Miles To Go.

This way, or that way? (Photo ABC News)

This year’s Presidential Election will be the most important in my lifetime… as per usual.

I was a fan of politics back in the day, when the process itself didn’t make me puke. I tuned in to the weekend talk shows eager to see who would say what, and even the most sold-out of hosts played it pretty middle of the road. I did the same this weekend: the most memorable prognosis was David Gergen who went so far as to say we may see a landslide, but he didn’t know for who…

Though I’m just a guy from Pittsburgh, I ended up living in a data driven world, and dealing with a lot of coastals. So I’ve been fascinated with a few interesting graphs like the Path to the White House from the NYTimes and Nate Silver’s BET THE FARM prognosis called 538. After 18 months, there are still hundred of permutations on the path to to 1600 Pennsylvania Avenue… which the rest of the world thinks is another exhibit for America’s case for self-inflicted insanity.

I also live in a world driven by Mobile and social – in fact I helped create it. I’m impressed (or bored or perturbed) by the frequency of Facebook or Twitter posts from friends who feel it’s a good time to share the scoop on the latest Gotcha charge from either camp. Events move dramatically, though they are played out before less people than back in the day, on network TV. Witness this week’s Sandy Storm; it featured the horror of Boardwalks falling into the sea (they are boards!), to cancelled marathons, to inter-party wet kisses on the jersey Shore in exchange for first dibs on FEMA help. Yet most of the rest of the country was faurly clueless as to the true effects of the storm. Or take the singular issue of the election:  jobs. That’s the one thing that will save our economy, but that debate turned to offshoring, tax burdens and the auto bailout. The real value added jobs created by entrepreneurs are too often overlooked.

Those that follow are more engaged, more vocal… and thank god only carry just one vote apiece. This Presidential Election has certainly set a record for skewing of the truth and for willingness to play for the margin of error in states that still count. Nixon campaigned in 49 states in the last month of his election… Romney and Obama, more like a handful. The rest didn’t matter. Data has allowed us to zero in on the few votes that hang in the balance. And our mobile social world have allowed us, even driven us, to magnify differences among ourselves in order to make a breakaway move, left or right.

“If we are victorious in one more battle, we shall be utterly ruined.” King Pyrrhus once said. And indeed, my prediction is the winner tomorrow will face an impossibly divided Congress, a debt burdened Treasury, and a society whose place in the world would best be managed as a soft landing.

Good luck with that.

I think it’s a lock: our next President will be Pyrrhic.

Fred w phone. No unlimited data plan just yet...

There is a yawning gap emerging in the world and I think this gap will define the advancement of societies, the creation of jobs,  and even the happiness of populations in the decades to come: it is access to mobile data and I call it Flintstones vs. Jetsons. (shout out to April Rudin for the headline).

• Generation segue: Some of us remember Fred Flintstone. Worked in a quarry, drove a foot pedal car. Loved to bowl and eat steaks. Life was simple, and there was not a lot of reason to innovate. Pebbles and BamBam didn’t seem to be a big generational culture gap. A loveable guy in the Jackie Gleason vein.
• And his cartoon counterpart, George Jetson. Worked are Spacely, drove an automated space scooter. Astro walked himself, Rosie the Robot did the chores. Skyped with the office, used the tele-puter on his wrist. Loveable knucklehead is in a fast-moving world, but he kept adapting and he kept pace.

So my point, my belief, is that we have arrived at a crucial inflection point in our history, where people, countries, leaders (and entire industries) are choosing to go Flintsone or Jetson. And the catalyst for this decision is, clearly, the smart phone and the data it generates. The Flintstone are content with how things are. They have found ways to live until now without technology, and they resolved they would coast from here on in, whether in their carreers or their lives. Financial planners are on the list. So is much of the financial services (non retail) industry. Traditional media has hated the transition. KONY is no fan. Nor is Assad, or Mubarak. People of a certain age (but not all!). There are lots more.

