Author: JP

As most of you know, I was born and raised in Calcutta; I spent my first 23 years there, fifteen of them being educated by the Jesuits. Calcutta, where, from 1977 to 2010, there was a “democratically elected communist government”. And the Jesuits, with their focus on promoting social justice. Between the two, they made sure that I experienced something about the moral, economic, social and political implications of unequal distribution of wealth.

[This is not meant to be an economics lesson, even though I read economics at university. I am keen on trying to explain my thoughts from a “first principles” basis, so that I can engender some real dialogue with readers rather than get bogged down in definitions and semantics. The objective of this post is to excite that dialogue, so that I can learn and refine my understanding. And perhaps help you refine yours in the process].

I’ve had an interest in The Maker Generation for some time now, as evinced by these posts over recent years: The Maker State (2007); Dersu Uzala (2008); Ragu and Bolognese and Cory Doctorow and Makers (2009); Better Mousetraps and the Maker Generation (2010); The Maker Generation in the Enterprise (2010);  and most recently 2012: The Year of Maker-Friendly (2011).

For many years now, I’ve been trying to document what it means to make something when you’re a “knowledge worker”. More recently, I’ve started writing a book on the subject (my fifth unfinished book; this Christmas I intend to finish one of them!). But that’s for another day.

Today’s post is about wealth, its creation and distribution. Over the years, besides Calcutta, besides the Jesuits, there have been a number of influences on me when it comes to this post. My father, my family and close friends are the obvious ones. But two other influences have material bearing on what I’m intending to write here, material enough for me to share them here. First off, this post by Paul Graham from May 2004 on How To Make Wealth. I was very taken with it when I read it, even if I didn’t make a song and dance about the post right then. For sure it influenced my thinking. And more recently, this very recent article by W Brian Arthur on The Second Economy. I would urge you to read both articles  slowly, take your time, it is well worth the investment.

So now you have an idea of the people and concepts that influenced what I’m trying to write here. It’s a classic provisional, partly formed Sunday post. I tend to write all my posts start-to-finish in one sitting, usually a couple of hours, usually no going back. Write, quick preview for any images or inserts, then publish. Here goes:

Doing anything at all requires an expending of energy, an effort. This effort gets called work. As you expend the energy, something around you changes. You can imagine this change to be an output, an output of the work you perform.

This output has value. The value can be positive or negative. That depends on whether someone else values the output you’ve created. If someone else values (and values positively) what you’ve created, then you’ve created wealth.

Value can be expressed in many ways; money is just one way, and it is a useful way. Because you can then convert that value you’ve created into something else you may want or need, by using the money you’ve received for the value you’ve created to “pay” for the value someone else has created, to pay for the something you want or need. This is why money works as a store of value and as a medium of exchange.

Everyone can create wealth as a result, just by expending effort to make something that someone else values; that wealth becomes “fungible” if you can exchange the value you create for the value someone else creates. If you exchange one thing for another then you’re bartering. Money, by being a medium of exchange, simplifies this process.

So all human beings can create (and destroy) wealth. This wealth that is created gets distributed in a number of ways, depending on how the wealth is created.

You make something and you sell that something for value; the terms differ but the principle is the same. You do a job and get a salary; you make a sale and get a commission; you invest and get a return; you advise and get fees. Most of the time it’s that simple.

If the value of what you create is greater than the value of the things you want, then you will start accumulating wealth.

There are some quirks. If the something that you make has physical form, then you can rent it out rather than sell it. So you can keep “creating wealth” as long as there’s a rental market for the something you make, a house, a car, a boat, whatever. We’re very clever, we human beings, so we come up with even more extreme ideas. The something you make does not have to have any physical form for it to be designated your property; the State is prepared to let you keep making money from something you did once, and call it “intellectual property”. And sometimes you can even get paid for destroying something: say for example you’re in the demolition business.

One way of looking at all this is that wealth gets created by people doing work, in a plethora of ways. And wealth gets distributed in a plethora of ways as well: through jobs, trading, investments, patents, copyright, and suchlike.

