Comments

Tom, I love that quote by Cisco's Guido Jouret: "California has a very welcoming attitude, but it's a Darwinian society...Companies come and grow and die, and no one sheds a tear. And there's a real sense that it isn't worth doing if it won't change the world." All that's missing is Bob Weir singing in the background: "California, preaching on the burning shore" (from "Estimated Prophet").

Posted by John O'Leary at October 26, 2009 9:29 AM

That is a really encouraging view. Thank you. I love California having lived in San Francisco for a number of years. But why were IOUs issued? Looking at all the great things happening in California, I guess I'm trying to figure out why they can't balance a budget? Do we just expect as with individual bankruptcies that states will also go bust every now and then?

Posted by Judith Ellis at October 26, 2009 9:51 AM

Part of the reason they are bankrupt has to do with the tax revolt mentioned in the article.
Anti-tax sentiments (along with anti-government sentiments led by Californian Ronald Reagan)
are one of the reasons we are in economic trouble.

Posted by zorro at October 26, 2009 3:34 PM

It looks like tax revolts are bad for State governments, but good for entrepreneurs!
Or does this mis-state the situation?

Posted by Mike L. at October 26, 2009 6:08 PM

Here's where some of that venture capital is going

http://www.nytimes.com/2009/09/25/technology/internet/25twitter.html

Posted by zorro at October 26, 2009 6:11 PM

Yikes Judith, please tell me that I am misreading your last line and you are not lowering the bar and seeing individual, corporate, or government bankruptcies as the new norm! It is like buying that load of crap out of Washington that the 10% unemployment should be viewed as the new acceptable level. Restore my faith in demanding excellence!

Posted by Terry Ransbury at October 26, 2009 7:45 PM

Zorro, you have no clue on California tax history. The revolt you are referring to is so old as not to be relevant. It was all manifested in fixed property taxes that remained constant until you sold your property, where they were then adjusted (always upward) to the new property value of the transaction price. Almost all homes have been sold many times since that revolt and its affect is long gone.

California is issuing IOUs because of out of control spending AND the net cost of "undocumented workers" in spite of the shining corporate examples Tom pointed to. California's taxes and fees (taxes by another name) are sky high compared to all states and they are still running huge deficits. I have moved from the state after 17 wonderful years in Silicon Valley and now live in the highest tax state in the South. And it does not even come close to California with regards to tax burden.

Posted by Terry Ransbury at October 26, 2009 7:57 PM

"Zorro, you have no clue on California tax history. The revolt you are referring to is so old as not to be relevant. It was all manifested in fixed property taxes that remained constant until you sold your property, where they were then adjusted (always upward) to the new property value of the transaction price. Almost all homes have been sold many times since that revolt and its affect is long gone."

Bull!!!

Posted by zorro at October 26, 2009 8:33 PM

"Yikes Judith, please tell me that I am misreading your last line and you are not lowering the bar and seeing individual, corporate, or government bankruptcies as the new norm! It is like buying that load of crap out of Washington that the 10% unemployment should be viewed as the new acceptable level. Restore my faith in demanding excellence!"

Terry - You may have faired much better with just making your points without addressing mine as they are not relative in the least. I see the passion in your exclamation marks but they are useless in reference to my rather ironic ending. I guess you missed that. Sorry. I appreciate your passion nonetheless.

Regarding IOUs, I imagine every state has its own reasons for not balancing their budget relative to spending and taxes--nothing new there. You make it seem like the issuance of IOUs was a small thing. But I don't think so. What you offer above are excuses. It seems that California just needs to get it done. How's that for excellence? :-)

By the way, do those undocumented workers not add to the profits of small and large businesses alike in construction, landscaping, hotels, restaurants, etc.? (By the way, I am for immigration reform and securing the borders.) Even if they are not paying taxes, they are benefiting businesses I'd imagine. This is also not a new issue to say the very least. What is California doing about it? I know it's a difficult one.

Regarding revolts, revolutions, wars, movements, etc., they have lingering affects often times indefinitely whether good or bad.

Posted by Judith Ellis at October 26, 2009 9:51 PM

Why do the words "Eggs" and "Basket" come to mind, what of a blended approach to things?

