Author Archives: Greg Satell

About Greg Satell

Greg Satell is a popular speaker and consultant. His latest book, Cascades: How to Create a Movement That Drives Transformational Change, is available now. Follow his blog at Digital Tonto or on Twitter @Digital Tonto.

We Must Prepare for Future Crises Like We Prepare for War

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We Must Prepare for Future Crises Like We Prepare for War

GUEST POST from Greg Satell

In a 2015 TED talk, Bill Gates warned that “if anything kills ten million people in the next few decades, it’s most likely to be a highly infectious virus rather than a war. Not missiles, but microbes.” He went on to point out that we have invested enormous amounts of money in nuclear deterrents, but relatively little to battle epidemics.

It’s an apt point. In the US, we enthusiastically spend nearly $700 billion on our military, but cut corners on nearly everything else. Major breakthroughs, such as GPS satellites, the Internet and transistors, are merely offshoots of budgets intended to help us fight wars more effectively. At the same time, politicians gleefully propose budget cuts to the NIH.

A crisis, in one sense, is like anything else. It eventually ends and, when it does, we hope to be wiser for it. No one knows how long this epidemic will last or what the impact will be, but one thing is for sure — it will not be our last crisis. We should treat this as a new Sputnik moment and prepare for the next crisis with the same vigor with which we prepare for war.

Getting Artificial Intelligence Under Control

In the Terminator series, an automated defense system called Skynet becomes “self aware” and launches a nuclear attack to end humanity. Machines called “cyborgs” are created to hunt down the survivors that remain. Clearly it is an apocalyptic vision. Not completely out of the realm of possibility, but very unlikely.

The dangers of artificial intelligence, however, are very real, although not nearly so dramatic. Four years ago, in 2016, I published an article in Harvard Business Review outlining the ethical issues we need to address, ranging from long standing thought experiments like the trolley problem to issues surrounding accountability for automated decisions.

Unlike the Terminator scenario, these issues are clear and present. Consider the problem of data bias. Increasingly, algorithms determine what college we attend, if we get hired for a job and even who goes to prison and for how long. Unlike human decisions, these mathematical models are rarely questioned, but affect materially people’s lives.

The truth is that we need our algorithms to be explainable, auditable and transparent. Just because the possibility of our machines turning on us is fairly remote, doesn’t mean we don’t need too address more subtle, but all to real, dangers. We should build our systems to serve humanity, not the other way around.

The Slow-Moving Climate Crisis

Climate change is an issue that seems distant and political. To most people, basic needs like driving to work, heating their homes and doing basic household chores are much more top of mind than the abstract dangers of a warming planet. Yet the perils of climate change are, in fact, very clear and present.

Consider that the National Oceanic and Atmospheric Administration has found that, since 1980, there have been at least 258 weather and climate disasters where overall damages reached or exceeded $1 billion and that the total cost of these events has been more than $1.7 trillion. That’s an enormous amount of money.

Yet it pales in comparison to what we can expect in the future. A 2018 climate assessment published by the US government warned that we can expect climate change to “increasingly affect our trade and economy, including import and export prices and U.S. businesses with overseas operations and supply chains,” and had similar concerns with regard to our health, safety and quality of life.

There have been, of course, some efforts to slow the increase of carbon in our atmosphere that causes climate change such as the Paris Climate Agreement. However, these efforts are merely down payments to stem the crisis and, in any case, few countries are actually meeting their Paris targets. The US pulled out of the accord entirely.

The Debt Time Bomb

The US national debt today stands at about 23.5 trillion dollars or roughly 110% of GDP. That’s a very large, but not catastrophic number. The deficit in 2020 was expected to be roughly $1 trillion, or about four percent of GDP, but with the impact of the Coronavirus, we can expect it to be at least two to three times that now.

Considering that the economy of the United States grows at about two percent a year on average, any deficit above that level is unsustainable. Clearly, we are far beyond that now and, with baby boomers beginning to retire in massive numbers, Medicare spending is set to explode. At some point, these bills will have to be paid.

Yet focusing solely on financial debt misses a big part of the picture. Not only have we been overspending and under-taxing, we’ve also been massively under investing. Consider that the American Society of Civil Engineers has estimated that we need to spend $4.5 trillion to repair our broken infrastructure. Add that infrastructure debt to our financial and environmental debt it likely adds up to $30-$40 trillion, or roughly 150%-200% of GDP.

Much like the dangers of artificial intelligence and the climate crisis, not to mention the other inevitable crises like the new pandemics that are sure to come, we will eventually have to pay our debts. The only question is how long we want to allow the interest to pile up.

The Visceral Abstract

Some years ago, I wrote about a concept I called the visceral abstract. We often fail to realize how obscure concepts affect our daily lives. The strange theories of quantum mechanics, for example, make modern electronics possible. Einstein’s relativity helps calibrate our GPS satellites. Darwin’s natural selection helps us understand diseases like the Coronavirus.

In much the same way, we find it easy to ignore dangers that don’t seem clear and present. Terminator machines hunting us down in the streets is terrifying, but the very real dangers of data bias in our artificial intelligence systems is easy to dismiss. We worry how to pay the mortgage next month, but the other debts mounting fade into the background.

The news isn’t all bad, of course. Clearly, the Internet has made it far easier to cope with social distancing. Technologies such as gene sequencing and supercomputing simulations make it more likely that we will find a cure or a vaccine. We have the capacity for both petty foolishness and extreme brilliance.

The future is not inevitable. It is what we make it. We can choose, as we have in the past, to invest in our ability to withstand crises and mitigate their effects, or we can choose to sit idly by and give ourselves up to the whims of fate. We pay the price either way. How we pay it is up to us.

— Article courtesy of the Digital Tonto blog
— Image credit: Pixabay

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Leading Your Way Through Crisis

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Leading Your Way Through Crisis

GUEST POST from Greg Satell

There’s a passage in Ernest Hemingway’s 1925 novel, The Sun Also Rises, in which a character is asked how he went bankrupt. “Two ways,” he answers. “Gradually, then suddenly.” The quote has since become emblematic of how a crisis takes shape. First with small signs you hardly notice and then with shocking impact.

That’s certainly how it felt to me in November, 2008, when I was leading a media company in Kyiv. By that time, the financial crisis was going full throttle, although things had been relatively calm in our market. Ukraine had been growing briskly in recent years and, while we expected a slowdown, we didn’t expect a crash.

Those illusions were soon shattered. Ad sales in Ukraine would eventually fall by a catastrophic 85%, while overall GDP would be down 14%. It was, to say the least, the worst business crisis I had ever encountered. In many ways, our business never really recovered, but the lessons I learned while managing through it will last a lifetime.

Build Trust Through Candor and Transparency

Our October revenues had come through fairly strong, so we were reasonably confident in our ability to weather the crisis. That all changed in November though, when ad sales, our primary source of revenue, dropped precipitously. By mid-November it had become clear that we were going to have to take drastic measures.

One of the first things that happens in a crisis is that the rumor mill goes into high gear. As if the real news isn’t bad enough, unimaginably crazy stories start getting passed around. To make matters worse, the facts were moving so fast that I didn’t have a clear picture of what the reality actually was, so couldn’t offer much in the way of consolation.

