Dis - Aggregation

I have long suspected that the "war for talent" as fought in the 'noughties was actually restricted to a small cadre of (self defined ) individuals, but a new post by Clay Shirky in the McKinsey Quarterly got me thinking: - He notes (about the 'Net generation)

If I’m a 25-year-old and I’m sitting at my desk thinking, “I’ve been doing this job for two years, it’s time to look around for something else. I wonder what’s next for me,” it would be easier for me to find a better job in a different city, working for a different company, than to go into my own company and say, “Where’s a new job for me? How do I get a promotion?”

In part because companies just make the internal career path harder for all kinds of reasons—they don’t publish it as clearly, middle management is often worried about people trying to rise through the ranks. People think, “Oh, I can keep them there for a while because they’re useful in that position.”
If the search costs for finding a new job are easier outside your company than inside your company, you’re communicating something to them about loyalty as well. That’s another place where a manager can say, “Look, here’s how career paths go at this institution. Here are the skills you need, [and] here are the different departments we have.”

Interesting thought - as transaction costs lower for job finding externally, so internal retention suffers. Three barriers for this happening anytime soon:

(i) In theory its never been easier to find other opportunities, but the flipside (as anyone who has done recruiting will tell you) is that you get inundated with email resumes, so digging through the pile is impossible and you tend to do a cursory cull then home in on a few that exactly fit all your (supposed) requirements. In theory Social Media can get over this, but so far it's not (yet) the Go-To tool.

(ii) The next company is probably as likely to treat you the same as this company, so the other dimension that one needs to use new tech to find out is the culture of the intended target. It is easier to Google it and varuous whingesites help, but you are still only allowed so many hops per decade before you look like a gadfly

(iii) I'd predict a few unintended consequences too - extended trial periods and non permament contracts, and lock ins for minimum periods - or near zero investment in someone - as the costs per permament recruiting cycle are very high, and managers will probably also skew the pay for the 20% who they really, really want to keep.

Interesting dynamics nonetheless, I'd love for it to be true, sooner, as i think it would probably have the biggest impact on company culture in the longer term. Elsewhere Shirky makes the point that:

A famous observation about the net generation, the millennials, is, “They’re doing Facebook at their desks on a Tuesday morning,” which is certainly true. One of the reasons for that is that they’re also being asked to use PowerPoint in their homes on a Saturday afternoon. If you went to any manager and said, “Would you offer your 25-year-olds the following bargain: no more Facebook at work, and in return for which, I won’t call you after 6 PM or on weekends or ask you to watch e-mail.” I don’t think the managers would make that deal.

True enough, but it's not just the 'Net Generation who have had to be at their desks on an evening or weekend, Clay - that started with the floppy disk and telephone, and if you think Facebook is bad, try the gaming software!. Now when I were a lad we had it tough - weekend working and no Facebook, we had to socialise face to face with people. The horror...........

Fred Wilson recording the trend we have also noticed, ie Techmeme is moving more towards being "GadgetMeme" (I read it on Techmeme):

We might as well call Techmeme news.apple.com many days. Or news.facebook.com or news.google.com or news.twitter.com. Techmeme is obsessive about the top companies and top stories of the moment.

He compares it with Hacker News, which takes a wider range of inputs and not all are from the main megaphones.

Way more stories above the fold. Way more diversity. Very geeky. But you get plenty of stories about non tech stuff and the stories move rapidly through the system. And not one story about Apple or Facebook in the top 20 right now.
I use both multiple times per day, but I really love what Hacker News is doing and I struggle with Techmeme which feels a bit like an echo chamber on many days.

I read both too, and I'm a great fan of Techmeme - I think it is the innovative newsform of the 2.0 cycle as it was a new media aggegator before most Noo Meedja aggregators could spell the word. And it, like many of the greater tech blogs, is steadily going more mainstream in its sourcing (just look at the sort of stories that were on top of Techmeme 5 years ago when it was polling blogs far more). That's where the volume, advertising revenues, etc etc are, after all.

But this is all part of the industry evolution as it grows - look at any Tech meedja index, and gadget news is always the top traffic item whether its dead tree magazines or blogs. Personally I'm not interested in tactical gadget news, so just like they split off Mediagazer, I wonder if its possible to curate GadgetMeme as a different "online magazine" to Techmeme. It's certainly big enough to have two streams now.

There has been quite a lot of hoo-ha about the role of the Intenet / Social Media in the Tunisian and Egyptian revolutions, with Pro-Apostles calling them "Twitter" or "Facebook" or "Internet" Revolutions, and Pro-Agnostics taking strong issue. The nuanced truth, as always, is in the middle but never generates the same copy and linkbait. To try and get some of the nuance into the open, therefore, I looked at the media production and delivery supply chain, and how it worked, as we would for any market analysis. To really understand it we also have to look at events leading up to, and during the actual on-the-streets activity. A caveat - this was done over an hour or so over a cup of coffee, so is very much a first cut, but even so I think it gives some insights.

