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Archive for the ‘nonfiction’ Category

The Adventures of Johnny Bunko, by Daniel Pink

Friday, February 5th, 2010

Book website
Amazon link

Dan Pink’s book Drive was good, so I also picked up this book from the library, subtitled “The last career guide you’ll ever need”. It’s written in the style of manga (Japanese comics), and can be read in half an hour, but offers solid advice on career management.

Here are the bullet points it hits:

  1. There is no plan – don’t assume that if you do what everybody tells you to do that it’ll work out. Nobody’s responsible for your career but you.
  2. Think strengths, not weaknesses – trying to fix weaknesses is a never-ending process, so focus on building strengths into world-class abilities instead (the book specifically calls out Marcus Buckingham of “Now, Discover your Strengths”, and Mihály Csíkszentmihályi of “Flow”).
  3. It’s not about you – help the people around you, both managers and coworkers, achieve their goals.
  4. Persistence trumps talent – given my recent posts, I don’t think I need to add anything there.
  5. Make excellent mistakes – avoiding mistakes means you aren’t stretching yourself – have high aspirations and make big mistakes, and then learn from the mistakes. It’s the deep practice concept in another form.
  6. Leave an imprint – do something that matters (another way of asking “What’s your sentence?”).

I thought it was a cute idea that took some standard career advice mantras and made them seem fresh by presenting them in the new form of a graphic novel. Not a ton of depth, but I enjoyed the quick read.

NurtureShock, by Po Bronson and Ashley Merriman

Thursday, February 4th, 2010

Book website
Amazon link

I’ve liked Po Bronson’s other books, like What should I do with my life?. I also really liked his New York magazine article called The Power (and Peril) of Praising Your Kids, which described Carol Dweck’s research into the fixed vs. growth mindset of children, and what a tremendous difference it made to praise effort rather than innate ability. So I’ve been meaning to read this book, which summarizes several similar topics (the praise article is the first chapter), and finally got it from the library a couple weeks ago.

The book covers several topics where common parenting assumptions do not match what science has learned over the past couple decades. The praise chapter describes how self-esteem is actually undermined by trying to build it up. There is a chapter on how squeezing in more activities and studying harder is causing kids to lose sleep, which has startling impacts on health and even intelligence (an hour of sleep a night separated A students from D students). Other chapters cover questions about race, honesty, the pace of cognitive development in children, self-control, and socialization.

One particularly non-intuitive point for me was that “to an adolescent, arguing is the opposite of lying”. Parents hate arguments, finding them stressful, disrespectful and destructive, and don’t appreciate their kids questioning their judgment. The interesting result was that kids that respect their parents are the ones most likely to argue with them – the rest “just pretended to go along with their parents’ wishes, but then they did what they wanted to do anyway”. In other words, parents that shut down conflict and argument ended up promoting lying because the kids didn’t feel bound by arbitrary rules that made no sense to them. But when the kids were allowed to have their say, and where parents could explain why the rules made sense, then the kids could be honest and ask for what they wanted, rather than feeling they had to lie and work around the rules. As an aside, substituting manager and employee for parent and kid in this paragraph illustrates the connection between management and parenting (in case you were wondering why I’d be reading a parenting book).

I think NurtureShock is a nice summary of interesting results from the new “science of kids”. I don’t know if there are any mind-blowing revelations, but I’m definitely questioning my instincts about praise and other topics as a result. I recommend going and checking out the list of all posts and articles the authors have published on the subject, including links to the articles listed above and many others, to see if you’d be interested in the book.

The Talent Code, by Daniel Coyle

Sunday, January 24th, 2010

Book website, with excerpts
Amazon link

A coworker recommended this to me, and was even kind enough to lend it to me for the weekend.

Coyle asks the question: where does talent come from? Is it nature (genetics) or nurture (environment/opportunity)? He started by visiting several talent hotbeds – the Russian tennis academy that spawned Marat Safin and Elena Dementieva, the Curacao Little League baseball team that has been consistently reaching the world semifinals, the soccer fields where Brazilians train – and constructs a thesis around what common factors he sees among those hotbeds.

Here’s what he came up with. Talent is a mix of three factors:

  • Deep practice – I’ve also heard it called deliberate practice. This is the kind of practice that is referred to in the “10,000 hour rule” popularized by Malcolm Gladwell – that it takes 10,000 hours of devoted effort to become a world-class expert at something – that’s 3 hours a day for ten years. Note this doesn’t mean just doing an activity – it means continuously pushing the limits of your ability, always operating just out of your comfort zone, making mistakes and learning to fix them, getting comfortable with that dynamic of improving by failing. And it’s making sure that time is spent doing the activities that you need to improve, whether it’s ball handling in soccer, technique in tennis, or expressivity in music.

