Innovation versus Idiots How to stay on the right road

Still catching up with some of the older pending posts in my draft bin. Found some from Harvard Business Publishing, especially this one by Bill Taylor.

The article of particular interest was Wisdom of Warren Buffett: On Innovators, Imitators, and Idiots in which he provides a hour-long television interview with Buffett in which he talks about the "natural progression" of how good new ideas go wrong. The "three I's":

1. Innovators, who see opportunities that others don't.
2. Imitators, who copy what the innovators have done.
3. Idiots, whose avarice undoes the very innovations they are trying to use to get rich.

Taylor tells us that, the problem, in other words, isn't with innovation -- it's with the idiocy that follows.

So how do we as individuals (not to mention as companies and societies) continue to embrace the value-creating upside of creativity while guarding against the value-destroying downsides of imitation? The answer, it seems to me, is about values--about always being able to distinguish between that which is smart and that which is expedient. And that takes discipline. Can you distinguish between a genuine innovation and a mindless imitation? Are you prepared to walk away from ideas that promise to make money, even if they make no sense?

So if Buffet warns us of the path to economic destruction, but what do we need to do to keep on the right road? Scott Anthony provides another insightful post, again from Harvard Business Publishing in which he discuses the Three Steps to Innovating in Struggling Industries.

1. Lower the cost of testing.
2. Creatively tap into outside resources.
3. Ruthlessly prune the portfolio.

Activist Bringing About Change Through Disruption (Social and Economic)

I am posting on this subject here before dealing with it over at my other blog Milestones for a New Millennium. This blog allows me far more philosophical latitude, making it more of a learning tool for me, and I am still exploring these concepts.

The question is whether it is possible to create economically sustainable enterprises that help the billion at the bottom of the economic ladder in a uber-consumer world? It seems obvious that efforts to break into a market will require innovation, but are the cards so stacked that such efforts are hopeless, especially in fields such as Healthcare? After watching this talk by Clayton Christensen, I am going to say no, that a sustainable social-entrepreneurial model is very viable.

• MIT World » : The Innovator's Prescription: A Disruptive Solution to the Healthcare Crisis

  diigo tags: MIT, engineering, systems design, healthcare, management

  • Christensen distinguishes between the kind of sustained and incremental technological improvements that help a market leader retain its edge, and “disruptive technology,” where a simple and affordable idea takes root in “an undemanding application at the bottom of the market, then improves from that foothold.” Christensen, looking at lots of industries “found almost invariably that an entrant company came in and killed the leaders” by way of a simplifying technology.
    

To my mind, this is closely tied with the the concept of creative-destruction. I don't, taking counsel from Robert Solow, see its founding proponent, Joseph Schumpeter as the savior of 21st century economics as some do, and especially not of activists seeking change through social enterprise,.

Which brings us to the "democracy" in Schumpeter's title. He was not a democrat by instinct or by reflection. He had little confidence in the ability of the average citizen to vote intelligently...

At the same time Solow saw that Schumpeter realized that:

Anyone can invent a new product or a new technique of production. The entrepreneur is the one who first sees its economic viability, bucks the odds, fights or worms his way into the market, and eventually wins or loses. Each win means profit for the entrepreneur and his backers, and it also means a jog upward for the whole economy. In the course of this process, which cannot possibly run smoothly, many businesses, individuals, and institutions, themselves founded on earlier successful innovations, will be undermined and swept away. Schumpeter called this birth-and-death process "creative destruction," and realized before anyone else that it was the main source of economic growth.

Creative-destruction is still a useful means, more descriptive than prescriptive, of looking at the world. The disagreement is with what actions we take with that knowledge. What disruptive innovations allow social-entrepreneurs is a means of striving in the world without having to beat the leading-edge of established corporations.

Other posts on creative-destruction
Creative-Destruction, Entrepreneurship And Innovation
The Awards And Risks of Innovation: Embracing Destruction And Creation
Consumerville USA Versus Creatorville USA

We Are All Getting Digital - Old Rocker Shows the Way

| New York Times August 10, 2008 An Old Rocker Gets Digital By FRED GOODMAN

Peter Gabriel, the rock musician, has become a powerful player in the emerging online music industry by helping artists find new ways to market their music on the Web.

This has been sitting in my draft bin for about a week. Going digital is not really breaking news, it is an on going transformation. I am pleased that it is an Old Rocker leading the transformation.

This has been an off and on topic for this blog for sometime. What is of interest is the transforming of older paradigms defining mass media industries, such as music, into newer paradigms. The transformation has impact on individual artists and businesses, but it also has broader impact on how we define ourselves in terms of community. It also makes for an interesting model as to how endeavors that are more social in nature can survive in an environment which is more business, the combining of artistic freedom with the creation of an economically sustainable enterprise.

Past posts on this subject
The Power of Many! Music For All?
Troubadour Troubles - Economic, Legal, Moral? You Pick
Confusing Means and Ends and the Pathways Between Them

The Musician As Businessperson The Entrepreneur as Artisan

What Makes An Economic Miracle? What Prevents It?

