Monthly Archives: March 2012

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Food Bubble Is Expanding U.S. Waistlines: Vikram Mansharamani

March 29, 2012 in Guest Bloggers

CLICK HERE TO LEARN MORE ABOUT AUTHOR & SPEAKER VIKRAM MANSHARAMANI

By Vikram Mansharamani

In the housing boom that lasted from 2001 to 2007, highly motivated investment bankers capitalized on historically low interest rates, abundant liquidity, government- sponsored housing finance, political encouragement to make housing accessible to all, and mortgage-interest tax policies to create a securitization party of unrivaled scale and scope.

The hangover from this toxic cocktail continues to plague the global economy: The world still struggles with too much debt, the threat of deflation and the painful prospect of more deleveraging.

Similar dynamics are at work in the global food system: Forces are combining to create another dangerous bubble. This food bubble, like the housing one, has grown from a system that is focused on generating efficiencies through high volumes, which generate lower prices and increased consumption. The commoditization of loans and crops, supported by government policies to keep prices low, has led to overconsumption of credit and food — resulting in a highly leveraged society, and a national obesity epidemic.

Just as bankers created loans for standardized mortgage pools, most farmers now produce predominantly for commodity markets. And just as bankers stopped caring about their customers’ financial health, or even their ability to repay loans, farmers, under the heavy influence of government programs, have increasingly stopped growing food for the benefit of the people who eat it. In fact, industrial farming is generally not even producing “food,” but rather inputs for what author Michael Pollan calls “edible food-like substances” — processed foods.

Bushels of Corn

Consider corn. While some of it is actually consumed as food (for example, “on the cob”), most is converted into animal feed, ingredients for processed food or feedstock for ethanol. The price of most corn grown in the world is based on qualitative variations from the benchmark No. 2 grade corn. By the U.S. Department of Agriculture’s definition, a bushel of No. 2 grade corn weighs about 54 pounds and contains no more than 5 percent damaged kernels and less than 3 percent broken corn and foreign materials. Just as unsophisticated buyers blindly bought AAA rated mortgage securities, so does the corn industrial complex readily accept all No. 2 grade corn. Similar dynamics exist for other commoditized crops, such as wheat and soybeans.

U.S. government policies have promoted the production of high-volume commodity foods. These policies date to the early 1970s, when poor harvests in the Soviet Union and bad weather in the American farm belt caused crop prices to skyrocket. U.S. News & World Report and Time magazines dedicated cover stories to food inflation and its social impact.

To prevent grocery prices from soaring 20 percent or more, Earl Butz, the secretary of agriculture in the Nixon and Ford administrations, made a series of policy changes designed to lower food prices. He did away with some loans to farmers, government grain purchases and incentives for leaving land idle during times of low crop prices. And he replaced them with direct payments to farmers to make up any difference between the market price and an artificial price floor.

Rather than discourage farmers from growing more crops when market prices were low, the new policy motivated them to produce more, regardless of price. The floor, which has been regularly adjusted, set a price at which farmers could effectively sell an infinite supply. Ballooning crop volumes drove prices lower, which, in turn, increased consumption.

Similarly, in 2001, when the Federal Reserve lowered short- term interest rates — to fight the deflationary forces from the popping Internet bubble — the price of money was driven lower, and that increased the use of debt.

Price of Calories

In the past 30 years, food prices have fallen, on average, 1 percent per year, according to an analysis from the Department of Agriculture’s Economic Research Service. During the same period, the daily average calorie consumption in the U.S. has risen about by an average of about 400 calories, or about 18 percent.

There’s reason to think that the low price of food has led people to eat more of it, and especially the kinds of foods that are subsidized by U.S. agricultural policy. Consider that overconsumption is not spread evenly across food groups, but rather predominates among processed foods containing ingredients such as corn, wheat and soybeans, whose prices are heavily influenced by government policies.

Flour and cereal products account for 39 percent of the total increase in average American food consumption since 1980 – – about 155 additional calories — while whole foods not supported by agricultural subsidies are not being eaten much more today than before: The average American’s intake of fruit rose by a mere 6 calories over the past three decades, and calories from vegetables were flat.

In 2004, a dollar could buy more than 1,000 calories of cookies or potato chips, or 875 calories of soda, but only 250 calories of carrots or 170 calories of fruit juice, according to Adam Drewnowski, a professor of epidemiology at the University of Washington and director of the Center for Public Health Nutrition in Seattle. In other words, agricultural subsidies cause the least healthy calories to be the cheapest.

Given that about 3,500 calories is equivalent to a pound of body weight, it is easy to see that extra calories are a major contributor to our obesity epidemic — alongside inadequate exercise and a poor diet. Furthermore, given the strong linkages between obesity and cardiovascular disease, diabetes and other illnesses, our industrial food system appears to be no more sustainable than our pre-2008 housing-finance system.

Another unintended consequence of producing food in such large volume is that the bigger the yields per acre, the fewer nutrients the crops contain. Donald R. Davis of the Biochemical Institute at the University of Texas in Austin has looked at the evidence regarding the relationship between yield and nutrient content. The studies comparing high-yield and low-yield varieties of corn, wheat and broccoli show, in his words, “uniformly inverse associations between yield and nutrient concentrations.”

Food and Health

In a time of strained budgets and rising medical costs, we must think more broadly about the health effects of our food system. To ignore the connection between agricultural policy and public health would be as wrong as to ignore the link between housing policy and financial regulation. Presidential campaign debates and the renewal of the farm bill in 2012 may offer a platform for the conversation. Let us begin by redesigning agricultural policy to minimize incentives for overproduction and encourage the production of healthy calories.

Two agricultural subsidies, in particular, should be greatly reduced or eliminated: themarketing-loan program and the countercyclical-payments program. The marketing-loan program, which allows farmers to borrow using their crops as collateral, effectively enables farmers to lock in a minimum price via non-recourse loans. If market prices are lower than the government-set target price, farmers are not required to pay back the full loan amount. Yet if prices are higher than the target price, they keep the difference. Countercyclical payments act as their name suggests: When prices are lower, subsidy payments are higher — enabling farmers to again lock in minimum prices. Both subsidies focus disproportionately on commodity crops.

