Innovation Blog

The Moomins:  Can YOU Invent a Whole New World?

By Shlomo Maital

 

      

A wonderful new translation (into Hebrew) of Tove Jansson’s book The Moomins: The Story of the Magic Hat, brought back wonderful memories of reading The Moomins to our children and watching the superb animated TV series with them.  To this day, one of our four children identifies himself with Snufkin, a sometime-Moomin family character.  There are 9 Moomin books in all, along with a Moomin theme park in Western Finland and a Moomin Museum in Tampere, Finland, which my wife visited and loved.

     The Moomins are trolls, with rounded snouts, and they live in Moominvalley, somewhere in Finland. (Tove Jansson, their creator, was ethnic Swedish but lived in Finland, where there is a substantial Swedish-speaking group).   There is a father, mother, children, and sometimes, an unwanted visitor or an unexpected event.   

      Jansson invents a magical world for the Moomins, and sets them off on wonderful adventures.  By creating non-human creatures, she is able to describe human characteristics and family interactions incisively, perhaps more sharply than she could if her heroes were truly human.  By creating a whole new world, Jansson makes us accept her premise, that we must set aside all our assumptions and preconceptions, and frolic with her, leaping and diving into the world she has created. 

      Here is a small test to see how innovative you truly are, reader.

      Create a new world.  Start with “zoom out” – the physical place.  Describe it. Draw a map, showing where your main characters live.   Then “zoom in”.  Create your characters.  Notice how hard this is – we tend to ‘invent’ things that are familiar.  Jansson’s Moomins are just human enough to be likeable, but non-human enough to be very interesting and draw our curiosity.

       Now, after zoom in and zoom out,  lights!  Action!  Set your characters in motion. What sort of adventures will they have?  What kinds of conflict will they encounter?  Will they have their own internal conflicts?  External ones?  How fanciful will your world be?  Will it have gravity, night, day, time?  Will you manage to persuade your readers to engage in what a famous writer called “the willing suspension of disbelief” – not an easy task, especially in the age of video.    

        There are numerous brain exercises that have proven helpful with creativity. I think that ‘invent a world’ is one of them. 

         Try it.  See if you can draw your characters and their surroundings.  Don’t assume you cannot draw, like me and many others. Just do it.  Find your own style, perhaps simple or stylized.  You will be surprised.   

Innovation Blog

Goldman Sachs: Again, an End Run Around the Rules

Are the Regulators Impotent?

By Shlomo Maital

 

 

 

A report in The Economist, Jan. 6 issue, describes the following:   Facebook is not a publicly-listed company, all its shares are privately held, by (allegedly) fewer than 500 investors, so it is not required to disclose any financial information. No-one knows for sure what its revenues or profits are.  There are great competitive advantages Facebook enjoys, behind this veil of secrecy.  But there is enormous interest in Facebook shares; Growing numbers of investors want to buy them.  But Facebook CEO and founder Mark Zuckerberg do not want to do an initial public offering (IPO) of shares yet.   They want to wait until Facebook’s soaring valuation peaks, perhaps at over $100 b. Yet Zuckerberg needs money, to expand his operations. How can you square the circle, sell shares without actually selling them?

   Goldman Sachs to the rescue!  This investment bank has valued Facebook at $50 b., and has set up an investment fund,  investing $500 m. in Facebook and creating a fund that may invest another $1.5 b. Its partner in this venture is the Russian company DST.  According to The Economist, “Clients considering signing up to its proposed Facebook fund are reportedly being asked to commit at least $2m each to it and to hold on to any shares they receive until at least 2013.”

    This action clearly circumvents the intention of the regulators, that once there is wider public ownership of shares in a company, even if the shares are not publicly listed the company must begin to disclose financial information. 

    Is Facebook worth $50 b.?  No-one knows.  Certainly there is great value to having over 500 m. subscribers.  But what is Facebook’s revenue model?  Can it support as high a valuation as $50 b.?   And what are Goldman Sachs’ motives?  Are they, perhaps, interested, in setting up an inside track for underwriting Facebook’s IPO, a deal that could bring them many billions of dollars in fees?

