Here Comes the P2P Economy
Stan Stalnaker
Peer-to-peer information networks portend a broader economic model in which consumers become consumer-producers, buying and selling on a small scale in a growing number of industries. The result: a truly distributed economy that generates micro-income streams for individuals. WEF | HBR
Task, Not Time: Profile of a Gen Y Job
Tamara J. Erickson
Compensating employees for what they actually do rather than the hours they log is not a new idea. Managers will need to re-embrace this preindustrial concept as the practical realities of work change along with the expectations of the new generation of workers.
A Doctor’s Rx for CEO Decision Makers
Jerome Groopman, MD
In medicine, misdiagnosis can bring great harm to a patient. Lessons in how to prevent errors in medical thinking have clear applications for business decision making—and for the well-being of a company, its employees, and its CEO.
Understanding Opposition
Michael Sheehan
Corporate leaders are great at competition but baffled when they face opposition. They can learn from politics the strategies of co-opting an antagonist’s goal and redefining an issue so that it favors their stance. They can also deflect the blows to a different target.
The Board Meeting of the Future
John J. Medina
Imagine a brain-friendly workplace where board meetings are conducted on treadmills, desks are equipped with stationary bicycles, and people wear gym clothes, not suits. Sound like a futuristic fantasy? The reality is that current work environments inhibit brain performance, and that’s not good for business.
How Honest People Cheat
Dan Ariely
Understanding the conditions that constrain or worsen cheating behavior is essential to the conduct of business. Our consciences impose limits, but we are highly adept at rationalizing dishonesty, and doing so becomes much easier when cheating is one step removed from cash.
Lies, Damn Lies, and Lie Detectors
Paul Root Wolpe and Daniel D. Langleben
Accurate, reliable lie detection using functional MRI technology may well be within our grasp. The potential applications in business and elsewhere are many, but peeking inside people’s brains is a delicate matter that interested firms will want to handle with the utmost care. WEF | HBR
The Cybercrime Service Economy
Scott Berinato
If you assume that a product claiming to help you hack must be an expectorant, think again. There are now criminal hacking enterprises that provide services to help others steal. Tech-savvy thugs are becoming cybercrime service professionals, and their growing client base is a new threat to your company’s security. WEF | HBR
Sick Transit Gloria
Mark Kuznicki, Eli Singer, and Jay Goldman
Social networking technologies can help in achieving large-scale change. A primer comes from Toronto, where these tools brought together an array of stakeholders in the city’s transportation system and served as a medium for dialogue during a highly effective in-person collaboration.
The Gamer Disposition
John Seely Brown and Douglas Thomas
The attributes your workforce needs in the twenty-first century are those that online games foster. Players become oriented toward change and the bottom line; they appreciate the power of diversity and the fun in learning; and they seek better ways to solve problems.
Making Alternate Reality the New Business Reality
Jane McGonigal
Acting as the puppet masters of custom-designed alternate reality games, leaders can tap broad collaboration to solve specific problems, forecast opportunities, and innovate dynamically. The enterprise counterpart of what is now niche entertainment could become the new operating system for real-world business.
The Metaverse: TV of the Future?
Miklos Sarvary
The next dominant internet interface is likely to be the metaverse, where people interact and do business through avatars that actually inhabit the virtual space. Lessons for how companies should prepare to compete and survive in that environment come from historical parallels in the early days of broadcasting.
Giving Avatars Emote Control
Judith Donath
As virtual worlds become hubs of social and business activity, people will need to decide how much of themselves to reveal in their avatars. Where on the veracity continuum will you want to place your surrogate, and how far will representational technology allow you to go?
Happy Metadata Trails
Jan Chipchase
The explosion in user-generated content will enable organizations to gain previously unparalleled views of the buying public. In this brave new world of aggregated data, you’ll be able to chart paths to customers with pinpoint accuracy. But trails that are richly plotted may be as dangerous as poorly mapped ones.
My BlackBerry Ate My Accountability
Lew McCreary
Personal devices have grown so prosaic as to become all-purpose, dog-ate-my-homework dodges for busy businesspeople. If you and your employees are tempted to let technological inventions encourage excuse invention, put yourselves on notice: That dog won’t hunt anymore.
On the Back of a Turtle, I See a City
Jaime Lerner
Like a turtle shell, the city of the future bespeaks purposeful design. No accident of mindless sprawl, no cancer on the landscape, it is a sustainable place that integrates work, leisure, and the natural environment. It is where businesses will need to operate and what they must first help to create.
Socially Responsible Lobbying
David Vogel
When lobbying the government is part of your CSR strategy, you gain competitive advantage over less socially responsible rivals. The corporate and public benefits can prove to be substantial, both domestically and internationally.
China’s Untapped Second Cities
George Pohle
The next horizon in the Chinese market are the 300 second-tier cities that together represent more than half of China’s urban population and nearly two-thirds of its GDP. While competition saturates the top tier, the next level down is ready for foreign attention.
Islamic Finance: The New Global Player
Aamir A. Rehman and S. Nazim Ali
Financial institutions worldwide are increasingly complying with the values articulated in Islamic law, or sharia. The market for sharia-compliant finance is booming, and the rules that govern it hold important lessons for any financial firm that takes corporate social responsibility seriously.
What Good Are Experts?
Michael J. Mauboussin
Throwing experts at every problem your firm encounters won’t get you the best solutions. Computers and the wisdom of crowds are often better. Experts are best when it comes to challenges that have rules-based solutions and that allow the solver a high degree of freedom.
Sustainable and Unsustainable Trends
Garrett Gruener
Stein’s law tells us that things that can’t go on forever don’t. Curiosity and practicality prompt us to figure out which trends are ready to end and which will last a while longer. HBR’s list of ten sustainable and ten unsustainable trends lets you peek into the future. WEF | HBR
Here Comes the P2P Economy
by Stan Stalnaker
Peer-to-peer, or P2P, networks have thrown the media industry into turmoil,
changing the flow of information from a one-to-many model (with newspaper
publishers, Hollywood
A shock like the one that jolted the media is poised to strike other
industries, perhaps more disruptively. It is already being felt in financial
services. Start with the phenomenon of microcredit: the lending of small sums
to, and then within, social groups at the village level in poor economies, with
members collectively guaranteeing the bank’s loan. Combine that with the power
of a global digital network, and a new model for banking begins to take shape.
Indeed, P2P financial systems are set to reprise in the banking industry
what has happened in media. Already, websites like Kiva.org, Prosper.com, and
LendingClub.com have extended microbanking to consumers in developed economies.
In such systems, everyone is a tiny bank, making it easier to raise small
amounts of capital among people who know—or at least, because of their social
network, trust—one another.
It is only a matter of time before these digital systems close the
arbitrage enjoyed by large banks, which lend at up to 15% interest but pay only
about 5% on capital. Why do business with a bank when your network’s lending
and savings interest rates are both 7%? To grasp the power of such a system,
imagine your local credit union with the membership and social networking
capabilities of MySpace.
Furthermore, people will soon use personal
currencies to make payments for “knowledge services” provided by other
individuals, such as social introductions and shopping tips. These currencies
will be traded on exchanges at floating rates determined by the market in real
time. Like national currencies, personal currencies derive their value from the
reputation and size of the network—status as an expert and number of friends,
in this case, rather than market expectations and size of the economy.
An even greater shock could hit the energy industry, transforming it into a
network that would make the current electricity grid seem rudimentary. Again,
the consumer-producer would be the driving force. Some people are already
installing home-based solar or other energy sources that allow them to sell
electricity to the grid. Companies are using the roofs of their buildings for
installations that turn the facilities into net power producers. Energy
production and distribution could ultimately shift from a few key players to
many participants.
The real breakthrough will come when cars generate more electricity than
they consume—not as outlandish as it sounds. Hybrid vehicles currently take the
kinetic electricity generated by braking and use it to help fuel motion and
prolong battery life. Kinetic and battery technologies could improve to the
point where cars generate excess kinetic power from their motion to be stored
and sold back to the grid for micropayments.
