Growthology

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.

The Volt Revealed; Pay No Attention to Recessionary Clouds

With the release today of these new pics of the Chevy Volt,

we see that even the supposedly declining auto sector continues to generate breakthrough technologies. With the introduction of the Chevy Volt, scheduled for sale in 2010, General Motors is leading the world. I can't wait to drive one. CNNMoney reports:

The Volt should cost less than 2 cents per mile to drive on electricity, GM said, compared with 12 cents a mile on gasoline at a price of $3.60 a gallon.

As the battery begins to run down as the car is in use, a small gasoline engine will turn on and generate enough electricity to drive the car about 300 miles, said GM.

Unlike hybrid cars, or plug-in hybrids, the Volt is driven only by electricity. The gasoline engine never directly drives the car's wheels.

It's enough to make you forget there is a recessionary storm forming, investment banks failing, sky falling, etc. Indeed, America may have lost 3 million manufacturing jobs in recent years, but U.S. industrial production in 2008 remains higher than ever (well ... as of January, and there was a sharp 1 percent dip in August reported just yesterday).

See Menzie Chin's review of the recession indicators at Econbrowser.com for a thorough analysis of why yesterday's industrial production release is part of a broader wave of depressing news.

I have been an economic optimist, but the recent spikes in unemployment insurance claims and the unemployment rate are powerful signs of recession. The other news is just piling on. But take note of this lesson that in a dynamic capitalist economy, you will continue to see revolutionary economic advances in the "fundamentals" (to use a trigger word) like automotive technology and productivity, even when the macro environment is bleak.

WALL-E is progressive & a must-see

WALL-E, The Pixar movie about the last robot on a despoiled Earth and obese tech-dependent humans is wonderful. I took the whole family to see it months ago, and have been thinking about it ever since.

There is ample reason for real progressives to dislike the film's premise: technological advancement destroy's the Earth's capacity to support life. Conservative / entrepreneurial critics made arguments that normally I would agree with - too often political "progressives" warn that progress is bad. But the question is whether kids who see this movie leave the theater feeling pro or anti technology? Are you kidding me?  Two robots have a love dance in space!  It's cool. Besides, there is a happy ending that soundly trumps the doom-and-gloom crowd.

I think viewers need to remember that the apocolypse is a plot device, not a commentary. The creators take advantage of an age-old (and probably innately human) concern - the end of civilization. So did Planet of the Apes, which most sane people agree is the greatest film of all time (my wife being the exception).

What impressed me is that WALL-E is brutal in its portrayal of obesity, despite treating it with humor. It pulls no punches. I can only imagine how uncomfortable this might have been for some families to explain to their kids, and Pixar deserves real kudos for making folks think about it.

WALL-E is a parable that at its core says that technology is anything but cold and lifeless. It reminds us that the challenge to humans in handling an explosion of technology is not to lose our humanity.

Just When You Thought We Were Out of Innovation . . .

Readers are undoubtedly familiar with the debates raging over American competitiveness and whether China or India or both will overtake the United States and consign us all to the dismal service sector tasks of burger-flipping, hair-cutting, and retail cashiering.

I exaggerate. But this is a not-so-subtle subtext running underneath debates over the continued decline in manufacturing jobs, as well as the persistent exhortations from the scientific and policy establishments that we need to train more scientists and engineers.

There often appears to be a disconnect, however, between the public debate and what is going on in the American economy. Such a disconnect is nothing new, but I sometimes think we only dimly grasp the shift beneath our feet.

By sheer coincidence today, I came across this chart on The Big Picture, showing a growing gap between world GDP and oil production, and this Resilience Report from Strategy+Business about "digital oil fields." One way to jointly read these is with the expectation that digital oil fields will help boost oil production. Maybe.

The more interesting tale here is the transformation of the oil industry: facing a labor crunch and spike in demand, it's responding by developing a "new breed of engineer and technician." The oil industry is becoming, or already is, an example of a "service system." Our friend Jim Spohrer over at IBM has been a leader in developing the science of service systems, management, and engineering.

