How Do We Jump Strat Our Economy?

Posted on 8th September 2011 by admin in BUSINESS, ECONOMY, EDUCATION, POLITICS - Tags:

Our economy is not an automobile (car) and it cannot be jump started like an automobile. But, there is something we can learn from the way we used to jump-start our car in the past and how we jump-start today. In the old days when the automobile stalled, we would manually push to start the car. It was a labor -intensive process. Today we jump start the car using jumper cables, portable chargers, and designer chargers that meet the specification of the automobile manufacturer. The reason for the change is because the times have changed, most of the cars have automatic transmission, digital technology, and the process has changed from a manual push to a technology based process. If the economy was like a car, we could charge the economy with a stimulus plan and expect the economy to return to normal growth. The economy is more complex than a car and it is not a man made machine. Economists think they can solve the economic problems based on the theories and past economic experiences. The problem with that thinking is the environment is changing and the old theories and approaches are not enough to stimulate the new economy.

We learned a lot from the great depression of 1929 and we realized that the managing economy involves monetary policy, fiscal policy, and managing the financial health of the financial institutions. If we look at our economic policy, the Federal Reserve has maintained the discount rate to zero to loosen the credit and maintain the circulation of funds in our economy. The federal government has bailed out failing financial institutions to maintain confidence and availability of credit to businesses. The Government has also interjected billions in the economy by investing in our infrastructure. The question is why has our unemployment rate jumped to almost 10%.  The answer may depend on the economic school of thought and the assumptions that economists make in explaining the economic situation. The average American is not interested in a debate between the two schools of economic thought. They are interested in finding a well paying job that provides an income to support their family, a house to live without thinking of foreclosure, and credit to buy goods or services so that they enjoy life, and pay as they go.

The current economic policy can be best explained using the jump-start process of the car.  The car with an automatic transmission and digital technology has stalled, and we are trying to start the car by a manual push like we used to do in the past.  We have a new (digital) economy and we are trying the tools we have used in agricultural and industrial economies. First, we need to recognize that we are part of both global and digital economy. Second, the Federal Reserve needs to do whatever is needed to maintain liquidity in our economic system. Maintaining a zero discount rate has not brought the liquidity and access to credit for small businesses. The financial institutions are prospering; large investors and foreign investor have access to credit because of the Federal Reserve’s action. The Federal Reserve needs to understand the changing nature of business of financial institutions and do whatever is needed to make credit available to both small businesses and consumers. Third, the Government has invested in our country’s infrastructure thinking that it will stimulate our economy soon. It was a good investment; the problem is it will not stimulate the economy like old days.  These days the construction is more a technology based process. A construction project that required 1000 employees in old days can be accomplished today by little over 100 people. The raw materials and prefabricated materials are imported from other countries. The heavy equipment used may be leased from a foreign subsidiary. The trickle effect is going global from U.S. investments in infrastructure.  This economic thinking will take years for economic growth. The trickle down economic policy is from the past and will not solve our current problem.

To stimulate economic growth, we need to include behavioral economic, understand the role of digital technology in the economy, and recognize that our economic system has changed to micro-cell economic system. We have borrowed and invested billions of dollars and still were not able to build the consumer confidence. The consumer confidence is low; the number one concern of the public is the economy.

The average American is still thinking of the economy before going to bed and waking up in the morning. In a digital economy the focus of the economic policy should be on millions not on just few. Millions of people make the nation prosperous not few so called essential industries. Our economy is a micro-cell economy. In a micro-cell economy, the growth of the economy depends on the growth in micro economic cells. The growth of micro-cell depends on education, intellectual capital, monetary capital, digital technology, and communication. A trickle up approach is needed to stimulate a micro-cell economy rather than a trickle down approach.

Bloger@sunlona.com

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Is Diplomacy is Delaying Democracy?

