"I have taken all knowledge to be my province."

Charity Event in Santo Domingo, Medellin

2012-01-24T06:48:00.009-05:00

On Monday, I was pleased to lead a charity event at a local school in Santo Domingo, a neighborhood in Medellin that in recent years was a hotbed of violence by right-wing paramilitary groups along with other urban gangs and drug traffickers.

Yuxi Pacific donated 20 laptop computers, along with educational software, to the school and allowed all Colombian-based employees a day of holiday to participate in volunteer work with the school.

More than 20 of our employees accepted the challenge and helped configure those computers, set up the network and routers, spend time with the teachers, and most important, teach the children.

I could not be more proud of our company and our staff today.

Yuxi Pacific has had a tremendously successful 2011 and we are off to a quick start in 2012. But as noted recently by Elizabeth Warren, companies cannot achieve that success without the support of the community. In that context, it's the responsibility of corporations to give something back.

Poverty can only be reversed through education. We have seen that time and time again in nations lift themselves up through education that facilitates a cycle of entrepreneurship, small business, jobs and even better education. We've unfortunately also seen the reverse in once great nations such as Venezuela and Nicaragua, where leaders have broken the cycle through extreme leftist policies that have wreaked havoc upon the education system and created an endless cycle of poverty.

I cannot think of a better donation than the gift of education.

I grew up in a working-class family and my parents scraped together enough money for my first computer, a Commodore 64, when I was only 11. That computer changed my life in a profound way. If these computers can make that difference in the life of only one of these children, it's worth 100x the donation that we made today.

As entrepreneurs, it is our responsibility to ensure that everyone wins when a business is successful - the owners who shouldered the risk, the employees who contributed their time, and the local community which both directly and indirectly supports those businesses.

DITA or DocBook? Vote "None of the Above" !

2011-12-30T09:28:00.004-05:00

For the past two years there has been a ranging debate among our customers between DITA and DocBook as the XML standard for storage of book content (note: NLM seems more universally accepted among the STM community).

In this debate, DocBook is the incumbent and has been a de-facto standard for more than a decade. DocBook is defined by a RELAX NG schema, with a very mature community and tools including conversion to various other XML formats and HTML.

DITA is the newcomer. DITA (Darwin Information Typing Architecture) is an emerging standard that was approved only in 2005 but has gained momentum because of its extensibility. DITA content uses topic items, each of which are generic enough to map to existing definitions.

But maybe the best XML standard is right in front of us? In fact, you are looking at it right now in this blog.

XHTML has universally been accepted as the standard for online publishing. XHTML can be natively displayed by all major browsers. It is the format supported natively within eBook formats such as EPUB and MOBI. XHTML has excellent support for MathML, linking, and re-use.

There are more than 25,000 international publishers and the majority of these are, in fact, not debating DITA vs DocBook. But they ARE converting to EPUB. As such, while the debate rages on among the world's major publishers, most of the rest of the world's publishers continue to push forward with conversion to XHTML format by way of EPUB.

Implicitly, then, XHTML is already becoming the de-facto standard.

5 Things You May Not Know About Medellin

2011-11-10T07:16:00.006-05:00

It has been 6-months since we opened our Latin American headquarters in Medellin, Colombia and I could not be more thrilled with our team. The confluence of the quality of talent, government support, low cost of living and English-language ability has made this city an ideal location for the high-tech sector.

With that context, I thought that I would create a fun blog entry today and list five more things that you may not know about the city of Medellin.

1. Medellin has more parks per square meter within the city limits than any other city in Latin America. These include several beautiful open spaces, some with rivers, in the mountains, and many set squarely in the middle of the city complete with nearby Museums and great restaurants.

2. The tap water in Medellin is the cleanest in all of Latin America. Bottled water does not sell in Medellin because most people can and do drink right from the tap. In fact, more generally, Medellin is a very clean city.

3. Medellin is home to several microbreweries, including the fantastic 3 Cordilleras. Tours are available and, for a fee of about $5 US dollars, you can get 5 free pints of top notch beer. As a world traveler, I would put the beer from 3 Cordilleras on par with some of the world's best in Germany and England.

4. Medellin is famous as the "City of Eternal Spring", with year-round temperatures between 65F and 85F. However, just outside the city are some beautiful locations and activities. Horseback riding, hand gliding, hiking and other great outdoors activities. Sante Fe de Antioquioa is only two hours driving and has a warmer climate, complete with all-inclusive hotels, pools and spas.

5. Medellin is home to the Feria de las Flores, a week-long event each July/August featuring parades, and of course a beautiful display of flowers.

This list, of course, does not tell the tale. The city is one with friendly people, great restaurants and nightlife, a beautiful climate, and a set of unique characteristics that make this a fabulous travel destination for business or leisure.

EPUB 3: Blu-Ray for eBooks

2011-10-17T07:36:00.006-04:00

We had another great conference in Frankfurt this month for the Frankfurt Book Fair 2011. I was thrilled to see the size of the audience for my presentation about novel uses of EPUB - and I see it as paramount that we continue to educate publishers about the EPUB standard and additional ways it can be leveraged in their workflows.

Of the first 6 visitors to our booth on Wednesday, 4 were from Latin America. In all, we received visits from Brazil, Argentina, Chile and Mexico. Clearly Latin American publishers are moving forward aggressively with digital publishing initiatives and I am excited to visit Argentina this Spring for the Buenos Aires International Book Fair.

One of the great things about these Book Fairs is the opportunity to listen to publishers.

During one such conversation, the Director of Research and Development at one of our publishing customers in France likened the changes in the EPUB 3.0 standard to what Blu-Ray has done for home movies. EPUB 3.0, in his opinion, will be used to allow publishers to embed special features into books, insight from the author, audio, and other unique items that allow users to dig even deeper into the genre in which they are reading. I believe this analogy plays very well and I'm excited to start creating EPUB 3.0 titles in the next few months.

New Web Site

2011-09-21T11:43:00.003-04:00

This week, I am proud to roll out our new web site, which brings forth a new layout and better access to information about our products and services. We have also launched the site in Spanish, as we are rapidly expanding our services into Latin America.

Over the past 7 years, Yuxi Pacific has serviced dozens of publishers to help them generate new revenue from their existing content through deployment of cutting edge technology. We have assisted publishers in deploying new content management solutions, moving their titles not only to print but to eBooks for wider dissemination.

Our customers are creating custom packages of their existing content for re-sale into specific verticals, image banks to bring forth the rich digital assets within their archives, subscription research databases, and much more.

The new Yuxi web site has very specific examples of these opportunities and I hope our customers will take the time to read these, as well as some of our case studies. Let's brainstorm together about how we can leverage the power of your content to bring forth new revenue, better knowledge dissemination and innovative new products!

eBook Sales Sour

2011-08-26T11:49:00.002-04:00

An astounding 114 million eBooks were sold in 2010, an amazing increase over the previous year, and more than 30 million eReaders will be sold this year.

Clearly the digital revolution in publishing continues. Perhaps we can call it the "Metallic Revolution".

Conversion to eBooks is more about a one-time cost. It means publishers changing their workflows to be more content centric, with central storage and the ability to publish into container formats that support HTML, PDF, eBooks, subscription research sites, and more.

This revolution is not about eBooks. It is about leveraging existing content to create new revenue.

Vive la revolución!

The Great Firewall is not kind to Google

2011-08-14T09:45:00.002-04:00

Is Google blocked in China? Not officially. But using it there is an exercise in frustration. That's my experience, just back from three weeks in Shanghai.

Of course, Google Plus is blocked, along with similar social media tools such as Facebook, Twitter, and Blogspot. Skype is a redirect to Tom, a government-owned conglomerate which has backdoors to spy on the local populace.

But the instability of Google within China was staggering. Chronic page failures manifested on virtually every other click, with the familiar "Connection reset by peer" message common to firewall foul play. After a failure, all Google pages will fail to load for about 30 seconds before being ready again.

Access to GMail was equally frustrating.

Now there is talk in China of authorities using a "white list" to allow sites to function within China's borders rather than a "black list" to block specific sites. One must wonder how long the local populace will continue to tolerate such a direct affront to their personal liberty.

The treatment (inflation) is worse than the disease (deflation)

2011-07-20T10:51:00.006-04:00

In the early part of this new century, the United States started to spiral into deflation. This was the result of a series of bubbles created throughout the latter part of the previous century, enabled through loose lending standards. When these bubbles burst, and consumers were unable to request new money (loans) from banks, the amount of dollars in circulation started to decrease. Deflation is a terrible problem that induces asset destruction and results in severe hardship.

To combat this, Ben Bernanke and the US federal government worked in concert to support a series of inherently inflationary quantitive easing steps. However, as we are discovering now, the treatment is worse than the disease.

The inflation created by the United States has been exported to all the world economies, and that includes third world countries which are popular outsourcing destinations. This inflation has been exported in three ways:

1) Purchase of assets in these external countries, resulting in "hot money" inflows that are converted into local currency and dumped into the local markets. More local currency chasing the same products results in inflation.

2) The acceleration of investors de-leveraging from the dollar. For example, with the expected continuing appreciation of foreign currencies (i.e. the continuing decline of the dollar), investors are liquidating their US assets and moving into foreign investment. This is particularly true of sovereign wealth funds. This has only accelerated and exasperated the problem.

