Tag Archives: technology

First movers and fast second

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I was reading my dear husband’s blog post about the new iPad mini and the Microsoft Surface, the latest entrants to the tablet market. It reminded me about a terrific book co-authored by one of my mentors, the late Paul Geroski. The book is [amazon_link id=”0787971545″ target=”_blank” ]Fast Second[/amazon_link], written with Constantinos Markides, written int 2005 so it pre-dates tablets. But the hypothesis may apply.

Their argument is that in a radically new technology, the supposed first mover advantage may be ephemeral: “The firms that end up capturing the new market are those firms that time their entry so they appear just as the dominant design is about to emerge…. For big, established firms contemplating entry into a new radical market, this is the best strategy to follow.” This is what they mean by fast second – neither first mover, nor second-mover i.e. waiting for a clearly dominant design and standards, and offering a cheaper me-too product.

The examples in the book include IBM in mainframes, GE in CT scanners, Canon in cameras, Sharp in faxes. I don’t know whether the iPad challenger tablets would count in Paul’s view, or whether the iPad mini will fend off fast seconds, but it’s worth pondering.

[amazon_image id=”0787971545″ link=”true” target=”_blank” size=”medium” ]Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets (J-B US non-Franchise Leadership)[/amazon_image]

Weightlessness revisited

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Somebody reminded me recently that a review of my very first book, [amazon_link id=”1900961113″ target=”_blank” ]The Weightless World [/amazon_link](pdf) (1997) had accused me of committing some faults of techno-utopian naivety in proposing how governments and all the rest of us might respond to the structural changes being driven by information technology and globalisation. It prompted me to be self-indulgent and have a look at the book for the first time in ages. (Here is a free pdf file if you want to look for yourself.)

[amazon_image id=”1900961113″ link=”true” target=”_blank” size=”medium” ]The Weightless World: Thriving in the Age of Insecurity[/amazon_image]

My verdict? That over-optimism on some issues is a fair charge. Like many other economists, I underestimated or ignored the changing character of the financial and corporate sector, the breakdown among the corporate elite of the social norms that sustain capitalism, and the increasing rent-seeking activity as the rich elite stacked regulations and tax systems ever more in their own favour.

On the other hand, I think it was pretty good going in 1996-97 to identify the way the technological changes would dramatically affect business, value chains and the demand for labour, and to say both the structure or delivery of government and the specific policies of governments needed to change in order to equip citizens for the new kinds of risk and uncertainty. I also think I was the first person to coin the description of ‘weightlessness’, inspired (if that’s the right word) by an Alan Greenspan speech.

Me in 1996, writing The Weightless World

Are ideas catching?

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This interesting paper, Germs, Social Networks and Growth, uses a network model to explore the diffusion of technologies – ideas – in different kinds of society: an open, individualist one compared to a collectivist one with fewer external contacts. The authors, Alessandra Fogli and Laura Veldkamp, sum it up thus:

“Our theory for why some societies have growth-inhibiting social structures revolves around the idea that communicable diseases and technologies spread in similar ways – through human contact. We explore an evolutionary model, where some people favor local “collectivist” social networks and others do not. People who form collectives are friends with each others’ friends. The collective has fewer links with the rest of the community. This limited connectivity reduces the risk of an infection entering the collective, allowing the participants to live longer. But it also restricts the group’s exposure to new technologies. An individualist social network with fewer mutual friendships speeds the arrival of new technologies, which increases one’s expected economic success and favors reproductive success.”

What’s more, the type of society is endogenous:

“In countries where communicable diseases are inherently more prevalent,the high risk of infection for individualists makes the individualist trait die out. A collectivist social structure that inhibits the spread of disease and technology will emerge. In countries where communicable diseases are less prevalent, the collectivist types will be less economically and reproductively successful. Greater reproductive success of individualists causes the network to become fully individualist.”

They test the model using historical data on technology diffusion and epidemics, and find a strong link between individualism and productivity growth driven by technology adoption.

This work touches on a number of economic literatures: on technology diffusion; on social capital; on the effects of culture on growth; and on the role of institutions in development.  It’s a very interesting paper, and reminded me of two wonderful books. One is obviously Jard Diamond’s [amazon_link id=”0099302780″ target=”_blank” ]Guns, Germs and Steel[/amazon_link], although the argument is obviously a twist on Diamond’s case that European explorers took diseases into previously isolated populations. The other – for the metaphor of viral ideas – is Neal Stephenson’s brilliant novel [amazon_link id=”0241953189″ target=”_blank” ]Snow Crash[/amazon_link].

