Five Ideas That Matter

We are not frequent posters – opting instead to get a post up here when we have an observation that helps the underlying argument. Hope that explains the radio silence.

Over the past week or so I’ve been trying to think how to get back to the core argument. This goes something like:

There are profound changes underway in the economy and society and they are taking place at a point where a set of new ideas meets a set of new practices. We think we can understand the probable success of the new practices by understanding the power (emerging popularity) of the ideas.

The image is of the Sintesi concept car from Pininfarina. The picture  is an example of new fabrication technology (one of the big ideas in auto) that represents one of these joining points in ideas and economic activity. It offers up an example of how resilience (a key element of new ecological metaphors or bioconsciousness)  and personalisation and customer-driven configuration (the ability to create or hack what I wish to) meet. Here is a couple more images:

So the obvious question is – why is it so interesting? The answer lies in the involvement of Materialize, who specialise in Freeform Manufacturing. Here’s how they describe their speciality:

Freeform Manufacturing uses additive technologies (also referred to as 3D printing technologies), fully automated processes that don’t require molds and thus allow a virtually unlimited freedom in design. Today, these technologies are increasingly used in the production of concept cars. Gradually, this production method will be applied for the production of final cars as well.

I came across the Pininfarina example at 3D Print. The link is this: desktop fabrication that can power the design and data output to make complex objects, cheaply, is upon us. Materialize’s facilities are desktop factories writ large.

In fact the DeskTop Factory project and others are aiming at providing that facility.

The interesting development (or evolution) in personal fabrication (well not quite personal but certainly local at $5000 a pop) is self reproduction in fabbing technologies.

Inevitably that idea is driven by an open source community. I think we are going to be surprised by what can be self-made and at the cost. The dream of self-fabricating things like autos is definitely one for the future but how absurd sane or is it?

I had the pleasure a few years back of seeing a few of the micro-cars created by impoverished engineers in the 1940s. For the most part I was looking at German microcars. They were made out of whatever an engineer could find in the rubble. Here’s an image from the Museum of MicroCars (mostly models from the 1940s and 1950s). MicroCars were homemades and they were production models. Their distinguishing feature was a skilled engineer who knew the product’s totality.

We might never get back to that but future production systems offer an opportunity for people to reinvent their interests and rebuild their communities. The term “bubble car” by the way seems to come from the aircraft cockpit inspiration for these early post War designs. Finally – talking about aircraft cockpits here are two pictures of the 1953 Messerschmitt KR175,

We’ve said a couple of times below that the success of the iPhone is an important case study in how the Web’s information dynamics work. In light of that I was fascinated to see this piece by Javier Marti. It was written in autumn 2007 as the initial hype around the iPhone was dying down.

The Obama election campaign and its aftermath has parallels – which we will come to below albeit only briefly.Why is it important to Five Ideas? The Western ethos of progress through criticism is important; changing information dynamics seems to threaten the principle that criticism is good, and needs to be effective. If information dynamics are changing then we need to understand what it means for what is “true” and what the “truth-to-reality” cycle is becoming.

First iPhone.

Marti being close to the action points out all the negative reactions to iPhone at the time and as importantly points out that the iPhone’s biggest early success was to turn the US into a more mobile using population.

This graph from Nielsen suggests that during the initial launch period the iPhone secured close to 0.75% of all blog posts everywhere, which is a pretty amazing feat.

Still, many of those early reviews were negatives:

3. The camera is a simple application that has one button: The shutter. Picture quality is no where near exceptional.
4. SIM card is near impossible to open, if at all.
5. Web browser is slow, even over WLAN. Even the simple OneList web app that was created takes around 20 seconds to load over WLAN. You can not highlight, cut, copy, or paste and text from a website, and you can not save any images you find from a website either. The only nice thing about it is the tabbed browsing, which crashed when visiting Engadget and YouTube on two tabs. This is the only application that allows you to use the keyboard in landscape mode.
6. The keyboard sucks. It gets slightly better after the iphone “learns” you, as the employees said, but even then, it’s not a device you can use with one hand comfortably, much less without looking.