Yet what I could do was offer clarity and transparency. I called my senior team into an emergency meeting and told them, “This is bad. Really bad. And to be honest I’m not sure where we stand right now. One thing that I can assure you all of though is this: Like everything else, eventually this crisis will end and, when it does, you are going to want to look back at how you acted and you are going to want to be proud.”

A good number of those in the room that day have since told me how much that meeting meant to them. I wasn’t able to offer much in substance, or even any condolence for that matter. What I was able to do was establish a standard of candor and transparency which made trust possible. That became an essential asset moving forward.

Create An Imperfect Plan

Creating an atmosphere of transparency and trust is essential, but you also have to move quickly to action. In our case, that meant restructuring the entire company over the next 36 hours in order to bring our costs somewhat back in line with revenues. We weren’t even close to having a plan for the long-term, this was about survival.

We still, however, wanted to limit the damage. Although we were eliminating some businesses entirely, we recognized that some of our best talent worked in those businesses. So to lay people off indiscriminately would be a mistake. We wanted to keep our top performers and place them where they could have the most impact.

Over the next day and a half, we had a seemingly never-ending and excruciating series of meetings in which we decided who would stay and who would go, where we could increase efficiency by combining functions and leveraging our scale. Our goal was to do more than just survive, but to position ourselves to be more competitive in the future.

The plan we created in that short period of time was by no means perfect. I had to make decisions based on poor information in a very compressed time frame. Certainly mistakes were made. But within 36 hours we had a plan to move forward and a committed team that, in many ways, welcomed the distraction of focusing on the task in front of them.

Look for Dead Sea Markets

In their 2005 book, W. Chan Kim and Renée Mauborgne popularized the notion of a Blue Ocean Strategy, which focuses on new markets, rather than fighting it out in a “red ocean” filled with rabid competition. As MIT Professor David Robertson has described, however, sometimes markets are neither a red or blue ocean, but more like a dead sea, which kills off existing life but provides a new ecosystem in which different organisms can thrive.

He gave the example of LEGO’s Discovery Centers, which has capitalized on the abrupt shift in the economics of mall space. A typical location is set up in an empty department store and features miniature versions of some of the same attractions that can be found at the Toy giant’s amusement parks. The strategy leverages the fact that many mall owners are in dire need to fill the space.

We found something similar during the Ukraine economic collapse of 2009. Because the country was a major outsourcing center for web developers, demand for those with technical talent actually increased. Many of our weaker competitors were unable to retain their staff, which gave us an opportunity to launch several niche digital brands even while we were cutting back in other parts of our business.

Every crisis changes economic relationships and throws pricing out of whack. In some cases that turns cheap commodities, such as Lysol and hand sanitizer amid a Coronavirus pandemic, into highly demanded products. In other cases, however, it makes both assets and market share surprisingly affordable. That can create great opportunities.

Prepare for the Next Crisis

By the fall of 2009, our company was financially stable and things were returning to some form of normalcy. We had a strong management team, a portfolio of leading products and our survival was no longer seriously in question. However, I was exhausted and decided to leave to pursue other opportunities.

The founder, who had started the company almost 15 years before, was as exhausted as me and was ready to sell the company. Given our highly political sensitive portfolio of news brands, I urged him to seek a deal with a multinational firm. However, for various reasons, he decided to go with a local group led by Petro Poroshenko and Boris Lozhkin.

In my book Cascades, I describe what happens next. Due to the hard-hitting coverage of our news journalists, the company came under pressure from the oppressive Yanukovych regime. In 2013, the new owners were forced to sell the company to an ally of the Ukrainian President. A few months later, the Euromaidan protests broke out and Yanukovych was unanimously impeached. Later, Poroshenko was elected President and named Lozhkin as his Chief of Staff.

I still keep in touch with a core group of my former colleagues. Many have started families or new businesses. Quite a few have moved to different countries. Yet we all share the bond of working through the crucible of crisis together, some pride in what we achieved and the satisfaction that, when it was called for, we gave it our honest best.

— Article courtesy of the Digital Tonto blog
— Image credit: Pixabay

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We Must Begin Investing in Resilience

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We Must Begin Investing in Resilience

GUEST POST from Greg Satell

In 1964, as the financial revolution was gathering steam, an MIT economist named Paul Cootner published a collection of essays called The Random Character of Stock Market Prices. Based largely on an obscure dissertation by a forgotten frenchman, it laid the foundations for a new era of financial engineering.

Yet among the papers included was one that told quite a different story. Written by Benoit Mandelbrot—a mathematician not an economist—it showed that the seemingly sophisticated models significantly underestimated volatility and risk. In effect, he was predicting that these models would massively blow up one day.

No one disputed Mandelbrot’s facts, because they were clear and indisputable. Nevertheless, reputations were invested and there was of money to be made. So Mandelbrot’s warnings, although not altogether forgotten, were put in the back seat and we paid an enormous price. Clearly, then as now, we failed to invest in resiliency. Will we ever learn our lesson?

The Path to Pandemic

The Coronavirus crisis, for all of its severity, shouldn’t have been a surprise. There was the SARS pandemic in 2003, the Swine Flu outbreak in 2009, MERS in 2012 and, of course, Ebola in 2014. Each of these had potential for global catastrophe that was, thanks to some decisive action and no small amount of luck, averted.

There were also no shortage of warnings. George W. Bush sounded the alarm back in 2005, saying, “If we wait for a pandemic to appear, it will be too late to prepare.” RAND issued a report in 2012. Bill Gates was explicit about our lack of preparedness in his 2015 TED Talk.

To highlight the risk, before leaving office the Obama administration set up an exercise for the incoming Trump administration based on their earlier experience with pandemics.

Yet to say we dithered greatly understates the problem. From its very first year in office, the current administration proposed deep cuts to the NIH and CDC. Even in January 2020, when it was clear that the danger from the virus was growing, it was calling for cuts to those same agencies. Administration officials then doubled down on these cuts as late as March.

The lights had been blinking red. There had been 4 major outbreaks in the last 20 years. Experts and public officials had repeatedly called for preparations. Instead, we got tax cuts and deregulation. The pandemic’s path was cleared by public inattention and government inaction. While the ship was sinking, the crew was sleeping.

Unfortunately, our problems don’t end there.

Multiple Ticking Clocks

Clearly the Coronavirus crisis is a tragedy, yet it’s not the only light that has been blinking red for a while now. Just as Mandelbrot warned of the financial meltdown that came in 2008 and experts had been warning about the danger of pandemics for at least 20 years, there are a number of crises waiting to happen that we’re currently ignoring.

Take the climate crisis for example. A 2018 climate assessment published by the US government warned that we can expect climate change to “increasingly affect our trade and economy, including import and export prices and U.S. businesses with overseas operations and supply chains.” Another study found that the damages from climate related disasters since 1980 exceeds $1.7 trillion. That will only grow.

