stargeek
HOW WE LEARN, AND WHY WE DON'THOW WE
|
 When you
spend a decade working in Knowledge Management, you can't help
thinking
a lot about how people learn. The book that first helped me understand
the learning process was Nancy Dixon's The Organizational Learning
Cycle. Nancy was writing about 'collective learning', a subject
I was
already skeptical about even then: I was, and remain convinced that
learning is an intensely personal, individual experience, and that we
all learn differently. The graphic above is adapted from Nancy's book. It says that, in general, we learn as follows:
Frames
trump facts. All of our concepts are organized into conceptual
structures called "frames" (which may include images and metaphors)
and
all words are defined relative to those frames. Conventional frames
are
pretty much fixed in the neural structures of our brains. In order for
a fact to be comprehended, it must fit the relevant frames. If the
facts contradict the frames, the frames, being fixed in the brain,
will
be kept and the facts ignored. [George Lakoff]
Because people understand by finding in their memories the closest possible match to what they are hearing and use that match as the basis of comprehension, any new idea will be treated as a variant of something the listener has already thought of or heard. Agreement with a new idea means a listener has already had a similar thought and well appreciates that the speaker has recognized his idea. Disagreement means the opposite. Really new ideas are incomprehensible. The good news is that for some people, failure to comprehend is the beginning of understanding. For most, of course, it is the beginning of dismissal. [Roger Schank]
The purpose of learning is ultimately Darwinian -- we don't learn just for learning's sake, or because it is fun. We learn, and learn the way we do, because it helps us to survive. In most situations, the recall and application of past learnings is far too slow and unreliable to keep us alive in critical situations, so to survive we rely much more heavily on instinct. Instinctive 'knowledge' is hard-wired into us, as it has been for us and our primordial ancestors since life first made its appearance on Earth. Intellectual and moral learnings are a back-up system, for when we have the luxury of time and the opportunity to apply more complex situational knowledge to a survival problem (such as planning a date, keeping a job, or designing a hydrogen fuel cell). Bernd Heinrich, in Mind of the Raven, probes the sharp, massive (relative to body size) brains of corvids, the brightest species of birds. He describes the raven's capacity for ruse (when hiding food so it won't be found by others) and sophisticated memory of place (for finding the food again). He also describes a simple IQ test for animals that most ravens pass with flying colours: A thick string is hung from a tree-branch, to which is attached a well-wrapped morsel of a favourite food. It cannot be reached from the branch or the ground, and cannot be extracted by grabbing it in flight. Ravens quickly appreciate that the answer is to sit on the branch and pull the string up, claw over claw, until the food can be reached and unwrapped. There is no trial and error involved. The abstract reasoning is well within the raven's considerable intellectual capabilities. Like us, they simply reorganize the accumulated learnings in their brains to fit the new problem's context. Heinrich surmises that the raven's large and sophisticated brain evolved because it had to, to survive. Ravens do not possess the tools to kill their prey, so, like man, they began as carrion eaters. But then, they 'learned' to collaborate with wolves and other killers of large animals. Now they fly overhead and find the meal, and then buzz the wolves, flying circles between the wolves and the prey until the wolves, too, 'learn' what the ravens are 'saying', make the kill, and share the spoils with their avian scouts. In Experiential Learning, David Kolb describes a four-phase learning 'cycle': Experiencing, Reflection/Observation, Conceptualization, and Experimentation/Application. If this is indeed how we learn, it is not surprising that 'on-the-job' learning trumps 'book' learning. If we learn by doing, it is hard to imagine a worse learning environment than the classroom or boardroom. And it also explains how stories, which are so engaging, so participatory, are such effective teaching tools: You are sharing your experience in the story, not merely your observations and conceptualizations. It also explains the popularity of Case Studies in the classroom and Best Practices in the workplace, though both of these are extremely poor substitutes for first-hand learning. Kolb describes four basic 'Learning Styles':
One of the things I have observed in watching people in social gatherings and in more formal meetings is that almost all multi-person social activities are essentially sequences of distinct two-party conversations. It is almost as if the signal/loss ratio is so poor in conversations, which are not really shared experiences but rather 'playbacks' of one individual's (the talker's) experiences and learnings for the supposed benefit of the other individual (the listener), that a simultaneous 'bandwidth' of two people is all we can manage. Perhaps the reason why we even tolerate these abstract social activities is that we hardly ever do anything together anymore. The job of the typical specialized 'knowledge worker' today (despite the prevalent and somewhat fraudulent hype about collaboration and work 'teams') is mostly individual, solitary activities and experiences. And social and family discourse often centres around the passive and individual watching of television or films or listening to music. We often don't even eat together anymore, the primeval, original social activity of all species. All of this got me thinking about the constraints to learning, and why, in this 'information age', there seems to be less learning occurring going on rather than more. Here is my list of the top 10 constraints to learning in our modern culture:
|
 It
is said that necessity is the mother of invention. Someone should tell
the agriculture industry, especially in Canada, which appears
incapable
of learning anything. It has only been five years since scientists confirmed the link between BSE ('Mad Cow' disease) and human vCJD. As a consequence, after 40 Britons had died of vCJD, a quarter million British cows were slaughtered and burned, borders were closed to meat products, anyone coming from Britain was 'disinfected', and blood donors were screened for vCJD. No one really knew what they were doing, so they just tried everything. BSE is caused by a prion, which isn't even 'alive', rather than by a bacteria or a virus, so it doesn't respond to normal antibiotics and other chemical poisons. To this day, no one knows how BSE spreads, or how dangerous it is. The related sheep disease, called scapie, has been around for centuries, and is endemic to sheep everywhere, but has not been known to jump to other species, including humans, so other than not feeding ground-up sheep parts to cattle anymore, we have chosen to do nothing about that. The isolation approach to BSE hasn't worked. Two years after the British outbreak, homegrown cases of BSE were found in France and Germany. Earlier this year, homegrown cases were found in Canada, and then in the US, allegedly from a Canadian cow but unrelated to the other Canadian case. Borders were closed again, with demands for testing of all animals, not just sick ones, before they will be reopened. In every case, the impact on farmers and on the markets has been devastating. Other than implementing what was mandated by government inspectors, what has the global beef industry done of