Ascama & Innovation

What?

The design goal was to create an interface for an existing speech recognition engine that will allow an easy interface with a web service that is running now as DocWrite. This accepts speech from an iPhone and allows a professional on the go to manage the dictation in a secure way. At the same time the service needs to allow an aggressive scaling of the recognition engines.

How?

My first step involved getting knowledgeable about speech recognition.  After having implemented the basics and being able to get a voice file recognized into a text file it became important  to setup the architecture of how to scale and to couple to existing and future services.

I choose the service queue approach with a state machine being the memory of the transaction. As the implementation was running on my local virtual machines, while the data resides on a cloud across the ocean I have focussed on how to spawn services in parallel so that latency didn’t have a impact on performance.

Status

At this moment the local system is fully capable of recognizing voice, train a profile an manage all the things needed and scale aggressively  with very low CPU overhead of less than 1 % in standby and a few % in full load leaving all capacity for data conversion. So from that point of view I’m happy as it seems to be able to scale to the maximum needed recognizer engines. The power of the implementation is in its ability to dynamically increase the number of parallel processes.

Next step is moving the local VMware Fusion implementation to the VM instances running on Amazon’s cloud and work out the limitations of recognizer engines and work on future add-on services. However as soon as the Amazon implementation is stable, the service will go life at apps.docwrite.com.

I’ll keep you posted.

Unfortunately I did that a couple of years ago, when I thought it to be time to spend money earned, in places where it could benefit locals as well as myself over time. The company trusted with the investment unfortunately followed the adagio of the financial world, take profits now and present yourself as a victim when the money runs out. So I learned a lot of how that works, although I had rather not collected that knowledge.

Putting ideas to work

Creating a lot of mental models is nice, without using them for action you don’t make progress. Luckily I ran into colleagues who were looking for ways to bootstrap their idea for developing documentation tools for the professional-on-the-go. In order to be of any use I had to upgrade my skill set with new technology as the service would be provided through cloud computing while the front end would be implemented on an iPhone. The whole approach lines up with one of my earlier articles where I suggested to invest with time and be paid with equity to keep innovation moving. I hope to be able to report in the future that retooling myself did work out. It simply is amazing how you can scale your business down from an operational cost point of view by buying computer power per hour, paying for revision control per month and investing in a computer development system with well integrated communication futures and virtualisation software. This to support iPhone development, combine Windows and Linux servers, have video conferences and one on one sessions of support. It is not that that was new for me, but there is a difference between setting that as a goal for a work environment 10 year ago and now seeing it implemented with a just few of the shelf products ( Imac, iPhone, Xcode,VMware Fusion, Amazon Cloud computing).

Solar Energy through the co-operative

Solar energy in the Netherlands doesn’t make as much progress as it could be as the support is up and down, not like in Germany where the feed-in system grows the solar business rapidly, although the Chinese solar panel are cheaper due to heavy subsidizing and create heavy competition stress in that business. I’m convinced that the local solar industry will survive if we provide it a stable enough market. A new private initiative in the Netherlands has generated a co-operative ”ZonneVogel” (sunbird) that will allow the members to invest in solar energy by bringing enough capital together to finance local solar project. I joined as I believe that diversity and downsizing are elements of a successful future.

In previous articles I have indicated that I’m not on forehand for system A or system B, but in stead that I need to see that a system will work now and in the future, realizing that there is no system that meets those requirements forever. What I’m convinced about though, is that a system these days needs to be judged on its sustainability and of those underlying aspects deals with its ability to handle the input speed. And if it doesn’t handle the input speeds, the input must be limited or the system changed. Sure there is a lot of complexity below that simple statement, but that doesn’t make it less valuable.

Speed applied to the financial system

The financial system e.g.  is capable of moving money so fast from one under served opportunity to the other, that the real world representation of that opportunity cannot keep up. Resulting in a willingness to overpay the value of the opportunity, followed by a rapid change into not wanting to pay the fair value and so killing a great opportunity.  

A great example of this can be found in the solar industry, due to instabilities of expected taxes credits, the growth of PV panels production in 2008 drove beyond the availability of silicon, so its price rose rapidly. And while facilities increased their capacity, the demand suddenly dropped. It can be seen as the hard hand of capitalism, but that doesn’t mean it is healthy and that we shouldn’t try to improve on that mechanism as it benefits only the financial transaction group.

