Intangibles food fight

The new French President has stepped into the middle of a new fight over an intangible — in this case, food. As the Times of London reports Nicolas Sarkozy loses his cool over French food:

The right way to make mayonnaise, cheese soufflé and foie gras will be protected by the UN if President Sarkozy’s latest ploy wins approval (writes Charles Bremner in Paris).
The French leader wants la cuisine française to be listed by Unesco, the UN agency, as part of the world’s cultural heritage.
At the opening of the annual Paris Agriculture Show, Mr Sarkozy said: “We have the best gastronomy in the world — at least from our point of view. We want it to be recognised among world heritage.”
Mr Sarkozy’s gesture in response to a two-year campaign by a group of leading chefs — who fear French cuisine is under threat from modern life and the global food industry — raised eyebrows because it stretches the meaning of a UN project to protect traditions in the developing world.

But, according to the Financial Times, this has not gone down well with everyone – France stirs food fight with Italy:

France’s campaign to put its cuisine on the United Nations’ world heritage list has sparked a transalpine war of words with Italy.
Italian farmers spurned President Nicolas Sarkozy’s proposal over the weekend that France should become the first country to have its cuisine recognised as an “intangible” cultural treasure.
“With 166 food specialities recognised by the European Union, Italy clearly beats France, in second place with 156,” Coldiretti, the Italian farmers’ association, told Reuters.

I really think that says it all.

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Lessons from JP Morgan

Floyd Norris’s column today in the New York Times – When Bankers Fear to Act – ask the key question: Where is the next J. P. Morgan?
The column is an interesting discussion of the paralles parallels with the Panic of 1907 – well worth the read.
For my own take on that see earlier postings Buffett makes a move and Buffett and Morgan

Investing in workers

Speaking of investing in intangibles, the Knowledge@Wharton newsletter is running an interesting story/podcast on Taking Work-based Learning to the Next Level:

In the mid-1990s, a new C-suite title was born when General Electric CEO Jack Welch dubbed Steve Kerr the company’s “chief learning officer.” Since then, CLOs have sprouted up at major firms in several industries. But what does this new breed of “learning leaders” bring to the table that traditional human resources departments and employee training programs do not?

The article interviews three “CLOs”: Ed Betof, former vice president of talent management and CLO at Becton, Dickinson and Company, who is a senior fellow and academic director of Wharton Executive Education’s Executive Program in Work-Based Learning Leadership; Mike Barger, vice president and CLO at JetBlue University; and Ann Schulte, vice president of global learning at MasterCard Worldwide.
The bottom line is that companies are taking their skills development activities much more seriously:

Knowledge@Wharton: Historically, Human Resources departments have been in charge of programs that enhance employees’ skills, such as on-the-job training and tuition reimbursement. Why is there a need for a separate role that’s wholly dedicated to learning?
Schulte: Well, I think that in the environment that we’re in today, identifying the skills and the competencies that are necessary for an organization to be successful is a critical first step. Once those competencies have been agreed upon at a strategic level by the organization, the learning department and the learning leaders can come in and provide a variety of different interventions.
In the old days, as you referenced, when training existed in the HR department, a lot of times those interventions were limited to a class of some sort. Today, we talk about all different sorts of ways to help employees build their skills and become continuous learners, so that they can continue to contribute to the strategic goals of the organization.
Barger: I think the evolution of the learning function has moved more from a training and skills delivery function to more of a performance engineering function. Our job now is directed much more at improving frontline performance — again, connecting that performance to business improvements, which is considerably different than I think what HR and training used to do. I think now our energies, as I mentioned before, are really directed at driving performance improvement through all levels of the organization.
Betof: One thing that I would add is, in addition to addressing the skills, knowledge and talent needs for today, the chief learning officer and the functions that they lead are responsible for anticipating and working with other leaders in their organizations to anticipate the skills, the knowledge, the talents necessary next year, three years and even five years, possibly even beyond, depending on the type of organization. So, it should be just about be impossible now, going forward in very contemporary organizations, to have a strategic business plan without a strong talent and talent learning element — not just hanging at the end of that plan, but integrated into the fiber of the strategic plan.

And so what is the pubic policy to encourage such activity? In some case, companies understand that enlightened self-interest dictates that they continually train their workforce. Much of this is in firm-specific knowledge. But some of it is in industry-specific or even general skills. Here we run into the free-rider problem. Why should I train workers who can just take that skill to some other company. In some cases, there is an IP solution — a non-compete agreement. But those have their own problems.
A free-rider problem has generally been accepted by economists as a market failure – where government intervention is acceptable and appropriate. In addition there is the spillover effect where general social welfare is increased by an increase in this private activity, thereby justifying public investment.
In this case, some have suggested a knowledge tax credit. Essentially this is an expansion of the research and experimentation tax credit — another activity with spillovers to both other companies and to society at large — to training activities.
There is another argument for the knowledge tax credit. We have long understood that increased private investment in plant and equipment is necessary for continued economic growth. As a result, there are various tax incentives for investment in equipment–including in the recent stimulus package. So why would we treat our people — which everyone says are companies’ most important asset — worse than equipment? If a tax incentive for investment in machinery is appropriate, so is a tax incentive for investment in workers. It is as simple as that.

