Feb 1, 2023 | Analytics, Governance, Strategy
Mark Zuckerburg has a lot to answer for, disrupting as he has the lives of my children. However, he is also very smart and rich, so being annoying must have something going for it.
When pitching the $5 billion Facebook float in 2012, Zuckerburg wrote to prospective shareholders via the prospectus, a letter that outlined his vision of what Facebook had become, and would continue to be.
This is to my mind the crucial paragraph, buried in the body of the letter.
“The Hacker Way is an approach to building that involves continuous improvement and iteration. Hackers believe that something can always be better, and that nothing is ever complete. They just have to go fix it — often in the face of people who say it’s impossible or are content with the status quo”
It now seems he has taken that perspective of his obsession to the world of virtual reality. He has invested billions of shareholder funds in his personal vision, triggering a loss of billions from the market value of Facebook, now Meta. He does not seem to care, but many other shareholders do. They must be getting very annoyed about now, the value of their shares dropping 70% from its peak 15 months ago.
At some point, businesses must develop stable, repeatable processes that just gets the mundane stuff done.
Facebook did that with remarkable efficiency for a long time, creating a river of cash. However, ‘hacking’ has taken hold.
Hacking to improve mundane processes should be part of the culture, so long as the experimentation is part of a managed process. The alternative to that discipline is chaos.
Mixing the cultures that accommodate the disciplined repeatable processes that get the bills paid, and the sometimes chaotic, creative environment of “hacking” is a function of the leadership of the enterprise.
Management needs to be “Loose” to accommodate the creativity and experimentation necessary for process improvement, while being “tight” to enable the learning that comes from experimentation to be incorporated into standard procedures when they prove to be an improvement.
Loose/tight management, is the environment in which “Hacking” Kaizen, or whatever you choose to call it thrives.
‘The Zuk’ has imposed his single minded obsession with hacking on the culturally poisonous monolith he created, because he can. If his VR vision becomes a reality, Meta share price will not only recover, but break all records. I do not expect that at any time soon, particularly if as rumoured, Apple comes out with their version. Meta now faces a governance challenge that could be a real game-changer.
Addendum February 4, 2023.
This article from the Statista website details the progression of losses Meta has booked on Zuks metaverse bet. $US13.7 Billion in 2022, on an increasing trend. While the share price has dropped dramatically, if you look at the PE ratios before and after the drop, it seems to me that the price is settling back to where an old fashioned investor, one who expected a return from dividends rather than capital growth on the basis of a never ending share price increase, might expect it to be. The same comment can be applied to many other digital pletform stock price drops over the last year or so. Fundamentals kicking in??
Addendum 2 February 5, 2023.
They are coming thick and fast!. I read this ‘Wired’ article by the brilliant Cory Doctorow this morning. It explicitly defines the life cycle of social platforms, something we all ‘sort of’ knew but dismissed in favour of the value for early adopters, progressively locking in users, at the same time they squeezed the algorithms to generate ad revenue. Doctorow calls it ‘Enshittification’, a lovely word. Towards the end of the article is a quote from a very young Zuckerberg ”I don’t know why tney trust me, Dumb fucks’. Here is the news Zuk, we don’t!!
Jan 30, 2023 | Governance, Small business, Strategy
The Federal Government committed to a $15 Billion National Reconstruction Fund’ in the October 2022 budget. While the 7 priority areas have been articulated, and there is a better than average website full of glossy photos and optimistic copy, we are waiting on the details.
Of the $15 billion, 8 billion has been earmarked as follows:
- Up to $3 billion for renewables and low emission technology. (I wonder how much the fossil fuel industry has earmarked in their political diaries for carbon capture projects that double as subsidies)
- $1.5 billion for medical manufacturing. Moderna has already committed to completing an mRNA manufacturing facility by the end of 2024 in partnership with the Feds, which must chew up a chunk of that money. They have also just tripled their price/dose in the US for a technology that greatly benefited from public funding during the pandemic. I wonder how the PBS will address that one?
