Innovation and Networks of Exchange

Instapundit highlights some questions from a Business Week interview with Frank Moss, the new head of MIT's Media Lab, discussing mass innovation and disruptive change:

What role will startups play in the future?

I see tremendous economic growth from startups from 10 years ago. Entrepreneurs will go from the 1,000 startup ventures funded in the last 10 to 20 years to ideas coming from people working together in network-based environments, using computers to dream up innovations in a way they never did before. It could be people in developing countries with low-cost computers.

You talk about education and the bottom-up effect that millions more people will play in societal advances. How do you see this unfolding?

We will undergo another revolution when we give 100 million kids a smart cell phone or a low-cost laptop, and bootstrap the way they learn outside of school. We think of games as a way to kill time, but in the future I think it will be a major vehicle for learning.

Creative expression (is another area). No longer will just a few write or create music. We will see 100 million people creating the content and art shared among them. Easy-to-use programs allow kids to compose everything form ringtones to full-fledged operas. It will change the meaning of creative art in our society.

We are already seeing early signs of it in blogs. The source of creative content is coming from the world. That revolution will go well outside of the written word to all forms of visual and performing arts.

In the same post, Instapundit also links to this article by the BBC discussing how technology is empowering grassroots media:

It is not an impact on the epic scale of an asteroid smashing into the Earth and killing off the dinosaurs, but the collision of technology and media is having profound effects on a more modern ecosystem.

Media are becoming democratised, and a global conversation is emerging.

The tools of production - used to create digital content such as blogs, podcasts, wikis, discussions, multiplayer games, mashups (I'll describe each of those in more detail below) - are increasingly powerful and easy to use, yet decreasingly expensive.

Distribution is also becoming less expensive and easily arranged. . . . The democratisation of media is also, fundamentally, about the people we once called mere consumers. Their role is evolving from a passive one to something much more interactive, but they are blessed (or cursed, depending on one's viewpoint) with an unprecedented variety of voices and services.

My Take: I completely agree with these articles about the trends that technology is allowing to happen. I believe that the innovation and entrepreneurship that has developed these technologies is acting in the marketplace to further lower the costs of innovation and starting up a business. As the pace of technological change quickens, more arbitrage opportunities open up, attracting new entrepreneurs to move into untapped niches in the marketplace. This in turn drives further innovation which continues the trend.

Take the media for example: One point I would refine in the BBC article is that I would call it the dispersion of media power rather than the democratization of it. There is still plenty of media power concentrated in the traditional "Mainstream Media" (MSM). What has fundamentally changed is that the tremendous advances in communications and computing technology have allowed any individual with a computer and internet connection to become their own publisher. The MSM maintains an advantage in their brand recognition and breadth of reach through an established media infrastructure (television, radio, newspapers, etc.).

The rise of new forms of media are allowing individuals to publish thoughts onto blogs in real-time, often beating the MSM to stories and acting as a fact-check against the MSM, giving the MSM stronger incentives to report accurately or else loose brand recognition and market share. (Think about the New York Times incident with Jayson Blair or the CBS "Rathergate" fiasco. The blogosphere was also instrumental in John Thune beating Tom Daschle in the last Senate elections -- with Daschle being the only incumbent senator to loose in that election.) The blogosphere is certainly acting as a powerful check against the MSM and a way to get access to stories that do not get press attention in traditional media outlets.

The other neat thing about the blogosphere is that it is rapidly innovating and should continue to do so, barring any political interference in its development. The dispersion of individuals involved makes it much more organic in its development and reduces the power and influence of any one stake-holder. Game theory predicts that this makes collusion extremely difficult (if not impossible), making an excellent "breeding ground" for open communication, exchange of ideas, and rapid innovation. The low cost of ownership and low stake-holder influence work together to create a dynamic environment in which risk-taking, experimentation, discovery and innovation all occur at an increasingly rapid pace.

What is true of the blogosphere should also hold true for any market sector in which there is a dispersion of stake-holders and a lowering of barriers to entry. As more people are able to enter a particular market (be it media, computer programming, biotech, nanotechnology, etc.), competition will increase and innovation will ensue as people strive towards attracting larger shares of the market. (See Michio Kaku's excellent book, "Visions", for more about these emerging technologies.) This should lead to growth of these markets, increased quality of goods and lower prices. What has been interesting about the blogosphere is that it represents a network of individuals that benefit from one another's success. In contrast to normal industries, blogs often increase their influence by cooperating with one another, rather than competing against each other. Blogs tend to compete in trying to win the "battle of ideas" rather than by trying to "win" readership at the expense of other blogs.

