Category Archives: Education

The economics of bubbles

By Brent Goldfarb and David Kirsch – The space between fiction and reality is where economic bubbles take shape. Froth fills that space.

As the Dutch Tulipmania of the 17th century and the South Sea Bubble of the 18th century attest, speculative bubbles have been with us since the early days of corporations and market capitalism. Instant mass communication, in the form of the radio, was an amazing invention of the 1920s. Almost 700 new radio stations – the United States’ entire current AM broadcast infrastructure – were established in 1922. But nobody had identified a successful business model for radio broadcast.

Often the opportunity for a bubble arrives on the back of a new technology. And some technologies make for fantastic stories – indeed, sci-fi is a whole fictional genre based on this premise. Bubbles form whenever a new story is not only told, but can also be sold. However, not every new story leads to a bubble. Sometimes stories can be told, but not sold.

These cases highlight two important necessary conditions for the formation of a bubble: first, bubbles need narratives. Every startup begins as a story about an imagined future. Every venture, every investment, is a statement about the future, an attempt to create a future that conforms to the imagined vision of the promoter. Teams are formed, resources acquired, alliances entered, products and services developed, all in furtherance of that story and that future.

Every startup story will have some common elements – a protagonist (sometimes, but not necessarily a technology), a plotline in which the protagonist struggles against a challenge from dark forces (incumbents, or the current way of doing things), and a happy ending where the sun shines and human progress is advanced. Ever incomplete, these stories provide the mental scaffolding for individuals and institutions to invest in new ventures. Good stories sell, and the more uncertain the outcome, the more leeway for entrepreneurs to fabulate.

Bubbles inflate as the distance between fiction and reality increases. Contexts – such as investor liquidity, regulatory frameworks and cultural and macro-economic factors – establish boundaries on how far our stories can depart from reality. But entrepreneurs are also creatures of context, and some are better than others at ‘entrepreneuring’, stretching the limits of plausibility and maximizing time for their imagined realities to catch up to their promises.

Sometimes, we don’t observe a bubble not because the stories aren’t sticky or because the technology isn’t narratible, but because the narrative comes to fruition and the technology or entrepreneur delivers. more>

Updates from Chicago Booth

Startup founders, put on your sales hat
Selling skills are essential for entrepreneurs and need to be taken seriously
By Michael D. Alter – I know an entrepreneur who built a hugely successful mobile-marketing company, starting out in the early 2000s until he sold it for a good deal of money in the mid-’00s.

The first few years of his business were in that dark era before smartphones were invented, but the idea was for advertisers to use his platform to get their messages on to people’s phones. He spent a lot of his energy trying to persuade big brands and big advertising agencies to sign up for his service.

One of his board members happened to know the executive chairman of a large US media group, and was able to help the entrepreneur secure a meeting with him to pitch his startup. This was a huge opportunity, but our entrepreneur was confident rather than nervous.

First, this was not his first startup. He already had a few successful new ventures behind him. He knew his skills: he was a good salesperson, and a good entrepreneur. Secondly, he knew he had to do his homework. He prepared more diligently than he had for any other meeting. He had the most impressive slide deck known to PowerPoint, with every imaginable chart and data point for whatever questions the executive might ask.

In the startup world, we talk about the importance of creating strong business plans, building a team with industry experience, and tapping into big markets. All of these are important, but we undervalue what is really the most important thing: selling the product. As a result, we do a disservice to ?<the entrepreneurial world by not giving startups the right priorities for success.

Entrepreneurs often think that if they have a truly great product, sales will take care of itself—as they say: build a better mousetrap, and they will beat a path to your door. I think of this as the first great myth of entrepreneurial selling. In reality, if people don’t know about it, they can’t and won’t buy it.

