Obama: more engineers, less bankers

A commentator on the internet commented on Obama urging American kids to study engineering instead of finance:

"I hear talk in canadian news about a shortage of skilled workers too, mandating the dire need to import more skilled workers on temp. work visas.

The problem with that is multi faceted. Our education system sucks, flat out, it's broken because they don't put the money into it and instead use it to get you indebted. The quality of the courses isn't there, the quality of the teachers is not there, student loans are less than 40% of what's required for engineering courses which are easily the most expensive, and you can't reasonably work a full time or even part time job while doing an inhuman program like they are unless you just "manager" your way though it.... which is all they are interested in graduating.

Then you look at your options and find that for a 30 to 40 thousand dollar education you qualify to earn just a little over min wage, but hey it's OK because you can work allllllll the hours you want, nobody will stop you.

Standard of living and quality of life are buzz words from a fairy tale that doesn't exist. Forget job security you don't even get that with engineering. Some of the world's very best analog engineers, the guys who wrote your books and designed some of the best components now in use are all getting the axe right now. There's nobody better, but there's millions cheaper. You don't even have to worry about them comming here to take your job anymore, the companies are going over there.

Anyway for decades they've created a void by underfunding education and making it feasible for the select few, further poisoning it by favoring the manager/ceo type that cheats their way through without knowing a damn.

Their solution to this self created void is always the same, you never hear them say "we really need to see what we can do to produce better and more engineers and make sure they have incentive to go into such a career. No, what they say is "there's big gap, must import".

They import ingineers that come and work for peanuts, send all their money home where their family can live off it like kings. Obviously this is just another bubble to be burst, but before it does they'll take it for all they can, and our countries will rott from the inside out as they so obviously are.
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Ways to improve the investment environment in developing countries

Developing countries, also known as the emerging markets, have attracted tremendous interest of foreign capitals from their richer counterparts. The reason is simple, there is more room for growth. This huge inflow of capital, usually in the form of foreign direct investment or international bank lending, is subjected to a number of systematic risks that the investors would be aware of. The risks include economic and political ones, such as the fluctuation of currency exchange rate, protectionism-driven trade policies, and local tax codes. Developing countries courting the global capitals nowadays are willing to stabilize their exchange rates, lower their tariffs for imports and reduce the corporate tax that foreign companies. Some ex-developing countries have successfully leveraged these policies to attract foreign investment, and simultaneously build their own economies using the technical and managerial expertise that come along. Ireland, the celtic tiger in the 90s, is a case in point. The low corporate and export tax combined with the highly educated workforce of the country have attracted numerous multinational companies to put regional headquarters and manufacturing divisions in there, and ireland gradually becomes the export platform for these firms. Many cities in China, such as Shanghai, Dalian, Tianjin, now all have the so-called high-tech zones, which are trying to do what exactly ireland, south korea, taiwan, or singapore were doing 10-20 years ago.

There are other risk factors that foreign capitals might face in developing countries that are not as easy to manage. The top three risks are social-political instability, corruption and lack of transparency. Social-political instability affects the security of the capital investment and the market demand (which might be highly manipulated by the governments). The poorest countries in the world have always been those with constant domestic unrest, albeit they might have the lowest wages. Corruption puts the foreign investment in an unfair competition. Foreign companies are restrained to bribe local officials to be favored over a government bid, for example, will lose to another firm which is willing to do so. The winner of the bid might not necessarily have the most cost-effective solution. The bidders who on the other hand have the expertise are discouraged from participating again. At the end, everybody loses except the corrupted officials, who usually are not accountable for how they are spending the tax-payer's money. Furthermore, accurate and updated financial information, macro-economic data, and information about government policies are usually not easily available to foreign investors. As a fund manager deciding which chinese companies to put your clients money into, for instance, you bear a lot of risks: does the company you are researching published trustworthy financial statement? Is the unemployment rate reported by the government accurate enough so that I can use that to plan my factory capability? Will my investment on a certain project be at risk if suddenly the government change its policies to favor another project?

