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G100 Network Notebook | March 2013

The China “Ghost Town” Story is Exaggerated

A recent 60 Minutes report about China’s empty ghost towns received lots of attention for its claim that the country is on the brink of a real estate bubble.

There is now plenty of research pouring cold water on that theory. Here is an excellent report that quotes Bank of America’s Ting Lu’s recent study Demystifying China’s Ghost Towns:

China’s urbanisation rate is up to 53%, from 39% in the past decade, and is expected to continue to rise to 65% in the next ten years. And as the government relaxes its hukou (residency permit) policy, urban residents are also expected to move from dorms to homes.

What Does Cypress Tell Us About Europe’s Future?

Euroskeptic economist David Beckworth offers a harsh assessment of the Cypress situation, suggesting that Europe can’t afford to kick the can down the road much more:
That leaves the final reform option: break up the Eurozone into austere and non-austere currency unions. …This reform is very radical, but there really is no other viable alternative. …The current Eurozone approach is the equivalent of an economic whack-a-mole game that never truly solves the problem. The Cyprus crisis is just the latest mole to stick up its head.

Buffet to American CEOs: Stop Whining

The Atlantic publishes an excerpt from Warren Buffett’s frank letter to fellow CEOs who routinely complain on cable news about US economic uncertainty. Observing that uncertainty about the immediate economic future has existed since 1776, Buffet argues that investors and managers play a game “heavily stacked in our favor,” so “it’s a terrible mistake to try to dance in and out of it” based on the short term. Buffett remains confident that, despite periodic setbacks, American businesses and stocks will perform well over time.

If you are a CEO who has some large, profitable project you are shelving because of short-term worries, call Berkshire. Let us unburden you.

John Mackey at G100: A Kinder, Gentler CEO?

Many companies post-financial crisis have looked to Conscious Capitalism, a movement spurred by Whole Foods CEO John Mackey, co-author of a new book who will kick off the G100 Fall Meeting with a discussion about the role of the corporation in society. The Economist recently conducted an interview with Mackey, who said the book aims to change the public’s perception of business, from a negative narrative focused solely on profit to a positive one that celebrates business as “heroic” and “the biggest creator of value in the world.” Jump to the 2:33 mark to hear his explanation of Conscious Capitalism.

Business Pundit, meanwhile, offers an appealing infographic that explains how companies, like Google and Intel, have embraced Conscious Capitalism.

Has The American Dream Become Elusive For Generations X, Y?

Yes, according to an enlightening study by The Urban Institute that shows young Americans have accumulated less wealth than their parents did at the same age, a circumstance the Institute credits to the collapse of the housing bubble, rising student loan debt, a tight job market, and stagnant wage growth. This decline in generational wealth threatens both young Americans’ ability to save for retirement and the country’s future economic growth. Researchers recommend that the government give younger workers a greater share in benefits that spur long-term asset development, such as the mortgage interest deduction and the preferential tax treatment of retirement savings.

The net worth of those 47 and older is roughly double that of someone the same age 27 years earlier. Today’s adults in their mid-30s or younger — the prime time for career and family formation — benefited little from the doubling of the economy since the early 1980s.

The Drones Are Coming

Privately operated drones are becoming a game-changer for American business and law enforcement. This fascinating article gives a detailed glimpse of how much activity is now underway. We will explore this subject at an upcoming G100 meeting:

The capabilities and cost of drones seem to obey Moore’s law. The advanced flight control systems built by DJI Innovations used to be reserved for vehicles priced between $5,000 and $10,000. Now $679 buys you DJI’s quadcopter Phantom, a craft capable of flying 22 miles per hour, achieving altitudes of more than 1,000 feet, and using GPS satellites to maintain its position, correct for strong winds, and navigate home in the event that the pilot loses his link.

Human Resources and Big Data

Thomas Davenport, who will speak at G100 Next Generation Leadership’s Spring Meeting, authors a CIO Journal blog about the talent gap for data scientists, advising companies against waiting years for data scientists to graduate. Davenport recommends that companies cultivate talent internally through online training programs or programs in business analytics, citing a 2011 survey that identified 59 such programs. Interestingly, another survey of 446 employers found:

The most desired skill was communications, followed by the expected technical and analytics skills. “Communications” doesn’t mean TCP/IP, but rather the ability to communicate the results of analyses effectively to decision-makers. The biggest obstacle to hiring reported by the employers was a lack of business experience.

In a multi-page spread on Big Data and business, the Journal weighs in on strategic recruitment, a session for the G100 Talent Academy Spring Meeting, explaining how Catalyst IT Services uses online assessments to improve hiring and cut turnover.

Online University, a Booming Business

The Washington Post offers a revealing profile of Virginia-based Liberty University that shows how the small Baptist college – founded in 1971 by preacher Jerry Falwell – profited from the online education boom. The college has increased its online headcount to 62,000, now ranking fourth among the largest US online colleges and universities. The Post adds:

The university ended 2012 with more than $1 billion in net assets for the first time, counting cash, property, investments and other holdings. That is 10 times what the school had in 2006, putting Liberty in the same financial league as universities such as Pepperdine, Georgetown and Tulane.

A Transatlantic Trade Deal

PIMCO CEO Mohamed El-Erian and Michael Hodin of Global Coalition on Aging offer separate endorsements of President Obama’s proposal for a Transatlantic Trade and Investment Partnership. Obstacles to the trade deal, says El-Erian, include political dramas (think sequestration) and a lackluster global policy dialogue. One inroad is the common challenge posed by our aging populations, says Hodin, who will speak at G100 Talent Academy’s Spring Meeting about what an aging workforce means for your business. Hodin says:

Any agreement that hopes to enable economic growth and job creation…cannot ignore this huge and exploding opportunity of a whole demographic segment becoming economically engaged in ways unimaginable in the last century. … It’s a short step to move this now into the U.S./European Trade Talks. It will take creativity and commitment, but it’s an opportunity for American and European leadership on a most critical topic of our time.

How To Make A Company Truly Great

Companies need only follow three rules for greatness: compete on differentiators other than price; prioritize increasing revenue over reducing costs; change anything you must to follow Rules 1 and 2.

This is the provocative thesis at the heart of a new book by Deloitte’s Mumtaz Ahmed and Michael Raynor. In this excerpt from The Harvard Business Review, Ahmed and Raynor research the 25,000+ companies trading on US exchanges between 1966 and 2010, opting to measure performance through return on assets, not shareholder return. Rather than just another book on “success stories,” the book is a full-on critique of the “truisms” found in works by Jim Collins and Tom Peters. Especially biting is their attack on what they call the “Do the Right Thing School of Management:”

Get the right people on the bus! (Did anyone ever want the wrong people?) Have a clear strategy! (Does anyone ever set out to create a confusing one?) Give customers what they want! (Who deliberately gives them what they don’t want?)

Worth reading.