Category Archives: US Economy

I’m not an American, nor do I live in the US, but I work for the Canadian Subsidiary of an American Firm. As a result I have strong opinion on the US economy.

uber

Uber and UberX a Travelers Perspective

If your anything like me, you’ve probably only heard of a new ride sharing service called Uber from their exposure to irate European taxi drivers.

It seems like every time I open the BBC newsreader app there is an article about a strike in London, Paris or New York by taxi drivers in protest of Uber. So what is Uber? and why is it causing such ire? Uber is a on-demand taxi service that uses technology to revolutionize the cab experience.

Uber uses its own application for iPhones and Android phones to allow perspective riders to “call” a ride. The ride can be serviced by UberX (amateur part-time drivers in their own vehicle), Uber Taxi (standard taxi’s), Uber Black (Town cars), or Uber SUV. The beauty of the system is its simplicity: you get a “fare quote” for each of the services before you actually order the ride, when you place the order – you are shown in real time the location of your driver, his license plate, vehicle, photo and name – all within seconds of placing your order. When your ride is complete, the application immediately shows you how much your credit card was billed – and allows you to rate your experience. Its all so seamless that most users are left wondering – how did I live without this?

I’ve been using Uber for my business travel in Dallas Texas, and my personal travel in Toronto for the last month. In total I was in Dallas for 3 weeks, and Toronto for 1, all of which without a car of my own. I was using both UberX (for client travel – less expensive) and Uber Black (for airport runs, and the odd night out) – wracking up close to 300$ in Uber related expenses last month. After all that usage I can say that my impression of Uber is extremely positive.

Briefly:

UberX: Personal Cars, amateur drivers
Pro: generally pretty clean/reliable. Very Affordable.
Con: crap shoot on vehicle, had several rides in a pickup truck. Crap shoot on driver quality: Sitting on a dog blanket in the back seat and smelling the heavy odor of a pack-a-day smoker. Not available in all markets.

Uber Black: Town Cars, Professional Drivers
Pro: great cars, professional drivers, prompt, have bottled water.
Con: Expensive

Do I think Uber will change the for-hire taxi Industry? Absolutely: its safer, faster, and far more efficient. Unfortunately, it requires a credit card so a large segment of the elderly and poor will not be able to use it, and it requires a smart phone (instead of the traditional phone call) – again eliminating the poor and elderly. I do worry that it may further segregate our economy – between the haves and have-nots – especially if it decimates the current taxi industry.

Despite my misgivings – I will continue to use it – its just TOO good :)

Forgetting to Grow – The Recession Paradigm

wallstreetI’m one of those weird individuals that enjoys earning season – especially in the first quarter – because its where companies share their strategy and goals for the year. For the last 4 weeks I’ve listened in on 5-6 calls and I’ve noticed a recurring theme. In fact, the calls are so similar I can pretty much sum it up with the following bulleted list:

  • Keep our existing customers happy
  • Reduce costs of delivery, reorganize the service delivery and support to do more with less
  • Protect our cash reserves – defer expenses, defer compensation, push out our account payables to their full contract length, accelerate our account receivables collections process.

What most companies have forgotten is that a recession is the perfect time to grow – provided you have the long term vision and capital. During a recession talented labor is less expensive, capital goods and property are less expensive, taxes are typically less, and most growth activities have government incentives. Consider that most of the worlds multi-nationals have grown during past recessions and downturns.

A recession doesn’t mean “no sales” – it means “different sales”. You can’t sell the high end stuff unless it has a killer value proposition – but the low stuff is easier to sell. Cartier watch sales dry up – Seiko watch sales go up.

So to the leadership of Corporations of the World – do not fear – focus on what you can produce and sell – focus on where you can grow – and be prepared to shrink where you can’t sell it. Don’t just assume the safe thing to do is to stop growing entirely – or you will be roadkill.

Buy American – a Capitalist Alternative

usflagI’ve been reading the ongoing debate on the inclusion of mandatory “Buy American” provisions in the stimulus bill. This sort of discussion always brings out the hard hit manufacturing states, and the usual choir of ‘Manufacturing in America is Dying’. Its annoying and disturbing – the arguments never change – and nothing is done to solve the underlying problem.

The reality is manufacturing in the US has been slowly dwindling for decades – primarily because the US became a victim of its own success. The standard of living in the US grew far faster than the rest of the world. While 60% of the world has never seen an electric bulb – Americans were buying their second and third televisions. Combine a large inexpensive global work force with a domestic work force with a increasing standard of living and you have a recipe for manufacturing decline.

How do you reverse it? You don’t mandate it – “You Mr. American must buy American!” will never work. Instead you market your goods as higher quality, you market as a “premium” good, and you market as a Domestic good. Where is the “Made in America” section in Walmart? How about Costco? or Sacks? This points to a lack of product placement, and a absence of a established brand.

Americans make great products, products that are in demand the world over – from Fine Wine, to Fine Furniture or fashionable clothes. The problem is for a good to be successfully made in the USA – it must garnish a premium – and the only way to get the premium is to market it correctly. Why aren’t goods branded as “Made in America” why aren’t there commercials pointing out the superiority of the goods? Until the manufacturers get there heads out of the sand – and make a superior product (with a superior marketing plan) – they will continue to decline.

Here are some things a manufacturer can do to keep their plant alive.

