Power And Dollar

Electioneering 102: A Lesson From Green Party of Canada

The federal election in Canada concluded on 2008.10.14.  The incumbent party won another mandate.  There are a lot of interesting content in this election to fill the media.  However, for the purpose of Electioneering, this story may not make the cut to the paper, let alone to the headline.  This case study lesson is experienced by the Leader of Green Party of Canada.  This biggest contribution of this race is: how to choose a spot to run.  The most applicable lesson of this is still city councilor.  

 

Green Party of Canada has been increasing its vote share ever since the turn of the millennium.  In 2006, they got 4.48% of the votes and no seats in the parliament.  After that election, the Leader of the party then did not run in the leadership race again.  It then became an open race and Elizabeth May won the leadership.  She was an Executive Director of Sierra Club Canada, with government bureaucrat experience, a law degree and a recipient of Order of Canada.  She ran a by-election earlier, against all parties and got the second largest votes in that race.  

 

Green Party has long held the position that they are unable to win a seat because they are excluded from the televised debates.  This election proves that a televised debate did not help.  

 

May was looking for an epic race.  This could have been the first sign of trouble.  An election is not about making a statement.  Election is about finding the most representative will of the people.  By being the leader and possibly the first elected officer of a party, May’s election is more important than any other candidate.  There is a lot of media attention, political resources, volunteer resources, and money involved in a leader’s race.  Therefore, it is only prudent to maximum the vote, not to dramatize an epic.  

 

If you are running in a city councilor race (or county board, school board, etc), you run to win.  Any other objective is mischievous, and misleading the voters.  It is true that people run elections for all kinds of reasons, some of them noble too.  However, it is only when you aim to win would you be serving your voters, be honest to your voters, donors, volunteers and other kinds of supporters.  Furthermore, if you do not run to win, your result tends to sink, even if you got some special interest groups’ backing because your true primary motives usually affect your plan, execution and result.  For instance, since your real motive is a geography A, you divert more resources to that area instead.  However, that area may be a contestable area.  if the votes are already secured, no need to get vote there.  However, you are doing it there to serve your personal interests.  So, your volunteer hours are lost, your lawn signs are wasted.  Alternatively, you may be interested at a specific donor group.  Similarly you wasted your campaign.

 

Liberal party delivered their promise not to contest against May in order to maximize her chances to a seat, wherever her choosing.  This promise is also unlikely to be offered in the next election since the leader of Liberal party is also in his trouble.  And no one should plan a race with the expectation that this offer will be made twice anyway.  

 

May placed this epic over at Central Nova, where the incumbent runs a dynasty there: 2 generations of incumbent, close to 10 elections.  This is where the second problem is.  One should contest in a place to win, not a place to dramatize.  By being the leader, she can choose any leader she wanted.  She should have picked a riding where

 

1)       The Liberal candidate is not the incumbent, however strong enough that the votes actually matter in her race;

2)       The Green votes are decent, say above the 2006’s record of 4.48% votes;

3)       Incumbent votes are actually weak; below 50% is minimum requirement.  The lower the better. 

4)       Since there are 3 major parties contesting in every riding in Canada, an ideal riding is where all three parties split their votes, i.e. around 30% each.  Of course this is unrealistic.

 

Election is a contest of organization, stamina of the salesman (candidate), branding (party), money (fundraising) and product (platform).  A leader got the luxury of choosing a riding, which most people cannot afford the infrastructure investment to do.  Building up a local political network to support is not easy.  However, this is fairly accomplishable if you were interested at a city race.  Changing a house from this corner of the town to that corner is not too difficult.  What is the ideal demographic for you?  Ethnic group? Income class? Age group? Occupation?  Family status? 

 

If she spent 30 minutes to look around the >300 ridings in Canada, she maybe able to see that there are multiple ridings where Liberal is the incumbent, however with >25% of votes; Green votes are above 5%, and the incumbent got votes around mid 30%.  

