Montie Design Blog » U.S. Economic Policy http://blog.montie.com Mechanical Design & Product Development Services Sun, 30 May 2010 11:10:15 +0000 en hourly 1 http://wordpress.org/?v=3.0 NC Product Design Co-Op Lunch & Learn #3 http://blog.montie.com/2009/02/24/nc-product-design-co-op-lunch-learn-3/ http://blog.montie.com/2009/02/24/nc-product-design-co-op-lunch-learn-3/#comments Tue, 24 Feb 2009 15:43:08 +0000 Montie Roland http://blog.montie.com/?p=147 This event is sponsored by the RTP Product Development Guild.

Date: Wednesday, 4 Mar 09

Time: Noon until 1:30

Location: Montie Design / Studio Hagler, 400 Dominion Dr., Morrisville, NC 27560

Purpose of Meeting: Get to know other, potential co-op members in a relaxed environment.  Six attendees will have five minutes each in front of the group to explain their business.  This is an excellent opportunity for us to get to know each other on a professional and personal basis.  If you would like to have your five minutes of fame, please purchase the ticket above with the time slot that you would like to have.

Purpose of Co-Op: Develop a standards-based community that presents a unified public face to the greater business community, both locally and nationally.  Potential clients see the Co-Op and understand that here is a group of design / prototyping-related businesses that already know each other and work together well.

Who Should Come: Local product design, development and prototyping vendors who are interested in working together in a constructiveand substantial way to bring more business to local design community.

This is a great way for entrepreneurs, engineers, managers, and purchasing agents to find local vendors.  If you have a need for engineering, design, or prototyping help this is a great place to not only find new vendors but personally meet the individuals running those companies.

Questions: If you have any questions, please don’t hesitate to contact Montie Roland at montie@montie.com, or by phone at 919-481-1845.

Pre-registration is Required:  Register at http://ncproductdesign3.eventbrite.com/

]]> http://blog.montie.com/2009/02/24/nc-product-design-co-op-lunch-learn-3/feed/ 0 Guild Building 101 The Rise of Expectations and Elevator Pitches http://blog.montie.com/2007/10/13/guild-building-101-%e2%80%93-the-rise-of-expectations-and-elevator-pitches/ http://blog.montie.com/2007/10/13/guild-building-101-%e2%80%93-the-rise-of-expectations-and-elevator-pitches/#comments Sat, 13 Oct 2007 17:48:58 +0000 Montie Roland http://blog.montie.com/2007/10/13/guild-building-101-%e2%80%93-the-rise-of-expectations-and-elevator-pitches/ Starting a Product Development Guild has been a journey that has lasted about two and a half years. The first two years were mainly discussions. The last five months have mainly involved laying the groundwork for the guild. We have now moved into a mode where we are starting to recruit members and look at project submissions.

Tom Vass first mentioned the idea to me two years ago at Carolinas PDMA event. At the time, I really didnt think much of the idea. It took several conversations for me to realize that the problem wasnt with the concept, but rather in the articulation and execution of the concept. So we spent about two years, off and on, discussing the concept and refining how we articulated a complex sounding concept.

One of the critical questions in developing in the Guild is ?why does the concept seem so complex The concept, in the simplest form I can come up with, goes something like this:

Consultants, and other product design professionals, band together in a contractual organization. This aspect of the organization most closely resembles a volunteer fire department. Guild members pay quarterly dues and an initiation fee to join. Guild members are proudly displayed in the Guild directory which is available online and in a print format next year.

Product champions submit project proposals to the guild in a structured format. The Guild evaluates each submission and picks the best submissions. The Guild looks for product concepts that are going to help launch product-driven companies. Products that combine technology from two different industries are given priority.

Once a product concept is selected, the product champion becomes the nucleus of a seven member team. Project champions can be inventors, entrepreneurs, serial entrepreneurs, a designee from a start-up company, or a designee from an existing corporation that has a product concept that they would like to spin-off into a new company. Six of the seven team members are product development professionals. These members could come from disciplines such as industrial design, engineering, software, electronics, business management, marketing or sales.

Projects run for six months. The goal of the project is to complete the fuzzy front end design of the product. At the start of the project, the Guild receives options for the clients stock. These options can only be exercised upon a trigger event such as a sale or initial public offering (IPO). At the end of the project the Guild transfers a portion of those options to team members.

