Tag Archives: innovation

automation

Leave a reply

Longreads has an excerpt from Nicholas Carr’s book The Glass Cage: Automation and Us

The historian Thomas Hughes, in reviewing the arrival of the electric grid in his book Networks of Power, described how first the engineering culture, then the business culture, and finally the general culture shaped themselves to the new system. “Men and institutions developed characteristics that suited them to the characteristics of the technology,” he wrote. “And the systematic interaction of men, ideas, and institutions, both technical and nontechnical, led to the development of a supersystem—a sociotechnical one—with mass movement and direction.” It was at this point that what Hughes termed “technological momentum” took hold, both for the power industry and for the modes of production and living it supported. “The universal system gathered a conservative momentum. Its growth generally was steady, and change became a diversification of function.” Progress had found its groove.

We’ve reached a similar juncture in the history of automation. Society is adapting to the universal computing infrastructure—more quickly than it adapted to the electric grid—and a new status quo is taking shape. The assumptions underlying industrial operations have already changed. “Business processes that once took place among human beings are now being executed electronically,” explains W. Brian Arthur, an economist and technology theorist at the Santa Fe Institute. “They are taking place in an unseen domain that is strictly digital.” As an example, he points to freight shipping. Not long ago, coordinating a shipment of cargo across national borders required legions of clipboard-wielding functionaries. Now, it’s handled by computers. Commerce of all sorts is increasingly managed through, as Arthur puts it, “a huge conversation conducted entirely among machines.” To be in business is to have networked computers capable of taking part in that conversation. Any sizable company has little choice but to automate and then automate some more. It has to redesign its work flows and its products to allow for ever-greater computer monitoring and control, and it has to restrict the involvement of people in its supply and production processes. People, after all, can’t keep up with computer chatter; they just slow down the conversation.

September 2014 in Review

Leave a reply

At the end of August, my Hope for the Future Index stood at +1.  As I did last month, I’ll sort selected posts that talk about positive trends and ideas vs. negative trends, predictions, and risks. Just for fun, I’ll keep a score card and pretend my posts are some kind of indicator of whether things are getting better or worse. I’ll give posts a score from -3 to +3 based on how negative or positive they are.

Negative trends and predictions (-8):

  • The drought in California’s Central Valley and on the Great Plains continues to get worse. (-1)
  • There are signs that Europe may be in a long-term economic depression. The term “new normal” is being batted around to describe a possible long term slowdown in growth affecting the entire world. (-2)
  • Governments and corporations are starting to use armed drones in crowd control. (-1)
  • In a new simulation of a society with increasing resource scarcity and technological innovation, increasing resource scarcity wins. (-1)
  • Meat and dairy consumption can’t continue rising at their current rate forever. (-1)
  • Herman Daly reminds us that the most common measure of economic growth does not distinguish between costs and benefits. Benjamin Friedman, in arguing that there is a moral imperative for economic growth, also used a more socially inclusive definition of growth than the most common one in use today. (-1)
  • The Ebola outbreak continues to get worse and worse, although people are arguing that this is not the type of plague that could threaten civilization itself. (-1)

Positive trends and predictions (+8):

  • Some countries have more sustainable policies than others, and the world could become more sustainable if we all copy the best examples. But even then, the world would probably not be sustainable enough. (+0)
  • People have come up with some novel ideas for backyard wildlife habitat. (+1)
  • Big companies are figuring out how to set up units that innovate more like startups. (+1)
  • Walkable cities with green infrastructure may help boost creativity and problem solving. There is plenty of evidence that walkability might be the single most important key to more sustainable cities. (+1)
  • There have actually been small advances in telepathy. Too soon to say if this will be used for good or evil. (+0)
  • There is a new generation of robot vacuum cleaners. Anything that can free humanity from the drudgery of house work has to be a good thing – almost any other use of our time has to be more productive, creative, or at least more fun. (+1)
  • There is some buzz about sustainable consumption. I just don’t know – the whole concept of “consumption” as an end in itself seems unsustainable to me. (+0)
  • There is also continuing buzz about “green growth” and “de-growth”, but in my opinion very little evidence that these ideas are catching on. (+0)
  • We were reminded that green infrastructure is more than just stormwater management. It’s a beautiful vision to link stormwater management, urban trees and parks, corridors and rural reserves together. But we need more people to share the vision and make it happen. (+1)
  • Another way to make cities a lot more sustainable is to have the price of parking actually reflect its total economic, social, and environmental cost, including the opportunity cost of the oceans of land that are just wasted. (+1)
  • Worldwide child mortality has dropped almost by half just since 1990. (+2)

Hope for the Future Index (August 2014): +1

August 2014 change: -8 + 8 = 0

Hope for the Future Index (September 2014): +1

walking and creativity

Leave a reply

This article in the New Yorker talks about how walking stimulates thinking and creativity.

Because we don’t have to devote much conscious effort to the act of walking, our attention is free to wander—to overlay the world before us with a parade of images from the mind’s theatre. This is precisely the kind of mental state that studies have linked to innovative ideas and strokes of insight. Earlier this year, Marily Oppezzo and Daniel Schwartz of Stanford published what is likely the first set of studies that directly measure the way walking changes creativity in the moment. They got the idea for the studies while on a walk.

