Erik on Software

Technology == Salvation ?

Due to service disruption with my print subscription to The Wall Street Journal (WSJ) this past week, I was not aware of the interview with Peter Thiel entitled "Technology = Salvation" by Holman W. Jenkins Jr. in last weekend's edition until today. Thiel was one of the co-founders of PayPal and an early investor in Facebook, and now serves as president of Clarium Capital, a global macro hedge fund that he founded in 1998.

Thiel offers some interesting perspectives in the interview of interest to the technology community. Some excerpts:

• Except for computers and the Internet, the idea that we're experiencing rapid technological progress is a myth.
• "People don't want to believe that technology is broken...Pharmaceuticals, robotics, artificial intelligence, nanotechnology - all these areas where the progress has been a lot more limited than people think. And the question is why."
• "The big variable that [Bernanke, Geithner, and Summers] are betting on is that there's all this technological progress happening in the background. And if that's wrong, it's just not going to work. You will not get this incredible, self-sustaining recovery."
• The great exception is information technology, whose rapid advance is no fluke: "So far computers and the Internet have been the one sector immune from excessive regulation."
• Some companies and countries will do better than others. "In China and India," he says, "there's no need for any innovation. Their business model for the next 20 years is copy the West."
• The West, he says, needs to do "new things." Innovation, he says, comes from a "frontier" culture, a culture of "exceptionalism," where "people expect to do exceptional things" - in our world, still an almost uniquely American characteristic, and one we're losing.

The fact that so many comments were posted in response to the online version of this interview in such a short time period demonstrates that there is a lot of interest here, but the substance of most of the comments is unfortunately lacking (probably due in part to the text of the interview being available to the public without a WSJ subscription).

As someone who studied economics as an undergraduate, I agree with Thiel that politics plays a heavy role in how the U.S. economy will play out in coming years. It is difficult enough to predict the future when the markets are able to work things out on their own, but when the government gets involved it is nearly impossible. Of course, I use the term "predict" loosely here - what I am referring to is estimating event probability.

And while I was not overly impressed with Michael E. Raynor's "The Strategy Paradox: Why Committing to Success Leads to Failure (And What to Do About It)", in my review of the book I noted the following:

Any future strategy, according to the author's explanation of the Strategy Paradox, may fail because the future cannot be predicted: "strategies with the greatest possibility of success also have the greatest possibility of failure". Planning and executing well a strategy does not necessarily increase the chances of success. Instead, companies should hedge their bets by developing practical strategies based on multiple options that respond to the different requirements of several possible futures rather than commitments on singular strategies.

There exists no public talk regarding the development and execution of multiple strategies for the U.S. economy. At present, the driving singular strategy is offshoring work in order to gain very short term profits. Offshoring complete industries will render the U.S. heavily dependent on other countries until the strategy is changed, and it is becoming increasingly clear that this dependence is not feared.

I agree with Thiel that the unfortunate business model that has been the main driver for growth in economies such as China is to "copy the West". The U.S. rebuilding of Japan and Germany following the second world war acted as a powerful catalyst for economic growth, but that growth would have been less probable if it were not for the intelligence and work ethic inherent in those countries.

While it might be true that China is "coming back" rather than "rising up" (as Chinese economist Dr. Peter Zhao Xiao noted in the recent conference I attended), the economic progress in China over the last few decades would have been unlikely if it were not for the vast investments from the West. And one of the resultant problems is that the accompanying knowledge and skills have followed these investments.

As a consultant, I need to be able to keep up with advancements in my field and reinvent myself on a continual basis in order to remain viable. Every year I experience periods of time where I am running in order to learn new skills in order to provide what is best for my clients. Knowledge transfer and mentoring are typical products by design during these periods of time, but the lifetime of each growth spurt is limited.

Applying this running analogy to the U.S. as a whole, there is a mathematical limit to how fast these sprints can be executed, and how long they can endure, when a sizeable part of the end products is also the ability to do the work itself without regard to whether subsequent sprints continue to contain innovation (and there are legal implications when products and processes are copied).

While my field is fortunate in that innovation still occurs, and there continues to be opportunity to advise clients and develop solutions, it is unknown what will happen if U.S. innovation in my field ever ceases. In my opinion, part of the country will be lost.

Global Leadership Summit 2010 Day 2:Daniel H. Pink

From the conference notes:

Best-selling author, business thinker, and former White House speechwriter, Daniel Pink has been credited with defining a new era in the workplace. His provocative business books describe the changing world of work.

