Tribute

Mike Seeger with John Cohen & Tracy Schwarz:

Second Life: the new playland?

The Economist reports that although their initial popularity has faded, "virtual world" websites have found a, well, second life as a playspace for tots.

In America, nearly 10m children and teenagers visit virtual worlds regularly, estimates eMarketer, a market researcher—a number the firm expects to increase to 15m by 2013. As of January, there were 112 virtual worlds designed for under-18s with another 81 in development, according to Engage Digital Media, a market research firm. . . .

Debra Aho Williamson, an analyst at eMarketer, believes “these worlds are a training ground for the three-dimensional web”. If virtual worlds for adults, which so far have been able to retain only hard-core users, manage to hang on for a few years, they may yet have a second life.

The dispiriting details are here.

Technorati Tags: innovation

Localvore's Paradises

The Huffington Post has  alist of the 10 ten cities for local food.  (The major criterion is compiling the list is the number of restaurants locally sourcing their produce and other food products.  Their top five:
San Francisco
Portland, OR
NOLA
Albuquerque, NM
Seattle, WA

This full list looks like it could be the itinerary for a Phish tour or a list of the top 10 indie film festivals.  Hmmm. . .

The full post is here.Technorati Tags: innovation

Turning Tweets into Cash

A recent post questioned whether social media will be able to generate sufficient profits for their creators.  The Economist provides an overview of the latest thinking:

MySpace, which was bought by News Corp in 2005, offers a cautionary tale. It grew rapidly from its origins as a site focused on members’ musical interests into a more eclectic network. But as it expanded, it spent too much time chasing revenue and too little improving its online offerings. Now it is bleeding users and advertising. . .

No wonder Rupert Murdoch is such a naysayer about social media.

What about Twitter? Embedding advertisements in “tweets”, short text messages that can be up to 140 characters long, is unlikely to appeal to users. A better bet would be for the firm to charge corporate users for premium services. For example, it could pocket a fee from businesses for verifying their Twitter accounts, so that users following their postings would know the firms’ tweets are genuine. It could also develop a statistical toolkit that measures the effectiveness of tweets in generating sales.

The full story is here.

Technorati Tags: innovation

The Changing World of Venture Capital

According to a recent article in the Boston Globe, New England's VC market is "eerily quiet." Some of the little activity that is taking place consists of VC funds buying shares in startups from other funds at steep discounts. The article indicates the entire sector is in the midst of a painful shrinkage:

According to Michael Greeley, chairman of the New England Venture Capital Association, last year there were about 45 venture capital firms among NEVCA’s membership that he considered active, meaning they’d made more than three investments to help get new companies off the ground. Going forward, Greeley estimates the number of active firms in our region will drop to something like 20 to 25.

But--it is argued--there will be long-term benefits:

Too much venture capital money breeds too many start-ups chasing the same opportunity, and when a company gets too much funding, it has little incentive to act frugally. Also, Payne adds, start-ups that are flush with cash can afford to sell their products or services at a loss (or simply give it away), which can impede the healthy growth of its market.

One implication: entrepreneurs themselves may look to reduce their dependence of capital, producing start-ups that make more productive use of the capital they have. The full article is here.

Technorati Tags: innovation

Chart of the Day: Do Skills Matter for Low-wage Workers?

The question is raised by an analysis from the Economic Policy Institute. The standard diagnosis for the ills of low-wage workers is that they have not achieved the levels of education required to compete in the modern economy.

However, as the chart shows, when EPI compared the education levels of low-wage workers in 1979 with education levels of low-wage workers in 2009, they found that today's low-wage workers have much higher levels of education than their peers of 30 years ago. EPI's conclusion?

This growth in education levels for minimum wage workers suggests that the minimum wage is failing to keep pace with workers’ capacity to produce goods and services. Higher productivity—the capacity to produce more per hour worked—should allow these workers to earn higher wages. In fact, we see the opposite. . .

Hmmm. . .

Technorati Tags: talent

Is growing inequality undermining Social Security?

That's one implication of a recent Wall Street Journal article. Ellen Schultz reports that at least part of the potential problem with financing Social Security is that income growth is occurring only at the very upper ends of the income scale, well above the level at which pay roll taxes are in effect to finance Social Security:

The pay of employees who receive more than the Social Security wage base -- now $106,800 -- increased by 78%, or nearly $1 trillion, over the past decade, exceeding the 61% increase for other workers, according to the analysis. In the five years ending in 2007, earnings for American workers rose 24%, half the 48% gain for the top-paid. The result: The top-paid represent 33% of the total, up from 28% in 2002.

The growing portion of pay that exceeds the maximum amount subject to payroll taxes has contributed to the weakening of the Social Security trust fund. In May, the government said the Social Security fund would be exhausted in 2037, four years earlier than was predicted in 2008.

