On Job Creation

According to a research study conducted for the U.S. Department of Commerce Economic Development Administration, business incubators provide communities with significantly greater results at less cost than do any other type of public works infrastructure project. This is a government report by a government agency responsible for economic development.

Researchers found that business incubators are the most effective means of creating jobs – more effective than roads and bridges, industrial parks, commercial buildings, and sewer and water projects. Incubators provide up to 20 times more jobs than community infrastructure projects at a cost of $144 to $216 per job.
Compare that to what is reported by recovery.gov for the state of California:
-- cost per job via grants: $154,000
-- cost per job via contracts: $508,000
-- cost per job via loans: $4,100,000
[Ref: http://www.recovery.gov/transparency/pages/home.aspx?State=CA]

Business incubators also increase the likelihood of success on a new business by 5X [nbia.org].

At a time when I believe California has a unemployment rate close to 20%, should we be spending federal dollars on "job creation" or should we incentivize businesses to do the same?

Primer on solar power options and costs for your home

Quite a few people have asked me about solar power for the home, and what it costs. Here is a very introductory description of options available to you, from least expensive (zero cost) to most expensive (maximum long term benefit). I assume that you will hire a company to install solar panels on your roof (or yard or wherever) and that you will give excess generated electricity back to your utility company - the best alternative for most. At the end, I'll touch on non-grid connected systems.

OPTION 1: ZERO SYSTEM COST: The solar company installs your solar panels at zero cost to you. Absolutely zero. They own and maintain the solar power equipment at no cost to you. The company borrows to pay for the installation, and reaps most of the financial benefit -- the benefit to you is a lower and never increasing electric bill. They guarantee that your electric bill will never exceed a certain fixed amount (typically in the range of $50-$100/month based on your historical usage) for 30 years. Say its $60 - it will never go above $60 even if electric rates skyrocket, which they eventually will do.



OPTION 2: LEASE SYSTEM: The solar company installs your solar panels for a lease cost per month, just like an automobile lease. You decide how much power you want to generate (the more power the higher the lease cost) but you can go all the way to having a zero cost electric bill, just the lease cost. If electric rates skyrocket, which they eventually will do, your lease price is fixed and your electric bill is still zero.

OPTION 3: BUY SYSTEM: The solar company installs your solar panels and you pay for installation and materials, anywhere from about $10,000 and up. Most people finance the system purchase using a home equity loan. You decide how much power you want to generate (the more power the higher the cost) but you can go all the way to having a zero cost electric bill, just the original system cost. If electric rates skyrocket, which they eventually will do, your electric bill is still zero.

NON-GRID CONNECTED/OFF-GRID SYSTEMS: You can take you home completely off the power grid, disconnect from your power utility but this is not a good option cost-wise. Neither the state rebates nor federal tax incentives are available, plus the system must store the power overnight (batteries, etc.). Finally, you must add more capacity, typically 50-100%, to be able to handle peak demands from your home. Not a good choice, unless your home is located where there is no power utility available.

I've done both Option 3 and Off-grid, for what its worth. My option 3 does indeed result in a monthly credit on my electric bill most months. Of course, option 3 has no electric bill since I am the utility. Coo-coo kachoo.

The demise of the earth: A fundamental error in logic

As I listen to world leaders from today's International Climate Summit, I am once again struck by a gross error in their logic.

Fundamental premise: It is unequivocal that use of non-renewable energy sources (primarily oil, natural gas, and coal) is ultimately catastrophic for earth, its only a matter of when, not if. The catastrophe could come from economic, political, or scientific bases, but it will come.
Arguable premise: It is debatable whether global warming/global cooling/climate change is the result of human activity, there are scientific data and scientists on both sides of this issue. If you accept this arguable premise as true, it is also unequivocal that such climate change is primarily a result of the use of non-renewable energy sources.

If we focus our efforts on renewable energy, we solve both the fundamental problem as well as the climate change problem if indeed it exists.

If we focus our efforts on climate change, we risk solving the wrong problem (or not a problem at all, depending on the outcome of that premise). More importantly, many of the methods being put in place to solve climate change are wrong or short-sighted at best (carbon sequestration, carbon tax trading, Waxman-Markey Climate Bill, etc.).

Regrettably these are politicians and self-serving individuals (not scientists) bringing much more attention to climate change than that of use of non-renewables. Will we look back 50 years from now and have missed the mark?

Institutional Trust

Trust is difficult to establish, easy to fracture, and takes a long time to restore. Media outlets are filled with reports of trusts that has been betrayed by individuals - politicians, school teachers, clergy/pastors/imams/rabbis/monks, spouses, significant others, etc.

Trust betrayal by individuals can be eclipsed by that of institutions - Wall Street, banks and financial institutions, religious organizations, political parties, governments, and, most recently, community service organizations. Regrettably these failures arise more from a shortfall of benevolence or honesty than from a lack of competence. Its apparent when the institution breaks from its core principles of service and instead becomes focused on self-perpetualization of the institution itself. The social implications of such are significant, and can lead to societal decay.

Sometimes trust is so badly broken that the institution must re-birth itself. In the mid-80's Datsun Motors changed its design philosophy and quality targets, changed its name and advertising to re-emerge with its parent company name, Nissan Motors. Most people didn't know that Nissan was once the manufacturer under the Datsun brand.