- $1 billion for value adding resources. Presumably, this is to start to cover some previously fumbled bets on Lithium, and rare earth mining and processing. We have roughly 50% of the global production of Lithium, 25% of known global reserves, but capture virtually none of the value of the stuff as it goes into battery production.
- $1 billion for advanced manufacturing. The facility set up by Flinders University in Tonsley Park in SA in collaboration with several defence suppliers, and the Manufacturing Institute of Scotland, one of the UK’s successful Catapult programs has a run up start. It is envisaged that defence accredited SME’s will be able to access funding and mentoring from the arrangements. This seems to be a very sensible bet, hopefully just the start of many experiments, but I am not holding my breath.
- $500 million for agricultural value adding covering food, fibre, fisheries and forestry. For an industry sector where Australia has consistently demonstrated a capability to innovate as a response to the poor average quality of our soils, this seems parsimonious.
The balance remains unallocated, waiting on the detailed guidelines.
Where the demarcation between this fund, the funds allocated to the CRC program, which recently announced $148 million to 6 CRC’s (from a final submission list of 26) is a bit unclear to me. However, what is clear by the thrust of all the programs and press releases, is that the emphasis is on high tech, however you choose to define it. The normal, run of the mill SME manufacturer, those not engaged in technology, struggling to pay the bills, employ and train people in the absence of TAFE, keep up with bigger domestic competitors funded from overseas, are left out in the cold.
It is easy to draw the conclusion we do not need them, and individually we do not. However, collectively they are a huge part of the economy, employ hundreds of thousands, and generally pay their taxes when lucky enough to make a profit, without engaging the services of accountants in Bermuda.
Most innovation comes from SME’s. Not just the technical innovation that drives the defence, electronics, and space industries, but the more mundane process and customer innovation that drives an SME to see a market opportunity that others do not, or choose not to see. Such innovations are sometimes potentially disruptive to an established group of big players who would rather stomp on the SME than change the business or product model that had made them successful. Often, these incumbents are protected by so called ‘industry standards’ written by those same incumbents, further expanding their hold on the status quo.
For that latter group of SME’s, they have a problem evolving from the deindustrialisation of the Australian economy over the last 30 years. This is graphically illustrated by Australia’s drop to 91 from 60 just 20 years ago on the latest Harvard Economic Complexity model. This puts us just behind powerhouses like Kenya (90) Laos (89) Uganda (87), and a host of others we would dismiss as ‘third world’ economies.
This lowly position is compounded by the currently disrupted industrial supply chains: they cannot get their hands on the equipment necessary to move quickly to fill the market gap. This assumes they can access the equity and/or loan funds necessary for the commercialisation, and the skills to run the gear.
There are also various programs run by the states, for all sorts of reasons, chief amongst them seemingly the opportunity for a press release and flurry of PR activity before an election. Printers (those that remain in business) are expecting a mini-boom in NSW over the next few months.
Being one who has seen this problem from both sides, I do not underestimate the challenges. Nevertheless, effectively ignoring a very substantial group that provides many day to day goods and services, employing and training thousands, and generally making an irreplaceable contribution does not seem sensible.
It seems to me that the answer of the question in the headline is ‘you can’t’
Is there anything I have not seen that assists these enterprises?
Feel free to disagree, or indeed, provide advice I can pass on to those struggling enterprises.
Jan 20, 2023 | Leadership, Strategy
Monty Python would struggle to come up with the tangled mess that is the Liberal party, nationally and in most states.
Nationally, retreating as contemplated by their leader to the right, seems self-defeating, especially while the ghost of the recent past hovers on the back bench. In WA, the next meeting on Monday is in the phone box on the corner of Hay and George streets, while in NSW the merits of a Hugo Boss designed dress uniform from 1938 is front page news.
Everywhere I look, it appears to be a re-run of the battle of Karansebes.
The ‘Battle of Karansebes‘ took place in 1788, in what is now Romania between the army of the Hapsburg empire, and itself.
