Wednesday, December 07, 2011

Innovations and Snake Oil

The passing of Steve Jobs has occasioned a lot of reflection about innovation in America and around the globe, what it looks like when it works well, and those aspects of the environment that have made society fertile for such development.  To see where we are as part of an ongoing trajectory, it is useful to reconsider innovations from the past.

Getting on the bandwagon, I've got a bit of this in this PowerPoint Presentation uploaded to Google Docs.  (Either download the PowerPoint file at the link or go to the Actions menu at the bottom of the screen and create a copy.  Then go the View menu and click Show Speaker Notes.)  It starts on slide 15:  The Music Industry - A Selected History.  Actually, the title is something of a misomer, since the focus is not on the music itself but rather on how recorded audio content gets distributed and how people listen to that.  There is also the issue of how people become aware of new content to purchase. There was much technical innovation in the 50 years that the mini presentation covers (starting at the time of Elvis with record players and 45 rpm discs and ending with the iPod and the iTunes Music Store).  The upshot of the presentation is to show that what came next was dependent on many predecessors in conception as it improved on that legacy, enhancing the user experience, and with the iPod in particular, saving an industry that many thought was permanently disrupted.

One might hope that all sectors of the economy proceed over time in this manner, where successive innovation leads to triumph of one sort or another, even if there is disruption and substantial stress from time to time as social issues seem to swamp technical progress or entirely retard it, on the one hand, or when drastic innovation creates a new set of social issues, on the other.  The crises notwithstanding, we have faith that well thought through innovation will triumph.  For example, read Dr. Berwick's Pink Slip, a tribute about the recent head of the Centers for Medicare and Medicaid Services, a recess appointment by President Obama.  Berwick just stepped down because his 18 months were up.  He accomplished a lot in that short period, applying W. Edwards Deming techniques of continuous quality improvement and cost reduction to the delivery of health care.
Health insurers and hospitals, who had generally thought of Medicare as little more than a stodgy, bureaucratic insurer, began to see it in a different light as well, as Medicare staffers, trained as “improvement coaches,” began to share ideas and push for simple, sensible steps that would, for instance, keep people with chronic medical problems from having to be constantly readmitted to the hospital.
It makes you want to believe in the art of the possible. One wonders whether it is only a matter of the will to do so. 

And yet such belief may be our undoing.  Read this moving, full of disillusionment piece, Why School Choice Fails, written by someone from a majority-black community in Washington DC. The piece personalizes the arguments that Diane Ravitch made in The Death and Life of the Great American School System.  Then consider much of for-profit education.  It is growing rapidly, much of it online.  There appear to be the makings of a bubble.  Read this piece, Virtually Educated, about for-profit education in K12, or this longer piece on the same subject, How Online Learning Companies Bought America's Schools.  It has the feel of the subprime loan market of the early 2000s.  It seems to be a way to make a quick buck off of public funds.  Innovation here is used as a cover, while underfoot is the old shell game, peddling snake oil.

Capitalism seems capable of producing both.  There are examples of of successive innovation in a sector, seemingly as reliable as Moore's Law.  Yet there are other examples of markets that are apt to implode in the near future, as a result of all the chicanery that has occurred heretofore.  I would argue, however, that we're seeing a lot more of the snake oil selling than we used to.  Let's say for the moment that's true.  The question is why.  Is real innovation that much harder to achieve now?  Are opportunities to rip off other people increasingly present?  Have our social mores weakened? 

I am particularly interested in what seems all to common to me - selling snake oil to ourselves.  In this well worthwhile video (it is long, 90 minutes), Joe Nocera reports that he talks regularly with Jamie Dimon, Lloyd Blankfein, and other leaders of the major investment houses, and based on those conversations they are in complete denial about their culpability for the financial crisis.  Students who want good grades, irrespective of whether they've learned the subject matter, are eerily similar in their denial.  I too do something likewise - the diet will start tomorrow.

Was it always such or have things changed of late?  Perhaps we need to talk more about attempts at innovation that end up stuck in the mud, or about alpha tests that produce less than promising results.  You can't sell snake oil unless somebody else wants to buy it. 

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