According to Sanford C. Bernstein's Vadim Zlotnikov, there is now a higher percentage of technology companies trading at more than twice the market multiple than at the peak of the bubble. Out of a universe of 600 tech companies, 55% are trading at more than twice the overall market multiple on 2004 estimates. (That figure includes profitless companies.) In March 2000, the figure was 49%. ... The fate of tech stocks could well lay, oddly, in the hands of the central banks of Japan and China. They have been steadily been buying Treasurys, keeping interest rates low. If they stop playing that tune, tech stocks are likely to be the sector left chairless. [JESSE EISINGER, Wall Street Journal, Dec 31]
During the 1990s, people thought modern-day alchemy had been discovered in the transformation of electrons, optical fibers, and secret programming codes into market value. But innovation does not automatically lead to profits. Economic history teaches us that when a wondrous new product is invented, its price generally falls as other firms enter and imitate the product, rapidly eating away at the profits. In fact, with a few exceptions, companies producing innovations on average earn no more than a normal return on their investments. Virtually anyone could, and apparently did, set up a dot-com making use of the Internet, and the market was flooded with electronic greeting cards, on-line grocery shopping, free Internet service, and similar companies that were losing money in order to make sales. After the gold rush ended in 2000, according to recent data, new economy firms appear to have earned lower profits than those in the rest of the economy. [WD Nordhaus, New York Review of Books, Jan 15, 04]
9. Anything can happen for a while! As Schumpeter said, only “when things have had time to hammer logic into men” is it safe to assume that some level of rationality will characterize economic outcomes. Market discipline and economic natural selection constrain outcomes over time, but in the short run “anything can happen.” [remarks of Sidney Winter on the life of Dick Nelson (economist)]
Worldwide spending on computer-related equipment and software will rise as much as 8 percent next year as the economy improves and companies replace aging machines, market researcher IDC said. ... While spending may never return to the 15 percent annual gains of the 1990s, Framingham, Mass.-based IDC said corporations are no longer freezing their budgets.
Let’s call it trickle-down technology: the tendency of high-end renovation, and even military research, to eventually work its way down to mundane, even tacky consumer items. For example, could the inventors of the original laser, struggling in labs during the 1950s, have ever imagined that their research would lead to the combination laser pointer/windproof cigarette lighter? [Peter J. Howe, Robert Weisman and Chris Gaither, From high tech to mall tech , Boston Globe, Dec 22]
What do you think were the technological lessons of 2003? Internet Time: Today's leader can become tomorrow's also-ran before you can say "AltaVista." ... You Never Have Enough Storage Bill Gates, famously, once said that 640 kilobytes ought to be enough for anybody ... You Never Have Enough Bandwidth ... Mobile Gets a Little More Mobile ... [Tim Hanrahan and Jason Fry, Wall Street Journal, Dec 22]
Tennenhouse threw millions at sensor research. He set up an Intel facility at UC Berkeley and told his researchers to use their imagination to develop new configurations and applications. Three years after that landmark trip to the East Bay, Intel's sensor investment remains trivial compared to the billions it has plunged into, say, the new Centrino wireless chip or its Flash memory business. The entire annual Berkeley lab budget is about $5 million. But in this case, Intel is acting more like an angel investor - one with $15 billion in the bank - feeling around in the dark for something that's not only different, but transformative. [Brendan I. Koerner, "Intel's Tiny Hope for the Future", Wired Dec 03] Millions for innovation, billions for established products. Just like the government's approach to SBIR. Existing programs have iron triangles of vested interests that form a defensive budget shield to grab every available dollar by arguing present benefits over future breakthroughs.
Technology Review's tally of R&D spending at 150 top technology companies shows good news and bad news. In telecom and electronics, budgets have been slashed. But the overall total of R&D spending is up more than $4 billion over last year--the increase led by the biotech and automotive sectors. Our data-rich table (an expanded version of the one that appears in the print issue of Technology Review) ranks the R&D investments by companies in every corner of technology.
If anything is dead, it is the notion of monolithic computer architectures built on closed, proprietary operating systems and databases. "In 1975, the thought of a Pentium chip was unfathomable," he adds. "Years from now, we are going to do things at a scale that is inconceivable today." [MARK VEVERKAM , Barron's, Nov 17]
A group of Valley corporations has formed the Arizona Business Accelerator to help commercialize technology innovations. the non-profit corporation AzBA. will offer help with product development, business infrastructure development and management, capital formation for proof of concept and revenue development. AzBA clients will include entrepreneurs and corporations spinning off products or looking for new ones. Fees will be customized but will be a combination of modest cash charges and equity, he said. Founding organizations include Pinnacle West Corp., Avnet Inc., Dial Corp., St. Joseph's Hospital and Medical Center, Bank of America and McMurry Publishing Inc. . [Arizona Republic, Nov 13]
Silicon Valley's companies clearly have improved dramatically. Almost half of the Silicon Valley public companies have announced their third-quarter results: For the 167 public companies reporting, sales rose 12%; As a group, they also showed a profit of $1.66B, a turnaround from the loss of $4.4B a year ago. Intel contributed $971M toward the improved earnings, Without Intel's profit, the remaining 166 companies would have broken even as a group. Of the 167 reporting, nearly half reported a profit. A year ago, of the same companies, only 38% were profitable. Two-thirds increased their sales in the third quarter from a year ago, an encouraging sign that the deflationary pressure on prices is letting up. [David A. Sylvester, San Jose Mercury News, Nov 12]
Job creation, like innovation, can occur almost anywhere. China, India, South Korea, and other nations are replicating the structural advantages that have made the U.S. the center of innovation. These nations are becoming very competitive, and it would be naive to believe that phenomenon is based solely on wages. They are investing in education and job skills; teaching their citizens the languages of modern commerce (English, software, genomics, and finance); and building modern network infrastructures. .... government will have to ask if it is investing sufficiently in innovation, not just basic research. We need government to focus in areas that play to the strengths of U.S. industry and deliver the greatest economic leverage. [Sam Palmisano, Business Week, Nov 17] Don't bet, Sam, on government fostering innovation. Just look at the mediocrity it has made of SBIR.
| Nanoelectronics happens to be one of Lieber's specialties. Yet he is not convinced that it will ever be able to compete economically with more conventional forms of chip manufacturing. After all, as long as the chip industry continues to spend billions of dollars on R&D, Moore's Law will hold out. Rather than try to make a Pentium out of nanomaterials, it might be better to use some of the novel properties of these materials to find a completely different way of computing. [Erick Schonfeld, Business2.com, November 07, 03] | The frontier is exciting as long as it’s mostly filled with pioneers—people who are willing to live with the rustic leading edge of technology. But as soon as new people move into town—when the roads get paved and the housing projects get put up—we discover that the problems on the now-conquered frontier aren’t all that different than the problems that we thought we left behind. [Simpson Garfunkel, MIT Tech Review, Nov 5, 03] |
Mark E. DuVal describes the strains on cash flow that keep biotechnology start-up companies from taking hold in Minnesota. Among the solutions he offers is direct state funding of biotechnology. Is this a good idea or should biotech fend for itself? DuVal answers his question in The biosciences play: A real-life example [Minneapolis Star Tribune, Nov 3]
a surge in business investment in computers and software came as no surprise to the team at Reel FX Creative Studios, a producer of special effects for television commercials and movie studios. This year, it has purchased 80 new machines that render the computer-generated images that are the company's products ... Business investment in technology is finally picking up across much of the American economy.... business spending on information technology - computer hardware, software and services - increased at an annual rate of more than 15% ... [Steve Lohr, New York Times, Nov 1] Good news for those SBIR companies who have realistic hopes of selling their technology to real markets. The government-only companies can keep hoping that SBIR continues to buy their stuff one R&D project at a time.
the Cheap Revolution (e.g., the combination of cheap technology, excess capacity and Internet-based pricing arbitrage) is exerting a powerful deflationary gravity. Solutions: Low disruption or high disruption. Low Disruption means leveraging the Cheap Revolution for all it's worth to introduce products and services that are stunningly cheap yet make money because their cost basis is so low. Think Google. and throwaway servers; open-source software; Wi-Fi; voice-over IP; radio-frequency identification chips; Web services from Salesforce.com, RightNow or the new Siebel/IBM alliance; network applications from One Network Enterprise; utility computing from Mercury Interactive; "on-demand" computing from IBM; programmers working from India; engineers from China; and Web designers from Estonia--just to name some. ... High Disruption is what BMW, Mercedes and Lexus did to Cadillac and Lincoln in premium automobiles It is what Pixar is doing to Disney in animation. the act of directing a premium product or service at today's affluent customers. ... To learn more about Low Disruption, read The Innovator's Solution: Creating and Sustaining Successful Growth by Clayton M. Christensen and Michael E. Raynor. The best book on High Disruption is Trading Up: The New American Luxury by Michael Silverstein and Neil Fiske. [Rich Karlgaard, Forbes, Nov 10,. 03]
A boundary line of manufacturing history cuts across the factory floor of Siemens Hearing Instruments in Piscataway, NJ. On one side, skilled technicians use casting techniques, precision tools, and years of experience to craft the acrylic shells of hearing aids modeled from silicone impressions of actual ear canals. On the other side of the factory floor, two pizza-oven-sized machines create similar shells from nylon dust. Inside the machines, needles of laser light, guided by digital design files, robotically scan back and forth, cinching paper-thin layers of dust into tough strata of plastic. Four hours and several hundred laser sweeps later, a batch of 80 hearing-aid shells is completed. The process saves hours of human labor and produces hearing aids that fit and sound better than traditional ones. It works so well that Siemens, the world’s largest maker of hearing aids, is completely switching to the technology at several factories [Ivan Amato, MIT Tech Rvw, Nov03] Labor hours down, costs down, means national jobs down? Only in a narrow view. Capital replacing labor often means more and better jobs in the capital equipment creation industries. That's the way a high tech nation maintains its edge on the rest of the world in profit creation Politicians of course want it both ways: more productivity and more jobs (and more re-election). It's thus best to ignore the political posturing whenever jobs is mentioned.
My colleague Robert Laubacher and I see the emergence of an “e-lance” economy. “E-lance ”stands for electronically connected free-lancers. In this world, many of the things that are today done by large corporations could be done by temporary combinations of very small companies, in many cases even individual freelance contractors. [Thomas Malone, MIT Tech Rvw, Oct 24]
Doerr Watch: The über-VC of Silicon Valley, John Doerr, is at it again. He (along with New Enterprise Associates) is backing a stealth energy-technology company. That much I've confirmed. What the company aims to do is still a mystery. (Anyone with hard info, please e-mail me.) The rumor is that it is developing a fuel cell to power homes and small buildings by producing energy for less than 9 cents/ KW. That would be cheap enough to jump-start the much-awaited era of distributed power, where homes and offices generate their own supplementary power that can be fed back into the grid during off-peak hours. But there is another unconfirmed tidbit floating around about this stealth startup. It seems that there is a slight technical problem that still needs to be worked out: The fuel cell gets superhot, as in 800 degrees Celsius. Sounds like another "Ginger" disaster waiting to happen. [Erick Schonfeld, Business 2.0, Oct 25]
Investors who believed in Mr. Gilder's wildly optimistic predictions about the telecommunications revolution, on the other hand, spent the last few years watching their portfolios unravel. Now, slowly but surely, portions of the telecom industry are recovering. ... His newsletters had 110,000 subscribers. today, with just 8,500 subscribers. ... Through the years, he has been building his own version of a socioeconomic unified field theory, integrating politics, sex, economics and technology, with a dose of religion thrown in. ... Then reality intervened. Demand for bandwidth, it turned out, was not what everyone had thought it would be. [KATIE HAFNER, New York Times, Oct 19]
One of the founding fathers of the nation's high-technology industry warned in dire terms yesterday that U.S. dominance in key tech sectors is in jeopardy, threatening the country's economic recovery and growth. ...[Andy Grove sees ] China and India as key threats. India's booming software industry, which is increasingly doing work for U.S. companies, could surpass the United States in software and tech-service jobs by 2010, he said. More ominously, Grove said, the software and services industries -- strong drivers of U.S. economic growth for nearly two decades -- show signs of emulating the struggles of the U.S. steel and semiconductor industries. [Jonathan Krim,Washington Post , October 10] When a technology becomes a commodity, efficiency and cost dominate, not innovation. SBIR companies with eyes on growth and profit take note -no not the ones who just want to feed at the government trough - that the pool of partners to exploit your technology, especially info-tech, is shrinking and moving to other countries. You can actually make deals with them to prove your marketability in agencies that care about marketability and are not paranoically nationalistic.
Looking for high-speed connections on the road? They're coming with some considerable birthing pains. My recent drive cross country found a variety of conditions. Three hotels advertised high speed internet on their websites. . The cabled Springhill Suites (Seattle) worked fine; Comfort Inn (Kent WA) worked fine; the cabled Comfort Suites (Springfield OH) did not work; the Days Inn (Grinnell IA) had no such stuff. Four hotels had unadvertised service. BW GranTree (Bozeman MT) wireless worked great; BW Sheridan Center (Sheridan WY) cable did not work; Comfort Suites (Council Bluffs IA) worked sporadically; BW Airport Inn (Moline IL) wireless worked sporadically. 1. If it is advertised, do not rely on its working and certainly do not rely on the staff to know anything about it; 2. if it is not advertised, ask for it, but consider it a bonus if it actually works. . If the hotel advertises "computer hookup" that does not mean high speed; it just means convenient plug in places for your modem. OK, so you'll never be in Bozeman or Sheridan! It is coming; with more hotels advertising and offering it, the competition to offer it will increase in places like Tucson and Cleveland. Today's Wall Street Journal (Oct 8, 03) also says that hotels are installing high speed in the never-ending competition for customers.
It seems that tech banking is growing up. Just as the junk-bond business settled down after .. 1990, tech banking is evolving into a more normalized operation at many investment banks. One big reason is that most of the tricks that Wall Street used to pump up IPO prices are now forbidden. ... And since Wall Street has drastically downsized its tech-banking teams -- by 70% -- bankers are pickier about which potential IPO candidates they will spend their time wooing. Many IPOs are not getting to market at all. Only 10 U.S. tech and Internet-related startups have gone public so far this year, down from 365 in 1999. In the '90s, the average was 155 a year. [Emily Thornton, Business Week, Oct 6]
SIGNS OF AN ECONOMIC RECOVERY ABOUND. Tech shares have climbed to frothy valuations. Corporate chieftains are finally planning to cut some checks to buy gear and software next year. The semiconductor industry is picking up. Personal-computer makers are optimistic. [MARK VEVERKA, Barron's, Oct 6] the Philadelphia Stock Exchange Semiconductor Index, commonly known as the SOX, closed at 214.06. It has rebounded nicely, closing on Friday at 449.12 .But it is still a long way from the peak of 1,332.73 it reached on March 10, 2000. [KENNETH N. GILPIN, New York Times, Oct 5] And for last week Ibis was up 33%.
Innovate or Die. Clayton Christensen has produced a sequel to his Innovator's Dilemma - THE INNOVATOR'S SOLUTION; Creating and Sustaining Successful Growth. Like most sequels it offers more evidence of the theory expounded in the original, at the expense of losing freshness. Reviewer Robert Hof (Business Week, Oct 6) says The only problem with the book is a paucity of examples showing how established companies have overcome the dilemma and capitalized on new innovations themselves.
Talk Innovation. Sloganeering as public image making for General Electric. "Imagination at work" will replace "We bring goods things to life." which displaced "Progress is our most important product." Talk isn't even cheap when you're GE and have to remake all the ads. Much of the impetus, though, is the need for the new CEO to deny he is his predecessor Jack Welch whose inage machine always ran in overdrive. GE's R&D budget is still rising (to $2.6B) which includes $100M for a new lab in the wilds of the Mohawk Valley. The R&D VP says, Ultimately, though, the culture here is such that if your invention doesn't end up going to the marketplace with a GE sticker on it, then we've failed. It's that simple. Getting patents, publishing papers -- these are all important things, and I give the guys kudos for doing all that. [story from Business Week, Oct 6]
According to Baumol, innovation is the tour de force delivering a level of economic performance unmatched by any rival economic system. [David Audretsch, Journal of Economic Literature, Sep 03, reviewing The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism the Growth Miracle of Capitalism. By William
Public Progress. Although the NASDAQ fell 3% Wednesday, a semiconductor company, AMIS went public raising $600M. But the leading percentage loser, Zarlink Semi, was also a semiconductor company that has seen its stock plunge with the bubble from $30 to $1 and now back to $4.
Nathan Myhrvold, a former top Microsoft researcher, blasted IBM and AT&T for retreating from basic, long-term research. ... Myhrvold said IBM and AT&T Bell Labs are doing some good work, but they are "shadows of their former selves." IBM views its mission as the "near-term health" of the company, which is a "disastrously stupid thing to do," said Myhrvold. With IBM collecting billions of dollars a year in patent and technology licensing, the "rational thing to do if you are running IBM," would be to "shut the rest of it down and do research," he said. AT&T's Bell Labs is in an even more dire financial position, with most of the company losing money while long-term patents provide hundreds of millions of dollars, Myrhvold said. [Steve Burke, Tech Web, Sep 24] What. large bureaucracies focusing on short-term results? Just like much of the government mission agency R&D, including and especially their SBIR.
