"We still don't know what we are doing."

Economist Tyler Cowen, of the www.marginalrevolution.com fame, notes that he and his fellow economists don't quite understand why high unemployment persists while US companies keep reporting near-record profits. Some kind of structural change is suspected, but the economists can't put their collective finger on it. "Macroeconomics is rarely simple," they say.

Why is it so difficult to understand? Companies make more profits because for the same revenue dollars they have, after multiple rounds of layoffs, much lower labor costs. In other words, compared to pre-recession levels, fewer people do the same or even greater amount of work.

How is it possible and why this productivity burst doesn't register with standard economic statistics?

It is possible because of two structural changes:
Firstly, over the last 30 years, manufacturing moved from the US and Europe to China and other so-called developing countries. That is, most work in the developed world is done at the office, not on the factory floor.
Secondly, over the last 10 years, communication technologies globalized and virtualized the office. That is, individual contributors and managers can do their work via web or e-mail anywhere anytime (which, with the advent of Blackberries, 3G laptops, and iPhones everybody does on a regular basis, now.)

As a result, from a highly regulated 5-days-a-week/8-hours-a-day sedentary work style we've transitioned to a largely unregulated 7-days-a-week/18-hours-a-day nomadic life. This means that the 40-hr work week ceiling has been effectively tripled to 120 hours. During the recession, office people work a lot more because ... well, they don't want to be fired. Working 60-70 hrs a week and being paid for 40hrs is still better than being unemployed. This structural shift is not reflected by the standard government statistics because, technically, it's not overtime. Rather, people work at home or Starbucks at their "pleasure".

To summarize, the persistent high unemployment in the US is not a fluke. It is due to the changes in technology(communications) and business methods(globalization, outsourcing). We can expect companies continue invest in information technologies because they make their workers more productive, e.g. by increasing work hours, without increasing the labor costs.

tags: information, technology, trend, economics, detection, problem, solution, communications, mobile, infrastructure, office, social, networking

A couple of quick links showing a converging trend between zoomable interfaces and zoomable data:

1. Microsoft Research Street Slide View (youtube video). Unfortunately, they are still stuck in the "computer mouse" world.

2. Flipboard interface that takes advantage of new information flows.


In system terms, we're seeing emergence of a new Payload that matches capabilities of the Tool. This indicates the beginning of a major technology shift in the information technology industry.

tags: trend, payload, tool, system, model, example, interface, synthesis

Why startups have lousy patents.

After helping several startups strengthen their IP, I feel like writing down some of the key problems they face in developing good patents.

Quote of the day.

The single biggest problem in communication is the illusion that it has taken place.

George Bernard Shaw.

Creativity as a function of language.

From a recent article in WSJ:

Languages, of course, are human creations, tools we invent and hone to suit our needs.

It turns out that if you change how people talk, that changes how they think. If people learn another language, they inadvertently also learn a new way of looking at the world. When bilingual people switch from one language to another, they start thinking differently, too.

This is a yet another reason to ask problem solvers, e.g. engineers, managers, entrepreneurs, to reformulate the problem in jargon-free terms. Very often their ability to find a solution is constrained by their inability to describe the situation in language that does not imply a specific approach dictated by past professional experiences. Switching from verbal to graphical descriptions, e.g. by using the Three Magicians method or Five Elements analysis, helps overcome this issue.

tags: creativity, method, magicians, five element analysis, problem, solution, example, information

hi-tech + haute couture = ♡

I wrote earlier that Apple sells its devices as fashion items. Now, the fashion industry is waking up to high-tech opportunities. With the proliferation of iPad and its clones, as well as emergence of 3D consumer devices, fashion shopping is going to be a very important application for high-end customers.

VentureBeat: Historically the fashion industry has been slow to adopt technology, so most venture investors have stayed away from investments in the sector. But that has begun to change. Entrepreneurs are focusing on fashion-related online services, and more customers are willing to buy fashion items over the Internet, and investors are following.

Japanese market is also a good indicator of a possible marriage between high-tech and haute couture:

One of the iPad’s eager customers is Novarese Inc., a firm that offers wedding services and wedding dress rentals, with spokeswoman Kazuka Nohara saying the iPad is a more effective communication gadget between the firm and its customers, especially the grooms.

