Thomas and his team have a more clear-eyed view of the landscape than some of the more established tech transfer offices. The potential weak points I see in the plan are (1) that mentors won't have enough skin in the game to do more than provide very early and general advice; and related: (2) adverse selection resulting from more experienced inventors and mentors never opting into the program. Both might be alleviated if they can get a handful of high-profile anchor tenants signed up immediately. Still, it looks promising, and I look forward to hearing more as the plan is implemented.
One of the biggest challenges to early stage innovation is that it most needs experienced advice when it is least able to attract it, says Alan Thomas, director of UChicagoTech, the University of Chicago’s Office of Technology and Intellectual Property. “A structural problem in Chicago is that at this embryonic point there have been very few resources to turn to,” he says.
Start-up ventures are more likely to thrive when advised by multiple mentors with proven skills and experience. “Collectively we are stewarding discoveries flowing from between a billion and a billion and half dollars per year of basic research,” Thomas says.
I'm an unabashed fan of this:
So imagine the courage and leadership necessary for David Kappos and his team to look at the revenue from selling these products, and to say ‘No, that’s wrong. The President's Open Government Directive makes it clear that these should be public goods, available without fee or favor; bundle them into the bulk downloads’.
Via O'Reilly Radar
This article contains the first ranking that shows which CEOs of large public companies performed best over their entire time in office—or, for those still in the job, up until September 30, 2009. To compile our results, we collected data on close to 2,000 CEOs worldwide.Thanks to Bob Sutton for turning me on to Hansen's work.
The most recent issue of the Journal of Institutional Economics has an excellent exchange of ideas on organizational economics. The issue begins with an essay by Richard Posner: “From the new institutional economics to organization economics: with applications to corporate governance, goverment agencies, and legal institutions.”Worth checking out.
Even cooler than the essay itself: more than a dozen scholars were asked to write essays in response to the above, and they also raise a host of new issues: Who are actors and entities, what are markets? What is the role of intrinsic versus extrinsic motivation? Do theories readily apply across various contexts — e.g., across different types of organizations? Where is mainstream economics versus more heterodox approaches? Etc. The responders include Elinor Ostrom, Bruno Frey, John Roberts, etc. And, Posner then in turn responds to these comments.
How do universities using federal R&D dollars balance the sometimes competing demands of:
- The pursuit of knowledge for its own sake; and
- Focusing on discoveries that have real potential to spawn new industries, new businesses and new jobs.
What is the best way to integrate universities into broader regional strategies for economic development?
And finally, how do we make it easier to connect entrepreneurs and other business builders with ideas coming out of university research labs?
Our romantic ideal of the university professor as distinterested gadfly -- as Socrates in spectacles -- must give way to a new ideal of ideas in action -- of the university professor as intellectual entrepreneur -- as Feynman at NASA.
Outside the pharmaceutical and biotech industries, few companies consider inventing, or producing patented intellectual property, to be their primary mission. Corporate R&D has become mostly “D”: the development of products. Hardly any large corporations have “inventing” as a job category—even though it requires a different mind-set, has different goals, and must be managed differently than research and development positions. At universities and government agencies that fund academic research, patents typically don’t enter into tenure or grant decisions. Published research is rewarded, but invention usually is not. Indeed, these organizations primarily fund blue-sky programs aimed at expanding scientific knowledge. That’s a worthy thing to do. But it’s quite different from invention, which applies scientific knowledge in novel ways to create something useful, something that has economic value.
Via Zura. I have more to say about Menand's arguments in The Marketplace of Ideas, Myhrvold's "invention capital," and Kauffman's proposal for "free agents." But I'm buried in "discovery" -- a classic legal misnomer.
IAM has announced the 2010 inductees to the IP Hall of Fame. This institution, which began in 2006, is very welcome by those of us who believe, like Lincoln, that the IP system marks a unique new stage in the progress of civilization.
This is also a special year for a colleague at my law firm, Henry Blanco White. Henry's father Thomas was posthumously inducted into the hall of fame this year. Congrats to Henry and his family, and to all of the inductees. They are an inspiration to many of us in the field.
Recently, I stumbled upon the work of W. Edwards Deming while doing some reading on the applicaton of stastical control to quality improvement. I'm not sure for whom Deming would today be a recognized name, and after reading The New Economics I have a few guesses as to why his reputation may not have persisted for as long after his death as has the reputation of F.W. Taylor, for example.
