Why Did The SBA Just Gift Millions To For-Profit Businesses?

The SBA just gave away millions in corporate welfare with no strings attached, to venture- capitalists accelerators. This is wrong on multiple levels.  

The U.S. Small Business Administration just announced the award of millions of dollars in grants to 50 "accelerators," which are designed for venture capitalists to sift through countless startups to find the few they think can make them money. But the rationale, efficacy, and fairness of this program all need to be challenged.

The Rationale--Accelerators Produce More Jobs (NOT)

Over the last decade, the SBA has shifted its focus away from the 98 percent of small businesses with 1-19 employees, to work with very large corporations with up to $36.5 million in revenue and/or 1,500 employees. This accelerator grant program is another example of that shift.

The SBA says accelerators produce a lot of jobs, but the evidence suggests the opposite. Over the last five years, the approximately 200 accelerators in the U.S. have created between3,300 and 4,800 jobs, or a measly 700 to 960 jobs a year, at a cost of $130,000 per job created. Small businesses add around 600,000 businesses and three million jobs every year, or an average of 15 million jobs every five years; all without handouts from the government.

The Efficacy--Accelerators Product High-Growth Companies (NOT)

The SBA says accelerators produce high-growth companies. The evidence suggests otherwise.

The best data on job creation from the Kauffman Foundation shows 100% of net new jobs are created in the first twelve months of a new business. 98% of those will never have more than 19 employees (and don't want more), and less than 00.06% have more than 500. And most importantly, nobody can figure out which startup will be the freak that will grow quickly. Not a single business that has gone through an accelerator program over the last couple decades has become "high-growth", and generated tens of thousands of jobs.

In contrast, McDonalds started as a hot dog stand in 1937, and didn't start growing until eighteen years later. It was not built to be big, "high-growth", or even make hamburgers. Accelerator owners would have laughed at it.

Sara Blakely designed and started selling panty hose from her apartment because she didn't like the way her panty hose fit. In a few short years, Spanx became a billion dollar company without the help of an accelerator, or even a single penny of outside investment. And no one, including Sara Blakely, could have guessed it would become huge.

In 1996, two college kids started a company called Backrub on their college campus server. Three years later they moved out of their garage and renamed it Google, which lived in obscurity in the backwaters of the Internet for another couple years. These kids would have never survived the "pitch deck" process to get into an accelerator.

The accelerators never recognized these or any others like them, and the overwhelming evidence is they never do. The fact is, good ideas don't need to be coddled. 81 percent of the fastest growing businesses in America never took a dime of venture capital, and those that achieved the highest financial return also took no vc money. Not one of the fastest growing businesses in America on anyone's list over the last twenty years has come through an accelerator.

Throwing free money at accelerators in not an effective use of SBA funds. They would be better off lending it to small business owners with interest.

The Fairness Issue

The SBA was formed to help small business owners get interest-bearing loans, not to give free money to wealthy vc's. One recipient of the handout, the Arizona Center for Innovation, is owned by Tech Parks Arizona, which owns 5.2 million square feet of commercial office space producing over $100 million a year in revenue. Do they really need a government handout to make more money?

Just as questionable, many other grant recipients formed their accelerator in the last few months, possibly just to get the grant. Some don't have a website yet. Some haven't even opened. One is a rental kitchen that opens this month and will rotate chefs in their for-profit restaurant area. How is that "high growth"? With no track record at all, the SBA is throwing money at all these, no strings attached. It's mind-boggling and a terrible investment practice that no accelerator with integrity would support.

How does any of this giveaway make sense? This is crony-Industrialism, and an affront to the millions of small businesses slugging it out in the trenches, who are more deserving, but won't see a dime of this giveaway. The SBA has a lot of explaining to do.

by Chuck Blakeman, Author of the #1 Rated Business Book of the Year, Making Money is Killing Your Business and Top 10 business book, Why Employees Are Always A Bad Idea

www.ChuckBlakeman.com

Article as seen on Inc.com

Marissa Mayer, The Old School Manager, vs. Ricardo Semler, The Participation Age Leader

Mayer manages to the Lowest Common Denominator. Semler leads to the Highest Common Denominator. The difference is dramatic. Last year, the CEO of Yahoo, Marissa Mayer, created shock waves throughout the tech world by dictating that “work from home” was no longer permitted. She summarily herded everyone back into the Office Day Care Center to be closely supervised like seven year olds. A few years earlier, a large multi-national company headquartered in Brazil named Semco, threw a party for their leader, Ricardo Semler, to commemorate his 10^th anniversary of not making a decision.

Managing to The Worst vs. Expecting the Best

LCD Management (lowest common denominator) asks, “What’s the most incompetent or laziest thing somebody could do?”, and then creates an environment to make it hard to get away with it. In contrast, HCD Leadership asks, “If given a clear vision, what is the best possible thing people could do without being managed?” HCD leaders then create the kind of environment that will attract self-motivated, self-managed achievers. Both of them are self-fulfilling prophecies.

LCD Managers create an environment where people will live down to our worst expectations of them. HCD leaders understand that the art of leadership is to know how few decisions the leader should make.

Ricardo Semler is perhaps the best, low-profile CEO leader in business today. Mayer is a high-profile CEO manager, using personal superpowers to hold everything together - for now. As a result, the futures of Yahoo and Semco are going in dramatically different directions.

Centralized Decision-making vs. Everyone is Capable

LCD managers assume they are the most motivated, qualified, committed, invested, and experienced. With all those superstar qualities, it would be foolish to have others making decisions. That’s why they are paid the big bucks. Mayer is infamous for regularly having a few dozen people waiting outside her office for hours, as she solves problems and makes decisions for them one at a time.

HCD Leadership believes most people are inherently motivated, qualified, committed, and invested, and that they make better decisions than someone in a hierarchy.  Semler doesn’t make decisions anymore because decisions are made where they will be lived out. Stakeholders throughout the company are responsible for Semco entering a variety of industries and growing dramatically year after year, from $4 million 29 years ago to $1billion+ today. As an HCD leader, instead of making decisions others can make, Semler is free to ask questions, cast vision, and work with others to build the future of the company.

Superpowers vs. Delegation

Mayer is a supermanager – which allows her to get away with a lot in the short term. But it is not sustainable. When she goes, the energy goes. She has entrenched herself in decision-making, making her nearly indispensable. While at Google, Mayer pulled 250 all-nighters in five years and held up to 70 meetings a week. She sleeps four hours a night. In contrast, Semler trained others to make decisions. There are now six co-CEOs who rotate leadership every six months, allowing Semler to function at the highest levels of leadership and not make decisions. As with any great leader, he has worked hard to get out of the way. He is fully dispensable, while nobody could replace Mayer.

The Results Are In

Semco gets hundreds of unsolicited resumes every month, and no one leaves. In the worst 10-year recession in Brazil’s history, revenues grew 600%, profits were up 500%, and productivity rose 700%. Innovative Stakeholders have taken them into profitable industries they could have never dreamed of entering, and they continue to grow exponentially. And unlike Yahoo, Semco hasn’t told people how or where to work for over three decades.

LCD management may get quick, short-term results, but Yahoo’s future will never look like Semco’s – it’s too reliant on a very high-profile, LCD superhuman manager. Very impressive in the short-term, but very old school.

Why They Lost Their Shirts with a Documentary Collection Payment

Documentary collection, sight draft, documents against payment, D/P, time draft, bill of lading, invoice, packing slip, insurance certificate, inspection certificate, protest, documents against acceptance, D/A, at sight, draft, customs, maturity date, open account, notary public, acceptance of the draft, International Chamber of Commerce

The Buyer Refused Payment

A customer of a bank in Minnesota, for which I worked, imported shirts from a supplier in Greece. The buyer and seller agreed to payment terms on Documentary Collection with a payment 60 days after acceptance of the draft, easily calculated once the buyer accepts the draft. On the maturity date, the treasurer informed us he would not make the payment.

Protesting Non-Payment of the Collection

After we informed the bank in Greece that we could not collect the payment, the bank in Greece requested us to perform a rarely used technique. They asked us to protest non-payment of the draft – a formality sometimes used to provide material evidence, if needed, in a legal proceeding, or sometimes nothing more than a bluffing technique.

I asked a coworker, a notary public, to accompany me to the buyer’s business. The treasurer invited us into his office. We explained that the bank in Greece requested us to either collect payment or protest non-payment. We produced the draft with his signature on it and bluntly asked, “Will you pay this draft or not?”

Without hesitation he shouted, “No, I’m not going to pay that draft. We ordered large shirts and received small instead. Our customers primarily consist of big Norwegian men,” he emphasized, “and they can’t wear the small shirts.”