Posted by patrick at October 27, 2009 9:39 AM

With "43% of all U.S. venture capital in 2008" going to Silicon Valley to companies like Twitter (Thanks Zorro for the article) which employs 60 people, I wonder how the other millions of jobless Americans will find employment. (I also have concerns about our poor education system which will exclude many in this economy.) I assume Facebook, Youtube and MySpace are employing around the same amount of people. I also assume that Apple and Cisco have offshore manufacturing.

Okay. I most certainly believe in a diverse robust economy, but we will most certainly not be able to saturate the market with many more of the same tech companies to employ more Americans, will we? Perhaps some of the 10% will fill a niche in their communities and begin a viable business. I would that the government would be more for small businesses.

While I really do sincerely appreciate these "shining corporate examples," I fear that they are not enough to stabilize a robust economy. I also appreciate California's efforts in cleantech. Perhaps more jobs will come from this effort nationally. Maybe it's the big bad incompetent government that should find employment for its people if corporations in this new economy can't. Does this sound scary? Well, what should be done?

Everybody will not be entrepreneurs. In fact, only a small percentage of the 10% unemployed or the masses in American generally will be small business owners. The interesting thing is that Twitter is a small business with regards to the number they employ, but most certainly is not a small business with regards to capital infusion.

I suspect someone will now comment that I am off topic and advocating socialism.

Posted by Judith Ellis at October 27, 2009 10:51 AM

"Maybe it's the big bad incompetent government that should find employment for its people if corporations in this new economy can't. "

Judith, I know you are being ironic here. It just gives me another chance to point out that
the industries that are growing in California are fueled by micorchips and the Internet -
both of which might not exist without government money dumped in during the 1950's, 1960's and 1970's. (I know someone will jump in and defend the religion of low taxes - but so what)

I see this a very big deal. These technologies were developed when the top tax rates were as high as 90%. Without them, we would have very little to be beating our chests about.
Higher taxes on the very wealthy would go a long way to making those big bonuses on Wall Street less attractive. I saw a statisitc on MSNBC that was shocking to me - in 1965, CEO's made salaries that were only 27% above the median. This is the same era where we developed the tecnologies that power what is left of our economy. Just some points to ponder.
Also, as far as California goes, in those days, the public school system was at the top (today its somewhere in the 40's) - also, tuition at State colleges was free to all residents.
That is more impresive to me than youtube, twitter, etc.

Posted by zorro at October 27, 2009 12:32 PM

There are some good points here, Zorro. Thank you. I especially appreciate the emphasis on education and what the government did to jump start the innovation on the Internet. The statistics given, if accurate, are also alarming. I think the problem of education goes beyond funding and what is most important is what we do with do with the Internet now that matters most. It is also a fact that government often squanders resources and Americans are sick of this too.

But Americans need not be sick. We ought to blame ourselves. We are the government. A great example of atrocious leadership would be Detroit where the people continue the same of same old year after year and nothing changes. I have also not been very happy with the Democratic governor. Michigan too issued IOUs along with its excuses as if the state couldn't prepare better for what was inevitable which include lowering taxes for businesses if employers will hire employees. Compuware got a huge tax break for moving its headquarters to Downtown Detroit.

Compuware hires some 6,000 employees. Some are complaining too because if you work in the City, even if you don't live there, you are taxed. Mike L's point is a good one above for which I have no answer. It seems like an either/or question which also addresses patrick's "blended approach" which has to do with a variety of solutions which require give and take. I think patrick's point is more accurate. But this would require something that we seem to be lacking—a general sense of the welfare of others and the necessity of some others to invest in their own advancement, not to mention government policies that will enable small businesses to thrive.

Posted by Judith Ellis at October 27, 2009 2:09 PM

When is the govenment at its worst?
Based on what we see today, I say it's at its worst when it disengages. Currently we do not have a problem of too much government - we have exactly the opposite problem - lack of government is much worse than too much government (as far as the history of the United States goes)
I doubt the US governerment has ever wasted money on government programs (welfare, education, the environment,etc) to the degree that we see to today - this money being spent today (on the bailouts - needed or not) is not spent on people, its spent to cover bad bets - very bad bets -
The hoards of 'welfare queens driving around in new Cadilacs' that Ronald Reagan imagined never came close to bringing the world to the economic brink, let alone the United States -

Posted by zorro at October 27, 2009 4:45 PM

I love the announcement President Obama made today that $3.4 billion will be awarded to modernize the electric power grid for renewable energy. I also love that a California company will be building electric cars in a former GM plant in Delaware. It will be retooled. Fantastic! These things are great as they will employ people. Bravo to President Obama and kudos to the California company!

