Greenwood's old friend, Ron living in Manhattan Beach and Greenwood living in Seven Mile Beach has been exchanging their views on various aspects of the world through email over more than 4 years. With the permission of Ron, a record of 95 mails exchanged in 1999 was compiled in chronological order. Some were lost. The same records of 2000 and 2001 will follow when available.
99/01/02 11:45:18
HOME PAGE
Perhaps I should address this to Greenwood!
It was so good to hear from you after many years. I don't know what happened to your previous cards, but this year's came through fine, including the internet addresses.
Your home page is wonderful. I've just spent a long time exploring it. Its impressive that you've updated it even today (while we were all asleep). Seven Mile Beach sounds rather similar to Manhattan Beach - same pressure from developers, same resisting residents who want to preserve the city / area. The photographs show a rather more hilly environment, but broadly similar. When I get more into the internet and computing I hope I can reciprocate with pictures from here.
Your interest in sailing I well remember. Its good to hear you are still involved. The Harley is new to me - I didn't know that was a hobby of yours. I've heard that they are popular in Japan, but yours sounds special. As it happens we watched Easy Rider only a few weeks ago. It really took us back to a different era, very nostalgic.
When I retired from Fluor, last March, I had several inquiries about various consulting roles with them and others. I was not very encouraging, although not quite ruling them out. My wife, Connie, and I feel it is time to catch up on the many interests we never had time for while working. (The number of hours in the workweek in USA has
considerably increased since we worked together - not, perhaps, quite to the Japanese level, but enough to leave very little time or energy for hobbies, travel, etc. So, we've been catching up on travel, visiting friends and relatives, etc. I'm also able to devote more time to my work for Amnesty International - something I've wanted to do for a long time. There are also other volunteer organizations, including one devoted to a long-time hobby - brewing. If you want to, please visit our home page at:
Its good to be back in touch. I hope this reaches you properly and look forward to hearing from you again.
Ron
99/01/02
Re: HOME PAGE
Dear Ron,
Thank you for your E-Mail.
I am happy that it reached you. I checked my address database and foundout anything wrong.
I have never tried motor cycle when I was young. When I got old I realized that I need something exciting. Harley Davidson was an answer.
I soon visited your http://strandbrewers.fsn.net. It is a professional work. Are you an official photographer of this community? I couldn't find you in any photos.All gentlemen in the scene have beer stomach. How about you?
When I stayed in London long time ago, I used to brew wine, but I didn't make beer because it seemed that beer is more difficult to brew.
In Japan beer brewery were almost monopolized by limited number of large breweries. But recently people here are realizing local beer gives us more variety and freshness.
I have just finished report making for the World Bank. Tomorrow, I'm going to visit hot spring in Izu peninsula with my children. I will be back to the office from January 5th.
Regards
Greenwood
99/01/09 10:55:41
BEER AND OTHER TOPICS
Dear Greenwood,
Judging by your home page and your report to the World Bank, it seems you are still very active, professionally. I'd especially like to know more about your feelings about the reasons for the recent US economic success, but the article seemed to be only in Japanese. In retrospect it feels a bit ironic, since, when we worked together the boot was on the other foot, with despondency in the US as to how we could possibly learn from Japan. I wonder if we are seeing long term cycles over which man (political and financial) has little control. (The current state of the US stock market reminds me al too much of the Japanese market a decade ago).
I'm afraid I'm not nearly as active in that way. I think that much of my enthusiasm has been worn away by the stresses in the engineering world over the last few years. Maybe it will return after a rest.
Quite a few of my colleagues at Fluor have expressed their own fatigue - perhaps "burnout" is a better word. Many others have also taken retirement. Although Fluor has not suffered the extent of the downturn in Japanese engineering companies, there have been enormous competitive pressures. You may have heard that our Chairman, Les McGraw, retired early on the basis of ill health. The company was unable to find a qualified replacement within the company and eventually hired the outgoing chairman of Shell Oil, USA. Shell retires their executives at 60, Fluor at 65, so we see him as having 5 years to reform Fluor. Everybody is braced for his first moves. He's been with the company 6 months, so its about time. I expect many "retirements" from the executive ranks: we shall see. All-in-all not a happy time, worldwide for our industry.
I do hope that your Harley is not too exciting. I've owned two motor cycles, years ago. After nearly writing off the second one and, happily, injuring my passenger and myself only slightly, I decided to stay with 4 wheels. My excitement remains, as I think it was when we met, my 1969 Datsun 2000 (now Nissan in USA too). A true "wind in the face" sports car in the most traditional style. It's become a little shabby, but now I have time, I intend to do some restoration.
Needless to say it's standing up well mechanically - far better than I'd expect from the British examples of the genre which I'd owned before.
Your description of the Japanese beer industry sounds very much like that in North America a few years ago. I believe we were down to about 40 US breweries, nation wide. About 15 - 20 years ago a few individuals, mostly in the Pacific northwest, started VERY small brewing operations (you really couldn't call them breweries). They found such good acceptance that the number has multiplied - there are now thousands of US breweries. The largest of the so-called Micro breweries are now quite substantial, although still dwarfed by Anheuser Busch, et al. The last 5 years or so has seen quite a sorting out, with many going under.
The big brewers are trying to clamp down on beer distribution and are rather successful, I'm afraid.
Another side of the "revolution" has been the upsurge in home brewing. Brew clubs have multiplied, like the Strand Brewers. There is a very strong American Association of Home Brewers, with hundreds of competitions each year and a well developed system of training and qualifying brewing judges. As a result the number of available beers,
both commercial and through clubs, is transformed from a decade ago. Each year there are many home-brew festivals, such as the big one at Temecula, CA - we religiously make our pilgrimages there every year! (As seen in the photographs). If you are interested I can send you many web sites URL's.
Yes, I did take many of the photos, although am not anything like "official". I am in several of them; perhaps my glasses fooled you, since I lost my tolerance for contact lenses. The clearest one is the 1st photo in the section "Serving Booth Construction". As you say, many members have Beer bellies, although I'm still at the same weight as
years ago - I'm one of those lucky people who's weight doesn't seem to change. However, looking at our members makes me believe that their size is relatively the same as the US population as a whole. You'll probably remember how large most Americans are compared to Europeans or Japanese. This has increased over the years and is really imbedded in US culture. It is something of a national health problem. Those, still equipped with small "European" stomachs, like myself, just cannot consume the same large meals that are universal here.
With warmest regards,
Ron
99/01/14
Re: BEER and Other Topics
Dear Ron,
Thank you for your comments on my draft paper for PMI. Your comments were very stimulating to me. Incorporating comments from others, I would rewrite and submit it to the program committee before closing date of 15th. Our problem is that, after long history of outsourcing non critical design activity, most of our engineer lost capability or will of conducting real design work in house. This may be for us, the hardest part of restructuring.
Coming back to your original question of reason of recent US economic success or failure of us. It may be appropriate to introduce Japanese economist view. Recently, I have read two impressive articles on this subject.
Both of them say that one of these reasons is attributable high stock value of US. One of them made a graph showing US and Japan's historical record of Gross Stock Value/GDP ratio. Apparently, Japan hit high ratio of 230% in 1988. I have attached scanned image of it and pasted English translation for you. It is in JPEG image. Please download and read it by browser. Later I may up load it to my HP. We call it bubble economy. After it was punctured, our ratio came back to 1970 level. Now US ratio is increasing up to 170. Some US economist says that they found new economy. We also felt that way in 1988. No one knows what happens in the future.
Then why US Gross Stock Value is increasing? One reason is that Japanese central bank is keeping extremely low interest rate to save Japanese economy after puncture of our bubble economy. US government supported this policy. Because collapse of Japanese economy means shrinkage of Japanese market for US industry. Due to extreamly low interest rate in Japan, all earned money by Japanese manufacturing industry in global market flowed into US money flow industry and pushed US stock market up and balanced US trade deficit. Invention of this mechanism by US leader is the true secret of US economic success.
On US side reasoning, please contact http://web.mit.edu/krugman/www/ I think Prof. Paul Krugman is a cool economist. Today I found translation of his book "The Age of Diminished Expectations", MIT Press. This is a second book for me. According to his recent analysis using static IS-LM model and dynamic model, Japan is trapped in fluidity trap (reverse translation from Japanese). Only solution is Central Bank's declaration on strong support on inflation that is to say minus interest rate.
Time is passing. I have to return to my paper.
I will come back after completion.
Regards.
Greenwood
99/1/15
Datsun 2000
Dear Ron,
Today it is a national holiday in Japan.
I have submitted my abstract as attached at the end of my E-mail. Thank you for your corporation.
I thought that I can paste my abstract prepared by MS Word into submission form but it didn't work. Therefore, I have to type online. It took one hour to complete. As I contacted PMI web site from my home though dial-up line, I was under pressure of line cut off. It was a very frustrating work. I'm not sure whether I made it correctly.
Now back to your beer and other topics, I can understand fatigue or burnout feeling you expressed. All our people share the feeling. Like you, we asked Mitsubishi Bank and Mitsubishi Corporation to send us top management.
When I was young, I wished to have Datsun 2000, but I couldn't afford it. I still think it has something. My daughter once acquired similar British made car MG Midget. I built a garage for it. It had two problems. One was stickage of clutch disc after long parking and over heating. Even parked in covered garage, high humidity due to proximity to the ocean could not resolve the problem. Over heating was remedied by overhaul of engine. Vapor tightness of the cooling circuit was the cause of the problem. Now it was sold and working properly in some where in Tokyo.
My son recently acquired Mazda RX-7, a rotary engine soft top sports car. Those car are tough for my spine.
We are chasing US fashion in Micro breweries, but not in home brewing. Our government is still reluctant to make deregulation in this area. If you make any king of alcohol at home, you will be endangered of arresting. This is not hampering US-Japan trade. Therefore, US government didn't claim strict control in Japan. If US have an established industry that supply home brewing equipment, probably they can push US government to open up Japanese trade door to them.
I contacted http://www.strandbrewers.org again but failed to open photo file. I will it try again.
I made a hyper link from my page to your page. I am also responsible for English version of JPMF home page. I am lucky to find web master for it. He is also an enthusiastic bike fun.
Regards,
Greenwood
99/1/17
Economy
Dear Greenwood,
There are many topics to cover, so I'll do them separately.
(Parenthetically, I've logged into the SBC via your page hyper link. It works well)
I also admire Krugman. Reading his 1990 book underlines his wisdom, especially in the difficulty (impossibility?) of predicting the future.
I especially like his comment "Looking back from 2010... marvel at our stupidity in 1990". In general I agree with most of his comments, but feel he is a little narrowly focussed. A good example is his often quoted "there is no chance that the US budget can ever be balanced". Of course, it did happen. The biggest difference I see is in the overall climate and dynamic atmosphere in a country.
In 1990 or so, US opinion was still largely negative, but much less so than 10 years earlier. In 1980, there was profound pessimism, especially with the country's technical and economic situation.
However, in the last 10 years or so there has been a profound change. I just saw a survey of US public opinion where 75% of the respondents were optimistic - both personally and for the country as a whole. The current "bubble" in the technical stocks on Wall Street is an extreme example of a general feeling of confidence.
Most people feel that the bubble will burst, but it keeps on going.
Could there be a real value here? Will the promise of the Internet actually be met? We also have a feeling that Bill Gates, et al may actually be right! I've still quite conservatively invested, but am wondering if I'm not too much so because there are objective reasons why the situation could be different from the Japanese bubble a decade ago.
(Parenthetically, I think you give far too much credit to US leaders.
According to Krugman again, the US trade deficit results mostly from the very low savings rate here. He hoped that balancing the budget would allow it to increase, but, in the event we find it is even LOWER - some months it is actually negative - people spending more than they earn!
Our leaders are very concerned, but nobody has any idea how to get savings rates up again).
The most important is that there really is a tremendous surge in technology development going on, not only digital, but also in the biological and other fields. The contribution of the computer, as Krugman stated in 1990 has been very long in coming. From our own experience in engineering, we are finally seeing the development and application of adequate computer tools. I believe that it is possible that we finally may get a most significant boost in this way.
Unfortunately, all these developments all carry the seeds of their own termination. Thus I see these long cycles where individual countries gain and lose ascendancy. Right now it seems to be favorable to the USA, no doubt it will also swing elsewhere at some time in the future.
To me there is no question that the US has been very fortunate lately, but has also done some things right. The up side is that there really has been a reduction in government spending, coupled with increases in taxes. (Ironically it was the Bush tax increase which allowed Clinton to be elected and allowed him to raise taxes again, finally doing what had to be done to balance the budget, and leading to Clinton's extreme popularity today - about 70% favorable!)
In addition, the country has swung well to the right, politically, since Jimmy Carter. Who would have believed a Democratic president cutting welfare? Of course, not everybody agrees, but the majority opinion certainly does.
We, like you and most countries are very concerned with pensions for retirees (Social Security here). There seems to be some hope that the US govt. will act in time to keep the system solvent here. (Its true that for demographic reasons, the US is better placed than Europe or Japan).
One of the largest changes here, has been the ongoing development of Krugman's diminished expectations. I feel he overlooks the main cause - 9% unemployment early in the 80's. Union power has been greatly diminished, although they are currently trying to rebuild and have had some success politically, especially in California.
General opinion seems content with small raises in return for just keeping a job. Job security is an obsolescent ideal. Loyalty in both directions is doubtful. As a result most people feel that they have to look after their own career, feeling they will make many job changes throughout their life and feel quite justified in changing jobs as easily as companies reduce staff.
Large layoffs are not regarded, anymore, as exceptional. There is hardly any negative reaction about preserving jobs, cities, etc - on the contrary - it's regarded as the normal, competent management response.
If management did not reduce staff, they'd be judged inadequate, so most larger companies do so anytime profits droop. Because unemployment here is lower than at any time in the last 30 years, people are philosophical, feeling they can get another, perhaps a better job.
The up side is that the country is now very much more able to restructure and move resources to where they are most useful. The downside (which is being ignored by most Americans) is that income is being very polarized as Krugman showed in 1990. It's gone on increasing income inequality, almost reaching Latin American proportions. (Has Japan been able to keep much more reasonable remuneration for top executives?). When unemployment rises again, there could be extreme political repercussions. Another example of seeds being sown.
I see the following differences between the Japanese and the US bubbles:
Inflation has been almost completely absent here. Therefore, because of lower interest rates, you can justify a higher Price/Earnings ratio for the stock market. (Interestingly, large parts of the market have quite normal P/E ratios - its only the Internet/Technology/and Large Growth Stocks like Coca Cola which are sky high).
Very rapid technological development which MIGHT justify some of the high P/E's.
The depression in Asia, and perhaps Latin America. Very low commodity prices. Due to the income redistribution, company profit margins are much larger relative to wages and as a % of GNP.
However, with the seeds being rapidly sown, I'm sure the baton will eventually pass to others (Europe, back to Japan, someone else?). I'm very disturbed to see some growth in American arrogance - one of the more distasteful aspects of all this.
Disturbing times. I found your letters most stimulating and hope you find my rambling comments of use. I will get back to you on the other matters another day.
With warmest regards,
Ron
99/01/18
Re: Economy
Dear Ron,
Thank you for your long letter. It will take some time for me to digest.
Today, I added a small article in my HP. It is at the top of what's cool.
I finally could open your photo. Problem was time to open it. I just couldn't wait it. Your image was a little bit different from my image, which was frozen for long time. Certainly, we are getting old. Why not enjoy remaining life.
Today, I washed and waxed my new car, Chrysler Jeep, and charged battery of my HD, which I didn't care more than 3 months. I contributed to American economy for about 100,000$ in 12 years. Highest value for Apple and Microsoft.
Regards,
Greenwood
99/01/19
More about Krugman
Dear Ron,
I have read through your comments on Krugman's books and articles. I then started thinking that if I can obtain your permission, I would like to attach your letter to my homepage with my short letter. How do you think about it?
Followings are answer to your question raised in the letter. There are still many differences between Japan and US. For example,
(1) Although it is changing, but very few people move from one company to other. Because of this rigid system, job finding in Japan is difficult.
(2) Annual income difference between top management and employee is relatively small except some top man in Bunk who receives big retirement fee. Some of them are asked to return money to the bank for misleading the company.
(3)Our Prime Minister has less power than US
(4)Our central bank is not independent from government
(5)A year ago, one of candidates to the Prime Minister talked about controlled inflation. But he lost the position. Once we learn something, it's hard to forget it. People still couldn't forget about former inflation of land price. They are still paying back heavy debt for their home.
As you can imagine, those are hurdle of recovery from deflation..
