Making Cents

Sustainable Sites Initiative releases landscape guidelines

2009-11-09T17:24:00.001-06:00

The Sustainable Sites Initiative has released the nation’s first rating system for the design, construction and maintenance of sustainable landscapes, with or without buildings. It was developed through a partnership of the American Society of Landscape Architects, the Lady Bird Johnson Wildflower Center and the U.S. Botanic Garden. The initiative’s rating system represents 4 years of work by the country’s leading sustainability experts, scientists and design professionals, as well as public input.

“While carbon-neutral performance remains the holy grail for green buildings, sustainable landscapes move beyond a do-no-harm approach,” said Nancy Somerville, exec. v.p. and CEO of ASLA. “Landscapes sequester carbon, clean the air and water, increase energy efficiency, restore habitats and ultimately give back through significant economic, social and environmental benefits never fully measured until now.”

“We are facing unprecedented environmental challenges such as water scarcity and climate change that require fundamental changes in the way that we interact with the land,” said Susan Rieff, exec. director of the Lady Bird Johnson Wildflower Center at Univ. of Texas at Austin. “This voluntary rating system and guidelines covers all aspects of working with outdoor spaces of all sizes, and provides information for designing landscapes that go beyond beauty to actually improving ecosystem health and the health of communities for generations to come.”

The rating system works on a 250-point scale, with levels of achievement for obtaining 40%, 50%, 60% or 80% of available points, recognized with one through four stars, respectively. If prerequisites are met, points are awarded through the 51 credits covering areas such as the use of greenfields, brownfields or greyfields; materials; soils and vegetation; construction and maintenance. These credits can apply to projects ranging from corporate campuses, transportation corridors, public parks and single-family residences. The rating system is part of two new reports issued from the initiative, “The Case for Sustainable Landscapes” and “Guidelines and Performance Benchmarks 2009.”

To test the rating system, the initiative opened a call for pilot projects in conjunction with the release of the rating system. Any type of designed landscape is eligible, so long as the project size is at least 2,000 sq. ft. The call will remain open until Feb. 15, 2010, and the initiative will work with and oversee the projects during the two-year process.

HT: Garden Center Magazine

Existing home sales take off

2009-10-23T18:17:00.010-05:00

From the September existing home sales report:

Existing home sales jumped 9.4% to a seasonally adjusted annual rate of 5.57 million units from 5.09 million in August. That was the highest since July 2007.
Single-family home sales gained 9.4%, while condo and cooperative sales rose 9.7%. By region, sales climbed across the board. They were up 4.4% in the Northeast, 9% in the South, 9.6% in the Midwest, and 13% in the West.
The raw number of homes for sale dropped 7.5% to 3.63 million units from 3.924 million in August. Supply was down 15% from a year earlier. The months supply at current sales pace indicator of inventory dropped to 7.8 from 9.3. Single family inventory dropped to 7.6 from 9, while condo inventory fell to 11 from 12.1.
The median price of an existing home fell 1.4% to $174,900 from $177,300 in August, down 8.5% from $191,400 a year ago.

Of course, there are logical reasons for the increase. Soon the tax credit will expire, and that combined with stabilization in the broader economy and cheap home prices drove sales to the highest level since 2007. The overall supply of used homes for sale is also steadily declining, an encouraging trend considering that new home inventory has already dropped steadily. Of course, there is some concern about the lag effect. Clearly, some buyers purchased a home this summer because of the tax credit. Unless that credit is extended or expanded, we’ll see a slight reversal in the coming couple of months. I don’t think it derails the overall recovery, but it will be noticeable.

Lean flow workshops scheduled

2009-10-23T13:11:00.010-05:00

Another topic that I have worked into a number of presentations lately is the need for growers [when looking to reduce costs during the downturn] to implement a lean flow event at their operation. I am sure that you have seen the articles in the trade press citing various nurseries and greenhouse firms who have gone down that path, but I too can vouch for the fact that I have yet to talk to a single operation that has not benefited greatly from a lean flow analysis. In fact, most growers become lean flow disciples (of sorts) after seeing the results.

