Archive for June 2014


Silicon Roundabout

June 24th, 2014 — 9:24am

If the old adage about transatlantic epidemiology is true, then in terms of the digital start-up economy, England, or at least Shoreditch, has not so much caught a cold as deliberately inhaled an entire chestful of virions straight from Silicon Valley. And this infection, rather than being resisted or quarantined by the public health authorities, has been welcomed and actively encouraged, in the hope that the economic gains it will bring mirror those which have accrued to its original US hosts.

But of course Silicon Roundabout* and its environs and satellites all around Hackney, Tower Hamlets, Bow, Mile End and Stepney, have also given the virus their own mutations, in the form of a language, fashion and culture that is distinctively English. While apparently aping much of the jargon and some of the appurtenances of their Californian forebears, startups in London have added their own twists – hence the prevalence of full-length beards and duffel coats, mankles and ‘staches as opposed to the t-shirts and flip-flops preferred by Googlers in San Francisco and Mountain View. Hence also the spiritual pre-eminence of native computer scholars Alan Turing and Tim Berners-Lee over Alan Kay and Vint Cerf and other American luminaries.

The language of VC funding, investment rounds, tweet-ups, and so on has been borrowed, wholesale, from across the pond, but even though these mantras are repeated with shamanistic fervour, they have not been, thankfully, internalised in the way they are in Stanford and Cupertino. Native irony prevents such fads from setting in.

A couple of years ago, I attended a meeting at one well-known company based in Shoreditch with a group of publishers. As we sat in the reception area, looking at the neon signs above the bar and sneaking envious glances at the pool tables, my friend leaned over to tell me that he knew someone who had just started work at a nearby firm.

‘His desk is on the ping-pong table’, he said, in a sort of awed whisper.

The peculiar financial mix in London’s cultural and creative industries has also shaped this landscape, for better or worse. There is much less investment capital available to firms in London than there is in either California or New York, although the range of ‘angel’ investors and seed funders has grown substantially over the last couple of years. Similarly, crowdfunding platforms have become an increasingly reliable part of the funding mix for many new ventures – notably independent games.

Most commercial revenue has come from the advertising industry, which has been relatively quick to catch on to the potential for new types of digital experience to turn consumers on to its clients’ products. By contrast, most public institutions have been slow to grasp the full cultural import of this new ecology, and funding interventions have typically been reactive and wide of the mark in supporting a truly artistic exploration of these new media. In any case, funding opportunities have rarely reflected the type of agile business models and software development cycles – or sprints – by which startups typically work. In most cases, they seem irrelevant or impossible to access to many digital ‘creatives’ and artists.

Broadcasters and ‘mainstream’ media organisations, when they haven’t viewed many of these startups as irritating tyros to be ignored or squashed, have also failed to implement effective models of partnership and collaboration to maximise the potential of working with them (straightforward commissioning relationships/service agreements notwithstanding). Channel 4’s Education team has perhaps been the notable exception to the rule, although in more recent times even they have struggled to keep up the same degree of energy, flexibility and resourcing.

Google and Facebook, hymned by the Prime Minister, have established beachheads, and are gradually breaking out, their immense gravitational pull slowly but surely warping the whole environment in their own, banal image. All sorts of schemes have been concocted by government to try to harness the digital wind blowing from the west and grasp some of the virtual wealth flowing around the world in beams of immaterial cash. Only time will tell whether these  initiatives, with their tax reliefs and brash publicity machines have any measurable impact.

There is, though, a feeling that in purely economic terms at least, the tech sector in London is rapidly maturing. It’s sometimes hard to fight your way through the PR and propaganda to make a sensible judgement about what is actually happening, but it’s certainly true that overall revenue to the sector is growing strongly, and the slightly tenuous, experimental atmosphere that used to pervade the area a couple of years ago has now been replaced by a much greater sense of self-confidence and assurance. This is born out of a feeling that Silicon Roundabout has reached a sort of critical mass in terms of size and density, that online consumer behaviours –  and the business models which can exploit them – have been more fully understood, and people really know what they are doing now and how to make money.