    He has three rules for deep practice:

    • Chunk it up – he breaks this into three parts as well – absorb the whole thing, break it into chunks, and then slow down each chunk until you can get it exactly right. I described something similar in my cognitive subroutines post.
    • Repeat it – This doesn’t mean repeating it mindlessly – it’s more about practicing each day and trying to push the limits just a bit more. He cites research saying that we can only live in that edge zone for three to five hours each day, so any more than that is just mindless repetition and doesn’t actually help.
    • Learn to feel it – In other words, internalize it to the point where it’s unconscious and emotions guide your reactions rather than depending on conscious rational thought. Our conscious mind is slow, so to be effective, we have to get everything into the unconscious.
  • Ignition – This is the will necessary to sustain oneself through those interminable hours of deep practice. Coyle suggests that one powerful factor is seeing others do it – if they can do it, why can’t I? He gives the example of Roger Bannister and the four minute mile – it was considered humanly impossible until Bannister did it, and within a year many others had. Or the explosion of baseball talent in Curacao after watching Andruw Jones, from Curacao, hit two home runs in his World Series debut as a 19-year-old rookie. Or the rise in South Korean professional women golfers after Se Ri Pak won an LPGA event in 1998. Ignition can also occur because of a desire to belong – Coyle cites several examples of clubs or teams providing the spark for kids to invest the necessary practice time.

    My favorite point in this section was a study by Gary McPherson which tracked students who were taking up musical instruments in middle school, and discovered that the single best indicator of how successful they would be with the instrument was a question that was asked of them before they started: how long do you plan to continue playing this instrument? Those that said they were planning to play the instrument for the long term got more out of 20 minutes of practice than the short-termers got out of 90 minutes. The instrument was part of the long-termers’ identity, and so they wanted to continue pushing themselves and get into that zone of deep practice.

  • Master Coaching – Coyle suggests that both deep practice and ignition can be catalyzed by a great coach. The coaches that he interviews are masters at observing each student and pushing the right buttons for each of them to get to the next level. Praise and criticism and information transfer are simply tools to push students to stay in that zone of deep practice at the edge of their abilities. For example, Coyle cites a study of John Wooden’s coaching style, which said that 7% of his communication was praise, 7% was criticism and 75% was information transfer – much of it in the form of “Here’s the right way, here’s what you’re doing (incorrectly), and now here’s the right way again” to reinforce the subtle improvements he desired. Another good quote from the coaching section was that “small successes were not stopping points, but stepping stones … Good. Okay, now do ____”.

One major theme of the book is the process by which expertise gets embedded in our brains. Coyle cites neuroscience research showing that brain circuits that get used extensively are reinforced by growing a myelin sheath around them – the myelin provides insulation for those neural pathways and improves the speed at which those neural pathways fire. In other words, as we repeat and get better at an activity, there is a physiological change that speeds up the signals in our brain so that we can do it faster. I love how this ties into my idea of cognitive subroutines and why I think that repetition and memorization is critical for expertise. I also learned that the myelin sheath breaks down so it has to be continually rebuilt, which is why we have to keep practicing every day if we want to maintain our expertise. Also, it responds to neural activity, and the activity is strongest when we are in deep practice mode, trying new things and seeing what works and what doesn’t.

All in all, a good book covering an important topic in a well-written breezy way. Admittedly, I like it partially because it reinforces my existing biases, so I liked the anecdotes and the neuroscience that supports those biases.

P.S. Another John Wooden quote: “Don’t look for the big, quick improvement. Seek the small improvement one day at a time. That’s the only way it happens – and when it happens, it lasts… Repetition is the key to learning.” This reinforces Drive‘s point that we need to pick our overall goal and get a little better each day.

Drive, by Daniel Pink

Wednesday, January 20th, 2010

Drive book website
Amazon link

I really liked Pink’s TED talk on the “surprising science of motivation” where he says “There’s a mismatch between what science knows and what business does”. In particular, the compensation and motivation strategies currently used by businesses have been shown to undermine motivation rather than enhance it. So I’ve been interested in reading the book-length version of his argument, and managed to snag it from the library soon after release.

Alas, there’s not much more in the book than what’s in the TED video. So go watch that. Or read his “cocktail party summary”:

When it comes to motivation, there’s a gap between what science knows and what business does. Our current business operating system–which is built around external, carrot-and-stick motivators–doesn’t work and often does harm. We need an upgrade. And the science shows the way. This new approach has three essential elements: 1. Autonomy – the desire to direct our own lives. 2. Mastery — the urge to get better and better at something that matters. 3. Purpose — the yearning to do what we do in the service of something larger than ourselves.

I don’t have much to add beyond that, except to cheer him on. I think that creating new organizational cultures that trust people rather than processes is a goal towards which we should all be aspiring, even if I have no idea how to make that happen.

