James Dyson: We Can All Be Inventors Now

A fascinating look at one of Britain's most innovative firms (NewScientist). There are a few points I'd highlight - while software and online services are often the best example of how innovating has gotten cheaper and faster to do (all it takes is a cheap computer, computer programming skills and a few good ideas), costs have been dropping in product development as well.

As Dyson points out, the tools for developing new products, inventing and ultimately making products market ready like rapid prototyping machines and simulators are now within reach to practically everyone. That, is a good thing given that economies primarily grow, not because governments decide to spend more, but either because people get faster at doing work (productivity), or they're able to find new ways to solve problems others are willing to pay for (innovation).

"Confessions of a Sweat Shop Inspector"

I'm not sure I'm comfortable with the term sweat shop as it could liberally apply as much to domestic Western factories as those overseas. There has been a push - particularly in consumer based industries (so I haven't seen as much of it as a requirement personally), to impose Western values and standards on vendors in Asia. This is an excellent article on both the benefits and disadvantages of doing so (Washington Monthly via Club for Growth) - with many similar experiences I've had over here. Here are a few highlights:

I don't pretend that everything monitoring brings about is for the best. An example: Mattel's factories in China are superb, but workers there often earn less than their peers in shadier factories because their employers confine them to shorter workweeks to avoid paying overtime. Another: You may rightly hate the idea of child labor, but firing a fourteen-year-old in Indonesia from a factory job because she is fourteen does nothing but deprive her of income she is understandably desperate to keep. (She'll find worse work elsewhere, most likely, or simply go hungry.) [...]

That's why monitoring and enforcement have such an important role to play. We don't expect developing nations to match us in what their workers earn. (A few dollars a day is a fortune in many nations.) But when a Chinese factory saves money by making its employees breathe hazardous fumes and, by doing so, closes down a U.S. factory that spends money on proper ventilation and masks, that's wrong. It's wrong by any measure. And that's what we can do something about if we try.

Given the increasing difficulty that most factories find in hiring and keeping good workers, I'd suggest that the lack of regulatory health controls is a self regulating condition that's already happening. That said, with still a fairly weak level of legal rights for workers, I also can't disagree with the idea that outsiders should exercise their power on a moral basis to ensure the health and safety of the workers that make their products.

The Most Important Characteristic in an Entrepreneur

At least according to the legendary VC investor Arthur Rock who financed Intel, Apple and Fairchild Semiconductor (Creative Capital):

Intellectual honesty. Rock knew that a new business would face many challenges and that in order to succeed entrepreneurs needed to be honest about the state of their business. Or as Rock rhetorically asked: “Do they see things the way they are, and not they way they want them to be?”

I'd humbly add that this doesn't seem to be a bad hiring criteria for managers either.

Asia as Center of Innovation in 21st Century?

An interesting debate over at McKinsey Digital though I'm not sure they had sufficiently polarizing opinions particularly on the disagreement side. The comments offer some of the more interesting insights. My two (libertarian) cents? Government doesn't need to enact an "innovation policy". Government needs to get out of the way. Americans are already the world's biggest innovators but the idea that taxing them, burdening them with regulations and making it more difficult for them to finance their ideas will help them innovate is, quite simply, crazy.

On the other side of the equation, if necessity is the mother of all invention, China's going to need a lot of it just to keep up with its demographics problem of its own making. Historically, let's also not forget China and India were the world's economic powers.

While there's no doubt that India and China are catching up - they're doing just that - they're playing catch up. While the US has its own problems, to say that US dominance as innovators is a position that's theirs to lose, grossly understates the problems both India and China face.

Good News: We're Killing Each Other Less

The next time someone reminisces about the way things (never) were, just remember Hobbes was right: "Life in a state of nature is nasty, brutish, and short" (Greater Good).

According to psychologist Steven Pinker (via Paul Kedrosky), "If death rate of early human tribal warfare had continued in 20th century, there would have been two billion deaths rather than 100 million." He goes on to ask "Why is there peace?" Personally, I blame capitalism. Markets provide incentives for cooperation and good governance - and this might be a useful reminder as we watch the regulatory and taxation disaster (Economist) in the making being created by US legislators.

