Wednesday, December 18, 2013

Google: just call us "U.S. Robots and Mechanical Men"

Just taking a brief interlude in my macro-innovation series, but this is an important breaking story.

It has been all over the press recently that Google is buying robotics companies. This of course has led to the now common speculative pieces, whenever Google does anything unexpected: What is Google Up To?

There is good coverage on the BBC website of the latest move. a robot that does not fall easily.

If the video below doesn't work go here.

Robotics for making stuff - maybe, but you don't need humanoid technology for that. You need more advanced versions of the industrial robots we already have - except ones with fine motor movements. Delivering parcels - not likely, what's wrong with a person for that task? The economics don't seem to add up for that one. No I think there is something bigger, grander in mind.

So my guess is as good as anybody else's right? So here is my take.

Google wants to be the first 21st Century corporation. Not just incrementally twiddle this or that or even disrupt the status quo. I think they want to disrupt disruption. These are guys and they are mostly guys that have read science fiction and they want to be 'that' kind of company. As huge as the digital economy is, life is still the interaction of stuff in meat space. We live in homes, we need transport, we need food and metals etc etc. I think Google understands the future is the intersection of digital and hard technologies.

Key executives in Google are personally investing in off-planet mining opportunities and presumably research. What to you need to get involved in those kind of heavy duty activities - robots. If NASA really does get serious about Mars, companies are going to be lining up to provide technologies (read Red Mars). Google with is growing suite of technologies could be an important player. Robotics, autonomous vehicles - what they don't have is the engineering companies yet. Before you get to outer space, undersea mining is opening up as an important near term opportunity - robotics again. Both applications undersea and off-planet are seriously dangerous/difficult and costly for humans, but the human body is remarkably well designed for difficult and dexterous tasks. Humanoid robots will be well suited to these kinds of tasks.

Think of Google as the next Apple/GM/GE.

If this is their strategy, their challenge, alongside those companies that have gone down this path before them, is the valley between today's costs and future profits. Will the timelines of markets and technology merge with elegant synchronicity, or will the technologies still take too long and be more costly than expected. Google is has waited for the technologies to mature, has it waited long enough?

Wednesday, November 27, 2013

Marco-Innov 5: The technosphere & slowing innovation

In my previous blog I tried to argue that technologies have complex interdependencies - not always with what we think of as technologies. Economics has always promoted the idea that what matters is change - mostly focussed on economic growth. Innovation studies has taken up the same view and focus on Δ (Delta - change) mostly in regard to technologies but more recently the introduction of new products. But I want to make the argument that this was always insufficient and certainly now needs urgent revision.

The Frontier View of Change

There are two ways of looking at what the frontier 'curve' is:

  • New products; and
  • Product frontier.
New Products. In my previous blog, I included the product diffusion / sales growth curves, with its typical S shape.

Product frontier. In traditional economics there are a series trade-offs that make it difficult to account for the new. 

Where does innovation fit? Take note for example of the capitalisation of R&D expenditures. Is R&D really capital in the same way a factory is or an office block for a KIBS or purchasing computer equipment - I'm not sure.

At present there is a debate going on about slowing innovation.

Slowing Technological Change: The Bernanke view

Back in May this year (2013) Ben Bernanke chairman of the Fed Reserve made an interesting speech on economics, growth and technology

The speech reads in part

Fifty years ago, in 1963, I was a nine-year-old growing up in a middle-class home in a small town in South Carolina. As a way of getting a handle on the recent pace of economic change, it's interesting to ask how my family's everyday life back then differed from that of a typical family today. Well, if I think about it, I could quickly come up with the Internet, cellphones, and microwave ovens as important conveniences that most of your families have today that my family lacked 50 years ago. Health care has improved some since I was young; indeed, life expectancy at birth in the United States has risen from 70 years in 1963 to 78 years today, although some of this improvement is probably due to better nutrition and generally higher levels of income rather than advances in medicine alone. Nevertheless, though my memory may be selective, it doesn't seem to me that the differences in daily life between then and now are all that large. Heating, air conditioning, cooking, and sanitation in my childhood were not all that different from today. We had a dishwasher, a washing machine, and a dryer. My family owned a comfortable car with air conditioning and a radio, and the experience of commercial flight was much like today but without the long security lines. For entertainment, we did not have the Internet or video games, as I mentioned, but we had plenty of books, radio, musical recordings, and a color TV (although, I must acknowledge, the colors were garish and there were many fewer channels to choose from).

The comparison of the world of 1963 with that of today suggests quite substantial but perhaps not transformative economic change since then. But now let's run this thought experiment back another 50 years, to 1913 (the year the Federal Reserve was created by the Congress, by the way), and compare how my grandparents and your great-grandparents lived with how my family lived in 1963. Life in 1913 was simply much harder for most Americans than it would be later in the century. ....

Firstly; lets deal with the purely ridiculous understanding of the past and present.

  • "Commercial flight was much like today
    • Look at ANY cost estimates and air travel is massively cheaper now than in the 1960s. Australia due to its isolated island but reasonably wealthy status seems to be a good test case for the Bernake view. For example, in 2012 there were 8.1Million overseas trips by Australians. That is the equivalent of more than 1/3 of the population making one international trip in the year (pop in 2010 =22.3m . The Australian Bureau of Statistics reported that for 2010 there were 13.4m outbound passenger movements in total [equivalent to 60% of the pop] (YearBook 2012).
    • In 1962-63 (a decade before the 747) there were 247,827 passengers that left Australia for overseas by aircraft - that is 2.36% of the population for that year (Year Book 1967).
    • The change in commercial flight is simply massive. The planes may look somewhat similar but the change is beyond transformational - Aust air traffic as % of pop has got up close to not 10X but close to 30X.
  • "For entertainment, we did not have the Internet or video games" 
    • - spoken like a retiree - the internet is primarily not about entertainment, and in the immediate future with the 'internet of things' a substantial proportion of it will not be websites, which is true even now. Modern international supply chains or international finance would simply be impossible without existing digital infrastructure.
So Bernanke is putting forward the idea that we haven't seen much transformative change in the last fifty years. Even if you ignore such obvious flaws as those above, if you look both at form (how things look not function) and the frontier (the curve as you might call it) then that view maybe persuasive, and depending on the circumstances I might make a similar case, but it is missing some very major underlying changes.