So a recent email blast by FlowVision caught my attention and I thought I share the learning opportunity with you. If you are interested in learning more about lean flow, check out these November workshop offerings by clicking here. No, I am not receiving a kick-back but I am a believer given all of the success stories I have heard. Here are some of the documented benefits:

Lead time reduction as high as 50%	Creation of working capital dollars	Floor-space reduction Greater than 50%
Productivity improvement From 20% to 50%	Less Stressful Peak Seasons	Shrink and dump reduction as high as 50%
Increased Growing Capacity as high as 25%	Defined and Predictable Processes	Highest ROI in Shortest time (4:1 to as high as 10:1)

Identify Your Employee's Hidden Talents

2009-10-22T07:09:00.002-05:00

Today's Management Tip of the Day from Harvard Business was pretty good, so I thought I'd share:

In today's economy, finding external talent to fill your company's needs isn't always possible. Nor is it always necessary. By paying attention and asking the right questions, you will likely discover many hidden talents among your existing employees:
Turn a compliment into an interview. When congratulating an employee on a job well done, ask exactly what helped her succeed. By better understanding her process, you may uncover an unseen strength.
Ask why employees prefer certain tasks or projects. Preferences can be a view into someone's talents. An employee might enjoy a project because it involves a product she cares about or because it gave her a chance to design surveys. Knowing which will possibly uncover talents.
Inquire about dreams. Ask your employees what they would do if they had their career to do over again. Peoples' dreams often include an aspect of themselves they don't regularly share.

Dry for a reason

2009-10-21T18:12:00.005-05:00

Those who have heard me speak before may recognize the following statistic from some of my recent talks: 43% of the 920 greenhouse growers in the state of Georgia are no longer in business. Pike's Nursery, who had long defined retail lawn & garden activity in the Atlanta metro market also suffered the same fate. This, of course, came in the wake of [what I thought] was one of the most severe droughts (2005-2007) the Southeast has faced in a while. Knowing all of this made the recent blurb in the newsletter for the newly branded Southeast Color Connection even more interesting:

We might have all thought they were the worst conditions possible, but according to researchers at Columbia University, the drought that gripped the Southeast from 2005 to 2007 was not unprecedented and resulted from random weather events, not global warming.

The published report (click here) examined population trends, data from weather instruments, computer models, and measurements of tree rings, concluding that the drought was “pretty normal and pretty typical by standards of what has happened in the region over the century,” said Richard Seager, a climate expert at the Lamont-Doherty Earth Observatory.

Census figures show that in Georgia alone the population rose to 9.54 million in 2007 from 6.48 million in 1990, and Douglas LeComte, a drought specialist at the Climate Prediction Center of the National Weather Service said the new report “makes sense.” Although Weather Service records suggest the 2005-07 drought was the worst in the region since the 1950s, LeComte said. “We have had worse droughts before. I am not going to criticize any governments for what they did or did not do,” he added. “But if you have more people and the same amount of water storage, you are going to increase the impact of droughts.”

Not good news for those of us hoping this drought was a freak occurrence or something that could be prevented, but it is a good reminder that times are changing…industry professionals alike should be prepared for the next drought with internal water conservation measures, drought-tolerant product offerings, and customer education literature.

"Water is the next oil"most pundits are saying today. Without a doubt, preserving and conserving our most important natural resource is imperative for green industry firms today. That's why we developed the recent webinar series on water quality, conservation, and management. We had a lot of folks join us for that series, but if you happened to miss them, you can listen online at the Ellison Chair website (click here).

90-year supply of natural gas at current consumption rate

2009-10-20T20:32:00.003-05:00

From MIT Technology Review (click here):

Experts now believe that the country has far more natural gas at its disposal than anyone thought three or four years ago. The revised estimates are largely due to advanced drilling techniques that make it economically feasible to extract the fuel from shale. And while the Marcellus is the most recently discovered and possibly the largest shale-gas deposit (covers PA, NY, VA and OH), others are scattered throughout the country.

The U.S. consumes about 23 trillion cubic feet (TCF) of natural gas a year, according to the Department of Energy's Energy Information Agency (EIA). The Potential Gas Committee (PGC), an organization headquartered at the Colorado School of Mines, put the country's potential natural-gas resources at 1,836 TCF in a biennial assessment released in June. That's 39% higher than its estimate of two years earlier. Add to that the 238 TCF that the EIA has calculated in "proved reserves" (the gas that can be produced given existing economic conditions) and the PGC pegs the future supply at 2,074 TCF.

In other words, there is enough natural gas to supply the country for 90 years at current consumption rates. Even if we used natural gas to totally replace coal in generating electricity, domestic supplies would last for 50 years.

Natural gas offers advantages over other fossil fuels. It burns cleaner than coal, producing much less carbon dioxide. Since coal-fired power generation is responsible for a third of U.S. carbon dioxide emissions, replacing at least some of that coal with gas could significantly reduce such pollution. And using natural gas to replace gasoline and diesel fuel in vehicles could reduce the country's reliance on foreign oil.