In the US our debt had already been a concern, especially considering that Medicare spending is set to explode. Now, with the Coronavirus crisis, we can expect to be adding trillions more to that, which doesn’t even include our massive environmental debt and infrastructure debt. Add it all up and our debts could easily exceed $30 trillion and possibly much more than that

It doesn’t end there either. Our electricity grid is insecure and vulnerable to cyberattack. As we increasingly delegate decisions to machines, we are realizing that we often do not understand how many of those decisions are made and we desperately need to make artificial intelligence explainable, auditable and transparent. We are also in the beginning of a genomics revolution, which will also create profound challenges.

A Proven Model

The challenges we face today, while profound and potentially catastrophic, are not at all unprecedented. In the 1950s, when we first began to understand the possibility of a nuclear holocaust, Albert Einstein and Bertrand Russell issued a manifesto highlighting the dangers of nuclear weapons, which was signed by 10 Nobel Laureates. Later, a petition signed by 11,000 scientists helped lead to the Partial Test Ban Treaty.

In the 1970s, when the dangers of gene editing became real, Paul Berg, one of the leading researchers, organized the Asilomar Conference to establish guidelines. The result, now known as the Berg Letter called for a moratorium on the riskiest experiments until the risks were better understood and instituted norms that were respected for decades.

Both efforts benefitted from a broad array of expertise. It was the partnership of Einstein, the world’s most famous physicist and the prominence of Bertrand Russell as a philosopher that jump-started the non-proliferation movement. The Asilomar conference included not only scientists, but also lawyers, politicians and members of the media.

In a similar vein, the Partnership on AI, which was formed to address ethical issues in artificial intelligence, includes not only leading tech companies, but also organizations like the ACLU, Human Rights Watch and Chatham House. CRISPR pioneer Jennifer Doudna has called for a similar effort to establish guidelines for synthetic biology, especially as it relates to germ-line editing.

Either Way, We Pay the Price

In a response to Mandelbrot’s paper in 1964 about the dangers of financial models, Cootner wrote that it forced economists “to face up in a substantive way to those uncomfortable empirical observations that there is little doubt most of us have had to sweep under the carpet until now.” He then added, “but surely before consigning centuries of work to the ash pile, we should like to have some assurance that all of our work is truly useless.”

In other words, the concerns were real, but the costs of addressing them seemed too great to bear. The era of financial engineering had begun and, although there were some hiccups along the way, such as a major stock market crash in 1987, things went relatively smoothly until the bottom fell out in 2008. It was only then that concepts like kurtosis and fat-tailed models came into wide-use to create more resilience in the system.

It was that same line of thinking that led congress to underfund our emergency medical stockpile to save money. It’s easy to underinvest today for a future risk that may never come. To many, it can even seem like the prudent thing to do. At any given time, the needs of the present can seem overwhelming. Borrowing from the future can help address those needs.

Yet as we’ve seen, in 2008 and 2020, eventually we pay the price, one way or another. Just as we will pay the price for some future catastrophe, whether it is a financial crisis, a pandemic, a climate event, social unrest or some other calamity. We can choose to invest in greater resilience now and save untold suffering in the future. We have that power.

Unfortunately, if recent events are any indication, we still haven’t learned our lesson.

— Article courtesy of the Digital Tonto blog
— Image credit: Pixabay

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Four Ways to Overcome Resistance to Change

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Four Ways to Overcome Resistance to Change

GUEST POST from Greg Satell

Why are organizations so resistant to change? Many point to a corporate immune system or to organizational antibodies that instantly attack change. The idea is that leaders prefer stability to disruption and put systems in place to reduce variance. These systems will instantly seek out and destroy anyone who tries to do anything different.

This is a dangerously misleading notion. There is no such thing as a corporate immune system. In fact, most senior executives are not only in favor of change, they see themselves as leading it! However, while most people are enthusiastic about change as a general concept, they are suspicious of it in the particular.

The truth is that is if the change you seek has the potential to be truly impactful, there are always going to be people affected who aren’t going to like it. They will seek to undermine it, often in very dishonest ways. That’s just a fact of life that you need to accept. Yet history clearly shows that, with a smart strategy, even the most ardent opposition can be overcome.

1. Ignore The Opposition — At First

The first principle for overcoming resistance is to understand that there is no reason you need to immediately engage with your active opposition. In fact, it’s something you should do your best to avoid in the early stages when your idea is still untried, unproven and vulnerable.

All too often, change initiatives start with a big kickoff meeting and communication campaign. That’s almost always a mistake. In every organization, there are different levels of enthusiasm to change. Some will be ready to jump on board, but others will be vehemently opposed. For whatever reason, they see this particular idea as a threat.

By seeking to bring in everybody at once, you are very likely to end up spending a lot of time and energy trying to persuade people who don’t want to be persuaded. The truth is that in the beginning your idea is the weakest it’s ever going to be. So there’s no reason to waste your time with people who aren’t open to it.

If you find yourself struggling to convince people, you either have the wrong change or the wrong people. So at first, seek out people who are already enthusiastic about your vision for change and want it to succeed.

2. Identify Your Apostles

In retrospect, transformations often seem inevitable, even obvious. Yet they don’t start out that way. The truth is that it is small groups, loosely connected, but united by a common purpose that drives transformation. So, the first thing you want to do is identify your apostles—people who are already excited about the possibilities for change.

For example, in his efforts to reform the Pentagon, Colonel John Boyd began every initiative by briefing a group of collaborators called the “Acolytes,” who would help hone and sharpen the ideas. He then moved on to congressional staffers, elected officials and the media. By the time general officers were aware of what he was doing, he had too much support to ignore.

In a similar vein, a massive effort to implement lean manufacturing methods at Wyeth Pharmaceuticals began with one team at one factory, but grew to encompass 17,000 employees across 25 sites worldwide and cut manufacturing costs by 25%. The campaign that overthrew Serbian dictator Slobodan Milošević started with just 5 kids in a coffee shop.

One advantage to starting small is that you can identify your apostles informally, even through casual conversations. In skills-based transformations, change leaders often start with workshops and see who seems enthusiastic or comes up after the session. Your apostles don’t need to have senior positions or special skills, they just have to be passionate.

3. Shift from Differentiating Values to Shared Values

People feel passionately about things that are different. That’s why the first product that Steve Jobs launched after he returned to Apple was the iMac. It wasn’t a very good computer, but its bright colors were designed to appeal to Apple’s passionate fan base, as was the “Think Different” ad campaign launched around the same time.

Yet if all Steve Jobs had to rely on was difference, Apple would have never grown beyond its most ardent fans and become the most valuable company in the world. It was the company’s growing reputation for high quality and smart features that brought in new customers. True change is always built on common ground.

One of the biggest challenges in driving transformation is that while differentiating values make people excited about an idea, it is shared values that help grow a movement. That doesn’t mean you’re abandoning or watering down your principles. It just means that you need to meet people where they are, not where you wish them to be.

For example, the Agile Manifesto has inspired fierce devotion among its adherents. Yet for those outside the Agile development community, its principles can seem weird and impractical. If you want to bring new people, it’s better to focus on shared values, such as the ability to produce better quality projects on time and on budget.

4. Create and Build on Meaningful Success

The reason people resist change is that they have a certain level of comfort with the status quo. Change forces us to grapple with the unfamiliar, which is always uncomfortable. There are also switching costs involved. So, if you want your change to take hold, at some point you are going to have to prove you can get results.

