Business

From an unprecedented number of start-ups to a rising class of billion-dollar giants going global, high technology companies in China have a dramatically increasing need for effective leadership. Since 1999, founders have led 24 Chinese firms to IPOs on NASDAQ, ranging from portals such as Sina and AsiaInfo in 2000 to mobile hardware makers and service providers like Hurray!, Vimicro, and Techfaith in 2005.

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Against the backdrop of export-led growth of some economies -- most notably China and India -- human development issues in Asia tend to be overlooked. The 2006 report Trade on Human Terms, produced by the United Nations Development Programme, finds that trade has contributed to further increasing the inequality both between and within countries. In addition, it warns that many of the region's open economies, particularly the East Asian success stories, are creating far fewer jobs, especially for youth and women, and experiencing "jobless growth." Many of the developing countries in the Asia-Pacific are now net importers of agricultural products; food security has thus become an emerging issue.

While Asia and the Pacific have embraced globalization, the regions poor are being left behind and will be so without determined action by governments. The report recommends that those countries adopt bold new policies that harness trade and economic growth, suggesting an "eight-point agenda" that includes investing for competitiveness; adopting strategic trade policies; restoring a focus on agriculture; combating jobless growth; and others.

Dr. Hafiz A. Pasha will discuss the findings and recommendations of this ground-breaking and thoughtful report which can be viewed at:

Asia - Pacific Human Development Report 2006

Dr. Hafiz A. Pasha is UN assistant secretary-general and UNDP assistant administrator and director of the Regional Bureau for Asia and the Pacific. He has served as the commerce and trade minister, minister for finance and economic affairs, deputy chairman of the Planning Commission, and education minister in three government administrations in Pakistan.

Prior to his government work, Dr. Pasha was the vice chancellor/president of the University of Karachi and dean and director of the Institute of Business Administration in Karachi, Pakistan.

Dr. Pasha has published extensively in the fields of trade, public finance, social development, and poverty reduction. He has an M.A. from Cambridge University and a Ph.D. from Stanford University.

Pasha was recently awarded the Congressional Medal of Achievement by the Philippines Congress in recognition of his work on poverty reduction, achievement of the Millennium Development Goals (MDGs) by the Asia-Pacific countries and his role in leading UNDP's response to the 2004 tsunami tragedy.

Philippines Conference Room

Hafiz A. Pasha UN Assistant Secretary General and Director of the Regional Bureau for Asia and the Pacific Speaker The United Nations Development Programme
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Shorenstein APARC
Stanford University
Encina Hall E301 MC 6055
Stanford, CA 94305-6055

(650) 725-0121 (650) 723-6530
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SPRIE Visiting Scholar
lin_bouwen.jpg PhD

Bou-Wen Lin is Professor of Institute of Technology Management at National Tsing Hua University, Taiwan. He gained his doctorate in Management of Technology in 1998 from Rensselaer Polytechnic Institute, Troy, New York. He is a teacher and writer in the fields of international technology transfer, new product development, real options, and strategic management of technology.

Lin is author of articles in several journals including IEEE Transactions on Engineering Management, Journal of Business Research, R&D Management, International Journal of Human Resources Management, and Technological Forecasting and Social Change. His current research interests include technology valuation, interfirm collaboration, knowledge management in manufacturing firms, and new venture management.

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The National Security Agency is a riddle wrapped in a mystery inside a code. Secrets lie within. Located in Fort Meade, Md., it dwarfs the CIA. Its budget is black, unknown. And, most disturbing of all, it is the world's largest employer of mathematicians.

One of its secrets, recently revealed, is that it's monitoring millions of phone calls to learn just who was calling whom. (Technically, only telephone numbers are being recorded, but you don't have to be Q from James Bond to get a name from a number.) This information was being used to determine who might be a terrorist.

Legal or not, the spying program isn't worth violating our civil liberties for. The information one can glean will hardly help us win the war on terror.

With the NSA data, you can draw a picture with nodes or dots representing individuals, and lines between nodes if one person has called another. Mathematicians who work with pictures like this are called graph theorists. The field of social network analysis deals with trying to determine information about a group from such a graph, such as who the key players are or who the cell leaders might be.

