Irving Wladawsky-Berger

Rethinking Personal Data

In 2010, the World Economic Forum (WEF), launched a project on Rethinking Personal Data.  The project brought together experts from business, government, academia and end user privacy and rights groups to examine the challenges and opportunities involved in properly managing the explosive growth of personal data in the digital world.  In January of 2011 they published their first report, - Personal Data: the Emergence of a New Asset Class.  

The report’s overall point of view is that personal data is a new asset class touching all aspects of society.  It is potentially as valuable a resource in the 21st century as heavily traded physical goods like oil have been in the past hundred years.  The report recommends the development of a principled, collaborative and balanced personal data ecosystem that is capable of evolving and improving over time.

This past May, the WEF released a second report, Rethinking Personal Data: Strengthening Trust.  I found it to be an excellent overview on the subject.  It observes that throughout history, economic value creation has been linked to the ability to move and trade physical goods.  Similarly, “data needs to move to create value.  Data sitting alone on a server is like money hidden under a mattress. It is safe and secure, but largely stagnant and underutilized.”

But, personal data lacks the trading rules and policy frameworks that exist for widely traded physical assets.  As a result, there is little trust among the key stakeholders, - individuals, governments and the private sector, - which could undermine its long-term potential.

Digital Common Law

On May 30 and 31 I attended a meeting in Washington, the Rights and Bytes: Law and Big Data Workshop. The workshop explored progress in developing effective, legally sound, software-based solutions for the management of digital identities and for the protection and sharing of sensitive data.  It was  sponsored by ID³, a recently organized multidisciplinary non-profit institution with close ties to MIT’s Media Lab.  ID³’s principal focus is to develop architectural frameworks and open source software solutions that embody the necessary policy principles for managing critical personal information so that it can be tested, verified, improved and scaled. 

For the past few hundred years, governments around the world have developed laws, policies and practices to help us better get along with each other as we conduct the many transactions and interactions that are part of our everyday lives.  But, as as Internet and digital technologies are increasingly integrated into just about all aspects of our lives, the laws, policies  and institutions we developed for the physical world are way too impractical for our fast moving, fast changing digital world.  We must somehow bring with us and adapt our policies and regulations from the physical to the digital world.

Is this even feasible?  Yes, argues John Clippinger, ID³’s Executive Director and CEO, and policy strategist and writer David Bollier in an excellent working paper Digital Common Law: Brief on Trust Frameworks and Self-Governance which they wrote for the workshop.

Fifty Years of Memories

On June 1 and 2 I was in Chicago to participate in the 50th high school reunion of the University of Chicago Laboratory Schools Class of 1962.  I have not attended previous class reunions, and was not sure I would attend the 50th reunion either when I first heard that it was being planned.  But, as it turned out, this became an event that I’ve been looking forward to for the last six months.  And, the actual reunion surpassed my expectations, turning out to be a very positive experience. 

The U of C Lab Schools was, and still is, one of the top private schools in the country.  Almost all its graduates go on to college.  Our class had an interesting mix of very sharp students, including children of faculty members and others associated with the U of C; kids from nearby fairly well-to-do, mostly Jewish neighborhoods; and other students throughout the Chicago area attracted by the Lab School’s academic reputation.  The school has long been known for the diversity of its student population, being the first private school in Chicago to admit African American students.  Our class included a number of black students, mostly from middle/upper-middle class families.  In this mix, a Cuban-born, Jewish kid fit right in.

The Untethered, Hyperconnected Enterprise

A few weeks ago I attended the MIT Sloan CIO Symposium.  The theme of this year’s Symposium was Piloting the Untethered Enterprise:  “In today's world of mobile, big data and the cloud, how does a CIO successfully pilot his organization towards its goals?” 

After listening to a number of talks and panels throughout the day, I came away with a few key impressions.  Pretty much everyone agrees that we are in transition from the tethered, connected world of PCs, browsers and classic data centers to the untethered, hyperconnected world of smart mobile devices and cloud computing.  The emergence of the untethered enterprise will have major implications for IT, for business and for society in general.  But lots of questions remain as to what those implications might be.  This is to be expected in the early stages of such a major transition. 

Two back-to-back panels explored what it takes to successfully transition to the untethered enterprise, one consisting of academics, and one of CIOs.  Not surprisingly, each of these panels viewed the opportunities and challenges through somewhat different lenses.

An Emerging Platform for Digital, Inclusive Innovation

The Internet era was born in the mid 1990s.  On August 9, 1995, Netscape’s IPO caught the world by storm.  It marked the passage of the Internet from a network primarily used by universities, research labs and geeks in general, to a platform with a vastly expanded reach and connectivity.  Anyone with a personal computer and Web browser, was now able to access all kinds of content, communicate with people all over the world, and conduct a variety of transactions over the Internet.  

The Internet became an incredible platform for innovation, enabling startups, large institutions, and everyone in between to quickly develop and bring to market many new digital products and services.   Its reach and connectivity led to the creation of all kinds of innovative, digital applications.  It enabled individual and institutions to do all the things they did much, much better.  It transformed all kinds of every day activities, including the way we work, shop, learn, bank, listen to music, watch films and deal with government.

But, getting online and being able to access the Web and the many applications built around it required a personal computer and an Internet account.  And, e-commerce transactions required a credit card or bank account.  So, while the Internet was truly empowering for those with the means to use it, it led to serious concerns about the growing digital divide both within countries and across the world. 

The reach and connectivity we were all so excited about in this initial phase of the Internet era was in reality not so inclusive.   As our economy was becoming increasingly digital, major new inequalities were now arising because so many around the world could neither afford a PC or an Internet account and had no bank relationship or credit card.  It was disconcerting to have a digital revolution and new information-based economy that left out the majority of the world’s population.

Cloud and “Game Changing” Business Innovation

Earlier this year, IBM’s Institute for Business Value published a very good report - The Power of Cloud: Driving Business Model Innovation.  Along with the Economist Intelligence Unit, the IBM study surveyed 572 business and technology executives around the world  to learn how organizations use cloud today and how they plan to use it in the future.  “Recent technology and social connectivity trends have created a perfect storm of opportunity for companies to embrace the power of cloud to optimize, innovate and disrupt business models,” is the study’s overriding conclusion.      

“Although cloud is widely recognized as a technology game changer, its potential for driving business innovation remains virtually untapped.  Indeed, cloud has the power to fundamentally shift competitive landscapes by providing a new platform for creating and delivering business value.  To take advantage of cloud’s potential to transform internal operations, customer relationships and industry value chains, organizations need to determine how best to employ cloud-enabled business models that promote sustainable competitive advantage.”

The survey finds that cloud is still in the early stages of deployment, but its use is expected to grow over the next few years.  Almost three quarter of the surveyed executive said that they have cloud initiatives underway, but only 13 percent said that they already have substantial cloud implementations.  In three years, over forty percent expect to have such substantial implementations, while 90 percent will be involved with cloud initiatives in one way or another.

Complex Sociotechnical Systems: the Case for a New Field of Study

Digital technologies are enabling us to develop systems with huge numbers of interconnected components and sophisticated software that infuses them with seemingly unlimited capabilities.  They are penetrating just about every nook and cranny of the economy and of society in general.  And, they are profoundly changing the way all organizations operate, as well as our working and personal lives. 

We are increasingly able to pull all these capabilities together and develop sociotechnical systems, which combine the powerful, inexpensive and ubiquitous digital technologies with the people and organizations they are transforming.  But, we have much to learn on how to best design and operate these systems.  They generally exhibit a level of complexity that is often beyond our ability to understand and control.  Not only do they have to deal with the complexities associated with large scale hardware and software infrastructures, but with the even more complex issues involved in human and organizational behaviors. 

A few weeks ago, MIT professor Joseph Sussman addressed these issues in a lecture - Complex Sociotechnical Systems: The Case for a New Field of Study.  Sussman is Professor of Civil and Environmental Engineering and Engineering Systems and interim director of the MIT Engineering Systems Division. 