Got A Better Idea? Be Prepared and Be Persistent. It's hard to walk into a building and show 2,500 engineers something they should have done, says inventor Paul Fenelon who found a fortune buried inside the door of his Lincoln Town Car. A dramatically new window regulator that is less than half the weight of the arm-and-sector design, 2 pounds rather than 5. It is quieter by 5 to 10 decibels. It requires 40% less electrical power and has just 10 components, as opposed to 24. It also requires no grease, a huge nuisance in assembly plants. So prove it! In order to win over manufacturers, Fenelon had to test his invention seven ways to Sunday. He built a contraption that opened and shut the windows of a modified Ford Explorer 35,000 times. He installed his device into a Ford Crown Victoria, the model abused by so many cops and cabbies, and slammed the door 100,000 times to see if vibrations would wear it down. [
What do these towns have in common: Albuquerque, Austin, Bentonville, Dayton, Denver, Omaha, Racine and Tacoma? They are the birthplaces of firms that created 17 of the top 25 personal fortunes. ... put your chips on cities that: a) attract smart people; and b) are low-cost enough to incubate a business so it won't need much outside capital, which is dilutive to wealth building. In other words, look for cities with these attributes: Universities. Especially those with strong science and engineering; Stellar K-12 education. Smart people want smart kids; Capital for experimentation. This is an underrated factor. The presence of local funds for research and development; Capital for business risk. Necessary but overrated. The best entrepreneurs bootstrap and only much later take outside money; Low taxes and light regulations. [Bit of a free lunch syndrome here because schools and infrastructure cost real money]; Love of creative mess. Central planning always fails; Inclusive optimism. The best places welcome outsiders; Respect for the risk-taker. [Rich Karlgaard, Forbes, Oct 4] Governments, local, state, and federal, take note. Government schemes like VC funds aren't the place to put your tax dollars for economic growth; they will be taken over by people with the wrong agenda. Build an infrastructure, a hard job in politics that looks for the quick hit and press release before the next election. (Witness Steven Pearlstein's essay The High Cost Of Not Spending To Modernize , Washington Post, Sep 24)
I hate being sold. New-product propagandists annoy me. Innovation entrepreneurs oozing charisma over their brilliant ideas also fail to persuade. As the poet observed, “A man convinced against his will is of the same opinion still.” In other words, while I’m happy to change my mind, I’d really rather change it myself. That do-it-yourself attitude is at the stubborn heart of a major marketing dilemma for innovators. Persuading potential customers that your innovation is indispensable is one thing; getting them to persuade themselves of that fact is quite another. ... The challenge for innovators is to get potential customers to taste, sample, and play with technologies that reduce their natural—or acquired—resistance to innovation. [Michael Schrage, MIT Tech Review, Sep 22] SBIR proposers have an easier problem - the feds MUST spend money on SBIR. If they have to choose among inferior ideas, too bad. Real customers, though, have the option of buying nothing, and often have to convince some boss to spend on your product.
Your technology will spread through the world, say Comin and Hobijn of the New York Federal Reserve Bank, in a pattern of trickle-down diffusion that is remarkably robust across technologies. Most of the technologies that we consider originate in advanced economies and are adopted there first. Subsequently, they trickle down to countries that lag economically. Our panel data analysis indicates that the most important determinants of the speed at which a country adopts technologies are the country's human capital endowment, type of government, degree of openness to trade, and adoption of predecessor technologies. We also find that the overall rate of diffusion has increased markedly since World War II.
Innovation Mantra Not Enough. Microsoft (and nearly every other technology company) likes nothing better that to wrap itself in the flag of "innovation." It's what these companies talk about when they can't come up with a good example of how a customer will use, enjoy or otherwise profit from what they're currently selling. [Lee Gomes, Wall Street Journal, Sep 22] Innovation should also not be confused with an advance in knowledge. Many SBIR proposers offer nothing more than giving the government more knowledge than it had before; if the government wanted only that, it could get it with a lottery among the horde of decent scientists in the USA. Whatever you offer has to mean some value to someone willing to pay for such value.
Economic forecasting is difficult. That's not because economists are dim, or influenced by conflicting agendas. It's because they're human and are no better than the rest of us at seeing the future. What they can do better is work with sophisticated mathematical models that analyze lots of past data and one way or another suggest that if this, that, and the other thing happen, the economy (or some portion thereof) will do such-and-such. [Marc Gerstein, Multex Investor, Sep 22]
Small businesses create three out of every four new jobs, make up half of our GDP, are responsible for a majority of innovations, and represent 99% of all employers. So the House of Representatives' Small Business Committee has created the Small Business Index, reflecting the current economic conditions facing small businesses. The only trouble is that the index is at a five-year low, down more than a third since the peak in 2000. In the second quarter of this year, the index stood at 72.16, down from the first-quarter level of 72.39. If small businesses are so important, it will be extremely difficult for the U.S. economy to fully recovery without them. [Seattle Times, Sep 21]
Most slide presentations are as excruciating as a badly dubbed chopsocky action flick. So we sought help from the black belts of this mysterious craft. 1. Stun them with wordplay; 2.Beware the fonts of fury; 3. Plot your moves craftily; 4. Illuminate your words; 5. Make brevity a virtue; 6. Control your impulse to go Hollywood; 7. Be at peace. [Anne Schukat; Business 2.0, Sept 03] As a government guy with money to pass out, I saw far too many slide presentations that sent the wrong message. Most presenters told what they new best with little regard for what I wanted to know about their technology and their company. CEOs did much better because they were interested in how the technology could go somewhere. Whatever you do, DON'T show word viewgraphs; either you have to read them to the briefee or you have to force the briefee to listen and read different words at the same time . Pictures that tell your story crisply and unforgettably, figures of merit that whose significance the briefee can grasp, a concise description of what you want from the briefee.
Building a Better R&D Mousetrap By posting their scientific conundrums online, companies like Eli Lilly and Procter & Gamble have discovered a rich new source of brainpower. ... Instead of relying solely on the company's 6,000 researchers and occasional help from outside firms, he could put those puzzles to thousands of bright freelance minds -- easily reached through the omnipresent ... In 2001, Lilly decided to test Bingham's idea. It invested a few million dollars to launch a startup, called InnoCentive, to serve as a kind of Internet dating service,... Bingham would put a bounty on the answer -- for example, offering $2,000 to anyone who could devise a cheaper process for making BTCA, a chemical compound used to manufacture polyester and carpets. ... InnoCentive charges clients like P&G about $2,000 to post an online query, which now carries an award ranging from $5,000 to $100,000. Freelancers who think they've nailed problems submit confidential reports or ship solutions they've made in their labs; then InnoCentive staffers either validate or disqualify the work. .... Researchers must agree to work on spec, and must relinquish all rights to the research. ... InnoCentive boasts a 40 percent solution rate .... 53% of InnoCentive's researchers live outside the United States. [Paul Kaihla, Business 2.0, Sept 03]
there are still good reasons to believe that IT will have at least as big an economic impact as electricity, with average annual productivity growth of perhaps 2.5% over the coming years. One is that the cost of computers and communications has plummeted far more steeply than that of any previous technology, allowing it to be used more widely throughout the economy. Over the past three decades, the real price of computer-processing power has fallen by 35% a year; during 1890-1920, electricity prices fell by only 6% a year in real terms. [The Economist, Sep 13] When you propose a handout from the government, you ought to have some higher goal than your being smarter about some technical stuff. Productivity is a great selling point for industry, although SBIR managers are not likely to be turned on by it. But the non-mission agencies, might have a manger or two thinking about national goals. Whether the particular agency values productivity gains or not, it is good practice and shows your strategic thinking to analyze your technology as a productivity tool. If you are going to sell it later, your highest goal, you will have to make convincing talk about it then.
Bottom line: Despite the lessons of the tech and telecom bubbles, speculation is very much alive again on Wall Street. ... The 18-member semiconductor index has risen 56% and the Street.com's Internet index is up 57%, ... The Amex biotechnology index is up 42% year-to-date .... Semiconductor capital-equipment stocks are being touted by numerous Street analysts, based on 2005 price/earnings ratios, partly because it's nearly impossible to justify buying them based on multiples of more proximate earnings. ... there isn't much room for disappointment [ANDREW BARY, Barron's, Sep 15]
Every month at Merck, groups of scientists in different areas of disease research gather to evaluate the latest breakthroughs. But the innovations they haggle over don't come from Merck's own laboratories. They're generated someplace, anyplace, else: journals, conference reports, patent literature, and visits to other labs. "We scour the world," says Merv Turner, Merck's senior vice-president for external research. At the end of the meetings, each group typically flags a couple of innovations for a small team of scientists to investigate. Last year, one of the brain trusts tagged Amrad Corp., a tiny Australian biotech company that's working on a promising drug to treat respiratory diseases. By June, Merck had ponied up $5 million to seal an exclusive license and a multiyear research collaboration with Amrad that one day could be worth $112 million. It's just one payoff from Merck's "very aggressive antenna function to survey what's going on in the outside world," Turner says. Welcome to the future of corporate research. [Jay Greene, John Carey , Michael Arndt, Otis Port, Business Week, Sep 22] What works for Merck could work for the government, and simultaneously work for the US economy, if the government would let it. Outsourcing R&D ideas in programs like SBIR to be more driven by company breakthroughs than driven by government ":requirements" would bring in a lot more exploitable ideas.
What is the single most important ingredient for technological innovation? MIT Tech Review voters say Money 13%, Creativity 64%, Hard Work 22%.
News items cadged from MDA's
Tech Transfer pages:
Nitronex raises $11.3 million in Series
C funding;
Cree launches production of its
RazerThin LED products;
NVE reports commercial product revenues
more than double in first quarter;
Celsion announces $9.6 million in new
capital;
Kyma Technologies obtains $4 million in
its Series B round of funding;
Boston Applied Technologies introduces
new generation of Acrobat polarization management devices; .
Third Wave Systems will provide high
speed machining simulation support to Stork Fokker for Joint Strike
Fighter
program.
The good tech news is here. Fundamentals in technology stocks might be better than at any time in the last three years. Demand is up, as people are buying cellphones and PCs and businesses order info tech. But it's just not good enough. Things are neither better than expectations, nor do they justify valuations. It should surprise no one if traders start selling on the news. [JESSE EISINGER, Wall Street Journal, Sep 10]
Innovators who keep their eyes open for unexpected results—and quickly take advantage of them—reap the biggest rewards. ... In his book ”Why Innovation Fails”, Carl Franklin quotes an intriguing study by three academics [who] looked at 197 product innovations, of which 111 were successes and 86 failures. ... the products that failed were based on cutting-edge or untested technology, followed a “me-too” approach, or were created with no clearly defined solution in mind. ... But the clear winner in the innovation stakes was “taking advantage of random events”, which generated 13 times more successes than failures. ... Weeding out the likely losers early in the innovation chain before development costs escalate would free up untold resources to apply either to widening the search for new ideas, or concentrating all efforts on the surviving few. [The Economist, Sep 6, 03]
to be great you have to defy popular opinion or the status quo. However, I admit that we can also learn from Napoleon's downfall. Entrepreneurs succeed when they see what others don't, when they get ahead of the market. Entrepreneurs fail when their vanity and their success blind them to their faults. They succeed by seeing what others can't, and fail by refusing to see themselves. [Dale Dauten , the Corporate Curmudgeon, Minneapolis Star Tribune, Sep 3]
technology innovation works a lot like a forest: Fires periodically sweep through, seeming to destroy everything. Yet before long, grasses and wildflowers sprout from the ashes in a timeless cycle of renewal. Today, tech is poised between the dying embers of the bust and the first green blush of the upturn. It's in fallow periods like these that the seeds of tomorrow's Microsofts and Ciscos sprout. ... maybe what I discovered has a chance to produce something big. Indeed, the journey itself made me realize things weren't as dead as they seemed. It's possible the catalyst for tech recoveries is really the collective efforts of these kindred souls, all striving to zero in on what's next. Maybe that quest never really ends. [Robert D. Hof, Business Week, Aug 25] One place you can be sure where the forest will NOT sprout is SBIR awards for projects that merely paint existing tree leaves a different color.
Is there now less incentive to use innovative products? A. (Nick Carr) Almost any innovation can be replicated by competitors. So it's not enough to be the first company to use this new, innovative technology and thus gain an advantage over competitors. The question is: How long is that advantage going to last? As the first company investing in it, you're going to pay a lot more, so you have to be assured of having that advantage that allows you to charge more or produce at a lower cost long enough to recoup that investment. The advantage that it has provided simply isn't lasting long enough to make it economically worthwhile.
The biggest danger to U.S. workers isn't overseas competition. It's that we worry too much about other countries climbing up the ladder and not enough about finding the next higher rung for ourselves. [By Michael J. Mandel, Business Week, Aug 25]
High technology's main street is showing signs of life again. ... Ideas for start-ups are bubbling, and infusions into early-stage companies were up 43% in the second quarter ... After three years of tight budgets, corporations are eyeing new technology, particularly products that can buoy in-house research and development or guarantee a rapid payback in cost-savings. Entrepreneurs, some of them victims of corporate layoffs, have had time to formulate more pragmatic ideas that fit the changed environment. ... Mayfield's Allen Morgan likens the environment to the aftermath of a forest fire: "If you look up, you only see scarred pines, devastation and you miss the point. If you look down, there's a profusion of damned near everything growing out of the ground." [Ann Grimes, Wall Street Journal, Aug 28] As always, unless you intend to peddle your technology to the cost-insensitive Defense Department, it has to make economic sense for industry to buy it.
While semiconductor investing remains flat, interest is high in start-ups aiming to solve one of that sector's biggest problems: how to minimize the heat generated by ever-shrinking, more powerful and cheaper computer chips. It's nice to have a little laptop, but not one that burns your knees, says Alexander Wong of Apax Partners.
Industry executives are salivating over the streams of new, valuable physiological data from sensor-wearing patients. With a few fairly brilliant algorithms, researchers hope to predict impending heart attacks or strokes, using the data to create a new service business. Says
Meeting of the Mindsets Philosophers and scientists have long inspired one another, swapped ideas, and sometimes clashed. Explore the results of this interchange at the Stanford Encyclopedia of Philosophy edited by Edward Zalta. Topics include a host of thinkers, ideas, and works that made an impact on science, along with scientific discoveries and approaches that shaped philosophy. Experts from around the world write the entries and keep them up to date. You can read up on the work of Karl Popper, the influential Vienna-born philosopher who in the mid-1900s insisted that instead of being provable, scientific hypotheses must be falsifiable--disprovable by experiments or observations. Or delve into the mind-bending implications of the "many worlds" interpretation of quantum mechanics, which posits the existence of multiple parallel worlds in which all possible quantum outcomes play out. The encyclopedia has grown from two articles in 1995 to hundreds and is still expanding; future entries will tackle topics such as sociobiology, artificial intelligence, and Aristotle's work on physics. plato.stanford.edu/ [Science, Jul 4]Reap the Wind Don Quixote would quickly run out of lances in Denmark, a country that produces about 15% of its power with windmills. This site sponsored by the Danish Wind Industry Association promises to teach visitors everything they want to know about wind power "short of becoming wind engineers." Breeze through the site's FAQ or dive into in-depth discussions of engineering, turbine location, economics, and environmental benefits and costs. For example, turbines with one or two blades are cheaper and lighter than the three-bladed models, but they are noisier and must spin faster to produce the same amount of energy. Although wind power is pollution-free compared with fossil fuels, it does take a toll on the environment. The whirling blades kill birds, the site notes, but far fewer than fall victim to cars and powerlines. www.windpower.org/en/core.htm [Science, Jul 4]
Technology is a queer thing. It brings you great gifts with one hand and it stabs you in the back with the other. -- CP Snow
May You Live In Interesting Times Larta VOX Publisher Rohit Shukla argues the U.S. can't have it both ways, calling for free trade and the opening of markets when we want to sell products and services to other countries, and then balking and backtracking when the shoe is on the other foot.
"The New Economy" demonstrates a welcome awareness that high-tech innovations may have little economic impact by themselves: "General-purpose technologies do not arrive fully formed, accompanied by a grand design or blueprint describing how they should be used." It is only when new technologies are followed by equally radical changes in business practices and modes of production, in a "symbiotic relationship between technological and institutional innovation," that periods of great economic prosperity can unfold. [Peter Dizikes, reviewing 'The New Economy' by Roger Alcaly, Washington Post, Jul 13]
Silicon Valley Is Acting Like It's 1999. In what appears to be a repeat of the '90s boom, stocks of unproven tech firms are soaring as venture funding and the IPO lineup are growing. "Please God, Just One More Bubble." ... "Part of the advantage of Silicon Valley is that it has no memory. That's how it can continue to innovate. [David Streitfeld, LA Times, Jul 13, 03]
there are signs that business spending has stopped its long decline and is even beginning to inch back up. But there's just as much evidence that businesses are still wary about making new investments: Many are now optimistic enough to consider new purchases but not enough to follow through on them. That means frustration for entrepreneurs [GREG IP, WALL STREET JOURNAL, Jul 7]
In 1999, US organizations spent over $250B on research and development, according to the US Department of Commerce, and this is growing at over 8% a year. The return on investment for successful R & D is extremely high. Companies generate $18.70 in sales for every dollar of investment in R & D. Innovative companies, defined by "percentage of revenue generated from products less than 5 years old", experience profit growth at four times the rate of non-innovative organizations (Source: Business Horizons, 1996). [Imaginatek, Jul 03] What do you think the return to the nation is on SBIR spending? Forget asking, the feds will never measure it. Not only do they not know how, they don't want to learn.