We thanked him and returned to the office where we prepared a notarized statement that we had witnessed non-payment by the buyer and sent the notarized statement with a letter to the bank in Greece along with an invoice for our services. When the Greek supplier finally realized they would not receive payment, they agreed to exchange the small shirts for large shirts and the buyer subsequently authorized payment.

The buyer and seller agreed to a “documentary collection,” one of the four methods of payment used internationally. When paid immediately, banks refer to the draft as a “sight draft,” “documents against payment” or simply, “D/P.” If the buyer and seller agree to a delay in payment, the transaction becomes a “time draft,” “documents against acceptance” or simply “D/A,” as illustrated in this lesson.

Understanding Risks of the Collection Payment

In a documentary collection method of payment, both the buyer and seller bear some risk, and, likewise, both have a measure of security. Therefore, I refer to this method of payment as a “compromise” payment. With a sight payment, the buyer has the protection that the seller can receive no funds until he has proved he has shipped the goods. This prevents the seller from using the money for a weekend ski trip or some other frivolous use. The seller, on the other hand, has the protection that the buyer cannot receive the goods without paying for them.

Logistically, the transaction begins when the seller delivers the goods into the hands of the transportation company, which issues a bill of lading as proof of shipment. The seller prepares a draft and attaches the bill of lading and other documents such as an invoice, packing slip, insurance certificate, inspection certificate, etc., and delivers all documents to his bank with the request that the bank attempt to collect the payment.

The seller’s bank then couriers the documents to the buyer’s bank with clear and precise instructions to: “collect payment from the buyer before releasing the documents.” Without the documents, the buyer cannot claim the goods and clear the goods through customs. When the buyer authorizes payment, the bank releases the documents and the buyer claims the goods.

Since the buyer pays on receipt of documents only, he will not see the goods until after payment. If the goods do not comply with the order, the buyer has little recourse. The buyer can mitigate the risk by arranging for inspection of the goods at the port of departure. (The buyer cannot inspect the goods at the port of arrival because he needs the documents to see the goods.)

The seller assumes the risk that the buyer may not pay. In that case the seller can exercise one of four options: (a) renegotiate with the buyer and try to induce him to make payment and accept the goods, (b) return the goods at the seller’s expense, (c) find another buyer, or (d) abandon the goods.

When the seller presents a time draft, as in the shirt story, the bank requires the buyer to indicate his acceptance of the draft by signing and dating a notation that reads “Accepted” across the face of the draft. The seller must consider the risk that the buyer may not accept the draft. In that case the above four options remain available to the seller.

After the buyer has accepted the draft, the bank will release the documents and the buyer can claim the goods. Ideally, the time period until maturity date will sufficiently allow for the buyer to liquidate the goods and collect payment before the maturity date. On the maturity date the buyer instructs the bank to remit the payment to the seller.

If, however, the buyer refuses to pay the accepted draft on the maturity date, the seller loses all of the previously mentioned options. Selling goods on a time draft basis falls only one degree short of open account. With open account terms the seller agrees to allow the buyer to receive the goods and pay for them at a future date.

Sellers have an advantage with a time draft because they hold the accepted draft which becomes tangible legal evidence as proof that the buyer owes the money. Once buyers accept a draft they have an obligation to pay at maturity. If buyers fails to pay, they risk facing legal action by the seller. In some countries, the buyer’s name may find its place on a “black list” which would effectively prevent them from further trade.

In a D/A transaction, the buyer's risk is accepting the draft before he sees the goods. If he wishes to mitigate this risk, he can arrange inspection of the goods prior to shipment.

The International Chamber of Commerce has published guidelines to promote uniform handling and to prevent misunderstandings when processing documentary collections. The publication # URC 522 is available from the ICC at 212-206-1150 or at www.iccbooksusa.com.

Used by permission from "More Bankers' Insights on International Trade: 101 Practical Lessions."

Nevada Wins Tesla Gigafactory

Elon Musk and Telsa Motors have been shopping around the US looking for the ideal location for the Gigafactory - Tesla and Panasonic's massive lithium ion battery manufacturing venture. Congratulations to the state of Nevada for winning the site selection. It's an exciting manufacturing plant (the world's largest lithium ion production facility) during an exciting time in the life of Tesla Motors - The company's stock was just given a $400 target price by market analysts.  Stifel Nicolaus analyst James Albertine compared investors’ enthusiasm for Tesla stock with a “freight train.”

“While there are no fewer than a half-a-dozen other key concerns we share with industry purists, the reality is, these issues simply do not matter with respect to Tesla’s stock,” Albertine wrote in a letter to clients. “Tesla sentiment is like a freight train, in our view, benefiting from a well manicured growth story that has caught the eye of a much broader investor base relative to most auto stocks.”

The stock reached $290 per share yesterday, following upbeat second-quarter results. The electric car maker is on target to achieving an annual rate of production of 100,000 cars by the end of next year, doubling its current rate. More inroads are being made in China which are also contributing to the string of records.

The Gigafactory is an important step in the company's growth path as it prepares to mass-produce a $35,000 model by 2107.  The facility looks like it will reach 50 GWh in annual battery production by 2020, which is enough to power 500,000 of Tesla's cars.  Nevada, while offering a $1.25 billion tax incentive package, will be gaining significant capital investment and around 6,500 jobs. Governor Sandoval said at the announcement that the agreement will add up to $100 billion to Nevada's economy over the next 20 years. Check out the full Gigafactory Press Release below.

THURSDAY, SEPTEMBER 4, 2014

CARSON CITY, NV – Governor Brian Sandoval and Elon Musk, Chairman and CEO of Tesla Motors, announced today that Nevada has been selected as the official site for the Tesla Gigafactory.

“This is great news for Nevada. Tesla will build the world’s largest and most advanced battery factory in Nevada which means nearly one hundred billion dollars in economic impact to the Silver State over the next twenty years. I am grateful that Elon Musk and Tesla saw the promise in Nevada. These 21st century pioneers, fueled with innovation and desire, are emboldened by the promise of Nevada to change the world. Nevada is ready to lead,” stated Governor Brian Sandoval.

“I would like to recognize the leadership of Governor Sandoval and the Nevada Legislature for partnering with Tesla to bring the Gigafactory to the state. The Gigafactory is an important step in advancing the cause of sustainable transportation and will enable the mass production of compelling electric vehicles for decades to come. Together with Panasonic and other partners, we look forward to realizing the full potential of this project,” said Elon Musk, Chairman and CEO of Tesla Motors.

“On behalf of the State of Nevada, I would like to acknowledge this monumental day and provide my initial support. This is a significant opportunity to make a major stride to improve our statewide economy. I look forward to receiving the necessary information so the Legislature can meet and take necessary action to support this major industry coming to Nevada,“ stated Speaker Marilyn Kirkpatrick.

http://www.teslamotors.com/about/press/releases/nevada-selected-official-site-tesla-battery-gigafactory

Why Doesn’t Everyone Use the Incoterms® Rule DDP? Incoterms®, EXW, DDP

The Choice of Incoterms® Determines the Seller's Responsibilities

U.S. exporters must prevent their products from entering into a counties or markets which are prohibited by U.S. laws, or into the wrong hands for use of the product in a detrimental way. Exporters need to know and have trust in the purchaser.

At a recent workshop on Incoterms®, I prepared my usual outline, using the technique of ranking the Incoterms® from least responsibility for the seller to most responsibility for the seller. Initially, exporters like the term with least responsibility for them, Ex Works. In laymen’s terms, the seller says, “The goods are at my back door, come and get them.” As the workshop develops, exporters learn that Ex Works has risks, one being diversion into the wrong hands..

The Transaction may Determine the Choice of the Incoterms® Rule

A company in Colorado sent two employees to my workshop at the Rocky Mountain World Trade Center Institute. They dutifully took notes but made very few, if any, comments during the course of the class, until we got to the last Incoterm®, DDP (Delivered Duty Paid). Then one of them made a simple statement, “I don’t understand why everyone doesn’t use DDP.”

I responded, “Sir, with that comment, I know you understand Incoterms®.”

The DDP term places full responsibility on the exporter and very little on the importer. The exporter must jump through all the hoops and over all the hurdles including transportation and insurance to the buyer’s facility. This Incoterm® requires the seller to arrange for customs clearance on the buyer’s side.

Why the Incoterms® Rule DDP Was the Exporter's Preference

Why was this important to this company? They manufacture computer products that have the potential for misuse if the goods find their way into the wrong hands. Exporters need assurance that their products arrive at the intended destination and are only used for the purpose intended. By using DDP, the seller has complete control of the shipment to its destination and can avoid the possibility of diversion to unwanted parties or countries.

