Growthology

Dealing With the Changing Facts Around Us

We're surrounded by changing knowledge. From what's nutritious and what's not, to the current state of our scientific knowledge, to even facts about the world, such as what is state-of-the-art technology and even how many billions of people there are on the planet, there is a great deal of change in the facts around. But beneath all of this flux and change there are certain rules and regularities. And I explore how to understand this in my new book The Half-Life of Facts. And as I discuss in a short essay, there are lessons in this for the entrepreneur:

When trying to break into a new market, develop a new product and grow a company, you can’t operate with outdated statistics. It's fine to quote an obsolete population size for a city at dinner, or reference an overturned research study to impress someone at a party. But when your business is dependent on understanding the facts, you can't rely on outdated knowledge.

So what can business owners do to be prepared for the changing facts around us? Well, simply put, don’t view education as a stage of our lives, relevant only when we are young. Rather, education is a stance we must take toward the world, along with a recognition that what we know is constantly changing. As the world continues to change rapidly, and generate exponentially growing information, view learning as an integral part of your life, rather than a youthful indiscretion.

Medical schools now teach their students that a significant portion of what they learn will be obsolete soon after they graduate. My grandfather, who learned the wrong number of human chromosomes in school, could have been served well by this information. And the same sort of advice should be given to entrepreneurs: that you must constantly be ready to change, because the facts you are operating with are changing around you.

The rest can be read here. And don't forget to check out my book!

A Couple of New Sketchbooks

First, there is this sketchbook featuring narration from Brad Feld, who draws from his experiences and new book, Startup Communities: Building an Entrepreneurial Ecosystem in Your City, to talk about how you can support your local entrepreneurial community.

 

Second, there is this sketchbook featuring narration from Jonathan Ortmans concerning Global Entrepreneurship Week (GEW). GEW this year is the week of November 12, though there are some kickoff events starting November 9. For more information about GEW and events near you, check out http://www.unleashingideas.org/.

Better Capitalism

Today, we are releasing another Kauffman Sketchbook about Better Capitalism, a book authored by Robert E. Litan and Carl Schramm that was mostly completed while they were both at the Kauffman Foundation. The book is a sequel or follow-up to their widely praised Good Capitalism, Bad Capitalism.

You can see all of our sketchbooks at www.kauffman.org/sketchbook.

Responding to Bryan Caplan

Bryan Caplan has posted comments he emailed me on an early draft of my new e-book Human Capitalism. I knew in advance that Bryan was going to be a tough critic: after all, a guy who writes a book arguing that parenting has little impact on how children turn out is unlikely to be receptive to my claim that cultural differences (e.g., differences in parenting) explain much of America’s growing class divide along educational lines.

Bryan’s skeptical comments proved very helpful. In particular, he steered me away from focusing too much on the narrow issue of the heritability of IQ – which, he concedes, is a pretty weak predictor of life outcomes. Instead, he urged me to look instead at the heritability of socioeconomic status generally. There is a strong correlation between parents’ outcomes and those of their kids, and there is a considerable literature in behavioral genetics based on the study of adoptees and twins that finds genes, not shared environment, account for practically all of that correlation.

Thanks to Bryan I dove into that literature and found that it does indeed offer support for the view Bryan has called “parental irrelevantism.” But, as Bryan fails to acknowledge, those findings are subject to serious caveats and, in any event, there are other findings in that same literature which show an important effect of upbringing. In addition, other important lines of evidence that Bryan ignores point to the considerable impact of the upbringing environment. I came away with my initial common-sense verdict undisturbed: nature is important, but so is nurture.

Since Bryan has shared his comments, I thought I would post a couple of them here along with the emailed replies I made at the time. I chose these exchanges because I think they address interesting issues I really didn’t tackle head-on in the book. I’ll put his comments in italics followed by my responses.

7. (chap 6) There may be “no prospect for a return to the more authoritarian morality of yesteryear.” But what about a marginal move in that direction? And if the breakdown is indeed caused by the absence of material scarcity, wouldn’t drastic cuts in the welfare state -- drastic enough to restore labor force drop-outs and unskilled single moms to material scarcity -- revive the morality of yesteryear? Why doesn’t this lead to the very unliberaltarian view that the welfare state is the problem?