Deming, unlike Taylor, was not offering easy solutions to his clients, his clients being managers at for-profit companies, teachers and administrators in schools and universities, and politicians or public servants in government -- really anybody who cared to listen. Rather, he was offering a theory about how organizations could improve their overall performance.The Systems Theory according to Deming
Of special significance to your author is the fact that Deming chose to call his theory "systems theory." Deming defines a "system" as follows:
A system is a network of interdependent components that work together to try to accomplish the aim of the system. A system must have an aim. Without an aim, there is no system. The aim of the system must be clear to everyone in the system. The aim must include plans for the future. The aim is a value judgment. (We are of course talking here about a man-made system.)
Included in this chapter 3 of The New Economics is Figure 6, which Deming calls a "flow diagram" of "Production viewed as a system":
Figure 6 illustrates the interdependence of the components (most economists would call them agents today) within the system. Deming uses the figure to explain how the product is the result not only of how each agent does his or her job, but of how well the agents cooperate to achieve their mutual goal of a happy consumer.
As Deming sees it, "[a] system must be managed. It will not manage itself. Left to themselves in the Western world, components become selfish, competitive, independent profit centers, and thus destroy the system." By contrast, "[t]he secret is cooperation between components toward the aim of the organization. We cannot afford the destructive effect of competition."
More specifically, Deming places the responsibility with management for studying the market, identifying and selecting goals, and clarifying and facilitating the communication of those goals among agents. In practice, this involves listening to agents more than talking, since it is the agents (especially the agents in contact with people outside the firm) that have the freshest information to guide goal development.
Deming suggests that the ultimate goal should be for every stakeholder in the organization -- stockholders, employees, suppliers, customers, community, the environment -- to benefit over the long term. Contrast this with fiduciary duty to maximize profits for shareholders instituted by Dodge v. Ford..
On my view, Deming was prophetic. This book was published in 1993, when the first of two major financial bubbles were just getting started. But now that the global economy has exploded into a chaotic frenzy of new markets and firms, most of which only roughly fit within traditional geographical or jurisdictional boundaries, it is now obvious that there is no institution in the world powerful enough to guarantee to any stakeholder that it will be favored over all others that contribute to an organization. Until a few decades ago, capital was king. No wonder that the owners of capital, often being the scarcest resource available to a firm, got special protection from government. What is the scarcest resource over the very long haul? As Deming could see even in 1993, the answer is human capital -- people power. The systems theory that Deming espoused is about optimizing firms to make the best use of human capital, and it is completely consistent with the systems theory Broken Symmetry seeks to understand in gory detail. Get in the habit of thinking this way, and life will not be the same.
Let's take one example of Deming's application of systems theory to the problem of optimizing firms. Deming attributes this application to Shewhart, who Deming says:
invented a new way to think about uniformity and nonuniformity. He saw two kinds of variation -- variation from common causes and variation from special causes. Common causes of variation produce points on a control chart that over a long period all fall inside the control limits. Common causes of variation stay the same day to day, lot to lot. A special cause of variation is something special, not part of the system of common causes. It is detected as a point that falls outside of control limits.
According to Shewhart, a lack of knowledge about common and special causes of variation leads to two mistakes:
The "Common Cause of Variation" is a Martingale
Mistake 1: To react to an outcome as if it came from a special cause when actually it came from a common cause of variation.
Mistake 2: To treat an outcome as if it came from common causes of variation, when actually it came from a special cause.
At this point, I can explain to my readers why I believe Deming's representation did not last long beyond his death. These statements, devoid of any experience with statistical or physical theory, must seem completely obvious, even trivial. They are not if one can understand and interpret what Shewhart and Deming (both trained as physicists) are talking about here.
What Deming and Shewhart call a "common cause of variation" is what most engineers, scientists, and even economists and other social scientists would recognize as a normal or Gaussian distribution in outcomes. As wikipedia explains:
By the central limit theorem, the sum of a large number of independent random variables is distributed approximately normally. For this reason, the normal distribution is used throughout statistics, natural science, and social science as a simple model for complex phenomena. For example, the observational error in an experiment is usually assumed to follow a normal distribution, and the propagation of uncertainty is computed using this assumption.
