released direct investment statistics showing that US direct investment abroad increased from $119,41 billion in 2003 to $229.29 billion in 2004. Foreign direct investment into the US jumped from $56.83 billion in 2003 to $95.86 billion in 2004.

The limited power of brands

| No Comments

In his new book, Three Billion New Capitalists, Clyde Prestowitz tells the following amusing story about the limited power of brands:

At a Harvard Business School symposium in 1983, I heard then RCA chairman Thornton Bradshaw explain that the RCA brand was so powerful that RCA could sell VCRs made by Hitachi more profitably than Hitachi. Three years later RCA ceased to exist as an independent company. The RCA brand, however, is still being kept alive by its latest owner, Thomson SA of France.

That reminds me of the story told about the economic rivalry between Great Britain and Germany at the turn of the last century. British manufacturers were concerned about the flood of cheap German goods into their market. They pressured Parliament to pass a country-of-origin labeling law so that all of these cheap goods would be marked "Made in Germany." The idea was that British consumers would see from the markings that these were cheap (read "shoddy") foreign goods and reject them. Unfortunately, the German goods may have been cheap, but they were not shoddy. Soon, British consumers were deliberately looking for the "Made in Germany" label as a sign of value.

In our own day, we have seen the same transformation of the "Made in Japan" label from cheap to quality.

Like most intangible assets, brands are of changeable value. Without the underlying reason for the customer's support behind them, their value and power can crumble and dissipate like a sandcastle on the beach.

(P.S. - more on the excellent Prestowitz book later.)

The wired city - Lawrence Kansas

| No Comments

There has been a lot of talk about the wired city - where everyone is connected to local news and events. That vision has arrived, in Lawrence, Kansas (according to a fascinating story in the New York Times, "The Newspaper of the Future":

The steward of this online smorgasbord is Dolph C. Simons Jr., a politically conservative, 75-year-old who corresponds via a vintage Royal typewriter and red grease pencil while eschewing e-mail and personal computers. "I don't think of us as being in the newspaper business," said Mr. Simons, the editor and publisher of The Journal-World and the chairman of the World Company, the newspaper's parent. "Information is our business and we're trying to provide information, in one form or another, however the consumer wants it and wherever the consumer wants it, in the most complete and useful way possible."

. . .

The Simons family, through the World Company, enjoys an unfettered and often-criticized media monopoly in Lawrence. But the family has used that advantage to cross-pollinate its properties, ranging from cable to telephone service to newspaper and online publishing, and to take technological and financial risks that other owners might have avoided.

. . .

On a sweltering midsummer morning in 2001, Mr. Simons convened most of his media staff in the basement of a handsomely restored former post office at the corner of New Hampshire and Seventh Streets. The building was World's new "converged news center," where the company's television, newspaper and online staffs would all be housed.

Mr. Simons told his editors and reporters that they were going to do more than merely work shoulder to shoulder; they were going to share reporting assignments, tasks and scoops - whether they liked it or not.

Many did not like it at all, and some World reporters say they sometimes still feel taken advantage of - when they are asked to squeeze multiple print, television and online duties into the course of a single day. Print reporters and their editors have, at times, been reluctant to share scoops or ideas with their television counterparts, and vice versa. But many reporters also said that, over time, they have adapted.

And they keep pushing into the technological future:

In 2003, World installed about 30 wireless hot spots around Lawrence. That same year, it began sending daily content to cellphones. For example, subscribers can have real-time scores and statistics from the University of Kansas's football and basketball games delivered on demand.

The company has begun offering daily "podcasts" of news and other information to Apple iPod owners or anyone else carrying an MP3 player. It plans to offer a service that automatically loads information onto a docked MP3 player in the early-morning hours before students head to school.

Lawrence is not the only town where local papers are using new technology to gain an edge. But they are certainly a leader. Whether they remain a leader - or others can follow - is still unclear:

As effervescent as the new media are in Lawrence, analysts balk at making grand extrapolations from World's efforts.

"It's a market dominated by one company so you have to be very careful when holding them up as a paragon," said Howard Finberg, director of interactive learning at the Poynter Institute, which operates a Web site devoted to journalism. "Are they creative? Without a doubt, but I'm cautious about it being seen as a single solution or a model."

Others are more laudatory but equally cautious about Lawrence's online innovations. "Nobody else is close to doing what they've done," said David Card, a new-media analyst at Jupiter Research. "But you also wouldn't necessarily be able to duplicate what they're doing in towns like San Francisco or New York."

In the meantime, what a fascinating experiment.

With the Supreme Court ruling on Grokster, expect of flood of ink (or, more up to date, a flood of digits) on the meaning of the decision for the future of the music and movie industries. As I've opined before (most recently last week in "Music industry adjusts to file sharing"), the Grokster case is an attempt to put the genie back in the bottle.

So where does this leave the music and movie industries? Some will use the decision to try to defend the existing business model. The smart ones will move on. And where will they go? An intriguing notion surfaced at a recent talk on the OECD's work on digital content. The presentation was an overview of the OECD's Working Party on the Information Economy (WPIE) studies on scientific publishing, music, video-gaming and mobile digital content.

The speaker, Graham Vickery, is a long-time scholar of innovation and new technology. He pointed out the parallels between the music industry and the video gaming industry. In all of our discussions, we tend to overlook the video gaming industry. Yet, it is 2/3 the size of the recording music industry. It is growing rapidly and is subject to the same problems of online piracy.

The direction video gaming is heading, however, may overcome the piracy problem. Games used to be relatively static. Once the game was released, it became a good, just like a movie or song. As such, it was easy to copy - until the latest version came out. The industry is now moving more toward online games (multiplayer that change and develop over time). In essence, the business model has changed from providing a good to providing a service (an experience). And an online service is much easier to protect from piracy.

Could the music industry move in this direction? It has been argued that the future of music in back with the live-performance (see my earlier posting "The new music industry"). That is one way of turning a good back into a service. Maybe there are other innovative ways to create an online, interactive music "service." Isn't that what radio stations (including XM radio) do? They provide not only the music but the service of the information broker. And they pay royalties to the artist and the companies.

For the movie industry, the situation is not the same. There already exists an interactive version of movie -- it is called theatre. If is doubtful that movie companies will survive as promotes for the stage. Interactive movies have been tried before (at the Expo 67 - Montreal Worlds Fair) with less than sterling success. However, the direct tie in between movies and video-games is growing. Maybe that will be a way for the movie industry to change its model -- say an online connection to some special feature of the movie that isn't available on the DVD. Remember that there were prophecies of doom when the VCR came out. And now videos make up a large proportion of the industry revenues.

Granted all of this is unclear -- major shifts tend to be that way. What is clear is that the old models are unsustainable - even now after the Supreme Court rules against Grokster.

Critics of reinventing high school

| No Comments

Earlier this week, I posted a story on how DC is changing its high school system to allow for both 3 and 5 year graduations. Now comes the backlash to that idea from the Washington Post editorial board - Reinventing High School:

Mr. Janey's departure from tradition may be necessary, but the reasons for it are no cause for cheering.

The thrust of the of Post's view is that the changes are due to a low graduation rate and an inability of the DC school system to keep track of how many students actual graduate.

