Good innovation model at Coke

In a September 22 HBR Ideacast (Harvard Business Review’s podcast), Coca-Cola CEO, Muhtar Kent, says this as a side note about innovation at Coke:

…for us, innovation is not only inside the four walls of the company.  We have incubation projects [in] many parts of the world, because we think that the Coca-Cola company and system is too big to have embryonic ides flourish.

So, we have outside [projects], in parts of the world, innovation/incubation projects.

I’ve seen my share of embryonic ideas die.  Some even showed promise.  With some adaptive business folks in charge, they may have grown into something.

But, inside a big company, there are many reasons to say no.  Arnold Kling and Nick Schulz wrote about this in their book, From Poverty to Prosperity, which I wrote about here:

Corporate decisions are made by committees.  In a typical committee, no individual has the power to say “yes” to a new project.  On the other hand, almost every member of a committee has the power to veto a new project.

Observers of organizational behavior have noted that in committees one is more likely to be regarded as intelligent and a good team player by one’s peers by arguing against a new idea than by arguing in favor of it.  Middle managers who fight for new ideas are regarded as troublemakers, even if they succeed in convincing corporations to undertake the projects they propose.

I’ve seen this in action.  For example, I’ve seen projects killed that threatened a powerful leader’s turf (of course, that’s not the reason they made passionate pleas against the project).  Or because the project was a pet idea of previous leadership.  Or, the project didn’t fit into some arbitrary slogan the leader had for running the company (e.g. “We’re in the widget business, not the gidget business”).  I’ve also seen these shutdown just due to impatience.

Because of this, I recommend that companies do just as Coke does, separate innovation from the bureaucratic organization.  In reality, it’s hard to put any new project out of the reach of meddling bureaucrats.

Ultimately, it takes the realization by leadership that few of these projects will succeed, that none will add significantly to next quarter’s earnings (think more like 5 to 10 years) and, most importantly, leadership needs to protect these external projects from the meddling bureaucrats.

Redistribution

In this Econlog post, Bryan Caplan provides nine typical responses that might be given against a bill requiring us to give 20% of income to any sibling making below poverty.  He then asks:

If any of these are good arguments against being legally required to financially help your siblings, why aren’t they equally good arguments against being legally required to financially help total strangers?

“My wealth does not create your poverty.”

In Russ Roberts’ take on Occupy Wall Street he points us to P.J. O’Rourke characterization of wealth:

But as the writer P.J. O’Rourke has said, wealth is not a pizza. If we’re sharing a pie, and you get a bigger piece, that does not mean that I have less to eat. It depends on what happens to the size of the pizza. Ten percent of an enormous pizza is more filling than all of a tiny one.

For those who think of wealth as a fixed pie, I don’t think the ‘pizza-size’ analogy helps them see what’s really happening with wealth, because they still view it as one pizza to be divvied up somehow.

What P.J. O’Rourke actually said (btw, I recommend his book On The Wealth of Nations) is better than the ‘pizza-size’ analogy (emphasis and numbers added):

Wealth is not a pizza where, if I have too many slices, you have to eat the Dominos box. [1] My wealth does not create your poverty. Your wealth does not create my poverty. They’re separate questions. [2] And we can generate more wealth.

O’Rourke makes two excellent points, as numbered.

Point 1:  Your wealth does not mean I have less wealth.  This is the point that the ‘pizza-size’ analogy misses.

Point 2:  We can create more wealth, which is the ‘pizza-size’ analogy again.  But, it’s helpful to understand point 1 before thinking about point 2. Instead of thinking about the size of the pizza, though, maybe we should just say that we can make more pizzas.

Unfortunately, both points are counter intuitive and that’s why we have such debate on the issue of wealth.

When you hear someone say things like ‘wealth is concentrated’ or ‘1% controls some large percent of wealth’, ask yourself where did that wealth come from?

City Hall, Hall, Hall, Hall

Here are paraphrased excerpts of a conversation between a local radio talk show host and a member of the local Occupy… movement.

Radio host:  I’ve seen the Occupy movement identify problems, but I haven’t seen solutions.  What solutions do you guys propose?

Occupier:  Well, it’s still early in the movement.  That’s next.  I can tell you we are working passionately on solutions.  There are a couple of good ideas that have percolated up already. 

