The number of involuntary underemployed was essentially unchanged (increased very slightly). The somewhat worrying part, however, is that slack work increased. This may be a reflection of slowing demand - or simply a statistical correction taking into account last month's large decrease.

UPDATE: This story ran in the morning edition of the Washington Post (before the data was released) "Modest gains forecast for Jan. jobs report":

With the government's monthly unemployment report expected Friday, economists predicted it will show that the United States added about 150,000 jobs last month, sustaining a modest momentum in the economy.
The emphasis might be on modest.

When new technologies change the world, some companies are caught off-guard. Others see change coming and are able to adapt in time. And then there are companies like Kodak -- which saw the future and simply couldn't figure out what to do. Kodak's Chapter 11 bankruptcy filing on January 19 culminates the company's 30-year slide from innovation giant to aging behemoth crippled by its own legacy. (emphasis added)

So here is the epitaph for Kodak: created the future; couldn't adapt.

The nation is producing more Ph.D.s in some fields than there are jobs, or at least jobs that graduates want and are being trained for, and the imbalance is likely to get worse. This may be especially true for biomedical research, but it is a problem for some other fields as well. The nation may need more scientists and engineers, even Ph.D.s, but not in all areas. There are policy options that could be employed, but they are not easy. Given the rapid pace of change in this age of technology, it is simply not possible to predict what the specific needs will be 20 years from now. The ability of the United States to continue to be a world leader in technological innovation will depend not only on having the necessary technical talent, homegrown and from abroad, but also being able to retrain and redirect that talent in response to new developments.

Those may be bad assumptions. It is time to take a close look at the issue of life-long learning in the STEM fields and the process of redeployment of STEM talent. Maybe we need a new set of policies for mid-career STEM professionals - to be able to move in new directions. Dr. Lane has done us a service by raising the issue. Now the scientific community needs to follow up.

On a recent visit to a company that makes equipment pipes and tanks for biotechnology companies, she [MIT professor Suzanne Berger] found that a quarter of the company's revenue comes from repairing and servicing the equipment. "What we're discovering is that this connection between manufacturing and services is an integral one," Berger says. "A set of capabilities is gained in making products that then get redeployed in the service part of a business."

BTW -- the story opens with another vignette of a factory visit by Professor Berger:

As she saw on the factory floor, the company has developed an innovative automation system that has increased its business: Between 2004 and 2008, its revenues doubled, and its workforce did, too. (emphasis added).

Facebook, the vast online social network, is poised to file for a public stock offering on Wednesday that will ultimately value the company at $75 billion to $100 billion, cashing in on the fuel that powers the engine of Internet commerce: personal data.

If Google's search engine cast the Internet as an instrument of solitary exploration, Facebook requires its users to share what they do with their Facebook "friends." In some ways, the Facebook offering is a test of how valuable the social model of the Internet could be.
. . .
While advertising is its bread and butter, Facebook has sought new sources of income by becoming a place where goods and services are bought and sold, whether it is virtual farm animals or real concert tickets.
Analysts expect Facebook to be the driver of more such transactions, using the persuasive power of Facebook "friends." Company officials use the word "frictionless" to signal that whatever you watch, read, listen to or buy on Facebook or its partner sites can be displayed automatically for the friends of your choosing.

He doesn't get in to a lot of detail in the article about reporting of intangibles. But he does advocate the use of pro-forma accounting as a compliment to the required GAAP accounting:

I see nothing wrong with managers' honest attempts to improve on GAAP earnings by releasing alternative numbers, particularly after the 2003 SEC requirement that non-GAAP measures included in earnings releases and statutory filings be reconciled with GAAP numbers. Because pro forma earnings are disclosed along with, not in lieu of, GAAP earnings-- and the differences between the two measures are highlighted--investors cannot be worse off with pro forma earnings. On the contrary, they are better off.
. . .
GAAP is particularly deficient at satisfying investors' information needs about "change" companies. These include innovative, intangibles-intensive enterprises; high-growth and early-life-cycle businesses; and organizations undergoing strategic restructuring. If your company has any of those characteristics, you should give serious thought to systematically releasing pro forma earnings and other non-GAAP information, such as the number of patents granted during the period specified, the churn rate of customers, and the gains from online activities.

