Is Industry 4.0 the New DotCom Boom?

Posted on April 3, 2017

Fear stalks the land.  The Robot Apocalypse is nigh, destined to steal our jobs and our future.  Worse yet the machines are made elsewhere (Germany, Japan, even China) and America is being left behind in the race for manufacturing prowess.

We’ve heard this story before.  In the late 1980s, the U. S. computer memory industry had been decimated by Japanese and Korean competition.  To the Cassandras, this meant that the U.S. had forever lost the global economic race and was destined to become a second-rate power.

Nothing could have been further from the truth.  The prerequisites for U.S. global dominance of the technology world were already in place.  Within a few years, U.S. prowess in personal computers, microprocessors, and digital networking would lead to a capital investment boom and a stock market bubble not experienced since the 1920s.  Stock market fluctuations notwithstanding, the global growth of the Internet has not abated since.

For all its impact, the Internet has touched only a relatively small portion of human existence, focused primarily on media, entertainment, telecom and more recently retailing and finance.  The larger world in which we live, the world of things and physical interactions has, until now, been only lightly touched.  But that is going to change – and change in a huge way.

Imagine Amazon on Steroids

The world of digital automation is at the same stage as the internet in 1993, when the Mosaic browser was introduced and we first discovered the wonders of the World Wide Web.  The technologies are in place for a boom that will transform the global economy and, in the process, create new opportunities for better jobs and better lives.  And once again the U.S. is asserting its leadership role in developing the critical technologies.

Today Amazon utilizes highly advanced predictive analytics and automation tools that plan … read the rest

INTERVIEW WITH AXIAL CEO PETER LEHRMAN

Posted on November 10, 2014

We recently interviewed Peter Lehrman, CEO of Axial, one of the most energetic and innovative companies providing advanced technology solutions to M&A and corporate finance professionals operating in the middle market. Speaking from the “Roosevelt Room” in Axial’s headquarters in the Flatiron District, Peter covers a good deal of ground and I highly recommend you listen.

We began with a discussion of the current M&A market and Peter shared with us some highlights of Axial’s recent Concord event in New York: a packed crowd listened to various Axial members and panelist experts on the middle market, but for some of them the main event took place outside the lecture hall.

Highlighting this heightened market activity, Peter shared some of Axial’s internal data showing a rapid rise in new deal submissions. In September over 1000 new deals were submitted to the Axial site, compared with a recent average of 750 submissions a month.  Just-released data shows that October submissions grew again to more than 1200.  No word yet on whether this will bridge the imbalance between buyers and sellers.

Axial recently completed an $11 million capital round with Comcast Ventures. Peter envisions this capital helping Axial become the go-to meeting place for all participants in middle market M&A.  Their target community includes private and public companies as well as the professionals who advise them with regard to strategic relationships and transactions.

Although Peter was reluctant to share too much about his new product pipeline, he did share Axial’s vision for the role of technology in our industry.  He firmly rejected the idea that robots and intelligent systems will replace smart and creative deal professionals in the M&A industry.  Instead, he believes new systems and apps will make M&A professionals more effective by eliminating many of the more burdensome administrative tasks we now endure. My

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Investing In An Age Of Transient Competitive Advantages

Posted on August 24, 2013

John Mason – Originally Published at Seeking Alpha – Reprinted with Authors Permission

In this article I will review the book “The End of Competitive Advantage,” by Rita Gunther McGrath, published by the Harvard Business Review Press in 2013.

I like to think of myself as a “value investor.” That is, I believe that I invest in quality companies that are underpriced. In terms of the quality of the organizations I like to invest in, I look for firms that have established a competitive advantage in their industries and are earning at least a 15% return on equity, after taxes. To judge the quality of management and its staying power, I look for those organizations that have a sustainable competitive advantage, defined as earning a 15% return on equity, after taxes, for a period of five to eight years. And, to capture the fact that a stock may be underpriced, I look for a low price/earnings ratio.

Other factors that have been important in my analysis are the industry share the company achieves and protects and the stability of this share over time. Of course, these are the quantitative factors and must be supplemented by other factors, such as an examination of management, industry make-up, and governmental factors that might contribute to firm performance.

Well, starting right here, Dr. McGrath starts to eat away at this picture. For one, she argues that industry boundaries are no longer that important. She argues that “arenas” are more crucial in the modern environment. The important thing in today’s world is that there are connections between “the outcomes that particular customers want (the jobs to be done)” and “the alternative ways those outcomes might be met” (page 10). Industry lines are not the determinants of what products one should be producing and what markets they should be sold … read the rest

Winds of Change: Banking

Posted on May 8, 2013

John Mason – Originally Published at Seeking Alpha – Reprinted with Authors Permission

Another Executive Leaves JPMorgan…” reads the headline of the business section in the New York Times. The question is, what is going on at JPMorgan Chase (JPM)?