 

With 30 minutes of your time, you can see that Welland is one such riding where the incumbent is Conservative.  Vancouver Kingsway is another one, where the incumbent is NDP.  There are probably others.  These 2 may not deliver an ideal environment for victory.  However, the point is there are potential sites to choose from.

 

If May knew that it wasn’t going to be a victory, then dramatizing an epic is not a bad option.  However, in your case, don’t run.  An election is costly not only to you, but also to your supporters in forms other than money.  

 

If you plan to remove a low performing incumbent, then get all the prospective candidates together.  Gamble all resources in only one person.  So, all your prospective candidates may want to have a quasi primary to determine who will have the best shot.  

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October 22, 2008 Posted by | activism, advocacy, canada, Current Events, Democrats, election, Election 2008, Electioneering, environment, fundraising, nonprofits, politics, Republican, wordpress-political-blogs | Leave a comment

Hurricanes, P&C Insurance and Property Taxes

Most natural disasters have short time durations with a long recovery period, like Katrina and Tsunami.  What we have now is something different:  climate change gives us a long disaster duration with a long recovery period.  Climate change gives us multiple disasters over a long period of time.  

 

What companies get affected by storms and hurricanes? Property insurance companies.  All state governments want to regulate property insurance heavily because this retail financial product touches a lot of voters.  State governments’ interest in this industry is actually pricing.  If the pricing is heavily regulated, then it is the expense that the companies have to control in order to make profit.  The biggest expense for property and casualty insurance companies is the managing the claims.  Big property insurance companies are AllState (NYSE: ALL), Travellers (NYSE: TRV), Progressive (NYSE PGR), ACE (NYSE: AEX).

 

For that reason, P&C insurance companies actually have more incentive in participating climate mitigation financial instruments than big financial houses like Merrill or Goldman.  As well, they have more at stake simply because they have less control over their revenue and absolutely no control over their payout.  Finding a climate change solution is more important to them than to many other industries.  The work around solution is to avoid the a high payout area.  But in the age of climate change, which place is not affected?  It is only a question of which natural disaster, be it drought, flood, hurricane, wild fires…

 

Another aspect of climate change is on infrastructure.  More and more infrastructure will require more repairs.  This will be a financial burden on local governments, which translates to state income tax and property tax.   

 

However the solution is global, not local.  This is where the political risk is.  Risk mitigation rests among national governments.  However, little is done.  Financial burden is placed on consumers and local governments.  However, they have very tools available to them.  Since financial impact is placed at a local level, that is why it is hardly a national election topic when it is actually a topic of heavy financial substance.

 

Increasing population density is one tool available since it minimizes the exposure to infrastructure.  Zoning is only one way to make it happen.  Property tax is another way.  In fact, a more effective way.  Change the composition of tax between property and land will create more incentive for building higher density areas.  Decrease the proportion of tax on property and increase the proportion of tax on land will naturally encourage builders to create high density communities.  

 

 

 

August 18, 2008 Posted by | Current Events, Democrats, economics, election, Election 2008, environment, nonprofits, politics, wordpress-political-blogs | 3 Comments

Is Obama Going To Fix Bridges For 15 Months?

The bridges are falling down.  Who is to fix them?  Will Obama take Keyne’s prescription and spend money on infrastructure?  How much will it cost?  Is there a cost-benefit analysis?  What about prioritizing which road/bridge to fix first?  Isn’t that another pork barrel all over again?  After all, it is about value produced by dollar spent.  It may be difficult to measure what value that is especially if America wants to spend public money to pull aggregate demand.  How will this reflect on Obama’s no gas tax relief position?  

 

An infrastructure repair program on every federal road/bridge will almost contradict on Obama’s energy policy position, i.e. to minimize gasoline consumption.  Having more roads is to encourage more driving, not only symbolically but also financially for the drivers.  By supporting fewer roads and bridges will not only off load some of the expenses from the federal balance sheet, but also encourage more job sites to congregate, thus increasing population density.  Higher population translates into few roads for a bigger population, i.e. servicing the same amount of people with a smaller budget.  