Projects are structured so Guild members spend two to four hours per week on the project. The product champions (client representative) spend fifteen to twenty hours per week on the project.

The team makes a presentation at the end of the project to selected angel investors and venture capitalists. This last step of the project is designed to help the client get funding for the next step in designing and then commercializing their product.

The goal is to complete twenty six month projects per year (ten every six months). This would add twenty new, high-growth companies to the RTP area each year and significantly impact the local economy. This means that the efforts of approximately one hundred and twenty Guild members can help drive the future economy in the regional area for the next ten to twenty years..

I am still struggling with how to present this in a thirty second elevator pitch. This is not an overly complex process when you consider the amount of work to be done. Sometimes I wonder if the previous presentation is trying to explain too much. Maybe the elevator pitch should go something like:

The RTP Product Development Guild is a confederation of product design, and business, who work together to help local entrepreneurs and businesses commercialize their products. The Guild seeks to improve the regional economy in North Carolina by helping create now product driven companies.

Salesmen reading this article are probably wondering why not just use the shorter version first. This is the difference between salesmen and product designers. Engineers and industrial designers often focus on how wonderful, and cool, the details are. A good salesman wants to convey just enough information to close the deal. They know that giving too much information is a possible way to talking your client out of doing business with you. The role of President of the Guild requires me to live in both worlds. This can be challenging at times. Product developers must always keep in mind that successful products find a balance between design and execution.

The chicken, or the egg, syndrome is alive and well at the RTP Product Development Guild. On one hand, we need a strong portfolio of consultants to attract product concept submissions. One the other hand we need strong product concepts to attract consultants. This means that there is going to be slow progress between now and the kick-off of the first project. We have spent the last month lining up product submissions and potential Guild members. The first inquiries about memberships are mostly coming from sales and marketing professionals. Another high interest area is the service providers. We have a class of Guild memberships that are designed to allow service providers to participate in the Guild without having to participate in a project team.

Another concurrent action item is to promote the Guild within the economic development community. North Carolinas economic development community is heavily focused, and politically invested, in the mode of using massive tax incentives to bring existing companies to North Carolina. There are other efforts that focus on using the universities and community colleges as concentrators of innovation. The Guild believes that there is enough talent, dedication and ambition in the local community to create new product-driven companies. This ?believe in the people? approach is counter-culture. The Guild isnt relying on tax incentives or government grants to drive new products to market. We are relying on our members to work together and help lift new companies from the stage of ?I have an idea? to the stage of ?we just rented office space?. Dreams are best pursued by the dreamer. It is hard to pursue someone elses dream. Product champions rev up your dreams, because you now have a home.

Montie Roland is President of the Carolinas Chapter of the Product Development Management Association. Roland is also President of Montie Design, a product development and prototyping firm in Morrisville, NC and the RTP Product Development Guild. You can reach Montie by email at: montie@montie.com

]]> http://blog.montie.com/2007/10/13/guild-building-101-%e2%80%93-the-rise-of-expectations-and-elevator-pitches/feed/ 0 The Great American Capital Market Train Wreck of 2007 http://blog.montie.com/2007/01/02/the-great-american-capital-market-train-wreck-of-2007/ http://blog.montie.com/2007/01/02/the-great-american-capital-market-train-wreck-of-2007/#comments Tue, 02 Jan 2007 16:23:27 +0000 Tom Vass http://blog.montie.com/2007/01/02/the-great-american-capital-market-train-wreck-of-2007/ Economic Commentary:

We are going to witness two spectacular events in 2007. The first is the rapid melting and break up of the polar ice cap. Not to worry. Real estate speculators and developers will show up in the Artic with every new fissure and start building homes on the newly uncovered land. Polar bears and toaster ovens will be given away as bait for the unwary homebuyer. The other event is a spectacular train wreck in the capital markets. In his Forbes Sneak Peek 2007, (12.31.06), Brett Nelson warns about one part of this train wreck. ?The private equity market will implode, initial public offerings crater and venture capitalists go on an Excedrin diet.? Nelson sees the potential for one fast moving train of private equity coming into the switching yard at full speed. There are at least 4 other trains headed there at the same time, all loaded with a witchs brew of nitro glycerin.

