Category Archives: Innovation

All posts that talk about innovation theory and technological innovations

New economy vs. old economy

Posted on by

With the rise of the so-called “Sharing Culture” there’s been a recent upswing in the types of business that focus on connecting people point to point with others that can provide services that people need without a lot of the fuss of other intermediaries. There are, of course, a few pioneers in this type of activity, Napster, Kazaa, but also more “Legitimate” companies, such as eBay, PayPal, and Craigslist. These caused disruption, but not on a seriously massive level. eBay expanded the amount of people that could or would auction off their goods. It more likely impacted the amount of garage sales or donations to Goodwill. Craigslist did have a negative impact on newspaper’s income – however newspapers were having other issues because people just weren’t buying them, so it was somewhat moot. Now, however, there are companies springing up that are impacting much larger less “fringe” portions of our economy.

I first heard of companies like this while in the Netherlands where some of my friends were using Couchsurfing. Which connected people that were passing through an area for a night to two to crash on someone’s couch. I don’t think any money was exchanging hands. I believe that this site was a natural precursor for AirBnB, which has gotten in a lot of hot water lately. This site, for those unaware, allows people to rent out rooms of their house or their entire house for short periods of time. The idea is that the renters can use the stuff in the house and have a cheaper place to stay compared to a hotel. While the owners are able to rent out unused space. For instance, I could rent out my third bedroom if I wanted too.

A lot of people aren’t happy with this notion. For one, it does violate a lot of zoning laws and people are pissed about their neighbors renting out rooms to god knows who. Secondly, it does violate those laws and New York City has decided to do something about that. They’ve asked for information on 15k users in the city. This will likely be a large blow to membership there. If users feel that they are likely to be hit by a law suit or forced to pay licenses to rent out the rooms, renting the rooms will be much less appealing. This of course will thrill hotels as they can continue to enjoy a higher cost.

Part of this stems from the fact that this is new and scary. People don’t understand the change. Part of it comes from the fact that the city doesn’t want people to do this instead of normal rental agreements which “protect” both parties in different ways. An AirBnB arrangement is very different and likely has a lower level of protection (mostly social norm based rather than legal based). Part of it probably has to do with money. The city likely earns less taxes from people renting rooms this way than from Hotels.

These types of differences are going to be occurring on a more frequent basis. We need to help steer the conversation as internet savvy folks and look into how we can create accommodations for both sides. I’m not saying for the hotels, I’m talking about for your neighbors and community. Work with them to help them explain what’s happening, why it’s happening, and what they can do to help develop the social norms for websites like AirBnB rather than destroying it before it has a chance to be successful.

I’m hoping there will be a lot more experimentation in these types of sites even if I never use them. I firmly believe that it’s your house you should be able to use it as you see fit as long as it doesn’t cause harm to other people. Having a two way conversation and educating the different stakeholders involved is crucial to ensuring the survival and continued experimentation in these spaces.

3D Printed Gun, Robots, and the future of food pricing

Posted on by

Recently there’s been a company based here in Austin Texas called Defense Distributed, which has been garnering a lot of attention. This is due to the fact that first, they developed a 3D printed magazine for an AR15. Then the decided to develop 3D printed versions of portions of the gun itself. These parts are being printed in plastic, so it seems unlikely that a plastic gun would work right? Well, the lower receiver for the AR15 can survive shooting 600 rounds. That’s a big deal. The first version was able to shoot one, the second only 7. As of yesterday they released a fully printable handgun. Due to restrictions in the US gun code a gun must have a certain minimum weight of metal to be detectable by metal detectors (125g). I think that this will have major ramifications – I’m not even talking about gun rights, or gun ownership or gun whatever. I’ll discuss those in a later post. Below is a video of the “Liberator” in action.

How is this a big deal in other ways than just Gun rights? Well, several months ago a book came out called “Race Against the Machine” which argues that we need to figure out how to work with robots and computers in an effective way to maximize the returns for both workers and for the owners of the computer/robots. One of these robots they discuss is a $25k robot called Baxter. This robot is extremely easy to program and control. It offers a lot of the capabilities that a low skill employee could offer and more than many expensive robots. In fact we’re seeing this in re-shoring efforts from companies like Tesla and Apple. They won’t be bringing back the old school manufacturing jobs. There will only be technician jobs related to fixing broken equipment, which will be significantly fewer jobs. Even if Baxter only lasts 3 years, it more than paid for itself in being able to operate for 24/7 for 25k in total rather than paying four people more than that each year.