And so on. Interesting that some of these are usability and interface issues. Experienced mobile users are accustomed to working with one hand and to tactile devices whereas the iPhone is very visual.

Anyway, the point is Apple managed to overcome rational critique and the “how” of that I think should be on every marketers mindd, and every sociologist’s too. So to Obama.

This is from the New York Daily News back in April 2008: “It seems like ancient history now, but not long ago Hillary Clinton argued that Barack Obama was getting a free pass from the media.”

It’s interesting because it comes well before the election. However, 8 months in and Obama’s style, rhetoric and capacity to change Washington are all pretty much subject to wider doubt than at any time when he was being hailed for his ability to connect to the voter.

This is from Newsweek in January 2009:  “Luckily for Obama, the public still likes and trusts him, at least judging by the latest polls, including NEWSWEEK’s.But, in ways both large and small, what’s left of the American establishment is taking his measure and, with surprising swiftness, they are finding him lacking.”

And this from the yesterday’s London Times: “President Obama is ready to retreat from a central part of his domestic agenda in order to achieve some sort of healthcare reform this year, two of his senior aides indicated yesterday.”

All politicians get an easy ride at some stage but I wonder is Obama another case study in the uncritical nature of open communications on the Web. If so what can we do to fix the problem. The great part of conventional information dynamics is its responsiveness, in principle, to the dialectic of criticism.

If I was a CEO or leader of a significant organisation, my response to claims that my company is threatened by, say Chinese competitors or climate change or indeed recession, would be, no: it is either safeguarded or threatened by my ability or inability to understand the changing patterns and dynamics of social interaction.

Everyone around me is equally affected by how people’s intentions change and what that says about their shared thought processes – the mutual future we are always building. Not understanding the speed with which people now recreate futures is why politicians are failing.

There is good harmless fun trend projecting and a couple of years back pure blogging listed a bunch of sites that do it well.

You can review those sites here. And we will review them all here soon.

My apoplectic response to apocalyptic trend spotting and critique goes something like this. Here is a dead easy futures portfolio.

1. The recession will last for a hundred years and you are all going to die. Pessimism sells well – in fact the author of Buyology Martin Lindstrom has shown the science of buying and selling is at one with fear. There is no shortage of futurology that tells folks it is all getting worse and will continue to do so until you listen to me.

2. The second version of futurology goes like this – Gen A (it could be x, y or z) is the ultimate slacker generation and determined to prove its slackiness is purer than the slackers who came before them (the mathematical formula is Gen = n [tusg]p where p = the present and tusg = the ultimate slacker generation.

3. The third category of doom apocalypse thinking is a combination of arguments that all say the condition of the world spells a sticky end soon. Climate, ascent of China, population growth, health care spending.

Behind each of these arguments lies a formulaic response which goes something like – if we get smarter, if we rely become more creative, adaptable, flexible, innovative (innovation is the new progress) then we can just overcome these problems.

When Chris and I started thinking abut metatrends one of the first things we noticed however is how well, how quickly and how imaginatively people are adapting to new circumstances. The brain and behaviour are the things we can change very quickly – curious fact, people continually talk about having attitudes and/or new ways of doing things in their DNA – my understanding is that genetic change takes about 40,000 years to work through in humans. Very little changes in our DNA – other than it becoming damaged or mutates.

It stands to a little bit of reason that change is therefore mostly social and interactive between people and the web is the place a lot of that interaction now takes place.

Here is a case in point During the recession the number of money saving blogs has been increasing as have their readers. This comes at a time when, the FT recently pointed out, old fashioned mutualism is dying out rapidly enough that Governments are trying to save it. American thrifts have had their day and European mutual societies got the high risk, high reward bug. Read all about it here.

By way of contrast we see a different mutualism growing. It is based around using the web as a source of mutual support and the primary weapon is not money but information.

Having said that, money is a focus of a new generation of peering systems, led of course by the ZOPA model. Even here in money, to date, information rules and includes the likes of wesabe and many more on that model.

In other words the adaptation of social DNA (the information repository for persistence) is well under way. We have written about it recently but only in private client papers. Hopefully we can approach the issue publicly soon. Understanding these trends and what they mean, before the opposition do is more important than the thought apocalypse.

