Sunday, December 19, 2010

A Question Of Strategy

An anonymous commenter encouraged me to read the Martin Ford book The Lights In The Tunnel (available free in .pdf form here).

Chapter Two is titled "Acceleration" with the first sub-heading being, The Rich Get Richer, where-in Mr. Ford illustrates the process of technologic acceleration using the example of Bill Gates and the old daily doubling model (this time with pennies instead of grains of rice). I notice a logical fault in Mr. Ford's thinking though.

Mr. Ford asserts that as Bill Gates increases his wealth through continued expansion of the technology acceleration Microsoft contributes to, necessarily others become less rich as a result of the advancing automation of industry (and human labor occupation generally) made possible thereby (which Mr. Ford analogises as the titular Lights in the Tunnel growing respectively brighter or dimmer). This seems consistent with a purely technological process, but ignores the actual condition and process of wealth possession (or so I have read; no direct experience sadly).

While I am confident he theoretically could, I suspect Bill Gates can't remember the last time he balanced his own accounts personally. This statement requires a brief look at the process of "wealth". Fortune doesn't exist as stacks of material in a storeroom somewhere; even in the days when it did that was a temporary solution to a handling problem, not a model for economic activity generally. With great wealth comes the necessity to manage it, an activity that typically doesn't generate great wealth for it's practitioners ("bankers" - those who own banks - employ financial managers, not vice versa). Bookkeepers, who's work is Accounted for by others so that specialists in Investment can transact in Markets to obtain some degree of ownership in something to result ultimately in some financial gain to Bill Gates.

See the problem here? Mr. Ford's Tunnel model fails to acknowledge the universe of financial betterment attendant to Bill Gates' richness. Not only does this illustrate the severe limitation on modeling-as-prognostication, it calls into question just how well Mr. Ford understands the strategy of human wealth.

Just to get this out of the way, when Bill Gates finds himself a bit short of cash of an evening, he stops at a convenient ATM just like most other Americans do. Unlike most of the rest of US, if he's thinking ahead he sends an employee to do that for him or has his bank (quite possibly literally his) deliver it to him. And Mr. Ford seems to think that Bill Gates is only about half way through his computer/technology related exponential growth, too.

The strategy of wealth is to create a series of interconnected mechanisms that each independently work to increase their net worth while avoiding inhibiting the efforts of allied efforts doing so themselves. Net worth, the value of something after removing the expenses incurred from maintaining and operating it, is one success standard that works against the change process due to the desirability for stability to nurture continued strength of alliances and control of costs in pursuing a chosen strategy. Mr. Ford's Tunnel model doesn't seem to even recognise the effect such contrary interests exert on market transaction decisions.

The Bill and Melinda Gates Foundation exists to keep Bill and Melinda in a sufficiency of the folding stuff and does so by creating as many opportunities for others to do so for themselves as can be arranged through the efforts of as many others as Bill and Mel can comfortably keep track of. Not only does this call into question Mr. Ford's financial example, it casts doubt on his "overcoming automation" concern. Agreed that automation removes humans from an existing application within the job market, but there without doubt exists mechanisms whereby they can adapt to changing circumstance - even from the most extreme of disadvantage, thanks to Bill and Mel among many others. Wealthy people (which condition doesn't actually include wealthy companies/corporations all that well) don't hoard their gains in a vacuum; they employee other people, both directly and at often surprising remove, to perform that process to their mutual benefit. The human psychology of "control" is intimately involved and any examination which doesn't take that into account is a profoundly flawed model.

None of which makes Mr. Ford's book a failure. His point about a lack of examination of the process such changes effect on financial and economic considerations is well taken. As too is his direction of attention on the short-term costs such a process inevitably levees on individuals. I look forward to reading his prescriptions in this area of concern especially.

