Category Archives: Economics

Ownership: Artist or Engineer?

There are varying ways that a client / service relationship can work, and this view can be the cause of harmony or discord in projects. It’s something I’ve understood for a while, but had trouble explaining at times. What follows is an attempt to explain my view of something that knowledge workers need to understand to have a successful and fulfilling career.

The Artist

When an artist does work, we typically think of them as having complete control of the work. This is certainly true in the case where the eventual owner is not yet determined. Meaning an artist creates, and then sells directly or via a gallery to the public. Even commissioned artwork has only varying levels of control. A commissioned portrait certainly falls into the realm of work that would come with constraints. After everyone involved is dead and gone, people tend to remember the artist, not the owner.

The Engineer

When work is not sponsored, but contracted, it begins to fall into a completely different classification. Though you may refer to it as “artwork”, a visual painting done for advertising is really more “creative” work for hire. Certainly work that is more functional (like a bridge) comes with rigid requirements. This is the attitude of the engineer. That work is asked to meet certain goals, and ultimately subject to the approval of the buyer. While the engineer is an expert who expects to provide guidance, but does so at the behest of the client. In terms of credit, this world is muddled. Sometimes it is the architect, other times it is the owner or visionary that is remembered.

What does any of this have to do with consulting, software development, functional work, or any other type of service industry? Don’t get caught up in the work medium (paint, steel, code), or left brain / right brain aspect of the work, but just consider the metaphor in terms of relationship to the client and ownership of responsibility. In my world (consulting in the areas of software development, creative, marketing, etc) this distinction makes a big difference. All of these types of work have a right-brained aspect to them. People think of software development as a very regimented thing, but there is a lot of freedom to work in your own styles and patterns. Languages are fairly abstract these days, and they are high level enough to provide nearly infinite ways to solve complex problems. Certainly I don’t need to discuss how easy it is for a graphic designer to relate to an abstract artist.

Here’s where the risk is of confusing yourself with having the control an artist does, when you do not. The consultant works in a world where the client owns the final product. And the project would never even exist but for the idea and financial commitment of the client. Deadlines, requirements and other constraints are all part of the context. “Ownership” of the direction is a privilege that goes to the person that takes the risk. While an artist that is producing works for sale is bearing the risk that the piece will not sell, the bridge builder is not. It was sold before the project started. Sure, many contracts include shared risk clauses, but for all intents and purposes, the risk is on the client.

It is arrogant and unproductive for a paid consultant to believe they have the final say in work. They have the right to turn down work. And some clients may choose to give control over to the consultant, but that is their choice, not a right of the consultant.

When a consultant is doing work for hire and thinks they have the privilege that come with the artist mentality, it easy to develop a disdain for the client. Whereas in the engineering mindset, it is understood that one can recommend to the client, but ultimately the idea must sell itself. There is no expectation that the consultant wins because they are the subject matter expert. They are expected to be able to convey their idea and it’s merits in plain English and at a level understood by someone outside the field. In short, they must sell the idea.

Am I saying that workers should not have principals? Not at all. Take the story of Howard Roark, the principal’ed architect of Ayn Rand’s The Fountainhead. Roark suffered while turning down business as he would only work on buildings where his style of architecture was called for and he had the free hand to build modern and innovative buildings. He turned down others with work that would not satisfy him, but he did so respectfully. In this fictional work Roark has many enemies, but not the clients he turns down. A read sympathizing with Roark may agree with those clients, but it’s hard to see them as malicious.

The problem is that so many give away the right to have those principles for the sake of expediency without realizing they gave up that control. So they still expect the control. As an example, coming to work for a consulting company, you give up that right. Why? I’ve already made the point that the client has control, so you can only control work by selecting projects that meet your criteria, or working with clients who are ceding control. But as an employee of the company, you are giving up the client selection privilege in order to minimize your risk and investment. The consulting company provides you with a salary, book of work, etc, in return for your work. You do not get to control what work the company takes or not. It is your choice to leave if their client base does not suit you.

Too easily do I see people in the business blame owners and clients for work they do not like. But owners and clients anted up. They paid for the right to call the shots. If you want them to call the shots differently, it is your obligation to sell them on those ideas. Not your right to complain if the idea is not sold.

So what should someone who believes in the artist mentality do? There are people that believe so strongly in the control of their output. Folks like this tend to idolize people they view as uncompromising, like a Steve Jobs. (It’s worth noting that there are a lot of signs that he compromised more than the public perceived).

