A Public System for Economic Development


How to create growth

Background

This was written in 2008. Until only a few decades ago economic development in the sense that it is viewed today did not exist. New developments happened by personal salesmanship and hard work. Everything changed after the federally funded “Manhattan project” showed what directed research could do. Then shortly thereafter when Silicon Valley was created in California as a result of mostly federally directed research for computational power for the military and space markets precedence was set. Now every city in the country would like to have a success like that in their town but how?

The focus over the past several decades has been on entrepreneurs and venture capital with emphases on the venture capital thinking that that was the key, to have seed, angel and traditional venture money available. That approach only partially works for the funds managers looking for a return, which they must, go where the perceived opportunities are which is not necessarily where the “local” community is. The local community is being defined here as where the fund is located.

But actually, if you think about it, the focus on money and trying to find the next hot deal is an exact backwards approach for a region or city. The key is not in making the venture money available for the money will come to the deals that are good. The key is creating a concentration of creative people and entrepreneurs.

The logic here is that no one knows what the next hot deal will be but the entrepreneur that has it. In fact, no one foresaw the benefit to any of the major development trends until after they happened. Further there is no way to know which entrepreneur will be successful and when they will first get an idea that’s good. Therefore for any locality, such as Cleveland, that wants to create growth the most cost efficient method to get real economic development would be to attract a large numbers of entrepreneurs. For if enough of them could be concentrated in a location their very numbers would almost guarantee a big hit at some point in time. This is a shotgun approach and when there is no hard target in sight a shotgun is better than a rifle.

To bring entrepreneurs to a location in the numbers required to guarantee a major hit would mean a number of thing are required and money is not one of them. Money is the most mobile of the requirements for success and will come to the ideas. What is needed is to focus on the innovation process and set up a process to facilitate all the steps. There areas can easily be identified and there are a place to live, a place to invent and a place to get help.

A place to live:

Create an economic empowerment zone by tearing down the worst ward in any inner city and build a village of middle class homes at say $150,000 each for the home. Say 500 to 1,000 homes so we would need maybe $250,000,000 for the project which can be done with bonds. These homes are loaned to anyone who submits a valid business idea to a review committee and they are allowed to live there free for 10 years. They get a reduction in the $150,000 home commitment that they make of $5,000 for every job created in the city. At the end of 10 years or sooner they get brought out. The home is then cleaned up and given to the next entrepreneur. There is a lot more to this but we’ll skip for brevity.

A place to invent:

Most inventors are hampered by a lack of resources. So the next step is to create a place they can go were all the tools for making and doing things exist. Let’s call it a craft center for lack of a better term. A place that has research facilities, a small machine shop a computer lab with appropriate software and all the other things that you might need to develop or build something. Ideally this craft center would be in the center of the entrepreneur’s village. That keeps travel time to a minimum which facilitates that innovation. Like in the previous discussion there is a lot that goes with this but those are only details. An educated guess would be $50,000,000 to build the center again well within the reach of local bonds.

A place to get help:

The third thing needed is knowledge and education; so how about a 2 year, a 4 year and a master’s degree in entrepreneurship for the curriculum in a special school or college within a university. In each case the requirement for graduation would be a business plan. What would be taught would be how to find markets how to manage and how to plan. A combination of a business and technology program so to speak. But since some of the areas where growth could be expected are very technical and science oriented some method of traditional education would be also be required. Combining an engineering degree with the entrepreneur’s school so all the non engineering courses required for a traditional engineering degree would be supplied by the entrepreneur’s courses.

Student loans could be given out with the entrepreneur either paying in cash, as normal, or given a credit of $5,000 for each job created. Again many details but we’ll skip those for now. Hard to estimate the costs but lets say a thousand students so it would probably be under $100,000,000 to put 1,000 students through 4 years. If those 1,000 students each created only 25 to 35 jobs, on average, that is 30,000 jobs per year after the first 4 years of the program.

Discussion:

Every location in the country, or the world for that matter would like to foster economic development within its geographic area of responsibility. Governments, States, Counties and Cities have all set up programs to try and find a way to promote economic growth, especially technology based growth with all kinds of “programs,” “grants” and “tax breaks.” Not many of these programs have worked as well as they were hoped to, and in my opinion there are several major reasons why promoting this kind of growth is very difficult. These are: one, true “New Ideas” typically don’t come from organizations they come from unknown inventors or entrepreneurs; two, these inventors (word used to mean both inventor and entrepreneur) normally don’t have “experience” or “money;” three, many of the traditional methods of help result in the inventors losing most of the value of what they came up with; four, because of politics with the use of “public money” most of these programs end up being very conservative; five, even with these programs there is no one source shop to go to.

