Endless Innovation

Innovation, the Singularity and the Most Mind-Bending Magazine You'll Read in 2009

Chances are, you're at least familiar with "the singularity" even if you've never picked up Ray Kurzweil's book or read anything at all about "transhumanism" or "augmented reality" or HET ("human enhancement technology"). Simply stated, the human race appears to be on the cusp of overcoming its current physical and mental limitations through a mix of biological and computational means. The magazine that has become the voice of the singularity is h+ magazine (the name is rather self-effacing, but it stands for "humanity plus") -- and the Fall 2009 issue is one of the most, well, mind-bending magazines that I've read this year. It's like WIRED magazine mixed together with those New Age magazines at the checkout stands at Whole Foods, spiced up with a healthy mix of inscrutable Matrix-style science fiction. The current issue includes:

• Excerpts from a Stephen Hawking lecture, in which he notes that humans "may have entered a new stage of evolution"
• A story by Surfdaddy Orca on how people are using "cognitive enhancers" to improve brain performance
• An article on "psychedelic transhumanism" that references Timothy Leary
• Advertisements for "cryonic suspension"
• Discussion of "nano-persons" and "macro-persons"

Oh, and just to bring it all back to pop culture and make it somewhat accessible to the masses, the magazine features a cover story on Fox TV's The Dollhouse -- the futuristic, sci-fi show starring Eliza Dushku that's about "programmable human dolls" made possible by breakthroughs in neurological technology.

The Most Innovative Business Thinkers in the World

In its first-ever edition of The 27 Brave Thinkers Who are Shaping the Future, The Atlantic magazine takes a closer look at the creative -- and often courageous -- thinkers who are unafraid to take on the Establishment and challenge the conventional wisdom of how things should be done. In other words, think Profiles in Courage mixed with TIME Magazine's Person of the Year, and you'll have a good idea of the type of people that The Atlantic has in mind. There are some obvious picks (is there any feature these days that doesn't include Barack Obama?), as well as some choices that may not be so obvious (the two co-creators of South Park!).

Within the business & technology space, The Atlantic singled out the following individuals for their unique contributions and innovative insights:

(1) Shai Agassi, for his conceptualization of a national electric car infrastructure

(2) Arthur Sulzberger Jr., for his attempts to bring the New York Times kicking and screaming into the Web 2.0 publishing era

(3) Mark Zuckerberg, for continuing to push Facebook in new directions while risking the displeasure of an engaged user base (i.e. for his attempts to turn Facebook into Twitter)

(4) Jeff Zucker, for challenging the conventional wisdom of prime-time programming at NBC Universal

(5) Steve Jobs and John Lasseter, for their groundbreaking creative work at Pixar Animation Studios

With the exception of Agassi, the list reads like a who's-who in the digital media space. Which begs the obvious question: Is it really the case that the only brave thinking is occurring in the world of digital entertainment? Frankly, I was a bit disappointed not to see other corporate thinkers singled out for their unique approaches to problems like healthcare, poverty and global warming.

[image: The Atlantic cover November 2009]

Innovators Are the New Untouchables

In an op-ed piece for the New York Times, Thomas Friedman riffs on American economic competitiveness and the state of our nation's educational system. Friedman suggests that companies are once again placing a premium on innovators and out-of-the-box thinkers:

"A Washington lawyer friend recently told me about layoffs at his firm. I asked him who was getting axed. He said it was interesting: lawyers who were used to just showing up and having work handed to them were the first to go because with the bursting of the credit bubble, that flow of work just isn’t there. But those who have the ability to imagine new services, new opportunities and new ways to recruit work were being retained. They are the new untouchables."

We assume here, of course, that Friedman has in mind the Capone-era Untouchables, and not the untouchables of India. The Untouchables, in this context, are the types of workers who have high-end analytical skills and all the attributes of innovators: "Those with the imagination to make themselves untouchables — to invent smarter ways to do old jobs, energy-saving ways to provide new services, new ways to attract old customers or new ways to combine existing technologies — will thrive."

Friedman pushes the case even further -- even as the U.S. economy steadily moves out of recession, it is up to our nation's schools to produce innovators and creative thinkers: "In a world in which more and more average work can be done by a computer, robot or talented foreigner faster, cheaper “and just as well,” vanilla doesn’t cut it anymore. It’s all about what chocolate sauce, whipped cream and cherry you can put on top. So our schools have a doubly hard task now — not just improving reading, writing and arithmetic but entrepreneurship, innovation and creativity."

