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Pattern Recognition: That Was Then; Losing My (Institutional) Religion; Mobile Native

My goal is to write one 'Pattern Recognition' a week. Just the top 3-4 stories that stayed under my skin. Here's what stuck this week:

  1. That Was Then, This is Now: Reading about Morgan Stanley's role in screwing retail investors in the Facebook IPO, and JP Morgan's hedge fund safely nestled in a too big too fail mega-bank (with an implicit US government guarantee), I am reminded that Wall Street wasn't always an amoral, scumbucket octopus. Back in the mid-70's, New York City was teetering on the edge of bankruptcy. Dark days, to be sure. Then, Walt Wriston, the visionary CEO of Citibank (now Citigroup), stepped in, and quite literally, helped save the city. Talk about a juxtaposition. Today's Citigroup not only had to be rescued by TARP, but its CEO was recently rebuffed by angry investors over his excessive pay package. All of which leads me to conclude that if the circumstances of a major municipality going bust were to repeat itself in America today, couldn't Wall Street be "trusted" to find a way to profit from the bust vs. acting socially responsible? How times have changed.
  2. Losing-trustLosing My (Institutional) Religion: A few weeks back, I saw an intuitive, yet troubling, chart on how Americans are losing faith in our greatest instituitions (e.g., Congress, Banks, Schools, the Presidency, the Supreme Court). Then, I read Apple's legal response today to the Department of Justice's E-Book Case. The specific way that Apple frames it (it's worth a read), put a bow around how fucked up so many of our intitutional processes are. This point was lain especially clear in a conversation I had with a friend of mine in the real estate industry. Regardless of whether you consider yourself pro-businesss, anti-business, liberal or conservative, his point was illuminating. He told the story of how everyone in his industry is worried about the capricious way that the government has gone about changing the rules for banks about lending, from reserve requirements to constraints on where they can make loans. His point was less that the government shouldn't be coming up with policies for these things, and more that the government bodies typically step in with broadstroke policies that are completey disconnected from the outcomes they want to encourage or discourage. As a result, we end up with policies that by virtue of their superficiality, just institute random risk, which is obviously not a good thing if you want business investing in growth. To me, this speaks to a false dichotomy that we find ourselves in with respect to the role of government. Today, it feels like a choice between: A) laissez faire policy/enforcement (which led to an SEC completely asleep at the wheel, culminating in the 2008 economic crisis); and B) broadstroke governance, which results in policy that's akin to the "successful" surgery where the patient dies. It's why the health care reform sucked so bad for the very people it was supposed to help most, at a time when they needed it most. The net effect of this false dichotomy is that it only serves to perpetuate the gridlock in Washington. 
  3. Go Native (Mobile): It's the nature of technological waves, that the first stage of a new wave always looks derivative of the old wave. But, the new wave doesn't lead to lasting, transformational change until 'native' applications are born that could only exist within the new medium. The silent film gave rise to the talkie, and while it took a while for the new medium took find its footing, our concept of what a motion picture could be was never the same again. The first TV shows were basically redux versions of their radio show parentage, but ultimately the medium became something entirely unique. So, too, the PC and then, the Web, completely transformed what came before it. Now, we are sitting at the precipice of 1 billion post-pc devices, on our way to 10 billion devices globally. Respected VC and Blogger Fred Wilson suggests that this confluence is due to give rise to legions of Mobile Native Services. In other words, apps and services that are not simply 'children of the Web,' but rather, new DNA entirely, powered my untethered mobility, GPS-locative attributes, perpetual connectivity, unparalleled scale, social fabrics, big data graphs and application platforms that are part hardware, software, service and tool. Metaphorically speaking, we are at the moment in the 1950's when everyone thought that TV was simply 'radio with pictures.' But very soon, that will change, and what rises on the other side is destined to be the Golden Age.

 

May 25, 2012 in Apple, Economy, Investing, Mobile, Pattern Recognition, Policy, Politics, Post-PC, Streams and Nuggets, Values | Permalink | 0 Comments | TrackBack (0)

Predator, Parasite or Protected Class: The NEW Theory of Relativity

New-Relative

So we completetely borked the budget ceiling negotiation last week, leading to the S&P downgrade of America (read, 'What Happened to Obama' for a brilliant analysis on Obama's utter failure to establish a coherent narrative as president).

And if that wasn't enough, last week also underscored how completely the patent laws are screwed up to the point that they're officially a drag on innovation - the exact opposite of what patents were designed to do (read the transcript from the NPR program, 'When Patents Attack' to see what I mean).