This suggests growing income inequality has a real price. The economy is growing sufficiently to support Social Security except that, unlike previous eras, the growth is all concentrated in the upper end of the distribution. Another troubling implication of Schultz's reporting: wages at the top end grew by 48% from 2002 to 2007, while overall wages rose by only 24%. That indicates that top end wages grew while wages for everbody else remained stagnant.

Blogger Kevin Drum has an interesting take on all this:

It also means that the average joes with stagnant wages couldn't keep up, so they went deeper and deeper in debt. And who loaned them the money to do that? Well, the rich can't really spend that ocean of extra dough they're getting — the technical reason is that they have a lower marginal propensity to consumer than average joes; the nontechnical interpretation is that you can only buy just so many yachts — so they ended up loaning most of it back to the middle class. We all know how that turned out — but the rich got bailed out by the taxpayers so they ended up OK. The rest of us, not so much.

Technorati Tags: economy

California looks to the Clouds

Cloud computing, that is. According to Government Technology, the State government is in discussions with Google to have the company host its email and records management system. An interesting idea, but, as Jonathan Zittrain points out in a recent piece in the NYT, not without its risks. Indeed, the folks at the LAPD are already raising privacy concerns.

Stay tuned.

Technorati Tags: innovation

The Changing Geography of Innovation

Over at Creative Class, Richard Florida has been tracking the changes in the innovative climate of the US and elsewhere. A recent posting suggests dramatic shifts in where innovation is happening in the US, in this case, by tracking trends in patent filing. As you can see in the accompanying graph (on which you can click to enlarge it), California is consolidating its already dominant position. Texas and Seattle are showing significant signs of life. Things do not look so promising for lld industrial cities like Rochester and Pittsburgh. The full posting is here.

Technorati Tags: innovation

Ford Uses Avatar to Design Its Verve Model

The New York Times highlights Ford's use of Antonella, a computer avatar to design a new generation of the Ford Fiesta.

Antonella is the personification of a profile created from demographic research about the Fiesta’s target customer, said Moray Callum, executive director of Ford Americas design.

Ford is using characters like Antonella to bring a human element to the dry statistical research drawn from polls and interviews. Based on psychological profiles, these characters are a more modern version of the “theme boards” that designers once covered with snapshots and swatches of material to inspire a design. They are also like avatars, those invented characters used in online games and forums to symbolize a participant’s personality.

“Invented characters get everyone on the same page,” Mr. Callum said. “Personalizing gives context to the information we have. Sometimes the target demographics are difficult to relate to by, say, a 35-year-old male designer.

“We found in the past that if they didn’t understand the buyer, designers would just go off and design something for themselves,” he added.

Technorati Tags: innovation

Friday Music

A short video commemorating our vacation:

Don't Mess with Texas

According to a recent profile in the Economist, despite the recession, Texas is an economic powerhouse:

Joel Kotkin, an urbanologist based in California, recently compiled a list for Forbes magazine of the best cities for job creation over the past decade. Among those with more than 450,000 jobs, the top five spots went to the five main Texaplex cities [see the red triangle on the map to the right]—and the winner of the small-cities category was Odessa, Texas. A study by the Brookings Institution in June came up with very similar results. Mr Kotkin particularly admires Houston, which he calls a perfect example of an “opportunity city”—a place with lots of jobs, lots of cheap housing and a welcoming attitude to newcomers.

A couple of potential dark clouds: Much of Texas's wealth is still based on oil and, like real estate, they're not making more of it. So when it goes away, Texas may have to confront a few issues: low education levels (41st among the states, according to a recent survey) and the rapid growth in the Hispanic population, who have a history of privation.

As they reach a majority status, they may call for changes in Texas's traditions of low taxes and minimal government services (cf., the State's 41st ranking in workforce preparation cited above). The Economist warns that if this demographic change causes the State to become Democratic, it will end up an economic basket case like California.

Hmmmm. . . . the full story is here.
Technorati Tags: economy, talent

Saving the Liberal Arts by Destroying Them?

Over at Inside Higher Education, Roger Baldwin and Vicki Baker examine the potential closing of Antioch College, a noteworthy private liberal arts school that is on the brink. They point out that, while there is much wringing of hands over losing dear old Antioch, saving it may be more of a loss:

[The] focus by reporters and educational policy makers on the potential closure of some colleges may mask a more serious threat to liberal arts colleges: a slow abandonment of their traditional mission in favor of a more “professional” orientation.

This longer-term and more significant trend was first highlighted by the economist David Breneman nearly 20 years ago in a 1990 article that asked, “Are we losing our liberal arts colleges?” At that time he concluded that many one-time liberal arts colleges were not closing, but gradually transforming into “professional colleges” as they added programs in vocational fields such as business, communications and allied health.

