Smolker Letter No. 6 (What You Need To Know if You Are 20 to 35 Years Old)
- Smolker Letter No. 6
“What You Need To Know if You Are 20 to 35 Years Old”
Posted April 14, 2012, revised several times, last revised on August 5, 2012
by Gary S. Smolker
QUESTION: Is there a recipe for success?
There is no such thing as a perfect world.
Every world that can possibly exist is going to have trade-offs.
The place you live is more important to you than how much money you earn.
Place is a major source of excitement and creative stimulation.
Happiness goes hand and hand with creativity, self-expression and well being.
Happiness leads to creativity – not the other way around.
Loving what you do is very important.
In the long run, what matters is how one feels in one’s own space.
Know yourself. Have a clear goal. Think through the issues. Make a plan to do what you love.
After you form your plan, ask yourself: Where, when and how will I embark on my plan?
As you encounter the inevitable obstacles and setbacks, form a new plan and ask yourself the question again: When, where, and how will I act on my new plan?
Regardless of how bad you may feel, do it! And, when you succeed, don’t coast. Ask yourself: What do I have to do to maintain and continue my achievement?
You can either go one way or the other. You might as well be the one deciding the direction.
Learn and practice strategies that work for you.
Work smart. Working smart includes giving yourself freedom to grow including opportunities to have frequent interactions with people you like and who like you.
Working smart also includes working in a city or region that fits your psychological needs which is poised to have a successful economy.
Communities are homes to job markets and personal relationships.
The social relationships you have and will have in the future are very important.
The quality of your personal relationships is very important.
The foundation of life in general and business life in particular is trustworthy relationships.
You must earn other people’s respect.
Just as you need to water plants in order for them to thrive you need to nurture relationships.
You need to devote time, energy, caring and sensitivity in order to have intimate relationships flower and bloom. Intimate relationships don’t just happen. Relationships will die on a diet of self-absorption.
Be genuinely interested in the things you do and the people with whom you do things.
Enjoy the things you do. Do them for interest and learning and you will do them well.
Whatever you want to do is usually what you do best.
If you do what you like you will do it well.
Blend knowledge, diligence, creativity and common sense.
Make an all-out effort. Be persistent. Keep your focus under pressure.
Always strive to be a more alive, a more courageous and a more open person.
If you don’t give anything, don’t expect anything.
Success is not coming to you, you must come to it.
1. The Aztec Prediction That the World Will End in 2013
Forget the Prediction that the World Will End in 2013. Take Charge of the Processes that Bring Success.
The sky is not falling. Don’t drown in negativism created by news media and financial advisers saturating all of us with “doom and gloom information” and do not look to the general news media or to financial planners to feature unique business opportunities created for you by on-going current events.
You and I need to put information reported by the general news media and by financial planners and the information which we can easily find in a Google Search in the context of what we should do to generate a desired outcome.
Many dramatic things are happening in the world that have created opportunities for you and I, for everyone.
You don’t have to be born rich or to have a college education to be a success.
It does not matter that people have different levels of resources.
A lot of financially successful people quit college to be entrepreneurs, such as Bill Gates, Steve Jobs and Mark Zuckenberg.
To identify which of the events happening in the world is your “opportunity knocking” you must place facts you come across in their real context. Don’t be surprised when you place facts you come across in their dreal context that you will see opportunity.
Don’t be afraid if you don’t know how things are going to turn out. Usually one thing leads to another. Isadore Sharp (the man who built the Four Seasons Hotel Chain) reports:
People often ask me about my original vision for Four Seasons. Well, the truth is there was no vision or grand scheme. In 1961, when I built my first hotel, I knew nothing about the hotel business. My only professional experience was in building apartments and houses. I was just a builder, and the hotel was just a real estate deal. I never thought this was going to be a career, nor did I ever imagine I would one day find myself building and managing the largest and most prestigious group of five-star hotels in the world.
After he started being in the hotel business, Isadore Sharp encounted one difficult problem or seemingly impossible problem after another. He had so much confidence and belief in himself that he continued on and on and while doing so achieved one amazing accomplishment after another.
Don’t expect magic. All successful people (including Isadore Sharp) confront and surmount obstacles. They persevere through rough spots and stalemates to gain a more favorable outcome.
Every super success story has one thing in common: Good results come from effort and working through problems. Success requires effort.
Many people arrive at the top as a by-product of their enthusiasm for what they do and the drive that accompanies that enthusiasm. However to succeed past a certain point in business, you must have a good mind for business.
Part of having a good mind for business is attitude. Attitudes are a product of our mindset.
How we think shows in how we act.
Mindsets create achievement in real life.
Having a positive mental attitude is asking how something can be done rather than saying it can’t be done.
Successful people do not allow themselves to dwell on distracting thoughts that might cause them to not have enough mental energy left over to do their best.
Successful people manage their motivation.
Repeat after me: If I want to be successful, I must manage my motivation.
If you want to be successful you must manage your motivation.
Working smart is critical.
Important achievements require a clear focus, faith in your potential to act successfully, an all-out-effort, and a bottomless trunk full of strategies that will work for you plus allies who will help you accomplish your goals.
Having the right team of advisors and working with the right co-workers is critical.
Don’t scrimpt on people.
Recruit and work with the most able people you can find.
Consult the most able consultants you can find.
Isadore Sharp reports (in his memoirs) that he worked so hard (from dawn to dusk) the week before he took his wife out on their first date, that on his first date when he took his wife to a movie he was so exhausted that he fell asleep in his chair when the movie began and did not wake up until the movie was over.
Isadore Sharp’s story is a rags to riches story consisting of story after story of clear thinking in action, of having truly wonderful partners, of working with unbelievably insightful lenders and working with amazingly talented people.
Isadore Sharp’s successes didn’t happen by chance or happen all at once.
Nothing happens over night.
To realize your full economic potential you will have to be willing to pay the price of success.
Isadore Sharp’s success story is another demonstration that success is about learning, often by trial and error.
Successful people, such as Isadore Sharp, faced challenges and kept growing.
Good decisions evolve over the years, each decision supporting the one before it.
Experience helps successful people develop a long-term plan that will guides them.
Starting at the bottom is okay and may be necessary.
Experience will help you know your game, know what you want to achieve, and will help you know how to get there.
Knowing your company/your business/ your industry from bottom to top, inside outside and upside down will suit you well in the future.
Nothing happens over night.
Forget the Aztec prediction that the world will end in 2013. That prediction is just an excuse to not work hard.
There is a social aspect to business: The foundation of business is trustworthy relationships.
Intelligent/savy people want to know for sure whom they are dealing with before entering into a long-term business relationship.
When you work with savvy people, they often seem more interested in getting to know you then getting down to business.
You will benefit by having the right people help you.
Many people will help you, as a favor, just because they like you.
But don’t take anything for granted. You have follow through to make sure everything gets done right.
Don’t expect your work to get done by itself.
Aristotle obserserved, human beings seek happiness above all else.
People who study “happiness” have concluded that true well-being comes from social relationships — close and loving relationships with family and friends.
Doing work that has purpose and that you are passionate about will make you happy.
It is true that money alone does not buy happiness.
In socieities where simple needs are largely satisfied, people rank happiness and satisfaction as a life goal.
People in modern societies are more interested in having a life that is enjoyable, meaningful, engaging, and fulfilling than in relentlessly working to make more money.
For almost everyone, at a certain point, higher income level does not translate into a higher level of happiness.
When happiness is related to one’s job, it is the substance of the work, not the pay, that matters the most.
It is not that people with more money are happier; it’s that happier people are better earners.
Happy people go on to earn higher incomes than unhappy people.
My best advice is find something you love to do, make a business out of it and frequently have meaningful interactions with people you like.
As a general rule of thumb, “successful people” do what they are genuinely interested in. They enjoy putting in the effort.
They have a readiness to grow. They happily learn from their mistakes and failures.
They are filled with passion and a desire to get things done. They have an inner hunger and self-confidence.
At one extreme are people whose pleasant affable projection of enthusiasm and self-confidence is such that you will doubt yourself before doubting them.
Correlating success achieved by people with high energy and enthusiasm to their self-confidence may lead one to conclude: Opportunity does not knock, it presents itself when you knock the door down.
That being said, it is not enough to have ambition, you also need to take initiative and to work hard and work incredibly smart.
If you have a good business mind, you must use it.
But keep in mind that people who do things they enjoy with people they like are happier than others.
Experiences and relationships bring longer lasting returns than fame or fortune.
Don’t Let the Present Whiz By You.
Be Alert to Geographic Sorting of People by Economic Potential, Innovation, and Current Events.
Innovation and economic resources are highly concentrated in specific places. As a result, there is a hierarchy of productivity rates.
Those places that are more “productive” than others, operate at a faster speed, and are more expensive then those further down the hierarchy.
The people who can afford to live in those top places are increasingly people who work in a highly productive way in a specialized industry.
That is because money and capital have gone to where the returns are greatest and people have moved to where opportunity lies.
Both talented people and capital have concentrated where opportunities for productivity and returns are highest.
This has resulted in a cycle of success and in a sorting of people.
For example, Manhattan is valuable as a site of high end activity production, particularly for the high end of finance.
Because to these types of businesses cost is literally no object, they have driven the cost of New York real estate through the roof.
As “finances” success drove up rents, many businesses in other business sectors had to leave Manhattan.
In Manhattan, lower value employee activities were squeezed out and replaced with higher ones.
Business success that comes from high levels of performance based on concentrated knowledge is not limited to success in the financial industry.
In all sectirs of business, success comes from learning by doing with increasing returns and the insights originating from the stock of knowledge accumulated.
Ray Krock, head of McDonald’s worldwide, explaining why his company led competition around the world, said, “We take hambergers more seriously than they do.”
The correlation between education, love of learning, proper training and focus on learning on success is robust.
Consider the following experience of a friend of mine on a recent trip to South Korea.
Neither he nor his wife speak Korean. The Koreans that he and his wife met in South Korea mostly didn’t speak English.
However, for US$3 his wife bought an app in a local store in Seoul for her iPhone that translates.
You talk into the phone and your words appear in English and Korean.
Then, the Korean talks into the phone and his or her words appear in Korean and English.
My friend reported: It really worked, and also does several other languages.
South Korea is not in a (educational and thirst for knowledge) league of its own.
In section 36, I discuss how innovation, entrepreneurship, and entrepreneurial energy are facotrs which explain the difference between successful and doomed or failed economies.
Israel has had a fifty fold economic growth in sixty years. The Israeli economic miracle and what contributed to that miracle is discussed in section 36 of this letter.
There is more to the Israeli economic miracle than the facts that Israelis have more cell phone per capital that anywhere else in the world most kids in Israel over the age of 10 have a cell phone and a computer in their bedroom.
Cities and Regions Best Positioned To Be A Success
Some people believe technological innovation is the ultimate source of productivity and growth. Other people believe entrepreneurship is the main engine for economies to evolve and regenerate.
It is a dictate of Western Civilization that education is key to economic success, prosperity, and wealth generation in an economy.
People point to the economies and amount of wealth created by the utilization of technology in South Korea and Taiwan, to the amount of wealth created by technological innovation in Silicon Valley (California), the quality and quantity of job growth and wealth creation in Israel as a result of performing mission critical technological feats related to creating successful new high technology start-up companies and doing mission critical research and development work for established high technology companies.
When people discuss the world economy of the future they point to South Korea’s dynamic economy, Israel’s dynmaic economy, America’s dynamic economy and what they believe is China’s dynamic economy.
For a further discussion of Seoul see Section 12 of this letter, entitled “Infrastructure Makes A City.” For a discussion of the high technology related economic miracle in Israel see Section 36 of this letter. For a discussion of why New York is the financial and cultural capital of the world, see Section 31 of this letter. For a discussion of the economies of Silicon Valley and China see Section 2 of this letter.
I have an opinion on which factors lead to a region and its economy being well positioned to be a success in this century.
I am fascinated by the question Where does financial success come from?
In the sections of this letter which follow, are set forth facts and opinions that I have thought about related to the following economic issues.
- Why should I make one kind of investment instead of another?
- Should I invest in gold or silver or in agricultural commodities?
- Should I invest in bonds, in notes receivable, in the stock market or annuities?
- Should I invest in an operating business?
- Should I invest in real estate?
- Where (if anywhere) should I invest in real estate?
- Why should I work in one place instead of working in another place?
- What type of work should I look for? Should I look for a job, a new occupation or launch a new career?
- Why should I live in one place instead of living in another place?
- Should I move?
- What should I advise my children to do about jobs, careers, investments?
Being A Genius or Being A Superior Person Is Not Enough.
Many people feel the world needs to change, not them. They feel entitled to something better. They feel the world should recognize their special qualities and treat them accordingly.
This letter is written on the premise that people who feel they are superior to someone else need to give up that idea; such an idea is not going to help anyone accomplish the many tasks in business that must be accomplished for a business enterprise to succeed.
This letter is written on the premise that being a genius, or a superior person, is not enough. You have to make things happen.
In order to make things happen, you need to make concrete plans — plans you can visualize — about when, where, and how you are going to do something. You really high levels of follow through in order to up your chances of success. If you don’t personally do everything or check everything you may have operational problems
You need to think about your plan in vivid detail and to work smart.
The old proverb, Measure twice and cut once – is the correct way to conduct yourself.
It’s Only Those Who Care About the Destination, Who Are Ever Going to Get There.
You must be willing to invest and work where there are suitable opportunities.
In my opinion innovation, creativity, initiative, technology, entrepreneurship and natural resources — not simply economies of scale and specialization — now power economic growth.
Since 2000 sustained growth has occurred in in regions that produce basic commodities like energy and food.
Texas has added 200,000 new jobs in its oil and gas sector over the past decade and Oklahoma some 45,000.
The Texas energy sector created two times as many jobs as exist in the software sector in San Jose and San Francisco combined. Those jobs pay upwards of $75,000 per year.
The states that have added the most jobs since 2007 are are oil producing states Texas, North Dakota, Louisiana, Oklahoma and Alaska.
Recently, technology has had a huge impact on job creation and wealth creation.
Fracking, a new process, has allowed companies to access roughly 4.3 billion barrels of crude oil that is believed to lie beneath parts of North Dakota, Montana, and Canada.
In four years, due to fracking, oil output has quadrupled in North Dakota.
In March 2008, North Dakota was the number eight oil producing state at 144,000 barrels a day.
Recently, North Dakota passed Alaska to become the number two oil-producing state in the U. S. North Dakota produced produced 575,490 barrels of oil in March. Alaska produced 467,480 barrels.
Unemployed? Underemployed? Want a job? There are now lots of jobs in North Dakota. Booming oil fields and high paying jobs there have drawn thousands of workers to North Dakota.
Of the 15 counties in the United States with the lowest unemployment rates, 11 are in North Dakota — some with unemployment rates below one percent.
Williston, North Dakota is the fastest growing small city in the United States. Construction is booming to keep up with demand.
In 2011, the city issued $358 million worth of building permits, up from $45 million in 2009. Housing is still in short supply.
As a result of “fracking”, U. S. oil and Canadian reserves now stand at 2 trillion barrels and constitute more than three times the total estimated reserves in the Middle East and Mexico.
New technology is making a big impact in the construction industry, on the built environment and on the economies in China and in Mexico.
Broad Sustainable Building (BSB) recently announced plans to build the world’s tallest building (“Sky City”), a 220 story, 2,750 foot high, energy efficient office building, in Changsha, the provincial capital of Hunan province, in China in three months.
The Sky City building will have one million square meters of usable space, linked by 104 elevators.
The construction company (BSB) reckons as a result of using prefabricated parts it will only need ninety days to complete construction of a 2,750foot high building.
Construction is slated to begin in November and to be completed in January, 2013, to take only three months from start (breaking ground) to finish.
Consider the economic impact that will be spurred by Broad Sustainable Building’s (BSB’s) plan to use prefabrication to build that 220 story building in three months. This will dramatically speed the construction process and dramatically lower costs of construction.
By comparison, it took Dubai five years to construct the Burj Khalifa, the world’s tallest building so far. The Burj Khalifa is 828 meters high. Sky City will be 838 meters high.
Ninety-five percent of the Sky City building will be assembled from prefabricated components manufactured by BSB, that will be already have been fabricated before ground breaks. In other words, 95% of the Sky City building will be completed before breaking ground.
The projected cost of the Sky City building is $US 628 million, which is $ US 62 per square foot. In a lot of other places the cost of a super high building is over $1,000 per square foot.
According to news reports, the total investment in Sky City will be $ US 628 million, compared to $ US 1.5 billion invested in Burj Khalifa, and $ US 2.2 billion to be invested on the Shanghai Tower.
The Sky City building is expected to consume one fifth of the energy consumed by conventional building due to unique construction methods.
I don’t know if there are 10 plus million square feet of tenants there (in Changsha).
By the way, the Burj Khalifa (which was built in Dubai) was/is a financial disaster.
Being optimistic, the Sky City building could be a financial home run and do a lot for the already fantastic eye-opening construction efficiency reputation of the company (BSB) that builds it.
BSB is already renown for its eye-opening construction efficiency. Its portfolio includes assembling a 15-story building in six days in June 2010, and erecting a 30-story hotel in 360 hours.
BBS has explained that the goal of building Sky City is to develop and put into use a “medium cost”, super-saving utility building and to promote a futuristic urban lifestyle.
Just because a project is a gigantic project does not guarantee that it will be a success.
In China many cities have recently been built which are now ghosts cities — cities in which no-one or hardly anyone lives or works or shops.
For example, the New South China Mall, once touted as the world’s largest, has been ninety-nine empty since it opened in 2005.
Talented Entrepreneurial People Do Not Sit Back and Hope for the Best.
That being said, highly talented people are combining their talents, ideas and energy in a few real places. Consider what that means.
Those places which attract a critical mass of top creative talent are doing well in the short term.
Innovation, economic growth and prosperity is occurring in those places all over the world.
Creative people and companies cluster (are becoming more and more concentrated) in those places because of the powerful productivity advantages, economies of scale, and knowledge spillovers such concentration and density brings.
This has been happening throughout modern history: the most highly gifted, the most enterprising, the strongest characters, the most skilled and productive people have attracted the presence of other skilled and productive people.
Consider the ripple effect impact on all facets of the local Silicon Valley economy of the Facebook IPO which created so many so-called Facebook Instant Millionaires.
The Chief Technology Officer of Facebook recently announced that he is leaving Facebook to start his own start-up.
It is highly predictable that other Facebook Instant Millionaires will leave Facebook to start their own start-ups too.
Entrepreneurs and Entrepreneurship
On May 31, 2012 I attended an event sponsored by the Cornell University Entrepreneur Network and Cornell Silicon Valley Network in Westwood (a portion of Los Angeles) entitled “Startup Stories: An Inside Look at the Growing L.A. Tech Startup Scene Taking Place in Los Angeles.”
The speakers provided the following recipe for success.
- Have a good sense of yourself.
- If your work doesn’t make you happy don’t be an entrepreneur.
- Don’t expect to have balance in your life. Balance in life and entrepreneurship do not go together.
- Super achievers dig in and do what it takes.
- Understand the market. Are there enough people (customers) interested in your product to have a sustainable business?
- Does anyone else have a product that does what your product does? How do you or your product “do it better”?
- Are you uniquely qualified to be the person doing this?
- Think about how you are going to get users/customers. How are you going to motivate people to use your product? How are you going to get users to use your product?
- You need to get people to use your product as a habit, to make a habit of using your product.
- You need to make cold calls all day long.
- Don’t compromise on people. Surround yourself with the most able people you can find.
- Find the right people – find people who know what they are doing and do things right.
- Your company is going to fail if you don’t have a great sales and marketing team.
- Pick complementary partners, pick people who have a different talent than you do.
- Be smart before you work hard.
- You need to have enough interest in your product (customers) in order to have a sustainable business.
- Stay focused.
- Don’t get distracted.
- You have to move forward.
Instead of saying that man is a creature of circumstances, it would be nearer the mark to say that man is the architect of circumstance. It i character which builds an existence out of circumstance. Our strength is measured by our plastic power. From the same material one man builds palaces, another hovels. Bricks and motor are bricks and motor, until the architect makes them something else.
It takes teamwork, not just the ability of a superstar to achieve major accomplishments.
Keep in mind Michael Jordan’s statement about what it means to be a star: In our society it’s hard to come to grips with filling a role instead of trying to be a superstar. A superstar’s talent can win games, but it’s teamwork that wins championships.
Thomas Edison’s accomplishments are proof of that statement.
Edison was not a loner. For the invention of the light bulb
Edison had thirty assistants, including well-trained scientists, often working around the clock in a corporate funded state of the art laboratory.
The light bulb was not one invention, but a whole network of time consuming inventions each requiring one or more chemists, mathematicians, physicists, engineers, and glass-blowers.
