A Few Parting Thoughts

This is my last blog for the Saporta Report, although you may hear from me again in a guest article or two.  I have relocated my blog to TAGThink, on the web site of the Technology Association of Georgia.  I hope you will visit me there.

Looking back, I never could have anticipated becoming so interested in the topic of whether technological innovation creates jobs. I frequently wrote about this topic because it is important. There is a pervasive, ongoing national debate about whether technology is a good thing (creating jobs) or bad thing (destroying jobs).  Both sides appear to agree that, at least in the short term, technological innovation destroys jobs. According to an Associated Press study, most of the jobs lost in the Great Recession will never return, because they have been “obliterated by technology.”

How can innovation destroy jobs, yet still be a force of economic growth and job creation? On many occasions my blog discussed the creative destruction of capitalism, a theory advanced by Joseph Schumpeter.  I also discussed the views of Harvard Business School Professor Clayton Christensen, who confirmed that some innovations create or sustain economic growth, but many “efficiency innovations” do lead to the loss of jobs, at least in the short run. Schumpeter, Christensen and others contend that, by destroying jobs, innovation frees up resources that can be better deployed, resulting ultimately in the creation of new jobs.

So are we justified in putting our faith in technological innovation?  Clearly the job losses associated with creative destruction are painful, but time and again “historical fears of technological change look foolish, given that automation has increased living standards and rendered our workweeks both safer and shorter.” www.nytimes.com/2013/02/03/sunday-review/raging-again-against-the-robots.html?ref=todayspaper

Historically, technological change has led to economic rejuvenation and growth, but will it be different this time? Have we planted the seeds of our own obsolescence? What should we do to promote growth?

Some say that education, the right kind of education, is the answer.  That may be true, but in a world of accelerating change, do we know what kind of education or training is required? For example, I wrote about a “new age” manufacturing job, involving the supervision and operation of robots.  The job required training.  Even at a time of persistent unemployment, some of these jobs have gone unfilled.  Because of global competitive pressures, the wages for this job are comparable to the wages of a McDonald’s assistant manager, and seemingly not high enough to attract qualified applicants. www.saportareport.com/leadership/technology/2012/11/26/the-creative-destruction-of-capitalism-robotics/

One comment to my blog suggested it would be “xenophobic” to consider the effect of technology from a US perspective. I’m not sure I agree.  When we celebrate innovation among Georgia companies, we are at least indirectly showcasing the ability of Georgia to compete with other States and our companies to compete globally.  If manufacturing automation leads to job losses worldwide, but the US could recapture some manufacturing jobs through superior robotics technology, wouldn’t that be a good thing, on balance?  I guess my point is that technological innovations are going to happen, so we may as well do whatever we can to best position ourselves to create, sustain and/or exploit those innovations.

What I learned during the past year has influenced the direction of my startup tech business. I learned that technology is obliterating good middle class jobs, including sales representative jobs. Recognizing that many sales rep functions are becoming increasingly automated, our Sales Power-Tools subsidiary has designed efficiency tools that will help businesses eliminate sales managers and enable sales reps to do their jobs more efficiently (since there will be fewer of them).  Moreover, we are designing algorithms that will enable businesses to eliminate sales reps altogether in some cases.

In closing, thank you for reading this blog on the Saporta Report. I hope you will visit my new blog at TAGThink where I expect to continue exploring the creative destruction of capitalism, as well as describing happenings in the local technology community, especially the upcoming Georgia Technology Summit and TAG’s Top 40 Innovative Companies competition.

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Another Kurzweil Kontroversy?

It’s no secret that I am delighted to have Ray Kurzweil speak at this year’s Georgia Technology Summit. Having dinner with him before the second TAG Summit was one of my biggest Summit highlights.  Kurzweil is considered a technology giant for his work as an inventor and as a futurist. You may recall my blog about the Best Buy ad that highlighted Kurzweil as one of the great innovators.

I have not run into anyone who questions Kurzweil’s contributions as an inventor. Even John Pavlus, who questions his ability as a futurist, concedes:

Ray Kurzweil is a genius inventor. His contributions to machine learning (including optical character recognition and speech synthesis) have literally changed the world–and helped make some of Google’s own computational feats possible.   www.technologyreview.com/view/508901/by-hiring-kurzweil-google-just-killed-the-singularity/.

But a controversy (a Kurzweil Kontroversy?) of sorts has arisen out of questions concerning the validity of Kurzweil’s Singularity theory, defined by Kurzweil on his website. In my inaugural blog for TAGThink, I write about this Kontroversy, focusing on the effect of Kurzweil’s new job at Google on his work as a futurist, particularly the Singularity.  Pavlus expresses his skepticism about the Singularity:

But as an author and “futurist,” Kurzweil is more like a sci-fi Deepak Chopra, spinning inspirational techno-fantasies about immortality, artificial intelligence, and consciousness that drive scientists and engineers batty while driving his speaking fees ever upward.