I'm not convinced this is a problem. Don't get me wrong: it is a problem if the liberal arts are diminished in the process. On the other hand, traditional private liberal arts colleges were set up for--to be blunt--trust fund babies. They could study liberal arts because their robber baron ancestors enabled them to avoid having to work for a living later on. The rest of us went to trade school.

So if this trend actually means that people who were previously consigned to a trade school education can now have access to the liberal arts, that's not a bad thing. And the extent to which liberal arts can be actively incorporated into professional training (and demonstrate its inherent value to those philistines) this could be a big step forward.

In fact, Baldwin and Baker put forth a very interesting idea to respond to this crisis, by challenging the foundations who support liberal arts institutions to "[establish] a competitive funding program encouraging liberal arts colleges to design innovative and entrepreneurial educational programs that preserve the best aspects of the liberal arts college model while adapting the model to the demands of a rapidly changing world. This initiative should encourage creative proposals within the liberal arts college framework rather than the addition of new programs on the margins that dilute the mission and intellectual coherence of these colleges."

And the logical place to start would be with public institutions. If liberal arts are going to continue to contribute to a democratic society, it has to be primarily through them, not through private institutions.

Technorati Tags: talent, innovation

Is Chinese Investment in the Energy Sector a Problem?

So wonders the Economist.

Although producers are particularly eager to drum up investors amid the credit crunch and the accompanying sharp fall in commodity prices, national governments are leery about approving outright acquisitions by Chinese firms. One reason is a lack of reciprocity: although China complains about nationalist impediments of the sort that blocked the Unocal transaction, it tolerates little involvement by non-Chinese companies in its own energy industry.

Apparently the Chinese are seeking to avoid these concerns in several ways. First, they lending to other state-controlled oil firms in Brazil and Russia. In addition, "CNOOC and PetroChina have each done multi-billion-dollar deals tied to the development of specific gas projects in Australia, blurring the line between investments and supply contracts." So, is China spreading its influence while still warding off foreign investment in its own energy sector? The full article is here.

Technorati Tags: economy

You Mean Twitter is Supposed to Make MONEY?

The Financial Times reports at that at the annual media and technology shindig in Sun Valley, Idaho, there is not much interest in Twitter as a business opportunity among Ruppert Murdoch and his peers:

Mr Murdoch, speaking on the sidelines of the Allen & Co-hosted conference, said he was not interested in buying Twitter, an online service that lets users broadcast short messages that has taken over the web by storm.

“Be careful investing here,” Mr Murdoch warned.

John Malone, chairman of Liberty Media, shared Mr Murdoch’s skepticism. “I don’t know if it’s monetizable,” Mr Malone said of Twitter. He added that someday, users might pay a nominal fee for social media.

News Corp, which owns MySpace, is struggling with restructuring the one-time world’s largest social network as it faces stiff competition from Facebook. . .

Why would anyone pay a "nominal fee" to use Twitter?

Technorati Tags: innovation

. . . And Speaking of Innovation

It's hard to beat this for creativity:

Innovation: It's All About Culture

The more consulting I do, the more I am convinced that there is no substitute for a culture committed to innovation. BusinessWeek's interview with Apple design maven Jonathan Ive seems to confirm this:

"We don't have identity manuals reminding us of points of philosophy for why our company exists," he said of Apple's internal culture. "I'm sure those things are very well meaning, but if you have to institutionalize stuff, you end up chasing your tail." In other words, unless the commitment to innovation or design is authentic and heartfelt, rather than this month's short-term strategy to cater to a hot trend, it will be nigh on impossible to build a true, innovation-led culture (and emulate Apple's success.)

How do you build a creative culture? Three things to consider:

1. Only hire people who write clearly and succinctly. Clear writing is usually evidence of clear thinking and a supple mind.
2. For God's sake, don't hire anybody without an original sense of humor and a general sense of playfulness mixed in with a strong sense of purpose.
3. Avoid anyone who has studied or worked at only one thing their whole life. Narrow interests kill flexibility and perspective.

Other than that, you're on your own.

Technorati Tags: innovation, talent

Experience-based Retail as Main Street's Competitive Advantage

Via Planetizen:

Despite all of the bad news coming from Michigan, Niles, Michigan (population 12,000) has experienced a startling rebirth of its central business district. (Check out the before and after pictures to the right.)

The area is not without its problems, but the community has used the principles of the national Main Street program to recreate itself. The full story is here.

