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Mega Trend In Food Supply

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The New Geopolitics of Food. Did you read this article in Foreign Policy Magazine? Definitely a must read regardless of how busy you are. It is the kind of mega trend to get your head around as fast as possible. Understand what it means to you on a personal level. It will be your children's global/local context.

Do you remember when the first signs of trouble came in 2007? Farmers began having difficulty keeping up with the growth in global demand for grain. Grain and soybean prices started to climb, tripling by mid-2008. I felt it at my local grocery store prices. Many exporting countries restricted exports in an attempt to control the rise of domestic food prices. Among them were Russia (wheat), Argentina (wheat) and Vietnam (rice).

Some affluent countries, (Saudi Arabia, South Korea, and China)  took the unusual step in 2008 of buying or leasing land in other poor countries on which to grow and export grain out for their own national consumption. A 2010 World Bank analysis of these "land grabs" reported that a total of nearly 140 million acres were involved .

1) Accelerating growth in demand 2) difficulty of rapidly expanding production supply are identified as the main drivers for this food price surge.

Everything from falling water tables to eroding soils and the consequences of global warming means that the world's food supply is unlikely to keep up with global demand. The rule of thumb among crop ecologists is that for every 1 degree Celsius rise in temperature above the growing season optimum, farmers can expect a 10 percent decline in grain yields. That's the global warming impact on farming. United States is converting grain into ethanol at a growing rate. Maybe good for the planet, not so good for the hungry inhabitants.

The Middle East, with its political challenges, is the first geographic region where grain production capped and begun to decline due to water shortages, even as the population continues to grow. Grain production is down in Syria and Iraq and Yemen may soon be next. In that neighborhood, any water extracted from the upper Nile River basin to irrigate affecting countries downstream is potential for conflict. But the serious cases ahead are in India and China.

This global mega trend shows a transition from an era of food surpluses to a new politics of food scarcity. How will this play out? What does it mean to you? How do you leverage this mega force?

Congratulations, Mr. President!

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I'm about to go speak to the crowd here in Chicago, but I wanted to thank you first. 

I want you to know that this wasn't fate, and it wasn't an accident. You made this happen.

You organized yourselves block by block. You took ownership of this campaign five and ten dollars at a time. And when it wasn't easy, you pressed forward.

I will spend the rest of my presidency honoring your support, and doing what I can to finish what we started.

But I want you to take real pride, as I do, in how we got the chance in the first place.

Today is the clearest proof yet that, against the odds, ordinary Americans can overcome powerful interests.

There's a lot more work to do.

But for right now: Thank you.

Manufacturing Renaissance in America?

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Manufacturing jobs migration which has been happening since the 1970’s to China and cheaper developing countries might witness a break soon per recent studies done by Boston Consulting Group.  The study expects the wage gap between China and USA to go down by 2015, due to rising wages in China. 

Companies are already exploring cheaper geographies to migrate, but some companies are finding that there are cheaper locations in the U.S. itself.  The BCG study validates other reports observations that some states in the US are cheaper than many locations.  The manufacturing jobs that come back may not all go to States. They might go to Latin America locations, especially Mexico, due to the cheaper labor rates. 

As they call it, nearshore in IT outsourcing, near-shore in manufacturing might bring jobs back to America as well.  Recent reports suggest that toy making, which is a staple industry for China, which makes 90% of U.S. toys, might also find some shift happening in the near future.  Some companies like Wham-O Inc  have actually made the shift back to the U.S.  Companies like caterpillar have announced increase in production in U.S.  The BCG study points that there are several highly skilled labor in low cost States in U.S. whose services can be used.

The wage difference, which was earlier 8% when compared to the U.S., is shrinking and is projected to reach 69% by 2015, making the process of outsourcing unnecessary.  Obama’s export target seems to be derived mostly from increased exports from America by making the dollar cheaper and other currencies stronger.  That would work since a weaker dollar will make U.S. manufacturing competitive and bring in more manufacturing jobs and hence strategically as well, financial moves are being made to make U.S exports more competitive. 