its own volition to adapt and respond to this devastation? Absolutely nothing. This week American speculators are up in Canada betting that the expected reopening of the US border to Canadian cattle this summer will mean a surge in Canadian cattle prices. But there have been no changes in practices, no pooling of funds to research the causes and cures for BSE. Oh well, Canadians said after it was all over, there's always chicken. There certainly is. Avian flu is endemic in many migrating birds and does sometimes infect domestic poultry, but, like BSE, there was until recently no compelling evidence that the disease can jump the species barrier to humans. Then in May 1997, six people in Hong Kong died from one avian flu variant called H5N1. Two years later there were two more deaths, this time from variant H9N2. All these cases were blamed on poor sanitation causing infection directly from bird feces. Then in April of last year, one man in Holland died and 80 others became ill when the H7N7 variant jumped the species barrier. Over the next ten months, there were outbreaks in Hong Kong, Thailand, South Korea, Vietnam, Japan, Taiwan, Laos, Cambodia, Indonesia, Pakistan and China. There were only about 30 human deaths in all, but because of the scale of the outbreaks and fear of human-to-human spread, borders were closed and hundreds of millions of chickens, ducks and other poultry were slaughtered. The WHO fuelled the panic, warning in January that there was "the possibility" that avian flu could quickly mutate into a highly infectious and very deadly human flu, and recommending the stockpiling of antiviral drugs "in case of a pandemic". They also said that human-to-human spread of the disease in a few recent deaths in Asia "could not be ruled out". In February, Delaware destroyed 12,000 chickens after an outbreak of a mild form of avian flu, then another 72,000 after a separate outbreak. The import of US chickens was banned by several Asian and European countries. Subsequent outbreaks occurred in New Jersey, Pennsylvania and Texas, and in British Columbia. By the end of March, 360,000 BC chickens had been slaughtered. Yesterday, the government ordered the slaughter of 20 million more, virtually every chicken in BC. Why is the disease spreading so rapidly? Because highly inbred farmed animals, which mostly live in crowded, unsanitary conditions, are fed a constant diet of massive antibiotic and antiviral chemical poisons to try to fend off epidemics, and so the diseases, which are among nature's most resilient and quickly mutating species, develop an immunity to these chemicals and strike instead with new variants. Science can't develop new chemicals as quickly as nature can adapt to circumvent them. Epidemics are nature's way of dealing with overcrowding, and, in the battle between man and nature, nature always bats last. When you eat meat, you're getting a big dose of these chemical poisons as well, so human diseases are quickly building up a similar immunity to antibiotics, which is resulting in new, virulent, resistant diseases in people, not to mention a whole raft of new autoimmune deficiency problems in people whose natural immune systems are getting more and more out of whack. So what are the BC poultry farmers going to do? They're going to spray all their farms with massive doses of chemical poisons, wait six months, and start up all over again. They plan no changes whatsoever to their operations. Of course, like the cattle farmers, they want massive subsidies and compensation from the Canadian taxpayers, to finance the repeat of this folly. I know a lot of my readers think I underestimate human ingenuity, adaptability and innovation, and therefore feel my predictions of coming ecological catastrophes are unduly pessimistic. Well, I rest my case. |
 If
you're a regular reader of this blog, you probably know that I'm
opposed to unregulated 'free' trade, very worried about the
extraterritoriality of the WTO, NAFTA, Davos and other corporatist
captives, strongly opposed to domestic corporations 'offshoring' jobs,
using influence with the Bush regime and other right-wing governments
to circumvent social and environmental laws and responsibilities, and
a
great believer in taking the pledge to buy local, and in community
self-sufficiency.At the same time, I'm a strong supporter of the UN and other multi-lateral NGOs, and I believe that we each have a responsibility for the well-being of all the people and creatures of this world. Some readers have said this view is inconsistent, and I wasn't quite sure how to respond to such charges. Fortunately, Peter Singer, in his recent book on global ethics, I'll have more to say next week about Bush's fraudulent and despicable Earth Day media blitz, and the major media's shameless lack of critical evaluation of the utter nonsense that his propaganda machine has been churning out this week on the environment -- newspeak of Orwellian proportions. The first part of Singer's book deals with environmental responsibility, and his prescription for increasing it -- immediate ratification of Kyoto by the US and other holdout countries, and introduction of an emissions trading mechanism to make the realization of Kyoto feasible (subject to the need for some oversight on the disposition of the proceeds of such trading when it involves autocratic governments). The second part of the book deals with the global economy, and Singer adroitly tears apart the Economist's (and other neocons') naive assertion that economic globalization somehow benefits both rich and poor countries. He then goes on to prescribe a substantial reform of the WTO and the GATT, which could actually lead to more equitable distribution of wealth and more efficient production of economic goods, while safeguarding human rights, labour and the environment. Unfortunately, the multi-national corporations and corporatists who hold sway in the WTO would never tolerate Singer's prescription, since it would entirely divert the benefits of economic globalization from their pockets to those of the world's poor. The third part of the book deals with international law, and Singer lashes out at Bush for his unconscionable refusal to ratify the International Court of Justice, and for the UN's continued hesitancy to accept a duty (not a right) to intervene in situations of genocide and other humanitarian crises, even within a single nation. Singer is sanguine about the limitations and dangers of 'global government', but supports strengthening the UN to enable it to act as a 'protector of last resort', and including in its mandate the responsibility to supervise elections in all member nations. The fourth and final part goes back to ethical principles and proposes that countries must, in this world where national boundaries no longer have any logistic meaning, set aside national interest and embrace, once and for all, global interest, impartially. That does not mean cultural homogenization, but imposes a responsibility for the reduction of inequality, both of economic resources and personal rights and freedoms. Always the pragmatist, Singer concludes by worrying out loud about how the responsibility for a global ethic could be managed: It
is widely believed that a world government would be, at best, an
unchecked bureaucratic behemoth that would make the bureaucracy of the
EU look lean and efficient. At worst, it would become a global
tyranny,
unchecked and unchallengeable. These thoughts have to be taken
seriously. How to prevent global bodies becoming either dangerous
tyrannies or self-aggrandizing bureaucracies, and instead make them
effective and responsive to the people whose lives they affect? It is
a
challenge that should not be beyond the best minds in the fields of
political science and public administration.