Engineering Company sells project management service. According to PMI definition, project is a temporary endeavor undertaken to create unique product or service. There was highest expectations that modern technology such as computer and information system can dramatically enhance engineering productivity and can achieve concurrent engineering in distributed engineering offices. I was a main promoter in Chiyoda. Now I found that it is true for steady state operational activity. But not true for project. In project execution, still, face to face communication is must. You should not be naive enough to expect people in remote office or vendor follows your instructions made in E-mail. Some times you have to physically fly to remote office or to vendor's shop. I found in Krugman's article that computer never exceeded what airplane or elevator did in enhancing productivity. This may be one of the reasons why New York and Tokyo exist.
After reading Krugman's original paper now I know it is liquidity trap not fluidity trap.
I have revised my home page accordingly.
Regards,
Greenwood
99/1/22
Hydrogen beer
Dear Ron
The laws of physics are not to be disobeyed.
TOKYO (AP) The recent craze for hydrogen beer is at the heart of a three way lawsuit between unemployed stockbroker Toshira Otoma, the Tike-Take karaoke bar and the Asaka Beer Corporation.
Regards
Greenwood
99/01/24
American success
Dear Ron,
Reviewing my home page, I found why you asked me about American success.
The purpose of the repeated presentation made to members of ENAA (Engineering Advancement Association) was to collect enough number of individuals for new organization called JPMF (Japan Project Management Forum).
The strategy I made was to count project management as one of reasons of American success. My point was that project management concept is widely adopted in American society as a change agent.
Of course there are many other reasons such as deregulation, free market, Anglo-Saxon type corporate governance, people's mobility, leadership in communication technology etc. In addition to those reasons, I added this reason as one of reasons of American success.
The mission was fulfilled. We collected 1,000 startup members.
Contents of my speech was deleted from the web site of JPMF, therefore, I also revised my web site accordingly.
I appointed a person to build English home page for international transparency.
An American friend in Tokyo who ia also HD rider has sent me following article by E-mail.
Greenwood
99/02/03
Re:Success/Discussion
Dear Ron,
Thank you for your January 29 mail, "Success/Discussion" sent to my office. I was unable to respond soon, because of back pain caused by excessive use of PC.
I spent most of free time in upgrading my home page. Thank you for your arrangement of future linkage from SBC.
I could download Los Angeles Times. It seemed now that Americans are working hard. We are also in a similar environment. My back pain is a typical example. You asked me whether I was able to download your Word attachment of last week. I have never seen such attachment. The last mail from you was a one received on January 17 on Subject "Economy". Did this have attachment? If so, I missed to download it. If you have a copy, could you mail it again?
My joke on US economy says that "Current bull market in US may collapse if senate is successful in impeachment of Clinton." But actually, it is said that US owe Mr. Greenspan its success of economy very much.
Japan is not in Stagflation, which occurred, in late 1970 in US. There is no sign of inflation. We are now in deflation spiral. People are not buying and saving for the future. Companies are reducing employee. Many people left engineering company. Few days ago, one of oldest department store that had 330 years history closed because they could not find buyer. Our central bank still does not increase money supply because they afraid inflation start again. They still could not forget bubble economy. They are not flexible and bound by former experience. Politicians, bureaucrat, economist, academia, media and people are all the same. They cannot make unlearning. Hopeless!
Regards,
Greenwood
99/02/03 10:29:34
Re: Success/Discussion
Here are the attachments again. The messages "said" they had them attached at this end. If they are getting lost en-route we may have a different problem..
One is a Word file, the other a text file, translated from Word.
Ron
99/02/04 9:19:19
ENGINEERING COMPANIES & OTHER TOPICS
Dear Greenwood,
I hope my quick note of yesterday got to you and included the attachments. If not, I'll try to incorporate text in the email text - although, like you, I've had problems doing that.
Your probing presentation on Engineering Globalization prompted many thoughts. In general, its amazing how parallel Chiyoda and Fluor have been in their response to the market developments you describe (allowing for differences in circumstances). The biggest difference is that Fluor probably "got out of the competitive business" of some projects and world areas sooner. We were amazed that Japanese companies continued to bid on what we considered "no win", lump sum projects long after we declined that sort of work. Even as late as 1997 when we assisted
Mitsubishi as a subcontractor on an ADNOC proposal - the ASAB gas development project. I believe Chiyoda bid reluctantly on that one too. On losing to Snam Progetti our reaction wa that they were welcome to it.
My main thoughts, however, are that the situation in Process Industry Engineering and Construction has changed fundamentally from the days we worked together on LNG. Technology leadership has shifted to others (it was even shifting 20 years ago). In most of our client's industries relatively few major technology changes are being seen. The result is that PIE&C is becoming a mature industry, with growth limited to roughly the rate of the economy as a whole. At the same time capacity in the industry continued to increase leading to the severe competitive situation we face.
Like other similarly placed industries, one response to this has been consolidation. One of the few growing US E&C companies, Jacobs, has been aggressively buying other companies with the stated aim of becoming competitive in the market for full-capability engineering (guess who they have in mind). Fluor tried to diversify, starting about 10 years ago, with a stated goal of 15% annual revenue growth. The effort was not successful and led to very high costs and something of a financial crunch over the last two years. We'll see how our new CEO tackles our problem. (He's the ex-CEO of Shell Oil USA - I expect a much more customer oriented approach).
There has also been a conflicting and opposite tendency here in the US.
Most of our clients have been very skeptical of claims by Fluor that ourhigher costs are offset by greater savings - e.g. in overall project performance - the good qualities you describe from a highly skilled engineering company. Naturally, we have been at pains to point out our side of the story, but the client response is so frequently negative that I'm afraid there must be a lot of truth behind their skepticism.
As a result, we have been seeing what is often described as "commodity engineering" - clients assume that results will be comparable and concentrate only on quoted cost. Naturally small engineering companies with skilled engineers do well in this environment.
From personal experience I know many very skilled Process engineers who have left Fluor to join small companies. Most remarkable, a couple of years ago, was the formation of a partnership of six of Fluor's most skillful engineers. They've formed a group of consultants and tell me they are not only doing well, but enjoying work far better. (They offered me a job when I retired, which I take as a great compliment).
On occasion during the last few years I have worked in some of the new technology areas, biotech, computers, environmental. The contrast between them and our traditional oil company clients is fundamental.
These are operations which double in size every year or so, whereas the others are basically stable. The main object is to be the first to develop and implement new technology, which, in turn, changes on a month to month basis. Even the giant IBM is caught up in this turmoil.
This makes entirely new demands on the engineers and companies working to assist them. Compared with our usual work schedules are impossibly compressed. Unfortunately, comparatively few of Fluor's engineers can handle that. We must recognize that this type of adaptability is required for survival these days. I'm afraid that one hurdle our new
CEO has to overcome is the ancient "paradigm" in the company, both in management and at the working level. (As you can guess, as Director of Process Engineering, much of my work consisted in persuading skilled process engineers that results were needed FAR faster than they thought possible - very uphill work I'm afraid).
All-in-all not an easy prospect for our industry. However, I'm sure that some companies will succeed, like Honda and Ford, while others fall behind and get bought out. I believe both Chiyoda and Fluor will get on top of this wave. As Jack Welch said in your quote "Control your destiny or......". Incidentally, he is very highly regarded at Fluor as well.
Best Regards,
Ron
P.S. I also suffered from back pain for many years. It, too, was brought about by long hours sitting at a desk/computer screen. I've found great relief by replacing my chair with a kneeler. That's a device which transfers part of your weight to your knees and encourages a much better back posture. You might look into them too.
Ron
99/02/05 8:27:59 Tokyo Time
TEXT FILE ATTACHMENT TEST
Dear Greenwood,
I'm glad the .doc file made it through. Did the message also make it? As a final? test, here's the text only file which was in the original, 2 attachment message. This is the article from the LA Times about working hard (If you also downloaded from the LAT over the internet it'll be interesting to compare what you get).
Regards,
Ron
99/02/06 15:19:22 Tokyo Time
Re: TEXT FILE ATTACHMENT TEST
Dear Greenwood,
I think we've found part of the secret. Today I consulted with my computer guru (my eldest son, who works with PC's). He believes the problem occurs when I either reply or forward messages instead of originating new ones. I believe the ones that misbehaved were replies; perhaps you can confirm that. In future, I'll always use new letter when I have attachments.
Do you have anything definite in mind for a visit to California? (Perhaps an extension of a business trip?). Of course, I'd be delighted to meet again after all these years, as would my wife (first time for her). If there is anything in the wind let me know of any others you'd like to get into contact with.
Best wishes,
Ron
99/02/06
Re: TEXT FILE ATTACHMENT TEST
Dear Ron,
Thank you for your quick response. Now I have LAT.text, SBC activity plan.doc, and your long letter about Engineering Companies & Other Topics.
As far as number of attachment is one, most of the type could be decoded.
Your letter on Engineering Companies & Other Topics was very interesting. The reason we couldn't withdraw from fierce market at the right time was management problem. In Japan, Top man has the strong power. But he has limited access capability to real time information. When every thing are going well, this is a strong system. But when something gone wrong, insensitive top man sometimes makes misjudgment due to delayed arrival of actual data to him. As a bottom level executive, I couldn't stop it.
Now, Korean is doing the same. I don't know how long they can continue.
In 1986, we also diversified and put young engineer to the new field. They could survive by themselves but could not support the main body. As a result of this decision, capability in main business area weakened. In this sense, diversification was not successful. Our competitor, TEC announced few days ago that they will separate new business area as small independent company.
Major oil companies are also suffering and they have to down size their organization and has to select lowest bidder. I share with you the concept of "commodity engineering" Outsourcing to small group may increase. But someone has to take the whole responsibility. Nowadays, client may not dare to take such responsibility they rather put such risk taking duties to the biggest contractor. We took it and failed. Now Korean's turn.
I also met many ex-BP engineer working as consultant and doing very well. They are paid $120 per hour worked.
Thank you for your suggestion to use kneeler. Now I'm using it. It has long been under the desk but completely forget to use it.
Today, I was busy writing an invitation letter to the Chair of PMI asking Keynote speech in our first Symposium of JPMF.
Regards,
Greenwood
99/02/07
Re: TEXT FILE ATTACHMENT TEST
Dear Ron,
Probably you are right. When I experienced similar failure before, sender used reply mode. I guessed differently.
Thank you for your kind invitation to California. If PMI accept my abstract, I have enough reason to visit Philadelphia in October. But it is not certain. My desire is to make a private trip to California accompanying my wife some time after retirement. It may come within 1 or 2 years time. In such occasion, I would like to consider your offer.
She has a cousin in San Francisco, a retired medical doctor. He is getting old, And may be appropriate to visit them too.
California is one of the best place in the world.
Best wishes,
Greenwood
99/02/08
Re: TEXT FILE ATTACHMENT TEST
Dear Ron,
Last night, after receiving your letter, I found a typographical error in making linkage from some of my page. I corrected it. Now it has special corner for Japan's problem.
Today, it is reported that Central Bank of Japan is going to have policy making meeting in Feb. 12. Very interesting to find what decision would be made.
Regard,
Greenwood
99/02/08 10:35:52
COMMENT ON "WHAT I THINK...."
Dear Greenwood,
I've been meaning to comment since I downloaded these thoughts from your page of 17 Jan. (Just because I'm retired doesn't mean I don't run out of time to do things!)
I've tried to access Krugman's home page, but got an error "bad locker name". Can you suggest what's wrong? Do I have to subscribe?
I understand the liquidity trap clearly enough from your description.
My analogy to USA a few years back was meant to suggest that, if most politicians in Japan believe that reinflation is actually the cure but are afraid to suggest it then, after things get intolerable, their fear of continuing depression will become greater than their present fear of inflation. Perhaps then they will find new code words for reinflation and (by unadmitted agreement) will actually do it. This was what happened when Carter appointed Paul Volker to the Federal Reserve with an agenda of tight money (carefully not pointing out that that would cause a major recession and high unemployment).
On your comment about new dams in the US. Not only are few, if any, being built, but the big push these days is to actually tear them down.
Many have been removed already, including some fairly big ones. The economic value of these was much exaggerated and the environmental consequences quite severe, especially for migratory fish, such as salmon. On our trip to Alaska last summer we found that the salmon "runs" have been catastrophically reduced. As you know fishing is under great strain all over the world. So fishermen have become very militant lately.
Your comments about road building really strike home to me. We have many of the same NIMBY effects you describe. At the moment there are big plans to expand LA airport. Many of the residents of Manhattan Beach and other cities in the area are fighting over alternates. (Manhattan beach is only about 5 miles south of the airport and the feeder highways and freeways run near us). Of course, their main theme
is "expand other airports away from me". There seems no doubt that the economy of Southern California will be threatened if LAX is not expanded, but how to do it will take long argument! I'll keep trying to get to Krugman and see what other avenues I can find.
I understand that it is only a possibility but, if you do travel to Philadelphia, why not stop over in LA on the way through? We live only 10 minutes car ride from the airport and would love to welcome you to our home for the night. (Since both of our sons have moved out of the house we've converted one of their bedrooms to a guest suite so friends can stop over).
Best regards,
Ron
99/02/10 10:59:46
Re: Krugman's Site
Thanks, Greenwood,
Its working very well. Now I've printed a lot of stuff to catch up with. Comments later.
Yes, the central bank decision will be most interesting. After the US Federal Reserve met last week without changing interest rates, speculation here is that they may very well do so next month, if the Stock Market continues up. As it happens, the market is down, so we're al uncertain what they'll do. Perhaps that also depends on the Central Bank of Japan.
Fascinating.
Regards,
Ron
99/02/14
Re: MACROECONOMICS / KRUGMAN / JAPAN
Dear Ron,
I have read two bad articles in the newspaper yesterday. One is of course, Central Bank's decision. And another is cancellation of big IGCC project planned by Exxon's subsidiary company in Japan. We lost 600 million $ project.
As you pointed out, it was very disappointing for me. It seems that Japanese policy maker is still bound by old theory of John Maynard Keynes established under fixed exchange rate. But according to new theory of Mundell and Fleming under changing exchange rate, action taken should be different. It is interesting to know that John Maynard Keynes himself pointed out in his book "The General theory of Employment, Interest and Money", that any statesman, government officials or banker are slave of economic theory he learned in the past and he can not learn new theory after 30 years old.
Recently, I have read through Paul A. Samuelson's book "Economics, Sixth Edition" wrote in 1964. But couldn't find Mundell and Fleming theory in this book. It is mentioned in Rudiger Dornbusch and Stanley Fisher's book " Macroeconomics first published in 1978. Old leaders of Japan at my age learned economics from Paul A. Samuelson's book. I bought this book in 1996 and never read it. But now I read it with great interest. History was repeated. I don't know what will be the out come of Central Bank's decision.
Second bad news about cancellation of IGCC project reminded me of my pessimistic prediction on the outcome of this project. Due to deregulation of power generation in Japan, Many oil refineries in Japan started thinking to join IPP business. Most of them considered simple BTG power generation with flue gas cleanup process. But City of Kawasaki had the policy of no change of total sulfur emission. This was why one of our client decided to adopt IGCC process. It is the best process to remove sulfur from fuel oil before power generation, but economically inferior due to extensive investment requirement and low thermal efficiency. I thought the idea would die out soon. But to my surprise, it was awarded to us few years ago. But strict requirement of reduction of total sulfur emission to air finally killed the project. Requirement was more stringent than LNG in respect of sulfur amount contained in the fuel. To achieve the requirement, we have to adopt Rectisol process for cleanup of the gas.
I do not have information about Australian economy. But close proximity to Asia may be the reason of their bad economy. I feel structural reform is necessary in Japan, but current situation is more urgent. I afraid it might cause an over kill or unnecessary disaster. Personally, if disaster does not occur, I can enjoy happy retirement. Now, I am trying to minimize the risks and prepare for any conceivable outcomes.
Never mind, I think I can manage and can visit your place or entertain your visiting Japan.
Regards,
Greenwood
99/02/14 13:15:50
MACROECONOMICS / KRUGMAN / JAPAN
Dear Greenwood,
Judging from the Bank of Japan action yesterday, (cutting the interest rate a massive 0.1%!) it looks as though Krugman's message is still not getting through. Pushing on a rope indeed. I understand they also said they would not be buying a larger number of Japanese government bonds.
That seems to have had wide repercussions; the bond market reacted here driving prices down and raising yields. I imagine Krugman is wringing his hands in frustration.
His many papers over the last year or so make sobering reading. After reading through them I'm rather more pessimistic than he about the chances of repeating the 1930's. Like then, there is no consensus among economists and the bankers and politicians are reacting as they usually do - by staying "respectable", "sound" and "conservative". If he is correct, that's a recipe for compounding disasters. Its also clear that they won't consider his remedy. We shall see.
He makes a very convincing case of the problems over there. I've long been aware of the difficult demographic situation in Japan, but had not thought through it beyond noticing how much more difficult it makes the financing of retirement pensions. His discussion regarding deflation and reducing national economic capacity makes it clear that it causes even greater problems in a broader economic sense.