3) The rapid decline of the US dollar, which is actually being facilitated by the previous two

As you can see, it is not the US consumers who are being affected by this inflation (yet), but foreign countries.

Ironically, the biggest misunderstanding is the myth that the US government can "print money" and create inflation. In fact, governments have no power to do anything. Governments do not create wealth. Their income is derived from taxes, which is extracted from their citizens. Governments can only transfer wealth.

In the context of recent events, we see that the US government has transferred wealth in both directions in patterns that are as incoherent as the bickering between the political parties. Democrats seek to raise taxes on the wealthiest Americans - which is often times defined as the middle class, and transfer that wealth to lower income brackets through spending programs. Republicans seek to transfer wealth in the opposite direction, from bottom to top, through government bailouts of public entities who mismanaged their finances.

You see? Everybody gets screwed!

Both of these practices, in combination are part of the problem. Government intervention generally facilitates malinvestment and is very damaging to economies.

Why write about this topic in a technology/outsourcing blog? Because these inflationary pressures are hitting the third world with disastrous consequences.

The CPI in China is stated in single digits, but the working poor in China know better. Inflation there has resulted in the cost of basic goods to live - rent, food, gas, to rise to levels that are unaffordable. As those of you who read this blog know, I believe a serious crisis is looming for China in the next 24 months. One that will take most pundits by surprise, but not readers of this blog. China, for their part, are trying to offset this through new rules on the purchase of second and third homes and by raising interest rates. Too little, too late, I'm afraid.

Inflation is causing problems in South America as well, where the Brazilian president warned only last year of "currency wars". The Colombian peso has moved from 2000 pesos to the dollar on January 1 to 1750 as of this writing. That is 12.5% acceleration.

What is sad about all of this is that the inflationary tactics by the Federal Reserve, and the bickering in Washington over how to redistribute wealth, have not actually fixed the problem. Money dumped into the economy has not resolved the core issue, which is that American consumers are tapped out and cannot request any more money. At the end of this horrible inflationary spike, deflation is still looming. Only, this time, the medicine will be even more bitter.

Yuxi Pacific LatAm

2011-07-12T08:39:00.005-04:00

I am proud to announce that Yuxi Pacific has opened our Latin American headquarters in Medellin, Colombia. This initiative fulfills two long-term strategic goals, both bring forth an outsourcing branch in a US timezone and opens the door to for us to reach South American publishers.

The city of Medellin was very attractive to us for a number of reasons.

Investment-friendly environment

The government, through projects such as Proexport Colombia, Ruta-N and Invest in Colombia have made tangible investments in the technology and infrastructure to attract investors. These changes put an emphasis on win-win relationships with investors that provide tax incentives for high-tech companies willing to make an investment into training and stability for the long term.

Strategic location

Medellin is a 4-hour flight from Miami and located in Central Standard Time. This is very important to our customers, who have requested more overlap during US working hours. Opening a branch in Latin America was strategic for other reasons as well. With our recent expansion into the South American market, Yuxi Pacific now has a Spanish-speaking sales and technology force that can connect with our publishing customers and bring solutions that were previously inaccessible.

Deep pool of talented

Of all the Latin American cities we visited, I have been most impressed by the confluence of quality universities and talented technical resources in Medellin. While in China recruiting has been more difficult in recent years, we were able to easily arrange scores of interviews during my visits to Medellin and find talented developers with very relevant work experience.

Low cost of living

It's possible to live in Medellin at a very low cost. In a city where the minimum salary is 550,000 pesos per month ($307), it is possible to both recruit high-quality talent and pay costs that are competitive, if not equal, with China and India.

Favorable currency exchange rate

Though it has strengthened considerably since January, the USD:COP exchange rate currently stands at 1 USD:1786 COP. Over a five year time horizon, the USD:COP is remarkably stable. In June 2008, three years ago, 1 USD:1680. Exchange rates are paramount in choosing an outsourcing destination. Currencies such as the Chinese RMB have conversely seen a slow, steady and controlled rise against the dollar, facilitated through government intervention and pressure from the White House.

Rumors of America's decline are greatly exaggerated

2011-04-25T09:20:00.004-04:00

This morning I was greeted by this headline article on Market Watch, IMF bombshell: Age of America nears end.

The problem, of course, is that this is not what the IMF said at all. It is based upon GDP, which is hardly the sole barometer of what governs a country's financial prowess. As noted in this space previously, and particularly as someone whose operations are nearly entirely based in Greater China, I can tell you candidly that China is in no position to overtake the United States economically within the next 5 years let alone the next 15.

China is plagued by an enormous real estate bubble, a lack of innovation and leadership, an aging populace that must be supported by an unequal distribution of younger workers, high unemployment in rural areas, a lack of social safety net and, perhaps most important of them all, a lack of consumption. Despite these GDP numbers, China is still an export-driven economy with no near-term plan to become one that consumes products.

So sleep well, U.S. citizens. China is much closer to being the next Japan than being the next Great Britain of the 1800's or United States of the 1900's. Of course, this does not guarantee the United States' position as world leader so long as the Federal Reserve continues debasing the currency. But I can assure you, the next successor will not be China.

StartupBus

2011-03-13T16:57:00.004-04:00

Last week, entrepreneurs from throughout the United States embarked on a 48-hour bus trip to Austin together as part of StartupBus. Under intense time pressure, and presumably consumption of both caffeinated and alcoholic beverages of choice, these entrepreneurs formed small teams and conceived new business ideas and pitched them to venture capitalists at the South By Southwest conference in Austin, Texas. Three cheers for American ingenuity!

As a part-time resident of the Naples, Florida area, I have the pleasure to know two of the entrepreneurs on StartupBus Miami, Lu Doan (founder of AgentShield) and Michele Lorito-Chase (founder of Ghost Executive Group). Their pitches are included inline below.

Bookmarks For.TV

Grupii

China poised for serious economic troubles

2011-02-24T02:09:00.006-05:00

I am just back from a three-week visit to China, the country most casual observers see as a red-hot economy that could potentially replace the consumer engine of the United States. As most of you know, I have been visiting China regularly for nearly a decade. What I am seeing now, however, is very troubling.

New construction has continued, but at a slower pace. Construction seems to have moved from the tier-1 and tier-2 cities into the countryside, with vast technology parks being constructed on the far outskirts of cities and additional construction in tier-3 cities such as Hefei in central China.

As construction continues, existing properties lay dormant. In Shanghai's Pudong district, I saw vast swaths of condominiums and villas unoccupied, swallowed up by rich investors hoping for a fast return. Technology parks lay empty with officials trying desperately to entice foreign and domestic firms with incentives - often rent free, to relocate their operations.

As the price of housing has skyrocketed, most ordinary Chinese are unable to buy properties. In an attempt to cool down the market, central and regional governments have enacted a series of restrictions on buying secondary properties. They have raised interest rates on loans and increased the reserve ratios required by banks.

Ask most Chinese and they still remain adamant that the hot real estate market will continue to rise indefinitely. There is a population issue in China, they say. There is not enough housing.

As an American, this should sound all too familiar. Where have we seen this nightmare before? China is playing through a repeat of the United States recent housing boom, with Shanghai, Beijing, Dalian and Guangzhou playing the well known parts of South Florida, Arizona, California and Las Vegas, of course. Clearly, the West's view of China is heavily distorted.

On top of this is the inflation problem. There is been a reported 20% increase in labor costs in China over just the past 6 months, and as Ben Bernanke continues to print additional dollars it is China who is left to absorb the burden. One secondary goal of this "economic stimulus" may be to put pressure on the Chinese to revalue their currency. The Chinese are having none of it, with exporters claiming even another 3% rise will put them out of business.

I have seen what has been dubbed as economic progress and am having none of it. China's economy is poised for major problems and the real estate market is poised for a downturn - perhaps even a rapid collapse.

It is worth asking the question, what caused this mess?

The easy answer is greed, investors looking to make quick money by borrowing money that they do not have to bid up prices, buying second, third and even fourth properties and trying to flip them quickly. But we are well past that. In the timeline, China is well past 2005 - into 2007, with most property owners now holding properties rather than selling them, unsatisfied with their returns. This has thusly resulted in the large inventory that continues to grow even now with overbuilding.

But the easy answer is not necessarily the right one. When the United States' economy slowed down, China compensated by spending government money and loosening bank reserve ratios. This resulted in a flood of RMB into the market and an overvaluation of assets.

While most ordinary Chinese may not be aware how serious the problem is, I can assure you that the central government is. But they are trapped between the proverbial rock and a hard place. Any slowdown in construction will cost jobs and create instability in the labor market, and consequently potential instability among the working class. China cannot have that. On the flip side, the larger this bubble grows, the worse the inevitable collapse will be.

Every Chinese economist knows the answer - a revaluation of the Chinese currency and creation of a domestic market for Chinese goods. But we are still years - perhaps decades - away from any such remedy.

China is being squeezed between the prospect of rapid inflation of living costs and deflation of property values and the equity markets and a working class populace that has tasted middle class luxuries and can never go back. The result is not going to be good - either for China or for the world. Most observers, the same ones who see China as the next world superpower, may be surprised when such events unfold in the coming months and years. I, for one, will not be.

EPUB: Not just for eBooks?