Selling helps to bridge that information gap. more>

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Updates from Ciena

When the lights go out: How utilities can better assess the impact of outages on their network assets
Do you have access to real-time data and an end-to-end network view to know what network resources are impacted during a power outage?
By Mitch Simcoe – We’ve all seen this movie before.  Back on July 13th, a power outage in New York City impacted 72,000 Manhattan customers (including shutting down Broadway on a Saturday night) which was attributed to an issue with the utility company’s relay protection system. The power grid’s protection system should have triggered a protection relay to isolate the faulty power line which ultimately led to the outage.

Yet as we enter the peak of summer heat in August, additional power outages continued to plague NYC this summer. A little over a week after the Manhattan blackout, 50,000 customers in Brooklyn and Queens lost their power as the temperature rose to above 90 degrees amid a brutal heat wave. “More than 30,000 customers had their juice deliberately cut by the utility thereby avoiding a much longer outage,” Con Ed spokesperson Allen Drury told Curbed at the time. Curbed also indicated that Con Ed had identified a ‘flawed connection’ as the cause of Manhattan’s major blackout.

As these power outages occur, and with more frequency lately, the first question to staff from utility management is: what resources, facilities and customers have been impacted by the outage?

In the world of Operational Technology/Information Technology (OT/IT) networking, how can utilities answer this question if they do not have a complete understanding of the resources underpinning their networks? To effectively manage their networks at the most basic level, utilities need an inventory system that accurately presents all available resources, both physical and virtual, end-to-end.

Why is it a challenge to get this view? more>

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Updates from Adobe

Reality-Defying Photo Composites Master the Impossible
By Jordan Kushins – Juan José Egúsquiza is based in Brooklyn, New York, but he spends much of his time as a man of the world. From Paris to San Francisco to Barcelona to Lucerne and beyond, the Lima, Peru-born multimedia artist and Adobe Creative Resident makes his way across the globe with his camera in hand. While exploring, he captures ordinary moments with a click, and these images become the basis for what he calls “Impossible Stories”: brain-bending composites that challenge the way we relate to and interpret our surroundings.

When I was young, I played music—percussion, mostly—and was in a band with my twin brother, who’s also an artist. He was so creative, and making things all the time, often grabbing trash and turning it into sculptures or instruments. That idea of recycling—of taking elements that were meant to be for something and then using them to build something else—was super, super cool to me. At some point I realized I wanted to start creating my own special things as well.

I was 19 or 20 when I first started taking pictures. I’d be traveling, mostly alone, and all of a sudden I’d be somewhere I’ve never been before: walking around, seeing new things, observing ordinary moments. I’ve always liked those the most; like, someone throwing a cookie away in a garbage can. Once you take a picture of it, it becomes something totally different.

At first, I wouldn’t edit my images at all, but eventually I started thinking: “What if I grabbed one element from this image and put it on something else?” Now that kind of photo compositing is a daily practice. more>

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How ergodicity reimagines economics for the benefit of us all

By Mark Buchanan – The principles of economics form the intellectual atmosphere in which most political discussion takes place. Its prevailing ideas are often invoked to justify the organization of modern society, and the positions enjoyed by the most wealthy and powerful. Any threat to these ideas could also be an implicit threat to that power – and to the people who possess it. Their response might be brutal.

In the real world, through the pages of scientific journals, in blog posts and in spirited Twitter exchanges, the set of ideas now called ‘Ergodicity Economics’ is overturning a fundamental concept at the heart of economics, with radical implications for the way we approach uncertainty and cooperation. The economics group at LML is attempting to redevelop economic theory from scratch, starting with the axiom that individuals optimize what happens to them over time, not what happens to them on average in a collection of parallel worlds.

The new concept is a key theme of research initiated by Peters about a decade ago, and developed with the collaboration of Gell-Mann and the late Ken Arrow at SFI, and of Alex Adamou, Yonatan Berman and many others at the LML. Much of this view rests on a careful critique of a model of human decisionmaking known as expected utility theory.

But there is one odd feature in this framework of expectations – it essentially eliminates time. Yet anyone who faces risky situations over time needs to handle those risks well, on average, over time, with one thing happening after the next. The seductive genius of the concept of probability is that it removes this historical aspect by imagining the world splitting with specific probabilities into parallel universes, one thing happening in each.