Technorati Tags: planning

China Seeks New Global Monetary System

In the Far Eastern Economic Review, Ulrich Volz reports on China's efforts to wean the world away from the US dollar as the basis for global finance. For example:

[Just] before the London G-20 Summit, the People’s Bank of China (PBOC), published a paper by Zhou Xiaochuan, the PBOC governor, on its Web site in which he asked for a new “super-sovereign” international reserve currency “that is disconnected from individual nations” to secure global financial stability and facilitate world economic growth. He proposed that a more prominent role should be given to Special Drawing Rights (SDRs), a basket of currencies used by the International Monetary Fund (IMF) as a unit of account, suggesting that SDRs could replace the dollar as main reserve currency in the medium term.

Volz points out that this effort is partly driven by Chinese fears that American stimulus efforts will unleash an inflationary spiral that will undermine the dollar (and thereby Chinese currency reserves). Yet, it is a double-edged sword. Since they hold huge reserves of dollar-denominated assets, as the Chinese economy grows and the yuan appreciates against the dollar, it negatively affects the value of China's reserves. What will China do? For the short-term, probably just grumble and bear it:

For the time being, the Chinese authorities have simply no choice but to cling on to their dollar holdings. Any indication that they might dump their dollar assets would most certainly cause a massive dollar crisis, so they would cut off their own nose to spite their face. Paradoxically, they will even have to increase their dollar reserves to prevent their existing reserves from losing value. In an already famous remark made in New York in February, Luo Ping, a director general at the China Banking Regulatory Commission, said “We hate you guys. Once you start issuing $1 to $2 trillion … we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

Technorati Tags: economy

Which type of networking works best: analogue or digital?

The Economist makes the argument that Web 2.0 will produce better economic performance than yesteryear's old boy networks:

Old-fashioned networks do no good either to companies or to society. When jobs and deals go to the good old boys, networks tend to undermine meritocracy. They encourage bosses to recruit people like them. Being mostly male and white, cliques tend to encourage discrimination against women and ethnic minorities. Online networks, by contrast, make both companies and society work better. They create links that cross national borders. They help people to exchange information about each other’s talents and businesses. They encourage the generation of new business ideas.

That's the ideal, at least. The article goes on to point out that, one of the problems with electronic social networks is that they can easily become so large that they become anonymous. Members no longer have the type of connections that encourage them to share favors. . . and so the whole process has to start all over again.

There are attempts to buck this trend. AACORN (the art aesthetics creativity organization research network) restricts members to only people who are referred by existing members. Makes good sense. But it could lead us right back to that same closed circle that the Economist cites as a problem with "old boy" networks. I guess the next five years or so will provide an indication of whether Web 2.0 can outperform the Elks Club.

US Consumer Spending Returning to Normal

So says the McKinsey Quarterly. Not that we're seeing a return to the "borrow and spend" madness of recent years. On the contrary, research shows that consumers are turning away from levels of indebtedness that were common in the in the last two decades and returning to typical post-war spending patterns:

Spending, saving, and debt averages are not at abnormal levels today but rather returning to long-term trends. It was the behavior of US consumers during the past two decades, our research shows, that was the aberration. The return to traditional spending patterns will cause companies to adjust to a fundamentally altered playing field...

This finding suggests that companies must develop a deep understanding of how such profound behavioral change will affect strategies fundamental to value creation: acquiring and keeping new clients, intensifying relationships with them, and improving service to consumers, for example.

It is easy to see how Web 2.0 consumer applications will become even more important under this scenario. But to make the picture even more complicated: some have asserted that we've seen consumer debt explode because family earning power has stagnated over the last 30 years. If that's the case, without an increase in take-home pay, those families will never return to pre-bubble levels of spending. In this case, is a robust recovery at all possible?

Hmmm. . .

The full story is here (registration required).

Technorati Tags: innovation

Three Mistakes the Fed Made. . .

According to economist Brad DeLong, there is fairly strong consensus that the Fed made three big mistakes coping with the financial crisis:

• nationalizing AIG, allowing financiers to act as if that company could still pay its bills, thus creating the impression that those financiers had done the right thing all along.
• letting Lehman Brothers freefall into bankruptcy to "teach the Street a lesson"
• failing to regulate the "shadow" banking system out of a Greenspan-like faith in the beneficence of markets

There is another action whose merit is still being debated: Was it sensible for Mr. Greenspan to keep interest rates low during the run up of the housing bubble? DeLong's take: the old man might have been right. For an interesting read, click here.

Technorati Tags: economy

Art and Business: A Good Match?

Via Creative Class:

In a new working paper for the Harvard Business School, Robert D. Austin and Lee Devinand examined the potential conflicts between business and art in creative enterprise. They found there was no necessary conflict. Key finding: "We conclude that despite an inclination to take offense that often attends the close juxtaposition of art and commerce … the interests of art, artists, and business can be best served if more commerce enters into the world of art, not less."

I remain a skeptic. The full report is here.