In addition, the shift in wealth that has happened due to outsourcing of IT and manufacturing to the emerging countries have increased standards of living and increased cost of living in the outsourced countries. This makes  their currency stronger as well.  

Could this be one card in the Obama Recovery Plan for 2012?

Perspective: Was it just a Big3 Bailout?

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At the Washington DC Auto show this year, President Obama had his victory lap - photo opp from feeling vindicated after a tough decision politically and financially.

The Auto Industry Bailout has given Obama lot of strength and hope and was stressed in his State of the Union Address on his decision for the Auto Industry Bailout.  Obama is using it as a strong campaign tool because the GOP had opposed it then.   

Paul Krugman writing for the New York Times reviewed both Obama and his state of the Union Address and clearly pointed out the Bailout was actually not targeted at the Big3 but the whole Auto Industry ecosystem.  The Auto Industry could have taken down lots of dependent companies down under if the industry had been allowed to collapse.  So the key takeaway from Paul’s analysis for us here is that the entire Auto Cluster was saved because of the Bailout.

It can be taken similarly that allowing the Big Investment Banks to be taken over or merged helped prevent further collapse.  By keeping interest rates close to Zero till 2014, the government is offering sufficient time for the market and economy to recover slowly.   The government understands that the markets cannot recover overnight and hence is betting on a slower recovery and deploying the financial tools at its disposal.

So, saving the cluster in any sector remains paramount to any stimulus decisions, not the individual companies.  Krugman rightfully points out when companies get their work done in other countries, it is not because that country has cheaper wages, and it is because it has a better eco system. 

Pondering over that statement and looking at India and China, India had a huge English Speaking Educated Graduate population which was just ripe for the outsourcing idea to fructify while China had well organized Industry clusters which allowed companies to reduce costs by getting products manufactured there with high quality at lower price. 

The price parity is largely again because of currency difference and not because of a difference in standard of living when compared ratio wise of costs, savings and expenditures.  These same industry clusters were once in the USA and no longer are there now.  Hence if the same jobs have to be created, it is paramount to create the Ecosystem which is no longer possible.

Despite the high cost of living, Silicon Valley wasn’t impacted as much by recession as were other areas.  People still flock to the Bay Area seeking jobs.  Despite a weak economy and the century’s worst recession, areas which contain clusters for say industries like pharma were not impacted as much as other areas.  

America should focus on creating these clusters again.

The Connected Consumer

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A Leading company executive said that we are going to witness more change in the next 10 years than what we have witnessed in the last 50 years. 

The primary change is the connected consumer, be it through a smartphone or through a wireless broadband or a Bluetooth device in a telematics device in a car.  The term has been used often but very few yet realize the real change that the Connected Consumer can bring to existing business models of various industries, from banking to healthcare.

Governments across the globe are investing in Intelligent Transportation Systems which will derive more data to pass onto consumers. 

The connected consumer on the social network is making traditional survey a passing reality.  It is much easier to do surveys on social networks today than normal door to door survey. 

So the way of doing business definitely has changed and all technology is focused into leveraging this connectivity to transition to a NEW ORDER and adoptable new Business Models. 

Technology innovations in the coming years will be more focused on how to leverage the connectivity of the consumer.  With 4G guaranteeing speeds of 20 MB, the internet of all things becomes a reality. 

It is just not the wireless monitors worn on the body, it is embedded telematics in the car in systems like Ford Sync, which provide voice controlled options to send messages, make calls and several other voice operated commands, powered by Nuance Communications. 

Services like Onstar, Toyota Entune, Ford Sync are revolutionizing the industry by making the mobile consumer more connected with the environment.  Location based services are offering you location based deals and services. 

This brings into picture a whole class of applications that can be leveraged.  No wonder most of these companies are projecting 10-20 times exponential growth in their revenues.

