Game On!: Debt, Global Competition

and America's Future

John N. Doggett, JD, MBA, Senior Lecturer

Global Management, Entrepreneurship & Sustainable Energy

McCombs School of Business @ The University of Texas at Austin john.doggett@mccombs.utexas.edu www.jndoggett.com

Strategic Inflection Points Are Scary

“A strategic inflection point is a time in

the life of a business [or a country]

when its fundamentals are about to

change. That change can mean an

opportunity to rise to new heights. But

it may just as likely signal the

beginning of the end.”

Andy Grove, Only the Paranoid Survive

Japan’s S.I.P.

Two Massive S.I.P.s

New Global Realities

Europe is tottering on the brink of bankruptcy

America is sinking under a mountain of debt

China, Brazil and India are emerging as the

strongest economies in the world

The location and nature of energy

supply and demand is changing.

Shale Natural Gas

Shale Oil

Geothermal

Ocean

Is The World Going Crazy?

PIIGS GET SLAUGHTERED

On the Brink of Bankruptcy

TOO BIG TO FAIL OR BAIL!

EU Banks Sovereign-Debt Protection

Deficits Forever . . . ?

This is a Serious S.I.P.

US Deficit Is At Civil War Levels

The Scariest Job Chart Every

America is Addicted to Debt

2000 = $ 5.67 Trillion

2004 = $ 7.54 Trillion

2008 = $10.57 Trillion

Today = $15.06 Trillion

2015 = $23.69 Trillion (Current Spend)

A Warning From The Future?

http://www.youtube.com/watch?v=OTSQ

ozWP-rM

Just The Facts, Jack (Billion US$)

May 2008

China = $506.8

Japan= $575.3

Caribbean Banking

Centers = $104.5

Oil Exporters = $164.2

UK = $271.2

Brazil = $151.4

Russia = $63.7

Luxembourg = $75.2

Hong Kong = $61.4

Taiwan = $38.9

September 2011

China = $1,148.3

Japan = $956.8

UK = $421.6

Oil Exporters = $229.9

Brazil = $206.2

Caribbean Banking

Centers = $173.0

Taiwan = $149.3

Switzerland= $146.1

Hong Kong = $109.0

Russia = $94.6 http://www.treas.gov/tic/mfh.txt

Is A New Economic Tsunami Coming?

How Do We Pay Down The Debt?

We must grow our way out of this

crisis.

If the US economy grew by 6%, many of our

problems would start to self heal.

If we grew at 9%, “Whoa Nelly!”

So, how do we turn America into North Dakota?

We must sell “assets” owned by the

federal government and apply to

proceeds to reduce the federal debt.

We Have Assets We Can Sell

LET’S LOOK AT OUR COMPETITION

Was Goldman Sachs Crazy?

6,100% Annual Inflation (1994)

Collapse of the Ruble (1998)

Two Weeks of Foreign Reserves (1991)

The Cultural Revolution (1966-1976)

National GDP in 2010 (purchasing power parity)

Country GDP Real Growth %

1. United States $ 14,660,000,000,000 2.8%

2. China $10,090,000,000,000 10.3%

3. Japan $ 4,310,000,000,000 3.9%

4. India $ 4,060,000,000,000 10.4%

5. Germany $ 2,940,000,000,000 3.5%

6. Russia $ 2,223,000,000,000 4.0%

7. United Kingdom $ 2,173,000,000,000 1.3%

8. Brazil $ 2,172,000,000,000 7.5%

9. France $ 2,145,000,000,000 1.5%

10. Italy $ 1,774,000,000,000 1.3%

11. Mexico $ 1,567,000,000,000 5.5%

12. South Korea $ 1,459,000,000,000 6.1%

13. Spain $ 1,369,000,000,000 - 0.1%

14. Canada $ 1,330,000,000,000 3.1%

CIA World Factbook – September 5, 2011

Elephants Emerging from the Mist Total World Population = 6,928,198,253

BRIC Population = 2,868,060,586 (41.4%)

Total World Land Area = 174,814,000 sq. km. (- oceans)

BRIC Land Area = 38,471,715 (22%)

Total World Gross Domestic Product = $63.17 Trillion

(Official Exchange Rate)

Total World Gross Domestic Product = $74.54 Trillion

(Purchasing Power Parity) (p.p.p.)