Capital spending dropped at an annualized pace of 4.8% during the first quarter.Ouch.Want more? Capital spending is down 14% from late 2000. Business spending in the first quarter fell to a low since the third quarter of 1998. New orders for non-defense capital goods, a pretty reliable predictor of near-term spending, also have been falling. Companies are willing to spend to keep equipment and operations running, springing for an extra toner cartridge, but that's about it.... Despite the plunge in interest rates during the past year, companies aren't borrowing money to expand their businesses. Sure, they're heading to the bond market to raise money. But more often than not it's to refinance existing, higher-rate debt or to replenish ailing pension plans.... Lower interest rates are nice, but the economy got into this mess because companies spent, invested and otherwise blew through much too much money during the past decade. There's an overload of capacity in many sectors, which feeds the deflation chatter.[GREGORY ZUCKERMAN. THE WALL STREET JOURNAL, Jun 27]
Experts reckon an enterprise has to start with around 3,000 bright ideas if it is to come up with 100 worthwhile projects, which, in turn, will be winnowed down to four development programmes for new products. And four such development programmes are the minimum needed to stand any chance of getting one winner. [The Economist, Jun 19] Attention, government technocrats: a bright idea is something new, not an improved computer model of a rocket plume.
hundreds of millions of dollars are being raised on the promise of the next big thing - the "optical chip."... our offices, homes, cars and in some cases even our hearts, could not function without the power of the microchip. ... Like LNL, Infinera said its chip controlled photons at micron levels - roughly 1/50 the width of a human hair - and could be modified easily to fit into any piece of optical-networking equipment. ..But, consider.... [The Promise of the Optical Chip, By Jim Lorick, LARTA, Jun 23]
Having a bad quarter in a for-profit firm (no, not an SBIR mill, a real for-profit)? Dump all your bad news into that quarter. Contract electronics manufacturer Solectron posted a huge net loss for its latest quarter, in part from its latest restructuring effort, and forecast unexpectedly weak performance in the current quarter..... The latest quarter's results included a $1.92B goodwill write-down, a $721M deferred tax-asset allowance and $384M in restructuring charges. [San Jose Mercury News, Jun 20]
Economic Engine Sputters. May was the 26th month out of the past 28, the NFIB reported, in which small companies cut more workers than they hired. [Jeff Bailey, Wall Street Journal, Jun 17,03] Oh never mind, the politicians won't give up on warm fuzzy convenient images. Indeed, when a political policy doesn't yield results, they prescribe a bigger dose. Like more SBIR/STTR with evaluation watered down.
Mr. Rutledge, who is 65 years old and has been analyzing tech stocks for 35 years, remains as skeptical as ever. His message: "I think this market run-up has been insane. There is no evidence of an upturn in demand" for tech gear. [ES Browning, Wall Street Journal, Jun 16]
Need a Zippy Net on the Road? Business Week (Jun 23) says hotels are starting to offer free broadband as a competitive come-on. Wingate, Comfort Suites, Hilton Garden Inn, and maybe Marriott Courtyard.
Got the Next Big Thing? Regarding "Segway's Breakdown": I thought big-name venture capitalists were supposed to help their companies with management advice and expertise. So how come John Doerr never explained "early adopters" to Dean Kamen? With any new product, there is only a small group of people willing to pay high prices for first-generation technology. The rest of us prefer to wait for improvements and price drops. Why did Kamen, or his backers, think the rules would be different this time around?
Chip Growth Shrinks.
Semiconductor chips will rise only 10% this year,
says the Semiconductor Industry Association which halved its 20%
estimate of six
months ago. [Reuters, Jun 11]
It is not that Moore's law has suddenly ceased to
apply. In fact, ... The real issue is whether this still matters. “The
industry has entered its post-technological period, in which it is no
longer technology itself that is central, but the value it provides
to business and consumers,” says Irving Wladawsky-Berger, a senior
manager at IBM and another grey-haired industry elder. .... the
technology industry has already gone greyish at the temples since the
bubble popped, and is likely to turn greyer still. Sooner or later the
sector will enter its “golden age”, just as the railways did. When
Britain's railway mania collapsed in 1847, railroad shares plunged by
85%, and hundreds of businesses went belly-up. But train traffic in
Britain levelled off only briefly, and in the following two decades
grew by 400%. ... Brad DeLong, an economics professor at the University
of California at Berkeley, puts it somewhat more succinctly: “I am
optimistic about technology, but not about profits.” [The
Economist, May 10]
"You should live so long?" After a 16-year cycle of boom, it is unreasonable to expect the readjustment to take less than 16 years. We are in for a very long period where the economy will not grow very much. This is intensified on a world basis by the deteriorating caliber of our political leaders. Bush has no fiscal sense whatsoever and is radical in his approach. The Republicans live solely to make the rich richer. The Democrats have no leaders or leadership and are barely conscious of the major issues of the day, which include growing unemployment, lack of affordable housing for the poor and the low end of the middle class, lack of health insurance, deterioration of our infrastructure -- our bridges, roads and sewer systems -- growing water shortages, drugs and crime. [Seth Glickenhaus (Octogenarian money manager) Barron's, Jun 9]
In a 1999 article he wrote about the stock market, Warren Buffett said great ideas and great technologies often don't translate into great investments. The airline industry and auto industry have changed the world with their technology, said Buffett, but both have been financial disasters. ''Products or services that have wide sustainable moats around them are the ones that deliver rewards to investors,'' wrote Buffett. [Charles Stein, Boston Globe, Jun 8] SBIR hopefuls should adopt the same hard-headed economic approach to asking government for money to develop new technology. Not because the government cares much, but because it is a huge opportunity, potentially disabling, cost to do government research with no future for the company. Remember that the government does CARES NOTHING whether your company lives or dies after the contract research is delivered.
Whoever Has the Money Gets the Ears. Silicon Valley is queueing up to hear government guys tout their programs., notes Ann Grimes (Wall Street Journal, Jun 5). Why? That's where the money is. Last week's AE(lectronics)A affair had more takers than seats to hear Homeland Security's technology buying plans. $60 billion on tech. "That's a lot of money, especially in Silicon Valley, where times are tough and it's a depressing place to be right now," Animal Spirits Aprowl. The optimists are unloosing their animal spirits among some of the SBIR tech stocks over the last few weeks. Implant Sciences has been jumping up and down, yesterday up 27% to 2.5 times its 52-week low. Kopin was up 13% to triple its 52-week low. Cree nearkty triple, EMCORE triple, and ATMI double its 52-week low.
For the past month, sales of motherboards, the hearts of computers, have collapsed in Taiwan. ... Some say the quarter's weakness reflects an even slower market for PCs than anybody is willing to accept. And that's not good news for Intel. [LESLIE NORTON, Barron's, Jun 2,03[ Nor is it good news for the small companies who supply Intel and its ilk. On the other hand, the commercial disdainers of the New England Innovation Alliance needn't worry since they sell research to the federal agencies and have only to worry that a bad report on SBIR's impact on the USA would undercut political support for the handout.
Technology stocks, many of which have rebounded sharply since the market bottom in October, probably are in for more disappointments as many businesses face oversupply problems that will hold down margins for years. [Floyd Norris, New York Times, May 31]
Investors clearly believe in their hearts that technology has different characteristics from other industries: that it grows faster, is more profitable, has more operating leverage and will produce some sort of killer app during the next several years to spur another leg of growth. "Most of that is nonsense," Pip pipes in. ... Analysts expect chip makers to have revenue growth of 10% this year, producing 57% earnings growth. Next year, the expected revenue growth of 15% is supposed to boost earnings 62%. Contrast those with forecasts from analysts for the closely linked software industry. This year, they expect 3% top-line growth and 2% bottom-line growth. Next year, they see 5% sales growth with only 11% earnings growth. "We are still holding on to this fantasy that nothing much has changed in semiconductor land," Mr. Coburn says. In fact, there's hyper-overcapacity and lower demand. Revenue growth might be only half of what it was on average for the past four decades or so, he predicts. [JESSE EISINGER, Wall Street Journal, May 29]
There are signs that SARS is penetrating technology stocks' immune systems. .. If you want to know what the future of U.S. tech companies holds, look East. In Asia, production has slowed sharply as SARS has slowed down the economy, inventories have built up and consumer demand for PCs and cellphones has fallen off drastically. For many tech companies, such as Intel Corp., Asia had been the last growth engine.... What are the ominous signs? Memory-chip prices are plummeting. PC inventories in China are at around 15 weeks to 20 weeks, compared with the normal six. The Taiwanese motherboard makers, which are a leading indicator of PC and semiconductor demand, had disappointing bookings in April, and May looks slower. Korean handset shipments fell more than 15% in April from March. [AHEAD OF THE TAPE, By JESSE EISINGER, Wall Street Journal, May 27]
There's no particular hurry, either, for businesses to invest in new plant and equipment when there's far too much existing plant and equipment. One other thing: we wouldn't make too much of the supposedly strong recovery in profits. A big chunk of the improvement comes from slashing payrolls and we're down to the bone there. ... But this market is only paying lip-service to fundamentals. It's got a "please don't disturb" sign hung out front while it indulges its revitalized impulse to blow bubbles. Volatility readings are minuscule, which means that investors are convinced the only thing they have to fear is fear itself. [ALAN ABELSON, Barron's, May 27]
Red Herring Redux. Jason Pontin admits things got out of hand the last time he ran a specialty magazine on an industry promising to change the world. But he says he learned his lesson and won't allow his new biotechnology publication, the Acumen Journal of Sciences, to clone the meteoric rise and fall of Red Herring, a magazine that paralleled the boom and bust of the high-tech startups it once covered. The San Francisco-based Acumen Journal, backed by former dot-com entrepreneur Eric Greenberg, made its debut Thursday with the modest goal of publishing five issues this year and attracting 30,000 readers before 2004. [Associated Press. May 25, 03]
Prince Charles is leery of it. Activists want to ban it. Michael Crichton has written a scary bestseller about it. And financial analysts predict that it will be a trillion-dollar global business in a few years. ... And nanotechnology is coming on fast. "For the first time in history, a technical revolution will approach the abruptness of a political event," writes William Atkinson. ... Atkinson's "Nanocosm" is a good substitute, an irreverent, comprehensive romp, by an experienced science popularizer, through the many fascinating details of the nano-world -- including portraits of the colorful figures who helped to "discover" it. "The Next Big Thing Is Really Small" by Jack Uldrich (with Deb Newberry), is another helpful book, a breathless but nevertheless handy nano-primer that sketches the many ways in which nanotechnology will change how we live and work. [RON BAILEY, Wall Street Journal, May 23]
Enormous sums of money were lost in the great Internet bust, and analysts are still wringing their hands over the industry's fall from grace. Has technology, one economist recently wondered, become "just another crummy factor of production"? But something more was lost in the bust. It has nothing to do with money, at least not directly. It has to do with people and history, with what might be called industrial memory. ... But more than jobs have been lost. To listen to Mr. [Doug] Engelbart that day almost five years ago was to realize that the computer industry, when it started, was not simply about becoming a chief executive or retiring on stock options at 35. It was to remember that real innovation — the stuff that made computers so much more than "crummy factors of production" — comes from mysterious places, wild people, dreamers and tinkerers, and to remember all the skepticism they had to endure. [ELLEN ULLMAN, New York Times, May 22] What do you think the federal R&D agencies are thinking as they manage innovation programs like SBIR? Can they see innovation as a needed disrupter, or are they trying to grip the present which they think they understand?
Research is Just a Cost. as John Grebenkemper, a veteran engineer who came to Hewlett by way of Compaq and Tandem Computer, rehearsed his presentation for the research group, he could not help quietly admitting some bad news to another manager. "It's been a very hard week for me," he said. "I had to lay off 40 percent of my group." And one engineer received lively applause when he told Ms. Fiorina during a question-and-answer session that "the thing that gets hit first" in the rush to meet the company's quarterly financial targets "are those new ideas." ... for many outside experts on corporate research it is still an open question whether Hewlett can rekindle the synergies it once enjoyed in computing and materials science research before 1999, when it spun off Agilent.."They took away what was really powerful about HP Labs," said Robert Buderi, an expert on corporate research laboratories. "They haven't gotten their edge back." [JOHN MARKOFF, New York Times, Apr 29]
[Technology] is an area where periods of great excitement are followed by disillusionment and lack of interest, and then excitement revives. Those cycles tend to last a long time - 10 or 15 years. In 1999 and 2000 we experienced the greatest excitement ever, with the dominance of technology in the marketplace far beyond its role in any past cycle. ... on the whole, technological change seems to be occurring faster, so reasons to become excited may re-appear faster than in the past. So, I would not abandon it altogether, but it may be some time before technology asserts itself as the leading edge of the market on an enduring basis. [T Rowe Price Report, Spring 03] Even the bias toward optimism by mutual funds and timidity in forecasting cannot hide the pessimism that tech stocks are the quick ticket to a happy and prosperous future. Which helps explain why the SBIR companies that went public in the 90s are struggling for survival today. They are simply not earning the profits that justify frothy evaluations.
Thinking Inside the Box. "'We're supposed to put public money into speculative investments that the private markets won't go near? Come on. Be serious.'', said Tom Finneran, then [a decade ago] chairman of the Massachusetts House Ways and Means Committee. Today Finnerman wants to put $100M into such investments. ... If recent history teaches us anything, it is that a lack of investment capital is not our problem. In fact, the glut of capital was the gasoline that fueled the boom that created the bust. There is no lack of capital out there; there are hundreds of investment firms sitting on billions of dollars. ... There are plenty of places for government to help business and create jobs. Venture capital is not one of those places. [Steve Bailey, Boston Globe, May 14]
Molten Metal Redux? Pressure cooking garbage to separate metals from carbon-based organics sounds great. But like all new, different, and exciting technologies, it's all in the cost. Not the fantasy costs you tell the government and the investors; the real costs that include overhead, government regulation, advertising, etc. Changing World Technologies, like Molten Metals, has a new way to cook garbage to turn it into something no longer dangerous or polluting. How long it survives before bankruptcy remains to be seen. [facts on CWT from Business Week, May 19]
Less is More,
Says Carly. HP CEO is scrambling to justify cutting the company's
R&D efforts as she transforms HP to be a cheap computer company
from being a champion of innovation. And as she framed it
here, a leaner and meaner research and development operation will not
just preserve the Hewlett-Packard brand, it will also help extend
it. ...
The study said technology thrives in states where education systems stress science and engineering, producing technologically sophisticated workers; where research programs regularly produce commercialized ideas, and where there is a history of entrepreneurs and the financial capacity to support technology startups. ... The study found the state lacking in its ability to sustain rapidly growing young firms, but had little data to understand why it was happening."Washington ranks sixth among our peers in terms of employment in smaller high-growth 'gazelle' firms and last among the peer states on the number (of) Inc 500 firms," the study said. ... "Good fortune is not a strategy," Myer said. "We need a strategy." [Stephen Dunphy, Seattle Times, May 11]
Connect the Dots of the steps of IdeaLab people out of town as the dot.com wonder closes its New England operation that now houses only four companies. [Peter J. Howe, Boston Globe, 5/10/03]
[Gordon] Moore himself observes, “no exponential is forever.” Moore's law may be good for at least another decade, but eventually chips will get faster more slowly. .... chip makers can no longer rely on the cheerful old principle of “Build it and they will come.” That is unlikely to be a catastrophe for the industry. Instead, a bit less fixation on raw technology may bring benefits. It will give the industry space to concentrate on what increasingly matters to customers: not the speed of improvements in chips, but things such as the reliability and user-friendliness of computer systems. ... Instead of stuffing more technology down its customers' throats, the IT industry must help them to use its wares to become more productive. That might be termed Google's law, after the popular web-search engine that owes much of its success to concentrating on its users. ... there is still a long way to go. Unless the industry focuses less on Moore's law and more on Google's law, it will become a commodity business. For this, nobody will get standing ovations: not even Mr Moore. [The Economist, May 10]
Losing the Chips. The U.S. semiconductor industry is on the brink of losing the race to continue producing more powerful, smaller and cheaper computer chips, a National Academies report said. ... the report's authors said Asian and European governments are taking steps to lure more foreign chipmakers to their shores and to make their own companies more competitive. The U.S. government, on the other hand, has no national policy for helping its industry remain dominant and in recent years has cut back funding for research and development into semiconductor designs, they said. [Faith Bremner, Gannett News Service, May. 9, 031 Disaster, or the market at work? That depends on your attitude toward government intervention in technology (or any other) markets. Said Charles Wessner, NAS guru on technology R&D, The good news is, there's time to react and change the policy framework for the industry. That includes everything from tax incentives for research and development to education incentives for students. The bad news is, we risk ignoring the first rule of holes, which is to stop digging. This debate raises the same question as the automobile debate, What is an American chip? Globalization makes every chip like every auto - a melange of national parts.