I also really liked his 2 questions video. The 2 questions:

  • What is your sentence? In other words, if you were forced to summarize your life’s work and accomplishments in one sentence, what would that sentence be? Distilling it to one sentence forces you to pick what your overall purpose is, rather than trying to do lots of things at once (says the generalist).
  • Was I better today than yesterday? After the sentence helps you define your purpose, each day is an opportunity to move closer to that purpose. Having a daily check-in forces us to question every day whether we’re making progress towards our goals. Or to put it another way, using a quote I found on Twitter, “If it’s important enough to you, you’ll find a way. If not, you’ll find an excuse.”

The weekday posts are going to be less thoughtful, but, hey, I’ve got a year’s backlog of books to review, so I can crank those out during the week, and hopefully I can continue digging into more meaty topics on the weekend.

The Design of Business, by Roger Martin

Tuesday, January 19th, 2010

Amazon link

I’m not sure where I heard about this book, but the subtitle, “Why Design Thinking is the Next Competitive Advantage”, pretty much sold me on at least checking it out, since I’m interested in both design and management. So I got it from the library and read it.

Martin frames business as operating in a “knowledge funnel”, which starts with a mystery, gets refined to a heuristic, and is instituted into an algorithm. He uses McDonald’s as an example of the knowledge funnel.

  • A mystery is a new niche or new problem that is not handled by existing solutions. People wander around in the mystery trying things to see if they can figure out something that might work. In the case of McDonald’s, the McDonald brothers were trying to figure out how a restaurant should work in a mobile car culture.

  • Once a partial solution has been found, it becomes a heuristic or rule-of-thumb. The heuristic is a frame that provides a useful way of thinking about the mystery that makes its solution tractable. It doesn’t guarantee results, but generates working solutions more often than not. The McDonald’s brothers created the idea of fast food as we know it, with reduced menu options, standardized cooking, and the drive-thru instead of the drive-in. But it was still dependent on the implementation at each new restaurant.
  • Once a heuristic has shown the way, the drive for efficiency begins, where the uncertainties of the heuristic are mapped out such that every element can be institutionalized as an algorithm. Once an algorithm exists, it can be standardized such that anybody can run it, or even automated by a computer. Ray Kroc bought the McDonald’s chain and compiled explicit instructions for every aspect of running a franchise, from how long to cook hamburgers, how often to clean the bathrooms, and even how to choose a new location.

The knowledge funnel is a nice little metaphor, but it is not a particularly new way of looking at things. Or maybe that’s just my overactive relational mind making connections everywhere, as I think that the knowledge funnel could be seen as another form of Latour’s Collective process or Moore’s Chasm.

Martin did articulate well how a company is often started around finding a heuristic to solve a mystery, and then spends the rest of its existence refining that heuristic into ever more efficient algorithms. But if the company isn’t careful, another company will find a new mystery that disrupts the original company’s business model (aka the innovator’s dilemma).

One of the reasons that companies get trapped into refining efficiency is that tackling mysteries is scary. Once a company is into the refining heuristic stage, decisions can be made analytically. Refinements can be tested to see if they are more efficient and reliable, so that cold, hard data removes the subjectivity of the heuristic.

Tackling new mysteries requires a leap away from the safety of data and reliability. Martin suggests that “validity” is a better way to think about such problems than reliability – a valid solution that works some of the time is more valuable than a less valid solution that works every time.

The rest of the book describes several case studies of companies that have successfully made the leap to “design thinking”, where attacking the next mystery is valued as much as refining the existing solution. His examples included:

  • P&G, which realized that it was better at the heuristic and algorithm phases of the knowledge funnel, so it set the goal of sourcing “half its product innovation from outside the company” to take advantage of its development engine.

  • RIM, the makers of Blackberry – I liked the description that the founders “realized RIM’s strengths lay in designing, building and marketing communications devices for busy people” which is a good mission statement since it is completely technology-independent
  • Herman Miller, the makers of the Aeron chair – where the CEO emphasized the independence of design to the point where he said “You never ask the sales force what they think of a design. Their job is to sell it.”

One suggestion I liked for companies to avoid ossifying around an existing algorithm was for companies to use a project oriented structure:

“In companies organized around ongoing, permanent tasks, roles are rigidly defined, with clear responsibilities and economic incentives linked tightly to those individual responsibilities. This structure discourages all but senior staff from seeing the big picture… to move along the knowledge funnel is by definition a project; it is a finite effort to move something from mystery to heuristic or from heuristic to algorithm. And such projects demand a business organized accordingly, with ad hoc teams and clearly delimited goals.

