Growthology

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. 

The Twitter Revolution In Iran

What we are witnessing in Iran is the first ever geek-led revolution. You've heard of the Orange Revolution, the Cedar Revolution, and the Rose Revolution. Upon further reflection, Iran is just the place for a Twitter Revolution. It boasts the world's highest per capita number of bloggers.

The Iranian regime is complaining that the U.S. government is behind the Twitterfest, but they couldn't be more wrong. The government has had little to do with it. (Aside from a few tepid remarks by Obama and the State Department requesting not to shutdown Twitter for scheduled site maintenance.)

Rather, the people of America - not the government - are helping the Iranian people who are bravely slugging it out in the streets after their election. 

Take the example of Austin Heap, a S.F. computer programmer. He is helping everyday Iranians get around the censors through the use of proxy servers. (A proxy server helps its users conceal their identity.) 

His blog, which lists proxy servers and now password protects them, has grown from a few dozen hits a day to over 100,000 in less than twenty-four hours. People are emailing in to him saying where there are more proxy servers and thanking him for helping them reconnect with loved ones. Even though he's receiving death threats from people within Iran, he knows that he has to continue helping out the Twitter revolution going on there. Unfortunately, he was detected, according to The San Francisco Chronicle. 

By mid-Tuesday, Iran appeared to be blocking all non-encrypted Internet traffic, making the 1,600 new proxy-server addresses now in his in-box temporarily useless. But Heap was working with other professionals and companies seeking new ways to reconnect.
"I haven't been in the middle of an outpouring like this, ever. And it makes me incredibly proud of the IT community," he said.
While it's not clear how much impact Heap's efforts are having, history may look back on his tweets about proxy servers as a profound moment in political evolution, said Stanford's Milani [a professor specializing in Iranian politics]

One growthology's favorite books is Clay Shirky's Here Comes Everybody: The Power of Organizing with Organizations. If you want to understand the Iranian Twittering Revolution, go out right now and buy the book. Or sit at home and order it.  

Shirky describes how for a time, a teenage girl was the Western world's only access point for the coup that ousted the Thai prime minister. Her blog posts on the topic went viral. 

Here's how he described what is going on in Iran right now during a Q&A with TED. Shirky gave a great TED Talk in 2008 and with full disclosure in mind, the Kauffman Foundation, is a TED sponsor.

I'm always a little reticent to draw lessons from things still unfolding, but it seems pretty clear that ... this is it. The big one. This is the first revolution that has been catapulted onto a global stage and transformed by social media. I've been thinking a lot about the Chicago demonstrations of 1968 where they chanted "the whole world is watching." Really, that wasn't true then. But this time it's true ... and people throughout the world are not only listening but responding. They're engaging with individual participants, they're passing on their messages to their friends, and they're even providing detailed instructions to enable web proxies allowing Internet access that the authorities can't immediately censor. That kind of participation is reallly extraordinary.

. . . 

So how does this play out?
It's complex. The Ahmadinejad supporters are going to use the fact of English-speaking and American participation to try to damn the dissidents. But whatever happens from here, the dissidents have seen that large numbers of American people, supposedly part of "the great Satan," are actually supporters. Someone tweeted from Tehran today that "the American media may not care, but the American people do." That's a sea-change.

Coffe, Pre, or iPhone 3?

Buzz is that the Palm Pre will be a serious challenger to the iPhone. The NY Times calls it an "an elegant, joyous, multitouch smartphone" that yields more value per dollar than the iPhone, though with a short battery life. Stephen Levy writes this summary at WIRED, "Great look and superb feel. Well-conceived OS with multitasking and instant notification. Physical keyboard. Utilizes iTunes to load and refresh content. TIRED: Multitasking puts a big suck on the battery. Sprint exclusivity will be annoying to Palm-philes on a contract with AT&T, Verizon or T-Mobile. Keyboard is puny."

I'd love to hear from anyone who is planning to get one when they go on sale tomorrow.

Naturally, Apple isn't sitting still. The next version of the iPhone is reportedly coming out next month.

Case Study in Innovation

Palm, as you may remember, stole Apple's thunder once already. I consider the failed Apple Newton, introduced by he-who-shall-not-be-named in 1992, to be the first handheld computer. While the Newton never caught on, its vision was vindicated by the revolutionary Palm Pilot in 1996.

A case study focusing on Palm inventor Jeff Hawkins and the PalmPilot's early days is available at the University of Cambridge. Forbes has the current development story on the Pre here. .

Just thinking out loud. Let's take account of where technology has taken us... A handheld device in 2009 includes: desktop computing power circa 1995, internet access (wireless), phone, GPS, gaming platform, email, calendar, camera, alarm clock, That's enough to inspire any pessimist. Oh yeah, they have music. And movies. Movies?! And am I the only one who uses his iPhone as a flashlight at night when checking on the kids or tiptoeing to bed myself? I can hardly imagine what computing will be like in 2020.

The Ascent (and Hopeful Descent) of Cash

(The title of this piece comes from a play on words of economic historian Niall Ferguson's book and PBS series, The Ascent of Money, which the Kauffman Foundation helped fund.)