"It doesn't matter what the exact number is," says Mark Zoback, a professor of geophysics at Stanford University. "The numbers are all so big it means we have an extremely large domestic resource that is going to play a significant role in the country's energy future."

The availability of vast natural-gas resources in the Marcellus shale and similar sediments around the United States has changed energy calculations in a fundamental way. The discovery of this large and seemingly economical new source of fossil fuel has surprised even geologists who have spent their careers studying the shale. Little wonder, then, that policy makers and politicians are just beginning to try to figure out what the discoveries mean.

Commentary on last week's market performance

2009-10-19T20:03:00.004-05:00

October is known as a month full of market surprises. For example, the Dow fell 508 points on 10/19/87 (22 years ago today), a record drop of 22.6% for the 30-stock index. The day became known as “Black Monday.” The Dow’s previous worst percentage drop was a 12.8% loss on 10/28/29, generally considered to be the start of the Great Depression. But October 2009, brings a recovery in the stock market? Few analysts can substantiate what is causing this “jobless recovery” amidst record government spending.

Last Wednesday’s close over the arbitrary 10,000 benchmark was greeted with enthusiasm by financial markets nationwide. Time will tell how soon the index will slip back below 10,000 -- as it has done 25 times previously. The S&P 500, the more widely-used benchmark of investment managers, finished last week up +22.8% YTD as corporate earnings results from the 3rd quarter continue to impress market watchers. The significance of the mild inflation number for the country reported on Thursday was not lost on investors, showing that earnings growth has occurred without igniting inflation pressures (source: BTN Research). In the first 9 months of 2009, the total market value of all US stocks increased by $2.0 trillion, reaching $12.6 trillion on 9/30/09. Stock values fell by $7.1 trillion during 2008 (source: Wilshire).

The final results for fiscal year 2009 are in and they are not pretty. $2.1 trillion of tax receipts were not nearly enough to cover $3.5 trillion of government spending. The resulting $1.4 trillion of debt for the entire fiscal year was more than 3 times the previous record ($455 billion) set just last year (source: Treasury Department).

Lastly, the Senate hopes to merge together health care bills from 2 different committees this week, leading the way to floor debate by the full Senate on the issue just a week from today. It's going to get interesting folks!

Make sustainability a core part of your business

2009-10-13T15:15:00.001-05:00

From today's Management Tip of the Day from the Harvard Business School:

Sustainability is here to stay. Yet too many organizations treat sustainability as a temporary compliance issue. Use these three tips to make sustainability central to your business:

Elevate responsibility for sustainability to the C-suite. Everyone at the top of the organization should be focused on sustainability, but ultimately, responsibility should lie with one person. Establish a Chief Sustainability Officer and fill the position with someone who has the expertise and power to make it an influential role.
Treat sustainability like a product or service. Incorporate the "triple bottom line" into the company lexicon. Ask people to think about economic, ecological, and social returns.
Establish permanent partnerships with the sustainability community. Identify the NGOs who have influence in your field. Treat them like critical customer accounts and cultivate relationships that allow you to identify win-win solutions to problems.

Water webinar series continues

2009-10-12T14:10:00.004-05:00

The Ellison Chair in International Floriculture announces the THIRD of a 3-part webinar series that focuses on water quality, conservation, and management on October 20 at 11:00 a.m. CDT.

Dr. Don Wilkerson of Texas AgriLife Extension Service will be our next featured speaker and he will address the topic: Water Management That Makes Cents!

CLICK HERE -- or go to http://ellisonchair.tamu.edu/webinar.htm to register for the SECOND webinar of the series.

In case you missed them, CLICK HERE -- or go to http://ellisonchair.tamu.edu/webinar.htm to view the RECORDING of the first two webinars of the series, which are now available online. Dr. Paul Fisher of the University of Florida was the first speaker and he covered: What's in Your Water? Water Quality and Treatment for Pathogens and Algae. Dr. Peter Ling of Ohio State University was our second featured speaker and he addressed the topic: Knowing Exactly When to Apply Irrigation Water.

IMF World Economic Outlook available

2009-10-09T13:21:00.003-05:00

For those who may not know, the International Monetary Fund (IMF) is an organization of 186 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

The World Economic Outlook presents analysis and projections concerning economic developments at the global level, in major country groups (classified by region, stage of development, etc.), and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects. It is usually prepared twice a year, as documentation for meetings of the International Monetary and Financial Committee, and forms the main instrument of the IMF's global surveillance activities.