There are some simple solutions. Being an independent consultant means that you can turn down work that does not fit preferred principles. Owning / building your own consulting firm allows you the control of selecting your projects and clients. The third option is to return to the artists root of non-commissioned work. In other words, start a product company. While your clients have say in the form of sales, you are free to put whatever product you see fit on the market that can be held to only your standards. For all the knowledge workers that idolize Steve Jobs and he uncompromising reputation, it is worth remembering that he started and returned to a product company.

Media is a great analogy. Being an independent musician, filmmaker, or game developer is hard. You have to market for yourself, sell each product, secure distribution, etc. But for that price, you have control of the product. Signing with a publisher makes those tasks easier, but you have to be aware of the conditions you agreed to with the publisher. Like any contract or relationship, you should consider what those terms will mean in good times and in bad.

This is not to say that the rest of us don’t have some control and determination of our own destiny. It’s just that you have to remember you only have one lever to pull, leaving the company. You can negotiate terms based on a company or client’s desire to have you be a part of the team. But to get emotional about it, or think you have a right to control without taking the primary risk is folly.

When Everything Becomes Content

There is a lot of talk around 3d printing these days, and what it will do for manufacturing. How it can democratize the creation of products and move innovation back into a cottage industry alongside big R&D departments. Once again, individuals will be a key creation of inventions, holding patents and other forms of intellectual property.

While this is interesting, there is a bigger picture to be excited for. What does life look like when this technology is commoditized and ubiquitous. Working in technology, there is a pattern that I think will hold true for 3d printing: the technology and hardware lose value, while content is king.

If you haven’t seen 3d printing, check this out:

Look at music. MP3 players ushered in a revolution. Now they barely exist. Who buys an mp3 player? It’s a feature of your computer, tv, game console, phone, car. Lots of devices can play mp3s. The money is in the marketplace (itunes), and the content (publishers and artists). Publishers are complaining and have been hurting because they didn’t adapt. With manufacturing taken out of the equation, the barrier to entry it lower. Record labels now compete on the ability to promote artists, content and merchandise, as well as general business acumen. Some will adapt and survive.

So what happens when 3d printing is everywhere? The barrier to entry for general merchandise is lower. Barbie™ is now just content. She is a license. I don’t go to a big box store and buy a plastic doll that was shipped across the country. I buy a license to print a doll for my daughter from some “iTunes for everything” store, and it prints. So now, Mattel’s advantage over the makers of a generic blonde doll (with unrealistic proportions) will be their ability to market and innovate a brand and culture behind the doll. Meaning that packaging, distribution channels and manufacturing are no longer a competitive advantage. Sure, they have a head start with branding, but they haven’t exactly been breaking their backs fending off competitors, have they. But what about when this digital license store for everything is selling a Barbie license for $4.99 and a model made by a home hobbyist that comes with a link to some youtube stories about the doll for $.99?

Which is why companies like Mattel would accept this shift in the first place. Knockoffs or pirated plans for their designs will be on the market before real designs are anyway. Just like music, the big product companies will get dragged into this business by the inertia of the technology.

In this version, a couple of interesting questions come up. Who owns that license store? It’s way too early to guess, but if I had to put money down now, I’d say Apple and Amazon are the leading contenders for seeing this far into the future. Being cloud content providers, they will be on top of the ball realizing that I want to carry these licenses with me, especially once the printer is a commodity.

Which brings up some other interesting areas: maintenance, travel and license enforcement.

I should never need to buy my daughter another doll if it breaks, because I can just reprint one. Thinking of disposable things, how is there recurring value. Once I buy the license to a razor, I never need to buy one again.

For that matter, what stops you from printing razors for your neighborhood? What is the DRM model like for a trivial thing? And who believes there wouldn’t be an open-source razor that was good enough.

Certainly I like the fact that I don’t need to store all these things. Assuming we can print almost anything, then I don’t have a closet full of toilet-paper, I just print a roll when I need it. Think of all the things in your house you don’t need to store, from seasonal tools to disposable goods.

The idea I really love is travel. If my phone/tablet/whatever is my wallet (near field payment) and stores my licenses, then I can travel with just the clothes on my back. Each hotel room would have it’s own 3d printer and I have my preferred razor, toothbrush, and entire wardrobe available.

Highway truck travel drastically reduces in a world where I only need the basics “inks” (raw materials like polymers, metals, cotton) for my 3d printer. My town is now full of service providers and social locations, not big box retailers. Personal travel for errands goes away. The virtual workplace is realistic or more than just information workers, center employees and data researchers. Certainly the remote access of this is huge. Imagine a specialized implant needed in a remote medical center. Or repair parts needed on a space station. Imagine the difference to the Apollo 13 crew if they had a 3d printer.

