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Global Crisis/Innovation Blog
China’s Social Engineering 2011-15: The Mind Boggles
By Shlomo Maital
Affordable Housing in China
China’s 11th National People’s Congress has just ended, after approving a new Five Year Plan (2011-15). According to Alan Wheatley, a Reuters correspondent, * the Plan will build 10 million affordable homes this year, 36 million total over the entire period. This, Wheatley notes, is enough to house the whole population of France, Australia and Canada: Over 100 million people!
“It will spark the greatest consumption story in modern history”, says Stephen Roach, chair, Morgan Stanley Asia.
What is China up to?
China realizes that its three-decade-old growth model, built on making stuff and selling it mainly to America (about a $25 b. export surplus every month), is running out of steam. The solution is easy to define, but very hard to implement: Shift its growth engine away from exports and related capital investment, toward domestic consumption.
But how do you get the high-saving Chinese culture to change its ways and spend like Americans rather than save like Chinese?
Read Pearl buck’s wonderful 1931 best-selling novel The Good Earth, about pre-1949 Chinese peasants and their struggle to save to acquire land. You will understand how deeply rooted is the Chinese need to own a home and to save in order to buy one (rather than borrow to buy one, American style, and then struggle to pay off the debt).
China’s government will fight the housing and real estate bubble and at the same time re-engineer Chinese society and culture by providing affordable housing – apartments that middle-class workers can afford, so that they can divert more of their disposable income toward spending.
Will it work? Much depends on China’s success. If we believe the world needs rebalancing, with Asia doing more spending and the West doing more saving, China holds the key. Don’t count on America for any social engineering – the message “lower your standard of living, stop spending, start saving” is the last thing U.S. politicians will campaign on. Many people mock China’s Five Year Plans as outmoded socialist planning. In this case, by 2015, China may have the last laugh.
* Alan Wheatley. “China’s plan for creating consumers”, Global New York Times, March 15, 2011, p. 22
Innovation Blog
The Greatest Innovation Of All: Your Life — We Can All Be Bill Gates
By Shlomo Maital
Bill & Melinda Gates (Foundation)
In an amusing Op-Ed piece this morning (March 15) in NYT, Zick Rubin writes about how a psychology website wikia.com reported his death (“Zick Rubin, 1944-1997”) – prematurely, recalling Mark Twain’s famous comment to a journalist “reports of my death are greatly exaggerated” (usually misstated as “..reports of my death are premature”). Rubin had to struggle to correct this. But what is most interesting is that Rubin writes of how he ended a great career as Harvard psychology professor and in midlife became a media lawyer! He was literally reborn.
The greatest innovation many of us will face is within our own lives. We will need to reinvent ourselves in midlife, at least once. But how? According to Strenger and Ruttenberg *: Avoid two extremes. Myth One: “the myth that midlife marks the onset of decline”. It doesn’t. Your cumulative wisdom will far outweigh your physical decline. Myth Two: “the myth of magical transformation through vision and willpower”. You probably cannot become a concert pianist, even if you do practice 20,000 hours.
Use the ‘adjacent possible’. What do I know now that could be useful in a new but related activity (adjacent to what I do now, but far enough to be interesting and challenging)? And what am I passionate about, to drive the energy I need for this transformation?
I know a great many successful managers and entrepreneurs who find new meaning in their second lives, through social activities – using their skills and wisdom to tackle social ills and problems, after building global companies and shaping world-changing innovations. Social entrepreneurship is ‘adjacent’, it is ‘possible’, but also new and challenging enough to energize. Bill Gates is an example. He is using his wealth and his Foundation, along with organizational and innovative skills, to tackle such problems as malaria, child immunization and developing a TB vaccine.
* Carlo Strenger & Arie Ruttenberg, “The Existential Necessity of Midlife Change”, Harvard Business Review, Feb. 2008
Innovation Blog
The Bigger the Bonus (Reward), The Lower the Performance:
Why Innovators Can “Choke” When Stakes are High
By Shlomo Maital
High bonuses cause lower % to attain
“very good” performance
Dan Ariely’s wonderful new sequel to Predictably Irrational is called The Upside of Rationality: The Unexpected Benefits of Defying Logic at Work and at Home.
