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Category: economics – Page 241

Common wisdom is that great companies are built by business leaders who out-vision and out-innovate their competitors. However, the truth is that groundbreaking businesses tend to come from entrepreneurs who were smart enough to out-execute everyone else in their space – which means getting products out there and growing a loyal customer base, instead of engineering a product until it’s supposedly perfect.

Microsoft is a great example of company that has succeeded by execution. They’ve rarely been first to market with any of their products, but they’ve successfully brought them to market, figured out how to improve them, and introduce them again and again. This is the approach that puts you in the Fortune 500.

Why do entrepreneurs believe so fervently in the myth that they need to be first to market with a never-before-seen innovation? Because that’s what they’re told in business school. The problem with this piece of wisdom is that it encourages business leaders to wait until the mythical breakthrough business idea is fully formed.

This myth is fed by the public perception of groundbreaking companies as having come out of nowhere to rock the world. But companies like Facebook rarely, if ever, spring into being with no antecedents: MySpace and Friendster were in the market first, but Facebook did social networking better than anyone else had done before. Google wasn’t the first search engine ever; AltaVista probably deserves that title. But Google advanced the search experience to the point that we all believe they were the breakthrough innovator.

The point I’m making here is that you don’t need to have the breakthrough vision to launch your company – you need to have breakthrough execution. Launch your company even if your concept is similar to someone else’s idea, and figure how you will change the business model.

When you stall your entry into the market, you run the risk of getting outrun by competition – who’ll have gathered valuable on-the-ground information and solved problems before you’ve even planned your launch party. At a certain point, the ecosystem around your market will have become so strong that consumers will not be willing to accept a new entry. For example, anyone who launches a Facebook-style social network right now will have to hope that people are willing to totally rebuild their friend networks from the ground up.

On the other hand, if you can tweak this idea for a new market – for instance, a social network that specifically serves the healthcare community – you can launch without an entirely new concept. Or you can go to a locale where you’re not first in the market, but where there is greater potential to become a player.

In other words, you can be first to market in Seattle with widget XYZ, where there’s only a moderate interest and market potential for your product. Or you can be tenth to market in Tulsa where there’s a far greater need for widget XYZ, giving you plenty of room to gain customer share. Here’s how to position yourself for entrepreneurial success without playing the waiting game.

Follow your heart – but use your head. As an entrepreneur, you should always develop businesses that you are passionate about, since that enthusiasm will keep you pushing ahead when times are tough. But that doesn’t mean you can’t think rationally about how to apply what a competitor is doing to a different market segment or locale.

Listen to the market, and tweak as needed. The reason for launching sooner rather than later is to gather feedback from initial customers, so that you can redesign or retool as needed. Without this early feedback, you can only guess as to what customers are willing to pay for.

Don’t wallow in brainstorming. Time spent fiddling with a business plan or filling up whiteboards with ideas is time that you could spend actually launching your business and seeing if the idea floats. If it’s real, you get solid feedback, instead of the imaginary “what if” scenarios you dream up in a conference room.

Launch early enough that you’re partially embarrassed by your first product release. Entrepreneurs are likely to be somewhat off-base about their first launch and what features customers really want, but they won’t make a product better until people are actually using it. LinkedIn founder Reid Hoffman says that his co-founders wanted to delay launch until they introduced the professional social network’s “contact finder” feature, but it turns out it wasn’t necessary — eight years later, LinkedIn still hasn’t added that feature.

Be your own worst nightmare. Once you do have that toehold in the market, ask yourself how you would outflank your company if you were a competitor. Constantly out-innovate yourself, and determine how to make your product offerings obsolete with each iteration.

Follow Naveen Jain on Twitter: www.twitter.com/Naveen_Jain_CEO

How important is failure – yes, failure – to the health of a thriving, innovative business? So important that Ratan Tata, chairman of India’s largest corporation, gives an annual award to the employee who comes up with the best idea that failed. So important that Apple, the company gives us the world’s most beautifully designed music players, mobile phones, and tablets, wouldn’t be here if it hadn’t dared to fail. Remember the Apple Newton? Probably not, since it was a flop, but it was a precursor to today’s wildly successful iPad.

In a struggling economic climate, failure is what separates mediocre companies from businesses that break through and astound us with their creativity.

Yet failure has become a scenario to be avoided at all costs for most CEOs. Between fear of losing jobs to fear of rattling investors, business leaders are expected to deliver a perfect track record of product launches and expansion programs. They indirectly instill this attitude in their employees, who lack the confidence to spearhead any corporate initiative that isn’t guaranteed to work.

Call it the Tiger Mom effect: In the business world today, failure is apparently not an option.

We need to change this attitude toward failure – and celebrate the idea that only by falling on our collective business faces do we learn enough to succeed down the road. Sure, this is a tough sell at a time when unemployment figures are still high and a true economic recovery is still a long way off. But without failures, no business can grow and innovate.

Why is it that we are willing to accept a certain amount of failure along with success in other arenas, but it’s forbidden in business? Take basketball: The best player on his best night will only score about 50 percent of the time. The other 50 percent of the shots aren’t considered failures – they are attempts to test playing strategy that will figure into dunks later in the game.

If a basketball player is scoring close to 100 percent of the time, he is clearly making layups and not considering the three-pointer that may be needed to win the game. The same is true for business leaders: if every one of your pet projects rolls out successfully, maybe you aren’t stretching far enough.

Apple Computer would not have reached its current peak of success if it had feared to roll the dice and launch products that didn’t always hit the mark. In the mid-1990s, the company was considered washed up, Steve Jobs had departed, and a string of lackluster product launches unrelated to the company’s core business had failed to catch fire. But the company learned lessons from its mistakes, and shifted focus to the development of flawlessly designed consumer electronics goods. Yesterday’s failures bred today’s market dominance.

Fail today, profit tomorrow
The good news about failing is that this is a smart time to do it. Today, the cost of failure is much lower than it used to be. And if you take chances while the economy is down, your successful business launch will grow and become exponentially more profitable as times improve.

Strange as it may sound, a positive attitude towards failure starts at the top. Here’s how business leaders can create an environment where failure is encouraged, not punished.

