First let me say that I wholeheartedly believe that the majority of our government is comprised of good people doing their best to do what they believe is right. However, I also believe that the chain of command in this country has been turned on its head in many instances.
Businesses and individuals are not here to serve the will of the government. It's the other way around. We are the bosses. They are the employees. We oversee and direct them. Yet government has taken on a leadership role in many aspects of our society, whether it be through zoning regulations, tax policy, resource distribution, or any number of tactics aimed at influencing the behavior and direction of the people they represent. They have taken the leadership role, not by force, but by default. Too often, people are too afraid of potential fines, permit denials, or some other form of retribution to speak out when they feel the government has overstepped its bounds.
Fortunately, I have found these fears to be largely unwarranted in our particular community. While I disagree with many of the tactics and policies of local authorities, as have many others, I have been able to speak my mind and make my case without undue reprisal. Spirited discourse, yes, retribution, no.
My suggestion here is not revolution but open and honest communication. When your government appears to be going astray, go tell them. Go to the public meeting, make the phone call, send the email. Keep it civil, concise and on point. You may not get "Gee you're right" right off the bat, but they will listen. If you make your grievance widely known (again make the logical case, not the emotional one), other voices will join yours, then they have to listen. After all, we're the boss.
This is your country. Start running it.
Friday, April 25, 2008
Thursday, April 24, 2008
Afghanistan - An alternative to Opium Production
Even as NATO proposes troop drawdowns in three years as the Afghan army gains strength, they know they may be leaving behind a major problem in establishing order and stability in the region. Afghanistan produces 93% of the worlds opium. Efforts to erradicate the poppy production have utterly failed.
As illustrated in the book Freakonomics, it's always helpful to approach these types of problems by looking at incentives. Why do so many Afghans risk the wrath of authorities to continue to produce poppy seeds? That's an easy one: money. The solution: money. Not a hand-out, a switch-out. New technologies have made a vast variety of agricultural products suitable for producing fuel. Amyris Biotechnologies has developed genetic engineering techniques that allow microbes to convert plant products into a number of commodities, including fuel.
NATO should consider appropriating funds to research the optimum agricultural product to commodity formula for the terrain currently being used for poppy production. It doesn't have to pay as well as the opium trade. Just enough to make the risk/reward ratio for poppy growing much less attractive.
Such technologies are already transforming Brazil into an alternative fuels powerhouse. When you factor in the cost of fighting poppy production by force alone, helping the locals get rich from other crops could be a real money saver as well as a path to peace. Who knows, Amyris may even come up with a way to turn poppy plants into fuel, or medicine or something much more productive than opium.
As illustrated in the book Freakonomics, it's always helpful to approach these types of problems by looking at incentives. Why do so many Afghans risk the wrath of authorities to continue to produce poppy seeds? That's an easy one: money. The solution: money. Not a hand-out, a switch-out. New technologies have made a vast variety of agricultural products suitable for producing fuel. Amyris Biotechnologies has developed genetic engineering techniques that allow microbes to convert plant products into a number of commodities, including fuel.
NATO should consider appropriating funds to research the optimum agricultural product to commodity formula for the terrain currently being used for poppy production. It doesn't have to pay as well as the opium trade. Just enough to make the risk/reward ratio for poppy growing much less attractive.
Such technologies are already transforming Brazil into an alternative fuels powerhouse. When you factor in the cost of fighting poppy production by force alone, helping the locals get rich from other crops could be a real money saver as well as a path to peace. Who knows, Amyris may even come up with a way to turn poppy plants into fuel, or medicine or something much more productive than opium.
Sunday, April 20, 2008
A Stimulating Proposal
Suppose you're a municipality searching for ways to encourage and enable small business success in your community. What type of incentives should you provide? To whom should you offer them? You can't answer these questions without an understanding of the role of the small business in the economy.
First of all, you have to understand what makes a market. Transactions take place when I have something that is of more value to you than it is to me. For example, I have a marble handled widget polisher. In my opinion it's worth $1.80. In your eyes it's worth $2.20. I offer it at $2.00. A transaction takes place. Difference of opinion in regard to value is what makes a market.
Second you need to understand what types of businesses are necessary for the local economy and how you go about determining "what we need". Too often this is done in meetings or even public forums. Neither of which is more efficient than the market. It has been conventional wisdom that for a business to thrive, it must grow. However, as Doug Tatum points out in his book "No Man's Land", not all business models are conducive to growth. Some work better on a small scale. Indeed there are a number of businesses that have existed for decades that never have had more than a couple of people working them. Are they not valuable? How do you know? The fact that someone is making a living doing something is evidence in and of itself that the activity has value to the community. You cast a vote every time you buy something. You're saying "I like that" "Keep doing it".
