Crafting an Obama Innovation Policy

Athena Alliance has just published it latest report, Crafting an Obama Innovation Policy. Candidate Obama made it clear that long-term economic growth—not just economic recovery—is a priority. The campaign advanced a well-thought-out list of technology policy recommendations. President-elect Obama now faces an opportunity and a challenge. The opportunity is to broaden his agenda into an innovation policy focused on other drivers of growth—not just science and technology. The challenge is to make the best use of existing and new institutions of government to design and implement that policy without getting in each others’ way. This paper outline short-term actions that would signal a commitment to a broad innovation agenda and longer-range actions which could significantly strengthen the nation’s innovation capacity.
The report is an expansion of an earlier posting, and has been forwarded to the Obama transition team.

More on underemployed – and the knowledge tax credit

Yesterday’s New York Times ran a story on the growing number of underemployed – More Companies Cutting Labor Costs, but Not the Labor:

A growing number of employers, hoping to avoid or limit layoffs, are introducing four-day workweeks, unpaid vacations and voluntary or enforced furloughs, along with wage freezes, pension cuts and flexible work schedules. These employers are still cutting labor costs, but hanging onto the labor.

As I’ve noted many times before, this may be a good business strategy but it creates a new economic policy challenge. A part of our demand stimulus — specifically unemployment insurance — is based on people who have lost their jobs, and therefore lost their purchasing power. That type of stimulus will not help restore the purchasing power (and therefore aggregate demand) of people who have wage or hour cuts. Some of the infrastructure stimulus will address the hours issue — but not the lower wages. We need specific policies to deal with the underemployment problem.
As I have argued before, one of the policies would be a knowledge tax credit. Take those slack hours and put people into training programs. That will help replace lost income (and purchasing power) and make the companies and the country stronger in the long run.

Battery consortium

On a related auto note, the battery manufacturers are forming consortia — National Alliance for Advanced Transportation Battery Cell Manufacture — to develop technology to electric cars. According to the Wall Street Journal:

The consortium is modeled on Sematech, the group formed by U.S. computer-chip companies in 1987 to compete with the Japanese. Sematech, based in Austin, Texas, is credited with helping U.S. companies regain their footing by focusing on manufacturing and design advancements with funding from the federal government. “We think Sematech was one of the best examples of government intervention in industry,” said Jim Greenberger, a Chicago attorney at Reed Smith LLP, who is working with the battery consortium.

While I support such consortia and wish the new group all the best, I would caution against too over optimism that this is the solution to the problems. I have some background in both electric cars and Sematech. Back in the early 1980’s, I was involved in a study of the potential of electric vehicles (that study help put me through my Ph.D. program) – and I was licensed to drive the Detroit Edison’s electric cars. The problem back then was batteries – and 25 years later it appears that it is still batteries.
On Sematech, I was involved in the crafting of the legislation creating the group. Originally, Sematech was meant to confront the Japanese memory chip challenge. By the mid-1990’s Sematech stopped being a US competitiveness institution and became an international research organization for the industry – including the non-US industry. Sematech made that decision for very sound business reasons. The industry also felt that it had reached to point that the US industry has stabilized. But the industry was now irrevocably internationalized with no thought that the US could necessarily regain the competitive lead.
The other point on Sematech is that it worked because of Bob Noyce. As one of the inventors of the computer chip, Bob has the eminence in the industry to pull this off. Without someone of Bob’s stature, Sematech could have easily become a failed irrelevancy, as some consortia are. Bob forced the industry to take the effort seriously and to contribute not only funds, but top talent and executive attention.
So I wish the battery consortia well. I would urge two points however. One, find someone who is committed and who has the stature to drive the group to success. Two, be very clear in your goals. Is it a mechanism to advanced research on batteries, manufacturing technology or something else? Is it a means to strengthen the electric car industry – or to help the US manufactures compete – or to keep production in the US? There is enough difference among those goals to cause the effort to fail if it tries to be all things to all people.

Terms of the auto loan – and intangibles

The White House announced a $17.4 billion loan package for GM and Chrysler this morning. According to the Fact Sheet (courtesy of the Wall Street Journal), here are the details:

Binding Terms and Conditions: The binding terms and conditions established by the Treasury will mirror those that were voted favorably by a majority of both Houses of Congress, including:
* Firms must provide warrants for non-voting stock.
* Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
* Debt owed to the government would be senior to other debts, to the extent permitted by law.
* Firms must allow the government to examine their books and records.
* Firms must report and the government has the power to block any large transactions (> $100 M).
* Firms must comply with applicable Federal fuel efficiency and emissions requirements.
* Firms must not issue new dividends while they owe government debt.

In addition, according to the New York Times, the loan would be called for immediate repayment if the companies cannot meet a viability standard by March 30.
What is unclear is the government’s recourse in case of bankruptcy — which would likely be triggered by calling in the loan. The government’ would get first claim on the companies’ assets, include the intangible assets such as the patent portfolio. (Generally, as I understand it, if it is not explicitly included, IP is automatically included. The problem is finding out if someone else has a claim on those assets — including a license.)
But what would the government do with those assets? There is a great opportunity to use this as a case study in the value of intangibles. The deal gives the government the right to look at the books and records. Treasury should use this power to go in and find out what the companies are really worth — specifically in terms of their intangibles assets. Such an audit would set a standard and raise the awareness of the issue.

TIME’s 50 Best Inventions of 2008

Apropos yesterday’s posting on broad innovation policy, come this story in TIME on the 50 Best Inventions 2008. We may still be gadget oriented when it comes to the word “invention,” but the TIME’s list has a couple of social and process (non-technological) inventions on the list, including MacroMarkets, co-founded by economist Robert Shiller, which will offer the first exchange-traded funds on housing prices; the Vatican’s new Seven New Deadly Sins; the proposal for new short-term housing refinance; the “Branded Candidate” ala Obama; the use of instant replay in baseball; and Montreal’s Public Bike System, nicknamed Bixi. My favorite “invention” was Number 36. The New Ping-Pong Serve:

German Olympian Dimitrij Ovtcharov’s serve isn’t about power. It’s about weirdness. Crouching to table-level, he peers over his paddle and executes a hand dance before launching the ball at his opponent, who is probably too dumbfounded to respond. Which, of course, is the point.

As they say, whatever works.