In the early 1940s, Joseph Schumpeter, a Harvard economics professor, was researching business innovation. At this time, innovation wasn’t really something that was studied, it was just something that occurred. Outside of Bell Labs, no organization seemed interested in investigating how great ideas came to be, and how they were scaled to society. Schumpeter was one of the first academics to take up the issue. He focused his thoughts on one of the major veins of American industry—railroads. In his lifetime railroads went from a novel invention to a technology that disrupted every facet of the American economy. But his primary interest wasn’t how the railroad connected New York with Los Angeles. It was how it burned a previous economic system to the ground and rebuilt a new—more efficient one—in its ashes. Schumpeter’s key discovery was essentially that competition creates innovation.
Category: Blog
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Book Review: Dawn of Innovation by Charles Morris
In Dawn of Innovation Charles Morris argues that America’s economic dominance wasn’t driven by science, technology or ingenuity, but our commitment to mass production (scale). “The dominating American characteristic across all major industries,” he writes, “was the push for scale—adapting the production methods, the use of machinery, and the distribution to suit the product.” Viewing the world through this lenses reveals two myths; applying it to modern times illuminates the biggest issue facing modern governments—How to scale innovation in a knowledge economy.
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The perils of privatizing public goods
In September 1987, nearly a year before Tracy Chapman sang about revolution, President Ronald Reagan started one in American policy—he started privatizing America’s public goods. The revolution didn’t happen overnight. In fact, most people didn’t even realize it occurred. As these two fantastic articles reveal, nearly thirty years later we’re dealing with the damaging consequences—economically, ethically, and mortally. Privatizing public goods can threaten nearly every aspect of our society.
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Jon Gerner’s The Idea Factory
Bell Labs, the world’s most innovative organization in history, had a simple view on innovation. Whatever improvement came out of their Murray Hill headquarters had to do the job “better, or cheaper, or both” than its predecessor. In thirty years, this philosophy allowed the company to develop semiconductors, lasers, fiber optics, solar panels, the Unix operating system, the C++ programing language, cellular phone networks, and much more. At its peak, America’s monopolistic telephone company was one of the most profitable organizations in the world. In his book The Idea Factory, Jon Gertner makes the case that nearly every single improvement in modern communications can be traced back to one lab, at one company—AT&T. Trillions of dollars in economic growth, millions of jobs, all from one group.
The question is, what can we learn from Bell Labs?
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Factory Man: The rise and fall of the American furniture industry
If they gave awards for the most comprehensive business books of the last ten years Factory Man by Beth Macy would be an unlikely–but worthy contender. It isn’t a TED ready think piece about the flattening of the world. Nor is it a feel-good call to revitalize American industry through disruptive innovation. Instead, it is a deeply reported narrative on the rise and fall of the American furniture industry. Told through the viewpoint of the Bassett Furniture Company, Macy explains how a manufacturing empire was created and systematically eroded. At first glance, the culprits of the decline are predictable: globalization and technology. Globalization because cheap Asian imports flooded the market at a fraction of the cost. Technology because advances in communications allowed businesses to build a supply chain that exported lumber from North Carolina to China, and the finished product back to American store shelves.
A lesser author would have ended the analysis there, but Macy peppers Factory Man with background and context allowing the real culprits emerge: systematically narrow management driven by orthodoxy and bad economic policy. The decline didn’t have to happen.
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Autonomous Taxibots: Who owns the future?
Fast Company recently published an article on the need for public ownership of an autonomous taxi utility. The article makes a case for why cities must own both the network and physical cars of the service. It is definitely worth checking out.
But what “ownership” of a taxibot network actually means is potentially confusing. That’s because a taxibot network will consist of at least three core components: 1) the taxibot fleets; 2) a physical infrastructure that allows the taxibots to communicate with the city, like an elaborate network of Wi-Fi routers; and 3) a set of operating systems and protocols that allows the taxibots to communicate with each other, as well as with other cars on the road.
It makes sense that a city would own both the physical infrastructure and the operating system that allow it to operate. Centralized public ownership would allow both an equitable and standardized system to develop. The standardization would lead to the acceleration of an economy of scale and the cost savings associated with that. I tend to believe that the ownership of taxibot fleets should be left to the market—imagine luxury and budget providers.
Another big issue, and I think the central selling point of a publically owned network: Who owns the data?
Every taxibot will be a node on a network, producing all sorts of data. This data will be valuable for the same reasons that any kind of consumer data is valuable: It can be used to improve products and services (which is a good thing) and market things to people that they may not need (which is a bad thing).
All in all this is a great article. It also begs the question, given the inevitable rise of an autonomous taxi service, why are are smaller cities without existing infrastructure (Milwaukee) still considering investing in costly light rail? Shouldn’t we be looking towards the future?
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Mercantilism: Donald Trump’s Economic Policy
Human dried apricot Donald Trump was born on third and thinks he invented baseball. His followers feel forgotten in modern America. But hidden behind his insane belief that a wall will stop migration and America should ban ¼ of the world’s population are some “interesting” economic policy ideas. Donald Trump’s economic policy is interesting because it’s rooted in ideas from the 1600s that have largely been forgotten or excluded from mainstream economics.
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Ulysses S. Grant on swearing
I am not aware of ever having used a profane expletive in my life; but I would have the charity to excuse those who may have done so, if they were in charge of a train of Mexican pack mules at the time.
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How do you rebuild America? Stop treating government like a start up.
It’s news to no one that America’s middle class has been devastated by computers and globalization. With income inequality on everyone’s mind, it’s now the billion-dollar question policy makers face over the next twenty years. The standard solution follows something like this: The entire economy seems to be stagnant, except for Silicon Valley. Government needs to copy that and become more like a start up. People gravitate to this because it makes sense on a superficial level.
But society has different goals than a 5 person team fresh out of Y-Combinator.
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At what cost was China’s development miracle?
In the span of forty years the China performed a development miracle. It transformed itself from an agrarian afterthought to the world’s second largest economy. This was in spite of pervasive attitudes and policies that ran contrary to most Western economic thought. In as recent as 1980, the country’s official dictionary defined “individualism” as “the heart of the Bourgeois worldview, behavior that benefits oneself at the expense of others.” Analyzing how one person’s world went from rural farming to internet millions is a hard task. Distilling the thoughts and attitudes of a billion people and putting it in context of modern society is a seemingly impossible one. As I explain in my Age of Ambition review, Evan Osnos delivers the impossible. He answers the question, “At what cost was China’s development miracle?”