No Support System – That is the Sacrifice for Risk Takers

I’m an advocate of entrepreneurship, working for oneself, and freelance work in general. I believe there is a performance improvement across the board in these situations. It could be quality or reliability or even creativity (customization). It’s the chance for the greatest amount of wealth creation and it requires the most sacrifice as well.

And when I say sacrifice it isn’t necessarily about the work. It is often about the support system, or lack of one, for these risk takers. Barbara Kiviat from the Curious Capitalist point this out to me in her blog entry called The Freelance Economy Turns South, Too. She uses the example of someone who cuts hair. How just if her clientèle lengthens their time between cuts by a week it results in a 20% decline in income. I wanted to use plumbers or carpenters as an example, but hair cutters work best because it is a routine need that normally doesn’t have much variability (the same person usually cuts the customer’s hair every month or so). Here is an excerpt:

Earlier today I was talking with Donald Grimes, an economist at the
University of Michigan, and we got to playing around with some data
from the Bureau of Economic Analysis.
He was making the argument that a lot of the things in the stimulus
bill meant to help people whose livelihoods are threatened—things like
extending unemployment benefits and COBRA healthcare coverage—do
nothing for the self-employed people out there whose incomes are
getting obliterated, too. Think about all those real estate agents. Or
even people like independent hairdressers. If all of your clients start
getting their hair cut once every five weeks instead of once every
four, there goes 20% of your income. This is a bigger problem than it
might otherwise be considering the shift over the past 15 or so years
towards a Freelance Economy—our increasing tendency to work as
consultants, free agents, project employees and other variations of
pay-as-you-go help.

So if you are willing to go on your own during these poor economic times, just be sure you can deal with changing revenue trends.

One other item I can’t let go of right now is something a friend of mine said to me in reference to a particular situation a few years ago. He said “Many jobs are treated like corporate welfare by the employee” or something akin to that. And it is true to a point. Only certain people really give it 100%. Others do the 9 to 5 and consider it a completely fair deal for both parties. Well, until layoffs come…

I’m an advocate of entrepreneurship, working for oneself, and freelance work in general…

20 Ideas for 2009 from the HBR

The Harvard Business Review, or HBR as some like to call it just redid its website. It is much easier to navigate now and I’ve ran across one segment that I want to highlight. It is called Breakthrough Ideas of 2009.

Here is the list of 20 ideas:

Just Because I’m nice, Don’t Assume I’m Dumb
Beware Global Cooling
Institutional Memory Goes Digital
Stumbling to a Longer Life
The Rise of Forensic Economics
State Capitalism Makes a Comeback
Now’s the Time to Invest in Africa
Consumer Safety for Consumer Credit
The Ikea Factor: When Labor leads to Love
Launching a Better Brain
A Central Nervous System for the Earth
A Looming American Diaspora
Harnessing Social Pressure
Western Union World
How Social Networks Network Best
Should You Outsource Your Brain
The Dynamics of Personal Influence
Forget Citibank, Borrow from Bob
The Business of Biomimicry
What you Need to Know about the Semantic Web

Many opportunities await.  I particularly like Launching a Better Brain because it reminds us that having fun learning stimulates the brain to develop new neurons and pathways.

Happy Chinese New Year and Era

Happy Chinese New Year. Today (01/26/09) is the first day of the year of the ox. Yes, the year of the ox. I don’t really know much about this except that there are several days of traditions. But it is important to note because China is not only facing a new year, but a new era.

That brings me to an article I read in the NY Times yesterday called College-Educated Chinese Feel Job Pinch by Edward Wong. Here are some excerpts I pulled. I particularly like the stats:

Normal
0

<wunctuationKerning/>

false
false
false
<woNotPromoteQF/>
EN-US
X-NONE
X-NONE

<wontGrowAutofit/>

<wontVertAlignCellWithSp/>
<wontBreakConstrainedForcedTables/>
<wontVertAlignInTxbx/>

MicrosoftInternetExplorer4

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin-top:0in;
mso-para-margin-right:0in;
mso-para-margin-bottom:10.0pt;
mso-para-margin-left:0in;
line-height:115%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,”sans-serif”;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:”Times New Roman”;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;}

Students applying for jobs at the same time the previous
year had gotten two or three offers by the winter, sometimes for a starting
salary 20 times the average Chinese annual income.

As this country lumbers into the Year of the Ox, a frisson
of anxiety is rippling through a generation of Chinese who had grown up
thinking that economic prosperity was guaranteed them.