I believe the fundamental problem is mass affluence, not the welfare state. Clearly we have to engage in speculation when imagining what life would be like in the absence of government-provided income support -- given that such support has been around in the English-speaking world for over 400 years. But my assumption is that private charity in our rich, liberal, humanitarian, soft-hearted society would provide some decent “social minimum” for poor children and by extension for their parents (can you really imagine an America in which children were allowed to starve? or in which they were routinely taken from their parents because their parents couldn’t support them?) I don’t believe the kind of material scarcity that faced the early 20th century American working class, or that shapes the mentalities of current-day immigrants from poor countries, is ever coming back to this country -- or it is does, it will be because of some catastrophe that causes us to forget entirely about the issues we’re discussing here.

That said, when specific welfare-state policies (e.g., the old AFDC) subsidize idleness rather than work, they ought to be changed. I call for a shift in welfare policies toward greater subsidization of work

One last comment that probably won't be very helpful, but I want to get it off my chest: When I see the hard work and positive attitude of the typical immigrant, I find it very hard to sympathize with the problems of the American working class. The so-called American poor are born with so many advantages, but they squander them through their own bad attitude and irresponsible behavior. Yes, in a welfare state the problems of my countries’ working class are my problem. But that makes me want to *attack* the welfare state, not expand it to help undeserving Americans even more. The people we should be worrying about are immigrants and would-be immigrants who can’t even legally accept a job offer, not Americans who can’t bother showing up to work on time.

On an emotional level, Bryan, I sympathize with you. I grew up as a nerd in the Deep South, where being smart and achievement-oriented in school meant social isolation and hazing. So living through that, my knee jerks in the same direction as yours.

But I don’t really think moral desert has much relevance for public policy, at least not here. If public policy reforms can change conditions and incentives in a way that ensures that a higher percentage of morally blameless infants grow up to be morally praiseworthy adults, then we ought to make those reforms -- even if they soften the blows of their own folly for some morally unpraiseworthy adults.

In that regard, I think the reason immigrants are so praiseworthy in your eyes is due to circumstances outside their control -- i.e., they were raised in poor countries under the lash of material scarcity. Likewise, the reason native-born working-class Americans are so often blameworthy is due to circumstances outside their control -- they were raised in mass affluence without being adequately acculturated with the skills needed to make good decisions. If you stop your analysis at the moralistic level, you miss the underlying factors that are driving differences in moral outlook.

Financing Women-Owned Firms

The new book A Rising Tide: Financing Strategies for Women-Owned Firms by Susan Coleman and Alicia Robb was released today (disclosure: the Kauffman Foundation partially supported the book's production).

A press release from the Kauffman Foundation and infographic are available here. The authors themselves offer some commentary at Forbes.com: Why Women-Owned Firms Are Being Held Back. I note that the book draws its data from the Kauffman Firm Survey and demonstrates the tremendous value of the dataset.

Solomon's Knot

We failed to mention here on growthology the release of Solomon's Knot by Robert D. Cooter and Hans-Bernd Schäfer back in January.

The book is part of the Kauffman Foundation Series on Innovation and Entrepreneurship imprint in the Princeton University Press. Alex Tabarrok reminds us about what this book has to offer and provides some commentary.

Reading List

The NBER has released the The Rate and Direction of Inventive Activity Revisited, commemorating the 50th anniversary of the original 1962 classic.

A press release from the Kauffman Foundation about the new book is here.

This will be added to the queue of Noam Wasserman's new release, and I sheepishly admit I have not gotten to the Jobs biography either. I am also eagerly anticipating getting through Phillip Delves Broughton's new release The Art of the Sale.

Peer Reviewed vs. Entrepreneur Reviewed

Noam Wasserman’s new book The Founder’s Dilemmas came out today. It is an excellent mélange of thorough research and starkly practical observations about successfully starting a business. If you do either of these things (start businesses or research them) I recommend you pick it up.

Unfortunately, it seems to me his work is a bit of an outlier. In my reading of the entrepreneurship literature I have been struck by the large gap between entrepreneurs and people who study entrepreneurship. The group of people who self select into entrepreneurship is almost entirely disjoint from the group of people who self select to study it. Such a gap exists in other fields to greater and lesser degrees. Sociologists, for instance, study phenomenon in which they are clearly participants whereas political scientists are rarely career politicians but are often actors in political systems.

