Modern Management Theory: Lean Methodology

Modern Management Theory:

Lean Methodology

Lean Manufacturing[1] is an Operational Excellence strategy that enables you to change for the better. Lean principles are derived from the Japanese manufacturing industry. The term was first coined by John Krafcik in his 1988 article “Triumph of the Lean Production System”. “Kaizen”, word recurrent in the Lean process, means to change for the better. It is the persistent pursuit in the elimination of waste, also called “Muda”. We must always fight to eliminate waste but taking care of the most important resource of all: the employees. Lean is not only about attacking waste while increasing the speed at which products are produced. Lean is also very focused in improving the quality of our products as well as the stability of our processes. Lean supports a continuous improvement cycle that is consistent with how we always approach quality. Lean is about incremental improvement, for example: improve 30% instead of 100% later or never. By the time we plan a 100% perfect improvement, we have lost valuable time, and the business environment will have changed. Lean is about removing the wasteful steps in a process or in how we approach our work. It is NOT about eliminating jobs or devaluing what people do. When wasteful steps are removed from a process, it frees people up to focus their time, and talent, in other quality work.

Lean Management[2] is based on 4 principles:

1.       Pull: rather than producing as much as possible, customer demand pulls goods or services through the manufacturing process. This minimizes overproduction, inventory and ultimately work in capital.

2.       One Piece Flow: focusing on one single piece at a time minimizing work in progress, process interruptions, lead and waiting time while increasing quality and flexibility.

3.       Takt: is how fast manufacturing must occur to meet customer demand. Takt allows us to balance work content, achieve a continuous flow and respond flexibly to changes in the market place.

4.       Zero defects: a Lean company does not pass on defects. Mistakes from previous steps must be fixed before going on.

Lean Thinking[3] is a philosophy about bringing value from your customers’ perspective, eliminating waste and continuously reducing costs and improving efficiency, productivity and quality. It is a way of thinking that is orientated to find and eliminate waste, and building a habit of looking for it. Office waste can take 4 forms: Information, Process, Physical Environment and People. Even if all the steps in a process add value, we still do not get ideal efficiency if it is blocked. Lean is derived from the Toyota Production System an appears as a generalization of it into other industries. However, it is not the same. Lean is more market orientated and focuses on the improvement concepts of “flow” or “pull”. A Lean Thinking includes a cultural change in organizations, by training the employees to review their processes regularly identifying and eliminating waste as well as increasing productivity and customer services.

The Lean Startup[4] is a business development methodology developed by Eric Ries in 2008 mainly orientated to high-tech companies. If an organization can learn as quickly as possible what the market values enough to pay for, it will be able to adapt it’s business and grow it into a sustainable enterprise. This is called validated learning. This is achieved through a cycle called: Build, Measure, Learn. The idea is to get back as possible to the Build phase as soon as the market has been tested. Innovation Accounting is the measurements that are taken, the milestones that are set, and prioritize the work that it done. If Innovation is valued, whether it is as a big company or as a start-up, this is the best way to accomplish it. The milestones of the Start-up:

Build a Rapid Prototype: A Minimum Valuable Product (MVP) is the smallest product or service that you can create and start to generate learning from. The goal is to attract the early adopter market, since they know that the products will have bugs if is not necessary to have the best possible product to launch. Any effort you need outside the MVP is considered waste because it wasn’t driven in a response to the market place.

Measure and Learn: this is composed of 3 learning milestones. 1. Establish the baseline 2. Tuning the engine 3. Pivot (or persevere). Be careful with vanity metrics! In the start-up world this can be website visitors or even registered users. The metrics must be Actionable, Accessible and Auditable. When implementing an improvement to your product, you should be testing that improvement against a baseline to see what impact the change has on your business. Once you define if your business has any chance of success, you can pivot or persevere. A pivot is a fundamental change in your business strategy. If you conclude that your business strategy isn’t likely to succeed you can change your strategy.  

Lean introduces the most modern management theory orientated to boost efficiency. Consider the introduction of the MVP in the IT Industry as a revolutionary concept. It concentrates on testing the market to look for the business opportunities before pushing through with them. But innovation can also be applied to drive organizational change. Internal resistance however can spoil it up. The Lean Turnaround[5] describes such situations, and how to use Lean Methodology to turn around companies. Lean introduces also it’s own metrics and analytics to analyze information and pivot when necessary. Pivoting and changing business strategy in time is key to success, as well as understanding which is the right information to analyze. 

