"The China Price" - The best business article I have seen in years.

It is a thinking man´s world 101.
No need to apologise

 

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Trada101: I like how you ignore companies like Google that have the same market cap as IBM and really represents the next generation of innovative of American businesses. Oh well, you just wanna be in your little hole and bring misery to the world like the little complainer you are. Sad.


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October 16, 2006

SouthAmerica: Reply to Trada101

Your comments shows that or you did not read my articles or you have not grasped what I was trying to say on these articles.



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Libertad: I am not right or left or in between...am not political...etc...

And I love the capitalistic markets and enterprise...this is how I have made and make my living...


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SouthAmerica: Today I am an independent, but I used to be a Republican for many years. Then I became a supporter of Jerry Brown, Ross Perot, and Ralph Nader when I started listening to people who made sense to me.

I also love capitalism and capitalist markets, but I can distinguish between good capitalism from harmful capitalism. I understand that a solid middle class makes the foundations for a prosperous society.

I know how bad capitalism can be harmful to society and I can recognize it and its symptoms - when I see it.

Various members on this message board have a very narrow view of capitalism and about many other issues. And their mind-set are stuck in the past.

You must know what I mean – by the way there is member on this forum who thinks that you and I are the same person. And he still thinks that even after I brought to his attention that you had been a member of this forum for more than a year when I also started posting on this message board.

He claims that we have the same style of writing and the same type of thinking – maybe because both of us were educated in the field of economics.

Besides there are other differences between us such as: you are a female, and I am a male, I am from Brazil and I still don’t have any idea from which country you come from in the Americas. You never mentioned any specific country, but I have been assuming all along that you have a Spanish background.

Who knows?

Many people on this message board have a narrow view of history, of economics, of politics, and so on. And most have a complete different practical work experience than I had over the years.

I see things from a different perspective than a lot people – I am always looking at the future and I am very optimistic about the future in many ways. I think outside of the box time after time again - and that makes the people who are completely boxed in regarding their views of most things very uncomfortable.

As a senior financial analyst, and later controller of various companies I saw very closely how businesses operates – the budget process, the internal politics, what you know but you don’t let the outside auditors know, how major corporations fudge the numbers on a regular basis, they manipulate the figures to provide information to the outside world what they are expecting and not what would be acceptable if you really used GAAP accounting principles that you learn in school or the rules created by FASB.

I know from practical experience how hard it is to develop new products, and develop new markets, how you have a hot product today and how fast they become obsolete on the market place. Today you are the king of the hill, and tomorrow you are trying to survive and stay afloat and avoiding have to go out of business.

I understand about of the costs related to every single employee that you have on your corporation (health care costs, pension costs and so on) and the difficulty of finding and hiring qualified new people and of having to fire anyone from his/her job for any reason.

I also learned from working on various types of corporations and industries from the investment field, to major insurance company, to major manufacturing conglomerate, to major communications’ company, and various international trading companies – and I always was in the international side of the business where you have an even broader view of things.

My writings it does not reflect only theories that I learned during my college and graduate studies years – in my case it also reflect many years of practical experience in the real world.


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dude, it's clear what your agenda is. You just choose to satisfy your emotional need to convince everyone to believe in your views. It's ok, it's just natural human behavior. But of course you're wrong.

But you do have a talent for posting long ass articles to peddle your point. Why not just use logic and reason.

 

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Trada101: dude, it's clear what your agenda is. You just choose to satisfy your emotional need to convince everyone to believe in your views. It's ok, it's just natural human behavior.


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October 16, 2006

SouthAmerica: By your style of writing I assume you are a young fellow, maybe a college student, and I don’t know if you are Chinese, Indian or American.

I am not putting you down, and I will make an effort to clarify my point of view and hope that that way you will have a better understanding of what I am trying to say. Maybe my articles were not clear to you.

In a nutshell:

First, I am writing my articles from my point of view – I live in the United States and I am worried about the job market and the economic situation that affect my life directly, including health care, Social Security, Medicare, pensions, a tax base to support an ageing population, fair competition on the market place and so on….

I am interested in developing as large as possible a middle class here in the USA – that is the foundation of the system that brings stability and economic prosperity.

You have to adjust the system to changing circumstances all the time for the system to be able to work properly – in the case of the United States a massive amount of ageing population, for example.

As you get older and have more experience with practical life work and personal then you realize that the world is not red, and blue, but a share of a number of colors. There is no such a thing as or you are with us or with our enemies – that kind of talk is better used on Hollywood movies it does not work well in the real world.

The real smart people have flexible minds and they adapted and adjust their thinking when they are trying to solve the new problems that are in the pipeline or that are developing.

