Smart Economy

Can neuroscience help Gap produce a better logo?

 

After Gap’s new logo failed, Neuromarketing company NeuroFocus used EEG and eye-tracking techniques to investigate the neural responses of a group of volunteers who were shown both Gap logos.

Neurofocus explained that the new logo didn’t register as novel or stylish in the volunteer’s brains, two big no-nos for a successful logo. The old logo on the other hand was a big hit, scoring high in the company’s “stylish” metric.

Source: New Scientist Short Sharp Science, Oct 20, 2010

Sarcasm detecting software; Just what everyone needs (not)

New Scientist writes last week:

Just what we need: sarcasm software  25 May 2010 by MacGregor Campbell

Computers are getting better at understanding human languages, thanks partly to algorithms that can analyse sentences for positive or negative sentiments, says Ari Rappoport of the Hebrew University of Jerusalem, Israel.  But picking up on sarcasm is still a problem.  "In many cases, sarcasm is difficult even for people to recognise", never mind computers, he says.

Rappoport and colleagues wrote a sentiment-analysing program.  They then trained this software to recognise sarcasm by feeding it sentences that had been flagged up by human reviewers as likely to contain sarcasm.

The team used the trained program to analyse a selection of product reviews on Amazon.com and a random selection of posts on Twitter.  Three human volunteers were asked to rate the same material for sarcastic content.

The algorithm agreed with the volunteers 77 per cent of the time for Amazon.com product reviews and 83 per cent of the time for the tweets.

Nice work, really "It is a very exciting paper, because it attacks a problem that I didn't really think we were ready to make headway on," says Lillian Lee, a natural language processing expert at Cornell University in Ithaca, New York, who was not involved with the study.

David Traum, a language researcher at the University of Southern California in Marina del Rey, says that getting people to agree about what constitutes sarcasm from single utterances with little context is difficult.  "Really all we can say is that for these cases computers are about as good as people at agreeing with other people about what is sarcastic."

The research was presented at the International AAAI Conference on Weblogs and Social Media in Washington DC this week.  The tool could be used by marketers to track online public sentiment surrounding brands."

Walter Derzko, The Opportunity Clinic, Smart Economy, Toronto

How to predict the future with over 90% accuracy? use Bayesian Game Theory

I've been compiling a list of qualitative and quantitative foresight (prediction) methods and the total has passed over 50.

New Scientist magazine this week reviews one quantitative method called Bayesian Game Theory, in surprisingly quite an understandable fashion, that even a lay person like me can understand...well maybe not all the math details but the overall workings are quite clear.

Ever wonder what methods the CIA uses to predict complex geopolitical events?

They turn to Bruce Bueno de Mesquita, a professor of politics at New York University, who back in 1979 developed a game theory based prediction model, which he calls predictioneering. He says" I can predict events and decisions that involve negotiations, coercion (lies, bluffing, reneging on promises), cooperation or bullying." The model predicts what people will do in "strategic  situations" where the outcome also depends on other people's decisions ie domestic politics, foreign policy, geopolitical conflicts, business decisions and social interactions.  

New Scientist writes: "

"Over the past 30 years, Bueno de Mesquita has made thousands of predictions about hundreds of issues from geopolitics to personal problems. Overall, he claims, his hit rate is about 90 per cent. So how does he do it?

Examples: Terrorism & Climate Change

Terrorism:

"Bueno de Mesquita recently used it to make a prediction on the political situation in Pakistan. Working with a group of students, he asked how willing the Pakistani government would be to pursue Al-Qaida and Taliban militants in its territory, and how the US government could exert influence on their decision."

In January 2008 the students fed in data on all the players, including the US, Pakistan's then president Pervez Musharraf and other leading Pakistani politicans. Their assumption was that the US would offer foreign aid to persuade Pakistan's leaders to target the terrorists, and Pakistan would try to extract the maximum amount of aid possible from the US.

The model predicted that to get maximum cooperation from Pakistan, the US would need to donate at least $1.5 billion in 2009, double the projected 2008 figure. In return for this Pakistan would pursue the terrorists on a scale of 80 out of 100, but no more. In other words, the leadership would make considerable effort to reduce the terrorist threat but not to completely eliminate it. "The Pakistani government are no fools," explains Bueno de Mesquita. "They know that the money will dry up if Al-Qaida and the Taliban are destroyed. So they will rein the threat in and reduce it, but not utterly destroy it."

The outcome? According to Bueno de Mesquita, the US government authorised $1.5 billion in foreign aid to Pakistan in 2009, and the Pakistani leadership sustained pursuit of the militants at that level. "We have done very well," says Bueno de Mesquita.

Climate Change:

So what of the future? Another of Bueno de Mesquita's recent predictions addresses the future of climate change negotiations up to 2050. Depressingly, he predicts that although the world will negotiate tougher greenhouse gas reductions than in the Kyoto protocol, in practise these are likely to be abandoned as Brazil, India and China rise in power in relation to the European Union and the US."

See: The Man who sees the Future, New Scientist Volume 250 No 2752 March 20,2010,  pg 42 

Walter Derzko

When will the recession end? Part 42 More lies, revisions, paradoxes, deceptions, omissions.

Over a  year ago, I warned our regular Smart Economy blog readers to be on the lookout for well hidden, camouflaged government lies, revisions, over hype, paradoxes, deceptions and omissions that would create a false image of economic prosperity, where none exists and an illusion of "we're back to normal times."