But even when you know everyone in the graph is a terrorist, graphs don't contain information about the order or hierarchy of the cell. Researchers look instead for graph features like centrality: They try to identify nodes that are connected to a lot of other nodes, like spokes around the hub of a bicycle wheel. Monterey Naval Postgraduate School researcher Ted Lewis, in his textbook "Critical Infrastructure Protection," defines a critical node to be such a central hub.

There are two problems. First, the central player might not be as important as the hub metaphor suggests. Jafar Adibi of the University of Southern California looked at e-mail traffic between Enron employees before Enron collapsed, and drew the graph. He found that if you naively analyzed the graph, you could mistakenly conclude that one of the central players was CEO Ken Lay's ... secretary. But that wasn't the person who ran the company into the ground.

Second, as the journal Studies in Conflict and Terrorism reported in 2003, you can kill all the central players in a terrorist cell and still leave the cell with a complete chain of command -- still capable of carrying out a devastating attack.

Expert Kathleen Carley of Carnegie Mellon was able to correctly predict -- twice -- who would take over Hamas when its leaders were assassinated, and her analysis used detailed information about the individuals in the organization, not just what anonymous nodes were linked with what. The moral is that the graph theory approach is inadequate. For useful results, it's important to utilize the lattice theory approach, which takes into account order and hierarchy.

The other questionable aspect of the NSA spying program is that it seeks to work out who might be a terrorist based on their calling patterns. While I agree that anyone calling 1 (800) AL-QAEDA is probably a terrorist, guilt by association is not just bad law, it's bad mathematics, for three reasons.

The simplest reason is that we're all connected. Not in the Haight-Ashbury/Timothy Leary/late-period-Beatles kind of way, but in the sense of the Kevin Bacon game. Sociologist Stanley Milgram took individuals unknown to each other, separated by a continent, and asked one person to send a package to the other -- but only by sending the package to an individual he or she knew, who could then only send the package to someone he knew, and so on. While Milgram's interpretation of the results has since been questioned, the conclusion that emerged is that it took only six mailings, on average, for each package to reach its intended destination.

For example, President Bush is only three steps away from Osama bin Laden. And terrorist hermits like the Unabomber might be connected only to very few people. So much for guilt by association.

The second reason the NSA methodology is flawed is the concept "strength of weak ties," made famous by Stanford sociologist Mark Granovetter. Robert Spulak of the Joint Special Operations University puts it this way: You might not see your college roommate for 10 years, but if he were to call you up and ask to stay in your apartment, you'd let him. This is the principle under which sleeper cells operate: There is no communication for years. The links between nodes that the NSA is looking for simply might not exist for the real threats.

Formal concept analysis, a branch of lattice theory, helps rectify this situation. Individuals who share many of the same characteristics are grouped together as one node, and links between nodes in this picture, called a concept lattice, indicate that all the members of a certain subgroup, with certain attributes, must also have other attributes. For instance, you might group together people based on what cafés, bookstores and mosques they attend, and then find out that all the people who go to a certain cafe also attend the same mosque (but maybe not vice versa). While this tool has in fact been used by researchers at Los Alamos National Laboratory to sift through hundreds of terrorism-related reports, it's still dangerous to rely on the math.

The NSA data mining is flawed because, as Kennedy and Lincoln buffs know, two people can be a lot alike without being the same person. Even if there is only a 1 in 150 million chance that someone might share the profile of a terrorist suspect, it still means that, in a country the size of the United States, two people might share that profile. One is just minding his own business. The other is Cat Stevens.

This isn't to say mathematicians are useless. In September 2004 -- 10 months before the July 7 bombing of the London Underground -- mathematician Gordon Woo warned that London was a hotbed of jihadist radicalism. But Woo, who works for the Bay Area company Risk Management Solutions, didn't anticipate the bombings using math. He used his knowledge and experience of London, especially the Wood Green area. That's what law enforcement officials should be doing.

As for tracking terrorist financing, it may already be too late. The terrorism of the future, according to mathematician Stefan Schmidt of the Technical University in Dresden, Germany, may be the terrorism of the futures -- when bombs explode, the stock market drops. Schmidt wants to quantify the impact on the market of a terrorist incident. The only people who know when a bomb will explode are the terrorists. By playing the market, they may already have obtained as much money as they need -- in perfectly legitimate ways -- thus stifling Treasury Department efforts to cut off the source of their funding.