I'd like to believe that this was possible, because if it isn't, we're in serious trouble. We cannot expect national governments to set aside parochial interests, especially when this entails accepting a responsibility that would, for the richer nations, inevitably lead to a drastic redistribution of wealth to poorer nations and hence a sudden and sharp reduction in, at least, economic living standards (if not necessarily well-being). But as John Ralston Saul has so eloquently argued, larger organizations and institutions, whether public or private, are almost always, and inherently, less efficient, less agile, more resistant to change, more hierarchic, and less transparent than smaller organizations. So the challenge is to achieve the best of both worlds, having organizations of global scope and authority and responsibility, but broken up into sufficiently small, autonomous and dynamic units that they are sensitive, resilient, responsible and responsive to the people and communities they serve. We can only hope that "the best minds in the fields of political science and public administration", wherever they are, are up to the task. |
 Two weeks ago I reported on the upcoming June 28 Canadian election, and predicted that there would be a Liberal minority government, with the NDP holding the balance of power. Since then, groupthink has taken hold, and the anger that many Canadians feel about the incompetence of the federal Liberals to detect either wasteful spending or the 'sponsorship' fraud by some government workers, plus the anger of many Ontarians about the new Provincial Liberal government's reneging on promises to avoid tax increases, has led another 8% of Canadians to vow not to re-elect them. This 8% swing has been predominantly older men in Ontario, who seem unwilling to believe that the Conservatives are as right-wing as Liberal Prime Minister Martin has portrayed them, and younger people, whose support for the Green Party has significantly increased. The province-by-province projections now stand as follows -- 155 of the 308 seats are needed for a majority:
Next week we'll hear the all-important leader debates, but they are likely to change nothing. The Conservatives are muzzling their own right-wing extremists, who are virulently anti-abortion, gay-hating, anti-gun control, anti-immigation, pro closer ties with the US, anti-Kyoto accord, and militaristic (Stephen Harper, the new Conservative leader and former head of a Western separatist party, wanted Canada in the Iraq war). The Conservative strategists are determined to portray Harper as a moderate, despite the fact that he is on record as having taken right-wing positions on many social, economic and environmental position. If this sounds a lot like Dubya, and the spin doctor white-washing of his extremism reminds you of 'compassionate conservatism' in 2000, it should, because the tactics are the same -- say anything to get elected, and then trot out the real agenda of the people who paid for the campaign. But it's even more frightening than that. Small-c conservatives make up only 30% of Canadians, and the capital-c Conservatives are already above that point, with some of their voters coming from angry liberals. But if the figures above don't change, the Conservatives will get 38% of the seats with 33% of the vote. And the Bloc Québecois, the Québec separatist party that runs candidates only in that province, will get 19% of the seats with only 11% of the vote. Add them together and you get a distortion almost identical to what happened in the US in 2000, where Dubya 'won' with only 46% of the popular vote. If the Conservatives and Bloc combine their seats in a strange-bedfellows anti-federalist coalition, they'll have 57% of the seats with only 44% of the votes, while liberal-centrist parties will have only 43% of the seats, even though they will have received 56% of the votes. There is no other coalition that would have enough seats to form a government. Problem is, this coalition won't hold for more than a few months. The Bloc is a left-wing, Francophone party, liberal on all social, economic and environmental issues. The Conservatives have diametrically-opposed views on every issue but one: their dislike of federalism. The cost of Bloc support would be to grant Québec limited sovereignty, kind of 'independence light'. The very idea of this is repugnant to core Western Conservatives. And the Bloc has already said that it would not support any Conservative government that tried to recriminalize abortion, and has made it clear that it would not tolerate abandoning Canada's support for the Kyoto Accord, or anti-gay laws, both of which are bedrock principles of the Western Conservatives. And Ontario Conservatives would quickly cross the floor to the Liberals to save their political skin if the Bush-style right-wing social agenda of the Western Conservatives was trotted out. The role of the media in the final two weeks of the campaign will be interesting. Conservative media are likely to present Harper as the 'heir-apparent', the surprise winner and a fresh new face for Canada. Liberal media will be torn over whether to simply relate the campaign stories as they are spun out by the parties, or to go behind the scenes and surface what Harper has said, in writing, in past, on many issues he is now trying to paint himself as moderate on. The current Liberal campaign has attempted to do just that, but it has backfired, being portrayed as negative 'US-style' electioneering, sour grapes or desperation politics, so the liberal media could be subject to similar admonishments if they get proccupied with the 'secret agenda' of the Conservatives. But media being what they are, expect Harper, the new frontrunner, to face increasing heat over unanswered questions from his decidedly non-moderate past. Not to mention some of his decidedly wacko neophyte candidates. So what do I think will happen? The Conservatives will win a small plurality, and have to either form a coalition with, or try to manage with the tacit support of, the Bloc Québecois. Paul Martin will resign right after the election, and the Liberals will choose a new leader not tainted by the recent scandals. The Conservatives will start to self-destruct right after the election, with hard-line right-wingers expelled or resigning, and moderates crossing the floor to the Liberals, especially after it selects a new leader. The new government will last 3-6 months, accomplish nothing, and fall when the Bloc Québecois withdraws its support. Then we'll have another election, and perhaps even a third, until the 70% of Canadians with moderate-to-liberal social and political views get a government they can live with. Ontario and Québec have 60% of Canada's population, and no party has ever successfully governed the country without healthy support from both provinces. Stephen Harper is on record as opposing bilingualism, although he is now waffling on what his precise position on this is, which makes him unelectable in Québec. And his previously stated positions on many other issues will, if they become widely known, make him unelectable anywhere. It's going to be messy, and stay that way for quite awhile. And if the Martin Liberals hadn't been so politically stupid, it could all have been avoided. Cartoon by Tom Cheney -- buy his stuff at Cartoon Bank. |