But in the case of entrepreneurship the gap is cause for concern. My sense is that all too often those studying entrepreneurship don’t understand, even through exposure, the messy process of creating a business, nor, due to selection effects, are they naturally inclined to think like an entrepreneur might. At Kauffman, we have had multiple scholars say to us that they’ve found that talking to entrepreneurs is useful in their research.

This should be obvious, but it’s not. The result is research that can lack grounding, perspective and credibility. As a researcher I understand the natural impulse to keep things neatly ordered so as to create elegant papers and clear conclusions. But the fact of entrepreneurship is that it is anything but pretty or neat. More importantly, the research product resulting from such a disconnect can present a distorted view of the entrepreneurial process that may actually hinder our understanding of it. Such ill-informed research can then go on to form the basis of a policy directed at entrepreneurs – without ever having involved or understood them.

If entrepreneurship is indeed a driving force in the economy – and it is – then we need to be able to understand it in systematic and rigorous ways. In other words, academics are necessary. The tough part, it seems, is convincing some of them that entrepreneurs are too. 

Unrestricted Consumption: Developments in Digital Rights Management

Via Mark Thoma, Joshua Gans reports on JK Rowling's Pottermore website and the planned distribution of Harry Potter eBooks. Rowling has negotiated with the big distributers (Apple and Amazon, etc.) to sell the eBook exclusively through Pottermore. There is clearly a strong profit motivation for Rowling, a superstar author with a large following, to try independent distribution and minimize revenue sharing. But the big deal for consumers is that when buying through Pottermore, the eBook will reportedly be transferable across devices. Comments to Gans’s post point to other examples of the transferability for eBooks, depending on the distributor. I think the real breakthrough is that Pottermore defaults the consumer to purchasing a device-independent file by forcing some distributors who don’t offer this to send the consumer to Pottermore, which does.

Rowling’s foray reminds me of comedian Louis C.K.'s experiment with independent distribution.

Traditionally, one of the ultimate career achievements for most stand-up comics has been to sign for an HBO (or similar) stand-up special. Under these arrangements, typically the performer is paid a fee for a performance, and HBO produces and pockets most of the profits from the sale of the show (the theatre tickets, the revenue from airing the taped special, and DVD sales). Unfortunately for comedy consumers, HBO puts a lot of restrictions on the consumption of the special (limited TV airings and typically high-priced DVDs with regional restrictions).

In 2011, Louis C.K. decided to try something different. He produced his own special and released it DRM-free on his website. For $5, anyone can download a video file of the special playable on any device, without restrictions—the file can be copied, burned to DVD, etc. Many warned that Louis’s distribution method wouldn't work without a studio backing the release, and that without any DRM, the video would quickly be pirated. C.K. reported the experiment being an overwhelming success, with the special generating over a million dollars of sales within 12 days. It has surely made more money since then (full disclosure, I purchased the special the day it was released and thoroughly enjoyed it).

I imagine Rowling will enjoy similar success. Both C.K. and Rowling have large, dedicated fan bases. C.K. stated that at least part of his motivation was to avoid DRM and make it simple for people to enjoy his production. I do not know if Rowling has similar motivations, or if it’s more about building the Pottermore brand.

I am hopeful that developments like Rowling and C.K.’s will further nudge industries that deal with electronic media to adapt to a world where marginal costs of delivery are low and consumers own multiple products designed for media consumption, needing easy transferability of content between them.

If you think of this in terms of entrepreneurs versus the incumbents, the C.K. and Rowling situations clearly are outliers due to their fame. But they can serve as needed reminders to startups, even if you have only a fledgling flock of customers. If you build good relationships with your customers and want to work around or outside an established industry structure, you can leverage your customer loyalty to deliver something you both want—for your customer, a higher quality product and service experience; for you, being able to do things your own way, and profiting because of it. Lean Startup is a recommended book from many of my colleagues here at the Foundation that talks about the importance of knowing your audience. Delivering Happiness, the Tony Hsieh and Zappos story, is a good read and an example specific to successfully revamping your product distribution and delivery model.

 

Reading List

Appearing on the shelves tomorrow is Standing on the Sun, from Christopher Meyer and Julia Kirby. The title is attributable to a quote from MIT physicist Richard Morley: "In order to see the solar system as it is, Copernicus had to be standing on the sun."