You've got an invention. You've got a patent. Big deal. Neither is enough to create a viable business, let alone a profitable one. That's the hard truth California attorneys Ardelle St. George and Don Carnegie try to explain when an eager inventor approaches them for help in applying for a patent. ... A business may be founded on an invention, but it also requires skilled management, financing, positioning in the marketplace, building a successful brand and more. [Jan Norman, The Orange County Register, May 4]
Got Real Innovation for Public Good? The Open Source Applications Foundation posted some software code on the Internet and invited programmers around the world to offer suggestions and improvements. The posting was an early -- very early -- version of ``Chandler,'' the code name for an open-source personal information manager, e-mail and calendar program. The project and the foundation (www.osafoundation.org) are the brainchild of Mitch Kapor, and a talented group of other people who want to create a new, unfettered platform for innovation. They hit another, less-noticed milestone at the end of March, when the Andrew W. Mellon Foundation (www.mellon.org) awarded the project a $98,000 grant. The money is being used to see if Chandler -- currently aimed at individuals and smaller businesses -- can work on a much larger scale, serving the needs of huge universities. The Mellon grant was, I hope, a harbinger of something much bigger. As we move into a Digital Age, it's essential that the foundation community recognize a crucial need: to keep tomorrow's information architecture as open, as free for all to use, as possible. [Mercury News, May 4] Note don't expect the government programs, like SBIR, to fund the public good for anything but advancement of the interests of the agency (or, more precisely, the interests of the deciders). Unfortunately, the real innovators who pay little attention to government interests won't know what those interests are.
Philips Electronics once asked a group of people what color its new radio should be. Most said yellow. Then, when choosing one as their thank-you gift on the way out, they all passed over yellow radios to pick up silver ones. The only way to be certain customers want what you're planning to sell is to show them a working model, which can take lots of time and money to develop. [Chris Charuhas, Tech Central Station, May 1]
In the atmosphere of cynicism and potential retribution that dominates the business landscape today, CEOs seem to want nothing more than a low profile. They are reluctant to undertake new and untested business initiatives, want no visible risk and are loathe to speak out on corporate governance matters. It's all very troubling: Risk-taking is essential to capitalism. Without it, the system can't function. [STAN O'NEAL, Wall Street Journal, Apr 24] No visible risk is what the federal agencies seem to want in their SBIR awards, playing a golf course with a nine-iron.
Bye, bye Boston If you survived Massachusetts in the early 1990s, you know the story. What was a mild national recession was a depression here. It started in technology, but it didn't take long to roll into real estate and the banks. Nothing was spared, and before it was over we had lost 11.6 percent of all jobs in just four years. The result: Massachusetts's most important resource, our people, started heading for the exits, big time. And it is starting to happen again. Massachusetts residents are again leaving the state in scary numbers. Last fiscal year, according to US Census numbers, about 28,000 more people left Massachusetts than moved here, double the previous year and about the same as 1992, when the state was just beginning to recover from our worst economic quagmire in a half century. [Steve Bailey, Boston Globe, 4/18/03]
Start-up's sensors keep tabs on bridges' health During a December rush hour 35 years ago, a steel connector in a suspension bridge linking Ohio and West Virginia suddenly failed. Within minutes, the bridge had collapsed into the icy Ohio River, taking with it 31 cars. Forty-six people died. The collapse of the Silver River Bridge changed the way bridges are inspected in the United States. Today, each of the nation's 600,000 bridges gets an on-site checkup at least once every two years. Now, founders of a Waltham start-up company want to change the way bridges are inspected -- again. They're hoping it won't take a similar tragedy. But, unfortunately, tragedy often spurs rapid change, while start-ups peddling new technology have a harder time. Senera was founded last year and has only three full-time employees. ... Why not install wireless sensors on older, problem-prone bridges to get a continual stream of data about their condition? Senera proposes to affix sensors to a bridge, all wirelessly connected in what might be called a ''bridge area network.'' Senera's software would interpret the data coming from the bridge and present it to the customer -- a state highway department -- on a secure website. Senera's system would produce such an objective ranking of the various bridges that had been outfitted with sensors, Taylor says. [Scott Kirsner,Wired and Fast Company magazines., Boston Globe, Apr 14]
The latest survey by the National Federation of Independent Business showed that managers, proprietors and assorted pooh-bahs of small firms haven't been so down in the mouth in a decade. .... In like vein, the Business Roundtable, populated by corporate top dogs and fat cats (it's a nondiscrimatory group), reported last week that more than five times as many of its members expect to cut their payrolls as boost them, and, not unrelatedly, only a tad more than half expect sales will grow this year. ... As to a shot-in-the-arm from fiscal policy, he notes that Japan has tried that tack for 10 years and has nothing to show for it but a spectacularly swollen government debt, now weighing in at 150% of GDP. [Alan Abelson, Barron's, April 14]
If small business can have subsidies like SBIR, why not steel companies? The nation's top steel executives and the leader of the steelworkers' union urged members of a joint congressional caucus yesterday to support steel tariffs for two more years, despite the WTO ruling last month that the U.S. tariffs are illegal. [Gus G. Sentementes, Baltimore Sun, Apr 9, 03] Oh yes. our subsidies are a must, theirs are optional.]
Still the Car of the Future. The celebrated ride of the car that spawned the nation's toughest emissions regulation ends at a parking lot in Southern California, where a growing fleet of General Motors electric cars awaits an uncertain fate. Dozens of the green, metallic blue and bright red futuristic autos are lined up behind a chain-link fence at the edge of a freight-rail line in Van Nuys, a sure sign the world's largest automaker has pulled the plug on a vehicle it heralded as recently as two years ago as "the car of the future." [Brian Melley, The Associated Press, Seattle Times, Apr 9]
With some exceptions, "war is
the enemy of most useful innovation,"
says Joel Mokyr, an economic historian at Northwestern University. ....
It's
important to remember, though, that the positive effects of fiscal
stimulus from
higher defense spending last only a short while. Over time, higher
spending on
defense and security hurts growth and productivity. .... According to
estimates
by economists Samuel Kortum of University of Minnesota and Jonathan
Eaton of
Boston University, the U.S. gets 30% to 40% of its
productivity-enhancing
technology from other countries. The liquid-crystal displays. .....
says Paul
Saffo, director of the Institute for the Future in Menlo Park, Calif.
"If
we pull in the welcome mat, we'll kill the technology industry."
[Michael Mandel, Business Week, Apr 14] Perhaps the time has
finally come
ripe to call DOD to account for its innovation from SBIR. Even though
DOD dodges
any economic accounting, at least the Iraq war makes a test ground for
DOD's
claim that helping the mission was paramount. Let it now prove that its
SBIR had
a contribution greater than not having such a program at all. DOD
actually would
like to prove that SBIR was NOT worth the effort so it could end the
administrative headache of a special program to do what it would have
done
anyway. Its challenge would be to prove to the politicians that it did
its best
and still came up short. It most likely course, though, is to avoid the
question
and continue to muddle through by fudging any acid tests.
Innovation could suffer, too. Over the long term, growth depends on the
willingness of companies and individuals to take risks on developing
and
implementing new technologies. If they are worried about factors beyond
their
control, they may opt for safety, and the rate of innovation could
slow. One
sign of that: the continued fall in venture-capital funding, which
reflects not
just weakness in the tech sector but uncertainty about the future.
American companies are putting capital-spending plans on hold because of the war with Iraq, possibly setting the stage for further economic weakness, a survey said. [PATRICK BARTA, THE WALL STREET JOURNAL, Mar 21]
A long-term world of hurt'. Silicon Valley's economy will face an uphill struggle this year, as it remains bogged down from the aftermath of the dot-com bust, according to a new forecast from the UCLA Anderson School. The barriers? Investment bubble, savings bust, strong dollar, government budget deficits. [Mercury News, Mar 14] The few SBIR companies who envision selling new technology to the info-tech world have a uphill struggle even after they sell the conservative government on the technical merits to get a tiny subsidy.
Home Cooking, Child, Support and High Returns. The politicians want it all and would repeal economic laws to be everything to everybody. Washington's multibillion-dollar public-investment fund is considering changing its investment policy to funnel more money into the state's startup technology and biotech companies. The Washington State Investment Board, which manages $48B in investments mainly for public-employee retirement accounts, has crafted a policy that could allow it to favor home-state companies, so long as it doesn't sacrifice its duty to maximize investment returns. [Luke Timmerman, Seattle Times, Mar 13]
A well-known rule about doing business in technology is that nobody ever bet against Moore's law and won. .. Over the last 40 years, a score of brave and brilliant, but foolhardy, companies have tried to get ahead of the law: Trilogy Systems and MicroUnity with their superchips and IBM with X-ray lithography. All have failed, often spectacularly, losing billions of dollars in the process. [Michael Malone, The Red Herring, Feb03] SBIR firms needn't worry the government won't put up enough money to get them in that deep, and probably would not put a dime into something that challenges Moore's Law.
Got the perfect high-tech solution? OK, it's expensive. Hear Eric Schmidt, Google CEO:. We aren't interested in getting maximum power for a high price. What we're looking for is maximum functionality and that's a whole different thing." Each of Google's thousands of motherboards (a computer's main circuit board) are designed for the quick switching of components. Even the power supply is held on with Velcro straps: if it burns out, it can be replaced quickly. Recently, when the expensive top-end disk drives used by the motherboards proved inadequate, Google tossed out thousands and replaced them with cheaper, better models.
Sounds Great, Flunks Cost-Benefit. Not too long ago, investors poured hundreds of millions of dollars into firms pursuing the promise of artificial skin. Wooed by its potential to revolutionize the treatment of patients with severe burns and wounds, they envisioned huge commercial opportunities. .... But the hopes for profits that the technology once inspired have been dashed. ... Industry executives and analysts say they overestimated the commercial opportunities, underestimated the challenges, and encountered some obstacles they couldn't possibly have foreseen. ... ''That's the problem with a lot of promising, young technologies,'' said Tim Surgenor, a biotech executive, ''No matter how hard you try, you can't always sort out the market ahead of time.''... ''It wasn't a sustainable business model,'' said William Plovanic, a medical technology analyst in First Albany, ''In burn treatment, the market wasn't big enough. In wound care, the reimbursement wasn't there. That's two strikes against you, and those are two very big strikes.'' [Naomi Aoki, Boston Globe, 3/5/03]
Having spent most of my career on trading floors, my opinion is that government cna never keep pace with the innovation of the private sector. [Pippa Malmgren, former WH economic policy wonk]
Red Ink Kills Red Herring. The Silicon Valley magazine magazine devoted to the New Economy will close after ten years of highlighting the technologies of the info-tech boom. Its ad page count dropped from 3,357 in 2000 to 404 last year as VC sponsored hot companies folded. [story by MATTHEW ROSE, WALL STREET JOURNAL, Feb 28]
The world is plagued with a glut of capacity that has yet to work itself off. The system hasn't cleansed itself from the mania like excesses of the 90's. The delusion on part of Wall Street is that the only thing holding back investors and the new bull market is Iraq. Once we drop a few bombs it's back to party time again on Wall Street and the financial markets. P/E ratios of 50, price-to-book ratios of 4.8, price-to-sales ratios of 8 or more are ignored. Wall Street is living in a world of delusion and self-denial, wishing for days long past. [Jerry Olson, Barron's On-Line, Mar 3,02] The few SBIR awardees who hope to win big by selling info-tech stuff should take note that capital, and market interest, will be harder than ever to come by.
Fast Company Founders to Halt. Another victim of the bursting of the tech bubble is Fast Company magazine whose founders Alan M. Webber and William C. Taylor are resigning, the mag's future is up for grabs. [story by D.C. Denison and Chris Reidy, Boston Globe, 2/25/03]
[Craig Barrett] sounded an optimistic note in his speech Tuesday, urging a room full of engineers to come up with new solutions to help drive the faltering high-tech economy. "There is pent-up demand (for technology) out there," Barrett said in his speech. "What's going to ignite that pent-up demand is innovation." [Matthew Yi, SF Chronicle , Feb 19]
Red Herring Founder Unveils 'Super-Blog' for Business Geeks. With the whiff of Internet startups of yesteryear, Tony Perkins lays a bold claim to the ‘eBay-ization of media.’ ... AlwaysOn Network, he’s trying to take it to the next generation. AlwaysOn aims to completely rethink technology and business publishing. [David Kirkpatrick, FORTUNE, February 11, 03].
Gordon Moore predicts that the
semiconductor industry will maintain its torrid pace of development for
at least
another decade, regardless of normal fluctuations in the economy. ...
Growth in the semiconductor industry, he said, would equal the growth
in the world's gross domestic product by 2017 if the industry continues
its scorching pace. [Rachel Konrad,
The Associated Press]
for nearly 150 years, business in general, and big business in particular, has been the driving force in American history. It is the Hamlet of the play, without whom the drama has no clear shape or meaning. It has occupied center stage in the national pageant. Other aspects of American life may be more interesting or exciting, but none rivals the role played by big business in shaping the way we live and the world in which we live. To visit even remote corners of the culture is eventually to stand in the presence or shadow of big business. Not by accident have Americans erected the largest, most formidable material civilization in history. [M Klein, Coming Full Circle: The Study of Big Business since 1950, Enterprise and Society, Sep 2001] What big business conservatism shuns is new ideas that change or invent an industry. That's where small firms, sometimes abetted even by a conservative government, find a niche and expand into big business space. But better science does not qualify as industry invention, only profit-seeking entrepreneuring. An ideal SBIR would seed all the budding ideas that came to the door since there is far more SBIR money than qualifying ideas.
Tech companies and their investors are scratching their heads after President Bush introduced his economic stimulus plan Tuesday. They had hoped the Bush plan would help restart the industry, but now a painful realization is setting in: They got left behind. [Eric Hellweg, LARTA, Jan 13] No matter, the administration will spin out a rationalization that justifies tax cuts for everyone who makes campaign contributions.
Over the past three years, tech stocks have been steadily losing value as myths about technology companies' ability to grow and their invulnerability to downturns have been debunked. [K Brown and J Eisinger, Wall Street Journal, Jan 10, 03]
The Magic Has Cooled. trying to divine technology and spending trends, be careful which industry predictions you take to the bank. Vested interests and lofty aspirations lurk behind much of the technology industry's forecasting for 2003. Depending on whom you believe, the tech engine next year will run on embedded radios and semiconductors, Web services, self-provisioned broadband networks, all-in-one system management appliances or some other emerging technology solution. many of the consultants and executives making those predictions happen to sell some version of their vision. But even when vested interests aren't at play, the industry is too willing to project its future in terms of niche, gee-whiz or immature technologies rather than focus on improvements to the core technologies that drive most companies..... tech vendors, in particular, must come to grips with the fact that their products no longer evoke wonderment [Rob Preston, Tech Web, Dec 15, 02]
Overall conditions in high tech remain bleak, and employment continues to drop. Texas’ high-tech sector has lost 45,300 jobs since April 2001, about 11% of total high-tech employment. High-tech manufacturing jobs have declined 4.4% year-to-date. The outlook seems to be softer rather than firmer, according to industry contacts. Activity is not expected to improve in the next six months, and recovery in telecom won’t come until after 2003. Prospects for earnings growth are poor, keeping sales activity and equity prices in the cellar. [Mine Yuecel and John Thompson, Southwest Economy, Dallas Federal Reserve, N/D02]
Bad news for those who believe the worst of the bear market is behind us. Investors, strategists, and fund managers overwhelmingly agree with you. .. When no one sees anything but blue skies for stocks, you can be sure the storms aren't over. [Chris Graja and Wm Hester, Bloomberg Personal Finance, Feb 02]
The entrepreneurial spirit of 2002 may be summed up in one sentence: "I can always get a job." That was one of many thoughts shared by a group of four entrepreneurs who sat down with The Seattle Times recently to explain how difficult it was to start a technology company in 2002. ... Q: So are you saying investors' standards have come down this year? Noble: IPO has become a four-letter word. Verschueren: I haven't been paid for two months, but the thing that keeps me awake at night is that we have a really neat technology and some patents pending, but we are growing really slow. My only hope is that there isn't a competitor that we don't know about sneaking up behind us. [Tricia Duryee, Seattle Times, Jan 6]
If wishes were horsepower, California environmentalists would be riding in the cars of their dreams. Instead, they were mugged by physics. Batteries are still too heavy for electric vehicles to lug around. Gasoline in a tank stores vastly more energy in less weight and volume. After a decade of spending billions of dollars for research and development, the auto industry's best electric cars had a driving range of 120 miles before needing a lengthy recharge. Enthusiasts claimed that was enough for most purposes, but drivers don't agree. [THOMAS G. DONLAN, Barron's, Jan 6] When drivers don't agree, bet on politicians following them. But the Energy and Transportation Departments in their R&D (including SBIR) will keep on slogging for better batteries in bite sizes improvements. Just go light on the grand pronouncements of how America will be saved by your contribution to the imminent adoption of electric vehicles. Rhe realists will not believe your claims.
