Phillips $10 million dollar $60 light bulb: just your average government project part 4

Phillips $10 million - $60.00 light bulb

Each morning I look forward to reading the morning paper.  Since she got an iPad, a little over a year ago, my wife keeps saying why don’t you cancel the paper and just read the paper on-line.  It is a routine, I know, but this habit helps me start the day and get my mind in gear—usually.  And maybe now I am ooooollllllddddd fashioned.  Or perhaps just old, but I really appreciate the ritual—ritual sounds much more mature than routine and lends an air of distinction to this anachronistic practice don’t you think?

Well, as I was reading once again I am presented with yet one more justification on why we need to have a serious discussion about the national economy, the role of government in the economy, and why we need to move much of the ‘new found’ federal responsibility back to the states, and the private sector; as if any more justification was needed on top of, Cartagena Hooker-gate, GSA let’s all meet and have a party at the taxpayer’s expense-gate, and Solyndra-gate.

The point of today’s reflection is an article, in the Boston Globe by Peter Svensson, “Rebates to ease shock of a $60.00 light bulb.”  I think everyone needs to read this article, if you have not done so already.

Having been in the technology sector for many years, and having a few friends who have either invested in or started, “green” energy companies, I have a passing familiarity with the basis for the creation of this bulb.  There was a $10 million contest, sponsored by our federal government to stimulate the production of more energy efficient light bulbs, driven by political pandering to the let’s save the environment from the evils of incandescent light bulbs crowd.

The justification was that incandescent bulbs convert a large amount of energy to heat, therefore it is wasted.  This is a valid point.  Another point is that from these group’s figures, the average life span of a 60 watt incandescent bulb is 1,500 hours and therefore the contest was for not only a green bulb but one that lasts longer so the cost could be justified.

The contest rules were for a bulb that lasted much longer and it had to cost $22.00, or less, in the first year, with the assumption that the price would go down as adoption and production increased.  Oh yea, it was an American program, and you would think it was also to stimulate American jobs and American business? Nope!  Only one company, Phillips, and if you don’t know Phillips is based in the Netherlands, entered the contest.  Of course they won.  But there is a catch!

The bulb will cost $60.00 not $22.00 or less.  Of course the argument from the groups is they are forcing electric companies to provide rebates for the purchase of the bulb so the price will be offset by $20 or $30 dollars, but if my math is correct $60 – $30 is still $30 which is more than $22.00, last I checked.  And now, as this is coming to light (so to speak), Phillips says they will offer an initial discounted price of $50.00 so the price will be in the $20 to $30 range… Great deal isn’t it?  They got $10 million so you can bet the discount will last until they sell the first million bulbs (that’s $10 million divided by the $10 dollar discount). And let’s not even ask the question if the chemistry in these bulbs might be more hazardous to the environment once they are disposed of.

The thing that gets me about this whole program is that all of this “savings” are coming from us in the first place, so we are not saving anything.  The rebates are charged back to us in the form of higher cost per kilowatt, and the $10 million came from us in taxes.  Most importantly, we are increasing the cost of light bulbs from about $1.10 per bulb to over $50.00. And this is predicated on saving the planet, lowering our energy costs, and stimulating the American Job market . . .  Well forget the American Job market part I guess . . .

Last point I have on this subject is, if the statistics I hear quoted about incandescent bulbs are accurate, then I am the luckiest S.O.B. in the whole world because . . .

The earth killing $1.11 incandescent light bulb

They claim that an incandescent bulb only lasts for 1,500 hours.  I have by a quick count at least twenty-eight, 40 – 60 watt incandescent bulbs in my house now.  I have been in this house for over ten years. I replace on average two bulbs a year. Most of the lights in my house burn five hours a day, some more, some less, but this is my best guess on the average.  So, my lights are lit about 1,825 hours per year.  Given the 1500 hour average life, according to these green groups, I should be buying and replacing about thirty bulbs a year.  But you know what, I don’t . . .  I never have.  In fact, the reason that incandescent bulbs burn out as quickly as they do, albeit much more slowly for lucky me, is because the vacuum in the bulb at manufacture is not as complete as it could be.  And it only costs me $1.11 cents to buy these evil, world destroying, 60 watt bulbs, or $2.20 per year.  This means, I theoretically change them all once every fourteen years.

Now, if I buy twenty-eight of these new bulbs that are supposed to last twenty years, even with the discount, it will cost me $840.00.  I can buy 756 of my old bulbs for that price, which would have lasted fifty-four years at my current replacement rate.