Cristian Bøhnsdalen

CMO/CFO & Co-Founder @ITRevolusjonen

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[1] https://en.wikipedia.org/wiki/Lean_manufacturing

[2] http://searchcio.techtarget.com/definition/lean-management

[3] https://en.wikipedia.org/wiki/Lean_thinking

[4] https://en.wikipedia.org/wiki/Lean_startup

[5] http://www.lean.org/downloads/Byrne_slides_cm3.pdf

Equalitarism in Modern Times

Equalitarism in Modern Times

According to Wikipedia, Equalitarism[1] is a trend of thought that favors equality for all people. Egalitarian doctrines maintain that all humans are equal in fundamental worth or social status: either as a political doctrine that all people should be treated as equals and have the same political, economic, social, and civil rights; or as a social philosophy advocating the removal of economic inequalities among people, economic egalitarianism, or the decentralization of power. Some sources define egalitarianism as the point of view that equality reflects the natural state of humanity.

Social Equality is at some point the major goal of governments, but it is difficult to know what is the best way to achieve it. Socialists usually refer to heavy government intervention as a way to balance inequality, in the form of Social Plans, benefits, etc. Capitalists take the opposite approach: they are usually in favor of a pro-company free-market philosophy. Both have advantages and disadvantages. Too much Welfare and help from the government stances Entrepreneurial spirit: the population expects to have everything resolved for them. No government intervention would mean very few benefits: some sort of Social Support is necessary to support the working force that is shifting jobs, unemployed or needs some sort of social assistance.

It is quite clear though that European countries have achieved the highest levels of development through the most important factor: Education. The first Universities in Europe were established in the early 1000s! Very clearly, only well accommodated men were able to afford University in the first centuries. From the 1900s and onwards, going to University became more popular as well. Families would save up money to support their children's education, with the expectation that they would have a better life (and eventually support their own parents financially in their old age). In European countries and countries of European origin (such as Argentina and Canada), public education has been a reality for more than a century. The same could be said about Public Health Care system.

So what is it then, that has made some countries more successful than others? Why is it that some societies achieve higher levels of development than others? Very simply put... it's the CULTURE. Again, examples from the American continent come to mind. Canada, one of the most developed countries in the World, has been mainly populated by Europeans. However, they have not received much non-European migration, making it a multi-european country (and not multi-cultural). Amongst Europeans abroad there are high levels of trust, and good levels of integration. This is not the case for Europe, where hard feelings between nations prevail after centuries of conquest, occupation, civil wars... and Two World Wars!!! Another great example is Argentina: whereas Europeans who migrated there between 1880s and 1970s have integrated and achieved high levels of trust, it has not been so for the people of indigenous origin and their children. This has led to the formation of Guettos and poverty districts spread throughout the country. But Argentina has a great educational and health system, plus interesting welfare benefits that have been re-established in the last 10 years under the Kirchner Administration. How can it be then, that 5% of the population is poor (by poor defining people who live in slums, a type of poverty not found in Europe), and more than 20% of the population is Socially Excluded?

In Argentina, people of European origin are considered Argentinian. But not those of indigenous origin, who must tolerate bad working conditions, be treated as a thieves, do not get proper jobs, are victim of racism, discrimination, etc, etc. Meaning, the 20% of the population that is not of European origin are not considered... Argentinian (at least not in practice)!!! Identification might be an issue for people who belong to different cultures, but were born and raised in that country.

By separating between different cultural groups, the US has done the best job at multi-culturalism. Latino-americans, Hispanic-americans, Italo-americans, Scandinavian-americans, Afro-americans, Asians... They are not the same. By separating the groups they can be studied independently, to find out how productive the different groups are, and what are their issues. Some of the groups have been established many decades ago and pass on their inheritances. Other groups are newly established and could struggle more due to lack of proper contacts and networks (like the Asians). But some groups like the Afros have been around for a couple of centuries and have been oppressed, discriminated and relegated only until a couple of decades ago. By finding representatives or figures to lift forward in society, the US has managed to get their population identified with the American dream. When a black person sees a Tina Turner in the music industry they think: it is possible, I can make it, I can be the NeXT Tina Turner. Or J Lo. Or Britney Spears... These figures target very different audiences.

The US also values grades. The people in lower classes do not have proper contact and networks. But if they got good grades at school they get places at good universities. And if they continue their streak at University companies go to search for them at the Universities themselves. The best students get the best jobs, with impressive salaries. Another route is through sports: those who excel in sports also get good places at University and high paying jobs after graduation. In that way, some sort of equality is achieved: people who do merits do get better places.

The issue of inequality will always continue. There is no real solution to it. But it's effects can be tampered by making it easier for the best people from different cultures to earn their place by hard work and studying. In that way, wealth is also spread within that community or in that circle, providing a concrete "map" of footsteps for other people to follow. It might not be the solution to all people's problems, but at least it provides some hope. Like building channels or bridges between different cultures and social classes. Clearly the "American model" cannot be copied by other countries, since US development also responds to historical and cultural reasons. Which is why it is important to compare models that can offer a CULTURAL match.