We have recently been discussing the book "Guns, Germs, and Steel" by Jared Diamond in my macroeconomics class. In his book, Diamond argues that the primary driving force of historical economic growth has been the geography of where people have lived. A large component of this is the isolation or connectedness people have had with one another. As you might expect, regions (such as the fertile crescent) that have had access to large numbers of trading partners tended to have societies that flourished, innovated and grew. Societies that were cut-off from other regions by geography tended to stay in a relatively primitive form of development.

If you think of this as people being in a "network of exchange", those societies that were able to exchange goods and ideas were able to use these new resources to develop and innovate further. As the pace of exchange quickened, so did the corresponding development. I believe this is the transition we are now seeing occur in the hi-tech fields. The rise of the World Wide Web and ubiquity of computers and internet access has facilitated the development of a world-wide "network of exchange" of ideas. As more and more members enter into this network, the power of this network will grow exponentially.

Innovations that I believe will catalyze this further include developments that make using these technologies even easier and that make access more ubiquitous. Think in terms of how much advances in GUIs (Graphical User Interfaces) for computer operating systems, WYSIWYG (What You See Is What You Get) and text-based editors for blogs (allowing people to create and maintain them without needing any knowledge of HTML), the World Wide Web for the internet, etc. Each one of these advances greatly reduced the learning curve needed to operate these technologies. This has the same effect as reducing the barrier of entry into these areas, opening the floodgates of potential entrepreneurs. As these technologies extend into further areas of the world that now are not well-connected into this "digital geography", we can expect to have greater innovation as a result of the power of their minds and creativity joining in the chorus of innovation.

Will that be an exciting time or what?

For further reading:

Hugh Hewitt's "Blog", Glenn Reynold's "Army of Davids", Jared Diamonds "Guns, Germs, and Steel", and Michio Kaku's "Visions".



Also, be sure to read Arnold Kling's thoughts on how these lowering costs of starting business and rising costs of college should lead more young people towards becoming entrepreneurs.

Questions: What do you think about all of this? Do you think that lowered barriers of entry will lead to increased innovation? Do you expect the spread of the "networks of exchange" I described to new areas of the world to have a large or small impact on those areas? How about on the development of these technologies? What impact do you think the emergence of low-cost bio-tech and nanotechnology will have on the world? Are there any dangers from this? What are the downsides of the development of these technologies? What about the upsides? Do you have any other thoughts on these issues?

Map of the Market

This is not something new, but it is something good. (This has been on the internet for several years.) SmartMoney.com has a map of the market that allows you to look at gains and losses in various sectors of the stock market. It's a useful visual tool for understanding how different areas of the economy have done on a daily, YTD, six-month or yearly basis. The size of each sector on the map also represents the relative market share that sector comprises of the total market measured by this map. Likewise, the relative size of each company in its appropriate sector represents the market share that company posseses.

The map is color-coded by company to indicate if stock prices for companies have increased or decreased over a specified amount of time. The brightness of color represnts the magnitude of gains or losses in stock price. You can also select specific companies and get detailed prices, financial statistics, analysis, and news for each one, simply by pointing and clicking.

Check it out and have fun! This is a brilliant way to convey a lot of useful information in a simple, non-technical, easy to understand way. This makes me wonder how else interactive technology and novel use of graphics (static or animated) can help convey other complex ideas? What other non-technological methods can be used? Certainly important questions a future economist should be asking...

The Geography of Seinfeld

Take a virtual tour of all the misadventures of George, Elaine, Kramer and Jerry on this interactive map.



Courtesy of del.icio.us

Awesome Artwork!

This has got to be the world's coolest sidewalk art:

See many more after the link...

Hattip to Michelle Malkin for pointing to this.

Free to Choose?

Don Boudreaux over at Cafe Hayek has a great article comparing the thinking of Paul Krugman with GMU's own Nobel Prize Winner, Vernon Smith. He contrasts their views on health care and how much respect they give to the average individual.