These programs create de facto price floors, allow farmers to ignore crop prices when deciding how to allocate land, and effectively encourage overproduction. From 1995 to 2010, the Department of Agriculture spent more than $50 billion on these programs. Eliminating them would save enough money not only to subsidize the farming of fruit, vegetables and other healthy foods, but also to sponsor education programs on how careful eating and exercise can reduce or prevent obesity. Acting now could help keep today’s cheap food and expanding waistlines from adding to tomorrow’s high health-care costs.

(Vikram Mansharamani, who teaches a seminar on financial booms and busts at Yale University, is the author of “Boombustology: Spotting Financial Bubbles Before They Burst.” The opinions expressed are his own.)

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Robert Bryce on THE ‘CLEAN ENERGY’ STALKING HORSE

March 28, 2012 in Guest Bloggers

CLICK HERE TO LEARN MORE ABOUT JOURNALIST, AUTHOR AND SPEAKER ROBERT BRYCE

March 25, 2012
The Weekly Standard

They’re not calling it a carbon tax or cap and trade. But make no mistake, the national “clean energy” mandate introduced earlier this month by Senator Jeff Bingaman (D-N.M.) and eight cosponsors entails both a tax and a trading measure.

Bingaman’s legislation has the apparent support of the White House. A day after the bill was introduced, Nat Keohane, a special assistant to the president for energy and the environment, called it “an important step towards the president’s goal of doubling clean energy by 2035.” He added, “we look forward to working with Congress as the bill moves forward.”

The bill is bad legislation in search of a problem. The United States doesn’t need a mandate in order to cut carbon dioxide emissions. Those emissions are already falling. Innovation and market forces, not regulation, are making that happen. Furthermore, pricing data and analysis from the Energy Information Administration show that a national mandate will saddle consumers with higher electricity bills. More on those issues in a moment.

First, a look at the heart of Bingaman’s bill, which requires the establishment of a “clean energy trading program” that will create a “national market for the sale or trade of clean energy credits.” Those credits will be based on the carbon intensity of each form of electricity generation. The legislation puts a limit on the amount of carbon dioxide that can be emitted per megawatt-hour of electricity generated: 0.82 metric tons. That limit spells doom for coal, which emits about 1 metric ton of carbon dioxide per megawatt-hour produced.

By 2035, the bill requires that at least 84 percent of all electricity in the United States be produced from “clean energy” sources. Put another way, coal will be limited to no more than 16 percent of domestic electricity generation. That’s a drastic reduction given that coal-fired generators now provide about 40 percent of our electricity.

Last year, Suedeen Kelly, a former commissioner of the Federal Energy Regulatory Commission, said that renewable energy mandates are a “back-end way to put a price on carbon.” Kelly’s point applies directly to Bingaman’s bill. By nearly outlawing coal, a fuel which continues to be among the cheapest options for many generators, Bingaman’s bill is a back end way to put a tax on coal.

To be clear, the definition of “clean energy” in Bingaman’s bill is capacious enough to include natural gas and nuclear, as well as renewables. But its point is to evade an honest debate about the merits—and drawbacks—of a carbon tax and a carbon-trading system, and how those measures would affect consumers. Instead, it would impose those regimes by stealth, under the “clean energy” label.

What makes the “clean energy” rhetoric even more deceptive is this: According to the International Energy Agency, the United States is reducing its carbon dioxide emissions more rapidly than Europe is, even though the European Union has, for years, been relying on a carbon-trading scheme. And that scheme isn’t working. Over the last nine months or so, the price of carbon allowances under the EU’s Emissions Trading Scheme has fallen by more than half. That price collapse was predicted last November in a report issued by Swiss banking giant UBS. The same report estimated that the EU’s trading scheme will cost about $275 billion while having “almost zero impact” on carbon emissions. Had the EU instead targeted the region’s dirtiest electricity plants for replacement, UBS said, emissions would likely have been reduced by 43 percent.

Nevertheless, Bingaman and the White House are touting—what else?—a trading scheme. And they are doing so despite the fact that between 2007 and 2011, U.S. carbon dioxide emissions fell by 7 percent. What’s driving carbon emissions downward? The struggling economy is certainly part of it. But the larger reason is an abundance of cheap natural gas.

The shale revolution, which began about four years ago, has resulted in a tsunami of natural gas production. And that gas is displacing lots of coal in the domestic electricity generation sector. Last year, the United States produced about 23 trillion cubic feet of gas, an amount that easily eclipsed the previous record of 21.7 trillion, back in 1973. And last year’s record production is likely to be surpassed this year. That surfeit of natural gas is making it the fuel of choice for electricity generation, so much so that coal’s share of the domestic electricity generation market is now at its lowest level since 1979.

By pushing legislation aimed at reduced carbon dioxide emissions, the Democrats and the president are clearly trying to appeal to the environmental lobby and the left. But for the vast majority of consumers, the key energy issue isn’t carbon content, it’s price. And the Energy Information Administration has made it clear that a national “clean energy” mandate will mean higher electricity costs.

Last October, the agency released a report on the likely impact of such a measure. The agency predicted that by 2035, the average price would exceed what it calls the “reference case average”—i.e., the status quo—by 29 percent. But the average numbers do not tell the entire story. The EIA analysis found that by 2035, the mandate would result in price hikes of at least 40 percent in 7 regions, with the biggest impact seen in coal-dependent areas. By 2035, electricity prices would rise by 42 percent in Texas, 46 percent in Oklahoma, 47 percent in Tennessee and Kentucky, 48 percent in Colorado, 50 percent in eastern Pennsylvania, Delaware, and New Jersey, 51 percent on Long Island, and by 61 percent in southern Illinois and eastern Missouri.