[amazon_image id=”0099302780″ link=”true” target=”_blank” size=”medium” ]Guns, Germs and Steel: A short history of everybody for the last 13,000 years[/amazon_image]

[amazon_image id=”0241953189″ link=”true” target=”_blank” size=”medium” ]Snow Crash[/amazon_image]

Look on the bright side of life

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One of the highlights of the Olympics closing ceremony was Eric Idle getting the 80,000 crowd in the stadium to singalong to ‘Always Look on the Bright Side of Life’:

A natural optimist

This cheerful song was brought to mind by [amazon_link id=”1451614217″ target=”_blank” ]Abdundance: The Future is Better than You Think[/amazon_link] by Peter Diamandis and Steven Kotler. Diamandis is one of the founders of the Singularity University and so clearly a techno-optimist. It struck me that there’s a whole optimism genre, and one I generally greatly enjoy. There’s Mark Stevenson’s excellent [amazon_link id=”1846683564″ target=”_blank” ]An Optimist’s Tour of the Future[/amazon_link] and Matt Ridley’s [amazon_link id=”0007267126″ target=”_blank” ]The Rational Optimist[/amazon_link]. Mark Lynas tried to debunk conventional eco-gloom with [amazon_link id=”000731342X” target=”_blank” ]The God Species[/amazon_link]. In a way, my [amazon_link id=”1587990822″ target=”_blank” ]Paradoxes of Prosperity[/amazon_link] from 2001 riffs on the same theme, that technology is a powerful lever for increasing prosperity ad solving problems, and that its power often takes us completely by surprise.

[amazon_image id=”1451614217″ link=”true” target=”_blank” size=”medium” ]Abundance: The Future Is Better Than You Think[/amazon_image]

Abundance has the slightly breathless eagerness of a New York Times bestseller, not entirely to my taste, but it’s a highly readable summary of several areas of important technical progress. It starts with an interesting discussion of the characteristics of how our brains evolved to make us natural pessimists, and also touches on the speed with which successful new technologies can spread (although it doesn’t acknowledge the many techno-failures that therefore spread with zero speed – there’s too much determinism in this account).

The book also looks at forces that might bring about the technological nirvana humans have the capability to create – the possibility of ‘DIY’ or entrepreneurial innovation in many fields, philanthropic activity by rich technology entrepreneurs, and the large and growing market in developing countries with great unmet needs. While these are perfectly valid, this is obviously only part of the story. I wish the book had looked more closely at the economic and social forces acting for and against the embodiment of new technologies in people’s lives. This – as Paul David has so brilliantly pointed out – is the hard, and slow, part. Invention is easy by comparison. In short, I wish Abundance had been a bit less excited and more nuanced. But I enjoyed reading it – an ideal airport purchase.

What we don’t know about innovation and productivity*

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A few interesting comments on productivity have crossed my path recently. This blog post in The Economist addresses Robert Gordon’s habitual scepticism about technology-driven productivity growth, expressed again in a recent paper (pdf). I agree with the blog’s point about the inadequacy of traditional metrics when it comes to capturing the implementation and experience of innovations, which is what productivity growth consists of.

A few days earlier came Plan I from NESTA and a comment by Mariana Mazzucato about the specific role of public funding and strategic leadership in innovation. The former report usefully captures the wide range of influences that turn innovations into economic growth. The latter focuses on one of those influences, the co-ordination (and funding) role of the state – arguing strongly for the government to back innovation more actively in the UK.

It all sent me back to a great book of essays by Richard Nelson from 1996, [amazon_link id=”0674001729″ target=”_blank” ]The Sources of Economic Growth[/amazon_link]. One of his themes is the need to look at firm-level behaviour and data to analyse innovation and productivity growth. As firms are different, and rivalry between them drives innovation (in an evolutionary framework in his mind), aggregates disguise what’s happening. He also argues that standard marginal analysis is inappropriate outside decisions or outcomes at the margin – one can look at small changes sensibly, but not at big changes of the kind that come from important innovations.

He also adds a cautionary note about concluding either that innovation is solely a private, profit-driven business, or that public intervention is essential. Countries differ in important ways, he argues, and at present we do not understand well enough the innovation system as a whole in any single country, never mind across all of them.

[amazon_image id=”0674001729″ link=”true” target=”_blank” size=”medium” ]The Sources of Economic Growth[/amazon_image]

* The answer is – a lot