Political meetup in Provo

I updated my Financial Crisis Reading List today with two must read books:

Republic, Lost: How Money Corrupts Congress and a Plan to Stop It by Lawrence Lessig. (http://amzn.to/IbaKyL)

Throw Them All Out by Peter Schweitzer. (http://amzn.to/HLOVu8)

A week or so ago, I had lunch with someone who has read almost everything on my reading list. My first question was, “are you depressed?” We quickly turned the discussion to, “what can be done about the corruption of our representative democracy and our financial system.” We both think the outrage people are feeling towards government has been manifest by the Tea Party and the Occupy Wall Street movements, but neither effort seems to have any real power to challenge the status quo of the two major political parties and the massive fund-raising machine that continues to elect the same people to Congress, despite the overall 10-12% approval rating.

We’ve started a small political discussion group in Provo, to see if we can agree on things that can be done to channel our disillusionment in productive ways.

Let me know if you are interested in learning more.

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Who is looking at your profile on LinkedIn?

Who is looking at your profile on LinkedIn?

If you are in the job market, or are an entrepreneur building a new company, or if you create value through business development partnerships, there is a feature on LinkedIn that you should probably know about. It’s pretty powerful and could lead you to explore opportunities that you otherwise wouldn’t have considered. But it might also seem a little spooky, as it did to me earlier today. I’ll explain in a minute.

LinkedIn premium users have access to some cool features. One is called Who’s Viewed Your Profile? I probably only check this every month or two, mostly out of curiousity, because I’m not really in the job market, and I haven’t yet talked publicly about any future entrepreneurial ventures.

Another premium feature is Jobs You May Be Interested, which is clearly in beta because today it suggested I consider applying for a “Nursing Adjunct Faculty” position at the Waubonsee Community College in Sugar Grove, IL. Hmmm. Hadn’t thought of that. But back to the real story…

Today I noticed that “someone at US Government” had viewed my profile. Normally it doesn’t just say “someone” but it actually gives me a name, pic, and company name of the person who looked at my profile. This was a little strange.

When I clicked to see who that someone might be, I was given a list of about 10 US Government employees who may have been the person looking at my profile. I don’t know why LinkedIn can’t be more specific. I find this rather odd. Nevertheless, I quickly saw that none of them were from the FBI or from any other department that might be singling me about because of my anti-political-party, anti-corruption, anti-war sentiments (which are actually becoming fairly mainstream, IMHO.) But I wondered how I would feel if I thought, or suspected, or knew that my personal political views and speech were being monitored by a taxpayer paid employee. (Maybe they are. I just don’t know for sure and I don’t even suspect it.) I wonder if Steve Jobs knew the FBI had a huge file on him. For a moment I truly felt empathy for millions of bloggers and social networkers in countries where speech is closely monitored. I can’t imagine actually living in a country where I felt singled out. It must be very stiffling, and would require great courage to express one’s opinion. In the past 2 days I’ve seen references to one country where the death penalty may be imposed for a subversive tweet, and that Indonesia may have a law that imposes up to 12 years in prison for the same.

On the contrary, I feel very safe expressing my free speech online here in the United States, and I feel very empowered using social networking tools to connect with technologists, entrepreneurs, and investors who are trying to build things and change the world. While I’m not as young as I used to be, I’m feeling an increasing sense of optimism that change is coming to world, not top-down change from political leaders or parties, but change inspired by like-minded, technology-empowered, socially-connected citizens of the world who want peace and respect and opportunity and liberty to be available to all.

I’m excited to 1) continue to develop my programming skills and 2) to build social tools that will enable millions of people to improve their lives and improve the world. That’s what’s up next for me, I hope.



from PaulAllenGplus’s Zipl.us Google+ Feed https://plus.google.com/117388252776312694644/posts/ZkR7ZMDqmZm

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Tim Draper keynote at OnDC ’09–“Land of the free, home of the brave”

How free are we?

The government spends 40% of what we make.

We spend more for our average prisoner than for an average student.

Going through the airports, almost every time I get the probe.

Some construction permits take more than 6 years.

How brave are we?

There are more lawyers per worker than any other country. More bureaucrats per worker than any other country.

Average salary for a public worker is higher than for a private worker now.

Speedy trials? He shows picture of OJ Simpson.

Are we still free to own guns?

We’ve become very politically correct, except maybe me. But I’ve always thought I was correct politically.

How happy are we?

Do we all fit into a mold and become automatons?


  • Pay increases for bureaucrats based on GDP growth, not cpi. (Right now, they are incentivized to create inflation, not GDP growth.)
  • Drop the border with Canada. They have oil. (And they want to do this.)
  • If a department can do the job with less, give them raises.
  • If a department fails, eliminate it.
  • Free trade.
  • Right to work. (Right to work states are outperforming the rest of the union by quite a bit.)
  • Leave venture capital alone. It works.

All these were VC funded: copier, semiconductors, PCs, Skype, etc, etc.

Also, solar panels, Electric cars, space launches, wind energy, genetics, etc, etc

The “Draper Wave” shows that the recessions are all part of an economic cycle. VCs create a bunch of jobs, new innovations, the market gets excited, and inflated, then the market comes crashing down. The Private Equity business comes in, buys companies, fires half their workforce. (He shows how VC funds create surges in innovation and jobs, then private equity comes in and fires lots of people, creating another recession.)

It’s time for another VC resurgence.

Viral marketing works. Hotmail has now reached 500,000,000 people. All web based email has reached about a billion. Skype has reached a billion even faster.

It’s a global game now.

The game has changed for governments too. Each government used to govern a geographic territory. Now we have competitive governance. Better communication, perfect information, simplified supply chains. Governmens have to compete for great businesses, for capital, for entrepreneurs.

As he goes around the world, he notices how governments around the world are doing a great job attracting capital and entrepreneurs. The U.S. is not. The U.S. is adding more difficulty, more regulation for entrepreneurs. Imagine if the world completely opened up, and you could pick and choose. You might pick Chile’s privatized social security, you’d pick something about Singapore, US freedom of speech, maybe Sweden’s ______.

He looked at the government spending chart at usgovernmentspending.com. It’s gone from 7 1/2% to over 40% in the past 100 years. That may be a good thing, but I want to see whether it really is.

He showed charts of government spending per capita (normalized per capita) In 1820, India, US and China were all dirt poor. He has charted spending over time, and he has determined that US GDP growth is hurt by the increase in government spending. He can show this correlation.

He spoke with SBIC head Seth Greene today about the government’s plans to invest in Infrastructure, Market, CleanTech. The government can:

  • make us secure (Tesla loan example)
  • create the market platform that works–Sarbox after 10 public years
  • encourage good behavior–such as green incentives

His fund used to tell entrepreneurs that if in five years they could do $20 million in revenue and $3 million in profits they could go public; but now, with Sarbanes Oxley, that entire $3 million in profits would be taken up by compliance, so the entrepeneurs don’t go public.

He thinks Sarbanes Oxley should only apply to companies of a certain size and only after they’ve been public for 10 years.

What the government should not do:

  • Do not invest equity capital
  • Do not regulate/tax venture capital
  • Do not scrutinize entrepreneurs
  • Do not hire and spend

Government does a great job of identifying problems: energy, security, health care, traffic, polution. I understand there is more traffic here (in DC) since the stimulus because everyone is coming here.