Furthermore, EIA pricing data show that renewable-electricity mandates—which are now in place in 29 states as well as the District of Columbia and Puerto Rico—are already driving electricity rates upward. I recently completed a study for the Manhattan Institute on these mandates. In 2010, residential electricity prices in states with renewable-electricity mandates were 31.9 percent higher than in nonmandate states. Commercial electricity rates were 27.4 percent higher, and industrial rates were 30.7 percent higher. Of the 10 states with the highest electricity prices, 8 have renewable mandates. Of the 10 states with the lowest electricity prices, only 2 have such mandates.

In an effort to compare states with similar profiles, I looked at seven coal-dependent states with renewable mandates and seven coal-dependent states without mandates. Between 2001 and 2010, electricity rates in the coal-dependent states with mandates increased by an average of 54.2 percent, more than twice the increase seen in the coal-dependent states that don’t have mandates.

Those numbers, along with the EIA’s analysis of the costs of a national mandate, should convince policy-makers that these types of regulations are bad policy. Indeed, they are particularly onerous now, when nearly 19 million American households are so financially strapped that they are relying on federal food stamps.

Nevertheless, the Democrats—who like to claim that they represent the poor and the working class—are pushing a tax-and-trade, anti-carbon-dioxide agenda that will inevitably hurt those very same people. If the Democrats (or the Republicans) were truly interested in pro-growth, pro-consumer energy policies, they would be promoting a simple agenda: Make energy cheap, abundant, and reliable.

Original article here:

http://www.weeklystandard.com/articles/clean-energy-stalking-horse_634425.html?nopager=1

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JAMES MAPES on The Paradox of Paradigms

March 28, 2012 in James Mapes

CLICK HERE TO LEARN MORE ABOUT JAMES MAPES AUTHOR AND SPEAKER


“Surprise occurs the moment we realize
our view of the world no longer matches reality.”
-Wayne Burkan, author, WIDE ANGLE VISION

Blockbuster, Eastman Kodak, and Borders – what do they all have in common? All these business giants failed, but why? Like many analysts, you could come up with a number of logical reasons for their plight – they did not create new products that kept them competitive, failed to embrace the power of the Internet or were not willing to take bigger risks. But, the bottom line is they were unable to recognize and overcome the underlying paradigms that sabotaged them from quickly recognizing opportunities and quickly adapting to the changing marketplace.
What is a paradigm?
The word “Paradigm” comes from the Greek “paradeigma” which means model, pattern or example.” Thomas S. Kuhn, a scientific historian and author of “The Structure of Scientific Revolutions” (1962) first brought the concept to the scientific world.
Adam Smith defines paradigm in his book, “The Powers of the Mind” as “A shared set of assumptions. The paradigm is the way we perceive the world; water to the fish. The paradigm explains the world to us and helps us to predict its behavior.”
There are cultural paradigms or unstated, deeply entrenched rules underlying or guiding our behavior. Stephen R. Covey, the author of “The 7 Habits of Highly Effective People” wrote, “We see the world, not as it is, but as we are – or, as we are conditioned to see it.”
It might be helpful to view paradigms as the internal “maps” we carry with us. They predict how we see the world, the way we believe things “should be.” These maps provide us with our reality and create our “judgments.”
Our paradigms are formed by our early experiences including the belief systems of our parents, family and culture. They form a set of rules, mind-sets, regulations or procedures that create boundaries or limitations and tell you how to conduct your behavior (make your choices) within those boundaries or limitations in order to meet with success.
A perfect example is a game of chess. You cannot suddenly take your pawn and start jumping over the other chess pieces as if you were playing a game of checkers. You must stay within the rules to play the game. In fact, all games are paradigms and these paradigms regulate our actions. This is positive when the rules support us to live as a coherent society. But, as with Blockbuster, Kodak, Borders, as well as many individual failures, that is not always the case. Sometimes we stay within these invisible boundaries even when the boundaries and rules are self-defeating.
Forming a new paradigm is extremely challenging. In order to create a new game, whether it is marketing a product or shedding a negative habit, you must first identify and change a restricting paradigm. Consider someone who takes on a system of rules to lose weight but continues to cheat on a diet or an individual commits to achieving a goal but procrastinates. Something else is going on. When an unacknowledged paradigm or rule goes against what we consciously choose to change, the subconscious rule will win.
The antidote is to create a “paradigm shift.” A paradigm shift is a radical change in underlying beliefs or theory. The shift happens when a majority of people accept a changed belief, attitude or way of doing things. Personally it is stepping “out of the box” and creating a new game with a new set of rules – a transformation. It does not magically happen, but is driven by agents of change.
You can trace major paradigm shifts throughout history. For example, primitive Indians existed for centuries roaming the earth, hunting and gathering. The paradigm shifted. By 2000 B.C., Middle America was transformed with a landscape of small villages surrounded with fields of corn and vegetables.
Scientific history is ripe with paradigm shifts. A major paradigm shift in scientific theory happened when the Ptolemaic system (where the earth was seen as the center of the universe) shifted to the Copernican system (where the sun is at the center of the universe). There was the paradigm shift from Newtonian physics to Relativity and Quantum Physics.
Culture was changed with the invention of the printing press. Today both the personal computer and the Internet have created massive paradigm shifts in the flow of information. We are still in the midst of transformation as we shift from a mechanistic, manufacturing, industrial society to an organic, service-based, information-centered society and increases in technology will continue to impact us globally.
Change is inevitable and it is the only true constant. Although change is difficult and Human Beings resist change on a genetic level, growth and forward movement demands shifting self-restricting paradigms. As Kuhn states, “Awareness is prerequisite to all acceptable changes of theory.” It all begins in your mind by indentifying and changing limiting paradigms. There are three ways to identify a paradigm.
The easiest to identify and the most visible are the paradigms (rules) that are imposed on you that you disagree with. Example: – talking on the cell phone while driving – knowing it is against the law.
The second easiest paradigms to identify are the paradigms (rules) imposed on yourself, by yourself – that you say you agree with, but actually disagree with – and – don’t follow. Example: – dieting, exercising or stopping an addiction such as alcohol or tobacco.
The most difficult paradigms to identify and the ones that have the greatest impact are the ones you agree with. In a sense, these paradigms are invisible because you believe your present reality is the way “things should be” and is the real “truth.”
Joel Barker, the creator of The New Business of Paradigms, the first person to popularize the concept of paradigm shifts for the corporate world, wrote, “What may be perfectly clear and visible to one person is invisible to another because of differing paradigms. This is the Paradigm Effect. Old paradigms block our ability to view new paradigms. What is obvious to one is not to another. Paradigm-enhancing innovations are easy to see, but paradigm-shifting innovations blind us because they don’t follow our paradigm. It just means we must trust others and put ours aside so we can see theirs.”
This is hard to do because it requires you to really listen to what other people say that may be the polar opposite of what you believe – without getting defensive. There is almost always more than one right answer. Both eliciting advice and listening to others allows for more perspectives. Two people see the same thing two different ways. The other person may identify a limiting paradigm in your thinking or the collective thinking of a group.
Uncovering limiting paradigms to personal or professional growth is tricky. You must become a “paradigm detective” using a stealth-like approach. You must shake up your thinking by using your imagination and asking the right questions. Only then can you uncover hidden paradigms.
Following are variations of two strategies that I have successfully used both in my private coaching and in business breakout sessions. Play the game. They work.
Strategy #1: What measure of performance FOR YOU, either personally or professionally, would be extraordinary, but virtually impossible to achieve? Next, ask yourself: If I achieved that level a year from now, what did I do differently? Write down the answers. Don’t lay the change challenge on your company, your budget, the economy, or anything else outside your control. What could YOU be doing different to get to that level? Finally, after each answer, write the phrase: “According to my paradigm.”
Strategy #2: Project 3 years in the future and imagine you, your team or your company has failed in achieving your goals. Write a short article, no more than two paragraphs, as to why. After you have completed your article, ask yourself, “Do I see any of these reasons for failure happening in my life now?” If so, what action steps can you take to prevent failure from happening?
Uncover your limiting paradigms and you will enhance your ability to live an exceptional life.