An argument for the Technosphere

To examine the idea of change behind the curve let's take a closer look at Bernanke's perspective.

It can be difficult to comprehend just how far life really has changed. So I offer this. It was filmed in 1964 (close to Bernanke's date) but in Brisbane Australia and close enough to the time I was born in the town I was born in, so this video brings back a number of memories. Obviously, it is a government propaganda piece for advertising outside of Australia but it does give a feeling for life in the sixties for the middle class.

So you tell me, does this video support the Bernanke view? Okay, there is a tv and cars but; has there been little innovation? The point that captures my imagination about this film is not the state of the technology not the cars, trams, telephone etc but the disconnectedness of it all. Every piece of technology is a separate individual entity.

The blokes sanding timber have no computer controlled cutting equipment. and the stevedores are working with their hands. Everywhere you look there is something that is hard to put your finger on.

What we are fast moving to a grid of technologies where the internet of things has everything wired together.

Change behind the curve

The technological productivity frontier is not enough to explain how changes in the very wiring of the economy is changing. The problem is that we tend to take a business / industry focus to innovation not an economy wide perspective. Much of the academic literature will focus on the patenting in x product classification in a particular country or increasing globally.

But take one just one example from the little film above, the loading of a ship. Notice that it was being done by hand. No containers. Containerisation has facilitated not just a change in the volume of trade, but also the nature of the products that could be traded (delicate products), but also the port city configuration of the global economy has grown stronger.

Why have companies been able to improve the efficiency of aircraft so much; two answers; computing power in design and electronics controls in the planes.

In academic circles, the big movement in the 1990s was to move from the heroic innovator to the innovation systems idea. Innovation is not developed by businesses in isolation. We need a similar transformation in the 21st century. It matters less how an individual technology moves forward than how those technological changes will facilitate changes throughout the economy.

Friday, November 1, 2013

Marco-Innov 4: Technology Accounts

Every reader of this blog is, I'm sure, at least somewhat familiar with economic accounts. But what would technology accounts look like? There have been many concepts trying to account for the structure of technology. I start with a scattered sample, move onto discuss Brian Arthur's notions of technology and then introduce what this got me thinking about.

Standard accounts of technology

There is the life cycle perspective and the famous S adoption curve. One version that is famous although it seems to deliberately leave off TV is from the New York Times.

Like anything there are problems with this graph including the comparisons but its not bad. It gives an idea of how technologies were adopted across the 20th century. But there are other perspectives.

Autio and Hameri 1995 present a kind of hierarchical view that finishes for some unknown reason at national political borders, which for technology I have to say is a bit odd but consistent with 1990s and the blurring of innovation, technology and political jurisdictions.

This paper focuses on the construction of an integrated model of technological systems. The model has two purposes: (I) to clarifv the scope and relations of various concepts in this peld, especially the concepts of technology, of national systems of innovation, and of technological systems; and (2) to pro- vide a framework in which to study the conceptualization and construction of evolving technological systems. These purposes require the creation of new concepts and the redefinitions of some familiar ones. The model is structured at four levels of aggregation: (1) the individual; (2) the organizational; (3) the sectoral; and (4) the national. From within this structure we can identify parallaxes, or changes in the appearance of each of the four levels as the level from which observation takes place is changed. The structure of the model and the concept of parallax serve to clarify some important complexities of the dynamics of the system within which technological change takes place. 

Richard Lipsey Kenneth Carlaw, and Clifford Bekar constructed a detailed historical view of General Purpose Technologies in their book  Economic Transformations:General Purpose Technologies and Long Term Economic Growth.

1)The domestication of plants. 10000 BC 
2)The domestication of animals  8000 BC
3) the smelting of ore 7000-6000
4) Pottery 6000 BC
5) The wheel 5000 BC
6) Writing 3400 BC 
7) Bronze 2800 BC
8) Iron 1200 BC
9) The water wheel - Early medieval period, The heavy plough - Early Medieval period
10) The three masted sailing ship 13th century AD
11) Printing 14th century
12) The steam engine 18th century
13) The factory system 18th century
14) The railway 19th century
15) The internal combustion engine 19th century
16) Electricity 19th century
17) Mass production late 19th early 20th century

18) New GPT - computer and digital revolution.

The concept of GPT ended up being too limited for all the technologies being contemplated in the list so GPT includes organisational technologies, product technologies and process technologies. My problem with the notion of GPT is that unwinding what is a GPT and why seems unendingly complex every technology is a web of co-dependencies - but that perspective always seems to be missing from technology studies.

The Nature of Technology (2009)

Okay so that is three completely different perspectives. Then a couple of years ago I found something that really got me thinking and took me back to my studies of ecological systems and which got me interested in innovations systems at the start.

Brian Arthur (p41) The standard view - I am talking about the one most technology thinkers have taken - sees a technology as something largely self-sufficient and fixed in structure, but subject to occasional innovations. But this is true of technologies only if we think of them in the abstract, isolated in the lab, so to speak. "In the wild' - meaning in the real world - a technology rarely is fixed. It constantly changes its architecture, adapts and reconfigures as purposes change and improvements occur. A [aircraft] carrier's jet fighters may act as more or less  independent components one day. The next they may be assigned to the protection of a radar surveillance aircraft, becoming part of a new temporary grouping. New structures, new architectures, at any level can form quickly and easily, as needs require. In the real world, technologies are highly reconfigurable; they are fluid things, never static, never finished, never perfect. We also tend to think of technologies as existing at a certain scale in the economic world. If the technology is a traditional processing one (the basic oxygen process for producing steel), this is largely at the scale of factories; if it is a device (a mobile phone), this is largely the scale of products.