Business Solves problems:

  • Energy (EnerNoc, Konarka, GreenFuel)
  • Security (Lumena, SafeView, Tesla)
  • Health Care (Athenahealth, Epocrates)
  • Traffic, Pollution (Skype, Hotmail, Meebo)
  • Poverty (SugarCRM, SocialText, World of Good)
  • Education (Baiku, Google)

He ran though a number of companies that are solving big problems in energy. Oasys does water purification. Tesla lets you go very fast (0-60 faster than a gas car) and this is the wave of the future. When you drive an electric car past a gas station you realize you are driving by a dinosaur. (And gas does come from dinosaurs, so this is just the circle of life.)

Reva is the India version of the Tesla. I drove one around.

Technology just continues to march on. Think of all the inventions in the past 50 years. Airplane, etc.

Imagine all the inventions that may be coming. Clean air and water. Near infinite energy supply. Green buildings. Batteries that last. Self-navigation electric cars. Education holodeck. Space travel. Immersive 3-D entertainment. Genetic disease prediction. Cure for heart disease. Cures for cancer, aids and malaria. Non-invasive surgery and security. Near thought communications. (I have moved a mouse cursor with just my mind, with a new technology.) New life forms. Food drop.

Liquidity is a problem. Mark to market from FASB 157 is a problem for our economy.

We have set up something called XChange, to provide liquidiy.

My daughter said, “everyone was rich before, and now everyone is poor. What happened?” I had to think about it for a minute, and then said, it’s all about the deal. If we make deals with each other, everyone is better off. (He walked through an example of lettuce, tomato, beef farmer, etc, cooperating to make a perfect cheeseburger)

We are all better off if we are freely able to trade with one another. Let’s say there is a big wall between us and China. Our semiconductor would be a slide-rule. Except for Micron there are no memory semiconductors here in the U.S. We’d have no flat screens. Without China, there’s no memory. Without computers, there’s no software. Without software, there’s no new media. (We’d go back to hieroglyphics).

The biggest problem we have is friction to free trade. Tariffcs, customs, quotas, import duties, licenses, standards, subsidies. When you see these reported in the press, you know someone is trying to hinder free trade.

This is what I call the Sucking Sound of Socialism:

Good Words and Bad Words

  • When you hear Entitlement, think Opportunity.
  • When you hear Rights, think Earnings.
  • Government Intervention, think Business Solution.
  • Bailout, think “let losers die.”
  • Regulation, think Freedom.
  • Patriotism->Protection->Poverty think “Free Trade.”

Audience question about XChange, the private stock market. He said, this is only for qualified institutional buyers, so it doesn’t affect the individual investor, unless the government saw that it was working well and they changed their mind. This is a way a company can be traded among qualified institutions, it helps the entrepreneur who wants to buy a house, but can’t get the company public. It helps VCs, because we have a lot of portfolio companies that can’t get liquid yet, and our investors need some liquidity.

Sarbanes Oxley rules are all designed to protect the individual investor, the widows, the orphans, to protect them from themselves, I guess. So the XChange would only work for institutional investors. But I believe personally that individual investors should be free to do what they want.

Audience question about the new Tesla. Tim said the upcoming Tesla will be $40-80k. The high end will have a 300 mile range, the low end will be 120 miles. I see this as being the Great American Car. I see Tesla as the next GM. It’s very exciting. If you have new technology, Tesla can incorporate it in a matter of months where it may have taken GM five years. You’ll see more computerized things in a car, like iPod connections, computer stuff, etc.

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Liveblogging OnDC — David Boaz, EVP Cato Institute

Entrepreneurism and free markets work. Johann Norberg from Sweden at Cato institute says entrepreneur is a hero. A hero makes the world better for people. That’s what entrepreneurs need. They need freedom to create and freedom for consumers to choose. There are obstacles to that. Corruption is the biggest obstacle in many countries. Because we eliminated more obstacles than anyone else, we led the world in prosperity. For my lifetime, half the world was free, half was socialist.

During my life, many people thought that planning could create more wealth than freedom and free market. But over time it became clear by looking at all the data and all the comparisons, that central planning doesn’t work as well. Look at North Korea vs. South Korea at night. Half is lighted. Half is not.

Free markets still face challenges from interventions of all sorts, cronyism, corruption. We’ve always had some elements of this. In the past 13 months they’ve gotten pretty painful here. Bailouts, TARP, Health care takeover. Frenzy of special interest lobbying. Obama complained to George Stephanopolous on TV a couple weeks ago that some people think he’s taking over the whole economy. He’s not. Just health care, finance, education, automotive, etc, etc.

This what is Nobel prize winner Hayek called “the fatal conceit.” The idea that smart people can make better decisions than consumers in the market.

I don’t think Obama really wants to nationalize the means of production. He just wants to use government money and regulations to expand political control over the economy. The more this happens, the more lobbying will occur. It won’t surprise anyone that lobbying expenditures are rising. All of this investment in lobbying reflects what Willy Sutton said when asked why he robbed banks, “that’s where the money is.” Why do companies lobby Washington, “because that’s where the money is.”

Ralph Nader organization: “the amount spent on lobbying reflects how much the government intervenes in the economy.”

Hayek explained this in “The Road to Serfdom”:

As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing ….

If you want money flowing to the companies that have powerful lobbyists and good congresssmen, maybe this is a good idea, but we must realize that politicians rather than consumers will pick winners and losers.

The $700 billion TARP was mostly cooked up in secret, but no sooner was it out than lobbyists flooded the hill. By the time it passed it included provisions for Puerto Rico’s rum producers, makers of children’s wooden arrows, things in Nancy’s Pelosi’s district, all kinds of pork projects. Official story is always that every project that is funded goes through a federal procurement process, but that isn’t true.

The truth is that when you lay out a picnic, you get ants. And this is the biggest picnic ever laid out.

The Washington Post is doing a pretty good job of telling us what is happening. For example, at JP Morgan Chase [I missed what he said about them.] Citigroup’s general counsel is now working in DC, not in New York. Chairman of Blackrock used to talk to federal officials a couple times a month. Now he talks to them everday.

The problem is not just wasteful spenidng. It’s the intrustion of politics into business decisions. This is what has wrecked economies all over the world.

What do you get? The President firing the CEO of GM. Members of Congress pressuring GM to keep inefficient dealers open. Every CEO has a board, plus 536 bosses in Washington.

This creeping hand didn’t start in the past year. The biggest entrepreneurial success in the country may have been Microsoft. But in our modern politicized economy, some call it the parasite economy, no good deed goes unpunished for long. The government started launching investigations of monopoly, some competitors joined the attack. I don’t like how the govt lured Microsoft into this. Washington people started to threaten Microsoft that they had to play the Washington game. So in 1995 Microsoft hired a lobbying firm, hired a PR firm, got involved in trade associations. In 1998, Bill Gates wrote, “it’s been a year since I’ve been in DC. I think I’m going to making the trip a lot more.” I think that is a tragedy. Our most important asset is human talent. And now some portion of the brains at Microsoft is spent, not on pleasing consumers, but on getting on the right side of Washington.