At a higher level it can be seen as money hopping from one place to the other without supporting a sustainable purpose, besides making more money that is not coupled anymore to real world output. And without a real world coupling, money is useless, you cannot eat it, drive with it, although you could construct a shelter with it.

How could it be restored?

An observation I have made before and seen more and more evidence of lately is that many innovations dealing with money and organization aren’t new at all, what is new is the scale of usage and the speed with which these “innovations” have been applied. So maybe there are old “innovations” that would do well, but first let’s redefine the problem as “the inability of the investment money to stick to the opportunity long enough to make it successful”. The logical question is why does it not stick? Looking at high level answers, trust rises to the surface fast, as they say it comes on foot and leaves on horseback.

What is needed for trust?

• Transparency (You need to know what is going on)
• fair control (You want to be able to influence the decision, and share profits)
• Accountability (You want to hold people responsible who have misrepresented facts and action)

Like it or not the above have not been implemented effectively in the financial system that financed the growth of the economy the last decade. The good news however is that there is an organization, the co-operative,  that has proven to work and support the required trust and could be used again to organize capital and business and direct them towards sustainable growth. The co-operative has been leading to create the industrial and agricultural revolution.   Although a sustainable growth will probably not growth that fast, as an end result it will most likely produce more growth than what we have seen taking into account that what exchange indexes ( DJI, AEX) tell us, we are as far as we were 12-13 years ago, or in other words zero growth since 1996-1997.  A slow growth makes then  more sense.

That is a good question and difficult to answer without knowing details, so I’m going to try to give answers based upon my beliefs and understanding of how to bootstrap. With bootstrap I mean growing from limited means, by iterating fast and by investing the gains into what brought the gain or supports the gain. In other words I want to become part of what brings more than it costs, after of course having put in effort.

My beliefs

• Many businesses are not sustainable and they must become it in order to survive.
• The financial system as we know it has outlived itself. The question is whether to change it or build a new one in parallel, while the old system is kept alive? I’m in favor of the latter approach.
• We must invest in innovation and there are other ways than just putting money in dying structures. As money represents knowledge, labour, energy and materials we could invest them directly in stead of through money, as money goes in a not functioning system and as a result doesn’t get out.
• In the western world there are groups in society that could still live even without getting paid for their efforts directly for a while. If those are without paying jobs, they would be in a position to invest their knowledge and labour for parts of the business that have a future.  

The open source business model

In the closed business models we assumed that if others would know our secret, it would lose its value, despite of that open source software has flourished. So maybe its not so bad to share knowledge, particularly when we now realize that even if you could produce something for free at location A it would still cost money to get it at location B. And when all the cost is incorporated it is obvious that it isn’t wise to concentrate creating activities in one location or service activities in another or governing activities in yet another, every community needs them all in different sizes. Just think about having all the Internet servers in India, it would result in a very unresponsive Internet no matter how big we would make the glass fiber pipes to the continents.

My Action

I’m looking into how to organize the hands and brains that can afford to help organize local companies to become sustainable, not as a free service, but with a delayed payment model. The world has shown many different implementations over the years, think about the early Internet approach where employees and suppliers accepted stocks as payment, the book author that gets paid through royalties when their book is published, the engineering company that gets a small initial funding for a development and later-on receives a percentage of the product sales, etc.  

I’m interested in those that want to participate in the model.

For many years we have all heard the different messages that explained us that it is possible to get a much higher return on investment, than one would expect from the economic growth. Many have probably seen that it worked well for years, and even big institutions applied it. We have heard on the other hand the message from specialist that it isn’t possible. These hide and see games have kept me busy thinking for a long time, like who is right who is wrong, what is the mechanism. With all the information that comes available and one investment scandal after the other it becomes easier to make a simple model that we presented in many different ways. 

The Basics

• Higher return on investment that is based on higher productivity growth isn’t higher risk.
• Higher ROI on low productivity growth is suspicious, probably higher risk.
• Not everyone demands the maximal possible ROI of an investment.
• So there is low cost money available to leverage the still safe high ROI.
• High risk demands a high ROI possibility.

Let me put it in numbers, if the average economic growth is 2%, there are places where the growth is maybe even 10% and others where it close to 0% or even negative. By borrowing money at a locations where the productivity growth is low and a low ROI is accepted and moving it to places where the productivity growth is higher and a higher ROI is the norm good money can be earned. And with leverage extreme money can be earned.

Example: borrow $900 for 3% and use $100 out of your own pocket and invest/lend it out for 7%. That means you would make 7% on your own $100, but also 4% on $900 you don’t have or 43% on your $100. To borrow the $900 you most likely must warrant it with some asset.

