Unintended consequences of knowledge management regimes

There are several consequences of the differences between the US (and the west) and China (and other autocracies). First, with one of the major assumptions of neoclassical economics out the window, it calls into question basing economic policy on neoclassical economics. Second, with a monopoly structure for intellectual property several different economic incentives have been created. Finally, the differences in IP management between the countries creates tensions at several different levels. I'll discuss each of these points in more detail.

First, if one of the major assumptions for economic policy includes non-rival, non-exclusive knowledge, it's difficult to understand why there isn't more competition in many markets. However, as we know it's not really possible for any firm to pick up any sort of technology and start to produce a given product. Because of this difficulty regions and areas tend to become experts at specific types of technologies. However, even in the case of China the freedom of access to IP makes it easier for firms to produce specific products. The problem still lies in the fact that you still need tacit knowledge to actually make the product. A patent is supposed to give you the information you need to produce the technology. However, the actual patents are difficult to read and not likely to be possible

Second, with a monopoly structure in place for intellectual property it gives very different incentives for owners of intellectual property. First, for people who actually produce a product, attacking products that are similar for infringement can be a very lucrative proposition. It prevents other companies from becoming competition. Apple is currently using this tactic to go after Android through Samsung and HTC. With a full monopoly technological progress can actually come to a standstill. An example of this is with Xerox copiers. With the monopoly in place Xerox did not innovate and kept prices extremely high. As soon as their patent ran out the competition came in and almost took all of the market share from Xerox. They introduced lower priced products and a wider more personal product range. Without the monopoly in place other companies could try to move into the market space earlier and drive innovation from the beginning of the market.  Finally, with reduced ownership of IP there will be less patent trolls like Intellectual Ventures.

Third, the IP management is causing issues between firms and the Chinese government. The firms do not want to give up their IP because it's how they are able to make their money. Some of these technologies are so easy to copy it's impossible to make a profit without protection. In theory pharmaceuticals should be perfectly copyable based on the chemical properties of the drug. If the pharmaceutical companies didn't have a chance to recoup the investment on a drug (500 million - 1 billion per drug) there would be no innovation. The differences present problems for trade and agreements between countries. The US and China have had serious disagreements over how IP should be managed.

Basically, the differences in how IP is understood impacts a countries policies economically and in trade. It is important to understand exactly what's going on with these issues. Our governments are pushing for different levels of control over IP both in patents and other forms of copyright. As some one interested in policy, it's important to understand what types of policies we should be pushing for. I don't think there's any true right answer for the IP problem. In different situations policies should be adjusted. We cannot have a stagnant IP regime when technologies are evolving as fast as they are.

Are democracies or autocracies better with technology Management?

According to neoclassical economics knowledge is a non-rival (I can use it without preventing you from using it) and non-exclusive (available to everyone) resource. This has two impacts on their economic theory. First, the actual impact of research and development is excluded from economic growth and is ignored. Second, that any company should be able to pick up and produce any technology. Both of these points are relatively ridiculous. For two reasons. First, we know that research leads to the formation of new companies. Second we know that most companies cannot produce any product and many companies that produce products outside their expertise fail at it.

From a neoclassical perspective democracies are terrible at sharing knowledge and technologies. Democracies have a slew of laws that regulate access to technology form monopolies for specific technologies if they have something called a patent. Additionally, there are other contracts that can get in the way of sharing of knowledge in a way that is neoclassical. Non-disclosure agreements and non-compete clauses. If you aren't allowed to discuss a specific technology with other people, it prevents knowledge from spreading and being shared to other companies. If you aren't allowed to compete within the same industry after you leave a company, it prevents you from using that knowledge in a positive way at another firm.

These laws have been put into place in our democracies to ensure proper protection of technologies for firms. It's designed to prevent the spreading of tacit knowledge from company A to company B. As a company this is incredibly desirable. Without these protections some research would be worthless to conduct. Knowledge spill-overs would cause prices to fall to cost or lower as firms compete for market share. It's great for consumers, but bad for firms.