 

Transportation Secretary says $20B is required annually for 20 years.  Obama promises a one time deal of $25B.  So, is this a 15 month fix?

 

Of course, it is inconvenient for pork barreling.  Will Obama want to attract more Chamber-Of-Commerce kind of Republicans?  Or will Obama want to attract more rural voters?  More construction jobs and concrete all over the country?  Or move the jobs to population centers?

 

Check who donates to Obama and you will get a better clue.  Find donors by employers.  And these are the names you want:  NYSE:GVA, NYSE: URS.

 

Not that I am ignoring McCain.  It’s just this election is becoming an election between Obama and Anti-Obama. 

August 1, 2008 Posted by | Barack Obama, Current Events, Democrats, election, Election 2008, environment, John McCain, mccain, obama, politics, Republican, wordpress-political-blogs | 4 Comments

How Did Global Warming And Afghanistan Get Together?

CNN brought these two topics together.

 

Engaging Europe to dispatch more troops in Afghanistan does help lower fiscal expenditure of America.  This message affirms the previous post regarding the relationship between Obama’s foreign policy and fiscal policy.  However, Obama’s assertion that it will give tax cuts is suspect since the fiscal expenditure is so high.  Any fiscal expenditure reduction from Iraq may not be sufficient to bring America back to black.  

 

However, having a lower fiscal expenditure will help the crowding out effect and make credit more availability.  This is important to the economy of America since the credit market in such a mess.  No lender is thinking of lending and no buyer in major metros is thinking of buying.  

 

CNN’s article mentions global warming (not climate change) at the end.  This is where Obama’s European trip actually turns interesting.  How critical will global warming be to the Obama’s administration with European Union?  Are you thinking: how relevant is this question?  Is it worthy to consider?  

 

First of all, every relationship is give and take.  Engaging Europe to support an American pet cause, i.e. Afghanistan, will require American cooperation in something else America has long ignored.  That could be global warming, or anything else.  Of all things, global warming may be the most likely choice, not because Obama is committed to the cause, but because he is very likely to have to reward his critical core supporter base: educated high income urbanites.  

 

His presidential campaign, not his senator campaign, got its first footing through the support of educated high income urbanites across metropolitans.  Each state may have an interest unique to them.  However, one common platform issue of this group across all metropolitans and states is global warming.  This supporter group gave the seed money and the in-kind support for the campaign.  They are also the first investors, employees and customers of the Obama company.  This is the political capital Obama cannot spend. 

 

Green issues to trade for a more engaged Europe ally, for a more long term solution of gas prices, for a more oil independent America, more energy efficient cars produced in Michigan, is a good deal, isn’t it?  It may be.  The question is: what is the price for that?  How is that going to be paid, financially or politically?

 

Solutions to global warming all eventually lead to one thing: urbanization, i.e. high population density, efficiency with natual resources.  Who benefits first from high population density?  Capital intensive builders and urbanites.  Everyone else will have to face regulatory or financial conditions more averse to their life styles: rural residents or even suburbanites.  

 

Obama’s intent to continue the gas tax and provide tax cuts in other ways is a good indication (and it is the right economic policy) of that direction.  Who gets the worst of the deal?  People who have commute, the longer the commute the worse off they are.  The disadvantage versus advantage spectrum is thus rural residents, than suburbanites, than urbanites.

 

Lower emission means public transportation, more communal facilities (high rises of 50 floors rather than acres of single family homes) or equipment, more usage of communal services.  While very few urbanites supported Obama due to their economic incentives, they will definitely benefit from policies that a crafty politician intends to reward and sustain their support for re-election.

 

And Obama will dutifully inform the rural residents that in order to sustain military operations overseas and the military jobs where a higher proportion of rural residents take, European demands have to be met. 

July 25, 2008 Posted by | activism, advocacy, Barack Obama, Current Events, Democrats, election, Election 2008, environment, John McCain, mccain, nonprofits, obama, opinion, politics, Republican, wordpress-political-blogs | 2 Comments

Any Platform Question For McCain? Obama?