Could Pavlus be correct that the Singularity is a techno-fantasy?

To assess whether the Singularity is likely to come true, it is helpful to consider Kurzweil’s track record as a futurist. Ever since I discovered Kurzweil, I have been impressed by the accuracy of his predictions. Kurzweil predicted the demise of the Soviet Union precipitated by electronic communications, the defeat of the best chess player (Kasparov) by a machine (IBM’s Deep Blue) and the rise of the Internet.  I am inclined to believe in Kurzweil, because so many of his predictions, including the Singularity derive from his “law of accelerating returns” as reflected in Moore’s Law.

Yet there appears to be a bit of a Kontroversy concerning not only the accuracy of Kurzweil’s predictions, but Kurzweil’s own view of that accuracy.  Much of the discussion focuses on predictions in The Age of Spiritual Machines, published in 1999. One commentator concluded that Kurzweil was right 86% of the time! Stuart Johnson, who analyzed ten randomly selected predictions from The Age of Spiritual Machines, concluded that Kurzweil was correct more often than not (54%).  Others point to specific predictions that have proven correct, such as including cloud computing and virtual relationships (such as through Second Life). www.foxnews.com/story/0,2933,480231,00.html.

Others have disagreed.  Perhaps most notably, Forbes author Alex Knapp criticized Ray Kurzweil’s predictions for 2009.  Knapp writes:

Out of 12 key predictions that Kurzweil highlighted for the year 2009, only one has come completely true. Four were partially true (score them a half-point each) and eight failed to come true by the end of 2011. That’s a score of 3 / 12 – or 25% accurate.

Kurzweil responded with his own analysis, claiming that about 80% of his predictions were proved correct or “essentially correct.”

So who is correct?  It really depends on what predictions you are evaluating and how much of a margin of error you give. I found Stuart Johnson’s conclusion to be convincing www.lesswrong.com/lw/diz/kurzweils_predictions_good_accuracy_poor/:

So what can this tell us about Kurzweil as a futurist, and about the predictions he makes? Essentially two points stand out:

  1. He’s most likely good at predicting.
  2. He’s most likely overconfident, reluctant to admit his misses, and hence unlikely to update on his failures.

Okay, maybe Kurzweil exaggerates a bit. That doesn’t change how amazingly accurate his predictions have been. I have a feeling that many more of his 1999 predictions will eventually come to fruition.

It’s also fun to think about some of Kurzweil’s predictions for the future. www.businessinsider.com/ray-kurzweil-singularity-future-2012-11

Next week’s posting on The Saporta Report will be my last one.  I will be moving my blog to TAGThink. Check out my inaugural posting on TAGThink, A Kurzweil Kontroversy, which is a companion piece to this blog.

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TAG Summit Lineup Features True Innovators

In last week’s posting I discussed the theme of the Technology Association of Georgia’s upcoming Georgia Technology Summit. “Global Commerce Revolution: Innovation in Every Interaction.”  TAG has announced that the speakers will be Robert “Bob” Metcalfe, Matt Quinlan and Ray Kurzweil. Although this year’s topic suggests “FinTech,” as always the underlying theme is innovation. The lineup boasts one of the strongest fields of innovators that we have seen on an Atlanta stage.

Let’s start with Bob Metcalfe.  According to his bio, “Dr. Metcalfe was an Internet pioneer at MIT starting in 1970 and in 1973 received his PhD from Harvard for “Packet Communication.” He invented Ethernet in 1973 and founded 3Com Corporation (now part of HP) in 1979.”

Matt Quinlan, who is the Chief Technology Officer of Visa, Inc. should provide an interesting perspective into Visa’s corporate innovations. Interestingly, as we have seen from First Data’s awards in two consecutive Top 10 Innovative Companies competitions, larger companies can and do innovate.

Speaking of corporate innovation, Google recently announced that Ray Kurzweil, the Summit’s headliner, would become Director of Engineering. Members of the tech community may recall that Kurzweil spoke at the second TAG Summit, back in 2006; he is our first returning speaker.

