How Technology Must Grow Up

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I love technology innovation, a sector I spent most of my thirty-something-year professional career in. First as a hobbyist at around fourteen years old (winning awards programming an HP-41C), then at eighteen-years-old as a programmer, later as entrepreneur, pre-sales engineer, marketer, product marketing consultant and as a venture catalyst, CEO of startup companies and venture capitalist in Silicon Valley.

 

Technology is not the risk of technology

My tenure in the technology space is perhaps unlike most who roam the streets of Palo Alto. I have personally experienced the impact and relevance of technology’s many iterations far beyond the reverb of Silicon Valley’s echo-chamber.

I experienced technology on a global basis, where the rubber of technology meets the road of reality. From the buy-side of technology, as a customer buying multimillion-dollar technology products and services to help companies run their business with technology. And later from the sell-side of technology, as a purveyor of said technology products. An experience that exposed me to a gaping hole between the promise of a technology proposition and the reality incurred by customers, risk, and cost often far higher than the immediate benefit of technology. It is therefore prudent to consider the broad consequences of the use of technology before diving head first into its adoption or implementation.

I cannot think of a better anecdote of that experience than a tale of my young pre-sales experience at Oracle. Under pressure of reaching yearly quotas by Oracle’s direct-sales machine, I was instructed by my account manager to sell hard the displacement of an aging database infrastructure with Oracle’s relational database to a globally recognized client. It was not my first visit to this client, and I had already made the benefits of Oracle’s technology advantage abundantly clear. But I caved under pressure that could challenge my career and paid them another visit, to see if we could still – with hormone infused sales stamina – “kick this deal in” before fiscal year’s end. After a day devoted to weighing all the business consequences with the client, they asked me point-blank what I would do. I could not lie and recommended to hold off for now, and the client heeded my advice and tore up the contract. Long story short, I got sidelined as an uncooperative sales engineer and parlayed my unquestionable expertise in new-media products to a product marketing role at Oracle.

One year went by, and amid a formal presentation to about ten people of a new corporate prospect visiting Oracle’s offices, the phone rang. Office managers knew better than to patch calls to conference rooms, and I asked one of my colleagues to pick it up while we continued. The person on the phone insisted he speak with me. Reluctant to disrespect my current audience I irritatedly walked to the back and picked up the phone, and asked who dared to break me away from any client presentation. To my surprise, it was the CIO of the global client I advised one year ago to hold off. And what followed was the most heart-warming reference I have ever received, when he described the trust I had instilled in them to sign a multi-million deal with Oracle that day. I was only his second call to Oracle after he signed the contract. His first was to Oracle’s CEO.

The lesson I instinctively deployed is always to recognize how we must balance the incredible power of technology with an understanding of how the implementation of technology can induce new risk. That we should not dampen the enthusiasm and broad role technology can play, yet realize that technology is a tool, not the objective of a stated goal. And remain aware of the promise of technology advancement, described with much fervent by purveyors of technology, may not include an accurate assessment of all the risks, benefits and deficits involved. And that the success of a technology is predicated on the trust by which its stated promises come true.

 

Trust from an authentic promise

Today, the technology industry is plagued by many fallacies of “input” and “output” preventing innovation from instilling trust and lasting socioeconomic value.

By “input” I refer to venture capital as the arbitrage of innovation that determines what budding innovation will ever see the light of day. As I have predicted and described in excruciating detail on this blog many times before, venture capital has turned predominantly subprime, which in turn promotes innovation that is predominantly subprime (and turns a blind eye to prime). The intellectual capacity of entrepreneurs is now used to produce advertising clicks, with advertising being the antithesis of consumer value. Forgetting for a moment that the public as the ultimate investor through institutional funds (pension funds, endowments, insurance companies, etc.) in most venture capital firms has and is poised to lose more money on the deployment of ten levels of subprime risk, that can never serve as the mechanism to producing prime returns. A reason why venture capital, despite having access to a massive greenfield of innovation, is getting no more than single-digit percentage interest in assets under management from financial managers (the investors in venture capital) some forty years after birth.