These successive and ever more disruptive P2P shock waves foreshadow a
distributed economy in which consumption is transformed into production that
provides micro-income streams for individuals. The greater efficiency of such a
system would help us all to live closer to sustainable economic
equilibrium—which would be, on the whole, quite a pleasant shock. WEF | HBR
Stan Stalnaker is the founder of Hub Culture, an
international online and off-line social network. He is the author of Hub
Culture: The Next Wave of Urban Consumers
(John Wiley & Sons, 2002).
Task, Not Time: Profile of a Gen Y Job
by Tamara J. Erickson
Jobs have long been structured primarily around units of time—a 40-hour
workweek, an eight-hour day. The time you spend—or are supposed to
spend—determines whether you are working full or part time, with implications
for compensation and other benefits. Face time can serve as a proxy for
commitment and ambition. But that comes as a bit of a surprise to many of
today’s newest employees. Generation Y workers (born since 1980) clearly prefer
jobs defined by task, not time. They want to be compensated for what they
produce.
That’s not a new concept. Workers in agricultural and craft-based economies
were rewarded for output—bushels of wheat, the number of cups or bowls. Even in
the early days of the Industrial Revolution, workers were paid by the piece.
With the advent of the industrial economy, however, piecemeal pay preserved too
many irregularities in an increasingly scientific and mechanized approach to
management. Production shifted from the discrete output of individual workers
to a complex, integrated process in which it was difficult to isolate tasks.
Logging time made more sense. Post-Depression regulations and the rise of
unionization soon led to standardized hours.
The economy has shifted again, though, and the drumbeat for another change
is intensifying, sounded largely by Generation Y—a vital resource for
talent-hungry corporations. Many younger employees find they can complete tasks
faster than older workers, perhaps partly because of technological proficiency
but even more, in my view, because they work differently. They spend less time
scheduling and are comfortable coordinating electronically. They resent being
asked to log hours and stay in the office after their tasks are done, and the
idea of face time really annoys them. Ys love to work asynchronously—anytime,
anywhere. One said during our research, “What is it with you people and 8:30 am?”
Practical realities are also moving us toward a task-based definition of
jobs. Who can say how long it takes to write a piece of software? Many salaried
knowledge workers are already effectively paid for tasks rather than time.
Allowing telecommuting and flexible hours is essentially trusting that the task
will be accomplished, even when people working from home are expected to put in
a specified number of hours. And institutionalizing task-based job definitions
is arguably fairer than arbitrarily approving flex work and telecommuting—an
approach as ripe for favoritism as the piecemeal systems of the preindustrial
age. As virtual work continues to spread (already 40% of IBM employees have no
official offices, for instance), it’s time to match the stated expectation to
the operational reality.
What would that look like? At Best Buy’s headquarters, more than 60% of the
4,000 employees are now judged only on tasks or results. Salaried people put in
as much time as it takes to do their work. Hourly employees in the program work
a set number of hours to comply with federal labor regulations, but they get to
choose when. Those employees report better relationships with family and
friends, more company loyalty, and more focus and energy. Productivity has
increased by 35%, and voluntary turnover is 320 basis points lower than in
teams that have not made the change. Employees say they don’t know whether they
work fewer hours—they’ve stopped counting. Perhaps more important, they’re
finding new ways to become efficient: “Do we really need this meeting?”
Going forward, we can devise a better model of how to define work. Think
task, not time:
• Articulate the results you
expect—and tie accountability to getting the job done.
• Make physical attendance in the
office, including at meetings, optional.
• Gauge performance on the
quality of the work performed.
• Help managers and employees
learn to measure dedication in ways other than face time.
• Use today’s networking
capabilities to allow employees to work from anywhere.
• Support the changes by creating
drop-in centers, team spaces, and open work areas.
Shift your definition of work from a place your employees go for a
specified period to something they do—anytime, anywhere. Task, not time—a model
that dominated employment until a century ago—is a powerful way to draw in the
newest crop of workers.
Tamara J. Erickson is the president of the Concours
Institute, the research and education arm of BSG Alliance Boston
A Doctor’s Rx for CEO Decision Makers
by Jerome Groopman, MD
Doctors, like business leaders, make mistakes. Some errors are purely
operational. A pint of blood is mistakenly transfused into Joan Smith rather
than Jane Smith, and Joan goes into shock. A young doctor writes an incorrect
dose of chemotherapy on an order sheet, and a woman with breast cancer dies
from the toxic effects of overtreatment. A neurosurgeon operates on the wrong
side of the brain because an X-ray was mislabeled as “right” rather than
“left.” These kinds of errors make headlines, trigger lawsuits, and terrify
patients and their families; in the academic world, such mistakes prompted the Institute of Medicine
However, operational mistakes account for only a small percentage of
medical errors. The overwhelming majority reflect poor thinking. In fact, 15%
to 20% of all medical conditions are misdiagnosed. A middle-aged man’s
indigestion, treated with antacids, turns out to be a heart attack; a child’s
chronic headache is due not to “family stress” but to a brain tumor; a
grandmother’s fading memory is not early Alzheimer’s disease but vitamin B12
deficiency. Such diagnostic errors reflect shortcomings in physicians’ thinking
rather than technical mistakes. In 2007, a national conversation began in the
medical field about how best to address these errors of judgment. Business
practices were not the solution this time; in fact, CEOs and other senior
managers would do well to adopt the strategies that physicians are pursuing.
Senior doctors, like CEOs, traditionally have cast themselves as confident,
autonomous decision makers; they take pride in their rapid analyses and
sure-footed recommendations. Their judgments filter through the hierarchy in
much the same way that decisions in a company are disseminated from the corner
office. However, in sharp contrast with most businesses, hospitals convene
regular meetings where all faculty and trainees—from the chief to the beginning
medical student—revisit cases that had poor outcomes. At these forums,
participants are beginning to dissect doctors’ misguided thought processes, not
just discuss bodily organs. This shift has required that even the most esteemed
physicians acknowledge their fallibility in an effort to teach others and to
improve themselves.
Medicine is drawing on the work of cognitive scientists—particularly Amos
Tversky and Daniel Kahneman, who three decades ago explored the benefits and
risks of heuristics, or shortcuts in thinking. Heuristics help to explain the
15% to 20% of cases where we get it wrong. My extensive research on
misdiagnoses shows that even the most seasoned physicians are highly
susceptible to anchoring error, or seizing on the first bit of clinical
information that makes an impression. Similarly, all doctors recall dramatic
past cases of theirs and mistakenly apply them to the case at hand, a so-called
availability error. Another cognitive trap is attribution error, whereby a
physician relies on a stereotype to which he attributes all of his patient’s
complaints. Menopause, old age, and stress are common categories that
physicians glibly invoke as explanations for vague symptoms without digging
more deeply for other causes. Contrary to the image of the doctor as
authoritarian, dismissive of criticism, and resistant to self-analysis,
physician leaders are starting to welcome the insights of cognitive science to
help them avoid errors of judgment, in part because they have recently seen the
benefits of rectifying operational errors. By making themselves vulnerable,
physician leaders have now begun to encourage those lower down in the hierarchy
to question decisions more freely and think more broadly.
I recently asked business leaders in manufacturing, real estate, and
banking how misdiagnoses in their industries are handled. I learned that formal
decision-making reviews are rare. CEOs are seldom challenged by employees.
Moreover, executives are still lauded for being rapid decision makers who rely
on their own minds; they know little about innate susceptibility to cognitive
biases. The format of clinical conferences, where the tools of cognitive
science are used to air and dissect errors in physicians’ judgment, can become a
part of every business enterprise. All managers, including the CEO, should be
open to the kind of self-analysis that doctors now employ. Thinking errors in
medicine can mean the death of a patient. Similar cognitive errors in a company
can have profound implications for the future of the organization, its
employees, and the CEO.
Jerome Groopman, MD, is the Dina and Raphael Recanati
Professor of Medicine at Harvard Medical School Beth Israel Deaconess Medical Center Boston
Understanding Opposition
by Michael Sheehan
Top executives are good at competing, but when they come up against
opposition rather than competition, they flounder. The problem is getting worse
because, for a variety of reasons, businesses face better organized and more
vocal opponents than ever before.