Click here for the executive summary and here for the full document.

Jobless claims continue to fall

2009-10-09T12:42:00.007-05:00

WALL STREET JOURNAL -- In a positive sign for the labor market, the number of U.S. workers filing new claims for jobless benefits decreased more than economists expected last week. Initial claims for jobless benefits fell by 33,000 to 521,000 in the week ended Oct. 3, the U.S. Labor Department said in its weekly report. The last time initial claims were this low was on January 3.

The four-week moving average of new claims, which aims to smooth volatility in the data, also fell by 9,000 to 539,750 from the previous week's revised figure of 548,750. The last time the four-week moving average was this low was on January 17.

Economists at JP Morgan Chase & Co. wrote in an economic analysis last week that claims generally appear to be on a downward trend, but the pace at which they are falling is a bit sluggish. "The drop has been somewhat slow relative to other large recessions," the economists wrote last week. "Initial jobless claims have fallen 18% in the 26 weeks since they peaked. In the same time span, jobless claims fell by 23% after the 1975 recession, 33% after the 1980 recession, and 29% after the 1982 recession. Claims are usually a good predictor of employment, and the slowness of their decline could indicate a sluggish recovery in the labor market."

Mark Perry provides commentary regarding his chart below: From the early April peak of 658,750, jobless claims (four-week average) have fallen by 119,000 (-18%), and that measure of jobless claims has fallen in 20 out of the last 26 weeks. It's also interesting that in the WSJ article above, the Chase economists didn't mention the two most recent recessions of 1990-1991 and 2001. During those two recessions, jobless claims fell by a comparable amount, by -15% from the March 1991 peak and by -19% from the October 2001 peak.It’s the pace and strength of the recovery that matter now, particularly whether improvements in gross domestic product translate into increased employment. Until businesses start adding to their payrolls -- probably not until next year -- indicators tracking the consumer (retail sales) and manufacturers (durable goods orders) will likely remain unsteady. Housing sales (another consumer indicator) have been doing well this year, having gotten a boost from Uncle Sam in the form of the $8,000 federal income tax credit for new home buyers.

Staycation makes the dictionary

2009-09-23T23:45:00.006-05:00

Obviously the green industry was partially sustained this year by the staycation phenomena. In spite of Much Ado having been made in the trade press over this term, I actually talked with someone at an industry conference tonight who had not heard of it so I thought I might provide further commentary. Wikipedia provides this definition:

A staycation (also spelled stay-cation, stacation, or staykation) is a neologism for a period of time in which an individual or family stays at home and relaxes at home or takes day trips from their home to area attractions. Staycations have achieved high popularity in the US during the financial crisis of 2007–2009 in which unemployment levels and gas prices are high. Staycations also became a popular phenomenon in the UK in 2009 as a weak pound made overseas holidays significantly more expensive.

Interestingly, the term was added to the 2009 version of the Merriam-Webster's Collegiate Dictionary. Proof of the staycation phenomenon can also be illustrated graphically:

Do price increases reflect value?

2009-09-22T19:28:00.003-05:00

An interesting article appeared in Advertising Age this week regarding Restoration Hardware's latest pricing strategy. Hint: It's all in the marketing! Click here.

Another confirmation...

2009-09-19T10:55:00.001-05:00

David Brock provides a quite humorous read with his anecdotal evidence that the recession is indeed over...click here.

Turnaround signs

2009-09-15T17:57:00.007-05:00

The latest from Bill Conerly, www.ConerlyConsulting.com. Click on each graph below to enlarge.
Charts are in PDF at: http://www.ConerlyConsulting.com/charts.php
I'm not sure I have provided Bill's contact info in the past; see below:

Bill's email: Bill@ConerlyConsulting.com

Bill's website: www.ConerlyConsulting.com

Bill's blog: businomics.typepad.com

Bill's book: www.Businomics.com

Protectionism, part 2

2009-09-15T15:58:00.021-05:00

Based on my earlier post, Anonymous makes the following comment:

Since you are an economist I would have expected your title to this entry to read "Depending on Where You Sit, Protectionsim Doesn't Work Folks". The tire retailers will sell tires no matter who makes them, China, Taliban or Americans. American tire makers do care. I would rather read your list of solutions for fair trade between nations instead and maybe find out the extent that Chinese tire manufacturers are competing on an even playing field their US counter parts. By the way, you need to update this entry because the Major Indicies ended up today, I guess on news of US China trade disputes? Come on Charlie, lets leave the politics out of economics.