So what happens in China? Well according to Make it in America, China requires many firms to hand over their Intellectual Property to the Chinese state. What ends up happening after this is that the Chinese government sells the information or gives the information to one or more Chinese company. These companies tend to be made up of former employees at the company that made the product before. This allows tacit knowledge transfer to the firm and a fast ramp to compete directly with the inventor of the technology. The knowledge is freer in China than it is in the US because of this. This increases competition and may be impacting the cost of goods like solar panels.

In a way this type of behavior forces companies to compete based on the actual costs of the technology. This is what is expected in the neoclassical theory. All prices will eventually drop to the marginal cost of a product with near zero profits for the producing company. In a perverse way, this is a "freer" market than ours because it comes closer to the non-rival non-exclusive knowledge base.

In my next blog, I'll discuss this topic more.

China, Technology and creativity

Sorry I've been away for so long. I've been hanging out with my Awesome wife! She gave a talk in Ireland, which I went to for most of a week. It was a good time. She then came here to Eindhoven for a week and had an interview. So that's why I haven't been updating. Sorry faithful readers.

At a party on Saturday, I got into a fairly active discussion with 4 PhDs and myself. They are all engineering PhDs, so they understand research and how technology works rather well. We got into a discussion on if China was going to actually really over take the US in scientific research. I said I think it's likely, but there were many arguments against that likelihood. I didn't really get to finish my argument on why it's possible. So, I'm going to do that now.

Basically, some of the core arguments against China being able to overtake is us lack of creativity. China is a country of followers, not a country of creative leaders. Another argument was the lack of high quality education and research centers in China. I'll address the second argument first and then discuss the first argument.

Americans know that we educated a lot of foreigners at our universities, 2008 was an all time high for the number of international students. In fact my roommate at one point explained to me that one of the groups at the University of Texas was comprised entirely of Chinese students. They conduct their meetings and research all in Chinese and, in fact, leave the US speaking worse English than when they arrived. But why are they leaving? The link above notes that there simply aren't enough H1B Visas or green cards for them all to stay. Effectively we're throwing out the people we educate. Over time enough good scientists and engineers will be sent back and will start teaching in China. China has big ambitions and has been creating universities as fast as it can. Using an evolutionary perspective, we can see that it's likely they will continue to create variation and students will be selecting the best universities. One of them is likely to start producing more science and better science than another. This will lead to the best students and best researchers going to that school. One or two could become the Chinese version of MIT, Berkeley or Harvard. I think it's clear that education won't hold them back. Eventually, they will have several universities in the top 200 list according to the Times Higher Education ranking.

The second argument is a little tricker to argue against. The Chinese aren't creative enough to create radical innovations. First, I'm sure that the Chinese I know would object to this blanket statement. However, let's assume for the moment that's it's some what correct. There's a culture that doesn't reward creativity and rewards conformity. I can think of two countries that have similar types of culture that have been creative and are excellent centers of research and innovation, Japan and South Korea. Now are they as good as the US at innovation or research, No. However, they have had some great innovations and do great research.

When it comes to patent research there's something called a Triadic patent. It's a patent that is filed in the US, Europe and Japan. Europe and Japan have higher standards for patents than the US and are more difficult to acquire. Why does this matter? Well effectively Japan is the only country in Asia that would fit better with the European countries in terms of GDP per capita, protection of IP and research.

Both South Korea and Japan have a few companies that are on the leading edge of their respective fields. Samsung is in a huge number of different areas and is the world leader in many of them. Japan has Nikon, Sony, Toyota and a few other big companies that are on the cutting edge in research, design and innovation. So, I don't accept the argument that the Chinese couldn't be creative.