By automating the checkout process at the Foundation lunchroom (where the food is incredible, by the way) the machines don't accept cash, only credit cards. What happens to unlucky staff like this author (lost card) and his research assistant (stolen identity, so he says)? It makes one wonder, will there ever come a day when we do not have cash? When money exists in 1s and 0s and nowhere else? 

Here's a bold prediction (from Atlas, the wunderRA): That day will arrive by 2025, if not sooner.

True, there have been stabs at moving us closer to that day, but none of them have really ignited. For those looking for a really good read, I recommend the book, The PayPal Wars: Battles with eBay, the Media, the Mafia, and the Rest of Planet Earth. The book is written by Eric M. Jackson, who was one of the first employees of PayPal and is reviewed at Reason Magazine by Radley Balko. 

Balko describse my favorite chapter in the book, 

Jackson recalls a speech Thiel gave to Confinnity employees, just a few days after he began work, in which he described his hopes for PayPal to become a borderless private currency. He saw PayPal facilitating trade in currency for anyone with an Internet connection by enabling an instant transfer of funds from insecure currencies to more stable ones, such as U.S. dollars. Thiel explained to his young staff how governments had historically robbed their own citizens through inflation and currency devaluation. The very rich could always protect themselves by investing offshore. It's the poor and middle class, Thiel explained, who get screwed. "PayPal will give citizens worldwide more direct control over their currencies than they ever had before," Thiel predicted. "It will be nearly impossible for corrupt governments to steal wealth from their people through their old means because if they try the people will switch to dollars or pounds or yen, in effect dumping the worthless local currency for something more secure."

Sadly, it seems that the libertarians in the room may have been too optimistic and that the only full scale innovation we will see is if the government exits the currency market a la Hayek's theory of competitive and therefore stable, currencies.

 

If history is any indication, privatized money can work. See economist George Selgin's great book, Good Money: Birmingham Button Makers, the Royal Mint, and the Beginning of Modern Coinage, 1775-1821, which documents the coinage entrepreneurship of Matthew Boulton, who built one of the best mints in existence after he landed a government contract to mint coins for Britain. People loved his coins and so use of the Royal Mint's coinage fell. Of course the British government's Royal Mint wasn't pleased about decline of their coinage and so it reasserted control and gave it back to the initial monopoly.

We all know the dangers that printing excess money can do to an economy. Milton Friedman's restatement of the quantity theory of money -- and subsequent Nobel Prize for Economics -- leaves little doubt. And yet, in light of the recent economic downturn, I think we must ask ourselves, Can we afford paper currency? 

A recent Wired Magazine article makes the point that minting them coins ain't cheap and that it cost in excess of 848 million dollars in 2008 alone, just to print things we'd just as soon not have. Here's the essential paragraph: 

To maintain our stock of hard currency, the US Treasury creates hundreds of billions of dollars worth of new bills and coins each year. And that ain't money for nothing: The cost to taxpayers in 2008 alone was $848 million, more than two-thirds of which was spent minting coins that many people regard as a nuisance. (The process also used up more than 14,823 tons of zinc, 23,879 tons of copper, and 2,514 tons of nickel.) In an era when books, movies, music, and newsprint are transmuting from atoms to bits, money remains irritatingly analog. Physical currency is a bulky, germ-smeared, carbon-intensive, expensive medium of exchange. Let's dump it.

Wow, talk about wasted resources. Fortunately, companies like PayPal, are leading the way to a cash- (and check-)less future. 

Between 2003 and 2006, noncash payments in the US increased 4.6 percent annually, while the percentage of payments made using checks dropped 13.2 percent. Two years ago, card-based payments exceeded paper-based ones—cash, checks, food stamps—for the first time. Nearly 15 percent of all US online commerce goes through PayPal. Smartcard technologies like EagleCash and FreedomPay allow military personnel and college students to ignore paper money, and the institutions that run dining halls and PXs save a bundle by not having to manage bills and coins or pay transaction fees for credit cards.

Hmm... avoiding cons and bills... maybe Kauffman's dining hall was on to something, after all.  But not so fast! MIT economist, Amy Finkelstein, has found that when EZ-passes are installed on road high ways, the charges to the tolls become less noticeable and therefore become subject to higher increases. Might that hold true for services or goods that are sold in non-competitive markets as well? I guess, we'll just have to wait and see.

New Asymmetry: Robots in the U.S. Military

Economic growth has some perverse implications. Not only does new technology allow for enhanced weaponry, but it also implies a reluctance for humans to tolerate casualties. One could argue that the collapse in human mortality and frailty in modern societies has stoked a rising intolerance for the bloodshed of war. An interesting result is that American attitudes towards was seem less sensitive to the carnage of war, so long as our side is relatively unscathed.

Regardless of other causes, the basic fact is that robotic war-fighting is extraordinarily effective in terms of costs and benefits. For surveillance alone, a small robot can see bad guys or sniff our roadside bombs in a mortally costless fashion that defies imagination and traditional concepts of war. Once you expand imagination to the offensive realm, the impact of robotics is obviously revolutionary. Consider these facts, quoted from P.W. Singer's article in Wilson Quarterly:

• When U.S. forces went into Iraq in 2003, they had zero robotic units on the ground. By the end of 2004, the number was up to 150.  By the end of 2005 it was 2,400, and it more than doubled the next year. By the end of 2008, it was projected to reach as high as 12,000.

