Solving the world economic crisis

It seems like a tall order, solving the world economic problems, and, given that so many have tried unsuccessfully, I thought that it wouldn’t hurt for me to take a crack at it. I’ve actually gotten a few phone calls from people who asked me: “Bob, you work at Babson, a business school, right? How do you think we should solve this problem?” First, my degree is in engineering and most of what I’ve learned through starting and running several businesses has been in the field of psychology, not business. But, maybe they’re the same.

My first observation is that the stock market and the economy both have the deceiving attribute that they are described with numbers which would lead one to believe erroneously that they have something to do with mathematics, statistics, and formulas. My own impression is that nothing could be further from the truth. Both are really driven by mass psychology much more than by number theory. So the roots to the solutions may lie not in interest rates but rather in the hearts and minds of people.

It seems fairly obvious that if more of the population was employed, then productivity would be higher, and with more productivity, each additional dollar earned would cycle through the economy several times (I believe that I read that each dollar cycles an average seven times) and the GDP, and tax revenues would also climb wiping out the national debt and making everybody happy. It all starts with jobs.

An increase in jobs and productivity would also drive the real estate market as people looked to improve their living conditions with their new found salaries.

But the problem is that employers are reluctant to speculate on growth and add resources without clear evidence that their customers are ready to buy and so goes the vicious cycle. If “you” don’t invest, then I’m not going to either. And if neither of us invest in hiring, and building, the jobs and the spending associated with those newly employed people just doesn’t materialize.

So what happens is that downturns in the economy can be precipitous as many shed jobs quickly in response to fear, but the growth back occurs gradually as confidence builds in their ability to sell what they’re going to make.

I see this in very much the same way traffic at a stop light works. All of the cars come to a full stop and there are two ways that they can move as a group when the light turns green. In the first way, the common way, the first car moves, then second sees the first move, and begins to move. The third sees the second, and so on. The cars propagate through the light, but slowly, and some, at the end of the line don’t make it.

It would be much more efficient, and many more would go through, if everyone applied gas to their car simultaneously, upon seeing the light turn green, with confidence that the car in front of them was also accelerating at the same pace.

So, we’re stuck at the light waiting for the consumer or business before us, our customer, to flinch first.

There are four approaches to solving this problem.

First, do nothing and eventually, maybe in 10 or 20 years, the economy will slowly grow back. Each year, the consumers buy a bit more, the manufacturers build a bit more and we all get moving. Keep in mind that 60 to 70 percent of our economy is driven by consumer spending.

Second, stimulate the economy by having the government buy a whole bunch of stuff, like roads, airports, and infrastructure. After all, we need that stuff, the stuff we have is getting old, and we’ll all enjoy the better roads, schools, trains and airports, so why not. Remember that every dollar that the government spends is a tax dollar, but it does cycle through the economy and generates more tax revenues through the growth of employment.

The TARP funds were an attempt at this and it would appear in comparison to the UK, where last I looked there were riots, the concept was successfully responsible for growth. But, the problem lies not with the concept, but rather in the fact that we are a bitterly divided country on political grounds and if one side says blue, then the other side feels compelled to say red. And with our government divided, it leaves us at a standstill. One would have hoped that there was a possibility that our elected leaders could form rational decisions, but having met a few of them, the concept of rational and elected official seems somewhat oxymoronic.

Third, we could start, or participate in, a war. That would give us all something to focus on that we could unite in, namely the mobilization of our resources for the protection of our country. Everybody gets to work, the government borrows the money from the citizens (through bonds) to pay for the labor and tax revenues go up, and productivity is maximized. Note that this isn’t all that different from the second choice only that the elected officials agree to borrow the money to boost productivity in this case because they’re doing something good overall for the country.

There are only two problems with this. First, you have to kill a whole bunch of people in a war, and that’s fairly unpleasant. And second, the productivity is directed at the creation of assets that are of no real use to the society. Unlike the second case, you don’t have a new airport, you just have more bombs.

In both the second and third cases, there is another problem, the accumulation of additional debt by the government. I’d like to discuss this in two ways.

First, governments, unlike businesses don’t seem to publish their complete balance sheet. They do disclose their current and long term debt but they don’t seem to disclose their assets in the same way. As in the case of Greece and other struggling companies, the sale of assets can be used to pay off debts. The US has enormous assets including the Post Office, roads, bridges, parks, mineral rights, waterways, as well as several operating “businesses.” Back during the Vietnam War Lyndon Johnson sold off Fannie Mae and Freddie Mac to private investors as a way to finance the war. It was a good idea to reduce the debt, a bad use of the money.

Not carrying a record of the assets on our national books leads us to misunderstand our debt. If, for example, we assumed 10 trillion dollars of additional debt for the purpose of building a national solar energy generation facility and distribution system that completely eliminated our need for imported energy, that investment would be paid for in 10 years. But, getting our government to make those long term investments is virtually impossible if we don’t actually understand or record the asset and the impact that it has on our collective spending. Keep in mind that our government could sell us the electricity and the income would retire the debt. We do leave this to business in the US, which isn’t a bad idea, but in some cases, it’s just too large a problem.

So, one way to deal with all this debt is to sell off some of our collective assets. When selling assets, one typically considers whether the interest that you’re paying on the debt is greater or less than the income that the asset would otherwise provide. Or, as an example, one could either sell mineral rights to a tract of land, or choose to lease or license the mineral rights for an annual fee. While interest rates are low, it’s likely that the fees that can be generated from these assets is actually the better deal. This implies that the entire concept of getting energized about the national debt is silly since at any time we want, we could sell assets to cover the debt, but with the interest rates so low, it makes more sense to hold on to the asset and collect the revenue that they offer. If interest rates climb, then the sale of assets becomes more compelling.

Finally, here’s the fourth method for raising productivity. To use the car analogy, we all need to step on the accelerator simultaneously. But, nobody wants to take the risk. This is exactly where the collective force and wisdom of government can help. If the government would effectively “guarantee” the investment in increased productivity, then it would all just likely work out OK. This means that the government, instead of paying unemployment insurance and letting someone sit and watch Jeopardy should guarantee the wages of new hires if, and only if, revenue and profits don’t grow in accordance with the additional investment.

Companies are shielded from the additional risk, unemployment goes down, productivity goes up and the tax base along with it. The risk to this plan is that positions are created in companies that have no impact on their actual productivity. For example, the CEO gets two additional “assistants” to shine his shoes and bring coffee as opposed to adding two more workers on the assembly line. Thus, companies need to be able to demonstrate the growth of their productivity, which is measured through revenue or an increase in their assets through the additional hiring. Of course, there are ways to cook the books and defeat the intent of the program, but that goes without saying with any government program and the critical question is whether the end justifies the means.

The Fifth Generation of Digital Imaging

Introduction I began my career in electrical engineering in 1969 when I graduated from NYU’s school of engineering and science. At that time, the best that the school could afford were a collection of vacuum tube laboratory systems, DC motors and a single large IBM mainframe computer. Students could practice programming through the creation of punch card decks with one programming instruction per card and therefore, a program was typically represented by a stack of cards often several feet high. It’s fun to recall that special features were added so that if you accidentally dropped your program on the floor, and shuffled the cards, you could reorder the deck though the use of a sorting machine that was the size of several washing machines.

Clearly, technology has come a long way. In one of his recent books called “The Singularity” Ray Kurzweil, the popular futurist and entrepreneur speculates about the ever increasing speed with which technology seems to move. His point is that technology feeds upon itself, the latest computer is used to design the next computer, and so on, making the rate of change exponential as opposed to a linear progression of advancement. We are taught how the progressive doubling of some quantity can quickly build into an enormous number through the simple example of attempting to repeatedly fold a piece of paper, doubling its thickness with each fold. After a mere 17 folds (if one could do it) the paper would be taller than the average house, and after 50 folds would reach to the sun!

For the duration of my career, I have been involved in the digital imaging industry and the effect of this exponential growth can be illustrated over the last forty years by observing how this one field of technology has evolved.

In the early 1970s, digital imaging computers were referred to as signal processors or digital signal processors, and eventually shortened to the DSP. The only applications that one could find back then were related to the military because of the prohibitive cost of these computers. One of the first projects that I worked on was an “over the horizon” radar system that would watch for enemy intercontinental ballistic missiles (ICBMs). The radar data would be processed by a room full, over 300 cubic feet, of computer hardware that would create images that could be viewed and evaluated by an operator. This multi-computer system would accomplish something in the order of around 6 million arithmetic multiplies per second.

