Massively Networked

Technology is the game-changer

Nobel laureate economist James Tobin (quoted in this week's Economist) predicted the current financial trajectory in a 1984 lecture, tying it to the adoption of computers to facilitate transactions: "[W]e are throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services, into activities that generate high private rewards disproportionate to their social productivity.  I suspect that the immense power of the computer is being harnessed to this 'paper economy', not to do the same transactions more economically but to balloon the quantity and variety of financial exchanges...I fear that, as Keynes saw even in his day, the advantages of the liquidity and negotiability of financial instruments come at the cost of facilitating nth-degree speculation which is short-sighted and inefficient."

The Economist article goes on to consider that financial services need to adapt to the economy of which they are part. I.e., we have to take into consideration the kind of innovation enabled by new technologies and adapt, in this case financial services, accordingly.

If you read this blog, you know I believe the current economic system is fundamentally broken and making adjustments to how financial services are or are not regulated isn't going to be a long-term solution. I don't believe that because I hold some ideological point of view that makes a certain system right or wrong. I believe that because we're embedded in a world that's informed by our technology (as Tobin eluded to) and that technology has reached the point where it's a game-changer.

The ordering strategies and rules of engagement that facilitated life in the relatively slow-moving paper economy won't work in a massively networked world. A successful future economy will be based on an ethos entirely different from one that relies on regulation to monitor the acquisition and distribution of assets. This ethos will be informed by technology that allows transfer of information approaching the speed of thought, rapid prototyping, low- or no-cost creation and distribution of many goods and services, time shifting, social networks, the "wiring" of the physical world, and virtual worlds that are independent of physical location. How this plays out depends on if we have indeed reached a critical mass of folks who are tuned in enough to this reality to know how best to engage the new game.

Positives of punctuated change

Stephen Jay Gould described biological systems experiencing long periods of stability marked by a rare event that alters the biological landscape as "punctuated equilibrium." (Some creatures survive this jump, and alas, some do not). On a similar note regarding human history, Nassim Nicholas Taleb in The Black Swan proposes that  “almost all consequential events in history come from the unexpected."  London School economist Willem Buiter echos this in his Financial Times blog post about the current economy, “Too often for comfort I hear variations on the following statements: 'The long run is just a sequence of short runs, so if we make sure things always make sense in the short run, the long run will take care of itself.'" Buiter sees looking to past precedent a flawed strategy for determining current fiscal policy. (He gives the US dollar, BTW, 2-5 years).

Economic analyst Anita McGahan in a recent interview notes that during periods of punctuated change like the period we see ourselves in now, there is a time of uncertainty - similar to a river kayak that is momentarily stalled in the eddy just before it goes over a waterfall. Based on her historical analysis, she says this period of uncertainty is frequently followed by turbulance and a breakthrough from an unexpected source. A real innovative game-changer.

Transitions are always disconcerting and we’re experiencing transitions on a massive scale – economic, environmental, political and personal – all at once. Nobody knows for sure exactly where we’ll end up, but right now we have a window of opportunity to focus on creating alternative economic and business models that work better. The time to start creating viable economic alternatives is now, before the foundation crumbles completely.

The good news is with smart organization of grassroots efforts – gathering community members who can mutually benefit from each other’s products and services, or figure out how to solve for any gaps – the transition will be less painful. Moreover, we’ll have a base from which to create something new.

Welcome to the Momma Matrix, buh-bye Papa Grid

Our current culture is good at pattern recognition. The race to be the first to capture the zeitgeist has become a popular pastime. How about all those books with pithy buzzwords on the bestseller lists? We've apparently hit the tipping point in a flat world where the long tail and crowd sourcing shape the new, new, new economic reality! Whew.

As the rate of change speeds up, it becomes ever more challenging to capture and control reality by naming it. Just check out the accuracy of recent past predictions of the current future. Certain elements might be accurate, but the aggregate of lived reality is impossible to capture.

