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 Happy Countries – and Unhappy Ones

By Shlomo  Maital

 

 A new study led by Jeffrey Sachs, called the World Happiness Report, based on a global Gallup survey, ranks countries according to self-evaluated happiness.  Here are the answers to the question,  how happy are countries and what underlies their happiness (or unhappiness)?

  * The happinest nations are, predictably, the Scandinavian countries Denmark, Finland and Norway, together with Netherlands and Canada.  All have high standards of living, and very very strong social safety nets, providing security and peace of mind to their citizens.  They also are in “good neighborhoods”, without border conflicts.

* United States, despite political gridlock, economic stagnation, and the housing bubble, ranks high (11th).  Americans are in general happy, despite the economy.

* Israel, despite wars, conflicts, threats, Iran and the bomb, ranks quite high, 14th, just behind the U.S., Costa Rica and Austria.  In general, Israelis are buoyant and contented. 

* Singapore is notably low on the list, 33rd, despite its wealth, stability and climate of security.  It falls well behind Spain, for instance, which despite everything, ranks 22nd, just ahead of France. 

*  Germany, despite its relatively strong economy, ranks 30th, just ahead of Singapore and well below France.

* The most unhappy nations are the failed states:  Sierra Leone, Central African Republic, Benin, Togo, as well as Haita, Congo (both of them); in general, the bottom third of the list is full of nations in Africa. 

     In general, there seems to be little correlation between national happiness and GDP per capita.  Guyana and Malta tie with Taiwan. Bolivia ties with South Korea.  Russia ties with Peru.  Moldova, a very poor nation, ranks just ahead of Russia. 

    What we conclude is obvious:  There is no true direct link between material resources and non-material happiness.  The happinest nations are those who make the best of what they have.   Happily, as Keynes once predicted in his essay “Economic Possibilities for our Grandchildren”,  economics has become ALMOST irrelevant.  But – there is still a way to go. 

 Pixar: What Innovators Can Learn

By Shlomo  Maital    

 Woody, in Toy Story

What can innovators learn from the brilliant creative animators and executives at Pixar (who created, among others, Toy Story 1, 2, 3,  Ant Story, The Incredibles and Ratatouille, my own personal favorite (about a rat who loved gourmet food and learned to cook it).  Recall that Steve Jobs was the founder and creative spirit at Pixar.

    McKinsey Quarterly has recirculated a 2008 article about this, including an interview with Brad Bird, a Pixar director and two-time Oscar winner. * 

   Here are some key lessons in Brad Bird’s own words:

1. FIGHT COMPLACENCY:  “One thing that was unbelievably different about this company was that they were worried about becoming complacent. When I came here, they had made three movies—Toy Story, A Bug’s Life, and Toy Story 2—that had all been big hits. I was coming off a film called The Iron Giant that was a highly regarded financial failure.  Steve Jobs, Ed Catmull, and John Lasseter said, in effect, “The only thing we’re afraid of is complacency—feeling like we have it all figured out. We want you to come shake things up. We will give you a good argument if we think what you’re doing doesn’t make sense, but if you can convince us, we’ll do things a different way.” For a company that has had nothing but success to invite a guy who had just come off a failure and say, “Go ahead, mess with our heads, shake it up”—when do you run into that? “

2.  FIND AND EMPOWER THE ‘BLACK SHEEP’:  “[I said, ]….Give us the black sheep. I want artists who are frustrated. I want the ones who have another way of doing things that nobody’s listening to. Give us all the guys who are probably headed out the door.” A lot of them were malcontents because they saw different ways of doing things, but there was little opportunity to try them, since the established way was working very, very well.

We gave the black sheep a chance to prove their theories, and we changed the way a number of things are done here. For less money per minute than was spent on the previous film, Finding Nemo, we did a movie that had three times the number of sets and had everything that was hard to do. All this because the heads of Pixar gave us leave to try crazy ideas.”

