Category Archives: Future Thinking

You Feel the Earth Move Under Your Feet

Posted on February 2, 2011 | 5 comments
You feel the sky come tumbling down.

EGYPT

Egypt is about much more than a popular uprising against a ruler who has stayed in power through what can only be described, charitably, as a corruption of the democratic process. Egypt is the most compelling example to date of how the physics of human society are being rewritten. In much the same way that Quantum Physics turned Classical Physics on its head, the twin revolutions of information and connectivity are turning society upside down or perhaps better put, every which way and loose. 

The fact that Egypt, the society political scientists always marveled at for its stability even in the face of daily, accumulating disasters, is the country that’s exploded has concussed even the most loyal adherents of the Status Quo. When the Tunisian regime fell you could discount it as the kind of thing that happens to small countries, even the Colored Revolutions of the former Soviet Union didn’t really capture the elite’s attention, because in these revolutions you often were replacing one elite-based power construct with another. (And this might still happen to Egypt, by the way.)

But Egypt seems different right now.

And everyone should be paying attention. Not just the political scientists, the national security experts in their dark suits reciting by rote the laws of classical society, the intelligence agencies. Everyone should be paying attention, particularly anyone supposedly in charge of an organization of any kind. Steve Denning today writes a blistering post on what the dynamics behind Egypt mean for American business leaders. There’s very little I can add but these two points:

  • The history of the world has been dominated by the machinations of men, and they’ve usually been men, making secret deals in backrooms. Transparency and Collaboration are destroying the backrooms of all institutions. Open, dynamic forces that carry with them their own advantages and disadvantages will take their place. Start adjusting now.
  • All institutions of any age are disconnected from this powerful dynamic. Their survival depends entirely on how quickly they adjust to it. Time grows short.

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Posted in Change, Collaboration, Democracy, Foreign Affairs, Future Thinking, Government Performance, Intelligence, Internet, Leadership, linkedin, Social Networks

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Thoughts for the New Year

Posted on December 31, 2010 | 4 comments

Does my right to privacy extend to the right to be invisible?

Are humans basically good or bad?

Why do we try to control others?

Why do we tolerate such a sub-optimum nation-state system?

Is the material world the only reality?

Something big is going on right now in how we humans organize our societies and our lives. Most people don’t deny that now even though I still encounter folks who ask me whether all this social media is just a fad. I’m full of optimism about how humans will continue to learn and thus improve our lot. These steps forward are not for anyone to prescribe; they will emerge from our interactions and our improving ability to record and share our experiences.

Still there are some habits of thought, propositions that are too often accepted as true in public discourse, that stand in the way of that forward momentum. In my view, they’re increasingly not true but I must admit also tremendously stubborn in their influence. These 5 mental frameworks, most of which have been with us for a very long time, for the most part create friction and inefficiencies in human society. I’m betting that in the years to come they will all be recalibrated as we work to achieve a fuller human potential.

Does my right to privacy extend to invisibility? OK, I admit this is a relatively new difficult question. It’s been with us for most of the post WWII period but sharpened acutely in the last five years. But here is the distinction I want to make. Much of what we think of as privacy issues in this social media/Facebook/Twitter/Google Latitude/pervasive video cameras-engineered world aren’t really privacy issues at all. They are visibility issues. When I go to the store to buy milk, I’m not trying to keep that transaction “private.” It of course would be impossible to do so. What’s really different is that by checking in on Four Square or using my loyalty card or simply carrying my smart phone (really consumers lost this battle a long time ago!!) I am making the transaction more visible (and more important recordable and thus analyzable). There are legitimate privacy concerns out there: I don’t want everyone to know my bank balance or my SSN but it’s important to distinguish that much of what we are fretting about is a new kind of visibility, not an invasion of privacy. If something bad happened on the way to the grocery store–if I backed into a car leaving the parking lot and fled the scene–the police would immediately look for people who “saw what happened.” I would not be able to claim a right to privacy because none exists. Why is any of this relevant? A society that understands more of what is happening will be a smarter society and should make better decisions. I would be smarter about myself if I understood the patterns of my own life better. And a society with improved understanding should be able to self-organize more effectively. Again, it’s not my intent to argue for the right trade-off between visibility and invisibility. We will work this out over time with the usual fits and starts. I just believe we’re confusing two important terms–privacy and visibility.

Are humans basically good or bad? I’m in the basically good camp, always have been, although I would phrase it a little differently. I think humans are usually well-intentioned but feckless. I think bad behavior follows bad decisions and bad outcomes, not the other way around. Most people don’t set out to do the “wrong” thing; they think they are choosing the best option, although admittedly there is plenty of delusional thinking out there, and frankly absence of thinking, not to mention hyperactive lizard brain. (Absence of knowledge and lack of understanding of other perspectives also contribute to the bad decisions that lead to bad behavior.) But when the decision begins to go bad and they are scrambling to recover, that’s when I think humans most often fall into the bad behavior trap. They run with their survival instincts, which evolution tells us are largely selfish. So to return to the visibility issue, if you think humans are basically bad then no wonder you worry about what people will do with all that information about you. My friends who ask me if social media are a fad also like to ask me if I’m not worried about all the information that is out there about me. Well as an optimist about human nature I’m not worried. And even if I were to worry, I trust that the general lack of feck will waylay most plans to do bad by me.

My first point here is that I really hope we humans can get beyond this debate about our basic natures sometime soon. I am biased here as to what I think the right answer is. The belief that humans are basically bad, in my view, is the driver behind many institutions/processes that over-control and micromanage. But I also recognize that we will only bury the humans-are-basically-bad meme through a long record of actions, fueled by truly millions of personal conversion experiences. My second point: if you are an advocate of self-organizing communities, you are essentially assuming people are basically well-intentioned and that more, shared information will allow them to make better decisions. So it’s best not to mock people who don’t get it; I know I’m guilty of that myself sometimes.