Before the Revolution:

The above value chain was all fully connected, (we can assume some filtering of sites was done by the Governments) so the messeges and mediums were in full flow, and undoubtedly were being used to organise revolution. Looking at where the New Media had an impact, its worth looking at the areas:


(i) Content production

As we noted, people have been able to create seditious content for centuries, thus it is unlikely that the Net per se helped here, its more likely that user owned devices - PCs, Videocameras, phones, cameras etc were the more imortant element in content creation. What the Internet probably did help with was rapid transmission of the text/graphic form ideas (rather than the lower bandwidth of voice), both within Egypt and with outsiders. Fahmy puts it well:

Through this, an even greater underlying principle emerged: Social media is built and designed to support social movements. The social media framework itself is a powerful underlying force that allows the momentum of movements to surge uncontrollably and organically. A revolution, a movement, or any major social cause nourishes on unity, “people power,” advocacy, connectivity, grassroots mobilization, free expression and shared aspirations… all of which are inherently embedded within the social media skeleton and system. (Best example lies within Facebook). It is almost as if social media perfectly fits as a layer within a movement’s structure.

(ii) Aggregation

This is probably where the 'Net was most productive, creating fora for idease and planning to be aggregated and co-ordinated. Modern social media is more atttractive (graphics, multiple functions etc) is no more efficient than the old, but by dint of attracting very large user groups was arguably very effective. Fahmy again:

If anyone wants to challenge a status quo, energize and mobilize their network towards a cause…

- Where do you think they will go first?
- What will help them gather supporters and resources faster and more efficiently?
- What will allow them to connect, notify, and engage their base?
- What will help them easily organize events, rallies and get donations?
- What will help them recruit other activists and get their voices across?

Wael Ghonim notes a similar story (quoted on CNN):

I’m talking on behalf of Egypt. This revolution started online. This revolution started on Facebook. This revolution started in June 2010 when hundreds of thousands of Egyptians started collaborating content. We would post a video on Facebook that would be shared by 60,000 people on their walls within a few hours. I always said that if you want to liberate a society just give them the Internet…. The reason why is the Internet will help you fight a media war, which is something the Egyptian government regime played very well in 1970, 1980, 1990, and when the Internet came along they couldn’t play it. I plan to write a book called Revolution 2.0… that will highlight the role of social media.

Its worth pointing out that the the "intelligentsia" is historically at its most effective during this phase of a revolution, so the low % of 'Net connected population is not a major disadvantage


(iii) Distribution

As can be seen, the Internet has a fairly low penetration within Egypt compared to Mobile or TV, so we would hypothesize that more people were touched by the latter. However, it is perfectly believble that there was a 2-phase supply chain, with the 'Net being used by organisers/intellectuals to generate the initial revolutionary content and co-ordinate on a macro-scale, and the other media used to co-ordinate at a local scale.


(iv) Customer Equipment

Distribution channels are all very well, but if no-one can receive it it is irrelevant. Satellite TV distribution is lower than Aerial TV, but people do tend to group around satellite TV to watch Al-Jazeera. Penetration of PCs is higher than Internet itself (though PC's, with the ability to desktop-publish, probably had an impact on non-elecronic distribution too). Radio and good old printing presses are probably unsung media in this revolution


During the Revolution

I would argue that during the actual on-street activity, most of the "why" content was already produced (ie the ideas were largely known), the issue was more around "how/who/where" ie tactical aggregation (especially co-ordination) and distribution of data about the ongoing situation - Twiter user @alta1989261 on the Twitter 140 blog:

Twitter is a very important tool for protesters, as evidenced by the fact it and Facebook were repeatedly blocked in Egypt as the protests flared up. We use it to campaign and spread the word about protests/stands–hashtags are invaluable in that respect, and to share news quickly and efficiently, with our own 140-char commentary on them, and subsequently have conversations with random people/complete strangers. But most importantly, it allows us to share on the ground info like police brutality, things to watch out for, activists getting arrested, etc.

As most customer equipment was stand-alone (like the smartphones used for the above example) and owned by the users, it was fully functioning (imagine if all the devices were "dumb" and run via a cloud and/or or could have all their data locked like a Kindle can do). The main change during the revolution was that the Egyptian government shut off large tranches of the Comm Distribution system (so I'm not clear on how long/how the twittering went on for) - as the New York Times notes:

As in many authoritarian countries, Egypt’s Internet must connect to the outside world through a tiny number of international portals that are tightly in the grip of the government. In a lightning strike, technicians first cut off nearly all international traffic through those portals.

In theory, the domestic Internet should have survived that strike. But the cutoff also revealed how dependent Egypt’s internal networks are on moment-to-moment information from systems that exist only outside the country — including e-mail servers at companies like Google, Microsoft and Yahoo; data centers in the United States; and the Internet directories called domain name servers, which can be physically located anywhere from Australia to Germany.

The government’s attack left Egypt not only cut off from the outside world, but also with its internal systems in a sort of comatose state: servers, cables and fiber-optic lines were largely up and running, but too confused or crippled to carry information save a dribble of local e-mail traffic and domestic Web sites whose Internet circuitry somehow remained accessible.

In fact the ability of a Government to turn off the internet has got a lot of people around the world, who thought the 'Net was very robust, quite worried. It still worked here and there, but it was clearly largely crippled.