3.  SEEK PASSION AND INVOLVEMENT, ABOVE ALL, NOT ‘JOB SATISFACTION’: “I would say that involved people make for better innovation. Passionate involvement can make you happy, sometimes, and miserable other times. You want people to be involved and engaged. Involved people can be quiet, loud, or anything in-between—what they have in common is a restless, probing nature: “I want to get to the problem. There’s something I want to do.” If you had thermal glasses, you could see heat coming off them.”

4. TO SAVE MONEY BUILD MORALE:  “In my experience, the thing that has the most significant impact on a movie’s budget—but never shows up in a budget—is morale. If you have low morale, for every $1 you spend, you get about 25 cents of value. If you have high morale, for every $1 you spend, you get about $3 of value. Companies should pay much more attention to morale.”

 5. LEVERAGE SUCCESS BY REACHING MUCH HIGHER:  “The first step in achieving the impossible is believing that the impossible can be achieved. There was a point during the making of The Incredibles where we had a company meeting. We have them about twice a year, and anybody can bring up concerns. Somebody raised their hand and said, “Is The Incredibles too ambitious?” Ed Catmull said, “I don’t know” and looked over at me. I just said, “No! If there’s one studio that needs to be doing stuff that is ‘too ambitious,’ it’s this one. You guys have had nothing but success. What do you do with it? You don’t play it safe—you do something that scares you, that’s at the edge of your capabilities, where you might fail. That’s what gets you up in the morning.””

6. CUSTOMER INTIMACY STARTS WITH YOU! “….my goal is to make a movie I want to see. If I do it sincerely enough and well enough—if I’m hard on myself and not completely off base, not completely different from the rest of humanity—other people will also get engaged and find the film entertaining.”

7. MAKE THE PHYSICAL WORKPLACE ITSELF CREATIVE.  “If you walk around downstairs in the animation area, you’ll see that it is unhinged. People are allowed to create whatever front to their office they want. One guy might build a front that’s like a Western town. Someone else might do something that looks like Hawaii. Steve Jobs initially didn’t like this idea, but John Lasseter said, “We’ve got to let it go a little crazy where the animators are.” John believes that if you have a loose, free kind of atmosphere, it helps creativity.  Then there’s our building. Steve Jobs basically designed this building. In the center, he created this big atrium area, which seems initially like a waste of space. The reason he did it was that everybody goes off and works in their individual areas. People who work on software code are here, people who animate are there, and people who do designs are over there. Steve put the mailboxes, the meetings rooms, the cafeteria, and, most insidiously and brilliantly, the bathrooms in the center—which initially drove us crazy—so that you run into everybody during the course of a day. He realized that when people run into each other, when they make eye contact, things happen. So he made it impossible for you not to run into the rest of the company.”

8. CREATE A LEARNING ENVIRONMENT. “One thing Pixar does—which is a knockoff of old-school, Walt-era 1940s Disney—is to have all kinds of optional classes. They call it “PU,” or Pixar University. If you work in lighting but you want to learn how to animate, there’s a class to show you animation. There are classes in story structure, in Photoshop, even in Krav Maga, the Israeli self-defense system. Pixar basically encourages people to learn outside of their areas, which makes them more complete. Sometimes, people even move from one area to another.”

9. MAKE MONEY CREATIVITY’S HANDMAIDEN, NOT ITS TYRANT. “Walt Disney’s mantra was, “I don’t make movies to make money—I make money to make movies.” That’s a good way to sum up the difference between Disney at its height and Disney when it was lost. It’s also true of Pixar and a lot of other companies. It seems counterintuitive, but for imagination-based companies to succeed in the long run, making money can’t be the focus.

*   Hayagreeva Rao, Robert Sutton, and Allen P. Webb.  “Innovation lessons from Pixar: An interview with Oscar-winning director Brad Bird”. McKinsey Quarterly April 2008

The Rolling Stones: 50 Years!

By Shlomo  Maital   

 

 

   Last Sunday night, the Rolling Stones launched their worldwide tour in London, to mark their 50th anniversary as a performing band. They first performed in 1962! 