    And again, where are the regulators?  Is Goldman Sachs and its Russian partner, along with Facebook itself, making a terrific speedy end run around the regulations,  within the law but with dubious ethics?  And have we seen this movie before, in 2005-9? 

     The Economist concludes: “ Regulators have a duty to protect investors and weigh the concerns of companies that wish to remain private. It is a delicate balancing act. But anyone who invests in a market this frothy must surely realize it is also risky. Meanwhile, Goldman and the other banks which hope to turn these vehicles into a big business should consider friending some good lawyers.”

****  postscript:  Facebook, under pressure, has announced it will disclose financial results by April 2012 (probably a runup to an IPO), and the U.S. Securities and Exchange Commission has announced it will investigate Goldman Sachs’ “end run”.

Innovation Blog

Nature as the Great(est) Innovator

By Shlomo Maital

   

 

 

HORNET and its “photovoltaic” cell

The stories I recount below confirm, I believe, that the greatest innovator remains…Nature.  Nature, and the enormous power of natural selection, have the patience to try experiments and select only those that work. And some of the results are quite incredible.  The free-market paradigm of economics is only a weak imitation of Nature’s innate innovation process.

   *  Gulf oil spill:  Enormous quantities of methane spilled into the Gulf of Mexico, after the BP Deepwater oil spill, because methane is a major component of natural gas.  Now, scientists find, most of it has disappeared. Where did it go?

      Apparently, there are microbes that feast on methane.  They are mainly dormant in the oceans, because they have no food supply. But suddenly, when the Good Fairy arrives with millions of tons of methane, they feast, reproduce, feast…and so on.  A Christian Science Monitor report reveals that  “bacteria took fewer than four months to finish off the methane, and it appears that at no time did oxygen levels in the area the team studied fall to levels dangerous to marine organisms there.”  Hey – chalk one up for Nature.

    *  Carmel Forest fire:  A disastrous fire destroyed many acres of lovely forest in Israel’s Carmel Forest.  A walk through the area reveals that after winter rains, green shoots are everywhere, as the forest struggles to renew itself.  It will take years – but it will happen.  A type of orange mold has been discovered, which feasts on charcoal, created by the forest fire.   Another one for Nature.

    *  A team of Texas A&M scientists has studied leaf-eating farmer ants, which chew up leaves, make a paste, use it to grow fungus, then eat the fungus.  They found that when the ants whose job it is to cut leaves find their mandibles have grown dull, too dull to effectively cut leaves, they simply switch jobs, and become carrier ants – ants whose job it is to transport the leaves cut by younger ‘sharper’ ants.  Remember how Prussian diplomat Bismarck, who invented the Old Age pension system, picked the age of retirement as 65? It was an age so old, then, he felt very few would live to collect their pensions. Today, nearly everyone does.  So in many nations pension funds are actuarially bankrupt.  Solution?  Follow the ant, as the Bible says. Abolish retirement.  Simply reorganize to shift careers – as the ants do.  Ever heard of an ant on pension?  Yet another for Nature.

    *  Hornet’s nest:  A study  described in ScienceDaily, done by a team of Tel Aviv U. interdisciplinary researchers, has discovered that the hornet’s striped body captures and transforms solar energy, much as plants do in photosynthesis. In the course of their research, the Tel Aviv University team also found that the yellow and brown stripes on the hornet abdomen enable a photo-voltaic effect: the brown and yellow stripes on the hornet abdomen can absorb solar radiation, and the yellow pigment transforms that into electric power.  “The team determined that the brown shell of the hornet was made from grooves that split light into diverging beams. The yellow stripe on the abdomen is made from pinhole depressions, and contains a pigment called xanthopterin. Together, the light diverging grooves, pinhole depressions and xanthopterin change light into electrical energy. The shell traps the light and the pigment does the conversion.  The researchers also found a number of energy processes unique to the insect. Like air conditioners and refrigerators, the hornet has a well-developed heat pump system in its body which keeps it cooler than the outside temperature while it forages in the sun.”   The team is now trying to mimic the hornet’s energy innovation with ‘bio-engineering’. 