One, we should amend the Constitution to only have campaign speech from real people.  That means that corporations and foreign entities should not be able to control this.

Another one, the Fed should help everybody, not just the big banks.  We need to give assistance to small businesses too.

Regarding the first solution, I would recommend that these folks closely study what happened after the McCain-Feingold campaign finance reform.  This well-meaning legislation just pushed dollars from campaigns into organizations like MoveOn.org and Swift Boat veterans.  In other words, it didn’t really limit anything.

Regarding number two, eesh.  How tough is it to learn this lesson?  They don’t want to change the processes that lead to the corrupt distribution of taxpayer dollars.  They want to control it.  For the good of all of us!  To lead us to a new land!

Be careful what you wish for

Image representing Eric Schmidt as depicted in...

wtf?

Google Speaks Truth to Power, and op-ed in yesterday’s Wall Street Journal is worth a read.  Eric Schmidt, executive chairman of Google and big government supporter suddenly doesn’t seemed so pleased with big government.

Mr. Schmidt had just given his first congressional testimony. He was called before the Senate Judiciary Antitrust Subcommittee to answer allegations that Google is a monopolist, a charge the Federal Trade Commission is also investigating.

“So we get hauled in front of the Congress for developing a product that’s free, that serves a billion people. OK? I mean, I don’t know how to say it any clearer,” Mr. Schmidt told the Post. “It’s not like we raised prices. We could lower prices from free to . . . lower than free? You see what I’m saying?”

An absence of consumer harm didn’t stop senators from offering some improbable recommendations. Among them: that Google replace its algorithm with a panel of experts to ensure “fair” search results. As Google tries to improve the relevancy of its search results for consumers, some sites inevitably come up higher and some lower in the results. The losers now lobby Washington.

“Regulation prohibits real innovation, because the regulation essentially defines a path to follow,” Mr. Schmidt said. This “by definition has a bias to the current outcome, because it’s a path for the current outcome.”

Once again, the President does not ‘run the country’

I enjoy watching the Ellen Show with my wife.

Ellen recently had a politically-hot guest on her show and I appreciate when Ellen said, “I don’t know much about politics.”  Here, Ellen sets a great example others–especially those in Hollywood–can learn from.

She went on to exhibit how little she knows about politics by saying the President runs the country. This is one of my pet peeves.

Stalin ran his country.

Mussolini ran his country.

Mao Tse Tung ran his country.

Kim Jon-il runs his country.

If you were a citizen in one of these countries when these guys were leading and one of these guys ordered you to do something, you did it or faced harsh consequences. If our President ordered a citizen to do something, it would be optional. That’s a tremendous difference.

Our Constitution was designed so that our President does not run our country.  (See the link to my pet peeves for the role our President does serve).

And for very good reasons. The outcomes produced by the leaders above demonstrate those reasons. None of these leaders produced results anyone should want to repeat.

Our President doesn’t even really run the Federal government, though that’s closer to an apt description than ‘running the country’.

The “tea party’s intellectual godfather”

I highly recommend reading Berkeley law professor, John Yoo’s weekend op-ed in the Wall Street Journal, Twenty Years of Justice Thomas.

This is one of the most powerful paragraphs on the Constitution and Supreme Court I’ve read in some time:

Clarence Thomas set the table for the tea party by making originalism fashionable again. Many appointees to the court enjoy its role as arbiter of society’s most divisive questions—race, abortion, religion, gay rights and national security—and show little desire to control their own power. Antonin Scalia, at best, thinks interpreting the Constitution based on its original meaning is “the lesser evil,” as he wrote in a 1989 law journal article, because it prevents judges from pursuing their own personal policies. Justice Thomas, however, thinks that the meaning of the Constitution held at its ratification binds the United States as a political community, and that decades of precedent must be scraped off the original Constitution like barnacles on a ship’s hull.

I’m glad Clarence Thomas is a justice and I’m also glad that we have folks who can write about this like John Yoo.

And for those who still struggle with figuring out the tea party is about, this is one key thing — having those in government serve their roles as defined, not as one political group or the other believes they should be defined.

The other key thing is fiscal sanity.