Living through the digital revolution

Clay Shirky says more or less everything that needs to be said about why newspapers are in trouble and what might replace them in the future. He concludes:

In craigslist’s gradual shift from ‘interesting if minor’ to ‘essential and transformative’, there is one possible answer to the question “If the old model is broken, what will work in its place?” The answer is: Nothing will work, but everything might. Now is the time for experiments, lots and lots of experiments, each of which will seem as minor at launch as craigslist did, as Wikipedia did, as octavo volumes did.

[...]

Society doesn’t need newspapers. What we need is journalism. For a century, the imperatives to strengthen journalism and to strengthen newspapers have been so tightly wound as to be indistinguishable. That’s been a fine accident to have, but when that accident stops, as it is stopping before our eyes, we’re going to need lots of other ways to strengthen journalism instead.

When we shift our attention from ’save newspapers’ to ’save society’, the imperative changes from ‘preserve the current institutions’ to ‘do whatever works.’ And what works today isn’t the same as what used to work.

[...]

For the next few decades, journalism will be made up of overlapping special cases. Many of these models will rely on amateurs as researchers and writers. Many of these models will rely on sponsorship or grants or endowments instead of revenues. Many of these models will rely on excitable 14 year olds distributing the results. Many of these models will fail. No one experiment is going to replace what we are now losing with the demise of news on paper, but over time, the collection of new experiments that do work might give us the reporting we need.

As Shirky so astutely points out, the economic reality of newspaper publishing is shifting beneath the feet of the industry. Probably today's newspapers can't dance nimbly enough to save themselves. And that shouldn't worry us very much. It's just that one crucial function of newspapers--namely, reporting--remains a pillar of democratic society. We don't need to care who does it, but we need to care passionately that it gets done.

The economists have no clothes

Over at The Atlantic, Gregory Clark admits, rather refreshingly, that academic economists have no clothes.

The current recession has revealed the weaknesses in the structures of modern capitalism. But it also revealed as useless the mathematical contortions of academic economics. There is no totemic power.

As a discipline, economics proposes models, which are by definition incomplete. That is, they exclude some details and highlight others. To think that economic theories actually describe reality--as opposed to offer an image of reality that is useful for some purposes--is to mistake the map for the world.

Ceci n'est pas le monde.

Further, the dismal science has all too often provided models whose validity is impossible to ascertain, since it has often built its theories on the basis of premises that are false prima facie. The point here is that, logically speaking, false premises do not yield false conclusions; rather, false premises render the truth values of an argument's conclusions indeterminate. It isn't that economic models are false, but rather that the falseness of their premises means that can know nothing with certainty about their conclusions. We can't say whether economic models are true, false, or some determinate mix of the two. Logically speaking, they're mere speculation, with the same logical status as wishful thinking.

You mean we came all this way and we don't even know if we're wrong?

For example, the theories of classical economics generally accept as axioms (i.e., they accept as true without argument) the following:

1. All economic actors are rational.
2. All economic actors have perfect information about the markets in which they act.
3. All resources are scarce.

These are bad axioms, since they're obviously not true. As in, there's no doubt at all that these are false. Of course, not all branches of modern economics still accept these premises without qualification, but historically speaking these assumptions lie at the foundation of all economic thought. This is precisely the main reason I never studied economics in college. Who can take seriously a discipline that, wherever it ends up, begins with nonsense? While there's no doubt that the phenomena we think of as economic are intrinsically interesting, I remain skeptical that the formal discipline of economics has a great deal to offer beyond the obvious. As Clark notes:

The debate about the bank bailout, and the stimulus package, has all revolved around issues that are entirely at the level of Econ 1. What is the multiplier from government spending? Does government spending crowd out private spending? How quickly can you increase government spending? If you got a A in college in Econ 1 you are an expert in this debate: fully an equal of Summers and Geithner.

Common sense cloaked in jargon and equations. Even the economists' invisible clothes look rather shabby these days.