The room was far too small for the crowd. People were standing everywhere and sitting on the floor in the front along the sides to hear six leading economists opine on productivity and the new economy. Martin Baily, Martin Feldstein, Robert Gordon, Dale Jorgenson, Joe Steiglitz, and Larry Summers. Each had his own perspective on why the productivity jump 1995-2001 and where productivity was going. None said it would continue at 2.6% - the bubble number which owed a large debt to simply a larger output number. Gordon noted that until now, computer hardware development was driven by the need to keep up with the new software development. But now that hardware has caught up, there is no great need for faster bigger hardware just to browse the Internet.
So Long, Seattle. After two decades of nearly continuous growth, this year the Seattle area might see more people move out than move in, according to moving companies, relocation services and demographers move in, ... The dot-com crash and Boeing layoffs have left this region with one of the nation's highest jobless rates. [Bradley Meacham and Dave Woodfill, Seattle Times, Jan 4]
Semiconductor News Junkies, Awake. MIT is offering a new pub - a bi-monthly Semiconductor Innovation Letter - promising insight into significant R&D developments in the chip industry as well as close-focus news and analysis of venture investment in private semiconductor companies. Get a FREE sample issue
Hot Government R&D Growth, Cool Private. U.S. companies expect their research-and-development spending to be flat again this year, as the falling stock market has weighed heavily on corporate budgets .... Companies plan a 0.1% increase in R&D spending for 2003, [say] Battelle and R&D Magazine. [AMY MERRICK, THE WALL STREET JOURNAL, Jan 2]
REMEMBER the technological malaise that befell America in the late 1970s? Japan was busy snuffing out Pittsburgh's steel mills, driving Detroit off the road, and beginning its assault on Silicon Valley. Only a decade later, things were very different. Japanese industry was in retreat. An exhausted Soviet empire threw in the towel. Europe sat up and started investing heavily in America. Why the sudden reversal of fortunes? Across America, there had been a flowering of innovation unlike anything seen before. Possibly the most inspired piece of legislation to be enacted in America over the past half-century was the Bayh-Dole act of 1980. ... this unlocked all the inventions and discoveries that had been made in laboratories throughout the USA with the help of taxpayers' money. More than anything, this single policy measure helped to reverse America's precipitous slide into industrial irrelevance. ... A dollar's worth of academic invention or discovery requires upwards of $10,000 of private capital to bring to market. Far from getting a free lunch, companies that license ideas from universities wind up paying over 99% of the innovation's final cost. [The Economist, Dec 14]
----------- Dateline 2003 ----------------------
The 2003 forecasts are in, and they're not pretty. Venture capitalists who were optimistic last year about an improving landscape in 2002 have long since recanted and are singing a much darker tune as they look ahead to the coming year. [Beth Healy, Boston Globe 12/30/02] Many industry observers predict that the industry's slumping revenue will finally turn around in 2003, though the growth should be modest. Forrester, the Cambridge-based research firm, projects technology spending will grow 5.6 percent over this year to $410 billion, barring any dramatic changes in the US economy. [Chris Gaither, Boston Globe, 12/30/02]
ViaSat will sell satellite modems and other equipment for a sweeping project to expand Internet access in Mexico. e-Mexico is a digital divide program that sees opening 3,200 digital community centers is a government project subject to the usual political maneuvering. ViaSat's VP claimed that every site will be a school and every school will have a computer lab. Presidente Fox somehow sees that 4% of Mexicans using Internet will translate to 90%. Which would community rather have - a sewer of an Internet connection? Fox also expects private enterprise to pay for 90% of the project. [story from Mike Freeman, San Diego Union Tribune, Dec 24, 02]
Top
Trends 2003 guessed by The Red Herring:
Wireless LANs; Virtualization; VC investments; security chips;
nano-everything;
expensed stock options; bankruptcies; biotech; digital radio;
broadband.
Companies must upgrade their computer systems - eventually. And while it won't be a 1990s-style tech-buying frenzy, many analysts are predicting a modest tech rebound to come in 2003, a sorely needed boost for a still-wheezing U.S. economy. ... Most - like Cincinnati Bell - will keep their spending level while trying to keep up with fast-paced upgrades and replace the last generation of systems they bought in the1990s. [Amy Higgins, The Cincinnati Enquirer, Dec 21]
Gas, glass, and brass are so pre-millennium. LEDs are the lights of the digital age - everywhere. ... In a few years, they'll illuminate automobile headlights, homes, and offices ... The most advanced way to mix them: pulse-width modulation, which varies each diode's duty cycle. Boston-based Color Kinetics has a patent on this technique, which is the basis for its color-changing floodlights, spotlights, and night-lights. ... LEDs consume a fraction of the power of incandescents. ... LEDs also throw off almost no heat and last longer. ... They're Cheap. Each has a lifespan of 50,000 to 100,000 hours - 10 to 30 years. .... Predictions are that by 2006, they'll be cheaper than even supercheap fluorescents. [Simson Garfinkel, Wired, Jan 03]
“The mountain ranges are stacked up one behind another,” said Paul Saffo, industry pundit and director of the Institute for the Future (Menlo Park), providing an image of the opportunities that lie ahead. “I think the unintended consequence of the dot-com bust is [that] we have created the largest generation of entrepreneurs this country has ever seen.” But Saffo was equally quick to trot out an old joke to describe the angst of the investment community. “These days, venture capitalists sleep like babies: They sleep for two hours and then get up crying,” he quipped. [Rick Merritt, 12/9/02, quoted by LARTA, Dec 17]
The Chips Are Down, Again. the
industry's flagship trade group, the Semiconductors Industry
Association, is
projecting average revenue growth of 8% to 10% in the years to come.
[five-star analyst Mark] FitzGerald thinks
that
chipmakers will continue to suffer in 2003. Intel, which long preached
a
philosophy of spending through the downturn, will probably trim capital
spending
in 2003 to $3.5 billion from $4.7 billion for 2002. ... Equally
gloomy is FitzGerald's outlook for chip manufacturing equipment
companies.
Chipmakers are taking on two capital-intensive burdens at once:
increasing the
size of silicon wafers to 300 millimeters and decreasing the size of
transistors
on a chip. The cost of a new chip factory now runs about $3 billion.
... There
are six companies that can afford to move to 300-millimeter wafers,
FitzGerald
says. Of those six, two are Taiwan. [Forbes,
Cash-strapped shoppers still may be buying this holiday season, but cagey technology insiders are definitely selling. We have benefited from a relief rally of sorts in tech, but one has to wonder how much leg it really has, with management dumping shares faster than Saddam Hussein can ditch chemical canisters. Tech shares stumbled mid-last week, with the Nasdaq giving up 4% [MARK VEVERKA, Barron's, Dec 16]
IT WAS arguably the greatest misallocation of capital in recent history. In the late 1990s, telecoms firms spent billions building new data networks, believing that Internet traffic would double every 100 days for the foreseeable future—a collective misjudgment that caused the telecoms meltdown, with many carriers and equipment vendors now bankrupt and others scrambling for cover. Yet innovation in telecoms has not stopped. And it may be telephone services that help struggling telecoms firms to claw their way out of their slump. This time, however, the voice applications that are attracting attention are radically different from those that data networkers dismissed a few years ago. They could even revolutionise telephony in much the same way that the graphical World Wide Web turned the dreary old text-based Internet into the all-singing-and-dancing multimedia show that it is today. [The Economist, Dec 14,02]
Langer's
ideas were ahead of their time.
1977-78 he submitted nine separate proposals for research
grants--including work
on the controlled release of cancer drugs and the inhibition of
angiogenesis--but was rejected by the National Institutes of Health and
various
foundations. "Peers reviewed my ideas and didn't like them because they
weren't in the textbooks," he says. He persisted and eventually became
a
full-time assistant professor at MIT. ["Plastic
Man",
Forbes,12.23.02]
Got the same feeling from your SBIR rejections, especially by the
mission
agencies? You're probably right about the conservatism, although, of
course, you
could be wrong about your ideas. Those conservatives could be right for
the
wrong reason. Hve you tackeld their skepticism in your proposal?
Perhaps you've noticed how many people seem to be living their lives in a never-ending dialogue with their cellphones. ... Howard Rheingold has made a career of being amazed, says D.C. Denison, Boston Globe, 12/15/02 in his review of Rheingold's latest book Smart Mobs, subtitled, with typical exuberance, ''The Next Social Revolution.'' The title refers to groups of people who use ''mobile media'' - cellphones, pagers, personal digital assistants, handheld and wearable computers - to stay in touch or organize collective actions. Says Denison, 'Travels with Howard'' more accurately describes the structure and content of the book. And that's not such a bad thing. Clearly something is going on here, on a number of technological and cultural fronts. And while the activity may not add up to a neatly packaged ''social revolution,'' it is interesting to explore its various manifestations with someone like Rheingold, who has no desire to curb his enthusiasm.
The Technophobes A guide to assorted Luddites, labor monopolists, muddled intellectuals and otherworldly pietists who kept resisting modernity even as it overwhelmed them. Why? 1. new technology threatens the material interests of some groups. 2. new technology is thought to be unhealthy. 3. New technologies are resisted because they are viewed, correctly, as fostering economic growth, and growth is viewed, incorrectly, as bad for the human species. 4. technology is said to offend religious faith. []Don't Hold Your Nano-Breath. A widely-cited estimate for the nanotechnology business in ten years' time is a trillion dollars—a figure seemingly plucked from the air. Lured by such large numbers, and always on the look-out for the next big thing, venture capitalists are fervently courting nanotechnologists. But as one pundit put it, so far there are more meetings on investing in nanotechnology than there are serious opportunities. ... business plans are often little more than repackaged research-grant proposals. ... a lack of clarity is not stopping America, the EU and Japan from vying to outspend each other. Politicians have been successfully sold the idea that nanotechnology is the industrial revolution of the 21st century. The nano-spending race began with America's national nanotechnology initiative, launched two years ago, which will bring some $700M to the table next year. .... The irony is that nanotechnology is still a long way from living up to the expectations of either optimists or pessimists. ... In many new technologies, it is common to overestimate what can be done in five years' time, and to underestimate what can be done in 50 years' time. ... However, there is a huge technological gap between molecular cascades and fully-functional nanobots. The rest of the world, then, should not hold its breath. [The Economist, Dec 7, 02]
Grove Not So Hopeful. Andy Grove said it may be too early to forecast a rebound in the semiconductor sector despite recent industry outlooks indicating an upturn may be on the horizon. m... Global sales of semiconductors fell some 30%in 2001 to about $140B from a record $200Bin 2000. ...Grove said the current chip downturn is unique because it followed massive investment and spending on technology during the Internet boom of the late 1990s. [New York Times, Dec 11]
It's not that the data and tools are bad. Quite the contrary; they're fabulous! What's bad is that they're lulling many of us into a false belief that we really can see the future. In other words, when it comes to looking ahead, we aren't just wrong; we're wrong with confidence and gusto. ... That's exactly what the information age has brought to Wall Street. Investors today have so much confidence. Even when they have no clue, they act as if they had perfect certainty, even if that certainty is 180 degrees different from yesterday's certainty. Hence the often-extreme market reactions that tend to be way out of proportion to the news of the day. ... I have no hesitation about staying apart from the NASDAQ surge, at least until I get more comfortable that there's fundamental support and that the companies can deliver a lot more growth than what we see [Marc Gerstein, Multex Investor, Dec 6]
When Knowledge Was Spread Around, So Was Prosperity, says VIRGINIA POSTREL in reviewing Joel Mokyr's new book on what she calls the Industrial Enlightenment. The "knowledge economy" did not begin (or end) with the Internet boom. But technology, institutions and attitudes that lower the cost of information and encourage people to share knowledge have not always been around. Indeed, a new book argues, to understand why the West not only grew rich after the Industrial Revolution but also kept growing richer, we have to understand the revolution in how people organize and exchange "useful knowledge." "The main thing I'm interested in is how societies can end up knowing more and how that changes us," said Joel Mokyr, an economic historian at Northwestern University and author of "The Gifts of Athena" (Princeton University Press). (New York Times, Dec 5)
Nothing is in short supply. "It won't get back to the way it was," he [Levy] says darkly. "If nothing is in short supply then how can profits rise?" More supply than demand triggers a deflationary spiral of lower prices and profits. He doesn't see a replacement source of higher profits on the horizon to break the spiral. "Where is the compelling force for growing profits?" he asks. The consumer not only lacks for nothing, but also is paying down debt or building up personal savings. Wealth is shifting from corporate savings (i.e., profits after taxes and dividends) to households. [R Lenzner interviews Leon Levy, Forbes, Dec 9,02]
A number of companies that rely on the strength and flexibility of their research departments, like Eli Lilly and Procter & Gamble, have begun to incorporate open market innovation swapping into their business models. ... in the late 1990s, under pressure to increase productivity and speed product development, [P&G] set up a special group to solicit complementary technologies from the outside that fill gaps in its intellectual property portfolio. It never turned back. Today, technology "entrepreneurs" at each of P&G's business units use search engines and other tools to mine billions of pages on the Web, in global patent databases and scientific literature. One specialist has gleaned critical leads from sources outside of the cleaning industry, which have subsequently been shepherded inside P&G through joint-development deals -- resulting in breakthroughs in cleaning performance. [DARRELL RIGBY and CHRISTOPHER ZOOK, Wall Street Journal, Dec 3] Government agencies could copy the search and adopt scheme instead of relying on regular invitations to people to submit formal proposals in schemes like SBIR and BAAs. The DOD, in particular, who is in competition with the rest of the world's armed forces would benefit from actively searching for innovations. MDA actually did invite the public to send in ideas for anti-missile defense [Washington Post, Dec 2] .
After a doubling in Oct-Nov, Cree dove
12% yesterday
(Dec 3) on a bad day for semiconductor stocks in general. Although
Ibis
gained 12%. Meanwhile, KEN
BROWN and DON CLARK
(THE WALL STREET JOURNAL
With 66% Gain Since October, Semiconductor
Shares Astonish.
You have to be very smart in business, but no amount of smarts will protect you from a technological revolution. It can overthrow you in a minute. [Nathan Myhrvold, 1993]
The recovery has been lackluster so far because businessmen have lacked animal spirits. To join the consumer in boosting the economy, businessmen need to take prudent risks. You never know for sure whether your new product will succeed or your new investment will pay out; no economy can prosper unless businessmen are willing to take these risks. [R Bartley, Wall Street Journal, Dec 2, 02] Although Bartley was haranguing corporate CEOs for hunkering down, his attack might well beat the backs also of the federal mission agency SBIR deciders who are playing it super-safe instead of taking flings with infant technology that might bring big advances.
| The tech sector suffers from deep problems that will take real work and creative thinking to fix. Simply waiting for a recovery won't be enough. Many startups can't get funding. Corporate and university research isn't getting to market fast enough. And innovative technologies that could recharge tech spending, such as online music sharing and wireless services, are getting stifled by media giants and outdated government policies. ...What's needed is new thinking. ... A series of steps, from slashing the size of venture funds and trying new ways to commercialize research to lessening reliance on litigation to solve disputes, could help clear the way for innovations to get to market. [Robert Hof, Business Week, Dec 9] | Could government help? It could, but it's not likely. Every actor in both government and corporate is looking out for Nr 1, the next quarterly statement, the next election, the next campaign contribution, the next year's budget. SBIR could be a vehicle to keep innovations flowing from those pesky startups, but the government managers need something to talk about in the next budget cycle. And long term investment with private sector benefit does nothing for them. So everyone will muddle and look to blame the problem on the other actors. |
Talking Tech Stocks Up. [Jim Kerstetter, Dean Foust, and Cliff Edwards, Business Week, Dec 9] Optimism on stock prices is as intellectually honest as predictions of commercial success from SBIR projects.
Although the semiconductor stocks (ATMI, Cree, AXT, ...) perked up lately , Gartner Dataquest still predicts as 32% revenue drop this year, says The Red Herring (Dec 02}.
Innovation Interrupted. Tech buyers are taking a breather from the massive rip-ups and rollouts of the past decade's IT projects. Nevertheless, innovations can't be ignoredRecently, at a Morgan Stanley conference, I asked a panel of CIOs what technologies they were excited about or would personally invest in. There was a long silence and a few blank stares; to a person, they answered, "None." They might be right. It's possible that the step-function improvement in technology that was so compelling in past computing shifts is just not in the cards for the next decade. [Charles Phillips, Tech Web, November 2002] There is still one tech buyer for incremental improvements- military SBIR. Small free money.
Though entrepreneurial activity world-wide fell 25% last year, the USA had 10.5% of the working population (age 18 to 64) in entrepreneurial activity down from 11.6% (a drop of 10%)says the annual Global Entrepreneurship Monitor study. Worldwide numbers are way down: . Japan- 65%; France -57%; and Italy -42%. Some observers say it is a from the US decline of 30% a year ago. Doesn't (shouldn't) SBIR make a contribution to keeping entrepreneur alive in new companies? Yes, it should, but it cannot do very well at that by funding a narrow stable of the same companies who have learned to schmooze government.