Read the rest of the post below

Walter Derzko, Smart Economy, Toronto

Author of the soon-to-be published book- Opportunity 45 Scenarios to Drive Your Business in Challenging Times,

published by J. Wiley and Sons

ISBN13: 978-0-470-73761-3

ISBN10: 0-470-73761-1

 

Contact us to book your Opportunity Clinic workshop or for a keynote speaker for your next event

The Chinese Paradox

Take China-the fastest growing economy in the world...well maybe? I've always had my serious suspicions about the accuracy of Chinese GDP growth numbers.

100 years ago during the Great Depression, America was hit the hardest economically, because they were the "prime exporter to the world" and in the dirty 1930's when everybody stopped buying US exports, America suffered the most. (Just think...why didn't other countries in the 1930's suffer their own local  Great Depressions? (--well with the exception of the 1933 man-made, forced  Soviet famine in Ukraine, caused by the Soviet Union (read Russia).

China has taken over as the new  "exporter to the world" ( think Japan, America and Walmart) so China should now  be in a recession too and not just America. It just doesn't make any economic sense, unless the Communist government is orchestrating the biggest economic deception and ponzi scheme in the world.

Most savvy entrepreneurs and business people now recognise that all the billion dollar bailouts in China and the USA has only delayed the next great depression, but it didn't eliminate the looming threat of it altogether. All the trillions of dollars of private, business and national sovereign debt accumulated around the globe has to be deleveraged first, one way or another, before things get back to normal. 

[see How China Cooks Its Books  BY JORDAN CALIN  in the widely respected Foreign Policy Journal from 2009 http://www.foreignpolicy.com/articles/2009/09/03/how_china_cooks_its_books ; It's an open secret that China has doctored its economic and financial statistics since the time of Mao and there is nothing to indicate that anything has changed.  But could it all go south now?  --Walter Derzko]

Last June, as  the economy and exports in China were supposedly booming, industrial electricity consumption was dropping, indicating that industry was closing,defaulting and not growing as fast in any case. Since then, the communist Chinese government mysteriously stopped releasing public numbers on electrical demand and usage. I wonder why?

UPDATE: One reader responds with an on-the-ground view:

"...[...]..."in prefecture-level cities --- provincial capitals --- there is huge amounts of construction and consolidation. Huge apartment complexes are being built and older Cold War-era Communist-style housing blocs (nicknamed Khrushchevka's by the Russians--Walter Derzko) are being torn down. The adjustment in figures could also be a realization of energy efficiency as older buildings are torn down and new ones built." ..[..]...Maybe industrial electricity usage has dropped because Chinese companies are becoming more energy conscious and conservative. Lots of people I've met, befriended or interacted with have demonstrated a basic awareness of environmental understanding.

At the same time, most people don't have a deep understanding of anything other than the history of the country and society. Only financial professionals understand finance. Likewise, only teachers understand teaching. Society is very compartmentalized. It makes everything efficient, in a unique way, because not as many people engage in finger pointing criticism." 

We read reports that the  growth of new car sales in China has been growing exponentially but we don't see a corresponding increase in gasoline consumption. Has China figured out how to drive on air or water, or are Chinese officials just storing their new cars in the garage?

And what about all those exports? Where are they going when the cumulative imports of their top trading  partner nations are either flat or still decreasing? Global trade is not just at a comparative standstill, but has nose dived again from a local peak in Nov 2009. The Baltic Dry Index (BDI) is at record lows for the last two years, dipping from 4661 in Nov 2009 & dropping to 2864  on the last business day of Jan 2010.

Surely, the Chinese are more quality conscious and wouldn't be stupid enough and stoop low enough to actually buy and use their own junk and kitchy production at home?

UPDATE: Monday morning Feb 1, 2010, I received an email ( bold and underlining is mine for emphasis) from a regular Smart Economy blog follower --an expat living in China who writes a differing opinion:

Walter ...[..]...This is a fallacy that many economists and critics fall into. What they and you have failed to realize is that the Chinese consumer market is the largest in the world. And it is under-provided. Chinese consumers have historically not been prominent players in the global economy because of their relatively lack of wealth. This wealth is mainly accumulated in Beijing's foreign exchange reserves and sovereign wealth funds, not to mention the coffers of China's political elite.

However, this is changing rapidly. The financial crisis in the US is quickly shifting markets in China, and this effect is playing out now and will continue over the next two or three years. The average Chinese salary is rising, so Chinese consumers are awakening.

Additionally, the government's stimulus intended to get capital into the hands of consumers for consumption. I believe that it was distributed unlike the American stimulus -- which went directly into banks. The Chinese stimulus went into infrastructure projects. The trickle down to the consumer will be much quicker than in the United States. Chinese banks are also more willing to lend credit.

Finally, Chinese merchandise, while traditionally considered "junk", is no longer junk. Check the labels of everything that you own.

Industry leaders all outsource production to China, because that is where labor is most abundant and cheapest. Not to mention the political climate is stable, if not questionable to Western standards.You'll be surprised that most of what you own and consider "valuable" is made in China."

..[...]...I live in China, at the moment, in [ommitted to protect the identity of the email sender].

Here is relatively backwater, but it developing at an amazing pace.