What distinguishes opposition from competition? Consider soft-drink vending
machines in schools. What we saw a few years ago was a standard face-off
between the world’s two most competitive companies, each trying to present the
better deal to local school boards. But the people who really needed to be
persuaded were parents and public interest groups concerned with childhood
obesity. They didn’t care whether Coke was better than Pepsi. They didn’t want
soft drinks in the schools, period.
When companies mistake oppositional situations for competitive ones, they
adopt approaches that don’t match the terms of engagement. Worse, their
missteps can lead to serious setbacks. When a waste disposal business met
opposition to a new plant, management made what it considered a reasonable
attempt to sweeten the deal: It offered to build a new community recreation
center. Instead of being hailed for its generosity, it was accused of making a
callous bribe. By falling back on negotiation reflexes developed in competitive
situations, the company only dug itself into a deeper hole.
Better approaches are found in politics, where leaders tend to face
opposition more routinely. Their experience underscores the importance of
stepping back from the fray to assess its dynamics. Who is on the other side of
the table, and why? What is that side’s ultimate goal? How can it be met with
your help?
One way is by co-opting your antagonist’s issue. If, for example, you
disagree with Michael Moore’s demand for single-payer universal health care,
clashing with him head-on is probably not the best approach. Instead, understand
why he’s getting traction with middle-class America Moore
In other situations, the key is to redefine the issue. In California
Somewhere between co-option and tug-of-war lies what I call a deflection
strategy. The most famous example comes from the tobacco industry. When, in the
1980s, indoor smoking bans came on the scene, the industry embraced the
campaign for clean air in buildings. But it fingered a non-tobacco culprit: It
claimed that overzealous property managers, in pursuit of energy efficiency,
had made buildings airtight. Cigarette smoke was a minor annoyance compared
with the chemical discharges from copy machines, carpet adhesives, and other
contributors to “sick building syndrome.” The solution was to engineer
efficient ways of bringing more fresh air into facilities. Although the
strategy wasn’t ultimately successful, it stymied the inevitable bans for
several years.
Once management learns to distinguish opposition from competition, it can
use its newfound skills proactively. A community hospital in the Midwest Boston
Michael Sheehan is the founder and president of Sheehan
Associates, a communications consultancy in Washington, DC. He was a media
coach for President Bill Clinton.
The Board Meeting of the Future
by John J. Medina
If you wanted to create a work environment in direct conflict with what the
brain is equipped to do, you’d design the standard cubicle. Instead, imagine a
brain-friendly workplace where board meetings are conducted on treadmills,
desks are equipped with stationary bicycles, and people wear gym clothes, not
suits.
The Brain’s
Active History
If our ancestors sat still in the savanna for eight hours straight—heck,
for eight minutes—they became somebody’s lunch. Our brains developed while we
walked about 12 miles a day, seven days a week, for several million years.
How Exercise
Jogs the Brain
• Exercise improves the blood’s
access to specific brain regions and stimulates learning cells to make
brain-derived neurotrophic factor, or BDNF, which acts like cerebral
Miracle-Gro for neurons. If you want more of this natural fertilizer, you can’t
be a desk potato.
• The brain’s executive
functions—higher-order capacities valued by businesses everywhere—respond to
exercise. They help an engineer both design a satellite and resist hitting his
boss during a performance review.
• Just as roads improve access to
goods and services, exercise makes it easier for oxygen to get to overworked
tissues, via the blood, and absorb toxins. Thanks to exercise, the body’s
natural hazmat teams reach more tissues and do a better cleanup job.
Clinical
Proof: Food for Thought
• You learn 20% faster
immediately after exercise than after sitting still.
• An active lifestyle reduces the
risks for Alzheimer’s disease, dementia, anxiety, and depression—and for
hospital visits. It doesn’t take a brain scientist to see the inverse relationship
between exercise and health care costs.
• Study participants who jog for
30 minutes two or three times a week for 12 weeks improve their cognitive
performance. When they stop the exercise regimen, the cognitive benefits
evaporate.
• The cognitive benefits of
exercise have been demonstrated in older people, the middle-aged, and even
overweight Japanese fourth graders.
The
Brain-Friendly Workplace
• Treadmills are installed in the
office. Morning and afternoon exercise breaks are encouraged.
• Workstations include stationary
bicycles that fit under the desks. Employees keep their legs moving while
answering e-mail.
• At board meetings, people wear
gym clothes and walk on treadmills at about 1.8 miles per hour—to cool down
right after a period of intense physical activity.
• In a competitive climate,
exercise is as close to a magic productivity bullet as you’ll get.
John J. Medina is a molecular biologist who works as
a private consultant and teaches at the University Washington Seattle Seattle Pacific University
How Honest People Cheat
by Dan Ariely
There are two basic conceptions of cheating. One holds that people are fundamentally
dishonest and look actively for opportunities to cheat. A person walks by, say,
a gas station, considers how much money is in the till, who might be around to
stop the theft, and what punishment awaits him if caught (including potential
time off for good behavior). On the basis of a cost-benefit calculation, the
would-be thief decides whether to rob the place. The second notion is that
people are basically honest. They are not out there scoping for chances to
cheat, but circumstances tempt them. They “borrow” a pen from a conference,
take an extra splash of soda from the soft drink dispenser, exaggerate the
value of a television on a property loss statement, or falsely report a meal
with Aunt Nava as a business expense (well, she did ask how work was going). How prevalent is this kind of
dishonesty, and what drives it?
My fellow researchers and I tempted a few thousand “honest” people to cheat
in a set of scientifically controlled experiments at Harvard Business School Princeton
The results grew more interesting when we tried to understand the
circumstances that influence the degree to which people cheat. First, we found
that the risk of being caught did not change the level of dishonesty. For
example, allowing participants to avoid revealing any sign of possible mischief
(for example, by having complete anonymity in how much payment they took) did
not affect the average level of cheating among them. Second, we found that
getting people to contemplate their own standards of honesty (by recalling the
Ten Commandments or signing an honor code) eliminated cheating completely.
Finally, and perhaps most disturbing, we found that if payment was given in
poker chips, which were exchanged for cash a few seconds later, the average
level of cheating more than doubled.
These results point to a few interesting aspects of human nature. One is
that most of us, when tempted, are willing to be a little dishonest, regardless
of the risks. Another is that even when we have no chance of getting caught, we
still don’t become wild liars—our conscience imposes some limits. Finally, it’s
clear that we have an incredible ability to rationalize our dishonesty and that
justifying it becomes substantially easier when cheating is one step removed
from cash. Nonmonetary exchanges allow people greater psychological latitude to
cheat—leading to crimes that go well beyond pilfered pens to backdated stock
options, falsified financial reports, and crony deals. Such latitude is the
force behind the Enrons of the world.
Dan Ariely is the Alfred P. Sloan Professor of
Behavioral Economics at the Massachusetts Institute of Technology in Cambridge
and a visiting professor at Duke University in Durham, North Carolina. He is
the author of Predictably Irrational (HarperCollins, 2008).
Lies, Damn Lies, and Lie Detectors
by Paul Root Wolpe and Daniel D. Langleben
Deceit is ubiquitous yet difficult to detect. It’s no surprise, then, that throughout
recorded history people have tried to devise techniques for detecting lies.
Until recently, we had not improved very much on the methods of the ancient
Greeks, who took the pulse of a suspect under questioning—a rudimentary
polygraph in concept. But recent research using functional magnetic resonance
imaging, or fMRI, has begun to identify the
areas of the brain involved in deception. These laboratory experiments (many
done by coauthor Daniel D. Langleben) suggest that accurate, reliable lie detection
is finally within reach. They have also sparked interest from the law
enforcement, defense, and business communities. Two start-ups (No Lie MRI and
Cephos) have already been launched to offer commercial fMRI lie-detection
services.
