“Invention is the most important product of man’s creative brain. The ultimate purpose is the complete mastery of mind over the material world, the harnessing of human nature to human needs.”–Nikola Tesla
MEDIA
Innovation in Education with Ray Girn and Matt Bateman
How can education help promote human progress—and how can we promote progress in education? Ray Girn and Matt Bateman from Higher Ground Education explain how a Montessori education fosters independent thinking and creativity, and share lessons they’ve learned about innovation from running the world’s fastest-growing Montessori chain.
Ray Girn is CEO of Higher Ground Education. Matt Bateman is Vice President of Pedagogy at Higher Ground.
Entrepreneurial Contagion - Silicon Valley Examined 8
On the Silicon Valley Explored podcast, Robert Hendershott and Don Watkins discuss Matt Clancy's essay, “Entrepreneurship is contagious,” which argues that one reason people become entrepreneurs is simply because they know other people who are entrepreneurs.
INSIGHT
Don’t Block Blockchain
Robert Hendershott and Don Watkins
Our current financial system reflects a mix of two different principles: market participants have the freedom to experiment—but only within a centrally-controlled regulatory system. These regulations may prevent some mistakes and reduce fraud but they also reduce innovation and competition—and the opportunity cost of reduced innovation and competition is probably far larger than most people think.
Consider Initial Coin Offerings (ICOs), a boom in 2018 that was quickly squashed by the Security Exchange Commission (SEC). In an ICO a cryptocurrency is sold in conjunction with launching an ambitious venture, roughly similar to the way a company might raise money by issuing stock. ICOs offered a new, potentially transformative way to not just finance but also organize ambitious projects using a combination of cryptocurrency, smart contracts, and distributed innovation.
Cryptocurrencies are digital “coins” that record and verify ownership in a decentralized system (using cryptography) rather depending on a centralized trusted authority, like a bank. These coins can be exchanged electronically as payment for goods and services. A smart contract is a self-executing digital agreement that combines the mutual acceptance imbedded in standard contracts with the enforcement that historically is done by a separate legal/judicial system. Distributed innovation is when widely scattered specialists coordinate to solve problems and build value without being linked by a strong central control (think Wikipedia).
A thought experiment
The combination of these three things has the potential to be extremely powerful. To see the upside that we’re missing by restricting ICOs, consider creating AirBNB. You need to build the platform, recruit hosts to list properties, effectively connect guests with hosts, and maintain an ecosystem that consistently delivers value to both, etc. Historically there has been only one way to acquire the substantial resources to start the company: you raise a series of large slugs of venture capital and get to work.
Venture capital investors are exceptionally good at supporting new efforts like AirBNB. But there are only a few thousand VC firms in the world, and they are very expensive: often they end up owning more than 50% of the new venture.
Only, maybe you don’t have to go the traditional VC route. All of these activities are contracts—contracts with developers and infrastructure providers, between hosts and guests, etc. Could these contracts exist outside of a corporate structure? Could we successfully build and run the platform that is AirBNB without there being the company that is AirBNB?
AirBNB without AirBNB
This is the possibility that ICOs support. Imagine you start by selling StayCoins, a cryptocurrency that will be used to rent rooms and houses on the Stay Network. You can think of StayCoins as being like airline or hotel loyalty points. Their value stems from the ability to exchange them for something desirable. Of course, StayCoins are speculative, particularly at the beginning. They will only be valuable if the Stay Network launches and thrives, just like airline miles are only valuable if the airline keeps flying.
The speculative nature of StayCoins is a key feature. First, any effective system for allocating resources must channel capital and talent towards “better” ideas, where better is nuanced because it reflects both the odds that the venture is successful and the upside if works out. Having to sell StayCoins in advance of the Stay Network even existing requires that the idea and sponsors inspire potential purchasers. Much like VC except here the idea and sponsors are going direct to the source—potential users—rather than through the much smaller universe of venture firms.
Second, once sold StayCoins have significant potential value (or could eventually end up worthless). This significant upside both entices the initial purchase of StayCoins and incentivizes a large group to participate in the network, both to get value for their coins and to push the fledgling effort past critical mass so that it can flourish.
From coins to contracts
Once the initial StayCoins are sold, the proceeds are available, along with an additional pool of StayCoins, to support creating the Stay Network via distributed innovation. Smart contracts allow developers to be automatically compensated from the initial pool of cash/StayCoins based on their contributions.
