SOPHISTICATED FINANCE

Philosophy and Physics

George Polya, the famous Stanford math professor, once quipped " I am too good for philosophy and not good enough for physics. Mathematics is in between". Amongst the many implications of this quote, Polya implies that there is a relationship between philosophy and physics.

The intersection of philosophy and physics is an admittedly escoteric subject but a great example of interdisciplinary thought. However, as physics advances and becomes increasingly complex, the challenge is for the philosophers to understand the physics and identify the philosophical questions that must be considered. The discipline that addresses such issues is the philosophy of science.

The philosophy of science deals with "what science is, how it works, and the logic through which we build scientific knowledge". Building scientific knowledge requires a theory of epistemology, albeit a somewhat specialized epistemology or theory of knowledge. Philosophers were doing a good job of keeping up with the physicists until recently.

The Guardian newspaper has a great article on the three possible roles for the philosophy of science, as physics and perhaps all science gets increasingly complex. The three possible roles, as defined by Peter Godfrey-Smith, are:

1. an integrative role, whereby philosophy can assess and connect various fields with an emphasis on generic categories and perspectives; 
2. an incubator role, where philosophy develops new ideas in a broad and speculative form, which are then pursued in a more focussed and specific way within an individual science; 
3. an educative role, where philosophy teaches various general skills, including critical and abstract thinking

I will leave it to to your own deliberate thinking to decide which role you believe is the right course for the philosophy of science to pursue, although the Guardian writer argues for one particular role.

Now you may be wondering why I wrote this post on a subject for which the term "esoteric" might be an understatement. My three reasons are:

1. To demonstrate that philosophy is still relevant in the modern world
2. To show that the complexity of science has many implications, to which I think we are paying insufficient attention
3. To highlight a great example of interdisciplinary thought--the philosophy of science

I also think the Guardian should be commended for writing on such a learned subject. Other posts on public intellectualism are here, here and here.

Related articles

George Polya--Problem Solving and Heuristics

So Many People Interested in George Polya

Thoughts on CES 2013

I have just returned from a week at the CES show in Las Vegas. I think it was ReadWriteWeb who first caught my attention by saying this year's show would be a "me too" show--not much new! I agree. I did not see much in the way of breakthrough ideas. Much the same as last year, which I described in this post from a year ago. 

Most popular attraction at the show was about eight helicopters flying around a booth, all controlled by tablets. Brookstone, among others, sell the helicopters.

Car manufacturers and their accessory providers took a huge amount of the space at the show. Connectivity in the car for devices was a big theme. Ho hum for me.

The show was tablet mania with everybody showing 7" tablets running Android. Almost nobody had any new thinking on tablets. Most companies focused on price and a few focused on better performance due to better specs. Starting to see licensed tablets, such as Hello Kitty, Flintstones, etc. Seeing some evidence that people are giving up their iPads for Android devices. Better integration with Google, longer battery life, ease of sharing and flexibility in storage/backup might be the reasons. Also, Apple has done nothing noteworthy in the last iPad or mini-iPad release. 

Two statistics caught my attention:

1. From my friend Michele Borba (@micheleborba), 37% of 2-4 year olds in the U.S. have used a tablet
2. Children are giving up physical toys (e.g. blocks) at an earlier age due to tablet usage

Implications for the U.S. school system are noteworthy. Maybe schools will have a BYOD policy for kindergarten. 

 

 

 

 

Thoughts on Creativity

For a variety of reasons lately I have been thinking about the concept of creativity. Quite a wide range of great thinkers all describe creativity as a process based on discovery. In other words, creativity is not creating but rather discovering something new. We all have perceptions and experiences which when put through an appropriate process foster the discoveries that produce the new ideas--creativity. Such luminaries as Plato, Cezanne, Van Gogh and Einstein, to name a few, all share this view of creativity as a process of discovery.

The question that you should now be asking yourself is "What prompts the discovery process?". The simple answer is curiosity--the most natural instinct of all and shared by all of us from a very young age. So if your schooling did not kill off your curiosity you are well on the road to being creative. (I will avoid the temptation to turn this post into another article on education.)

