Innovation Blog

 Bipolar Issues: Is Self-Confidence or Humility A Better Motivator?

By Shlomo Maital

  If you are an innovator,  is it better to be supremely confident, even arrogant? Or is it better to be humble, self-effacing, modest?

   The answer is: Yes.  There appears to be a bipolar aspect to the underlying psychological attitudes that drive innovation.  This emerges from research on self-esteem, noted in David Brooks’ recent NYT column, and led by psychologist David Schmidt, of Bradley University, in Peoria, Illinois.  This research measures national self-esteem:   Confidence in our ability to think, to cope with the basic challenges of life and confidence in our right to be successful and happy.   His team measured self-esteem in a large number of countries.

   The top six are:   

 •          Serbia: 33.59

•           Chile: 33.12

•           Israel: 33.03

•           Peru: 33.01

•           Estonia: 32.63

•           United States:  32.21

 Note that among these, Israel, Estonia and the U.S. are highly innovative nations, whose entrepreneurs are endowed with great self-confidence and willingness to undertake risk.  One might assume that innovation and entrepreneurship correlates strongly and positively with self-esteem.

   However, consider also the bottom-ranked nations, with Japan the lowest of all:

•           Taiwan: 28.77

•           Czech Republic: 28.47

•           Bangladesh: 27.80

•           Hong Kong: 27.54

•           Japan: 25.50

Among these nations, Taiwan and Hong Kong are highly entrepreneurial and innovative.  But Japan is not.   Taiwan and Hong Kong appear to have entrepreneurial drive arising from ‘worst-case scenarios’ – bad things may happen, if they do you will have only yourself and your own wealth and savings to rely on.  Japan’s self-effacing culture of modesty and understatement does not seem to boost innovation.

   In general, I believe that innovation is highly dependent on national culture, but each nation that excels in innovation does so, in its own way, unique and distinctive.  This is why nations that have tried to emulate other nations’ innovation ecosystems have generally failed.  The message for nations that seek to become more innovate is:  You can do it, either through supreme self-confidence, or utter lack of self-confidence and self-esteem – but you can do it.   

   * Who’s No. 1 in Self-Esteem? Serbia Is Tops, Japan Ranks Lowest, U.S. Is No. 6 in Global Survey, by Miranda Hitti, WebMD Health News,  Sept. 27, 2005

Global Crisis/Innovation Blog

“Deleveraging”:  It’s Really Happening! But: A Long Way to Go

By Shlomo Maital

 

 

“Someday, children, all this will be yours!”

Earlier, in this blog, I noted why we should all read economist Martin Wolf, Financial Times columnist, carefully and regularly.  To that, I would like to add  New York Times business columnist Floyd Norris, who writes “Off the Chart”.  Unlike most of us journalists, Norris does his homework thoroughly.  He crunches data most of us shun.

   In his March 19-20 column, Norris documents the remarkable deleveraging (debt reduction) process now going on in America.  He does this by digging through Federal Reserve “Flow of Funds” statements going back to 1990. 

   He finds that the debt of the financial services sector, which grew by 600 per cent between 1990 ($2.6 trillion) and 2008 ($16 trillion), has fallen sharply, to about $14.2 trillion in 2010.   Household debt also soared from 1990-2008, but has fallen sharply as well, for two reasons: a) debt holders are writing off bad loans, and b) households are borrowing less and are paying off old loans.  The only institution that is still ‘leveraging’ is the federal government, whose outstanding debt is now $9.4 trillion. 

    Here are the underlying figures:  (Total outstanding debt at year end, $ trillion)

                                       1990                2010

Fed. Govt.                   2.5                   9.4

Households                3.6                  13.4

Nonfinancial bus.      3.8                  11.1     

Financial                     2.6                  14.2

State & Local Govt.    1.0                  2.5

    TOTAL:                   13.5                50 .6

  % of GDP               169 %              385 %

 Deleveraging still has a long way to go.  Total debt in America in 2010 is nearly four times GDP, compared with less than twice GDP in 1990.

  Had we tracked the Fed Flow of Funds data carefully, and observed the ballooning amounts of debt (especially in financial services),  we would have realized that systemic risk has ballooned as well, and that the system is headed for a crash. 

   For brave souls willing to try crunching the numbers (they are presented simply and clearly), the URL is:    http://www.federalreserve.gov/releases/z1/Current/z1.pdf

   The data are updated every quarter.

 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.   

Innovation Blog

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.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital

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