I am at an early morning session where Jason Calacanis, CEO of mahalo.com, Nick Denton of Gawker, and Jeff Jarvis of BuzzMachine and the New York Daily News, discuss the challenges of printed media’s transition to online digital media. This topic and Twitter are big themes at this year’s Ideas Festival, with everyone from Steve Brill to Michael Kinsley, Norman Pearlstine and Katharine Weymouth discussing the former and Peter Hirshberg driving an army of Tweeters at #AIF09 to develop a use case for the latter.

What amazes me is that the discussion on the demise of the traditional media model amounts to a collective shrugging of the shoulders by these experts.  Given that the business model for traditional newspapers is so broken, the disagreements as to the way forward run very deep.

Some of the suggestions in this morning’s breakfast discussion include that every print article should disclose  metrics as to how many people have read it in order to establish popularity benchmarks—this becomes a way of judging market reach as well.  Risk: ‘The New York Times could become the Paris Hilton Times’.  This tension between the eroding credibility and gravitas of the “traditional press” and the “deep but unverified assertions” of many blogs is at the heart of the problem.  Building a business model that scales to capture the high ground of credibility at a large scale online is in the process of evolving.  100-journalist strong online media news organizations are now thriving (meaning profitable), per the panelists.

Chaos currently reigns. Jeff Jarvis recommends reading Clay Shirky’s Thinking the Unthinkable.

Commenting on Twitter– the speakers highlighted the asymmetry of Twitter between The Followed and Followers. Finally the discussion has turned to the fact that Twitter makes no money.  The speakers believe that the Twitter business model will turn into search-based advertising and feel that Twitter is so revolutionary that the successful business model for Twitter is at hand.

I’ve been a Twitter skeptic but am starting to see it as a useful public utility for crisis situations and spontaneous viral group eruptions (from the incipient Iranian revolution to the Aspen Ideas Festival).

Follow me on Twitter @plevensohn and check out #AIF09 in the Twitter stream to see what is going on at the Aspen Ideas Festival in real time.

Scott Draughon, Anyck Turgeon, Robert Rodriguez, Pascal Levensohn

At 4 pm EDT on June 17 Robert Rodriguez, chairman of the Security Innovation Network, and I will discuss the recession’s implications on the continuing pace of American innovation on MyTechnologyLawyer, a live radio show.

The title of the hour-long show is “The Innovation Crisis in America.” The format for the show will be conversational, and I expect that our hosts, Anyck Turgeon of Crossroads Systems and Scott Draughon, originator and the main host of the show, will elicit some provocative answers through their questions.

Among the questions that we will discuss:

What is Innovation?
What supports the argument that there is an innovation crisis in America?
How does Silicon Valley fit into the innovation ecosystem?
How has global competitiveness changed over the past decade, how do observers measure changes in competition, and what does this mean for America?

Listeners can tune into the show live by going to this link: CLICK HERE

The show will be recorded and accessible for downloads at your convenience at www.mytechnologylawyer.com/crossroads .

There is plenty of ink flowing with speculation on the future of the venture capital industry.  Phil Wickham, CEO of the Kauffman Fellows Program, has a constructive perspective on this topic, which he expressed in his CEO recap in the Kauffman Fellows Program eBulletin that was published on June 2.

Below, I’ve quoted his key observations from the newsletter, with which I agree:

“… I [have] found two camps regarding venture capital: the majority believes venture is the answer to all our needs (mostly entrepreneurs) and the minority seems to think that the entire industry couldn’t fall of the edge of a cliff fast enough (mostly policy and academia). I have to say that the whole thing alarmed me, since we so strongly believe that the answer is nuanced and solidly in the middle of these two extremes. The CVE’s [Center for Venture Education] DNA is that of an “entrepreneur-first” organization, growing out of the culture and values of Mr. K [Ewing Marion Kauffman] and his Marion Labs team that put together and operated the Kauffman Foundation.