Also, the foreign owned mobile operators in Egypt proved to be effectively state controlled and rapidly closed themselves down (as we saw with various Cloud services in the Wikileaks affaire)

If you look at the loss of the distribution system vs say the 1980's Russian revolution (where comms was via carefully hidden Samizdata methods), or the !980s/1990s South African and Velvet revolutions (mainly pre internet) then clearly the big difference here was the Net, and (in 2011) Social media. However, in Egypt the 'Net was fairly effectively shut down, but the Egyptians still had their revolution, so its hard to argue it had any real impact. Looking back it is also clear that even with the huge restrictions of Samizdata, the Russians were perfectly able to run a revolution - as were the Czechs, Poles, South Africans etc with mobile phones and old fashioned fly-printing and word of mouth. Going back in history to the first Russian revolution (1917) and beyond to the various nationalist movements in the 1800's and the French Revolution of the 1790's, it is clear that if people want to have a revolution, they will have one!.

Thus if you compare Egypt and what has gone before, it seems fairly clear that closing of the 'Net during the actual on-street activity was probably fairly ineffective. There was data coming out (the most effective being YouTube video) from the small amount of systems still up, but the heavy lifting in Egypt at the critical time was via distribution systems that were harder to shut off (as it was since the 1980's), ie other foreign people's broadcasting systems - specifically Satellite TV (Al Jazeera, take a bow) and (probably, but much less glamorously) radio. This was also true in Russia, South Africa etc. and of course if you go pre-internet, the number of revolutions that got on quite happily without any electronic mediation of any sort is vast.

Another impact of the events spreading to the West via the various media was that it made it harder for Western governments to behave with Realpolitik and prop up their old friends, as it was clear that their own citizens by and large supported the Egyptian revolutionaries (I noted this in my notes on the silence from Davos and thereafter when the events in Egypt broke out). However this was not purely a Social Media thing - TV and Newsprint were as much a part of this phase, though getting videos and liveblogs out via Internet helped create content for these stories. But I would argue in this case the heavy lifting was by Satellite TV, especially in the English language.


After the Revolution

I was interested in the excoriation of Malcolm Gladwell when he pointed out the Weak Links of Social Media don't make revolutions. To my mind he is merely repeating (in another way) what many observers through the centuries have noted, ie that regime change without significant high risk commitment (ie bloodshed) is fairly unusual. The pen may be mightier than the sword, but at some point you need the sword..... (Eastern Europe being an interesting exception, but the governments there had largely given up already). To my mind what is provable is that Social Media is a more efficient way of building up the latent will of a group will to move from a "weak link" to a "strong link" mode by making them realise there are vast numbers of like minded people (by dint of reaching more people, much faster). But it not the spark to action, that is elsewhere and is usually an heroic act (setting yourself on fire), the creation of a martyr via state violence, or committed organisers getting people on the streets - ie strong links.

Some argue that state violence is less possible today as modern media makes it clearer what atrocities are being committed. I would argue that Tiananmen Square and lately Iran showed the opposite - a modern regime is quite capable of behaving brutally, no matter how many distressing videos on YouTube or green avatars on Twitter. History tells you that Regimes change by and large when the army fails to shoot its own citizens, at that point the Regime no longer has a sword. (History also tells you that the replacement is very often people with swords that the army promotes, at least for a while, but that is for a future post). I strongly suspect Egypt's reluctance is also more because of realpolitik (ie US subsidies, trade links) - which China and Iran do not need as much - or it could be that the Egyptian state is just far more subtle, or divided, or just a more ethical society (looking at their behaviour during the revolution I can believe the latter, most of the high value looting seems to have been state sponsored robbing of the coffers and Egyptian Museum).

Of course, strictly speaking the Egyptian revolution is not complete, in effect there is a military coup with promise of future democratic options. If the intentions are benign I would expect to see no more censorship of people expressing themselves via media, if it were not I would expect to see censorship and increased filtering.

I also suspect that the reason that Western "Pro Social Media in Revolution" pundits see the 'Net as such a large factor (apart from self interest) is that they were largely interacting with the 'Net enabled Egyptian educated class, rather than all the locals interacting at a local level on local (non english speaking) media. The medium may be the message, but make sure you are looking at all the media. This was probably even more so in the US, as I understand they could not easily get Al-Jazeera TV so were largely watching it unfold on Social Media. In fact I note with interest that Wael Ghonim, who has been channeled as the voice of the Internet Revolution, has been at great pains to point out that a lot of factors were driving the revolution. There are dissenting voices in Egypt about media usage, but they are not getting amplified, especially in the US:

“I think it’s been incredibly condescending to diminish, if you will, what was an incredibly popular revolution the likes of which the Arab world has not seen, perhaps the whole world has not seen, and just to say that it was a Facebook event or a Twitter event.” — Parvez Sharma, filmmaker and writer

I will go into more detail in a subseqent post about the real causes and modes of a revolution, using the same research techniques we do for market analysis (I believe the new word for this approach is cliodynamics), but what I think we would conclude as an initial hypothesis is that the Internet, and moer specifically Social Media is:

- a good way to create and aggregate "Seditous Content" before the actual "Street Phase" of a revolution, however, the reasons for dissatisfaction have to exist already
- a way of building up "weak ties" into a point where "strong ties" may be possible. However, it does not (yet) seem to promote the spark of actual open revolt
- is probably overstated by Westen proponents as a force in Egypt as (i) penetration is low, (ii) western (especially US) observers are getting a disproportionate amount of their data via this source and (iii) there is quite a bit of self interest in advancing the cause (and opposing it, for that matter) so claims tend to be over-optimisitc
- not as useful once people are on the streets as before
- is more prone to shutdown as most 'Net distribution assets are "in country" than "out country" and can be blocked - Foreign assets like satellites, or unjammable assets like paper, word of mouth, etc are more reliable. Rely on teh 'Net at your peril
- is a useful component of the data fed back to Western peoples, to rapidly dissuade their governments from propping up the Old Regimes

In other words, I would argue from this analysis that the 'Net is just another layer of the comms systems, and is a tool of, rather than a cause of, any revolutionary movement. It is more efficient and effective than what has gone before to connect and aggregate, but less useful once the people hit the streets, so ultimately it is definiely not the "killer app" that allows a revolution to occur.

What I think it has done is shifted the balance of media power to citizen, from State. I would however argue that its gone back to a level of c 70 years ago, before (largely state controlled) broadcast mass media emerged. In say the 1920's politics was a far more local issue, carried in town halls and on the stumps - you saw your opponenst up close and personal - and I would argue that modern 'Net media is a return to that era. But that era was unable to stop the march of Stalinism and Fascism, because - as I will argue subsequently - far larger forces are at play than the means of communication.

Update on that last comment about shifting the balance - it appears even in Egypt, the state was starting to use social media - TechCrunch:

Alyouka also notes how the Egyptian authorities themselves were trying to use Twitter to spread propaganda and misinformation in a “painfully awkward” manner (the fake accounts are always easy to spot, aren’t they?). The tell-tale signs: always repeating the same Tweets, word-for-word, over different accounts about how bad the protests were for the country or praising Mubarak with few followers and very few tweets per account.

So there will be an arms race, clearly....

This is quite interesting - a small group of shareholders are putting their agenda - to vote the current Nokia board away - onto the 'Net:

We are a group of nine young Nokia shareholders. All of us have worked with Nokia in different capacities in the past. We plan to challenge the company’s strategy and partnership with Microsoft in the next Annual General Meeting scheduled for May 3, 2011.

If you elect us to a majority in the Nokia Board of Directors we will pursue the following agenda:

- Return the company to a strategy that seeks high growth and high profit margins through innovation and overwhelmingly superior products with unrivaled user experience.

- Maintain ownership and control of the software layer of the Nokia products. Software is where innovation, differentiation and shareholder value can most easily be created.
- Revamp hiring strategy to target the top young software talent from around the world. Only if Nokia is able to attract and keep the best talent in the industry it will be able to generate the level of innovation that is needed to achieve sustained growth and consistently high profit margins.
- Dramatically increase efficiency by eliminating outdated and bureaucratic R&D practices like geographically distributed software development and outsourcing.
- Avoid at all cost becoming a poorly differentiated OEM with only low margin, commodity products that is unable to attract top software talent and cannot create shareholder value though innovation.

It's not so much the agenda that interests me, its more the extension of online unrest from the overturning of political elites to overturning elites in the corporate sphere.

It is very true to say that traditional fund manager shareholders (and boards for that matter) have been "asleep at the wheel" in corporate life too often recently (the latest news that only one option was put to the Nokia board is disgraceful in my opinion too - but I don't know what is worse - that the management did it, or the board accepted it - how can that be diligent to shareholders by either party for something so key ?) so its no surprise that some of the more switched on shareholders are cross.

But what is more interesting is how this will pan out now - the story is in Techmeme, lots of people are reading it and blogging it - imagine if it could generate the sort of protests from other Nokia shareholders that we've seen in recent political protests? The big lesson of the last 10 years is that the regulators, major shareholders and boards are not watching out for ordinary people's interests, and one thing the new media is proven to do is help monitor and organise protest.

I don't think this one will do it as is (the plan in my opinion is still too ropey - they want MeeGo to the main platform), but given a bit work could be a lot better - maybe crowdsource from other disgruntled shareholders

Definitely one to watch.........

Update - the answer is no, this time the institutional shareholders are not going onto the barricades - combination of timing and a poor Plan B:

Posting an update today Nokia Plan B said that “after reviewing the feedback we’ve received from investors on our Plan B, we have decided not to carry on with it,” despite contact from hundreds of individual Nokia shareholders (which they note owned anywhere between 10 and 400,000 Nokia shares).

It was Nokia’s institutional investors and developers that put the nail in the coffin, the responses they received from them “were not encouraging”. Due to the fact that they aren’t allowed to support activities such as Nokia Plan B, they can vote with their feet by withdrawing stock from the company instead of protesting changes.

They also realised that by May 3, many of Nokia’s Symbian developers may have already left the company – campaigning for the future of Symbian would be fruitless.

Well there we go - didn't think it would, but we saw the first swallow......

Update 2 - it was a hoax apparently, one bored engineer - and this droll piece of Nokianalysis. Interesting that the zeitgeist of this post got so far, I stick with the view above the some form of shareholder activism is coming via new media.