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CHUCK LEAVELL – Rolling Stone, Conservationist, Farmer, Environmentalist & Speaker

March 27, 2012 in Authors, energy issues

Chuck Leavell has been pleasing the ears of music fans for more than 30 years now. His piano and keyboard work has been heard on the works of Eric Clapton, The Rolling Stones, The Black Crowes, George Harrison, The Allman Brothers Band, The Indigo Girls, Blues Traveler, Train, Montgomery-Gentry, Lee Ann Womack and many, many more.

In addition to being a well established pianist/artist in the music industry, Leavell is also a published author, long time tree farmer, co-founder of the popular website The Mother Nature Network, and keeps busy with his advocacy work on behalf of the environment.

Leavell is also a respected author. In 2001, he penned “Forever Green: The History and Hope of the American Forest.” Chuck is a highly sought after speaker on the subject, invited by various committees, environmental officials and high level government officials to share his knowledge and help shape forest policy in America. His name is well known on Capitol Hill for his advocacy work on behalf of the environment, and he has played a solid role in forming the forest component of the past two US Farm Bills.

Leavell’s other books include his autobiography, Between Rock and a Home Place, a wonderful children’s book called The Tree Farmer, and his latest, Growing a Better America: Smart, Strong and Sustainable.

Speech Topics Include:

Chuck offers two different types of motivational speeches, the first theme is conservation and the other is on stewardship and teamwork. He draws upon his amazing experiences as both a musician and conservationist. Unique to our industry, Chuck offers the option to end his speech with a live musical performance.

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GEOFF COLVIN ON Dow’s New Direction

March 26, 2012 in geoff colvin

CLICK HERE TO LEARN MORE ABOUT GEOFF COLVIN SPEAKER, AUTHOR AND JOURNALIST

CEO Andrew Liveris is focusing Dow Chemical on more innovative, high-margin products – and making them in America.

When Mr. McGuire told Dustin Hoffman’s Benjamin in The Graduate that “I just want to say one word to you,” and that word was “plastics,” he could have been recommending a career at Dow Chemical. It was advice that Andrew Liveris, a new chemical-engineering graduate from Darwin, Australia, followed in 1976, when he joined Dow (DOW). The company produced mainly petrochemicals and the plastics created from them, and it was a good business. But by the time Liveris became Dow’s CEO in 2004, that commodity chemical strategy no longer made sense. That’s why Liveris, 57, has been turning Dow in a new direction, focusing on unique, innovative, high-margin products, such as recently introduced solar shingles. Dow makes them in Michigan, underscoring another of Liveris’s major themes, the importance of U.S. manufacturing. Last year he published a book on the subject, Make It in America, and President Obama named him co-chair of a new Advanced Manufacturing Partnership. Liveris talked with Fortune’s Geoff Colvin about emulating “Intel inside,” optimizing a staggeringly complex business, America’s national mission, and much else. Edited excerpts:

Q: Last fall you said you foresaw much slower growth in the U.S., and indeed your fourth-quarter results showed sharply lower demand. What’s the outlook now?
A: I think slowly getting better. I won’t say the economy has a huge tail wind. It’s a slow recovery that’s getting a little bit of steam. What’s causing that steam? Low energy costs, especially natural gas in this country. There is the beginning of what I would call a job recovery, not because of construction and housing, but because of investment. The oil and gas industry is a good example. People get jobs, they’ll spend a little more, so it’s the beginning of a consumer recovery.
What about Europe for the rest of the year?
It’ll stay exactly where it is now if we’re lucky. It might get worse, which is more likely. It’s not just one year but several years. The design of Europe is at risk. What it ends up looking like, we don’t know, but the scary thing is, neither do the politicians who are doing the design. Business hates uncertainty, so whether it’s investment or consumer confidence, you’ll start seeing people pulling back, and there will be job cuts, as you’re seeing announced. We’re in a recession there now — I’m seeing it from our demand point of view. And, as a consequence, we go where growth is and where the recovery is something that won’t reverse itself.