These ways of distributing wealth are usually directly connected to the ways of creating wealth. If there is inequality in the landscape of creating wealth, then there will be inequality in the landscape of distributing wealth.

When it comes to creating wealth, people have advantages (and disadvantages) all the way from birth: inherited wealth; the atmosphere at home, the stability and care from the family; health and nutrition; education; cultural nuances, and so on. We’ve come to recognise this inequality and we’ve tried to deal with this in a number of ways, usually by passing laws against discrimination, occasionally by putting in mechanisms to correct historical inequalities via positive discrimination for a period of time.

This attempt to reduce unequal wealth distribution has probably gathered pace over the last 50 years. It would appear to be true for most democracies; it is likely that steps to reduce inequality have existed longer in the developed world when compared to the developing world.

Fifty years. And I get the impression that wealth inequality has increased during that time. And increased at some pace, particularly in the west.

Hmmm.

There could be many reasons. Equality of opportunity does not guarantee equality of outcome. Some people don’t like hard work. Market mechanisms to value outputs aren’t necessarily fair. A free market can be gamed, sometimes despite regulation, sometimes because of regulation. Barriers to trade, particularly protectionist barriers, can be erected by the incumbents to try and prevent erosion of the power to create wealth, or for that matter erosion of the accreted wealth. Yes, there could be many reasons.

If anti-discriminatory legislation and short-term positive discrimination have not succeeded, then perhaps we need to look at what we can do to change the way wealth is distributed rather than just the way it is created. This can happen in a number of ways; in fact this does happen in a number of ways:

People can amass wealth and give it away, distribute it to the masses, make donations to charities and nonprofits. People can pool their wealth in groups and communities, so that everyone in the community gets helped, as in Acts 2:42 or perhaps in some of the modern Kibbutzim.

Free markets alone don’t seem to work, if the last 50 years are anything to go by. [And non-free markets, if we look at communist examples, appear to fare at least as badly if not significantly worse.] Jobs as the basis for distribution don’t seem to work; for one thing, not everyone has a job; in future, with the current economic environment and demographic trends as the backdrop, full employment is not likely to be anything more than a theoretical economic model, much like the “rational actor” who preceded behavioural economics.

The recent book by Erik Brynjolfsson and Andrew McAfee, Race Against The Machine, is well worth a read in this context; it shares a relatively gloomy outlook on many types and styles of job, a view that is echoed in W Brian Arthur’s article on the Second Economy, which I referred to earlier, since it was the trigger to my writing this post.

So where do we go from here? One of the ideas I’ve been playing with is a simple one:

What if people got paid for their data?

We live in an age of lifestreaming. For decades customers “spoke” in the past tense, “I bought” or “I did”, because it was expensive to invest in the infrastructure to collect anything else. IT-intensive investments were made at the point of sale and in the back office, and so everything the customer did was viewed as a transaction in the past.

More recently, with the ubiquity of smart device and connectivity, customers began to speak in the present tense: “I am doing”. Even more recently, customers have begun to speak in the future tense “I will do” “I plan to” “I want”. Sometimes they even speak in groups “we intend to” “we are prepared to”.

The data in the lifestreams has value.

Soon everyone will be able to lifestream.

What if people got paid for their lifestreams?

Just wondering.

Views? Flame away, I do this to learn. And sometimes I learn best when someone tells me I am talking absolute balderdash and poppycock. As long as you take the time to explain to me why I am so wrong.

 

There’s been a lot of buzz about Sugru for a couple of years now; I’d read the coverage, played with the stuff, but hadn’t bothered to buy any until today. It was the same with opensource software and, later, opensource hardware. I’d see the buzz, lurk for a while, then commit a couple of years in. It happened with linux, it happened with arduino, and it will continue to happen; I hope to get my hands on an affordable 3D printer soon.

As I completed my Sugru transaction, I marvelled at the site and the way it made me feel; and it occurred to me that perhaps we were not far off a time when “maker-friendliness” became valuable, as the tectonic plates of society did their regulation generation shift.

And it made me think about the whole concept of maker-friendliness, in terms of what it could mean, how it could be claimed or certified, who would do the claiming. All of which would need some answers to the why and the when as well.