Obama is travelling overseas.  However, this is not about vacationing.  He is still selling himself to his home audience.  He wants to show that he is able to represent the United States, he will not be treated like kid.  Part of his weakness is he lacks the credential in foreign affairs.  This trip is address that. 

However, for most of us, we are more interested at our wallets.  What do you want to ask to the candidates?

Sen. John McCain’s top economic adviser, Doug Holtz-Eakin, will meet with Forbes magazine’s reporters and editors next week.  Forbes is inviting questions from the general public.  The same invitiation is sent to Obama as well. 

Here is the link for your submission:

http://blogs.forbes.com/trailwatch/2008/07/your-economy-yo.html?cid=122822586#comment-122822586

My questions directly correspond to the content from McCain’s website. McCain’s material is quoted first and then my questions.

John McCain Will Help Americans Hurting From High Gasoline And Food Costs. Americans need relief right now from high gas prices. John McCain will act immediately to reduce the pain of high gas prices.

Would McCain consider the idea of cutting taxes through increasing personal exempt instead of cutting corporate would increase aggregate domestic demand, off set the price increase in gasoline?

Would McCain consider the idea of levying taxes at the oil, coal and nuclear buyer level so that energy producers while cutting income tax both at personal and corporate level at the same time since it would create the incentives for energy producers to be more efficient, and thus decrease the consumption of those commodities without affecting consumers’ preferences?  Basically, would McCain tax oil as if they were cigarettes and decrease income tax elsewhere?

McCain:
John McCain Will Keep Tax Rates Low. Entrepreneurs are at the heart of American innovation, growth and prosperity. They create the ultimate job security – a new, better opportunity if your current job goes away. Entrepreneurs should not be taxed into submission.

Questions
Would you agree that if income tax cuts can off set the recent increase in energy, it will create sufficient demand for American manufacturers to manufacture energy efficient products to be internationally competitive and save more jobs?  Our automobile industry is a great example: If we wish to sell more cars overseas (or even domestically), producing energy efficient products is to equivalent to stay competitive. China is now the largest solar panel producer in the world by footage and India now exports windmills to America.

John McCain Will Reward Saving, Investment And Risk-Taking. Low taxes on dividends and capital gains promote saving, channel investment dollars to innovative, high-value uses and not wasteful financial planning. John McCain will keep the current rates on dividends and capital gains and fight anti-growth efforts by Democrats.

To courage more saving, would McCain consider the idea of allowing people to cash out their 401k as down payment to complement the first home buyer program, with a cap, without tax implications?  This probably would revive the demand in the real estate market.  The tax revenue impact to the government would probably be smaller than increasing the tax credit as it current stands.

July 18, 2008 Posted by | activism, Barack Obama, Current Events, Democrats, economics, election, Election 2008, environment, John McCain, mccain, nonprofits, obama, opinion, politics, Republican, wordpress-political-blogs | Leave a comment

Why This? Why Now? Gore Pushes Obama

Gore’s speech highlighted a point raised here earlier, that is energy is the intersection of issues in this election: gas price, national security and environment.  Gore specifically picked to deliver this speech at the Society of Daughters of American Revolution because he wants to equate the importance of energy independence as to the American Revolution.  Gore is not having this speech on any random day.  He is affecting politics to the best he can.  He is a politician.  He understands how to make the most political impact of one man’s effort.  This post is not about the content of the speech, but rather to emphasize that he is showing techniques how the rest of us can make a difference in a critical time like this.  

 

Obama is getting $52M in the month of June, according to his federal election filing.  Given a large proportion of his donors are small monthly donors, a fraction of this amount can already be accounted for next month.  In addition, Obama seems to be able to integrate a good portion of Clinton’s donors.  Although we hear news about the discontent of some of the Clinton fundraisers, it looks like that probably is a minority of loyal supporters of Clinton.  However, by no means the accusations against Team Obama’s arrogance against Clinton’s fundraisers are false.  It is probably more likely that more of Clinton’s fundraisers are complacent to the arrogance and are willing to stay in order to become as a “Door to the President”.  