It goes on to talk about differences between walking in natural and park-like settings vs. city streets. But is it too much to ask for safe, park-like city streets where people can stroll and think and interact? Does this sound crazy? No, it just means picking some streets and getting all or most car traffic off them, which can be done if people live near where they work and shop. Then you drastically slow down the remaining motorized traffic, if any, plant lots of trees and provide occasional places to sit. Make those public investments, and complementary private investments will pop up. Even from a cynical economic perspective, the cost-benefit is there, I sincerely believe. And the more subtle effects that cost-benefit analysis will miss – a more creative, innovative, less-stressed society – will follow, I sincerely believe. These are really the fundamentals, I am pretty sure. Maybe we can unleash a new wave of creative problem solving. Let’s stop thinking cynically about how we can make cities a little less bad, and start thinking about how we can unleash their potential.

innovation units within big companies

Leave a reply

According to the BBC, some big companies are forming small internal units to act more like startups:

Kassir Hussain, director of connected homes at British Gas, says Hive was founded on the “lean start-up principles” espoused by Eric Ries in his book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.

In practice, this means developing a product or service step by step, constantly consulting with customers so that money isn’t wasted on features they will not want. Each stage of development is tested – so-called “validated learning” – so that future success is almost built in to the process. Normal management structures don’t apply.

“We believe that job titles can actually prevent co-operation and teamwork,” says Mr Hussain. “It’s about encouraging an entrepreneurial mentality throughout the business. Hive’s product development is in days and weeks, not months and years.”

Hive’s Active Heating system, which lets you remotely control your home heating via smartphone, now has about 80,000 customers. But the service could not have come about from within British Gas’s complex corporate structure, Mr Hussain believes.

“Nearly three-quarters of Hive’s business is staffed by people with digital backgrounds from outside the group,” he says.

I see a few lessons here. First, the group has outsiders. Second, it is protected from the internal bureaucracy. Third, it has permission to take risks, which implies permission to fail. But it tries to limit the size of failures by staying in constant touch with customers. Not mentioned here is the idea that it has adequate resources, but that must be the case.

The other important question is how you would take this concept that seems to work well with consumer products and apply it to other sectors like, say, services or government.

Endogenous technological and population change under increasing water scarcity

Leave a reply

This article in Hydrology and Earth System Sciences (which is open access) is a great simulation-based study of how natural resource scarcity, the economy and technological change interact. First, they take an economic production function and add water to it as a factor of production. Then, they simultaneously allow population growth, increasing water scarcity, and technological innovation. Technological innovation is driven by scarcity, the level of investment the society chooses to make in innovation activities, and an assumed success rate. To invest more in innovation activities, the society has to save more, which means incomes have to decline in the short term.

So, this model answers the criticism economists often make that other models have ignored the effects of scarcity on innovation. With reasonable inputs the simulation always ends in declining water consumption, declining incomes, and eventually declining population. They relate this to real case studies from Australia where drought did drive innovation (for example drip irrigation), but ultimately it was not enough – agricultural output declined, incomes declined, and eventually population declined (they didn’t die of thirst, they just moved away).

the “greater depression”

1 Reply

This article from Project Syndicate is very pessimistic about prospects for the global economy. It focuses mostly on low inflation:

Draghi began by acknowledging that, in Europe, inflation has declined from around 2.5% in mid-2012 to 0.4% today. He then argued that we can no longer assume that the drivers of this trend – such as a drop in food and energy prices, high unemployment, and the crisis in Ukraine – are temporary in nature.

In fact, inflation has been declining for so long that it is now threatening price stability – and inflation expectations continue to fall. The five-year swap rate – an indicator of medium-term inflation expectations – has fallen by 15 basis points since mid-2012, to less than 2%. Moreover, as Draghi noted, real short- and medium-term rates have increased; long-term rates have not, owing to a decline in long-term nominal rates that extends far beyond the eurozone…

A year and a half ago, those who expected a return by 2017 to the path of potential output – whatever that would be – estimated that the Great Recession would ultimately cost the North Atlantic economy about 80% of one year’s GDP, or $13 trillion, in lost production. If such a five-year recovery began now – a highly optimistic scenario – it would mean losses of about $20 trillion. If, as seems more likely, the economy performs over the next five years as it has for the last two, then takes another five years to recover, a massive $35 trillion worth of wealth would be lost.

When do we admit that it is time to call what is happening by its true name?

This discussion doesn’t really get at potential root causes (a valid criticism of most economic and financial reporting, I think) – is it just a lack of confidence feeding on itself? Is it lack of innovation causing productivity to fall? Is it automation causing productivity to rise but lining too few pockets? Is it climate change or some other manifestation of environmental degradation?