So I thought I’d share what I’d been thinking about, see what you thought about it, learn from your comments.

The essence of maker-friendliness: one person’s perspective

My formative years were spent in India, more specifically in Calcutta. One city, two addresses (three if you’re being pedantic), 23 years. Throughout my time there, I was able to observe a city of makers. People who built or made things from first principles, from raw materials. Houses were built from scratch: you saw the doors and windows being made, the floor mosaics were made and laid in front of you, glass was cut to size, paint was mixed to the tones required, the furniture was not just made in front of you, it was made to suit the environment it was meant to fit in.

Labour was extensive and affordable. “Custom” was cheap and “manufactured” was expensive. There were a few manufactured goods, mainly electrical. Electronics was busy being invented, the transistor found its way into our lives only in the early 70s. There was an automobile industry, any colour you like as long as it was a copy of 1950s designs from Austin, Fiat and Standard. White goods were rare largely because they didn’t serve much purpose: electricity was not in reliable supply.

Besides shelter and transportation, the same was true of food. Food was rarely available in processed form, and frozen food was unheard-of. Dishes were prepared from scratch: fresh herbs, fresh spices, everything chopped and ground and dried or made into paste in front of you. (And everything smelt heavenly). Fast food was rare as well, except via the street vendor, whose particular chemistry of secret spices attracted and beguiled all who passed.

Clothing fared no better. Manufactured clothes, particularly those made from artificial fibre, were rare, expensive and (sadly) sought after. [I wonder how many Asians of my generation were “forced” to wear terylene shirts, clammy, incapable of absorbing perspiration, rash-forming, ill-fitting and altogether decidedly uncomfortable? All this in preference to handmade pure cotton tailored, absorbent, skin-friendly shirts that had somehow become unfashionable…. how life changes.

Things worked. And when things didn’t work, they were repaired. Made to work. By people who knew what they were doing, people who showed mastery in their skill. They would observe something not working, listen, sometimes touch and feel the not-working thing: I have seen car mechanics put their ear to a car bonnet and just listen, intently, and then pronounce what needed to be done.

Repairing was about making do. Spare parts were rare. So the first resort was to try and use what was already there, mutate the existing part. The second resort was to cannibalise the part from some other thing, again with mutation as needed. The final resort was to make the part from scratch.

There was no resort called “throwing it away”. Not last, not first, not ever. Shoes, clothes, even cars. Mended, not replaced.

Some household goods were mass-manufactured. So I saw people buy toothbrushes, toothpaste, sugar, salt, pepper, “Western-style”. But I also saw people clean their teeth with sticks of neem and with salt. I saw people “making” salt by boiling sea water. I saw people use molasses or jaggery instead of “refined” sugar. You could buy polished rice as well as brown, natural, still-with-husks rice.

Sugary and carbonated drinks were rare. Cold sugary and carbonated drinks were rarer still. When you had a fruit drink, it started with the fruit in front of you. If you wanted, you could pay someone to make the drink for you: this was common for things like sugarcane juice, where the cane was crushed between two heavy cylinders and the juice run-off collected and served. But if you wanted you could just chew the sugarcane yourself.

We were relatively well off; more accurately, we thought we were relatively well off, and we were treated like we were relatively well off. And so, like many other Indian families, we had servants. And service was not seen as a stigma. Handymen were common, people skilled at fixing things and altering things to suit changed needs. I was one of five siblings. By the time number five arrived it was clear that we needed more beds. But the bedroom (singular) wasn’t expandable. And bunk beds were dangerous because of an odd contraption called the ceiling fan, which worked sporadically and could therefore cut heads off sporadically as well. So we contrived. [Our family motto was for sure We Shall Contrive. For some reason I think its adoption as a motto had to do with Georgette Heyer, it may well have been through one of her Regency books that we discovered and adopted the motto].

The contrivance was simple. Two beds of normal height. And two further beds that came out at night, on wheels, staying underneath the normal beds by day. Custom built for us. When furniture was made, it was made from scratch. Something needed re-caning? The cane was stripped and prepared in front of me. A chair needed mending? Dowels and plugs were made to size in front of me. I cannot remember our buying a single piece of furniture during my childhood or youth. Repairing, yes. Re-upholstering, yes. But buying new? Not a chance.