It is just not the mobile consumer, but the normal consumer has many more choices and options to handle business than earlier.  Speed and connectivity are blurring the lines for many industries already.

 Companies ranging from Google to Microsoft are entering the automotive applications areas whereas carriers are not behind. They apart from carrying the entire connected traffic are offering their own services to leverage telematics growth. 

Smartphones today have a 35% penetration rate in USA but will slowly move to 100%. 

In BRIC countries, penetration rates have risen from single digits to double digits in just under a year and are speedily moving up.  CAGR for penetration is very high in these countries. 

Anyone who fails to understand this change will likely be left behind.

Joined at the HIP --Europe Sneezes, America catches the Cold.

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While America still struggles with high unemployment and declining housing prices, the financial world is being threatened with another slowdown. The Fed Chairman this week said that the U.S. is close to “faltering”.  Lawmakers are working on spending cuts that were agreed to for raising the debt ceiling. Fed is concerned that imposing too many spending cuts will accelerate economic decline.

The impending Greece default has already been the cause of concern for the global financial markets for quite some time. The bailouts will stop sooner or later since the larger economies like Germany are facing internal opposition to bailing out other countries.  The conditions imposed by IMF for bailout are raising protests internally in Greece since they dictate that Greece should cut down on a large segment of its public employees.

Public service constitutes 20% of employment in the U.S. So connected are the financial markets globally that while Europe Sneezes, America is catching the cold. Earlier when America sneezed, the world markets used to catch the cold, but currently all action is deriving from Europe.

The only concern is that Fed might use the only monetary tools at its disposal- printing more money. While this is a positive for the stock markets, this will steadily decline the value of the dollar though the decline of the Euro has still the global investors scurrying to investing in U.S. Bonds. Interest rates have been hence falling despite the AAA downgrade rating. If the Euro crisis had not been there, the American Dollar might have declined against the Euro due to the internal fiscal situation. So for the Dollar, the Euro crisis has in fact been a blessing. 

Consumer Spending, which is the lifeline of the Economy, has fallen because incomes have fallen in the U.S.  More and more consumers are moving towards discount stores and this has resulted in declining revenues for luxury market chains. 

Another crisis that Americans face with Europe is that many American Money market funds have nearly 40% of their investments in Europe. They are slowly scaling back their investments into Europe. The move towards safer Asset Classes has accelerated due to a uncertain Global Macro Environment.

The Power of One. Caution!

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Two individuals in Mexico are facing around 30 years in prison for spreading Twitter rumors of gunmen attacking schools. One of them had claimed that around five children were kidnapped while the other mentioned a helicopter firing shots at a school.  Parents rushed in a panic and that caused several accidents. 

During the London Riots, two people tried to incite violence by exhorting people to resort to violence on their face-book pages.  Several celebrities face the misfortune of obituaries regularly on social media by pranksters.  The ability to connect with 200 million people across the globe through a single click makes twitter a power that can be wielded for both good and bad.

While social media networks have enabled ordinary people to get following across the globe through sharing their experiences, it has also given power to pranksters who through causing false alarms are destroying the credibility of posts on the social networks. 

Many people are not even verifying the posts since they assume that something posted on twitter is genuine and this has been exploited by companies who have mushroomed only to push posts and traffic on social media by hiring people to just like or view or re-tweet.  Despite best efforts of the platforms to restrain such behavior, it is hard many a times to restrict this behavior.  This causes influence by unethical means. 

To give an example, manipulated opinion sites are today publishing ratings beneficial to the customers and not to the consumers.  They are also like traditional media threatening to blacklist genuine businesses by fake complaints if they do not take corporate subscription. 

Similarly, when one spreads news such as the Mexicans did, it genuinely can lead to large-scale disturbance, more so in these days when traditional media is following social media.  All traditional media now has space where they publish regularly the best social media posts.  What has happened thus is that the power of influence has passed from the batons of large corporations or political institutions to an individual with a computer and an internet connection.