Last year I was involved with a bunch of other smart but irreverent people and we wrote Big Potatoes - The London Manifesto for Innovation (over here). The prime reason for us writing the Manifesto is that our research showed us that Innovation today is not what it once was, in fact we found that Innovation today is typically pretty mealy mouthed - "continuous improvement of past innovations" is typically about as good as it gets. Innovation has in too many cases been sanitised, incorporated and de-risked so anything that rocks the boat is removed. Most R&D labs these days are short term "D" (if they haven't been closed down)

In fact my research showed that there was a LOT more innovation 100 years ago than there is today, and in fact real, radical innovation dwindled rapidly after the 1969 moon landing / 1970's oil shocks. Very little (compared to the across-the-board Innovation of 1911) that has happened since the early 1970's wasn't started in that period (Except financial innovation, which has brought a whole lot of problems, but that is another post).

That our view was unpopular in some circles puts it mildly, but I read an FT article tonight about a book by one Prof Tyler Cowen, that looks like he has done the same research and come to a similar conclusion. Cowen is arguing that we have a number of major economic problems today, and they are not going to go away in a hurry because:

...Another easy gain in days gone by was to enjoy the gradual roll-out of the staggering array of vital innovations developed in the late 19th and early 20th centuries, including electrification, refrigeration, aeroplanes, indoor plumbing, bulk chemical processing, the internal combustion engine, and the telegraph, telephone and television. Everyday life was transformed by these technologies between 1930 and 1970, Great Depression notwithstanding. Since 1970, we have the rise of computers and mobile phones – truly wonderful inventions – but not much else.

In short, if Cowen is right, there will be less growth in future unless a new wave of technology arrives, and our political institutions will have to cope, if they can. The same argument surely applies to western Europe too, and will come as no news to Japan.

Cowen's book is The Great Stagnation, he is an economics professor and blogger. It is only available as a Kindle e-Book, interestingly I cannot buy it in the UK off Amazon UK however (so much for the barrier-breaking power of digital media) so I searched Google for some reviews:

Here is part of The Economist's review:

There are two kinds of economic growth possible in this world. One can take good ideas already in use elsewhere, adopt them, and make use of underused stocks of people and capital. That's what China and India are currently doing, and we shouldn't mistake their rapid growth for something it's not. Or one can come up with new ideas and apply them in ways that allow the economy to grow.

The rich world has been stuck doing the latter for most of the last century, and lately they haven't been doing it as well. Mr Cowen looks at growth rates of output and median income over the last few decades and notes that there's a steady downward trend. And this trend is due, he says, to the exhaustion of the supply of low-hanging economic fruit.

.....

the big setback for society, according to Mr Cowen, is the end of the exploitation of the major innovations of the last two centuries. The 1700s and 1800s yielded revolutionary innovations in industry, chemistry, and electricity. Rich countries spent the 1800s and 1900s figuring out how to exploit those innovations to their fullest, and as recently as the 1950s and 1960s, these experiments were producing products that utterly changed the way people lived. During the lifetime of those born in the 1930s and 1940s, household technology changed fantastically: refrigerators, laundry machines, dishwashers, radios, televisions, electric light, air conditioning, cheap automobiles, and so on. But with a few exceptions (among them computers, on which more later) today's households don't look that much different from their 1970s counterparts. Products have improved, but the development of revolutionary new technologies has slowed substantially. The progress of technology has plateaued.

The Internet is not a great help:

The internet, on which he has a lot to say, has had enormous benefits, but a striking amount of online activity is free and internet businesses create few new jobs (and displace lots of others). The result is growth in utility without much of a contribution to GDP, which would be fine except that countries and people have bills to pay, on things like health care, pensions, and government debt. Complicating matters is the fact that the fastest growing contributors to measured GDP—the government, education, and health sectors—deliver returns that are very difficult to measure. This suggests, he says, that rich world GDPs are likely overstated; we're poorer than we thought. And that, Mr Cowen concludes, will make it very difficult for us to make good on the many, many obligations accumulated while we assumed that our previous growth trajectory would continue.

.....

....it's a little amusing to focus on the implications of the spread of cheap-to-free internet amusement. As Mr Cowen notes, the availability of good, free internet entertainment has allowed a lot of people hit hard by falling incomes or recession-induced joblessness to maintain relatively high levels of utility (though this available substitute has also made it easier to cut down on physical consumption, with nasty effects on GDP). This suggests that other forms of consumption, like that resulting from the status competition of the relatively well-off, now loom more important in supporting "real" consumer expenditures, of the job-creating, revenue-generating, GDP-enhancing sort.

The Economist's criticism is:

I think there's strong evidence that the most of the economic pain experienced from the summer of 2008 to now can be attributed to a big demand shock, and most of it was preventable. I also think Mr Cowen may undersell the potential of recent innovations. I see computing and the internet as revolutionary innovations, every bit as transformative as the steam engine or electrification. I think society is only beginning to reorganise itself around these technologies and huge changes will follow, many of which will produce rapid growth in output and jobs. That assertion isn't incompatible with Mr Cowen's thesis about slow recent growth, and it could be decades rather than a few years before the next acceleration. But I think the economic benefits that result from cognition-augmenting innovations (as opposed to labour-augmenting innovations) will be dramatic. (More disconcertingly, so too will be the expansions of government, as per Mr Cowen's thesis.)