This type of evolutionary transformation is occurring across the economy, as old and new technologies, new knowledge, software platforms, and continuous learning keep coming together to create ever-greater levels of integration that require new approaches (entrepreneurship), new ways of thinking, and new forms of business.

In this sense, the steady drumbeat for 'more scientists and engineers' begins to appear a bit shallow. We need them, of course, but before simply recruiting more students into the existing disciplines, maybe we should think about restructuring those disciplines. In an odd way, the age-old story of specialization, increasing returns, and greater knowledge that continues to shape the economy, may push us toward an educational system that emphasizes integrative, consilient thinking.

"The Flip Side"

OK, one more thought on the speed of technology adoption and then I promise I'll move on.

Reader JMD, commenting on the last post, wondered if there was any hope for "oldsters" in adopting new technologies as compared to the apparent speed of adoption by younger generations. JMD offered a formula, attributed to Kenichi Ohmae, that was one attempt to temporally chart adoption gaps. (I remain skeptical, with others, about Ohmae's book, The End of the Nation-State.)

JMD's question got me thinking: why do younger generations seem to adopt new technologies faster than their elders? First of all, do they? Second, if so, why? Many Growthology readers likely use Skype: we use it mostly to keep in touch with our children's grandparents. So there is one example of an older generation using a new technology: our parents use Skype to communicate with their grandchildren. (I suspect many Internet-based communications advances are driven in large part by grandparents today.)

And we all know people older than us who have taken up recent technologies better than those younger than them. Prima facie, though, it definitely seems as if younger people are not only faster to adopt, but better at adopting new technologies. But why? Do you think that in medieval Europe, the young picked up new agricultural techniques at a more rapid pace than their forebears? Or, more recently, did younger generations in nineteenth-century America push technological change more than their parents? One answer is that improved technologies or processes didn't exist to be adopted. But that's not really an answer: it raises the perennial question of economic history of why growth took off when it did in western Europe.

This isn't an irrelevant issue: technological adoption and all it entails (learning, knowledge, increasing returns) is absolutely crucial in accounting for economic growth. If faster technological generation and adoption has fueled the rapid growth in the world economy since 1820 (see the fabulous work of Angus Maddison), why did younger generations, seemingly all of sudden, become vehicles of this? So what do you think? Why do younger generations adopt technologies more rapidly? Is this an artifact of modern (as in since 1820) market capitalism? Might this have something to with rising life expectancy and perhaps changing attitudes toward childhood and adolescence in the last century or so? Have I stumbled on something here or am I spinning wheels?

OK, next week, with the Olympics, perhaps we'll touch on some issues pertaining to international economic growth and the "competitiveness" of nations.

The (Real) Tech Gap

Greetings, Growthology readers. As Tim promised, I will spend the next week expounding on what I happen to find interesting on any particular day in relation to economic growth. Here, humbly submitted, is my first attempt. We often hear it said today that the world has never changed so fast, that change is constant, etc. Is this true? Every time period likely stands guilty of chronocentrism, but there certainly seems to be something distinct about change in our time. Consider this:

Roughly 34 or 35 centuries ago, the Shang Dynasty ruled a great portion of modern-day China. At its height, the Shang presided over an efflorescence of progress: bronze tools, the horse, the chariot, and what is considered to be the first writing system in China all came together at once. By "at once," I mean a fairly short period of time in archaeological terms--roughly 200 years. (There is also an interesting debate over the nature of these advances, marvelously explored in Peter Hessler's Oracle Bones.)

That two hundred years is perceived to be a short time frame shouldn't be particularly surprising--virtually our entire method of historical study (at least as it's taught in schools) is premised on looking at history in blocks of decades and centuries. We study ancient Greece, the Roman Empire, the Renaissance, the Industrial Revolution--all in large chunks of time.

Now, aside from the interesting and completely unanswerable question of how historians in the year 2200 will view the year 2008 in the long scope of history, how does the present day compare in terms of change? Please permit me a personal anecdote.

My wife and I have a two-year-old son. Like all toddlers, he is curious, particularly about things that aren't toys, like his father's cell phone. He often walks around the house pretending to talk to one of his uncles on my phone. And sometimes, he sits on the floor and puts the cell phone (a flip model) at a right angle and tell us he is checking "his computer." On one level, this is a cute story a parent could share at parties.