• All told, some 22 different robot systems are now operating on the ground.

• The amount spent on ground robots, for example, has roughly doubled each year since 2001.

• In addition to the Predator and Reaper [two large robotic air drones], a veritable menagerie of drones now circle in the skies over war zones. Small UAVs such as the Raven, which is just over three feet long, or the even smaller Wasp (which carries a camera the size of a peanut) are tossed into the air by individual soldiers and fly just above the rooftops, transmitting video images ....

• As new prototypes of aerial drones hit the battlefield, the trend will be for the size extremes to be pushed in two directions ... The military's estimation of what is possible with micro air vehicles is illustrated by a contract let by DARPA in 2006.  it sought an insect-sized drone that weighed under 10 grams (roughly a third of an ounce), was 7.5 centimeters long, has a speed of 10 meters per second and a range of 1000 meters, and could hover in place for at least minute.

The big idea in military strategy is "asymmetric warfare" where conventional forces face an enemy that is smaller, lighter, and qualitatively different. While that asymmetry poses difficult problems, the rise of robotic warfare is in the process of turning asymmetry upside down. The power of force stemming from greater financial resources, traditionally manifested in heavy conventional arms, is being supplemented by robotic forces that are smaller, lighter, and qualitatively different than revolutionaries and guerillas.

Peace on Earth?  It would be nice to think so. While I am convinced the battlefield is changing faster than most soliders, let alone policymakers, can anticipate, the path to peace is on the other side. Strategic counterinsurgency requires transformative construction, not transformative weaponry. I'm certainly not the first to say so. I wouldn't put it past the brightest minds in the Pentagon to already have worked on robots that build roads, schools and hospitals.

Notes from the Future, the SXSW conference

Kauffman's Keith Mays - web manager, intrepid blog tech guru, and visualization expert at Kauffman - attended the SXSW conference and shared these observations:

Thanks Tim for the opportunity to share some thoughts on returning from the South by Southwest Interactive conference in Austin. My job as a web manager is more about a steady hand on the tiller than keeping Kauffman on the bleeding edge of technology. That being said, SXSW is an opportunity for me to dip my hand into the stream of digital hipness and hopefully drink some of that in.

Just so you get the picture of SXSW Interactive: 9000 or so of the digerati, from big names to up and comers. Hundreds of sessions to choose from, not to mention a ton of social events, which combined with the relative inexpensiveness of the conference, make it the place to go, be seen and network.

Twitter was introduced here in 2007 and seems to be exploding as of late; certainly it was as standard an accessory as a Starbuck’s Grande at the conference this year. What interested me — as someone who’s had trouble getting what Twitter is all about — was that while there was a certain amount of friends arranging meet-ups and commentating on the weather, it is considered essential for anyone who want to have a serious voice online. For leading lights in the digital space, like Guy Kawasaki and Chris Anderson (editor of Wired, author of the Long Tail), the number of “followers” they have (people who’ve subscribed to their tweets), is considered a measure of their ranking in the digital space, as well as their potential to monetize their personal brand.

One of the things I’ve learned about the value of Twitter, is that while some people can fit an intelligent comment into 140 characters, more often than not it’s a link to something relevant that makes a post worthwhile.

Another way I saw Twitter being used was as a “backchannel” during sessions. While a presentation or conversation was happening on stage, there was also a dialog going on among attendees. Often, during one of the interview sessions, the facilitator would monitor this backchannel and selectively weave a question or comment from the audience into the conversation. This dialog could then continue on after the session was over, particularly if it had been lively or provocative. In this use, Twitter is a very efficient, low overhead technology for encouraging a mix of real and virtual conversation.

Speaking of the personal brand: Gary Vaynerchuk, who was one of the keynote speakers, exemplifies the importance of establishing an online identity. Fortunately someone mentioned (thanks Nicholas) that he was a speaker not to be missed, so I wedged in with throngs of adoring fans. How Gary, a wine retailer from New Jersey, could be a folk hero to these people is an interesting story about how the Internet works. Gary’s a classic entrepreneur: his parent immigrated to the U.S. when he was a child; he was franchising lemonade stands to other kids as an 8-year-old, and was interested in the family business from an early age. He took his family liquor store and turned it into a major wine retailer, with $50 million in store and Internet sales.

Here’s where the personal brand comes in: Gary wanted to express his opinions about wine, but didn’t think he could carry off the writing part of blogging. So, he started a video blog. He worked really hard, posting with not much audience at first, but built it up by researching where people talked about wine online and putting in subtle plugs, answering all emails (still does that today) until finally he got noticed by the mainstream (Conan O’Brien, Ellen, TIME, etc) and things took off. What he is selling, more than wine, is himself. He is funny and passionate and speaks to regular people -- a wine anti-snob. To the crowd at SXSW, he’s a hero not so much because he’s turned people on to wine, but because he is so accessible, both through social media, and in person. A good portion of the audience seemed to have gained confidence to pursue their dreams after seeing him, hearing his story, and buying that anyone can make it, if they do what they love.