  Lead singer is Sir Mick Jagger, 69, was joined by guitarists Keith Richards, 68, Ronnie Wood, 65, and drummer Charlie Watts, 71.

   The band had been due to start their concert, the first of their new worldwide “50 and Counting” tour, at 8pm “sharp” but did not appear on stage until just before 8.30pm.   The result?  They were not able to play their signature tune “I Can’t Get No Satisfaction”, as they had to end at 11 pm.   A BBC broadcaster suggested they should have violated the curfew and paid the fine – after all, their world-wide tour will bring them some $500 m. in income.  Tickets to the London show were costly:  the cheapest was 95 pounds, the most expensive, 950 pounds.

  According to press reports and the BBC, Jagger performed with huge energy, despite his age.  And it was not forced. He really does love to perform before live audiences.  The other band members seem to enjoy themselves too;  Keith Richards had a big permanent smile on his face. 

   As someone who just turned 70, I strongly identify with this band.  They teach us, that the way to stay vibrant and alive, is to find something you really love to do, and then keep doing it, renewing yourself, learning new things, trying new things, reinventing yourself and your products, but always always tackling life with passion and enthusiasm.  And if you lose that passion, well, find something else to do.  “Retirement” is out of the question.

     Jagger was an economics student, at the prestigious London School of Economics, when he began performing.    After the London concert, he said jokingly that he was surprised he was still alive (hinting at prolonged use of drugs and alcohol).   Perhaps having fun in life is an antidote to a great many unhealthy things.      

Poland’s Economy Excels!

By Shlomo  Maital       


 Consider Poland. This large country of 38 million people, and 313,000 km.2 grew 4.3% in 2011, faster than nearly all other EU nations.  Its unemployment rate is lower than the EU rate (9.7%), and it attracted massive foreign direct investment in 2011 (2.8 % of GDP), much of it from Germany.  Poland’s GDP per capita is a surprising $20,731.  Its currency, the zloty, is about three per dollar, which means it is much like the Chinese yuan, undervalued, giving Polish exports a boost. 

  According to Marcin Piątkowski, a World Bank Senior Economist, Poland has made effective use of some 10 b. euros of EU funds.  Most of it was spent on low-tech, not high-tech, and the result was to make Poland part of Germany’s wider industrial ecosystem, with Polish factories and workers providing low cost manufactures, buttressed by the undervalued currency.  This is almost a Chinese model.  It stands in stark contract to, for instance Hungary, which had a property bubble and which is mired in debt, much of it euro and dollar debt that is hard to pay back. 

Poland is 34th in global competitiveness, up from #44 in 2008.  It has no glaring weaknesses – its economy, govt. efficiency, business efficiency and infrastructure are all reasonably good. Poland’s sturdy independent farmers, who never gave in to the USSR’s kolkhoz collectivization, give Poland a strong collective memory of free markets. According to the IMD World Competitiveness Yearbook, Poland has predictable policy, a skilled workforce, competitive costs, good education, good labor relations, and access to financing.  And, of course, a big neighbor, Germany, that likes to invest in Poland because of its proximity.

  What we learn from Poland, is that each nation needs its own unique competitive strategy, tailored to its own advantages, history and culture.  Poland has found a good one.  You do not need high tech, or high R&D  spending, to thrive.  If you have a big neighbor, find how you can hitch a ride on its economy, find what it needs, make it efficiently and at low cost, and you can do well. It’s very simple.     

The Langer Lab: How An Egghead Lays Golden Eggs

By Shlomo Maital       

       Bob Langer

  Today’s Global New York Times (Nov. 26, p. 19) carries an article by Hannah Seligson, “Shepherding innovation from a university lab to the patient”, about MIT Institute Prof. Bob Langer and his incredible lab.  According to Seligson, Langer’s incredible lab ” has spun out companies whose products treat cancer, diabetes, heart disease and schizophrenia, among other diseases, and even thicken hair.  The Langer Lab is on the front lines of turning discoveries made in the lab into a range of drugs and drug delivery systems.”  Langer’s pathbreaking lab discovered new ways for drug delivery, helping millions of sick people.