]]> http://blog.montie.com/2007/01/02/the-great-american-capital-market-train-wreck-of-2007/feed/ 0 The Malthusian General Glut Returns: Pushing On the Interest Rate String Will http://blog.montie.com/2006/12/17/the-malthusian-general-glut-returns-pushing-on-the-interest-rate-string-will/ http://blog.montie.com/2006/12/17/the-malthusian-general-glut-returns-pushing-on-the-interest-rate-string-will/#comments Sun, 17 Dec 2006 15:23:56 +0000 Tom Vass http://blog.montie.com/2006/12/17/the-malthusian-general-glut-returns-pushing-on-the-interest-rate-string-will/ The Malthusian General Glut Returns: Pushing On the Interest Rate String Will Not Avoid The Economic Recession

MyOwnFund Daily Commentary
Saturday, December 16, 2006
Thomas E. Vass

It Is Not Different This Time
Many years ago, an economist named Mathus described the economic conditions associated with a general glut of over-supply in the market place. Subsequent historians have tended to emphasize his work on the glut in terms of population, but Mathus also described general oversupply in markets not related to the labor market.
His analysis is apropos for describing the glut in the housing market today in America. The result of this analysis is that no amount of pushing on the string of interest rates by the Fed can remediate the excess supply of housing on the market. As it has in the past, the housing slump is correctly forecasting an economic recession. It is not different this time.

]]> http://blog.montie.com/2006/12/17/the-malthusian-general-glut-returns-pushing-on-the-interest-rate-string-will/feed/ 0 Economic Bulls and Heifers: Why The Focus On Economic Productivity Provides Inaccurate Predictions on the Future Movement of the Stock Market http://blog.montie.com/2006/12/11/economic-bulls-and-heifers-why-the-focus-on-economic-productivity-provides-inaccurate-predictions-on-the-future-movement-of-the-stock-market/ http://blog.montie.com/2006/12/11/economic-bulls-and-heifers-why-the-focus-on-economic-productivity-provides-inaccurate-predictions-on-the-future-movement-of-the-stock-market/#comments Mon, 11 Dec 2006 16:05:27 +0000 Tom Vass http://blog.montie.com/2006/12/11/economic-bulls-and-heifers-why-the-focus-on-economic-productivity-provides-inaccurate-predictions-on-the-future-movement-of-the-stock-market/ Economic Bulls and Heifers: Why The Focus On Economic Productivity Provides Inaccurate Predictions on the Future Movement of the Stock Market

The arguments for interest rate adjustments by the Fed hinge on whether one is an economic bull or an economic heifer. In making their respective arguments, observers from both sides point to trends in economic productivity to bolster their side of the argument.

For the entire text of the article Click Here

]]> http://blog.montie.com/2006/12/11/economic-bulls-and-heifers-why-the-focus-on-economic-productivity-provides-inaccurate-predictions-on-the-future-movement-of-the-stock-market/feed/ 0 New Markets and Old: The Link Between the Housing Market and the Stock Market http://blog.montie.com/2006/11/29/new-markets-and-old-the-link-between-the-housing-market-and-the-stock-market/ http://blog.montie.com/2006/11/29/new-markets-and-old-the-link-between-the-housing-market-and-the-stock-market/#comments Wed, 29 Nov 2006 15:14:03 +0000 Tom Vass http://blog.montie.com/archives/33

Economic Commentary:The WSJ reported yesterday that the housing market prices declined, and in the same story, mentioned a decline in business investments for equipment, as if these two economic factors were related. (Existing-Home Sales Climb, But Prices Show Record Drop by Rafael Gerena-Morales and Michael Corkery, November 28, 2006 2:41 p.m.)

They quoted a Mr. Lereah, who helpfully provided the logical link between house sales and the rest of the economy. While the improved sales pace could help prevent job losses in industries heavily tied to housing, such as furniture and mortgages, Mr. Lereah said “the wealth effect of housing right now is certainly turning negative,” because of the price declines.

The Economic Impact of Housing

The comment by Mr. Lereah is important because it describes the interindustry, income multiplier effect of housing on other sectors of the economy, notably furniture and mortgages. When a new house goes up, the new owner goes to HomeDepot, and buys new stuff for the house. A dollar spent in housing creates an income multiplier effect in the existing marketplace for furniture.