While acknowledging that their statistics are less than reliable, D.C. school officials say they are grappling with a high dropout rate among students in grades nine through 12. One school system report, according to Post staff writer V. Dion Haynes, showed that of the 4,207 students who enrolled as ninth-graders in 2000, only 2,740 graduated four years later. Of course, some of the students may have transferred out of the D.C. school system, but at this point, D.C. officials have no way of knowing. They do know that the system has a large number of students at risk of not finishing high school. Thus Mr. Janey's flexibility on high school completion, or as critics might charge, his loosening of attendance standards.

The Post is apparently worried that this change will result in more kids dropping out:

At this stage, the school system cannot speak with confidence about its statistics on student transfers or dropout rates. Absent a tracking system that produces reliable data, an extended school year could augur more of the same, only with a longer time frame for discovery of the disaster.

I am very disappointed in the Post's reaction. Their negative take on the process is disheartening. The potential problem they point is a problem now - and has only little relation to the new system (DC schools need to improve their student tracking systems whether they stick to the traditional system or not).

I am especially concerned that, at it heart, the Post's critic is about a lack of understanding of the need to change the educational model (as I've discussed in earlier postings). This concern is raised in the very first sentence of the Post's editorial:

The path to a D.C. high school diploma was once a straightforward proposition: Enroll in the ninth grade, receive passing grades, complete all school requirements and, four years later, attend graduation exercises.

The Post's editorial board celebrates the old industrial model of high school education (and probably education in general -- just change "ninth grade" to "kindergarten" and "four years" to 13 years"). The whole point of the editorial is that DC is failing properly execute this model. Yet, this lock step assembly-line process model -- enter the education factory here; come out processed with a degree here -- is exactly what needs to be changed.

Yes, it will require a change in the school system's tracking statistics (among many, many, many other changes that the Post does talk about or seem worried about). But Superintendent Janey is laying the groundwork for the fundamental change needed in the system. The editorial board demonstrates that they (and many others) haven't quite understood the direction we need to go if we are to meet the challenges of the information-innovation-intangibles economy.

Design awards - and competitive advantage

| No Comments

Business Week Online is running a special section on the 2005 Industrial Design Excellence Awards. To me, the awards highlight both the importance of design as a competitive advantage and the importance of customer-driven innovation.

On the first point, the lead story starts out with this statement:

When people talked about innovation in the '90s, they invariably meant technology. When people speak about innovation today, it is more than likely they mean design.

Now, if we could only get that into the policy debate, which is fixated on the techological solutions!

On the second point, as the teaser for the report states:

Many of the winning entries from this year's competition for Industrial Design Excellence Awards spring from a close observation of the customer.

Customer-driven innovation - always a winning strategy.

If we could only get that point as well into our debate over innovation!

The "stuff" economy

| No Comments

We may be moving to an intangible economy, but we are still a "stuff" economy - as David Wessel points out in his "Capital" column in today's Wall Street Journal, "In Modern Era, Self-Storage Has Right Stuff"

How much? So much that there is enough space in rentable self-storage lockers in the U.S. for each man, woman and child to stand on a spot 2 1/2 feet by 2 1/2 feet, with room left over.

The U.S. has 1.875 billion square feet of self-storage space, according to the Self Storage Association. That is three times the area of the island of Manhattan or the square footage of 426 copies of the 110-story Sears Tower in Chicago.

. . .

"Forget about two- or three-car garages and finished basements -- today that's just not enough space for U.S. households overflowing with excess furniture, camping gear, sporting equipment," Joseph Quinlan, chief stock-market strategist for Bank of America Corp., said in a note to clients the other day. He even suggested that the ability to put all that stuff in storage units is a "critical prop to global growth" because consumers will keep spending only as long as they have a place to put their purchases. "If U.S. consumers run out of storage space," he quipped, "the global economy is doomed."

I doubt that the global economy is doomed if the US runs out of storage space. There are lots of people in the world who don't have all that stuff (of course, they may also not have the multi-bedroom, three-car garages and basements to store it all in either - hence they may need extra storage space as well). I wonder, however, how well the stock value of the self-storage companies will do as we more to a more weightless society.

On a more serious note, Quinlan's quip does highlight an interesting point. Yesterday, at the New America Foundation's National Policy Forum on America's Economic Future, the issue of the need to reduce US consumption kept coming up. With it came the concomitant concern that this would result in a lower standard of living for Americans. Well, if all we are doing is storing that stuff, I've not sure that a cut back in consumption (both in the purchase and in the storage fees) will have much of an impact on our standard of living (unless, of course, you count the entertainment value of buying - not just shopping - as part of standard of living).

The perils of instant information

| No Comments

This was the view from the Wall Street Journal's "Marketplace" page on the wsj.com website at 10 am today:

Left side of the screen, story saying "Stocks are likely to gain early Thursday, as traders consider a bigger-than-expected decline in jobless claims, a restructuring at GE and merger deals."

Right side of the screen: stock chart showing the opening lower than yesterday's close and heading even lower.

I'm not picking on the Journal -- I'm just pointing out the problems of reporting in the age of instant information. It would be difficult for the news page of the Journal's website to keep up with very tick of the Dow. If I wanted real-time analysis, I would probably tune into one of the financial cable channels. Even with the boost that the Internet has given to the written word (via websites, blogs, etc.), there is still nothing like live reporting for fast moving stories.

Music industry adjusts to file sharing

| No Comments

In advance of the expected Supreme Court ruling on Grokster, the news media has been cranking out stories about how the music industry is trying to cope with the new technology. For example, "File-Swapping May Be Here to Stay" from the AP

Recording companies have begun taking steps to legitimize the peer-to-peer technology that lets computer users share songs, video and other files with one another online.

. . .

In the last few months, major record labels have signed licensing deals with companies working to field file-swapping services that would block unauthorized files from being traded online.

Yet, even these optimistic stories question whether such a strategy will work.

Even so, it remains to be seen whether those industry-endorsed alternatives can attract people who now tap open file-swapping networks using such programs as eDonkey, BitTorrent and Kazaa.

"When it comes down to it, why is somebody going to pay for something they can get for free?" said Mac Padilla, 21, a student who lives in Los Angeles.

So, as I've said earlier (see Closing the barn door -- the Grokster case) regardless of the Supreme Court decision, the music industry will ultimately find a new model. And there are some tantalizing suggestions out there. More on this later.

Destroying your local advantage

| No Comments

In this economic era of global competition, localities are desperately seeking unique local assets (what Professor MaryAnn Feldman calls "jurisdictional advantage" - see her paper on the Athena Alliance website) upon which to build a competitive advantage.

Yet, here we have a case of a locality in the process of destroying a unique local asset. WSJ.com - In Tasmanian Forests, A Battle Breaks Out Over Bees and Trees:

Leatherwood grows only on this heart-shaped island the size of Ireland, a hundred miles south of the Australian mainland and 800 miles west of New Zealand. The trees' small, star-shaped flowers blossom into the autumn, generating 70% of the 1,200 tons of honey produced in Tasmania each year.