Math is just a tool. Used wisely, math can indeed help win the Battle of Britain (by breaking the German codes). But used unwisely -- as seems to be the case in the NSA telephone caper -- your approval rating might just hit an all-time low.

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CISAC faculty member Lawrence M. Wein works at solving mathematical problems posed by potential terrorist attacks.

It's been said that World War I was the chemists' war and World War II the physicists' war, but that World War III is destined to be the mathematicians' war.

With the gravest threat to U.S. security now posed by rogue terrorists who simultaneously hold a grudge and have access to weapons of mass destruction, some of this country's prime human calculators are on the case.

Combatting terrorism not with mortars and missiles but with mathematical models, they intend to prove this theorem: There literally is safety in numbers.

In their vanguard is an amiable Stanford University professor who, by devoting himself to the application of math principles to doomsday scenarios, is beginning to acquire the nickname "Dr. Doom." The attacks of Sept. 11 inspired mathematician Lawrence Wein to channel his expertise into some of the most compelling questions of our time.

He has ciphered the risks of our "woefully inadequate" inspection of container ships, assessed the effectiveness of border-control fingerprint checks to spot terrorists, and performed what may well be the first math analyses of hypothetical botulism, anthrax and smallpox contaminations.

Recall the agitation last year over warnings that the nation's milk supply was vulnerable, based on the calculation that one terrorist with a few grams of botulinum could contaminate a tanker and potentially poison 100,000 gallons of milk? That's just one of many tidings of comfort and joy brought to you by Wein.

Another such upper is that just about 6 percent of containers shipped into U.S. ports will be categorized as suspicious and subjected to tests for a nuclear device, based on a system that relies largely on reporting by the shipper. The rest, Wein noted, "just waltz right into the country without an inspector laying an eye on them."

At Stanford's Graduate School of Business, he teaches a core course in operations, and he says the parallels are strikingly similar: Just as McDonald's needs a well-designed distribution system to get its hamburgers out quickly, so the government needs a well-designed distribution system to get vaccines and antibiotics to citizens who might sicken or die from a bioterror attack. In math lingo, some of these computations rest on "queueing theory" -- the notion that a lot of needy people must line up behind a limited number of distributors.

And what do we do after crunching millions of numbers to arrive at specific prescriptions? Wein has taken on the role of necessary nag to a torpid federal bureaucracy and recalcitrant industries.

In fact, the feds scrambled to try to suppress publication of his damning milk study as a threat to national security -- an argument the journal Proceedings of the National Academy of Sciences rejected before publishing the work.

These days, Wein regularly testifies at congressional hearings, addresses scientific forums and pens op-ed pieces in national newspapers about precisely what the government should be doing -- and where it is falling short.

"I believe my work demonstrates that numbers really matter, and we need to pay attention to what they tell us," said Wein, a critic of the federal government's homeland security failures in key areas, particularly at the ports. "I really don't bring my own personal political views into this -- I would be just as critical of the federal bureaucracy if a Democrat were in the White House.

"Bureaucracy just isn't designed to respond nimbly."

On the other hand, politicians are eager to do something, anything, that might thwart a terror attack or save lives. But in an information vacuum, that makes them easy prey for entrepreneurs hawking all kinds of safety gadgets.

So, much of Wein's math analysis goes beyond documenting threats to assess the most effective, cost-efficient remedies.

Take the milk scare, for example. Wein urged the government to mandate that milk tanks and trucks be locked, that two people be present when it is transferred along each part of the supply chain, and that milk truck drivers use a 15 minute test to detect any toxins. The estimated cost of all this: 2 cents per gallon.

Some other experts disputed Wein's assumptions, and dairy industry groups insisted they already had taken extra steps such as raising pasteurization temperatures to secure the milk supply. They dismissed the scenarios Wein described as "highly unlikely or impossible."

To avoid being victimized by a radioactive device aboard a tanker -- otherwise known as a "poor man's missile" -- he and colleague Stephen Flynn of the Council on Foreign Relations advocate using techniques such as gamma-ray imaging to screen 100 percent of containers. They calculate the cost at $7 per container.