[image: The Untouchables]

I Want to Say Three Words to You: High Speed Trains

Mr. McGuire: I want to say one word to you. Just one word.

Benjamin: Yes, sir.

Mr. McGuire: Are you listening?

Benjamin: Yes, I am.

Mr. McGuire: Plastics.

Benjamin: Just how do you mean that, sir?

**

More than 40 years ago in the film The Graduate, the buzzword of the day was "plastics." In 2010, I'm wondering if the buzzword might just be "high speed trains." There's been a lot of chatter out of Washington about building a national high-seed train network, partly as an economic stimulus measure and partly as an environmentally-sound move to get more cars off the roads. In California, there's talk of using high-speed trains to connect the northern and southern parts of the state. And there's even been mention of converting Detroit's shuttered auto factories into high-speed train factories.

The push toward high speed trains is not just an American domestic issue. High-speed trains have always captivated the imagination of innovators in Japan and Europe. Now Russia is getting into the act. The magnificent Sapsan ("peregrine falcon" in Russian) trains (pictured above) will now connect Moscow and St. Petersburg in less than four hours. Moreover, those trains will have plush leather seating, gourmet meals, and presumably, a very nice selection of premium Russian vodkas.

Back in the day, I remember leaving Leningradskiy Vokzal in Moscow for the long overnight trip to St. Petersburg. Even on the rapid "Red Arrow" train (the favorite of American expats -- sorta like the express Acela trains that Amtrak has), it was still 7-8 hours to get into Petersburg. By cutting down the time to less than 4 hours, the Sapsan trains are making it significantly easier than ever to travel between the two cities.

[image: Russian Sapsan high-speed trains via New York Times]

Innovation at the Bottom of the Pyramid

The traditional view of global innovation is that innovation from developed markets eventually "trickles down" to emerging markets in the form of lower-end, less-sophisticated products at lower price points. Think OLPC. Yet, in countries like India, it's increasingly the case that innovation actually "trickles up" to more developed nations when products are completely re-engineered and re-thought practically from scratch. The Wall Street Journal has a fascinating front-page article on how Indian innovation is upending our traditional notions of how innovation works. Whether it's the Tato Nano for $2200 or the Godrej Little Cool Refrigerator for $70 (pictured above), multinational corporations are taking a closer look at what they can learn from Indian engineering know-how and innovation.

 GE Chairman Jeffrey Immelt refers to it as "reverse innovation" -- the tendency now for innovation to migrate from emerging markets to developed markets:

"Such innovations represent a fundamental shift in the global order of innovation. Until recently, the West served rich consumers and then let its products and technology filter down to poorer countries. Now, wth the developed world mired in a slump and the developing world still growing quickly, companies are focusing on how to innovate, and profit, by going straight to the bottom rung of the economic ladder. They are taking advantage of cheap R&D and low-cost manufacturing to innovate for a market that's grown large enough and sophisticated enough to make it worthwhile."

What's surprising about the Wall Street Journal article is that it never once mentions C.K. Prahalad's excellent book on emerging market innovation: The Fortune at the Bottom of the Pyramid. Prahalad, of course, is among the leading experts in the world on how Indian companies in sectors ranging from health care to hospitality are at the forefront of global innovation.

[image: The ChotuKool Refrigerator via The Wall Street Journal]

Shazam! And the New Superheroes of Venture Capital

Until last week, it was easy to think of iPhone apps more as a distribution channel, less as a full-fledged business that deep-pocketed venture capitalists would attempt to bring to market. After all, for any Fortune 500 company, the current revenue stream from iPhone apps would most likely amount to little more than a rounding error. Is it possible that start-ups selling iPhone apps for as little as $0.99 -- or, more likely, giving them away for free -- can ever transform themselves into billion-dollar companies?

The answer could be "yes." Celebrated venture capital firm Kleiner Perkins – the same Kleiner Perkins Caufield & Byers that has invested in some of the biggest names of the Internet -- recently announced that it was investing an undisclosed amount of money in popular iPhone app Shazam through its new $100 million iFund. As a rule of thumb, big-time VC firms like Kleiner Perkins don’t invest in companies unless there’s an identifiable billion-dollar market opportunity, so methinks that KPCB has a future vision of greatness for Shazam. Claire Cain Miller of The New York Times has the details:

“[Shazam] will soon be able to do a lot more, propelled by new capital from Kleiner Perkins Caufield & Byers, the elite venture capital firm that is investing its $100 million iFund in start-ups that develop applications for the iPhone. It has invested an undisclosed amount in Shazam, which had previously raised $12.3 million from Acacia Capital and DN Capital.

