This is my recent article on Medium about trends in the Fourth Industrial Revolution.
This is my recent article on Medium about trends in the Fourth Industrial Revolution.
A few of the better books I read this year are shown below:
Best book was definitely From Material to Life, which I am going to teach in my Entrepreneurship, Design and Thinking course this spring.. Fantastic demonstration of how to approach an impossible problem--how did life emerge.
Elinor Ostrom is a manual for how to live in a Blockchain directed government less world, although she researched for much less aggressive purposes.
Everyone interested in social problems should read about agent-based modeling. I believe we are on the verge of modeling social problems to derive real insight.
Not a year for much light reading, but a great year for learning.
The quote below is from Paul Heyne‘s 1982 speech “What Is the Responsibility of Business Under Democratic Capitalism?”
"The primary problem that modern, industrialized economic systems must solve is the problem posed by the scarcity of information. We are inclined to overlook these difficulties and to take their resolution for granted, because we take for granted the remarkable mechanism of social coordination through which we gather and disseminate the knowledge that is essential to the system’s functioning. In overlooking the knowledge or information problem, we focus undue attention on a different scarcity, the scarcity of goodwill. We erroneously suppose that goodwill can resolve problems that can in fact be resolved only through the accumulation of additional information. Moreover, many of our proposals for increasing the amount of goodwill in the economy fail completely to attain their objectives, but do manage to subvert the crucial information system."
Increasingly I come to the conclusion that social problems are caused by the asymmetry of information. Rarely do I see approaches that take this idea into consideration.
I have liked Twitter since the first time I heard about it, probably on Fred Wilson's blog AVC. Twitter was like Dropbox and the Palm Pilot. Love at first sight. Twitter instinctively filled a need for me and the interface was so simple there was no learning curve.
I joined Twitter February 29, 2008, about 18 months after the launch. My statistics on Twitter come from my Twitter Archive, which is under Your Twitter Data in Personal Settings. A few stats:
Most popular blog I tweet on--Marginal Revolution--is devoted to economics with an Austrian School point of view.
All of the above looks fairly representative of what I do and think about. Economics is probably underrepresented.
My Twitter handle "rhhfla".
I was talking to someone recently that argued that government grants to private companies were the most effective grants because the companies had proven methods to commercialize innovation. The person cited government funding for Tesla, but I can find little evidence of government cash as opposed to incentives going to Tesla.
This Tesla example reminds me of a big difference now at the beginning of the Fourth Industrial Revolution compared to the Third Industrial Revolution that began in the 1960s with the advent of computing and digital information. In the 1960s government funding was plentiful at top universities like MIT and for government agencies like NASA. This investment lead to new technologies such as computer networks, microwave and advanced materials which were widely adopted. Eventually the resultant creation of economic and social benefit reached unheard of levels of prosperity.
The situation today is one where government funding, in limited amounts, is made available for basic research at universities. Little money is available for applied research and agencies like NASA have been greatly reduced for many years. If we think about when a startup needs money, the answer is in the early stage when it cannot easily access capital markets. If we look at an Industrial Revolution, again the capital is needed in the earliest stages to fund the primary innovations.
What might save the Fourth Industrial Revolution from a lack of government funding is that so much innovation surrounds data, information and technology (like the Blockchain) that does not require huge amounts of funding. Now generally I favor limited government and a commercial playing field not disrupted by government. However, government funding for significant basic and applied research makes sense to me, particularly given the declining spending on research by corporates. The corporates with the best ROI still invest in research according to HBR. Almost all the other corporates choose to enrich management or shareholders rather than invest in research.
The views expressed herein are my personal views and do not reflect the views of any organization that I might represent.
For expert advice on real estate in Queens, NY, please contact my daughter Christina at 347-768-0427 or email email@example.com
Recently there have been some excellent articles and talks on AI, including:
Each of these articles deals with the advances in AI with respect to data analysis. The articles herald the amazing conclusions we have only recently been able to draw from the data. The second article goes on to talk about how the way humans think is changing to better use the new AI tools. The third article talks about how AI tools have totally changed in the last ten years, moving away from rules toward something that approximates human "learning". I could have picked 10-20 other articles in the last month that herald the same trends as these three articles.