First, I am delighted to receive the comment (we bloggers really appreciate them) and I can also appreciate the sentiment/perspective that Anonymous provides. I will be the first to admit that I am sometimes too transparent in my political leanings, but I have always encouraged readers to "understand where folks are coming from when we read or listen to them. To me, it is important to know enough to know the difference." (click here for citation)

But I think, in this case, the economics underlying these types of scenarios does point out the shortcomings of such a protectionist strategy.

For example, let's use the graph above (HT: Mark Perry) to demonstrate the probable effects of the tariffs on consumer and producer surplus, where:

Pw is the tire price in the U.S. before the tariff and Pw+t is the higher tire price after the tariff. As a direct result of the tariff protection for inefficient domestic producers, their output expands from Q1 to Q3, and imported tires decrease from Q2 to Q4.

As a result of higher tire prices and fewer tires purchased, American consumers as a group will be worse off by the area (-a, -b, -c, and -d), which represents the loss of "consumer surplus" from the tire tariff.

American tire manufacturers will be better off by an amount represented by the area +a, because they have both increased sales (to Q3) and raised prices (to Pw+t) as a result of their protection from more efficient Chinese tire producers.

The U.S. government will collect tariff (tax) revenue on imported Chinese tires by an amount represented by the area c, which is the product of tire imports (Q4-Q3) times the tariff (t). If we can assume that the tariff revenue in area c will be redistributed efficiently to the economy, we can treat that as a net gain to the economy (this could obviously be argued by supporters of the tariff).

But when you add it all up, considering the costs of the tire tariffs, American consumers are made worse by the area (-a + -b + -c + -d). (Note: This area could be quantified as a specific dollar amount if we had information about the supply and demand for tires.)

When we consider the benefits of the tire tariffs, U.S. producers are better off by area +a, and the government is better off by area +c.

So there is a net loss to the system in that the costs of the tire tariff (-a + -b + -c + -d) are greater than the benefits of the tire tariff (+a + +c), for a net welfare loss of (-b + -d), which will be the "deadweight loss" of the tire tariff (costs to the economy that are not offset by benefits).

One can only conclude therefore that America will be worse off with the tire tariff, not better, and we (collectively) will suffer from higher tire prices, a net loss of jobs, lower economic growth, and a reduction in our country's standard of living.

That is why economists almost universally support free trade and oppose tariffs and trade protection - economic analysis and empirical evidence clearly show that there are always net welfare losses from tariffs. Therefore, politics aside, it will be Americans in the end who will be punished with the punitive tire tariffs.

Tributes to a great man -- Norman Borlaug

2009-09-15T14:29:00.010-05:00

Click on each link below:

Texas A&M news release

New York Times article

Wall Street Journal article & video

Reason Magazine interview

Nobel Prize website

Protectionism doesn't work folks

2009-09-15T14:17:00.007-05:00

Here is a recap of the headlines regarding the recent tariff on imported tires:

Obama to impose tariffs on Chinese tires: Obama imposes tariffs on China tires for 3 years, a decision that could anger Asian powerhouse

China Strikes Back on Trade: Beijing Threatens U.S. Chicken, Car Parts After Washington Slaps Stiff Tariffs on Tires

Stocks head lower on US-China trade concerns: Major indexes fall in early dealings amid concerns about US-China trade dispute

Tire Tariffs Are Cheered by Labor: Mr. Obama ordered the tire tariffs after the United States International Trade Commission, an independent government agency, determined that a more than tripling of Chinese tire imports had disrupted the $1.7 billion tire market....President George W. Bush had rejected four similar recommendations from the trade commission, angering organized labor.

"One of the most amazing and overlooked details about the "punitive tire tariffs" is that they were actually opposed by the domestic tire industry (Goodyear and Cooper). It was the United Steelworkers who filed the complaint, not domestic tire workers or the domestic tire industry." (Mark Perry)

From the NY Times:

Mr. Obama, responding to a complaint by the United Steelworkers, imposed a 35% tariff on Chinese tires for cars and light trucks. China has deplored the administration’s decision, suggesting it caved to domestic support for protectionism. The Tire Industry Association, which represents American tire retailers, said the decision was ill-advised and would lead to higher prices for consumers.

What a difference a value proposition makes!

2009-09-09T13:16:00.006-05:00

From today's Harvard Business Daily Stat:

76% of frequent fliers would switch airlines in order to have Wi-Fi access in the air, according to a new survey by Wakefield Research and the Wi-Fi Alliance. 71% would prefer Wi-Fi over a meal, and 55% would change their travel plans by a day to avoid being out of touch during the flight. 94% say Wi-Fi is "the best thing airlines have done" in the last three years.

