SBA Chief vs real story -Interviews on Small Business and the Economy

World economy fallen down! specially US economy.

As the numbers roll in -- jobs lost, financial markets fall, bailouts -- I'm sitting in the middle of a 40-person company I started in 1988 and wondering, as I assume so many others are, how bad this is for other small businesses.

Sandy K. Baruah, Acting Administrator of the U.S. Small Business Administration, has media availability in Detroit, MI Wednesday, Dec. 17 to discuss the auto industry's impact on small business, the current economy, what SBA is doing to help small businesses, and how to keep America's entrepreneurs competitive.
Baruah will lead a small business town hall hosted by the Detroit Regional Chamber of Commerce that morning, from 7:30am - 9am, to address the challenges confronting entrepreneurs in the Detroit region. Information on the town hall can be found at http://www.detroitchamber.com/. Media is welcome to interview him at the event or schedule an interview at another time.
WHO: SBA Acting Administrator Sandy K. Baruah
WHAT: Media interviews on the auto industry's impact on small business, the current economy, what SBA is doing to help small businesses during the economic downturn, and how to keep America's entrepreneurs competitive.
WHERE: Detroit, MI
WHEN: Wednesday, December 17, 2008
CONTACT: Christine Mangi at 202-205-6948 or Christine.mangi@sba.gov to arrange an interview.
BACKGROUND:
Sandy K. Baruah was designated Acting Administrator of the U.S. Small Business Administration on August 15, 2008. He has served in the Bush Administration since 2001. Prior to SBA, he was the Assistant Secretary for Economic Development at the Department of Commerce, and comes to SBA with a keen understanding on how to promote local business growth, manage organizational change, and respond to federal disasters.
Before joining President Bush's team, he spent seven years with a Portland, Oregon-based corporate management consulting firm. As a business consultant, he worked on engagements with clients such as Walt Disney World, Intel, Key Bank and Citizens Bank.
SOURCE: U.S. Small Business Administration U.S. Small Business Administration
Christine Mangi, 202-205-6948
Internet Address: www.sba.gov/news/
Copyright Business Wire 2008.

Real story on Small business:

I've been through recessions before. I was looking for my first job in 1971, buying our first house in 1982, and moving a company in 1992. In 2001 I laid off five people (of 33) in a single day.
That one was really hard. Our sales dropped steeply when the tech stocks fell, and we waited too long, got into real trouble, before we finally bit the bullet and cut the staff. What I discovered then was 1.) the 28 people who didn't get laid off were relieved to see we were dealing with the problem; they thought our response was long overdue; and 2.) hard as it is to lay off several people at once, it's not as hard as laying off an individual. An individual feels personal failure, but when it's a group, it's the company, or the economy, that caused it.
Now in this recession, which is certainly the worst in my lifetime, there's so much we don't know. I've read a lot of the available information of course, but it's pretty hard to gauge. For example, I've been watching as the official stats showed half a million jobs lost last month. And I followed as ADP showed small businesses increased jobs in September, but lost them in October and again in November. At the same time the SBA released a report showing that small businesses generate 80% of the new jobs.
But things are not that simple. Scott Shane asked Can Entrepreneurs Fix the Job Loss Problem on Small Business Trends earlier this week, and his answer is "the scale of the economic downturn is so large that we can't offset it just by boosting our level of entrepreneurial activity."
And then there are surveys like this one, which supposedly shows that 43% of small businesses aren't feeling the recession, and 4% say they're better off. Which is why I'm suggesting the survey we're going do to here.
One of the most important realities of small business in this country is how diverse and disconnected we really are. Small business owners don't vote alike, don't think alike, and don't respond to business crisis alike either. Four out of five small businesses are personal businesses with no employees. They're freelance writers, business consultants, graphic artists, designers, real estate brokers, butchers, bakers ... well, you get the idea.
While economists and politicians give "small business" credit for creating jobs, and there are several well meaning public agencies and business groups, we're still mostly out here in the trenches minding our own businesses, worrying, and wondering how bad things are and how bad they'll get. And when they'll turn around.
So I'd like to ask any and all small business owners, and yes definitely including those 21 million personal businesses, how are you doing? How bad is (or isn't) it?
With that in mind, please join me in collecting some real information, one person at a time, on what's going on throughout the economy with all those businesses that aren't big enough to attract news media attention, but are still there and, presumably, hurting as much as Wall Street and Detroit.
And to make this work, we want to start with the basics: Do you own the business? Do you have employees? How many people did you have six months ago, and how many today? What do you see happening to sales -- in percent growth or percent decline -- next year?
And from there, the stories. Add your own story. How are you weathering it, how bad is it, when will it turn around, what do you need, what have you done, what surprised you, what are you hoping, and what are you fearing?
And we'll be tracking responses and general results, so you can check back here to see what we come up with!