The value of inconvenience

By almost any meaningful performance measurement, the U.S. economy in the 20th century performed better under Democratic administrations than under Republican ones. Reflecting on this seeming paradox, Christopher Carroll suggests that

perhaps the best explanation has to do with attitudes, not doctrines: Maybe capitalism works better when its excesses are restrained by skeptics than when true-believers are writing, interpreting, judging, and executing the rules of the game. (The Democrats are surely the more skeptical of our two parties).

Most would agree that restraining the excesses of almost anything counts as good sense, but this is only a preliminary step toward a bigger and more interesting idea:

Capitalism works better when it is being held accountable to some external standard than when left to its own devices.

The whole system works better when "held accountable to some external standard," when it is, in a word, constrained. Optimal performance, in other words, is the fruit of struggle. Make things too easy and performance declines.

Relaxed external standards? Check. Highlight reel material? Not so much.

Consider how effective coaches pull outstanding athletic performance from their players. Good coaches don't let their players do whatever they want, without accountability or oversight; they create rules and systems of accountability. A good soccer coach makes you use your weak foot in order to develop it. A good swimming coach pushes you to hold your breath longer. Optimal athletic performance depends upon the measured application of psychological and physiological pressure. (Go watch Gavin O'Connor's Miracle to see a dramatization of great coaching.) Good coaches don't remove limitations--they use them.

Or consider architectural and industrial design. The famous designer Charles Eames (yet another famous St. Louisan) once remarked:

Design depends largely on constraints.

We tend to believe that creativity is best served by removing constraints. If we could just somehow make the process of invention easier for the inventor, we imagine that she would be more inventive. But the opposite is usually true. People get creative--truly creative--when challenged to negotiate constraints. Budgets (within reason) push architects to develop new strategies to solve old problems. (The story of how the design of Seattle's new public library building developed is a great example.) The particularities of manufacturing processes push industrial designers to find solutions which challenge convention. (The story of the how the first commercially viable computer mouse was designed is a textbook example.) Constraints drive creativity.

Artist Andy Goldsworthy creates astonishing ephemeral works using only the materials he finds on site during his wilderness hikes: creativity driven by constraint.

The same is true in business. Real innovation happens where someone discovers a new way to scratch an old itch, where someone thinks through a problem in a new way (even if it's simply a new application of an old technology). When we talk about innovation happening "at the edges" of a market or industry, what we mean is that innovation happens where business rubs up against constraints. (The "mainstream" of anything is where things flow smoothly, right?) We can't have innovation--and capitalism's greatest strength as an economic system is its powerful incentives for innovation--unless we have the right kind of rules and restrictions. (The question of "more" regulation versus "less" regulation is puerile. The kind of regulation matters more than the amount.) The free market, to put it pointedly, is only as free as its constraints force it to be.

Of course, constraints are damned inconvenient. And that's precisely the point. It's often--if not always--in response to inconveniences that people are most creative, most inventive, most innovative. And so we're led inevitably to the conclusion that inconveniences can be useful.

"Traffic lights are just the Man keeping us down! We will not be constrained!"

Some inconveniences, naturally, are more useful than others, but that hardly obviates the necessity of inconvenience for optimal performance. It's easy enough to see how inconveniencing others might be worthwhile, but it's one of the marks of emotional maturity to see the value of inconvenience for oneself. Politics--in the largest possible sense of the word--is only possible because we deliberately accept to be inconvenienced in certain ways (e.g., we don't simply use whichever car is closest, use guns to force our crushes to go out with us, or lynch elected officials from opposing parties). We recognize that our condition is collectively better when we all accept to be inconvenienced in certain ways. (Again, the kind of self-regulation matters more than the amount.)

Finding--and enforcing--the right kind of constraints is key to getting the most out of people, as innovators, as politicians, as artists, as designers, and even as citizens. We would all of us do well to remember that inconvenience--yes, even our own--often serves us much, much better than convenience.

A cinema whose house is always full

As promised, I'm getting around to posting my better business ideas. Yes, yes. I'm sure your breath has been bated.