The other key ingredient for creativity is the process one uses to analyze their perceptions and experiences. Here again many genius level thinkers (Einstein, Hamming, Minsky to name a few) provide the answer. One can learn the process, especially by studying the great thinkers. Alternatively, or perhaps in parallel, one could develop the ability to think critically. Critical thinking is the foundation for creativity. Critical thinking is defined here in this article on training young entrepreneurs. (If you have read this far then the critical thinking process is probably/hopefully engaged.)

 In a post on Brain Pickings today there is an interesting article on creativity--Chuck Close on Creativity, Work Ethic, and Problem-Solving vs. Problem-Creating. The best quote from the renown photorealist is:

 “Inspiration is for amateurs — the rest of us just show up and get to work.”

The other good quote from Close is:

"And the belief that process, in a sense, is liberating and that you don’t have to reinvent the wheel every day. Today, you know what you’ll do, you could be doing what you were doing yesterday, and tomorrow you are gonna do what you did today, and at least for a certain period of time you can just work. If you hang in there, you will get somewhere."

Suffice it to say that Close recognizes the critical role that processing plays in creativity.  And....no more excuses about waiting for inspiration.

Related articles

Creativity as a Life Skill: Inspiring Tedx talk by Gerard Puccio, Ph.D.

Creativity and Failure

{Ten Tips} The Creative Process

How to Know if You are Correctly Integrating Technology in the Classroom

Edudemics has an interesting post on integrating technology in the classroom. They offer a matrix developed at the Northern Arizona University to demonstrate the phases of integration, as shown below.

The matrix has two shortcomings.

1. The developers of the matrix assume that technology must be phased in. Overlooked is the natural adaptive abilities of children. 
2. The most successful projects using technology in classrooms use a total immersion approach where the laptop or tablet is constantly used by every student from day 1 in all curriculum.

The matrix was developed for teachers and overlooks the objective--children learning. We will never learn the proper way to use technology in the classroom until the approach starts with a focus on the natural abilities of the child and how they learn.

The views expressed herein are my personal views and do not represent the views of any organization, client or university with whom I am affiliated.

 

Related articles

Computer Technology and Test Scores in Education

Can schools afford to wait for classroom technology?

Joi Ito's Trends in 2013

MIT Media Lab Logo

Joi Ito, the Director of the MIT Media Lab, did a piece on Google Think about the four trends he sees for 2013, which are listed below:

1. Hardware as the new software  "Supply chain provider companies are making the cost of manufacturing [hardware] and risk really, really small.." There is much new hardware being developed, much of it open source. I expect that this will produce many appcessories. Appcessories are peripherals attached physically or through wifi to tablets to capture data (sensors) or to create new experiences. Very big opportunity.
2. Gene Printing  "Bio-fabricating genes using something called a 'CMOS' chip, which basically allows him to print genes using machines instead of people". Biology is not my field but the idea of using CMOS chips is logical. CMOS chips are the special purpose chips that you find in your car for example.
3. Life Long Learning"It has always been my [Ito] opinion that 'education' is something people do to you, whereas 'learning' is something you do for yourself." My thoughts on life long learning are here. Lifelong learning is perhaps the most important lesson to learn from schooling.
4. Survival of the Quickest  "You want to have your peripherals wide open and adapt as quickly as you can. I think that will be an important survival trait of people and companies in the future." The abundance and speed of information has been a recurring theme here at SF.The implications for the management of organizations is an under appreciated point. A post I like on that theme is here. 

If I do a post for the future of 2013 I may write about this relationship:

perception--language--knowledge--understanding--learning

Actually ties together 3 out of 4 of Ito's themes.

 

Related articles

Inside MIT

Joi Ito: I'm Not a Futurist, I'm a Nowist

Carao Ventures--Central America VC

I met Adrian Garcia several years ago when he worked at MesoAmerica, perhaps the first venture capital firm in Central America. I would also point out that Adrian is a graduate of the MIT Sloan School, so we have some other shared interests.

Recently Adrian and a partner, Allan Boruchowitz, founded Carao Ventures, a venture capital firm that specializes in early stage tech companies targeting the Latin American market. What differentiates Carao from most VCs is their approach, which I quote below:

"Carao Ventures has an early stage startup program where one of our partners takes an active role in the startup through the next stage of company development, participating in relevant roles such as strategy, finance, marketing and others."