”Whereas grooms before used to be less participative, we were surprised at how grooms became more active in speaking with our coordinators and choosing wedding dresses since our coordinators have been giving the iPads to customers to look at them freely,” Nohara said.

tags: commerce, information, interaction, business, apple, entertainment, trend

Throwing stones in glass houses.

Using a new laser technology, a ship can now shoot down a drone:

Built by Raytheon Missile Systems of Tuscon, Arizona, the 32-kilowatt infrared laser is shown illuminating and heating the wingtip and then the underside of what looks like a radar-seeking drone – until its remote pilot loses control and the aircraft catches fire and plummets into the ocean.

Imagine you are a remote pilot and you've just detected that your drone is being illuminated by a laser gun. What do you do? With little hesitation, you press a button that launches a missile that uses the laser to guide it straight to the enemy. Kaboom!!! The ship goes up in flames! Game over.

tags: detection, control, drones, military

East vs West: twitting [un]happiness

tags: emotion, source, map, 10x, psychology, process

The Survival of the Luckiest.

It looks like Intel's grip on the semiconductor industry is being disrupted by ARM. Not because ARM did something extraordinary clever, but because the world shifted to applications that care a lot more about electric power consumption than computing power. In biology this is called preadaptation.

Driven by the success of the iPad and iPhone, Apple is expected to pass Samsung as the world's No. 2 chip buyer in 2011, second only to Hewlett-Packard, according to market researcher iSuppli.

The firm is projecting that Apple's semiconductor spending in 2011 will hit $16.2 billion, surpassing Samsung Electronics, which is forecast to be at about $13.9 billion. HP will stay in the No. 1 position with $17.1 billion in spending, iSuppli said.

"This is a an indication of where the technology is moving," said Min-Sun Moon in a phone interview. "Apple is contributing to the trend of moving away from Microsoft-Intel to ARM-based systems," she said.

One of the more interesting aspects of this transition would be the abandonment of legacy applications. Especially, those that were written for the WYSIWYG environment tied to sharing/exchanging information via printed documents.

a 10X change in mobile app revenue model

About a month ago, I cited a study showing that on average revenues from iPod/iPad applications don't cover development expenses. But it appears that a certain type of applications emerged to solve this problem. The key to revenue seems to be in-application purchases:

Apple turned on the in-app purchase feature for the iPhone last fall. That enabled game developers to embrace the same “free to play” business model that has made companies such as Zynga so successful on Facebook. In that model, companies offer their games for free, but they charge real money for virtual goods such as better weapons or online multiplayer play. The in-app purchase feature allows gamers to purchase their goods without leaving their games at all.

The results are surprisingly good. In January, Flurry said that the games that it tracked generated revenue of $9 per user per year, on average. In June, that number had risen to $14.66 per user per year. Previously, these games were generating around 99 cents to $1.99 per user per year.

I think this approach can work for all kinds of digital content, including books. Essentially, we need to create a new product placement technology where the product is sold, rather than advertised, within the context of the story.

A 10X diagram note for my students: by increasing the frequency of transactions, we are moving to the left along the time axis of the diagram.

tags: 10x, content, commerce, money, business, games, mobile, apple, market, book, virtual, problem, solution, course

Recessions are great for entertainment companies because people have a lot of free time on their hands. Moreover, playing social games is much cheaper than even going to the movies, so we can expect a strong new industry emerge from this economic downturn.

TechCrunch: Google has quietly (secretly, one might say) invested somewhere between $100 million and $200 million in social gaming behemoth Zynga, we’ve confirmed from multiple sources. The company has raised somewhere around half a billion dollars in venture capital in the last year alone.
...
Zynga’s revenues for the first half of 2010 will be a stunning $350 million, half of which is operating profit. Zynga is projecting at least $1.0 billion in revenue in 2011.

Another quiet milestone along a similar path was reported by Bloomberg about a week ago:

Microsoft Corp.’s Xbox Live online video-game service probably broke the $1 billion revenue mark for the first time in the year that just ended, helped by sales of movies, avatar accessories and extra game levels.

tags: games, internet, business, industry, entertainment, economy, microsoft

Creativity Quote of the Day

From "Steps to an Ecology of Mind", by Gregory Bateson

I once knew a little boy in England who asked his father, “Do fathers always know more than sons?” and the father said, “Yes.”

