The Conundrum for Innovation

Innovation is the solution to our most serious problems. We must do more with less in new ways . However, there are significant impediments to innovation as author and entrepreneur Sramana Mitra pointed out in her recent article an Innovation Conundrum. Much of this relates to the distortion of the relationship between risk and return.

Our capital system is a case in point: it compensates speculators disproportionately above creators. Compounded by significant risk-aversion, venture capitalists are acting like bankers, and Wall Street remains obsessed with quarterly results discouraging long term R&D. Hardly an environment for innovation. In distributing capital the middle men of Wall Street have been grossly over compensated for the service they provide - taking one group's money at one price and selling it to another group at a higher price. VC’s had been getting outrageous compensation in management fees, even when generating negative returns. As with many industries this is unsustainable because there is no value being generated. More importantly it drives away the opportunity for innovation because the need for immediate return and payment of middle men trumps the patience development requires and the rewards given to those who create it.

Eric Benhamou, former CEO of 3com recently commented that, “The preferred, risk-limited model of the venture capital industry will leave many important problems unsolved, many large-scale opportunities unaddressed and many radical innovators unfunded.” However, there is hope.

"A willingness to take intelligent risks and try something new is critical to both innovation and entrepreneurship. But the last decade has seen an increasing focus on short-term returns through risk taking without questioning or transparency to even understand the real level of risk. As a result, we replaced the foundation for real economic growth with the illusion of prosperity," writes Judy Estrin, a long-time entrepreneur and author of Closing the Innovation Gap. In the end a new system will emerge with the rewards of prestige and money increasingly going to the value creators, not the speculators. See Judy's brief outline of thinking about the Innovation Gap.

What is So Great About Private Health Insurance ? Ask Wendell Potter

Most significant challenges deserve objective analysis based on economic principals. Supply and demand being at the core. Things costing to much ? The explaination is usually a lack of competition or artifical restrictions among alternative options for buyers. Not enough supply ? Barriers to entry , government restrictions or diminishing prospects for profit can be at the root. Interestingly, when it comes to health care what people pay for and what they get is at the core of the problem and private insurance intermediaries are profiting from market inefficiencies. In the end the private for profit insurance industry delivers no real or sustained value and this is central to the health care crisis because they slice the pie with the main objective being their profits, not a uniform allocation of risk and costs among populations to make the cost for all lower. This runs counter to the purpose of insurance, particular for a risk that we all are subjected to, our health. This is why the public option being debated in Congress isn't the answer to impact costs and coverage; what is is universal coverage that eliminates private insurance.

Recently Wendell Potter shared his views as a high ranking former insurance executive. During Congressional hearings in June 2009 he reminded us all that health insurance executives had assured Congress in 1993 they would work to secure universal medical coverage and end denials of coverage to people with pre-existing conditions. Then they moved heaven and earth to kill reform. They've made the same promises now, Potter observed. But they're in an even better position to throttle reform. Mergers and acquisitions have turned the industry into a cartel of huge corporations.

"The industry is bigger, richer and stronger, and it has a much tighter grip on our healthcare system," he said. "The last thing they want is a government program set up as their competition."

See Potter's interview on Bill Moyers Journal wherein he describes the realities of the health care insurance business.

If Potter's observations aren't enough, read the Los Angeles Times' Michael Hiltzik's recent article What's so great about private health insurance?: The bloody battle in Congress over a 'public option . In it he explains some basic facts.

The firms take billions of dollars out of the U.S. healthcare wallet as profits, while imposing enormous administrative costs on doctors, hospitals, employers and patients. They've introduced complexity into the system at every level. Your doctor has to fight them to get approval for the treatment he or she thinks is best for you. Your hospital has to fight them for approval for every day you're laid up. Then they have to fight them to get their bills paid, and you do too.

People should remember what the health care nightmare in the U.S. really involves. Insurers are part of the problem, not the solution. That observation is nothing but straight forward economics.

Toffler and the Revolution

Gregory Mantell's interview of Alvin Toffler relating to he and his wife's latest book Revolutionary Wealth addresses a series of notions including the intangible nature of knowledge and its reprecussions to wealth and his prediction of a series of "Institutional Katrinas", where businesses, governments and educational systems will catastrohpically fail in delivering on promises. Watch the interview.

Pollan and Kenner WNYC Radio Interview on Food

Author Pollan and Director Kenner talk on WNYC Radio about US food policy. For the complete interview listen here. Each synthesizes the idea of how flawed food policy is based on a past paradigm of scarcity of calories as the key obstacle; thus leading to a strategy of subsidizing corn and soy production which serves as the foundatio of our centralized fast food nation.

Serve Up Food Inc.

Michael Pollan, award winning author of a number of books including best seller The Omnivore's Dilemma is featured in the just released movie Food Inc.. No sphere of our world is protected from the impact of the revolution, least of which is the food industry as this documentary shows. You'll never look at food the same again. The need to decentralize our production and consumption of food has never been more evident.