TIMnovate

 Innovation/Global Risk

 Somalia: A Success Story We Never Read or See

By Shlomo  Maital  

Ahmed Silanyo, Somaliland President

  There is a strong and growing media bias toward reporting disaster /pain/famine/catastrophe and away from ‘good news’.  Once the Christian Science Monitor tried to report mainly good news, and today all that remains is a moribund web site. 

   Perhaps that is why the successes in Somalia (Somalia???) go largely unreported. Did you know that “Somalis enjoy one of the cheapest and most modern mobile phone networks in Africa” (Alex de Waal, Global NYT Feb. 22), because it has a self-regulated booming private sector.  Sure, the central Transitional Govt. is corrupt.  But, well, where isn’t it?  And besides, people just ignore it.  It exists only in a part of the capital city.

    The most successful part of Somalia is in the north, “far from the international community’s gaze”.  There, the Republic of Somaliland exists. This is a breakaway part of Somalia, not officially recognized by other nations, but a well-functioning democratic state with a wise leader.  Like Slovenia, which broke away from Yugoslavia before the ethnic strife, in 1991, Somaliland saw the chaos and decided not to join it.   There have been two regime changes there, peaceful  and democratic, one in 2003 and another in 2010.   Somaliland has its own, stable currency, the Somaliland shilling.  Its area is huge – larger than England.   Its population is only 3.5 million and many Somaliland residents make their living by herding livestock, although tourism is also booming. 

    And the West?  It sees Somalia only as a basket-case and home for terrorism. Western governments focus on piracy and the Shabab terrorists, even though they have now retreated from Mogadishu, which is relatively quiet and stable.  And the media too follow knee-jerk journalism, reporting mainly on the preconceived notion of Somalia synonymous with terror.    

   Somalia represents the triumph of human resilience.  Where democracy and central governments became corrupt and create failed states, people bounce back, fight to earn a living and build systems that replace those of failed governments.  Once again, Western governments see Somalia through distorted lenses, fail to do their homework, and focus only on aspects that affect their well-fed behinds, the terrorists.   And the media play into this. 

   Tomorrow British PM David Cameron will call an international  conference on Somalia. The focus?  Drones, ships, anti-piracy, anti-terror…and yes, money for the corrupt failed Transitional Government in Mogadishu.  “It won’t work,” says de Waal.

•  Alex de Waal. “Getting Somalia right this time”  Global NYT Feb. 22.

 Innovation/Global Risk

 Nature Innovates, Man Imitates: 

Car Industry: Germany Takes the High Road..and Wins!

By Shlomo  Maital

In the Scottish song, Loch Lomond, the singer sings

 Oh! ye’ll take the high road and

I’ll take the low road,

And I’ll be in Scotland afore ye;

    In business and economics, there is also a high road and a low road. The high road is the one where you pay high wages and create high productivity to compensate for it. The low road is where you pay low wages and accept low productivity.  Unlike the song, in the car industry the high road wins.  (In the song, the ‘low road’ is the less comfortable, but more direct, one). 

  In Israel, after the Six Day War, hundreds of thousands of Palestinian workers became available for Israeli kibbutzim (collective farms).  The kibbutz principle was never to use hired labor, but only kibbutz members. Some were tempted, broke their principles, and hired low-wage Palestinians to work in their fields and factories. Some stuck to their guns, and modernized, using technology to compensate for high wages.  Guess which kibbutzim were more successful?  The high road ones.  They were more profitable, more viable, and failed less.   And the same principle holds for cars.

    Today, according to articles in Forbes and in remappingdebate.com, by Kevin C. Brown, Germany made 5.5 million cars in 2010, while America made half that, or 2.7 million cars, even though Germany’s population is one-third that of America’s. In other words, Germany made ten times more cars per capita than America.  Yet, here’s the catch, the average auto worker’s wage in Germany is $67 an hour; while in America, experienced workers earn half that, and workers in new non-union plants in the South earn $15.   How then can Germany compete with the U.S., when its wages are in some cases four times higher?