 

Gore sees that he still has influence in the public.  He is trying influence as many people as possible to see that energy is the determinant of America’s future.  Of course he is thinking from an environmentalist point of view.  However, what it really matters is what argument convinces other to the direction Gore seeks.  He found the right angle: our wallet is affected by energy (not only gas price at the pump but inflation in general); national security buffs like this energy talk; and the environmentalists of course.

 

Gore probably sees that Obama has a good shoot at it.  And that’s why he remains in the spot light.  For if Obama does not (perceived by Gore), Gore would see that arguments raised by him in the public probably has smaller influence over the voters McCain is courting.  Gore would then be less active publicly. 

 

There are always five elements to an electoral campaign: candidate, platform, money, field and message.  The content of the speech is trying to affect platform.  However, there is very little Gore can do about that.  His delivery is not about platform either.  For if he were, he would have found a specialist (i.e. hint: surrogate) to participate in Obama’s platform team.  Gore has no field operation to speak of since he has been out of politics for so long.  What Gore is really trying to get to is the message part.  He is trying to tilt the theme of this election toward the solutions of the problems. 

 

What can we learn from it?  We can do better than one vote.  We do not have to be Al Gore to make a difference.  Many local organizations have their issues at stake in elections, although no necessarily national election.  State and county elections are also in play.  Every candidate needs some volunteers.  These fellow volunteers are the ones we want to engage.  The message that actually gets to candidate and the operatives are filtered through the volunteers by their daily interactions with others.  This is how candidates react to the field (one of the 5 elements above).  For a county candidate, the same opinion from a few volunteers may have a decent impact already.  

July 17, 2008 Posted by | activism, advocacy, Barack Obama, Current Events, Democrats, election, Election 2008, environment, John McCain, mccain, nonprofits, obama, opinion, politics, Republican, wordpress-political-blogs | Leave a comment

Environmetal Groups Mis-focused G8

CNN’s G8 summit news story focuses on the criticisms against the emission control proposed by G8.  Both CNN (and other news sources) and environmental groups fail to recognize other more important items, some of them relevant to this climate change topic.  As a result, they misfired. 

 

While the G8 agreement is unproductvie, something else actually may have an impact.  This something else is against the interests of environmental groups.

 

Most politicians blame speculation as the greatest contributing source to increase in oil prices.  To combat this price increase, environmental groups point out that this is time for renewable energy.  This is nothing new.  The new part is this argument gets media attention, i.e. oil price increase is strengthening the cause of environmental groups.  To combat this price increase, Italian finance minister Giulio Tremonti proposed to increase the margin requirement for futures trading.  By increasing the margin, the amount of money required to speculate the same volume of commodity increases as well.  This suppresses the quantity of speculative trades.  Therefore, the oil prices will go down, if indeed speculation trading is the cause of high oil prices.  This is a very effective way to combat oil prices and working against the interests of the environmental groups because a lower oil price diminishes the incentives of renewable energy.  No money can buy this much media coverage for the environmental groups.  No money can buy (or political donation) this much air time from the politicians, even if they were committed to the cause.  On the issue of renewable energy, speculation trading is an important ally of environmental groups.  

 

G8 is, like any other high publicized event, an excellent opportunity to promote products.  Japan is doing exactly that to promote their zero emission cars and buses.  Every crisis is an opportunity to stay ahead of competitors.  Japan is trying to stretch this technology gap against America.  Will this energy crisis get America to some action?  Both McCain and Obama are still thinking about what to do with the tax money.  This is so 1980’s: supply side economics.  Commercializable solution comes when there is sufficient demand for a product.  This high price is helping the demand for the green collar jobs Obama is talking about, not refunding the consumers.  

