Solyndra and Innovation Support

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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.

Individuals, governments, and investment firms, including venture capital, private equity, and angel groups, make bad investments every day, collectively that is.  Unless investment decisions are the result of some secret sauce or proprietary black box assessment that somehow produces above-market success rates and returns, any investor would be unwise to put all her or his proverbial eggs in one basket.  In the case of the US investment in Solyndra debt, the investment was 0.1% of the total portfolio of loans, grants, and contracts, certainly not an all-in-one-basket scenario.

Was Solyndra a bad investment of taxpayer money?  Certainly, if the standard is return on investment.  Was Solyndra an unwise allocation of risk capital?  No, since 0.1% of the portfolio would not seem to be over-allocation into one investment.  Was Solyndra risky?  Yes, but probably not any more risky, and possibly less risky, than other ventures at the same stage of development.  Should the Solyndra experience cause government decision makers to use a different assessment of innovation potential?  Probably, but the Solyndra failure should not become an excuse for governments to stop investing in innovation.  Early stage companies in innovative industries are risky investments; they always have been and always will be, and that is why investors demand and recieve the potential returns that they do.

References

Grunwald, M. (2012, August 27). Yes, more Solyndras. The solar company failed, but the decision to invest in it was the right one. Time, 180(8), Business 4.

Globalization and U.S. Domestic Jobs

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In the August 27, 2012 issue of Time, Rana Foroohar (2012) wrote about globalization.  Foroohar asserted that globalization was originally all about creating a lop-sided benefit for companies and workers in the United States.  On the surface, this is a rather parochial, if not absurd, concept.  Foroohar, in effect, proposed that globalization’s purpose was economic colonialism, overcoming boundaries, borders, and barriers.

The Levin Institute (2012) noted that international trade both causes and results from globalization.  The proliferation and distribution of products from the United States is an example of globalization as is the availability of goods and services from Japan, South Korea, China, Germany, France, Italy, and Mexico.  Trade negotiations effectively negated the consequences of any intended one-sided, eco-colonialism.

U.S. Imports, Exports, and Trade Balance by Year (in $millions)

Trade negotiations did not seem to reduce either exports or imports.  Despite the economic downturn that struck most of the world’s economies in 2008, imports and exports since the beginning of globalization continue their upwards march, albeit with a noticeable dip in both imports and exports in 2008 and 2009.  The assertion by Foroohar (2012) that globalization harmed the wages and upward mobility of workers in the U.S. would not seem to be related to a reduction of exports, as measured in dollars.  Globalization seems to have increased exports and imports.

The detrimental phenomenon related to globalization, or not, is that U.S. imports have exceeded exports every year since 1975.  The steady rise in exports since 1975, only dropping briefly in 2001-2002 and 2008-2009, would seem to have enhanced wage and mobility opportunities for workers in the U.S..  Similarly, the parallel rise in imports would seem likely to have had a corresponding influence on the economic well-being of  workers in the countries from which the U.S. imports goods and services.  Foroohar (2012) notwithstanding, perhaps the opportunity in the U.S. is not to somehow try to put the brakes on globalization, as if the U.S. is in control of such phenomenon, but to reduce the overall trade imbalance by taking steps through policy, innovation, and better management.  Slowing globalization would seem to have the potential to reduce imports and exports; the objective should be to narrow or close the gap by some combination of continued growth in exports and a slowing of the growth in imports.

References

Foroohar, R. (2012, August 27). The economy’s new rules: Going global. Time, 180(8), 26-32.

The Levin Institute. (2012). Trade and globalization.  Retrieved September 2, 2012 from http://www.globalization101.org/trade-introduction/

Job Creation and Deficit Reduction

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The August 13, 2012 issue of Time examined the financial implications of the 2012 presidential campaign.  Letters to Time’s editor printed in the August 20, 2012 issue noted, among other things, that the money spent on presidential campaigns, particularly the 2012 edition but possibly generalizable to other elections, could have been used to create jobs.  It might be argued that different spending creates different kinds of jobs in different locations, but it seems that most spending on most elections directly or indirectly employs somebody somewhere.  With all the conversation about jobs moving offshore, it might also be interesting to see how much election-oriented spending stays in the United States to employ residents of the U.S. rather than employing residents of other countries.

During this election cycle and the previous one in the U.S., pundits frequently expressed the desire to end the U.S. military’s involvement in Iraq and Afghanistan and, almost in the next breath, proclaimed the need to fix unemployment.  Some pundits added the need to reduce government spending and to make government agencies more efficient.  Reducing the number of service members deployed would seem to eventually reduce the number of people serving in the military and reducing government spending would seem to rather quickly result in fewer government workers; in both cases, wouldn’t unemployment probably rise as a result of both actions?

It seems that the only way to reduce government-related payroll, whether civilian or military, and government spending and not increase unemployment is to create a coordinated, comprehensive plan to stimulate sustainable job creation that is synchronized with implementation of a strategy to improve efficiency of government services and reduce government payroll.  Treating them as unrelated would seem to offer dire consequences for unemployment and the economy.

Klein (2012) encouraged President Obama to redouble his efforts to reduce the budget deficit and the national debt.  Klein noted that the Simpson-Bowles plan received minimal support in part because it was not comprehensive enough to allow anybody to ascertain the consequences.  It seems that politicians frequently vote for legislation that leaves too much to chance or unwritten future laws and policies.  Perhaps one of the challenges of governing the United States in 2012 is that the systems and structures have grown too complex and too intertwined for simple or straightforward solutions to practical problems.  As demonstrated by the attempt at comprehensive healthcare reform, it may also be that attempts at comprehensive legislation also do not get read by those who vote.