One great example is the PxG initiative at Procter & Gamble. It got started when three mid-level executives decided that they could dramatically improve a process. They didn’t try to convince anybody or ask for permission but were able to reduce the time it took from weeks down to hours. That started a movement within the company that has attracted thousands.

When Experian CIO Barry Libenson started a cloud transformation at his company, he didn’t force anybody to go along. Instead, he focused on helping product managers who wanted to build successful cloud projects. As they began to show concrete business results, the pressure for others to get with the program increased.

Perhaps most of all, you need to accept that resistance is part of change and that’s not necessarily a bad thing. In fact, skeptics can often point out important flaws in your idea and make it stronger. The difference between successful revolutionaries and mere dreamers is that those who succeed anticipate resistance and build a plan to overcome it.

— Article courtesy of the Digital Tonto blog
— Image credit: Pixabay

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Asking the Wrong Questions Gets You the Wrong Answers

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Asking the Wrong Questions Gets You the Wrong Answers

GUEST POST from Greg Satell

“Greed… is good,” declared Gordon Gekko, the legendary character from the 80s hit film Wall Street. “Greed is right. Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.”

The line resonated because it answered a question that people cared deeply about at the time, “how can we become more efficient?” In the face of heightened competition from Japan’s doctrine of total quality management, American firms appeared too sclerotic to compete. Corporate raiders preaching shareholder capitalism offered an easy answer.

The results are clear. Since then, the stock market has crashed a number of times, the last one resulting in a Great Recession. Productivity growth has been depressed for half a century. The incidence of extreme weather events and pandemics like coronavirus is on the rise. Clearly, we’ve been getting the wrong answers. It’s time we started asking different questions.

How Can We Become More Resilient?

We’ve grown accustomed to a reasonably stable world in which disasters were relatively rare. In the 19th century, wars, epidemics and financial panics were relatively common. The 1930s and 40s saw a global depression and a world war that claimed 75 million lives. By 1945, almost all of Europe and large parts of Asia lay in ruins.

Yet out of the ashes, we built a new, more resilient world. Institutions like the United Nations, World Bank and the International Monetary Fund created platforms to solve problems on a global scale. Bretton Woods established a global financial system and the Marshall Plan rebuilt Europe. An emerging welfare state permanently altered the role of the public sector in society.

That began to change in the Go-Go 80s when we shifted our focus from resilience to output maximization. As economists developed exciting new financial engineering techniques, business and governments increased their tolerance for risk and loaded up on debt. Staid chief executives gave way to corporate raiders and tech moguls.

The result is that we’ve become more vulnerable to shocks. In addition to worrying levels of financial debt, we also have considerable environmental debt and infrastructure debt, even as threats from terrorism, cyberattacks, extreme weather events and, of course, pandemics increase. We desperately need to figure out how to increase our resilience.

Clearly, a capitalism that focuses solely on financial capital and ignores other forms, such as social capital, human capital, natural capital, etc., is far too narrowly construed. We need to get better at integrating Environmental, Social and Corporate Governance (ESG) metrics into how we evaluate organizational performance.

What is the Relationship Between Cause and Effect?

Even a young child understands that if she touches a hot stove, her burn was caused by the stove and that it is no coincidence that both happened at the same time. We would expect her to run to her mother crying, “the stove burnt my hand!,” not “the pain in my hand coincided with touching the hot stove.”

Yet our algorithms and equations have no way of making basic distinctions between correlation and causality, which makes it difficult to design interventions. For example, if you find a strong correlation between temperature readings and ice cream sales, you might conclude that moving the thermometer close to a heater will improve ice cream sales.

Now I admit that sounds a bit silly, but similar mistakes happen all the time. For example, if a correlation is found between certain zip codes, crime rates and recidivism, we will tend to design our systems to punish people from poor neighborhoods more harshly. In fact, there is abundant evidence that mistakes such as these are common.

Debates about correlation and causation may seem academic, but they have real world impacts. If we could incorporate causation into our machine learning algorithms, we would greatly increase the speed and likelihood of finding a cure to Covid-19. At this point, there is a nascent effort to build intelligent systems based on causal principles, but there haven’t been any practical breakthroughs yet.

What is the Right Thing to Do?

In modern times, acting ethically has been seen as a relatively simple matter. You try to be kind to people and don’t lie, cheat or steal. In a moral classical sense, however, the study of ethics has been less about adhering to moral principles and more about trying to understand what the right thing to do is when there isn’t any cut-and-dried answer.

Most important decisions, like those that involve Covid-19 policy, have tradeoffs. It’s not hard to get people to agree that we should do everything possible to save as many lives as we can. Yet it is also true that we need to think about people’s ability to earn a living as well. So coming up with a strategy that saves lives and minimizes economic impact is far from easy, especially when easing restrictions too early could lead to even greater economic and human costs.

As our technology becomes more powerful, more difficult questions emerge. Can we teach an algorithm to understand right from wrong? Who is accountable for decisions machines make? To what extent should artificial intelligence systems be auditable? Or consider the emerging field of synthetic biology. Clearly, it’s giving us a leg up in fighting the coronavirus, but too what extent is it okay to alter the genetic code?

Part of the reason we were so unprepared for the Covid-19 pandemic is that most people were completely unaware of how dire the danger was. Clearly, we need a more public dialogue about the technologies we are building to achieve some kind of consensus of what the risks are and what we as a society are willing to accept. As we have seen, the consequences, financial and otherwise, can be catastrophic. We no longer have the luxury of acting cavalierly.

What Will It Take to Make Change Happen?

It should be obvious by now that things need to change. What’s not so obvious is how to bring change about. Theoretically, in a democracy you drive change forward by convincing a majority of your fellow citizens that it’s a good idea. However, research suggests otherwise. In fact, one study found that “when a majority—even a very large majority—of the public favors change, it is not likely to get what it wants.”

We see this play out in the real world as well. It has become common for those calling for change to organize a “March on Washington.” They make some noise for a while and then sputter out. In 2011, the Occupy Movement organized protests in over 950 cities across 62 countries, with little or nothing to show for it.

Yet it’s also misleading to suggest that shadowy special interests dictate what happens. While it is true that there are a number of rich and powerful forces, ranging from the Koch Brothers and George Soros to the NRA and Planned Parenthood, these forces are often in opposition to each other. They are better at blocking change than bringing it about.

As I explain in Cascades, change is not top-down or bottom-up but moves side-to-side. You need to mobilize people to influence institutions that have the power to affect change. Or, as Martin Luther King Jr’s biographer put it, “A social movement that only moves people is merely a revolt. A movement that changes both people and institutions is a revolution.”

We’re where we’re at today because people convinced institutions that maximizing output was more important than stability and resilience, that correlation was more important than causation and that technology was ethically neutral. We know now that none of these things are true. If we are to come up with better answers, we need to start asking different questions.