But today, a battle of trees versus bees is unfolding here. For more than 30 years, timber companies have been energetically converting the forests of this Australian state, which have the tallest and oldest flowering trees in the world, into sawdust and woodchips, which are shipped primarily to Japan. The loggers want the huge eucalyptus, but like dolphins caught in a tuna net, the leatherwood, Huon and King Billy pines that grow alongside them are harvested as well. The loggers then firebomb the forests to clear out the debris, a process that can lead to runaway "regeneration burns" and inadvertently destroy nearby leatherwood, and threaten the hives.

If the logging of leatherwood isn't limited, the beekeepers warn, not only will their livelihood disappear, but so will the world's only source of leatherwood honey, which has a sharp, musky flavor similar to honey from chestnuts or thyme.

Reminds me of the story Jared Diamond tells about Easter Island -- "and so what was that inhabitant of Easter Island thinking of when he cut down the last tree" and thereby destroyed a key pillar of the local economy.

Hire the retired

| No Comments

One of the central premises of the information-innovation-intangible economy is that we need all the brainpower we can muster. Yet, some of our most experienced brains are leaving the workforce. But there is an alternative, as the New York Times' John Tierney explains in the "The Adams Principle."

The work ethic is alive and well among America's retirees, or at least the ones who bombarded me with letters after I suggested raising the retirement age for Social Security. They said they would be glad to keep working if I could find them a job.

In theory, this shouldn't be a problem because employers ought to be clamoring for workers as baby boomers hit retirement age and the pool of younger workers shrinks. In reality, though, older workers face discrimination. While some companies are recruiting them, many employers are still leery, partly because of irrational prejudice against the old, but also because of perverse incentives in current policies.

. . .

Most workers could keep going longer if they and employers reconsidered the old assumption about a career trajectory. They could learn from the example of John Quincy Adams, who was elected to Congress after serving as president. He dismissed objections that the new job was beneath him, and voters didn't discriminate against him for being overqualified.

Adams started his new career at age 63, just about when the typical American man now retires. He wasn't especially spry, once calling his body "a weak, frail, decayed tenement battered by the winds and broken in on by the storm." Yet he stayed on the job until his death at age 80.

He accomplished so much in those years that he is remembered as a better congressman than president. You could call him an inverse example of the Peter Principle, someone who succeeded by being demoted below his level of incompetence.

But I prefer to draw a different lesson. Call it the Adams Principle for employees and employers: if the president can flourish after a demotion, so can anyone else.

I'm not sure Adams would agree that his time in Congress was a demotion. If fact, he often referred to it as a promotion, since it was the one public office he held where he was directly elected by his neighbors (elected as Senator by the Mass State Legislator and his term as President through an election in the House of Representatives).

However, the point is well taken. The "retired" have more to offer than simply being "re"-"tired".

Two alternatives in drug research

| No Comments

News of two alternative models in drug research (alternatives to the generally understood model of private company R&D funds leading to a drug that is patented in order to recoup R&D costs):

1) WSJ.com - Government Offers Funds For New Drug Research:

The federal government is trying to lure pharmaceutical companies into investing in riskier medical research by offering to pay for and carry out early clinical trials of experimental drugs.

The clinical trials are part of an unusual effort by the National Institutes of Health to solve a seemingly intractable problem: the dearth of breakthrough drugs for diseases that have long stymied researchers. The shortage stems from drug companies' aversion to investing in promising but untested ideas that have been cooked up in academic labs. The cost of getting a new drug to market has ballooned, and drug makers tend to pursue products where the biology is known and the pathway to regulatory approval is laid out.

The project could bring pure research out of university labs and into the marketplace, but it faces hurdles in drug makers' reluctance to share information with potential rivals.

2) WSJ.com - Funds Steer Biotech Drugs to Poor:

To remove barriers blocking biotech inventions from reaching patients in the developing world, the Bill and Melinda Gates Foundation is awarding a $5.4 million grant to BIO Ventures for Global Health, a nonprofit offshoot of the Biotechnology Industry Organization.

The award was to be made today at BIO 2005, the industry trade group's annual convention in Philadelphia.

The grant aims to help the nonprofit group identify market opportunities in poor countries now considered too high-risk and low-yield for companies to invest in costly new drugs, diagnostics and vaccines. The funds will pay for business case studies of an array of products, starting with tuberculosis vaccines. A century old, the existing TB vaccine is only partially effective, and hasn't prevented the disease from killing about two million people a year world-wide.

The grant could clear the way to making other biotech vaccines, as well as delivery systems to reduce the need for needles, refrigeration or trained personnel. It also could advance new diagnostic tests and drug-delivery mechanisms to enhance health care in poor countries.

Let a thousand research models bloom!

EU patents

| No Comments

The EU is pushing ahead with its plans for patenting of software. Technology giants win with EU patents plan - Technology - International Herald Tribune:

The 26-member Legal Affairs Committee agreed late Monday that companies could have EU-wide patent protection for computerized inventions including washing machines, cellphones and antilock brake systems as long as they make a technical contribution to further innovation in a particular field of technology.

The committee voted against several more stringent amendments in approving a measure that still bans patents on so-called business methods, like Amazon.com's "one-click" online purchase feature.

. . .

The proposed patent protection would also extend to computer programs, but only when the software is used in realizing inventions.

. . .

Debate over the bill has divided those who say patents are needed to reward companies for innovation and others - mostly from smaller companies - who say they are concerned that they would be shut out of software they have been able to use for free.

I'm sure that open-source software community will see this as a defeat - and the big software companies as a victory. I take no sides in that fight - but I am glad that the Europeans didn't go down the road of patenting business methods.

And if you are not worried about business method patents, try this as a thought-experiment: imagine what might have happened if Franciscan monk and mathematician Luca Pacioli had patented his system for double-entry bookkeeping?

By the way, according to Luca Pacioli: The Father of Accounting

While Brother Luca is often called the "Father of Accounting," he did not invent the system. Instead, he simply described a method used by merchants in Venice during the Italian Renaissance period.

Under today's US standards of "obviousness", that doesn't necessarily mean that he would not have gotten a patent.

Parents and education

| No Comments

If teachers are one of the keys to a successful education system (see Schools and Competitiveness), another key is involved parents. There is a fear that parents don't always see the value in education. For example, according to a recent study in Michigan - "Your Child" Parent-Teacher Survey:

only one in four Michigan parents believe that getting a good education is essential to getting ahead in life.

Other key findings include:

* Nearly half of parents don't think everyone should have a college education nor do they trust the judgment of teachers and professors.

* Three out of five define the success of their children without reference to education or the ability to support themselves.

The immediate response to these findings was summarized in a Detroit Free Press editorial, "Parents' Low Expectations Frustrate Education Reform":

Educators have taken a lot of criticism in recent years. But it's now clear that their effectiveness has been limited by uninterested parents. State law and common sense give parents the fundamental right to direct their child's education. But many parents have shoved off all the work on others, who cannot possibly carry the load by without parents as partners. State and local leaders need to convince parents that education should be more of a priority.

However, I think we need to take the summary of these findings with a large grain of salt. I am not sure that everyone should have a college education -- there are many vocational and other types of training that are useful. And I am not completely surprised that parents define success for their children in non-educational and non-financial terms. "Be happy" was the number one answer in the survey; "education/degree" was number two.