Figures coming out of China suggest slowing growth there.
I’m very involved in U.S.-China business relationships, and I’ll be there in March running a conference on behalf of the Chinese government with U.S. CEOs. The way I view the China growth story is, it’s the growth they have to have. They walk a fine line. Inflation on the one side causes prices to rise to the point where they get social unrest in the streets. On the other side, slow growth means unemployment, meaning social unrest in the streets. So that fine line is 8 1?2% or 9%. That’s what you’ll see.
You mentioned falling energy prices — that’s a big issue for Dow because oil and gas are your main feedstock. How important is the development of shale gas in the U.S.?
It’s a game changer, not just for companies like mine but for the U.S. There’s enough shale gas being discovered, and enough information on that shale gas is being gathered — depletion ratios, contamination issues, etc. — to put in place a pragmatic policy that could reverse our being an energy importer to our being a net energy exporter.
Now between here and there a lot of good partnerships have to be struck between the private sector and government to work out the supply-side policies, including the environmental issues. Then we have to create the demand-side policies; let’s not put this gas to a poor use. That’s a very important BTU. It’s cleaner than coal, so it has an impact on climate change. It’s a very good BTU for value-add manufacturing — advanced manufacturing — like I would do. Then I create jobs, and for every job I create, I create five to eight jobs around me. So it’s a very powerful engine. We have an opportunity for job creation in this sector like we’ve never seen.

The chemicals industry has been dominated for a long time by a handful of very large global corporations. Don’t you have to figure that a big global player will emerge from China?
Absolutely. I call that the emergence of the super-regionals, and we’re seeing that beyond chemicals. You see Haier coming out of China in the appliance space. We’ll see national champions coming out of state-run economies, China being a classic case, where they have a market of size domestically, and they can scale up through subsidy of capital or of feedstock and make a ton of money. Then they start acquiring internationally and acquiring global footprints.
The top 10 chemical companies in 1990 were all Western companies. Today four are Asian, and three are Middle Eastern or Brazilian. That leaves three that are U.S. or European — only a few of us: BASF, Bayer, Dow. The remainder of what used to be a very vibrant sector in the U.S. and Europe is very small and niche-oriented.
How you maintain scale and compete internationally is an industry topic in the U.S., but actually it’s a Dow topic because DuPont (DD) is mostly in the ag space these days. Dow is the only company left that’s of scale, global, and based in the U.S. Therefore I and all my successors are going to be very active ensuring not only that we stay here but also that we can grow here through reinvestment.

What’s Dow’s strategy now?
This is the third great transformation of the company. It started out as an inorganic chemistry company 115 years ago. It became a petrochemical and plastics company. The transformation of the past seven or eight years is to a science-based company that takes feedstocks and adds value to them. So less commodities. We’re bringing in biological science, physics, chemistry, material science.

You’re going after four large trends: clean energy, health and nutrition, consumerism in the emerging world, and infrastructure. Operationally, what has that led you to change?
Technology R&D — in the past five years we’ve spent $9 billion on research and development in those four trends. We have become innovation-centric on the R&D side. That’s a big change. We can now get the best and the brightest of the U.S. and the world to come join us. Our recruiting strategies have changed with our advertising strategy, rebranding the company around the human element and sustainability, presenting a company that is innovation-centric vs. the notion that it was a legacy company in commodity chemicals.
Also marketing. I’m not in the consumer domain, but from a consumer psyche point of view, if they know “Intel inside,” if they know that I’ve got the special ingredient that makes the shampoo better or the special material that makes the chip faster or that insulates the home better and leads to a net-zero-energy-use home — if they’re to understand all that, I need marketing of the consumer variety.
On that we’re still maybe a third of the way there. On the other changes I think we’ve really elevated our position, representing ourselves not as Dow Chemical but as Dow, a company based on sustainable business.

You’re coming close to a consumer product with solar shingles. It may be the contractor who buys them, but it’s the consumer who signs off on the decision.
That’s back to end-use brand marketing. You don’t have to be at the interface directly. As long as the end-user knows it’s you that’s created the enabler, that is very important for many reasons. We’re judged by the court of public opinion on everything we do. “Sustainable” is no longer an option, it’s an adjective — sustainable business, sustainable science, sustainable solutions. Presenting ourselves as solution providers to the John and Jill on the street will lead us to more, if not consumer products, then consumer-oriented businesses that are in a consumer domain, like the shingle.

You’re passionate about manufacturing in America, and you’ve said government should offer more incentives for it. But the counterargument is that if a business can’t make it without a government incentive, then is it a good business?


I think we’re off-center with the question and the answer embedded in that point. Most of the big inventions of our time have come through government-funded labs — Bell Labs, Argonne Labs, Lawrence Livermore. Through these laboratories the taxpayer actually did create incentives that spilled out to industry. Putting a man on the moon, the Internet — all those came from front-loaded, thoughtful responses to some national mission.
What is our national mission today? Do we want to just be a service provider to the world, or do we want to be a provider of intellectual property because we’re smarter, we can make it more efficiently, and we’re going to export to the world?
An incentive is not a subsidy. I have subsidized competition all over the place — subsidized feedstock, subsidized capital, subsidized labor. There’s no such thing as a level playing field — let’s not get starry-eyed about that notion. Agriculture and defense are must-do’s for the country, and the government takes a very big role in them. So in manufacturing, have we given thought to the country’s needs? I would argue there are two very vital needs. One is energy and our being an importer vs. an exporter. The second is infrastructure. We have to rebuild this country. Those two things are worthy of — not a subsidy, but a holistic government plan that incentivizes the private sector to participate in the solution.