Same story with Google. Again, some nerdy brililant engineers invented a product that revolutionized our lives. I can’t imagine doing research without Google. I couldn’t do my job with Google Desktop search. And some of us appreciate it. And others don’t like to see a company becoming indispensable. Google got the same kind of treatment Microsoft did. Now both companies have to compete in courts, halls of congress, halls of Federal Trade Commission and Justice Department.

Two hunters in the woods see a bear coming. One starts putting on tennis shoes. “You can’t outrun a bear.” “I don’t have to, I just have to outrun you.”

We are not yet at the level of Russia. “Because the government plays such an immense role in their economy litle can be done without bribing officials.”

I did wince when I saw that Mr. Gao (sic) from China said that the US doesn’t have a Chinese version of socialism, but “socialism with American characteristics.”

Sales of Atlas Shrugged and Road To Serfdom have been soaring.

Maybe mine is an anti-keynote addreess. I see titles here like “Tapping The Trillions”.  I wish the March of Entrepreneurs to Washington was to ask the Federal Government to stop doing all that they are doing.

There are “Political entrepreneurs” who make money by gaining influence in Washington. There are “Market entrepreneurs” who make money by selling products in the consumer marketplace.

Market entrepreneurs are the good guys. Too many people come to DC to become political enterprenreurs.

He said the term Laissez Faire originated in like 1680 in a conversation between Colbert (sic) and Ms. Lejandre (sic), the mercantilist minister asked how the French state could be of assistance to them. The entrepreneur basically said, “Leave us alone.” If government leaves entrepreneurs alone, they will raise the standard of living 8 times in the next century.

My keynote message is this: farm the great plains, not the capital. Network with computers, not politicians. Invent new ways for consumers, not to get influence in Washington.

Ask government to cut corporate tax rates, remove regulatory obstacles.

Ask them to stop centralizing everything.

Audience member asked a question about how to balance government involvement and the private sector. David said the government should do much less. He mentioned the entrepeneur who invented shipping containers. The containerization of shipping drops shipping costs by 97%. Government is going to do procurement, I think it should do a lot less regulation. We know about our unsustainable commitments to entitlements and deficits. Even if you are aware of this problem, it’s even harder to detect the cost of having the government involved in doing everything.

Another audience member asked a question about long term vs. short term. David answered by saying the investors generally take a longer term view than governments. Governments usually take at a short-term view–based on the next election. When the prescription drug benefit was passed, did Pres. Bush care about the fact that it would cost  a trillion in the next decade? No, he wanted to do something for the seniors before the next election. Capital markets are much better at long term investments.

When you get drunk, you will get a hangover. We have made a lot of bad decisions, there is no easy answer to solve this. Reducing corporate taxes will create more jobs. When you make it more difficult to fire workers, people become more reluctant to hire. Even if my plan were implemented today, unemployment would go to more than 10%, but I do believe it would come down more quickly after that.

Another audience member said she thought Google did a good job working with Washington on the spectrum auction. David said, I think Microsoft initially came to Washington for defensive reasons because they were being assaulted. But once they get here and hire a lobbyist, there is a danger of getting sucked in, when a lobbyist says, “if we can get this comma changed in the tax law, then that company will pay instead of you.” Maybe the answer is don’t make your lobbyist a senior vice president, make him a junior vice president.

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Liveblogging: AlwaysOn: Tapping the Trillions

Moderator: Michael Zolandz, Partner, Sonnenschein

Owen Barwell, Deputy CFO, Dept. of Energy; Christine Tezak, Senior Analyst, Energy & Environmental Policy Research, Robert W. Baird & Co; Wes Coulum, Exec. Dir Gov’t Relations, Morgan Stanley.

Owen. Out of our $24-25 billion budget, most of our money doesn’t go to what is reported in the press today. We spend around $9 billion as stewards of nations nuclear stockpile. $6 billion cleaning up from cold war activities. $4-5 billion to run the nation’s science labs. Only after that do we get to spend money on civilian energy activities. Our dept. is really the dept. of nuclear military energy and science. Last year it was clear that both presidential candidates thought energy was important. So we were trying to prepare for changes that were coming. Under the new administration it has been a massive shift. Almost a 180-degree shift in energy policy. The economy has resulted in the Recovery Act. We were endowed with $40 billion in Recovery Act money in addition to our normal $24-25 billion annual budget. Most of the money in the Recovery Act is focused on the energy problems that are in the press today. So our energy efficiency and renewable division normally has a $2 billion budget, but now they have $16 billion that is supposed to be deployed quickly. Our organization that oversees the grid, has a $200 million annual budget, and now they are endowed with $4-5 billion to get us to a smart grid. Very difficult to manage a 30x greater budget. We have obligated $17.5 billion already. We are overseeing how quickly it gets deployed and how wisely it gets spent. We have 3 major loans programs: one is the advanced vehicle manufacturing program which Fisker referred to earlier today. Nuclear, biofuel, grid technologies–somewhere around $100 billion in loan guarantee authority. It’s been great to be a part of this as well. It has been an extraordinarily busy and challenging time.

Wes. The scope and size of what government has put out there is unprecendented, in terms of grants and loans for private entities. The stimulus package was about a trillion, deficit is a trillion and a half, so we are getting to some very big numbers. Compared to the past, we had tax credits in the energy space, some grants for renewable energy, but nothing like today. You have $7.5 billion for broadband infrastructure, $10 billion for life-science research. It’s unprecedented across the board in scope. Given the seizing up of the credit markets, the new administration had the opportunity to put their money into their spending priorities. So how do private companies get a piece of this? We are seeing the credit markets start to loosen. There have been renewable energy tax credits in the past, they are moving forward. One important thing is that these are government contracts and programs. You approach them differently. There are procurement rules and guidelines that companies need to think about to get this funding. When you do get a grant or loan guarantee, there should be private funding to go along with it to create a multiplier effect. Think about the state and local govt also. Funding center has shifted from New York to DC, but state capitols are also important. States are given money to dole out also. States have programs. They have individual laws and regulations also. California is the primary example of stimulus in the renewable energy space. Fed govt is the big player. As capital markets return, there will be more private sector funding for follow on funding to build on what has already been established.

Christine. There’s a bit of chicken and egg in the renewable energy–they got everything they asked for in the bail out and in the stimulus. But the economy is so weak, they are still struggling. If the economy has contracted and the number of KW hours you sell has shrunk, as a utility you may not be able to sign a purchase power agreement on renewable energy projects. You don’t get the cash until the service is delivered. So it’s a challenge to get utilities and regulators to get back into the procurement process before the demand has returned. We are close to the tipping point. It will be critical to see how the industry adjusts to information sharing among jurisdictions. Or will each area insist on doing their own pilots. The whole machinery can be moving if something works in one area and other areas get on board. We need a good news story. The Obama administration wants to convert to cleaner, greener, as part of their overall program. Jobs, photo ops, “here’s your government dollars at work.” As Congress comes back in January for Climate legislation, we want this momentum to be in place.

Michael: We are approaching half of the money being deployed already. What gets private companies attention from the government? What are the characteristics of success?