In 1965, Gordon E. Moore, cofounder of Intel, predicted quite accurately that digital electronic circuits would double their density approximately every two years. So it was fairly soon into the 1970s that these same mathematical algorithms used for radar image processing were finding their way into the first commercial market application, medical imaging, specifically in the form of CAT scanners. The specific mathematical equations that were being used to process radar images were similar to those needed to reconstruct x-ray images as done within a CAT scanner but the price of this equipment and its size were dropping rapidly as predicted by Moore. Early CAT scanners could be purchased for 1 to 2 million dollars.

In the 1980s it became affordable to bring the same mathematical processes to yet a new market, graphic arts imaging, in the form of computers that would help an artist or designer lay out a magazine or newspaper page on a computer screen in place of the manual techniques which would require a razor blade and film. These systems had again dropped in price again, breaking into a new application.

It is interesting to note that the basic science of image processing was not really changing that much. For example, Johannes Kepler, a German astronomer and mathematician had defined the equations that would be used in a CAT scanner back in the early 1600s. What was changing was that with each progressive cycle of redesign of the basic hardware, its speed, size and cost were all rapidly improving and frequently surging through market opportunities that became practical when cost performance objectives could be achieved.

From graphic arts imaging, basic digital imaging techniques were next found in consumer imaging, most famously in the form of digital cameras that today can be found in virtually every cell phone of which there are billions already in use.

From a room full of computer equipment costing millions of dollars, today the digital camera portion of a cell phone can cost in the range of tens of dollars, and yet exceed the performance of their early forbearers by a factor of 30 times in speed. A common cell phone might perform mathematical multiplies at a rate of 1 GHz or 1 billion per second. This is an improvement of cost and performance of roughly 1000 times overall in 40 years.

From a generational perspective, we might consider the DSP as having gone through four generations from military, to medical, to graphic arts, and finally consumer applications. And now we stand that the edge of the fifth generation which I call surrogacy.

Surrogacy

The concept of the imaging surrogacy market is that cameras in combination with small fast computers are capable of watching and making autonomous decisions based upon what is being seen. Those decisions can be communicated to other systems, or can, for example, in a simple case, activate a machine. As in prior markets, the application of imaging to the surrogacy market is not a question of “if it will occur” but rather, more simply, “when it will occur,” and current technological advancements have brought us to that moment now.

It was estimated by the automotive industry that over the next 10 years, one would find tens if not hundreds of digital cameras in every automobile. But most would not be used in the way that one might expect. It’s true that you would find low cost digital cameras used in place or as an adjunct to mirrors to assist the driver in seeing otherwise hidden vantage points. Back-up cameras are common in many vehicles. But this is a provincial use of digital imaging and the real volume of applications are represented by imaging surrogacy systems.

It has been common to think of low cost imaging as simply a way to bring images to a human operator at a remote location. For example, a security camera in a store delivers its images to a console in the security office where a guard can scan and watch for thieves.

However, the concept of surrogacy implies that the camera along with its DSP not only watches and potentially records what is seen, but more importantly it can make fundamental decisions, autonomously, without the need for human intervention.

So, for example, the pressure switch that might be located in the passenger seat that would disable a passenger airbag from being deployed when a child is sitting there would be replaced by an inexpensive digital camera and DSP that would “see” the passenger, measure his/her size and position and make an airbag deployment decision based upon the processed result.

In automotive applications, it is anticipated that cameras will be used to observe and make decisions on: • Operator fatigue by watching the head and eyes of the operator, • Lane drifting by watching the dashed or solid lines, • Distance to an obstruction by watching (often in stereo) objects in front and behind the car • Dimming the headlamps by watching for an approaching vehicle • Deploying the airbag (as described) • Obtaining the speed limit by reading signs • Observing danger by reading signs • Steering by observing the road • Measuring the speed by observing the road • Watching for rain and dirt

As well, insurance companies are deploying automotive cameras that record the last few minutes or seconds before an accident which can be used to assign blame or improve designs.

Today Volvo is testing a car which contains cameras that automatically avoid collisions and accidents by seeing and processing the objects and more importantly pedestrians in the path of the car.

As a completely different example that is already in common use, fully autonomous systems can already be found in Las Vegas gambling casinos watching for the faces of known card counters (or cheats from the perspective of the casinos) so that they can be escorted from the property.

As the cost of these systems continues to drop, it is only more likely that they permeate our environment as sensors that are used to make basic decisions like: should the lights and heat (or A/C) be on based upon whether there is any person in the room, or should the brakes be applied based upon whether there is an obstruction in the path of a car.

One can also envision imaging systems that are hybrid in nature and include human operators for whom the responsibility of decisions is aided by the processor through either the reduction of information to only relevant images, or through the enhancement or highlighting of suspected regions of interest. A common example today is the highlighting of mammography images to aid a radiologist in finding micro-calcifications, an early sign of cancer. Other examples include: • Security cameras that detect motion automatically and pass video clips of interest to an operator. • Security cameras that can discriminate between a dog that has been intentionally left on the property from an intruder who should not be there.

One must consider the application of surrogacy cameras from the perspective of: “if I could put a tireless human at this position and ask them to watch for a simple (or in some cases, not so simple) event at virtually no cost and with no environmental or size limitations, would I choose to do so?” Such cameras can be mounted on the wings of airplanes looking for “out of the ordinary” changes, or on cruise ships looking for an intoxicated passenger who accidentally falls overboard. These cameras have the advantages of never becoming tired, or bored. They can see in a variety of spectra, for example IR or UV, and can watch and observe endlessly.

Soon, cameras along with their autonomous computers will be less than a few dollars each which will cause an explosion of these types of applications.

Finding Surrogacy Solutions

Finding surrogacy applications begins with forgetting commonly held beliefs about the use of cameras in industrial or consumer environments.

The key is to identify events, which if observed, have a direct cost or profit impact on one’s business. Often, a safety or theft issue can drive the need for continuous observation, processing and a resulting decision that in some cases, calls for the attention of a human and in other cases makes a decision relating to the operation of the system.

Keep in mind that these cameras can be tiny, especially if used in higher quantities or for applications where high value is obtained. In these cases, one can integrate the camera and processor into a single tiny package, often no larger than a pencil eraser head. Systems that are this small are often easier to hide or protect environmentally. Today, there are complete wireless cameras that can be swallowed in order to inspect the patient’s GI tract.

Camera systems can be completely encased in plastic thereby eliminating many environmental considerations. Camera systems can provide mono or stereo vision and, like humans, can therefore make accurate distance assessments based upon a stereo pair. Camera systems can observe changes over time periods that are too slow or fast for human observation.

For me, it’s fun to ponder some future applications. Here are some of my favorites. All of these are possible within the context of currently available hardware and software. • A lapel camera and earphone that reminds me of the name of an approaching customer at a trade show. Imagine this used in retail environments to remind the sales agent of the identity and history of a shopper that enters the store. • A door camera that unlocks my door when I or my family approach. • A light switch and thermostat camera that saves money when no one is in the room. • Cameras used in retail environments that watch for theft by observing that objects are moved past the register without properly being scanned. Or taken by a customer without being paid for. • Cameras on complicated machines like airplanes and boats that call attention to malfunctions so as to create a faster appreciation for the situational emergency. • Cameras at train stations that stop trains if tracks are obstructed by a fallen passenger. • Cameras that watch for fires or leaks or floods. • Cameras that protect hands and fingers from machinery. • Cameras that scan skin for cancerous lesions.

It’s endless.

Business Evolution

During the Jurassic period, some 150 to 200 million years ago, large dinosaurs ruled the land, and like all other life forms on this planet, they share a common cell structure that includes a genome which contains the entirety of each organism’s hereditary information. This tiny data storage bank therefore defines the organization of biomass into complex organisms and frequently into social structures involving multiple organisms. Sometimes it even defines symbiotic relationships between dissimilar creatures. In each case, through the process known as evolution, the size, shape and function of each organism and their social structure adapts, albeit slowly, to environmental pressures. Stephen Hawking, the renowned physicist, remarks in his essay on “Life in the Universe – 1996” that evolution accumulates data at a rate of about 1 bit per year, consistent with the current estimate of a dinosaur’s DNA as being several billion bits long and early life, consisting of simple cells, as being about 3.8 billion years old. It is the very stability of patterns in the environment, for example, the sun rising each day in the east that gives organisms their ability to adapt. Over millions of years, plants evolved the ability to point to the sun for more energy.

The process of extinction can be seen as occurring when an organism is unable to adapt to a rapidly changing environment which includes the pressures from competitive organisms. For example, it is believed that the rapid disappearance of large dinosaurs (and their currently believed evolution to birds) was driven by a cataclysm, likely a meteor strike, which in a short matter of time radically changed their environment. Many species simply did not have the time to evolve into new forms that could survive. Their evolutionary traits that gave them dominance up until that time were no longer an advantage. For dinosaurs, it’s likely that meteor strike and the “nuclear winter” that followed vastly reduced the available plant material and the subsequent collapse of the entire dinosaur community started with the herbivores, and then eventually, ended with the starvation of the T-Rex who fed upon them.

