sum2llc

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Big Data for a Small World: SMEIoT

smeiotIoT

The world is a great big database and algorithmic wizards and mad data scientists are burning the midnight oil to mine the perplexing infinities of ubiquitous data points.  Their goal is to put data to use to facilitate better governance, initiate pinpoint marketing campaigns, pursue revelatory academic research and improve the quality of service public agencies deliver to protect and serve communities. The convergence of Big Data, Cloud Computing and the Internet of Things (IoT) make this possible.

The earth is the mother of all relational databases.  It’s six billion inhabitants track many billions of real time digital footprints across the face of the globe each and every day.  Some footprints are readily apparent and easy to see.  Facebook likes, credit card transactions, name and address lists, urgent Tweets and public records sparkle like alluvial diamonds; all easily plucked by data aggregators and sold to product marketers at astonishing profit margins.  Other data points are less apparent, hidden or derived in the incessant hum of the ever listening, ever recording global cybersphere.   These are the digital touch points we knowingly and unknowingly create with our interactions with the world wide web and the machines that live there.

It is estimated that there is over 20 billion smart machines that are fully integrated into our lives.  These machines stay busy creating digital footprints; adding quantitative context to the quality of the human condition.  EZ Passes, RFID tags, cell phone records, location tracking, energy meters, odometers, auto dashboard idiot lights, self diagnostic fault tolerant machines, industrial process controls, seismographic, air and water quality apparatuses and the streaming CBOT digital blips flash the milliseconds of a day in the life of John Q. Public.  Most sentient beings pay little notice, failing to consider that someone somewhere is planting the imprints of our daily lives in mammoth disk farms.  The webmasters, data engineers and information scientists are collecting, collating, aggregating, scoring and analyzing these rich gardens of data to harvest an accurate psychographic portrait of modernity.

The IoT is the term coined to describe the new digital landscape we inhabit.  The ubiquitous nature of the internet, the continued rationalization of the digital economy into the fabric of society and the absolute dependency of daily life upon it, require deep consideration how it impacts civil liberties, governance, cultural vibrancy and economic well being.

The IoT is the next step in the development of the digital economy. By 2025 it is estimated that IoT will drive $6 Trillion in global economic activity.  This anoints data and information as the loam of the modern global economy; no less significant than the arrival of discrete manufacturing at the dawn of industrial capitalism.

The time may come when a case may be made that user generated data is a commodity and should be considered a public domain natural resource; but today it is the province of digirati  shamans entrusted to interpret the Rosetta Stones, gleaning deep understanding of the current reality while deriving high probability predictive futures.  IoT is one of the prevailing drivers of global social development.


SME

There is another critical economic and socio-political driver of the global economy.  Small Mid-Sized Enterprises (SME) are the cornerstone of job creation in developed economies.  They form the bedrock of subsistence and economic activity in lesser developed countries (LDC).  They are the dynamic element of capitalism.  SME led by courageous risk takers are the spearhead of capital formation initiatives.  Politicians, bureaucrats and business pundits extol their entrepreneurial zeal and hope to channel their youthful energy in service to local and national political aspirations.  The establishment of SME is a critical macroeconomic indicator of a country’s economic health and the wellspring of social wealth creation.

The World Bank/ IFC estimates that over 130 million registered SME inhabit the global economy. The definition of an SME varies by country. Generally an SME and MSME (Micro Small Mid Sized Enterprises)  are defined by two measures, number of employees or annual sales.  Micro enterprises are defined as employing less than 9 employees, small up to 100 employees and medium sized enterprises anywhere from 200 to 500 employees.  Defining SMEs by sales scale in a similar fashion.

Every year millions of startup businesses replace the millions that have closed.  The world’s largest economy United States boasts over 30 million SME and every year over one million  small businesses close.  The EU and OECD countries report similar statistics of the preponderance of SME and numbers of business closures.

The SME is a dynamic non homogeneous business segment.  It is highly diverse in character, culture and business model heavily colored by local influence and custom. SME is overly sensitive to macroeconomic risk factors and market cyclicality.  Risk is magnified in the SME franchise due to high concentration of risk factors.  Over reliance on a limited set of key clients or suppliers, product obsolescence, competitive pressures, force majeure events, key employee risk, change management and credit channel dependencies are glaring risk factors magnified by business scale and market geographics.