The emerging reality is a process-oriented one and different skills will be called for as we hit escape velocity from time-based, historical, location-dependent, statically codified and hierarchically ordered reality. Reality is moving toward a massively networked, generative Momma Matrix and leaving the presumptive order of Papa Grid behind.

Building the kind of skills that will allow us to successfully engage the emerging interactive marketplace (and by marketplace I’m thinking of something closer to an ancient agora than a modern mall) requires developing the habit of exploring possibilities as if seeing the world for the first time and in the moment, rather than trying to capture and codify the big picture.

Participatory vs speculative engagement in an emerging environment

A reader sent me a great email noting how object-oriented design provides a workable model for facilitating collaboration with qualities of a dynamic, emergent system. We shared a couple of thoughts on the topic of how systems can work. She noted how emergent systems are evident all throughout nature and summed by saying something along the lines of, "we just need look at how God designed things, and that’s the best way to go.” 

Though I respect where she is coming from, her intelligent design comment struck me as odd on the heels of our conversation. I realized later that’s because at the heart of what I see changing is a collapse of dualistic thinking and speculative engagement in the world in favor of a participatory one. The designer “deus ex machina” God is perhaps simply an artifact left over from a mechanistic worldview with linear causality, i.e., “if something exists, something else must have created it.” 

Successfully engaging a dynamic, emergent system, I believe, requires a fundamental change in awareness and worldview. It’s a worldview that embraces amorphous meanings, the ability to tolerate ambiguity and to understand the sense in which seemingly opposing ideas can both be true. It doesn’t rely on linear causality or export responsibility for knowing what’s right to an external authority. External authority and descriptions of causal relationships are valuable to the extent they resonate as being accurate, and remain so only as long as they continue to pass the inner value test. Those who successfully navigate this emerging environment of evanescent meanings and nonlinear causality will be those whose inner compass works best.

Rapid prototyping: Closing the gap between imagination and reality

Ideas that were abstract and esoteric a few decades ago now seem more tangible to me in large part to activities the Web enables. I’m reminded in particular of Sorbonne professor Henri Corbin’s description of what he called in the ‘60s the mundus imaginalis: “a world as ontologically real as the world of the senses and the world of the intellect, a world that requires a faculty of perception belonging to it, a faculty that is a cognitive function, a noetic value, as fully real as the faculties of sensory perception, or intellectual intuition.”  He believed the imaginal realm to be a less-tangible yet fully real precursor to what can appear in the material world.

Corbin carefully distinguishes imagination from fantasy. Having a well-developed faculty of imagination makes the difference between, say, producing Cirque du Soleil and a roadside carnival, or Bilbao Guggenheim and the Venetian. The fantasy end of the spectrum tends to yield products of little substance, whereas being able to tap into the realm of imagination potentially adds greater value.

This notion is relevant to the period we’re entering now. Increasing numbers of people have access to tools that enable rapid prototyping of ideas. Already it’s easy to see how political ideas, music, video, virtual realities and the written word can be prototyped, remixed and iterated in the online space. It’s been less obvious, so far, how these tools might impact the realm of material production.

Maker/hacker spaces are doing just that; members are coming up with designs that can be rapidly prototyped and executed in the 3D world, for example, through 3D printers and cutters (laser, water or other). As the trend continues it’s perhaps a matter of time before the tools of the online and offline worlds become connected enough where the gap between imagination and reality starts to close.

In this version of the emerging interactive marketplace, it will not be sufficient to rely on relatively slow-moving, linear processes that require project plans and product specs to move ideas to market – though these will continue to have their place. I expect the skills that will distinguish leaders include the faculty to tap into the mundus imaginalis and discern what of value might be drawn from its contents.