This weblog was created to obtain a better understanding of economic principles, among other subjects, with global trade and the rise of developing nations becoming of special interest. Now Wired Top Stories in an article by Spencer Reiss back in April takes a look at the economic miracle of China and asks whether it, once the World's Great Factory, is the Next Great Innovator?

The world's notorious source of low-cost labor is generating mountains of capital, tons of hot new companies and even some signs of technological innovation.

diigo tags: innovator, economics, China, global, creative-destruction

Everyone knows about China's emergence as a global manufacturing power. Well, guess what: the People's Capitalist Republic isn't just emerging or ascending — it's exploding. The world's go-to source for low-cost labor is generating mountains of capital, squads of hot new companies, and — surprise! — glimmers of innovation.

For inspiration, would-be entrepreneurs can look to homegrown rock-star CEOs like Alibaba Group's Jack Ma (age 43), Tencent's Pony Ma (36), and Baidu's US-schooled Robin Li (39).

Even China's notorious environmental meltdown has an upside: It's both a sharp spur to innovation and the driver of a huge homegrown market for green technologies. The country will soon be the number one maker of windmills and solar cells.

Marginal Revolution's Tyler Cowen looked at another part of the globe back in February to determne the new roots for the Irish miracle? Professor Cowen puts forth the idea that

Ireland found a more complementary economic partner, namely the United States. The Irish economic miracle is in part the American economic miracle.

By the turn of the century [2000], according to some reckonings, 70 percent of Irish manufactured exports were by US-owned firms...This was, of course, encouraged by tax breaks and a form of industrial policy. But part of this process was a shift away from English investment:

Between 1960 and 1970 British-owned companies represented 22 percent of new industrial enterprises in Ireland. But by 1980 they accounted for less than 2 percent. Significantly, the proportion of exports to Britain from Ireland halved between 1956 and 1981.

Both countries have put a great deal of effort in becoming more innovative and providing services and products to other countries. Both countries could have been catergorized as at best 2nd world economies. Both countries have their own foreign aid programs with China making significant inroads into Africa. Both have arguably benefitted from Free Trade. The question I have is how did they or do they differ from other third world countries. Those answers are not, I am finding out, as obvious as I might have thought before working on this blog. This post will have to be satisfied with just raising the question.

The Musician As Businessperson The Entrepreneur as Artisan

The New York Times brought up an ongoing debate with its Free Music? Only With a Fight article back on March 15, 2008 under its BUSINESS| What's Online section. The fight is over the economics.

Hugh MacLeod asked the same basic question, in his case regarding software, how does a software company make money, if all software is free? via gapingvoid: "cartoons drawn on the back of business cards" by hugh macleod back on 4/8/08.

On Page 122 of this month's Wired Magazine, I'm given a brief mention in the first paragraph of an article, "Open Source Software Made Developers Cool; Now It Can Make Them Rich", all to do with monetization of Open Source software. Here's the online version.

Last spring, marketer and blogger Hugh MacLeod posted a question on his site: If open source is such a phenomenon, where are all the open source billionaires? His audience wasn't amused. Open source software relies on a community of volunteer developers who tinker on, write for, or amend a program, then give it away free. MacLeod's site filled up with complaints that even to look for billionaires violated the spirit of the open source movement. "There have to be rewards," one commenter wrote, "but they don't have to be financial."

What gets me working for Microsoft is that I've always been very interested in something else, namely, how people make a living. This is true for large companies, small companies, billionaires and "humble tradesmen" alike. This is why I can work with a large software company like Microsoft, or a small tailoring firm like English Cut, and find them both utterly fascinating. Everybody needs to get paid; that is the great constant in business.

Much of today's economy seems to be based on the intangibles of creativity rather than the production of product. This weblog initially looked at fair use and copyright issues and its impact on the economic viability at the individual level. Special interest has also been paid to the economics of this new paradigm at a more broad based level. Hugh MacLeod provides some insight from the world of Web 2.0.

Last summer, at a dinner party in London, I had the great pleasure of meeting Simon Phipps, the Head of Open Source at Sun Microsystems. .. A lot of the conversation was off the record, but one of my main take-outs was that Simon passionately believes that "The Future Is Open Source".

A few weeks ago, I met a young developer who worked in an IT department of a large insurance company. I asked him what kind of software did he use. Answer: About 75% Microsoft, 25% Open Source. I asked him why did he not use more Open Source? I thought IT people loved Open Source?

"If something goes wrong with Microsoft, I can phone Microsoft up and have it fixed. With Open Source, I have to rely on the community."

And the community, as much as we may love it, is unpredictable. It might care about your problem and want to fix it, then again, it may not. Anyone who has ever witnessed something online go "viral", good or bad, will know what I'm talking about.

When you buy a Microsoft product, you're not just getting ones and zeros. There's also a form of "social contract" implicit in the commercial transaction. You gave them money, this entitles you to certain expectations.

