Sunday, November 30, 2008

Mid-Level Innovation

The New York Times has a good piece this morning about Amar Bhidé’s new book, The Venturesome Economy. His main argument is that the innovation that creates economic value comes not from basic research but from creative business applications. Those of us in innovation studies should think less about quantum dots and academic labs and more about Wal-Mart's brilliant logistics.
The piece is good because it also points out a key problem with this presentation:
The flaw in Mr. Bhidé’s thesis is that it amounts to a “false choice,” said Robert D. Atkinson, president of the Information Technology and Innovation Foundation, a nonpartisan research group. Most of the economic gains from technology, Mr. Atkinson agrees, do come from its innovative use. “But that doesn’t mean that the basic research is not critical,” he said.
But my favorite quote is from Bhidé, who says value really comes from “all the various forms of knowledge generated by the massively multiplayer innovations game that sustains economic growth.”

This puts the question back where it belongs: not with an either-basic - or-applied question, but with the kinds of institutions that link them together in ways that are effective because they really do pool the multiple players by treating the players equitably.

BTW, for a good overview of the Obama campaign's use of their massively multiplayer online environment, listen to this "To the Point" episode (featuring Thomas Gensemer of Blue State Digital and John Palfrey, author of Born Digital, among others).

Thursday, November 27, 2008

Info Problems

Our group often talks about the difficulty with telling research from publicity in high-tech world in general. I first ran into this in the mid-1990s when reporters from Silicon Valley started to call me in Santa Barbara to talk about workplace conditions in famous SV companies whose employees wouldn't give them the time of day. They were upset that I didn't each in a business school.

Greentech has a kind of funny piece about the problem with compnay information - "Greentech's Top Eight Paranoid Companies." They actually understate the problem.

Saturday, November 15, 2008

The Future of Science Literacy

Here's a nice n depressing review of basic educational level stats. The author is right to wonder where we can go without a better base than this!

On a happier note, Chris Mooney, the author of The Republican War on Science, says the war on science is over and that science has won.

Thursday, November 13, 2008

Solar "Panic"

From Reuters, November 12:

Chinese solar cell maker JA Solar Holdings Co Ltd said on Wednesday the global economic slump had triggered a "panic" in the solar market, prompting it to slash its sales forecasts and sending its shares down more than 30 percent.

Sales of solar cells and panels have risen sharply in recent quarters as companies such as JA Solar ramped up production of the clean power source, but the global economic slowdown has caused that growth to slow, leading to a supply glut.

"At this moment the market reaction has been panic," Samuel Yang, chief executive officer, told a conference call.

The company, which posted a quarterly loss from its ties to defunct investment bank Lehman Brothers, said it had cut back on output of the cells that turn sunlight into electricity and would seek to renegotiate its polysilicon supply contracts.

That effort to cut costs for polysilicon, the key material in its cells, was an attempt to offset an expected 20 percent price decline in the average selling prices of its products.

"Just recently the euro depreciated dramatically, more than 23 percent. So we have to adjust our ASP (average selling price) to support our customers," Yang said.

Europe is the largest market for photovoltaic solar equipment because of the subsidy programs set up by the German and Spanish governments.

JA Solar's stock plunged as much as 32 percent to $2.27 following the announcement, bringing its loss since the beginning of September to nearly 90 percent.

"We do not believe in the 'disaster scenario' implied by the stock's sharp drop during today's session," Raymond James analyst Pavel Molchanov said in a client note, noting that the stock was trading nearly 40 percent below its book value. "JA Solar's low cost structure and healthy balance sheet place it in a strong competitive position."

JA Solar said it would seek a 20 percent drop in the price it pays its suppliers for polysilicon in 2009, and that it had already won price concessions for 2008. The company would seek to push its contracted costs for silicon below the spot market price of about $200 to $220 per kilogram.


The company cut its 2008 revenue forecast to between $849.5 million to $878.9 million from the $1.05 billion to $1.17 billion it had forecast in October, and said its earnings per share would be near break-even.

It also cut its 2009 revenue forecast to $1.5 billion to $1.7 billion from the previously issued $2.0 billion to $2.2 billion.

Fourth quarter growth margins would drop to 5 to 7 percent, the company said, from 21.6 percent in the third quarter and 23.3 percent in the second quarter.

JA Solar said it lost a net $21.0 million, or 36 cents per American Depositary Receipt, in the third quarter. In the same quarter a year ago it earned $24.4 million, or 17 cents per ADS.

Excluding one-time items, the Hebei, China-based company reported earnings of 25 cents per share, just short of Wall Street analysts' average forecast of 26 cents per share, according to Reuters Estimates'

Total revenue rose to $312.3 million from $125.2 million, and beat estimates of $302.1 million, according to Reuters Estimates, as the company more than doubled its solar cell sales.

JA Solar posted a one-time loss of $100 million in investments it made with Lehman, a $7.3 million loss from the derivatives deals with the bank and a 1.1 million share dilution based on shares lent to the collapsed investment bank.

Tuesday, November 11, 2008

Renewable Energy - So Three-Months-Ago

This piece from the Financial Times is one of a series of reports about falling investment in the renewable energy sector. The sector is getting squeezed between the crisis in the financial markets on the one hand, and falling oil prices on the other.