I am talking on an economic sense, and I don’t stop to think if this is a republican, a democrat, or a socialist solution. I just try to look at a solution as a rational human being and trying to find a human solution for the problems.

I would recommend that you read the book “The End of Work” by Jeremy Rifkin that book does a very good job in explaining what has been happening on the job market.

I wish that Mr. Rifkin up dated his original work and took in consideration the technological advancements that we had since he wrote that book including today’s world connected by fiber optics, new types of communications, the internet and so on…..

At the core of my articles I put the spotlight on IBM, over and over again. But why this trend with IBM has a much great negative impact on the US economy than what is going on on a zillion other companies on the United States including Google as you brought it up?

I said on one of my articles: “The first thing that came to mind was that IBM has clout and the connections to all the major corporations in the US. With this vast army of outsourcing consultants they could outsource at the speed of light a large amount of good paying American jobs to cheaper places such as India, and China; before the fools in Washington realized and grasped what was going on.

This particular case of “IBM and Outsourcing on Steroids” has a major implication for the US economy, because of IBM’s unique position and connections to the US major corporations.

… IBM is in the position to outsource, and at a very fast rate, a large number of good paying jobs out of the United States and out of Brazil into China, India and other lower cost countries. IBM and the other major outsourcing companies can outsource American and Brazilian jobs faster than the United States and Brazilian economies can create new ones.

… The article said: “IBM’s new chief executive is betting that the company’s future lies in the acquisition of a consulting arm and on-demand computing services….Under Sam Palmisano, chairman and chief executive, IBM is investing billions of dollars in research and acquisitions under the banner of “e-business on demand.”

… The future of information technology can be found in central Cincinnati, Ohio, where Procter & Gamble has its headquarters. The 166-year-old maker of soaps and snacks has this year outsourced not only management of its IT infrastructure but also business processes including relocation services and employee benefits administration.

The scope of Big Blue’s ambition is breathtaking. Executives admit that IBM now sees itself as competing not only for the $ 1 trillion that companies spend each year on IT but also for the billions spent on processes of the kind outsourced by P&G – which last month signed a $ 400 million, 10-year contract with IBM.

……When Mr Palmisano took the top job last year from Lou Gerstner, he wasted no time in putting his stamp on the company he had joined in 1973. He disbanded the 12-strong management committee that had ruled IBM for close to 100 years.…Early in his tenure, however, it was unclear in which direction the 51-year old insider would take the company. The answer came a year ago with two high-profile moves.

IBM – The Outsourcer.

First, Mr. Palmisano paid $ 3.5 billion for the management consulting business of PwC, the professional services firm. The deal brought 30,000 consultants on to IBM’s payroll and took it into the nascent market for “business process outsourcing.”

… As a result of its huge scope, IBM now competes against almost every company of note in the technology sector. In services it competes not only against outsourcers such as Electronic Data Systems and Computer Sciences Corporation but now also against IT consultants Accenture and Cap Gemini Ernst & Young.

Even if a significant proportion of customers is ready to embrace the “on-demand” agenda, and Mr. Palmisano can compete effectively against everyone from Intel to Accenture, a further challenge remains: how to mobilize IBM’s 315,000 employees in common cause.”

… I don’t know why the American mainstream media didn’t follow up on The Financial Times article and stress the impact that IBM would have in the American economy in future, because of this massive exporting of American jobs to the rest of the world.

IBM alone has an army of consultants ready to help American companies export millions of American jobs to other lands. Remember you need only a hand full of consultants to export jobs by the thousands. Then you add on top of that all the other consulting companies operating in the United States today; all of them trying to export American jobs by the thousands. Companies such as, Electronic Data Systems, Computer Sciences Corporation, Cap Gemini Ernst & Young, Infosys Technologies, Wipro Technologies, Deloitte Consulting Offshore Technology Group, and Accenture to just mention a few of the major players; are jumping on the band wagon.

It will be easier for IBM and for the other outsourcing companies to outsource a massive number of jobs from the United States than to outsource the jobs from the Brazilian economy, because of the English language. India, China, and many other countries from around the world, countries that have lower costs, can communicate very well in English, and that alone simplify the outsourcing process of jobs out of the US economy.

One result of this outsourcing business is a net reduction of salaries for US workers at all levels, which in turn will result in lower taxes paid to the states and federal government. Salaries and wages in the United States are under attack in at least two ways. First, the United States is exporting good paying jobs to other countries via outsourcing. Second, by the permanent replacement of jobs by new technologies; in this case jobs disappear forever.