Some of Wein's calculations have translated into real reform.

In 2004, he presented to the White House his findings that the system of collecting only two fingerprints from incoming foreign visitors ran a high risk of missing terrorists because so many prints turned out to be of poor quality. His solution was simple: Take prints from all 10 digits. The government adopted it.

His 2003 research into the most effective response to an anthrax attack prompted pilot programs that are now testing his finding that the best way to widely distribute antibiotics would be by mail carriers, who already go door to door.

Albert Einstein once observed: "As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality."

And sure enough, one of the impediments to fighting terrorists with mathematics is the paucity of hard data.

An anthrax scenario illustrates the point. Estimates of fatalities per kilogram of poisonous agent released vary from a low of zero to a high of 660,000. That's because of variables: the dose required to cause infection, the percentage of people who survive infection, the degree of aerosol dispersion, the density of the population, the environmental stability of the agent and the effectiveness of a public health system response.

As Wein acknowledges, "It's not like we can do massive clinical trials on this."

The trail of what-ifs is so convoluted that in 2002 the National Academy of Sciences cited "an irreducible uncertainly of several orders of magnitude in the number of people who will be infected in an open-air release."

This makes some experts suspicious of anybody's calculations, even from a researcher with a pedigree like Wein's.

"With so much uncertainly surrounding the outcome of a bioweapons attack, it does not make sense to plan extensive biodefense programs when more-certain public threats, particularly those involving nuclear weapons, require attention," argued Allison Macfarlane, research associate in the Science, Technology and Global Security Working Group at MIT.

But Wein is undeterred, and is busy on new assessments. Yet he insists his work has not impaired his ability to sleep soundly.

"People really are much more likely to suffer from cancer than a terrorist attack, but that doesn't merit the same attention," he said. "We should do what makes sense to protect ourselves from both."

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On November 13-14, 2006, the Stanford Project on Regions of Innovation and Entrepreneurship (SPRIE) of Stanford University and the Industrial Technology Research Institute (ITRI) together with the School of Technology Management, National Tsing Hua University, will co-sponsor an invitation-only workshop at Stanford University.

Deadlines and Proposal Submission Guidelines

  • Paper proposals are due by July 31; notification of acceptance will be by Aug. 18; papers are due Oct. 31
  • Papers will be considered for inclusion in the proceedings, which will be published in English by SPRIE.
  • Paper proposals should be 1-2 pages long (single-spaced) and in English; include with your proposal citations of your recent and related publications.
  • Submit your proposal in .pdf format; send via electronic mail with the subject "November workshop proposal" to sprie-stanford@stanford.edu. Be sure your proposal arrives in time for the July 31 deadline or it will likely not be considered!
  • Academic presenters of papers will receive a sum that serves both as an honorarium and as support for travel expenses from the home institution to Stanford. Those whose travel across the Pacific or Atlantic will receive $2,000; those who travel from within the contiguous United States will receive $1,800, and those from the Bay Area will receive $1000; lodging and food will be covered by the organizers. Note that papers with multiple authors only receive one honorarium.
Theme

Leading high tech regions face the challenge of sustaining their competitive position amidst shifts in the global knowledge economy. Their ability to create/re-create their edge depends in large measure on the ability to foster innovation and entrepreneurship--to respond to challenges and opportunities presented by competition and collaboration with rising high tech regions as well as to innovate in technologies, services, processes, strategies and business models. The workshop will concentrate on three topics:

Indicators and Analysis of Regional Innovation and Entrepreneurship

  • What are the core strengths and weaknesses of major high tech regions now facing the challenge of sustainability? How are they evolving? Which indicators best reveal regional attributes and trends and how can we improve the collection of such data?
  • What key factors are determining the development of these regions and how is each region's performance in innovation and/or entrepreneurship?
  • What indicators point to the next stage of development for these regions?
Policies, Strategies, Models
  • How are regions responding to pressing challenges and opportunities? How are regional leaders reinventing strategies, exploring new practices, and developing new models?
  • How effective have government policies (national and local) been in fostering productive high tech regions? What are similarities and differences in these policies across regions/countries?
Global Linkages
  • High tech regions are connected through people, technology and capital, linkages that have become both more important and more complex.
  • How do multinationals, hybrid firms and local firms use linkages of people, technology and capital to enhance their competitive advantage? What new business models have emerged recently?
  • What forces nurture or inhibit these global high tech linkages? What kinds of processes and networks are at play and what is their impact on the vitality and sustainability of regions?