Do you think your view of our national mission is widely agreed upon?
I think this current administration has grabbed it. Just by being co-chair of the Advanced Manufacturing Partnership, I am delighted — three or four years ago, we weren’t even talking about manufacturing. We now are.
I’m an Australian-born citizen of Australia, privileged to be in this great country, so I think I have some objectivity when I say this. We still have the best system in the world, with its resilience, entrepreneurial focus, and innovation. All we have to do is stop warring with each other and start partnering in public-private partnerships. I think this administration has worked hard to get that going with the Advanced Manufacturing Partnership. I’m very confident that after this political cycle, we’ll see something adopted.

You’ve spent your entire career with one company. A lot of young people today could not imagine doing that. Is it still the way for young people to go?
People may well think that I’ve had 36 years at this company as a deliberate thing, but I did not. I had a career one or two years at a time, and every one or two years, Dow recruited me again. So I’ve got to re-recruit our young employees every one or two years, or for their generation maybe it’s less than a year. The younger generation are not as mobile. They love their fun. They want their environments a bit different. So I’ve got to recustomize my corporation to be appealing quicker based on their attention span. I’m not criticizing. That’s just an “is.”
So I haven’t had a 36-year career. I’ve had many opportunities to not be part of Dow Chemical. I joined the company, but I stayed because of the people. It’s the people around you that make a difference to what is hopefully a happy, energetic work and life. Because if you don’t do that, then what the hell are you doing every day?
The Leadership Series
Formerly called “C-Suite Strategies,” this is the latest interview with a top executive by Fortune senior editor-at-large Geoff Colvin. See video excerpts of this interview at fortune.com/leadership — plus find Colvin interviews with Chicago mayor Rahm Emanuel, DirecTV CEO Michael White, Xerox CEO Ursula Burns, Humana CEO Michael McCallister, and many more.

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AMY JAFFE A leading expert on the geopolitics of oil, energy, security and risk. Associate director of the Energy Program at Rice University’s James A. Baker III Institute for Public Policy

March 23, 2012 in energy issues

CLICK HERE TO LEARN MORE ABOUT AMY JAFFE ENERGY EXPERT & SPEAKER

Amy is a frequent keynote speaker at major energy industry and investment conferences. Her latest book is “Oil, Dollars, Debt and Crises.A widely quoted commentator on oil and energy policy in the international media who has provided testimony on Capitol Hill on energy matters, Jaffe appears regularly on a variety of television news stations and programs including CNN, “The News Hour with Jim Lehrer,” FOX, MSNBC, and National Public Radio. Her writings have been featured by the The New York Times, Dow Jones International, Mideast Report.

A contributor to Foreign Policy magazine’s “21 Solutions to Save the World” and recipient of the Award for Excellence by the International Association for Energy Economics, Jaffe was among the 2004 “Key Women in Energy-Americas” honorees and was named to Esquire’s annual 100 Best and Brightest.

Jaffe’s long list of accomplishments include serving as a member of the reconstruction and economy working group of the Baker/Hamilton Iraq Study Group and a major contributor to the recent joint Baker Institute/CFR task force on Guiding Principles for U.S. Post-Conflict Policy in Iraq. She has also served as an advisor to the U.S. National Intelligence Council Study on Energy to 2015 and as a principal advisor to USAID’s project on Options for Developing a Long Term Sustainable Iraqi Oil Industry.

Jaffe is a principal author of the Baker Institute’s numerous energy studies that cover energy trends in the Middle East, Caspian Basin, China, Russia and Japan, as well as emerging technologies in the nuclear, nanotechnology, and natural gas sectors. Jaffe is currently organizing a major study on oil, the US dollar, national debt and market crises as well as a major initiative on global poverty and energy.

Prior to joining the Baker Institute, Jaffe was the senior editor and Middle East analyst forPetroleum Intelligence Weekly. Her research focuses on the subjects of oil geopolitics, strategic energy policy – including energy science policy – and energy economics.

Speech Topics Include:

* Oil Sheiks and The Demise of the Dollar: What Investors Need to Know About the Coming Oil Apocalypse

* Guns and Butter: How Our Perpetual Dependence on Foreign Oil Leads to Global Financial Crises

* Oil, Dollars and Financial Crises: How To Ensure that Oil Sheikhs and Interest Rates Don’t Ruin Your Investor Returns

* The Oil and Dollar Crisis: A Primer on How to Avoid Losses in the Next Financial Meltdown

* The Global Resource Curse: How Mideast Petrodollar Bubbles Are Financing Global Economic Meltdowns

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Vikram Mansharaman PhD. on FoodStock 2012

March 22, 2012 in Guest Bloggers

CLICK HERE TO LEARN MORE ABOUT VIKRAM MANSHARAMANI AUTHOR AND SPEAKER

A steady stream of Lincoln town cars delivering confident executives.  Unbridled enthusiasm in the air, record attendance, and eager attendees seeking pictures with the keynote speakers.  An assassinated former president was reincarnated with impressive accuracy to provide for audience entertainment.  Professional videos were prepared to tout the industry’s successes.

Mortgage bankers convening in 2007?  Nope, the scene I describe was from the USDA’s Agricultural Outlook Forum in late February in the Washington DC area.  Attendance at last week’s event exceeded two thousand, and included farmers, politicians, regulators, agribusiness executives, bankers, and academics from around the world.

Might the collective confidence of the event’s attendees indicate an irrational exuberance that is destined to reverse?  Was the widespread enthusiasm and economic success (farm income exceeded $100bn in 2011) sustainable?  Was the “life is good” attitude indicative of a bubble before it bursts?

I have been a student of booms and busts over the past 20 years and have developed a set of indicators for identifying bubbles.  Two in particular seem relevant to the study of agricultural conditions today.  First, there is a always a believable story of how “it’s different this time” and the inevitable (over)confidence and invincibility that accompanies such a feeling.  Second, moral hazard (via government guarantees or downside price protection) makes for a “heads I win, tails you lose” risk environment.  With respect to agriculture, both of these indicators suggest the situation is not sustainable.