The depressing conclusion I draw is that science and social science is now going to be almost entirely shaped by the available data sets and the AI tools available to researchers. Also, probably for the first time in history private companies now have greater resources to do AI research than universities and more importantly are using the resources for this research. However, this corporate research is more likely to find the next behavioral insight than a breakthrough such as chaos theory or quantum mechanics. Furthermore, the best academics in Physics, math and computer science are being lured away by the corporates to do AI research. The outlook for breakthrough research that changes the future of mankind looks much less likely.
All of this would be distressing if not for a bigger concern. As we continue to advance science we are coming to realize that almost all human behavior can be explained by biology and physics. A representative article showing this trend is Swirling Bacteria Linked to the Physics of Phase Transitions. (For some unknown reason I love these articles where the apparently chaotic is explained.) I call this the "think like an ant theory". To understand a problem, think like an ant.
A popular emerging field is the combination of biology and business, where complexity science brings a cohesiveness to two such disparate fields. From this increasing understanding and reliance on biology and complexity science, one comes to realize that these simple models and methods can probably explain nearly everything. For example, to understand cities, first understand hunter-gatherer tribes. To understand entrepreneurship, first understand exploration and exploitation (what we now call Lean Startup), the fundamental behaviors of every living thing. This trend toward simplicity, however, is not supported by the popularity of AI and data sets.
If we look back in human history, until the twentieth century research was not heavily reliant on data collection and data sets. Therefore, most of the great thinking in human history was done by methods that were far simpler than AI. I do not think we need to return to the 16th or 17th century methods at the expense of AI, but I do think we need to realize that AI is not a panacea and traditional thinking still has much to contribute.
One could probably argue that the problem with research since the last century has been an increasing effort for it to look data-based and scientific. AI will only make such approaches easier and wider ranging. The original style of thinking of Aristotle, Descartes and Hayek should not be forgotten or held in disdain.
Brain Pickings today writing about Bertrand Russell:
"But beneath such a surface impression is enormous depth of insight and a timeless, increasingly timely clarion call for nuance in distinguishing between the sort of knowledge driven by a greed for power and the higher-order wisdom that makes and keeps us human."
Yesterday's reading discovered some excellent articles:
Image credit: Marginal Revolution
After WWII the U.S. economy transitioned from a wartime to normal economy. In the 1960s the first large (30,000 square feet) discount stores appeared, K-Mart being a notable example. What K-Mart represented is that retailers could no longer succeed by pushing basic merchandise at the consumer. Instead the retailer had to offer a varied merchandise assortment from which the consumer "pulled" what they wanted.
Roll forward to today and we see several opportunities for the transition from push to pull. Instead of a doctor-centric approach ("push") to healthcare, Kaiser Permanente, the large healthcare provider, is switching to a patient-centric model ("pull") and achieving significant cost savings to boot. Another example is in university education where the monopoly of universities has broken down in favor of MOOCs and other providers such as Kahn Academy. Now students cannot only select what and where they learn subjects but when--high school, university or as part of lifelong learning. Healthcare and education may suggest that many services that are heavily regulated by the government are going to transition from push to pull. However, as is the case in education, the consumer is initiating the change and not usually the service provider.
In a recent article, Networked Leadership, the author makes the point that leadership is transitioning to a pull model directed from the bottom rather than an asymmetric, top-down push model. To me it makes sense that if the business is living in a real time environment dictated by the customer, then leadership and management styles have to change to much less rigid, hierarchical alternatives.
Read Write Web has an interesting article on the challenges of city management, "Smart cities need banks’ data muscle more than governments". The article states that cities are not likely to be able to manage all the data required to provide modern services in an age of IOT. To solve the data management problem perhaps the banking industry with its expertise in large volume, real time data management is a solution for cities. Given that I think most banks will not survive the coming disruption from distributed networks and related technology, maybe banks should move into data management for cities.