Boudreaux quotes Krugman:

But the case of diabetes and other evidence suggest that a third problem with health savings accounts may be even more important: in practice, people who are forced to pay for medical care out of pocket don't have the ability to make good decisions about what care to purchase. ''Consumer driven'' is a nice slogan, but it turns out that buying health care isn't at all like buying clothing.

And then goes on to quote Smith:

Many will say that neither the patients nor the students are competent to make choices. If that is true today, it is mostly due to the fact that they cannot choose and have no reason to become competent! Service providers are oriented to whoever pays: physicians to the insurance companies and the government; universities to their legislatures. Both should pay more heed to their customers -- which they will if that is where they collect their fees.

Why this difference between the two economists? Who is to be believed? This issue strikes at a key issue studied in economics -- who has the best information to make choices for you? You or someone you don't even know? Someone you have never spoken to? Someone who doesn't know your name, age, weight, family history or anything else about you? Krugman in noticeably silent about who he proposes would do this choosing for you. Presumably, he would propose to put this power in the hand of politicians in DC who are perfect examples of people lacking knowledge about anything personal about you. Notice, I am not doubting the intentions of the politicians, only their ability to do the job many propose they do. Even the most benevolent among them would not be able to do an adequate job at this.

If we need more intelligent people making choices for us, why not trust them to tell us what cars to buy, what clothes to wear, who to marry, what items we're allowed to buy from the grocery store and where we can live? Surely many of these things matter just as much to our overall well-being as health care. (I can live longer without going to the doctor than I can without eating. Why no clamoring to stop the ignorant masses from shopping at the grocery store?)

These issues all highlight something Hayek called the knowledge problem. No one knows better than you how to spend your money, what priorities you have in life, the goals you want to accomplish or how much you value things like food, health and happiness. There is no exceptional level of intelligence needed to make decisions on these things. Hayek once observed that one of the problems with intelligent people is that they tend to overvalue intelligence. These words ring very true!

Ask yourself if you need some one else to choose for you an auto mechanic, optometrist, computer vendor, church or civic group to join? We are not autonoma with no individual preferences. We are all unique human beings with personal experiences and situations in our lives that differentiate us from others. That's what makes us the best choosers of our own destinies and what makes interacting with other unique individuals such an exciting and dynamic experience. The things that make you you are the things that make life worth living.

I highly recommend reading Milton Friedman's excellent book, "Free To Choose". (Also be sure to check out his accompaning website.) This is the premier primer on this kind of thinking. It was the third economics book I ever read and completely changed the way I look at the world.

Superman's Widow Dies

This is really sad:

Dana Reeve, the widow of 'Superman' star Christopher Reeve, died last night from lung cancer. The 44-year-old nonsmoker faithfully stood by her husband's side after an accident left him paralyzed and later poured her energy into the Christopher Reeve Paralysis Foundation, which funds research on paralysis and works to improve the life of the disabled. The couple's 13-year-old son lost both parents in less than a two year period.

I grew up as a big fan of the Superman movies -- particularly the first one. Dana and Christopher Reeve both lived up to the Superman name after a horse-riding accident left Christopher as a quadraplegic. Truly a sad and touching story.

Please remember their 13-year-old son, Will, and the rest of their family in your prayers.

For those who care to do so, donations may be made in Dana's memory to the Christopher Reeve Foundation, 636 Morris Turnpike, Short Hills, New Jersey 07078 or online at www.ChristopherReeve.org.

The No S Diet

I'm not looking to go on a diet right now, but if I were, this sounds like one I'd be prone to try. It's called the "No S Diet" and here's how it works:

There are just three rules and one exception:

• No Snacks
• No Sweets
• No Seconds

Except (sometimes) on days that start with 'S'

That's it.

Sounds simple and that's what I like about it. I tend to think that way too many people needlessly complicate their diets when trying to loose weight. I took two semesters of advanced thermodynamics in my undergrad mechanical engineering program and understand that the only way to loose weight is to burn-up more calories then you consume. Nutrition is more complicated, but this is the basic formula for weight-loss. All diets that are successful at causing people to loose weight boil down to this basic formula.

I like the idea of the "No S Diet" because it wouldn't restrict me specifically, would give me some guilt-free "wiggle room" on days that are more likely to be social and would be something very simple and easy to remember. Very nice! The simplicity of it is something that I think would make me more prone to follow it and much easier to stick with it without expending too much mental energy in the process.

