Tag Archives: BarackObama

Stimulus Money Goes To Ground.

Under the banner of saving jobs, kick-starting the economy and keeping small businesses and organizations afloat through tough economic times, the US government has handed out more than $840 Billion in federal stimulus money since 2009. Of that, more than $33 Billion went to California.

Some of the largest and most recognized companies in Silicon Valleynearly all of which are flush with cash—were awarded $94 million as either prime recipients or sub-recipients.

Google got $686,681 as a sub-recipient on a contract to reach 14 additional different language audiences for the 2010 Census Integrated Communications Campaign. HUH?

McAfee was awarded $1,579,271 as a sub-recipient on five different contracts from 2009 through the first quarter of 2012. For ???

eBay received more than $4,447,000 on three different grants including a $2.5 million grant to the Office of the Governor of Arizona for the Government Services Fund. For the WHAT?

Applied Materials took over $10 Million to develop and demonstrate an advanced epitaxial growth system for high-brightness LED manufacturers. Somehow, this doesn’t sound like it is going to save jobs, lives or cure cancer.

Scott Amey, General Counsel at POGO, is critical of some of the outcomes of the stimulus bill.

“There are a lot of large contractors that received stimulus money, and it makes you scratch your head and wonder, ‘Were they really in need of receiving that money?’” Amey said. “A lot of people would say no.”

He went on to say, “When it comes to competition in federal contract, you always have a fear that the usual suspects, that the larger contractors, are always going to get the bigger piece of the pie. And then you have the small and mid-sized businesses that are fighting for the scraps.”

Yahoo! got almost $10 Million to build a clean-energy data center in upstate New York. According to federal data, the project created all of 25 jobs. Why can’t Yahoo! build its own data center?

Yeah sure. These guys really need all the stimulus help they can get. Are you kidding me?

Of all the recipients, more than half didn’t create any more than four jobs with the funds.

One of the biggest jokes was PG&E who received  $47,387,955. Twenty-five million dollars of that goes to design and test an underground compressed energy storage system. On our tax dollars? Come On, Man.

Why can’t a huge utility company do these things on their own?  PG&E made $332 Million in NET PROFIT even after absorbing the $550 Million costs of the pipeline explosions in 2010. “That is the whole purpose of the stimulus money.” A PG&E spokesman said, “to encourage innovation and testing new technologies.”

Sam Rosen-Amy, fiscal policy analyst for OMB Watch in the nation’s capital, said there was a tension between getting the stimulus cash “out as fast as possible to people who need it most,” and ensuring the money is being spent in “an effective and responsible way.” And, he admits that some of the smaller companies that should have received money did not.

Among these were two local applications for stimulus dollars that were denied back in 2009. Linda Crowe applied for stimulus funding, twice, so her organization Califa, which represents public libraries, could buy laptops and provide training for unemployed residents.

“It was all connected toward job assistance and for helping people find work,” she said.

“How much did you get?” Stock asked Crowe.

“Nothing,” she said.

Debarag Banerjee and his three business partners at WiViu Technology applied for $1.5 million to hire 13 people and build a video conference system to serve rural hospitals.

“If we got stimulus, funding had come at the right time,” Banerjee said, “we would have been in a much, much different state.”

Banerjee’s company has downsized significantly, and now it’s essentially out of business.

All of the other Silicon Valley companies who received funds wouldn’t agree to an interview with reporters about their stimulus projects or why their corporations needed the money.

If we simply gave the money to Kickstarter, and let them fund projects through the next few years with that $33 Billion, we would create tons of jobs and a lot of wealth. As one simple example, Pebble Watch Co., which just closed its Kickstarter round after raising $7 Million in three weeks has already created 6 new jobs and expects to create another 15 by year-end and they haven’t even begun to manufacture the watches yet. And, when you think about how this all works, it isn’t just the jobs created directly, its the indirect jobs that really count. Microsoft used to create 6 service jobs for every one new hire.

I don’t know whether Banerjee’s video conferencing system to serve rural hospitals makes any sense, but it only would have cost $1.5 Million to find out. That’s a rounding error on $33 Billion.  Or, how about a few bucks for laptops and training for the unemployed?

Instead we have PG&E throwing almost $50 Million into the ground for compressed energy? Really?


Entrepreneurship: Our Future.