Applaud people who fail: As a leader, you need to praise people who take risks and explore new ways to gain market share, since short-term failures can lead to the biggest business successes down the road. Talk publicly about why the failed venture has merit, and what your employees have learned from it. At performance review time, let the innovators who dare to fail know that you value their contributions.

Acknowledge your own failures: When you experience a failure as a leader, don’t hide it – talk about it. Your missed opportunity will encourage others to take risks. When you tell personal stories about your own failed plans, you give permission to everyone in the organization to do the same, without fear of reprisals. (Of course, you should always remind people that they should dig deep for lessons learned from every failed attempt.)

Create a culture of innovation and entrepreneurship: Grant people the time to work on projects that they are passionate about – beyond their daily responsibilities. This sends employees a signal that their failures as well as their successes have great value to the business. Google does this, allowing its engineers to spend 20 percent of their work time on side projects. You can’t argue with success: Google’s Orkut social networking service and AdSense ads for website content came directly from this “20 percent time” program.

So get out there and fail – and take inspiration from Thomas Edison, who suffered through more than a thousand experiments before finally inventing a working light bulb. “I didn’t fail a thousand times,” Edison told a journalist. “The light bulb was an invention with a thousand steps.”

Follow Naveen Jain on Twitter: www.twitter.com/Naveen_Jain_CEO

“Jobs for every American is doomed to failure because of modern automation and production. We ought to recognize it and create an income-maintenance system so every single American has the dignity and the wherewithal for shelter, basic food, and medical care. I’m talking about welfare for all. Without it, you’re going to have warfare for all.”

This quote from Jerry Brown in 1995 echoes earlier fears that automation would cause mass unemployment and displacement. These fears have not materialized, due to surging economic growth, the ability of the workforce to adjust, and the fact that the extent of automation is largely limited to physical, repetitive tasks. This is beginning to change.

In recent years, before the current recession, automation in already well established areas has continued to make productivity improvements. “Robotics and other computer automation have reduced the number of workers on a line. Between 2002 and 2005, the number of auto production workers decreased 8.5 percent while shipments increased 5 percent. Assembly plants now require as little as 15 to 25 labor hours per vehicle.” The result of these productivity gains has been a higher quality, less expensive product.

As machines become smarter, less repetitive “white collar” jobs will become subject to automation. Change will come so rapidly, the workforce will not be able to adjust, with real opportunities for alternative work decreasing. The earlier fears of mass unemployment will become realized. This mass displacement could lay the foundation for civil unrest and a general backlash against technology. The full extent of this change is unlikely to happen for another generation, with strong growth in China and other emerging economies. Regardless of exact timing or mechanism, the fact is that this transition to full automation has already begun, and micro economics dictate that it will continue. The choice between an inefficient, expensive, human labor force and an efficient, cheap, automated labor force is clear at the micro level, which will drive the pace of change.

What is needed now is a new economic paradigm, new theories, and a new understanding for the new coming age. We are not far away from a time when it will be possible to provide every human with a clean, safe place to live, with excellent healthcare and ample food, through the provision of automated labor. If it is possible to provide these things as a birth right, while not infringing upon the rights of others, then it should be done. As long as we are human, no matter how virtual our world becomes, we will still have basic physical needs that should be accessible by everyone, as owners by heritage to this offspring of our species. The correct lessons from the failures and shortcomings of Marxism and Austrian Economics must be learned. The introduction of something never before possible, an intelligent omnipresent and free labor source (free once machines are able to replicate themselves from the mine, to design and manufacture, without any human input), is a game changer.

Jerry Brown was right. The trick is to not be too far ahead of your time.

Dear Ray;

I’ve written a book about the future of software. While writing it, I came to the conclusion that your dates are way off. I talk mostly about free software and Linux, but it has implications for things like how we can have driverless cars and other amazing things faster. I believe that we could have had all the benefits of the singularity years ago if we had done things like started Wikipedia in 1991 instead of 2001. There is no technology in 2001 that we didn’t have in 1991, it was simply a matter of starting an effort that allowed people to work together.

Proprietary software and a lack of cooperation among our software scientists has been terrible for the computer industry and the world, and its greater use has implications for every aspect of science. Free software is better for the free market than proprietary software, and there are many opportunities for programmers to make money using and writing free software. I often use the analogy that law libraries are filled with millions of freely available documents, and no one claims this has decreased the motivation to become a lawyer. In fact, lawyers would say that it would be impossible to do their job without all of these resources.

My book is a full description of the issues but I’ve also written some posts on this blog, and this is probably the one most relevant for you to read: https://lifeboat.com/blog/2010/06/h-conference-and-faster-singularity

Once you understand this, you can apply your fame towards getting more people to use free software and Python. The reason so many know Linus Torvalds’s name is because he released his code as GPL, which is a license whose viral nature encourages people to work together. Proprietary software makes as much sense as a proprietary Wikipedia.

I would be happy to discuss any of this further.

Regards,

-Keith
—————–
Response from Ray Kurzweil 11/3/2010:

I agree with you that open source software is a vital part of our world allowing everyone to contribute. Ultimately software will provide everything we need when we can turn software entities into physical products with desktop nanofactories (there is already a vibrant 3D printer industry and the scale of key features is shrinking by a factor of a hundred in 3D volume each decade). It will also provide the keys to health and greatly extended longevity as we reprogram the outdated software of life. I believe we will achieve the original goals of communism (“from each according to their ability, to each according to their need”) which forced collectivism failed so miserably to achieve. We will do this through a combination of the open source movement and the law of accelerating returns (which states that the price-performance and capacity of all information technologies grows exponentially over time). But proprietary software has an important role to play as well. Why do you think it persists? If open source forms of information met all of our needs why would people still purchase proprietary forms of information. There is open source music but people still download music from iTunes, and so on. Ultimately the economy will be dominated by forms of information that have value and these two sources of information – open source and proprietary – will coexist.
———
Response back from Keith:
Free versus proprietary isn’t a question about whether only certain things have value. A Linux DVD has 10 billion dollars worth of software. Proprietary software exists for a similar reason that ignorance and starvation exist, a lack of better systems. The best thing my former employer Microsoft has going for it is ignorance about the benefits of free software. Free software gets better only as more people use it. Proprietary software is an inferior development model and an anathema to science because it hinders people’s ability to work together. It has infected many corporations, and I’ve found that PhDs who work for public institutions often write proprietary software.