Another point I was trying to make, is that over time as a country becomes the center of manufacturing and incremental innovation on a product, it's likely that they are going to be able to create the next radical innovation in that field. There are two things that support this. First, in a book by Andrew Liveris, the British CEO of Dow Chemical, there is anecdotal evidence to support bringing manufacturing back to the US along with the R&D that goes with it. The other argument is based on the research of Cesar Hidalgo of MIT that shows through network theory, that to become a leader in technology you have to build your way through a series of other technologies. It helps explain why it's so hard for countries to pick up creating semiconductors. However, as a country develops the technological capability to work within a type of technology they are likely to create innovation and changes in that technology.

China has effectively been given the ability to manufacture just about everything through outsourcing. They have the technological capabilities to build and design new technologies. China also has the resources devoted to it. They created a five year plan where they are going to invest $1.5 trillion in 7 science sectors. Because of these factors I believe that China is a real threat to US and European leadership in research and technology. For any one to dismiss China because of cultural reasons or technological capabilities is making a mistake and is likely to be surprised in 20 -30 years when China becomes a leader in at least one field, likely more than one.

The trouble with experts...

I wrote two blogs in September about technocrats and how as experts of science and technology they some times think they know what's best for the larger population. The problem becomes when these scientists start to venture outside there area of expertise. They start arguing about topics with a voice of authority on a topic they know little more than a lay person. The difference may be that they pick it up a little bit easier. However, they are also some what blinded by their own knowledge of other topics and not listen to a knowledgeable person.

I'm picking on scientists right now, but the truth of the matter is this happens all the time. There's a well known (in the US) and depressing example of this during a climate debate in the US congress. During a hearing Rep John Shimkus called a bishop to testify, where he read a passage from the bible where god said he would never flood the earth again, he then went on to say that god decides when the end of the earth will happen, so he's confident that global warming is a fraud (see youtube video). The scary thing is that this guy is the chairman of the subcommittee of environment and economy. The bottom line is that he feels he's an expert of the bible and of religious matters and is using this in a context that he's not an expert.

These are just two examples but they bring me to my main point. There's a greater difference between acknowledged experts and self appointed experts. Scientists have degrees and go through formal training to become experts. Congressmen also typically are well educated and are voted into an expert position by their constituents. If they are experts or not is clearly up for debate, but at least they have been accepted by at least one community as a whole.

Then there are the self-styled experts. I think the two most obvious ones are leadership gurus and social media experts. I follow a few of each on twitter and some of what they have to say is really frustrating. For example the leadership gurus typically have some trite quote from some one. Something along the lines of "When a window of opportunity opens don't pull down the shade" (literal quote not sure who it's from). First of all, this is an incredibly easy thing to say, but horribly difficult thing to do in practice. In the entrepreneur literature I've been reading one of the biggest indicators of entrepreneurial behavior is the ability to notice when there IS a window of opportunity. The second is having the means to take advantage of it before it closes. In the case of academic spin-offs this can be measured through the resources the university has on hand for an academic to start a firm. This is in terms of technology transfer offices, incubators, equity stake investments, licensing and venture capital. Sadly, the skills to identify these windows can't be taught at a seminar. They can only be taught by being surrounded by people that are already able to find them. The ability to exploit them comes from being in the right place. So, if you want to leverage your opportunity as best as you can then you need to figure out how to put yourself in the right position to take advantage of it. See how fun it is to be trite!! The fact is you can control that, it's not easy, but it's possible.

The second group, social media experts, are equally frustrating but for different reasons. The first is that their focus on social media blinds them to fact that in many cases it plays a very small role in day to day business operations. For example, many social media experts say that if a firm doesn't do social media then they are going to fail. That's insane. Many firms the end customer never deals with. There are tons of suppliers that don't need to care about social media at all. An example of this is a company that supplies chemicals to Intel to make semiconductor chips. Most likely a firm like this doesn't have social media, because it never deals with random people.. Now, if you are a firm that does deal with the end customer, we the consumers, then yes you should have some form of social media. That's not to say that some of these supplier companies don't have them because they need to deal with environmentalists or some other protest group.