Of course you may have realized that cities and banks share one common characteristic. They are both subject to significant government regulation. Just like healthcare and education, they are also leading industries to be disrupted. Effectively, the artificial boundary of government regulation is now being pierced by new technology.
The point on data got me thinking about whether we should not consider outsourcing more city services than just data management. If we consider cities a stack of software services or perhaps a stack of networks, we realize that every part of the stack is a candidate for outsourcing. In the end, the only service that may remain with the city government is the right to set policy, which is, of course, a basic requirement of a democracy. This notion of the outsourced city government perhaps becomes more interesting when we recognize that power is going to shift away from the national level and back to the cities. Networks and communities are naturally gaining power through the new technology, which will lead to local initiatives that will manifest themselves in the cities and their governance. The networks and the communities are gaining power because comparatively more information is now flowing to the local level through the new technology. Effectively, the individual captures information better than the government, as evidenced by the article that began this post.
The role of information in the shift of power is explained in this Powerpoint, "The Great Convergence". Download .
This is the link to my previous writings on cities and urbanization.
Here is a recent talk I gave on the use of networks to solve social and environmental problems.
"Increasingly I believe that we can form a new social contract using the technology available to transfer increased decision making authority to the individual. Rather than "fan the fire" or fight the status quo we should use the technology to avoid the current nodes of power and explore alternative approaches at the individual level. Everyone acknowledges that the current paradigm shift in technology will have profound economic and social changes, but we should not overlook the chance to change the political system."
On Saturday September 24 I am speaking at an event for WiseTribe. I am interested in what they are doing because I think they are exploring a new form of "organization" that could be common in the future. Some of my remarks are below.
I have three interests:
2. Creativity and early childhood learning
3. Complexity science
• Entrepreneurship is a result of individual empowerment and leads to economic well being. I spend most of my time teaching people to use social entrepreneurship to solve social and environmental problems. My hope is that eventually we can drop “social” because entrepreneurship becomes so responsive to society’s problems.
• Creativity interests me because it is the basis for invention and innovation. I study it from the perspective of the young child because so many geniuses say their secret was to maintain a childlike attitude.
• Complexity is important because it brings so much insight to understanding people, organizations and networks. There are three types of problems—simple, complicated and complex. Tying your shoes is a simple problem. Building a bridge is complicated, but follow engineering, apply math and bingo a bridge is built. Complicated problems are linear and deterministic. These are the kinds of problems that AI will solve, leaving only the complex problems. Complex problems have independent variables that produce emergent features that are not caused by the variables. Stock markets and social problems are examples of complex problems. Black Swans are a subset of complex problems.
• Now if we take complexity in a simple form to understand people, organizations and networks, we see that the roles of each component changes throughout history. When we lived in caves 40,000 years ago the individual was paramount and there were no organizations or networks. Why—no trust and no sharing
• Roll forward to the Dark Ages—individuals are enslaved, kingdoms and the Catholic Church are dominant organizations and there are no meaningful networks.
• Next 1800s in the U.S.--individuals are becoming empowered after the French Revolution, many small networks such as railroads emerge and the government is emerging as a powerful force. The government increases its dominance throughout the 19th and 20th century because small disorganized networks lend themselves to dominant nodes or organizations.
• However, what we have today thanks to computing and the Internet is large, well organized and connected networks. In this environment what network science tells us is that we no longer need large nodes like government. When networks are organized, information exchange is easy and we no longer need large organizations like universities or governments to store and organize information.
• Now we could talk about how to redefine government or the modern university, but the more interesting question to me is how do we bring about change through the power of the networked individual. Stanford Social Innovation Review has a very interesting article in which they discuss the new concept of emergent strategy. Emergent strategy, as opposed to the traditional strategy concepts of Michael Porter, focuses on an iterative approach using networked partners to solve problems. Trial and error, decentralized exploration, solid evaluation at every step, transparent reporting—these are the features of emergent strategy, 21st century organizations and movements. In fact this has always been the approach of movements like Gandhi and Mandela. This approach based on emergent strategy has also been embraced by the Rockefeller Foundation, one of the most accomplished social organizations in the U.S.
