The myth of "passive income"

A friend of mine, JD, who used to work as a developer in New England, tells me that there's a new board game which is "sweeping the country." The game: Cashflow 101. The object of the game: become wealthy by mastering the art of investing. The game's designer (or perhaps just endorser): Robert Kiyosaki of Rich Dad, Poor Dad fame.

After reading his Yahoo! Finance column a few times, I've come to conclusion that Kiyosaki is a financial charlatan (which means that I refuse to drive traffic his way by linking to his stuff directly). In a nutshell, Kiyosaki's financial advice boils down to "Choose to be wealthy." I'm not kidding. His is the worst kind of quasi-libertarian snowjob, since if you pay for any of his motivational products or services, but don't get rich, why, it must be that you just haven't "really committed yourself" to being wealthy. If you're poor, it's your fault. You just haven't really, in your heart of hearts, chosen to be rich.

"As you can see, my heart of hearts loves poverty more than I do."

While it's true that the acquisition of wealth can be a very subtle art, it's an open secret that (in the US, at least) the most simple, most direct, and by far most common strategy for getting rich is to have wealthy parents. But this is all really an aside. What I really want to discuss is the folly underlying Kiyosaki's game and the worldview it reflects.

In Cashflow 101, each player begins with a randomly selected income-expense profile--a job and a bunch of expenses. After that,

There are two stages to the game. In the first, "the rat race", the player aims to raise his or her character's passive income level to where it exceeds the character's expenses. The winner is determined in the second stage, "the fast track". To win, a player must get his or her character to buy their "dream" or accumulate an additional $50,000 in monthly cash flow.

The whole thing revolves around this mysterious concept of passive income.

He just followed me home. Seriously. So... can I keep him?

Aaron Maxwell has written a pretty good beginner's guide to Cashflow 101, which explains that

[p]assive income is income that comes in with little or no additional effort on your part. If you have royalties from a book, income from a rental property you own, or stock that pays dividends each quarter, you have passive income.

Maxwell immediately goes on the qualify that definition:

Sometimes you'll have to do SOME work - if that rental house develops a leaky roof, you'd better have it fixed if you want to continue collecting rent! The difference is that for a "normal" job, you have to invest your time continually to keep receiving income, and if you work half as much, your income immediately goes down by half or more. With passive income, after you do some initial work up front, you have an income stream that continues with little or no time on your part to maintain it.

And there's the rub. Passive income isn't genuinely passive in the sense that it requires no effort. It's simply that compensation isn't immediately correlated to effort. Passive income doesn't require endless, futile labor to sustain it. Rather passive income represents one flow within a relationship of ownership--and in the opposite direction flows responsibility. We receive passive income from assets for whose condition and behavior we are liable.

Calling the income passive is misleading, because it implies that such income arrives not simply without--or with minimal--effort, but with minimal worry as well. But ask any landlord--you're essentially paid to worry about stuff. Whatever the gods of pop music claim to the contrary, tenants do not call Ghostbusters first. Especially when the heat goes out. First, they call the landlord. Then, they call their lawyers.

I ain't afraid o' no tenant.

Responsibility implies liability. Although rental property income provides the most stark example, other kinds of passive income also admit of analogous forms of responsibility. In exchange for book royalties, the author remains responsible for what he's written. In exchange for stock dividends, the owner becomes responsible for the behavior of the company whose shares she owns. (Warren Buffett famously advocates treating the purchase of stock as equivalent to the purchase of the entire company.)

The point here is that wealth, because it depends upon ownership, entails responsibility and liability in direct proportion. There's no such thing as truly passive income, and anyone who thinks she wants to be rich should be warned that Easy Street is the main thoroughfare in Neverland. Wealth is a sacred social trust, not a ticket to heedless self-indulgence. It is most certainly possible to enjoys the fruits of responsibility, but only for so long as and to the degree that one proves willing and able to bear its weight.

We have a word for those who take the lazy way to easy street, and it ain't flattering.

Knowing what you know

When I found Langdon Morris's book on innovation which boasts an epigram from Aristotle's Nicomachean Ethics, I was understandably excited. "Which passage from Aristotle did he choose?" you ask. Well, he chose:

Excellence is an art won by training and habituation. We are what we repeatedly do. Excellence, then, is not an act but a habit.

Which is an awesome quote, except that it doesn't belong to Aristotle. As a one-time teacher of the Nicomachean Ethics, I can vouch that this quote accurately sums up Aristotle's position on excellence. But when I went looking for the precise provenance of the quote, I discovered that (according to Wikiquote, at least) while the meaning does indeed belong to Aristotle, the specific words flowed from another's pen. Apparently, the above quote is Will Durant's summation of Aristotle's position in Book I of the Nicomachean Ethics. Since the quote remains a clear, concise, accurate summation--in fact, it's probably better than anything Aristotle wrote himself--we'll keep it.

I expect that Mr. Langdon's ethically sensitive parsing of the innovation process will yield a number of worthwhile insights, but for now I just want to cover one. His definition of knowledge and its implied definition of learning. Definitions appeal to my inner philosopher, and smart definitions are what make the world make sense. Too, the subject is, I think, central to the whole constellation of fields covered by this blog; loyal readers will recall that this blog was launched with a post on knowledge and learning.

Langdon's subtle and sophisticated definition of knowledge (found on p. 61 of the .pdf), boils down to the following:

Knowledge is concerned with "how," with the capacity to do useful things. Such capacity, in turn, comes about as a result of the integration of three other elements, information, theory, and experience. Information is the "what," the basic description [the "facts" or "data"]; theory is the conceptual framework that explains how the world functions [the "context"], and experience is the immersive and multidimensional process of doing and having done [the "practice"].

The subtle shift in emphasis from knowledge-as-what to knowledge-as-how turns our entire educational system on its head. Knowledge isn't something that you have--it's something that you exercise. It isn't an amalgam of friable and discrete facts--it's a layered, nested, and embodied concatenation of practices. It isn't a two-dimensional map of bounded domains--it's a multi-dimensional narrative.

Academic education as internal phrenology.

On Langdon's definition of knowledge learning becomes the subjective fusion of information, theory, and experience. The student generates knowledge for himself by bringing information, theory, and experience into relation with one another. It isn't enough simply to have data; nor is it enough to see contextual possibilities; nor is it enough simply to have one or several experiences. All three must fuse within a single self-awareness, and the resulting knowledge possesses the breadth and depth only of the most limited of the three factors.