In other words, when your entire job is defined around a function, you will not welcome others who are trying to disrupt the status quo, even if that’s the right thing for the company. But if everybody works in a project-oriented mode as they do at design firms like Ideo, they will work towards finishing the current project, and moving onto the next.

Overall, this was a quick read with a few good anecdotes and a useful metaphor, but it’s not a book that I see myself buying for my permanent collection.

P.S. Using the cheat code of doing a book review for a blog post, since they don’t require as much thought. We’ll see how long I can keep this up.

Nonfiction Roundup August 2008

Tuesday, August 26th, 2008

I’m finishing up packing my books, and came across the pile of books that I read this summer but haven’t reviewed yet. So this is going to be a quickie placeholder post with short reviews of each book, and hopefully I’ll have time to come back and do a longer review later on a couple of them (particularly McCracken’s book).

Transformations, by Grant McCracken

I’m a big fan of Grant McCracken’s blog, so I was eagerly anticipating his new book, which postulates that, as he titles his preface, “Entertainment is dead, long live Transformation”. Instead of passively watching entertainment, people have become active consumers of the world around them, using ideas from all cultures to drive change within themselves. We have moved from a world where one’s birth determined one’s destiny (sons of tailors became tailors) to one where we reinvent each ourselves on an ongoing basis. McCracken traces transformation possibilities throughout history, starting with tribal ritualistic transformations of rites of passage, passing through the industrial conception of working to improve one’s social status by imitating the upper class, on to the 50s warring transformations of beatnik dropout culture vs. technophilic “brightwork” culture, and then to the postmodern transformations available to us today. McCracken takes the reader on a tour of several categories of these postmodern transformations, including the capitalistic swift self and the Eastern-philosophy leaning radiant self. I highly recommend this book – it’s so dense with new ideas and incisive observations that every few pages I would have to put it down and think for a while.

Convergence Culture, by Henry Jenkins

Henry Jenkins is an MIT professor who is one of the leading analysts of media and culture and technology. This book is a collection of essays on three concepts he describes as media convergence, participatory culture, and collective intelligence. He uses these ideas to analyze a number of different communities, including the Internet groups that work to discover who wins the Survivor reality show before the results are displayed, the delicate interaction between corporations and fans in American Idol voting, the transmedia creation of the Matrix movies, etc. I liked his description of the “social process of acquiring knowledge” that communities like the Survivor “spoilers” develop to decide what information is accepted as community knowledge as opposed to individual contributions (reminiscent of Latour’s collective). Jenkins also emphasizes the ways in which culture is not a degrading force to be demonized, but instead a powerful force that drives people to collaborate in ways they might not under normal circumstances (e.g. his essay on “Why Heather can write”, discussing Harry Potter fan fiction). I liked how this book provides a quick tour inside these different communities, but I don’t feel like I came away with a necessarily new understanding of these trends. It felt a little fluffy to me, but that may be because of my relative familiarity with this world compared to his target audience.

Group Genius, by Keith Sawyer

Keith Sawyer is a psychology professor who studied under Mihaly Csikszentmihalyi, author of Flow (which I’ve still never read), and this book is his attempt to extend the Flow theory to how groups of people think and interact. Sawyer is an experienced jazz musician and improv comedian, two activities where the “product” is a collaborative creation among several people, and depends on the group working with each other and creating a “group flow” situation. He starts out by showing how very few inventions are the work of a lone genius – inventions involve continual improvements, as people keep on adding one more feature, until the final result is unrecognizable as the work of a single person. He also suggests the conditions necessary for a group to achieve flow, including trust, placing the group’s goals over individual egos, communication and active listening, etc. I love the concept of group genius, especially given my penchant for teams, but the book felt light on the details of actually achieving it. It’s a useful quick read, though, for reorienting around the idea of groups rather than individual genius.

X Saves the World, by Jeff Gordinier

This is a fun little rant by a Gen-X-er on various trends associated with our generation. It was particularly fun for me as I identified all too well with his descriptions e.g. Gen-X-ers taking pride in knowing things, “sponging up information” while “finding [their] own path through this maze of programming and pressures” (he cites Richard Linklater, Quentin Tarantino and Beck as slackers whose encyclopedic knowledge eventually turned into an asset). Or his assertion that “Xers are temperamentally opposed to a monoculture”. Gen X rejects how it is told to behave, and figures things out for itself. I enjoyed reading through and identifying with this book, although I can’t say there’s all that much substance here – more like a guided trip down memory lane.

After reading this book and being sensitized to these generational issues, Sanford’s post about generational analysis caught my eye, as well as a followup by Jessica Margolin. Apparently, William Strauss and Neil Howe have identified four generational archetypes, which tend to repeat themselves in a cultural cycle with the “Nomad (Reactive)” generation (that’s Gen X) following (and rejecting) the “Prophet/Idealist” generation (Baby Boomers) – I’d really like to read their book at some point, as it sounds interesting.