The book is about the underpinnings of capitalism and the forthcoming evolution the system will see as developing economies (the so called BRICs--Brazil, Russia, India, and China) mature. The authors critically assess the modern system of capitalism in developed economies, arguing too much emphasis is placed on production margins--return on equity--and competition, and rather it is overall value and innovation are the most important factors to consider. Financial returns are not the only outcome society values; competition should not be mistaken as a proxy for innovation. For example, how do successful open source initiatives like Linux and Wikipedia make sense on the criteria of financial returns and competition? They don't, but start to look a lot less like outliers when you consider them as pursuits towards innovation and value as a whole.

Just as debtors were first jailed before bankruptcy laws were developed, and the 19th century and 20th century capitalism evolved to first witness and later combat monopolies and trusts, so will capitalism undergo an evolution as information rather than financial capital becomes the dominant productive resource. The authors posit these developments will take place primarily in developing economies, which are not burdened by an existing system (hence the Morley quote), but that the lessons learned will be applicable to economies worldwide.

I am pleased to see an assessment of capitalism that does not fall in the camp of overreacting to the recent financial crisis, and one that expounds innovation as key for promoting economic success. I hope to witness an evolution and improvement upon (which remains to be seen), not a destruction of the current system. I am unsure if economies like that of the U.S. will be taught lessons from developing economies or learn them on their own. I personally am inclined to believe it will be easier for those developing economies, which as the authors say have the metaphorical clean slate to start from.

But ultimately, where the lessons learned originate is largely immaterial. It is putting them into practice that matters. The Kauffman Foundation has expended a lot of effort on researching to improve the current system to be more amicable towards entrepreneurship and innovation, recently culminating in a set of policy prescriptions we have grouped under the Startup Act. It will be interesting to see what we can learn from other economies as they develop and hopefully embrace innovation and entrepreneurship.

 

What It Takes: RBC Day

For most economists, RBC means real business cycle.  For me, it means Richard Ben Cramer.  I'd like to third the Ezra Klein nomination of an RBC Appreciation Day (HT Josh Green for seconding it):

Last week, Ben Smith at Politico published a long (for Politico) and terrific piece on Richard Ben Cramer, the veteran journalist and author of the seminal 1992 campaign book, "What it Takes."  ... Ezra Klein, political journalist and RBC admirer of a slightly younger vintage, has had the inspired idea of declaring today "Richard Ben Cramer Appreciation Day." So let me add my wholehearted support.

An Exciting Day

I just received in the mail a copy of Matt Ridley's forthcoming book, The Rational Optimist. I was fortunate enough to be able to attend a seminar last year at which Ridley discussed the book and solicited input and ideas.

Based on that discussion and Ridley's extraordinary intelligence and writing ability, this book will be stupendous, no doubt about it. Check out his blog here; good stuff.

The Great Brain Race

My friend and colleague Ben Wildavsky is a senior fellow at the Kauffman Foundation and author of The Great Brain Race: How Global Universities Are Reshaping the World, to be published in May by Princeton University Press. May 12, Ben tells me.

 

Take a minute to read this excellent summary essay Ben recently published in Times Higher Education.

Here is a long excerpt to whet your appetite:

Long known primarily as the world's largest exporter of students, China is now doing much more to build its human capital at home. In addition to expanding the quantity and quality of its own universities, it is forging partnerships with Western universities that operate programmes in China. And it has lured home some academics who left for the West, but who now find appealing opportunities in newly revitalised universities.

Moreover, China is not alone. The yearning to create competitive universities is also vividly on display in Singapore, which seeks to become a world-renowned educational hub and has brought in numerous Western partners, including the Massachusetts Institute of Technology. South Korea, for its part, is creating what amounts to an academic free-trade zone in a 52,000-acre complex near Incheon International airport, playing host to branch campuses of many Western universities.

Nor is academic globalisation confined to Asia. The lavishly funded King Abdullah University of Science and Technology opened in Saudi Arabia last year, seeking to join the top ranks of world scholarship via alliances with the likes of Imperial College London and Stanford University. KAUST is also taking advantage of the new global talent market, poaching its first president, Choon Fong Shih, from the National University of Singapore.

The book's website is www.greatbrainrace.com. It features a book excerpt, a video interview, links to articles adapted from the book, and several online ordering options. The book has already been endorsed by Judy Woodruff of PBS Newshour, Yale president Richard Levin, Sebastian Mallaby of the Council on Foreign Relations, and Andrew Witty, CEO of GlaxoSmithKline. 