Academe, too, has begun to hover over the agglomeration of entrepreneurial activity, partly driven by the imperatives of Whitehall’s confused and demented search for ‘value-added’ contributions to export growth, partly by the dawning awareness of a substantial cultural phenomenon that has become ripe for study, another set of entrails to be read, bones to be picked clean, once the Promethean heat has gone out. The linkage between universities and tech firms is still embryonic. The process by which companies can patent and adapt research to commercial ends, compared to its equivalent in the States, is Byzantine and needs to be reformed (but without inculcating the sort of IP trolling that has hindered genuine competition and growth in the US).

In terms of arts and culture, there is an energetic critical strain in the work of technologists, hackers, developers, games makers and businesses. A pervasive irony still courses through the area, in posters, restaurants and cafes, clothes, pets, pop-up shops, conversations, food, facial hair, multi-coloured mushrooms installed on the tops of buildings, and just about everything else. Sometimes layer upon layer of the stuff overlaps in such a way that it becomes vertiginous and you cannot tell what is serious and when you have disappeared down some sort of Ballardian sinkhole. Developers and coders often make ‘art’ in their spare time, or confess a desire to make more imaginative work, free from the constraints imposed on them by their agencies or clients – but these emerging artists (who would probably not refer to themselves by that name or even think of themselves as artists) are rarely recognized or championed by curators, producers or patrons in the cultural sector. The Barbican’s ‘Digital Revolution’ and partnership with Google, and the re-launch of The Space, among other things – have brought a renewed focus on digital art in the short term, but by and large there is still a lack of awareness about where the most interesting work is being made, who by, how to support it, and just how important it is.

The featureless corporate discourse, the ruthless financial zeal and rapacity of the zealots from the golden land across the Atlantic is still fundamentally alien – the sort of cold steel one encounters in transcripts of conference calls with Jeff Bezos and Mark Zuckerberg. That unreflective, appetitive will for dominance  doesn’t catch on in this country. It is still viewed with too much suspicion. Our horizons are just too narrow to think on that scale. There is still an element of ‘Make Do and Mend’ among all the techno-utopianism spouting forth from pundits, journalists, market-makers and bureaucrats. The maverick spirit of young English minds, the crossword-puzzling, code-cracking, tinkering inquisitiveness that begins with the Book of Riddles and ran through Bletchley is still strong.

But it can’t survive forever against the tide of corporate cash unless there are other frameworks of support and other rafts of public, charitable or philanthropic funding for it to cling to.

 

* In Bologna, at the Children’s Book Fair, where I went to speak about support for digital publishing in the UK, I met the CEO of a startup from New York – ‘Silicon Alley’. He was introduced to me by his assistant, a girl who regarded him with the sort of wide-eyed devotion usually reserved for the Messiah or the Mahdi. When I told him about ‘Silicon Roundabout’ he gave me a pitying smile that seemed to encompass the whole course of British Imperial decline and American ascendancy from 1918 onwards.

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Innovation, Disruption and ‘Anti-fragility’

June 19th, 2014 — 10:38am

Jill Lepore has a much-discussed article in the latest New Yorker about innovation, in particular the book “The Innovator’s Dilemma” by Clayton M. Christensen and the theories it contains and the influence those theories have had. She gracefully debunks the ideology of disruption, pointing out that many of its claimed successes are, on closer inspection, nothing of the kind, and that the whole premise of widespread disruption leading to greater efficiency and generating better economic performance is built on very shaky foundations.

‘Disruption’, in its most common usage, seems to be closely related to Schumpeter’s idea of ‘Creative Destruction’* – the idea that markets need to clear by ruthlessly burning away dead wood, or failing businesses, to spur future growth. And of course Schumpeter’s analysis of the business cycle and ‘Kondratiev Waves’ anticipates the idea of disruptive or path-breaking new technologies leading to economic expansion. It’s surely no coincidence, then, that as the venerable economist’s ideas have resurfaced – (e.g. in a recent Nesta report: http://www.nesta.org.uk/publications/schumpeter-comes-whitehall )** – this has coincided with the ubiquitous deployment of the terminology of disruption and the worship of disruption among hungry start-ups and new businesses keen to do away with the old behemoths and inherit their customers and profits.

Why is this idea, this way of thinking about business and the wider economy, so powerful? Why does it have such an appeal to the instincts of aggressive entrepreneurs and investors, as opposed to the much more successful and widely accepted (at least in academic circles), Keynesian model of the economy which has in fact helped to moderate recessions and depressions, create greater employment, keep inflation low, reduce inequality, etc… for extended periods of time?