It is difficult to dispute that Kurzweil is one of the great innovators of our time.  According to Wikipedia www.en.wikipedia.org/wiki/Ray_Kurzweil:

Forbes. Inc. magazine ranked him #8 among entrepreneurs in the United States, calling him the “rightful heir to Thomas Edison,” and PBS included Ray as one of 16 “revolutionaries who made America,” along with other inventors of the past two centuries. Ray was the principal inventor of the first CCD flatbed scanner, the first omni-font optical character recognition, the first print-to-speech reading machine for the blind, the first text-to-speech synthesizer, the first music synthesizer capable of recreating the grand piano and other orchestral instruments, and the first commercially marketed large-vocabulary speech recognition.

Many have wondered why Google would appoint Kurzweil to this position and what he would hope to accomplish.  Kurzweil himself said:

The focus of the position is on new technology development, however I will be continuing my role as a thought leader through lectures, speaking with the press, and such initiatives as my recent book.

In a later blog, I will discuss the implications of Kurzweil’s move into a larger tech company and what he might hope to accomplish.

Coincidentally, Tripp Rackley is another innovator who recently took the plunge into corporate America.  Although Tripp is not on the program this year, he has stood on the Summit stage many times before, including as a 2011 inductee into the Georgia Technology Hall of Fame and as the presenter for Firethorn, a TAG Top 10 winner. Cox Enterprises, Inc. believes in Tripp and has created a $250 million fund to invest in companies created by him. Investments are expected to be in mobility, Internet security, payments and media. According to the Atlanta Business Chronicle:

Rackley has founded several technology companies that have created a combined $1 billion in shareholder value and more than 500 jobs in Georgia. Most recently, Rackley founded Firethorn, a mobile commerce technology firm, he sold to Qualcomm Inc. in 2007 for about $250 million.www.bizjournals.com/atlanta/blog/atlantech/2013/01/tripp-rackley-cox-enterprises-250m.html?page

Tripp’s track record demonstrates the ability of entrepreneurs to help create economic growth and jobs.  The continuing successes of serial innovators like Tripp and Ray Kurzweil are inspiring.



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Follow-Up to What I learned in 2012…This and That

Economic Growth. Last week I asked how we can reconcile the belief that technology innovations have a beneficial impact on economic growth with today’s sluggish economic growth? Economics Professor Russell Roberts explains two benefits from innovation.  First, innovation drives down the price of goods, resulting in an improved quality of life.  (This may be true, but how do you quantify the benefit of having a flat screen TV over a CRT box?) Second, as previously contended by Clayton Christensen, innovation frees up resources that can be better deployed, resulting ultimately in the creation of new jobs. Professor Roberts further explains:

Why do new jobs get created? When it gets cheaper to make food and clothing, there are more resources and people available to create new products that didn’t exist before. Fifty years ago, the computer industry was tiny. It was able to expand because we no longer had to have so many workers connecting telephone calls. So many job descriptions exist today that didn’t even exist 15 or 20 years ago. That’s only possible when technology makes workers more productive.

I continue to believe that the creative destruction of capitalism remains our best hope for creating jobs.

TAG Summit to Focus on Innovation in FinTech?  On numerous occasions I have written about the Georgia Technology Summit.  The theme of this year’s Summit, to take place on March 20, 2013, is “Global Commerce Revolution: Innovation in Every Interaction. Although TAG’s Summit website refers to these clusters: “health IT, information security, financial technology, logistics and communication services,” the Summit’s theme suggests a focus on FinTech.

Atlanta’s FinTech cluster is outstanding, as I discussed in my November 19, 2012 posting and as supported by these statistics www.wheregeorgialeads.com/fintech/:

▪   More than 85 billion of the 135 billion credit card transactions passed through the global networks of Georgia FinTech organizations.

▪   Georgia FinTech organizations employ more than 25,000 professionals in Georgia and over 105,000 globally.

▪   Revenue generated by over 70 Georgia-based FinTech organizations exceeded $22 billion annually.

Although we should have a healthy representation of FinTech companies in the 2013 Top 40/10 Innovative Technology Companies competition, expect (as usual) winners from a broad range of technology sectors. The Summit will also feature Robert “Bob” Metcalfe, additional speakers and the induction of an honoree into the Georgia Technology Hall of Fame.

ParkAtlanta. You may recall that my June 12, 2012 posting discussed the ticket my son Ned received the ticket for “parking on the sidewalk” in front of Fellini’s on Peachtree in Buckhead.  We appealed, because no one would have thought that it was a “sidewalk,” and there were no “No Parking” signs. ParkAtlanta never acknowledged that we filed an appeal, but did send us a subsequent notice that the fine had doubled to $200. Unable (after several attempts) to reach a human at ParkAtlanta, I eventually got Ned a hearing in October 2012, almost two years later.