Arthur has the order differently - the following text precedes the text above butfor the story rvesing it makes more sense.

Following a lengthy breakdown of the technologies within the F35 fighter Arthur writes. We could follow the hierarchy of executables upwards as well. The F-35C is an executable within a larger system, a carrier air wing. This consists of several fighter squadrons along with other support aircraft, whose purpose is to provide both striking power  and electronic warfare capabilities. The air wing is a part of a larger system; it deploys aboard a carrier. The carrier is an executable too: its purpose is (among others) to store, launch, and retrieve aircraft. It in turn typically will be an executable within a larger system, a carrier battle group. This, as the name suggests, is a combination of ships - guided missile cruisers and frigates, destroyers, escorts and supply ships, and nuclear submarines - grouped around the carrier. And it has varying purposes .... Therefore the carrier group is an executable....

and on and on up the scale....

All of this is built to support Arthur's three definitions of technology

1 - a means to fulfil a human purpose (an executable).
2 - technology as an assemblage of practices and components
3 - technology as the entire collection of devices and engineering practices available to a culture.

I must admit that, and as any reader of my blog will understand, this book has revolutionised my understanding of technology. Not what I had an intuition for but it gave it detailed expression, a language for it. I have been surprised how little reference to the work I have seen in the academic literature. For me it has been mind expanding and fired my imagination. For a couple of years now I have been trying to figure out how to illustrate the above concepts even for a simple thing like the car through time.

For example the car (a technology) reconfigured the world geo-politically due to the need for petroleum products ( so we have companies, ships oil refineries etc etc), spatially (city structures) spurred many new technologies (road management, health systems - spinal care) etc etc. That gets wildly complex very quickly.

What will the Google car do - maybe just as much. By linking the digital world and cars why not redesign the car all together - put a desk in it (thanks for whichever blog suggested this), car parking spaces on streets can disappear, multistorey car parking can become vastly more efficient, police enforcement will change, hospital ERs potentially will change over time ...etc etc. I gave up trying to illustrate this one example when another my scribblings led me to another idea - every major technological era has been accompanied by institutional, spatial, and soft innovations.

Constructing National (?) Technology Accounts

It has been popular amongst statistical agencies for more than a decade to collect internet sales data, but this about the only 'technology' data being collected. In an age emerging where advanced technology is at once ubiquitous and second fundamental to the economy we need to start thinking about technology like we think of basic economic data. But there are challenges, technology has twin processes - changes in artefacts are preceded by and followed by soft technologies.

Fig 1. Technology Through Time - Till The Digital Revolution.

At any point with any technological era, technologies reshaped the politics, the urban structures, the organisational landscape and the connectedness of the technologies themselves. In this diagram I left off the digital technologies.

In the 1960s Galbraith talked of the Technostructure - the technocrats of large corporations, but the nature of corporations is changing who is in them and who is not. Just as likely today companies are linked together in tight or loosely coupled networks - product networks and chains.

I want to draw the distinction between traditional mechanical, chemical and biological systems because they have proved to be difficult to manipulate. Progress in these technologies is slow, not for some conspiracy but because they are really hard to improve. Getting an object through space takes a lot of energy and the physics of that are a problem for us.

Fig 2: Technology to the Present.

However, we have discovered that we can manipulate technologies that send information signals much more easily. Although obviously the digital has evolved from and remains embedded in many ways in traditional industries it is revolutionising industries, products and space so if we separate it off it helps us look for what might happen.

So far, most energy has been spent examining what the digital revolution means for industries, (incl universities etc), or humans themselves (the arguments over "what this is doing to us"). But it is and will continue changing the institutional identity of our society.

I'll make one argument - this is the cause (not the GFC) for macro-economics as a discipline being in so much trouble. Macro-economics emerged as a necessary technology when other technological changes (globalisation) meant that economic shocks were transmitted between economic zones (continents). With new wave technological change - we need to invent new modes of thinking - a mode I am calling Marco-Innovation in this current series until a better name turns up.

I have not discussed here biotechnology or nanotechnology as I think both of these are still in the hype stage.  I know biotech has some wins but I don't think it has really arrived as a technology so I will reserved judgement for now.

Tuesday, October 15, 2013

Macro-Innov 3: Society, economy, technology

As I start on this macro-innovation series, I first want to make a case that we need genuinely macro-notions.
Societies and economies are not separate worlds, they are interlinked but we have become obsessed with the economy. Indeed, while I generally laud the change from a focus on technology to innovation at the firm and industry level, it is now becoming obvious that a key element of the emerging macro puzzle is not coming together in a coherent way. It will be increasingly important, I believe to study technology coherently, like we have studied economics in the past. A good economics degree can bring together various elements of how we think about economic behaviour - history of economic thought and philosophy, the neo-classical rules, policy, behaviour economics and hopefully geography. But technology studies today are scattered across philosophy and communications, business, economics (hopefully though no guarantees), ethnography, engineering schools etc. It is not possible generally to do a degree in technology studies. 

The nature of discipline based research

Every discipline in the natural sciences, engineering and social sciences has and has to develop a particular perspective and a group of methodologies for conducting its analysis. ‘Holistic’ studies are a nice idea but simply impossible. We can do better at finding linkages between them however. Lets look at a few examples.

Earth Processes (geology, biology and ecology) 

For scientists interested in the processes of life on earth there are three inter-related but separate fields of study.  If for example you are simply interested in geology for mining then there is no need to worry about biology, but geology is very important for understanding ecosystem development and evolutionary biology because, as the earth changes through plate tectonics so the terrestrial systems have had to adapt with them.

But for the purposes here I will focus on two disciplines, biology and ecology. Here again there are components that clearly relate to each other but remain distinct. In a sweeping generalisation we can say that biology is interested in the construction and operation of particular animals or plants (individuals, species etc) and how they evolve across aeons   Ecology is interested in how populations of animals and plants in a particular place interact at a particular point in time. All life in a particular location is interdependent on the other biota and the natural resources (including sunlight).