The next question was, “Daddy, who invented the steam engine?” and the father said, “James Watt.”

And then the son came back with “—but why didn’t James Watt’s father invent it?”

Predicting future is not that hard.

In 2001, guided by the invention principle I call "Telegrams before the train", my son and I came up with an idea of a portable playlist (US patent application 20040057348). This year, a new music service Songvote pushed the concept a little bit further:

...about 70 percent of music enthusiasts don't want to spend hours creating the perfect playlists, meaning that unless you're a DJ--or just really hard-core about music arrangement--you'd probably prefer to just listen to your library on shuffle or have someone else do the mixing for you.

Songvote is the service for you. This extremely nifty (and completely free) Web-based app lets users create collaborative playlists based on a simple time-restrained voting system. Using it is ridiculously straightforward: visit the site; create a theme-, event-, or activity-based contest; and then sit back and wait for the votes to roll in.

This "Telegram" principle is hard at work within any large-scale system that aims to optimize its performance. According to it, in order for the system to become more efficient, it has to shift upstream (to the Source and Distribution) the task of solving detection problems, e.g. determining the "quality" of a particular song. That's how it was done with the telegrams and train schedules 150 years ago; and this is how it is being done today with playlists and songs.

tags: detection, control, telegraph, example, course, payload

The ultimate shopping channel is coming to a smartphone near you:

Twitter is getting into the online shopping business--or at least pointing to places where deals can be had.

The company's new service, aptly named @earlybird, is an official Twitter account that the company plans to feed with deals at both online and offline retailers, as well as "sneak peeks and events." Users who follow the account will see these entries just like any other tweet in their stream.

This is another sign of the upcoming revolution that is going to produce a change in information consumption comparable to the emergence of the world-wide web in the 1990s. I need to stop procrastinating and write an analytical post about this transition.

tag: trend, system, payload, interface, search, business

$400K per green job

Last week, Business Week published an article by former CEO of Intel, Andy Grove, where he, among other things, pointed out that now it takes tons and tons of money to create jobs in America. The chart below shows that in 2010 dollars high-tech job creation costs went from about $2K in the 1950s to $100K in the 2000s.

Andy Grove thought it was a gruesome trend that spelled doom for American workers. He said that unless we learned how to create jobs more efficiently, the gap between the haves and have-nots is going to grow. Pretty bad, isn't it.

But just three days later, real life events exceeded his gloomy forecast:

"President Barack Obama, under pressure to spur job growth, said on Saturday two solar energy companies will get nearly $2 billion in U.S. loan guarantees to create as many as 5,000 green jobs."

It's $400K per job! Four times greater than the current already absurdly high level. This looks like the disruption pattern described in The Innovator's Dilemma, by Clayton Christensen. That is, we keep "producing" more and more expensive jobs (products/services), while our growth model is being disrupted by China and other formerly 3rd world countries.

tags: innovation, problem, trend, energy, infrastructure, disruption, economy, growth

Psychology of creativity

In the Authors at Google series, Rick Hanson, author of Buddha's Brain, talks about brain plasticity, i.e. how consistent thought patterns restructure brain's connections. Among other things, he links creativity (a generative state of mind) to core psychological systems, Avoidance, Approach, Attachment (see below).

Maybe that's why having an attitude, either justified or unjustified, that you can solve any problem often helps to develop breakthrough ideas. In addition to that, this attitude allows to overcome fear and generate a lot of problems during reverse brainstorming sessions.

A related dilemma:

On one hand you don't want to be aware of a lot problems because it activates the threat response and inhibits creativity; on the other hand, you want to be aware of as many problems as possible, so that you don't miss the one or two that represent the greatest opportunities.

tags: creativity, method, psychology, control, mind, brain, reverse brainstorm, stress, dilemma

Andy Grove, co-founder of Intel, talks about scaling up, a key difference between processes of invention and innovation:

Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.

He also notes the decline of innovation-related jobs (scaling-up) in the US:

Today, manufacturing employment in the U.S. computer industry is about 166,000 -- lower than it was before the first personal computer, the MITS Altair 2800, was assembled in 1975.

Since the early days of Silicon Valley, the money invested in companies has increased dramatically, only to produce fewer jobs. Simply put, the U.S. has become wildly inefficient at creating American tech jobs.

tags: invention, innovation, scale, problem, technology, business, model, quote