Here is a paragraph from my writings I will copy here:

I start the AI chapter of my book with the following question: Imagine 1,000 people, broken up into groups of five, working on two hundred separate encyclopedias, versus that same number of people working on one encyclopedia? Which one will be the best? This sounds like a silly analogy when described in the context of an encyclopedia, but it is exactly what is going on in artificial intelligence (AI) research today.

Today, the research community has not adopted free software and shared codebases sufficiently. For example, I believe there are more than enough PhDs today working on computer vision, but there are 200+ different codebases plus countless proprietary ones. Simply put, there is no computer vision codebase with critical mass.

We’ve known approximately what a neural network should look like for many decades. We need “places” for people to work together to hash out the details. A free software repository provides such a place. We need free software, and for people to work in “official” free software repositories.

“Open source forms of information” I have found is a separate topic from the software issue. Software always reads, modifies, and writes data, state which lives beyond the execution of the software, and there can be an interesting discussion about the licenses of the data. But movies and music aren’t science and so it doesn’t matter for most of them. Someone can only sell or give away a song after the software is written and on their computer in the first place. Some of this content can be free and some can be protected, and this is an interesting question, but mostly this is a separate topic. The important thing to share is scientific knowledge and software.

It is true that software always needs data to be useful: configuration parameters, test files, documentation, etc. A computer vision engine will have lots of data, even though most of it is used only for testing purposes and little used at runtime. (Perhaps it has learned the letters of the alphabet, state which it caches between executions.) Software begets data, and data begets software; people write code to analyze the Wikipedia corpus. But you can’t truly have a discussion of sharing information unless you’ve got a shared codebase in the first place.

I agree that proprietary software is and should be allowed in a free market. If someone wants to sell something useful that another person finds value in and wants to pay for, I have no problem with that. But free software is a better development model and we should be encouraging / demanding it. I’ll end with a quote from Linus Torvalds:

Science may take a few hundred years to figure out how the world works, but it does actually get there, exactly because people can build on each others’ knowledge, and it evolves over time. In contrast, witchcraft/alchemy may be about smart people, but the knowledge body never “accumulates” anywhere. It might be passed down to an apprentice, but the hiding of information basically means that it can never really become any better than what a single person/company can understand.
And that’s exactly the same issue with open source (free) vs proprietary products. The proprietary people can design something that is smart, but it eventually becomes too complicated for a single entity (even a large company) to really understand and drive, and the company politics and the goals of that company will always limit it.

The world is screwed because while we have things like Wikipedia and Linux, we don’t have places for computer vision and lots of other scientific knowledge to accumulate. To get driverless cars, we don’t need any more hardware, we don’t need any more programmers, we just need 100 scientists to work together in SciPy and GPL ASAP!

Regards,

-Keith

well-in-an-oasisIt’s easy to think of people from the underdeveloped world as quite different from ourselves. After all, there’s little to convince us otherwise. National Geographic Specials, video clips on the Nightly News, photos in every major newspaper – all depicting a culture and lifestyle that’s hard for us to imagine let alone relate to. Yes – they seem very different; or perhaps not. Consider this story related to me by a friend.

Ray was a pioneer in software. He sold his company some time ago for a considerable amount of money. After this – during his quasi-retirement he got involved in coordinating medical relief missions to some of the most impoverished places on the planet, places such as Timbuktu in Africa.

The missions were simple – come to a place like Timbuktu and set up medical clinics, provide basic medicines and health care training and generally try and improve the health prospects of native peoples wherever he went.

Upon arriving in Timbuktu, Ray observed that their system of commerce was incredibly simple. Basically they had two items that were in commerce – goats and charcoal.

According to Ray they had no established currency – they traded goats for charcoal, charcoal for goats or labor in exchange for either charcoal or goats. That was basically it.

Ray told me that after setting up the clinic and training people they also installed solar generators for the purpose of providing power for satellite phones that they left in several villages in the region.

They had anticipated that the natives, when faced with an emergency or if they needed additional medicines or supplies would use the satellite phones to communicate these needs however this isn’t what ended up happening…the-road-to-timbuktu

Two years after his initial visit to Timbuktu, Ray went back to check on the clinics that they had set up and to make certain that the people there had the medicines and other supplies that they required.

Upon arriving at the same village he had visited before Ray was surprised to note that in the short period of only two years since his previous visit things had changed dramatically – things that had not changed for hundreds, perhaps even thousands of years.

Principally, the change was to the commerce in Timbuktu. No longer were goats and charcoal the principal unit of currency. They had been replaced by a single unified currency – satellite phone minutes!

Instead of using the satellite phones to call Ray’s organization, the natives of Timbuktu had figured out how to use the phones to call out to neighboring villages. This enabled more active commerce between the villages – the natives could now engage in business miles from home – coordinating trade between villages, calling for labor when needed or exchanging excess charcoal for goats on a broader scale for example.mudshacks-in-timbuktu

Of course their use of these phones wasn’t limited strictly to commerce – just like you and I, they also used these phones to find out what was happening in other places – who was getting married, who was sick or injured or simply to communicate with people from other places that were too far away to conveniently visit.

In other words, a civilization that had previously existed in a way that we would consider highly primitive had leapfrogged thousands of years of technological and cultural development and within the briefest of moments had adapted their lives to a technology that is among the most advanced of any broadly distributed in the modern world.

It’s a powerful reminder that in spite of our belief that primitive cultures are vastly different from us the truth is that basic human needs, when enabled by technology, are very much the same no matter where in the world or how advanced the civilization.

Perhaps we are not so different after all?
Timbuktu

Introduction
At a fundamental level, real wealth is the ability to fulfill human needs and desires. These ephemeral motivators are responsible for the creation of money, bank ledgers, and financial instruments that drive the world—caveat the fact that the monetary system can’t buy us love (and a few other necessities). Technologies have always provided us with tools that enable us to fulfill more needs and desires for more people with less effort. The exponential nanomanufacturing capabilities of Productive Nanosystems will simply enable us to do it better. Much better.