What is fascinating about ecosystems is that the concept is based in geography but it is scaleable. From ecotopes (the smallest ecologically distinct landscape) through to the biosphere – the entirety of life on Earth, there is a myriad of types of ecologies let alone the huge number of individual ecological patches on Earth. What is important for the discussion here is that there are two disciplines which are co-dependant yet focus on different aspects of the animals or plants. Biology is more straightforward and is easier to conduct in a lab. Ecology because of the complexity of data collection has tended in the past to be more theory driven with some very complex modelling. Gradually, more and more empirical studies are appearing but it is slow.

Society [sociology], (sociologists)

For most of our time as a species that could communicate we have understood ourselves as living in societies (families, tribes, language groups, political empires and political nation-states). The idea of society comes very naturally to us we are relational beings, we are dependent on particular people (carers - mothers, grandmothers etc) for a very long time as we grow up. For most of human history humans stayed within very small geographic places for most of their lives. Not surprisingly we have an academic discipline called sociology. It focusses primary on power and relationships. Power is a universal idea. In every organisation of society, in fact anything above hunter and gather societies there will be leaders.  Likewise relationships, is so universal to human identity it needs no explanation.

Economy [economics], (Economists)
In recent decades we have begun to do away with the notion of society and the language has turned more and more towards economics and business. Thatcher once reportedly said there is no society, confusing governments with societies. 

"I think we've been through a period where too many people have been given to understand that if they have a problem, it's the government's job to cope with it. 'I have a problem, I'll get a grant.' 'I'm homeless, the government must house me.' They're casting their problem on society. And, you know, there is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It's our duty to look after ourselves and then, also to look after our neighbour. People have got the entitlements too much in mind, without the obligations. There's no such thing as entitlement, unless someone has first met an obligation."

In the 2000s there was a small movement with the slogan we live in societies not economies.

The truth is we live in both. Economies have always existed, even in the most ancient of societies there was usually complex trading systems. But, while I do not want to live in a communist economy neither do I want to live is in a pure market society with minimal justice and no compassion.

Economic change [innovation studies], (neo-Schumpeterians, innovationists)

In the early years after WWII, particularly after the OECD was established there was growing interest in how first science and then technology impacted the development of economies. As computerisation grew in the 1970s and 1980s there was growing concern over the positive and negative impacts of change. By the end of the 1980s there was a realisation that innovation as it was progressively called rather than technological change had a geographic element. At that point the term ‘innovation systems’ was coined, and ever since the innovation field has focussed on every aspect of geography (nation-states, cities, regions, clusters, industries etc). But as this has become more methodologically focussed it has become narrower and narrower resulting in the emphasis on business competitiveness. At the same time innovation studies has moved from multi-disciplinary research centres such as SPRU to the business schools.

Although conventional economics does not deal well with innovation there are many economists who study innovation. 


The way forward is not generalists researching everything but a university structure that supports a matrix organisational operation. In this way teaching by experts can be utilised to form new teaching units out of the specialisations of the existing disciplinary base.

One area where such capability would be helpful is with technology. The emphasis remains on change but what is happening behind the curve is as much changing as what is happening at the frontier.  

Technology [technosphere], (Techneists)
In the 1960s and 1970s there was great interest in the technological society by sociologists and philosophers but almost all of it was prospective. As the changes were slower and less than expected, there was less and less interest in the topic. Today, as ethnographers have run out of conventional unstudied primitive societies to work on more and more are researching the use of technology (in particular digital technology). 
Kevin Kelly in his book “What Technology Wants” coined the term “The Technium’ to give expression to his idea that technology was the 7th kingdom of life on earth.

Brian Arthur in his book “The Nature of Technology” lays out the following definition of technology.

(1) a means to fulfill a human purpose,
(2) an  assemblage of practices and components(3) a collection of devices and engineering practices available to a culture.  

Arthur seems uncomfortable with the idea of the Technium, yet I think his book lays out an excellent series of reasons why we need to get more serious about the study of technology. The hierarchical  nested, and connected nature of technology is a topic for 21st century exploration.

While I am also uncomfortable with the notion of the Technium, I think there is an itch that is important. We need a biology and ecology of technology.  Just as in biology and ecology there are two disciplines that are closely related it is possible to conceive of two topics innovation studies and technospherics that are different but related. 

Monday, September 23, 2013

Macro-Innov 2: structures of the debate

The point behind this series is that innovation studies has been virtually reduced to a sub-discipline of economics and business. While the growing focus on innovation in all its conventional forms (products, processes, supplies, markets and organisation) is welcomed it reveals an underlying problem - what counts is business / economic success and, in fact, a de facto support of increasing consumerism.

What matters now in innovation studies are flows and turnover. What will be the latest disposable high tech gizmo be? What is the production of new energy technologies? etc etc. The stocks (capital) in the system and the cost of those gizmos is not well accounted for. So:

1. If we rely on the myopic view that innovation only counts at the level of business then there is only limited room for governments to structure innovation and markets in necessary ways to support sustainability;

2. This micro presentation also ignores the growing phenomena of the linkedupness of our technological systems. Discipline of innovation studies needs to be more aware of how connected technological change is to the way we design cities, to way we live etc; and then

3. Innovation policy has concentrated on the production of innovation, we thus need a macro-economic revolution in innovation studies to pay attention to the disruption, adaption and management.

Thus the big themes of this blog series will be.

1. The technosphere;

2. Wealth, growth and Competitiveness;

3. Sustainability; and

4. Innovation policy.

Lets begin ......

Friday, August 30, 2013

Macro-Innovation: 1. An Introduction

Earlier this year, I came to the realisation that practically all innovation policy was either promoting the production of ‘innovation’ or is concerned with the efficiency of its production in the public sector complex (labs and universities etc). A very small percentage of innovation policy focuses on the uptake of advanced technologies. None is concerned with the post-innovation event - understanding the disruptive effects on employment, industries or government programs and resulting impact on existing policy structures.

That in turn led to this thought.