Cristian Bøhnsdalen

CMO/CFO & Co-Founder @ITRevolusjonen

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[1] https://en.wikipedia.org/wiki/Egalitarianism

Comparing Apples vs. Oranges

Comparing

Apples vs. Oranges

Compared to, compared to, let us compare... the countries!!! In my Releases "Revolution 4.0 and the Man of Tomorrow - Post-Industrialism, Inequality and the Knowledge Based Economy - Parts 1 & 2", I take you through the last 200 years of history of the two regions I know the most: South-South America and Scandinavia, to show you the differences, but also the similarities. Comparing countries is a difficult thing. Sure, government processes have played their role, but what about history, culture and religion? It is very difficult to compare countries in different regions. Let us take the discussion to a higher level. While the American continent has been mainly populated by immigrants, Europe has much more history of emigration, war and colonization. Could be difficult to explain the situation TODAY without knowing a little bit about the history of these regions.

While Northern Europe has only received migration waves from other parts of Northern Europe, and Southern Europe was under the influence of the Roman Empire (a multicultural empire), Argentina was populated mainly by Europeans, being the 2nd country in the American continent to receive the most European immigrants after the US. Argentinians naturally tend to compare themselves with the US, but the United States of America consists of 320 million inhabitants spread in 50 States. Meanwhile, Argentina consists of 23 states housing 43 million inhabitants. Norway, on the other hand, has only 5 million inhabitants and can be compared only to a Province in these countries. There is no possible comparison.

As explained in my fantastic chapter "Death and Taxes", tax systems cannot be applied indiscriminately without having regards for the culture. While Scandinavians tolerate a heavier tax toll, Southern Europeans prefer a more moderate tax rate and Southeast Asians do not want to pay taxes at all. Consider that communities IN those countries will keep their customs and traditions. Meaning the Asians will still resist paying taxes, even if they live in Europe (or Argentina). The counterpart of the Tax System is the Welfare System. The more taxes you pay, the more you get in return: be it healthcare, education, social plans, whatever. But be careful, too much welfare kills entrepreneurial spirit and drives laziness. Countries should then look up to models that offer a CULTURAL match.

Argentina, the most southernmost country in the World, can look up to both Australia and Canada. From the center South, it could be said that Argentina is very much like Canada. Consider an average of 25.000 USD x capita for Buenos Aires and the Southernmost provinces compared to 5.000 USD x capita in the North. This responds to lower Productivity from the Bolivians, Paraguayans and Peruvians, people of Indian origin and their children also found in Buenos Aires and who live in very bad conditions (they are Argentina's poor people). Former President Cristina Kirchner referred to this group as the people "of the original tribes". They are really 3er or 4th generation immigrants from nearby countries that were not incorporated Productively to the workforce (for whatever reason). I will refer to this group as "the latinos", a much friendlier term than the nicknames that they usually get. The solution to poverty in the case of Argentina lies in increasing the Productivity of the latino group. Canada, much further North, does not face this issue. Australia did have descendents from indigenous people, but not as much. The US does have a much higher Latino immigration rate, usually coming from Mexico. My view is that migration at some point happens naturally: no wall or fence will separate the North of Argentina from Bolivia or Paraguay. As explained in my chapter "Bolivia: the NeXT India", the most powerful nations in South America must "help" or make sure that the situation in Bolivia and Paraguay improves, to resolve their own situation. The impoverishment of nearby countries eventually hits you, as migration waves naturally flow from one country to another. This was not understood by Europe, that with austerity measures strangled Southern European economies dooming itself to the deepest depression since WW2.

In my article: "Dark Clouds over Norway and Scandinavian countries", I explain the challenges Scandinavian countries are going through TODAY. In his masterpiece "Scandinavian Unexceptionalism: Culture, Markets and the Failure of Third-Way Socialism", Nima Sanandaji explains that the success of the Nordics little had to do with the Government. Scandinavians and their descendants abroad show higher Productivity rates than in Scandinavia itself, were government intervention and the Welfare system have actually contributed to hinder growth. This might refer to "the Protestant Work Ethic and the Spirit of Capitalism", as described by German Sociologist Max Weber. Consider that Scandinavian countries have not received migration that is not from Northern Europe at any point in history, and are as such uni-cultural societies. Social tensions are arising as the region shifts towards multi-culturalism. From that view, ALL Scandinavian countries (composing a total population of 20 million people, excluding Finland), should look to the Kingdom of the Netherlands, a country with a colonial, multicultural and merchant history consisting of 17 million people.