As the title suggests, Ariely describes a variety of ingenious experiments he and his colleagues and students ran, to explore how we can actually gain from non-rational behavior.
In one of his experiments, conducted in India (because to do so in America would have been prohibitively expensive), he gave groups of villagers challenging tasks (Packing Quarters, Recall Last Three Numbers, Labyrinth, Dart Ball, Roll-Up), offering them low, medium and high bonuses for performance. In “Recall”, for instance, participants were given random numbers, stopped randomly and asked to recall the last three. Participants were given bonuses based on performance. The high bonus amounted to 2,400 rupees, a sum equal to about five months of the villagers’ regular pay. Medium bonuses were 240 rupees, and small ones, 24 rupees.
The graph shows the per cent of participants who reached “very good” performance levels, for each type of bonus.
It is interesting that performance dropped significantly for those who got the “high bonus”. Why? “The experience was so stressful to those in the very-large-bonus condition that they choked under the pressure”, note the researchers.
Bankers insist they have to have super bonuses in order to perform well. Ariely does not agree. All the bonuses seem to do is create risky short-term-profit seeking behavior, inimical to the bank and to society.
Economists are rational, Ariely notes wryly (and ironically); they know which incentives help improve performance and which do not. So do boards of directors and shareholders. Do they really? Are these super-bonuses truly rational? Or are they irrational? When you watch your favorite sport and team, do they play better when the stakes are super-high? Or do they get tense and play worse? And do wise coaches try to relax their players, rather than stress them out, in the dressing room? Innovators would do well to avoid over-stressing themselves and their colleagues, and avoid stressing how high the stakes are – focus on the task, on the process, and keep people laughing. You don’t want to be on the negative slope in Ariely’s curve.
Innovation Blog
Innovator: Think With Your Gut!
Why Sherlock Holmes Failed to Solve the Greatest Mystery of All
By Shlomo Maital
Sherlock Holmes: all head, no heart!
Here is how Arthur Conan Doyle, creator of Sherlock Holmes, describes his hero in “A scandal in Bohemia”:
“All emotions…were abhorrent to his cold, precise but admirably balanced mind. He was, I take it, the most perfect reasoning and observing machine that the world has seen…he never spoke of softer passions…admirable things for the observer, but for the trained reason to admit such intrusions into his own delicate and finely adjusted temperament was to introduce a distracting factor which might throw a doubt upon all his mental results…grit in a sensitive instrument”.
I’m pretty sure most of us agree, believing that emotions cloud decision-making. Good thinking, we believe, is left brain (logic), messed up by right brain feelings and passion.
Fortunately, New York Times columnist David Brooks has written a brilliant new book The Social Animal: The Hidden Sources of Love, Character and Achievement (Random House, 2010), which cleverly reviews neuro-science research through two fictional characters’ lives, and which shows that emotion, and our inner voices, actually strengthen reasoning, rather than weaken it. Much of this research is based on FMRI (functional magnetic resonance imaging), which maps the areas of the brain that control reason and emotion.
Here is a great passage from the book: “The unconscious mind is like a million little scouts [that] careen across the landscape, sending back a constant flow of signals…they maintain no distance from the environment around them but are immersed in it. These scouts coat things with emotional significance. …they guide us like a spiritual GPS, as we chart our courses.”
I believe Brooks’ book powerfully shows that great innovators must harness, and carefully listen to, their intuition and their deepest passion. It is why I always counsel my students to look deep into themselves and find what they truly care about – and why I believe there is no such thing as ‘left’ brain and ‘right’ brain, but simply brain, a whole brain, linking emotion tightly with reasoning.
Sherlock – get with it, man! You may be the world’s greatest detective. But if Conan Doyle had let you use your gut, as well as your deductive powers, well, maybe you could have done more than just solve murders. Maybe you could have figured out what the true source of creativity is!
Here, by the way, is David Brooks’ tip, a practical way to improve your decision-making. Suppose you are torn between two choices. Say, Cherry Garcia and Chunky Monkey ice cream. Can’t decide? So, flip a coin. Heads, Cherry, tails, Monkey. Now, after you flip the coin, ask yourself, how do I feel about this? If you feel sorry, pick what you wanted in the first place. If you feel happy, well, the coin toss validated your choice.