Much to the disappointment of his wives, Edison’s consuming love throughout his life remained self-improvement and invention, but only in his field.
2. Boom and Bust Economies
In “Who’s Your City”, Richard Florida reports that the largest economically productive mega-region on the West coast runs from Los Angeles, through San Diego to Tijuana, Mexico. It is home to 21 million people and the source of $710 billion in cross-national product.
Florida goes on to report that the second largest economically productive mega-region surrounds the San Francisco Bay Area and is home to 13 million people who produce more than $470 billion in output
The third largest economically productive mega-region stretches from Medford and Portland, Oregon through Seattle and into Vancouver. It is home to nearly 9 million people and generates $260 billion in economic output.
However Florida, whose book “Who’s Your City” was published in 2008, does not discuss the following facts that have been reported elsewhere by others.
- Silicon Valley has a boom and bust economy.
- Although Silicon Valley has the highest proportion of tech jobs of any country in the United States — more than four times the national average — it is not leading in the expansion of science and technology related jobs in the United States.
- Silicon Valley at the end of 2011 employed 170,000 fewer people than in 2000. Most of the losses came in manufacturing, and business and financial services.
Florida reports that greater Tokyo is the worlds’ biggest mega-region.
Tokyo is home to more than 55 million people and responsible for nearly $2.5 trillion in economic output.
According to Florida, Beijing produces about as many patents as Seattle or Phoenix, while Shanghai produces as many as Toronto or Salt Lake City.
Three cities worldwide dominate the global market in initial public offerings (IPOs): London ($51 billion as of summer of 2007), New York ($46 billion as of summer of 2007) and Hong Kong ($41 billion as of summer of 2007).
In China, according to Florida, talent is concentrated in a few regions generating the bulk of its innovations, and producing most of its impressive wealth.
Talent is concentrated in Shanghai, Shenzhen, and Beijing, each of which is a virtual world apart from its vast impoverished rural areas.
The top ten Chinese regions have 17% of the nation’s population, house 45% of its talent-producing universities and generate 60% of its technological innovations.
Florida reports, in China 17% of its population lives on less than $1/day, almost half lives on less than $2/day, 800 million farmers cannot afford to see a doctor, and in 2005 the Chinese countryside was the scene of an estimated 87,000 riots and demonstrations, up 50% from 2003.
Think twice before you decide to invest in or to take a job in China.
A real estate bubble, not reported by Florida, has left China with an estimated sixty four million empty homes. Some economists see China as the biggest property bubble of all time — featuring entire ghost cities built on speculation.
A recent Google search I conducted of “Ghost Towns in China” reported “about 953,000 results” in 0.24 seconds.
You can find amazing satellite images of portions of China on the Internet which show cities meant to be home to millions lying deserted.
One short-seller, Jim Chanos has issued a dire warning. He said/warns he expects China’s economy to implode in a real estate bust. He has said/warned China is “on an economic treadmill to hell.”
The Business Section of the Los Angeles Times recently published an article with the subheading: China’s shipyards languish after a building binge.
Below is a quote from that article.
Yuequing, China — A shipbuilding boom raised the fortunes of this hard-scrabble industrial port. Five-star hotels sprouted along with machinery depots and metal shops. European luxury cars darted past heavy trucks on the butling streets.
But in another sign of China’s economic slow-down, shipyards are now closing and half-finished vessels lie rusting in the humid haze. Prosperity is receding like the tide.
A Low Tech Highly Successful Socially Creative Entrepreneur Story
Being innovative counts.
At the May 31 Cornell event one of the “start-up entrepreneur” presenters (Anat Baron) told the following story about a cab ride she had in Chicago.
When she got in his cab the cab driver asked her if she was single. She replied, “Yes.” He then showed her picture of three men he said he thought would like to meet her and she would like to meet.
This cab driver is a yenta — a match maker. He collects personal data volunteered by people who answer his questions while they ride in his cab and then “matches” them.
He has created and is running his own very popular low tech social network and making a good living as a “cab driver.”
That cab driver has a high degree of situational awareness, creativity and entrepreneurial energy.
That cab driver understands you have to show up in order to win. Success doesn’t just happen. You have to make it happen.
His success story demonstrates that effort is what ignites ability and turns it into accomplishment.
We seem to be living in an expanding tsunami of information. You can drown in a sea of too much useless information.
A key to success is how you pay attention to information. That is to say, one of the keys to success is the ability to process information perceived, to separate the wheat from the chaff, and to understand its significance.
Before you begin any course of action it is wise to look more closely at the subtleties of how things are connected in the world around us.
Failure to think is a war on wisdom.
Consider Ben Laden’s thought process. Ben Laden’s goal was to bankrupt America. It appears to me that Ben Laden achieved his goal through what he has done to the United States. Ben Laden invested $500,000. This prompted the U.S. to invest in a response that cost the U. S. more than three trillion dollars.
That is an impressive “financial kill ratio.” For additional information on this topic reference, Google “Osama bin Laden’s goal to bankrupt America.”
Financial Products and Real Estate Speculation Leading to Self-destructing Cities, States, and Countries
We are in an era of financial warfare. Federally regulated lenders originating and selling sub-prime mortgages and then holding back foreclosed homes from local real estate markets is a part of that on-going war. Regulated lenders manipulating Libor interest rates is another part of that war. The U. S. Federal Reserve Board “regulating” interest rates is another part of that war.
Spending the government’s “money” on what is called “war” in the Muslim world on projects described as bringing “democracy” to the Muslim world is an additional part of a war that is causing countries, states and cities to self-destruct.
Consider the trillions of dollars the United States has spent in Iraq, Afghanistan, Pakistan and Egypt,is continuing to spend and can reasonably be expected to spend in the future related to those countries. Who has gained by that expenditure, who will gain from those expenditures in the future, what has the U. S. as a nation received to date in return and what can the U.S. reasonably expect to receive in the future from those expenditures?
What has the United States given up by spending money on “wars” and “military aid” in Afghanistan, Pakistan and Egypt instead of alternatively spending that money on domestic projects, such as building infrastructure in the United States or spending that money to support education of children in the United States? Consider what can reasonably be expected to happen in Afghanistan, Pakistan and Egypt over the next the next five years.
Pakistan has a justice system overseen by tribal elders. In a story published in the Los Angeles Times on August 1, 2012 we are told the story of a man who went to the tribal elders in his village demanding justice. He wanted permission to seek justice for his wife sleeping with another man. The village elders verdict was, “Punish the man and his family any way you see fit.
Within minutes that man and his three brothers broke into the other man’s house. Only the man’s mother and another son were home. They dragged the woman out of her home and brought her to the village square. They then stripped her naked and dragged her by the ankles, making several circles in the dirt with her body.
This system of justice is a cornerstone of tribal societies in Pakistan.
In order to make thoughtful decisions, you need to understand how one thing is connected to another, how everything is interconnected to everything else.
Information needs a social context.
We lose our ability to think when we don’t practice it. It’s like a fire that dies out when we stop feeding it with fresh wood.
Look at what Spain has done to itself and you will be able to predict what it is going to be like for people living in Spain and for the country (Spain) going forward. Should the International Money Fund (IMF) and/or the Central European Bank (CEB) loan money to Spain, ostensibly so Spain “may” pay its bills? Should the IMF or CEB loan money directly to Spanish banks so they will not have to be closed down? What will be the real consequences to other lenders, to the Spanish people, to the people “governing” Spain, to the stock holders and managers of Spanish banks, to the country of Spain if and when the IMF or CEB loan money to Spain or to Spanish banks?
If you have the courage and imagination to do so, go beyond currently accepted concepts, assumptions and political partisanship.
Don’t allow politicians, political parties, partisan politics or political hierarchy determine what you think.
Six years ago, Spain was building 50% as many new housing units as the United States while having 85% less population. The government of Spain actively recruited immigrants from Ecuador and Columbia to work in the construction industry. Construction workers were offered immediate citizenship rights that would allow them to be on social programs/social welfare, they were given apartments to live in and on and on.
Roughly 6 million immigrants came to work in the real estate boom in Spain, as roughly 7-8% of Spaniards preferred to remain unemployed. Now those immigrants are unemployed and living on welfare in Spain. Spain has offered them $50,000 to leave Spain, to go back to Ecuador and Columbia. The general unemployment rate in Spain exceeds 23%; the unemployment rate for people under 35 in Spain exceeds 50%.
In that Spanish banks loaned money to developers who can’t and didn’t repay the loans, and in that people who purchased new housing units lost their jobs and can’t pay their loans, the banks have lots of loans that are not producing income and are not going to be repaid. If there was a property tax based on home value it is not being paid by the people who lost their homes and the value of homes has sunk.
Meanwhile, the number of people on social welfare programs in Spain (including people from Ecuador and Columbia imported to work in the boom time construction industry) have expanded and the number of people and business who previously paid income taxes and sales taxes has shrunk.
It does not look like Spain or its banks are going to be able to repay loans, if new money is loaned to them.
Spain is not the only country in which real estate loans that made no sense was made.
Look at what the United States did to itself as a result of allowing banks to make real estate loans to builders who would never be able to sell the buildings they built and also allowed banks to make home loans to people who bought homes they would never be able to pay for.
Many of those loans have been foreclosed. Many times the lender owners do not take care of the foreclosed houses they now possess.
Take as an example what is going on in the City of Los Angeles as a result of lenders not maintaining foreclosed properties they now possess.
The City of Los Angeles has brought suit against banks that have not taken care of foreclosed homes for creating blight, in which the banks are accused of being slumlords.
Many people in Los Angeles own a house on one side of a street and across the street from their house is a foreclosed empty house on the other side of the same street owned by a bank which has not been maintained; the bank has allowed that property to fall into disrepair and to deteriorate into a slum. Some of these foreclosed unkept deteriorated house are being used by gang members and squatters and stink of dead animals.
Problems associated with such properties include drug dealing, prostitution and assault with a deadly weapon.
A body was found in one vacant home in South Los Angeles.
The City is demanding the banks clean up vacant properties and improve conditions for families living in others.
The City of Los Angeles has invited neighbors who observe blighted conditions at bank owned properties to contact the city attorney’s office at email@example.com.
Nearly a million California homes have been foreclosed since the housing crisis began five years ago., displacing hundreds of thousands of homeowners and tenants and wrecking havoc on some neighborhoods.
Before purchasing a home (a single family home or a condominium unit) find out if any of the homes in the neighborhood are empty, and/or if any of the units in the building are empty, who owns those empty homes/units, and are any homes/units in foreclosure.
I was involved in a situation where a next door neighbor’s condominium unit was vacated after being foreclosed.
While the foreclosed condominium unit was empty, a pipe leaked and flooded the condominium unit next door.
The owner-occupier of the next door unit did not know who to contact to stop the water flood of water coming into to her unit from the unit next door. Both condominium units became infested with mold due to the flood.
Now consider why the cities of San Bernardino and Stockton, in California went broke.
What bankrupted Stockton and San Bernardino were the most severe housing busts in the United States. What bankrupted those cities were banks making sub-prime mortgage loans to poorly paid workers who obviously would not be able to make their monthly mortgage payments.
Stockton and San Bernardino are working class towns. Banks enticed non-affluent buyers through sub-prime mortgages to buy new homes in those cities.
When the real estate bubble burst, both cities experienced a record number of foreclosures and a sharp dip in employment, particularly in construction.
Among U.S. cities, San Bernardino ranks third in foreclosures while Stockton ranks fifth.
Unemployment in the city of Stockton in May stood at 17.5%. In San Bernardino it stood at 15.9%.
Like all California municipalities, Stockton and San Bernardino depend on tax revenue — chief among them property taxes and local sales taxes — to fund city operations.
In cities with new construction and raising home values, such as Stockton and San Bernardino, property taxes provided a reliable stream of revenue until the foreclosure wave hit. At that point, property values collapsed and property tax revenues with them.
According to one report: median home values in San Bernardino County dropped 65.6% – from an average of $350,290 at the peak in 2006 to an average of $120,410 at the trough in 2009. Values haven’t risen much since then. The city of San Bernardino’s tax revenues have declined by one-sixth since 2007-2008. Retail sales plummeted as well, dragging down San Bernardino’s sales tax revenue 14%.
In California, the State of California has been accused of balancing its budget on the backpacks of kids by allowing school districts to charge students in grades K through 12 illegal fees to purchase assigned materials for credit courses, for text books, art and field trips. The only mechanism to enforce the California constitutional right of a student who can’t afford a textbook is to go out a hire a lawyer. Such a lawsuit is now pending in California.
According to legal papers filed in that case, plaintiff “Jane’s Spanish teacher wrote her name on the class whiteboard because she could not pay for assigned workbooks,” the plaintiff’s lawsuit charges. Also, her middle school “required that Jane [not her real name] pay more than $440 annually in course and uniform fees for her physical education class and musical instrument rental fees ..
“In some classes, teachers made grades partially dependent on the students’ payment of course fees or awarded extra credit to students who bought $20 T-shirts.”
There Are Always Problems. What Matters Is Their Level of Difficulty, the Difficulty They Present in the Solving.
Many people with situational awareness thought about what was going on and what must happen next; they foresaw the situations described above would happen before they happened.
Thoughtful people who make correct predictions have situational awareness, an up-to-date understanding of the world around them. — That is to say, they are alert attuned to the implications of what is going on.
The critical attribute that places them heads and shoulders above their contemporaries is mental. They know what to look for.
Without basic perception of important information (through visual, auditory, tactile or other means) the odds of forming an incorrect picture of the situation increase dramatically.
Situational awareness involves more than simple perception of information – it also demands that people understand the meaning and significance of what they have perceived.
At the highest level of situational awareness, the ability to forecast future situation events and dynamics marks individuals who have the highest level of understanding of the situation.
This ability to anticipate future events (and their implications) allows for timely decision making.
In all areas of life, in the most extreme case, a person who is completely new to the system and situation in a particular domain will be considerably overloaded in seeking to gather information, understand what it means, and formulate a correct response. Without knowledge of the underlying relationships among the system components, novices do not realize what information to seek out following receipt of other information. Seeing raising temperatures, for example does not lead to the immediate shifting of attention to determine whether an explosion is imminent or radioactive vapor is about to be released into the atmosphere.
Thus, the prototypical novice (untrained person) is quickly overloaded, inefficient, and error prone in developing situational awareness. Decision making and performance are highly compromised as a result.
Understanding is often not just a matter of interpreting one piece of data but rather is a function of the integration of multiple pieces of data.
Predicting the mess that would ensue from making loans to build houses to sell to people who could not afford to buy them and loaning money to people who had no way pay them back secured by their home was a no-brainer.
You didn’t have to know much about people — what makes people tick and how people tick — to know that was going to create a fiasco.
Experienced thinking people should have predicted we would be in the mass foreclosure mess and the unemployment mess in which indebted parents are not leaving their jobs, which forces younger persons to put their careers on hold. Since 2008 the percentage of the United States workforce under 25 has dropped 13.2 percent, according to the Bureau of Labor Statistics, while the workforce of people over 55 has risen by 7.6 percent.
When the unemployment rate goes up it disenfranchises the younger generation because they are the least qualified and employers often replace entry-level positions meant for college graduates with people who have more experience because the pool of
Overall the young are suffering high unemployment rates – and an even higher incidence of underemployment. The unemployment rate for people between 18 and 29 is 12 percent in the U. S., nearly 50 percent above the national average.
Young college graduates find themselves incredibly educated but drowning in student loans with a job market that isn’t hiring.
Problems can be anticipated and problems can be solved, great opportunities exist and great success in the real world is happening every day.
People making successful decisions in any complex situation are more likely than not making their decisions propelled by the kind of skill and knowledge that they have built up through deep experience, book learning, formal and informal education and always asking themselves, what can I learn from this. Through the “learning” and “study” they have acquired a rich highly complex conceptual structure that is used consciously to represent and reason about situations.
They have gained their skills and knowledge through hard work and purposeful learning. They study and study and study some more. They have developed the habit of learning. They are thus able to use a detailed analysis of the situation they are facing in order to come to a decision. Only as a result of experience and practice will an individual possess the detailed understanding of a situation needed to think through the issues and to support creative thinking.
It is very important to understand what a decision is all about. Herodotus, writing in the fifth century B.C. reported that whenever a group of the ancient Persians reached a decision while sober, they later reconsidered it while intoxicated. Alfred P. Sloan, the man who built General Motors, once told a group of high-level policy makers who had seemed to have reached a consensus: “Gentlemen, I take it we are all in agreement on the decision here … Then I propose we postpone further discussion on this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.”
Although there are too many factors and combinations of factors that come into play for anyone to be able to create a perfect economic model to determine whether an investment will become an economic wealth creating success (or whether an experiment or business or relationship will work) there are simple underlying principles which in the ordinary course of affairs when skillfully applied more often than not lead to success.
People who understand and skillfully apply those principles increase the probability they will succeed.
Experts are better at extracting information from what is going on around them than non-experts. Experts can actually see patterns and structures that are invisible to their less experienced less expert colleagues. Experts have knowledge drawn from long experience.
By all means use experts, consult experts, but consult real experts.
Andrew Carnegie once said, “I wish to have as my epitaph: ‘Here lies a man who was wise enough to bring into his service men who knew more than he.'”
Having Situational Awareness Means Being Alert.
Having situational awareness means being alert.
Successful people spend considerable time and effort at learning and self-improvement.
This effort allows them to work smart.
Achieving situational awareness is hard work. Situational awareness comes from having an open mind, from being willing to admit your mistakes, from wanting to improve, from a lot of training, a lot of book learning, a lot of quality coaching and from the trials, errors and tribulations of experience.
Successful people actively project what will happen next and plan for contingencies.
Successful people make their decisions and move forward with confidence grounded on facts with the kind of knowledge that has been built upon through deep experiences.
I have a friend (Jason Fane) who has consistently demonstrated exceptional situational awareness for more than 40 years.
All during those 40 plus years Jason spent a considerable amount of his personal resources making/setting goals, on advanced planning and then moving forward.
He has never treated the future as a low priority just because it has not yet arrived.
He has always been forward thinking, treating the future as a high priority.
He is always thinking BIG.
He is very successful at grasping the meaning of what he is looking at. Through his enhanced awareness he is able anticipate what is going to happen next.
I observed Jason start his career as a real estate investor in Ithaca, New York and watched him progress in his career from painting the interior of an old house, a single family residence, he purchased in 1967 as a rental property (while he and I were graduate students at Cornell University) to becoming one of [if not the largest] private owners of residential rental property in the small Ivy League college town of Ithaca, New York.
Over the year his commercial property projects became larger and larger. Today, Jason is the owner-builder-developer of a 47 story residential building in Toronto which is approved as a 512 unit condominium unit project at completion. You can visit Jason’s latest real estate project in Toronto on the worldwide web at http://www.CHAZyorkville.com.
Jason is a great example of what can happen when you always focus forward. While I have known Jason he has always been spending time focusing on future opportunities and how to make those opportunities happen.
Jason never stopped going forward.
Jason attribues attributes his success to what he calls “dynamic property management.” I attribute Jason’s success to a combination of talents, including situational awareness.
Jason worked hard to gain his mastery of situational awareness by putting in thousands of hours of purposeful acquisition of knowledge.
He absorbed himself in his chosen fields of real investment and real estate development.
He continuously and tirelessly acquires new information and knowledge which he continually builds on. If something doesn’t go right, if something doesn’t turn out as anticipated or planned, he does not regard that as a reason to stop striving.
He has fanatical devotion to his business. His appetite for hard work is ravenous. His enthusiasm is palpable.
Jason has worked and worked and worked and worked some more to reach the top of the real estate development and real estate investment fields.
He is a man who is not only totally absorbed in his work but is also a refined appreciator of food, wine, literature, art, movies, plays, etc. etc., a world traveler, fun to be with and a wonderful friend.
As long as I have known Jason he has never been arrogant/”full of himself.”
As long as I have known Jason, he has always been full of passion and a desire to get things done.
Jason has always had an “inner hunger” and a readiness and giant capacity to grow.
He has never been smug.
When I met Jason in 1967, we were both graduate students. Jason was working on his PhD.
Jason had already earned a B.S. and an M.S. from M.I.T. and a MBA from Harvard.
I don’t know how much time Jason spent working on his PhD, but I do know he spent a lot of time doing research in order to determine which city in the world would be the best city for someone like him to be in business.
Jason did not ask himself the question, who has the time or ability to assess all the options and calculate all the costs and benefits of every possible location. He just did it.
After six months of research, Jason told me he concluded that Toronto, Canada was the best city in the world for him to expand to. Jason then rented an apartment in Toronto and (while still a student at Cornell University in Ithaca, New York) he began doing business (real estate investment, real estate development and real estate management) in Toronto, Canada.