It is a strategic maxim that Opportunity = Risk. Indeed, it is the emergence of the latter that creates the former. You can't have the one without the other and it is this which distinguishes Opportunity from Chance. Accept this most fundamental condition of human existence and you free yourself from useless resistance to change to concentrate on adaptation of your personal circumstance to benefit instead.

Addenda: Mr. Ford's Tunnel model posits Bill Gates as a single market source and uses the market transaction of a $50 cell phone sale as example; behind Door "A" is Bill Gates, behind Door "B" is tens of thousands of potential individual sales. Since Bill Gates (through his dominance of other's purchasing decisions by way of their financial relationship) represents a potential single sale of tens-of-thousands of phones on his own individual decision, I choose Door "A", Mr. Ford, as doing so potentially represents a reduction in my transactional costs by an order of tens-of-thousands to one. None of which precludes my yanking open Door "B" as well, you know. People like Bill Gates are simultaneously both a single point of sale and a group purchase opportunity, a circumstance Mr. Ford's model doesn't address very well. Which is more a failing of models than anything else.

Thursday, December 9, 2010

Making IF Real

Alvis Brigis examines a potential resolution to the current job loss situation in his latest blog post which I commented on here. In his post, Alvis said:

One result of this possibility expansion will be the ongoing emergence of a new class of Super-Prosumer companies that will fill much of the void left by dwindling American jobs. As the traditional economy flounders, these social web companies will clean-up (they already are) and expand the phase space for massive, rapid value creation like never before.

Over at The Speculist commenter damndirtytape asks in comments:

That's an enticing scenario, but what does each CEO-company actually do or make? as in what tangible goods do they produce that other people (foreigners primarily) will buy?

What we are doing now doesn't work. A high tech, but debt and credit based economic model is an illusion. At some point America will have to actually create real goods and services to sell to other countries to reverse the trade gap and get out of worlds largest debtor nation status.

Not sure how any of this prosumer stuff really creates anything new.

Alvis' response speaks for itself, I wish to use both the above quotes to give context for what follows. As per my usual want, we get there by going this other way first. :)

I suspect more people are aware of Bristol Palin from her recent turn as third place finisher on the latest season of Dancing with the Stars, but what seems to be largely lost is the example she provides us of a possible mechanism whereby we can all help save our national economy. Unwed teen pregnancy is traditionally regarded as at best a devastating event. Young Miss Palin's response takes a different tack (via wikipedia). Instead of a disaster, she chooses to make teen motherhood into a career - one that apparently earns a decent living, I might add.

Anybody seeing where I'm going with this yet?

In my initial comment to Alvis' post (which is where this all started, remember?), I said:

How you initially define context greatly influences individual willingness to commit to a concept. The context "root cause" places the existing economic environment in an aggressive defense of established practice and process; the suggested alternative identifies potential additional revenue streams for existing business entities to consider. From there it becomes easier to consider more fundamental changes to business structure and process. Much like the change from manufacturing to service, the economy is easier to change to some entirely different model if there is an established business practice to expand upon to effect the transition. Without something of that nature in place, the established economic/governmental structure will actively resist transition instead of merely drag its collective feet.

The "context" I seek to define today is how we might structure our transition from a job-losing economy - where jobs are the providential offering of some diffuse other - into a job-creating environment in emulation of la Palin's example.

A Limited Liability Corporation is a recognised legal and economic mechanism available to virtually any US citizen or resident, at modest individual cost, that provides a mechanism to transform almost any activity into a profit-making (and, lest we forget, tax-paying) enterprise. Unwed teen mother? No problem, Professional Advocate. Prosumer? What (or even who) do you know that you can start building into a network positioned to connect to a market (either existing or potential)?

The underlying point of all this is that, so far, we the individual retain the initiative in determining how (and by whom) our economic salvation might be attained outside of the established, historical arrangements. To do so via such a creative example as touted by Alvis (and many others, to be fair) requires that we provide some mechanism whereby the existing powers-that-be (like, potentially, that other Palin woman) can recognise and categorise our efforts into their present understanding of things. Doing that makes our efforts merely part of the system, something to be ordinarily taxed and otherwise burdened (think Craigslist), rather than some extremist, disruptive activity to be actively opposed and outlawed (pick your favorite file sharing/aka: music piracy site as example).