I'd Swim across the Pacific to Avoid Using a Letter of Credit

Letter of Credit, Open Account, Documentary Collection

As I found my seat on the plane in O’Hare Airport to return to Denver, I introduced myself to the passenger next to me. He introduced himself as the controller of a meat packing plant in Colorado. My international banking instincts caused me to ask, “Do you export your product?”

He replied, “Yes, we export boxed beef.”

I next probed, “How do you get paid?”

“Cash,” was his short answer.

Letters of Credit and Other Methods of Payment

In my experience, most exporters use all or most of the various payment methods: cash, letters of credit, documentary collections and open account. Industry and market conditions often dictate the choice. When asking the question, “How do you get paid?” I expect answers such as: “We get paid by cash when selling to countries A and B, Letters of Credit in country C, and open account to our established distributors in countries D and E.”

My fellow passenger’s short answer caught me off-guard because I expected a more elaborate response. “Cash?” I asked. “Don’t you ever ship on a letter of credit?”

“No way,” he said with conviction. “If I can’t collect payment on a letter of credit, I’m not swimming after the boat to get our goods back.”

Leniency with Payments Can Be a Competitive Advantage

He implemented a hard and fast credit policy. One has to admire the quality of his foreign receivables. He slept well at night and never had to inform his president of a slow paying customer overseas. However, one has to wonder if this policy didn’t limit their ability to expand their export markets. Certainly they had competitors who offered more lenient terms. Competing involves more than just pricing. Payment terms often dictate the success of an overseas sale.

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Life on the Oil Rigs

Life on an oil rig is no picnic, and much of what goes on on the rig is a mystery to the common man.  Workers on an oil rig can spend weeks at a time on the job, and many rigs employ a 14/21 schedule meaning 14 days on followed by 21 off.  Its a tough job, but it can be a very rewarding one.   What actually goes on out on the rig is somewhat of a mystery, but thanks to a Washington-based oil company's recent contest, we are treated to a unique look at what life on the rigs can be.  

The photos depict a side of life on the oil rigs not typically imagined by those outside of the industry.  It appears that while working on one of the most industrial settings there is a surprising amount of wildlife.  While workers in the Middle East work to save the life of a trapped sea turtle, others on a bus in Russia have to deal with overly inquisitive bears.  It's amazing to see that while working what has to be one of the most demanding jobs, workers are still able to reflect on beauty in their work.

Click the Photo for the full gallery at The Journal.

Dealing with the Patent Trolls

Start-ups face a lot of adversity in their quest to become profitable companies and, in fact, most don't make it.  One large factor in preventing start-ups from moving forward is the intervention of the dreaded "patent troll."   Patent troll is a derogatory term for a business that produces no products or services, yet obtains patents and uses them to launch a plethora of law-suits against other companies.  A patent troll uses the threat of a lawsuit against businesses in order to extort settlement money without having to go to trial.  What set these trolls apart from companies that legitimately license out thier patented ideas, is that the trolls have no interest in developing the idea, only using it for threat purposes.  They don't want to lease the idea out, and they don't care about the benefits of the final product. Patent trolls are a pain in the butt for not just start-ups but many other businesses as well.  Adam Corolla, a comedian and owner of Lotzi Digital Inc, a podcasting company, is being sued by a company called Personal Audio, a company that claims to own the rights to the idea of a podcast.  When it realized that there wasn't much money to be made in suing podcasters, Personal Audio moved to dismiss the suit, a dismissal that Carolla refused.  Carolla wants to see the suit through to the end, in the hopes of getting Personal Audio's patent revoked, a move which would free other podcasters from the fear of an absurd suit showing up on their front doorstep.  This trend, the trend of taking the fight to the trolls, seems to finally be making some headway and others have started to follow suit.

In 2011 patent trolls were estimated to have cost businesses over $29 billion in legal fees and settlements costs, and creating legislation to curb their suits is hard to create.  Any move to abolish software patents would work, but this would also harm legitimate research companies, companies like Toyota which has software patents on the device that controls the hybrid engine in their Prius.  So what can be done?

In June of 2014 the Supreme Court gave those fighting the trolls a great new weapon for their arsenal.  The case of Alice Corp. v CLS Bank made huge waves when the supreme court ruled that “merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.”  This means when dealing with computer software, simply having the idea for something is no longer patentable, and only becomes patentable when implemented.  Even then, only your particular version of the implementation is patentable, and not the idea as a whole.  For trolls, who rely on not implementing to protect them from similarly absurd suits, this is a striking blow.  Fresh on the heels of this Supreme Court decision, another trend is making the trolls take notice.

Patent Trolls make a large portion of their money from settlements outside of lawsuits.  The cost of fighting a lawsuit is high, and rather than pay giant legal fees, many companies choose to pay what amounts to blackmail, often having to close down the company to do so.  When one NYC startup was faced with a similar decision, they reached out to Brooklyn Law students for help.  The students quickly realized that this was an opportunity for the best real-world practice that they could find, and put the troll on notice.  With an unlimited number of hours of legal representation by third-year law students available to the defendant, the patent troll had no option but to tuck his tail and run.  This free legal support drastically changes the game against the trolls, and could seriously impact many companies who make their money this way.

Leaders and Managers Have Nothing In Common

Manage Stuff. Lead People.

Managers are one of the core business diseases of the Industrial Age. They are sacred cows who have been around only for a little over a century, but who should go away as quickly as possible. Few things are as disruptive, unhelpful, and unproductive in the workplace as managers.

Solve and Decide, or Become Less Important?

The manager’s worst habits are to a) solve things and b) decide things. No other actions are as debilitating to others. When a manager solves and decides, the only thing left is to delegate tasks to be executed—“put this nut on that bolt, at this rate.” But when we delegate tasks, people feel used. Managers who solve and decide things are fundamental in the dehumanizing of the workplace, because tasks are for machines.

Leaders do it quite differently. They train others to solve problems and make decisions, and then they get out of the way. If you’re becoming less and less important in your position, you’re leading.

The Best Business Leader Makes the Fewest Decisions

The art of traditional management involves planning, organizing, staffing, controlling, and manipulating human capital. In the awful assumption of traditional management model, people are “capital” to be manipulated and controlled.

In contrast, the art of leadership is to know how few decisions the leader needs to make.

Ricardo Semler, the architect behind Semco, an $800 million Brazilian Participation Age company (with 3,000 stakeholders, but no managers), just celebrated his 10th anniversary of not making a decision. That is tremendous leadership, the kind we should all aspire to by training others to “solve and decide” and then, by getting out their way.

It works because Semler and other Semco leaders have trained others to solve problems and make decisions. Having gotten out of the way, the leaders are now free to stop solving and deciding, and instead to ask questions and think about the future. If you’re making decisions for others, you’re managing. If you’re just asking questions, you’re leading.

What Are You Delegating; Tasks or Responsibility?

We said earlier that when managers delegate tasks (“put this nut on that bolt”), people feel used, because tasks are for machines. But leaders delegate responsibility (“make a great product”)—a much broader request that requires thinking, solving, and deciding. When given responsibility, people take ownership, and ownership is the most powerful motivator in business. Are you delegating tasks, which simply require action, or delegating responsibility, which requires the whole messy, creative person to show up? Management Is Not Leadership; Leadership Is Not Management Management is a very recently invented construct, but leadership has been around for centuries. We’ve conflated the two. Here’s a simple reference for pulling them back apart:

Manage Stuff. Lead People.

The traditional business model we inherited from the factory system of the Industrial Age made the flawed assumption that people need to be managed like stuff. They don’t. They need to be led, and the difference is not semantic, it is gigantic.

Stuff needs to be managed. People don’t. The factory system reinvented people as extensions of machines, and when people are extensions of machines, they are “stuff” to be managed. But if they are fully human, they require leadership, not management.

In our company, we only manage stuff; computers, numbers, software, processes, systems, delivery of goods and services, accounting, marketing, sales, etc. These are all “things” to be managed, and everyone in our business manages stuff. But we don’t need someone with the title of “manager” to hover over any of us to ensure the stuff will get managed. People manage the stuff, and we lead each other by vision, guidance, training and support, and then, most important, by getting out of the way.

The manager’s quest is to be as helpful as possible for as long as possible. The leader’s quest is to relentlessly train others to solve and decide, and become less necessary every day.

It’s important enough to say twice: the art of leadership is to know how few decisions the leader needs to make. Become a leader—stop solving and deciding, and focus instead on asking questions. Everyone will be better off if you do.