Innovation Blog

Religion, Meaning and Innovation: The God Factor

By Shlomo Maital

   “Make meaning, not money,” says Guy Kawasaki, former Apple and garage.com guru and an entrepreneurial educator.  What he means is this:  Find people with unmet needs, find an innovative way to satisfy those needs, create meaning for your life and your work – and chances are, you will make money.  If you focus solely on making money, without making meaning – chances are, says Kawasaki, you will fail.  Ever heard of Lehman Brothers?

    Now comes interesting evidence that religion can play a role in innovation.  A cover article in APA Monitor by Beth Azar * reviews evidence that believing in God can strongly contribute to ‘making meaning’, by making us more caring toward others.  She cites a study from Science (vol. 327, March), by Joseph Henrich, who found that across 15 diverse societies, people who participated in a world religion were more fair toward strangers (when playing economic games) than those who were not religious. 

   In other words, belief in God, whether or not in the framework of an organized religion, can help us focus on helping others, which in turn is crucial to successful innovation.  Contrary to the often-quoted passage from Adam Smith’s Wealth of Nations (about how selfishness drives behavior),  it is this quality of empathy, sensitivity to others, that drives innovation and entrepreneurial success. 

   This principle is not always true. There are world religions that foster hatred to those who are not co-religionists.   Check it out – those religions that build on hate have zero entrepreneurship or innovative activity. 

    Azar cites studies showing that one key purpose of religion is to allow people to live in large cooperative societies – in other words, to get along well with others.  “Religion is one of the big ways that human societies have hit on as a solution to induce unrelated individuals to be nice to one other,” notes researcher Ara Norenzayan.  And a great way to be nice to others is to find innovative ways to meet their often-unspoken needs.   As our planet becomes increasingly crowded, and as we compete with increasing ferocity for scarce resources (fossil fuels, water), this aspect of religion will become increasingly important.

   It is often assumed that great innovations come from science and engineering, and that scientists and engineers tend to be agnostics or non-believers, since rational science contradicts the tenets of faith.  I think this is simply not true.  Many great scientists are deeply religious.  And even those innovators who eschew organized religion are in my view religious, because in battling stiff odds with heroic persistence to develop new ideas, they seek to help others in meaningful ways – in other words, to chance the world for the better, which is the ultimate goal of those who believe in a Divine Presence. 

  • Beth Azar, “A Reason to Believe”, APA Monitor, December 2010.

Innovation Blog

By Shlomo Maital

Innovation, Absolute Truth and The Broken Workings of Scientific Research

  

 

After 40 years of academic research, writing and publishing close to 100 papers published in refereed journals, I believe I know something about the ‘scientific method’.  Here are two things I’ve learned – a) the ‘scientific method’ is seriously flawed, and b) it is not appropriate for research on companies, management, leadership and organizations.

    A recent article by Jonah Lehrer in The New Yorker supports my (a) claim.*  Lehrer documents how even rigidly-run scientific clinical studies that ‘proved’ a drug was effective, now show that similarly rigid studies show the drug is ineffective. This is happening increasingly often. And it is hard to explain. What is very easy to explain is the ‘paradigm bias’ Lehrer mentions, in refereed scientific journals, the journals whose ‘yes’ or ‘no’ is a matter of life and death for young researchers.  If you write an article attacking an ‘old’ scientific paradigm or theory, you increase your chances of getting it accepted.  But if you write an article attacking a relatively new paradigm, chances are it will be rejected.  And worst of all, researchers ignore negative results (“this drug doesn’t work”) and report only favorable results (smoking was  correlated with alcoholism, at a 95% significance level), often with correlations that are statistically significant but in practice meaningless.  (A large sample, which many journals favor, can generate “significant” correlation coefficients that are only 0.05).   So researchers dig, and dig, and dig, until they find something ‘significant’, and with enough digging you always find something…even though failure to report negative results indicates what you found is really just random noise (enough monkeys typing on typewriters will….)