In the United States, during the banking crisis the Federal Reserve was criticized for pursuing policies that favored large banking and capital market participants while largely ignoring SME. To mitigate contagion risk, The Federal Reserve  quickly acted to pump liquidity into the banking sector to buttress the capital structure of SIFI (Systemically Important Financial Institutions). It was thought that a collateral benefit would be the stimulation of SME lending.  This never occurred as SBA backed loans nosedived. Former Treasury Secretary Timothy Geithner implemented the TARP and TALF programs to further strengthen the capital base of distressed banks as former Fed Chairman  Ben Bernanke pursued Quantitative Easing to transfer troubled mortgage backed securities onto Uncle Sams balance sheet to relieve financial institutions  of these troubled assets. Some may argue that President Obama’s The American Recovery and Reinvestment Act of 2009 (ARRA)  helped the SME sector.  The $800 billion stimulus was one third tax cuts, one third cash infusion to local governments and one third capital expenditures aimed at shovel ready infrastructure improvement projects.  The scale of the ARRA was miniscule as compared to support rendered to banks and did little to halt the deteriorating macroeconomic conditions of the collapsing housing market, ballooning unemployment and rising energy prices severely stressing SME.

The EU offered no better.  As the PIGS (Portugal, Ireland, Greece, Spain) economies collapsed the European Central Bank forced draconian austerity measures on national government expenditures undermining key SME market sensitivities.  On both sides of the Atlantic, the perception of a bifurcated central banking policy that favored TBTF Wall Street over the needs of  an atomized SME segment flourished.  The wedge between the speculative economy of Wall Street and the real economy on Main Street remains a festering wound.

In contrast to the approach of western central bankers, Asian Tigers, particularly Singapore have created a highly  supportive environment for the incubation and development of SME. Banks offer comprehensive portfolios of financial products and SME advisory services. Government legislative programs highlight incubation initiatives linked to specific industry sectors. Developed economies have much to learn from these SME friendly market leaders.

The pressing issues concerning net neutrality, ecommerce tax policies, climate change and the recognition of Bitcoin as a valid commercial specie are critical developments that goes to the heart of a healthy global SME community.  These emerging market events are benevolent business drivers for SME and concern grows that legislative initiatives are being drafted to codify advantages for politically connected larger enterprises.

Many view this as a manifestation of a broken political system, rife with protections of large well financed politically connected institutions. Undermining these entrenched corporate interests is the ascending digital paradigm promising to dramatically alter business as usual politics. Witness the role of social media in the Arab Spring, Barack Obama’s 2008 election or the decapitalization of the print media industry as clear signals of the the passing away of the old order of things.  Social networking technologies and the democratization of information breaks down the ossified monopolies of knowledge access. These archaic ramparts are being gleefully overthrown by open collaborative initiatives levelling the playing field for all market participants.

SMEIoT

This is where SMEIoT neatly converges.  To effectively serve an efficient market, transparency and a contextual understanding of its innate dynamics are critical preconditions to market participation.  The incubation of SME and the underwriting of capital formation initiatives from a myriad of providers will occur as information standards provide a level of transparency that optimally aligns risk and investment capital. SMEIoT will provide the insights to the sector for SME to grow and prosper while industry service providers engage SME within the context of a cooperative economic non-exploitative relationship.

This series will examine SME and how IoT will serve to transform and incubate the sector.  We’ll examine the typology of the SME ecosystem, its risk characteristics and features.  We’ll propose a metadata framework to model SME descriptors, attributes, risk factors and a scoring methodology.  We’ll propose an SME portal, review the mission of Big Data and its indispensable role to create cooperative economic frameworks within the SME ecosystem. Lastly we’ll review groundbreaking work social scientists, legal scholars and digital frontier activists are proposing to address best governance practices and ethical considerations of Big Data collection, the protection of privacy rights,  informed consent, proprietary content and standards of accountability.

SMEIoT coalesces at the intersection of social science, commerce and technology.  History has aligned SMEIot building blocks to create the conditions for this exciting convergence.  Wide participation of government agencies, academicians, business leaders, scientists and ethicists will be required to make pursuit of  this science serve the greatest good.