Productive Nanosystems
The National Nanotechnology Initiative defines nanotechnology as technologies that control matter at dimensions between one and a hundred nanometers, where unique phenomena enable novel applications. For particles and structures, reducing dimensions to the nanoscale primarily affects surface area to volume ratios and surface energies. For active structures and devices, the significant design parameters become exciton distances, quantum effects, and photon interactions. Connecting many different nanodevices into complex systems will multiply their power, leading some experts to predict that a particular kind of nanosystem—Productive Nanosystems that produces atomically precise products—will dramatically change the world.

Productive Nanosystems are programmable mechanoelectrochemical systems that are expected to rearrange bulk quantities numbers of atoms with atomic precision under programmatical control. There are currently four approaches that are expected to lead to Productive Nanosystems: DNA Origami[1], Bis-Peptide Synthesis[2], Patterned Atomic Layer Epitaxy[3], and Diamondoid Mechanosynthesis[4]. The first two are biomimetic bottom-up approaches that struggle to achieve long-range order and to increase complexity despite using chaotic thermodynamic processes. The second two are scanning-probe-based top-down approaches that struggle to increase productivity to a few hundred atoms per hour while reducing error rate.[5]

For the bottom-up approaches, the tipping point will be reached when researchers build the first nanosystem complex enough to do error correction. For the top-down approaches that can do error correction fairly easily, the tipping point will be reached when subsequent generations of tip arrays no longer need to be redesigned for speed and size improvements while using control algorithms that scale well (i.e. they only need generational time, synthesized inputs, and expansion room). When these milestones are reached, nanosystems will grow exponentially—unnoticeably for a few weeks, but suddenly they will become overwhelmingly powerful. There are many significant applications foreseen for mature Productive Nanosystems, ranging from aerospace and transportation to medicine and manufacturing—but what may affect us the hardest may be those applications that we can’t foresee.

Thus far, no scientific reason has been discovered that would prevent any of the four approaches from leading to Productive Nanosystems, much less all of them. So when an early desktop nanofactory prints out the next generation of Intel’s processor (without a $8 Billion microphotolithography fab plant), or a sailboat goes out for a weekend cruise and collects a few kilograms of gold or plutonium from seawater, people will sit up and take notice that the world has changed. Unfortunately, by then it will be a bit late — they will be like Neanderthals staring at a jet fighter that just thundered by overhead, and is already half-way to the horizon.

Combined with sufficient medical knowledge of how the human body should operate at the nanoscale, Productive Nanosystems may also be able to cure all known diseases, and perhaps even reverse the seven mechanisms of aging. For example, replacing red blood cells with microscopic artificial red blood cells (consisting of pressurized tanks and nanocomponents) will enable people to hold their breath for four hours.[6] Such simple nanobots (with less complexity than a microwave oven) may save the lives of many patients with blood and heart disorders. Other nanostructures, such as artificial kidneys with biocompatible nanomembranes, may prevent end-stage renal failure. One important caveat however, is that Productive Nanosystems can only move atoms around—they are useless when we don’t know where the atoms are supposed to go. Discovering the optimal positions of atoms for a particular application is new science, and inherently unpredictable.

In contrast to inventing new science, connecting nanodevices together to form a Productive Nanosystem is an engineering problem. If done correctly, it will make possible nanofactory appliances that can “print” anything (caveat the flexibility of the output envelope, the range and limits of the input molecules, the “printing” process, and the software).[7] These developments should increase our average standard of living to levels that would make Bill Gates look like a pauper, while reducing our carbon footprint to negative numbers, and replacing the energy and transportation infrastructures of the world.
Maybe.

After all, we currently have a technologically-enhanced standard of living that kings and pharaohs of old would envy, but we certainly haven’t reached utopia yet. On the other hand, atomically precise products made by Productive Nanosystems will be able to reduce economic dependency to a square meter of dirt and the sunshine that lands on it, while simultaneously lowering the price to orbit to $5/lb. Those kinds of technological capabilities might buy a significant amount of economic and political freedom.

Economics
The collisions between unstoppable juggernauts and immovable obstacles are always fascinating—we just cannot tear our eyes away from the immense conflict, especially if we have a glimmer of the immense consequences it will have for us. So it will be when Productive Nanosystems emerge from the global financial meltdown. To predict what will happen in the next decade or so, we must understand the essential nature of wealth, and we must understand the capabilities of productive nanosystems. Plus we must understand the consequences of their confluence. This is a tall order. Like any new technology, the development of Productive Nanosystems will depend on economics and politics, primarily the Rule of Law and enforceable contracts. But then the formidable power of Productive Nanosystems to do more with less will significantly affect some of the rules that govern economics and politics.

In the past few months, many people have panicked over plummeting retirement accounts, tumbling real estate values, and the loss of jobs by their coworkers (if not themselves). The government’s subsequent response has been equally shocking, as government spending has skyrocketed with brain-numbing strings of zeros being added to the national debt. Historically in both the U.S. and abroad, an expansion of the money supply in excess of the production of real goods and services has invariably produced inflation.

To make some sense of what is happening, and of how we might get out of this mess, it might be useful to re-examine the concept of wealth. Karl Marx’s “labor theory of value” identified human labor as the only source of wealth, but there are at least three major errors with this view. First, valuable material resources are spread unequally over this planet (which is why mining rights are so important). Second, tools can multiply the value of a person’s labor by many magnitudes (and since tools are generated by human labor and other tools, the direction and specific accomplishments of human labor become important). Third, political and social systems that incentivize different types of human behavior (and attitudes) will significantly increase or decrease the amount of real wealth available. Unfortunately, the tax rates of most political systems decrease the incentive to produce real wealth, and few of them provide an incentive to encourage the ultimate source of real wealth: the valuable ideas in the minds of inventors and innovators.

But what is that real wealth? Basically, it is the ability to fulfill human needs and desires. This means that (as subjective value theory claims), one person cannot know the needs and desires of another, and therefore all central planning schemes will fail. Statistics are fallible for a number of reasons, but mostly because reality is too complex: In the chaotic interplay of causal forces in the real world, the injection of a brilliant idea into a situation that is sensitive to initial conditions can change the world in very unpredictable ways. Also, central planning fails because human beings in power (i.e. politicians) are too susceptible to temptation (as in rent-seeking), and because the illogical passions that drive many human decisions cannot be encompassed by bureaucratic rules (or bureaucratic minds, for that matter).

