Commentary & Analysis
FREE: Economic Roundup, Outsourcing Good and Bad, China and the 'net, Interactive Marketing, and Random Road Warrior Thoughts
By Dr. Joe Webb
Published: April 30, 2004
Those poor experts got the Conference Board's Consumer Confidence Index wrong again. They were expecting a decline, and those darn consumers got more confident! The index went from 88.3 to 92, and implies a 6.2% real growth rate in GDP. New and existing home sales were also better than expected, yet again. The home data has been confounding experts for over a year now.
Remember that many of the economic experts use models that are basically moving average models that include seasonal and other adjustments. These models tend to produce a result that people incorrectly refer to as the law of averages (there is no such thing) but is actually regression to the mean (ummmm in layman's terms, that would be referred to as kind of a law of averages glad I can keep this straight for all of you). So a high reading one month will get averaged down by the model and will result in a down forecast (closer to the average) for the next month, regardless of reality.
Model builders are always torn over whether or not they should adjust the model's forecasts because that might introduce personal bias. I always felt they should adjust the model's forecasts based on thorough research, where the model is just one part of the picture. The value of these models is that they are independent. The worst part is that they are just numbers with no understanding of what business transactions actually create them. That's where human interpretation comes in handy. When I've done this, I've always said, The models say, but I think this will happen because
The best forecasting really comes from detailed demographic analysis, where you build forecasts and estimates from the ground up from the demand level. That's really hard work and hence, the preference for the quicker moving average models and their sophisticated cousins. These models are always bad in the short term, which is why the experts are almost always wrong. But their accuracy improves in the long term.
Always remember John Kenneth Galbraith's answer when he was asked why economists make forecasts. Because they are asked, he answered. Forecasting is not really part of the economics discipline, as he reminds us, and we should keep that in mind. And as John Maynard Keynes said about long run forecasts, In the long run, we are all dead. He eventually proved it, in 1946.
The constant harangue about outsourcing is getting a little tiring. The printing business is a prime example. Much of our essential equipment comes from overseas suppliers (supposedly a bad thing) yet we use this equipment to produce a trade surplus in books and printed matter (I think that's a good thing, but it was caused by a supposedly bad thing, so maybe it's not good; I'm confused now). Many of the suppliers in the business are from overseas. They employ U.S. workers, pay U.S. taxes, and buy local goods to run their businesses (a good thing). Some of the suppliers are U.S. companies, who have offices overseas and do the same thing there (a good thing, I think). It's trade. It raises the standard of living on both sides of the transaction and brings us closer together as countries and as people (a good thing, I think, but then, I'm easily confused).
And of course, I admit it, I have been an outsourcer and an outsourcee. Back in my consulting days, I did research projects for overseas companies, and yes, I did take money for it. And I did send jobs overseas when I hired consultants in other countries to provide research data about their countries and countries near them. Yes, I am guilty of participating in international trade and the global economy. And yes, these companies were creating new technologies to make our industry more productive and more competitive. I apologize. I am sorry.
For a look at how outsourcing permeates daily business, a recent Conference Board report shows how many functions of human resources management are outsourced. Remember, most outsourcing dollars go to small businesses (like a public relations firm, an ad agency, a cafeteria management company, and myriad other services). In the case of human resources, the regulatory environment of health and financial services has led companies to work with insurance companies and investment firms to provide these services at lower costs (and lower compliance and administration risk) and provide superior customer service compared to doing it in-house, leading also to more options for management and employees.
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A recent speech by the president of the Business Roundtable summed up the global outsourcing issues:
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Morgan Stanley's Mary Meeker (yes, one of the Internet bubblers who recommended measuring eyeballs instead of sales) has issued a bullish report about the Internet in China . Since these pages and others have expressed interest, concern, or dismay about that country, I thought I would provide a link to the report. It has some interesting data and perspectives about the Internet on a worldwide basis, and even if you disagree with Meeker's perspective or are suspicious of her analysis, the report is informative nonetheless.
PROMO magazine had a brief but interesting article that shows healthy increases in promotional spending, and what happens, good and bad, when electronic media are added to the mix.
Over the past few weeks I've done my fair share of traveling, and I've realized how much things have changed in just a short time. The idea of hotels without broadband or wireless is just unthinkable. Broadband is everywhere for the business traveler. I've also been reminded about security as I was sitting in a doctor's office and I was able to hop on their wireless network without a problem, which was nice but certainly made me worry, especially when they were bragging about their paperless workflow. If I was a hacker, I bet I could figure a way of getting in without them knowing it.
The shrinking size of projectors, physically and in price, and their increased quality and features, is astonishing. I remember just seven years ago when we scraped together $3,500 for a used VGA projector. Now you can get some superb ones for $1,000.
I've been playing with Sun's StarOffice (and the open source OpenOffice version) and have been impressed by its word processing features (once you get over the shock of the different commands) and compatibility with Microsoft Word. I still can't get the hang of their spreadsheet, but its sometimes counterintuitive graphics package comes up with better-looking graphs than Excel. In working on a recent report, I saved a StarOffice workbook in Excel format and the graph that I thought would only work in StarOffice worked just fine in Excel.
If you make animation-limited presentations, the presentation program works just fine. But as expected, PowerPoint is clearly better for its automatic features (like adjusting font sizes to make things fit as you type). The compatibility with PowerPoint is not that good. Some of the templates I've tried to import are just awful as they seemingly disassemble when brought into StarOffice and font colors become unreadable.
You can't beat the free PDF-making capabilities, though, and the ability to save presentations in Flash is very convenient. My son, the 13-year-old guru, had a PowerPoint presentation he had to get up on a website. It imported very well into StarOffice (I felt lucky) and then I saved in Flash format, and it worked beautifully.
StarOffice is about $75 ($65 from amazon.com) and OpenOffice is free (they are the same program, but Sun adds templates and some other goodies, like an exceptionally good thesaurus, which is better than Word's). I know I've mentioned them before, but now I have more experience with them, and I'm pleased. Sun allows StarOffice to be used on up to five computers.
One of the drivers for OpenOffice and StarOffice is Linux. Over the next year, you'll see more Linux desktop systems being offered with Sun's Java Desktop. Sun has also made significant inroads in Asia with StarOffice, especially in China .
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Geek clothing you might occasionally see in the Webb household: