Improvisations

The New York Times  reports this week on how the rapid growth of “digital data”  – everything from public records in digital form to information generated from social network traffic  – creates all kinds of new opportunities for statistical analysis – and for statisticians.  “We’re rapidly entering a world where everything can be monitored and measured,” Erik Brynjolfsson, director of the MIT Center for Digital Business, told The New York Times.

As the downturn continues, some technology start-up companies are closing or being acquired at low prices, The Wall Street Journal reports. That, along with a reported decrease in angel investing, raise questions about the environment for innovation.

But the news isn’t all bad. The San Jose Mercury News recently highlighted entrepreneurial companies that are growing despite the economy, in sectors such as online video, software as a service (SaaS) and open source software. One key to getting venture capital now? Offering a business model that will save money for customers, according to The New York Times ”Bits”  blog. And there’s always the possibility of eschewing venture capital entirely:

• Xconomy.com reports on a biotech start-up that has launched without outside investors – in a sector where that’s tough to do. (The entrepreneur instead obtained research contracts from established companies.)
• Start-up expert Guy Kawasaki offers ten bootstrapping tips for self-financing your start-up.

We blogged earlier this month about some companies trying creative responses to the recession, including reducing employees’ hours rather than laying staff off. The New York Times this week reported that there’s a trend: An increasing numbers of organizations are seeking to cut labor costs but avert or limit layoffs – so they are trying measures such as reducing workweeks, offering or requiring unpaid time off, or eliminating bonuses. According to The New York Times,  

Companies seem particularly determined to find alternatives to layoffs in this recession, said Jennifer Chatman, a professor at the Haas School of Business at the University of California, Berkeley. “Organizations are trying to cut costs in the name of avoiding layoffs,” she said. “It’s not just that organizations are saying ‘we’re cutting costs,’ they’re saying: ‘we’re doing this to keep from losing people.’ ”

Also this week, Caterpillar Inc. announced that it will it will cut compensation for executives and managers (but particularly executive compensation, which the company may cut by up to 50% for 2009) and offer a voluntary buyout option to U.S. employees.

Right now, it’s hard to escape being inundated with new headlines about the financial crisis. But amid the din of ever-changing news soundbites, it’s not easy to make sense of the bigger picture. Here are two thoughtful perspectives that can help you do just that :

•  An article in today’s New  York Times explores how a little-noticed 2004 SEC decision allowing the largest investment banking firms to take on more debt paved the way for the current crisis in the U.S. financial markets. ”We foolishly believed that the firms had a strong culture of self-preservation and would have the discipline not to be excessively borrowing,” Professor James D. Cox of the Duke School of Law told the The New York Times.  One of the investment banks that sought the deregulation in 2004? Goldman Sachs, then headed by Henry M. Paulson, Jr. – now U.S. Treasury secretary.
• But it’s a mistake to think the current financial crisis is just a result of overleverage or trouble in the housing market, according to economists Simon Johnson and Peter Boone. On their new website, The Baseline Scenario, Johnson, a professor at the MIT Sloan School of Management and Boone, an Associate at the Centre for Economic Performance at the London School of Economics, argue that the real issue is a crisis of confidence among creditors – analogous to the one that roiled emerging markets such as Thailand and Brazil in 1997 and 1998.  The Baseline Scenario offers a weekly analysis of the economic crisis, with policy recommendations – as well as updates throughout the week.