Humans also adapt to our environment for survival. But, unlike our neighboring creatures, as Hawking observes, through language we can pass hereditary information to our offspring far more efficiently. He estimates that we add some 100 billion bits of information each year just through the books we write. And while, most of this information doesn’t actually change our individual cell organization, it does change the organizational social structures that we create including governments, businesses and religions. Our social structures are defined through language in many ways, including: laws, management structures, religious tomes, and even marketing programs that influence and control the behavior of individual members of the group. And we observe that between groups there is both symbiosis and competition.

But, keep in mind that the “goal” is the same, namely that the stored data is used to promote the evolutionary success of the organism, whether it’s the individual organism that we’re referring to, or the organization of many individuals into a group. We have seen in recorded human history the emergence and demise of organizational structures, like fiefdoms and feudal estates that have become extinct and today are replaced by governments and corporations.

Wal-Mart, which is only 60 years old, is currently the largest public corporation in the world, measuring in at $258 Billion in revenue while some150 million years ago, the world’s largest dinosaur, the Bruhathkayosaurus, weighed in at around 220 tons. The mega-corporation is relatively recent in human history. Can it go the way of the Bruhathkayosaurus?

We live in interesting times. As observed by Ray Kurzweil in his book “The Singularity,” technology feeds upon itself and is therefore increasing its rate of change to levels that are unimaginable. There was a 25 year gap between the invention of the telephone in 1876 and Marconi’s discovery of wireless communication in 1899. A shoe manufacturer back in the early 1900s would have had more than fifty years to adapt its business model to the use of the telephone before being threatened with extinction. But look around you today. New technological inventions are appearing daily. Many, like social networking, are still not understood in their potential for changing business models. It is not a huge leap of science fiction to believe that eventually, for example, the Internet will be integrated effectively into every business model, whether it’s a Wal-Mart or a local garage. Yet, we have trouble however anticipating whether we’re thinking about adaptation times of tens of years or just a few. But there is no doubt that whatever it is, it’s getting shorter.

Observing evolutionary changes and extinctions has never been possible for humans. Our lifetimes are simply too short. But that is changing. The rapid changes in our environment that are driven by technology are occurring within time scales that are going to modify organizational models and force the extinction of structures that are unable to adapt. It’s likely that many large institutions are simply, like the dinosaur, unable to change quickly enough to survive.

It’s quite possible that the industrial revolution of 300 or so years, along with contemporary concepts of governance which are roughly the same age and even religious institutions that are measured in thousands of years are all teetering on the edge of their own existence simply because in an age of the democratization of information and universality of communication, their structures are no longer optimum or even relevant. We may be nearing the end of the era of the mega-corporation and its extinction may occur right before our eyes.

My Nomination Speech for the Babson Thomas Kennedy Award

With great pride, I was one of three graduate school teachers who were nominated for the Thomas Kennedy award for best professor.  I thought that it would be helpful for those students who missed the speech and might have wanted to hear it if I posted it here.  I should mention that I gave it without referring to my notes so some of the written parts were skipped and some new ad libs were added.  With great affection for my students:

Welcome

Thank you for giving me this opportunity.  I would like to use my time here today to offer you a sort of Whitman Sampler of advice, a Forest Gump box of chocolates, so to speak.  I have for you, eight small observations and conclusions that could be taken as profound advice, or as a statement on the absurdity of life, or simply that, as most of you already know,  I’m nuts.

1.     On winning an election

The last election that I won was in 1959.  I was running for class president of my fifth grade class.  Yikes, that’s a long time ago.  My mother, who was otherwise known as the Carl Rove of the Bronx elementary school political system, was my campaign manager and her plan to get me elected was to give candy to each and every member of my class.  Well things haven’t changed that much for political campaigns today except the candy has gotten more expensive.  And as I said, it worked and I won that election. 

My mother died twenty four years ago but I was wondering whether she had anything to do with this election.  Did any of you get candy before you voted?

While thinking about my mother’s dedication to her eleven year old child it might be a good time to also think about how we tend to fall from our ideals of integrity that are clearly reinforced during our education.  I have observed two ways that we typically begin our descent. Here’s my warning.

First, it’s often a small transgression that starts us.  We’re a bit short on our cash flow, we borrow a little for a few days from the federal withholdings, the days pass, nobody notices, the crises passes.  We survive.  What has happened though is that we have chipped away at our moral compass.  We now feel a bit empowered to break the rules.  We wake up a year or two or ten later as Tiger Woods or Bernie Madoff;  so talented, yet so fallen.

Entrepreneurship offers you unusual freedom from the prying eyes of others.  That freedom means that your responsibility to form your own boundaries is amplified.  Make sure that you create for yourself a clear definition of the behavior that you believe will build a legacy that you aspire to and then never ever waiver from it.  I remember when my youngest daughter was a teenager and returned from a kid’s party with her shirt on inside out.  It was clear that something had happened.  After some interrogation by both her mother and me (using various CIA techniques) she admitted that all of the kids had thought it would be cool if they all went streaking outside (basically running in their underwear between the bushes).  Of course, the boys had to wait inside while the girls ran, and the girls would wait inside while the boys did it.  My advice to her (and this was 12 years ago) was to live her life as if it was constantly in the public eye.  How would she feel if her streaking picture was on the front of the local town newspaper?  Well, it’s interesting what has happened since then.  We have youtube, facebook, twitter.  Our lives are constantly on public display.  It further emphasizes the importance of my advice.

The second way that I see transgressions begin is through the acceptance of behavior by others that is less than ideal and yet willingness to associate with that person in the hope of achieving some benefit.  It might start with a casual conversation that indicates a less than ethical attitude by a potential business partner, but rather than pull away, the potential benefits of the relationship seem too appealing.

Just to be clear, you are talking to the devil.  You can’t out con a conman.  You must pick your friends carefully and in the same way, pick your business associates carefully.  If you observe any lack of principle on the part of a potential business partner, customer, or vendor, I strongly advise you to walk away.  Life is too short.  There are plenty of good folks out there to do business with.  Don’t worry about getting even.  Simply get away.

2.     On Space and Time

Now you’re not going to believe this stuff.  I did some research on Wikipedia.   Did you know that it takes the earth 365 days, or equivalently, one year to travel around the sun.  What a coincidence?  But think about this, if the earth were located where Venus is, not only would we all be venutians (and our sight challenged citizens would be referred to as Venutian Blinds) but if, for example, you’re currently 27 years old, instead you would be 44 years old and your parents would be that much more pissed that you still don’t have a job. 

Or, think about this.. Did you ever notice that a foot of length, 12 inches, is about the size of a person’s foot?  What a coincidence?  So listen: If we humans were all the size of Rhesus monkeys, which are about a third of our current size, with tiny little feet, the Boston Marathon would probably take around 8 hours to run and a dollar bill would be a foot and a half long.  That’s crazy.

Our lives are divided neatly into earth years.  And each year we make a measurement of our progress.  For example, we celebrate our birth date (which, by the way, would come more frequently on Venus – another benefit of Venutian living – more gifts).   And when we’re little, once per year we get our report card.  (As many of you might expect, “plays well with others” was not my strong suit in elementary school.) 

Then, as we get older, the report cards become a more formal document: our “official transcripts,” all part of our ever growing “Permanent Record.”  And again, we continue to measure our progress. 

In business school we learn to divide years into Quarters, much more precise.  And, after you graduate, your official measurement will be your 1040 (that’s your IRS form just in case you’ve never filed taxes).  What did you make this year?  Are you still making progress?

It’s all so arbitrary.  Time, distance, success, progress.  Who made this stuff up? 

As official entrepreneurs, you are hereby free to make up your own rules, your own measurements and your own definitions of success.  My advice: Don’t simply buy into the systems defined by others.  Select your own path, live in your own dream.  Most importantly create your own concept of success and then achieve it.

And while I’m talking about success, let me add:  If you haven’t figured it out yet, you’re going to fail many times on the way to finding your own version of success.  Please, clean up your messes.  Take responsibility for your errors.  Your parents were right, clean up your room, but more importantly, learn to apologize for your transgressions and own your errors.

3.     On Movies and Technology

I, and I’m sure many of you as well, love watching movies.  I’ve heard it said that the most creative of any era are drawn to the latest technologies for self expression.   Brahms and Beethoven in the 1700s were being drawn by the creation of new orchestral instruments.  Rod Serling in the 1950s was being drawn to television, The Beetles drawn to electric guitars and today James Cameron, the creative energy behind the movie Avatar is drawn to film. 