Innovation Blog
Lobsters Are Not Stupid, But Maybe We Humans Are!
By Shlomo Maital
A Lobster Trap
The widespread practice of boiling lobsters alive has always seemed to me barbaric. Who cares? People say, lobsters don’t have consciousness or intelligence anyway.
Now comes evidence that lobsters are smart, intelligent, clever, and even cute. They deserve far better than boiling alive.
Lobsters are caught in lobster traps, which are mesh boxes with ‘one way’ entrances and bait. Once in the trap, lobsters have their final meal before execution, are too dumb to know how to escape, and are pulled up into boats by lobster fishermen.
Or, so we thought for a century.
Researchers and students at University of New Hampshire decided to test this well-worn assumption noted above and lower video cameras into lobster traps, to see precisely what happens inside one. And here is their surprising finding, based on 24-28 continuous hours of time-lapse shooting:
- A large number of lobsters approach and enter a trap, but only 1-3 are caught, because THE VAST MAJORITY ESCAPE! Only 10 per cent of lobsters that approach a trap actually enter, despite the tempting bait inside, and of those, only 6 per cent are caught. Over three-fourths of the lobsters who escape do so through the entrance.
It is interesting that the huge (and so far, misunderstood) inefficiency of lobster traps have inadvertently kept the lobster population from being overfished. If we could, we would have trapped every possible big lobster, thus endangering them.
So who is the dumb one here, lobsters? Or us humans? And who, if any, deserves to be boiled alive?
Innovators: Any time you encounter something EVERYbody believes implicitly, it’s true because it’s always been true, we all know it’s true, question it! Check it out! You may get a lobster-like surprise.
Source: http://www.lobsters.unh.edu/lobster_tv/lobster_tv.html
Global Crisis / Innovation Blog
S**T HAPPENS! Resilience: We Have True Grit, in Spades!
By Shlomo Maital
Dung bettle: knows how to leverage S–T. So do we all.
Media have stressed the suffering, hardship and pain people suffered, and continue to suffer, during the global economic crisis 2007 – 9. They fail to stress the upside: People have showed tremendous resilience in bouncing back from great hardship, and always have, throughout history. People have “true grit”, just like the drunken, hard-nosed U.S. Marshal and a Texas Ranger in the 1969 John Wayne movie (and 2010 Coen Bros. remake) who help a stubborn young woman track down her father’s murderer in Indian territory. Even those born with silver spoons in their mouths show resilience, more often than not.
I asked a large sample of Israeli innovators what is the key driver of Israeli entrepreneurship. “Resilience” was #1 ! Israel has a culture of resilience, living in a bad neighborhood with frequent unexpected crises, wars, terrorism and hardship. People have learned to bounce back.
Research by Columbia U. Teachers College scholar George Bonanno has documented how people adapt surprisingly well to whatever the world presents – grief, loss, terror, war, disease. In his experiments, he and colleagues found that the Freudian notion that loss of a friend or relative left indelible scars and required therapy was untrue. Bonanno has a clipping posted on his inner door, from a German newspaper item about his work, headlined: S**T HAPPENS! It does indeed. And we clean it up, mostly.
In my trips to India, I found the people of India spectacularly resilient, because they get to practice resilience so often. Even high-income financial workers in Mumbai’s financial district are resilient – a flood there left waist-deep water, suspended transportation – so many of them simply walked home for miles through the waist-deep flood.
As Gary Stix observes in his March 2011 Scientific American article: “The new science of resilience shows that one size does not fit all in coming to terms with what befalls us. Sometimes the worst does happen, but our innate capacity to bounce back means that most of the time things turn out all right.” And by the way, belief in this sentence can often become a self-fulfilling prophecy. Hope is the world’s most powerful remedy, not penicillin.
Global Crisis / Innovation Blog
Hedgehogs vs. Foxes: Why Economic Experts Flunk Forecasting 101
By Shlomo Maital
The Fox and the Hedgehog: Which are You?
The famed philosopher Isaiah Berlin once wrote an essay, “The Hedgehog and the Fox”, which quoted ancient Greek poet Archilochus: (“the fox knows many little things, but the hedgehog knows one big thing”).