2010-12-11T09:49:00.004-05:00

As more publishers recognize the need to distribute their titles on eBook platforms, there has been a rush to convert titles into EPUB standard format. EBook readers offer a unique opportunity, particularly for small and medium sized publishers, broadening readership to new audiences and enabling a one-time cost of conversion to sell many times without the cost of print and distribution.

The result has been widespread conversion of titles into EPUB format throughout publishing organizations worldwide, often facilitated through external offshore conversion vendors. As the universally accepted standard for eBooks, EPUB is now utilized on more than 40 eBook readers including the Apple iPad, Amazon Kindle, Sony eBook Reader and Barnes and Noble Nook.

Once this conversion process is complete, publishers are often left with yet another binary conversion format to manage and store within their archives. On the surface, EPUB seems to be an inflexible format that is difficult to modify, a delivery format at the end of a publishing workflow. However, this is far from accurate.

Publishing Workflow Without XML?

Interestingly enough, most publishers have chosen not to incur the costs of converting to XML as an intermediary or storage format for their titles. These publishers have made a strategic decision to instead convert their titles directly to EPUB from other electronic mediums, such as InDesign, PDF or Microsoft Word, and for older titles through a complex scanning process involving the physical title itself.

Over the past decade, XML has become widely accepted in the publishing community as the best means for content interchange and storage. Though there remains disagreement regarding specific XML Schema choices and implementations among publishers, it is generally acknowledged that a content-centric workflow with XML as the storage medium within the repository provides the most agile approach to facilitate discovery, transformation and delivery of content.

That being the case, conversion to EPUB without XML as an intermediary would seem to be a short-sited decision for publishers. Not so fast!

Is XML Really the Solution?

Publishing organizations have spent considerable capital over the past decade to convert to XML in order to enjoy the benefits of an electronic representation of their content that minimizes the complexity of conversion in interchange.

XML itself, however, is a generic term that represents any number of of disparate DTDs and W3C XML Schemas.

One could argue then that this investment has been unsuccessful, as many publishers continue to struggle in imposing constraints upon their own content. These publishers often develop custom DTDs and W3C XML Schemas as the representation that limit interchange because external consumers do not have software or transformation rules to interpret these custom schemas.

Forward-thinking XML proponents have encouraged adoptation of standards, such as DITA, DocBook and NLM, each imposing more generic constraints. Unfortunately, these schemas are often too generic to accurately represent content. Additionally, because a standard has not emerged throughout the publishing industry, publishers spent considerable resources and investment in conversion only to find that there are no consumers able to natively process these standards.

Perhaps most importantly, editorial teams have had to undergo training to understand this XML and learn to create and edit it. Over the years, XML editorial software has emerged and evolved to help enable publishers to modify this XML and impose constraints upon editing. This represents a further investment into training and software licenses.

Finally, while touted as a content storage format to facilitate interchange, XML itself is simply a container format. Most often, it is not read and processed by consumers without applied transformation. Web sites, eBook readers, mobile devices, and other containers cannot natively read and process XML without transformation as part of the delivery process.

Given that context, is XML still a wise investment? Yes, it is, but perhaps there is already a standard that can be utilized to meet the stated goals of the publishing community.

A Peek Inside EPUB

EPUB itself is a compressed zip file, comprised of XHTML, CSS, images and two ancillary metadata files. It is, therefore, simply a markup language derived from XML and HTML. Most eBook readers are in fact analogous to web browsers, capable of reading this markup language and rendering it within the reader.

Publishers who have converted their content into EPUB format have in fact already converted it to XML.

XHTML is an operational standard, a hybrid approach between utilizing a readable format that can be modified by editors and an interpreted markup language that can be rendered by eBook readers, web browsers and mobile devices.

EPUB: More than an eBook Format

Publishers who have converted their content to EPUB format will find that they can now enjoy the benefits of XML. With the proper tools, EPUB content can be loaded into a native XML repository such that content can be mined and delivered. Within a native XML database, such as MarkLogic or eXist, or a native XML CMS such as RSuite CMS, it can be managed down to the chapter and section level, then compiled into on-the-fly derivative products.

Why not use EPUB as your standard?

European market for eBooks grows

2010-11-01T20:15:00.006-04:00

Forgive me father for I have sinned, it has been 4 months since my last blog post!

In all seriousness, my absence in this space is a reflection of just how incredibly busy Yuxi has been over the past several months. My recent travels have taken me to Shanghai, Guangzhou, Hong Kong, Paris, Frankfurt, Miami and New York City.

Among the more interesting revelations from my travels, while in Paris I learned that the French government has plans in the works to subsidize the creation of eBooks. Always keen to promote French culture and language, several major publishers are now in talks with the French government to receive subsidies to cover the costs of these conversions to EPUB standard format.

At Yuxi Pacific, to my surprise, Europe has represented our largest market for EPUB conversion services. European publishers clearly see the ROI in distributing content on eBook platforms and reaching new audiences.

Among those European publishers, Norway has surprisingly represented one of our biggest markets. Norwegian publishers have been stymied in recent years from launching eBooks onto a domestic platform, as a dispute with the federal government over taxation has held up launch. This dispute just about resolved, there has been a mad rush to conversion over the past several months.

Spanish publishers are also seeing the opportunity. While in Frankfurt, I met with many Spanish publishers, all with seemingly the same message. By getting their Spanish-language titles into eBook format, the market for their books to reach new audiences. According to the census that took place in 2000, the Spanish language in the United States is used by more than 34 million people as a common language at work and at home.

All in all, it has been a hectic four months, but I will endeavor to post more and deeper insights into the ever changing publishing industry in the coming weeks.

Second leg down for the US dollar

2010-07-02T20:22:00.003-04:00

Just over a week after announcing that the RMB-USD peg will again be lifted, the US dollar has taken another step down against the Chinese RMB. As of this morning, one USD bought 6.76 RMB. That is more than a 1% decline in 10 days.

How low can it go? We're not sure. China is wrestling against two very contradictory forces, the need to protect export-driven employment and the need to prevent inflation.

Months ago, I speculated that the Chinese government might resolve the problem with a one-time, massive double-digit revaluation. I still believe that this might have been the better recipe. Instead, the current scenario is sure to invite hot money speculation into the country, flooding the Chinese with even more unwanted US dollars.

Despite public comments to the contrary, the Chinese economy is facing serious challenges.

As the RMB appreciates, it will put even more pressure on the export-driven economy, reduce margins and potentially increase unemployment. The situation could have been even worse if China had not initiated its own massive stimulus plan and decreased the required reserve ratio for banks at the start of the global recession.

This, of course, brings us to the second side of the proverbial knife. Inflation. Loose lending practices in China over the past two years have resulted in mountains of bad loans, failed projects and a run-up in real estate prices. Aware of the problem, China has once again increased the reserve ratio for banks, tightened lending standards and put severe restrictions on borrowing to buy properties.

As we move forward into what could be an interesting late Summer/early Fall, it will be interesting to see how the confluence of these two actions impact Chinese businesses and, more importantly, the Chinese consumer.

Yuxi's MRDC App Re-branded as Zoom Deposit!

2010-04-29T12:19:00.003-04:00

Yuxi Pacific's recently announced Mobile Remote Deposit Capture platform for iPhone has been officially re-branded as Zoom Deposit. Check out our new promotional video:

Getting Your Books into the new iBook Store

2010-04-10T13:09:00.003-04:00

According to LibreDigital, Apple has already sold over 300,000 iPads, and analysts estimate that as many as 10 million iPads will be sold this year. According to the web site, a recent study by comScore found that 37 percent of potential iPad owners said it is likely that they will read books on the device.

Now then, you are a publisher, and want to broaden your reach and get your titles up on the new Apple iBook Store. How is this done?

Apple currently only allows publishers to bring their books into the iBook store through an official Apple partner. The full partner list can be found here.

In my humble opinion, the best aggregation partner is Bibliocore, who charges only a one-time fee and takes no revenue share on sales. The disadvantage is that the books must be converted into EPUB format. However given the growing importance of EPUB, it should be a part of your existing workflow already, right?

Yuxi Pacific working with Spanish-language publishers

2010-04-09T10:41:00.004-04:00

According to the 2000 US census, there are more than 34 million people in the United States who use Spanish as their primary language either at home or in the work place. That is a staggering number, and a real opportunity for publishing and media companies who produce Spanish-language content.

Today, I am proud to announce that our firm will officially begin working with publishers across Latin and South America to facilitate conversion of their titles into EPUB format. This will, in turn, assist in getting them into the EBook marketplace in North America. We have been doing this unofficially for several months, but hope to open this initiative to hundreds of publishers across the continent.

If you are a publisher of Spanish-language content, please have a look at our brochure, or call us to speak with one of our Spanish-language conversion specialists at +1 610.572.2865. As always, publishers interested in our EPUB conversion services can email us as ebooks at yuxipacific.com.

Bringing China to North America - in books, of course

2010-03-28T19:09:00.004-04:00

I am back after an almost 4-week trip to the Middle Kingdom, where I was unable to blog due to the Great Firewall of China. It was, however, another fantastic trip.

On this visit, our focus was meeting Chinese publishers and publishing groups to facilitate the forthcoming launch of the Yuxi Publications scholarly database. We signed several new contracts (press release coming) and found genuine excitement among publishers who see North America as an untapped market for their titles.