Wes. It takes some experience with govt procurement and contracts. Govt officials will look at these applications. You probably need to hire some consultants to help you through the process. Financials will be important. How will the project be financed. What is the financial strength of the project is important. And getting applications in early is important.

Owen. Fundamentally these are new programs in unprecendented times to accelerate a lot of what we do, but at the end of the day, you are a customer trying to deal with the fed govt, so those who understand the procurement process, whether it is a loan or grant, they already know how this works. Frankly, this can be quite exclusionary. We are doing our level best to try to engage companies and individuals to get them famililar with the program along the way. I really care about trying to get our message out. That is why I’m here today. While the opportunity is huge, this is far from “dumb money.” Working with us is harder than working with Wall Street. Senior debt, credit risk, they pretty much want their money back. Even that criteria in recent history may have been lenient. For the government, we also want to back technologies that may not be funded by the private sector in the normal environment, so we have a lot of rigor. Our deputy general counsel said, referring to the complexity of the rules and regulations that apply here, he referred to regulatory Darwinism. If you are sophisticated, you should be able to get through the hurdles. But on the other hand we should make it as easy as possible. We’re somewhere in the middle. You do need some kind of advice to understand the interace. Don’t be afraid to pick up the phone and make contact directly with someone in the department.

Michael. There are two criticisms of the stimulus: it’s not moving fast enough, and then what happens after it ends? The renewable companies got everything they wanted, but it’s still not enough. What does it look like 6-12 months from now?

Christine. Some of the companies hope to be able to accelerate their deployments, doing in 2 years what would normally take 5. This means purchasing has to happen. So we will see if the orders will come fast enough, so that companies can commit their manufacturing, so costs can come down, so we don’t have to subsidize everything. Another question: will this go into some act in 2010 to perpetuate this going forward. We may continue to struggle for deployment in this industry. We are hoping to see the ramp up and the response from the industry to this money, so we can see the manufacturing gears moving, so it becomes self-reiforcing.

Michael. Traditionally when you talk about federal dollars was it was research. But you are saying we are looking at manufacturing again. Is that an alternate view that hasn’t traditionally come from fed funding?

Wes. Yes, it’s now loan guarantees to build manufacturing plants, not just research. Inherently these are risky projects and risky technologies. Probably analysis a year from now will show where we are at. Will we need to extend loan guarantees in a year? Or can the fed govt pull back and let the private sector take it from here. These are risky projects and there needs to be some certainty.

Michael. How much interdepartmental cooperation is there?

Owen. I have seen a lot of cross department collaboration. I was with Ed Montgomery, Presidents advisor, he pulled together people from Labor, Energy, states, HUD. Energy Secretary has been working closely with HUD on weatherization. It’s top down and bottom up driven. We have people that want to work across those boundaries to get things done.

Audience question: how is the DOE responding to visibility requirements to show Congress they are doing what they are supposed to be doing.

Owen. recovery.gov and recipientreporting.gov — there has been an unprecedented (unprecendented has been used an unprecedented number of times today), the office of budget and management has reporting requirements for all of our transactions. They are all online. We disclose all obligations, estimates and reports of recipients about jobs created. We have made significant investments in the past so we can generate financial reports. So I could go into the office this morning and generate reports to the penny on how much we have invested so far.

Christine. The biggest problem is succeeding in how to get the money in the first place. Utility companies have a hard time understanding all the requirements up front. The follow on reporting required is not that challenging, compared to the application process.

Wes. Private companies are not used to reporting like public companies. The transparency and jobs numbers are going to be important 6 months from now to demonstrate how effective the programs have been. So it’s key.

Christine. I can’t imagine it’s something that VCs and financial investors are already looking for.

Audience question for Christine. Europe has a lot of manfacturing and renewables. How do you see us doing manufacturing for renewables, including wind energy, when Europe is looking at longer term horizons?

Christine. The most important thing we need to do as a nation in 10-20 year time frame. Wind is not the only one struggling. I don’t think you’ll see durations extended here. The way Congress pays for things with tax credits, we’re going to continue to hamstring ourselves, until we determine what our carbon reduction strategy is going to be. I don’t think any subsidies, even if they are extended 10 years, will get you the manufacturing base we need. We need to figure out carbon pricing.

Michael. What do you see as the possibility of a second stimulus?

Wes. You won’t call it a second stimulus, there may be efforts to finish spending the first. It depends on what happens the economy. A lot of promises were made. Next year is an election year, so politicians will talk about jobs that were created.

Michael. What is the expected timeline for deploying the resources from the first stimulus?

Owen. The funds have a time limit to them. Our focus has been to get the funding obligated as quickly as possible. Once we put the money in the hands of states and local govts, we are doing our best to make sure they have plans to execute. It’s not stimulus unless it’s actually spent. Our focus in 2010 will be to make sure the recipients of Recovery Act funding are spending it.

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Liveblogging: OnDC panel, Entrepreneurs March on Washington

Moderator: Bill Schnoor, Goodwin Procter.

Panelists: Henrik Fisker, CEO Fisker Automotive; Jonathan Wolfson, CEO of Solazyme; Wes Bolsen, CMO of Coskata; Andrew Perlman, GreatPoint Energy.

Coskata has raised $40 million in funding. Fisker has raised nearly $200 million in equity. Solazyme and GreatPoint Energy have also raised capital. Solazyme does algae fuel.

Fisker: some ventures need government support because they require hundreds of millions of upfront capital. We applied for the federal loan so we could beat the foreign competition to market with our plug-in hybrid. Our first car seats four people plus luggage. Our second car, the $40k model, would have come to market 3 years later if we didn’t get the federal loan. We do have to pay it back. It was not a grant. We are trying to take a lead worldwide with this new technology. We need to be able to export these vehicles.

Bill. You got some press coverage when the federal loan was announced. Can you comment on that?

Fisker. There was some misinformation. American has historically helped industries and countries get on their feet — Marshall Plan in Europe is an example. The important thing for us was that we were using this loan (which we will pay back) to get ahead of the competition. Some people asked, why can’t they do it without federal help? We could have. But it would have taken extra years. Toyota owns the hybrid market in most people’s minds, because they were first to market. The important thing about this government loan is that it gives us a chance to compete with the conglomerates in the rest of the world. I know we couldn’t have gotten $500m from the private sector this fast.

Jonathan. Solazyme was founded in 2003. We use algae to make renewable oils. Our main focus is to produce large scale low cost low carbon fuels that drop into the existing infrastructure. Most cars run on petroleum based fuels. Our tech takes algae and actually grow them in the dark in stainless steel industrial fermentation equipment, by feeding them low cost biomass feedstocks. They can convert that incredibly rapidly into oil.  It takes a few days. The good news is we can leverage the pre-existing infrastructure, using existing facilities. We can create diesel and aviation fuels. We have been demonstrating both in standard unmodified vehicles, doing thousands of miles, with unblended fuel. You can understand that the environmental footprint is an important piece of the puzzle. CA has hired some experts to measure the environmental footprint of these. So we’ve demonstrated this works, now how can we scale up with a cost-structure that works? The way this tied into DC was that when tax bills were being discussed in 2006/2007 that would give $1 per gallon tax credit to certain types of fuel (cellulose ethanol to cellulose alcohols). We had to engage against the auto industry to get the legislation changed to cover cellulose biofuels. We were a small 20 person company when we realized we had to be involved with DC. We recently announced two contracts with the Navy to test our fuels in aviation and shipboards. We have been delivering quantities on those contracts and will deliver more over the next 10 months. This shows how government can be involved. DOE of course will be very important in policy. But we had to look to DOD as well.