    Answer: The high road.  German auto workers come out of top vocational high schools and are highly skilled. They are given the latest in technology, in their assembly plants. They belong to one of the world’s toughest unions, IG Metall, but rarely strike. Their workers’ councils work with management to improve productivity and keep the plant efficient. I once visited a BMW plant near Munich– it was a marvel of efficiency and the cars made there were top quality. America has no such vocational education. And it believes that unions are the problem, not the solution. 

    It is not China’s low wages that drives China’s manufacturing excellence. It is, as it always is, the ratio between productivity and wages.  And productivity is relatively high.  It is best to fight low wage nations with high productivity, not with low wages. America doesn’t understand this, never has. Germany does.  Why don’t American car companies benchmark Germany?  Yes, German firms DO make cars in America, DO pay low wages there (in the South), and do battle unions fiercely. They adapt and adopt America’s low road. But they retain Germany’s “high road”, and BMW, Audi, VW and other firms are highly profitable. And their German plants are extremely profitable.  They take the high road – produce high quality products, charge premium prices, pay high wages and demand equally high productivity. 

     In global markets, if productivity in country A is half that in country B, then wages too will be half.  To compete, you can either slash wages, as America does, or boost productivity.  Which do you think is best for ordinary people who work for a living – the high road (high productivity  and high wages) or the low road (low productivity and low wages)? 

     Why then has America chosen the low road?  And why do Republicans extol its benefits?  Not only is the low road worse for workers, it is worse for owners of capital. Proof?  Look at the profits BMW and VW are earning, compared to the near-bankruptcy of GM, Ford and Chrysler.   Do those who extol the low road ever open their eyes and look around the world? If they did, they would see a very different reality from the one they believe in.

 Innovation/Global Risk

 Nature Innovates, Man Imitates: 

Joanne Aizenberg’s Lab Shows the Way

By Shlomo  Maital

 Nature’s Burrs on a Dog Inspired Velcro

The February issue of Scientific American has a feature on Harvard Univ. Professor Joanne Aizenberg, who founded the Aizenberg Biomineralization and Biomimetics Lab there.   Aizenberg emigrated to America from Russia, via Israel. She got her Ph.D. from Israel’s Weizman Institute.  

  Biomimetics is defined as “the study of the structure and function of biological systems as models for the design and engineering of materials and machines.”  In other words:  Through evolution, Nature has had many millions of years to perfect its creatures, its systems and its materials.  Why not learn from Nature, study it carefully, and then apply what we learn to our own innovation, to solve human problems, rather than try to re-invent the wheel? 

   Aizenberg says,  “In the course of evolution, Nature has developed strategies that endow biological processes with exquisite selectivity and specificity, and produce superior materials and structures.  Learning from and mastering Nature’s concepts not only satisfies humankind’s insatiable curiosity for understanding the world around us, but also promises to drive a paradigm shift in modern materials science and technology.”

    An example of biomimetics?

•  Swiss electrical engineer George de Mestral noticed burrs on a dog’s coat, in 1948.  Thousands of people before him noticed the same thing, and struggled to remove them.  de Mestral asked, why not make use of Nature’s brilliance, in attaching plants’ seed pods to animals in order to not to overcrowd the mother plants’ immediate soil?  The result:  Velcro! 
•  The pitcher plant lures insects with sticky pollen, then its slippery sides on its ‘pitcher’ cause the insect to slip down into the pool of water collecting at the bottom of the ‘pitcher’, where enzymes break down the insect and use it for nourishing the plant.    Aizenberg has carefully studied what makes the sides of the ‘pitcher’ so slippery, and is using it to design slippery man-made materials.  A Harvard press release notes:  “After a rain, the cupped leaf of a pitcher plant becomes a virtually frictionless surface. Sweet-smelling and elegant, the carnivore attracts ants, spiders, and even little frogs. One by one, they slide to their doom.  Adopting the plant’s slick strategy, a group of applied scientists at Harvard have created a material that repels just about any type of liquid, including blood and oil, and does so even under harsh conditions like high pressure and freezing temperatures.”   The bio-inspired liquid repellence technology, described in the September 22 issue of Nature, should find applications in biomedical fluid handling, fuel transport, and anti-fouling and anti-icing technologies. It could even lead to self-cleaning windows and improved optical devices.
• The lotus plant is well known to repel water.   In Aizenberg’s lab: “Inspired by this idea, we have developed a synthetic liquid-repellent surface—which we name Slippery Liquid-Infused Porous Surface (SLIPS)—that consists of a film of lubricating liquid locked in place by a micro/nanoporous substrate.   …this can be used to repel immiscible liquids of virtually any surface tension.”  In other words: a truly waterproof raincoat. 