Smart contracts also govern the interactions of hosts-guests, all using StayCoins. Hosts automatically receive StayCoins from guests in exchange for property time, special amenities, etc. Further, early in the Stay Network’s life, when the network is small, hosts could be granted StayCoins just for listing their properties. Bonuses to list properties early on might be crucial to the Stay Network’s success. Once the Stay Network reaches critical mass, when there are plenty of hosts offering properties and plenty of guests renting properties, usage explodes—just like it did with AirBNB.
The dollar price of StayCoins, the exchange rate, is determined by the supply of StayCoins from hosts and original purchasers (who are willing to sell) and the demand from people who want to get, say, a beach house in Maui for a week. Over time hosts accumulate StayCoins from their past guests and sell StayCoins to people who are interested in being future guests (or speculators who are betting on the continued success of the network). As the Stay Network grows, demand for the limited (but rising) number of StayCoins grows with it. Think Bitcoin.
Ongoing operations of the Stay Network can be funded by selling a steady stream of coins and/or by charging a modest transaction fee (far less than AirBNB’s roughly 15%). Again, this is governed by a transparent smart contract. There is no corporation—the Stay Network is effectively “owned” by its users—yet guests are easily finding and transacting with hosts and vice-versa. AirBNB without AirBNB.
Cutting out the middleman
This can be hard to wrap your head around. The corporate form has been central to how people connect and collaborate and divide up the value from that collaboration for our entire lives. But unprecedented connection combined with key enabling technologies have the potential to transform our standard framework for creating value.
Now, saving 14% on vacation rentals isn’t world-shaking but the principle is: connecting people without a corporate middleman. Why limit this to vacation rentals? Imagine everyone having an open-source, fully controlled-by-the-user smart agent—call it AgentSmith—to connect them to seven billion other people supporting their lives in a way that doesn’t answer to Amazon, Google, Apple, Microsoft, or Facebook. If you are looking for a beach house in Maui, it matches you to a host (or seller). And you pay with SmithCoins via a transparent smart contract that lives on a blockchain. If you are looking for a ride to the airport, it matches you with a driver. Looking for a date, a job, a sports ticket, a collectible? AgentSmith has got your back.
That’s the potential that ICOs offer. The potential to transform how ambitious new ventures are organized and financed. To transform how we live our lives and collaborate with each other. The potential that, at least for now, has been sacrificed by the SEC in the name of investor protection.
Will we ban the future?
Granted, you need some form of legal, governance, and enforcement systems. There were plenty of fraudulent ICOs, after all. The question is: how do we have our cake and eat it too? How do we protect innovation and investors?
There’s no obvious answer to that question: it has to be discovered through trial-and-error experimentation. This is why blockchain technologies and decentralized finance are so exciting. Smart contracts are effectively creating a blank slate for exploring new ways of organizing and funding ambitious projects. Applications that support rapid, transparent learning quickly prove themselves or fail in ways that provide hints about what to try next. Different ways to transact, clear markets, and reward contributions are all on the table.
We have entered an era of experimentation and discovery with the potential to enhance how innovation reaches the world as much as the modern corporation/venture capital did over the past 50 years. We just need to unleash our ingenuity and discover how to make more cake.
QUICK TAKES
The trial of the century
Moderna is starting Phase 1 trials for mRNA flu and HIV vaccines this year.
Since mRNA teaches the body to recognize a virus, it can be effective against multiple strains or variants as opposed to just one.
“The mRNA platform makes it easy to develop vaccines against variants because it just requires an update to the coding sequences in the mRNA that code for the variant,” Rajesh Gandhi, MD, an infectious diseases physician at Massachusetts General Hospital and chair of the HIV Medicine Association, tells Verywell.
Future mRNA vaccines have the potential to ward off multiple diseases with one shot, according to the Centers for Disease Control and Prevention (CDC). Current mRNA vaccines, as demonstrated in their use against COVID-19, already appear to be more effective against new variants than traditional vaccines.
This is amazing. Most of the major medical breakthroughs in my lifetime have been theoretical, with the incredible practical applications always being “five years away.” Well, it seems that “five years” has finally arrived.
The importance of blowing things up
Here’s a cool Twitter thread where Elon Musk breaks down the five-step design and manufacturing process he uses at SpaceX.
Step 1: Make the requirements less dumb
Step 2: Try to delete parts of the process
Step 3: Simplify or optimize
Step 4: Accelerate cycle time
Step 5: Automate
The whole thread is interesting, but I really liked Elon’s discussion of how SpaceX’s approach compares to NASA’s.
The shuttle had almost no room for iteration because there were people on board. So you couldn’t be blowing up shuttles [in tests]. That’s a big problem. In fact, a lack of iteration was the problem. Because [Nasa’s engineers] were aware of a lot of the issues, but people were too afraid to make changes.