Why Do I Love These People?, by Po Bronson

After Bronson tackled the question of careers in What should I do with my life?, Bronson addresses the topic of family in this book. As with his previous book, Bronson spent a couple years wandering the country talking to people about their families, and this is a collection of the stories that he gathered. Also like his previous book, the stories don’t just include easy stories of happy families – it includes stories of people struggling to make their families work in difficult circumstances (including a memorable one of a couple from opposite sides of the Irish split). Each person will have their own stories that they identify with in this book, but it was inspiring in reminding me that families don’t just happen – they require dedication and work and selflessness. I mostly read this book one story at a time at bedtime, and I think it was a good way to read it.

Civil Disobedience, by Thoreau (Project Gutenberg version)

Read on the iPhone with Stanza. Interesting essay where Thoreau examines the idea of government and what it means to submit to majority rule, especially if the majority is wrong (as it was about slavery when he wrote it). He also decries the accumulation of wealth and material objects as chains that prevent people from doing the right thing because they are afraid of losing what they have. In contrast, he laughs at his night in jail for not paying his taxes:

I could not help being struck with the foolishness of that institution which treated me as if I were mere flesh and blood and bones, to be locked up. I wondered that it should have concluded at length that this was the best use it could put me to, and had never thought to avail itself of my services in some way. I saw that, if there was a wall of stone between me and my townsmen, there was a still more difficult one to climb or break through before they could get to be as free as I was. I did nor for a moment feel confined, and the walls seemed a great waste of stone and mortar. I felt as if I alone of all my townsmen had paid my tax. They plainly did not know how to treat me, but behaved like persons who are underbred. In every threat and in every compliment there was a blunder; for they thought that my chief desire was to stand the other side of that stone wall. I could not but smile to see how industriously they locked the door on my meditations, which followed them out again without let or hindrance, and they were really all that was dangerous. As they could not reach me, they had resolved to punish my body; just as boys, if they cannot come at some person against whom they have a spite, will abuse his dog. I saw that the State was half-witted, that it was timid as a lone woman with her silver spoons, and that it did not know its friends from its foes, and I lost all my remaining respect for it, and pitied it.

Interesting thoughts, especially when I’m feeling weighed down by how much stuff I have, and wish I could learn to live lighter. Not to mention the freedom and courage to stand up for what is right.

Leadership Lessons of the Navy Seals, by Jeff and Jon Cannon

A management book with a twist, as it’s from the interesting perspective of extracting lessons from the Navy Seals, an extremely effective organization. The authors illustrate each of their lessons with an example from Jon’s experience in how Navy Seals train and operate, and then describe an example of applying the same lesson to corporate life from Jeff’s consulting work. Nothing too new here, but it was fun seeing how the same leadership principles apply in the different context of life-and-death missions.

True Enough, by Farhad Manjoo

Thursday, July 24th, 2008

Amazon link

Based on my previous thoughts about the decline of Absolute Truth , it’s not surprising that I wanted to read a book that is subtitled “Learning to Live in a Post-Fact Society”. Manjoo observes that we, the body politic, used to agree on what was happening and the problems we were facing, but had different ideas about how to address those problems. Now we can’t even agree on what reality is. He wrote this book to try to answer the question “How can so many people who live in the same place see the world so differently?”

Manjoo cites several great experiments throughout the book that demonstrate the human psychology contributing to this divergence of “realities”. One is an experiment by Brock and Balloun to demonstrate selective exposure, which “set out to determine what happens when people are presented with information that contradicts their core beliefs”. They played audio tapes of speeches on various topics, but the tapes were recorded with a lot of static. The test subjects could eliminate the static for a few seconds by pressing the button. By correlating when subjects pressed the button with the subject of the speech, the experimenters noticed that people only wanted to hear information they matched their worldview already. The application of this idea of selective exposure in a media ecology with divergent viewpoints is obvious, as Republicans tend to listen to Fox News, and Democrats to NPR. We choose media that reinforces our existing biases, and therefore the biases become stronger, driving us further away from each other and reducing our ability to have a common dialogue.

Similarly, another experiment by Hastorf and Cantril demonstrates the power of selective perception. As Manjoo puts it, “Selective perception says that even when two people of opposing ideologies overcome their tendency toward selective exposure and choose to watch the same thing, they may still end up being pushed apart from each other…. each of them will have seen, heard, felt, and understood the “thing” vastly differently from the others who have experienced it.” Hastorf and Cantril illustrated this by showing a clip of a football game between Princeton and Dartmouth to students of the respective schools and asked them to “objectively” mark down any infractions they saw. From the same clip, the students got very different results, as Dartmouth students saw the Princeton team cheating on every play, and vice versa. Even when we see the same thing, we only notice and remember the things that fit into our existing worldview, and fill in the blanks accordingly.

