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Michael considered fate at 15:19   |   Permalink   |   Post a Comment

Google's Olympic logos are getting pretty hideous, which just goes to show you that when you have to come up with something new every day it ain't so easy - even for a goliath like them. Back when they posted just a few special holiday logos they had all year to perfect them but now.. shit, I think I saw them throw up a festivus pole as the 'l' in late december. I wonder if Larry and Sergey wrestled?

And this is why big companies struggle. It's all about movement. Product is one thing, service is another, but when those offerings don't continually improve (whether through price or performance) is when you have an ailing business that starts looking for an out. The only question is where will they look.

Sometimes, a company gets out from under the bright lights of the hot seat by playing with the numbers; cooking the books. While that might work for awhile we all know how that goes in the long run. Others, such as Google, run wild purchasing small upstarts to fill the void - they were once a small upstart and they have nothing but fond memories of those times so why wouldn't they pick up some more of that? Then you have your AOL-TimeWarner deals which basically looks like two ancient old drunks hugging in the alleyway for warmth and comfort. Someone must have found some money there because all the talk these days is about TimeWarner breaking up again - somebody wants it all and doesn't want to share. Ever tried to get two bums to split a fiver?

As the knowledge economy becomes more and more a thing of the present and not just the talk of the future, we will continually find ourselves asking, "is the culture of corporate business dead?" This is because of the unique nature of the beast; information is a very liquid resource.

What is the knowledge economy?

It's an economy based on information and not on our traditional notion of "goods". It's a business market trading in correlative data. It's a trend that is all about trends. No longer are we dealing in raw data; our currency now is pertinent data. Data-mining, statistical analysis, machine-learning, and artificial intelligence is moving us forward in our understanding of what all the numbers mean.

So how does the knowledge economy change anything?

It changes how we look at business. It changes how we massage the numbers. It changes how we look at ourselves in the mirror in the morning. It changes our entire perspective on things. It changes how the economy actually works.

Remember that we are nothing more than a part of the evolutionary process and that our collective - our intelligence that keeps us feeling so very separated from that process which bore us from it's very womb - is itself as much a part of the process. Economy is nothing more than the biology of currency, the study of the living-breathing-wriggling-and-writhing thing that is the markets of the world. Sure, when things become so abstract that we are no longer trading cattle but ideas about the statistics about the cattle, frame of reference can get shaky; but never forget, it all boils down. We are nature.

So what? So we evolve? What's the point?

Take a lump of savings that is compounding interest. Even at the (sometimes) slow rate of inflation, over time it seems to grow more quickly. An inflation of 2% on $1 is 2 cents. An inflation the next year of 2% on that $1.02 is 2.04 cents, and on and on, until the actual value is increasing very quickly (10 years later it would grow 2.39 cents), even if the inflation rate is constant.

One could argue that the economy, an evolutionary process with invention and innovation is similar to this problem of compound interest. Things start to move really fast and the acceleration only gets larger with time.

Can companies sustain themselves in this evolutionary market?

The answer to this question may be yes or it may be no but most likely there is no static answer. It's similar to asking whether all species will be able to adapt and cope with a changing environment; certainly some will, yet some others won't.

The important thing to note is that, more than likely, the conventional numbers don't capture the emerging knowledge economy:

As Greenspan would be the first to tell you, it's a lot easier counting how many widgets the nation produces in a year than quantifying the creation and marketing of knowledge. After all, we're talking about intangibles: brand equity, the development of talent, the export of best practices.

Historically, "hardware" such as machines and buildings have been tallied as investments yet spending on "software" - education, training, and R&D - have not. In fact, it wasn't until 1999 that the Bureau of Economic Analysis started counting software purchases in this way. At the time:

Companies were spending more than $150 billion annually on software, far more than the $100 billion for computer hardware. And the software often stayed in use longer than the hardware.

And that's just scratching the surface:

Grab your iPod, flip it over, and read the script at the bottom. It says: "Designed by Apple in California. Assembled in China." Where the gizmo is made is immaterial to its popularity. It is great design, technical innovation, and savvy marketing that have helped Apple Computer sell more than 40 million iPods. Yet the folks at the BEA don't count what Apple spends on R&D and brand development, which totaled at least $800 million in 2005. Rather, they count each iPod twice: when it arrives from China, and when it sells. That, in effect, reduces Apple -- one of the world's greatest innovators -- to a reseller of imported goods..