OK, admittedly these are stated versus revealed preferences, but obviously, such behavioral change in a relatively short period of time requires a value proposition that is compelling and relevant.

Makes me wonder what value propositions we are putting forth in the green industry that would cause similarly stark behavioral change??? Could it be emphasizing the quality of life enhancements that we offer???

As usual, feel free to weigh in with your own thoughts...comments welcomed.

Unemployment update

2009-09-06T08:57:00.003-05:00

The latest numbers, fresh from the Bureau of Labor Statistics:

The unemployment rate went up to 9.7%, reversing the improvement we saw in July. To be fair, “unemployment” is somewhat difficult to measure. For one thing, the way the unemployment rate is calculated doesn’t take into account the people who are no longer looking for work. (You know, the “discouraged workers” we heard about endlessly during the Bush years.) So you could see the economy improve but the unemployment rate actually go up, because more people start looking for work.

Source of graph. Click here for Mankiw's interpretation of it.

Are We Leaving the Recession Behind

2009-08-31T19:30:00.003-05:00

The latest from Robert Barr in the Floral Trend Tracker. He makes a good point about the money that federal, state and local governments are borrowing for their programs.

With a number of economic indicators flashing green over the past couple of months, it sure seems like we're leaving the recession behind. Even new home sales are rebounding, up 15% in the last three months (May, through July) relative to the three months prior (February through April), even after seasonal adjustment.

But even if we're in a "statistical" recovery, the economic climate will feel sluggish. Expect to hear a lot about our "jobless" recovery well into 2010, as though that's a contradiction in terms. It isn't; the last two recoveries were marked with very low job growth for quite some time. In fact, the jobless recovery of 1992 felt so oppressive that the presidential campaign treated it like a recession: "It's the economy, stupid!" And 20 months after the recovery began (as was determined later), the poor economy was a key contributor to President George H.W. Bush's defeat in November 1992.

So it ís not surprising that, even as we get some positive reports, we see that employment is still falling, with the number of payroll jobs 4.2% lower than it was a year ago.

Why such a lackluster recovery? The economy is still making major adjustments to the severe imbalances that created the worst financial crisis since the Great Depression.

Bank lending activity remains low, especially for small business expansion. The willingness of banks to lend to consumers continued its two-year descent during the summer. True, analysts were quick to point out that the declines were less severe than those of a year ago. But still, after the plummet of the past year, we're still falling to even lower levels today. Bank lending standards across all major loan categories to households and businesses also continued to tighten.

For their part, households are improving their balance sheets ñ saving more and consuming less. Many suggest that this lack of spending is harmful to the economy — as if to be economically beneficial, income should be spent immediately and not saved. But that's a misconception. It's easier to see the beneficial effects of immediate spending (Look! They bought cars, homes, and furniture!) but the beneficial effects of saving, while less visible, are nonetheless critical to long-term economic growth and prosperity. More household savings expands the pool of available capital for firms to borrow to expand their business.

That means funding the same level of economic activity will require less borrowing from overseas and lower interest rates in the economy.

Then the issue becomes: if rates are low and funds for lending are available, are businesses willing to borrow and expand production? How confident are they that the economy will be ready to buy their expanded set of products? As always, business confidence and entrepreneurial assurance will need to be in place to generate a sustainable recovery.

Looking long-term, the massive increase in government debt will offset the progress households are making in correcting their debt imbalances. The deficit-to-GDP ratio in 2008 was 3.2%; in 2009 it's expected to be 11.2%, and the administration ís ten-year forecast projects that the U.S. will exceed $9 trillion in total deficits just over the next ten years. That's in addition to the $5.8 trillion national debt we've already accumulated.

Why is that important for future economic growth? Because the money that federal, state and local governments borrow for their programs can't be lent to businesses to fund private-sector projects. Consequently, the more we allow the government to borrow, the less we have to channel toward productive investment.

The Success Trap

2009-08-28T09:56:00.003-05:00

From the latest BNET -- Stanford professor Jeffrey Pfeffer warns against the dangers of making it big:

Recently, my wife and I went to one of our favorite restaurants in Half Moon Bay, California. The experience wasn’t what we remembered; we waited 30 minutes past our reservation before we were seated, and another 15 minutes for bread and water to appear. I started to reflect on how common such experiences are - and not just in restaurants.