And perhaps most importantly for me, as an educator, on Langdon's definition of knowledge teaching becomes a creative attempt to stimulate and/or guide the student to meld the three ingredients of knowledge into practicable know-how. Successful teaching doesn't mean providing students with more or better information; it has to do with process only tangentially. Successful teaching means that students are, after being taught, measurably more effective in doing things. They get more done of what they want to do. It's hard to imagine students wanting anything else from their teachers--which may in itself be the strongest single argument for Langdon's definition.

Sector four

A riddle: If you're not for-profit, and you're not non-profit, what are you?

"Ah..." says the clever reader. "You're the government."

"But my lawyers tell me that I really am the government."

But let's just say that you're not the government either. (You listening, George?) You're still a private organization, you don't live off charitable donations, and you're not just in it for the money. Is there a fourth option?

There is. Although not fully formed, the emergent fourth sector comprises organizations not interested in playing by the old rules. Goodbye Marx, Spencer, Jacobs, and even Keynes. Hello KaosPilots. Increasingly referred to as "for-benefit," 4th Sector organizations have the following features:

• Privately owned and controlled (not government)
• Sustains its operations based on income generated by their activities (not a charity)
• Returns some of their surplus to their equity owners in the form of profits (not a non-profit)
• Leaves some of the value it generates in the community where it can continue to accrue (not merely a profit machine)

While for-benefit organizations often represent the fruit of social entrepreneurship, they're not one and the same. Social entrepreneurship (which has very official support here in Canada and elsewhere) means using the tools, techniques, and attitude of for-profit entrepreneurship to tackle social issues. For-benefits are one possible outcome of social entrepreneurship, but so are innovative charities, non-profits, political organizations, one-off events... even for-profits can be conscripted sometimes.

While no one knows exactly what the 4th Sector is going to look like, it's increasingly obvious that it's coming. (Even the last-to-every-party NYT has caught the shift in the wind.) And it won't be just companies--it's a whole new ecosystem. They're even growing their own venture capital firms. Watch out, old order.

"4th Sector rabble resists Ancien Régime forces?" No way.
"4th Sector overruns final barricade manned by scruffy Ancien Régime holdouts." Oh, yeah.

Development of the slums, for the slums, by the slums

Shack / Slum Dwellers International (an organization which seems to take a Puckish pride in the lumpishness of its name) has undertaken a challenging mission: "Securing land tenure and housing" for the urban poor "in 24 countries on 3 different continents." Bold, but hardly original. Their approach, however, is another matter.

The group, known by the initials SDI and formed in India in 1996, is a loose network of grass-roots organizations of the urban poor. It’s grown to millions of members in 24 nations, cities spread from Manila to Cape Town, Mumbai to Sao Paulo. Typically, members are women ready to share their meager savings in collective efforts to upgrade their homes, secure titles to the land their houses sit on, build a latrine block, perhaps start a school.

Slum dwellers sit right across the table from local government authorities, designing projects and negotiating how they’ll be financed and carried out.

Of course, the slum dwellers get professional advice [.pdf], but we're talking about slum dwellers acting as their own real-estate developers. For themselves and on their own terms. And they just got an unrestricted grant of US $10M from the Gates Foundation.

Unbelievable? On the contrary: perfectly necessary. When governments, NGOs, and big businesses can't or won't get people what they want, people quite naturally just do it themselves. Although it's obvious, it bears repeating: the poor (like every other demographic) are their own best--and in many cases only--allies.

Caging the innovation bird

So, 800-pound Microsoft has begun developing a network of Innovation Centers around the globe as part of strategy to "to foster innovation and growth in local software economies." Hmmm....

I think most people would be at least a little suspicious of Microsoft's intentions in spearheading such an effort. Innovation is inherently a collaborative and not a competitive process. Microsoft claims to be cooperating with governments, universities, and other software companies; while I see no reason to think that they're not doing so, I do believe there are grounds for thinking that Microsoft may understand "cooperation" differently than some of its Innovation Center partners. Microsoft Founder Mr. Gates may or may not have reconnected with his inner philanthropist; it remains the case that Microsoft's behavior and corporate culture during his tenure was profoundly combative and territorial.

Soon every innovation in this neighborhood... will be mine!
(Photo by oddthingies)

A key question private businesses are asking themselves these days is how to capture value generated by an innovation process--how keep the innovation bird happy in its cage, as it were. Innovation, however, doesn't just thrive in an open environment--it arguably cannot even survive unless it can roam freely, build doors in impenetrable walls, outgrow its origins. While people can own innovation processes and products in the looser sense of taking responsibility for them, it's hard to see how anyone can own them in the stricter legal sense. (And I seriously, seriously doubt that Microsoft will be the one to crack this nut; their outlook is too closed.)

And if you've been wondering whether or not the new fixation on innovation is just a passing fad, it isn't. My ex-boss David Smith of the Affordable Housing Institute recently blogged about an April 2007 PNAS paper by Luís M. A. Bettencourt, et al., entitled "Growth, innovation, scaling, and the pace of life in cities." According to Smith, Bettencourt et al. divide all the factors of urban life into three categories:

1. Factors that scale linearly with the city's size, such as number of jobs, water consumption, etc. (Smith calls these "personal matters");
2. Factors that scale sublinearly with the city's size--i.e., those factors that enjoy economies of scale--such as consumption of energy and transportation resources (Smith calls these "hardware");
3. those factors that scale superlinearly with the city's scale--i.e., those factors which enjoy network effects--such as disease rates, innovation rates, and wealth generation (Smith calls these "software," or "social interactions").
   

Wealth is, as Jane Jacobs has noted, an urban phenomenon. But wealth moves hand in hand with innovation--both are superlinear urban effects. Which means that big cities both demand and generate higher rates of innovation and wealth generation. Note that superlinear effects are not merely epiphenomena--that is, it's not just that bigger cities "happen to" generate exponentially more innovation, crime, wealth, and disease. The economies of bigger cities, when they grow (again, as Jacobs has noted), grow on the basis of wealth and innovation. An ever-growing economy producing ever more wealth--the holy grail of Protestant democratic capitalism--both requires and produces ever more innovation. As long as our cities keep getting bigger we will keep getting wealthier and smarter, and innovation will weave itself ever more inextricably into our economies and cultures.