   Langer has helped start 25 companies and has 811 patents under his name. More than 250 companies have licensed or sublicensed Langer patents. 

    Polaris Venture Partners, a Boston VC firm, invested $220 m. in 18 businesses that came out of the Langer Lab. 

    We need to study Bob Langer’s Lab very very closely. The reason?  What we call “technology transfer”, the process of transferring basic research done in universities to the marketplace, is misnamed.  What it really is, is a perilous journey across the ‘valley of death’, where there is a lack of money, management expertise, marketing channels…everything professors do NOT understand, to create a business.  And few professors are good at it.  Bob clearly is.  We should try to learn how and why. 

    Here are some of the inventions that have come out of the Langer Lab: 

    • A tiny wafer that delivers a dose of chemotherapy, used to treat brain cancer;
    • A miniaturized chip that can test for diseases. 
    • A controlled-release polio vaccine, developed in the Langer Lab, financed by the Bill and Melinda Gates Foundation for use in developing countries.
    • A method for regenerating tissue, used on wounded soldiers.

    What is it about Bob Langer that gets so many of his lab’s ideas across the ‘valley of death’?   “Very often, when you are going for real innovation”, Langer told the NYT, “you have to go against prevailing wisdom, and it’s hard to go against prevailing wisdom when there are people who have been there for a long time and you have some vice president who says, “no, that doesn’t make sense”. “   Langer puts no pressure on his students to start businesses. Half of them become academics.  But those who want to start businesses based on their lab discoveries get active assistance, advice, mentoring and help in raising money from Langer.

       I know a small number of scientists who resemble Langer, at my university, Technion. They are rare birds indeed. They are dedicated bench scientists, with a deep desire and ability to find ways to implement their discoveries, to change the world.  They find students who can and will do so.   I try to write about them and tell their stories, so that more professors might emulate them.   

The Age of Possibility is Increasingly Impossible

By Shlomo  Maital     

 Economists are wrong about a vast number of things.   One of our fallacies is the firm belief that freedom of choice is always ‘welfare-improving’ (i.e. makes us happier) and binding constraints make us unhappy.  As David Brooks notes in his latest NYT column (Global NYT, Nov. 17-18, p. 7), we have in the past generation entered the ‘age of possibility’.  This is an age where we are intolerant of “any arrangement that might close off our personal options’.  The result:

*  “The number of Americans living alone shot up from 9 per cent in 1950 to 28 per cent today”.  Not only are we “bowling alone”, as scholar R. Putnam wrote, we are living alone.   Responsible only for ourselves.  How great. How liberating.

*  “In 1990 65 per cent of Americans said children are very important to a successful marriage”.  The percent saying that today is only 41 per cent.

*  “There are now more American houses with dogs than with children”. 

  This phenomenon extends to Germany, Taiwan, Scandinavia, Brazil and many other societies.  Why is it happening? In part, you can blame global capitalism.

   The surest way people ‘bind’ themselves, says Brooks, is through the family.  But says Brooks, we are “entering a world where more people search for different ways [other than family] to attach”.

    To me, this is sad.  I’m convinced that for most people, especially toward their later years in life, having a warm and loving family to wrap around you is by far the greatest source of joy, comfort, inspiration and meaning.   And I strongly agree with Brooks that people are “better off when they are enshrouded in commitments that transcend personal choice—commitments to family, G-d, craft, and country”.  Indeed, I published an article precisely about this 26 years ago.*   

* S. Maital  “Prometheus Rebound:  On welfare-improving constraints”, Eastern Economic Journal, XII (3), July 1986, 337-344   

 

