Jugaad and frugal innovation article in Innovation Management

Our report on Jugaad innovation in India along with a general description of the Universe Foundations project on Frugal Solutions are featured in a long article in Innovation Management.

Jugaad - frugal innovation in India

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"Jugaad – frugal innovation in India" is a brand new report describing the methods and the mindset which companies and organizations in India use to create low cost solutions under very scarce circumstances. 

It's based on my recent trip around India. 

The report argues that some of these methods could well be transferred and used by Western companies.

There are many indications that the market will demand lower priced solutions, and for Western designer and engineers, the Indian approach could be an inspiration and a challenge to our usual way of developing new products.

The report is available in English and Danish.

India: So run down - so beautiful

This is normal

Robo-jugaad

Should you need to have your robot repaired while in India, it's nice to know that there is a shop in Pune, that will do it for you, cheap and while you wait. No need to use those fancy high priced Japanese service labs.

5 (very rich) persons living in a 27 story skyscraper - in Mumbai

 

India never ceases to surprise. It’s just so weird sometimes. Now this: In Mumbai, which is not exactly Monaco, the owner of one of India's largest Industry conglomerates Reliance, has built a home for his family of 5 persons. It has 27 floors and is supposed to have cost a billion dollars to build. Vanity Fair has photos of the inside – looks more like a hotel than a home to me. Certainly, it's quite a contrast to the rather hardcore slums in other parts of the city. 
When I passed it the other night, it didn’t look like anyone was home.
You stare and wonder.

Trains of Mumbai

The trains in Mumbai are filled beyond the brim. I'm surprised by the calm that these guys radiate, despite hanging on the edge of the door.

Ugly dog in ugly underwear

I collect photos of ugly dogs. There are some amazingly ugly, infested, worn out, and just weird specimens out there. Just met this one on a crowded street in Mumbai.
How did this come about, I wonder?

The conspicuous ecologist

Here it is, at last: our new 3,5 KW PV panel. Let the sun shine!

Audio interview with Michiel Schwarz, co-author of Sustainism

I reviewed Michiel Schwarz and Joost Elffers book "Sustainism is the new modernism" for the Danish newspaper Politiken. The review is in Danish, but I also did a telephone interview with Michiel Schwarz in which he talks about some of ideas behind the book, and why they chose to coin a new word – sustainism – and design new icons in order to describe the characteristics of the future.

The interview lasts 14 minutes.

E.O Wilson - interview

Oh, I should put this up: I did an interview with biologisk E.O Wilson about his most recent - and excellent - book The Social conquest of Earth.
You can hear it here, at Danish newspaper Politikens website. 

I did the interview in conjunction with my review of his book. If you can read Danish, you can read it here. 

Ord, der trænger til en opstramning

Det er forbløffende, hvordan mange af de helt centrale ord, der definerer vores kultur har meget forskellig betydning, alt efter hvem man er.

Vi bruger ord som vækst, kvalitet, fællesskab, demokrati og kreativitet til at beskrive, hvordan vi ser verden hænge sammen, men det, vi forstår ved begreberne, kan være vidt forskelligt.

Resultatet er en kommunikation, hvor vi kan sige og høre de samme ord, selvom vi hver især mener noget forskelligt.

Faktisk kan betydningerne af nogle ord – vækst, eksempelvis - være direkte modsatte. Resultatet er at man kan anstrenge sig for at realisere én opfattelse af vækst, samtidig med at man forringer mulighederne for at opnå det, andre forstår som vækst.

Når et ord bliver udvandet eller det får en ny betydning, indebærer det, at det oprindelige begreb, som ordet beskrev, bliver vanskeligt at tale om.

Der er grundlæggende ord i vores kultur, som har fået så forskellige og brede anvendelser, at de ikke længere er præcise nok til at handle efter.

Der er ord for centrale ideer, der historisk har fået en bagage af associationer, som gør, at ordet i sig selv afskrækker mange fra at overveje det bagvedliggende begreb.

Endelig er der ideer, forhold og mekanismer der først netop er opstået, ellers som vil præge verden fremover, men som endnu ikke har fået et alment kendt ord, der gør det muligt for de fleste at diskutere og tænke på det.

Uden mere præcise forståelser af de ord, vi bruger, risikerer vi at forværre de problemer, vi vil løse. Uden de rette ord, kan vi ikke beskrive vores visioner.