When you read my attempts at formulating a list of what makes something maker-friendly, please bear the foregoing in mind. I am a product of my experiences.

Maker-friendly attributes

Before I can call something “maker-friendly”, I would look for the following attributes:

Based on “first principles”: There were instructions as to how you could make the thing yourself if you so chose, using simple accessible”raw” materials. From “first principles”, a la what Marcin Jakubowski and his friends have been up to with Open Source Ecology and The Global Village Construction Set.

Underpinned by communal learning: If you did use the instructions from scratch, it was to be based on what Doc Searls called NEA in the early days of open source: Nobody owns it; Everybody can use it; Anybody can improve it. NEA provides a sense of community and sharing that I found powerful at the time, and continue to find powerful.

Commoditised by design: For many years I thought of something as “commodity” when the price was driven down by open competition. More recently, I think of something as a commodity when it has no real differentiation in itself, when it can be used for a variety of purposes. Not “standardised”. Commoditised. Where you can modify purpose at will, as in “this used to be part of my bicycle and will now be used to repair that grandfather clock”.

Lookable under-the-hood: You should be able to take it apart, even if you find it hard to put back together. The putting-back together should not require specialist machinery that is hard to find or rent.

No parts-ransom: Repair must be something you can do yourself, without having to buy spares from a specific outlet. Without invalidating the warranty. [The more I think about, the more I realise that the very concept of warranty may need simplification, and possibly doing away with completely. Something is either fit for purpose or it isn’t. Perhaps warranty has become a Trojan Horse besieging Makers worldwide].

Globally available: Regional constraints in licenses and agreements are often reprehensible. Even today, I was frustrated that a book I wanted to buy was not available in the UK while it had been released in the US. Ironic, since the book was about reform of copyright! I tend to think that region coding of DVDs was perhaps the single stupidest technical “invention” I have come across, stultifying its inventors in its ability to pave cowpaths.

Encouraging development of skills: This one’s likely to be contentious, but I feel strongly enough about it to give it a try. Maker-friendly things will encourage the acquisition and development of a skill or skills, will help lead to achieving mastery of the skill or skills.

 

Maker-friendliness: How it is claimed, who does the claiming

I think that there is a case to be made for the “manufacturer” of the goods in question to make the claim; but as a community we can get involved in the process. It’s still very early days, but I was thinking something along these lines would work:

1. The community sets up a Maker-Friendly site, probably a wiki, listing what makes something maker-friendly: it doesn’t matter whether the community uses any of the things I’ve suggested, what matters is that there is a community-verified list of attributes, the “terms” of Maker-Friendliness.
2. Someone who wishes to claim “maker-friendliness” then uploads the reasons why into the Maker-Friendly Wiki, and then unilaterally agrees to adhere to the terms. Legally binding.
3. The claim is rated by the community, term by term. There is a threshold below which no claim is assertable. After that, a Maker-Friendly score is available for the product or service, a score that is a derivative of individual term ratings.

Maker-friendliness: Why and why now

This is no longer about politics or “freedom” or utopianism or anything like that. It’s about being stewards of what we have on earth…. as a community. It’s about that stewardship, and about bringing more sustainability into our actions. It’s about reducing waste.

And it’s about unleashing creativity. By the truckload. Because we’ve been wasting the latent creativity of whole generations by denying them the opportunity to be makers, denying them the satisfaction of gaining mastery in skills that have meaning. And sometimes mystery as well.

What next?

Well, if people are interested in the idea, something will happen. If people like what I wrote, they might involve me. And if the idea’s not worthwhile, it will die. Which is what it will deserve if people don’t like it.

Views? What can I improve? Where have I gone off beam? Let me know.