Among publishers in China, security is paramount. They have been reluctant to embrace eBooks and on-line subscription database because, despite the ability to generate new revenue, there is concerns about piracy. EPUB, the current standard for eBooks, does not really have a standard for security - this is enforced at the client level.

For the subscription databases, I spent time pitching Vuzit's DocuPub Platform, of which I am a proponent. Vuzit's technology allows publishers to control access to documents at a very granular level, prevent unwanted copy and printing, and get detailed view statics. It's truly groundbreaking and I expect widespread adoption.

I expect the EPUB format itself to continue its evolution even more rapidly now that Apple has announced that the iPad will use it.

eBooks represents the second largest application category in the App Store

2010-02-08T16:01:00.003-05:00

From Flurry via the Really Strategies blog, there are now more than 3 million users of eBook applications in the United States.

More telling, however, is the rate of adoption. There has been a whopping 300% growth in eBook users between April and July, and according to Apptism, eBooks represents the second largest application category in the App Store. That is 12% of Total Apps in the store!

Consider that 3 million users is still a mere 1% of the population, and that the iPad has not even launched. All signs point to widespread and accelerated use of eBooks in the coming weeks and months.

Amazon's Kindle Books Have A Real Market

2010-02-05T11:34:00.000-05:00

Courtesy of a tweet from Ann Michael, I learned today that Amazon Now Sells 6 Kindle Books for Every 10 Physical Books When Both Editions Are Available.

If true, and the source is none other than Amazon CEO Jeff Bezos, that is big news. It means that E-Book acceptance, after years of struggle, is finally here. As noted in my previous blog entry, the widespread availability and acceptance of E-Books opens the door to additional revenue for publishers agile enough to add E-Book creation to their existing workflow.

Market potential drives R&D. This revelation from Amazon makes clear that there is market opportunity and need.

Apple's iPad will Revolutionize Publishing

2010-01-28T11:49:00.008-05:00

"The Apple iPad will Revolutionize Publishing". This is a bold statement, but I believe it to be a true statement. Let me tell you why.

It was October 23, 2001 when a small device with a funny name was released, the "iPod", allowing consumers to find, purchase, transfer, sort, store and of course listen to their music.

There were doubters. Why, I could already buy an MP3 player, what makes the iPod so special? Can the music industry embrace this technology, given their concerns for intellectual property? Will anyone actually pay real money to buy music on-line?

Of course, we all know how the story ends. Moving music into the digital realm shifted the paradigm, applying all of the great things that we love about technology to music. The term "Play List" was invented, and we all became iPod addicts. We could now sort and mix our music, throw away all those CDs and hold thousands of our albums directly on a device that fit into the palm of our hands. Our music, indeed our full music library, now travels with us everywhere.

Yes, it has been quite a revolution. The iPod changed everything. And as Mark Twain once said, "History does not repeat itself, but it does rhyme".

Yesterday, more than 8 years later, Apple announced the forthcoming release of the "iPad". Again, as before, it is being roundly criticized both in terms of functionality and for the name.

I firmly believe that this device will be the catalyst for consumers worldwide to move their book collection digital, revolutionizing how we read, sort, bookmark and share books. The parallels are uncanny.

The iPad will succeed in revolutionizing publishing in the same way that the iPod revolutionized the music industry. It will succeed where others have failed, or at least in the case of Kindle, met only moderate success.

Are there concerns? Of course. Though the iPad display is beautiful, it is big. Will you read a book in the train on your iPad when you might now read a small novel? It's expensive. It cannot multi-task, so I cannot listen to my music while reading my favorite book. All are indeed design flaws that Apple will surely evolve.

But, publishing companies that are agile enough to add EPUB creation to their workflow, along with DRM technology to protect their assets, will be first-to-market in manufacturing new revenue. Subsequently, everyone else will be pulled forward by gravity.

These are exciting times, indeed.

Yuxi presents at Mobile Mid-Atlantic

2010-01-26T09:23:00.002-05:00

Yesterday, it was my pleasure to introduce our fledgling Mobile Remote Deposit Capture app for iPhone at the Mobile Mid-Atlantic Demo conference. Our application was selected as one of 10 finalists.

Though we did not win the competition (that honor went to Venmo), I was excited about the response we received from those in both the banking and investment community.

The value proposition for the application could not be simpler. As my colleague, Paul Eisenberg, told spectators, "Have a check? Have an iPhone? Make a deposit".

For banking customers, avoid the lines and save time and money by depositing your check instantaneously without driving to the bank or ATM. As long as you are within range of a cell phone tower, you can make a deposit.

For banks, here is a first-to-market opportunity to attract and retain tech-savvy customers, associate your brand with Apple, reduce costs and differentiate.

I am energized today after the fantastic reception at the conference. Thank you to everyone who voted for us and showed your support!

Yuxi Pacific Announces Mobile Remote Deposit Capture for iPhone

2010-01-07T15:57:00.002-05:00

I am thrilled to announce our latest venture into the iPhone market, a Mobile Remote Deposit Capture application that allows banking customers to deposit checks from their mobile device without ever making a trip to the bank. The full news release can be found here.

Unlike the traditional iPhone development model, we developed this software generically with templates. It is being offered to financial institutions, with customized logo, color palette and marketing copy.

This latest initiative provides a first-to-market opportunity for small to medium sized financial institutions. This is an opportunity for banks to attract and retain tech-savvy customers, associate themselves with the Apple brand, and offer a viable alternative to larger banks.

In the bigger picture, however, the move to depositing checks remotely was inevitable. USAA Bank, who launched a similar application in the 4th quarter of last year, saw 270,000 members install the iPhone application within the first 6 weeks of launch. In the first week that USAA Bank offered remote deposit capture by iPhone, more than $7 million deposits were made.

Clearly, this is the wave of the future. I am proud and excited to offer this application to financial institutions nationwide!

Announcing Luther's List!

2010-01-01T15:24:00.005-05:00

Today, my good friend and business partner Luther Andal announced the beta launch of Luther's List, a website created to help consumers find and share information about deals, discounts and sales.

Luther's List is the first and only consumer website with a truly local focus, a category-based browse and search site that lets users find, share and review deals from local area stores and restaurants. The success of sites such as Fat Wallet and Retail Me Not show that there is a significant market for consumers who seek better ways to pinch pennies and get the most for their dollar.

And what better timing could there be for such a product? Belts are tightening in this long economic downturn. Luther's List allows consumers to be opportunistic in finding deals, waiting for the best local deals to manifest and then striking when a local deal emerges. It is intended leverage the collective resources of consumers nationwide, all motivated to help each other find the best deals and discounts available.

The website has been launched in "limited beta". Go ahead and give it a whirl.

China enacts new 5.4% tax on property flipping

2009-12-29T09:00:00.004-05:00

With a relaxation in lending standards and recent government stimulus, China's property market has again started to heat up. Both methods were intended to boost the consumer economy and help pull the country out of the worldwide recession, and they have indeed had that effect.

As with any nation, relaxing of lending standards leads to an inflation in the money supply, and thus mal-investment and speculation. In an attempt to combat this, China enacted a new law, passed only in December and going into effect as of January 2010, imposing a 5.4% tax on any property sold that was held for less than 5 years.

Will it work? Time will tell, but it has left some owners scrambling to pay all tax and close out their property sales before the end of 2009.

Like in the United States, the real problem is a loose monetary policy. Due to the economic crisis, and the slow down in Western economies, China had no choice but to use government stimulus to boost the domestic economy. And as we all know, the only long term solution to this problem is domestic consumer demand, something that has remained elusive in the Middle Kingdom.

Yuxi's first iPhone application!

2009-11-23T23:09:00.002-05:00

I am absolutely ecstatic to announce the launch of our first of many new iPhone applications in the iTunes store today. RAD Estimator is a tool for radiology professionals to evaluate assets and research the value of equipment in today’s marketplace. It went live today and will sell for $19.99.

Earlier this year, Yuxi Pacific began soliciting local area entrepreneurs for their ideas and the response has been overwhelming. Now, in concert with our partners, Yuxi Pacific has almost a dozen iPhone applications in development and scheduled for launch in the 4th quarter of 2009 and 1st quarter of 2010.

The word-of-mouth on blogs is that iPhone app development is not practical. Most firms charge between $125/hr and $200/hr for iPhone app development, and considering the average app takes 6 weeks to develop, that is about $7,500.

However, Yuxi has changed the game with the off-shore and partnership model. We have received and evaluated hundreds of submissions. For those with viable business models, we build them at cost - which, because our staff is located in China, is often times less than $2,000. Yuxi and the partner share ownership of the application, and revenue is split. It's a win-win all around.

Automating Ontology Creation

2009-10-29T18:03:00.003-04:00

While the idea of using ontologies to enhance data mining capabilities is now widely accepted in the publishing community, there is still widespread disagreement about ontology creation and maintenance. All too often, publishers resort to large scale, manual ontology projects that are expensive and quickly become impossible to maintain. Automated solutions present challenges as well, often providing confusing and unintuitive results.

At this year's On-Line Information 2009 conference in London, England, I will be giving a presentation that will discuss some of the common hurdles that must be cleared in development of ontologies, and how a publisher’s own content can be used to automate the ontology creation process and create an authoritative, vetted ontology at low cost.