The end of the line for expanding fiscal stimulus is also clearly at hand, as he describes. The lowering of Japan's bond ratings and the rise in interest rates point to this clearly. The point about defending the value of the Yen hits me very hard. I clearly remember the miserable days in Britain during the 1950's when the government desperately and unsuccessfully tried to maintain the value of the Pound - yes, also trying to be an "International Currency" ( very much out of nationalistic vanity as Krugman acidly observes in Delusions.....) The result was similar to the situation in Japan today - stagnant economy and high unemployment. (Coincidentally, my brother in Australia says that real interest rates there are close to zero, while unemployment is still high - do you feel they are in a similar position to Japan?)
One of Krugman's most telling points was the comparison with the recovery in the US from the 1990-91 recession. As he points out that took a CUT of 6% in the US interest rate. Obviously with Japanese rates of ) 0.15%, European rates of 3% and US rates of 5 - 5.5% that cannot occur again. Luckily the US (and European) economies still are charging ahead at the moment, but what happens if they falter?
While his critique of the opposition (especially in "Delusions of Respectability") was quite devastating, I still have some reservations about his position.
A minor point is the strong reliance he puts on his simplified models.
I don't know how valid they are for the points he's trying to make.
A bigger concern is his cavalier encouragement of governments establishing a policy of inflation. Does he really trust them to stay with a small amount? We all remember the 70's where it really got out of hand. A very dangerous drug I'm afraid.
He quotes a Japanese economist opposing his proposal because " (it) would allow those guys to keep on doing the same old things, just when the recession is finally bringing about change". Krugman rather dismisses the need for structural reform in Japan, saying its far more urgent to cure the recession. What do you think? Is reform badly needed? Is it actually happening now? Would curing the recession postpone urgently needed changes? I'd be most interested in your view.
(Many of his comments mirror your own comments on unneeded bridges and difficulties in the upper levels of corporate management regarding actual trading matters).
Another long letter, I'm afraid. Still the subject is very interesting and fundamental to all our lives.
Its also very interesting to me also that you are considering retirement. I can really relate to that having just gone through the same process. I trust you'll be able to plan it successfully. As I think I've told you, I have no regrets at all; like most retirees I wonder if I should have done it earlier. The best news is that it seems we'll meet again sometime in the fairly near future.
Regards,
Ron
99/02/14
Re: MACROECONOMICS / KRUGMAN / JAPAN
Dear Ron,
I have read two bad articles in the newspaper yesterday. One is of course, Central Bank's decision. And another is cancellation of big IGCC project planned by Oil Major's subsidiary company in Japan. We lost 600 million $ project. As you pointed out, it was very disappointing for me. It seems that Japanese policy maker is still bound by old theory of John Maynard Keynes established under fixed exchange rate. But according to new theory of Mundell and Fleming under changing exchange rate, action taken should be different. It is interesting to know that John Maynard Keynes himself pointed out in his book
"The General theory of Employment, Interest and Money", that any statesman, government officials or banker are slave of economic theory he learned in the past and he can not learn new theory after 30 years old.
Recently, I have read through Paul A. Samuelson's book "Economics, Sixth Edition" wrote in 1964. But couldn't find Mundell and Fleming theory in this book. It is mentioned in Rudiger Dornbusch and Stanley Fisher's book "
Macroeconomics first published in 1978. Old leaders of Japan at my age learned economics from Paul A. Samuelson's book. I bought this book in 1996 and never read it. But now I read it with great interest. History was repeated. I don't know what will be the out come of Central Bank's decision.
Second bad news about cancellation of IGCC project reminded me of my pessimistic prediction on the outcome of this project. Due to deregulation of power generation in Japan, Many oil refineries in Japan started thinking to join IPP business. Most of them considered simple BTG power generation with flue gas cleanup process. But City of Kawasaki had the policy of no change of total sulfur emission. This was why Exxon decided to adopt IGCC process. It is the best process to remove sulfur from fuel oil before power generation, but economically inferior due to extensive investment requirement and low thermal efficiency. I thought the idea would die out soon. But to my surprise, it was awarded to us few years ago. But strict requirement of reduction of total sulfur emission to air finally killed the project. Requirement was more stringent than LNG in respect of sulfur amount contained in the fuel. To achieve the requirement, we have to adopt Rectisol process for cleanup of the gas.
I do not have information about Australian economy. But close proximity to Asia may be the reason of their bad economy.
I feel structural reform is necessary in Japan, but current situation is more urgent. I afraid it might cause an over kill or unnecessary disaster.
Personally, if disaster does not occur, I can enjoy happy retirement. Now, I am trying to minimize the risks and prepare for any conceivable outcomes.
Never mind, I think I can manage and can visit your place or entertain your visiting Japan.
Regards,
Greenwood
99/02/15 11:16:35
Re: MACROECONOMICS / KRUGMAN / JAPAN
Dear Greenwood,
I'm sorry to hear of your loss of the IGCC project. Chiyoda probably needed the project. This parallels our own bad experience generally with IGCC. The plants are so expensive that special economic circumstances are usually necessary even for initial consideration. These often change as Kawasaki's policy did.
Even when they don't, once the size of the investment becomes clear and hard economics are done, the client generally thinks twice and abandons it. We've lost quite a few over the years.
On the other hand Fluor Daniel (recently Duke - Fluor Daniel) has been pretty successful over the years with combined cycle Gas Turbine Generation/Process and power generation steam plants. During a slow period in our refining business in the 80's I was lead process engineer on what I think is still the largest US plant, 1360 MW. During the last 5 months Fluor has won almost 3000 MW of work, 1500 MW in the last two months. Most of this work is domestic, caused mainly by the deregulation of the US power business.
Krugman covers many of the points very well in his speech "Return of Demand Side
Economics". He particularly refers to the "The Irreconcilable Trinity" of independent monetary policy, stable exchange rates and full convertibility. I'll look out for Mundell and Fleming. If I track it down I'll let you know.
Like your leaders I learned my economics from Samuelson! (At least I'm retired now, which should minimize the damage I can do). Since then, I've only dabbled in the field until you resparked my interest. Most of my recent hard learning has come from the stock market; - a very hard task master. The most clear lesson is that, as soon as a relationship becomes apparent, it no longer holds ? since everybody tries to take advantage of it. (Incidentally, I feel the inability of people to learn new theories after 30 is pretty universal. I'm afraid Fluor is full of engineers stuck in the past that way.)
I guess the solution to the Asian economic crunch cannot be at that stage yet, since there is no consensus. Although Krugman is not credited, general discussion of the possibility of a world-wide recession is now common here.
We seem to feel about the same way about personal investment. Like you I think
I'll be safe in retirement unless there is a real disaster. In that case, who could say where anyone could be safe. Another factor in my decision were the prospects at Fluor - personal and corporate. They seemed not very good. Since I retired, the stock has declined about 25%, so it seems that Wall Street thinks the same thing.
Regards
Ron
99/02/21 13:29:17
L.A. TIMES ARTICLE
Dear Greenwood,
Today the L.A. Times had the following article on its front page. It seems to summarize the arguments quite well and indicates how the concern about the world economy is growing. The other day I saw an other article about how the Chinese government will be greatly increasing public works spending (and its deficit) to try to reduce unemployment and, they hope, dissent.
Storm clouds everywhere you look these days (except Wall Street!).
Best regards,
Ron
Japanese Banks May Get Loans Interest Free By MARK MAGNIER TIMES STAFF WRITER
(Incidentally, I've found how to paste other files into my email text ? at least on my own email system. I save the Word file as text only, highlight it and put it into the copy mode. Then, in email I use "Edit/Paste Quotation". I hope this is readable. To make sure I'm also attaching the file. Ron)
99/03/02
Re: L.A. TIMES ARTICLE
Dear Ron,
Sorry for not responding soon. I have been to Nagasaki to enjoy three days holiday with my wife.
About 8 years ago, a copy town of Holland was build near Nagasaki by a man called Kamichika born in this area. I never considered of visiting it, because, I can visit Holland with the same amount of money. But Airline Company offered me free tickets and free Hotel coupons for both of us. I found it was a nice offer.
With substantial investment amounting up to 6 billion $, it is 90% complete copy of Netherlands. Canals, dock, brick buildings having Dutch facade, castles, plaza, cathedrals, museums, residential district with private boat pier, several tall ships for hire, 5 big hotels, casino, athletic club, restaurants, shopping arcade and royal palace etc. The royal palace is an exact copy of Paleis Huis Ten Bosch. Key building materials were imported from Holland.
The idea came from the fact that Nagasaki was an only gateway to western world over 300 years in Edo era and Holland was a sole trading agent for Japan at that time.
I enjoyed it very much and would recommend my friend to visit. In a marine shop, I found fake scrimshaw and acquired one. It was made in Italy. I like it.
Among 3 sailing ships, I found a ship, which arrived Japan in the year 1,600. The name of the ship is De Liefde. It passed through Magellan straight and sailed across Pacific Ocean before arriving Japan. On board of the ship, there were an English man called William Adams and Dutch called Yan Yosten. Both of them lived in Japan as vassals of Shogun the rest of their lives. William Adams was given a land in Miura peninsula near my place and Yan Yosten had an estate in a place just east of Tokyo station. The place is still called Yaesu named after Yan Yosten.
The article of L. A. Times is a reflection of general atmosphere in Japan. I was a bit disappointed with the decision made by the Bank of Japan. They are bound by a Taboo of not buying national bond. There are many Taboos in Japan. I afraid our society is a bit slow to be released from Taboos that were once correct in the history but lost their correctness as the year passed by.
I could read both of your text of L. A. Times. But latter contained html tags.
Regards,
Greenwood
99/03/04
Kellogg etc.
Dear Ron,
No policy issued from our new sharholder in US.
I think this issue is an initiative of Mitsubishi corporation. Now, Mitsubishi Heavy Industry does not have power nor Mitsubish Oil which merged with Nippon Oil.
To new sharholder in US, This is a reasonable buy to minimize competitor.
We know what had happened to McDonnell Douglas. But Boeing itself is not running well.
We are watching what policy will be taken by our Japanese competitors. Fluor's forth coming policy is also interesting.
I uploaded to my website some of the photos taken during our visit.
I had no knowledge about scrimshaw before I have read article about it written by chairman of JGC corporation, our competitor.
He bought one in Australia. An English man advised him to consult with almanac to find out the story about the ship and the captain.
Finally, he reached Kendall Whaling Museum. To his disappointment, the museum advised that it is a fake scrimshaw made by plastic. But he had an curiosity on it's weight. Too heavy for plastic. Company laboratory revealed the secret of it `s weight. The polyester resin contained about 50% of fine powder of Doromite.
First text of LA Times was readable. Second text contained tags similar to the one found in source list of html document.
Regards,
Greenwood
99/03/06 13:17:51
TEST OF LA TIMES ARTICLE TRANSMISSION - sent Friday 8
Dear Greenwood,
Here are a couple of tests for transmitting articles from the LA Timesweb site. In the body of the letter, below, I'll put in a quoted copy.
This I downloaded as a text file and (rather laboriously) cleaned up.
It should be normally readable. The attachment is the file directly downloaded. It has "htm" as a suffix, so I suppose its an html file.
It may be of no use.
The article is about the Chinese economy and its own version of the"Asian Flu". It seems they are taking Krugman's Keynesian advice moreseriously. Of course they have a much more explosive situation. What do you think about the Chinese situation and what they plan to do aboutit?
Regards,
Ron
China Budgets Red Ink to Meet 7% Growth Plan By ANTHONY KUHN
99/03/07
Re: TEST OF LA TIMES ARTICLE TRANSMISSION
Dear Ron,
I could read LA article in the body of the letter but I could not read attachment. Even worse, I could not delete the unreadable file from my hard disk.
China's prime minister is a very bright man and seems he understand Krugman's Keynesian advice. As far as he is in his position he will do a good thing to China and the world. But I afraid political unstability created in China may sweep him away from the power.
Regards,
Greenwood
99/03/09 8:50:17
MORE LA TIMES - JAPAN'S ECONOMY
Dear Greenwood,
I'm very sorry that my message put an uneraseable file in your computer. In future I'll just use text in the body of the letter. I've found an easier way to edit it. My email allows me to send either text, html or both. I'll send this and future emails text only.
As it happened the LAT had another interesting article yesterday (Sunday). It's by James Flanigan, their head economic columnist / editorial writer. He's normally on the optimistic side, but is thoughtful and often correct. His article is very positive, as you'll see below. I'm encouraged by his implication that, in spite of denials, the BoJ is, in fact buying government bonds, in effect "printing Yen", and quotes Takashi Kiuchi to that effect. This could be similar to the US govt. behavior in 1980, - clamping down on the money supply without admitting it would lead to massive unemployment - in other words, taking Krugman's advice, but not admitting it because of political risks.
In his close he sees the possibility of small, information and technology companies in Japan having a major turnaround, leading to the sort of explosive growth in that sector we've been seeing here. (Shares of one US computer company (Dell) are up 36,000% (e.g. 360x) in the last 10 years). Perhaps another "bubble"? I can never be sure because the applications in the internet and other places just keep on increasing.
He also mentions Chiyoda - to say that Kellogg / Brown & Root are helping to restructure it He describes Chiyoda as a developer of oil & gas properties. Is that, perhaps a different part from the Engineering section? Brown & Root have a reputation of ruthless cost and staff cutting here.
On the other hand, I've just read the March economic forecast and review from Daiwa Institute of Research. They are much more pessimistic, seeing only a temporary boost from government stimulus measures, with a new downturn in the second half of the year. They make no mention of the buying of government bonds. They predict unemployment rising to 5.5% by the 4th quarter.
Regards,
I hope the file is readable without problems.
Ron
Sunrise for Japan's Economy By JAMES FLANIGAN
99/03/10 13:17:25
FLUOR STRATEGY
Dear Greenwood,
Just a quick note that Fluor outlined its strategy today. If you'd like to read the whole thing its on <www.businesswire.com>.
They see tough times indeed. Because of the many non-profitable jobs we've discussed they foresee new awards down from $ 10 to $6 billion - partly because of greater selectivity and partly due to bad business conditions ("severe challenges"). Fluor stock dropped about 3% today, about the same as yesterday's drop - (Over the years we've very often seen impending bad news show up on the stock market during the days before the announcement.)
Corporate profit is projected as only $1.42 per share, down from $2.97 last year. Big reason for that is yet another "one time charge" of $130 million to implement the strategic actions . (A slightly smaller charge taken in 1997 "to implement cost reduction initiatives" actually turned out to be only about $25 million). So the $130 may be much larger than they actually need, allowing them to report better results later.
Somewhat in the category of rearranging the deck chairs on the Titanic is the news that they are reorganizing into 4 business groups plus a business development / sales / marketing group. The heads of these are many of the same people involved before. (The word "Group" crops up many times in their plan.)
With the decreased volume of work they are planning to close another 15 offices (in addition to the 17 or so already closed) and reduce 4000 positions "directly involved with project activity" plus 1000 overhead positions in Fluor Daniel, the E & C business group. That's about 15 - 20% of FD staff.
The selectivity will involve serving fewer customers and cutting out low margin business areas. The E & C company will cut back from 17 operating companies (!) to 5 industry groups.
As expected, and we discussed, they are putting massive effort into IS / knowledge-management systems - spending $30 million over the next 3 years.
Not happy days at Fluor.
Regards
Ron
99/03/17
FLUOR ORGANIZATION
Dear Greenwood,
I do not have the detailed new FD organization - only the previous one.
The new one, from the 1999 strategic plan seems greatly simplified. Its hard to describe the old organization - it doesn't fit any single logic! I'll try to summarize below, but like most of our charts, it was only one stage in a constantly changing set of plans. We never really tried to clarify details:
(A) Because they were enormously complicated
(B) Because they were always being changed.
I counted more than 30 separate business organizations in the July 1997 chart. These were simplified a little in Dec 1997, although most of the 30 survived. That last one had 4 main operating groups for:
Energy & Chemicals
Industrial
Government, Environmental & Telecommunications, and
Diversified Services.
As is often the case in our reorganizations, they seem to be rearranging the same old project organizations. For example, Energy & Chemicals used to include Chemicals, Plastics & Fibers; Petrochemicals; Petroleum; and Production, Pipelines and Marine Systems. It seems that these will be split between Oil, Gas & Power; and Chemicals & Process. The old Government, Env. & Telecom is probably part of what they call "low margin business areas". They've already sold off a 1996 acquisition FD/GTI in the Environmental area.
Each of these had many operating business units. Some were full fledged divisions, such as Petroleum and Petrochemicals. Others were aligned with clients or partners , such as the Kodak Alliance and Duke/Fluor Daniel. Most were EPC, but several were not. The latter included most of diversified services, even including our temporary manpower unit, TRS.
In addition to those operating units there were large sales, marketing and regional operating companies. Some of these also included EPC offices, such as Fluor Australia and ICA/Fluor Daniel in Mexico.