INTRO
Think of your favorite movie. Now imagine the ideal environment in which to watch it. Do you see yourself alone, in your underwear, in your own bedroom, late at night, watching your favorite movie on your computer monitor? Unless you're one of those rare individuals willing to argue the artistic and cultural merits of porn, it's not likely.

The future of porn? Maybe. The future of cinema? Don't count on it.

Probably you're thinking of a dark room with a huge screen and comfortable chairs. And, almost certainly, other people. Although the advent of forums like YouTube has fomented whole new genres of minimalist movies (e.g., machinima, video how-tos, porn vlogs, and even as yet un(sound)bitten political speeches), our thirst for full-length feature films appears unslaked. And we still prefer viewing them, when possible, in the company of other viewers. As an art form, film descends from theater, and the social dimension of theater is irreducible and ineradicable. Part of the meaning of watching theater--and therefore part of the meaning of watching films--is watching them as part of group.

Viscerally, we know this is true. Funny movies are funnier when viewed in a packed cinema. Scary movies are scarier. Exciting movies are more exciting. The whole experience of watching a film is intensified and improved when the house is full.

In a sense, "audience" is a role--a role it sucks to have to play by yourself.

OPPORTUNITY
Most current thinking about about how people are going to consume movies in the future, even the freshest, can be divided into models based on how people consume live theater on the one hand and how people consume internet pornography on the other. (There are some non-stupid "innovations" in the works which try to make the most of the cinema space, but they have little to do with the movie-going experience per se.) The theater model can't seem to get past the fact that plays are performances while films are recordings of performances--that is, they're what we call media. The porn model can't seem to get past the fact that watching anything except porn by yourself isn't nearly as much fun as watching it as part of an audience.

The most important development in the movie business during the past 20 years isn't--with all due respect to Peter Jackson and his fanboys--CGI, but the megaplex:

The improved viewing experience and the ability to let consumers watch whatever movie they wanted almost whenever they wanted brought more people through the door and bulked up Hollywood's grosses.

I love this conceit--that access to 20 or 30 screens has allowed consumer to "watch whatever movie they wanted almost whenever they wanted." Whatever movie I want? Give me a break. And what about TV series, animated shorts, foreign releases, etc. etc. etc.? And rental stores? There are good reasons why they're dying out.

"Um.. Bollywood? The Thunderbirds? Fullmetal Alchemist? Le Dîner de cons? Nah, we don't got any of that. But, dude, have you seen The Transformers?"

Megaplexes offer an order of magnitude more choice than the 3-screen movie house; your average rental store (which carries some 3,000 titles according to Chris Andersen) ups the choice by two more orders of magnitude. And then Netflix and company bump that up to 60,000+ titles--another order of magnitude plus a doubling thrown in for good measure. No doubt that 30 screens offers a lot of choice, but it's still the film industry and the theater managers who decide what's on the menu. Time to break out.

THE IDEA
The challenge, I would argue, is to get The Long Tail of screenable media (i.e., movies, TV, video games, and a bunch of stuff I'm sure I'm missing) to interface elegantly with the social theater experience.

The Setting. So, imagine an urban megaplex which offers 30 screens of varying sizes--from the 300-person stadium to the 15-person black box. (I'm picking 15 as the minimum capacity because, in my experience anyways, 12 is the magic number where dinner party tips and becomes a house party.) However we manage it, our megaplex is technically capable of showing anything that's currently out on DVD on any of its screens. (I see two basic possibilities here: either (1) allow the viewers to bring their own media--you're just a screen and seat provider; or (2) go digital--maybe make ISO images of every DVD you can get your hands on, or an equivalent. I like (2) better for a variety of reasons, but (1) might be the place to start while the IP agreements get hammered out.)

Architecturally, the lobby resembles a cafe more than a cattle yard. Picture a large space subtly divided by differences in floor height, floor coloring, lighting, etc. in order to create a cluster of distinct, yet interconnected spaces, each of which feels somewhat enclosed and therefore intimate. The idea is to provide environmental level support the social dimension of consuming screenable media. Film clubs, groups of friends, and/or couples can use this space to nosh and chat before and after movies.