Classical strategy teaches that success is attained by a steady process of supportive alliance and avoidance of active opposition. I believe that to be an effective summation of ordinary human interaction and something everyone is well advised to consciously practice in their day-to-day activities, most especially when setting out to effect change to an existing -and well entrenched - paradigm of human behavior and association.

Like turning "job" into individual liberty instead of controlling dependence.

Tuesday, December 7, 2010

The Future Is Coming

Blog friend Alvis Brigis has a post up about the transition in economic activity he sees underway in the US. While I still question just how broadly applicable the Prosumer concept will prove to be, I concur that it is certainly one of the options available to people today to begin their individual transition into the developing economy.

In his post, Alvis identifies some of the factors that contribute to the on-going economic downturn:

The erosion of traditional American jobs continues unabated and we can expect it to steadily worsen. From a macro perspective, there is simply no silver-bullet counter to the converging forces of globalization, automation, overvalued real estate prices, national debt, mega quantitative easing (printing more U.S. dollars to buy back our bonds so they don’t tank - a new round of $600 billion has just been proposed), mounting international resistance to U.S. monetary policy, massive overseas spending (Iraq, Afghanistan) general inefficiencies in govt, defense, education, oversight, and social services. Despite weak signs of life in the country’s massive services sector, which comprises an astounding 80% of U.S. jobs, last week’s dismal jobs report reinforces the steady downhill march.

I find it telling that all of them are governmental/regulatory in nature.

That said, I also find it refreshing (if not at all unexpected of the man) that his prescriptions are all oriented around the individual human, alone or in organised groups, creating their own relief without recourse (or even regard) to government.

Note that I did not say in dis-regard to government. Lack of reliance does not mean rejection.

Elsewhere in the post, he says:

If our goal is to save American jobs, then it’s our responsibility to identify, vet and selectively apply these emerging solutions.

First and most obviously, we can turn to well-established, leading-edge American tech and web companies like Microsoft, Google, Apple, Intel, Cisco, IBM, Johnson Controls, Amazon, EBay for software, hardware and intelligent systems that can bring down personal and business costs and increase profit.


Even more interesting is the symbiotic relationship these companies have with their customers. Each and every one of them fundamentally depends on user generated content and participation to function. Therefore, they inherently must make the cost of participation as low as possible, and the benefits to users as high as possible

Every company Alvis identifies is dependent on government provided infrastructure just to operate and all of them have both governmental regulatory constraints and self-imposed limitations they impose on their users - Alvis' proposed Prosumers. Certainly they offer some opportunity, and the Groupon example Alvis provides is inspirational, but the problems left unstated make success through these channels much more unlikely than Alvis makes apparent (not an unexpected aspect of an introductory effort such as this one, it should be acknowledged).

All of the companies named have to offer the most user experience for the least user expense (whether financial or in usage frustration levels). All of the companies named risk additional regulatory and taxation burdens resulting from increased individual economic activity beyond that already regulated/taxed. From this it can be seen that increased usage will result in decreased usability. Methinks these won't cooperate much or for long.

All of which ignores the mores most of them practice; E-Bay discriminates against anyone wishing to exercise the tenets of the US 2nd Amendment on their site for only one example of highly dubious company conduct that inhibits the user/prosumer experience. Google is infamous for it's unethical censorship and data gathering practices.

The point being that none of the examples proffered are positioned to be quite as opportune as Alvis seems to believe. They could be, but in practice have not been to-date. Perhaps an effort to persuade them differently, developed at the local societal level, would be a practicable first step in changing this circumstance.

As is his usual practice, a complex and thoroughgoing look at the present circumstance with an eye to getting to a future we all can find fulfilling. Well done you.