Posted by Judith Ellis at October 27, 2009 11:58 PM

It is nice to hear positive thoughts about California, but as one who first came to California to live in the mid seventies, I can tell you that the dream is currently not on. I ran a very successful business there for a couple of decades, but had to finally relocate for family quality of life , and a less troublesome environment for business operation. Today, only a fool would start up a new business in San Francisco. I am sorry to say it but,the golden age of California is now behind us

Posted by Wil at October 28, 2009 2:59 PM

"I love the announcement President Obama made today that $3.4 billion will be awarded to modernize the electric power grid for renewable energy."

This is great news - but, the Chinese are investing 100 billion in modern electric grids -

I know Obama is getting as much as he can without being called socialist -
But what are we going to do if a communist country kicks our ass?

Posted by zorro at October 28, 2009 3:25 PM

Twitter? More like Twiddle.
In Denmark, they are retooling the highway infrusructure for electric cars.
The big problem with electric cars is they take a long time to recharge. The solution -
Robots that will swap out your battery stationed where you would pull over for gas.
Cooler than the Iphone, Twitter, Ipod, Youttube etc.
While Americans use tecnology to entertain themselves to death, the Danish use technology to solve real problems.

Posted by zorro at October 28, 2009 8:46 PM

I missed your irony Judith; sorry, my bad. Yes, IOUs are a very bad thing/sign. I also did not mean to pass judgment on the immigration issue. I agree with you that we need a program where the workers are registered. It would help them assimilate and help their wages. Yes, we need the labor force. However, I was just pointing out a math issue with respect to state/federal deficits. Most citizens, and most non-citizens, do not make enough wages to pay enough tax to cover any ONE of the following events: a child in school, multiple children in school, an uninsured visit to any medical facility, a response by the police or fire departments, etc. Much less a combination of them that typically occur, some yearly. Sadly this is true even taking into account their contribution to business and their paid sales tax.

Posted by Terry Ransbury at October 28, 2009 8:49 PM

Just a point of interest—The battery swapping system being installed in Denmark was first started in Israel, and is now being considered for several other countries and U.S. states…including California. Renault and Nisson are building several car models specifically for the automated battery swapping system.

Oh, the company that conceived, developed and sold this concept around the world is located in Palo Alto California.

Posted by Bob Foster at October 29, 2009 12:56 AM

"I was just pointing out a math issue with respect to state/federal deficits. Most citizens, and most non-citizens, do not make enough wages to pay enough tax to cover any ONE of the following events: a child in school, multiple children in school, an uninsured visit to any medical facility, a response by the police or fire departments, etc."

Thanks, Terry. Regarding the above, I'd assume it's about the aggregate and responsible government (policy, accountability, and active citizenry.) Today this seems more challenging than ever.

Posted by Judith Ellis at October 29, 2009 1:11 AM

Thanks for that, Bob. It's appreciated. I also appreciate your blog and the recent focus on small business. Thanks!

Posted by Judith Ellis at October 29, 2009 1:49 AM

I have never thought California was on it's last feet in terms of technology. Certainly demand for those who know how to manage a project and those who have a good understanding of the software development life cycle has stayed constant or even grown.

The big problem is that salaries and rates of those with these skills are dropping as more work is offshored, but as long as the VC money keeps flowing this should be offset by the advent of new startups.

However the same can't be said for the public sector in California. We need to send you over Maggie Thatcher to sort it out for you!

Regards

Susan de Sousa
Site Editor http://www.my-project-management-expert.com

Posted by My-Project-Management-Expert.com at October 29, 2009 9:38 AM

Tom - data source on "greenest state"? VT has lowest C footprint by far in comparison; CA not even close...

Posted by Eric in Rutland at October 29, 2009 2:54 PM

Short non-expert comment. It seems to me that organizations, including business, exist in an ecology, a set of relationships that critically sustain them.

The concern in California seems to me to be the retraction of the public education system in general, and in particular the universities, both public and private. Entrepreneurial talent, is an individual gift, requires quality of institutions to provide the necessary education and training.

