Full Speed Ahead As many of you are probably aware, this past week Governor Rick Perry created a Task Force for Economic Growth. I was privileged to be named to the 29-member group chaired by Ross Perot, Jr. Given the distinguished resumes of the other members, I suspect my role is one of comic relief.
Our goal is to develop recommendations for the Governor’s consideration that will significantly enhance the economic growth and development of the Lone Star State. This charge is a formidable one, but certainly one worthy of the efforts that will be put forth to accomplish it.
Over the next several months, the Task Force will be holding open meetings around the state to solicit ideas and suggestions regarding the most effective means of recruiting new businesses to the state and fostering and promoting free competitive enterprise. We will also examine procedures that could be employed to help diversify Texas’ employment base and develop high wage job opportunities. Furthermore, the Task Force will be considering various ways to maintain employment, production, and purchasing power.
There are, of course, several state and local entities already studying similar aspects of our economic development, including the challenges of attracting new businesses and improving workforce training. They will continue their work, and their findings will definitely be helpful as we seek to develop a vision for long-term sustainable economic growth for the entire state.
In addition to reviewing what these groups are discovering, the Task Force will examine the state’s total economic environment, from the educational infrastructure and business milieu to the litigation climate. We will also give consideration to how these issues are being addressed by various national organizations, as well as by neighboring states and Mexico.
Texas has enjoyed an unprecedented period of economic prosperity over the past several years, and our state has led the US in net job creation. During this period, significant emphasis has been given to improving educational opportunities and creating a foundation that will be conducive to building a strong economy.
Because of the leadership provided by independent entrepreneurs and business leaders, within both public and private sectors, the Texas economy has become more diversified and dynamic. As a result, major difficulties faced by one industry no longer dramatically affect the total economy of the state.
I am convinced that Texas and the US are now looking upward as we gaze at tomorrow’s economic picture. Within a few months, evidence of the upswing will be manifested across the state, although some sectors will see the results later than others.
Economic prosperity stems from “thinking outside the box” in an effort to enrich the lives of our citizenry. Competition for new business is intense and global; any successful area must be constantly ahead of the curve. Attractive regions reflect a multi-faceted combination of factors—workforce, tax climate, location, costs, resource availability, transportation, and quality-of-life, to name but a few.
The Task Force for Economic Growth is a much-needed initiative at this time. Even a prosperous and diverse economy is not exempt from global events, crises, and the ebb and flow of markets. Hardships and dislocations occur even in the midst of overall business expansion. Channeling the creative energies of a group of successful leaders into this task of looking ahead and being prepared can’t help but pay handsome dividends.
The next few months can make a difference in the economic future of the Lone Star State. I look forward to joining such a distinguished group of individuals as we seek to prepare Texas for long-term economic advancement and expansion.
Back to Basics The Enron debacle continues to grab headlines, as investigations accelerate, lawsuits fly in every direction, and the Fifth Amendment gets a really good workout. Even Olympic gold can’t outshine the light generated by such a tawdry mixture of money, politics, allegations, and intrigue. For all of the complexity of the web of enterprises and cast of thousands, however, there is at least one simple theme that harkens back to the first chapter of just about any Economics 101 book. It has to do with information.
I have been saying for quite some time that I believe the stock market will come back with a vengeance. With a trillion dollars or more sitting on the sidelines earning low interest rates, the next rally should be one to remember. Having said that, the Enron aftershocks are delaying this surge and changing market dynamics in fundamental ways.
Any company, no matter how blue chip or how old and established, with even a hint of doubt about accounting practices is being hammered. The Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) are exploring new regulations and guidelines, and will no doubt implement some. Long before they can even get a quorum or call a meeting, however, the market is imposing its own brand of much harsher discipline. Irrespective of any new requirements (which may well be needed), firms will promptly respond to the demands of investors; the consequences of failing to do so are much greater than any fine or sanction.