But if you think deeper about this, it illustrates something astounding about the pace of change in the world. The cell phone did not exist when my wife and I were born. The personal computer was in its infancy. Yet three decades later, these two technologies are so ingrained in the fabric of our two-year-old's life that he is treating as fungible two technologies that didn't even exist or barely existed when his parents were born.

It makes you marvel at how much the world has changed in such an incredibly brief span of time, and it makes you begin to wonder about technology and change thirty years from now. There will be technologies and firms and types of business that do not exist today, and likely don't even exist as sparks in someone's brain. And speaking of the brain, I also wonder about the impact (good, not bad) that this will have on the neurological structure of future generations. (See, for example, Steven Johnson's Everything Bad is Good For You.)

This is something that needs to be kept in mind whenever we discuss economic growth and economic policy in general: how do we leave the path open for the as-yet-unimagined leaps in technology and society?

Ranking Greatness

"Digital revolution" is the moniker used to describe the rise of computation and its wide application to things that were not imagined years ago. Yet there is resistance to the underlying notion of using quantification as a method of analysis in many areas. One example that fascinated me when I was young was that many historians dismissed ranking the greatness of U.S. Presidents as a parlor game, yet the popularity and wider acceptance of such rankings has grown tremendously since they were first created in 1948.

Recently, David Galenson came up with a method that ranks works of art, described in this article in the NY Times (Hat tip: EJ Reedy).

Galenson is an economist at the University of Chicago who initially specialized in colonial America. But during the past 10 years he has turned his attention to artists and creativity, convinced that the type of economic analysis that explains the $4-plus gas at the pump can also explain the greatest artists of the last 100 or so years.

His statistical approach has led to what he says is a radically new interpretation of 20th-century art, one he is certain art historians will hate. It is based in part on how frequently an illustration of a work appears in textbooks.

“Quantification has been almost totally absent from art history,” he said.

Yet, the most effective counter-argument might also be unwelcome among the purists. It comes from conventional economics, which suggests that value is already well established - not by emotional depth or expert evaluation but by something far simpler - by the market price:

Charles M. Gray, co-author of “The Economics of Art and Culture,” said, “We all want to believe there is something special about the arts, but I don’t buy that there is a difference between artistic and economic value.” The accurately priced piece will capture all of those intangibles as well, he said.

So the question in my mind is not whether ranking artistic greatness is possible, or appropriate, or whatever. Rather, the question is one of methodology. I tend to believe a free market can misvalue greatness -- the whole point of consumer and producer surplus is that value exists in exchange beyond the market price. But I also think Galenson's methodology - described here at least - oversimplifies.

How would you devise a better ranking system?

If you could time-travel, what five things would you bring?

What five innovations will spur economic growth in 2009? New solar power tech? A cure for cancer? Cheap desalination?

One way to help think about this question is to ask another (sillier) question. If you could travel back in time, What five things would you bring?  Let's imagine we are travelling to meet Augustus Caesar or Marcus Aurelius, one of those relatively calm Roman Emporers. 

An interesting and related dialogue on time travel was started recently by Tyler Cowen at marginalrevolution.com:

You might think that knowing economics, or perhaps quantum mechanics, will do you some good but in reality people won't even think your jokes are funny.  Even if you can prove Euler's Theorem from memory no one will understand your notation.  I hope you have a strong back and an up to date smallpox vaccination.

Tyler is a time travel pessimist, but plenty of folks think a typical modern would thrive in a pre-modern economy (see his comments). I agree that we moderns lack practical skills that local economies tended to instill ... subsistence farming, slaughtering, hunting, digging a well, basic metallurgy and carpentry. Despite that and the loss of all our electric tools, I think our modern background knowledge is underappreciated: knowing that heat kills germs, the crudest sense of saving and banking and lending, optics, a horse collar. We also underestimate our IQ relative to the dunces of old (they with little nutrition and less literacy). If you travel back in time, you will be surrounded with ignoramuses and idiots, meaning the situation would be ripe with danger and opportunity all the time.

