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Hi John--happy 4th to you and thanks for this. I've been so busy lately it's been difficult to write substantive blog/public work, most everything deeply detailed technical work under NDA. As you may have noticed this is essentially my default position for many of the same reasons. It's very difficult to tell whether it's pulled anyone and even less obvious or measurable whether it's assisted our business or financial lives--in fact it looks just the opposite, and in that regard to date in our experience conventional wisdom seems to have been accurate. But that may well be due to timing--we tend to be early and in most cases were not persistent enough to enjoy the long term benefits. I certainly hope that with Kyield it will be a better outcome--we have been patient and persistent, and it's as solid as anything I've been involved with, so certainly should be. My primary reason for posting a comment was simply to add how important this basic philosophy of individualism is to a diversified economy. As we often see evidenced in our shared interest in complexity, nature and reality are often counterintuitive, running directly opposed to dogma that is often taught from a position of fear or conflicted interests. A long-term student of economics, this trend shows in odd ways. The most dynamic and strongest economies are usually found with a high percentage of individuality in the form of small and medium sized businesses of various types. This was true in the peak years of the U.S. as well as China and Germany among others. Politicians speak to it often, but policies are often driven by consolidated power, which creates a negative spiral of sorts as the more consolidated power that exists, the more extreme measures are applied to protect and extend, the less diversity and more systemic risk. Of course we saw this in the financial crisis though we see it elsewhere--I observed it in SV VC in rare form during the dot com bubble--different today, but similar dynamics. The missing ingredient is sacrifice. Authenticity, deep reward, trust, meaning--it requires sacrifice. Not nearly as much as the Founders risked or those that lost everything on the field of battle, but it does require sacrifice and it also requires supporting those who make the sacrifice in meaningful ways--commerce and trade. We need much more of it.
Hello Irving, Appreciate the focus--since my teen years I've been building businesses and trying to help entrepreneurs, numbering in many thousands, and have invested a great deal of time and money attempting to educate the educators on the topic. It's a highly complex issue with literally millions of variables, a great many of which are "layered in legislation that gets approved in order to see what's in them." A couple of obvious issues popped up reading this-- one is that academic researchers & majority of book authors simply aren't good sources to cite on this topic, and frankly never have been. It is very much an experiential learning game including what works, what doesn't, and why. Anyone without a great deal of experience are frankly dangerous--and that's the problem for nations when they reach a tipping point. When a super majority of the population are no longer directly engaged in most aspects of the private economy, as in SMEs and not a specialist in a company who is never exposed to most issues that impact that business, we begin to make very poor judgements. When the public education system becomes indoctrinated towards scientific socialism--clearly as ours has, with assumptions about economics that are frankly not accurate, well this is what occurs. For example, ease of entry is obviously not conducive to successful business. It creates hyper competition, which favors predatory monopolists that tend to be backed by institutional investors. Sustainable economics with functional markets contains a dynamic balance of diverse forces, always under tension, but that consists of challenging barriers that are achievable. This process was part of the cultural memory until about 20 years ago when institutional capital buried markets, creating the most severe price war in human history. That's how we got Facebook instead of flying cars, or cancer cures. A great deal goes into functional markets, particularly in business creation. Universities & pension funds in the U.S., among others--including gov't & major corps, could no longer grow without taking increasing share of the entrepreneurial process, and with disruptive technology, rapid scaling, etc. of our era, strategic engagement & competitive intelligence has been raised to a level never before seen, including full-time senior staff inside national labs, very unhealthy relationships with universities--some of which in my industry are primarily outsourced labs for market leaders now, lobbyists in every state crafting legislation, secret investments in venture firms--by company & individually--so one never knows who is looking at confidential material, and on and on. As icing on the cake, or dagger in the heart, the financial crisis resulted in bailing out institutions at the direct cost of individuals, and in particular private businesses of all sizes and shapes. Public companies have access to literally unlimited funds thanks to the FRB, but private companies must pay for their capital if and when paying customers can be found. Amazingly that wasn't sufficient--after the largest realize moral hazard in modern history, a few years later we had the president of the U.S. tell entrepreneurs "you didn't build that". The question is not why entrepreneurism is in decline. Rather the question is why on earth would an entrepreneur take such risk in a country that treats them so poorly? One often missed statistic is ratio of SMEs to total population, GDP, and drilled down into sectors. One thing the U.S. in peak era had in common with Germany & China among others is/was a very large diversified mix of SME ecosystems that were not just outsourced contractors of gov't or major corporate ecosystems (SAP's comes to mind, but see FedEx ruling this week on contractors as employees).