I observe that films and especially science fiction films can often serve as the first half of a sort of déjà vu experience in the future.  For example, the Truman Show anticipated reality TV and YouTube.  Eternal Sunshine of the Spotless Mind, also with Jim Carrey, anticipates the ability to do selective memory adjustment (something that the government is working on as a way to reduce PTSD (post traumatic stress disorders suffered by war veterans).  Jurassic Park anticipates the genetic recreation of long extinct species (in fact they just found intact genetic material inside the marrow of long petrified dinosaur bones and think now that this might be possible) and Avatar anticipates the ability as predicted by Ray Kurzweil, in his book “The Singularity” that we will someday be able transport our identities from our bodies into other vessels and achieve immortality. 

If you lived in the early 1900s when Jules Verne wrote From the Earth to the Moon, you would need to have waited until 1969 to see science fiction turn into reality.  But today, technology is evolving much more rapidly.  Technologically driven changes to our societies are occurring in ever shorter and shorter time spans.  Societies, and more importantly, you no longer have the luxury to slowly adapt to technological advancements.  You must embrace the changes and learn to live in a rapidly adapting world.

My advice: watch and learn from others.  I am always surprised at how much I find in every book that I read and every movie that I watch that helps me with the anticipation of business trends and technological advancements.  Remain curious and use every opportunity to learn someone else’s business model and ideas.  It is through those discoveries that you will form your own new entrepreneurial ideas.  And finally, stay involved in technology.  It is more important to small company development than you can possibly imagine.

4.     On Business Planning

A few weeks ago nice young student, an undergraduate business student, from BU came to talk to me in my office (as you know, I have the largest office in Babson, Pandini’s – with its own private bathrooms, men’s and women’s (that you’re all, of course, welcome to use).  He had found me on the Internet (how random is that? – but more about that in a few minutes). 

He wanted to interview an “entrepreneur” and apparently I was the only one that he could find.  Imagine – he had to travel 15 miles from BU to find an entrepreneur – that’s 45 Venetian miles.

He came with a carefully constructed set of questions, almost 50, neatly typed on a single sheet of paper.  Undergraduates are much better prepared than graduate students.  He thought a lot about those questions.  He started: “So, Mr. full time lecturer adjunct Caspe, he said, (addressing me with my proper title) I see that you started 5 businesses and I was wondering how much preparation and planning went into your first business?  For example, how long did it take to create the business plan?”  As many of you know, I said: “planning?  None…  business plan, none… in fact, I’ve never written a business plan – it’s not that I never used a business plan.  Once my businesses were up and running and I was managing lots of people, and we were spending lots of money, of course I had my employees write business plans for me.   But write one on my own?  Nope, not a one.  In fact, I told him, once I had raised some money from a VC who said after he gave me the check, “you know, Bob, it would be really nice if I had a business plan for the file.  Could you write one?”  to which I replied:  Nope.. don’t have the time, how about it if you write it yourself.

At that point, I saw this bright young BU business student kind of deflate and scanned his list of questions. Unfortunately, all of them were based upon the presumption that I followed the traditional path to starting a business – invent a product, write a plan, build a prototype, make the website, raise money…, He paused.  And he tore up the list of questions. 

My advice: Business plans are kind of like his neatly typed questions, often irrelevant after the first answer.  Don’t put too much time into planning.  Put it into doing.

5.     On regrets

One of my young interviewer’s questions was whether I have any regrets about decisions that I’ve made, or would choose to have done things differently if given the chance.  My response was that the actions that I do regret the most were those where I have failed to show proper patience, appreciation and kindness to others.  A trait that I have attempted to control with the help of my wife who is considerably more civil than I am.  But in business, I have no regrets, nor do I believe that it was really all that much in control.

In the spirit of ending my accumulation of regrets, therefore, let me say now that I am terribly proud and appreciative that the graduate student body has elected to offer me this recognition and approval.  I truly value your opinions and I can think of nothing that I value more than what you have given me.

And to those of you to whom I’ve been a bit too rough, or unkind, I have two comments:  First, I am truly sorry and second get over it.  If you think I was hard on you, wait until you do some cold calls.  Please allow me to join you in the celebration of your accomplishments with no hard feelings.  And please do understand that for me, it’s all about your success, not mine.  It’s your turn, not mine.

In some way, I think that the biggest regret that my generation has is that we didn’t leave you a better world.  But, the good news is that it’s your turn.  My advice: Pick one way to make it a better planet.  (other than moving it to where Venus is) and do it.  You have both the power and the responsibility to make this a better place.  By the way, you’re what I picked, my way to make a better world is now through you.

6.     On randomness

As many of you know, I have integrated a book called “The Drunkard’s Walk” into my course and I spend a lot of time talking about how, as John Lennon said: Life is what happens to you while you’re busy making plans.”  I have been watching each of you as you perform your own drunkard’s walk, some more drunk than others.  Much of your destiny is defined by events that you will not be able to control.  As I’ve shared with you, that doesn’t mean that you just sit back and wait for it to happen to you but rather, that you must have a plan for survival that gives you a chance to enjoy the serendipitous things that are going to occur and avoid your demise at those that are less fortuitous.  And, that the most important advice that I can offer to someone starting out in business is to focus on survival.  Your cash flow.  That’s it.  Don’t spend more than you make and you’ll never go out of business.  It’s not real complicated. 

Also related to randomness is the topic that I frequently have brought up in class regarding our tendency to retrospectively and selectively analyze businesses (often through the case study method) in ways that tends to lead to improper assumptions.  We often, for example, study only the winners and not the losers. 

My advice: don’t be too impressed with the advice that you’re given.  (including this advice)  Make your own decisions based upon your own instincts and have the confidence that you can accomplish anything.  And that leads to my next topic.

7.     On Fear

Again, as many of you know, I’ve spent a fair amount of time talking about fear in my class.  Sioma mentioned to me that the image of that chicken that I use in my class presentation has been burned into his memory.  In fact, he’s lost his taste for chicken at this point. 

But the right word isn’t fear, it’s really phobia.  Fear is our natural response to a real threat, a form of self preservation. 

Have you ever seen those guys that jump off of mountains wearing those odd suits with wings under their arms?  They should be afraid.  Yet, oddly enough they don’t appear to be controlled by fear.  The last guy I saw on TV, his partner who was going to do the 60 minutes interview with him, had actually died just before the interview– probably flew into a mountain.  But this guy, he still wasn’t afraid.

But just as clearly as you can imagine the rational fear that you might feel if you stood on the edge of that cliff wearing a spandex suit with wings, there’s another image I want you to imagine, of two pre-teen girls standing at the edge of a swimming pool, holding hands, and afraid to jump in.  The water is chlorinated – there isn’t a live bacterium within miles.  It’s only 6 feet deep and there are lots of adults standing within easy grasp.  They can swim and the water is 80 degrees.  And yet, they’re afraid.  And they hold hands as if to say – if we jump together that’s better.  At least then, if I die, so will you and our parents can at least mourn together. 

That’s not fear, that’s a phobia – an irrational fear that’s not based upon a real understanding of the potential outcomes, but rather they’re just afraid.

I see fear as driving most of the decisions around me.  Conquering that fear is part of entrepreneurship.  You must develop an understanding that in fact you are risking nothing.  A year of low income, the sense of failure.  Who’s watching?  Who are you afraid of disappointing?  Our parents make us nuts.  Get over it.

 Lately, I have been studying small businesses that were started by former Babson graduates and after interviewing 10 businesses, I’ve found a simple common thread: their difficulty in forming successful partnerships.   Next year I’d like to edit the video interviews that I’ve done into an hour long story about partnerships. 

For me, my experience with partnerships has been great.  For most of my business career I’ve had 3 partners and we completely trusted each other and shared everything.  We never felt a need to own more of the company that the next guy and have voting control, we never regretted their making money as a result of our own efforts.  We remained partners until we sold the companies and remain friends today.  But, many of the partnerships that I observed that were formed by students aren’t so fortunate.  Many ended quickly, some with bitter remorse.  Some with legal battles.  Now I understand the advantage of having a partner, someone to commiserate with, someone to share the joy with, someone to debate the choices with but I also observe that many of the partnerships here at Babson are born out of fear as opposed to common goals and aspirations.  It’s like those two preteen girls:  “I’ll jump if you do.”

Learn to break through your fear and make decisions without regard to it.  And, if you choose to join as partners, make sure that your goals and aspirations align.  And, I should add, that I’m not a fan of “co-presidents.”  Pick someone to be in charge – even if they never make a decision in any way other than to either find a consensus or delegate the decision to someone else.