Consider the case of Spain. Many times Spain looks up to Germanic countries. Quite clearly, nothing does the multicultural Kingdom of Spain (Roman Empire influenced), have to do with Northern Europe. Different religion, colonial history, multiculturalism, the way the country is organized, the Tax system... Comparisons seem futile. But what is Spain missing, to take the leap? In my article "How Tech Hubs create Wealth", I explain that entrepreneurs should be focused in the efforts of Wealth creation leaving the distribution of that Wealth in the hands of the Government (hopefully in a transparent manner). Culturally different but with the same Religion and Tax burden, Spain can look up to Ireland, a country that appears as bridge between the US and Europe and that the largest Tech giants in the World have chosen to establish their offices (location matters as well). Once more, the same cannot be said about the Nordics, which offer a different Tax System and can look to each other for examples in the Tech Industry (Finland being the most attractive case).

But enough with the countries and comparing!!! In my article "the 4 Keys of Value Creation", I have given you the ingredients to change YOUR OWN life and situation. If you live in a Developed Country, you have all the tools that you need to improve your situation. Don't follow the Pack, do your own thing, find your niche, succeed, and ENJOY LIFE!!! Better LUCK NeXT time!!!

SKÅL!!!

Cristian Bøhnsdalen

CMO/CFO and Co-Founder @ITRevolusjonen

Dress yourself in Orange... to be like the Netherlands!!!

Dress yourself in Orange... to be like the Netherlands!!!

Countries look up to other countries for examples, or for role-models. The big disadvantage of being number 1 in the HDI Index is not to have someone to look up to. And since things change, and times change, if you don't keep yourself updated at some point you are going down in the ranking without even noticing it. So, much has happened in the World in the last 10 years. I mentioned before stagnation and lack of growth in the Euro Region. A context of stagnation has it so that younger people, foreigners and their children struggle in the job market. Good and solid welfare systems help tamper the situation, but only true raw entrepreneurship is the solution to the rising social tensions that come from the Rise of Inequality (check out my Release in Amazon: "Revolution 4.0 and the Man of Tomorrow: Post-industrialism, Inequality and the Knowledge Based Economy").

But can countries indiscriminately "choose" other countries as role models? The answer is NO, they don't have the RIGHT to choose. After travelling Europe to study European culture, history and religion, I have concluded that culture or historical processes prevail over government policy. In the mentioned releases, in chapter 19 "Death and Taxes" I explain how different cultures tolerate or not different degrees of Tax Burden. An extreme right government had disastrous results in Argentina in the 1990s, a mainly Southern European country (culturally speaking). Can Norway be like the Netherlands? Maybe... in 20 years. The Dutch Empire, one of my favorites, was a colonial empire famous for it's strong navy, commerce and overseas territories. Quite clearly, born and raised abroad to a Dutch parent is Dutch by blood-right in the Netherlands. But Norway, more isolated geographically speaking and closer to the North Pole, is really more culturally similar to Sweden, Denmark or Iceland (depending on the region).

So becoming like the Netherlands would imply a "liberalization" of the culture. That would mean things like: it would be OK to be gay, to marry a foreign, , there would be many bars, discoteques, good accessible restaurants, we could eat some brownies (space cakes) at restaurants, there would be a Red Zone to... (for å ???). Anyhow, many things that are not happening today. However, there are some similarities industrially speaking. Like the Netherlands, Norway is a Kingdom. Norway has historically been a fishing country, with a strong Shipping Industry. The Netherlands also suffered the "Dutch Disease"[1] in the 1970s, which refers to economies that are based on natural resources which in turn destroy the other local industries due to the high cost of labor (influx of capital to the offshore industry strengthens the currency making exports less competitive). Now that my prediction of a long-term downturn in the Oil markets is confirmed (and being the ONLY person in the WORLD who predicted the Oil Crisis AND found FUNDAMENTAL factors as to WHY the price of oil was going down, but also WHY it was not going back up again), many times people ask me what we will are going to live off in the post-oil era. Remember that oil will still be important, but not as important as today (as explained in my Release "Where No Man Has Gone Before: the Road to the Fourth Industrial Revolution"). Some options do come to mind:

- Shipping Industry: it is clear that the industry already exists and is international, but more focus on global expansion can be made.

- Aviation: Norwegian appears as a relatively new airline with a solid brand with possibilities for global expansion.

- Banking Sector: strong brands like DnBNor could also be exported anywhere. It is clear that banks in Northern Europe are more solid and offer more confidence than anywhere in the world. So the banking sector has tremendous potential for international expansion and creates thousands of jobs.