I would go a little further and argue for some standards on that pro-forma accounting - so that it can be used to make year-to-year, company-to-company, and industry-to-industry comparisons.

But I like the strategy of going around the deficiencies of GAAP accounting using the allowed mechanism of pro forma reports.

1) money seems to be chasing ideas (good, bad or indifferent):

Some investors no longer even need to hear about a company to hand out money. Jakob Lodwick, an entrepreneur and co-founder of Vimeo, recently raised $2 million simply on the promise that he might have a good idea for a company in the near future.

2) VCs seem to be playing games as to what they are really backing:

Paul Kedrosky, an investor and entrepreneur, explained in an interview that one reason valuations are so wildly inflated is that venture capitalists want to be associated with a potentially successful start-up just so it looks good in their portfolio. This, he said, has driven absurd buying on the secondary private market, where stocks are bought and sold before a company goes public.
"There is massive buying on the secondary market by venture guys just for the showmanship of it," he said. "These buyers are much less price sensitive and just want a company in their portfolio so they can stick the logo on their Web site."

3) smart money seems to be betting against the VCs:

"I have never seen such a generation of people shorting tech stocks," Mr. Kedrosky said, noting that he too has chosen to bet that Groupon, Zynga and LinkedIn will fall significantly in value. "Usually the short community is more nervous about it, but there is a monolithic view that this generation of technology I.P.O.'s is completely broken"

Not a good state of affairs.

And I would note that this is the "advanced" estimate of GDP. It is subject to revisions, to be release on February 29 (second estimate) and March 29 (third estimate). So the number will change - guaranteed.

By the way, the same thing happened yesterday with respect to the Index of Leading Indicators -- as the Wall Street Journal reported: "The December increase was half the 0.8% increase expected by economists surveyed by Dow Jones Newswires, but the index has increased for three consecutive months, indicating a strengthening domestic economy, the [Conference Board] report said."

Maybe we should stop asking economists for their predictions.

I will stick to what the numbers say, not economists guesses as to what they might say. The economy grew by a modest but increasingly larger amount in the 4th quarter of 2011. And the biggest drag on the economy was the cuts in government spending.

"The future of the U.S. economy is knowledge intangibles. This is where we enjoy a competitive advantage second to no other nation. Yet we continue to cling to industrial-era conventions that ignore and devalue these critical assets," explained Mary Adams, co-chair of the advisory board, principal of Trek Consulting and author of Intangible Capital: Putting Knowledge to Work in the 21st Century Organization. "Athena's work is unique in helping promote approaches to management and innovation that will tap the intangible capital lying fallow in American communities and companies."

The mission of the Advisory Committee is to expand Athena Alliance's understanding of these changes taking place in the US and global economy and to offer ways to meet the economic challenges arising from the emerging interconnected knowledge intensive world. With the advent of the new year, the Advisory Committee is aggressively starting to build support for the policy issues that will drive positive change and to create collaborative relationships and develop partnerships to bring national attention to the critical issues surrounding intangibles.

"Now is the time to take the work of the Athena Alliance to the next level," said Andrew J. Sherman, co-chair of the advisory board, partner at Jones Day and author of the newly-released Harvesting Intangible Assets. "The proper management and harvesting of intangibles can be an engine for job growth and economic recovery, at a time when all companies and the government need to be capital efficient in its strategic planning."

The Committee members comprise a wide range of individuals with hands-on experience with the measurement, management and monetization of intangibles.

"The Advisory Board will significantly advance Athena Alliance's programs as it reflects a broad spectrum of individuals from a variety of backgrounds and experiences," said Richard Cohon, Athena Alliance's Chairman of the Board. "These Advisory Board members have proven track records of understanding and utilizing intangibles assets to create competitive advantage and finance innovation."