The last time this was considered, under Troubadour Troubles - Economic, Legal, Moral? You Pick, links were provided to David Byrne and his advice on Survival Strategies for Emerging Artists — and Megastars. This time the advice comes from Entrepreneurial Mind, who provided back on March 28, 2008 a perspective on the Musician as Artisan.

The music industry is facing an interesting puzzle these days How do you run a business where customers do not want to pay and they do not want advertising?

Efforts to sell music by subscription have mainly failed...traditional radio's offer of free music surrounded by audio advertising also is being rejected by a generation that resents undesirable interruptions.

"They want to be the program director, and they insist that the program be free," says Jerry Del Colliano.

The big boys in the industry do what big boys do in any industry undergoing fundamental change -- they try to get the government to protect their interests.

The predictions from the Institutue for the Future about the future of small business might offer a glimpse into the future of music:

Artisans, historically defined as skilled craftsmen who fashioned goods by hand, will re-emerge as an influential force in the coming decade. These next-gen artisans will craft their goods and shape the economy -- through upswings and downturns -- with an effect reaching far beyond their neighborhoods, or even their nations. They'll work differently than their medieval counterparts, combining brain with brawn as advances in technology and the reaches of globalization give them greater opportunities to succeed.

Summing it all up from Hugh MacLeod:

The reason Microsoft is able to charge the money it does IS NOT JUST BECAUSE OF THE SOFTWARE. Like Open Source, the social contract can often matter far more than the ones and zeros.

Summing it all up from Professor Cornwall:

...I hope that it is an industry sustained by talented artists -- and successful artisans -- who help us understand love, heart ache, happiness, sadness, joy, despair.

I have to admit being pleased with the idea that the rock star provided the more business oriented advice and the business professor talked about issues closer to the artistic soul. Both Hugh MacLeod and Professor Cornwall, I suspect, are approaching the same place from different directions. Whether they or we all will arrive at the same place is another question. The challenge is to actively instill the humanity that Professor Cornwall evokes into the so far unwritten and to a large extent unrealized social contract that Hugh MacLeod suggests.

Creative-Destruction, Entrepreneurship And Innovation

One of the ideas that this weblog has been particularly interested in is creative-destruction. Even though it does not hold the view that Schumpeter is the savior of 21st century economics as some do, the concept of creative-destruction is a useful means of looking at the world. The disagreement is with what actions we take with that knowledge. A number of posts have already been made on creative-destruction approaching it from a variety of perspectives. The links provided below resulted from combining the terms creative-destruction and entrepreneurship in del.icio.us resulting in some expected and already discovered results, but also bringing up some new insights that have been added to the online MyStuff Creative-Destruction folder. The common focus of these links in the importance of Joseph Schumpeter to modern entrepreneurialism. The concepts quoted and highlighted here were also highlight through my diigo account.

Creative Destruction's Reconstruction: Joseph Schumpeter Revisited - ChronicleReview.com By J. BRADFORD DELONG December 7, 2007 Annotated

tags: creative-destruction, economics, entrepreneurship, innovation

• The average literate Americans know of three 20th-century economists: John Maynard Keynes, Milton Friedman, and Alan Greenspan
  - quotes posted by brianddrpm on diigo
  

Schumpeter saw farther: that market capitalism destroys its own earlier generations. There is, he wrote, a constant "process of industrial mutation — if I may use that biological term — that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in, and what every capitalist concern has got to live in."

It is important to stress that a Schumpeterian entrepreneur is not an inventor, but an innovator.

He did not think governments could maintain enough social insurance to counter the destructive part of capitalism without strangling the sources of rapid growth. But why Schumpeter's Capitalism, Socialism, and Democracy places so much blame on "democracy" is unclear to me: Oligarchs fear change at least as much as democratic electorates do.

One great test of our era will be whether creative destruction can flourish alongside public order and political liberty. If not, we're in big trouble. But if so — and I'm an optimist on the point — the results could be a marvel.

Rediscovering Schumpeter: The Power of Capitalism — HBS Working Knowledge Author:Sean Silverthorne Published:May 7, 2007 Annotated

tags: creative-destruction, economics, entrepreneurship, innovation

As for my title, here's the quotation that inspired it: "Without innovations, no entrepreneurs; without entrepreneurial achievement, no capitalist returns and no capitalist propulsion." Schumpeter wrote this sentence during the Great Depression of the 1930s. Many, many smart people of that time believed that technology had reached its limits and capitalism had passed its peak. Schumpeter believed the exact opposite, and of course he was right.

This is an extremely hard lesson to accept, particularly by successful people. But business is a Darwinian process, and Schumpeter often likened it to evolution. The creative destruction can occur within a large innovative company (Toyota, GE, Microsoft), but it's much more likely to happen with start-ups, particularly since they now have so much access to venture capital. Schumpeter, by the way, was one of the first economists to use that term. He wrote an article in 1943 in which he speaks of "venture capital."

A: Several economists, including Larry Summers and Brad DeLong, have said that the 21st century is going to be "the century of Schumpeter," and I agree.

