Silicone Valley Moves to Warp Drive

Disaster Can Be Profitable

Fast Can Be Beautiful

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Silicon Valley is the leading exporter of economic value from the entire United States. Bigger than Detroit or Seattle. That's clout.

More good news. Their jobless rate is the lowest since 1969, when the place was a prune farm. Recent statistics show unemployment at 2.9 percent, down from 3.1 percent the previous month and 3.5 percent a year earlier. Much lower than the national average.

Employers in Santa Clara County (the political name for the area) created 6,100 new jobs last month. Six thousand of these were at private and public schools! In the past year new jobs climbed by 38,500 - a 4.3 percent growth rate, higher than any place in North America except Phoenix and Seattle.

Nearby San Mateo County did even better. Their rate dropped to 2.6 percent from 2.8 percent in one month. This is the lowest in the entire state of California with 30 million residents (about the same population as Canada).

The jobless rate in Sioux Falls, South Dakota, is 1.5 percent. In Des Moines, Iowa, it's two percent.

During the Christmas sales boom, retailers in places like these have staff troubles. No help. "Finding an new employee is like finding out we're having a White Christmas, hardly possible this far south on the west coast," says Christina Cooley, store manager at Valley Fair's Godiva Chocolatier. During her breaks she cruises the mall, seeking out anyone who wants a job.

When labour costs get too high, manufacturers can move to other states, continents, or countries. Retailers don't have that luxury. They have to survive where they stand. Manufacturers are like people and animals. They can move. Retailers are like trees. They have to adapt or die where they are planted.

Why can't Canada do something like Silicon Valley? In British Columbia, the most highly unionized enclave in the world, entry-level jobs can only be filled at over $7 per hour (minimum wage). At that salary unskilled workers can't provide the productivity required to make the store or factory a profit. So employers have stopped hiring at that level. They constantly seek out machines that can do some of the work.

Also, Canadians do not have the American sense of urgency. They are not raised in an educational environment that stresses the business ethic, "You can do anything you want, rise to any level." For the past three decades, Canadian students have been taught that "profit is a dirty word." Only government jobs can provide real money, security, and unbelievable union-driven pensions." Canada's letter carriers collect $17.41 an hour for taking little pieces of paper from one door to another. This is something anyone can do and would, except Canada Post holds a monopoly and deals with unions that have threatened so much over the years that politicians always gave in rather than making "the buck stop here."

Fortunately, as the planet globalizes, the word is getting through. Our soft life, largely living off Canada's huge exports to the United States, Europe, and Asia--mainly due to the 70-cent Canadian dollar is coming to an end. With few skills, an arrogant belief in a public school system that graduates people who produce half the product of Japan at twice the cost and where 90 percent of all school budgets are for over-paid union jobs, there is little money left for new technologies that increase economic productivity.

It's a late arrival replay of what happened to Argentina 50 years ago, mainly caused by a mili-tary/political government that "froze" everything and allowed little innovation, by decree. Frozen minds in Canada have done the same thing, and it's not due to the cold.

Trouble, big time, is coming.

Whitewater rafting on a Force Five river anyone?
 

Disaster Can Be Profitable

I have long been observing meltdown in Asia. And an Indonesian tree company that, even in a land with 200 million people including many unemployed, has decided to go with three robots and three human workers because of the uniqueness of this certain tree cloning process. The robots never stop. The humans work eight-hour shifts. One robot crew can process 750 trees per hour, 18,000 per day, five million a year. They can set up as many production lines as they like. The human payroll is insignificant. That was BM. Before Meltdown.

The Indonesian ringitt dropped 85 percent relative to the U.S. dollar (although it has recently recovered about 25 percent). So, in American dollars, production costs decreased at least 50 percent within Indonesia even with the partial bounceback.
Let's say the lumber company running this bio-tech bonanza is the world's largest lowest-cost pulp and paper producer. They have been selling production for U.S. dollars (the international marketing standard for pulp and paper). So they have mountains of American cash on hand. They exchange a million dollars U.S. and get back at least $2 million and maybe $4 million depending on the exchange rate at time of transfer. They pay workers with ringetts. Costs drop dramatically even further. And when they sell their produce, even at slightly less than world market price (and capture an even larger slice), they still get valuable U.S. dollars" and repeat the same exchange process. Company wealth could triple overnight. They could then underprice any competition anywhere and still make huge profits.