The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again. John Maynard Keynes, A Tract on Monetary Reform (1923) Ch.3 English economist (1883 - 1946)

Neo-Schumpeterians (innovationists) set themselves too easy a task, too useless a task,  if they say that the maximisation of the production of innovation will be good for growth and competitiveness but can give no guide to governments on transitions in periods of disruption (Brian Wixted).

We need an understanding of innovation that goes beyond just economics but which also worries about transitions – that is the destruction in Schumpeter’s creative destruction equation.

I have been increasingly struggling with conventional notions of ‘technology’, ‘macro-economics’ and ‘innovation’ in the 21st century world. With increasing disruption to industries, labour markets, together with globalisation, climate change and resource use, is it possible to begin to simply and logically analyse some of the issues. Is there a framework like macro-economics has provided for so long that we can develop to frame the issues for better analyses?

In this forthcoming series I started with the idea of trying to apply the idea of innovation systematically to macro-economics and quickly ran into some significant conceptual problems. So I began to rethink how the economics of innovations is currently developed as a discourse and came to conclusion that to get different answers we need to break with some of the fundamental assumptions.  I can promise that this series will not be a series of completed thoughts in book ready shape – far from it. But I think that by scratching away at some macro topics, perhaps I can learn something and you the reader will benefit from the journey.
Along the way I already know that I will introduce some ideas such the ‘technosphere’ which I have begun to mud map out.

Secondly, while in a business we categorise the micro-economics of innovation has extending its market (new products or new markets), reducing costs (new supplies, processes, or organisation) or re-arranging internal affairs (organisation, supplies, markets) to keep fit with changing market environment configurations applying this to nation-states is not so simple. For starters, companies can externalise their costs relative to societies. A business needs to downsize, it sacks people. Hopefully they can find new jobs but if they can’t society needs to bear the transition costs. Or as another example there is little equivalent in the economy of a firm for housing booms or busts – unless it is managers over investing in capital.

Macro-economics is simply different to micro-economics and macro-innovation is different to macro-economics.

At the 2013 DRUID conference they debated the motion that national innovation systems was no longer a fruitful line of academic research (this succeeded). Instead the future is framed as the micro-foundations of innovation. You can watch the video here. This just re-enforces the point that we need a new macro paradigm.

I am not quite sure how the series will develop except that at the moment there are 2 parts envisaged.
In Part A, I want to introduce the idea that part of the problem we face is that in the economics of innovation we are only interested in the rate of change – the rate of innovation. This leaves us unable to notice the degree to which there is significant technological change occurring simply in the way our technological society works.

In Part B, I want to analyse the main structures embedded in conventional macro-economics from an innovation perspective (GDP accounting, input-output structures, land, labour, capital, and other topics (entrepreneurship?).

So let the games begin.

Thursday, July 4, 2013

GEM Conference (20-21 June 2013)

Following DRUID, I attended a mall conference sponsored by the Global Entrepreneurship Monitor team in Spain to promote the use of GEM data.

The use of GEM data is clearly evolving. One of the impressive features of conference was the increasing use of pooled data (compiling the data across a number of years and countries) to build impressively large numbers of observations.

Still a number of the papers were naive or misguided in their choice of variables.

The highlight of the day was a keynote by Professor Xavier Sala-i-Martin of Columbia university. It was nice to hear an economist focus attention on adoption of innovation not newness per se.

Day 2 brought forth a number of quite interesting papers including one on rent seeking behaviour in MENA countries and another on the role of high tech entrepreneurship across factor driven, efficiency driven and innovation driven economies.

The papers are in early stage development, so I won't reference them.

An interesting conference, but clearly to me GEM is running out of data for interesting academic work, and needs to ask bigger questions like to ones Burton was asking in her DRUID conference talk, see the previous blog for details.

DRUID Day 3 (19 June)

Today the DRUID debate was whether 'innovation systems' was still a promising line of research. Disappointingly, I felt the team arguing for 'innovation systems' gave up without much of a fight. Both teams converged on the micro-foundations of innovation being the way forward.

Watch the debate here

What profoundly disappointed me was the lack of courage. At a time of global economic crisis and massive industry disruption the innovation scholars are effectively retreating to micro-economics. We know from a century of micro-economics that it does help with macro questions. Economics lacks the unifying 'string theory' and so does innovation. With 50 per cent unemployment in host country for the conference Spain, I personally thought the debate was actually an insult to the populations that pay for academic research.

It doesn't bother me that most of the papers at DRUID were econometrics, that is the standard development of fields of research, it is the development of greater rigour and that is GOOD. BUT when I couldn't see a single paper on unemployment, macro-innovation or industry disruption I am actually angry at the direction of research in my field.

What made it worse, was the presentation by Diane Burton, a labour market economist was brilliant! It highlighted a bunch of issues about our notions of entrepreneurship - big fundamental questions that the previous debate had overlooked. It used to be that Schumpeterian researchers were the ones to ask the tough questions of the patterns of economic development. I think that is true no longer.

Watch the talk here:

Paper session.

Papers 1: evolutionary pattern of change requests to telecommunications technical standards during the 3G and early 4G development process.

Paper 2: using a classification of service innovation types (ie. that is different to product process etc) the paper mapped the changes through time as a service organisation changed one service which then led to another change etc etc... Seemed interesting and I will probably read the paper.

Paper 3. Entrepreneurship, market novelty, econometrics.

DRUID Day 2 (18 June)

I had intending posting updates as the conference progressed but that didn't happen, still the summaries are worthwhile.

The debate of the first day was on whether financial performance measures lead to poor strategic decisions.
Watch it here.

The highlight of day 2 was the DRUID debate on scientific fraud. The examples are breathtaking and it seems the situation is getting worse. This is the first time I have opening heard serious criticism of the metrics of academia and how these are probably creating the perverse incentives behind fraud. In some European countries in an effort to get the paper count in A journals up, authors are paid CASH bonuses.

Watch the debate here, it is a vitally important issue.

The plenary for day 2 was interesting, but I am not that much into exploitation/exploration issues.

