Dear Reader

Business Development is a complex topic. In such case the questions raised are more important than potential answers. Therefore, this blog will focus on presenting questions. There will be answers, full or partial, to be supplamented by links presented when relevant. The answers from my experience will be clearer once the questions are clearer.

While this is not a discussion forum, readers are invited to comment, and the comments will help determine the topics and current issues to be explained in the future.


Monday, September 16, 2013

Spanish research policy – is that the real problem?

In a recent article published by the Guardian, the sad story of the last two years in the life of Spanish Research are being told, with the recommendation: " Spain urgently needs an internationally credible science policy", which also serves as the title for the article. The gist of the article by Amaya Moro-Martín, is the following: 1. Spanish research funding has been cut severely, Spain is failing to meet EU research investment standards; 2. Promised funds have not been forwarded; 3. Research institute reserves have been used for daily expanses instead of investment in research; 4. Research positions are being lost and the research community is aging; 5. A credible research policy combined with a restructuring in government and a national research agency will solve most problems. The article raises a serious issue one that could, due to damage to international standing Spain in research, brain-drain to other countries and reduction in R&D investment damage the economy to an extent that will take a long time to recover. The article ignores to a certain level the EU commitments of Spain and the impact the events described have on the EU general goals. In Barcelona (part of Spain?) the EU declared the Knowledge Based Society as it target, and set quantitative goals for it. The picture described in the article gives the impression that Spain at least may have given up on the Barcelona Declaration. I would like to contest the title of the article. Why is an international credible policy required? The international aspect is a small issue compared to the national credibility issue discussed in the article. Brain drain, lack of R&D investment, delaying projects etc. are firstly a national problem. There is more, a policy is only good if you can make sure it is implemented. Regarding R&D, EU policies and member states included, do not have a shining history when it comes to implementation. The R&D goals have been moved due to none compliance of member states. So what will change? What will permanently change so that future governments restructure and changes in the freedom of councils cannot change? The article offers going back to the situation of 2009, and what from there? How would you prevent 2013 from happening again? Unlike the Guardian I do not think that policy making with or without financial power is the long term answer. But there is another issue that I wish to discuss, how could the government do it? Not morally, but in fact, how could they get away with it? Living in a country with a fuzzy if at all research policy, such a thing could not happen here as both research organizations and the industry would not allow the government to do it. The strongest friend of Research in Israel is the industry. It feeds on it, it requires it for the industry's future development, and it is these sectors which will not allow such a decline. Moreover, over 70% of Israeli R&D investment is private. Therefore, at least to some extent, any government reduction in R&D funding would be taken up by the industry. This is the long term answer. The Spanish research sector has failed to integrate itself with the industry, make it its partner in economic development. Any of the steps mentioned in the article would probably solve the current situation and allow some respite, but unless the Spanish research community finds its way to cooperate and make itself indispensable to the Spanish and EU industry, it will remain open to danger from restructuring, government cuts etc., the respite the steps mentioned can bring is dangerous as it may tempt the research community in Spain to think all is well and not prepare for the future.

Sunday, July 7, 2013

Basically Flawed

The New York Times published an article regarding the Irish bank bailout  in which it states:" The Irish bank bailout in the fall of 2008 was the first one to hit a euro zone country during the credit crisis, and it set some unfortunate precedents. Now we learn that it was based in no small part on manipulative lies by venal bankers."

While the article raises some interesting question regarding the specific case, I would rather discuss the more general case of disaster decision making process.

In the above mentioned case it would seem that there is a mix of hindsight and indignation regarding the action of the government. There were many things that were not known or were misrepresented to the government. However, that does not make the decision taken at the time wrong or even irrational. Based on the information available at the time, the way it was represented and the context of world events it would seem that the decision may have had some merit.

The second point relates to the infrastructure. In the article it states:" Regulators were clueless, or worse, about what was actually happening. There seems to have been no one in the government who was truly familiar with the bank. Outside experts were called in, but it is not easy during a crisis to evaluate something from scratch."

The fact that the government and specifically the national bank was not familiar and could not itself get the necessary information in time and clearly to be able to assess independently the real risk, its origins and recommend a course of action, is the main problem.

The EU is fond of identifying "Market Failures" – but here we have a "Governance Failure". For it would seem that there must be something wrong in the governance procedures that allow a bank to become so big, its failure would negatively impact the national economy, and yet there would be no effective control, or monitoring mechanisms in place allow the government to assess the situation. If you believe in the free market completely, and allow the market forces to play, than indeed you can claim there is no need to monitor, to control or to follow up. But then, you should not be expected to bailout the institution, but rather let the same market forces lead it to its destiny.

My claim is the following, if there is a potential danger to the public good, from a sector, or specific organizations, the government, as part of its responsibility to the public should ensure that there are procedures in place, that will allow it either to avert the danger or, (if not liberal enough) at least allow it, in times of crisis to identify the problems including their magnitude and potential impact, in order to take the right steps to protect the public. According to the article such procedures were not in place at the time (are there such procedures now in place?), and therefore the situation was skewed from the start.

The criminal aspect is not discussed here, and the real impact of what will happen now to the German support from that aspect is again not discussed here. However, while one cannot change the past, one can learn from it. I would imagine that procedures in place that would prevent such occurrence again would be more important than allocating blame.