Manpower would often be transferred between these units. I myself worked in three of them over the last 10 years or so.
The bottom line is that there really is no definitive answer to your question. My guess would be that a bit more than half the manpower would be somewhat EPC connected - Note, its only a guess. I doubt the boundaries would be clear enough for anyone to really add up the totals.
I imagine that the exact nature of the staff reduction will only be clear after the event. As you know, contracts can come in at any time, so each organization will try to hold off until the last moment, hoping for a "reprieve". The pattern will probably be very different in the different operating companies. In the middle 80's, when more that 65% of our total staff were laid off or retired, the process went on for many years. Our Process Engineering Vice President was replaced in the middle. He just couldn't bring himself to lay people off!
The wording "4,000 in project activity and 1,000 in overhead" leaves a great deal of wriggle room. The sheer size and byzantine organization structure of Fluor in recent years is really a challenge to the new CEO. From my knowledge of oil companies (not including Shell USA) he's used to a much more logical and tightly knit organization.
I'm sorry to hear that your paper didn't "make the cut". There sounds to be a very great deal of activity in the PMI. No doubt Chiyoda will not be happy to pay for a non presenter visit to the conference (FD hashad that rule for many years - all part of being "lean and mean"). I'm sorry that it seems to rule out a possible meeting en route in Los Angeles this year.
The Scrimshaw came through clearly. My printer was also able to make a presentable print. It certainly looks authentic and is a real treasure.
Regards,
Ron
99/03/20 9:41:53
MORE FLUOR NEWS
Dear Greenwood,
Thanks for the details on Mitsubishi Corp. and new shareholder in US. To hear that Mitsubishi, Mitsui, Sumitomo group cannot help really underlines the debt problems there.
The newspapers here often mention that there is beginning to be resolution of some of the bad bank debts in Japan. I suppose the bank debt includes much of the debt you mentioned for MHI, Mitsubishi Motor Co, Nissan, et al.
Today's paper has more detail on Fluor's layoffs. Irvine has about 2,500 people, so 700 there is more than 25%, roughly in line with Chiyoda. (They appear to have underestimated Fluor's total staff. Last year's annual report had 30,000 at Fluor Daniel alone.) I attach the article below, along with another one I found in the LATimes when I searched their site (Recommended as a very good source, by the way). It's also below.
The contrast with Chiyoda's methods is stark. In fact, as you see financial circles here are not impressed. The stock fell again today down to $ 27.69, almost 50% below its 52 weeks high of $ 52.5. I'm afraid Philip Carroll may soon have the nickname "Chain saw Phil"! One can only guess what Fluor employees think about his $ 11 MM signing bonus. (There was no publicity about that, of course, the story was found by Bloomberg in their screening of the required proxy filing with the US Securities and Exchange commission.) This really underlines the importance of having strict disclosure laws.
Oddly enough, I feel that the analysts are only partly right. Fluor may develop a bad reputation as an employer from this behavior, but only in a broadcontext. Compared with our US brethren in the EPC field, Fluor still looks good. The others, including KBR, Parsons, etc. have been doing this sort ofthing for years. I hope their influence will be restrained as far as Chiyoda is concerned.
Regards,
Ron
No Severance Pay to 5,000 Fluor Workers
99/03/21
Bad loans
Dear Ron,
Thank you for an additional information on Fluor.
I have a friend in Bechtel Asia Pacific. According to him, his Singapore office may be down sized due to the lack of workload.
Down sizing is every where. But according to your rule, economy will go up, because oil prices are going up.
It is believed here that loans for land acquisition in bubble times is a major bad loan. But may be you are right. Big company's big debt is the hidden bad loans.
Regards,
Greenwood
99/03/23 11:28:08
NEW FLUOR ORGANIZATION - DETAILS. Sent 22 Mar 18:30
Dear Greenwood,
I've just received details of the new Fluor organization. I've not digested it yet, but there are many missing names.
I'll put a straight quote here and also attach a Word document which may be clearer because of differentiated headings, etc. It'll be straight text only, no html.
Regards,
Ron
Fluor Corporation Announces New Structure and Leadership
99/05/02 7:58:44
RUBIN & OTHER TOPICS
Dear Greenwood,
Robert Rubin's comments are most interesting, especially the way he seems to be threading his way most carefully to avoid saying the wrong thing - walking on eggs as we say. As you mention, transparency is a strong part of his message, along with the need for real commitments to political and economic reform. (His remarks were difficult to read even for English speakers).
He makes it clear that your government is not alone in avoiding fundamental reform that offends powerful constituencies. Its ironic that, for all his pious closing remarks about protecting the most vulnerable people and budgets for core social programs during financial crises, the polarization of income in the US continues faster than ever. The latest, first 1/4 1999, Commerce Dept. report shows our consumer boom reaching feverish levels. The economy grew at a 4.5% annual rate. Corrected for our enormous trade deficit the rate was 6.9%! To achieve this our savings rate was minus 0.5%. Consumption increased at a 6.9% rate, while after tax income was up only 1.4% and employers' wage and benefit costs were up only 0.4%. Corporate profits continue to rise, surpassing most predictions.
It seems that the economies of our two countries are going to opposite extremes. Everybody acknowledges that the US boom cannot go on for ever, but every forecast of the end of the boom has been wrong, so all the experts are saying "not yet". I suspect that this uneasy feeling is part of the cause of the capital flow into Asian markets - hedging a bet on the assumption that, as the US boom ends and Europe remains stagnant, the next growth areas will be in Asia, Latin America, etc. (My investment has been quite small - I'm not that adventurous).
Apparently the Bank of Japan's Tankan survey in March showed a significant increase in "the business condition DI" in December. The Daiwa Institute regards this as a very reliable indicator of business cycle turning points based on previous history. As expected, the Japanese unemployment rate continues to rise with the restructuring going on. Daiwa believes there is a good chance that this will cause a rise in business profits later this year if the "propensity to consume" recovers. (Wishful thinking?). Perhaps we should lend you a few million US consumers - it might stabilize things here and reignite your economy.
Rubin's remarks also cast some more light on another concern of Paul Krugman - Washington's preoccupation with markets and their disdain for orthodox economic analysis (New Republic article, Oct, 98). Its as though Rubin, et al believe that only the market can be an effective (if brutal) policeman of poorly managed economies. Despite his article, Krugman also seems to be leaning in the same direction with hiscrediting Margaret Thatcher with much of the health of the Englishspeaking economies.
As you describe the English language problem there it does sound very difficult. I was not sure if you included China in the Asian countries using English textbooks (I'm quite sure South Asia is, since English is the only common language across India). Some years ago I remember a Chinese claim that they had 100 million (!) people learning English - twice the population of England itself, so I can easily understand if they do. (When I was in Beijing a few years ago I was surprised to find street signs in both Roman and Chinese characters).
I'm extremely fortunate that both my sons show no signs of wandering the world - they still live within a few miles of home. I keep my fingers crossed that this continues. Most of my friends' children have scattered to all parts of the globe. My brother and his family live in Melbourne, Australia. His daughter works for a US law firm there but is being transferred to the NY office. She'll visit us on the way to NY this summer and we hope to visit her there when she's settled in. Later this year both my brother and his eldest son expect to visit us here.
The son will spend New Years' Eve in NY. Quite an interesting year in prospect.
Regards,
Ron
99/05/19 9:09:38
MISC. & PERSONAL AFFAIRS
Dear Greenwood,
I'll look forward to reading about your trip, but there is no hurry.
I'm sure the new position will impose an extra work load, especially at first. I hope it's not too tough, at least you now have something definite.
Fluor in Irvine continues to lay off Process Engineers and others. I'll visit there next week and should have more information after that.
My eldest son, Bill, who had been getting increasingly into computer programming, has just changed jobs. A colleague at his old company quit to join Toyota's USA headquarters, in the LA area, close to where we live. As is very common, the friend suggested Bill look into making the same move. Bill was very impressed with Toyota, especially the paths of advancement in the computer area, compared with his old company. I told him that I felt that Toyota was a very well managed company and that, in the computer field, the US branch might well play a leading role. He decided last week and will start with them on Monday the 24th. I think he has made the right decision. (Changing jobs is so much easier when you're 30).
Today the Federal Reserve left our federal funds rate unchanged. You probably heard that the US Consumer Price index rose far more than expected this month. Although most of that was because of gasoline, tobacco and transportation, the core rate was still up 0.4% - about double what had been predicted. Speculation abounds that the dreaded inflation is coming back. So far our stock market is down a little, but only back to where it was at the beginning of the month. The US market is really tired, I don't think anyone expects it to be able to continue upwards for quite a while. The big question seems to be "Is it due for a crash?" (Incidentally, my small "flutter" in emerging markets has gained about 7% relative to the US market in about 3 weeks. I expect it will go up & down a lot, but keep my stake small to see how things are
going. Although retired, I still regard myself as a long term investor since, with reasonable luck, I hope to be around for a long time.)
Certainly, there are few Chinese residents who speak English. And one cannot take announcements from Beijing at face value. However, the claim they made seems another indication that they (at least Jiang and Zhu) see greater involvement with the rest of the world as inevitable.
During Premier Zhu's TV interview here he was noticeably upset that he had not been able to get US backing for entry into the WTO. As you know he is very good a disguising his true feelings, but this feeling seemed too strong to hide. I suspect he is under very heavy pressure at home, especially after the tragic bombing of their embassy in Belgrade. I'm very concerned that Chinese/US relationship may be on a downward spiral unless the two governments can reverse it. (There are many on both sides who would welcome a return of the old antagonistic stance).
Once again I'll send this to both your email addresses, please let me know if there is a change.
Good luck in your new job, I hope it works out well.
Ron
99/05/21
Visit to Los Angeles
Dear Ron,
I will be in Los Angeles from June 1 to 4th.
Could you give me your phone number?
When I find some spare time, I would like to have contact with you.
The purpose of my visit is to attend shareholders meeting to be held in June 2nd in Los Angeles.
New organization of Chiyoda was announced. A man from US will control all operations except LNG project. All heads of technology, project, engineering and procurement division report to him. All of them were former staff member of Indonesian LNG project except me and then site manager. New president of Chiyoda was a project manager at that time.
Your E-mail received in my office and at home has no problem at all.
Japanese stock market is falling a little bit. A sign of inflation in US caused this change. Good luck for you investment. I understand managing investment will stimulate your brain and keep you young.
I have no spare money to invest in stock market, because still I have a large amount of debt, which was inherited, from my father together with real estate. It is not a bad loan. It is under control even in current situation.
I don't know about Toyota US. But Toyota is most respected corporation in Japan. They continue successful operation for long time. Your advice to your son may be right.
I'm not concerned on Chinese/US relationship. China need free access to the world market now. Hatred creates nothing but destruction.
Regards,
Greenwood
99/05/24 5:03:39
Re: Visit to Los Angeles
Dear Greenwood,
What great news. I'm eager to meet you again after all these years. Most importantly, my house is literally a 10 minute drive from LAX. That makes it practical to meet even if your time is very tight. Let me know details as you get them firmed up; I'm sure we can work out something.
Looking forward to seeing you.
Ron
99/05/25 4:52:03
VISIT TO LA - MORE CONSIDERED REPLY
Dear Greenwood,
I trust you received my short note with my 'phone #.
I didn't realize LNG was quite as important at Chiyoda. Apparently its still in its own department, not part of the responsibilities of a man from US. Its not clear whether the small company you may head is under his wing.
Our papers have been full of stories of restructuring in Japan. Most commentators see the situation there as being very difficult, with no quick solutions. I also read that your parliament has just passed a national Freedom of Information / Right to Know law. Comment from there and here seems to regard this a major step towards openness and accountability. Let us hope that it will be.
I certainly hope the Chinese need for world access keeps our relationship on track. The Clinton administration is under a very great deal of pressure right now on many fronts. Opinion here and around the world is becoming more negative as the bombing campaign fails to produce the expected results (at least less quickly than hoped for). One respected commentator pointed out that the last 3 Democratic Presidents left office after failed or bogged down military actions or wars (Truman / Korea, Johnson / Vietnam and Carter / Iran hostages rescue mission. George Bush (Republican) was very popular immediately after Desert Storm, but rapidly lost popularity as people realized that Saddam Hussein was still in power. He lost to Clinton, of course, in 1992.
The swing of Overseas opinion (United States as a belligerent power) is seen to be threatening much more important relationships than the Balkans - including those with Japan, Russia and even some NATO countries.
Good luck with your "presidential candidacy", in any case I'm looking forward to meeting again next month.
Ron
99/05/27
Re: VISIT TO LA - MORE CONSIDERED REPLY
Dear Ron,
I have got your phone number.
I'm going to stay in Marriot Downtown. I will arrive Los Angeles at 11:15 June 11th and leave LA at 14:30 June 5. Chiyoda's share in LNG business has been 2nd. largest.
A shareholder in US has the right to over see what subsidiary companies doing. (they say due diligent)
Restructuring Japanese industry is not easy, because, people's mind is still stagnant.
I still remember what President of KTI USA (who was British man) had said to me that President Clinton has no moral fiber to be as President of USA because he refused US military service in the time of Vietnam War.
Probably, because of this, he couldn't make right decision in the critical moment.
Hoping to meet you soon,
Truly yours,
Greenwood
99/05/29 9:49:31
Re: VISIT TO LA - MORE CONSIDERED REPLY
Dear Greenwood,
Let me know when it would be most convenient for us to meet. My schedule is very open and flexible, so I'll adjust to whenever you find best. (Since we live so close to the airport it may be most convenient to arrange to meet on you way in or out of Los Angeles). If you have the time, my wife and I would like to invite you to our home. Her spaghetti is well renowned and she would love to serve you some. (You might also be interested in my 1969 Datsun 2000 / SRL 311).
Layoffs continue at Fluor. Most people I met during my visit to the office this week feel it will be some time before things get better and that there will be much more staff reduction before then.
Many people here are strongly questioning Clinton's judgment regarding Kosovo.
He also has another particular difficulty in addition to the one you mention.
All Democratic Party presidents start with the handicap that they are seen as more peaceful than Republicans. (This is seen to be a big disadvantage by many Americans). Therefore, they always have to prove that they are "tough" enough in foreign policy. For example, Nixon was able to open a dialog with China because of his reputation as a very strong anti-Communist; no Democratic president would have dared to do the same thing. In the peace / war question the best candidate would be an ex-general like Eisenhower, who doesn't have to prove his "manhood" in war. The closest candidate to match that criterion for the 2000 election is Senator McCain, who was a Korean War hero.
Have a safe trip, looking forward to our reunion.
Ron
99/05/30
Meeting Schedule
Dear Ron,
Thank you for your invitation to your home.
Now I have more definite idea about my schedule in Los Angeles. I am free in the afternoon of June 1st. June 2nd. is fully occupied and I couldn't manage my time in the 3rd.
How about directly visiting your home before checking in the Hotel. I will take a taxi and visit your home in Manhattan Beach. I will call you before taking taxi.
My ETA at LA is 11:15 by JL062.
Regards,
Greenwood
99/05/31 7:04:18
Re: Meeting Schedule
Dear Greenwood,
We'll be so glad for you to visit us. Tell the taxi driver that my house is:
Two blocks east of Sepulveda and Marine and One block south of Marine. These are the main streets near my house.
See you on the 1st.
Regards,
Ron & Connie
99/06/06
Safe return back
Thank you for your kindness rendered during my stay.
Now I'm back home.
I have prepared a quick report of my trip in HP.
Please convey my thanks to Connie.
Regards,
Greenwood
99/06/07
Re: Safe return back
Dear Greenwood,
Thanks for letting us know that you arrived safely, and thank you for the trip report. You make Manhattan Beach very attractive! I'm glad the photos turned out well.
Regards,
Ron
99/06/07 5:22:29
CONNIE'S COMMENTS
Ron sent you an e-mail before I had a chance to ask him to include a message from me. So I am sending this separately. I saw your web page and was very impressed. I especially liked your garden site and the picture of you enjoying your view. You are very close to the beach.
How lucky. The plants you noticed growing along the side of the road here in Manhattan Beach are Agapanthus, commonly called "Lilly of the Nile" and they look like the ones growing in your front garden.
Regards,
Connie
99/06/07
Re: CONNIE'S COMMENTS
Dear Connie,
Thank you for your kind coments.
Yes "Agapanthus" I could't remember the name in LA. We also call it like that.
Though, I did't know the name "Lilly of the Nile".
I have attached a photo taken in your garden.
I will attach other photos of Ron one by one on the coming E-Mail.
Regards,
Greenwood
99/06/12 7:28:39
PHOTO RECEIVED IN GOOD CONDITION
Dear Greenwood,
The photo came through in very good shape, thank you. Others will be interesting to see.
When I get mine developed I'll scan and send to you. It'll be an interesting comparison, since my scanner is pretty crude.
