Sunday, September 13, 2009

Korean Electric Car

At the Korean Products Show in Chicago this week CT&T showed off their ezone electric cars.

They are ‘in town’ cars with a maximum speed of 35 mph and will travel up to 80 miles on a single charge. According to the show, these cars cost about $12,000- $13,000 but are eligible for a $5,000 Federal Income Tax Credit.
They looked pretty slick for tiny two seaters. Not surprisingly, the company makes golf carts too!

Wednesday, September 9, 2009

The New Normal - Financial Leverage

The new normal

In March this year the McKinsey Quarterly published an article entitled The New Normal. In it they said:

Obviously, there will be significantly less financial leverage in the
system. But it is important to realize that the rise in leverage leading up to
the crisis had two sources. The first was a legitimate increase in debt due
to financial innovation—new instruments and ways of doing business that reduced risk and added value to the economy. The second was a credit bubble
fueled by misaligned incentives, irresponsible risk taking, lax oversight, and
fraud. … it is clear that the future will reveal significantly lower levels of

I think this prognosis is overly influenced by unusual factors impacting the correction we are currently experiencing. A big part of the problem rests with the impact on bank capital from the losses around credit default swaps and their related mortgage backed securities. The banks’ capital determines how much leverage they can put into the market. But that capital will get rebuilt pretty quickly.

Certainly there will be less foolish lending once credit becomes available. On the consumer side, I think we will return to a fairly highly leveraged economy. And from a business perspective, I think we will once again see ample credit available where credit is needed.

The McKinsey article is at:

Monday, September 7, 2009

Cloud Computing

At the Thursday PDMA breakfast meeting on September 3rd, 2009 we discussed the notion of cloud computing. The fundamental concept is that businesses today own a level of capacity that ensures a cushion at peak demand. This is excess capacity. When it’s added together across many businesses it amounts to substantial waste, especially because peak usually tends to be an infrequent event for most businesses.

For example, the credit card industry maintains capability to handle volume for the day after Thanksgiving shopping deluge. If this capacity were pooled together with other industries then the total capacity needed at any one point in time would shrink. As a result, the cost should be lower in that pooled environment.

Fundamentally, Cloud Computing is similar to other utilities like the telephone, water, and electricity. It should be universally available, reliable and affordable.

Proponents of Cloud Computing also suggest that with the plethora of software solutions, there is a lot of duplication of effort. This too can be pooled to leverage established solutions across multiple users instead of customized solutions for each user.

The benefits are:
· Lower Cost – more efficient use of capacity drives lower costs.
· Greater Accessibility – Users have access to a greater library of solutions 7/24.
· Safety – 7/24 staff to handle any problems anytime.
· Automatic secure backup of data.
· Unlimited capacity from the perspective of any individual user.
· Ease of use.
The costs are:
· Network capacity is not really there yet.
· The cost of capacity may not actually go down, especially in the long run.
· The cloud likely will not be as reliable as desired, at least initially.
· Security is a concern where a third party is responsible. It is usually an internal person who breaches security.

The conclusion was that for many small and medium sized businesses, cloud computing makes sense. Where it is less likely to be beneficial is where IT is a core component of competitive advantage for the business.