I should note that now that you’re graduating you’re running out of excuses.  It’s time to start your journey.

8.     On Jealousy

I always get confused on the difference between jealousy and envy.  So you figure out which I really mean.

Over the last one or two years I have met many of you, become friends with some of you, mentored some of you.  I’ve listened to your business ideas, and more often than not, replied “That’s a STUPID idea” but then, as you know, I’ve attempted to work with you to find a way to make it work and encouraged you to talk to customers and see what they say.

I have mixed emotions at this moment.  I will be saying goodbye to all of you.  Maybe not a permanent goodbye, but clearly not “I’ll see you tomorrow.”  And, I will truly miss you.  I will miss our discussions of your nutty ideas.  I will miss hearing when you find success and we share a high five (a bit lower for Yuka).  I will miss hearing about your life decisions, your families, your plans.

When my dog Mickey was still alive (he was a cockapoo) my wife and I would often go out to dinner and Mickey would come to the window by the door and get up on the bench and watch us walk to the garage.  I could see his little head above the windowsill and his beady little eyes.  And, I could read his mind:  “Me, you forgot me, Me, wait.. I’ll be good, I won’t pee on the floor, I promise, can I go?”  But we knew.  He would pee on the floor and he couldn’t go. 

Well, here I am.  And all of you are about to embark upon your journeys, your adventures.  I’m jealous.  (or envious – again, you figure it out).  Can I go?  Wait?  Me.  I won’t pee on the floor.  But, unlike Mickey, I know.  I can’t go.  It’s your turn.  You must leave. 

The only thing that I can ask, in the spirit of Mickey (he died a few years ago), is “please – if you’re going to leave me.  If you’re going to force me to go through this trauma.. then please, please… Don’t eat at MacDonald’s.  Don’t sit in a cubicle for the rest of your life.  Find your passion.  Follow your dream.  Don’t be afraid.  Don’t live by the measurements of others.  Create your own sense of purpose and achieve it.

And, don’t forget.  I can’t sit on that bench by the window too long.  I’ve got to be let out.  So please let me know what you’re doing.  Stay in touch.  Share your battle stories with me.  I do want to hear.  And, most of all, enjoy the trip and bon voyage.

Thank you.

But wait.  There’s more.  Tomorrow, you will be getting your formal certificate from Babson (that is all except for 3 of you, and you know who you are), but today,  I’d like for to take the Bobson oath.  Please rise, raise either hand or foot and repeat after me:

I, state your name, being of sound mind, do solemnly swear that I shall conduct my life with integrity I shall keep away from creeps I shall clean up any mess that I make I shall create my own crooked path in life And I will not write it down first I will remain curious, but most importantly unafraid ..buck buck buck and I will buy a boat left parenthesis motor close parenthesis and invite Bob for a ride So help me bob – (say that with more pleading) SO, HELP ME BOB.. AMEN

You may be seated, thank you.

The latest Supreme Court Decision

Like many others who noticed the latest Supreme Court decision concerning the ability of corporations to fund political campaigns I wonder if this was good for our country? Some time ago, I read a book called: Why Socrates Died? written by Robin Waterfield, a British historian.

If I correctly understood what I read, Socrates was disappointed in the political process of the day, namely DEMOCRACY. He had grown tired of living in a society where the uninformed rabble made the decisions. Back at that time, a group called the Sophists were formed. They had figured out that when decisions are being made by unintelligent mobs, it was possible through strong oratory skills that had nothing to do with the fundamental truth to carry the vote through oration (or what I will refer to as “advertising”). As such, they would sell their influence and training to be influential to anyone who could afford it. And, as a result, trials and political decisions were being carried by oration, or more precisely by money.

Socrates was accused of corrupting the youth of his day. And, while some thought that he was put to death because of his sexual preferences, it was, as the author points out, his political views that were more dangerous to the ruling powers. But, what in fact did he stand for? If his goal was to support the revolution by the oligarchs, who were better educated and richer, wouldn’t it in fact have had the same outcome, specifically that political power would be concentrated in the hands of a few. He did believe that there were underlying truths that should drive decisions, and that it should not be simply the capricious whim of the rabble, but I suspect that he believed that a “ruling class” that was benevolent and well educated would be better suited to enforcing the “truth” as opposed to counting on the analysis by a drunken mob.

Well, when I thought about it, what was funny to me was that both processes ended up in the same place: the power to influence decisions was in the hands of the rich and well educated. Whether you did it through sophism or through revolution didn’t really matter (except revolutions often kill people). The key then, and now, is the integrity of the leadership and its respect for “the truth.”

So here we are 2500 years later. The adults, just like back then, are complaining about the music of the kids and the way that they wear their hair. And, the political process is decided by money. The only difference is that we’ve changed the name of the influential group from “the sophists” to “the advertising agencies.” And, nobody died in the revolution.

So where does this leave us?

My conclusions are: Socrates was basically right, sophism or advertising can be used to manipulate democracy with money. The key is how to make sure that the ruling class (the elected few) have the best intentions to serving the common good as possible. It’s not counting on the voting process. We’ve seen that this just doesn’t work. Karl Rove and the sophists were identical.

I don’t know the answer, but I suspect that if over 2500 years it hasn’t evolved, possibly it doesn’t exist. (There, I got evolution into the argument). It is apparent that large corporations whose only goals are to increase profits have demonstrated frequently that they will sacrifice people to their goals and use advertising in apolitical ways to accomplish those goals. The best example being the tobacco industry. So it’s clear that putting advertising power into the hands of corporations for political decisions is not aligned with the common good. But, I see no real difference between putting the power into the cold hands of corporations versus the cold hands of some billionaire who made his (or her) money appearing nude on television. Neither meets the intended goal.

I suspect that the most satisfying answer will be to create a “test” for leadership. A demonstration of their ability (or tendency) to act towards the common good in ways that are fair and just along with a basic level of education and brains that suggests that they are capable of performing the task of serving in the role of leadership. Gosh, we even have a test for people who work in a hair salon. Why not the Senate? Then, there’s no advertising allowed. None at all. The test scores and resumes are distributed over the Internet. We read, and we vote. Oh one last thing. The only ones who can vote have also passed a test.

Again, what’s interesting to me is that while advertising is more effective than sophism it is only in its reach through media. This is in fact no real difference since in the time of Athens the population was small enough to fit into one city, today it covers the country. The effect is identical – 51% of the vote.

Entrepreneurship and Chess

I continue my thinking about the value of business education, the influence of random events and the value of business planning on entrepreneurial endeavors. Here’s my latest thought. Running a small business can be compared to playing chess. Good players are constantly thinking many moves ahead; the better the player, the further into the future they can envision. They understand that as soon as the opponent makes their next move, most of the prior analysis is discarded and a new round of analysis begins. As well, they also understand broad strategic goals that might include the relative value of pieces and territories of the board. And finally, they clearly understand the rules of battle and the more experience they gather; the more likely they will be able to anticipate likely outcomes.

For entrepreneurial ventures I have never been a fan of the writing of lengthy business plans. Recently, an article in the business section of the Times discussed that most venture capitalists don’t even bother to read the plans. My reasons have been twofold. First, the author of the plan tends to fall too deeply in love with it and as a result, less open to alternative strategies. Second, as in my chess example above, the plan is usually obsolete after the opponent’s first move.

In entrepreneurial ventures one’s chess opponent can be considered to be the actions of all of the external influences under which one has no or limited control. These include the market, the customers, the employees, the vendors and even the basic product technology. All are constantly pushing the reality of the plan in a variety of directions that are sometimes expected and sometimes not.

As I have stated in prior entries, I’m convinced that the short term strategic goals of small entrepreneurial ventures must be first and foremost simply survival. As such, the winds of market influences can easily, and most often do, drive a company to radical departures from its intended direction. Flexibility is the key attribute of management; constantly looking to convert opportunities into cash flow.

Lynn's New Website

Take a look at Lynn's new website which features her most recent artistic creations - animals from junk. http://www.lynn.caspegroup.com

My Thoughts about Teaching Business to MBAs

Teaching Business to MBAs

When I was in school, quite a long time ago, and studying engineering, I was struck by how “out of date” the technology that my school had seemed to be.  My electronics courses were focused on DC motors and vacuum tubes instead of transistors and computers.  But, in defense of my school, NYU, as an engineering student, I was taught that it wasn’t about the specific technology but rather about the methods that an engineer learned to use when approaching problems.