By its very nature, real wealth requires government to uphold the inalienable rights of its citizens (including property rights), to provide for the common good by creating and orderly environment in which free citizens may prosper with their work, and to protect the weak from the strong. So government plays an important role in creating real wealth.

Wealth is often associated with money, but money is simply a counter: it replaced the barter of objects and services because it is an efficient marker that facilitates the exchange and storage of real wealth.[8]

Productive Nanosystems will only rearrange atoms, so they will not change what money and real wealth are. However, because Productive Nanosystems will provide a precise and powerful mechanism for rearranging atoms, they will be able to fulfill more human needs and desires than ever imaginable. But it still won’t be free.

Nanotechnologies and their applications will not be easily bartered, and atoms of different elements will still have relative scarcities (along with energy), so money will still be very useful. Unfortunately, it also means that deficit spending will still be inflationary. But will that be bad?

Early medieval Christian, Jewish, and Islamic societies all denounced usury as immoral, thereby preventing fractional reserve banking and inadvertently reducing the supply of available capital for business expansion. Some people are suspicious of the consequences and ethics of fractional reserve banking, based on an instinctive uneasiness that it seems like a Ponzi-scheme — creating money out of nothing. But while a Ponzi scheme is always based on extravagant promises and fraudulent misrepresentation, fractional reserve banking can serve a beneficial role (i.e. generate real wealth) as long as the fraction that banks choose to lend is commensurate with the velocity of money, risk weighted credit exposure, and the productivity of different forms of real wealth.[9] In today’s non-agricultural post-industrial society, the optimum reserve percentage has been calculated to be around 10%, and that is what the legal limit has been for some time. Unfortunately, greed being what it is, people have found loopholes in that law. In the United States this began occurring most notably in the early 1990s with the repeal of the Glass-Steagall Act of 1933 and the creation of Collateralized Debt Obligations.[10]

In the olden days, monetary expansion occurred when the king called in all the coins, shaved them or diluted the alloy that made them up, and then re-issued them. This was the old-fashioned form of deficit spending. This trick became easier with the invention of paper money, and became even more easy as financial services moved into electronic bits. Other than being a theft from future lenders by present borrowers, deficit spending skews the value decisions of consumers and investors, causing them to spend and invest money differently than they would if they knew how much real money actually existed. Another problem develops when bankers start underwriting government bonds, giving them powerful incentives for pressuring governments to maximize profit for themselves—not to benefit the country or its citizens (this is especially true when those in power build monopolies to reduce competition).

The expenses of running a bank, along with the expansion of the money supply via fractional reserve banking means that lenders must charge a reasonable interest rate to stay in business (at the same time, the exploitation of the poor by charging exorbitant interest is certainly unjust). The expansion of the money supply then maximizes the productivity of human labor as population grows and technology improves. This is why most economists think that the money supply should expand at the same rate as the growth in goods and services. Otherwise deflation occurs as the exchange value of the money increases to meet the expanded demand. At best, deflation only makes it more difficult for businesses get loans for expansion; at worst it signals the beginning of a deflationary spiral, in which falling prices give consumers an incentive to delay purchases until prices fall further, which in turn reduces overall economic activity, etc.

Thus deficit spending skews the economical signal between production and consumption. This is why it is harmful, especially as deficit spending increases, and especially if the spending is politically charged. With respect to nanotechnology, the salient point is that deficit spending incentivizes short-run gains over long term investments. The real problem is that this bias makes the investment necessary for nanotechnology-enabled productivity much more difficult to attain, even though such an investment could ameliorate the negative impact of the current deficit spending.

Nanotechnology can do nothing about correcting distorted economic signals. However, nanotechnology can increase productivity. And if it increases productivity as fast as the money supply grows, then we may not suffer from hyperinflation—though admittedly outracing politicians on a spending binge will be no mean trick. Whether it does or doesn’t depends on some sensitive initial conditions that may or may not trigger a psychological tipping point at which many people realize that more claim-tickets (dollars) to wealth have been printed (or stored as zeros in some computer’s memory) than can ever be redeemed. So they start selling panic- selling—exchanging paper or electronic money for anything with a more solid aspect of reality. The enhanced properties of primitive nanotech-enabled products will certainly have a dramatic effect on reality—this will be even more true with Productive Nanosystems—many of which may seem miraculous. Why worry about whether the numbers in your checking account are “real” as long as they cover the credit card bill next month for medical nanobots we would buy online and download today? The big question is *if* the medical nanobots will really be available or not.

Unfortunately, even in the best case many individuals will suffer because hyper-increased productivity may cause hyper-increased money flows. If the flow of money hyper-accelerate does (and even if it doesn’t), the hyper-acceleration of productivity will undoubtedly cause more economic and social turbulence than most people can handle. This is a matter for concern, because many scenarios predict very significant amounts of turbulence as Productive Nanosystems reach a tipping point. By analogy, the recent financial meltdown is to the nanotech revolution what a kindergarten play dress rehearsal is to the Normandy invasion.

Why is the advent of Productive Nanosystems so significant, why is it bad (if it is), and what are we going to do about it?

First, it seems obvious that a rapid commercialization of Productive Nanosystems will cause turbulent economic fluctuations that hurt people who aren’t fast enough to adjust to them. But how do we know that Productive Nanosystems will cause massive fluctuations?

Briefly, it is because they are so powerful. For example, building nanoelectronic circuits on a desktop “printer” instead of a fab plant will probably bankrupt the many companies needed to build the fab plant (no matter whether it is a mere $2B as it is today, or whether it may top $50B as expected a few Moore’s generations from now). It is difficult to predict what would happen if the desktop “printer”, or nanofactory, could print a copy of itself, but a continuation of “business as usual” would not be possible with such an invension.

Second, why is the quick development of Productive Nanosystems bad? Or is it?

Though many Americans today have adequate material comforts, we do not have some of the freedoms taken for granted by kings of old. Trinkets and baubles are not equivalent to freedom, and nanotech-enabled trinkets are trinkets nonetheless. On the other hand, atomically precise products made by productive nanosystems will be able to reduce economic dependency to a square meter of dirt and the sunshine that lands on it, and lower the price to orbit to $5/lb. Those kinds of abilities will buy a significant amount of economic and political freedom, especially for those with more than a square meter of dirt and sunshine. Just as the settlement of the New World had large effects on the Old, an expansion off-planet would have huge implications for those who stay behind. Given such possibilities and pushing Bill Joy’s overwrought fears of nanotechnology aside,[11] it seems that there is cause for concern, but there is also cause for hope.