Neuroeconomics. A stranger offers $10 to anyone who pulls a green ball from an opaque jar. He'll disclose how many balls are in the jar, but not how many are green. While a contestant ponders the offer, the stranger raises an alternative. He'll pay $7 for a green ball pulled from an opaque jar filled with spheres of only two colors. Half are green, half red. Most people prefer to take their chances on the $7 offer, because the odds of winning are well-defined. Who knows how wide the variety of colors of balls is inside the other jar? The greater uncertainty associated with the $10 prize makes people anxious and insecure, overshadowing the temptation of a larger reward. [Mike Meyers, Minneapolis Star Tribune, Nov17,02]
Merrill Lynch cut its stock rating on Intel and other chip makers to "sell," arguing that the companies are overpriced under Merrill's new valuation method. [Wall Street Journal, Nov 15] "Sell" is really tough talk for Wall Street and dumping Intel would trigger a chain of dumping the SBIR chipsters who operate in Intel's shadow.
Mark Andreessen provided a tongue-in-cheek list of 10 ways we'll know the tech-dominated Nasdaq stock index has hit bottom. Among the sure signs: No. 9: "The market cap of Cisco is surpassed by Crisco."
A U.S. Commerce Department study shows that information technology companies accounted for nearly 30 percent of national growth between 1995 and 2000, despite comprising just 8 percent of the national GDP. And tech firms grew in large part due to innovations cooked up in America's research labs. ... According to one study, spending on research and development (R&D) in the technology sector declined 8 percent from mid-2001 through early 2002, a total drop of $1.7 billion. ... the tech slump seems to have accelerated two broad shifts in the world of research. Scientists, instead of being holed up in the lab, work more with the developers at their companies, churning out new products. And their projects are more frequently driven by the needs of customers -- who, at this point, seem to have a better understanding of technology than the free-spending hordes of a few years ago. [ABCNews.com 11/11/2002]
Expect 20% growth a year for two years in world chip industry says the Semiconductor Industry Association. Surging demand in Asia and a recovery in the sputtering market for personal computers should drive semiconductor sales up 19.8% next year and 21.7% in 2004. Which is a whole lot better than the 32% decline in 2001 and the zero growth this year. [Chris Gaither, Boston Globe, 11/7/02] BTW, do you believe those three significant figures and do you use them in your SBIR proposals to pretend you have more accuracy?
They're Just Not Importing. During the 1990s, U.S. exports of advanced technology products consistently exceeded imports. This is no longer the case, with overseas demand for U.S. technology goods falling drastically. Exports of semiconductors dropped by 15% in the first seven months of 2002. Exports of computers and computer accessories also witnessed a sharp decline, falling by 25%. Other technology sectors like telecommunications equipment also witnessed declines; in total, exports of information-technology goods fell by 21%. [Ketaki Sood, Larta, Nov 5,02]
Potomac Folds, Rte 128 Stays. Potomac Tech Journal joined other local technology papers in the dustbin. done in by the lack of advertising revenue. Parent company American City Business Journals Inc.is also closing a Denver journal, but is keeping alive Mass High Tech which serves Route 128. [Nicholas Johnston, Washington Post, Nov 6, 02]
Med-Tech Minnesota. Times have changed. ... the medical device industry is holding its own in this tough [VC] market. And in Minnesota, long a major center for medical technology, venture funding for medical-device start-ups will hit a record this year ... .About $153M, , .. according to the PricewaterhouseCoopers/Venture Economics. [Susan Feyder, Minneapolis Star Tribune, Nov 4, 02]
Too Much Stuuf, Too Few Customers. Particularly vexing have been cuts in corporate budgets used to buy the types of things most start-ups sell: software, telecommunications gadgets and Internet services. "Are there enough lawyers?" said Thomas Dann of ECentury Capital Partners. "Yes. Are there enough venture firms? Yes. Are there enough customers who want to buy products? No." Even if there were, much of any increase in corporate information technology spending would not go to start-ups. Large companies burned by risky client relationships with untested start-ups during the boom would probably turn to large and proven technology companies, according to Jack Biddle of Novak Biddle Venture Partners. [Nicholas Johnston, Washington Post, Nov 4]
If a Little Bit is Good, Isn't a Whole Lot Better? Forrester Research concluded companies that perform best as businesses "don't spend the most" on information technology. The report, which is likely to be widely cited by corporate financial officers seeking to rein in computer costs, ... examined the financial results of 291 companies .. with an eye to correlating financial performance and budgets for information technology, or IT. The firm measured sales and cash-flow growth and highest return on assets and then correlated those figures with IT spending as a percentage of revenue. ... The report is likely to raise eyebrows because industry-research firms get much of their income from computer companies and are typically loath to question the value of buying computers, software and services. [Wall Street Journal, Nov 1]
History of GaN A BRIEF HISTORY OF GaN BLUE LIGHT-EMITTING DIODES by Paul Maruska who "invented" the blue LED, and who got SBIRs at Spire, NZ Technologies, Implant Sciences, and Crystal Photonics. an enlightening reminiscence of how things really got started on the blue LED front, Maruska was the key person at the RCA lab years ago when it all really happened. His story corroborates that which we presented on video, via Jacques Pankove (another SBIR winner at Astralux, ONR Report by CSCI [Compound Semi News, Oct 31]
Efforts to wire U.S. homes with high-speed Internet access are foundering. New technology could help--if only carriers could afford to buy it. The much-hyped broadband revolution is sputtering. Five years after cable companies and local phone giants first teased consumers with dreams of fat pipes beaming the Internet, on-demand video and hundreds of other services into the home, just 15% of U.S. households have signed up. In Canada, with lower prices and higher data speeds, usage is almost twice as high. A big reason for the disappointment: price. [Scott Woodley, Forbes, Nov 11,02]
| The job of the entrepreneur isn't to act prudently, to err on the side of caution. It's to err on the side of reckless ambition. It is to take the risk that the market allows him to take. What distinguishes a robust market economy like ours from a less robust one like, say, France's, is that it encourages energetic, ambitious people to take a flier -- and that they respond to that encouragement. It encourages nerve, and that is a beautiful thing. As the business writer George Anders puts it, ''The personality that allows you to be Jeff Bezos in the first place does not have a shutoff valve.'' If it did, Amazon.com wouldn't exist. [Michael Lewis, "In Defense of the Boom"New York Times, Oct 28] | Unfortunately, the entrepreneur cannot depend on government for succor in programs like SBIR which talk entrepreneur and walk away into the safe arms of caution and predictability. The politicians enact an entrepreneuring program and then turn the execution over to the bureaucrats who have no interest in either chance nor change. So, agencies like DOE and the Army hand out multiple SBIR awards to companies that have already had 1500 awards and are still at the door with their begging bowls. |
Stock market losses are not losses to society. They are transfers from one person to another. ... About the trillions that have been shaved off the stock market in the past two and a half years, from whom did it come and to whom did it go? A coming book, ''In the Company of Owners,'' written by the sociologist Joseph Blasi and the economist Douglas Kruse with the Business Week reporter Aaron Bernstein, ingeniously answers this second question. ... while the executives of [the 100 biggest New Economy-type] companies made off with great wads of cash, the ordinary employees, as a group, did far better. Through the boom, investors forked over $78B to the regular employees of 100 start-ups. The grunts of the bankrupt Excite@Home, for instance, made off with an estimated $660 million before their company went under. [Michael Lewis, "In Defense of the Boom", New York Times, Oct 28]
| The Big Foot Wafers. One foot diameter silicon wafers offer a the 50% increase for only 20% in diameter and 2.5 times more surface area for etching chips for only 20% higher cost than the present 8-inch standard. , yet costs only about 20% more to process. That's enough cost shift to revolutionize the world industry. says Business Week, Nov 4) to reshuffle the chip industry's worldwide balance of power. And for all but the largest producers, the smartest choice may be to go "fabless," avoiding the manufacturing rat race. The price of a chip factory, or wafer fab, that can handle 300-mm platters can easily top $2.5 billion--and some plants are pushing past $3.5 billion. Only a handful of traditional chipmakers can justify such an investment because keeping one of these "megafabs" humming requires annual sales of at least $6B. The economics are enticing lots of fab lines - far too many for the expected demand. More bad news about the good news is that chipsters like Cypress,Fairchild, National Semiconductor, and Siliconix have a huge problem. The jump to 300-mm wafers presents a stark choice. Companies that ignore the technology may not survive as major producers much after 2005. And those that invest in it may find profits elusive even longer. For many, going fabless may be the most sensible option of all. [Otis Port, Irene M. Kunii,Bruce Einhorn, and Andrew Park, Business Week, Nov 4] | Start with a a single Texas Instruments chip that's half cost and one-quarter size. Load into a $30 pocket gizmo that e-mails and surfs. For consumers, there is no downside: Single chips mean smaller, cheaper, and less-power-hungry devices. Some manufacturers, however, will struggle to survive in an era when the number of chips in every gadget is shrinking. The likely outcome is a market share battle of unprecedented intensity. In fact, it has already begun. In the market for wireless chips, for example, deep-pocketed chipmakers are racing to combine on one semiconductor all the functions of a cell phone. Next up will be other high-volume gadgets such as digital cameras, MP3 players, and even personal computers. IXI Mobile (Palo Alto, CA) got $15M to develop the gizmo in an industry riddled with excess manufacturing capacity and desperate for growth. [Andrew Park, Cliff Edwards , Andy Reinhardt,Irene M. Kunii, Business Week, Nov 4] |
| Parched at Texas Instruments. The semiconductor sector seems to be headed south once again. On Oct. 21, Dallas chipmaker Texas Instruments (TXN ) said new orders declined 7% in the third quarter, after a spring surge. The slowdown caused lower-than-expected quarterly earnings of $188 million for TI, which is cutting 500 jobs. With orders weakening, TI expects that sales will drop 10% in the fourth quarter and profits will evaporate. TI says customers continue to ante up for chips for new wireless phones, but demand for parts for PCs, notebooks, servers, and peripherals has tanked. | |
Profits are the lifeblood of a market economy. Without them, businesses don't invest, they don't spend on research and development, and they don't put money into new products. Without profits, there's no incentive for innovation or for the creation of new companies. ... U.S. corporations are 25% more productive than they were in 1992. But by the government's figures, the aftertax profit rate on corporate investment peaked in 1997. It likely stands at only 5.2% today, no higher than it was a decade ago and well below the long-term historical average. ... in order to boost operating profits by 12% during the next year, companies in the S&P 500 may have to cut some 900,000 jobs, or 4% of their workforce. [Michael Mandel, Business Week, Nov 4,02] For SBIR hopefuls who actually want to sell commercial technology, look for profitable companies for whom your technology would raise productivity. As for convincing the government that you have something commercializable: 1) most don't care, 2) and therefore, they will accept anything you say. All they need is a fig leaf to cover their looking out only for their agency's agenda.
Netpreneur Folds. Netpreneur's sugar daddy said enough for the six-year old networking group that linked start-up executives with funding sources and promoted entrepreneurship in the Washington DC area. The tech executives had to choose between saving their companies and schmoozing their fellows. The sole patron and founder, Mario Morino, had invested $8M in the idea. [Shannon Henry,Washington Post, Oct 23,02]
Even though the Phila Semi Index lost half its value this summer, Chris Graja, sees some semiconductor stocks with the right formula for avoiding deepest disaster: lots of cash, bulletproof balance sheet, proprietary products, Cree< is the one SBIR tsock on his list with cash five times current liabilities. R&D spending 18% of sales, price only twice book vlaue, and total debt under 30% of equity. [Bloomberg Personal Finance, Nov 02]
Four SBIR companies made the Forbes Best 200 list of America's best small public companies. Albany Molecular Research (#16, third consecutive year of listing), SurModics (#59, third year), Embrex (#74, third year), and AstroPower (#147, first year). Which ones should you buy (or sell)? Not my department.
Watts Wacker, futurist, names the five stages in the progression from deviant to mainstream: the ''Fringe,'' where the idea is hatched in the mind of the deviant; the ''Edge,'' where it starts to gather a small following; the ''Realm of the Cool,'' where trendsetters adopt it; the ''Next Big Thing,'' where it is celebrated on a much wider scale; and ''Social Convention,'' where your parents get on board. The trick is to capture a product or phenomenon in its deviant stage, ride it into the mainstream, and reap the profits - although there's money to be made in all the stages. [D.C. Denison, Boston Globe, Oct 20]
More Scientists, Please. Economist Paul Romer says that the key to economic growth is the pace of technological innovation. And that the driver of that is the supply of scientists and engineers which the universities restrict by focusing on university objectives. Undergrad programs driven by professorial job protection and graduate by research grants to produce too many academic PhDs. His fix: government portable graduate fellowships to a select group of high school graduates if they go on to earn undergraduate degrees in natural science or engineering. [Washington Post, Oct 20] Don't hold your breath waiting for such a solution that has no vested interest constituency. If they really wanted Romer's approach, government could use programs like SBIR, which are mostly wasted for creating new commercial technology, to help educate useful engineers by subsidizing the company to hire part-time students.
the technology industry is again in eclipse. The 100 largest tech companies have lost money in the aggregate for five straight quarters, according to Merrill Lynch & Co., and their revenues in the second quarter stood 29% below their peak. The Nasdaq Composite is down 75% from its high 2 1/2 years ago. And this time, tech's troubles have a wider impact than ever, on both the stock market and the broader economy. Some 47% of business capital spending goes into tech equipment and software now, compared with 20% in 1990. [SCOTT THURM and KEN BROWN, THE WALL STREET JOURNAL, Oct 18]
Two celebratory magazines of the info-tech bubble have shrunk. Upside is folding immediately and The Red Herring is having a "major reorganization". [Verne Kopytoff, SF Chronicle, Oct 8]
How long will the bloodletting go on? Business Week spent a month examining the capacity for each type of telecom service, from long-distance to wireless, and comparing it to worldwide demand. The results show that capacity continues to dwarf demand. .. Today's telecom companies, struggling to survive one of the greatest busts in business history, are slashing prices below cost and selling precious assets. "Neither one is a long-term survival strategy," says Stephan Beckert, research director at TeleGeography Inc., a Washington consultant. .. More than a cyclical downturn, what they're experiencing is a full-blown industrial depression, one that has wiped out half a million jobs and $2 trillion in U.S. market value. ["When Will the Telecom Depression End?" , Business Week, Oct 7]
For tech spending, wait till next year. Those feeble signs that technology spending was picking up in the spring all but vanished during a summer of corporate chicanery and cascading stock prices. And there's growing evidence now that corporate technology buyers aren't planning to open their wallets until well into 2003. [Beth Healy, Boston Globe, Sep 30]
Memory-chips prices are bouncing around $1.75 for the benchmark chip, far below the break-even price for most of the manufacturers. That is down from around $17 in mid-2000. The problem with memory chips is that too many companies in too many countries make them. Countries like to be in the memory-chips business, as they like to be in shipbuilding or steel, as a point of national pride. Such pride goeth before falling stock prices. [Jesse Eisinger, Wall Street Journal, Sep 24] States lusting for the New Economy can also fall into the trap of encouraging an industry that has already reached saturation.
what has become of the talk of the New Economy? The pundits that touted it are often now fleeing from their pronouncements. In so doing, they exhibit as much charm as the West Nile virus, and none of its bite. But they also open a schism, between the new and the old, that seems in line with the nostalgia we all feel for older, simpler times. The danger is that we fall back into romanticizing the old, without the perspective of the real benefits of the new [Rohit Shukla, Larta CEO, Sep 23]
SEMICONDUCTOR STOCKS SUNK to new lows this week. They can't fall much further, some analysts believe. It looks like bargain time for bottom fishers. But be warned: The semiconductor industry is undergoing fundamental change, and low prices won't matter much if chip stocks are stuck in the mud. [By Russ Mitchell, Smart Money,Sep 19]
One notion is surely dead now: that the people and places who produce information technology will get ever richer, while the rest of us languish on hold waiting for "technical support." Auto dealers are making money; companies that make fiber optics aren't. ...The biggest benefits from information technology, it is increasingly apparent, often go to those who use it cleverly rather than to those who make it. The computer hardware and software businesses are sexy, but some parts of it are very competitive. That is squeezing profits for producers and cutting prices for consumers. Look at the personal computer that $1,500 buys today. ... one of the biggest beneficiaries from information technology is Australia, which hasn't any high-tech industry at all. ... High-tech producers get pretty plants, some high-wage jobs and lots of glory, but as the prices of their exports fall, more of the benefits accrue to consumers elsewhere, International Monetary Fund economists Tamim Bayoumi and Markus Haacker observe. ... The technological revolution of our time has lots in common with earlier revolutions. Parallels are most often drawn to electricity and railroads. "They also had stock-market mania where people expected to make huge amounts forever," Mr. Bayoumi says. "And they didn't. So you had a big rise in stock prices and then a big fall." [David Wessel (capital@wsj.com), Wall Street Journal, Sep 12]
Too often, global capitalism seems to boil down to overworked and underpaid workers around the world making goods U.S. consumers borrow too much money to keep purchasing even though they don't really need them. [Marc Gerstein, Multex Investor, Sep 12]
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If Up Wasn't So Up, Maybe Down Isn't So Down.. The technology boom may not have been as big as the experts thought, according to recently revised government figures. ... If corporations didn't buy as much computer hardware a few years ago as had been estimated, they could be ready to purchase new machines sooner. ... The spending numbers are reported as part of the [quarterly] GDP data. ... The government now says spending on computers and peripheral equipment, adjusted for inflation[was] 15% percent lower than its earlier estimate. In 2001, ... many experts suggest the replacement cycle for personal computers is stretching. Even if people used to replace their PCs every three years, more users may be willing to wait four or five years before buying a replacement machine. ... Until more compelling reasons emerge for a massive upgrade, the tough times may continue for a while. Companies selling computer security are also in the doldrums. But while it's not clear why people need to replace PCs, there are plenty of reasons to upgrade security. [Alan Goldstein,Dallas Morning News, Sep 9]
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Innovation isn’t what companies do; it’s what customers adopt. [Michael Schrage, MIT Tech Review, Sep02]
Six Full Pages. Glenn Hammond Curtiss in the spring of 1910 completed a 243-kilometer public flight along the Hudson River from Albany, NY, to Manhattan. Curtiss’s feat, the first true cross-country flight in the US, was a technological tour de force. Not only was it by far the longest flight yet attempted in the United States, but it meant traveling over unpredictable terrain with virtually unknown wind and weather hazards, quite a different matter from the fair-weather demonstration laps around airfields that characterized most of the previous flights. Hundreds of thousands of people showed up to watch Curtiss’s flight, and the New York Times devoted no less than six full pages of text and photos to the occasion, the most space the newspaper had ever allotted a single news event. [Seth Shulman, MIT Tech Review, Sep 02]
Isaac Newton had nothing but derision for the vulgar "inferior horde of people" (p. 88). Yet his disciples launched into careers as purveyors of his science in public lectures heavily weighted to mechanical explanation. Often viewed with suspicion elsewhere in Europe, in England such lecturers flourished. [LARRY STEWART, Isis, Jun 02]
Think Becomes Thought Ford drove a spear through the techno-blather that electric cars are a good commercial application for new technology by caving in to the cheap gasoline auto. After $125M in electric vehicle development, it pulled the plug for lack of buyer interest.