Joseph Alois Schumpeter, Biography: The Concise Encyclopedia of Economics: Library of Economics and Liberty Annotated

tags: creative-destruction, economics, entrepreneurship, innovation

Indeed, Schumpeter was among the first to lay out a clear concept of entrepreneurship. He distinguished inventions from the entrepreneur's innovations. Schumpeter pointed out that entrepreneurs innovate, not just by figuring out how to use inventions, but also by introducing new means of production, new products, and new forms of organization. These innovations, he argued, take just as much skill and daring as does the process of invention.

Under perfect competition all firms in an industry produced the same good, sold it for the same price, and had access to the same technology. Schumpeter saw this kind of competition as relatively unimportant. He wrote: "[What counts is] competition from the new commodity, the new technology, the new source of supply, the new type of organization... competition which... strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives."

Most economists accept the latter argument and, on that basis, believe that companies should be able to keep their production processes secret, have their trademarks protected from infringement, and obtain patents.

• The question, especially in the digital age, is how long and under what conditions such a monopoly should be extended. - comment posted by brianddrpm on diigo
  

What is of particular interest is the role innovation plays in creative-destruction. Innovation has been another topic of inquiry for this weblog.

Open Innovation from QuickMBA / Entrepreneurship / Open Innovation

tags: creative-destruction, economics, entrepreneurship, innovation

• Innovation and entrepreneurship are at the heart of "creative destruction". In his book, Open Innovation, Henry Chesbrough describes a new paradigm of open innovation that is in contrast to the traditional closed model. To understand open innovation, it is worthwhile to review the older model of closed innovation. - quotes posted by brianddrpm on diigo
  

Tagging Lessons Learned, Learned Again

One of the lessons learned during this weblog experiment is how useful tagging is for both organizing and discovering new website of particular interest. The favorite tagging system for this weblog is still del.icio.us which still has the greatest level of participation regarding websites in which I am generally interested. Another benefit is the ease with which different concepts can be combined.

A combination that should have been obvious to this weblog before this are combining the tag creative-destruction and the tag entrepreneurship. The combination of creative-destruction/entrepreneurship brings up some expected and already discovered results, but it also brings up some new insights that have been added to the online MyStuff Creative-Destruction folder. Whether the online folder is preferable to the del.icio.us tags may be a matter of preference.

We are trusting each others tagging assignations though over time and wide enough participation this seems to work out. Sites are unlikely to be widely miss-tagged. What would seems to need to happen is the constant application or combination of new ideas and concepts. One could, of course, always choose the combined term and Google it instead, getting day one 138,000, day two 150,000 websites to select from, but then there isn't the social verification component, for whatever that is actually worth.

The Awards And Risks of Innovation: Embracing Destruction And Creation

The challenge of how we deal with innovation may not seem like much of a problem, innovation should always be a good thing. Innovation though is one of the effects of creative-destruction process. The challenge is making sure that one is on the right side of the dichotomy, the fear is in the inherent risk of the process. The New York Times article raises this question regarding The Risk of Innovation: Will Anyone Embrace It?.

Whether humans will embrace or resist an innovation is the billion-dollar question facing designers of novel products and services. Why do people adapt to some new technologies and not to others? Fortunes are made and lost on the answer.

The greater danger is how we as a society will approach innovation in the future. The issues found within this next New York Times article on Two Views of Innovation, Colliding in Washington - New York Times seem similar to some of the fair use issues discussed in this weblog regarding media, but applied to technology. The article points to a bias towards big business in Washington which could create massive obstacles for smaller innovators.

From the vantage point of a half-century, for example, it's clear that the formation of Silicon Valley involved serendipity more than intentional design.

It appears that the Senate leadership has sympathy for the large technology companies. Opposed to big tech is a small group of high-profile inventors, like the Segway designer Dean Kamen and the former Apple engineer and QuickTime co-inventor Steve Perlman, as well as venture capitalists and a growing array of smaller businesses that do not share the market power of the largest companies.

Schumpeter, who is seemingly being hailed by many lately as having the answer to entrepreneurialism in the future, was arguably in line with the folks in Congress abd had according to the Economist View post Robert Solow on Joseph Schumpeter,

a lasting bias in favor of big business. "American opinion is so anti-big business," he wrote, "precisely because big business has made the country what it is...: who is not a part of big business feels he does not meet the standard and by compensation turns against it." Clearly a successful innovation confers, in his view, at least a temporary monopoly. Without the lure of those monopoly profits, there would be no incentive for anyone to bear the risks of entrepreneurship. Schumpeter believed that large firms were both the source and the result of successful innovation; and so tampering with them would be dangerous. ...,

The Businesspundit on 1/19/08 offers two basic choices in meeting this challenge Adaptive Vs. Creative Strategy.

Strategy is, in general, adaptive. New market opportunities rarely catch entire industries by surprise. The moves of most companies are evident in advance, so it really becomes a game of small adaptations to new circumstances by offering new products, entering new lines of business, and using other basic strategic business moves.