— Article courtesy of the Digital Tonto blog
— Image credit: Business Insider

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Spotting Frauds and Hucksters

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Spotting Frauds and Hucksters

GUEST POST from Greg Satell

Within hours of planes crashing into the World Trade Center on 9-11, stories began circulating that it was not, in fact, the planes that caused the towers to collapse, but explosives planted inside by someone with access. Since then, a number of conspiracy theories have circulated that people ranging from government employees to Wall Street Traders were responsible for the attack.

So, it shouldn’t be surprising that there is no shortage of alleged schemes about the coronavirus epidemic, from theories that the disease is caused by 5G mobile networks to that Bill Gates cooked it up as part of a global plot to electronically track us through vaccinations. Even the president’s son has a pet theory.

The simple truth is that when a tragic event happens, we lose our sense of control and there will never be a shortage of hucksters willing to take advantage of that, for profit or for other reasons. Often, these are elaborate narratives and can seem very convincing. Yet the schemes tend to have common characteristics which we can use to spot and nullify their effect.

Questionable Credentials

The first and most obvious thing most fraudulent conspiracy theories have in common is questionable credentials. Credentials, like a professional degree or certification, are important because they show that someone’s expertise has been recognized by other experts in a specific field of endeavor and that person has subjected themselves to evaluation.

That doesn’t mean someone has to have a piece of paper for their ideas to matter. In fact, as Thomas Kuhn pointed out decades ago, it is often outsiders, like Richard Feynman in virology and Elon Musk in space exploration, who drive paradigm shifts in a particular domain. However, in those cases, the outsiders are almost always working in conjunction with recognized experts.

Of course, the hucksters understand the importance of credentials, so they use several ploys to confuse us. They often appear in videos in white lab coats and use scientific sounding words. Like a cargo cult, they adopt the appearance and forms of a scientific method but discard the substance. Often, they will point to the lack of acceptance by “the establishment” as proof that their ideas are so important, they are being silenced.

So, the first thing we should look at is the credentials of the person or people making the claim. Lacking credentials doesn’t immediately make you wrong and having them doesn’t necessarily make you right. Nevertheless, when someone is unwilling to accept some type of training and evaluation it should put us on our guard.

A Lack of Transparency

Real science is transparent. There are no trade secrets. You are providing information on your materials and methods as well as the data that results. The idea is that you want to give everybody all of the information they would need to question your conclusions and judge the value of what you profess to be contributing.

Conspiracy theorists don’t do this. That’s why YouTube is a favorite medium. It’s so hard to fact check. You aren’t expected to provide links or data in an appendix to a video. You can just make assertions set to dramatic music. You can flash images that suggest nefarious activities without making any real assertions.

Another favorite ploy of the hucksters is to point to the lack of data as proof of the importance of their ideas. Of course, they don’t have data! That’s part of the cover up! So, they refuse to give any real proof and try to bury you in false assertions. They shift the burden of proof to anybody who questions them. Can anybody prove the data doesn’t exist?

We want to constantly ask ourselves, “Is this person giving me all the information I would need to come to a different conclusion? Is he or she open to different interpretations of the same data?”

A Persecution Complex

While researching my book, Mapping Innovation, I interviewed dozens of top innovators. Some were world class scientists and engineers. Others were high level executives at large corporations. Still others were highly successful entrepreneurs. Overall, it was a pretty intimidating group.

So, I was surprised to find that, with few exceptions, they were some of the kindest and most generous people I have ever met. The behavior was so consistent that I felt that it couldn’t be an accident. So, I began to research the matter further and found that, to a surprising extent, generosity can be a competitive advantage.

One particular case that comes to mind is Jim Allison, who had his idea for curing cancer rejected by the establishment. The pain was apparent in his voice even 20 years after the fact. Yet he didn’t blame anybody. He tried to understand why people were skeptical, went back and further validated his data, pounded the pavement and kept advocating for his idea. Jim won the Nobel Prize for Medicine in 2018.

Conspiracy theorists, on the other hand, often go to great lengths to explain how they have been silenced by the establishment and say this is proof of the importance of their ideas. They ascribe malevolent motives to those who disagree with them. For them, there is no such thing as honest dissent.

Have You Ever Seen a Humble Conspiracy Theorist?

One thing that always impressed me about the innovators I researched was how they insisted on giving credit to others. This came through especially during fact checks, when they would insist, I note the contributions of their collaborators. They never claim that they did it all themselves.

The people who make the biggest breakthroughs aren’t necessarily smarter or harder working than anybody else. However, they are effective knowledge brokers who build up strong networks of collaborators. They don’t always know more, but they know who knows more and that helps them to access that random piece of knowledge or insight that allows them to crack a really tough problem.

Yet conspiracy theorists would have us believe that they possess, by either innate ability or opportunity, some unique insight that others are not privy to. They don’t invite collaboration, scrutiny or alternate perspectives because they believe they are already possessing the absolute truth.

We need to have a healthy skepticism, especially with ideas we would tend to agree with. We should ask questions, explore alternative explanations of the same data and be open to additional evidence. What we need to look out for are people who would suggest that we shouldn’t do these things, because they are the ones looking to deceive us.

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

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How COVID-19 Has Exposed Us

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How COVID-19 Has Exposed Us

GUEST POST from Greg Satell

The moon landing in 1969 was, in many ways, the high point of the American century. Since then, we’ve been beset by scandals like Watergate, Iran-Contra and two presidential impeachments, mired in never-ending wars that we don’t win, while increasingly encumbered by rising debts and income inequality amid falling productivity growth. Incomes have stagnated while education and healthcare costs have soared.

Yet in an essay written back in February, just before the Covid-19 crisis, Ross Douthat wrote that these apparent woes are actually signs of success. In effect, he argued that we lack major technological breakthroughs because we become so technologically advanced, and we lack economic progress because we’ve become so prosperous.

Even then, it was a strange and somewhat maddening position to take. Why would Douthat, an intelligent and insightful man, write such things? Because he so wanted to believe them that he went in search for facts to support them. Many of us have been doing the same. Yet the Covid-19 crisis has unmasked us and it’s time to start facing up to the truth.

A Failed Market Revolution

In 1954, the eminent economist Paul Samuelson, came across an obscure dissertation written by a French graduate student named Louis Bachelier around the turn of the century. The paper, which anticipated Einstein’s later breakthrough on Brownian motion, declared somewhat innocently that “the mathematical expectation of the speculator is zero.”

Samuelson’s discovery launched a revolution in mathematical finance models based on on Bachelier’s assumption, including the Efficient Market Hypothesis, portfolio theory, the Capital Asset Pricing Model (CAPM) and the Black-Scholes model. The underlying assumption was that markets were rational, and risk could be quantified and managed effectively.

The flaws in these models should have been obvious even at the time and some, including the mathematician Benoit Mandelbrot, pointed out that markets were far more volatile than the financial engineering models predicted. Nevertheless, policymakers chose to ignore the warnings and put their faith in the “magic of the market.”

Probably the biggest failure of market fundamentalism is that, as economist Thomas Philippon points out in his book The Great Reversal, over the past 40 years markets in the United States have become significantly weaker. In a similar vein, a study published in Harvard Business Review that examined 893 industries found that two thirds had become more concentrated.

The truth is that we’ve chosen weaker markets and less competition, which has led to less dynamism and innovation. That’s no accident.