The reference to falling food and energy prices wouldn’t seem to support that last hypothesis. But I don’t quite get it – Brent crude is at $102 a barrel compared to its historic inflation-adjusted level of $20-40 for most of the last century. Meat and grain prices in the U.S. are definitely up due to one of the worst droughts ever in some key farming states. And that’s the U.S., not the tropics where the bulk of humanity now lives and the bulk of food needs to be grown in the future. So if I am right and there are serious pressures on water, energy, and food, we better hope that we are innovating at the same time to do something about it.

monopoly and free markets

Leave a reply

This article from Alternet has a nice explanation of why “free markets” in the absence of regulation do not lead to open and fair competition:

Some monopolistic industries mess around with your daily life in an obvious way, like Big Telecom bringing you the low-grade misery of shoddy service and defective products. Others fly a bit lower under the radar, like the credit reporting monopolist Fair Isaac Corp, which can blast your financial existence in a nanosecond…

What I want to see, when I look at a marketplace is: Is that market open to a newcomer?

If I want to go into the business of farming in this community, can I become an independent farmer? If I want to go into the grocery business, can I do that, is it open? If I want to bring a new variety of paint to the market, do I have a place to sell my new variety of paint? If markets are open, that’s a good thing.

What we see is that the people who have actually preached the doctrine of free markets, this last generation, when you go back and look at it historically, is that the idea of free markets really comes out of the Chicago School, the libertarian wing of academia. They were preaching free markets, but when they would preach free markets, they also preached the elimination of all regulation. But when you eliminate all regulation you end up with no markets at all, because you end up with monopolists, and monopolists are the antithesis of an open market.

This idea of markets truly open to new competitors makes a lot of sense, and it makes sense for the government to support it. However, going back to Joseph Schumpeter and his idea of “creative destruction”, there is another kind of competition that may be more important. Competition is not just about new competitors entering the market to provide the exact same good or service in the exact same way. It is also about innovators finding completely new ways to satisfy people. For example, instead of competing with existing car companies by offering a different brand of car, I can compete by inventing Uber, or a car pooling website, or bike share, or protected bicycle lanes. These are alternative ways of meeting peoples’ need and desire to get from point A to point B. Even if the car company has a monopoly on the market for cars and it is hard to enter that market, we can compete with them. In fact, if they are slow to innovate and respond to outside threats, we may be able to crush them.

This model sounds great, but there is something insidious that often happens. The monopolist, instead of responding with innovations of its own, buys political power and uses it to try to prevent others from innovating. You can see this in the fight against Uber, and Airbnb, and selling solar power back to the grid. This is what I find really shameful and undemocratic, and we good citizens should not let it stand.

grid parity

Leave a reply

If a good indicator of grid parity is articles about grid parity, then grid parity seems to be here. This article from Renewable Energy World has a good roundup of recent articles on grid parity and the possibly dire consequences for traditional utilities.

And yet the thesis of the Renewable Energy World article seems to be that all this is overblown. Their main argument is just that people won’t switch because they are stubborn. I don’t buy that. I agree that people are not just economic robots who will do cost-benefit analysis and switch instantly, but if the economics is pushing them off the grid then resistance will gradually fade, until one day it will be a landslide. The one thing I think could slow it down would be reliability. It might be annoying and even dangerous if your entire house is giving you a “low battery” signal. Sure, you could keep a diesel generator around. But that involves storing diesel fuel. It would make more sense to just keep a backup battery. But every once in a while, that backup battery might not be enough, so you might need a second backup battery, and so on. Neighbors or whole towns could share a backup system, but then you would be starting to build a grid again. You could have a natural gas generator, but then you need to be on a natural gas grid, and if I had to choose between the electric grid and the latter I would rather go electric.

We can take it as a good sign or a bad sign that traditional utilities are starting to fight back through lobbying and through the courts. They are trying to get states (examples: Florida, Virginia, South Carolina, even Pennsylvania, ) to outlaw or limit selling energy back to the grid, on the grounds that the customers who don’t do it will then have to pay more. This is true as far as it goes – if all but a few people go off the grid, the ones who are left will be stuck paying for the entire traditional system, which doesn’t work. So as a society we can probably afford to support some early adopters, but once it really starts to catch on it’s all or nothing. Lobbying and buying off politicians might slow the tide for awhile but not forever if the forces pushing us in this direction are strong enough. The traditional utilities can either find a way to get in on the game or die.

 

please remind me, what are patents for again?

Leave a reply

Okay, maybe so-called intellectual property rights encourage innovation in some industries sometimes. But the evidence shows that they sometimes do the exact opposite, especially if taken to the extreme. This is the abstract of a working paper from the National Bureau of Economic Research:

Cumulative innovation is central to economic growth. Do patent rights facilitate or impede follow-on innovation? We study the causal effect of removing patent rights by court invalidation on subsequent research related to the focal patent, as measured by later citations. We exploit random allocation of judges at the U.S. Court of Appeals for the Federal Circuit to control for endogeneity of patent invalidation. Patent invalidation leads to a 50 percent increase in citations to the focal patent, on average, but the impact is heterogeneous and depends on characteristics of the bargaining environment. Patent rights block downstream innovation in computers, electronics and medical instruments, but not in drugs, chemicals or mechanical technologies. Moreover, the effect is entirely driven by invalidation of patents owned by large patentees that triggers more follow-on innovation by small firms.