I essentially did same many years ago John, and have been working towards systems that attempt to do much the same, realizing that many large institutions will be with us for our duration anyway. The only couple issues I see in first scan is that one person's passion can be and often is another's poison--some very destructive passions out there, and feminine qualities are not necessarily better. I support the intent but not the outcomes that still scar in both. But important message is spot on--and timely as the founding docs are full of such wisdom. We are all born into this world as individuals--rare case of conjoined twins, and we all leave this life as individuals. While our social and organizational relationships are obviously critical, the mutually beneficial relationships (worth keeping) are those that recognize this frankly genius found in the U.S. structure. As radical as it sounds, you and I both know it isn't--the best managed organizations and leaders embrace much the same philosophy. I happen to know of a great system that does just this -- Vint Cerf found the misspelled word in the patent, and just this week in WSJ said something like "orgs are finally realizing how important adaptive data can be. NLP & AI may well make the Internet far more of value than it is today". I first started discussing our R&D with Vint back in mid-90s… Good work John and nice contribution. I hope the cure is as viral as the disease has been -- we'd really have something to celebrate then. Cheers, Mark Montgomery Founder & CEO Kyield
I started warning about that backlash since 1996. My forecasts on technology and ventures proved far more accurate than apathy quotient and social behavior. I now think any such backlash if it were to manifest would build up until the point of an Arab Spring rather than a consumer boycott. Hopefully my peers in venturing will learn more global leadership skills, a bit less sociopath, and embrace more of the Ford philosophy. I thought John Hagel did a fairly good job in response to this debate, which I found embarrassing, primarily for Harvard. Cheers, MM
Very nice Irving--particularly for busy execs on the run who can benefit from well written summary and interpretation. I am often disappointed in some old friends and colleagues in KM who desperately hold on to the notion that technology either isn't a factor, or is something that can be resisted. It is the single most important error that resulted in loss of credibility. Fortunately, some of the PhD programs at leading university programs responded to the criticism and have corrected their ship's course. Tom Davenport captured the phenom simply in a recent piece at CIOJ where he simply stated that those in KM were from liberal arts backgrounds versus engineering and science backgrounds in CS and analytics, making a point that the two world now must come together--a task I have been struggling with frankly for two decades. As difficult as it has been, I found it more productive to design and build a system that does so versus attempting to change deeply held beliefs reinforced by protectionism. -- KR, MM
Another fine focus Irving. I'd like to highlight a couple of areas: “What’s clear from our analysis is that CEOs are looking to the cloud as a source of innovation, not IT productivity. The problem is that the investment profile in many companies doesn't match that priority. Unless companies make that switch, disruptors that use technology to fuel innovation (i.e., like Amazon and other new entrants) are going to drive them out of business.” This is quite revealing on several fronts. Many CIOs would like to adopt innovation systems, but are being held back by CEOs and boards. An example-- very well regarded CIO in large company just below the top tier responded to me that our system 'was perfect' for his company, but he just didn't think his board and management culture were quite mature enough yet. He is working on the challenge, speaking to need for high level edu, but the problem for his CEO is that multiple competitors ARE sufficiently mature. Interestingly, in our case it doesn't matter much whether it's on premises, cloud or hybrid from an ROI perspective, rather the choice is quite often being driven by comfort zones and defense, speaking perhaps to the culture and challenge of demising returns on investment. Ironic for those offering decision systems no? -->While an increasing number of companies are now paying attention to cloud, they have mostly been doing so to improve the economics of IT.