In ” Who’s Your City?”, Richard Florida has this to say about Toronto, Canada and the economically productive mega regions that stretches from Buffalo, Rochester, New York through Waterloo and London, Ontario, Toronto, Ottawa, Montreal, and Quebec City, in Canada, and then back through Syracuse,, Ithaca and Utica in the United States “… this bi-national mega is home to a population of more than 22 million people and an economy of more than $530 billion, making it the fifth largest mega-region in North America and the twelfth largest in the world. Toronto is a significant economic center with superb universities, leading arts, entertainment, design and culture industries; it also has what is arguably the most diverse population in the world. Like London, but unlike most major U. S. cities, Toronto offers schools that work, low crime, and safe streets. Unlike London, New York, Los Angeles or San Francisco, it also remains reasonably affordable, which allows it to retain a wide mix of social and economic classes.” [Emphasis added.]
Few people appreciate how much it matters where we work and live. Jason is one of them. Jason works and lives in Ithaca, New York, Manhattan, New York, and in Toronto, Canada.
Last year (2011) or this year (2012), the National Association of Builders at its International Builder’s Show in Orlando, Florida gave the high rise condominium project Jason is currently developing in Toronto its award for being the best international residential project.
Profiting from Being Alert
Many people processes information so well that they can accurately project what is going to happen next.
Another friend of mine, who lives in Northern California, purchased a run down house in Menlo Park, California 1971 for $38,500 with a $7,700 (20%) down payment and sold it 31 years later for $1.7 million. He is not a real estate developer. When he purchased that home, he was in the business of renting wind-surfing boards and arranging tours for wind-surfers. He was a man who had turned his love of wind-surfing into a very successful business. He bought that house based on projecting the economic situation existing in 1971 into the future.
He made his projection solely on the basis of President Nixon’s announcement on August 15, 1971 of President Nixon’s plans for financing the Viet Nam war.
He interpreted what President Nixon said to mean that President Nixon planned to trash the United States dollar.
My Northern California friend, profiting from what President Nixon had said, concluded that he should buy a house with a 20% down payment because the value of the dollar would go down. Inflation would result as a consequence of trashing the dollar, the dollar would buy less and he would therefore be able to sell his house for a lot more in the future.
After shopping for three months, my Northern California friend bought a house in Menlo Park. His accepted offer was $38,500 — financed by a Savings and Loan with 20% down. He turned that $7,000 down payment into an investment that paid back $1.7 million.
The house he bought was built in 1927 with a 1/2 acre lot. It needed fix-up. He painted it twice, and re-roofed it but did did little else until it was sold 31 years later with no mortgage left for $1.7 million.
Was the situation in 1971 was similar to the situation today? In 1971 the situation was 1) a war, going on for a while, 2) no war declaration, thus little public participation (except for involuntary servitude to fill the ranks), 3) promises of gifts to buy votes, mostly left over from LBJ.
Are we in a similar situation today?: Again an undeclared war, voters wouldn’t likely tolerate a tax to support it, so, with Nixon’s adjustment the processes used in the 1970’s have been started again. The new plan to trash the U. S. dollar was announced November 21, 2002. Google that date and what comes up is Bernanke’s speech containing the following pronouncement: “But the U. S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U. S. dollars as it wishes at no cost.” This speaker (Bernanke) was shortly thereafter given the job of overseeing the production of the U. S. dollar.
However, we all now know that the price/value of houses does not always all go up. It is common knowledge that the value of houses in the U.S. have experienced a dramatic decline.
Relatedly, it is also common knowledge that the Euro zone currency regime is teetering, and that a “debt crisis” is overwhelming governments.
Some people handled the 1971 situation better than my Northern California friend did. Looking at charts shows that from 1970 to 1980 houses went up tenfold, Gold went up twenty-twofold, and Silver went up sixty-sixfold.
Please contact me by leaving a comment at the end of this post or by e-mail at GSmolker@aol.com if you would like me to pass on to you what my Northern California friend advised me to do as a result of the U. S. government again trashing the U. S. dollar.
You Don’t Need A College Degree to Succeed. A Lot of Success Is Achieved By Taking Initiative, Taking Risks, Hard Tireless Work, Continuous Improvement Through Trial and Error Learning, Being Alert, Having the Right Mind-set Plus Receiving Quality Coaching.
Although the above two examples are in the field of real estate, of course, you don’t have to be in “real estate” to make a lot of money.
Another friend of mine (ZK) was born in India and immigrated to America from India in the early 1970’s, without much money and without a college education.
He landed at LAX (Los Angeles International Airport). He got as his first job in the United States as the job of parking cars at the airport.
One day, he ate lunch at a KFC near the airport.
He loved the spicy food served at that KfC but didn’t have enough money to eat regularly at KFC.
So, what did he do? Answer: He got a job as a cook’s helper at the local KFC.
Over time he became the manager of that store after working in each position in that store and gained extensive experience in all aspects of operating a KFC store.
He became expert at what it takes to operate a KFC store at a high level of successful performance. He actively continued to learn how to improve the performance of all the KFC stores. While I knew him, he became one of the largest (if not the largest) owners of KFC Stores.
He is an example of the fact that everyone has the capacity for excellence with the right opportunities and training.
This friend (although he started as a recent immigrant from India who did not know how to cook KFC fried chicken when he arrived in the United States) embraced the idea that expertise/excellence is ultimately about the quality and quantity of practice.
He constantly had “secret shoppers” eat at and evaluate first-hand the operations of his KFC Stores.
Based on those evaluations, he gave constant objective feedback to all his employees; he constantly coached and mentored them.
He pushed the employees who worked for him to their creative limits and beyond.
This friend and his employees were constantly developing their core competencies.
Together, he and his employees made whatever changes were necessary so that his KFC stores were always operated at the highest level of excellence.
He always focused forward.
He always focused on the future, on future opportunities and how to make those opportunities happen.
He triumphed against the odds.
He was the beneficiary of the following fortuitous circumstances.
- He liked spicy food.
- He could not afford to eat at KFC.
- He was willing to work as a cooker’s helper. He was able to and strived to get a job as cook’s helper.
- By paying attention and hard work he was promoted to and worked in all the positions in that KFC store.
- That KFC store was owned by a company that owned a chain of several KFC stores.
- He did such an outstanding job running “his” KFC store that his employers put him in charge of training all the people who worked in all their KFC stores.
- When a derelict KFC store went up for sale, he didn’t have enough net worth to qualify to purchase that store, but KFC (Pepsi) allowed him to do so anyway.
- The master owners of KFC (Pepsi) knew what a good manager-operator of KFC stores he was.
- Based on his tract record “corporate” Pepsi made an exception to the net worth requirement by allowing him to buy that derelict store.
- He was able to borrow $500 here and $1000 there from friends which he used to buy his first KFC store.
- His wife and he worked day and night at that store. He was used to hard work.
- His attitude is and was: You work hard. You don’t wait. If you don’t want to excel you’ll get nothing.
- He took advantage of every opportunity that allowed him to learn, to get better and to make his stores better.
- Through hard work, special circumstances and training/education he was able to realize his untapped potential.
- He did not start out knowing how to cook KFC friend chicken or how to run a KFC store.
- He transformed himself through diligent purposeful hard work into an expert in all aspects of successfully running a KFC store.
- His sense of purpose, along with fire, ambition and a determination to achieve counts a lot.
Ethnic Indian Immigrants
I know from personal experiences that ethnic Indian immigrants in America are a powerful force.
In his 2006 book “Who’s Your City?”, Florida reports that detailed research has shown that Indian and Chinese entrepreneurs ran roughly 25% of all Silicon Valley startups from 1980 through 1990, which generated $17 billion in annual revenue and 58,000 jobs. By 2005, that percentage has increased to 30%.
Economic demographer Joel Kotkin reports that ethnic Indians are less than 1% of America’s population but 13% of the graduate students at the top universities in the United States. They are reshaping the economic and employment map.
There Is A Lot of Capital Searching for A Good Investment.
Young adults today are creating a world I never dreamed of.
Young adults (ala Mark Zuckernberg and his colleagues at Facebook, Sergy Brin and Larry Page and their colleagues at Google, Steve Jobs and his colleagues at Apple, et al.) are creating new products that I would not have been able to imagine or conceive.
They have made unimaginable amounts of money.
They and their companies have so much money (cash on hand) that they are looking for a good investment.
There is a lot of capital searching for a good investment.
According to an article in the New York Times on May 30, 2012, the private equity industry at the end of last year (2011) had about $100 billion dollars to invest. At current investment rates it would take the private equity industry almost ten years to invest those funds.
Returns are down and fund raising is slow. Those funds must be invested in a creating a better future.
Shrinking demand (low birth rates, low population growth, etc.) in certain so called advanced countries has created additional motivation for companies in those countries to invest elsewhere.
Turn someone else’s problem into your opportunity.
Consider the plight of the Japanese toy industry:
We know that the number of children in Japan has been declining for 31 straight years.
It has been predicted that the under 14 year old population in Japan will fall one third by 2035.
What does that tell you?
It tells me that Japanese toy manufacturers face a shrinking domestic market. If they want to increase sales they have to enter foreign markets and/or they need to create new toys and toy related products.
It is no coincidence that the Japanese toy market shrank by 11% in the fiscal year ending March, 2012.
This “problem” (the need of Japanese toy manufacturers, and the the need of other Japanese companies to make foreign investments in order to expand) provides “opportunities” for lots of people in many firms.
That being said, do not be distracted by the fact that interest rates paid on some bank deposits and Certificates of Deposit are less than one percent, that the interest rate paid on a 10 year U.S. Treasury Note recently declined to 1.4%, that yields on two year German bonds recently fell to below zero, or by the fact that an unprecedented number of homeowners have lost their home in foreclosure or are facing foreclose proceedings, and that there is massive unemployment and under-employment.
Don’t be discouraged by doom and gloom facts reported by the news media, even if those facts are true
Look for opportunity. Have a growth oriented mind-set.
Need Is Opportunity #1.
While my three daughters (now aged 24, 26 and 42) were in college, some parents purchased condominiums for their children to live in, near the school their children were attending .
After their children graduated, those parents made a lot of money when they sold those condominiums.
Sometimes their children lived in those condominiums with rent-paying roommates, further adding to their return on investment.
Need Is Opportunity #2.
At the May 31 Cornell Entrepreneur Network event various Presenters (“younger people”) described new products based on a “need” they want to solve.
Ryan Hudson and Brian Silverstein told us the problem that challenged them is the problem of waiting for a table in a restaurant.
Faced with that problem, what have they done? They have created a company that has developed a smart phone application that tells the user the “wait” time at any restaurant.
Is there a market for that product? Is the cost of creating the infrastructure (gathering information) for their product prohibitive? Those entrepreneurs don’t think so.
Another person who presented her product at the same entrepreneur networking event (24 year old Star Li) told us was challenged by the fact that she didn’t know what discounts were available to her at local stores, restaurants, hotels, etc.
What did she do? She started a company that created a smart phone application that notifies the person who uses that application all discounts available to that user personally at each local store, restaurant, etc. of interest. Ms. Li reported that a big company bought Li’s “application” and made her the sales manager of that product.
The two above described smart phone “applications” are in the process of being brought to market by very small start-up companies founded and run by those three young entrepreneurs.
The above examples prove that the world we are living in is not ending, it is merely expanding.
My advice is: Have the right mind set. Have a growth mind-set. Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable.
Whole Systems Thinking Consists of Identifying and Appreciating Relevant Important Social, Demographic, Political, Economic and Technological Forces
Some people claim, “Demographics is Destiny.” Is that true? Is that the whole story?
I believe that demographics, innovation, mind-set, technology, entrepreneurship and politics are the drivers of economies, prosperity and wealth creation and destruction.
Today, I am asking myself the following questions:
- Where should I invest my money?
- Is this a good time to buy a new house?
- Is this a good time to buy a foreclosed single family residence and convert it to a rental unit?
- Is this a good time to own rental property?
- Is this a good time to own stocks or bonds or Treasury Notes?
- Is this a good time to buy Gold or Silver or to get into the commodities market?
- Where should my children look for a job?
- Where should my two younger daughters “look” for a spouse?
- Where should my children live?
- Where should my children work?
- How worthwhile is it to get a additional degrees via formal college education?
- What is the best way to ride the waves of change engulfing us?
Feel free to share with me and with the readers of this blog you opinions and stories on ways to ride the waves of change that are engulfing all of us.
3. Back Stories
It is my position that we need to get to the root of what is going on – we need to understand the action implications of the demographic, social, political, technological, and economic forces that are having the largest impact on what is going on.
We need to focus on causes and mechanisms, the multitude of forces that are creating the greatest change, not only symptoms.
We need to make a clear distinction between thinking, fact reporting, sound opinions, speculations and propaganda that caters to our prejudices, biases, fears, insecurities, ignorance and laziness.
4. The Impact of Receiving Up to Date News 24 Hours Per Day Seven Days A Week While Simultaneously Being Connected to Other People Through Social Media
Nine years ago Facebook did not exist. Today, 13% of the people in the world are active Facebook users.
The multiplication of means and methods of delivering information, games and entertainment, of being connected to other people, has had maximum impact on the state of minds and expectations of people all over the world.
To a large extent our present state of consciousness and our current set of expectations has been brought about by receiving news 24 hours per day, by the widespread use of smart phones and social media, e-readers, iTunes, the World Wide Net, and the Internet.
The “information explosion” created by CNN (the 24 hours per day “Cable News Network”) and the connectivity to other people spawned by Facebook has had a greater impact on the world then the dropping of atomic bombs on Hiroshima and Nagasaki.
Relatedly, more people quickly embrace new and different states of mind and consciousness than ever before in the history of mankind.
Powerful opportunities are stacked in favor of people who can take advantage of that.
Success is not as simple as knowing where to look; success also requires grasping the meaning of what you are looking at then being able to act on what you know you ought to do.
Powerful opportunities are stacked in favor or people who take advantage of grasping the meaning of what they are looking at.
By the way, the path to excellence and success is steep, grueling and arduous. It forces voyagers to stumble and fall at every step of the journey. Excellence and success are built upon the foundation of necessary failure.
Quality of attitude is important. Failure is an opportunity to improve. It’s not the mistakes, but how you respond to them that counts.
5. What are you going to do next?
There are an awful lot of objective facts, and the more facts you manage to obtain, digest and understand, the closer you will come to knowing the truth and to understanding cause and effect connections that are visible for you (or someone else) to see right in front of you eyes.
It is very important to have enough time to ask all your questions, to talk to someone who gives you good answers , to read things that give you good answers and to digest what you have learned.
Those activities will make you a good observer of what is going on.
What you see is a function of what you know and what you understand while you are looking.
Wisdom is in a sense (a) a sense of reality, (b) knowledge of how to live, and (c) a special sensitiveness to the contours of the circumstances in which you happen to be placed.
Take for example, the way the gobiid fish lives. The gobiid fish knows its environment. Goobiid fish have a sense of reality, knowledge of how to live, and a special sensitiveness to where they are placed.
Gobiid fish live in shallow water. When the tide goes out the gobiid fish’s environment is reduced to little pools and puddles.
At low tide the gobiid fish jump with great accuracy over rocks and dry ridges from pool to pool.
How do they do it?
During high tide the gobiid fish wander around absorbing (“learning”) the landscape and storing maps in their heads.
When the tide is low, they have a mental map of the landscape they live in and unconsciously know what ridges will be dry and what hollows will be full of water.
If you put a gobiid fish in an unfamiliar place it will not jump at all and die from not knowing where it is.
My advice: Become deeply familiar with what is going on now. Though your own effort enable yourself to reasonably accurately predict what is going to happen next.
Act on what you predict. You must move forward.
6. Change Makers, Risk Takers and Boundary Breakers Are Responsible for Innovation Driven Growth
Creativity is goal-directed production of novelty.
A creative person is one who produces innovations.
Innovation, making something new, drives economic growth.
Innovation stems from a diverse pool of resources.
A wide variety of talents and specialties is vital to spur innovation.
That is this the main reason why Silicon Valley produces more economic growth than Detroit does and why Detroit formerly was a great entrepreneurial center but isn’t one now.
Doing “ordinary” work is not the key to wealth creation.
Innovation that changes an industry or creates a new industry is the key to wealth creation.
The key to wealth creation is doing “mission critical” work.
Many successful companies started in a bedroom, or a garage, or a dorm room.
The creation of real economic growth requires entrepreneurial energy.
You don’t have to work for a big company to create innovative new products or services.
Behind economic growth spurts is a certain type of person who has a particular type of personality.
Dramatic economic growth is personality centric.
Dramatic innovation driven economic growth is thrust upon the world (a) by people who question the status quo, (b) by people who have the courage and talent to do something new and different, (c) by people who have a “can-do” spirit, and (d) have determination to succeed. Those kind of people have entrepreneurial energy. They don’t let anything get in their way, including failure. Those kind of people are driven by a dream.
The creation of real economic growth requires the entrepreneurial energy those kind of people possess.
A great number of those kind of people live and work in Silicon Valley. A great number of those kind of people don’t live and work in Detroit.
That is the reason why Silicon Valley produces more economic growth than Detroit does and why Detroit formerly was a great entrepreneurial center but isn’t one now.
Many people think China is at the top of the economic pecking order and will have a great economic future.
Those people think China is a great place to invest, a great place to work, a great place to do business. Some people believe China is a great place to live.
What do you think you know about China or Iran or Syria or Egypt or Saudi Arabia or Iraq or Afghanistan or Greece or Spain or Ireland or Italy or Spain or Singapore or South Korea or Japan or Russia or Brazil or India or Argentina or Venezuela, or the Panama Cannel or Mexico or France or Germany or Canada or Israel or Iraq, or Pakistan, or Turkey or the dependence of the United States on what happens in those parts of the world?
Do you think China:
- Is a wealthy country?
- Is a poor country?
- Is a corrupt country run by a political nobility?
- Practices crony capitalism?
- Does not have freedom of speech, thought or religion?
- Does not provide humane or up to the minute modern health care for all its citizens?
- Would go broke in three months if it provided the same level of medical care to its citizens as provided in the United States?
- Has violent social unrest?
- Does or does not do leading edge scientific and engineering research?
- In China bout 95% of its citizens are living a 13th or 14th century life style.
- China is so polluted that you can not see the sun in industrialized sectors of the country.
- China competes with the industrialized world for scarce natural resources?
- China produces great ping-pong players.
- China is a gigantic market the U. S. based entertainment industry is trying to invade.
According to Richard Florida, Beijing, China produces about as many patents as Seattle or Phoenix. Shanghai, China produces about as many patents as Toronto, Canada or Salt Lake City, Utah. Florida estimates that innovation in those Chinese cities has increased four fold between 1996 and 2001 and has likely grown at an even greater rate in recent years. In “Who’s Your City”, Florida opines that Beijing and Shanghai appear to be poised to join the ranks of global innovators.
Florida reports that although China is seen as the “world’s factory”, a manufacturing center, China is quickly moving up the creative ladder by expanding its science workforce, improving its universities and attracting the world’s top technological workers.
But, according to Richard Florida, the majority of China’s talented people are concentrated in a few regions which generate the bulk of its innovations and produce most of China’s wealth.
According to Florida, talent is concentrated in Shanghai, Shenzhen and Beijing, each of which is a world apart from China’s vast impoverished rural areas.
China’s top ten regions have 16% of China’s population, yet house 45% of China’s talent-producing universities and generate 60% of the innovations which originate in China.
Political, Economic and Cultural Polarization
Seventeen percent of China’s population lives on less than $1/day, almost half of China’s population lives on less than $2/day and 800 million farmers in China cannot afford to see a doctor.
In Shanghai, regular middle-class people live better than those in the United States, but in the countryside, just outside Shanghai, people live in what can only be described as pre-civilization conditions and in 2005 the Chinese countryside was the scene of an estimated 87,000 riots and demonstrations, up 50% from 2003.
Innovation has given rise to a new sorting process that geographically separates economic and social classes both domestically and globally.
Growing disparities in wealth, opportunity and lifestyle are staring people right in the face.
According to Florida, New York and Shanghai arguably have more in common than New York and Louisville.
Shanghai looks and feels nothing like the rest of China. It is determined to transform itself into a global creative center by supporting the arts, fostering a bustling nightclub district, and forging connections with cosmopolitan centers around the world.
Today we are seeing the mass relocation of highly skilled, highly educated and highly paid people to a small number of metropolitan regions, and a corresponding exodus of traditional lower and middle class people from the same places.
The ability to outsource routine functions has made highly skilled people less reliant on the colocation of unskilled and moderately skilled people.
What matters most today is where the greatest number of the most skilled people locate.
Because high-end incomes are rising so fast it makes sense for high-skill-high-income workers to continue to bid up the price of real estate and to accept other costs that traditional middle class workers and families cannot afford.