The United States still seems to have the best system with the most peaceful regime change in the world, but sometimes it surely seems that a better way must be out there somewhere.

References

Klein, J. (2012, August 20). The trouble with Simpson-Bowles. Obama has tried to reduce the long-term deficit, but he should try harder. Time, 180(8), 19.

Various authors.  (August 20, 2012). White House for sale. Time, 180(8), 4.

What is Fair?

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Yesterday, July 4, the San Diego County Fair, a combination of fried food feast, cabinetmaker creations, mind-numbing merchandise marketing, and carnival, ended its 2012 run.  That is one sense of fair.

Time’s Joel Stein, one of my favorite journalists, in part because of his irreverent tendencies, made a point about what is fair in his essay on solving the European economic instability (Stein, 2012).  Stein proclaimed that fairness “is the rallying cry of idiots” (p. 62) and, while that may be a tad harsh, in the context of the essay, a functional definition of fairness seems elusive.  Even if we could agree on definitions of fair and fairness, such agreement might not have utility beyond some moral keel rather than a rudder.

Stein (2012) offered examples that seem to suggest that people who cry out for fairness are frequently those who do not have something that they want somebody else to provide.  People in some of Europe’s southern countries want their counterparts in the north to be fair.  This, of course, is not always the case.  As a professor, students seem inclined to ask for, or demand, fairness in grading; rare indeed is they outcry for justice in grading.  As a consultant, clients want fair valuations for their companies and for services rendered; again, justice is, at best, an implication.

In each of these instances, fairness seems to be subject to negotiation, as if we should not expect what is fair to be somehow self-evident and obvious within a specific cultural context.  So, fairness is not a matter of objectivity.  Fairness also seems to be too rarely associated with accountability; people asking for fairness generally do not seem to want the other party to hold them accountable for the past, but the future might be a topic for negotiation.

People asking for fairness frequently seem to request grace and generosity from others.  Perhaps fairness is easier to request than grace and generosity because people in some cultures see fairness as an obligation whereas graciousness and generosity are gifts from one to the other.  In those cultures, asking for a gift might be rude and seeking fairnessoug may carry an implication of guilt if the request is denied.

Even though I dislike the traffic, the crowds, the exaggerated prices, and the excessive calories, the Fair somehow seems easier to fathom and define than the fair.

Reference

Stein, J. (2012, July 2). Acropolis now. It’s not hard to rescue Europe from Greece. Even I have a plan. Time 180(1), 62.

Opportunity, the Economy, and the 1%

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Joseph Stiglitz, a Nobel Prize-winning economist, offered a rather narrow view of opportunity in a recent interview (Luscombe, 2012). Stiglitz seemed to propose that opportunity can only be measured by what people actually do with opportunity, by whether people improve their lot in life at all economic layers in the United States. Stiglitz proposed that other countries have surpassed the United States as the so-called land of opportunity; while this may be the case, as measured by upward mobility, is this truly a reflection of lack of opportunity or does it more accurately reflect comparatively lower levels of motivation or execution resulting in capitalization on those opportunities?

Stiglitz raised a key factor in economic growth, which seems otherwise ignored, or at least under-considered, in the overall harm done to the economy if society either takes steps to restrict access to opportunities by economically disadvantaged people or does not consciously provide mechanisms to improve that access. Stiglitz asserted a artificial yet de facto restriction of access to the potential of people at or near the bottom of the economic ladder. I have long supported the premise that a key to sustainable improvement in business performance or the greater economy is to take strategic and tactical steps to raise the performance of those currently performing below their capabilities and capacities. On this point, I seemingly can agree with Stiglitz; however, even the best leaders cannot force people to do what they consciously or unconsciously elect not to do.

Leaders, whether political, academic, business and organizational, community, or religious and social, can encourage, empower, and inspire people to live into their potential. The opportunity to live into one’s potential is an insufficient driver of realized potential. The unasked question is whether systematic or systemic barriers prevent the realization or whether something else may be going on? Stiglitz approached the unasked question when he offered that free markets, in reality, are a false premise because laws and regulations shape all, or most, markets so access to opportunity may be artificially, yet legally, constrained.

If laws and regulations are constraining access to opportunity or it’s realization, then political leaders should take steps to identify those constraints and remove or change them. The people positioned to propose those changes are members of the so-called 1%, a term which Stiglitz also takes credit for first offering. Insufficient attention seems to get paid to the reality that a 1% will always be in a better position to do something than a 99%. We simply do not live in a society or world in which every is equal with equal resources, or equal power, or equal capacities, or equal potential. The labeling of people as members of “the 1%,” as if only one such strata exists, is also a false premise and is not necessarily or inherently a demeaning moniker.

The challenge that is greater than a simplistic label or cry of lack of opportunity is to develop the societal will to examine the causes for unequal access to and realization of opportunity and potential. How do leaders help members of society at all economic levels understand and seek to live into their potential. What defines opportunity and potential for individuals, for groups, and for society? Once somebody identifies their potential, we may find that the next major hurdle is getting people to want to live into it.

One of the biggest challenges I see as a graduate school professor land that I hear from my public school teacher colleagues is that students offer as a primary reason for not doing homework that they simply did not want to o it. Teachers cannot get students to work. Parents cannot or will not get students to work. Why should anybody expect the system to facilitate the attainment of a person’s potential when neither parent nor teacher nor, sadly, a large portion of students clearly demonstrate tat the will or the ability is not there?

Reference
Luscombe, B. (2012, June 11). 10 Questions, Time, 179(23), 66.