 

The possibility that green collar jobs may be years away is the source of talks about nuclear energy cooperation While it is true that one disaster event is too many, nuclear technology is available (versus renewable energy), operational and the cost being predictable and controllable.  Environmental groups focus should not be why nuclear energy is bad.  Environmetal groups focus should be what will make the renewable energy technology commercializable and how to create those conditions.  If it is about the game rules of the market set-up (as in the case of margin requirement), then this is the prime to mobilize the organizational infrastructure, since it is election time.  

July 8, 2008 Posted by | activism, advocacy, Barack Obama, Current Events, 石油, Democrats, economics, election, Election 2008, environment, Japan, John McCain, mccain, nonprofits, obama, opinion, politics, wordpress-political-blogs | Leave a comment

Energy has so many spins this year!

McCain announced his $300 million prize for a next generation of cars.  This election is increasingly turning to an election about environment due to the high gasoline prices.  While money is still favoring Obama, McCain is finally trying to close the gap on ideas.  If McCain can get more media exposure on his issues and ideas, McCain can sharpen Obama presidency.

 

McCain still needs to catch up with Obama on ideas.  So far, McCain is still reacting to Obama’s idea.  McCain’s $300 million prize is a good example.  McCain needs to be ahead of Obama. 

 

In addition, McCain can use security issue to frame the debate on energy, such as energy independence of Middle East.  McCain can also use religion to frame the debate on energy: save all God’s creatures on earth, not just fetus. 

 

Obama is actively courting the religious votes.  And he is very comfortable with his religion before the TV, comparable to Bush 2.  In a way, Obama can split the religious vote.  For Republicans to protect and expand the religious vote, abortion may fail in this year.  However, religious environmentalism may work. 

 

McCain’s move can also help revitalize the auto industry in America and compete against foreign car makers.  His idea is actually more cost effective since this program’s overhead costs is a lot smaller in dollar amount as well as a percentage of the funds than Obama’s venture capital fund.

An oil independent America is not only about disengaging itself from the Middle East, but also about compteting against China and India for resources.  The supply line between America and Middle East is simply too long.  Being oil independent is about production cost.  And it will be too late for America if India or China can beat this against the States too.

 

 

McCain’s team needs to be more flexible and recycle the same issue to different audiences.

 

Although the environmental issues are getting into the debate, the Green Party cannot benefit any of it in the United States.

June 23, 2008 Posted by | activism, Barack Obama, Current Events, Democrats, economics, election, Election 2008, environment, John McCain, mccain, obama, opinion, politics, Republican, Thoughts, wordpress-political-blogs | 1 Comment

The Spending and Energy Program of Obama

Gore finally made the endorsement to obama.  At about the same time, obama WSJ published their interview with obama regarding the other half of the fiscal policy, the spending side.  WSJ’s article does not capture everything Obama has in his website.  But then, WSJ’s responsibility is to synthesize the information, not to copy and paste.

 

WSJ highlights Obama’s $150B spending.  The source of the funding comes from the cap and trade energy auction.  The price of energy of course will go up.  No one has produced figures on how much the gas, heating gas and electricity will cost with this tax revenue source.  However, the tax revenue is expected to rebate back to the consumers’ utility bills.  If we assume the 300 million Americans are all eligible for this rebate, then each gets $500 back.  If we assume only the 100 million American tax filers are eligible, then it is $1,500 each.  

 

This has not figured in the program admin cost.  My usual figure is 1/6 of the total amount is program admin cost, i.e. $25B of the $150B.

 

Obama can achieve the same goal without incurring new program admin cost.  Instead of incurring new program admin cost, Obama can increase the personal exempt.  $1,500 in utility bill rebate is equivalent to $15,000 increase in tax exemption.  And this is not only about taxes, but also about strengthening his cause for energy independence.  Here is why.

