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Archive for October, 2010

Japan: Canary in the Coal Mine or Economic Experiment Gone Wrong?

In recent months, Japan has been getting increased attention; not for its economic success, but its supposed failure. Jeff Kingston’s “Contemporary Japan: History Politics, and Social Change since the 1980s” tells a story of Japan in stagnation since the bursting in the early 1990s of its economic bubble (like us, based on excessive real estate values). “The Economist” describes Japan as being in a state of “gentle decline.” The “New York Times” has been running a series on “Japan’s slow disheartening decline.

This is a critically important topic, not only for its implications for the United States and other developed economies, but also for the future of the global trading system and for nations like China that are taking a page out of the Japanese development play book.

First, the stories on Japan. It’s long been popular among the Washington economic punditry to sneer at the Japanese economy. Japan, Inc. (the idea that business and government should work collaborative to grow the economy) has long been a threat to the so-called “Washington consensus” that holds that markets, not governments, should be the sole determinate of an economy’s

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More on Exporting Process Innovation

In the software business, we learned a decade or so ago that the right level of abstraction at which to “export” software design ideas was the design pattern.

Taken from Christopher Alexander’s classsic, work on pattern languages for architecture, the idea of a software design pattern is an abstraction from details of implementation to the gist of the software algorithm.  Software design patterns are widely used to disseminate innovations in software (they should, in a rational world, be the only form in which algorithms can be patented, but we digress).

The same kind of abstraction – a process pattern, if you will – is the right way to bundle up our innovative DC processes for export.  Iraq may not want a Senate complete with two representatives from each state, but the nation builders among the Iraqi local countrybuilders may well want the Committee with Expert Staff process pattern as a model for how to digest complex policies for a generalist legislative body.

Who in the technology policy community speaks the language of design patterns and the language of policy process?  That’s the crew who needs to work

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Ending Innovation Mercantilism

As it’s becoming clearer every day that innovation is the central driver of economic growth, more and more countries are trying to be innovation leaders. Unfortunately, in that quest all too many countries are choosing to go down a path of “innovation mercantilism” by implementing beggar-thy-neighbor strategies designed to gain advantage at the expense of other nations and overall global innovation progress. These nations see the royal road to prosperity as through expanded technology exports and the best way to do that they believe is through gaming the international trading system through a number of mercantilist practices, including by manipulating their currencies, distorting technology standards, providing export subsidies, forcing technology transfer as a condition of market access, pirating intellectual property, and favoring indigenous over foreign technology products and services in government procurement.

While China is perhaps the most egregious example of a country practicing innovation mercantilism, it is by no means the only one, as similar (if not as prevalent) practices can be found in Brazil, Argentina, India, Japan, Russia, Singapore, South Korea, and a host of other, even European Union, nations. As these countries bend and break the rules,

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Why A Price on Carbon is Not Enough to Solve Climate Change

David Leonhardt of the New York Times posted an interesting blog “The Fight Among Environmentalists”  which discussed how some environmentalists and neoclassical economists defend the idea that putting a price on carbon is the key to solving climate change.  My posted comment is here:

The real issue is if one had to pick which would do more to solve climate change – a price on GHG emissions or a clean innovation policy – the answer is clear: the latter. As we stated in a recent ITIF report, “Ten Myths of Addressing Global Warming” one key myth of the climate change debate is that “Higher prices on greenhouse gases are enough to drive the transition to a clean economy.” The reality is that while price signals are helpful, but are not sufficient in significantly reducing GHG.

There are at least 3 reasons why. First, for many clean energy technologies to be competitive with fossil fuels, governments would have to set very high prices for carbon pollution, and typically governments face stiff political resistance to doing so.

Second, even if it were feasible to hike carbon prices radically, we still

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Innovation and Commercialization – 2010 McKinsey Global Survey results

With all the furor around the innovation imperative to pull the global economy out of the doldrums, one might think we’ve forgotten how to innovate. We have not. However, evidence suggests that we may have been distracted from it, failing to capture dramatic improvements in our ability to innovate more effectively.