These questions are exactly what a developing country should tailor its economic reform to address to make the country more attractive to a continuous flow of foreign investments. Feasible economic measures to reduce corruption, include reducing relation-based bank lending, better accounting standards and allowing more foreign competitors to enter the local market. If banks are operating on their own instead of being guaranteed by the government, they would only lend loans to the most profitable projects. If more foreign players are let in, with their more sophisticated operations and managements, weaker local companies who used to rely on bribery will be forced out of the competition. Fast and more accurate disclosure of information too is desirable for governments as well as for banks and private companies. In U.S., macro-econ data is published everyday, both by public and private agencies. Investors learn these data and make decisions. Such efficiency can quickly direct resources to the most needed areas away from those non-profitable ones. In developing countries, herding among investors (investors following not their data-driven decisions but the crowd) is a common phenomenon. The root cause is the lack of accurate information that they can study. Such herding tends to amplify the economic cycle and driving output and asset prices higher in booms and lower in slumps. The economic stability will therefore be seriously damaged due to the lack of information.

GE's RnD Budget and Warranty

In a seminar given by Dow's CTO Bill Banholzer, a veteran from GE Global Technology, he briefly mentioned an interesting budgetary strategy of GE's RnD. The warranty of the products from GE, is budegted into RnD's spending. That means, if you RnD folks screw up the design, which leads to a reliability problem of the products, you need to pay for the warranty.

Sounds like a smart idea to me.

Observations from Effective Economy (1)

I will start documenting some characteristics that I observe from effective economies. This will be accumulated bit by bit. Today is about corporate management and culture.

1. In an effective company, the rewards or compensation received by employees (including managerial leaderships)are directly linked to the economic value they have created, in a transparent way. People management involves ranking and motivating your team members by their impacts to the companies in a data-driven fashion. The relevant data should reflect the amount and significance of work they have accomplished.

2. In an effective company, employees are also held accountable for their mistakes. Rules are established to guide employees on daily business practice. The rules should be clearly and unambiguously written.

3. In an effective company, goals and achievements are quantitatively measured.

What can you do during uncertain stressful time?

The economy continues winding down and layoff pink-slips are blanketing everywhere in the globe. Unknowing for how long you can hang on to the job you have, it's an uneasy and grilling experience. I want to share with you a few things on how I deal with uncertainty and this job-related stress. It's not because I am an expert on this topic. Every one has their own stress management tricks. Most of us are already pretty good dealing with stress. But generally what people do is to avoid it. Many people resort to alcohol, drugs, sex, shopping, disorderly eating instead on facing and attacking the stress directly. Here I give you my two cents.

1. Identifying the long term areas that are core and important to you. We all want to have a job. Or you might be losing your home. Or your stock portfolio might worth <10% of it's value a year ago. But these are not the core values that characterize you. Your family and friends, your health, your personality, and your knowledge are. Underlying the volatile, uncontrollable aspects in your life such as net wealth and job, are the fundamentals. And the areas that I just identified are the fundamentals.

2. Stripping your material lust to the very least. Try to think of what you can carry with you if you are about to a refuge. I do this thinking all the time and now I am pretty satisfied having a minimalist material life. Knowing that my family and my knowledge are much more important than the stuff that I own is very relieving.

3. Setting a long term goal and continuing working towards it. Try to picture what you want to be doing in 10-15 years. I, for example, have several goals. I want to be an entrepreneur in china providing effective, free-market solutions to solve business or social problems. There is a lot of white space in China. For example, how to direct the vast selection of manufacturing products to the Chinese market, how to provide an effective quality control system for products, how to help finance entrepreneurship in high-tech, high-growth industries, and how to protect their fruits. To be able to do that, I need knowledge in technology (having a PhD gives me a good start), economy, finance and business management. I won't be surprised if I find myself in a business school somewhere down the road.

$. Try to stay focused. Do one thing at a time. I have to admit that I am not that good in this area.

5. Having said the above three points, all of which are interconnecting and it's about living an active life, the last but not the least is keep in touch with family and friends.

Japan’s Crisis of the Mind - MASARU TAMAMOTO

RECENT events mark Japan’s return to the world’s stage, or at least so it seems. Tokyo was Secretary of State Hillary Clinton’s inaugural overseas destination. Last week, Prime Minister Taro Aso was the first foreign leader to visit the Obama White House. All this suggests that Washington sees Japan, the world’s second-largest economy, as a powerful nation. If only we saw ourselves the same way.