Forcing people to look at things in new ways!

Economy is emerging to force people to look at things in new ways...........
source :www.bloomberg.com

Bob Corker said yesterday that a crisis like the U.S. automakers’ fight for survival can create opportunities by forcing people to look at things in new ways.
The first-term Republican might just as well have been talking about his own career.
Corker, a former mayor of Chattanooga who became a senator just two years ago and ranks last in seniority among the 10 Banking Committee Republicans, emerged from relative obscurity to become a key figure in the 11th-hour negotiations over a proposed $14 billion auto-industry loan package.
While the effort ultimately collapsed in partisan discord over union wages, Corker, 56, stands as a rare winner in the debate.
“I’m hard-pressed to think of another member who’s been here such a short period of time who’s made such an impression on colleagues of both sides of the aisle,” says Senate Republican Leader Mitch McConnell of Kentucky.
Majority Leader Harry Reid seconded McConnell’s assessment. “I’ve been extremely impressed with Bob Corker,” says Reid, a Nevada Democrat. Illinois Senator Dick Durbin, the No. 2 Democrat, says Corker did a “magnificent job.”
Corker tried to broker a deal after Senate Republicans turned their backs on appeals from Vice President Dick Cheney and White House Chief of Staff Josh Bolten to support the bailout package. The House had approved a plan, backed by President George W. Bush, for short-term loans to keep General Motors Corp. and Chrysler LLC from running out of cash early next year.
Plan B
Corker’s proposal became Plan B. His package sought to overcome Republican doubts, without alienating Democrats, by making creditors exchange some bonds for stock, and by cutting union wages to levels competitive with amounts paid at U.S. factories owned by European and Asian automakers.
“Crisis is when good things happen -- when you make people do things” they wouldn’t ordinarily do, Corker says.
When executives from Detroit’s Big Three automakers appeared before the banking committee last month, Corker originally suggested bankruptcy as a way to restructure the industry. He started moving toward efforts to broker a compromise after a Dec. 3 briefing on GM’s restructuring plan and a meeting with GM Chief Operating Officer Fritz Henderson.
The following day, he proposed a plan that became the blueprint for possible compromise, saying he was willing to give the automakers a chance to solve the crisis without bankruptcy if the government got a “big stick” to force reforms.
Closed-Door Talks
As the Senate considered the House-approved bailout on Dec. 11, the freshman Republican holed up for seven hours behind closed doors on the first floor of the Capitol with the Democrats’ top negotiator, Banking Committee Chairman Christopher Dodd, as dozens of reporters crowded the ornate hallway outside, waiting for news.
The talks included Stephen Feinberg, founder of Cerberus Capital Management LP, which owns Chrysler; Ford Motor Co. lobbyist Ziad Ojakli; GM lobbyist Ken Cole, and United Auto Workers union lobbyist Alan Reuther. Treasury Secretary Henry Paulson and GM’s Henderson kept tabs by telephone, Corker later said.
The sticking point, which ultimately killed prospects for an agreement, was a Republican demand to set a specific date for cutbacks in auto-worker wages and benefits. Corker says lawmakers were “three words” away from a deal. “Had we agreed on a date, any date that’s reasonable, I think it would have passed the Senate with 90 votes,” he says.
Falling Short
Instead, on a 52-35 tally, supporters of the package fell short of the 60 votes they needed to end Senate debate and proceed to a vote to approve the measure.
Dodd says wage-reduction demands had more to do with jabbing the Democrats’ loyal union constituency than with reforming the automobile industry.
The banking committee chairman, in response to a question, later acknowledged that Corker’s lack of seniority may have hindered his ability to sway more Republican colleagues. Still, “you’ll hear no criticism from me about how Bob Corker handled himself,” Dodd says. “I respect him immensely for stepping up and making the effort.”
Corker will have to make an even greater effort to build clout when the Senate reconvenes next month. There he’ll find himself in a minority wielding less influence, with Republicans holding 41 or 42 of the body’s 100 seats compared to 49 now.
Frist’s Successor
Before this week, Corker was perhaps best-known for prevailing in a hard-fought 2006 race against then-U.S. Representative Harold Ford for the Tennessee seat vacated by former Senate Republican Leader Bill Frist.
Corker founded Bencor Corp., which got its start by installing drive-through windows at fast-food restaurants and grew into a shopping-center construction company with operations in 18 states. After selling his construction business, Corker ran commercial real estate companies. He was elected in March 2001 to a four-year term as mayor of Chattanooga, Tennessee’s fourth-largest city.
After the bailout failed in Congress, the Bush administration said yesterday that it may provide short-term auto-industry aid from the $700 billion financial rescue package approved earlier this year. Corker says an aid plan should include conditions similar to those he proposed, which Paulson could impose “by fiat.”
Reid says Corker’s efforts will “pay dividends next year” when a new Congress is likely to renew consideration of ways to bolster the automobile industry.
“We weren’t able, based on his good work, to arrive at something on which we could get enough Republicans to agree,” Reid said on the Senate floor after negotiations collapsed. “But he did some wonderful work, and I think the work he did is going to pay dividends next year.”