I think we'll take that as a fairly good ratification of our hypothesis then. Cowen's view of the impact of this is interesting:

[Firstly], While America tries to wring additional innovative capacity out of an already well educated population, the developing world is home to billions of people, including hordes of potential geniuses and innovators, living in poverty and ignorance. Getting their economies rich enough to move people into classrooms and laboratories is far more likely to yield growth-boosting innovations than trying to get a marginal college grad to get a PhD. Mr Obama's State of the Union theme was precisely wrong, in other words; America needs to focus on helping the rest of the world catch up as fast as possible. Meanwhile, looser immigration rules in America would also provide a big boost to American growth potential.

Second, improvements in rich world living standards may, for the moment at least, come from the capture of policy low-hanging fruit. In other words, the rich world should focus on getting rid of blatantly foolish and costly policies. Moving from taxes on goods, like income, to bads, like traffic congestion, would be a good start. Not spending so much on medical treatments with dubious benefits would be another possibility. Cutting out policy foolishness like agriculture subsidies and the mortgage-interest deduction would be another positive step. Amid rapid growth, really silly policy choices could be tolerated, since surpluses continued to rise. As growth rates slow, the failure to cut out bad policies will mean continued stagnation or declines in living standards for some.

One of the Economist's commentators makes a point re Financial Engineering Innovation:

Third point, something that always struck me as odd at comparing this century to others is that we count as growth so much that is now being supplied on the market that used to be supplied for free. Is it really growth to replace the extended family, with both old age and child care supplied in the household unit, with paid childcare and elder care instead? This of course can be growth, if it allows the adults to go on do higher value added labor, but it can also be a net loss if the adults are going on to be fry cooks at McDonalds while Grandma is getting cared for by Medicare nursing home care at a cost of 4 times her daughters salary and the kids are running wild on the street. Simply moving something into a tradeable market good isn't necessarily growth, it's just accounting.

Could explain why neo-capitalists are so keen to privatise everything - gives an illusion of growth while in fact everyone is more impoverished - but that is an article for another day.

Last year I was involved with a bunch of other smart but irreverent people and we wrote Big Potatoes - The London Manifesto for Innovation (over here). The prime reason for us writing the Manifesto is that our research showed us that Innovation today is not what it once was, in fact we found that Innovation today is typically pretty mealy mouthed - "continuous improvement of past innovations" is typically about as good as it gets. Innovation has in too many cases been sanitised, incorporated and de-risks, so anuthing that rocks the boat is removed. Most R&D labs these days are short term "D" (if they haven't beeen clsed down)

In fact my research showed that there was a LOT more innovation 100 years ago than there is today, and in fact real, radical innovation dwindled rapidly after the 1969 moon landing / 1970's oil shocks. Very little (compared to the across-the-board Innovation of 1911) that has happened since the early 1970's wasn't started in that period. (Except financial innovation, which has brought a whole lot of problems, but that is another post)

That our view was unpopular in some circles put it mildly, but I read an FT article tonight about a book by one Tim Cowen, that looks like he has done the same research and come to a similar conclusion. Cowen is arguing that we have a number of major economic problems today, and they are not going to go away in a hurry because:

...Another easy gain in days gone by was to enjoy the gradual roll-out of the staggering array of vital innovations developed in the late 19th and early 20th centuries, including electrification, refrigeration, aeroplanes, indoor plumbing, bulk chemical processing, the internal combustion engine, and the telegraph, telephone and television. Everyday life was transformed by these technologies between 1930 and 1970, Great Depression notwithstanding. Since 1970, we have the rise of computers and mobile phones – truly wonderful inventions – but not much else.

In short, if Cowen is right, there will be less growth in future unless a new wave of technology arrives, and our political institutions will have to cope, if they can. The same argument surely applies to western Europe too, and will come as no news to Japan.

Cowen's book is The Great Stagnation, by the economics professor and blogger Tyler Cowen. It is only available as a Kindle e-Book, interestingly I cannot buy it in the UK off Amazon UK however (so much for the barrier-breaking power of digital media) so I searched Google for some reviews:

Here is part of The Economist's review:

There are two kinds of economic growth possible in this world. One can take good ideas already in use elsewhere, adopt them, and make use of underused stocks of people and capital. That's what China and India are currently doing, and we shouldn't mistake their rapid growth for something it's not. Or one can come up with new ideas and apply them in ways that allow the economy to grow.

The rich world has been stuck doing the latter for most of the last century, and lately they haven't been doing it as well. Mr Cowen looks at growth rates of output and median income over the last few decades and notes that there's a steady downward trend. And this trend is due, he says, to the exhaustion of the supply of low-hanging economic fruit.