The Great Brain Race tells the story of the transformation of the global academic landscape in recent years. Nearly 3 million students now study outside their home nations; globe-trotting faculty hop from the United States to Singapore to Saudi Arabia; Western universities create branch campuses in the Middle East and Asia; and new or rejuvenated research universities in China, South Korea, Europe, and beyond vie with American giants for the top spots in global education rankings.

 

If you didn't know, Ben was once in charge of the annual U.S. college rankings for a major U.S. magazine. He agrees with me, by the way, that the Air Force Academy is the best all around undergraduate education available. So I guess all this global hubbub is about who is number 2, West Point or Annapolis, right?

 

Final note: Ben did not ask or know about this review. He is a great writer, this is a great topic, and I hope you make an effort to read this great book. To put the topic in context: economic growth is, we now know, fundamentally about ideas and the human capital that adopts and invents them. Globalization is about the evolving network of flowing goods, capital, and ideas. And labor. Growth and globalization cross paths in front of every university. Summed up, a central "battle" for 21st century leadership is the competition for brains. Ben Wildavsky's book could not be more important for America's leaders to understand what is at stake in preserving and expanding our prosperity.

Advice for Jeff Bezos (Amazon on the Mississippi?)

The eBook is getting very, very interesting. It has inspired one of the wackier posts I have ever written ...

WIRED blog epicenter says the Barnes & Noble brick and mortar locations gives it a huge advantage, which is my gut instinct, too. 

This eBook latecomer, founded in 1873, has something Amazon cannot replicate: 1,300 or so physical locations (including college stores) across all 50 states. Ironically, the same high-overhead stores that helped Amazon undercut Barnes & Noble’s book prices could give the bricks-and-mortar retailer an advantage at selling e-book readers, for at least three reasons.

First, Barnes & Noble’s stores give consumers a place to play with the nook, the Que, and other e-book-reading devices the chain plans to sell, before taking the e-book plunge. This is crucial, because e-books represent a far bigger leap for readers than the one music fans made when they switched from CD to MP3 players that let them use the same headphones. Readers who are reticent to forgo “dead tree” reading material for some new-fangled gizmo might change their minds after seeing the nook and Que proReader in action.

On the other hand, the only way to test a Kindle before you buy is if you can borrow one. And while you can test-drive the Sony e-book reader at Sony Style stores, there are only 50 or so of those nationwide, and other retailers that sell that device don’t allow customers to try them out

The intermix of online and meatspace retailing is, well, mixed. Gateway famously faceplanted with its meatspace effort. I even visited one, and was a loyal Gateway(2000!) customer. (I loved them for the ads in PCMag, but those were the days, eh Jimmy?). And then there's the Apple Store. A huge success so far, and probably the engine for continuous near-term dominance in iPods and now smart phones.

Sony Style has been a mixed effort, I think. Of course, I did get my first physical touch of an e-Book there. And I've been fascinated by the undead nature of Radio Shack. What DO they sell? I mean, I bought my first laptop there actually - a Tandy? And I keep finding myself there once a year. But every time I walk by a Radio Shack in the mall (any mall), it just feels like a massive decades-long missed opportunity.

Keep in mind that I am, as many Kauffman folks are, a Kindle early adopter.  My 1.0 Kindle is here beside me as a write. (I know, I know, I said I never early adopt. But if this hint doesn't get me a free review version of a 3 or, dare I say, 4 -- which I apparently have to disclose or refuse or something, as if I were a President getting honored by foreign royalty -- then what is this blogging any good for?)

Speaking of missed opportunities, maybe the marriage of virtual and actual reality is an essential part of any 21st century business plan. If so, what should online retailers do?

My advice: Jeff Bezos should get Amazon in the brick and mortar space in a big way. He knows better than to get tied down with a chain of stores in malls and strip malls where his baby would morph into the Radio Shack of tomorrow. No, what he needs is a theme park sized Ultimate Store. Like the Pyramids of Giza and the Library of Alexandia combined.

It should be a wonder of the world ...and could double as a warehouse if you think about it. Put the Amazon Pyramid somewhere in the middle of the continent... though astride the Missippi river would be ironically bizarre. Maybe Denver. Or hey, why not Kansas City?