In fact, in my school, engineers weren’t required to declare their major (for example as electrical engineering versus mechanical engineering) until their junior year on the premise that the fundamental mathematics and problem solving methods as well as a basic introduction to every specialty in engineering was required regardless of your eventual field of specialization.  Thus, even though one can think of engineering as a vocation, much like auto repair, my school, tended to focus on the academic qualities of learning and less on the vocational skills that students might acquire.

When I graduated, my first job, and the first week on the job, threw me into a subspecialty for which I was ill prepared, the design (and repair) of one-of-a-kind signal processing computers developed for the government, but, in spite of my lack of exposure while in school to these systems, I seemed to flourish on the job, potentially using my learned scientific methods, or maybe just using my native curiosity and talent.  We’ll never know.

Now I teach at Babson’s MBA program.  And, as an adjunct who has never gone to business school, I am ill equipped to teach with the Socratic methods based upon case studies that I never learned myself.  Like other adjuncts that are described in academic circles as PQ or Professionally Qualified, I bring to my teaching a more vocational or practical understanding of business from the perspective of having done it rather than study it.

The feedback that I get from some of my students often leads me to believe that they enjoy the more practical and less theoretical approach to understanding business.  In their desire to start their own businesses, they seek fundamental rules and methods that they can use now and the hope that my practical experience and history can offer them some insight into finding their own way.

I have spent some time thinking about whether teaching business is more like teaching engineering in that it has both a vocational and theoretical basis of understanding that one can use as an approach to understanding it and problem solving.  I question both the correct balance of these two alternative approaches and as well, the issue of whether a better fundamental rounding in mathematics and the sciences would serve the entrepreneur better in their pursuit of business success.

Defining Entrepreneurship

I was often amused at how many times at Babson I sat and listened to my colleagues attempt to define exactly what “entrepreneurship” is.  At this point we have “big E” entrepreneurship and “little E” entrepreneurship.  I’m so confused that my head is spinning.

When I teach marketing to aspiring entrepreneurs one of the points that I attempt to make is that key to marketing is to understand the concept of “value” but, it’s not about your definition of “value” that’s important, but rather the customer’s definition.  If we apply the same rule to entrepreneurship, then it’s not our definition, but rather the definition of our students.

My students, who of course, are self selected to take my course and as such are either completely lost or, more likely, have an immediate desire to start their own businesses seem to define entrepreneurship education as the pursuit of the set of skills necessary to increase the likelihood that their fledgling businesses will succeed. 

And, we must keep in mind that their businesses are virtually all starting from zero.  Thus the lessons learned that relate to success in larger organizations are potentially irrelevant and at worse distracting to them.  In general, I find that their essential questions are:

·         What should I do first?

·         How do I create a corporation and what kind should I use?

·         How do I survive the first year?

·         How do I increase my likelihood of success?

·         How do I attract and hold good people (how should I use stock options)?

·         How do I find a product to make if I can’t think of one myself?

·         How do I find capital and what should I give away for it?

I tell them all on the first day of my class that their biggest problem is simply conquering their own fear of the unknown.  Millions of small businesses were started without MBA certificates.  I ask them: what it is that they’re really waiting for?  What nugget of information will enable them to finally start?

The role for Vocational Teaching

One of the many questions that I am attempting to better understand is: what is the proper role for the development of practical skills versus theory when attempting to address these initial concerns?

In my 35 years of running small companies, whenever I found the need to have an employee learn a new skill, like a new programming language, I discovered that the best way for them to learn was to throw them into a real project where only the acquisition of the skill would enable them to succeed.  As well, the most successful, would try to learn the least and simply borrow from others what was needed to accomplish the task, all along absorbing the fundamental skills and understanding of the new language.

The acquisition of a new programming skill would therefore teach two fundamental skills, most obviously, the new language, but, of more general value, the technique involved in seeking out the specific answers to immediate questions that are needed to meet the defined goal.

As an excellent example of this, I recently took on the task of helping one of my former students by designing her website for her.  To do the job I needed to refresh my skills in programming in 4 languages: html, PHP, MYSQL, and Javascript.  While I had some exposure to each, I was nowhere near proficient.  The method that I used to write the needed programs was mostly to use Google to search for help with queries in the form of “javascript calendar popup example.”  With this technique I was able to quickly find snippets of code written by others, and offered up for free on the Internet.  In time, I pasted the snippets together and began to absorb the rules and syntax of each language.

Probably the best example of a vocational skill that would seem misplaced in an intellectual environment would be to learn to use a specific computer software tool such as video editing or to learn to use Ad-Words to build an Internet advertising campaign.  Both represent a fleeting skill that will likely be obsolete quickly.  Yet, becoming skilled with both can provide a framework for understanding that might serve as a bridge to other technologies or future versions of the same technology.  I know from practical experience that students desperately want to acquire these short term skills since they see their desire to start their own businesses as a short term obsession for which tools are needed NOW.

And, in a more practical sense, if we measure our success in training future business leaders, then arming our students with practical skills today may lead to measurable results in leading to earlier business success.

Attempting to Keep Pace with Technology

Ray Kurzweil, in his book “The Singularity” talks about the effect of the ever increasing rate of change of technology.   For my generation, the television slowly took over for my parent’s radio, and color cinemascope with surround-sound replaced their silent movies.  But, the changes occurred over many years and afforded us the opportunity to gradually change our fundamental methods of living and working.  Even so, the generational gap between our parents and us might have been deeper than they had experienced with their own parents for whom the technological change was of less impact. 

Today, there is a technological gap between my MBA students and my undergraduates.  The rate of change of technology is becoming so fast that within a few years, one’s basic constructs are being challenged.  One hundred years ago, to say “I just spoke to Frank” might imply that you were with Frank in person, while today it might imply a text message, or a tweet.  Social structures are changing at a pace never before experienced.

In many cases, business opportunities are born from the changes that technology has on preexisting business structures.  The minicomputer replaced the mainframe, the desktop replaced the mini and today the cell phone replaces the desktop.

Even the adjuncts like me who have been in business for the last 35 years are quickly falling behind the times in understanding the new business models that are emerging as a result of technological change.  It becomes ever more difficult to teach vocational skills if one’s own vocational skills are obsolete. 

This leads therefore to two questions: 

·         How important is it to teach vocational skills? 

·         How does one create an environment where the relevant vocational skills of today are brought into the classroom?

The Case Study Method of Teaching

For many reasons, I am probably the least likely person that one might ask for an opinion on the value of the case study method.  Nonetheless, I have developed certain opinions and biases.  In some ways, the case study method attempts to sidestep the question of technical relevance by assuming that there are fundamental business truths that can be learned from examining prior businesses. 

Most recently, for example, one frequently finds comparisons of the current financial crisis to the great depression or to the Dutch tulip industry collapse as attempts to build an understanding of how to forecast the future based upon the past.  There clearly seem to be cases for which this would be true and thus building an understanding of prior businesses should be helpful in developing the skills needed to find success today.  Nonetheless, I have several problems with case studies.  Allow me to list them:

Problem 1: Relevance.

I feel that the currently popular method of case study teaching seems rooted in an oxymoronic dilemma: The businesses that are willing to display their innermost thoughts and weaknesses are by definition old and irrelevant.  Often their business models are based upon assumptions that are no longer true and their methods for marketing are no longer relevant.  More contemporary businesses seek to more closely hold their private information and are unwilling to become case study targets.

Problem 2: Not Entertaining.

Most of the case studies that I have read, read like cheap novels.  They typically start with some poorly written drivel like: “John was staring out at the fallen leaves and considering his next move on this brusque autumn day.”    Yikes.   Our students are all consumers of media of all forms: TV, movies, books, radio, etc.  And, by their very experience they have become critics of media quality.  If it’s bad it’s bad and it’s not going to hold their attention.

Case writing is storytelling and storytelling can be good or bad.  Unfortunately, most cases are just bad stories.

Problem 3: Missing an Ending.

Cases present the problems but, based upon the Socratic methods, offer no solutions.  There’s an assumption that there is no right and wrong answer.  My experience in business is quite to the contrary and I have stumbled on too many wrong answers to not care.  There must be a role for teaching the right analysis and answer, much as in the basic sciences.

I’ve also tended to find that the entrepreneurs who have experienced problems and either been conquered by them, or conquered them, have strong opinions about what works and what doesn’t and they need to have a voice in the case study process.

Opportunity

There is an opportunity in my opinion bring the case study method up to date.  I would suggest that we merge the documentary video storytelling style with case study goals.  I would also suggest that we focus on Babson spinoffs exclusively since we would have a higher likelihood of having a “peek” at their innermost workings.