Bill. What about the funding aspect? Have you gone after grants and loans?

Jonathan. We’ve raised almost $80 million in equity. If you include unannounced partnerships and some level of govt funding (DOD contracts) then we have over $100 million in total funding. We have the state of California (which many think is almost bankrupt) a grant from them to develop cellulose fuels there.

Wes. Coskata was founded 3 years ago. We wanted to have a distruptive technology that displaces oil. We want to do it from non-food sources. Mr. Khosla is our Series A venture investor. Series B was General Motors. Series C was Blackstone, largest private equity fund. We have successfully scaled this technology. We have a semi-commercial facility outside of Pittsburgh. It works on woodchips, grass, municipal waste. We can put our technology everywhere. Why can’t we eliminate landfills? We did away with enzymes, pre-treatment. We use gassification on the front end. There are some people talking about building a pipeline from the midwest to the coasts, spending $7 billion. With our technology you don’t need a pipeline. We can deploy our technology anywhere. We haven’t taken a dollar from the federal government. We’ve never announced our funding levels. But it’s 2-3x what has been reported. We want to create jobs, reduce our dependency on foreign oil. We can reduce water use by half to create a gallon of gasoline. We have created a long-term viable fuel, that is cost competitive with gasoline. What we need from the federal government is consistent policy. Our investors don’t want less commitment from the government to getting off foreign oil dependency. After today I’ll be meeting with a number of people in the Senate energy committee to make sure the definition of biomass covers our product. Coskata will be rapidly licensing our technology.

Bill. Policy in Washington affects all of you. An article in the Times yesterday said lobbying costs in Washington have grown significantly in the last year. So how do you approach lobbying? Direct, by joining groups, by using PR? What has been most effective means for you to advance your cause on the hill.

Wes. We’ve had a good story. With General Motors launching their investment in us at the 2008 auto show, it helped us get the message out that we are ready to compete today with gasoline. It’s not 5 years away. This isn’t the technology you’ve thought about with enzymes. We’ve joined a few organizations, but I find that sometimes a message gets lost. So we’ve gone direct to our own Senators and Congressmen. They want to hear that you are considering their state. With a feedstock flexible message we can show that we can deploy our technology in Mississippi, California, etc.

Jonathan. Making sure you have a message that resonates is the most important thing you can do to affect change. We are in South San Francisco, founded in Palo Alto and Menlo Park. So we are very much a Silicon Valley company. Traditionally, SV companies did not come to Washington. We realized soon that the industry we are in requires coming to Washington much sooner. SV is really a meritocracy–best technology, marketing, strategy wins. We are comfortable in that world. The message in Washington should be that policy should be driven by the ends–and should be technology neutral, not favoring one technology over the other. This resonates with people. We say, when you create rules, regs, legislation, think about the end result you want. Set those ends, then let the market work out the details based on the ends. We have found a lot of like-minded companies that agree with this. Some trade organizations and small group visits can help. You can go in with examples of how some policies have not been ends-driven, some have favored some tech over others, making the playing field unlevel. Those are very effective.

Fisker. You have to have some private capital before going to DC. I needed to learn how the whole system works. It takes hours or days to explain. It depends on what type of company you are who you need to go and see. You need some face time with the politicians. They have so many things thrown at them every day. There is no simple answer–it’s many different avenues. Getting your story out, going to DC, etc.

Bill. As a history major, a book that I loved, that I recommend to my clients, is Lyndon Johnson: Master of the Senate. He got an incredible amount done. Our process is not end-result driven, its a constituent driven process. You have to understand that.

Bill asked a question about reducing our dependency on gasoline, what the prospects are, etc.

Fisker. We are going to see multiple energy sources, gasoline, biofuels, electric cars. With electric cars you’ll need an incredible new infrastructure. I believe that within the next 10 years we are going to see an emergence of these new technologies that will easily be over 20% of the market, because as people start adopting them, you’ll see the impact on your budget as well as on the environment. US is one of the cheapest places to fill up your car with fuel, but when you drive electric it will be like 3-4 times less expensive than fuel. And in Europe, where gas is so much more expensive, the incentive to drive electric is even greater.

Jonathan. You will see things like cleaner ethanol replacing gasoline; but you look at where Solazyme is focused, it’s on diesel and aviation fuel. We see the future being a combination of fuels. Our technology focuses on one area. It won’t be an either/or. There will be ethanol for quite a while. I’d like to see electric vehicles. What people don’t talk about is, where do the electrons come from for the electric vehicles.

Wes. Today the base level of all electricity is coming from coal. This is addressed in the Energy Bill. To reduce our dependence on oil we need a lot of things. Coskata doesn’t produce aviation or diesel. I’m talking about the government resolve, it needs to be consistent. Let’s use what we have today, start making a dent. As new technologies emerge, we should go there too.

Bill. Ethanol was adopted with a tremendous amount of government support, came from the Midwest, but the political backlash over using food sources for ethanol has occured. So there is debate about the sustainability of food and non-food ethanol. Do you have a person working with environmental groups in your company?

Wes. Corn-based ethanol is a good product, has been unfairly treated by some who call themselves scientists in that field. We need to support them–they started all this 25 years ago. There probably won’t be much investment from private or government in food-based ethanol, it’s going to non-food based biofuels. You can’t build a facility that needs biomass and cut down all the trees, because that will only work for one year. So sustainability has to be considered, it has to make sense.

Jonathan. We should be measuring the direct and indirect carbon affect of everything. We should rate biomasses. The fears are that the ratings will be politically driven. You don’t want to be so reactionary that you step on something before it has a chance to succeed.

US News reported asked question. You said that in the 50s, 60s, and 70s, you didn’t have Silicon Valley going to Washington. What changed?

Jonathan. The difference is that in energy, government policy does matter and some companies have won because of government support. The silicon industry didn’t require government to take off. We are in a very old industry that is very heavily regulated. And new regulations are being discussed every day that will affect our ability to go commercial.

Wes. “Washington DC has become your new Wall Street. That is the answer.” When lending isn’t happening, everyone looks to Washington.

Bill. My IT clients think there is one govt agency that matters, the Patent Office. My life science clients think there are three, including the FDA. But energy companies and others may find there are 50 government entities that matter.

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Marriner Eccles and Franklin D. Roosevelt

This is getting fun! I now have pictures on my blog!

My blog traffic has declined a lot in the past couple of years.

I used to have thousands of readers back when I posted articles every week on internet marketing and entrepreneurship. But my consistency wore off and my readership waned.

I heard recently (I think it was at the CrunchUp in Redwood City) that blog posts with images get like 3 times as many readers as posts without. I can’t find my source on that, so I don’t know if it is true, but I do know that I have almost never included images in blog posts because it took me too long to do it.

Not anymore. Now I can find an image anywhere on the web, click on the Share on Posterous link on my Google Chrome browser bar, add a few comments, and voila!–a new blog post with an image.

