Time to Short Gloom

So after this last week, the one piece of data that came as no surprise is that we’re all depressed about the economy.   A McClatchy Marist poll says 68% of Americans think the worst is yet to come in terms of the economy.  Boy, I hope this is a time when the man on the street is wrong.   Small business owners are split according to an American Express poll in terms of their feeling that their business prospects are about to improve.  The Economist / Financial Times poll of executives at large companies finds less than a quarter of them expect things to get better. 

I mostly talk to small business owners these days.  While I don’t see a statistically significant group, I will tell you the folks I talk to are managing to keep their heads above water.  I guess if you’re still in business after the 2008 crash you’re either really lucky or really smart.  (OK maybe a little of both).  Still, the idea that keeps coming up that makes me relatively optimistic (not a hard spot to find right now) is the ongoing theme of innovation. 

Productivity is down, after having a long stretch of improving.  That means net net employers have to pay more to get output in this economy with lots of unemployment.  Sooner or later that has to translate into either hiring more, or doing things differently.  Which is just another of way of saying innovation.  A Financial Advisor Benchmarking survey shows assets under management by Registered Investment Advisors were up by 20% at the end of 2010.  Now it may be that all those gains are gone after this last week – but the fact is, these advisors can’t let their clients invest in Treasuries with negative yield forever.  The crowd that is stowing cash under the mattress clearly isn’t growing, so sooner or later that capital has to be put to work. 

I don’t want to be too much of a Pollyanna, but necessity is the mother of invention, and it seems the need to figure out a better way has to be at an all time high for most businesses.  That should mean better times are not far away.  I know this has been a long slog, but watching to see businesses that are doing things differently has to be a better use of time than picking where the VIX will be next week.

Think Globally Innovate Locally

I'm prompted to share my takeaways from a Pittsburgh Tech Meet Up event I attended earlier this week.  Dennis Yablonsky, CEO of the Allegheny Conference spoke about entrepreneurial opportunities and challenges in the Pittsburgh region.  As expected he had encouraging things to say about building a local business in the areas of health care, tech and education.  The unexpected twist for me was his tip that advanced manufacturing techniques and energy related businesses are the areas where local entrepreneurs get the friendliest hearing from investors.

Despite Pittsburgh’s collection of prestigious educational institutions,  there’s  a general belief that the kinetic dialogue  young companies need to be on the cutting edge is less available in Pittsburgh than say New York, Boston or Silicon Valley.  I can see the point, but net net I’m not convinced.  If that’s really true I have to wonder how the borderless techie world remains so dependent on chance meetings at Starbucks.  Still, if perception is reality, location is a real road block (thought not a dead end) for tech start ups here.

When it comes to Energy, Yablonsky says the view is different.  He indicated it’s not just Marcellus Shale hysteria, but perhaps the local history of energy business success that makes the difference.   The Conference is such a believer in this idea that they participate in a group formed to promote energy related business development.  The idea is this Energy Alliance can assist in encouraging innovation and linking businesses that can participate in the supply chain for energy.

In addition to his strategic direction for start-ups Yablonsky gave some lessons learned from his experience as a successful entrepreneur.   His “5 commandments for aspiring new business owners” include:

1.  Focus – Do what you do best.  Don’t try to grab every opportunity you see. 
2. Hire people you like and trust.  No one is competent enough to overcome the lack of these key ingredients.
3. Be clear about expectations with your employees.  Reward the good with specific feedback as well as money.  When there’s a problem, detail what needs to happen to fix it.
4. Honesty and integrity are your most important assets.  The cost of a damaged reputation is never worth it.
5. Ask yourself these questions:
   1. What problem does my business solve?
   2. Who needs that solution?
   3. Why will they pay for it?

So between bites of pizza I promised myself I would bone-up on energy and research related tax credits and look forward to preparing solar battery powered financial statements for VC review.