Mr. Lereah, and the WSJ also provide another clue about the relationship of housing to other sectors of the economy through a relationship that many economists call the wealth effect. Mr. Lereah is quoted as saying the wealth effect is turning negative.

A Closer Look At The Economic Impact of the ?Wealth Effect?

MOF is skeptical about the theoretical importance of the so-called ?wealth effect.? Melissa Griggs, a reporter in Florida writes about the most obvious economic effect of the wealth effect. (Sellers can only wait as market for homes tightens, November 29, 2006).
She reports that, ?Gertrude Butler, 75, and her husband Arnold, 77, have been trying to sell their house since April, dropping the price twice, so they can move back to Delaware to be near their family. But, Butler said, “If we dont sell this house, we wont be going anywhere.”
The Butlers have dropped their price $12,900 in seven months. They started out asking $289,900, dropped to $284,000 last summer and now are asking $277,000 for their three-bedroom, two-bath, lakefront home in the Cypress Cove subdivision.

If a family is prohibited from moving to Delaware because they cannot sell the house in Florida, what exactly is the economic effect on the rest of the economy of their dreams deferred?

Two Pictures: Both Scary For Different Reasons
The Federal Reserve Bank in St. Louis adds a graphic dimension to the WSJ linkage between the housing market and the decline in business investments.Click link to see graphic.http://research.stlouisfed.org/fred2/series/DGORDER/Custom?cs=Medium&crb=on&cf=lin&cosd=2000&coed=2006-10-01&seid2=+%3CEnter+Series+ID%3E&cg=Go

Click link
http://research.stlouisfed.org/fred2/series/PERMIT/Custom?cs=Medium&crb=on&cf=lin&cosd=2000&coed=2006-10-01&seid2=+%3CEnter+Series+ID%3E&cg=GoExisting Demand In Existing Markets vs. Future Demand in Future Markets

In any 6-month period of time, current expenditures affect the income multiplier effect in existing markets. This is the primary economic effect of housing on the rest of the economy. There is some tortured logic between what happens today in the housing market, and what happens today in the stock market.

But, getting to the understanding is not worth the effort, and would involve adding ?airy-fairy? non-priced variables, like the ?wealth effect,? to get to the logical conclusion.Future Markets

The future stock market prices are based on economic demand that does not exist today, and on future markets that are not yet created. No matter how important Mr. Bernake thinks inflation is, the Fed is powerless to influence innovation and investments that create future economic demand and future markets.


Two Types of Future Markets
As economic growth in America declines, corporate leaders are looking for new markets. For example, the Chairman of General Electric Co., the worlds second-biggest company by market value, said revenue from developing countries will increase by about 15 percent this year, buoyed by demand in India and the Middle East. “We see huge demand, Chairman John Rice said in a Nov. 14 presentation to investors in Italy.

Mr. Rice is describing a new market for his company, but it is not the type of new market that has the biggest economic impact on the American economy. What he hopes is that rising incomes in India in the future lead consumers to buy more of his existing goods and services.

The future economic demand in as-yet-uncreated? markets in America for products that do not yet exist is vastly more important than the market Mr. Rice is talking about in India.


Why Business Investment Is Critical to Americas Future Economic Success
Most of the investments made by business for new equipment are to support existing products in existing markets. Some small portion is designed to enhance technological innovation in new products. The statistical evidence does not distinguish very well between these two types of investments.Investing in the stock of companies making the investments to create future products for uncreated future markets would make a lot of financial sense. Old markets, and old stock prices tend to decline over time, just as the economic statistics are now describing.

The stock market today is at a historical top, and there is nothing underneath it to prop it up.

While the second picture on declining new housing is exciting, it is not really significant to the economic future of America.

The other picture of declining business investment is more important and much more significant than anything the Fed chairman says about inflation.