Third you must look at how the small business fits into the overall economy. Large businesses need small businesses. Even big call centers need their carpets cleaned, their windows washed, they need phone techs, somewhere for people to eat lunch, office supplies and a host of other support products and services. These things cannot always be efficiently provided by other large businesses. In addition, the small business market offers a place for employees of large business to go when they decide it's time for something new. The typical large business has a few great paying jobs and a lot of not so great paying jobs. The supply of opportunity does not meet the demand. The small business market provides a venue for new ideas and innovation that may not fit the bill for the company someone is currently working for. The economy is not a big business vs. small business proposition. They work in tandem.
How can government help? Primarily by understanding and being aware of the principals above. Let's look at the marble handled widget transaction again. Suppose I were required to collect a sales tax, have a pre-sale safety inspection and file a widget sales registration for a fee. Now the price of the widget has increased by 50 cents, the "cost of commerce". Remember in my mind the widget was worth $1.80. For the transaction to make sense from my end I have to get more than $2.30 for it. But, in your mind the widget is only worth $2.20. You'd have to get it for less than $2.20 for the transaction to make sense to you. The transaction doesn't take place. The cost of commerce has squelched it. It is an obstacle to the free market. Governments interested in promoting commerce should focus on minimizing the cost of commerce.
Which businesses should be helped? All of them, and equally so. As explained in point two, the free choices of free individuals will determine which products and services are needed or wanted. The role of government in this dynamic should be limited to restricting products and services that are for some reason undesirable to the community. All legal entities should be equally enabled in the marketplace. No one needs a gaurantee of success. Only the opportunity to put forth their ideas on a fair playing field.
Finally, all decisions on creating a thriving market environment should start with the premise that every business is valuable. A business that employs one person is of great value to that person. If the market deems them unworthy, they will fail. You don't have to push them out or encourage them to take on a growth strategy that doesn't make sense for their business model.
In the short term it is politically tempting to tamper with the mechanics of the free market. After all, if a policy is implemented with your name on it and it leads to some measure of success, it can greatly further your career and your stature. However, the market doesn't respond well to tampering in the long term. One of the best things a municipal govenment can do to stimulate creativity and energy in the local marketplace is to understand and trust the free market and occasionally send a message to participants: "Thanks for participating. We're glad you're here. Keep up the good work." Then, just let the market do its thing.
First of all, you have to understand what makes a market. Transactions take place when I have something that is of more value to you than it is to me. For example, I have a marble handled widget polisher. In my opinion it's worth $1.80. In your eyes it's worth $2.20. I offer it at $2.00. A transaction takes place. Difference of opinion in regard to value is what makes a market.
Second you need to understand what types of businesses are necessary for the local economy and how you go about determining "what we need". Too often this is done in meetings or even public forums. Neither of which is more efficient than the market. It has been conventional wisdom that for a business to thrive, it must grow. However, as Doug Tatum points out in his book "No Man's Land", not all business models are conducive to growth. Some work better on a small scale. Indeed there are a number of businesses that have existed for decades that never have had more than a couple of people working them. Are they not valuable? How do you know? The fact that someone is making a living doing something is evidence in and of itself that the activity has value to the community. You cast a vote every time you buy something. You're saying "I like that" "Keep doing it".
Third you must look at how the small business fits into the overall economy. Large businesses need small businesses. Even big call centers need their carpets cleaned, their windows washed, they need phone techs, somewhere for people to eat lunch, office supplies and a host of other support products and services. These things cannot always be efficiently provided by other large businesses. In addition, the small business market offers a place for employees of large business to go when they decide it's time for something new. The typical large business has a few great paying jobs and a lot of not so great paying jobs. The supply of opportunity does not meet the demand. The small business market provides a venue for new ideas and innovation that may not fit the bill for the company someone is currently working for. The economy is not a big business vs. small business proposition. They work in tandem.