You can read more thoughts on this here.

I wonder -- would "study days" count as days that starts with "S"???

Hattip to Health-Hack.com for pointing to this.

Questions: Does anyone out there have any thoughts on the merit of this? Anyone have any other good health tips or dieting tips they'd recommend?

Quote of the Day

"The worst thing about Europe is that you can't go out in the middle of the night and get a Slurpee." -- Tellis Frank

Is That A Microphone Stuck In Your Ear?

Most laptops have speakers built-in, but many of them do not have a built-in microphone. Lifehacker has a great idea for a workaround:

Here’s a great McGyver tip. It’s a basic fact of physics that headphones and microphones are basically the same thing. Sure, one of them turns electrical signals into sound waves and the other turns sound into signals, but they’re both basically identical.

It’s just like a motor. Add electricity to a motor and the shaft rotates. Turn the shaft manually, and you create electricity. So the next time you can’t find a working microphone, consider using a pair of headphones. We’re not talking high-quality sound response, but it should get you through the task at-hand.

The next time you're in a hotel overseas and suddenly get the urge to talk to your loved ones on Skype, no need to despair because you left the microphone at home...

The Best Law School In the US!

From today's Opinion Journal (emphasis mine):

Here is a complete list of universities that have said they will decline taxpayer funds rather than allow military recruiters on campus:

Yet another campus may be about to join this list, the Associated Press reports from Montpelier, Vt.:

Vermont Law School is unlikely to begin admitting military recruiters to its South Royalton campus even though the U.S. Supreme Court says it's legal for the federal government to withhold money as a result.

Dean Geoffrey Shields said the decision would be up to the school's trustees, but he did not anticipate a change of position just because the high court had ruled unanimously against Vermont Law and other law schools. . . .

Shields said the school's position probably had cost it several hundred thousand dollars a year, although he said he could not be certain because some of the money could have come in the form of grants that it was not able to seek.

The Yale Daily News reports that only two other law schools--William Mitchell College of Law in St. Paul, Minn., and New York Law School (not to be confused with New York University)--defied the recruiting requirement before Monday's Supreme Court decision upholding it.

Only one law school, George Mason in Arlington, Va., filed a brief on the winning side. Given that not a single justice agreed with the views put forward by profs at Harvard, Yale, Columbia, Cornell, NYU, Chicago, Penn, etc., it seems fair to say that George Mason has the most competent professors of any law school in the nation.

Not only do we have the best economics program in the nation, looks like we have the best law school too!

What If Montana Took Over The World?

ChicagoBoyz takes a look at how the world might have been (emphasis mine):

Imagine Montana, population 900,000, conquering the Western Hemisphere, population 800 million. In little more than one generation: slaughtering its armies, assimilating its air forces and navies, killing almost every government and corporate official; conscripting a tenth of the entire population in every country to provide logistical support; deliberately sparing, but nonetheless abducting, every high-profile scientist, engineer, entrepreneur, doctor, and clergyman, and rotating them amongst Helena, Albany, Austin, Mexico City, and Brasilia. Building infrastructure from Point Barrow and Labrador to Recife and Tierra del Fuego, then mounting a two-pronged invasion of Africa, overrunning Nigeria and South Africa in six weeks, poised to sweep north and east to the Mediterranean and Red Seas within months -- and then abruptly withdrawing.

In the thirteenth century, events on that scale occurred in Eurasia,and Jack Weatherford explains how in Genghis Khan and the Making of the Modern World ...

With a few simple but fervently held and rigorously practiced organizational and fighting techniques, the Mongols smashed army after army and city after city, incidentally creating a profoundly uncorrupt, meritocratic, and egalitarian polity even while accumulating enormous amounts of plunder. Temujin's ... shifted the loyalties of hundreds of thousands of tribespeople to himself and the nation, transforming a hyperfragmented nomadic people into the most effective fighting force the world had ever seen...

What I regard as the single most fascinating counterfactual in human history is what failed to occur in 1242 AD. Batu Khan's armies, having already conquered Russia and the Ukraine, continued westward... having overrun Poland, eastern Germany, and Hungary as rapidly as the Nazi blitzkrieg would advance seven centuries later, and scouted at least as far west as Vienna -- they returned to the east, to attend a khuriltai to elect a successor to Ogodei Khan, who had drunk himself to death four thousand miles away in Karakorum.