And while innovation has become a top-of-mind issue for public officials seeking elusive job growth, it has long been a leading issue for CEOs. At McKinsey and Company we have been capturing an instructive fact base for years, focused on executive views on the subject. The good news from our recently released results, is the continued focus on, and importance of innovating. The less encouraging news — at a time when we are counting on innovation more than ever — is that we have not gotten markedly better at it.

In that spirit and for my first contribution here, I’d like to share some of our recent findings. Hopefully these help in coloring much of the current rhetoric with fact — at least how our client executives see the subject. What follows are highlights from a McKinsey Quarterly administered

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Exporting Process Innovation

As Director of Research at Valhalla Partners (my day job), a venture-capital firm in Northern Virginia, I’ve thought quite a bit about sources of regional advantage in the Washington, DC area. 

One thing we understand very well in Washington is process, although many of us are frustrated with it more often than excited by it.  But to my mind, it can be a source of strength.

Many of our processes are pretty good.  Consider, for example, a process we might call “Forming Consensus Among Disparate Factions”.  That’s a specialite of DC, and one which is in short supply in, say, Iraq, or Zimbabwe, or even Malaysia.

What if we could export some of our DC processes as innovations to the rest of the world?

We’ve tried it, of course, in the form of grafting our legal system onto Afghanistan or our commercial code onto Iraq.  But we’re exporting the wrong thing here.  We need to export not the details of our processes but the “process pattern” of them.

More on this in a subsequent post.

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Internet Wars: A Who’s Who Guide

Back in the day, there were no protesters outside corporate headquarters in Silicon Valley, no one had a position on net neutrality because no one knew what is was, and technology journalists were breathlessly trying to keep pace with new technologies and companies instead of holding forth on civil rights and liberties or network engineering protocols.

But ten or 15 years in the life of the Internet is a long time.  The Internet is the transformative phenomenon of our time and its role in our lives raises serious questions about who the Internet “belongs” to, whether it is used for good or ill, what are its technological limits, and what role government has as arbiter of its future.  The debates on these and other questions has become passionate and shrill, generating more heat than light at times.  A person trying to follow the debate might need a field guide to sort through the wide array of groups and their philosophical or economic orientation.  Allow me to offer up this breakdown, the details of which are spelled out in “Who’s Who in Internet Politics: A Taxonomy of Information Technology Policy,” a

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Open or Neutral: Pick One

Should the Internet of the future be just like the Internet of the past? If the net neutrality movement – an often raucous coalition of law professors, public interest advocates, political bloggers and others – gets its way, we can brace ourselves for more of the same: More web sites, more social networking, more picture sharing, more email, but little else.

Net neutrality focuses on preserving the Web, but the Internet is more than the Web, it’s also Voice over Internet Protocol services like Skype and Vonage, it’s gaming, it’s video conferencing and much more. By traffic volume, the Web is actually less than a quarter of the Internet today, and its share is declining. While net neutrality aims to preserve the Web, a more expansive Open Internet perspective is needed to preserve the innovation potential of the Internet as a whole.

“Open” and “neutral” aren’t really the same thing. The Internet can’t be both because applications don’t have the same needs: some require low delay delivery of small pieces of information, some require low cost delivery of a lot of information, and some, like the Web, only require generic

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Everything You Know About the Internet is Wrong

Most people see the Internet as something like a car, a toaster, or a cell phone: we like it, rely on it in our daily lives, but don’t care to understand how it works. The debate about net neutrality – how to regulate the Internet – has exposed us to many strong opinions about how the Internet does or should work, but they’re mostly wrong. Both regulators and advocates need an in-depth understanding of the Internet if they’re to accomplish their goals without doing harm. Here are some of the major myths circulating around the net neutrality debate that we can do without:

Myth #1: Net neutrality has always been the law of the Internet.

Reality: Net neutrality is a simplified form of the “end-to-end argument,” a technical precept that argues for implementing new Internet functions mainly in the computers attached to the network and only enriching the network proper when it’s absolutely necessary for performance, security, or some equally vital purpose. Because of the way the Internet was designed, the rise of video calling, gaming, and P2P file transfer applications causes performance and fairness issues that can only

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