Light bulb manufacturers, all the way back to old Tom Edison, knew they could make bulbs that lasted for a long, long, time—10 to 30 years. In fact, they have, by accident and random chance.  My grandfather’s house had some of the original Edison bulbs with a base the size of a ping pong ball and a filament that looked as thick as a pencil lead.  If they were not broken over time, they would all probable be burning today. Good for homeowners, but bad for GE, Sylvania, etc.  These guys new that bulbs could be cheap because you bought a lot of them every year, and if you only buy a few every twenty years then they will cost a whole lot more.  And guess what, they were correct back then and they are correct now!

Since I am now living in California, and I can’t buy many incandescent bulbs because they have been outlawed, I have a few CFL bulbs, and so far I have had to replace these bulbs at least once a year and in one case, in the globe ceiling fixture in my closet that has two 40 watt bulbs, much more frequently.  In fact, if one of these suckers blows out in the fixture, the other one dies, seemly out of sympathy, in just a few days.

Due primarily to labor and benefits costs, and secondarily because we have a dwindling lower wage labor pool because everyone must go to college, we are already non-competitive in manufacturing.  Now, we will begin increasing the cost of lighting by almost fifty times as we move to these “save the planet” bulbs.  Many supporters of these bulbs argue that in the long run we are going to save so much more in costs of energy because of their efficiencies.  Well, due to past experience I am both skeptical of the claim, and dubious that the short term increase of costs on an already non-competitive economic structure will ever be offset.  And even if it theoretically will lower costs in the long run, I am starting to doubt we will be around as a vibrant economy for it to matter anyway; which means we won’t be buying a lot of $60 light bulbs because we won’t be able to afford them.

While I am all for limiting the impact we have on the environment, like everything else in life we need to also maintain some viability.  In this case, the viability is tied to our cumulative cost and its impact on our economic i.e. national and cultural viability. Perhaps If we really want to save the planet then we should likely all agree to commit suicide now.  Then we will no longer have an impact.  I guess, that is, after the ecosystem once again returns to stasis after the population blooms of bacteria, predators, carrion feeders, etc. — all go through their own population explosion-die off cycles as the excess food sources from the rotting polluting corpses we leave behind are finally consumed and absorbed into the ecosystem.  On second thought, this will likely be a bigger polluting source that all the incandescent bulbs so maybe we should just keep the incandescent bulb and balance it by what we save by not committing suicide in the first place—Cap n’ Trade at its finest.

Oh yea, can’t use cap n’ trade, cause the state is going to use that to pay for the High-Speed Rail to nowhere!

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About Thomas W. Loker

Meet the Author - Thomas Loker is a Startup Consultant and Advisor at SYDK.ORG, Angel Investor, Mentor and Advisor at Keiretsu Forum & Venture-Med and an established operations guy with serial successes with startups, transitional companies and turnaround situations. He has had a long career serving in the fields of science, technology and healthcare related industries. He is an active board member in both for-profit and not-for-profit companies. Tom has written numerous articles in the areas of healthcare, technology, politics and the economy. He is currently the principal author of Health Reform 2.0: Beyond partisan divide lies pragmatic solutions – a whitepaper focused on moving beyond the partisan rhetoric of the ACA (Obamacare) to a simple, efficient, effective, accessible and affordable healthcare system. He maintains a passion for serving the underserved and has founded, supported and worked in various companies to serve the most fragile among us. Because of his expertise on the business of healthcare, he was invited to conduct multiple congressional briefings on healthcare reform in Congress, meeting with more than 100 congressional representatives. He has been a guest on HuffPost Live to talk about health care issues, and is a frequent keynote speaker on the topic for many groups and events. Prior to his latest book, The History and Evolution of Healthcare in America: The untold backstory of where we've been, where we are, and why healthcare needs more reform, Tom published “Delusional Ravings of a Lunatic Mind”—a collection of essays on healthcare, politics and their interaction with the economy, available at Amazon, Barnes and Nobles, and other bookstores. Tom's passion for Music is currently expressed by his role as VP Operations and General Manager of David Victor Presents. See www,davidvictorpresents.com to find out more. You can find Tom online at: Website: http://www.loker.com Blog: https://tloker.wordpress.com LinkedIn: http://www.linkedin.com/in/thomaswloker Photography: http://www.loker.net

13 thoughts on “Phillips $10 million dollar $60 light bulb: just your average government project part 4

  1. Perhaps I shouldn’t be saying this publically for fear that the green police or whatever Federal Agency is assigned to enforce any governing laws for the unlawful transfer and trafficking of incandescent bulbs may beating down my door, but Tom I would be willing to send a few incandescents from my personal stash. (My children would argue hoard might be a more appropriate word.)
    I guess I had better get those out to you while the United States Postal Service is still in operation. I feel about letters like you do about the newspaper, unfortunately I am afraid that it will too soon be nostalgia that we feel for these things.