The Website. The website of our megaplex looks more like a social networking website than a tarted-up broadsheet for the very simply reason that it is a social networking site. The website is the platform which our megaplex uses to decide--on a rolling, ongoing basis--what it's going to show on each of its screens. Website members "vote" for a particular title and a particular time-slot by prepurchasing tickets to those titles at those times. (Credit card authorization--not charged until movie is shown.) The most popular title for any given time-slot is shown in the biggest theater, the second most popular in the second biggest screen, and so on. Titles are "locked in" 48 hours in advance in order to allow everyone to plan their schedules and casual viewers to pick what they want.

One interesting consequence of this system is that it becomes possible to distribute various screens over several different physical locations within a city. Not too many different locations, or people would get confused. But a single web system could link together a handful of physical clusters of screens into a single movie selection and viewing system, effectively allowing our megaplex to consume urban real estate much more efficiently. We can therefore offer 100 screens' worth of choice without thereby incurring a need for a gargantuan, unbroken chunk of real estate. In fact, precisely the opposite. The more geographically concentrated our demand (the more "urban"), the more screens we can offer. And further, since every theater is filled to capacity (or as close as we can get) every time, we optimize our use of square footage even further.

Show Me the Money. Our megaplex will pass profits back to those who own the rights to the media on a per-seat-sold basis rather than a per-showing basis. This has several consequences.

First, pricing for the viewer is dynamic. The more "votes" a suggested title-and-time gets, the cheaper the tickets. This displaces some of the responsibility (and risk!) of promoting a particular title-and-time onto its supporters. A film club working its way through all of Humphrey Bogart's films, for example, will not only form the core of the audience which views those films--they'll also promote those title-and-times to everyone else. Take this line of thinking to its logical conclusion, and you've got individual promoters buying out entire screens and promoting film events (say, a Star Wars-a-thon) on their own. The promoters shoulder the risk of promotion; the audience gets a full house experience; and our megaplex gets a locked-in profit on an optimized use of cinema square footage. Every title which gets shown in our megaplex has, before it shows, demonstrated that it can command such-and-such level of committed demand.

Second, pricing between our megaplex and media rights owners is negotiable on a title-by-title basis--even on a showing-by-showing basis--because our megaplex can show exactly how many seats are sold for each title. Structurally, such a system will favor older titles (whose production costs have already been either recouped or written off), niche titles (which capture focused, sustained affection), and less publicized titles (which have fewer advertising costs built into their financing model). Basically, although our megaplex is perfectly capable of competing with "normal" theaters when it comes to blockbusters, it's capable of making gold out the vast libraries of screenable media currently lying around in our culture.

And third, this system really opens up the possibilities for using a cinema-like space in creative ways. Business presentations? Naturally. Ungodly-huge-screen Super Smash Bros. Brawl parties? No problem. Anime marathons? Duh. In a way, this model is a bit like McDonald's:

The brilliance behind Harry Sonnenborne’s model [for McDonald's] was to sell real estate and not hamburgers. His suggestion was to purchase or lease the land on which all the McDonald’s restaurants were built on. Franchisees would then pay the company either a monthly rent amount or a percentage of their gross sales, whichever amount was greater.

The idea isn't to sell movies (which today's theaters can't do, so they sell outrageously priced corn syrup instead) , it's to rent square footage, facilities, and equipment to those in a position to use those resources to their utmost. Why be a lousy movie promoter or a gouging snack-food vendor when you can be a fantastic screenable media landlord? Let the watchers be the deciders, because those who decide what to show bear the risk for promoting it.

AFTERWORD
There are plenty of holes here, so please, comment away.

The meaning of business

Lately, I've been mulling over a comment made by my uncle--who has the reputation in the family of being a super savvy investor--to the effect that it doesn't matter what a business does per se, so long as it turns a profit. I've argued before on this blog that my uncle's position unfairly impoverishes the concept of value. I've even gestured (crudely) in a few directions which might help us to enrich our concept of value.