Many, if not most, of the core issues for the inventor center on finding money for doing the designs, building prototypes and getting patent protection without losing their idea. Writing business plans and securing seed and/or start up money are also high on the list of needs as well. Getting through these hurtles is extremely hard for most inventors and many good ideas never get made because of this. So is there a way to help these inventors and promote technology based growth. I think there is.

At the State or better at the County level within a state a special kind of community could be established with public money that did the following.

A. Have a place to live for the entrepreneur and his/her family. This would consist of homes build for the city or county where they were located, preferably located near a major university. In the community would be created an environment that would facilitate inventing. That means as many of the daily needs of the community as possible would be located here. The logic being that you want the inventor to spend as little time as possible doing things that aren’t inventing.

B. In the center of this community would be a facility that would contain: a number of good computers and appropriate software (both business and technical), related support equipment like desks, phones, file cabinets, copiers and fax machines, a complete machine shop, a model making shop to include stereo lithography, and an electrical and electronics lab. This listing is only meant to show breath not every aspect. In essence this facility would have everything that an inventor would need to take his or her idea from concept to working model.

C. Have a small staff of support people such as technicians, attorneys, engineers, programmers, accountants, business people and machine operators knowledgeable in all aspects of making things. These people would be there for advice and could come from the nearby college and/or from retired business executives. Existing organizations like SCORE would fit in here perfectly. Obviously there would need to be some admin people as well to keep the place running.

D. Have the support of local business that had previously agreed to help or mentor those using the facility.

E. Have ongoing contacts with the seed and venture capital community and even hold investment conferences during the year where inventors could present their case or ideas to interested parties.

In other words this would be a comprehensive facility where and inventor could get access to design and make almost anything be it hardware or software in nature. And it would be a place that took no ownership in the idea its sole purpose would be to facilitate the inventor and give him or her a place to work.

To gain access to this facility an inventor would need to write up his/her idea and submit it to a review committee. The main purpose of the review would be to make sure the idea was within the scope of the facility to handle and that it had some economic potential if it could be produced. This would not have to be a formal presentation and its purpose would not be not to judge whether the idea would work or whether the inventor had the ability to make it. The secondary purpose would be to see if the inventor had the will to make things happen. Based on a positive review of the idea presented the inventor would be allowed to use the assets of the facility to design and build their idea. However this is not an open ended deal and part of the review would be to tell the inventor for how long they had the use of the facility. It is assumed some form of scheduling would be required and the facility should be open 24/7 to accommodate people that are holding jobs. They would have to do the work and the “state” would provide the tools to do so. The inventor would not be given any money only the means to design and build their idea. The technical and business staff would be there for guidance and support but not for doing the work. However if the inventor needed help in an area and wanted to pay for help it could be provided at minimal cost to them.

To an inventor buying all the equipment needed to build something would be cost prohibited and to try and find a range of local companies that would even do it for them would be very hard as most companies are looking for production work not one or a kind projects with unestablished companies or inventors where they may not get paid for what they did.

To the state buying all the equipment needed to establish a facility of this kind is not out of the question but finding new ideas are. Public employees are not risk takers and so most publicly funded programs end up being to make small improvements to existing ideas. The state here provides the expensive physical plant and since it is a conservative use of funds the public is not seeing their money being given away.

Since local and state money was part of the funds used to build the facility the inventor would agree to start their venture in the immediate locality if at all possible and within the state in any case. That is not too much to ask for the use of the facility and is really the only string attached.

Analysis:

Using Cleveland as an example since it has gone from the top to the bottom in less than 80 years we can see what works and what doesn’t work. Cleveland in the last half of the 19th century and the first part of the 20th century was a center of innovation. That innovation created growth. Cleveland in the ’00’s is for all practical purposes brain dead and is now ranked as the second poorest city in the country.