  Innovator:  Do your homework. Study how Nature solves its problems.  See if you can learn from it.  Remember, human innovators are impatient; they have at most a year or two to develop an innovation, without ever knowing if it really works or is marketable.  Nature has millions of years, and tries infinitely numerous experiments before one of them actually works, in giving species an edge to reproduce.  

 Innovation/Global Risk

 EU Debt Crisis: Germany Is Next?

By Shlomo  Maital

Germany and its Chancellor, Angela Merkel, have led the charge in imposing fiscal austerity on Greece (with draconic measures such as slashing the minimum wage by 20%).  Germany will sow what it reaps.  The drip-by-drip Chinese water torture imposed on the Greek people will end when Greece defaults, as it must.  Meanwhile, Germany’s economy is now weakening. And a German expert has admitted that Germany originally supported creating the euro to stop its neighbor Italy from devaluing its lira and competing with VW.

     The German self-interest that created the euro is still very strong.  Only it is now self-defeating.  If you look at the ratio of debt to GDP (see below),  you see that at 82%, Germany is in the top 9 in Europe, roughly equal to Hungary which is in deep fiscal trouble.  All countries with debt ratios over 80% need strong economic growth to enable their fiscs to pay their debts. No European country will achieve such growth, unless the EU works together to stimulate the entire EU economy.  Narrow self-interest, like that practiced by Germany, is failing miserably.   The strong (and justified) anti-German sentiment in Greece will in the end doom the Euro bloc perhaps even more than Greece’s burdensome debts themselves. 

   And incidentally:  Has anyone checked to see how tiny Estonia has kept nearly debt-free, with debt to GDP of only 6 %?  What has Estonia done that other countries (including the arrogant Germany)  can mimic? 

Ratio of Debt to GDP: from highest to lowest

Greece 150% ,Italy 120%, Portugal 110%, Ireland 105%, Belgium 99%, France 85%, Britain 85%, Hungary 83% Germany 82%, Austria 72%, Malta 70%, Cyprus 68%, Spain 66%, Netherlands 65%, Poland 56%, Denmark 49%, Finland 47%, Latvia 45%, Slovenia 44%, Slovakia 42%, Czech Republic 40%, Sweden 37%, Romania 33%, Bulgaria 15%, Estonia 6%

 Innovation/Global Risk

 Innovator: Can You Make It Fun? 

By Shlomo  Maital

  VW Musical Stairs

In the Roman Senate, Cato the Elder ended every speech by insisting, Carthage must be destroyed! (“Carthago delenda est!”).  He got his way in the end. In the Punic Wars, it was obliterated.

  My personal equivalent is “innovate in dark corners”.  Be creative in places where creativity is lacking or absent.  Today’s Global New York Times * brings a great stimulating piece by behavioral economist Richard Thaler – make it fun!  He shows us how to alter behavior, in the right direction, simply by creating…fun.

   For instance:  the Swedish division of VW gets its works to use the stairs, rather than the escalator, by making the steps into a keyboard, with each one playing a note. You make music by going up the stairs. Result: stair use rose by two-thirds. (See the viral YouTube video:  http://www.facebook.com/thefuntheory, which so far has over 17 million viewers).  Or – Taipei City created a lottery for dog owners who deposit their doggies’ waste in a bin; they become eligible to win gold, turning (literally) crap into gold. 

    Thaler says, “if governments want to encourage good citizenship, they should try making the desired behavior more fun”.  

   So innovator:  Can you make doing dishes fun?  Cleaning the house? Taking out the garbage?  Going to work? Changing the baby’s diapers?   Going on a diet?   Working out?  Studying for a test?  Doing your annual tax return?  This too is creativity.   Try it first on yourself. Then spread the word.  

* Making good citizenship fun, by Richard Thaler.  Global New York Times, Op-Ed,  Feb 15/2012  

 Innovation/Global Risk

Lovenomics, or, Not Fair! Men Are Happier, Women are Unhappier! Why?

By Shlomo  Maital

 Betsey, Justin and Matilda

As an economist, I am daily appalled at the bankruptcy of macro-economics (how to manage a national economy) and its inability to provide any creative solutions for Greece, Portugal, Ireland, UK or other countries in deep trouble.  At the same time, I am daily amazed at the creativity of micro-economics in shedding new light on individual behavior, with the help of anthropology, sociology and psychology. And I am incredulous about the severe schizophrenia of the discipline of economics, how one half can be so awful and the other, so interesting and relevant. 

   Here is an example.  Today’s Global New York Times reports on Betsey Stevenson and Justin Wolfers, U. of Pennsylvania economists, who are (according to Motoko Rich) the “go-to pair on the economics of marriage, divorce and child-rearing”, dubbed “lovenomics”,  while they themselves are a couple, with a 2 ½ year old,  named Matilda.  Their research sheds light on the economics of daily living.

    For example, their joint NBER paper (May 2009), “The paradox of declining female happiness” addresses the prickly question,  if women have closed the gap with men in education, income, wealth and other areas, in the past few decades,  why aren’t they happier?  True, in the past women in the UK and US reported being happier than men,    but the trend in white women’s happiness in the US is negative.  In fact, note the authors, today women throughout the industrialized world now report happiness below that of men!  

     Any ideas, readers, why this is so?   Is it because women’s increased opportunities have simply led to an increase in the amount of work women do?  Women are increasingly multi-taskers, while men single-task?  “Women may simply find the complexity and increased pressure in their modern livesto have come at the cost of happiness”, they conclude. 

   The couple have shown that people in rich countries are happier than those in poor countries (wow, surprise!), and that the divorce rate has been falling in America for decades (!), partly because fewer people are marrying in the first place, or because expectations about marriage have become more realistic.

   Their child Matilda has helped shape their research worldview.  Betsey Stevenson says she was put off by the fact that people with kids were less happy.  But they both take real delight in their daughter, and Wolfers says, about the joys of fatherhood, “it’s visceral, it’s real, it’s hormonal, and it’s not in our economic models.” 

    And Matilda pipes up, at dinner,  “Mama!  Stop talking about work.” 

   By the way: They are not formally married. American income tax law punishes married couples, who pay more taxes than if they were living together and unmarried.  That’s economics, too!    

 Innovation/Global Risk

Living On 100 Rupees a Day: Lessons Learned

By Shlomo  Maital  

My friend Pramod alerted me to an article on the Indian website The Hindu, about two young men from wealthy Indian families who decided to see what it is like to live,   as poor Indians (on 26 rupees daily, or fifty cents) and as average Indians, on 100 rupees ($2) a day, (75 per cent of all Indians live on less).

        Tushar, the son of a police officer in Haryana, studied at the University of Pennsylvania and worked for three years as an investment banker in the US and Singapore. The other, Matt, migrated as a teenager to the States with his parents, and studied in MIT. Both decided at different points to return to India,  came to share a flat, and became close friends.

      Here is what they learned, on 100 rupees daily:  They found soy nuggets a wonder food — affordable and high on proteins, and worked on many recipes. Parle G biscuits again were cheap: 25 paise for 27 calories! They innovated a dessert of fried banana on biscuits. It was their treat each day.  Living on Rs.100 made the circle of their life much smaller. They found that they could not afford to travel by bus more than five km in a day. If they needed to go further, they could only walk. They could afford electricity only five or six hours a day, therefore sparingly used lights and fans. They needed also to charge their mobiles and computers. One Lifebuoy soap cut into two. They passed by shops, gazing at things they could not buy. They could not afford the movies, and hoped they would not fall ill.

 Next,  they upped the stakes, and decided to live at the poverty line, 26 rupees daily.

    For this, they decided to go to Matt’s ancestral village Karucachal in Kerala. They ate parboiled rice, a tuber and banana and drank black tea: a balanced diet was impossible on the Rs. 18 a day which their briefly adopted ‘poverty’ permitted. They found themselves thinking of food the whole day. They walked long distances, and saved money even on soap to wash their clothes. They could not afford communication, by mobile and internet. It would have been a disaster if they fell ill. For the two 26-year-olds, the experience of ‘official poverty’ was harrowing.

   After their experience, they wrote to their friends:  “Wish we could tell you that we are happy to have our ‘normal’ lives back. Wish we could say that our sumptuous celebratory feast two nights ago was as satisfying as we had been hoping for throughout our experiment. It probably was one of the best meals we’ve ever had, packed with massive amounts of love from our hosts. However, each bite was a sad reminder of the harsh reality that there are 400 million people in our country for whom such a meal will remain a dream for quite some time.  That we can move on to our comfortable life, but they remain in the battlefield of survival — a life of tough choices and tall constraints. A life where freedom means little and hunger is plenty… “

What did they learn from this?

   “It disturbs us to spend money on most of the things that we now consider excesses. Do we really need that hair product or that branded cologne? Is dining out at expensive restaurants necessary for a happy weekend? At a larger level, do we deserve all the riches we have around us? Is it just plain luck that we were born into circumstances that allowed us to build a life of comfort? What makes the other half any less deserving of many of these material possessions, (which many of us consider essential) or, more importantly, tools for self-development (education) or self-preservation (healthcare)?”

    And finally, they learned:   “That hunger can make you angry. That a food law which guarantees adequate nutrition to all is essential. That poverty does not allow you to realise even modest dreams. And above all — in Matt’s words — that empathy is essential for democracy.”      

 Innovation/Global Risk

The “Real McCoy” – America’s Earliest Entrepreneur

By Shlomo  Maital   

 Joseph McCoy

  An Illinois entrepreneur named Joseph McCoy may well be America’s first true entrepreneur, and may have given birth to the expression “the real McCoy”, which means, the true authentic thing.  Born in 1837, McCoy had a business vision. At the time, the railroad had reached Kansas.  Millions of cattle were raised on the lush pastures of Texas.  But how can you get the beef to the meat-starved East from the Wild West, and from Texas to Kansas, where the steers can be put on cattle cars?

    Not long after the Civil War ended, McCoy found a tiny town called Abilene, Kansas, on the rail line, with a population of 35.  He decided that it would become his ‘rail head’.  He bought land, and invested heavily to build a stockyard.  But it was ‘field of dreams’.  He had to convince Texas cattlemen to drive their cattle for some 150 miles, at least, to Abilene from Texas.  And there was no established trail to do so.   So McCoy explored and found the Chisholm Trail, that had been used in the Civil War to bring supplies to the Confederate (rebel) forces.   And then?  According to Wikipedia: 

     McCoy advertised extensively throughout Texas to encourage cattle owners to drive their cattle to market in Abilene. By 1870 thousands of Texas longhorn cattle were being driven over the Chisholm Trail to the shipping center at Abilene. By 1871 as many as 5,000 cowboys were being paid off during a single day, and Abilene became known as a rough town in the Old West.  Due to their long legs and hard hoofs, Longhorns were ideal trail cattle, even gaining weight on their way to market.  One story says that McCoy bragged before leaving Chicago that he would bring 200,000 head in 10 years and actually brought two million head in 4 years, leading to the phrase “It’s the Real McCoy”.