So who do you trust and why? What institutions do you trust?

When good intentions go bad: The California Solar Initiative

Incentives from the California Solar Initiative reduce the installed cost of a solar system to homes, businesses and government/nonprofit buildings that are connected to the utility grid. This sounds like a fabulous idea...encourage people to install solar on their homes and businesses, make it more financially viable, encourage entrepreneurs to start solar installation businesses. This last point should result in electricians being cross-trained on solar, encourage new solar installers to enter the field, all helping to create a permanent new "green" economy.

The problem is that the solar incentives decline over the 12 month period, such that most of the installations happen in the first 3-6 months and, by the end of the year, companies are laying off solar sales people, installers, etc. Only to get kick started the following January, presuming that the incentives are renewed. That's what happened last year (2008), and it looks like its happening again this year (2009).

Why is this a problem? Would you open any kind of business if you knew in advance that that business would suffer serious decline in the last 6 months of the year? Or that year to year, your business activity is at the whim of a policy analyst? More importantly, would you pay for the training of employees to develop the skills to make that business successful? I wouldn't.

An alternative would be to offer a constant incentive all year long, resulting in a more permanent - and predictable -- business activity. Business owners can then plan - and train new employees - with the knowledge that their business is more predictable.

Are there reasons why its done the way it is? Yes. Are they any good? No.

We want a clean, green economy. We know that entrepreneurship is the economic engine that will fuel adoption of new energy sources. But we permit policy analysts that know little to nothing about running a business to legislate incentives that cause chaos in one of the most promising technologies available to us today.

Jim Hamerly
College of Business Administration, Cal State San Marcos
Board of Directors, cleanventure.org, a non-profit cleantech incubator
owner of one on-grid and one-off grid solar powered home

Delayed gratification: Where do you stand?

You will find it helpful to think about your investment in delayed gratification. If nothing else, knowing this about yourself will help you make better life decisions.

I like to think about delayed gratification in life intervals in powers of ten; for example:
-- 50-100 years (e.g. investing in retirement savings)
-- 5-10 years (investing in your education, physical health, your children, etc.)
-- one-half-to-one year (saving for vacations, going on diets, etc.)
-- 3-6 weeks (planning a day off, an event with friends, etc.)
-- 2-4 days (what you'll plan for this weekend, dinner with friends, etc.)
-- 4-8 hours (how you'll spend your evening after work/school, etc.)
and less than 30 minutes (for those of you with weak powers of delayed gratification).

At this extreme, my dog Gershwin, for example, has a maximum delayed gratification period of about one minute. I can't motivate him to withhold gratification for more than that length of time, no matter how hard I try.

I found out fairly early in my career that I do not like to work on projects that have a 50-100 year time frame or longer. At least one of the graduate research theses that I completed had a challenge with a 100+ year time frame, it was unlikely that I would witness "significant" results in that field during my remaining lifetime. After several degrees and numerous jobs I have settled in on 5-10 years maximum as my limit of "delayed gratification" in a job of project, and am much more comfortable with one-half to one year. There are two reasons for this: (1) I want to see results for my efforts in the fairly short term and (2) my interest level starts to drop after several years, and I want to move on to something else. I'm just not a good long term research person, and that's OK.

Not suprisingly, looking back on my career discover that I have changed my "job" in significant ways about every 3-5 years. I can identify about 10 distinctly different jobs and/or careers in my lifetime. Again, after 3-5 years I want to see measureable results attributable to my efforts and I get bored and want to move on.

Of course, not everything is quite that simple, and most efforts have a combination of short and long-term gratifications. I raise sequoias from seed, and their maturity is definitely in the 100+ year category. I will not live long enough to see the mature trees. However I do have the pleasure of accomplishing seed germination (very difficult!) and seeing them grow in the 5-10 year timeframe. And there is this mysterious often uncharacterized component of delayed gratification that benefits not me, but someone else, namely, those who will hopefully appreciate those trees 100-500 years from now.

So what is your interval of acceptable delayed gratification? And is it aligned with life decisions that you make?

A thought experiment..please consider

Please seriously consider the following: Suppose you went food shopping 4-5 times per month (or whatever interval you normally shop) but only one thing was changed: None of the prices would be posted, and you only had a vague impression that steak was more expensive than hamburger; in fact, you wouldn't know the relative pricing of anything that you bought. At the end of the month, you would receive a bill from your grocery store that summarized your total spending for the month. You wouldn't know the percentage spent on meats, cheeses, milk, vegetables, fruits, bread, chips, salsa,...., anything! Nor would you care enough to change anything.

Sound absurd? Of course!

But that's almost EXACTLY what happens with your utility bill each month. The average utility spending per month is very roughly the same as the average grocery spending per month, but most consumers have no idea how much of it goes to lighting, heating, air conditioning, running a pool filter, powering the computers and TVs in the home, etc.

You probably know where to buy the cheapest gas in your neighborhood, you likely stay on top of the current gas pricing (within a few cents per gallon, or to about 1%). You probably know to 5% the cost of hamburger per pound, and that low fat hamburger is more expensive than high fat.

So we are essentially making bad economic decisions, based on little or no data, and poor consumer education. Think about it.