The following article I found in a Beer Newspaper here. Some of the places sound worth a visit.
News here is that, although Japanese Government reports show a large growth in the economy in the first quarter, most independent economists feel it is something of a fluke, which will be reversed next quarter as layoffs mount. However, the Nikkei doesn't agree since it seems to be continuing upwards. (The Dow is sliding down again, expecting Greenspan to raise interest rates later this month. If he does 1/4%, I expect the Dow to go back up again since its already discounting the change.
Turbulent days!
Regards,
Ron
Beer News
The Alehouses of Tokyo
By BRYAN HARRELL
(English Joke Collections No,99)
99/06/13
Re: PHOTO RECEIVED IN GOOD CONDITION
I have attached one photo of you.
I never thought that there are so many microbreweries and beer restaurant for expatriate in Tokyo. Some time, I will inspect one of them.
Because of the slow down of economy, we are enjoying smooth flow of the traffic on Major Road.
In the new company, I have found a rather old book called "Beyond The Limits" written by Donella H. Meadows, Dennis L. Meadows and Jorgen Randers and published in 1992. The writers once wrote a famous book "The Limits to Growth" in 1972.A work sponsored by Club of Rome.
In this book, I have found that they are using a dynamic simulation program called Stella (now iThink) developed by High Performance Systems Inc.
I am using this software from 1991 and wrote a more simplified world model in 1991. The report written in Japanese is included in my HP.
Recently, using the same program, I have made a simulation about what had happened in Chiyoda. The report is also included in my HP. I will translate it in English in the near future.
Regards,
Greenwood
99/06/14 10:18:46
OTHER PHOTOS and dynamic simulation
Dear Greenwood,
All photos received in good condition. As you say, they are large files. My printer has very limited resolution, so my sons and I are processing them on their systems (one IBM, one Mackintosh) to get better quality ( more like what is visible on the screen). Thank you, they are great momentos of your trip.
You're dynamic simulation program sounds very ambitious - to dynamically simulate the world's economy is quite a task. I'd guess simulating the recent history of Chiyoda would be somewhat simpler. The English translation will be most interesting to read. We've done a great deal of dynamic simulation at Fluor, but only of Process systems and controls. I'm very familiar with the huge volume of number crunchingthat goes on. We found ourselves always needing more speed. Generallywe updated our Digital Eq. Co. "Alpha" computers as soon as faster ones were available (running on the PC generally was slower than real time!)
Its interesting you mentioned the Club of Rome report. That was one of the works that Krugman had in mind in his recent article "Global Vision du Jour", about the temporary nature of conventional wisdom. "In 1979 everyone knew that it was a Malthusan world, that the energy crisis was just the beginning of a global struggle for ever-scarcer resources". As I remember, the Club of Rome report was very pessimistic ? fortunately premature. Its quite possible, in my mind, that the world's resources will indeed soon become scarce. It's very unlikely that the world will be able to offset the next OPEC petroleum crunch with new resources like the North Slope. As Krugman said, our current conventional wisdom of the triumph of the free market along the US model will soon be replaced by the next wisdom. Perhaps the US "Bubble" will soon burst and we should dust off "The Limits to Growth" again. Recently, overseas Stocks and Mutual funds here have done much better that Wall Street and many people here are increasingly nervous. Keep your fingers crossed.
CDM sounds like a different atmosphere from the usual E&C company. I suspect its a bit like the atmosphere I found during my short stay with MMT in Boston (an environmental company). There is an enormous amount of environmental work to be done. The problem seems to be getting the funding to pay for it.
Good luck in the field.
Regards,
Ron
99/06/27 9:52:55
U. S. CRONY CAPITALISM
Dear Greenwood,
The file attached was a column in Friday's LA Times. If its right, there could be a real rise in protectionism as various countries and trading blocs blame each other and, if Paul Krugman is right, generate a worldwide depression like the thirties. I've just re-read his paper
"The Return of Demand Side Economics". It makes sobering reading. The US economy continues to roar along; just about every expert expects the Fed. to raise interest rates 1/4% on Tuesday to head off inflation which is nowhere apparent! This is another of the errors which Krugman cites in his paper. To get the US out of a minor recession in 1991 they had to drop interest rates almost 6%. With current rates under 5% they obviously cannot do it again if the Fed engineers a slow down which is too severe. Krugman makes a very strong case for the value of limited inflation on a worldwide scale, but points out that the world has had exceptional price stability for the last several years.
On another topic, we've just returned from our first visit to Las Vegas in about 20 years. The changes are enormous, but the "wretched excess" of the place remains firmly in place. We stayed at the newest casino/hotel, the Belaggio. It reportedly cost the best part of $2 billion! The quality of construction is very impressive and they have a really good small art museum with many important Impressionist and other famous paintings. I feel the quality of the art is better than the much advertised Getty Center here in LA.
Its one of the largest hotels there, with about 3000 rooms, but there are two new ones under construction which are much bigger. The wealth of the town is staggering, unemployment hovers between 2 and 3% and there are about 6000 families moving to the town EVERY MONTH. Perhaps Las Vegas represents the most visible example of what may be the US "Bubble" economy.
I've finally developed the film of your visit. Unfortunately, the picture of the two of us was focussed clearly on the background. Others came out well. I intend to scan them and will try to send to you.
I trust your new position is progressing as planned.
Best regards,
Ron
Let's Revisit Asia's 'Crony Capitalism' Economy By CHALMERS JOHNSON
99/06/29
Re: U. S. CRONY CAPITALISM
Dear Ron,
I couldn't respond soon, because I had been busy translating my speech made at JPMF symposium.
I have made it and up loaded to HP. Translation is crude, because I didn't make any proofreading yet. I will brush it up gradually.
My first trip abroad ended up in Las Vegas. It was 30 years ago. I was a member of Tokyo delegates gas at that time for Japan's first LNG receiving terminal project. Phillips and Marathon Oil invited us.
I was very impressed with the color of mountains which we couldn't see in Japan.
From your letter, I can imagine recent Las Vegas. How about results of gambling in Las Vegas?
I will respond later regarding LA Times and economy.
Regards,
Greenwood
99/07/03
Re: U. S. CRONY CAPITALISM
Dear Ron,
Finally, having corrected what I can find in my paper, I can come back to your letter.
It seems that Mr. Greenspan is doing well.
You may have enjoyed some gain in your investment.
I think Mr. Greenspan's understanding is right. He believes that the success of recent US economical boom without inflation was achieved not by higher productivity in US but low priced import goods from Asia.
I don't think protectionism is coming from Asia. Though, it may come from USA when your bubble economy collapses.
Charles Johnson's article about " Asia's 'Crony Capitalism' was most enjoyable.
My daughter told me a story about recent European/US development told by her Yugoslavian friend, which goes on similarly to new explanation as it is developing in seminar rooms from Seoul to Kuala Lumpur to Beijing about true reason of Asian crisis.
The story says that all evil acts by President Micelovich of Yugoslavia were actually controlled by secret agent of USA. The hidden intent is to weaken European economic strength and to maintain US economic hegemony. The operation was very successful by recent bombing in Cosovo.
Those stories are invented every day. Conspiracy of Jewish people is the historical one. Interesting theory, but most people do not believe seriously.
Your story about the Belaggio reminds me the fact that any economic boom will bring culture to the society. It is a good aspect of it, what ever you call it bubble or not. Empire State Building in New York was completed in a few years after economic crisis of 1929. It was called Empty State Building just after completion. But, it has been a symbol of the wealth of USA.
Victorian England made London.
Best buildings in Tokyo were also built in early 1990.
By the way, I have met Mr. Gallinaro in the party for affiliated company meeting. There, he made a short speech. He said, "Don't work hard, but find some time and think smartly. You are leaders. Don't become hot, but act strategically. We no longer can compete with Chinese or other Asian competitor only by cost. We have to provide client some values. Create ideas. Good speech isn't it.
Regards,
Greenwood
99/07/08
Japanese Economy
Dear Ron,
Recently, I have read an interesting review made in Japanese paper by a professor of Columbia University.
He said that increasing Japanese government financial deficit is a good sign for Japan.
Firstly, it will reduce government wasteful spending of budget in helping low efficiency industry sector. Government role of resource allocation will be replaced by more efficient free market.
Secondly, despite denial, sooner or later, Central Bank of Japan has to buy out government bond. As a result, inflation will start in Japan and value of yen will drop. Thus, Japanese economy will boost again.
Prof. Krugman's theory will be fulfilled.
He said within this year, Yen will drop down to 150 yen/$.
I wonder whether I should by US $?
Sincerely,
Greenwood
99/07/21 5:11:24
Re: Japanese Economy
Dear Greenwood,
I certainly hope the Columbia U. Prof. is correct. Certainly the stock market agrees with him; today I read that the Nikkei-225 index is up 33% YTD, compared with 22% for the DJIA. It looks like he feels that the size of the deficit will eventually force the govt. to cut back its spending and replace it with buying bonds. Of course, if the economy really recovers, tax revenues will rise and perhaps the deficit will take care of itself.
Currency trading is too adventuresome for me. If the Yen does actually go to 150, then there seems to be a good buying opportunity at the moment since it rose to less than 118 yesterday.
I wonder how you feel about the conversation Paul Krugman reported with the Japanese economist who was afraid that, if recovery occurred too quickly, necessary reforms could be avoided. (Such as restructuring of the banks, increased transparency, etc.)
I've just been reading Fluor's second 1/4 report, ending 30 April. They've taken a huge $130 MM charge for the restructuring, which results in a loss of $22 MM for the quarter. Excluding that charge, the six months showed an operating profit of $117 MM. Most telling was the 26% drop in backlog and the 38% drop in new awards. This was well accepted by Wall Street; the stock price remained in the low $40's. Its consistent with the announced philosophy of greater selectivity and margin improvement, accepting a lower volume of business.
Layoffs continue; the Process Dept. in Irvine is now cutting good engineers.
Luckily, the market is very good for finding work right now, so they should be able to find good new jobs.
Did you receive my email of the 9th - "PROGRAM MANAGEMENT / CRONIES"? The message I sent to your Chiyoda address was returned as undeliverable. However, its looks as though the one to aol got through. If it didn't, I can resend.
With best regards,
Ron
99/07/22
Restructuring
Dear Ron,
As you have said, currency trading is too adventurous. Yen is now rising!
The majority of Japanese commentators (most of them are university professors) still believe that restructuring is important. But most of them are armchair commentators sitting in a cozy place protected by old system. Restructuring those people are urgently needed in Japan.
I haven't receive your 9th - "PROGRAM MANAGEMENT / CRONIES". Please resend it to me.
Regards,
Greenwood
99/07/23 5:21:23
Fwd: PROGRAM MANAGEMENT / CRONIES
Here it is, Greenwood, sorry it went astray.
The college profs. in their armchairs, who are often on TV here, are also known as "The Chattering Classes". I agree, they are top candidates for restructuring. However, they all have "Tenure" and so are even more insulated from the market place about which they claim to know so much.
Ron
99/07/26
End of Kennedy Dynasty
Dear Ron,
Not like Diana case, but still Kennedy's death caused deep emotional impact in me. Kennedy family represented good aspect of America. Is this the end of dynasty? I hope not.
Thank you for resending PROGRAM MANAGEMENT / CRONIES. I requested to send it again because I couldn't find it in my home PC archives. Probably I received it and read it in my office. After that my office PC was replaced into new Gateway machine and accidentally erased the data. Now I am keeping all correspondence.
My paper was uploaded to JPMF's home page.
I think it was too long for home page.
In my simulation, I applied scenario for market behavior, but some time, I would like to simulate market behavior using system dynamics tool. It is only for my enjoyment.
In the midst of actual life, we make decision based on a limited information. But in hypothetical world, you can standup in God's position.
Regards,
Greenwood
99/07/28 4:22:41
DOS BEER
Thought you might enjoy a beer with your hacking. This comes from Craig Corley, Chief Bottle-washer of the Pacific Gravity Brew Club in Culver City.
Ron
99/08/02 4:01:25
KENNEDY AND JAPAN ECONOMY
Dear Greenwood,
Like you, many Americans have a deep emotional feeling for the Kennedy era and family. Connie and I are among them and John's death hit us hard too. There was a list of Kennedy family tragedies in the paper.
There's been one every 2 - 3 years since 1963! On the other hand the family is very numerous, so there is no danger of it becoming extinct.
Our only regret is that few of them seem to be much involved with politics (as you know John was a small magazine publisher - "George"). We greatly miss the idealism which Jack and Bobby represented. Politicians and social leaders these days seem only out for their own selfish ends (at least in this country).
It appears that the Japanese economy is reaching a crunch point - whether declining domestic sales (caused by large corporate restructuring) will kill off the recovery before the civilian economy can replace the large and unsustainable government deficit spending.
Daiwa thinks summer consumer spending will show the way ahead. Paul Krugman has an interesting column on the probably RISE in other currencies vs. the dollar due to our continuing massive current account deficit. (He compares today's situation with 1985 where the same size of deficit existed and the dollar declined from 240 to 140 Yen. This tendency, of course, is supported by the direction of the Yen in recent weeks.
I don't think the Columbia professor has many companions these days.
Simulation of the market is something of a holy grail. I suppose every investor has some system to choose where to invest, based on what he thinks of future movements. Your idea of using the system dynamics model as a tool may give a significant advantage - good luck. I'd be very interested to hear about your progress.
Regards,
Ron
99/08/11
Summer vacation
Dear Ron,
I have been out for summer vacation. Main event was tracking mountain trail with Jeep. This was reported in my HP.
I also visited Paul Krugman's site today and read recent articles. It seems that Columbia professor is discussing long term forecast. In the short term exchange rate went to reverse. I was not hurt, because I did not follow him.
System dynamics couldn't tell us what to buy, because real system is too complex to simulate. My intention is to simulate our business cycles.
Any way, I am busy finding cash flow of my company.
Regards,
Greenwood
99/08/17
y2k
Dear Ron,
I enjoyed very much a book "Y2K: It's already too late", written by Jason Kelly.
According to his web site"www.y2kbook.com", he sold total 110,000 copies in Japan and US.
Regards,
Greenwood
99/08/20 9:56:35
Re: y2k
Dear Greenwood,
The book seemed interesting for the combination of computers and social unrest. Both of these are always popular topics - I'm not at all surprised it has been popular. I'm afraid it paints an alarming view of Los Angeles, although I'm sure he could point to precedents for all his scenes. I certainly hope the computer problems are not as bad as he predicts.
It also casts an interesting light on a vigorous debate here about violence in the media. (The gunmen at the Colorado high school were avid players of violent computer games). On one side there are those who blame our alarming number of mass killings on the easy availability of semi-automatic, rapid-fire guns. The other side blames the lack of proper parental responsibility and violence-saturated media (film, video games, books, etc). As I recall, Japan is a very non-violent country, but you have a lot of violent media, an example which tends to undermine the second theory. Canada, which shares many of our media, also has a much lower level of violence. You'll no doubt see much more about this since the Presidential election will probably address the debate.
I hope and trust that Japan continues its peaceful ways.
Regards,
Ron
99/08/31
Re: y2k
Dear Ron,
Your August 20 re-sent mail on Summer Vacation and your mail on Y2K have been delivered.
Japan is a volcanic archipelago and 60 % of the land is covered by mountainous area. In addition, our government couldn’t find a tip of land to invest into new road in Metropolitan area but they can find a lot of places in county side. As a result we can find fairy nice road spinning in county side. You may not meet other vehicle for some time.
I can imagine how nice it is in north San Francisco, because I have visited there about 35 year ago. Whether in East Side of big ocean is always nice in northern hemisphere because of ocean current. West Coast of Canada and US and Europe enjoys this good whether. New York, Tokyo, Houston are all miserable places.
Because of chips having Y2K problems, thousand of GPS navigation system mounted in private car stopped working in August 22. Although manufactures announced free remounting of chips, most of the public ignored and didn’t replace it beforehand. But no fatal consequences have observed.
Despite Power Company’s assurance, Railway Company announced temporary stoppage of all train at nearest station at 0 time of the year 2000.
My wife has acquired camping stove.
I have prepared Y2K manual for corporate staff.
That’s all I have done.
While reading Prof. Krugman’s article “ Why I am an Economist (Sigh)”, I have found that he enjoyed the book “Guns, Germs, and Steel” written by Jared Diamond. As I have a good experience on his earlier book “The Third Chimpanzee”, I would try to find Japanese translation today.
Regards,
Greenwood
99/09/11
Guns, Germs, and Steel
Dear Ron,
I couldn't find Japanese translation of " Guns, Germs, and Steel". Two-year had passed since this book was first published. Now I have original book acquired from Amazon.com. I have only read through Prologue, and started reading Chapter 1. It is relatively easy to read, but still not comfortable reading such volume of pages in English.