(Warning: some financial math ahead.) A Ponzi scheme, named after its early 20th century inventor Carlo Ponzi, is a form of pyramid scheme. Basically it involves selling a nearly worthless security to a small group of investors, with the promise of great returns if they promote the security to more investors, and so on, ideally, forever. Like any pyramid scheme or chain letter, of course, it eventually collapses when it runs out of suckers. The first ones in get rich, and the last ones in (much greater in number) get shafted. As we all know, the stock market is focused on the short term, and fluctuates wildly in response to a single quarter's earnings, external economic events, even rumour. If you look at it holistically and long-term, however, it has all the markings of a century-long Ponzi scheme, the most lucrative, and potentially most devastating, in history. Let's take a look at the US S&P 500 as a surrogate for the entire stock market, the entire market for equity securities of listed public corporations. The index goes back to 1917, but was revamped in the 1940s and recalibrated so that the index for the average of 1941-43 was 10. It slowly rose to 100 over the next 50 years, and then to 1000 over the next 12 years. This broad index earned, in 2003, about $55 per average share of the component securities, using GAAP (generally accepted accounting principles). So at its current level of about 1100, it has a P/E (price-to-earnings) ratio of about 20. That means investors are willing to pay $1100 now for a share that will theoretically 'pay back' $55 next year, and hopefully successively more in future years, to justify the 'present value' of $1100. To think of ir another way, it's like a bank charging you $55 this year, $65, say, next year, and so on for at least 50 years, as 'interest' on a loan of $1100. The 5% interest in the first year isn't very attractive for such a risky 'loan', but since future 'interest' will be dependent on (hopefully rising) earnings, there is the prospect of a very lucrative return eventually. So the S&P 500, like all equities, is said to 'discount expected future cash flows'. A general rule of thumb says that the P/E ratio approximates the annual expected growth in earnings, so that means the investor in the market is expecting earnings to grow by close to 20% each year, essentially forever. How is that possible? Well, it isn't. Earnings grow because (a) prices increase, (b) costs decrease, and/or (c) volume increases. In a 'free' market economy, prices are determined (theoretically, now) by competition -- new competitors will enter the market, and/or existing competitors will adjust their prices, to the point that their return on invested capital is just high enough to justify the investment risk. That level, in a low-inflation economy where the alternative 'risk-free' investment in GICs and bonds is only 2%, is roughly a modest 7%, with the extra 5% compensating the investor for the risk implicit in equities. And, in the long run, volume can't increase -- there's only so much market for anything, and once it's saturated, earnings should therefore level off at a flat rate. Let's suppose we've more or less reached that state now. Let's also set aside the fact that the $55 earned last year by the average share is likely considerably inflated -- there are undoubtedly some more undetected Enron-type exaggerations out there in some of these 500 companies, and GAAP allows capitalization of stock options and other near-fraudulent practices that significantly overstate 'true' earnings. Is the $55 a fair return on investment in these companies? To answer that question we need to calculate what the investment is. According to the S&P, this $55 represents a 17% return on investment. In other words, the net assets or 'book' value of the average share is $55/17% or about $325. We already indicated that a reasonable return, given the risk, was 7%, which on $325 would be about $22 per share. Why are stocks earnings $55 per share when in a 'free' market they should only be earning $22? To answer this we need to look at the three components that make up ROI (or more correctly, return on equity -- ROE). These three components are: Margin (profit/sales), Turnover (sales/assets), and Leverage (assets/equity). Leverage can be inflated by excessive borrowing, which companies can get away with in times of low interest, but which boomerang when interest rates spike. Leverage can also be inflated by stock buy-backs, where the company essentially uses excess cash flow to buy back its own stock and hence increase the value per share of the remaining stock -- but this is a form of cannibalization, and leads to the same imbalance between debt and equity. Neither is sustainable. Turnover can be increased by lowering inventories, factoring and off-balance-sheet financing, but ultimately tops out -- you need to have a certain amount of money tied up one way or another in assets to be able to run an effective business. So you're left with Margin, which ultimately is the only explanation for the enormous ROE of $55/share, when in a free competitive market someone should be willing to accept $22/share. The truth is that the market, and big corporations, are far from efficient. Many industries are heavily subsidized by governments to the tune of billions of dollars in kickbacks -- er, I mean, support payments -- per year. Big corporations also work as oligopolies to prevent smaller companies from entering their markets and charging more reasonable prices for their products. We, the consumers, are in fact paying $55 for goods and services that could be sold for $22 and would still provide the corporations with a very reasonable return. If and when government subsidies end, oligopolies are broken up, and the market for goods and services truly becomes free and open, the S&P 500 should then generate $22/share each year, a 7% ROE, still an attractive return in a low-inflation economy. So we have a number of factors at work, conspiring to drive up stock prices in the unsustainable illusion that double-digit growth can and will continue forever, or at least until we're dead and it isn't our problem anymore. We have big corporations earning exorbitant returns, two and one half times a reasonable level given the risk, paid for by the taxpayer and consumer (the same people who then take what's left of their meagre paychecks and invest it, with insane trust in the brokers' unsustainable recommendations, in the stock market). And we have a P/E ratio that is already assuming that these wildly inflated, taxpayer subsidized, price-gouging levels of profit will continue to rise even further, at close to 20% per year, forever. Voilà, Ponzi scheme, par excellence. Let's do the math. Take the $22 per share that big corporations should be earning per share in a properly regulated and open market. Acknowledge that the assumption that these earnings are going to grow in the future, when markets are saturated, consumers, corporations and governments are already buckling under grotesque and unprecedented debt loads and cannot afford to buy or pay more than they already are. Discount that annual stream of $22 of earnings for 50 years at a reasonable 7% discount rate. Know what you get