Friday, Merrill Lynch's Brett Hodess joined the Greek chorus and downgraded all the big equippers -- Applied Materials, KLA-Tencor, Lam Research and Novellus. Raw materials suppliers to chip factories tell Hodess that factory utilization levels at big Asian operations are faltering. Leading edge factories continue buying the latest technology, Hodess told customers, but in low volume. "It is going in with 2,000 wafers per month worth of equipment," writes Hodess, "instead of 10,000 as planned a month ago." [BILL ALPERT, Barron's, Sep 3] Which correlates with SBIR chip-related companies' stocks languishing in the doldrums.
What is your company worth when you go to sell an equity share? Ann Grimes (Wall St Journal, Aug 29) reports that the median valuation is $10.6M, about where it was in the go-go mid-90s. OK, so yours isn't a median company since you have dynamite potential. But since you cannot convince the potential investors, you'll have to settle for being compared with a standard version.
the bust of the early 2000s is being driven largely by a collapse in telecom. The industry has lost an estimated $2000B in paper value on the stock market--more than eight times what it cost to bail out the savings and loan industry a decade ago. New investment capital, vital for innovation, has dried up. In the first six months of this year (i.e., before WorldCom's bankruptcy) telecom lost 225,000 jobs, one-fifth of the total jobs lost in the country. And with thousands of miles of excess capacity in fiber-optic cable, and as much as $500B in questionable debt, the industry may continue to hemorrhage value and jobs for the foreseeable future--potentially imperiling the country's overall recovery. [John Judis, The New Republic, Sep 2]
Too Much Although Mae West thought too much of a good thing was wonderful, in high-tech goods it is a drag. Nicole Ridgeway (Forbes, Aug 12) lists the glutted industries: fiber uses only 35% of installed lines and within that only 11% of capacity; too many homes and business already have all the PC they can use; only 29% of hard-drive capacity is being used; companies have far more software "seats" than they can presently use; companies use only 10% of all those routers that made Cisco rich. If your SBIR proposal intends to throw around market numbers, and you want honest predictions instead of the biggest number you can think of, you'll need to tone down the near term enthusiasm.
Branscomb was critical of the DHS proposal, saying the administration is "creating a $40 billion department without knowing what it is going to do. I think there is a huge amount at stake because neither the president's bill nor Lieberman's bill is thoroughly satisfactory with respect to the science and technology [Jim Dawson, Physics Today,org] The fight is on for the structure of DHS as the S&T advocates are getting in their licks as Congress shapes the department that Bush didn't want. Forming another Cabinet department goes against the Republican faith in less government. But presidents can't long enjoy the cool shade of principle when a crisis demands that they be seen doing something or be accused of not caring. Even Republicans cave in those situations.
No single measure tells you all you need to know about R&D. In a study of 3500 companies' performance 1964-1998 MIT researchers found that each 1% increase in R&D spending brought a 4.3% rise in the mean ratio of market value to book value. ... although the market recognizes in general that R&D creates value and prices it into shares, at the extremes - an intense research effort or a really cheap company - it underestimates the power of R&D, both to sustain growth stocks and lift up losers. [Michelle Diblasi, Bloomberg Personal Finance, May 02]
Forbes ASAP June 24 let twelve scientists lay odds on the next great inventions. Ray Kurzweil sees a three-dimensional molecular computer; Carver Mead says any specific prediction is bound to be wrong; James Fergason says the next step is real-time automation that makes full use of the PC's database and computing speed.
The Red Herring [July 02] take on AstroPower: For US leader in solar electric components, smart expansion of production will drive margins higher. For Fuel Cell: Maker of fuel cell generators survives on government contracts. Finds commercial market a challenge. For Plug Power: Its fuel cell power system won't be widely avaialble until 2003. Distribution contract with GE will help.. For American Superconductor: Maker of ultra-efficient superconductor wires and power converters won't turn a profit for some time.
Next Innovations. The
World Future Society gives guesses by Batelle on ten innovative
products for the next decade:
genetaceuticals, personalized computers, multi-fuel autos, flat screen
HDTV, electronic wallet, home health monitors, smart maps, smart
materials, anti-weight and anti-aging products, never-owned leased-only
products.
Fortune's 100 Fastest Growing Small Companies included SBIR companies Cree (#32), Surmodics (#36), AXT (#56), II-IV (#59), Embrex (#70).
Q: The dot-com years spawned lots
of innovative startups. What's wrong with that?
A: It fostered a gold-rush mentality that sucked a lot of good
scientists and engineers out of schools before they finished their
degrees. Even a lot of professors went off to start companies. So it
created a climate that was negative toward long-term thinking and work
on long-range problems.
.. when we wake up, when the next crisis hits, it will be way too late.
Innovations are built on basic research that was done long ago--15 or
20 years ago for electronics and communications, and 20 to 30 years
earlier for new materials.
Q: What can we do to foster long-term research?
A: I think we ought to open the floodgates to immigration and encourage
scientists and engineers to come to the U.S. One reason we're a strong
country is that the last two great waves of immigration brought the
smartest, most motivated people here. Look at the number of Nobel prize
winners who were first- and second-generation Americans. Make a list of
the people who've created industrial empires or thriving new ventures,
and you'll find damn few who were here for three generations. The
public is worried about the threat of foreign terrorists. But my
experience has been that immigrants are the most adamantly patriotic
people you'll find. They have a visceral appreciation for what they've
gained by coming here. [Greg Blonder, Business Week, Aug 6,02]
Innovation isn't enough. Of three Minnesota firms on Inc magazine's Innovation 50, which applauds the "the nation's most inventive entrepreneurial firms", one just filed for bankruptcy. Says the Minneapolis Star Tribune, July 30.
Why did Henry Ford make only a black Model T? Marketing genius? Marketing ignorance? Random choice? Michael Schrage (MIT Tech Review) says because black was the fastest drying paint for his innovative speedy production line.
Got a world beating idea? So did Charles Goodyear as told in what Rich Jaroslovsky's review (Wall Street Journal, July 31) of "Noble Obsession" (Hyperion/Theia, 274 pages, $24.95) calls Charles Slack's slim, utterly absorbing retelling of the development of rubber. Goodyear worked the miracle but the pirates worked the patents, and Goodyear found himself in the Paris debtors' prison. Eventually the Goodyear Tire & Rubber Co made millions of which Goodyear and his family got none. Industrial museum aficionados can visit the mediocre Goodyear World of Rubber at Goodyear headquarters in Akron which is more a showcase for Goodyear products than an incisive review of rubber.
Corporate America, for all its scandals and schemes of late, still funds a good chunk of technology as it transitions from research to market. That also applies to the funding of nanotechnology, said Joe Lichtenhan, president and founder of Hybrid Plastics (Fountain Valley, CA), a nanomaterials company. [Jayne Fried, Small Times, July 26] Lichtenhan also quoted Lewis Branscomb's figures that the money for transition from research to market comes 34% from corporations, 29% from the federal government, 25% from angel investors, 5% from state and local governments, 4% from venture capital firms, and 3% from university endowments.
The downside of all the advanced technology we're talking about is that it costs more, There's not a market for fuel efficiency. Gasoline is cheap, so it's no big deal. The auto industry has been putting all its advanced technology into increased power. [Robert Sawyer, a professor at Berkeley who studies vehicle emissions and regulatory policy, Washington Post, July 22] How does your fancy new tech meet the "cheap enough to use" standard?
Buying or Selling Tech Company Equity? Caveat Emptor. Researchers Xianjun Geng, Lihui Lin, and Andrew B. Whinston at UTexas say that corporate insiders have an even better change to hornswoggle investors because the main asset of such companies is future market potential. [Business Week, July 29] With "future potential" anything could be true. Unfortunately for small companies hoping for SBIR subsidy, the uncertainty is a cover for government agencies to ignore it altogether. Geng et all suggest a remedy that insiders give advance notice of intent to sell shares. Which, like many financial remedies, sounds better than it would work in practice.
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Ever since Mary Shelley’s Frankenstein, futurists, including Orwel, have worried that technology’s growing avalanche would overwhelm all attempts to control it. On that point, Orwell was right. But he mistakenly prophesied that governments would successfully use technology as a weapon to obliterate liberty. Communications would spread propaganda, the "Big Lie", and electronics would be used for surveillance and thought control. Radio had spread Hitler’s evil eloquence to millions of Germans, many more than could have been reached by the unamplified human voice. By 1948, Stalin had effectively used technology to achieve god-like status in the Soviet Union. Orwell extrapolated the trend, and that’s where he went wrong. ... Orwell’s error was remarkably simple: he assumed that only the state would be able to afford high-tech, an assumption shared by virtually every prophet, science-fiction writer, and futurist. But it has proven to be wrong. As late as the 1970s, the driving force for electronic technology in the U.S. was the military; now the Department of Defense has difficulty getting industry to respond to its needs, since they are dwarfed by the consumer market. The military, whenever possible, now orders commercial off-the-shelf technology rather than "mil spec." [Richard A. Muller, MIT Technology Review, Jul 12] It is a whole lot easier to criticize predictions after their time than to project the future in any form. Orwell wasn't predicting, he was warning.
Creativity is becoming a driving force in American economic life, argues Florida, a professor of regional economic development at Carnegie Mellon University in Pittsburgh. Economic assets such as natural resources and physical labor have become less of a competitive advantage. Meanwhile, ''creativity has come to be valued - and systems have evolved to encourage and harness it - because new technologies, new industries, new wealth and all other good economic things flow from it.'' Whether the creative work involves writing software code or music or scientific research papers, Florida sees it employing an increasing share of the work force. That, of course, is hardly a new idea; for years now, we have heard about ''knowledge workers'' and the ''Information Economy.'' What is noteworthy is Florida's theory that this economic shift has created a new societal class - the Creative Class - and his analysis of how that class is influencing our culture. To hear him tell it, everything from office design to work schedules, recreational habits, community life, and regional economic development is being affected by the rise of the Creative Class. ... Florida's theories are fairly sweeping - and, as a result, readers may find themselves disagreeing with some aspects of his worldview. For example, he has this to say about the reasons Creative Class people often work long hours: ''We do it because we long to work on exciting projects with exciting people. We do it because as creative people, it is a central part of who we are or want to be.'' Maybe. The Rise of the Creative Class, By Richard Florida, Basic Books, $27.50, 404 pp. [Martha E. Mangelsdorf, Boston Globe, July 14]
WorldCom's impending $40B bankruptcy should galvanize Washington to this simple fact: For the last two years we have suffered not a mild recession but a technology depression. 17% of the economy -- is the prime source of a $4T decline in the net worth of U.S. households. President Bush did not cause the tech depression, but it is his responsibility now. Without a continuation of the productivity gains of the 1980s and 1990s, both the economy and the Bush presidency will topple. To get the economy back on track, he should unleash broadband, the final connection to homes and small businesses that ultimately feed the telecom infrastructure. ... the number and speed of last-mile broadband connections has been far below the expectations on which the Internet expansion was based. Internet traffic growth is down from 1,000% per year in the mid-1990s to 100% today; U.S. semiconductor sales fell 45% between 2000 and 2001; and the valuations of the top venture capital portfolios (not to mention my own list of favored companies in the Gilder Technology Report) are off between 90% and 99%.... In six to nine months, however, the tech depression threatens to deepen into a general economic collapse. President Bush needs to add his support, stating his emphatic endorsement of full broadband deployment, and encouraging the FCC to move vigorously toward nationwide deregulation that preempts state regulations. If the ICC Clause doesn't apply to the Internet, it might as well be rescinded and the Internet dismantled, since the Net cannot work if it is divided into local and long-distance regimes in 50 states. ... With Congress and the courts hopelessly deadlocked, only George W. Bush and Michael Powell can lead us out of the telechasm. [GEORGE GILDER and BRET SWANSON, Wall Street Journal, July 8]
Wanted: executives who can sell. That's right, sell, not invent, evangelize, market, or engineer. In these challenging economic times, with companies spending hesitantly, if at all, on technology, what start-ups really need are experienced sales people. ... When it comes to selling technology, Anderson says, it's virtually impossible to prove that one gizmo is better than the next. ''Usually the best sales team wins,'' he says. [Beth Healy, Boston Globe, July 8] And that doesn't mean selling SBIR proposals to government; it means selling product to real companies with real economics.
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Slurry scurry, or why even great SBIR innovations have trouble penetrating markets. Cabot Microelectronics has been a terrific business. ... supplies polishing compounds used by chipmakers as they lay down the successive layers of today's multi-layered computer chips. Cabot helped pioneer this polishing process with IBM, and enjoys nearly a 90% market share ...Trouble is, everyone wants a piece of Cabot's margins. Because of its quality product, Cabot has been able to charge $15-to-$25 a gallon for its slurries. Rivals like DuPont, Fujimi and Rodel have tried displacing Cabot Micro with prices of $6 a gallon. But while chipmakers have railed at Cabot's high prices, they don't like fiddling with established production processes. [BILL ALPERT, Barron's, July 8]
on 31 July, the Nobel Economist and pioneer of monetarism Milton Friedman will turn 90. There's a [very unlikely] story of the student who fell asleep in one of his classes. As the snoring grew louder, Friedman went over and tapped the guy firmly on the shoulder. "I'm sorry, Professor, I missed the question," said the student, waking up with a start. "But the answer is the Quantity Theory of Money." [story from the Adam Smith Institute] A lot of SBIR proposers and wannabes have a similar approach: whatever the question is about their technology, the answer is $750K of SBIR money. And although such students eventually graduate, some companies never graduate from SBIR because the government makes it too easy and rewarding for companies to learn the game.
one of the most prolific writers of his generation, and some of the most glowing passages he has ever written illuminate this book. He cannot jot down a hasty memorandum except in the best literary style. He commands the English language as a skillful general commands armies. June 1948, NY Times review of Churchill's Gathering Storm.
Got a catchy invention? Thought about why it was never invented before? Do an energy balance around your system and find that you've invented perpetual motion.
The Incredible Shrinking Circuit. Silicon could be on its way out. The resistors, transistors, and wires in the next generation of minute microchips might be made from individual molecules. NanoHub offers a software toolkit for electrical engineers, physicists, and other researchers investigating this radical technology. The site lets you run more than a dozen programs to simulate nanoelectronic circuits. "You can explore designs for devices that Intel might be building in 10 years," says electrical engineer Mark Lundstrom of Purdue University in West Lafayette, Indiana, one of nanoHub's founders. For example, one program calculates the electrical characteristics of different kinds of carbon nanotubes put to use as transistors. Free registration gives you access to most of the site's programs, which provide tools unavailable in commercial software packages, Lundstrom says. nanohub.purdue.edu [Science, May 24]
The semiconductor stocks were not helped by a weekend Business Week piece on IBM's woes with overcapacity. the [Wall Street] analysts ignored all that and grilled the CEO on what they consider IBM's biggest headache: semiconductors. Wall Street is right: The global chip slump is dragging down IBM's bottom line. ... the chip slump drags on, with recovery unlikely before next year ... As for foundries, the world is awash in contract-manufacturers--in Taiwan, Korea, and soon, China. .... IBM needs to downsize its least profitable chip assets [Spencer E. Ante, Business Week, Jun 3]
Where's the Boom? Summertime, and the living is iffy. Double-dippers - economists who believe that the economy will turn down again - are still a small minority. But we're no longer hearing the triumphalist predictions of roaring recovery that were so prevalent back in March. The funny thing is that there hasn't been much negative economic news, just an absence of the good news that we were told to expect. Above all, business investment, whose plunge led us into this slump, has yet to show any serious signs of life. How did so many business economists convince themselves, and each other, that a great boom was imminent? No doubt it was the result of wishful thinking on several levels: the investment community wants to sell stocks, and it also wants to believe that Republican administrations are good for business. But I suspect that a big factor in the premature declarations of victory was a false analogy between George W. Bush and Ronald Reagan, which led people to expect that 2002 would play like 1983. [PAUL KRUGMAN, New York Times. May 28]
Technological Disaster - The
Top Ten.