    But what about (b)?  I have argued, after long experience, that survey data, statistics, correlations, all the social science voodoo methodology, are effective in obscuring the truth about organizations and management, rather than revealing it.  Rather than build hypotheses and models in advance, why not get out into the field, work with companies and managers, ask them a ton of questions, and only then, when you think you really know what is going on, sit down and build a theory or framework. This is known as grounded theory, and it is the only effective way to research issues that are highly complex, with interactions among the players.**  It is why business schools must liberate themselves from the terrible tyranny of the scientific method, and build their own integrated approach, which links consulting with research and teaching. (“I consulted in project management at Hi-Teck Inc., and here, students, is what I learned, in this and other companies, about the role of stage-gate planning in project management”).   Alas, qualitative research is very hard to publish, and very very few journals accept such work.  So, in future, I fear management faculty will continue to play by the rules of the scientific method, as set by the science faculties, and management research will continue to be of little value, for this reason.

 * Jonah Lehrer, “The Truth Wears Off”, The New Yorker, Dec. 13, 2010.

** Shlomo Maital, Srinivas Prakhya, and DVR Seshadri, “Bridging the Chasm between Management Education, Research, and Practice: Moving Towards the Grounded Theory Approach”.  Vikalpa-Indian Management Journal, Jan-March 2008.

Global Crisis/Innovation Blog

Estonia, the Euro, and National Contrarian Thinking

By Shlomo Maital

    A few years ago, I visited Estonia, a small Baltic country with only 1.3 m. people, once a part of the USSR and now a dynamic and creative nation with strong political leadership.  We were impressed by its commitment to innovation, not just at the level of startups (Skype was founded and developed by ethnic Estonians) but at the national or government level. For instance, Estonians file taxes on-line, usually submitting their annual tax report in 20 minutes or so, and it also votes on-line, the first nation to do so.  Estonia’s Government meets on-line, often, with travelling ministers joining sessions by videoconference,  dialing in to a start-of-the-art wired Cabinet room.  Estonia has very low tax rates and is singlemindedly weaving its economy into the fabric of the European Union.

   Now, as of Jan. 1, Estonia has happily, wholeheartedly, embraced the euro.  Prime Minister Andrus Ansip slid a bank card into an ATM and withdrew some euros, at an ATM specially set up in front of the opera house in the capital city Talinn.  With this, Estonia became the 17th member of the Euro zone.  “Being inside is better than being outside” [the Euro zone], said a leading Estonian banker. 

   Why would Estonia want to join the Euro zone, when the euro has been so unstable, so troubled, its future in doubt?  The answer is simple.  It is a matter of alternatives. Which do you prefer, as a foreign investor, as the head of Estonia’s Central Bank, or as Estonia’s finance minister – the kroon, weak and unstable, with high risk, or the euro, known, and relatively more stable? 

     Estonia suffered a deep drop in its 2009 GDP.  Part of this was self-inflicted.  In order to defend the fixed kroon-euro exchange rate (part of the condition for officially adopting the euro), Estonia slashed its government budget and reduced its deficit by fully 9 per cent of GDP – a huge cut, one that other larger governments have been unable to even contemplate.

     Estonia remains a poor country, with GDP per capita only two-thirds of the OECD average. But it has vision and determination, and sees Ireland 1987-2007 as its model.  Estonians are ethnic Finns.  They share the Finnish stoicism and toughness.  Estonia endured centuries of foreign domination, and many now see the Euro as a key to future independence. 

      Estonia has a long road to travel.  One in ten Estonians are unemployed, a fifth of the population lives in poverty and it is by far the poorest country in Euro zone.  But it perceives of itself as the anti-Greece: the opposite of the profligate irresponsibly heavy-spending Socialist nation that took to the streets to fight necessary fiscal cuts. 

    “There is no reason to be afraid,” said one leading Estonian. “We have had worse experiences.” For Estonia, everything is relative.  The tribulations of embracing the euro, however bad, cannot come close to what Estonia endured under the Soviets and other colonial powers.   While other nations ponder leaving the Euro, Estonia practices contrarian thinking and embraces it with vigor. We wish Estonia well.