Ved at diskutere ordene, giver vi dem mening og får selv mening. Vi skaber redskaber til at skabe forandring.

Hvad mener vi egentlig med….?

- Kreativitet

- Fællesskab

- Demokrati

Utilstrækkeligt i forhold til realiteterne og tidens problemer

- Forbrug

Forbruger, mindset og rolle, i modsætning til borger

Deltagelse, openness, sharing

- Frihed

Til hvad, for hvem

- Ansvar

Påtage sig ansvar, ansvarlig, i modsætning til u-ansvarlig

- Integration

Forpligtelse, Interdependence, indbyrdes afhængighed, connectivity

- Vækst

Udvikling, produktivitet, velstand, effektivitet

- Kvalitet

Nytte

- Lighed

Polarisering, mangfoldighed

Wrap

A few snapshots from wonderful Iceland

Bill Clinton: interdependence means you can't get a divorce

Bill Clinton recently participated in one of London School of Economics public lectures - talking about the activities of his global initiative fund. Like all of the amazing LSE events, you can listen to it as a podcast.

During the Q&A (41 min. into the recording) he talks about some very fundamental political issues: 

"...The world has become completely interdependent, but we can’t make up our minds what that interdependence is going to look like. Interdependence simply means you can’t get a divorce. That’s all it means: that you can’t get away from each other. But it might be positive, it might be negative, it might be both. To pretend that the United States and China are not going to share the future is nuts. Or the US and India, or Europe and... You pick, fill in the blanks. So the world now is awash in a kaleidoscope of questions that all come down to this: are we going to share the future – or try to take it away from someone else?

Will we adopt a conflict model or a cooperation model to resolve our differences and to meet our own objectives? And I basically believe - in a world where growth and opportunity, and even basic humanity is drastically constrained by severe in-equality and the un-availability of jobs that pay an affordable living, by instability that is brought on not only by the aftermath of terror but by the financial crisis and by a totally unsustainable use or resources that causes climate change and local resource depletion - the only thing that makes sense is to try to develop a path to a shared future, where you have shared responsibilities and shared prosperity, and where people respect their differences, but think that their common humanity matters more. No other strategy will work."

There is only one Watson - and Siri is its prophet

There is only one traffic and Google is driving it.
The Cloud is everywhere, in everything.

The fascinating story of plastic - for better or worse

Another great talk from the Long Now Foundation's series of seminars on longterm thinking:
Susan Freinkel, a journalist, presents the story of plastic. Fascinating, informative, and ultimately disturbing, Freinkel tells how quickly this material has conquered the earth. When Titanic sunk, no part of it was plastic. Today, most of us would be very seriously challenged to get by even a few minutes without using something made of plastic. It's everywhere, and unfortunately it ends up accumulating in nature, in oceans and landfills, where it breaks down only very slowly.
If you have an hour or so for listening, this podcast will fill you in on the state of plastic.

China: Getting old before they get rich

Getting old before they get rich, is a sentence that’s popping up a lot about China. If you want a quick overview of just how dramatic and fast the ageing of the Chinese population is, this article in the Economist, ”China’s Achilles heel” is a good place to start.

Among the facts are:

Shanghai is believed to have the lowest fertility rate in the world, just 0,6 in 2010 – way below the 2,1 rate which is necessary to keep the population number stable.

A fast rise in lifetime combined with rapid urbanization and the one-child policy means, that the number of old people is growing, and the number of young is dropping much faster than in the west. By 2020 it is expected that a third of Shanghais population will be over 60 years old.

The 4-2-1 families of four grandparents, a couple and their only child has become the norm, and obviously this will become a considerable burden on the lone child soon.

China is not prepared.  The systems of pensions and healthcare cover only a fraction of the population. Just adapting the physical infrastructure to accommodate elderly is a huge task. 

How this plays out at the personal level is well illustrated by this BBC program”Assignment: Too old to get rich” – which portrays how elderly in Shanghai get by. Some are faced with climbing the stairs to the 8th floor because there is no elevator; some are ashamed because their spouse is becoming demented in a culture that often sees dementia as a form of mental illness. Others join the crowds of elderly in IKEAs cafeteria, sipping coffee and hoping to meet a companion.

One obvious conclusion: there is vast potential for Danish companies to deliver expertise on how to support an ageing society. But the solutions need to be really cheap.

Socializing kids to see themselves as co-creators

Entrepreneurial spirit is not a Danish characteristic. Our culture tends toward the less risky, less offensive approach to life. Much has been said about the need to make our educational system instill a more entrepreneurial culture, and train kids to see starting a business as a real possibility. The discussion often includes the need for leadership.

In typical Danish fashion I would like to suggest another line of thinking: maybe we should go broader. Perhaps what we need is to educate kids to become participants and co-creators, to show initiative, to assume responsibility and contribute – as opposed to passively accepting what ever we are offered in a role as receivers, consumers, and clients.

Once we have that kind of culture among kids, I’m confident that entrepreneurs will emerge. Also, we would have the foundation of a democracy that is not just a matter of saying yes or no, but one in which we see eachothers as participants and co-creators.

Sommerhus for sumpere

Af og til er det svært at forstå hvad man ser. I Vollerup, nær Kalundborg, er 6 sommerhusgrunde til salg, men jeg kan ikke rigtig forestille mig, at nogen skulle få lyst til at købe dem. De ligger midt i en sump, som det fremgår af billedet. Der er vel en kilometer til vandet, og der er masser af fine, tørre sommerhuse til salg i området til finanskrise priser. Hvad tænker ejendomsmægleren på? I don't get it.

The business of organizing civil society

The German ride-sharing service ”Mitfahrzentrale” turns out to be a really good example of how a little bit of commercial organization can mobilize resources in civil society that would otherwise be wasted.

I used to hitchhike quite a bit. You would find a good place to stand, maybe hold a sign with your destination, stick out your thumb and hope for a ride. It’s a cheap way to get around, it makes better use of all those empty car seats on the highways – and it allows for all kinds of great meetings and conversations among strangers.

But it’s pretty unpredictable for both riders and drivers. You may end up with a jerk beside you. You never know how long the journey will take, and as a driver, it’s not likely that the rider will offer any payment. Should anything happen, you probably will have no idea what the identity of the other person is.

A ride-sharing service takes a lot of the uncertainty out of this. You go online, post where and when you are going (e.g. Hamburg to Kolding, Thursday afternoon) or you browse the list of rides that are offered by drivers who will take riders.

There’s a set price, so the driver can recover some of the costs (and the ride-sharing services gets a cut of that), and the users of the service are registered. In some cases there are reputation systems, so you can asses the person you will be riding with beforehand.

The point here is that by adding a minimal level of commercial activity, you can make the sharing of resources much more attractive and easy. There are great resources that can be mobilized in the non-commercial realm of civil society, but a lot of the potential is never realized, because of uncertainty, inconvenience, opaque circumstances etc.

This points to a very interesting area of new businesses: providing the framework to harness the potential and resources of civil society.

Generally, I believe we will see a lot more hybrid organizations in the future, where commercial and non-commercial players interact, resulting in the creation of a lot more value than if the game was only pure commercial or pure non-commercial. 

There is a lot of discussion about "gov 2.0" and what the appropriate role of government should be. One of the slogans is to move "from provider to enabler" - in other words, that the government should focus on creating the necessary conditions, infrastructure and framework for productive interaction among companies and citizens. 
That is exactly what the ride-sharing service does. It doesn't deliver the driving, but enables people to get around in a more efficient way. 

What should we tag this with? Collaborative consumption, mesh economy, social networks, enabler/provider, frugal solutions. There is a lot going on. 

A cheaper, stronger state

Interesting challenge:
In the future, governments will need to have more influence, but at a lower cost to tax payers. 

Insights from IDEO

Anyone interested in innovation can probably find inspiration in the brief online newsletter, Patterns, which IDEO publishes. It's a great place to stay updated on the latest buzzwords. Most recent issue is about Gamification, other recent topics were "Serve the people", "Social media bolstering big brands" and "Care and repair".

Lots of good stuff, easily accessible.

Great instrumentalists - a capella

Hardly news, I realize, but I hadn't seen it till now. Just amazing how these guys are great instrumentalists - except that they don't play any instruments.

E.O Wilson - Evolution selects on both group and individual level

E.O Wilson, the grand old biologist, has a new book out - The Social conquest of earth.
While I'm waiting for the mail man to bring me the book, I've listened to a few presentations online.
Wilson just did a Seminar of long term thinking - talk for the Long now foundation. If you are interested in evolution, you should listen to it.
One of his main points is that evolution in fact selects at both group and individual level - not just at the individual level, which has been the orthodoxy for many years.

In his recap of the talk, Steward Brand writes:
Wilson’s alternative he calls “multi-level selection,” where individual selection and group selection proceed together (with kin selection a continuing bit player). In our eusocial species, that mix of traits makes us “permanently unstable, permanently conflicted” between selfish impulses and cooperative impulses. We negotiate these conflicts endlessly within ourselves and with each other. Wilson sees inherent adaptive value in that constant negotiation."

Another good introduction to Wilsons book is this interview with Charlie Rose. At 19 minutes, it's amazingly comprehensive.

Economics as complex evolutionary systems

Eric Beinhocker by blindwatcher


A meeting of two great minds: Richard Dawkins interviews Eric Beinhocker, the author of “The Origin of Wealth”. The 15 minutes interview is a great introduction to the idea of seeing economics as complex systems.

A few quotes from Beinhocker's responses:

…Evolution is a recipe, an algorithm that’s at play in economic systems, just as it is in biological system. And that recipe values cooperation just as much as it favors competition

…We can think of businesses as designs, for instance a design for running a bank, and each of the banks along the high street will have a slightly different way of running a bank – a different design. And the evolutionary competition is a competition for you walking down the high street to determine which bank wil serve you best, which design will suit your needs better than the others.
Where cooperation plays a role, is that you can deliver on a better design if you have strong cooperation, so a bank where the employees work together as a team and cooperate can maek better service than a bank that doesn’t. And large companies with lots of employees cooperating, often have great advantages over much smaller organisations.

…Companies that engender large scale cooperation will tend to be – on average - more successful.

…We often talk of evolution as design without a designer, but in economic systems we have lots of designers - human beings who sit and think of things. And the key role, that plays is that it is a source of variety. When an entrepreneur comes up with a new idea in their garage, that’s adding variety to the system. We can’t predict whether that will work or not untill it’s actually tried, but it creates this teaming variety in the system.

The Conundrum by David Owen - review and podcast interview

I did a review of David Owen’s excellent little book ”The Conundrum” for this weekend’s literary section of Danish Newspaper Politiken. I also did a 13-minute audio interview with David Owen about his book.

”The Conundrum” describes how – despite all good intentions – all our efforts to reduce environmental impact by creating more efficient technology end up paving the way for MORE consumption. High speed train make us go further; LED lighting lets us use much lighting everywhere; more efficient refrigerators expands our use of cold drinks, makes fridges available for more consumers – and expands our use of Air-conditioning as well.

David Owen concludes that we need a more fundamental shift – but that shift is a lot more difficult.

From the book:

”We’re consumers at heart, and our response to difficulties of all kinds involves consumption in one form or another: Just tell me what to buy. The challenge arises when consumption itself is the issue. How do we truly begin to think about less – less fossil fuel, less carbon, less water less waste, less habitat destruction, less population stress – when our sense of economic, cultural and personal well-being is based on more?”

”In truth we already know what we need to do, and we have for a long time. We just don’t like the answers. That’s the conundrum.”

Only in India - funny, real, very Indian

I love sites like "Only in India": funny, very particular, and somehow a great love for the subject shines through.

The Only in India blog is filled with photos of the weird ways Indians cope with being in India. Jugaad innovation – bottom up. Like this tuk-tuk driver and his hand free mobile phone solution...

Climate change is like an asteroid on collision course with earth

Renowned climate scientist James Hansen has a TED talk out. Low key, but very scary:

”Imagine a giant asteroid on a direct collission course with earth. That is the equivalent of what we face now. Yet we dither, taking no action to avoid the asteroid, even though the longer we wait, the more difficult and expensive it becomes. If we had started in 2005 it would have required emission reductions of 3% pr. year to restore planetary energy balance and stabilize climate this century. If we start next year, it is 6 % pr. year. If we wait ten years, it is 15% pr. year – extremely difficult and expensive, perhaps impossible. But we aren’t even starting. So now you know what I know, which causes me to sound this alarm”.

My interview with Lisa Gansky on the Mesh economy

I reviewed Lisa Gansky’s ”The Mesh” and Rachel Botsman’s ”What’s mine is yours” in the Danish newpaper Politiken this weekend. In addition to the review they published an audio recording of an interview I did with Lisa Gansky.

You can hear the interview here.

From the interview:

”A lot of the mesh economy is organized around this particular theme:

unused value equals waste. So, at a global community level we already have a lot of stuff. But we don’t need a lot of what we have much of the time. And so a lot of these services are about getting more yield or getting more utilization out of what we already have”.

Attention is the first resource that we will run out of

We create all this stuff, but we can barely find the time to use it – because we are so busy creating even more stuff.

And now the economy is crashing and unemployment is rising because we can’t consume fast enough to keep production growing.

It’s seems that the first resource, which we are running out of is attention. We can’t overcome to consume enough to keep up growth.

It’s a weird, backward logic – but it’s real, for now.

The more we have, the less we appreciate additional growth. It takes more to make us happier – while on the other hand, we need to run even faster and put even greater strains on the planet’s resources to increase consumption.

At some point it implodes, when gains are clearly losses.

Quality is subjective, what is quality can change

Quality is subjective, what is quality can change. A few examples come to mind:

- It used to be that music lovers were really concerned with hifi sound quality. These days we gladly accept bad mp3 quality through lousy earbuds for the convenience of having anything we want anywhere, anytime.

- ”Handmade” used to be an indication that something was made in a more exacting way, but these days lots of stuff can only be made by robots. Humans don’t have the consistent precision required to make our gadgets.

- Price and quality are not necessarily correlated. Google is free, like Facebook, YouTube et al.

Looking for a new capitalism

A good quote – by Gary Hamel, from his foreword to Umair Haque's book “the new capitalist manifesto”:
“We know the future cannot be an extrapolation of the past. As the great-grandchildren of the industrial revolution, we have learned at last that the heedless pursuit of more is unsustainable and, ultimately, unfulfilling. Our planet, our security, our sense of equanamity, and our very souls demand something better, something different.
So we long for a kinder, gentler sort of capitalism – one that views us as more than mere “consumers”, one that understands the difference between maximizing consumption and maximizing quality of life, one that doesn’t sacrifice the future for the present, one that regards our planet as sacred, and one that narrows rather than exploits the inequalities in the world”.

Visions with a small "v"

Tired of big breathless visions. I don’t know where to start. I’m looking for a few small visions, visions with a small “v”.
Small steps, small bets, but real.

Teaching for the future

You really need to see Salman Khan's TED presentation of his amazing Khan academy and the idea of flipping the classroom by making kids watch instruction videos on their own, and then doing what used to be "homework" in the classroom, assisted by the teacher.
The Khan academy has developed some great digital tools to track the progress of each student and to ensure that the student can learn a topic in a coherent fashion, rather than jumping on to new subjects before having the foundation of understanding that's needed.
Indeed, this seems to be a glimpse of the future.
And if you liked this; check out the "School of one" project in New York. Sort of similar, and apparently with great results too.

The solution will be shared

In my last posting I concluded that, on balance, sharing is becoming a more attractive strategy for growth than trying to conquer resources from others.

And so what?

Well, it has a number of consequences:

For one, defaulting towards sharing takes a different mindset than what most of us have been brought up with. The past three decades have been an era of individualism, classic liberalism, and a belief that greed is good because the invisible hand of the market will sort it all out.

Sharing is an act of individual surrender. You bet part of your resources and some of your sovereignty and control on others. You chose to trust that together you would achieve more, than you could have done on your own. You could be ripped off and cheated, the project may not work out, others can free ride and leave you with the bill… There are risks, and not necessarily any guarantees.

You lose some freedom by joining the community. You can be held accountable, you have to follow rules, others may not vote for your ideas.

If you are strong, it may not be obvious why you would want to depend on a community.

But, you may not really have a choice. In so many areas, our fate is shared, whether we like it or not. The global ups and downs are increasingly linked. As the global finances go, so will you. Likewise with social unrest, climate change, and a functional biosphere; you are affected by the actions of others, and you affect them – in ever larger and tighter connected systems.

Whether you are an individual, a company or even a nation state, you can’t go it alone anymore.

Sharing and co-creation is becoming ever cheaper and more powerful. Increasingly, those who chose to go alone, will not be able to compete and thrive compared to those who are capable of cooperating and creating community.

And ultimately, if each of us simply try to keep growing in a finite world with an increasing population, the system will crash for everyone. That possibility is uncomfortably real.

IMHO we cannot go on like we have done so far. At some point, soon, we need to find some solutions. I think they will be based on sharing, on community – despite the imperfections.

Two ways of growing: Taking or sharing

It seems there a basically two different ways of growing:

- You can acquire more of something that already exists – in some cases by taking it from others – or:

- You can combine your resources with the resources of others, and, with a bit of luck, something extra and completely new will emerge through your interactions.

In other words: you can play a zero-sum game, where resources are finite, and your gain is someone else’s loss – or you can enter a non-zero-sum game, in which the entire pool of resources grows for all participants.

It’s a classic dilemma: Should you try to make the most of the situation for yourself, or should you share in the hope that you will be better off as part of a community.

My argument would be that we are moving towards more cooperation. It’s generally becoming a better deal to share.

Two trends in particular are changing the balance:
1)There’s a growing scarcity of resources, and 2) we’re increasingly connected.

Consequently, we are becoming much more interdependent – and I think that we are all becoming more aware of this reality.

We’re clearly approaching the limit to how much strain we can put on nature’s resources. The planet was once infinite for us, now it’s getting tight, so the battle for resources is evident - as the rising prices indicate.

This situation will only tighten. As we move along, we can either try to conquer from others – or we can cooperate to develop smarter ways of creating utility, expanding our possibilities through shared innovation.

One could argue that cooperation and sharing is how new true growth can happen. This is the amazing and hopeful insight of complex systems; that in the interaction between the elements of a system, something completely new can emerge – something, which is more than the simple sum of its parts.

It’s like magic, yet it’s completely normal, and it’s what drives this whole evolution onwards to new levels of complexity.

We need that kind of growth desperately these days, and luckily, it’s becoming much easier, cheaper, faster and efficient to share – not least because of digital networks, but also thanks to roads, shared language and culture, technical standards, trade agreements etc.

Furthermore, the fact that a large part of the value of our economy resides in bits means that in a great deal of our interactions, we don’t have to give up what we have when we share it with others. The cost of sharing is falling, as is the cost of connecting to others.

All told, there are strong indicators that sharing is becoming a more attractive strategy.

Is it productive to consume?

What does "productive" mean, anyway?

Value and price are not the same - we should keep it in mind

We often use “price” and “value” as if they had the same meaning. But when you dissect them, there are several areas where it’s important to keep in mind that they are different.

GDP is one. It’s almost banal these days to point out that measuring a society’s wealth in terms of GDP – simply the economic activity – is misleading. There are other factors, which contribute to the true wellbeing of an economy – there are other values than money.

In the industrial age, with its focus on physical objects – atoms – scarcity determined the price. Exclusivity made stuff expensive. These days the economy is increasingly based on information – bits. Bits are different than atoms. Their price may be low, but when bits are shared and widely distributed and used, their value increases.

When you recycle or reuse an object, value is created, but in purely economic terms it’s a loss, compared to simply throwing the old away and buying a new.

Many people can report about the rise in quality of life that comes from getting a job so close to their home that they can bike to work. When you don’t need a car, you spend a lot less, but in this case you experience an increase in utility and pleasure. This illustrates a decoupling between growth in value and growth in revenue.

Finally, price and value do not grow in sync. It’s the old 20/80 rule again: You can often get 80% of the value for 20% of the price. The last 20% of value is much more expensive. The higher you are already, the more expensive it becomes to achieve the next marginal increase in value.

This is colossal!

This is the most interesting and entertaining site I’ve come across in quite a while - thisiscolossal.com. Colossal presents art that is very close to my liking: modern, colorful, high tech, quirky, fun, beautiful. There’s just a lot of great stuff, day after day.

Colossal is the project of Christopher Jobson – based in Chicago. This is how he presents the site himself:

”I like to describe Colossal as a blog that explores the intersection of art, design, and physical craft. I enjoy artwork that is tactile, physical and non-digital in nature, especially sculptural work and installations that use impossible numbers of components, or sequences in a process. During the course of a week you’ll find roughly 30 posts on photography, design, animation, painting, installation art, architecture, drawing and street art. I share things that I feel are accessible to everyone, requiring little explanation or theory, so in that sense, I hope people not involved directly in the arts can also find this site engaging”.