The other problem with these social media experts is they very easily start to move into other aspects of business. If you keep within your social media bubble I have no problems with you at all. In fact, you're doing something that I am really bad at. You're what Malcolm Gladwell would call Mavens. You're connectors, you have a great deal of contacts that listen to what you say. In social network theory you'd have many structural holes. This is a good thing for you as a person. However, when you start to believe you're an expert in other topics that's when things get dangerous. I read two articles in the past two days that really irritated me. The first article discusses a five step plan to save Google from Google+, it really shows that this guy doesn't have any understanding of how Google itself works. He basically calls for splitting the company and firing the management group. Google made 9.2B in revenue with over 2B of that as profit. He says Google needs to innovate. Google is cutting bad unused apps and getting back to the core business with plans to work on innovation. While the author is an owner of a small start up, he doesn't really know how large companies work and bases his comments entirely on social media aspect of Google.

The second article was on an unofficial facebook blog which argues that Google is done because facebook came up with some algorithm that focuses on keyword correlation. The algorithm is an iterative process and gets better with time. Pretty innovative, but Google's been doing this a long time. Every time they've been challenged in terms of search Google has stepped up to the plate and kept it's dominance in results.

The final point I'd like to make is that social media experts clearly understand the importance of social capital. You can see this from the amount of retweets they send out, the thank yous and the use of Klout. All of these tools indicate an understanding of the need to scratch some one's back to have them do it back. However, they apparently aren't able to understand how to extend this to firms. I believe that Google has a great deal more social capital than Facebook. I would say that Google and Apple have about the same level of social capital where neither company can do wrong in the eyes of a large portion of the population. I'd argue that Facebook, on the other hand, has as much social capital as Microsoft in the late 90s and early 2000's. No one trusts them. They have had a virtual lock-in on the market since Myspace couldn't keep up with their innovations and borrowing of ideas. Now that there are new platforms opening up its obvious that Facebook has the most to lose. Google will make missteps as they develop Google+ into a different platform than Facebook. For a service that is as young as it is, I'm surprised it hasn't made more.

So, you ask, what gives me the right to comment on these people, are you an expert? I don't know if I'm an expert, but I've been trained to look critically at arguments like those presented by the social media experts. I understand business strategies and environments that allow people to create new firms. I would argue that Google+ is effectively a case of corporate venturing, where Google created an internal start-up that produced Google+. So, in the end, yes I think I have the proper insights to address these points.

Ubiquitous free high speed wireless: Society

This is the last post I discussed the impact on the computing industry of ubiquitous high speed free wireless internet. In this post I'll discuss some of the societal changes. In some ways the societal changes may be smaller, at first, than we'd anticipate.

First, we've seen how much people have jumped on playing with their phones in public spaces. I fully expect this trend to continue and in fact to increase. Simple to play games like Angry Birds will become more advanced and will likely look better. People will do more work on their phones and will likely begin using video calls in public. Which will be annoying, but it's going to happen.

There may be a wave of apps that will try to increase the amount of social interaction of players. This doesn't mean that we'll have an increase of in person social interaction, but will likely be an increase of virtual social interaction. Which for some people is significantly better than what would happen otherwise.

I think that the ubiquitous internet will have a mixed impact on the ability to do work. As it is a lot of people already spend a great deal of time working from home off the clock. This will likely increase, but I think there will be a trade off. As people will, hopefully, be able to work while commuting more easily on trains and buses. People will begin to work in more places like cafes compared to the amount that currently do.

There will be other changes as new devices and applications are created to take advantage of the high speed internet. Many of these changes will happen as these devices are developed.

I would like to be completely optimistic that the greater the amount of internet will lead to a larger amount of user created content. That the increase of wireless internet will increase personal engagement in political and social activities, but I don't think it will. I think that there will be a small increase because there will be a larger number of people that weren't able to do it before are able to do it.

I think that a high percentage of engagement in social networks, content creation and other types of engagement will take some time to occur. I think it's because of a mind set. A lot of people have no desire to become involved in these types of things. I would like to imagine that these changes will happen over night. However they will not. People will need time to understand how to exploit this infrastructure. It will take time for unique social experiments to develop using the network. Some people will understand immediately how to create new tools for the new environment, but it will take many established firms time to fully exploit it.