.....

the big setback for society, according to Mr Cowen, is the end of the exploitation of the major innovations of the last two centuries. The 1700s and 1800s yielded revolutionary innovations in industry, chemistry, and electricity. Rich countries spent the 1800s and 1900s figuring out how to exploit those innovations to their fullest, and as recently as the 1950s and 1960s, these experiments were producing products that utterly changed the way people lived. During the lifetime of those born in the 1930s and 1940s, household technology changed fantastically: refrigerators, laundry machines, dishwashers, radios, televisions, electric light, air conditioning, cheap automobiles, and so on. But with a few exceptions (among them computers, on which more later) today's households don't look that much different from their 1970s counterparts. Products have improved, but the development of revolutionary new technologies has slowed substantially. The progress of technology has plateaued.

The Internet is not a great help:

The internet, on which he has a lot to say, has had enormous benefits, but a striking amount of online activity is free and internet businesses create few new jobs (and displace lots of others). The result is growth in utility without much of a contribution to GDP, which would be fine except that countries and people have bills to pay, on things like health care, pensions, and government debt. Complicating matters is the fact that the fastest growing contributors to measured GDP—the government, education, and health sectors—deliver returns that are very difficult to measure. This suggests, he says, that rich world GDPs are likely overstated; we're poorer than we thought. And that, Mr Cowen concludes, will make it very difficult for us to make good on the many, many obligations accumulated while we assumed that our previous growth trajectory would continue.

.....

....it's a little amusing to focus on the implications of the spread of cheap-to-free internet amusement. As Mr Cowen notes, the availability of good, free internet entertainment has allowed a lot of people hit hard by falling incomes or recession-induced joblessness to maintain relatively high levels of utility (though this available substitute has also made it easier to cut down on physical consumption, with nasty effects on GDP). This suggests that other forms of consumption, like that resulting from the status competition of the relatively well-off, now loom more important in supporting "real" consumer expenditures, of the job-creating, revenue-generating, GDP-enhancing sort.

The Economist's criticism is:

I think there's strong evidence that the most of the economic pain experienced from the summer of 2008 to now can be attributed to a big demand shock, and most of it was preventable. I also think Mr Cowen may undersell the potential of recent innovations. I see computing and the internet as revolutionary innovations, every bit as transformative as the steam engine or electrification. I think society is only beginning to reorganise itself around these technologies and huge changes will follow, many of which will produce rapid growth in output and jobs. That assertion isn't incompatible with Mr Cowen's thesis about slow recent growth, and it could be decades rather than a few years before the next acceleration. But I think the economic benefits that result from cognition-augmenting innovations (as opposed to labour-augmenting innovations) will be dramatic. (More disconcertingly, so too will be the expansions of government, as per Mr Cowen's thesis.)

I think we'll take that as a fairly good ratification of our hypothesis then. Cowen's view of the impact of this is interesting:

[Firstly], While America tries to wring additional innovative capacity out of an already well educated population, the developing world is home to billions of people, including hordes of potential geniuses and innovators, living in poverty and ignorance. Getting their economies rich enough to move people into classrooms and laboratories is far more likely to yield growth-boosting innovations than trying to get a marginal college grad to get a PhD. Mr Obama's State of the Union theme was precisely wrong, in other words; America needs to focus on helping the rest of the world catch up as fast as possible. Meanwhile, looser immigration rules in America would also provide a big boost to American growth potential.

Second, improvements in rich world living standards may, for the moment at least, come from the capture of policy low-hanging fruit. In other words, the rich world should focus on getting rid of blatantly foolish and costly policies. Moving from taxes on goods, like income, to bads, like traffic congestion, would be a good start. Not spending so much on medical treatments with dubious benefits would be another possibility. Cutting out policy foolishness like agriculture subsidies and the mortgage-interest deduction would be another positive step. Amid rapid growth, really silly policy choices could be tolerated, since surpluses continued to rise. As growth rates slow, the failure to cut out bad policies will mean continued stagnation or declines in living standards for some.

One of the Economist's commentators makes a point re Financial Engineering Innovation:

Third point, something that always struck me as odd at comparing this century to others is that we count as growth so much that is now being supplied on the market that used to be supplied for free. Is it really growth to replace the extended family, with both old age and child care supplied in the household unit, with paid childcare and elder care instead? This of course can be growth, if it allows the adults to go on do higher value added labor, but it can also be a net loss if the adults are going on to be fry cooks at McDonalds while Grandma is getting cared for by Medicare nursing home care at a cost of 4 times her daughters salary and the kids are running wild on the street. Simply moving something into a tradeable market good isn't necessarily growth, it's just accounting.

Could explain why neo-capitalists are so keen to privatise evrything - gives an illusion of growth while in fact everyone is more impoverished - but that is an article for another day.

I've long felt that bloggers often know their fields better than the MSM journos who write about said areas, so this is very interesting - Vuru:

Wednesday was a great day. The so-called “amateurs” beat Wall Street’s finest by correctly predicting Apple’s (AAPL) reported earnings for their most recent quarter. And people are starting to take notice.

In a CNN Money list of the best (and worst) Apple earnings predictions, the bottom 20 spots (out of 41) were firmly occupied by the “professionals”. In fact, barring two bloggers, the bottom 30 were all analysts. The top 9 were individual investors.

Naturally, many people will be surprised by this and rightly so. It’s common sense to think that handsomely paid professionals who spend countless hours evaluating companies and who have the best investing tools in the world available to them would easily beat a few guys with a laptop and an internet connection.