Digital Disruption

In Regional Advantage, AnnaLee Saxenian describes how Silicon Valley replaced Boston’s “Technology Highway” as the center of the digital universe. While Boston was corporate and hierarchical, Silicon Valley was freewheeling and networked. The Silicon Valley ethos was very much the counterculture.

So, it was no accident that when Steve Jobs flew to New York to recruit John Sculley, who was at the time President of Pepsi, to lead Apple he asked him,”Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?” The implication being that selling computers was a higher calling than selling soft drinks.

That was nearly 40 years ago and while the Covid-19 crisis has certainly highlighted some benefits of digital technology, such as cheap and effective teleconferencing, it’s also become clear that the digital revolution has largely been a disappointment. Productivity growth, except for a relatively brief period in the late nineties and early aughts, has been depressed since the 1970s.

Compare the iPhone to the breakthroughs of the mid-twentieth century, such as Bell Lab’s transistor, Boeing’s 707 and IBM’s 360 and it becomes clear that while digital technology has done much to disrupt industries, it’s done relatively little to create significant new value, at least in comparison to earlier technologies.

The Uncertain Promise of Globalization

The aftermath of the fall of the Berlin Wall was a time of great optimism. With the Cold War over, books like Francis Fukayama’s The End of History predicted a capitalist, democratic utopia in which free markets would conquer the world making everyone more prosperous. Those that refused to reform would be unable to compete.

While there were genuine achievements, especially in lifting up the world’s poorest, it’s hard to see how globalization has made us significantly better off. In fact, rather than the triumph of freedom, we’ve seen a global rise in populist authoritarian movements, the polar opposite of what intellectuals like Fukayama predicted.

In the United States, the situation has become especially dire. Social mobility and life expectancy in the white working class are declining, while anxiety and depression are rising to epidemic levels. While wages have stagnated, the cost of healthcare and education has soared, squeezing the middle class. Income inequality is at its highest level in 50 years.

So, while it’s true that there have been real benefits from globalization, such as curbing inflation, we’ve done little to mitigate the costs to the average citizen. That didn’t just happen but was the result of choices that we made.

We Need to Choose Resilience and Grand Challenges Over Output and Disruption

The Covid-19 crisis has unmasked us. We thought that markets, technology and globalization would save us, that we could just set up some sensible rules of the road and everything would run on autopilot. That’s clearly untrue. We took short-term profits while ignoring long-term costs, loaded up on debt and hoped for the best.

The current crisis has followed the same pattern. We simply failed to prepare for known risks because it seemed expedient not to. George Bush warned about the possibility of a pandemic as did his Health and Human Services Secretary. Jay Leno mocked them. The Obama administration set up a step-by-step playbook and it was ignored. The long list of failures goes on.

Yet we don’t have to be victims of our failed choices. We can learn to make better ones. After the 1918 Spanish Flu pandemic, we embarked on a 70-year productivity boom. Out of the ashes of World War II, we built a new era of peace and prosperity that was unprecedented in world history. We can do so again. We have that power.

New technologies, under development as we speak, will likely give us the power to cure cancer, create clean energy, save the environment and colonize space. We can rebuild the middle class, usher in a new era of peace and prosperity, increase life expectancy while improving quality of life. These are all things we may be able to achieve in the next decade or two.

Yet those possibilities are merely potential that we can succeed or fail to actualize. We can, as we did after World War II, choose to invest in the future and tackle grand challenges. We can build new infrastructure, spawn new industries and create an educated workforce. Or we can, as we did after the end of the Cold War, choose disruption over construction.

What’s clear is that nothing is inevitable. The digital revolution didn’t have to be a dud. The Great Recession didn’t have to happen. The Covid-19 Pandemic could have been, at the very least, greatly mitigated. We are responsible for the choices we make. Now is the time to shoot for the moon (and Mars), not to grade ourselves on a curve.

— Article courtesy of the Digital Tonto blog
— Image credit: Pixabay

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America is in Desperate Need of a Shared Purpose

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America is in Desperate Need of a Shared Purpose

GUEST POST from Greg Satell

In 1993, after being named IBM’s CEO as it was quickly careening toward insolvency, Lou Gerstner said, “There’s been a lot of speculation as to when I’m going to deliver a vision of IBM, and what I’d like to say to all of you is that the last thing IBM needs right now is a vision.” It was a peculiar thing to say, especially for an executive renown for his strategic acumen, and people took note.

What Gerstner meant was that IBM was broken internally. It had lost sight of itself and fallen into infighting. It no longer sought to serve the customer. Instead of collaborating, executives engaged in endless turf battles. Until IBM’s culture and values could be brought back into harmony with the market, it didn’t matter what the vision was.

Today, America has a similar plight. We are undergoing profound shifts in our racial makeup, urban concentration and generational demography in the midst of great geopolitical and technological disruption. We need to build a new social contract based on shared values that align with those shifts and, until we do that, any vision for the future will be irrelevant.

The Racial Divide

The recent incidents involving Amy Cooper and George Floyd outraged people across the world. In the former, a white woman leveraged her sense of privilege to threaten a black man in the most despicable way. In the latter, a black man was senselessly murdered at the hands of a police officer, while his colleagues sat back and watched.

What was notable about both incidents is that they were filmed and that the subjects involved knew they were being filmed but proceeded with their behavior anyway. How many times have they acted similarly off camera? There’s no way of knowing, but given the air of confidence they had in their actions, it’s hard to believe it was the first time for either.

At the same time, life expectancy for the white working class is actually declining, mostly because of “deaths of despair” due to drugs, alcohol and suicide. For those struggling and who see their friends and families undergoing similar travails, assertions of “white privilege” fall hollow. In fact, the very idea of “white privilege” intensifies the feeling that they are under attack.

The racial divide in America is wide and encompasses gaps in economic circumstances as well as values and attitudes. It doesn’t show signs of closing anytime soon. Yet until it does it’s hard to see how we can move forward as a nation.

The Urban-Rural Divide

In addition to the racial divide in America, we have a stark urban-rural divide that seems to keep widening. While having some gap between city and country dwellers is quite common all over the world, in America that gap is almost uniquely vast and encompasses a number of political and economic forces.

Politically, the fact that each state has two senators gives rural states with small populations an advantage in determining federal policy. On the other hand, because capitals tend to be in cities, those who work in government tend to be more liberal than their rural counterparts. Voting data has long shown that the urban and suburban areas tend to vote Democrat and exurban and rural areas tend to prefer Republicans.

On the economic side, cities wield enormous power. Most major corporations are headquartered in urban areas and large industries tend to agglomerate around specific cities, such as finance in New York, entertainment in Los Angeles and technology in San Francisco. Some observers have also noted that, as housing costs in key cities rise they are beginning to hemorrhage mid and low skill workers who tend to be less educated.

Much like the racial divide, the urban-rural divide is heavily rooted in values and attitudes. While city dwellers often dismiss rural areas as “fly-over country,” those who live in rural areas feel disrespected and unrecognized. They often complain that their communities are being dictated to by people in other places who live other kinds of lives, which leaves them angrily seeking political redress.