 

This is the first in a series of articles on Big Data and SMEIoT . It originally appeared in Daftblogger eJournal. Next piece in series is scheduled to appear on Daftblogger eJournal within the next two weeks.

#smeiot #metasme #sum2llc #sme #office365 #mobileoffice #TARP #capitalformation #IoT #internetofthings #OECD #TBTF #Bitcoin #psychographics #smeportals #bigdata #informedconsent

July 9, 2014 Posted by | banking, Bernanke, capitalism, commerce, credit, credit crisis, culture, economics, information technology, internet of things, legal, legislative, metasme, OECD, politics, private equity, psychology, regulatory, risk management, small business, SME, smeiot, TALF, TARP, Treasury, Uncategorized | , , , , , , , , , , , , , , , , | Leave a comment

Sustainable Economics

We have put our good mother through a lot over the past few million years. Ever since we walked out of the great rift the biospheres dominant species has really left a mark. I know that mark is but a tiny spec on the archaeological record of the earth which spans a few billion years but our impact is unmistakable.
 
I guess it started with the invention of hand tools, fire, wheels, shelter construction, water cultivation and agriculture. You can’t forget hunting in packs, weaponry, domestication of animals, speech, art and writing. A consciousness of a portfolio of skills, specialization, division of labor and the ability to discern exchange value within the community birthed a notion of governance. Our social nature was crowned with our ability to transmit craft and knowledge to successive generations, assuring continuity and cohesion with a common history and a well articulated cosmology. Put it all together and I think you got your basic modern Homo sapien.
Oh yeah, we also developed a psychology, an ego, that incorporates the primacy of ourselves and our selfish needs. It rationalizes and guides our interactions with nature, transforming the intention of our labor into a transaction that alters the conditions of the environment. It also serves as indisputable empirical evidence of the master species, elevated above all others as time marks the progress and dominion of the human race.
 
Our dominion has been codified into our sacred literature. Our creation stories and cosmic mission statements expressly state to exercise our dominion over nature, to propagate the species and to be fruitful and multiply. The screaming unencumbered id, left to its own devises, unchecked in the grand supermarket. We human’s have succeeded beyond our wildest expectations and the species continues to be fruitful and multiplying. 
 
We sojourn on, notching the ladder of history with marks of our progression through the ages. Along the way we Cro-Magnons expropriated the Neanderthals and moved into their Mediterranean digs complete with fire pits, burial chambers and the best take on modern art until Picasso came along.
 
I guess that’s the point. Our survival comes at the expense of other creatures and things. I’m no Malthusian, but Tom Friedman’s flat world is getting crowded.    And as we celebrate the 44th Earth Day a midst the greatest die off of species since mankind coronated himself as master and commander of all things earth; it may be time to consider how our dominion is hampering the well being of the lesser flora and fauna kingdoms and what we can do to begin the practice of a more sustainable economics.
 
When I look at Las Vegas, I behold a garish mecca of capitalism on steroids.  I’m overwhelmed by the banality of the the things we so highly esteem. A community venerated and propped up on the foundation of vice, hedonism and the radical pursuit of money. Unbridled development of a crystal neon city constructed in the middle of a desert, recklessly consumes water and energy resources and misdirects human capital to maintain the facade of an unsustainable economy. 
 
Phoenix poses the same paradox. Darling child of the credit boom, Phoenix is a city consuming itself. The rising threat of climate change, blistering heat, dwindling water supplies and raging haboobs would give any urban planner reason to pause. A bustling city of many millions of striving citizens consuming energy, water and human capital built on the unsustainable foundation of excessive consumption and an unrealistic valuation of the capital required to maintain it. 
 
The explosion of fracking natural gas deposits in the Marcellus Shale formation is another example of sacrificing long term sustainability for the immediacy of shareholder returns. The Marcellus Deposit has proven reserves that only last a decade. As evidenced by the hyper development occurring in North Dakota,  economies tied to resource extraction are prone to experience classic boom bust cycles. During boom times all is well. But the good times don’t last all that long and communities are left in the wake of the bust cycle to deal with the aftermath. 
 
The Keystone XL Pipeline and the rapid expansion of the LNG extraction industries are being touted as the foundation of American energy independence. But this energy resource extracts a high cost on the land and its natural bounty. It poses significant risk to water aquifers, air quality, wildlife and the storage of waste-water byproducts will present long term remediation challenges to communities for many decades after the last well is capped.
 
