Monday, June 29, 2009

China's Super-Sovereign Reserve Currency Idea: Could the SDR Be a Reserve Currency?

China's Super-Sovereign Reserve Currency Idea: Could the SDR Be a Reserve Currency?

This I think is one of the more interesting thoughts on China's push to SDR's as reserve currency:

"Foley: In the short term the costs to the US of losing its role as the reserve currency would be significant as it would lose seignorage benefits and ability to borrow in its own currency. In the longer term, the U.S. would benefit as it would regain some control over its currency. A central currency would make it harder for one country to get into so much debt to another. If the currency was increased along with global GDP it could provide a steady store of value."

Although bitter medicine, the US dollar losing its place as the global reserve currency could actually benefit the US economy in the long-term because it would force the US to lessen its reliance on debt and increase its savings.

Yes, that would cut consumption and lower growth rates, but the growth that does occur will be more stable and sustainable.

Friday, June 26, 2009

Microloans need macro-mentoring

Very similar to the point I was making with C-BAM

Indeed, the nonprofit research group Innovations for Poverty Action in New Haven, Conn., published a paper in May that found that Peruvian villagers who had received microloans and had been randomly selected to receive business training performed significantly better than peers who had received loans and no financial education.

Canada and Peru are obviously two very different economies, but the point is that capital, be it microloans or big-buck Silicon Valley VC money, isn’t effective in building great businesses and fueling economic growth if there isn’t some sort of mentoring or business education to back it up.

Capital and mentoring are ying and yang, they need to work in harmony to produce a single successful business. The challenge is that while capital is relatively easy and quick to deploy in emerging markets, finding sustained, experienced, and committed mentoring on-the-ground in poor areas is very hard. People with the right knowledge and experience don’t tend to live in poverty-stricken areas. They’ve used their talents to move elsewhere in search of a better life.

In Canada, the need for mentoring is important, but less acute than in emerging markets, and C-BAM provides one easy fix. Canada is obviously a developed capitalist economy and the start-ups we’re dealing with are already staffed with highly educated and sophisticated people, so we’re starting at a huge advantage. Plus there is the benefit of being in a similar timezone as enthusiastic mentors and having ready access to technologies such as TP.

In poor rural areas, the need for mentoring is there in a big way but there is no sustainable, scalable way to provide it. I know for a fact experienced people want to help micro-enterprises and while parachuting experts in from time-to-time may be better then nothing, it isn’t a true fix.

Having spent some time bouncing around emerging markets, I can see what kind of important tool business mentoring is for development. I don’t have an answer here, maybe as internet video technology spreads farther and wider it will be easier to do C-BAM type events.

Small Business - Teaching Business Basics in the Developing World -

C-BAM: Mentoring Canadian start-ups, Silicon Valley-style

I’ve written here and elsewhere that a main problem with the start-up communities in different parts of the world (both developed and emerging) isn’t the lack of capital, it is the lack of mentoring. While it may seem counter-intuitive in this age of “credit crisis”, the world is actually flush with capital opportunities if you have the right business plan.

Aye, there’s the rub, coming up with a business plan that investors will feel comfortable with. A lot of the times you come across great ideas, interesting technologies but weak companies and inexperienced (although usually very enthusiastic) management teams.

This is where mentoring comes in. An experienced mentor can help a start-up get its business plan in order and can provide an inexperienced/enthusiastic management team with the sage advice and coaching that will calm a rattled investors’ nerves.

Enter C-BAM!

C-BAM stands for Canada-Bay Area Mentoring (goofy name I know, it was the best I could come up with at the time) and the goal is to provide some Silicon Valley style advice to promising start-ups up in Canada.

The program is exciting to me because it uses technology to bring business mentoring to a whole new level. Although this is not a Cisco event, we used Cisco’s Telepresense (TP) to link up mentors in the Bay Area and start-ups in Canada (in our first instance, in Ottawa.) The start-ups pitched their companies via TP and got real-time feedback from a super group of experienced Canadian Bay Area-based executives and VCs.

(If you think there aren’t a lot of fantastically talented Canadian executives and VCs in the Bay Area, I challenge you to come down here, pick up a rock, throw it and try not to hit one. It can’t be done, I’ve tried.)