So where is the risk?

• If the period for loan and the interests are fixed and the same, there is no risk from that point of view.
• If the currency it is executed in, has a fixed exchange rate, there isn’t a risk either.

In other words, in my mind there is nothing wrong, suspected, or unethical with this approach.

Question is it sustainable? In the long run, I don’t think so, as the more people become aware of this opportunity the more the low rate will be pulled up and the leverage will become 1, meaning, you only get the interest on the money you invest. As more people can be part of it, in effect the same amount of money is available for those high growth location. And as  a result the stream of spending money will slowly cap.

There is however one major effect that needs to be accepted, there needs to sufficient money available to maintain / grow the local community, otherwise you are digging a hole for your local community, so a cap is essential and that can be different than the max possible cap from the investment point of view.

Next Model

The above model was still financed with real earned money from previous productivity growth.  

What if you start to finance the above model with future money (money to be earned, like from stock value, knowing that the value of stock is based upon the future profit of an organization). Then it gets tricky!

• Let’s assume company Smart Money starts  to attract customers that can borrow through them 5 times the money they put in against the low 3% rate. Smart Money has sufficient initial money to attract thousands of customers that see hefty profits at a monthly basis. 
• The company wants to earn from this as well and takes 10% from the 27% profit they generate for their clients and they receive of course the normal low interest of 3% of every $ they lend. That is a hefty premium but still leaves 17% for the customers. 
• With the money Smart Money earns it can borrow money from a bank, as they make a good profit of 5%  on every $ while the cost is 3% and you only need a computer and trust, so a low production cost. The trust you create by living expensive and the high return that is given to the initial customers. In a real implementation such an organization needs to meet a lot standards and satisfy controlling organization, although they all have failed.
• With that magic,  Smart Money shares start to grow in value bringing in cheap money from investors, and with the share value as asset enough cheap money can be borrowed (even more when the shares are traded on a stock exchange) from banks, that are allowed to issue more money than they have. 
• So more money can be invested in the high growth location which grows even faster with money that still needs to be earned.

Oops everyone gets it!

• When in such a situation low interest rises, the profitability of the Smart Money deteriorates fast, so its shares will go down in value, which means the shares don’t cover the bank loan anymore.
• so Smart Money must liquidate its shares, which due to that action depreciate even further. So now Smart Money must use money from shareholders and customers and Smart Money runs into a downwards tail spin evaporating a lot of future money from customers and shareholders.

Conclusion

Models need to be examined for sustainability and tested for extreme cases as through a leverage approach and super fast financial transactions implosions can happen extremely fast, leaving ample time to control the situation. Particularly leveraged systems need to investigate the leverage for sustainability.

Understanding a system.

Before it is possible to work on a resolution you must understand the system and particularly when a system consists of a number of feedback loops, loops that can reduce or amplify a change to the input of the system. In my technical years the first test for a  junior in the field of electronics was to repair a “simple” power-supply, the approach he or she took was a clear sign of the understanding, as measuring in a feedback system is very difficult unless you understand the effects of the feedback loops very well. In general it is difficult to distinct between cause and effect. The technical approach was simple cut the feedback loops open and measure the system from begin to end. 

Let’s do that with our market driven system.

• We absolutely know for sure that the early inhabitants made things for comforting their daily living, by eating what nature offered and making housing and tools from materials nature provided.
• After that we started to manage food production and created buffers for when there was less food. We created more efficient tools, better housing, energy products and created ways of transportation.
• The surplus in food, tools, energy products and housing was our buffer that we could use to manage our  energy, temperature, transport and innovation.
• A day we invented that it was possible to convert that surplus into money and use that to overcome periods where the effort had not resulted yet into new productivity of food and things.
• Then we industrialised our tools and transportation by building machines fed with cheap energy
• In a next step computer automated our manual transaction system and allows us to do them fast for limited cost
• We connected the world allowing information and money transactions to go very fast across the world
• Unfortunately the managers of our surplus, financial community,  thought that their service was the productivity of the system itself and started to think along those lines, making enormous big swings in change possible, as it is very simple to transfer billions of dollars or euros from one activity to another overnight. Having this mechanism is great for starting things but as we have all seen disastrous when it grows beyond a certain size.
• I can remember myself saying “it is time my money starts to work for me” (something every pensioner expects), this however can only be true if the majority of people stay in the production cycle as without them money isn’t worth a dime.