So now take these two tendencies to only accept media inputs that match our biases and see only what makes sense to us, and combine them with our growing ability to locate ourselves with our communities of choice, and it’s unsurprising that we choose communities that think the same way that we do and reinforce our beliefs. After the last presidential election, a friend and I were discussing the result, and he said “Do you know any Republicans? I can’t think of any that I know.” which is an astonishing claim in a country where half the country had just voted Republican. But he lived in Boston, and I lived in the Bay Area, and those communities are decidedly liberal. We had self-sorted into communities which matched our ideologies, shielding us from having to deal with conservative viewpoints. It’s much easier to deal with the straw men put up by liberal media than it is to deal with other real people who might make good points, a phenomenon Manjoo calls “weak dissonance” – we like being able to easily refute points with which we disagree.

These trends also play into the polarization of media. We want media that is “objective”, but alas, we don’t share a definition of what “objective” is. Manjoo calls this biased assimilation:

“… each of us thinks that on any given subject our views are essentially objective, the product of a dispassionate, realistic accounting of the world. This is naive realism, though, because we are incapable of recognizing the biases that operate upon us. … You think there are more facts and better facts on your side than on the other side. The very act of giving [the other side] equal weight seems like bias. Like inappropriate evenhandedness. … we all want objectivity, but we disagree about what objectivity is.”

Given that tendency to want “objective” news that caters to our existing opinions, and given a market economy where media channels are supported by viewership, it’s obvious why news outlets have become more polarized to satisfy audiences in a culture of niches.

I liked this book. It takes several real-world examples from across the political spectrum, from Swift Boat Veterans to the Democrats who thought the 2004 election was stolen to 9/11 conspiracy theorists, and describes psychology experiments that illustrate the underlying principles that drive such behavior. Ironically, part of the reason I liked the book is that it played into my own pre-existing biases about the fragility of Truth. Regardless, it’s a quick read that provides some insight into the world of splintering reality that we live in.

Information Rules, by Carl Shapiro and Hal Varian

Monday, July 21st, 2008

Amazon link
Google books link, which appears to have most of the book’s content available (not surprising as Hal Varian is Google’s Chief Economist).

According to the preface, this book arose because these two economics professors were perplexed by complaints that “economics was not much use in today’s economy” even as they were getting hired as consultants by the same people doing the complaining. They realized that what most people knew of economics was Econ 101, the classic supply and demand curves with perfect competitive markets. But there was an undiscovered trove of economics research on exactly the sorts of issues facing companies, and this book is a summary of that research, applied to the “information economy”. What really impressed me about this book is that it was written in 1999, and unlike most business books written in the dot-com era, this one still is perfectly applicable today, lending credence to the book’s thesis: “Ignore basic economic principles at your own risk. Technology changes. Economic laws do not.” The authors support this thesis by using examples from throughout history to illustrate “information economy” principles.

The book starts with a discussion of pricing information. We all know that information has a somewhat unusual cost profile – it’s expensive to produce the first copy, but all subsequent copies are extremely cheap, bordering on free. The free part is what makes information different – unlike other products with economies of scale like toys, there is no lower bound to how low the price can go after the sunk costs of originally producing the information – “Competition among sellers of commodity information pushes prices to zero”. To survive in such a market, companies must either differentiate their product by adding value to the raw information, or achieve cost leadership by increasing sales volume so that initial sunk costs are spread over more and more copies. This means avoiding greed – it’s better to make less money per copy if it means scaring off other potential competitors for the market.

Differentiation of the product can be achieved with a number of different strategies. One is to offer different versions (get the information faster for more money e.g. real-time stock quotes costing more than quotes delayed by 20 minutes). Another is to use intellectual property or licensing rights to restrict access to the information, but the authors observe “the basic trade-off: more liberal terms and conditions will tend to raise the value of your product to consumers but may reduce the number of units sold”. The book spends a chapter delving into the potential benefits and difficulties of each of these options.

The book next discusses the phenomenon of lock-in, where choosing to buy a product locks one into that company’s products in the future (with classic examples like AT&T’s 5ESS switches forcing customers like Bell Atlantic to come to AT&T for aftermarket software upgrades). One interesting result discussed in this chapter is that the profit associated with a customer can be estimated as the total switching costs associated with that customer, summing up the costs borne by the customer and the costs borne by the new supplier. In other words, the present provider of a service can afford to charge up to the total switching costs as a premium over the market rate because other providers would have to pay that much to convince the customer to switch. I still haven’t quite wrapped my head around this concept, but it’s definitely thought-provoking.