So Tyler thinks you would be lucky to survive. True. But once you survive the first 60 days, I say it would be difficult to avoid becoming a very important, wealthy, and celebrated person. 

But to me the more interesting question is what five things you think would make the biggest impact on pre-modern civilization? Keep in mind, there is no wrong answer, but I'm pretty confident there is a most insightful answer ...

More SSRN in the NY Times

Following my scoop on the Jensen interview, this little paper in Manhattan ran a story on them, too:

Time was that if you were a professor at a prestigious university you were, by definition, among the most read authors on a particular subject. And you would play a similar gatekeeper role through reviews of who else should be read on that subject.

Compare that with the Social Science Research Network’s principles, as explained by Mr. Jensen. Anybody, anywhere in the world can put up a paper, he said.

In all seriousness, this is a fine article by the New York Times. But it only touches on the possibilities SSRN offers.  So here's a question: does SSRN itself face any threat from potential competitors? Some say that Wikipedia (created in 2001!) will take over the world, and all publishing venues will fall to its completely free, completely peer-produced model. Will it take over SSRN's infomediary role?  Will something else?

Paul Krugman Kindles My Faith

I’m tickled that Paul Krugman is enjoying a revolutionary new technology product, Amazon’s Kindle:

The download thing is great. It works — and it means getting books when you want, without having to trek over to Barnes and Noble or wait for a delivery.

Congratulations, Paul. I am envious, and look forward to getting a Kindle or Sony Reader Digital Book someday soon (Hint to family: Christmas is on December 25th this year!).

Krugman has a reputation as a Cassandra glass-half-empty pundit, but he’s also a great economist. I assigned his books to my students, and I learned many deep lessons from his textbooks and journal articles as a grad student. But I am happiest about Krugman’s new purchase because it shows that even a macro bear is enjoying the fruits of technology during a recession. Think about that.

I don’t see his position as a contradiction, or hypocrisy, indeed I applaud Krugman for acknowledging the good as well as the bad. But I do see it as a validation. Growth and technology win out in the end. Or to paraphrase another great economist, “In the long run, we may be dead, but our progeny will be much better off than we can imagine.”

(Note: Krugman blogged again on the Kindle today ... I'll comment on that shortly)

Interview with SSRN's Founder

Economic growth happens because of technology, we all know that. But technology happens first and foremost in the inventor's brain. And the inventor's brain is operating at the scientific frontier. Or is it?

We can speculate that some of the greatest inventions were invented hundreds of times, and we can document that many were invented more than once (hence the need for patent offices to document the exact timing of applications). The redundancy and overlap can be eliminated, and research energies focused more efficiently, if everyone has access to knowledge at the actual frontier instead of their perceived frontier.

Any lag between research completion and its diffusion is effectively a growth retardant. The policy challenge is to increase the speed of knowledge diffusion. Traditionally, research was published by peer-reviewed printed journals or at infrequent conferences. Printed journals remain a vital sign of quality, and we can imagine they will proliferate in a networked knowledge economy. Regardless, since the advent of the Internet, the ability to review research in rough draft or "working paper" format through an online community is creating a revolution.

One of the leading online research communities is the Social Science Research Network (SSRN), created in 1994 and summarized here on wikipedia. Michael Jensen, SSRN's co-founder and a successful financial economics professor, spoke with me today and I thought you might be interested in some of things we talked about:

TK: Why did you start SSRN?  What motivated you and what did you expect?

MJ: I was an accidental entrepreneur, actually.  Wayne Marr originally suggested we start something he called the Financial Economics Network, and I said yes, and that eventually became SSRN.  When he moved on to other projects, I'm left holding the bag (laughs).  Actually, I was motivated by my own experience as a long-time editor of journals. In fact, I co-founded the Journal of Financial Economics, and was familiar with the pluses and minuses of it. It was one of those experiences that helps you see your own blindness. In the 1970s, I began to receive quite a few papers challenging the efficient market hypothesis. The referees rejected them and I rejected them. Any one of these articles standing alone could be rejected, but I began to feel that as a package they cannot be ignored.  The authors were onto something, even if we didn't see it. Sometime around 1975, over the objection of my referees - many of them close friends - we published a special issue with a collection of those papers.  That was controversial but proved to have great value. Subsequent to that, behavioral financial economics evolved. 