Our new found fortune of LNG comes with a significant opportunity cost to develop alternative energy sources as it continues to tether our economic dependence on a dwindling supply of fossil fuels. Perpetuating this dependence also requires us to expend huge sums of money on the military. The political arrhythmia in the Ukraine and the keen interest of the United States has much to do with the changing political economy of fossil fuels and the protection and accession of markets.
 
Sustainability requires a new approach to the emerging realities of the global political economy. Recognition that competing interests bring important capital to the table, and that all must be recognized and fully valued in the new algorithms of sustainability is the keystone and pipeline of sustainability. The practice of unfettered development is unsustainable. Regulation, arbitration and revitalization cannot be sacrificed at the altar of laissez-faire politics that only serves to widen the wealth gap at tremendous social cost. The politicization of economic policy cannot continue to be beholden to rampant monetization. Sustainability is the creation of long term value for a diverse community of stakeholders. It needs to become our guiding mantra as the global population approaches 8 billion souls. 

Happy Earth Day.

Music Selection:

Risk: fracking, political, water, air, war, opportunity cost, renewal clean energy, climate change

April 23, 2014 Posted by | business continuity, commodities, compliance, economics, environment, military, political risk, politics, psychology, regulatory, risk management, social unrest | , , , , , , , | Leave a comment

Drivers Wanted!

fuel efficientThe cash for clunkers rebate program is a great success.  The first $2. billion allotted to the program was spent within two weeks.  The recently approved additional allocation of $1 billon for the program will no doubt be taken advantage of by consumers.   American’s are always keen to do a deal and can’t wait to drive away in a brand new ride unwritten in part by our most favorite relative, Uncle Sam.

The government’s goals of the cash for clunkers program are being achieved.  The program  will have a positive environmental impact as more fuel efficient vehicles replace the old gas guzzling clunkers.  The program has also allowed car manufacturers to liquidate 2009 inventories that were piled high due to tepid demand borne from the recession and credit crisis.  The program may also help cure consumers recession psychology and their new found aversion to purchasing new stuff.

It is hoped that this boost to car manufacturers may kick start the economy.  Ford Motor Company’s  recent positive earnings announcement and GMs and Chrysler’s arrest of declining quarterly sales are one of the “green shoots” of recovery pointed to by politicians and economists.  However a huge question remains concerning how to incubate long term sustainable drivers that will end the recession?  The $600 tax rebate checks sent out by Paulson last year provided a temporary boost to the economy.  Its effects did little more then forestalling the more deleterious effects of the growing recession.  See The Charge of the Light Brigade.  Hopefully cash for clunkers will help to kick start some recovery momentum to an economy aching for relief from systemic malaise.

The US economy has grown overly dependent on a few industry sectors that include services, real estate, banking and construction.  The SME service sectors have been devastated by the contraction of credit, unemployment and the curtailment of consumer demand brought on by the recession.  During the good times, these sectors were driving economic growth and expansion.  Unfortunately these sectors remain conspicuously absent as leading drivers in the new emerging  economy.

Macroeconomic factors unpinning recovery continue to be negative for these sectors.  Hi tech and manufacturing seen as critical to a lasting recovery have also been a bit lethargic.   These industries are capital intensive and with the capital markets still seeking a firm recovery footing these sectors will remain weak.   Health care and pharmaceuticals are key sectors in the US economy, but political uncertainty around reforming industry practices and much needed restructuring hampers the sectors ability to assume a leading position in recovery scenarios.

Last year Sum2 published The Hamilton Plan, a Ten Point Program to incubate small midsized enterprise (SME) manufacturers.  At its core, the plan seeks to encourage capital formation initiatives from public and private sources.  Manufacturing is key to any sustainable economic recovery.  Our ability and desire to link manufacturing to the entrepreneurial capabilities and business skills of SME’s to address targeted needs could well be the drivers that finally steer us out of the recession.

Risk: recession, SME, manufacturing

August 10, 2009 Posted by | commerce, credit crisis, economics, Hamilton Plan, manufacturing, private equity, psychology, recession, SME, sustainability, Uncategorized | , , , , , , , , , , , , , , | Leave a comment