• It could have rides like a theme park -- Disney did it for Milne's Pooh, why not for Rowling's Harry Potter?
• It could have amazing authors give guest lectures and shows every night and day -- Vegas does it for Celine Dion, why not Stephen King? Why not Steve Martin? Why not Steve Wozniak??
• It could have long tail sections for every four and five word category imaginable. SF/SpaceOpera/Hard/Postsingularity. There is no meatspace analogy here, which is why it would be so cool!
• And don't forget, comic books are BOOKS.  Marvel and DC would want to partner with Amazon instead of Disney. Wait, scratch that.

And best of all, I would go there. Every summer. With my kids. And we wouldn't lose them, like we do at Barnes and Noble sometimes. And instead of partnering with Starbucks, they could partner with Red Bull and party all night. Maybe it's just a small minority of us who are freaksih book lovers, but the final test of any genius idea is solpsistic: I think my idea is great. And remember: You read it here first!

Rereviewing a book

My goodreads.com friend, Chris Prottas, just posted this interesting review of William Easterly "Quest":

Recently went back and re-read this book. As other reviewers mentioned, I am curious to see what Easterly would say of this more optimistic earlier work, but regardless this text is an excellent, accessible history of economic development in the 20th century. Easterly explains the progression of economic thought and the fate of the 'latest and greatest' foreign aid ideas spurred by ever changing growth theories.

Contrary to some of the spurious one-line reviews below, this book is definitely not the work of a laissez-faire ideologue. Easterly is, however, quite critical of the aid establishment's record (though, once again, optimistic about the potential for aid as poor gov'ts grow increasingly competent and decreasingly corrupt).

Easterly is concerned with economic growth, and he adroitly explains how aid of all shapes and forms has largely failed to positively impact development. If you'd like to see some of the good aid has done, you will have to look to improvements in quality-of-life, not the subject of this book, which can be found in Charles Kenny's draft "The Success of Development." How much credit should go to NGOs and how much to commercial firms who lowered the price of living well through technological innovation is up for debate, but it's important to remember that Easterly is talking specifically about the aid establishment's impact on economic growth.

Highly recommended, along with White Man's Burden, Daron Acemoglu, Douglas North's new book, Dani Rodrik's articles, and yes -- some Collier too! (Just ignore Sachs)

Makes me wonder what books I go back and re-read again and again. Easterly's Quest is one of them. I love to reread sections of old econ textbooks, to be honest. Sometimes for information I have forgotten, but more often for a nostalgic reflection on how my eyes see the text in contrast with how those words felt the first time they hit me. I never studied Mankiw's textbooks, but I taught them, so those feel a little different than the nostalgia of a Samuelson or Granger or Varian or Mas-Colell or Alpha C Chiang. Krugman's popular titles I've reread dozens of times. For fiction, I confess to rereading Memoirs of a Geisha as well as all the novels of Vernor Vinge. Just this weekend, I reread Stephen King's The Stand for the second time, last being in the summer of 1980.

Top five novels:

The Last Ship
Memoirs of a Geisha
A Sense of Honor
The Foundation
The Might Avengers (collected works, 1977-82)

A Few Thoughts on Tyler Cowen's New Book

[Another guest post from Charles Johnson, one of our summer interns.]

Tyler Cowen's new book, Create Your Own Economy: The Path to Prosperity in a Disordered World is one of the more engaging books I've read recently. It rests comfortably in the niche between books about behavorial economics and social technology. Careful readers of this blog will note that Tyler Cowen was a participant in the Kauffman Economic Bloggers Forum in February. We prepared videos of the participants. You can see him on video discussing blogging here. Cowen is a seasoned blogger at his blog, Marginal Revolution. 

The thesis for Cowen's new book is that technology is allowing many of us to become autistic-like in our processing of information and consumption of entertainment and culture. We've moved into a "bits" culture where we can constantly be orienting and re-orienting our culture. This remix culture is evident in everything from iPods, to blogs, to delicious, and to Facebook. In a way, I took this part of the book as a kind of demonstration that we can all become renaissance men because the costs of such renaissance have plummeted. We don't need Jefferson's library when we have a worldwide web with easy information at our fingertips. 

Cowen's book can be read as an appeal, that, for the sake of society at large and the individuals in particular, we should embrace neurodiversity, or the different ways in which our brain is wired. (You can hear him discuss the book in an interview with John J. Miller of National Review here.)

I was struck by this paragraph about autism and the foundation of companies. We know that dyslexics tend to have high rates of firm creation. (See here for more details). But what about autistics? 

