Porter and the "Competitive Advantages of Nations' [Cluster Theory Development]

Nations should continuously seek to gain competitive advantages and that occurs through the development of their industries to meet and exceed market expectations. When a nation can further its industrial development through the use of economic clusters it can often realize higher GDP growth rates. The study of clusters is an analysis of the economic environmental and organizational factors that lead to momentum for firms to adapt to those market needs. Market Need, Environment, Organizational Capacity, and Human Capital come together.

Michael E. Porter is from Bishop William Lawrence University Professor at Harvard Business School and one of the leading theorists on clusters and economic development. While the type of cluster being proposed in this work is of a similar strain there are some differences between his and mine based on the way the theory has developed. However, you will find there are similarities and contributing factors so some of the work is based in part on aspects of his theoretical underpinnings.

Porter believed that the capacity for nations to push development is based on four broad attributes that constitute the "diamond" of national advantage,

1. Factor conditions

2. Demand conditions

3. Related and supporting industries

4. Firm strategy, structure, and rivalry (Porter, 1990, Para 1)

Companies must continuously update to increase operational and innovative sophistication if they expect to lead the global market with their products and services. The process of adaptation leads to consistent improvement. According to Porter putting competitive businesses in close geographic locations increases competition and in turn speeds innovation. As companies engage in domestic competition they also improve their competitiveness in comparison to foreign rivals. If lucky a cluster can block out other foreign market entries based on a cluster's unique advantages that would be difficult to copy.

Porter also believes that economic clusters are seen as a way to avoid inward focus and stagnation in growth. The ability to speed economic development with new products and services through improved competition leads to greater benefits to society. In the model I'm presenting it is believed that economic clusters not only innovate around market needs but also create long-tail adaption of products and services in the manufacturing and supply chains that optimize to feed such clusters. In turn, maximizing and improving infrastructure.

In my theory, these supply chains are seen as economic vines and that is a wider conception beyond business-specific purposes and into the human elements that also feed the fuller functioning of the system. The physical and digital aspects of business are often calculated in traditional economics but the soft side of human capital such as libraries, quality of life, contentment, politics, safety, discrimination, etc. have an impact on human choice and influence the health of a cluster.

In general, it is believed that government should support cluster development without necessarily being directly involved unless they have research and development objectives. For example, they may encourage international trade, product safety standards, deregulation, etc. One can see these as environmental factors that help encourage clusters to develop by using influencing factors like regulation, taxes, foreign/domestic policy, etc. Specifically, in this transactional cluster model, I'm proposing government and industry collaborate to spark a cluster, create rules for the cluster, and actively manage the environment for developmental success around key objectives.

The Transactional Rapid Innovation Cluster (TRIC) Model helps to encourage unique competencies that can contribute to solving defined problems through focused cluster creation or organic general development through environment enhancement. When focused cluster development occurs companies increase the pace of product creation through collaboration in the R &D development process. The advantage they gain is not only from the specific products they create but also the adaptations in their wider industrial base from patents and new products drawn from partnering with other industries.

Key Points:

-Michael E. Porter was a leading theorist on economic clusters and economic development.

-Porter believed four broad attributes lead to the "diamond" of national advantage. 

-The Transactional Rapid Innovation Cluster (TRIC) model is an offshoot branch of theory focused on pinpointed investment to solve defined market problems through R&D collaboration. 

-The Transactional Rapid Innovation Cluster (TRIC) model can be used to improve the economic and quality of life/social health of a community.

Porter, (March April 1990) The Competitive Advantage of Nations. Harvard Business Review. Retrieved. https://hbr.org/1990/03/the-competitive-advantage-of-nations.

Firefighters in Columbus Get Well Deserved Raise: A Few Ideas on Future Budgeting Opportunities

18.5% raise for firefighters in Columbus is a nice start to a wider fire fighter recruitment and retention problem. Firefighters Get Raise Columbus. Good news for them because firefighters earn this raise through taking risks. The demands are increasing and pay is stagnant. While there is a $103 million cost to the budget its not the fault of such firefighters nor is it a unique cost to only to some places. As with any challenge is the opportunity to try and find new paths.

Thus, we have to start thinking of budgeting long term and create a cushion because these types of services are vitally needed. We can't skimp them least they don't function at their optimum. There may be options to change things around to help but that should not impact total functionality. Sometimes changing the lens can provide new thoughts, ideas and solutions.

Most towns and government entities nationally are running the red line on budgets consistently. The goal should not be to spend but to invest to create net positives. Economic development and social development are connected from a total system perspective so as to help think of what city costs add long benefits and which ones are truly costs (scientists break them apart for analysis but they are connected). 

