Farming in the future

I have long argued just as the industrial revolution mechanized agriculture (essential turning family farms into outdoor food factories), the information revolution will transform manufacturing into a knowledge-intensive activity. But that does not leave agriculture back in the industrial age. Farming is already becoming an information-intensive activity – from the use of remote-sensing satellites and GPS to indicate exactly where water, fertilizer and pesticides should be applied to up-to-the-minute information on markets and the use of sophisticated financial instruments.
But farming in small nations has always been a problem case, especially in the industrial model where nations with large agricultural areas (US, Australia, Argentina) could reap the benefits of economies of scale. In the I-Cubed Economy, is there a future for smaller farms or will they simply disappear?
Birthe Linddal Hansen, of the Copenhagen Institute for Futures Studies, argues that smaller agricultural nations, such as Denmark, still have a place in the economy. But they must move from the industrial logic of production to the information logic of customization:

We need to rely on quality instead of quantity, on processing instead of bulk, on taste instead of price, on individuals instead of multitudes, on nature instead of chemistry, on advanced technology instead of industry, on diversity instead of standardisation.

Danish agriculture will have to replace the industrial logic and its concomitant rationality with a logic that takes into account the fact that tomorrow’s consumer already has become enmeshed with the modern knowledge, enlightenment, dream, and self-actualisation society. Tomorrow’s food producers, farmers and manufacturers alike, will have to plan their production so as to catch the attention of the consumers and offer them products, choices, quality, variation, and possibilities to an extend that surpasses anything we see in Denmark today, be it quality, delivery, or taste variation. Danish agriculture and food processing must contribute to creating attractive needs for tomorrow’s customers before the customers can see it themselves. They must be able to offer the customers far more unique taste experiences than they can today. They must give the customers a clean conscience about Nature, extend them a helping hand when it comes to health concerns, and give them pleasant associations vis-à-vis nature and production, not the least when it comes to their own food preparation.

I’m not sure I agree with all of her argument, especially relying on the self-actualized consumer:

Tomorrow’s consumer won’t just ask for menu and wine list, he will demand a raw ingredient chart so that he’ll know what he’s eating and where the ingredients came from.

But her emphasis on variety, customization and higher value-added products is very much right on target. We see this with the resurgence of farmer’s markets in the US and the growth of higher-end grocery stores, such as Whole Food and Harris Teeter.
I don’t think that such higher-end production will completely replace cheap mass production. Cost still matters.
High-end production does offer a viable alternative strategy for agricultural producers in countries like Denmark, who are facing global competition of eggs from Thailand, steaks from Argentina, and milk from New Zealand.

Publishing questionable information?

There is a new website that publishes information on schools. Run by a collaborative that includes Standard & Poor’s, the Council of Chief State School Officers and others, the site (School Matters) contains a
variety of data on schools. But, as a story in today’s Washington Post (“S&P Opens A Rating Service On Schools”) points out, not everyone is happy with the quality of the data presented:

some school district administrators said some Web site numbers are wrong, out of date or easily misinterpreted. Sharon Ackerman, assistant superintendent for instruction in the Loudoun County schools, said staffing trends and class size numbers for 2002 to 2003 were out of touch with reality. One page of the Web site said some schools in Loudoun averaged 132 students in each classroom, she said.

Of most concern to me is the attempt to create analytical scores. The site includes S&P developed indicators (ratios). However, when you attempt to access them, you first get the following warning:

Stop! Use S&P Ratios with Care.

Standard & Poor’s (S&P) provides ratios to help education stakeholders understand the complexities surrounding public education. S&P intends for these ratios to inform the decision-making that can help improve student performance, and does not intend for these ratios, alone, to be used to draw conclusions about school systems’ performance. With the hundreds of facts and figures used to evaluate school systems, S&P offers these ratios as a place to begin asking diagnostic questions.

S&P acknowledges that data are not perfect and that even the best statistics have limitations. These ratios should be considered with other academic, financial, and demographic indicators provided on this website. Pulling individual data points out of context to create a ranking is a serious misuse of the data and S&P strongly discourages users of this website from using data in this way.