  • Above all else make a superior product. Quality, Finish and design MUST be superb.
  • Team up with other factory owners, Co-Brand as “Made in America”. Put a flag on your packaging, complete with a trademarked slogan or name. Something like “Quality made by your neighbor”.
  • Combine your advertising dollars and market the hell out of the “Made In America Brand”. Show smiling kids playing baseball with their employee fathers, pull out the sappy music.
  • Finally use your newfound unity to pressure Walmart, Costco and the other National Retailers to carry your quality goods under the “Made In America” brand.
  • Finally work with the media – do interviews about how you hired 100’s of Americans to make your goods.

This is how capitalism works. Centralized mandates aren’t.

US Bailout package – the Hidden Cost

wallstreetI’ve seen differing reports on the total cost of the bailout package for the banking system in the United States. The total amounts are reported between 3.5 and 5 Trillion dollars, even worse, a lot of the cost is hidden and undocumented in things like poorly documented tax law changes to support acquisitions. There is no transparency, no oversight, and even worse no accountability.

To put this monstrous amount of money in perspective, consider the following:

  • Universal Health care is estimated to cost 110 Billion per year, the bailout would’ve paid for health care for 45 years.
  • The US trade deficit with China is 500 Billion.
  • Revenue for the US government in 2007 was 2.5 Trillion Dollars. This is the revenue collected in income taxes (both personal and corporate), user fee’s, gas taxes, federal tolls on roads, everything. The amount spent on the bailout would’ve given US Citizens and businesses a 2 year tax holiday – now THAT is a stimulus package.

Right now there is a lot of rationalization going on in Washington, they honestly expect to make most of this money back as loans are repaid (with interest), or the equity stakes are sold.

The question is will history mark this as a positive action or a negative action? I sincerely hope for the worlds sake that this move works out, but the amounts of money involved are truly scary.

Yahoo Finance Article
Forbes Article

A New President Now What?

obamaOn November 4th, 2008 the United States of America elected their first Black President – and entered into a new era of political inclusion. After the hang overs have passed, and the pundits have danced many Americans are probably wondering “What Now?”.

The reality is the US is in serious trouble, they’ve had a decade of spending without the necessary increase in revenue. They’ve opened unpopular wars on two fronts, and doomed their economy by not regulating the banks that serve as its engine.

President Obama has a lot to fix and not much time. Here is the short list of things I hope Obama makes a priority:

  1. Improve the image of the US Abroad by closing Guantanamo Bay, ending the war in Iraq, and restoring the Civil Liberties that were eroded under George Bush.
  2. Implement regulation for Banks, Trade Unions, and Investment Banks for Credit Default Swaps and any instrument used for money creation.
  3. Implement an economic stimulus package for the Middle and Low class. 700 billion for Wall Street is crazy, zero dollars for main street is criminal.
  4. While health care is important, don’t let it blind you to the underlying problems in the US economy.

I wish Obama well, and offer my sincere congratulations on his great accomplishment. Obama – the world is watching – don’t let us down.

US Economy Meltdown – The Overlooked Cause

wallstreetReading the news today, we are awash in statistics and opinions regarding the current economic challenges in North America – specifically the United States. Its been called a “credit freeze”, a “Banking Crisis”, a “Crisis of Confidence”, and obviously the result of a summer-gone-wild attitude for sub-prime mortgages. I however believe the problem is more fundamental than that.

If I had to sum it up, I’d say it boils to down to this (and feel free to quote me): North America has gone from being a net producer of goods and services to be being a net consumer of goods and services.

I’m going to use some anecdotal evidence, so those with A.D.D. feel free to skip ahead. Growing up in Canada, my first summer job was at a factory that made sweaters. In high school my best friend made his pocket money by doing the bookkeeping for a plastics firm. The 80’s weren’t easy (by any stretch), but jobs were present and growth was consistent and steady. The dip in 87 was also short lived and not nearly as global as the current crisis.

Somewhere between the 1980’s and 2008 the culture in North America decided it was better to produce goods overseas where costs were lower and regulation less intrusive. The factories shut down, the jobs moved over to the service sector, or in many cases lost completely. Normally a loss of jobs of this magnitude would result in lowered standard of living, instead, the opposite occurred.

Thru the liberal use of debt (both public and private), and a lowered price for goods (hello Walmart) the good times kept rolling. The problem was that any system that relies on IOU’s to function is doomed to failure. The US Government now owes over 10.2 Trillion Dollars, and has on-the-book obligations for another 50 Trillion Dollars for Medicare and Social Security. In the words of David Webber – thats 480 Thousand dollars for every man-woman and child.

So how do we solve it? Like all things in life – the answer is complicated.

  1. The current bailout plans must be executed to stabilize the system
  2. Medicare and Social Security need to be funded or eliminated. The current status quo of “We’ll figure it out later” isn’t working, and just heaps 50 Trillion dollars of obligations on the next generation. The solution may also involve work sharing (were retired folks share jobs with the younger generation – thus feed tax and secondary revenues into the system) or an increase in the mandatory retirement age.
  3. The actual budget deficit needs to be serviced. Saying deficits “Don’t Matter” as Dick Cheney often spouts, is tantamount to guaranteeing another economic crisis.
  4. It is necessary for a sustainable economy that the US start manufacturing goods for local consumption. These goods can be resources (like oil), goods (more than auto’s – start feeding Walmart with USA goods), and lastly services. The service industry should be the employer of last resort as their are already too many service industry employee’s.

Bah – they’ll figure it out sooner or later – and I’m sure smarter minds are working on it – but I had to vent.