Idea pesticides: 4 innovation killers to avoid

1.    It’s already been thought of
Carl Sagan once said, “If you want to bake an apple pie from scratch, you must first create the universe.” It’s almost guaranteed that a version of your idea has been at least thought of by someone else. So what? Innovation happens in the space between having a thought and making it real. That someone else has thought of your idea is not in itself a reason to discard it. If it were, the fashion industry would be out of business.

2.    The research rabbit hole
You have an inkling of an idea. You google a key phrase. In a flash your inkling finds itself between the Scylla of page 10 in the search results and the Charybdis of Wikipedia. What nascent idea can stand against the sum of documented human thought, arguments, counterarguments and derivative musings? Don’t subject your idea to research until it’s had a chance to take shape on its own.

3.    Not valuing what you know
Call it “the best lack all conviction” innovation killer. Bringing an idea to life takes the confidence to hold the space without knowing the exact outcome and without chickening out at the first run-in with an intensely passionate critic.

4.    Somebody will take my idea
During the height of the first dot-com boom, I could barely go a week without someone NDA’ing me. It seemed everyone feared losing “first mover advantage” in grabbing market share. It’s a scarcity-driven notion that might have applied to the pre-Web world, but one that is becoming less relevant. Ideas horded die in isolation, or at best become idiosyncratic hobbies. Sharing ideas with others who have their own to contribute makes them greater than the sum of each.

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I’m a proponent of research, acknowledging those who had similar ideas, and testing ideas with logical critique and common-sense practicality at some point before they’re taken to market. That point, however, is after the idea has had a chance to take form. More important is the capacity for engaging both the creative messiness of innovation and the refining sweep of critique – and for knowing when is the right time for each.

Thought Bubbles: CitiMorg, Real dreamcatchers, Crash course, Bailout game

  Thought Bubbles shares bits of news, ideas, links and random scribblings. Feel free to email me your own.

Citigroup + Morgan Stanley = CitiMorg (Gallows humor from the trading floor)

Real dreamcatchers: Japanese scientists create software that can capture dream images (the headline promises more than the actual technology delivers, but it's still a fun idea; or maybe not so fun depending on the vision: Until the End of the World, Paprika or The Cell for starters)

End of money: The Crash Course presents logic backed with stats on why the present economy isn't sustainable (a bit pedantic at times, but a good 101 to share with those who believe the present economy might just be going through a temporary downturn)

And if you're in the mood for a little fun and have some time to waste, play the Bailout Game

Mistaking the instrument for the music (or, Why having children is always immoral)

John Kenneth Galbraith's 1955 book The Great Crash, 1929 is apparently a great read right about now. It's among Amazon's bestsellers and was among those featured in this week's Economist. I haven't read it yet (I will), but the decade-plus of reviews on Amazon were worth a read in themselves as the US economy has hit its troughs and heights. From what I have read, the central thesis is that speculating for speculation's sake is what led to to the 1929 crash (and subsequent depression) - which is no doubt why it's resonating with so many folks currently.

Stepping back to take a neutral view of the components of our current economic system, I see that the very thing that makes the creation of value possible within the system is the same thing that destroys it. It's like a group of music lovers that get so focused on creating more intricate instruments with which to play better and better music. Eventually they spend so much of their time and expertise eeking every improvement out of each instrument, they forget what the instruments are used for in the first place and start hording the instruments themselves.

Credit instruments within the economic system are perhaps similar. It's a good thing to have credit. Credit allows entrepreneurs to start a business that can add value to the marketplace. Credit gives people the opportunity to purchase a home so they have a secure base from which to become contributing citizens. When the drive for eeking every improvement out of each financial instrument gets to the point where it's an end in itself, however, we've forgotten what the system was supposed to accomplish in the first place.

It's the nature of all established systems. By the time I became a Philosophy undergrad, the system had perfected itself to the point where logic - in and of itself - was the standard by which to assign value. A PhD star student teacher who had made her way up the academic ranks quickly enough to be getting her doctorate in her late teens, authored a much-praised paper on why it is always immoral to have children. It's a good thing to use logic. Logic is a useful instrument to test assumptions and help tease out the details of an argument. But when logic becomes an end in itself, we've lost the value of philosophical enquiry and end up with conclusions that fail to make much of a meaningful contribution outside the system itself.

