Tag: innovation

Five articles about Clayton Christensen

As I mentioned in yesterday’s post, Clayton Christensen passed away recently. Five articles about him in today’s write-up, to honour the man, and his most popular and lasting contribution to theory.

The Innovator’s Dilemma is what most people know Clayton Christensen for, and the book is a great read. It is slow going, be warned, but the idea is remarkable. And that idea is the theory of disruption.

First, a quick recap of the idea: “Disruption” describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price. Incumbents, chasing higher profitability in more-demanding segments, tend not to respond vigorously. Entrants then move upmarket, delivering the performance that incumbents’ mainstream customers require, while preserving the advantages that drove their early success. When mainstream customers start adopting the entrants’ offerings in volume, disruption has occurred.

As I said, most people know of The Innovator’s Dilemma, but there was another book – and theory – called The Innovator’s Solution. But where the second theory was concerned, Ben Thompson wasn’t so convinced.

Read the whole thing, but if I had to summarize the argument (always a dangerous thing to attempt), it’s this: there’s a world of a difference between B2B and B2C companies.

The excerpt below is from a fine profile of Clayton Christensen by Larissa MacFarquhar, and reading it (the entire thing) is recommended. You might also want to pair the excerpt with Thiel’s Christainity. At any rate, I was reminded of it.

Mormons believe that family is for eternity, and that in Heaven they will be together with their relatives as they were on earth. They believe that after death they will grow to resemble their heavenly parents as children grow to resemble earthly parents, until eventually they become gods.

Also from the New Yorker, a rather less complimentary piece about the efficacy of the theory of disruption:

Christensen has compared the theory of disruptive innovation to a theory of nature: the theory of evolution. But among the many differences between disruption and evolution is that the advocates of disruption have an affinity for circular arguments. If an established company doesn’t disrupt, it will fail, and if it fails it must be because it didn’t disrupt. When a startup fails, that’s a success, since epidemic failure is a hallmark of disruptive innovation.

Joshua Gans writes in his honour, upon his passing, and the link is here.

And finally, I found this advice from an essay written by Clayton Christensen very useful indeed – and of course, the rest of the essay is also very well written!

 

In using this model to address the question, How can I be sure that my family becomes an enduring source of happiness?, my students quickly see that the simplest tools that parents can wield to elicit cooperation from children are power tools. But there comes a point during the teen years when power tools no longer work. At that point parents start wishing that they had begun working with their children at a very young age to build a culture at home in which children instinctively behave respectfully toward one another, obey their parents, and choose the right thing to do. Families have cultures, just as companies do. Those cultures can be built consciously or evolve inadvertently.

Notes from Launching the Innovation Resistance by Alex Tabarrok

After Murali’s talk in Gokhale Institute the previous week, I got around to reading this book. What follows are some of the highlights from my reading of the book on Kindle, along with a quick review of the book.

Key takeaways (for me):

  1. Alex Tabarrok ends his own post on the book over on MR by saying “although we share a few common themes that perhaps due to differences in personality Tyler focuses on describing problems while I am more excited to promote solutions!”
    That comes through in both the title of the book as well as what I think is they key question for Tabarrok: “What combination of incentives and foundation will bring the greatest innovation to the modern world? How can we create a 21st-century Renaissance?”
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  2. “But there is also a more fundamental critique: After hundreds of years of experience, there is surprisingly little evidence that patents actually do promote the progress of science and the useful arts.”
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    This has been an eye-opener for me: both from Murali’s talk as well as this book. There just isn’t that much evidence that patents have worked.
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  3. “Firms innovate because they know that if they don’t, someone else will. In this kind of industry, instead of stimulating innovation strong patents may create a “resting on laurels” effect. A firm with strong patents may reduce innovation, secure in the knowledge that patents protect it.”
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    And it may actually be even worse! Patents may actually discourage innovation, let alone protect it.
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  4. “Overall, however, the ODA did create real innovation, and as the number of new drugs for rare diseases increased, the mortality rate for people with rare diseases fell.”
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    The Orphan Drug Act seems to have been one of the few things that can be used as an argument in favor of patenting.
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  5. “When asked to rate various sources of competitive advantage only 4 percent of corporate managers regarded patents as highly effective. Much more effective was getting a head start, learning by doing, and investing in complementary sales and service.”
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    “The aircraft patent-war slowed innovation in the American aircraft industry so much that just prior to World War I the government forced the industry to share its patents for reasons of national security.”
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    …were real eye-openers for me
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  6. So what might be the solution, if not patents?
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    “The major vice of a prize fund is that it replaces a decentralized process for rewarding innovation with a political process.” In this regard, you might want to read this book, by Peter Diamandis
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  7. “I see two views of humanity. In the first view, people are stomachs. More people mean more eaters and less for everyone else. In the second view, people are brains. More brains mean more ideas and more for everyone else.”
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    And patents, of course, are a way to restrict ideas.
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  8. “From Florence in the 14th century to Great Britain in the 19th and the United States in the 20th, the leading economic power has always been a leading educational power.”
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    Alex Tabarrok goes on to speak about the usual econometrician’s worries about a statement like that, but all that notwithstanding, this is exactly why India’s education standards (outcomes?) need to be way higher.