We had the first C-BAM last week and I think (hope) we were able to provide some real value to the participating start-ups. We looked at start-ups in the mobile, video conferencing and semiconductor optimization spaces. I have to say the companies were far more sophisticated than I had anticipated, so the discussions happened at a really advanced level.

We still have a few kinks to work out in the overall format but we’re continuing to plan future events, so I’m sure C-BAM will get better in each iteration.

Tuesday, June 16, 2009

Can we adapt to climate change?

I’ve been reading the terrific book “A Short History of Progress” and one of the more fascinating questions author Ronald Wright asks is, if people have been on the earth for 1-2 million years, how come we only developed agriculture some 10,000 years ago?

Wright’s answer, because the global climate entered a phase of unusual stability that allowed humans to nurture domestic plants and therefore create agriculture.

That’s why I’m highly skeptical of people who say we can adapt to on-going climate change. I don’t think they appreciate the scale of the devastation to humanity if climate change continues. It is not a function of wearing lighter clothes in parts of the world that get warmer or buying more umbrellas in parts fo the world that get wetter, it is about the very basis of our food supply being threatened with extinction.

"The projected rapid rate and large amount of climate change over this century will challenge the ability of society and natural systems to adapt," the report says.

Report: Climate Change Already Affecting U.S. -

Reaching out to emerging markets

Fantastic piece inthe Globe on Canada’s need to expand its economic and commercial horizons beyond the US. This has been a refrain for some time now but the writer nicely summarizes the key points. As I deal in emerging markets investments for a large US firm this topic is of particular interest to me. At conferences and in conversations, Canada is noticeable absent from the emerging markets dialog.

Canada does not have a holistic strategy on how to engage emerging markets. I use the word “holistic” because it needs to include Canada’s foreign policy and international trade interests. It seems to me that there is a separation of church and state in Canada around foreign policy and trade. In our economically interconnected world, this separation is not a sophisticated strategy. With a relatively strong banking sector, Canada has the unique opportunity to use its national balance sheet to create economic and policy linkages in the emerging markets.

Don’t forget, the emerging markets are going through a recession because the West, a main customer, is going through a recession. But there isn’t a fundamental crisis of finance in the emerging markets as there is in the West (an ironic twist of fate, one could say.) So the emerging markets remain open to do business with whoever still has capital.

Despite current challenges, Canada still has capital, but it is not seizing the opportunity to use it and expand its economic and political influence.

Some thoughts on what the writer said:
By 2050, China and India are set to be the No. 1 and No. 3 economies in the world by GDP, and together will be larger than the G7 combined.

Yes, but the US is still #2, so let’s not get too ahead of ourselves. And if we look at GDP per capita, the US will remain number 1 for a very long time.

Moreover, the emerging patterns of global trade, travel and investment are increasingly multidirectional - from China to Africa, Brazil to India and no longer guaranteed to flow through the once dominant hubs of Europe and the United States.

Great point. All Western countries, not just Canada, need to better understand this trend.

Our competitors are cued up with active strategies and we risk losing out if we do not act quickly and with focus.

The US and Europe have diverse strategies that engage the emerging markets with a combination of aid, expertise, commercial contacts, loans, equity investments, technology sharing, JVs, the list goes on and on. It involves national governments and companies together creating linkages in the emerging markets and using a portfolio of investments, loans and grants to win influence and business. Canada doesn’t seem to get this.

The structural advantage is we have a good story for the times. Canada's relative financial stability amidst crisis, our advanced resource markets, quiet excellence in many of the emerging 21st-century technology areas, from clean tech to agriculture, in addition to the advantage that comes from our diversity, make for a compelling story that, if marketed well, will find ready global audiences.


Being a destination and source of trade with India is essential - but better still, we need to be part of India's strategy for Brazil. Innovative trade and corporate strategies should be focused on building these trade triangles.

Genius.. This man for PM.

An effective diversification strategy requires focusing even greater corporate and public diplomatic resources on three key markets: Latin America, China and India.

What can I add?