In A Whole New Mind, Pink examined the rise of "right brain" skills that will be required in modern economies. His latest book, Drive: The Surprising Truth About What Motivates Us, analyzes the scientific data behind high performance and vocational satisfaction.

Pink's articles on business and technology have appeared in The New York Times, Harvard Business Review, Fast Company, and Wired where he is a contributing editor.

A sought-after speaker, he addresses corporations, associations, and universities around the world on economic transformation and the new workplace.

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From my personal notes:

• People are so much more complex than their biology - their physical needs - their biological drive.
• Humans respond exquisitely to their "reward and punishment drive".
• We do things because they are interesting.
• For example, attending this conference does not satisfy either the biological drive or the reward and punishment drive.
• There exists about 50 years of research on human motivation.
• The 2-dimensional view of human beings that requires suppressing the biological drive to focus on the reward and punishment drive does not work so well.
• A study said that a greater reward increased performance except when the requested task was less complex or required less creativity, which caused decreased performance.
• Big rewards tend to create tunnel vision - this phenomena is shown again and again in the research, but this is routinely ignored.
• Red Gate Software did something radical. Salespeople were gaming the system, so the CEO eliminated commissions. Instead, salaries were raised and profit sharing was provided.
• Part of the problem with organizations is that we make assumptions about people: that human beings are "machines" and that human beings are "blobs".
• The assumption is that human beings are complicated machines, but "mechanical" - they respond the way you want them to respond given certain inputs.
• The assumption is that human beings are passive and inert blobs, but our essence is to be active and engaged.
• There are 3 elements for motivation: autonomy, mastery, and purpose.
• Management is a technology from the 1850s. What other technologies do we use from back then?
• Management was designed to "get compliance". Our organizations are too complicated.
• People want engagement. Autonomy in 4 things leads to engagement: time, task, team, and technique.
• Attlassian Software has "Fed-Ex Days" where people can work on anything on Thursday as long as they deliver overnight on Friday to the rest of the company. Fed-Ex Days worked out so well that they now have "20% Time" where people can work on anything they want for 20% of the time. According to the company, all the "good" ideas have come about from this time.
• Since it can be difficult for a company to adopt something like 20% Time in a short period of time, 20% Time with training wheels (or as the Brits would say, "stabilizers") or 10% Time are options.
• It can be difficult to initiate such measures quickly. Some "scaffolding" is helpful to gradually move in this direction.
• The "single, largest motivation at work is making progress".
• Mastery is partially met by contributing more.
• People are more likely to have "flow" at work than at leisure, so this is a great opportunity. Unfortunately, the workplace is one of the most feedback-deprived places in the world, and performance reviews are worthless.
• Workplace performance reviews are America's version of Kabuki theatre (great laughter from audience).
• Pink thinks that we are seeing the limits of the "profit motive", even though it might be good morally and financially.
• The bad and the mediocre result when the profit motive and the "purpose motive" are not working together.
• "Most businesses are not run very well."
• To be motivated by purposes larger than oneself is important.
• Pay attention to determine whether people refer to their organization as "we" or "they". Use of the pronoun "they" points to alienation. The pronouns being used say a lot.
• One person cannot change one's organization, but one can change as an individual what they do tomorrow.
• Anything good in life begins with a "great conversation" - this is what changes the world.

Global Leadership Summit 2010 Day 1:Dr. Peter Zhao Xiao

From the conference notes:

A prominent Chinese economist, Dr. Peter Zhao Xiao was commissioned by his government to study the success of the American economy. He concluded that a moral foundation allowed the economy to flourish, argued that China's economy would benefit from the spread of the Christian faith, and embraced Christianity himself.

Former Head of the Economic Research Center, where he provided strategic advice for the central committee of the Chinese government, he continues to be a respected scholar and government advisor, speaking openly about the influence of Christianity on economics.

In 2007, Dr. Zhao assumed the chairmanship of the Cypress Leadership Institute which seeks to help transform the business culture in China and to bring world-class leadership resources to Chinese leaders in key industries.