Stauffer Auditorium
Hoover Institution
Stanford University

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Despite its threat of severe consequences, the Bush administration has little leverage to use on North Korea to keep it from testing a long-range missile and few ways to punish the nuclear-armed nation if it proceeds. Daniel C. Sneider, associate director for research at Shorenstein APARC, comments.

WASHINGTON - Despite its threat of severe consequences, the Bush administration has little leverage to use on North Korea to keep it from testing a long-range missile and few ways to punish the nuclear-armed nation if it proceeds.

The United States has no diplomatic or economic ties with North Korea, the rudimentary U.S. missile-defense system is untested in real-world conditions and Pyongyang is regarded as having a right to test missiles, making any American attack to forestall a launch an act of war with potentially explosive consequences.

"The United States could try to shoot down the rocket, but good luck,'' said Wonhyuk Lim of the Brookings Institution, a policy-research organization in Washington.

The dearth of options illustrates the limits of the administration's pre-emption strategy and its need to rely on the cooperation of others -- especially given the strains on the U.S. military from Iraq and Afghanistan -- to contain threats.

Washington hopes that the world's only Stalinist regime will heed demands by the United States, South Korea, Japan, Russia and China to uphold a self-imposed 1999 moratorium on missile tests and rejoin talks on curbing its nuclear program in return for security guarantees and economic and political benefits.

At the same time, the administration is reviewing its options should the Kim Jong Il regime test-fire what U.S. officials describe as a multi-stage Taepodong-2 missile, thought to be capable of reaching Alaska.

"The launch of a missile would be a provocation,'' Assistant Secretary of Defense Peter Rodman said Thursday during a House Armed Services Committee hearing. "If such a launch took place, we would seek to impose some cost on North Korea.''

Rodman declined to say what Washington would do. Experts said that even the imposition of sanctions by the United States would be largely symbolic.

They think that North Korea would not have readied the missile for flight unless it had decided it could live with the consequences.

"It probably means they are not worried about the American reaction,'' said Daniel C. Sneider of Stanford University's Shorenstein Asia-Pacific Research Center. "There is nothing that the United States can do to them.''

The United States has no diplomatic relations or financial assistance it can threaten to cut, and it suspended contributions to international food aid for North Korea last year.

The administration has moved against Pyongyang by trying to halt its missile sales to other countries, its alleged international narcotics trafficking, and its alleged counterfeiting of U.S. currency, cigarettes and over-the-counter drugs.

Under American pressure, banking regulators in February froze North Korean accounts at the Banco Delta Asia, a Macao bank that the U.S. Treasury Department accused of laundering North Korea's ill-gotten gains.

Other banks, anxious to avoid American scrutiny, reportedly have curtailed business with North Korea.

David L. Asher, a former Treasury Department official who oversaw the crackdown on North Korea's alleged illicit dealings, said the United States could respond to a test with an intensified campaign against Pyongyang's alleged international criminal activities that would hurt the ruling elite.

"Do not underestimate the impact of the financial pressure we could put on them,'' said Asher, a scholar with the Institute for Defense Analyses, a policy-research organization.

Washington is counting on Japan, which also is threatened by Pyongyang's nuclear arms and missile programs, to react to a launch by closing ports to North Korean ships and shutting off remittances by ethnic Koreans to relatives in North Korea. But those measures are expected to have limited impact.

A North Korean missile test in 1998 prompted Japan to boost missile-defense cooperation with the United States, and experts said a new launch probably would prompt Washington and Tokyo to forge even closer military ties.

The only nations that could tighten the screws significantly are China and South Korea, North Korea's main foreign trading partners and aid donors.

But while Seoul and Beijing would be outraged, because a missile test would effectively kill hopes of restarting talks on containing North Korea's nuclear arms program, they are unlikely to take any step that could rock Pyongyang.

Both are anxious to avoid destabilizing their neighbor of 26 million people. China doesn't want to be overwhelmed by North Korean refugees, and South Korea would be unable to bear the economic and social costs of sudden reunification.