In creating SSRN, I envisioned an alternative distribution vehicle.  No peer-review, of course. But papers must be part of the world scientific discourse. The only way to do this before was through academic working papers, which I had organized at the Simon School in Rochester years before, and they were clumsy, slow, inefficient. The Internet allows us to share working papers without all the cost and time of mailing printed copies. The idea of SSRN was to change the way research gets distributed and to thereby change the way research gets done.

In my own field, I was part of a very small group doing cutting-edge work in the early days of modern finance, and I noticed that elites in all fields were 2-3 years ahead of other scholars just because they knew about research that took so much time to get distributed widely. The Internet allowed everyone to see the frontier.

TK: What has been the reception and impact of SSRN?

MJ:  There are around 650,000 papers downloaded a month from SSRN, which is a conservative count based on 1.4 million actual total downloads per month, some going to multiple downloads by the same person and others to automated bots and so forth. There are half a million registered members at SSRN, and around 96,000 authors. We have had an impact.

SSRN was our baby, and we knew it should be successful. But it took a bloody fortune to get there. There were no revenues for quite a long time. Still, the VCs were interested in making a deal early on, but they would have wanted to do things we were not ready for, and I suspect SSRN would not have survived the dot-com crash if we had gone that route.

TK: Will you be upgrading or adding new features to SSRN?

MJ: We are always investing in improving SSRN. There are many different activities going on  right now, including working through a complete redesign of the site.  This will be the third time.

Citation analysis is the main tool we are working on, which will be like the ISI index.  Measures of downloads are valuable, and SSRN currently shows which papers and authors have the most downloads of all time, per year, and so on.  Measuring downloads is highly imperfect, but does say something about popularity.  Once we engineer a citation analysis system, we can assess impact.  My belief is that we can create reputation systems that help people find important work, and where papers can rise and fall in reputation as they warrant over time.

The citation analysis we are developing also provides a powerful research tool. It provides a way to click backward through a paper's references to find research that it was based on, and a way to click forward in the citations to a paper to find those papers which referenced this paper. To accomplish this we are in the process of scraping millions of references from archived papers, something like 3.7 million references so far with 1.3 million citations to SSRN papers.  I've already discovered how powerful this can be when in debugging the system I found a dozen papers directly relevant to my interests by following the links to papers that cited my paper.  I would have never known about them so easily without this technology.

We are releasing a recommender system this summer, where you will see on most abstract pages the 3 to 6 papers that were downloaded by others who downloaded this paper. This will soon be available on SSRN in beta. We now release most of our new developments to our Beta Labs before launching them in the regular site. Registered users can use these features by clicking on the Beta tab which appears at the top of every page where we have released a Beta version of some feature.

Another feature we are working on is the ability to comment on and rate papers. We are hosting a conference this fall that will use a Beta version of it, and it will probably be ready for beta testing in late 2008 or early 2009.

An important caution to innovating too quickly with a system like this is that people's reputations are at stake, and we have to be wary of people gaming the system. The overall idea is to keep improving this parallel system to peer-reviewed journals. We will get some things wrong, but will also continue to learn and to get better. 

TK:  Thanks very much, Professor Jensen.

MJ:  It's an honor. Thank you, and good luck with growthology.org.

Singularity Special

My daughter is worried that robots may take over the world. Not to worry, I told her, we have one of those fancy remote controls that can turn off anything.

During my brief time at SDSU, I asked Vernor Vinge to lunch, and to my great pleasure he accepted. This is probably the single most insightful SF writer living today, author of multiple excellent novels and one penetrating (and famous) 1993 essay about the future of technology and its impact on human civilization which popularized the idea of a Singularity.

Now a free online magazine for tech insiders, Spectrum, has a special report on said Singularity.  Very cool stuff indeed, and here are three favorites:

1. "Signs of the Singularity" by Vinge.

