Michael Grunwald (2012) discussed Solyndra within the context of the appropriateness of government investment in innovation. Conceptually, government support for innovation has a lengthy precedent. What few pundits discuss is that the Solyndra loan under the stimulus plan represented 97.7% of all loans under the program made within the state of California, $535 million directly to Solyndra and $284 million to Rudolph & Sletten, a prominent green energy general contractor, as a subcontractor to Solyndra. The balance of the loans in California went to government agencies and Native American entities.
Under the stimulus plan, California-based entities received more than 12,000 grants, most seemingly for infrastructure, research, or education projects. The sheer scale of the stimulus program would seem to make the prospects for a “where are they now?” type of report. Nearly three years after the receipt of many of these awards, an accounting of the taxpayers’ investments would be interesting and appropriate, even if an overwhelming undertaking.
Government support of innovation seems generally connected to new or newly emphasized policies. In the Solyndra example, the policy was to support green energy in general and solar in particular. Grunwald (2012) observed that the solar industry has grown dramatically since 2009. The Solyndra example would seem, then, to have been a bad investment in an otherwise good industry for investment.
The discussion of Bain Capital provides an interesting backdrop to the first topic for this course. Bain Capital (2012) began in 1984 as the investment arm of management consulting firm Bain & Company. In 1984, I completed my MBA studies at Rutgers University’s Graduate School of Management and joined a management consulting firm to help that firm, not Bain, transition from their traditional expertise of scientific management and productivity improvement to process and quality improvement based on the principles of Deming, Juran, and numerous disciples. Consulting firms and their clients interested in improving operational and financial performance had one primary tool in their toolkit, productivity improvement leading to staff layoffs of, typically, 20-30%.
It seems easy to complain about companies buying companies or parts of companies and then reducing costs, often through labor reductions, in order to realize a profit on their investments. Investment firms have an obligation to their investors to produce a positive return on their investments. For many of the firms that Bain and others purchased, the alternative was closure; companies like Bain may not have been able to save every job but some organizations were able to survive as the result of significant changes in operations. In some cases, however, the seller to the investment firm made out much better than the investment firm or the purchased company’s employees.
A fascinating read providing some insight into causes, or possible effects, of division in the United States. http://online.wsj.com/article/SB10001424052970204301404577170733817181646.html?mod=WSJ_WSJ_US_News_10_1
I’m not sure whether this article identifies causes or effects, but it seems clear that people who profess a religion, delay children until after marriage, stay married, and finish high school, if not college fare better economically than people who profess no faith or religion, have children outside of marriage, get divorced, and do not, at least, finish high school. The article does not examine whether the more “traditional” lifestyle leads to more economic success or whether people who are more economically successful gravitate toward a more “traditional” lifestyle. The presented facts are food for thought.
The demographic differences seem to suggest that, as the middle class experienced division since 1960, during a time of broad cultural change in the United States and elsewhere, two seemingly distinct cultures emerged. These distinctions may help account for the increasing sense of division in U.S. society and among our elected officials, along with the increasing sense of polarization in general. Whether these are causes or effects, what is the vision of leaders for addressing the causes and the effects?
Two links, parts 1 and 2 of a lecture I gave to the University of Phoenix Leadership Colloquium. 500 doctoral learners and faculty from Phoenix’s School of Advanced Studies registered. I have another 10-20 minutes of responses to questions posed during the lecture and am constructing a document drawn from online discussions during the week before and the week after the lecture.
Leadership and Innovation, Part 1 (10:31)
Leadership and Innovation, Part 2 (10:22)
This Industry Week article provides examples of some of the innovations I had in mind when I speak on innovation and leadership as engines of economic recovery. http://www.industryweek.com/PrintArticle.aspx?ArticleID=26015&cid=NLIWIT
One of the sources of uncertainty about the global economy is the unsettled debate among leaders in Western Europe’s Eurozone about the use of monetary policy to solve economic problems. That debate rages in the United States despite rarely seeming to be framed in those terms.
The downturn in 2008 was led by a liquidity crisis, a shortage of cash, that resulted from mythical wealth and cash from over-valued real estate. The real estate bubble resembled a grand Ponzi scheme without a Madoff-like figurehead to blame. The feared second dip is not a result of a crisis of liquidity but of confidence and uncertainty. Bruder (2011), writing about Egypt following their Arab Spring episode, observed that investors do not and will not pour capital into economic environments when the direction of the country is uncertain. In that regard, the current climate in the United States is similar to that of Egypt.
Hough (2011) observed that publicly-traded U.S. companies, excluding financial companies, currently hold 12% of reported assets in cash, the highest reported level since 1954. Business executives are unwilling to release the estimated $1.2-2 trillion in cash on their balance sheets (Foroohar, 2011), and unknown amounts hidden offshore and elsewhere, until people in positions of leadership lead and re-establish certainty and a sense of confidence about fiscal policy, tax policy, spending policy, the deficit and whether to continue deficit-driven budgets, and what to do about companies and countries allegedly to big to fail. Compounding the uncertainty are conflicts and political turmoil seemingly around the globe and the limited recognition that the issue of debt extends beyond nations to states, businesses, and individuals.
For most of 2011, national lawmakers in Washington, DC have invested what seems to have been the vast majority of their time, and our attention, on the need to get the debt ceiling raised and the nation’s revenues and expenses aligned. Meanwhile, the economy flounders because business executives in the United States, and increasingly globally, have little or no confidence in the direction or stability of the legal and economic arena. Uncertainty like that makes strategic investing in jobs and in job-creating expansion risky and seemingly unwise. The debt ceiling crisis is a symptom of a much more difficult problem, the mismatch between overspending and too little revenue.
Political rhetoric out of Washington, DC is simply lip service meant to placate the itching ears of the electorate. Politicians have devolved into re-election machines focused on the next election cycle as soon as the last one is over. Most members of the U.S. House and Senate simply have no experience or education that would allow them to create effective policy for most of the topics they must address. So, with no basis for for developing, debating, and implementing effective solutions to the problems the nation needs them to address, elected and appointed decision makers in Washington seem inclined to simply parrot back the words the electorate and self-serving advisors and lobbyists beg them to say.
From my previous postings, it may be clear that I have an interest, even a fascination, with the ongoing discussions of job creation by people in positions of leadership about job creation. I posted a question on LinkedIn last week asking how many of our senators and representatives in Washington, DC have a background suggesting experience in creating jobs. I raised the question because evidence indicating such experience seems thin after more than two years of conversation about economic recovery and the need to reduce unemployment through job creation.
Since several people responded that I raised a good question and nobody seemed able to answer the question, I spent part of my 4th of July weekend reviewing the biographies of each member of the U.S. House of Representatives and Senate, as found at house.gov and senate.gov. The chart below shows the combined number from both chambers.
In these charts, I use the term “politician” to mean anybody whose indicated background includes only positions involved in negotiating and defining public policy or having no experience other than in those positions since 1980. I use the term “entrepreneur” to mean experience owning, building, or starting a small business.
- Bain Capital and 1980s-vintage Management Consulting John Bryan
- Telecommunications Sales Force Reorganization John Bryan
- What and What if? The start of a typical eProcesses client relationship John Bryan
- Selling in Business Markets and Sales Force Improvement John Bryan
- Leading in the Economic Recovery John Bryan