If you will be attending the exhibition area of the conference, please join me for this presentation. The presentation will be held on Thursday 3rd December, 12.45-13.15. If you plan to attend, please RSVP to info@yuxipacific.com as seating is limited.

Please also stop by our stand! We will be in stand X14.

Yuxi Pacific to Exhibit at the Frankfurt Book Fair

2009-09-17T10:55:00.004-04:00

I am pleased to announce that Yuxi Pacific, and our sister organization Yuxi Publications, will be exhibiting at this year's Frankfurt Book Fair! Please stop by our booth, located in Hall 6, Booth #B917.

In addition to promoting our products and services, this conference will serve as the launching pad for the new Yuxi Publications On-Line Database!

The Yuxi Publications On-Line Database (YPOD) is the premier on-line collection of Chinese reference books, newspapers and journals. With more than 15 terabytes of combined Chinese language content dating back to the middle of the 19th century, YPOD is the most comprehensive and complete index of Chinese language publications available.

Yuxi Publication’s exclusive on-line database includes newspapers, reference books and journals. This comprehensive library includes such titles as the prestigious China People’s Daily (1949-2009), the Shun Pao (1872-1949), the Encyclopedia of China, Literature of Mao Zedong and much more…

If you will be at the Book Fair, please contact me to make an appointment and come see us!

Preparing for iPhone in China

2009-07-03T13:33:00.002-04:00

Though the much anticipated release of the iPhone in China this past May never materialized, it is universally recognized as inevitable. When asked about getting the iPhone into China, Cook said that Apple would like to start selling there within the next year and are working on doing so.

There are surprisingly few Chinese iPhone applications, or iPhone applications geared specifically toward Chinese users, though the number is growing. Companies that create these applications now will be ahead of the curve once the launch takes place.

With that said, Yuxi Pacific Group will soon announce the formation of the Yuxi Pacific Mobile business unit. The goal of this new business unit will be nothing less than to become the largest creator and distributor of iPhone applications for the Chinese marketplace.

Look forward to a press release and more details in the coming weeks...

Reed Smoot and Willis Hawley, living in infamy

2009-05-07T09:25:00.002-04:00

On Wednesday, Yuxi Pacific Group was a sponsor of the Doing Business With China conference, held at Temple University. The event was informative, if not intended primarily for a younger audience of potential entrepreneurs seeking to capitalize on business opportunities with China.

Mr. Bing Xu spoke at the event, the Chinese Consulate General in New York City. The speech rehashed much of the same tone that we have heard from Beijing in recent months. As Chinese government officials often do, he raised the Smoot-Hawley Act as an example of the dangers of protectionism.

Ironically, of course, in the 1920's and 1930's it was the United States playing the role that China plays today. China has taken tremendous steps in the past 15 years to reduce trade barriers as part of their entry into the WTO. However most obviously, what has not changed, is the government controlled RMB-USD exchange rate, despite a US account surplus that should dictate otherwise.

Changes are coming soon, however. With the massive amount of dollars being printed by President Obama, in addition to the relaxed lending standards by Chinese banks, China is about to face a massive inflation problem.

Technology keeps making us closer

2009-04-04T16:09:00.004-04:00

As if we needed more evidence of technology making us closer, Skype announced this week the launch of the new Skype for iPhone application. It has been wildly popular (3 downloads per second just in the past several days) and it is free.

Why does this matter in a blog about China? Well, it also happens to coincide with AT&T's recent announcement to allow sales of the iPhone without a contract. We promptly bought one at Yuxi Pacific, and shipped it to China.

While our purpose for buying the iPhone is in support of several related iPhone application development projects, the Skype application will now make the iPhone usable as a phone without a jailbreak program (China Mobile does not have an agreement with Apple). Now, anyone with a wireless connection (they are ubiquitous within urban areas in China) and the Skype app can use an iPhone, and make free Skype-to-Skype calls.

Philadelphia Entrepreneurs

2009-03-12T17:00:00.004-04:00

Last night, I attended the Philly Startup Leaders happy hour event at the Science Center in Philadelphia. I was very impressed by the large number of attendees and the vibrant atmosphere.

I, of course, was representing Yuxi Pacific Group at the event. Yuxi's offering to early-stage companies is compelling. We offer companies the ability to quickly build out product concepts and take them to market internationally at a relatively low cost. In addition, our firm makes strategic investments (manifest both through discounted development services and cash investment) into early-stage companies with innovative ideas and a clear path to profitability.

We will be attending the Entrepreneur Expo in early April. This event will feature local area entrepreneurs, showcasing their work in a trade-show like setting.

Also during last night's event, Steven Welsh from DreamIt Ventures provided details about their application process, which ends today. I found the concept to be fascinating. Accepted applicants receive between $10K and $25K in funding, mentoring, office space and embark on a three month program to prove their business.

Are Taxonomies Dead?

2008-12-29T12:56:00.002-05:00

There is an interesting blog entry on the Really Strategies blog today regarding the perception that taxonomies are increasingly being replaced by clouds of metadata tags that do not belong to a single taxonomy or ontology.

I have cross-posted my commentary, below. There is no doubt that a user-driven, cloud-based approach to metadata tagging has great value. But, to use a cliche, rumors of the death of taxonomies have been greatly exaggerated.

In my opinion, this definitely depends upon the context in which the user is browsing/searching content. Personalized metadata tagging is a way of tagging and identifying content that has already been discovered. However, unified controlled vocabularies are necessary for undiscovered content.

Another perspective is that taxonomies and ontologies provide value because of their relationships. Sure, a map of Botswana could be tagged with "Ohio" because it is relevant to a particular user, but that only provides discoverability through searches that use the word "Ohio". This is the difference between metadata keyword tagging and metadata concepts tagging.

Ontologies allow more abstract searches. Take, for example, the case where the map of Botswana is tagged with the keyword "Botswana" or "Africa". Because it is a type "map" in an ontology, search terms such as "Kalahari Desert" and "Limpopo River" should also produce this result. You could also make the argument that search terms which match the Botswana culture should also produce this result.

It is not possible to allow flat metadata word tagging and then to layer in relationships, because the English language is riddled with multi-use words and context is of critical importance.

In my opinion, the multi-tiered relationships that taxonomies and ontologies allow users to leverage in search are difficult to replace. The biggest challenge, and the reason why publishers have sought alternatives, is building reliable and unified taxonomies that have enough topical coverage. There are several ways to adress this, but it is clearly an ongoing challenge.

Parallels between China 2008 and USA 1925

2008-12-26T12:01:00.000-05:00

One Perspective, is China 2008 the United States of 1925? Let us consider...

In 1919, following the signing of the Versailles Treaty, Germany was in a tough position. As a result of their defeat in WW1, they were obligated to pay war reparations to the Allied powers, equivalent to 15 million lbs of gold. Of course, Germany was a defeated nation, and they did not have nearly that much, nor the capacity to obtain it. So they resorted to printing more Marks, buying the gold on the open market and providing it to the Allies.

This created hyperinflation. We have all seen the history books, pictures of ordinary Germans carrying buckets of German Marks to the store to buy a loaf of bread. What is not often told is that the Germans were buying this gold from the Allied powers, who then used those German Marks to buy Germany's raw materials. As hyperinflate hit, Germany's exports became more and more inexpensive.

This, in turn, fueled what became known as the Roaring 20's. At that time, the United States was an export nation, the supply engine of the world. The USA leveraged these raw German materials to create goods and services, and the world borrowed and bought them.

However, the ponzi scheme could not go on forever. By 1924, hyperinflation in Germany eventually caused a collapse as maximum inflation was reached, and was followed (as inflation always is) by hyperdeflation in the value of the German Mark. This deflation sent shockwaves out that eventually spread into the macroeconomy.

In 1926, the collapse hit the United States and collapsed the real estate markets, then quickly led into the stock markets. By 1929, as world demand collapsed, the United States found no customers for its products and fell into the Great Depression, which lasted from 1929 to well into the 1930's.

There are eerie parallels betwen the China of 2008 and the United States of the mid-1920's. China has artificially fixed their currency, has massive man power and industrial capacity, and has become the supply engine of the world economy. The United States is playing the role of Germany, running enormous trade deficits and printing money, this time not to buy gold but to consume more goods than it creates.

Just as in 1924, China (US) is accepting goods from the United States (Germany) in exchange for a weakening US Dollar (German Marks).

Just as in 1924, China (US) is using those dollars to buy raw materials (such as oil, copper, concrete) to fuel an industrial boom.

Just as in 1924, the United States (Germany) has reached maximum inflation potential, and we have entered a serious deflationary cycle.

Just as in the 1920's, this deflation began with the real estate sector, spreading into the stock markets and destroying billions of dollars in wealth.

And, just as in 1926, this has caused deflation in the supply nation (China) and exposed their vulnerability to having an export-driven economy.

So, if history can be used as a lesson, how does China navigate out of this mess? The easy answer is domestic consumption and cutting the lifeline of export reliance. That is easier said than done.

Bernanke plays an economic trump card against China

2008-12-20T13:52:00.005-05:00

Ben Bernanke shocked the Chinese leadership this week by lowering the Fed's key interest rate to nearly 0%, throwing China's plan for a short-term controlled depreciation into serious doubt. By reducing the interest rate to historic lows, and more importantly commiting the Fed to printing more dollars and buying troubled securities, the Fed is forcing dollar depreciation.