 

Overall, definitely recommended.

EC101: Links for 5th September, 2019

All five links from Marginal Revolution today, in relation to a talk that was held at the Gokhale Institute yesterday, by Murali Neelakantan. This is a topic that I am becoming more interested in, so you might see more posts about this topic.

  1. “It is less commonly recognized by the critics, however, that tougher IP protection may induce more foreign direct investment. Why for instance invest in a country which might subject your patents and copyrights to an undesired form of compulsory licensing?”
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    A typically Cowenian (and by that I mean contrarian) statement, and therefore also likely to be at least somewhat true. MR on Why TPP in IP law is better than you think.
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  2. “It’s hard to believe that the extension of copyright for decades after an author’s death can appreciably increase artistic creation and innovation, thus the public has gained little from copyright extension. What has been lost?”
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    Alex Tabarrok on the tragedy of the anti-commons.
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  3. “Patents are supposed to increase the progress of the useful arts.”
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    Are patents out of control?
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  4. “Walt Disney was long-dead when his copyright to Mickey Mouse was extended. Rumors to the contrary, Walt ain’t coming back no matter how much we incentivize him with a longer copyright.”
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    Alex Tabarrok is rather exasperated with copyright protectionism.
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  5. “How can we increase innovation? I look at patents, prizes, education, immigration, regulation, trade and other levers of innovation policy.”
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    Alex Tabarrok’s blog post on his book, “Launching the Innovation Resistance”

Links for 27th May, 2019

  1. ” In today’s world, we’re typically writing contracts in natural language, or actually in something a little more precise: legalese. But what if we could write our contracts in computational language? Then they could always be as precise as we want them to be. But there’s something else: they can be executed automatically, and autonomously. Oh, as well as being verifiable, and simulatable, and so on.”
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    Stephen Wolfram on computational languages, and what it might mean for all of us in the future. Can’t say I understood all of it right off the bat, to be honest – which is why I’ll be reading it again sometime later.
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  2. “I was interested in the notion that you could take a busy place — an airport and a marketplace, you can call it kind of a mall, with hundreds of shops and all that comes with it — and cohabit it with a magical park, which is nature at its best, which is relaxing and serene, and is the escape from all of that busyness.Airports are not exactly relaxed places, and I thought, what would be better than to create a place of total serenity?

    We’ve planted thousands of trees and all kinds of other vegetation. And now, six months since we planted it all, it’s already a lush jungle.