My preference would be to create a new course which would have around 30 students all interested in creating documentary video case studies as a group.  This group would shoot raw footage during most of the semester.  Some would be saved for future classes and some would be assembled into coherent “stories” from the footage.  I believe that the storyline for any one company wouldn’t even be obvious until after one collected lots of footage and saw how the company progressed.

Internet Learning

One of my former students said to me that “education is really driven by two different objectives:  Certification and knowledge.”  Certification is useful for getting a better job, while knowledge may be useful for reaching another objective entirely especially within the context of entrepreneurship.

There are thousands of online courses available on every imaginable topic.  Universities are videotaping many of their popular courses and placing them online for free.  ItunesU is a good example of the depth of what is available.  Recently I developed an interest in Quantum mechanics (remember that I am an engineer) and started auditing a course taught at Stanford and offered for free online.  Clearly, my objectives are not to receive a certificate but rather, simply the knowledge.  But, it’s interesting to note that I intentionally chose a “FREE” course as opposed to paying for one.

Yet, while Internet learning would seem to offer many advantages in time management and convenience for the consumer, it also seems that its success is limited in comparison to more conventional forms of education. 

This can be seen as both a problem and an opportunity.  If, for example, the loss of human interaction with teachers and other students is part of the barrier for its success, it would seem that technology could eventually of some solutions to these shortcomings.  It would also seem that there is an opportunity for a school to attempt to lead in this field and develop intellectual property that puts it at a commercial advantage with other schools.

The Value of Brand Certification

That same former student and I discussed the concept of “where certification value comes from?”  Is it possible to simply create one’s own certifications?  There does appear to be a generally accepted methodology to the concept of creating a certification.  First, a committee of “wise men” is assembled.  They are recognized as leaders in the field.  Then, they, quite arbitrarily create a “standard” of proficiency and an exam that tests to that level.  Finally, they print some certificates with the obligatory unreadable signature.  The value of the certificate is associated with the credibility of the brand which can either be “borrowed” from a respectable brand that already exists (for a fee) or can be developed over time.

The ability to create unique and new certifications

This leads to the general question from a marketing perspective of “what is it that people want to buy in the way of continuing education?”  If for example, there are a large pool of potential customers for whom a certification, albeit a new one, with lesser value than an MBA, along with a lower cost, lower investment of time that might be consistent with Internet Learning then there might be an opportunity for Babson, with its established brand (especially in entrepreneurship) to exploit that market.

Imagine, for example, a family of courses that were aimed at specific entrepreneurial challenges that were low cost, Internet delivered and also resulted in mini-business certifications that could be used to enhance one’s longer term employment goals (outside of entrepreneurial challenges in the short term).

In most cases, specific vocational training can be found on the Internet already.  For example, training on the use of a specific software tool is often offered by the manufacturer as well as by other firms.  Nonetheless, there is an opportunity for Babson to associate its own brand and quality with a subset of these learning tools.  As well, there is an opportunity through consolidated marketing of this brand to bring customers that are otherwise unreachable.

As well, there are many specific topics for which there are not easily findable online teaching tools, for example, business acquisition, financing, marketing, management and even the most fundamental “how to incorporate” which can be of interest and value in the market.  Many of these can be developed directly from the intellectual property already managed under the Babson brand.

There is also a need to offer these in a variety of languages throughout the world.

Conclusion

Keep in mind that there are not intended to be actual conclusions, but rather a basis for further discussion.  However, I can summarize certain statements with the following:

1.       One needs to establish a clearer role for vocational and tool training as part of the educational process for entrepreneurs.

2.       Case study methods should be brought up to date and there is an opportunity for Babson to lead the market in the creation of video documentary style case studies.

3.       There is an opportunity to develop new Internet tools for enhancing the value of Internet teaching

4.       There is an opportunity to create new, lower cost, certifications and matching programs that are tailored to small company development.

5.       There is an opportunity to aggregate preexisting Internet training  from other vendors under the Babson brand.

I don’t speak the language

Beth J. Harpaz, columnist for the Associated Press, when referring to her teenage kids wrote: “I do not know the customs and cannot speak the language.”

In his book called “The Singularity,” Ray Kurzweil talks about the eventual merger of humans and machines through a process of innovation that is accelerating.  Hundreds of years ago, significant technological innovations might occur every ten years, today they seem to occur daily.  If one believes Ray’s book, then the proper choice for today’s actions might only be to attempt to simply survive until 2050 when our software (our soul and self) can be downloaded into a machine for our immortality.  But, I ask the question: Are there other things that we should be doing?

Related to this I offer two observations:

First, there seems to be a generational gap between my graduate students and my undergrads who are only separated by a few years.  And, second, my students are bringing technological innovations into my class that I’ve never heard of and yet, I considered myself a techie.

In general, technological innovation has led to business opportunity.  Entrepreneurship is to a great extent based upon observing these discontinuities that are offered by technical advancement.  The important question for business today is: If it’s true that significant innovative steps are occurring at rates never before seen, how can they stay contemporary and in touch with new technologies and the needs and wants of new demographic groups?

Again, 100 years ago, a shift, for example, from domestic manufacturing to offshore manufacturing was an innovative step for which companies had 50 years to adapt.  (Still some didn’t.)  Today, they may only have a year to adapt.  Tomorrow, maybe only a week.

I offer the following solution/observation.  Businesses and schools need to learn to communicate better at younger ages of students.  For example, high school students need to be working and contributing to companies in a way that would have seemed absurd a few short years ago.  They need to be teaching the businesses what the new culture and new language rules are and what the new technological landscape looks like and how it will affect their businesses.

Businesses can no longer wait to absorb, for example, “Social Networking” into their lexicon of tools.  They must figure out how to “Tweet” and relate to a population that has a completely new set of tools and values to offer.

Business schools, like Babson, where I work, also need to rethink their approach to business education.

The Parental Voice and Entrepreneurship

In his book “Predictably Irrational,” Dan Ariely, a professor at MIT’s Sloan school describes an experiment that he performed.  He gave three classes three different choices regarding their required assignments for class.  Each class was given three written exams that needed to be submitted over the course of the semester. 

The first class was given until the last day of the class to submit all three, with the warning that leaving them all until the last minute was unwise. 

The second class was given a structured schedule with a penalty of a 1% deduction for each day late where the schedule was the end of first, second and third month of the semester respectively. 

The third class was given the choice of setting their own individual schedule, any three dates that they liked, so long as all there were before the end of the semester.  As with the second group, late papers were penalized 1% per day.  Once the dates were selected, they could not be altered.  Obviously, a student could voluntarily select the last day of the semester for all three, but if a student felt that they tended to procrastinate, then they could arrange for their own deadlines and provide their own targets for performance.

Dan found that the first class did the worst, the second the best, and the third somewhere between.  His conclusion is that many of us perform better when there is structure imposed from above, which he called the “Parental Voice.”

While Dan and I both teach marketing in a business school, we differ on the lesson learned from his experiment.  My students are all self selected for being entrepreneurs.  They all would like to start and manage their own businesses.  My own experience is that part of entrepreneurship is to learn to operate and find success in an unstructured environment.  There is no “Parental Voice” when you’re running your own business.

Each semester, my students are asked to grade me as their instructor and often I receive the negative feedback that they wish that I would provide more structure for them: regular assignments with clearly stated due dates.

Most recently, I was just about to relent and modify my course so that much like Dan’s it would have three papers, with three due dates, however, with the help and guidance of some of my friends, who are not teachers, but do run their own businesses, I’ve decided to stay the course.

Real life in the real world of entrepreneurs requires that you find your own voice of guidance.  It’s not about me playing the role of parent for my students. 

As well, I further tend to disorient my students with my obvious disinterest in the grading system of the school.  My method for assigning grades is predominantly based upon a form that each student fills out which highlights clearly my set of defined measurements for their achievements over the semester, but I leave it to each student to come up with their own grade based upon these criteria.

Again, in my own defense, my understanding of the real life of an entrepreneur is that it is not the measurement by others that is relevant, but rather one’s own sense of accomplishment that is key.  I leave it to my students to find their own motivation, evaluate their own sense of accomplishment and worth.

I have decided to change one aspect of my course, however, I will be having a discussion with them on the first day in order to share with them a better understanding of my goals for them and what the course might entail.  I leave it to them to drop the course if they are uncomfortable with the lack of structure and guidance that they have come to expect from the educational system which is not available in my course.

A Random Walk through Business or Let’s redo the Venture Capital Industry

“The Drunkard’s Walk” by Leonard Mlodinow has had a significant influence on my understanding of small business and entrepreneurship. That phrase has now become the catchphrase of my current MBA Marketing class as everyone is beginning to internalize what its real meaning is. Here’s a synopsis of what I’m teaching:

At business school the professors all teach that process is everything. One needs to perfect an idea, then from the idea, perfect the plan and finally, go out and do it. I’ve discovered that entrepreneurship is just the opposite. In my class, which is frequently one of the last taken by students on their way to an MBA, I suggest that they forget the concepts that they’ve studied for the past year or two and instead approach small business in a completely different way.