Why do we try to control others? The belief that you know the right way and your job is to force others to accept that truth is the single most destructive quality in humans, in my view. It must also have some significant evolutionary benefit for it to persist. If you’re asking: well, isn’t your writing of this blog an indication you too want a slice of that control, then I have to admit you have a point. I think enough of my views to try to express them carefully, although luckily I can’t force anyone to read my blog. Indeed, this is why this particular drive is so seductive and so strong in so many individuals, even those that start off with the best–that word again–intentions. I believe our human potential will be best expressed when we minimize our control instinct, but I’m not sanguine this will happen quickly. But it will happen. Governments and organizations built on the desire and need to control others will eventually contract as individuals learn–and have the capabilities–to manage most of the transactions themselves.

Why do we tolerate such a sub-optimum nation-state system? Why indeed? You know, I worked for 32 years in one of the great creations of the modern nation-state, the Intelligence Agency, so you would think I’d know better than to ask such a question. After all, I must be a realist, right? But nevertheless I’m puzzled more people don’t question why we tolerate such a nutty arrangement. The nation-state system, and here I’m speaking specifically about how countries relate to each other, runs on a set of rules–spoken and unspoken–that have been largely discredited in and abandoned by other systems. The nation-state system still assumes the inevitability of conflict, the need to expect the worst from others, the need to hide things from and trick others, the wisdom of short-term, grab-it-while-you-can thinking, etc. etc.  (There was recently a good article in Financial Times by Parag Khanna describing how the world system might evolve differently.)

The reason I phrased the question the way I did is because I think the answer is in the question. The nation-state system exists as is because we tolerate it. In fact, we more than tolerate, we accept it and some–neocons and marxists, for example?–revel in it. We are complicit. What will be interesting to see is the reaction of nation-states as individuals and communities begin to distance themselves from their status quo. You see the beginnings of this today as individuals, many of them completely delinked from their nation-state identities, interact with each other seamlessly across Twitter and other social media. If you dismiss such thinking as utopian or pollyanish, fact is humans have already broken at least twice in our history with very powerful governing systems–Royalty and Churches. But both aristocracy and the church heirarchy went down swinging and I’m betting the governing class will find it hard to accept its displacement. Stay tuned, more coming.

Is the material world the only reality? Well, in for a penny, in for a pound. If you don’t already think I’m nutty, this will convince you. But as I read about theoretical physicists struggling to understand the universe or universes, I can only surmise that our own existences are more complex than just the physical entities we know. Understanding what that exactly means is a purpose for human existence. We exist in large part to understand. And we understand better together.

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Posted in Change, Foreign Affairs, Future Thinking, Internet, linkedin, Social Networks

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What To Say about Wikileaks

Posted on December 7, 2010 | 6 comments

Now that Clay Shirkey has posted the following on Wikileaks, there’s very little left for me to say. Shirky expresses I hope the discomfort of many when they read of otherwise wise individuals embracing the idea of extralegal action against Wikileaks (including thinly veiled threats of violence.) Are people nuts?

So I’ll restrict my comments to some thoughts about how the Wikileaks/open internet controversy appears to me to be part of the next big battle in the millenia-long war over the proper relationship between government and society.  When I was a kid in college, some 35 years ago, I came to hope that government is in essence a temporary construct, a necessary evil. Humans need to cooperate on a whole host of transactions to make living with each other more pleasant, particularly as we clumped into larger and larger groups, and for millenia we’ve decided to hand over day-to day responsibility for this management function to something we call government. Actually we didn’t quite always hand it over; in the beginning some people or institutions such as warriors, priests, or religions actually just kind of grabbed the power and the populations essentially acquiesced. But even before the ancient Greeks, some communities were trying to figure out ways to handle these transactions and resolve differences in ways that didn’t require the creation of a permanent governing class, which unfortunately throughout history has tended to acquire a PERSONALITY OF ITS OWN, and, darn it, not always a very pleasant one.

So for all my adult life, I’ve been kind of a practical libertarian in the sense I always thought government was a lamentable but unavoidable fact of the human condition. (Along with this conviction, is the related view that the worst characteristic of humans is the desire to control others–the conviction that “I know the best way forward and you’re going to follow me or else.” (I’m afraid, based on admittedly incomplete knowledge, that Julian Assange suffers this all-too-common affliction) That’s why I tweeted the other day that the people I most admire in history have been those with radical goals who adopted moderate tactics. It’s always seemed to me that your pursuit of change always has to leave open the possibility you might be wrong and/or that better ideas exist. Going a little bit more slowly than your ardent followers would want is one way of accommodating that possibility.)

But back to imagining a good world with minimal Government. In the last ten years or so,  the internet revolution, the ability to link millions across the globe in essentially peaceful dialogue (Twitter) got me to hoping  we might eventually think our way through to a self-organizing planet. Woohoo!! Now there are lots of problems, not the least of which is the “I’m right, you’re wrong”, the “I’m better, you’re not”, and the “We’re together, you’re the ‘other'” pathologies that plague the planet. I know, I know, but, gosh, a Puerto Rican can hope.

This revolution underway is not, of course, the first global revolution against previous concepts of government. The Age of Enlightenment marked by the American and French Revolutions, essentially discredited the “divine right of kings” concept of government.  And the collapse of the remaining aristocracies at the beginning of the last century brought down the idea that only a particular, genetically-defined group of people could serve as the governing class. (I know this is a distorted thumbnail view of history, I’m leaving out all the really thrilling economic bits, for example, not to mention the cultural dimension, but I’m already at 580 words…)

And so the Wikileaks controversy is unfortunately part of the next battle in this effort to define the relationship between government and society. What’s at stake in this battle is the idea that governments require secrecy and control of information to protect its citizens and that there are a lot of things that citizens just don’t need to know. Many people are arguing against this concept, including many politicians who are winning elections based on the call for more open and transparent government. Many existing governments  in power, in fact, are demanding that other governments be more open.