There is construction everywhere, transportation networks are upgrading, business are closing and opening almost monthly. Renovation is rampant. It's all very exciting. This is truly a land of entrepreneurial opportunity, if you can clear your initiative through the authorities. Usually this means merely having the money and the resources required to succeed. Not a bad stipulation.

..or is it an inflating construction bubble, as some Chinese economists at the WEF at Davos are speculating ?--Walter Derzko

PBOC Adviser: Asset Bubbles Are Real Worry For China's Economy
Wall Street Journal
BEIJING (Dow Jones)--Asset  bubbles are "the real worry" for China's economy and the government should properly manage them, a key adviser to China's central ...

 Satyajit  Das, a risk analyst, writing about the current situation in China in a story called Riding the Dragon Part 3 observes:

"The Chinese economic model may be unsustainable. It relies on global trade and investment (much of it export related), which together contribute a high proportion of China's GDP. This trade entails importing foreign components that are then reassembled and then exported. Domestic consumption has been kept low. (this conflicts with the above observation--Walter Derzko) Treasure has been built up in the form of domestic savings and trade surpluses.

Recently, China announced that its $2 trillion treasure would be used to make foreign acquisitions to secure exclusive access to raw material. The problem is that China's treasure is already invested in assets of dubious value and limited liquidity to finance global consumption.

Chinese Premier Wen Jiabao warned that the Chinese growth was becoming increasingly "unstable, unbalanced, uncoordinated and ultimately unsustainable". That was two years ago! Currently, China may be aggravating the problems by massive liquidity-driven stimulus to perpetuate a failed strategy.

Speaking at the meeting of the World Economic Forum in Dalian on 10 September 2009, the Chinese Premier Wen Jiabao repeated his message from two years ago without signalling any change in direction: "China's economic rebound is unstable, unbalanced and not yet solid. We cannot and will not change the direction of our policies when the conditions aren't appropriate." 

So as you can see we clearly have two polar opinions about China. So is this an Equivicality Opportunity? (from the Opportunity Clinic--Walter Derzko)

Deflation vs Inflation?

Commodity prices on a number of industrial feed-stocks and inputs has jumped over 100% in 2009, but producers prices have been relatively flat, since the consumer is tapped out and in debt over their heads. One grocery store chain in eastern Canada has even announced that they will stop charging 5 cents for each plastic grocery bag and absorb the cost since the consumer is overstretched.

Many newspapers trumpeted the story last week about Ford, who announced that it has hired 1,500 new workers for a second shift in Chicago, but most neglected to mention that the starting salary for a new worker was only $14 per hour, half of what older unionized workers got when they first started. These newer union workers will never see the same salary caps in old age or pensions that current longtime auto workers now enjoy....a sign of the continued pauperisation of America.  I see more deflation on the way, and not inflation, which is what the government is truly wishing & hopng for ( to inflate their way out of this debt crisis.)

+5.7 GDP growth in the USA -Real growth or Voodoo economics?

And what about the stellar 5.7% 4Q US GDP number?  While government official and bankers where popping champagne corks, regular investors were selling (read dumping)  shares on Wall Street on Friday.  Google's two founder unloaded (dumped) $10 Billion dollars of their own google shares in the last quarter, taking profits off the table.  Even though they still own $29B in current valued shares, it's not a great vote of confidence for sustained growth in the US economy.

So is the +5.7% GDP increase a sign of real economic growth in the US economy or just a statistical quirk?

The latter, it appears.

It's a statistical aberration if you look at the numbers that make up the GDP.

2 /3  or 60% of the +5.7 GDP growth was due to a process called inventory adjustment-a one time boost to the economic bottom line.

Here's the logic.

As sales on everything nosedived during the 2008-2009 recession, due to excess capacity and falling demand, companies were left with backlogs of excess unsold inventory of all sorts. Instead of making new goods, they first reduced and sold the backlogged inventory. Only then do they begin to restock. This restocking in the 4Q 2009 added the 3.4% to the +5.7% of GDP growth.  Note that this is product going on the back room shelf again, back into inventory and not actually out the door, being sold to the consumer.  Funny how that works-when you add goods to inventory thenthat counts at a positive to GDP, when you actually sell soemthing out the back door it's a negative impact to GDP.

Personal consumption which accounts for 70% of US GDP actually slowed in growth from 2.8% in the 3Q when we had "cash for clunkers' program to 2% annualized growth in the 4Q in the run up to Christmas. Since these are the first estimates of GDP they will likely get revised (probably downward by 30% ) just as we saw in the final 3Q GDP numbers. If you take out inventory adjustments, then  real economic growth for Q4 was only 2.3%. Subtract  30% from that estimate and you get an anemic +1.6% for Q4 GDP growth and that's with $787B in stimulus TARP bailouts. The US needs a minimum of 3% growth just to absorb the new 18-25  year olds who want to enter the workforce, forgetting the 7.2 million people who lost their jobs in the recession.

Another major paradox--If the recession is really over, then why has the NBER been silent on the topic and not officially declared the recession (actually a depression) over?

A more balanced, real-time, comprehensive and realistic economic growth indicator that I like better then GDP is called the Chicago Fed National Activity Index (CFNAI) 3 month moving average, which never gets quoted in the mainstream business media. Most entrepreneurs and managers in my class and workshops have never heard of it. It sharply contradicts the official GDP increase, showing  a slowing and flat. stagnant economy for Oct, Nov and Dec 2009 in the USA.