This story is interesting, but why do I think it is important? Because online, as vast as the Internet is, people still want to connect to people. I’m convinced that people are much more apt to feel an affinity for someone with an online voice, than they are with an impersonal organization or Web site.

Some other messages from the conference:

-- Charlene Li, formerly of Forrester Research, presented “The Future of Social Networks”. The main thing I got out of her talk was that in the future, the idea that in 2009, we went to selected sites to be social (Digg, Facebook, MySpace, etc.), will seem odd in retrospect. Instead, our social identity (who we are, who we know, what we do) will follow us where ever we go. So, a trip to Amazon to look at flatscreens might feature reviews from people in our network, etc.

-- Guy Kawasaki interviewed Chris Anderson about his upcoming book “Free.” The essential premise Anderson talked about is the expectation that content online will be free, along with the marginal cost for digital content, has forced prices in the space to nothing. In itself, free is obviously not a sustainable business model. Sites and online services need to make money, pointing to a “freemium” model, where users pay for added value beyond the basics, seems to make the most sense: access to extra time, storage, seats, etc. By his calculation, a site can make it if five percent of its customers are devoted and spend money. The funniest theme in the session: Kawasaki repeatedly coming back to the question: so, are you going to give the book away?

-- Is Spec Work Evil: found myself listening to a brawl about an issue I didn’t know existed in this at times contentious session. Fascinating example of how the Internet has shaken economic models, driving prices down on certain commodities. In the middle of the controversy was Mike Sampson, mild-manner CEO of the Web site crowdspring.com. Have need for a logo or other small design job? This site will connect you with designers world-wide, who present ideas in an open competition for modest awards. The fact that the work is being won by an untrained designer from Bulgaria, or housewife working from her kitchen table in Topeka, is what is what was appalling to the real designers on the panel, one of whom actually said that he found clients to be stupid, not knowing good work from bad work. A former photographer, my sympathies are with the trained creatives, but who’s out of touch with basic economics here?

-- Shift Happens: a diverse panel on visual thinking. Basic premise is that illustrations, even crude ones, can often help in a decision making process, or in helping bring understanding to complex concepts or processes. See: Common Craft Web site, which has short movies explaining things like RSS, Wikis, and yes, Twitter; also the Web site for the book “The Back of the Napkin”, a best-selling book on using pictures to solve business issues.

-- The Big Picture: I admit a personal interest in this one, but there’s a general take-away. The Big Picture is the project of Alan Taylor, a programmer for the Boston Globe. He simply began selecting photos from wire services and other sources and running them really big in a three-times-a-week feature on the paper’s Web site. This feature has become massively popular, drawing millions of views worldwide, simply because of the selection, number and size of the photos. Any number of organizations have access to the same photos; he just saw a niche that wasn’t being filled. The message: sometimes it doesn’t take a revolutionary idea, just a recognition of an obvious need.

-- Venture Capital for Long Tail Entrepreneurs, facilitated by Taylor Davidson. Much of the talk of financing was over my head, though essentially the discussion was about the need for alternative models so that startups and small businesses can find financing (by our definition, “long-tail entrepreneur” is an oxymoron, because what was being discussed was mostly lifestyle businesses rather than growth companies). In any case, a takeaway is that there seems to be room for the Web to enable smaller investors to pool resources for startups that don’t need a lot of money to get going. The microfinance site kiva.org focuses on the very poor business person, but what’s out there for the U.S.-style entrepreneur?

-- New Market Research vs Old Man Nielsen — a good session I haven’t completely digested yet. Essentially, social media presents all kinds of opportunities for organizations to tap into available data and learn about their reputation and their market space. There were a number of services and companies mentioned that I need to investigate more: Quontcast, Kissmetrics, Whostalkin.com, Networked Insights, VisibleTechnologies.

Two takeaway quotes from a session on design for the Web:

-- How a Web site should work: “Turn beginners into intermediates, immediately.”

-- “There’s a difference between awareness and understanding”

Finding Other Earths; Keeping Perspective

Everyone is so gloomy about the economy!  Of course, I am incredibly sympathetic to those who are jobless, who have lost life savings, and see policymakers making things worse instead of better.

So is there any room to be optimistic about the future? 

Yes.

Today of all days we should be wildly happy. Today, NASA launches a mission into space that I have been dreaming about since I was a wee toddler. 10:49 P.M. from right here in Florida (where I am travelling at the moment). It is called Kepler, and this new satellite will have the biggest camera ever sent into space.  Its mission is to find Earth-like planets around other stars. These are places that odds are have oceans of water, puffy white clouds, and (with some luck) little green men that we can go to war with and scapegoat all our problems on. Quoting the InformationWeek story:

Kepler will search for planets that orbit stars and are partly covered with water, a vital ingredient for life. If all goes as planned, it will spend more than three years with 100,000 stars in its sights. ... The Kepler mission is scheduled for liftoff from Cape Canaveral Air Force Station in Florida Friday at 10:49 p.m., EST. Nine boosters will power the Delta II rocket, which will send Kepler 115 miles above the Earth in less than 10 minutes. In just over an hour, the spacecraft will separate from the rocket and begin orbiting the sun.