Few businesses are able to avoid the “success ruins everything” syndrome. Some firms overexpand and fail to maintain consistent standards, a fate that has befallen numerous restaurants and celebrity chefs that have spread themselves too thin. Others lose sight of their quality and performance standards in the push to grow quickly. Toyota, which built its reputation and economic success on its quality and design processes, recently admitted that it had let those standards slip in its quest to become bigger than GM. Toyota’s newly appointed CEO promised to return the company to its roots, fixing its quality problems and reinvigorating its technical innovation.

Some companies respond to success by resting on their laurels and ceasing to innovate. Microsoft, with its dominant position in many software markets, failed to improve security and other features on its browser after it crippled Netscape. This lacuna in product development permitted Mozilla to rise from Netscape’s ashes, build a more user-friendly browser, and in the process, gain almost a quarter of the browser market.

The complacency that often comes with success provides a window of opportunity for underdogs and upstarts. Witness Apple’s recent dominance over former cell-phone kingpin Motorola and Ryanair’s profits in a European airline market where its larger competitors are losing money in the face of declining revenues.

And it’s not just companies that suffer from success. So, too, do personal relationships. When a group achieves great success, it can split apart with jealousy as individuals each seek credit and a disproportionate share of the resources from their collective accomplishments. Individuals in firms often come to feel that they could make it on their own and really don’t need their colleagues. Such is the story behind the numerous splits in law firms, investment banks, and management consulting companies. As Tommy Chong, part of the counterculture comedy duo Cheech and Chong, remarked in an interview in the Toronto Star, show business, and maybe all business, is like mountain climbing: “When you’re climbing up the mountain, that’s when you really need each other. Then, when you get near the top, it’s over.”

But it doesn’t have to be this way. The key is to understand the basis of your success, whatever that happens to be, and retain a laserlike focus. Michael O’Leary, CEO of Ryanair, has not let the airline’s success change its emphasis on cost-cutting, even at the expense of customer service. Ryanair’s value proposition is cheap fares - and if you want something else, fly another carrier. Southwest Airlines has resisted the temptation to fly planes other than Boeing 737’s and to expand internationally. I understand how important great colleagues have been to my work over the years, so I try to be as generous with credit as possible, work on maintaining these important relationships, and to always be on the lookout for those who can complement my skills.

Yes, maintaining focus and discipline in the face of success is difficult. But the companies that maintain their performance over time do what it takes to maintain what made them successful to begin with. The night before our debacle in Half Moon Bay, we ate at Gary Danko’s, one of the toughest reservations to get in San Francisco. It was our anniversary, and when I expressed some dismay that our table wasn’t as private as I had hoped, a complimentary appetizer arrived almost immediately. Maybe that’s why Danko’s restaurant has maintained its position in the ratings stratosphere while so many other enterprises - restaurants and businesses - fall by the wayside, lured by success into forgetting what made them great in the first place.

I’m sure you have examples of businesses that were able to maintain the bases of their success as they grew and over time, and some that have fallen by the wayside. Let us know those examples and the lessons you draw from them.

Jeffrey Pfeffer is a professor of organizational behavior at Stanford’s Graduate School of Business and is the author or co-author of 12 books including “What Were They Thinking? Unconventional Wisdom About Management.

Water webinar series continues

2009-08-23T07:41:00.025-05:00

The Ellison Chair in International Floriculture announces the second of a 3-part webinar series that focuses on water quality, conservation, and management continues this month on September 15, 2009 at 11:00 a.m. CDT. Dr. Peter Ling of Ohio State University will be our next featured speaker and he will address the topic: Knowing Exactly When to Apply Irrigation Water.

Proper irrigation management is a key to successful plant growth and pest management in controlled environments. Further, limited water resources and public concerns of environmental sustainability are making greenhouse water usage efficiency a priority for commercial greenhouse production. Peter will discuss three aspects of automated irrigation management to achieve high efficiency water usage: when to water, how much to water, and how to deliver water. Starting with an overview of commercial sensors for irrigation management, Peter will also introduce emerging non-contact sensing technologies to determine when plants need water by monitoring plants directly. Using this sensing technology, along with evapotranspiration models to determine irrigation quantity and proper delivery of water, his research team has achieved about 50% water savings in growing plants, using water as a biological growth regulator to improve plant quality.

CLICK HERE -- or go to http://ellisonchair.tamu.edu/webinar.htm to register for the SECOND webinar of the series.

HOLD THE DATE for the third webinar of the series! Registration will be open soon. October 20, 2009 - 11:00 a.m. CDT. Dr. Don Wilkerson of Texas A&M University will our third featured speaker discussing the topic: Water Management that Makes Cents!