Advisory Committee Members: (affiliations for identification purposes only)

Mary Adams, ICapital Advisors -- co-Chair
Mary Adams is a co-founder of Trek Consulting, co-author of the breakthrough book, Intangible Capital: Putting Knowledge to Work in the 21st Century Organization and founder of the 300+-member ICKnowledgeCenter on-line community. Prior to co-founding Trek in 1999, Ms. Adams worked for 15 years in high-risk finance at Citicorp and Sanwa Business Credit.

Andrew Sherman, Jones Day - - co-Chair
Andrew Sherman has served as a legal and strategic advisor to dozens of Fortune 500 companies and hundreds of emerging growth companies. The author of 17 books on the legal and strategic aspects of business growth, franchising, capital formation, and the leveraging of intellectual property, his latest book is Harvesting Intangible Assets.

Joe Dyer, iRobot
Vice Admiral Joseph W. Dyer (U.S. Navy, Ret.) oversees operations at iRobot as Chief Operating Officer. He came to iRobot in 2003 from a career in the U.S. Navy where he last served as the commander of the Naval Air Systems Command, where he was responsible for research, development, test and evaluation, engineering and logistics for naval aircraft.

Gabe Fried, Hilco Streambank
Gabe Fried is the CEO of Hilco Streambank, the intangible asset valuation and disposition arm of Hilco Trading LLC. Mr. Fried has authored numerous articles for the Turnaround Management Association and American Bankruptcy Institute and is frequently a panelist for both organizations.

Allen Howell, Corporate Flight Management
Allen Howell has been in the aviation industry for 30 years, and for the last 13 years, he has been at the helm of Tennessee-based, Corporate Flight Management as its CEO. In 2011, he launched Social Flights, which markets private aviation flights through Web 2.0 social technology.

John Hudson , Deloitte
John Hudson is a Senior Manager in Deloitte Financial Advisory Services LLP with more than fifteen years of experience valuing businesses and intangible assets.

Don Kuratko, Johnson Center for Entrepreneurship & Innovation, Indiana University
Dr. Donald F. Kuratko ("Dr. K") is The Jack M. Gill Distinguished Chair of Entrepreneurship; & Executive Director of the Johnson Center for Entrepreneurship & Innovation at Indiana University. Professor Kuratko has authored 28 books over 180 articles on aspects of entrepreneurship and corporate innovation.

Bob Laux, Microsoft
Bob Laux is the Senior Director of Financial Accounting and Reporting at Microsoft Corporation where he interacts with and responds to accounting standard setters on numerous issues. He was an Industry Fellow at the Financial Accounting Standards Board working on emerging issues. Before that, Mr. Laux spent eight years at General Motors managing their external financial reporting.

Jim Malackowski, OceanTomo
James E. Malackowski is the Chairman and Chief Executive Officer of Ocean Tomo, LLC, an integrated Intellectual Capital Merchant Banc™ firm. Mr. Malackowski is a member of the IP Hall of Fame Academy and is currently the President of The Licensing Executives Society International, Inc. He began his career spending fifteen years as a management consultant and forensic accountant focused on intangible assets.

----------------

The Changing Frontier: Rethinking Science and Innovation Policy

With the 1945 publication of Science: The Endless Frontier, Vannevar Bush established an intellectual architecture that helped define a set of public science institutions that were dramatically different from what came before yet largely remain in place today. Now, at the start of the 21st century, many aspects of the science and innovation system ­ from its organization and scale to the role of geography, networks, and legal institutions ­ have witnessed important changes, with potentially substantial implications for the design of science policy and institutions both today and in the decades ahead.