Article as seen on Inc.com

by Chuck Blakeman, Author of the #1 Rated Business Book of the Year, Making Money is Killing Your Business and Top 10 business book, Why Employees Are Always A Bad Idea

www.ChuckBlakeman.com

Math Methods and Madness

I admit that I'm part of the problem. I'm lousy at math. Like many Americans, I can calculate basic equations (though it probably takes me longer than most) and do so accurately. But if I tried to solve problems that kids are given in school today, I would surely pull my hair out before getting any where close to a correct answer.

It's possible the reason American students are so far behind in math on a global scale, is because our school systems frequently change the methods, and then change them again. Worse yet, the methods or standards can change without enough investment in teaching the teacher to teach the new methods. That's according to a rather comprehensive, recent article from the New York Times; Why Do Americans Stink at Math?  by Elizabeth Green.

It's a lengthy article, but worth the read for it's insights, which I'll share, in part, here.

Author Elizabeth Green uncovers the problems with American Mathematics pedagogy by following the teaching career of Akihiko Takahashi from Tokoyo. As a University student, he met the man who would be his mentor, Takeshi Matsuyama, as he worked in the University affiliated elementary school.  His classroom was a sort of laboratory where they studied new teaching ideas. Together, they sought to revolutionize how students learn math by making radical changes in how teachers taught the subject. This included encouraging students to uncover the procedures, properties and proofs for themselves, by having passionate discussions about possible ways to find the answers, rather than focusing on rote memorization.

Hmm. That sounds much like the strategy behind today's Common Core initiatives, but we're not quite there yet.

As Takahashi investigated ways to reform math learning, he found that methods that most intrigued him, came from reformers in the United States. Throughout the next twelve years, Japanese education employed the vibrant, American approach to math. Takahashi also learned about the National Council of Teachers of Mathematics, an American organization and followed their efforts. When he was finally able to move to the U.S. to teach teach math, he was excited to work with other teachers as passionate about these ways of teaching learning as himself.  Imagine his surprise to discover none of those methods were being used in American schools.

As it happened, Americans had developed a new, effective way to teach math, and then failed to implement it. It wasn't the first time, nor the last. It happened in the 1960s with "new math" and then I heard about new math again in the late 80s and early 90s. Now Common Core standards are further refined and more ambitious, although there are limited, to no systems in place to educate teachers to teach them.

"...in practice, most teachers are unprepared and children are baffled, leaving parents furious"

This all emphasizes the recurring notion that traditional methods of teaching math don't work. Yet I learned them.

Today educators indicate innumeracy is the problem, similar to illiteracy in the language world - children simply aren't learning the math facts upon which all arithmetic problems are based. Studies point to student's inability to read an accurately drawn thermometer, or that students are confused by which is greater, 1/3 or 1/4. The default mistake assumes that the higher value denominator connotes greater worth. (It is this revelation that proves to me, I'm better at math than I ever believed!)

In summary, there are wonderful, innovative ways to teach math more effectively. But teachers can only teach effectively when they are given the tools and resources, and through instruction on how to employ those methods.

The article, which I encourage any parent or teacher to read, briefly mentions the Japanese practice of Lesson Study, which has been practiced on a small scale in the United States. ICOSA sponsor, the Colorado Business Roundtable sponsored a Lesson Study here in the Denver Public Schools. It entailed a group of teachers jointly observing one another's lessons in the classroom, critiquing the lesson and observing how the students learned from it. The teachers involved, reported a great deal of insight on their own lessons based on their team teacher's reactions, as well as learning more from other teacher's experiences. As a whole, educators who participate in lesson study, wholeheartedly recommend it's practice, even in acknowledging the extra work and time investment involved. If you'd like to learn more about Lesson Study, there are materials here, and videos of CObrt parent project here:

How a Standby Letter of Credit Can be Used to Create an Earthquake

Cash, Letter of Credit, Standby Letter of Credit, Collateral, Small Business Administration (SBA), Export Working Capital Program (EWCP), Guarantee

An engineering company in Boulder, Colorado, designs and builds shake-tables used to simulate vibrations and movements. The hydraulics mounted underneath the table are operated by computers which are programmed to simulate movements ranging from minor vibrations to earthquakes. Equipment manufacturers, electric utilities, etc. buy the custom-built tables to test equipment prior to installing it in their power plants and for product qualification.

The company in Boulder received an order for a shake-table from a ship builder in Korea. The buyer wanted the shake-table to simulate the vibrations of a ship and the motion of the waves. In this way he could test the durability of the equipment prior to installation in ships.

The engineering company had to invest a considerable amount of money in engineering, parts, and labor to build the table to the buyer’s specs. In this transaction they negotiated payment terms as follows: 40% cash in advance, 50% payable by a letter of credit upon presentation of shipping documents, and 10% upon acceptance by the buyer after installation of the shake-table and completion of on-site training.

Securing the Cash Payment

The buyer in Korea had one condition for the 40% cash payment. He wanted a standby letter of credit for an amount equal to the down payment, payable to the buyer upon his certification that the exporter failed to build the shake-table. The standby letter of credit would provide assurance that the buyer could get his money back in the event the supplier never produced or shipped the goods. The supplier asked a bank to issue the standby letter of credit.

By way of a brief background, the supplier was a well established, proven, capable and well managed engineering firm. However, the de-regulation of the energy industry caused a collapse of a major market segment for this company. As a result, at the time of the Korean contract, the company’s liquid collateral had weakened. This contract to Korea proved their proactive effort to diversify into other markets.

When the bank received the request for issuing the standby letter of credit, they agreed to only do so with cash collateral. This caused a “catch 22” for the supplier. In order to get the cash payment he needed a standby letter of credit. In order to get the standby letter of credit he needed the cash. The bank partially resolved this problem by stating in the letter of credit that it would become effective upon the bank’s receipt of the cash in advance. However, this did not help the supplier’s cash flow. If the bank kept the cash to secure the standby letter of credit, the exporter would not have use of the cash and would be no better off than before issuing the standby letter of credit. Enter a government program.

Assistance from The Small Business Administration (SBA)

The Small Business Administration (SBA) of the U.S. government has a program to assist with the financing of exports. The program, “Export Working Capital Program” (EWCP), provides guarantees to banks to eliminate a major portion of the risk. In short, if an exporter has an order with an acceptable, firm means of payment and can prove ability to perform, the transaction may qualify for the guarantee.

Since this company had a proven track record of performance with many satisfied customers, SBA issued a guarantee, which enabled the bank to issue the standby letter of credit without the cash collateral. The company then had use of the cash for the purpose intended. SBA’s guarantee also allowed the bank to advance funds over and above the standby letter of credit. This enabled the company to borrow money for purchasing raw material and meeting payroll during the six months it took to build the equipment.

The company constructed the three-axis shake-table on schedule, received payment and paid off the loan, thanks to the SBA.

Business Insider Ranks Colorado #1

With states finally starting to recover economically, Business Insider decided to take a look at the numbers and see just how each state has grown over the past few years.  The metrics used ranged from last years GDP growth, percentage of unemployed citizens, to international exports, housing prices and even auto sales.  ICOSA is proud to report that, according to Business Insider, Colorado is number 1 on the list.

Highest on the list and highest in altitude

The list credits Colorado's wide range of industries as well as a 3.8% growth in GDP and an added 66,000 jobs.  Colorado came in just ahead of Utah, Arizona, Texas and California.

To see how other states ranked, check out the full Business Insider list.

Uganda Women Leadership Conference, Part 2

U.S. Ambassador DeLisi is hopeful as he and his wife celebrated a group of young Ugandan fellows at their residence who will spend the summer in the United States growing their global networks to build film schools, launch small businesses and pursue careers in human rights.  The Honorable Minister Nsereko is hopeful about the public health partnerships we are forming together as she invited us to a ceremony in a rural province where they distributed some of the $400 thousand worth of medical supplies that we shipped over in partnership with Project Cure. And there is even hope for me that I will learn from my mistakes as my iPhone was stolen out of my hands once again as I sat in a cab with my window down in a Kampala traffic jam at night on the way to the airport.  There is hope that next time I will roll up my window like the taxi driver suggested!  Later that evening, I was reminded over a Skype back home that despite the “tragic” loss of my iPhone someone will at least eat better this week from its sale on the black market; a potent reminder that my very worst day is many people’s best.

The hope at the reception that the First Lady of Rwanda hosted for the Women’s Leadership summit as we arrived in Kigali was palpable.  A parliamentarian, a deputy chief of staff, a minister of youth services, the head of a foundation, all gathered to greet us; all women.   These are powerful women making positive change in a country with one of the largest percentages of women in parliament in the world.   There is hope that my own country can humble itself to learn from Rwanda where in 2014 there should be more than one woman running for President.  Jus’ sayin’!