Third, what are we going to do about it?

Part of the problem is that the future is not clear. Throwing more smart people at the problem might help reduce the amount of uncertainty, but only if the smart people understand why some events are more likely to occur. Then they need to explain to us and to policy makers the technical possibilities of Productive Nanosystems and their social consequences.

Second, we need to invest in Productive Nanosystems. Historically, we know that companies such as Google and Samsung, who increased their R&D spending after the dotcom bubble of 2001, came out much stronger than their competition did. In 2003, China ranked third in the world in number of nanotechnology patents, but in recent months Tsinghua University has often had more than twice as many nanotechnology patents pending as any other U.S. university or organization. Earlier, the Chinese had duplicated [12] Rothemund’s DNA Origami experiment within months of the publication of his seminal article in Nature. Those who invest more money with more wisdom will do much better than those who do not invest, or who invest foolishly.

The other part of the problem is that we often don’t have the intestinal fortitude to do what is right, even when we know what it is. As human beings, we are easily tempted. Neither increased intelligence nor mature Productive Nanosystems will ever help us get around this problem. About the only thing we can do is practice ethical and moral behavior now, so that we get into the habit now before the consequences become enormous. Then again, judging from the recorded history, legends, and stories from ancient sources, the last six thousand years of practice has not done us much good.

Some of our current financial meltdown occurred because we were soft-hearted and soft-headed, encouraging the making of loans to people who couldn’t pay them back. Other financial problems occurred because of greed—the attempt to make money quickly without creating real wealth. Unfortunately, the enormous productivity promise of Productive Nanosystems may only encourage that type of risky gambling.

There is also the problem that poverty may not only be the lack of money. This means that in a Productive Nanosystem-driven economy, poverty will not be the lack of real wealth, but something else. If that is true, then what is real poverty? Is it ignorance? Self-imposed unhappiness? The suffering of injustice? I don’t know, but I suspect that just as obesity plagues the poor more than the rich, a hyper-abundant society will reveal social dysfunctions that seem counterintuitive to us today. Some characteristic disfunctionalities, such as wealth producing sloth, are obvious. Others are not, and they are the ones that will trap numerous unsuspecting victims.

Eric Drexler has identified a few things that will be valuable in a hyper-abundant society: new scientific knowledge, and land area on Earth (the limit of which has been a cause of wars since humans first left Africa). Given the additional gifts of disease-free and ageless bodies, I would add a few more valuables, listed by increasing importance: the respect of a community, the trust of friends outside the increasingly byzantine labyrinth of law, the admiration of children (especially your own), the total lifelong commitment of a spouse, and the peace of knowing one’s unique destiny in this universe. We should all be as lucky.

Footnotes
1. Paul W. K. Rothemund, Folding DNA to create nanoscale shapes and patterns, Nature, Vol 440, 16 March 2006.
2. Christian Schafmeister, Molecular lego. Scientific American 2007;296(2):64–71.
3. John Randall, et al., Patterned atomic layer epitaxy — Patent 7326293
4. Robert A. Freitas Jr., Ralph C. Merkle, “A Minimal Toolset for Positional Diamond Mechanosynthesis,” J. Comput. Theor. Nanosci. 5(May 2008):760–861; http://www.MolecularAssembler.com/Papers/MinToolset.pdf
5. The Zyvex-led Atomically Precise Manufacturing Consortium has recently met their DARPA-funded Tip-Based Nanofabrication project’s Phase I metrics by writing 100 dangling bond wires, half of them 36.6nm x 3.5nm and half 24.5nm x 3.5 nm in 5.66 minutes. That is 1.5 million atoms per hour, but the error rate was ±6.4%, which is unacceptable for Productive Nanosystems (unless they implement error correction, which for Patterned Atomic Layer Epitaxy may or may not be easy because the high mobility of hydrogen at the operating temperature of the process).
6. Tihamer Toth-Fejel. Respirocytes from Patterned Atomic Layer Epitaxy: The Most Conservative Pathway to the. Simplest Medical Nanorobot. 2nd Unither Nanomedical and Telemedicine Technology Conference. Quebec, Canada. February 24–27, 2009. www.unithertechnologyconference.com/downloads09/SessionsDayOne/TIHAMER_web.ppt
7. Chris Phoenix and Tihamer Toth-Fejel, Large-Product General-Purpose Design and Manufacturing Using Nanoscale Modules: Final Report, CP-04–01, NASA Institute for Advanced Concepts, May 2005. http://www.niac.usra.edu/files/studies/final_report/1030Phoenix.pdf
8. The Federal Reserve distinguishes value exchange as M1 and the [storage] of value as M2. For a good description of the history and role of money, see Alan Greenspan, Gold and Economic Freedom. http://www.constitution.org/mon/greenspan_gold.htm
9. Karl Denninger describes the benefits and drawbacks of fractional reserve banking, pointing out that the key determinate is whether or not the debts incurred are productive (e.g. investments in tooling, land, or education) vs. consumptive (e.g. heating a house, buying a bigscreen TV, or going on vacation). See http://market-ticker.denninger.net/archives/865-Reserve-Banking.html
10. Marc and Nathalie Fleury, The Financial Crisis for Dummies: Securitization. http://www.thedelphicfuture.org/2009/04/financial-crisis-for-dummies.html
11. Bill Joy, Why the future doesn’t need us. Wired (Apr 2000) http://www.wired.com/wired/archive/8.04/joy.html On some issues, Bill Joy was so far off that he wasn’t even wrong. See “Why the Future Needs Bill Joy” http://www.islandone.org/MMSG/BillJoyWhyCrit.htm
12. Qian Lulu, et al., Analogic China map constructed by DNA. Chinese Science Bulletin. Dec 2006. Vol. 51 No. 24

Acknowledgements
Thanks to Forrest Bishop, Jim Osborn, and Andrew Balet for many excellent critical comments on earlier drafts.