    You walk through the trails, and you forget you’re in a city, and you forget you’re in an airport, and you forget you’re in a building. You’re just out there in nature and, in that sense, it’s completely magical.”
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    Singapore’s Changi airport now has a seven storey waterfall apparently. Of course it does.
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  3. “Econtwitter is wonderful. Yesterday, an undergraduate emailed me to ask for book recommendations about the overlap between economics and philosophy. I recommended:Amartya Sen The Idea of Justice
    Michael Sandel What Money Can’t Buy: The Moral Limits of Markets
    Agnar Sandmo Economics Evolving
    and
    D M Hausman and M S McPherson and D Satz Economic analysis, moral philosophy, and public policy
    Then I asked Twitter, and here is the resulting, much longer, list. I won’t editorialise about them, although some are not good undergraduate intros in my view. One striking thing is how few recent overviews there are, however (as @esamjones also pointed out on Twitter). Huge thanks to all who made suggestions. This is a fantastic collective list.”
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    Whatever bookmarking method you use, add this to that resource. And as she mentions, #econtwitter, really is wonderful. Diane Coyle with a very important, very useful list. Undergrad resources for the intersection of economics and philosophy.
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  4. “If you missed the Chinese mission, maybe it’s because you were focussed on the remarkably inexpensive spacecraft from SpaceIL, an Israeli nonprofit organization, which crash-landed into the moon on April 11th, soon after taking a selfie while hovering above the lunar surface. The crash was not the original plan, and SpaceIL has already announced its intention of going to the moon again. But maybe you weren’t paying attention to SpaceIL, either, because you were anticipating India’s Chandrayaan-2 moon lander, expected to take off later this year. Or you were waiting for Japan’s first lunar-lander-and-rover mission, scheduled to take place next year. Perhaps you’ve been distracted by the announcement, in January, on the night of the super blood wolf moon, that the European Space Agency plans to mine lunar ice by 2025. Or by Vice-President Mike Pence’s statement, in March, that the United States intends “to return American astronauts to the moon within the next five years.””
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    The New Yorker explains how the moon is becoming a rather crowded place, and is likely to only get even more crowded in the years to come – and also explains why.
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  5. “Santacreu and Peake compared research and development (R&D) efforts of the U.S. and China for the period 1999-2015. As of the most recent year, China’s R&D intensity, measured by R&D spending as a percentage of GDP, was 2.1% of GDP versus 2.8% for the U.S.However, China’s R&D intensity grew from less than 1% over the period studied, therefore increasing considerably faster than that of the U.S. “Because R&D intensity is a proxy for technological advancement, these data suggest that China is catching up to the U.S. in technology,” the authors wrote.”
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    Ask yourself this: in about thirty years from now, are you more likely to see the world’s innovation hub be in China or America? This article points to the likely answer.

Links for 16th April, 2019

  1. ““Wow, they really train you over there,” our father said. In the weeks since her release, he had become a champion government booster, missing no opportunity to point out to Lulu how nicely the roads had been paved since she’d left, how grand the malls were that had been built. “There are so many opportunities for young people now,” he said. It was a new tic of his, and it grated. Earlier that day, as we strolled the neighborhood, he’d taken the chance to point out a set of recently upgraded public toilets across the way. “They even installed a little room where the sanitation workers can rest,” he said. “It has heating and everything. You see what good care they take of all the workers now?””
    A tale of what happens if you happen to against the authorities in our big neighbor to the east. Sobering reading.
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  2. “Friends and relatives in other parts of the developed world tell me that many of these services and speed are unique to India. While we were busy cribbing in India, a huge shift happened in the last 10-15 years in services—both public and private—that we’ve failed to notice. A mix of technology, cheap labour and super competitive firms have unleashed this service boom in the private sector. Technology, political will (across parties and governments) and the failure of the human government interface in public services has driven the public service boom. Just on the services metric, India will soon plunge ahead of most of the developed world. Take a moment and reflect on how far we’ve come in just a decade.”
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    Meanwhile, Monika Halan points out how much things have improved here, in India.
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  3. “And it reinforced a change in mind-set that already was bubbling up from Chinese urban planners—one that then got ratified in a startling way. In 2016 the Communist Party Central Committee and the State Council, the highest organs of the state, issued a decree: From now on Chinese cities were to preserve farmland and their own heritage; have smaller, unfenced blocks and narrower, pedestrian-friendly streets; develop around public transit; and so on. In 2017 the guidelines were translated into a manual for Chinese planners called Emerald Cities. Calthorpe Associates wrote most of it.”
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    There is much to excerpt from this article about how urbanization is changing, taking root and improving (mostly) the world over. A great bird’s eye view to urbanization in various parts of the world today.
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  4. “A brief description of Lambda School for the uninitiated: A live, fully online school that trains people to become software engineers, data scientists and designers which is free until you get a job. Instead, students pay a percentage of their income each year after they’re employed, the maximum of which is capped at $30k.”
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    Rahul Ramchandani explains what Lambda School is, in case you haven’t heard of it before. Also a good article to learn about Bloom’s 2 sigma problem.
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  5. “But remember: gravity was considered creepy occult pseudoscience by its early enemies. It subjected the earth and the heavens to the same law, which shocked 17th century sensibilities the same way trying to link consciousness and matter would today. It postulated that objects could act on each other through invisible forces at a distance, which was equally outside the contemporaneous Overton Window. Newton’s exceptional genius, his exceptional ability to think outside all relevant boxes, and his exceptionally egregious mistakes are all the same phenomenon (plus or minus a little mercury).”
    In praise of having bad ideas, and how one bad idea (or even a few of ’em), shouldn’t really define a person for you.

