Category Archives: rants

Apparently Accountants Have a Very Different Meaning for the Word Enormous

According to a recent article in Modern Material Handling (MMH), which reported on the Grant Thornton Realities of Reshoring Survey and quoted Wally Gruenes, Grant Thornton’s National Managing Partner for Industry and Client Experience, the results (of the survey) could dramatically impact U.S. trade balances, and should provide an enormous boost to domestic manufacturers, retailers, wholesaler/distributors and service providers. Great news, right?

Let’s dig in. According to the results of the survey, more than one-third of U.S. businesses are likely to move goods and services back to the United States in the next 12 months. In particular, 42% of executives indicated they were likely to bring back IT services, 37% said they were likely to bring back components/products, 35% said they were likely to bring back customer services or call centres, and 34% said they were likely to bring back (raw) material. Not exactly enormous, but not too shabby either. For one third of companies to at least be thinking in the right direction, that’s pretty good. Except when you dig in and realize that the numbers imply that as much as 5% of overall U.S. procurement may come back to the United States. 5% is not enormous! It’s not even close. And this is the best case scenario, which we know isn’t going to happen.

First of all, someone would have to get off of their @ss and push for a major change (and in your average company, meet a lot of resistance). This is something that only happens in market leaders, which we know are only (depending on which analyst firm you ask) the top 8% to the top 20% of the market. Secondly, a C-Suite executive, still focussed on quarterly numbers and penny pinching, would have to sign off on what could be moderately high one-time expenses associated with re-shoring — expenses which would be minimal in the mid-to-long term, but which would probably really irk the CFO in the short term (and mess up his attempt to look good for Wall Street). (And given the number of companies that have invested in training over the last 5 years, even though case studies from Procurement training institutes, including Next Level Purchasing, have proven ROIs of 10X to 100X from proper training investments, we know that few companies in North America put long term savings ahead of short term gains.) Thirdly, someone has to be willing to get a little egg on their face and admit that maybe outsourcing (so much) to China wasn’t that great of an idea in the first place — that if appropriate investments had been made at, or near, home to increase productivity, decrease production time (and cost), and improve operational sustainability, similar cost savings could have been made over the long term with an appropriate investment up front. How many pompous C-Suite executives in North America are willing to fess up and admit they were wrong? (Let’s put it this way, the Mad Men would be an awful lot poorer if more were.)

Long story short, if even 1% comes back this year, the doctor will join you in the dance of joy because he just doesn’t see it happening. He’d like nothing more than for 10% to come back, especially since he’s been preaching the importance of Home Cost Country Sourcing since 2007, but believes only the true market leaders will take any actions at all. Most companies just aren’t hurting enough to bother.

Will 2014 Be the Year the SEC Kills Crowdfunding? And Innovation With It?

According to a recent article over on VentureBeat, it might cost you $39K to crowd fund $100K under the SEC’s new rules. On October 23, 2013, the SEC Issued its Proposal on Crowdfunding, available as a 585 page PDF, that, if passed, could put an end to crowd-funding, and even innovation, as we know it.

According to the VentureBeat article, the (proposed) legislation requires that the selling of crowd-funded securities take place on registered websites, which doesn’t sound too bad, until you also add in that these websites (which must be registered with the SEC and FINRA), must also provide investors access to a business plan, a detailed breakdown of the planned use of the proceeds, a company valuation, and financials. And already the problems begin.

If you look at the average Kickstarter campaign, it is to create something new, through a new endeavour, which has no financials, no company valuation, and no business plan beyond we plan to build this, in this way, and our production estimates are that it will cost this much. In the end, we will deliver X to you, or to the community. The business may or may not go on once the product is completed (and delivered). Moreover, these efforts are typically put together by the innovators themselves, who have expertise in creation and production, not writing business plans that have to include sections on marketing, sales, financial projections, etc. etc. Who’s going to write this plan? Create the (potentially ludicrous) financial projections? Provide, and take responsibility for, a valuation of a company or product that doesn’t exist?

