Colm Kearney on the smart economy

Each time I hear ‘Knowledge Economy’ I wonder about the cognitive well-being of the speaker. It sounds nice. So I suppose it might be nice. I regard it as Quackspeak.

Reality is somewhat different. We have had a global ‘knowledge economy’ for at least a generation. Its called ‘services’ – which is a sort of symbiotic life-form adhering to the teat of a PC, (production – construction, economy. No PC, no services. No jobs! Except in the Civil Service and the HSE and … … ???

If the hope is that somehow or other a ‘knowledge economy’ will produce new and very desirable products which will be in great demand and fetch good prices – then great! But this is wishful thinking – if you care to think about it in any meaningful way. You may be able to make it, but can you sell it?

The focus of the PC economies has moved eastwards. Hence the older developed economies are – with some exceptions, primarily ‘consumers’ and very indebted ones! We will slowly submerge (economically) unless we extinguish our debt burdens – and fast. Not over the next decade but within two years. Any useful ideas we may come up with will be ‘stolen’ (al la Bill Gates). and we will be left behind.

We have a reasonable amount of unique ‘natural resources’ – and it is these we need to concentrate on -like manual labour ‘down-on-the-farm’ (or such like endeavours). But these are not acceptable! However we humans need to eat at least one hot, cooked meal each day and a mandatory amount of fresh water. Ever wondered where your food and water come from?

When you hear ‘knowledge economy’ – try to think about solutions to our current problems, not virtual solutions to virtual problems.

“Ireland’s young people need the assurance that the government can deliver high-quality third and fourth level education and state-of-the-art broadband infrastructure that is critical to fostering the growth of indigenous firms, while continuing to attract and retain the multinationals. Only then can they commit with confidence to building their careers and futures here.”

How?

“Policy failure on this front cannot be countenanced, because we would forfeit a generation of gains.”

What gains? Indebtness and negative equity!

“Our universities’ top scholars would move elsewhere, the development of our indigenous firm sector would falter, fewer multinational firms would locate here and more would relocate to other countries, and our young people would be forced to follow.”

To where would they – top scholars and the young – go to, pray tell? Antartica?

B Peter

Those that propose the knowledge economy need to be challenged on the reality of their visions and consistency of their arguments.

Is it an intended aim of the KE to achieve full employment?
If not, then what is the aspirational employment rate?

Etc, Etc

The smart economy, the knowledge economy, the green economy….

The future does not lie in any of these ….. I suspect the black economy will outperform these in the next decade….

I saw a report from some on how Ireland will recover faster than the rest of Europe but the recovery will be ‘largely jobless’;

Given that; its in everyones interests to junk the official economy and to spend whatever they can in the black economy. At least will provide some income to local people and keep money out of the hands of the state. As the government have loaded the debts of their cronies onto the general population, it makes sense to opt out of the official economy where possible.

The key difference between western economies and their competitiors abroad in relation to science and technology is that western economies have the social, cultural and legal frameworks to promote technology and innovation. It is the framework for the knowledge economy that will define where is locates.

We need to compound our advantage in cultural and social terms by focussing on legal and regulatory frameworks that effectively encourage business start-ups and established businesses to locate here.

For example, laws which allow cloud computing providers based in Ireland more freedom in their choice of laws and jurisdiction and which limit their liabilities might help. Also, providing forms of statutory cloud computing contracts (as we provided for statutory mortgages, as other countries such as New South Wales provided for statutory leases) could reduce transaction costs for cloud computing company set-up and for their creation of a market offering.

Legal and statutory innovation through the introduction of voluntary regulation is key to all sectors. How many tenants would be happy to hear they were being offered the statutory lease or the statutory terms of service without having to review it?

Proper standards monitoring and enforcement is also key. If my cloud computing provider has been ok’d by the Irish authotirities then I don’t need to look behind that.

Unfortunately, the only bills and statutory instruments we get are overly-complicated mostrosities drafted without any reference to the relevant bodies’ capacity to enforce, operate or understand them.

It appears our expertise and capabilities in regulation, legislative reform and legal innovation are close to nil. This is a serious and immediate problem.

Ireland’s young people need the assurance that the government can deliver high-quality third and fourth level education and state-of-the-art broadband infrastructure that is critical to fostering the growth of indigenous firms, while continuing to attract and retain the multinationals. Only then can they commit with confidence to building their careers and futures here.

The fundamental problem is that there is no credible policy but a set of aspirations.

Employment in the multinational sector is back to 1998 levels while the Government has accepted the Innovation Taskforce report that as many jobs again can be created in the ‘smart’ economy sector as in the foreign-owned sector today, by foolishly extrapolating from the experience of Silicon Valley.
Why will we be more successful than the UK and on a par with Israel?
Most high tech firms that survive remain as micro firms with less than 10 employees.