It looks like I can’t type comments above the image, but I imagine Posterous will address that flaw at some point.

But what I can do is start every blog post on any topic by finding a nice image from somewhere, in this case from Life Magazine’s excellent photo archive, and then I can write my post.

I decided to include this photo of Marriner Eccles with President Roosevelt because it illustrates in my mind how any blog post–even on some obscure topic like what the Federal Reserve and the Treasury Department tried to do in the 1930s to bring the country out of the Great Depression–can become far more real and interesting by including a photo.

Marriner Eccles was a successful Utah banker who founded First Security bank in 1928. None of his banks ever lost a dime for their customers and none failed during the nationwide run on the banks.

Marriner started speaking out on what the government could uniquely do to lead the country out of the depression, and his controversial views got the attention of some powerful people in Washington, D.C. By 1934 he was appointed Chairman of the Federal Reserve and served in that role for 14 years.

He wrote his memoirs in 1951. I found a used copy on Amazon and bought it and devoured it. It is amazing to read his very honest and open account of government efforts to end the depression–and to learn which programs worked and which failed miserably.

As I read Eccles’ memoirs, I wished I could get a copy of the book to every decision-maker in Washington, DC, but the book is out of print and the Eccles family has so far declined from allowing me to create an electronic version that could be distributed to legislators and government employees.

You would kind of sort of think that if we are spending trillions of dollars to try to stimulate the US economy, that we might kind of want to go back to the 1930s and learn first hand from the people who were on the front lines back then, when the government was spending billions of dollars on all kinds of new programs, and get a close up look of what worked and what didn’t and at least one very smart man’s opinion of why various programs succeeded or failed. (Even if he and others like him in the 20s and 30s seemed to have somewhat socialist leanings partly because the Russian experiment seemed so promising back then–it hadn’t played out fully yet.)

There is currently only 1 copy of this book for sale on Amazon and it is more than $200 (and it is NOT my copy which I am NOT giving up!): http://bit.ly/gJudd

I wish we could tap into the experience of people like Marriner Eccles somehow and harness it in our current debates over the government’s role in the economy.

Which historical figure would you like to consult with most about our economic problems and what government should or should not do to intervene?

Posted via web from Paul’s posterous

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Solve Nation’s Problems with Citizen 20% Time

Google is the most innovative company in the world, in large part because they hire smart people who get things done, and they give their engineers 20% time to work on any project they want. Google has found a powerful way to unleash creativity to solve incredible technical problems.

I wonder what would happen if enough Americans did the same thing — devoted 20% of their work week — to finding solutions to our nations problems that might actually work.

In Utah there has been talk about the government’s experiment with a 4-day work week. What if a large number of citizens worked 10 hour days on Monday through Thursday and then took Fridays off to participate in government? We are, after all, ultimately in charge of what our government does. At least we are supposed to be. Or what if we devoted 2 hours a day, not to watching TV, but to reading the best books on major political topics and searching for the right solutions — based in historical fact and experience and true principles — and not on party politics? 

Most Americans believe that our government has been failing us and that we really need change. Last July, a Gallup poll showed that approval of Congress had hit an all-time low of 14%.  

So we voted for change in Washington, and in March our approval rating of Congress “soared” to 39%. And that is a four year high!

I’m amazed that a free people is willing to put up with a government for so long that we are so dissatisifed with.

My 20% Time Projects

I’d like to use my 20% time on a couple of projects. First, I’m trying to understand the root causes of the global financial meltdown. I’m documenting all my findings on a web site called Crashopedia. I’d like to learn for myself what we (meaning our government) should do to prevent future global financial crises. Not that I think I can solve the problem; but I feel a responsibility to try, to at least do my part to help. Especially after what I have learned so far.

Second, I have set up a new non-partisan Facebook group called Citizen 20% Time, where I hope to make contact with other citizens who are willing to take responsibility for what has gone wrong in our country (we elected the people who passed the laws that allowed these awful things to happen–George Will refers to our Congress as toxic assets). I’d like to interact with others who devote time and energy to creative problem solving, who don’t play the partisan blame game, but put forth ideas that could really help.

And third, I plan to study the issue of Congressional representation and stagnation. I want to understand why so many of us feel disenfranchised, even though we hold free elections every two years for the House and every six years for the Senate. 

I have learned already that the Apportionment Act of 1911 capped the number of House members at 435. While the Constitution said there would be a representative for every 30,000 people, today it is closer to one for every 700,000. (The proposed First Amendment to the Constitution, never ratified, would have changed this.) Just yesterday, I discovered an interesting non-partisan non-profit that is seeking to return the House of Representatives to the people. 

I found another non-profit in DC that says we should require our elected representatives to actually read the bills that they vote on. What a novel idea! I think most people would be outraged to know that their Senators and Representatives don’t actually read the bills that they vote for, including the massive spending bills.

We should also give citizens time to read bills before they are voted on. The Obama-Biden campaign web site promised, “As president, Obama will not sign any non-emergency bill without giving the American public an opportunity to review and comment on the White House website for five days.” The Whitehouse.gov web site promises that this “Sunlight before Signing” promise will be implemented soon.

Inspired by Entrepreneurs

I have always been inspired by entrepreneurs. One favorite is Alexander Graham Bell, who invented the telephone while trying to be a teacher of the deaf. (Later he built the first airplane in Canada, he held the world speed record for fastest boat, and he helped start the National Geographic Society, among many other accomplishments.) He was really into genetics. He believed every child should have a chart showing photographs of their ancestors so they could see who they inherited their physical characteristics from. He tried for 3 decades to breed sheep so they would always bear twins. That would have significantly moved that industry forward. He failed, but he tried.

Today I am inspired by internet entrepreneurs like Jimmy Wales, who created Wikipedia, which is becoming the greatest contribution to organizing and disseminating knowledge that the world has ever seen. (Now we need entrepreneurs who can help millions of students and teachers worldwide to take more full advantage of the wealth of knowledge that is found here.) As recently as a couple of years ago, Wikipedia was headquartered in a Florida mall and had like 5 full time employees. I’m sure it has since grown, but talk about a project where a few full time people (combined with the wisdom of the crowds) can benefit hundreds of millions of people worldwide with more access to knowledge.

I am a huge fan of Josh Kopelman, a very successful entrepreneur who is now one of the best and brightest investors in the country. Josh recently attended the TED conference and came up with a powerful idea — to harness the “bread crumbs” of the social internet to study disease causation on a massive scale (as opposed to medical research studies that involve just a small number of participants.)

I think citizen entrepreneurs will do much more than politicians can ever do to actually solve the massive problems that we are facing today.

The Sunlight Foundation, for example, has raised several million dollars from Pierre Omidyar (founder of eBay) to bring transparency to government, and to help us hold our elected representatives accountable. This is much needed, since the historical role of the free press to hold government accountable has been lost — today’s media is about entertainment and sensationalism.

I’d like to think that an outside entity like this could take all the data published online by the Federal Government, marry it with mobile applications, and social networking, and for the first time, give every citizen a very simple way to find out exactly what their own elected officials are doing.