We’re interested in ways of gleaning new insights from online data, and also in new ways of delivering those insights. So, our ears pricked up when we heard about a recently-launched iPhone application – called “Outbreaks Near Me” – based on MIT’s HealthMap resource.

From HealthMap.com

HealthMap monitors and maps semantic references to various illnesses through news reports and social media channels, giving users a potential early warning of outbreaks. It’s one among a number of interesting health data mashups that have cropped up, including Google Flu Trends – a similar initiative, which bases its findings on search trends, rather than media or blog comment.

Some are sceptical about the utility of these initiatives as standalone tools – false positives are an issue for example in both comment monitoring and search data. This scepticism is often justified, but we’re mainly interested in their contribution to metatrend analysis. Their value really becomes apparent when you look at combining the outputs from many different data sources together.

We can measure flu trends now by a combination of social media listening and aggregated search trends, but what else can we add to the mix? There have been successful attempts in the past to identify outbreaks through pharmacy sales data, and in the future technologies like FLIR (forward looking infrared cameras) might also have a contribution to make. More data, tighter insights, better value.

Because key economic drivers like the USA have already spent way ahead into the future, because of China’s desire to keep more of the value of what it produces, and because of the current inefficiencies of environmentally GOOD technologies our understanding of efficiency and productivity has to change.

A good example of this, which we rabbited on about down here, is the $7 incubator. Regular western incubators for infants cost $20,000. One can be built for $7 – $20 that does about 95% of the same things.

The big question is can low, low prices create more demand? Actually the chances are that new pricing models built around radically reduced prices will do exactly this. A new future = real productivity gains, really lower prices, and continuing value relationships between the firm, its suppliers and the customer.

We contrast this with Chris Anderson’s idea of Free. We think Anderson is missing the point. Free might be in the process of being reinvented as a selling technique, but nearly free is going to be a commercial imperative for design and the business model. The $100 computer and the $2500 car are good examples. As we have trended towards the $100 laptop the opportunity to give laptops away with a Net subscription has emerged as a booster for this category.

This got surprisingly little attention in August but there are reasons to dig deeper:

“Israel’s government on Monday endorsed the ambitious plan of a private entrepreneur to install the world’s first electric car network here by 2011, with half a million recharging stations to crisscross the tiny nation.”

What it didn’t say is that Shai Agassi, the man behind the plan, sees the future in subscription-based car sales.

Agassi’s Electric Vehicles will be trivial cost unless you drive a whole lot. At around $600 a month to subscribe they come in at the cost of what many people lay out on petrol a month. You can find out more about the company here.

The point is people are thinking about radical price reductions and transformative pricing models. Coming soon!

The HBR reports this is the first recession ever with recorded decline in household debt

What it also means is people are digging out all those forgotten subscriptions and cancelling. And companies that rely on the monthly transfer are starting to see it dry up.

While we’ve been digging around for trend intelligence like this we’ve also been undertaking our own pilot study using web comment as our primary data source.

Results to date are starting to firm up….. yes, we note that people are not just paying down debt. They are especially focused on paying down credit card debt. And we are logging a revealing structure in the way people make points of view online.

For example we are seeing people interpret recession and recovery much more in terms of personality than in terms of institutions – ie they talk people not banks. We see people in the USA and UK take quite different views of what needs to be done.

In the UK the preference for fundamental change in the economy is strong; in the US not so.

Now we’re back from holiday, time to start cranking out the stats.

For much of the past twenty years two commercial sectors have had a considerable influence on how we perceive risk and reward.They in turn have carried the burden of our sense of moral hazard.

Regulated companies, typically,  have to balance our perceptions of risk and reward. Pharmaceutical companies and banks have varying experiences of this.

I wonder does this become part of the strategic debate in these companies? The diligence and skill is an important management skill.

A. You wonder does it get enough attention?

B. You wonder, is it inevitable that some sectors will always fulfill this role, taking the brunt of our fears and basking in the light of our expectations?

Our view is it is inevitable – corporations deal in emotion. Fear and expectation are important emotions for us and they need a home.

Pharmas and banks are two types of company for whom the balance of risk and reward perception has recently changed significantly.