• Now how does all of this apply to WiseTribe? WiseTribe is not an organization. It is a movement, of networked individuals, focused on social and environmental change. WiseTribe is an alternative to government for the management of society—for economic, social and political well being. The government is no longer the default solution. We need to iteratively explore this new power, figure out how to communicate it to more and more people and use WiseTribe(s) to solve the impossible problems that are the ones really worth solving.
Previous thoughts on related subjects are here.
You might think this would be a post on the environment, but it is actually about what might be a bigger threat to the extinction of humans. For the first time in history we now have the ability to interfere with evolution.
An article on autism helped me to see this point. The silly article was about whether we should use the word "cure" when talking about autism. The week before a student had presented the idea that the autistic might be the next evolutionary species in the human line (Neanderthal, Homo sapiens sapiens, etc.) Novel idea, particularly from an 18 year old student. I have no opinion on such a question particularly given my lack of expertise on autism. Obviously if we "cure" autism we might very well kill off the future direction of human evolution.
Such an issue is of particular interest to me when I consider morality. After a very good education in meta-ethics, I now think that much of morality should be concerned with "not doing harm to future generations". Plato did not have much to say on genetics or the environment, but these topics look very relevant today.
To think the government might have to legislate on evolution is very scary, especially when one considers that humans are not really built to survive. Cock roaches, alligators and turtles are all very old surviving species. We humans share very few characteristics with these species.
I believe that the economic prosperity of individuals can be achieved through individual empowerment and entrepreneurship. Regardless of whether one discusses poverty, equity or the wealth gap, empowerment combined with entrepreneurship provides a solution that offers the most effective approach.
I began studying individual empowerment after I concluded that government economic development programs will never address poverty effectively. The simple reason is that government programs typically focus on government objectives and not individual solutions to problems. I saw this mistake by governments all over the world when I worked at One Laptop per Child.
For individual empowerment to succeed, there are three necessary conditions that must be met for the individual:
To these conditions must be added access to information, which I explain in a TEDx talk--"The Poor Know How to Overcome Poverty".
If we look at the conditions for individual empowerment, we see that condition 1 frames a psychological requirement. Condition 2 dictates a minimum level of education (FA Hayek thought it should be through primary school). Condition 3 addresses the constraint or boundary that must be overcome.
Now if we think about applying this three-part framework to entrepreneurship for disadvantaged peoples, we might use the same types of conditions:
(We would also have to provide access to information.)
Condition 1, trust and sharing, would be required to address the worldwide problem of most entrepreneurs--finding good staff. Of course, most of the reason they cannot find the staff is that they have not learned how to trust people, which demotivates staff and prevents delegation. Education would be specialized training on identifying opportunities and execution. Condition 3 would address the limiting boundary--capital. Capital is also frequently cited by entrepreneurs around the world as one of their biggest problems.
I think that many programs fail to address the psychological issues and access to information. Much as the early Head Start programs succeeded when they realized they had to feed the children breakfast, any program to overcome poverty has to address the fundamental issues which include the participants psyche and their risk profile. And, of course, no economic program can succeed without access to information because therein lies the opportunity for the individual to help themself...which brings us back to individual empowerment.
(These conclusions are derived in part from teaching a national program for over 200 small and medium size businesses.)
SSIR has an article in the latest edition, "Is It Time to Ditch the Word “Nonprofit”?", which suggests we need a new term to replace "non-profits". An alternative approach might be to stop creating non-profit organizations. Why do we have 1.5 million such organizations in the U.S., or roughly 1 for every 4 for-profits?
The obvious solution is to convert non-profits to social entrepreneurship. This was not an alternative considered in the SSIR article. Of course, the writer has a startup that raises capital online for non-profits. Except for some human rights issues, I think all the UN Sustainable Development Goals could be achieved by entrepreneurship.