..Most of the workers who immigrate to the U.S. each year have at least a high school diploma, while about a third have a college education or better. Since it costs, on average, roughly $100,000 to provide 12 years of elementary and secondary education, and another $100,000 to pay for a college degree, immigrants are providing a subsidy of at least $50 billion annually to the U.S. economy in free human capital.

As many regular readers will remember I am a big proponent of trying not to forget the little guy - human resources are about as important as it gets in a knowledge economy because - whether you count knowledge as the resource or humans as the resource - it's all coming out of our brain matter, this isn't stuff you're pulling out of the ground or manufacturing in a plant. Example? IBM spends roughly $700 million a year on training, another uncounted statistic.

Certainly, problems in the economic numbers is nothing new. A classic issue is the black market - those mutually agreed-upon activities such as the sale of sex or drugs which are not really measurable because they exist underground, uncharted, untracked, yet are true "productive" transactions that are taking place and ultimately should somehow be fit into the numbers.

Nevertheless, the issue I am discussing here is not existing unmearsurables but the unmeasured changes that are taking place.

Is information flow the new energy flow?

While it would also appear that the average U.S. citizen has a negative savings rate one must take into account that educational debt (i.e. student loans) is still considered consumer spending. Somehow, this doesn't quite seem to fly. The $168 the average American male spends on valentine's day does not seem like it should be categorized with an equal $168 of tuition.

This is a matter of information and it's important to remember that the flow of it is almost wholly and purely positive - that is to say, information send from point A to point B does not cease to exist at point A. This is the very definition of intangible. How do you measure an economy based on freely-replicatable resources? We have yet to discover a law of conservation of knowledge. The answer to these questions, right now, is that we just don't know.

Are big businesses the dinosaurs of our age?

What it's going to take to understand the evolving economy is innovation, not invention. Building a new robot to vacuum my rug is great, but building a new adaptive economic model in order to understand the business of knowledge is even greater and that is the difference. As evolution speeds up it doesn't just increase in velocity, it increases in acceleration as well. Big businesses that are not able to move quickly in the face of change will be the ones that eventually die out. We may be seeing the very beginnings of these deaths in companies like GM.

Maslow's hierarchy - a phsychological theory based on a pyramid of needs - places security in a much more important role than love, self-esteem, and self-actualization (the top of the mountain, so to speak). While a company, as a being, is not necessarily directly-comparable to a human as a being, security is nevertheless very important here as well. It is human nature to be reluctant to consider changes in the rules and this transcends the individual into institutions as well, where it may be much harder to dislodge as a way of thinking. That is to say it is harder to change the resistence to change in a corporation than it is in an individual. When resources become more ephemeral (what is considered important or valuable information quickly becomes old news and is replaced by newly created information) and more abstractly attainable (information can be pulled out of thin air whereas there is a finite number of trees in the world at any given time that may be cut down and turned into lumber) you have a situation where small, quickly moving creatures (e.g. start-ups) can evolve much quicker than giant monoliths. They are not stuck with an aging philosophy of business and - if they are - they can quickly die out to be replaced by yet another small start-up. Their needs (in resources) are more easily met, their efficiency is higher, there is less leakage (i.e. middle-management) and therefore their level of security is higher, and they have a better chance of attaining that elusive and all-important self-actualization (a term originated by Kurt Goldstein) - the instinctual need to make the most of one's unique abilities.

So for now our start-ups will be bought by larger corporations, these corporations will merge and demerge, but overall there is an inevitable evolution of the process; the rules, they are a changin'. Eventually, we may look back on the economy of the 20th century and recognize it no more than we recognize Cro-Magnon as our great-uncle.

Knowledge is power and power corrupts. Absolute knowledge is absolute power which corrupts absolutely. But remember, "corrupt" is simply another way of saying "alter from the original", which is to "innovate", which is to accept the path we all must follow (whether by choice or by proding) down the road of change we call life.

A musician must make music, the artist must paint, a poet must write, if he is to be ultimately at peace with himself. What a man can be, he must be. (Motivation and Personality, 1954. Abraham Maslow)