Complex sociotechnical systems are high-impact, difficult-to-understand, technology-intensive systems that have major societal, political and economic implications.  While this definition can rightfully apply to many of the systems we have been developing in the last few decades, their importance is on the rise now for two major reasons. 

We are increasingly using systems thinking to address some of our most critical contemporary problems including climate change, energy and the environment, cities and metropolitan areas, jobs and productivity, the global economy, financial systems and national security.  At the same time, we now have the technologies, tools, engineering methodologies and scientific principles to be able to better design and manage such systems.

Reflections on My Fifty Year Involvement with Computers

On May 5, I had the honor of giving the commencement address at Penn State’s College of Information Sciences and Technology.  Dean David Hall gave me very good advice on what makes for a good commencement speech: make it personal, tell us about yourself including your background, and keep it short.  He also suggested that I share with the new graduates any key lessons I have learned during my long career. 

The timing for reflecting on my life and career could not have been better, given that in a few weeks I will be going to Chicago for my 50th high school class reunion, the University of Chicago Lab School Class of 1962.  For the last several months, I have been involved in an online group with many of my former classmates, learning a bit about their lives and careers over the past fifty years, and sharing with them some details about my own.

Systems Thinking, Safety and Risk Management

A few weeks ago I participated in a roundtable breakfast on Protecting Financial Markets in the Age of the Cloud.  The roundtable gathered together a group, - consisting primarily of financial experts, with a sprinkle of technologists like me, - to explore how to best regulate financial markets in our fast changing, highly interconnected, complex, digital world. 

Several participants cited the sharp rise in volume and speed of high-frequency trading over the past decade as an example of a current practice that is potentially increasing volatility and systemic risk in financial markets.  They mentioned the flash crash of May 6, 2010 as the kind of incident that is not well understood, and whose recurrence could compromise the stability and general trust needed for financial markets to function smoothly.  At least one of the roundtable participants was convinced that another major event, similar to the global financial crisis of 2008 would inevitably take place in the next few years. 

Toward the end of the roundtable, the moderator asked us to reflect on the kinds of controls needed to make financial systems more stable and less prone to another major crisis.  Can you do so with incremental, evolutionary safeguards, or do you need major new regulations?  Can the industry institute the needed safeguards on its own or do governments have to play a bigger role?

These are very complex and important questions for which there are no simple answers.  Our answers often reflect where we stand in the conservative-liberal spectrum.  My own point of view is shaped by my interests in complex engineering systems, in particular, in systems whose components are interconnected via digital networks; where software plays a major role in their overall design and operations; and, which involve people and information as well as technology. 

Financial systems are an example of such complex engineering systems.  Thus, I am hopeful that much of the research on the design and operation of such systems will shed light on how to better manage financial systems as well.

Adjusting to Life in a Hyperconnected World

In the spring of 1997, during a presentation in Paris on IBM’s new e-business strategy, the CIO of a major European retail chain mentioned that his company had just spent a lot of money remodeling their stores.  He was wondering if they had done the right thing, given all this new economy talk.  We were in the middle of the dot-com frenzy, and the buzz in the air was that in the Internet-based new economy, brick-and-mortar businesses, like other businesses grounded in the physical world, could not possibly compete in this fast-moving digital space and were therefore headed for extinction. 

Similar questions were being raised all around us.  In my local library, in whose advisory council I have been serving since those days, we were making plans to leverage the new Internet capabilities, such as introducing an online catalog and providing wireless Internet access in the library building.  But we were also wondering if a library building would be needed at all in the future, given the growing digitization of books, music, videos and just about all content. 

As it has turned out, the Internet, along with the overall digital revolution has proven to be a transformation of true historical proportions, propelling us from the industrial society of the past two centuries to a new kind of information society and knowledge-based economy.  But, it has not quite worked out the way some predicted back in those dot-com bubble days.

Measuring the Forces of Long Term Change

Intel co-founder Gordon Moore described what became known as Moore’s Law in a 1965 paper where he observed that the number of components in integrated circuits had doubled every year since their invention in 1958, and predicted that the trend would continue for at least ten years, a prediction he subsequently changed to a doubling every two years.  The semi-log graphs associated with Moore’s Law have since become a visual metaphor for the technology revolution unleashed by the exponential improvements of just about all digital components, from processing speeds and storage capacity to networking bandwidth and pixels.

But, while the dramatic advances in digital technologies have been well measured and quantified, their impact on firms, economies and individuals has been more anecdotal.  We talk about how this digital revolution has been transforming just about every aspect of business, society and our personal lives, bringing us both near-magical products and services as well as their accompanying creative destruction and pain.  But, how can we quantify this revolution beyond its technological foundations?

This is the task undertaken by Deloitte’s Center for the Edge in its ambitious Shift Index project.  The Shift Index is an attempt to quantify the long term impact of the digital revolution through 25 metrics grouped into three overlapping waves of deep change which is referred to as the Big Shift.  First published in 2009, the study has been updated twice since, most recently in November of 2011.  The study is led by the Center’s co-chairmen John Hagel and John Seely Brown.

Design Principles for Complex, Unpredictable, People Oriented Systems

An IBM Global CEO Study conducted in 2010 concluded that complexity was the primary challenge emerging out of its conversations with 1,500 CEOs and senior government officials.  “CEOs told us they operate in a world that is substantially more volatile, uncertain and complex.  Many shared the view that incremental changes are no longer sufficient in a world that is operating in fundamentally different ways.”  

These same CEOs cited creativity as the most important leadership quality they look for over the next five years.  “CEOs now realize that creativity trumps other leadership characteristics.  Creative leaders are comfortable with ambiguity and experimentation.  To connect with and inspire a new generation, they lead and interact in entirely new ways.”

A similar view was expressed by Roger Martin, the dean of the University of Toronto’s Rotman School of Management in an excellent January, 2010 article in the NY Times - Multicultural Business Theory.  At B-School?.  For over a decade, Professor Martin has been advocating “what was then a radical idea in business education: that students needed to learn how to think critically and creatively every bit as much as they needed to learn finance or accounting.  More specifically, they needed to learn how to approach problems from many perspectives and to combine various approaches to find innovative solutions.”

Over the past several years, we have seen a rising emphasis on design, creativity and holistic thinking in business to help us deal with an increasingly volatile, unpredictable complex world.  This is reflected not just in studies and articles, but in the growing number of design consulting firms like IDEO, as well as of design centers in universities, such as MIT's Media Lab and the d.school in Stanford.

Business and business schools are supposed to be all about applying hard, that is, quantitative, analytical approaches to management.  What then do we mean by bringing seemingly soft topics like design and creativity to business and why is it so important in today’s world?

The Complex Transition to the Age of the Cloud

In June of 2008 I participated in a conference on cloud computing.  After a full day of talks and discussions, the sense of the meeting was that cloud computing has the promise to bring a real paradigm shift to the IT world, although, as the conference organizer succinctly put it in his closing remarks: “There is a clear consensus that there is no real consensus on what cloud computing is.”  In other words, something big and profound seems to be going on, although we are not totally sure what it is yet. 

Where are we now, almost four years later?  Just about everyone agrees that cloud computing is one of the major trends in IT, with important implications not only to IT but to business and society in general.  Many books and articles have been written on the subject.  A number of companies have cloud-based offerings in the marketplace, with more to come.  But, while many of us feel that cloud is even bigger and more profound than we thought back in 2008, lots of questions remain on its intrinsic nature and its value to the business. 

In November of 2011, Andrew McAfee published an article in the Harvard Business Review: What Every CEO Needs to Know about the Cloud.  McAfee is Principal Research Scientist and Associate Director of the MIT Center for Digital Business, where I am a Fellow.  

He writes that cloud computing is “ . . . a sea change - a deep and permanent shift in how computing power is generated and consumed.  It’s as inevitable and irreversible as the shift from steam to electric power in manufacturing, which was gaining momentum in America about a century ago.”