Posted by wmmbb at October 29, 2009 7:10 PM

Tom suffers occasional myopic and nostalgic vision. He looks at all the 'tech' stuffs and conclude all is well in CA. He quote 43% VC, but fails to identify where these VC go to? I'd be surprised if much goes to 'tech'. Does he know percentage of jobs delivered by the 'tech' industry compared to total? I say small and dwindling. Because 'tech' growth, especially on the hardware side, now belongs to Asian countries.

If Tom shake lose his jetlag and opens his eyes broad he should be able to see CA has descended into one awful mess. You name it - polarized politics, irreconcilable ideologies, budgetary insolvency, runaway social welfare, cancerous illegal immigration, high crime, massive housing collapse, irrational environmental abuse, water shortage hitting a wall, jail overloaded, plus severe economic and industrial downsize. But the most troubling - Californians just don't want to work together to solve problems and build the future. Everybody is working for themselves - take the money and run.

Posted by Tom K at October 29, 2009 8:13 PM

Judith -

"I love the announcement President Obama made today that $3.4 billion will be awarded ..... "

Flip this coin over and you see a sorry tale on the other side.

- So, 'green' energy is so promising that no private company is willing to invest in it. We need a de facto bankrupt federal government, one already marred in $1.4T current year budget deficit (and $13T in national debt) to borrow yet another $3.4B to invest in power grid. What the hell happen to the big fat power companies? Where are their investments - it's their business you know. This is a power company bailout.

- Do you know why a Calif. company will be building electric cars in a Delaware plant? Because that company has received $1B of funding from the Dept of Energy! Do you really think the executives of this incredible company want to risk their own money to make their own fantastic products to sell into a market that cannot afford it?? This is a sad tale of pure socialism jump-starting America's risk-adverse capitalism.

I have no issue with government investing in high-risk research. Every country does it - and it is smart and frequently essential. But when a government finances actual productions, building plants and facilities, as in the above cases, we have socialist bailout. It is a sign that the private sector has gone stupid or dead. Does Germany's BMW/Benz, or Japan's Toyota, require their respective government to spend taxpayer money to build their electric car factories, so that their executives can pay themselves profit bonuses?

Posted by Tom K at October 29, 2009 8:39 PM

Tom K – Some thoughtful points there. Thank you. I shall think on them and perhaps do a bit of research. However, what strikes me immediately is that there have long been partnerships with government and the private sector, or the one enabling the other to better succeed. There is nothing new here. It was the investment of the government in technology that enabled the boom of the Internet. It might be said that without the government there would be no Internet. Your point about socialism falls flat as we have long had as Taleb said "socialized debt and privatized gain." I look at the government's investment in electric cars like that of the Internet. The government’s investment in the expansion of the electric grid and car in partnership with the private sector does not wave the socialist banner for me. I see it as a public/private partnership your automatic assumption that

You seem to be mistake that Mercedes Benz of GERMANY does not "require government to spend taxpayer money to build their electric car factories." A super quick Internet search revealed that there are a number of partners in the development of the electric car in Germany and the government is a stakeholder. There is no breakdown of the partners' percentages, their duties or how the funds will be distributed. But Sept 19, 2009 an article in German Car Scene reported that the "serial production of electric vehicles with fuel-cells…has been made possible by the continuous commitment of a significant number of industrial stakeholders and comprehensive support by the German government with the common aim of preparing for the commercialization of electric vehicles with fuel cell and embedding hydrogen- and fuel cell technologies in the future powertrain portfolio."

USA Today reported on October 21, 2009 "that JAPAN has invested more than $1 billion in its battery companies. CHINA, attempting to become a global force in the car market, has been pumping money and energy into developing electric-only cars, hoping to leapfrog other countries that already have strong auto industries. A recent McKinsey & Co. study forecasts the Chinese electric auto market will be worth $220 billion by 2030. There are already plans for electric vehicle recharging stations in Beijing, Shanghai and Tianjin, infrastructure that's critical to getting consumers on board with new plug-in battery vehicles." Our investment of $3.4 in research and development seems like pennies in comparison. I fear that the forever continuous fear of socialism can be quite damaging actually. Do you think what Roosevelt did with infusing capital into the system in the 1930s and putting people to work lead to our current socialist state? My problem with what we did with the banks is that we will be here again as the basics of the faulty system has not changed.

I will continue thinking about your points. Thanks again.