In case you are wondering, justice prevailed. The Judge concluded that Ned was guilty of parking on a sidewalk (as defined in the statute), but he suspended the fine, because a reasonable person wouldn’t have known that it was a sidewalk.

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What I Learned in 2012: Part 1

I have been struck by polls showing the declining faith of Americans in capitalism.  I studied Economics in college and graduate school, and have always believed that the capitalist engine will always prevail in the long run.

The US economy’s recent performance has made our citizens less optimistic about economic growth and job creation.  Even before the Great Recession, income inequality increased.  Some argue that technological innovation contributed to the widening gap by generating wealth and decreasing the number of good jobs.  Increases in federal taxes may result in income redistribution, but the trend-line of US economic growth does not appear to be sufficient to effect a meaningful reduction in unemployment over the near term.  No doubt at least some of this is attributable to an overly complex federal income tax system, excessive government spending and debt, misguided Fed policies, and political gridlock.  Even so, it is hard to identify likely drivers of economic growth that will help us grow our way out of the challenging economic conditions we face.  But then again, no one saw the Internet coming.

I started the year 2012 thinking that innovation, particularly technological innovation, ultimately will lead to economic growth.  As you may recall, the theme of every Georgia Technology Summit (“GTS”) of the Technology Association of Georgia (“TAG”) has related to innovation. As suggested most overtly in GTS’s 2012 theme, “Innovation: The Path to a Bright Future,” our thought has always been that innovation will lead to economic development and job growth.

I continue to hope that the lack of economic growth could be explained by economist Joseph Schumpeter’s theory of the creative destruction of capitalism, discussed in my August 7, 2012 posting.

Although the destructive aspects of capitalism include lost jobs (“technological unemployment”), bankrupt companies and vanishing industries, Schumpeter and his followers emphasized the long-term consequences of that destruction: economic growth, enhanced productivity, improved products, better jobs and economic wealth. One of the primary drivers of rapid technological change is Moore’s Law, which can be summarized as the doubling of computational power every 18 months at the same cost.

How do we reconcile the commonly-held belief that technology innovations will always have a beneficial impact on economic growth with today’s sluggish economic growth? Are we still in the destruction phase?  Will some technology innovation ultimately drive growth in unanticipated ways?  If so, which technologies hold the most promise, and what effect will they have?

I examined four significant technology trends identified by Erik Peterson as the most likely to have an economic impact: big data and supercomputers, nanotechnology (specially 3D printing), the human genome project and robotics. I applied an analytical framework developed by Harvard Business School Professor Clayton Christenson, who categorized innovations as “Empowering Innovations” or “Sustaining Innovations” that create or sustain economic growth or “Efficiency Innovations” that lead to the loss of jobs, recognizing that Efficiency Innovations often free up capital for future deployment in job-generating growth.

My preliminary conclusions were mixed.  Robotics appeared to be the most depressing example of “Efficiency Innovations.”  A New York Times article by Adam Davidson concluded that 6 million manufacturing jobs in the US have been lost over the past decade, more to automation than offshoring, and these jobs aren’t likely to come back.  Even more depressing, Davidson concluded that the pay for more skilled manufacturing jobs (such as operating robots) was comparable to the pay of an assistant manager at a fast food restaurant. Similarly, some analysts characterized 3D printing as “Efficiency Innovations,” recognizing that other innovations from other aspects of nanotechnology may be more beneficial.  While these manufacturing technologies (robotics and 3D printing) may not be squarely in the middle of the “Path to a Bright Future,” perhaps their innovations will continue to generate profits, free up growth capital and enable US companies to compete.

On the other hand, analysts are quite optimistic about the likely impact of genomics, big data and nanotechnology (other than perhaps 3D printing) on economic growth, not to mention the benefits to mankind. These trends should lead to “Empowering Innovations” or at least “Sustaining Innovations.”

One interesting question is how these technology trends are playing out in Georgia. Interestingly, local educational institutions (particularly Georgia Tech and Emory) appear to be playing a significant role in research and development in each of these areas. Every time I researched one of these topics, a Georgia Tech or Emory study, white paper or symposium popped up.

I need to spend more time evaluating how this R&D has contributed to the successes of Georgia startups in these four areas. I have run into a number of Georgia technology companies that claim to be innovative in “big data,” including in the FinTech area.  I hope that some of the Top 40 applicants will be innovative in genomics, big data, nanotechnology or even robotics.



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The Year of Blogging Noisily

Happy New Year!

As I look back on my first calendar year of blogging, I am reminded about the paradox of the Internet. The infrastructure that makes it possible to broadcast your ideas to potentially millions also makes it equally possible for others to broadcast their ideas to millions. The infrastructure that makes it easy to be heard makes it incredibly difficult to be heard. As a result, everyone is inundated with communications, from email to blogs to Twitter to Facebook to Google Plus to Tumblr to Pinterest. Not to mention voice communications.