Reflections on the Evolving Role of the CIO

Much has been written about the future role of the Chief Information Officer in the last few years.  Many opinions have been put forward.  All pretty much agree that fundamental changes, already underway, will take place over the next few years in how the IT function is organized and managed.  Some feel that the CIO role is likely to significantly diminish, with its various responsibilities distributed across the business or subsumed within the CFO organization.  Others are of the opinion that CIOs will play an even more influential role.  Given the growing importance of information technologies to all aspects of the business, the CIO role will likely be viewed as being as critical to the business as the CFO.  

I am very much in the latter camp.  I strongly believe that CIOs are in the eye of the IT storms that continue to rage all around us.  While their impact on business is hard to predict and unlikely to be the same for all institutions, few will dispute that over the past couple of decades IT has been significantly transforming just every company, industry, economy and society around the world, as well as our own personal lives.

Hot Spots: Benchmarking Global City Competitiveness

A new report, Hot Spots: Benchmarking global city competitiveness, was just released by the Economist Intelligence Unit.  Hot Spots is the result of a comprehensive study that analyzed the competitiveness of 120 of the world’s major cities.  The study evaluated their performance along eight distinct categories, from which it developed an overall Competitiveness Index for each city.  The study was commissioned by Citigroup as part of its Citi for Cities initiative.

 Hot Spots observes that over half of the world’s population now lives in cities, generating over 80% of global GDP.  As a result, companies are planning their global business strategies from a city, rather than from a country perspective.  The 120 urban centers ranked in Hot Spots have a combined population of about 750 million and collectively account for almost 30 percent of the global economy.  They are fiercely competing with each other to attract business investment and top talent that will enable them to grow their economies, create jobs and improve their overall standard of living and quality of life.

What determines a city’s competitiveness and growth potential?  Hot Spots defines competitiveness as a city’s ability to attract capital, business, talents and visitors.  Competitiveness, according to the report, “. . . is a holistic concept.  While economic size and growth are important and necessary, several other factors determine a city’s overall competitiveness, including its business and regulatory environment, the quality of human capital and indeed the quality of life.  These factors not only help a city sustain a high economic growth rate, but also create a stable and harmonious business and social environment.”

The research team assessed each of the 120 cities benchmarked using 31 different indicators.  Working with a number of experts, it then grouped these indicators into eight major categories, assigning a weight to each toward the final overall ranking: economic strength (30%), human capital (15%), institutional effectiveness (15%), financial maturity (10%), global appeal (10%), physical capital (10%), environment and natural hazards (5%), and social and cultural character (5%).

The Economic and Cultural Polarization of America

Coming Apart: the State of White America 1960-2010, a recently published book by scholar and author Charles Murray, has generated some very interesting and important discussions about America’s increasingly polarizated society.  In a January NY Times Op-Ed, David Brooks wrote that Coming Apart will prove to be one of the most important books of 2012 because it “so compellingly describes the most important trends in American society.”

The key premise of the book, as described by Murray in this Wall Street Journal column, is that “America is coming apart. For most of our nation’s history, whatever the inequality in wealth between the richest and poorest citizens, we maintained a cultural equality known nowhere else in the world - for whites, anyway.”  For most of its history, a major hallmark of American democracy has been the comfortable mingling of the social classes.  “Americans love to see themselves this way,” writes Murray.  “But there's a problem: It's not true anymore, and it has been progressively less true since the 1960s.”

Fifty years ago, there were large income gaps between rich and poor, but the differences are much bigger today.  More important, those income gaps did not lead to differences in behavior.  There was a common civic culture, - the American way of life, - “that swept an extremely large proportion of Americans of all classes into its embrace.  It was a culture encompassing shared experiences of daily life and shared assumptions about central American values involving marriage, honesty, hard work and religiosity.”

Blogging and Personal Feelings

In November of 2008, Andrew Sullivan published an excellent article in The Atlantic, - Why I Blog, - in which he discussed the unique characteristics of a blog by reminding us what a web log shares in common with its namesake, the ship log.

“In journeys at sea that took place before radio or radar or satellites or sonar, these [ship] logs were an indispensable source for recording what actually happened.  They helped navigators surmise where they were and how far they had traveled and how much longer they had to stay at sea. . .  A log provided as accurate an account as could be gleaned in real time.”

“As you read a log, you have the curious sense of moving backward in time as you move forward in pages - the opposite of a book.  As you piece together a narrative that was never intended as one, it seems - and is - more truthful.  Logs, in this sense, were a form of human self-correction.  They amended for hindsight, for the ways in which human beings order and tidy and construct the story of their lives as they look back on them.  Logs require a letting-go of narrative because they do not allow for a knowledge of the ending.  So they have plot as well as dramatic irony - the reader will know the ending before the writer did.”

“Anyone who has blogged his thoughts for an extended time will recognize this world.  We bloggers have scant opportunity to collect our thoughts, to wait until events have settled and a clear pattern emerges.  We blog now - as news reaches us, as facts emerge.  A reporter can wait - must wait - until every source has confirmed.  A novelist can spend months or years before committing words to the world.  For bloggers, the deadline is always now.  Blogging is therefore to writing what extreme sports are to athletics: more free-form, more accident-prone, less formal, more alive.  It is, in many ways, writing out loud.”

I have now been blogging since May of 2005.  As Andrew Sullivan observes about blogs in general, my blog is a record of my changing interests over that time span, of the key items that were catching my attention, and how I felt about them at the time.  Looking back at the many blogs I have posted, I am reminded of some of the major events of the past seven years.

Politics, Women and the Talmud

A couple of months ago a story out of Israel caught my attention.  It concerned an incident that, while extreme, illustrates the tensions between groups with very strong religious beliefs and the larger, much less religious society that does not embrace these views.  As we know, such discussions are now taking place in the US as part of the 2012 Presidential Campaign.  But I prefer to comment on the situation in Israel because it concerns my own religion - Judaism.  In something as personal as religion, you should be sensitive about directly commenting on religions other than your own.

An 8 year old girl, the daughter of observant but modern Orthodox Jews, was harassed by ultra-Orthodox Jewish men as she walked on her way to school.  The men felt that her modest dress did not adhere to their more rigorous dress code for girls and women.  They spit on the girl, insulted her and called her a prostitute.

“The country was outraged,” said the article.  “For many Israelis, this is not a fight over one little girl’s walk to school.  It is a struggle that could shape the future character and soul of the country, against ultra-Orthodox zealots who have been increasingly encroaching on the public sphere with their strict interpretation of modesty rules, enforcing gender segregation and the exclusion of women.”

Would a Distributed Model of Government be More Suitable for a Complex, Diverse 21st Century Democracy?

Last week I wrote about the forces that, in my opinion, are contributing to an increasingly polarized America.  I mentioned three such key forces:  the structural changes and employment challenges our economy is going through; the changing demographics and emergence of a kind of new establishment in US society; and the technology-amplified, free-for-all conversations taking place through our multitude of information and communication channels.

How should government evolve to better adapt to these forces?  Are there innovative government models that might work better than our present ones?  Can we look at the evolution of organizational models in business over the past twenty years for inspiration and guidance?

Companies, especially large, global companies have been going through dramatic changes in the last couple of decades, driven by a combination of advances in information technologies, the Internet, the fast-changing market environment, and the heightened competitive pressures brought about by globalization.  In particular, companies have had to move away from the hierarchic, centralized management models that prevailed in much of the last century and embrace a more distributed organizational style.

“One Nation” in an Increasingly Polarized America

Among America’s most cherished ideas is the notion that, despite all our differences, we are one nation.  It is embodied in the Pledge of Allegiance:  “I pledge allegiance to the flag of the United States of America, and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all.”  E Pluribus Unum - out of many, one, - appears in all our coins and in the Great Seal of the United States.

But, watching the heated political and social debates taking place all around us causes one to wonder what it means to be one nation in our fractious times.  The ideological polarization of our political parties reflects the deep divisions in the country as a whole.  It is more likely than not that the political volatility of the past decade will continue, barring some rare, high impact black swan event like a severe economic depression or 9/11-like terrorist attack.