It will also take people time to adapt to the change. It's not obvious in what ways the average user will exploit this technology. In many ways it will just increase the amount of general web browsing going on, in other ways video viewing will increase as well.

In this series I've looked at how our government, business, computer and social environments will change based on ubiquitous free wireless internet. It will have immediate changes and longer term changes that currently fall into the realm of science fiction. Device makers and app developers will have a new world to exploit because of increases in computing power locally and remotely. Creating novel methods of using this power is what will drive the next phase in our economy.

Ubiquitous free high speed wireless: Computing

In my last two blogs, Government and Business, I've discussed some of the impacts on our society of ubiquitous high speed wireless internet. In this post I'll look at the future of the computing industry. I think that this industry will go one of two ways, or perhaps both at the same time. The first route is obvious and is already happening, the second route will probably begin as a backlash to the first route.

The obvious route is cloud computing. As I've said we're already going down this route. The best example of the speed of this transformation is the Amazon Kindle Fire (all three different links). Basically, we will be using less powerful, but still growing in abilities, equipment and pushing the more processor intensive applications out onto a server in the cloud. This will most likely be owned by some private organization. Amazon's Fire is a great example of this because it provides the ability to browse websites at a much faster rate than what's allowed under current network speeds. Even with high speed internet this may continue because it'll fit the website to your screen and make it even faster than over the high speed network.

However, many people are skeptical of cloud computing. There is a sense of a loss of ownership. You become locked in to a specific firm to provide the required services. End User license agreements change frequently and your true ownership of the data and information you place on their servers can change unexpectedly and in ways that aren't in the favor of the users. Additionally, it's been acknowledged by both Google and Microsoft that all data in their cloud servers are subject to the US Patriot Act. This raises privacy concerns for the EU and firms using cloud services.

I think that these concerns will drive another type of cloud computing. I think it'll be something like a personal cloud. It will be similar to working with both a desktop and a laptop at the same time and remoting into the desktop from the laptop, but it will be done seamlessly and transparently. The ownership of the data will be clearly yours and the power will effectively take a phone or low power table and turn it into a fully powered desktop computer. This way the cloud won't be out there and will be easily controlled by the end user. You don't have to worry about the Patriot Act or a company going under, changing rates and other issues like that.

Both of these changes will create disruptive changes within the computing industry. The Kindle Fire is on the cutting edge of this. I fully expect Amazon to create additional applications that will run on the Amazon cloud system. There's no reason not to expect this. It will shift how apps are developed. It will also change who is in the game of creating computers. Dell, for example, will continue to have a major hold over both servers and personal computers, however as we move away from laptops to tablets and phones over time Dell is going to fail in this market. They have been unsuccessful at every attempt to enter these markets. There will be a shift in the players in the market.

These systems will only work with ubiquitous internet connection. They will become more effective as the network speed and capacity increases. Users will become more willing to use the systems as the reliability of the systems increase.

In my opinion these changes will fundamentally change the way that we look at computers. The way we interact with computers and how we feel about the usage of computers. Today they are everywhere, but in the next few years I expect them to become more prevalent as we are able to offload high power demanding applications off of our phones and onto powerful servers.

In my next blog I'll discuss some overall societal changes.

Ubiquitous free high speed wireless: Business

In my previous blog I discussed some governmental issues with ubiquitous free high speed wireless internet. In this piece I'm going to discuss the impact on businesses. I'll start with some really obvious impacts and then move into some that may be more interesting.