To be sure, more research in real-world situations is needed to prove the
effectiveness of the technology. And if other MRI usage is any indication, fMRI
lie detection will be expensive to employ routinely and could require subjects
to travel to specialized centers for testing. Nonetheless, investigators of
various stripes certainly want a reliable tool for getting at the truth,
sometimes in life-or-death situations.
Less obvious, perhaps, is what businesses will want from fMRI-based lie
detection. Although polygraph use in the private sector has been banned for
most purposes since 1988, companies do have investigational needs, whether routine
(for pre-employment screenings) or exceptional (to address fraud and
embezzlement, IP theft, industrial espionage, claims of infringement, and leaks
of confidential information). At the highest levels of organizations that have
contentious cultures, loyalty itself—to the CEO and to the policies and
principles of the enterprise—may become a target of inquiry. Board members
could one day serve with the understanding that they will be subject to an fMRI
examination if suspected of misconduct. Disputes between employees over credit
for ideas and innovations, among other things, could be adjudicated using fMRI
lie detection.
Because fMRI is a powerful, sophisticated medical technology, its use for
lie detection raises numerous questions. Who, for example, should be licensed,
and based on what criteria and training, to design and administer the testing
and interpret its results? Who will be responsible for dealing with incidental
medical findings (such as brain tumors) that may turn up on fMRI scans? Who
should have access to the technology and the results? What are the ethical
limits to its application? Is use on suspected terrorists and criminal
defendants appropriate? Are employees also fair game, and, if so, should they
be subjected to any inquiry an employer wants to pursue?
Critics and proponents alike have raised concerns about the rush to
commercialize fMRI lie detection before it undergoes the kind of scientific
scrutiny that would be standard for a drug or a medical device. Indeed, some
have argued that MRI should be regulated for use in lie detection just as it is
for medical diagnosis.
Although fMRI holds significant potential for cracking the problem of lie
detection, businesses may reasonably decide to tread carefully before adopting
it. Like other tools used to scrutinize employee behavior (surveillance
cameras, software for monitoring e-mail and internet use), fMRI has the
potential to influence corporate culture and the level of trust between workers
and employers. Courts and legislatures will inevitably become involved as
society tries to define reasonable limits. After all, fMRI literally looks
inside people’s brains—a sensitive endeavor. And that’s no lie. WEF | HBR
Paul Root Wolpe, PhD, is an associate professor of
sociology in psychiatry and a senior fellow in the Center for Bioethics—and Daniel
D. Langleben, MD, is an assistant professor of psychiatry—at the University Pennsylvania
School Philadelphia
The Cybercrime Service Economy
by Scott Berinato
Anyone who doubts that internet commerce faces serious threats from online
criminals should consider this: Criminal hacking has spawned a full-blown
service economy—one that supports growing legions of relatively lower-skilled
but fulsomely larcenous hackers.
In the past year, entrepreneurs, many of them based in Russia
Last year, two Russians created a subscription-based identity theft
service. Rather than steal personal credentials themselves, the two hacked into
PCs and then charged clients $1,000 per compromised machine for 30 days of
unfettered access. The clients are betting that during the 30-day period (one
billing cycle) victims will bank or otherwise submit personal data online.
To offer their subscription service, the hackers contracted with yet
another service provider to obtain a sophisticated distribution system for the
illicit code, called a bot, that they would use to infect the PCs. That
distributor enticed website owners to hide its bot on their sites by promising
weekly payments based on the volume of traffic, much the way newspapers are
paid by advertisers according to the number of visitors to their websites.
Other service businesses aggregate large networks of compromised computers,
called botnets, and rent out portions of their networks for whatever task the
client has, perhaps to distribute spam, disable a competitor’s website, or
infiltrate a firm’s network in order to steal intellectual property.
As with any service business, customers willing to pay extra can obtain
premium offerings. The two hackers behind the subscription service will “clean
up” your data—get rid of low-value information and generate helpful reports
itemizing what you’ve stolen. The botnet rental operations offer ancillary
consulting to maximize the effectiveness of your attack; some guarantee
specified service levels or your money back.
The biggest factor driving the emergence of this new service economy is the
obvious one: an explosion of online banking and shopping, coupled with
consumers’ increasing willingness to disclose personal information over the
internet. For those with the technical skills, opportunities for exploitation
are richer than ever before.
But something else is happening, too. Those gifted hackers are now enabling
the far larger market of wannabes whose deficient skills would otherwise shut
them out of the cybercriminal enterprise system. By creating services for those
people, hackers can generate huge profits without actually committing fraud.
Gold prospectors may or may not strike it rich, but folks selling pans and
pickaxes make a heck of a living either way.
What surprises some experts about this new service economy is just how
innovative and vibrant it has become. The hackers code at a PhD level. Their
solutions to problems are creative and efficient. They respond to market
conditions with agility. Their focus on customer service is intense. If this
loose collective of criminal hackers were a company, it would be a celebrated
case study of success.
Cybercrime services are so sophisticated and powerful that they make one
pine for the days of simple website defacements and e-mail viruses with cute
embedded messages. The new breed don’t just disrupt business; they threaten it
by frightening customers and undermining commercial confidence. As the victims
of online crime pile up, more and more of them will look for someone to hold
responsible. And it won’t be the hackers; it will be the brands that customers
trusted to protect them. WEF | HBR
Scott Berinato is the executive editor of CSO magazine in Framingham ,
Massachusetts
Sick Transit Gloria
by Mark Kuznicki, Eli Singer, and Jay Goldman
The Toronto Transit Commission runs the third-largest public transit system
in North America
A public entity, the TTC is obligated to consult regularly with its
customers, a process that became increasingly contentious as rider frustration
grew. In public meetings, cash-strapped TTC officials cowered as angry riders
protested the system’s aging infrastructure, from the rolling stock to the
stations to the commission’s once highly praised website. It was clear that
communication was among the most badly broken parts of the system—an impediment
to constructive action.
The stalemate might have persisted if not for the serendipitous convergence
of social networking technologies, a growing army of technology and transit
geeks, and an open-minded new TTC chairman named Adam Giambrone. He accepted a
pitch from local bloggers on how to revitalize the TTC website: Use the geeks’
lively networks as conduits for ideas.
On February 4, 2007, Giambrone and a number of other TTC officials
participated in a unique live event dubbed TransitCamp. Created by members of
the Toronto
In the case of the one-day TransitCamp, participants set out to
collaboratively debug the transit system as if it were a complex piece of
software and, ultimately, to reform riders’ experience. The organizers (we were
among them) set ground rules intended primarily to keep the tone constructive:
TransitCamp was styled as a creative “solutions playground” rather than a gripe
session. Among the participants were transit activists, ordinary riders,
technology geeks, visual artists and designers, and web developers. Some of the
TTC representatives in attendance came out of simple curiosity about the new community
Giambrone was seeking to engage. Won over by the participants’ passion, most of
the officials canceled their other plans and stayed for the entire day.
TransitCamp was promising in both its process and its results. The on-site
use of social networking tools allowed many ideas to be put forward quickly and
iteratively as the day unfolded. The event moved the TTC to entirely rethink
its website redesign plans. In impromptu closing remarks, Giambrone called the
participants an inspiring voice for change. The icy relations between the TTC
and the riding public have since begun to thaw. A previously issued RFP for the
new website was canceled and a new one was developed from the principles that
were articulated at TransitCamp. The commission is still short of funds and
facing possible service cuts and fare increases, but it has begun a frank,
constructive online conversation with riders about which trade-offs make the
most sense. A similar dialogue will soon take place in San Francisco
The TransitCamp experience demonstrates the power of a new,
technology-supported model for social and community change. This model empowers
citizens to engage cooperatively with public officials in an otherwise unlikely
civic—and civil—dialogue.
TransitCamp reformed a transportation system by reinventing the way
stakeholders collaborate with decision makers. To learn more, visit hbr.transitcamp.org.