With funding from the National Bureau of Economic Research and the Erwin Marion Kauffman Foundation, the conference and subsequent volume will explore two overarching questions: (1) what are the critical dimensions of change in science and innovation systems, and (2) what are the implications of these changes for policies and institutions in the 21st Century?
Topics of interest include, but are not limited to:

* The influence of increasing market scale and globalization on the demand for and supply of innovations;
* Innovation in financing, such as venture capital, and the role of entrepreneurship in driving innovation;
* Changes in the knowledge production function, including the human and physical capital intensity of R&D, changes in the salient features of the scientific workforce, and the implications of new research tools;
* Shifts in the geography of R&D, including regional and international dimensions, the implications of shifting geography for where the returns to R&D are captured, and analysis of the evolving forces that shape agglomeration and collaboration tendencies;
* Changes in intellectual property regimes and their use, with particular reference to its impact on licensing and alliances;
* Changes in public views of science;
* How information technology and digitization are impacting the production and diffusion of knowledge;
* The evolving roles of different research institutions (including government agencies, universities, and the private sector) in regional, national or global innovation systems, including changes in the relative scale of these types of institutions, the organizational forms these institutions take, the incentive mechanisms these institutions provide, and the ways these institutions interact;
* Unique features of "new" innovative sectors (e.g., biotech, clean energy, nanotech, and mobile broadband) and any implications for innovation policy; and
* Interactions among the above.

This list of topics is intentionally broad and open-ended, and is meant to simply highlight some of the many possible areas witnessing substantive changes in the science and innovation process that may also raise important questions for policy and institutional design.

Interested authors are encouraged to submit a 2-page research proposal that includes an abstract of the intended paper, an outline of the methodologies to be used, and a brief statement about the current state of the research project. The research proposals are to be submitted by April 15, 2012 to http://www.nber.org/confsubmit/backend/cfp?id=RSIPf12. Accepted papers will ultimately be published together in an edited volume.

Authors will be notified of acceptance by May 6, 2012. A pre-conference is scheduled to be held in Cambridge, MA on October 26 and 27, 2012, and the formal conference will be scheduled for summer 2013. Authors of accepted papers will be reimbursed for regular transportation expenses for both the pre-conference and conference, and receive an honorarium of $7500 for timely submission of the draft and final manuscripts.

Conference Organizers

Adam Jaffe, Brandeis University and NBER & Ben Jones, Northwestern University and NBER

Here is a perfect example of how he misunderstands. Yglesias states, "Indeed, even in the fabled industrial juggernaut of Germany, 68 percent of the population works in services." Of course. It is that "industrial juggernaut" that supports those services jobs. And many of those "services" jobs are actually part of the manufacturing process. And that the Germans are light-years ahead of us in figuring out the fusion between manufacturing and services.

With muddled thinking like this that passes for "expert analysis", no wonder we can't make any headway in the public debate.

In an interesting twist, the White House has prepared a slideshow to accompany the speech and a background paper on the economic policies -- Blueprint for an America Built to Last. Unfortunately, both the speech and the Blueprint did not break any new ground when it come to innovation. The President reiterated his support for small business and entrepreneurship, for basic R&D and for clean energy technologies. In this time of tight budgets, such a limited set of proposals may be all we can realistically expect. And even there, we may not get all that is needed (for example in the R&D budget).

So the fight continues.

We need to increase our investments in basic research, education and infrastructure - and bring back manufacturing.

As I've noted before, that is all well and good. But here is what I would like to hear next (using my wording from a number of reports and posting on this blog I've written over the past few years):

This is not the first time we have faced economic challenges. In the 1980's, the U.S. confronted a series of challenges to our economic competitiveness. By working together, we overcame those challenges. We can do the same today.

But we need to recognize that today's challenges are different. The nature of our economy has changed. We are still an economic powerhouse. We need to understand the new environment in which we find ourselves.