First, this would effectively kill the current business model for telecoms. Not just internet providers but it would also have a massive impact on telephony and television providers. Internet providers would basically go out of business unless the governments that implemented the network hired them to manage the networks and perform the upgrades required to ensure expected performance. It should also be expected that net neutrality should be the norm as the internet is free as in free beer and as in free speech in a situation like this. This would impact telephony in a similar manner. With free internet phones could be designed to work on wifi (or whatever the network type is) and use services like Google Voice (which is popular in the US and free). These services provide a telephone number as well. Further more skype communication or similar type programs could become the norm as they are free and easy to use. The impact on television would be a continuation of the current system. With Netflix and Hulu driving usage to the web. Without easy access pirating will be the norm and extremely easy.

In the US Starbucks is extremely popular for two reasons, gigantic flavored coffees and free wireless internet. I think in the Dutch context free wireless internet would spur an increase in the amount of business meetings that happen at cafes. With the slow service which is designed to encourage conversation and being social, it would be a great way to work remotely from outside of home. As it stands there aren't that many places, at least in Eindhoven, that have wireless internet like that. I think it will spur sales at restaurants.

The broadband movement is already increasing the number of people that can work from home and be educated at home. I think there will be some differences though. Mostly because of the freedom that is allowed with the wireless connections. You are able to connect everywhere and anywhere. I think this will create more flexible schedules. I'd be able to work nearly as easily on a train as I would be able to in the office. I would be able to get on a train at the time I'm supposed to be at work get there for some meetings and finish up around the same time just on the train.

I think that there will be more business models based on highly interactive advertisements and user driven actions out in the "wild." I've seen a lot of the QR codes outside of buildings as it is, but I think there will be an increase in the number of these. Users will be more willing to activate them because they are going to get the data from them significantly faster than previously. This will drive traffic to these sites and potentially new jobs from the different types of videos/ads that could be created with them.

I think this will also be something of a technological discontinuity. Broadband at home encourages one type of behavior, but I think there will be very different interactions with broadband everywhere. In the long term there could be a slew of different devices that will take advantage of the continual connections. Clothing could be that could measure the current weather conditions real time which could be uploaded to get real time weather information. We could collect data at levels we've never seen it before. This is just one usage of the informational sphere we'll be living in. There will be a huge number of new applications that will radically shift the way people think about knowledge, information and computing products. Predicting the next wave of technologies based on the wireless web is difficult. It's likely to be impossible.

However, I think that in my next blog on Computing, we'll see the largest changes.

Enabling Technological Convergences

In my last post I discussed technological convergences. I didn't really discuss anything ground breaking or earth shattering. We all know these things happen. Even if we never really make a note of it. What's a more interesting question though is why do some companies, like Apple and Blackberry, succeed and others like Microsoft and Rio (early MP3 maker) fail, either in creating technologies that converge or create technologies that then fail.

One of the first reasons is the culture of the company. To create a totally different product that will shake the core business firms may have to do something called "corporate venturing." This is where a company decides they are going to take people that normally work on the major product and put them into a different area and seclude them and allow them to create a new product. Whatever sort of leadership structure develops, develops. It really doesn't matter if this matches the rest of the firm. Essentially, these people are put into a position where they are starting a new company. Apple famously did this with the original Macintosh program. It was called a skunk works area. Of course recombining the two portions of a company creates huge problems, but good management can figure out how to deal with this.

Another piece required for a firm to successfully move into a new product space is the ability to identify the market need. This one is pretty obvious, but it still needs mentioning. In many cases it's really obvious that there's a product space and that some one should fill it. When companies don't move into it there must be some sort of reason.

One of those reasons comes down to firm capabilities. Every firm has something at its core that it's best at. I would argue that Microsoft is best at taking advantage of a virtual monopoly of a platform and moving into new directions within that platform. Internet Explorer and the Office Suite are the best example of this. Microsoft has also tried to do this with servers and other peripheries. Which is why Microsoft has had difficulty moving into other platform positions. They have failed (or mixed results at best) over and over again with phone OSes because it doesn't rely on their dominate platform.

Another company that is an R&D powerhouse in energy but has failed at anything outside of their major focus is Shell. As a major energy company you'd expect Shell to be moving into other types of energy production to make massive amounts of money in the transition from fossil fuels to renewables. You'd actually be right. They have tired and failed. Aside from having a failed solar industry Shell has a moderately successful Wind program. Between the two it actually makes sense why solar failed and wind is doing well.