The timing of this last leaving is raising questions. The latest major departure is Frank Bisignano, the co-chief operating officer. The questions are about the status of Jamie Dimon, Chairman and Chief Executive Officer of JPMorgan, the “persistent executive turnover,” and the up-coming board meeting where a debate is raging about whether or not Mr. Dimon should hold both top positions.

To me, there are two reasons for the recent departure events. First, Mr. Dimon is in control and he does not like what has happened inside JPMorgan over the past two years or so, with “the London Whale” and other events that have tarnished the “bravo” image of Mr. Dimon and his bank. The activity going on inside the bank remind me of a “turnaround” operation!’

But, there is a second reason for the things that are going on. Mr. Dimon is moving JPMorgan into the future.

If this is true, then this whole effort is to move JPMorgan into the future in the face of the “hostile” regulatory environment that exists, in the face of the changes that information technology are forcing on the banking industry, and the changing nature of the financial industry.

If I were Mr. Dimon, my feeling would be that the current regulatory environment “sucks”!

Being John Mason, my feeing is that the current regulatory environment “sucks”!

In either case, the basic feeling is that I really don’t want to run a bank. I want to run something different.

Second, whatever is being done in the financial industry, the future of commercial banking…of finance … read the rest

Winds of Change: Energy

Posted on May 6, 2013

John Mason – Originally Published at Seeking Alpha – Reprinted with Authors Permission

In my last post I wrote about all the economic re-structuring that is taking place. Even though economic growth remains relatively tepid, changes are taking place in the economy that are going to dominate the future when the economy fully adjusts.

Maybe one of the reasons that the economy is growing so slowly is that the economy is going through a transition phase, like in the 1930s, where resources have to be re-allocated and re-structured in order for the economy to take off once again.

That is, resources are mis-located now relative to what is happening in the economy. For the economy to pick up its full head of steam, resources have to be re-aligned to fit what the economy is evolving into…not what it was. Economic policies that attempt to put resources…especially labor…back into the jobs they historically held…just doesn’t work!

Therefore, as I mentioned in the previous post, this re-structuring is creating tremendous opportunities for investment. But, one has to change ones perspective…and not focus on what was. This is why I found the recent article on the future of energy by Clifford Krauss in the New York Times so refreshing. The title to the article, to me, says it all, “By 2023, A Changed World in Energy.”

“If you could close your eyes for just a moment like Rip Van Winkle, and blink them open in 2023, you might see a very different energy world.

Electric cars may be popular. Solar energy could be cheap enough that millions of households and businesses deploy solar panels to generate their power needs. Fossil fuels will probably still dominate, but most trucks and many trains could run on natural gas rather than more polluting diesel. And the United States could be … read the rest

The Winds of Change Are Blowing

Posted on May 5, 2013

John Mason – Originally Published at Seeking Alpha – Reprinted with Author’s Permission

The world is changing. The world is changing because it must change. When the unemployment rate hits 27 percent, as it now stands in Spain, something more is going on than just a business cycle.

Unemployment is also above 27 percent in Greece. In Italy, the unemployment rate is close to 12 percent. In France, the unemployment rate is above 10 percent. The employment problems in these countries are not just cyclical, they are structural.

The same for the United States. Although the unemployment rate in the United States is under 8 percent, the startling figure concerning the U.S. labor market is that the labor participation rate has dropped below 64 percent, a figure not reached since the latter part of the 1970s when women were not as big a part of the workforce as they are now.

These structural forces are causing divisions between countries as the world tries to recover from the Great Recession and more. Angela Merkel, German Chancellor, “highlights eurozone divisions.” The unemployment rate in Germany is 5.4 percent.

But, as we know, the utilization of capital in the western world tends to be lower now, for this stage in the business cycle, that at any other time in the past fifty years. Western countries are not only not using the human capital that is available; it is not using the physical capital it possesses. The competitiveness of the eurozone is an issue that comes up over and over again.

Phillip Stephens writes in the Financial Times about The New Deal for Europe: More Reform, Less Austerity. “High unemployment in Europe is not just a reflection of recession. It often mirrors ossified labor markets that lock out young people and discourage investment and innovation.”

But … read the rest

Looking West (and South) Toward Tomorrow

Posted on January 31, 2012

If the U. S. economy is to successfully navigate its current perilous course, attention must move from the baggage of the past to the opportunities and challenges of the future.  Nothing symbolizes that better than the comparison of Europe’s ongoing economic morass with China’s relentless growth.