Back in the 1980's, we faced global competition in goods and loss of domestic manufacturing firms; now it faces the fusion of manufacturing and services and the opening to international competition of services sectors once thought immune to such challenges. Then, the operating issues were quality and productivity; now they are customization, speed, and responsiveness to customer needs. Then, a key concern was creating a flexible and educated workforce; now, in addition, we must foster an educational enterprise that can provide the constantly changing skills required in a knowledge- and information-intensive economy. Then, the main financial challenge was reducing the cost of capital; today's equivalent challenge is unlocking the value of underutilized knowledge assets and ensuring the efficiency and stability of the global financial system. Then, the policy problem was raising awareness of the importance of international trade; now it is crafting policy appropriate to an increasingly globalized and interconnected economy.

In the 1980s our focus was on individual firms and industries; now we must find ways of sustaining networks of firms and of adopting new business models. Finally, these problems and challenges, as well as myriad new ideas and technologies, are rapidly sweeping across the domestic and international economy. Their speed requires that U.S. industry, both manufacturing and services--as well as the suppliers of financial, scientific, and human capital--have the capabilities and resources necessary to prosper and grow in this new environment.

Basic research helped sustain America's economy growth in the 20th Century. But basic research is not enough. It is one part of a the larger mix that fuels the economy. We moving to a post-scientific economy where, to quote Dr. Christopher Hill, former Vice Provost for Research at George Mason University, "the creation of wealth and jobs based on innovation and new ideas will tend to draw less on the natural sciences and engineering and more on the organizational and social sciences, on the arts, on new business processes, and on meeting consumer needs based on niche production of specialized products and services in which interesting design and appeal to individual tastes matter more than low cost or radical new technologies."

Education needs to move from the classroom to the living room. Life-long learning should not be a slogan but an ingrained part of everyday life. And as important as STEM is, our economic future is not solely in the hands of our scientists and engineers. Our future prosperity rest on raising the skills and knowledge level of everyone. Productivity no longer comes just from new machines, but from new ways of organizing work. And as Professor Jamie Galbraith once said "American competitiveness depends at least as much on style, design, creativity and art - and especially on the liaison between technology and art."

And let us be clear. The manufacturing jobs of our father and grandfather are not coming back. But we can create the manufacturing jobs for our children and grandchildren. We cannot -- we will not -- compete on the basis of a race to the bottom where wages and living standards are lowered to keep jobs from moving elsewhere. We can - and will -- compete based on raising the knowledge content of our products -- both goods and services.

We need to create new policies to confront our new challenges. Government can play a major role in innovation and the development and diffusion of new products. But, innovation policy needs to catch up to the innovation process.

In crafting a new policy, we must recognize three points:
 • the innovation model has changed,
 • it's all about people and organizations, and
 • technology plays multiple roles.

First, we all need to recognize that the innovation model has changed. It is not the linear process of flowing from basic research to final product that sticks in everyone mind. It is a network process. There are many points on the network where innovation can come from. We have used a number of terms to try to describe parts of the new model: "open innovation," "user-driven innovation," and even "design thinking."

It is also not solely about technology. Technology remains an important component. But, as noted earlier, social innovations, marketing, finance, design and business models are also key sources of innovation as well.

Suffice it to say that innovation policy needs embraced this broader concept.

Second, innovation is about people and organizations. Skills, not just education, are critical. Likewise, both tacit and experiential knowledge, not just codified and science-based knowledge, are also important. In order to put those skills and knowledge to proper use, organizational structure comes into play. The old hierarchical systems of the industrial age are no longer adequate or appropriate. New adaptive organizations which encourage innovation are needed. What we use to be called "High Performance Work Organizations" are needed to effectively utilize worker skills and knowledge.

Finally, any innovation policy needs to understand that there are multiple roles for technology. Technology can be a driver of innovation, a tool of innovation, and even sometimes not all that that relevant to innovation. As a driver, the creation of new technology is a major source of innovation - the kind we normally think of when we use the word "innovation."