What if Ogodei had sobered up? -- or moderated, even slightly, and lived even one more year?... [It is assumed] that they would have utterly destroyed Western civilization, thereby retarding political and technological development by several centuries.

Read this excellent post describing this fascinating part of human history. To think that all of Western History hinged on one man's night of alcohol abuse!

Absolutely fascinating!

Questions: What other singular events have occurred that may have forever altered the course of human history? How much can one man influence the course of history? How much impact can each one of us have?

Give Me Liberty or Give Me Pizza?

From the desk of Jane Galt:

"Give me liberty, or give me a large thin-crust with extra cheese and pepperoni."

An Elevator to Space?

I used to think talk about elevators to space was just science fiction, but it looks like there are some people out there trying to make this an actual reality. Here’s a quote explaining more about it from Business 2.0 (courtesy of Gizmodo):

Earth is constantly spinning. So if you attach a counterweight to it with a cable, and put it far enough away—62,000 miles—the cable will be held taut by the force of the planet’s rotation, just as if you spun around while holding a ball on a string. And if you’ve got a taut cable, you’ve got the makings of an elevator.

As strange as that sounds—push the “Up” button, climb in, and soar off into weightless bliss—don’t be surprised if it happens. The space elevator is where the PC was in the 1960s: The theory is solid, the materials exist, and people in garages are starting to tinker with the next step. Two Seattle startups are competing to build the elevator. Both believe they can do it within 15 years at a cost of $10 billion. NASA and China’s space agency are eager to
help make it happen.

And no wonder: A working elevator would reduce the cost of launching anything into space by roughly 98 percent.

If anyone succeeds in making this a reality, it would completely change the dynamics and cost-structures of all industries connected with space – satellites, space travel, etc. Who knows what new innovations might emerge from this?

Here’s a website explaining more about how this might work. Also, Instapundit’s Glenn Reynolds has several articles on this here, here and here.

Anyone up for a 62,000 mile elevator ride?

A Friend Gets Published!

Stephen Slivinski is the husband of one of my classmates, Krystal, and has an upcoming book that is now available for pre-order on Amazon.com. The book is called "Buck Wild: How Republicans Blew the Bank and Became the Party of Big Government".

Stephen is the Director of Budget Studies at the Cato Institute in Washington, DC. Here's a brief profile about him from Cato's website:

Stephen Slivinski is an expert in tax and budget issues at the state and federal levels. Most recently, he worked as a senior economist at the Tax Foundation in Washington, D.C. Slivinski has served as director of tax and budget studies for the Goldwater Institute in Phoenix, Arizona, and as a research associate at the James Madison Institute in Florida. Slivinski has appeared on CNN, Fox News Channel, and MSNBC. He is coauthor (with Stephen Moore) of Cato's Fiscal Policy Report Card on America's Governors, and his writing has appeared in the Wall Street Journal, the New York Post, the Washington Times, the Philadelphia Inquirer and National Review Online, among others. Slivinski holds a master's degree in economics from George Mason University.

Stephen is a really great guy and I'm very impressed with him on both a personal and an intellectual level. Every conversation I've had with him has been insightful and engaging. I'm sure this is bound to be a great book!

Please support Stephen and pre-order your copy today!

P.S. -- Here's a report by Stephen on How Republicans became defenders of Big Government. (Hattip to Marginal Revolution.)

What Do Women Want?

I ran across an interesting article examining the issue of what makes wives happy? Here's some of what they had to say:

Freud confessed that his “thirty years of research into the feminine soul” left him unable to answer one great question: “What does a woman want?” Modern feminists have been arguing for decades over a variation of it: What should a woman want?

This week, two sociologists from the University of Virginia are publishing the answer to a more manageable variation. Drawing on one of the most thorough surveys ever done of married couples, they’ve crunched the numbers and asked: What makes a woman happy with her marriage?

... it turns out that an equal division of labor didn’t make husbands more affectionate or wives more fulfilled. The wives working outside the home reported less satisfaction with their husbands and their marriages than did the stay-at-home wives. And among those with outside jobs, the happiest wives, regardless of the family’s overall income, were the ones whose husbands brought in at least two-thirds of the money.

