Democratic candidates on job outsourcing

From last night’s Democratic debate — Tavis Smiley . Special Feature . All-American Presidential Forums . Video | PBS

Outsourcing Jobs
Ruben Navarrette, Jr. asks if the candidates find outsourcing of U.S. jobs to be a problem, and if so, what their solution is.

The candidates went through the general list of solutions: better trade agreements, elimination of tax breaks that encourage movement of jobs, better education system, more training in math and science and health care system that takes burden off of businesses.
The highlight for me was Bill Richardson calling for an industrial policy (yes – he actually used the words) to keep companies here. By the way, Dennis Kucinich got the biggest round of applause when he called for the cancellation of WTO and NAFTA.

Promise (and pitfall) of techno-hype

Here is a fun article from today’s Washington Post on techno-hype — The iPhone As Crowning Achievement? Um, Hel-lo? – washingtonpost.com

Americans love their techno-hype, which — from the space program to the Segway — has long been a facet of daily life. Embracing the hype over the would-be Next Big Thing is one of the things that defines us as Americans, the most innovative and optimistic people on Earth.
Today, that Thing is the iPhone. Perhaps you’ve heard of it? Apple’s new gizmo — on sale starting today! — is a cellphone, a camera, an Internet browser, a music player and (possibly) a Swiss Army knife. Gaseous clouds of publicity have hung about its introduction since January, when Apple co-founder Steve Jobs declared that his company is “reinventing the telephone.” The San Francisco Chronicle played along, asking this week: “Can the iPhone Change Your Life?” (The paper’s conclusion: Um, yeah, kind of.)
The iPhone is just the latest iCon in our Golden Age of Techno-Hype. It follows essentially similar swoons for the XBox, PlayStation 2, the Razr phone, PalmPilot, BlackBerry, iPod, HDTV and other products. Periodically, hosannas are also shouted over the latest wonder of the Internet (Amazon, eBay, Google, MySpace, Facebook, YouTube, etc.).
What’s more, there are whole utopian promises floating major parts of our scientific-industrial complex. Nanotechnology. Biotechnology. Artificial intelligence. Gene-mapping and stem cell medicine. Fusion power and hydrogen fuels.
The persistent techno-hype of this era, however, masks a simple observation: We don’t live in particularly inventive or transformative times. This has been an age of scientific refinement, not revolution.
As British historian David Edgerton notes in his new book, “The Shock of the Old: Technology and Global History Since 1900,” much of the basic technology we rely on today was introduced many decades ago, although improved upon in multiple ways since.
. . .
If a person were to time-travel from the late 1940s to today, observes Edward Tenner, a technology historian, he’d have very little trouble recognizing our age.
Tenner, the author of “Why Things Bite Back,” about the unintended consequences of technology, argues that truly radical innovation has occurred in roughly 30-year cycles — and that our own era isn’t one of the radical waves.
. . .
The downside of techno-hype is that it has raised expectations that can’t, or haven’t yet, been met. Despite bright promises, some technologies have never quite worked as touted, or have had side effects that arrested their potential (which is why no one wants a nuclear power plant in their back yard).
Remember artificial intelligence, which was supposed to make computers as intuitive as a human being? A 2-year-old child still has superior reasoning and cognitive abilities. Remember magnetic-levitation (mag-lev) trains, which would speed passengers to their destinations in frictionless comfort? Remember low-temperature superconductivity, which would enable almost infinite power storage?
Remember the supersonic Concorde, which would take over transatlantic travel? The SST is now just a museum piece.
The good news is that if Tenner’s cycle theory is right, we could be on the verge of a new 30-year wave of paradigm-shattering innovation. Maybe in a few years, stem cell medicine will yield all the miracles that its supporters have promised. Maybe animal cloning and genetically modified foods will lead to the end of malnutrition and starvation. Maybe breakthroughs in battery and other energy-storage technologies will create true alternatives to fossil fuels and thus slow the pace of global warming.
Maybe. But as in all things technological, it pays to heed a disclaimer buried in the fine print:
You can’t always trust the hype.