Posted by Judith Ellis at October 29, 2009 10:43 PM

Judith,
Thanks for the detailed response. I read it with care.

However may I clarify my remark? I did say government should, and has, played a big role in research and early technology development. Every country does that. The examples you listed belong to this category. That include Germany, Japan and S Korea development of core electric car components. All these are fine.

BUT:
- The Delaware plant is a PRODUCTION plant. Not a R&D shop. Government is financing production.

- The $3.4B to the power companies is to build so-called 'green' power grid. This is a PRODUCTION facility. Not R&D.

When gov gets into the production game, we are on a slippery slope into pure socialism - by definition - government ownership of means of production. Worse, here we have gov investing in production plants, but the executives, not the taxpayers, get the profits.

Posted by Tom K at October 31, 2009 12:40 AM

Thanks for the clarification, Tom K. But what does the "development" part of the "research" do? Without the development it would just be research. There would be no R&D proper, no? There would be no production. The government got into production during the Great Depression. For example, The Tennessee Valley Authority was established by Congress in 1933 "to operate Wilson Dam and to develop the Tennessee River and its tributaries in the interest of navigation, flood control, and the production and distribution of electricity. Related TVA activities, based on the original TVA Act and subsequent enactments, include reforestation, industrial and community development, test-demonstration farming, the development of fertilizer, and the establishment of recreational facilities."

This was production, Tom K, and the country did not dissolve into socialism. What seems to have evolved, in fact, are broad public and private partnerships, increased competition, and various roles for the government and the expansion of the private sector. (Think Fed EX.) The government competes with private energy companies to this very day. Treasury even acts on our behalf with regards to energy investment in private markets saving the government in 1989 "$200 million in interest expense reductions" and by "the early 1990s the US Treasury received about $2.8 billion from TVA power proceeds as repayments and dividends on the appropriation investment." (All quotes taken from http:encarta.msn.com)

We are the government and in times of crisis we have to act. But our actions must be thoughtful in the way that Roosevelt consulted with his "brain trust" which included professionals in both the public and private sectors. But I'm not sure that our action with regards to the banks was best in that we allowed them and their foreign counterparties to profit without investing in the taxpayers in various means who allowed them to exist. Who invests thusly? Treasury seems to have failed us here. We say, "Oh, we're capitalists. We don't get involved in production (development.) We would rather pour hundreds of billions of dollars into banks and allow them to make profits while we retain our vaunted sense of capitalism without any real stake in our own investments.

A real stake of the government in banks, i.e., profits for the taxpayers without whom they would not exist and not percentages alone would mean outright socialism for many. So, we go on doing the same thing every fifteen years with banks, "socializing debt and privatizing gain." You see, Tom K, regarding our respective ideologies, it’s not as black and white as we might would like to think. We are all producing something. But I do understand your basic concern with regards to the traditional sense of production and wonder how the best way of structuring the electric car investment that will benefit the people whether with jobs or direct profit or a combination of both.

Overall, we seem to need more honesty and thoughtfulness on all sides and a reduction of ideology. More pragmatism is needed and we need to listen more i.e., it seems like an infusion of capital into local banks and credit unions would have been a better jumpstart for the economy, providing capital for small business and homeowners. I do agree with you that with any government investment the taxpayers should benefit no matter the business or means of capital production. Thanks again for your words, Tom K. They matter to me.

Posted by Judith Ellis at October 31, 2009 9:27 AM

Ideology is the big problem. We tend to ignore the pragmatic in favor of ideology. Some of the Conservatives seem to be as ideological as the Communists were in the Soviet Union. The big failure of Communism in the Soviet Union may have more to do with irrationally sticking to ideology than Communism itself. How else can the success of Chinese economy be explained?
The Chinese are pragmatic above all else. As the Chinese become more pragmatic, we seem to be becoming less and less so. I said before that I think the nations that will do well in the 21st century will be the ones that strike the right ballance between indivuality and doing what works for the collective good. Worrying about a divison between reasearch and production is a bit like debating how many angels can fit on the head of a pin. Who cares? Besides there are virtually no industrial products produced by the federal government. The military and NASA get all of thier weapons and rockets from private industry and always have. At the height of WWII, all the tanks and planes and so forth were produced by private industry in retooled factories. No one (especailly Obama) has any desire to change any of that. Private contracors even built the Interstate Highway System. The only question revolves around where the initial investment comes from for green power or electric cars or whatever. If we look to the past, (semi-conductors, the Internet) - government investment had a lot to do with developing and expanding new technologies. The computer itself was invented with government money and the first large ones built by IBM were purchased by the military and the social security administration.