Mark Kuznicki is the principal at Remarkk
Consulting. Eli Singer is the director of social media for Segal
Communications, a Draftfcb agency. Jay Goldman is the president and
cofounder of Radiant Core. All three authors are based in Toronto
The Gamer Disposition
by John Seely Brown and Douglas Thomas
Today’s multiplayer online games are large, complex, constantly evolving
social systems. Their perpetual newness is what makes them enticing to players.
Each generation of games begets a new generation of participants who develop
what we call the gamer disposition.
It’s exactly the disposition you should want in your workforce.
The gamer disposition has five key attributes. More than attitudes or
beliefs, these attributes are character traits that players bring into game
worlds and that those worlds reinforce. We believe that gamers who embody this
disposition are better able than their nongamer counterparts to thrive in the
twenty-first-century workplace. Why?
They are
bottom-line oriented.
Today’s online games have embedded systems of measurement or assessment.
Gamers like to be evaluated, even compared with one another, through systems of
points, rankings, titles, and external measures. Their goal is not to be
rewarded but to improve. Game worlds are meritocracies where assessment is
symmetrical (leaders are assessed just as players are), and after-action
reviews are meaningful only as ways of enhancing individual and group
performance.
They
understand the power of diversity.
Diversity is essential in the world of the online game. One person can’t do
it all; each player is by definition incomplete. The key to achievement is
teamwork, and the strongest teams are a rich mix of diverse talents and
abilities. The criterion for advancement is not “How good am I?”; it’s “How
much have I helped the group?” Entire categories of game characters (such as
healers) have little or no advantage in individual play, but they are
indispensable members of every team.
They thrive on
change.
Nothing is constant in a game; it changes in myriad ways, mainly through
the actions of the participants themselves. As players, groups, and guilds
progress through game content, they literally transform the world they inhabit.
Part of the gamer disposition is grounded in an expectation of flux. Gamers do
not simply manage change; they create it, thrive on it, seek it out.
They see
learning as fun.
For most players, the fun of the game lies in learning how to overcome
obstacles. The game world provides all the tools to do this. For gamers, play
amounts to assembling and combining tools and resources that will help them
learn. The reward is converting new knowledge into action and recognizing that
current successes are resources for solving future problems.
They marinate
on the “edge.”
Finally, gamers often explore radical alternatives and innovative
strategies for completing tasks, quests, and challenges. Even when common
solutions are known, the gamer disposition demands a better way, a more
original response to the problem. Players often reconstruct their characters in
outrageous ways simply to try something new. Part of the gamer disposition,
then, is a desire to seek and explore the edges in order to discover some new
insight or useful information that deepens one’s understanding of the game.
• • •
Together, these five attributes make for employees who are flexible,
resourceful, improvisational, eager for a quest, believers in meritocracy, and
foes of bureaucracy. If your organization is receptive to these traits (and it
should be), look for gamers and the disposition they will bring you.
John Seely Brown is a visiting scholar at the University of Southern California Annenberg School
Making Alternate Reality the New Business Reality
by Jane McGonigal
In the coming decade, many businesses will achieve their greatest
breakthroughs by playing games—specifically, alternate reality games, or ARGs.
Custom-designed ARGs will enable companies to build powerful collaboration
networks, discover solutions to specific business problems, forecast
opportunities, and innovate more reliably and quickly.
ARGs are immersive, massively multiplayer experiences that unfold in the course
of people’s real lives for days, weeks, or months. ARG designers, known as
“puppet masters,” distribute thousands of story pieces, puzzles, and missions
via websites, e-mail, mobile messaging, online video, and podcasts. The players
who receive these building blocks use wikis, social networking sites, chat
rooms, and blogs to analyze clues, debate interpretations, devise mission
strategies, predict game events, and ultimately build a common narrative.
Although commercial ARGs are, in relative terms, a niche entertainment
genre involving several million players worldwide, their enterprise counterpart
could eventually become a significant platform for real-world business—in
essence, the new operating system.
Why? ARGs train people in hard-to-master skills that make collaboration
more productive and satisfying. Playing an ARG teaches 10
collective-intelligence . These
include cooperation radar, a
knack for identifying the very best collaborators for a given task, and protovation, the ability to rapidly
prototype and test experimental solutions. Using these skills, players amplify
and augment one another’s knowledge, talents, and capabilities. Because ARGs
draw on the same collective-intelligence infrastructure that employees use for
“official” business, games will map directly to a familiar reality—no
translation required.
Ten
Collective-Intelligence Competencies
As these competencies mature within a business, ARGs will provide a truly
stimulating framework for doing everyday work. Few meetings are as engaging as
an ARG, whose emerging narrative evokes players’ shared sense of urgency and
whose puzzles and clues deepen their curiosity. The structure for collaboration
is clear, with players rallying around explicit goals and continually sharing
theories, tactics, and results. Playing also generates compelling momentum: The
puppet master monitors and rewards participants’ efforts, and times the release
of new challenges so that players experience multiple cycles of success.
Imagine using an ARG as a more vivid alternative to traditional scenario
planning and business-simulation exercises. Recently, 1,700 players from 12
countries set out to manage a simulated global oil shortage in an ARG called
World Without Oil, which I helped develop (visit http://worldwithoutoil.org). Players
joined the game as individuals but coalesced over time into a powerful online
collaborative network as they investigated the mysterious oil crisis, sharing
what they’d learned. They leveraged their collective intellect to forecast
fictional shifts in gasoline, diesel, and jet fuel prices and availability.
They debated how shortages would transform many industries and disciplines.
Finally, they devised interventions to mitigate these effects, producing
plausible strategies for managing a realistic future dilemma.
The ARG framework allows players to grapple with risky potential realities
yet remain safe from real-world consequences. It’s easy to see, then, why
businesses would want to bring custom ARGs to bear on particular competitive
problems—including innovation. Eventually, games will become the go-to tools
for launching internal initiatives, or they will rally global teams of outside
“expert players” to engage in business forecasting. Ultimately, ARGs will
involve customers in inventing new products and services or in testing
companies’ market assumptions.
In all these cases, business leaders will become the vital puppet masters,
guiding collaboration, introducing complicating variables, and helping focus
players’ attention in promising new directions—not so very different from their
job descriptions today. But their skills will be augmented by an ARG-based
operating system that amps up collaboration in the service of strategy.
Jane McGonigal is a speaker, writer, and consultant
based in Palo Alto, California, where she designs alternate reality games and
is an affiliate researcher at the Institute for the Future.
The Metaverse: TV of the Future?
by Miklos Sarvary
Here’s a familiar story: A new communications technology that allows one to
broadcast live to millions of people appears on the scene. At first it’s
clunky, and the content is largely trivial and of poor quality. But serious
players soon latch on, the content improves, and before long everyone tunes in,
businesses flock to buy advertising time, and shares in related companies
skyrocket.
That was the early history of radio. The parallels with the dot-com frenzy
are eerie. (In fact, the broadcaster RCA used WWW, for World Wide Wireless, as
its logo.) And the party was just as short: Broadcasting companies struggled to
turn a profit, stock prices plummeted, and only a few players survived. Then
came the Great Depression and World War II. By the time these traumas had
passed, a new technology was on the block: television, which has been the
dominant broadcasting medium ever since. Radio is very much the poor cousin.
All the signs are that the life cycle of the internet will continue to
parallel that of broadcasting. The technology that produces websites as we know
them is limited in its ability to exploit the mass interactivity that the
internet can potentially deliver. Sure, people can communicate with one another
instantly online and even form communities—but they do it blind, through a
keyboard. Once again, there’s a new technology that gets around the limitation.
Within five years, the dominant internet interface is likely to be the metaverse, a term used to describe
interactive multiplayer games such as Second Life. In these new cyberworlds,
companies will have not websites but, rather, virtual stores where their
customers’ avatars can browse and chat with assistants before trying on and
eventually buying that dress, T-shirt, or tie. Why bother with a MySpace page
when you can have your own room in a virtual clubhouse? Some companies already
have these worlds in their sights: IBM, for example, is developing ways for
people to move their avatars from one metaverse to another.