Productivity Bit: Tell Yourself You Suck

This is sort of cool that one of the authors of the study is from my home town - apparently those with low self esteem shouldn't bother trying to fight it - they should embrace it (Time):

A study just published in the journal Psychological Science says trying to get people to think more positively can actually have the opposite effect: it can simply highlight how unhappy they are. [...]

Wood, Lee and Perunovic conclude that unfavorable thoughts about ourselves intrude very easily, especially among those of us with low self-esteem — so easily and so persistently that even when a positive alternative is presented, it just underlines how awful we believe we are.

The solution? "Mindfulness and meditation techniques, in contrast, can teach people to put their shortcomings into a larger, more realistic perspective. Call it the power of negative thinking."

Electroshock as Cure for Internet Addition

One of those Made in China moments:

The Ministry of Health ordered that the clinic in Shandong province stop using electroshock as a form of punishment, according to Chinese media. [...] In what might be an indication of the clinic’s effectiveness, its practices came to light when former patients went online to complain.

How not to Stimulate an Economy

From the WSJ (via Greg Mankiw):

House Democrats on Tuesday unveiled sweeping health-care legislation that would hit all but the smallest businesses with a penalty equal to 8% of payroll if they fail to provide health insurance to workers. [...]

The House bill would place new taxes on the wealthiest people to help expand insurance coverage to the nation's 46 million uninsured people. The legislation calls for a 5.4% surtax on those with annual gross incomes exceeding $1 million.

As Glenn Reynolds highlights (also from the WSJ): "A new study by the Kaufman Foundation finds that small business entrepreneurs have led America out of its last seven post-World War II recessions. They also generate about two of every three new jobs during a recovery."

It defies reason as to how some people sincerely believe that disproportionately increasing taxes on some of the most productive members of society will result in those same people being even more productive. As Greg Mankiw notes, after you factor in sales taxes, this means that 55 cents for every additional dollar earned would go just to pay taxes - nevermind that new taxes rarely result in the level of new revenues politicians project and nevermind President Obama claims that public funding of healthcare will improve the economy.

Things unfortunately begin to make sense if you assume that these people are less interested in the health of the overall economy and more with catering to their donors - ie public unions. Meanwhile, a poll by CBS News shows "75% believe Obama's stimulus plan has had "no impact" or a "worse" effect on the economy so far" (via Club for Growth). That should be enough to make anyone "go Galt" (DrHelen).

Is the "Cheap China Price" Gone?

According to Businessweek, after "the added challenges of quality, logistics, and engineering changes", Mexico's apparently cheaper. While I'd agree up to a point - those who initially seek to outsource usually ignore the risks - I've got a boatload of horror stories clients have told me.

Frankly I like hearing that clients have been burned before we work with them because it means they recognize the value we provide after we do deliver. For us, we're not the cheapest price but we're not the most expensive either. On the other hand, in my experience, many of these risks carry over to both the US and Mexico. The proximity/clustering of some services makes the production of more complex parts often less expensive than Mexico - so long as quality can be managed.

That said, I wonder how one can make such a broad assessment of a swath of manufacturing services based on one indicative part alone that BusinessWeek cites. Here comes my cheap shot - maybe that's why Businessweek may only fetch $1 (FT). More seriously, I think these things have to be evaluated on a case by case basis with even service providers resulting in massive range of variance in both quality and price - especially over here in China.

Productivity Tip: Be Brilliant - Daydream.

In the past I've wondered if we make more out of "Eureka" moments because we just notice them more as they appear out of the blue rather than when we seek them out. Apparently, however, brilliance can come with daydreaming - as a recent studies of volunteers given problems to solve showed (WSJ):

In those cases, the EEG recordings revealed a distinctive flash of gamma waves emanating from the brain's right hemisphere, which is involved in handling associations and assembling elements of a problem. The brain broadcast that signal one-third of a second before a volunteer experienced their conscious moment of insight -- an eternity at the speed of thought. [...]

By monitoring their brain waves, he saw a pattern of high frequency neural activity in the right frontal cortex that identified in advance who would solve a puzzle through insight and who would not. It appeared up to eight seconds before the answer to a problem dawned on the test subject, Dr. Bhattacharya reported in the current edition of the Journal of Cognitive Neuroscience.

Though it's probably something that's best not to do while your client/boss/wife/gf is talking to you...