Asia Pulp & Paper found themselves in this dominant position. Their 1997 sales were US$2 billion. Most of their production is in Indonesia. When the meltdown hit their stock on the New York Stock Exchange, it dropped 52 percent to $8.69 a share. The stock has already bounced back to $12.69. It will not stop there. AP&P were the world's lowest-cost paper and pulp producer even before meltdown. They have the cheapest fibre, transportation, and labour costs. Their high tech machinery is ultra-efficient and far superior to most similar machinery in Canada or in the U.S.

Asia Pulp & Paper has another little plus. They grow quick hardwoods that produce as much in seven years as North American trees that takes 20 years to grow. Thanks to the Indonesian currency drop, AP&P profits moved from 20 percent of sales to one-third. That's improvement. Even though they had spent-pre" meltdown—over two billion for new high-tech machinery, they still had a spare US$2 billion cash to continue takeover of a market they had basically already taken over. They just installed (and presumable paid for) machinery for their company in China. They expect sales there to double this year to just under one-fifth of their total world sales.

Some highly paid New York stock market analysts think the stock will go up 70 percent. One Morgan Stanley analyst believes it will jump 73 percent.
Compared to pulp or paper produced in North America, there is no contest. Asia Pulp & Paper can undercut the market by half. Whenever they want. For pulp or paper produced in British Columbia, long the king of the forest, this will be a fatal blow. 

B.C. can't.
 
 

Fast Can Be Beautiful

About a year ago I came to the conclusion that the old ways aren't good enough anymore. I gave early expression to this sentiment in my first bestseller, The Last Book You'll Ever Read. Inside the back cover (this was more than five years ago) was the whole book on a 3.5-inch computer disc. I wanted to show readers what this technology looked like and what it could do. Recent letters from readers say that was their survival course.

My second bestseller, Navigating in Cyberspace, I created on CD-ROM, also to show how fast our information age was moving. Colleague John Robert Colombo reverse-engineered the CD-ROM into an old-fashioned Gutenberg-format book. Continual learning seems essential.

Both these books took a year to reach retail shelves. That makes such books ancient history in an era already moving seven times faster than the Industrial Age average! Sometimes haste helps. I write my QBooks, collectively called Dispatches from Cyberspace one a month, and I produce them in sets of five books in 30 days. My first two sets are out, and this book is part of the third set. Two five-volume sets cost $100 taxes included. Each set comes with a tech-toy bonus. To survive today, the best investment is in your own brain. Don't be afraid to pay for information. Become aware of what you want and what others want.

Consider the implications of these current developments:

A pair of fibre optic cables can carry two million simultaneous voice calls, equivalent to today's peak voice traffic carried by Sprint, AT&T, and MCI combined. A year from now a single fibre pair will carry four times that amount. Two years thereafter, the same single fibre pair will carry 17 times today's peak load or 34 million simultaneous calls or data.

You see why companies are trying to consolidate?

Suppose an old-fashioned, formerly monopolistic phone company has labour troubles downsizing. They figure the best way out is to sell. The new company may only buy the assets (most of which they won't use) and move into smaller quarters reducing staff 75 percent. They aren't cruel. They know that one mere microchip devoted to routing procedures that cost $5,000 and handled 500,000 packets of data a second yesterday has been made obsolete. The old-fashioned company stayed with that technology because they had so much money invested in that long-installed router and they had been milking it to the limit. Big mistake.

The new company learned that a new router's coming out. Cost $700. Handles 7.5 million packets a second. That's a 1,500 percent improvement in speed. At one-seventh the cost! This is Bay Network's latest. It's lead will last for months. They are already well underway with its successor. A successful company has to replace old products with something new before someone else does. The race never stops. Get your product into the marketplace six months earlier than the competition and they may never catch up. Suddenly that once outrageous price the new company paid for the old seems like a rock-bottom bargain when these new chips are installed.

By the year 2001, according to Jeffrey Harrow's newsletter, "Desktop PC digital video will exceed television quality." Imagine what the new company will do then!
Three-D visual computing will allow chat talk among digirati while watching the same TV show from opposite sides of the world. The latest in PIP (picture in a picture) viewing.

In 1956, hard disc storage opened with 50 two-foot discs providing five megabytes of storage. Now it's two million times better! The new GMAR drives can store 725,000 pages of text in an area the size of a thumbprint.

Where is all this heading? Into a network of one. You, the individual, are a network. Learn to enjoy it. Check out the website:  http://www.foxnews.com/video
Does it stop here? Not anymore. Available in Tokyo now: Tamagotchi Virtual Pet can detect another tribe member via aroma and communicate directly. Your tribe may learn it next.

If you don't, guess who wins slave status?