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From my personal notes:

• The communist party sent Zhao to the U.S. to learn about free market economics, and ended up concluding that the Chinese economy will benefit from the Christian faith.
• Zhao lives in Beijing and doesn't speak English (a translator was present).
• Wrote an economic paper for school entitled "Market Economies with Churches and Market Economies without Churches".
• Religion brings stability to economies.
• Agrees with Bill Hybels that leadership is about bringing someone from one place to another ("here" to "there"), but also stated that it's about bringing someone to the "right place" - in the "right direction".
• The most significant change in the last 2,000 years was Christ being born and the spreading of Christianity.
• The most significant change in the last 1,000 years was the change that Martin Luther brought about.
• In the past 500 years, the most significant change was the discovery of America by Columbus and the "blooming" of America.
• The twentieth century brought about the collapse of the Soviet Union and the rise of China.
• Zhao does not agree with the statement that China is "rising up", but that it is "coming back".
• China led for most of the last 5,000 years, and fell far behind, but no other country has seen the high rate of growth that China has seen in the last 30 years.
• China is about to surpass Japan economically, and by the year 2020 is expected to surpass the U.S.
• Margaret Thatcher once said that China will not become a superpower unless it can export values.
• No country in Asia will follow China. There is no "Chinese Dream" like the "American Dream".
• The Chinese people love Americans because of the values the people exhibit.
• China needs to go beyond economic growth.
• China needs more mature leadership, to learn from the whole world - not just economically, or technologically, but culturally - to learn from the world's best values.
• Most importantly, China "must" learn Christian values.
• Zhao expressed his thankfulness to all the missionaries who brought the Gospel to China, such as Matteo Ricci, Robert Morrison, and Eric Liddell. 
• In 1949, missionaries were asked to leave China.
• It might take 1,000 years to recover the church of 1949, but "God is powerful".
• Christians have grown 100-fold in the last 30 years - conservative estimates indicate there are now 18 million Christians, while "optimistic" estimates indicate upwards of 130 million.
• "Personal life" transformation has far surpassed China's economic growth. 
• Zhao prays that China will become the largest Christian nation in the world.
• Personal life transformation happens first, and the rest builds upon this foundation.
• There are only 2 forms of transformation: transformation with the cross and transformation without the cross.
• All great civilizations have either been Christian or have been influenced by Christians.
• "America has built a city on a hill."
• Europe came first, then America, and now Asia.
• One good thing about Chinese culture is that Chinese people are "not stubborn".
• "Chinese culture is not a static thing - it is dynamic."
• 202 B.C. - Han Dynasty
• The Han Dynasty combined Confucianism and Daoism.
• 618 A.D. - Tang Dynasty
• The Tang Dynasty combined Confucianism, Daoism, and Tao Buddhism.
• Zhao believes a "third great revival" is coming, one that combines Confucianism, Daoism, Tao Buddhism, and Christianity.
• China is forming a harmonious society.
• Taking Christianity away now will not enable a harmonious society.
• A Chinese "Mayflower" has set sail - Chinese coming to America to learn.
• The Chinese government has seen how honest Christian business people are - they are always the first to follow the law - to comply, for example, when the government first asked businesses to keep only one set of books.
• Zhao believes that having a lot of Christians in China alone does not guarantee a "smooth ride". China has "quantity" now, but not "quality".
• Zhao stated that he knows a lot of Westerners fear China. The Church can support China - to help the Chinese love God more, to help them live godly lives, to give generously, to love their neighbors.
• Zhao concluded by saying that he hopes the Global Leadership Summit will be held in China one day.

New Book Review: "Don't Just Roll the Dice"

Recently posted book review for Don't Just Roll the Dice: A Usefully Short Guide to Software Pricing, by Neil Davidson, Simple Talk Publishing, 2009, reposted here:

This white paper sized introductory guide to software pricing is very well put together. After Davidson walks the reader through some basic concepts from economics and marketing that specifically relate to pricing software products, he addresses some of the more advanced aspects of pricing that include areas such as versioning, bundling, and licenses. The discussion provided in the fifth chapter, "What Your Price Says About You (and How to Change It)" is especially well written.

The author reminds the reader that one should never forget that practice trumps theory, and that product pricing is as much art and craft as it is science: "Sure, it helps to understand the economics and psychology of pricing, but theory can only tell you so much. At some point, you need to make a decision and do it. Use the information in this handbook to make an informed stab at what a good price would look like, and how your customers will react, and try it out. The exact price almost doesn't matter - get it broadly right, don't screw up totally - and you can tweak it later. You're never going to know if you've chosen the exact right price or not, but you should experiment once you've set your initial price; not experiment in the scientific sense of forming a hypothesis, changing a single variable, and accepting or rejecting the hypothesis, but in the sense of changing something and seeing what happens."

Especially well recommended to those new to economics and marketing theory. Note that this book is currently available free of charge as a PDF document download at the author's "dontjustrollthedice" website.