But this is just the beginning. If the event (intends to) raise(s) 100,000 or more, in addition to providing potential investors with tax returns for the most recent tax year, the firm also has to provide investors with audited financial statements (before the offering and audited tax returns after the disposition of the funds). CPAs (Certified Public Accountants) are not cheap!

In addition, a crowd-funding campaign has to pay the registered website a success fee (calculated as a percentage of proceeds) for facilitating the transaction, compliance costs related to the preparation and filing of individual forms related to the crowd-funding offer both before and after the campaign, and additional fees to third parties whose help it will need to complete the financial (projections), business plan, and obtain a market valuation.

All told, the SEC estimates portal and compliance fees will eat up between 12.9% and 39% of the money raised, but, depending on what the fees turn out to be, and how much help the inventors and creators need to satisfy all of this bureaucratic BS, the costs could conceivably reach 50% of the proceeds, or more!

What is the SEC thinking? If a bunch of educated and reasonably well-informed people want to risk throwing $5 to $5000 of their disposable income behind someone who is willing to take a chance and try to do something new, what’s wrong with that? Innovation is what made North America, and without continued innovation, North America is going to be in big trouble. GDP growth is nominal, unemployment is high, and China owns too much of our debt. We need to be encouraging innovation, not discouraging it.

And while the SEC is spending time and effort writing 585 pages of rules to govern amounts of money that are minuscule in the grand scheme of things, hedge fund managers and investment banks that can crash the market and tank our economy literally overnight run free and get rich at our expense. (And SI agrees, the bank ain’t gonna help you.)

SI isn’t saying that there shouldn’t be some regulations around crowd-funding, as you do want some protections for the common man, but they should be reasonable and minimal. For example, maybe crowd-funding regulations should allow for unregulated crowd-funding events which could be:

  • limited to a maximum raise of 999,999,
  • limited to a maximum investment of 9,999 per investor, and
  • limited to registered platforms
    (that can register for free and decide whether or not they want a cut of the money raised with a 2% limit).

With the exception of (big studio-quality) movies *, most of the crowd-funding efforts are for initial product or idea development, and most of them are looking for (well) under 1,000,000, which is the number where you are looking to build a real company and would, presumably, be far enough along where you could bring in (super) Angel and VC funding.

In SI’s view, the individuals and small teams behind the efforts should be left alone and given a chance to innovate. Some may fail, but that’s okay. The point is that most will succeed, and anyone who is going to invest in crowd-funding understands that innovation is fraught with risk and that sometimes success only happens with grass-roots effort.

If you also agree, your chance to provide the SEC with your views expires in two weeks on January 21, 2014! SI encourages you to Submit Your Comment through this link today! Please save crowd-funding! We need every ounce of innovation we can produce!

 

* These should have their own class of exemptions. You might want some accountability due to the large amount of money that can be involved, but certainly nowhere near the levels that traditional investments of this size require.

Best Design Trends of 2013? Don’t You Mean Worst, VentureBeat?

Of course the doctor is going to to be attracted to an article that purports to chronicle the 10 best design trends of 2013, but after a quick read, the doctor wonders if the author meant to say the trends mentioned were the worst trends because, as far as the doctor is concerned, the list contains four (4) of the worst design trends of the year. (An editing snafu, maybe?)

In no particular order, these four (4) trends are among the worst that 2013 had to offer.