As people produce more and more in a city or region, the cost of living in those places will inexorably rise.
According to Florida, the most innovative centers in the United States — including Silicon Valley, Boston and the North Carolina Research Triangle, for example — have the greatest levels of economic inequality in the United States.
Richard Florida predicts that communities and people will eventually sort themselves into an economic pecking order.
The World Wide Banking System
Were you amazed when you found out that
- J.P. Morgan Chase lost $2 billion and might lose as much as $5 billion dollars trading securities.
- The banks in Greece and Spain own so much of their government’s bonds/debt and have made so many bad loans that they are probably insolvent. They have been facing massive withdrawal of deposits.
- The banking systems in Greece and Spain are teetering and might collapse.
- One out of nine mortgages in the United States is at least 30 days behind in mortgage payments or is in foreclosure proceedings.
7. Opportunities Created by Existing Widespread Economic Pessimism, Teetering Economies and Downturns
Many people, myself included, are terrorized and alarmed by the state of the economy.
I am terrorized that low interest rates are being paid on saving account deposits, CDs, U.S. Treasury Notes and bonds as a result of interest rate manipulations by the U. S. federal government that result in almost no interest being paid on bank deposits.
This suppression of interest rates by the government has artificially induced economic activity, has raised the price of a favored class of assets, has perverted and continues to pervert the housing (real-estate) market and other markets.
The constant bombardment by the news media of claims that the housing market is recovering and/or has turned the corner is hogwash.
One commentator recently opined to me, “Those who have authority to make decisions that impact the economy as a whole, and each of us in general, are making those decisions with some consideration for how those decisions impact their interests and zero consideration for our interests.”
I have asked yourself the following question: How dynamic is a capitalistic economy in which a central bank manipulates interest rates, loans money to banks at or near zero percent interest, purchases securities and mortgages, and makes the un-financeable financeable?
The fact that the self-correcting mechanism of a free-market economy driven by natural supply and demand has been thrown off the rails by politicians provides short-term opportunity for many people.
To protect myself and to thrive, I have recently directed my efforts to understand what governments are doing and have done. I see merit in anticipating what governments will be doing next, in the near future during this election year in the United States and after upcoming elections are over in order to identify opportunities for me to act on and pitfalls and dangers to avoid.
If you and I go through a continuous process of proactively evaluating the deep impact of governmental actions on the system in which we live we will find opportunities to act on and dangers and pitfalls to avoid.
It is up to each of us to make the best of things.
I am interested in arming myself with strategic guidance. I am interested in practical things I should consider doing in order to make the best of things and why I should consider doing those things.
I have asked myself the following question: What explains the concentration of economic activity ad growth in the world?
I recommend you ask yourself, friends, colleagues and financial advisors the same question.
While thinking about how to answer that question, I came up with the following two subquestions and answers to those subquestions.
8. Strategic Guidance Recommendations
Keeping in mind that (a) nearly one in three homeowners with mortgages in Los Angeles County owes more on the loan than the property is worth, (b) that in roughly 10% of the cities in Southern California one in every five homeowners with a mortgage owes double the value of their home, (c) in the Inland Empire in California more than half the homeowners with mortgages owe more than their home is worth, and (d) that HP recently announced that it is going to “shed” 27,000 workers, 8% of its workforce, by the end of fiscal 2014, and (e) Facebook millionaires knock down $5 million dollar houses and start from scratch, below is a process I recommend you and I follow based on my personal whole system analysis of the realities of life on this planet.
First, make yourself happy by understanding how good life is here in the United States compared to what your life might be like if you lived in other places. For example: “In its remote northern reaches the Democratic Republic of Korea detains an estimated 150,000 to 200,000 political prisoners. The gulag’s prisoners are not told their crimes, which might consist of defacing an image of the “Great Leader” or listening to a foreign broadcast. Chronically malnourished, they work in mines, quarries and logging camps with one rest-day a month”.
The aesthetic of our environment enhances the quality of our lives. Live in a place that is beautiful, a place that provides both stimulation and serenity. Don’t live in a gulag.
Second, understand (a) the interaction between individuals and the community in which they live (i.e. what presidential candidates have to do — deals they have to make with their special interest supporters — to raise enough money to support a $750 million advertising budget), understand (b) the role of social networking in everybody’s life (i.e., benefits that may be derived from being referred to professionals, from advice on products, services and how to live, benefits that may result from being referred new business), understand (c) the role of government and impact of governmental policies on your life and well being, and be aware of (d) governmental actions that have increased and governmental actions that have decreased the supply, the demand, the availability and the price of things, and understand (e) the impact of organizations that benefit us through their efforts for the greater good.
Third, rank cities in which you live, in which you work, in which you are considering working or making investments.
Rank cities that you travel to and/or have investments in.
Compare your rankings of those cities to your rankings of other cities.
Fourth, determine which cities are becoming better and which cities are declining. Then decide which city you want to live in, work in, make investments in, and visit.
Fifth, understand how important where you live, where you work and where you invest is to your well-being.
Understand how important the information explosion (Goggle, the Internet, smart phones), social media (U-Tube, Facebook, etc.) and governmental actions are to your future.
Sixth, understand why people succeed, why cities succeed, why states succeed, why countries succeed and why empires succeed.
Understand what ingredients/factors lead to peak performance.
Seventh, decide what is important and meaningful to you.
Consider how the following facts impact your ranking of the City of Los Angeles compared to other cities.
In the City of Los Angeles school teachers, firemen and policemanare being laid off while simultaneously the mayor is attempting to have taxes raised to obtain additional funds in order to build-out a mass transit system and the Los Angeles Memorial Coliseum Commission is on the brink of financial ruin.
9. Importance of the Back Story
It is important to know your priorities, your values, what is important to you.
You and I need to decide what we want and how we are going to get what we want.
We need to decide where we are going to live, in what we are going to invest, where we are going to work, and where we are going to play and travel.
We don’t want to be like the joke about the man who couldn’t find his missing keys in the dark of night because he looked for them under a lamp post. When asked why he was looking for his missing keys under one lamp post, he replied, “Because this is where the light is.”
The greatest growth in billionaires in 2010 came in the so-called BRIC nations (Brazil-Russia-India-China). Those are countries whose economies are rapidly growing. They produced 108 new billionaires in 2010. Is that of any importance to you or to me? Why did that happen?
The greatest number of billionaires’ primary residences in any city in the world are in Moscow. Seventy nine billionaires own primary residences in Moscow. What does that tell us about Moscow, Russia, Russians, the rest of the world? How does that effect your world view? How does that effect other people?
According to the Forbes’ 2011 World’s Billionaires’ List: In 2011, Moscow had 79 billionaires. New York had 59 billionaires. London had 41 billionaires. Number 4, 5, 6 and 7 on the list are Hong Kong (4th), Istanbul (5th), Mumbai and Sao Paulo (6th), Mexico City (7th), and Taipei, Los Angeles and Beijing tied for eighth. What does that mean to you? How could that effect your life? How will that affect your life?
What role did city income tax play in the billionaires’ choice of location of their primary residence?
According to one recent survey of the best place for jobs in 2011 in the 65 largest metropolitan areas in the United States:
- The local Washington, D.C. economy expanded 17% from 2007 to 2012. But, in 2011 fell out of the top 15 cities for jobs, to sixteen.
- In 2011, large Texas metropolitan area cities led the nation in job growth rankings: Austin (first), Houston (second), Fort-Worth (fourth), Dallas-Plano-Irving (sixth).
- In the San-Jose-Sunnyvale-Santa Clara metro area the number of information sector jobs is up 36% over the past five years.
How does that effect you? How will that effect other people? Do those numbers matter?
According to another survey: In 2011 the US manufacturing sector expanded at three times the rate of the Gross Domestic Product (GDP) and added 425,000 jobs. As a result, the fortune of some of America’s hardest hit manufacturing regions are improving. How does that effect you? How will that effect people currently living in the hardest hit manufacturing regions?
According to another survey: In the first quarter of 2012, US-based companies raised $6.3 billion through 777 venture capital deals. California captured a 47% share, more than twice that of the second and third ranking regions combined.
The Boston region accounted for 17% and the New York City region pulled in five percent.
According to that survey, information technology was the only major industry that saw year-over-year increases in number of deals and capital raised in the first quarter of 2012. Information technology companies raised $2 billion through 257 deals.
Do the statistical numbers listed above tell you where to live, where to work, where to invest or what to invest in? No.
You need to know more facts, more back-ground information. We need to know how those numbers are connected to us, how those numbers will effect/impact us if we chose to live or work or invest in a business in California, in the Boston region, or the New York City region or some other place.
Those numbers do not represent the “whole picture.” What is the story behind these numbers?
Despite the social media boom, the concentration of tech jobs in the two dominant media centers in the United States — Los Angeles and New York — have fallen to roughly half the national average.
New York City is ranked 33rd and Los Angeles is ranked 39th on one ranking of the best metropolitan areas for technology jobs in the 51 largest metropolitan regions in the United States.
I would like to know answers to the following questions:
- Why do so many billionaires have their primary residence in one place rather than in another and why should that matter to me?
- Why are so many billionaires being created in one place and not in another and why should that matter to me?
- Why was the US manufacturing sector expanding at three times the rate as the increase in GDP and how does that impact me?
- Why was so much venture capital being invested in California companies instead of being invested in companies in other states? Why wasn’t more venture capital invested in the New England Knowlege Corridor, i.e., in the Boston and New York City regions? How does that impact me? Why should that matter to me?
- Why is so much venture capital money being invested in Information Technology companies? Why should that matter to me?
- What is the impact of having a large number/high concentration of wealthy people in a particular city or region?
- What is the impact of having a high concentration of creative knowledgeable highly skilled people in one geographic area?
Although Silicon Valley has the highest proportion of tech jobs of any country in the United States — more than four times the national average — it is not leading in the expansion of science and technology related jobs in the United States.
Silicon Valley at the end of 2011 employed 170,000 fewer people than in 2000. Most of the losses came in manufacturing, and business and financial services.
Silicon Valley has a boom and bust economy. Even though the current boom has sparked an impressive 8% expansion in the number of tech jobs in the San Jose-Sunnyvale-Santa Clara metropolitan area over the past two years, and 10% over the past decade, the area still has 12.6% fewer tech jobs than in 2001.
The most consistent large metropolitan area for tech job growth over the past decade has been the Seattle-Tacoma-Bellevue, Washington metropolitan area. It had a 12% tech job growth over the past two years and a 43% increase in tech employment over the past decade.
The Washington-Arlington-Alexandria metropolitan area had a 20.6% growth in tech employment since 2001. Over the past two years it has had a 4% increase in tech jobs.
Over the past decade, tech employment has grown by almost 30% in the San Diego-Carlsbad-San Marcos, California area and by 15.7% in the past two years.
Boston has had a 11.3% growth in tech jobs over the past two decades and nearly 10% over the past two years.
Salt Lake City has had a 31% growth in tech employment over the past decade. Three quarters of Salt Lake area households can afford a median priced home, compared to 45% in Silicon Valley and about 22% in San Francisco.
One well known demographer argues that it is bad social policy to allow wealthy people to purchase homes in Silicon Valley because those rich people will cause the price of housing in Silicon Valley to become more unaffordable for middle class people.
In addition to having the above informational insights on job growth and housing affordability, I would like to be informed about the action-implications of the following geo-strategic facts:
- 12 of the top U.S. trading partners (import/export) are in the Asia-Pacific region.
- The Asia-Pacific region contains 61% of the world’s population.
- 15 of the world’s 28 Megacities are in the Asia-Pacific region.
- The U.S. maintains 5 security treaties in the Asia-Pacific region.
- 22% of U.S. oil imports come from Africa.
- The U.S. imports 10% of net crude oil and petroleum products from Venezuela and 9% from Mexico.
- The Panama Canal facilitates 5% of global seaborne trade and 12% of American international seaborne trade.
- 49% of the world’s oil travels through 7 major sea choke points.
- 95% of international communications travels via underwater cables.
- 70% of the world is water.
- 42,000 trading ships are underway daily.
- 95% of the world’s commerce moves by sea.
- Freedom of navigation/commerce is important.
- The Islamization of Europe,
- The Euro zone debt crisis,
- Municipal, state and national budget deficits,
- The Christianization of Asia,
- Competition for resources,
- Social unrest,
- Violent extremism (criminal, terrorist, religious), and
- The status of women in society.
10. Cities and Regions That Are Good Places to Work, to Live, and to Invest In Will Succeed
Which cities do you think will succeed this century? Why?
What is your definition of success? Is your definition of success a “good” place to work, a good place to live or a good place to make an investment or a good place to travel to on a vacation?
Which characteristics of cities or of a region are important to you?
What is important to you? Is economic activity in a city, a city’s ability to attract capital, ability to attract businesses, ability to attract talent, job market, ability to attract visitors, knowledge and influence, quality of life, housing affordability, political power, quality and adequacy of infrastructure, government’s priorities, presence of municipal leadership and effective functioning government officials, attitude towards growth, attitude towards commerce, attitude towards education, attitude towards culture, civic spirit of citizens, the presence of entrepreneurial energy, expanding technology-related employment, proportion of tech jobs, the number of ”start-ups’, proportion of citizens earning more than $100,000 per year, presence of one or more impressive buildings, the value put on human life, tolerance, diversity, and the priorities in the nation in which a city is located important to you?
It is desirable to study a city’s and region’s attitude towards “progress” and definition of “progress”, commerce, infrastructure, budget deficits, natural resources, the built environment, growth and respect for civil liberties and property before deciding if that is a place where you want to live, to work, or to invest.
11. Factors Important to You and to Me When We Rank Cities
Below is a method, proposed by me, for ranking cities.
Pick a set of criteria that are important to you, then apply those criteria to your sample cities, then rank your sample cities for several different times, perhaps 5 or 10 years apart.
Over time, some cities will be rising and some will be falling.
In selecting factors that makes a city “good” you could use as your criteria, for example:
- population, number of immigrants, quality of immigrants,
- number of small businesses (i.e. businesses employing less than 25 people), average wage paid to employees, job market, unemployment rate,
- number of top universities and their world rank, their endowments, their on-going clearly defined plans for expansion and upgrading,
- number of start up companies, number of IPOs, amount of money raised in IPOs, number of companies listed on the NASQD Exchange, per capita venture capital investments,
- number of patents, number of academic publications, number of academic papers published and quality of academic papers published — number of other academic papers which refer to papers written by people living or working in this place,
- number of airport passenger; availability, quality and condition of public transportation; state of roads, bridges, water supply and ports — 95% of the world’s commerce moves by sea, 42,000 trading ships are underway daily,
- number of murders, number of random acts of violence, number of burglaries, respect for human life and freedom of thought and expression, recognition of civil rights, religious tolerance, racial tolerance, ethnic tolerance, status of women in society, tolerance of gays and lesbians, attitude towards same sex marriage,
- degree of corruption in government, respect for law and order, following the rule of law, protection of property and property rights, number of years it takes on average for a civil case to go through the legal system,
- number and quality of local public schools, number and quality of public parks, number and quality of public libraries, number and quality of museums, number of movie theaters, number of live performance theaters, number of musicians, number of artists, number and quality and variety of restaurants,
- number of amateur sports leagues, number of professional sports leagues, number of amateur sports teams, number of professional sports teams,
- priorities of elected officials, fiscal responsibility of electorate, fiscal responsibility of elected officials,
- number of construction cranes on the skyline, number of buildings 40 or 50 years old that are being torn down for newer towers, number of buildings under construction in the 50 to 80 story range, number of impressive buildings, number of modern buildings, presence of an edifice that symbolizes the city’s power, position and progressive outlook in the world;
- air quality, water quality, amount and type of environmental protection, environmental laws rules and regulations, enforcement of environmental laws rules and regulations,
- land use regulation, rent control laws rules and regulations,
- economic freedom, political freedom, freedom of speech, religious freedom, number of churches, number of mosques, number of synagogues,
- residential and comercial rental rates; medium home prices; residential and commercial vacancy rates; number of single family houses, condominiums, co-ops and apartment houses in foreclosure; number of buildings worth less than the amount of the lien of a mortgage,
- taxes, and/or
- any other criteria you think is meaningful.
In my opinion it is desireable to study a city’s/metropolitan area’s and a country’s attitude towards “progress”, energy thought and acceptance of it’s population, commerce, infrastructure, budget deficits, natural resources, educational system, built environment, business and tech start-up scene, demographics (percentage of different age groups of the population, educational and racial mix), and “growth” before deciding where to live, where to work, where to invest and where to go to on a vacation and where to hold a meeting.
12. Infrastructure Makes A City
New York City is a national infrastructure financing innovator and major investor in infrastructure. As a city it has made substantial recent investments in the World Trade Center transit hub, the Second Street subway and the Long Island Railroad tunnel under the East River into Grand Central Station.
However, most of New York City is old and aging and building that are 40-50 years old are still considered modern. This is better than Europe where buildings 100 years old are still considered modern. By contrast, in Toronto, buildings 40-50 years old are being torn down and new building towers are being built in their place.
Canada has made infrastructure investments a national priority.
China, which for years had invested billions in state-of-the-art transportation lines and other infrastructure, cut back spending on infrastructure in 2011. In China, increasing internal debt, water supply and environmental issues are pressing concerns.
A sharp downturn in China’s economy would be a blow to the world economy, particularly to California. China is now California’s third largest export market, behind Mexico and Canada. Last year, China purchased $14.2 billion worth of computers, wine, citrus and other products produced in California.
China responded to the 2008 financial crisis with a massive stimulus program consisting of easy credit (massive bank lending) and governmental spending on infrastructure.
Easy credit stoked inflation, created a real estate bubble and encouraged local governments to take on mountains of debt.
China’s government is now trying to slow China’s supercharged economy by cutting back on investment in infrastructure and tightening credit.
China’s supercharged economy is slowing down: Chinese manufacturers have had seven consecutive months of shrinking activity.
The World Bank recently shaved its economic growth forecast for China this year to 8.2% from 8.4%. A 8.2% rate of expansion of economic growth would be China’s slowest pace of expansion in thirteen years.
In 2011, Brazil and India also cut back on infrastructure investments.
In spite of spending 8% of its GDP on infrastructure, India has not been able to keep up with the needs of its exploding population.
The political leaders of France, the Netherlands, Greece, Portugal, Ireland, Spain and Italy have been ousted as the 17 nation Euro zone region’s economy worsens.
Around Europe, many voters, politicians and investors while fretting about economic weakness, high debt, and fiscal discipline are skeptical of the “austerity for all” mantra that stands for the proposition that governments must cut back spending on government programs.
13. The Ranking of the Economic Influence and Quality of Life in Top Ranked Cities
According to one ranking of cities, in 2010, New York City was tops in economic activity, political power, knowledge and influence, and Paris was tops in quality of life.
The same organization updated ranked cities for the year 2011 on the basis of the following parameters: economic activity, political power, knowledge and influence, and quality of life. The top cities and their ranks for 2011 were (1) New York City, (2) London, (3) Paris, (4) Tokyo, (5) Brussels, (6) Los Angeles, (7) Singapore, (8) Beijing, (9) Toronto, (10) Berlin, (11) Chicago, (12) Washington, D.C., (13) Seoul, (14) Frankfurt, (15) Sydney (16) San Francisco, (17) Hong Kong.
According to another entity’s ranking of cities on the basis of the following six parameters “Economy”, “Research and Development”, “Cultural Interaction”, “Livability”, “Environment”, and “Accessibility” the top ten cities are: (1) New York City, (2) London, (3) Paris, (4) Tokyo, (5) Singapore, (6) Berlin, (7) Seoul, (8) Hong Kong, (9) Amsterdam, (10) Frankfurt.
14. The Hottest Housing Market
Are you interested in knowing which city in the U.S. has the hottest housing market? According to one newsletter, the Phoenix area has the hottest housing market.
That newsletter reported in late April, 2012, “The Phoenix housing market is on fire, driven by strong economic growth, once in a generation affordability levels, and a surge in investment activity that far surpasses levels during the housing boom. … Phoenix was one of the hardest hit housing markets during the bust, with home values declining 57% from 2006 through mid-2011. … Investors have flooded the Phoenix area since the downturn and now make up close to 45% of all buyers. Investor demand is so strong that first-time buyers frequently have difficulty competing with investors who are buying with all cash, often resulting in bidding wars where homes are sold above asking prices. With a current average single-family rental rate of $12,500 per year, and the selling price of a distressed home usually well below the median home price of $127,000, investors can expect to achieve between a 5% and 10% annual return (after operating expenses and before any home price of rental appreciation).