* based on: Jack Ewing, “As euro struggles, Estonia readies for entry in currency”, Global NYT, Dec. 30, 2010.

Global Crisis/Innovation Blog

China Patents A New Direction in Patents

By Shlomo Maital

   In this blog, I have consistently argued that China is fiercely determined to move up the value-chain ladder into the realm of innovation-intensive products and services, and is acting aggressively to implement this policy.

    Writing in today’s International Herald Tribune,  Steve Lohr [“Building a more innovative society by government decree”,  IHT Jan 3/2011, p. 14] reports on a Chinese government document defining goals for drastically raising China’s production of patents.  US PTO’s David J. Kappos, the Director, says the Chinese targets for 2015 are ‘mind blowing numbers’.

    China’s goal for annual patent filings by 2015 is … two million, including ‘utility-model patents’ or design patents,  which cover items like engineering features and are less ambitious than invention patents.  In contrast, in 2009, there were about 300,000 applications filed for utility patents, about equal to the total of invention patents. 

   Patent filings in the U.S. totaled about 480,000 in the year up to September 30. 

   China’s patent surge has been evident for many years.  China has been expected to overtake the U.S. in patents this year, but it has happened faster than expected, Lohr reports.

   China is not only ambitious for Chinese patents.  It wants to double the number of patents that its residents and companies file in other countries.  Chinese filings in the US PTO are soaring, and are focused on strategic areas China finds crucial, such as solar and wind energy, information technology, telecommunications, battery and manufacturing technologies for automobiles. 

    China’s government is offering incentives, including cash bonuses, better housing for individual filers, and tax breaks for companies that are prolific patent appliers.

     Creativity expert John Kao told Lohr that “one day China will have the Chinese entrepreneurial equivalent of Steven P. Jobs of Apple and Mark Zuckerberg of Facebook.”

     Kao takes comfort in the fact that American culture, more than any other, forgives failure, tolerates risk and embraces democracy.    I wonder when America will begin taking seriously the ominous challenge “Made in China” poses for America’s wealth and wellbeing. 

Innovation Blog

How Old Do You Need to Be To Become an Entrepreneur?

By Shlomo Maital 

 

Suhas Gopinath

 

How old do you need to be to become an entrepreneur and launch a successful global company?   Would you believe – 14?   That’s how old Suhas Gopinath was, when he launched Globals Inc in Bengaluru, India, ten years ago,  from an internet café.   Here is the story, relayed to me by my close friend and co-author D.V.R.  Seshadri:

When 14-year-old Suhas Gopinath started Globals Inc ten years ago from a cyber cafe in Bangalore, he didn’t know that he had become the youngest CEO in the world.  Today, Globals is a multi-million dollar company with offices in the United States, India, Canada, Germany, Italy, the United Kingdom, Spain, Australia, Singapore and the Middle East and has 100 employees in India and 56 abroad.  Among the several honors that have been bestowed upon this young man, the most prestigious is the invitation to be a member of the Board of the ICT Advisory Council of the World Bank. He is also recognised as one of the ‘Young Global Leaders’ for 2008-2009 by the prestigious World Economic Forum.  Suhas is the youngest member ever in the World Economic Forum’s history. The other members include the Louisiana governor Bobby Jindal, Hollywood star Leonardo Di Caprio, musician A R Rahman, Prince of Brunei, etc.

      Globals Inc. has grown rapidly from a small home office to a globally recognized multinational company offering world class quality solutions in Web, e-Commerce, and Mobile. Today “Globals develops mission critical applications on the web for various industries including Education, Finance, and Governments”.

     Gopinath taught himself how to build websites and sold portals to bricks-and-mortar firms in the US. He was the youngest certified website-builder in the world.   He originally called his company CoolHindustan.

Global Crisis/Innovation Blog

“Beware of Greeks Bearing Gifts”:  Michael Lewis’ Insights”

By Shlomo Maital

    Michael Lewis is perhaps the leading writer able to expose the deepest darkest inner secrets of the financial services world, dating from his book Liar’s Poker.  New York Times columnist David Brooks, in his annual “Sidney Awards” column, draws our attention to Lewis’ essay in Vanity Fair (Oct. 1), titled “Beware of Greeks Bearing Gifts”.