As anyone who's tried to innovate knows, innovation relies upon creativity, and creativity thrives in open systems, open networks, and open minds. It's no wonder that the interests in innovation and social entrepreneurship have developed in parallel, since social entrepreneurs seem willing to perform all kinds of commercial functions without basing their organizations on the pathological greed and egomania which lie at the heart of corporate misbehavior. Greed and egomania are diametrically opposed to the values of generosity and humility which form the basis of every successful culture of innovation.

Corporations today--and Microsoft is no exception--want the wealth that follows on the heels of good innovation, but they can't bring themselves to believe that "proprietary innovation" makes about as much sense as "a happily caged falcon." At bottom, I think it's our whole notion of ownership which needs rethinking. In a sense, after all, wealth belongs to communities (or societies, if you prefer). We just entrust it to corporations and families and individuals in the belief that they will use it responsibly if their personal well-being depends upon its sound management. A pretty smart system, overall. But can we imagine (and design) a better one? Can we imagine (and design) a form of ownership which engenders and protects responsibility, but also resists the excesses of the miser and the tyrant?

Maybe building a better cage means not building a cage at all; maybe it means becoming falconers.
(Photo by wallyg)

Responsibility in education

One of my personal favorite pedagogic precepts was best expressed by the laconic Mr. Miyagi, one of the all-time best teachers portrayed in cinema: "No such thing as bad student; only bad teacher."

"Man who catch fly with chopstick accomplish anything."

Which is not to say that even the most gifted teacher will enjoy success with every student. It's just that the most important lessons we learn from our teachers--how to face the overwhelming reality of human ignorance, when and how to (dis)respect authority, when to resort to knowledge and when to resort to compassion--derive not from what the teacher knows but from who the teacher is. That's because good teachers know that learning is not the process by which the student absorbs the teacher's knowledge, but rather the process by the student creates knowledge. The teacher can only either stimulate or suppress the student's personal learning process; or, put differently, what a student really gets from a teacher is an attitude, and if a student internalizes a (teacher's) bad attitude, then that student will find all future learning difficult.

Thus Bob Talbert's corollary to Mr. Miyagi's precept: "Good teachers are costly, but bad teachers cost more." So when I see failure in an educational context, I always look to the teacher (and his bosses) first.

Mr. Whipswitch could never understand why the other teachers kept ending up with the best students.

But it's not always that simple. Take the example of 14-year old Australian Beau Abela, who can barely read, let alone spell. He's in high-school, and has trouble counting beyond 10, so let's just set aside any questions you might have about his performance in algebra class. Beau suffers from a mild learning disability, so in some ways it's not surprising that his performance is subpar for his age, but this seems egregious. Indeed, Beau's condition--unless you're one of those all-too-common philistines who actually embrace incompetence--seems utterly outrageous. As in, it outrages me.

And I'm not the only one who's upset. Beau's father is suing the Victorian educational department for AU $300k. On the surface, seems like they probably deserve it. As you might expect,

Mr Abela [has] said his court action was not motivated by money, but by frustration at the way the system appeared to be letting down children. ... Mr Abela said he would drop the lawsuit tomorrow if the department would guarantee him it would educate (Beau) to a proper level.

I think most people can understand that Mr Abela is frustrated given his son's lackluster academic performance, but what exactly does he mean when says that the system is "letting down children?" Certainly the system doesn't seem to be producing measurable results in Beau's case. But to whom to attribute this failure? Or rather, how should responsibility for this failure be untangled?

Mr Abela concedes that

the Education Department had made significant efforts to help his son, including paying for one-on-one tutoring and providing a laptop. Over the years dozens of assessments and reports have been done to get to the bottom of Beau's problems. ... Documents seen by the Sunday Herald Sun show Panton Hills Primary School and Eltham High have directed considerable time and effort towards the troubled student.

What kind of problems, exactly?

Beau has been on ADHD medication in the past and school reports consistently say he does not concentrate in class or make an effort with his work. ... Eltham High School principal Vincent Sicari said in a recent report Beau's behaviour was increasingly disruptive and violent.

Doesn't sound like Beau's is an easy case. In fact, it rather sounds like the school system has been sensitive, proactive, and generous.

As framed by the Sunday Herald Sun, it looks as though Mr Abela is suing simply because he's frustrated--not because the school is at fault. And even if the school had been less responsive, how much (and what kind of) responsibility for Beau's failure could we honestly lay at the feet of his teachers and their bosses? How much (and what kind) belongs to Beau? Without more particular information on Beau's case, it's impossible to judge the case wisely.

But the very intractability of the case forces one interesting issue to the surface: Why do we persist in regarding education as a responsibility? Issues in contemporary education--especially failures--are almost always framed as a polarized conflict between individual responsibility and systemic sensitivity. The important question, as this line of thinking has it, is how much responsibility belongs to the student and how much to the system (as though responsibility only came in one flavor).

The key assumption which underlies this thinking is that education is a necessity, with all that that entails. And of course, education is necessary for the kind of society we operate [.pdf], the kind of culture we participate, the kind of government we practice. Indeed, few institutions bear more of the weight of our current way of life than universal education. The incredible social importance of education, however, tends to overshadow the fact that education provides (if these guys are to be believed) the most sublime pleasure available to human experience. It's worth remembering that our word school derives from the Greek skhole, which means "leisure"--school is supposed to be what humans do for fun.

In a Protestant culture (and especially in a Puritan culture), even the pleasure of learning is suspect; only the pleasure of discipline passes without question--especially if the one disciplined is oneself.

Wait just a minute? Did I just say that learning is fun? Yes. That's it exactly. We often get so invested in the importance of "an education" (by which we too often mean "a decent résumé") that we forget that we can always recognize real learning when it happens because it is always pleasurable. (Incidentally, this is a non-trivial criticism of contemporary schooling, which is, as everyone knows, no fun at all. When learning happens in an academic environment, it's almost always either an accident or against the rules.)

So I have one question for Beau and his teachers: What does it mean that Beau is obviously having no fun at all "being educated" at Eltham High?

Do values have value?