Meanwhile, the Jetsons accelerate. The gap has not even yet begun to present itself.

mOcean at Mobile World Congress

If you have any doubt of how quickly this industry has grown, check out the Mojiva/Mocean (I am an investor) booth at The Mobile World Congress. MWC was, five years ago, just a bunch of suits from Nordic and Asian countries wielding flip phones for voice and text. Today, MWC is heralded as the biggest and the best mobile technology event in the world. According to conference organizer the GSMA, this year’s event played host to a record number of attendees, topping out at 67,000 visitors from 205 countries; an 11% increase over the 2011 show. The four-day conference and exhibition attracted mobile operators, software companies, equipment providers, Internet companies and media and entertainment organizations, as well as government delegations from across the globe. More than 50 percent of this year’s attendees hold C-level positions, including more than 3,500 CEOs.

Most telling perhaps, CEO’s were wearing jeans, T’s and blazers…

So here’s the shocker datapoint from cisco: 40% of the worlds smartphone data is consumed by… 1% of the world population. That means a small group of people are gaining an unfair (perhaps) advantage because of their access to information

• The subways are down: take the bus.
• This new place is overcrowded: here’s another local option.
• Gas prices are skyrocketing, but discounted in NJ this weekend.
• This client has spent xxx seconds on the site and is ready to take the next buying step
• Yo Twitter! The rally to unseat the government has been moved to the following sidestreet!

The examples go on and on. A few minutes saved. A better solution for the moment. A bit more background before the interview. A better way, on the way. Compound that millions of times over billions of people and guess what: you have a new gap between the haves and the have-nots. Food for thought before you make your choice between Flintstone or Jetson!

How long can Ben float?

Years ago I got my start on Wall Street and was assigned to read business plans for a tiny investment banking boutique named Beuret & Co. I saw a lot of crap, but nothing near what the deficit “super committee,” must be analysing this week.

I didn’t have any financial background aside from a knack for knowing what added up and what didn’t, in a spooky kind of way. By my own count, people had wheeled in something like 10,000 plans, which I digested and, in many cases called the hapless entrepreneur and told them why it wouldn’t work, IMHO of course. One habit that I had been to take a little 3×5 piece of scrap paper and staple it to the cover of the plan with some basic facts, just to rememebr what plan I was talking about. What industry. Problem and solution. Stage of development. Unique properties. Raise and use of capital. And profit and loss basics. When I was asked about this deal or that, I had a handy reference, but later in life I realized that, once you get it you rarely needed more than those basics. (See my many references to investing like a child). When asked later in life how I came to read plans so quickly and asses a companies prospects in a flash, my only explanation was that when you see 10,000 of anything wrong by process of elimination you begin to know what is right.

Which is why, when I read this balance sheet and income statement on USA Inc. from Mary Meeker at the end of her Mobile Update, I nearly cried.

It came at the end of her regular update on digital media, now done under the auspices of Kleiner Perkins. She has routinely walked through the basics of income, expense, assets ans liabilities much the way I would have done it sitting in my little cubicle on Wall Street. As an American citizen, listening to this deadpan presentation is a must-do.

“By the standards of any public corporation, USA Inc.’s financials are discouraging,” she writes in an introduction to the report. “True, USA Inc. has many fundamental strengths. On an operating basis (excluding Medicare and Medicaid spending and one-time charges, the federal government’s profit and loss statement is solid, with a 4% median net margin over the last 15 years. But cash flow is deep in the red (by almost $1.3 trillion last year, or ~$11,000 per household) and USA Inc.’s net worth is negative and deteriorating. That net
worth figure includes the present value of unfunded entitlement liabilities but  not hard-to-value assets such as natural resources, the power to tax or mint  currency, or what Treasury calls ‘heritage’ or ‘stewardship assets’ like National Parks. Nevertheless, the trends are clear, and critical warning signs are evident in nearly every data point we examine.”

