Category Archives: How to

Preventing digital feudalism

By Mariana Mazzucato – The use and abuse of data by Facebook and other tech companies are finally garnering the official attention they deserve. With personal data becoming the world’s most valuable commodity, will users be the platform economy’s masters or its slaves?

Prospects for democratizing the platform economy remain dim.

Algorithms are developing in ways that allow companies to profit from our past, present, and future behavior – or what Shoshana Zuboff of Harvard Business School describes as our “behavioral surplus.” In many cases, digital platforms already know our preferences better than we do, and can nudge us to behave in ways that produce still more value. Do we really want to live in a society where our innermost desires and manifestations of personal agency are up for sale?

Capitalism has always excelled at creating new desires and cravings. But with big data and algorithms, tech companies have both accelerated and inverted this process. Rather than just creating new goods and services in anticipation of what people might want, they already know what we will want, and are selling our future selves. Worse, the algorithmic processes being used often perpetuate gender and racial biases, and can be manipulated for profit or political gain. While we all benefit immensely from digital services such as Google search, we didn’t sign up to have our behavior cataloged, shaped, and sold.

To change this will require focusing directly on the prevailing business model, and specifically on the source of economic rents. Just as landowners in the seventeenth century extracted rents from land-price inflation, and just as robber barons profited from the scarcity of oil, today’s platform firms are extracting value through the monopolization of search and e-commerce services. more>

Updates from McKinsey

Digital transformation: Improving the odds of success
By Jacques Bughin, Jonathan Deakin, and Barbara O’Beirne – or established companies, the pressure to digitize business models and products has reached new intensity. McKinsey research shows that the best-performing decile of digitized incumbents earns as much as 80 percent of the digital revenues generated in their industries.

Ascending to that elite group is far from easy. In a new survey of more than 1,700 C-suite executives, we learned that the average digital transformation—an effort to enable existing business models by integrating advanced technologies—stands a 45 percent chance of delivering less profit than expected. The likelihood of surpassing profit expectations, on average, is just one in ten.

The good news is that executives can decisively increase the chance that a transformation focused on digital enablement will beat performance expectations.

Our latest research shows that exceptionally effective digital transformations are distinguished mostly by the practices that executives choose to follow. Adhering to a well-defined set of transformation practices lifts the likelihood of exceeding profit expectations to more than 50 percent—about five times better than transformations that involve none of these practices. What’s more, the same combination of practices works for every type of digital-enablement effort that our survey covered. more>

Linear Labs Promises a Moonshot for Electric Motor Technology

By Dan Carney – There is something almost as absurd afoot in Texas now; an electric motor startup making amazing performance claims that arose from a father/son project to improve upon the traditional Aeromotor windmill (a San Angelo, Texas product) for pumping water from wells.

Linear Labs CEO Brad Hunstable makes claims about the effectiveness of what the company dubs the Hunstable Electric Turbine, an electric motor (or generator) that would seem improbable if not for the fact that he says products employing motors from Linear Labs will hit stores early next year.

Consider this, the HET produces 2-3 times more torque than a conventional motor of the same size and specifications, it can be manufactured with no specialized tools or processes at comparable cost to traditional motors, it runs at lower voltage and uses simpler control electronics and it does all of this using iron ferrite magnets rather than the expensive rare earth Neodymium magnets that rely on Chinese suppliers.

It was developed while U.S. Military Academy alum Brad Hunstable and his father, nuclear power engineer Fred Hunstable collaborated on development of a old-fashioned many-vane-style water-pumping windmill, with the notion that it could be upgraded for use in the developing world to also produce small amounts of electricity.

The generator needed to work using the back-and-forth motion of the water pumping shaft that descends from the windmill to the well, so their generator was linear rather than rotary in motion. Hence “Linear Labs.”

A breakthrough in designing that motor led to the idea of applying their new configuration to electric motors. more>

Updates from ITU

How can AI help make our roads safer?
ITU News – What does a fully autonomous, electric, high-performance race car have to do with the United Nations Sustainable Development Goals (SDGs)?

For starters, the vehicle, developed by Roborace, is providing a testing ground for new efforts to build public trust in how next-generation vehicles could improve road safety and reduce the 1.35 million annual road deaths worldwide (SDG 3.6). Increased use of autonomous, electric, connected vehicles could also reduce emissions, improve traffic flows — and provide affordable, safe and sustainable transport systems to underdeveloped nations (SDG 11.2).

But how do we go from race track to the road?