If the metaverse is the future of the internet, what should companies do to
prepare for it? History once again provides clues. For starters, there’s the
network effect. Just as early television networks got a leg up by approaching
advertisers and building a base audience in the 1960s and 1970s, companies that
get their metaverses up and running early will poach a lot of customers from
rivals that leave metaverses for another day.
Also remember that it took decades for TV networks to learn how to
efficiently address audiences with appropriate content and advertising, which
was essential for the broadcasting business model. That suggests that companies
had better start to experiment with the technology while it is still a
sideshow. How, for example, might a company like L’Oréal use the metaverse
community to build a brand? We’ve asked ourselves just that kind of question at
Insead. We know that the metaverse will be an important channel for our
educational services, but we still have lots of questions about how best to
attract students to it and present material on it. So we’ve opened a virtual
campus on Second Life to find the answers.
Finally, as was the case for broadcasting, metaverses will present a real
challenge for governments and regulators. We already see important issues
emerging around security, network reliability, property legislation, and
taxation. Down the road, questions of infrastructure, software standards, and
compatibility between potentially competing metaverses may also dog regulators,
who will have the additional difficulty of coping with these matters on a global
scale.
Miklos Sarvary is a professor of marketing at Insead
in Fontainebleau, France.
Giving Avatars Emote Control
by Judith Donath
Millions of people have joined virtual worlds such as Second Life and
There.com, creating avatars through which to socialize, explore, and conduct
business. What makes virtual worlds so compelling, even in their current
primitive form, is the presence of other people. We are inherently social
creatures, deeply attuned to the nuanced actions and expressions of others, even
other avatars.
However, the expressiveness of current avatars is limited. They can be
moved next to each other to talk but often stare blankly into space, inert and
unengaged. With virtual worlds poised to become major hubs of social and
business activity, an important focus of research is how to make avatars more
smoothly expressive—able to make appropriate eye contact, smile, show their
interest or boredom, and so on.
Giving avatars this kind of expressiveness raises complex questions about
how we present ourselves in virtual worlds. We will soon be able to choose
avatars who span a spectrum of veracity in their expressiveness. Options will
range from avatars with gracious but inauthentic scripted performances to
avatars that convey extraordinarily candid, intimate, and potentially invasive
views of their operators’ interior lives.
In face-to-face interactions, our expressions signal our thoughts and
feelings. A gaze indicates attention; narrowed lips reveal anger. Our
expressions are reliable means of communication, but we can also edit and
control them: We feign attentiveness when bored and maintain a poker face
during intense negotiations. Expressions that do not match our underlying
feelings are essential not only for deception but also for privacy and social
graciousness.
In the not-too-distant future, we will choose the veracity of our avatars
depending on our needs in each interaction, much as we now choose our
communication media—video conference, phone, e-mail, IM—according to our desire
for immediacy, accuracy, and control of the message. The choices for avatars’
expressiveness will probably take one of three broad forms that fall on what I
call the veracity continuum.
In the idealized form, personality programs will give avatars gestures and
expressions that, though consistent, detailed, and convincing, are generated by
the avatar not the user. You will be able to outfit your avatar with a
preferred affective style to keep it in character—for instance, “brisk and
businesslike,” “elegantly European,” or “rude and rebellious.” This form will
be suited for performative situations, such as online parties, sales demos,
social games, and professional conventions.
In the representative form, which describes most current avatars,
expressiveness is based on user commands, entered via keyboard or selected from
a menu. Also in this category are experimental systems that use machine vision
or gesture-sensing to match avatars’ virtual expressions and movements with
users’ real-world behavior. When users laugh, or look puzzled or bored, so do
their avatars. The representative form, well suited for more personal
communication, allows users the same revelatory and inhibitory control over
their avatars’ expressiveness that they have over their own.
At the most advanced end of the continuum is the interior form, which could
enable your avatar to represent your thoughts, through its movements and
expressions, with even greater veracity than you do in the real world.
Technologies for such control range from simple methods such as galvanic skin
response, which gauges your emotional state by essentially measuring how sweaty
your palms are, to early-stage technologies that read brain activity to deduce
your thoughts and feelings. Interior-form avatars might be desirable for tasks
that require a high level of cooperation. Teams could use them to quickly
assess when members have doubts or are excited about a new idea. The intensity
of such communication might make working together virtually seem more intimate
than being together physically. These technologies might also be used in
competitive situations. During a business negotiation, one party might demand a
move to the more revealing, interior-form avatar. If the other party resisted,
would it be perceived as untrustworthy and evasive?
Although such mind reading is far from being commercially available, it is
not too soon to be thinking deeply about the choices for expressiveness we may
soon have in virtual worlds. When will you want to be in a solipsistic
wonderland where everyone is beautiful and poised, where you learn little about
your fellow humans yet still enjoy their company? When will you want
interactions in which once-private responses become nakedly public? And when
will you choose the extraordinarily delicate balance between revelation and
control that characterizes your everyday face-to-face interactions?
Judith Donath is the director of the Sociable Media
Group at the Massachusetts Institute of Technology’s Media Laboratory and a
faculty fellow at Harvard Law School’s Berkman Center for Internet &
Society, both in Cambridge, Massachusetts.
Happy Metadata Trails
by Jan Chipchase
The explosion in user-generated content will enable organizations to gain
previously unparalleled views of customers. This has important implications for
user privacy—and presents excellent opportunities for marketers.
To explain: Both user-generated digital content (an appointment made on a
BlackBerry, photos taken on a cell phone) and passively generated data (your
Skype profile, your GPS coordinates as revealed by your mobile phone, your
Google search history) leave real-time trails or logs. As more and more
activities “go digital,” these data trails together chart patterns of user
behavior. In some cases, a trail is apparent and part of the user experience;
in others, people have a vague awareness of such a trail but don’t understand
how it is used. Some data trails—say, the recording of your car’s license plate
as you drive through the city—may be completely hidden from view.
In an increasingly connected future, the data trails from all these sources
will create a massive universe of metadata. A new generation of devices will
provide filters or lenses through which to view this universe. This technology
will send constant signals that can be used in the aggregate. Even now in New York City
This is just the beginning. Soon it will be possible to view, sort, and
mine these aggregations in new ways. For example, tools such as Google Earth,
in combination with a cell phone that logs personal health parameters in real
time, could allow an organization to, say, map levels of emotion in the
population of certain city areas. If the Red Sox won a baseball game, data sent
from a variety of tools could be accumulated to register tremendous excitement
in the Fenway Park Boston
The ability to tap vast amounts of aggregated “people data” will have
serious implications for behavior, ranging from the way individuals control
their personal interactions and information to possible manipulation—for good
or ill—by corporations and governments. All this raises fundamental questions
about whom to trust with our data: Are you more comfortable backing up your
digital life with your online provider or doing it off-line in your home? Which
data set is more likely to be compromised?
Large organizations that have the ability to monitor aggregated data will
have to resist the temptation to abuse it. Individuals and companies will need
to find and walk a new line between serving customers and exploiting them,
either way with pinpoint accuracy. In the brave new world of aggregated data,
companies will need to monitor themselves as well.
Jan Chipchase is a human behavior researcher on the
design team at Nokia. He is based in Tokyo
My BlackBerry Ate My Accountability
by Lew McCreary
No sooner is a new tool invented than someone cooks up an off-label use.
Sometimes an off-label application improves on the initially conceived one. For
example, Thomas Edison originally intended the phonograph to be a dictation
machine, not a source of entertainment. Soon enough wiser heads, and market
forces, prevailed. Edison
Let’s consider personal technologies, which have become means of shifting
responsibility, tacitly or explicitly, to a device and away from oneself. Cell
phones, for instance, have long been used self-importantly to showcase their
users’ raw power while the technology takes the heat for the offense. I
recently overheard these swaggering words in an airport departure lounge: “You
tell him I’m coming in there this afternoon to fire his ass!” Then there’s mortifying
exhibitionism—intimate, embarrassing lovers’ quarrels or, worse, smarmy public
displays of affection (which, by the way, is what PDA once stood for). Mobile
phones have been used slothfully by people pretending to be too busy with a
business call to be confronted about some dereliction of theirs.