The 300 children from the local villages that we hosted at Entusi on the second day of our summit for a basic health clinic arrived with hope that someone would pay attention to them. And we delivered. Everyone left with something. More importantly, every child who made their way through the clinic felt important and felt welcome. They had a seat at the table. For many, this was the first time they had been ever invited anywhere.

And so, our Second Annual Women’s Leadership Summit concluded yesterday and as 20 extraordinary women began making their way back to their families and their work in Kampala and Kigali and Colombia and Nigeria and the United States, Africa had changed each of us.   It always does, right?

Despite the enormity of the challenges that confront us from girls in captivity to the unforgiving conditions of poverty; despite the very different backgrounds and life experiences of each of the women who came together over this past week; everyone left with something in common.  They all left with hope.

On Lake Bunyonyi at the Entusi Retreat Center on June 11^th, there was a sense of hope that was so pervasive and so thick that you could almost touch it.

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The New Global Epoch of Competitive Economic Development

The world has entered a new epoch characterized by intensifying international competition, continuously improving technology, a blizzard of information, and trans-national capital flows, making every company, technology, product, service, market and job vulnerable to worldwide competition. To compete, businesses must change their modus operandi. They must dismantle hierarchies and organize into smaller and smaller units that can respond quickly to growing competition for fast-changing, specialty, niche markets worldwide.

These dynamics are changing the very nature of economic production as we have known it for the past 100 years. In this fast-changing global information economy, ideas are capital. More important than technology, machines, or money are people: well educated, multi-skilled, creative, adaptable, innovative people who can respond quickly to rapid change to seize opportunities and solve problems. People are the most competitive factor in the global economy.

The product design/creation/marketing/distribution/service/quality process now happens simultaneously. To continually make incremental improvements in products and services requires new leadership styles, empowered employees, state-of-the-art technology, a common vision, and continuously adapting to and mastering change.

Organizations now require workers who are able to work on autonomous teams, solve problems, take risks, are resilient, co-accountable, will make decisions and collaborate with associates, adding value, improved quality and achieving customer loyalty.

Change will likely continue to accelerate. It is estimated that scientific and technological information now doubles every three years. Sometime in the first decades of the 21st century, the world information will double every year. Those who have learned how to use information effectively are dominating and inventing the future.

The most essential skill that workers (and that includes all of us) need, is to learn how to learn—to become critical thinkers, able to analyze and synthesize information, make connections, evaluate, estimate outcomes, communicate clearly and join with our associates in a continuous search for solutions and opportunities.

Workers need to perform not as robots as in the industrial era, nor as technocrats (although technical skills are necessary), but as thinkers, challenging assumptions, searching for better, faster, less expensive ways to do everything. Competition is now a global race with no finish line, for new enterprises, jobs and wreath creation.

Economic Development is the best tool communities, regions, states and countries have to create competitive businesses, good jobs, new wealth and diversified tax base.

As Jim Clifton, CEO of the Gallup Group, has pointed out in his book The Coming Jobs War, those places in the world which figure out how to create and grow new enterprises and good jobs will dominate the 21st century and beyond.

Economic Development in My Own Words - Jeff Wasden

Jeff Wasden, PresidentColorado Business Roundtable

Economic Development in my own words…

To me, economic development is fostering a culture, an environment and thought processes that are centered around a healthy, vibrant, and strong economy. Scaled down, it’s the utilization and application of resources in a manner that creates increased business activity and opportunities, employment and sustainability. It is getting an infrastructure in place that allows you to attract the right mix of jobs and workforce opportunities.

ICOSA: Where are we at with economic development in Colorado?

I am extremely encouraged about where Denver and Colorado are in terms of economic development. We have incredible resources, recreational activities, and a remarkable quality of life. We have had some leaders guide us through some difficult economic times with bold, courageous guidance that has seen us not only survive but, in many cases, thrive. While we still have some challenges ahead, I am very optimistic about what local communities and counties are doing, as well as the regional cooperation we see manifested in our state.

ICOSA: Where do you think the most effort is being directed currently?

We are seeing three major efforts currently being undertaken. One is the I-70 corridor. The second is continued growth around the airport with new flights that have opened up access to new regions, as well as business opportunities in other parts of the world that we are not in currently, and finally, our work around this states precious and scare water resources.

ICOSA: Where should we be focusing more?

We need to create a conservative, workable transportation and infrastructure plan that utilizes shared resources across jurisdictions, public private partnerships that include a long-range vision. We will soon see additional overpasses and bridges that are deemed unsafe, roads that will deteriorate past patchwork, and congestion that will threaten our movement of goods and services. We need to be open to out-of-the-box, creative plans and make tough decisions on allocation of resources.

ICOSA: Where does economic development start for you?

Economic development for me starts in the same place that everything I do stems from - my core belief that collaboration and partnerships make us stronger. We as leaders need to understand that people are our greatest resources. We need to involve others, listen, and work together. Traits I strive for are a strong work ethic, coupled with an open mind and a servant’s heart. My hope is to then take these traits to get the experts in the room, create a vision and a plan and make things happen!

Jeff Wasden is with the Colorado Business Roundtable, an organization that works with leaders of great groups who work towards sound public policy and a thriving economy for Colorado and its neighbors. You can contact Jeff via email at [email protected].

Pacific Northwest Economic Region: A Cross-Border Model of Collaboration

For more than a quarter century, state and provincial legislators from northwestern states in the United States and western provinces in Canada have been reaching across the border in a model of Canada-U.S. collaboration. Originally founded in 1988 as a forum for leaders from the state and provincial legislatures representing Washington, Oregon, Idaho, Montana and Alaska in the U.S. and the Canadian provinces of British Columbia and Alberta, the Pacific North West Economic Region (PNWER) has grown to include the province of Saskatchewan, and the northern Canadian regions of Yukon and the Northwest Territories.

The idea of what is today’s PNWER came from then Washington state senator Alan Bluechel, who was PNWER’s first president. Growing up on the Canadian side of the border in western provinces, Bluechel understood the common issues and interests that connected states and provinces in the region. His counterpart at the time who played a pivotal role on the Canadian side was Jim Horsman, then Alberta deputy premier and minister of intergovernmental affairs.

Every year, a PNWER delegation visits the two nations’ capitals – Washington and Ottawa – where meetings are held with federal politicians and government officials to address key cross-border issues. As well, PNWER stages an annual summit, an event that this July will be held in Whistler, B.C. This year’s agenda will tackle issues such as expanding market access, workforce development, ocean policy, as well as energy and the environment, among others.

In recent years, PNWER has been particularly active on Canada-U.S. border issues, working to ensure both a safe and efficient border. With the U.S. and Canada sharing the largest, most mutually beneficial two-way trading relationship in the world, ensuring the border provides the security needed, but, at the same time, does not become a barrier to trade and economic growth for both nations, has been a key PNWER priority.

Another issue that has received significant attention from PNWER has been energy and the environment. A key feature of the focus on energy is PNWER’s Legislative Energy Horizon Institute (LEHI), which is designed to educate legislators on the North American energy infrastructure and delivery system. Given the high turnover rate in state legislative bodies, there can be a lack of institutional knowledge about the complex energy issues in state and provincial legislatures. LEHI holds annual sessions to raise the awareness and understanding of legislators on key energy and environment issues from a U.S.-Canada perspective.

What started out as purely an organization to bring together U.S. and Canadian legislators, PNWER has broadened its scope in 1994 to become a true public-private partnership. It includes official private sector participation that involves non-elective public sector, non-profit organizations and non-government organizations. A private sector council, mirroring that of the organization’s legislative delegate council was established and private and public sector co-chairs became part of the working group structure.

As a result, funding for PNWER has become a blend of the public and private sectors. It is financed primarily through three sources, approximately one third from state and provincial dues, one third from private sector sponsorship and dues, and one third from public and private grants.

In an age where both the U.S. and Canada face ever-more complex and challenging issues, when collaboration is key to ensuring both nations continue to benefit from what has been a model bilateral relationship for the world, PNWER stands out as a key example of working together to ensure strong economies and societies.

Negotiating Agreements for Highly Collaborative Relationships

Businesses often wonder how they can improve their strategic relationships. They ask, “Do I dive straight into the ‘deal’ terms to hammer out problematic clauses or do you take a different approach?” If you want to deliver an enduring relationship that will deliver value in the long run, you do need to take a very different approach to negotiating strategic relationships.The danger with the traditional approach to deal making is that it sets you up for an adversarial negotiation. Not a good way to improve any relationship!