Yet would it surprise you to learn that most people seem not to perceive the recession in terms of banks. In a study of 22,000 blog comments around financial stories coupled to three weeks of the FT, Times, Guardian, WSJ and one or two more august papers we found the association between “bank” and “recession” was very much skewed towards the professional press.

We call this relationship “engagement power”. We mean by that the ability of any one communications’ channel to exert a significant pull over a subject.

For example the engagement power of blogs is very much personality related. Even serious bogs like to deal in people. Readers much more so. In blog readers comments people RULE!

That means readers typically perceive and discuss recession and recovery in terms of leaders whereas the mainstream financial press have engagement power over the institutions of the financial system.

Let’s extend the discussion….

Pharmaceutical companies were very much on the risk side of risk/reward, while financial services have happily inhabited the reward side for the past decade and a half.

How times change. The financial sector is now having to deal with a perception of risk whereas the pharmaceutical sector is beginning to manage perceptions away from risk towards – if not reward – then at the very least, security.

Swine flu is one trigger for an upside to pharma reputation.

Think back over the past two decades…. Vioxx, the elephant man drug trials, Selective Serotonin Re-uptake Inhibitors, high drug costs, particularly in Africa. Pharmaceutical products have had a tough time.

Simultaneously pharmaceutical companies have conveyed a more positive impression of their endeavours and mission – that the investments they are making in targeted therapies presage a new era in treatment and a potential cure for cancer and other diseases. We have bought the downside in order to see progress here.

That we seem no closer to a cure was in danger of denting pharma’s arguments. That could have led to a tipping point in the overall perception of pharmaceutical research.

Is it ironic that a better press has begun with swine flu and vaccines? This is after all a relatively benign illness and a relatively simple treatment. Yet vaccines, drug companies, are out there – ready (almost) to protect us.

Let’s now look at banks. They have spearheaded the extraordinary reward syndrome we are just dragging ourselves out of. Cheap mortgage, investment vehicles for the general public, cheap credit, infinite opportunity.

The complicating factor, as we found in our study, is that people’s desire to hold banks responsible is far less pronounced than their desire to see politicians resolve the crisis. Why would this be the case when the mainstream press has so much engagement power with banks?

It could be that people find it difficult to rebalance their rrisk/reward realtionship with banks, having enjoyed a good decade. Nontheless we are surprised by the finding.

We think the point is that risk and reward for customers is part of any corporate-customer relationship. That can be balanced, it can be imbalanced accidentally, or it can be ignored. But it is clear that there are perils in how it is handled. Perhaps most importantly though people are more than willing to see moral hazard shared between corporations and politicians.

We reported below that the end of July brought about a potential reversal in web fortunes for the iPhone. A little digging around and we found non-US experts looking to short sell Apple shares already in June, because of poor performance and poor strategy over the iPhone (and a feeling that June price discounts were going to become the strategy).

Why does it matter to fiveideasthatmatter? Because we are trying to understand:

• The web sentiment stream
• How it works
• And how it affects the wider world of brands, governments and ‘life’.

Apple is a great example of a company that seems to have a true market-like presence on line, in other words if we can find the right way to put this – Apple, especially the iPhone, seems to illustrate a new type of sentiment market, peculiar to stock markets, commodity markets and the web. In this type of market, sentiment rather than fact prevails, or rather sentiment becomes fact.

Understanding the iPhone’s sentiment history is part of our project. Some US commentators were getting testy about the iPhone recently.

Here’s the bull stuff.

Here by the way is a post from 2007 that illustrates how vulnerable Apple’s shares are to bubble thinking.

A reminder here also from 2007 that positive iPhone sentiment was not a foregone conclusion.

Our argument is simply that a bear market may have begun in iPhone sentiment. Let’s see.

We’re interested in Metatrends partly for their potential to deliver untapped insights, and partly because we’ve lost confidence that traditional quantitative market research can deliver bread and butter insights in a convincing way.

The frequency which which we read about badly applied primary research methodologies is depressing, and even more depressing is the fact that examples of bad methods – such as television audience measurement – have attained institutional acceptance through inertia.