A panel of experts – Bryn Balcombe, CSO at Roborace and Founder of the Autonomous Drivers Alliance; Lucas di Grassi, Formula-E World Champion and CEO at Roborace; and Fred Werner, Head of Strategic Engagement at ITU’s Standardization Bureau – met at Web Summit 2019 to discuss how AI will make our roads safer, and how ITU is helping lead the charge. more>

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Too Much Democracy Is Bad for Democracy

The major American parties have ceded unprecedented power to primary voters. It’s a radical experiment—and it’s failing.
By Jonathan Rauch and Ray La Raja – Americans who tuned in to the first Democratic presidential debates this summer beheld a spectacle that would have struck earlier generations as ludicrous. A self-help guru and a tech executive, both of them unqualified and implausible as national candidates, shared the platform with governors, senators, and a former vice president. Excluded from the proceedings, meanwhile, were the popular Democratic governor of a reliably Republican state and a congressman who is also a decorated former marine.

If the range of participants seemed odd, it was because the party had decided to let small donors and opinion polls determine who deserved the precious national exposure of the debate stage. Those were peculiar metrics by which to make such an important decision, especially given recent history.

Had the Democrats seen something they liked in the 2016 Republican primary? The GOP’s nominating process was a 17-candidate circus in which the party stood by helplessly as it was hijacked by an unstable reality-TV star who was not, by any meaningful standard, a Republican.

Americans rarely pause to consider just how bizarre the presidential nominating process has become. No other major democracy routinely uses primaries to choose its political candidates, nor did the Founders of this country intend for primaries to play a role in the republican system they devised.

Abraham Lincoln did not win his party’s nomination because he ran a good ground game in New Hampshire; rather, Republican elders saw in him a candidate who could unite rival factions within the party and defeat the Democratic nominee in the general election.

Today’s system amounts to a radical experiment in direct democracy, one without precedent even in America’s own political history.

The two major parties made primaries decisive as recently as the early 1970s. Until then, primaries had been more like political beauty contests, which the parties’ grandees could choose to ignore. But after Hubert Humphrey became the Democrats’ 1968 nominee without entering a single primary, outrage in the ranks led the party to put primary voters in charge. Republicans soon followed suit. more>

Updates from Chicago Booth

Why do analysts low-ball earnings forecasts?
By Martin Daks – The market-research company FactSet reports that for each quarter over the past five years, an average of 72 percent of companies in the S&P 500 beat earnings estimates. Past research, including by University of Pennsylvania’s Scott Richardson, University of California at Irvine’s Siew Hong Teoh, and Boston University’s Peter D. Wysocki has found that analysts’ forecasts become more pessimistic and thus beatable as the quarter end approaches, but an unaddressed question is how this walk-down affects clients. If analysts revise their forecasts downward each quarter to placate managers, wouldn’t this confuse the investors who ultimately pay for their services?

According to Chicago Booth’s Philip G. Berger and Washington University’s Charles G. Ham and Zachary R. Kaplan, analysts walk down forecasts by suppressing positive news from quarterly forecasts, not by issuing misleading negative revisions. When analysts have positive news, they will often revise the share price target upward or state explicitly that they expect companies to beat earnings estimates, while leaving the quarterly forecast unrevised. Suppressing positive news leads to beatable forecasts—behavior that benefits corporate executives but carries important implications for both the individual investors who rely on these predictions and researchers studying investor expectations.

When securities analysts receive updated information after issuing a quarterly forecast, they have three options: revise the current-quarter earnings forecast; issue an alternative forecast signal, such as a revision to the share price target or future-quarter earnings; or issue no additional forecast.

By not disseminating all information through the current-quarter earnings forecast, which is widely available through commercial databases, analysts provide an advantage to investment clients who have paid for access to the full breadth of their research product.

“Analysts convey information in ways that enable them to be of service to clients, who they care about, and, at the same time, to avoid displeasing corporate managers, who they also care about,” Berger says. “Non-clients, who rely on earnings forecasts because they do not have access to the whole of an analysts’ work product, end up with skewed information, but this is not a primary concern for the analysts’ business.”

The researchers demonstrate that a simple strategy based on buying companies expected to beat earnings, using share price target revisions and the text of reports, yields significant abnormal returns, suggesting the market does not see through the analysts’ strategy for conveying information selectively. more>

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Updates from McKinsey

Bias busters: Avoiding snap judgments
Despite their best intentions, executives fall prey to cognitive and organizational biases that get in the way of good decision making.
By Tim Koller, Dan Lovallo, and Phil Rosenzweig – The board of a mining company thinks it’s time for a new CEO, one who understands the increased role of technology in the industry and can inspire the next generation of mining leaders. The hiring committee has a few internal candidates in mind—namely, the heads of the copper, nickel, and coal divisions.