Until now, the billions of dollars pumped into banks has not resulted in new money creation. In order for new dollars to come into existence, they need to be requested from consumers, and U.S. consumers are tapped out.

But Bernanke knows that there are other ways to increase the money supply and get it circulating into the economy. The U.S. government, under the Obama administration, has already committed to borrowing and spending close to 1 trillion dollars.

Now, the ball is back in China's court.

In order to prevent civil unrest and save jobs in the short term, they have committed to depreciating their currency. However, a 0% Fed Funds Rate and trillions of new U.S. dollars has thrown a wrench into this plan. Now, if China does not continue strengthening their currency, if they continue to take in money from the United States in exchange for their exports, they will effectively be importing this inflation. This would wreak havoc in their domestic market.

China has had a basic understanding with the United States. The Federal Reserve Bank will continue to be responsible in new dollar creation, and China will continue to accumulate dollar reserves and buy U.S. treasuries. That tacit agreement appears to now be in jeopardy.

If Bernanke's actions result in a serious crash, or worse civil unrest, in the Chinese domestic markets, China could retaliate by dumping their foreign currency reserves.

Desperate times call for desperate measures, and Bernanke has decided this is worth the risk. Now, the ball is back in China's court. How they respond will have consequencies for the macroeconomy for generations. All we can do is wait.

Race to the Bottom

2008-12-14T13:57:00.002-05:00

As the world faces global deflation, the best chance for a correction is for countries with surpluses to strengthen their currencies, while countries with account deficits see their currency weaken. In this context, the China government's recent decision to weaken their currency in order to preserve GDP growth, as predicted in this space several weeks ago, is quite dangerous.

For the past 5 years, the country has taken steps to increase domestic consumption. Everyone knows that an export-driven economy has left the Chinese vulnerable to the consumption patterns of the West. In the long term, the only sustainable path for China is to increase domestic consumption, strengthen their currency and turn those factories producing mountains of toys for the West into factories producting goods for Chinese consumers.

However, this transformation takes time. The hope was to weather the storm, and sustain growth until a social safety net could be put into place to encourage domestic spending. Unfortunately for China, the worldwide economic recession is damaging their export-driven economy before the transformation could complete.

So China needs more time, and will roll the dice. They will weaken their currency and hope to keep their GDP stable long enough to spur domestic demand. The macroeconomic consequencies of this could be dire. As China weakens its currency, other world economies will need to do the same. This "race to the bottom" has the potential to cause lasting damage, deepen the slump, and turn a sure recession into a possible 1930's style depression.

Chinese RMB Will Weaken

2008-11-30T17:29:00.001-05:00

Last we joined the macroeconomic soap opera, the United States and China were locked in an abusive symbiotic relationship.

The United States, the world's demand engine, consumer economy and debt machine needed to borrow money, a country willing to buy its mounting debt and cheap labor to mask the inflationary effect of all the irresponsible borrowing practices from the financial sector.

China had millions of migrant farmers moving to their urban centers for work, and needed a double-digit growth rate to keep this work force employed, and a weak currency to make said workforce and factories the supply engine of the economy. In order to sustain their artificially weak currency, they were forced to buy debt from the United States in the form of U.S. treasuries that it knows Uncle Sam will never repay.

For a long time, the United States benefited from this policy. Inflation in asset prices caused a real estate and stock market boom (commodities as well, unfortunately for the poor and retired). U.S. consumers benefited through artificially low prices from Walmart, thus hiding the inflation in the price of consumer goods.

China, too, benefited from this relationship. On a visit to Guangzhou on any given day, one can play the "count the cranes" game from the airport to the hotel. The flood of U.S. dollar investment meant modernization of factories, brilliant new skyscrapers, a burgeoning middle class and a more educated workforce.

Oh, there were nasty aspects to this relationship that everyone wanted to forget. The U.S. national debt grew uncontrollably during the past 8 years as the U.S. government, like its consumers, had more expenses than revenue. China saw the flood of U.S. dollars into the country create inflation, and the price of rice, gasoline, and pork skyrocketed (yes, there were other contributing factors as well - like the growing wealth of Chinese citizens). China also digested an ever increasing amount of U.S. foreign reserves, and now hold the dubious title of the United States largest creditor.

For some reason, most economics (Stephen Roach excluded) thought this relationship could last forever. It couldn't, and didn't.

The United States, under pressure from labor unions, applied pressure to China to devalue its currency. The USD:RMB rate subsequently fell from 8.2:1 to 6.82:1 over a three year period. This weakening increased the cost of doing business in China. At first, this cost was absorbed, as profits were quite ridiculous. But as the correction continued, U.S. and Chinese companies alike began to feel the pain. Socialist mandatory vacation and leave policies instituted by the central government in China only made matters worse.

Fast forward to 4th quarter 2008, where the economic recession in the United States and demand destruction, coupled with the stronger RMB, has meant the closure of literally thousands of factories in China. China now has to not only sustain an accelerating amount of borrowing from the United States, but a double-digit growth rate in the face of hundreds of thousands of layoffs across the country.

So, China is faced with two conflicting pressures. On the one hand they have the United States, their economic partner and strategic rival, using all means at their disposal to push for a further strengthening of the RMB and perhaps floating the currency altogether. On the other hand, China faces the prospect of millions of unemployed Chinese workers with idle hands and civil unrest.

Faced with both of those options, which one do you think they will choose?

The choice has been made. Over the next 6 months, China will not only halt the strengthening of its currency, but begin to weaken it. I predict that the Chinese RMB exchange rate will be 7:1 by April 2009. How this will play with the incoming Obama administration remains to be seen. The Chinese are gambling that their leverage in holding U.S. treasuries and USD foreign currency reserves, coupled with the United States' strategic weakness both economically and militarily, will be enough to stifle any thought of protest.

We all eagerly await the result.

Obama gets it

2008-11-24T07:10:00.003-05:00

“The news this week has only reinforced the fact that we are facing an economic crisis of historic proportions,” he said. “We now risk falling into a deflationary spiral that could increase our massive debt even further.”

The preceding quote is from none other than President-Elect Obama in the New York Times, 11/24/2008.

This is not a political blog, and anyone who knows me is clear that I am a true Libertarian and Absolute Capitalist without political leanings to either of the two major parties in the United States. Nonetheless, I was astonished by the frankness of the preceding quote. It is a true assessment of exactly where we are today.

Let's be clear, the proposed $200 billion dollar stimulus package (it may be double that size once it gets through the U.S. Congress) is not about creating infrastructure in the United States, boosting the middle class, or improving our standard of living. It is about preventing a deflationary spiral that will, as Ambrose Evans-Pritchard said in September, make the Great Depression look like a walk in the park.

It is important to keep everything in the proper context. Since the USA went off the gold-standard in the 70's, and particularly within the past 8 years, the world economy has been driven by borrowing and new money creation.

New money is created when consumers request it, by borrowing on existing assets. For example, when one has a $250,000 house and borrows $200,000 to spend, that is $200,000 of new money that enters the economy. As new money gets pumped into the economy, GDP grows and asset prices inflate. It becomes an inflationary shell game, where he who makes the most wins.

Alas, all good things must come to an end, and eventually inflation reaches its maximum potential as consumers reach maximum borrowing capability. Sure, there are ways to keep the game running longer - allowing consumers to borrow in non-existent assets (so-called "liar loans"), stimulus packages, tax cuts, decreasing the Fed funds rate (it will soon be 0%), even the extraordinary measure of writing checks and mailing to every American citizen.

This is where we stand, friends. We have reached maximum inflation, and now the bubble must deflate. President-Elect Obama is not the only one who will attempt to reinflate through government spending as all of the world's major powers scramble to prevent a deflationary collapse.

In inflation, he who makes the most money wins. In deflation, he who loses the least money wins. Those of you looking for a bottom in the market, who think we are at the end, are misinformed. We are at the leading edge of a steep decline, a deflationary hangover that must be commensurate with the partying we have done for the past 25 years. For years, we have been a nation of consumers and not savers. We spent all our cash, then borrowed everything we could, then borrowed from future generations. Finally, now the credit card is maxed out.

Obama understands this. The stimulus packages, both those passed over the past few months and those that are coming, may result in permanent damage to the US dollar. Unfortunately, there is very little choice.

Bank Failures, Bailouts, and the US Dollar

2008-09-29T09:24:00.002-04:00

Lost in all the talk of spending $700 billion dollars of U.S. taxpayer money is a narrative of how we got to this point and where we will go from here. Make no mistake, this bailout is a complete paradigm shift not seen since prior to World War 2, and the consequences will be felt for generations in the macroeconomy.

So, how did we get here, and who is to blame? It's not terribly complicated, and there is plenty of blame to go around.

The U.S. government and American people consumed more than they made and borrowed the difference. While the U.S. government can create money out of thin air via their printing press, American citizens do not have this luxury. As Americans began to default on their loans, banks lost ridiculous amounts of money, and that has caused them to go into default themselves.

Don't buy the argument that this has anything to do with the credit system. This is a symptom of the core problem, but not the central problem itself. Pumping $700 billion into the economy to buy worthless assets is the equivalent to taking morphine for a gunshot wound. It's a temporary measure, it treats the pain but not the source, and if it makes us ignore the wound, it will make the situation even worse.

There is no inflating ourselves out of this problem. Deflation and a market correction is the only inevitable answer.