Here Cowen points to the work of Simon Baron-Cohen, who is a researcher of autism at the University of Cambridge. (Simon Baron-Cohen created an AQ test -- or autism quotient -- that you can take here to see if you might have autistic-like tendencies.) Cowen recounts that Baron-Cohen believes that there may be a lot more autistic high achievers than most people realize. On p. 24-25, Cowen writes about some of these high achievers. [The bolding is mine.] 

Craig Newmark, founder of the web forum Craigslist, has written on his blog that his history as a "recovering nerd" is connected to Asperger's. It is perhaps no accident that autistics are known for their attachment to lists as a means of processing, recording, and ordering knowledge. Bram Cohen, creator and former CEO of BitTorrent, also describes himself in terms of Asperger's syndrome. He founded the company at age twenty-nine and BitTorrent has been a pioneer in exchanging digital information over the web; one of his key insights was how BitTorrent could break up files into smaller bits and send through the bits rather than the whole file at once. Cohen mastered three programming languages by the age of sixteen and his work on BitTorrent is regarded as brilliant. The best-known example of an autistic high achiever is Temple Grandin, a woman who has pioneered commonly used improvements in animal treatment and slaughterhouses; her unique cognitive perspective has helped her understand when animals are afraid and how they can be made to feel more secure. 

I've yet to see a scientific paper or serious clinical discussion of the autistics who hold political office, work in Hollywood, start web 2.0 companies, or run major U.S. corporations or hedge funds.

If Baron-Cohen is right that there is the huge reserve of highly successful autistic achievers, I wonder why there hasn't been some kind of online, Craigslist-type sorting website that seeks to place autistic people with the things in which they specialize or some kind of wider texting that seeks to identify and help autistic people find their niches.  

I came upon this idea when I was spending time with my next door neighbor, who has Asperger's. He has an obsession with clocks and with taking them apart and putting them back together. Imagine the societal benefit if he could be placed with a clock making company. 

Indeed, if I could fault Cowen's book for one thing, it's that it doesn't take the ideas he's advocated and move towards policy. Still, perhaps policy is not one of those things for which Dr. Cowen is wired and I ought to respect his neurodiversity. 

Weekend Reading

Michael Lewis, "Wall Street on the Tundra," Vanity Fair

"Symposium: Government and the Economic Crisis," Claremont Review of Books ($)

Amartya Sen, "Capitalism Beyond the Crisis," New York Review of Books

On Bill Gates, Economists, and "Creative Capitalism"

My review of Creative Capitalism, the book version of the blog inspired by Bill Gates's speech at Davos a year ago: just posted to the City Journal website.

Super Crunching

I’ve got another great read for our readers – Super Crunchers by Ian Ayres, of Yale Law School. Ian is one of the best and more original “law and economics” scholars in the country, and indeed the world. And, it just so happens, he’s a native of Kansas City, the home of the Kauffman Foundation. But that’s not the reason I’m plugging his book. This book is a real treat: an explanation of how data mining is transforming business, social policy, and Internet, all largely in a positive way.

But Ayres is also even-handed, highlighting the potential dangers to personal privacy through all this data mining. It’s not clear much can or will be done about it, however. Few people appear so far to value their privacy, if one looks at market transactions. That could change, however, with more data breaches and revelations of how data are used.

Another downside to all this data crunching is the erosion of discretion. As data crunchers find that formula-driven decision making beats intuition and personal judgment, the nature of jobs and those who fill them change. With formula-based rules, many more people can teach, approve loans, handle customers, and even provide medical care than ever before. The current holders of these jobs naturally feel threatened and may do their best to oppose change. But just as the word processor has changed the job of secretary into “personal assistant,” the continued rise of super crunching will change the nature of many jobs throughout our economy.

Some readers will see these changes as disturbing; others as inevitable. The smart ones among us will realize what is happening and get ahead of the curve. The really smart ones – the entrepreneurs among us – will find ways of making fortunes from the continued march of technology, and the ever expanding ways that the digital revolution is changing our lives.

Book of the Week

The Knack, by Norm Brodsky and Bo Burlingham.

After years of building companies and mentoring would-be entrepreneurs, Brodsky has finally collected his thoughts in one volume. And it is fantastic. As Bob has noted, you can now walk into the bookstore, sweep all the alchemy cookbooks how-to entrepreneurship books off the shelf, and replace them with The Knack.