Somehow, we can no longer figure this stuff out, yet recent history suggests that we can figure out how the universe works, can figure out how to thwart Hitler and rebuild Europe after World War II, can put a man on the moon, can create the Internet, etc.

Given this seeming asymmetry between the two realms, let me submit the following:

  1. While everything is more complex than you give it credit for; and 
  2. The weight of self-interest meaningfully incentivizes people who **should** know better to nonetheless screw the pooch for everyone else;
  3. We don't have to be dumb and blind about it.

Much of this starts with changing the old memes (i.e., ideas that virally propagate), and replacing them with new memes.

Simply put, while form logically follows function, there is a larger truth that our thoughts on the "definition of the situation," including both specifically desired outcomes and tangible constraints, fundamentally instructs function.

In other words, our thoughts codify function, which give a mandate for form to manifest in a particular way.

In fact, there is a specific term that defines how we process congruities and incongruities called Cognitive Dissonance.

It basically suggests that if your actions and perceptions are out of whack, either you need to change your actions OR you need to change your perception of the situation as it exists. To NOT do so is physically and mentally uncomfortable.

A simple example is that if you think that you are fat and need to change your diet, one of two things is going to happen the next time that you are chowing down on a deliciously greasy pizza.

One, you will feel that eating that pizza is incongruent with your new aspirational image for yourself, and stop eating pizza so much.

Or, two, you will decide that being thin is over-rated, all relative, and more to the point, life is too short not to eat pizza, which is so delicious.

So, what does this have to do with the mess in our economy, our governance mechanisms, and the rot festering within society in general?

Most fundamentally, it's that changing the narrative and the actual words that we use to establish that narrative is a first, integral step to manifesting real change.

Putting it to the Test

Therefore, next time you encounter a story about Wall Street, Insurance Companies, Congress or Special Interest Groups (like Unions, Patent Lawyers, Environmentalists, etc.) start training your mind to be on the look out for:

  1. Predatorial Behaviors: Ask yourself if the behavior being discussed is a case where one individual or group is taking advantage of another group by virtue of power, influence, wealth or knowledge.
  2. Parasitic Entities: In order to maintain its existence or position in the economic, societal or organizational system that it participates within, does the entity leech off of the lifeforce, blood, energy or money of others? Does it remove more from the system than it puts in?
  3. Protected Classes: Does the indvidual, industry group or company have undue influence on the rules that define its governance, and the methods and consequences by which those rules are enforced?

Now, recognize that most stories will be presented according to False Dichotomies, such as being "pro" this (e.g., business, big government, unions or jobs) or "anti" that.

It's far easier to tell a story, and sell a desired outcome, such as passing a bill or changing a rule, when the conclusions are presented in black and white terms.

Don't get fooled by this anymore. When you hear the facts presented in a way that frame the topic as an either/or scenario, be willing to question if the scenario presented is indeed a false dichotomy, and be rigorous about: A) consistently calling it such; and B) codifying what a reasonable "and" scenario looks like.

Understanding "Relative Yields: Everything is Relative

Similarly, the efficacy, or goodness, of specific outcomes are defined by the qualitative and quantitive content of what they yield.

Most yields are relativistic to multiple variables. Ask yourself what the yield is locally in your own backyard, for the larger region or nation as a whole, and/or globally.

Think about the actual impact both in the short term, measured in days, weeks, and months, and in the long term, over many years.  

Also, ask yourself if there are collateral impacts that further shape yield. For example, a program that results in less expensive clothes for consumers, but that also has the collateral impact of jobs moving overseas can be good or bad, but the collateral impact is real, and needs to be factored into relative yields.

Finally, when all else fails, simplify the topic and be surgical about the words that you use to codify it. If an individual did this same type of action to another individual, would that action being considered reasonable or lawful?

If not, then ask yourself, why it's reasonable at the governmental or corporate level. There may be valid reasons, but learn to articulate and understand the "What" so as to ask "Why," and be willing to challenge conventional wisdom by saying, "So What."

UPDATE: Mark Cuban has written an excellent post arguing that we should get rid of software and process patents completely. Worth a read.

Related Posts:

  1. The Great Reset: Why tomorrow may not be better than today (O'Reilly Radar)
  2. Why the Malaise in our Economy (and Society) is a case of The Innovator's Dilemma
  3. Getting Real: On Doomsday, the Demise of So-Called Experts and the New Arbitrage
  4. Assertion-based Reasoning: What, Why and So What

August 08, 2011 in Coaching, Current Affairs, Economy, Pattern Recognition, Policy, Politics, Values | Permalink | 0 Comments | TrackBack (0)

Why the Malaise in our Economy (and Society) is a case of The Innovator's Dilemma

Budget-Negotiation 

So the Republicans play chicken with not only the US economy, but the global economy as well, and the President, always wanting to be seen as the "most reasonable guy in the room," once again lets smart tactics, lead to poor strategy and an even worse outcome. 