Most people think that the most difficult part of a start up is to think up the idea itself and to develop the idea. A blog is like a start up, except that you have to come up with and develop a new idea every week.  To gain readers, the ideas must be interesting and worthwhile.  Even then, the challenge is finding those readers.  People will spend time on a subject that interests them or addresses a problem they have. The key is to find a way to match people with applicable content. If this concept is ignored, then that great blog or idea will echo, unheard in the vast world wide web.

The same issues apply to e-commerce.  When we launched our first e-commerce company four years ago, One Stop Dorm Shop (OSDS), we naively thought, “if you build it, they will come.”  That is, customers would find us, if we build a better web site, with superior functionality and product selection.  We were satisfied that our web site design and functionality accomplished our objectives.  (Ultimately a major national retailer was so impressed with our proprietary, patent-pending interactive checklist that they copied it and used it on their dorm site this year.) But the OSDS site did not generate much traffic.

Our enterprise morphed from dorms to office products.  Group Office Buys has a better business model, but we are still challenged by the difficulty of being heard. So we hired an experienced marketing person to develop a comprehensive plan, including social media and an email campaign.  We also explored the use of Google ad words with Heath Hyneman, at his Hypepotamous co-working space.  Heath and two partners launched H.M. Wallace almost a decade ago with $2,000 of seed money. They sold toilets over the Internet through Google ad words.  Now H.M. Wallace sells hundreds of millions of dollars of plumbing fixtures. Heath is our hero. But the optimal ad word strategy for Group Office Buys is not obvious.

Group Office Buys has had a successful first year, but customers have come primarily from networking and human sales, rather than through the Internet or social networking. To grow quickly, we need to “catch fire,” through a combination of social media, Google ad words, search engine optimization and email. Our marketing director admonishes us that we will have to spend more money to become an online success.  Even so, adequate funding is a necessary, but not sufficient, condition to success.

We are not the only ones to face this issue. Like tens of thousands of independent dealers, we license an e-commerce platform that is dedicated to the sale of office products.  Our provider’s platform facilitates electronic order entry by customers, but has limited capabilities as an Internet site.  To position ourselves for Internet marketing, we have had to build a proprietary web site around the platform. Many of our competitors use “off-the-shelf” order-entry web sites but still completely lack the capability of being found.

Whether you are blogging or engaging in e-commerce, you can benefit from expert advice. South Korean B-list pop star Psy is known for the billion hits on YouTube received by his video Gangnam Style (talk about catching fire!) but less well known is the support he’s received from his country’s thriving pop music industry.  My blog was introduced to thousands through the Saporta Report. A structured and established delivery vehicle like the Saporta Report can save the time of finding and connecting with followers, recognizing that readership can be expanded further through emails, commenting on other blogs, Tweeting and using social media strategies.

Whether for blogs or e-commerce, the lesson is that success requires not only good ideas but also a way of having those ideas heard. Next week we return to the ideas themselves, as I synthesize the themes of my 2012 blog postings.


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The Rolling Stones at 50: Lessons for Tech Companies

What can a tech company learn from the Rolling Stones, who are celebrating their 50th anniversary? After reading Keith Richards’ autobiography, Life and watching the recent documentary, Crossfire Hurricane, I learned almost as much about building a business as I did from Walter Isaacson’s biography of Steve Jobs.

Know Your S**t.  In Outliers, Malcolm Gladwell cited the Beatles’ 10,000 hours of practice and performance (especially all-nighters in Hamburg) as a prerequisite for outstanding achievement.  The Stones scored some hits well before reaching that milestone, by mastering the blues idiom. This set the stage for their bigger successes staring with 1965’s Satisfaction, one of the greatest songs of all time.

Differentiate Yourself From Your Competitors.  The Stones’ manager, Andrew Loog Oldham, encouraged them to embrace a “bad boys” image to contrast with their principal rivals, the Beatles.  Maybe the Stones went a little overboard with drugs and generally outrageous behavior, but the differentiation worked.

Exploit What Makes You Unique. The Rolling Stones have a recognizable sound, deriving primarily from Keith’s open-tuning of his guitar.  Also, drummer Charlie Watts explained that, unlike most drummers, he follows the rhythm guitarist, rather than the other way around. As a result, the drum beat is a unique half-second behind.