By contrast, when Deming and Shewhart talk about "special causes of variation," they're talking about distributions of outcomes with fat tails -- pareto distributions (a/k/a power laws), Levy distributions, and so on. Deming and Shewhart were studying Martingales and non-convergent stochastic dynamics decades before these became popular in academic fields! Even better, they were teaching managers inside large corporations how to recognize non-Markovian dynamics and correct system design without making the problem worse.An Application to Financial Regulatory Reform
How might this be applied to the financial system? Fat tails developed, which almost destroyed the system. Lots of folks are jumping in now with reform proposals that promise to make the system more efficient, more stable. What would Deming and Shewhart have to say?
Chapter 9 provides some tantalizing clues. Chapter 9 is called "The Funnel," and describes a process whereby marbles are dropped through a funnel (which is wide enough for each marble to have some clearance) onto a table cloth, with the position at which the marbles come to rest being marked. Without doing the experiment yourself, you can imagine that the actual pattern of marks formed after such an experiment will be a cluster of marks on the table under a target under the funnel -- not one spot right on the target. As Deming explains by successively considering various alternatives, most active efforts to reduce the radius of the cluster of marks will not be successful.
What's going on here and how is this relevant to the financial system? Banks are funnels for cash and other assets -- the marbles flowing through our system. The marks on the table are the marks on the books of each bank -- marks of how each asset is valued at a given moment. The various alternative rules for moving the funnel around represent the effects of mark-to-market rules on the financial system -- rules intended to correct for the default gaussian spread of marks!
How and why was FAS 157, which implemented these rules, ever put into place? The answer is that the accountants who work on these regulations work for the banks and institutions that wanted to mark up their book value during the Great Moderation that preceded the present financial crisis. And they're not entirely to blame because most of these people do not have a systems-wide view of the consequences of these rules. But it should be clear how important they can be.
I hope this example demonstrates the instrumental value of systems theory to policymakers. Until now, law and economics (the economics being mostly neoclassical) was the only quantitative tool in the toolbox. What this example shows is that systems theory can provide insight. As Deming points out, none of the active efforts to correct the error would have been as helpful as simply moving the funnel closer to the table cloth or using a sticky table cloth (by analogy to the financial system, this could mean better matching the frequency of marks to market to the frequency of transactions or increasing the transactions costs relative to the size of the transaction).
While I was reading Popper I was also studying economic theory and I was struck by the contradiction between Popper’s emphasis on imperfect understanding and the theory of perfect competition in economics which postulated perfect knowledge. This led me to start questioning the assumptions of economic theory. These were the two major theoretical inspirations of my philosophy. It is also deeply rooted in my personal history.The FT has a whole website up with transcripts from each of his lectures, which are ongoing this week. It's little things like this that make my day.
For an earlier post on epistemlogical and ontological questions that offers one version of reflexivity, see here.
In reponse to Soros's proposal that we dichotomize the natural and social sciences, I have this to say: His misinterpretation of Heisenberg's uncertainty principle kills his proposal. In fact it is true of both natural and social scientific theories that our theories influence how reality evolves. It is true too that bad natural science may not have as catastrophic or immediate consequences for us as bad social science. But what we perceive depends in part on our theory of what exists, and those theories are not social. Soros's dichotomy is in fact a continuum.
To wit, from whence did Soros derive his understanding of positive and negative feedback loops? By analogy to the natural sciences. Our exploration of nature is the ultimate origin of all of our theories, bot natural and social.
We study characteristics of cells, of organs, of the nervous system as a whole, of the human being as an organism, of groups, and of larger aggregations of human beings. Certain characteristics are common to all these "systems"; others are unique at each level. Water, for example, is composed of atoms of hydrogen and oxygen. Knowledge about these at the level of the atom would not give us knowledge of the properties of water, nor of the fact that water at temperatures below 32 degrees Fahrenheit becomes solid and floats.
Management's insistence that the individual is the unit of organization is as limiting as an engineer's insistence that the atom is the unit of physical systems. The limitations of a physical technology based at one level alone would be great indeed. A molecule is an assembly of atoms, to be sure, but certain relationships among the atoms result in molecules with given properties, whereas other relationships result in entirely different properties. These properties of molecules cannot be predicted solely on the basis of knowledge of the properties of atoms.
That's from The Professional Manager, published in 1967, which I picked up at D.G. Wills in La Jolla while on vacation. I'm still in the first chapter, but have been delighted with what I've discovered so far. McGregor points to Maslow as the foundation for his theory of human behavior, and comes out (in the passage above and its surrounding pages) very strongly in favor of group selection theory. This was just a few years before the new Atheists, especially Dawkins, effectively put the kibosh on multilevel selection theory in evolutionary biology -- a trend that has recently reversed.
