Glenn Hutchins, who is the co-chief executive of Silver Lake Partners, has a great piece in Fortune.com. Over the years, he has structured a variety of innovative private equity deals in the tech sector.

So, what is his take on the future? First of all, he said that "everyone" is to blame for the current financial turmoil (such as mortgage lenders, politicians, rating agencies, the Fed, homeowners and on and on). He does say that the tipping point was the collapse of Lehman Brothers, which deflated worldwide wealth.

The mantra of the day is frugality and cutback. Rightsize and hunker-down, as tougher economic times are ahead.

But graft hunkering-down on to a U.S. auto sector that has accounted for a disproportionate share of lateral innovation, and you have the makings of an U.S. innovation slump, if not a drought.

The Wall Street Journal points out that the U.S. auto sector has had a kind of dual personality with regard to innovation. The Big 3 have failed to roll-out technologies that would have made their cars more competitive on the global stage, while at the same time pushed their suppliers -- including steel makers and auto parts suppliers -- to improve their parts supplied in order to retain the Big 3's business. Further, that high-performance-bar for suppliers has benefited other industries: one example -- metal parts in cars that last longer has led to metal parts in other applications, and for other industries, that do the same.

These days, most investors, executives, and economists know that there's no shortage of unpleasant news regarding the U.S. economy.

Moreover, some days it's hard to find those bright spots that we know exist amid the the snow storm of the recession. Here's one: U.S. worker productivity.

Underscoring that while there are no positives to job layoffs -- each job loss is a tragedy -- citizens and investors can at least point to the fact that the U.S. workforce is becoming more productive, and corporate efficiency is improving.

I recently read an excellent book, Gary Hamel's The Future of Management. Essentially, he believes that corporate management approaches are antiquated. As a result, many companies are failing to innovate and grow.

But, Hamel has found a variety of companies that are building new management models. Of course, one is Google (NASDAQ: GOOG).

According to Hamel: "What makes Google unique is less its Web-centric business model, but rather its brink-of-chaos management model. Key components include a wafer-thin hierarchy, a dense network of lateral communication, a policy of giving outsized rewards to people who come up with outsized ideas, a team-focused approach to product development, and a corporate credo that challenges every employee to put the user first."

That's a lot, but it's working quite well so far.

So how can your company get some Google magic?

Let's take a look:

Sanford C. Bernstein analyst Toni Sacconaghi looked at Apple Inc.'s (NASDAQ: AAPL) latest sales numbers and thinks that the company may have an iPhone inventory problem:

We believe the data points to a significant amount of iPhone channel inventory ... This is negative in two ways: (1) it indicates end-user demand for iPhone is lower than many investors may think based on Apple's sales figure; and (2) it points to slower iPhone sales in the current quarter, since much of this inventory is likely to be drawn down.

Check out News.com's coverage of the report for more details and insight.

Apple's stock has been hit hard of late, and this latest inventory report underscores one of the reasons I wouldn't buy Apple stock (I wouldn't short it either): The company is 100% dependent on its continued ability to innovate and stay ahead of the competition with each new product introduction. Even a blockbuster hit can only carry the company for so long.

Any investment in Apple is essentially a bet on the company's ability to continue being an innovator. Call me crazy but if I'm going to pay 6+ times book and 25 times earnings, I'd prefer a strong moat that doesn't require continued brilliance.

Regular BloggingStocks readers know by now that my investment strategies are fairly conservative and relatively coarse. Please don't begrudge me that. Although I don't track my picks in a portfolio, I do mentally track the general performance of the companies I tout, and I believe that overall I've done fairly well.

There are two major differences between my stock-picking efforts and what I perceive to be Warren Buffett's style. First, Mr. Buffett has years of experience that I myself do not have. Second, Mr. Buffett likes to have a greater working understanding of the nature of the businesses he chooses to investment in than I do. I choose my companies of favor with what I call my "big picture" strategy. All that means is that I use a broader view than most of my contemporaries who like to dig right down to the very roots of their picks.

I like to think that my strategy provides solid conservative support, which shall then free an investor to do some aggressive speculating with their profits.

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

John Christy, editor of the Forbes International Investment Report, chose Nokia Corp. (NYSE: NOK) as his favorite stock for 2007, which rose 38% as of 6/1/07. Here is his original recommendation for Nokia and his new favorite stock for the rest of 2007.

Updating his outlook on Nokia, the advisor says, "I've been arguing for some time that investors have not been giving the company enough credit for its leading position in the global mobile phone market. Fortunately that mind-set appears to be changing, in part because of a strong Q1 earnings report.