How can government help? Primarily by understanding and being aware of the principals above. Let's look at the marble handled widget transaction again. Suppose I were required to collect a sales tax, have a pre-sale safety inspection and file a widget sales registration for a fee. Now the price of the widget has increased by 50 cents, the "cost of commerce". Remember in my mind the widget was worth $1.80. For the transaction to make sense from my end I have to get more than $2.30 for it. But, in your mind the widget is only worth $2.20. You'd have to get it for less than $2.20 for the transaction to make sense to you. The transaction doesn't take place. The cost of commerce has squelched it. It is an obstacle to the free market. Governments interested in promoting commerce should focus on minimizing the cost of commerce.
Which businesses should be helped? All of them, and equally so. As explained in point two, the free choices of free individuals will determine which products and services are needed or wanted. The role of government in this dynamic should be limited to restricting products and services that are for some reason undesirable to the community. All legal entities should be equally enabled in the marketplace. No one needs a gaurantee of success. Only the opportunity to put forth their ideas on a fair playing field.
Finally, all decisions on creating a thriving market environment should start with the premise that every business is valuable. A business that employs one person is of great value to that person. If the market deems them unworthy, they will fail. You don't have to push them out or encourage them to take on a growth strategy that doesn't make sense for their business model.
In the short term it is politically tempting to tamper with the mechanics of the free market. After all, if a policy is implemented with your name on it and it leads to some measure of success, it can greatly further your career and your stature. However, the market doesn't respond well to tampering in the long term. One of the best things a municipal govenment can do to stimulate creativity and energy in the local marketplace is to understand and trust the free market and occasionally send a message to participants: "Thanks for participating. We're glad you're here. Keep up the good work." Then, just let the market do its thing.
Friday, April 4, 2008
Could "Talking Down" the Economy be a Good Thing?
Many politicians and pundits have been accused of "talking down" the economy for political gain. That is, exaggerating problems and using terms that don't really apply to the current situation to try to influence the general public's perception of how the economy is doing.
Technically, a recession is two consecutive quarters of negative growth. There's a couple of weeks' lag time between the end of a quarter and when the results are published. Since we haven't recorded even one quarter of negative growth yet, we won't know if we are currently in a recession until July of this year (assuming the first quarter was negative). This allows plenty of time for speculation and pronouncements.
A case in point may be President Bush Sr's re-election bid in 1992. We were in a recession at the end of '91. Hyperbole was the rule of the day. "Worst economy since the great depression...yadda, yadda, yadda") Statistically speaking the recession was shallow and short, actually ending in Spring of '92. However, it takes a couple of months to get the data that confirms what's happening in the economy. By the time people realized the recession was over and we were growing again, the election was also over.
All of the politically motivated hyperbole and the consequences thereof may actually have a positive effect in the long term. Our tolerance for economic pain has dropped substantially in the past few decades. Unemployment of 5% or less used to be considered "full employment" and many suggested we would never achieve it. Now, 5.1% unemployment is unacceptable. In the 70's inflation was in double digits, now 2.5% inflation is "out of control". It wasn't that long ago that a 30 year fixed interest rate of 8% was a bargain. Today, 7% would spur calls for impeachment and resignations. The politically motivated hyperbole has actually raised the bar for economic performance. This has been transferred to the business world due to the fact that politicians have very little power to change what's happening in the market place, except to the extent that they can influence the behavior of the players. They actually have to enable commerce and free trade, often by reducing taxes and regulation. This isn't a giant shift in philosophy, it's job preservation, but works almost as well.
A key component in this dynamic is the explosion of the number and variety of information outlets available to everyone. People become aware of, and respond to information much more rapidly than ever before. The task before incumbents today is to ensure that if first quarter growth is negative, second quarter growth is positive. In other words, this recession has to end before it even technically qualifies as a recession.
Not a bad challenge I think. Politics may be ugly, but every once it a while it can produce positive results. Elected officials may not always believe in or trust the free market, but they can understand that if it gets sick, they get fired. So like it or not, they have to take care of it.
Technically, a recession is two consecutive quarters of negative growth. There's a couple of weeks' lag time between the end of a quarter and when the results are published. Since we haven't recorded even one quarter of negative growth yet, we won't know if we are currently in a recession until July of this year (assuming the first quarter was negative). This allows plenty of time for speculation and pronouncements.
A case in point may be President Bush Sr's re-election bid in 1992. We were in a recession at the end of '91. Hyperbole was the rule of the day. "Worst economy since the great depression...yadda, yadda, yadda") Statistically speaking the recession was shallow and short, actually ending in Spring of '92. However, it takes a couple of months to get the data that confirms what's happening in the economy. By the time people realized the recession was over and we were growing again, the election was also over.