The book then spends several chapters covering how to handle network effects, where the value of a product increases with the size of the community of other people using that product in a positive feedback loop. Industrial companies leveraged supply-side economies of scale, where the variable costs of production were driven down by increasing production volume; however, these economies of scale eventually ran out when confronted with the difficulty of managing the large organizations necessary to produce such large volumes. Information companies, on the contrary, leverage demand-side economies of scale, which have no such limits; because the distribution and reproduction costs are minimal, the positive feedback cycle can continue until the market is saturated in a winner-take-all scenario.

The authors continue by discussing the various competitive scenarios that play out in an information economy. New entrants need to decide between evolution (providing a risk-free backwards-compatible bridge to their product) or revolution (depending on superior performance to convince existing customers to take the leap). They also discuss the balance of openness vs. control and emphasize what I consider to be a key point: “your ultimate goal is to maximize the value of your technology, not your control over it… [the value equals the] total value added to industry multiplied by your share of industry value.” In other words, it may be worth it to pursue an open strategy if it will grow the industry sufficiently to offset the potential market share loss. This continues into a discussion of alliance building and standards setting (including a chapter on waging a standards war).

The book ends with a discussion of information policy and government regulation. As Varian put it in one interview, if a company successfully executes the strategies from the rest of the book, they’ll have to deal with the anti-trust provisions of the government discussed in the last chapter.

Excellent book. Well worth a read from anybody making strategy decisions in the information economy.

A Whole New Mind, by Daniel H. Pink

Monday, July 7th, 2008

Amazon link
Official book site

My friend Wes recommended this book to me after my social capitalist post where I claimed that we were moving from a world defined by technology to one defined by social connections. Daniel Pink’s book describes a similar transition from an emphasis on left-brain thinking towards right-brain thinking.

Pink starts the book by describing the characteristics of L-directed thinking and R-directed thinking (his descriptions of left-brain and right-brain thinking). These are probably familiar to most readers – the left brain controls language, is detail-oriented, and thinks sequentially and deductively, while the right brain is better at reading emotions and context (the right brain does facial recognition), thinking inductively by synthesizing from “isolated elements together to perceive things as a whole” and seeing the big picture. Pink emphasizes that neither brain half should be dominant – that they are designed to complement each other and create one functioning whole (hence “whole new mind” as the title).

Pink then explores the forces changing the world from an emphasis on L-directed thinking to R-directed thinking. The 20th century was dominated by technology, from the assembly line and machine guns at the beginning of the century to the atom bomb and space flight in the middle, to electronics and the Internet at the end. Pink observes that three forces are combining to de-emphasize technology in the developed world:

  • Abundance – when material wants are satisfied, then the differentiating factor is no longer functionality, but design e.g. the market dominance of the iPod over other MP3 players with more functionality.
  • Asia – like Friedman’s World is Flat, Pink believes that anything that can be outsourced will be. Things that can’t be outsourced include high-touch jobs that involve direct human interaction e.g. nursing is one of the fastest-growing professions in America.
  • Automation – any job that can be reduced to a set of instructions will be automated, not only on the factory floor, but also in offices. Jobs that require human intuition or empathy are the only ones likely to be safe from automation.

The rest of the book is a description of the R-directed skills that Pink thinks will be important in the decades moving forward: Design, Story, Symphony, Empathy, Play, Meaning. The ones that stood out to me were Story and Symphony, which isn’t surprising given my interest in stories and in the value of synthesis. I especially liked the description of Symphony as seeing relationships: “People who hope to thrive in the Conceptual Age must understand the connections between diverse, and seemingly separate, disciplines.” is a nice one-sentence summary of what I value in being a generalist.

At the end of each chapter, Pink also provides a set of activities to exercise that particular skill, which include seeing that skill performed well (design museums, story-telling festivals, etc.), trying it oneself (drawing, finding ways to learn more and empathize with coworkers), or reading books on the subject. I’ll have to try some of them myself.

Overall, it’s a decent book that’s a quick read. Nothing particularly new to me, but it was nice in providing a reference work to explain some of the ideas that I believe. I’d recommend it as a library book if you’re interested in moving your life or career in the direction of the right brain.

World-Systems Analysis, by Immanuel Wallerstein

Tuesday, June 3rd, 2008

Amazon link

A friend suggested that I learn more about Wallerstein’s world-systems analysis, as it is also derived from the Annales historical school that spawned Bruno Latour’s work that I like so much. This is a brief 90-page introduction to the concept which nonetheless provides a good overview of the field.