“… many are concerned with the inability of non-cash homebuyers to compete with investors in many neighborhoods, particularly since mortgage qualification is so difficult. Government-sponsored loan guarantor Fannie Mae … has been pushing a program called First Look, which prohibits investors from bidding on Fannie Mae-owned homes for the first 15 days after they are listed for sale. … Another tactic implemented by some lenders … has been to refuse all bids, from investor or homebuyer, for a set number of days after a bank-owned home is listed for sale. … The competitive environment in the resale market has an upside for homebuilders: primary buyers who are fed up with the bidding process and cash-heavy investors in the resale market often turn to purchasing a new home for the relatively hassle-free experience.”
15. Interpreting “Housing Numbers”
The newsletter referred to above states that close to 45 % of the new buyers in Phoenix are investors and that investors can expect to achieve 5% to 10% annual return on their investments.
What is the action implication of a region being the “hottest housing market”?
Is the percentage of new buyers who are investors in a city or metropolitan area or in the entire United States
- an indication that the housing market has hit bottom?
- an indication that it cost less to make loan, tax and upkeep payments as an owner of a house than it will cost to pay rent as a tenant to a landlord?
- an indication that investors can not obtain a better return on their money in an alternative investment?
- an indication that interest rates charged on real estate loans are lower this year than last year?
- an indication that governmental loan modification programs have increased the values of homes owned by borrowers whose real estate loans have been modified?
- an indication that implementation of governmental loan modification programs have constricted the supply of homes for sale?
- an indication that now is a good time to buy a home?
Real estate agent friends of mine who work in Los Angeles have told me:
- 33% of new buyers in Los Angeles are investors.
- On May 25, 2012 one real estate agent reported to me that another agent had recently complained that she had received 31 offers (many all cash) on a house listed for $250,000.00 in Van Nuys, CA.
- Houses that couldn’t be sold last year at their list price are getting multi-offers this year and selling for more than the listed price.
- Interest on real estate loans last year were in the neighborhood of 7%. Real estate loans this year are in the neighborhood of 4%. This allows prospective purchasers to pay much more for the same house this year than last year. Such purchasers will pay the same monthly payment this year (with a 4% loan on a much higher loan amount) than they would have paid last year if the same home was at a lower price with a lower loan amount with a 7% loan.
- Rents on investor owned houses at the low end of the market are dropping due to the flood of recently foreclosed homes owned by banks being converted into rental properties.
- It is not unusual for a house that was last sold for $500,000 a couple of years ago, after having been recently “taken back” in foreclosure proceeding to be sold at auction during the foreclosure process for $250,000, or to be sold for $250,000 after being taken back by the lender through foreclosure proceedings.
- It is not unusual for loans to be modified under federal government loan modification programs such that the principal interest and tax payments after the loan modification are reduced by 50%, i.e. it is not unusual for a $4,000 per month loan payment to be reduced to a $2,000 per month loan payment as a result of a loan modification. This makes the “value” of the home with the loan modification payment schedule worth much more than an identical house next store with an identical home loan that has not been modified. This is so because the price most people pay for a house is directly related to the amount of their monthly loan payment rather than being based on an intrinsic “value” or worth of a home.
A friend of mine, who lives two blocks from Steve Jobs, told me that Facebook millionaires knock down $5 million houses and start from scrath.
The Sunday (May 6, 2012), Los Angeles Times contains a front page article with the headline, “Surging Rents raise a new housing hurtle. Foreclosure victims and young workers vie in an increasing tight apartment market.” The article states that rents are surging to all time highs from New York to Los Angeles and cites a forecast of a 10% jump in Los Angeles County rents over the next two years. This raises the question of what is going on as a result of the surge of foreclosed properties being flooded into the rental market. What is the impact of this flood of foreclosures?
Foreclosures have been reported to have made up 28.6 % of the Southern California resale market in April. Short sales (homes that were sold for less than the outstanding debt on the property) made up 18.4% of the market. In April the median sales price of homes ($290,000) in Southern California was 42.6 % of the peak ($505,000) in 2007.
At the end of March 2012, 11.8% of all home mortgage loans in the United States were at least 30 days past due or in foreclosure. Combining deliquent loans and loans in mortgage foreclosure proceedings, one out of every nine home mortgages in the United States was showing at least initial signs of distress.
If the government wants to minimize the number of people and families in homeless shelters shouldn’t the government facilitate and encourage the conversion of foreclosed houses into rental units?
As more and more foreclosed homes are converted to rentals, what will that do to rental rates? At what point will rental rates be influenced by the conversion of foreclosed houses into rental units?
If you divide the population in the United States into households who live in rental housing and households that live in their own home, renters currently comprise 34 % of the population and these numbers are growing at the rate of 1.6 million households per year while at the same time the number of households living in homes they own are declining.
Approximately 55% of new renters are renting single family homes, while 45% are renting apartments.
The single-family rental market business is larger than the institutional quality apartment business.
Unprecedented levels of distressed home sales, at house price/rent ratios that are at the lowest in decades is driving the boom in single-family home renter growth.
One forecaster has forecast that 78 % of single-family home renter growth over the next few years will consist of homeowners displaced by mortgage distress, 8.4% will consist of new renter households, and 3% will consist of renters moving from apartments to a single family home.
According to that forecaster there will be a growth of 4.5 million households who will rent single-family homes and a growth of 3.7 million new households that will rent apartments between 2010 and 2015.
Newspaper reports of foreclosure declines would be wonderful news if they were being driven by a true market recovery in which hundreds of thousands were no longer unable to make mortgage payments and millions of houses were no longer upside down (in the owner had equity in the house instead of debt against the house exceeding the value of the house). Instead we are seeing an unprecedented government intervention in the foreclosure process.
Relatedly, Bank of America has begun to experiment with leasing houses to owners who could not make mortgage payments who deed their house to Bank of America.
Will a surge in rental rates reported in the news media cause local governments to enact more rent control laws?
Do existing federal laws and regulators regulate the rental of foreclosed houses? Fannie Mae and/or Freddie Mac have a program where they lease homes to owners who could not make mortgage payments after taking ownership.
Will new federal laws be enacted to regulate the sale and/or rental of foreclosed homes?
16. Finding Hard Reality vs. Blindly Climbing on the Gold Speculator’s Bandwagon
Roughly speaking, today, you can obtain a 0.3% to 0.6% annual return on a short-term bank CD or a 1.7% annual return on a 10 year U.S. Treasury Note. Therefore, it is extremely important to be financially active and informed today.
Should you purchase gold? Gold bugs are people who think gold is a good investment.
According to a “gold-bug” I know:
- The U.S. government is devaluing the dollar.
- This will help housing prices, and will be a big help to people with underwater mortgages.
- The devaluing dollar will be a windfall for any leveraged investment such as a mortgaged property, as the debt will be paid back in ever-cheaper dollars and therefore the dollar value of the investment will rise.
According to this “gold-bug’s” theory (way of thinking), seller financing will be a windfall for the buyer and a disaster for the seller. Of course that is not always true and in some cases would be nonsense.
If you are a senior citizen trying to live on a fixed income the extra income you could derive from seller financing when you sell your house which you purchased 20 or more years ago and now has no mortgage or a very small balance owing on the mortgage, will make all the difference in the world to you.
Similarly, if you have multiple heirs who cannot agree on anything as mundane as whether or not to rent the house they inherit when you die, or the rental rate to charge or how much to spend to maintain your house, selling your house with seller financing may be the best way for them to turn their inheritance into cash.
Keep in mind that the amount of interest paid on seller financing debt may be more interest than the seller would earn if the seller deposited money in a bank or purchased a certificate of deposit or invested in the stock market.
The risk of buying a house with leverage (lots of debt) at this time is the risk of cash flow. Can you make the payments? If the property is rented and rents rise in this market along with the price, you will have a perfect storm situation, a great buying opportunity.
If you are depending on rents to pay the mortgage, tax, insurance and upkeep and rents decline you may find yourself losing some or all of the money you invested. Existing rent control laws or future rent control laws could make your investment [in a foreclosed house turn] into a financial disaster.
If prices return to or continue in a downward direction, the buyer will likely see more people walking away from underwater houses and flooding the rental market stabilizing or decreasing rents, all the while adding to the mountain of foreclosed property and thus extending the bear real estate market.
It is my understanding that there are 500,000 houses facing foreclosure in California.
If you decide to purchase a foreclosed house, check out how many houses in the neighborhood are facing foreclosure and/or have been foreclosed and are unoccupied.
Watch out for unoccupied lender owned condominiums. I have personally been involved, as an attorney, in several cases where water leaks in an unoccupied lender owned foreclosed condominium flooded an owner occupied adjacent condominium. The flood caused the owner occupied condominium to become uninhabitable.
According to the gold-bug: Eventually, income-producing real estate must equal and exceed the cost of reproduction. Meanwhile the cost of reproduction is on a mirror image path upwards as the dollar devalues, a double multiplier for the leveraged (risk taking) investor.
That theory ignores the fact that some properties are not worth keeping. For various reasons, some properties remain unrented, some properties have no rental value.
Keep in mind that housing price declines vary from regions to region. According to one survey, in eight metropolitan areas homes have lost more than 50% of their peak market value to date (May 23 2012). Leading the declines are: Las Vegas (62.5%), Phoenix (58.4%), Orlando (58.3%), Riverside (58.1%), Sacramento (56.9%), and Miami (54.1%).
I am not a “gold-bug.” However, I wish I had bought gold when I was told to buy gold more than a year ago.
However, if I had purchased gold through the MF Global Holdings, Inc. (largest gold commodity broker who stumbled into bankruptcy on October 31, 2011) I might not be able to get my money because $1.6 billion that was supposed to be in customer accounts is missing.
17. What Will Happen Next if One In Ten Children Are Effected by Foreclosures?
According to a recent report by the Brookings Institution and First Focus, one in ten children are effected by foreclosures.
The authors of this report estimate that 8 million children will be directly impacted by the nation’s foreclosure crisis. Of the 8 million children, 2.3 million have already lost their homes, 3 million are at risk of losing their homes and another 3 million have been evicted or may be evicted from rental properties that have been foreclosed.
Do you think these children are going to rush to buy homes when they grow up or that their parents will purchase another home soon? I don’t.
18. The Intrinsic Strength of the Housing Market vs the Value of Houses In An Election Year
The risk of borrowing money to purchase a house has been socialized by the federal government and by state governments.
The federal government is in the process of further socializing the risk of borrowing money to buy a home.
Federal funds are available to help certain borrowers at risk of foreclosure by cutting the principal owing and/or by cutting their monthly loan payments.
The federal government by changing the interest rate on loans to purchase a home from about 7% last year to 4% this year has created a hot real estate market.
That being said, the Federal Reserve System either by itself or in conjunction with other federal agencies controls factors that are significant forces determining the state of the housing market, including the price at which houses will be sold, when houses will be sold and which houses will be sold.
Recently, the five biggest banks in the United States, agreed, as part of a $25-billion settlement of lawsuits brought against them by various states and other parties, to reduce the principal on some of the loans they own.
Ask yourself the following questions.  Are we witnessing the housing market getting stronger or are we witnessing the impact of mortgage interest rates dropping from about 7% to 4% over the past year?  Are housing prices stabilizing or rising because the federal government has manipulated interest rates charged on home mortgages, new loan modification programs have come on line, and some banks are leasing back homes to borrowers who could not make mortgage payments after those borrowers deed their homes to their lender?
19. Social Networking, Personal Development and Relationship Building
My eldest daughter Terra and her husband Scott have two children: Nate age 8 and Marissa age 10.
Nate and Marissa are on a local soccer team, lacrosse team and baseball team.
Participating in sports leagues by being on sports teams teaches Nate and Marissa many important and useful life lessons.
A couple of weeks ago, while it was 45 degrees and raining, all the kids and their parents showed up for a scheduled soccer game.
The scheduled game was played in spite of a downpour of rain and cold weather.
The children were taught by their parents taking them to play in the downpour “to have a stiff upper lift”, to show up, that they are part of a team, that life is hard and life is competitive, to not complain and to not be whiners.
In addition to being on a soccer team, a lacrosse team and a baseball team, Marissa takes piano lessons and fencing lessons and is a competitive fencer.
Terra takes Nate and Marissa to team practice Monday through Friday.
Terra goes with her husband Scott on Saturday and Sunday to watch Nate’s teams and Marissa’s teams play.
Terra also takes Marissa to fencing lessons, to fencing practice, to fencing contests and to piano lessons.
Participating in these activities builds relationships, leadership skills and social skills, teaches parents and children who is dependable and who is not dependable, teaches modes of thinking including the necessity of making intense efforts and the need to have a strategy and the value of teamwork.
Being on these teams teach children the importance of showing up on time, the importance of having a plan, the importance of taking risks, the importance of teamwork and the importance of training, practice and developing skills.
Being in these activities builds a competitive state of mind which supplements what can be learned in a school classroom.
Being on a sports team or involved in any professional or personal group activity creates a “social glue” built around personal relationships, face-to-face contact, a sense of common purpose, shared commitment and insider status that binds team mates together.
Going to school, going into the military, working in the working world, and/or being part of any team provides introductions to new people who may become life-long friends.
People who become part of your social or business or professional network may enrich your life.
The soccer leagues, lacrosse leagues and baseball leagues that Nate and Marissa play in are organized, supervised and run by a network of parent volunteers.
These leagues are not government programs.
They are not dependent on governmental funds nor are they run by or organized or managed by the City, County or State in which Terra. Scott, Marissa and Nate live.
Do not underestimate the value of close social relationships.
It has been my experience that your friends become your will become your surrogate family.
A 2007 study by economist Nattavudh Powdthavee of the University of London used survey data to estimate the monetary value of close social relationships, the value of frequently seeing friends or relatives.
The study found that seeing friends or relatives in person almost every day is worth more than $100,000 in additional income.
Based on my personal experiences, I believe that having friends and interacting with them is worth much more than that.
Having a diverse group of highly intelligent grounded mature and experienced reliable real friends provides a robust and reliable frame for your mental visualization of the world.
Participating in the world (which is what you do when you interact with your friends) is the key to achieving great financial success.
You need to keep in touch with your friends for many reasons.
Keeping in “touch” will help you keep up with change.
You need to keep up with change (i.e. identify new opportunities presented by on-going changes and have an exist strategy) because no business remains being the money making machine it used to be.
20. The Benefit of Being Connected
Is there anything better than happy companionship, having a sense of common purpose with someone else?
It is well known that people want and need to connect with other people.
People want and need to have relationships that compliment their lifestyle and core values.
People are happier when they find a community that fits them.
People who feel isolated or disconnected age at an accelerated pace and are unhappier people.
When large numbers of smart creative people constantly bump into one another, social and business ideas and relationships can be formed, sharpened, executed, and – if successful – expanded.
In society, no man is an island.
Plugging-in, building networks and creating support structures not only furthers social, personal and professional relationships but also contributes significantly to overall well-being and to the development of sensitivity to the needs of others.
Such activities may lead to many hours happily spent with good and enjoyable companions and to profitable business ideas and relationships.
21. The Importance and Reward that Comes from Raising Children
I believe that “the hand that rocks the cradle determines the future of the world.”
I disagree with and protest the dig made against Ann Romney recently (on a recent Wednesday night) on cable TV, when Hilary Rosen, a Democratic strategist, said on CNN that Mrs. Romney was a poor guide to her husband on women’s economic anxiety, because she “never worked a day in her life.”
Mrs. Romney made a choice to stay home and raise five boys.
Mrs. Romney knows, and all other active parents know, what it “costs” to raise a family, how to work to a schedule, how to balance competing interests and has lots of experience making choices.
I agree with Mrs. Romney’s response: “Believe me, it’s hard work.”
I attack and reject the idea that raising children isn’t challenging work and the idea that parents don’t have anxiety.
I also reject the implication that raising children impairs an adult’s awareness of worldy affairs and stunts an adult’s intellectural development.
To the contrary, my personal experience has been that raising children raises awareness of local and worldly affairs, exposes one to a bigger world, enhances intellectual, social and personal development, forces one to have priorities, forces one to make life changing decisions, forces one to work hard and expands one’s personal, social and business horizons.
I agree with Mrs. Obama statement: “Every mother works hard” and should be respected.”
I know from the personal experience of raising three daughters that raising my children exposed me to a bigger world, kept me young, kept me current and expanded my personal, social, business and economic horizons. Being an active parent connected me to a bigger world and helped me become a better person.
Yesterday, my 26 year old daughter told me: Women are like flowers. They need to be watered with compliments. Then they will grow and bloom. Children are like that too. Everyone is like that.
Poets say “No man is an island.”
In our world, everyone depends on someone else.
I disagree with the philosophy, “No man is beholden to any other man. No one owes you anything and you owe no-one anything.” — attributed to Ayn Rand and expoused by many Libertarians.
No business team, or sports team, or military unit that followed that philosophy would operate effectively.
22. The Warnings and Actions Implications I Derived from Witnessing the Day of Reckoning in Burma
There are trade-offs in our lives and in the lives of countries and civilizations.
It takes time and effort to achieve a stable relationship with someone else, to have a family life, to have a social life, to make awesome things happen, to make a business succeed, to make a career, to make a higher income and/or to become and stay famous.
Man’s interdependence creates the need for a political community.
Man is a social animal.
The “glue” which holds men together is a “group feeling.”
In the nature of things, the greater the social cohesion, the more complex the division of labor may be, and the greater the economic growth.
Macroeconomic forces of population growth, human capital development and technological development effects “development.” Growth and development stimulate both supply and demand.
One definition of government is, “Government is an institution which prevents injustice other than such as it commits itself.”
One historian has observed that every state eventually falls because sedentary luxuries distract people. Eventually government begins to overtax citizens. Government begin injustice against property rights. The state fails to exercise self-criticism about its errors and intentions and to demand from itself moderation and fairness. Injustice ruins that state. That state fails to move forward. When a state or civilization fails to have a good sense of self, fails to stay focused, fails to move forward, injustice ruins that state or civilization.
I recently saw a movie (“They Call It Myanmar: Lifting the Curtain”) about current conditions in Burma.
This movie documents how a rich country (Burma) went to pot.
This movie presents a dramatic warning of what lies ahead for countries that are mismanaged.
Today, and for the past 57 years or so, Burma has been run by a military junta.
Burma (now called Myanmar) used to be a rich and beautiful country, the rice bowl of Asia.
Its citizens were once well fed, were colonized by British gun-boat diplomacy, obtained freedom from being a British colony, fought off Japanese invaders, then prosperously lived in a relatively modern country until their country (Burma) was taken over by a military junta.
I saw this movie/documentary on Tuesday, April 10, 2012. This documentary is called “They Call It Myanmar: Lifting the Curtain.”
I saw this documentary at the Landmark Theatre located at 10850 West Pico Blvd., Los Angeles, CA. 90064.
“They Call It Myanmar” was made and narrated by a Cornell University Physics Professor.
I believe it was not the professor’s intention to make a political statement or to make a political film when he made this documentary because in this documentary the film maker did not dwell, comment or report on the ruling military juntas’ violations of international humanitarian law through killings, torture and employing forced labor.
This film comes across as being a travelogue. There are intimate pictures of a day in the life of ordinary people.
There are dialogues between the film maker (narrator) and native Burmese.
However, mention is made of the fact that ordinary citizens living in Myanmar (Burma) do not feel safe talking to anybody, especially to a stranger because many people in Burma are held in prison as political prisoners and spies are listening to everyone everywhere and then reporting what they hear to members of the military who control the government.
When local citizens were interviewed by the film maker often times the interviewee’s faces were not shown. Instead, a picture was shown of the torso of the interviewee or the features of that person’s face was blurred to hide identity.
Many pictures of small young children working take up a good portion of the documentary. Some children are shown crushing rocks. Some children are shown carrying crushed rocks.
Some pictures of small young children working in simple manufacturing and other pictures of small young children working in shops take up a significant amount of time.
The film dramatically makes the point that children go to work when they are about six or seven or eight years old to help support their family and that only a very few lucky children receive one or two or more years of formal schooling.
The most memorable thing brought to my attention in this documentary was that young little children who called their mother and father, “mama” and “daddy” did not know the name of their mother or father or where they live and were not be able to tell anyone who their parents were or where they lived when they were rescued away from their home in a disaster.
The documentary includes pictures of devastation wrought by a horrible storm. Trees are shown blown over. A great number of houses and huts that were demolished by a storm and of water driven over the banks of water ways by the storm causing floods are shown.
The narrator reported that parents tied their little children to trees so their children would not be blown away by the strong winds in the storm which blew away houses.
Some of those children tied to trees were drowned when a tidal surge overflowed the banks of water ways.
Small children who were blown away from their homes but lived were unable to tell rescuers the names of their parents or where they lived.
The travelogue aspect of this documentary consists of pictures of a lush gorgeious country with many old buildings which have exceptionally strikingly beautiful exotic architecture.