Papers. I only attended 1 parallel session.

Paper 1: Entrepreneurship, local knowledge, Italy, Econometrics.
Paper 2: Global (Regional) Entrepreneurship Development Index - uses GEM and other data to map entrepreneurship system in countries or regions.
Paper 3: Structural change, skill cohesion, individuals employed at plants at the municipality level in Sweden (this was my top pick of the conference papers).

Day 2 result - avoided econometrics and 'high technology' papers successfully.

Tuesday, June 18, 2013

DRUID 2013 Day 1

Wes Cohen did the opening address to the conference reviewing the empirical research on the 'economics of innovation' across 50 years (late 1950s ro 2010ish). The term 'the economics of'' is usually meant, as it was here, in a very technical sense - the tools of standard neo-classical economics applied to whatever.

I am always stunned by the narrowness of the topics 'true' economist rather than those who are rather more heterodox and more problem focussed are. The economists start with the topics which seem to cause the most pain for their modelling of the economy. Rather than focussing on the bigger issues within the topic and trying to understand those better.

So economists have spent 50 years looking at firm size and RandD amongst other topics.

However, onto other things. I thought I would keep a tally of the topics and methodologies of the papers I heard.

Paper 1: Pharmaceticals in India, econometrics.
Paper 2: Semi-conductor industry, world, econometrics
Paper 3: U.S. trucking industry, econometrics
Paper 4: Patents, eco-energy, descriptive
Paper 5: establishment data, geography, econometrics
Paper 6: Photovoltaics, patents, Germany, descriptive
Paper 7: Multinational corporations in Portugal, labour market data, econometrics.
paper 8: Knowledge theory /descriptive paper.
Paper 9: Biopharma firms, USA, spatial analysis, econometrics

So the Pharma industry with 2 of 9 papers wins day 1.

Friday, June 14, 2013

The World of Tomorrow 2013 ads for Emirates Airlines

Lately  in The Economist, the airline Emirates has been running a series of advertisements which centres on a picture of Dubai.

But every time I see the ad my mind recollects the cover of a book called The World of Tomorrow.
Obviously, they are not identical - but there is something intangibly similar.

The Emirates ad.

The cover from the book.

Thursday, May 30, 2013

Works wanted: science fiction for serious economic research

As a fan of science fiction I have often been disappointed how poorly the genre has explored economics and social change. Although, I have to say William Gibson fills in the socio-economic world better than most.

Nevertheless, I increasingly feel that we are beginning to live in the future. Being inspired by Intel's Tomorrow Project, I have been thinking wouldn't it be great if some science fiction writers or really good 'economics' communicators could take up the challenge of writing short stories about the near future focused on jobs and industries. I know that this may sound like scenario writing but the difference is good fiction writers I think would be better at the story-telling and by starting at level of individuals it may provide a richer set of ideas from which to work rather than the rather macro scenarios.

FIRST, academic writing by its nature simplifies down the externalities so that it can concentrate on a single phenomena for analysis. This is necessary. BUT, academic writing can never then reverse back out of the pit to integrate. In this way the writings are rather abstract, dry and difficult to apply.

SECOND, fiction writers focus on people and and their relationships - they naturally focus on networks of people, organisations and technologies (and always have). The rise of academic network analysis is rather late to the scene (just e.g. read Agatha Christie). Further, it comes naturally to fiction writers to think in terms of how technology gets used - its social context. This I am afraid is a challenge for many academics and even more so for engineers.

THEREFORE, fiction writings could play the role of integrators, helping us connect abstract thinking about trends and patterns and what that means for the lives in real people's lives..

Now, okay I'm not very good at this, but here is a couple of starts....

What might the life of a 'tasker' be like in 2028 (15 yrs away)?

John lives with his family in a small condo in a typical North American city, he used to be a taxi driver, but there are no taxi drivers now that taxi companies have all adopted auto-piloted vehicles. It is hard for him to make a living, there are very few full time 'jobs' anymore and both he and his partner gave up looking years ago. They make a living from being 'taskers'. In many ways it is similar to being a taxi driver. There is lots of work but you have to bid your price for any particular piece of work and then wait to for notification of which work you got. It is challenging because you can cost yourself money - something that you learn with experience.

You also need to specialise, just like in the 'good ol days'  there is a huge variety of tasks so getting good at some is important. There are office taskers and computer software taskers, home help taskers and many more varieties. However, the new apps that facilitate the ranking of quality work has made the process easier. If you have a good 'star' ranking you can bid a little more than those who don't get good marks, still you don't want to over-price yourself. ..........

What might a journey work look like if we don't solve the energy problem?

Its 2035 and despite the promises that a fix for the fuel shortage was coming just around the corner it still hasn't arrived. In European cities with mass transit systems people can still cover large distances to cross town. However, in North American cities with vast distances between home and work the dysfunctions are becoming greater. Unlike Asian cities where the populations have returned to the bicycle, cities like LA, Chicago and many others are just too vast to be viable. Far too much space was devoted to the now disused roads.

Ranjeeta and her husband work from home, a remodelled tower block in what was once one of the outer business districts.  They are both software engineers that do contract projects mainly for Indian IT companies that  outsources their work all over the world.

As cities have begun the fragment and self destruct somewhat, working from home and community provided office space has been the only alternative for many. The return to local communities has been a dramatic shift in time. Cities are quickly becoming a vast set of villages centred around schools and shops but which butt into each other.  Downtown cores, once the core agglomerations of jobs have been rapidly renovating buildings into apartment spaces. The Vancouverisation of North America has been rapid. More people live downtown than ever before.....

Ranjeeta .......

Okay, so I won't make a living writing science fiction but we need to make the abstract more real. What are 'logics' of for the big decisions of today.

Thursday, May 16, 2013

Megashift: Mapping Future Scenarios

About a year ago I started to write a blog on the shape of the future. Some of my blogs I let sit to mature so leaving it a year isn't unusual. Anyway I had started to think of future scenarios as being constructed around three enormous tectonic plates that were colliding and pulling apart along the fault lines of technologies. 