Camera-equipped models have been put to especially heinous misuse as tiny
digital Peeping Toms wielded surreptitiously on escalators and beneath
conference-room tables.
But my favorite example of off-label use of a PDA—call it “excuse technology”—is
one involving Lurita Doan, head of the U.S. General Services Administration.
Doan testified at a 2007 congressional subcommittee hearing into the alleged
untoward politicization of her agency—namely, brown-bag lunches during which
political appointees to the GSA were urged to use their positions to help elect
Republicans. When asked under oath what transpired at these lunches, Doan said
she had not been paying attention because she was doing e-mail on her
BlackBerry.
I cast no aspersions on Doan’s memory or motives. She spoke for many when
she offered this perfectly plausible excuse for modern inattention. Technology
has grown so prosaic as to become the all-purpose, dog-ate-my-homework dodge
for busy grown-ups. Anticipate, therefore, epidemic levels of BlackBerry- and
Treo-constrained recollection of important decisions made in your presence or
of orders you’ve issued to your teams.
Forewarned is forearmed. You may be tempted to ban the use of these devices
during important meetings and discussions. You will, of course, make sure that
someone’s on hand to take careful notes to then circulate among attendees, so
that those present know they’re accountable. And if employees are correct in
believing that multitasking during boring meetings allows them to accomplish
work of a higher value, ban those meetings.
Lew McCreary is a senior editor at HBR.
On the Back of a Turtle, I See a City
by Jaime Lerner
The city of today is too often a campground, an unchecked metastasis. It is
either an ever-spreading Atlanta Los Angeles Gotham
By contrast, consider a turtle’s shell: a house upon the back of its
self-sufficient occupant. Have you ever noticed that the meticulously organized
outer surface resembles an aerial view of a city? The shell’s pattern evokes
the cells that constitute urban tissue—blocks, streets, and functional centers.
A turtle-shell city is a place to live, to work, to relax and play. In all, it
is a circumscribed, homey shelter.
This schematic drawing of a turtle can
help you imagine some of the important features of the ideal urban environment,
built upon principles of mobility, sustainability, and cultural identity. In
the denser area of the turtle-shell city, identified by the taller edifices,
you can find apartments, office buildings, mixed-use structures (with
residential, commercial, and service functions), as well as street-level
attractions—a bakery for morning bread, a fancy bistro for business lunches, a
newsstand with reading material for bus rides, a town square, a church, an art
gallery. Supporting the high-density area is an ecologically sustainable mass
transportation system that, whether it operates on the surface or underground,
is fast, safe, comfortable, and accessible to all. It’s also part of a public
transit network that extends throughout the community.
The turtle-shell city’s housing accommodates the needs and preferences of a
broad spectrum of people. It has high- and low-rise buildings along with
stand-alone homes. There are no ghettos, because neighborhoods comprise a
mixture of income and age groups performing a variety of functions. The more
you mix, the more livable the city becomes.
Near the residences are schools, hospitals, and workplaces. All areas are
permeated by parks and gardens—keys to a healthier urban environment. Such
green spaces are even part of the city’s drainage system, protecting the
waterways and creating natural flood basins. Just as no part of the turtle’s
shell can be changed or removed without harming the whole creature, none of
these elements of the city can be altered without affecting its overall
sustainability.
The city of the future will not be an accident of mindless growth. Instead,
it will be a home as exquisitely and holistically designed as the turtle’s. It
is where businesses will need to operate and what they must first help to create.
Jaime Lerner, architect and urban planner, is the
founder of the Instituto Jaime Lerner in Curitiba, Brazil Curitiba
Socially Responsible Lobbying
by David Vogel
When companies lobby the government, it’s often to avoid regulation. They
may spend considerable time and money establishing themselves as good corporate
citizens, but rarely do they cross the line to promote good social policy. That
leaves their voluntary social commitments vulnerable to competitive pressures
from rivals that do not burden themselves with corporate social responsibility
(CSR). If companies could make their commercial and social interests become
legislative priorities, they might bolster their efforts to help society.
Fortunately, this type of change is not a pipe dream. We can already see it
happening with regard to global warming, an area where much of the business
community now views regulation as inevitable. Some environmentally conscious
firms are actually pushing for strong rules, in some cases to gain competitive
advantage over their emissions-heavy rivals or increase demand for their
cleaner technologies, and in other cases to support their long-term investment
goals. They’ve learned that they benefit strategically when they promote the
public good. The lesson applies to other areas of CSR as well.
Consider the recent furor over hazardous toys imported from China U.S.
To their credit, Mattel and the Toy Industry Association have supported a U.S.
Proactive lobbying of this kind can have an even bigger payoff
internationally. Many of the world’s poorest citizens live in resource-rich but
corrupt and violent states. Even the most economically sophisticated,
well-intentioned CSR programs have had little impact in such places. The elites
who govern these nations have self-interest goals that undercut the efforts of
companies to behave responsibly. Firms that refuse to pay bribes or do business
with government-connected companies, for example, risk getting shut out of the
country.
To make a real difference, firms should encourage the governments of
Western nations to enact policies, possibly including trade sanctions, that
pressure the elites of developing countries to behave responsibly. A case in
point is the Kimberley Accord, which has helped to reduce international trade
in diamonds sold by warring groups to fund their activities. The effectiveness
of this global regulatory program has been enhanced by trade sanctions actively
enforced by developed countries.
Lobbying needs to become a critical component of a CSR strategy. It is not
enough for companies to engage in sophisticated private initiatives, however
strategic. They must also be willing to support public policies that make it
easier for them and other firms to do the right thing. Without government
support, many socially beneficial corporate programs will have limited impact.
David Vogel is the Solomon P. Lee Distinguished
Professor of Business Ethics at the University of California at Berkeley’s Haas
School of Business. He is the editor of California
Management Review and the author of The
Market for Virtue: The Potential and Limits of Corporate Social Responsibility (Brookings Institution, 2005).
China’s Untapped Second Cities
by George Pohle
Most companies serving the Chinese market have focused on the top-tier
cities in China
The next horizon is the second tier, a category of cities that my IBM
colleagues and I defined as having fewer than six million people and an annual
per capita GDP of less than 34,000 yuan. Collectively, the 300 or so cities in
this group, such as Fuzhou Hefei China
The opportunity is easier to envision than to realize. To succeed in the
second tier, companies have to price their products lower than in other world
markets. This means, at the very least, taking a hard look at their cost
structures and seeking out local parts and manufacturing suppliers to provide
components. Savvy companies are going a step further. Motorola and Peugeot, for
example, are trying to create strategic advantage by localizing their R&D.
This approach allows them to invent low-cost, low-price alternatives to the
products they sell elsewhere, tailored to the specific needs of the Chinese
market. It also permits them to collaborate with local suppliers from the
beginning, so that product development reflects local skills and costs.
The next hurdle is distribution. According to some studies, up to 42% of
foreign companies’ sales in China
Notwithstanding these challenges, multinational companies that my
colleagues and I have spoken with are currently sourcing 9% of their global
revenues from China
George Pohle is a vice president at IBM and the
global leader of the firm’s business strategy consulting practice and its
Institute for Business Value. He is based in New York
Islamic Finance: The New Global Player
by Aamir A. Rehman and S. Nazim Ali
Islamic finance is booming. To be precise, more and more financial services
are being provided in accordance with Islamic law, or sharia. Sharia-compliant
banking is becoming increasingly prevalent in Muslim markets, accounting for
more than half of total banking assets in Saudi Arabia as of 2005 and, soon,
about 40% in the surrounding Gulf region. Malaysia
Sharia-compliant finance is not limited to Muslim markets. When Ford sold
Aston Martin to an LBO consortium for $848 million, the deal used
sharia-compliant structures to meet the needs of Kuwaiti investors. Caribou Coffee , America
Not surprisingly, global players are joining the trend. Citigroup, HSBC,
Deutsche Bank, Standard Chartered, ABN AMRO, and countless others have built
Islamic finance units—several of which, including Citi Islamic and HSBC Amanah,
are separately branded—and invest in expanding their sharia-compliant
capabilities in the Muslim world. These financial institutions engage
independent sharia scholars, typically in the form of a “sharia supervisory board,”
to set guidelines for compliance, approve products and transactions, and
conduct regular audits. (For an overview of how the industry is incorporating
such guidelines, see the May 2007 document “Islamic Financial Services Industry
Development,” available from the Islamic Financial Services Board at www.ifsb.org.)