Virtues of the formal economy: There are reasons for having taxes and regulations

The ideas of the ”mesh” economy and ”collaborative consumption” are to create services built on shared access and shared maintenance of goods. Lots of businesses are based on this: Hotels, rental cars, car sharing, and airlines… What’s new is how digitization, urban density and a tight economy makes it possible to share many more things: Tools, sports equipment, car rides, little chores like shopping or assembling IKEA furniture.

In a sense it is a very efficient market: if someone has idle capacity, it can be offered to others and used easily and quickly and with a minimum of regulatory hassle and paperwork. Wonderful!

However, there are a few dilemmas that arise as the exchange becomes less formal, and you start doing a lot of peer-to-peer exchange and bartering.

In many ways it's the good old moonlighting economy, but digitally enhanced – and the trouble with moonlighting is that you can’t collect taxes from it, and there’s no way to enforce society’s normal regulation.

So, if you believe in having a well functioning and adequately funded public sector, good roads, public healthcare and education – or if you believe in regulation to keep track of pollution and unsafe working conditions – or if you believe in trade unions to protect decent wages and blatant exploitation of those who are too weak to negotiate – well, then you might feel that a growing informal sector is undermining the rights that others have fought hard to ensure over the past century.

It’s a paradox that the mesh economy is seen as a way of strengthening local communities and building stronger social interaction – but at another level, you can argue that it short-circuits the building blocks of society as a whole.

I have no doubt that the current commercial system, and our current way of regulating business and interactions is too rigid and often counter productive. Mesh-style initiatives are needed to challenge and explore.

But going local shouldn’t mean ignoring your obligations to contribute to society at the greater level.

Sign of the times - fake euro bills in Copenhagen

This is new

Business models for wired objects

It strikes me, that as every object gradually becomes equipped with computing power and net connectivty, we can extend to all industries, the distinction used in the computer industry between hardware and software, and within software between the operating system (OS) and the specific applications.

In hardware, new products and features are quickly copied and adjusted, and over time a product tends to become a commodity, where the only differences between makes are in the price. Also, despite the talk about mass customization and 3D printing, physical manufacturing belongs to the industrial age of mass production. High volume of identical stuff means lower prices – for now.

Software is different. Bits are live, fluent. It’s in their nature to be modified, recombined, individualized etc. The bit business is about processes rather than products. Value comes from change, and from matching the user’s context exactly.

But there are different types of bits: Some software is the OS: The protocols, standards, interfaces and basic functions, that the more specifics apps can run on. Crucially, the more devices use the same OS, the more diversity you can achieve in the apps that will be available.

So there is a progression: The physical device is a platform, which supports an OS, which in turn supports the apps.

As more objects are equipped with computing power and network connectivity we will see the same progression in every industry. Whether it’s cars, classrooms, hospital beds or thermostats, there will be a physical platform of objects that functionally are very similar. There will only be a handful of manufacturers on the market, and their margins will be razor thin.

Even though end-users have more or less the same physical equipment, they will have very different experiences, because the processes that are running on their devices are very different. We all have the same smart phone, but the feel of each phone is very personal.

This is a useful observation, because it allows you to understand better how there are different business models and different logics at play in the market – not just in computers, but generally.

When we think about the trend toward mass customization, we need to distinguish between the physical object and the processes it supports. Physical objects can be customized by running different applications on them. Physical products are cheaper when you produce them in large volume, but the software they are running can be individualized at very little cost. For manufacturers, these are very different games.

The OS layer is particularly interesting, because this is where the most power and profits reside.

There are very powerful lock-in effects at this level. Everyone benefits from standards, so once one system is established as the dominating solution, there will be a strong trend towards monopoly – witness Microsoft, Google, Facebook.

The problem with monopolies of course, is when the benefits to users from standardization and mass production are outweighed by high prices and lack of innovation when the dominating brand isn’t kept alert by competition.

… And you could go on to describe the relations between producers of apps and those owning the OS, or the relative importance of the physical device and the OS…

The main argument is to point out, that this division of roles and business models will extend to almost any kind of objects, as everything becomes wired.