Danny Crichton

Economists often talk about ideals - free markets, perfect competition, free movement of labor. They use these ideals as a model to explain phenomena in the real world. One of the important findings discovered in innovation studies is that innovation has a high correlation with open competition and free markets. In short, the ideal environment for innovation is in many ways the ideal environment posited by economists.

But ideal economies are the topic of academic research papers. In the real world, companies, industries and entire countries often work hard to prevent open competition. There are many different facets to this issue. In some cases, there might be a legitimate case for tampering with the free market - for instance, a government penalizing externalities such as pollution. But in other cases, it can be difficult to defend the market intervention.

These issues of protectionism are starting to come to a head in U.S./Korea relations as the on-going legal battle between Samsung and Apple continues over the technology behind their mobile phones. Sunny Yang wrote an editorial in the Joongang Daily blasting the United States and its judicial system for protecting Apple against foreign competition:

It was hardly surprising: A jury in San Jose, California, delivering a one-sided verdict for Apple over Samsung Electronics in a legal battle over smartphone technology. It is the “American style” of doing things when their interests are threatened. It is the yardstick Americans have stuck to in every economic and business battle. Anything that Americans are not tops at is evil and dangerous.

...

To build a country and defend one is not the same work. It is not entirely wrong to claim Americans discovered, invented and created almost every modern cutting-edge technology. They were great builders, but not such good defenders. If they

Yong Zhao had a story earlier this summer about the correlation between entrepreneurship and test scores as measured by the Trends in International Mathematics and Science Study. Based on his statistical research (and really just looking at the darn graphs), there is a distinct negative correlation between the scores on the math section of the TIMMS tests and general entrepreneurship levels as rated by the Kauffman Foundation.

I will accept these numbers as they are. However, I would like to make a handful of observations:

1. It is difficult to use TIMMS to make comparisons between the United States and other countries. South Korea, Norway, and to some extent, Singapore, all benefit from strong central governments with relatively homogenous populations. The United States has this horrible bi-modal skew in its data: while our average performance is fairly low compared to many other industrialized nations, we simultaneously have a lot of top and bottom performers. This nuance is lost when we merely look at averages. This problem of averages also applies to the entrepreneurship ratings as well.

2. As an alternative hypothesis, I would like to emphasize this point when it comes to entrepreneurship - diversity is good. Silicon Valley is one of the most ethnically and linguistically diverse places on Earth. That doesn't mean every group is represented, but as a region (if not in the workforce), this region draws people from around the world. Vivek Wadwha has shown that about 25% of engineering companies are founded by immigrants in the United States. This is interesting in light of the homogeneity of the top countries in terms of test scores.

3. Given this alternative explanation, I think it is healthy to note the reality of the data. These sorts of correlations are interesting, although there are probably a dozen of potential reasons

I promised not to bring up the patent case again, but today's debates infuriate me. Farhad Manjoo, a staff writer at Slate, wrote about the Samsung/Apple patent verdict today. He argues that Samsung is ultimately the final victor in this fight in the greater context of the cell phone industry:

But if you study what’s happened in the mobile industry since 2007, a different moral emerges. It goes like this: Copying works.

Of the three paths open to tech companies in the wake of the iPhone—ignore Apple, out-innovate Apple, or copy Apple—Samsung’s decision has fared best. Yes, Samsung’s copying was amateurish and panicky, and now it will have to pay for its indiscretions. But the costs of patent infringement will fall far short of what Samsung gained by aping Apple. Over the last few years, thanks to its brilliant mimicry, Samsung became a global force in the smartphone business. This verdict will do little to roll back that success.

And for me, the real kicker:

Yes, it was clear that many of Samsung’s ideas weren’t original. But customers don’t care about originality—if they did, Windows wouldn’t have won the PC world, and we’d all be using Friendster instead of Facebook.

Manjoo often writes these contrarian, blog-bait pieces (I guess it works - I am even commenting on it). Robert Scoble, one of the most followed bloggers based in Silicon Valley, had similar thoughts:

I think this is actually a sizable win for Samsung

Why? It only cost $1 billion to become the #2 most profitable mobile company. Remember how much Microsoft paid for Skype? $8 billion. So, for 1/8th of a Skype Samsung took RIM's place and kicked HTC's behind.

Not too bad.

Computer scientists and software engineers, particularly those who specialize in web technologies, are some of the most desirable workers currently in the labor market. Undergraduates from the nation's top schools are starting in the six figures at major corporations, or joining start-ups with significant equity. In many ways, the world is their oyster.

Yet, a number of these graduating engineers are turning their back on the field. Their reasons tell a lot about the current engineering culture in the Valley and the choices companies must make in the coming years to continue to attract and retain top talent.

Within the last few months, more than a dozen of my close friends from Stanford have taken non-engineering jobs with their bachelor's degrees in computer science or other technical disciplines. These aren't washouts - several of them are among the top graduates of their class year. All of them have had internships (or full-time jobs) in the field, and they have effectively sampled the offerings from the most prominent Silicon Valley corporations and start-ups. They seem almost destined to join engineering teams.

Yet, they will be choosing other careers. While they have had diverse experiences, their complaints are largely the same. The most common fear among them is that their skills are getting clustered too closely - that their work rarely lacks any kind of broad thinking. As coders, they are often given small scope to make changes in a large corporation, and they are often left to handle "the technology" at many start-up companies.