So what are the misconceptions?

1. Money is the driver of productivity.
   Wrong, money bridges the periods of non productivity, it represents previous productivity (when saved) and future productivity (when borowed).
2. The market mechanism is the efficient system.
   Wrong, the market mechanism allows fast execution but the preference of the money lenders determines for what purpose the money will be used. So if there is no long term money, there will be no long term targets addressed. 
3. The governments can replace the market. 
   Wrong, they can create long term goals and as such create long term market stability which will allow entrepreneurs to get their ideas financed, a perfect example is the German Feed in Tariff law for sustainable energy. 
4. Big or more is better.
   Wrong, if you don’t have e.g. enough food, then more is better, however if you already have sufficient food to cover calorie usage and maintain your body, more food is disastrous for the individual. So most natural processes have an optimum size and this also goes for company size and transactions. If however a process is sustainable one can have more of them without problem
5. The financial world knows best how to repair the system.
   Wrong, they know best how to keep the system working for them. The outsiders have to reset the rules and determine what their added value should be, within that definition the financial world knows best how to implement such a newly defined role efficiently. 

What can we do to bootstrap out of misery?  

We need to start at the beginning of the cycle and focus on making the basic requirement sustainable in a Cradle to Cradle principle. This means that we accept that we do not get more water, air, minerals and get more or less a fixed daily amount of energy, so that when we convert them, we can feed them back and use them the next time. Edward the Bono once handed a very simple solution by stating that when you would be required by law to use  your dumped water, you would really be interested not to dump toxins in it.  This thinking could accelerate progress very fast.

1. Every business can focus on that principle and accept that we have to do that anyway and the faster we do it the faster we are more competitive and use as much capacity as available , that isn’t needed for production, assuming that the products/services that particular business produces are needed when the economy recovers.  So start with converting the energy consumption into sustainable energy.
2. Create new transparent banks that focus on providing money for let’s say 
   sustainable transportation
   sustainable energy production
   sustainable food production
3. Create a value system for innovation, as good ideas are not lost.
4. Governments must create stability for sustainable targets.
5. Re size the business to its right size and location, as a result you don’t need the big banks and it becomes easier to attract local money.
6. Make sure no money is being spent on doing nothing.
7. Just think about what a freeze of interest (extend the total period to compensate) could do, if we all have to live with less income for one or two years to allow de-leveraging of the financial system. 

More aspects today are inter-related then maybe expected

Over and over again I read in the media “surprising” statements like “the statistical risk analysis for the financial products doesn’t hold”, “PV manufacturers dump toxic production waste !”, “outsourcing production affects the design business !”. So has anything changed lately?

Uh, Yes and No. No the the underlying issues were there for quite some time and Yes we didn’t pay attention till they hit us.

Q: So why are they hitting us now and not before?
A: Through a change in communication and speed of information distribution, heavily influenced by Internet, and growing size, the underlying models became ineffective and made the negative effects visible.

Example: “the statistical risk for financial products doesn’t hold”

Particularly for statistics the relationship between the individual transactions and assets is important, with a correlation of zero a nice statistical approach can be taken. And a low risk is established by combining e.g. a number  of mortgages together and by spreading the mortgages over region and type and then making x individual contracts out of those. Let’s say there is 0.1% chance an individual mortgage can’t be paid any more and that it creates a 30% loss on that value. If one would buy such a contract that had 1 mortgage the risk of failure would be low, but the impact when it goes wrong would be high. Now take a contract with 10 chopped mortgages, 10 buyers would have a higher chance on failure (10 times as high) and still low (1%),  however the impact would be reduced by the same factor and be very acceptable (3%). So all good and well as long as the behavior of the owners of those contracts don’t ruin the statistical behavior of the underlying contracts.

When few buyers and sellers start to copy each other’s  behavior by first buying in high volume these contracts, it drives up the price without the underlying assets becoming worth more, this increases the impact risk by failure. Due to the high volume distributed over a limited number of buyers, the increased risk will show up faster. If then a few owners start to sell the contracts because they recognise the growing risk, due to mortgage payment problems, this could trigger in a short notice every owners to start  selling off their contracts. In theory this should make it interesting for other buyers, as the lowering price reduces the risk impact, however the sellers and buyers are from the same group and act like a group, so there are NO buyers, resulting into a melt down.