What are the implications of living through an extended period of deep social divisions?  How will our idea of one nation evolve over such times?  Has the country ever gone through similar politically volatile times in the past?  Given that the future is so unpredictable, can we at least look at our history for some guidance?

Capitalists and Capitalism

A recent NY Times OpEd by Nicholas Kristof observes that:  “Just as Communists managed to destroy Communism, capitalists are discrediting capitalism.” 

“A Pew Research Center poll in December found that only 50 percent of Americans reacted positively to the term capitalism, while 40 percent reacted negatively.  Among Americans ages 18 to 29, more had a negative view of capitalism than a positive view, the survey found.  Those young Americans actually viewed socialism more positively than capitalism.  In other words, America’s grasping capitalists are turning young Americans into socialists.”

Kristof’s OpEd references a very interesting survey by Edelman, a global public relations firm which has been publishing an annual Trust Barometer for over ten years.  Their 2011 Trust Barometer notes that “Trust Plunges in the United States While Resilient across the Globe.” 

“Trust in business saw a two-point global increase, surging in Brazil, rising in Germany, and holding steady in China and India.  The United States was the outlier, as trust dropped across all institutions - business, government, NGOs, and media.  U.S. trust in business fell by eight points to 46 percent - placing the world’s largest economic power within five points of last-place Russia - and decreased in government by six points to 40 percent, putting the U.S. among the bottom four countries with the least trust in government.  In the Trust composite score, an average of a country’s trust in all four institutions, the U.S. also fell to fourth from the bottom, while three years ago, it was in the top four.”

Over the last few weeks we have heard the term vulture capitalism used in national public debates, not by members of the Occupy Wall Street movement, but by arch-conservative politicians.  Are we seeing the emergence of a New Populism where the people, - whether the Tea Party on the right or Occupy Wall Street on the left, - are rising up against the elites, - the rich and powerful who have gotten the US into such a mess?

My Upcoming 50th High School Reunion

I graduated high school in 1962 from the University of Chicago Laboratory Schools, usually referred to as U-High.  This June we will be celebrating our 50th class reunion, and, this being 2012, some classmates set up a social media group site that any member of the class of '62 can link to and participate in an online conversation.

Through the years, I have been involved with the University of Chicago (U of C), which I attended after high school for both college and graduate school.  In particular, I have been a member of the Physical Sciences Division Visiting Committee for years.   But, I have not been involved with U-High, perhaps because I only went there for my junior and senior years.  I have not attended previous class reunions, and was not sure if I would attend the 50th reunion when I first heard about it.  But I joined the online group site, as a way to learn about high school classmates which I have not heard from in almost fifty years. 

The group discussions started slowly, but after a few days, I was really looking forward to the postings.  It has proved to be fascinating, not only because of what I am learning about my classmates' lives, but because the discussions of teachers, neighborhood places, and class events have brought to mind many long forgotten memories.  I feel like a character in a coming-of-age film, who as an older man, is reminded of an important period of his youth, which he then proceeds to narrate.

Information, Money and Related Subjects

“Money, it is conventional to argue, is a medium of exchange, which has the advantage of eliminating inefficiencies of barter; a unit of account which facilitates valuation and calculation; and a store of value which allows economic transactions to be conducted over long periods as well as geographical distances,” writes Harvard historian Niall Ferguson in The Ascent of Money: a Financial History of the World. 

For a long time, money was embodied in precious metals like gold and silver.  The earliest known gold coins were produced in Lydia, in what is now Western Turkey about 2500 years ago.  But, with the introduction of banknotes in seventh-century China, money started to decouple from physical objects with intrinsic value.

“Today . . . we remain more or less content with paper money - not to mention coins that are literally made from junk,” writes Professor Ferguson.  “ . . . we are happy with money we cannot even see.  Today’s electronic money can be moved from our employer, to our bank account, to our favorite retail outlets without ever physically materializing.  It is this virtual money that now dominates what economists call the money supply . . .The intangible character of most money is perhaps the best evidence of its true nature.”

Given this intangible character of money, it is not surprising that major advances in information technologies have in turn led to major advances in the way we deal with money and payments.  In the 1960s, 1970s, and 1980s, mainframes, minicomputers, data networks, transaction processing and data bases enabled financial innovations like ATMs and credit cards.  Then in the 1990s, the wide adoption of the Internet and World Wide Web led not only to online banking, but paved the way for online shopping and e-commerce in general.

Smart mobile devices, broadband wireless networks, cloud-based services and big data are now ushering the next major phase in the evolution of money and payments.  Money is continuing its centuries old transformation from being embodied in objects with intrinsic value, like gold and silver, to being nothing more than information in the digital wallets of our mobile devices as well as in our digital accounts someplace out there in the cloud. 

Since just about everyone in the world, rich and poor alike, now has access to mobile devices, this major chapter in the history of money brings with it a universal inclusiveness that has been missing in the previous links between information technologies and money.  Mobile digital money is coming, - over time, - to every individual in every corner of the world.

Principles for Managing Strategy and Innovation

Through the years, I have been intrigued by the number of once powerful companies that are no longer around.  Darwinian principles seem to apply in business as much as in biology.  When technology and market environments go through major changes, as is certainly the case today, previously successful business strategies will no longer work, no matter how much you try to fix them.  Companies that are unable or unwilling to adapt to the changes in such a Darwinian climate will become marginalized or extinct.

It is not hard to understand how I come to this somewhat fatalistic view of business.  In the IT industry, I have seen many once leading companies disappear altogether or become shadows of their former selves.  IBM's near-death experience in the 1990s was very painful for me personally and for all us in the company.  Even though IBM managed to survive, as well as to regain a position of leadership in the IT industry, the experience has definitely left its imprint and colors my views of the world.

More recently, Citi, which I joined as strategic advisor in March of 2008, has gone through its own near-death experience as a result of the financial crisis of the past few years.  As we know, quite a number of once mighty financial institutions did not survive the crisis.  

Why is it that some firms are able to go through ups and downs, yet survive and thrive?  What accounts for their long term, enduring success?  Are there any principles or patterns that can help guide companies through these highly uncertain times and allow them to not only survive but emerge stronger than before?

The Legend of Apple and Xerox PARC and the Truth About Innovation

Every December for the last few years, NY Times OpEd columnist David Brooks picks the best magazine essays of the year.  He describes his choices in two of his columns, with links to the essays in their online version.  I generally really like his selections.  One of his choices this year is a New Yorker article by bestselling author Malcolm Gladwell - Creation Myth: Xerox PARC, Apple, and the truth about innovation.

Gladwell is a great storyteller.  He uses Steve Jobs’ legendary 1979 visit to Xerox PARC as the springboard for his reflections on the nature of revolutionary innovations.  While describing his version of the legend, he also gives us his version of the truth about innovation, including the evolution of an innovation concept from original idea, to lab experimentation, and on to marketplace success; the role that environment plays in the eventual fate of an innovation concept; and the messy, probabilistic, hit-and-miss nature of disruptive innovations.

Xerox founded its Palo Alto Research Center (PARC) in 1970, which brought together some of the world's best computer engineers and programmers.  In the 1970s, PARC was the mecca for innovation in computing.  In 1979, Steve Jobs asked Xerox to let him tour PARC, and in return he would allow Xerox to buy a hundred thousand shares of Apple for a million dollars.  After much discussion, Xerox agreed.

The US Economy in 2012 - Two Big Problems, Two Ready Solutions

What should the US do in 2012 to address its tough economic problems?  We will hear many answers to this question through this presidential election year.  Many will be based on ideological conviction and/or political opportunism.  They will likely not lead to any kind of workable solutions.  But some will be more pragmatic and might perhaps stand a chance.