So participation on the social media certainly needs some self-discipline, which cannot be imposed but needs to be inherent.  One needs to participate in social media with the utmost responsibility than one would have when interacting with an offline person since here he is talking simultaneously to 200 million users. 

A person with the right online marketing strategy can make him more popular than even the president of the United States and at the same time can make himself as dangerous than Bin Laden. 

Internet has not just broken down geographical barriers, but it has also broken down governance into a more decentralized manner where everyone matters, especially the ONE.

A Passion & A Vision

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I love this CNN story! ...Are we seeing opportunities often right under our nose? We have to  think outside the box. The path to success starts from within: A passion and a vision.


Do Well (...then Do Good)

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The share of the national income received by the richest Americans has been rising steadily since the Great Depression.

Between 1995 and 2004, average household wealth nearly doubled and the percentage of millionaires tripled. However, 89% of total growth was driven by the wealthiest quartile. In turn, most of that growth was driven by the top 1% of income earners.

The average after-tax income of the top 1% of income earners increased by 129% between 1979 and 2003. Between 1997 and 2001, the richest 1% received a larger share of the national income than at any time since 1937, with incomes rising by an average $180,000.

Between 1979 and 2003, the bottom quintile of income earners increased their after-tax income by just 4%. The average after-tax income of the bottom 75% of tax filers actually fell slightly between 2002 and 2003. In 2009, the nominal median income fell to $49,777, from $50,303 the year before. This is the first time the nominal median income has dropped since census records have been kept.

As of 2010, the poverty rate [$10,285-11,161] is at 14.5%, up from 14.3% the year before. This has already eclipsed nearly every recent year except 1992 (14.8%).

The Gini index is a percentage measure of inequality in economic distribution in which 0 represents perfect equality and 100 represents perfect inequality (1 person holds all the wealth). The lowest reported Gini index for the United States, 38.6, was in 1968. The highest reported Gini index, 47.0, was in 2006. As of 2009, the Gini index is 46.8. This is a small rise from the 2008 Gini index of 46.69.

There is a winning team in this game. Financially speaking (only financially), the one with the most "toys" wins. We also know, "s/he who has the gold makes the rules". It is always better to be with the winning team in the end.  These adages are valid individually, corporately, nationally and in the international arena.

To win we have to work hard, yes. Also, (maybe more importantly) we have to work smart. A keen sense of "awareness" (self & one's context) to augment high education, plus a clear understanding and leveraging of one's "differentiator" as competitive advantage are paramount in my view.  

The budget battle is shaping up in Washington, DC. It is as much a dollars and cents debate as it is about  values, philosophy and world view.  It seems to me that a healthy dose of "picking oneself up by the boot straps" is very important. At the same time nurturing a vibrant community as a whole with smart long term strategic investments in children/education while honoring the elderly make intelligent sense.

Tectonic Shifts in US Demographics

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The Census Figures offers interesting data to analyze the 2012 elections now that U.S. President Obama has declared his reelection campaign. The growth of Hispanics in the U.S. to become the second largest group in the U.S. has Hispanics rejoicing while others are concerned looking at future scenarios. Asian population stood at 14.7 million in 2010.

Most of the government spending programs in education and healthcare benefited Hispanics, African Americans and other Latinos the most. Nearly 50% of all Texas public school students are Hispanics. Texas will witness a Hispanic Majority in less than 10 years.

Traditionally, Hispanics are aligned with the Democrats and their electoral influence in the coming years will be clearly visible in the four largest Hispanic populated states: New York, Texas, California and Florida. 

Obama's reelection campaign surely sees the above changing demographics in the country. Both parties will initiate steps to get the diversity vote. This growing immigrant population is closely watching the current ongoing debate on public spending cuts. Obama won nearly four fifth of the nonwhite vote, which represents 26% of all votes.

On the other hand, there is the political issue of redistricting...