Tag Archives: Economy

Technological Convergences

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Convergences happen in all different ways. They happen in books or book series, where a good author can plan to have plotlines converge in a specific time and place. In the case of the series I just finished, the Malazan Book of the Fallen, the author was able to get two totally unrelated characters meet in really unexpected ways. It happens in films too, Crash and 21 Grams are two great examples of this. This happens in technology as well. Most of the time, we as consumers never even see it happening. When we look back though we realize it was incredibly obvious that it would happen. Two great examples of this happened with cell phones.

MP3 players have been wildly popular since they came out in the late 90’s. Napster and easy to rip CD’s made them incredibly useful and provided hours of great listening. Around the same time cell phones were becoming smaller and more popular. No unexpectedly, phone manufacturers decided that it would be useful to put a music player onto the phone. These were clunky and really only used when people didn’t have a better MP3 player. Apple had created a great MP3 player and realized, like the phone manufacturers that users only wanted to carry one of these devices. This is one of the reasons that drove them to make the iPhone. Great interface and good music experience. At this point they already had the music infrastructure and the loyal fan base to be sure of a high number of sales.

Around the same time as the MP3 boom businessmen were starting to use Portable Digital Assistants (PDA). This was a replacement to the calendar and phone book. It also provided a few applications that allowed some work on documents. It could also be used to schedule emails when the PDA was synced with the computer. It was obvious that this would be a great device to connect to some sort of network aside from plugging it in. Blackberry used to make two way pagers and figured out a way to send emails and other useful data over the pager network. This was one of the earliest smart phones. Eventually Microsoft and Palm got into the phone manufacturing game for the same reason. People didn’t want to carry two device a PDA and a phone. If you put them both together you’d have a better product and would sell more.

These two technologies converged on a similar product, smart phones. Both types of phones had a very different set of users initially. However, since the iPhone there has been a further convergence of these phones into general purpose phones. Blackberry, while still catering to the business side, is shifting to compete directly with the iPhone because business users want the apps that the iPhone has. Palm has vanished from the market being unable to compete and Android has appeared as the first PC based OS. Android is a distribution of Linux, it doesn’t run well on PCs but MS and Apple are moving in a direction of merging mobile OSes and PC OSes (sure it’s a Mac, but it uses Intel so there’s no different besides the OS).

If we look back at these convergences, aside from new competitors and firm failure, they appear to be pretty obvious. Why wouldn’t these companies move into these market spaces? I’ll discuss some of that in my next blog.

Innovation, Science and Money II

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In my last blog I discussed some of the budgetary cuts occurring in the US and how these cuts are going to impact the future of science. I want to spend some time explaining why this is the case. I mentioned something called Path Dependency, what do I mean by this? Well it’s a pretty simple concept, once you start down a policy path your choices are constrained by your previous choices and the results based on those choices.

This type of path dependency can be seen in scientific and technological changes. For example, if a piece of technology has three parts each one can be improved independently. If each one can be changed in one direction, from a 0 to a 1 each change could impact how likely a specific technology would be selected by consumers. Each change could lead to a local optimal, and could prevent the technology from becoming a global optimal. Additionally, these changes over time, with further research, could lead to radical different technologies. This happening from changing a single feature from on or off. Basically, it’s an evolutionary process.

Policy works the same way. There’s a paper written by Mustar et al (2008) that discusses the policy choices in France and the UK. The objective of the paper was to investigate the impact of policy choices on the creating of academic spin-offs. Some of the results lead to additional technology incubators in the UK and in France. However, the number of academic spin-offs in France actually decreased, however in the UK they increased significantly.

These differences came about because of previous policy choices. For example, France has laws related to civil servants and starting a new company. In France all professors are considered civil servants, so there is a history of professors not starting companies. There’s a lack of culture for entrepreneurship in France for increasing the number of academic spin-offs.

This is what I meant by path dependencies. Decreasing the amount of money going into meaningful academic research will have an impact in other ways. In the US there has been an increased push for increasing the number of companies being started. Scientific research can be turned into new companies through academic spin-offs. Decreasing the funding at two of the biggest funding agencies will decrease the number of academic spin-offs.

References:
Mustar et al 2008 http://www.springerlink.com/content/68282r1460889062/

Innovation, Science and Money

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The death of Steve Jobs has really shaken the technology community. It has really made people do a lot of thinking about innovation and the impact of technology based companies on the economy. The Economist notes that the American work force is on the decline and the high tech companies aren’t making up enough jobs. That now companies like Apple and Google employ less than a third of what companies like GM used to employ. These high tech companies don’t need as many employees. Additionally, it’s a different type of work force that are required in the US. Apple outsources manufacturing because they are really concerned with driving down the cost of manufacturing and maximize profits. This is good business.