It was hard not to notice the celebratory tone that hailed the many impressive accomplishments of US agriculture.  In many ways, the success of agriculture has generated a sense that good times will continue indefinitely.  I was gently (and regularly) reminded that the USDA touches every American since we all eat food.  It was repeatedly mentioned that Lincoln referred to the department as the “People’s Department” and that while 50% of Americans lived on farms in 1862 (the year Lincoln established the USDA), today 2% of Americans live on farms that produce a surplus that is exported to a hungry world.  Record land prices drew some discussion of bubbly dynamics – but rationalizations of how “it’s different this time” seemed to win the day.  Demand from emerging middle classes in the developing world provided strong support for the belief that we are in a new era of agricultural prosperity (i.e. that it’s “different this time”).

As is typical of most bubbles, past trends are extrapolated into the future to paint a picture of continuing good times ahead. The pinnacle of last week’s events was a plenary session moderated by Secretary of Agriculture Vilsack that included 7 former Secretary’s of Agriculture discussing the future of agriculture in America.  It was noteworthy that the 8 members on stage included republican and democratic appointees, lawyers, farmers, and legislators.  While the event was truly a “love-fest” in that everyone was praising everyone else about how great a job everyone was doing, there were some noteworthy exceptions from former secretaries who commented on the sustainability of US agriculture and implied heavily that the current good times were unlikely to continue indefinitely.

Clayton Yuetter, Secretary of Agriculture from 1989-1991, noted “the antidote to high prices is high prices; the antidote for low prices is low prices.”  While an appealing intellectual construct, USDA supports policies that contradict this perspective.   The counter-cyclical and marketing loan programs both allow for farmers to not consider prices when making planting decisions.  Lower prices don’t deter production as government subsidies effectively create the moral hazard-induced asymmetric risk-reward trade-off.

Given these two very concerning dynamics, it is not surprising that John Block, Secretary of Agriculture from 1981-1986, suggested the USDA’s “strength and power and influence in the halls of government and in the nation” are at risk in a time of budget cuts.  He even suggested the USDA change its name to the “Department of Food, Agriculture, and Forestry” in order to maintain control of the food programs (~70% of the annual budget, includes food stamps, school lunches, and other nutrition programs) and the forest service (manages ~193 million acres and employs more people than any other group within the USDA).  His specific rationale: USDA would be at risk of losing its cabinet level status without the size and breadth of these two programs.

Why should cabinet status drive inappropriate organizational structure?  Birthdays are wonderful times to celebrate the past, but they are also appropriate times to reconsider plans for the future.  As the USDA turns 150 this year, we should consider if the food and nutrition programs actually belong in it.  Might these programs be more appropriately placed in the Department of Health and Human Services? Or, as mentioned by Secretary Block as a risk, perhaps the Forest Service should be relocated to the Department of the Interior.  Frankly, even the underlying agricultural subsidy programs should be reconsidered.  Should American taxpayers be providing subsidies to an industry that posted record profits in 2011?  The time to reduce or remove subsidies is now, while prices are high and pain of removing them minimal.  Further, the Farm Bill should be rewritten from scratch, not modified incrementally from Depression-era policies that in many cases are no longer relevant.

Reorganizing the USDA and rewriting the Farm Bill might remove some of the hot air supporting the bubble dynamics in agriculture today.  The USDA has inadvertently contributed to overconfidence and moral hazard, much to the detriment of taxpayer resources.  The fiscal tightening that appears necessary might best begin by grabbing the “low-hanging fruit” (pun intended!) at the USDA.  The time has come to return the People’s Department to the people.

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VIKRAM MANSHARAMANI Expert on Bubble Scenarios and Author, Boombustology

March 22, 2012 in Authors, Speakers for Business Groups

CLICK HERE TO LEARN MORE ABOUT VIKRAM MANSHARAMANI AUTHOR & SPEAKER

Vikram Mansharamani is an experienced global equity investor and Lecturer at Yale University. Dr. Mansharamani teaches the seminar “Financial Booms & Busts” to Yale College undergraduates, an extremely popular course as indicated by student reviews and enrollment. He is also the author of BOOMBUSTOLOGY: Spotting Financial Bubbles Before They Burst and is a regular commentator in the financial media, having contributed to Bloomberg, MarketWatch, CNBC, Forbes, Fortune, The New York Times, The Wall Street Journal, The Atlantic, Yale Global, The South China Morning Post, The Korea Times, The Khaleej Times, and The Daily Beast, among others.

Dr. Mansharamani has been an active participant in the financial markets for the last 20 years. His Experience includes positions in management consulting, investment banking, and asset management. Analysis has been the focus of his professional endeavors and his current research interests include bubbles in both financial and non-financial markets, the unsustainable dynamics of food and fuel, and the relative value of experts and generalists in understanding complex problems.

Dr. Mansharamani currently serves as chairman of the Torit Language Center Montessori school and is a member of the Board of Governors of the Association of Yale Alumni. He is a former director of the US-Pakistan Business Council, Interelate Inc, and ManagedOps Inc. He earned a PhD and MS from the Sloan School of Management at MIT, an MS in Political Science from MIT, and a BA from Yale University, where he was elected to Phi Beta Kappa and graduated with distinction.

Vikram Mansharamani speaks on a broad range of topics that help people plan for the future. He applies the analytical power of a multi-disciplinary approach (microeconomics, marcoeconomics, psychology, politics and biology) to topics not generally thought to be in the investment domain – though potentially with significant investment implications. Dr. Mansharamani tailors each presentation to meet the specific need. Listed below are some example speech titles.

Speech Topics Include:

Boombustology: Spotting Bubbles Before They Burst

Great Big Problems – and How to Think About Them

The Surprises that Will Change the World

The Forthcoming Chinese Bust: Why 4% Growth Looks Increasingly Likely

Bubble Trouble: A Global Look at Forthcoming Busts

Food, Fuel, & Finance: An Unsustainable Trinity

The End of Cheap Oil: Investment Implications

The End of Cheap Food: Why Peak Soil Matters More than Peak Oil

Connect the Dots! Why Expertise is Overvalued

Bubbly Books: The Case for a Higher Education Bubble in America Today

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JIM CARROLL – report from a keynote: “dare to be groundbreaking!”