… Another study published in October 2003 said: “Economists at Alliance Capital Management LP in New York looked at employment trends in 20 large economies and found that from 1995 to 2002, more than 22 million jobs in the manufacturing sector were eliminated, a decline of more than 11%.

…Joseph Carson, director of global economic research at Alliance, says the reasons for the declines are similar across the globe: Gains in technology and competitive pressure have forced factories to become more efficient, allowing them to boost output with far fewer workers. Indeed, even as manufacturing employment declined, says Mr. Carson, global industrial output rose more than 30%.”



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Today we are eliminating more jobs than we are creating in many parts of the world, but the population continues to increase almost everywhere.

Today I was reading Inc. Magazine latest issue – this is a special issue and they mentioned the Inc 500 – the 500 fastest growing new corporations in the US – and on page 138 they had some charts and information under “The Big Picture” and one of the trends that they wanted to highlight is that offshoring’s up and today 26 percent of CEO’s outsource work overseas, up from 17 percent last year. That is a very large increase in offshoring for just one year.

Never mind the thousands of US jobs that are being eliminated by mergers and acquisitions just for the sake of the bottom line and pocket a quick profit.

I am putting the spotlight on how easy it is to eliminate or export millions of good paying American jobs to other lands around the world. It is easier than ever before.

There are many other economic and political implications regarding this subject, by the way this is a very complex subject with no simple solution.

I hope you start getting the point that I have been trying to make.

I am not against China or India, and I find China to be a fascinating subject in every aspect, and China’s economic development it is mind-boggling to me because of its magnitude and scale.


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October 17, 2006

SouthAmerica: When I finished writing the above posting, I posted it immediately after I finished writing and without checking it if I need to revise or rewrite anything for further clarification. But after I returned to check if there were any follow up to my posting I realized that I needed to make the following correction:


“As you get older and you can draw from a larger pool of life experiences including your education, your work, your personal experiences and relationships, then you realize that the world is not black and white, or red and blue, but it is made of various shades of a large number of colors. There is no such a thing as or you are with us or with our enemies – that kind of language sounds good only on Hollywood movies, but it does not work well on the real world.”



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October 25, 2006

SouthAmerica: John Naisbitt the author of “Megatrends” published in 1982, and of “Megatrends Asia” published in 1996, just published a new book – “Mind Set!” published in October 2006.

I just finished reading his latest book "Mind Set!" and I was very disappointed by its contents, I was expecting from him a better book than that.

I did enjoy reading his book “Megatrends Asia” and found it to be a lot more useful than his latest book. I find China to be a fascinating subject regarding its economic development and Chinese society in general - and it is “mind boggling” to me how the Chinese are able to make that country to function and prosper in the global economy.

After reading Chapter 2 of his latest book – Economics – “From Nation-States to Economic Domains” – I have no idea what John Naisbitt expects that it is going to happen to our global system of nations. That chapter of his book did not make any sense to me.

He also did not take in consideration major trends that are shaping our future right now, not only here in the United States, but also in other parts of the world.

I guess according to John Naisbitt a lot people are going to move to Cyberspace and live on the vacuum away from everything else.

But the chapter about China (only 20 pages) was worth the price of the book.

Naisbitt mentioned something on this chapter that I was not aware about – He said:

(On Pg. 191) “China has 166 cities with population of more than 1 million people – compared with 12 in Japan, 9 in the United States, and 1 in Britain. There are many cities in China that one has never heard of that have populations of 6, 7, or 8 million people.”

He also mentioned that Tsingtao a city with 7 million people and astonishing economic growth is one of the most beautiful cities in China.

But he did not mention on his list that Brazil has 16 cities with a population of over 1 million people.

As you can see from the list below of the 400 largest cities in the world – Today, over 1/3 of these cities are located in China.