All three have similar years and types of industry experience and comparable P&L responsibilities. But the front-runner in the minds of many on the committee is the head of the copper division. After all, copper has contributed the most to the bottom line over the past few years, while the other divisions have been lagging. It must be because the unit head is a tech-savvy people person, with a good understanding of industry trends, they reason. “Seems like a no-brainer,” the head of the hiring committee notes.

But how can the board be sure that it is picking the best candidate for the top job?

These distortions don’t apply only to company performance; the halo effect can also alter how we view individual performance. That’s what happened in the case of the mining company. The front-running CEO candidate’s division had performed well in large part because of a significant spike in the price of copper, something over which he had no control. Yet the halo of high profits shined on the business-unit leader, the hiring committee’s initial impressions of him stuck, and he was appointed CEO.

Much to the board’s dismay, the new CEO did not demonstrate either skillful use of technology or strong leadership, two capabilities that were critical for this role. Early in his tenure, the company incurred billions of dollars in losses. more>

Updates from Adobe

The Simple Life
By Jenny Carless –By day a graphic designer, by night a nature photographer, Anders Bundgaard focuses on simplicity, no matter the medium.

Bundgaard’s interest in graphic design was first piqued during an internship at an advertising agency. After finishing school, he sought out a series of courses—including year-long programs in print and reproduction, drawing, advertising, and multimedia—to develop the skills he needed.

At 21, Bundgaard moved from Denmark to London in search of new and interesting work. “My first job here was for a company that designed film posters,” he says. “I really liked the work and continued in that direction.”

Today, Bundgaard’s graphic design work is mainly aimed at the film industry. His portfolio includes film posters, motion graphics for trailers, and title sequences.

Whether working in print or motion, his preferred style is simple and clean.

“I try to get to the core of a project and then distill it down to the bare minimum to communicate the idea,” he says. more>

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New Microeconomics: How Evolution Explains Resource Distribution

By Blair Fix – Through years of schooling, mainstream economists are trained to ignore the obvious facts about human nature. The theories that economists learn make it impossible for them to understand human sociality.

Economists are trained that humans are asocial ‘globules of desire’. This is Thorstein Veblen’s satirical term for ‘homo economicus’, the economic model of man.

As Veblen makes clear, economists’ model of human behavior is bizarre. Indeed, the assumptions are so far-fetched that one wonders how this ‘theory’ ever gained acceptance. I’ve spent years trying to make sense of homo economicus as a scientific theory. I’ve concluded that this is a waste of time. Economists’ selfish model of humanity is best treated not as science, but as ideology.

Unlike scientific theories, ideologies are not about the search for ‘truth’. Instead, they are about rationalizing a certain worldview — usually the worldview of the powerful. Economists’ selfish model of humanity is a textbook example.

The discipline of economics emerged during the transition from feudalism to capitalism. During this period of social upheaval, business owners battled to wrench power from the landed aristocracy. To supplant the aristocracy, business owners needed to frame their power as legitimate (and the power of aristocrats as illegitimate). Their solution was devilishly clever. The new business class appealed to autonomy — the mirror opposite of the ideals of feudalism.

Feudalism was based on ideals of servitude and obligation. Serfs were obligated to perform free work for feudal lords. And these lords, in return, were obligated to protect serfs from outside attackers. This web of obligation was rationalized by religion — it was a natural order ordained by God.

To upend this order, business owners championed the ideals of autonomy and freedom. Business owners claimed to want nothing but to be left alone — to pursue profit unfettered by government or aristocratic power. From this world view, the autonomous model of man was born. It had nothing to do with how humans actually behaved. It was about rationalizing the goals of business owners. They wanted power, but they framed it as the pursuit of freedom and autonomy. “Power in the name of freedom” is how Jonathan Nitzan puts it. more>

Updates from Adobe

By Cristina Daura – llustrator Cristina Daura grew up steps away from an amusement park. A trail led straight from her house to the top of Barcelona’s Tibidabo mountain, where a large church looms over a colorful theme park full of twinkly lights, charming roller coasters, creepy vintage animatronics, and sweet-smelling air. Daura’s family held an annual pass, so she could pop in any time. Today, the artist’s playful but dark illustrations are clearly inspired by the kitsch, the bright colors, and her memories of this extraordinary place.

A bit of an outcast when she was younger, Daura found her community at comic book stores. Always with a sketchbook in hand, she thought she wanted to design comic books for a living. When she found out that illustration work paid better, she switched gears—but she continues to take inspiration from the way comics tell a story.

Daura also uses symbols and an intentionally limited color palette to communicate, with many symbols repeated in multiple works. With the symbols, Daura has created her own representational language—and because she doesn’t like to explain her work, the viewer is left to interpret meaning on their own. more>

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