Posted on 4th February 2011 by bloger in ECONOMY, POLITICS - Tags: , , ,

Diplomacy may be explained as skillful negotiation to avoid conflict and build a long-term relationship. In the political world, diplomacy is used to cover the interest of parties involved in the conflict or the third parties that will be affected due to the conflict. Yes, diplomacy is confusing: only people who are involved in diplomacy may know the true (hidden) meaning of diplomacy. Discussion of the role of diplomacy is important today. The people of Egypt are fighting for their rights (human, economic, assemble, express, choose a new leader), the dictator is ignoring the will of the people, and the people are exposed to violence by government organized thugs. World leaders are depending on diplomacy to succeed in bringing down the dictator. History shows that dictators will never give up power, and try their best to stay in power as long as possible. They are not losing anything: they have billions of dollars stolen from the nation, and are always able to negotiate safe passage and asylum in another country.

The lives of eighty million people are at stake; people are dying, people are being injured, property is being destroyed, people are unable to earn daily bread, people are losing every day as the standoff between the people of Egypt and the dictator continues. In contrast, the dictator is safe, enjoying his luxurious life in the palace, and generating millions of dollars from his billions of dollars of investment.

We have laws to trace drug dealers’ money and seize the money. These laws are designed to protect people because drugs destroy people’s lives. Dictators destroy people’s lives by torturing, controlling free speech, promoting corruption, stealing the people’s money, and controlling people’s lives. Dictators are worse than drug dealers. Drug dealers give a choice, and dictators force choices on the people. Drug dealing is illegal, but dictatorship is not illegal in the eyes of developed countries. We need to have laws to trace dictators’ money, and then seize and return the money to the people’s treasury. This may discourage anyone from becoming a dictator in the future.

The current situation in Egypt raises the question, is diplomacy is delaying democracy? Yes, diplomacy is delaying democracy. The developed countries that have the power to help the people of Egypt in removing the dictator are using the word diplomacy to negotiate the dictator’s departure. This is because the world was aware of the situation in Egypt, and did not do anything in the past to improve the live of the people. Developed countries believed in dictator’s explanation of progress, and did not question it, and ignored what they saw through their own eyes because they were using diplomacy. The developed countries’ past diplomacy did not address the needs the people of the Egypt. Thus, people started the revolution. At this point, the developed countries must stand with the people, and privately demand the immediate departure of the dictator from Egypt. Dictators understand two consequences: (1) prosecution for atrocities committed against people and (2) the seizure of bank accounts in foreign countries. Developing countries have a choice to support the people of Egypt and use the diplomacy of prosecution and seizure or use the diplomacy of delaying democracy by negotiating with a dictator. Still, developing countries have time to take a stand with the people of Egypt and continue a good relationship with a nation of eighty million people in the Middle East.  Let’s hope diplomacy leads to the freedom of Egyptian people.

bloger@sunlona.com

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Obama’s State of the Union was a Wake–Up Call for America (?)

Posted on 26th January 2011 by admin in BUSINESS, ECONOMY, EDUCATION, POLITICS, TECHNOLOGY - Tags: , , , ,

It is the tradition for Presidents to address the joint session of congress every year and give Congress information on the State of the Union. Politicians have a habit of focusing on symptoms and presenting strategies to solve the symptoms. The rationale behind this tactic is that people, in general, assume symptoms to be problems. A good example is unemployment (jobs); it is a symptom, and no one in politics is interested in identifying and solving the problem. Most of the politicians from both parties are promising to create jobs. Unless they understand why we are losing jobs, they will not be able to solve the problem and create jobs. The president addressed both symptoms and problems. The president addressed the symptom (jobs) almost 25 times, problems (compete, competition8 times, the economy7 times, and recession4 times) and strategies (education— 10 times, change—10 times, ideas—10 times, and innovation9 times). The major theme of his State of the Union address was we will work together or need to work together; he usedwe” 187 times to tell the Congress to work together and send a message to people that the problems can be solved by working as a team with the executive branch. The government working with the people can solve the nation’s problems. He usedI” 57 times to inform the people that he will work in the best interests of the people and take the action necessary to protect the country.