1. Parasitoid larvae in caterpillars affect the behaviour of moths: Found this as a result of my looking into ecosystem equilibrium. I am fascinated by how pests, parasites and plants live in fragile harmony: there is beauty in that fragility and in that harmony. I also like three-cornered hats and regulatory systems. Parasite hides in caterpillar, gets to plant as caterpillar goes munch munch, proceeds to protect said plant from said caterpillar’s future state. Something poetic and wonderful and almost psychedelic about that.

2. World in 2000 as predicted in 1910: Found at the delightfully-named sadanduseless.com site, a collection of drawings by a French artist on how he perceived life would be at the turn of the next century. Very instructive. I’m very tempted to see if we can’t start an opensource competition, Answers On a Postcard, asking people to submit their visions for 2100. Tim O’Reilly?

3. Learn to code|codeacademy : Interesting cloud-based selfserve approach to teaching someone to code. I’ve only looked at the first few exercises, classic scripting language stuff around javascript, but I do like the interface and the flow. I can imagine a time when the knowledge of a scripting language becomes a universal need, so anything that lowers barriers to entry is worth it.

4. SpaceChem: Been researching design-based games suitable for entry into the world of work. Minecraft seemed an early possibility. SpaceChem holds fascinating promise. But I haven’t really tried it out yet, need to move over to a linux machine for that. Like what I’ve seen so far.

5. Information is cheap, meaning is expensive: A George Dyson article in the European. Always interested in what he has to say.

Incidentally, I will only continue to do this if you guys find it useful. So feedback is important.

I love the web, and all the things it lets me do.

Take the Ricky-Tick Club in Windsor. Ever since I moved to Windsor in 1988, I’ve been hearing about the place. It started off as an R&B/folk club in a small upstairs room at the Star and Garter Inn, shown below, which appears to have been near where the Goswell House alleyway is today.

 

Then it moved to the Thames Hotel, down by the river, where the Old Trout used to be, and is now Browns. You can see the original hotel here, and below that a poster of the kind of people who used to play there weekly!

 

 

 

And finally, the club “settled” at the riverside mansion at Clewer Mead. I believe it was demolished to make way for what is now the new leisure pool.

Here’s a smattering of the posters you can find on the web to do with the Ricky-Tick in Windsor (while there were other Ricky-Ticks started in Reading, Guildford, Croydon and Hounslow, by the same team, it was the Windsor one that took pride of place). For the sake of historical relevance, I’ve included one poster that wasn’t for the club but for the music festival, held at Windsor Racecourse. It helps you understand what the times were about.

The list of people who played Windsor in the early-to-mid 1960s reads like a Who’s Who of the kind of music I listen to:

Jimi Hendrix. Stevie Wonder. The Rolling Stones. Eric Clapton. Cream. Bert Jansch. John Renbourn. Pentangle. Syd Barrett. Pink Floyd. Led Zeppelin. Peter Green. Fleetwood Mac. The Animals. The Yardbirds. The Moody Blues. Alexis Korner. John Mayall’s Bluesbreakers. The Graham Bond Organisation. Donovan. Ten Years After. Long John Baldry. Elton John. Not to mention people like BB King, Bill Haley and the Comets, John Lee Hooker, Howling Wolf, Sonny Boy Williamson and Screamin’ Jay Hawkins.

What appears to have made the Ricky-Tick Windsor special is that it was a showcase for fresh talent; many of the people and acts named debuted there, in terms of their first real public performance.

And now?

Nothing.

Well that can be fixed, can’t it?

For many years, I have planned to build a school in Windsor when I retire. A school that others can copy for free. I will still do that for sure. That day is coming closer.

Now I know there is something else to be done after that. A good concert venue, where budding talent of the future can show us what they’ve got.

Talent is timeless, as is music.

As the web teaches us about the past, it can help us with renaissance. Where renaissance is called for.

Music’s a good place to start.

Incidentally, with respect to the Ricky-Tick. If you have any memories or memorabilia about the place then please comment and share. There’d been some rumours of a book coming out, by one of the original founders, John Mansfield, but I’ve not heard of it happening.

Outsourcers are a bit like private equity. They make money by taking something over, ruthlessly and rigorously standardising everything about, and making money on the difference between the price they agreed in advance and the costs they actually incur post-cleanup.