All of the politically motivated hyperbole and the consequences thereof may actually have a positive effect in the long term. Our tolerance for economic pain has dropped substantially in the past few decades. Unemployment of 5% or less used to be considered "full employment" and many suggested we would never achieve it. Now, 5.1% unemployment is unacceptable. In the 70's inflation was in double digits, now 2.5% inflation is "out of control". It wasn't that long ago that a 30 year fixed interest rate of 8% was a bargain. Today, 7% would spur calls for impeachment and resignations. The politically motivated hyperbole has actually raised the bar for economic performance. This has been transferred to the business world due to the fact that politicians have very little power to change what's happening in the market place, except to the extent that they can influence the behavior of the players. They actually have to enable commerce and free trade, often by reducing taxes and regulation. This isn't a giant shift in philosophy, it's job preservation, but works almost as well.
A key component in this dynamic is the explosion of the number and variety of information outlets available to everyone. People become aware of, and respond to information much more rapidly than ever before. The task before incumbents today is to ensure that if first quarter growth is negative, second quarter growth is positive. In other words, this recession has to end before it even technically qualifies as a recession.
Not a bad challenge I think. Politics may be ugly, but every once it a while it can produce positive results. Elected officials may not always believe in or trust the free market, but they can understand that if it gets sick, they get fired. So like it or not, they have to take care of it.
Wednesday, March 19, 2008
The Housing Market - Dear Government, Please Stop Helping!
The bubble in the housing market has finally burst, or has it? It's more of a leak. What's needed to bring the current slog to a halt and turn it around is called "market capitulation". That's when the home sellers, whether it be the bank or private individuals, collectively acknowledge that they paid way too much and accept the loss. Home prices plunge and a new round of opportunity begins.
The problem is that everyone is holding their breath for the government bail out. Homeowners are looking for some kind of principal write-down deal and banks are looking for some sort of government assistance or subsidy. Nobody wants to mark their real estate to the market when it looks like the American taxpayer is going to help them perpetuate this fraud.
The promise of government "assistance" is only dragging out the pain. Let the market do its thing. Yes, people are going to take losses and it's going to sting, but let's just go ahead and yank that band-aid off. You can't start recovering until you recognize the failure. Let the foreclosures happen, let the bankruptcies take place, let the CEO's face the music, then let the aggressive risk-takers come back in and make something new out of the debris. We're trying to prop up a dangerously dilapidated building when we should be clearing the area and letting it fall. Just get out of the way.
The problem is that everyone is holding their breath for the government bail out. Homeowners are looking for some kind of principal write-down deal and banks are looking for some sort of government assistance or subsidy. Nobody wants to mark their real estate to the market when it looks like the American taxpayer is going to help them perpetuate this fraud.
The promise of government "assistance" is only dragging out the pain. Let the market do its thing. Yes, people are going to take losses and it's going to sting, but let's just go ahead and yank that band-aid off. You can't start recovering until you recognize the failure. Let the foreclosures happen, let the bankruptcies take place, let the CEO's face the music, then let the aggressive risk-takers come back in and make something new out of the debris. We're trying to prop up a dangerously dilapidated building when we should be clearing the area and letting it fall. Just get out of the way.
Saturday, March 8, 2008
The Partnership Paradox
To create a strong business partnership you want to be sure to choose as a partner someone you know and trust, right? But,too often partnerships formed by good friends can result those friends becoming bitter enemies, as well as financial calamity and bad feelings that may be with them the rest of their lives. Yet, obviously partnerships can and do work. Why do some partnerships thrive while others fail miserably? There is no single answer to that question, but you can greatly increase the probability of success by getting the structure right from the start. Here are some fundamental guidlelines. For specific legal language, consult an attorney.
The primary cause of enmity between partners is differing perceptions of what's expected of each other and what they "deserve". This is usually caused by trying to shortcut the process of aquiring equity in the partnership. There are three simple rules that can be employed to avoid this problem. First, the only thing that gets you equity in the partnership is CASH. Second, don't confuse compensation with income distribution. Third, every organization needs a captain, and there can be only one.