There was a risk/reward asymmetry: big punishment for it—you make a change and something goes wrong. But if you make a change and it goes right, you only get a small reward. The biggest problem with the shuttle was that its design froze. Due to all space shuttle missions being crewed, design changes were high risk and low reward. Starship does not have anyone on board so we can blow things up. It’s really helpful.
That’s such an important lesson. The more costly failure is, the more costly success is.
The Great Regulation
Yascha Mounk has an interesting interview with economist and Marginal Revolution co-blogger Alex Tabarrok exploring how to boost innovation. A slice:
We do not live in a technologically progressive era. We think we do. [In] 1903, the Wright brothers fly, and by 1969, we’re on the moon, right? We have not had that kind of progress since. Part of it may just be bad luck, part of it may be [that] you get some technological innovations which cause you to make a leap. But I think a lot of it also is regulatory.
A nice metaphor is throwing a pebble into a stream. You have a regulation, it’s a good idea, and you throw the pebble into the stream. Nothing happens. And then you throw another one in; it’s also a good idea. There are good reasons for the regulation, at least on paper, and you throw that pebble into the stream, and you keep doing this. No single regulation in and of itself is bad, but you just add them on top of one another, and they begin to interact and interfere, and so then it becomes much, much more difficult to actually get anything done.
If we want an environment that supports innovation, we can’t only think about policies piecemeal. We have to see whether they are part of an overall trajectory that is encouraging progress or discouraging it.
The beer straw hat of the future?
No, it’s actually a magnetic helmet that shrinks aggressive brain cancer.
The device was recently tested on a 53-year-old glioblastoma patient, whose tumor showed a remarkable 31 percent size reduction in a short time before the patient sadly passed away from an unrelated traumatic head injury.
"Thanks to the courage of this patient and his family, we were able to test and verify the potential effectiveness of the first noninvasive therapy for glioblastoma in the world," said neurosurgeon David S. Baskin of Houston Methodist Hospital.
Hopefully future patients will enjoy the same results. The tumor shrinkage…not the other thing.
Atlas Slugged
If you want to catch a glimpse of our future robot overlords in action, check out this TechCrunch story about Boston Dynamics’ Atlas robot.
The good news, for those fearful of robot rule, is that Atlas still struggles doing parkour. The bad news is that Atlas can totally do parkour!
RECOMMENDATIONS
The Mind’s Best Work by D. N. Perkins
What goes on inside the mind of innovators? Pretty much the same thing that goes on everyone else’s mind, argues D. N. Perkins, a Harvard researcher.
In The Mind’s Best Work, Perkins demystifies the process of creative thinking, and concludes that creativity is not some foreign activity only geniuses engage in. Rather, it is essentially no different from familiar acts like remember, noticing, planning, judging that we all engage in.
For example, Archimedes is taking a bath and jumps out screaming “Eureka,” having realized that water displacement will allow him to measure the volume of irregularly shaped objects. On its face, this seems like a mysterious insight.
But is it really? Perkins thinks not. Rather, what Archimedes did was closer to what we do when we interpret the meaning of a sentence. “Though some routine sentences say what they mean, most do otherwise. We understand many of the implications with no effort at all, as part of the normal realizing process.”
So what distinguishes us and Archimedes? Why does he experience a world-changing insight while we merely discern the meaning of vague sentences? Part of the answer is that Archimedes had a lot of relevant knowledge about science, but he was also primed with a particularly challenging question. Archimedes was able to have a new insight because he was using familiar mental tools to solve an unfamiliar problem.
What distinguishes innovators, concludes Perkins, is that they direct these familiar mental processes to creative tasks and to solving hard problems.
What makes creating special is not so much its component processes but their organization and direction, and that organization and direction derives from an end in view, however broadly characterized and vaguely grasped. Intents to create or to satisfy unreasonable demands, or both, pattern and bias those component processes toward creative accomplishment. There will be more creative thoughts and actions in response to such purposes, just as there will be more carpentering thoughts and actions if one is building a birdhouse than if one is assembling a stamp collection. Purpose shapes process.
What emerges from Perkins’ book is not that everyone can become a world-changing genius. But we can all be more innovative than we are—probably far more innovative than we are. It’s not a matter of learning some foreign skill, but deliberately honing skills we use without even thinking of them.
One implication is that there’s a lot we can do to promote more innovation in the culture. My own view is that a major thing we can do is to demystify creativity. The more people realize that innovation is a demanding process, but one that harnesses familiar skills rather than some sort of mystic insight reserved for starving artists, the more innovation and creativity we’ll see.
Until next time,
Don Watkins
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"A is A. Or, if you wished it stated in simpler language: You cannot have your cake and eat it, too."