Now, unfortunately, I don’t think Wikileaks is a particularly good ally to have in this battle, because it is taking an absolutist position–nothing needs to be secret –and because it is increasingly clear it’s agenda is not really about open government and transparency. Before its most recent leaks, most advocates of open government probably viewed Wikileaks much in the same way Winston Churchill viewed Josef Stalin during World War II; now advocates of open government and transparency need to be clear as to whether they want Wikileaks to represent their goals and vision. I don’t.

But that doesn’t mean I completely support how governments are reacting. One of the lessons I’ve learned in life is that when something unfortunate happens, it is difficult to contain the damage; lots of other suboptimal consequences follow. Eventually we will navigate  through this period and come to a better understanding and an agreement between government and the governed as to what is appropriate transparency. I suspect this transparency will be much greater than most members of the governing class can imagine today. And it will be a necessary precondition for much greater social self-organization and much smaller and less secret government.

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On Work, Consumption, Economy and the Whole

Posted on September 6, 2010 | 9 comments

Saul Kaplan, the founder of the Business Innovation Factory–where incidentally I will be a storyteller on 16 September–writes a Labor Day post on his blog listing what he calls 20 random thoughts on the Future of Work. (They’re not so random, really, but it’s a really good list.) Naturally agreeing with points such as

Projects are more important than jobs; and

Free agent nation becomes a reality,

I got to thinking that change of this scale will have GINORMOUS downstream effects (I’ve been told by some very reliable sources that ginormous is now officially a word!). Because if we change how we work, don’t we in fact CHANGE EVERYTHING? Saul touches on some of these broader implications when he notes that

Workforce and economic development are transformed and become indistinguishable; and

Work and social become indistinguishable

but what I’d like to do in my Labor Day post is draw these points out even more.

We cannot underestimate how important steady 9 to 5 work is to the American economy; it is that steady, predictable income that has allowed US consumers to become the BEASTS that we are. (It was part of Henry Ford’s genius to realize the connection between his profits and the wages he paid.) The US consumer has been the engine behind world economic growth since WWII. I wasn’t able to easily find a statistic on what percentage of the world economy is ingested by the US consumer–the closest I could get is the oft-cited data point on how we account for about a quarter of world energy consumption despite being in low single digits in percentage of world population. But you get some indication of the importance of US consumption to the world economy from the website of the Worldwatch Institute, which in its press release for its 2004 monograph on world consumption noted that “the 12 percent of the world’s population that lives in North America and Western Europe accounts for 60 percent of private consumption spending, while the one-third living in South Asia and sub-Saharan Africa accounts for only 3.2 percent.” It’s safe to assume the US consumer accounted for more than half of that 60 percent.

So let’s get in that trusty Time Travel Apparatus and fast forward let’s say 50 years. If the predictions about how work will change are true, then one of the implications–unless we come up with interesting new methods of compensation, question mark?–is that the steady income that drives American consumer consumption will dissipate, to be replaced with more aperiodic payouts. Presumably these payouts will average out to meet our needs and sustain roughly approximate standards of living, but not without some important adjustments. I would imagine, for example, that the average individual’s willingness to accept large revolving debt balances will weaken once she cannot rely on a regular, stable income. Similarly, companies and business models that are based on consumers handing over huge amounts of money on a regular basis, like the cable companies, may have to retool.

Many industries in fact will have to rethink. Agreeing to five years of car payments? I don’t think so!! The 30-year mortgage? Perhaps not!! It’s interesting that already in the car industry companies such as Zip Cars are introducing new ways to acquire the services of a car on a pay-as-you-go basis. And the shambles in the mortgage industry have led people to question the inviolability of the American dream of home ownership. Finally, the emergence of Cloud Everything probably will allow consumers to dispense with the need to own important consumer goods such as music, videos, books, etc.

So my hunch–a sophisticated analytical term–is that a redefinition of work will be the prelude to a redefinition of economic prosperity. Prosperity and economic growth would no longer be synonymous. I don’t know yet whether this will be a net plus or minus, although the optimist in me believes of course it will be a net plus. Certainly the world’s ecology could tolerate a break from constant growth, particularly growth dependent on mass utilization of finite resources. Again from the Worldwatch Institute, “WWF’s Living Planet Index, which measures the health of forests, oceans, freshwater, and other natural systems, shows a 35 percent decline in Earth’s ecological health since 1970.”

Nevertheless, there’s also a part of me that senses the wisdom of the view that the opposite of growth is death. Without economic growth, can we advance as a species and improve the lot of those who live and die without ever getting a chance to explore their human potential? I know many have conceptualized what they argue are more equitable economic models, but these always seem to ignore the demonstrable quirks of human nature.

Clearly, there’s still a lot of work to be done.

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The Importance of Innovation to the US Economy

Posted on August 30, 2010 | 3 comments

I know I still owe pictures on my African trip, but first I’m going to insert below what I have been working on most recently, which is a short talk on the importance of innovation to the US economy. I welcome comments and brickbats.

In the new National Security Strategy articulated this year by the Obama administration, prosperity is identified as the second of four US national interests.  Specifically, the US seeks a strong, innovative, and growing US economy. In my comments today, I want to focus on that second adjective—innovative. I want to discuss the issue of innovation as it relates to economic security, although I guess I would rather use the term economic prosperity. I chose the topic of Innovation because it’s a “thing”, a dynamic, that really appeals to me intellectually and psychically. Despite 32 years in the Intelligence Community, I’ve come to realize that my cognitive orientation is essentially a progressive one. I am much more interested in what can be than in what is.

