Fighting Climate Change With Low-Tech Tools

In the late 1990s, regulators in some U.S. states began to make electric utilities sell their nuclear reactors to private operators. They weren’t trying to help head off climate change, yet they managed to do just that.

Deregulation was supposed to bring down power prices. The sale of nuclear plants to nonutility owners, such as Exelon Corp. (EXC), was part of the process and was intended to serve that goal. But it also helped offset more greenhouse gas emissions in the 2000s than all of the wind and solar generation in the country combined.

The U.S. doesn’t need a new economic engine. It already has one: entrepreneurship. It’s just that we aren’t getting the mileage out of it that we could.

Small businesses are instrumental to the U.S. economy. They employ 50 percent of all private-sector workers and create more than 60 percent of new jobs. The proof is present; entrepreneurs and small-business owners can revive the economy but they need more than just capital.

Much has been written about the qualities of successful leaders. These attributes often seem to float above any specific context, in the same way that a consumer’s preference expressed in a focus group is assumed to be equally present when that person is shopping in a grocery store or preparing a meal at the end of a long and tiring day.

Yet a leader’s success in attracting followers -- the essence of effective leadership -- is dependent upon how people perform in their roles in front of specific audiences. It’s in the day-to-day, meeting-to-meeting performances that someone moves key initiatives forward.

With rare exceptions, marketing designed to create or enhance brand preference over competitors in established product categories changes nothing. No matter how big the budget or how clever the execution, “my brand is better than your brand” marketing rarely results in sales growth.

Look at any product category over a long time period and you will see that changes in market position rarely occurred unless there was a substantial or transformational innovation. Innovation drives customer “must haves.” These, in turn, define a new subcategory in which competitors are either weak or nonexistent, resulting in meaningful sales change.

As commentators, politicians and academics struggle to make sense of the recent financial crisis and its ramifications, many of their accounts seek to identify a root cause or the “beginning of the story.”

Theories abound: Former Federal Reserve Board Chairman Alan Greenspan’s “easy money” for banks; the blindness of the credit- rating companies; strategies that encouraged low-income Americans to own homes; the invention of high-risk investment instruments; high-leveraged borrowing; short-sighted executives; greedy investment bankers; lying real-estate dealers, and so on.

Mark-to-market accounting has long been viewed in academia as the gold standard for preparing financial statements. The rule makers, the Financial Accounting Standards Board and the International Accounting Standards Board, are coming to the same view. Yet shifting to those norms has some adverse consequences for investors.

For centuries, assets generally had been recorded on balance sheets at their actual “historical” costs. Critics argued that this method provided investors with stale information that was irrelevant to decision-making (“sunk” costs). Instead, they advocated marking assets to their estimated market prices, or “fair values.”

As I struggled to navigate a roundabout at London’s Heathrow Airport recently, I wondered why the Brits don’t switch to driving on the right side of the road. The main obstacle, of course, is the difficulty of ensuring that all vehicles make the change at the same time. Just a few holdouts, particularly trucks, could cause major problems.

This is an appropriate analogy for the current chaos in companies’ financial statements as standard setters embrace fair-value accounting. Some recent examples:

The themes of inequality and the 1 percent dominate the news. Critics deplore that the share of pretax income accruing to those at the top has increased markedly over the past 30 years and is now greater than it has been since the 1920s.

It is suggested, too, that growth in income inequality has been a significant contributor to the current financial crisis and the slow recovery. President Barack Obama recently took this position, arguing that this is dragging down the economy. The Occupy Wall Street movement has been motivated by outrage over the gains of the top 1 percent and the nefarious consequences of this imbalance.

News reports suggest that the Securities and Exchange Commission may be backing away from a reform of money-market funds. This would be a mistake.

The debate over how to overhaul prime money-market funds has focused on preserving the commercial viability of these instruments while significantly lowering the threat they pose to financial stability. The latter objective should have priority.

Deutsche Bank AG (DBK) recently separated its U.S. investment bank from its bank holding company, removing it from supervision by the Federal Reserve.

So far, U.S. regulators have reacted passively to such moves by foreign banks to avoid the heightened capital requirements mandated by the Dodd-Frank Act.