In summary, a formation of Austrian Hussars was sent to reconnoitre the terrain and find the Ottoman army, the intended battle opposition. Instead, they found a bunch of Romanian gypsies who sold them some barrels of the local booze, which the Hussars took to be serious opposition, setting about the task of conquest.
Some time later, a platoon of Austrian infantry came upon them, and wanting to share in the spoils of war, a request that was vigorously opposed, leading to a drunken and chaotic shooting.
Somewhere into the chaos the main Austrian force thought the Ottomans were attacking, and opened fire on their own troops, then panicking, withdrew to try and restore a fighting stance.
2 days later, the Ottomans turned up and found nothing but the dead and wounded from the battle.
It seems to me to be a wonderful parallel for the war obviously going on in the liberal party. What can only be described as friendly fire adding mightily to the chaos after the destruction of the last election.
Header drawing: Battle of Karansebes, drawn in 1795 showing Ottoman forces advancing to Karansebes
Jan 17, 2023 | Governance, Strategy
Eddie Jones is back as the Wallabies coach, a week after being sacked by England rugby, despite a contract that took him past the world cup in France starting in September. Under Jones, England did very well from 2015 to 2021, having a 73% win record. A dismal 2022 season blew that number away. The English team failed to perform in 2022, so the coach must go.
Meanwhile, back in Rugby Australia headquarters, coach bingo was starting again. Incumbent Dave Rennie failed to call ‘Bingo’ last week, being edged out by none other than Jones, who had snuck back in through the side door.
Jones previously coached the Wallabies from 2001 to 2005, with considerable success on the field. However, it seems he lost the game in the boardroom, which is the one that really matters to the nincompoops who run the game, so he had to go. Then came a conga line: John Connolly, Robbie Deans, Ewen McKenzie, Michael Cheika, and finally, Dave Rennie. If we had the broken contract payouts of that lot, we could build a stadium!
By vivid contrast, we have the current Australian Open draw. It is full of Canadians. Who would have guessed 20 years ago, as Jones was being sacked for the first time, that snowbound Canada, a country with so few tennis courts most would not have recognised them as such, would emerge as a tennis powerhouse. In just 20 years they would have gone from a tennis-less country to one others are looking towards for inspiration.
Canada has several real chances at a win in Melbourne, the ranks include a winner of a grand slam (Bianca Andreescu US Open 2019) several slam runners-up, and more semi and quarter finalists than so called tennis powerhouses like Australia have in the draw, and are the current holders of the Davis Cup.
It is instructive to look at the differences.
The fact that they are entirely different sports is irrelevant. What is absolutely relevant is that Tennis Canada developed a strategy that they stuck to, adjusting tactically as necessary. The absolute objective was, and is, to be a top performing nation in the tennis competitions that matter, the Slams, Masters, Davis and Federation (now Billie Jean King) Cups.
Coaching has been a key part of the Canadian strategy, as has been the early identification of talent, and the focussing of very limited resources on nurturing that talent, commitment, and patience, all heading towards that shared and unambiguous objective.
Meanwhile, Australian rugby bounces from coach to coach, without any evident strategy. Talent identification is left to the few schools that still play rugby, there is little pathway from park rugby to the elite level, star players are not encouraged to play domestically as their value is not recognised in the pay packets, and we even dismiss Israel Folau, the greatest crowd puller since David Campese because he has an invisible friend who makes him say stupid things.
Failure of the Wallabies to perform consistently on the field is the outcome, not the cause of the current malaise, and will not be fixed by more of the same. We have changed coaches almost as often as my grandson has his diapers changed, and for the same reason. Surely it should have sunk in by now that the performance problems are not just coaching, they hide elsewhere?
It is the total lack of a strategy, thoughtfully implemented over an extended period that is to blame, not the coaches.
Rugby Australia could learn a lot from Tennis Canada.
Header photo courtesy Rugby World magazine. (it looks like Eddie is watching his back).
Jan 16, 2023 | Marketing, Strategy
At the intersection of the science of the brain and Artificial Intelligence, is something called ‘The Frame Problem’
This is a term used to describe the way we, subconsciously, sort the relevant from the irrelevant in any context, or ‘frame’.