Carao is headquartered in San Jose, Costa Rica. 

Does Paul Krugman Read my Blog

Last week I wrote a post--Corporate Performance Raises Questions-- that discussed the inverse relationship between corporate profits in the U.S. and wages earned. Corporate profits are at an all time high and wages earned as a percentage of the economy appear to be at an all time low.

Paul Krugman, Nobel Laureate and NYT columnist, wrote an op-ed piece on December 9 citing the same statistics and making a point that IT technology is not only replacing low wage jobs but also more value added positions. My post on the disruption by IT of higher value positions appeared in this August 2010 post--The Future of Professional Services. Mr. Krugman's article-Robots and Robber Barons--is here.

I doubt Mr. Krugman reads this blog, but if you want to know what he will be writing about, read Sophisticated Finance :)

Thanks to my friend, Martin, for pointing me to the Krugman article.

Related articles

Public Intellectualism Still in Decline

Observations on Mary Meeker's Presentation

Forbes has a story today on Mary Meeker's annual report (link to slide deck) on trends in the Internet. Meeker is a former star equity analyst at Morgan Stanley and now at the renown venture capital firm Kleiner Perkins. Three slides prompted some thoughts.

The increase in student loans in the last ten years is staggering. The increase in loans is in part explained by increased costs for higher education and increased enrollment. However, the shear scale of this debt concerns me and a marked contraction in such borrowing would have significant negative consequences for institutions of higher learning.

The growth in digital information will accelerate which reinforces the point that curation of data is a huge, unheralded business opportunity. I have talked about this point many times but there is still little effort to exploit it. LinkedIn News is a simple example but this approach just scratches the surface of the opportunity.

Tablets have caught on very quickly with children, as shown below, but the key question remains. Will parents pay the iPad/mini-iPad prices, especially for younger children. A rugged tablet built for a child at a better price point still looks like an undeveloped market.

 

 

 

Related articles

Apple iPad--What's the Big Deal

Here's Mary Meeker's Big Year-End Presentation On The State Of The Internet

Chip Design

Recently I have had the need to learn about different processors in computing devices. Most of the analysis has been of ARM processors, which were originally developed by Motorola for cell phones and now power smart phones, tablets and a few laptops. ARM chips are a lower cost alternative to INTEL with historically lower energy consumption.

In learning about ARM processors I have had to understand their architecture, the different processor speeds, the multiple versions of ARM and the new manufacturing techniques being used. One can really learn a lot reading manufacturer specifications. In the course of this investigation I even came across a techy who was working on a whole new processor design to reflect that much of computing power is now really web-based and processor functionality could be reduced with coincident cost savings. Very interesting idea as one ponders how to reduce the cost of computing devices. After the screen, the processor is the next most expensive component (although in some tablets the battery can match the screen cost).

My preliminary conclusion is that the next battle ground in tablets will be at the processor level, as manufacturers look to offset increased screen cost with price/performance improvements in processors. Also, except for screen improvements, processors may be the only way to differentiate tablet hardware, This conclusion may very well be true for other computing devices.

Interesting to me that Apple is the only computer manufacturer that does its own chip design. The importance of chip design to Apple is shown in this story which shows that all chip design for all devices at Apple is for the first time under one executive. Designing your own chips enhances the integration and performance with the other components in a device and perhaps enhances a uniform user experience across multiple devices. This story from Bloomberg suggests Apple may switch from Intel chips to the same chips in the iPad and iPhone for its other computers as early as 2017 to achieve a more uniform user experience.

Technology in Education

Yesterday I spoke on a panel on technology in education at the Cyberposium at Harvard Business School. I believe that much of the new investment in education through technology is directed toward improving the productivity (return on investment) in the classroom or in improving traditional education methods. This is the focus of Microsoft, Intel and many other companies.

I advocated, on the other hand, for startups and companies to focus on using technology to develop new methods for children to learn. This approach recognizes that technology is making education much more student centric and therein lies the opportunity for new ways of learning to be adopted. Reynol Junco, a professor at Harvard, shares this view in an article on Venture Beat entitled "Most ed-tech startups suck! Here’s where they’re going wrong". Junco states:

"Indeed, it’s not the technology that generates learning, but the ways in which the technology are used."