One of the most pernicious fallacies into which our business thinking is prone to fall--and this is especially true in disciplines like finance and engineering, where numbers are particularly preeminent--is the conflation of measured value and real value. It's an old truism that you cannot manage what you cannot (or do not) measure. But managers, driven by objective results, take it one step further: If we cannot (or do not) measure it, the thinking goes, then for all practical purposes we can act as if it were not real. Oh, the endless debaucheries which descend from this one, simple stupidity.

Who says you can't measure love?

If we reject this fallacy, however, we ipso facto assume the value of CSR ("Corporate Social Responsibility"), which is really just another way of saying that the bottom line isn't really the bottom line. (Although, then again, maybe it is.) There are plenty of us who believe that environmental concerns, labor issues, management practices, and other corporate habits of thought and action impact the bottom line. Many of us also see quite clearly that making lots of money in our stock portfolio isn't worth it if the costs show up elsewhere.

Where else? Well, we might, I don't know, run out of water or something. (Even soft drink company execs, who seem to view potable water as competition, must realize that water is the main ingredient in their product.) Or perhaps canned air will become the only kind of air worth breathing. (Los Angelians must love the smell of cancer in the morning.) Or we pave our "path to financial freedom" using the backs of children. Or maybe we'll get to that point where corporate boneheadocracy seems normal.

After all, who cares? We customers and shareholders don't have to pay to clean up everything up when corporate America poops in the nest. But then who does? We taxpayers do, that's who. But wait. Aren't "customers," shareholders," and "taxpayers" just different roles played by the same flesh and blood human beings? Not only that, but at the end of the fiscal year, there's really only one balance sheet. Costs that corporate America manages to externalize just end up on a different line item on our annual budget, that's all. If we don't pay them as customers or shareholders, we pay them as taxpayers or family members or landholders or what have you. Only the dense, the foolish, and the psychopathic truly believe that the corporate bottom line is their own bottom line.

Burning Beds, Inc. has posted outstanding earnings for the past three quarters, and... hey! That's my bed!

Once you assume that clean water, clean air, happy children, and sane work environments have value (anyone other than these guys want to argue that this stuff is without value?), there are two possible ways forward:

1. Get creative when it comes to measurement. Instead of whining about how some things are "unmeasurable," innovate new mensuration and valuation techniques. Two interesting actors in the field of valuation innovation are Innovest and Communications Consulting Worldwide (CCW). What's this all about? Consider the following example: Say Wal-Mart's got labor troubles (no, really, imagine it); how much does that dent in their reputation cost shareholders? According to CCW, "if Wal-Mart had a reputation like that of rival Target Corp., its stock would be worth 8.4% more, adding $16 billion in market capitalization." That's a game changing assertion, shifting the debate from "Can the effects of reputation be measured (i.e., is it possible)?" to "Can we improve the methodology used in this study (i.e., how well are we doing it)?"
   
2. Stop managing and start leading. Insanity, as AA has it, is doing the same thing over and over and expecting different results. While the methods of bureaucratic management can optimize a banal system defined by quantified data, they are poorly suited to effecting metamorphic leaps in consciousness and/or character. As a rule, our businesses don't need to "do better," they need to "do differently." Better data and better management practices cannot provide a fresh, holistic vision for the future of business--only inspired leadership can do that. Bill McDonough and the Regenesis Group are two interesting players in the field of consciousness shifting.
   

We did not manage our way to the moon.

While I believe that creative mensuration and valuation techniques are effective tools for advancing a CSR agenda, they are useless without the proper outlook. Only competent, inspired leadership--a coherent vision supported by capable entrepreneurship--can truly change things. The incremental approach is appropriate as a rhetorical approach (that is, as part of a strategy of persuasion), but only a true leap in consciousness and character can ever save us from ourselves.

Cerebration

Innovation competitions are becoming all the rage. We all understand that, in a crowded marketplace, it's important to stand out if you want to get ahead. But there may be limits. The National University of Singapore, for example, runs a competition which they've cleverly entitled Cerebration. As you can see from the fact that my link works, I kid you not.

But, you may ask, what's the problem with calling an innovation contest Cerebration? After all, cerebration is real word and everything. Well, since the contest is based in Singapore... THIS is the problem. Cerebrate good times, baby.

I've looked over the contest website, and it appears that the organizers are staring the irony right in the eye. No one appears to have blinked yet.

The only way to stress less is to let it go

The NYT covers an emerging trend in affluent US high schools, where a culture of "super-achievement" has taken over.

Relaxation, like stress, is a habitual behavior based on learned techniques.
(Photo by Jodi Hilton for NYT)

I have a feeling that many people will view requiring stressed out high school seniors to take yoga (and the like) as a kind of fad aimed at making kids even more well rounded. But I would suggest that such efforts may really reflect the first wave of a shift in consciousness which sees clearly that the habits kids acquire in school become the backbones of their respective characters. And being stressed by work is one of those habits. (And remember, this is all high school level coursework--i.e., almost completely insignificant.)

Challenge results

UPDATE: They won!

Well, first-round results are in, and they aren't pretty. The bad news: both of my teams (search for "McGill") landed pretty short of the top 10. In both cases, we were at least partially victims of the evaluation methodology, which allows various judges to give give absolute grades without guidance. (So, for example, one of our judges for the Sustainable Innovation Summit gave us a score of 30-something/100, which seems bad, except that the highest grade he gave was 41/100. How to integrate those results with those of the judge who gave us 81/100? We were the judge's no. 2 choice in both cases....)

We also suffered from a certain confusion among the judges about what innovation actually means. For the Innovation Challenge, we had one judge comment that our idea of making a large retailer's catalog available from within a small concept store was extremely innovative, while another judge castigated us for not putting the small concept in its own special space within the large retailer ("that would have been really innovative"). It's tempting to believe that taking a kind of "average" definition of innovation will take off the rough edges, but it's really just a way to cut corners. Understandable when resources are limited and rough-and-ready solutions are preferable, but increasingly suspect for a competition that wants to become truly global in scope.

An Innovation Challenge judge cogitates intensely.

I fully confess that there are plenty of sour grapes in my comments. I would note, in all fairness though, that I made the same complaints last year when we won.

An interesting observation which my wife made in our conversations about this year's results is that most commentary on innovation concerns process rather than product. There's plenty of information out there on innovation processes, but precious little on how to recognize a truly innovative idea if it hits you in the face. Lots on the how; not much on the what. I'm currently reflecting on this, and will post the fruits of my pondering later.