The truth is, Japan is a mess. Mr. Aso’s approval rate recently hit 11 percent, and his ruling Liberal Democratic Party is in open disarray. His predecessor barely lasted a year. The opposition Democratic Party of Japan just offers more of the same. This is largely because we have become a nation of bureaucrats. What passes for national policy is the sum of various ministerial interests, often conflicting or redundant, with jealously guarded turfs and budgets.

There can be no justification for all those mostly unused airports. Or for roads that lead nowhere. Or for the finance minister who appeared to be drunk at the Group of 7 meeting this month in Rome. Our problem is so deep that it sometimes seems that no political party can tame the bureaucracy and put in place a coherent national agenda.

But what most people don’t recognize is that our crisis is not political, but psychological. After our aggression — and subsequent defeat — in World War II, safety and predictability became society’s goals. Bureaucrats rose to control the details of everyday life. We became a nation with lifetime employment, a corporate system based on stable cross-holdings of shares, and a large middle-class population in which people are equal and alike.

Conservative pundits here like to speak of this equality and sameness as being cornerstones of “Japanese” tradition. Nonsense. Throughout much of its history, Japan has had social stratification and great inequality of wealth and privilege. The “egalitarian” Japan was a creature of the 1970s, with its progressive taxation, redistribution of wealth, subsidies and the dampening of competition through regulation. This all seemed to work just fine until our asset-price bubble popped in the 1990s. Today, the hemmed-in Japanese seem satisfied with the knowledge that everyone around them is equally unhappy.

Since the middle of the 19th century, our economic success has relied on the availability of outside models from which to choose. Our model for social security took inspiration from Bismarck’s Germany, state planning from the Soviet Union, public works from the Tennessee Valley Authority, automobile assembly and manufacturing from Ford. Much of Japanese innovation has involved perfecting what others have created. Sony is famous for its Walkman, but it didn’t invent the tape recorder. Japan’s rise to economic greatness was basically a game of catch-up with the advanced West.

So what happened once we caught up? Over the past two decades, the answer has largely been paralysis. Japan’s ability to imitate outside models was mistaken for progress. But if progress is defined by pursuing a vision of a desirable future, then the Japanese never progressed. What we had was a concept of order and placement, which is essentially stasis.

In the West, on the other hand, the idea of progress rests on establishing individual autonomy and liberty. In Japan, bureaucratic rule offered security and predictability — in exchange for personal freedom. The problem is that our current political leaders can’t keep their side of the bargain. Employment security can no longer be guaranteed. The national pension and health plans seem to be insolvent in the long run. People feel both insecure and unfree.

Signs of despair are everywhere. Japan has one of the highest suicide rates among rich countries. There may be as many as one million “hikikomori,” from teenagers to those in their 40s, who shut themselves in their rooms for years on end. Then there are all those “parasite singles” — or unmarried adults living with their parents. But by far our most serious problem is a declining and aging population. Given present trends, total population will likely decline from around 130 million to under 90 million in 50 years or so. By that same time, 40 percent of Japanese could be over 65.

If we want to survive as a nation, we must shed our deeply rooted resistance to immigration. Contrary to widespread prejudices in favor of keeping Japan “pure,” we desperately need to dilute our blood. Our aging nation will need millions of university-educated middle-class immigrants with high productivity, people who will put down roots and raise families, whose pride and success will be the affirmation of new Japanese values.

Japan desperately needs change, and this will require risk. Risk-taking is not common among the bureaucratically controlled. You won’t find many signs on Japanese beaches saying, “Swim at your own risk. No lifeguard on duty.” If that sign were to appear, many Japanese would likely ask the authorities to tell them if it is safe to swim. This same risk aversion translates into protectionism and insularity. The ministry of agriculture, for example, wants to increase self-sufficiency in food. There is not nearly enough critical thinking and dissent in the Japanese news media.

Still, the idea that the Japanese are afraid of risk has no basis in history, for better or for worse. Remember Pearl Harbor? In fact, Japan’s passiveness today is in large measure a calculated and reasonable reaction to its behavior during the Second World War. But today, this emphasis on safety and security is long past its sell-by date.

We have run out of outside models to imitate. We must start from scratch, embracing an idea of progress that is based on innovation, ambition and dynamism. Doing so will take risk — and extraordinary leadership. But the alternative is to continue stumbling down a path of decline.

Masaru Tamamoto is a senior fellow at the World Policy Institute.