Turns out this explains why economists’ forecasts (and those of other experts) are so dreadful!
Writing in Scientific American (March 2011), Michael Shermer cites a study by U. Cal (Berkeley) Professor Philip Tetlock, who examined 284 experts and 82,361 predictions about the future. “They did little better than a dart-throwing chimpanzee”, notes Tetlock.
But why?
Cognitive style. Foxes, who know a little about a great many things, did far better in prediction than hedgehogs, who know a lot about one area of expertise.
Academic training, and doctoral research, makes scholars highly specialized and narrow – pure hedgehogs. Economists know about free markets. They tend not to know about sociology, politics, psychology, history and other disciplines. Result: Narrow wrong forecasts that miss the complexity of economic systems.
Want to become a great forecaster? Become a fox. Develop your curiosity about everything. And, at the same time, listen to forecasts of experts who you know are hedgehogs with wide interests.
Diseases in a Dish: George Bush, Hero of Stem Cell Breakthrough, or
How Reframing Spurs Creativity
By Shlomo Maital
induced pluripotent stem cells
In August 2001 President George Bush, then in office for about six months, announced that the National Institutes of Health would no longer fund creation of additional embryonic stem cell lines. This effectively blocked research, because existing lines were insufficient.
This was perhaps one of ex-President Bush’s greatest decisions. Sometimes, you create breakthroughs by making life harder (rather than easier) for creative people.
A fascinating article in Scientific American * recounts how James Thompson, a dozen years ago, created stem cells in a dish at Univ. of Wisconsin. After Bush’s decree, and despite Obama’s relaxation of it, and because of a Federal judge’s reaffirmation banning NIH funding of embryonic stem cell research in 2010, researchers redoubled efforts to create stem cells rather than harvest them from embryos.
In 2002, three Columbia U. scholars published a paper showing how to transform embryonic stem cells into motor neurons (nerve cells). Lee Rubin, a biotech veteran who then headed Harvard’s stem cell research institute, then had a great idea, a transformative idea. Others want to use stem cells to cure disease. Hey, why not use them to CREATE disease? If you can create an illness, maybe you can find faster ways to cure it. Why not CREATE stem cells, then use them to produce diseased cells, then see how to treat them? This REFRAMING approach originally led to the multiple sclerosis (MS) drug Copaxone, when Weizman Institute researcher Ruth Arnon sought ways to induce MS and came up with a co-polymer molecule that was successful in treating it.
Result? Columbia U. researcher Wendy Chung took skin cell samples from two Croatian sisters suffering from ALS (amyotrophic lateral sclerosis, or Lou Gehrig’s disease). Those cells were transformed into stem cells, or what was called induced pluripotent stem cells (IPSC), using a technique developed in japan. Those stem cells were persuaded to become nerve cells, and as such, they had the genetic predisposition to ALS. Now, researchers are using the test-tube ALS nerve cells to see whether existing FDA-approved drugs can cure ALS. Trays of dishes with the ALS cells are used to test thousands of drugs for anti-ALS potency. This is far far faster, than other methods for developing drugs that require three-phase clinical trials that take forever.
Rubin, Chung, Thompson may get Nobel Prizes. I hope they acknowledge George Bush’s assistance. By making stem cell research harder, he probably speeded it up by light years. Versatile stem cells made from adult cells and with induced diseases may now serve as disease simulators, in Petri dishes, for drug trials. This comes at the perfect moment, when Big Pharma is abandoning earlier attempts to use the ‘target molecule’ approach (find good proteins that shut down bad proteins turned on by genes, that cause illness).
When you seek a solution to a problem, try reframing the question. Ask it in different ways. Turn it on its head. Reverse it. Hold it up to the light, and turn it around and view different angles. Sometimes, it is CREATIVE QUESTIONS that generate breakthroughs, rather than the answers.
* Stephen Hall, “Diseases in a dish”, Scientific American March 2011.
Innovation Blog
HAIR! Why Do Humans Lack It? How Lice Reveal the Secrets
By Shlomo Maital
A Head Louse – Real One!