First, wind is closer to extracting material from the ground than making energy from the sun is. Now hang on, I know, but Shell has to maintain offshore oil rigs in tough conditions. Understanding how to build a wind farm out in the ocean has some similarities. Shell doesn't actually make the windmills themselves, they buy the windmills and put them together to harvest energy. Shell was trying to make solar panels. Intel would be a significantly better solar panel producer than Shell. Why? Because solar panels are semiconductors. You make them with similar machines the technologies are adjacent to each other.

What's technological adjacency? It's whenever you are able to use your current skills and apply them with some research to a related technological field. I'll discuss this more in my next blog.

Innovation, Science and Money

The death of Steve Jobs has really shaken the technology community. It has really made people do a lot of thinking about innovation and the impact of technology based companies on the economy. The Economist notes that the American work force is on the decline and the high tech companies aren't making up enough jobs. That now companies like Apple and Google employ less than a third of what companies like GM used to employ. These high tech companies don't need as many employees. Additionally, it's a different type of work force that are required in the US. Apple outsources manufacturing because they are really concerned with driving down the cost of manufacturing and maximize profits. This is good business.

In a long article by Peter Thiel, co-founder of Pay Pal and a venture capitalist, he discusses what he calls the end of the future. Where he claims that we've been in an innovation slow down since the 70's. He also argues that scientists and technologists aren't living up to the claims they are making. He argues that in a lot of ways we've been technologically stagnant. Politicians have been making the same promises on energy since the 70's and that we've been slowing down are rate of increase of production for food barely keeping up with population growth. I think that he does make some good points, but he definitely goes a bit over the top with his statements. He's looking at things only within the national and regional context and is ignoring the fact that there have been cultural changes that have driven a change in how companies innovate.

Historically, companies don't find value in doing basic research. If you look at the history of research labs within industry, they hire researchers to do incremental and radical innovation. However, this research is carried out within a scientific paradigm which was created in basic research.

In fact we've seen a decrease in the amount of R&D being spent by companies. This has lead to some of the stagnation in innovation that Thiel mentions. To combat this and to reduce the risk borne by the company they have been doing more and more contract research with universities and have increase the amount of money they spend with universities.

Thiel also mentions that the government might be able to help but doesn't see it ever going to happen when you have to justify the expense by cutting something else. Since he's a libertarian he feels that the budget must be balanced. However, our politicians are cutting budgets to the largest scientific funding agencies in the US. My wife sent me an email with some of the funding cuts, National Science Foundation is getting cut by 2.3%, in fact it's 14% below the budget requested by the administration. The National Institute for Standards and Technology's budget is getting cut by 9.3%. Both of these agencies create a large number of jobs. It's been shown that one research job creates several other jobs. Cutting these budgets will reduce the amount of research which can be conducted. This will impact the number of researchers, impact the quality of education at universities and slow down the ability for universities and firms to exploit new research.

It typically takes 10 years for research to be monetizable. Cutting funding now impacts employment now and future employment. In fact, these changes will have a long term lasting impact. These choices create a path dependency within our society. Without proper funding we'll be passed by some one that feels research is paramount.

Remembering Steve Jobs

This post will piss a lot of Apple Fans off. I'm going to say that now.

Steve Jobs was a great designer. He built a company up twice based on maximizing control over the hardware, design and the software. He was able to do this an incredibly well. He was able to use this skill to dominate the early computer industry. However, under more competition Apple faltered as it relied heavily on a single creative driver. The designs that Apple created were radical design, these designs in a way constituted a type of radical innovation. The components within the computers themselves weren't radically improved over the competitors, the design was what made it special.

This is the same for the iPod. By the time the iPod came out there were already many MP3 players and many of them were doing very well. What Apple was able to do was make it simpler to move music onto the device and interface with the device itself. This is the radical portion of the iPod. I feel that this is exactly what happened with the iPhone as well. They created a radical design for the interface, but in many cases didn't even have legacy features.