Rule one does not mean that one cannot gain equity through knowlege, labor, land or some other asset. It simply means that you should not skip a step in between. Each should be converted to cash first, then the cash used to acquire equity. In the case of knowledge, that knowlege needs to be applied on behalf of the company before it is of any value to it. Assuming the knowlege will be applied in some sort of management or consultation position, you first define the position, come up with a reasonable salary based on what you would pay a non-partner with the same qualifications and an agreed upon portion of the salary can be applied to equity. This can be done either in the form of repayment of a loan made by the company to the partner (for the purpose of buying in) or the partner can buy in over time as salary is earned. The same is true for labor. Pay a fair wage. The employee then pays for equity. This protects both the company and the employee. The employee is paid in full for work performed and earns equity based on actual cash investment. Again, this can be a paper transaction, but all the steps should be spelled out, so that there is no ambiguity. To illustrate the shortcomings of the alternative, consider this scenerio: You invest $10,000 cash (which at some point was a result of your own applied knowledge and ability). Your partner, gets half the company simply for having knowledge (as yet unapplied). Due to some unforeseen circumstance, the company has to be liquidated a month later, or maybe your partner decides to sell their portion. You just lost half your investment. What did you get in return? Your partner walks away with $5,000.
A contribution of assets should be handled in much the same way. First you agree on the market value of the assets, pay for them (even if only on paper), and invest the cash into the partnership.
The second rule is just as crucial. Compensation is compensation. Earnings distributions are earnings distributions. DON'T CROSS THE STREAMS! Compensation should be clearly defined and based on actual work performed, just as in any other job in which one is not a partner. Your percentage of ownership should not be a factor in determining your compensation. You may agree to take a below market salary to help out your company, but that does not entitle you to a larger share of equity. In fact, if your lower salary results in increased earnings, you'll only recover your share of the increase, the rest is divied up between the other partners. This can lead to serious resentment and is generally not a good idea. A work-around might be to include pre-distribution profit-sharing as part of your compensation. Income distribution should be based solely on your percentage of ownership in the partnership. Even if you do a lousy job and wind up getting fired, as long as you have equity, you're entitled to your full share of distributions.
This brings us to rule three: For a company to function effectively there needs to be a captain. One person who decides when input-taking is over and decision time is at hand, and who makes that decision. You don't have to be majority partner to be in this position. The position is commonly known as "managing partner" and is best given to the most qualified parnter, not necessarily the one with the most equity. Employees need oversight, direction, evaluation, encouragement and discipline whether they are partners or not. Performance standards should not be based on equity. All partners should fully understand this going in. If a partner needs to be demoted or fired for the good of the company, they should be ready and willing to accept that.
Business, like sports, can be a lot fun. Good friends coming together and achieving success can be very rewarding. To maximize your potential, make the ground rules very clear and easily understood. That way you can focus you energies on good ideas and implementation instead of spending all your time arguing about what constitutes a "foul".
The primary cause of enmity between partners is differing perceptions of what's expected of each other and what they "deserve". This is usually caused by trying to shortcut the process of aquiring equity in the partnership. There are three simple rules that can be employed to avoid this problem. First, the only thing that gets you equity in the partnership is CASH. Second, don't confuse compensation with income distribution. Third, every organization needs a captain, and there can be only one.
Rule one does not mean that one cannot gain equity through knowlege, labor, land or some other asset. It simply means that you should not skip a step in between. Each should be converted to cash first, then the cash used to acquire equity. In the case of knowledge, that knowlege needs to be applied on behalf of the company before it is of any value to it. Assuming the knowlege will be applied in some sort of management or consultation position, you first define the position, come up with a reasonable salary based on what you would pay a non-partner with the same qualifications and an agreed upon portion of the salary can be applied to equity. This can be done either in the form of repayment of a loan made by the company to the partner (for the purpose of buying in) or the partner can buy in over time as salary is earned. The same is true for labor. Pay a fair wage. The employee then pays for equity. This protects both the company and the employee. The employee is paid in full for work performed and earns equity based on actual cash investment. Again, this can be a paper transaction, but all the steps should be spelled out, so that there is no ambiguity. To illustrate the shortcomings of the alternative, consider this scenerio: You invest $10,000 cash (which at some point was a result of your own applied knowledge and ability). Your partner, gets half the company simply for having knowledge (as yet unapplied). Due to some unforeseen circumstance, the company has to be liquidated a month later, or maybe your partner decides to sell their portion. You just lost half your investment. What did you get in return? Your partner walks away with $5,000.
A contribution of assets should be handled in much the same way. First you agree on the market value of the assets, pay for them (even if only on paper), and invest the cash into the partnership.