Essentially Junco and I are advocating for disruptive innovation in education by focusing on how children learn. As Junco makes clear in his article, the basis for innovation in education should be directed toward understanding child learning and not focusing on traditional methods of education.

I also made a few other points in my remarks:

1. As children are adopting technology at a younger age (2-4) due to the popularity of smart phones and tablets, this will place increasing importance on schools for how and when they deploy their technology.
2. This early adoption also suggests a very large market for software that offers new ways for these children to learn pre-school.
3. The market for educational technology is a consumer market and not the traditional government market as parents look to supplement the public education system (at least in developed markets such as the U.S.)

NewME Accelerator Miami Nov 12-14

My friends at the Pino Entrepreneurship Center and Knight Foundation are sponsoring a NewMe Accelerator in Miami on November 12-14. An accelerator is an intensive, short period approach to concepting, demoing and pitching a new business idea to prospective investors. TechStars is perhaps the most well-known accelerator.

The NewME program focuses on helping women and minorities to start their own technology-based businesses. Registration is at NewMEMia.eventbrite.com (scroll down the link for more details).

Executives from Andreessen Horowitz and Base Ventures, two leading venture capital firms, will lead the event. 

A Better Approach to Design

Over the years I have been involved in several design projects for retail stores, shopping centers and merchandise. Mostly, I participated because skilled professionals were not available. I have no formal training in design or related disciplines.

Recently I joined a team of both design professionals and corporate executives to develop a new product. In three months this team produced a totally new product in the category and initial reactions are very positive. The team consisted of only 4-5 people who had a strong vision of what the product needed to be, relied on their experience rather than exhaustive research and aimed to produce a working concept rather than a completed design. Also, the product significantly evolved in terms of 1-3 key features throughout the design process.

What I find interesting about our approach is that it mirrors the advice of UX Magazine in an article yesterday-Lean Strategy for UX Design. UX Magazine advice:

1. Have a clear strategic vision for the product
2. Have a working theory of what the product should be
3. Target to deliver the product in its simplest form
4. Planning should be ongoing rather than carved in stone at the beginning of the project

The full article is worth a read.

Computer Technology and Test Scores in Education

Much has been written to show that technology does not improve student learning. More precisely, what this statement typically means is that student test scores do not improve after laptops are introduced in the classroom. If we step back and look at the results of computer technology in classrooms, we have four possible conclusions:

1. The laptops and software are being used to reinforce traditional methods of teaching (so why would one expect better test scores)
2. The laptops have no software that allows learning in new ways which might improve test scores
3. The laptops and software are allowing children to learn faster but this benefit is not captured in test scores by the grade level measurement system
4. The laptops and software are allowing the children to learn new skills that are not measured by the test scores

3 out 4 chances (1, 3 and 4) for testing to show that laptops do not improve education. 3 out of 4 chances (2, 3, 4) to have a meaningful contribution from laptops and software, if only we asked the right questions. 

As Clayton Christensen, the famous HBS professor, showed in "Disrupting Class", we should not expect better results if we use technology to reinforce traditional teaching methods. The question (3) that intrigues me is whether we could educate children faster using self-paced technology, graduating children faster and thereby freeing up resources for other students such as the disabled. The new discoveries in neuroscience have not yet been incorporated into learning and education and software based on this new knowledge may improve the way children learn (2). Of course, if we realized that education needs to change to reflect the easy access to information through the Internet we would focus on the need for children to develop new skills (4) for the 21st century. Any of these questions are more relevant than does technology improve test scores.

Note: Another possible conclusion is that the teachers do not know how to use the laptops in the classroom, but I think there is enough evidence to show this is not the case. Many groups have the know-how to train teachers to successfully adopt laptops in the classroom. South Kent School is one such group. 

 

Other post on education are here.

These views are my personal views and do not reflect the views of any client, company or other organization with whom I am affiliated.