A lot of this view of the world relies on the ability to easily recycle these materials back into those raw materials (inks). Assuming that, then some things may go away. For instance, if the power used to recycle and reprint an item of clothing is less than the power to wash clothes, then clothes washers go away. You would wear an outfit until done, then put it in a recycling bin. And you don’t need a closet, you just have a license to a variety of designs. If clothes are always new, then will the stigma of wearing the same outfit go away. Will people find 2 or 3 favorite outfits and simply rotate those.

This new view of the world of things is very interesting to me. On one hand it has a utilitarian view, where we can have much less stuff around us on a regular basis, and people can more easily live wherever they want. On the other hand, it doesn’t have the cold feel of many utilitarian views of the future, because of the freedom and ease of design, redesign and distribution. If the printer can use almost any material and the recycling can keep efficiency pace, it could really be a stunning new world where we have real ways of dealing with scarcity. Materials are used more efficiently in this manner, and products only need to exist during small windows of time. An for an even bigger change, imagine what happens the minute organic material can be printed in this, namely food and replacement organs.

Lessons of a Failed Startup(s)

A couple of months ago, I finished reading Eric Ries’ The Lean Startup. It got me to thinking about startups and small projects I’ve been a part of in the past.

In particular, I think of a social site for readers that I was apart of that failed. I think of the the end, where I was trying to make the case to launch something and let users drive the feature list. What I find really frustrating is that I did such a poor job of communicating that at the time. Reading the book, I hear a much better way of emphasizing the point of customer feedback loops. The minimum viable product with hypothesis and user testing driving the next steps; it has so much value. Additionally, that movement has a number of successful followers to their name, so they have credibility with their message. Timing and other market factors may have doomed us anyway, but I can’t help but thinking of what could have been different armed with some of that information at the time.

The other part of the book that really resonates with me is how hard successful startups are. People are so afraid of there idea being stolen. In the book, Eric Ries suggests that you try to have someone steal your idea (it’s hard to do). He’s right. If someone actually wants to steal your idea, at least it validates that other people think it’s a good idea.

I get approached by people with startup ideas a lot, looking for programmers who want to work for equity. For young developers with the time, I think they should get involved, it’s a great way to learn the realities of business and to get some extra experience. But beware of how much of a longshot it is to get the product successfully to market. It has to be a good idea, successfully built, successfully marketed, and fill a timely need. Miss any of those categories, and you probably won’t do much.

I’m not suggesting people avoid startups. They are a great learning experience and some of them work out. But go in with your eyes open to the amount of work you have in front of you. And be discriminatory about where you choose to invest your time. Are the others involved willing to put in the same effort you are? Will this new organization be capable of all of the things needed to be done to launch a product?

My advice for evaluating an idea: run a set of books for the project (meaning keep accounting). If you’re working for equity, keep track of time anyway and what you could have been paid at your regular rate to do that work. How long will it take for the project to pay that back? That question opens a lot of eyes. Say what you will about money as a measuring tool, but it’s the standard for all projects and companies. It’s relatively objective, and very compatible with math. The same can’t be said of a subjective goal like “let’s take over the XYZ market.” Presumably, you have your day job because you make someone more money than you cost them. If you can’t say the same of your startup project within the first year, then your project doesn’t even have the ROI of your “boring old day job” (you may love your job, my point here is that people thing of startups as high risk / high ROI and that may not be the case). Every time you sit down to put more into the project, you’re saying that you will get that back in cash on the other end. Is that true, or are you kidding yourself?

There can be other reasons to do a startup. I’ll use a personal recent example. I built VicinityBuzz, and iOS application around Social geo-search (also coming soon to Android and WP7). It’s been slow out of the gate so far, but I’m hopeful that some of the new features coming in the next update and some marketing ideas I have will help. Regardless, I’m certainly a long way from paying myself back for the time I put in. But I have been working in cutting edge technologies more and mobile is a real focus. I knew even if the project never paid for itself that it was valuable time learning and to put the project into my portfolio of work. I went in with those realistic expectations, but try really hard to exceed them.

If there is intended to be a single message of this post, it is to apply measurable goals to your projects, and evaluate and pivot your direction as often as reasonbale. If I had to boil down the message of the book to one sentence, that would be it.

Deming on the Financial Crisis From Beyond the Grave

Tell me these aren’t relevant. Tell me it isn’t like a summation of Wall Streets mistakes leading up to 2008. Deming died in 1993.