I’m sure that many of you share my sense that we’re living in one of those periodic spurts of progress and innovation that punctuate human history on a fairly regular basis. I’m not prepared to argue that this spurt is unprecedented, although personally I’m inclined to believe the impact of the changes we’re seeing now will have particularly profound—dare I say it—unprecedented consequences. For my purposes, it is enough that technological and process-based changes and improvements are bunching up right now in volume  and chunkiness rivaling beach traffic approaching the eastbound Bay Bridge on a Friday afternoon.

So how important is it—to our economic-slash-national security for the US to be an important driver of this Innovation Caravan? To answer that question adequately, I indented four additional questions.

  1. How important is Innovation to the overall economic health of the US?
  2. Where does the US currently stand in the world’s innovation index and how are we vectoring?
  3. How do our likely peer competitors compare to the US in their innovation potential?
  4. What is contributing to the conditions described in the answers to Questions 2 and 3? What are the causes and correlates?

I’ve tried to take the approach of the so-called objective intelligence analyst in answering these questions. So I’m not going to try to persuade you of my beliefs necessarily, but rather just lay out what I think is known and not known about this topic. When I do have a personal view I will label it clearly as such. I don’t expect you all to agree with me, I don’t want you to agree with me, although I hope you will find my approach and conclusions credible.

Before proceeding to answer the questions, let me spend a little time providing you with some definitions of Innovation. The World Bank, in a recent report on agricultural innovation, had a definition I liked, which I’ve paraphrased slightly for efficiency.

Innovation is neither science nor technology but the application of knowledge of all types to achieve desired social and economic outcomes. Specifically, innovators master and implement the design and production of goods and services that are new to them and/or their societies.

People speak of many different types of Innovation. The taxonomy of Innovation is usually presented in the form of paired concepts that are in opposition to each other. So, for example, people speak of fundamental innovation, which is often technology-based and leads to new industries, as opposed to social innovation, which refers to changes in the way people behave. These changes in societal behavior, for example most people adapting to cell phones or GPS systems, are often essential to harvesting the advantages of fundamental innovations.

Process vs. Product Innovation: The experts generally agree that product innovation often creates jobs; although my question would be does it lead to a net increase in jobs? After all, new products usually displace the individuals working on the old products. Process innovation, however, usually eliminates jobs as few innovators seek to increase labor costs through process improvement.

Then there are several twin-headed taxonomies that strike me as generally describing similar qualities—the extent of change.

Is the Innovation Revolutionary or Evolutionary? This usually is assessed in terms of outcome.

Radical vs. Incremental Innovation. This usually distinguishes ease of adaptation.

Continuous vs. Discontinuous. This distinguishes those innovations that trigger mass extinctions from those that don’t.

A final taxonomy pair distinguishes fundamental innovation, this time from applied innovation. In this case fundamental innovation involves science and engineering leading to a new “AHA” moment. Whereas applied innovations take these “AHA” moments and turn them into something utilitarian and in some respects pedestrian.

So with that out of the way, let’s return to the four questions I set out to answer.

  1. How important is innovation to the overall health of the US economy?

Although some of the subsequent questions have less clear or authoritative answers, here the facts appear to be without controversy. Everyone agrees that innovation has accounted for most US economic prosperity in the post WWII period. The Department of Commerce notes for example that technology innovation is linked to 75% of US economic growth since WWII.

Perhaps less appreciated—or less appreciated in any case by me until I started to do the research for this talk—is the unique role that venture capital and the modern private equity firm had in fueling post WWII US economic growth. It is generally agreed that the venture capital industry really began in the US in 1946. You had private investment before then—the Transcontinental Railroad was a startup—but the investors were rich individuals acting on their own. (A trend by the way that we appear to be returning to as the amounts required by startups decline precipitously as a result of web services and cloud computing, but that’s another talk.) Venture capital firms in the post WWII environment began by investing in the new businesses started by returning veterans. This was a uniquely American concept at the onset, but Europe caught up by the 1990s.

Venture capital reached its highest percentage of GDP in the mid-1990s at just about 1%, but the cascading effects of venture capital are more significant. The National Venture Capital Association estimated in 2003 that ventured-backed companies were then providing more than 9% of all US employment.

But we don’t have to take the lobbying group’s word for it. The OECD estimates that in the US firms less than 5 years old have accounted for almost all of the new jobs created in the US economy in the last 25 years. Put another way, established companies have essentially created no net new jobs during that same period. The Kaufman Foundation in a very recent study based on a new set of data from the government called Business Dynamic Statistics analyzes that firms more than a year old actually have destroyed net more than a million jobs since 1977.

Although I couldn’t locate a breakdown of exactly how these new jobs link to innovation, I think it is safe to assume that the many of the new firms every year are based on some type of innovation, whether it is fundamental, applied, or social.

So there’s no arguing, I think, that the capacity for innovation has been the primary catalyst of US economic growth. (And indeed capitalism essentially is built on innovation and the concept of creative destruction.) But my research suggests to me that, going forward, innovation will be even more critical to US economic prosperity. And that’s because our particular economic circumstances today imply that innovation not only will need to contribute all US economic growth but will have the additional burden of compensating for anti-growth dynamics currently infecting the US economy.