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World’s 50 Largest Cities

City (Agglomeration)..-...Population

Tokyo, Japan……………....29,971,000
Mexico City, Mexico…..…27,872,000
Sao Paulo, Brazil………....25,354,000
Seoul, South Korea…...…21,976,000
Bombay, India…………......15,357,000
New York, USA………....….14,648,000
Osaka, Japan…………….....14,287,000
Tehran, Iran…………....…….14,251,000
Rio de Janeiro, Brazil……...14,169,000
Calcutta, India………….…...14,088,000
Buenos Aires, Argentina…12,911,000
Manila, Philippines………....12,846,000
Jakarta, Indonesia………….12,804,000
Lagos, Nigeria…………….....12,528,000
Cairo, Egypt………………......12,512,000
Delhi, India……………….....…11,849,000
Karachi, Pakistan……........11,299,000
Moscow, Russia……….....….11,121,000
Los Angeles, USA…….….....10,714,000
Lima, Peru………………......……9,241,000
Istanbul, Turkey…………....….8,875,000
Paris, France……………....…….8,803,000
London, UK………………….......8,574,000
Taipei, Taiwan……………….....8,516,000
Bogota, Colombia…….………..7,935,000
Bangkok, Thailand………....…7,587,000
Shanghai, China…………..……7,540,000
Madras, India………………...….7,384,000
Bangalore, India…………….….6,764,000
Pusan, South Korea……..……6,700,000
Chicago, US……………….…...…6,568,000
Dhaka, Bangladesh……..…….6,492,000
Santiago, Chile……………..……6,294,000
Beijing, China…………………....5,993,000
Hong Kong……………………......5,956,000
Lahore, Pakistan………….…...5,864,000
Kinshasa, Zaire…………….…….5,646,000
Nagoya, Japan…………………...5,303,000
Tianjin, China……………..………5,298,000
Baghdad, Iraq…………………….5,239,000
Belo Horizonte, Brazil…………5,125,000
Madrid, Spain………………….….5,104,000
Milan, Italy……………………..…..4,839,000
Barcelona, Spain………………..4,834,000
St. Petersburg, Russia…......4,738,000
Shenyang, China……….….…….4,684,000
San Francisco, USA……..………4,214,000
Philadelphia, USA…………..…...3,979,000
Manchester, UK……………..…...3,827,000


Source: City and population figures:
US Bureau of the Census; US Dept. of Commerce



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The world's largest cities


Urban Areas ranked 1 to 100

Source: http://www.citymayors.com/statistics/urban_2006_1.html


Urban Areas ranked 101 to 200

Source: http://www.citymayors.com/statistics/urban_2006_2.html


Urban Areas ranked 201 to 300

Source: http://www.citymayors.com/statistics/urban_2006_3.html


Urban Areas ranked 301 to 400

Source: http://www.citymayors.com/statistics/urban_2006_4.html


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China is trying to become the world's greatest economic power.

But they're just trying ...

China is a Loser, it's people are our slaves not world dominators.

 

That is precisely what the English thought of the new colonialists (you) all those years ago.
If you do not study history and learn from it, it will return to bit you.

 

I am in Guangzhou, China right now. Guangzhou is the third largest city in China. It feels more like I am in Chinatown of a large US city than in a third world country.

At the moment, there are more cranes here than in anywhere else in the world. The $3 billion airport, that I flew into, is huge and modern.

For about $.25 USD, I can ride the bus all over the city. Or, if I prefer, I can take the subway for $.12 to $.50 USD.

I attended the export trade fair that was here last week and I was completely blown away! I saw just about everything you can buy except clothes. Electronics, small and heavy equipment, tools, parts, small and large appliances, etc.... hundreds of vendors ready to export. It was quite the education of what is available, what can be done and what things actually cost.

I love tools. I saw Black & Decker and Ryobi tools WITHOUT THE LABELS, in other words, I was looking at the manufacturer of these tools. A tool box that sells for $20 - $30 USD can be bought for $5.00. MP4s were being snapped up by people left and right at prices about 25% of what you pay stateside.

I saw the machine that makes those little salt and pepper bags that you get at fast food places. All I can say is the power of China manufacturing is not something you should poke fun at.

I also saw a factory where clothes are sewn by hand. There is quality being produced by and in China.

If the USA continues its arrogance towards China and the rest of the world, it will be to its detriment.

If China catches up, it will surpass the US. The momentum will be unstoppable.

THE HANDWRITING IS ON THE WALL.

 

Yes, we are arrogant in the USA. But don't forget that for now, we control the game, so there is some credence to that arrogance.

Its wonderful that you can buy a device that was manufactured to specs and technology that were designed in the USA for 25% as an 'off label' pirated product. Stealing is so much fun! And yes, we have taught the chinese how to make these devices themselves in the process, so that they may end up actually improving them. Not the best business model, but it happens. Live and learn.

Of course, when that happens, the other chinese manufacturers can simply rip off their competitor. That won't persist very long, will it? And thereafter, the 25% price on what you are buying now will largely dissapear, except on things that don't matter.

But don't forget that China MUST succeed in its goals of economic growth in order for its power structure to remain intact. And as there are more haves, the have nots will get more ornery.

Without a market for the chinese to sell to, much of this growth becomes irrelevant as outside of guangzhou, there are still 500 million chinese living in pre 1900 conditions as subsistence farmers. And they won't be happy if there is a famine when the rich city dwellers have imported food to eat. That causes revolutions - of which there is still a memory.