     To show how financial bungling leads to moral rot, Lewis takes us to a 1,000 year old monastery, cut off from the world, in remote northern Greece near Mount Athos, accessible only by boat.   

      Greece’s banks and government conspired to plunder the public treasury.  The Greek national railroad, lewis notes, earned 100 m. euros in revenues, but had a wage bill of 400 m. euros (!) plus 300 m. euros in other expenses.  The country reported a budget deficit of 3.7 per cent of GDP, to gain EU entry, but in fact its deficit was really 14 per cent of GDP.   But the real cause of Greece’s crisis was the remote monastery known as  Vatopaidi.

“In late 2008, news broke that Vatopaidi had somehow acquired a fairly worthless lake and swapped it for far more valuable government-owned land. How the monks did this was unclear—paid some enormous bribe to some government official, it was assumed. No bribe could be found, however. It didn’t matter: the furor that followed drove Greek politics for the next year. The Vatopaidi scandal registered in Greek public opinion like nothing in memory. “We’ve never seen a movement in the polls like we saw after the scandal broke,” the editor of one of Greece’s leading newspapers told me. Without Vatopaidi, Karamanlis is still the prime minister, and everything is still going on as it was before.”  *

The Vatopaidi scandal brought a Socialist government to power, headed by George Papandreou, son of an eminent economist and former Prime Minister. Papandreou’s government squandered money, in ways Karamanlis would never have dreamed.  Had it not been for the moral rot that touched Vatopaidi’s monastery, Lewis explains, Greece would have avoided its virtual bankruptcy. 

    Remember the parable of how “a butterfly’s wings flap in a remote forest, and the result changes the world totally”?   There is a strong similarity.

 *   Source:  http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010?printable=true#ixzz19OUDR5T7

Global Crisis/Innovation Blog

Handling Freak Weather: The Wisdom of a New York Cabbie

By Shlomo Maital

  An enterprising BBC reporter covered New York City’s blizzard, which dumped 75 cms. of snow (30 inches) on the city, by chatting with a New York cabbie (taxi driver).   I’ve found that if you want to really know what is going on in a country, regarding its business energy and economic performance, ask a taxi driver.  The same appears to be true about snow removal.

  Former New York Mayor John Lindsay lost his job after the Feb. 15, 1969, snowstorm dumped 15 inches of snow on New York City and paralyzed it; Lindsay was widely perceived as incompetent.   Today, twice as much snow fell on New York City and within a day the city was back to normal. 

    Cabbie Peter Franklin told BBC that Mayor Michael Blumberg reflected the spirit of New Yorkers.  “The cost of snow clearance,” Franklin said, is “$1 m. per inch of snow”, or $30 m. for the 30 inches.  But, he noted, “Mayor Bloomberg said,  so what? So what if it costs $30 m.?  Let’s just do it.”  Bloomberg realized that you cannot shut down a city, and the cost of doing so, as Mayor Lindsay learned, is a thousand times more than the cost of clearing the snow.

    New York City simply has a method – it takes all its thousands of garbage trucks, and puts snow shovels on the front, and sends them out to clear the snow, then hires day laborers at $14/hr. and has them shovel the snow from intersections.  These two simple ideas together put New York City back into commission after a very short shutdown. 

    “To deal with problems,” cabbie Franklin says, “you need two things:  Will and money.  We in New York have both.  So we did it.”   He expressed price in the resilience of New Yorkers, and likened the snow removal to a “war” – enlisting money and energy, defining the goal (keep things functioning), and then…as the Nike mantra goes, Just Do It! 

     Other cities would do well to benchmark New York City. Meanwhile, cities in snowy climates treat blizzards as ho-hum – Helsinki, and Toronto, and Winnipeg, Canada, for example, while a few inches in London shuts everything down and sows panic.    

Blog entries written by Prof. Shlomo Maital

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