If the United States of America was a start-up, no one would give it any more money. More likely we would just take it out back and shoot it.  Luckily, USA is not a start-up, but unfortunately it still takes a boatload of faith and capital to run the thing. While unlikely to actually go out of business, the cost of keeping the lights on gets higher and higher as the faith goes lower.

This does not bode well for us. But we can do something about it. If we really try.

More likely, it will get kicked to 2012 instead.

From my UN field trip...

The streets of new York City are clogged with tyrants, powerbrokers, divas and muses these days… and I don’t just mean Fashion Week! The Isle of Manhattan yields to the UN General Assembly’s Fall Gathering, and while I passively observe both, Melissa reminds me I am more useful commenting on the latter.

I spend a fair amount of time and capital in my own quest to understand the Middle East, but it doesn’t take all that to know this week brings a seminal moment in our influence there… it’s a whole new ball game if you haven’t noticed.

Wednesday’s Sarkozy rebuke of Obama was legendary, but Friday brings us the big squirm: the Palestinian quest for membership at the U.N is driving the US to the brink of sanity as throwing a veto on behalf of Israeli interests will surely off the rest of the Arab States. In the morning, Palestinian President Mahmoud Abbas is scheduled to speak. He has said that after he gives that speech, he will deliver a letter for application to the U.N. secretary-general. Israeli Prime Minister Benjamin Netanyahu is scheduled to speak a little later in the day.

What makes me interested in this business is that the Arab Spring has set in motion a Rube Goldberg progression with no known end result. What Cairo unleashed was the power of  mobile social media among restless people, aided by the most unlikely of news sources al-Jazaeera. Long running dynasties in are running scared. And the West and the US in particular has at least one eye on the oil spigot, at least one toe in the Israel camp, and one hand in their pocket looking for the any loose change to help their ailing economy. Meanwhile, with this “people’s democracy” thing being bandied about as the likely solution to the vacuum left by the tyrants I have to believe everyone at the UN Cafe is wondering where it all leads and who leads after all.

Many of us Americans were only recently introduced to Islam in a most unfortunate way 10 years ago, as Irshad Manji points out in her blog . The Middle East is beginning to get its footing in modernity after a long and deep slumber with a rich cultural and religious legacy. That footing will displace our world order. As Robert Fisk opines in the Independent  this vote at the UN – General Assembly or Security Council is going to divide the West – Americans from Europeans and scores of other nations – and it is going to divide the Arabs from the Americans. It is going to crack open the divisions in the European Union; between eastern and western Europeans, between Germany and France (the former supporting Israel for historical reasons, the latter sickened by the suffering of the Palestinians) and, of course, between Israel and the EU.  Ten years ago on 9/11 OBL succeeded in polarizing the West and the Muslim world  Zach Karabell, from Daily Beast reminds us, but a decade later, in the wake of the Arab Spring, that seems more transitory than permanent. We are living one of Thomas Friedman’s four ruling bargains, and it is going to probably hurt.

I was fortunate enough to join US Ambassador Frank Wisner for breakfast this week at the Next American Economy gathering put on by Bo Cutter. Reflecting on his overview, and I paraphrase here and am not quoting or mis-quoting,…the glide path from hegemony to responsible power is an important one for the US to manage. Letting domestic politics trump global influence will make the landing a hot mess. We must remember the importance of events, stay engaged, and remain cautious.

So while the Middle East and  the Arab spring may seem far away to us most of the time, this week the whole show is right here in Manhattan and the effects of how it all plays out will have profound influence on how we are viewed in the world. It will be a painful reminder of just how vulnerable we Americans really are.

No fashion runway ever had so much riding one show!

Errmm, all's well here...

The beatings will continue until morale improves…

That about sums up the Assad’s family strategy for dealing the outbreak of “Arab Spring” in Syrian towns as it continues into “who’s next to Fall, this Fall”.  I think it is a country worth keeping an eye on, though it is very difficult with limited social media permitted.