If nothing changes than nothing changes and in Cleveland if it doesn’t work the first second or third time just keep trying till it does. Sadly no matter how many times we study the problem and try it has never worked and so we are where we are. We’ve been trying the same formulas for several generations and so the people have figured out that the politicians and community leaders don’t have a clue so they voted with their feet, their gone. Even the PD figured that out in the editorials they have done over the past several years. Much good it did as no one is reading them but then maybe the flaw in the PD work is they assumed Clevelanders can actually read.

A solution that has worked well in other areas of the country, where similar but not as bad problems existed, was to combine all the affected communities into one large city. Again the PD has recommended that for Cleveland but I guess we would all rather disappear as a community rather than fix the problem. Too many politicians involved to actually make this possible. For think about it there would be a lot of mayors and council people out of a job if this was enacted. So since that will never happen here this entrepreneur’s village maybe something that could be done.

Recommendation:

The underlying logic here is to find a way to attract entrepreneurs here not the money as for the jobs it’s the people not the funds that is the key to turning Cleveland or any city around. So, using this White paper as background any of the local colleges could do an economic analysis of this idea to include pro forma economic projects of implementing these recommendations. The study would cost little and given the critical condition of the city what is there to loose?

Analysis of Global Temperature Trends, February 2014


What really going on with the Climate?

The analysis and plots shown here are based on the following: first NASA-GISS temperature anomalies (converted to degrees Celsius) as shown in their table LOTI, second James Hansen’s Scenario B data, which is the very core of the IPCC Global Climate models which was based on a CO2 sensitivity value of 3.0 degrees Celsius, lastly, a plot based on an alternative climate model designated the ‘PCM’ climate model based on a sensitively value of .67 degrees Celsius. To smooth out large monthly variations a 12 month running average is used in all the plots.  This information will be shown in four tables and updated each month as the new data comes in. Between last month and this month some new information was made available to me and so I spent some time tweaking my model which ended up improving the accuracy a few points. This change did not apply to the IPCC model.

STATUS 2014-02

The first plot, UL is a plot of the NASA temperature anomaly converted to degrees Celsius shown in red with a black trend line added. There has been a very clear reversal in the upward movement of global temperatures since about 2001 and the IPCC has no explanation for this. Since CO2 has continued to increase at what could be argued an increasing rate this raises serious doubts about the logic programmed into all the IPCC global climate models.

The next plot UR, also in red, shows the IPCC estimates of what the Global temperature should be, based on Hansen’s Scenario B, with the NASA actual temperatures’ subtracted from them.  Therefore this plot represents a deviation from what the Climate “believers” think the temperature should be; with a positive value indicating the IPCC values are higher than actual and a negative value indicating the IPCC values are lower than actual.  A black trend line is added and we can clearly see that the deviation is increasing at an increasing rate. This makes sense since the IPCC models project increased temperatures based primarily on the increasing level of CO2 in the earth’s atmosphere. Unfortunately, for them, the actual temperatures from NASA are trending down since other factors are in play, therefore each year the gap between them widens. Since we have 12 years of observations’ showing this pattern it becomes hard to justify a continuing belief in the climate models, there is obviously something very wrong.

The next plot LL shown in blue is based on the equations in the PCM climate model described in previous papers and posts here and since it is generated by “equations” a trend line is not needed.  As can be seen the PCM, LL, and the NASA, UL, trend plots are very similar the reason being that in the PCM model there is a 68.2 year cycle that moves the trend line up and then down a total of .30 degrees Celsius (.0044 degrees Celsius per year); and we are now in the downward portion of that trend which will continue until around 2035.  This short cycle is clearly observed in the raw NASA data in the LOTI table going back to 1880. Because there is also a long trend, 1052.6 years with an up and down of 1.36 degrees Celsius (.0013 degrees Celsius per year) also observed in the NASA data; there is a net cooling of .0031 degrees Celsius per year going up right now. After about 2035 it will reverse and be a net increase of .0057 degrees Celsius. These are all round numbers as both curves are sine curves.

The last plot LR in blue uses the same logic as used in the UR plot, here we use the PCM estimates of what the Global temperature should be with the NASA actual temperatures’ subtracted from them.  A positive value indicates the PCM values are higher than actual and a negative value indicates the PCM values are lower than expected. A black trend line was added and it clearly shows that the PCM model is tracking the NASA actual values very closely.  In, fact since 1970 the PCM model has rarely been off by more than +/- .1 degrees Celsius and has a trend of almost zero error, while the IPCC models are erratic and are now approaching an error rate of +.5 degrees high.