For the most part, the people of Burma shown in this documentary are good looking and healthy.
The film maker makes the point that Burma is one of the most isolated countries on the planet.
Burma is not a peaceful place because there is ongoing ethnic conflict, an armed rebellion. Many people are imprisoned as political prisoners. Captured rebels often become forced laborers — the slaves of their captors.
Political freedom was squelched and done away with when the military junta took over.
The military junta has not maintained or improved the infrastructure.
There are now potholes in the side walks in the main city.
Universal free education to children (the future workforce of the country) is not provided.
Few children attend school for more than two or three years. Almost all children must work full-time.
According to the narrator:
- Poor family men are compelled to leave Burma to find work outside of Burma in order to earn money to send back to their families in Burma.
- Working people in Burma that are so poor that they pawn their mosquito nets and bedding at a pawn shop in the morning to borrow enough money to pay bus fare to ride on a bus get to where they work.
- When those working people come home at night, they buy food with money earned during the day and then pay back the money they borrowed that morning to pay for bus fare.
- The next morning they pawn their mosquito nets and blankets again to obtain money to pay for bus fare to get to work; this cycle is endlessly repeated.
As a result of widespread poverty in Burma, the narrator tells us in his film:
- It is not unusual for a family to only be able to eat one meal a day, and not unusual not to be able to eat even one meal.
- If a family can eat two meals a day they are doing well.
- If a family can eat three meals a day they are doing exceptionally well.
- Children in Burma (Myanmar) rarely get more than one to four years of schooling.
- Burmese go to work at age six, seven eight or nine to help support their family.
- Many families sell their children to work as slaves.
The point is emphasized that Burma is rich in natural resources. Once, not to long ago, Burma used to be the rice bowl of Asia.
Burma is depicted as being in a time warp, modern progress for the general population is depicted as having been stopped all together.
The Burma portrayed in the movie is a country in which economic expansion, increasing the volume of economic output can not happen.
However, in this documentary we are told that Chinese companies are now in the process of “invading”/investing and through their investments are economically taking over parts of Burma. They are in Burma to mine Burma’s rich natural resources.
23. A Painful Recalibration Is Going on For Many People
Throughout history, human beings have always migrated to find food, to escape military conflict, to avoid religious or political persecution, or to gain economic opportunity.
That is going on “big time” in Ireland, Spain, Greece and other southern European countries today.
To a lesser degree this has begun to happen in the United States as well.
Yesteryear, Ireland had a dynamic economy.
Today, Ireland has an enemic almost “dead” economy.
A painful recalibration is going on for many of the people still living in Ireland. They see a bleaker future if they remain in Ireland.
About 60 percent of Ireland’s jobless had been out of work for a year or more at the end of 2011.
An estimated 76,400 people left Ireland in the year ended 2011.
Roughly one in four of the people in Ireland used to work in construction or related industries.
Now, finding work for more than 100,000 former bricklayers, carpenters and mason — many with mounting mortgage payments — is one of the challenges facing Ireland.
The unemployed are being driven to take lower paying jobs out of necessity.
The exodus of working people from Ireland today, is a common story.
There is an on-going “brain drain” migration from Southern Europe (i.e. Spain where unemployment is about 25%) to Germany.
Young engineers who are unemployed and can’t find a job in Spain, or in other Southern European countries, are now immigrating to Germany where the demand for engineers is huge.
Economic fears also also control life defining decisions being made by young college students and their guidance counselors in the United States.
Many engineering, math and science college students here in the United States are enrolled in those studies out of fear and not out of love of engineering, science or mathematics.
I have been told by young college graduates that most students who major in engineering, science and mathematics do so because they are afraid they would not be able to find a job if they majored in the humanities.
They are being told by their guidance counselors if they want to be able to find a job, they must major in science, engineering, mathematics or computer science.
While school districts throughout the United States are laying off school teachers, South Korea is hiring teachers to teach English as a second language.
The South Korean government pays for transportation to South Korea, for decent living accommodations (provides a studio apartment) and pays a decent salary to Americans who teach English as a second language in South Korea’s schools.
Young American college graduates who want to teach are applying for jobs to teach English as a second language in South Korea.
Here in California, teachers in California school districts have been laid off and additional college teachers are threatened with layoffs because the State of California’s most recent projected budget deficit has ballooned to almost $16 billion from the $9.2 billion budget deficit forecast in January.
Governor Jerry Brown has said, “We will have to go much further, and make cuts far greater than I asked for at the beginning of the year.” “We can’t fill a hole of this magnitude with cuts alone without doing severe damage to our schools.”
24. Where You Live May be the Most Important Decision in Your Life
California schools are shutting down.
Faced with budget cuts local community colleges in California have all but cancelled their summer sessions due to budget cuts by canceling or severely reducing course offerings.
In an informal survey of about half the states 112 community colleges more than a third reported reduced offerings this summer and eight campuses planned no summer sessions at all.
Overall, enrollment in community colleges and course offerings are at their lowest level in 15 years. From 2008 to 2011, the number of students served fell nearly 43%.
Santa Monica City college found in a recent study that 15 of Los Angeles-area community colleges this summer are offering only a third of the courses they offered in 2008. This is equivalent to a loss of 6,000 teaching assignments and 168,000 classroom seats.
“Two-year” community colleges feed students to the 10 campuses of the University California and to the 23 campuses of the California State University System.
This is a “Code-Red” situation. Cut-backs in summer programs exacerbate the difficulty students have in completing community college course work in two years, drawing out community college to a three-four or five year undertaking.
Due to budget cuts and course cut-backs, summer class enrollment in the 23-campus California State University system fell from 75,000 in 2009 to about 12,000 in 2010.
Keep in mind the predictable impacts of these cut-backs in addition to the degradation of the learning environment.
Today’s college students are part of the “future” work-force for the State of California, etc.
The United States’ economy needs to grow by 125,000 jobs each month just to maintain the current unemployment rate and is failing to do so.
If you want to read a very powerful argument on what makes where you live the most important decision in your life, I recommend you read (1) “The Rise of the Creative Class” and (2) Who’s Your City” — two books written by Richard Florida, published by Basic Books.
Florida’s argument is that the “power of place” has everything to do with a person’s success, a city’s success, a state’s success, a country’s success and prosperity.
Florida states that where we live affects the people we meet, the “mating market” in which we participate, and the jobs, networks, and careers available to us.
Florida argues that when talented and creative people come together ideas flow more freely, as a result individual and aggregate talents increase exponentially; the end result amounts to more than the sum of the parts.
This clustering makes each person more productive which in turn makes the place each of those persons inhabit more productive; collective creativity and wealth grow accordingly.
There is an unprecedented exodus of highly skilled and highly educated people from places where it is “impossible”to get a job. The smartest most educated people realize they have to live somewhere else in order to realize their full economic potential.
At this moment, luxury cars are flying off dealer lots in San Francisco, San Mateo and Santa Clara counties. In those counties luxury vehicles accounted for nearly 21% of new car registrations from April 2011 to March 2012. That is almost twice the national average in the United States.
In Palo Alto, California the median home price in the 943062 Zip Code hit a record $1,606,750 in the first quarter of 2012.
Nearly fourteen percent of all households in Santa Clara and San Mateo County earn more than $200,000 per year.
Imagine a society in which people interact only with others who share the same educational, financial and psychological backgrounds. Perhaps that day is coming. Perhaps that day is here.
According to Florida, it matters where you live and work in a “knowlege driven economy.” Florida argues: What matters most in such an economy is where the greatest number of the most skilled people locate because the returns from colocation among the ablest is high.
In that regard, employment opportunities and salaries differ by location.
For example, software jobs are not only more plentiful in Silicon Valley; high-tech employees there are paid 75 percent more than the national average for the same work and many of them participate in stock option plans that allow them to get rich.
“Accelerators” put classes of aspiring tech-start-up entrepreneurs together to do their work in the same room.
The reason for sitting these entrepreneurs next to each other is the belief that one smart tech-start up entrepreneur sitting next to other smart entrepreneurial people working on a business plan and preparing to put their new start-up tech business in operation will result in one smart motivated person sharing ideas with another smart motivated person.
If one “start-up” doesn’t work out, the founders of that start-up will have the opportunity to use the contact they made working next to other people starting their “start-ups” to find a “job” in a start-up company. It is about being at the table and breaking bread with people.
Many of the people funding “accelerators” and many of the people taking classes and working on their start-ups in accelerators look at what is going on in the world through the lens of the Cinderella like Facebook story.
Facebook created about $87 billion of value in eight years.
In May, two start-ups, Evernote and Pinterest, raised new rounds of funding that valued them at more than $1 billion.
We live in a diverse complex multidimensional economy with many needs, including a need for energy.
That is the reason the highest job growth rates in large metropolitan areas in the United States last year were in big cities in Texas.
Texas is the largest oil producing state in the United States. Texas pumped 1.7 million barrels of oil a day in February.
Recently, North Dakota passed Alaska to become the number two oil-producing state in the U.S. North Dakota produced 575,490 barrels of oil in March. Alaska produced 467,480 barrels.
In four years oil output has quadruple in North Dakota. In March 2008, North Dakota was the number eight oil producing state at 144,000 barrels a day.
Booming oil fields and high paying jobs there have drawn thousands of workers to North Dakota. Of the 15 counties in the United States with the lowest unemployment rates, 11 are in North Dakota -some with unemployment rates below one percent.
Williston, North Dakota is the fastest growing small city in the United States. Construction is booming to keep up with demand. In 2011, the city issued $358 million worth of building permits, up from $45 million in 2009. Housing is still in short supply.
Since March 2008, new technology called hydraulic fracturing (fracking) has allowed companies to access roughly 4.3 billion barrels of crude oil belied to lie beneath parts of North Dakota, Montana, and Canada.
25. The Benefit of A City/Country Being An Epicenter of Intellectual Excitement
Jane Jacobs once famously said, “When a place gets boring, even the rich people leave.”
Los Angeles is not boring. One of the reasons Los Angeles is not boring is Los Angeles has movie theaters, such as the Landmark Theatre, which show intellectually stimulating thought provoking and artistically well made movies.
By design, “They Call It Myanmar: Lifting the Curtain” played at the Landmark Theatre on Pico Blvd. in West Los Angeles for only one night (Tuesday, April 10, 2012). the movie played to a sold out crowd.
I was there. It was an “exciting show.” The CEO of Landmark Theatres introduced the film maker to the audience before the film was shown and invited the audience to ask the film maker questions after the film was shown.
The film maker was present. He answered questions after the film was shown.
The “sold-out showing” was the result of successful social networking marketing. I was informed of the showing by an announcement from a group I belong to – The Cornell Club of Los Angeles. I brought two guests with me to see “They Call it Myanmar: Lifting the Curtain.” My guests enjoyed the experience immensely.
They enjoyed watching the film, listening to the film maker describe the making of the film, they enjoyed the question and answer session that followed the show and they enjoyed discussing the film.
Films are important. They can change the way we look at the world and they can make lots of money.
Last year, thousands of people, including me, attended the The Toronton International Film Festival (TIFF). TIFF is the second largest film festival in the world.
During the film festival, films are shown from early in the morning to late at night in large theaters. Lines of people waiting to get into movie theaters showing TIIF films often stretched around the block.
If I rememeber correctly, 300 films were shown at the TIFF last year. Films begam beginning shown early in the last film of each day began at midnight. Last year, at TIFF, I watched between three and five films per day, every day for over a week.
Many of the movies I saw at TIFF and discussions about those movies following watching those movies changed the way I see the world.
26. The Status and Impact of Adult Slavery and Squelching Freedom of Speech.
After watching the wretched conditions of the ordinary person in Burma in “They Call It Myanmar: Lifting the Curtain” someone I saw the movie with was moved to express the opinion:
You might think we don’t have slavery in the United States.
If we don’t physically have slavery (a the traffic in human beings) here it is only because the United States has exported slavery to other countries.
In the United States we are supporting slavery by buying products made by people who are so desperately poor that they sell their children as slaves.
I learned from the conversation that followed that you will have a thought provoking conversation with your friends if you ask them the following questions:
- What is slavery?
- What is the impact of globalization, the Internet, social media and smart phones on creating demand for consumer goods that people “must” now have?
- What is the impact of globalization, the Internet, social media and smart phones on creating life changing decisions in people’s lives?
Recently, I read an article in either the “Wall Street Journal” or the “New York Times” about a very poor boy in China who wanted to own a cell phone but did not have enough money to purchase one. Under normal circumstances he would never have enough money to purchase one.
He bought a cell phone. After it was discovered that this poor young boy owns a cell phone an investigationwas carried out.
This poor young boy had purchased his cell phone with funds received from selling one of his kidneys.
A broker arranged the sale of the boy’s kidney, arranged for kidney removal surgery to take place in a local hospital in China and hired surgeons to perform kidney removal surgery after pre-sale of one of the young boy’s kidney.
Ask yourself: Is the pre-sale and surgical removal of this boy’s kidney the result of China being an exporting powerhouse which exports “cheap” goods produced in sweat shops to the United States?
A highly educated worldly friend of mine has told me that 5% of China is industrialized. The other 95% of the people in China lie in the 13th or 14th century. If the Chinese government gave the same type of medical care to China’s population that the United States gives to its population China would be bankrupt in three months.
The same friend told me that the U.S. will lead China forever in science, technology and medicine because freedom of thought and expression of ideas and opinions is not allowed in China.
Another friend, who has done business in China for many years, informed me of a conversation she had with the manager-owners of various manufacturing plants with which she conducted business in China. The owner-managers she spoke to were around 35 years old. When she asked them, “Where is your father?” They uniformly replied, “He is dead. He died of cancer.” or “He is dying of cancer.”
Several friends have told me that there is so much air pollution in the industrialized areas of China that you cannot see the sun.
A headline in the April 11, 2011 issue of the “Wall Street Journal” caught my attention. The headline calls into question whether we have freedom of expression in the U.S.
That headline reads, “Manager Benched for Castro Praise.”
The newspaper article which followed reports that the Miami Marlin baseball team suspended team manager Ozzie Guillen for 5 days (Tuesday) following his comments praising Fidel Castro, the former president of Cuba.
The manager’s exact words, according to that article were: “I respect Castro. You know why? A lot of people wanted to kill Fidel Castro for the last 60 years, but that mother f- is still here.”
27. Time Spent in Preparation Makes What Talented, Productive, Creative People in the U.S. Do Look Effortless
Can many qualities requisite for success can’t be formally taught?
Of the twenty-six self-made people on the Forbes 2007 list of the world’s fifty richest people, eleven did not graduate from college.
In the United States, if you are an exceptional basketball player (like LeBron James or Kobe Bryant) you can go straight from high school to being a professional basketball player in the NBA with a contract that will pay you more than $100 million dollars to play basketball. You can make additional money for “endorsing” products.
If you are a talented singer like 18 year old Justin Bieber you may make millions of dollars a year.
Really talented people like Oprah Winfrey and Leonardo DeCaprio can make between $50 milion and $100 million dollars per year.
Thirty-seven year old Leonard DiCaprio recently listed his home in Malibu for rent: $75,000 per month for a long term tenant, $150,000 per month for a lease less than six months.
The United States is rife with examples of remarkably talented, creative and successful people who never graduated from college, such as Tiger Woods, Bill Gates, Steve Jobs, Michael Dell and Mark Zuckerberg. Each of them is a college drop out.
People who are really talented and successful practice a lot, are monitored by mentors and coaches who know what they are talking about and constantly receive constructive feed-back from people who know what they are talking about.
Top performers push themselves harder for longer.
Top performers absorb themselves in their chosen field.
The consequence of experts absorbing themselves in their chosen field for so long is that they become pregnant with creative energy.
It is only by trying — and often failing — that they are able to build the knowledge necessary for the eruption of creativity. Each stratum of their master works is drawn from experience.
Even scientific creativity is a function of how hard you work at it.
You need to know where you are going wrong in order to know what you are doing right. That means you need knowledgable feedback. Feedback is, in effect, the fuel that propels knowledge, and without it no amount of practice is going to make you a top performer.
Circumstances and opportunity are deeply and inevitably implicated in the success of every high performer.
The keys to the success of top performers are (a) the acquisition of knowledge (mere experience does not translate into excellence), (b) specialized learning, (c) hard work at getting better (called deliberate practice and/or purposeful practice), (d) access to the most enlightened system of training, access to the right training system, and (e) feedback that propels the acquisition of knowledge.
The advantage of a coach is that the coach has perspective — being able to look from the outside in — that the player asks. That is why professional golfers have coaches following behind them at professional contests. The job of that coach is not merely to offer encouragement but to advise his professional golfer client what his client is doing wrong after making a mistake so the golfer can adjust his game. The coach is on the lookout for small technical glitches that may have escaped the attention of his charge.
Successful entrepreneurs, athletes, musicians, artists and professionals will tell you:
- Have a good sense of self.
- Find the right people. Don’t compromise on people.
- Stay focused.
- Don’t get distracted.
- Constantly re-evaluate.
- Balance and entrepreneurship don’t go together.
- You are the instrument of a higher force.
- You have to move forward.
The infra-structure for economic successes to be achieved by talented productive creative people is in place in the United States.
In “Outliers”, Malcolm Gladwell explains that each of us has his or her own distinctive personality. But overlaid on top of that are tendencies and reflexes handed down to us the history of the community we grew up in, and those differences are extraordinarily specific. The sum total of those differences is that in certain kinds of situations that require dealing with risk and uncertainty people with different cultural backgrounds react in a very different way.
In “Outliers”, Gladwell discusses the Power Distance Index developed by Dutch psychologist Geert Hofstede while working for the human resources department of IBM’s European Headquarters in the 1960s and 1970s. Power distance is concerned with attitudes towards hierarchy, specifically how much a particular culture values and respects authority: How much are older people respected and feared? Are power holders entitled to special privileges?
America is a classic low power distance country. Who we are cannot be separated from where we’re from. That is why Americans challenge authority.
Also Hofstede argued that cultures can be usefully distinguished according to how much they expect individuals to look after themselves. He called that measurement the “individualistic-collectiveism scale.” The country that scores highest on that scale is the United States.
Did you ever wonder why Asians are such hard workers and so smart?
Gladwell has an answer to that question: In Japan or China there wasn’t any extra land that could easily be converted into new fields So rice farmers improved their yields by becoming smarter, by better management of their own time, and by making better choices.
Cultural legacies matter.
Throughout history the people who grow rice have always worked harder than almost any other kind of farmer.
Working in a rice field is ten to twenty times more labor-intensive than working on the equivalent-size corn or wheat field.
Some estimates put the annual workload of a wet-rice farmer in Asia at three thousand hours per year.
Consider this proverb which comes from a culture shaped by the demands of growing rice: No one who can rise before dawn three hundred sixty days a year fails to make his family rich.
Gladwell’s description of wet-rice farming (there is a clear relationship in rice farming between effort and reward; the rice farmer is essentially running a small business, juggling a family workforce, hedging uncertainty through seed selection, building and maintaining a sophisticated irrigation system, and coordinating the complicated process of harvesting the first crop while simultaneously preparing the second crop; and, most of all it’s autonomous) is fascinating.
Below is a quote from “Outliers”:
The peasants of Europe worked essentially as low-paid slaves of an aristocratic landlord, with little control over their own destinies. But China and Japan never developed that kind of oppressive feudal system, because feudalism simply can’t work in a rice economy. Growing rice is too complicated and intricate for a system that requires famers to be coerced and bullied into going out into the fields each morning. By the fourteenth and fifteenth centuries, landlords in central and Southern China had an almost hands-off relationship with their tenants; they would collect a fixed rent and let farmers go about their business. Rice is a crop that doesn’t do very well with something like slavery or wage labor. It would just be too easy to leave the gate that controls the irrigation water open a few seconds too long and there goes your field.
However ambition and the willingness to pay the price of striving for what is just out of reach and not quite making it (trial and error) is also important. Progress is built upon the foundations of necessary failure.
To become a top performer you have to work like crazy, regardless of your genes or cultural background, creed or color. There is no shortcut. If you want to achieve anything special in life you have to work, work, work and then work some more.
Practice must be challenging rather than nice and easy. It is only by working on what you can’t do that you turn into the expert you want to become.
It is estimated that Shizuka Arakawa of Japan, one of the greatest skaters of all time, tumbled more than twenty thousand times in her progression from five-year-old wannabe to 2006 Olympic champion. It has been said that Arkawa’s story is invaluable as a metaphor — “Landing on your butt twenty thousand times is where great performance comes from.”
Do you know the real story behind Tiger Woods? Tiger’s father Earl Woods was obsessed with the idea that practice creates greatness.
Tiger was given given a golf club at Christmas five days before his first birthday and at eighteen months had his first golf outing. He couldn’t yet count to five but he already knew a par 5 from a par 4. At age two Tiger could already hit the ball eighty yards with his 2.5 wood and pith accurately from forty yards. When Tiger was four, Earl hired the services of a professional to accelerate Tiger’s development.