  1. Responsive Design
    There’s no such thing as responsive design, at least not from a programmer’s perspective. The idea behind responsive design is that a single interface is coded to adapt to the viewing environment by using fluid, proportion-based grids, flexible images, and CSS3 media queries. While this sounds great in theory, this is impossible in practice as what looks good on a 5″ mobile touchscreen won’t look good on a 27″ monitor, nor will you be able to fit the same amount of information. In other words, you will have to code the UI to minimize, replace, or drop components as the screen size decreases from whatever the normal viewing size is taken to be (which is probably still 1366 * 788, based upon January 2013 statistics) and to add more components, more options, or more images as the screen size increases from the normal viewing size. You will have to have different scaling rules for images for different screen sizes (as some images will have to not only scale proportionally, but scale in multiples to look good, and only to a pre-set minimum and/or maximum size), return different amounts of data depending on display capability (and, if you can get an idea thereof, processing power), and even adapt the color scheme to the display characteristics. For every component, you end up needing so many rules, to account for mobile screen sizes, tablet screen sizes, laptop screen sizes, desktop screen sizes, and large monitor sizes, that it would have been less code, and less confusion, to just code five different designs. The theory sounds good but the practicality is virtually non-existent.
  2. Delight in Animation
    Just because you can, doesn’t mean you should. The analogy is just because you can down 3 bottles of free vino before you pass out, this doesn’t mean you should. Animations are not only processor-intensive (which is an issue for mobile devices with limited battery life), but they are also bandwidth intensive. Just because the carriers have the capacity, this doesn’t mean the individual does, especially if she’s on the go. Cellular provider data plans are expensive and the last thing we want to do is run up tens of dollars in overage charges for your stupid animation. And yes, many places offer free wi-fi, but usually only have a single low-end 54 MB router that can’t really handle the amount of traffic all of the freeloaders are trying to route through it. Give us a nice graphic if you must, but don’t waste our dollars on frivolous animations.
  3. Creative Typography Explosion
    Some of us like to be able to read what you write and don’t want to spend 30 seconds trying to figure out if the word is ‘moot’ or ‘nook’ because your fancy-smancy psuedo-cursive type-front is so quirky and blurry we can’t differentiate u’s from v’s, a’s from o’s, t’s from k’s, and p’s from q’s. There are a large number of good, old fashioned, type-fronts that have been around for decades for a reason. They work. Use them.
  4. Dashboards
    Everyone should know better than to get the doctor started on this topic. I don’t know how many times I’ve told you that dashboards are dangerous and dysfunctional (which is a message I’ve been shouting from the rooftops since 20007)! Austin got the message. Why Can’t You? (Why do you need to find out for yourself that integrated dashboards are deadly or that dashboards will be your downfall.) Needless to say, the doctor is not pleased by the explosion thereof!

Got any of your own bad design trends of 2013 to share? Leave a comment!

Where is Canada’s Road to Riches? The Rails, My Friend, the Rails.

As SI posted three months ago, The Road to Riches [is] The Rails, My Friend, The Rails. Not only is rail transport more fuel efficient and predictable than road transport, but it’s increasing adoption in the east has shown just how beneficial it can be.

The reality is that It’s Time for California to Update It’s Passenger Rail Solution and it’s time for Canada to update its passenger rail solution. Not only are parts of the country utterly without passenger rail service (as the only Via Rail stops in NS are in Amherst, Halifax, and Springhill Junction, for example), but the parts of the country that desperately need high-speed rail the most, like the GTA (Greater Toronto Area) are totally bereft.

As per this very well written article over on The Huffington Post, Canada’s Tech Future May Ride on the Rails. For example, right now it takes almost an hour to get from Pearson Airpot to Union Station downtown, a problem that is expected to be completed in 2015 with the Union-Pearson Express rail-link that will cut the travel time down to 25 minutes.

But this is not the biggest problem. Right now, one of Canada’s biggest tech-hubs is Kitchener-Waterloo, home of RIM, the University of Waterloo, Wilfrid Laurier, and a slew of technology companies, including many start-ups prime for US VC investment. Investment that is likely to flow only if it’s easy for VCs (who will fly out the afternoon before) to get there, meet with prospects, and get on the flight back home the day of the meeting (on the last flight out of Toronto between 6 and 7 pm, depending on their airline of choice). But with their only option being either the train, which only leaves Kitchener at 5:49 am (arriving at Union at 7:53 am) or 7:07 pm (arriving at Union at 9:08 pm), or the 401, which is typically a two to a two and a half hour drive at standard congestion levels, getting in and out of KW in one day is impossible (even though the straight line distance is under 100 km) if you also want to conduct business in Toronto during your trip.