Eric Scigliano [MIT Tech Review, Jun 02] lists the ten worst tech
failures over 373 years:
1. VASA sinking. 1628, great museum of the recovered ship in Stockholm.
2. Hyatt Regency walkway collapse, 1981
3. Iroquois theater fire, 1903
4, Eschede train derailmment,1998
5. Ashtabula Creek bridge wreck, 1876
6. St Francis Dam burst, 1928
7. Atlantic Empress/Aegean Captain tanker collision, 1979
8. AT&T system collapse, 1989
9. Northeast Blackout, 1965
10. Concorde crash 2000.
The tale of Candescent Technologies shows how two of the technology world's most cherished ideas are often just plain untrue. First, that antiquated old technologies are always sitting ducks for "disruptive" new technologies that come along to challenge them. Second, that every engineering problem can be solved if you have the best and the brightest working on it. The idea behind Candescent was to make a flat-panel display with a picture as crisp and bright as a regular cathode ray tube in a format no thicker than a matchbook. [LEE GOMES, WALL STREET JOURNAL, May 13] A great idea that attracted a lot of VC money, and the government's economic nationalists put a lot of government money into flat panels. But neither VC nor government could beat the Asian LCD companies who invested in incremental improvements in an established market.
Martin Pyykkonen, a network-equipment analyst at C.E. Unterberg, Towbin, notes that the seven biggest telecoms reduced their 2002 capital-expenditure forecasts by 25%. And in software, even tech-slump survivors like Siebel Systems Inc. (SEBL ) say a recovery this year is iffy, at best. "I think tech companies are late in the food chain," says Craig A. Conway, CEO of business-software maker PeopleSoft Inc. [Business Week, May 23]
SBIR Beat NASDAQ A dollar invested in the NASDAQ Index on Jan 3,2000 would be about forty cents (a loss of 60%) whereas the same dollar invested in the SBIR Index of Inknowvation would be 55 cents, a loss of only 45%. While both would have lost you a bundle, and while there is no practical vehicle for investing in the Inknowvation Index, the difference does say that a lot of SBIR companies that went public were not blown away in the info-tech bubble. They could at least go back to Uncle Sam for more free money.
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Founders Move On. Every entrepreneur knows, or should know, that corporations have a life independent of their founder(s). After the merger battle for a re-make of the company, HP has now neither a Hewlett nor Packard as a director. The new generation now runs the place, who knows where.
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To those who fear an HP-Compaq monopolistic colossus. Tom Stein [Red Herring, May 02] says relax: there's one thing the tech industry always gets wrong - one thing that no matter how many times it tries, it fails - megamergers.
Innovator Re-Born. Smiling out from a Red Herring (Apr 02} picture in a story "The Light Brigade" is the face of Dave Welch. Om Malik's story asks whether the new chip by the "secretive Silicon Valley startup" Infinera is the "dawn of a new Intel". Dave headed R&D at SDL as it emerged and headed for public markets and the eventual $41B bubble-era buyout in the 90s. He has 30 patents in optics that Malik says, "chart the history of the development of modern optical components". SBIR palyed a small role in SDL's product development but not as much as the agencies like to claim as their "success stories". The agencies get away with such claims because, except Jeff Bond and Leslie Aitchison at MDA, they make no credible quantitative claim and because hardly anyone cares anyway.
The Silicon Valley model has been fantastic, but it's been stretched to the limit. We've had a lot of talented people with a lot of money pursuing dumb ideas. [Nathan Myhrvold, quoted in MIT Tech Review, May 02]
Glory days long gone for venture capital, FleetBoston trims. It was a pledge made at the top of the market: BancBoston Capital in late 1999 said it intended to invest aggressively in start-ups rather than simply hand money to other venture firms to manage, as it had for decades. At first, huge wins during the dot-com frenzy. BancBoston started doing more deals each quarter than any other venture firm in New England. Its total venture portfolio nearly doubled to $4.4B in 2000,.. But the glory days are long over. BancBoston has been cutting staff, trimming its portfolio, and has nearly halted its direct dealmaking for the past year. The venture group's assets are now at $3.5 billion, and Fleet said yesterday it aims to slash that by another 29 percent over the next two years, to $2.5 billion.... Although Fleet is unlikely to withdraw support from sought-after funds it will try to exit commitments with industry sector funds and less established funds, bank executives said. ... Fleet wrote off as a loss $1.1B in venture investments in 2001, 47 percent of that related to start-up deals. ... The ugly numbers came after a year in which BancBoston Capital delivered $373 million in net income to Fleet, or one-fifth of the banking company's total earnings. The 2000 venture results marked a 73 percent jump from 1999. [Beth Healy, Boston Globe, 4/17/2002]
not the end of innovation. The problem is not the restrictions imposed by physics, but our still crude application of those physical laws. For instance, the performance of a computer is not limited by the physics of semiconductors, but by the creativity of the engineers designing the machine. "Real innovation is going to occur at the architectural level", one [Economist] reader believed. In short, technology in the 21st century is going to be less about discovering new phenomena and more about putting known things together with greater imagination and efficiency. [The Economist, Mar 16]
Too Many Pessimists Make for Optimism. Hate a stock? Sell it short, unless everyone is trying to do the same thing. AstroPower has a short position with 30% of the shares sold short which at the average daily trading volume would take 30 days to cover (re-purchase). Which means that there will eventually, sooner rather than later, be buyers who are afraid of a short squeeze when too many try to re-purchase at once. Watch for volatility in the stock price.
With the Nasdaq composite index down 60% from its peak two years ago, venture capitalists know they can't make a quick buck by taking an unproven concept public. Across the nation, they're making fewer investments and concentrating on seasoned companies that they consider less risky. That leaves early-stage companies more dependent than ever on >B>the mercy of angels. ... The trouble is, these folks saw some of their own wealth disappear in 2000 and 2001. "The angel money is there," said Marc Braun, a St. Louis attorney who organized two angel-investing clubs. "It has definitely gotten more conservative and more prudent since the stock market crashed." Tarby Bryant, who runs the Gathering of Angels in Santa Fe, N.M., assesses recent events more bluntly: "Funding from angel investors did not occur in any measure last year." Bryant's concept operates in five cities, down from 10 at its peak. A St. Louis Gathering held just two meetings last fall before suspending operations. ...Clayton attorney Scott Levine is organizing an investment club for people who aren't wealthy enough to join groups such as the St. Louis Angel Network. His Catalyst club requires a commitment of $3,000 over three years. Levine is trying to attract 90 investors, including some who can invest quite a bit more than $3,000. He says about 40 people have committed so far. [David Nicklaus, St Louis Post, Apr 3]
Defense or Myth? Ted Postol fires a howitzer through the arguments that anti-missile defense is alive and working in MIT Technology Review. Unfortunately the whole article is available only to print subscribers and even then requires a huge .pdf download (because it is loaded with big pictures). SBIR hopefuls needn't worry about drying up of all that money, though. The Republicans will find reason enough to continue funding the dream at deployment preparation levels.
A New York survey of small business found that business's most common (24%) first wish was more demand for their product or service and second wish (20%) was better access to capital.
THE MOUSEDRIVER CHRONICLES: The True-Life Adventures of Two First-Time Entrepreneurs,by John Lusk and Kyle Harrison. In the late 1990s, a typical American dream might have involved landing a cushy dot-com job with stock options. But John Lusk and Kyle Harrison chose to travel a less fashionable path: manufacturing a novelty-gift item for office-bound Tiger Woods wannabes--a computer mouse shaped like the head of a golf driver. A crazy decision for two recently minted Wharton School MBAs? If making and creating a market for such an improbable gizmo weren't enough, the duo then one-upped themselves by writing a book, The MouseDriver Chronicles, describing the experience. The result is a well-written and witty how-to, with worthwhile lessons for all entrepreneurs. MouseDriver took shape as the idea of selling the mice quickly gained momentum, ... partly because Leonard M. Lodish, a Wharton entrepreneurial-marketing professor, kicked in $20,000 of the $120,000 they ultimately raised to get Platinum Concepts Inc. off the ground. Frugality and creativity became the partners' watchwords. A nearby Starbucks served as their "conference room" and even provided a setting for market research since an espresso bartender there fit their "main demographic--gift-buying women ages 25-75." ... One humbling discovery: Their vaunted degrees and Wharton contacts proved less of a resource than the Yellow Pages. Another lesson--when in doubt, imitate. ... They nosed around at the mall to see what they might copy. ... their Rule of Four, a "homemade metric for understanding startups." Put simply, the maxim suggests that you divide sales estimates by four and multiply work-time estimates by four. ... by the book's end the authors paid themselves for the first time, hired a publicist, gotten a real office (even if it's a "shed"), and sold about $600,000 worth of product via about 500 stores,... They come across as tireless salesmen, while at the same time they could be poster boys for the idea that it's the journey that counts. [By Karin Pekarchik, Business Week, Mar 25]
CHALLENGE: Decimal Decathlon. Many people think that to solve a mathematical problem you can just "throw it at the computer." Most researchers don't pay much attention to the algorithms computers actually use. But numerical analysts are paid to worry about such things--because seemingly simple problems can require mountains of algorithmic ingenuity. To prove it, Nick Trefethen, a numerical analyst at Oxford University, has thrown down the computational equivalent of a gauntlet, offering $100 for the most accurate answers to a set of 10 mathematical problems.The problems and the rules of the competition are downloadable from the Society for Industrial and Applied Mathematics (SIAM). One puzzler, for example, asks for the future location of a photon bouncing around in a forest of circular mirrors. Others look like exercises you might find on a calculus exam--proctored by the Marquis de Sade. The questions are particularly challenging because the seemingly straightforward solution yields the wrong answer. According to Trefethen: "If anyone gets even half the problems, I will be impressed." Entries are due by 20 May, and Trefethen will publish the answers and the names of the winners in the July/August issue of SIAM News.www.siam.org/siamnews/01-02/challenge.pdf [Science, Feb 22]
Cheap! Cheap! Cheap! That’s the hungry cry of the marketplace. Faster is nice. Better is good. But cheap, cheap, cheaper is what fuels growth and accelerates market share. Innovation dangles the tantalizing promise of more for less. "More for less" is what customers say they want. Just ask Intel about its next-generation microprocessor or Merck about the impact of generic drugs on its bottom line. That’s precisely why innovators have such a tortured relationship with price. ... The problem is a fundamental economic confusion between "price" and "cost." Most innovators honestly believe the price they charge represents the customer’s cost of acquiring their brilliant innovations. It doesn’t. Not even close. Genuine innovation almost always creates a disjunction between the price that’s paid to acquire it and the actual costs of implementing it. Customer cost, more than innovator’s price, is what really determines the success of innovative offerings. Michael Schrage, MIT Tech Review,Apr 02]
Even the forecasters who are most bullish about the pace of recovery this year do not anticipate a return to the earnings growth or equity values realized in the last two years of the roaring 1990s. Like previous technological upheavals, the IT revolution is likely to yield the greatest benefits not to investors but to workers, in the form of higher real wages, and to consumers, in the form of enhanced product selection, quality, service, and lower prices. No wonder so many of America's investors and chief executives remain anxious about the future, even as economists--not usually known for their optimism--celebrate the economy's remarkable performance. [Laura D'Andrea Tyson, Business Week, Mar 25]
Where Are All the Bright Ideas? innovation comes in cycles. And caution now among once-burned VCs is slowing the search for the Next Big Thing. Perhaps no other industry in the world has produced as many innovations over the past decade as America's high-tech sector. Until 18 months ago, tech innovation -- much of it related to the dot-com boom -- was the engine that powered the rapid expansion of both the technology business and the U.S. economy, plus a surging stock market. So as tech companies struggle to escape the doldrums, the question arises: What happened to the innovation that's supposed to sustain them through good times and bad -- and when will it return? ... The modern Web owes its very existence to rapid innovation in myriad technologies such as servers, communications networks, and Web-browsing software. So, tech companies and the economy would be much better off right now if substantive innovation -- advances that cut costs, improve productivity, or appeal mightily to consumers -- weren't taking a break. The simplest answer for why it has is that innovation, like all things in business, comes in cycles. It surges when risk-taking is in vogue, as it was during the late 1990s. It slows when caution is in the wind, as has been the case since mid-2000 -- both in corporate research-and-development labs and among venture capitalists. ... That may sound like an overstatement. After all, though venture-capital investment in 2001 dropped 65% from the year before, it still came to $32B, the third-highest yearly total in history, according to research firm Venture One. Projected investment for this year is expected to fall again but will hit a still-hefty $25B. What doesn't show in raw numbers, however, is the degree to which venture capitalists have become more risk-averse -- using the bulk of their money to support existing initiatives, rather than going boldly where no VC has gone before. ... Young entrepreneurs with even deserving projects have become discouraged, and that may now be stifling new innovation. VCs -- who a short time ago were advising their charges to put off making a profit in favor of winning market share -- now mainly want to fund projects that will lead quickly to a viable, commercial product. ... VCs say despite the difficult funding environment -- or perhaps because of it -- the pace of true innovation is increasing. Just because huge numbers of entrepreneurs got money during the dot-com craze, they argue, doesn't mean it added up to real innovation. It was "me-tooism," says Wes Raffel ... Cycles of pauses in innovation followed by renewed momentum have plenty of precedents. During the creation of the steel industry and the rise of railroads in the late 1850s and early 1860s, historians point out, investment outpaced the market's capacity to absorb it. The result was a period of retrenchment and consolidation. The golden era of steel and railroads didn't happen until 10 years later, when demand for these advances had caught up with innovation. ... So perhaps the current lapse is really a new beginning [Jane Black]
It's the most oft-told startup tale in the wired world: A genius invents the next big thing but can't commercialize it. His original investors go so deeply into debt trying to support his efforts that they have to declare bankruptcy. Then a savior arrives in the form of a talented manager, a frontman who knows how to both inspire the genius and get his product into the world. At the dawn of the steam age, the geek genius was James Watt, and his savior was the British entrepreneur Matthew Boulton. [Wired, Jan 02]
the tracks were being laid so fast that even the robber barons couldn't keep up. Flat-fee ticketing became commonplace, for lack of any other viable business model, and competition between the rail giants acted to hold the prices down. [Wil McCarthy, Runaway Train, Wired, Jan 02] The Janaury Wired reviews the history of technology.
Above the Crowd: Unlearning Lessons of Internet Mania. The venture community will start investing again in new ideas--but startups will have to behave as if it's 1994. ... The first thing startups need to do is purge themselves of the sprinter mentality .. These days investment banks are preaching the following rule of thumb: If a startup wants to go public, it needs at least $30 million in annual revenues and at least two consecutive quarters of profitability. ... there is a quicker way for startups to now deal with the Internet era: They should simply forget it ever happened. [FORTUNE, December 10,01; By J. William Gurley ]
Advanced Materials. We are starting to see the end of Moore's Law in chips and without breakthroughs in materials the speed ceiling will be reached. Also the uses for unique metals, composites, laminates, and ceramics will amaze anyone. Compounds that have 30 times the tensile strength of steel at 1/5 the weight will change the building industry, Superconductive materials used in power transmission will increase power delivery efficiency by 300-500%, and ZeroG grown crystals have an unknown and unexplored potential. Developments in Advanced Materials will drive the next technology boom. [Wall Street Journal forum contributor, Jun 14,01]
While reluctant to make any specific forecasts, [Jim Bagley, CEO of Lam Research] said breakthroughs for semiconductors will come from the health care sector with the introduction of devices such as the recently unveiled pill-sized digital cameras that patients swallow to capture images of their digestive tract. "A PC isn't important to everyone," Bagley said, adding that people in the future will place more value on semiconductor technology that improves their health. "The place where our industry can make an impact is in areas that we haven't even thought of." Bagley predicted that innovation will come from those outside the industry who realize semiconductors can solve problems they are grappling with. [East Bay Business Times, Jan 14]
General Electric Co. plans to spend $3 billion on technology in 2002, up 12% from a year ago, but only on things that will create value. Spokeswoman Diana Sousa said the large conglomerate expects payback on its investments for small projects in 12 months and large projects in 24 months. ... The one overriding theme [for the industry] is technology spending won't see a rebound until 2003. [DONNA FUSCALDO, Wall St Journal, Jan 14]
National R&D Matches Inflation. Today's Wall Street Journal predicts a 3.2% rise in R&D for 2002 to $285B of which only 26% will be government.
It is often assumed that an economy of private enterprise has an automatic bias towards innovation, but this is not so. It has a bias only toward profit. It will revolutionize manufactures only if greater profits are to be made this way than otherwise. ... The sound business man, if he has any choice, will produce very expensive jeweled timepieces for aristocrats rather than cheap wrist watches, and the more expensive the process of a launching cheap goods, the more he will hesitate to risk his money in it. [Eric Hobsbawm, Industry and Empire, Penguin Books, 1999]