This sounds like the bigger technological companies. In order to succeed, smaller companies are forced for all intentions to adopt a more creative strategic approach with all of its risks. Taking some ideas from the Businesspundit,

Almost all literature about strategic thinking is geared to adaptive strategy, which makes sense because that is what companies need most of the time.

This is where Schumpeter's concept of creative-destruction, and how it seems to be being commonly applied, makes the most sense to me. The innovation is not limited to only the product itself, but includes the strategy on how the new business is implemented. As the Businesspundit states,

Creative strategy involves strategic moves that come as a surprise. Because such moves are unexpected by definition, you can't plan for them. Think of Apple releasing the first iMac, and re-defining the playing field for home computers and how they are evaluated.

As a result, creative strategies, when they work, work really really well.

See the full article from Businesspundit for a more details and on how to enhance your chances for success .

The driving force behind innovation, however, remains individual intellects and passion. Businesspunditon 1/11/08 provides the Wozniak on Innovation podcast of Steve Wozniak's talk at the 2007 Ideafestival click here. Quoting the Businesspundit,

It is worth listening to, if for no other reason that Wozniak's contagious enthusiasm about technology. See full article.

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The Power of Many! Music For All?

Small Business Trend's small business expert Steven Teo writes about New Business Ideas: The Power of Many

Termed "crowdsourcing" by Wired Magazine, this trend looks set to be exploited by businesses and entrepreneurs who appreciate the power of crowds and communities:

One site Steven provided was of particular interest because it could potentially serve as a very viable solution for musicians looking for a new path

• Independent music site Amie Street knows economics inside out. It uses demand-driven pricing to let the community dictate the pricing of the tracks it sells on the website. Prices begin at zero and rise up depending on demand and supply factors. Community members recommend their favorite music and give back 70% of proceeds to artists after the first $5 in sales. We like it because it encourage musicians to mobilize their fan bases to support their music.
  

Troubadour Troubles - Economic, Legal, Moral? You Pick

The industry most mentioned throughout the Fair Use/Copyrights debate is the music industry. This is not a black and white issue and we lose something of value if we go to extremes in either direction. However, I do believe that the world is changing and we have to choose to fall behind or find new pathways.

Below are excerpts from those whom I believe have correctly identified that direction. What is provided here are only web-bites and for a deeper understanding the original posts should be read. The challenge and advice to those musicians wishing to avoid the 'starving' appellation is raised by Brand Autopsy.

What's a Troubadour to Do?

via Brand Autopsy by johnmoore (from Brand Autopsy) on 1/19/08

Mega-selling recording artist Natalie Merchant doesn't have a recording contract with a major label these days. The digital download era has rendered many top-selling artists, like Ms. Merchant, unattractive and irrelevant as it relates major labels releasing newly recorded CDs.

Writing in the New York Times, John Pareles tells us, "Ms. Merchant is back to the age-old economic model of the troubadour. People who want to hear her latest songs will have to see her perform them."

Wired Magazine gets additional advise for Ms. Merchant and other twenty-first century troubadours from David Byrne.

David Byrne's Survival Strategies for Emerging Artists — and Megastars

What is called the music business today, however, is not the business of producing music. At some point it became the business of selling CDs in plastic cases, and that business will soon be over. But that's not bad news for music, and it's certainly not bad news for musicians. Indeed, with all the ways to reach an audience, there have never been more opportunities for artists.

The best advice though on helping modern musicians survive in the post-modern world of new marketing comes from -

Music lessons via Seth's Blog by Seth Godin on 1/7/08

Things you can learn from the music business (as it falls apart)The first rule is so important, it’s rule 0

• 0. The new thing is never as good as the old thing, at least right now.
  