Posted by zorro at October 31, 2009 2:33 PM

Thanks for that, Zorro. There are more than a few excellent thoughts there that are much appreciated.

Posted by Judith Ellis at October 31, 2009 5:43 PM

Zorro, Judith,

China will export wind turbines to build Taxes wind farms, $1.5B financed by China bank:

http://online.wsj.com/article/SB125683832677216475.html

Think about that.

$1.5B is chump change when you're holding more than $2000B in US dollar reserve. That's enough to buy the top 10 US technology companies and use them to build both US and China infrastructure. Not a dime needed from Uncle Sam. Of course, you don't expect China to give up ownership of US infrastructure. ;-)

Posted by Tom K at October 31, 2009 7:14 PM

I am thinking about it.
Don't you see this as a problem?
Why do we just shrug our shoulders as jobs leave our country?
Also, it sure puts your argument against socialism to shame since the country building our infrastructure is communist.

Posted by zorro at October 31, 2009 8:37 PM

Excellent sobering article, Tom K. The investment of $1.5B from the private sector in China seems to be in addition to the estimated government infusion of $200B by 2013, I think I read elsewhere. But what is more alarming to me more than anything is that a once great industrial country is in a position that such a trade of Chinese wind-turbine is even necessary or allowable. We seem short-sided while others seem to have longer views. I guess when we have become a largely debt society as opposed to an industrial one and a sexier short-lived company like Netscape is praised over an industrial one like GM there should be reason for alarm. (Sorry, Tom, your statement was a tad bit off-putting to say the least in the BVO interview. We are talking about jobs and people, the lack of one and the great number of the other. But my disagreement with it might be chalked up to my home-girl status and my love of The D.)

The mention of the large amounts of treasury bonds held by foreign governments is probably a reason why our hands are tied to a large extent, not that it has to always be this way. We have to change our debt spending and trade policies, so it seems. (By the way, it looks like GM is expanding in China and perhaps we will be buying GM cars made in China should we so desire their cars.) JP Morgan invested in the infrastructure of his country. Those days seem largely gone, although they need not be. The private sector does not seem to see investment in energy as advantageous as the investment in technologies like Twitter and Facebook. If I'm mistaken, I'd like to know this. I think Zorro makes a good point above about government investment initially, not that government has to always invest first. Thanks for the article. It’s an eye-opener.

Posted by Judith Ellis at October 31, 2009 9:35 PM

"I guess when we have become a largely debt society as opposed to an industrial one and a sexier short-lived company like Netscape is praised over an industrial one like GM there should be reason for alarm. "

Tom's been saying stuff like this for years. I rememeber when he blogged about what you mentioned above. He is an influential thinker and I say once again that his ideas are part of the reason we are in the situation we have today. These ideas to some extent enable the distruction (creative distruction, which for a time was a favorite TP phrase) of jobs that supported the middle class. But then, like Tom said the other day, 'middle class' only refers to the middle salary range.

Given the current jobs situation, I'm very surprised he brought up the Netscape/GM comparison in a recent interview. It shows how tightly wrapped up in a safe celebrity bubble he is.

Posted by zorro at November 1, 2009 9:52 AM

Zorro - Please know this: I have no desire whatsoever to be unilaterally critical of Tom or anyone for that matter. I think it's important to be both fair and discerning as best we can. (Many times I'm successful. Sometimes I fail miserably.) I was just moments ago reminded of the beauty and brilliance of Tom's years as a leader in business thought that inspire action. I read two posts from September 26, 2009 ("Getting or Not 'Getting' Brand You") and September 29, 2009 ("The Phat Manifesto.") Both deal with simple concepts and ordinary people that can generate change on any level. Thanks, Tom! Simply beautiful stuff.

Posted by Judith Ellis at November 1, 2009 10:58 AM

Sorry. Both posts above are from 1999, not 2009. Great posts!

Posted by Judith Ellis at November 1, 2009 11:00 AM

My point of posting the WSJ story on China selling wind turbines to the US, and that of my previous posts, is this:

The industrial base has been severely weakened. We know this very well. The basis of allowing that to happen is faulty capitalist economic, trade and business ideologies.