Nobel Awarded in economics for "mechanism design theory,"

"WHAT on earth is mechanism design?" was the typical reaction to this year's Nobel prize in economics, announced on October 15th. In this era of "Freakonomics", in which everyone is discovering their inner economist, economics has become unexpectedly sexy. So what possessed the Nobel committee to honour a subject that sounds so thoroughly dismal? Why didn't they follow the lead of the peace-prize judges, who know not to let technicalities about being true to the meaning of the award get in the way of good headlines?

In fact, despite its dreary name, mechanism design is a hugely important area of economics, and underpins much of what dismal scientists do today. It goes to the heart of one of the biggest challenges in economics: how to arrange our economic interactions so that, when everyone behaves in a self-interested manner, the result is something we all like. The word "mechanism" refers to the institutions and the rules of the game that govern our economic activities, which can range from a Ministry of Planning in a command economy to the internal organisation of a company to trading in a market.

The real world rarely behaves like economics models do, so mechanism design is used to design markets and auctions that will better reflect the actions of the participants. Mechanism design is also used to look at how companies behave and to consider how governments can best provision public goods like defense or infrastructure. In general, mechanism design is applied to interactions where people or companies participating in the mechanism may have reasons to behave in a non-truthful or less than optimal way, and attempts to create rules and incentives to discourage this unwanted behavior.

The winners of the 2007 Nobel Memorial Prize in Economics, announced yesterday, are Leonid Hurwicz, Eric Maskin, and Roger Myerson. The three men received the prize for their work on "mechanism design theory," a field of economics that focuses on creating incentives and rules for an economics interaction such that the desired outcome or some desirable properties are achieved.

Hurwicz began working on mechanism design over 50 years ago by applying mathematical analysis to companies and economics systems like capitalism and socialism. His major theoretical contribution is "incentive compatibility," where participants in a mechanism will want to vote or play honestly. It's an important result, since we tend to want mechanisms like voting systems to encourage truthful voting, rather than encouraging people to disguise their true opinions.

Although "mechanism design theory" may not sound like something you or I would need to interact with very much, it pops up in quite a few places. Take the upcoming 700MHz spectrum auctions, for example. For this auction, the government has some set of goals, including perhaps getting some payment and fairly allocating the spectrum. The companies also have goals, which may be to gobble up as much of the spectrum as possible. By applying some mechanism design theory to the situation, economists can then design an auction mechanism that best meets the goals of all the parties. This type of game theoretical analysis of auctions has been done by Roger Myerson, whose work has influenced these types of spectrum auctions.

Software patents are another area where mechanism design comes into play. One of the Nobel laureates, Eric Maskin, has done some work on patent valuation. In particular, Maskin is critical of the software patent system, which he believes is harmful to innovation when new inventions are closely related to old ones. His (very) basic argument is that in many technology fields, competition is actually better for firms in the long run. Patents generally lead to less innovation in a particular field, and also lead to less competition since companies can't work on the same types of products. Thus, in the end, patents are bad for software and technology companies, because of how they limit competition.

If you're at all interested in mechanism design theory, I would highly recommend checking out the scientific background for the prize, since it provides a nice overview of the key results from the work of Hurwicz, Maskin, and Myerson. It can be a bit daunting to delve into, particularly since it's not a field of economics that gets talked about at your average cocktail party, but it's worth a look due to the sheer number of social and governmental situations that rely on mechanism design to operate more efficiently

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