    • Hey maybe if you can source we may be able to attract all the soon to be out of work drug dealers in the U.S. due to the fast and furious, war on poverty, and war on drug programs from our federal “giverment.” I am sure they will be looking for new contraband to sell at high margins. Gee, I wish my uncle Al still lived in Chicago, he would know what to do.

  2. This article was written by someone with a conservative agenda and a desire to knock the government, but what the heck, I like talking about technological progress and when it is appropriate for the government to provide incentives for it. This new energy efficient light bulb costs $60 today, but the most salient fact is that the prices of all things technological decrease over time. Cars, computers, TVs, refrigerators, everything. The higher initial cost of a new product is partly due to the cost of research and development, and to the fact that version one of just about everything costs more. Improvements in the production process, higher sales volume and continued improvements to the product itself will bring down the price.

    Consider the very first computer, the ENIAC, which filled a room and had less capability than most of todays calculators. You can thank the Federal government for financing the devlopment of the ENIAC in the 1940s — as you read this article on your very own computer!

    • Dear Gary,
      thanks for the comment. The only thing I will respectfully disagree with is that I represent a conservative agenda and want to knock the government. My agenda is mixed both conservative and more liberal and is really driven by pragmatism and not to knock the government. By government I assume you mean federal government. I think there are a number of things that the federal government does well and should do but these kinds of deals have as yet led to an ENIAC, or ARPANET type of gain. In both of those examples prior technologies were not outlawed to make way for a much more expensive option as was with the incandescent bulb. Secondly, you may be right and the price may come down but initial projections have not as yet shown that. The initial projections show a real reduction in the replacement purchase of bulbs exponentially reducing demand which is where the economies of scale come from. I actually hope you are right. I just wish the federal government would get out of some of these kinds of things.

      The main point of the article is we need to understand that the cumulative cost of all of these decisions has left us with no buying power. We have demurred to all the tangential issues and said well its only 60 dollars for this or 30 dollars for that or this group can pay more for this etc. In the end we ran out of money in 1972. We have been playing a shell game since and today have a cumulative deficit of $10 to 16 trillion depending on whose number you believe. Today, since there is no more economic room all of these decisions are flow backs… In other words we keep increasing the costs and loosing international economic ground.

      Again, I appreciate your points and your opinion. I even understand the rational on why you feel this way. My perspective is perhaps just slightly different.

      • As someone who has seen the benefit og government incentives, for computers and other technologies, along with small small businesses, I am glad the government has helped keep the United States in the forefront. I don’t want to see America as an also-ran in new technologies. I think it is dangerous, for example, to allow China to lead research, development and manufacture of renewable soloar technology. We need the US to be the leader and our citizens to own solar companies and have jobs working for them.

        People tend to point the finger at anyone or anything convenient when assigning blame for the national debt, mostly based on if they are conservative or liberal. But the debt resulted form this: Congress created budgets and then decided not to raise enough money to pay for them, year after year. Some things that the Republicans hold dear are as much or more to blame than what the Democrats favor. After the budget was passed, Republicans chose not to raise enough taxes to pay for it. The item that drained the lagest amount of money from the us is the military budget. It’s huge and drains hundreds of billiions of dollars away from the economy every year, yet the Republicans choose not to even discuss the budget items in the military budget. Starting wars with small countries in the Middle east and elsewhere? We need to spend adequate time discussing the price of those wars before jumping in.

        If we are really serious about balancing the budget, each year we need to pay for the yearly budget that Congress votes for. We need to immediately drastically reduce the militart budget, eliminate many foreign military bases, bring troops home from the Middle east, end funding for cold war weaponry, and reduce wild spending for new weapons. Make everyone pay their fair share of taxes. The theory that we can go on allowing corporations and rich people to pay less than their fair share of taxes, and that will somehow magically boost the economy enough that these corpoartion and rich people eventually end up paying more taxes has been proven false. Examine the social welfare system objecively. Continue to help those in need, but set a reasonable limit, and put adequate fraud protection in place. That goes for all social programs such as Social Security, Medicare, unemployment, help for the sick etc.

        The money that we spend for US businesses to research, develop and create products, in order to lead the field in various technologies and to provide businesses and jobs here on American soil is the most important, the most crutial thing that we need to do. The government should be spending money on these things, the things that make us strong, rather than on starting wars or putting more money in rich people pockets.

  3. This article explains why government incentives make sense and describes some notable success stories:
    http://www.hybridcars.com/news/should-government-invest-technology-research-44193.html

    An excerpt:
    As companies like Fisker Automotive contend for a remaining balance of a low interest Energy Department loan – with critics saying it will be “the next Solyndra” – the briefings showed that sometimes the government can also pick winners.