Shazam’s app has been downloaded 10 million times on the iPhone and has 50 million users across all platforms, including BlackBerry and Android phones. It already helps people discover new music and results in more purchases from the iTunes Store than any other company, said Matt Murphy, the Kleiner Perkins partner who manages the iFund.

Shazam will add other ways to find new music, like recommendations and sharing with friends, he said. It will also move into other types of media, like video, and partner with media companies and artists, he said. For example, Shazam will most likely start selling items like band tickets and merchandise from within the application, he said.”

In the case of Shazam, it’s easy to see that the iPhone app is highly scalable across other entertainment fields beyond music. What’s also interesting, of course, is the new business model that Shazam is bringing to the music industry. In the ongoing battle for supremacy between intermediation and dis-intermediation, this time it looks like Shazam is playing the role of the intermediary, matching seekers of music with the sellers of music. Shazam is developing a diversified business model and exploring new ways to monetize the “discovery” process:

“Shazam is a model for how businesses can be successful with iPhone applications, because it began with something simple and started expanding once it got popular. Shazam is already cash-flow positive, with a variety of revenue streams. It makes money from carriers that preload the application on phones or that charge for the application. It gets a cut when users buy a song on iTunes and download paid versions. (Shazam’s app is free on the iPhone, but there are paid versions for BlackBerry and Nokia phones.) It also makes money from mobile ads… Shazam will start offering subscriptions for premium versions of its application, which is a popular model these days. Users will get a certain number of song identifications and some features free, and pay for unlimited identifications and features.”

These are exciting times for the mobile space, and especially for iPhone app developers. Any ideas on which other iPhone (or BlackBerry or Android) apps could also be ripe targets for deep-pocketed venture capitalists?

[image: Shazam ad via iPhone Blog]

The Baby Boomer Web

The Baby Boomer Generation has had a disproportionate economic and cultural impact on nearly every trend of the past 40 years, so why not the Internet? Of late, there's been a steady stream of stories, articles and anecdotes about the Baby Boomers and the Web -- including all those stories of how Twitter users skew so much older than just about any other social media user group. As a result, I've been putting together a broader thesis about The Baby Boomer Web.

Simply stated, the Web is being increasingly impacted by an older generation of Internet users who suddenly have the time to spend on sites such as Facebook -- as well as the wealth and affluent heft to be courted by online marketers. Suddenly, the 18-24 demo isn't looking so hot... In fact, the latest data from Nielsen in a CNN story about the demographics of the Web includes some relatively surprising and striking statistics about Web usage in a sidebar -- only 10.27% of Internet users between the ages of 18-24 use Facebook; 15.46% use MySpace; 3.99% use LinkedIn; and 9.51% use Twitter. Comparatively speaking, the Baby Boomer generation is much more active when it comes to social media and social networking sites.

For Barron's, the Baby Boomer Web is more than just a theme -- it's a tradable investment thesis. About two weeks ago, the cover story on Barron's was Boomer Consumers. The article chronicled how certain sectors of the economy continue to be significantly impacted by Baby Boomers, and outlined why marketing professionals may want to give the Over 50 crowd a bit more thought. According to Barron's, the 50+ demographic now accounts for 45% of all U.S. consumer spending, and that figure could approach 50% by 2015. Even in areas that you might not expect -- such as new household furnishings -- Boomer spending accounts for nearly 40% of all spending. By 2015, in fact, Boomers will represent 40% of all U.S. consumers.

All of this has implications for the Web, of course. The new hot areas -- in addition to pharma and health care -- could be beauty products for Baby Boomers, travel & entertainment companies, and financial services companies catering to an older, savvier investment population.

[images: The Baby Boomer Web and Barron's]

The FTC and the Strange Death of the Celebrity Endorsement?

Lost in all the hoopla about the new blogger guidelines on endorsements and testimonials is the rather important issue of celebrity endorsements. Given a narrow interpretation of the FTC Guidelines, it's clear that these expanded rules on The Use of Advertisements and Testimonials in Advertising could have a chilling effect (it's a legal term, look it up) on the way brands deploy celebrities as spokespersons.

Specifically, there are several clauses in the Guidelines that could be troublesome. For the sake of brevity, let's refer to them as the bona fide, typicality and material connection clauses:

Section 255.1: "When an advertisement represents that the endorser uses the endorsed product, the endorser must have been a bona fide user of it at the time the endorsement was given. Additionally, the advertiser may continue to run the advertisement only so long as it has good reason to believe that the endorser remains a bona fide user of the product."