82% of the survey agreed with the statement: "Parents need to be fully involved in their child's education. Teachers and schools can only do so much by themselves."
13% agreed with "Parents need to communicate with their child's school from time to time, but it's up to the teachers and
schools to let the parents know if there's a problem."
only 4% agreed with "Parents are responsible for making sure their child is dressed and ready for school. The teachers and schools are responsible for the rest."

That doesn't sound like a group of parents that "have shoved off all the work on others".

Nor do I understand the finding that claims that patents don't think education is important. On the question "How important do you think having a good education yourself is for getting ahead in life?" only 2% said it was unimportant. 21% said it was essential and 51% said it was very important. 20% said it was fairly important.

What they don't have is confidence in the educational system: 48% said they had complete or a great deal of confidence. 51% said they some, very little or no confidence.

And while half of the parents don't think everyone should necessarily go to college, those findings don't apply to their own children. Only 3% said their child will not attend college. 9% said their may or may not attend college. 87% said their child would definitely or probably attend college (60% in the definitely category).

That doesn't sound like a set of parents who don't understand the value of college. 95% of the parents what their children to get some form of post-secondary education (vocational school or community college - 8%; at least a few years of at a 4 year college - 8%; a bachelors degree - 37%; an advanced degree - 42%).

One of the most interesting finding in the study was that parents understand the difference between "school" and "education":
only 2% agreed with the statement: "Education is something that happens when a person is in school, and it's done when you leave school."
24% agreed with "Education can happen throughout your life, because
there are always opportunities to take classes."
34% agreed with "Education can happen throughout your life if you
know how to educate yourself."
38% agreed with "Education happens automatically throughout your life, whether you're in school or not."

That last answer is undoubtedly extremely troublesome to the education professionals. In other words, 2/3 of the parents surveyed believe that education is something that an individual does -- not something that happens in schools.

More on this point later.

Schools and competitivness

| No Comments

While I'm on the topic of education (see yesterday's postings), here is a story on how Finland upgraded its education system as part of its drive for improved competitiveness.Washington Post, "Focus on Schools Helps Finns Build a Showcase Nation":

Superb schools symbolize the modern transformation of Finland, a poor and agrarian nation half a century ago, and today one of the world's most prosperous, modern and adaptable countries.

Finland finishes first in the Program for International Student Assessment (PISA) exams that test 15-year-olds in all of the world's industrial democracies. Finland also finishes at or near the top in many global comparisons of economic competitiveness: Internet usage, environmental practices and more. Finland, where the modern cell phone was largely invented, has more cell phones per capita than any other nation -- nearly 85 per 100 citizens.

As recently as the 1970s, Finland required that children attend school for just six years and the education system here was nothing special. But new laws supported by substantial government spending created, in barely 20 years, a system that graduates nearly every young person from vocational or high school, and sends nearly half of them on to higher education. At every level, the schooling is rigorous, and free.

"The key," said Pekka Himanen, 31, a renowned scholar with a PhD in philosophy (earned at age 20) who is a kind of guru of information-age Finland, "isn't how much is invested, it's the people. The high quality of Finnish education depends on the high quality of Finnish teachers. You need to have a college-level degree to run a kindergarten. You need a master's-level degree to teach at a primary school. Many of the best students want to be teachers. This is linked to the fact that we really believe we live in an information age, so it is respected to be in such a key information profession as teaching."

That last point is especially important -- people make the difference. And, in contrast to the solutions that have been pushed in the US (computers and testing):

[Arabia Comprehensive School] includes the computer lab and two dozen laptops that students can check out for their own use. But there is no systematic teaching of information technology in the first nine grades -- no teaching even of typing, and many Finns use just two fingers on the keyboard. It's a good example of the non-compulsive Finnish approach to education.

Another is the general absence of testing. According to Karkkainen, the principal, apart from the PISA exams, her students face math tests at the end of fifth, eighth and ninth grades, and a test in chemistry and physics at the end of eighth grade. That's it. "And there are no bad consequences," for student or school, if the results are not good.


Restructuring high schools

| No Comments

And speaking of reinventing the high school, here is something I ran into - an excerpt from an interview from the June 1 Lou Dobbs Tonight show, "America's High Schools Lacking":

KITTY PILGRIM, CNN ANCHOR: My guest tonight says America's public high school system is under relentless attack and he says politicians, businesses and the schools themselves are to blame. Well, joining me from Orlando is John Farrendino president of the National Academy Foundation. He's a former superintendent of high schools in New York City.

And thank you very much for joining us. That's quite a badge, former superintendent of high schools in New York City, and certainly you bring with you a wealth of experience. Why are schools failing so badly?

JOHN FARRENDINO, PRESIDENT NAT'L ACADEMY FOUNDATION: Well, there are lots of very complex reasons, but the simplest is that American secondary schools, as they're presently structured, do not meet the needs of the young people who we service, and they were designed in an -- a century ago. They need to be restructured into more accountable, small, learning communities so that we can get engagement of the business community into the school and answer the question that every teenager, time immemorial has asked: why do I have to know this stuff?

So, we need to change the actual structure and accountability systems that exist within the schools.

PILGRIM: You know, I was really fascinated by your premise that the schools were built for an agricultural society. Why, and why won't they work? And, certainly reading, writing and arithmetic is still very relevant.

FARRENDINO: Oh, absolutely, it's very relevant. But, yet, the design of the school at the turn of the century was designed in a theoretical, classical curriculum base which was designed to have 30 percent of the young people be successful, and the other 70 percent to go into our factories and our farms, and those factories and farms no longer have that need. So, the schools need to change dramatically.

We need to -- the National Academy Foundation, our experience, is to create career academies using thematic approaches that turn kids on to learning and allow the business community to get actively involved so that when the young person is engaged, they can see that what they are doing in school relates to what opportunities might exist in the future for them.

PILGRIM: Give us an example of something thematically based that might...

FARRENDINO: OK, sure. A simple one and one of the academies we use is called the academy of finance, but, if you think about it, if a kid is learning their math and their social studies and their English as it relates to a theme -- and you can use business or the financial services industry -- when they are doing their algebra and the application of their algebra problems relates to how much money is earned or profit margins or all of the different kinds of machinations that take place that can take place with mathematics, using a business context, the kids then understand that the skills and tools that they are gaining are not abstract, but they're things that are actually going to apply to their everyday life.

Sounds right on target to me.

Reinventing High School in DC

| No Comments

I've posted a number of comments about the need to reinvent the school system and move out of the industrial era mindset of the ridged high school. It looks like the DC school system is moving exactly in that direction, according to a story in this morning's Washington Post, "Reinventing The Route to D.C. Diploma":

Starting in fall 2006, the school system plans to offer the option of a fifth year at its high schools -- with smaller classes, tutoring and other support services -- for students who need more time to complete their requirements.

[ D.C. School Superintendent Clifford B.] Janey's goal is to provide flexibility to teenagers who might be juggling school with job and parenting responsibilities -- and to retain students who, after falling behind, might otherwise drop out well before 12th grade. He also plans to establish a three-year track for students who want to graduate early.

School officials said those moves are part of an effort to reinvent high schools. Other measures, they said, might include staggering class schedules so some students can start and end their school day later; expanding apprenticeship programs in various trades; and allowing students to enroll in community college while in high school.