Perhaps it is because some of those people see markets, and much of life, as a simple competition. They do not understand Ricardo’s idea of comparative advantage, nor do they understand the concept of counter-cyclical fiscal policy and management of aggregate demand. They just think that business is a race, and that only the fittest can, or ought to, survive. And as long as they simply believe that and carry out that work, they go a long way to fulfilling their social function. From the perspective of the rat, the experiment looks like a labyrinth, and so it should. The problem comes when rats (so to speak) think they can be scientists, and lobby for the re-arrangement of the labyrinth to suit themselves.

The concept of simple competition, and the accounting concepts of debt and credit, are easy to grasp. They do not require any real mental effort. They are intuitive and ‘make sense’ on the basis of personal experience. On the other hand, advising a government to spend money that it (apparently) doesn’t have seems counter-intuitive, and grasping why it might ultimately be the best policy requires an understanding of sophisticated financial relationships, in both real and nominal values. Thinking of debt not as an accounting identity or a fixed, real value, but as a concept that is somewhat malleable, a social and cultural as much as a financial construction, is difficult (although anyone who has read David Graeber’s excellent ‘Debt: the first 5000 years’ will have a massive head start in this respect).

Simple, clear, intuitive concepts are easier to sell, easier to explain, and easier to spread, than subtle, nuanced and counter-intuitive ones. And this partly explains what Paul Krugman likes to refer to as ‘zombie’ arguments and why they keep reappearing long after they have been comprehensively refuted. This is also perhaps why such weak, unoriginal or generally uninteresting ideas seem to find currency in financial circles. And perhaps this is why the idea of disruptive innovation is now so ubiquitous and so much unwarranted, and uncritical, respect is paid to it.

Nassim Nicholas Taleb’s book ‘Antifragile’ is another example of the way in which this kind of idea gains traction. Taleb is one in a long line of successful investors who want to credit themselves not just with the ability to pick stocks, but to draw profound philosophical lessons from their ability to do so. Success leads them to conclude that they do actually know the secrets of the market, and that they can establish a coherent system by which the movement of markets (and by extension a great deal of human behaviour and psychology) is to be understood. George Soros, with his theory of ‘reflexivity’, has made similar claims.

‘Antifragility’ means thriving in situations of extreme turbulence or violence which are generally destructive or ‘disruptive’. To be antifragile is not just to be tough, to be able to endure powerful destructive forces, or enormous change, but to be able to profit from them and grow as a result of them. An example of an ‘antifragile’ organism might be thermophilic bacteria who live in vents near the ocean floor where they grow in conditions of extreme heat and pressure. For Taleb, these adaptations make the bacteria extremely tough and resilient, and allow them to survive and even flourish where other species cannot.

Taleb argues, at wearisome length, that investors can make themselves somewhat antifragile by adopting certain positions in the market, allowing them to profit massively when the vast majority of people are losing money. Not only being resistant to stock market crashes, but thriving in them. This is an extremely grand and long-winded way of expressing  a fairly simple concept. But precisely because the insight is a simple one it can quickly be understood and establish itself as a meme with widespread influence.

Innovation is a treacherous concept, and because the word and its denominals are so widely used and applied to so many objects, events, and processes, it has lost much of its meaning. There is a distracting obsession with degrees of innovation, with just how new and original something is. Apart from the fact that this is almost impossible to judge, and almost entirely subjective, it doesn’t really matter. What matters is surely not just how different something is from what went before, but the degree to which it improves things. A modest reform or update may bring far more benefits than a radical one. Does it matter which is the more ‘innovative’ approach if the one that is most helpful requires less change, less disruption to the status quo ante?

It is a mistake simply to associate upheaval with progress. It is a mistake that Josef Schumpeter made, and many of his intellectual descendants continue to make.

 

* An idea which had its most famous, and notorious, expression in Treasury Secretary Andrew Mellon’s advice to Roosevelt in the depths of the Great Recession: ‘Liquidate the farmers…’ Quite how this policy was supposed to work in practice (and not lead to mass starvation) is a mystery.

** The idea of applying Schumpeter’s ideas (which in and of themselves are a bit zany, and mostly untested, and apply in any case largely to a specific analysis of the business cycle in the private sector) to the provision of public services is, in my view, just, well, a little bit misguided.

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