What to do about entrepreneurship.

A lot of people agree that entrepreneurs and the resulting startups that they foster are the heart and soul of future economic and innovative growth in the United States and the world.

Here are the current administration’s efforts to spur entrepreneurship. Recognizing that startups are the engines of job creation, the Obama presidency has started a Startup America initiative and has come out strongly in support of the Crowdfunding component of the JOBS act. And it has acknowledged that “it is the entrepreneurs in clean energy, medicine, advanced manufacturing, information technology, and other innovative fields who will build the new industries of the 21st century, and solve some of our toughest global challenges.”

In January 2011, President Obama called on both the federal government and the private sector to dramatically increase the prevalence and success of entrepreneurs across the country. In the year since launch, the Obama Administration rolled out a set of entrepreneur-focused policy initiatives in five areas:

Unlocking access to capital to fuel startup growth

Connecting mentors and education to entrepreneurs

Reducing barriers and making government work for entrepreneurs

Accelerating innovation from “lab to market” for breakthrough technologies

Unleashing market opportunities in industries like healthcare, clean energy, and education

Have we not heard all of this drivel before? Does this sound like a commercial for your government at work or what? And, not only does this “initiative” NOT HAVE ANY LEGISLATIVE SUPPORT IN CONGRESS, but it has been handed off to the Small Business Administration and the Veterans Administration, two agencies that have elevated the fine art of bureaucracy to the Masters level. Just ask anyone who has applied for an SBA loan, or a returning veteran simply trying to get the benefits we contractually owe him. There’s really nothing more to say about this.

How about this one:

Leaders in the private sector launched the Startup America Partnership in 2011, an independent alliance of entrepreneurs, corporations, universities, foundations, and other leaders, joining together to fuel innovative, high-growth U.S. startups. Within just one year, the Partnership has mobilized to make over $1 billion in business services available to a national network that will serve as many as 100,000 startups over the next three years. This sounds ominously close to my plan to end the great recession, doesn’t it?

Their intent is to support the growth of startups in five key areas:

Expertise: Connect startups with training, mentors, advisors and accelerators

Services: Provide startups with access to critical services at reduced costs

Talent: Assist startups in recruiting, training and retaining the people that can help them grow

Customers: Help startups through acquisition of new customers and expansion into new markets

Capital: Highlight sources of capital available to startups in various regions and sectors

In addition to the product and service focused offerings, Startup America firms gain access to Connection Programs which provide unique opportunities to connect with thought leaders, major corporations (as partners or customers), customers, and more.

This sounds really good, but then why does it feel like a giant bureaucracy? Because it is.

Their sponsors are American Express, Microsoft, Dell, Intuit, American Airlines and the New York Stock Exchange. Does this sound like fleet of foot, startup incubators ready to make split decisions based on squiggles on the back of a napkin, just like they did to get started years ago? NOT.

Wouldn’t it be so much better if the sponsors were Twitter, Google, Facebook, eBay, Pinterist, LinkedIn, or even Salesforce?

And wouldn’t it be more promising if their “team” wasn’t composed of a CEO of a national staffing firm who sits on the boards of Comerica and Kohl’s? Or Fred Smith, the CEO of FedEx? Or Magic Johnson, an NBA basketball player, or Tory Burch, a fashion designer for Ralph Lauren who leveraged her relationships in the fashion industry and personal financial strength to become a leader in global lifestyle brands?

To be fair, they have Reid Hoffman, Reed Hastings, Michael Dell, Steve Case, Lynn Jurich and Kevin Plank on their team as well, but I think all of these guys have pretty demanding day jobs. Who actually runs the joint?

I think the Canadians might have a more realistic view: Their view is that entrepreneurs and small businesses are the backbone of the Canadian economy. There are more than 1 million small businesses that employ 48% of Canada’s total workforce, account for 25% of total exports, and provide 30% of their total GDP. Of those small businesses, only 4.7% are classified as high-growth enterprises, yet are responsible for 45% of new job creation in Canada.

The Canadians recognize that entrepreneurship is a powerful force for driving job creation, innovation, economic growth, and for fueling healthy and sustainable communities. Governments around the world are responding to shifts in global markets by strengthening the domestic climate for entrepreneurs as a way to ensure economic growth and prosperity. The launch of Startup America, Startup Britain and similar private-public-civil society initiatives in 2011 has contributed to entrepreneurial growth in more than a dozen countries worldwide.