An Example of Possible Net Positives

Taking that extra step to think about return on investment allows for finding and thinking about new opportunities with old costs. A quick not well thought out example. You need more firefighters and recruitment is low and budgets are limited. You create a cadet program that can take on some of the roles, reduce costs, etc. by partnering the fire department with youth programs paid by the state, organizations, other businesses, etc. The program helps develop new talent and helps teens find a path the chaos of their lives (Yes as a society we have responsibilities here even if it doesn't fit well on a balance sheet.). This program teaches basic civil values, teamwork, fire prevention, character development, encourages educational excellence and is a fertile recruitment grounds for highschool juniors and seniors that might want to join the fire department. Perhaps it could be a place business may want to recruit from as well because the training prepares young people for gainful employment in  through broad skills. A certificate of completion is provided once someone gets through the program they can provide to potential employers (I can think of a fire dept. in rural MI that might contribute further to the community with such a program.).

 Its not a perfect idea but you get the point about thinking about parity and reducing total costs overall while maximizing the societal benefit of that budget. In this example you might help improve 1. firefighter recruitment, 2. fire prevention knowledge, 3. youth grooming, 4. reduce costs through parity, 5. help local businesses, and 6. Improve local business function through human capital development. From a societal level it provides an opportunity for people to learn skills on how to advance thereby improving social mobility throughout ones life. Heck the fire department may be able to hire a few more people for these programs based on an increased budget that saves total cost and raises value to the community. Its just an example so feel free to beat it up or branch out your own thoughts. If leaders start thinking along these or other lines on nearly all budgeting decisions they are likely to find all types of duel efficiencies improving performance and reducing costs while improving output. 

Maybe in a couple of years 10% savings while improving return on investment value to society can be realized. We just don't think of government having profits and costs in terms of quality of life and economic development.

Sorry...I'm rambling. Happy to see them get put up to speed on pay. 

How much are Firefighters Paid?

The average annual pay according to the BEA is about $55K making it not the best paid occupation. BEA Firefighters Employment 2019  But there are other perks that include benefits, a sense of duty, and a connection to other people. Everyone love firefighters because they bring good into the world!

Source

Trade Gap Rises to 74.6 Billion in April: The Animal Spirits May not be Out to Pasture Yet [Economic Theory Development]

The economy is starting to show signs of slowing. The trade gap just increased and there are a few other markers indicating a slow down is likely occurring. That doesn't mean it is going to be long term but much of that depends on factors in and out of the country. i.e. the environment. Matching choices to long term environmental pressures is helpful. If your asking me, I have been working on an economic cluster theory that I hope improves the highest value of products and services within the U.S. and encourages the fostering of innovative environments for people and companies. Anyways, not all of is it my theory because there are others who studied similar ideas starting a decade or so ago but mine is a little unique version. As with all theory no one knows if it has value or not. Could just be theoretical dribble dribble. No promises! Science only explores ideas its up to everyone else to decide their uselessness. Just saying. 🤷 It happens!

If we want to be an advanced manufacturing center and the most innovative nation we can be then there are likely some things that would be helpful. Its not easy for anyone to say concisely what all of those things are because factors are confounded on a macro level. One could think of infrastructure and human capital as two important components to functioning of the entire system (performance and change). There are others as well. Companies are innovating/adapting naturally based on new infrastructure with new tools like AI implementation but exist within a national (Recent infrastructure improvements) and global market (world economy and geopolitical issues. Thus building an environment that can speed up innovations for macro adaptations is more of a locality issue (virtual/physical and social) that helps to foster wider national adaptations based on outputs. We also have some work to do on our electrical grid that needs to happen if we want to handle the next The Economic Platforms of History or a more calibrated Perpetual Sustainable Economic Systems (Based on big data management). I think we are over half way there. Theoretically anyway......

April 2024 Trade Gap is $74.6 Billion

"The U.S. goods and services trade deficit increased from $68.6 billion in March (revised) to $74.6 billion in April, as imports increased more than exports. The goods deficit increased $5.9 billion to $99.2 billion, and the services surplus decreased $0.1 billion to $24.7 billion. (BEA, 2024, para 1)"

The Military's Mountaineers: Climbing on multiple peaks

I came across a piece published on the military's mountaineers. Since I used to do a little climbing, and wouldn't mind doing some more, I thought it was interesting. As I have one relative going into the national guard I find such information more appealing. I am a big supporter of the military and have been for a long time because they teach skills, honor, and values. Anytime we can raise our fellow man/women just a little we should praise and encourage participation in such organizations.

Training for a value laden selfless cause can help foster deeper beliefs that can only come from some institutions such as boarding schools, spiritual schools, military, and a couple of different value centric organizations. They are not the values you always learn on the streets, in all businesses, or in our daily lives. When you meet people with honor and integrity you know it and the military sets the foundation for people to develop those value sets for the betterment of society. Each on their own merit but they can't say they haven't been introduced to those values.

Deep values with honor is hard to come by in today's world as leadership comes from practice not birthright. Some might think it comes from wealth but true leadership comes deep from within and isn't given (History profiles show leadership comes from just under and that is based on skill and exposure that can be learned through motivation.). Maybe no one may think you are a leader and that is best for you because true leaders don't always look like leaders. Not being known as a leader is a blessing because leadership comes with a heavy burden. Such leaders are the one's who help their society and do what is right no matter the costs.