In other words a nice statistical risk spread product in combination with a market behavior with a positive feedback loop creates a system that grows bigger than healthy and which implodes faster than one can imagine, although it isn’t sure when a trigger will be strong enough to let that happen.

Example: “PV manufacturers dump toxic production waste”

This is more true in developing nations, simply because society there has less experience with the life cycle of industrialising. The developed nations have had their share of toxic wast disasters and had to spend a lot of  learning money to correct  and avoid the implications. If that cost of learning isn’t taken into consideration when moving production to other places the total production cost will be wrongly compared and the price has to be paid one day or another.

Example: “Outsourcing production affects design business !” 

Market economy advocates that production needs to be done where the cost is lowest, which makes sense if all the cost is considered. Unfortunately this hardly ever is the case. By eliminating e.g. production in one place and thinking that the creative design part can be kept is foolish. Simply because every nation will want to climb the food-chain as high as possible and by doing a lot of production you get ideas about how to do it better and will want to design products. Economies that lost their production capabilities, will also step by step loose their edge in design with respect to how to produce it optimally. Particularly when profit is part of the economic system and cost is handed over to society, it is easy to create the wrong trade-offs.

The above examples indicate different aspects of the consequences of not thinking through the full system. That’s why I believe that the “Think Global” approach is needed so that the whole system is taken into consideration, to assure sufficient stabilizing negative feedback loops (e.g. the more money you want to borrow above a certain level, the more expensive it gets, the bigger the manufacturing plant the more costly). The “Act Local” part assures that there is sufficient diversity in the implementation of where to act. The Internet makes it possible to establish dynamic virtual organizations that create designs and solutions that can be re-produced locally in smaller production facilities that allow smarter usage of resources. Smaller production units can work with smaller financial institution and create smaller risks. As a rule of thumb, the bigger the object the more important it is to produce it local to where it is needed.

Areas of short term importance

• Energy must become much more decentralised and sustainable, this is possible with the German definition of Feed In Tariff  (So every government can use the German model as it is the best available see, so start there and improve on it).
• Transportation must become sustainable, Israel has a very effective plan to achieve, could be copied for local usage. Moving to electric transportation makes most sense.
• Energy neutral houses and buildings can be built for the same cost as traditional houses by using smarter system thinking and produce local building blocks  see.
• Water should be heavily recycled locally as there is no new source, also the drink-water system is a safety risk due to is central production, anything could happen after it has been purified, while bottled water is redicoulously expensive and inefficient way (every Internet connection these days has a firewall for intruders, but the water supply is without one)

So all great opportunities for new infra structure business.

Why aren’t there more Electric Cars for Sale?

Many articles show over and over new designs, new intentions, great ideas, however it is still close to impossible to buy an electric car besides a few old approach hybrids. I’m not the person to dig into conspiracy theories, I’m more interested in following the money and understand the impact a change would have. Conspiracy or not nobody is interested in losing their job due to change and the car industry is a major employer with an incredible supply chain from all around the world. It further is still using the in my eyes old “BIG is better approach”, so a change in production in a US car manufacturer or European car manufacturer is felt even at industries in the Netherlands that provide bolts, paint or engine blocks just to name a few connections. In order to increase the number of electric cars we need to know what the impact would be and try to manage the impact of the transition.

The basics

In a combustion engine a big engine with many cylinder’s and many liters represent a comfortable driving as there is a high torque at low rpms. 
An electric engine however has always the highest torque at low rpms, without losing much at higher rpms and having a powerful electric engine doesn’t translate into a low mileage when the power is used in a conservative way. At constant speed the big electric engine does hardly use more energy than a less powerful electric engine. So the bigger engine can be used for a higher top speed and also for higher torque.  
High torque however relates to high current and that means the source must be able to deliver high current. Chemical storage units, like batteries are often limited by their power, more power mostly requires more capacity.  Capacitors on the other hand have relative high power, but are more limited by their capacity when taking weight and volume into consideration.  So in order to use the maximal power of the engine a big battery capacity is needed or a combination of batteries and capacitors or other source (e.g. new ulta capacitors). 

What would change for the Car Salesman?

The story needs to become different, you don’t need such a big hp engine to get good torque, but you need to be able to pull sufficient power from your storage system. With respect to the hybrid story, old style hybrid approach is parallel and allows most experience to be used from building internal combustion engines (ice) cars. A series hybrid, where a small ice drives a generator  electricity (or fuel cell) and the wheel are driving by electricity, is the more efficient approach and allows simplification of car design. This however retires a lot of knowledge, car companies have invested in. When also in-wheel motors are used to drive the car the complete mechanical construction simplifies and many features move from hardware to software (think about e.g. driving a curve where wheels get a different speed to tighten the curve). Further an electric engine would be able to drive more miles in total, so a car could be driven longer. 