Since our full independence from the [Ewing Marion Kauffman]Foundation in 2001, our focus has been to anticipate as much as possible the evolution of the entrepreneur’s needs and opportunities, since we are management’s primary service provider. As a result, we have included the unique expertise of tech transfer funds, angel groups, corporate venture funds, international government seed funds and even foundation investors in the Kauffman Fellows Program as we strive to build a curriculum with maximum value for our customers.

… We’ve concluded a few simple things. First, that entrepreneurial capital is about enabling scale, and the value we deliver as an industry is much the same at any stage or in any environment. Second, that the CVE’s intellectual capital built up over the past 15 years is broadly applicable across all forms of entrepreneurial capital. Third, within that body of knowledge, our evolving expertise in leadership and managing the human dynamic has far more long-term impact than anything else we do. Finally, we are starting to discover that there is a much broader opportunity to spread this leadership know-how to all of the players in the eco-system: university researchers, entrepreneurs, LPs, government policy experts and service providers. We think that if – across the globe – each positional player can come to understand their own and each other’s roles and put their collaborative talents and energies behind the entrepreneur’s imagination, the world will be a better place for our children to inherit.”

In 2007 the National Academies published an important essay by Norman Augustine, former CEO of Lockheed Martin and a deep thinker on America's slipping global competitiveness, titled "Is America Falling Off the Flat Earth?".  This brief monograph is required reading for anyone seeking facts about how America's global competitiveness is declining– as well as clear recommendations for the way forward.  Mr. Augustine touches on the declines in education, in business, in technology, and he diagnoses the self-inflicted nature of a society's successful development that leads in this direction. At its core, this essay is a passionate  appeal for coordinated national action to catalyze a multi-disciplinary program designed to win in a radically new global playing field.

What Mr. Augustine refers to as the competitiveness ecosystem includes the innovation ecosystem.  It is clear today that the global financial crisis which began in early 2008 has only accelerated the negatives, both by catalyzing further spending cuts in critical areas of long-term research and by worsening the odds that our government will recognize the immediacy of the need for the allocation of critical financial resources to get America's innovation train back on track.

A couple of my favorite quotes from the essay follow:

Perhaps the most incisive summary to be found, as far as the nation's competitiveness ecosystem is concerned, comes from the 2,500 year-old writings of Aeschylus:

So in the Libyan fable it is told
That once an eagle, stricken with a dart,
Said, when he saw the fasion of the shaft,
"With our own feathers, not by others' hands,
Are we now smitten".

In America, we are to a considerable degree living off past investments, the comparatively strong position the nation held at the end of World War II, and the prevalence of English as the predominant language of business, government, and technical education.  But the impact of those discriminators appears to be diminishing.  Simply stated, we have been eating our seed corn. . . . We are witnessing a gradual, albeit accelerating, erosion rather than a single cataclysmic wakeup call. . . . Charles Darwin observed that "it is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change."

While there's been a lot of "Change" in Washington in the last few months, we are still at the bottom of the mountain.   The challenge ahead of us requires our policymakers to understand that the Change we must be investing in now is open-ended, risk-tolerant, and all-consuming. It is the long-term change that will protect our nation's posterity, and, by its very nature, is not politically expedient.  Sadly, the posterity baby has been thrown out with the bathwater many times in the course of the development of America's national obsession with immediate gratification, and we are paying a heavy price for this short sightedness today.     

Four years ago I became very concerned that the threats to our nation's critical infrastructure from cyber attacks were not only increasing, but that the escalating risks to our country's economic and national security were being largely ignored outside of the intelligence community and small groups of innovative entrepreneurs focused on addressing this problem.  Through Levensohn Venture Partners' involvement as the lead venture sponsor of the IT Security Entrepreneurs' Forum (ITSEF) since its inception in 2007, and through my personal initiatives advocating public policy solutions to address cyber security issues, I have had some positive impact in increasing awareness of this problem.  The non-profit Security Innovation Network, on whose board of directors I now serve, is taking this message to Washington on June 25th. I am joining an unusual group of thought leaders crossing big business, small business, academia, venture capital, and government who have all come together to address the urgent need for solutions to our nation's cyber security vulnerabilities:

Admiral (Ret.) Michael McConnell
Sr. Vice President, Booz Allen Hamilton
Former Director National Intelligence
 
David Cullinane
Chief Information Security Officer
eBay

Tony Sager
Chief Vulnerability Analysis & Operations
National Security Agency
 
Jerry Archer
Chief Information Security Officer
Intuit

Randy Katz
United Microelectronics Corporation Distinguished Professor
EE and Computer Science Department, UC Berkeley
 
Dr. James Finley
CEO, The Finley Group
Former DOD Deputy Under Sec.
Aquisition & Technology
 

Dave Robbins
Chief Executive Officer
BigFix
 
Bob Ackerman
Allegis Capital
Managing Director and Co-Founder
 
John Weinschenk
Chief Executive Officer
Cenzic
 
Steve Elefant
Executive Director
Heartland Payment Systems
 
Robert Rodriguez
Chairman
Security Innovation Network
 
David Bryan
Executive Vice President
ManTech International
 
Dr. Douglas Maughan
Program Manager
Department of Homeland Security S&T
 
Bob Bragdon
Publisher
CSO Magazine
 

A brief description of my panel follows:

The Innovation Crisis in America—Implications for Cyber Security

The global financial crisis has exacerbated long-term negative trends
undermining the foundations of America’s economic growth engine.
Entrepreneurs, corporate and academic research and development
professionals, and venture capitalists are inextricably linked together
in this crisis. Declining spending on basic research by the U.S. Government and universities, reduced corporate R&D expenditures,  and systemic risks to the integrity of the venture capital growth engine are converging to undermine the development of cutting
edge future solutions needed to protect our country’s cyber security.
This perspective from two venture capitalists, a leading academic, and
a successful security entrepreneur highlights the interdependence of
these communities and the implications to our country’s prospects for
sustainable economic growth, new job creation, and national security.

Panel Chair: Pascal Levensohn

Panelists:

Dave Robbins, CEO BigFix
Bob Ackerman, Managing Director & Co-Founder, Allegis Capital
Randy H. Katz, United Microelectronics Corporation Distinguished Professor, EE & Computer Science Department UC Berkeley
Co-Chair, Committee on Assessing the Impacts of Changes in the
Information Technology and Research and Development Ecosystem, National
Research Council of the National Academies

Attendance at this special event will be limited to 125 applicants.

Registration Fee: $75.00

Registration Fee for Government Employees: $45.00

Registration Fee for Media: No Charge

For more details about the Security Innovation Network and this special event, CLICK HERE.

Believe it or not, according to a report from the Washington Post, “the National Archives lost a computer hard drive containing a large amount of sensitive data from the Clinton administration, including Social Security numbers, addresses, and Secret Service and White House operating procedures, congressional officials said yesterday...”

Apparently, the drive was lost between October and March, and it contained one terabyte of data — enough material to fill millions of books… According to California Republican Rep. Darrell Issa,  the hard drive was moved from a "secure" storage area to a workspace while it was in use. The inspector general explained that at least 100 badge-holders had access to the area where the drive was left unsecured… Besides those with official access to sensitive material, the inspector general said janitors, visitors, interns and others passed through the area… Further, the workspace is in an area that Archives workers pass through on their way to the bathroom…

Many things trouble me about this report—but the biggest one is that inexpensive, commercially available solutions that would have made the hard drive useless to unauthorized parties have been around for years.  These solutions cost less than $100 and there are numerous quality systems available.  For example, John Muir and Bill Bosen of Trusted Strategies first built one in 1987, and this solution eventually became Pointsec. There are Federal security standards that should have enforced encryption. What were these people not thinking?

People in the National Archives are charged with organizing, preserving and protecting data, there are Federal requirements to do so, there have been numerous previous incidents from which to learn, and the means to provide adequate security are readily at hand. How can there be any excuse for this?