CLICK HERE -- or go to http://ellisonchair.tamu.edu/webinar.htm to view the RECORDING of the first webinar, which is now available online. Dr. Paul Fisher of the University of Florida covered: What's in Your Water? Water Quality and Treatment for Pathogens and Algae

Inflation fears calmed...for now.

2009-08-21T15:04:00.005-05:00

I received an interesting question from a green industry grower this morning:

I appreciate your informative blog. Thanks. In the January conference we heard that on the rebound inflation will devalue dollars and we should convert cash to inventory as goods will increase in value. We also were advised to convert to fixed rates on loans. Our banker is unsure if we will see this inflation as we have in exiting past recessions. It seems that spending will continue to be weak for several years and commodities which were falsely valued high by traders are still in oversupply and profitable with foreign oil still draining too many dollars from the US at a healthy profit to producers and suppliers. Do you have any thoughts on this now you could post?

I think the best way to attack this question is by examining the usual components of inflation -- that is, trends in the producer price index and the consumer price index.

In their report released on Aug 18, the BLS reported that wholesale prices in the U.S. fell more than forecast in July as energy costs receded, capping the biggest 12-month drop on record and showing inflation will not be an immediate concern for Federal Reserve policy makers.

The 0.9 percent decrease in prices paid to factories, farmers and other producers followed a 1.8 percent gain in June. Excluding food and fuel, so-called core prices unexpectedly fell 0.1 percent.

A record amount of excess capacity will prevent production bottlenecks from developing, indicating wholesale prices will be slow to recover even as the economy improves. A lack of inflation was one reason Fed policy makers last week reiterated a pledge to keep the benchmark interest low for an “extended period.”

On the consumer side of things,

U.S. consumer prices fell last month at their fastest annual pace since 1950, an indication that inflation isn't a threat to the economy or the Federal Reserve. The consumer price index was unchanged on a monthly basis in July from June, the Labor Department said Friday, matching economist expectations, according to a Dow Jones Newswires survey.
The core CPI, which excludes food and energy prices, rose 0.1%, which was also in line with expectations. Unrounded, the CPI posted no change last month. The core CPI advanced 0.091% unrounded.
Consumer prices plunged 2.1% compared to one year ago, the largest 12-month decline since January 1950. Most Fed officials think a positive inflation rate around 2% is consistent with their dual mandate of price stability and maximum employment.

Even regarding inflationary pressures from an increase in the money supply, most economists now (in 2009) feel less inflationary pressures are likely. For example, Mark Perry reports:

There are some economists who are concerned about future inflation because of the loose, expansionary monetary policy in 2008. I don't think inflation will be a problem, and here's why:

The chart above shows the annual growth rate in the M2 money supply (percent change from the same month in the previous year, data here) monthly from January 1960 to July 2009. Notice that:

1. There was sustained double-digit money growth in two periods in the 1970s, and that is what generated the high double-digit inflation in that decade. There was double-digit M2 growth for 29 consecutive months from March 1971 to July 1973 (and nine straight months above 13%), and then again for 30 consecutive months from July 1975 to December 1977, with a high of almost 14% growth in early 1972 (see chart above).

2. There was double-digit M2 growth in 1983, but only for 12 months from January to December of 1983, and this monetary expansion wasn't enough to cause inflation (see chart below). Inflation never rose above 5% for many years after the double-digit money growth of 1983.

3. There was double-digit money growth in September, November and December of 2001, but inflation in subsequent years never got above 5% (see chart below).

4. The peak monetary expansion of M2 in 2008 was below the peaks in 1971-1972, 1976-1977, 1983 and 2001 (see chart above), and during the recent monetary expansion there has been only one month of double-digit money growth, and that was the peak of 10% in January 2009.

Bottom Line: Without sustained double-digit M2 growth, we won't have anything close to double-digit inflation. And the historical evidence during the two most recent experiences of double-digit money growth in 1983 and 2001 demonstrates that short periods of double-digit money growth aren't enough to bring about inflationary pressures. And since recent M2 growth during the "loose" monetary policy of 2008 is actually lower than in 1983 and 2001, there probably can't be any inflationary pressures that will lead to problems with future inflation. In other words, a single month of double-digit M2 growth in January 2009 isn't expansionary enough to create inflation.
Hope this helps, Mr. Grower.

Importance of social media

2009-08-21T10:24:00.010-05:00

Much discussion has ensued lately at various green industry meetings regarding the applicability of social media marketing efforts. Is this something that you should consider for your business? Click below to find out.

HT to Stan for the link.