Building Up rather than Bailing Out

Stephen DeAngelis

November 18, 2008

In my post Green Capitalism and the Map of Grand Challenges, I discussed proposals by individuals like New York Times’ columnist Tom Friedman that the United States take advantage of the current financial crisis to build up a green economy. Friedman notes that the housing bubble is not the first to burst, but that that other bubbles have left us with infrastructure on which future prosperity could be built. He believes that building the infrastructure necessary to support a green economy would not only create jobs now but also good jobs in the future. And the infrastructure that would be built, he claims, would provide a firm foundation for future prosperity. Part of that infrastructure would include improved electrical grids that could support alternative sources of energy and the increased use of electric vehicles [see my post GE, Google, and Grids]. In that post, I discussed how GE and Google are lobbying for public/private partnerships to help strengthen America’s electrical grid.

IBM’s chief executive Sam Palmisano has now weighed in on the subject of building our way out of the current financial crisis [“I.B.M. Has Tech Answer for Woes of Economy,” by Steve Lohr, New York Times, 6 November 2008]. Palmisano’s plan is very much in line with proposals discussed in my earlier posts. Lohr writes:

“I.B.M.’s chief executive, Samuel J. Palmisano, is proposing a technology-fueled economic recovery plan that calls for public and private investment in more efficient systems for utility grids, traffic management, food distribution, water conservation and health care. Recent technology advances make this possible, and the need is apparent, Mr. Palmisano [said] in a speech he is … to the Council on Foreign Relations in New York. Sixty-seven percent of electrical energy, for example, is lost because of inefficient power generation and grid management. Congested highways cost $78 billion a year in squandered working hours and gas burned.”

“Going Green” is likely to be more about finding efficiencies and eliminating waste in our current system than it is in trying to reduce consumption or focusing strictly on the reduction of greenhouse gasses. That is why Palmisano believes we can build our way out of the current crisis. Of course, he plans on making money for IBM at the same time.

“Mr. Palmisano’s speech never mention[ed] I.B.M., but his proposal has a self-serving side. I.B.M. is increasingly playing the role of lead contractor in these so-called smart infrastructure projects around the world, from a traffic management network in Stockholm to electric grids in Texas.”

To be fair, Palmisano is not alone in his assessment — as my previous posts prove. Lohr agrees:

“Some economists and policy experts say similar projects are a good way to improve the long-term health of the economy, potentially providing a foundation for innovation and growth across a range of industries. Applying more computing intelligence to help transform fields like transportation, energy and health care will be ‘critical to solving an array of pressing public problems,’ said Robert Atkinson, president of the Information Technology and Innovation Foundation, a nonpartisan research group. ‘The countries that take the lead in this area will be the nations that enact the best public-private partnerships,’ said Mr. Atkinson.”

I have weighed in before as a proponent of public/private partnerships. Such partnerships help ensure that government policies and private enterprises move in the same direction. The last thing a struggling economy needs is for government and business sectors to be working at cross purposes.

“In an interview, Mr. Palmisano compared today’s economic challenge, in broad strokes, with that faced by the United States as it struggled to emerge from the Depression or after World War II. In the 1930s, he said, the New Deal programs, among other things, brought electrical service to much of country — not only to rural homes, but also to factories, which no longer needed to build their own power plants, as many had previously. After World War II, Mr. Palmisano said, the government’s construction of a national highway system helped create larger markets for goods. ‘We’re at a similar stage now in that these are difficult economic times,’ he said. ‘The right way through it is not to hunker down, but to step up and invest and improve our competitiveness.’ In his speech, Mr. Palmisano points to the technology trends that are beginning to make his proposal possible and affordable. Items ranging from cars, appliances and packaged goods to roadways and utility wires, he says, are increasingly ‘instrumented’ with transistors, sensors and radio frequency ID, or RFID, tags, ‘interconnected’ over the Internet and ‘intelligent’ because of advanced software that communicates with vast supercomputing data centers. In energy, for example, computerized grids, thermostats and appliances can sense and communicate line failures or automatically turn off air-conditioners during peak load times to save money and fuel.”

I discuss smart grids in the post about GE and Google proposals mentioned above. It’s worth mentioning at this point, that the “vast supercomputing data centers” mentioned by Palmisano constitute the core of what has come to be called “cloud computing.” For more on that subject, see my posts entitled The Coming Age of Cloud Computing, The Air is Getting Blurry with Clouds — Computing that is, IBM Heads into the Clouds, and Google brings Cloud Computing to the Masses. Larry Ellison, CEO of Oracle, is not a believer in cloud computing. At a recent conference, he said, “Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish. It’s insane.” [“A Mostly Cloudy Computing Forecast,” by Daniel Lyons, Washington Post, 4 November 2008]. His skepticism, however, is a topic for another time. When it comes to controlling the types of large grids discussed by Palmisano, massive computer power does make sense. Back to Lohr’s article:

“I.B.M., to be sure, is one of many companies developing smarter grids, roads, food distribution and water conservation systems. In the technology sector, Microsoft, Cisco Systems, Hewlett-Packard, Oracle, SAP, Accenture and others are working on bringing computing intelligence to physical systems, Ted Schadler, an analyst at Forrester Research, said. But no other company, he said, yet has the breadth of hardware, software, services and research scientists to tackle these challenges. ‘What seems different and noteworthy about the I.B.M. approach is its sweeping comprehensiveness and message,’ said Rosabeth Moss Kanter, a professor at the Harvard Business School. ‘Putting the pieces together under one inclusive and rather bold label can stimulate discussion and innovation.'”

With a new administration poised to take office, people are looking for the president-elect and other politicians to make good on their promises to help create jobs and support alternative sources of energy. Businessmen, like Palmisano, sense that this moment in history presents a unique opportunity to move in a new direction and they are using public forums to encourage politicians to get on the bandwagon with them. Good businessmen always see opportunities, even when others are embracing fear and caution. Obama was elected because he inspired the same kind of hope in the future that Reagan did in the 1980s. Palmisano, Friedman, and others are hoping that he seizes the moment and builds for the future.