The Next Silicon Valley

My friend Mariana (@Yaquesita) is one of the best sources of excellent articles and blog posts I don't find myself. She covers a wide range of subjects, including education, gadgets, tech, entrepreneurship and all things Mexico to name a few subjects. She is well worth a follow on Twitter. Today she sent me a post “Can our country be the next Silicon Valley?” from Tech Crunch.

The article lists six factors to duplicate Silicon Valley, which are:

1. Market
2. Capital
3. People
4. Culture
5. Infrastructure
6. Regulations

I think this list misses the point. To foster great entrepreneurship requires three factors:

1. Available capital to finance early stage companies
2. Great universities, such as Stanford and Cal Tech
3. A culture of business people (this is a difficult point to explain at the risk of being discriminatory, but certain groups have thousand year cultures of doing business)

You also need a regulatory environment sufficiently permissive to allow individual empowerment. Not a full fledged democracy, but a certain permissiveness that allows business formation.

In many countries the biggest challenge is the lack of great universities (Latin America). In an equally large number of countries there is no long standing culture involved in business (perhaps much of Africa). Everywhere access to early stage capital is an issue, even in Europe.

If we reduce the scope of the analysis to regions like Silicon Valley or cities, the possible centers of entrepreneurship are reduced further. For example, in Asia there may be only 5-6 cities that have a great university devoted to technology, but 4-5 of these lack multiple sources of organized capital for early stage companies.

Re-creating Silicon Valley is not impossible, but I would start by attracting a great technology oriented university to the area. Two would be better as Silicon Valley shows with Stanford and Cal Tech. Also, note that Boston has both MIT and Harvard.

My last article on this theme is here.

Smart Cities--Smart People?

The "smart city" project is designed to introduce better, more environmentally friendly technology into larger urban areas to improve the overall quality of life. Much of the early work was done in Europe but now the movement is spreading to lesser developed areas including Latin America. This story from Co.EXIST, "Filling South America With Smart Cities", highlights a project in Santiago, Chile.

I think the "smart city" project is a great idea particulalrly given the dramatic growth in urban population. Free ubiquitous Internet access, solar powered everything and better mass transportation all sound attractive. I have only one question? Where are the smart people who will inhabit the the smart city? Without equal emphasis on improving education for the poor and disenfranchised, smart cities will only further exacerbate the class discrimination so prevalent in Latin America and other parts of the world.

Previous thoughts on urbanization are here, here, here, and here.

Image credit: faculty.fairfield.edu

Business Model Innovation

Silicon Alley Insider has a nice post this morning called "The 7 Principles of Successful Entrepreneurship". What caught my attention was principle 5 "Remember that business model innovation is often as important as tech innovation". They explained this point as follows:

"We’ve never seen any statistics or studies in this regard, but it sure seems that the majority of shareholder value created over the last half century had a lot more to do with companies innovating around their business model than around technology. Think of eBay with online auctions. Store brands and generic drugs. Amazon cutting out the retail middleman. Manufacturers asking suppliers to co-locate. Dell building PCs to order. Social networking typified by sites such as MySpace and Facebook. The way HMOs and PPOs fused insurance and healthcare delivery. Sure, in many cases, technology was involved, but technology was not the strategic driver that created shareholder value. Instead, it was creativity applied to the business model (product/service mix, value proposition, channels, pricing) that made the difference. This kind of thinking needs to be applied not only by entrepreneurs but by corporate new-business professionals as well."

In my classes and workshops on business concept development one of the main themes is the opportunity to improve the value proposition through innovation in pricing, sales and distribution. I think too many entrepreneurs gloss over these decisions and miss the opportunity to build better customer relationships.

Thoughts on UI

Two of the oldest interfaces are the abacus and the map and both are still widely used. They have survived because of their simplicity and ability to serve a narrowly defined need. However, Rebecca Rosen at The Atlantic thinks maps will go away. By integrating more and more information into a location (weather, restaurants, gas stations, etc.) the notion of "map" breaksdown replaced by a new interface for "geospatial information".

Of course, the really big question in interface is whether the tablet will replace the keyboard. The keyboard was invented about 170 years ago and was unchallenged until the iPad. Where I now think interface will go is toward combined devices--both a physical keyboard and a touch interface. The advantages of each interface combined outweigh the advantages of either interface. Just need somebody to come up with a design. Maybe a 6 inch Samsung note would be big enough to have a decent keyboard on the horizintal axis.