So, is it fated that all systems carry within them the seeds of their own demise? Yes and no. The beauty of the world we live in now is we have the means to create a system from the get-go that acknowledges things will fall apart, and reassemble and fall apart again before we get so invested in a system that its demise is tragic. A dynamic, emergent system lets us leave a system that's not working before it gets to a state where whoever gathers the most intricate musical instruments wins, and those who still know how to play music no longer have the means to do so.

Making room for generative thinking

Catching up on NPR's Planet Money podcasts while climbing Telegraph Hill early this morning, I was struck by how much energy the producers put into normalizing the extraordinary economic events we're currently experiencing. Each episode doggedly tracks the TED spread, explains the structure of bailouts and asks the leading economist du jour innocent-sounding questions like "where is all the money?"

The kind of thinking that drives Planet Money interviewers to seek out established economists, bankers, politicians is process-oriented thinking to preserve some existing life context. The unspoken driver of the discussions is to figure out ways to normalize extraordinary economic events, so we the audience don't have to face the unimaginable alternative of economic collapse. SciFi author and social commentator Bruce Sterling had a great quote in a post on the state of the world in 2009: “When you can’t image how things are going to change, that doesn’t mean nothing will change. It means things will change in ways that are unimaginable.”

We are currently facing extraordinary economic circumstances. Process-oriented thinking - deductive and inductive reasoning - is helpful in the short run as we figure out how to make the existing engine run as well as possible for as long as it lasts. Deductive and inductive thinking won't, however, be sufficient to solve for what comes next. Solving for what comes next is a creative endeavor that requires generative thinking. Generative thinking takes a step back from the existing context and asks what are its basic elements and how might they be put together in a way that works better. It requires looking at the components of the existing economic reality as raw materials to be worked with, rather than as part of an existing system that must be held together.

Thoughts on the practical applicability of "freeconomics"

Stephen Colbert was dryly amusing as usual lampooning Lawrence Lessing on the Colbert Report the other night. If you're not familiar with Lessing, he is the leading advocate of abolishing outdated aspects of current copyright laws in favor of Creative Commons licensing in light of the detachable, portable and remixable reality of the online world and people's creative motivation to participate in it. Colbert's rapid-debate schtick gets Lessing to explain that the economics of the creative commons are people want to contribute to sites like Flickr for free and Flickr makes money by selling ads to them. Lessing calls this an aspect of the "hybrid economy."

What Lessing gets right with his "hybrid economy" notion is that there is an intrinsic motivation for creativity and generating something new among people. There is a satisfaction contributors to open-source software get when they figure out a bug fix and share it with others. The endless YouTube video creations wouldn't exist if their filmers didn't get pleasure from creating and posting for everyone to see. The twin joys of creative expression and popular recognition are part of the power that is effectively harnessed online.

It is too much of a leap, however, to call providing a platform for creative expression and recognition and then selling advertising or service upgrades a "hybrid economy." The notion Lessing describes creates a non-necessary dependence between two economies running in parallel. Strictly speaking, Lessing's freeconomy needs the traditional economy to survive, whereas the traditional economy has no need of the freeconomy. Rather than a hybrid, it's more of a parasitic relationship. To create a truly hybrid economy, there has to be more of an interdependence between the freeconomy and the traditional economy.

So, how do we harness the economic power of the decentralized, emergent networks  the web has now enabled - while acknowledging that most of us will have to engage the established economy for some period of time in order to live?

We need a true hybrid economic model to get the ball rolling. An economic model that is parasitic on the established economy will lose its base when the old economy finally decomposes. If you have thoughts or questions of your own, I invite you to post them in the comments section.