Yet Even More on the Logic of the Minimum Wage

I'm a bit of a sadist in that I find the minimum wage fascinating. That it's an idea that persists suggests where we are in the fight between dead ideas, demagoguery and economic enlightenment. From Peter Schiff (via Club for Growth) who is now running to replace Senator Christopher Dodd, Chairman of the Senate Finance Committee:

The only way to increase wages is to increase worker productivity. If wages could be raised simply by government mandate, we could set the minimum wage at $100 per hour and solve all problems. It should be clear that, at that level, most of the population would lose their jobs, and the remaining labor would be so expensive that prices for goods and services would skyrocket. That's the exact burden the minimum wage places on our poor and low-skilled workers, and ultimately every American consumer.

Since our leaders cannot even grasp this simple economic concept, how can we expect them to deal with the more complicated problems that currently confront us?

Heh. Profanity as a Pain Management Tool

From the Scientific American: "According to neuroscientists from Britain’s Keele University, dropping the f-bomb can actually relieve physical pain."

This Probably Won't End Well for the Obama Administration

I don't really want to talk specifically about politics here, but given the massive heaps of uncontrolled spending, it's difficult not to. The level of admiration accorded to President Obama has far exceeded the level of his achievements but this has been helped, in no small part, by the media who seem to fawn at his every move and defend what little there is of his record to the point of absurdity (TheVirginian) .

As Rex Murphy puts it "Mr. Obama has taken the real crisis of the U.S. (and world) economy and used it as the screen and lever for a massive agenda of transformation, a transformation that calls for expenditures on a scale never before seen in the history of government on this planet" (Globe and Mail). Keith Hennessey makes a similar point in critiquing Mr. Obama's Op-Ed that Obama ironically chose to publish in the Washington Post (Politico). Mr. Obama has chosen to use this crisis to spend trillions of dollars on an ideological agenda to expand the size of government. As Victor Hanson points out, in what he calls The War Against The Producers (via Instapundit), this can't possibly be sustainable:

Ponder a simple fact: The Obama administration is dispersing income lavishly to those who do not pay taxes and it will have to be paid for by those who do. For all the talk of that awful percentile who make over $200,000, this administration has not distinguished the hyper-rich 1% that make untold money (e.g., the Buffets, Soroses, Turners, Gateses, Kerrys, Gores, etc), from the much more demonized, larger 5% of the population whose income does not come from investments and insider influence and deal-making, but rather from providing more tangible goods and services–the family doctor, the plumbing contractor, the small lumber company owner, the car dealer, the local family-held insurance company, the airline pilot, the car-leasing firm, the patent attorney, etc.

I do believe one thing is for certain - if the 'stimulus' doesn't end up working as planned (and there's unfortunately very little reason to believe that it has or that it will), and as Americans begin having to pay off their new gargantuan debt loads that have been accumulated, Obama could end up even less popular with history far less kind than even the previous Bush Administration.

Programming Linear Thinkers

A piece of software from Microsoft that I'm actually a little excited about. Their new game Kodu seems to be getting some rave reviews teaching kids to program without actually telling them it's programming. As Slate calls it (for those like me who actually remember LOGO), it's LOGO on steroids - and that's pretty cool.

As one pundit argues, the best value in the market today is engineers whose gains on productivity outstrip pay increases (TechCrunch). Despite fears that we'll be outsourcing all our programmers to India or whatever farflung place, this is like saying that we'll outsource all of our problem solving and thinking. Learning the basics of programming is learning the basics of structured problem solving - and for this reason should be considered a universal skill. For as much as pundits complain about the education system, it's obvious that because of teachers unions, change ain't coming anytime soon. It's going to be technology and solutions like this that bridge the gap.

Food Isn't Bad for You After All

Not really directly relevant to much except for the fact I love good food, recent media claims that a calorie restrictive diet leads to a longer life is bunk (JunkFoodScience) based on a rather selective culling of the data. Despite my recent stint as a workout fanatic, this is fantastic news given that I'd probably trade off having a longer life for consistently good food.