In a long article by Peter Thiel, co-founder of Pay Pal and a venture capitalist, he discusses what he calls the end of the future. Where he claims that we’ve been in an innovation slow down since the 70’s. He also argues that scientists and technologists aren’t living up to the claims they are making. He argues that in a lot of ways we’ve been technologically stagnant. Politicians have been making the same promises on energy since the 70’s and that we’ve been slowing down are rate of increase of production for food barely keeping up with population growth. I think that he does make some good points, but he definitely goes a bit over the top with his statements. He’s looking at things only within the national and regional context and is ignoring the fact that there have been cultural changes that have driven a change in how companies innovate.

Historically, companies don’t find value in doing basic research. If you look at the history of research labs within industry, they hire researchers to do incremental and radical innovation. However, this research is carried out within a scientific paradigm which was created in basic research.

In fact we’ve seen a decrease in the amount of R&D being spent by companies. This has lead to some of the stagnation in innovation that Thiel mentions. To combat this and to reduce the risk borne by the company they have been doing more and more contract research with universities and have increase the amount of money they spend with universities.

Thiel also mentions that the government might be able to help but doesn’t see it ever going to happen when you have to justify the expense by cutting something else. Since he’s a libertarian he feels that the budget must be balanced. However, our politicians are cutting budgets to the largest scientific funding agencies in the US. My wife sent me an email with some of the funding cuts, National Science Foundation is getting cut by 2.3%, in fact it’s 14% below the budget requested by the administration. The National Institute for Standards and Technology’s budget is getting cut by 9.3%. Both of these agencies create a large number of jobs. It’s been shown that one research job creates several other jobs. Cutting these budgets will reduce the amount of research which can be conducted. This will impact the number of researchers, impact the quality of education at universities and slow down the ability for universities and firms to exploit new research.

It typically takes 10 years for research to be monetizable. Cutting funding now impacts employment now and future employment. In fact, these changes will have a long term lasting impact. These choices create a path dependency within our society. Without proper funding we’ll be passed by some one that feels research is paramount.

Occupy Wall Street

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Since September 17th people have been having a live in protest on Wall Street in New York City. The protests are attempting to bring attention to the inequities between Wall Street, CEOs and the rest of the US and world. There has been a media blackout since it started until recently. The Daily Show has covered it twice (Here and Here). There were two reasons for this. First the media didn’t know how to deal with the protests. They act differently, the people protesting aren’t grandmothers yelling about the government, instead it’s a bunch of hippie like people that are protesting corporations. Another problem was that there was no cohesive voice coming out from the movement. However yesterday there was an actual list of “demands” released. Basically these demands explain the need for changes at all levels of government and how corporations behave towards both workers and the environment.

The protests are in their third week now. They have been growing every week. Initially, there were only a few hundred protesters now it’s been reported that up to 20,000 people have started to protest in NYC. The occupy movement has spread from only being in NYC to Boston, LA, DC, and several other cities as well. While the Daily Show is right that these protests are very similar to the Tea Party protests the problems they hope to address the end goals and the means are very different. Both groups also had a lot of uninformed people, for example you had the old lady saying keep the government out of my healthcare when she had medicare (government healthcare), and here you have people just saying they want Wall Street to take less money. These protests have gone beyond just the hippies, unions in NYC have also joined the protesters as well as more “responsible” people from other walks of life.

I think these protests could eventually make a difference. I don’t think it will happen in time for the next presidential election. The changes that they are demanding are structural changes that require socio-economic changes. They require complete changes in our ethics and our goals in lives. These are not changes that happen over night. There are some changes that we can do that will have immediate impacts though, and these aren’t popular among policy makers. We need to get money out of politics, we need to limit how politicians can make money off the laws they pass and we need to use public funds for elections (as well as have elections on the weekend or a holiday). Removing the money by creating public funds will eliminate the leverage that lobbyists can use on politicians. Preventing politicians from making money off the laws through stock purchases will prevent tit-for-tat behavior with lobbyists as well. Making it easy as possible to vote will increase the immediate participation in the government.

The reaction to OWS in NYC has been horrifying. The cops have been brutal towards the protesters and really show that the indignation our leaders displayed during violent responses to protest are just words. If US politicians cared about freedom and democracy they would support the protesters. Protesting is part of being American. It’s part of our constitution because it drives conversation and it drives democracy. Protesting is a form of participation. If we aren’t able to participate we don’t have a democracy. Arresting 700 people for going to the protest isn’t acceptable. Pepper spraying women that were corralled is not acceptable, it’s not how a democracy deals with protests. The right way to deal with these protests is to invite them into the conversation and really take a look at what they have to say. We aren’t doing that in the US. The 99% don’t have the same voice as the 1%. As can be seen from Fox News, that 1% is trying to divide the 99%.