Specifically:

  1. The financial crisis and the necessary deleveraging occurring in the US economy. Economists agree that the hangover from a debt crisis is the worst kind and lasts the longest. I also have the hunch—very technical analytic term—that this economic downturn is made worse by a simultaneous disruptive secular shift in the economy—from analog to digital. Employment will stay stubbornly high because companies, I believe, are using this downturn to divest themselves of employees and occupations they no longer need in a digital and knowledge economy. (There are some economists who have argued a similar dynamic deepened the Great Depression, which was the occasion that finally allowed—so the argument goes—for the complete unwinding of the agrarian/horse economy that had dominated the US during the 19th century.) The only elegant way for the US to resolve its deficit issues is to grow ourselves out of them. A nice average 5% per annum growth rate for the next ten years might be a good place to start. Unachievable without the frisson of significant innovation.  (And I suspect unachievable, period.)
  2. The mature nature of the US population. Although there is considerable difference of opinion among academics as to how population growth affects economic growth, particularly for underdeveloped and developing economies, most agree that the declining and aging populations of Western Europe and Japan necessarily cut into economic demand. The US economy is not there, largely because of the positive impact of immigration, but we’re also no longer going to benefit from the economic boost that was provided by the consumption patterns of the baby boomer generation.

So having established that innovation is critical to the future of the US economy, let’s turn to Question #2.

2. How are we doing in terms of innovation—specifically, given the focus on national security, relative to other countries?

My exploration of this topic did not reveal as much clarity as on the first question. Measuring where countries stack up on the Innovation Table appears to have become a cottage industry in the last ten years. Let me cite the two most recent and most credible:

A report compiled by the Boston Consulting Group and the National Association of Manufacturers. Like most of these studies it measures innovation inputs and outputs and has the US ranked 8th in the world.

A second report by the Economist Intelligence Unit, sponsored by Cisco, has the US as 4th.

A third report by Insead, the Paris-based economic school, still ranks the US as first in the world in innovation, God bless them.  But I did not use it because I wasn’t able to readily locate the details on the internet. Both of the reports cited below were published in the last couple of years.

Boston Consulting Group                                     Economist Intelligence Unit
National Association of Manufacturers                 Cisco Systems

1.  Singapore                                                            1.  Japan
2.  South Korea                                                         2.  Switzerland
3. Switzerland                                                           3.  Finland
4.  Iceland                                                                4.  USA
5.  Ireland                                                                5.  Sweden
6.  Hong Kong                                                           6.  Germany
7.  Finland                                                                7.  Taiwan
8.  USA                                                                     8.  Netherlands
9.  Japan                                                                   9.  Israel
10. Sweden                                                               10. Denmark
China 27th                                                                China 54th

Projected Rankings in 2013 (Economist Intelligence Unit)

Russia 32
Brazil 45
China 50
India 52

What these tables tell me is that the methodology for these studies isn’t very exact or agreed upon. Although most people agree on what are innovation inputs (skilled work force, education, R&D expenditures, etc.) innovation outputs are another matter. For example, the number of patents, a popular metric, is criticized by others who argue patents only indicate inventions and societal concepts of intellectual property, not innovation.

I don’t know about you, but I can’t quite work up a lather of concern because Iceland or Switzerland is considered more innovative than the US. I can say without doubt or equivocation that neither country will become threats to US national security. On the other hand, I believe these studies underestimate where China is—the Status Quo always underestimates the new kid on the block because the Status Quo owns the yardsticks. That said, however, I share the view of many commentators who think China’s status as a holder of US debt will be a strategic problem for the US long before China’s innovation capacity. It should matter in the long term, of course, but by then China will be dealing with its own structural problems, such as the graying of their labor force.

There is, however, no doubt that the US capacity for innovation has declined in relative and absolute terms over let’s say the last 20 years or so. Our standing on these inexact charts has consistently declined. Other evidence points to a less vibrant American economy. For example, according to Deloitte’s Center for the Edge, the rate of return of US assets has declined by 75% since 1965.

We’ve already begun to touch upon the Third Question.

  1. How do our likely peer competitors compare to the US in terms of their Innovation potential?

We’ve already discussed China’s innovation performance and my instinct that the methods of measurement discount China’s progress. Other potential national security concerns for the US, such as Russia, are essentially non issues, according to these studies, when it comes to economic innovation. Obviously Russia, given its strong performance on pure scientific research, retains the potential for military innovations but its economy, which is dwarfed by China’s in any case, is increasingly based on exploitation of natural resources and is not poised for strong growth or innovation.

At first blush then, the European Union and China then are the two coherent economic powers that could deny the US leadership of—or a significant share of the economic innovations that will shape the 21st century.  But a broader trend, the emergence of the BRIC economies—Brazil, Russia, India, and China—will, if Goldman Sachs is right in its projections earlier this year—fundamentally alter the world economic map by 2020. (By the way, I bet Goldman Sachs regrets its inclusion of Russia in this list given the developments of the last decade. The Economist Intelligence Unit indeed only speaks of the BIC.)

Let me quote directly from the Goldman Sachs report, which can be found on their website.

Our baseline projections, underpinned by demographics, a process of capital accumulation and a process of productivity catchup, envisage that the BRICs, as an aggregate, will overtake the US by 2018. In terms of the size of the economy, by 2020 Brazil will be larger than Italy. India and Russia will be individually larger than Spain, Canada, or Italy. By 2020 we expect the BRICs to account for a third of the global economy and contribute about 49% of global GDP growth.

One of my favorite analytic sayings/precepts is that quantity has a quality all its own. (Josef Stalin) This kind of change in the global economy will have profound effects on the world which we in the West, in my view, are inclined to not even want to think about.  And it only serves to underscore the argument that US economic prosperity depends upon our capacity for innovation, by which I mean that only innovation will allow us to fight about our weight class (i.e. absolute size of our economy—largely a function of demographics and maturity.)

So back to China and the EU. While many of the most innovative countries are in the EU, it is still hard to imagine the circumstances by which the EU becomes a peer competitor for the US, which returns us to China. Although China, in the EIU survey, is projected to rise to 50th in the Innovation Index by 2013, its low ranking is deceptive. China has risen 9 places in just 5 years, a rate faster than the EIU anticipated. In a separate study of Innovation in BRIC economies published last year in the journal Research Technology Management, it was noted that in 1995 the patent count, duly caveated by my earlier discussion, of China was the same as Brazil’s. Now it is 7 times that of Brazil.