The problem started after the dot com bubble burst in April 2000. Economic recessions are natural phenomenon, they are market events that deflate artificially inflated assets and cleanse the market of failed business models. In April 2000, there were plenty of businesses funded with speculative capital, investors looking for a quick entry and exit without looking at the fundamentals of their portfolio.

When the Internet bubble burst, the U.S. economy began to slide into a recession. Rather than accept a mild recession, and spurred by the terrorist attacks of September 2001, the Federal Reserve bank began lowering interest rates to historic levels. The intention of this was to encourage citizens and businesses to borrow money, boost consumer spending and keep the economy growing.

The strategy was worked, but it was short-sited. Real incomes did not increase, and Americans continued to spend on credit. Banks and foreign investors were all too eager to lend money to those who could not repay it, looking for short term asset inflation and a quick buck.

To quote George Will on This Week with George Stephanopoulos, "For as long as I can remember, the slogan in this town has been ... the Federal government ought to behave more like families, because families balance their budgets. It turns out the families looked around and said, let's behave more like government!"

Here we are, in 2008, with an average of $12,000 of credit card debt per household. There are 105 billion credit cards in the United States, nearly 9 cards for each citizen over the age of 18. Houshold debt now represents 139% of household income.

The American people, and their government, consumed more than they created, borrowed themselves into bankrupcy, and will now need to deal with a lower standard of living. There can be no more inflation to get us out of this mess.

So how does all of this relate to a blog about China?

China, of course, has financed the United States' ever-growing account deficit. While many people, principally Morgan Stanley's Stephen Roach, have sounded the alarm bells for years about the sustainability of such a model, it continued unabated.

Though often called a symbiatic relationship, it was China who benefited the most.

The capital inflows to China were used to fund major infrastructure projects, including the country's new super highway system, new rail lines, modern factories, construction, and perhaps most important of all, a new generation of Chinese educated with modern skills ready to compete in the 21st century economy.

The United States, in turn, bought billions of dollars worth of plastic toys, cheap furniture, and assorted Walmart accessories, and borrowed themselves into debt that will take generations to repay. Or will it?

No, as witnessed by the imminent government bailout, the United States will never actually repay this debt. Instead, the treasury will print this money, pumping 700 billion (and likely) dollars into the economy, debasing the currency. The Chinese will find it increasingly difficult to hold so much American debt and sustain their loose currency peg as the dollar is sunk into oblivion.

So, indeed, we have an imminent paradigm shift.

As an American, it is with great regret when I say that the post World War 2 lifestyle that most Americans have enjoyed was destroyed in only 8 short years. Americans will soon learn to live without excess, to save what they earn and live with less. The US dollar will lose its reserve currency status, likely replaced by the Euro, Chinese RMB, a basket of currencies, or perhaps a new currency that has not yet been forged.

This, my friends, is the sober reality. I hope that everyone is aware of just what has transpired, who is responsible, and that all of you adjust your portfolios accordingly.

RSuite Users' Conference

2008-09-06T23:05:00.002-04:00

I am proud to announce that Yuxi Pacific Group will be a sponsor of the RSuite Users' Conference on October 14th and 15th. The RSuite CMS is a content management system built specifically for publishers with complex XML sharing and re-use needs.

On July 3rd, Yuxi Pacific announced a strategic partnership with Really Strategies. This relationship has included several consulting engagements between Really Strategies and Yuxi Pacific immediately, but an announcement pertaining to a deeper partnership agreement will be forthcoming at the conference.

Coverage of the Beijing Olympics

2008-08-24T14:00:00.000-04:00

As mentioned in a recent blog post, my recent trip to China, from August 3rd through August 19th, coincided with the Beijing Olympics. Though I was 1200 miles south of Beijing, CCTV provided full and complete coverage of the games and it was played in every restaurant, bar, and eatery in the city.

While I was there, seemingly every hour (or perhaps more frequently), CCTV would proudly post the overall rankings, showing China right at the top. The measure that they used was the number of gold medals. This seemed reasonable enough to me.

Seeing as English is my first language, sometime before I left I went to the NBC web site and stumbled upon the medal rankings. It was, you guessed it, ranked by total medals where the USA was the leader. This also seems like a reasonable ranking - those silvers and bronzes must count for something! So, I turned my computer to face a Chinese colleague and showed her the ranking and she was quite surprised!

Then, when I returned to the USA, there were a few more surprises. First, I heard about the lip synching incident. Then, I was hit by many Americans who accused the Chinese of cheating in gymnastics by lying about the age of their gymnasts. As you might imagine, there was absolutely no negative coverage of the games while I was in China.

Two countries, two different perspectives.

China on the World Stage

2008-08-09T01:17:00.000-04:00

Yesterday evening, on 08/08/08, I found myself at a restaurant in downtown Guangzhou watching the opening ceremonies of the Olympic games in Beijing.

It is indeed a fascinating time to be in China, and the air is filled with an electricity that everyone can feel. I cannot express in words the great pride that the people of China feel today, as they stand side by side, gathered in front of their televisions, watching this event unfold. The Olympics are more than just the games, though they matter too. This is about China on the national stage, as a nation that wants to be recognized as an emerging power.

Being here at this time, and also having been in this city during the catastrophic earthquake a few months ago, it's impossible not to see how this country has fundamentally changed.

Economic impact of the "One Child Policy"

2008-07-25T14:48:00.000-04:00

In the late 1970's, in order to control population growth, the People's Republic of China enacted the "one child policy". This policy, which remains in force today, inflicts strict penalties and fines upon citizens who conceive more than one child.

As it was instituted in the late 1970's, children of the "one-child policy" era are now almost 30 years old. This is a complete generation of families with only a single child. The term "brother", "sister", and later even "aunt" and "uncle" now are nothing but memories of a previous generation.

I do not wish to debate the policy in this space, though I do have some rather strong feelings about it. Rather, I'd like to discuss one little-known impact of the policy - the unwillingness of children to stray too far from their parents.

Chinese culture is very family-centric. By Western standards, Chinese parents exert enormous control over their children throughout their lives. Traditionally, as parents age they are cared for by these children. Now, of course, they must rely on their only child to care for them.

Last month, a very talented developer on our team informed us that he will be returning to his hometown in a distant province. This man was 30 years old, fluent in English with international experience, and a strong technology background. Yet he will leave, take a lower paying job and leave behind a promising career to be close to and care for his aging parents, and marry someone from his hometown.

Increasingly, young Chinese are willing to sacrifice their career and their salary to stay close to home and be with their parents. While in years past, the best talent was always found in Shanghai, Beijing, and Guangzhou, talented staff can now be found in some of the less well known regions of China, like Changsha and Chengdu.

This reverse "brain drain", from China's largest cities back to home provinces can be directly attributed to the "one child policy". Smart companies will consider opening offices further inland in China, to take advantage of lower wages and an eager talent pool.

Commodities and Demand Destruction

2008-06-26T14:53:00.003-04:00

There are many reasons that oil is priced at almost $140/barrel today, but one primary factor takes us back to our first lesson in Economics 101: Supply and Demand. MSNBC's World Blog posted very timely commentary about China, and their insatiable demand for oil supplies.

DEMAND SIDE OF OIL ISSUE: 1.3 BILLION CHINESE

In fact, many in the West have asked for the exact situation that we find ourselves in now - an increase in living standards for poor, third world countries. The miracle of globalization has made this a reality, as month by month the standard of living in China gets better.

The cold reality, however, is that there is simply not enough natural resources on this planet to support the U.S. standard of living across the globe. When there are 87 million barrels of oil being supplied to the world, and the demand is greater than the supply, the equation is simple. Prices must rise. And so they have.

People continue to ask, when will the price of oil stop rising? The answer again takes us back to that Economics 101 class. The price of oil will continue to rise until we experience demand destruction.

In a global economy, the standard of living is linked directly to the value of your currency. If you are Chinese, and your currency rises by 20% in two years, that fiat money in your pocket now buys 20% more from imported goods than it did. If you are an American, where the dollar has fallen 40% against the Euro since 2001 (thank you Ben Bernanke), then your dollars buy 40% less than they did. This is sometimes manifest as inflation, but that's another problem for a different discussion.

So, speaking of reality, I have only one question. When demand destruction comes for oil, and as sure as the sun rises it will, whose demand will be destroyed? The United States or China?

China Displacing India in Outsourcing Enterprises

2008-06-01T21:21:00.001-04:00

One interesting dynamic in the software industry over the past year has been the rapid pace of which Chinese off-shore development companies are displacing their Indian counterparts.

The advantages of working with an Indian company seem self-evident. The cost to employ a consultant in India is 25% that of a consultant in the United States. The personnel speak English, are well educated, and can help your company work on a 24-hour development cycle.

So it's a simple decision, right? Why are so many companies choosing China instead?

The key driver is the talent pool in India, which is significantly depleted. In the late 1990's, India was a gold mine for IT talent, as companies rushed to set up off-shore operations. But that boon for India has created a supply and demand problem.

It is now very difficult to attract talent in India. Good talent now costs more, as the high level of demand has increased the salaries that Indian IT developers can fetch. This has led directly to low retention rates, as IT developers routinely switch companies seemingly every 12 months to fetch higher salaries.

In fact, the salaries in India have become so competitive that many Indian companies are outsourcing their work to China! Last week, a well respected Indian software outsourcing company contacted my firm to see if we could take over some of their projects.