It locates the inflection point between artificial intelligence, getting smarter by the day, and the sentient intelligence we humans can bring to bear without conscious effort.
Often, we just call it common sense.
For example, if we saw a 3-year-old child we did not know about to jump into a swimming pool, we would automatically try and stop them. By contrast, if we also saw the kids mother waiting a few feet away to catch them, we are unlikely to even register the fact that they are about to jump into the pool.
The resulting ‘frame’ which drives our response is different, although the scene our eyes ‘see’ is identical. It is the interpretation our subconscious makes that is entirely different. That difference is how our brains interpret the factual scene our eyes register on our retina.
Applying the ‘Frame’ to largely qualitative contexts when outcomes are variable, and derived from a host of drivers, frees up cognitive capacity to do other, more important things. In differing contexts or ‘frames’ the variables stimulate differing courses of action, as the value of experience and domain knowledge comes in.
You cannot learn this stuff from a book, as no book can adequately predict which set of variables will show up at any given time in differing contexts. That variability will have a profound influence on the resulting action we take.
For a marketer, understanding the ‘frame’ of their target customer or market will enable you to tweak the drivers that will lead to a desirable outcome. Equally, it will enable discrimination between drivers so that investment is not made in combinations of drivers and situations that will not suit the marketing objective.
The key question to ask yourself is: What did we miss?
Dec 15, 2022 | Innovation, Strategy
Many of us are concerned with two key questions that will impact the lives of our children and grandchildren.
- From where is the next wave of innovation is going to emerge?
- How can we put Australia in front of that wave, so we can reap the benefits?
The challenge in this country to the generation of real innovation, the creation of new value, is that we do not invest sufficiently to be in the game. In addition, we spread it around, compromising the depth of research in any one domain we can undertake.
This insufficiency comes from the politicisation of science, its underfunding, and the fragmentation across public and private sectors, as well as regionally by state.
With a few notable exceptions, Australian owned enterprises do not have the scale to fund the depth of research required, little culture of philanthropy that funds science elsewhere in the world, and multinationals that do have the scale generally are not interested in Australia. This has resulted in a brain drain, and we suffer from a tendency to look backwards and extrapolate to make the bets that will shape the future.
As any innovator knows, constraint is often the best catalyst for original thinking. This has been exemplified over the last few years by the rapid development of covid mRNA vaccines from research labs into available vaccines in record time.
Enough of the problems, what are the trends driving the shape of the future wave onto which we can hitch a ride?
Medical science.
Australia punches above its weight in medical science, despite the constraints. CSL and Cochlear are international leaders, Moderna has announced an mRNA development lab in Victoria. Australian expertise goes all the way back to Sir MacFarlane Burnett, and past successes from the vaccine for the papilloma virus, innovative cancer treatments, and Fiona Wood who pioneered artificial skin are considerable. We may have sequenced our DNA, but the function of the vast majority of the 3.2 billion base pairs we all carry is unknown, a vast trove of potential knowledge to be gained!
Quantum computing.
The Quantum unit at University of NSW led by Professor Michelle Simmons is a world leading research institute. The potential of Quantum physics to drive development across a range of fields, including those listed here is agreed by the experts, of which I am not one, to be immense.
Materials science.
Australia is uniquely situated as a stable democracy blessed with an abundance of raw materials from the traditional minerals, to rare earth minerals, and an overabundance of sun and wind. The materials that will drive the emerging world will come from those sources, powered by advanced computing and materials science.
In short, we do not need to spend piles of money trying to reproduce the Australian version of Silicon Valley. We need to find our own way based on the unique position we are in, and the potential for that position to be leveraged by intelligent and focussed public and private investment.
We have the opportunity to define emerging fields of science that will deliver over the long term the innovative products and services that will reshape our economy. I wonder if we will have the will and foresight to grasp that opportunity, or as has happened in the past, we pass on it and go to the beach.
Header credit: Irina Blok at www.irinablok.com