But across the year this now doesn't seem nuanced enough. It is nevertheless, I think, a good place to start a discussion. So I will start with the tectonic plates concept and then move to the matrix concept.

The Tectonic Plates of Scenario Building

We are seeming facing an interesting future with three continental plates in our global landscape on the move.

1. Economic geography
2. Social economic equality (in advanced economies)
3. The state of the environment and natural resource use.

The fault lines for these plates are created by technology.

The fault lines between these three plates is technology. Just as in global geography tectonic plates push against each other along the fault lines and where plates are pushed apart or sucked under. So in our social world technology is playing a similar role.

What amazes me is the lack of ability of commentators and journalists to link only two of these at a time.
So there will be amazing stories of growth and change particularly in India and China aided by technology - which if extrapolated will mean that they have such and such an economy in 20 years. The problem is the world doesn't work this way. Everything is linked and always has been.

The Roman Empire grew on the back of resource expansion, the British Empire grew on the back of resource access / cheap resources. However, today we don't have cheap resources anymore. China and India will have to grow while resource costs rise. Their growth will indeed be the main driver of those resource prices. So is growth even possible in conventional terms in this model?

This is megashift and this is the challenge before us.

Economic Geography

Development studies of the late 1980s were unanimous that up to that point there had probably only been one country to transition up the development ladder and that was Japan. Today, a number of countries are dramatically improving their standard of living. More importantly if we look at cities rather than nation states we see even bigger changes.

Korea and Taiwan improved first but now parts of Brazil, Russia, India, China and South Africa are doing much better as well. Watch any of Hans Rosling's talks on TED for more illumination. This in many ways is a great thing. Too many people for too long have lived in great poverty and moving towards a world where more people can live better lives is to be welcomed. One of the leading drivers of such change is the geographic split in production that has been enabled by current technological trajectories.

So reducing global poverty - doing better than ever before.

But with that comes costs like the tragic building collapse recently in Bangladesh, poor pay and conditions for the workers and increasingly poorer quality clothing in the OECD countries.

Large Scale Growing Inequality in 'Wealthy' Countries

So wealth is being distributed downward to the very poor, but is wealth becoming more equal - no.

There have been any number of reports over recent years on the growing inequality in advanced economies. While the poor and the middle class tread water the rich have been getting richer - fast. The Conference Board of Canada 2011, the OECD (Divided We Stand 2011) and other organisations have all reported in the last few years on this issue. It Matters because the more uneven a society the greater the likelihood there is for the bonds of societal cohesion to breakdown. Note that the rich can also evade taxes in a phenomenal way.

In an article last year Hay and Muller  (2012) ‘That Tiny, Stratospheric Apex That Owns Most of the World’ – Exploring Geographies of the Super-Rich' Geographical Research 50(1):75–88, had this to say.

Capgemini and Merrill Lynch (2010) identify two wealthy groups. The first, who currently number 10.9 million globally are described as High Net Worth Individuals (HNWI). These people hold financial assets in excess of $1 million. This figure includes the book value amounts of private equity holdings, as well as publicly quoted equities, bonds, funds, and cash deposits. It excludes primary residences, collectibles, consumer durables and consumables. In 2010, HNWI wealth totalled $42.7 trillion (compared with World Gross Domestic Product in 2009 of $58.26 trillion [World Bank, 2011]).
So 10.9 million people hold assets [note that is not income in any year] that is equal to 72.8 per cent of the planet's gross income in a single year.   

Long term social / economic inequity is not good for economies or the people themselves.

Natural Resources and Ecological Services 

Because we still do national accounts in a way that only poorly represents the natural wealth of nations it is very challenging to discuss the situation globally for the environment. But let us just say here that massive economic growth as is being driven in China and India particularly is simply not sustainable under current conditions. That is not t say development is impossible but development is a pressure on resource use and global innovation adoption that is very different to rapid development. I hope to explore more this topic in an upcoming blog series on Marco-Innov-nomics.

A recent Economist article notes that we are just about to pass the 400ppm (parts per million) Co2 level. In 1958 the reading at the key observatory at Mauna Loa was only 315ppm. That is a rise of a third in atmospheric carbon in 55 years.

A Matrix approaches to scenarios

The issues analysis depicted above while true does not capture the complexity or the dynamic interactions.

In the diagram below I have three categories; trajectories (such as existing economic development pathways), technologies and economic consequences.

Now, for each of these categories what I have listed are only a sample. All three categories can interact in unpredictable ways.

For example, continued development in China will increase the demand for energy, raising the price. That can lead to a general economic stagnation for everyone because as soon as growth starts the price goes up.  It can drive innovation as we have seen for new ways of exploiting existing resources (fracking natural gas), but this then as negative consequences for climate change which may then start to genuinely effect economies - with less predicable weather and crop failure / water resource issues - which may slow fracking because it needs water. Lastly it can and will induce greater uptake of alternate energy innovations.

Although I scan the scenario and foresight literature, I only recently came across an article which comes close to taking this rather complicated view of foresighting, although I don't think the article develops the idea  far enough. Yanuar Nugroho and Ozcan Saritas (2009) 'Incorporating network perspectives in
foresight: a methodological proposal' Foresight VOL. 11 NO. 6 2009, pp. 21-41 

Wednesday, April 17, 2013

Jobs, tasks and possible future labour markets

In the last blog I discussed the question of whether empowering innovations create jobs. Behind my skepticism is partly my work on global value structures. But the other half is all about the nature of jobs.

In this blog I want to explore the difference between jobs, tasks and the geography of both.

Earlier this year the Canadian CBC broadcast a documentary on the high jobless rate amongst Canadian younger workers . (Note it can only be watched in Canada). Even though Canad'a youth experience a high unemployment rate is still lower than for many countries in current continuing global economic environment. In the show Futurist Thomas Frey commented that he thought that young people across the coming decades would move from having 10s of jobs to 100s of tasks.

It triggered a  thought for me is Vancouver is a task economy.