"We will monitor a wide range of stars, from small cool ones -- where planets must circle closely to stay warm -- to stars bigger and hotter than the sun, where planets must stay well clear to avoid being roasted," William Borucki, principal investigator for the mission, said in a statement released Thursday. "Everything about the mission is optimized to find Earth-size planets with the potential for life, to help us answer the question: Are Earths bountiful or is our planet unique?"

NASA said that Kepler's powerful camera is the largest to ever fly in space. It has a 95-megapixel array of charge-coupled devices like those in digital cameras, and it will detect the faintest "winks" in starlight, Next year, Apple computer says it will include an identical camera in its mass-produced iPhone.

(Okay, I tacked on that last sentence about Apple, which is entirely made-up.  Still, don't you see it happening in a few years? Technology! iPhone!  You have to willfully not see the reasons for optimism in your face.)

Now I spent my formative years as a young Air Force officer, anticipating that career when I was a cadet as a cold warrior during a cold war. Our ambition was to fight and win a nuclear war. So you can imagine that this pesky global recession just doesn't seem such a bother, relatively speaking. Naturally, the way to win a nuclear war is to never have it, which is exactly what we did. So now I am a happily married man with non-radioactive children. Not a bad ending.

Oh and another thing, The Watchmen movie is out today. Come on!  It's a great day!

As for happy endings ... "Nothing ends, Adrian." (that line better be in the final cut).

Happy weekend. Enjoy the sunshine on our little blue planet.

Kindle is a case study of Creative Destruction

I think I can speak for Bob and Dane in that we are all huge fans of the Kindle 1. I doubt any of us will buy the Kindle 2 just yet, but its launch this week is garnering a great deal of attention and some controversy. The fact is that e-books in general have succeeded, and Kindle's success in particular, is now going to cause real frictions in the market. This is a case study in creative destruction.

A very big, very old (and quite wonderful) industry called book publishing is evolving incrementally, and along comes a breakthrough innovation that will concievably supplant it. The market is sliced in half in a way that was beyond imagination years ago: the whole concept of readership demand has been cleaved away from the physical page. The phenomenon creates a co-joined market in which the older form cannot fight back. Classic.

How will it play out? Perhaps book stores, not publishers, are the new dinosaurs. Perhaps libraries will flourish (readers will still like to browse). Perhaps Amazon will open the largest book store in the world ... like the Mall of America for the printed word. Will the physical/digital book markets co-exist and complement (as Stephen King articulated at the launch event)? Yes ... for a while. But the Kindle is hardly done evolving. As it becomes faster and more flexible (and especially cheaper), it is hard to imagine real books will be supplied for much more than high-end afficianados. Given a world of conspicuous consumption, maybe. But in the regular sense of the word, I give the book 7 years to live.

The newness of the new technology may obscure its importance. A touch pad screen for a book, along with the capacity to assemble scribbled notes and highlights, has only begun to unfold in application to learning (check out the iRex ILiad, a competitor). What strikes me most is the new reader technology in Kindle 2, which caught me by surprise. I dreamt of innovating a synth reader 15 years ago, and my hunch is that this will be as important a technology as the e-ink. Can you imagine having your spouse's voice reading the news to you? Or President Kennedy? (For me, that would be cool).

Other reactions to the new Kindle are collected below:

Engadget covered the launch event live-blogging.

"It's reading! It actually sounds fairly good -- still very computer-voicey, but totally listenable."

"0.36-inches thick... the iPhone is 0.48!"

TechCrunch compares 1 to 2

NYTimes: "For publishers, Amazon’s e-book efforts could represent a bright future, as the book industry struggles to sell traditional formats. But some worry that Amazon may be assuming too much control over pricing, similar to the influence Apple has established in the music business."

Lance Ulanoff at PC Mag has 10 count review, and concludes strongly positive. Best critique: "Why no touch screen? As I held the Amazon Kindle 2, I had to fight the impulse to touch the screen and navigate and turn pages with gestures. This, too, is something the Sony Reader offers, as does, as noted, the iPod touch and iPhone."

BusinessWeek says "But Amazon is in something of a catch-22. Lowering Kindle's price too much might threaten Amazon's print book business." Already, e-books represent 10 percent of Amazon.com sales.

Final thought: My vision of the near future imagines highly personalized education for all students, and I very much see something like a Kindle in the hands of every child -- replacing heavy textbooks and bookbags, making reading much more expansize and interactive. If you've read Neal Stephenson's The Diamond Age, you know.  I'll end on this, one of my favorite passages:

"The little story went on to include an Excited Elf who was Nibbling Noisily on some Nuts. Then the picture of the Raven came back, with the letters beneath. "Raven. Can you spell raven, Nell?" A hand materialized on the page and pointed to the first letter.

"R," Nell said.

"Very good!  You are a clever girl, Nell, and good with letters," the book said. "What is this letter?" and it pointed to the second one. This one Nell had forgotten. But the book told her a story about and Ape named Albert.