]]> http://blog.montie.com/2006/11/29/new-markets-and-old-the-link-between-the-housing-market-and-the-stock-market/feed/ 0 Frothy M&A Deals Means That Stock Market Top Is Near http://blog.montie.com/2006/11/22/frothy-ma-deals-means-that-stock-market-top-is-near/ http://blog.montie.com/2006/11/22/frothy-ma-deals-means-that-stock-market-top-is-near/#comments Wed, 22 Nov 2006 13:39:30 +0000 Tom Vass http://blog.montie.com/archives/31 MyOwnFund Daily Commentary
Tuesday, November 21, 2006
Thomas E. Vass

Economic Commentary:
What Is On Top When The Stock Market Goes Down?
Stock market analysts and pundits like to point to the inverted yield curve as the lead indicator of the stock market top because they suspect that the inverted yield curve, in a round-about-way, eventually affects stock prices.
The logic of the inverted yield curve, as a indicator of doom, is that investors like present
incomes better than the prospect of risky future incomes. When short rates are higher than long rates, rational investors would prefer the income bird in the hand, not the risky bird in the future. If that suspicion is borne out in reality, the inverted yield curve perhaps could signal, in an even more round-about-way, a possible economic recession. There is some statistical correlation between the appearance of the inverted yield curve and an economic downturn, which also would affect stock market prices in a negative way.
A Better Indicator of Doom: The M&A Frenzy
The Wall Street Journal today reports on another indicator of stock market decline that is even better than the inverted yield curve in predicting a stock market drop. They do not describe the indicator the same way MOF does, and editiorialize that the M&A frenzy is an economic positive.

MOF is happy to provide the contra-argument to the WSJ.
The WSJ graphic below is great for explaining both how the Merger & Acquisition frenzy is
occurring, and for the future, even describes what industrial sectors are most vulnerable to stock market declines.
http://online.wsj.com/media/info-mergeracq0611.gif

The Dire Economic Implications of the M&A Frenzy on Technological Innovation
All of the sectors mentioned by the WSJ could pass harmlessly into a stock market abyss without causing lasting economic damage to the U. S. economy. Except.
Except that two of the sectors contribute the most to technological innovation in America, and innovation is the last, best economic hope of America.
Telecommunications and information technology are the crown jewels of innovation, and when the smaller U. S. players in these two sectors get merged into the big players, especially the big non-domestic, foreign players, America loses the vital breeding grounds of innovation. The acquisition of Oregon Steel Mills by Russian Steel Maker Evraz fits this bill.
As the WSJ report points out, the process of M&A involves loading the target up with debt. They tend to gloss over the fact that after the merger, the parent company radically cuts essential research and development expenditures in the target in order to squeeze out more current revenue from operations.
As they note, ?More than $60 billion in deals were consummated in the past 48 hours of frantic merger and buyout activity?buyout firms searching out prey and raising cash with bonds and loans that are then sold off to investors around the world. Leveraged buyouts account for some 17% of the $3.4 trillion in transactions announced globally so far this year.?
The Link Between The Inverted Yield Curve and the M&A Frenzy
?Investors also have a growing appetite for high-yielding assets, which has them turning to junk bonds and risky loans behind takeover deals. So far this year, junk bonds have returned a robust 10%,? reports the WSJ. And, therein is the link between the inverted yield curve and the M&A frenzy.
The M&A frenzy and the urgency for yield means that irrational behavior for short-term gains will keep short term interest rates higher than long rates, which requires patience and foresight.
Patience and foresight are the lynchpins to making investments in technological innovation, especially in high risk sectors like biotech. If economic conditions change so that the highly leveraged companies do not have sufficient revenues to pay dividends and interest, or short term interest rates creep higher, the bulk of the M&A target companies will default on the junk debt.
Why The WSJ Editorial Comment On M&A Is Wrong
The editors at the WSJ state: ?But the very fact that billions of (M&A) dollars are being put on the table in an attempt to shift assets to their highest and best uses is a sign that the animal spirits that give the U.S. economy its dynamism are alive and well. The time to worry about an economy is when no one wants to take such risks.?
Directly contrary to their opinion, the fact is that frenzy of M&A activity is a prime indicator that no one wants to take the risk of making the tough private equity investments in technological innovation, in favor of the easy money to be had on existing technology in the M&A targets.

The M&A activity squanders private equity on a huge and massive scale, and depletes the
potential supply of capital that could be directed to long term, risky investments.
The WSJ states: ?But as an economic matter, it is largely irrelevant whether the shares are publicly traded or not.?

We disagree. The public capital markets are inextricably intertwined to the private capital markets, and the private capital markets are not able to do their job for America with the bloated M&A frenzy.

]]> http://blog.montie.com/2006/11/22/frothy-ma-deals-means-that-stock-market-top-is-near/feed/ 0