Large businesses like General Electric have potentially hundreds of thousands of employees and millions of customers. Every day their destiny is mostly shaped by the shear momentum of the organization. Of course, a major economic shift, as we’re experiencing now, can influence them, but, for the most part, the winds that blow have little overall influence on their day to day success.

Small companies are quite the opposite. Their momentum is infinitely small in comparison. As a result, the random influences around them that occur each day cause wild fluctuations in their performance. For example, the CEO meets a business opportunity by sitting in a fortuitous seat on an airplane, or a snow storm causes the entire engineering staff of one to miss the deadline for a customer.

Several books have been written about our tendency to see patterns where none exist. In “Outliers” Malcolm Gladwell points out how one’s month of birth in Canada can strongly influence their likelihood of being a successful hockey player though a series of connections that are completely rational but difficult to have foreseen. We often improperly credit an individual with an accomplishment that was driven by external forces. Or, many of my students suggest the use of “mouth to mouth” marketing as their preferred choice and show examples of successful use in the past, but importantly, they can’t demonstrate the critical differences between those that succeeded and those that failed.

All of the successful entrepreneurs that I know (at least those with some modesty) are able to retell the apparently random sequence of events that conspired together to cause their success. They also all shared many important qualities of rationality, perseverance, likability, etc. - too many to list here, that also contributed to their success, but without exception, each also could credit “the Gods” for happenstances that were critical.

The key question is: if random occurrences have a significant influence on our likelihood to succeed in small business, is there anything that we can do about it other than to simply hope for luck?

And, the key answer is yes. I’m reminded of the joke, but truth of the following observation. If you want to live to ninety years of age, there’s one thing that you can do that, from an actuarial perspective will vastly increase the odds of living that long. It is, simply, to live to eighty nine! Look at the actuarial tables on line. As we age, our life expectancy extends.

Thus, the critical ingredient to increasing the likelihood of finding success in small business is simply the act of survival. If one cannot determine with any accuracy when the magic moment will occur or which events will conspire to bring us to success, then the only thing that you can be sure of, is that if you go out business before it occurs, you’re dead.

Survival isn’t simply waking up in the morning with the determination to not die. It requires a plan of action that maximizes your likelihood of not being killed. In small business, survival is equivalent to having a break even or positive cash flow. And, cash flow is contingent upon creating transactions that have value and closing deals with customers that yield profit.

Note that it is not demonstrating a specific minimum rate of growth year over year. It is simply surviving. Any real entrepreneur will tell you that it is a combination of the thousands of meetings with customers, vendors, peers, employees and the like that eventually lead to the eureka moments that seed business ideas with the critical sparks that lead to eventual success.

The next important question that I ask is whether our methods for funding small companies lead to a higher or lower likelihood of success. I think that the answer is at this point self evident. If a venture or angel investor presses a company to show year over year growth in the interest of increasing the stock price for attracting future investors, then the pressure that they are applying is the most destructive force that can be applied. It’s that simple.

Venture capital hasn’t been around for that long a time. It’s quite possible that the methods and concepts that have been used are not optimized and I am suggesting that it is time to consider changing them radically. The skill and resources that investors bring to small companies is invaluable. But, as board members and advisors, the investors must change their focus once the investment is made to one of achieving cash flow neutrality as quickly as possible and then to survive and evaluate new opportunities as they become apparent to the fledgling company.

Comments on the economy, weather and gasoline.

I just finished reading Outliers and a few interesting points stuck with me, one of which was that in days of yore our ancestors (in the west) didn’t work anywhere near as hard as we do. They might spend only a few hours a day at work, and then hang for the rest of the day. It is apparent when we look at our US economy (especially before the crash) that only a small percentage of our productivity is required to meet our essential needs and the rest, maybe 70% or more goes into the acquisition of useless crap. Most recently, with the recession, most of us have pulled back from the accumulation of said crap and the net result has been a near global collapse because, among other reasons, the crap manufacturers, located mostly in Asia, now have nothing to do when not building our junk.

It’s indeed an odd place that we have gotten to where most of the consumption of America was of stuff that no one needs and that the entire manufacturing base of the world is busily at work making for us. It seems, however, that with two exceptions, this wouldn’t by itself be a problem. In fact, one can observe that in the past, huge investments of labor went into equally useless stuff, but often in the form of pyramids and cathedrals instead of large flat screen color TVs.

The problems now are first that we are consuming enormous quantities of carbon based fuels in the manufacturing processes and transportation systems and if global warming predictions are accurate, this behavior is not sustainable without the impending collapse of large portions of the world economy through displacement caused by weather changes or rising seas and worse, the political insurrection that will follow.

Second, in the age of the Internet, jet air travel and nuclear weapons, it becomes more easily possible for unhappy residents of our planet in far off lands to make our collective lives miserable right here in the good ole USA. Thus, it appears that we are at a cusp where we will likely need to decide that a radical shift in our consumer spending is needed so that we can reduce carbon usage and invest instead in the equalization of global comfort, education and prosperity if for no other reason, simply our own safety.

How much would (will) each of us pay to stabilize our world and protect it from political insurrection that is the likely outcome of global warming and global poverty and ignorance? Are we willing to forego a piece or two of electronic junk or possibly a Gucci handbag? We must admit that it has gotten silly. Fifteen thousand dollar shower curtains, multiple homes, thousand dollar handbags and shoes; where will it end?

Obama is right. It’s time for a change; a fundamental change in priorities. Count me in.

On the topic of gasoline, I am in a small way a contrarian. There is a tremendous push for us to replace fossil fuels with batteries, wind, and the like. For at least cars, truck and busses, maybe this will someday occur, but there might be a more direct solution and batteries may never achieve the capacity of a tank of gas. Researchers at UCSD (http://www.technologyreview.com/Energy/18582/) demonstrated that it’s possible to create gasoline from CO2 with a substantial amount of energy. Think about it. You burn the fuel in your car, the CO2 travels through the atmosphere to a plant located in the desert and solar power converts the CO2 back to gasoline which is piped back to the gas station and returned to your car. Not a bad solution. Plug up the wells. There’s plenty of gas in the air already. If one considers that solar power is plentiful and can already be gathered with current technology, it isn’t so farfetched to consider enormous plants in the deserts of the US creating both electricity for our grid (more likely a new grid) and gas for our cars.

Consider the following: The total US consumption of power is in the range of 4TW (teraWatts 10**12). Nevada Solar One which was built for around $250M will generate on the order of 100MW (megaWatts 10**6) in an area of around 300 acres which is around 12M Square Feet or ½ square mile. The math yields a need for 40,000 such plants to totally satisfy our power need, occupying an area of 20,000 square miles or a box around 141 Miles on each side – not really that big… at a cost of 10 Trillion dollars – not much money in comparison to our bail outs of banks and insurance companies.

Of course, it's more complicated than that.  The 10 trillion is a capital investment in power generation equipment which generates around 4 teraWatts per year.  Our gasoline consumption is way more expensive than our electric consumption per watt and by itself is around 1 trillion per year.  Now the 10 trillion doesn't look like a bad investment.

My Anguilla Reading List

I’ve just spent 5 weeks in Anguilla with my wife and had a long desired opportunity to spend more time reading.  Here’s my reading list:

John Steinbeck’s “The Grapes of Wrath”

It’s about time that I read this classic.  I enjoyed it.  It gives a marvelous view into early 20^th century America and is relevant today to problems of the underclass.  Definitely recommended.

Bruce Rosenblum and Fred Kuttner’s “Quantum Enigma.”  I really enjoyed this easy approach to quantum mechanics and a bit of history of physics.  As well they explore the connection between consciousnesses and quantum theory.  I’m certain that what they’ve written would be considered controversial in some physics circles but it was an excellent read.

Leonard Mlodinow’s “The Drunkard’s Walk.”  This is a funny, well written history of math developments leading up to a discussion of probability and statistics and how we easily get misled in both.  I’m considering using this as a text in my class.  It’s a superb book.

Robert Pirsig’s “Zen and the art of motorcycle Maintenance.”  I can’t say that I learned a lot about either Zen or repairing motorcycles, but it’s a pleasant story and a bit too much philosophy, especially on the topic of “quality.”  I’m glad that I read it, but I was a bit disappointed.

Last and least was a book on FDR’s first 100 days.  A bit too much detail and not enough strategic discussion.  Sorry I read it.