Instead of over-turning these faulty ideologies and start fixing, we are adding one more. We are turning to quasi-socialism to fix faulty capitalist ideology. The private sector, which is the only one that must bite the bullet and rebuild productions, is taking government handouts to build factories instead. They don't have what it takes anymore. And since they don't have what it takes, the government 'investment' into their production facilities are guaranteed to fail.

The private sector took the easy way for quick profit the past 15 years, outsourcing the industrial base instead of developing and nurturing it - like the Asian tiger countries, like industrial giant like Germany. Now they are continuing that easy way buy taking easy money from the state and pretending to producing something. Going back to this title of this thread - the California Dream has become the California Disease.

That even China is selling wind turbines to Texas is a sorry indication that, perhaps it is too late to fix the lost industrial sector. Yes China loves to sell us turbines. But don't count on the to rebuild US industrial base, unless they get to own them.

Posted by Tom K at November 2, 2009 2:56 PM

Tom, the Asian Tigers, and even Germany, usually succeed though partnership between the state and the private sector. It's not either-or. They don't worry about whether it's "socialist" or not, just whether it gives them an advantage. The risk in a capitalist free market, driven by short-termism, is that there are too few systemic drivers towards long-term investment over the production of immediate dividend. As in the story of the scorpion and the frog, that's its nature, even if it may be the cause of its downfall.

Posted by RobCH at November 3, 2009 3:48 AM

It looks like tax revolts are bad for State governments, but good for entrepreneurs! Or does this mis-state the situation?

This mis-states the situation. Silicon Valley has been a hotbed of entrepreneurship since the 1950s. Part of it was due to the close proximity of 2 very good universities: Stanford and UC Berkley. Part of it was also due to the very mild winters, so that an unheated garage was a viable workspace (such as where HP was founded).

Currently, the VCs in San Francisco are much quicker at chosing start-ups to fund. The 2nd VC area in the US - Boston - has much slower VCs, consequently many startups have accepted funding from SF before the Boston folks have had enough meetings to decide. In other words, SF venture capitalists are operating inside the OODA loop of the east coast venture capitalists. Since many technical startups are a couple of younger (early 20s) folks, they don't have houses and children that need to get uprooted in order to move to Silicon Valley or San Francisco. Consequently they (quite often) move closer to the VCs so as to get better and more timely business advice from them.

Two essays from Paul Graham that are on point:
http://www.paulgraham.com/startuphubs.html
http://www.paulgraham.com/siliconvalley.html

Posted by Tangurena at November 3, 2009 4:54 PM

Nov. 6 (Bloomberg) -- The Obama administration should bar a $1.5 billion wind-farm project in Texas from receiving U.S. government stimulus funds because most of the power turbines would be made in China, Senator Charles Schumer said.

"The idea that stimulus funds would be used to create jobs overseas is quite troubling," Schumer, a New York Democrat, wrote in a draft of a letter he said yesterday he would send to U.S. Energy Secretary Steven Chu. "I urge you to reject any request for stimulus money unless the high-value components, including the wind turbines, are manufactured in the United States."

Posted by Judith Ellis at November 5, 2009 9:36 PM

I'd like to think that California and its industrial "theater of operations," if they really wish to make a difference in the WHOLE WORLD, it will be pulled out by its diverse constituency.

Posted by Andres Agostini (Andy) at November 6, 2009 8:18 PM

Judith,
Thanks for posting the reaction of US gov to the Texas wind farm project. My take:
1) Barring US stimulus money, which has a Buy American provision, from the project is illegal under WTO. But since when the US gov has fully complied with WTO rules? It complies only when it like them. This is classic American Exceptionism.
2) However, the state of Texas can stop the project from stimulus funding, which must go through the state for actual authorization. If Texas does that, the project may still proceed under private funding.
3) If any level of US governments acted to bar the project, even under private funding, then that will be protectionism. China may file a complaint to WTO and if it won, will allow China to retaliate. I.e. trade war. A trade war with your banker?
4) In the end, nobody forces the builder to buy turbines from China. It's a commercial deal. If the builder likes US turbines (GE make them, albeit quite expensive), they buy.

Posted by Tom K at November 7, 2009 10:54 PM