The issue is so intuitive that we often take it for granted. If you read the most basic primer on economics, it will tell you that one of the essential prerequisites for markets to work is access to reliable information. Without it, neither buyers nor sellers can function properly. While this notion is simple, it is also profound. In fact, the most recent Nobel Memorial Prize in Economics was awarded to three scholars who explored what happens in cases of “information asymmetry” (where one party has more reliable information than another). It explains why people buy “lemons” (the cars, not the fruit) and how otherwise efficient market mechanisms can go terribly askew.
Implicitly, our vast global networks of financial markets rely on the validity of the information they receive. It has become automatic for investors to put considerable faith in public filings. Although the extent (if any) to which the normal process was inappropriately distorted will be arduously examined in committee hearings and jury rooms for the next several years, the bottom line is that the confidence of investors has been shaken. Importantly, the magnitude and implications of the situation are such that it is not merely the prospects for a specific firm that are being questioned (as occurs regularly when there is an earnings restatement or similar disclosure), but the very core of the market itself. The basic textbook requirements for a market are at stake; a stone in the foundation is wobbly.
When events of this nature occur, investors react by (1) imposing higher standards and (2) staying away longer. The former is healthy and will be addressed through both formal and (more powerfully) informal means. But investors’ reluctance to get back in the game prevents the market from reaching its full potential as soon as it should, thus limiting capital access, innovation, and long-term growth. Reliable company information is an absolute requirement for proper market performance. This idea may be so basic that we typically ignore it, but it is also so vital that we can ill afford to neglect it.
USA! USA! USA! The Olympics are like no other sporting event. Perhaps that’s because they are more than sporting events. True, the central theme of the Olympics focuses on the drama of human athletic competition, but with so many other distinct elements associated with the games, the Olympics take on a life of their own.
Sporting a pricetag of about $2 billion, the Salt Lake City Olympics will be the most expensive of any Winter Games. The cost to put on the 17 days of competition at the various snow and ice venues will average about $791,667 per athlete. The 1998 Nagano Games, at $1.1 billion, pale in comparison. When the US was the host of its last winter Olympics at Lake Placid, NY, in 1980, the organizers almost went bankrupt trying to operate on a $168 million budget.
The 1980 games are perhaps best remembered for the US defeat of the Soviet ice hockey team. The unprecedented achievement of the US team was uniquely recalled last week when its members lit the Olympic flame for the 2002 games. The “USA! USA! USA!” chant that had reverberated across the ice rink at Lake Placid when those players stood on the platform to accept their gold medals was still on the lips and hearts of Americans everywhere.
Much of the massive increase in the cost of the games is thanks to a growing tradition of organizers trying to outdo the previous games in terms of extravagance. The cost of this year’s Olympics is also up due to increased security, the large number of competitors, and the enhanced technology that is required.
The staggering cost of this year’s games have been largely met by advertising, sponsorships, ticket sales, and television rights, with American taxpayers footing the bill for the remainder. The US General Accounting Office puts the value of federal spending on the games at about $342 million. Nearly $185 million of this amount is for security.
In covering the Olympics, NBC is broadcasting about 15 hours a day, including network and cable coverage. That’s a far cry from the four or five hours a day that the Olympic events could be seen just a few years ago. Even though NBC is spending some $110 million in production plus the $545 million rights fee, the television network is anticipating making a profit. Its $720 million revenue goal has almost been met. This accomplishment is impressive, especially in the current soft advertising market (evidenced recently by the drop in ad rates for the Super Bowl).
More than 2 million sports fans are expected for the games. Organizers anticipate that when they leave, the State of Utah will be left with significant improvements in its transportation infrastructure, plus some of the best winter sports facilities in the world and several million dollars to help fund their future operations.
The spectators and athletes alike will go home with hosts of items they purchased. Among them will be clothing, key chains, cheering bells, medallions, pins, toys, plates, books, programs, and special souvenir hockey pucks. Some will even be wearing commemorative tattoos.