"This flies in the face of the traditional way we've run public schools," said William Caritj, the District's associate superintendent for educational accountability and assessment. "We're living in a world where young adults are faced with challenges. Public education needs to get with it to serve the needs of students."

Or if public education doesn't get with it, it will find itself part of the residue of the industrial age, and condemn its students to falling further and further being in the information age. In an information-innovation-intangible economy that will need every brain available, that would be unfortunate.

Patent reform - summary of Athena event

| No Comments

Patents are generally thought of as a means of boosting innovation. But, according to two leading scholars in the field (Adam Jaffe and Josh Lerner), "In the last two decades, however, the role of patents in the U.S. innovation system has changed from fuel for the engine to sand in the gears." As Congress begins to examine the issue of patent reform, Athena Alliance and Congressional Economic Leadership Institute (CELI) held a Congressional luncheon briefing on Is the US Patent System Endangering American Innovation?

Speaker included Adam B. Jaffe, Professor of Economics, Brandeis University and co- author of Innovation and Its Discontents: How Our Broken Patent System Is Endangering Innovation and Progress, And What To Do About It; Susan DeSanti, Director of Policy and Planning, Federal Trade Commission; and David J. Kappos, Vice President, Assistant General Counsel, Intellectual Property, IBM. The session was moderated by Congressman Jim Cooper (D-TN).

The summary of the discussion is now available on the Athena Alliance website.

The latest in outsourcing

| No Comments

This just in from Art Buchwald - Outsourcing Takes a Holiday

The country is outsourcing everything these days. By sending work abroad, America saves billions of dollars.

It is in this spirit that Tommy Cook, a travel agent, came up with a plan.

"Why not outsource vacations?"

. . .

"Now this is the 'Great Wall of China Trip.' A Chinese guide in Beijing will visit the Great Wall and send you pictures of it. He will also go to Shanghai and Hong Kong. If you took this trip, it would cost $3,000. My man would do it for $130."

And when will they outsource death and taxes?

The role of the firm

| No Comments

Being successful in business means living on the edge, according to a new book The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization by John Hagel and John Seely Brown. In recent interview (Can Your Firm Develop a Sustainable Edge? Ask John Hagel and John Seely Brown - Knowledge@Wharton) John Hagel explained:

In fact, the title has multiple meanings, as anyone who knows John Seely Brown and myself will appreciate. We are never content with a single meaning. "The only sustainable edge" certainly has to do with the notion of competitive advantage, but it also has to do with the view that the ability to develop capabilities involves operating at the edge. Of course, "edge" has multiple meanings as well. It means the edge of the enterprise, the edge of business processes, geographic edges in terms of emerging economies, demographic edges in terms of younger generations coming in with different mindsets - it's a whole set of edges that create the opportunity for accelerating capability building.

While their theory of accelerating capability is interesting (I wonder how long capabilities can continue to accelerate), I am more interested in their ideas on the future of the firm.

Ultimately what we see is the re-conceiving of the role of the firm. Traditionally the role of the firm has been to increase the efficiency of transaction costs, whereas we see more and more that the firm has to provide opportunities for capability building of the people within the firm. If the firm cannot do that, people will leave and seek out environments that can help them accelerate capability building better. It's a very different way of thinking about what the firm needs to provide to its employees, and the role of the employees within the firm.

This may be a bit of "blue-sky" thinking. But the trend toward virtual organizations continues, with companies outsourcing more and more functions to other companies (e.g. shipping and logistics to UPS, payroll and even HR functions to Paychex, etc.). The current corporate form was an invention of the late 19th Century (as Alfred Chandler described so well in The Visible Hand). The organization form for business in the 21st Century is likely to be very different.

Supreme Court patent decision

| No Comments

Some years back, patent law was changed so that all patent cases are heard by the US Court of Appeals for the Federal Circuit. The idea behind this change was to have an expert court specialize in these complex cases and review them in a uniform manner. However, in the subsequent years, concern has arisen over the Federal Circuit's interpretations of the law. For example, some argue that the Federal Circuit has lowered the "obviousness" standard for what can be given a patent -- beyond what the Supreme Court ruled.

Now comes a new patent case where the Supreme Court has overturned a Federal Circuit decision.

From LegalTimes.com - Supreme Court Allows Patented Compounds in Drug Companies' Research:

In a closely watched patent case, the Supreme Court on Monday gave drug companies broad leeway to use other companies' patented compounds in their own research, even at the earliest stages of new drug development.

The unanimous ruling in Merck KGaA v. Integra Life Sciences overturned a decision by the U.S. Court of Appeals for the Federal Circuit that had jolted the drug industry with a narrow interpretation of when companies can use rival patents in drug research. Monday's high court ruling means companies can begin developing competing drugs and generics earlier in the life of a competitor's patent, enabling them to jump into the market as soon as a rival patent expires.

But, as the Wall Street Journal story "Drug Makers Win Big Patent Victory" points out, the ruling is limited:
The High Court's ruling set aside a lower court ruling that had interpreted the patent exemption more narrowly. The Supreme Court didn't rule on the specific facts of the case, which was remanded back to the lower court.

Though unanimous, the court's decision doesn't necessarily signal a change in the drift of intellectual-property law, since the Merck case concerned not the validity of the law but rather its interpretation. The court sided squarely with the government's understanding of the Drug Price Competition and Patent Term Restoration Act, which was introduced so that generic-drug makers wouldn't have to wait until the expiration of patents before conducting FDA-related research.

It remains to be seen if the Supreme Court's ruling will, in the long run, change the Federal Circuit's interpretation of patent law. The ruling clearly does not obviate the need for reforming the patent system - it might be seen as one small step along that path.

Future Competitiveness

| No Comments

One of my favorite websites is the Globalist, which runs excerpts from new books. Earlier this month, they ran a piece from Kent Hughes' new book The Past and Future of U.S. Competitiveness. Kent is an old colleague and co-sponsor (in his position at the Woodrow Wilson Center) of our policy forum on the Intangible Economy. The book is both a history of the competitiveness debates of the 1980's and a policy prescription for the future:

What should the United States do to remain the leading economic power in the 21st century?

The answer lies in the not too distant past when the United States responded to an earlier period of economic difficulties at home and rising international competition abroad.

As the United States entered the 1980s, it faced stagnant productivity growth, surging inflation and rising international competition. By the middle of the decade, Japan was scaling the heights of high-tech industry that the United States thought defined its own economic future.

The United States rose to the challenge. The private sector, political leaders and students of policy all responded. Private industry adopted and adapted lean production to meet and often beat the price, quality and pace of innovation set by Japanese companies.

. . .

the strategy that worked so well in the 1990s created a framework for policy that can - and must - be adapted to the new economic and geopolitical challenges of the 21st century.

I couldn't agree more. For my own take on today's competitiveness challenge, see "Info Age: Recast Issues Demand New Solutions"

Looking at the US from outside

| No Comments

America for the Americans seems to be the cry in some quarters. After all, America is different and we can expect outsiders to understand -- for example, our love affair with the automobile.

Wrong, as the story of the new Mustang shows:

"This is the best Mustang ever produced," said Brad Barnett, who runs an enthusiasts' Web site called TheMustangSource.com. "It's all-American. Baseball, apple pie and Mustang are all-American."