Links for 27th February, 2019

  1. “The time for masking such equity-type investments as loans has passed. Real estate in India is facing a glut, with $110 billion worth of unsold homes across the top eight markets, including Mumbai. That’s almost four years of sales, according to property analytics firm Liases Foras. Back in 2009, when apartment inventory was equal to about one year of sales, only 25 percent of construction funding came from shadow financiers. Banks controlled 75 percent.The tables have now turned: Housing-finance firms and other nonbank lenders, more adventurous than conventional banks, account for 55 percent of advances to builders. Lenders pocketing 2 percent to 3 percent of the loan value as upfront fees in exchange for not collecting on the principal for years has allowed a buildup of poor-quality debt. Moratoriums have delayed builder bankruptcies, and prevented timely detection of the problem.”
    This is a problem just waiting to become a full blown crisis in India – not the real estate sector per se, but the financing of the real estate sector in India. Read this article to find out how and why it has become as big a problem as it has.
  2. “Like all great work, it was the foundation for other huge contributions – work by other great economists such as Oliver Hart, Bengt Holmstrom, Paul Milgrom and many others can easily be traced to this paper. The paper’s starting point – that coordination within firms is not accomplished ‘by fiat’ (Demsetz famously remarks “This is delusion”), and that one should instead examine how incentive structures within firms create efficiencies relative to other forms of organisation – became the starting point for nearly the entire field of the economics of organisation ever since.”
    I have linked to this piece earlier, I think in January. But since I am currently teaching a course in Industrial Organization at Gokhale Institute, I found myself reading this piece all over again. Demsetz really was a giant in this field – and his analysis of why firms exist, and how they coordinate and incentivize activity within the firm is truly illuminating.
  3. “So, the UN forecasting model inputs three things: fertility rates, migration rates, and death rates. It doesn’t take into account the expansion of education for females or the speed of urbanization (which are in some ways linked). The UN says they’re already baked into the numbers. But when I went and interviewed [the demographer] Wolfgang Lutz in Vienna, which was one of the first things we did, he walked me through his projections, and I walked out of the room gobsmacked. All he was doing was adding one new variable to the forecast: the level of improvement in female education. And he comes up with a much lower number for global population in 2100, somewhere between 8 billion and 9 billion.”
    Population “crises” are over-rated in any case (people are a resource!) – but even the forecasts for how many people there will be on the planet in the next thirty to eighty years are likely to be wrong. The world is changing right in front of our eyes. The problem of the (near) future isn’t one of too many people – it’s one of too few.
  4. “Instead, the signatories objected to the election of a student union president of Tibetan descent, who “was found to hold the political belief that Tibet should be free”.”
    Based on what you have read above, which country are we talking about? Not only might the answer surprise you, but it will also help you think about geopolitics, international finance and the benefits of diversification.
  5. “Most developed countries of today addressed many of their basic plumbing challenges largely through public production. China is clearly an example of the latter. It appears to have perfected the use of industrial policy to co-ordinate private enterprise even into some of the most difficult areas for private engagement. This is the case of industrial policy to both address a critical plumbing issue as well as catalysing a market. And this is what makes its achievement exceptional.”
    Law, innovation, state led industrial policy and judicial pendency, all in one lovely article by Gulzar Natarajan. Gokhale Institute recently released a report on judicial pendency in India – China has an interesting way of tackling this problem.