 

When there is a rebate to the utility bill, the consumer needs to consume a certain amount of utilities, be it gas, heating gas or electricity.  Therefore, the incentive to modify energy usage is at best unchanged.  Consumers will be less mindful of usage simply because they may think they will get some money back.  The price after rebate maybe unchanged and if that were the case, then it is simply a job creation program for more civil servants.  All these unintended consequences are defeating the purpose of minimizing energy consumption and energy reliance on fossil fuel, foreign dependence and minimizing trade deficit.  

 

However, if the cap and trade revenue is refunded through income tax exemption, then the incentive to save energy consumption is stronger.  The tax refund can now be recycled into the discretionary income.  One may pay down his mortgage debt or buy another bicycle.  But having a rebate on the utility bill requires a consumer to consume a certain amount of energy.  Obama already refuses to cut corporate tax and chooses to cut personal income tax exactly because his platform is focusing (knowingly or not) on lifting domestic aggregate demand. 

 

Fiscal expansion policy does lift domestic aggregate demand.  However, an increase in aggregate demand by a single decision maker is not as effective as having the increase decided by the consumers themselves.  There is an efficiency issue.  And it is also a democratic issue.  Who is to say what is wanted by whom?  

June 17, 2008 Posted by | activism, Barack Obama, Current Events, Democrats, economics, election, Election 2008, environment, John McCain, mccain, obama, opinion, politics, Republican, Thoughts, wordpress-political-blogs | 1 Comment

What Is Your Company’s Plan B?

Myanmar has finally accepted foreign experts to enter its soil, although only among its neighbors, the ASEAN countries.  Its death toll is above 100k now, half of 2004 Tsunami.  Myanmar is likely to miss the spring farming seasons, which will creates a second disaster: famine.  

 

China started its 3-day mourning on the 19th.  Flood is now another up and coming disaster.  Floods may damage railroad connecting Vietnam and transportation network to Myanmar.  This area has some research and development sites, including nuclear research facilities.  A destruction of the facilities does not present as much damage as the removal of the research community.  

 

135 dams/reservoirs are in danger, as in having cracks or not functional.  18 are in danger of collapse. 

 

Equipments can be replaced.  No matter how expensive the equipments are, a vendor can still produce another one.  However, if the research personnel are displaced (the better scenario) to other institutions, then the knowledge goes with it as well.  Physical capital is no longer the important critical factor to a modern economy.  The most important asset in a knowledge economy is community.  The value of research personnel community is not the knowledge stored in the brains of their individual brains.  If that were the case, one would just need to buy more disk space to store the knowledge.  A research community is facilitated by a group of research personnel where they interact with each other while having a chat off work, in the corridor, or even a conversation with colleagues who have only a peripheral relevance to their research project.  Once a community is disintegrated, it cannot be re-builded. 

 

A good example is the Canadian fighter jet research community.  Canada spent a lot of resources to research an ideal fighter jet suitable for the northern climate (metal fatigue, engine ignition, everything).  Given the strategic value Canada was during the Cold War to defend the Artic, a fighter jet designed for the Artic was invaluable.  However, US were unwilling to place a sizable order to make the production financially viable.  Canada’s order alone could not have made last either.  So, all the research personnel had to find their new employers.  Some people went to NASA.  Some people went to civilian aerospace industry.  However, the asset (being this research community) was forever gone.  

 

The same could be said about any company, not only technology companies.  Say financial industry.  Each company is more experienced in a specific kind of product; say yours is more experienced in smokers’ life insurance products or self-employed mortgage applications.  A spreadsheet (or database) can only go so far.  The knowledge / experience is among the seasoned employees and their collective ability to train to the others.  This is the same reason why big companies like GE would send their management staff across departments to get a better exposure.  GE continues their management culture, and sustains their P/E ratio, through this kind of cross department experience.  That contributes a great part of its asset.

Does your company have a Plan B to continue a critical part of your business?  In case of unforeseeable event, be it natural disaster or political risk event, does your company have a Plan B to protect your critical asset?  

May 19, 2008 Posted by | business, China, Current Events, environment, Investment, opinion, politics, Thoughts, wordpress-political-blogs | , , , , | Leave a comment