Over at The Bastiat Society Blog, however, Ben Rast has a post entitled Business as Creative Act, which takes the first few steps down what I think is the brightest path toward a full and mature understanding of what business is (and why my uncle is mistaken). Simply put:

Business, as a creative act, draws on the very same strengths and suffers the same weaknesses as the creative act in art. They are more alike than dissimilar.

By "creative act," Rast means to emphasize entrepreneurship particularly:

We can illustrate just how much artistic creativity and business creativity have in common with the following paragraph of advice to writers, taken from an interview of William Faulkner published in the Paris Review in 1956:

"Let the writer take up surgery or bricklaying if he is interested in technique. There is no mechanical way to get the writing done, no shortcut. The young writer would be a fool to follow a theory. Teach yourself by your own mistakes; people learn only by error. The good artist believes that nobody is good enough to give him advice. He has supreme vanity. No matter how much he admires the old writer, he wants to beat him."

Now, notice how well it works as advice to entrepreneurs -- those troublesome dreamers and innovators in business -- with a few strategic substitutions.

"Let the entrepreneur take up surgery or bricklaying if he is interested in technique. There is no mechanical way to get business done, no shortcut. The young entrepreneur would be a fool to follow a theory. Teach yourself by your own mistakes; people learn only by error. The good entrepreneur believes that nobody is good enough to give him advice. He has supreme vanity. No matter how much he admires the old business, he wants to beat it."

Rast is astute to catch this similarity. People who launch new enterprises resemble artists in their drive to make something new, to add an original trope to the poem of humanity. But it's obvious, in a sense, that entrepreneurs are creators. What's not so obvious is that all productive activity (in the economic sense)--that is, all business activity--is creative as well.

To put it succinctly, human creativity is coextensive with human endeavor. Wherever people get stuff done, there people come up with new ways to think, do, and make. It doesn't matter what you call the end product--good, service, artwork--productive human activity demands creativity for the very simply reason that every object humans make with intention and every action humans do with intention bears the stamp, as it were, of the intention that brought it into being.

Aristotle identified four causes which obtain in the world: the material, the formal, the efficient, and the so-called final cause. It's the last one which concerns us here. The

final cause explains the cause of something in terms of its conceived end, or the purpose why it is made. According to Aristotle, [the] final cause is “the end (telos), that for the sake of which a thing is done.”

Every good is made and every service performed for the sake of something else--specifically, they're made and performed for the sake of the customer's good. That's why we call them "goods," right? Yes, yes, the producer produces goods in order to get paid, and the service provider serves in order to get paid, but they only get paid if someone recognizes the value of their goods and services. (And this objection is weak, since money is only and always a means to an end. "To get paid" can never be a final cause for making or doing something for the simple reason that money always points beyond itself to another end--one always exchanges the money on something else. It is not, simply put, final.)

Because goods and services are self-evidently intended to do someone some good (otherwise who would buy them?), we can say that economically productive activity is not only a functional activity, but is additionally an expressive activity--that is, it means something. In particular, it speaks to a vision of the good in general and the customer's good in particular. Even further, each good produced and each service provided changes the world; each good and each service brings into being a new state of affairs which must be presumed to be better than had the good been left unmade, the service undone (again, otherwise who would buy them?).

From this line of thinking two absurdly important conclusions follow:

1. Businesses really do change the world--so they'd better get it right. The presumption of "providing value," of making or doing something "good," is built into the very possibility of business. If a business doesn't add value--that is, if it doesn't make the world a better place--then it has no business being in business. It seems almost too obvious to need saying, but... businesses may be judged by the same standard as every other human endeavor, and that standard is whether or not the business's making and/or doing makes the world a better place.
2. Investors are to companies what patrons are to artists--so they'd better get it right. Warren Buffet famously advises investors to buy shares of a company only if they'd be willing to buy the whole company. I'll take Mr. Buffet one step further. You should buy shares of a company only if you'd be willing to be that company's sole customer--like an artist's patron, buying, owning, and enjoying responsibility for that company's entire output. Just as being a shareholder means being wholly and individually responsible for (and dependent upon) a company's entire financial performance, so being a shareholder means being wholly and individually responsible for (and dependent upon) a company's entire, world-changing making and doing. Just like a patron, you've put money down so that the companies you own can make what they make, do what they do. You enjoy the financial fruit of the shares you own for the single, simple reason that the companies you own get paid for changing the world, and the world they're making and enacting is the world we all live in--the world our children are growing up in.