While Obama was cheer-leading the nation in renewed hope, jobs and prosperity in his State of the Union Address (the deception)-the annual WEF gathering of global CEO's, insiders,  politicians, top bankers and economists at Davos (i.e from the World Bank, IMF, Bank of International Settlements, numerous national Central Banks) were all unanimously (both privately and publicly) warning of a possible double dip recession, or W-shaped recovery (the reality).This falls in line with the over 100 assets, debt and hype bubbles that I've cataloged on the Smart Economy blog last week. It was interesting to compare my list of 100 bubblesto the WEF Davos session on the Next Crisis, which  was broadcast publicly.

But the WEF Davos  session I really wanted to see and hear the most was on Bubbles, which, as expected, was held behind closed doors and  out of public view...sadly no webinar was available.

Trouble with Bubbles

Date: 27. 01.2010 Time: 10:45-12:00

The US dollar is the major funding currency of carry trades as investors borrow at exceptionally low interest rates in search of higher returns around the world.

How can potential asset bubbles be spotted and addressed before they emerge?

[...odd..I had absolutely no trouble at all spotting and cataloging over 100 asset, debt and hype  bubbles in 2009 and into 2010 ..I wonder why mainstream economists are having so much trouble? --Walter Derzko]

At the end of  the Next Crisis Davos workshop (which appears to be a given, a-taken-for-granted assumption by most Davos attendees), participants were offered only 3 choices on what would precipitate the next financial crisis   1) excessive sovereign debt, 2) over-regulation of financial services or 3) or global trade protectionism.

As the Washington Post reports:

"Harvard economist Kenneth Rogoff kicked off the Wednesday discussion with a simple, depressing argument: The banking collapse is morphing into a long-term crisis of government debt.  Instead of financial panic, we now face an "illusion of normalcy," with governments stepping in to guarantee everything.  They've succeeded in fending off another Great Depression -- great!  -- but at the cost of skyrocketing debt." ..[..]...And if history is any guide, he said, financial crises are often followed precisely by a wave of sovereign debt crises a few years later.  "In countries like the United States and Britain, I'm not talking about default, but we certainly may have to see very painful political crises," Rogoff predicted, "belt tightening, higher taxes, slower growth." Rogoff, a former chief economist at the International Monetary Fund, believes we're fooling ourselves if we think otherwise: "We may tell ourselves we're better, we've figured things out .  .  .  We're different.  I submit to you: We're not."

Lord Peter Levene, chairman of Lloyd's of London, was up next, arguing that the prospect of overregulation poses the biggest threat.  "I'm from the government -- I'm here to help," he said mockingly.  "You guys in the industry don't know what to do, so we're going to fix it for you."

He was followed by Jacob Frenkel, a former governor of the Bank of Israel, who maintained that the threat of trade protectionism looms large.

The panelist I like the most and who seemed to be the most candid was Chinese central banker Zhu Min who warned the audience  of new Asian crisis.

Who won the debate?

Washing Post summarizes"

"Yet, even in this World Economic Forum crowd, full of fund managers and chief executives, conventional pro-market arguments didn't seem to resonate.  In an anonymous, electronic vote by the members of the packed auditorium, 50.7 percent agreed that government debt poses the biggest threat, 37.3 percent worried most about protectionism and only 12 percent feared over regulation the most."

Government Market Manipulation & Back room politics

It doesn't hardly surprise me that Bloomberg reports that:

"Russia urged China to dump its Fannie Mae and Freddie Mac bonds in 2008 in a bid to force a bailout of the largest U.S. mortgage-finance companies, former Treasury Secretary Henry Paulson said. Paulson learned of the “disruptive scheme” while attending the Beijing Summer Olympics, according to his new memoir, “On The Brink.” The Russians made a “top-level approach” to the Chinese “that together they might sell big chunks of their GSE holdings to force the U.S. to use its emergency authorities to prop up these companies,” Paulson said, referring to the acronym for government sponsored entities.  The Chinese declined, he said."

"Russia sold all of its Fannie and Freddie debt in 2008, after holding $65.6 billion of the notes at the start of that year, according to central bank data."

Don't be surprised !!

I'm sure the US government and other governments have secretly  orchestrated market swings that go in their favor with the Trillions of dollars it holds in your and my tax monies. The estimated cumulatively accounts for the US government  likely totals over  $110 trillion dollars or $12 trillion for the State of California alone.  These secret, off-the-public-balance-sheet,  rainy day investment (CAFR) accounts,  reported in Comprehensive Annual Financial  Reports (CAFR) or Annual Financial Reports are traded by Goldman Sachs and other investment banks. (see Walter Burien's eyeopening video "The only game in Town on http://www.cafr1.com )

And here is my favorite head scratcher:

The tiny African country Ghana has revised its GDP, not by a tiny fraction but up by 50% - Go figure !!! and now projects a 22 % growth in GDP in 2011. ..[next African Growth Bubble?--Walter Derzko]

Ghana’s GDP May Be Revised Up by 50%, Standard Bank Says

By Emily Bowers

Jan. 28 (Bloomberg) -- Ghana may revise up the size of its economy by 50 percent, after underestimating growth for years, Standard Bank Plc said today.

