Mass TLC annual meeting and Mandel's insight into the looming recovery

Posted by Dave Broadwin on March 31, 2010

 

I attended the annual meeting of Mass TLC this morning. Michael Mandel spoke and had a bunch of great insights. I want to get to what he had to say about energy and renewables but I need to go into a few preliminary items first.

Mandel starts from the premise that the most accurate measure of the state of the economy, crude though it may be, is employment. The unemployment rate is the unemployment rate. Either you are paying unemployment tax or you are not. There is no ambiguity. 

Having established this as his measure of health. He showed that one industry (communications – very broadly defined to include mobile, web, cloud etc.) actually increased employment during the recent great recession. His point is that if an industry is robust enough to grow during a recession (when everyone else is shrinking) then it will really move forward when the rest of the economy gets back to growth. So he thinks that growth in the next economic upturn will be highly driven by growth in the communications industry.

He also showed that the biotech industry continued to grow during the first part of the great recession but then flattened out as the recession wore on. So, why isn’t the biotech industry as strong as the communications industry? Well, if Mandel is to be believed, we put a lot of money and effort into the biotech industry but did not get the big needed innovations that can drive an industry. So, he is hopeful that the biotech industry will give the communications industry a boost and help the recovery along.

What is the story with the vaunted energy and renewables industry that has captured everyone’s imagination? Mandel did not even have a slide on it. So asked him. The gist of what he said was that we, as a country, have not invested nearly enough to develop enough potential new innovative technologies to have a reasonable expectation that some will develop to the point where they provide the revolutionary changes needed to move the needle on the recovery. Unless we get lucky on one of the few bets we have made, the energy and renewables industry is too far from maturity to help this time around.

I had not thought about it this way, but the amounts being invested each year in the US on energy and renewables is scary low. See my earlier post on this topic. Unfortunately, this industry does not lend itself to venture investment because so many of the technologies need large amounts of capital and have long lead times before a return can be harvested. This is really bad news for the world because we really need innovation in this space. It is also bad news for the industry because there is not a good existing investment structure.

Someone has to come up with a new investment model to attack the larger, more expensive and longer term innovations. 

 

Security in the Cloud

Posted by Dave Broadwin on March 25, 2010

Wednesday night I went to the TiE event on cyber security in the age of the cloud at the Nerd center. Among the panelists were Michael Sutton of Zscaler and Chris Wysopal of Veracode. In each case they are kind of in the cloud and kind of not in the cloud. Veracode delivers is product on a SaaS basis from the cloud but maintains its own data facilities because it can’t really put client code on the cloud – why? For security reasons.

The conversation turned to regulation, which was probably the topic of the evening. It seems clear that privacy regulation is a huge impediment to the development of the cloud. For example, hospitals can’t use the cloud (at least today) because of HIPPA compliance issues. HIPPA, is of course, the result of deep social concerns about patient privacy. In order to get hospitals, and others with analogous security concerns, to move to the cloud, cloud providers are going to have to be able to assure them categorically and without ambiguity, qualification or reservation that their information is secure and compliant with all applicable regulations. It seems like right now, they may be able to provide reasonably compelling assurances that information is secure and compliant, but I don’t think reasonably compelling assurance is going to be enough.

It may turn out that information is more safe in the hands of an appropriate cloud provider than in the hands of your IT department, but that (even if it can be demonstrated) isn’t going to be enough. It is like car travel versus air travel. I am under the impression that car travel is generally thought to be more dangerous than air travel, in the sense that you are way more likely to die in a car crash than a plane crash. But, plane crashes are way more spectacular and way more publicized. 

Cloud based security leaks are going to be like airplane crashes. They will be far less frequent that the issues companies now have, but they will be spectacular and will get the kind of publicity that will lead to big law suits, massive negative publicity and regulatory activity slowing the development of the cloud.

The economies of the cloud are so compelling that it will ultimately overcome these regulatory issues. Look at it from a macro point of view. If every company has to build for its individual peak capacity, then as a society we are going to way way way overbuild. Not going to the cloud would be like having every town build its own power plant. In the end, it just does not make sense.

So, a massive battle is shaping up between privacy concerns and compelling economics. Here is my prediction: Soon (just a few years) we will be living with airplane crashes.