SOPHISTICATED FINANCE

IT Industrial Revolution Short Lived

In this article from the NYT on digital disruption in industry I found an interesting paper by Robert J. Gordon of the National Bureau of Economic Research on forecasted economic growth in the U.S. In the paper Gordon describes the three industrial revolutions that followed one thousand years without any economic growth. The point to note is perhaps that significant, sustained economic growth requires an industrial revolution.

The three industrial revolutions, according to Gordon, are:

1. Steam and railroads 1750-1830
2. Electricity and the combustion engine 1890-1972
3. Computers, the web, mobile phones 1960-present

The most significant industrial revolution was 2 and the least significant in economic terms was 3, the one we know the best. 3 really only generated a growth revival in the economy from 1996-2004 and will not be able to sustain the economy at satisfactory growth rates going forward. Gordon thinks that growth rates in the U.S. may be sub 1% for the forseeable future given the lack of stimulation from the current industrial revolution.

Why has the current industrial revolution been short lived and not much of an economic impetus? In my opinion, much of the benefit of the new technology manifest itself merely in productivity improvement that allowed lower levels of production to sustain us. Effectively, the major benefit of this industrial revolution in many ways has reduced industrial production..so no growth revival.

The Economist critiqued Gordon in this article. The full Gordon paper is here. Summary link above.

Image credit 1: industrial-revolution.org

Image credit 2: cepr.org

How to Retail Tablets

Yesterday I went with some colleagues to visit a Microsoft kiosk for the Surface tablet. I was most interested to see the reaction of my principal tablet evaluator, who has evaluated every tablet I have received in the last two years. However, as shown in the picture below, he was not tall enough to reach the tablet without help.

This advisor quickly moved over to a cell phone kiosk where he could reach the phones and spent ten minutes evaluating a Blackberry smart phone. I think he had not used a Blackberry before.

Another valued advisor has the same problem, as shown below. (Note: a reader just wrote to tell me that Apple used to have a special table where children could use devices but they have discontinued the practice.)

Pre-school children have discovered tablets, in case you have been living in Siberia. They increasingly have a view on what products they want to work/play with. A 12" step in front of the tablets would probably help impromptu evaluation and might even increase sales to "short" customers who are also future customers.

Don't take this post too seriously, but one commentator I respect believes that tablets will dominate pre-school education but not for older children (because of the lack of a keyboard).

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.)

Nice Story about Me

The FIU Honors College at FIU, where I teach social entrepreneurship, published a story about me in the recent issue of their magazine, Summa Cum Laude. Story appears on pages 8-9 here. The Honors College has been very supportive of my teaching, provided me with my first teaching assistant in eight years of teaching and made me feel very welcome by everyone in the administration. Thank you.

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. 

The Growth of Science and the Implications for Education

I recently read an interesting article in Reason.com entitled "Half of the Facts You Know Are Probably Wrong". The article provides two interesting facts about science:

1. Scientific data grows at 4.7% per year
2. Scientific data has been doubling every 15 years since the 17th century (a mathematical derivative from annual growth of 4.7%)

Obviously back in the 17th century the addition to scientific data every 15 years was quite small, but today the additions are considerable and much information previously developed is being proven wrong every 15 years. 

A 15 year period closely approximates the time a child is in school in the U.S. prior to university. This child is learning scientific facts and scientific reasoning. Scientific reasoning is probably less affected by the growth in information although new methods are constantly evolving with the increased use of technology. However, the facts the child learns are outdated in large part by the doubling of scientific information and many facts learned will turn out to be wrong. The question is why we put so much emphasis in science education on memorizing facts. Perhaps we should be emphasizing scientific reasoning and leave the facts to Google or Wolfram Alpha. Of course, teaching scientific reasoning and critical thinking would probably be much more challenging and difficult to test in examinations, but it would be more valuable than examinations of facts that are outdated or wrong.