Tihamer Toth-Fejel, MS
General Dynamics Advanced Information Systems
Michigan Research and Development Center

From financial crisis to global catastrophe

Financial crisis which manifested in the 2008 (but started much earlier) has led to discussion in alarmists circles — is this crisis the beginning of the final sunset of mankind? In this article we will not consider the view that the crisis will suddenly disappear and everything returns to its own as trivial and in my opinion false. Transition of the crisis into the global catastrophe emerged the following perspective:
1) The crisis is the beginning of long slump (E. Yudkowsky term), which gradually lead mankind to a new Middle Ages. This point of view is supported by proponents of Peak Oil theory, who believe that recently was passed peak of production of liquid fuels, and since that time, the number of oil production begins to drop a few percent each year, according to bell curve, and that fossil fuel is a necessary resource for the existence of modern civilization, which will not be able to switch to alternative energy sources. They see the current financial crisis as a direct consequence of high oil prices, which brace immoderate consumption. The maintenance is the point of view is the of «The peak all theory», which shows that not only oil but also the other half of the required resources of modern civilization will be exhausted in the next quarter of century. (Note that the possibility of replacing some of resources with other leads to that peaks of each resource flag to one moment in time.) Finally, there is a theory of the «peak demand» — namely, that in circumstances where the goods produced more then effective demand, the production in general is not fit, which includes the deflationary spiral that could last indefinitely.
2) Another view is that the financial crisis will inevitably lead to a geopolitical crisis, and then to nuclear war. This view can be reinforced by the analogy between the Great Depression and novadays. The Great Depression ended with the start of the Second World War. But this view is considering nuclear war as the inevitable end of human existence, which is not necessarily true.
3) In the article “Scaling law of the biological evolution and the hypothesis of the self-consistent Galaxy origin of life”. (Advances in Space Research V.36 (2005), P.220–225” http://dec1.sinp.msu.ru/~panov/ASR_Panov_Life.pdf) Russian scientist A. D. Panov showed that the crises in the history of humanity became more frequent in curse of history. Each crisis is linked with the destruction of some old political system, and with the creation principle technological innovation at the exit from the crisis. 1830 technological revolution lead to industrial world (but peak of crisis was of course near 1815 – Waterloo, eruption of Tambora, Byron on the Geneva lake create new genre with Shelly and her Frankeshtain.) One such crisis happened in 1945 (dated 1950 in Panov’s paper – as a date of not the beginning of the crisis, but a date of exit from it and creation of new reality) when the collapse of fascism occurred and arose computers, rockets and atomic bomb, and bipolar world. An important feature of these crises is that they follow a simple law: namely, the next crisis is separated from the preceding interval of time to 2.67+/- 0.15 shorter. The last such crisis occurred in the vicinity of 1991 (1994 if use Panov’s formula from the article), when the USSR broke up and began the march of the Internet. However, the schedule of crisis lies on the hyperbole that comes to the singularity in the region in 2020 (Panov gave estimate 2004+/-15, but information about 1991 crisis allows to sharpen the estimate). If this trend continues to operate, the next crisis must come after 17 years from 1991 , in 2008, and another- even after 6.5 years in 2014 and then the next in 2016 and so on. Naturally it is desirable to compare the Panov’s forecast and the current financial crisis.
Current crisis seems to change world politically and technologically, so it fit to Panov’s theory which predict it with high accuracy long before. (At least at 2005 – but as I now Panov do not compare this crisis with his theory.) But if we agree with Panov’s theory we should not expect global catastrophe now, but only near 2020. So we have long way to it with many crisises which will be painful but not final. Continue reading “From financial crisis to global catastrophe” | >

(This essay has been published by the Innovation Journalism Blog — here — Deutsche Welle Global Media Forum — here — and the EJC Magazine of the European Journalism Centre — here)

Thousands of lives were consumed by the November terror attacks in Mumbai.

“Wait a second”, you might be thinking. “The attacks were truly horrific, but all news reports say around two hundred people were killed by the terrorists, so thousands of lives were definitely not consumed.”

You are right. And you are wrong.

Indeed, around 200 people were murdered by the terrorists in an act of chilling exhibitionism. And still, thousands of lives were consumed. Imagine that a billion people devoted, on average, one hour of their attention to the Mumbai tragedy: following the news, thinking about it, discussing it with other people. The number is a wild guess, but the guess is far from a wild number. There are over a billion people in India alone. Many there spent whole days following the drama. One billion people times one hour is one billion hours, which is more than 100,000 years. The global average life expectancy is today 66 years. So nearly two thousand lives were consumed by news consumption. It’s far more than the number of people murdered, by any standards.

In a sense, the newscasters became unwilling bedfellows of the terrorists. One terrorist survived the attacks, confessing to the police that the original plan had been to top off the massacre by taking hostages and outlining demands in a series of dramatic calls to the media. The terrorists wanted attention. They wanted the newsgatherers to give it to them, and they got it. Their goal was not to kill a few hundred people. It was to scare billions, forcing people to change reasoning and behavior. The terrorists pitched their story by being extra brutal, providing news value. Their targets, among them luxury hotels frequented by the international business community, provided a set of target audiences for the message of their sick reality show. Several people in my professional surroundings canceled business trips to Mumbai after watching the news. The terrorists succeeded. We must count on more terror attacks on luxury hotels in the future.

Can the journalists and news organizations who were in Mumbai be blamed for serving the interests of the terrorists? I think not. They were doing their jobs, reporting on the big scary event. The audience flocked to their stories. Their business model — generating and brokering attention — was exploited by the terrorists. The journalists were working on behalf of the audience, not on behalf of the terrorists. But that did not change the outcome. The victory of the terrorists grew with every eyeball that was attracted by the news. Without doubt, one of the victims was the role of journalism as a non-involved observer. It got zapped by a paradox. It’s not the first time. Journalism always follows “the Copenhagen interpretation” of quantum mechanics: You can’t measure a system without influencing it.