Which makes it all the more remarkable that the new Mustang is largely the creation of a Vietnamese immigrant named Hau Thai-Tang.

. . .

it was another Asian American -- Larry Shinoda, held in internment camps for Japanese Americans during World War II -- who designed the 1963 Corvette Sting Ray, arguably the top rival to the Mustang as the quintessential American car.

The rest of the story can be read at last Sunday's Washington Post,
"Importing Ingenuity". As the story points out:

Sometimes it takes a distant vantage point to see America quite that way. After all, it was Frenchman Alexis de Tocqueville who captured the spirit of American democracy in essays in the 1800s, and fellow countryman Frederic Auguste Bartholdi who created the great symbol of the Statue of Liberty. Think of the Eastern Europeans of the early 20th century who shaped American cinema -- Samuel Goldwyn, Adolph Zukor, Louis B. Mayer. Or French designer Raymond Loewy, who created the Greyhound Scenicruiser, the Shell and Exxon logos, the streamlined S-1 locomotive that was the pinnacle of 1930s railroading.

Keeping an open mind to ideas from others is always a good policy (as some in this country seem to have forgotten).

File sharing not a threat - OECD

| No Comments

OECD has released a new study on music filing sharing: Report on Digital Music: Opportunities and challenges

Broadband access is now starting to lead to innovative creation and use of content and stimulating the rise of new technologies in PC and consumer electronics. These trends have lead to the rapid creation of online music services. Unauthorised sharing of copyrighted works and new commercial digital delivery possibilities have thus far been a disruptive technology for the music industry. Still, the outlook for the music market in 2005 is positive due to rapidly increasing sales of (mobile) digital music services. Digital music is also a driver for the global technology markets. Furthermore, the new digital music value chain produces an array of new digital intermediaries (e.g., digital rights management DRM). Finally, the availability of online technologies opens up possibilities for content created by network users. Music is thus an area in which the transformative impact of digital distribution, file-sharing and new online business models is strong for both the supply side (artists and the music industry) and on the demand side (new music lifestyles, users as content creators).

However, business and policy challenges analysed in the study need to be addressed if the full potential of online music distribution is to be reached. In sum, regulatory frameworks which balance the interests of suppliers and users, in areas such as the protection of intellectual property rights, and digital rights management, without disadvantaging innovative e-business models are called for.

* A key requisite for the creation of efficient online music delivery is a competitive and wide-spread access to broadband infrastructure. The delivery of online content also necessitates new technologies and an environment that facilitates the creation, acquisition, management and delivery of content. Effective and secure (micro)-payment systems are needed.

* Alliances between content providers, broadband and technology providers that come up with new business models play a critical role in driving the adoption of licensed content services.

* A diversity of interoperable content, standards and hardware are likely to prove most beneficial to efficient online content markets. With vertical integration, lock-in of consumers to certain standards, and difficult access to certain content, an environment where small and innovative players can compete should be maintained.

* The OECD notes the importance of government actions to take steps to address online piracy. Around one third of Internet users in OECD countries have downloaded files from P2P networks. While, in principle, file-sharing software is a new and innovative technology, piracy is an important impediment to legitimate online content services. The most important is to find equilibrium of available legitimate and innovative uses of new technologies and the necessary protection of associated intellectual property rights (i.e. copyrights).

* The Internet already provides new forms of advertising at lower cost, lower barriers to entry for artistic creation and lower costs of finding new talent. However, the effects of authorised and unauthorised file-sharing and digital music services with pay-per track offers on artists and the music supply are not yet obvious and need further study.

Wired had a more enthuisatic take on the study "Come On Music Biz, Embrace P2P" :

File-swapping networks alone are not to blame for the recording industry's woes and might plausibly be converted into legitimate channels for distributing music, one of Europe's most influential economic bodies has concluded.

In a report issued Monday, the Organisation for Economic Co-operation and Development -- a Paris-based alliance of developed nations -- also suggested that it's difficult to establish a link between piracy and the music industry's shrinking revenues.

The report said a "re-evaluation" of music distribution needs to happen to achieve a balance between consumers' desire to access digital music and the industry's copyright protection concerns.

"Online technologies could evolve in a manner in which unauthorized use of copyright works are finally transformed into legitimate businesses," said Sacha Wunsch-Vincent, an OECD economist and one of the report's authors.

The report said it is difficult to establish a causal connection between the rise of file sharing and a drop in music sales. While the music industry's revenues fell 20 percent from 1999 to 2003, other factors, such as illegal CD copying, might have played a role in the decline, the OECD said.

Innovation in paint

| No Comments

One of the areas of innovation I find most intriguing is non-technological innovation, be it marketing, financing, design or simply a new use for an old product. In many cases, these innovations are married to a change in the technology. Take for example, the innovations described below in a Washington Post story last month on A Splashy Spectrum of Choices

Now I'm hearing the whispering of spring, a season of hope and promise, convincing me that it's time to try again with that bedroom I never got quite right. That thought sent me into several paint departments, where I discovered that painting has become more high-tech than ever. I found myself staring longingly at an electric paint roller. It looks like an amazing contraption, pumping the paint right from the can to the roller, from which it glides onto the wall, for only $100, and the promise of easy cleanup.

One way to persuade me to buy paint is to make the job look simple. Today's equipment looks pretty tantalizing, with pre-taped drop cloths and a variety of painting pads that can be attached to an extension pole and come in different sizes, designed to whip a layer of paint into a corner or onto trim like so much frosting on a cake.

Sherwin-Williams Co. has made its Dutch Boy paint easier to pour by putting it into a one-gallon plastic container with a lid and spout similar to a jug of liquid laundry detergent. The company also has a rectangular container with a built-in roller tray, which you can close and reopen without having to clean the tray. It holds 2 1/2 gallons of paint, which the company says is the amount needed for the average room.

Maybe you've seen the range of CDs that allow you to do a virtual paint job. Put the CD into your computer, upload a digital photograph of the room you want to paint and experiment by applying a few thousand or more colors onto it, as you sit in front of your screen.

Of course, one way of choosing a color is to match it to a color you know you like. Benjamin Moore & Co. has just put out a portable $299 paint-matching device, intended for architects, designers and contractors, called the Pocket Palette. Put it up against a painted wall or a piece of fabric and its digital readout will tell you the name of the matching Benjamin Moore paint color.
. . .

the latest method of marketing paint -- the sample. Everyone seems to have them. For $5 to $6, you get a couple of ounces of paint, enough to put two coats on a two-foot-by-two-foot section of wall.

"They have been an extraordinary success," says Eileen McComb, director of communications for Benjamin Moore. "Women will go and buy eight to 12, almost like nail polish. It's so easy for them to see what it's like on the wall."

McComb says that the CD programs are useful in finding an appealing family of color and developing a theme but that a computer screen color will never look exactly like real paint on a real wall. "What we discovered is that people want to look at a color electronically and on a paint chip, but they also wanted to paint it on a surface," she says.

In other words, to really be successful the virtual paint technology needed to be matched with a marketing device. Living in a household where walls are re-painted on a regular basis (which seems to me constantly), I have learned the value of the small sample. So why didn't someone think of that before?