What would change  for the Car Dealership?

Electric driven cars need much less maintenance, so income from preventive and corrective maintenance will lower significantly and the more simplified the car design the more maintenance income will be lost.

What would change for the Car Manufacturer?

As indicated in the section for the salesman, when the manufacturer chooses the most efficient design it will have to write-off a lot of its production capabilities and knowledge. So likely the transition will be stretched depending upon competition of newcomers, to minimise the loss.  Any efficiency opportunity for the ICE will be used to safeguard the investments, so the ICE designed cars will get their continuous improvements in efficiency but a full turnover will take time.  A number will start to invest in new storage sources(Nissan Renault, Toyota)  and create start-up companies to develop electric cars. But unless they find replacing products for their old capabilities the transition will be slow.

What would change for the Supply Chain?

A number of product types in the mechanical sector will simply disappear, but also new products will emerge, so more or less a zero-sum game change, where the focus will initially be on making all parts more energy efficient and finding ways to recover energy (e.g. just compare mobile electronics with those in a car).

New entrants

There are basically 2 new types of entrants, those that produce small production scale innovative designs and those that combine that with a “Think Global Act Local” production business model. The second group will become the competitor of the old industry as they can achieve economy of scale through combined design, homologation and purchase power  with a franchise like local production approach. In the latter business model I also see opportunities for combining the free capacity in the maintenance sector and conversion of  existing luxury ICE  cars and SUV’s in electric plug-in version with a range extender (small ICE acting as generator).

The real breakthrough needs to come from rethinking the car as mean of transportation, could it not be designed smarter, why must an integrated navigation cost $3000 while a standalone cost $300 or less. Why do we need miles of copper wire to control a zillion of buttons, switches and interfaces, why do we need so much heating and cooling to keep the interior comfortable temperature wise, why do we redesign cars completely, for a cost so that many need to be sold to make a profit?

The answer although simple “because consumers accept it” could also be reversed when new entrants offer alternatives. It is my hope that the “Think Global Act Local” business model will soon hold as it would reduce the liability of big companies drastically and would stabilize the economy (http://www.mdi.lu/english/concept.php).

The Impossible makes you Think

In the early eighties I got confronted with a desire to build a CPU based gift that had to run for a year on 4 AA batteries. A quick calculation revealed that my desire was off by 100,000% with the reality of the available standard components. The CPU needed 1000 times more energy than the average available.

So what do you do? You re-asses your assumptions

Did the gift had to be powered continuously?. The answer was yes and no. The display with some logic had to be running all the time, luckily that part needed very little current. And the CPU could be shut down as in average it only needed about 1/000 of second running software every second . So the resolution was simple shut off the CPU most of the time and restart it every 0.5 second, to achive a sufficient smooth response. A mechanism that is pretty normal these days in portable electronics. While a part of the electronics was powered all the time, the power consuming CPU had to be isolated properly to avoid leakage currents through the CPU. Those leakage current were initially so high that all available power was consumed. After a weekend of tinkering the leakage was down a factor of 20, so 5% of the available current was lost due to leakage, now leaving 95% for powering the CPU for a reduced time to satisfy the needed SW routines to do their job. 

In general it is stil possible to sell an initial idea that is off by 10- 50% of the state of practice as an realistic alternative , however when something is off as much as 100,000% it is in general seen as unrealistic, keep dreaming on . The above low tech example however shows that there are probably more assumptions that could be outdated than we realize. Just think how little power your brains use to manage the same amount of data as the fastest super computer today, although the latter can do many data handling much faster, you can however still not reason with it. So there must be a way to reduce the power consumption reasoned kwabena Boahen and that motivated him to work on research to develop new ways of managing data (http://www.ted.com/index.php/talks/kwabena_boahen_on_a_computer_that_works_like_the_brain.html). 

What makes us, Humans, different?

Despite the amazing results humans have achieved, there are many species out there that run faster, can fly, swim better, handle more heat or cold, are much stronger, are more flexible etc.
So what sets us apart? We have evolving software and some firmware, which allows us to reorganize, while other species are limited by their firmware to play the role they always did or extinct. With that software we have been able to hide our weaknesses in those area by amplifying our capabilities with external energies and structures. In the developed world we have been able, to a large extend, to replace the need for our physical capabilities or mental repetition for daily production, as there was enough energy in a readily available form, while the developing world is starting to increase their energy usage to achieve the same benefits. The organization however has as a result become so complex that we do not recognize the amazing inefficiencies that we have built into the system any longer.