These results, of course, are just averages. Plenty of people are happy with different arrangements...

The happiest wives in their study were the ones who said that housework was divided fairly between them and their husbands. But those same happy wives also did more of the work at home while their husbands did more work outside home. Nock doesn’t claim to have divined the feminine soul, but he does have one answer to Freud’s question.

“A woman wants equity,” he says. “That’s not necessarily the same as equality.”

Interesting, but is this surprising? I have a number of female friends and family members who have become stay-at-home moms after having their first baby and for the most part, I've never seen them happier or more fulfilled. As I talk to many young women here at GMU, it seems many of them are planning to take time off of work to spend with their kids, when they have them. Many women from elite colleges are also choosing traditional paths to motherhood, even those with advanced degrees.

Is there tacit knowledge contained in traditional marital arrangements and roles that we don't fully understand? For the average couple, does this type of family arrangement lead to more happiness and satisfaction out of life? That doesn't mean it is the best for all families, only that it is a successful arrangement for many.

The more I learn about economics, the more impressed I am by Hayek's insights into how culture and tradition contains unarticulated knowledge that helps people survive and thrive. Despite our best intentions, we don't always know how meddling with our institutions (such as marriage, family, etc.) may impact our society in the long-run. Even the best laid plans often have unintended consequences.

I think the unprecedented opportunities available to women today are a tremendous blessing to our society and are something to be protected and cherished. However, I also believe that wives should be able to make choices with their husbands about how to divide up responsibilities in their marriage. The choices they make together for how to organize their lives should be celebrated in its many forms -- even when it takes on a traditional form. The freedoms women now enjoy include the right to decide to stay home and raise a family as a full-time mom. This choice should be celebrated and applauded when it is made. As should any other choices made by moms and dads to provide for their families in the ways they think are best.

To all you moms out there and dads who work together with them to love and support your families, thank you for all you do! I want to especially say an extra big thank you to my own parents. My mom and dad worked together as a team to provide for our family when I was growing up. Mom stayed home with my brother and I and dad worked at the office to earn the finances to keep the family going. They made an awesome team and both made a lot of sacrifices in their own lives for the sake of my brother and I. They set a tremendous example for me to follow. Mom and Dad, I love you both! Thank you so much for all you did and are still doing!

Follow-up:

• Here are some thoughts on how economic changes have shaped changes in family structure.
  
• Some commentary on how delayed marriages and declining fertility are leading to profound demographic changes around the world.
  
• Statistics indicating that marriage appears to boost the happiness of both men and women significantly, while working status has a much larger impact on men.
  
• Linda Hirshman (a visiting professor at Brandeis University) weighs in on "choice feminism" and ABC News tells of the "Mommy Wars".

Lastly, I would be remiss if I did not include Walter Williams' take on all of this...

Questions:

• What do you think is the best form of family?
  
• Do gender roles help or hurt family dynamics?
  
• What is the nature of motherhood and fatherhood?
  
• How interchangeable are the roles of each?
  
• What is unique about each?
  
• What impact does it have on children for moms to stay home or for moms to work?
  
• How about dads staying home or working?
  
• Do you believe that staying home with the family tends to make women more or less happy?
  
• Why do traditional gender roles tend to persist?
  
• Do you believe traditional lifestyles tend to make families better or worse off?
  
• Is this due to something inborn in our natures as men and women or is it the result of culture?
• If we stop focusing on individual fulfillment and equality, and instead focus on the good of the family, do our perceptions of these issues change?Are these in conflict with one another? Which perspective is best?
• If marriage is such a great happiness booster, why is there such a strong trend for people to delay getting married?
  

How to Peel A Potato

Lifehacker has a great video today showing how to peel a potato in one easy step.

Very reminiscent of an earlier video of how to fold a shirt in one quick motion.

Weird...

I got in my truck tonight to go to church and suddenly realized it had been seven days since I had driven anywhere...

Engines That Move

Harkening back to my former life as a mechanical engineer, I found these animated engines to be pretty cool...



Their creator, Matt Keveney writes:

I have loved mechanical things since I was a kid. Engines in particular have always intrigued me. All my life I've pored over books, studying cutaway diagrams, hungry to understand how things worked. These pages are an attempt to share that magic.

He also goes on to explain how he created them.

Hattip to Make for pointing to this.