* * *

Update: Some friends and commentor O argue the paperback will never be replaced by the e-book. To me, that is an appealing argument, but on reflection it sounds a lot like a record executive saying the LP will always be with us. Any content - music or writing - is going from a standalone business model to a "razr-blade" or "printer" model. You buy the holding device for a moderate fixed cost, then buy cartridges (blades, laserjet ink, 99 cent iTunes, novels) for a low marginal cost.  When a mini-Kindle costs $30 in ten years ... or are given away as promo devices by RandomHouse ... the cost economics of publishing on paper will have evaporated. It's not that novels will disappear, or authors (they will likely flourish). Just the dead trees.

 

Kindle 2.0 Rumors

Ars Technica says: Rumors of a next-generation Kindle, Amazon's e-book reader, started appearing on the Internet almost as soon as the initial version hit the market. Now it appears that the company is finally ready to show the world what it's had up its sleeve.

Amazon has invited the press to an event it will host on February 9th at a location -- the Morgan Library and Museum -- that suggests it may have books on its mind.

That's from Portfolio.com. 

In my book, the Kindle is the second best tech product of the decade so far. Number one is the iPhone. Number three is the Wii. But I think the Kindle will have the biggest impact -- I imagine a $50 device with a touch screen and color that replaces all the textbooks and 30-pound backpacks kids drag to school today. In a decade, the way textbooks are lugged around campus today will look as anachronistic as Gordon Gekko's brick or outhouses in the city or fat-screen TVs. Vanished from reality.

Using Facebook to Nab Burglars

While India's trying to ban open wi fi due to terrorism, the folks down in New Zealand learned a thing or two about how technology can help, rather than hinder. 

Using Facebook, authorities were able to nab a burglar. I imagine this kind of stuff is only going to become more common now with the facial recognition software in iPhoto.

h/t: John Lott's list of how technology can help solve crimes.

Amazing Computer Failures

Atlas the RA recently cooked his computer's power source by trying to modify it to accept more power (and hence charge faster). Fortunately he has a spare. Apparently, though, he isn't entirely alone. Take a look at all the great damaging things done to laptops. Here's my personal favorite.

When Hurricane Katrina hit the US in 2005, a newlywed couple caught in the hurricane thought both their engagement and wedding photos would never be recovered after their home was caught up in the wild weather. Despite initially being told the drive was corroded beyond repair, they dug up the waterlogged drive from their basement more than two years later and were finally able to recover their pictures of the big day.

MacWorld, CJ, and Privacy

My research assistant, Charles "Atlas" Johnson, is attending MacWorld today in San Francisco. He'll have more on all the new and cool entrepreneurial programs and speakers. But until then, check out the new iPhoto that uses facial recognition to categorize photos.. (The video is about five minutes long.) Naturally, the new iPhoto links up with Facebook which allows you to update photos easily and quickly. The other cool, related feature allows you to GPS where your photos were taken. It's downright James Bond in its application, but more likely to help you automatically categorize your photos.

Kind of makes me wonder if this erodes privacy by making privacy-erosion a fun toy. But is there such a thing as privacy in the public space? Or has modern sensibility replaced authentic privacy with a demand for anonymity that is unnatural and unrealistic?

Communication Weirdness

It's a new world humanity is moving into, and sometimes downright goofy when technology works, but works in weird ways. Be warned, this is post with me talking out loud. Would love to hear your comments.

This is information age, we're told. As an economist, I tend to abstract concepts down to a variable (presumably linear), and I often think about measuring all of technology as the famous "A" reisdual term in Solow's growth equation. But what if we want to break technology into a taxonomy -- communications, production, health, construction, transportation? But even then, no category is big enough to measure using a linear variable.  Communications is a great example. We tend to think that faster commo is one of the best measures of human advancement, but that would imply that technological advanced peak the day I plugged into the Internet, right?  That day I became connected at the speed of the light to anyone.

Aha.  Maybe not anyone.  What about that Ethiopian villager?  So we need to extend the variable by adding a scale dimension to it, right?  That's easy, but still obviously incomplete. Communication is multi-dimensional in terms of type (voice, email, text, imagery) and time (asynchronicity is the great power of email) and ... what else? How do you evaluate RSS or Hulu or webcams?

Well the weirdness for me is that Google keeps coming up with amazing technologies, and they all keep stretching my sense of how to measure communication. One of the most useful little things they have is called Google Alerts (wiki here), which I have been using for years (I think).

While this is a fascinating thread in its own right, this morning I am just laughing at how I get my daily Alert for any web postings that have written about "growthology" or "Tim Kane." Unfortunately, I live in a state where I nearly share a name with the Governor, Tim Kaine. It seems like a lot of other mothers didn't realize my name was taken and gave it to their sons also.  So, some days I get cool stuff like this:

Google News Alert for: "tim kane"

GRIDIRON Third Team Offense Joliet Herald News - Joliet,IL,USA "Tim has a good leg," Tigers coach Tim Kane said. "He kicks the ball into the end zone with some regularity, and he's consistent with his extra points and ... See all stories on this topic It seems there is a Tim Kane who is a good super-hero artist, and that MUST be me living in an alternate universe.  There are a handful of Tim Kane professors. And of course the governor, and almost Vice President. What is hard to imagine is how communications technology continues to advance. But we know it will. The natural extension is the way that tecting allows an individual to be hyper-aware of multiple other individuals.  Right now, text/chat involves active engagement, meaning that others have to actively send messages. But how long before that becomes passive? Can't you imagine the demand for parents to have heartbeat and location monitors on their children? What about devices that monitor in real-time what we browse?  I still think the hive mind is creepy, but you know me, I'm a Luddite.