“The implications are clearly huge,” Stephen Bailey- Smith, head of Africa research, said in an e-mailed report.  “Many of the risk measures that we calculate will have a significantly lower denominator,” including fiscal and current account deficits.

While reducing the relative size of the budget deficit, the revision may also cut the impact of oil production, which will begin later this year and was expected to push economic growth to 22 percent in 2011, Bailey-Smith said.  The revision would give a greater weighting to more dynamic sectors of the economy, he said.

“It is our understanding that the Ghanaian authorities (confirmed by the IMF) believe that they have been underestimating GDP and thus GDP growth for many years,” Bailey-Smith said.

No-one was immediately available at the Finance Ministry to comment.

The Bank of Ghana will probably cut its prime lending rate, currently at 18 percent, by 2 percentage points next month, Standard Bank forecast.  The domestic currency, the cedi, will strengthen to 1.35 to the dollar by the end of this year, Bailey-Smith said.  The currency was trading at 1.4305 as of 11:09 a.m. local time.

I wonder where all the hot "carry trade money" that sloshes around the globe is heading to next, after $ $608.5 million dollars just exited from the Russian equity market in the past 12 weeks-another equity bubble that was overinflated and ready to burst.

Have you seen more government lies, revisions, paradoxes, deceptions and  omissions?

Email me and I'll post them.

Walter Derzko, Smart Economy, Toronto

 

Author of the soon-to-be published book- Opportunity 45 Scenarios to Drive Your Business in Challenging Times,

published by J. Wiley and Sons

ISBN13: 978-0-470-73761-3

ISBN10: 0-470-73761-1

 

Contact us to book your Opportunity Clinic workshop or for a keynote speaker for your next event

Technology, Control, Happiness and Depression: Is technology controlling you and your life or vise a versa?

(Graphic from New Scientist)  Just sit back and think for a moment: how long has it been since you read your last email? Scanned your last last Twitter?  Dispatched you previous text message? Updated Facebook or Linked In?

With the annual homage to the  Mecca of consumer materialism -the consumer electronics show  (CES) in  Vegas this month ,it may be appropriate to ask the bigger social question

Is technology controlling you and your life or vise a versa?  

Yair Amichai-Hamburger offers  a provocative opinion piece on this month’s issue of New Scientist (Dec 27, 2009 volume 2739) titled “Shiny unhappy People” in the print version or “Free yourself from oppression by technology.” In  the online version

From his Tetrad model, Marshall McLuhan reminds us that technology has four simultaneous impacts on society...and in this case, here's my take on the social impacts and secondary consequences of communication technologies

 

1)Something gets enhanced?  (materialism, consumption, depression, a stecato culture of information, continuous interruption, a middle class that's under the influence of mass cultural and perpetual distraction, fragmentation of reactive efforts, sense of being overwhelmed and not knowing were to turn, public passivity, digital version of divide to conquer etc )

2) something gets obsolesced or lost?  (social relationships, happiness, tenacity & longevity of thought, thoroughness,  propensity for societal action, coordinated social response)

3) something gets brought back or retrieved? (digital-slavery, time enslavement ) and

4) something gets flipped or reversed?  (from ease of communication to communication stress &Info overload or what I call pauperization of communication & information, debasted or watered-down wisdom)

 

Amichai-Hamburger touches on  all 4 of these social impacts- enhancement, retrieval, obsolescence, and reversal.

 

Here’s a recap and summary of his key points

• "Are we being served by these technological wonders or have we become enslaved by them?"
• We living in an"age of melancholy" coined by psychologist Daniel Goleman to describe our era. "People today experience more depression than previous generations, despite the technological wonders that help us every day. It might be because of them."
• "Our lifestyles are increasingly driven by technology. Phones, computers and the internet pervade our days. There is a constant, nagging need to check for texts and email, to update Facebook, MySpace and LinkedIn profiles, to acquire the latest notebook or 3G cellphone. "
• "For many of us it is becoming increasingly difficult to control the impulse to check our inbox yet again or see whether the headlines have changed since we last looked. [...] In many homes, the computer has become the centre of attention; it is the medium through which we work and play."
• "How did this arise, and what is it doing to us? In this era of mass consumption, we are surrounded by advertising that urges us to find fulfillment through the acquisition of material goods. As a result, adults and children increasingly believe that in order to belong and feel good about themselves, they must own the latest model or gadget."
• "Yet research has shown that people who place a high value on material goals are unhappier than those who are less materialistic. Materialism is also associated with lower self-esteem, greater narcissism, greater tendency to compare oneself unfavorably with other people, less empathy and more conflict in relationships."
• "People who place a high value on material goals are unhappier than those who are less materialistic "--N.B. this is supported by other studies that show consumers value "experiential events" over "material goods"--Walter Derzko
• "Our culture also constantly reminds us that time is money. This implies a need for total efficiency, which is why we are allowing laptop computers and mobile phones to blur the separation between work and home. As one unhappy human-resource manager in a high-tech company put it: "They gave me a mobile phone so they can own me 24 hours a day, and a portable computer, so my office is now with me all the time - I cannot break out of this pressure." Sound familiar?"
• "Psychologists generally believe that the lack of a clear separation between work and home significantly damages our relationships with loved ones. It also predisposes us to focus on the here and now at the expense of long-term goals."
• "By imposing these twin pressures, modern society is in danger of swapping standard of living for quality of life. We need ways to help recover those increasingly large parts of our lives that we have ceded to technology, to regain mastery over technology and learn to use it in a healthy and positive way."
• Amichai-Hamburger offers a 4 point  prescription to reagin self-control based on  self-determination theory, developed by psychologists Edward Deci and Richard Ryan of the University of Rochester in New York state. It identifies three vital elements of healthy personal development and functioning that  can be used to recalibrate our relationship with technology. Amichai-Hamburger  thenadds a 4th point below.