You are also given the options of going to the welcoming statement by former NC Governor Jim Hunt (advisor to the project) which includes the following warning:

Using RaMP, or one of S&P’s other indicators like the Return on Spending Index (RoSI) or the Performance Cost Index (PCI), helps users understand the complexities surrounding public education. However, these ratios should not be used alone to draw conclusions about education performance. These ratios should always be considered with other academic, financial, and demographic indicators provided on the website. I also urge you to read the SchoolMatters glossary and user advisory to better understand the proper use of S&P ratios.

Now, I’m sure that there must be a lot of heavy internal politics that is going on over these warning statements. But I am still mystified as to why they are doing that. Would S&P put out data about companies with such heavy caveats? If not, then why do it about schools. Maybe someone can enlighten me.

Information (like and not like time) is still money

The Wall Street Journal has a story today (“New Web-Watching Tools Pique Interest of Investors”) about how some technology-savvy investors are using news aggregation software (such as RSS) to glean the latest tidbit that will given them an advantage in the stock market.
This reminds me of the old stories of Rothschild and news of the battle of Waterloo. Information has always been power — and money. But we need to remember that there are two ways that information equal money. The first is the use of information that no one else has — be it insider information or first-recipient information. That type of information is only powerful in zero-sum situations (I use the information to outsmart you in a transaction). This is what economists call information-asymmetry (and won Joseph Stiglitz a Noble Prize). And once that information is used, its value goes to zero (when everyone knew the outcome of Waterloo, Rothschild’s information was worthless). In this way, in information is like time; a scarce commodity that is easily used up.
But information is also not like time. It is something that continues to build on itself. As New Growth Theory teaches us, information, knowledge, technological advance and innovation are the result of economic production. However, knowledge and information differ from traditional factors of production in important ways. Information and knowledge are non-rival, meaning that more than one person can use the economic good at the same time (e.g. a software program). Therefore, they are only excludable by law rather than through physical possession (excludability refers to the ability of someone to prevent others from using the economic good) – otherwise known as intellectual property rights. As a result, the spillovers from knowledge make the accumulation of knowledge self-perpetuating. Not only is the growth of knowledge self-perpetuating, there are increasing rather than diminishing returns. In the neoclassical model, the growth effect of simply adding more capital and labor diminishes over time; it takes more and more input to maintain the same growth. Knowledge is different; it continues to grow itself.
This is the type of information that has lasting value. Unlike hot stock tips, it is the foundation of the I-Cube Economy.

Customized manufacturing

Is that age of mass production really over? Is customized production ready to sweep away the last remaining remnants of the industrial age? Well, maybe yes and maybe no. Last year, many of us received emails from SN World Foundation marketing a “mini-plant” manufacturing solution from the SCINet Corporation. These plants are 40 ft mobile containers for over 700 types of production:

Bakeries, Water purification, Dehydrated food elaboration, Steel Nails, Welding Electrodes, Tire Retreading, Reinforcement Bar Bending for Construction Framework, Sheeting for Roofing, Ceilings and Façades, Plated Drums, Aluminum Buckets, Injected Polypropylene Housewares, Pressed Melamine Items (Glasses, Cups Plates, Mugs, etc.), Mufflers, Construction Electrically Welded Mesh Plastic Bags and Packaging, Medical assistance mobile units, Sanitary Material (Hypodermic Syringes, Hemostatic Clamps, etc)

This sounds good — but I don’t know how widespread these systems are. And it appears that they are design to be part of larger factory layout — similar to a plant laid out in work modules.
Now comes a story in the The Economist that describes a “fab lab” developed at MIT

a collection of commercially available machines that, while not yet able to put things together from their component atoms, can, according to its inventor, be used to make just about anything with features bigger than those of a computer chip. Among other tools it includes a laser cutter that makes two-dimensional and three-dimensional structures, a device that uses a computer-controlled knife to carve antennas and flexible electrical connections, a miniature milling machine that manoeuvres a cutting tool in three dimensions to make circuit boards and other precision parts, a set of software for programming cheap computer chips known as microcontrollers, and a jigsaw (a narrow-bladed cutting device, not a picture puzzle).