- IT Sector: as I always mention, and this would be the same for any country, Revolution 4.0 refers to the Knowledge Based Economy. And here Norway is really lagging. In the article "Norway lacks the future's mind power"[2] we are explained about the challenges for entrepreneurs to grow in Norway, and how we do not have enough qualified technological heads to build a proper Tech Industry. In another article we learn how Norway takes the last place in the Start-Up scene in the Nordics (and surely Northern Europe).[3] But this is not an issue. It is still easy to get hold of qualified foreign skilled workers and entrepreneurs. Since Norway is in the European continent, there will always be foreign competence available. So the question is, do we really want to benefit from foreign skilled labor? In the Netherlands they do... This would be the same in most developed countries. Despite efforts from the coordinators, at some point it is the locals who open doors to foreigners, or not. Engineers and people in the Tech field are usually the best well paid and sought after in the job market. But remember that the people IN the Hub, make (or break) the Hub. Do we want them here, or not? If we don't and as the IT sector becomes a larger and larger player in any country's economy, I can only think that technological development will lead to growth and welfare of those who understand it, and more stagnation, isolation and recession for those who don't... Or are not willing to understand that picture of a future dominated by Artificial Intelligence, Robots, Virtual Reality and things you can only read about in an Isaac Asimov sci-fi novel.

If we want to be like the Netherlands the road must be paved today, with a LONG-TERM 20 year perspective. Building channels is the first step, towards a better and more inclusive tomorrow for ALL. A salutation from KING WILL OF THE KINGDOM OF NORWAY, and his Wife Maxima, FROM Argentina!!!

Cristian Bøhnsdalen

CMO/CFO and Co-Founder @ITRevolusjonen

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[1] https://en.wikipedia.org/wiki/Dutch_disease

[2] https://www.abelia.no/politikk/nyheter/norge-mangler-fremtidens-hjernekraft/

[3] http://shifter.no/index.php/2016/06/01/norge-sist-i-nordic-startup-awards-lettere-a-vinne-priser-med-candy-crush-enn-logistikk/

Inheritance: the root of Inequality

Inheritance:

the root of Inequality

More about inequality. Do we ALL start from nothing? Is the starting point the same for ALL? The answer is: NO. Some people inherit stuff, others don't. Check out the following article: "How to stay rich in Europe: inherit money for 700 years"[1], where it states "family fortunes are more prevalent in Europe than in U.S. or Asia. Their relatively high level is a sign of the continent’s low social mobility, keeping education, income and social connections from evolving over generations. In many European countries, not only wealth and income but even occupations tend to be “sticky,” passed on from generation to generation. More than one-third of Italy’s richest people inherited their fortunes, compared with just 29 percent in the U.S. and 2 percent in China. Overall, heirs and heiresses make up about half of Western Europe’s billionaires." "In hardly any other country does social origin influence one’s income as much as in Germany. An example: Count Alexander Fugger-Babenhausen, a descendant of arguably Europe’s richest man in the 16th century, says maintaining the fortune’s integrity is a responsibility. The 34-year old returned to Germany to manage the family’s wealth and charitable activities after working in investment banking and private equity in London".  

Interesting the case of Argentina, as always, it stands out. As a country founded by European migration, the hispanics that were first established 200 years ago took possession of large areas of land called: "latifundios". European migration that entered the country in the beginning of the 1900s were promised that if they worked the land they would be allowed to purchase it and eventually become owners. This never happened. The rich people, members of the aristocracy and owners of the land, also controlled the police and the military. In the 1920s, period famous for the appearance of Carlos Gardel and Tango, Italian workers that were rebelling against the factory owners to fight for their rights were brutally murdered by the police. Bad working conditions and a feeling of "longing for home" characterize Tango, a sad and melancholic music. Violence and government repression against unions and working class remain even today. See the following chart: "One Way to Make Money: Percentage of billionaires who inherited their wealth, by country":

Some economists suggest that the only way to really eradicate inequality is to abolish inheritance. That would be the only way to secure that everyone starts from the same level. It is clear though that this will never happen. Some countries though do introduce heavy taxes on inheritance as a way to equalize. In the same line of thought, in the article "Inherited wealth destroying our country"[2] Nobel Prize winner Paul Krugman, states that the number of self made millionaires is decreasing, giving room to the rise of an oligarchy. That being said, the US remains the system closest to a meritocracy in the Western World.