1) "The first is autonomy - the feeling that our activities are self-chosen and self-endorsed. When we feel in control, we are able to organize our priorities and place effective boundaries around them. But when we feel we have insufficient control, it leaves us vulnerable to our impulses and causes us to abdicate decisions to other people. It is easy to see how technology undermines autonomy, but also how to regain it. This may be as simple as switching off mobile phones during meals and family time, setting aside specific times to answer emails, and being available only when we choose to be."

2) "We also need a sense of competence, a belief that our actions are effective. In this respect our relationship with technology is complex, because many of us feel competent when we deal with an email, when we have the newest BlackBerry, or because 50 people enjoyed the holiday snaps we posted on Facebook. "

3) "Relatedness:our need to feel close to other people. Technology is a threat to this. Devices like the iPod can be used to create a bubble that disconnects us from normal human interactions, and while some virtual relationships may be truly meaningful, in many cases they come at the expense of real-world connections. Psychologists have found that the pivotal difference between happy and unhappy people is the presence or absence of rich and satisfying social relationships. Spending meaningful time with friends, family and partners is necessary for happiness."

Many North American's have lost this, which is why seemingly poorer nations tend to be happier --Walter Derzko.

4) "Critical thinking. In today's world, where we are potentially available 24/7 to absorb messages from well-honed advertisements, it is vital that we know how to analyze and evaluate their validity - and to neutralize them where necessary."

Autonomy, competence, relatedness and critical thinking are the best ways to establish a balanced approach to technology, and so enhance our well-being.

Intersting question to ponder...will Eastern & Asian cultures (India, China etc) turn to North American ideals of materialism & consumption to find fullfillment in life as they develop economically or to something else?--Walter Derzko

N.B Yair Amichai-Hamburger is director of the Research Center for Internet Psychology at the Sammy Ofer School of Communications, the Interdisciplinary Center in Herzliya, Israel.

Full story here

Walter Derzko, Smart Economy, Toronto

 

Author of the soon-to-be published book- Opportunity 45 Scenarios to Drive Your Business in Challenging Times, published by J. Wiley and Sons

ISBN13: 978-0-470-73761-3

ISBN10: 0-470-73761-1

When will the recession end? Part 33 Société Générale warns clients of Global Economic Collapse scenario

Politicians of all stripes, central bankers and economists employed by stock brokerage firms are all cheering us up-claiming (more like wishing)  that things are getting better on the economic front, yet behind the scenes out of public view, bankers and hedge fund managers are in fact,getting more concerned. ( ..shades of warnings that we saw in 2006 on the Smart Economy blog about the pending US housing collapse and the imploding financial banking system.)

 

The latest to go public with warnings to its customers is the French bank Société Générale who has advised wealthy clients to be ready for a possible "global economic collapse" over the next two years, according to The Telegraph in the UK. They should know since they have been around the recession/depression block several times since their startup in 1863.  In a 68-page report titled "Worst-Case Debt Scenario," SocGen explains that the rescue packages over the past year have merely transferred private liabilities onto government shoulders, creating a fresh set of problems. Debt levels, public or private, are too high as a share of GDP. The deleveraging process will take years to undo the debt problem.

 

SocGen says that under the worst bear-case scenario, the dollar would continue to decline and global equities would retest the March lows.  Property prices would slide again and oil prices would fall back to $50 in 2010. Public debt would explode within two years, with worldwide state debt reaching $45 trillion. Further, the aging population will make it harder to erode debt through growth. As for the U.S., it could take nine years to reduce debt/income ratios to the safe levels of the 1980s.

Full story  here

 

Have you adjusted your business strategy playbook for this contingency? Where you shocked by the financial crisis and did you miss the opportunity windows the first time around in 2007-2008? Do you know how to mitigate the looming threats and seize these new once-in-a-lifetime opportunities again?

 

What could trigger this collapse? It could be a number of things such as a combination of various debt bubbles (18 at last count ) which we have discussed in length before in this blog. One growing possibility  is a country defaulting on its soveriegn debt. This is not unusual and not really out of the ordinary. We  see one or two countries declaring bankrupcy every decade, --remember Russia, or Argentina in the 1908's etc? Well the global banking system can handle a rescue of one or two countries at a time. But, what if this time around we had a cascading failure of a dozen or so failed states like dominoes all collapsing at once? The global economic and financial system is not set up to handle this disaster wild card.

 

Who could that be on that failed states list?

 

The  Top 10 Safest Sovereign Debt List (based on Credit Default Swaps thiis week ) includes Australia,  New Zealand, Belgium, Norway, France, Germany,  the Netherlands, Finland, the U.S., Denmark 

 

Countries with the highest perceived default risk include Argentina, Venezuela, Latvia, Iceland, Lithuania, Kazakhstan, Lebanon, Ukraine and Russia,   See Bloomberg...

 

Wild Card-Dubai (UPDATE Bloomberg Nov 26, 2009) or another oil/gas petro states (such as Russia) may default due to falling commodity prices and growing debt.