The story notes that these are really for rapid prototyping of new inventions, especially in developing countries. While not yet ready for prime-time manufacturing, these mini-production systems are being used for low-volume localized needs. For example:

In Norway, Sami animal herders-who are among Europe’s last nomads-are using fab labs to make radio collars and wireless networks to track their charges.

I’m not sure that these two examples herald the end of mass production. But, they are clear illustrations of the direction that things may be headed. While we may always have a demand for standardized, high volume products, there are lots of products that can best be created in a customized, lower-volume production process. This information-intensive customized production process may no longer be confined to the realm of science fiction – but may be the next wave of the industrial revolution.

Can you copyright the Crusades?

There is a nasty little copyright fight brewing — over a nasty piece of history: the Crusades. Author James Reston Jr. is suing 20th Century Fox for stealing his ideas. Reston claims that Fox’s new movie “Kingdom of Heaven” is based on his book “Warriors of God: Richard the Lionheart and Saladin in the Third Crusade.”
The legal issues seem clear cut, as pointed out in a story today’s New York Times:

Michael J. Plonsker, a lawyer with the Los Angeles firm Alschuler Grossman Stein & Kahan who litigates such cases, said winning them was difficult but not impossible. “History is not copyrightable,” Mr. Plonsker said. “But if the manner in which you tell about a historical event is a particular expression of character or sequence of events, that is copyrightable. If you can show that the defendant had access and that the works are substantially similar, which is the legal standard, then you can win.”

But it will come down to a case of “who-said-what.” Fox claims their writers never even read Reston’s book while Reston claims the producer and directors had already optioned the book.
Interestingly, when Oliver Stone did his movie on Alexander the Great, he not only paid tribute to the author of the book he used — Robin Lane Fox — he gave the author his greatest wish: to lead a cavalry charge in one of Alexander’s victories. Lane Fox also used the tie-in with the movie to reissue his book “Alexander the Great” complete with book jacket blurb from Stone.
That is the way that synergy from ideas is supposed to work in the intangible economy. Maybe Reston and 20th Century Fox can settle their lawsuit along the same lines.
PS – and in the irony department, 20th Century Fox is advertising an other of its movies on Grokster, at the same time it is party to the Supreme Court case against the file-sharing software (see yesterday’s post). Thanks to BoingBoing for this tip.

Closing the barn door — the Grokster case

Tomorrow, the Supreme Court will hear oral arguments in the case of
MGM vs Grokster (for background and documents from both sides, see the Electronic Freedom Foundation’s site). Gorkster and the other defendants are peer-to-peer file sharing systems that MGM (and others) claim facilitate illegal copying and sharing of copyrighted materials (specifically music and videos). Technically, the case is an extension of the 1984 Sony Betamax case concerning secondary liability for copyright infringement (can the maker of the technology be held liable for the infringement by the users).
However, the case may already be irrelevant. A recent study by the Pew Internet & American Life Project, Music and Video Downloading Moves Beyond P2P shows that about half of the people who download music or videos have found ways outside of traditional peer-to-peer networks or paid online services to swap their files – most often direct sharing from an iPod or MP3 player or through email or instant messaging.
If millions of people are sharing their favorite tunes via email, nothing short of a massive police-state can stop it.
As has been stated so often as to become almost a cliche, digital technology has fundamentally altered the nature of the music business (and soon, the movie business) — just like the printing press altered the business of writing. Those industries need to develop a new business model. Steve Jobs amazing success at Apple with the iPod is an example of what can be done (see story in Business 2.0). Larry Lessig’s Creative Commons is another example, as more and more artists use the concept (see Washington Post story “Creative Commons is Rewriting Rules of Copyright“)
But more creative thinking (in what is supposed to be a “creative industry”) is desperately needed.

Information wars

As I mentioned last week (see posting Control over Information), there are growing concerns that the Federal government is severely restricting access to public information by the public in the name of protecting the public. A good example of the clash between access and security is this story in today’s Wall Street Journal, “Information Incognito”:

Ever since Sept. 11, 2001, the federal government has advised airplane pilots against flying near 100 nuclear power plants around the country or they will be forced down by fighter jets. But pilots say there’s a hitch in the instructions: aviation security officials refuse to disclose the precise location of the plants because they consider that “SSI” — Sensitive Security Information.