The January 1 Sunday Business section of the NY Times asked six economists to give their best advice for 2012 on a variety of issues.  Among them was Christina Romer, Professor of Economics at UC Berkeley and former chair of President Obama’s Council of Economic Advisors.  Professor Romer wrote an excellent article, - Two Big Problems, Two Ready Solutions - offering practical advice for the US economy in 2012.

“The United States faces two daunting economic problems: an unsustainable long-run budget deficit and persistent high unemployment,” she writes in the opening paragraph.  “Both demand aggressive action in the form of fiscal policy.  Waiting until after the November elections, as seems likely, would be irresponsible.  It is also unnecessary, since there are plans to address both problems that should command bipartisan support.”

Scale and Complex Systemic Innovation

The year end issue of The Economist includes a provocative column - Big and clever: Why large firms are often more inventive than small ones.  The column addresses a fundamental question that those studying innovation have been wrestling with for years:  “Are big companies the best catalysts of innovation, or are small ones better?”

The column is based on a recent study - Scale and Innovation in Today’s Economy - by Michael Mandel, chief economic strategist of the Progressive Policy Institute. 

“Conventional wisdom these days says that small is better when it comes to innovation and putting new ideas into practice,” writes Mandel at the beginning of the report.  “Large enterprises are typically thought of as hidebound defenders of the status quo, dominating by market power and brute force rather than technological and innovative prowess. . .Yet reality is far more complicated than this simple small versus big distinction. . . After 20 years where startups have rightly dominated the innovation headlines, we will show that the pendulum may be swinging back.  As a result, there are reasons to believe that scale may be a plus for innovation in today’s economy, not a minus.”

There is little question that small, entrepreneurial start-ups are almost always the ones that bring to market highly disruptive innovations.  They excel at creative destruction, the term that economist Joseph Schumpeter  popularized almost seventy years ago to describe the process of transformation that accompanies disruptive innovation. 

Entrepreneurs have sharp incentives to break into a market with a disruptive new idea that attacks the dominance of established companies.  They are highly motivated to bring to market new products which offer significantly improved designs and/or lower costs, and thus gain competitive advantage and market share from the established leaders in their segment of the market. 

But, in what has become known as the Schumpeterian Hypothesis,  Schumpeter also believed that large companies in concentrated markets have more incentives to innovate.  By investing in new products or processes, the company can sell them to their already large customer base and reap greater rewards faster.  Moreover, in a highly competitive market, startups will have trouble holding on to the gains from their innovations because they will be quickly imitated by rivals, while large companies with greater market power will be able to better protect and hold on to the gains from their innovations.  

So, which is it?  Are large companies at a disadvantage because start-ups can move much faster in bringing new ideas to market, or is their scale an incentive for investing in innovation?  Mandel summarizes the economic research evidence in two words: It depends.

The Emergence of a Digital Money Ecosystem

At the beginning of this year I wrote that the transition to universal mobile digital money is likely to be among the most exciting, important and challenging projects the world will undertake in the coming decades.  Everything I have learned through the year indicates that, while still in the very early stages, the transition is well underway and gathering momentum. 

This transition involves a lot more than the transformation of money - cash, checks, credit and debit cards, and so on, - from physical to digital objects that we will carry in our smart mobile devices.  It encompasses the whole money ecosystem, including the global payment infrastructures, the management of personal identities and personal financial data, the global financial flows among institutions and between institutions and individuals, the government regulatory regimes, and so on.  

In other words, just about every aspect of the world’s economy is involved.  Over time, mobile devices will truly become our personal windows into an increasingly global, digital economy.  This will take decades to fully play out, - historical transitions take their time.  But, it is most definitely underway, with an increasing number of market pilots and research studies already taking place around the world.  

As part of my work with Citi, I have been spending a lot of time thinking about the implications of this historical transition to a digital money ecosystem.  The more I learn about it, the more I am convinced that this is truly a major paradigm shift that will change the very way we think about money.

Open, Collaborative Trust Frameworks

A couple of weeks ago I attended a workshop on Inventing the Future of Finance cosponsored by ID³ and the MIT Media Lab.  ID³, - the Institute for Institutional Innovation by Data Driven Design, - is a new multidisciplinary non-profit institution formed to develop architectural frameworks, open source software and educational content for the protection, sharing and monetization of sensitive data. 

It was founded by MIT Media Lab Professor Alex “Sandy” Pentland, and by John Clippinger, who is currently a Research Scientists at the Media Lab, and until recently was a Senior Fellow at Harvard’s Berkman Center for Internet and Society.  Clippinger is Executive Director and CEO of ID³, while Pentland serves as its Chief Scientist.  I just joined its Board of Directors.

One of the key missions of ID³ is the creation of trust frameworks, which it defines as:  “A combination of software mechanisms, contracts, and rules for defining, governing and enforcing the sharing and protection of information according to a common and independently verifiable standard of performance.  Whenever possible, such governance mechanisms and contracts should be self-executing and self-correcting.”

A Neural, Digital System for the Economy

Most everyone will agree that the world’s economy is undergoing historical structural changes, mostly caused by the digital technology revolution taking place all around us.  In particular, ever since the explosive growth of the Internet in the mid 1990s, we are seeing the emergence of a global, digital economy.  What does this mean?  How can we best describe the nature of this emerging digital economy?  What are some of its key implications for the overall economy?

There is clearly no simple answer to these questions.  But, I recently read one of the clearest and most elegant explanations of the changes our economy is going through in an article in McKinsey Quarterly by economist W. Brian Arthur, - The Second Economy.  Dr. Arthur is external professor at the Santa Fe Institute and visiting researcher at PARC’s Intelligent Systems Lab.

“Digitization is creating a second economy that’s vast, automatic, and invisible - thereby bringing the biggest change since the Industrial Revolution,” he writes at the very beginning of the article.  He illustrates his point with an analogy to the transformation of the US economy by the railroads in the second half of the 19th century.”

Open Services Innovation

Earlier this year, UC Berkeley professor Henry Chesbrough published a new book, Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era.  This is his third book on open innovation in the last eight years, having published Open Innovation: The New Imperative for Creating and Profiting from Technology in 2003, and Open Business Models: How to Thrive in the New Innovation Landscape in 2006.

Professor Chesbrough is in the faculty of Berkeley’s Hass Business School and executive director of the Garwood Center for Corporate Innovation and of the Program in Open Innovation.  I met him over a decade ago when I first got involved with Linux and open, collaborative innovation.  He is a top expert on the value of open innovation to business.

When I recently found out that he had published a book on services, I was eager to learn how he framed the subject.  For over ten years now, I have been thinking about the application of technology and innovation to services.  Over the years, I have given quite a few seminars on the subject, including a graduate course in MIT in the Fall of 2010.  I have also written a number of entries on services in this blog.

Jobs in the Age of Watson

On October 31, I participated in a symposium sponsored by MIT’s Center for Digital Business on The Race Against the Machine: The Future of Technology and Employment.  The symposium was associated with an event that took place later that same day on the Harvard campus, the IBM Watson Challenge.  The Watson Challenge was an exhibition Jeopardy! match between Watson, IBM’s question-answering system, three students from the Harvard Business School and three students from MIT’s Sloan School of Management.  Watson won the exhibition match, with the Harvard team finishing a close second.

At the MIT symposium, I was part of a panel on How will technology affect productivity and employment? The panel was moderated by MIT management professor Erik Brynjolfsson, who is also the director of the Center for Digital Business.  The other panel members were MIT economists David Autor and Frank Levy.  We discussed the impact of technology on jobs, in particular, the impact of advanced systems like Watson which are pushing the boundaries between human and machine capabilities

Digital Technologies for 21st Century Democracy

The Club de Madrid is an independent, non-profit organization of 80 democratic former Presidents and Prime Ministers from 56 different countries founded in 2001.  Its members include Bill Clinton, Mikhail Gorbachev, Felipe Gonzalez and Vicente Fox.