Our friends at McVean Trading consistently produce one of the most insightful newsletters on global economic trends.  They’ve been generous to share their recent analysis reprinted below of the global trading shifts that have led to China’s current export dominance. We’ve reprinted the article in full below.  The article includes a interesting analysis of inflation trends in China, but the most important takeaway is that the Chinese surge is not an isolated event, but a continuum of trends that began almost forty years ago, first with Japan’s export boom, then with the Korean, Malaysian and Taiwanese Miracles and more recently with the strength of the Chinese manufacturing economy.  These are all part of a global movement to equalization of economic opportunity.

Far from dragging down the American economy, China’s boom is better viewed as the extension of trends that started more than 200 years ago when Samuel Slater (unfortunately no relation) memorized the technology developed in England for mechanization of the textile industry and brought it to the U. S.  Andrew Jackson gave Slater credit as being the Father of the American Industrial Revolution.  Of course today the shoe is on the other foot and he would more likely be branded as an intellectual property pirate.

Over time the seat of textile manufacturing moved from New England to the American South and eventually on to China.  It would be hard to argue that, over the longer term, New York or Boston has suffered as a result of the shift in their regional economies from strength in clothing and … read the rest

Categories: Economic Growth, Economic Stimulus, Economics, Globalization, Innovation

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January Video Newsletter

Posted on January 26, 2012

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Inequality Debate Based on Bad Data

Posted on December 19, 2011

America is stumbling toward one of the most important decisions it has made in decades: how to bring our financial accounts back to a sustainable balance.  Due to a lack of perspective on tax policy over time, the political decision makers and the media have accepted misleading data with regard to an assumed increase in inequality of income as the primary framework for the debate.

With tax receipts at historic lows and expenditures heading for the stratosphere, no rational observer doubts that this decision will entail a combination of both spending cuts and tax hikes.  Republican rhetoric aside, the real question on the tax side of the debate is how these tax increases will be structured.  I am increasingly concerned that Congress will make a huge mistake that will penalize the mid-sized businesses, i.e. growing companies with 50 to 500 employees, that serve as the backbone of American productivity and that are the only hope for domestic jobs growth.

Let’s start with a bit of history from my personal experience, first as a business and tax lawyer and for twenty-eight years as an investment banker serving entrepreneurial businesses in M&A and arranging business financings.  When I started in practice, essentially all substantial businesses with which we worked were structured as C Corporations.  A typical client might be a manufacturer with 100 plus employees, revenue of $10 million plus and pre-tax profits of $1-2 million.  The owner often took a surprisingly small salary, say $100-125,000, paid a small amount of personal expenses from the business and retained the rest of the company’s profits in the corporation.

As a result of changes in federal tax law and the parallel development of Limited Liability Corporations (LLCs), a major shift from C-Corporations to pass-through entities began in the middle 1980s.  To demonstrate how dramatic this shift has been, … read the rest

Categories: Banks, Economics, Inequality, Innovation, Taxes

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James Mawson – Publisher of Global Corporate Venturing

Posted on February 8, 2011


It has become increasingly clear that many large  enterprises are not very good at innovation.  The chart below, courtesy of Robert Ackerman, Founder of Allegis Capital, in the February 2011 issue of Global Corporate Venturing, shows that the share of U. S. Industrial R&D investment of corporations with 25,000 or more employees declined from 70.7% in 1981 to 37.6% in 2005.  During the same period the R&D share of companies with 1000 or fewer employees increased from 4.4% to 24.1%.


This clearly supports the primary Capital Matters theme that future jobs growth will come from small and medium sized privately held businesses.  But where will the capital come from to fund these businesses?

James Mawson has created an innovative new publication called Global Corporate Venturing which is built on two theses which may help answer this question.  Mawson believes that global corporations have learned that smaller companies have advantages in innovation.  He sees this knowledge playing out in two related trends:

  1. Even with today’s resurgence, IPO markets are a dim reflection of past glories.  As a result both venture capitalists and private equity firms increasingly recognize that they must depend on acquisitions of portfolio companies by larger strategic firms as the only realistic exit for most investments.  Increasingly strategic investment/acquisition has become a critical element in such firms’ growth paths as these larger entities control customer bases critical to the smaller firms’ success.
  2. The larger strategic entities are increasingly investing in early stage entities, often through formal internal venture capital organizations, to provide a window into new technologies and access to entrepreneurial talent.

Mawson estimates that there are now over 500 corporate venture capital organizations around the world.  The largest of these, Intel Corporations venture capital arm, invests $1 billion per year in smaller firms.  And the pace appears to be accelerating; … read the rest