The Ingenesist Project

The Next Economic Paradigm

Tag: japan

Ideas Are The New Currency

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On December 20, 2011

In General Information

‘Tis the season for “The Year In Pictures” – the annual new year pictorial accounting of the events of the outgoing year.  Any rational collection for 2011 would include three events; Arab Spring, The Earthquake / Tsunami in Japan, and Occupy Wall Street. These three events eclipsed the Royal Wedding, Steve Jobs, the tenth anniversary of 9/11, the space shuttle retirement and even the end of the war in Iraq.

These three events tell a very interesting story of who we are and where we are going as a civilization.  

Classical economists such as David Ricardo and Adam Smith brought us the idea that a merchant class allocates land, labor, and capital in various combinations as “the factors of production” that match supply and demand for all that societies need via the invisible hand of market capitalism.

Yet, in a single hour, land, labor, and billions of units of Capital were wiped off the surface of the Earth by in Japan.   While we see the images of total destruction, there are hundreds of square miles that were untouched and where all seems quite normal – except for that invisible hand of radioactive cesium.  Land, labor, and capital failed as a an economic cornerstone for all those who had once called this land home.

In the Middle East, with few jobs and even fewer opportunities for youth, the quaint notion of “land and labor allocations” crumbled under the forces of people with mobile access to dynamic data, free information, community knowledge, innovation, and wisdom. Governments, with no relative shortage of money, were unable to challenge the opposing factors.  Again, the idea of land, labor, and capital as the economic cornerstone had failed.

Quite appropriately, Occupy Wall Street was executed on borrowed land, with borrowed labor, and borrowed capital.   The operation was peaceful so nobody died. The stock market did not even crash.  Politicians went largely unscathed and the attorneys stayed in their collective offices. Nothing physical was actually created, and therefore, nothing physical was actually destroyed.  However, a great deal was produced.

All three of these events had something in common – they all produced something very tangible.  They all produced an idea in the minds of others.

As we review the year we review it is increasingly evident that land, labor, and capital are inadequate to articulate what people actually produce.  It will be through these shortcomings of classical economics that a new economy will form.  The degree to which society actually produces the things that society actually needs, this new economy should not look much different.  The degree to which society does not actually need the things that capitalism produces, great new ideas will emerge.

What was once the land of opportunity can now become a planet of opportunity.

Photo Credit: David Shankbone via Mashable 

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An Ode To Japan

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On March 12, 2011

In General Information

A Familiar View From a Familiar Land

I was deeply moved by the events in Japan over the last several days.  I have spent many weeks over several years in that country from my work supporting All Nippon Airways with Boeing.  I have also experienced several earthquakes in Japan, obviously nothing like the most recent.

Throughout many of my writings, I talk about the integration of of knowledge assets, the integration of markets, and the integration of communities.  Yet here I reflect that there is likely no country as tightly integrated as Japan.  This is the reason why they are so resilient and will arise successful despite any adversity that they encounter.

Several years ago, I was in downtown Tokyo during a magnitude 5.4 Earthquake.  The central subway loop closed down and the feeder trains kept pouring people into the station – the streets filled to standing room only.

As the account manager for All Nippon Airways, I was amazed at the astonishing reliability that they achieved with the aircraft fleet.  Reliable airplanes are essential because transportation is tightly integrated; if the plane did not leave on time, the trains would keep dropping people off at the airport and it would quickly fill up to, again, standing room only.

I have worked with dozens of Japanese engineers.  They are an amazing group in themselves – they design for two or three levels of fault tolerance in all of their decisions because when things go wrong in Japan, they go very wrong.  Their airplanes are impeccable throughout despite severe service requirement. Airplanes leave on time or they are replaced, but they always deliver on their promise of safety and security. Many of the buildings are sacrificial; meaning that they may may no longer be useful after a big quake, but they will not fall.  The train station may fill up, but the trains won’t crash.

This mindset has permiated into all of their products.  Where Americans may see obsessive compulsive drive to higher degrees of quality for no apparent reason, the Japanese see solutions to problems that don’t yet exist.  They take deep personal responsibility for failures that are two or three levels deep in unlikely probability.

It is not surprising that the casualty numbers so far, while deeply tragic, are not what one would expect given the magnitude of the event – the Earth was knocked off it’s Axis by this temblor, but the Japanese were not.

I extend my deepest condolences to my many friends and colleagues of Japan and stand ready to help in any way that I can.

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Toyota Raises the Bar, Again

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On October 12, 2009

In General Information

Adapted from NY Times article here

Last week Akio Toyoda, president of Toyota Motor, apologized for his company’s poor financial performance and possible culpability in the death of an American family for faulty product.To this, I ask – what is the value of this conversation in the age of Social Media and where is the associated innovation?

I worked extensively in Japan and apologies from CEOs are not uncommon.  When All Nippon Airlines and Japan Airlines had a few runway incursions – both CEOs (competitive enemies) appeared together on national TV nearing tears and ending with a loooooooong bow of remorse.  US media does not often get a chance to see this side of Japanese culture because of it’s intimacy, sensitivity, and frankly, it’s a little bit strange since scandal and corruption in Japan can be truly world class.