Facebook Viruses, Or Destructive Entrepreneurial Behavior

Facebook is now twice as big as France -- 125 million inhabitants and growing fast. The Motley Fool suggests that it may be an economy like any other.

Last week, Chief Operating Officer Sheryl Sandberg said that Facebook has 280,000 applications hosted at its site, small programs that enhance the service. Some, like Mob Wars, are huge moneymakers. Facebook's own virtual gifts -- $1 page decorations -- bring in more than $30 million annually.

That's today. Tomorrow, Sandberg says, you'll see Facebook become like France -- and the U.S., U.K., China, or any other country -- as a platform for business.... Facebook is creating a business-friendly virtual economy whose borders have yet to be fully defined.

It's an interesting idea; one that shouldn't entirely surprise us, given the proliferation of online shopping.

World of Warcraft and SecondLife fans have known about the benefits of an online market for years as this Reason.tv video makes clear, but Facebook promises to turn the idea fully mainstream in a way Peter Thiel's PayPal-dreaming libertarianism never really could. (But if you're planning of taking all your money and storing it in a virtual world, be forewarned. Congress was at work in 2006 trying to figure out ways to tax virtual worlds.)

But as with any economy, there can be disruptions and yes, even terrorism. Witness the Facebook virus, Koobface: (via Reuters)

Facebook's 120 million users are being targeted by a virus dubbed "Koobface" that uses the social network's messaging system to infect PCs, then tries to gather sensitive information such as credit card numbers.

It is the latest attack by hackers increasingly looking to prey on users of social networking sites.... Koobface spreads by sending notes to friends of someone whose PC has been infected. The messages, with subject headers like, "You look just awesome in this new movie," direct recipients to a website where they are asked to download what it claims is an update of Adobe Systems Inc's Flash player.

If they download the software, users end up with an infected computer, which then takes users to contaminated sites when they try to use search engines from Google, Yahoo, MSN and Live.com, according McAfee.

How cool, how creative, how destructive! Wired Magazine has more.

The Coming Browser Revolution?

Notwithstanding the tremendous success of Mozilla's Firefox at dislodging Internet Explorer, most people still use I.E for patrolling the Internet which just goes to show you that the best product isn't always the first.

As reports InformationWeek,

Mozilla's Firefox has seen steady growth in market share this year, reaching more than 20% as Microsoft (NSDQ: MSFT)'s Internet Explorer has fallen below 70%, a Web metrics firm said Tuesday.

As of the end of November, Firefox had a 20.78% share, while IE had fallen to 69.77%, according to Net Applications. Throughout the year, Firefox usage on the Web has grown steadily, starting in January with a 16.98% share. Internet Explorer, on the other hand, started the year with a 75.47% share.

Also showing steady growth is Apple's Safari browser, which rose to 7.13% after starting the year with a 5.82% share, Net Applications' figures showed. Google Chrome topped 1% when launched in September, and soon fell below that mark. The browser did not reach 1% again until Nov. 27, but ended the month with a 0.94% share.

My R.A., Charles, convinced me to switch from IE to Firefox over the summer ... an experiment that lasted about 4 days. I'm perfectly happy with IE, but will keep an eye on the churning here. Oddly, Charles has switched over from Firefox to Google Chrome, which as of yet isn't available for Macs, but promises to be one of the coolest new browsers around. The Google suite -- gmail, gchat, YouTube -- all seem faster on Chrome, but he's very upset that it isn't perfectly delicious compatible as Firefox's latest version. Still, Google's promised that Chrome will have more add-ons, so he's pretty excited.

Wired Magazine has a fun time imagining what the browsers of the future will look like and how they'll be modified to suit very particular markets. It's an interesting idea -- that browsers will be designed for specific types of people -- and one that will totally revolutionize the way you interact with the web.

Imagine the first company that allows users to have access to their click stream -- that is what they click on over time. Imagine a web browser that knows what you want before you know it. Far-fetched? Not quite. Just check out our post on the awesomeness that is Netflix's recommender system. (For those interested in recommender systems, you might want to check out Wired Magazine's article on Gavin Potter, a 48 year old British psychologist who may end up winning Netflix's $1,000,000 prize for designing the best recommendation system. He blogs (infrequently) at Just a guy in a garage.)

The downside of clickstream is that utilizing its power involves a major privacy tradeoff. Kids don't want parents watching their every cyber-step. Same goes for spouses. It may be one of the great ironies of this age of discovery that one of the biggest truths we discover is that the human animal needs, more often than not, to be left alone.

Some more food for thought: Read John Battelle's masterful book, The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture. It is essential reading for understanding how Google and other search companies but the information in information technology. For those who don't have the time to read the book, Battelle gave a great hour-long lecture on the book for Google NYC. 

