Eye on Innovation, Design and Technology

Innovation Leaders Forum and Conference 2012

If you're an Innovation Leader, Innovation Leaders Forum and Conference 2012 is a don't-miss event. Imaginatik and the Fidelity Center for Applied Technology are joining forces for a full day of innovation topics, speakers and networking activities

The conference will take place on Thursday, March 8, 245 Summer Street, Boston, MA

Lawyers Shift Focus From Big Tobacco to Big Food

The New York Times reports on how asbestos and tobacco litigation lawyers have now set their sights on food litigation.

People may have laughed 16 months ago when obese teenagers unsuccessfully sued McDonald's, saying its food made them fat. But a well-honed army of familiar lawyers who waged war against the tobacco companies for decades and won megamillion-dollar settlements is preparing a new wave of food fights, and no one is laughing.

However, as opposed to the tobacco settlements, food companies are not government-protected licensed monopolies. If for example, fast food companies declare bankrupcy as a result of these lawsuits, new ones will take their place that will not have to pay tribute to the lawyers, thus the gravy train can not go on forever.

The New York Times > National > Lawyers Shift Focus From Big Tobacco to Big Food

Insourcing? Indian Software Company to Create Jobs in the U.S.

Much is being written about U.S. software jobs leaving for India. In a man bytes dog story, Infosys, an Indian software company, announced the creation of a U.S. based unit that will create 500 jobs

In an attempt to offset anti-outsourcing sentiment, the new company, Infosys Consulting Inc., will hire 75 experienced consultants in the first year with plans to hire as many as 500 people in the next 3 years, Infosys Technologies said in a statement. "By taking this initiative, we are creating jobs in the U.S. That should help us counter some of the anti-outsourcing sentiment out there," Kris Gopalakrishnan, chairman of Infosys Consulting, told reporters.

Update: IBM has acquired an Indian outsourcing company

When offshoring goes bad

S. Williams describes in detail the perils of outsourcing and how the expected savings might never materialize

Smith predicts a turnover rate of 20 percent in the next six months and laughs whenever a vice president, CEO or politician uses "outsourcing" and "cost savings" in the same sentence.

"Sure, we saved money on the labor," she says. "But what about the other costs? What about the cost of rewriting the same piece of code 50 times? What about the cost of delaying other projects, the travel and lodging?"

Anger venting, Smith ends with a flourish: "Where did all our savings go when, at the end of the day, we have a piece-of-shit system that'll just need to be replaced in three years?"

The Origins of the Stock Market Bubble

F. Norris' article on the New York Times describes how the use of stock options, the failure to properly account for them in financial statements, and the belief that the income derived from them would continue for ever, were a large reason for the stock market bubble of the 1990's and the elimination of the government budget deficits during the same period. It was clearly an unsustainable situation.

''You manage what you measure,'' as they say, and the fact that no one had to measure options values helped lead to an explosion in their issuance after 1994. Employees knew they could be valuable, and so did bosses. Most shareholders either did not care or accepted the argument that reporting the expenses would depress share prices and thus be bad for them. The companies that issued options worried about the one place all those options did show up in their financial statements: as dilution on the balance sheet. So, many companies borrowed money to repurchase shares.

The government was another beneficiary. Executives paid ordinary income tax when they cashed in the bonuses, and that led to a surge in government tax receipts that was little understood at the time. The budget bean counters assumed that those taxes were offset by reduced corporate taxes, because companies got deductions for the option profits, and so did not affect the deficit. But a lot of the profits came on options from unprofitable companies.
That helped to produce the Clinton budget surpluses, and the bursting of the bubble meant that most of the forecasted surpluses were going to vanish anyway, even before the Bush administration cut taxes

The Ultimate Outsourcing Story

You would think that the nature of certain jobs would always protected themfrom the outsourcing trend. I certainly would have placed funeral houses in that category. However, as this story shows, not even jobs in the funeral industry are protected from being outsourced.

Germans are shipping their loved ones to eastern European graveyards and crematoriums to beat the rising price of funerals at home. The trend has been labelled "corpse tourism" and is on the rise in Berlin and other cities close to the borders with former Iron Curtain states such as Poland, Slovakia and the Czech Republic.

The Negative Impact of Creative Destruction

In a previous post, D. Drezner described that the normal process and job destruction and creation is what maintains economic vitality. On the other hand, in this article, K. Boo documents the negative aspects of this process and some of the actions taken to mitigate the effects.

Since the turn of this century, three million American manufacturing jobs have disappeared. Some economists and politicians attribute this loss to global trade deals. Others credit improvements in production efficiency. But, however the responsibility is apportioned, most people agree on one point: the need to retrain displaced workers. Under a popular, expanding federal program called Trade Adjustment Assistance, workers who are judged to have lost their jobs because of foreign-trade policy are eligible for the sort of expensive, generously conceived assistance that has become a rarity since Great Society strategies fell out of fashion. Beneficiaries like Lupita receive up to two years of aggressive training in “demand occupations”—jobs identified by government and business officials as growth areas—as well as unemployment compensation and subsidized health care while they learn. It has been estimated that this assistance can cost up to twenty thousand dollars per worker.

Latam must get ready for when "bonanza" ends -IADB

J. Weber describes that Latin American countries must reform their economies n preparation for the end of the current environment of high prices on commodities and low interest rates.

this foreign bonanza has clear elements, like interest rates, commodities and even the devaluation of the dollar that has helped our competitiveness in non-dollar markets," Inter-American Development Bank President Enrique Iglesias told a news conference ahead of the bank's annual meeting in Lima.

But he added: "Foreign bonanzas have always been limited. We don't know how long this will last, but our experts say a rise in interest rates, of say 200 (basis) points in countries like the United States has a 500-point (five percentage point) impact on our countries."

The Demise of US Airways

J. Brancatelli discusses the upcoming demise of US Airways at the hands of Southwest.

The facts behind rising gasoline prices

Gasoline prices hit an all-time high today. However, in this link and this link there are graphs of inflation adjusted gasoline prices that help keep things in perspective. And in this link there is a tracking plot of gasoline prices for 2002-2003 national and regional averages, as well as a wealth of reports that explain the reasons for changes in gasoline prices.