<-- “The reason for considering this (cloud) is that so many companies are hampered by legacy technologies that they are unable to be flexible and simply cannot innovate,” Highlights the problem for CIOs. The reason for being for IT in business decision making isn't even within the realm of many IT decision makers. Many argue that they aren't incentivized or rewarded for anything but incrementalism, but that's quite often what separates future leaders from everyone else--we are all faced with this dilemma in today's economy at some level. Strong leaders may move on, but by definition don't sit back and knowingly allow their organizations to fail. Incremental IT may be very costly to maintain, but it does not provide a competitive advantage -- the precise same systems are used worldwide, often in competitors working at lower cost levels with other advantages as well--like growth markets. This is the fundamental challenge, of course, that many of us have been working on for decades--continuously adaptive systems are finally at the inflection point. The game is being changed. CEOs still have much to learn about the complexity at the confluence of IT systems, organizational management and the increasing neural network economy. It requires an exceptional level of commitment over a long duration working at a competitive level few have experienced or prepared for--in no small part due to market power, which is why the not invented here syndrome is so dangerous in this environment, however prevalent. KR, MM
Hi Julie, A nice post with obvious effort and experience so despite being a very long day I wanted to share some thoughts while still somewhat fresh. I really appreciate the emphasis on two dramatically different models as we've experienced same from several sides as consultant first, then incubator with several ventures, a VC firm, and now with Kyield which has been the most important and challenging. I can relate to your second client-- we've been accused of the same at times, which has been true at times. A few thoughts from our own experience and many others recently as we just went through a review with Kyield that was similar and brought in several very experienced people that span a lot of companies. 1) Our experience and feedback agrees with your position that there is no best method, and strategy must be tailored to the specific situation. 2) We totally agree with need for customer feedback, but it's also true that many customers have zero credibility in that they want others to take all the risk, then when they do as we've seen hundreds of times by less experienced entrepreneurs, customers don't support the effort. The U.S. government has earned the top dog award for this relative to data standards in my book, but they are far from alone - it's become a serious problem across enterprise SW. So this may be why your client has resisted investing heavily in a product without customers actually supporting with dollars what they claim to support with words--many won't with good reason. This is actually a strategy that built the industry long before there was much VC-- in collaboration with customers in a custom build or quasi custom hybrid, but in my observation the vast amount of VC often backed by institutions with similar cultures, has acclimatized large social orgs to subsidies and believe they don't need to take risk. And if we look at the P&Ls and track records of the vast majority of ventures who followed the build SaaS model, some have been amazingly high cap with massive losses and an overall failure rate that is terrible by any standards in my experience other than perhaps restaurants! May not be the case with your client, but thought worth sharing -- it's surprising to me just how many in VC now employ themes and models based on asset allocation of LPs rather than markets, and how few understand that tech can actually be more valuable in the hands of partners and customers than end users. We have a lot of experience with deep tech -- and have been boosters to several of the most successful companies at pre-investment --often is the case where how it is deployed isn't even physically within the realm of what customers are able to understand, other cases the tech is buried in a stack as infrastructure and customers don't even know it's there- perhaps that is an option in this case-- it's one we're often negotiating at Kyield -- different customers, and in other cases in more user /consumer products the customer doesn't even know they want it or need it yet (S. Jobs). Speculation, but may be applicable to others and a good exercise for me selfishly as most of us are constantly re-evaluating and checking strategy. Thanks - MM
Very impressive Jeff -- certainly meshes well with my philosophy. When governance fails, innovation must prevail! -- Best, MM
Nice work Jeff -- you may be interested in my recent op-ed discussing the commonality in a series of events: Systemic failures, by design
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Jan 22, 2010