for the fair value of the S&P 500 with these calculations? About 300. That is what, when you strip out the growth hype, the subsidies, the price-gouging, and the unsupportable P/E valuation, the S&P 500 should be trading at. Not 1100. Eventually the Ponzi scheme will collapse. There may yet be time to con yet more foolish investors into believing that it will rise from 1100 to 1500 to 2000 or 5000 or higher, and if investors can be duped into believing that's what shares are worth, that's what they'll trade at. This scheme has been running for a century, and made many people millionnaires. But eventually we, or our children or grandchildren, will realize that the S&P 500 should be at 300, and since stocks always trade at what people think they're worth, that's where the S&P 500 will end up. The millions left holding the bag will lose most of their life savings, their pensions, everything. (Oh, and if you change the assumptions about inflation and interest rates, the above valuation doesn't change. Future values and discount rates both go up proportionally, so the inflation-adjusted present value stays the same.) Even the brokers can see the writing on the wall. They will now try to convince you that by wise investing you can 'outperform the market' by buying low and selling high, even if the market is ultimately doomed to do no better than go sideways. This is another great variant on a Ponzi scheme. It's the stuff that has hooked the new breed of gambling addicts called 'day traders'. For every investor whose holdings 'outperform the market' there will be, of course, at least one loser. But the magic of Ponzi is that it's always the other guy, the next guy, the not smart enough guy, who will get burned. You'd be better to play slot machines or buy lottery tickets -- at least the potential payout isn't overstated by 250%. In addition to the perpetual-growth Ponzi scheme, and the 'outperform the market' con, brokers also make scads of money from IPOs -- initial public offerings. As James Surowiecki has elegantly pointed out, the IPO is a scam by which an aptly-named 'syndicate' of investment firms ('underwriters') buy a mass of shares from the company 'going public', at about half the price per share they know they can flog them to gullible investors, many of whom rely on these very brokers for investment advice. They then dump their shares on these investors, knowing that the price will promptly drop back close to the IPO price. The underwriting brokers get rich, and the unsuspecting customers get burned. That's the reason Surowiecki and others, most recently Lawrence Fisher in yesterday's excellent analysis over at our mother ship Salon.com, have urged Google, potentially the most lucrative IPO of all time, to screw the brokers and either sell all the shares directly to the public by auction, or, even better, not to go public at all, and save the delirious investors the grief they will suffer when they find out Google has no direct line to God, and hence isn't worth a million dollars a share. Eventually we, or our descendents, will learn (or have no choice but) to 'just say no' to dysfunctional stock markets and all the evils they breed. Until then, we'll continue to be addicted to short-term thinking, the illusion of perpetual growth, paying too much for everything we buy, subsidizing public companies with our taxpayer dollars, downsizing and outsourcing and offshoring as 'productivity enhancement', and putting up with the atrocious greed, corruption and devastation of insatiable global corporations that pull the strings of politicians like puppeteers, all in the name of 'maximizing shareholder value'. It's addictive gambling with a staggering cost, it's insane, and it's fraud. |
 Graham Westwood of ProCarta gave me a copy of Bill Jensen's Simplicity, a book that claims
most business problems are a result of unnecessarily complex
decision-making processes. I recently
wrote
that if Knowledge Management were relabeled Work Effectiveness
Improvement, both the requirements of the job and the customers'
expectations would be much clearer, and we might finally get the job
done. Jensen's book offers a prescription for WEI.Jensen's thesis is that poor decision-making is the root cause of business error and ineffectiveness, and his diagnosis of the four causes for it is shown at right. Most employees, he says, want to do good work, but are impeded by these four causes, which produce unnecessary complexity in each of our jobs. I concur with this diagnosis, though I'm not sure large organization have either the capacity or the will to fix these four problems. At the individual and team level, Jensen suggests* five behaviour or learning changes that could alleviate these problems:
These are useful suggestions for improving work effectiveness and hence decision-making in organizations, but none of them is new. Those that would take up WEI (or KM) as a career need to understand why these techniques have not worked in the past, before they attempt to implement them in their organizations. In many companies, both employees and managers raise their eyebrows at 'soft skills' courses like time management, effective communication and story-telling. We know how to do that, they will say, the problem is more systemic, more entrenched than merely teaching common-sense skills can hope to solve. These critics are half-right. Many problems in business are structural, strategic, or systemic, and raising people's hopes by suggesting that these basic work management techniques are suddenly going to work bottom-up when they didn't work before, will merely create disappointment. Excessive size and hierarchy, poor managers, and inappropriate success measures (that reward executives more for cutting staff than for making staff more effective, for example) are at the heart of much work ineffectiveness, and need very different solutions. But these critics are also half-wrong. Each of us today is increasingly in charge of our own careers, our own jobs, and hence our own work effectiveness. The five skills listed above are critical skills for every entrepreneur and every front-line worker, and we should each ensure we have these 'core competencies'. If the big, cumbersome organizations we work for do not allow these skills proper exercise, then the answer is either to leave them or reform them, not to revel in our ineffectiveness and just blame management (even when they are to blame). The remainder of Jensen's book prescribes some higher-level organizational 'disciplines' that can enable improvements in work effectiveness:
Nevertheless, this book provides some of the much-needed definition for WEI, which I believe will be the next wave of organizational change, and will accomplish much of what reengineering and knowledge management failed to do. The #1 purpose of management must become empowering people to know and do what's important to achieve the organization's goals, and enabling them to stop doing the other stuff that, today, takes up most of their time. * Jensen uses different words for these, and for many of the key ideas in this book. As much as I liked his messages, I found sometimes his choice of labels for his key concepts confusing. |
This
is the first of five
articles in a series that will be published intermittently this month.