Productivity Tip: Early Risers, Eat Your Hearts Out

For some reason this study reminds me of the 'definition of an accountant' (or economist depending on the variation) - "Early to bed, early to rise work like , and economize" (though I think this applies generally more to entrepreneurs more than the accountants and economists I know). There's a new study that suggests "night owls have more mental stamina than early birds" (Globe and Mail):

“The results suggest that night owls generally outlast early birds in the length of time they can be awake without becoming mentally fatigued,” the study concluded.

This is particularly good news for my brother (and sister for that matter) but since he doesn't read my blog he probably won't learn of it and I'm guessing my parents probably won't clue him in on it either.

The Chicken and the Egg Conundrum of Capitalism and Startups

On whether the heart of capitalism is greed or the desire to solve great problems (TechFlash):

I feel like every time I see people who are trying to come up with a business that they can monetize, instead of trying to think of a problem that they really want to solve, that they really care about solving, they just get it ass-backward, and they don't build a good product - Glenn Kelman, the founder of RedFin

Redfin's changing the way real estate is and will be sold. A pretty cool company, I should add, that just turned profitable (TechCrunch).

Personally, I've thought for quite some time that it's trust that bridges the gap. Customers have to believe that you'll solve their problems before they'll fork over the money. How big of a problem they feel it is and how well they think you'll solve it becomes directly related to the amount they'll pay.

Asia's Rise? Maybe not so much.

I wonder if I'm a contrarian to gravitate to stories like this and whether my skepticism for the faddish is what makes me conservative. Either way, "Think Again: Asia's Rise" from Foreign Policy, (via Paul Kedrosky) makes the cut:

Don't believe the hype about the decline of America and the dawn of a new Asian age. It will be many decades before China, India, and the rest of the region take over the world, if they ever do.

First and foremost, while I think there are some fears in the US over China's rise, the reality is that even if they're able to overcome the small problem with its demographics, China's neighbours will end up keeping it in check.

China's Aging Dependents Problem

The unintended consequences of prematurely curtailing population growth are often not obviously apparent at the beginning. Normally a developing society begins with larger families to smaller ones as the cost of having and raising kids moves higher.

China, on the other hand, has had an aggressive one child policy that it has only relatively recently relaxed. Whether the relaxation is a recognition of the crisis that's building or simply political pressure, this graph says it all (the Economist via Paul Kedrosky):


It's useful to remember that China's fears of population growth are a direct result of the belief that more people consume resources. The contrarian, cornucopian view of those like the late economist Julian Simon, is that people are the only finite resource. People create resources by innovating which in turn literally creates wealth where none existed before. If India finally gets its act together I get the sense that they will end up pulling well ahead of China on the development tables in the future. It's also why short term protectionism against China, brought on in part by a bad recession, are rather silly given what's to come.

Update - as one of the commenters notes at Paul Kedrosky's blog, is it little wonder that they have such a high savings rate? Personally, the theory I like best is that people in China save because they have to plan for the unexpected particularly as they may not trust insurers or that insurance products may not exist.

Update #2 - also via Paul Kedrosky, Foreign Policy makes the argument that population control is necessary for development to happen using such stunningly great examples of governance like Pakistan and the booming mecca of Iran. Sorry, I just don't buy it.

Africa Isn't Poor Because of a Lack of Resources

Africa can feed the world according to the (New Scientist via Instapundit). But as Glenn Reynolds notes - "But it never will, so long as it’s run by inept kleptocrats." Of course this isn't earth shattering. Uganda has one of the most fertile lands in the world because of its volcanic soil. Zimbabwe used to be the breadbasket to Africa until Mugabe and his enablers ran it into the ground and where millions now live in hunger.

I had an interesting meeting, albeit a bit too brief, with folks at an international microfinance agency last week. I think I came away with the reminder that it's tough for those in development not to gravitate to places in the world with the greatest suffering. It's a difficult line in the sand to draw but I think the line between aid and development must first be drawn by donors recognizing that without cooperative governments, the choice must be made to abandon or substantially curtail programs with resources focused where a greater difference (measured in several orders of magnitude) can be made.

Update: Foreign Policy has an interesting overview of its Failed States Index and attempts to explore some of the reasons that lead to what they call failed states. Interestingly, China is considered "borderline" with most of the African continent and Asia fluctuating between "borderline" and "critical". It'd be interesting to overlay this with development indices as this almost seems like a guide to regional development where the more developed you are, the less risk that you'll fail.