Fellow Americans know so very little about the little country wedged between Lebanon and Iraq. I know just enough to be dangerous: my trek through the country with Tad Jones gave us a very unique perspective and continues to be the influence for our singular effort to inform our kin with our in-development play, A Line in the Sand. As we’ve said before, the region may look differently if TE Lawrence used twitter. We have tried piecing together Syria’s history enough to understand its future. But we’ve only been noodling it for five years, while they’ve had centuries to create the puzzle. Here’s a few pieces:

First: Syria is a key domino in one of the four big tectonic changes that will define the next generation: access to oil. While they have little oil themselves, they have long been a keystone in the strategic interests of the region, crossing both ethnic and geographic ties. Many of the current conflicts in the region lead back to Damascus, one way or another: Baghdad, Tehran, West Bank, Golan, Beirut, Israel proper, the Palestinian question, etc. etc. The entire region has a long history of being tribal, and Syria has exploited those gaps for centuries.

(for the other three, and a lot more eloquent grasp of geo-politics, see Thomas Friedman and the world’s four ruling bargains): 1) The world’s oil tap is deposing its old regimes, 2) Europe is unravelling as PIIGS spend and Germans save, 3) China’s deliberately undervalued currency and export-led growth keeping the Communist Party’s in power by providing rising living standards, and 4) In America, a credit-consumption-led economy, whereby we maintained a middle class by using steroids (easy credit, subprime mortgages and construction work) and less muscle-building (education, skill-building and innovation).

Second: It’s strategic. because of this  position, the region has been fought over for centuries. Long before there was oil, there were the Crusades whereby the Catholic church essentially invented the jihad, IMHO. Teutonic Knights were promised eternal gratitude and absolution in advance for re-taking Jerusalem and slaughtering anyone that stood in the way. This generally meant Muslims. In support of the thousands that made their way to the Holy Land, huge logistical challenges were met as Hospitallers literally paved the path from France to Palestine with roads, castles, and supporting infrastructure provisions (and became rich in the meantime).  I have personally visited Krak de Chevaliers in Homs and I can attest to the awesomeness of the work as well as the brilliance of the positioning. It was clear the spot was very important and was not going to be given up easily.

Third: Syria is the ultimate state controlled, exterior influenced, family business. Bashar al-Assad is the current president, and was preceded by his father Hafez al-Assad. Bashar’s prior occupation was ophthalmologist, so it was likely his family connections that got him the job. With very few natural resources and de-minimus GDP (#67 thank you, just beating Oman) sometimes it seems like the whole country gets by playing two rivals against another, or one against the middle. Iran and Russia have deep ties, obviously. The former a result of Cold War support, the latter more like neighborly politics. Syria has been under Emergency Law from 1962, effectively suspending most constitutional protections for citizens, and its system of government is considered non-democratic. Many citizens I know live between terror and resignation. If the Arab revolt continues, hope will replace resignation, but terror will continue.

Fourth: Syria has stunningly rich history. The near future is likely to take inspiration from its past. I had the good fortune to tour just a bit of it, including Jerash which was one of the great Roman outposts and remains today one of the finest of Syria’s 50,000 archeological sites. The Crusaders rolled through a thousand years later and left an amazing collage of castles and fortifications. The French have stuck around for the past millennium in the Levant, and it shows. In this century, Lawrence of Arabia organized the tribes of the dessert into revolt against the Turks by promising Damascus as the prize upon victory. For a people raised in the sands of the deserts, there was no more fertile green imaginable. The bait worked, for at least as long as Lawrence’s promises weren’t already undercut by French-English back-handedness. The West is still reaping what was sown in post WW I Syria it’s no wonder Lawrence is called by one biographer ”A Prince of Our Disorder”.  