To send the right signal to corporate India, Canadian business needs to take the lead and support the call for a "comprehensive economic partnership agreement" - a pathway to free trade. We should start simply by focusing on free trade in services and leave the other more contentious issue like agriculture off the table.

I agree in theory, but wonder if this will work in practice. Can Canadian businesses take the lead in building these sorts of economic partnerships? Perhaps, unfortunately, business waits too long and government must lead. That seems like a more Canadian way.

We are late to the party in these emerging markets. To jump ahead in the queue, Canada needs to get ahead of its peers with a co-ordinated public diplomacy strategy enabling us to tell a compelling 21st-century Canadian story, streamlining the cacophony of messages from our various levels of governments.

…and business communities.

Wednesday, June 03, 2009

$80-$100 m "me toos" to bring bling to Bing

I guess I don’t understand MSFT’s new push into search with Bing. Yes, I understand the importance of search and the value of search advertising, but I’ve used Bing and yes it is nice, yes it works well, yes it has a couple of nice features, but it seems to me to be at best an incremental improvement on what is currently out there from Yahoo and Google.

There is no earth-shattering innovation here. There is no new take on search. So I’m not sure what the big deal is. (The trivia-filled photos are nice, but it feels like they’re trying too hard to be “fun”)

Microsoft is going to spent $80-$100 million to say “look, we’re here also.” It looks like an $80-$100 million “me too” campaign.

I wish they would go back to Jerry Seinfeld, I found those ads super amusing (at least the first one in the shoe store.)

Tuesday, June 02, 2009

Saving grace of slow money

With all the money being pumped into the economy from the Feds, Tom Campbell says we may be looking down the wrong end of 13% inflation in about a year, as soon as the velocity of money picks up.

Paul Krugman says “don’t worry be happy”, inflation is econo-imaginary boogeyman and a bit of inflation will pint-size the debt, anyway.

The story here is why I think the answer will lie somewhere in the middle. If there is one fundamental change that we may be facing is that Americans may begin to save more. Not Asia type of savings, but more than in the recent past. If inflation creeps up, Bernanke and co will have to jack up interest rates which will also create and incentive for increased savings.

So jacked up interest rates and increase in savings may both contribute to lessening the return of high-velocity dollars, which may in turn dampen inflation so it’ll just be high, rather than very high.

Money quote:
With income growth far outpacing spending, Americans' personal savings rate zoomed to 5.7 percent, the highest since February 1995, the Commerce Department reported Monday.

Monday, June 01, 2009

If you can't bring Silicon Valley to Canada, bring Canada to Silicon Valley!

Through a series of “bootcamps”, the Canadian Trade Commissions in the US are helping provide guidance to Canadian start-ups on how to pitch and compete is a market as demanding as the US.

Select start-ups event get to move down into Silicon Valley for a while to establish operations and build a presence down here.

I’ve heard this process has taken some heat up in Canada because some claim this program is actually assisting the “brain drain” and creating incentives for start-ups to move out of Canada.

Rubbish! This is actually a very savvy move. What goes on in Silicon Valley cannot really be replicated elsewhere. Many programs around the world have tried, and almost all (if not all) have failed.

This program by the Trade Commissions is far more reasoned. Instead of spending all sorts of time and money attempted to re-create Silicon Valley someplace else, why not bring companies down here and let them learn from the original incarnation?

Canadian tech start-ups need access to the Valley’s ecosystem. It is not just access to capital, but access to talent, mentorship, new ideas and to customers. Companies, with one foot in Silicon Valley and one foot in Canada, are the best conduits through which some of the culture of innovation that exists down here can begin to filter north.

The local Trade Commissions realized this and through this “bootcamp” process have come up with a very creative initiative.

Will some companies move their HQs down here? Sure, probably. But they’ll also keep some functions back up in Canada and thereby create a great platform for SV/Canada exchanges.

And for the other companies that only stay down here for a short while and then head back, they’ll be newly armed with professional and commercial contacts that will help them grow their businesses.

Access to Silicon Valley means access to capital, expertise, and customers. The Trade Commissions are allowing Canadian start-ups to benefit from this access. Well done!

Canadian Technology Accelerator now open in Silicon Valley