They also fear that Kim's government could lash out with its million-member army against the South, igniting a conflict that would drag in the United States and devastate the Asian-Pacific economy.

"China and South Korea fear instability more than they fear a nuclear North Korea,'' said Marcus Noland, an expert at the Economic Policy Institute.

Moreover, Beijing probably would be unwilling to jeopardize the budding commercial ties it has been pursuing with North Korea.

"China opposes sanctions on North Korea because it believes they would lead to instability, would not dislodge the regime but would damage the nascent process of market reforms and harm the most vulnerable,'' said a February report by the International Crisis Group, a conflict-prevention organization.

South Korea has been pursuing a policy of economic engagement and political exchanges with North Korea.

The United States has been consulting with members of the U.N. Security Council on a response to a North Korean test. But North Korea has the right under international law to test-fire missiles, making it tough for the United States to win more than words of chastisement of North Korea from the council.

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The anticipated title from Cambridge University Press has been released in hard-cover and is available for purchase. Edited by PESD director, David Victor, Rice professor Amy Jaffe, and PESD fellow Mark Hayes, the book sheds light on the political challenges which may accompany a shift to a natural gas-fed world.

Energy is on the front burner and will stay there, so this book has special value. Read it and learn about the topic of today and tomorrow and tomorrow.

- George P. Shultz, United States Secretary of State, 1982-1989

The coming phase of energy industry development is bringing with it the rapid globalisation of the gas business. Long term take-or-pay contracts, which align supply and demand and which formed the foundation of all successful projects in the past, are coming under pressure from liberalisation. But security of supply still depends on security of demand: this timely and authoritative study demonstrates that, if gas is to

fulfil its enormous promise as an energy source, new ways must be found to establish the confidence of both sides that secure supply will be matched by reliable demand

- Frank Chapman, CEO, BG Group plc

This is a very valuable addition to the global literature on energy issues and energy policy ... Natural Gas and Geopolitics goes deep into the global gas policy issues that affect critical US energy policy, not only looking backward but helping understand what may happen as the global natural gas market develops.

- Bill Richardson, Governor of New Mexico, United States Secretary of Energy, 1998 2001

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Innovative financial instruments are being created to reward conservation on private, working lands. Major design challenges remain, however, to make investments in biodiversity and ecosystem services economically attractive and commonplace. From a business perspective, three key financial barriers for advancing conservation land uses must frequently be addressed: high up-front costs, long time periods with no revenue, and high project risk due to long time horizons and uncertainty. We explored ways of overcoming these barriers on grazing lands in Hawaii by realizing a suite of timber and conservation revenue streams associated with their (partial) reforestation. We calculated the financial implications of alternative strategies, focusing on Acacia koa ("koa") forestry because of its high conservation and economic potential. Koa's timber value alone creates a viable investment (mean net present value = $453/acre), but its long time horizon and poor initial cash flow pose formidable challenges for landowners. At present, subsidy payments from a government conservation program targeting benefits for biodiversity, water quality, and soil erosion have the greatest potential to move landowners beyond the tipping point in favor of investments in koa forestry, particularly when combined with future timber harvest (mean net present value = $1,661/acre). Creating financial mechanisms to capture diverse ecosystem service values through time will broaden opportunities for conservation land uses. Governments, nongovernmental organizations, and private investors have roles to play in catalyzing this transition by developing new revenue streams that can reach a broad spectrum of landowners.

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SPRIE benefits from the experience and knowledge of its Advisory Board, and one member of the Board and his company were recently the focus of a Newsweek article called "Shanghai Starts Up," a look at how some Chinese software firms are fighting to "jack up outsourcing to a new level."

Steven Levy looked at Liu's company Augmentum, a rapidly expanding three-year-old software start-up whose programmers are working on projects that go beyond the traditionally "low- and medium-level programming" tasks that have usually been outsourced to China.

The article, which originally appeared in Newsweek's June 12, 2006 issue, examined the challenges that face Chinese software companies as they attempt to tap into their workers' creativity and innovation to tackle the most advanced programming projects at--as Liu puts it--"a third of the price it would cost our customers to do [it] in-house."

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