But all of those new process technologies leave me cold. I've long since learned (after an errant power-roller painted the hardwood floors blue) to leave that work to the professionals.

April trade in intangibles

| No Comments

The overall trade deficit rose significantly in April as both imports and exports surged to record levels, the BEA reported this morning.

Early news reports of the deficit had a mixed tone. On the one hand, the New York Times reported "U.S. Trade Gap Widens, but Less Than Expected":

The U.S. trade deficit widened less than expected in April to $57.0 billion, as both exports and imports set records, the Commerce Department said on Friday. The monthly trade gap expanded 6.3 percent from March, but was below the median forecast of $58 billion from a group of 35 economists surveyed before the report.

On the other hand, the Washington Post reported "Trade Deficit Shoots Up to $56.96B in April":

The U.S. trade deficit shot up 12 percent in April to $56.96 billion, reflecting a surge in oil imports to the second highest level on record, the government reported Friday.

The Commerce Department said the new trade imbalance increased from a $53.56 billion deficit in March as imports rose 4.1 percent to a new record, swamping a 3 percent increase in U.S. export sales, which also set a record.

So far this year, the trade deficit is running at an annual rate of $686 billion, 11 percent higher than the record $617.58 billion deficit set for all of 2004.

Both exports and imports of of intangibles grew to record levels, exports by .54% and imports by 1.3%. But the balance of trade in intangibles stayed essentially the same at a revised $7.2 billion.

We also continue to run a deficit in Advanced Technology Products. The deficit was larger in April than in March - but not as large as during January or Feburary. The last monthly surplus in this category was in June 2002 and the last sustained series of monthly surpluses were in the first half of 2001.

Intangibles trade-Apr05.gif

Note: we define trade in intangibles as the sum of "royalties and license fees" and "other private services". The BEA/Census Bureau definitions of those categories are as follows:

Royalties and License Fees - Transactions with foreign residents involving intangible assets and proprietary rights, such as the use of patents, techniques, processes, formulas, designs, know-how, trademarks, copyrights, franchises, and manufacturing rights. The term "royalties" generally refers to payments for the utilization of copyrights or trademarks, and the term "license fees" generally refers to payments for the use of patents or industrial processes.

Other Private Services - Transactions with affiliated foreigners, for which no identification by type is available, and of transactions with unaffiliated foreigners. (The term "affiliated" refers to a direct investment relationship, which exists when a U.S. person has ownership or control, directly or indirectly, of 10 percent or more of a foreign business enterprise's voting securities or the equivalent, or when a foreign person has a similar interest in a U.S. enterprise.) Transactions with unaffiliated foreigners consist of education services; financial services (includes commissions and other transactions fees associated with the purchase and sale of securities and noninterest income of banks, and excludes investment income); insurance services; telecommunications services (includes transmission services and value-added services); and business, professional, and technical services. Included in the last group are advertising services; computer and data processing services; database and other information services; research, development, and testing services; management, consulting, and public relations services; legal services; construction, engineering, architectural, and mining services; industrial engineering services; installation, maintenance, and repair of equipment; and other services, including medical services and film and tape rentals.

US brand irrelevant?

| No Comments

From the "on the one hand" department comes this from Ad Age Magazine - AMERICAN CONSUMERS LARGELY IGNORE 'MADE IN USA' PITCH:

The good news for beleaguered U.S. manufacturers: Americans believe "Made in the USA" stands for quality and value. The bad news: Consumers -- especially young adults entering their prime buying years and richer households who have money -- aren't inclined to look for products made at home.

So American companies have finally won the quality wars (from the 1980's). But for American consumers, that is sooo 80's.

As I have been saying -- it's not the old competitiveness challenge we faced before (see Competitiveness Revisited). We have move from quality as a selling point to quality as the starting point. The name of the game is design, customization, speed and responsiveness to customer needs. And our public policy needs to get with the game.

Science or not science

| No Comments

One of the important aspects of an information age is the continual quest for new knowledge. That quest is only made possible by raising more and more detailed questions. That is, as Thomas Kuhn pointed out long ago, the process of normal science. Paradigm shifts occur when the process of normal science can no longer adequately answer the questions. Then, is it right to dismiss a theory simply because is does not explain every detail of the phenomena understudy? Sharon Begley, the Wall Street Journal's science writer thinks not (Yes, Evolution Still Has Unanswered Questions; That's How Science Is)

Advocates of teaching creationism (or its twin, intelligent design) have adopted the slogan, "Teach the controversy." That sounds eminently sensible. But it is disingenuous.

. . .

Gaps in knowledge? Of course. Every ongoing field of science has them. Physicists can't explain why elementary particles have the masses and other traits they do, but that doesn't invalidate the basic theory of matter. It just means scientists have to keep trying. Say "God did it" if you like, but that isn't science.

Evolution is as well-established by empirical observation as other sciences. There is no serious debate that evolution happens, only deeper questions (left to college and graduate school), such as whether it proceeds gradually or in spasms. "It's dishonest to single out evolution," Prof. Carroll says, "when the very nature of science is to have unresolved questions."

Good point!

May employment

| No Comments

May's employment numbers came out this morning. BLS reported the unemployment rate dropped to 5.1%, but non-farm payroll employment increased by only 78,000, well below expectations.

Bottom line: Managers and professions continue to have the lowest unemployment rates and construction and farm workers the highest. However, unemployment rates for the blue collar occupations (construction, farm, production, transport) have declined. May was a bad month for managers, but ok for professionals, service, and construction. Sales jobs declined compared to April, but are up significantly over May 2004.

Interestingly, the unemployment rate for production workers declined while manufacturing lost 7,000 jobs. The reason is that manufacturing companies actually added production workers while getting rid of other jobs.

Managerial, professional, office and installation/repair occupations (what we might consider the upper, middle and blue-collar "information" economy positions) increased over 661,000 from May 2004 to May 2005. But declined slightly as a percentage of the total work force to 52%.

Here is the breakdown by occupation (note - these are not seasonally adjusted, so both monthly change and the change from the same month last year are given as the monthly change may be seasonally related):

Management, business, and financial operations occupations:
continues to have a below average unemployment rate (2.3%); up from April but down from 3% in May 2004. Employment down (206,000) from last month and down (137,00) from same month last year (May 2004); total number of people in this occupation (working or looking for a job) down by 183,000 from last month and down 280,000 from same month last year (May 2004).

Professional and related occupations:
below average unemployment rate (2.4%); up from April but down from 2.6% in May 2004. Employment up significantly (323,000) from last month and up significantly (776,000) from same month last year (May 2004); total number of people in this occupation (working or looking for a job) up significantly by 388,000 from last month and up significantly 730,000 from same month last year (May 2004).

Service occupations:
above average unemployment rate (6.5%); down from April but up from 6% in May 2004. Employment up (447,000) from last month and up (216,000) from same month last year (May 2004); total number of people in this occupation (working or looking for a job) up significantly by 529,000 from last month and up 357,000 from same month last year (May 2004).

Sales and related occupations:
average unemployment rate (5.1%); up slightly from April and up slightly from 5.1% in May 2004. Employment down (111,000) from last month but up significantly 870,000 from same month last year (May 2004); total number of people in this occupation (working or looking for a job) down by 110,000 from last month and up significantly 921,000 from same month last year (May 2004).

