An interesting blog entry caught my eye this morning on the impact of start-ups on jobs and by default, industry. (see here) The author points out that start-ups are not the panecea for economic growth (or by default, recovery) given their inefficient use of capital and other resources and how government involvement will spur a rush of companies into a segment that simply cannot support them.

That's not to say that start-ups are not a viable concept by any means but when we consider all of the money that has been thrown at printed, organic and thin-film electronics markets by government agencies, just how far have we collectively come?

As an aside, last month we were approached by a company who would be classified as a start-up that was looking for assistance in advancing their manufacturing operations. They were going to be relying upon an EU grant in order to become the next "(name deleted)". The market doesn't need another company to offer the technology but regardless, the firm was in line for several million Euros so why not take the chance? After all, it isn't as if the business has to succeed......

Especially when the bids are shall we say, rigged?

Interesting article in today's Wall Street Journal about the role of entrepreneurs in getting the economy back on sound footing. You can debate the merits of the proposals but one thing that sticks out is the need for technology, investment and leadership to come to the forefront.

We believe that materials, manufacturing and product innovation will be crucial elements of the story.

An article in Investors' Business Daily yesterday (see here) brings to light the trade-offs between environmental activism (and really, government interference in the market) and economic reality. Everyone thinks that going green is a good thing but what happens when pursuing those policies mean that people lose their jobs, prices increase and/or competition is stifled? How about when politicians see these initiatives as a way to generate cash flow instead of sound economic and fiscal policy making? Can anyone really expect to have a sustainable business or develop new technologies that rely on inefficient uses of capital as the justification for a company's existence? Or how about taxes and fees that make the "next big thing" a non starter? Sure, government mandates (i.e. interference) can provide a spark for innovation but how can anyone raise capital for speculative technologies when concepts like risk, ROI and market driven capitalism have been distorted by non market forces? How does the consumer gain access to the solutions that best meet their needs from a cost or utility basis when policy makers want to appease special interest groups?

The NY Times has an article on how credit and banking issues are impacting the green tech market. (See here). While access to credit facilities is an issue for most businesses any industry that reliant on tax credits (i.e. subsidy) and borrowing has to be seen as suspect. Solar will still be a favored technology for years to come but companies scrambling for new markets to address have to consider that solar is yet another government and social policy influenced sector that someday will have to make it on its own.

When elected officials are forced to make hard choices on spending and resource allocation in an era of declining tax revenues it will also be interesting to see what happens with renewables. A few years from now when the pendulum swings back to more fiscally conservative thinking either by choice or necessity these businesses have to make money or they are done.

Caught the news release about the 2009 CES show taking place in Vegas this week. The release is what you might expect for an event that is trying to put on a happy face when most of the news points to something rather dour.

A few random thoughts...

The trade show is where companies announce and demo new products, they are used as a venue to blitz the media and meet with customers and suppliers. Do it right and you can generate a lot of buzz for the products. They are also a good gauge of what's going on in an industry.

When I see a lead off of 20,000 new products helping lead the way to economic recovery I have to laugh. More so when I see "Innovation will restart the world's economic engine". Unless the innovations are going to significantly reduce costs or offer up a productivity proposition that warrants someone ponying up scarce money then take this one with a grain of salt too. (The only caveat for that I would offer is if you work for a PR firm or in the Marcom department then said innovations will likely keep you employed for a while) Supply is not our collective problem. It's all about demand and that is becoming harder and harder to find. See Mish Shedlock's blog.

I don't consider CEOs attending a trade show worthy of mention in a press release. Of course CEOs should be at major shows. In addition to meeting with press and analysts these people should be out walking the floor, visiting other booths and yes, talking to your average consumer.

However, if you are a CEO (or anyone in electronics) you should be gravely concerned about what is coming down the pike. Consumer electronics are in for a really rough stretch, business spending is falling rapidly and deflation is the current condition. The frantic discounting and panic selling of Q4 has not only destroyed margins but promoted buying of stuff today that manufacturers and retailers would have been able to count on a few quarters down the road. Karl Denninger of the Market Ticker Blog nails it in this entry where he touches upon what happens when we borrow against future demand. The writing style is a tad bit dramatic but the point is rather clear; how many more TVs, displays, iPod/MP3s, smart phones or other gadgets do people want and need right now?

Other issues:

There is talk of large scale reductions in the amount of retail outlets in 2009 and 2010. Clearly we have too many places to shop for goods and while it won't help unemployment numbers the contraction simply has to happen. For newer technologies though that means shelf space is going to be much harder to come by. Best Buy and Circuit City (in Chapter 11 right now) are places where people go to look at what's new then search on-line for the best price. If you get lucky you might actually find someone who can answer some product specific questions. If they go who is there to educate the consumer on why the next generation of tech is worth paying for? Companies cannot underestimate the effectiveness of retail outlets in the success of consumer technology. As retail stores dies off and competition for shelf space increases companies are going to have to come up with new means of promoting and selling products. That's why I found the mention of attempts at about trying to restrict attendance and making sure the "right" people come to the show the most outrageous of all.