John Seely Brown and John Hagel, at the 2006 Davos conference, asserted that China is now the world leader in management innovation. I’m not clear as to the basis for their claim, but I do believe, as I’ve mentioned before, that the methodologies used to rate innovation by country are based, unavoidably, on how the West has done it and thus have a tendency not to appreciate how countries such as China, Brazil, and India might be doing things differently.

In theory, China’s success (or any other country’s) at innovation need not pose a problem for the US. But it can affect US economic capacity if US-based multinationals choose to divert more of their R&D efforts to China, which is graduating scientists and engineers at an incredible rate. The US, as we have discussed, is lagging badly on STEM education. If Chinese and Indian graduates stop wanting to work and live in the US, our innovation potential suffers. (By some estimates, Indian immigrants lead up to a third of the startups in Silicon Valley.) Finally, the economic advantage of innovation, that surplus income, goes to those who do it first and well.  The more countries that have the skilled workforce and modern economic base for innovation, the harder it will be for the US to be first to the pole.

Let me be clear here. I’m not suggesting any malice or nefarious intent on the part of any other nation. These trends have impact regardless of the policies of specific governments. It’s really just a matter of physics and arithmetic.

The Fourth Question

  1. Why is the US losing momentum in economic innovation? The literature presented several compelling reasons. We’ve already discussed one, the US is falling behind in STEM education. Given the size of China and India’s population, we will never be able to match them numerically, but at the rate we’re going, the US will simply be overwhelmed.

A second related issue is a current workforce that needs new training and skills.

A third reason is the inadequate US federal and state government support for an innovation-friendly environment. We lag many other parts of the world. I’m not necessarily advocating increased federal R&D spending, which I suspect is not the answer. But today the US, for example, ranks 17th among OECD countries in the generosity of its tax credits for R&D. France is four times more generous than the US, according to the Information Technology and Innovation Foundation. This is not good.

A fourth factor points to the short term perspective of too many US companies and their outdated-slash-myopic management/leadership concepts. Steve Denning, a leadership consultant, notes that the management principles of most US companies are scalable bureaucracy. Bureaucracy is of course the natural predator of innovation. As a personal observation too many US companies seem to have become quite innovative in inventing ways to use fees to bolster their bottom lines rather than seeking to innovate a new product or process.

Finally, I also believe but have no sources or citations for support that the US, as a society and culture and economy, suffers from having transitioned into a Status Quo mentality. When I listen to the public debate, which I try to avoid, I hear altogether too much about preserving what we have or returning to core values. Having been a student of dozens of countries over the last 30 years, I believe I can detect the difference in the vocabulary and body language of a nation looking forward versus that of a nation looking to preserve what it has.

So let me share some concluding personal opinions that I think you may find negative or positive, depending upon your perspective.

  1. Innovation is our economic strong suit but it will not solve all of the US economic problems. It can create many jobs, but my hunch is we are undergoing a significant transition in labor markets and the nature of jobs. It will not cure our debt problem.
  2. As we transition from the knowledge economy, already OLD HAT, to the Creative economy, we are shifting away from economic concepts that can be captured in nationalistic or mercantilistic terms. (The Chinese, by the way, issue statements and doctrine that suggests they don’t quite believe this.) National boundaries are not only irrelevant to knowledge and creativity, they are actually counterproductive. Innovation is becoming more collaborative. So what do the terms economic and national security mean then?
  3. In my opinion, we are focusing on security and spending on military matters out of proportion to our economic capability and economic potential. (By the way the experts tell us that our spending on health is similarly out of whack.) Paul Kennedy in his seminal book the Rise and Fall of the Great Powers, written during the 80s I believe, argued that such disproportionate spending is an indicator of a declining great power. There is presumably an optimum balance between wealth creation and military strength. Are we there yet?
  4. The conditions I’ve described are not a platform for continued US “dominance” of the world. We don’t want to talk about it, but the US economy will not support single, great power dominance once our economy represents only about 10% of the world economy, vice the 50% it represented after WWII.

I always want to tell young people just starting their careers that their greatest challenge will be to help the US make the adjustment from great power status to a more complex but I believe still quite comfortable relationship with many peers. Our choice is clear: we can either not talk about reality and continue patterns of deficit spending that will only hasten a messy denouement or we can begin to make the intelligent choices today that will ensure we remain the most influential society in the world even as we relinquish the only superpower status.

Thanks.

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Starts and Evens (Lesson 21)

Posted on June 30, 2010 | Leave a comment

I spent five hours in a meeting yesterday during which I asked many “stupid” questions. A couple of weeks ago I tweeted:

When it comes to asking “stupid questions” in meetings, I like to ask mine early and often.

Asking stupid questions is Lesson 21  I learned as a CIA manager. The questions you hesitate to ask are precisely the questions you probably most need to address. Now, why do people hesitate to ask “stupid” questions?  I think it’s because the asker doesn’t want to look foolish. She presumes that she is the only person that doesn’t know the answer or thinks the question is too simplistic or fundamental to ask. Surely, the briefer, discussants thought of this already, she asks herself. But my experience in asking “stupid” questions reveals they have a high batting average of uncovering faulty assumptions and other basic process/thinking errors.

It is particularly important that managers step forward to ask the stupid questions.

  1. The other people on your teams, you know all those small people in subservient positions, they believe, and truth be told they are probably correct, that they run the risk of more consequences by appearing stupid in a public forum.
  2. The individuals briefing the project are also more likely to dismiss a question from the small people or try to doubletalk their way through it.
  3. But the most compelling reason why managers need to ask the “stupid” questions is that, in most organizations, people already think we’re incompetent, a nutcase, or stupid, so really what do you have to lose.