Intellectual Property is Essential.  The Stones started as essentially a cover band focused on the blues.  In 1964, they had a number one hit in the UK with Willie Dixon’s Little Red Rooster, a blues tune.  But to become great, the Stones had to write their own songs, with their first original hit, The Last Time, charting in 1965. Keith and Mick (the Glimmer Twins) wrote many of the 500 Greatest Songs of All Time (according to Rolling Stone Magazine).

Collaboration is Key.   Like Lennon and McCartney, as well as Jobs and Wozniak, Mick and Keith likely would have accomplished much less without each other.  And the Rolling Stones may never have gotten off the ground without their founder, Brian Jones.

Be Willing to Fire People.  So much attention has been paid to the death of Brian Jones that it is often forgotten he was pushed out of the band for nonperformance. Jones’ departure is a reminder that even a founder can become unproductive. At a recent “live chat,” Pardot’s founder, David Cummings, cited “quick to fire, slow to hire,” as an important policy.

Listen to Your Customers.  In his 1971 Rolling Stone magazine interview, John Lennon said: Every f***ing thing we did, Mick does exactly the same thing- he imitates us….You know, Satanic Majesties is Pepper.” The Stones may not have been as innovative as the Beatles, but they have always understood and exploited musical trends, from psychedelic in Satanic Majesties to disco in Miss You. Now their fans demand the hits, and the Stones oblige, notwithstanding Mick’s public protests that he doesn’t care what the fans want.

Create the Right Culture. David Cummings said that Pardot’s success depended on creating the right culture. Likewise, the Stones’ work-hard/play-hard culture, emphasizing collaboration and musical excellence, has inspired great performances and loyalty from band members.

Inspire Passion. How passionate was my recently deceased friend George Long about the Stones?

[H]is dedication to the Rolling Stones sent him catapulting over a six-foot wall, in cast up to his knee, and eventually landed him in a new cast. It was 1975 when Long and his bosom buddies took a midnight road trip from Atlanta to Greensboro, N.C. to a general admission Stones’ concert. They wanted to be first in line so they could claim front-row seats, said Mike Egan, a friend since junior high school. “When the gates opened, we wanted to be the first in, but George was lagging a bit behind because of the cast,” said Egan, who lives in Atlanta. “But he was not going to let that wall stop him from getting there. Of course when he jumped and landed, he cracked the cast open, and he had to go get that ankle reset, but after the concert when we got back to Atlanta,” he added with raucous laughter.

Talk about inspiring passion!

Built to Last. Since the Stones first appeared, countless bands have come and most have gone, from Herman’s Hermits to Grizzly Bear.  Like Apple under Jobs, the Stones used to be innovative.  Their incomparable run of Beggars Banquet, Let it Bleed, Sticky Fingers and Exile on Main St. reminds me of the iPod, iTunes, iPhone and iPad. Apple recently released the iPad Mini (a smaller copy of the iPad) and the Stones released One More Shot (reminiscent of their early 70s heyday).  Although current creations are inspired by past innovations, Apple is still the world’s most valuable company and the Stones are arguably still the world’s greatest rock and roll band!


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The Creative Destruction of Capitalism: Genomics

Genomics is a discipline in genetics concerned with the study of genomes: the entirety of an organism’s hereditary information.  In an earlier posting, I discussed the Human Genome Project (HGP).  The primary goals of HGP were to determine the sequences of 3 billion chemical base pairs that make up human DNA and identify and map the approximately 20,000–25,000 genes of the human genome.

In my posting, I discussed the findings of a report by the Battelle Memorial Institute, which concluded that the benefits of HGP have been widespread and increasing over time:

HGP produced 3.8 million job-years of employment, or one job-year for each $1,000 invested. Personal income generated by HGP (wages and benefits) exceeded $244 billion over the time frame, averaging out to $63,700 income per job-year. …In 2010 alone, genomics directly supported more than 51,000 jobs, and indirectly supported more than 310,000 jobs, according to the Battelle study. This created $20 billion in personal income and added $67 billion to the U.S. economy.

I also mentioned that, thus far, the economic activity surrounding genomics focused on basic research, as well as predictive reports concerning proclivity towards future diseases.

From my brief survey, it appears that the activity in Georgia is focused on research and predictive reports, consistent with the trends in the industry.  For example, the Georgia Genomics Facility at the University of Georgia is focused on research and development, and states it is the  “core sequencing and genotyping laboratory at UGA “Georgia Tech’s Center for Integrative Genomics (CIG) describes itself as “a virtual affiliation of researchers interested in the application of genome-wide research strategies to diverse biological themes.” Georgia Tech and Emory have collaborated on predictive health through the Emory-Georgia Tech Predictive Health Institute, which “focuses on maintaining health rather than treating disease… using new tools of bioscience.” 