I strongly agree that we are in the grips of techno-hype. Our view of innovation suffers from gadget-ites. But I have to disagree that we haven’t seen major technological breakthroughs. We have seen the “green revolution” (those of you under 50 would probably not remember that – but it dramatically increased food supplies, especially in the developing world), the transportation revolution, the communications revolution. And the double-helix structure of DNA was not articulated until the early 1950’s. Each decade has its breakthroughs – which are sometimes not recognizable until well after the fact. The breakthroughs of the past 10 years may still be in the academic literature and discussed within the small circle of specialists — not in the popular press and not yet showing up in the form of gadgets.
So I think the person from 1945 would suffer from a form of “Future Shock” if they arrived today. Not because of the basic technology, but because of the social and organizational uses of that technology and of all the other social and organizational changes. In this sense, both historians and the author of the article fall into the same technological determinism trap of believing in techno-hype. So much more has changed in the economy and society since 1945 that we often fail to realize it. Innovation has been piled upon innovation — and only some of them technological.
So, the bottom line is true — you can’t always trust the techno-hype. But you also can’t trust the hype of the techno-hype.

Immigration update – part 2

According to the AP, the Senate has voted to block the immigration bill. The vote to limit debate was 46 to 53 far short of the 60 needed and even short of a majority. That is a clear sign that the bill is dead. And any immigration reform will not likely come up until 2009.
So the chaos of the status quo will continue for who knows how many more years.

Notes on financial markets

Two quick notes on financial markets in the I-Cubed Economy.
From a recent speech by Fed Chairman Bernanke comes this reminder of the importance of that intangible we call money — The Financial Accelerator and the Credit Channel–June 15, 2007:

Economic growth and prosperity are created primarily by what economists call “real” factors–the productivity of the workforce, the quantity and quality of the capital stock, the availability of land and natural resources, the state of technical knowledge, and the creativity and skills of entrepreneurs and managers. But extensive practical experience as well as much formal research highlights the crucial supporting role that financial factors play in the economy. An entrepreneur with a great new idea for building a better mousetrap typically must tap financial capital, perhaps from a bank or a venture capitalist, to transform that idea into a profitable commercial enterprise. To expand and modernize their plants and increase their staffs, most firms must turn to financial markets or to financial institutions to secure this essential input. Families rely on the financial markets to obtain mortgages or to help finance their children’s educations. In short, healthy financial conditions help a modern economy realize its full potential. For this reason, one of the critical priorities of developing economies is establishing a modern, well-functioning financial system. In the United States, a deep and liquid financial system has promoted growth by effectively allocating capital and has increased economic resilience by increasing our ability to share and diversify risks both domestically and globally.

I thought that was a good summary of the role of financial markets. The rest of the paper is a discussion of the interplay of financial conditions and monetary policy
But Bernanke also points out the other role of financial markets:

By developing expertise in gathering relevant information, as well as by maintaining ongoing relationships with customers, banks and similar intermediaries develop “informational capital.”

Informational capital is one of the financial markets greatest intangibles. When studies are done on the competitiveness of the US financial system, that fact needs to be front and center in any analysis. Ongoing relationships and other tacit knowledge may be one of the reasons companies seem to still pay a premium to raise capital in the US. Let’s keep that in mind as we “reform” the system.
– – –
The second is Martin Wolf argument that capitalism itself is changing – FT.com / Comment & analysis / Analysis – Unfettered finance is fast reshaping the global economy:

It is capitalism, not communism, that generates what the communist Leon Trotsky once called “permanent revolution”. It is the only economic system of which that is true. Joseph Schumpeter called it “creative destruction”. Now, after the fall of its adversary, has come another revolutionary period. Capitalism is mutating once again.
Much of the institutional scenery of two decades ago – distinct national business elites, stable managerial control over companies and long-term relationships with financial institutions – is disappearing into economic history. We have, instead the triumph of the global over the local, of the speculator over the manager and of the financier over the producer. We are witnessing the transformation of mid-20th century managerial capitalism into global financial capitalism.

Excellent point.

PS Thanks to Dani Rodrik’s blog Dani Rodrik’s weblog: Martin Wolf makes my day for pointing this out.

Financial competitiveness – part 11

And the process of looking at our financial competitiveness continues, as the Wall Street Journal reports — Paulson Details Plan to Review U.S. Regulatory System:

Treasury Secretary Henry Paulson Wednesday unveiled the next phase in his plan to improve the competitiveness of U.S. capital markets, which some analysts worry are falling behind international competitors.
Wednesday’s announcement calls for a “modernized regulatory structure,” mutual recognition of comparable international regulatory regimes and the development of voluntary best practices for asset managers and investors in hedge funds, among other initiatives.
“To maintain our capital markets’ leadership, we need a modern regulatory structure complemented by market leaders embracing best practices,” Mr. Paulson said in a statement. Mr. Paulson is formally announcing the review at The Wall Street Journal’s “Deals and Deal Makers Conference” in New York.
With regard to the regulatory overhaul — which should produce a “blueprint for reforms” from Treasury early next year — possible changes could include merging regulators with overlapping responsibilities, such as the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

Apparently, few details were available.
Modernizing the regulatory structure sounds fine – as long as it sticks to that task. My only concern, as stated many times before, is that we don’t misdiagnose the problem and end up with a regulatory system that is worse than before.