Thank you for LA times. It reminded me Darwinian's dogma, survival of fittest. I also remembered a scene of small children working in coal mine of England during industrial revolution. I think now US need some kind of safety system. In Japan, still we are protected and people are slow to move. Differential income is small, but slowly we are becoming poor together.
Our GNP stayed positive side by governmental spending. But no new business has been evolved. People are still loosing jobs.
When I have used FORTRAN, I some times used 9999 for some special purposes. But this time, nothing has happened. 9 problem at all.
Hot spot of Pacific Ocean went north this year. People visited Hokkaido Island north of Japan seeking nicer whether there was disappointed. Because, there is no air conditioning facilities like in northern Europe.
But there is one good side effect. Typhoons can not develop. In the next weekend, I'm planning to visit Japan Alps. I hope I can enjoy good weather.
Regards,
Greenwood
99/09/11 11:00:05
GUNS AND OTHER MATTERS
Greenwood,
You reminded me about this book. Its been on my read list since it came out a couple of years ago. So I finally looked it up and borrowed it from the library. Its not disappointing - quite the opposite.
Its hard to put down!
I'm enclosing a long article from Tuesday's LA Times. The long-awaited development of political pressure relating to our increasing income disparity seems to be surfacing. In LA, of all places - not in any way a leading center of advanced political thought. I'm not sure how much of the details about local politics will be apparent, but the overall stress put on the subject is not surprising - especially given the statistical data on the last page.
The advent of 9/9/99 seems to have been without computer consequences, which is encouraging for Y2K. (I did hear a joke that it caused problems in Germany - they thought it meant No! No! No! No!) My apologies for a bad joke.
Your climate comments are interesting. I've been looking at Tokyo temperatures lately. They seem even higher than New York. You have my greatest sympathy, because I find that I am very much affected by extreme temperatures and have felt much better since we moved from Chicago to LA (25 years ago). A very dear friend, who I met when we lived in Toronto after we both emigrated from England 40 years ago, has decided to move back to England. Moreover he's going to an old, heavy industrial town in the depressed North East where his family still lives (West Hartlepool).
The potential costs of continuing to live in San Francisco, plus the death or departure of most of his friends are the primary reasons. Needless to say he's giving up a great deal in the climate department. Getting old is only good when you consider the alternative.
Here's the article. I hope you enjoy it.
Regards,
Ron
L.A.'s Growing Pay Gap Looms as Political Issue By J. M. NEWTON, Times Staff Writer
99/09/18 6:40:37
MORE ON JARED DIAMOND
Dear Greenwood,
I'm deep in G,G & S. Fascinating and quite time consuming! I came across an article in magazine which you might find interesting. It seems Diamond has big plans.
Here it is "Sex and Guns and Jared Diamond"
All you needed was more to read, right?
Regards,
Ron
99/09/26
Re: MORE ON JARED DIAMOND
Dear Ron,
Thank you for Carolyn Ramsay's long report.
Diamond's third book, "Why Is Sex Fun?" is already translated into Japanese.
Probably, because of larger market.
When I finished reading one third of his book, I found another new book "Res Gestae Populi Romani--- Crisis Et Ab Ea Exitus". This is 8th volume of Roman history written by a Japanese woman writer living in Rome. She is another favorite writer I never miss. After consuming this book, I will return to Diamond.
I was busy in preparing a material for invited lecture for university student coming next month. A topic given to me is about "Project Life Cycle."
It is boring for me, therefore, I started comparing S shaped progress curve to that of Logistic curve.
Logistic model was developed by Belgian mathematician Pierre Verhulst (1838) who suggested that the rate of population increase may be limited, i.e., it may depend on population density. At low densities the population growth rate is maximal. This population growth rate in the absence of intra-specific competition.
Population growth rate declines with population numbers the upper limit of population growth. It is called carrying capacity. It is usually interpreted as the amount of resources expressed in the number of organisms that can be supported by these resources.
This model is used in various places. One example is for predicting world petroleum production rate. Nebojsa Nakicenovic's diagram of primary energy substitution in "Energy Strategies for Mitigating Global Change'IIASA is a typical one.
But during my study, I found that similar equation to Logistic model behaves like Chaos when initial population growth rate is high. It reminded me chaotic phenomena when project is on extreme fast track.
Some time, I would like to study further.
Regards,
Greenwood
99/09/28
Re: MORE ON JARED DIAMOND
Dear Ron,
Pierre Verhulst's logistic equation could be found in www.gypsymoth.ento.vt.edu/~sharov/PopEcol/lec5/logist.html
Regards,
Greenwood
99/09/28
Re: MORE ON JARED DIAMOND
Dear Greenwood,
I had the book from the library and so had to sweat it out. It was worth the effort, although a little repetitive towards the end. When you've finished I have a few questions for you about some things he said about Japan and east asia.
Your comments about curves struck a familiar nerve with me. I, too, have been fascinated by various ways of predicting variations on the familiar S-curve. (I suppose chemical engineers - at least during our era - got familiar with the McCabe-Thiele distillation curves first).
After many iterations I believe most of them actually fall somewhere near the standard curve as long as the y-axis is correct. Generally it should be arithmetic or logarithmic. The x-axis falls into three regions: An initial logarithmic increase A more or less straight line portion and A final asymptotic section which is actually an inverted logarithmic relationship.
There is some very handy "Probability" curve graph paper. This only comes in arithmetic y-axis plots, but I constructed some with logarithmic y-axis. It was amazing how many experimental and historical relationships could be plotted to draw approximately straight lines using these two papers. (Of course, there was quite a bit of thought necessary to discover the correct variables. The hardest is to identify the upper limit.)
These thoughts seem to parallel your comments. In recent years the Project Progress curve was one I often used in planning work. Its especially useful because it guards against excessive optimism in the middle part of a project.
I'll try to dig out Pierre Verhulst's logistic equation. Then, of course, I'll plot it on my probability paper!
Best regards,
Ron
99/10/01
Nuclear accident
Dear Ron,
As you may know, very primitive but largest nuclear accident occurred last night in Japan.
A subsidiary company of Sumitomo mining company who is normally purifying 3.5% Uranium235 fuel was asked to purifying 19% Uranium235 fuel. When the feed stock is 3.5% Uranium235 fuel, it is allowed to charge up to 16kg feed stock into the precipitation vessel. This quantity is about half of the amount to start chain reaction.(critical state) But operator was given an instruction to charge 16kg of 19% Uranium235 fuel into the precipitation vessel. Whereas, in this case, upper limit should be 2.4kg.
The facility was designed to use re-melting vessel and volume measuring vessel connected by piping and pumps to the precipitation vessel. But operator was given an instruction to bypass all those process facilities and re-melting precipitated uranium in hand carrying bucket and pouring solution into precipitation vessel by hand. The reaction started when operator poured 3rd bucket. Total volume charged into the vessel was 7kg.
The reaction continued over 17 hour until brave people finally broken cooling water piping outside of the facility housing to drain cooling water inside jacket of the precipitation vessel. The water inside jacket reflected neutron back into the precipitation vessel and contributed for continuing chain reaction. Apparently, small quantities of fouled water spilled to the ground but the pipe breakage operation consumed over 20 person exposed 2 time of allowable exposure in a year during 2 minutes operational duties per person.
Technology transfer from generation to generation fails over a time because of the people's interest in technology. Because of bad reputation in public, our nuclear industry is loosing good people.
Consequences are two operators are in critical condition and evacuation of nearby resident. Over 100,000peoples were asked to stay home over 24 hours. But biggest loss would be loss of public confidence in government attitude toward nuclear technology. They repeated that Japanese technology is perfect and best in the world. Therefore, there would be no mistake.
Regards,
Greenwood
99/10/02 11:45:24
Re: Nuclear accident
Dear Greenwood,
Thank you for such a quick news report. Reports we have here are contradictory about exactly what happened. Its nice to get a good engineering report.
As in Japan, the US Nuclear Engineering and Power Plant fields have lost many good people. The big event here was 3 Mile Island. NO nuclear power plants have been ordered here since 1979! Some were designed for overseas customers, but the Engineering part of industry went into a complete eclipse after '79. Now, of course, since the existing plants are being operated by a rather despondent workforce, the risks of accidents here is very high. Also similar to Japan, there are many anti-nuclear organizations.
As you know, a similar thing happened to the LNG undustry in the USA (although without a tragic accident, thank heavens). I experienced that first hand.
Nuclear engineering deals with an extremely unforgiving technology. I brushed against this during my stay in Boston with MMT. They had a radical technology for, among other things, reducing the volume of low level nuclear waste.
Consequently they had a strong Nuclear Safety department. These people could veto or shut down ANYTHING. Nevertheless, the company as a whole was not safety conscious and their pilot plant was a very dangerous (but not radioactive) place. One of their plants in Tennessee introduced radioactive material while I was at another, similar plant in TN. I was very glad to get out of there before they ever put radioactive material into my plant.
There was an interesting article today about the Culture of Safety in technical facilities. I attach it below.
Fluor has always put very strong emphasis on safety. As a result, our construction safety record is very, very much better than the average contractor (50 times better!). When we did a very big project at the El Segundo Chevron Refinery (near my house) Chevron actually had quite a difficult job to bring their own practices and management attitudes up to Fluor's. This, even though they were rightly proud of their own safety program (compared with other refineries),
As I write, the news is that the contamination has been controlled. As you say, there is a longer term problem with the industry's reputation - in Japan as here.
One final question. Was there no way to drain or shut off the cooling water from outside the building without breaking the pipe?
Best regards,
Ron
The Process Can Be Managed. By NAJMEDIN MESHKATI
99/10/02
Re: Nuclear accident
Dear Ron,
Thank you for NAJMEDIN MESHKATI's article. As he pointed out, attributing accidents to actions of front-line operators is a traditional culture of Japanese community. I think this attitude will not eliminate potential dangers. It is not the attitude of learning from the accident.
We have to learn that no provision was ever made for the possible "Critical-mass Accident" to occur in such facilities. And no foolproof design was provided. A foolproof design may be either restricting diameter of the vessel or providing device limiting the charge amount. Public may accept no provision for going beyond double jeopardy consequences, but there were even no secondary containment considerations. This may be a gross negligence of all people concerned in nuclear industry.
I have spent over 30 years in designing LPG and LNG facilities. I always carefully applied such safety philosophy in my design. No fatal accident occurred on my plant including LPG terminal, which survived Kobe earthquake. But I experienced many fatal accidents on a plant designed by others. Some times, there were regrettable designs, but no one blamed for such design. Because, the design concept is authorized by regulatory authorities. They are eager to protect us because they are also responsible.
Coming back to your question, "Was there no way to drain or shut off the cooling water from outside the building without breaking the pipe?" Firstly, they tried to open drain valve but couldn't. Finally they used hammer to break the pipe. Time given to each person was 2 minutes. Shutting off the cooling water is dangerous because, remaining water inside jacket will keep the reaction and end up in a situation of no cooling media. Stoppage of cooling and neutron reflection should occur simultaneously.
If you are interested in photo of the precipitation vessel, it is shown in my memo database with images serial No.20 in my HP.
Regards,
Greenwood
99/10/05 8:19:14
SAD WEEKEND
Dear Greenwood,
Many condolences on the death of a great Japanese innovator and business man, Akio Morita. He was very widely admired here, indeed, all over the world. Almost single-handedly, long before car exports, he built the Japanese reputation for top quality, innovative and reasonably priced goods. This is a sad day for the whole world.
Condolences, also, for your nephew. He sounds like a most remarkable person - very smart, conscientious and brave. Your whole family has my deepest sympathy. I did not understand why too much similarity of DNA would make the treatment unsuccessful. (I do understand the rejection problem with too little similarity)
I had not seen your HP lately and was surprised to see so many new things. The Commonwealth Cemetery was very inspiring - I did not realize such a thing existed. You travels are revealing a side of Japan.
I'd never thought of. Many scenes are very beautiful.
Our papers are full of a terrible story from the Korean war of 1950. A group of American soldiers apparently massacred hundreds of Korean civilians during the initial fighting there. This has caused great shame and dismay here. Most Americans would not believe our troops could do such a thing, but several of the men involved have admitted it.
Anger is present also because the Pentagon, for years, has been "Stone Walling" questions about the incident. We shall see how they behave now. The rule of silence is not confined to the LA Police Dept. it seems.
At least, in today's paper, JCO has admitted that it had allowed staff to bypass government safety regulations in the U reprocessing plant.
However, it seems that blame is being placed on the staff on the site.
From your comments it seems that the problem is much more widespread in the Nuclear industry. For example; how could local engineers be allowed to issue instructions which did not follow safety regulations ? what policies did the company have, if any?
It will be instructive to see how officials in our two countries react to these revelations.
Best regards,
Ron
99/10/14
Condolences
Dear Ron,
In the last 10 days, I was very busy in preparing lecture draft for one of advanced education agencies for Ministry of Foreign Affaires about project management. And I have to visit Sendai City to attend Funeral of my adviser in Chemical Engineering course in Tohoku University. In the weekend, I was fully occupied in traveling to Japan seaside on horseback Harley Davidson. There, our group decided to ride from LA to Chicago via heritage route 66 and stopping at Las Vegas next year some time in summer. This may be the last chance for our group chief and oldest man at the age of 72 next year. It may take 2 weeks. Our plan is to hire a big wagon car and several HD and each person ride 2/3 of entire course on HD and the rest on wagon for recovery from fatigue. Finally, in this week, I spent half day for lecture in Yokohama City University. I spent only one day for my company analyzing cash flow. This was the hardest one and annoying.
Thank you for your condolences on the death of Mr. Morita and on my nephew.
I conveyed your mail to my nephew's son.
Mr. Morita was a hero in Japan but it seem that he was more accepted internationally.
Newsweek's article about him was a good example.
Japanese media reported massacre in Korea very briefly. I found detail story in the same Newsweek. Such accident may occur in such chaotic situation.
It is becoming apparent that government safety regulations itself was a poor one. I have an impression that even if JCO strictly followed government safety regulations, still similar accident would surfaced in some time. Because government safety regulations didn't assume critical mass accident may occur in any fuel processing plant. Foolproof design was not mandatory. Government is accusing JCO that they didn't use approved melting vessel and measuring vessel connected by piping and pumps. But diameter of the precipitation vessel was not restricted to inhibit the critical mass reaction to occur. This design was approved by government anyway. Legally government could blame JCO. But technically, it is meaningless.
I have visited The Commonwealth Cemetery in Singapore and in Romania. I have got a strong impression when I encountered the one in Romania. Japanese and American brings back dead body or ashes to home land and bury there. But British tradition is different. It seems more honorable to sleep where they die in battle. I presumed this tradition started during great voyage time when it was almost impossible to bring back dead body to homeland or cremate on board ship.
Professor Robert Mundell was awarded Nobel Prize. He is famous in proposing Mundell-Fleming model, the theoretical basis of Professor Krugman. At last, our central bank started right action admitting this theory.
Regards,
Greenwood
99/10/19 11:52:18
ROUTE 66 TRIP
Dear Greenwood,
This sounds like a wonderful trip. When we moved from Chicago to LA in Feb. 1973 we naturally drove on what used to be Route 66. It really made the lyrics come alive! It would be good to see the refurbishment of the historic route. Those towns are all there, in the correct order. Las Vegas will be a side trip. I'd think twice about doing the trip in summer on motor cycles. Its a southern route (that's why we went that way in Feb.) and will be pretty hot. East of New Mexico it'll be hot and humid, Arizona and most of California will just be hot - probably well over 100 deg F, 40 deg C. Spring or Fall would be much more bearable.
It seems you are in great demand on the topic of Project Management. Should you ever give a presentation here I'd love to attend. I can understand the chore of cash flow analysis - thank heavens Process Engineers didn't get much involved in such things, except for much simplified exercises for project alternative comparisons.
As you know, popular opinion about ANY government agency or department is very low in the US. I understand its much higher in Europe and Japan. Do you believe the JCO business, together with the long drawn out economic difficulties will undermine confidence in Japanese government agencies?
We are currently in a huge political fight over the Los Angeles Public School District. Student learning performance is very low, lower than most States, let alone other countries, and there are many stories of schools in very bad physical shape and, yet, the embattled Superintendent of Schools claimed the other day that there was no school crisis. Most people here feel this is yet another example of a huge bureaucracy with "no one in charge" "No one to blame". While not as critical of government as most people, I have to admit there are very many agencies which are a disgrace. (Incidentally, on retiring and signing up for my Social Security, I was most happily surprised to find the Social Security people to be both efficient & courteous. Would thatmore government agencies were half as good.)
Mundell is another very interesting man. Some think that he has deteriorated in recent years (he was one of the leading proponents of ;Supply Side economics, along with Laffer of L. Curve fame). It'd be interesting to hear a debate between Krugman and him over his latest theories.