Office and administrative support occupations:
average unemployment rate (4.8%); up from April but down from 5% in May 2004. Employment up (25,000) from last month but down by 157,000 from same month last year (May 2004); total number of people in this occupation (working or looking for a job) up by 68,000 from last month but down 202,000 from same month last year (May 2004).

Farming, fishing, and forestry occupations:
slightly above average unemployment rate (6.4 %); down significantly from April and down significantly from 8.6% in May 2004. Employment up (24,000) from last month but down by 53,000) from same month last year (May 2004); total number of people in this occupation (working or looking for a job) the same as last month but down by 82,000 from same month last year (May 2004).

Construction and extraction occupations:
slightly above average unemployment rate (6.3%); down from April and down from 7.8% in May 2004. Employment up (234,000) from last month and up significantly by 876,000) from same month last year (May 2004); total number of people in this occupation (working or looking for a job) up by 164,000 from last month and up significantly by 791,000 from same month last year (May 2004).

Installation, maintenance, and repair occupations:
below average unemployment rate (3.4 %); down from April and down from 4% in May 2004. Employment down by 18,000 from last month but up by 179,000 from same month last year (May 2004); total number of people in this occupation (working or looking for a job) down by 69,000 from last month but up 152,000 from same month last year (May 2004).

Production occupations:
slightly above average unemployment rate (5.7 %); down from April and down from 6.9% in May 2004. Employment the same as last month and up (194,000) from same month last year (May 2004); total number of people in this occupation (working or looking for a job) down by 51,000 from last month but up by 83,000 from same month last year (May 2004).

Transportation and material moving occupations:
average unemployment rate (5.2 %); down from April and down from 7.2% in May 2004. Employment down by 65,000 from last month and down (41,000) from same month last year (May 2004); total number of people in this occupation (working or looking for a job) down by 155,000 from last month and down by 230,000 from same month last year (May 2004).

Changing music

| No Comments | 1 TrackBack

A number of earlier postings have focused on the impact of information technology on the business of music. Now Alex Ross, music critic for The New Yorker, has written a wonderful summary of recent books about the impact of information technology on music itself: "The Record Effect: How technology has transformed the sound of music."

The article is an enlightening description of how the art and craft of music changed because of recording technology, starting with John Philip Sousa prediction that recordings would lead to the demise of music.

I found the discussion about recording versus live performance especially interesting - including the following passage about the decline the concert experience:

In 1964, Glenn Gould made a famous decision to renounce live performance. In an essay published two years later, "The Prospects of Recording," he predicted that the concert would eventually die out, to be replaced by a purely electronic music culture. He may still be proved right. For now, live performance clings to life, and, in tandem, the classical-music tradition that could hardly exist without it. As the years go by, Gould's line of argument, which served to explain his decision to abandon the concert stage, seems ever more misguided and dangerous. Gould praised recordings for their vast archival possibilities, for their ability to supply on demand a bassoon sonata by Hindemith or a motet by Buxtehude. He gloried in the extraordinary interpretive control that studio conditions allowed him. He took it for granted that the taste for Buxtehude motets or for surprising new approaches to Bach could survive the death of the concert-that somehow new electronic avenues could be found to spread the word about old and unusual music. Gould's thesis is annulled by cold statistics: classical-record sales have plunged, while concert attendance is anxiously holding steady.

. . .

A few months after Gould published his essay, the Beatles, in a presumably unrelated development, played their last live show, in San Francisco. They spent the rest of their short career working in the recording studio.

Ross goes on to decry the death of concerts as a blow to art. He does not go on to describe how this latest wave of IT - file sharing of digitized copies - may be leading to a return to the concert tour. That is something that his New Yorker colleague James Surowiecki wrote about just a few weeks earlier in "Hello Cleveland" (see my earlier posting "The new music industry").

Surowiecki's argument about the return of touring is clearly true in popular music - because it is being driven as much by the artists as the fans. It remains to be seen whether classical music will
(and can) move in the same direction. Some months ago I posted a piece on how the San Francisco Symphony is gaining a strong following (The innovative organization - not what you think). But I have no real evidence one way or another.

The old cliche is that technology changes everything. If in fact concerts are the new wave of the music future, another cliche might be more appropriate: the more things change, the more they stay the same.

Trade theory doesn't always work

| No Comments

Surprise, surprise, surprise. Economists are finding that classical trade theory doesn't seem to explain what is happening (or not happening, in this case). As a story in the Wall Street Journal, "Why Dollar Can't Close Gap" explains:

Economists, puzzled that a weaker dollar hasn't done more to shrink the U.S. trade deficit, think one reason may be the growing flow of goods moving between the foreign and U.S. divisions of large multinationals.

Forty-two percent of all U.S. trade in goods, $950 billion last year, occurs between arms of the same companies, including U.S.-based companies trading with their foreign divisions as well as foreign companies trading with their U.S. arms. Nearly 90% of U.S. imports from Ireland are such "related party" trade, as are 74.6% from Singapore, 62.1% from Germany and 61.1% from Mexico.

"When so much of trade is related-party moves, the determining driver is demand in the U.S., not shifts in exchange rates," says Joseph Quinlan, chief market strategist of global wealth and investment at Bank of America.

. . .

Economic theory says that as the dollar declines, the trade balance should shift in the U.S.'s favor, usually with a delay of about 18 months after the currency starts moving downward. But it has been more than three years since the dollar started its slide, although it has recovered some ground recently, and there is little evidence of a significant impact on trade.

. . .

Gary Hufbauer, an economist at the Institute for International Economics, says companies with factories around the world, in theory, should be quicker to respond to shifting exchange rates because they see more immediately where it is cheap to produce and where the markets are strongest. But, in fact, he says, this isn't how it works in practice.

One reason is that in large markets like the U.S., with many competitors, companies that import products are competing with domestic producers who don't face the same pressure from the latest currency swings. As a result, importers are hesitant to raise prices to offset a falling dollar, because that would likely cut into market share, says Mr. Hufbauer. That, in turn, short-circuits one of the main ways in which a falling currency is supposed to curb imports.

Moreover, all producers face large fixed costs, regardless of where they build their plants, especially in industries such as autos and electronics that increasingly rely on advanced production technology and costly distribution systems. These companies are more inclined to choose production locations around the world and set prices according to competitive conditions in each market, rather than currency rates.

Seems like it isn't your grandfather's Ricardoian trade world any more.

Sweden changes its law

| No Comments

An update on the earlier posting on file sharing, Movie piracy - China, Russia . . . and Sweden. This story from Reuters.com

Sweden's parliament approved a law on Wednesday that bans the downloading of copyrighted material such as films and music from the Internet after being singled out for criticism by Hollywood.

Sweden had until now allowed downloading of files, while uploading, or putting material on the Web, was illegal.

The new Swedish law allows people to make one copy of a CD for personal use and to make copies of newspaper articles.

    Note: the views expressed here are solely those of the author and do not necessarily represent those of Athena Alliance.

Creative Commons License
This blog is licensed under a Creative Commons License.
OpenID accepted here Learn more about OpenID
Powered by Movable Type 5.12