Old values are hard to come by sometimes. Where the Military Mountaineers are Made

Knowledge Retention Strategies That Maximize Corporate Training

 Training/education participants often forget much of what they learn just after leaving a class session. That know loss can impact corporate performance. For example the article Understanding the Science Behind Learning Retention indicates that 50% of info is lost in an hour, 70% is lost in 24 hours, and 90% lost within a week. That creates a big problem on training ROI. 

In today's market businesses should seek to maximize their human capital. Education can create a strong foundation and training can pin point that information for practical use.

The article suggests, 

-Simplify cognitive load. 

-Smaller component of information.

-Repeat information.

-Spaced intervals of information 

-Varied modalities of learning.

-Create stories and get emotional.

-Gamification can help (I would include the alternative solving practical problems where information must be used in novel ways.)

Let me also add a few pieces of advice from my own experience. Ensuring that information is relevant not only to the participant's success as well as market needs helps participant's find relevance in the information. Having participants solve a problem would force them to use that information and apply it based on their own personally earned knowledge mixed with new presented knowledge by experts. 

Information should also be presented in a way in which they can learn through different senses and activities. We all learn a little differently so providing variety can help. While it might not be possible in all types of training venues it is possible to encourage sight, sound, touch, social conversation, symbolism (its actually a learning tool), and anything that can create new neural pathways. 

Finally, let me also add follow up and metrics are also important. Providing the information again at some point in the future will help retain it. Practical application being high on the list when connected with other relevant information. Likewise, having some of the learning reflected in the job and on evaluations provides incentives to learn. Designing appropriate metrics can be some of the more difficult aspects of the business implementation strategy.

Tourism as the Third Biggest Economic Driver in San Diego (San Diego Under the Moon Picture)

 According to the San Diego Tourism Authority tourism was the third largest sector in San Diego drawing in $23.4 billion and 200K jobs in 2023. That is a pretty big influence of the local economy. If you have ever visited the city, and explored the area, you are likely to find the beautiful beaches, restaurants and other activities of interest. San Diego Tourism Authority

When I'm not in San Diego I'm probably in Michigan or some unknown place on the planet. Part of what I'm trying to do for my hometown of Escanaba is to encourage tourism as well as match that with industry and other activities to foster a market diversified economy where each industry enhances the whole system and yet hedges against market downturns. One industry goes down and some go up. 

Each industry encourages and supports the others within the same community area strengthening all businesses and the lives of those who live in the area (i.e. quality of life). Its possible to sort of multitask to create cross divergent solutions through helping a local community to thrive. Good peeps!  You can be part of that if you want to start a business, visit, or invest locally. The place has come a long way in a few years! Escanaba

Anyway, come visit San Diego or Escanaba and you will find two different worlds that are very much similar. One is on ocean beaches and the other more rural with Great Lakes beaches. One provides a tropical feel and the other one more norther pine cozy. Get a beach tan and then head to go fish near Escanaba (Fishing is a big industry in both areas. Escanaba even has a boat industry.) 

Now onto my amateur hobby artwork. It gets me out exploring and sometimes I do get a good pic. I call this one San Diego Under the Moonlight. Life would be boring without hobbies! Feel free to peruse my online gallery just for the giggles of it. Don't be cheap and busy something. jk 😂:) The Wooded Pathway Gallery

San Diego Under the Moon

Americans Positive About Their Own Finance but Less on the Economy (Federal Reserve Survey)

A poll by the Federal Reserve Survey of Household Economics and Decision Making found that Americans in general are feeling fairly optimistic about their own personal finance but less about the economy in general. This is interesting because for the most part the economy has been pretty strong and personal finances seemed to have felt more shaky. The animal spirits might be at work again.

Pessimism chokes the desire to buy new products and services so it could have some impact on the economy. The extent of that is not well known but might not be significant unless such pessimism is long term. According to survey Americans feel ok 72% National Economy Good or Excellent 22%

A good easy to understand article you can read, The Great Nonpartisan Divide That is Plaguing Americans

Interesting, this piece of research below indicates that within developed capital markets positive sentiment has a minimal impact while in underdeveloped markets the impact of sentiment might be prolonged. One might wonder if the reverse is true as well. The difference is based on the strength of market fundamentals and efficient quick corrections. Sentiment, Productivity, and Economic Growth.

Let us go back to the survey. It looks like they use "ok" but if one were to move the category to "excellent or good" the numbers may not be exactly the same. The way we define the category is important for the end results. The survey information helps us think about sentiment's impact on the economy and how people categorize those sentiments.

In a country the size of the U.S., less confidence would indicate some impact but would be expected to be short-lived. Prolonged inflation, partisanship or geopolitical issues could confound the feeling of optimism. The article also brings up some of the changes in purchasing behaviors based on economic sentiment. I don't know about you but I weigh and balance life purchases all the time. I suspect you are the same.

No one wants to purchase expensive products unless they are feeling good about their futures so the lower feelings about the economy and higher feelings about personal finance are a mixed bag. I'm curious how the economic community and analysts are going to see mixed sentiment. For now it would seem that as a highly developed nation we have some resilience.

Source Federal Reserve