He stated: “But we have never measured progress by these yardsticks alone. We measure progress by the success of our people. By the jobs they can find and the quality of life those jobs offer.” Is this a wake-up call for America? The success of individuals and institutions depends on their ability to change. We need to ask ourselves whether we are willing to change with the changing environment or whether we are going to dwell on how we are going to get back the lost jobs. Trying to look for lost jobs is like focusing on the symptom and ignoring the problem of your skills not being marketable. We need to learn new skills because the environment has changed, and industry is reshaping, and chances are we are not going to find the types of jobs we once had anymore. It is a time to move on, develop new tools, and learn new skills. The President talked of global competition and how technology is reshaping our businesses. He even pointed out the threat of competition from China and India. If this address was a wake-up call, the question we need to ask ourselves is what we need to do to achieve success. The following are ten things we need to consider if we want our people to succeed:

  1. Stop focusing on the symptom (jobs); focus on the problem (competition).
  2. Develop a nationwide training program with public and private partnership.
  3. Promote change among people, governments, businesses, and institutions.
  4. Invest in education, and demand quality of service.
  5. Promote entrepreneurship, innovation, and creativity.
  6. Understand the impact of research and development on economic growth
  7. The Internet is like any other utility (water and electricity); it should be available to everyone.
  8. Micro-lending is the key to small business growth.
  9. Fiscal and monetary policies are not enough to manage a micro-cell economy.
  10. A balanced budget is good for the future of our nation; not investing in a growth project just to balance the budget is not good for the future of the nation.

We don’t know whether the State of Union address was intended to be a wake-up call or not. Whatever the case, use this address as a wake-up call to address the problem (global competition) and not the symptom (jobs).

bloger@sunlona.com

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Happy New Year ->2011

Posted on 31st December 2010 by admin in Happy New Year, Life, New Year 2011

The New Year celebration is a celebration of new beginnings. Normally, we use the end of a period, process, or an event to celebrate individual and group accomplishments. We do not celebrate the beginning of the school year because it is the beginning of the journey to get an education and gain knowledge. The celebration is after graduation, which is at the end of the school year. But, during New Year, we celebrate the New Year before accomplishing anything at the beginning of the year. It seems like a celebration of the uncertainties and risks that we will be facing in the next twelve months. Everyone is looking forward and not interested in looking backwards to see what was accomplished during the last year. If we are not interested in evaluating the performance at the end of the year, then what is the purpose of setting New Year’s resolutions every year? It doesn’t make any sense to set goals and not evaluate whether those goals were accomplished.

The beginning of a New Year is the ending of the last year and should be the celebration of what was accomplished during the last year. For example, if you invest in the stock market on January 1, 2011, then it is considered at the beginning of the investment period (or year). There is no celebration of the beginning of the investment period because nothing has been accomplished. Usually you set investment goals, analyze investment opportunities, and, based on your goals, invest in investments that have the potential for maximizing wealth. The celebration is at the end of the year when the value is generated by the investments. The investment’s value is determined by individual risk preferences, values and beliefs.

Life, while not a monetary asset, is an individual investable asset. It is an intellectual asset. It is a human asset. You can create value for yourself and the world by investing in life. That’s why you need to spend time at the end of the year evaluating what was accomplished during the last year, what you were not able to accomplish and why. Analyzing the past may help in planning for the future. Always think long-term when investing in your life. The goal in life should be to maximize the value during the lifetime. Value created by investing in life is not a monetary value, and it cannot be measured by a universal yardstick or standard. It is based on an individual’s purpose in life, spirit, personal values, and beliefs. To create long-term value, you may have to accept failure in the short term. The New Year is a good time to think about how life was invested in during the last year, and how the rest of your life will be invested in the future. New Years should be the celebration for the value created by the investment of life. There is nothing wrong with celebrating the beginning of the year; the celebration brings happiness, and provides an opportunity to detach us from day-to-day stress. However, celebrating without understanding what you are celebrating is not a good investment of your life.

bloger@sunlona. com

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Why Are You Wearing A Sports Jersey And Shouting At The TV?

Oh! The football season has just started. Sports have been part of our culture from ancient times. In the old days, sports were developed and introduced to show how the combined power of the human mind and body could develop skills and talents to enhance individual and team performance. In addition, sports introduced the concept of competition in society, and showed that excellence can be achieved by hard work. Every society, business, and nation needs competition for its survival, and fair competition always results in growth and prosperity. Sports give energy to the competitive sprit and, in turn, results in the growth and development of society. For centuries, the Olympic Games have provided an international platform for athletes to demonstrate their skills and talents and represent their countries. Sports fans from all around the world watch the Olympic Games and rally behind their nations’ athletes and teams. It is a genuine national competitive sprit that involves the waving of national flags by the fans, singing the national anthem, and expressing emotions.