Section 255.2: "If the advertiser does not have substantiation that the endorser's experience is representative of what consumers will generally achieve, the advertisement should clearly and conspicuously disclose the generally expected performance in the depicted circumstances, and the advertiser must possess and rely on adequate substantiation for that representation."

Section 255.5: "When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e. the connection is not reasonably expected by the audience), such connection must be fully disclosed."

One of the inherent problems of celebrity endorsements, of course, is that any celebrity touting a handbag or car or watch might not actually (gasp!) use that handbag, car or watch. Or, they may use it a few times, but not actually use it as often as the ads might imply. This is the bona fide clause.

Another problem is that if a celebrity is touting a product and implying that the product is responsible for his or her superior performance, this might still run afoul of the FTC for the simple reason that this superior performance may not be "typical" and "representative." Maria Sharapova may endorse a Prince tennis racket, but that doesn't mean that you'll be winning a major pro tennis tournament any time soon if you buy the same racket (or even a tournament at your local country club). This is the typicality clause.

The final problem is that, given the constant 24/7 attention that the media lavishes on celebrities, it's not always clear when celebrities are talking as "satisfied customers" (the FTC wording) or as "endorsers." If Yankees baseball superstar Derek Jeter appears on the David Letterman show and starts talking about his great ride to the TV studio in a Ford Motor Company SUV, he would need to interrupt the show with a little disclosure that, hey, he happens to be an endorser of Ford. This is the material connection clause.

As a result of its renewed "truth in advertising" mandate, the FTC is placing a greater burden of proof on the advertiser when it comes to celebrity endorsements. So, celebrity endorsements are ubiquitous these days -- but would they be if every celebrity endorsement came under relentless FTC scrutiny?

[image: The Celebrity Endorsement Game via New York Times]

Hot Innovation Trend: Augmented Reality

One of the most compelling arguments for getting an iPhone rather than any other smart phone was always the size and robustness of the Apple app store. In just the past month, perhaps the coolest (but still "unofficial") applications to hit the app store are the new breed of Augmented Reality apps that overlay data & information on your screen in real-time. Imagine walking down the street and passing a restaurant -- using an AR app, you'd be able to use the in-built GPS technology to locate the restaurant and receive real-time ratings and reviews of that restaurant. The possibilities are limitless. Perhaps this doesn't sound as cool as it looks -- if you're having trouble envisioning this, think back to the first Terminator film, when Schwarzenegger's augmented reality vision gave him all kinds of advice about which clothing to wear and which motorcycles to ride.

The first "unofficial" augmented reality app to hit the iPhone app store is from Yelp, which enables you to view information about restaurants, bars and other locations, layered over a camera view of your street: "Social review service Yelp has snuck the first Augmented Reality (AR) iPhone app specifically for the US into the iTunes App Store. The undisclosed new feature allows iPhone 3Gs owners to shake their phones three times to turn on a view called "the Monocle." This view uses the phone's GPS and compass to display markers for restaurants, bars and other nearby businesses on top of the camera's view."

There are plenty more on the way. And judging by the look and feel of apps like Layar (not yet available for the iPhone 3GS), these apps will change the way you think about physical location and the Web.

This is a trend that definitely has legs, especially once Apple officially unlocks the door to the app store for AR apps.

[image: The Terminator's Augmented Reality via Mobitrends]

Hot Innovation Trend: The Real-Time Web

Other than maybe "cloud computing" (which I still don't really get) and mobile computing (in all of its permutations, but especially on the iPhone), it's hard to think of a hotter Internet trend right now than the "real-time Web." For most people, the "real-time Web" is synonymous with Twitter, but the real-time Web goes way beyond Twitter to a fundamental re-thinking of the way the Web works and the way content is archived online. That fact itself has huge follow-on consequences for companies like Google, Yahoo and Microsoft -- all of which rose to prominence when the real-time Web was nothing more than a vague construct of what might be possible. Rob Hof of Business Week recently wrote a fairly comprehensive overview of the real-time Web (with an emphasis on the cool real-time start-ups being funded by John Borthwick's VC shop Betaworks), and Read Write Web recently highlighted 10 Useful Examples of the Real-Time Web, including search, real-time publishing and the real-time Web of people.

With so many different ways to leverage the real-time Web, the upcoming Real-Time Web Summit hosted by Read Write Web that's taking place two weeks from now in Silicon Valley looks like a winner.

[image: John Borthwick of Betaworks via Business Week]