The IPCC models were designed before a true picture of the world’s climate was understood. During the 1980’s and 1990’s CO2 levels were going up and the world temperature was also going up so there appeared to be correlation and causation. The mistake that was made was looking at only a 20 year period when the real variations in climate move in much longer cycles.  Those other cycles can be observed in the NASA data but they were ignored for some reason.  By ignoring those trends and focusing only on CO2 the models will be unable to correctly plot global temperatures until they are fixed.

The purpose of this post is to make people aware of the errors inherent in the IPCC models so that they can be corrected. 

Sir Karl Raimund Popper (28 July 1902 – 17 September 1994) was an Austrian and British philosopher and a professor at the London School of Economics. He is considered one of the most influential philosophers of science of the 20th century, and he also wrote extensively on social and political philosophy. The following quotes of his apply to this subject.

If we are uncritical we shall always find what we want: we shall look for, and find, confirmations, and we shall look away from, and not see, whatever might be dangerous to our pet theories.

Whenever a theory appears to you as the only possible one, take this as a sign that you have neither understood the theory nor the problem which it was intended to solve.

… (S)cience is one of the very few human activities — perhaps the only one — in which errors are systematically criticized and fairly often, in time, corrected

The Responsibilities of the Citizens and the Press


The unsaid understanding of the Constitution

The Constitutional Convention in Philadelphia in 1787 ended with a Proposal to Change the existing Articles of Confederation to the Constitution that we now have.  There was a procedure to make changes in the Articles just as there is in the present Constitution and so a national debate ensued. On one side were those that wanted a stronger agreement between the states to solve existing problems; on the other side were those that felt the proposed Constitution went too far.  Those for the Constitution were the Federalists and those that were not (as written) were the Anti-Federalists. The compromise to get the votes necessary to make the change, were what we now know as the Bill-of-Rights which are the first 10 amendments to the constitution. Specifically they were a listing of things that the Federal Government could not do or had no jurisdiction over, the reason these were enacted as the first order of business of the new government was that the citizens, who had just fought the American Revolutionary War, did not want a Ruling Class to take over and negate what so many had just died for.  We would call this process consensus today as everybody got enough of what they thought was needed to get all 13 states to agree, albeit it was a long process lasting until 9th state ratified it on June 8, 1778 making it legal by the terms of the Articles. Four years later Vermont, the last state, ratified the Constitution making it all thirteen.

The first Amendment of the Constitution was of a guarantee of various fundamental freedoms; of freedom of religion, of free speech, a free press, the right to assemble, and the right to petition the government.  This was very important and so it was the first of what ended up being the Bill-of-Rights.

That held for almost 200 years and then we became spoiled and forgetful and to trusting of our elected representatives and we are where we are now with a congress, both the House and the Senate, and President and Vice President that have desires to nullify much of the Constitution and Bill-of-Rights.  These 537 elected representatives, both political parties, are now trying to tell 317,674,000 Americans (when this was written) that they know better than we do how to live our lives. Most families have issues managing 3 or 4 individuals so to assume that, that so few a number could manage the most complex economy that ever existed is frankly absurd.

There were three checks to the concentration of Federal power. The first was a knowledgeable citizenry, the next were the states themselves, and the last was the press. The Free Press was the last defense for maintaining a free country.  Their duty was to question and research everything the government was doing and to assume that there were nefarious reasons for anything that they proposed.  There should have been no distinction as to who was in power as all of them are human and we all have the same faults, self interest.

The politicians are no different from any of us and if given the opportunity they will find ways to gain power and influence. One of the ways they do this is to convince us that they are different from any of the rest of us, how that would be possible I’m not sure since they have the same DNA as we do.  According to them Businessmen and Financiers are all corrupt and they need to be managed by them. This would be no different from letting the Fox guard the hen house. The people in the government and the people in private business are identical and many go back and forth between the two sectors.  The only difference between the two is if a business does not provide a service or product you don’t like you don’t buy it and with no sales they go out of business.  In the public sector what you want does not matter it’s what the government will give you that you will get and if they need more money they tax you, which is not a choice you will pay them what they want.

The free Press is now incapable of doing its job, for various reasons, and so the citizens are not aware of what has been going for the past twenty some years.  The problem is that there are a host of very fundamental changes in play now in this country; it’s unlikely, in my opinion, that many of these “fundamental” changes will be successful and that will result in a high probability of economic collapse.