In Canada, the local movement has only just begun:

  • The government of Canada declared 2011 as the ‘Year of the Entrepreneur’, recognizing the critical role of entrepreneurship in securing Canada’s ongoing economic recovery and prosperity;
  • The ‘Review of Federal Support to Research and Development’ Expert Panel Report, spearheaded by Tom Jenkins, Chief Strategy Officer of Open Text Corporation, called for action to unleash the potential of Canadian entrepreneurs through innovation;
  • Action Canada released ‘Fuelling Canada’s Economic Success: A National Strategy for High-Growth Entrepreneurship’, calling for the creation of a central enabling organization with the mandate to fuel high-growth entrepreneurship in Canada; and,
  • The Coalition for Action, C100, Startup Visa and other organizations in the innovation and entrepreneurship community, put forth proposals and recommendations for action to strengthen innovation and entrepreneurship in Canada.

While Canadians like to think of themselves as great collaborators, the Canadian entrepreneurship community hasn’t come together yet around a shared vision or purpose. Canadian entrepreneurs are struggling to navigate a complex and highly fragmented enterprise ecosystem, which creates challenges for entrepreneurs to identify and access support, build and leverage national and global networks, and limits the capacity to share knowledge and best practices. An absence of adequate risk capital, combined with a shortage of management and business skills normally fostered through startup failures and second- or third-attempts, contributes to Canada’s overall deficiency in “entrepreneurial culture”.

What is needed most urgently, as recommended by Action Canada, is a national strategy to bring together the collaborative efforts of the entire entrepreneurship community to create more favorable conditions for entrepreneurs to flourish. Without a strategy, Canada will continue to trail international competition and risk economic recovery and long-term prosperity. And so will the United States.

The solution begins with a grassroots, entrepreneur-led movement to bring together Canada’s national entrepreneurship community to create a clear vision and strategy that leads to real change and action. And, that is a blueprint for the United States as well.

We don’t need a presidential initiative that is not supported by Congressional legislative action, nor do we need the outcomes to be administered by the SBA, or God-forbid, the VA.

What we need is money, a National Initiative supported by an ACT OF CONGRESS, and the full time attention of successful entrepreneurs and venture capitalists (often the same thing) to insure that a working infrastructure gets created to support several hundred thousand entrepreneurs in the pursuit of innovation.

This working infrastructure needs to be regional, and centered around Universities with proven track records in fostering innovation. VCs jokingly tell anyone who will listen that the reason 80% of the country’s Venture Capital firms are located on Sand Hill Road in Menlo Park is because it is an easy commute from Woodside, Portola Valley, Palo Alto, Los Altos Hills and Atherton. Location matters. This means Stanford, UT Austin, UW in Seattle, NYU in New York, MIT in Boston, Carnegie-Mellon, Berkeley, etc.

All of the functions that entrepreneurs need to operate need to be in place. Human Resources, Payroll, Accounting, Payables, Receivables, Legal, PR, Advertising, Sales and Marketing Leadership, Engineering and prototype Manufacturing. Let the founders focus on their big idea and let the staff do what they do to keep the lights on, while capitalizing on economies of scale to reduce costs.

 

All of this infrastructure, as well as the seed capital will be provided by the Federal Reserve. If there was ever a better justification for creating money out of thin air, I don’t know what it was. Certainly not the $9 Trillion gift to the 6 biggest investment banks in the US in 2010. Nor the $800 Billion TARP bailout in 2008. No. This will actually create jobs, jack the economy, reduce unemployment below 5%, fund Medicare and social security for a hundred years and probably solve 5 of the world’s most pressing problems within 5 years.

 

Imagine a modern “Manhattan Project”:

Cheap, sustainable and renewable, non-carbon energy

Practical synthetic biology at the cell level

Cures for all forms of cancer

Automobile battery technology that enables 1,000 miles between charges

Complete bio-robotic drug delivery systems

YES!

One model that will work is to rotate VCs in and out of the board governance and mentoring responsibilities. These guys should be willing to volunteer as a matter of public service and they should also be allowed to invest in subsequent rounds. VCs don’t need orientation. You’ve sat on one board, you’ve sat on them all.