Vancouver attracts human capital like no other city I know but with the quirk that there does not appear to be the jobs to support them. In this way, I sometimes wonder if Vancouver should be charged with vagrancy   (no visible means of support).

Photo from

It looks like any other downtown right. But the majority of those towers are condos (apartment blocks). Very few contain office workers. In contrast to other major cities like Toronto or Sydney as examples where major corporations base their operations with thousands of jobs, generating higher incomes for workers, the numbers for Vancouver do not add up. Across occupation groups or by degree type workers in metro vancouver earn less than the Canadian average. Note that is against the Canadian average not just the other leading Canadian cities such as Toronto or Calgary.  

So crucially we need to focus on the difference between Jobs and Tasks.

Jobs in the era of scale and scope. In Chandler's scale and scope global companies need huge employment numbers to organise production across the globe. Production (and it was generally production) was organised in company plants. Global service firms have always needed big number internally organised.

But today as the digital economy continues to fragment and de-layer the labour market we see outsourcing and the re-organisation of many industries.

So it seems we are seeing the rise of the task economy. In the task economy, it isn't just that a long term job is outsourced to another employer, it can be that each task in what was previously a job is broken up and separated to different people. The Australia ABC recently ran a program on micro-labour which was illuminating.

Mechanical Turk which is widely known offers small amounts of money for completed task. A quick glance reveals that many are priced well below minimum wages for OECD countries. Other web platforms such as Task Rabbit and and Airtasker are designed to source labour for very small usually small business or household tasks/ services usually requiring physical presence. However, 'taskers' bid against each other in a reverse of ebay to get the job.

It is completely conceivable that such developments could scaled up across the next decade ad change the shape and structure of traditional labour markets. We have seen 'industry' disruption we can now see seeds of labour disruption. A big question will be how governments respond to develop new labour laws and regulations to structure these markets.  Some cities will probably withstand this tasking trend better than others, but the dichotomy between tasks and jobs is at least a lens through which to begin analysing new patterns.

Friday, April 12, 2013

Do empowering innovations create jobs?

Recently, Paul4Innovating wrote an interesting blog that pointed to a Clayton Christensen article in the New York Times last year . There is also this video of Christensen at Davos.


There are three types of innovation in his view where jobs occur or are lost. These are summarized by Professor Christensen as:

Empowering innovations: these create jobs, because they require more and more people who can build, distribute, sell and service these products. Empowering investments also use capital — to expand capacity and to finance receivables and inventory. Empowering innovations are essential for growth because they create new consumption.

The second type is “sustaining” innovations: these replace old products with new models. They replace yesterday’s products with today’s products and create few jobs. They keep our economy vibrant — and, in dollars, they account for the most innovation. But they have a neutral effect on economic activity and on capital.

The third type is “efficiency” innovations: these reduce the cost of making and distributing existing products and services. Taken together in an industry, such innovations almost always offset the net number of new jobs, because they streamline processes. But they also preserve many of the remaining jobs — because without those, entire companies and industries would disappear in competition against companies abroad that have innovated more efficiently.

and then further down later ....

The need is to “unlock” the right type of innovation that creates a renewed, sustaining wealth for economic and industry revitalisation. There needs to be a shift from investing in efficiency innovation that tend to cut out jobs, where the focus is constantly on focusing on less capital in use and fewer people so that the extra release of capital is re-invested in more efficiency, not in disruptive or empowering innovation.
So then the question is empowering innovations create jobs?

So do empowering innovations create jobs
I certainly, agree there is a need to create jobs across the globe. This is an important issue and one it seems that is hard to prove one way or the other. But it seems there are some serious issues behind the assumption.

In the hard economy there have been various industries that act like massive hubs for the economy. If you look at an input-output table it is clear why so much political capital has over time been invested in the car industry. It has been one of these hubs. For many countries resource based activities such as food, and service based activities such as construction and finance are others. Construction and food have typically been local/national while auto and finance have been increasingly globalised through modularity.

But traditionally all four of these agglomerated activity.

What we are seeing with the digital economy is almost the reverse. Digital platforms offer the opportunity to create virtual marketplaces that disperse activity. Amazon and Itunes by increasingly removing an entire layer of economic activity have simultaneously put money into the pockets of consumers but in removing jobs are taking money out of the economy as well. By enabling outsourcing the digital platform has facilitated a massive global increase in jobs - just not in the west. These jobs have been across the economy; mfg and services. Just in time everything only works with incredibly efficient IT. 

So empowering innovations may create jobs but what disruptions will they cause on what timeline for existing industries. Even situated innovations like micro-energy generation - a huge innovation may create more jobs in the manufacturing businesses and construction jobs but against the losses in infrastructure maintenance, power station employment, and the carbon chain which will be the bigger employer?

So the followup question becomes even accepting the assumption that empowering innovations create jobs, where will they be? 

The answer is that many innovations will likely be increasingly unsticky simply because as complexity increases so then does the number of players involved. My focus for years has been understanding global trade patterns and value chains from a technological perspective and it is clear to me that the most high tech products are also the ones where it is very hard to capture value - apart from key architecture firms (Apple etc). Even with these architecture firms there time at the top is typically short lived.

Innovation alters every interaction in a macroeconomics spreadsheet. I think the trouble is that innovation thinkers still somehow are thinking about the economy of the 1990s - still largely based in industries, geography and scale. My primary frustration  is that in focussing on geography it still overlooks the dispersed nature of value. So what if patents generate a spiky global landscape (Richard Florida) - the wealth generated from those patents (and patents is a tidy share of innovation anyway) is spread thickly at first and then thinner and thinner across the globe. My second frustration is that this innovation model is still built on a growth model. There are serious sustainability limits which technology can leapfrog us beyond but they can not be simply wished away.

Thus, I am a skeptic that empowering innovations necessarily create jobs and industries and when they do, that those jobs will be sticky to any place in the world. 
I am a moderate optimist about the future but I feel we don't have the mental tools to understand the evolving economy yet.