This article summarizes what I believe were the most important ideas
of
2003 in the world of blogs and blogging. The other articles in
the
series will propose the most
important ideas of the year in:
 BLOGS & BLOGGING -- THE TEN MOST IMPORTANT IDEAS OF 2003  During the year, the blogosphere doubled in size, and began to mature into a true alternative medium for information and connection. My nominations for the most important ideas of the year* in blogs & blogging are:
* Yes, I know some of these ideas are themselves not new this year. There is nothing new under the sun. But I would argue that the application and implications of these ideas were first manifest some time in 2003 |
 Diagram ©2004 The Caring Enterprise
Coach
Today, the average North
American entrepreneurial business lasts just four years, the average
sole proprietorship even less. Yet entrepreneurship is not rocket
science; it's nothing more (or less) than making a living for yourself
with your business partners, instead of depending on some indifferent
corporation to provide you with a living wage. Running a business is
certainly no more difficult than raising a family, or landing a job
and
building a career with a big company. The essentials of
entrepreneurship could easily be taught in every school, and there'd
still be plenty of time left for the rest of the school curriculum.
But, perhaps because big corporations and the governments they control
want the 'labour force' to be meek, subservient, fearful and insecure,
most people have come to perceive entrepreneurship as a complex and
difficult art, fraught with danger, unprofitable, emotionally
scarring,
and demanding of enormous courage and energy. "It's certainly not for
everyone", I keep hearing.Entrepreneurship requires self-knowledge of what you're happy doing, what you're especially good at, how much you're willing to put into your enterprise and what you expect to get out of it. Without this self-knowledge, you're likely to be as miserable in your own business as working for some unappreciative boss, and that unhappiness will bear directly on its success. Beyond that, all you need are common sense, self-confidence, and a modicum of four key, learnable skills:
One of the 15 steps in the process of establishing and running an enterprise is avoiding the landmines. In MBA school they now call this Risk Management. This article identifies ten of the major landmines for entrepreneurs, using some real-life examples. I don't believe any of the enterprises described below is still in business (though some of the entrepreneurs have moved on, learned their lesson, and succeeded in other businesses):
Another technique entrepreneurs can employ to alert themselves to potential landmines is establishing an Advisory Board made up of people who have well-rounded business experience, knowledge of markets, and skills the entrepreneur and his partners lack. Such Advisory Boards are often reciprocal, offering mutual support and advice in lieu of fees. I am constantly surprised how few entrepreneurs use such 'support groups', relying instead on their own instincts, the counsel of inexperienced and costly 'professional advisors', and others (bankers, customers, franchisors, and various 'agencies') who have only a nominal, and purely financial, interest in the entrepreneur's success. Some 'support groups' and networks have been set up as money-making ventures, but these tend to be unwieldy and their members terribly needy -- ten people looking for advice and new customers for every one capable of offering useful information or counsel in return. It's best to create your own. The problem, of course, is that most entrepreneurs are paradoxically too busy fighting fires and avoiding landmines, to be able to invest time finding and networking with support groups and other valuable advisors who can help them avoid the next round of fires and landmines. But, despite the failings of the first generation Social Networking tools, such tools hold enormous promise. Although Shoshana Zuboff coined the term The Support Economy to refer to federations of businesses working together to support their shared customers, the first true Support Economy may well be entrepreneurs supporting each other. |
 Figure 1 Richard Manning's book Against the Grain is a remarkable work -- succinct, well-researched, solution-oriented and mind-altering. It's an absolute must-read. Please don't settle for the synopsis below, and don't assume that because it's about the history and economy of agriculture it's a dull read. It's riveting. The issues that Manning describes in the book were first raised in his Harper's Magazine article last winter called The Oil We Eat. But the book goes much further. In my earlier root-cause analysis of what 'caused' us to invent civilization, to abandon our joyful hunter-gatherer cultures, the cause-and-effect went like this:
 Figure 2 The 'discovery' of grain monoculture in areas of recurring natural catastrophe (like floodplains) was only possible where man was already settled, which only occurred in areas where fish were plentiful, which is where all agricultural cultures began (the birthplaces of civilization) before they expanded and merged into the single civilization culture we know today. Sedentary life, and soft grain gruels, also allowed a higher birth rate, since babies no longer had to be carried for four years until they were weaned -- and the population explosion began. The ability to store food also allowed the provisioning of armies, and the need to keep people from going back to their instinctive hunter-gatherer ways and abandon the farms required the use of force, which required hierarchy and government. The provisioned armies conquered the remaining hunter-gatherers (most notably in Africa and the Americas) and made them slaves on the farms. To keep unnatural hierarchy1 from crumbling, the governors bribed subordinates with extra resources, larger homes, and their own 'private' land, as long as the subordinates kept the slaves and peasants in line2. Wealth, and its inevitable partner poverty, were born. Dependence on monoculture, which failed often, gave rise to the first famines. Average human heights plummeted due to disease and poor, unvaried diet, bone deformities from constant stooping became commonplace, and grain monoculture and crowded villages allowed previously rare diseases to flourish: anemia, arthritis, malaria, syphilis, and tuberculosis, and, finally, plague, all of them unknown before agriculture. And the high-carb diet of grain monoculture also brought with it other new and unnatural phenomena: tooth decay, obesity, diabetes, lactose tolerance, and alcoholism, which devastated many hunter-gatherer cultures when they were suddenly exposed to this deadly and seductive diet. So agriculture was irresistible to man, the ultimate devil's bargain. By doing so, man threw in his lot with a host of life forms that co-evolved with man and grain monoculture: this 'coalition' included the rat, insect pests, weeds and parasites as well as the aforementioned diseases and a handful of animals suited to domestication, all of which thrive with monoculture. In fact much of the 'conquering' of the hunter-gatherer