Game On!: Debt, Global Competition and Americas Future John N. Doggett, JD, MBA, Senior Lecturer Global Management, Entrepreneurship & Sustainable EnergyMcCombs School of Business @ The University of Texas at Austin firstname.lastname@example.org www.jndoggett.com
Strategic Inflection Points Are Scary “A strategic inflection point is a time in the life of a business [or a country] when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end.” Andy Grove, Only the Paranoid Survive
Two Massive S.I.P.s New Global Realities Europe is tottering on the brink of bankruptcy America is sinking under a mountain of debt China, Brazil and India are emerging as the strongest economies in the world The location and nature of energy supply and demand is changing. Shale Natural Gas Shale Oil Geothermal Ocean
How Do We Pay Down The Debt? We must grow our way out of this crisis. If the US economy grew by 6%, many of our problems would start to self heal. If we grew at 9%, “Whoa Nelly!” So, how do we turn America into North Dakota? We must sell “assets” owned by the federal government and apply to proceeds to reduce the federal debt.
Was Goldman Sachs Crazy? 6,100% Annual Inflation (1994) Collapse of the Ruble (1998) Two Weeks of Foreign Reserves (1991) The Cultural Revolution (1966-1976)
National GDP in 2010 (purchasing power parity) Country GDP Real Growth %1. United States $ 14,660,000,000,000 2.8%2. China $10,090,000,000,000 10.3%3. Japan $ 4,310,000,000,000 3.9%4. India $ 4,060,000,000,000 10.4%5. Germany $ 2,940,000,000,000 3.5%6. Russia $ 2,223,000,000,000 4.0%7. United Kingdom $ 2,173,000,000,000 1.3%8. Brazil $ 2,172,000,000,000 7.5%9. France $ 2,145,000,000,000 1.5%10. Italy $ 1,774,000,000,000 1.3%11. Mexico $ 1,567,000,000,000 5.5%12. South Korea $ 1,459,000,000,000 6.1%13. Spain $ 1,369,000,000,000 - 0.1%14. Canada $ 1,330,000,000,000 3.1% CIA World Factbook – September 5, 2011
Elephants Emerging from the Mist Total World Population = 6,928,198,253 BRIC Population = 2,868,060,586 (41.4%) Total World Land Area = 174,814,000 sq. km. (- oceans) BRIC Land Area = 38,471,715 (22%) Total World Gross Domestic Product = $63.17 Trillion (Official Exchange Rate) Total World Gross Domestic Product = $74.54 Trillion (Purchasing Power Parity) (p.p.p.) BRIC Gross Domestic Product (p.p.p.) = $ 18.55 Trillion (24.88%) Source: CIA World Factbook – September 5, 2011
The BRIC Middle Class Is Exploding McKinsey says 48 million Chinese will join the middle class every year until 2020. Goldman says 30 million Indians, Brazilians and Russians will join the middle class every year until 2020. Only 312.5 million people live in the US. By 2020, the BRIC’s could have 1 billion middle class citizens. This is the greatest time to be an American entrepreneur!
Building Skyscrapers Like Crazy China is building 24 of the 50 skyscrapers to be completed worldwide in the next six years. This will double the number of Chinese skyscrapers. McKinsey say that China could build enough new skyscrapers to equal one new Chicago every year until 2030. More than 1,500 new buildings over 30 stories
From China with Love Thermal Power Research Institute is China’s world-leading laboratory on cleaner coal, has just licensed its latest design to Future Fuels in the US. Future Fuels will pay about $100 million to import from China a 130-foot-high maze of equipment that turns coal into a gas before burning it. This method reduces toxic pollution and makes it easier to capture and sequester gases like carbon dioxide under ground. Future Fuels will ship the equipment to Pennsylvania and have Chinese engineers teach American workers how to assemble and operate it.
Canada formally pulls out of Kyoto The world’s largest two emitters, China and the US, never ratified Kyoto. “To meet the targets under Kyoto for 2012 would be the equivalent of either removing every car, truck, ATV, tractor, ambulance, police car and vehicle of every kind from Canadian roads or closing down the entire farming and agriculture sector and cutting heat to every home, office, hospital, factory and building in Canada,”
American Farmers Will Thrive China and India are covering farm land with factories. Global warming is increasing flooding from the Himalayas. Farm commodity and land prices can only trend in one direction. By the end of this decade, finding farm workers will be a major challenge. Farm equipment manufacturers will be running two shifts, seven days a week.
A Great Time To Be a Farmer! The world’s appetite for farm products will soar. The world will have more than enough cash to buy what we grow Farm support payments will no longer be necessary Quotas, tariffs and other market protections will no longer be necessary We will be able to sell everything that we can grow and process.
Impact of MIT Alumni Entrepreneurs MIT Alumni founded 25,800 currently active companies in 2009. The firms employed 3,300,000 people. These firms generated annual world revenues of $2,000,000,000,000. If currently active firms founded by MIT graduates were a country in 2009 they would have been the 11th largest economy in the world. Economic Impact of MIT Alumni Entrepreneurs - Entrepreneurial Impact: The Role of MIT, Roberts and Eesley, MIT & Kauffman Foundation for Entrepreneurship, February, 2009
“Recruit” The Right Immigrants Immigrants started 25% of U.S. public companies that were venture-backed. The market capitalization of publicly traded immigrant-founded venture-backed companies in the U. S. exceeds $500 billion. 40% of U.S. publicly traded venture-backed high- technology manufacturing companies were started by immigrants. 50%+ of the employment generated by U.S. public venture-backed high-tech manufacturers has come from immigrant-founded companies.
WE CAN REINVENT MANUFACTURING The Chevrolet Sonic is Transforming the face of American Manufacturing The plant is 50% smaller Wielding Robots are clustered together instead o being spaced along the line The first coat of rust proofing is 1/100 as thick Many employees make $14 an hour instead of $28 an hour . . . With the UAW’s blessings. All of this so the Sonic can be manufactured in Detroit instead of Mexico.
China and Energy In 2000, the US used twice as much energy as China. In 2010, China used 4% more energy than the US. Americans use 5x as much energy per capita. In 2007, China became the largest emitter of Greenhouse gases. Today, 80% of China’s energy comes from coal. The # for India is 70%. China consumes more coal than the US, Europe and Japan combined.
Massive Energy Investments The World Energy Outlook for 2011 says that $38 Trillion in new investment is needed to expand the world’s energy infrastructure between 2011-2035 Electric Power = $16.9 Trillion Oil = $10.0 Trillion Natural Gas = $9.5 Trillion Coal = $1.1 Trillion Biofuels = $0.3 Trillion
Small Hydro Projects Putting many small hydro dams on rivers to generate 5 to 10 MW of power.
Is This the Golden Age of Gas? The International Energy Agency says total recoverable resources equal over 250 years of current consumption. From 2010, global natural gas use could increase by more than 50% and account for over 25% of world energy demand in 2035. Power generation will be the dominant sector for natural gas demand and Russia will have to increase by 3X.
Shale Gas Is Revolutionary Shale Gas increased America’s gas reserves by 40% in this decade. Shale Gas reserves outside of North America could increase the world’s gas reserves by 50% to 160%. That is equal to 211 to 690 years’ worth of gas consumption in the United States at current levels.
Cheap, Available Fresh Water What happens to global stability if every country with access to the sea can get all the fresh water it needs? What happens to global agriculture and hunger if every country with access to the sea can get all the fresh water it needs? What happens to global economic growth if every country with access to the sea can get all the fresh water it needs?