What's going on? Is the President just clueless? Are the Republicans just evil? 

Meanwhile, our economy sits in a 'dirty diaper,' with literally no catalysts for significant job creation, and yet, the story being conveyed by the media is focused on the false narrative of "compromise" narrowly averting disaster (a pyrrhic victory, if there ever was one).

And count on this: when the next set of bleak economic numbers come in, they will again be presented as "surprising," as opposed to predictable from a mile (and many quarters of data) away.

It's a case of Spin, Cycle and Repeat.

What's the Definition of the Situation?

In 'Why This Crisis Isn't Going Anywhere--And What To Do About It,' Umair Haque frames the problem as being just as much a case of a failure to properly diagnose what ails the patient, the US Economy, as a case of malpractice:

What's going on here? Why continued stagnation, and perhaps more interestingly, why is the status quo always "shocked" by it, every dismal quarter? Here's what it suggests, in no uncertain terms: they're struggling to discern what this crisis is yet.

As noted in my earlier piece, 'The Great Reset,' he's right. There is a disconnect.  This is no ordinary cycle that just needs to bide its time until the sun magically rises again. 

Rather, we are in the midst of a systemic disruption that is, at a minimum, as significant as the stifling days of Stagflation in the 70s, and on the cusp of the true horror that was The Great Depression.

The Innovator's Dilemma and the US Economy

I won't recite the Whats and Whys of my analysis -- read the piece if you'd like -- but I will say this.

As a student of disruptive innovations, I would argue that the pattern that we are seeing is a textbook example of the principles espoused in Clayton's Christensen's, The Innovator's Dilemma.'

Let me explain. In 'Dilemma,' Christensen shows how smart enterprises can make catastrophically bad decisions by using the following, seemingly sound, logic:

  1. Does the innovative approach have a compelling return on investment?
  2. Does our core constituency want this innovation?
  3. Does this innovation leverage our core competencies?

In the PC era, we see how Microsoft outflanked much bigger companies, IBM and DEC, specifically because the PC was disruptive to the mainframe and minimcomputer.

IBM's best and brightest using the above litmus test, could "easily" evaluate the logic of trading in historically-proven product sales that were measured in the millions of dollars per sale for speculative ones that would be measured in the thousands of dollars per sale, and conclude that there was no "there" there economically speaking.

Moreover, their best customers could tell them plainly that the last thing that they wanted was an undepowered machine that couldn't be centrally managed.

Finally, back then, all of IBM's bones, muscles and sinew were designed for selling vertically integrated, proprietary solutions, something that a more horizontally oriented PC harnessing commercial-off-the-shelf components was to be an anathema to.

The moral of the story then, as now, is that disruptive technologies often serve a different audience, start off as small opportunities, and bit-by-bit, work their way up the stack until they destroy the incumbent's position.

Upstarts often win these battles because they have no base to protect, and thus, can think and act outside the box.

Flash forward to the present. We are in an economy absolutely gasping for new jobs and, at the very least, a "fig leaf" of hope.

What are your priorities, Mr. President, Mr. and Ms. Congress? Do you disrupt big business by taking away favorable taxation? Do you tighten governance so squishy lines of business go away? Do you play chicken with the companies that make up the Fortune 2000, risking jobs and the stock market?

After all, YOU are the incumbent, and the ultimate return on investment is getting re-elected, right? Your best customer tells you repeatedly via lobby and specific interest group that he/she absolutely does not favor any new products (taxes, legislation) that promise short-term pain, even at the cost of long-term gain.

The market doesn't reward it, the electorate doesn't reward it and the media only tells stories with binary narratives.

Plus, your core competency is taking pork and making it into sausage.

Such is the Innovator's Dilemma. That, and the hard truth that one should never under-estimate the ability of people to convince themselves of anything when their livelihood depends upon it.

Related Posts:

  1. The Great Reset: Why tomorrow may not be better than today
  2. A Contract to Fuck America: Ruminations on Good Governance and Corporate Irresponsibility
  3. Getting Real: On Doomsday, the Demise of So-Called Experts and the New Arbitrage
  4. Assessing the Internet: Great Creator or Better Destroyer?

August 01, 2011 in Economy, Pattern Recognition, Policy, Politics, Values | Permalink | 0 Comments | TrackBack (0)

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