 

But, the real key is Congress. They need the courage and strength to enact laws that allow a small group of people to navigate around existing agencies and government infrastructure to create an initiative like this and to drive it through to formation and execution.

 And, if you care about this, you could help make it happen. Write your Congressperson. I know this sounds lame, but I know of no other way to start the sausage going. I have, and will continue to do so. The Crowdfunding bill got done the same way. Honest.

 

 

 


It’s Not Just the Economy, Stupid.

Over the past few years it’s become fashionable in sophisticated political circles to argue that presidential campaigns themselves barely matter. What matters is the economic fundamentals. When the economy is strong, the incumbent party wins. When the economy is lousy, the incumbent party loses. All the rest is just a bunch of sound and fury, signifying nothing.

I’ve long had some problems with this attitude. I don’t think there’s any question that the state of the economy matters, and I agree that political journalists probably ought to pay more attention to this than they usually do. At the same time, it’s easy to go overboard. For one thing, political scientists have come up with a lot of different models, and they don’t all rely on the same economic measures. Nor do they make the same predictions. Nor do they even claim (in most cases, anyway) to explain more than about 60-70% of the variance in how well the parties do. So even if the models are accurate, there’s plenty of scope for other factors to influence presidential elections too.

But are they accurate? It’s easy to be impressed by a model that accounts for past election results with high accuracy. That’s a nice looking regression line, buddy.  But it’s quite another thing for your model to predict elections in advance, and that’s the acid test for any election model. Until now I’ve never seen anyone do a systematic review of actual predictions by the various models, but today Nate Silver filled that void, taking a look at model predictions since 1992.

The results aren’t pretty:

In total, 18 of the 58 models — more than 30 percent — missed by a margin outside their 95 percent confidence interval, something that is supposed to happen only one time in 20 (or about three times out of 58).

Across all 58 models, the standard error was 8 points of vote margin or 4.6 points of incumbent vote share. That was much larger than the error that the models claimed they would have — about twice as large, in fact.

The “fundamentals” models, in fact, have had almost no predictive power at all. Over this 16-year period, there has been no relationship between the vote they forecast for the incumbent candidate and how well he actually did.

Nate argues that the state of the economy does have some predictive power. He figures it at about 40%, but says that most current models don’t even do that well because they’re poorly designed. That doesn’t surprise me: this is a really hard subject with lots of hard-to-answer questions. What matters most, the absolute state of the economy or whether it’s on an upswing/downswing?

Should we look at GDP growth or unemployment? Or something else, like disposable income? Do voters respond to some variables, like inflation, only when they get above a certain level? Etc. This is hard stuff, and we don’t have a whole lot of data points to work with.

What’s more, common sense suggests that other things matter too. For example, I just can’t accept as coincidence that since 1950, incumbent parties have nearly always won after one term in office and nearly always lost after two terms. If I used that as my only rule, I’d have an accuracy rate of 87%. (Though only 80% if you count Al Gore as the popular-vote winner in 2000.)

All of this is one reason why I’m reasonably optimistic about Obama‘s chances in November. Yes, the economy is still in weak shape. But it’s improving (I think, or at least I continue to tell myself while I hold my breath), which I suspect is at least as important as its absolute level. What’s more, his party has been in power for only one term and he’s a strong candidate running against a weak Republican field. Put all that stuff together, and I think his odds look pretty good.

As long as Greece can keep the lie up for about eight more months and Merkel can keep persuading the good Germans to continue to be good Germans, and North Korea stays sedated, and Iran keeps rattling and not thrusting, and no other big bubble bursts (like the student loan bubble for instance), and oil doesn’t go to $150., and no other Soldier loses it in Afghanistan and blows away 20 or 30 innocents, and mexico isn’t taken over by drug gangs, and the rest of Europe can keep their pants on, and Iraq doesn’t erupt in civil war (which will clearly be Obama’s fault) and the Supreme Court doesn’t find the “Obamacare” mandate to be unconstitutional, or even if it does, and the Chinese, well you get the picture. Say again, why would anyone want this job?

Bottom line: the economy matters, but it’s probably wise not to get too deterministic about these things. Monocausal explanations are often appealing, but just as often wrong. The world is a very complicated place.


Follow

Get every new post delivered to your Inbox.

Join 62 other followers