March 21, 2012 in Guest Bloggers

CLICK HERE TO LEARN MORE ABOUT INNOVATION EXPERT AND SPEAKER JIM CARROLL

I’ve been remiss in blogging – 20+ keynotes since January, so I’ve been on the road. I’ve got lots to report on what I’ve been focused on in a huge range of different industries.

Back at the start of this travel odyssey, I found myself in Palm Springs, California, as the opening speaker for the 2012 California Community Associations Institute annual conference. In the room were several hundred lawyers and legal professionals supporting condominium and other community developments.

My focus? The key trends that would impact their role, both as lawyers and as individuals involved with complex real estate, construction and building design issues. So I did my homework, and put together what I thought was a great keynote. Certainly the instant Twitter feedback emphasized that I likely hit a home run.

I addressed numerous issues — including what will happen to the legal profession when the next generation of kids — who have grown up never knowing a world without an iPhone — enter the legal profession. Everything changes….

And here’s the fun part of my job — its’ always fascinating to find, after the keynote, the impact that I might have made on some people in the room. Which leads me to a post I found at the blog for Goodman, Shapiro and Lombardi LLC, a firm specializing in this industry, but based in Massachusetts and Rhode Island.

After a brief intro, the post, headlined “Embracing Technology: Insights from the CAI’s Law Seminar,” gets right to the point:

I was somewhat skeptical about what I’d glean from the keynote speaker, Jim Carroll, a corporate consultant who describes himself as a “futurist.”

I’m often greeted by such a reaction. But that’s my job — I spend a huge amount of time thinking about future trends, undertaking research in dozens of industries, meet hundreds of executives at the events that I speak at and prepare for — and synthesize all of this into a concise 45 minute to 1 hour overview of what the folks in the room should be thinking about. In this case, my keynote focused on two big issues: the future of the legal profession, and the key trends that would impact the construction/condominium industry and communities going forward into the future.

After that introduction, the blog post goes on:

“Turns out he is recognized worldwide as a “thought leader” on global trends and has helped many companies, including NASA and the PGA, transform their businesses through creativity and innovation.”

This is true — you can read about my keynote for NASA in this post, and a simple search for PGA on my Web site reveals all kinds of posts on my keynote for the “largest working sports organization in the world.” You don’t get to to do my type of job if you aren’t on your “A-Game” all the time!

So what did he think? This makes for a good read:

Part of my keynote in Palm Springs focused on my “10 Big Trends for the Legal Profession” – read the PDF by clicking on the image.

“Among the intriguing facts he imparted was a study citing that 65% of today’s preschoolers will work in jobs and careers that do not even exist yet.  He piqued our interest with other obvious-yet-provocative statements… our kids have never known TV without a remote and have never heard the phrase, “Please get up and change the channel.”

It bears emphasizing that he was talking to a roomful of lawyers – people who, by definition, practice in a conservative profession averse to change or novelty. Indeed, much of the law is based on precedent and the notion that if it hasn’t been done before, it probably can’t be done now.

Yet our challenge, at this particular moment in history, is to get ahead of the curve, to dare to be groundbreaking.  This may seem threatening, but it’s a message that should resonate within our industry as we think about what this means in concrete terms. On the horizon, I see more green buildings; eco-design; solar panels; and electric cars, among other innovations.  There will certainly be legal implications for all this, and we need to be ready.  In short, we need to think creatively and to embrace change.

And there’s my home run from the keynote – right there: “In short, we need to think creatively and to embrace change” and “Dare to be groundbreaking.” My job is to get people thinking about the future, and challenging them to think and act differently to deal with an ever faster rate of complex change.

It’s always a thrill to look back to see that I’ve pulled it off!

Read more in another post I wrote: “What Goes Into Building a Great Keynote?”

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MICHAEL HORN Co-author of Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns & co-founder and Executive Director of Education at the Innosight Institute

March 21, 2012 in Authors, Speaker for Education Groups

CLICK HERE TO LEARN MORE ABOUT MICHAEL HORN SPEAKER AND AUTHOR

Michael B. Horn is the co-founder and executive director of education at Innosight Institute—a not-for-profit think tank devoted to applying the theories of disruptive innovation to problems in the social sector. He is the coauthor of “Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns” (McGraw-Hill: June 2008) with Harvard Business School Professor and bestselling author Clayton M. Christensen and Curtis W. Johnson, president of the Citistates Group. BusinessWeek named the book one of the 10 Best Innovation & Design Books of 2008, Strategy + Business awarded it the best human capital book of 2008, Newsweek named it as the 14th book on its list of “Fifty Books for Our Times,” and the National Chamber Foundation named it first among its 10 “Books that Drive the Debate 2009.” Disrupting Classuses the theories of disruptive innovation to identify the root causes of schools’ struggles and suggests a path forward to customize an education for every child in the way she learns.

Horn has been a featured keynote speaker at many conferences including the Virtual School Symposium and Microsoft’s School of the Future World Summit. Tech&Learning magazine also named him to its list of the 100 most important people in the creation and advancement of the use of technology in education. Prior to this, Horn worked at America Online during its aol.com re-launch, and before that he served as David Gergen’s research assistant, where he tracked and wrote about politics and public policy. Horn has written articles for numerous publications, including Education Week, Forbes, the Boston Globe, and U.S. News & World Report. He is co-editor of the upcoming book Private Enterprise in American Education, which examines the role of for-profits in education. In addition, Horn has contributed research for Charles Ellis’ book, “Joe Wilson and the Creation of Xerox” (Wiley, 2006) and Barbara Kellerman’s “Bad Leadership: What It Is, How It Happens, Why It Matters” (Harvard Business School Press, 2004).

Speech Topics Include:

• Education Innovation
• Education Policy
• Education Reform
• Online Learning
• Blended Learning
• Higher Education Business Models

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