    For example, Google’s search engine algorithm was born from a $4.5 million National Science Foundation grant for a Stanford University digital library project. Similarly, federally funded research into lithium-ion batteries, liquid crystal displays, signal compression and magnetic storage devices was credited with the 2001 introduction of Apple’s iPod. And thus far $5.6 billion invested in the Human Genome Project over 13 years has netted an estimated $67 billion economic payoff.

    • Gary,
      thanks for the comment and the link to the article. I really appreciate your participation here. I think one of the biggest issues we have now is not the division between ideological bases that has existed since the founding of the country, it is the relative lack of detailed thinking and backup to the arguments so that people and find compromise through tolerance as Ben Franklin advocated. I try hard to not be an ideological pundit but to approach the issues pragmatically. Some time soon we will all need to have a national debate as the some of the fundamental differences in outlook that you brought up in your first comment. And we will need to figure out how we revise our structure in a manner that will continue to allow as all to move forward together as one people despite differences. I truly appreciate your participation, the manner in which you debate and the extent that you elevate the conversation! Thanks!

      • I’m glad that you appreciate comments that differ from your own opinions. I like to discuss important topics but too often discussions degenerate along ideological lines and nobody wants to look at the subject objectively and do a little research before repeating some along party lines.

        It’s interesting that you have done so much research and thinking about health care. This issue has been important to me because I have been an independent computer contractor 19 years and had to pay for my own health care. In 1993 my employer fired me right after my wife got cancer, something he called “a business decision”. My health insurance cost so much that I had to become uninsured. My wife managed to get into a Wisconsin state run program. It still costs a lot and now even that is in jeopardy because Governer Walker (R) is trying to drastically reduce or eliminate most social programs that help people who need help. During tha last 2 descades I had a few ideas for lowering health insurance costs, health care costs, and for laws that would stop economic catastrophes that people omay encounter when they get serious illnesses. I was glad to see the health care bill pass, but I wish Congress had spent their time working together on the bill. Instead Republicans tried to get it killed and Democrats tried to do whatever it took to get it passed, and the quality of the bill suffered a great deal as a result. Now it looks like the Supreme Court is going to morph into a second legislative branch and possibly un-pass the bill. What a country! When I get some more time I’ll read what you have written about health care. Maybe something decent will pass by the time my kids get to be my age.

        I’d rather make things work for the state and the nation as a whole that just push legislation that rigidly follows a right or left wing agenda. It’s better to be practical, smart, mature, reasonable and good-hearted rather than just mindlessly follow an ideology and watch things go to Hell because legislation is not grounded in reality. I think the day of the Centrist is coming.

  4. Why Customer Service Can Beat Price Every Time

    The tough economic times have finally pushed many organizations to the point where prices have to be raised on products and services. While you know that the price increases are motiavted solely by the harsh ecoknomic times, how willp customerfs perceive the action? While customers are concerned about price, in almost every instance a customer will be willing to pay a bit more to receive better service. Why is this the case, and how can this fact be used to the advantage of an organization?Customer Comfort Level”Sometimes you want to go, where everybody knows your name” is more than a great line from the theme song of a classic television program; it is also a psychological fact that people like to be places where they are comfortable, and where they feel that the staff are looking out for their specific needs. Thiss is especially the case in the restaurant industry. Several research studies have shown that customers are willing to go out of their way to visit a restaurant that is identifcied wiht good cuystomer service, and thos even durinb harsh economic times. If you can provide hte kind of customner sevrice that makes customers feel “at home” when they come, they will remain loyal despite changes in prices.Price is Not EverythingMany businesses sell their customefs short in assuming that price is the biggest, and sometimes only driving force behind doingbusiness with a particular company. A good price is great, but the truth of the matter is quite often at a certain point, low prices are associated with products and services of inferior quality. In fact, consumer studies have shown thatt the vast majority of consumers expect to pay more for better quality products and servces. It is better to build your company’s reputation for doing quality work and providing good customer servicw, than to live and die by the price of the products thnat you offeer. Author Brian Koslow made the observation that “The only way to keep a good reputation is to continuously earn it.” Does the level of service that customers receive when they visit your organization show that you are trying to continuously earn the good reputation acquired over the yeas?While customers may check out a new place once, because of a great priceor discount, tehyt will not be headed back if they feel that they are not treated well. The fact that so mnay companies have seen customers remain loyal despite the hard economic times shows that excpetional customer service will bring yuor customers back even when it is a little harder on their wallet to do so. To make sure this kind of customer service is provided it is important to provide your employees with thd training they need.

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