"Although Nokia's net income for the quarter fell 7% due to some one-time charges, margins showed solid improvement across the board. At the same time, Nokia is gaining market share in key segments such as emerging markets (low-end) and in multimedia phones (high-end).

"The improvements in profitability suggest that Nokia is not pulling this off simply by selling dirt cheap phones. Instead, it looks more like the result of savvy cost control and continued innovation.

"Separately, Nokia and Siemens said that they plan to cut about 9,000 jobs in their telecom equipment joint venture. The reductions -- which were expected -- should help drive savings of $2 billion a year by 2010. The stock remains a buy in our global portfolio."

See all 20 stocks the advisors picked for the second half of 2007.

The International Trade Commission (ITC) has banned imports of some cell phones containing chip technology from Qualcomm (NASDAQ: QCOM). The ITC has said that the ban covers cell phones that infringe on a patent held by Broadcom (NASDAQ: BRCM) and that were imported for sale after June 7. The majority of the cell phone import world is up in arms, claiming that the ban will do irreparable harm to the American consumer. Frankly, those that choose to infringe on patents shouldn't be importing technology they aren't ready to sit on when discovered.

James Gerace, spokesman for Verizon Wireless, claims that the ban "essentially attempts to freeze innovation in cell phones." A more accurate interpretation would be that the ban seeks to freeze piracy that circumvents innovation. A Red Herring article says that Sprint Nextel (NYSE: S) has openly declared that it expects to sell 5 million phones this year that contain the infringing technology. That's a pretty bold statement by Sprint, and in light of the current ban, I think it's a pretty stupid statement also. That would be similar to me stopping at the local police station to tell them I plan on driving over the speed limit for 500 miles this year.

AT&T (NYSE: T) doesn't seem to care much about the cell phone ban. It has plenty of handsets available that don't contain the infringing chips. AT&T thought ahead and based the majority of its offering on a different technology. Might we call that decision prudent?

Meanwhile, as the pirates cry and whine about appeals and a stay of execution, Broadcom has eloquently made clear that it will consider discussion about licensing of the patent.

In Jim Jubak's latest column "10 Innovators for Your Portfolio," he discusses an interesting study done by consulting firm Booz Allen Hamilton. According to their research, "There are no significant statistical relationships between R&D spending and the primary measures of financial or corporate success: sales and earnings growth, gross and operating profitability, market capitalization growth and total shareholder returns."

According to Jubak, "The companies that get the biggest bang out of their R&D spending are those that manage research and development as part of an ongoing process that includes customer feedback, design, manufacturing, marketing and -- certainly -- innovation and commercialization."

This is interesting for several reasons. First of all, it should encourage investors to look at R&D expenses more critically, especially when they are such a large part of expenses for some companies. Some questions to think about:

• Is the company investing in technology to grow its business, or is it simply forced to do research to maintain the current position in the market. For instance, some companies are constantly tinkering with their products to fend off knock-offs and competitors. This is not a form of R&D that is likely to lead to increased sales or earnings.
• How close is the company to developing something commercially viable, i.e. When do we get paid? A company working on a time machine that won't be ready for 200 years probably won't produce any profits you can enjoy. When a company is focused on a "long-term strategy," remember the words of John Maynard Keynes: "In the long run, we are all dead."

One of the great paradoxes of innovation is that in many cases, advances that have a tremendous effect on society make very little money for the innovators. Consider Warren Buffett's comments on new technology:

Sizing all this up, I like to think that if I'd been at Kitty Hawk in 1903 when Orville Wright took off, I would have been farsighted enough, and public-spirited enough -- I owed this to future capitalists -- to shoot him down. I mean, Karl Marx couldn't have done as much damage to capitalists as Orville did.

I won't dwell on other glamorous businesses that dramatically changed our lives but concurrently failed to deliver rewards to U.S. investors: the manufacture of radios and televisions, for example. But I will draw a lesson from these businesses: The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.

While there can be no doubt that online video is the future, there are still tremendous questions about whether it will ever make any great amount of money for anyone. The Wall Street Journal (registration required) recently discussed the future of the online video industry, and quoted Brahm Eiley of Convergence Consulting as saying that "It's not much of a business model to give up television at the end of the day." But as companies like Viacom Inc. (NYSE: VIA) are learning, it may happen even if it isn't a good business model.

I would caution investors to always remember Warren Buffett's words about the Wright Brothers when considering investments in sexy new technology. When buying stocks, the question must always be: "How will this company make money?"