At one end we move certain production capacity far away as local human capacity is too expensive, but on the other hand we still pay more than 10 times of what it costs. And I’m sure the cost of the product isn’t composed for 100% of human labour, it is probably more like 20% and if that 20% can be done 100 times cheaper the total cannot be built more than 20% cheaper. In other words much more could be gained if the total system could be redesigned as there is often a high ratio between cost price to end-user price. The reality is that change is often built on top of existing mechanisms. And more often than not only the mechanisms are revised and only when disaster happens the whole system is subjected to scrutiny.

The Energy Cost

Although many years experts have been telling that the old way of harvesting energy is running out, in general it is not accepted as a reality, in the month of November the car sales numbers of the US showed that although the Toyota Prius had had the best incremental sales figures for months, that month it had the worst decremental sales figures. The ford F-150 was most successful simply because the energy prices had gone down, although absolutely below sustainability levels. Ripudaman Malhotra, Associate Director of the Chemical Science and Technology Laboratory at SRI International expressed the energy needs in Cubic Miles of Oil (CMO) and showed that when we continue using more energy like we have done we would need another 270 CMO by 2050 while from conventional resources we could likely only get about 85 CMO. Many resources can help e.g. 22,000 CMOs of renewable energy per year are delivered by the sun, so there isn’t an issue from a potential availability point of view. Unfortunately we have not given harvesting that energy enough priority. So redesigning the energy system must have the highest priority as it isn’t done overnight. As a result of that coming shortage, the transport cost we have in the system today, ranging from goods that need to cross the world and people that get daily stuck in traffic jams up to the environmental consequences, create an incentive to subject the energy and production system to scrutiny.

The Labor Cost

Our working model is for a part built on the acceptance that we “wear out” employees to such an extent, that they, while aging, become useless for the productivity process, while they still need money to live.  This means that the money to survive needs to be collected during the shorter active live by the individuasl upfront or by the active working community or a combination of both . When heavy physical activities were the norm and pensioners had only a couple of years to live in average after retirement, this worked from a numbers point of view pretty well. Today however the expectation has changed, so it makes sense to rethink how paying contributions can be redesigned that align with our capabilities over time. In my mind it makes sense to be able to contribute to society and be paid for that during your whole live, as babies and young kids we entertain the broad population (and are they willing to pay !), at puberty we break apart that isn’t well designed (not always appreciated) and as grown-ups we support the production system, while as pensioners we are not expected to add value anymore, so the last two steps should be redesigned.
That should not be equal to extending a rat race. Sustainability should not only be applied to energy and materials and food but also to human smarts. Having the capabilities to perform a lot of labor by using renewable energy combined with supporting structures, the question should be how we organize our smarts. So that we can harvest all ideas and allow them to be converted when needed into products as local as possible to avoid energy waist and avoid toxins in our environment. Such a system will require downscaling of production (nothing in nature has become successful by only scaling up). Often economy of scale is misinterpreted e.g. when it is very complicated and thus expensive to e.g.  move a laser over a layer of fabric to cut it, it is probably more efficient to use multiple layers of fabric to reduce the cost and produce many of the same item. If however this process due to innovation has become low in cost, it could be that individual cutting of fabric to be cheaper and so allowing custom made fashion at whole sale prices. Even going one step further, what if the fabric could be manufactured into the individual shape without cutting?

Redesigning the System

Several businesses have been able to find production methods where the delivery of data merged with the production capability resulted in custom manufacturing for a mass volume price. Looking at the system it could be presented as 

• growing raw material
• + 
• converting material into components 
• + 
• assembling components into products
• =
• Using products
• +
• Retiring products into reusable material

Every step has a energy cost, knowledge cost, organization cost and investment cost. The energy cost depends heavily on the distribution and production approach and how the whole process avoids waist by allowing products to go back to material. The investment cost is strongly related to knowledge and organization, where downscaling helps with reducing the investment.

• That what sets us apart from other living species, knowledge, however has not been captured in an effective value system. There is however a model describing Innovation Economics at http://www.ingenesist.com that could do just that.
• the energy system needs an overhaul to switch to renewable sources
• and computer networks can help us with the organization and allow distributed production to downscale towards the level of customized manufacturing. http://www.ted.com/index.php/talks/paola_antonelli_previews_design_and_the_elastic_mind.html

 

Who loves change?