Add in the capability for people to download  designs for guns and many other things from Thingiverse which can be printed from home and how cheap it is to send designs to companies like Shapeways – where you can print in metal, these changes are going to radically change our current manufacturing infrastructure and distribution system. We aren’t prepared for this and it’s going to reduce the number of low end jobs in existence.

Which brings me to the next point. Food prices are high. When people can’t feed themselves there are riots and revolts. We’ve seen this twice already in the past 5 years and we’re poised for more violence by August of this year. According to a study published two years ago food prices are near the threshold level of the Arab Spring. If these prices are still as high as predicted then we could see some serious issues in the next few years unless we radically begin rethinking our economic models.

We’ll be seeing massive disruption and opportunities in the manufacturing space. This will likely have massive ramifications on our supply chain, which has huge numbers of employees. The ability to print your own cheap plastic products could impact toy sales and the retail industry.

Is this bound to happen, no, certainly not. However, 3D Printers are now available for sale at Staples for $1,300 prebuilt, they’ve come pretty close to mainstream. The next step are going to be more advanced printers that are able to print faster, cool faster, print more complex designs with less structure, and eventually we might be able to print metal products on a printer that costs $1300. A lot of people won’t want to do this, but there will be enough where it could have a serious impact on the economy.

What do you think? Am I overreacting?

Looming battle: Content providers vs. service providers

Posted on by

In my last post about the PS4, I discussed how the PS4 is a long term play and that over time the product will move away from playing directly on the PS4 towards utilizing servers to stream the game to the user. This was an argument to counter many PC gamer’s disdain for the specs for the system. Sure, the specs aren’t great, but they are a huge advancement over the PS3, which is still able to play, rather well, new games.

Most of the feedback I got on the article basically went “well that’s great and all, but the infrastructure isn’t there for this in the US.” This is extremely valid feedback. AOL still records $500 Million in revenue from dial up connections. The US rates among the worst in developed world for internet speeds and penetration. Of course there’s the argument that our country is so much larger, well, the EU as a whole tops us, it’s not uniform across the EU, but that still makes it a valid comparison. The other thing to remember, the console won’t just come out in the US. Many of these features will work better in Korea and Japan than in the US. Typically Sony has released different features by region and will likely experiment with the sharing features in Japan before rolling it out to the US, where Sony knows it will have infrastructure difficulties.

This discussion raises additional concerns though, infrastructure isn’t just about the lines in the ground, but also the structure of the service providers that allow access. In the case of the US, not only does quality and speed of the connection vary wildly but we also have more restrictions on the amount of data we can download than other countries. For a typical family you end up buying the internet 2 or 3 times at the minimum (smart phone access per family member and then the main house connection). Each of these connections likely has a different maximum for downloading or uploading with fees for going over this.

This creates a lot of difficulties as we don’t always know how much bits a specific file will use as we access it. In many cases, it likely drives consistent under utilization of the service do to excessive fees and user dissatisfaction for those hitting the cap. Americans are starting to cut the cord in record numbers, my wife and I don’t have TV, just cable internet; I have a lot of options without Cable. This is going to start increasing the rate of frustration users have with caps. I typically watch live streaming video in 720p while my wife surfs the net and watches a show on Hulu.

I have absolutely no idea how much bandwidth is being consumed on a typical night. There is no easy way for me to measure this or plan for getting close to a cap. Furthermore, both my wife and I use our phones to access the internet, listen to music, watch videos, and play games on our phones. Again, all of these use bandwidth and likely push us against our cellular plan. Sure there’s meters for these, but they are notoriously inaccurate.

This issue with be further exacerbated by the proliferation of cloud services like Drop Box, video sharing on YouTube, streaming new services all the time, and the eventual goal of offloading computing power to the cloud. The measurement of these services will be extremely difficult and planning for how much data these services will require will be absurdly difficult at best for the average user. It is likely that these services will push users over the usage caps on a monthly bases.