Tiger Woods won his first national major tournament at thirteen.
Here is what Michelangelo had to say about his mastery of art and creativity, “If people knew how hard I had to work to gain my mastery, it would not seem so wonderful at all.”
28. An Example of Social Networking Being Fun and Benefiting Everyone
Social media can be used to build a bond among people when social media is used to communicate something of common interest, something useful, when social media is used to be helpful by sharing information. Maggiano’s does a good job of that.
Maggiano’s is a local restaurant in Woodland Hills, California that is part of a large chain of restaurants. I am one of Maggiano’s customers. Maggiano’s is one of my favorite restaurants.
Maggiano’s collects e-mail addresses of its customers. Maggiano’s has my e-mail address.
On March 21, 2012, I received an e-mail invitation to attend Maggiano’s Woodland Hills Special Event Open House on Thursday, April 12 from 5:30 pm – 8:30 pm.
Maggiano’s e-mail invitation stated: Let us exceed your expectations and show you what we can do for Birthdays, Weddings, Bar/Bar Mitzvahs, Business Events and much more! Join us for a complimentary open house with a lavish buffet, sweets table and live entertainment. Meet some of the top event planners, florists, bakeries, photographers and other speciality vendors in the industry.
I attended that event. To my way of thinking, Maggiano’s event is a good model to follow for anyone who wants to promote more business through social networking.
Maggiano’s event was a “shopper’s carnival.” I had a great time. The guest I brought with me had a great time.
Event planners designers and producers, calligraphers, creators of custom stationary, photographers, florists, designers of unique party favors including designer candy buffets, creators of cakes to wow you and your guest, providers of sizzle wear (glitter tattoos, custom head ware and apparel, custom zipper pulls, keychains, pins and necklaces) for you and your guests, masters of ceremony, disk jockeys, dancers and magicians were on hand to demonstrate their talents and show case their products.
The following vendors were on-hand, showcasing their products and services:
- SKY Events & Productions (818) 769-9494, http://www.skyeventsandproductions.com, firstname.lastname@example.org
- Dazzle Party Productions (818) 609-8040, http://www.dazzleparty.com
- DB Creativity, Inc. 818-565-6833, http://www.dbcreativity.com, email@example.com
- Laura Taylor, (818) 716-7130, http://www.laurataylorstationery.com, firstname.lastname@example.org
- The Party Zone, (818) 883-0303, http://www.tpzdj.com, email@example.com
- Delicious Bakery Inc., (818) 349-5700, http://www.delicious-bakery.com, firstname.lastname@example.org
- Favor It Girl, (818) 371-7059, http://www.favoritgirl.com, email@example.com
- Sky Flowers, (818) 769-9494, http://www.skyflowers.net, firstname.lastname@example.org
- Karen Ard Photography, (818) 888-7202, http://www.karenard.com
- Steve Sherman and Associates Photography Inc., (818) 881-9100, http://www.steveshermanphoto.com, email@example.com
- Sizzle Wear, (818) 676-9397, http://www.sizzle-wear.com, firstname.lastname@example.org
Maggiano’s organized the event and provided food, drink and banquet facilities and by doing so demonstrated that Maggiano’s is a specialist in creating memorable events. On hand from Maggiano’s was Maggiano’s Banquet Sales Team: Rebecca Black (Banquet Sales Manager), Kayla Beighley (Banquet Sales Assistant) and Boyd Ingram (Banquet Sales Assistant). Phone (818) 887-4543. Email: email@example.com. World Wide Web: http://www.maggianos.com.
29. The Ideas Driving Politicians Spending One and A Half Billion Dollars on Political Advertisements In the Next Few Months
Once again we are witnessing presidential political campaigns primarily focused on arousing emotions — forging an elemental bond with groups and voters.
Each candidate is telling a stories to build emotional involvement with a multitude of specific groups of voters.
It has been predicted the presidential candidates and their supporters will spend, in the aggregate, at least $1.5 billion on negative advertisements “putting down” their opponent’s background, expertise, experience and political philosophy.
In the past I predicted those who supported Mitt Romney would run negative ads whose message is: Obama will tax those who don’t vote for him and give tax money collected to those who do vote for him.
I am surprised that Mitt Romney has taken the position that he has experience and expertise in creating jobs because his job at Bain was to create profit for investors, not to create jobs.
One of Mitt Romney’s most current sales pitches is, “We need to have a president who understands how the economy works.” President Obama doesn’t understand what it takes to help people. President Obama doesn’t understand what he has got to do.
Romney supporters argue that President Obama doesn’t have experience being an “executive.” They fail to acknowledge that President Obama has executive experience. President Obama is the executive in charge of the executive branch of the United States.
On the other hand, I initially predicted Obama supporters would run ads whose message is: Romney thinks women are sheep who shouldn’t be allowed to decide for themselves when or whether to have children. The government should decide that for them.
For some reason, neither side is talking about the amount of job creation wealth creation in the United States created when Democrats were in the White House vs. when Republicans were in the White House. Historical job growth, wealth creation in the stock market and GDP growth strongly favors the Democrats.
Uncritical acceptance of raw data can be very dangerous. But the historical facts are as follows.
If the nearly fifty years following the Kennedy administration, Democrats created nearly twice as many private sector jobs as REpublicans. Even though Democrats held the presidence for only 23 years compared with 28 years for Republicans.
Private-sector payrolls increased by 42 million jobs under Democratic administrations and 24 million under Republican administrations. That is an average of 150,000 new paychecks a month under Democrats and 71,000 per month under Republicans.
Under Democrats, the real median income over the past 50 years grew at 2.2%, and grew 0.6% under Republicans.
Real GDP grew faster under Democratic administrations (4.2%) than under Republican administrations (2.7%).
Investing in a hypothetical fund that tracked the Standard and Poor’s 500 Index over the past years would have returned $10,920 when Democrats held the White House and $2,087 when Republicans held the White House. Annualized returns would have been 11% under the Democratic administrations and 2.7% under Republican administrations.
Voters favor the candidate that seems to be the kind of person they like and admire.
Independent voters want to cast their vote for a candidate who clearly and definitely states (a) what our problems are and how he proposes to fix them, and (b) what our opportunities are and how he proposes we seize those opportunities.
Every voter cares whether a candidate cares about the needs and problems of people like them.
At this time nearly 4 in 10 Americans say they have been falling behind financially.
The biggest thing on most voters’ minds today is the president’s ability to make the right decisions on the economy and to be commander in chief.
Please feel free to send me your comments on how your think the candidates and their super political action committees should spend their advertising dollars.
30. Immigration and Demographic Shifts
By the way, although migration from Mexico is a hot button issue for many politicians and voters, net migration from Mexico has plummeted to zero as a result of changing demographic and economic conditions on both sides of the border.
Mexican immigration to the United States peaked in 2000 at about 700,000 and began to slide after the housing bubble bust and jobs in construction and other sectors disappeared.
Between 2000 and 2010, there were more Hispanic births in the U. S. then there were arriving Hispanic immigrants.
About 50,000 Latinos in the U. S. turn 18 every month.
If the U. S. depended on white births alone it would not be possible to support its aging population.
The median age for non-Hispanice whites in the U. S. is 42. The bulk of white women are moving out of their child bearing years.
The median age of Latino women is 27. They are in their peak fertility years.
Minorities accounted for 92% of U. S. population growth in the decade ended 2010.
In 348 counties in the U. S. whites are not longer the majority. That number doubles when it comes to the toddler population.
There are large differences in the ethnic and racial identity of the elderly in the U. S. (who are mostly white) and the young. In Yuma County, Arizona, for example: 18% of the people under 20 are white compared to 73% of the people over 65.
31. The Economy, Your Well-Being and Interesting Facts About Manhattan and Brooklyn
Big dense cities filled with diverse ethnic immigrant populations, multi-unit residential buildings, lots of intellectual excitement and mouth watering food are positive contributors to national prosperity, the economy, national security, and your well-being.
New Yorkers, and the rest of the world, consider New York to be the capital of the world.
According to one wag, to borrow the language of mathematics, “New York is Hong Kong, plus Paris times two.”
How did New York become the “financial and cultural capital of the world?”
Immigrants filled with ambition to “strike it big,” to make a fortune, to become rich, to become “famous” and their creativity, diverse perspectives, skills, talents and hard work have provided the energy and dynamism that made New York into the financial and cultural capital of the world.
If you are an immigrant in a new place, and you’re poor, or you were once rich and your family was stripped of its wealth, then you have drive. You don’t see what you’e got to lose; you see what you could win. That drive to succeed is the attitude of most people in New York today.
Immigrants are not adverse to starting over. They are by definition, risk takers. A city of immigrants is a city of entrepreneurs.
Today, at least 40 percent of the city’s inhabitants are foreign born. More than a quarter of Manhattan’s residents didn’t live there five years ago.
Also, Manhattan is the capital of people living alone. In Manhattan, 25.6 percent of the households are married, whereas the national average is 49.7 percent.
Cities, such as Manhattan/New York City, attract more single people than other areas, in part, because urban density increases the odds of meeting a prospective partner and because they are fun places to be young and single.
The ability to walk from bar to bar or restaurant to restaurant make them ideal places to meet the thousands of other young single people who have come to the city for exactly the same reason.
Cities, such as New York, attract the most economically successful couples because of the ability of both spouses to find suitable jobs within a big urban labor market.
Today, 40 percent of Manhattan’s payroll is in the financial services industry.
The five zip codes that occupy the mile of Manhattan between Forty-first and Fifty-ninth streets employ six hundred thousand workers (more than New Hampshire or Maine), who earn on average more than $100,000 each, giving that tiny piece of real estate a larger annual payroll than Oregon or Nevada.
In 2010, the average weekly wage in Manhattan was $2,404 which was 170 percent more than the U.S. average, and 45 percent more than in Santa Clara County, home of Silicon Valley, which pays the highest wages outside of greater New York.
Between 2009 and 2010, as the American economy largely stagnated, wages in Manhattan increased by 11.9 percent, more than any large county.
There is an exuberant mood in the Manhattan. Skyscrapers located on broad boulevards fill the skies of Manhattan. They seem like deliberate attempts to affirm the mastery of man over nature.
In Manhattan, 76 percent of housing units are rentals. Fewer than 20 percent of Manhattan residents own cars.
The sidewalks of Manhattan are bustling and filled with pedestrians.
Urban scale makes it possible for Manhattan/New York City to support the fixed costs of theaters, museums and restaurants.
By the end of April, the biggest price median sales prices increases over the same time period last year for brown stones have been in Boerum Hill — up 60 percent, to $1.7 million from $1.1 million — and Red Hook — up 73 percent to $825,000 from $475,000. In some cases houses are selling for more than what they might have brought in the heady days of 2007.
Rising rents are also driving more people into the sales market. In April, the average rent in Park Slope was up 33 percent from the previous spring.
Brooklyn has buzz. According to one local real estate broker, “You can’t open papers without reading about some style or trend that started in Brooklyn or some new restaurant that everyone is talking about. It has been infectious.” People are drawn to Brooklyn because they want a different vibe than the one they find in Manhattan — less rushed,with the feel of a village, but still urban.
32. The Value of Urbanization
High wages reflect high productivity.
Within the United States, workers in metropolitan areas with big cities earn 30 percent more that workers who aren’t in metropolitan areas.
There is a near-perfect correlation between urbanization and prosperity across nations. On average, as the share of a country’s population that is urban rises by 10 percent, the country’s per capita output increases by 30 percent.
Cities everywhere allow people to move from destitution to phenomenal wealth, and to a great number of promising points in between.
Per capita incomes are almost four times higher in those countries where a majority of people live in cities than in those countries where a majority of people live in rural areas.
33. Should the Federal Government Be Creating Artificial Demand in the Housing Market or Directing Additional Resources to Education?
The federal government heavily subsidizes home ownership many ways. By allowing home owners to deduct interest on their home mortgage the federal government makes owning a home cheaper than renting.
Empty houses are an acute problem.
Currently, President Obama and Federal Reserve Chairman Ben Bernake encourage low interest rates because they want people to flock back to the housing market. Low interest rates create artificial demand and keep housing prices from falling further.
Lenders are modifying home loans to encourage people who can’t make monthly mortgage payments to stay in their homes in order to stop housing prices from falling further and to avoid the expense they would incur if they (lenders) took over home ownership.
When people move to the suburbs to own a home or stay in the suburbs they have to travel further to work; they have to use more gasoline.
The United States has to import more oil from the Middle East the further people have to travel by automobile. This has tremendous national security and prosperity implications.
If commuters lived closer to where they work, the United States as a whole would use less gasoline; furthermore, people would spend less or their time commuting.
As the price of gasoline continues to go up and as highways become more and more cluttered and congested, people’s life style choices (the way they live, where they live and which politician and governmental policies they vote for) will continue to change.
If the price of gasoline becomes high enough it will effect the amount of money people have to pay rent and/or to pay the costs of owning a home.
The American dream to own a big home on a lot in the suburbs appears to be dramatically changing. We are seeing people who highly value their time, and people who can’t afford to pay high gasoline prices, return to once downtrodden big city downtown areas to reap the advantages of walking to work, nearby retail, restaurants and entertainment. If mass transit comes with urban living, that is a big plus.
Many urban schools in the U. S. are not places where all students compete to get good grades and to be the smartest in the class. Unfortunately in many public schools lack of structure supporting students who “try hard” is ultimately responsible for the lack of success of students.
Violence and bullying in public schools, peer pressure to be socially acceptable by not being a good student, poorly trained teachers and lack of order lead to a degraded educational environment.
Many public schools are nothing more than a day care facility. In such schools, students are not taught to embrace the notion that being more than mediocre is desirable.
Not all teachers, guidance counselors or parents support an academic culture.
Some guidance counselors eagerly push students towards vocational schools, local colleges and universities, but do not push students to apply to some of the better schools that they are qualified to attend, or to apply for scholarships, or help students manage the application process.
I have been told that textbook salesmen say they sell twice as many text books in Chinese neighborhoods because the mothers also buy books so that they can study the material and go over it with their children each evening.
An academic culture can come from parents and seems to be concentrated in certain ethnic groups.
When parents hold the highest expectations for their children that makes a difference.
For example, ethnic Indians are 1% of the population in the U. S. but 13% of graduate students in the finest universities in the U. S.
The American public school system which forces people to move or to go to a private school in order to find better schools is a disaster.
34. The Movement of Information and Ideas Today
People want to be connected to other people.
Better connections between people can create far ranging opportunities.
Ideas move from person to person. The exchange of ideas and the desire to connect to one another occasionally creates miracles of human creativity, such as “Facebook.”
Facebook began in a college dormitory approximately eight years ago.
Today, 13% of the people in the world are active Facebook users.
At this point a Facebook presence is the cornerstone of almost any social media strategy. Any business that hopes to reach consumers is pretty much required to create a Facebook presence.
Facebook’s initial public offering (IPO) recently took place.
According to Facebook’s Amended S-1 Statement:
- Facebook now employs 3,539 people full time.
- Revenue for the first quarter of 2012 was $1.058 billion.
- Monthly active users now total 901 million.
- 300 million photos are uploaded to the site each day.
- 3.2 billion Likes and Comments are posted daily.
- 125 billion friendships are forged each day.
Facebook went public on May 17, 2012 at an initial offering price of $38 per share, which is 108 times earnings, compared to Google which trades at 18 times earnings.
The Facebook stock offering closed at $38.23 per share, which put a market value of approximately $105 billion on Facebook.
The Facebook public offering created about 1,000 new multimillionaires whose stock in Facebook is worth between $2 million and $5 million.
Mark Zuckerberg, the founder of Facebook, owns one fifth of Facebook. Mr. Zuckerberg’s stock in Facebook makes Mr. Zuckerberg worth $19.5 billion.
Facebook trades on the NASQD Exchange under the ticker symbol “FB.”
Facebook (Mark Zukenberg and his colleagues) created approximately $87 billion of value from scratch in eight years.
35. The Built Environment As Evidence of Power, Position and Progressive Outlook
Hong Kong, Shanghai, Taipei, Tel Aviv, Tokyo and Seoul are all modern 21st century cities.
Each of those cities has an edifice that symbolizes their power, position and progressive outlook in the world.
Tel Aviv is vibrant. There is art and life in Tel Aviv. There are boutiques. There is a stunning boardwalk.
By the way, Israelis have more cell phones per capita than anywhere else in the world. In Israel, Blackberry’s never lose reception. Internet is as near as the nearest coffee shop.
New York, on the other hand, is modeled after a secular European City.
New York is still alive with music, opera, theatre and museums and has some of the best restaurants in the world and is still known to be the playground of billionaires (so is London).
Although New York still has preeminence as a financial center of the world and still has “it”, its look is of rot and decay.
Most of New York is old and aging and buildings that are 40 – 50 years old are still considered modern.
This is better than Europe where buildings 100 years old meet that test.
The New World Trade Center 1, when it is built, will be a symbolic tower that symbolizes New York’s power, position and progressive outlook in the world.
In Toronto, by contrast, buildings 40 to 50 years old are being torn down for newer towers. There are about 132 construction cranes on the skyline, and about 10 buildings under construction will be in the 50 to 80 story range.
Having an impressive or iconic building doesn’t make a city or a country a 21st century city or country or necessarily evidence “subtance” or economic vitality.
For example, the Burj Khalifa, in Dubai, United Ara Emirates, is the tallest manmade structure in the world, at 2,723 feet.
The building officially opened on January 4, 2010 and is part of a new 490 acre development called “Downtown Dubai.”
The total cost for the building was about $US 1.5 billion and for the entire “Downtown Dubai” development $US 20 billion.
Vast overbuilding in the country led to high vacancies and foreclosures. Due to slumping demand in Dubai’s property market, the rents in the Burj Khalifa plummeted 40% some ten months after its opening. Out of 900 apartments in the tower, around 825 were still empty at that time.
36. Innovation, Immigration, Top Performing Economies, Entrepreneurship, Culture and Entrepreneurial Energy
Why is it that Israel and South Korea have two of the most dynamic economies in the world?
Why do some economies succeed far more than others?
Is there a science to success?
In “Outliers” author Malcolm Gladwell argues that if we want to understand why and how top performers get to the top of their game we should look at such things as their family, and the culture they come from. Gladwell argues, who we are cannot be separated from where we are from.
Gladwell concedes that each of us has his or her own personality but argues that on top of that are tendencies and assumptions and reflexes handed down to us by history of the community we grew up in, and those differences are extraordinarily specific.
Gladwell gives as an example the safety record of Korean Air. Gladwell claims South Koreans’ cultural legacy explains why their national airline Korean Air had a horrible safety record (“low marks”). Gladwell’s attributes a Korean Airlines crash to the Korean Flight team.
The story is given as an example of how loyal, committed and respectful Koreans are to authority and to superiors, even in the face of lethal consequences. For cultural reasons, the Korean Flight team could not question the decisions of the pilot. An American Flight team, in contrast, according to Gladwell, would have no issue with questioning the decisions of its captain/pilot, not struggle with questioning authority or rank, no loyalty or respect for the pilot would stand in the way of questioning his decision.
According to Gladwell, Korean Air’s poor (actually awful) safety record was a consequence of coming from a hierarchal culture that respects and treats elders and authority figures as socially superiors to be deferred to. Gladwell explains, this is a culture in which an enormous attention is paid to the relative standing of any two people in conversation. The Korean language has no fewer than six different levels of conversational address, depending on the relationship between the addressee and the addresser: formal deference, informal deference, blunt, familiar, intimate and plain.
Gladwell explains that the kinds of errors that cause plane crashes are invariably errors of teamwork and communication. A tricky situation needs to be resolved through a complex series of steps. Airplanes are very unforgiving if you don’t do things right.
Airplanes work best when you have one person checking another and both people willing to participate, i.e. people need to speak up forthrightly. But, in Korean culture all social behavior and actions are conducted in the order of seniority or ranking, there is order even to drinking cold water.
In Western cultures it is considered the responsibility of the speaker to communicate ideas clearly and unambiguously. In a Western cultural context, if there is confusion it is the fault of the speaker. According to Gladwell, in Korea, like many Asian countries, it is up to the listener to make sense of what is being said.
Gladwell states this type of “… communication works only when the listener is capable of paying close attention, and it works only if the two parties in a conversation have the luxury of time, in order to unwind each other’s meanings. It doesn’t work in an airplane cockpit on a stormy night with an exhausted pilot trying to land at an airport with a broken instrument.
Gladwell concludes the pilots’ problem resulting in a very high number of airplane crashes was they were trapped in roles dictated by the heavy weight of their country’s cultural legacy. By the way, Korean Air safety record has been transformed by purposeful training of its flight crews in the English language and requiring that they speak English. Read Chapter Seven, The Ethnic Theory of Plane Crashes in “Outliers” to get the full story.