Marina Gorbis of the Institute for the Future just wrote a passionate and excellent blog post on the need to develop different organizational and revenue models. It really is a must read. For those of you who think the idea of moving away from current economic principles is unworkable, a fantasy, just remember that up until 150 years ago half of this country ran on an economic model based on slavery. And its defenders argued it was inconceivable to move away from it. We have over-learned the lessons of capitalism. Tens of millions of people around the world have become used to providing value to others for no direct monetary reward–think Wikipedia and Twitter. This is a trend we can build on.

Speaking of Wikipedia, I was in San Francisco last week and had an opportunity to visit the Wikimedia Foundation, the non-profit engine facilitating the wiki community. What a great vibe!!!! Clearly the individuals there believe in the upside potential of human beings working together. Cynics need not apply.

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It’s the Pace, Stupid!

Posted on June 16, 2010 | 3 comments

Digitial Capital Week (#dcweek) is well underway in Washington and yesterday I attended a half day of sessions on the new media. During the morning panel on social networks and the new media with representatives of National Geographic, USATODAY, NPR, and Aviation Week (just too cool that Orville Wright was an original subscriber to the magazine),  the NPR rep noted how difficult it was for NPR’s small operation to keep up with the speed of change in technology. He cited specifically mobile apps and how NPR has chosen to support a limited range of apps because it simply doesn’t have the resources to keep up with all the technologies, particularly if they’re going to have to be updated several times a year.

OK, I thought, NPR seems to be assuming there is a certain pace to human events that is natural and well-ordered. Well who made NPR or any other company for that matter the judge of the best pace for human society, I snorted? (Politely, to myself.) No one of course; NPR was simply hoping for the continuation of a pace convenient to its structure. At that moment it became clear to me at least that the pace of normal human life, with digital and internet innovation as its new metronome, now overwhelms the structure of the great majority of organizations.

(I know I have a few readers outside the US, so I guess I should note that NPR stands for National Public Radio, although the NPR official at the panel said they now refer to themselves just as NPR to reflect the growing range of their activities, such as on the internet.  After listening to their news broadcasts and shows, I’m persuaded the acronym actually stands for National Pessimists Radio, but I digress…)

It’s commonplace to speak of the rate of change as being too fast for organizations but the phenomenon attains a different quality when we realize that it is the pace of normal life that now exceeds organizational capacity. Mobile apps are a great example of this. Many of these apps are being tweaked by gifted amateurs. (At the panel, NPR noted its first iPhone app was created by one of its avid listeners.) These individuals don’t think of these adjustments as change initiatives, the way industry or government would. Adjusting a feature often is not that much more significant for them than deciding to have lunch at 130 pm vice noon. WordPress, which hosts my blog–thank you, announces changes to its platform so frequently I hardly notice.

Legacy, 20th century organizations are designed for quite a different rhythm of life.  Any change in software code must be tested against the entire cascade of code lest some catastrophic consequences ensue. (For the person living to digital rhythm, you simply tackle these anomalies as they present themselves.) The assumption that implementation must wait until the system is completely tested dictates an operational rhythm with many, looong pauses. And of course, hierarchical and/or authoritative management philosophies always assume the process can be safely stopped for the management intervention that theoretically improves quality. For legacy organizations, pace and quality are to a certain degree in opposition to each other. In digital life, pace and quality are paired; quality occurs as a result of keeping up the pace.

I often saw this dynamic in my government career. Every change effort was attacked by the “first tell me how will the whole new system work” question.  And when we finally set off on a new change effort (Cue Angels and Trumpets), it took so long that by the implementation date we were already behind at least three technology cycles, even if we had been cutting edge at the decision point ten years earlier. The structure of government is particularly ill-suited to keeping up the pace. Just think of lengthy Congressional hearings and the marathon journey of legislation.

Organizations did not always lag the pace of normal human life. During the Industrial Revolution, factories powered by the new machines so accelerated the pace of life that many feared the human physiology would collapse under the pressure. As the British history section on the BBC website notes:

The Victorians had become addicted to speed and, like all speed crazy kids, they wanted to go ever faster. Time was money and efficiency became increasingly important…With greater speed came a greater need for industries and businesses to make more and make it quicker. Steam made this possible and changed working life forever. Gone were the days when work was dictated by natural forces: steam engines were servant to neither season nor sunshine.

An example of this I bet we’re all familiar with is this great scene from I Love Lucy, which is by the way the first I Love Lucy clip that pops up on YouTube. (For years I had a tshirt that read “Forget Lucy, I love Ethel” I loved that shirt so much I wore it to death, but I digress…)

But now the dynamic is completely reversed. Organizations hold the keys to very old machines and processes. But for most individuals under the age of 40, the digital pace is the natural pace. (Seems to me that the internet makes us dumb arguments of Nicholas Carr also have at their heart this unease with the new pace. Before I can take any of these arguments seriously, someone has to prove to me that there is some inherently desirable pace for human activity. Until then, I accept what is.)

This issue of pace also has implications for the John Hagel/John Seely Brown insight concerning how individuals and organizations today must learn to interact with knowledge flows rather than managing knowledge stocks. I believe organizations, just like Lucy and Ethel in the video, underestimate the pace at which the flow of knowledge will come at them. For sure they overestimate the ability of their existing structures to keep pace with that flow. And unlike Lucy and Ethel, it does you no good to eat the knowledge. I believe many of them will learn over time that the only way to keep pace will be to break down their organization walls and rely instead on their community of supporters. The NPR representative chuckled at the idea of someone outside the organization creating their first iPhone app but I think NPR would be able to support many more mobile apps if it embraced and developed this phenomenon into a new business model. Successful organizations of the future will share leadership responsibilities with their community of trusted supporters.)