“The message is; ‘please don’t fly there, but we can’t tell you where there is,’ ” says Melissa Rudinger of the Aircraft Owners and Pilots Association, a trade group representing 60% of American pilots.

Determined to find a way out of the Catch-22, the pilots’ group sat down with a commercial mapping company, and in a matter of days plotted the exact geographical locations of the plants from data found on the Internet and in libraries. It made the information available to its 400,000 members on its Web site — until officials from the Transportation Security Administration asked them to take the information down. “Their concern was that [terrorists] mining the Internet could use it,” Ms. Rudinger says.

We had a similar issue here in DC (that I worked on in my role as a local elected official). The CSX rail line runs within blocks of the Capitol building (also past the Department of Energy, the FEMA building and within sight of the Pentagon). CSX used to ship tank cars of ultrahazardous material, such as chlorine. (Remember that chlorine spill in South Carolina that killed 8 people in a rural area? Imagine if that had happened 2 blocks from the U.S. Capitol).
Privately, the company told government officials (not me) that they had rerouted those tank cars, although we continued to see tank cars (supposedly empty, I presume) pass by. CSX has now admitted publicly (as part of a lawsuit) that they reroute these shipments away from the specific line just south of the Capitol. However, for the longest time they pointedly refused to say whether the tank cars were still using this rail line or not. They said they would not comment on security measures. We argued that telling everyone there were no ultrahazardous materials on that line would reduce the threat by taking away a terrorist target.
In the course of these arguments, I would like to say that their silence on the issue made as much sense as declaring a non-fly zone and then not telling pilots about it. After reading the Journal article, I now know why this argument carried little weight.

Losing jurisdictional advantage – the case of Miami

At one time, Miami was considered the unofficial capital of Latin America. But that seems to be changing due to heightened security restrictions (according to a story in the Wall Street Journal – “Panama Seeks Miami’s Heat“). The story relates how Panama is consciously seeking to undermine Miami’s role:

Complaints about stepped-up U.S. border scrutiny since the Sept. 11, 2001, terrorist attacks are prompting many Latin American travelers to do more than gripe: They are using places like Panama City’s Tocumen International Airport as a regional hub instead of Miami, once the preferred way station for Latin fliers making connections to Europe or North America or even destinations within the region.
It is just one way in which Panama is taking advantage of the post-Sept. 11 environment to help itself — usually at the expense of Miami. The small isthmus nation, normally off the radar of international travelers and investors, also is luring banks that want to protect back-office operations from terrorist attack and is pitching itself as a safe but friendly port-of-call for businesses as diverse as cruise ships and call centers. Panama’s historical ties to the U.S. and its relatively large number of English speakers — 14% of the population — also make it an attractive alternative to Miami.

As Professor Maryann Feldman has pointed out, a locality’s competitive advantage come from a strategy of differentiation, not low cost (see “Constructing Jurisdictional Advantage” at the Athena Alliance website). Panama seems to be doing just that — “avoid the hassles of Miami,” they are saying. “We are different, better.” That does not bode well for Miami’s own jurisdictional advantage – which was to be better that any other city in Latin America. We will see if the city leaders take the Panamanian threat seriously and either revamp their activities or change their strategy. Or whether they just drift, like the frog in the pot of water who doesn’t notice that the heat has been turned up until it is too late.

Does sports-based economic development pay off?

In these posting (and elsewhere) I have made the case that tourism-based economic development is a great way to diversity the economic base and build on local amenities. However, not all tourism is positive – according to Professor Victor Matheson. In an interview with Business Week (The Final Four: Economic Air Ball?) he talks about has problems with the idea that cities who host the NCAA basketball championships gain any real benefit:

Since 1970, cities that have hosted the men’s Final Four actually experienced [a slowdown in] economic growth. So the year that they host the Final Four, economic growth is actually lower in that city than in other years.

The reason:

Remember, the Final Four crowds out all kinds of other activity in a city. So while you’re bringing basketball fans in town, you’re reducing other business and tourist activity, and you’re reducing business among people who actually live in the city. People tend to stay away from the city and stay away from the craziness.