While some coders may enjoy the high specialization, others prefer a more broad set of duties. Several of my friends have turned to product management, business development, or finance in order to get this more diverse experience, depending on

Evgeny Morozov remains my favorite critic of technology writing today. His book, Net Effect, is still the gold standard for criticism of Web 2.0 technologies, and the "techno-optimism" that pervades Silicon Valley. One of my largest concerns in the world today is that we have started to frame all problems in terms of technology - rather than in terms of humans, or politics, or really anything else. TED Talks are probably the largest purveyor of that notion today, and its ideology has become one of the main frameworks for thinking about the world today.

Morozov just wrote one of the most damning critiques I have read about this entire ecosystem. Everyone should read this article. Period, full stop Think critically about it, and then start to look at the world around us. I realize that not everyone will read the article, so I picked my top 10 favorite attack lines to summarize it.

The book review focuses mainly on Parag Khanna and his attempt to push his "Hybrid Reality."

Only the rare reader would finish this piece of digito-futuristic nonsense unconvinced that technology is—to borrow a term of art from the philosopher Harry Frankfurt—bullshit.

Describing Khanna's approach:

All of these insights are expressed in linguistic constructions of such absurdity and superficiality (“a world of ever-shifting (d)alliances,” “peer-to-peer micromanufacturing marketplace”) that Niall Ferguson’s “Chimerica” looks elegant and illuminating by comparison.

Summarizing the author's work:

Khanna’s contempt for democracy and human rights aside, he is simply an intellectual impostor, emitting such lethal doses of banalities, inanities, and generalizations that his books ought to carry advisory notices.

On Khanna's Hybrid Reality Institute, which can help companies handle the Singularity:

So far the firm’s main accomplishment

I just finished reading this short interview with Cullen Roche, who has some out-of-mainstream views on current monetary economics. One of his major points concerns the importance of heterodox economics to the current discussion about the global financial system: "Many of the heterodox economists are overlooked though some take extreme political positions which explains why the mainstream shuns them."

This is an unfortunate state of affairs. Most economics departments are still filled with professors trained in the neoclassical economic approach to the economy, which is by far the reigning paradigm in the field. The rigorous exclusion of alternative theorists in economics is, in my humble view, one of the major reasons that few predicted the financial developments of the last year. The only area where some have gotten through is in behavioral economics, although even this sub-field certainly takes neoclassical economics as its core paradigm.

Unfortunately, economics, like venture capital and finance, is an imprecise science. There are techniques and tools that allow us to reduce complex phenomenon into its constituent parts, but it can be difficult to understand the interaction of these different variables. Economics is less mathematical in real life, and far more human. People follow others, get excited, get depressed, and just do irrational things. Unfortunately, I feel that we are going the wrong direction in academic disciplines of guaranteeing a plurality of intellectual viewports.

One of the advantages that Silicon Valley has over other innovation regions is the sheer number of start-ups that are in existence. We have an amazing level of diversity in almost every space, and if a particular approach is not around, entrepreneurs have an opportunity to fill it and potentially have a lucrative exit. In fact, some of the most important corporations here developed from doing

The Christian Science Monitor has an article today on innovation at Samsung in light of the decision in the Apple/Samsung patent case. The newspaper reports that there are increasing calls for Samsung to ditch its fast-follow strategy in lieu for in-house innovation:

Samsung should “stop fighting it,” says James Rooney, chairman and CEO of the Seoul advisory firm Market Force. “It’s time to stop copying others. Samsung would be far better advised not to fight it. To continue fighting it is to give themselves a bad name.”

Despite the massive repercussions that could arise from these rulings, I find this patent litigation tedious and rather boring. These cases always end up being extremely technical, and are usually better windows into the American legal system than any notion of innovation. For instance, there has been controversy that the jury moved too quickly to make a judgment and ignored significant evidence.

My personal prediction has been that Apple and Samsung will settle the case after the judgment, and that was echoed in the CSM article as well:

“They clearly have an enduring relationship,” says Morris. In the end, he believes, Samsung should pay to license Apple intellectual property. “Appeals will be difficult,” he says. “I doubt if they can overturn the outcome.”

This is a logical outcome, but it would be a shame if Samsung failed to take the message of these proceedings to heart. Internal innovation is ultimately more lucrative - the company can sell better products to more customers and build mindshare among consumers as a leading innovative company. To do that though, the company is going to have to adapt, and it so far has shown little willingness to do so.

Let's get philosophical for a second. What is reality? This is an on-going area of debate, dealing with human perception, reasoning and verification. When we see something, is it just us, or is it in the "real world"? Since none of us can inhabit another's mind, it is impossible for us to truly understand what another person perceives.

Today, there are increasingly visible fragmented realities. Different people can have radically dissimilar notions of the world, from science to personal values. This has been true forever -- in the 1500s for instance, members of the Aztec civilization had different realities than Europeans did. Yet, there was little interaction between these disparate groups, and these realities rarely clashed (of course, they eventually would, leading to the history of colonialism and imperialism of the past few centuries).

Due to the power of the internet and mass media, there has been a blending of realities to create a sort of global norm, while simultaneously, there has been a strengthening of alternative realities. Pop culture from Hollywood is blasted throughout the world building connections between cultures and their underlying realities. At times, the power of this global culture can seem inescapable -- there are even KFCs in Mecca these days.

Yet, some realities seem to be hunkering down, fighting off this global synchronization. We got to witness this dynamic the past weekend with the comments from Congressman Akin in Missouri regarding "legitimate rape." That phrase, while deeply disturbing, was hardly the worst part of his language. Akin also intimated his view that women have the ability to willingly abort fetuses on a lark. That is his reality.

There continue to be different realities in this country, but generally, they are compatible with each other. Different religions, ethnicities, and politics generally