A friend tells me that McGregor taught both Warren Bennis and Peter Drucker. It's very intellectually satisfying to find that McGregor shared so many of my personal inclinations. I may have more to say about this book in the future.
If one were to quibble with McGregor's last claim in the quoted passage (that properties of molecules cannot be predicted solely on the basis of properties of atoms), then one would point out that renormalization group methods give us some insights into how relationships at one scale affect dynamics at larger scales.
[Tech transfer] is an ongoing relationship continuum, not just a single transaction. A relationship continuum spans many years. It results from many points of contact, and many engagement types. It is akin to building a pyramid or climbing a staircase, or contributing different sectors of a pie to create a whole. Our networks are essential. We cannot accelerate innovation on our own; rather, our public-private partnerships and product development partnerships demonstrate that we can expedite translational research and bridge funding gaps through creative partnering and flexible contracting.The high-bandwidth feedback loops established through what Mimura calls a "relationship-based" approach to tech transfer are an example of the integrated complex systems that are a theme for this blog. Like the neural networks of its individual members, the social networks established can learn over time, gradually building up tacit knowledge of the science and engineering problems that pose challenges both to public and private organizations.
Success under the relationship model consists of rights transfer and knowledge transfer in both directions (into and out of the university) to enable innovation acceleration, deployment, uptake, and translation. By many measures, the relationship model has borne fruit. By valuing corporate relationships more than any single transaction, utilizing our networks to advantage, and valuing research support as highly (if not more highly) than license revenue, the overall industry dynamic has changed. Cultural and negotiation biases have been reduced, industry and foundation funding have risen dramatically, collaboration types and numbers have increased, barriers to gifting into the university have been lowered, and greater numbers and types of contracts and strategic alliances have been formed. We have also enjoyed reputational gains as a campus that has improved its corporate relations and contracting units.
A key cultural difference between UC Berkeley's IPIRA and other university tech transfer offices is that Mimura and her team first took the time to learn about the needs of every stakeholder involved in these complex, multilateral agreements. As a result, the deals she has closed -- including the pathbreaking BP-Berkeley deal and the Socially Responsible Licensing Program (SRLP) -- are nothing less than the future of the IP market. Although it might be inconvenient for some market participants to acknowledge, ultimately the highest value of IP rights is realized through the increased collaboration (and hence learning) that they promote.
As one of the few people who might have a broad enough perspective to weigh in on the economic and political viability of their proposals, I feel an obligation to speak out with my opinion. Putting aside the whining and sibling rivalry, there are a few proposals in the letter that I agree with, and a few that I disagree with. Further, there is a proposal not in the letter that would potentially resolve all of the problems here and do even more to improve UC's relative position with respect to private institutions, which are its main competition.
Now for the creative solution: Technology Transfer. IBM spent $5 billion a year on R&D every year for a decade and managed to squeeze out about $1 billion a year in technology licensing revenue over the same period. That's 20%. What's UC seeing from its Technology Transfer Office right now? Maybe 2%.
Why so low? The answer is because tech transfer is being done by salaried employees who will never be as aggressive or work as hard to make the connections and close the deals that are necessary to make these complex, multilateral negotiations work.
Last year, I made a pitch to a person with strong UC affiliation to startup a private equity fund to do technology transfer with top-tier universities like UC. No dice. The sense is that this would have an adverse effect on university culture. Really? Did AT&T Bell Labs have an adverse effect on Shannon or Mandelbrot? Did IBM's ARC have an adverse effect on Don Eigler or W.E. Moerner?
If UC wants a positive way to deal with its budget crisis, then the best way would be to embrace the rest of the economy, settle its internal squabbling, and start building on its strength -- which is turning out some of the most creative and brilliant artists, authors, and inventors in the world.
Check out Running a Hospital.
Our President has a blog.
If you're a leader of any kind, blogging is a very good way to communicate your vision, and to receive feedback in real time from people within your organization.
See also this earlier post on the impact that blogging by leaders might have on innovation.
I am still amazed when I look back at the last 8 years and see how an administration that billed itself as conservative and pro-market has spent more money, invaded more civil liberties, and taken over more private firms than any administration since FDR. I don't believe it anymore when people say it was a necessary expedient given the circumstances. Things could have gone more smoothly with a different leadership style, even if the ideology was less explicitly pro-market.