The real trap is building a new facility for the event. Matheson is an ardent critic of any economic benefit from the “build it and they will come” strategy.
He is also skeptically of any spillover benefits:

There are certainly some nonmonetary benefits, but it’s ridiculous to say hosting the Final Four has these immeasurable benefits. I certainly don’t know of a business that has moved to a city because it hosted a sporting event. So if you point to the image factor, I’m not sure what you’re getting for that.

And the second thing is, just because you host an event doesn’t mean you’ll be making a positive image. Jacksonville hosted the Super Bowl and you had a lot of people coming back saying “Hey, it’s nice, but there’s not much to do there.” Munich with the ’72 Olympics certainly didn’t come out with a better image.

I agree that large events don’t automatically translate into economic benefit. In part, it depends on if they are one shot or if they can be leveraged into an ongoing activity. I would also argue that bringing in a big-time sports event does not draw upon the unique local intangible assets. Nor do such events necessarily help build local assets.
Spending a lot of city money on a one-shot outsider event is probably a waste of time and resources. Using those resources to build up a cultural amenity that will bring people back over and over again makes more sense.

Eminent Domain and Intellectual Property

Can eminent domain be used in the case of intellectual property? It may sounds farfetched, but the Washington DC City Council is exploring the idea as a way of cutting health care costs. Councilmember David Catania, who has been leading the charge in the city to encourage re-importation of drugs from Canada, is proposing legislation (Bill 16-114)to use eminent domain to seize the formula and contract with a cheaper generic manufacturer. (See story in Washington Post, District section.)
It is an interesting concept – but there any many twists to the tale. First are the limitations on the use of eminent domain. The Supreme Court is currently looking at that in case of Kelo v. City of New London.
More fundamental is the notion of ideas as property. The proponents of stronger intellectual property rights constantly portray this as a property right. “It is mine, I own it, you can’t take it away.” They make the moral and legal arguments based on the age old concepts of the sanctity of private property.
However, others have argued that the concept of intellectual property is fundamentally flawed. It is not “property” but a government-granted right of monopoly – similar to the old AT&T monopoly over the phone business or an airport landing right. Larry Lessig puts it succinctly in his book, the Future of Ideas (p. 205):

A patent is a form of governmental regulation. It is a state-backed monopoly granting exclusive rights to an “inventor” for an invention deemed useful, novel, and nonobvious.

This view of intellectual property is not just some left-wing idea. As Judge Richard Posner and William Landes have argued (from the right):

Equating intellectual property rights to physical property rights overlooks the much greater governmental involvement in the former domain than in the latter, at least in a mature society in which almost all physical property is privately owned, so that almost all transactions involving such property are private. Government is continuously involved in the creation of intellectual property rights through the issuance of patents, copyrights, and trademarks. Skeptics of government should hesitate to extend a presumption of efficiency to a process by which government grants rights to exclude competition with the holders of the rights. Friedrich Hayek, than whom no stronger defender of property rights can easily be imagined, warned that “a slavish application [to intellectual property] of the concept of property as it has been developed for material things has done a great deal to foster the growth of monopoly and . . . here drastic reforms may be required if competition is to be made to work. In the field of industrial patents in particular we shall have seriously to examine whether the award of a monopoly privilege is really the most appropriate and effective form of reward for the kind of risk-bearing which investment in scientific research involves.”

There are also international ramifications of this proposed legislation. If governments in the US can seize intellectual property, every developing nation in the world who has tried the same thing will feel vindicated (and emboldened to do so). While compulsory licensing requirement such as this have been ruled illegal in international trade, exceptions have been carved out for AIDS and other drugs (see Comsumer Project on Technology).
The hearings on the bill may put the drug companies (and others) in an awkward position. If they maintain their conceptual framework that patents are property, then they have to explain why the application of eminent domain does not apply. If they argue that IPR is not property, but a government-granted right, then they have to argue why the government can’t limit or take away that right in cases of public health emergencies (this is essentially the argument that was generally successfully used in the case of AIDS drugs in South Africa). My guess is that they will argue both contradictory positions simultaneously. It will be interesting to watch.