But technology is also a tool in the innovation process. Technology as innovation tool works in two ways. One is innovation as the absorption and utilization of technology. For example, the iPod contained no new technology. It utilized the technology in a new way. The other is technology as an enabler. This is especially true in the information technology (IT) area, where IT allows for a myriad of new applications and innovations.

Take the analogy of the railroad. The marrying of the steam engine to a carriage on iron rails brought about far reaching changes in many difference areas. The railroads spurred on development of a number of other industries, most notably the steel industry. They changed opened up vast new markets and changed the retail and wholesale industries. They even gave rise to new management practices and the shift from ownership capitalism to managerial capitalism.

And sometimes technology plays a very minor role in innovation, if at all. Which was more important in creating the American suburbs: the automobile, Levittown or the 30 year mortgage? One was technological; one was design; one was financial. All were important. As a nation we need to recognize and promote multiple forms of innovation.

So here are some policies I plan to put forward. The new demand driven model innovation shows that government procurement and regulations can drive innovation. Government as a demanding customer can create the "thin opening wedge" -- new products and services that have a specialized use. Once that specialized use is established, the product or service can be refined and adopted to a broader customer base. The demanding customer in fact becomes a co-creator. Smart regulations can serve the same function by creating demanding customers.

Here is another example of how we can expand our thinking on innovation. We have a program to create and fund Engineering Research Centers (ERCs) in a number of areas. We should create one for design thinking. We should expanding the ERC model to funding research on and demonstration of new business methods and organizational mechanisms as part of our "Catalyze Breakthroughs for National Priorities" element of the innovation strategy. And we should fund more organizationally-focused challenges, such as the famous DARPA "Red Balloon" challenge.

These are but few of the types of new policies we will pursue -- beyond the status quo and conventional thinking that government should confine itself to basic research, education and infrastructure. That might be uncomfortable for some to hear. But it is where we need to go if we are to restore long term economic prosperity in this highly competitive global economy.

That is would I would like to hear (or a variation there of). If the President hits any of the major points, however, I will be happy.

Over the weekend, it appears that that the specific issue of this area (know as Grant Memorial or Union Square) has been resolved. According to an email to Washington City Paper from the Senate Sergeant at Arms, the existing policy based on the Park Service policy will continue for 90 days while the powers-that-be look into the situation. The expectation is that the current policy of allowing filming will continue. I say "powers-that-be" since the leadership and institutions of both the House and Senate are involved (AOC, Capitol Police, Senate Sergeant at Arms, House Sergeant at Arms and their respective House and Senate oversight committees).

I hope, per my earlier suggestion, that the powers-that-be will use this review to the entire policy toward the management of the U.S. Capitol as a filming site. I would note that the Agence du patrimoine immatériel de l'État (APIE) -- the Agency for Public Intangibles of France last April published a guide for agencies and local authorities for managing filming in public spaces. We should do the same -- including filming at the U.S. Capitol.

Now we are beginning to see the same phenomena with 3D printing. In numerous earlier postings, I've talked about how 3D printing (or "additive manufacturing") is becoming a replacement for customized fabrication. For example, one of the growing uses appears to be in the creation of customized medical devices, like hip replacements. Now users are finding that additive manufacturing allows for the fabrication of items that could not be made before. A story last month in The Economist ("The shape of things to come") describes some of 3D printing products that would be difficult or impossible to make using existing techniques. One example concerns artificial hips that not only better follow the curves of the patient's bones but also reproduce the lattice-like internal structure of natural bone making the implant lighter and stronger. Another is a heat exchanger in an optimum shape that resembles a fish gill. Yet another are objects that are stiff on one end and flexible or soft on the other. Each of these are not simply substitutes for existing manufacturing processes, but processes that allow for a new type of product.

As the cost of 3D printers come down and more users become familiar with their capabilities, expect to see a lot more of these never-before-seen creations. Just as precision machining made possible manufacturing revolution of mass production using interchangeable parts, additive manufacturing may spark a new manufacturing revolution with opportunities and consequences that we can barely conceive of today.