Investing Our Way out of the Crisis: the Ben Rosen Model

 September 25, 2011

Resolving the EU’s debt crisis might be affected by political indecision. America’s economic recovery, however, is affected by political infighting and proposals of Keynesian-style stimulus packages that have no chance of being adopted by Congress and are inappropriate at this junction in time. The lessons of the 1980’s recovery could help end the current policy paralysis in Washington

The news that Steve Jobs has left Apple due to illness has brought to mind another outstanding American entrepreneur I have actually met in Sydney in 1985, the one and only Ben Rosen. At the time, I was a very young marketing and sales consultant at ComputerLand, promoting the products of a PC industry still in its infancy.At the beginning of the 1980’s when the microcomputer revolution started, the Anglo-Saxon world was going through a severe recession. To reduce unemployment, the Australian Labour government invested heavily in retraining the unemployed, enabling many, including myself, to get jobs in high tech industries – an area of the economy hitherto closed to them due to lack of adequate skills. Ben Rosen came down to Sydney to talk to us about the virtues of a new relational dbase product – Paradox – he happened to be involved in at the time. He was jovial, friendly and unassuming. His venture capital company had made Compaq Computers the most successful company in capitalist history and he was also behind the huge success of the Lotus 1-2-3 spreadsheet package. In fact, many of today’s hardware and software companies that are the pride and glory of Silicon Valley could not have seen the light of day without his stewardship and money. To be sure, the US federal government did its bit and helped the microcomputer industry take off, as it became its most important buyer, seconded by universities all over the country. As a graduate of the prestigious Caltech Institute and the holder of a Master’s in Engineering science, Ben Rosen decided to work on Wall Street as a technology consultant. He was known to carry around to his clients an Apple IIe computer and was eager to invest in the first-ever portable microcomputer, Compaq. Unlike today’s Wall Street advisers who prefer to recommend various speculative investments to their clients, he made his reputation and money the old-fashioned American way, that is by investing in start-ups and asking his friends and clients to do the same. Together with his brother, he also invested 24 million dollars of his own money in the production of a clean car engine, a venture that did not find favour with US car manufacturers at the time. Today, when neoliberal economics have been thoroughly discredited, the work of Ben Rosen the entrepreneur and investor should become a model to be emulated. The presence of too many MBA graduates specialising in financial transactions and the relative scarcity of technology consultants, such as Ben Rosen, underpins America’s current predicament. As matters now stand, the US economy has all but hollowed out, deriving more than 35 percent of GDP from financial transactions, including speculations. Naturally, there is a way back from the brink, if only the US’ two major parties could put ideology aside and work together with the private sector in addressing the ills of the American economy and the plight of the unemployed.

The E-G8 Deauville Summit

 May 31, 2011

As a regular user of internet services as well as a content provider, I was very interested in last week’s e-G8 summit. The idea of bringing together the chieftains of the internet industry and the world’s most powerful political leaders seems a step in the right direction. The internet as a platform and applications such as social media have an awesome power to help people network,educate themselves and even promote major political change, as the unfolding events in the Arab world illustrate. As always, however, along with great power comes great responsibility.

If during the ’90’s hopes of a new frontier in business development via e-commerce have somewhat evaporated in the wake of the dot com bubble, academic research, political awareness or activism and some areas of the mass-media have benefited enormously from the IT revolution.

This is not to say that all is well in the virtual world. The relative absence of adequate regulation protecting personal data and the confidentiality of communications / business transactions is sapping users’ confidence. The fact that executives of internet companies resist the introduction of minimal norms and regulations governing further development of services proves that neoliberalism is still affecting the mentality of many – albeit not all – in the business community. J.A. Schumpeter, the noted Harvard economist otherwise known for his professional admiration of American corporate achievements, was nevertheless in favour of the introduction of laws and regulations governing innovations and business development in general. To make his point, he used an analogy from the car industry, demonstrating that automobiles have been able to reach ever-increasing speeds only after being equipped with adequate brakes and safety features, which had to be developed first.

As matters now stand, however, intellectual property rights are trampled upon by “content farms”, children are exposed to pornography, and governments, from the US on down, can unlawfully obtain data from personal emails and have access to confidential files on a regular basis. As a consequence, the cyber world looks more as if it were governed by the laws of the jungle than those of civilised states protecting their citizens from harm or legal abuse.

One issue that has not been discussed so far at e-G8 is the hegemonic position achieved by the United States due to its status as the global communications hub. In the long run this has to be addressed in a way that could relieve the national security concerns of European, as well as Asian governments. As the recent financial crisis has shown, America’s position as the centre of both global finance and global communications by no means guarantees the integrity and smooth functioning of the two systems, on the contrary.

The EU’s political leadership also has to investigate why the invention of the internet by local specialists was not followed by a development of applications for it. Lack of technological savvy is surely not one of the reasons. It’s a sad spectacle to witness the fact that even the most mundane applications such as operating systems for PC’s and leading edge word processors, not to mention search engines or efficient email services come from the United States. Instead of endlessly dragging Microsoft through the European courts, it might prove a better idea to provide financial and tax incentives to interested European e-entrepreneurs or existing IT corporations to develop home-grown IT products for the 500-million strong European market.

From an international relations perspective, “the real problems of the post-cold war world would not be challenges for hegemony, but the new challenges of transnational interdependence” (Joseph Nye Jr, The Changing Nature of World Power). The political leaders of the G8 proved that they are aware of this fact. It is now up to the executives of the internet industry to grasp it and live up to their many responsibilities. (sources: Dow Jones newswires, WSJ, France24)