Deming’s 7 Deadly Diseases of Management*

  1. Lack of constancy of purpose
  2. Emphasis on short term profits
  3. Evaluation of performance, merit rating or annual review
  4. Mobility of top management
  5. Running a company on visible figures alone
  6. Excessive medical costs
  7. Excessive legal damage awards swelled by lawyers working on contingency fees

*http://en.wikipedia.org/wiki/W._Edwards_Deming

On Commuting and The Economy

Yesterday, I left downtown Cleveland at 3:45 headed to a 4 o’clock meeting. I was probably going to be 5-10 minutes late. Instead I ended up calling to reschedule, and still didn’t make it home till 6:15. Two and half hours, for a drive that usually takes me 45-55 minutes. Google maps says 38 minutes, but that’s not realistic on a weekday. As I was virtually at a standstill on I-77, and I saw some helicopters coming and going, I assume this was a very bad day for someone up ahead, and so as frustrating as the experience is, delaying my day (and many others) is a small price for life saving flights to the hospital.

But the traffic did get me to thinking, that most traffic jams are a multifaceted problem. I’m referring to those simply caused by congestion, fender-benders, or traffic stops (and the associated gawking). Wikipedia does a nice job of listing the negative effects. But I think in the current context of the US today, it’s worse than what they list. And I think we have the power to mitigate some of this.

As already mentioned in the Wikipedia list, there is opportunity cost, massive pollution increase, and psychological effects to traffic problem. What about our current time period makes this worse? Try the housing market. How? Workers commuting a long distance wanting to avoid the risks of long traffic tie-ups aren’t nearly as free to move closer to their jobs. Or they aren’t looking at far away jobs merely because of the commute. The tie-in between housing (mobility of workers) and jobs is clear, add urban congestion to that fire. Also, construction and maintenance projects that can make for better commutes aren’t exactly popular, particularly when tied to state and local budgets. Unlike the Federal Government, these state and local entities can’t run large deficits during times of tax revenue decline. Finally, consider the wasted fuel (which is getting more expensive with turmoil in the Middle East) and it’s effects on household budgets that are already stressed thin.

So what remedies exist?

The White House has been pushing for high speed rail projects across the country, but some states have turned the money down fearing the investment they would have to put with it. There are a lot of questions about the value, but it’s hard to imagine that making people more fluid is a bad thing for commute times and the job market. With this in mind, I asked a question about the speed of Ohio’s rail on quora.com.

Telecommuting has gained a lot of momentum, although I expect there has been some reduction during the recession (office space is not as much of an issue with a contracting workforce). While I’ve never been a big fan of working from home, it’s clear that it can save both the individual and company time and dollars.

GPS Systems are increasingly integrating traffic data. Just like emissions standards, having smart traffic systems as mandatory in cars could go a long way to assist in intelligent rerouting of commuters in the event of a backup. How many times have you been in a traffic jam and felt like you were rolling the dice when deciding whether to get off the highway and try another way? There are even social GPS systems like Waze that attempt to address this.

Google has been working on driver-less cars for a while now. Certainly safety, reliability and such are an early concern during testing. Once refined and proven, however, this technology would drastically reduce accidents, traffic stops, and save lives. If everyone were driving such cars (this is a loooong way out), speed limits could be drastically increased with little additional safety risk.

IBM, under their Smart Planet initiative, have been researching and implementing smart traffic systems.

I can only hope that some of these advancements lead to the kind of information available to drivers that is portrayed in this video “A Day Made of Glass” by Corning.

I think the challenge is finding reasonable first steps and getting some coordination between these initiatives. Given a recession, and global competition from rising powers like China and India, the US could gain a lot output from simple efforts to improve traffic scenarios. And maybe civil engineers (specifically transportation engineers) are on top of these ideas, but for now it certainly doesn’t look like the US is leading the way with solving these issues. Even if commute times aren’t drastically reduced, with solutions like the Google car or the high speed rail, imagine the productivity increase of commuting free time with internet available. You could use the time to pay your bill, catch up on news, do correspondence course work, etc. For some commuters, this is already a reality.

Some of the stimulus money was aimed at these kinds of projects, but in my mind, not enough. The long term economic effects of a mobile workforce are undeniable. And these efforts could payoff in terms of global competition for years to come.

What do you think? Does your city have solutions or efforts under way for this? Do you see a particular effort or company leading the way with this? I see mostly efforst coming from technology companies, but are there other significant efforts to address these issues?