The Demographic Divide

In addition to the racial and urban-rural divides, we are also beginning to see a massive generational shift. Over the next decade, baby-boomers, many of whom came of age during the Reagan revolution, will be replaced by millennials, whose experiences with the Great Recession, debilitating student loan debt and rising healthcare costs, have very different priorities.

The main drivers of the Baby Boomer’s influence have been its size and economic prosperity. In America alone, 76 million people were born in between 1946 and 1964, and they came of age in the prosperous years of the 1960s. These factors gave them unprecedented political and economic clout that continues to this day.

Yet now, Millennials, who are more diverse and focused on issues such as the environment and tolerance, are beginning to outnumber Baby Boomers. Much like in the 1960s, their increasing influence is driving trends in politics, the economy and the workplace and their values often put them in conflict with the baby boomers.

However, unlike the Baby Boomers, Millennials are coming of age in an era where prosperity seems to be waning. With Baby Boomers retiring and putting further strains on the economy, especially with regard to healthcare costs, tensions are on the rise

A Problem of Identity and Dignity

In 1989, standing on Kosovo Polje, in a ceremony commemorating the Battle of Kosovo, in which the Serbian army was annihilated by the Ottomans in 1389, Slobodan Milošević told his followers, “No one should dare to beat you again!” Since then, we have seen a wide array of leaders, from Vladimir Putin to Donald Trump, leverage our innate need for recognition and collective identity to whip us into a frenzy.

Amy Cooper threatened a black man because he refused to recognize her privilege and she immediately called the police, with whom she obviously felt a shared identity. The Tea Party was driven, in large part, by older Americans who felt that younger Americans, who they did not feel a shared identity with, wanted to “freeload” off the country they worked their lives to build.

We can expect that as long as these divisions remain, there will be politicians and others who will seek to exploit them for personal gain. If we were still a white, Christian country in a simpler world, things would be easier, but we would lose all of the incalculable benefits that come with diversity, including more dynamism, innovation and culture. Much like IBM in the 90s, we cannot move forward until we heal our internal divisions.

Nothing about a multi-ethnic, multicultural society is simple. Building anything worthwhile takes work and no small amount of pain. Still, we need to try harder. We need to rebuild our society, culture and values based on a new basis of shared purpose. Until we do that, nothing else will really matter.

— Article courtesy of the Digital Tonto blog
— Image credit: Pixabay

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What Great Transformational Leaders Learn from Their Failures

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What Great Transformational Leaders Learn from Their Failures

GUEST POST from Greg Satell

We tend to think of transformational leaders emerging fully actualized. We look for early indications of promise, sure that there must have been nascent signs of greatness from the start. It’s hard to imagine those that attain the highest level of achievement are anything less than destined for greatness.

While talent clearly plays an important role in success, most talented people live their lives without any great distinction. Some attain some moderate level of achievement, but simply go unnoticed. Others even fail miserably. A few hit on the right mix of luck, skill, time and place that catapults them to greatness.

What’s interesting about the stories behind so many of those of remarkable achievement is how they often begin with heartbreaking tales of desperation and failure. Yet, those failures didn’t define their path. In fact, very much the opposite. It is what they learned from their early struggles and failures that helped make them the historic figures we know today.

The Prelude to a Miracle Year

When we think of Albert Einstein, we inevitably conjure up images of the icon rather than the man. We see Einstein with his wild hair and his tongue sticking out or Einstein as a playful old man, riding a bicycle. We remember his cheerful confidence and his easy comfort with his own genius. He wasn’t always that way.

The younger Einstein, the one who actually came up with the ideas that established his place in history rather than the world-famous scientist he became, was far different. Reeling from chronic unemployment and a troubled marriage, he fell into a deep depression, became nearly suicidal and wrote to his sister in a letter:

What depresses me most is the misfortune of my poor parents who have not had a happy moment for so many years. What further hurts me deeply is that as an adult man, I have to look on without being able to do anything. I am nothing but a burden to my family…It would be better off if I were not alive at all.

His father would pass away a few years later. By that time, the young Albert Einstein did find work as a lowly government clerk. Soon after, in 1905, he unleashed four papers in quick succession that would change the world. It was an accomplishment so remarkable that it is now referred to as his miracle year.

Einstein’s years of struggle changed him. The brash, arrogant boy became a very different man, open to the ideas of others. In 1924, by this time world famous, he received a letter from an obscure Indian physicist named Satyendra Bose. Many would have simply ignored it, but he took interest, translated it from English to German himself and submitted it to a journal.

The paper proved to be a breakthrough and Bose was nominated for a Nobel Prize. Einstein, for his part, is remembered as much for his humanity as for his genius.

Gandhi’s Himalayan Miscalculation

In 1919, Mahatma Gandhi initiated a campaign of civil disobedience, including the sale of banned literature, fasting, prayer and work stoppages, to protest the oppressive Rowlatt Acts the British had recently passed. These were an immediate success, but soon turned disastrous and ultimately ended with the massacre at Amritsar.

He would later call this his Himalayan miscalculation. “I realized that before a people could be fit for offering civil disobedience, they should thoroughly understand its deeper implications,” he would later write. So, Gandhi spent a decade doing just that, training a cadre of followers in his philosophy of Satyagraha or ‘truth force’.

Another opportunity would present itself a decade later, when the Indian National Congress asked Gandhi to design a campaign of civil disobedience in support of independence. This time, rather than rashly calling for national action, he meditated for weeks before deciding to march 240 miles with a limited number of followers to defy the British salt laws.

Today, the Salt March is known as Gandhi’s greatest triumph. It was the first time that the British was forced to negotiate with the Indians and, because it demonstrated that the Raj could be defied, helped lead to Indian independence in 1947. Yet without that earlier failure, it would likely not have been possible.

Mandela’s Rivonia Trial

In 1964, Nelson Mandela stood in court at what is now known as the Rivonia Trial accused of sabotage, a crime for which he was surely guilty. Many believed he would be sentenced to death. Yet rather than succumb to his fate, he decided to use the trial to showcase his values in a speech that would be remembered as a key moment in South African history.

“I have cherished the ideal of a democratic and free society in which all persons live together in harmony and with equal opportunities,” Mandela said. “It is an ideal, which I hope to live for and to achieve. But if it needs be, it is an ideal for which I am prepared to die.”

He was sentenced to life in prison and would serve 27 years. During his incarceration, his statements were banned from public consumption. The Apartheid regime thought that by imprisoning both his body and his ideas that both would eventually die out. They were wrong on all counts. In prison, Mandela became a symbol of the injustice of the Apartheid system.

When Mandela was finally released and rose to become President of South Africa, he stayed true to the ideals he spoke of in that famous speech. Although many of his political allies urged him to seek retribution, he pushed for reconciliation. He won the Nobel Peace Prize in 1993.

Transformation is Always a Journey, Never a Destination

Today, Einstein, Gandhi and Mandela have become iconic figures. Einstein has become synonymous with genius, Gandhi with dignity and Mandela with courage. Yet they didn’t simply emerge fully formed. It was, in large part, their struggles that shaped the men they would become.

Einstein, although clearly a genius, couldn’t find a job at a university. As a young lawyer, Gandhi was so shy he couldn’t bring himself to address the court. Mandela started out as an extreme black nationalist. “I was angry at the white man, not at racism,” he would later write. They would all evolve and grow over time.