There is a lot to worry about when we talk about our nation’s cybersecurity vulnerabilites.  But we are talking about a fundamental breakdown in process here, and this worries me more than anything.  This incident is striking evidence of the truth that security is only partially a technology problem, and is largely an issue of personal and social responsibility.  Until people grasp that reality,  security will be elusive…

How can we expect to protect our country, even if we do manage to enact reforms that will allow innovative solutions to find their way into the hands of those who need them, when the barn door is being left wide open?

I usually try to keep my blog posts short. Today I have failed in this endeavor but urge you to please read through to the end of this important post. The current issue of Foreign Affairs Magazine features an excerpt from Leslie Gelb's new book, Power Rules: How Common Sense Can Rescue American Foreign Policy.  This essay is exceptionally good, and, in my view, Gelb's thesis should be applied to all forms of statecraft and to promote the resolution of both newly emerging and long stagnating public policy debates.

Gelb accurately diagnoses the "weakening fundamentals of the United States.  First among them is that the country's economy, infrastructure, public schools, and political system have been allowed to deteriorate.  The result has been diminished economic strength, a less vital democracy, and a mediocrity of spirit."

Several paragraphs in this powerful essay deserve highlighting:

"The bases of the United States' international power are the country's economic competitiveness and its political cohesion, and there should be little doubt at this point that both are in decline.  Many acknowledge and lament faltering parts here and there, but they avoid a frontal stare at the deteriorating whole.  It is too depressing to do so, too much for most people to bear. … The United States is now the biggest debtor nation in history, and no nation with a massive debt has ever remained a great power.  Its heavy industry has largely disappeared, having moved to foreign competitors, which has cut deeply into its ability to be independent in times of peril.  Its public-school students trail their peers in other industrialized countries in math and science. They cannot compete in the global economy.  Generations of adult Americans, shockingly, read at a grade-school level and know almost no history, not to mention no geography.  They are simply not being educated to become the guardians of a democracy.

These signals of decline have not inspired politicians to put the national good above partisan interests or problem solving above scoring points.  Republicans act like rabid attack dogs in and out of power and treat facts like trash.  Democrats seem to lack the decisiveness, clarity of vision, and toughness necessary to govern.  This tableau of domestic political stalemate begs for new leadership.  The nation that not so long ago outproduced the rest of the world in arms and consumer goods, the nation lionized and envied for its innovation, can-do spirit, and capacity to accomplish economic miracles, has become overwhelmed by the tasks it once performed competently and with relative ease."

This is the most succinct and gut-wrenching summary of our national predicament that I have read.  Gelb puts his finger directly on the jugular vein of America's innovation ecosystem and diagnoses the multiple layers of dysfunction that have launched our country into such a deep crisis.  I share his fear of a new global reality developing along the following lines:

"The real danger in this universe of primitivism and plenty is not new wars or explosions among major states, or a world war, or even a nuclear war.  It is the specter of nations drowning in a flood of terrorism, tribal and religious hatred, lawlessness, poverty, disease, environmental calamities, and governmental incompetence.  Many nations are going under because they are simply unable to cope, and they will drag others down with them."

Gelb closes this essay with an impassioned plea for action, and most important, he retains a strong sense of hope and pride in our country:

"Every great nation or empire ultimately rots from within.  One can already see the United States, that precious guarantor of liberty and security, beginning to decline in its leadership, institutions, and physical and human infrastructure, heading on the path to becoming just another great power, a nation barely worth fearing or following.  It is time to send up flares signaling that the United States is losing its way and its power, that it is in trouble. But it is even more important to reaffirm the belief that the United States is worth fighting for both across the oceans and at home.  There should be no doubt that the United States, alone among nations, can provide the leadership to solve the problems that will otherwise engulf the world.  And for all the country's faults, there should be no doubt that it remains the last best chance to create equal opportunity, hope, and freedom.  But to restore all that is good and special about the United States, to rescue its power to solve problems, will require something that has not happened in a long time: that pragmatists, realists, and moderates unite and fight for their country."