  • 1. Past performance is no guarantee of future success
    The music business had a spectacular run alongside the baby boomers. As a result, the music business built huge systems. It was a well-greased system, but the key question: why did it deserve to last forever? It didn’t. Yours doesn’t either.
    2. Copy protection in a digital age is a pipe dream
    There’s a paradox in the music business that is mirrored in many industries: you want ubiquity, not obscurity, yet digital distribution devalues your core product.
    3. Interactivity can’t be copied
    Music is social. Music is current and everchanging. And most of all, music requires musicians. The winners in the music business of tomorrow are individuals and organizations that create communities, connect people, spread ideas and act as the hub of the wheel... indispensable and well-compensated.
    4. Permission is the asset of the future
    Today, of course, permission is an asset to be earned. The ability (not the right, but the privilege) of delivering anticipated, personal and relevant messages to people who want to get them.
    5. A frightened consumer is not a happy consumer.
    I shouldn’t have to say this, but here goes: suing people is like going to war.
    6. This is a big one: The best time to change your business model is while you still have momentum.
    The sooner you do it, the more assets and momentum you have to put to work.
    7. Remember the Bob Dylan rule: it’s not just a record, it’s a movement.
    He understands at some level that music is often the soundtrack for something else.
    8. Don’t panic when the new business model isn’t as ‘clean’ as the old one.
    If there’s a business here, first few in will find it, the rest lose everything.
    9. Read the writing on the wall.
    Industries don’t die by surprise. It’s not like you didn’t know it was coming. It's not like you didn't know who to call (or hire).
    10. Don’t abandon the Long Tail
    Instead, in an age when it’s cheaper than ever to design something, to make something, to bring something to market, the smart strategy is to have a dumb strategy. Keep your costs low and go with your instincts, even when everyone says you’re wrong. Do a great job, not a perfect one. Bring things to market, the right market, and let them find their audience.
    11. Understand the power of digital
    You may believe that your business doesn’t lend itself to digital transactions. Many do. If you’ve got a business that doesn’t thrive on digital, it might not grow as fast as you like... Maybe you need to find a business that does thrive on digital.
    12. Celebrity is underrated
    The music business has always created celebrities. And each celebrity has profited for decades from that fame. Frank Sinatra is dead and he's still profiting. Elvis is still alive and he's certainly still profiting.
    13. Value is created when you go from many to few, and vice versa
    The music business has thousands of labels and tens of thousands of copyright holders. It's a mess. And there's just one iTunes music store. Consolidation pays.
    14. Whenever possible, sell subscriptions
    The biggest opportunity for the music business is to combine permission with subscription. The possibilities are endless. And I know it's hard to believe, but the good old days are yet to happen.

The above are again only web-bites (web-bytes?) of Seth's post that I found particularly insightful, even more insight at the original post.

As far as my understanding of the issues issues of fair use, copyrights and artistic content go:

• If it is your material, then it is an economic issue.
• If it is somebody else's material, then it is also a legal issue
• If it is the RIAA's claimed material, then it is also a moral issue.

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Confusing Means and Ends and the Pathways Between Them

Jeff Cornwall of Entrepreneurial Mind offers a post on Confusing Means and Ends Annotated but only if use use diigo.

The goal of entrepreneurship is not simply to find the next big thing to lure venture capital or make a mad dash to a public offering. It is to create a venture that creates income and wealth for the entrepreneur and allows the entrepreneur to pursue other goals in life through this economic activity, be it creating more jobs in a better place to work, offering a better product to the customer, or making the world a little better place. The goal of entrepreneurship should be to build a good business -- with legs -- that will help build this entrepreneurial economy.

He also offers what he calls "one of the funniest, albeit somewhat depressing due its truth, videos I have seen in a long time: Here Comes Another Bubble v1.1 - The Richter Scale via YouTube.

At the same Entrepreneurial Mind post Anita Campbell of Small Business Trends provided the following response.

Jeff, this sures feels like another bubble. I spoke with a Web entrepreneur yesterday who is getting some good traction with his free add-on for blogs. When he mentioned that his investors were likening his product to the next Google and that it could be worth billions, I quickly ended the conversation. $50 million -- even that seems outlandish, but at least I can understand the logic of a sales price that is consistent with other sales of like Web products. But billions? What are these people thinking?

Anita Birdied by: Anita Campbell | January 15, 2008 08:48 AM

Both Professor Jeff Cornwall and Anita Campbell have been important resources in the development of my thinking during the first quarter year of my weblog, but I still feel that this only lightly touches upon some of the issues that are raised by Richter Scales video. Those issues include Fair Use and the generational divide that it invokes and Creative Destruction as envisioned by Schumpeter which is seemingly hailed by many lately. These issues that have been dealt with under the fair use posts and creative destruction posts of this weblog. I may be playing Cassandra here but it doesn't seem like a bubble to me. It's too easy a plug, but it seems like a paradigm shift to me. What is changing for me is the view that Web 2.0 is not the paradigm shift. It is simply something else riding the wave.

diigo tags: creative-destruction, entrepreneurship

- post by brianddrpm

Consumerville USA Versus Creatorville USA

I have been attempting to formulate a position in regards to Fair Use and Copy Rights over the last couple of weeks. What I have really been trying to do is understand the issues from a perspective that incorporates my beliefs without compromising logic. However, as stated earlier, the difference in the perspectives of the opposing sides is so drastically different that what seems obviously logical to one side is illogical and more likely immoral to another side

From a Civic Media perspective I support Fair Use. From the perspective of entrepreneurs and artists protecting proprietary content I support Copy Rights. The problem is to understand the abuse that comes from both sides. Large media corporations abuse Copy Right by denigrating Fair Use, while many, the young being the most suspect, abuse Copy Rights by illegal downloads for free use.

I couldn't help but wonder if there isn't a common factor in all of this and I believe I found it from another source. Karrie Higgins reviewed two new books in the Los Angeles Times. The title of the article provides both a synopsis of the books and the perspective the reviewer takes.

Escape from Consumerville - Los Angeles Times.