Nothing wrong with that. It’s a business, like any other, providing something the customer wants, at a price the customer is prepared to pay, and usually one that is profitable for the provider as well.

It’s the same sort of thinking that pervaded firms when they had to decide what to own and what to buy in. Why firms used to focus on deep vertical integration.

It keeps the costs down.

Which is a good thing, isn’t it, keeping costs down?

Firms couldn’t be wrong. Private equity operators couldn’t be wrong. Outsourcers couldn’t be wrong.

Vertical integration coupled with rigorous standardisation was the way to go.

So the thinking was applied to systems as well. Integrate everything in sight, as deeply as possible. Standardise everything within the resultant monolith. Reduce transaction costs as a result.

Yup, makes sense.

Provided.

And it’s a big “provided”.

Provided we’re talking about steady-state. No changes.

In all these models, transaction costs are kept low because nothing is allowed to change. The firms of the early 20th century could mandate it. PE companies could enforce it. Outsourcers could demand it. Usually by deploying a simple mechanism: high tariffs for any changes.

And so it is with monolithic vertically integrated systems. Good for steady state.

But very expensive to change.

The world we live in is a world of change. Demanded change. Mandated change. Customer-driven change.

Steady-state transaction costs can be controlled, of course. But only in a steady-state world.

What is now needed is a means of managing transaction costs in an ever-changing world.

And that’s where the cloud comes in. Real cloud, not the zero-sum-game “private” porcine make-up.

There was probably a king on the throne of the United Kingdom the first time the phrase “keep fixed costs as low as possible, and let variable costs be driven by the market” was used. Keeping fixed costs low makes sense. Because the cost of change is usually the cost of changing something in the fixed cost bucket. Variable costs, by their very nature, vary according to volume.

Imagine you bought a fixed-price ticket to Paris. And, sometime after you bought it, the demand drivers and environment had changed, and you had to go to New York instead. Would you say to yourself “Well, I bought this ticket to go to Paris, and that’s what I will do, regardless of where I’m meant to be”? Or would you berate yourself for buying a fixed-fare no-changes low-cost ticket while knowing that things might change?

Sometimes I’ve heard IT people talk like that. “I have to try and get value from what I bought, even if it is of no use to me”. I guess this is part of what gets called Sunk Cost Fallacy.

I’m going to continue to think about this, just wanted to air some of the thoughts, especially since some of them are thirty years old.

But before I end this post, I wanted to bring up two more things: meeting scheduling; innovation. Because I think this fixed cost/variable cost dichotomy plays out well in those areas as well.

Take scheduling meetings. How many times have you been in a situation where it’s really important to get a particular bunch of people together, and the “system” spurts out the 12th of Never as the next available date? A strategy that relies on agent negotiations between Outlook calendars….

I’ve always considered this a strange phenomenon. If it’s important to keep fixed costs low, and if human time/salary is one of the biggest costs, then why pre-commit a high proportion of the time? Isn’t that creating a new fixed cost? What I tend to do is to hold on jealously to white space in my schedule for as long as possible, so that I can respond to changes in demand quickly and effectively. Of course there are some regular meetings, these have to be scheduled in advance. When someone plans a visit, meetings have to be scheduled in advance, to “lock” the event in…..otherwise the cost of travel should not be undertaken. But for most of the time, it’s best to keep the swing room. Knowledge work is lumpy. Peaks and troughs.

Similarly, let’s think of innovation, particularly innovation with a technological component. One possible barrier to innovation is the corporate belief in Sunk Cost Fallacy. The space to innovate is taken up by the long-term commitments within the fixed cost bucket. An inspection of the ratio between fixed and variable costs for each part of the estate may provide a proxy for the innovation capability of that part of the estate. Obviously it would depend on the cycle of investment the firm is in, the market conditions (steady-state or fast-changing), the market itself (a manufacturer of oil tankers is going to have somewhat different characteristics from a retail bank), a whole slew of exogenous and endogenous variables.

But despite all that, I am intrigued by the possibility that something within the fixed/variable ratio may be a simple proxy for the cost of change, and therefore for some part of the capacity to innovate.

Views?