The expected value doesn’t come from an average calculated over time, but from one calculated over the different possible outcomes considered outside of time. In doing so, it simplifies the problem – but actually solves a problem that is fundamentally different from the real problem of acting wisely through time in an uncertain world. more>

How America Lost Faith in Expertise

By Tom Nichols – I’m used to people disagreeing with me on lots of things. Principled, informed arguments are a sign of intellectual health and vitality in a democracy. I’m worried because we no longer have those kinds of arguments, just angry shouting matches.

I fear we are moving beyond a natural skepticism regarding expert claims to the death of the ideal of expertise itself: a Google-fueled, Wikipedia-based, blog-sodden collapse of any division between professionals and laypeople, teachers and students, knowers and wonderers—in other words, between those with achievement in an area and those with none. By the death of expertise, I do not mean the death of actual expert abilities, the knowledge of specific things that sets some people apart from others in various areas.

There will always be doctors and lawyers and engineers and other specialists. And most sane people go straight to them if they break a bone or get arrested or need to build a bridge. But that represents a kind of reliance on experts as technicians, the use of established knowledge as an off-the-shelf convenience as desired. “Stitch this cut in my leg, but don’t lecture me about my diet.”

The larger discussions, from what constitutes a nutritious diet to what actions will best further U.S. interests, require conversations between ordinary citizens and experts. But increasingly, citizens don’t want to have those conversations. Rather, they want to weigh in and have their opinions treated with deep respect and their preferences honored not on the strength of their arguments or on the evidence they present but based on their feelings, emotions, and whatever stray information they may have picked up here or there along the way.

This is a very bad thing. more>

Updates from Siemens

Transforming the Capital Asset Lifecycle – Part 1
By John Lusty – “Innovate or die”. Three years ago, in the global oil & gas industry, this was the dire message communicated from the boardroom to the operating plant as falling commodity prices were hollowing out corporate income statements. The same story echoed through the supply chain as engineering contractors and equipment manufacturers fought for survival – trying to win enough work to remain healthy within a shrinking capital project market while creating greater value from the existing capital asset lifecycle.

The cost-cutting that ensued was ugly, and the job losses were substantial. In parallel, the appetite for innovative ideas sky-rocketed as producers worked to wring out costs and remain profitable at any price. This triggered a new behavior within the traditionally siloed energy industry, for the first-time visionaries started to look to other manufacturing industries for capabilities that could be adapted to their own companies.

What they saw was a shock. Despite years of investing in software and technology, capital asset owners in the energy and process industries still had a long way to go to get full value from their technical information compared to other, more mature, industries. Unlike their business information which, to a greater degree, had been consolidated following two decades of ERP implementations, the technical information supporting their plant assets was still scattered across different locations and incompatible file formats.

To make matters worse, data from multiple projects and facilities used software from a variety of vendors along with their own standards and specifications. Plants that came in through acquisitions and mergers were even more unique. more>

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Updates from ITU

Dark skies, bright future: overcoming Nigeria’s e-waste epidemic
By Eloise Touni – Nigerian law prohibits burning plastic cables, as well as acid leaching and other common methods used by John and his fellow pickers to reclaim valuable metals from discarded electronics. But minimal enforcement and a low awareness of the risks they are running means most pickers continue to regularly expose themselves to toxins that cause respiratory and dermatological problems, eye infections, neurodevelopmental issues, and, ultimately, shorter lives.

While international agreements like the Basel Convention prohibit the import of hazardous waste, unscrupulous importers and a porous customs system mean Nigeria now ranks alongside Ghana as one of the world’s leading destinations for electronic waste. The country receives 71,000 tonnes of used consumer goods through the two main ports in Lagos from the European Union and other more industrialized economies every year.

“Some of the e-waste from abroad is comprised of cathode-ray TVs, which contain lead, as well as refrigerators and air conditioners containing hydrochlorofluorocarbons, making it a threat to those who are dismantling and dealing with the products,” the UN Environment Program’s Eloise Touni says.