The public sector needs to be a big customer of the sector and given the fiscal situation, the direct spending of more than 10% of current tax revenues in this area, has to be justified.

Simply, we need to move beyond the field of dreams vision.

@ zhou_enlai

The key difference between western economies and their competitors abroad in relation to science and technology is that western economies have the social, cultural and legal frameworks to promote technology and innovation. It is the framework for the knowledge economy that will define where is locates.

So what would you call India’s tech sector?

@MH

My statement, “It is the framework for the knowledge economy that will define where it locates.”, is clearly incorrect.

I should have said “the framework for the knowledge economy will be what attracts businesses to Ireland.” I would then have to define framework as including culture etc. … Anyway, I think you know what I mean now…

@zhou
Proper standards monitoring and enforcement is also key. If my cloud computing provider has been ok’d by the Irish authorities then I don’t need to look behind that.

Have a look at the prices being charged by my cloud provider.
http://aws.amazon.com/ec2/pricing/

Do you really think some Paddy endorsement or standard will influence me? Or influence the decision of providers to locate here… All I or anyone else really care about is value….

This smart economy is ruthless, barriers to entry are always dropping, and what used to be niche either dies or becomes commodity very quickly, there is no room to support a kleptocracy of regulators, legal eagles and state inspectors. They need to have the same productivity as those they serve.

That said, I agree the social, cultural and legal framework is important. But legal reform is urgently needed with major implications for this sector…

The game has changed utterly, Paddy Standards have no place in the modern world. The innovation is as much business as tech, and having rent seekers attempting to become the gatekeeper/approval body will not be tolerated by anyone ‘smart’.

The Irish Business Model, an example: Take something as old tech and as simple as plumbing, the NSAI have standards for Irish pipe fittings. These are copied from the British and changed slightly so they are not inter operable. A BS 1/2″ fitting is different to a Irish one, which is different again to the EU standard, (you can force them to work together using different washers)
Result: ‘busy work’ for civil servants and increased costs for everyone. (And of course have created a niche/opportunity for control for themselves by stopping imports of stuff with perfectly good EU/BS standards)

I would hate to think what Paddy Regulators would do if let loose on the “smart economy” … the mindset is to extract rent and to control…

@ All,

If the Progressive Democrats were a part based around principles of economics. If the Green party is based around principles of the environmental movement. If other political parties can be argued to have been based around issues like land and/or re-distribution of wealth. Then we are still awaiting in 2010, for the junction between the knowledge based society, and politics. It has happened on and off, at various points, during election campaigns and so forth. There are elements about Obama’s campaign, which have to do with access to the leadership, which seem to foretell of a new discursive, inclusive kind of society.

Listening to Sean Barrett, FG TD for DLR constituency on RTE’s The Week in Politics, his suggestions for the role of parliment within our society was revealing, of how things may alter in the near to medium future. To reflect a society which is based more around technologies which enable us to gather, share and re-direct information through various mechanisms and means. You even see people such as Mark Little dropping out of the traditional broadcasting industry, to explore alternatives. You have people such as George Lee, unsure of where they stand in society today, and un-happy about the platform they received after a vote of 25,000 in Dundrum area. I read an article by Fintan O’Toole in Saturday’s Irish Times, reviewing a theatrical production at the Abbey Theatre, which starred David McWilliams.

Believe it or not, much of this activity which is happening in un-connected fashion, at the end of the day will add up to something, which may underpin a new knowledge based society, new knowledge based villages, courtyards and hubs of entreprise. But to understand and interpret what is going on, it will require more than understanding of wires and signalling systems. It will require people with the right sort of understanding to interpret it from a social point of view. And, a political movement which will provide the said new communities with formal representation. BOH.

http://www.irishtimes.com/newspaper/weekend/2010/0626/1224273341457.html

@ Brian O’ Hanlon

A lot of us fall for the line that trends in our own era are particularly different.

60,000 years before the Age of Discovery, humans escaped climate change and headed east out of Africa.

The technology advances of our own age, have not been monumental in a historic context.

Just wonder what the invention of the eye glass did for the world of art alone, never mind so much else.

@Brian Lucey – there are as always different ways to look at this.
As a small country with relatively small third level institutions and only a hand full with significant levels of research, we can’t be top class at everything and so we should specialise. That could either involve specialising on what we are already good at, or it could involve picking winners or a combination of both. If we have to pick ‘winners’ it seems daft to me to pick the same ones other countries pick unless we are ahead, given that the scale of their research effort is likely to be larger. Unfortunately the government (in common with most others) has not brought any imagination to this – our policy documents read like every other countries’. What are we good at? Which niches can we get a head start in? There is more to an economy than manufacturing, so why are we focused on science and technology policy?