As I wrote in Cascades, transformation is always a journey, never a destination. We don’t idolize Einstein just for his equations, but also for his humanity. We remember Gandhi not for the violence he unleashed in 1919, but for the peace he helped to bring about later on. Most people have never heard Mandela’s famous speech, but his ability to forgive and reconcile shaped an entire nation and inspired the world.

In a sense, it’s a shame that we hear so much about triumphs and so little about the dark times of our heroes. It was, to a large extent, those early struggles that led to their greatness, not the failures themselves, but finding the will and strength to see it all through. Clearly, we are going through some dark times ourselves right now, but our journey is not over. Our future is ours to make.

— Article courtesy of the Digital Tonto blog
— Image credit: Wikimedia Commons

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The Ways Inflection Points Define Our Future

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The Ways Inflection Points Define Our Future

GUEST POST from Greg Satell

Humans tend to think in a linear fashion. If something is growing, we expect it to keep growing. If it is decreasing, we expect it to continue to decrease. We are natural trend watchers and instinctively look for patterns. Yet it is often the discontinuities, rather than the continuities, that have the biggest impact.

The mathematician Benoit Mandelbrot referred to this cycle of continuity punctuated by discontinuity as “Noah effects and Joseph effects.” Joseph effects, as in the biblical story, support long periods of continuity. Noah effects, on the other hand, are like a big storm creating a massive flood of discontinuity, washing away the previous order.

Throughout history, inflection points have defined the future. Business models, built on top of Joseph effects, are disrupted by Noah effects, creating new opportunities for those who are able to identify and adapt. Today, we’re in the midst of a series of inflection points in what was already a time of enormous flux. We can’t predict the future but we can prepare for it.

1920s: A Second Industrial Revolution

By 1920, electricity was already nearly a 40-year old technology. In 1882, just three years after he had almost literally shocked the world with his revolutionary electric light bulb, Thomas Edison opened his Pearl Street Station, the first commercial electrical distribution plant in the United States. By 1884 it was already servicing over 500 homes.

Yet although electricity and electric lighting were already widespread in 1919, they didn’t have a measurable effect on productivity and a paper by the economist Paul David helps explain why. It took time for manufacturers to adapt their factories to electricity and learn to design workflow to leverage the flexibility that the new technology offered. It was the improved workflow, more than the technology itself, that drove productivity forward.

Automobiles saw a similar evolution. It took time for infrastructure, such as roads and gas stations, to be built. Improved logistics reshaped supply chains and factories moved from cities in the north — close to customers — to small towns in the south, where labor and land were cheaper. That improved the economics of manufacturing further.

It was the confluence of electricity and internal combustion, along with the secondary innovations they spawned, that led to mass manufacturing and mass marketing. Enterprises scaled up into huge bureaucracies exemplified by the organization Alfred Sloan built at General Motors. Firms were designed to move large numbers of men and materiel efficiently. Information flowed up, orders went down and your rank determined your responsibility.

1990s – Globalization and Digitization

In November 1989, there were two watershed events that would change the course of world history. The fall of the Berlin Wall would end the Cold War and open up markets across the world. That very same month, Tim Berners-Lee would create the World Wide Web and usher in a new technological era of networked computing.

Much like in the 1920s, these forces had been building for some time. Commercial computers had been around since the 1950s and global trade as a percentage of GDP began to sharply increase in the 1970s. Yet 1989 marked an inflection point and the world would never be the same after that.

The combined forces of globalization and digitization favored the quick and agile over the large and powerful. Rather than spending months or years to develop products, startup firms could rapidly prototype and iterate their way to launching a product in months or weeks. So called “unicorns”, startup companies valued at over a billion dollars, began to emerge and disrupt incumbent industry giants.

Perhaps the biggest shift of the globalized, digital world was from hierarchies to networks. While in the industrial era strategy was focused on linear value chains and the sum of all efficiencies, in the networked world strategy increasingly focused on the sum of all connections. A leader’s role was no longer simply to plan and direct action, but to inspire and empower belief.

Yet much like technologies that came of age in the 1920s, the second and third order effects of globalization and digitization were very different than anyone had predicted. Instead of the triumph of democracy we got a rise in authoritarian populism. Instead of a new era of prosperity, we got stagnant wages, reduced productivity growth and weaker competitive markets.

2020s – A New Era of Innovation

Today, as Moore’s law nears its theoretical limits, the digital revolution is coming to a close and we’re about to embark on a new era of innovation. Much like in the 1920s and the 1990s, the future is likely to surprise us, but the rough outlines of new inflection points are already beginning to take shape.

The first is in energy. The World Economic Forum reports that wind and solar now produce energy cheaper than coal and gas in North America. In fact, in some sunny parts of the world, solar costs less than half as much as coal. Costs for energy storage are still too high, but here too there is significant progress and we’re likely to see a scaled solution within a decade.

Another is the rise of synthetic biology. Driven by new technologies such as CRISPR, we’re beginning to go beyond merely reading genomes and starting to write them. Andrew Hessel, CEO of Humane Genomics, told me that we’re nearing the point that the value of a genome exceeds the cost to produce one. That will unleash a new wave of biologically driven business models. A similar revolution is underway in materials science.

Over the next decade we will also see the emergence of post-digital computing architectures such as quantum and neuromorphic computing, which are potentially thousands, if not millions of times more powerful than today’s technology. Although we don’t expect much of an impact from either of these for at least a decade, they will accelerate advancements in biology, materials and artificial intelligence.

Clearly these new technologies will open up new possibilities, but right now it’s impossible to see beyond first order effects. Nobody looked at a light bulb and saw household appliances empowering women to enter the workplace, or looked at a Model T and saw suburbs and the transformation of retail, or came across an IBM mainframe and said, “Gee, this thing will put journalists out of work one day.”

Preparing For the Future

Six years ago, I wrote how 2020 was shaping up to be a pivotal year. Boy, I had no idea! In addition. In addition to the convergence of longstanding trends in technology, energy and transportation, Covid-19 and the resurgence of the Black Lives Matter movement burst onto the global consciousness.

Two things stick out about these new inflection points. First, they were not only predictable, but were, in fact, predicted by a number of people. Second, both will accelerate already existing trends. Covid-19 has shifted digital transformation and synthetic biology into high gear. Black Lives Matter will likely expedite the shift in political power from Boomers to Millennials.

We can think of various scenarios that can play out. Covid may catalyze nascent trends, such as telemedicine and genomic medicine to greatly improve healthcare in the US. Black Lives Matter may cause a shift in hiring patterns that may help to accelerate productivity. On the other hand, the tensions both inflection points create may exacerbate underlying divisions and make things worse.

Those are just two possible scenarios. There are many more, each of which will create their sets of Noah and Joseph effects and then combine secondary and tertiary changes in ways that are unknowable today. What we can do, however, is explore new possibilities and prepare for them. The most important inflection points are often the ones that we create ourselves through the choices we make. No future is inevitable.

— Article courtesy of the Digital Tonto blog
— Image credit: Unsplash

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