What is left of the free press will be one of the first to go. Unless they wake up!

The Repeating Cycles of Social Time


A Major War is Coming!

Strauss and Howe in their 1997 book The Fourth Turning An American Prophecy outline how social or political time runs in cycles. There is much they have to say in their book and much of that goes all the way back to the Roman times where they find the name for this cycle from the Romans and it’s a Saeculum meaning a long human life of 80 to 90 years. This Saeculum is composed of 4 generations of about 20 some years each. Read the book for the full analysis which is very compelling but for here the salient point is near the end of each Saeculum there is a major war, no exceptions.

The cycles they identify go back to England and the war of the Roses 1459 to 1487 and since then there have been five complete cycles and we are now in the final stages of the sixth cycle which according to them ends around 2025 plus or minus a few years. This period that we are now in is the fourth turning (a turning meaning going from one generation to the other in the Saeculum) hence the name of the book. They can pin down the basic times that all this occurs because these changes have repeated themselves for 555 years now.

The last three major wars going back from the present were: WW II from 1941 to 1945; the American Civil War from 1861 to 1865 and then the American Revolution from 1775 to 1783. The civil war started 86 years after the American Revolution; WW II started 80 years after the Civil War started. The scary thing right now is that 80 years from 1941 is 2021 which is a likely start for the next major world war. However over all the Saeculum’s since the War of the Roses have been getting progressively shorter so that 80 years may not be a good guess.

Straussand Howe are not the only ones to see the pattern but even still they go to great lengths to show why it occurs and how many other sociologists have also seen all or some of the pattern they have identified in their book. I read the book after it came out in 98 or 99 and thought it was interesting and put in on my book shelf. After 9/11 I went back and read the book again since I remembered that they talked about that kind of an event happening around 2005. Since then I’ve read it a couple more times and I am now convinced they are right on and a major war is now eminent.

So based on current events (read my previous post on the Ukraine) which seem to parallel the years before WW II started, actually in 1938 in Europe, we can make a case for the next world war to start any time from 2016 to no later than 2022.

What to do with the Russians?


But the real worry is what about the Chinese?

This president came into office just over 5 years ago with the “Stated” goal of making a “Fundamental” change to America.  Whether the American’s believed him or not he was going to do just that!  Progressives’ like Obama and his appointed minions believe that America is the problem in the world and that our large military scares everyone and that is why they do not like us. I would not agree with this proposition one bit, but but my opinion is irrelevant I’m not in politics either here nor there. However, that doesn’t mean I cannot understand what is going on in the world for I have studied the subject of global politics from both the military and civilian perspectives.

To the rest of the world what has Obama done? Well a partial listing follows: First a world apology tour for “us” being so bad; then he cancels the anti missile agreement with Poland, then he cancels the US manned space program, he does not negotiate a status of forces agreement in Iraq; he does nothing with the green movement in Iran; he begins to cancel DOD advanced weapons programs soon after assuming office; he encourages the Arab spring; he ignores Iran’s nuclear program for all practical purposes; he gives the impression that he does not like Israel; he proposes major reductions in US nuclear weapons; he announces that all American troops will be out of Afghanistan in 2014; he does nothing In Syria or prior to that in Georgia; he was AWOL after the Benghazi terrorist attack, he has his EPA continue to make regulation that start to close down major sections of the U.S. economy; then he announces that the U.S. military will be significantly reduced and more military programs are to be eliminated.

Foreign leaders with real world experience see a U.S. president with no experience dismantling the US military as fast as he can. They will obviously take advantage of this as real leaders always do.  So it’s no surprise that Putin is doing what he is doing which is to attempt to reestablish the old U.S.S.R. as there will be no military action against him; since the EC has no military and is dependent on Russian e.g. Putin, for their natural gas so there really is nothing that they can do other than complain.

The real issue is not Russia reassembling its empire but what will China do?  The logical thing for them is to see how the world acts or doesn’t act to the absorption of at minimum the eastern Ukraine into Russia.  If Putin gets away with this and its hard to see how he will not given the box that Obama has put himself in, unfortunately along with the rest of the country, they will likely make a similar move in their sphere of influence with those disputed islands with Japan or maybe even a much bigger target Taiwan.

The American Eagle has clipped wings and can no longer fly.