"ONE of the great ironies of living in a consumerist culture is that, in pursuit of success, so many of us unwittingly surrender our freedom. We confuse career and consumer choices with personal liberty, when in fact they all represent the same underlying decision: to buy into the system that produced them. Two new books -- "Unmarketable: Brandalism, Copyfighting, Mocketing, and the Erosion of Integrity" by Anne Elizabeth Moore and "The Freedom Manifesto" by Tom Hodgkinson -- remind us that we have other options. We can resist rampant consumerism despite its infiltration into every corner of our culture. The key is to reject the competitive ethos at the core of capitalism and embrace failure."

I have, previously, taken a position against this line of reasoning. The motives are honorable and I readily agree with turning against over-consumption,in fact almost every phrase in the article, we do confuse career and consumer choices with personal liberty, yet I still have to take a stand in opposition to this philosophy. My first fundamental objection, saying that "we buy into the system that produced them", is only half the story. We also collectively produce that system. The people shopping in Wal-Mart worked someplace else creating goods or services to make their purchase possible. Yes, we can argue that manufacturing jobs went over seas but people there are also both producing and buying into the system. I may agree that nobody should buy a Hummer, but I also recognize that somebody will be out of a means of support. Yes, there are substitute industries which are less harmful to the environment and more beneficial to humanity. That is not, however, the key that is being sought, rather the, "key is to reject the competitive ethos at the core of capitalism and embrace failure." Perhaps this word is being used in a special manner, but it still strikes me as a dismal philosophy.

This is, to my mind, the common factor in the Fair Use/Copy Rights debate. We have come to think of ourselves as a country of consumers, not producers or creators. The majority of the young see themselves as only as consumers with no stake in producing anything of value and little reason to compensate multi-million dollar media corporations who are seen as amoral if not immoral. The multi-million dollar media companies have no moral foundation as they have purposely worked to turn us into a nation of consumers and now seek to solidify their advantage into perpetuity. This is where I can completely agree with the philosophy Ms. Higgins expounds.

We part company in that I still believe in a Democratic/Free Enterprise system. I see too much in the world today that gives me faith that working for creative excellence is the best means of helping the world and even with all of its faults the Free Enterprise system guided with democratic principles is still the best means to achieve that. This though is not though the end of my philosophical conundrums. I am still opposed to completely unfettered markets in the Milton Friedman ideal.

This strikes me as being especially true regarding the concept of Creative-Destruction. In the "New" Economy, the destruction portion begins immediately upon bestowing your creation on the world. We seem to be entering a world of just-in-time obsolescence. The question is how do we formulate a basis of interacting with each other that works. What I have written here does not really resolve anything. It merely puts down some more evolving thoughts on a complex subject.

In a past post I wrote that, "I do not believe is the Generation X and Y are immoral as a whole. They are defining themselves differently but doing so those not make them immoral even if they don't follow old rules." The trouble with this line of reasoning is that the fact that they don't agree with our morality does not mean they by default automatically have one of their own. What I quoted in the same post from Professor Cornwall seems all the more important.

Whether it's in everyday life or in the business world, we have to be careful not to boil morality down to a simple list of don''s that serves as a checklist of how to be ethical. Business ethics should so much more than a list of rules to follow. It should be a much broader set of standards of how we treat one another.

The Bricks For Building Dreams

CoolPeopleCare | There's a Rumbling
"Passion is key for anyone looking to start something new. It's not all you need, but it's a big part of what's necessary when you set out on your own. Finding the right balance of passion and realism is key."

Those are the words of Samuel Davidson, a blogger who appears to be at the cusp of Generation X and Y, and who has provided food for thought for this weblog before. I like him because he combines idealism with pragmatism. This weblog has talked about his 4 step process from dream to reality before.

"That's the thing about passion – it's always there with us. For some of us, we wear it on our sleeves and those who know us know that we're about something..."
"Because when you have a passion, you know it. And there's no way you can't not follow it." But passion is never all we need. It's the first thing you need during the early stages of start up, but it alone won't get you to the finish line. It may not even get you to step 2. As Robert Greenleaf so eloquently pointed out:"

"Not much happens without a dream. And for something great to happen, there must be a great dream. Behind every great achievement is a dreamer of great dreams. Much more than a dreamer is required to bring it to reality; but the dream must be there first."

I am not quite as ready to accept his position on Schumpeter.

"Schumpeter was a very early advocate of entrepreneurship, believing that individual invention was what powered a capitalist economy, and not the role (or non-role) of the government. McCraw points out that while Schumpeter's ideas didn't immediately catch on in the first half of the 20th century, he now looks like a genius." McCraw writes:

"One of the hallmarks of Schumpeter's 1911 book is that he ventured into territory where no economist had gone before - namely, the psychology of entrepreneurs. Entrepreneurs, he insisted, are not propelled solely by a wish to grow rich or by any "motivation of the hedonist kind." Instead, they feel "the will to conquer: the impulse to fight, the prove oneself superior to others, to succeed for the sake, not of the fruits of success, but of success itself...There is the joy of creating, of getting things done, or simply of exercising one's energy and ingenuity.

As someone who identifies with Schumpeter's definition, I believe that the organizations and companies that will succeed in today's economy will be those that embrace entrepreneurship at every level.