An alternative is to think outside the box and consider what it would take to make our education/research system good and large enough to compete across the subject areas. Why not think of it as an export sector of its own where we can sell services worldwide. The US and UK universities realised a long time ago that you can charge foreign students high fees provided you can give a good enough service. An important spin-off is that one can identify the top research talent as it comes through the system and try to keep that talent here, which would considerably enhance the research capacity. To make this strategy work means getting serious about having world class universities. In contrast the approach of the government has been to hope that increased participation rates would lead to more talent in postgraduate study.

@Richard,
Creating “an export market on the back of a routine operation of another company” is quite a good description of how large numbers of software, IT services and technology consulting companies operate. On the whole, they do it by offering better solutions to existing problems with routine operations, or by offering solutions to new problems that their customers can adopt more quickly and/or more cheaply than a home-grown solution.

In the case of EWI’s “transmitting electricity” / National Grid hobbyhorse, wind power, wave power, tidal power and microgeneration are making a mess of traditional strategies for managing electricity networks, and someone is going to make money out of selling solutions. Looks to me like ESB is in a good position to get in early, and potentially make good money out of it.

@Richard, thank you. I thought s/he had also had something to say about the electricity grid. That said, while the Danes are probably building experience earlier, ESB may develop commercially useful knowledge and expertise from the combination of a wind-heavy grid and electric cars.

“we need to increase co-operation between private sector & academia; in every discipline or field of study where practicable & Government needs a strategy that includes specific (measurable) targets to this end.”
At present its very much one way Derek – academics being told they must “get with industry”. A reciprocity, wherein industry seeking any government help were told they must “get with academia” might help. For instance – we have, afaik, not a single person in Ireland who has a chair in property economics/real estate finance. Now, wouldnt that have been useful…

@ Brian

Agree, it’s a two-way street.

Irish companies spend an inordinate amount of time (& money) on CSR programmes. Perhaps if they spent 50% of this, fostering better links with Universities, we’d have better outcomes.

I guess it’s Carrot n’ Stick, but where’s the incentive for Corporate Sector – this is where Govt policy has to change

@ All,

I’m looking at a PDF document I must have downloaded at some stage, which has an Irish Economy blog site member on the cover. I had a quick search but I cannot find the original IE blog entry, where the paper was linked from. Perhaps someone else knows it? BOH.

Institute for International Integration Studies
IIIS Discussion Paper
No.298 / September 2009
Power and Plenty in 2030
Kevin H. O’Rourke
Department of Economics and IIIS
Trinity College Dublin
Prepared for the session on “The World in 2030. Educated
guesses from a long-run perspective”, 15th World Economic
History Congress, Utrecht, August 2009.

@ Michael Hennigan

I take your point about our failure to create National Champions. Perhaps we could in the Agri-Business or food processing sectors. With more than 90% of Irish FDI from US Multinationals, we have failed to capitalise on indigenous supplier industries (with a few notable exceptions). Instead we make their workers sandwiches!

With regard to the level of post-graduate discipline switching or worse the “Brain-Drain” you refer to, surely that is a function of lack of proper opportunities here, which is why we need to target specific research activities & if necessary provide some level of Government subsidies (to be matched with Corporate investment).

For example, in 1973 when Ireland joined the EEC, many farmers sent their sons & daughters to Agricultural Colleges. Farming techniques & yields increased sharply thereafter, thanks to the certainty of EU money, quotas & intervention prices. However, today the Agrarian sector employs slightly more than 100,000 people – a far cry from a couple of decades ago when the numbers exceeded 400,000. There is no longer any linkage between farm-incomes & land-values, even despite lower Ag-Land values. According to IFA/Irish Farmers Journal, typical farm incomes are just EUR 170 per acre. Yet the UN is forecasting global population growth from 6.7 billion people to 9 billion by 2050, so world food production will need to rise by at least 50%. At the same time we have recent EU accession countries like Bulgaria & Romania with severely underdeveloped Agricultural sectors, hampered by fractional land ownership – a throwback from the Communist era. We in Ireland have the people. Wannabe accession countries like the Ukraine export 19 million tonnes of Wheat per year, despite average crop yields of 1.7 tonnes per Ha. Ask a Carlow or Kilkenny wheat farmer what yields they’re getting and they’ll tell you about twice that per Acre not Hectare! We need to export people Services to these countries, ideally through Joint Ventures, linking up with co-operatives there to work the land alongside Irish farm managers. Then have the likes of a Glanbia in-situ to process the output.

This is analgous to your Nokia example with operations in China, alongside a network of indigenous domestic suppliers & start-ups. The Fins do it with Phones, the Irish could do it with Food.

