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Tuesday, February 22, 2011

He Just Doesn't Understand How The Economy Works

The Cowardly Lion is in Cleveland today meeting with "small business owners". He will give his speech and they will all break up into small study groups to discuss how to create "innovation". All of this innovation will then be sold overseas and our budget problem will be solved. That is his plan.


That is not how innovation works. Period. I once worked for a company where the president was as dumb as Obama and he ordered the company to create new products. And did we ever. The problem is that they were all crap. Not a single one grew out of a customer need. They were all just different versions of what we already made. And that is what Cleveland will produce.

New products come when someone sees a new way to solve a problem for somebody. Well run corporation's R&D departments focus on this activity, but they seldom create many new jobs.

New jobs come from small companies that use innovation to grow their businesses. Small companies can do that when they are profitable, which is not now!

400,000 small businesses have disappeared in the past two years.

When David Perez noticed that a lot of the homes in Newport Beach, California had dirty awnings, he decided that he could start a business cleaning the awnings. So he went to a local hardware store and bought the necessary supplies. He charged it on his credit card. Then he hired a helper. The store was so sure he would succeed, they hired an new employee. Three new jobs are created.

Howard Schultz was selling drip coffee makers and watching the steady long term decline in U.S. per capita consumption of coffee. He had seen coffee bars in Italy that created a very different kind of experience drinking coffee. He got a job with a coffee importer in Seattle and then went to venture capitalists to buy the company, which he turned into Starbucks. To date, 137,000 jobs have been created.

That is how jobs are created and innovation happens. Somebody gets an idea about how to so something better, or cheaper, or faster.

Jobs are not created by some guys sitting around discussion groups in Cleveland. Ask Steve Jobs and Steve Wozniak. Ask Hewlett and Packard. Ask Michael Dell. And on and on and on.

Obama clearly understands absolutely nothing about how the U.S. economy works. Yes, I beat up on him a lot, but the Republicans (of which I used to be one) are just as bad, and if you believe Paul Ryan, worse.

I once managed the new products department of a large company (not the one above). I had a multi-million dollar budget and an extremely talented staff. You cannot believe how many dead ends are the fate of really good ideas. Innovation is damned hard work. If it weren't, I would be as rich as the Koch brothers (well, maybe not exactly).

What we have in Washington now is a discussion of how many fairies can dance on the head of a pin.

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