These disappointing results do have a silver lining, though. I've become pretty good friends with the captain of last year's 2nd place finishers from North Carolina. He's one of the most competent people I've met, he's good a great nose for great ideas, and he's hands-down the best presenter I've ever even heard of. He's in the finals this year, so at least I have someone to root for. Go UNC!

The ghetto of sustainability

I'm also concurrently at work on an innovation challenge for the Sustainable Innovation Summit, which is much like the Innovation Challenge, only ghettoized. Although the SIS draws some big name brands (e.g., Johnson & Johnson, Xerox, et al.), I find it hard to see how it plans to effect real market transformation, since it tries to carve "sustainability" off as a niche family of problems rather than trying to integrate environmental consciousness into business thinking generally.

Since this is my first time through the SIS wringer, though, I'm reserving judgment. I'll let you know how it turns out.

Innovation Challenge

I have no good excuses for not posting anything recently. Except for the past days, during which I've been hard at work recruiting and doing admin for my Innovation Challenge team. The Innovation Challenge is something like a case competition, but orientated toward real current and future business problems rather than previous or hypothetical situations.

Apart from the $20K grand prize, if you win you also get to call yourself a member of "The Most Innovative MBA Team in the World." Yes, yes, I know I'm not an MBA, but I hope that's at least partially an asset. And I have at least a little experience in this department...

Letters to a Young Teacher

Salon's Mathew Fishbane interviews Jonathan Kozol, author of the recently published Letters to a Young Teacher, in which Mr. Kozol advises school teachers to adopt an "attitude of irreverence." Thank goodness at least one person who testifies before the U.S. Congress is saying it.

Learning in time

Over at FutureLab, Jack Kenny has an article discussing the importance of time in learning environments and experiences. Kenny details the experiences a number of schools in the UK have had in changing the way that time and learning interact. Faithful readers of this blog will recall the post on thought/days, in which I suggested a supplementary time measurement for learning (in addition to the now-standard credit/hour).

I think the most important point raised by Kenny's article is that "a [rigid] timetable is restrictive when teachers are working creatively." Clock time and learning time are related, but they're not necessarily isometric. To illustrate this difference, you need only reflect on what happened to clock time during one of those magic moments when you became completely immersed in an enjoyable learning experience...

The MBA: new, improved, or simply on steroids?

In Austin, Texas, a bunch of teachers at the Acton MBA program have uncovered the secret of American greatness (such as it is):

We believe that thoughtful, principled entrepreneurs are the secret to America's success, and her scarcest resource.

Anyone who doubts whether or not Acton's founders are correct in this surmise should stop and think about the meaning of the word entrepreneur. I hardly think it unfair to qualify Jefferson, Madison, Lincoln, and King as entrepreneurs. It's just that their domain was politics rather than commerce. The US owes all of its greatness (again, such as it is) to its most entrepreneurial members. Better US entrepreneurs can only mean a brighter future for the US.

But setting aside for the moment the whole question of social entrepreneurship, Acton claims as its goal

to educate a new kind of MBA: one who is equipped to add value from day one, build successful businesses, raise a healthy family, and give back to his or her community.

Having considered business school in the past, and having cheered from the sidelines as a spouse paid her two years of dues, this sounds great. Your average garden-variety MBA program makes it a rule to thwart whatever entrepreneurial impulses its students may bring to its doors. So maybe Acton really does offer something different. At the very least, it has proven itself capable of convincing already successful entrepreneurs that it offers something worthwhile:

Acton is the only MBA program in the country that offers every student a $35,000 Acton Fellowship to cover the full cost of tuition, fees, and materials.

Seems like a hell of deal, if the curriculum is any good. And the curriculum looks pretty damn good to me. They use the the case method, but with a focus on entrepreneurial issues rather than managerial ones. They include hands-on experience in sales, complex simulations, and site visits as part of the package. And one of their core curricular segments is entitled "Life of Meaning," suggesting that they're not merely about enabling corporate greed. And to top it all off, it's all taught by seasoned entrepreneurs, not by researchers. It looks like a fantastic curriculum, and I'd endorse it wholeheartedly except for a few little details which set my nose to twitching.

(A) First off, the workload is 80-90+ hours per week. Now, it's only a one-year program, and traditional MBA programs seem to work their little serfs 50-70 hours per week for two years, so perhaps it's not so bad by comparison. It's just that that kind of workload sends several important messages:

1. it suggests, by sealing people hermetically into their program so that they barely even see their spouses, that success in business depends upon sacrificing everything else (from the FAQ: "We offer several sessions throughout the year in which students and their significant others get together with the Life of Meaning teacher to discuss the contributions and sacrifices each has to make throughout the year-long program");
2. it teaches the phony lesson that working harder is more important than working smarter;
   
3. and because it lasts an entire year, it creates habits of dissociation (an addiction to work really is a spiritual disease) which can reappear at any time.

(B) Second, it looks like the school is staffed by only (or almost only) white males. Lord knows that a lot of diversity can exist beneath identical skin colors and genders, but it's nevertheless hard to believe that this kind of homogeneity doesn't reflect a certain homogeneity of outlook. Driving forward relentlessly has been a very successful strategy for white males, but I can't help but wonder whether or not there may be other strategies.

(C) Third, and most importantly, it's still a curriculum taught by faculty at a school where students come and sit in classrooms to "learn at the feet of the master." Acton notes that "traditional MBA faculty see themselves, not their students, as the customers," thereby suggesting that at Acton, students are the customers. That is to say, the students are the boss. But while "clear contracts and a competitive grading system" probably do provide for quite a bit of the pressure experienced by students, I fail to see how they "encourage... perspective, discipline and accountability." Perspective comes from broad understanding--not from narrow focus; discipline arises as a result of self-knowledge--not from external standards; and accountability arises from a sense of connectedness to other persons and things--not from abstract contracts, however clear.

From its website, Acton appears to be a smarter, leaner, and perhaps meaner MBA, but it's still an MBA. In many ways it returns to original intent of the MBA, which was to provide to rising managers (who already had some real-world experience) a suite of tools to help them manage more effectively. And in several ways it has outgrown its roots: its focus on entrepreneurship is welcome; its penchant for hands-on teaching is laudable; and its ability to support its students financially is breathtaking.