Pushing the limits of intellectual property

This just in from today’s New York Times — Chef Sues Over Intellectual Property (the Menu):

Sometimes, Rebecca Charles wishes she were a little less influential.
She was, she asserts, the first chef in New York who took lobster rolls, fried clams and other sturdy utility players of New England seafood cookery and lifted them to all-star status on her menu. Since opening Pearl Oyster Bar in the West Village 10 years ago, she has ruefully watched the arrival of a string of restaurants she considers “knockoffs” of her own.
Yesterday she filed suit in Federal District Court in Manhattan against the latest and, she said, the most brazen of her imitators: Ed McFarland, chef and co-owner of Ed’s Lobster Bar in SoHo and her sous-chef at Pearl for six years.
The suit, which seeks unspecified financial damages from Mr. McFarland and the restaurant itself, charges that Ed’s Lobster Bar copies “each and every element” of Pearl Oyster Bar, including the white marble bar, the gray paint on the wainscoting, the chairs and bar stools with their wheat-straw backs, the packets of oyster crackers placed at each table setting and the dressing on the Caesar salad.
Mr. McFarland would not comment on the complaint, saying that he had not seen it yet. But he said that Ed’s Lobster Bar, which opened in March, was no imitator.

This appears to be a new wave in IP litigation:

In recent years, a handful of chefs and restaurateurs have invoked intellectual property concepts, including trademarks, patents and trade dress — the distinctive look and feel of a business — to defend their restaurants, their techniques and even their recipes, but most have stopped short of a courtroom. The Pearl Oyster Bar suit may be the most aggressive use of those concepts by the owner of a small restaurant. Some legal experts believe the number of cases will grow as chefs begin to think more like chief executives.

According to the story, some chefs are having their employees sign non-disclosure agreements to protect their recipes. I can understand this. A chef’s signature food is a major part of the draw. But in part, it is the tacit knowledge and the total package that defines a good restaurant. Non-disclosure agreements and other trade secret mechanisms are difficult to utilize in that situation. Is good service a trade secret?
I also worry about the ability to spin-off new restaurants and menus. Do these agreements cover derivative works — dishes that are slightly different? Will a spin off restaurant have to pay royalties? What happens when the recipe is published in a cookbook?
A whole new area for the lawyers to explore. Let’s hope they don’t muck it up.

More patent confusion

This story from Information Week — Wi-Fi Takes Shape As The Next Patent Battleground

A little-noticed Federal court decision issuing an injunction against wireless LAN equipment vendor Buffalo Technology in its patent fight with an Australian science agency could have broad implications for the Wi-Fi industry.
Judge Leonard Davis of the U.S. Eastern District Court of Texas found on June 15 that Buffalo violates the Commonwealth Scientific and Industrial Research Organization’s 1996 patent underlying 802.11a/g technology–the core of all corporate wireless LANs and public Wi-Fi networks. Davis issued an injunction blocking Buffalo, a Japanese manufacturer with a subsidiary in Austin, Texas, from selling WLAN products until it has a license agreement with CSIRO.
Buffalo is likely to appeal the ruling and ask the court for a stay of the injunction. But if the ruling stands, Davis’ decision could force makers of Wi-Fi-based products–from laptops to smartphones to semiconductors to game consoles–to pay hefty licensing fees to CSIRO, an Australian federal agency akin to the U.S. National Science Foundation.
Recognizing the CSIRO patent as a threat, a group of major tech companies that includes Dell, Hewlett-Packard, and Intel filed lawsuits in May 2005 to have the CSIRO patent invalidated. CSIRO countersued. In all, CSIRO has three other cases challenging Wi-Fi use by Belkin, Dell, D-Link, Fujitsu, HP, Intel, Microsoft, Netgear, 3Com, Toshiba, and others. Notably absent is Cisco Systems, which pays royalties to CSIRO from its acquisition in 2001 of Radiata, a company formed by CSIRO.

MP3, VoIP and now Wi-Fi? Does anyone really know who owns these fundamental patents?