Wednesday, August 11, 2010

Michael Porter: U.S. Needs Increased Domestic Investment

Recently, Harvard Business School Professor Michael Porter was on CNBC's The Kudlow Report.

Video: Porter on CNBC

In the segment with Larry Kudlow he makes the following points:
  • There is too much uncertainty right now so businesses are just trying to run themselves lean vs expansion and hiring. Much of the uncertainty is government related.
  • Need to change the atmosphere. A war is going on between government and businesses and is really distressing from his point of view. Business feels attacked. Change of tone is needed or some new players in the adminstration who can change that tone.
  • He advises companies to drive productivity and improve technology. Today, for the most part that is what business is doing by investing in software and capital equipment.
  • US foreign investment is happening. The problem is lack of US domestic investment.
  • Data shows that US domestic investment as % of GDP is actually lowest among OECD countries.
  • Our individual companies are competitive globally but they hold back investment in the US because the cost and complexity (healthcare, litigation, taxes, other regulations etc.) of doing business in the states has piled up over the years. Each rule and regulation probably began with good intentions.
  • Health care costs highest in world.
  • Business is spooked by the union proposals that are being made.
  • Human resource pool is sometimes found lacking for certain skill sets and, in some cases, those skill sets have a comparatively high cost. Companies move investment globally wherever they can be most productive.
The bottom line seems to be Porter thinks we need to start reducing cost and complexity of doing business to encourage more domestic investment. That investment will lead to increased competitiveness with other countries and ultimately more US jobs. According to Porter, much can be fixed quickly...this is not a structural problem. He also said that the good news is after 20 years we are now finally making some progress in public education.

Having the lowest domestic investment as a % of GDP among OECD countries certainly needs to change.

Adam

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