When we think of inheritance however, most people think about money, or assets. But positions can be inherited as well. Take the example of last names. 1000 years ago, last names would define professions: Smith (for the Blacksmith), Cook, Butcher, Baker, Taylor... Usually one member of the family would somehow get into the business, establish a shop and get his children involved as trainees until they grew older to take charge of the business. An even better example would be in farming, where owners of large portions of land usually had up to 10 or 12 children to help them work the land!!! It was so also that child mortality was very high, so not all children made it to adult life. It was important to have many children.

The difference between people who inherit and who don't inherit must be stressed. People who DON'T inherit must work harder to get ahead in life. People who DO inherit might be a little more relaxed... they know that THEIR OWN situation is more or less resolved. Once again, entrepreneurial knowledge, culture and spirit is transmitted from generation to generation. In my case, coming from a Norwegian business family has given me an unfair advantage.  

Due to the strong Networking and relationship-based structures in European countries, getting ahead in life has been very difficult in Europe for people with no connections in the business world. Today, however, things are changing. Revolution 4.0 makes access to information easier than ever. The Knowledge Based Economy and free and easy access to information has it so that acquiring knowledge and selling it as a product or service can be done by anyone. Developed countries already have solid healthcare and education systems. It is up to YOU and only YOU to change your life. You can take control, reach people internationally and become a leader in your field. You don't have to be a genius, you just need to take the initiative... and be a VISIONARY.

Cristian Bøhnsdalen

CMO/CFO and Co-Founder @ITRevolusjonen

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[2] http://www.alternet.org/economy/paul-krugman-tells-bill-moyers-inherited-wealth-destroying-our-country

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[1] http://www.bloomberg.com/news/articles/2016-08-23/how-to-stay-rich-in-europe-inherit-money-for-700-years

The impact of Dictatorships on Economic Development

The impact of Dictatorships on Economic Development

According to Mayan calendar, the year 2012 will see a period a great change for mankind. A period of peace and prosperity for the people of Earth. For people who have travelled or lived in South America in the last 20 years, my comments or optimism towards the region must sound at least "strange". Without any doubts, european migration has positively contributed to growth and productivity. But political processes have also played their role. After WW2, the World was divided in 2: "the West" and "the Soviet bloc". Whereas in Europe people were told that "the West" was composed of Western Europe, the US and allies (Canada, Australia); in Latinamerica people were told that they were actually part of "the West" as well (I would assume as part of the Western Hemisphere). I found out, to my surprise, that the Latin-american region is NOT really considered part of the West, but it is considered a 3rd world region at the same level as Africa or Asia.

The Latin-American region became under US political and military influence after 1945 in it's "War against communism". Puppet governments where supported politically and financially in order to secure that the region did not turn to communism. Communistic parties, or people that had communistic or socialists views (there was no difference between communism and socialism), where kidnapped and murdered by local authorities. Operation Condor[1] was a campaign of political repression carried out by US-backed Latin American dictatorships in the 70s and 80s that was designed to eliminate tens of thousands of leftwing activists. It was the idea of Chilean dictator Augusto Pinochet, who enlisted Argentina, Bolivia, Paraguay, Uruguay and Brazil in a continent-wide campaign. In Argentina, an estimated of 30.000 people "disappeared" in the last dictatorship the most bloody of all. Pinochet's[2] dictatorship in Chile was the longest and lasted from 1973-1990. Thousands of Chilean refugees moved to Scandinavia in the beginning of the 1980s. They established themselves in communities which can be still found today. The members of these communities can of course not believe or accept the advancements Chile has had since the 1990s.

The same situation, but opposite, occurred in Eastern Europe. In the same way that the Latin-American region was not really part of "the West" but satellite contries under the influence of the West, countries in Central and Eastern Europe were not part of the Soviet Bloc but satellites under Soviet influence. In the case of the Soviets, dictators were placed more directly. Everyone knew that Nicolae Ceausescu[3], the bloodiest Rumanian dictator who ruled for 1967 to 1989 years until executed, responded to Soviet interests. This was not so in Latin-America, were the public only found out that it was "the West" that was behind the dictatorships only a few years ago. In the same way that Americans wanted the Latin American region to turn extreme right, the Soviets wanted the Central and Eastern European region to turn extreme left.  

The threat of WW3 hovered for many decades in what was known as the Cold War[4]. The Cold War was a state of political and military tension after World War II between powers in the Western Bloc (the United States, its NATO allies and others) and powers in the Eastern Bloc (the Soviet Union and its satellite states). It's climax was the Vietnam War[5], were US and Soviet fought for control of Vietnam, in an effort to spread their influence in South East Asia. Secuels in landscape and the region still exist today, an example being the Agent Orange[6], which was spread as a herbicide from airplanes and has produced deformities not only to those exposed but also to their children and grandchildren.