A few interesting quotes from Mr. Toyoda:

  • Toyota was shamefully unprepared for the global economic crisis and now is a step away from “capitulation to irrelevance or death,” said Mr. Toyoda, the grandson of the car maker’s founder. The company, he added, is “grasping for salvation.”
  • Toyoda declared the automaker had gotten too arrogant on “the hubris born of success” and the “undisciplined pursuit of more.”
  • “I want Toyota to return to profit, so we can start paying taxes and go back to contributing to society,” he said.
  • And in a peculiar show of deference, even the reporters gathered were issued an apology.
  • “I’m sorry I am standing on a podium, standing above you,” Mr. Toyoda told the seated audience. “But my seniors always taught me that I must stand when addressing those who are above me.”
  • ….and they go on and on….

And on the other side of the pond…

I am still waiting for a single US Banker, Insurance company CEO, or Corporate executive to apologize for mismanagement and failing to sell worthy products.  Not one – Sure, they will kowtow to the Congress or the courts, but not the people – all they need to do is look straight at the camera. Seat belts were not even installed in US automobiles for the first 60 years because they did not want to give the “impression” that automobiles were unsafe.

The devaluation of conversation?

“Sometimes, this apology business is a way to avoid taking real action or responsibility,” said Robert Dujarric, director of the Institute of Contemporary Japanese Studies at Temple University’s Japan campus.

“When you hear these long apologies,” Mr. Dujarric said, “It makes you want to say: ‘Don’t be sorry, just do something about it.”’

Now, enter Social Media:

Toyoda again has set a new standard.  This story is covered throughout social media space – most other big Japanese apologies had not.  The difference between the US automaker and the Japanese is stark.    Toyota intends to be the standard by which all other competitors are compared.  When most are trying to lower the bar, Toyota raises it.

That’s the value of conversational currency.

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A System of Innovation

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On December 2, 2008

In General Information

We have established that Innovation and wealth creation are profoundly related and that one cannot be sustained without the other.  A huge problem is becoming apparent because Money lives in a complex, global and highly integrated system where billions of dollars can circle the globe daily at the speed of light. Meanwhile, innovation does not live in an equally diverse, integrated and global system.

Instead, innovation lives in the patent system which is extremely slow, prohibitively expensive and full of secret language and legal strategy – certainly not accessible to most people who actually do the innovating.  In the immediate financial crisis where we are printing money at an astonishing rate, we must increase the speed, quantity, and quality of innovation at a comparable rate in order to preserve the balance.  We need an Innovation System to balance the Financial system.

Everyone knows that innovation happens in places like Silicon Valley, Corporations, a bunch of research labs, someplace in Japan, and of course the proverbial “Steve’s Garage”; but these places do not behave like a system, they are not integrated and they often compete rather than cooperate. Everyone knows what money is – but innovation is treated like some sort of mystery potion related to supreme knowledge among the gifted few.

Nothing could be further from the truth. Remember in the last chapter, the billions upon billions of tiny ideas are basically crowd sourced.  These ideas are combined into larger advances and that process continues until, say, an IPod rolls off the assembly line.   We readily call the IPod the innovation, but not the billions of tiny ideas.

A System of Innovation

Our accounting system is used to keep track of money, it is not designed to keep track of billions of tiny ideas.  So it calls human knowledge “intangible” while the IPod is “tangible”.  Somewhere along the line our culture reinforces this idea.  The truth is that knowledge is not intangible – knowledge is simply invisible.  This is a much easier problem to solve.

Intellectual Capital, social capital, and creative capital are locked up inside corporations sitting behind processes, job descriptions, and insulated from tangibility by multiple levels of management.  The command and control system arose from the industrial revolution, and with the help of Wall Street, is responsible for great innovation advances leading humanity to a global gross domestic product of 65 trillion dollars. However, the volume of innovation under this system is no longer sufficient to sustain the debt that it has also created.

Today, the phenomenon of Social Networks is showing us that human knowledge is desperately trying to become visible, and predictably, innovation in this area is increases at a remarkable rate!  The challenge now is to marry the phenomenon of social media to the financial system just like corporations are married to the financial system through Wall Street.

In market economics there are five components that are essential for a market to work properly; first, there is a currency of trade; like Dollars, or Euros, or Yen. Second, there is always an inventory so we can find pieces, count them, and build stuff. Third, there are financial and government institutions that are supposed to protect property rights to keep the game fair so that the people that own things don’t get ripped off. Fourth, we have entrepreneurs to do the fuzzy math, they interact with the system, they fill in the grey areas, and they manage risk. Finally, there is a business plan so that the entrepreneur can do what they do best – buy low, add value, sell high and pocket the difference. That’s how a market works. It’s quite simple.

Now listen carefully, these five elements are tightly connected and must be present in some way at every transaction. If any one of these elements is missing, disconnected, or corrupted, the system will fail. This is the underlying cause of the financial crisis, the system became disconnected.

We need to make “knowledge” look like money, walk like money, and talk like money and some real interesting things should happen.

The next several modules will go step by step through the five elements of market economics and we’ll uncover as best as we can those same five elements as they exist today in our knowledge economy.  Then we’ll connect the dots, fill in the blanks – and out pops the innovation economy!!!

After that, we’ll discover the new business methods of the innovation economy. And finally, we will talk about the thousands of new “corporations” that will arise. Literally, every business that we know of can be made more efficient in an environment where knowledge is tangible and a great deal of new wealth creation will occur.

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