The mission of the Club de Madrid is succinctly captured in its tag line: democracy that delivers.  As described in its website, it constitutes “the world´s largest forum of former Heads of State and Government, who have come together to respond to a growing demand for support among leaders in two key areas: democratic leadership and governance; and response to crisis and post-crisis situations.  Both lines of work share the common goal of addressing the challenge of democratic governance and political conflict as well as that of building functional and inclusive societies, where the leadership experience of our Members is most valuable.”

It holds an annual conference, which this year took place on November 8 and 9 in New York City.  The focus for this year’s conference was Digital Technologies for 21st Century Democracy.  The program was comprised of a number of plenary panels and breakout sessions, each of which included experts from business, government and academia as well as Club de Madrid members.

I was invited to attend the conference, and participate in the opening plenary panel on Digital Technologies and the Future of Governance.  The panel was moderated by Beth Noveck, Professor of Law at the New York Law School, who until recently served in the White House as Deputy Chief Technology Officer and leader of the White House Open Government Initiative.  In addition, Professor Noveck was the conference's overall content advisor and wrote this introductory paper on Evolving Democracy for the 21st Century.

Race Against the Machine

Erik Brynjolfsson and Andrew McAfee just published an excellent short (sixty pages, less than twenty thousand words) e-book - Race Against the Machine: How The Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy.  Erik Brynjolfsson is a professor at MIT’s Sloan School of Management and director of the MIT Center for Digital Business.  Andy McAfee is Principal Research Scientist at the Center for Digital Business, as well as serving as its associate director.   

“This is a book about how information technologies are affecting jobs, skills, wages, and the economy,” they write in the opening sentence.  There are few more timely and vital subjects.  During the 2007 - 2009 Great Recession, unemployment increased by as much as 5.7%, the largest increase in the post war period. 

But, recessions are always accompanied by job losses.  A more perplexing problem is our jobless recovery since the recession was declared officially over.  The seemingly recovering economy is not putting enough people back to work.  More than two years after the recession officially ended, US unemployment is still over 9 percent.

The Emergence of Cognitive Computing

On October 21 I participate in a Colloquium on the Frontiers of IT at IBM’s Thomas J Watson Research Center.  The colloquium, - which was part of IBM’s Centennial celebration, - brought together experts across industry and academia to discuss and debate the direction of four key Grand Challenges at the very leading edge of IT:  nano systems, exascale, big data, and cognitive computing.

John Kelly, senior VP and director of IBM Research, gave an overview of these four areas.  Here is a similar version of his talk given a week earlier at the University of Melbourne.  John explained that these four areas have the potential to transform the IT industry because of their exponential growth, a result of both continual improvements and disruptive innovations.  “Exponential curves,” he said, “will either put you ahead of the competition of kill you.  It’s one of the other.”

Over the next decade, nano-devices are expected to advance by three orders of magnitude, from a billion to a trillion transistors in a chip.  We will be able to design sophisticated, powerful nano systems-on-a-chip that will be totally contained within such a trillion transistor nano device.  To do so, we will have to shift from silicon to other carbon-based materials.  This requires disruptive technologies and innovations at all levels, including new materials, fabrication processes and design tools.  The work is underway.

Unleashing the Next Age of Prosperity

A few weeks ago I met with Carlota Perez in New York.  I first met Carlota, - a friend so I will refer to her by first name, - around the time of the publication of her 2002 book: Technological Revolutions and Financial Capital:  The Dynamics of Bubbles and Golden Ages.  In her book, as well as her many articles and lectures, she frames the turbulent times we are going through into a clear, historical perspective.  Let me briefly summarize her views. 

Over the past couple of centuries, we have had a technology revolution every 40 - 60 years, starting with the Industrial Revolution in 1771, which was characterized by the emergence of machines, factories and canals.  This was followed by the age of steam and coal, iron and railways which started in 1829; steel and heavy engineering (electrical, chemical, civil and naval) starting in 1875; and the age of the automobile in 1908.  Our present information technology and telecommunications age, whose starting point Perez pegs at 1971, is the fifth such major revolution in that span.

Each such technology revolution is composed of two very different periods, each lasting 20 - 30 years.  The installation period is the time of creative destruction, when new technologies emerge from the lab into the marketplace, entrepreneurs start many businesses based on these new technologies, and venture capitalists encourage experimentation with new business models and speculation in new money-making schemes.

Services, Production and Clouds

Last week I wrote about the workshop I recently attended in IBM’s Almaden Research Lab on The Co-Evolution of Future Technologies, Skills, Jobs, and Quality-of-Life.  In particular, I discussed the talk on the IT-based transformation of services given by John Zysman, professor of political science at UC Berkeley and co-director of the Berkeley Roundtable on the International Economy.

Professor Zysman key premise is that the service transformation we are going through is truly an Algorithmic Revolution, that is, the ability to formalize and codify the activities underlying services, express them as computable algorithms and capture them in software.  Given the major advances in the power and costs of information technologies, many more such service activities are now amenable to be transformed into algorithms and embodied in software.  This is profoundly changing the nature of business and just about all other institutions in society, as  they increasingly turn to IT-based services to add value to their offerings.

Over the past several years I have given a number of seminars on technology and innovation in services.  It has been a tough subject to teach.  Services, along with their creation and consumption, have been difficult to define.  So, like many others, I have discussed services and their attributes in contrast to what they are not - physical products that are generally manufactured in factories.  But, while such a definition of services and the service sector of the economy may have worked well in the past, it does not work so well now.      

One of the major consequences of the IT-based transformation of services is the blurring of the lines between manufactured products and products delivered as services, as well as between the industrial and service sectors of the economy.  The distinction between products and services blurs, as physical products are increasingly embedded into service-based solutions, where the clients pay for the services they receive, not the products embodied in the solutions.  The traditional boundaries between the industrial and service sectors of the economy have been breaking down.

The IT-based Transformation of Services

On September 27 I participated in a workshop at IBM’s Almaden Research Lab on The Co-Evolution of Future Technologies, Skills, Jobs, and Quality-of-Life.  The key objective of the workshop was to explore how new technologies are changing the economics of work activities, and to understand the frameworks, theories and models that might help us better deal with these economics changes.

In a series of talks and panel discussions, the workshop first reviewed the historical patterns of technology innovations and economic cycles, and then looked at the future of work economics in three key areas: technologies and societal infrastructure; skills and jobs; and careers and quality-of-life measures.  I gave a presentation on Job Creation, Education and Entrepreneurship in the Emerging Knowledge Economy.

John Zysman, professor of political science at UC Berkeley and co-director of the Berkeley Roundtable on the International Economy, gave an excellent talk on Production, Clouds, and the Transformation of the Global Economy.  He presented a particularly interesting point of view on the ongoing IT-based transformation of services, which he calls an algorithmic revolution.  His discussion of services is largely based on his 2006 paper, The 4th Service Transformation: The Algorithmic Revolution, which was later followed by a more comprehensive 2010 paper, Services with Everything: The ICT-Enabled Digital Transformation of Services co-written with Stuart Feldman, Jonathan Murray, Niels Christian Nielsen and Kenji E. Kushida.

We Are All New Immigrants to the Hyperconnected World

Last week I wrote about Think: A Forum on the Future of Leadership, a conference that IBM held in New York on September 20 and 21 as part of its Centennial celebrations.  The THINK Forum included a number of talks and panels which looked at leadership from a number of different angles.

One of the speakers was Tom Friedman, Foreign Affairs columnist for the New York Times and renowned author of a number of books, including The World is Flat.  Tom (whom I know personally and will therefore refer to by his first name) moderated a session on The Importance of Systems Thinking.  He then gave an excellent talk focused on the themes in his new book - That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Come Back.  The book was co-authored with John Hopkins Professor Michael Mandelbaum.

Tom said that the biggest challenge we all face is that in the last few years we have gone from a world that was connected to a world that is now hyperconnected.  He observed that when he started writing That Used to be Us, he went back and looked at The World is Flat, which he had written in 2004.  In the earlier book he never mentioned Facebook, Twitter, Cloud, LinkedIn, 4G or Skype.  These companies and technologies had not been born or were in their infancy in 2004, yet they are now a major part of our conversations.  In these short number of years, we have moved from a flat to a hyperconnected world.