Investing in a real intangible

It is generally supposed that, with most investments, the investor knows something about what they are getting — even if it is a highly complex financial instrument that is multiple derivatives away from a hard asset. Even in venture capital, there is an idea — not withstanding the fact that VCs will tell you that they invest in people not necessarily the idea. Now a new investment vehicle which invests in the pure intangible of the fund manager.
As the Washington Post reports The New Way To Make Deals: Blank Checks:

Also known as special-purpose acquisition companies, or SPACs, blank-check firms raise money by selling stock to the public and then scouring the world for businesses to buy. They are the current rage among dealmakers, but have drawn some skepticism from critics who say investors don’t know what they are buying when the SPAC goes public.
In many ways, blank-check companies are bets on the dealmaking prowess of their founders. In this case, investors are counting on the connections that Kemp, Aaron, Tavares and Cuomo bring.
“The more I looked at it, the more I realized that the potential for sports properties and entertainment in a global economy is huge,” said Kemp, who runs Kemp Partners, a Washington-based investing firm, and is chairman of Sports Properties. “SPACs are hot.”

The New York Time’s DealBook blog explains – Million to Burn, With a Catch:

Here’s how it works: Average Joe buys shares in an initial public offering for an investment company with no assets to speak of other than the pot of money from the I.P.O. The company’s sole mandate is to make one big acquisition. Average Joe has no idea what it will buy. And frankly, neither do the folks running the investment company. It’s a blind bet that the Masters of the Universe will live up to their name.

But, haven’t investors been doing that forever? Isn’t that what the “blind trust” is all about? And how many investors look beyond the historical rate of return in their mutual fund to analyze the portfolio?
Investing has always been about intangibles – especially that intangible of competency. The only question in my mind is not about the blind nature of the bet – but how quickly these things can blow up.

Patent reform update – about the bill

Last week, Senators Patrick Leahy and Orrin Hatch (the Chairman and Ranking Member of the Judiciary Committee, respectively) published an op-ed in the Washington Times – Meaningful patent reform. The piece defends their bipartisan work on the bill and ends with this:

As legislators, we know we are headed in the right direction when everyone is complaining that the entire bill is not going their way. We see this as a necessary, albeit somewhat difficult, part of the legislative process. But we welcome it. But at the end of day, we are confident that we will resolve the remaining issues in ways that should make everyone comfortable and will ensure final passage.
The Senate has a tremendous and historic opportunity — and a constitutional responsibility — to further strengthen our nation’s competitiveness through meaningful patent reform. Now is the time.

Sound like they are building the case for moving ahead soon. I hope so.

The downside of those financial innovations

Steven Pearlstein lays out the problems with the decade of financial engineering — – Time for Wall Street to Pay – washingtonpost.com:

As the industry and its cheerleaders constantly remind us, these innovations have helped to lower the cost of capital and make the business sector more efficient and globally competitive. But what we are now discovering — or perhaps rediscovering — are all the ways in which all this glorious financial innovation has weakened the economy and the society it serves.
For starters, these innovations have helped to create a cycle of financial booms and busts that have a tendency to spill over into the real economy, contributing to a heightened sense of insecurity.
They have shortened the time horizons of investors and corporate executives, who have responded by under-investing in research and the development of human capital.
They have contributed significantly to massive misallocation of capital to real estate, unproven technologies and unproductive financial manipulation.
They have made it easy and seemingly painless for businesses, households and even countries to take on dangerous levels of debt.
They have given traders a greater ability to secretly manipulate markets.
They have given corporations clever new tools to hide risks, liabilities and losses from investors.
And by giving banks the tools to circumvent reserve requirements and make more loans with less capital, they have enormously increased the leverage in the financial system and with it the risk of a financial meltdown.
But far and away the greatest damage from all this financial wizardry is the obscene levels of compensation it has generated for a select group of Wall Street executives and money managers.
For when you look over the long term, at the good periods and the bad, it is obvious that the pay collected by these masters of the universe has been grossly excessive — out of line with the personal financial risk they have taken, out of line with their skills relative to the next-best performers and certainly out of line with the returns earned by investors.

So our task as we look to incorporating intangibles into the financial system is to avoid this pitfalls. It will be a challenge, to say the least.

Rethinking business method patents

From today’s Wall Street Journal — Court to Re-Examine Method Patents:

A federal appeals court in Washington has decided to reconsider the boundaries for so-called “business-method patents,” a controversial type of intellectual-property protection given to methods and processes used by insurance companies, banks and securities-traders, among others.
The Court of Appeals for the Federal Circuit, which hears appeals from lower courts and decisions of the Patent & Trademark Office, said Friday that it has decided on its own to hear the case en banc, or by all 12 of the court’s judges. In its order, issued Friday, the court stated it would re-examine a landmark 1998 case, State Street Bank v. Signature Financial Group, which largely paved the way for the creation of business-method patents.

This could dramatically alter the landscape. For a more detailed discussion, see the Patent Law Blog (Patently-O): Bilski: Full CAFC to Reexamine the Scope of Subject Matter Patentability.