“Under the current situation, new social conflicts will be
created nonstop,” Chen Jiping, deputy secretary general of the Communist
Party’s central political and legislative affairs committee, said this month in
Outlook, a magazine published by Xinhua, the state news agency.

The Chinese government reported Thursday that the growth
rate for the final quarter of last year fell to 6.8 percent, bringing the rate
for the full year down to 9 percent, the slowest pace in at least six years. In
2007, the economy expanded at a roaring 13 percent clip. Analysts say growth
could slow to 5 or 6 percent this year, which would be the slowest pace for
more than a decade.

Reliable unemployment statistics are hard to come by. The
official registered urban unemployment rate for the end of 2008 was 4.2
percent, up from 4 percent in 2007
; it was the first time the official rate had
risen after five consecutive years of decline.

About 670,000 businesses shut down and 6.7 million jobs
“evaporated” last year because of the economic downturn, Chen Quansheng, an
adviser to the Chinese cabinet, said in a magazine published by The People’s
Daily, the Communist Party’s mouthpiece.

Of 5.59 million college graduates in 2008, an estimated 27
percent
were unable to find jobs by the end of the year, according to the
Chinese Academy of Social Sciences.

For the students, that meant the odds were dismal: every job
opening in the government had an average of 78 applicants.

I once read that it is estimated that for the US economy to generate jobs the GDP has to be approximately 2.5%or above. This is relational to the population size of the country. For China, the GDP has to be at least 7.5%.

Weekend Read – 6 Errors add to an Economic Crisis

I like weekend reading that is a little light and fresh with perspective. I want to learn something I didn’t know before without a lot effort. It is the weekend after all. Well, I ran across a good summation of the financial situation in the NY Times. It is in a piece by Alan Blinder called Six Errors on the Path to the Financial Crisis. Here are some excerpts:

WILD DERIVATIVES In 1998, when Brooksley E. Born, then chairwoman of the Commodity Futures Trading Commission,
sought to extend its regulatory reach into the derivatives world, top
officials of the Treasury Department, the Federal Reserve and the
Securities and Exchange Commission squelched the idea.

SKY-HIGH LEVERAGE The second error came in
2004, when the S.E.C. let securities firms raise their leverage
sharply. Before then, leverage of 12 to 1 was typical; afterward, it
shot up to more like 33 to 1.

A SUBPRIME SURGE The next error came in
stages, from 2004 to 2007, as subprime lending grew from a small corner
of the mortgage market into a large, dangerous one.

FIDDLING ON FORECLOSURES The government’s continuing failure to do anything large and serious to limit foreclosures is tragic.

LETTING LEHMAN GO The next whopper came in September, when Lehman Brothers, unlike Bear Stearns
before it, was allowed to fail. Perhaps it was a case of misjudgment by
officials who deemed Lehman neither too big nor too entangled — with
other financial institutions — to fail. Or perhaps they wanted to make
an offering to the moral-hazard gods. Regardless, everything fell apart
after Lehman. People in the market often say they can make money under any set of
rules, as long as they know what they are. Coming just six months after
Bear’s rescue, the Lehman decision tossed the presumed rule book out
the window.

TARP’S DETOUR The final major error is mismanagement of the Troubled Asset Relief Program, the $700 billion bailout fund. As I wrote here last month, decisions of Henry M. Paulson Jr., the former Treasury secretary, about using the TARP’s first $350 billion were an inconsistent mess.

The Value of Time and the Economy

I’m not as negative about the next year as others are. Many people in the know are saying 2009 is going to be dismal. I don’t think it will be good, but I think it is going to be poor for 6 months and then flat for 3 and then starting to pick up for another 3. I was signaling a coming recession in 2007 by looking at wage levels against debt levels. I didn’t see a credit situation arising, but I did know that the consumption rate was out of whack. And now I don’t see all the possible worst case scenarios coming to fruition either. The reason is time. Time is a good balance to the economy now. The hyper connectivity and resource allocation system that is in place now allows for anyone with money making ideas to act on them in a relatively fast manner. Time is more valuable now than it ever was. Does it make sense that time is currency?

Anyway, I ran across a good piece in the NY Times about inefficient meetings called Meetings Are a Matter of Precious Time by Reid Hastie. There is a profitable niche market in this area and some quirky book or training always breakthrough as winners. Here are some excerpts I like:

The main reason we don’t make meetings more productive is that we
don’t value our time properly. The people who call meetings and those
who attend them are not thinking about time as their most valuable
resource.