Commercial market research is a mature discipline, but while methods and resources to collect and mine data have evolved, program design has barely changed at all.

There are two widespread problems with traditional commercial research, split between sampling errors and respondent errors.

Sampling errors are usually the result of a compromise between scope and budget. For example, prestigious and respected surveys such as Fortune’s Most Admired Companies – based on a survey of only around 4,000 people.

Respondent errors are a hangover from another age, when there were no other ways to gather opinion than to ask people what they thought. The problem: people won’t always tell you the truth – because of embarrassment, malice or any of a number of other reasons. Gaming surveys has even become popular as a form of subversive act. The best possible example of this problem are election exit polls – notoriously volatile, and consequently hard to rely on.

Our experiments in metatrend analysis are rooted in the belief that there could be another, better way to measure trends – built on opinion, attitude and intention signals that can be mined online.

We’re building our method as we go – testing out a range of open and licensed data sources, acquisition and analysis tools for effectiveness. A methodology white paper will follow in the next few weeks, but what is certain is that it will not be a sacred cow. We plan to avoid the same stagnant rut as traditional market research: as tools, resources and processing capabilities evolve, so will we.

Behavioural economics is the dismal science with people brought back in. I think it tells us that the more perfect a market, the easier it is to see human irrationality at work. The web is a perfect information market, full of glitches of course, but one that REALLY shows human irrationality and its consequences.

The definition of a perfect market would be something along the lines of information being freely and equally available in the same timely manner to all participants. Sounds like the web.

This is one of the reasons why we think the web acts in a bull and bear kind of way that stock markets also do. And why we think marketing has to think less rationally and change its expectations.

My vote for the most irrational market behaviour of people is the Apple iPhone. Apple dominates the market in information about mobile handsets, and specifically that of smart phones.

First a piece of external data from Hitwise: iPhone almost immediately outstripped interest in the iPod just about from the minute it was launched.

Then there was consolidation of that interest until by late 2008 the iPhone was unassailable in the market for smart phone information. We studied the iPhone and Android, the Google-led open source operating system for mobile phones, from December 2008 to March 2009 to compare the two, to understand the web as an information market for handsets.

If you want to get on top of the very latest in the iPhone bull market turning bear take a look at this post of yesterday from Michael Arrington at Techcrunch. Om Malik is also an iPhone sell advocate. Interesting point is both have lived with serious iPhone negatives for two years and chose not to write or mention this. And the sell recommendation is not based in performance negatives. It is based on new contract conditions that Apple and AT+T want to impose.

So let’s turn the clock back. During our study period there was no major iPhone initiative or announcement. There was however the announcement of the first Android handset, the HTC G1.

Under normal circumstances Android, with the infinite reach of Google, and HTC should have dominated the information market for mobile handsets during this period.

What happened? During that time iPhone garnered 12 times more information flow than the G1 and Android combined.

The normal way to look at this is to say the iPhone gets stronger information flow because it is more popular. But we don’t believe the web works that way.

Take Facebook as a parallel. There is little in the way of competition to Facebook. It has define a service that is similar on concept to many other social networks but no-one else tops 200 million users. There is a bull market in Facebook information. Its numerical success bears only an ill defined relationship to its inherent qualities.

In our view there is a tipping point in cases like iPhone and Facebook where the fact of information becomes more critical than their features, price or quality.

The iPhone is a poorly constructed product, with a long lock-in contract, arguably with poor performance characteristics compared to competitors.

If the only answer to its success is the user interface or usability then we’d have to conclude that all products should focus primarily in usability regardless of performance. In the case of the iPhone consumers choose to pay a higher than normal price to ignore poor performance.

Instead we believe iPhone addiction is the phenomenon we are looking at. As with Facebook. And other online bull markets. The kind of factors that are at work are confirmation bias – a tendency to take on only information that works as confirmation of our views; and availability bias – a tendency to use the latest information available rather than the balance of information.

Neither of these explains the peculiar web characteristic that we see with the iPhone, that people are generating information about it, all the time and that this information is crowding out other information about smart phones. To get at that we need to look at the sources of influence in web information markets. We’ll be digging out our Android study to do that in our next post.