The second rule is just as crucial. Compensation is compensation. Earnings distributions are earnings distributions. DON'T CROSS THE STREAMS! Compensation should be clearly defined and based on actual work performed, just as in any other job in which one is not a partner. Your percentage of ownership should not be a factor in determining your compensation. You may agree to take a below market salary to help out your company, but that does not entitle you to a larger share of equity. In fact, if your lower salary results in increased earnings, you'll only recover your share of the increase, the rest is divied up between the other partners. This can lead to serious resentment and is generally not a good idea. A work-around might be to include pre-distribution profit-sharing as part of your compensation. Income distribution should be based solely on your percentage of ownership in the partnership. Even if you do a lousy job and wind up getting fired, as long as you have equity, you're entitled to your full share of distributions.
This brings us to rule three: For a company to function effectively there needs to be a captain. One person who decides when input-taking is over and decision time is at hand, and who makes that decision. You don't have to be majority partner to be in this position. The position is commonly known as "managing partner" and is best given to the most qualified parnter, not necessarily the one with the most equity. Employees need oversight, direction, evaluation, encouragement and discipline whether they are partners or not. Performance standards should not be based on equity. All partners should fully understand this going in. If a partner needs to be demoted or fired for the good of the company, they should be ready and willing to accept that.
Business, like sports, can be a lot fun. Good friends coming together and achieving success can be very rewarding. To maximize your potential, make the ground rules very clear and easily understood. That way you can focus you energies on good ideas and implementation instead of spending all your time arguing about what constitutes a "foul".
Wednesday, March 5, 2008
Boeing vs Airbus
In a contraversial decision the Air Force awarded a $40 billion contract to Northrup Grumman and Airbus rather than to Boeing. The contract is for refueling planes.
A number of issues have been brought up in defense of Boeing, some legitimate, some not. The jobs issue should not be on the table. Awarding contracts for the purpose of job creation is counter-productive and a disincentive to excellence. Ultimately the contract should go to the better product. Then there is the issue of subsidies. The case may be made that the EU is taking money from taxpayers in order to make a sweet deal to the US. That may be, but they're taking money from European taxpayers, and if the European taxpayers are okay with that, so be it. I'm no fan of government subsidized anything, but the best way to demonstrate that it's a bad way to go is to defeat it in the marketplace.
Boeing may have a case based on a couple of other issues. First, they claim they were the victims of a bait and switch in that the Air Force requested a smaller craft, then selected the larger one. Boeing also claims that, despite claims to the contrary, when you factor in maintenance and upkeep, their bid was actually lower. Another valid point brought up by some in Congress is that we may wind up having military equipment manufactured in countries that do not necessarily look favorably on the US.
The contract has been awarded, but it's not over. There will be hearings and Congress does have the power to nix the deal. I would like to see Boeing beat out Airbus, but I'd like to see them do it based on criteria consistent with free market principals. It's tough to know what factors actually were used in awarding this contract, since it's a government venture, there's always politics involved. I look forward to the debate. Ultimately I look forward to private, not subsidized companies outperforming "corporate/government partnerships" in the long run. Which I'm confident they will do, given the opportunity.
A number of issues have been brought up in defense of Boeing, some legitimate, some not. The jobs issue should not be on the table. Awarding contracts for the purpose of job creation is counter-productive and a disincentive to excellence. Ultimately the contract should go to the better product. Then there is the issue of subsidies. The case may be made that the EU is taking money from taxpayers in order to make a sweet deal to the US. That may be, but they're taking money from European taxpayers, and if the European taxpayers are okay with that, so be it. I'm no fan of government subsidized anything, but the best way to demonstrate that it's a bad way to go is to defeat it in the marketplace.
Boeing may have a case based on a couple of other issues. First, they claim they were the victims of a bait and switch in that the Air Force requested a smaller craft, then selected the larger one. Boeing also claims that, despite claims to the contrary, when you factor in maintenance and upkeep, their bid was actually lower. Another valid point brought up by some in Congress is that we may wind up having military equipment manufactured in countries that do not necessarily look favorably on the US.
The contract has been awarded, but it's not over. There will be hearings and Congress does have the power to nix the deal. I would like to see Boeing beat out Airbus, but I'd like to see them do it based on criteria consistent with free market principals. It's tough to know what factors actually were used in awarding this contract, since it's a government venture, there's always politics involved. I look forward to the debate. Ultimately I look forward to private, not subsidized companies outperforming "corporate/government partnerships" in the long run. Which I'm confident they will do, given the opportunity.
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