18 inspirations for educators and social entrepreneurs

Some people collect stamps. Others collect curiosities. I collect (among other things) pedagogical models, theories of learning, writings on education, and great educators. Someday I'll boil it all down and give you just the bullion, just the essence. But I need more time. My collection is far from a complete 7-course chowdown; heck, it won't do anything more than whet your appetite... but at least that means I've probably gotten to hors d'oeuvre status.

"My! You have such an interesting collection of... um... what are these, exactly?"

Model Institutions, Organizations, Etc.

1. Danish Folkeuniversitetet ("Folk High Schools"). The keystone of Danish national and democratic identity. One of the great triumphs of modern liberalism (in the strict sense of the term).
2. Hampshire College. The Un-Ivy League. Classes, but no core curriculum. Written evaluations, but no grades. Books, but no teacher's dirty looks.
   
3. The Nueva Escuela ("New School"). A program aimed at the developing world which supports schools as agents of positive social change. Focuses on education which is "active, participatory, cooperative, child-centered, and life-relevant." The story is that the founder asked every Nobel laureate she could get her hands on what kind of school they wished they had attended.
   
4. The KaosPilots (of course). A new kind of business school, aimed at at the fourth sector.
5. The Acton MBA (of course). Business school on steroids, which aims to produce entrepreneurs rather than managers.
6. Y Combinator. Although it claims to be a new kind of venture capital firm, it's really an intense education in how to be a world-class tech entrepreneur.
7. Gever Tully's Tinkering School. Let your kids do dangerous things, otherwise they'll never learn how to handle dangerous things. When I put it that way, it's obvious, right?

Writings Worth Reading

1. "On Education." Ralph Waldo Emerson's seminal essay on the subject, in which he argues that "the secret of education lies in respecting the pupil."
2. "Talks with Teachers." Brilliant lectures on teaching by eminent 19th century American psychologist and philosopher William James.
   
3. "Complicity." Online journal on complexity (read: chaos theory) and education. Be warned: this journal has a rather pointy head.
4. Infinite Thinking Machine. A blog providing coverage of innovation in education.

Models, Movements, and Technologies

1. Ignatius of Loyola's Spiritual Exercises, by which I mean more than simply the book by the same name. The exercises are a masterfully conceived and carefully refined ethical technique (read: a practice by which one acquires a particular character).
2. Unschooling. Let the child set the educational agenda; teaching consists principally in encouraging and enabling.
3. Moodle. A widely used open source course course management system.

Educators to Emulate

1. Socrates. The gadfly of great Athens.
2. Johan Amos Comenius, the Czech (Moravian, to be precise) "Copernicus of education."
3. Nikolai Frederik Severin Grundtvig, founder of the Danish Folk High School.
4. Amos Bronson Alcott, the original Transcendentalist, and the greatest teacher [.pdf] in U.S. history.

From this spark, fire

At the behest of some smart people I recently had the good fortune to meet, I'm going to start using this blog to post concept sketches for some of my business ideas. (All such posts will be filed under--i.e., tagged as--"JPs Biz Ideas") I'm posting ideas in the spirit of cooperative thinking; I hope that my thoughts inspire reflection, conversation, and maybe even action. Just remember that this is thinking toward getting something started. Whatever you have which will help move the conversation forward--thoughts, criticisms, stories, whatever--I'm eager to hear from you.

For those worried that I'm only sharing the chaff, I can understand where you're coming from, but I'm not going to be driven by my fear. What you'll see here will only be the cream. And further, just because an idea happens to sashay in front of my mind's eye doesn't mean I'll post it; only those which my satisfy my rather demanding inner impresario will be offered up for your delectation. In other words, only the truly interesting ideas will find themselves in pixels.

Enjoy! And please add to the conversation. Comments and contacts welcome!

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.

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)

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 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.