Self reference is a classic dilemma for journalism. Journalism wants to observe, not be an actor. It wants to cover a story without becoming part of it. At the same time it aspires to empower the audience. But by empowering the audience, it becomes an actor on the story. Non-involvement won’t work, it is a self-referential paradox like the Epimenides paradox (the prophet from Crete who said “All Cretans are liars”). The basic self-referential paradox is the liars’ paradox (“This sentence is false”). This can be a very constructive paradox, if taken by the horns. It inspired Kurt Gödel to reinvent the foundation of mathematics, addressing self-reference. Perhaps the principles of journalism can be reinvented, too? Perhaps the paradox of non-involvement can be replaced by ethics of engagement as practiced by, for example, psychologists and lawyers?

While many classic dilemmas provide constant frustration throughout life, this one is about to get increasingly wicked. Here is why. It is only 40 years since the birth of collaboration between people sitting behind computers linked by a network, “the mother of all demos”, when Doug Engelbart and his team at SRI demoed the first computer mouse, interactive text, video conferencing, teleconferencing, e-mail and hypertext.

Only 40 years after their first demo, and only 15 years after the Internet reached beyond the walls of university campuses, Doug’s tools are in almost every home and office. Soon they’ll be built into every cell phone. We are always online. For the first time in human history, the attention of the whole world can soon be summoned simultaneously. If we summon all the attention the human species can supply, we can focus two hundred human years of attention onto a single issue in a single second. This attention comes equipped with glowing computing power that can process information in a big way.

Every human on the Net is using a computer device able to do millions or billions of operations per second. And more is to come. New computers are always more powerful than their predecessors. The power has doubled every two years since the birth of computers. This is known as Moore’s Law.

If the trend continues for another 40 years, people will be using computers one million times more powerful than today. Try imagining what you can do with that in your phone or hand-held gaming device! Internet bandwidth is also booming. Everybody on Earth will have at least one gadget. We will all be well connected. We will all be able to focus our attention, our ideas and our computational powers on the same thing at the same go. That’s pretty powerful. This is actually what Doug was facilitating when he dreamed up the Demo. The mouse — what Doug is famous for today — is only a detail. Doug says we can only solve the complex problems of today by summoning collective intelligence. Nuclear war, pandemics, global warming. These are all problems requiring collective intelligence. The key to collective intelligence is collective attention. The flow of attention controls how much of our collective intelligence gets allocated to different things.

When Doug Engelbart’s keynoted the Fourth Conference on Innovation Journalism he pointed out that journalism is the perception system of collective intelligence. He hit the nail on the head. When people share news, they have a story in common. This shapes a common picture of the world and a common set of narratives for discussing it. It is agenda setting (there is an established “agenda-setting theory” about this). Journalism is the leading mechanism for generating collective attention. Collective attention is needed for shaping a collective opinion. Collective intelligence might require a collective opinion in order to address collective issues.

Here is where innovation journalism can help. In order for collective intelligence to transform ideas into novelties, we need to be able to generate common sets of narratives around how innovation happens. How do people and organizations doing different things come together in the innovation ecosystem? Narratives addressing this question make it possible for each one of us to relate to the story of innovation. Innovation journalism turns collective attention on new things in society that will increase the value of our lives. This collective attention in turn facilitates the formuation of a collective opinion. Innovation journalism thus connects the innovation economy and democracy (or any other system of governance).

There is an upside and a downside to everything. We can now summon collective attention to track the spread of diseases. But we are also more susceptible to fads, hypes and hysterias. Will our ability to focus collective attention improve our lives or will we become victims of collective neurosis?

We are moving into the attention economy. Information is no longer a scarce commodity. But attention is. Some business strategists think ‘attention transactions’ can replace financial transactions as the focus of our economy. In this sense, the effects on society of collective attention is the macroeconomics of the attention economy. Collective attention is key for exercising collective intelligence. Journalism — the professional generator and broker of collective attention — is a key factor.

This brings us back to Mumbai. How collectively intelligent was it to spend thousands of human lifetimes of attention following the slaughter of hundreds? The jury is out on that one — it depends on the outcome of our attention. Did the collective attention benefit the terrorists? Yes, at least in the short term. Perhaps even in the long term. Did it help solve the situation in Mumbai? Unclear. Could the collective attention have been aimed in other ways at the time of the attacks, which would have had a better outcome for people and society? Yes, probably.

The more wired the world gets, the more terrorism can thrive. When our collective attention grows, the risk of collective fear and obsession follows. It is a threat to our collective mental health, one that will only increase unless we introduce some smart self-regulating mechanisms. These could direct our collective attention to the places where collective attention would benefit society instead of harm.

The dynamics between terrorism and journalism is a market failure of the attention economy.

No, I am not supporting government control over the news. Planned economy has proven to not be a solution for market failures. The problem needs to be solved by a smart feedback system. Solutions may lie in new business models for journalism that provide incentives to journalism to generate constructive and proportional attention around issues, empowering people and bringing value to society. Just selling raw eyeballs or Internet traffic by the pound to advertisers is a recipe for market failure in the attention economy. So perhaps it is not all bad that the traditional raw eyeball business models are being re-examined. It is a good time for researchers to look at how different journalism business models generate different sorts of collective attention, and how that drives our collective intelligence. Really good business models for journalism bring prosperity to the journalism industry, its audience, and the society it works in.

For sound new business models to arise, journalism needs to come to grips with its inevitable role as an actor. Instead of discussing why journalists should not get involved with sources or become parts of the stories they tell, perhaps the solution is for journalists to discuss why they should get involved. Journalists must find a way to do so without loosing the essence of journalism.

Ulrik Haagerup is the leader of the Danish National Public News Service, DR News. He is tired of seeing ‘bad news makes good news and good news makes bad news’. Haagerup is promoting the concept of “constructive journalism”, which focuses on enabling people to improve their lives and societies. Journalism can still be critical, independent and kick butt.

The key issue Haagerup pushes is that it is not enough to show the problem and the awfulness of horrible situations. That only feeds collective obsession, neurosis and, ultimately, depression. Journalism must cover problems from the perspective of how they can be solved. Then our collective attention can be very constructive. Constructive journalism will look for all kinds of possible solutions, comparing and scrutinizing them, finding relevant examples and involving the stakeholders in the process of finding solutions.

I will be working with Haagerup this summer, we will be presenting together with Willi Rütten of the European Journalism Centre a workshop on ‘constructive innovation journalism’ at the Deutsche Welle Global Media Summit, 3–5 June 2009.