 

From Oct 2008.....The creditworthiness of at least 20 countries around the world has more than halved in the last six months as the global credit crisis has deepened. There are growing fears that  other countries such as Pakistan, Iceland, three Baltic states -Estonia, Lithuania, and Latvia, Hungary, Bulgaria, Romania, Serbia, Sweden, Ukraine, Russia, Greece, Italy, (and others in the Eurozone), Turkey, Kazakhstan, Vietnam, South Korea, Venezuela, Mexico, Bolivia and Argentina could all slide into a downward spiral towards bankruptcy..

 

...as Harvard historian Niall Ferguson warns today in a story in the Globe and Mail (There will be Blood Part 2) .."we are now in uncharted waters."

 

 

Walter Derzko,

Smart Economy, Toronto

 

 

 

 

 

Author of the soon-to-be published book- Opportunity 45 Scenarios to Drive Your Business in Challenging Times,  published by J. Wiley and Sons

ISBN13: 978-0-470-73761-3

ISBN10: 0-470-73761-1

Contact us about the Opportunity Clinic workshop and to invite Walter Derzko as a keynote speaker at your next event 

 

When will the recession end? Part 27 The Sun could create a double dip depression

New Solar Cycle 24 Prediction: Fewer Sunspots, But Severe Mass Coronal Ejection (MCE) Activity possible.

 

In the past, human populations have survived 7 climate change-related mass extinction events...James Lovelock reminds us...but are we more vulnerable now and less resilient as a society?

 

Now privately, some scientists are quietly predicting two imminant wild card possibilities-a mini ice age, that could punctuate global warming,  if sun spots do not pick up in the next solar spot cycle and the distinct possibility of severe solar storms. At the extreme, both events could cause billions of deaths in a worst case scenario that we looked at last month.

 

Publically, an  international panel of experts has released a new prediction for the next solar cycle, stating that Solar Cycle 24 will peak in May 2013with a below-average number of sunspots. Led by the National Oceanic and Atmospheric Administration (NOAA) and sponsored by NASA, the panel includes a dozen members from nine different government and academic institutions. Their forecast sets the stage for at least another year of mostly quiet conditions before solar activity resumes in earnest [..they hope].

 

 

This plot of sunspot numbers shows the measured peak of the last solar cycle (Solar Cycle 23) in blue and the predicted peak of the next solar cycle (24) in red. Credit: NOAA/Space Weather Prediction Center.

 

"If our prediction is correct, Solar Cycle24 will have a peak sunspot number of 90, the lowest of any cycle since 1928 when Solar Cycle 16 peaked at 78," says panel chairman Doug Biesecker of the NOAA Space Prediction Center, Boulder, Colo.

 It is tempting to describe such a cycle as "weak" or "mild," but that could give the wrong impression. "Even a below-average cycle is capable of producing severe space weather,"says Biesecker. "The great geomagnetic storm of 1859, for instance, occurred during a solar cycle of about the same size we’re predicting for 2013."

The 1859 storm -- named the "Carrington Event" after astronomer Richard Carrington who witnessed the instigating solar flare -- electrified transmission cables, set fires in telegraph offices, and produced Northern Lights so bright that people could read newspapers by their red and green glow. A recent report by the National Academy of Sciences found that if a similar storm occurred today, it could cause $1 to 2 trillion in damages to society’s high-tech infrastructure and require four to ten years for complete recovery. For comparison, Hurricane Katrina caused $80 to 125 billion in damage.

 

 

The latest forecast revises a prediction issued in 2007, when a sharply divided panel believed solar minimum would come in March 2008 and would be followed by either a strong solar maximum in 2011 or a weak solar maximum in 2012. Competing models of the solar cycle produced different forecasts, and researchers were eager for the sun to reveal which was correct.

"It turns out that none of the models were really correct,"says Dean Pesnell of the Goddard Space Flight Center, Greenbelt, Md. NASA’s lead representative on the panel. "The sun is behaving in an unexpected and very interesting way."

Yearly-averaged sunspot numbers from 1610 to 2000. Researchers believe upcoming Solar Cycle 24 will be similar to the cycle that peaked in 1928, marked in red. Credit: NASA/MSFC

Astronomers first noted the solar cycle in the mid-1800s. Graphs of sunspot numbers resemble a roller coaster, going up and down with an approximately 11-year period. Predicting the peaks and valleys has proven troublesome because cycles vary in length from 9 to 14 years. Some peaks are high, others low. The valleys are usually brief, lasting only a couple of years, but sometimes they stretch much longer. In the 17th century, the sun plunged into a 70-year period of spotless quiet known as the Maunder Minimum (mini ice age) that still baffles scientists.

At a recent climate change symposium at Monash University in Australia, David Archibald, an expert in solar cycles stated:

“You haven’t seen any sign of the end of Solar Cycle 23 yet and the cooling over Solar
Cycle 24 as a consequence may be as much as 2.8 degrees centigrade. We are due for a de Vries cycle cooling event every two hundred and ten years, and actually even a Bond event because the last one of those was in the Dark Ages. And severe cooling over the next twenty years is now a certainty.” 

Right now, the solar cycle is in a valley--the deepest of the past century. In 2008 and 2009, the sun set Space Age records for low sunspotcounts, weak solar wind, and low solar irradiance. The sun has gone more than two years without a significant solar flare.