Our Brewers Club has undertaken a very ambitious project - a course for prospective judges in beer tasting competitions. Originally, we just hoped to organize a group to attend well established classes given by one of our local "Authorities". Unfortunately, he has found it too much of a drain on his time and energy. So, a group of us in the club have worked out a cooperative class with different members teaching different topics. The class has proven immensely popular. We finally had to cut off new students - we've now got a class of 24, collected from 3 local brew clubs.
Its fallen to me to organize the whole thing. Its almost like having a full time job! (For some reason the other members think retired people have all the time in the world). This week's class features no less than 15 different beers, some of which have to be "doped" with various contaminants. The Datsun has put on many miles tracking down some of them. Happily, unlike your cash flow analysis, its interesting, so things are going quite well. The last class is Nov. 3, with the BJCP(Beer Judge Certification Program) examination on Nov. 20.
Connie & I are off to New York between Nov. 11 and 18 to visit my niece. She's now settled in an apartment and we're all looking forward to the visit. I hope the weather cooperates. Early Nov. may not be too bad in NY. Does Greenwood's travel guide have any top recommendations in NY? Its been over 30 years since I've been there.
Best Regards,
Ron
99/10/26 5:59:44
CHANGES IN JAPANESE STOCK MARKET
Dear Greenwood,
I thought you might be interested in a LA Times report this weekend about changes occurring on the Japanese Stock and other Markets. If some of the people quoted are right it could result in far reaching changes. I think that Michio Mitsui has the most balanced and insightful view (see last section). Like Merrill Lynch, many of the old line firms could be in for a big surprise (e.g. Nomura and Daiwa).
Here's the text,
with best regards,
Ron
Investors Pile In as Japan Lifts Commission Rules By MARK MAGNIER
99/10/28
Re: CHANGES IN JAPANESE STOCK MARKET
Dear Ron,
This is a response for your 19th mail.
Temperature in Arizona frightened me. We are busy in spring and in autumn. May is the best season for us. But in this season, no reasonably priced ticket from Japan is available. June may be a fair choice for us. We will discuss this issue in November.
In my speech, I normally point out that in any project lifecycle, there should be a check gate to determine whether to continue or not to continue of the project at early phase of the project lifecycle. This decision process should be transparent to all stakeholders. The reason I highlight this practice is that our governmental projects never stop once it is initiated or chartered. We suspect that their decision might be an insider's decision.
After JCO accident our government is busy preparing new regulations to force double integrity concept even in fuel processing industry. They admitted that in the past it wasn't.
The term I used cash flow is find safe operation fund for the company by forecasting future cash flow of the company. We need operating fund about 25% of annual turn around. But due to high percentage of governmental contract, most of the payments by clients are always made at the project completion. We need parent company guarantee for the fund. But both parent companies have problems. Chiyoda has bad performance. Dame and Moor was not independent any more.
I still remember news reporting that American school system has been improved. But you are saying no, at least in California. Our public school system deteriorated very much. More people are now selecting private school. I thought that bureaucracy with "no one in charge" "No one to blame" is typical Japanese system but it seems that it is a universal tendency.
Our Social Security people are same as other agencies in Japan. They are not efficient & courteous; they stick to formalities but not unkind.
I have no knowledge about Prof. Mundell except Mundell Flemming model. I didn't realize that he is a leading proponents of "Supply Side" economics. When I was young, I was fascinated by "Supply Side" economics, because I couldn't clearly understand it and felt mystic feeling about it. Now interest was faded out in me.
I have two questions about your classes.
Firstly, who issue "Competency Certificate or Beer Judge" at the completion of your course?
Secondly, what is doping material?
Greenwood has no recommendations in NY. His last trip to NY was sales trip to MRDC Princeton campus about 8years ago for Qatar LNG project. His mission was fulfilled and ended up International Project Award of the Year 1999 from PMI.
This is a response for your 26th mail about LA Times report.
Only changes I know about Japanese Stock and other Markets was biggest profit gained by Japanese Brokerage Company such as Nomura after bubble economy. All gained through traditional business scheme. E-trading is emerging quickly in Japan. Mr. Matsui is a front runner.
My daughter just started up a company in web business with her friends. There is a venture capitalist in Japan who wishes to invest in such an uncertain business. I am not sure about her future.
Like most other Japanese, all my money was heavily invested in real estate business and has no allowance to play in stock market. But luckily I could avoid crises and in a few years, I could return all remaining debt. This personal debt was a biggest concern for me in the last few years.
Regards
Greenwood
99/11/01 12:42:40
TRAVEL & OTHER TOPICS
Dear Greenwood,
Arranging non-business travel is often frustrating. As you know, we have finally made our plans for NY (originally scheduled for spring) and won't be doing our European trip till next year. A major expedition, such as yours, is even harder to pull off. Let me know if there is any specific information I can dig out which would help your planning.
(We've already sent my brother a package of information for his planned trip to the USA this winter with his younger son).
Krugman's columns have been interesting of late. (He has a good piece on Mundell under "O Canada". Having lived in Canada and worked there fairly recently I can verify that he also knows Canada well). His other news is more disquieting: he will be writing regular columns for the NY Times. Although he promises to keep up his web page, he obviously hedges about how much he'll be allowed to put there.
On the Japanese side, I note that Daiwa now puts the chance of economic recovery at 80%, even though they think it will be slow and uneven. I think that, once again, the market has been ahead of the economists.
The big worry here is that things will recover / boom too much, causing Greenspan to raise interest rates. Every time there is bad news on the inflation front our market "tanks". The rise of venture capitalists in Japan and the entry into the market of US & European financial interests may have a snowballing effect on your liquidity crisis - then, I hope your own company will be able to find the operating funds it needs. It seems that the delay in Engineering Company revenue is similar to that of farmers, and should find a "commodity" market to get the bridging funds from investors.
Your daughter seems to be very much part of the modern internet generation. She's much more adventurous than my sons, but all three of them are employed in the computer area. (My eldest son seems very happy at Toyota. They recently introduced, successfully, a new comprehensive program integrating many of the company's financial programs. All seems to be well - a remarkable achievement compared with Fluor's general experience of new programs!) His comments confirm my belief that T. is a very well managed company.
When you are immersed in something I find there is a big danger that you use too much jargon , assuming that everybody else understands it. I apologize for doing that about the beer class! As you know home brewing is a very big hobby in the USA. Some years ago (1985) a nationwide group of home brewers in the American Homebrewers Association decided to form a committee to "promote beer literacy and the appreciation of real beer, and to recognize beer tasting and evaluation skills". This group is know as the Beer Judge Certification Program; they currently have over 1500 judges involved! They are very well organized and have rigorous examinations before you can be qualified by them. Two of their judges will set and supervise the examination we are preparing for on 20 Nov.
One of the most interesting parts of their course is that for a "Doctored Beer Seminar". There are many off flavors that occur in beer, such as sour/acidic, astringen , stale and phenolic. They have published a list of 16 of these, giving ingredients to be added to otherwise good beer (doping) which will produce these off flavors. The idea is that judges will learn these flavors and be able to recognize them in beers. Finally, the judge can comment to the brewer as to what types of brewing process actions may produce them.
Now that I'm immersed in all of this, its amazing how much there is to know about a drink we all take too much for granted.
Cheers,
Ron
99/11/08
Hawaii
Dear Ron,
I have consulted with a person who has made a cross continental ride three times. His recommendation is to make it in May. We are going to have meeting on this subject within November.
If I need your help to find some information, I would like to contact you.
I have read "O Canada". It was well presented. Our Central Bank is gradually adjusting their policy, but still pretending that fighting against inflation is their duty.
Engineering business is still in bad shape.
Condition of parent company is becoming worth. New restructuring policy will be announced at the end of November. Despite parent company situations, if we can convince bank, we may be able to have separate loan from the bank.
I heard from my friend in Bechtel, that Bechtel is considering withdrawal from Asian market and reentry to Japanese PFI (Private Financial Initiative) market. I wonder whether they know Japanese market or not.
Now there would be no mosquitoes in New York. I hope you to enjoy your stay in New York.
My wife is going to visit Hawaii with my sister this month. I will keep working.
Regards,
Greenwood
99/11/11 5:36:07
Re: Hawaii
Dear Greenwood,
I'd agree with May as a good chance for the best weather. These days there seem to be many new discount fares issued quite late by the airlines, perhaps a more reasonable ticket may be available in the spring.
The last week or two our stock market has really taken off. Mutual Funds with Japanese stocks have also done well. One, I noticed, is almost three times its value at the beginning of the year!
Things seem very quiet on the Engineering front here also. Fluor stock is hovering just below $40; at least its not going down. Some of our competitors (Jacobs, etc.) are still posting good earnings growth, so the picture is not quite bleak. I'm afraid the Fluors of the world are losing position relative to other competitors. I hope your small company can convince the banks that you are in the latter category.
I wonder if Bechtel did any Power Station work in Japan? I suspect that would have been the only area in which they could have been competitive.
New York beckons - I have to pack. Weather seems similar to Tokyo lately, not too bad,
lows generally safely above freezing. Lets hope it continues for the week.
Best regards,
Ron
99/11/22
New book about Japanease economy
Dear Ron,
How was the trip to New York?
I felt that any big city in US is now clean and neat.
As new invitation came from Sado Island to visit their place in May next year, we have to rearrange our schedule. We are considering a trip in September. But it is not fixed yet.
My reading of Guns, Germs and Steel is very slow. Because I find many interesting books and sift to those new books instead. I am still half way. Recently, I have read a very interesting book about Japanese economy written by a Japanese professor.
According to his book, current difficulty of Japanese economy was caused by Japan’s continuous reliance on US dollar as key currency for trade and credit supply to other nations namely United States.
When England became a creditor after Industrial revolution, they used Stirring pound for supplying credit to debtor nations, in this case, United States and Canada. Although Britain soon lost competitiveness in international market and trade balance went into deficit, capital gain from credit supply to other nations far exceeded the loss in trade. This stable money circulation is called “Victorian Circulation” by the author. Pacs Britannica was thus maintained.
After World War 2nd United States took creditors position. But in Kennedy era, US trade balance plunged into deficit. After series of efforts, finally Nixson had to cut the linkage of gold to dollar and exchange rate started floating. According to the author, Japan should start preparing using Yen as key currency for credit supply to debtor nations as Britain and United State did in the past. But unfortunately, no one considered doing so. Japan’s bond issuing system require security or mortgage and thus costly and tedious. No one wished to accept Yen bond. In Regan administration, wise Bolker raised interest rate very high and attracted Japanese investor's eye on US national Bond using dollar as key currency. This money flow is called “Imperial Circulation” by the author. In 1985, US government have to ask cheep dollar in Plaza agreement. Japanese government supported US by lowering its interest rate at very low level. This low interest rate created so-called Bubble economy. Because of interest rate difference, most of the capital gain from this Bubble economy flowed into US. In Clinton administration, US government continued putting pressure on Japanese government and Central bank to keep differential interest rate to keep continuous money flow to US. After Bubble was intentionally ruptured by raising interest rate, this differential interest rate was again maintained. During this money circulation, risk of currency exchange was born by Japanese side. Because key currency was not Yen but dollar.
Author's answers to get out of this dilemma are firstly, to establish internationally acceptable bond issue mechanism by deregulation, secondly, stop investing in US only, thirdly, portfolio investment for multi-currency basis and finally joining Euro.
How do you think about this book.
Regards,
Greenwood
99/11/25 10:35:41
Re: New book about Japanease economy
Dear Greenwood,
New York was very good indeed. One week, however, was enough; we both came home exhausted. (that's what "burning the candle at both ends" does to people of our age!) We went out many evenings until very late because of our interest in Jazz. Its hard to hear really good Jazz in LA, its very easy in NY. In two days alone we heard the grandson of Duke Ellington and the Ellington Orchestra and the son of Thelonious Monk and his sextet. During the days we visited both the Guggenheim and the Metropolitan Museum as well as many tourist things such as dinner at the top of the World Trade Center, shopping, NY Harbor (Staten Island ferry for free!), Central Park on Sunday, etc, etc.
My niece is very well established there already and is hoping to be made a partner in her law firm within a few years (she has high ambition and works exceedingly hard - every day at least some hours while we were there). Just thinking about her life schedule made both of us exhausted.
Although much cleaner than I remembered it, NY is still pretty grubby once you get away from the main streets. They still have no idea of what good service means as practiced in more southerly states (even good restaurants have only passable service by LA standards). In this sort of way, as well as such things (alas) as good Jazz, the city struck me as rather old fashioned, as well as being expensive (although I'm sure not to Tokyo price standards).
The professor's book sounds fascinating. It prompted me to do a little research since some of his statements didn't ring true.
I looked up US Trade balances since 1960 in the US Govt. statistics. They showed worldwide trade balances close to neutral through the early '80's. The deficit widened rapidly from '82 thru' about 87, then got back almost in balance by 1991. Since then its widened again. Perhaps the prof. was talking about deficits with Japan?
Another point I do not follow is how lowering the Japanese interest rate would cheapen the $. I would expect it to have the opposite effect. The dollar did appreciate when Volker raised interest rates, starting in '78 or '79. This caused a bad recession here and contributed to Reagan's victory in 1980. The Federal Funds rate averaged more than 13% in 1980. Naturally, the $ rose against other currencies and the US trade deficit ballooned through about '87. The Fed. started cutting the discount rate as inflation abated, going below 10% late in 1982. They gradually cut it all the way to 3% in July '92. As a result the dollar weakened. It went from about 240 Y in 1985 down to below 90 Y in '95.
I also thought the Bubble burst late in the late '80's, not after Clinton's election in 1992 (He took office in Jan '93). If the BOJ raised interest rates while the Fed. was cutting all the way down to 3% I can well understand the strengthening of the Yen. The weak $ in the early '90's would also track well with the temporary improvement of the US trade balance.
The question of joining the euro is really radical. Krugman and others point out the difficulties in maintaining fixed currency conversion rates without either having capital movement controls or the ability to adjust monetary policy to compensate for delflation/inflation in each country. One of the interesting questions now is how the Europeans can handle inflationary booms in Ireland and Portugal and, at the same time, do something about the extremely high unemployment rates in E. Germany. Theoretically (and as actually happens in the US) this could be managed if there were free movement of workers, but that's hard to imagine in Europe (can you imagine an E. German moving to Ireland?). I think this is the heart of the British objections to joining the common currency.
Finally, there was a wonderfully droll column in the Economist. I think you'll be amused. Here it is:
Wow! A long letter! I hope I've not trespassed too much on your time.
Best regards,
Ron
99/11/25
MUSIC AND ECONOMICS
Dear Ron,
I am still keeping old LP records of Miles Davis, Cannonball Adderley, Sonny Rollins and Ray Charles, which were acquired, when I was around 25 yeas old. I have modern CD for Duke Ellington. But there is non for Thelonius Monk. Listening live one may be different. Especially, in New York! When I was in Philadelphia to attend PMI symposium, one of the Jazz freak told me an enjoyment of hearing live Jazz play.
Your niece reminded me similar story. Cousin of my wife is a Japanese American living in Belvedere, San Francisco. He was a medical doctor for Kaiser Hospital and had three daughters. The youngest one became a lawyer and worked in law firm in New York. Her hobby was singer song writer. In the daytime, she worked in the office and in nighttime she sang her song in the nightclub. Now she came back to San Francisco.
I apologize many miss spelling of names and some words in my previous letter.
Yes you are right. I checked Prof. Kikkawa's original book and cross checked with Krugman's book and found out that in 1971, US first experienced short term deficit but soon recovered in 1972 and fluctuated around balance point until it start dropping from 1982. In 1991 it got back to balance point then started dropping again. I took one sentence and translated it and ignored other explanation.
Your second question is also right. This misunderstanding was caused omitting many sentences. Appropriate sentence becomes like this:
In Reagan administration, wise Volker raised interest rate very high and attracted Japanese investor's eye on US national bond using dollar as key currency. This money flow is called "Imperial Circulation" by the author and raised dollar value again. In 1985, US government have to ask cheep dollar in Plaza agreement to stop trade imbalance. Sharp drop of dollar by concerted intervention did not help to stop trade imbalance. This phenomenon was explained by Krugman's hysterics theory. Japanese government supported US to keep capital flow to US by lowering its interest rate at very low level. This low interest rate created so-called Bubble economy. Because of interest rate difference, most of the capital gain from this Bubble economy flowed into US. In Clinton administration, US government continued putting pressure on Japanese government and central bank to keep differential interest rate to keep continuous money flow to US.
Yes, Bubble economy was raptured in 1989 at the start of Bush administration.
All above mistakes are caused by my translation omitting many sentences.
I also agree that Joining Euro is pointless.
Revised paper was uploaded in my home page. I appreciate very much your detailed review.
A column in Economist is what I would like to say.
I would like to cite it later.