The 1968 Broadway musical Hair! is about long-haired hippies. Perhaps a more appropriate title would be Skin! Humans are almost the only mammals without a thick covering of fur or hair. It turns out that this conveys a huge evolutionary advantage. But how? And when did humans lose their furry hair (we know a branch of homo sapiens evolved from chimpanzees some 6 million years ago). And since human hair does not exist in million-year-old human fossils, how can we ever know the answer? Writing in Scientific American * Mark Pagel notes:
“We humans are conspicuous among the 5,000 or so mammal species in that we are effectively naked. Just consider what your pet dog or cat (or, for that matter, a polar bear) would look like, and how it might feel, if its furry coat were shorn. Scientists have suggested three main explanations for why humans lack fur. All revolve around the idea that it may have been advantageous for our evolving lineage to have become less and less hairy during the six million years since we shared a common ancestor with our closest living relative, the chimpanzee.”
The main advantage of no hair? Skin. Humans can sweat, and their sweat glands produce a liter of sweat an hour. This helps cool the brain, which generates 20 watts of energy and heat! (Try putting a 20 watt light bulb in a closed box, and see what happens!). The human body’s skin and pores make possible a larger brain because it can be cooled. (Three degrees of extra body heat destroys the brain).
An innovative researcher at the University of Florida has used the DNA of lice to discover when humans lost their hairy covering. He discovered that by studying the DNA of human lice that live in hair, humans lost their body fur about 3 million years ago! Somehow, lice moved from gorillas to humans, then evolved and adapted to human hair. He has also discovered, by analyzing the DNA of clothes lice (human lice that live only in clothing), that humans first put on clothes about 170,000 years ago. This enabled humans to move out of Africa and migrate to Asia. This also means that ancestral humans, descended from apes, went naked for over 2 million years.
Who is the brilliant researcher who figured out how to study human evolution through studying the DNA of lice? His name is David Reed, associate curator of mammals at the Florida Museum of Natural History on the University of Florida campus. His study appears in the January print edition of Molecular Biology and Evolution.
* http://www.scientificamerican.com/article.cfm?id=latest-theory-human-body-hair
Global Crisis/Innovation Blog
Would You Buy a Used America from This Man?
Or, Is America Bankrupt?
By Shlomo Maital
Mary Meeker
In our book Global Risk/Global Opportunity, my colleague Seshadri and I argue that a country is a business, and should be evaluated on the same basis used to do due diligence prior to an acquisition. A new 468-page study by Mary Meeker, from the leading venture capital firm Kleiner Perkins, claims that as a business, well, you would not want to invest in America. *
“Our review finds serious challenges in USA Inc.’s financials,” she writes. “The ‘management team’ has created incentives to spend on healthcare, housing, and current consumption. At the margin, investing in productive capital, education, and technology – the very tools needed to compete in the global marketplace – has stagnated.” “In effect, USA Inc. is maxing out its credit card. It has fallen into a pattern of spending more than it earns and is issuing debt at nearly every turn.”
Using standard business tools for evaluating businesses, Meeker finds that America’s current net worth is minus 44 trillion dollars (three times its GDP). Negative net worth means you owe more than you own. When the amount is huge, it means you are broke.
The introduction to Meeker’s report is signed by such knowledgeable, luminary economists and business leaders as George Schultz, Paul Volcker and Michael Blumberg.
Meeker does not simply claim America is broke. She offers a solution. “Technology plus infrastructure plus education investments drove 90% of labor productivity growth for past 30 years,” she writes. America will emerge from bankruptcy when it returns to investing in those three areas that proved so productive in the past. But where will the resources come from?
A tiny item from Associated Press today notes that last month’s tax cut gave U.S. consumers the biggest jump in their incomes in nearly two years. What did the American people do with the tax cut? Did they spend it, as they did the Reagan tax cut (1981-85)? No, they mostly saved it. Consumer spending adjusted for inflation actually declined 0.1 per cent in January. The American people get it. They realize the road out of bankruptcy is paved with savings that fund investment.
But do their leaders understand? And, by the way, would you buy a used economy from Obama?
* http://www.businessinsider.com/mary-meeker-usa-inc-tech-2011-2#ixzz1FL5sQ06w
TIMnovate 