Some argue that the impact of genomics already goes beyond diagnostics, including by producing plant varieties with specialized oil content and to creating new treatments for disease. 

Not everyone agrees. Michael Mandel, an economic strategist, concluded that the results of HGP have been disappointing thus far:

What about jobs? Successful new innovations create new jobs–that’s what history tells us. If the Human Genome Project had led to a wave of new diagnostic test and treatments, the jobs would have followed.  Instead, what happened is that the pharma industry invested heavily in ‘genomics’ and got hit hard when it didn’t produce a flood of new diagnostics and treatments.  As a direct result, big pharma companies have been merging and laying off workers, not adding them. When’s the last time you heard someone talking about biology as a hot field for jobs?

Notwithstanding his skepticism of HGP’s impact to date, Mandel remains hopeful that ultimately HGP would lead to: advances in drugs for disease such as cancer, diabetes or Alzheimer’s, which in turn would help reduce healthcare costs; the creation of new jobs; economic growth; and the exportation of biotech products and knowledge.

According to Greg Lucier, the chief executive officer of Life Technologies, whose foundation sponsored the Battelle analysis:

Now we sit at the dawn of the ‘Genomics Revolution’ and all humankind will reap the benefits as we transfer what we now know about the human genome into major breakthroughs including: new forms of ‘personalized medicine’ and genetics therapy better suited to solving the problems we all care so much about, such as cures for cancer, cardiovascular diseases, Alzheimer’s, HIV/AIDS, and many more terrifying diseases. These major advancements are rapidly creating multiple new industries and companies and those companies are creating quality jobs for thousands of people. Life will be even better for all of us thanks to the HGP.”

Regardless of the economic impact of genomics in the past, if Lucier’s vision proves correct, innovations from HGP ultimately should have a profound effect, not only on job creation, but also on the health of humankind.


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The Creative Destruction of Capitalism: Nanotechnology

What effect will Nanotechnology innovations have on our economy?  Will they be “Empowering Innovations” or “Sustaining Innovations” that create or sustain economic growth?  Or are they more likely to be “Efficiency Innovations” that lead to the loss of jobs?  This week’s posting continues to analyze the effect of technology innovations on job creation.

Nanotechnology “is the manipulation of matter on an atomic and molecular scale. Generally, nanotechnology works with materials, devices, and other structures with at least one dimension sized from 1 to 100 nanometres.”  In the United States alone $3 billion is invested each year in nanotechnology research and development, according to a Georgia Tech study by researchers Philip Shapira and Jan Youtie.  

The impact of the nanotechnology revolution is expected to be far-reaching. According to the Triennial Review of the National Nanotechnology Initiative (NNI), nanotechnology will not only benefit mankind but also create jobs, presumably through commercialization.

In addition to improving our fundamental quality of life as a result of positive developments in nanotechnology-related medicine, energy production, national security, environmental protection, and education, the commercialization and adoption of new technologies resulting from nanoscale R&D are expected to yield a positive economic return in the form of benefits such as the creation of businesses, jobs, and trade.

Innovations from nanotechnology are expected in manufacturing, medicine, electronics and even green energy.

It is easy to imagine that nanotechnology could have a significant effect on manufacturing. As discussed in my previous posting, one example of commercialization of nanotechnology is 3D printing, which Disney is now using to produce innovative illuminated toys.

There are many other areas of potential impact.  For example, someday nanotechnology could generate green energy. The Shapira and Youtie Georgia Tech study cites the following examples of green nanotechnology:

  • Nano-enabled solar cells;
  • Nanogenerators;
  • Energy storage to improve existing batteries and fuel cells;
  • Thermal energy insulation;
  • Fuel catalysis; and
  • Safe drinking water through improved water treatment, desalination and reuse.

Another far-reaching innovation was raised by the Dallas Federal Reserve Bank: “Nanoelectronics has the potential to replace the semiconductor and have a major impact on the U.S. economy by continuing Moore’s law of doubling data storage and processing capacity every 18 months.” Ray Kurzweil and other scientists believe that Moore’s law is responsible for most technological innovation.

The APEC Center for Technology Foresight observes:

If nanotechnology is going to revolutionize manufacturing, health care, energy supply, communications and probably defense, then it will transform labour and the workplace, the medical system, the transportation and power infrastructures and the military. None of these latter will be changed without significant social disruption.

But because nanotechnology underlies many different industries, assessing and forecasting its impact won’t be easy. The Shapira and Youtie Georgia Tech study observed:

“Compared to information technology and biotechnology, for example, nanotechnology has more of the characteristics of a general technology such as the development of electric power,” said Youtie, director of policy research services at Georgia Tech’s Enterprise Innovation Institute. “That makes it difficult to analyze the value of products and processes that are enabled by the technology.