world by 'civilized' man was really accomplished by our coalition partners: it was our diseases, to which hunter-gatherers had no exposure and hence no resistance, that killed most of them, not our weapons or their years of subsequent slave labour. The introduction of our domestic animals likewise altered the New World's terrain, since these animals had few natural predators and exploded in population, literally eating the natural flora to extinction. Like us, these domestic animals paid the price of civilization -- they are smaller, sicker and poorer than their wild counterparts, but the ultimate test of evolution is endurance, and our unholy coalition has passed that test with flying colours. Humans, members of the six domestic animal groups and the big five monoculture grains, and the rodents, insects, weeds and disease parasites that come with them have all flourished, at least in numbers, together, and together they now constitute a huge and growing proportion of Earth's biomass, while the millions of non-coalition creatures almost all face extinction. Although our diseases did most of the dirty work, Manning argues that our civilization culture committed systematic genocide against every hunter-gatherer culture on the planet, from the Cro-Magnon man in Eastern Europe (whose language, intriguingly lives on only in the tiny Basque community whose culture is still under siege), to the First Nations of the Americas and Oceania. The result was what anthropologists have called "remarkable cultural homogeneity" and "pathological conventionality". Its sustained hallmark has been ever-increasing famines, the "very badge of civilization". The worst famine ever, and one of the most recent, in Mao's China, killed 80 million people. The second worst, in Russia, was also in the past century. Famine, a sudden and severe shortage of vital resources, breeds hunger, and that always breeds imperialism in turn. The alternative, common and legal in China for millennia until quite recently, is an invention called "Swapping Children / Making Food" -- in times of famine you exchange your children for your neighbour's, and then kill them and eat them and use their bones for fuel. Modern mythology would have us believe that famine is a political problem -- a consequence of bad distribution of food and bad government -- and while this is in part true, famine is ultimately an inevitable consequence of our fragile monoculture and massive overpopulation. This quote, describing one such famine in Ireland, where potato blight in one year eliminated 90% of the monoculture potato crop and hence 90% of the food, has given me nightmares: In the first hovel, six famished
and ghastly skeletons, to all appearances dead, were huddled in a
corner on some filthy straw, their sole covering what seemed a ragged
horsecloth, and their wretched legs hanging about, naked above the
knees. I approached with horror, and found by a low moaning that they
were alive, they were in fever -- four children, a woman, and what had
once been a man. It is impossible to go through the details. Suffice
it
to say that, in a few minutes, I was surrounded by at least 200 of
such
phantoms, such frightful specters as no words can describe.
All of this because we threw ourselves out of the Garden of Eden, seduced by the lure of uniform plenty. Why and how did we get into this mess, and who is to blame? Manning recaps: "A population explosion generates the need to grow more food, but agriculture is the cause of that population explosion, and agriculture creates the need for government. The hierarchical, specialized societies that agriculture builds are wholly dependent on the smooth operation of their infrastructure, on transportation, on stability. Dams must be built, canals must flow, roads must be maintained and government must be established to order these tasks. Government leaders emerge from the social hierarchy that agriculture's wealth makes possible. Failures are human and inevitable. To hold agriculture blameless and government responsible for famine is like holding a lion blameless for a child's death on the grounds that it was the lion's teeth that did the damage. Poverty, government and famine are co-evolved species, every bit as integral to catastrophic agriculture as wheat, bluegrass, smallpox and rats." Our solution, of course, was not to blame agriculture, but to try to make it more efficient. Although we now produce a massively excess amount of monoculture food, famines, starvation and poverty remain commonplace. So lately we developed the Green Revolution to increase efficiency of grain production, to increase yields and edible mass per acre and per plant. The theory was that these high-yield crops could be grown closer to the starving. But fifty years later this has not solved the problem, and it has in fact increased the fragility of the system. Plants are now patented, and GM now threatens existing plant species and diversity and their utter homogeneity exposes them to new vulnerabilities as nature evolves new pests and diseases to try to bring back into balance this massive, ecologically unsustainable and undifferentiated surplus. And these higher yields come with a huge price tag. Whereas a calorie of your home-grown carrots requires less than a calorie of non-photosynthetic energy to produce, a calorie of grain requires ten calories of energy to produce3, mostly in the form of Mideast-oil-based, highly processed nitrogen fertilizers poured onto severely and evermore soil- and nutrient-depleted land. Ironically, that fertilizer replaces animal manure, which is no longer economical to truck from the new concentration-camp factory farms (also developed to improve 'efficiency'). So most of the oil-based fertilizer runs off into the water supply, along with massive amounts of pesticides, herbicides, antibiotics and other by-products of 'efficient' agriculture and the mountains of shit from the factory farms, which no longer has commercial 'value'. And if the smell of that shit makes living in the area unbearable, that's fine, too, because Archer Daniels Midland and the other handful of companies that run this entire system can then buy up and concentrate the farms more cheaply. Besides, we don't want nosy 'eco-terrorists' and news media poking around and seeing what really goes on in those factory farms anyway. The cost of this is so phenomenally high that government subsidies now exceed the entire 'commercial value' of the food produced. It's a massive corporate welfare scheme originally designed to keep families on farms and now accruing primarily to the few corporations that control the industry. Taxpayers pay for these corporations to produce and process an absurd excess of bad food and to finance governments who pursue Middle Eastern wars to get the oil needed for fertilizer. And in return the taxpayers get cheap, tasteless, unhealthy, polluted food, monstrous animal cruelty, massive pollution of the air and water, heart disease, obesity, diabetes, tooth decay, alcoholism, ruined land, and unemployment. And still there is famine. So what are we to do? Manning starts by pointing out what not to do -- try to get government to change the system. "The political system cannot be counted on to reform agriculture because the political system is a creation of agriculture, a co-evolved entity". Of course we should try to end agricultural subsidies, but Manning says we are unlikely to succeed. Vegetarianism can help, but not much: As long as the vegetables come from the same commodity system, they're still causing massive environmental and social damage and animal cruelty. And we couldn't go back to hunter-gatherer culture, at least not in our current numbers, even if we wanted to. But reducing human population is a necessary condition: "I do not take human population as a given; if we accept six billion as inevitable, we are doomed". Beyond that, Manning's solution is the same one that a rising chorus of radicals and revolutionaries is calling for: A walking away from this system and its products, and the creation of a new, healthy culture and economy. To Manning, focused on the food economy, this means:
|
| Four
years ago I wrote a well-received paper entitled A Prescription for Business Innovation:
Creating
Technologies that Solve Basic Human Needs. I've updated it,
broken it into three manageable pieces, and present the first part
below. The remaining parts will follow on successive Tuesdays. Introduction: Why I'm Here My modest objective in this presentation is first, to tell you some new, interesting and useful things about innovation, and, second, to persuade you that innovation is the most important determinant of every business' success, and perhaps even the quality of our lives. I want to convince you that in your business, whether it employs one person or one million, innovation is probably the solution to whatever is currently keeping you awake at night -- whether that be sales growth, cost control, customer satisfaction, employee retention, or maximizing shareholder value. And if you, like me, spend some of your sleepless hours worrying about things more altruistic than your personal and business success, I want to convince you that innovation is probably also the solution to most of the problems that have befallen our suffering planet, in part because past innovations have created many of these problems. And finally, if I'm successful in this evangelical task, I want you to leave today not only with renewed hope about the future of your company and our world, but with some new tools to make innovation happen in your business. I would like to ask you to listen to these ideas with an open mind, suspend briefly your disbelief, and give this your full attention. If this was that easy to explain, someone much smarter than I would have done it years ago. One: Learning from our past: How Need Drives Innovation The advent of a new millennium has recently given many business, political and economic thinkers pause to consider what will be, as most put it, the 'Next Big Thing':
Technophiles who favour the Acceleration Model tend to be infatuated with artifacts of the last thirty years: more digital, faster, smaller, lighter. Advocates of the Chaos Model, on the other hand, believe there are no rules for our brave new world of the 21st century. Their advice for business and other leaders is to be opportunistic and think short-term. I lean towards the Evolutionary Model. I believe that using an understanding of the past, with the right perspective, can help businesses anticipate the future with exceptional clarity and probability of success. There are two reasons I hold this belief, and they form the basis for much of the rest of this presentation:
 Figure One: How Fundamental Needs spawn Innovations & Technologies (Adapted from Credit Suisse First Boston New Economy Forum 1999 Synthesis) According to this model, innovations like crop cultivation, the printing press, and the harnessing of solar energy, have always arisen in response to an urgent human need -- overcoming the sudden food scarcity after the Ice Age, bringing literacy to the masses, and solving the energy crisis respectively in these three examples. Technologies are applications of these innovations. The intriguing organic-looking ovals for each technology are also from the Credit Suisse Synthesis, which proposes are technologies are best developed using the following process:  Figure Two: Development Process for Technologies (from Credit Suisse First Boston New Economy Forum 1999 Synthesis) Let's now take a look at this synthesis model in more detail, to test whether it represents the way in which historical innovations have occurred, and then what this might tell us about innovations of the future. Two: Man's Earliest Innovations: A Brief History of Technology The first humans to walk on our planet, according to most anthropologists, were not the mighty hunters most of us might picture. In fact we were particularly disadvantaged, lacking both keen senses and a hide adapted to changing climates and weather. As a result, early humans were scavengers, ignominiously surviving off the leftovers of creatures with better innate hunting 'equipment'. In the first scene of 2001: A Space Odyssey, Kubrick & Clarke hypothesize that a carrion bone was the first human tool. Marshall McLuhan explained in his book Understanding Media that this early human was using the bone, this very first tool or technology, as an extension of his hand, giving it strength, reach and durability his hand alone did not have. McLuhan argued that all technologies are extensions of the human body and the human senses, and it is these technologies that have allowed the poor, badly-pelted, sensory-deprived human species to buck Darwin's odds and survive. So picture our poor shivering proto-human looking among the bones of a wolf's recent meal for new tools beside the greasy bone, and thinking, in true McLuhanesque and 20th century economics terms: 'If the bone as an extension of my hand helps me to compensate for my competitive disadvantage in the hunter-gatherer marketplace, why can I not use other tools similarly? Then, lacking the appropriate scientific training but still intoxicated over his first innovation, he or she comes across a dead wolf and considers the following applications of this technological insight:
Without animal domestication and crop cultivation, we as a species might well not have survived to come up with newer and more sophisticated innovations like the wheel, paper and the computer. Three: Six Principles about the Innovation Process The first humans used precisely the process shown in Figure Two to develop and 'commercialize' the technology applications of the innovations of animal domestication and crop cultivation. It is the same commercialization process taught in business schools today. However, the success of the process is only as good as the idea, the innovation, that lies at its front end. Business schools are actually very good at explaining the recipe, but they, and most educational and business institutions, are absolutely terrible at teaching people how to find the essential new ingredients -- the 'grey matter' at the left side of Figure Two, the ideas & innovations that make the recipe work. The problem isn't a scarcity of good ideas either -- it is the lack of rigour and investment in infrastr |
I've now finished Jim
Merkel's book 