Also, promising is Siva Vaidhyanathan, author of  a (forthcoming) book and blog tentatively entitled, The Googlization of Everything. Vaidhyanathan did a bloggingheads.tv with Will Wilkinson of Cato talking about Google and its revolutionary search power and effect on culture. He's a little too dismal for my tastes, but all in all, worth watching.

Recommender Systems

I anticipate the technology of "recommnder" systems, such as that used in digg and Netflix and Amazon and ye olde "Firefly" to be an increasingly important component of the digital economy.

Here's a thoughtful essay on the topic by Tom Slee. 

Could Entrepreneurship Stop Aging?

Science fiction often wonders what would happen to our civilization if mankind could live for ever, but could it actually happen? As it was recently put in Reason Magazine's December 2008 issue, science fiction moves us beyond the old adage of all that is constant is death and taxes. If you solve the first, could we please do something about the second? Take a look at this feature story on Wired.com about efforts to slow or even undo aging in mice.

Cancer, diabetes, Alzheimer's, Parkinson's, heart disease: All have stubbornly resisted billions of dollars of research conducted by the world's finest minds. But they all may finally be defied by a single new class of drugs, a virtual cure for the diseases of aging. In labs across the country, researchers are developing several new drugs that target the cellular engines called mitochondria. The first, resveratrol, is already in clinical trials for diabetes. It could be on the market in four years and used off-label as an all-purpose longevity enhancer. Other drugs promise to be more potent and refined. They might even be cheap. "It's going to revolutionize western medicine," said Doug Wallace, a pioneer of mitochondrial medicine at the University of California at Irvine. "All the things that are common for an aging society, and nobody worried about when they died of infectious disease," he said, could be treated. If the idea of a cure-all sounds fantastic, that's because it is. History is littered with failed wonder drugs, elixirs of youth and miracle cures. But these new drugs have shown tremendous promise in mice. And though success in animals is far from a guarantee for humans, the research has gone from tantalizing curiosity to a possible foreshadowing of human health care in the 21st century. As fewer people in the West die of infectious diseases, these new mitochondrial drugs could prevent a wide range of age-related illnesses, though they likely won't extend the lifespans of healthy individuals.

Just don't anyone tell Bob Litan.  He's worried enough about Entitlement Spending as it is ...

Technology and the Recession

A recession has a curious effect on technology development. First, tech vendors react by lowering prices which helps "trickle down" faster diffusion of new consumer technologies. Tim Bajarin, writing at PC Magazine, observes

"Couple this with an interesting trend that potentially impacts tech spending during a downturn: cocooning. This basically means that if money is tight, consumers will spend more time at home instead of going to movies and restaurants, or taking long vacations. One area that gains from this is HDTVs. People will justify the cost of a high-definition TV by thinking of it as the center of their cocooning entertainment. Also, with the analog broadcast cut-off date just around the corner, retailers tell us that they still see strong demand for HDTVs—albeit for the less-expensive models. However, they still see HDTVs and even surround-sound audio systems selling well this holiday season.

"Another area related to cocooning is gaming systems. Nintendo has already said it should have a large supply of Wii consoles in place for the holidays, and Microsoft's recent price cuts on the Xbox will help sales this fall. Demand for gaming software for consoles and PCs should remain strong as well."

And even with the slowdown, Tim notes in another column that forecasters expect a level of demand growth that other industries would kill for: "Market research firm Forrester reduced its prediction for growth in technology spending in the U.S. next year to 6.1 percent, and Gartner believes worldwide spending will grow only 8 percent this year."

But that's just the market side. The introduction of new technologies that have been in the pipeline for years should continue unabated. Despite the financial turmoil, just consider the new products unveiled yesterday:

Apple's "sexy" new aluminum-and-glass MacBooks.

Toyota's new iQ mini-car (WSJ story, WIRED story).

Google's Android (iPhone Killer?) Hits Stores Oct. 22

Insofar as I can tell, there are at least two reasons to love the new Google phone.

1. The cost.

"The data plan for the phone will cost $25 per month on top of the calling service, at the low end of the range for data plans at U.S. wireless carriers. And at $179, the G1 is $20 less than the least expensive iPhone in the U.S."

2. The freedom to innovate on your own terms

"Google is giving away Android, the software that underlies the G1, for free, and opening the operating system to third-party developers who can create their own programs. Google hopes that in turn, mobile phones will provide even more ways for people to interact with the company's advertising network."

If you aren't completely excited yet or convinced that Google will destroy Apple's market share, watch this video from Jonathan Rosenberg, Senior VP for Product Management and Marketing at Google. Apologies for the length, but it is well worth it!

For the record, I bought an iPhone early this year, and I absolutely love it. This whole situation smells a lot like PC vs Mac in the 1980s. I think Apple learned the lesson about supporting 3rd party developers as the path to standardization dominance. We'll see.

Google's "Computer Navy"

Google has a cool idea for housing its data centers.  Literally.

According to a report in the Times, the "water-based data centres" would use wave energy to power and cool their computers, reducing Google's costs.

This reminds me of Neal Stephenson's novel, Snow Crash, for some reason.