Without visiting the campus and conversing, face-to-face, with its students and teachers, I don't think it would be possible to render a more complete judgment. (I despair of the possibility of any student giving me any time for conversation.) It's an extremely exciting project, but I think it's still mostly a large step in the direction of faster and more, and only a small step in the direction of better.

KaosPilots' Admission Workshop

As I mentioned before, I was able to observe the KaosPilot Admission Workshop (AW) in Århus, Denmark. Living up to their reputation, the KaosPilots put on an AW that was fun, unexpected, and a bit chaotic--definitely a breath of fresh air. The structure of the process made excellent use of a great deal of extremely creative thinking about getting to know applications ("test-pilots," as they're called), and while I think their evaluation methodology is flawed in some ways, I also think it's both courageous and corrigible.

I can't give away too much here, but I can say that the AW consists in a series of team-based activities designed to create opportunities for test-pilots to showcase their creativity, aptitude for leadership, and personal courage. Also, while the final decisions are made by KaosPilot staff, it's the first-year students who act as the frontline evaluators. The students' recommendations are generally determinative for admission.

My role, which I was honored to perform, was to act as part of the "Evaluation Team" (also composed of students), which tries to evaluate the efficacy of individual evaluation activities as well as the entire process arc. I found the experience both stimulating and inspiring--I ended up writing a 5,000-word memo detailing my impressions. While I wouldn't exactly say that the KaosPilots opened my eyes to what's possible (their innovative activities resemble strikingly some of the educational activities and projects I've designed myself), they definitely showed me that the key ingredients for creating something new are passion, courage, and faith. I can only hope to emulate them in this regard.

What's wrong here

Sustainable Architecture, Building, and Culture (which very cleverly yields the name Sustainable ABC) has got its hands on the domain GreenHomesForSale.com. And what are they doing with this bellwether domain?

We make green homes hip, stylish, and easy to find. Or not.

I'm very happy that someone, somewhere is trying to market green homes. I'm delighted that someone has expended serious thought and effort on giving sustainable homes a virtual presence. But I think some serious improvements are possible and in order.

Oh, and why should green homes be ghettoized? Why not simply provide it as one searchable criterion out of many?

Who's to say who can be pilot?

As it turns out, I'm to have a small say watch the process! I'm delighted to announce that I've been invited to act as a guest interviewer admission workshop monitor for the KaosPilot school in Århus, Denmark. (I don't yet know the exact capacity in which I'll be operating, so I'm presuming that I'll have a kind of advisory role.) According to the official website copy, the admissions workshop functions thusly:

The admissions workshop lasts two days. Here the applicant enters a group of 8-10 applicants divided according to nationality. During the workshop applicants from non-Scandinavian countries work in English. In each group the applicants – either as a group or individually – complete a long series of creative and professional assignments set by the school in collaboration with the KaosPilots external partners.

Sounds like fun, if you ask me.

The workshop is scheduled to take place Thursday and Friday of next week. I'll have more details after I participate. I'm very much looking forward to meeting the some of the school's faculty, students, and prospective students.

Thought/days (a new measure for slow learning)

Our culture is all too quick to prejudge in favor of high speed, and nowhere is our prejudice so evident as in education. The idea of "slow learning" would probably seem to most people to be something to be avoided. Children who learn slowly, after all, are called disadvantaged.

I've been doing some reading and thinking about learning, though, and I have a bone to pick with our speed prejudice, particularly as it relates to environmental issues. To begin, I'd like to cite David Orr's lecture on "Environmental Literacy," in which he distinguishes between cleverness and intelligence, giving the nod to intelligence in part because it is slower:

From an ecological perspective it is clear that we have often confused cleverness and intelligence. Cleverness, as I understand it, tends to fragment things and to focus on the short term. The epitome of cleverness is the specialist whose intellect and person have been shaped by the demands of a single function. Ecological intelligence, on the other hand, requires a broader view of the world and a long-term perspective. Cleverness can be adequately measured by SAT and GRE tests, but intelligence is not so easily computed. In time, I think we will come to see that true intelligence tends to be integrative and often works slowly while mulling things over. Further, intelligence can be inferred, according to Wendell Berry in Standing By Words, from the “good order or harmoniousness of [one’s] surroundings.” In other words, the consequences of our actions are a measure of our intelligence, and the plea of ignorance is no good defense. Because some consequences cannot be predicted, the exercise of intelligence requires forbearance and a sense of limits. Ecological intelligence, in contrast to mere cleverness, does not presume to act beyond a certain scale at which effects can be known and unpredictable consequences would not be catastrophic.

While I don't care for Orr's diction (cleverness and intelligence seem too close in terms of connotation and valence in my view), his more general point that there exists a kind of quick intelligence and a kind of slow intelligence is well taken. I would suggest further that his distinction be extrapolated a bit: there's also a kind of quick learning and a kind of slow learning, both of which are good. Children who suffer from learning disabilities are simply "slower" (than average) when it comes to the quick kind of learning. The slow kind of learning can't really be measured in the same way. In fact, I believe it requires an entirely different conception of time.

Clive Holtham, et al. n their article Slow Knowledge: The Importance of Tempo in Debriefing and in Individual Learning [.pdf], discuss some of the key qualitative differences between "fast time" and "slow time." Without getting too deep into their work (which is worth at least skimming), they specifically advance the notion of tempo (fast tempo vs. slow tempo) as a conceptual overlay for understanding time as it relates to learning. Tempo means rhythm, and it is precisely the notion of rhythm as it relates to learning which I want to refine.

We currently measure quantity of learning (quite apart from quality, which has its own issues) in terms of credit/hours, instruction/hours, or something similar. We measure, in other words, learning time from the instructor's point of view. Or, to put it slightly differently, we measure time from the subject matter's point of view. As if the sheer number of hours a subject matter and a mind were in contact were meaningful. And it is, under certain conditions and within limits.

Student learning + instructor timetable = VERY slow learning.

I'd like to propose a new measure for quantity of learning. (Not a substitute for credit/hours, but a complement.)

The thought/day: a day in which specific, conscious mental attention is brought to bear on a particular idea-cluster. Thought/days are typically measured within a larger context, just as credit/hours are. One generally doesn't simply assign 50 thought/days to a project; one assigns 5 thought/days per week for 10 weeks.