As a result, as the article points out, a number of valley VCs make less trips than they might otherwise and don’t stop by to visit potential opportunities that haven’t commandeered their full attention (which, due to circumstances, typically requires multiple expensive trips to the valley). Opportunities, that, with funding, could bring more investment north of the border. Opportunities that could be used to fill the five million square feet of building space that could be built on all of the vacant land within a five minute walk of the multi-modal station in downtown Kitchener if there was demand.

If Kitchener-Waterloo achieved its technology potential, and another five million square feet of building space were filled with technology companies, according to Rod Regier, the executive director of economic development for the City of Kitchener, you would have another 15,000 technology workers in the area. At 2011 figures, these workers would generate 1.1 Billion in personal income and generate almost 400 million in income tax.

And guess how much a high-speed train with regular all day service between Union Station and downtown Kitchener would cost? An estimate in 2009 pegged the cost at 400 Million. It would be more expensive now, but probably not more than 20% more expensive. At this cost, the project would very quickly pay for itself since more tech companies would move in and once the region reached its potential, it would be generating tax revenues every 15 to 18 months that equaled the initial project cost. But for now, this logical project, just like high-speed rail along the North East Corridor of the US (and high-speed rail across Northern and Southern California in our lifetime) remains a pipe-dream. Too bad. It seems that the rails really do bring riches to those who choose to ride them.

Why Is China Going to Beat the US in GDP Very, Very Soon?

If market trends continue, China is very likely to overtake the US in GDP by 2025. Why is this?

Is it because China has 1,351 Million people compared to the US population of 314 Million?

Is it because the world is still aggressively outsourcing to China?

Is it because China controls 90%+ of the global supply for some of the increasingly important rare earth metals?

Is it because China is effectively balancing socialism with capitalism?

Is it because they have manufacturing plants the size of small cities?

Is it because they run on five-year plans designed to improve the overall state of the country every five years?

Is it because they recognize not only the importance of public health-care but the importance of getting it right?

Is it because they realize that you can effectively defend your country on 6%- of your budget (and 2.2% of their GDP) compared to the US that needs to spend 11%+ of their budget (14% of revenue and 4.4% of their GDP)?

Is it because the populace is actively protesting GM (Genetically Modified) food?

Is it because they are pushing ahead on R&D and exploration (having landed the first spacecraft on the moon on December 13 for the first time since Russia landed Luna-24 in 1976)?

It’s all of these reasons, and more. While the US media is too focussed on the scandal of the day, the Chinese media, while censored, is more focussed on the issues. While the political parties in the US squabble over minutia and blame each other for the government shutdown that just occurred, and the one that is likely to happen in January, the one party system in China is discussing amongst itself how best to move forward (and keep the necessary control). While the US is on the verge of another energy crisis, China is building new power plants, including those that run on renewable energy sources, as fast as it can.

Now, SI will be the first to admit that China is not without its problems. It still has way too many coal-producing power plants, too much smog in its big cities, limited freedoms (especially where the press is concerned), urbanization issues (as it is still building cities it doesn’t yet need to keep people employed), logistics challenges, and so on. But compared to the US, where the republicans and democrats spend all their time blaming each other and fighting instead of working together to advance the country, where the government apparently spends too much time and money spying on its own citizens and pursuing controversial drone technology instead of fostering better inter-agency cooperation, public support for homeland defence initiatives, and scientific research endeavours, and where education spending often gets the shaft (with the Department of Education budget typically clocking in at under 2% of GDP), China is making more progress, and doing so faster, than the US.

If the US wants to retain its top spot on the economic powerhouse rankings, once the elections are over, the elected representatives have to work together to do what’s best for the country, otherwise, despite all of the limitations of socialism that one can identify from a free market perspective, China is going to win, and win big, and do so at the expense of the US.
While it may be an inevitability that China overtakes the US in GDP at some point in the future, it doesn’t have to be the near future, but unless the US makes a concerted effort to shape up from a global perspective, and forces its politicians to grow up, we may all need to start registering in Mandarin classes very soon.