Plastic components, including hard casings and cables, also contain persistent organic pollutants used as flame retardants, such as polybrominated diphenyl ethers (PBDE).

These were banned by the Stockholm Convention due to their long-lasting global impacts and are regularly detected in ecosystems and people all over the world, including in Arctic wildernesses and their traditional inhabitants. more>

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America’s Hot New Job Is Being a Rich Person’s Servant

“Wealth work” is one of America’s fastest-growing industries. That’s not entirely a good thing.
By Derek Thompson – In an age of persistently high inequality, work in high-cost metros catering to the whims of the wealthy—grooming them, stretching them, feeding them, driving them—has become one of the fastest-growing industries.

The MIT economist David Autor calls it “wealth work.”

While there are reasons to be optimistic about this trend, there is also something queasy about the emergence of a new underclass of urban servants.

Wealth work falls into two basic categories. First, full-time retail and service jobs at places like nail salons and spas. “You’re talking about people with $30,000 incomes that are often employed in high-wealth metro areas, or resort economies,” Muro said.

Because they often cannot afford to live near their place o-f work, they endure long commutes from lower-cost neighborhoods. These arrangements aren’t merely time-consuming; they can also be exploitative. For example, New York City nail salons are notorious for flouting minimum-wage laws and other labor regulations, and massage parlors across Florida have served as fronts for human trafficking.

A second category is the “Uber for X” economy—that nebulous network of people contracted through online marketplaces for driving, delivery, and other on-demand services.

Optimistically, these jobs offer autonomy for workers and convenience for consumers, many of whom aren’t wealthy. But the business models that keep these firms aloft rely on the strategic avoidance of laws like the Fair Labor Standards Act, which regulates minimum wage and overtime pay. These laborers often do the work of employees with the legal protections of contractors—which is to say, hardly any. more>

Is Tourism an Antidote to the Global Wave of Nationalism and Xenophobia?

By Stewart M. Patrick – As vacation photos from exotic locales pile up in Facebook and Instagram feeds this summer, it’s easy to take far-flung tourism for granted. Well-heeled friends riding elephants in Thailand or camels in Giza might as well be at the Jersey shore or beside a lake in the Adirondacks. Mass international tourism, like the free flow of goods, services, money and data, has become a hallmark of globalization.

This is neither accidental nor trivial. The ability of those with with means and passports to travel the world is a function of international cooperation. It is also a force for global understanding, a potential antidote to the resurgent nationalism that now infects this era. Achieving such cosmopolitan ideals, however, requires a tourism focused on people-to-relpeople contacts and mutual benefits, rather than perpetuating self-contained bubbles of privilege.

At the dawn of the 20th century, foreign leisure travel required no passports. But it was the province of aristocrats and plutocrats of the sort that populated Henry James novels. The advent of jet travel, followed by package tours and declining airline fares, hastened mass tourism. According to the World Bank, between 1995 and 2017 the number of international tourist arrivals rose more than 250 percent, from slightly above 500 million to more than 1.3 billion, while tourist expenditures more than tripled, from $463 billion to $1.45 trillion. The United Nations estimates that tourism now accounts for 10 percent of global GDP and 7 percent of exports, and supports one out of every 10 jobs. Tourists still flock to Paris and Acapulco, but new, once unimaginable destinations from Antarctica to Zanzibar have also emerged.

Back in 1795, the philosopher Immanuel Kant famously outlined three preconditions for “perpetual peace.” The first two are more well-known: the emergence of self-governing constitutional republics and open international commerce. Kant’s third precondition is more often overlooked. It is the principle of “universal hospitality”: the right of all “citizens of the earth” to visit and be welcomed in all lands, regardless of their country of origin.

Kant believed that humans should act according to moral imperatives regardless of the precise effects of those actions. But his concept of hospitality still carried a utilitarian logic, since if universally practiced it would contribute to a cosmopolitan peace. more>