So, far as I can see, the beatings in Syria will likely continue. It will not fall easily because we have little leverage, outsiders are too interested in the status quo, and the insiders are not interested in anything short of carrying on. Change will depend on those who see the benefits and are willing to risk to consequences of the process. In the meantime, I wish my Syrian friends their safety, peace and a better place than yesterday.

PS: the best damn rose petal jam in the world is served with the french croissants at the Biet al mamlukkka hotel.

Ranjit & Chad. We NEED these guys. (generalization)

One thing I hear month after month at the Next American Economy thinktank breakfast is, “Where are the Jobs Jobs Jobs? “Seems like a giant game of peekaboo.

I have seen scary Powerpoint slides from David Autor (MIT) and Dane Stangler (Kaufman Foundation) about not only the dearth of new jobs, but the dearth of the new businesses that create most of them. (“Dearth” is a double credit word in Scrabble). I touched on this same issue in a previous post Stuck in the Middle with You.

Nobel Laureate Michael Spence and Sandile Hlatshwayo note that the American economy has seen the lower and middle components of the value-added chain moving to the rapidly growing markets abroad and warn that soon, higher-paying jobs may follow low-paying jobs in leaving the United States.

The actions of the free market have made goods less expensive for Americans, but the free flow of labor and capital has also diminished the employment opportunities available in the United States and will, the authors warn, continue to do so at all levels of society. While Spence and Hlatshwayo acknowledge that there’s no simple policy fix to improve the trade-off between inexpensive goods and diminished domestic job opportunities, they argue that given the political policymakers must tackle this enormous question of inequality and economic distribution.

I’ve got a suggestion. Rather than lament our long slide into global parity, let’s do something that will arrest the dive: issue more H1B Visas.

Years ago, super angel Brad Feld was a guest on my show, MoneyHunt, and between filming takes, we talked about how America’s new job creation engine would be pinched by access to tech talent. Wow, was he right (many of Brad’s words follow). As is typical in Washington, the issue bounced around for a decade until Senators Kerry (D-MA), Lugar (R-IN) and Udall (D-CO) unveiled the Startup Visa Act of 2011. This is an updated version of the Startup Visa bill from last year that is aimed at making it much easier for foreign entrepreneurs who want to start a company in the US to get a visa. Today, this process is incredibly difficult and has been stifling the creation of new companies and the corresponding job creation that these companies provide.

Tad and Alleyanne. Wadi Rumm.

I once rode a camel across the desert, with a local named Saba and a TE Lawrence look-alike, Tad Jones. We concluded that the Middle East would be more fun if Lawrence had had access to Facebook and Twitter. If he had, some of his posts might have looked like this:

1. WTH #Versailles we can’t mix #Sunni rulers with #Shiite peeps. They don’t abide!
2. Not a drop of water in this damn desert! Black goopy stuff all over. Burns good though… other uses???
3. #Libya, using bombers on (your) people in the streets? see #Baghdad. Eventually, they do start to hate.
4. How is everyone spelling #Khadaffi?# Gadaffi? #Quadaffi? In the name of the holy one, please choose!

Lawrence wrote the seminal work on the Middle East in a notebook . Since then, Seven Pillars of Wisdom has never been out of print, and never far from the bedstands of every despot, marine and guerilla with even a passing interest in the region. Here’s the Cliff Notes for the rest of us:

1. It’s tribal. From Baghdad to Riyadh, there are hundreds of unique tribes and dozens of sects.  Sunnis and Shia are just two. The locals have been wandering, sniping and looting each other for a thousand years. Recent behavior has improved, but they don’t trust outsiders quickly.  Or much, for that matter.
2. It’s slightly blessed with a black gooey natural resource, which has fallen into the control of a small elite class. The Western world (France, England and the US, for this discussion) has quite an appetite for said Black Stuff- so we’re willing to tolerate the stench of  the despots who control it. China is immune to this moral argument, (see prior post on China: How we roll).  In any event, we set up most of them in their cushy situations, but this “buddy deal” tends to upset the masses.  And then the leaders have to choose, because…
3. The borders of these kingdoms are completely made up. It happened one afternoon in 1921 over tea at the Cairo Country Club when Winston Churchill, T.E. Lawrence, Gertrude Bell et al literally drew Lines in the Sand (check out the play by the same name in development by writer A.C. Grayling).