The attempt to control the regions did not only obey political interests but also economic. The puppet governments in Latin America where also turned "Adam Smith" from an economical perspective. In Argentina, the process of de-industrialization carried out from 1976 - 2001 meant opening barriers to trade and destroying the local industry. Whereas the US spoke about liberalism (which was really New Liberalism, carried out from 1980 - 2008), the country was in a better position to compete with imported goods. It was not so for Latin American countries. Opening barriers of trade meant importing cheap goods and destroying the jobs in the local economies. The region was under political influence from the US until the 1980s, but maintained economic or thought influence until the 1990s. This explains why TODAY the region is still divided in left (socialist) and right (republican) from a political perspective. Older generations actually lived the period where being a leftist was a crime to be paid with your life.

From the end of the 1990s and with the rise of Chavez as president in Venezuela, the left was slowly reestablished in Latin America. With Chavez and Evo Morales as the most leftists, other political figures such as Lula Da Silva, Rafael Correa and the Kirchners in Argentina focused on government policy to reestablished workers rights which had virtually disappeared in ultra rightist governments. These governments have been protectionists of national interests, and as such have received mass critique from international media. Chavez was portrayed as a Dictator, when he was democratically elected. With defamation campaigns and bad press, international leaders tried to weaken his position. Under his command, Venezuela was very bad for business but he did protect the national oil reserves from foreign appropriation and improved significantly the lives of poor people. Government such as his as known as "populist governments", where social plans, welfare, etc, are handed out to the poor people in exchange of a vote. But definitely not dictatorships. With a series of populist governments, South American countries might not have developed but "caught up" in many social aspects where they were lacking. However, as I always explain, after many years of populism growth stagnates. This has happened to Argentina from 2011 - 2015.   

The rise of democracy in Latin America, and new young generations who are not as politically "charged" as their progenitors is bringing stability to growth and institutions. This explains why they have not yet matched central countries, but they have rapidly taken distance from Third World countries in other regions. Besides the atrocities and crimes against humanity that dictatorships bring about, they hinder growth and are bad for business. The impact of democracy in development cannot be stressed enough. While Europeans think that things haven't changed, the Latin American region has advanced substantially in a period of only 20 years. From asking for advice to developed nations, to finding their own solutions to problems. From commodity based economies, to the debate of value added that is only starting to happen now. From bad working conditions, to solid laws for workers. The same could be said about Central and Eastern Europe. After a civil war, the ex-Yugoslavia is showing signs of recovery. For polish people, working in the West might not be as attractive unless they are offered good working conditions. In the article "I want you back"[7], you can see how some Eastern European countries want to get back their most talented citizens by offering them better working conditions. It might work out for some, depending on their current situation. Brexit will of course have a stronger impact on foreigns and their children than on British people.

After the fall of the Iron Curtain and having moved towards democracy and economic freedom, the Latin American and Eastern European regions (who have a common history having been suppressed by military governments under the Cold War), will find that they are in a strong position to make the most of Revolution 4.0. Once solid healthcare and educational systems are in place, it will be up to the citizens to see how they can capitalize on these fantastic period of changes. The same cannot be said about countries that have still not found a way to freedom, or that are trying to get rid of totalitarian regimes. Achieving solid institutions and economic freedom comes of course before all else. To those who have not understood my point, that is what differentiates  South America FROM Africa!

Cristian Bøhnsdalen

CMO/CFO and Co-Founder @ITRevolusjonen

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[1] https://www.theguardian.com/world/2013/mar/10/latin-america-left-40-year-timeline

[2] https://en.wikipedia.org/wiki/Military_dictatorship_of_Chile_(1973%E2%80%9390)

[3] https://en.wikipedia.org/wiki/Nicolae_Ceau%C8%99escu

[4] https://en.wikipedia.org/wiki/Cold_War

[5] https://en.wikipedia.org/wiki/Vietnam_War

[6] https://en.wikipedia.org/wiki/Agent_Orange

[7] http://www.bloomberg.com/news/articles/2016-08-17/-i-want-you-back-cries-east-europe-as-emigrant-tide-erodes-gdp

Bolivia: the NeXT India

Bolivia: the NeXT India

If you have followed my blog, you surely have noticed that I am obsessed with ECONOMIC DEVELOPMENT. In my 4 books, I have challenged 150 years of modern economic history by including the impact of CULTURE on PRODUCTIVITY. Once again, the South American experience seems interesting to discuss. The regions' ethnical diversity comes from 3 main groups: Europeans (which were not all the same), Africans (which were brought as slaves to work the land, like in the US), and several different indigenous tribes (of which the largest and strongest were the Incas). Ethnical diversity did not work out properly in South America, were the people of Africa have never received equal opportunities. A good example would be Brasil, who received more European migration in the South, and Africans in the North. Today, the South is known as the rich region, whereas the North is the poor.