Leadership and Rational Thinking

As part of its Centennial celebrations, IBM held a conference in New York in September - THINK: A Forum on the Future of Leadership.  The two day THINK Forum brought together leaders from government, business and academia  to discuss the future of leadership from a number of angles, including the changing nature of the corporation, the importance of systems thinking, leading in times of deep structural changes and bringing science to leadership.

After the Forum, I spent some time reflecting on what I had heard in the various talks and panels.  Lots of different opinions and points of views were expressed.  But, I believe that an overriding message kept coming through loud and clear: to make progress in addressing the very complex problems that we all face, we must leverage the power of rational thinking.

Several speakers pointed out that the world is no longer just connected via the Internet, as we have been saying for the past fifteen years.  It is now becoming hyperconnected, given the proliferation of smart mobile devices and sensors all around us.  In such a hyperconnected world, changes now propagate and build on each other faster than ever, rendering just about all private and public institutions increasingly unpredictable and harder to manage.

But, a number of speakers also pointed out that our ability to understand the world around us is directly related to the tools at our disposal.  And, we now have an array of highly sophisticated tools that, when properly used, can help us make sense of all that complexity.  In particular, just like centuries ago telescopes enabled us to peer into the sky and better understand the universe and our role in it, information has now become a similar such tool, enabling us to now peer into our highly complex world and help us understand what is going on.

Innovation in Higher Education

A glance at the latest US employment figures from the Bureau of Labor Statistics reveals sharp differences in unemployment rates by educational attainment: college degree or higher: 4.3%; associate degree or some college: 8.2%; high school graduates, no college: 9.6%; and no high school diploma: 14.3%.  Moreover, while the overall unemployment rate remains over 9 percent, a recent McKinsey report found that employers are having trouble filling specific positions because they could not find applicants with the right skills.  The report projects that if economic conditions improve, there will be a shortage of 1.5 million workers with college degrees by 2020, but a surplus of almost 6 million of workers with no high school degree.  It also projects a continuing shortage of workers with technical and health care skills not necessarily requiring a college degree.

Just about every such study points to a similar trend: for the foreseeable future, the US economy will need better educated workers with specific skill requirements.  Workers without a post-secondary education face a contracting set of job opportunities.  Those with higher educational attainments will be in the best position to obtain good jobs with good pay. 

Thus, we need to significantly increase the number of students receiving post-secondary education.  However, our colleges and universities, the very institutions to which the country should turn to help us address these increased educational demands, are facing problems of their own. Tuition costs have risen much faster than the rate of inflation and keep going up, thus making it harder for them to serve the students most in need of their services.  Many educational institutions are facing financial difficulties.  The financial crisis has been aggravating the situation, at both public and private institutions.  Government education budgets are under huge pressure at all levels, - local, state and national.

Incremental steps will not make much of a dent on the problem. We need to look at higher education through the lens of disruptive innovation, argues a report published last February, - Disrupting College: How Disruptive Innovation Can Deliver Quality and Affordability to Postsecondary Education.  The report is written by Clayton Christensen, Michael Horn, Louis Caldera and Louis Soares.

Social Business: e-business 2.0 . . . and Beyond

IBM executive Sandy Carter has just published a new book - Get Bold: Using Social Media to Create a New Type of Social Business.  I know Sandy well, having worked with her at IBM for over a decade in various initiatives.  She is now Vice President of Sales for Social Business and Collaboration Solutions, as well as one of IBM's key Social Business evangelists and strategists.

IBM announced its Social Business initiative in the Fall of 2010.  Its basic definition is simple and practical: A Social Business embraces networks of people to create business value.  When I first learned about Social Business, I thought of it as the natural evolution of IBM’s Internet and e-business strategies.  Let me explain. 

When first announced in 1997, the basic definition of e-business was equally succinct: Leverage the Internet for Business Value.  So, as Web 2.0 technologies and Social Media applications emerged several years later, it is natural that e-business would have now evolved into something like e-business 2.0, continuing to leverage (the more recent advances of) the Internet for business value.  But, as Sandy observes in Get Bold, Social Business goes way beyond its Web 2.0 implications.

The Limits of Meritocracy

In March of 2010, The Atlantic published an excellent article by Don Peck which painfully described the dire consequences of a long period of high unemployment on US society -  How a New Jobless Era will Transform America.  According to Peck, the consequences of prolonged unemployment are not only bleak but truly systemic in nature -  “a slow-motion social catastrophe.”  Joblessness is more devastating to families and communities than poverty, he wrote:

“The Great Recession may be over, but this era of high joblessness is probably just beginning.  Before it ends, it will likely change the life course and character of a generation of young adults.  It will leave an indelible imprint on many blue-collar men.  It could cripple marriage as an institution in many communities.  It may already be plunging many inner cities into a despair not seen for decades.  Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.”

Peck just published another very good article in the September 2011 issue of The Atlantic - Can the Middle Class be Saved?  In this article, his focus is on what he refers to as The Culling of the Middle Class:

“Arguably, the most important economic trend in the United States over the past couple of generations has been the ever more distinct sorting of Americans into winners and losers, and the slow hollowing-out of the middle class.  Median incomes declined outright from 1999 to 2009.  For most of the aughts, that trend was masked by the housing bubble, which allowed working-class and middle-class families to raise their standard of living despite income stagnation or downward job mobility.  But that fig leaf has since blown away.  And the recession has pressed hard on the broad center of American society.”

The Passing of an Era

The IBM Personal Computer was announced on August 12, 1981.  Having sold its PC business to Lenovo in 2005, IBM itself did not mark the occasion, and as far as I know, neither did Lenovo or the other companies still selling IBM PC’s.  But, the 30th anniversary of this important event in the history of computing was duly noted by IBM Fellow Mark Dean, - a member of the small team that designed the original machine, - in a nostalgic and thoughtful blog.  At the beginning, Mark writes:       

 “It’s amazing to me to think that August 12 marks the 30th anniversary of the IBM Personal Computer.  The announcement helped launch a phenomenon that changed the way we work, play and communicate.  Little did we expect to create an industry that ultimately peaked at more than 300 million unit sales per year.  I’m proud that I was one of a dozen IBM engineers who designed the first machine and was fortunate to have led subsequent IBM PC designs through the 1980s.  It may be odd for me to say this, but I’m also proud IBM decided to leave the personal computer business in 2005, selling our PC division to Lenovo.  While many in the tech industry questioned IBM’s decision to exit the business at the time, it’s now clear that our company was in the vanguard of the post-PC era.”

“I, personally, have moved beyond the PC as well.  My primary computer now is a tablet.  When I helped design the PC, I didn’t think I’d live long enough to witness its decline.  But, while PCs will continue to be much-used devices, they’re no longer at the leading edge of computing.  They’re going the way of the vacuum tube, typewriter, vinyl records, CRT and incandescent light bulbs.”

The 20th Anniversary of Linux

In mid-August I traveled to Vancouver to attend LinuxCon, the industry’s premier Linux conference.  The conference is organized by the Linux Foundation, which is the nonprofit consortium dedicated to fostering the growth of Linux.

This year marks the 20th anniversary of Linux, which made the conference particularly special.  Most of the keynotes reflected on the impact of Linux on the computer industry and on society in general.  A number of additional activities were also planned to celebrate this important milestone.

The history of Linux was summarized in this charming three and a half minute video:
 
“ . . . It was August of 1991, and a 20 year old computer science student named Linus Torvald sat down at his computer in Helsinki to post what is now one of the most famous entries in computer history: ‘Hello everybody out there, I am doing a free operating system, just a hobby, won’t be anything big and professional like gnu, it probably will never support anything other than AT-hard disks, as that is all I have’ . . . word of the Linux open source project quickly spread around the globe . . . Linus named his OS kernel Linux, and chose a penguin as a mascot after a little incident at the zoo.” 