The thought/day attempts to guide and quantify reflection rather than the co-presence of "learner" and "subject matter." Naturally, thought/days have no significance unless the learner is committed to reflection. Since, however, the student is the independent actor and the instructor the dependent actor in a teaching system, thought/days don't offer the temptation of education-as-body-processing which is all too common under credit/hour regimes.

Again, though, thought/days cannot replace credit/hours, but they can supplement them. They are especially helpful in disciplines such as philosophy, theology, and creative writing, in which reflection (spiritual digestion) is more important than the absorption of information.

How green is your zipcode?

MarketWatch's real-estate writer Amy Hoak publishes a few links--with extensive commentary--to websites which provide information your average real-estate agent may not be able to provide. Setting aside the sex offender nonsense, the article provides some great links.

First (of course), the environment:

The U.S. Environmental Protection Agency Web site has a tool that allows visitors to search a community by ZIP code for environmental facts about the area, including pollution statistics, the location of hazardous waste sites and information about the area's watershed.

Another site dedicated to helping the public retrieve information about local environmental health is Scorecard.org, which generates a pollution report card at the county level, giving information on such topics as air and water quality.

Where in this picture would you like to live?

Second, another issue dear to me, schools:

A national database of school demographic information can be found on the National Center for Education Statistics Web site. Click on the "School, College and Library Search" tab at the top in order to view data including a particular school's student-to-teacher ratio or enrollment by race and ethnicity.

For a snapshot of academic performance and to compare schools, a prospective homeowner might browse the School Matters Web site, a service of Standard & Poor's.

Another site, Great Schools, offers similar tools.

Even as the internet threatens to inflict fully-fledged virtuality upon us, it also enhances the quality and quantity of information about place.

How green is green?

Ah! St. Patrick's Day! When everyone is green. Or at least, everyone wears green. But some people really are drinking green beer--and the recipe involves no food coloring.

Newsvine feed

For those who love news, love the internet, and think they go great together, there are variety of interesting new services out there which are trying to change the way we discover and digest news. My current favorite is Newsvine, which offers a collection of tools aimed at helping internauts share their online discoveries with each other. Taken together, Newsvine's tools allow users to initiate, track, and advance conversations about the news. It relies upon extant news production and distribution networks, but it enormously expands the possibilities for commentary and discussion.

I've added a feed to my "column" (as they call it) over on the right. Questions, criticisms, and comments welcome!

What do you get when cross ethics and Wal*Mart?

Besides a bunch of lawsuits, I mean. Evidently, you get Global Ethics University (GEU), who really, really, really wants to be your

one-stop online ethics and compliance-training provider for both individuals and corporations. From easy, affordable online ethics courses to complete, ready-to-use ethics training curricula, look no further than Global Ethics University. Ethics is a serious problem and requires serious solutions. Of course you can do it yourself or reinvent the wheel, but Global Ethics University has everything you need in one convenient place with packages and prices that suit any size organization.

"Ethics is a serious problem?" Um, no it's not. Ethics means principally the study of habits, which means that it is at bottom a framework for understanding what the problem is and how to solve it. One kind of "serious problem" typically results when unscrupulous people and ineffective management systems get together and do the corruption mamba. Another kind of "serious problem," as I've noted before, occurs when people conflate ethics with compliance (again from the homepage):

You can do something significant and different TODAY to achieve high standards of ethical compliance. The best part is that you don't have to settle for either reflective professional/personal development course or hard-hitting compliance training. You can have BOTH in EVERY Global Ethics University course or training program.

Textbook conflation. This kind of thing just reeks of intellectual confusion.

But wait! There's more! From the glossy-pamphlet literature on their "flagship Ethics for a Modern Workforce program":

[The program] is the perfect balance between a no-nonsense compliance program and a personal/professional growth course. The easy, straight-forward program builds participants’ ethical skills and knowledge using practical teaching and real-life scenarios. What makes Ethics for a Modern Workforce unique is that it builds skills in incremental levels, or ethics Competencies.

"Perfect balance?" They mean that it's both and neither, right? Donkey before the cart and all that, right?

No one told us that the donkey was on a diet.

And the program "builds participants’ ethical skills and knowledge?" Maybe they mean working on participants' ethical reasoning, or something along those lines?

And the uniqueness of the program "is that it builds skills in incremental levels, or ethics Competencies?" The whole incremental education thing has been around since Johan Amos Comenius took the idea mainstream back in 1657 or so. And "ethics Competencies?" First off, the whole capitalization of random nouns thing died off in the early 19th century. And secondly, there are no such things as generalized competencies in ethics. Each person must develop techniques for his/her personal challenges.

If you want to learn pablums bordering on nonsense, it would seem that GEU is you one-stop shop. Otherwise, it's back to the books.

Web 2.0 meets real estate

I recently--in the context of this blog, I mean--opened the can of worms that is web 2.0 vis-a-vis education. Another important intersection between the internet and the real world is real estate. Although there's a tendency, as I recently noted, for people to think that the internet univocally minimizes the importance of geography, in fact there are a number of interesting ways in which the internet actually reifies geographical distinctions. One important way is through the organization and distribution of real estate information.

I've been poking around in the web 2.0 universe a little bit lately, and I'd like briefly to introduce four web 2.0 real estate tools to anyone who may not have yet heard of them. Organized roughly in order, in this author's humble opinion, from most interesting to least interesting (all emphasis added to call out the key innovation of each project):

(1) Zillow. From the site:

Today we are answering what we believe is the first question most home buyers, sellers, and the curious ask: "How much is this home really worth?" Zillow.com calculates a valuation (the Zestimate™) that anyone can see — for free — for most homes in the U.S., including yours. Or the one you want to be yours. Or the one you are curious about. Or ours, for that matter. You can refine the value of any home with My Estimator, an interactive tool that allows you to enter things you know about a home but we don't.

(2) Homethinking. From the site:

Homethinking helps you find real estate agents by showing you what each real estate agent has done in the past and what customers have said about the job they did.

(3) Propsmart. From the site:

Propsmart is a next-generation, independent real estate search engine and online community. We crawl and index over 1 million homes for sale and other properties, then organize and display them on a slick Google Map interface.

(4) Trulia. From the site:

Whether you are moving down the street or clear across the country, we're here to help you understand real estate trends at the local level. When you are about to make the biggest financial decision of your life, we help you understand how your future home stacks up compared to similar homes on the market, and similar homes that have recently sold. We show you how sales prices have been trending where it matters—in your county, city, ZIP code and neighborhood.