"In our professional careers, we’ve never seen anything quite like it," says Pesnell. "Solar minimum has lasted far beyond what we predicted in 2007."

 

 

In recent months, however, the sun has begun to show signs of life. Small sunspots and "proto-sunspots" are popping up with increasing frequency. Enormous currents of plasma on the sun’s surface ("zonal flows") are gaining strength and slowly drifting toward the sun’s equator. Radio astronomers have detected a tiny but significant uptick in solar radio emissions. All these things are precursors of an awakening Solar Cycle 24 and form the basis for the panel’s new, almost unanimous forecast.

 

 

According to the forecast, the sun should remain generally calm for at least another year. From a research point of view, that’s good news because solar minimum has proven to be more interesting than anyone imagined. Low solar activity has a profound effect on Earth’s atmosphere, allowing it to cool and contract. Space junk accumulates in Earth orbit because there is less aerodynamic drag. The becalmed solar wind whips up fewer magnetic storms around Earth’s poles. Cosmic rays that are normally pushed back by solar wind instead intrude on the near-Earth environment. There are other side-effects, too, that can be studied only so long as the sun remains quiet.

 

Meanwhile, the sun pays little heed to human committees. There could be more surprises, panelists acknowledge, and more revisions to the forecast.

"Go ahead and mark your calendar for May 2013," says Pesnell. "But use a pencil."

Source: Marshall Space Flight Center

Walter Derzko

When will the recession / depression end ? Part 25 New Financial sector Business Models or New Creative Workarounds?

I listened to US president Obama last Wednesday on the White House lawn, just before AIG’s CEO Liddy testified before the American congress on AIG’s bonuses. The significant point that Obama made at the end of his speech, was a fundamental change or shift to the status quo. Coincidentally or not, most mainstream newspaper reports missed this key idea and quote.

“People are rightly outrages about these particular [AIG] bonuses. But just as outrageous is the culture that these bonuses are a symptom of., that have existed for far too long. A situation where excess greed, excess compensation, excess risk-taking have all made us vulnerable and left us holding the bank. And  one of the message that I want to send is as we  get out of this crisis, as we work towards getting ourselves out of recession, I hope that Wall Street and the marketplace don't think that we can return to business as usual. The business models that created a lot of paper wealth but not real wealth in this country and have now resulted in crisis can't be the model for economic growth going forward." said Obama.

The New Yorker magazine featured this cartoon (on the right) earlier this month (March 9, 2009) , which is a more likely scenario for the financial sector….One business person says to the other….These new regulations will fundamentally change the way we get around them…

 

Walter Derzko;

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

The Opportunity Clinic-28 Tactics for managing your Business in a Recession; Part 15 of 28 Drop problem-solving and adopt opportunity surfing

Why problem-solving, Total Quality Management (TQM), Continuous Improvement (CI), Value Network Analysis (VNA) etc is not good enough in a recession…..you  need to be totally focused on designing and /or finding novel  opportunities. These tools have their place, but it's usually in the upswing part of the business cycle to improve efficiencies of existing operations, but not now.

Many companies are still applying the pre-recession, boom-time mentality to today’s totally changed and novel business environment. Driven by existing business models, mindsets and existing ongoing relationships with  consultants, experts, suppliers and vendors, who are desperately trying to maintain their sales numbers and quotas, companies are continuing to do more of the same…what seemed to worked for them in good  times..lets' work in the same box. What we need is not "out of the box thinking" [I hate that expressionm becuase it shows that you don't understand cognition and how the brain patterns information], but to design brand new "boxes".  

 

The recession is not a problem to be solved, it’s a crisis to be avoided. And you  can only do that in one way. NOW, you need to be totally opportunity-focused and opportunity-receptive and less problem-focused and preoccupied with incremental change. Radical ideas and concepts, (and not accruemental solutions to old problems, unless they lead to novel opportunity spaces) are in order, along with resulting new business models (which we often forget to explore and redesign ), that will help companies thrive and not just survive in a recession.

 

See the cartoon in this week's New Yorker....We're still the same great company we've always been, only we've ceased to exist.  I bet they were great problem-solvers at the tactical, operational level, but poor opportunity surfers at the strategic level.

 

Walter Derzko

Smart Economy,

Toronto;

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

 

When will the recession / depression end? Part 24 Wanted -a new economic driver

This week's Newsweek features a cover story with Uncle Sam urging you to stop saving and to start spending...in other words do what got you into trouble in the first place..spend or go into debt for the sake of the economy. It's not likely to happen soon.

In a recently published book, called "The Difference: How Anyone Can Prosper in Even the Toughest Times." by Jean Chatzky, the results of a 2008 Harris Interactive poll/ survey on income was pubished.

• 3% in the USA are indepently wealthy (usually bigger savers, as a rule)
• 27% in the USA are comfortably wealthy (recently earned money and wealth, and tend to save more then spend)
• 54% in the USA live pay check to pay check (driving most retail spending, the classic consumer)
• 15% going deeper into debt

These are 2008 numbers, so that the stats today are likely much worse.

So if ordinary Americans aren't going to spend their way out of this recession / depression. then who will? Business ? No liquidity yet. It may just take another country, if not another coninent to take over the "consumer" moniker from the USA.

Walter Derzko, Smart Economy, Toronto

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.