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CANDLELIGHTING

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{weblog_name} - From Lotus Land
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I just returned from L.A., where I was attending the Milken Institute Global Conference (http://www.MilkenInstitute.org). It’s a non-profit, non-partisan economic think tank. The topics ranged from reforming K-12 education (featuring Maryland State Superintendent Nancy S. Grasmick as a moderator) to entrepreneurial philanthropy, and from energy to global warming.  There was even a whole track dedicated to Israel. (To read more, check out The Sun’s story.) What struck me the most about the conference was the number of venture capitalists there specializing in “Green” technology. They’re all chasing the next great thing, looking for high returns in a market flush with cash and limited opportunities. Yet, we also learned that in terms of returns, nothing beats good old fossil fuels. In fact, old-fashioned oil companies continue to generate record profits.) In my opinion, both political parties get it wrong. Bob… read more

Andrew, you’re certainly thinking along the right lines.  The problem that we may face is that investment money does not chase returns that are not significantly higher than the existing alternatives.  We’ve become fixated on the idea that every record, every return must be topped in order to gain some sort of satisfaction.  Our expectation levels are simply too high and our risk appetite too low.  In the financial world it’s a matter of 90-day income cycles where employee growth, development and security have been replaced by stockholder value.  If you miss by one penny, then you must be doing poorly.  Imagine that, you miss your income target by one penny, your stock tanks and you are forced to lay off those people that helped build your company.  All for a paper loss, but real people feel the impact.

With respect to the government, Congress cannot afford to develop incentives as too much money is being spread across the world.  Our schools, poor and roads need much more.  This energy issue, largely because of the tremendous wealth and success of the overall American economy, has not “touched” individuals to the point where it is painful to do without alternative energy sources.  Without this pain, who is really interested enough to “fix” the problem? 

It seems we have moved beyond the days when one person could invent a solution.  Now it takes tremendous resources and large scientific teams to inch towards an answer.  How much more can we talk about global warming before everyone believes it to be true?  Where is the Kennedy mandate?  Instead of going to the moon by the end of the decade, where is the courage in our Congress to make such a challenge.  Personally I look to Congress for courage and the private market for money.  Unfortunately, both hands keep coming up empty.  Has there been a leader in Congress over the recent past that has sacrificed their political career for the advancement of a “human” cause?  Where has the courage of our previous generations gone?

I agree that we need to move on this but what is it actually going to take?  Will $5.00/gallon do it?  What if our local energy prices jumped by another 70% next year?  How do we convince the conservative VC market that average returns ARE better over the long run?

Ultimately I believe the answer will come from the private market, just as many have in the past.  Sadly, I don’t believe we are experiencing the conditions necessary for the private market to respond and I’m not sure we really want to experience those conditions especially given the level of our governmental debt.  Any turn in the economy now and a lot of money earmarked for R&D will vaporize.