The amount of effort that is required today to find online federal databases and publications or CSPAN broadcasts and to search them, and to actually find out what is going on in Washington, DC, is herculean. Few citizens have time to sift and sort through all the content in order to figure out what is really going on.

One of my favorite iPhone apps is Congress Plus. It tracks all the representatives in Washington, what committees they serve on, and what legislation is moving through the process. Imagine mobile phone apps or social networking apps that made it easy for each of us to follow issues and causes that interest us — and give immediate feedback to our representatives.

Our Facebook application, We’re Related, has more than 15 million monthly active users. We can ask our users any question and within a day get 10-20,000 responses. Why doesn’t every elected official have a tool like this?

Perhaps the Sunlight Foundation could set up an instance of Uservoice (a powerful customer feedback tool) for every Congressional district in the country, so that citizens could interact with each other and vote on each other’s ideas–thereby helping set the legislative agenda for their representative. Currently, few citizens feel they have any voice at all.

I applaud efforts that can better inform and engage the citizenry in solving local and national problems. I am working towards becoming involved — hopefully for 20% of my workweek — as a citizen entrepreneur.

Motivated by Frustration

What motivates me is the same thing that is motivating millions of Americans to pay attention and take action: the realization that our government has failed us, and the remedies they put forth show that they are scared and flying blind–risking the future prosperity of our country in a rushed effort to fix everything. They seem uninformed by common sense and a knowledge of history. At this point, there are few people in Washington that I can trust.

I was extremely upset when the $700 billion TARP program was pushed through Congress in early October.  I think giving a single person (a former banker at that) authority to spend up to $700 billion buying toxic assets from big banks may have been the worst single decision in American legislative history.  Secretary Paulson had made millions in salary and bonuses (I have heard $110 million) while CEO of Goldman Sachs, which made a large percentage of their profits creating these derivatives/toxic assets which TARP was designed to take off these bank’s books. I’ve never seen a more eggregious example of the fox guarding the hen house in my life.

The “sky is falling” scare tactics that Paulson and Bernanke used behind closed doors with Senators and Congressman worked, and the big check was written. And now Pandora’s box has been opened and there is no end to the calls for bailouts and government stimulus of the economy.

With almost no legislative restraint on spending, our debts and deficits are growing so big that China, our largest creditor, is sending powerful signals that the day of US dollar dominance may soon come to an end. Recent Fed decisions to basically print more money will devalue our currency. High inflation may result. (Warren Buffett and China are both warning of this.) The central bank of China is now calling for a new global reserve currency.

The Treasury Department have used the TARP funds to invest in the big banks, rather than to take their toxic assets off their balance sheets, effectively nationalizing much of the banking industry. The toxic assets still exist, and the latest proposal from the Treasury Secretary caused a blip yesterday in the stock market, but really does nothing more than stimulate bankers and investors to excitement by letting them create another generation of potentially toxic assets — another trillion of securitized debt instruments with the federal government assuming most of the risk. Of course financial stocks will go up 20% in one day on news like that! “Hey guys, you get to do more of the same thing you were doing for the last few years, and make huge commissions and potentially huge profits for doing it. And we’ll take most of the risk.”

The whole affair makes me completely sick. While the initial TARP legislation was being debated, I registered my opposition by phone to my Senators. I’ve since taken time to meet in person with Senator Bennett and also had the opportunity to share a cab in NYC with freshman Utah Congressman Jason Chaffetz. I flew to DC recently to meet with a staffer in Senator Hatch’s office. And I also met with a senior legislative assistant for North Dakota Senator Byron Dorgan, whose proposed legislation on derivatives back in 1994 may have prevented this global financial collapse.

I have found some tremendous books and articles by scholars and former derivatives traders that shed light on how the global meltdown happened. Some event predicted it. They clearly explain the role of unregulated derivatives in creating 1) the boom years, where the financial sector went from producing about 8% of S&P 500 profits to nearly 40%, 2) the feeling that this could go on forever because traders would offload risk through risk management best practices and 3) the systemic risk that has now triggered a massive domino effect in the global financial system.

The best book I have read so far about how all of this came about is “Infectious Greed,” by Frank Partnoy, a San Diego State University law professor and former derivatives trader. 

Books for Congress

For my 20% time I plan to organize an effort to get a copy of this book hand delivered to every member of Congress, by one of their respectable constituents. The author has just mailed me one or two boxes of hard copy versions. I met him through LinkedIn, and we had a great phone conversation recently. I know I can learn a lot more from him, after all the years of effort he has put into researching this incredibly complicated topic.

As I learn about the key players in the derivatives industry and in the decade-plus long fight over derivatives regulation, I have discovered that the world is smaller than ever before, and by using LinkedIn and other online tools like Google Alerts, I can either get introduced to people, or find out if they are speaking at some conference somewhere. 

A google alert on “Mark Brickell,” the former Chair of the International Swaps and Derivatives Assocation, told me that he was speaking at an American Enterprise Institute debate in February.

From Partnoy’s book I had learned that Brickell was the key lobbyist who defeated congressional attempts to regulate derivatives in the 90s. I had to meet him. I needed to know if he was a good guy who was just misguided in his enthusiasm for completely unregulated OTC derivatives markets or if he was an evil guy who used deceptiveness and pressure and lies to persuade congress to stay out of the way of all the bankers and traders who have been making billions by creating and selling toxic assets all these years.

I flew to DC (I had business to do there anyway) and attended the AEI debate between Brickell and Christopher Whalen.

I spoke with Brickell afterwards, asked him a few questions, and got a feel for what kind of a person he is. 

I even asked him to sign my copy of “Infectious Greed,” (which does paint him as a villain), and he did. I twittered afterwards that this was like asking Voldemort to sign your copy of Harry Potter. Partnoy laughed when I told him about this.

The second most important book I’ve read is “Trillion Dollar Meltdown,” by Charles R. Morris, published in early 2008. His foresight is startling. I gave a copy of this book to Senator Bennett, but would like to raise money and purchase more copies for more members of Congress.

Another fascinating book that I am studying, and hoping to get rights (from the family) to deliver electronically to members of Congress, is “Beckoning Frontiers,” the memoirs of former Federal Reserve Chairman Marriner S. Eccles. (The Federal Reserve building in Washington, DC is named after him.)

Eccles wrote the book in 1951. It is a very honest and open assessment of the New Deal, with its successes and failures, written by the millionaire Utah banker that many considered its key architect.

If our government is spending trillions of dollars to try to stimulate the economy, shouldn’t we first each take a few hours, or days, or weeks, to study the programs of the 30s, and to learn from their architects and administrators which programs helped and which actually made the Great Depression worse?

Citizen Entrepreneurs Make a Difference

I appreciate citizens who serve in local government, or devote time to public service at any level. Some give much more than 20%. One of my Facebook friends this week noted that unfortunately, more and more of our citizens will soon have 100% time to devote to citizen involvement, as hundreds of thousands of jobs are lost every month.

What excites me the most, however, are citizen-led efforts to solve problems independent of government.

I was teaching Internet Marketing at BYU in fall 2005 when Hurricane Katrina hit, leaving hundreds of thousands of people without homes or power. A local entrepreneur wondered what he could do to help out all these victims. His wife encourage him to put his web design skills to work, so he did. In just a couple of marathon days, he built KatrinaHousing.org, which within a week had attracted listings for something like 114,000 available rooms in homes all across the country.