I think that we need to start looking for another solution. I think that Google Fiber is a start, it would make sense for Netflix, Amazon, Dishnetwork, Microsoft, Intel, and other content providers to join a consortium that will introduce a new service provider to attack the incumbents. I have heard that Dish is currently working on creating their own system with Google or some other company, I think that this could potentially shake up the industry and allow users more options. There are going to be a wealth of new services that require more and more bandwidth and higher speeds. If these content providers want users to be able to access and enjoy their services they need to challenge the status quo to enable their customers.

Cash reserves, risks and innovation

Posted on by

In my last post I discussed the large cash reserves that companies have been holding since the 2007 recession. As I mentioned there are several reasons for this, some of it has to do with lack of R&D investment. R&D is an expensive investment. This requires both train scientists and equipment to conduct the research. In addition there are extra requirements for technicians and other employees to support the R&D effort. This isn’t cheap. As we can see in the bottom half of the chart all types of research funding has decreased recently.

R&D is not a certain thing by any stretch of the imagination. This is why companies are paring with universities to share the burden of R&D. Universities are doing much of the basic and applied research, while industry is developing it into product. This is where the money is and the greatest amount of certainty. You can’t really blame companies for this, but they need to work to develop their own technologies regardless of the work being performed at universities. To compensate many companies do engage in corporate venturing. This is where they fund a start up to conduct research and get a product to a certain position and possibly buy that company after a certain maturity point, set up an exclusive license or license the technology once it’s mature. This reduces the large company’s risk exposure.


The final piece that has increased since the late 80’s has been the amount of litigation due to patent infringement. In 2011 the amount of money spent on patent litigation was $29 Billion. That is a lot of money. That’s a quarter of the money that Apple has in it’s reserves. We also know that Apple is one of the largest spenders on litigation. I know there are a lot of Apple lovers out there, but they could have invested that money into more products and reduced their risk of a flop with the next iPhone. We all know that iOS6 was a major disappointment for many people, spreading their revenue stream into more sources with some cool research could mitigate any fall out from that or if iOS7 is more of the same. 


Litigation is such an outsized risk because it can lead to your entire firm being shut down by a non-producing entity. This reduces the incentives for innovation and increases the incentives for hoarding cash.

Business Cash Reserves and Innovation

Posted on by

I found an article on MarketWatch that discussed the fact that the private sector is, in fact, doing just fine. As the author mentioned, this didn’t go over very well whenever Obama mentioned it a few weeks ago. However, he’s right. Companies as a whole are doing extraordinarily well (see graph below), but normal people aren’t seeing it. I’ve discussed this before in a Future of Employment post.

As you can see from the graph Corporate profits are at an all time high. We also know that investments are still occurring in new equipment. We know from the numbers that companies aren’t hiring. I think that the GOP would argue that this is because of regulation uncertainty, which they are contributing to. From what I’ve seen the Democrats don’t really have any sort of good explanation for the lack of hiring. The author of the MarketWatch article claims that companies aren’t spending money on new employees because they are returning most of it to stock holders through dividends or stock buybacks. The data supports this perspective to some extent. Part of it could be the fact that many companies are automating, outsourcing and offshoring all contribute to some level or another.

I think that it’s a combination of these factors plus one other factor. This was added as something as a throw away at the end of the article, but it really stuck with me. “Corporations may be intensely profitable, but they have no profitable ideas about what to do with the vast sums they earn.” This comment is extremely important, especially when you couple that with the article that the Washington Post just published about the difficulty of PhDs finding jobs. 


These researchers are the core of the future for innovation at companies. If companies aren’t hiring these scientists, despite the fact that many claim there are skill gaps, then they are unlikely to innovate moving forward. My old roommate in the Netherlands, Brian, told me that the Holst Centre where he worked created 3 jobs for every employee at their research center. I’ve seen similar numbers in one of my courses as well. 


In this case the trickle down effect actually works. You hire researchers and they need to have technicians building equipment, which needs to order parts and raw materials to build those components. Which requires additional labor elsewhere. While 3 for 1 may not seem like the greatest ratio, those other workers typically make good money and will end up spending money elsewhere.

Innovation drives the economy. Companies need to look at how they manage risk, especially if they are sitting on huge reserves of cash. Putting more money into research for their field can lead to huge disruptions in technology and could lead to an increase in market share.

I will talk more about these risks in my next blog.