BRIC Gross Domestic Product (p.p.p.) = $ 18.55

Trillion (24.88%)

Source: CIA World Factbook – September 5, 2011

The BRIC Middle Class Is Exploding

McKinsey says 48 million Chinese will

join the middle class every year until

2020.

Goldman says 30 million Indians,

Brazilians and Russians will join the

middle class every year until 2020.

Only 312.5 million people live in the US.

By 2020, the BRIC’s could have 1 billion

middle class citizens.

This is the greatest time to be an

American entrepreneur!

Chinese Banks and The World

25

Source: The Conference Board Report issued on November 10, 2010 using

Purchasing Power Parity (PPP)

The Conference Board Says . . .

China Could pass The United States BY

2012!

Per Capita Income trumps Size

WHILE WE WERE SLEEPING,

THEY WERE RUNNING

Remember, WE Won the Cold War

This is a Brazilian Super Tanker

An Orange Juice Super Tanker

Competing With Innovation

Add A Large Dash of Oil . . .

Bangalore, India

This Is the New India

Indigo Airlines

Tata Motors People’s Car

Tata Motors’ Newest Ride

Tata Motors’ Newest Ride

Welcome to the New China

copyright - John N. Doggett, 2008

40

Growth at Warp Speed

China has 6 of the 15 Tallest Buildings

Building Skyscrapers Like Crazy

China is building 24 of the 50

skyscrapers to be completed worldwide

in the next six years.

This will double the number of Chinese

skyscrapers.

McKinsey say that China could build

enough new skyscrapers to equal one

new Chicago every year until 2030.

More than 1,500 new buildings over 30 stories

The People’s Republic of Communist China?

www.lenbracken.com/images/china31

Shenzhen in 1979

30,000 people lived here in 1983

Source: http://en.wikipedia.org/wiki/Image:57440.jpg

Progress Comes at a Steep Price

Source: New York Times, 8/25/2007

The Chinese People Hate Dirty Air

The Clock is Ticking

From China with Love

Thermal Power Research Institute is

China’s world-leading laboratory on

cleaner coal, has just licensed its latest

design to Future Fuels in the US.

Future Fuels will pay about $100 million to import

from China a 130-foot-high maze of equipment

that turns coal into a gas before burning it. This

method reduces toxic pollution and makes it

easier to capture and sequester gases like

carbon dioxide under ground.

Future Fuels will ship the equipment to

Pennsylvania and have Chinese engineers teach

American workers how to assemble and operate it.

Canada formally pulls out of Kyoto

The world’s largest two emitters, China

and the US, never ratified Kyoto.

“To meet the targets under Kyoto for

2012 would be the equivalent of either

removing every car, truck, ATV, tractor,

ambulance, police car and vehicle of

every kind from Canadian roads or

closing down the entire farming and

agriculture sector and cutting heat to

every home, office, hospital, factory

and building in Canada,”

INVENT, INNOVATE, OWN

Yes We Can!

American Farmers Will Thrive

China and India are covering farm land

with factories.

Global warming is increasing flooding

from the Himalayas.

Farm commodity and land prices can

only trend in one direction.

By the end of this decade, finding farm

workers will be a major challenge.

Farm equipment manufacturers will be

running two shifts, seven days a week.

A Great Time To Be a Farmer!

The world’s appetite for farm products

will soar.

The world will have more than enough

cash to buy what we grow

Farm support payments will no longer

be necessary

Quotas, tariffs and other market

protections will no longer be necessary

We will be able to sell everything that

we can grow and process.

Impact of MIT Alumni Entrepreneurs MIT Alumni founded 25,800 currently active

companies in 2009.

The firms employed 3,300,000 people.

These firms generated annual world

revenues of $2,000,000,000,000.

If currently active firms founded by MIT

graduates were a country in 2009 they would

have been the 11th largest economy in the

world.