Negotiate The Relationship – Not Deal Points

Getting To We: Negotiating Agreements for Highly Collaborative Relationships changes the goal of the negotiation from getting a deal done to establishing a collaborative relationship between the parties. In other words, the relationship itself becomes the focus. This unique and compelling idea says that once the parties establish the relationship according to common social norms, the parties are in a better position to continually improve their relationship.

Social Norms To Do Business By

In order to negotiate the relationship, the parties ought to use an ethical approach to negotiating. Naïve and impossible to achieve you say? There is ample research from sociologists, economists and legal theorists from the U.S. and Europe that suggests relationships based on common social norms outperform power-based relationships on multiple levels.

For example, academics have studied cattle ranchers in Shasta County, California; fishermen in Norway, apparel firms in New York, New York; and the economic performance of thirteen regions in Italy. The body of research clearly supports the connection between social capital and improving economic prosperity.

Social capital is the application of commonly accepted norms and social networks that exist to enable cooperation and mutual benefit. Adding to that body of research, the authors working with the University of Tennessee confirmed that companies of various sizes that established highly collaborative outsourcing relationships often had a fair amount of social capital.

Getting to We took both bodies of research and identified six guiding principles that help relationships excel: reciprocity, autonomy, honesty, equity, loyalty and integrity.

These principles, so important in our personal endeavors and interactions, also drive collaborative business behaviors. These behaviors apply equally to existing relationships and to new ones.

To ensure a constant state of collaboration, each party is responsible for always following the principles. For example, if the parties take seriously the principles of loyalty and integrity, they will look out for and strive to preserve the relationship. That means buying companies do not disingenuously threaten suppliers with re-bidding work, and suppliers do not sell the “A” team just to substitute the less expensive “C” team to make a hefty profit.

Negotiating the nature of the relationship means the parties create a negotiation atmosphere that encourages trust cooperation. Some very common negotiation tactics become unacceptable, such as coercion, bluffing, or withholding relevant information.

What’s In It For We

Collaborative relationships start with a What’s-In-It-For-We (WIIFWe) mindset, which is radically different from the What’s-In-It-For-Me (WIIFMe) mindset present at most buyer/supplier negotiations. WIIFWe is the philosophical mantra that forms the architecture for a collaborative and trusting relationship. Once embraced, a WIIFWe mindset has the power to deliver a powerful competitive advantage for the parties long after a deal is signed. There are three things about a WIIFWe relationship that alter conventional negotiations:

• The players turn into partners for success. They set out to enter into a long-term relationship where each partner intends not to “eliminate” their partner by moving to another supplier or customer. The intent transforms a transactional business relationship into a strategic relationship. • The relationship adheres to the common set of principles (outlined above) that drive cooperative behavior. • The partners live the WIIFWe approach in daily interactions and use a formal, governance structure to ensure compliance with cooperative behavior.

Thus, the relationship itself generates successive rounds of cooperative negotiations that allow for parties to constantly improve their relationship and the output of that product whether the output is a product or service. Structuring the relationship should follow a process. Getting to We suggests a five-step process for establishing highly collaborative relationships.

The Getting to We Process

The Getting to We process comprises five distinct steps: the first four take the parties to WIIFWe, and the fifth step ensures that the parties live the WIIFWe mindset. None of the steps should be skipped, because cutting corners will only derail the ultimate purpose: a highly collaborative relationship.

The five steps are outlined briefly as follows:

1. Getting ready for WIIFWe. This initial step looks at three foundational elements for a successful collaborative relationship: trust, transparency and compatibility. The CaT™ (compatibility and trust) diagnostic tool helps the parties identify their level of trust and compatibility through a 360 assessment. When the parties complete this assessment, they will have a deeper understanding of their relationship.

2. Jointly agree on a shared vision for the partnership. The parties discuss and create a shared vision for the partnership. They will each enter the discussion with their own vision, of course. But then the parties transform their separate visions into one shared vision, giving the partnership its purpose beyond a series of transactions. Furthermore, it will guide the partners, not only throughout the negotiation process but throughout the term of the relationship.

3. Collaboratively negotiate the guiding principles for the partnership. The Getting to We process demands that partners not only improve the relationship but also abide by a set of principles to drive highly collaborative behavior. This is the critical step that distinguishes highly collaborative relationships from average functioning relationships. The principles provide the mindset to support the partners on their journey to live WIIFWe. Without guiding principles to prevent opportunism and competitive tit-for-tat moves, partners will not behave in a collaborative manner with each other.

4. Negotiate as We. It is now time to begin to negotiate deal points. Partners following the Getting to We process must not start by negotiating the details of the deal such as the scope of work, pricing and terms and conditions. Rather, they must first establish the mechanisms they will use as they negotiate the details. Once the partners have agreed to these mechanisms, they will use them to achieve a consensus on the deal’s specifics.

5. Living as We. At this point the partners have reached the final stage of the journey – living as we – which occurs when they maintain a focus on the shared vision and guiding principles throughout the life of the relationship. Because relationships are dynamic, the partners choose to focus on relationship management by taking actions and measures required to keep it highly collaborative. The principles continue to play a critical role by driving the partners’ daily behaviors.

So it’s not just a one-off negotiation, a handshake and then on to the next negotiation. Partners are developing and nurturing a collaborative entity based on social capital. This is the beauty and transformative power of the Getting to We concept: the business deal gets done, yes, but as a long-term partnership based on the parties' commitment to fundamental, beneficial social norms.

Are You Ready to Get to We?

Moving away from the traditional approach to deal making is not for the fainthearted. It takes some courage and determination, as well as a willing partner. But when these things come together, the results are transforming and the economic benefits are all but impossible to replicate using traditional ‘Me’ focused methods. A collaborative deal is going to deliver these results, not just initially but for the long term. So what’s stopping you – start getting to we with your partners!

Broad Industry Growth Will Lead to Record Jobs in Colorado

The following economic projections and commentary were compiled from various products of the Business Research Division at the Leeds School of Business. Primary sources are the 2014 Colorado Business Economic Outlook, the Colorado Secretary of State Quarterly Business & Economic Indicators Report and the Leeds Business Confidence Index. Job growth was strong in Colorado in 2013, with the state adding 68,100 jobs, a gain of 2.9%. This is the highest rate of employment increase since 2000. This growth accelerated to a rate of 3.0% in February 2014, with 70,900 jobs added compared to February 2013. In June 2013, the state surpassed the previous peak employment reached in May 2008. The consensus of the 2014 Colorado Business Economic Outlook estimating committees is that employment growth will continue in 2014, with the state adding 61,300 new jobs. The fastest growth is being observed in the Greeley, Fort Collins-Loveland, Denver-Aurora-Broomfield, and Boulder metropolitan statistical areas (MSAs).

New business filings from the Colorado Secretary of State’s Office serve as a leading indicator of employment. Business filings fell slightly in Q1 2014, to 26,522, despite increases in existing entity renewals and entities in good standing. New entity filings remained near record highs despite this slight drop of 0.1% in comparison to Q1 2013, with a five-year compound annual growth rate of 5.3%. Despite the aforementioned drop in Q1 filings, annual new business filings rose 3% over the past year. This relationship between new business filings and employment in Colorado signals continued employment expansion in the first half of 2014. Existing entity renewals numbered 118,167, an increase of 7.3% in comparison to Q1 2013. Likewise, the Leeds Business Confidence Index (LBCI) indicates further growth in 2014 as the index increased from 59.9 to 61 in the Q2 2014 survey. Expectations above 50 show a positive economic outlook for the upcoming quarter. Improvement coincided with improving economic conditions and subsiding political risks. Compared to the Q1 2014 survey, respondents’ confidence improved for all metrics except capital expenditures. The greatest gain was in expectations for profits, which rose 3.4 points. Large companies were notably more optimistic than small companies. Sales expectations rose to 62.7 while profits rose to 61.3. Capital Expenditures slipped to 58.6, yet remained strongly positive. Hiring expectations rose slightly, from 59.3 in Q1 to 59.6, in Q2. Around 43.5% of respondents were neutral on hiring, while 46.4% were positive.

Over the past 10 years, goods-producing industries lost a net 25,000 jobs; however, in 2013 the industry saw growth, adding 12,800 jobs, or 4.6%. Services-producing industries gained 253,300 jobs and an accelerated growth of 2.7% in 2013, up from 2.3% in 2012. Both goods- and services-producing sectors are anticipated to add workers in 2014.

Highlights on the goods and services industries follow.

GOODS-PRODUCING INDUSTRIES

The goods-producing sector includes Agriculture, Natural Resources and Mining, Construction and Manufacturing.