Korean Air’s safety record since 1999 is spotless and Korean Air is currently a member in good standing of the prestigious SkyTeam alliance.
Gladwell does not opine why it is that South Korea is such an economic dynamo, or touch that topic.
When I told my youngest daughter Leah what Gladwell has said about Koreans, Leah responded with a fifteen minute speech on how terrific the South Korean mentality is how, modern Seoul is, that Seoul is more modern than any city in the United States and that South Korean companies such as Samsung, LG, and Hyundai are world business leaders.
In “Who’s Your City?”, Richard Florida reports that the world’s innovation centers — measured by patents granted in the U. S. and data from the World Intellectual Property Organization (WIPO) which tracks number of patents reported to the WIPO by each national patent office — are the metropolitan regions around Tokyo, Seoul, New York and San Francisco.
Florida reports that the mega-region that runs from Seoul to Busan houses 46 million people and produces $500 billion in economic output and houses innovative companies whose portfolios include electronics and telecommunications to semiconductors and flat panel displays.
Seoul is a location that not only uses established innovation and creativity, but is transitioning into a place that not only uses knowledge but generates it.
The numbers indicate coming from a hierarchal culture is not an obstacle to innovation.
Florida reports that Beijing produces about as many patents as Seattle or Phoenix while Shanghai produces about as many as Toronto or Salt Lake City.
Florida’s estimates show that innovations in Beijing and Shanghai have increased four fold between 1996 and 2001 and have likely grown at an even greater rate in recent years.
Florida concludes that Beijing and Shanghai are about to join the ranks of the best global innovators.
Some Cities Attract Talented Skilled Educated People while the Economies in Other Cities and the Rural Countryside Decline
Beijing, Shanghai and Shenzhen attract talent. Each of those cities in China is a virtual world apart from China’s vast impoverished rural areas.
In Shanghai, regular middle class people live better than those in the U. S. while in the countryside, just outside the city, people live in what can only be described as pre-civilized conditions.
Seventeen percent of China’s population lives on less than $1/day, almost half lives on less than $2/day, and 800 million farmers in China cannot afford to see a doctor.
The top ten Chinese regions have 16% of China’s population, yet house 45% of its talent-producng universities and 60% of its technological innovations.
China is seen as the “world’s factory,” the manufacturing and outsourcing destination. But, China is quickly moving up the creative ladder by expanding its science workforce, improving its universities, and attracting the world’s top technological workers.
However, in 2005, reports Florida, the Chinese countryside was the scene of an estimated 87,000 riots and demonstrations, up 50% from 2003.
The Impacts of the Power of Adversity and of the Fear of Losing Face
One explanation for South Korea’s success is that adversity, like necessity, breeds inventiveness.
About thirty nations have compulsory military service that lasts longer than eighteen months. Among first-world countries, only three require such a lengthly period of military service: Israel, South Korea and Singapore. All three face long-standing external threats or have fought wars for survival in recent memory.
At different times in history, Korea has lived under threat of invasion by Japan and by China.
South Korea have lived under constant threat for its entire existence from North Korea, which has a large standing army poised such a few miles from Seoul, South Korea’s capital. And Singapore lives with memories of the occupation by Japan during World War II, and its recent struggle for independence, which culminated in 1965, and the volatile period which followed.
Singapore gained independence twice over the course of just two years. The first was independence from the British in 1963, as part of Malaysia. The second was independence from Malaysia in 1965. Singaporeans also feared threats from Indonesia, all while an armed Communist insurgency was looming just to Singapore’s north, in Indochina.
South Korea, Singapore and Taiwan (which faces a constant external threat of being conquered by China), can also boast growth records that as impressive as Israel’s. But none of them have produced an entrepreneurial culture, nor an array of start-ups that compares with Israel’s.
Why doesn’t Korea produce as many startups per capita as Israel?
Korea was a dictatorship in the 1970’s under General Park. He grew the economy.
Samsung, Hyundai and LG were once state-sponsored companies that grew into private companies.
Korea has some very powerful capitalists that call most of the shots.
Korea has no shortage of large technology companies.
Koreans have a great affinity for technology.
One expert’s opinion is that Korea doesn’t have a lot of startups because of “the fear of losing face.”
In early 2000 many Korean entrepreneurs jumped on the Internet bubble bandwagon. When the bubble burst, their public failure left a scar on entrepreneurship.
We live in a psychological world.
In this psychological world, some people (i.e., Koreans) dare not fail in pubic.
Israelis seem to be on the opposite side of the spectrum. The don’t “care” about the social price of failure.
Hold that thought.
Remember Shizuka Arakawa, who fell down more than twenty thousand times on her odyssey from wannabe school girl to Olympic figure-skating champion.
Ask yourself the question: Why would anyone endure all that? Why did she keep striving in the face of constant failure? Why not give up and try something else?
The answer is, she did not interpret falling down as failure as the a means of improving. Falling down (failure) was not something that sapped her energy and vitality, but something that provided her with an opportunity to learn, develop and adapt.
In the Israeli military [which is compulsory] mistakes are acceptable, provided they are used as opportunities to improve individual and group performance.
Judaism and Israel have always cultivated a culture of doubt and argument, a intellectual culture of interpretation, counter-interpretation, opposing interpretations. An attitude of questioning is built into the Jewish religion as well as into the national ethos of Israel. From the beginning of its existence, Jewish civilization was recognized by its argumentativeness.
From age zero, Israelis are educated to challenge the obvious, to ask questions, to debate everything, to innovate.
Innovation is all about finding ideas. Innovation often depends on having a different perspective.
Israel is the opposite of a uni-dimensional Jewish country. It is a monotheistic melting pot of a diaspora that brought back with it the culture, language and customs of the four corners of the earth. Israel’s population is made up of more than 70 different nationalities.
Israel’s economic success story, according to the authors of “Start-up Nation”, is a story not just of talent but of tenacity, of insatiable questioning of authority, of determined informality, combined with a unique attitude towards failure (it is okay to fail if you learn from it, failure indicates willingness to innovate by trying something new and untested), teamwork, mission, risk, and cross-disciplinary creativity.
Israelis have attitude, a growth through applied effort attitude, a growth mindset.
That is one explanation of why and how Israel/Israelis has/have been able to specialize in high-growth entrepreneurship — startups that wind up transforming entire global industries.
My explanation is: It is the quality of their attitude.
Please let me know your explanation.
In “Start-Up Nation The Story of Israel’s Economic Miracle” authors Dan Senor and Saul Singer address the question, How is it that Israel — a country of 7.1 million people, only sixty years old, surrounded by enemies, in a constant state of war since its founding, with no natural resources — produces more start-up companies than large stable nations like like Japan, China, India, Korea, Canada and the United Kingdom, why Israel have such a dynamic entrepreneurial economy?
I love the following observation/joke(?) they quote at the beginning of Chapter One of their book:
Four guys are standing on a street corner . . .
an American, a Russian, a Chinese man, and an Israeli. . . .
A reporter comes up to the group and says to them:
Excuse me. . . . What’s your opinion on the meat shortage?”
The American says: What’s a shortage?
The Russian says: What’s meat?
The Chinese man says: What’s an opinion?
The Israeli says: What’s “Excuse me”?
Somewhere along the way, Israelis learn that you must be willing to take on higher authorities rather than just following directives from the top, assertiveness is the norm, reticence something that risks you being left behind.
Foreign born citizens of Israel currently account for over one-third of the nation’s population, almost three times the ratio of foreigners to natives in the United States.
Nine out of ten Jewish Israelis are either immigrants or first- or second-generation descendants of immigrants.
Technological innovation is a fundamentally experimental endeavor.
Perspective comes from experience.
Israel has had fiftyfold economic growth in sixty years.
Israel’s key ingredient is more than just the talent of individuals. It is the diversity of backgrounds of its citizens and their attitudes.
Singaporean students, for example, lead the world in science and mathematics scores.
Singapore’s growth is impressive.
But, Singaporeans do not put a high value on initiative, risk taking, or questioning authority. Fear of losing face is one of the reasons Singapore does not have many start-ups. Another reason is that Singaporeans are taught to do things by the book.
Israelis are on the other side of the spectrum — they don’t care about the social price of failure, they question authority and accepted ways of thinking. This is the cultural aspect that makes Israel’s start-up scene tick.
Israelis have not only talent but also tenacity, insatiable questioning of authority, determined informality, and they also have a unique attitude towards failure, a sense of purpose, ambition and determination to achieve.
In Singapore routine, rules and systems govern everything.
Israelis emphasize improvisation, questioning authority, questioning everything. Everything in Singapore runs counter to that mentality.
In Singapore public dissent is discouraged if not suppressed altogether.
In Israel everything is examined, re-examined and re-examined again, and subjected to a rich heated debate.
Flow of new ideas prevents ossification of the mind.
Israelis are wary of kowtowing and group think. They cross boundaries.
Start-ups that transform entire global industries use specialized talent.
Most kids in Israel over the age of 10 have a cell phone and a computer in their bed room.
Israelis have more cell phones per capita than anywhere else in the world.
In Israel, unlimited phone lines can be set up with only a few hours notice.
Blackberry’s never lose reception and wireless Internet is as close as the nearest cafe.
Forty-five percent of Israelis are college educated.
They have a very work oriented attitude.
In “Start Up Nation” Dan Senor and Saul Singer tell the following story about the founders of Google’s (Sergey Brin and Larry Page’s) visit to a Israeli high school, Shevach-Mofet High School.
This was the founders only stop in Israel, aside from the prime minister’s office.
The Google founders strode into the hall, and the crowd roared. The students could not believe their eyes. “Sergey Brin and Larry Page … in our high school!” one of the students proudly recalled. What had brought the world’s most famous tech duo to this Israeli high school of all places?
The answer came as soon as Sergey Brin spoke. “Ladies and gentlemen, girls and boys” he said in Russian, his choice of language prompting spontaneous applause. “I emigrated from Russia when I was six,” Brin continued, “I went to the United States. Similar to you, I have standard Russian-Jewish parents. My dad is a math professor. They have a certain attitude towards studies. And I think I can relate that here, because I was told that your school recently got seven out of ten top places in a math competition throughout Israel.”
This time the students clapped for their own achievement. “But what I have to say,” Brin continued, cutting through their applause, “is what my father would say — What about the other three?“
Most of the students at the Shevach-Mofet school were, like Brin, second generation Russian Jews. Shevach-Mofet is located in an industrial area in South Tel Aviv, the poorer part of town and for years notoriously one of the roughest schools in the city
By the beginning of the 1990s, when large waves of Russian Jews began to arrive following the collapse of the Soviet Union, the school was one of the worse in the city. At that time, Yakov Mozganov, a new immigrant who had been a professor of mathematics in the Soviet Union, was employed at the school as a security guard. This was typical in those years: Russians with PhDs and engineering degrees were arriving in such overwhelming numbers that they could not find jobs in their fields, especially while they were learning Hebrew.
Mozganov decided that he would start a night school for students of all ages — including adults — who wanted to learn more science or math, using the Shevach classrooms. He recruited other unemployed or underemployed Russian immigrants with advanced degrees to teach with him. They called it Mofet , a Hebrew acronym of the words for “mathematics,” “physics,” and “culture” that also means “excellence.” the Russian offshoot was such a success that it was eventually merged with the original school, which became Shevach-Mofer. The emphasis on hard sciences and on excellence was not in name only; it reflected the ethos that the new arrivals from Russia brought with them to Israel.
Senor and Singer state that Israel’s economic miracle is due as much to immigration as to anything. Israel is now home to more than seventy different nationalities and cultures. But the students Sergey Brin was addressing were from the single largest immigration in Israel’s history. Between 1990 and 2000, eight hundred thousand citizens of the former Soviet Union immigrated to Israel; the first half million poured in over the course of just a three year period. All together, it amounted to adding to adding about a fifth of Israel’s population by the end of the 1990s. The U. S. equivalent would be a flood of sixty-two million immigrants and refugees coming to America over the next decade.
Quoting a statement about the Jewish attitude made by Nathan Sharansky, the most famous Soviet Jewish immigrant in Israel, set forth in “Start Up Nation:” “For us in the Soviet Union,” Sharansky explained, “we received with our mothers’ milk the knowledge that because you are a Jew — which had no positive meaning to us then, only that we were victims of anti-Semitism — you had to be exceptional in your profession, whether it was chess, music, mathematics, medicine, or ballet …. That was the only way to build some kind of protection for yourself, because you would always be starting from behind.”
The result was that Jews made up only about 2% of the Soviet population, they counted for “some thirty percent of the doctors, twenty percent of the engineers, and so on,” Sharansky told us.
That was the ethos Sergey Brin absorbed from his Russian parents, and the source of the same competitive streak that Brin recognized in the young Israeli students. And it gives us an inkling of the nature of the human resource that Israel received when the Soviet floodgates were opened in 1990 — allowing immigration of Jews from the Soviet Union to Israel.
The educated elite of a country the size of the Soviet Union would not easily fit into a country the size of Israel. Before this mass immigration, Israel already had the highest number of doctors per capita in the world. The Russians could not have arrived at a more opportune time. The international tech boom was picking up speed in the mid-1990s, and Israel’s private technology sector became hungry for engineers.
Again quoting from “Start Up Nation:” Walk into an Israeli technology startup or a big R & D center in Israel today and you’ll likely overhear workers speaking in Russian The drive for excellence that pervades Shevach-Mofet,and that is so prevalent among this wave of immigrants, ripples throughout Israel’s technology sector. … “if you are an immigrant in a new place, and you’re poor, or you were once rich and your family was stripped of its wealth — then you have drive You don’t see what you’ve got to lose; you see what you could win. That’s the attitude we have here across the entire population.” — explains a venture capitalist the authors interviewed.
Israeli culture and experiences force Israelis to think ahead.
On the basis of number of patents issued, number of published academic articles, number of IPOs, amount of money raised in IPOs, Israel ranks very high as an economic miracle.
In addition to boasting the highest density of start-ups in the world (a total of 3,850 start-ups for every 1,884 Israelis), more Israeli companies are listed on the NASDAQ Exchange than all companies from the entire European continent.
In 2008, per capita venture capital investments in Israel were 2.5 times greater than in the United States, more than 30 times greater than in Europe, 30 times greater than in China, and 350 times greater than in India.
Comparing absolute numbers, Israel — a country of just 7.1 million people — attracted close to $2 billion in venture capital, as much as flowed into the United Kingdom’s 61 million citizens or to the 145 million people living in Germany and France combined in 2008.
It is important to understand Israel’s economic miracle and its crusty, resourceful impatient and effective people because innovation is the best and maybe only way to get out of an economic hole.
37. Spirit, Attitude, Initiative, Self-Reliance, Entrepreneurial Talent, Openness to Change Are the Key Ingredients in Productive Endeavors
I admire self-reliance, initiative, productive endeavors and “honest financial success.”
In Smolker Letter No. 5 dated January 1, 2012, I wrote an essay about Hong Kong in which I noted that Hong Kong has the highest per capital number of Rolls Royces. I praised the spirit and attitude of Hong Kongers.
I wrote that I am very impressed that when a person who owns a Rolls Royce parks his car in a “poor neighborhood” the people in tha neighborhood admire the owner, don’t resent that he owns a Rolls Royce. Unlike in the United States, the owner of the Rolls Royce can park their Rolls Royce and leave it unattended in a poor neighborhood without fear that it will be vandalized.
I received (by e-mail) responses to that essay from people with vibrant personalities whose comments captivated my imagination. Nobody commented on my observervation that people in Hong Kong are not envirous of other people’s financial success, that the people who live in Hong Kong admire hard work, self-reliance and success.
The comments I received were about the status consciousness of Chinese people, their wealth, their cleanliness and “spitting” in Hong Kong.
Below are copies of e-mail responses to that essay.
Unless changes were drastically made, almost “everyone” drives a Rolls-Royce in Hong Kong! Even taxis are Rolls Royces’.
You have to stay long enough in Hong Kong to really know them. I had that experience when I visited relatives residing in Hong Kong and staying at Renaissance, a waterfront hotel.
They spit on the streets, train stations even on sidewalks which is a complete challenge dodging at all times hoping they won’t hit my Jimmy Choos shoes!
Everyone seems to have hacking cough and its just disgusting what they spit out. They have no qualms about them doing it even if you scream.
I can go on and on but you have to experience it yourself to believe it.
FYI, because of my late husband’s manufacturing business, we went to the Far East every year to do business. Then visited Hong Kong. My main purpose is to shop, but I find that a better place to shop and stay longer is Singapore which is the cleanest country in the Far East.
The police in Singapore will put you in jail if you get caught spitting on the streets or anywhere.
You can also easily visit Bali, which you will find the most beautiful place (our opinion) to visit.
I don’t wear Jimmy Choo shoes and I don’t ride in a Rolls when I am in Hong Kong and I also don’t frequent neighborhoods and hotels where spitting on the ground or other people’s shoes is common.
I have no idea which part of HK that respondent was in but where my husband and I stayed, there was no spitting or anything disgusting. Also, fewer Rolls Royces and many Lexuses.
My husband and I have variously stayed at the Four Seasons Hong Kong, both Mandarin Oriental on HK Island, the W Hotel in Kowloon, and also the new Ritz Carlton in Kowloon.
The Sun Hung Kai properties (IFC etc) are impeccably run and the washrooms have two cleaners stationed permanently in them at any one time.
Even when we went to the “seedier” areas, Mongkok, there was little spitting.
And why would you be wearing Jimmy Choo shoes walking around HK as a tourist?
That person’s broad labelling of HK as a disgusting place is very misleading and ill informed.
I couldn’t keep silent any longer about the spitting and the Rolls Royce’s in Hong Kong.
Your friend was partially right: Since the 1950’s, there have been signs in all public places, buses, ferry’s, admonishing: “Do Not Spit” 不得吐啖. But the practice was pervasive and no one paid attention to the signs.
I remember a not so funny incident on the Star Ferry where a nicely dressed businessman sitting next to the window “did his thing”. He didn’t notice that the glass window was “Up”. He left his mark on the clean window and quickly tried to wipe it off with his hanky.
Everyone carried a cloth hanky those days.
That was in the early 1950’s.
Since then, Hong Kong has seen many, many changes: City campaigns to clean up and modernize, such as Do not litter campaigns, Do not spit campaigns, Respect the elderly campaigns….etc.
Then came the high-rises, the Metro, Japanese tourists and shoppers and 1997.
Eventually, Hong Kongers began to feel they were in the eyes of the world. And some of those campaigns began to take root.
People queue up for buses and trains. There are trash bins on the streets and people actually use them!
Yes, there are the old folks who still push and shove in lines, and spit. They are the old dogs who won’t learn. They live in Mong Kok and Shau Kee Wan. I know those people. They’re my aunts and uncles and relatives and old friends. But the majority of the Hong Kongers don’t do that anymore.
Yes, I’ve heard that Hong Kong has the greatest number of RR’s. But Hong Kong is a very status seeking society.
My wife’s cousin carries a Chanel hand bag to lunch because she doesn’t want her father’s secretary to be better equipped than her.
The rich definitely flaunt it.
I have to say that HK is a very clean and orderly society today. But it also depends on where you go.
For those who are wondering what the “fishing village” of Shau Kee Wan looks like, here is an article with a good photo.
Further to the prior person’s comments in reference to Mongkok, here is an article on Mongkok that includes 10 photos. I recommend viewing the photos at the maximum resolution that will fit on your screen. Based on my visits to Mongkok, the photos fairly present Mongkok as you can see it when you are there.
38. My Conclusion:
Wisdom is a sense of reality, knowledge of how to live, a special sensitiveness to the contours of the circumstances in which we happen to be placed.
Some human beings are better aware and are better at being aware than others.
Each of the commenters whose comments are repeated above is a frank intelligent knowledgeable person who functions at a high level.
Each has a different point of view, a different reaction to Smolker Letter No. 5 based on real life experience.
We should not overlook that we live in a country where people can disagree on fundamental moral issues such as birth control and not be put in jail for disagreeing.
The United States is a beautiful place to live with spaceous blue skies in which you can see the sun. The United States has natural beauty, it has fields of amber waves of grain, rivers, oceans and majestic mountains,.
Although the United States is till a country of immigrants from many nations, people in the United States live in peace. In the United States there are soccer leagues where soccer games are played without the audience rioting.
There is economic opportunity in the United States for new immigrants and college drop-outs.
It is a place where creative hard working productive people want and choose to live.
Happy pausing to think, networking and learning.
Gary S. Smolker, Publisher of the Gary S. Smolker Idea Exchange Blog
Copyright (c) 2012 by Gary S. Smolker