In my post "4 Worlds", I divided the world in 4 by using the HDI Index. I then showed you how Argentina and Chile were the 2 most developed countries in South America, considered "Very Highly Developed". In that division, Bolivia appeared as a Third World country, at the same level of India. More reactive than the Inca tribes, the Bolivians of indigenous origins (reactive culture) have never been able to display any entrepreneurial spirit, or add value to the economy. This is the same for Bolivians established in Argentina and their children, who live in slums (but still have a better situation than in Bolivia, due to free access to education, healthcare and facilities).

However, not EVERYONE in Bolivia is poor. The population presents 62% of indigenous people, 24% mestizo and 14% white. Poverty affects more rural areas and people of indigenous backgrounds. The same in Argentina, were the Bolivians represent the poorest scale in society. Politics does play a role as well: since Evo Morales took office in 2006, Bolivia entered a pseudo-communist phase by nationalizing it's natural gas reserves and being unfriendly to foreign business.  The communist regime has made sure that the people would see some of the benefits of owning South America's 2nd largest gas reserves after Venezuela. Poverty which before represented 60% of the population (surely the indigenous people), is today 45%. Extreme poverty has fallen from 38% to 17%. GDP has grown at an average rate of 5%, and GDP x capita from 1000 USD to USD 3000, as a new indigenous bourgeoisie was born.[1] [2] Impressive results for South America's poorest country. Protectionism can play in favor, if a country is in early stages of development. However, in the long term growth stagnates.

A country of beautiful landscapes, Bolivia has leveraged growth through developing it's natural resources. Natural gas, but also salts for tomorrow's oil that have not yet even began development: LITHIUM. Between Argentina, Chile and Bolivia they control 80% of lithium's world reserves. But as always, the key is to master the technology AROUND the natural resource. Bolivia has achieved great results, but has not developed technologically. Mark Zuckerberg has taken note, and has included Bolivia in the Internet.org[3] program, which aims at increasing Internet coverage for people with limited resources to reach rural areas. Today 47 percent of the Bolivian population does not have internet access, and his company wanted to contribute towards democratizing technology use through this project to "help improve the quality of life of the people".

But in a country that is not technologically developed, and that does not thrive on innovation, where is the potential for the Tech industry? Bolivia is today the most underdeveloped economy in the region. Argentina, with a similar cost level as Spain, is outsourcing it's low end jobs to India as most developed countries. However, long distances, time zone and cultural differences make it inconvenient. The potential is to establish Bolivia as the chosen outsourcing destination for South American countries. Remember the global tendency: low end jobs are outsourced to least developed economies, whereas the high end are kept in developed nations. More investment in communications, education and healthcare, but very specifically in the production of a competitive engineering workforce that can take those jobs that will be moved abroad anyway from the most expensive and developed South American economies is the key. By REPLACING India for Bolivia, the nearby economies "help themselves" by contributing to Bolivia's development and moving towards REGIONAL INTEGRATION.

If you have read my releases: "Revolution 4.0 and the Man of Tomorrow: Inequality, Post-industrialism and the Knowledge Based Economy - Parts 1 & 2", I have approached Argentina's poverty issue as a migration issue. Migration from nearby countries is not productively integrated to the workforce due to the low level of education and skillsets. The solution is to attack the problem at it's root: to provide for Bolivia all that they need in order to increase the level of education. Thanks to Revolution 4.0, education can now reach rural areas that were hidden before. With a comprehensive plan and the collaboration of all the other South American countries, low end jobs should be moved to Bolivia in order to keep the high end jobs in the high-income economies. After continuous and sustainable technological development, Bolivia will eventually create it's own outsourcing culture in the same fashion India has. Compared to India however, the case of Bolivia is much easier to solve: it is a country of only 10 million people.

In a period of 20 years, Bolivia can easily leave it's position in the Third World to join Second World countries. It will still be less developed than the rest of the South American countries, but with the right skill-set and education the Bolivians that move abroad will contribute positively to productivity. In that sense, nearby countries such as Argentina and Chile will be able to use them as cheap but EDUCATED workforce, solving it's own (inproductive) migration issue, and poverty as we know it today.

Cristian Bøhnsdalen

CMO/CFO and Co-Founder @ITRevolusjonen

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[1] http://www.economist.com/news/americas/21693271-longest-ruling-president-wants-carry-enthusiasm-idea-ebbing-they-think

[2] http://www.globalsecurity.org/military/world/bolivia/economy.htm

[3] https://en.wikipedia.org/wiki/Internet.org