To quote a saying I like, "non-profit is a tax status and not a mindset". Your social entrepreneurship venture can be a non-profit, although I would not recommend it. There is better capital access in a for-profit business model and business approaches are a much faster way to solve social problems. The more important issue is to make more business people realize their for-profit models can be used to address social problems. That would be a better article from SSIR than an article on the terminology of non-profits.
I will be giving a talk (with an exercise) on "Validating the Idea" for StartUP FIU on Thursday, June 16 at 615 pm at the MARC Pavilion on the Doral campus. This talk will be a good example of the content that we will be giving to teams in the incubator program starting in September. To apply to the incubator, please go to the StartUP FIU website.
I am the Director of StartUP FIU and the strategy is described in this Miami Herald article.
One of the great things about Miami is the unique and insightful comments of the foreigners that live there. This morning a very successful Mexican businessman told me he thought Donald Trump should announce the lovely Kim Kardashian as his Vice Presidential running mate. His reasoning was as follows:
To this very compelling logic I could only add one point. Whenever Presidents blunder and get into situations bad for their re-election, a President frequently creates a situation to distract the attention of the American voter. With Ms. Kardashian as VP, the opportunities to distract the American voter are almost endless.
In the early years of this blog there were many funny posts and cartoons. This one on HUTM is probably the most popular. I would not say that we are returning to comical posts here at SF, particularly making fun of such a serious subject as U.S. Presidential elections, but it is tempting :-)
Photo credit: Twitter.com
If you click on the link of Ms. Kardashian, probably best not to do it in the office.
A few things I find interesting.
In the last few months various initiatives at MIT have signaled a change in approach at that university toward environmental problems. (I am not sure this is an institutional view and might just be the view of various groups within MIT.) No longer is there time for long term solutions and changing human behavior. Problems must be solved now before it is too late. Other organizations I am sure share this proactive approach which goes well beyond mere conservation.
A story on Medium, "How an Army of Ocean Farmers Are Starting an Economic Revolution", describes a new way to do ocean farming that immediately reduces environmental issues, but provides almost a balanced diet from the ocean. A point that did not occur to me until I read the article is that all life began in the ocean. Therefore the ocean has the ability to provide all the nutrients to keep us alive. Land-based alternative sources of nutrients required less energy so early man moved away from the ocean as a principal food source. Scaling may have also been an issue in an ocean food supply. As the article shows, the ocean can be a more environmentally friendly, highly productive food source with modern technology. We may have to go back to our origins to survive.
A recent post, "The Business Model to Downsize Government", talked about how the private sector could lead social change. I wanted to come back to this theme when I had more evidence than some research from HBS. I now have several confirmations that show that Tulane University was the local leader in rebuilding New Orleans after Hurricane Wilma. Local government was apparently so corrupt and inept that a group of people, including the leadership at Tulane, took into their own hands to plan and execute a recovery.
Perhaps we have a data point where the private sector addressed and solved a large, complex social problem.
Also, interesting to note that one of the multiple networks of Tulane University (the Trustees) engaged in the project and then energized the other networks to support. Successful organizations have multiple effective networks, but it only takes one network to capture the attention of the other networks and bring to bear the full resources of the organization.A reader wrote to correct me. The hurricane was Katrina.
I continue to believe that we are in the early stages to downsize government. I believe that the private sector can take over many services and provide comparable or better services at a fair price. Better technology and communications infrastructure make this possible. Prominent examples to support my view include Uber, Airbnb and Bitcoin.
The problem is that the private sector and individuals need to take the initiative because the government will never willingly reduce its scope. In a reduced government model who might be the advocates for new positions and approaches. An article from HBS, "Do CEO Activists Make a Difference? Evidence from a Field Experiment" by Aaron K Chatterji and Michael W. Toffel, shows that business leaders might fill this role. The article states:
"CEOs can sway public opinion, and potentially to the same extent as prominent politicians. Moreover, Cook's CEO activism increased consumer intentions to purchase Apple products, especially among proponents of same-sex marriage."
Perhaps if more CEOs shared their opinions on social issues we could accelerate change and save the histrionics of the current political era. Might even get a sales increase from thoughtful positions.