  70 on 70: An Adventure

By Shlomo  Maital

  To celebrate my 70th birthday on Nov. 10, I went on a 70 km. (42 mile) hike in the Dead Sea Mountains, with my three sons and second-oldest grandson.  The hike took us just over 48 hours.  On the last morning, we rose at 4:30 a.m., had coffee and set out to climb Mt. Elazar, reaching the top just before sunrise.   During our trek, we had many hours of conversation together, lots of bonding (especially during and after some hard climbs), amazing campfire meals (all our boys are experts at “poyka”, cooking in a heavy iron pot) that included wine and cold beer, and incredible views in one of the most beautiful spots in the world.  We mostly walked in solitude, as very few other hikers chose to hike mid-week and in November.  Some hard training beforehand helped me complete the trek without undue hardship.  My family surprised me when everyone (our daughter, son-in-law, daughter-in-law and all the grandchildren, all dozen of them, the long the (very) short and the tall, [except for our oldest, who is abroad earning some money], showed up to spend shabat together at our home in Haifa.  My wife Sharona somehow managed to prepare great shabat meals for all those hungry mouths.  

   What I want to share, about 70 on 70, is this:  From the dual vantage points of age (three score and ten, in Biblical terms) and height (Mt. Elazar), it is so clear that in later life,  what brings true joy and serenity is the family, the shining faces of the babies and grandchildren, the loving faces of the children.   Family is the supreme value.  Protect and cherish it.  

China’s Incredible U-Turn: Can It Be Done?

By Shlomo  Maital    

 

 I’ve just returned from a Workshop at the huge Shanghai Zhangjiang Science Park, in Pudong, Shanghai.  This massive park houses some 200,000 workers (2/3 have college degrees), thousands of companies, many startups, several incubators, and generates $30 b. in GDP.  With the help of 21 experts, I ran a Workshop to map the park’s innovation ecosystem. 

   The scale of the place is amazing.  It could house all of Israel’s R&D workers, with room to spare.  It has deep pockets, with the backing of the national government.  The incubator building where the Workshop was held is spanking new, with a lovely atrium, parquet floors and 12 stories of offices. 

    In a remarkable coincidence, the two biggest economies in the world chose their leaders, within two days (America, last Tuesday; China, last Thursday).  China’s next President Xi Jinping, and probable Prime Minister,  Li Kequiang,  will attempt to implement a major U-turn.  After the current leaders Hu Jintao and Wei Jaobao led China through the global crisis, with only a minor slowdown, the next leaders will try to move China up the economic food chain, toward Created in China and Innovated in China, as China’s wages rise making “Cheap China” more and more expensive.  This is a difficult goal.  China’s society is rule-based.  China’s ruling elite holds the place together by a massive public security operation (which costs more than the external defense spending).  How can you get an entire society to be more innovative, when it is taught to follow the rules from an early age?  Yet, it is happening. I met entrepreneurs at ZJ Park, who are no different from Israeli or American startup youths. 

  China’s scale is mind-boggling.  China created 39 m. new college grads in the past decade, and now produce 6 m. every year. 8.9 per cent of the population have college education, (or 117 m. people), up from 3.6% in 2000.  According to the BBC, by the end of the 2020 decade four of every 10 college grads in the world will be Indian or Chinese.  China is also aiming at producing 22 m. vocational school grads, building its vocational education system to supply well-trained factory workers.  By 2020, 29 per cent of the world’s college grads will be Chinese , compared with 11 per cent for the U.S.   This massive quantity of college grads will in itself generate quality – with that many college-educated people, at least some of them will doubtless be highly creative and enterprising.

    America focuses on China’s cheap manufacturing as a threat.  It should focus instead on China’s enormous historically-unprecedented effort to shift from low-cost manufacturing to high-value innovation.  We will watch the two new leaders closely, as they lead China in an incredible unprecedented U-Turn toward creativity.     
 

Should Obama & America Leap Off the Fiscal Cliff?

By Shlomo  Maital   


 

 

  Today’s Global New York Times has a column by economist Paul Krugman, advising newly-re-elected President Obama to … jump off the fiscal cliff. 

