Monthly Archives: November 2010

The World Doesn’t Need More Entrepreneurs?

I just read this article on Slate by Esther Dyson called Not Everyone Can Be Bill Gates

It is sub-titled “The world doesn’t need more entrepreneurs. It needs more people for entrepreneurs to hire.”

This didn’t sit well with me. Kind of like how a 3 day old bean burrito doesn’t sit well with me.

After I read the article I realized where she was trying to go with this, but I think she is completely oblivious to anything that could be called a “start-up” outside the tech industry.

Her argument is that why start a new business when you will have trouble getting qualified people to help you run it? Good point Esther… In fact, why should we start a business at all?

Maybe to add some value back to society?

Maybe to hire people who wouldn’t otherwise get hired elsewhere?

Maybe because we have a product or service that doesn’t require a “high tech” education or experience?

Maybe because the business model makes sense, and won’t require a lot of start up capital to get cash flow positive?

Or maybe people are simply tired of working for big corporations who count them as a number and lay them off at will?

Maybe because they want to work for a smaller yet more sustainable business that is going to see them as a valuable person where they won’t get laid off?

Come on Esther, I think I could do this all day!

Now I will be the first one to tell you that small businesses have a lot of problems that larger businesses or even start-ups don’t have. In a word, capital. But I have news for you, not every entrepreneur wants to start a “high tech” company.

A recent NY Times article reported that “Once a Dynamo, The Tech Sector Is Slow to Hire”

If you want employees then check out where people are most hired…

Here is the BLS listing of the jobs that employ the most people… Occupational Employment Statistics

Now if I wanted to start a business where I was guaranteed to find the labor I needed it would potentially be in one of these categories…

1. A retail store
2. A restaurant
3. A clinic
4. A janitorial service
5. A bookkeeping or accounting service
6. A tutoring service
7. A truck driving company

Now of course all these businesses will have problems of their own, but please don’t say the world doesn’t need more entrepreneurs. Don’t assume a smaller local or regional company can’t service my needs better then a worldwide conglomerate. And please don’t assume your one little sector of the economy, no matter how hot it is, is the only place that start-ups are happening.

So yes, if you are an entrepreneur please go start your business! The world does need you!

Bernanke’s Inflation is Fueling a Bubble in Asia

The saga continues…

Weakening the dollar here causes inflation to happen abroad as investment money flows out of the U.S. and into China.

That’s the news over at Sovereign Man in his article also named Bernanke’s Inflation is Fueling a Bubble in Asia.

Real Estate prices are soaring and getting past the point of profitability. Rents simply aren’t keeping up.

These and other indicators are signs of a coming bubble.

Many other nations are also manipulating their currency to keep it from rising so fast against the dollar, and causing prices to soar on all things, including commodities.

All of this continues to amaze me as I think about just how interconnected the world economy is, and how much we rely on each other.

It also makes me think about how I can best prepare for the future. Where my money should be invested. And what skills I should gain as we continue on into this future we are putting together.

On Quantitative Easing…

To QE or not to QE, that is the question…

As many of you know the U.S. Federal Reserve has been kicking around the idea of doing a second round of Quantitative Easing… Scratch that… Its a done deal…

In simple terms, this just means increasing the money supply so as to artificially create inflation. This is one of the main weapons the Fed has to use in a deflationary environment…

In an inflationary environment the Fed often raises interest rates to help slow inflation. By raising interest rates they make it less preferable for businesses to borrow and thereby artificially slow growth.

Currently, we have interest rates that are practically ZERO and we are still precariously close to a deflationary environment. Why? It’s not that people can’t borrow, its that they don’t want to…

When we have high inflation it encourages people to borrow more because they can pay of the debt in the future when their money is worth more. When there is deflation it destroys people with debt because the money they have now is worth less then when they originally borrowed it. They essentially are losing money on the deal, regardless of the interest rate they borrowed at.

Think about it. If you borrow money at 4% and inflation is moving along at 3-4% then inflation quickly overcomes anything you might lose through paying the interest. Assuming you are still making money at today’s inflated rates.

Who does inflation or deflation benefit?

“Deflation benefits low debt consumers and those on fixed incomes, because they receive a fixed number of dollars but can buy more with each dollar.” – InflationData.com

All these things go hand in hand…

U.S. citizens went from a negative savings rate to a savings rate as high as 6% because they were hedging their bets against inflation. If you have high inflation it makes no sense to save money that will simply be worth less in the years to come. However, if deflation is occurring the money you save now will be worth more in the years to come.

Back to QE2… Why is it happening? What does our government have? LOTS of debt! What environment benefits debtors the most? An inflationary environment. What does QE do? It puts more money into the money supply thereby creating artificial inflationary pressures. Therefore, it is pretty safe to say, the U.S. will continue to do everything it can to create inflation.

Now let’s look at China real quick…

They don’t want to let their currency appreciate. Why? They are the savers of the world. They will benefit more by keeping their money supply where it is at rather then letting it appreciate. All the money they have saved and invested will be worth less if their currency becomes inflated.

It is a financial war that is going on not unlike the Cold War. Except this time it is a war over who has the most money stockpiled rather then nuclear arms. The U.S. has always won this game by creating inflation. Will China bend to their will or try to play the game on their own terms?

Time will tell, but for now, I would certainly say that inflation will continue and we should plan for it…

More Businesses Should Innovate Like China

This may offend some people, but I don’t know how important intellectual property is these days. Or even if it ever was that important…

You invent a product, design, process, etc. and spend a lot of time and money getting it patented. Then you make a few bucks on it, and if it is even remotely successful, you have to spend a whole lot more time and money to protect your patent.

Meanwhile, people who make and market a slightly different product are making a killing without all the extra costs. They are producing it faster and cheaper then you ever could. It’s the continuing story of business everywhere… “Inventors make the product, Distributors make the the profit.” Just think of Amazon or Ebay…

This story is really playing out in China…

I just read an article over @ Sovereign Man entitled “Can Your IPhone Do This?“. It talks about how China continues to take technology and make it better….

Direct Quote: “This is a central theme among Asia’s technology developers. They start with a basic idea (like supercomputers, military aircraft, or mobile phones), analyze what the foreign companies are doing well, figure out how to make it better, and eliminate any dependency on western suppliers.”

Some of the best products are made from people who don’t care about gaining a patent and maximizing the profit they can ring out of it. Think Open Office, the free option that replaces Microsoft Office…

If you have a business that innovates you should definitely be watching the news on China and take some pointers from them. Whether you like it or not, the profits will flow to those who keep producing. Not those who rest on their laurels…