Economic Impact of MIT Alumni Entrepreneurs - Entrepreneurial Impact: The Role of MIT,

Roberts and Eesley, MIT & Kauffman Foundation for Entrepreneurship, February, 2009

“Recruit” The Right Immigrants Immigrants started 25% of U.S. public companies

that were venture-backed.

The market capitalization of publicly traded

immigrant-founded venture-backed companies in

the U. S. exceeds $500 billion.

40% of U.S. publicly traded venture-backed high-

technology manufacturing companies were

started by immigrants.

50%+ of the employment generated by U.S. public

venture-backed high-tech manufacturers has

come from immigrant-founded companies.

APPLE REINVENTED CREATIVITY!

The iPhone Didn’t Exist before 2007

Apple = 4% Sales & 52% Profits

If You Thought the iPhone Was Hot

iPad = 96% Of All Tablet Web Traffic

Apple Stores = 20% Retail Growth

Apple Passes Microsoft

WE CAN REINVENT MANUFACTURING

The Chevrolet Sonic is Transforming

the face of American Manufacturing

The plant is 50% smaller

Wielding Robots are clustered together instead o

being spaced along the line

The first coat of rust proofing is 1/100 as thick

Many employees make $14 an hour instead of

$28 an hour . . . With the UAW’s blessings.

All of this so the Sonic can be

manufactured in Detroit instead of

Mexico.

Made in Detroit

RETHINKING ENERGY

Exploding Energy Consumption

China and Energy

In 2000, the US used twice as much

energy as China.

In 2010, China used 4% more energy

than the US.

Americans use 5x as much energy per capita.

In 2007, China became the largest

emitter of Greenhouse gases.

Today, 80% of China’s energy comes

from coal. The # for India is 70%.

China consumes more coal than the

US, Europe and Japan combined.

Coal Is King in China

China Dominates Fuel Demand

Chinese Car Ownership Explodes

Massive Energy Investments

The World Energy Outlook for 2011

says that $38 Trillion in new investment

is needed to expand the world’s energy

infrastructure between 2011-2035

Electric Power = $16.9 Trillion

Oil = $10.0 Trillion

Natural Gas = $9.5 Trillion

Coal = $1.1 Trillion

Biofuels = $0.3 Trillion

Oil Fuels America’s Deficit

Small Hydro Projects

Putting many small hydro dams on

rivers to generate 5 to 10 MW of power.

Is This the Golden Age of Gas?

The International Energy Agency says

total recoverable resources equal over

250 years of current consumption.

From 2010, global natural gas use

could increase by more than 50% and

account for over 25% of world energy

demand in 2035.

Power generation will be the dominant

sector for natural gas demand and

Russia will have to increase by 3X.

Shale Gas = 50% Supply in 2020

Shale Gas Everywhere You Look

Shale Gas Is Revolutionary

Shale Gas increased America’s gas

reserves by 40% in this decade.

Shale Gas reserves outside of North

America could increase the world’s gas

reserves by 50% to 160%.

That is equal to 211 to 690 years’ worth

of gas consumption in the United

States at current levels.

THE OCEAN IS FILLED WITH

ELECTRICITY

French Tidal Power Plant Online in 1967

http://en.wikipedia.org/wiki/Image:Rance_tidal_power_plant.JPG

Tidal Power Growth

45 Wave and Tidal prototypes will be

tested in 2011 and 2012. Only 9 were

tested in 2009.

Korean Tidal Power Plant Online in August

Real Projects; Real Power

1,320 MW Incheon Tidal Power Station

built around islands west of Incheon.

Construction will start in 2017.

Ocean Wave Power

Capturing Waves

Sea Dog Pump = 22% Conversion

Ocean Powered Fresh Water

Cheap, Available Fresh Water

What happens to global stability if

every country with access to the sea

can get all the fresh water it needs?

What happens to global agriculture and

hunger if every country with access to

the sea can get all the fresh water it

needs?

What happens to global economic

growth if every country with access to

the sea can get all the fresh water it

needs?

Ocean Currents = Electric Power

Ocean Thermal Power Potential

Ocean Thermal Power

FINALLY . . .

This Is Not About A Car

http://www.youtube.com/watch?v=SKL25

4Y_jtc&feature=player_detailpage

The Future Is In Our Hands