In business, we like to convert time to money, and the
reverse. But in practice, time and money are different. We can get more
money, save it, move it between accounts and use it on demand. These
operations don’t apply easily to time.

Time is the most
perishable good in the world, and it is not replenishable. You can’t
earn an extra hour to use on a busy day. Nonetheless, we usually have a
vague feeling that there is plenty of time — somewhere in the future —
so we waste it now and carelessly steal time from our families, friends
or ourselves when we come up short at the end of a workday and need to
stay an extra hour.

Probably most important, we are blind to
lost time opportunities. When we choose where to invest our time, as
opposed to where to invest money, we are more likely to neglect what
else we could have done with it.

After productive or unproductive meetings, assign credit or blame to the person in charge.

Then, if people have track records of leading ineffective meetings,
don’t let them lead future sessions. When their expertise is essential,
make them subordinate to an effective meeting leader.

The Future is Bright – R & openFrameworks

Stanley Bing is a writer for Fortune.com. He provides a business viewpoint with a crusty tint to it. It is fun to read. The other day he wrote about a time when he was young. Several classmates went with him to see a farm and the they learned a life lesson – chickens run around after their head is chopped off. There is blood and there is twitching. The story was an analogy for the US economy and being graphic was intentional. I agree with what his viewpoint is, except it assumes there is only one chicken. But there isn’t. There are many chickens and life goes on. The point I’m trying to make is that there are a lot of great ideas in the US economy right now and these ideas are not simple “wouldn’t it be great” fluf” either. The future is bright.

Two examples of technologies I think are ready to launch:

The R Programming Language
It is making large amounts of data much easier to work with and not just for those that watched Stargate either. The language is fairly easy to pick up once you need to apply it. And that is what I see as most valuable. A new segment of the population is dealing with very large sets of data that before had to use an intermediary. This empowers them and it makes the challenge of ever increasing data scalable. Here are a few links to more information:

R (programming language) – Wikipedia
Data Analysts Captivated by R’s Power
– A NY Times article
R You Ready for R? – A NY Times blog entry
The R Project for Statistical Computing – An application of R

The Open Frameworks
This labels itself as “creative coding” and I have to agree. It names itself OF. Just watch the video and check the links below it.

http://vimeo.com/moogaloop.swf?clip_id=921725&server=vimeo.com&show_title=1&show_byline=1&show_portrait=0&color=&fullscreen=1
made with openFrameworks from openFrameworks on Vimeo.

openFrameworks – Wikipedia
openFrameworks – Home
openFrameworks – Wiki

President Obama Paraphernalia

Today is the inauguration of the new President of the United States of America. The peaceful transfer of executive power is what makes America so great.

But what is the deal with all the President Obama paraphernalia? There are coins, plates, t-shirts, hats, mugs, teddy bears, camcorders, and snuggies. OK, I’m joking about the snuggies, but they advertise often. But for a country in the middle of a terrible recession some business men believe consumers will spend for their new President.

Which makes me recall something that I’ve stated about a year ago. There are terrific deals to be had right now. You can get a car for dirt cheap. You can get housing for a major discount. You can vacation for far less than you probably believe. I’ve been harping on the jobs report as the key indicator of when the economy will change for the better. My theory is that once we are on the other side of the mountain the economy will pick up fairly quickly. My main rational for this is the efficiency of personnel resources within corporate America. Adding to that is the prospect of a stimulus. *

What I forgot to include in my reasons is there is a huge cash bubble right now. The everyman is suffering because he works for corporate America, but the super rich do not. Their long term wealth is improved by making deals that are timely. The stock market gets a lot of attention as a means to prosperity, but real affluence comes from taking advantage of times like right now. A year ago I called them the real estate vultures because I thought they would buy up sets of lots. Now it goes way beyond real estate. Everything is on sale and there are plenty of people with the means to get it on the cheap.

Barak Obama may be President and folks want a piece of that, but capitalism is still king and an astute few will be aquiring kingdoms. 

*Side note – there is a notion that stimulus packages don’t work
because they take affect after the tough stretch is over and facts back
this up. But this misses the point. Just declaring a stimulus gets the
economy moving. Businesses prepare for this coming infusion and this
preparation is what gets transactions happening. Without the stimulus there
isn’t a prompt to get commerce moving again. For example is shingles.
The cost of shingles should be decreasing because inventories are built
up, but they aren’t falling in price as you expect. The reason is
ingredients used in making shingles are also used to make roads. One of
the major stimulus targets is infrastructure. The supply and demand
rules are already adjusting to a stimulus that doesn’t even formally
exist yet.