The economic and social changes of the 21st century, the money available to spend on entertainment, and the leisure time available to watch sports has stimulated growth in the professional sports industry. The goal of the professional sports organization, as with any other business, is to make money; and there is nothing wrong with this. Rich people who are interested in fulfilling their self-actualization needs own most of the professional sports teams. Professional sports organizations are in the sports entertainment business, and their goal is to interest customers in their products and services to make money. They are no different from entertainment businesses, such as theme parks, movie studios, or movie theaters. This raises an interesting question as to why some sports fans wear their team jerseys when watching a game. They are not part of the sport team (business), cannot play professional football, and never coached a professional football team. They don’t wear their favorite actor’s or movie producing company’s jersey while watching a movie at home or in a theater, but they wear team jerseys while watching football. Another interesting question is: Why do these fans shout at the television while watching a football game? They don’t shout at the television while watching a movie at home or in the theater. It seems like this type behavior is highly promoted by the professional sports that involve more physical force and less mental involvement.

Two good examples of sports that require both mental and physical involvement are golf and tennis. In these sports, the fans focus on the performance of the athletes and do not wear their jerseys, shout at television, or coach the players. The question here is why there is a difference in the behaviors of sports fans. The difference can be explained by the theory of needs and emotional energy. The theory of needs suggests that a human being, after satisfying basic needs, such as food, shelter, and safety, seek to satisfy the needs of belongingness, social status, and self-actualization. Sports like golf and tennis that involve both physical and mental challenge focus on consumers who have already passed the need for belongingness. Most of the consumers (fans) watching these sports are competing for social status or self-actualization needs. They are looking for self-actualization, entertainment, escape from daily life, or a show of competitive talents and skills. They have learned how to manage their emotions because of their social status, and understand the benefits of managing emotions and using them to generate emotional intelligence. These differences in level, in terms of the hierarchy of needs, could explain the difference between the behaviors of fans’ in a tennis stadium compared to those in a football stadium. The tennis and golf association can survive by focusing on a narrow target, marketing to customers who have climbed further on the hierarchy of needs, because their target customers have the ability to pay higher prices for sports events and the number of athletes participating in the event are much fewer than in such sports as football.

Professional football is a team sport, and it requires a huge investment and expenditure in the salaries of the players. The football team’s market is determined by the location of the team. In this business, volume is the key to profitability. To generate volume, football organizations have to focus on every potential customer according to specific markets. These markets can be divided into five areas based on the wants and needs of the customer. The five classifications are: 1) entertainment, 3) competition, 3) escape from daily life, 4) belongingness, and 5) self-actualization. The market of the professional football teams consists of diverse customers, and that’s why diverse customer behavior is exhibited on the game day. If you were watching a football game in a posh hotel, the majority of customers (fans) would be interested in entertainment, looking forward to a competitive game, or just need an escape form whatever they were doing. The noise level of these groups is usually low and portrays managed emotions and a competitive sprit. On the other hand, if you visit a local bar in the community, you will find that the noise level is lot higher and the emotions are high because these fans are looking for belongingness and escape from life. These differences in behavior are exhibited at a live game in a stadium. Football customers who are looking for belongingness have painted faces and bodies and exhibit emotions; others focus on the competitiveness of the game and/or an escaping from daily life in the corporate boxes.

Consumers of professional football who wear jerseys, have painted faces, and show uncontrollable emotions are looking for an identity, and find it through their belief that they are part of the team. They think they can drive the outcome of the game by shouting at the television or in the stadium, and they consider the successes and failures of the team as their own. Their self-esteem depends on the outcome of the game. By associating with a sports team and large group of sports customers, they find a purpose for living that they can’t find in their personal and professional lives. In addition, sports events provide a place for these consumers to release the anger and frustration that they cannot release in personal and professional environments.

Sports bring happiness, sadness, anxiety, violence, and addiction to your life. Football is just a game, and your life is more than a game. If you are a smart consumer of professional sports, learn how to enjoy the game without wasting your emotional energy.

bloger@sunlona.com

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