China does not have any of these problems. In China, the situation is reversed and it is a "buyer's market". The talent pool is rich, and the rates are very cost effective. Recruiting talent out of the top ten universities in China simply requires an effective recruiting network and a knowledge of the landscape.

It helps that the Chinese government is now subsidizing this business. In May, Chairman Hu announced that China would actively work (read: provide funding) with off-shore software development firms to grow the industry.

Just as Chinese companies have accepted bargain basement rates from U.S. companies to build their manufacturing base, they will develop off-shore development centers that help invest their younger population learn the high technology skills they need to be successful. It is a win-win situation.

Moment of Silence

2008-05-20T21:20:00.000-04:00

On Monday, May 15th all of China stood silent in memory of the tens of thousands of people killed in the devastating earthquake in Sichuan province. I was in Guangzhou that day, conducting planning operations with the Yuxi Pacific team.

Guangzhou is a city of over 10 million people, bigger than the populations of New York City and Philadelphia combined. Normally the bustling heart of the Guangdong province, for three full minutes time stood still. For three minutes you could hear a pin drop in our office. There we stood, heads bowed, windows wide open, with no sound but the wind.

Following the period of silence, all cars, trains and boats throughout the country blared their horns. It was a surreal moment, for sure. An announcement was read aloud, then one by one each member of the team walked by the donation basket and gave what they could to help the victims.

To say that China has come together around this tragic event would be an understatement. People from throughout the country, indeed the world, rushed to Sichuan province to help rescue victims and aid the recovery effort. I went to the center of Guangzhou, where there was a concert held and donations collected. Students went block by block collecting money, and people gave what they had.

Estimates now stand at close to 100,000 dead, and more still at risk from aftershocks. The television has had 24/7 coverage, with the latest headlines scrolling on a ticker at the bottom of the screen. For me, it was the same helpless feeling that I had just after 9/11.

The manner in which China has handled this tragedy is admirable. Rather than attempting to cover it up, the government has been forthright with the world. The result has been an outpouring of sympathy and assistance, some of which has likely help save those who might not otherwise have made it. China has allowed foreign aid workers to bring their equipment and work on their soil, including workers from bitter enemy Japan.

The change that has come to China over the past 10 years is self-evident, indeed.

7.0 on the Richter Scale

2008-04-07T21:35:00.005-04:00

As I speak, the US Dollar is teetering at a 1:7 ratio with the Chinese RMB. Less than 18 months ago, the ratio was 1:8. Much of the fall of the dollar has taken place since January of 2008. On New Year's Day, one U.S. dollar bought 7.3 Chinese RMB.

It has been an amazing fall from grace for the dollar recently, not just against the Chinese RMB but against all currencies. However the recent acceleration in USD depreciation is continuing to have widescale macroeconomic implications.

The low Chinese RMB has been a boon to both the U.S. and Chinese economies. For China, foreign investment has modernized their factories and provided a better education for their people. The United States, for their part, has been able to use artificially cheap Chinese imports to offset inflation that would otherwise be pounding the U.S. consumer.

This symbiotic relationship may be on the verge of ending, for both parties. The chairman of the Federal Reserve, Ben Bernanke, has been printing and exporting dollars at an alarming level, manifested chiefly by lowering the Fed funds rate and a binge of borrowing US dollars into existence. This has exported inflation to the rest of the world, and China in particular. China now has no choice but to continue to accelerate the appreciation of their currency.

In my view, this is the end of one relationship and the beginning of another. As China's currency appreciates, so will the buying power of its 1.6 billion people. On every visit that I make to China, the difference is noticable. Each time, I see more affluence, more entrepreneurs, and more opportunity.

In the coming years, China will no longer be known as the origin of cheap manufacturing, but as a producer of high quality goods. Their modernized factories, now churning out cheap toys for American consumers, will soon produce goods that can be consumed by their domestic population.

Perhaps more importantly, though, U.S. entrepreneurs who are ahead of the curve will soon have access to a new population of consumers. On recent visits to China, I have been approached by Chinese investors, looking to buy into U.S. software startups with their new found strong RMB. Companies are modernizing and buying U.S. software for their operations.

That 7.0 RMB might as well be a 7.0 on the Richter scale, as we are on the verge of a major paradigm shift. After the U.S. awakes from the coming recession, U.S. based software companies who opened new sales channels into the Chinese marketplace will stand to benefit greatly from the new economic paradigm.

Automating topical classification

2007-02-20T23:47:00.000-05:00

Imagine this scenario. You've built (or bought) and maintain a comprehensive controlled vocabulary or taxonomy in a specific subject area. That means that you have either spent time, effort and money employing a subject area expert to meticulously create a topical hierarchy that suits the needs of your content set, or you have spent money buying and customizing one of the many off-the-shelf taxonomies, like those provided by Intellisophic, that best suit your knowledge area.

The problem is, you're not even half done. Now you need to apply this topical metadata to your ever growing content set, and invest in tools that utilize this metadata for search, retrieval and export of your content. Did I also neglect to mention that taxonomies need maintenance to adjust for changing events in the subject area?

It might be difficult to believe, but this is just the scenario that many publishers find themselves in after plunging head first into a taxonomy project without first considering the long term resource needs of such an effort. For large taxonomies and content sets, the manual assignment of topical metadata is a significant and ongoing resource issue. As such, many publishers are turning to automatic classification technology to automate their classification needs.

There are two core choices for classification technology, rules-based and statistical matching.

Rules-based classification uses simple Boolean rules to assign topical metadata. This is often a simplistic rule such as whether a series of words, chosen by an editor or matching on the title alone, are contained anywhere in the given piece of content. This can sometimes be enhanced by creating additional rules about how frequently the term must appear in the content, normalized against the content size.

Statistical classification uses a vector of terms that are chosen by an off-the-shelf technology component that are statistically relevant based upon a series of training documents. This has the advantage of providing a specific context to the matching criteria. Some taxonomy providers provide their controlled vocabularies with the statistical matching rules already built-in.

Both statistical and rules-based classification engines use user defined thresholds as the final deciding factor about whether or not a piece of topical metadata will be assigned. Some also use ISO 2788 thesauri to expand matching terms to synonyms, related, and broader/narrower terms.

So which method is right for you?

Rules-based classification is remarkably accurate for scientific, medical and pharmacological taxonomies that have very distinct matching terms. Topic titles like "Abscisic Acid" or "Hydroxypalmitate" which are contained in content are very likely to be a good topical match. The downsides to using rules-based classification are the time investment necessary to create the matching rules and the false negatives, or missed assignments, due to very rigid matching terms.

While imperfect, statistical classification is a better fit for general knowledge, historical, current events and financial taxonomies. Topic titles like "Aaron" could refer to the biblical Aaron, Hank Aaron, Aaron Spelling or even Aaron's Bicycle Repair! Statistical classification uses the context provided from the original training set to tailor results very specifically to your content set. This technology is likely to produce false positives, but if tuned properly can be editor-assisted and effective.

Though research has been ongoing for decades in this area, the explosion of digital content and the growing power of CPUs has led to a renaissance of sorts in this technology area. We can only expect the technology to get better with greater investment and wider use.

Naive about native XML

2006-12-29T02:35:00.000-05:00

So, you want to take large volumes of XML content and store it in a native XML database? Well, you have plenty of choices, or so it would seem. These days, everyone seems to be calling themselves a "native" XML database. When we embarked upon building the RSuite CMS over a native XML database, one couldn't help but ask the question: what does the term "native" mean, exactly? The answer is, it depends who you ask.

Oracle, for example, boasts the Oracle XMLDB as a native XML database. To them, being a native XML database is about supporting XQuery compilation and execution inside an existing RDBMS. That's a fair definition, I suppose, and Oracle is not the only one to use this basic definition. With the release of SQL Server 2005, Microsoft also claimed the mantle of being able to natively support XML. However, once again, SQL Server's XQuery capabilities can only be used against XML data stored in columns of the xml type.

But how does one harness the power of XQuery when your XML data is chunked separately into rows and columns in an RDBMS? Not only does chunking XML data into rows and tables create a management nightmare, it limits the use of hierarchical queries which take advantage of XML's strengths. Even worse, it can mean major performance problems later when the user needs to reconstitute XML data scattered across the database into a document for export.

There is another definition of what the word "native" should mean in a native XML database. That is to store the XML in its natural state and create separate indexes that store critical information about elements and the relationship between nodes. This allows for scalable query processing over the content. Mark Logic and the eXist XML database have separate implementations, but follow this basic model.

Storing content natively allows the flexibility of changing your DTD or schema without requiring a corresponding change in the RDBMS schema. In fact, both Mark Logic and eXist provide schema-less storage of XML, so one does not necessarily need to load a DTD at all. Content can be queried and repackaged with a few simple XQuery calls, because the content was not torn apart during the load step. Finally, functions that are inherent to the XQuery language, such as ancestor or descendant queries, have access to the entire tree-structure rather than being impeded by what is stored in a single RDBMS table or row.

Is the latter definition better than the former? Neither definition or approach is necessarily wrong, and each are advantagous to different content models. If your content is relational by nature and you can't live without join tables and foreign keys, you should probably be using a relational database. But if your content is XML, processing and storing your XML natively is the way to go.