Agriculture — While total cash receipts to farmers and ranchers are projected to decline into 2014, expenses are anticipated to moderate only slightly. Real interest rates remain low, and fuel prices are up over the past month, despite an overall downward trend. The year 2014 might be viewed as a transitional one in which both farmers and ranchers make adjustments stemming from lower corn prices. Net income is projected to fall by about 7%, to $1.48 billion, in 2014.

Natural Resources and Mining — Colorado has abundant natural resources, ranging from coal and natural gas to molybdenum and uranium. In 2013, Natural Resources and Mining saw 200 jobs added, or 0.7%. This is significantly down from 2012, when the industry was adding jobs at a rate of 8.6%. The value of production is anticipated to increase in 2014 for oil, natural gas, carbon dioxide, coal, minerals and uranium. This has translated into a promising growth in 2014, adding 6.1% over 2013 through February.

Construction — The greatest casualty of the recession, this industry is exhibiting strong year-over-year growth in permits, values and employment. Total value of Construction is estimated to rise 14.8% in 2014, to $15.1 billion. The largest increase is attributable to residential construction, which will grow to more than $1.4 billion in 2014. Non-residential projects recorded a decrease of 18% and non-building plummeted 38%. Residential increased 7% year-over-year in February. Total housing permits are expected to rise to 33,500, with 17.5% growth marked by year-over-year gains in both single-family and multifamily units. Employment will increase by 11,000 jobs, or 8.4%, in 2014.

Over the past year, home prices have climbed by 8.2% in Colorado according to the Federal Housing Finance Agency (FHFA). This gain was attributed to increases in six of the state’s seven MSAs: Denver-Aurora-Broomfield (10.9%), Boulder (9.4%), Fort Collins-Loveland (8.5%), Greeley (7.3%), Grand Junction (5.7%) and Colorado Springs (3.1%).

Manufacturing — Following a decade of decline, Manufacturing employment is expected to increase for the fourth consecutive year, ending 2013 with 1,900 jobs added (+1.5%) and 2014 with 1,700 more jobs (+14%). This growth will be mostly in the Durable Goods Sector. The services-producing sectors include Trade, Transportation and Utilities; Information; Financial Activities; Professional and Business Service; Education and Health Services; Leisure and Hospitality; and Government.

International Trade — Colorado’s merchandise and commodities exports experienced strong growth last year. Strength included electronics, beef, medical and surgical equipment, orthopedic appliances and engines and motors. Despite this, the state still ranks only 36th among U.S. states in dollar value of merchandise and commodities exports. Colorado’s manufactured exports and commodities are projected to grow 10% in 2014, to $9.8 billion in sales.

SERVICES-PRODUCING INDUSTRIES

The Service Producing industries include Trade, Transportation and Utilities, Information, Financial Activities, Professional and Business Services, Education and Health Services and Government. The outlook for services employment shows growth in all sectors but Information in 2014.

Trade, Transportation and Utilities — TTU employment is anticipated to increase by 9,100 in 2014 due to growth in wholesale and retail trade. Transportation and Warehousing employment increased in 2013, and Utilities recorded no net change. It is projected that Denver International Airport will record more than 52 million passengers in both 2013 and 2014. Retail sales are anticipated to rise 5% in 2014, following 4.2% growth in 2013.

Information — A best-case scenario is that the Information Sector will remain flat in 2013 and post a modest decline in 2014. In 2013, growth in telecom, software publishing and film outweighed losses in traditional publishing. It is anticipated that many of the losses related to the telecom merger between CenturyLink and Qwest have already been absorbed in the Denver Metro region.

Financial Activities — The Financial Activities Sector began rebounding in 2013, adding 4,000 jobs. Despite some employment declines related to reductions in mortgage refinancing, the sector is still expected to add 2,700 jobs in 2014, with most activity concentrated in banking and other finance and insurance activities. Increased regulation and tepid loan demand will continue to impact the industry.

Professional and Business Services — Employment in this sector will increase by 14,200 jobs in 2014, building on gains in the Professional, Scientific and Technical Services subsectors related to Colorado’s high-tech industries and research institutions. Growth in the sector may be stronger if political and fiscal uncertainty subsides.

Education and Health Services — Private education and health care services are expected to add 8,000 jobs in 2014, demonstrating resilience both during and after the recession. Most of the growth has been in health care, driven by population growth and demographic shifts.

Leisure and Hospitality — Despite a number of setbacks in 2013 (e.g., fires, floods, drought), the Leisure and Hospitality industry added 10,100 jobs. The 2014 forecast calls for 7,500 additional jobs, mostly in the Accommodation and Food Services Sector. This forecast rests on a number of assumptions, including average snowfall and reasonable gasoline prices.

Government — Government is expected to add jobs in 2014, but not at all levels. Federal government is expected to shed jobs in 2014, continuing a trend that coincided with economic recovery in 2010. Sequestration will impact both direct federal jobs, as well as federal contractors. State and local government are adding jobs, with a portion of the increase related to education. Population continues to grow, pressuring the public education system to accommodate a growing student number of students.

SUMMARY

Colorado will continue to record employment growth that will place it in the top five states for growth in 2014 with the unemployment rate remaining below 7%. With respect to population, Colorado is the seventh-fastest growing state in the nation in percentage terms and the ninth fastest in absolute terms. Population growth in 2014 is projected at 1.7% with a healthy amount of in-migration contributing to this scenario.

The forecasted employment growth will be broad based, although some sectors will do better than others. The information sector is forecast to continue the weak employment situation it has experienced since the recession of 2001. Agriculture production and tourism will continue to be impacted by volatile weather fluctuations and natural disasters of the past several years.

An additional bright spot is the value of homes. Home prices will continue to grow in Colorado as inventory is absorbed, foreclosures abate and more homeowners elevate from being underwater in their mortgages. Tightening inventory and more stable households are driving appreciation in all Colorado MSAs except Pueblo.

With Colorado’s skilled workforce; high-tech, diversified economy; relatively low cost of doing business; global economic access; and exceptional quality of life, the state is poised for long-term economic growth.

For more information on each industry sector, visit leeds.colorado.edu/brd.

Connect & Collaborate - CU Impact on Economy

Connect & Collaborate takes an in-depth look at the impact the University of Colorado system has on the state economy and our future as a whole. We are fortunate to have CU not only for the education of our students, but because the school is a a leader in research, enterprise and innovation.  Those qualities combine to drive the state economy by creating new companies and jobs, while attracting industry leaders to the state. Together with our Co-host, John Brackney, we talk with Don Elliman, Chancellor of CU Denver and Anschutz Medical Campus, on the ability to commercialize CU research to build industry partnerships; Steve VanNurden, President and CEO of Fitzsimons Redevelopment Authority on the impact of the CU Anschutz Medical Campus on healthcare and the economy; Diane Dimeff, the Executive Director of CU- Boulder's Espace Initiative on the role of aerospace, student recruitment and research, workforce development and industry partnerships.

The University of Colorado has become an economic driver, with millions of dollars in research funding, impacting job growth which ultimately impacts the local economy.

"The CU system does almost $800 million in sponsored research, right now, today. Roughly fifty-percent of that is in Boulder. There is some in the Springs <sic>. There is some in downtown Denver. But Boulder and Anschutz are at about the same level the high $300 million each." ~ Don Elliman

The CU Anschutz Medical campus is a hub of world class research, employing 22,000 people in three different hospitals and research facilities, with a unique ability to combine education, research and commercial businesses all in one place.

"What I want to do, is be able to make that shorter connectivity between the research and the marketplace." ~ Steve VanNurden

CU leads the way for innovation in the aerospace field as well. At CU-Boulder, Diane Dimeff heads the Espace initiative including the Center for Space Entrepreneurship which is the hub for a number of workforce development, and business incubator aerospace-related programs. Among them, the CU-led MAVEN mission which studies the atmosphere and volatile evolution of Mars - and brought in $671 million in research dollars.

"Through this mission, the state of Colorado received $300 million in funding. With that, of course, an enormous number of new jobs that have been created and if you add those new jobs and the salaries they created, and then the sort of multiplier effect of them going ahead and buying products and services within the state of Colorado, the total economic impact of this MAVEN project alone, much less the University's is something like two billion dollars." ~ Diane Dimeff

When we look at the leading players in economic development, we can't overlook the CU system. CU contributes to the state's future in more ways than we see on the surface.

Listen Saturday at 10:00 AM on KNUS 710 –  Please let us know what you think of our program, either by commenting here or on Facebook at Connect & Collaborate with ICOSA or join the discussion on Twitter @ICOSAMagazine.