Regards,
Greenwood
99/11/26 6:32:19
MUSIC, HOME PAGE AND ECONOMICS
Dear Greenwood,
Music has a different quality heard live. This applies especially to Jazz, where a good rapport between audience and musicians can elevate the experience enormously. The best evening we had was with a group headed by David "Fathead" Newman, a sax player who use to play with Ray Charles. He was joined by a singer I'd not heard of called Andy Bey.
When he opened his mouth it was as though Joe Williams had been reborn.
He was also a great jazz pianist and "scat" vocalist. It was one of those rare evenings of great music making with the audience part of the show.
Thelonious' son's name is the same as his father "Thelonious Sphere Monk", so to keep things clear, his group is called the T. S. Monk sextet. They have quite a few records out, perhaps not in Japan.
(Japan has a reputation here of often issuing jazz which is no longer available in the US; collectors often call on Japanese sources for their records). Then again, Amazon books and others are now selling CD's online - I'd guess worldwide.
Its interesting that your wife's niece did not stay in NY. I wonder how long mine will last!
I took the opportunity to revisit your page. Once again I'm amazed how many things you have been doing and writing up. The story about Hiromati especially hit home. I do hope the wonderful Cherry Tree is not destroyed. It seems developers are the same the world over. Also surprising were the non-Japanese restaurants in Kamakura-yama. Is this a recent development? Are there many such in Japan these days? Perhaps the world is really becoming one village.
I now understand professor Kikkawa's book. Especially clear is the huge money flow from Japan to the US. We well remember many, often high profile, investments here. Sony, in particular, still owns Sony Pictures (about 10 miles from me) and has weathered some very difficult times in making it successful.
The main point he makes about reserve currencies is a very good one.
The Europeans are hoping that the Euro will become such and, if the Yen could also, that would give investors three competing currencies. As a strong believer in competition, I think this would be very good for the world. Perhaps the US would suffer in the short term and would, no doubt, exhibit some Krugman hysterics, but should surely benefit longer term.
On the other hand, I vividly remember the distress in the UK during the 50's when Britain was desperately trying to maintain the Pound as a reserve currency. In the attempt to keep the pound strong, the country plunged into more-or-less repetitive recessions. Thus, even though it was in far better shape than other European nations and Japan in 1945, it soon became the world's sick man.
About another of his points, the need to keep Japanese investment high in the US, I'm not so sure. As Krugman describes it, if a country maintains high savings rates and a large current account surplus, the surplus cash and savings HAVE to be reinvested elsewhere. The danger of suddenly cutting off the investment is real, but I'm not sure its possible while our two countries have such opposite philosophies.
(Certainly it would puncture the US bubble). Many US observers quote loss of overseas investment as yet another threat to the bubble.
However, the market continues to roar ahead, and certainly looks like a bubble. The NASDAQ sets new records almost every day. The problem is that conservative investment advisors have been predicting doom for so long that they have no credibility!
Again, I think prof. Kikkawa is quite right in seeing Japan's solution in raising industrial productivity. As I understand it, this is now happening with massive restructuring (especially in Engineering?).
Unfortunately, the banks do not seem to be as active as other groups.
As Krugman discussed long ago, there seems to be a danger that, if the immediate crises is resolved, no fundamental changes will occur. Japan does not seem to be alone in this regard. Different articles I've seen see much the same problem in Korea, China and other Asian countries.
Perhaps the Economist's article should be implemented! (Incidentally, I think you should distribute it as widely as possible. Sometimes humor will highlight the need to change better than more serious talk. They would surely not object if they are given credit).
Prof. K also seems to believe that Government actions have more influence on economic matters that most US observers. I became skeptical too on reading about the sheer volume of currency transactions every day. These are so large that actions by governments to, for example, change exchange rates, are notoriously unsuccessful. Today, its hard to find any US expert even recommending trying such a thing.
It seems that, in Japan and Europe, many still believe in the need and the effectiveness of government actions. This applies even more strongly inside countries, than outside.
I still feel that this illustrates a far more fundamental discrepancy in the world. That is the question of the possibility of finding an alternative to the US / UK economic model. It is conventional these days to talk about the role of computer technology in enabling the US to increase productivity at a rapid rate. No doubt that is part of the story. However, I feel a more important cause is the complete victory here (and perhaps in UK) of the management philosophy of "Shareholders First". (This is, of course, very self-serving, since the managers profit mightily too. 30 years ago, or so the average US CEO made about 40 times the money of the average worker. Now the figure is more than 400 times).
If every company cuts 5% of its workers every year that equals 5% productivity growth even if output remains the same. If more companies increase sales than lose them, then a nation-wide rise in productivity would result. I've searched in vain for articles drawing the parallel between productivity and layoffs, but haven't found any. I suppose the US side would like to keep it quiet, while the Europeans don't want to give credibility to the US model.
Many people (including inside the US) are very troubled by this philosophy and wish there were a realistic alternative. Unfortunately, at the moment, the economic performance of countries which operate differently is not good, and show little sign of improvement. Perhaps France is the only exception - as you know they cut the legal work week this year and also have an economy which seems to be doing better than others on the Continent.
The big danger is that, if the US bubble bursts, not only will the economy tank, but there could be the most devastating political effects. (With US unemployment at only 4.1%, there is no credibility given here to critics of the present system. Once again, too many people have quoted similarities to the 1920's without validation, so that its hard to worry).
Today is our "Thanksgiving" holiday. We are having a small gathering with my sons, their girlfriends and another friend whose wife is in hospital recovering from serious (and successful) surgery. I must sign off and help Connie prepare.
Many thanks for so many thoughtful letters,
Ron
99/11/28
MUSIC AND ECONOMICS
Dear Ron,
Some time, I will try live Jazz.
Kamakura-yama was developed in 1930s. Percentage of the non-Japanese restaurants is not special. We can enjoy most of the world food in Japan. There are some foreign people living in Kamakura-yama.
I wondered why Professor Kikkawa's book gave me strong moral impact. My emotion was caused by the fact that we suffered very much by fluctuating exchange rate. But even if we have yen as reserve currencies, still it continues fluctuating. It may give us some pride, but it will not help us. Instead, as you mentioned about Britain's struggle to maintain Pound value, it may give us more burdens.
After Professor Kikkawa's book, I found professor Krugman's latest book "The Return of Depression Economy" in bookstore. This book summarizes all his new findings published elsewhere and in his web site. It is very understandable. As professor Krugman suggested in this book, the effect of having reserve currencies to GDP is only 0.1 to 0.2%. According to him, only escape route for Japan from recent liquidity trap is central bank to accept 2-3% inflation as necessary measure. This may cause difficulty for other country including US but he says this has to be done. But his voice is very small in Japan. There is no sign of our central bank accepting his suggestion to date. More time is needed for them to understand what he is saying. Once they understand, it may give Mr. Greenspan or his successor hard time to maneuver US economy.
As I didn't clearly mention who have said that Japan's solution is raising industrial productivity. Prof. Kikkawa didn't mention it. Professor Krugman said it. Massive restructuring in Japanese engineering company will help to cut unnecessary cost. But I think it is not enough. Without attractive technology having value to the client, exceeding competitor's productivity is very difficult.
I now think Prof. K's observation is side stream economics and cause confusion. There are many such kind of books.
I will add Professor Krugman' view, Economist's article and your view to my HP.
Have you enjoyed "Thanksgiving" holiday? I have a pleasant memory of celebrating "Thanksgiving" holiday in Allentown thirty years ago.
Regards,
Greenwood
99/12/05 6:06:28
Re: Prof. K & K AND WTO
Dear Greenwood,
No doubt you have been following the Seattle debacle. It could be read as a turning point in international trade negotiations. All countries have divided opinions about the benefits of opening international trade, with strong factions always looking toward their narrow interest. Perhaps the demonstrators have made it easier for protectionists to make their cases - its always easy to claim other countries are negotiating unfairly.
In this country it seems that the WTO may become a big item in the upcoming elections. Up till now only marginal politicians, like Pat Buchanan have made much of it, but some of Clinton's statements this week could be construed as anti-WTO. It will be interesting how this develops. In the meantime the US and other stock markets seem to be ignoring the whole thing. All the US indices are at record highs, as well as many European markets. If we are in a bubble, its getting very highly inflated!
One thing which has become lost in the shuffle is the question of international market instability. The sort of thing that causes violent swings in currency (e.g. Yen vs. Euro!). Another was the attack on Asian countries last year. From an engineering point of view it seems like a need for damping. This would seem to be a high priority, but the various countries and economists (except for Krugman and a few others) seem very far away from either taking it very seriously or doing anything about it. I'm afraid it will only be a little time before the next wobble.
The lack of progress in the engineering business in applying computer technology to get REAL improvements in productivity is very frustrating. As an information-intensive business there really should be much potential, but progress seems infinitesimal. Is this because its fundamentally a mature business, or just a long delay because of the large and difficult scope of the problem?
I'm very flattered that you feel my comments are worth putting on your page, especially with such illustrious company. I'll look forward to seeing your entries. Will they be in the what's new section, or?
On a lighter note, we finished our beer judge classes and took our final exam.
There will be no news until the new year, but most of us feel reasonably confident in getting passing grades. I certainly learned quite a bit. Now we'll see how well the knowledge "sticks". I've already modified the recipe for the batch I'm preparing now; I hope it is a move in the right direction!
Best regards,
Ron
99/12/09 15:06:30
MORE ON WTO / SEATTLE
Dear Greenwood,
Today's LA Times had a thoughtful column from their chief economist, Jim Flanigan. General opinion here is that repercussions from the whole Seattle affair are still being recognized and that world trade will probably have to muddle along without any new agreements for quite a while. Nobody seems to be predicting a retrenchment, just the status quo.
Text follows, with best regards,
Ron
Debacle in Seattle Was a Defeat for the World's Poor By JAMES FLANIGAN
99/12/12
Re: MORE ON WTO / SEATTLE
Dear Ron,
Seattle debacle was a surprise for me. But soon I realized that many people are tired of global competition. Separation between poor and rich in America may be another reason for attracting so many people to gather at Seattle or it may be Internet.
As you have said it may be a turning point in international trade negotiations. James Flanigan's view is also right.
But I am optimistic about the outcome of Seattle. Because in the long run, any government have to accept free trade. Denying free trade means a death to their economy.
Now I think that engineering business is the first industry to start using computer technology but would be the last industry to enjoy it. When we are successful in changing our business structure from Taylor made to combination of modular design or other new scheme, which can fully utilize the advantage of computer technology; we may be able to enjoy it.
I will be very busy in the last moment of the year. I may be in San Francisco just before Christmas to visit URS. New management of URS wishes to decline as a shareholder of our company. We are not happy with their decision, but we do not have other route but to follow their decision.
Best Regards,
Greenwood
99/12/17 10:19:00
Re: Seattle
Dear Greenwood,
I talked to some Fluor people the other day. I expected to hear that they were hopeful of better business next year, since the price of oil has remained around $25 / bbl. On the contrary, they did not see any improvement until next summer, at least. On friend, who is 63, has just about decided to retire next spring.
(US tax law makes it generally more favorable to retire early in a year to reduce taxes).
I, too, think that only misguided people think international trade is bad for the economy. Few nowadays remember the 1930's when the anti-freetrade philosophy was last tried. Let us hope that enlightened politics triumphs. (A news story today reported many regional groups discussing regional trading blocks. These included invitations to Japan, China and S. Korea to join the 10 Southeast Asian countries in looking at an expanded, ECU-type block). This suggests that there are middle ground routes between the WTO and isolationism.
I'm not sure that the Engineering companies will be able to sell clients on modular designs. Even car companies are using computer techniques to move in the direction of allowing customers to tailor-make their orders and to get delivery in a short time. (Toyota is a leading agent here). I suspect the true competitive advantage would go to companies that offer clients the maximum flexibility.
From my days with operating companies I remember thinking how rigid engineering companies were about design changes. Although, working at Fluor, I came to understand why late changes are so hard to do on a project, I've never been able to convince clients. Sometimes one has just to bow to the inevitable. It got so in my last few years, when I gave engineers the bases for their work I'd tell them "Whatever else is true, you can be SURE this will change". It wasn't welcome news to them, but prepared them for the inevitable changes.
In these days of very rapid change in the business environment, viable operating companies must react quickly and efficiently to those changes. During a multi-year project many changes will occur that require changes in the project.
To be competitive the Engineering companies must be able to accommodate this.
Small modules are probably part of being able to move quickly.
For some time, now, our non-US offices have been much busier than (Irvine ? now moved to Aliso Viejo) and Houston. Certainly the 65% dollar helps our Calgary office. (My last project was for a Canadian company - they never stopped complaining about the cost of US engineers and asking for more Canadians). We may be seeing a permanent migration of Chemical Process Engineering work to lower cost countries. This is pretty ominous for engineers in the US, Japan, etc. I hope I'm wrong, but it does put a very strong premium on rethinking our approach. (While I was there in recent years, Irvine was far more conservative and rigid than even our Houston office. I think this was because, until 1999, and unlike all our other US offices, there hadn't been any substantial layoffs in Irvine since the middle '80's. Irvine had become very complacent.)
Good luck with URS. I hope you are able to change their minds.
Thanks for the card with Chiyoda / D & M address. Have a happy holiday season.
Ron
99/12/19
New Model for Engineering
Dear Ron,
My visit to San Francisco was postponed. First meeting between Chiyoda and URS will be made without us.
I think that major demand for new installation of refinery never comeback. As Logistic curve predicts, when we spent half of the oil reserves, oil production rate start to decline. The balance of energy will be filled with new energy like natural gas. This means the world already have enough refining capacity. New project is planned to relocate the geographical distribution of the refinery.
Toyoda started selling personalized car to the client through Internet, but platform concept made it possible. The idea came from PC business. All components are standardized for cross platform. Client can combine those components on certain platform and make his personal car. Costly engineering is thus avoided. Information system can coordinate accessibly line.
Similar concept could be introduced to the plant design. To do this, engineering company have to develop platform and standardized component concept for plant design. Engineering firm has to establish supply chain for those standardized components. Projectwise component design and request for bids on equipment and material are no longer needed because design and equipment and material suppliers are already made. Cost and delivery time is thus improved.
As far as tailor made is the way we go, last minutes change certainly cause Chaos in the project.
Classical tailor design will be born in China or in other low cost countries.
This is my nightmare.
Regards,
Greenwood
99/12/24 12:54:46
Re: New Model for Engineering
Dear Greenwood,
I'm sorry to hear you'll not be coming here soon. Let us hope the initial meeting goes well so that the URS relationship develops as you hope.
I agree with your comment on refining capacity with one caveat. Although, after Seattle one must be more doubtful, there is always the possibility of undeveloped countries moving in large numbers towards the present industrial countries' standard of living. If this happens there could be a need for much greater refining capacity worldwide. After the WTO news I wonder if this will ever happen - it would seem to need unprecedented investment (or assistance) from the developed world, and the present climate seems much more selfish.
Another huge question mark is the worldwide environmental impact. Can you imagine the impact of China fueling millions of cars with their present disregard for pollution? Probably Japan would receive a big impact also - I assume prevailing westerly winds. (I understand, even at their present level of development, they are second only to the US for total emissions). Certainly, when I was in eastern China, there was always a heavy haze in the air.
Of course, if they did build refineries etc. they would insist on doing much of the work at home. In our negotiations a few years ago they seemed to want the US companies to supply the money, while their own people did most of the technical work with "assistance" from US technical personnel. As the Europeans are now finding out the Chinese are very hard bargainers! From comments from friends who have had dealings in India, things are not very different there. (Interestingly,
Fluor depends heavily on immigrants for technical and engineering personnel - many from India and quite a few from China. I believe this is true of all US engineering companies).
So, I share your nightmare. I'm afraid I must mention another. In the 80's I worked in the Power Plant field - especially the modern, combined cycle, cogeneration plants - often integrated with process plants. This field is extremely competitive, and so required very close relationships with the turbine, boiler and other equipment manufacturers. Since then most of these manufacturers have been steadily increasing their capabilities in process engineering design and the whole EPC management field to complement their mechanical expertise.
When companies with the resources of GE and ABB start buying up engineering companies I see another unwelcome development from the engineering companies' point of view. A manufacturer can often "throw" in the engineering work cheaply to secure the sale of equipment. Fluor is financially strong at the moment, but I wonder how long it will be before its the subject of an unwelcome buyout.
Incidentally, the predicted drop in contract awards has occurred as Fluor Daniel has become more selective. New awards are down almost 40%, backlog down more than 25%. On the bright side, the gross margin is up from 3.9 to 5%. Wall street is still reasonably happy, shares have been hovering in the low $40's, but not rising in the present bubble. (This year's low was $26).
Not a very encouraging time for the engineering business. I trust things will recover to a degree next year, but agree with you that the glory days are past.
Best wishes for the season and for a much better 2000.
Ron
July 13 2002
Rev. November 26, 2002