Economics arises from limitations on resources. Personally, I think there will always be such limits, if only because Mind's reach will always exceed its grasp. However, what is scarce for the new minds and how they deal with that scarcity will be mostly opaque to us.

2. "Economics of The Singularity" by Robin Hanson. I think this is Robin's lay version of a more technical paper he wrote framing growth over the very long term as a series of punctuated equilibria.  Here's a sampling:

Though such growth may seem preposterous, consider that in the era of hunting and gathering, the economy doubled nine times; in the era of farming, it doubled seven times; and in the current era of industry, it has so far doubled 10 times. If, for some as yet unknown reason, the number of doublings is similar across these three eras, then we seem already overdue for another transition. If we instead compare our era with the era of brain growth, which doubled 16 times before humans appeared, we would expect the next transition by around 2075.

3.  Who's Who - a one-page PDF with a dozen leading thinkers on the topic. Note, Ray Kurzweil, the great entrepreneur, is included.

 

Crichton's Mediasaurus

In 1993, author Micahel Crichton predicted the demise of the "Mediasaurus" within ten years.  Slate's Jack Shafer noted the failed prediction in 2002, but is graciously eating some humble pie here:

As we pass his prediction's 15-year anniversary, I've got to declare advantage Crichton. Rot afflicts the newspaper industry, which is shedding staff, circulation, and revenues. It's gotten so bad in newspaperville that some people want Google to buy the Times and run it as a charity! Evening news viewership continues to evaporate, and while the mass media aren't going extinct tomorrow, Crichton's original observations about the media future now ring more true than false. Ask any journalist.

Longtime growthology readers know I have been covering this story here and here. I don't pretend to know what happens to the print media in ten years, only why it happens. Consumer choice is being expressed through new disaggregating technologies and new delivery technologies and new matching technologies (algorithms that identify things for individuals that they were not aware they wanted). But does the old medium go exctinct? 

In 1993, Crichton predicted that future consumers would crave high-quality information instead of the junk they were being fed and that they'd be willing to pay for it. He's perplexed about that part of his prediction not panning out ...

What keeps the mediasaurus alive? There are at least five reasons I have on my mind:

1. Junk food tastes great. We are imagining a technology that WE want, and imposing that desire on the mass market. Most people probably don't want the super-informative information Crichton wants, and are happy consuming brain candy.

2. Bounded rationality.  The opposite side of the long tail is the short mass: one NBA champ, one Olympics, one President. In fact, mass media is under assault not just by disaggregating forces, but by aggregating forces as well. In a digital age, does the local station really need a D.C. correspondent? 

3. Cultural canon. I believe people enjoy have common cultural reference points (related to the items above), even trivial things like knowing who won Idol last night. Maybe this is sociobiological?

4.  Geography. The weather tomorrow doesn't need very much disaggregating (especially in February or August here in D.C. -- Ugh). Other local interests are also common.

5. What else are you going to read on the train?  (Kindle).  When the power goes out?

Also, there's a downside to Crichton's vision. Cost. I simply do not believe people will pay for information in the new economy. I believe in free pricing with a revenue model based on monetizing readers through personalized marketing.  In ten years.

Plaxo and Community

I was pleasantly surprised to find this post by Dr.Tax, which is motivated by Plaxo v LinkedIn:

A few years ago Robert Putnam wrote a book called Bowling Alone which argued that civic institutions were falling by the wayside - things like bowling leagues and Elks clubs. Putnam's argument reminded me a lot of Malthus - who for save a few changes like the invention of the steel plow might have been a bit more on target. In Putnam's case he was struck on the notion of geographic proximity. In this world that is increasingly unimportant. As the communities of the last century begin to falter - the new ones are taking their place. Plaxo and LinkedIn are but two examples.

I am in love with Plaxo - a personal contact management technology that is at once efficient and life-saving (for those of us who define "death" as a computer crash with totally MS Outlook). In the arms race of social networking technologies, I've been on and off and on LinkedIn, with mixed results. I quite enjoy Facebook, and only wish more folks from my generation would participate. I suppose these things will cross-pollinate features until they get it perfect. Or is there such thing as a perfect technology?  (long answer: No, progress is infinite.  See Viriginia Postrel.  Short answer: Yes.  See Pac-Man, Summer, 1980).