By “output” I refer to the socioeconomic value produced by technology companies large and small (even by the few that manage to escape the overwhelming wrath of subprime). What value is there in connecting people when the operating system of that connectivity relies on an opaque mechanism of socialism deployed by social networks? The kind of socialism that implicitly ignores and rejects outliers, and thus leads to regression of evolution.

Why would self-respecting sovereignties relinquish social control to immature technology that violates the basic economic principles of a meritocracy? Why would a country or business enthusiastically deploy internet applications cobbled together from popular open-source components that will cause severe threats to its security? Why would any state allow the exchange of artistic value (apps, music, videos, books, etc.) be concentrated to a single dominant operator who violates fundamental free-market principles and messes with the organic exchange of the creative works of its citizens? Should I go on?

No entity interested in the pursuit of free-market mechanisms should adopt the immature economics deployed by technology today.

Perhaps that is why forty-four countries in the world may not be as dumb as we think, in restricting the use of internet applications today. About my anecdote above, they have or will buy-in to the transport layer of the internet at some point, but their adoption to the immature applications we put on top may – justifiably – be a whole other matter.

 

The new risk of technology

How and why I became a self-proclaimed innovation economist reveals what I saw emerge eight years ago as technology’s most critical success factor, and has spawned the writing of a book that reinvents economics. For the economics by which both the input and output of technology innovation are selected and deployed must meet newly established principles of a meritocracy to instill renewable value and trust.

Neither input nor output of technology innovation complies with modern economics that can support the world today. And thus, its products are incapable of supporting the changing and diverse needs of its citizens.

Many captains of the technology industry keep preaching about a new digital age in which technology according to Google chairman Eric Schmidt, will “reshape the future of people, nations, and business.” Quite audacious, since none of those captains demonstrate to have a real understanding of the economics that supports such a promise. Their products show an overwhelming ignorance and blatant violation of the fundamental economics needed to embrace their lofty promise.

For technology systems to maintain the lasting respect of its participants, and gain the respect from countries that harbor them, it must evolve along the axis of the merit of transactions between its participants, and subsequently support the collective needs of their domicile. Therefore to meet the promise that instills trust, technology systems must pass at least the most rudimentary economic litmus test of a meritocracy. And yet, the vast majority of today’s leading consumer technology products and services (such as Facebook, Instagram, Google+, iTunes, Amazon, etc.) fail such a basic test.

The stampede of technology’s populism will not – as it is so popularly portrayed – shift the balance of power to its participants, but instead to the operator of the service.

Also, sovereign nations that expect to relinquish control to its citizens as democracy stipulates – now with the proliferation of technology will instead hand over their authority and the evolution of its people to the frivolous nature of a technology company. The freedom of participants will not improve, but instead be reduced to creepy socialism embedded in technology’s operating systems, with more concentrated oligarchic control than its analog precedent.

 

When ignorance is not bliss

The technology industry, using the internet as its universal distribution can stimulate and expose the undiscovered merit of many more people, as the title of Eric Schmidt’s new book appears to suggest. But only when the operating systems it designs embed the modern economics of a meritocracy.

A meritocracy defined by strict economic principles and dependencies many renditions of classical economics has failed to identify or deploy. The most significant opportunity for technology today is to ensure its operating systems understand and support the needs of modern economics by which the merit of all citizens of the world can be exposed and stimulated. An electronic version of an economic marketplace in which not merely our commonalities are displayed, but our unique and creative differences, responsible for reinvigorating and reinventing our future anew.

And yes, despite my cautionary tale the majority of the world will continue to adopt technology’s wild promises blindly. But be forewarned. Just because you can eat at McDonald’s every day, does not mean you should.

 

Discuss

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Georges van Hoegaerden
Georges van Hoegaerdenhttps://www.method41.com/georges
Georges is the Founder and Managing Director of method41. From analyzing the workings of policy, capital, and innovation, Georges noticed how these siloed constructs are woefully incompatible with the principles nature deploys to produce regenerative performance. With humanity stuck in a fabric of its own making, Georges set out to reinvent the operating-systems of humanity to fix the theory that determines what humanity can discover, aiming to fundamentally improve human adaptability to nature's entropy.
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