Cairo in 2011 has shown what can be accomplished by the people, when the people are informed.  What would the rest of the Middle East be like if TEL had been tweeting back then?  Here’s my take:

1. Oil might have been priced higher if the locals knew how badly we wanted it in the 1920′s (by reading Facebook Updates instead of outdated, state controlled papers).
2. The West may not have gotten away with simultaneous promises to a) give Syria to the French, b) give Palestine to the Jews, and c) arrange a pan-Arabian nation for the tribes. But we did, until the beans were spilt and all hell broke loose. Sorry!
3. And the leaders of these countries might have been elected by the people instead of chosen by France and England, and consequently overthrown by despots who are quite good at exploiting the resources.

But, the way things are going, Facebook and Twitter are keeping things honest over there now. And we might be getting higher oil prices and elected officials soon enough!

Author note: I have friends in every one of these countries, and have visited most of them. I do not belittle the violence against them.

Gerry Rafferty, rockin' the 70's thing

and  I don’t know what it is I should do…

Gerry Rafferty had it right, bless his soul. There is less and less in the middle these days, and of course, if you’re a “self made man” as the song says, someone is bound to hit you up, knock you down, or both (full lyrics below for the 70′s lovers).

This song was playing in my head as I was having monthly breakfast with NAE’s Bo Cutter, et al  and listening to MIT prof David Autor reflect on what happened to the middle of America, jobs-wise. This phenomenon, which also takes place in Europe, can be explained by the automation of routine tasks (thanks innovation!) and by patterns of educational attainment: (his words below).

1. The economy is adding jobs at the high end of the wage scale (managers, professionals and technicians) and at the low end (food service, security and personal care workers).
2. The economy is subtracting jobs in the middle of the scale, both white-collar (administrative, sales) and blue-collar (production, fabrication and repair).
3. “Middle-wage, middle-skill” jobs were decimated during The Great Recession (2007-2009) while employment at the ends of the scale held steady (high) or increased (low).
4. Jobs in the middle of the wage scale are characterized by routine tasks. These jobs are easily automated, computerized or performed in other countries. Rapid decline in costs of technology drives automation. Offshoring is properly considered a subset of automation since it involves the same technologies.
5. Jobs at the ends of the scale are difficult to automate. High earners need advanced education, intuition, analytical and persuasive skills. Low earners need adaptability, mobility and language skills.

News that Watson wiped the floor with all prior Jeopardy legends would seem to support the theory of what’s sure to come: machines gut the middle class jobs. But perhaps the most fascinating of all this is the irony. We as entrepreneurs are exhorted to innovate, create jobs, create wealth, and hopefully invest it back into the economy (net of taxes). But  David’s data suggests that innovating and creating high-skilled jobs will, in the long run, serve to marginalize the skills in the middle, which are easily automated.

His policy recommendations were:  Encourage higher education and begin preparation early. Emphasize re-training programs to boost skills in the low wage sector. Invest in R&D and infrastructure to create new jobs.

I would add to that: Learn to learn, because with the speed of innovation it doesn’t take much to feel old and useless.

Here’s the rest from Gerry Rafferty and Steelers Wheel:

Yes I’m stuck in the middle with you,

And I’m wondering what it is I should do,
It’s so hard to keep this smile from my face,
Losing control, yeah, I’m all over the place,
Clowns to the left of me, Jokers to the right,
Here I am, stuck in the middle with you.

Well you started out with nothing,
And you’re proud that you’re a self made man,
And your friends, they all come crawlin,
Slap you on the back and say,
Please…. Please…..