Apple does a great job in marketing what any other phone maker would have expected as a normal feature. Even some of the biggest changes, like the fantastic screen it's an incremental innovation. As a consumer I fully expected some of the newest phones to have amazing screens.

One of the things Jobs did best was to get people to buy the newest version of Apple's phones. The iPad was also a very similar type of innovation. It's a gigantic iPhone. However, the reason it worked so well was the fact that iOS was able to scale up and work well on it. In the end I feel that Jobs was able to use cases of Radical Design innovation with incremental technological innovation a loyal consumer base to turn products into massive success.

However, Jobs has also turned Apple into one of the largest patent trolls in the world. With the level of control that Jobs had over Apple, it seems unlikely that he would not have initiated the litigation. Jobs did remember how they lost the PC war in the 80's and 90's. I think that Jobs is attempting to use patent law to control the market. There were no software patents during the initial PC battle, however there are software patents now and Apple has been patenting a great deal in order to control how devices are marketed and developed.

Finally, I think that Jobs was what Jim Collins called a level 4 leader. Similar to Lee Iacocca (of Chrysler), Jobs was able to control Apple through sheer personality and create a great company. However, he doesn't like dissent and would probably pull a George Lucas and change the original Star Wars trilogy.

Jobs did have a vision of what devices should look like and how they should work. He was excellent at creating great designs. He will be remembered for saving a trouble company, bringing design back into mobile devices and forcing a huge number of companies to compete in the mobile market space.

The future of employment

I posted this Slate series a little bit ago on my facebook and twitter feeds. It's an interesting read about the future of robotics in the work place. Most people think of robots only in the automobile industry. However, they are in nearly every major industry now. All new semiconductor fabs can be run with only a handful of people over seeing the production of the product. The author notes that robots are making headway into pharmacies and other professions with menial tasks being a large component. In pharmacy computers also help ensure patients aren't on conflicting medicines, with medical records in the computer it can easily flag potential issues. You could argue that this isn't robotics it's automation, personally I don't see much of a difference. You use a machine to make a task faster and automated, it doesn't matter if there are moving parts or not.

This isn't the only recent discussion on the longevity of jobs. CNN had an opinion piece about 3 weeks ago discussing if jobs were obsolete. Which if this is the case we will have to take a serious look at our current capitalistic system. As an evolutionary economist (or at least having some training in it) I can see that this perspective is somewhat accurate. Between these two articles it really indicates that in the near future we'll have a great deal of mechanized labor through robotics and computer programs. We will need dramatically less and less people employed in the western societies. This will even eventually trickle down into the developing societies.

My roommate argued that we should stop creating pointless jobs. That we should create a system that supports these people that continually fall out of the labor pool through job type elimination. This would take a complete reworking of our society to make this sort of change happen. Also, for a huge amount of people this freeloading kills them. We hear anecdotal evidence about some old fart at a company that is forced to retire and then within the year is dead. Whether we want to admit it or not, for the vast majority of people employment is tied to self worth. There's increases in suicide rates when people aren't able to work and cannot support their families. Depression is also higher among the unemployed.

There are further problems with this future. The CNN article discusses how we should be ok with just a white collar work force. I completely disagree. When I worked at Samsung some great ideas came from the technicians fixing our tools. The greater the variety of knowledge sets the higher the number of ideas. Sure a great deal of them may be really crappy, but the ones that end up surviving through the competition end up being better ideas. Make the workforce more homogeneous would reduce this affect.

I don't have an answer to this. We need to be realistic and try to understand the fundamental changes that our economy is going through. If we see that jobs are in fact going the way of the dodo we basically have to throw out all free-market economics. Why? Because there's no one to buy anything except an elite few and they just do not have the buying power to keep an economy of this size going. We will have to evaluate our morals, ethics and goals in life. It will not be easy.