(One last aside. While researching some references to the Industrial Revolution I ran across this very lovely piece about the pace of life in industrial countries on the BNET website. (It appears to have originally been published in the journal American Demographics.) The research looks to be about 15 years old but the piece has some great data and is also great fun to read. I think it would be a useful research project to update this work in light of the new digital culture.)


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There is Nothing So Weak as an Idea whose Time Has Not Yet Come

Posted on May 18, 2010 | 2 comments

Readers of this blog (there are some out there, right?) have probably figured out by now that I am a sucker for pithy sayings. Yes, I am shallow enough to find meaning in short statements that appear to capture something truthful–others might say short statements that capture something obvious. I’ve organized many of them in my Lessons from a CIA Manager page. But yesterday, while talking to someone preparing material for the Business Innovation Factory, where I am scheduled to tell my story at their Collaboration Innovation Summit in September, I was led to recall one of the most meaningful guiding principles/obvious statements I’ve encountered: There is nothing so weak as an idea whose time has not yet come. This guidance has such wide applicability that it can’t be restricted to the management lessons category.

Now when I decided to write on this topic I googled the phrase to see if I could track down its origins. The phrase “an idea whose time has come” is of course everywhere and appears to have been popularized by the French novelist Victor Hugo, who is credited variously for having written:

All the forces in the world are not so powerful as an idea whose time has come.
An invasion of armies can be resisted, but not an idea whose time has come.
Greater than the tread of mighty armies is an idea whose time has come.
Nothing else in the world… not all the armies… is so powerful as an idea whose time has come.
One can resist the invasion of an army but one cannot resist the invasion of ideas.
There is one thing stronger than all the armies in the world, and that is an idea whose time as come

Martin Luther King, Jr. quoted Victor Hugo on this point when he accepted the Nobel Peace Prize. The phrase ‘an idea whose time has passed or gone’ is also popular. But I did not find, at least not on the first few pages of the Google search results, any reference to the inherent weakness of an idea whose time has not yet come. My memory, which is I fear becoming increasingly unreliable, tells me I first heard the phrase 20 years ago while listening to a show on the BBC’s Radio 4. (I lived in England in the early 90s and was quite devoted to all the talk shows and introspection celebrations that aired on Radio 4.) The phrase was used by the narrator in a show discussing the experience of British colonial administrators in Africa. As soon as he said it, my brain BOINGed, and I’ve been devoted to the principle ever since. (The entire show was fascinating for the light it shone on the British colonial experience in Africa and its implications. I remember particularly one fellow who as a sergeant (as I remember) ruled a large swath of Ghana during the 1950s. I tried to understand the impact such an experience must have had on the British psyche: to be British meant that you had some right, perhaps even obligation, to guide the rest of the world, and really you needed no other qualification then to be British. The experience of the United Kingdom during the last century does show that a great power can make the transition, more or less elegantly, from superpower to member in good standing of the neighborhood watch, which should give some hope to Americans who are beginning to grapple with this possible future for the US in this century. But I digress….)

There is nothing so weak as an idea whose time has not yet come. If you have the good or bad fortune (you decide) of  being able to see, to imagine how things can be different, to make out the fuzzy outline of the new amidst the noise of the current state, then you have  experienced the frustration of  trying to popularize a concept for which no one else is ready. The interviewer from the Business Innovation Factory reminded me of this when she quoted from a rebuttal that a colleague made almost ten years ago to a piece I had written on the need for intelligence reform in the journal Studies in Intelligence. Let me quote a paragraph that makes his point and illustrates the weakness of premature innovation (the acronym DI refers to the analytic directorate of the CIA):

Claims of dramatic shifts in large systems, whether the environment, a national economy, or a US government agency, always need to be viewed with some skepticism. Systems do not change overnight, especially those affected by some of the more immutable traits of human nature. Medina’s claims about a new environment of information abundance radically altering policymaker needs are overstated. They echo much of the “new economy” thinking that, as good as it sounds, is increasingly unconvincing as it has been put into practice. Not too long ago, The Washington Post ran a series of articles on “The Rise and Fall of Michael Saylor,” the Microstrategy chief who became a multi-billionaire, then watched his wealth and his company collapse after bad accounting practices took the luster off his vision of how to handle the new environment of information abundance.4 The series reminds us that untested theories, especially when presented in glowing terms to excite the imagination of investors and managers, often promise more than can be delivered and more than, in practice, anyone wants.5 The DI, like many corporations, already has a good and useful product. When consultants and others come to us saying that everything has changed and so must we, the proper response before investing significant resources ought to be “prove it.”

Well I can’t really disagree with anything the author wrote many years ago. Yet I know in my heart (and my brain) that if organizations wait for the need for change to be obvious, it becomes White Rabbit time–too late.  It is a fact that many ideas for how to do the new are wrong. But it is also a fact that ALL existing ideas for how to do things, whatever the field, however small or complex, are eventually replaced by a better way of doing things. So I guess it all comes down to timing.

This then is one of the many dilemmas of innovators. Innovators have to balance the “earliness” of their ideas against their “effectiveness”.  Too early and you might as well be speaking to yourself. Too late and you have sacrificed your effectiveness and failed your group, organization, mission. Decisionmakers in organizations must have a process to harvest ideas so that they can incubate, be protected from the perils of premature delivery, and thus eventually reach their maturity–their time of acceptance. Innovators, who too often are blinded tactically by falling in love with their ideas, need to have a long-term approach to the marketing of their concepts. It is just immature to expect widespread acceptance of your new ideas or to give up at the first opposition.

So let me turn again to Victor Hugo for an appropriate last word: “Each man should frame life so that at some future hour fact and his dreaming meet.”

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Another Commercial Break

Posted on May 3, 2010 | Leave a comment

A piece I’ve been working on concerning the future the government needs to start preparing for was just published on the Center for American Progress website. You can check it out here if you’re interested.

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