Those who attend the games will also be filled with undying memories. Already we have seen the American men take all the medals in the halfpipe—an event many of us had never seen before this week. The little-known event provided the first US sweep in the Winter Games in 46 years. Nearly 30,000 fans witnessed the event in person and the TV announcers were nearly drowned out by the chanting of “USA! USA! USA!”
Prior to this year, the US had won 157 medals in the Winter Olympics, which date back to 1924. Norway has the most with 236, followed by the USSR with 193. Whether America will win the 20 medals in these games predicted by the president of the United States Olympic Committee remains to be seen, but the country is already proving itself a winner.
Our economy is on the rebound, our spirits are high, and that tattered flag found at Ground Zero is leading the American chant of optimism.
The World at Our Fingertips You can take a virtual tour of almost anywhere or buy practically anything you want with just a few keystrokes on a computer. It’s now official: more than half of all Americans are taking advantage of these kinds of opportunities through Internet access in their homes. Around the globe, the Internet is becoming an indispensable tool for business and home use.
In December, approximately 220.4 million English-speaking persons around the world had Internet access. That figure is expected to grow to some 270 million by next year. Non-English speaking Internet access is forecast to expand to about 505 million by 2003, up from the December figure of 292.7 million.
Not only do most of us have access, we’re also using it. In September 2001, approximately 145 million Americans used the Internet, an increase of 33% over the past three years. During that same month, 45% used e-mail and 36% searched for product and service information. Each of these usages rates were 10% higher than the same period the previous year.
For the last full week in January 2002, individuals in the US with Internet capability averaged logging on once a day from their homes. While online, the average number of unique sites visited totaled 19; the typical session lasted about 33 minutes. At work, Americans used their computers to reach out to the world an average of 12 times a week, visiting an average of 32 unique sites each and utilizing the Net nearly 7 hours over the five-day period. The average amount of time viewing a page—either at home or at work—was almost a minute.
Top five web sites visited during the study period (February last year) were yahoo.com, aol.com, msn.com, microsoft.com, and passport.com. Yahoo.com had 64.4 million unique visitors, well above the 51.3 million for second place aol.com. The other three sites had 46.7 million, 38.7 million, and 36.5 million, respectively. While those figures are huge, even the web site ranked 50th—espn.com—pulled in 8.2 million users during the month.
One of the fastest growing uses of the Internet is for e-commerce. Of course, many people still like to go somewhere to go shopping. Some even claim they were “born to shop.” Even so, 39% of Internet users are making online purchases. That figure will probably continue to rise as confidence increases in credit card privacy.
The five leading shopping categories are cars/car parts, books, computers, clothing, and CDs/Videos. Did you notice that within a nano-second of the New England Patriots’ victory over the St. Louis Rams in the Super Bowl last Sunday, T-shirts and hats featuring the logos of the world champions were available online? Watch for similar shopping opportunities next week as gold medals are awarded at the Winter Olympics.
Many people thought that the dot-com crash would spell the end of e-commerce. It was not even the end of the beginning. What failed (or at least no longer convinced the market that it could succeed) was a business model. The growth of the underlying technology has continued unabated, and will do well into the future. In June 1993, there were only about 130 web sites. Since that time, the rate of the web’s growth has been exponential. Although its early growth—doubling every three months—has slowed, the current pace of doubling every six months is still phenomenal.
Web usage has become an integral part of our lives. A few years ago, a goal of many Americans was to become “computer literate.” Now the objective is to become “Internet literate”—learning how to take advantage of the doors that are continually being opened as a result of technological advances.
Today, about nine out of 10 school age children in the US have access to computers, either at home or at school (although home access remains the province of the relatively affluent). Such opportunities will certainly enable them to enhance their abilities to reach out to the world with a few keystrokes, expand their budding innovative and entrepreneurial spirits, and add economic vitality and growth for the future.