When a group of us spoke in June to physicist and 3rd-Generation solar photovoltaics researcher Alan Heeger, he said he thought much of the investor motivation was driven by the high price of gasoline and not by a sincere commitment to alternative energy development. I thought this was a bit cynical at the time, but he is turning out to be correct.

The test will be what happens when the global recession keeps oil prices weak as the credit markets stabilize. If alternative energy investment doesn't come back then - even when helped by large state investment in China and perhaps even in the US - then Prof. Heeger will be, to his great sorrow, proven correct.

I personally believe the last line of the piece below.

Clean energy investment falls sharply

By Fiona Harvey in London, Richard Waters in San Francisco and Sheila McNulty in Houston
Published: November 10 2008 18:08 Financial Ties

Investment in low-carbon technologies is suffering its first reversal after several years of record growth, as the financial crisis dims the sector’s prospects.

Worldwide investment in clean energy companies and new clean energy capacity fell sharply in the third quarter of 2008, compared with the previous quarter, according to New Energy Finance, a market analyst company.

Venture capital and private equity investment totalled $4.4bn in the third quarter, down 24 per cent from the $5.8bn in the second quarter of 2008.

Brent Goldman, partner at BDO Stoy Hayward, said: “We are seeing less activity across the whole market.

“There will be more and more businesses without enough funds, and they will struggle.”

Clean technology investment has soared in the past four years, on the back of high conventional energy prices and fears over climate change and energy security. The cost of renewables has come down and governments have increased their subsidies.

But many clean technology companies are at an early stage, and have found it more difficult to raise funds. Longer established companies have suffered less, but some have found it harder to find funds and credit for expansion.

Capital raising in the public markets was down in the third quarter, at about $2.6bn of new money raised – most of which came from convertible issues rather than flotations or rights issues – compared to $4.9bn in the second quarter.

The biggest public capital raising was by EDF Energies Nouvelles, the French renewable energy company, raising $734m through a secondary issue.

The biggest IPO recorded by New Energy Finance from July to September, at $87m, was Energy Recovery, a Californian energy efficiency specialist.

M&A activity among clean technology companies also fell, by 21 per cent to $2.9bn in the third quarter.

But the financing of new capacity in the clean energy market, such as the building of new wind farms, remained strong at $19bn in the third quarter, only marginally down on the $23bn in the second quarter of this year.

However, as clean technology investment remained relatively strong for the first half of this year, new investment in clean energy worldwide is likely to be only about 4 per cent lower in 2008 than last year, according to New Energy Finance.

Michael Liebreich, chief executive of New Energy Finance, predicted investment would return to its previous high levels next year.

He said: “There will be a hiatus of about six months, but then capital will return. The fundamentals of this business still look good.”

Thursday, November 06, 2008

Obama Energy Policy

Here's Obama the candidate offering a good short summary of his energy and innovation policies. It will be interesting to see how the program holds up.

Renewable Energy World's morning-after summary is pretty sensible.
  • Hope 1: "“President-elect Obama is the first national presidential candidate who has explicitly campaigned for renewable technologies and green jobs."
  • Hope 2: "Some renewable energy experts and analysts say that Obama may use the job-creating opportunity that the renewable energy industry holds as a way to usher in a stronger economy while bringing more solar and wind power into the energy mix."
On the latter point, the strongest, clearest advocate is Van Jones, whose organization and new book should be injected without dilution into the Obama administration.

Obama's Tech Team

At least one technology member of Obama's transition team has been tentatively identified by the Washington Post: Julius Genachowski, a former counsel to the Democrat side of the FCC, a managing director of Rock Creek Ventures, and a friend of Obama's from law school. He seems connected, and draws comments like this:
"Julius is a true believer in the power of technology to change lives and I think that bodes well for the Obama administration that someone like him is part of the transition team," said Rick Whitt, Google's Washington telecom and media counsel.
But the web material on him is paper-thin - I'll try to find something more concrete.

Monday, November 03, 2008

A New Consensus on Innovation?

This year, the journal Nature has been running monthly commentaries on the innovation process. In August, their editorial on the series claims that we have seen a paradigm shift in our understanding of innovation. We've dropped the "linear model" in which knowledge moves from bench to bedside, from basic research to marketplace, in exchange for bundled processes that are non-linear, interactive, multi-directional, discontinuous, and decentralized. Here's their formulation.
A more accurate picture is that of a nonlinear ‘ecosystem’, in which innovation is driven by multiple players, forces and feedback loops working simultaneously. Such an ecosystem cannot be managed — at least, not in the conventional sense of top-down control. But it can be cultivated, in the way that a gardener can try to create the right conditions for plants to grow, while accepting that unforeseen
elements ultimately dictate the outcome.
The explosive idea here is that the actual, non-linear ecosystem "cannot be managed." We do say this regularly, but do we practice it? Is cutting-edge science becoming more democratic, or at least more self-organized? Have our institutions changed to allow this?

I would answer no to all of these. We can see the next paradigm but we haven't moved there. Our practice is in between paradigms. And when we talk about gardeners, we can assume that our metaphors and implied models also have a way to go.

More on this topic soon.