But, the world is changing. Actually, to put it more accurately, the internet is changing the world. All you need is little more than a laptop, an internet connection, and a thirst for knowledge to outperform some of the best and brightest.

The fact that they were able to do this shouldn’t actually be all that surprising. Today’s individual investors have an unprecedented abundance of information, research, and tools at their disposal.

It was only 15 years ago that a self-directed individual investor had to pile through thousands of pages just to find potential investments. Now all it takes is a few clicks.

Combine this with the number of educational resources available and individual investors have a potentially lethal formula.

But is that enough for individuals to start leaving brokers and mutual funds?

Brokers and Funds are bad news anyway owing to management charges (which translate into bonusses), and I've long felt they often follow the herd when investing, ie by definition buying higher and selling lower than they should. But this really adds to the DiY investing story.

Whatever you think of Mr Assange's leaks, the one thing that has got all "Net Neutral" people a-twitter is how easily some of the Big Names in the online world rolled over to a bit of (unofficial) US strong-arming. That Senator Liebermann & Co were able to pull Wikileaks from Amazon and Paypal (and now MasterCard have pulled them*) (Update - now Visa too) sans lawsuit, sans argument, sans any pushback that one normally expects is a scary thought to anybody who is not part of the US Establishment and who wants to rely on the Internet in a tough period. In that classic rule of opposite effects to those intended, this has (predictably) sparked off a lot of interest in building an Independent Internet - New Scientist:

It all started with a tweet on 28 November: "Hello all ISPs of the world. We're going to add a new competing root-server since we're tired of ICANN. Please contact me to help."

This missive, complaining about the Internet Corporation for Assigned Names and Numbers, was from Peter Sunde, an anti-copyright activist based in Sweden and one of the founders of The Pirate Bay website, which tracks the locations of copyrighted movie and music BitTorrent files. It instantly lit a flame among file-sharers. "That small tweet turned into a lot of interest," Sunde blogged two days later. "We haven't organised yet, but are trying to… we want the internet to be uncensored. Having a centralised system that controls our information flow is not acceptable."

What really caught my eye was this:

Ben Laurie, a London-based security consultant and a former technical adviser to WikiLeaks, thinks the alternative internet idea is eminently feasible. "Technically, this is all pretty easy. What they have put together already is really quite professional. Persuading everybody to use it is going to be the difficult bit. Why should people trust it more than ICANN's root server?"

He thinks WikiLeaks is the kind of premium content that could convince people to take it up. If it works, a sort of "shadow internet" could form, one in which legal action against counterfeiters and copyright scofflaws would be nearly impossible.

Ben knows his stuff - if he thinks its possible, then it is.... this is something to watch carefully.

*It would appear that one can still donate money to the Ku Klux Klan and buy porn via Visa and Mastercard....

Proof that Craigslist is turning into Olde Media, with all the attendant issues - Boston Herald:

Attorney General Martha Coakley fired off a letter to Craiglist yesterday, calling on the Web site to yank its “adult services” section as state attorneys general nationwide also stepped up the pressure.

Coakey said the “harmful role” of the site’s sex ads contrasts “sharply” with its purported community-driven mission.

“The incongruity between your claimed mission and your insistence on promoting ‘adult services’ is startling,” Coakley wrote. “You cannot reasonably lay claim to a public service mission yet turn a blind eye to the link between adult services ads and illegal conduct and exploitation.”

A few short years ago, and it was local newspapers that were feeling that sort of heat.....

First GigaOm, now TechCrunch - the big Silicon Valley blogs are lining up to apologise for Facebook:

Friday is Facebook CEO Mark Zuckerberg’s 26th birthday. My guess is he’s won’t be enjoying it as much as he should, given that the top tech story of the day is a look at a private instant message exchange he supposedly had six or seven years ago at Harvard. The messages show a callous disregard for personal information added by early Facebook users. Given that Facebook is in one of its regularly scheduled privacy scuffles right now, the connection is just too juicy. The press has gone wild.

It’s completely out of hand, and it’s just another example of an online mob getting out of control. I’m embarrassed to see people I respect stopping one step short of calling for physical violence against Zuckerberg.

And I'm embarrassed to see Tech blogs I respect coming out in defence of systemic privacy abuse. As, it would appear, are a lot of their readers - 170 comments and rising, most pretty anti TC for defending FB.

Question is why........is this a new revenue stream for TechCrunch and GigaOm, we wonder?

Update - Henry Blodgett over at Silicon Alley Insider is also on the Facebook Friend Gig, arguing that going for mass public expouse is the only way:

Given this reality, Facebook could take one of two approaches:

- It could always ask permission first -- methodically testing changes, asking users what they want, and not doing anything users haven't explicitly approved of in advance.

- It could keep doing what it has always done: Make changes first and then see what happens.

The first approach would unquestionably produce smoother peaks and valleys for Facebook's PR. It would also likely be vastly worse for the company's business.

But then I was around in Web 1.0, and the best thing to do - in my opinion - when Mr Blodgett starts to promote something, is to keep your hands tightly around your wallet and run for the hills!

By the way, I see Stowe Boyd has done a similar exercise in calling out the apologists and Dana Boyd reaches a similar conclusion to what we did re regulation if it doesn't change..