Which is why I'm quite optimistic at the moment. On my view, what our economy needs right now more than any stimulus package or bailout is a leader who can listen to ALL the stakeholders and forge a compromise and plan for moving forward that isn't predicated on more affirmative duties being carried by government. Paradoxically, I believe our newly elected liberal, pro-regulatory President stands poised to roll back the bureaucratic excesses of his conservative and pro-market successor. What it will take to get our economy out of the hole it's in is trust and cooperation. If nothing else, Mr. Obama has proven his ability to put people in the kind of mood that leads in that direction.
But at this point, with most of the financial, insurance, and maybe auto industry going into public service, I will admit that there is hardly anywhere left to go but up.
About six years ago I listened to a young lecturer from the University of Chicago give a campaign speech to an audience at my then employer (the law firm of Gardner, Carton & Douglas). It was an audience that was not generally happy to have its lunch hour interrupted. Nontheless within a minute you could have heard a pin drop in that room. Even then it was obvious that Mr. Obama was headed places. But none of us could have guessed how far or how fast. Regardless of your political commitments, this is a historic moment.
Over the weekend I found Tribal Leadership by Logan, King, and Fischer-Wright. I don't read a lot of management how-to books, but the blurb on the jacket plus the recommendation from Michael Jensen caught my eye. As readers of Broken Symmetry know, I've come around to the idea that markets and firms are, in an attenuated but nonetheless measurable way, subject to change according to evolutionary theory in a way not dissimilar from smaller groups, such as the cells that make up our bodies, or the genes that make up our chromosomes.
I'm in the middle of reading Evolution for Everyone by David Sloan Wilson, an excellent summary of his teaching on evolutionary theory, which claims to show, among other things, "that evolution and religion, those old enemies who currently occupy opposite corners of human thought, can be brought harmoniously together." That's a subject for another post (or several). Readers interested in that claim should see a few posts I've done on another blog here and here.
Chickens have always lived in groups, and in the modern egg production industry they are crammed inhumanely into cages usually containing nine to twelve hens. [Biologist William Muir] wanted to increase egg production by selective breeding, and he tried to do it in two ways. The first method involved selecting the most productive hen from each of a number of cages to breed the next generation of hens. The second method involved selecting all the hens from the most productive cages to breed the next generation of hens. You might think that the difference between the two methods is slight and that the first method should work better. After all, it is individuals who lay eggs, so selecting the best individuals directly should be more efficient than selecting the best groups, which might include some individual duds. The results told a completely different story.
When Bill presented his results at a scientific conference that I attended several years ago, he showed a slide of hens selected by the first method after six generations.The audience gasped. Inside the cage were only three hens, not nine, because the other six hens had been murdered. The three survivors had plucked each other during their incessant attacks and were now nearly featherless... What happened? The most productive individuals had achieved their success by suppressing the productivity of their cagemates.
Does anybody else feel like reading Larry Summers's columns recently has been like watching a tennis match -- but with him on both sides of the net?
Then we had this column, which without much subtlety calls for a straight-up Keynsian approach of increased spending. Ugh.
A few libertarians got their hopes up when he came gave Fannie and Freddie a good whack on the Creative Capitalism blog. But then the next week he was back with a more nuanced, classical liberal prescription for dealing with the Fannie and Freddie crisis here. I was really cheering for him at this point, as you can see here.
But now I have to read this column, and wonder whether Larry is not merely Keynsian afterall. What's the deal? My neck is getting sore!
More worrisome is the question of whether if somebody as smart as Larry Summers can't get a foothold on good theory and in generating consensus around that good theory, then who can? I can only hope that this is all just part of some elaborate political game that he's playing in order to maneuver various stakeholders into the direction of less dirigiste monetary policy and security regulations. What the markets need is more primary sources of information about what's happening inside the firm. Not more summaries of that information; not more watchdogs to ensure that the summarizers are doing their jobs. Just give investors more access to information and let the market get back to work.
Anybody still wondering whether we have an inflation problem in the United States should read this commentary by legendary bond fund manager Bill Gross.
As an aside, I wonder whether more people would be involved with public intellectual debates (as he suggests is desirable) if we heard more from the captains of industry like Mr. Gross. He's setting a good example in this regard. As are people like Mark Cuban and Marc Andreessen in the technology community. Actually, as much as I love to criticize venture capitalists, they also have been setting a good example for others in the financial industry by participating more in public discussion both online and offline.