While I can readily agree with, "There is the joy of creating, of getting things done, or simply of exercising one's energy and ingenuity" Schumpeter may be getting better press than he deserves because its a quick sell for the ideas people want to get across, but Schumpeter does not philosophically epitomize the ideals being expressed as he may seem on first look.

I do appreciate the concept of creative-destruction but keeping in mind the words of F. Scott Fitzgerald

"The test of a first rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function."

We need to appreciate the effect of the destruction as well as the creation.

Macro-Economics and Sex

The podcasts on Macro-Economics from University of California Berkeley have been explaining the Solow Growth Model created by Robert Solow. You have to like a Nobel prize winning economist who comes up with a line like,

"Everything reminds Milton Friedman of the money supply. Everything reminds me of sex, but I try to keep it out of my papers."

Using the Google Search box within Marginal Revolution, this weblog's favorite economics blog, gets a number of hits on either Robert Solow or his model, including Solow on Schumpeter whose ideas on creative-destruction have been discussed before.

In looking for more information on Robert Solow at Marginal Revolution, I ran across a post on Rodrik vs. Stiglitz, that's Professor Randi Rodrick and Professor Joseph Stiglitz. I know I said I was cutting down on the comments until I got a bit more knowledge under my belt regarding the dismal science but I couldn't resist leaving one, especially since this weblog had featured Professor Stiglitz previously. Since I said that I appreciated many of Professor Cowen's ideas on globalization, here is a link to some of those ideas - Creative Destruction: How Globalization Is Changing the World's Cultures.

Riding the Long Tail

According to Seth Godin in his week 9 Meatball Mondae on the Long Tail, "(Almost) everyone wants choice". He rightly says that "choice makes some people stressed and unhappy", which is something that Barry Schwartz would agree with. But in true marketing fashion he goes on to state that, "it also makes lots of people happy. And now people have the choice."

My interest is more from the economics concept of creative-destruction that I have been reviewing lately.

Competition and the Long Tail From Wikipedia

The Long Tail may threaten established businesses.^[10]

Before a Long Tail works, only the most popular products are generally offered. When the cost of inventory storage and distribution fall, a wide range of products become available. This can, in turn, have the effect of reducing demand for the most popular products.

It is also of interest because it can be related to word frequency which relates to tagging and linguistic evolution which I have also been studying. According to the SEO-Blog,

"Word frequencies in natural languages such as English demonstrate the following property: In a given body of text there will be just a few words that are used very often and a large number of words that are used not so often. This property was noted by the Harvard linguistic professor George Zipf and the precise mathematical relationship is called Zipf’s Law." This is the basis for HitTail.com which this blog utilizes.

Seth then goes on to discuss the trends that are arising due to this change

• a. Online shopping gives the retailer the ability to carry a hundred times the inventory of a typical retail store.
• b. Google means that a user can find something if it's out there.
  
• c. Permission marketing gives sellers the freedom to find products for their customers, instead of the other way around.
• d. Digital products are easy to store and easy to customize.
• e. Digital technology makes it easy to customize non-digital goods.
  

It was Seth that provided me the term change-agent. Even though its hairsplitting the term change-agent organization is far preferable to my thinking over non-governmental organization. The macro-economic class I am listening to informs me that only 30-35% of technological or productivity innovation comes from new machines or inventions, the bulk comes from new ideas from the suggestion box on how to use those new resources better. What I am now contemplating is how social change-agents can utilize this information. Items b through d seem fairly apparent to me. Items a and e are a bit more problematic.

Getting Deeper Into Creative-Destruction

Also spent the weekend doing a bit more studying of economics in particular the concept of creative-destruction. I have added a few more websites to the MyStuff folder for creative-destruction. Finally got around to reading the Wikipedia articles on creative-destruction and on Joseph Alois Schumpeter again to get a better understanding. One disadvantage of the web over a printed book is that it is harder to get and in-depth understanding of a particular perspective. One advantage of the web over a printed book is being able to get multiple perspectives rather easily. Now have a fairly good idea of what Tyler Cowen and Schumpeter mean by creative destruction but need to get a better understanding of how others are using the term. Another concept I have been studying is the "COASE THEOREM" , which I learned about at a Freakonomics post.

Creative Destruction Or Rebirth of Impermanance

Businesspundit: The Foundations of Capitalism

Businesspundit has a post on the Foundations of Capitalism, actually on one of the founders of modern capitalism Joseph Schumpeter. I have run across this name a number of times in my web-wanderings. In particular, when reading Marginal Revolution. The concept that keeps coming through is Creative Destruction.

I have a series of web articles I saved that not only need to be re-read but cogitated a good deal more about. These ideas are arguably foundational to some of the questions I have been raising about malaria nets and mobile phones. There is a biological basis for this approach that I am aware of which I need to find again. There is also the last post. Before this cartoon, by Hugh MacLeod, was only an excuse to try a new tool. Now it has a more meaningful impact.