Let me quote from the glossary to summarize world-systems analysis:

A world-system is not the system of the world, but a system that is a world and that can be, most often has been, located in an area less than the entire globe. World-systems analysis argues that the unities of social reality within which we operate, whose rules constrain us, are for the most part, such world-systems (other than the now-extinct small minisystems that once existed on the earth). World-systems analysis argues that there have been thus far only two varieties of world-systems: world-economies and world-empires. A world-empire (such as the Roman Empire, Han China) is a large bureaucratic structure with a single political center and an axial division of labor, but multiple cultures. A world-economy is a large axial division of labor with multiple political centers and multiple cultures.

Wallerstein uses the text to expand on this concept, and to describe the extant capitalist world-economy which he identifies as having been the dominant world-system since the sixteenth century. He defines a capitalist system as being one in which priority is given to the “endless accumulation of capital”. Based on these assumptions, he explains how the capitalist world-economy fits together, why new innovations start as “core” products that can extract high profits due to an oligopoly of producers (either through patents or trade secrets), before becoming “peripheral” products, as others copy the innovation and it becomes a commodity (the technology S-curve in another form). He separates states by whether they are primarily core producers or peripheral producers (instead of the more traditional developed and undeveloped monikers) and uses the term semi-peripheral to indicate those states that have a mix of such products (e.g. India or Brazil).

He also spends a chapter examining the nation-state in light of this worldview. Nation-states arise in this view essentially as a mechanism by which companies can assure themselves of the conditions necessary for the continued accumulation of capital. If the state is too weak, then it becomes corrupt, and bribes and “taxes” suck up the surplus value a firm might accumulate (as happens in many developing countries). The right balance is a state that assures the right of a firm to keep most of the surplus value it generates, but collecting enough taxes to provide a rule of law, security, sovereignty, etc. There’s a delicate balance among the states – states would prefer to dominate others (as they did during the colonial period), but the states also benefit from holding together the system as it exists so that prosperity can continue to increase.

Another chapter was devoted to trans-national movements, or ideologies. He views the French Revolution as a key turning point in the rise of ideologies, as earlier nation-states had ruled by fiat. The French Revolution introduced a new ethos to the world, one where “political change was not exceptional or bizarre but normal and thus constant” and one where sovereignty was decided by the “people who, alone, could legitimate a regime”. Ideologies are, in this view, a set of “competing long-term strategies of how to deal with change and who should take the lead in dealing with it”. Conservatives are reactionary and generally anti-change, liberals are in favor of equality of opportunity and meritocracy, and radicals want to throw the whole system out.

The interesting part of this chapter to me was that these competing ideological movements created the need for social science. As Wallerstein observes, “If political change was normal and the people were sovereign, it mattered very much to understand what the rules were by which the social arena was constituted and how it operated.” An ideology that could support its agenda with scientific support would have an advantage in its political maneuverings.

Wallerstein also observes how the social sciences immediately fractured into several branches, including history, economics, political science, anthropology, sociology, etc. The university system accelerated this fracture, as doing original work to get a PhD required ever-increasing specialization to find new territory. As Wallerstein describes, “World-systems analysis was an attempt to combine coherently concern with the unit of analysis, concern with social temporalities, and concern with the barriers that had been erected between different social science disciplines.” Pull down the barriers, take a step back, and look at the whole system, rather than looking for ever-smaller nuances within a discipline.

As a generalist, I like the idea of world-systems analysis as a concept, of looking across disciplines to understand the larger forces that shape the world that we live in. Wallerstein has assembled a reasonably compelling story of how the various pieces fit together in his analysis of the world. I am not entirely convinced of his objectivity, though, as hints of his political agenda appear throughout the book, and it seems as if world-systems analysis may be just another way to support a political ideology. While he claims to be looking at the whole world as a system, his analysis is necessarily a simplification, and the elements he chooses to include in his simplified story tell their own story.

I’m also somewhat amused by his last chapter, where he describes how the current capitalist world-system is breaking down and examines the new world-systems that might replace it. He dates the shock to the system to the cultural revolutions of 1968. The reason this amuses me is that this world-system that has survived massive upheavals of culture and technology for four centuries according to his reckoning is now heading into decline, coincidentally at just the time he’s around to analyze it. It reminds me of one of my friends quipping that it was interesting that predictions that immortality would be achievable in twenty years were always coincidentally made by people in their mid-forties, like Ray Kurzweil. I obviously haven’t done the research to question Wallerstein’s findings or conclusions, but my first reaction is that it’s curious that he happens to be writing at a time when the world-system is in crisis, and might be influenced by his writing to change to a new system that happens to more closely match his democratic egalitarian leanings.

Overall, I liked the book. It provides a good overview of how ideas from several social disciplines can be drawn together to tell a story about the way the world works. I don’t have the academic grounding to know how accurately Wallerstein represents those social disciplines and their conclusions, but the story made sense to me, and provides a useful way of looking at the world. And collecting new perspectives is one of my goals in life, so it was great to get this new perspective in a slim well-written book.

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