Emotional Engagement = Product/Market Fit

Successful salespeople understand the principle of emotional engagement. Product features, pricing, delivery schedules do not motivate people to buy a product. People have to have an emotional attachment to a product in order to purchase. This quote from Paoloa Antonelli sums up the idea perfectly:

"The bond between people and things has always been filled with powerful and unspoken sentiments going well beyond functional expectations and including attachment, love, possessiveness, jealousy, pride, curiosity, anger, even friendship and partnership."

As you try to sell a new product to find product/market fit do not focus so much on product features. Rather, listen to the customers reactions to the product and try to determine where the emotional engagement exists and how to foster more engagement with the product.

Paola Antonelli is the Senior Curator of Architecture and Design at the Museum of Modern Art in NYC. I found the quote in an article on Brain Pickings.

Some Good Articles on Innovation and Strategy

Two themes that interest me are strategy and innovation and how they are applied to economic development, entrepreneurship and social ventures. Two articles this weekend on these themes were noteworthy.

In "The Hardest Question Any Leader Can Ask" there is a particularly good point on strategy as it relates to business model:

"Business model innovation must be a strategic objective or it won’t happen.

One of my biggest pet peeves is setting strategy one tactic at a time. It drives me crazy to be surrounded by people and organizations that think if they just work hard enough and do more things that a strategic direction and destination will emerge. It seems that most of the world works this way. It is terribly inefficient. How many people and organizations do you know that pedal the bicycle like crazy but never seem to arrive anywhere. They just keep pedaling harder hoping that something will eventually stick. It is exhausting watching them. Why not establish business model innovation as a strategic objective, a specific destination, and work hard on those things that help you get there. It seems so simple. Setting a strategic direction provides a way to know which tactics are aligned and contribute to reaching the destination. The destination may change along the way requiring different tactics, and that is OK, but not having a destination at all is a ticket to nowhere."

In "A 5-point checklist to create lucrative opportunities with disruptive technologies" the author list five ways to disrupt a market and gets it absolutely correct:

1. Destroy your product
2. Make your product solve meaningful problems
3. Make your product insanely simple
4. Make your product smart
5. Give your product away

Read the article to understand the logic of each method.

Competence and Comprehension

One of the debates that I have been following is framed as follows:

Do we need to teach aritmetic if computers can perform the same task?

Until today I thought we should teach arithmetic.

Another related question is why we cannot develop computer software that does more than traditional teaching methods.

This article from Atlantic, "A Perfect and Beautiful Machine': What Darwin's Theory of Evolution Reveals About Artificial Intelligence" provides insight on both questions. This quote provides a possible answer:

"What Darwin and Turing had both discovered, in their different ways, was the existence of competence without comprehension. This inverted the deeply plausible assumption that comprehension is in fact the source of all advanced competence. Why, after all, do we insist on sending our children to school, and why do we frown on the old-fashioned methods of rote learning? We expect our children's growing competence to flow from their growing comprehension. The motto of modern education might be: "Comprehend in order to be competent." For us members of H. sapiens, this is almost always the right way to look at, and strive for, competence. I suspect that this much-loved principle of education is one of the primary motivators of skepticism about both evolution and its cousin in Turing's world, artificial intelligence. The very idea that mindless mechanicity can generate human-level -- or divine level! -- competence strikes many as philistine, repugnant, an insult to our minds, and the mind of God."

The distinction between competence and comprehension provides a possible answer to both questions. Competence does not lead to comprehension. We do not need to teach to achieve competence in arithmetic because computers can do it for everybody (with a computer and electricity). Comprehension in math, the higher level objective, is a totally different objective which is not necessarily derived from competence.

This distinction also explains the weakness in current educational software and most online offerings. Rather than using software/content to teach competence, we should focus on developing software to facilitate reasoning and comprehension. Perhaps harder said than done, but if we stop focusing on competence we will be on the right path.

Question: How many numbers between 0 and 10 can be divided by 2

Competence answer: 2,4,6,8,10

Comprehension answer: all the numbers

I found the Atlantic article on Arts & Letters Daily.