I've been sending out flares to other realistic moderate pragmatists on this and other topics that demand a "common sense" approach for years.  Through groups such as the Council on Foreign Relations, the Aspen Institute's Socrates Society, the Working Group on Director Accountability and Board Effectiveness, and, most recently, the Security Innovation Network, I have joined and helped forge communities of interest bound together by empowered individuals who are thoughtful and constructive agents of change.  As Gelb points out, we have a lot of wood to cut, but I remain energized and, most importantly, hopeful that we can make a difference because we have to.  Given where America stands today, fomenting pragmatic and realistic change is not an option, it is a requirement.

Global Competition and the Critical Role of Venture Capital in America’s Growth Economy

[RUN TIME 3 MINUTES 17 SECONDS]
Dr. Curtis Carlson, President and CEO of SRI International, speaking on the panel with Dr. Gururaj “Desh” Deshpande, Chairman Sparta Group, LLC and Lesa Mitchell, VP Advancing Innovation, Kauffman Foundation, at the IT Security Entrepreneurs’ Forum held at Stanford University on March 18, 2009.
Since 2007, ITSEF has focused on advancing innovation in security technologies through public-private partnerships by developing a community of interest between Washington and Silicon Valley. ITSEF is the only conference of its kind designed to “bridge the gap” between the Federal Government, system integrators, venture capitalists, and academic research communities. Dr. Carlson discusses the fragility of the U.S. venture capital ecosystem and how the U.S. Government needs to better understand the role of venture capital as the growth engine in the U.S. economy. Dr. Carlson also describes the declining competitive position of the U.S. in research and development today.
ITSEF is a part of the Security Innovation Network (SINet). For more information on SINet, click here.

Unintended Consequences of Regulation Put Fragile VC and Innovation Ecosystems at Grave Risk

[run time 46 seconds]
Dr. Curtis Carlson, President and CEO of SRI International, speaking on a panel with Dr. Gururaj “Desh” Deshpande, Chairman Sparta Group, LLC, and Lesa Mitchell, VP Advancing Innovation, Kauffman Foundation, at the third annual IT Security Entrepreneurs’ Forum (ITSEF) held at Stanford University on March 18, 2009. Since 2007, ITSEF has focused on advancing innovation in security technologies through public-private partnerships by developing a community of interest between Washington and Silicon Valley. ITSEF is the only conference of its kind designed to “bridge the gap” between the Federal Government, system integrators, venture capitalists, and academic research communities. Dr. Carlson addresses the challenges that exist today for the U.S. to build an innovation economy. He credits unintended consequences from financial regulation, in particular Sarbanes Oxley and current U.S. immigration policy for highly skilled foreign nationals, as killers of innovation in the U.S. today.
ITSEF is a part of the Security Innovation Network (SINet). For more information on SINet, click here.

The Increasing Role of Universities and Research Institutes as Centers of Excellence For Innovation Today

[run time 1 minute 27 seconds]
Dr. Gururaj “Desh” Deshpande, Chairman Sparta Group, LLC speaking on a panel the third annual IT Security Entrepreneurs’ Forum (ITSEF) held at Stanford University on March 18, 2009 with Lesa Mitchell, VP Advancing Innovation, Kauffman Foundation, and Dr. Curtis Carlson, President and CEO of SRI International. Pascal Levensohn, Founder and Managing Partner of Levensohn Venture Partners moderated the panel. Since 2007, ITSEF has focused on advancing innovation in security technologies through public-private partnerships by developing a community of interest between Washington and Silicon Valley. ITSEF is the only conference of its kind designed to “bridge the gap” between the Federal Government, system integrators, venture capitalists, and academic research communities. Deshpande explains how universities and research institutes like SRI International are at the center of gravity for innovation today.
ITSEF is a part of the Security Innovation Network (SINet). For more information on SINet, click here.