“He soon made a very important decision that would shape Linux’s future just as much as the technology.  He chose the GPL license created by a visionary named Richard Stallman.  The Linux kernel, along with the GPL license and other GNU components revolutionized the computer industry with a few very simple, yet very important freedoms:  the freedom to use the software for any purpose; the freedom to change the software to suit your needs; the freedom to share the software with your friends and neighbors; and the freedom to change the changes you make. . .”

 . . . and the rest is history.

Job Creation and America's Future

This past June, the McKinsey Global Institute published one of the most comprehensive reports I have seen on the high unemployment and jobless recovery the US has been going through for the past few years - An Economy that Works: Job Creation and America’s Future.  The report is based on a McKinsey research study that surveyed 2,000 business leaders, conducted detail interviews with a number of human resource executives, examined in depth those sectors of the economy with the highest potential for growth, developed a number of detail scenarios for how the US employment picture might evolve into the future, and made several concrete recommendations on what the country should do to address our very serious unemployment issues.

Right at the beginning the report hits us in the face with a few statistics highlighted in big text that succinctly capture the job picture in 2011: US jobs have declined by 7 million since December 2007; 20% of men are not working today, up from 7% in 1970; there has been a 23% drop in new business creation since 2007; the jobless recovery is projected to last 60 months; 10% of Americans move annually, down from 20% in 1985.

The very next page uses the same big text format to summarize the very tough challenges the country faces: we need 21 million jobs by 2020 to return to full employment, - that is, to return to the 5% pre-recession unemployment level instead of the current level of over 9%; the job-growth scenarios modeled by McKinsey ranged from 9.3 to 22.5 million, so only their most optimistic high growth scenario gets us back to full employment; in 2020, there will likely be a 1.5 million shortage of college graduates in the workforce; even today, 40% of companies have had job openings for six months that they have not been able to fill due to lack of the proper skills; and 58% of employers said that they will hire more temporary and part-time workers.

“The United States faces an immediate challenge:,” the executive summary starts out saying, “finding employment for 7 million people still out of work from the 2008–09 recession and reviving robust job creation in the decade to come.  But simply employing a nation’s people is not enough. In a globalized, information-age economy, there is no more important economic priority than building a strong workforce.”

Innovation and Entrepreneurship in Large Metropolitan Areas

For several years now I have been thinking about the differences between various models of innovation and entrepreneurship.  In particular, I have been trying to understand the key differences between the innovation and entrepreneurship models that have worked so well in Silicon Valley, the Boston-Cambridge area and similar high-tech, VC-based regions, and the models that might be more applicable to large metropolitan areas like New York and London.

The Silicon Valley model has become the most prominent example of what it means to be a successful innovation hub.   Over the last few decades, it has been the leading region in the creation of new high-tech products and companies based on advanced digital technologies.  A number of regions around the world have tried to become the next Silicon Valley, hoping to develop the right ecosystem mixture, - including technologists, entrepreneurs, venture capitalists, - that will establish their region as a world class center of innovation.  Most such efforts have fallen short of their goals, - a number ending in outright failure. 

Why is that?  To begin with, most successful high-tech innovation hubs have been built around the great engineering universities in their midst - Stanford and UC Berkeley for Silicon Valley, and MIT for the Boston area.  Over the years, these regions have brought together and carefully nurtured a large and fluid community of technologists and, entrepreneurs who share ideas as they move from company to company - as founders, employees, managers, board members or investors.  They have achieved a remarkable network effect particularly suitable for high-tech innovation that give them an advantage in scale that is almost impossible to replicate.

Their university-based, high tech innovation model is particularly oriented toward finding The Next Big Thing, - that is, the next big technology, product or service that will take world markets by storm, transform whole industries, and in the process, create considerable wealth for their creators and investors.  They have been at the center of several waves of disruptive innovations and creative destruction over the past few decades, and will continue to do so into the future.

But, beyond a few niche areas, this is not a model of innovation and entrepreneurship generally suitable for a large metropolitan region like New York.  A model that would work for New York has to leverage the key strengths of the region.  Let me briefly discuss three such New York strengths in particular.

Job Creation and Entrepreneurship

The debt ceiling crisis was further evidence of the highly polarized state of US politics.  But, even as our federal government borders on the dysfunctional, one of the few areas where most everyone agrees, - politicians and citizens alike, - is that addressing our prolonged rate of high unemployment must be one of the nation’s highest priorities. 

An August 5 NY Times article reported the results of a recently concluded poll and observed:

“The debate over raising the debt ceiling, which brought the nation to the brink of default, has sent disapproval of Congress to its highest level on record [82%] and left most Americans [62%] saying that creating jobs should now take priority over cutting spending, according to the latest New York Times/CBS News Poll.”

Economists generally agree that our persistent high unemployment rate, - the longest such period since the Great Depression, - is primarily caused by a fundamental reshaping of the economy.  The US economy is undergoing structural changes driven to a large extent, by advances in information technologies, which have led to a resurgence in US labor productivity as well as to an increasingly integrated global economy.

Social Reputation in the Age of Globalization

Given my current university affiliations and teaching responsibilities, I spend quite a bit of time thinking how we should best train future leaders to help prepare them for the complex, volatile and unpredictable environments that they must learn to navigate.  Before the Internet brought the world much closer together, change propagated relatively slowly and often became attenuated and lost intensity before reaching other parts of a business and the economies and societies in which it operates.  Not so today.  In our increasingly integrated world, change now propagates much faster, and its impact will often lead to unexpected serious problems that a company’s leaders have to learn to deal with.

My own personal experience has been primarily with the impact of disruptive technologies and innovations on business.  Thus, my seminars and courses have generally focused on the management of technology-based business transformation, the transition to an information-intensive, knowledge-based economy and related areas.  But, beyond my core interests at the intersection of technology, management and complex systems, I have been thinking quite a bit about the central role of trust and reputation now plays, especially for highly visible global companies that are leaders in their industry.

Regardless of how it eventually comes out, the ongoing News Corporation scandal is a real time case study of the importance of trust and reputation to a powerful global company.  As we now know, for the last few years, employees of the British tabloid News of the World have been accused of hacking into the phones of celebrities, politicians and members of the British Royal Family in the pursuit of juicy, exclusive stories.  They have also been accused of bribing members of London’s Metropolitan Police Service. 

Few paid much attention to these allegations.  But then, the scandal went viral seemingly overnight and reached its current critical stage when early in July of 2011 it was revealed that the hacking extended to the phones of ordinary citizens, including a murdered school girl, relatives of deceased British soldiers and victims of the London bombings of July 7, 2005.  These latest revelations resulted in a public outcry in the UK against the News Corporation, its chairman and CEO Rupert Murdoch and other senior executives of the company.

A New Style of Work

About a year ago I wrote a blog on the post retirement phase of my life.  Tom Foremski, a journalist blogger and friend who reports on the business and culture of innovation in Silicon Valley Watcher, wrote an interesting comment in my blog:

“In some ways, I see your post-retirement life as being somewhat futuristic, in that it will be the way many people will be working in the future.  It's what I call an "atomic" model - collaborating with others on specific tasks/projects and then dissolving those collaborations as you work with others on different projects. In some ways, this is the way Hollywood has been working for decades.  And it's also one that I increasingly see in Silicon Valley.”

“It's a model that increases individual productivity and also organizational productivity because you bring in consultants/experts for specific tasks.  Why have them sitting around on salaries in-between projects?”

“You've retired from the old style of working and you are now pioneering the new style of working :)”

Tom himself made such a transition when in 2004 he left his position as the Silicon Valley reporter for the Financial Times to found Silicon Valley Watcher, one of the first journalists to leave a position with a major newspapers to make a living as a journalist blogger.

I have been very intrigued with this new distributed work phase of my career, where I am associated with several institutions instead of one primary one, as was the case when I worked full time at IBM until I retired in May of 2007 after 37 years with the company.  In particular, I have thought a lot about the role of the Web and related technologies as key enablers of such a distributed style of work.