Innovative and rapid product development has been a key enabler of the
sector’s growth. The product set has expanded to include a wide range of
commercial and individual finance products (leases, home financing, personal
loans, and so on), hundreds of sharia-compliant equity and real estate
investment funds, and other savings products (such as term deposits) with
low-risk returns. Sukuk—the
sharia-compliant equivalents of bonds—are one of the fastest-growing areas of
Islamic finance: Japan Texas
Islamic finance may even have a thing or two to teach regulators and
conventional financial institutions. The sharia requirement that all parties to
a contract must disclose both risks and rewards could have prevented companies
from engaging in the kind of financial engineering that led to the subprime
lending crisis. Similarly, the currency speculation that has historically
destabilized some emerging markets would be prevented by sharia rules that
effectively outlaw the practice of short selling. Opaque financial contracts
laden with penalties and complex clauses would be more difficult to use because
sharia requires that the risks of any product or service be clear to both buyer
and seller. Perhaps most interesting is the explicit link that Islamic law
makes between financial decisions and values—the powerful notion that people
should not profit from activities they consider immoral. Given the growing
importance placed on values in the corporate world today, formal mechanisms
whereby firms ensure compliance with sharia may serve as a model for all
companies that take corporate social responsibility seriously.
Aamir A. Rehman, former global head of strategy for
HSBC Amanah, is the author of Dubai & Co.: Global Strategies for
Doing Business in the Gulf States Massachusetts
What Good Are Experts?
by Michael J. Mauboussin
As computing power grows and networks unleash the wisdom of crowds, the
unique value of experts in making predictions and solving problems is steadily
narrowing. This trend, which I call “the expert squeeze,” doesn’t necessarily
mean that expertise will become dispensable, only that organizations must
change how they use experts.
Not long ago, recommendations from experts, even if imperfect, were the
best ones available. So people relied on them to address challenges across the
entire spectrum of complexity. At one end of that spectrum are the problems
with immutable causes and effects that can be confidently solved using
rules-based processes. Today, computers increasingly solve such problems—credit
scoring, for instance—more cheaply and reliably than experts can. At the other
end of the spectrum are probabilistic problems, such as predicting stock market
behavior, whose causes and effects are not clear and whose outcomes are
significantly governed by chance. The collective wisdom of ordinary people
often proves to be better than experts at addressing such problems.
Nonetheless, research across many fields, from complex systems to
psychology, suggests there is a sweet spot where experts still have a unique
edge (see the exhibit “”).
They’re well equipped to solve problems that have rules-based solutions but
that allow a high degree of freedom in arriving at them. When avenues for
solutions are relatively few, such as in tic-tac-toe, the degree of freedom is
limited. When the potential avenues are many, such as in the board game Go, the
degree of freedom is high. The greater the degree of freedom in solving a
problem, whether rules-based or probabilistic, the more complex the challenge
is.
Computers are exceedingly adept at rules-based problems with a limited
degree of freedom, like tic-tac-toe. However, they’re often clumsy at high-freedom
problems like Go because, unlike people, computers cannot quickly eliminate
unproductive avenues of inquiry and make creative connections among bits of
information. Experts are likely to continue to outperform computers in
rules-based areas that require deep, domain-specific knowledge, such as
innovation and design. Success in these domains requires the efficient,
creative recombination of a vast array of building blocks in novel, productive
ways.
Crowds have proved to be skilled at solving certain probabilistic problems,
but they often fare poorly if they lack sufficient domain-specific knowledge.
Prediction markets, for example, were famously wrong in forecasting that
weapons of mass destruction would be found in Iraq
For now, individual experts or small expert teams within companies still
have an edge in the realm of rules-based, high-freedom problems such as
innovation, strategy development, and troubleshooting. To make the best use of
this advantage, managers must carefully categorize the business problems they
face. They should explore, for example, whether computers might do a better job
than experts at solving the company’s rules-based problems. Harrah’s, for
instance, has crunched data from its casino business to identify better—and
counterintuitive—ways to manage customers. Marketing experts had presumed that
Harrah’s most profitable patrons were high rollers, but computer-based
analytics revealed that loyal low rollers actually were.
For probabilistic problems, such as sales forecasting, companies should
consider replacing (or, at least, augmenting) expertise with internal
prediction markets where employees can buy and sell opinions on business
outcomes. Many firms, including Best Buy, Microsoft, Google, and Eli Lilly,
have found that a diverse group of employees with appropriate knowledge more
accurately forecast crucial business metrics, like product sales and profits,
than budgeting experts do.
For problems where experts still prevail, psychologist Philip Tetlock
offers an insight about how to nurture desired expertise. Using a metaphor
borrowed from the Greek poet Archilochus (via Isaiah Berlin
Going forward, the most competitive organizations will be those that
effectively categorize the problems they face and identify the best ways to
solve them. Throwing experts at problems that your competitors are solving more
effectively with computers and crowd wisdom will not serve you or your
shareholders well.
Michael J. Mauboussin is the chief investment
strategist at Legg Mason Capital Management in Baltimore Columbia Business School New
York Columbia University
Sustainable and Unsustainable Trends
by Garrett Gruener
Sustainable
Trends
A modest level of terrorism is something we can and must
endure for a long time. It is best combated with the tools of public health:
isolating the origins, disrupting the vectors of transmission, and protecting
Computing power is still increasing, despite
predictions that Moore
Human enhancements to ameliorate disabilities and the
effects of aging will keep coming. Stay tuned for many more drugs and devices,
some based on nanotechnology, that help average people perform better.
Agricultural productivity can increase indefinitely. Even
the most sophisticated farmers have yet to see the full effect of the biotech
revolution.
Urbanization is surprisingly sustainable. More than
half the people on the planet now live in cities, with huge implications for
birth rates (down), poverty (down), and economic growth (up).
World GDP will continue to rise, owing to increasing
productivity (driven mostly by IT), globalization, and the spread of markets.
Robots are here to stay. They will drive manufacturing
employment down and productivity up—and vastly increase mass customization.
Labor mobility persists. Despite the current furor
over illegal immigration, people will still move to seek economic advantage.
The cost of nearly everything will continue
to decline, as it has for hundreds of years.
Mean IQ scores will continue to rise, as they have
since 1920, perhaps because an increasingly complex world helps to train our
minds. On the horizon are drugs that improve memory and devices that enhance
cognition.
Unsustainable
Trends
Carbon emissions cannot continue to increase. They must
decline in absolute terms, not just per dollar of GDP. Regulations are paving
the way by forcing emitters to cover more of the carbon-remediation costs.
Health care spending cannot continue its upward trend. It’s
currently 16% of GDP in the United
States
The decline in the mean retirement age has come to an
end. The average is increasing because of financial needs, boredom, and better
health care.
Ecological diversity must not be allowed to decline
unchallenged. Toward that end, the Nature Conservancy has purchased 117 million
ecologically important acres and 5,000 miles of rivers.
The decline in union membership in the United States
World poverty rates cannot rise any longer. They will
begin to decline as urbanization continues and world markets expand.
The world’s dependence on fishing will change
dramatically. As major fisheries decline or collapse, offshore marine
agriculture will replace them. Already, inshore aquaculture supplies 50% of all
our seafood.
Nuclear weapons are now trending out. They will
continue to be dismantled and to fall into disuse. Many have no real mission,
other than to increase the threat of terrorism.
Oil production is near its peak. In the future, the
costs of biofuels, carbon remediation, and mining tar sands—not increased
production—will determine oil prices.
The U.S.
Garrett Gruener is
a cofounder and the managing director of Alta Partners and the founder of
Ask.com. He is based in San Francisco