All players to watch.

Preservation + green = good questions

The Real Estate section of today's Sunday NYT has an article on "The Greening of Graying Buildings." The article covers two successful preservation projects--a NJ farmhouse and a Hoboken factory--which also go green. The most interesting of the two is the farmhouse, developed by Conservation Development of Hillsborough, NJ. (Full disclosure: The principal of Conservation Development, Lise Thompson, is a personal friend and colleague.)

It may not look green... and that's the point.

In its customarily clunky way, the NYT states the obvious as though it were utterly arcane:

THE conversion of a huge Hoboken warehouse building into condominiums and the nearly completed restoration of a small 1860 farmhouse near the Delaware River are two very different sorts of projects. But they share an intriguing goal: creation of 21st-century “green” homes in history-laden structures without stripping the buildings’ original character.

It's not "intriguing"--it's only sensible. In any case, the real story here is captured beautifully and succinctly in a quote from Ms. Thompson:

“Sometimes, we had to ask ourselves: What is ‘green?’”

Green isn't a "movement," a "lifestyle," or even a technological category. Green is a state of consciousness--a paradigm--a mental model. The challenge isn't a scientific or technical one--the whole question of "efficiency" is merely a sidebar--but rather a spiritual one. In order to build greener buildings, we must become greener people.

Ms. Thompson goes on to explain a bit of her generative thinking vis-à-vis this project:

“The fact is that preserving the house is itself ‘green,’ because it avoids further development and sprawl — but there are tensions between being green and authentic restoration, and we had to resolve them as best we could.”

While there's plenty of room for growth beyond this statement, the point is that Ms. Thompson didn't assume that there is only one answer, and that all she had to do was find it. Instead, she creatively opened up an entire new vista for thinking green: the idea that preservation itself is a kind of environmentally sensitive practice.

There's much left to explore here. But the takeaway, which of course the NYT doesn't really take away, is that green isn't the answer, it's the question.

How the web thwarts virtuality

Here's a new site which I think indicates a general trend which has creeping potential to be really important for proponents of place: placeblogger.

Notice the tagline: "towards an annotated world..."

One emerging trend in our networked world is the return of geography in (post-) modern consciousness. I remember seeing an ad for a cell-phone company (can't remember which) a few years back which said, "New York, Buenos Aires. What's the difference?" To which one can only reply that if you don't find the difference obvious, then I pity you your blindness. That ad was based on a 20th century, world-is-flat (a la Thomas Friedman) mentality. Increasingly, I'm seeing geography--by which I mean embodied place--emerge as a concern for designers, and in particular for designers of web-based services and products.

I (almost) hate to break it to Thomas Friedman and his fans, but, um... no, it's not.

Although placeblogger specifically is a project inspired by the journalism/ free press movement online, there are tremendous implications--and opportunities!--for anyone who cares about place. Even as our world becomes increasingly virtual (where we use the word "community" to describe people who merely share interests), it also becomes becomes ever more embodied (where your neighbors--who drink the same water and breathe the same air--matter more than your far-away fellow-feelers). It's just so surprising--and delighting--to find that the Internet organically enhances embodied experience as well as what you might call virtual experience.

Inquiry always trumps "information"

Educator, blogger, and technophile TomMarch summarizes web 2.0 in a single sentence:

Inquiry always trumps "information."

His coinage, "School 2.0" is suggestive, but this isn't just school he's talking about (whether he means it or not, it's how the mind of humanity--aided by the internet--functions as a thinking collective. World wide web as prosthetic.

What is "Ethics Training?"

Mr. Norm Alster takes a look at some of corporate America's recent efforts at protecting themselves against Enron's fate. Central to most efforts, according to Alster, is ethics training; the piece essentially revolves around the question of whether or not ethics training works, and if so, to what extent. In a brief two sentences, Alster defines in what ethics training consists:

Typically, the programs involve training in ethical reasoning, along with mechanisms to encourage the reporting of misconduct. In some cases, employees act out scenarios that could land them in trouble in the workplace.

So, ethics training more or less boils down to "training in ethical reasoning" coupled with information on and incentives for snitching. Oh yes, and a bit of playacting. Ultimately, Alster concludes that

...ethical training may not be enough to discourage cheating in a competitive business world. Training must be coupled with new techniques — things like preemployment screening and revamped performance reviews — if future Enrons and WorldComs are to be averted.

Given his watered-down and indistinct definition of ethics training, it's hardly surprising that reinforcements should be necessary.

After reading the article, I have one burning question: What is "ethical reasoning" (and how does it differ from normal reasoning)? Reasoning in general means the inference of valid conclusions based on given premises. There is only one, universally valid, way to reason, though there are infinite chains of reasoning one might follow. Ethical reasoning must therefore simply mean reasoning about ethical issues. OK, so no special skills necessary. Any training given in ethical reasoning must be quite simply training in how to reason.

Different? Yes. Better? Well, um... at least we've got the technology in hand.

Besides, ethics means one's relationship to one's habits. Habits as in "automatic thought, feeling, or action undertaken without reflection." Reasoning about ethics consists almost entirely in first (1) becoming aware of one's habits of thought, feeling, and action; second, (2) in discerning the broader implications of the patterns one finds; and third, (3) in identifying appropriate steps to improve one's habits. Ethical problems, in other words, are not of the same order as the question, "Is this action, which I am considering doing, right or wrong?" Ethical problems are long-term considerations of personal character and its relationship to personal contentment.

The goodness or badness of a particular action, in ethical terms, depends upon its position within a larger pattern of behavior. Whether an action does or does not comply with some code of belief is not an ethical, but rather a moral consideration. (The curious should consult Alasdair MacIntyre's After Virtue: A Study in Moral Theory for more on this crucial distinction.) The moralistic and legalistic slant of the ethics training considered by Alster reveals itself through its reliance on the language of compliance, which has nothing really to do with ethics per se. Before corporate America can address its issues, it first needs to get clear on whether or not those problems are indeed ethical. If they are, then ethically effective--rather than morally hopeful--measures will be needed.

Graffiti that cleans

My friend AM emails me to let me know about reverse graffiti, which consists in making images by scrubbing away soot and dirt rather than applying paint or dye. Socially conscious art at its very, very best.

He's actually cleaning the wall--scrubbing away soot and grime to create images!