  What IS the fiscal cliff and why should Obama leap off it?

    “The United States fiscal cliff is the effect of a number of laws which, if unchanged by Dec. 31, will result in tax increases, spending cuts, and a corresponding reduction in the budget deficit beginning in 2013.  The Congressional Budget Office, an objective source,  estimated in May   that allowing current law to take effect would reduce the deficit by a net $560 billion in 2013, roughly half the $1.2 trillion 2011 deficit. But real GDP growth in 2013 would be reduced to 0.5% versus 1.1%, with a high probability of recession during the first half of the year (a 1.3% GDP contraction).  The reason for the recession is simple:  The huge falloff in public spending (and demand), with no compensating increase in demand or spending from any other source. ” 

    Krugman thinks Obama was wrong to give in to the Republicans in 2011, when the Budget Control Act was passed, raising America’s debt ceiling but chaining Obama to draconian spending cuts in 2013 if the deficit was not cut.  This time, he advises Obama to call their bluff.  The Republicans’ business supporters will blink first, he claims.  They know that if Obama really does leap off the fiscal cliff, which will happen if no new legislation and no new budget is passed,  business will be the first to suffer (along with the rest of Americans and the whole world – when the world’s biggest economy dives, so will the world’s economy). 

  But if you listen to House Speaker John Boehner, he is more determined than ever to sock it to Obama and not give in. 

   Can the world tolerate this kind of political brinkmanship?  Is it responsible for America to bring its own economy to the very edge of the cliff, together with that of the rest of the world?  Is this behavior acceptable for the nation whose currency is still, and for the foreseeable future, the world’s money?

   Stay tuned.  Whatever happens, it will be messy and very risky and unpleasant.  

What Romney Never Told You, Why Business Is the Problem & Not the Solution
By Shlomo  Maital  

   Dead money

 

  Among the many things candidate Romney never told us, is this:  Business is not the solution to the jobs and unemployment problem, it is more likely the problem.  Here is why.

 

   Companies all over the world, especially American ones, are sitting on mountains of cash —  retained earnings, or undistributed profits, which they simply refuse to invest or spend.   The reason, The Economist says, is four “grey swans” (dangers we know about, unlike black swans, which come as a surprise):  the euro crisis, the Mideast instability, slowdown in China and America’s fiscal cliff. 

   Firms in the S&P 500 held $900 b. in cash at the end of June 2012, 40 per cent above the level in 2008.  American firms’ savings (unspent profit) comprise a bigger fraction of the nation’s total saving than in Germany or China. Apple, for instance, holds hundreds of billions of dollars in cash profits abroad, where they are sheltered from tax.    Japanese companies’ liquid assets total a staggering $2.8 trillion.  “Dead money” (unspent profits), a term invented by the Bank of Canada Governor Mark Carney, amounts to $300 b. in little Canada.  “Put your money to work,” Carney admonished, “if you can’t think of what to do with it, give it back to the shareholders.”

   General Electric alone has $85 b. in cash stockpiled.  Nor will they spend it. “It’s not burning a hole in our pocket,” said GE CEO Jeff Immelt. 

    Why would businesses invest, if they can already produce all the stuff they can sell?  Why would they invest, if they are pessimistic about future scenarios?  Romney never mentioned this, never mentioned that the lack of investment demand is in fact the largest brake on the US economy (and other economies), while government spending and consumer spending are the only things holding the economy up.   Did he have a magic wand for persuading businesses to begin spending their cash?  If so, he never revealed it. 

    Economic momentum is the product of the amount of money times the rate at which it circulates. By keeping their money out of circulation, businesses are slowing the economy’s momentum.   Why not apply a special one-time tax on cumulative retained earnings (as much as a third), while offering a huge tax credit for business capital formation?  

   Somehow that dead money has to be revived.  I wish someone had asked Romney that question, how to do it, in any of the debates.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
November 2012
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