While preparing myself 20 years ago for working in another country and culture, I decided to inform myself about change/innovation from different angles. Without any doubt this list isn’t complete as it only focuses at the often overlooked aspects, it gives more different point of views than I have read in recently published articles and they are still valid, I think.

• Social communication studies done to explain the failures of adapting innovations in developing countries revealed that it wasn’t that easy to introduce change. It definitely didn’t function in a linear fashion like analyzing the issue, building the vision, and coming up with a plan, informing those about the benefits and then get it done. At that time it was clear that without managing the network in which people participated, the change wouldn’t stick and the penetration would be below the level from which it would spread out (5%), even if the planning was correct and the resources available. The same observations I see these days repeated in articles about project management and innovation. So I wonder how long our incubation time is for “old knowledge” or whether the information just needs to presented in an up-to-date fashion.
• Edward De Bono explained the strength of human mind, as being extremely good at seeing the difference between things that are equal (apple and bananas are both food but different ) and handling different things as equal (apples and bananas although different are both food). Particularly the last aspect doesn’t help with the implementation of change. When people feel they are following the right path, every induced deviation from that path will be worked back into the original direction of the path. In other words small steps of change don’t work when the change direction is different from the original direction. An acceptance of change of direction is needed first, then small or big steps can be applied.
• The old direction can be the result of a wrong interpretation (outdated value system) of the observation or a wrong extrapolation of the situation (wrong scope, smartest student in the class isn’t necessary the smartest of the school or country).
• When systems are implemented to achieve a certain goal, the systems are often translated into rules to follow through the processes. However in order to keep the rules usable they are simplified and underlying assumptions are left out. So over time people will follow the rules thinking that, as long as they do that the system will work. In reality those systems will mostly fail as rules will more and more be used towards their extreme cases, were they are weak.  When using incentive systems most people will find ways to optimize their outcome from the incentives system, so it be better they are well balanced.
• The largest group of a population is absolutely against change, a moderate group is change neutral and only a small group loves change.
• The users of the old approach will be able to better use the advantages of the old approach, while the users of the new approach will be lesser trained in the benefits possibly with bigger impact.
• Externally motivated individuals will rely more on the benefits of the active system, while internally motivated individuals can live with not having benefits yet as long as they can see them at the end of tunnel.     

What to change

From the above list it is clear that a number of aspects need to be changed in order for the change to catch on and stay. Some steps are hard while others are simple and easy.

• Arguments for change need to be created for the different thinking models people have. So the vision fits with all users.
• The network relationship must be used to distribute the arguments of change.
• System rules must be adjusted to make the old way more ineffective and promote the new way.
• Incentives must pull the new approach.
• The network must be used for fixing the bugs, change agents must have the knowledge or tools to make the change work.
• Depending upon the change new believers have to be created that can be the leaders of the mass, new models with rules need to be created with matching incentives.

The hardest steps are those that are involved with updating the individual decision algorithm. As new ways must become the new logic for the individual, this requires the individual to see examples that work and are consistently. And they must be used by those he/she trusts and also bring the individual benefits. And as always… trust leaves on horseback and returns on foot.  

How to change

The following steps are a good guide, knowing that there is a lot of overlap.

• Create a clear shared vision. The social network will have to support this step of creating and accepting the vision
• New ways require new skills. With new skills new opportunities arise.
• With these opportunities change must be pulled with the change of the incentive system that directs towards the new change. E.g. the change of TAX ruling in the Netherlands that lowered the taxation on a hybrid company lease car from 25% to 14% created more hybrid sales than all the reasoning why it would make sense.
• Now the people in the network will start to question their trustees what to do. Having provided those key individuals with the convincing arguments for the different people, they can be heroes by having answers.
• Assure the needed resources as the vision starts to become a reality with a realistic plan. With the new approach/product/service prototyped by internally motivated individuals who love change more skills are created and details collected to further detail the plan for the following stages.
• With the change neutral people the experiments can be shared to improve on the concept.
• Those results are again best distributed through the network.
• To make the new system stable the system should not only be rule based, but also requiring individual testing against the required outcome. So a banker providing a loan should always be convinced that the loan can be paid back independent of the rules that allow a loan to be issued.

With the above generic steps and good project management skills many more complex habit changing innovations will succeed.