@ Michael Hennigan,

Good points about education and its value as an export.

@ Derek,

I agree, Trinity is a strong brand and is there to be made use of each generation. It is something that constantly renews and re-invents itself. A very rare and valuable thing in a brand. BOH.

Albeit radical, the case for developing a knowledge economy has definition and discourse for adopting an approach that ii must first consider the policy implications (and implementable interventions to support such) to move from a low skill and low/med wage paradigm to one that supports the creation of high wage and high skilled labour force – the case and potential for unemployment is therefore a precondition – take it or leave it.

Furthermore, immigration and HR labour laws are other meso-level factors that will need to be tackled in an endevour to move to a (tangible, outcome based) smart/knowledge economy…..take it or leave it.

@ All,

The Irish Times newspaper published a supplement about the top 1,000 Irish companies recently. In it I found an article written by Michael Casey, former chief economist at the Central Bank of Ireland. One of the points in Casey’s article was: It is entrepreneurs who run the economy. I began to think about various aspects of this argument, and how one could define what an entrepreneur is in Ireland, in 2010.

In the 1980s, Apple computer corporation hired a new CEO named John Sculley. Sculley had worked for Pepsi beforehand and approached management from the point of view of marketing. Steve Jobs initially got along very well with Mr. Sculley, but in the end, Jobs found himself ejected from the company he had personal founded. Jobs found himself on the outside, with one hundred million dollars from the buyout of his shareholding in Apple. Later in the 1990s, Steve Jobs returned to Apple computer corporation. It was rumoured around the Apple campus at that time, if you happened to share a lift journey with Jobs, he would only ask only one question. Did you work for the engineering or the marketing department? People who answere the wrong way, found themselves unemployed by the end of the lift journey. Word got around the company. Very soon, no one at all in Apple worked for the marketing department – everyone was an engineer – at least, for the duration of elevator journeys. It reminds me of a statement by a Dublin taxi driver, who are the fountains of all knowledge and understanding about the universe. No one lives in Crumlin. People come from Walkinstown, Kimmage, Templeogue or Terenure. But no one lives in Crumlin. Not even the Crumlin children’s hospital is in Crumlin.

I am trying to make a point of relevance about Ireland and the ‘smart’ economy in 2010. Today in Ireland, we want everyone to become an engineer, an innovator, an entrepreneur of some sorts. It is a bit ironic really. Ireland is trying to emerge from the Celtic Tiger era (which was like a huge marketing deception), and managed to over-compensate in the opposite direction. The Irish became world class in the 2000s in selling goods to one another. Holidays, furniture, herbal medicines and gracious living. People who saw the world from a marketing point of view, often held positions of authority. The Celtic Tiger in Ireland, was very much a vendor’s market. I was involved in design and construction of homes and other building types. When the architects and engineers at Zoe developments would argue about some aspect of design or construction, Liam Carroll would always ask the question: Will it add or subtract anything to the sales prices. Arguments were settled very quickly in that manner.

In the book, DEC Is Dead, Long Live DEC: The Lasting Legacy of Digital Equipment Corporation, author Edgar H. Schein remembers one occasion where he had a meeting with the Digital CEO and founder Ken Olsen. Schein tells of when IBM introduced their personal computer product. Ken Olsen, the CEO of a major multinational corporation was in his office and had a screwdriver which he used to break apart the IBM personal computer. Olsen commented to Schein: Look at this thing! If any of my engineers built a computer like this, I would have them fired. Schein suggested back, it didn’t matter how poor the engineering was, if the marketing was first rate. Schein’s job at DEC was to offer his opinions of how the company could improve. Schein’s suggestion was that DEC should develop a really top class marketing department for its product range. Olsen retorted back: You have to understand, this is DEC. We will never have good marketing here. Digital Equipment Corporation was always a company for engineers, run by engineers.

Michael Casey offers some other arguments in his Irish Times article, about the unwillingness of Irish companies to hand over to professional management. Casey also referred to all sorts of inefficiencies in how we do business in Ireland. I attended Bolton Street Institute of Technology during the 1990s and early 2000s. All of the disciplines related to construction and planning resided in that institution.But just because you ‘house’ disciplines in the same facilities, it does not guarantee interaction or communication. Zoe developments was not considered the greatest company that Ireland produced in the past couple of decades. But it was the one place I can recall, where I had an opportunity to meet and chat with individuals from the other disciplines. We all got to meet each other while on company outings to do things like go-carting, paint-ball or five-aside team football. We could begin to consider how to share knowledge and different points of view. We believed in the creation of a much good product delivered to the market at the right price level. There is a lot of potential in the approach, if one cares to develop it. BOH.