Wiki Word Count ...

... as a metric for how serious our culture takes different topics, from the reliably funny and insightful Achenblog:

Selfless Wikipedians are staying up into the wee hours reading each individual article for the characters of the old G.I. Joe cartoon, ensuring the entry about Cobra Commander is neutral and unbiased.

It stands to reason that if an obscure cartoon villain can get a fair shake, then our first president will, too. The test is simple, if a little imprecise.... Do a word count, and you have a rough sense of your subject's importance in human affairs.

Winston Churchill: 10,808
Abraham Lincoln: 10,595
Napoleon Bonaparte: 10,414
Moses: 9,443
Jesus: 9,310
Muhammad: 9,194
Batman: 8,953
Julius Caesar: 8,766
Superman: 7,945
"Buffy the Vampire Slayer": 7,371
Christopher Columbus: 7,181
Albert Einstein: 7,135

If Schumpeter could talk to Larry Page ...

FORTUNE has a great interview with google co-founder Larry Page in the recent "best advice" issue. Lots of good stuff in there, but I appreciate his distinction between invention and entrepreneurship:

You don't want to be Tesla. He was one of the greatest inventors, but it's a sad, sad story. He couldn't commercialize anything, he could barely fund his own research. You'd want to be more like Edison. If you invent something, that doesn't necessarily help anybody. You've got to actually get it into the world; you've got to produce, make money doing it so you can fund it.

It's exciting to see smart guys like Larry make it big because I tend to believe they will use their fortune to great effect, i.e. huge positive externalities. Larry's fascination with automated cars is a case in point if you are, like he is, bothered by the 40,000+ car crash deaths annually in the U.S.

If Schumpeter had lived to see the development of the IT revolution, the Internet, and google, what would he have thought? He probably would be incredibly encouraged to see the acceleration of innovation and the constant re-spawning of innovative small firms. This is the start-up culture, and my sense is that it is the one big idea Schumpeter missed. It goes without saying that Karl Marx missed it. But the painful thing about creative destruction is that even a great company like google cannot help but face talent defection.

Again, FORTUNE has the story on the brain drain at Larry & Sergey's huge, young corporation. This has long been happening to Microsoft. And for all the blather about strategic plans and mis-steps made by these new gaints, the real story might simply be that there is only so much equity to go around. Best line:

Google was like that too, about eight years and 18,000 employees ago.

The story is somewhat anecdotal, but it raises an interesting challenge. What can a company do to keep innovative employees from leaving? The dominant model decades ago was for a major industrial firm to establish a corporate R&D lab - At&T and Xerox come to mind. This is the model Schumpeter expected to dominate the future on the theory that future innovations require integration of more and more knowledge, requiring larger and larger teams of researchers to push the envelope. History proved him wrong. (And history was named Noyce). The updated model has big firms shedding internal R&D in favor of M&A. They buy innovation and revenue growth through acquisistions - Cisco comes to mind. But the new model that google is wrestling with is to allow almost all their employees to be entrepreneurial.

I don't think any one of these models is always right or always wrong, because they are all contextual. Too often, commodity organizations buy into faddish management theories and try to empower all their workers. Nice in theory, but sometimes you just need the architect to draw and the sales team to sell. Regardeless, we can be confident the corporation is not done evolving. Companies face brain drains, and the question is how to stop them - or more properly - take advantage of them.

The smart companies will do what universities aren't doing very well yet - offer maximum flexibility to their innovative employees while retaining a minority stake in the offshoots. If google really wants to keep talent in-house, it might need more than google stock options and free food. It might need to create a new turn-key subsidiary framework - a kind of reverse M&A where employees can apply to start internal divsions using company capital in exchange for partial ownership of the future revenue stream.

What does this mean? Labor is more than labor. Modern labor is human capital, and it wants more than a paycheck, a pension, profit sharing, and, even more poignantly, aggregated risk capital returns. I think human capital wants a balance of individualized risk returns and security. Sorting out that balance is the true search function of modern capitalism.

Thoughts?