Meanwhile, most people just watched the news on TV and complained about the terribly slow response time from all the government relief agencies. Some people rolled up their sleeves and helped out.

Some people step forward and make a difference, like Clara Barton, who founded the American Red Cross in 1881. In September 1881 a great fire in Michigan left 5,000 people homeless. Clara Barton and the Red Cross stepped in to provide relief. Imagine how much good the Red Cross has done in the past century and a quarter! It was started by an activist citizen — not by the government.

Some citizen efforts are needed to provide relief for human suffering from local disasters, while some are needed to uncover corruption and fraud which indirectly hurts all of us. As I said, my obsession right now is unbridled, unregulated, out of control OTC derivatives trading, which Warren Buffett said in 2002 were “financial weapons of mass destruction.”

Not only did the Federal Government (including the SEC and CTFC) do nothing to stop these weapons from exploding, but they actually de-regulated them in the 90s, and prevented states from regulating them under state bucket laws (the 106th Congress voted for this) which had been created after the financial panic of 1907 to regulate pure gambling on the outcome of Wall Street ups and downs.

Other citizen led investigative-journalism type efforts can solve other problems. Patrick Byrne’s obsession with naked short selling led him to fund DeepCapture.com, a blog “examining the growing threat to our financial system posed by illegal naked short selling, stock manipulation, and the destruction of public companies.” 

Some haven’t taken Byrne seriously, but Bloomberg last week reported that Lehman Brothers may have failed because of naked short selling.

Billionaire Mark Cuban backs BailoutSleuth.com, the best site I’ve seen for tracking the use of the $700 billion in authorized TARP funds.

Next Steps

I’ve already spent most of my 20% time this week just working on this blog post, so forgive me if I leave it without a good conclusion or without the kind of organization I should give it.

I invite you to join me in the Facebook group Citizen 20% Time and I’d love for you to post a comment about what issue or problem you would personally like to tackle in your 20% time.

Perhaps if enough good ideas surface that can be effectively implemented with very small teams leveraging crowdsourcing of all kinds (like Wikipedia), we might be able to find financial sponsorship from someone like Pierre Omidyar or Mark Cuban or maybe the Google Foundation.

Cuban already announced his own stimulus package back in February — a private effort to fund the best open-source business ideas. Maybe he (or someone else) could apply that concept to non-profit non-partisan ideas from citizen entrepreneurs as well. We’ll never know unless we give it a try.

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Becoming Informed

I’m having a hard time sleeping lately. I keep waking up at 3 am or 4 am feeling compelled to investigate the root causes of the national and global financial crisis we are experiencing. I don’t have a lot of time, because I’m also running a startup company, but I have to carve out some time if I want to be part of the solution as we try to fix our government and our country, and get it back on track. I’ve got to become better informed.

I have several books now on derivatives trading, and I have come to believe they truly are “financial weapons of mass destruction” as Warren Buffett called them in 2003. I think unbridled use of OTC derivatives is the primary cause of the worldwide economic melt-down. The Wikipedia article on derivatives is a good starting point.

And I think the utter neglect of the tenth amendment, which was supposed to limit the Federal Government’s power, and reserve all powers not enumerated in the Constitution to the states and to the people, is the reason that we have a federal government that is so powerful that a few hundred leaders can basically sell the future of hundreds of millions of citizens for a mess of pottage. With millions of phone calls we can delay them for a few days, but basically if a few powerful people say the sky is falling our elected representatives will believe them and will turn over an unprecedented amount of power–in this case into the hands of unelected officials.

The world is topsy turvy. I am finding that I can trust what Chinese bankers are saying about the financial collapse than most of what is said in Washington or on Wall Street, or reported in the main stream media in this country. The business of the media is entertainment not journalism. So I turn to the Financial Times and Economist magazine from the UK to find informed and honest reporting. I have found a few excellent articles in US publications, that appear to understand the root causes, but they are primarily guest opinion pieces.

I’m also trying to learn more about the Great Depression: what caused it and how the country finally emerged from it. If there is a next depression, I wonder what historians will call it. Great Depression Two? I doubt it. I think someone will coin a phrase that will fit the situation and stick, like when Churchill used the phrase “Iron Curtain” and it stuck.

I’m very interested in the memoirs of Marriner S. Eccles, the successful Utah banker who was asked by FDR to serve as Chairman of the Federal Reserve Bank in 1934. He served in that powerful role for 14 years. The book is called “Beckoning Frontiers.” I purchased a used library copy on Amazon last week. It’s on Google Books, but only with a snippet view since it may still be under copyright.

His interpretation of what caused the Great Depression is radically different than anything I’ve heard before, and the solutions that he prescribed were radical at the time he first proposed them, but were soon woven into the fabric of the New Deal. After reading his description of the Senate Finance Hearings of February 1933, which took place one month before Pres. Roosevelt was inaugurated, and learning of his five-point plan for economic first-aid for the nation, it appears that Eccles was as much or more an architect of the New Deal than anyone else. I wonder who historians credit as being most influential in Roosevelt’s dramatic shift from being a states’ rights and balanced budget advocate during the election of 1932 (Eccles provides quotes from some of his speeches), to viewing the federal government as the key to leading the nation out of the depression, and providing economic security and employment as one of its key aims. Eccles must be one of the leading candidates.

His arguments sound very socialistic to me. The New Deal shifted huge responsibilities to new federal bureaucracies. Some of these federal programs are highly connected to the current financial crisis. I don’t believe socialism ever works, no matter how motivated by idealism it is in the beginning. Even Lenin’s biography, which I read years ago, makes you think he earnestly did care for the people, he lived very frugally and very ascetically, and that he believed Marxism was a better path for Russia than capitalism, with all the human suffering that comes with its excesses. But no one in this country claims to believe in socialism, so we practice what our friends in the UK call, “deceptive socialism.”

I’m trying not to judge Eccles too harshly, because he admits knowing virtually nothing about economics or the impact of finance and production on society, and he came up with what we thought were solutions to a devastating national crisis, when 5,505 banks closed in just 3 years and unemployment in Salt Lake City was more than thirty percent.

I want to be able to judge fairly whether he did more harm or good, and I haven’t read enough to do this yet. But I’m going to continue working at it.

Meanwhile, I’ve found some great online databases that Americans can freely use to do first-hand research into workings of each branch of our Federal Government. As citizens, we are empowered as never before with the ability to search online through millions of pages of government records. Here are some great resources for your 4 am time:

And while I’m posting this blog, I have to give a shout out to my 3rd grade class at Cascade Elementary, er, I mean to Consource.org, the free online library of the Founders’ constitutional documents, a great non-profit foundation with a wonderful mission.

These are all in my Google Chrome bookmarks bar, so I can click on them at any time. I recommend you make these a click away, and do as much searching in these as possible, so that you can become better informed as a citizen, and potentially better informed than your own elected officials, most of whom don’t have time to read the legislation they pass, let alone US history. Like kids today who use the internet to learn more than their teachers, it wouldn’t be hard to learn more than most of our elected officials. And then maybe we’ll be smart enough to upgrade our Congress next time we get a chance.

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