The value of nanotechnology must be considered in light of its risks:

Potential risks include environmental, health, and safety issues; transitional effects such as displacement of traditional industries as the products of nanotechnology become dominant; military applications such as biological warfare and implants for soldiers; and surveillance through nano-sensors, which are of concern to privacy rights advocates. These may be particularly important if potential negative effects of nanoparticles are overlooked before they are released.

Nanotechnology might be one of the purest agents of destructive capitalism. And like other agents of destruction, we hope the effect will be creative and beneficial, generating net jobs and economic growth.


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The Creative Destruction of Capitalism: Robotics

In these times of persistent unemployment, I am interested in whether technological innovations ultimately will lead to the creation of jobs and economic growth.  In previous postings, I analyzed technology trends within the framework of an article by Professor Clayton Christensen of Harvard Business School.  Christensen categorizes innovations by their effect on job creation. Some may be “Empowering Innovations” or “Sustaining Innovations” that create or sustain economic growth.  Others may be “Efficiency Innovations” that lead to the loss of jobs, recognizing that Efficiency Innovations often free up capital for future deployment in job-generating growth.

This week I apply the Christensen framework to the significant technology trend of Robotics that was identified by Erik Peterson.

Short-term, I am concerned that the Robotics trend will result in Efficiency Innovations that lead to a loss of jobs. Think of it as the destruction envisioned by Marx, without the creative regeneration envisioned by Schumpeter.  According to Adam Davidson in a recent New York Times article www.nytimes.com/2012/11/25/magazine/skills-dont-pay-the-bills.html?pagewanted=all, this has been the case over the last decade:

Nearly six million factory jobs, almost a third of the entire manufacturing industry, have disappeared since 2000. And while many of these jobs were lost to competition with low-wage countries, even more vanished because of computer-driven machinery that can do the work of 10, or in some cases, 100 workers. Those jobs are not coming back….

Although robots can perform manufacturing that requires extreme precision, their greatest immediate impact is likely to continue to be replacing humans with machines that can work longer hours at a lower cost.  This could help the US preserve jobs or even recapture some manufacturing jobs from lower-cost offshore competitors. But globally, the short-term impact of robotics appears to be increased efficiency at the expense of jobs.

Let’s assume that the Robotics trend will lead to the return of manufacturing jobs to the United States.  Manufacturing performed by robots requires humans to supervise the machines. According to Davidson, “many believe that the industry’s future (and, to some extent, the future of the American economy) lies in training a new generation for highly skilled manufacturing jobs — the ones that require people who know how to run the computer that runs the machine.  This is partly because advanced manufacturing is really complicated…”

Unfortunately, there continues to be a “skills gap” between the demand for skilled workers and the insufficient supply of trained workers.  “The National Association of Manufacturers estimates that there are roughly 600,000 jobs available for whoever has the right set of advanced skills.”

Because these jobs require skill and training, it would be reasonable to assume that these skilled manufacturing jobs would be high-paying, particularly given the shortage of qualified applicants. But Davidson cites a Boston Consulting Group study that concludes this is not the case.  Apparently, to be competitive, manufacturers are offering low wages.  “Trying to hire high-skilled workers at rock-bottom rates,” the Boston Group study asserted, “is not a skills gap.” The article observes manufacturing wages in the $10 to $15 per hour range, and compares these wages to the $14 per hour wages paid to new shift managers at McDonalds.  As a result, “according to the Bureau of Labor Statistics, the number of skilled jobs has fallen and so have their wages.” So my fears about automation in the manufacturing sector appear justified and my cautious hope for new jobs from the Robotics trend appears overly optimistic.

Although it is harder for me to envision, the additional skills of robots could generate economic growth or otherwise benefit mankind. For example, robots are already performing or assisting in surgeries.  In this case, robots (operated or directed by surgeons) do a better job than unaided surgeons. The arguments for robotic surgeries include the following www.en.wikipedia.org/wiki/Robotic_surgery :

Major advances aided by surgical robots have been remote surgery, minimally invasive surgery and unmanned surgery. Some major advantages of robotic surgery are precision, miniaturization, smaller incisions, decreased blood loss, less pain, and quicker healing time. Further advantages are articulation beyond normal manipulation and three-dimensional magnification, resulting in improved ergonomics. Robotic techniques are also associated with reduced duration of hospital stays, blood loss, transfusions, and use of pain medication.

Robotics may benefit mankind, but it is hard to see how the benefits will take the form of job creation.


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