McCoy ran into trouble because he lacked strategic agility.  He had become mayor of Abilene, and as such encouraged bars, saloons, and brothels, to cater to the cowboys who worked hard during the cattle drive, were paid off in Abilene and had pockets full of money to spend.  But the farmers in the area objected. McCoy took the brothels and moved them to the other side of the tracks, creating a ‘red light district’.  But that was not enough.  The Abilene citizens forced him into exile.  He launched new railheads, but the peak of his success had come and gone.   He wrote a   book about his life, before he died,  Historic Sketches of the Cattle Trade of the West and Southwest, but it was published only in 1974, 50 years after his death.

 Innovation/Global Risk

Wouldn’t It Be Great If….: WIBGI as an Innovation Tool

By Shlomo  Maital     

 Nathan Myhrvold

RCA pioneer David Sarnoff spurred innovation among his talented engineers by building wish lists.  “Would it be great if…  we could produce crisp color television?” he asked, in the days of black-and-white TV.  And they did.  “Wouldn’t it be great if we could amplify light, like we amplify sound?”   Result:  microwave amplification by serial emission of radiation (maser), which ultimately became laser, light amplification by serial emission of radiation. 

   Now, Nathan Myhrvold, who headed R&D at Microsoft, has launched a venture called Intellectual Ventures, which invests in patents.  His company holds invention sessions with experts.  In one such session, Myhrvold reports (in HBR, March 2010), “we brought highly respected heart, chest, bone, and brain surgeons together with many of our staff inventors. We asked the doctors to draft ‘wouldn’t it be great if…’ or WIBGI technology wish lists, which generated exceptionally productive discussions. We came up with new designs for surgical tools that are self-sterilizing or that can snake their way around delicate areas of the brain rather than passing through them….”

     This sounds to me like a method.  If you have expertise in some technology or other, find someone ‘in the field’ who provides a service of some kind.  Ask them for WIBGI…wouldn’t it be great if?   See you if can find a way to make the future tense into present—isn’t it great that we can…?    Or, make your own WIBGI list.  I think a great many breakthroughs emerged from individual WIBGI exercises.

 Innovation/Global Risk

Yes, Christina, You DO Have to MAKE Stuff!

By Shlomo  Maital   

    Writing in the Global New York Times, Berkeley economist Christina Romer (until recently,  head of President Obama’s Council of Economic Advisors), claims that concern about America losing its manufacturing industries is wrong.  She says consumers value haircuts as much as hair dryers, and that casino chips and computer chips are, well, just the same for economists.   When one of America’s top economists gets things massively wrong, the discipline of economics loses legitimacy – if any of it remains. 

    Responding to Romer, Clyde Prestowitz (Reagan’s chief trade negotiator) refutes her claims in his Foreign Policy blog. Here is the essence:

• The reason for the decline of the number of U.S. science and engineering graduates, is that “as a result of the decline of manufacturing, there are no jobs for these graduates.”  Is America prepared to abandon its world-class science? If not, it needs manufacturing.
• Every $1 of final demand in manufacturing generates $1.41 in additional (indirect) intermediate demand, for goods and services that support the manufacturing.  No other industry comes close ($1 retail generates $0.58 in indirect demand). 
• “Semiconductor industries in Japan, Korea and Taiwan have been heavily subsidized and protected and have taken a large part of the world’s production away from the U.S.”  It is legitimate and logical for the U.S. to take steps to offset this unfair tilted playing  field.  Jobs making computer chips are indeed higher-paying ones than jobs manipulating casino chips. 

   Of course, a modern advanced nation needs advanced services. But it also needs to make stuff – advanced manufacturing.  These two are not enemies. They are friends.  Why portray them otherwise?  When one of America’s most influential economists gets it so wrong, probably because her entire professional career has been spent inside an office, poring over numbers and words, what possible value can the discipline of economics bring to America, its struggling middle class and its jobless?