John Brackney is the Director of Strategic Community and Governmental Engagement at Webolutions, The Strategic Marketing Agency.  He has a combined 26 years of Public Policy and Community Problem Solving experience as the former CEO of the South Metro Denver Chamber, as a former Arapahoe County Commissioner and as a former Army National Guard Officer.  John received his law degree from the University of Denver, Sturm College of Law and a B.A. Political Science from the University of Northern Colorado. John and his wife are lifelong residents and natives of Colorado, are approaching their 25th wedding anniversary, and have two daughters.

International Development Enterprise

"It’ll never work.” “Look at all of the failed international aid programs, the big anti-poverty programs. Maybe you can feed people, but every effort to change communities fundamentally seems to have failed.”

“When you pull one strand of the problem of poverty, the whole mess begins to unravel – what do you do when people have no education, when healthcare is unaffordable?”

“Even if you did figure out how to help people support themselves, wouldn’t they just deplete the natural resources in their region, causing even bigger problems down the road?”

Good thing for millions of people on three continents that Dr. Paul Polak didn’t see any of these arguments as a reason to stop innovating. Like any great entrepreneur, he merely saw them as hurdles to leap, bulldoze, or sidestep on the way to his ultimate goal: helping poor farmers build secure futures for themselves.

Trained as a psychiatrist, Polak worked for years to help people cope with mental illness through the Southwest Denver Mental Health Association. There he witnessed the inextricable link between poverty and mental health - and even created housing and jobs programs to help his patients. Then, on a trip to Belize, he became interested in poverty on the global level, poverty much deeper than what he witnessed in the United States. Because of his background in business, he saw poverty as a breakdown of the market system. When hardworking people had the right tools and access to the right markets, they could succeed in escaping poverty.

Driven to continue his investigation, Polak traveled to Nepal and Bangladesh and asked hundreds of people who lived on small farms - why are you poor? The obvious answer came: “We need more money.” And what would help you get more money? “Water.”

With regular access to water, farmers would be able to increase their incomes dramatically. And with improved incomes, they would have the resources to gain access to healthcare and education.

Upon consideration, Polak thought that there was something he could do about this. He grew up on a farm in Canada and thought that perhaps some inexpensive agricultural technologies could help. A treadle pump would allow farmers to access water from seven to ten feet below the ground. Simple drip irrigation systems that allowed for more direct delivery of water to plants would increase production, and allow for production of higher value crops.

But hadn’t similar efforts failed before? Rusting infrastructure brought in by big international aid programs molders in developing countries throughout the world.

What could make the difference in terms of adoption and use?

In 1981, Polak founded an organization called IDE (International Development Enterprises) to answer this question. The answer has come through applying market-based principles to the needs of the poor. For more than twenty-five years, IDE has gone directly to small communities and, through appropriate technologies and the seeding of small businesses, has developed sturdy and sustainable economies that are improving the lives of millions.

IDE recognizes a few key things based on simple business principles. It’s important that the farmers themselves have an investment in the new technology, and that the technology be affordable enough to pay off in one year’s harvest. It’s important that seeds, fertilizer, and replacement parts for the pumps and irrigation systems be available locally. And finally - no way out of poverty is sustainable if it depletes the natural resources of the region.

Building Local Markets

The typical IDE program works like this: in-country IDE workers go to a local marketplace and demonstrate a treadle pump or a drip irrigation system. They connect with farmers who might be interested in trying the technology, and arrange with partner organizations for them to receive a very small loan to pay for the technology. Let’s say a farmer buys a treadle pump. He would receive a loan of about $20 to pay for the pump, and IDE would provide connections to local well drillers, information about the best agronomic practices, and links to local markets where he can earn fair prices. The farmer uses the pump to irrigate his crops and increase his yield. He takes his crops to market, sells them, and can earn up to 300% more than he would have in previous years. He is able to pay off his loan, and is on the way to economic self-sufficiency.

Panchagarh, Bangladesh – With the income from the chili, amaranth, radish, and potato grown using her IDE treadle pump, Rashida Begum has been able to support her family of five, and open a successful retail shop as well.

With increased income, the farmer’s life and that of his or her family can be transformed. Nazrul Islam of Bangladesh used his increased profits to keep all of his children in school. “I hope that one of my sons will go on to school in Dhaka and get a good government job,” he says. His additional income has also allowed his daughters to remain in school, which is uncommon in his village.

But IDE doesn’t stop there. As they build relationships with farmers like Islam, they also build relationships with entrepreneurs, craftsmen, and agricultural suppliers. Their goal is to create a sustainable market system in a community, where the pumps and irrigation systems, seeds and organic fertilizers are all produced and sold locally. They also stimulate markets for higher quality, higher profit crops by providing connections to broader distribution systems.

With certain pump models at just $20 apiece and drip systems as low as $5, the question arises: why not just give this technology to the farmers? IDE USA Executive Director Zenia Tata explains, “Our studies show that rates of adoption are much higher when farmers invest their own money. They are also more likely to properly maintain the equipment when they have ownership. Treating smallholder farmers as customers is a respect issue. Rather than deciding for them what they should have, we allow our customers to make the decision about whether our products have significant value for them.”

The Key is Sustainability

From central offices in Lakewood, Colorado, IDE runs in-country programs in eight developing countries in Asia and Africa, and operates affiliates in Canada, the United Kingdom, and India. Since its founding in 1981, IDE has helped an estimated 17 million people pull themselves permanently out of poverty and to do so in an environmentally sustainable way.

With millions of farmers using more water and planting more crops, it might seem that the natural resources of the regions where IDE works could be depleted. In fact, the opposite is true. “IDE’s anti-poverty programs are deeply rooted in sustainable design and environmental practices,” explains Andy Vermouth, IDE Communications Director. “Because our systems are so widely spread on smallholder farms throughout a region, they haven’t affected the water table or the surrounding environment the way a large scale irrigation scheme would.” Studies conducted in association with funding from the Bill and Melinda Gates Foundation have found that, because IDE promotes the use of organic fertilizer and drip irrigation, along with other water-saving technologies, agricultural run-off is significantly decreased in areas where IDE technologies are at work.

“If we are serious about ending extreme hunger and poverty around the world, we must be serious about transforming agriculture for small farmers - most of whom are women,” said Bill Gates, co-chair of the Bill & Melinda Gates Foundation. “These investments - from improving the quality of seeds, to developing healthier soil, to creating new markets - will pay off not only in children fed and lives saved. They can have a dramatic impact on poverty reduction as families generate additional income and improve their lives.” The Gates Foundation recently awarded $40 million in grants to IDE for projects throughout Asia and Africa.

Obstacles and Opportunities

IDE has achieved its success through focusing on a few key technologies, genuinely listening to the people in the countries it serves, and developing market systems that sustain themselves and preserve the environment. Major foundations like Gates and the Mennonite Economic Development Agency, along with international development agencies in the U.S., Canada, Europe, and Australia provide a steady stream of investment capital to seed projects around the world. Individual donors also play a part, since it costs only about $250 to raise a family out of poverty through IDE’s programs.

IDE is also seeking corporate partners who can help bring the global marketplace to small farmers. “In Nicaragua, IDE partnered with Nestlé and ECOM to create a market link for premium coffee produced by small farmers there using our drip irrigation technology,” says Tata, “and we’re getting great results. We’re looking for other corporate partners who are interested in working with us to create innovative, sustainable solutions to the problem of poverty.”

What prevents IDE from moving even faster to implement its successful model throughout the developing world? Vermouth cites political strife as one key obstacle. “We have people in both Myanmar and Zimbabwe, where the political situations are tenuous,” he explains. “This can make our work difficult, but our presence there can also be a blessing.” IDE’s in-country workers were among the very few people able to distribute aid to victims of the Myanmar cyclone last year.

IDE is proud of its success internationally, Vermouth notes, but they also hope to connect the power of their methods to local projects in Colorado. Last summer, he created a demonstration plot in a Denver Urban Gardens site, and despite planting the garden later than others, it still produced more than neighboring plots due to the benefits of micro-irrigation. “We hope to share what we’ve learned in developing countries here in Denver. This year we’re working with several local groups to promote a showcase village that demonstrates some of our technologies and by extension how they might be applied by others here in the U.S.”

While the economic downturn certainly challenges some of their funding streams, IDE continues to forge ahead with its programs, hoping to reach millions more people in need in the years ahead. “Because the systems we create are environmentally and fiscally sound,” Vermouth explains, “our work fits perfectly with the emphasis on a move to an economy based on sustainable development.”

For more information please check IDE’s website at www.ideorg.org

Rebecca Arno is Vice President of Communications for The Denver Foundation, a community foundation serving the seven-county Metro Denver area.