Tag Archives: M.I.T

How Tech Created a New Industrial Model

With a connected device for every acre of inhabitable land, we are starting to remake design, manufacturing, sales. Really, everything.

With little fanfare, something amazing happened: Wherever you go, you are close to an unimaginable amount of computing power. Tech writers use the line “this changes everything” too much, so let’s just say that it’s hard to say what this won’t change.

It happened fast. According to Cisco Systems, in 2016 there were 16.3 billion connections to the internet around the globe. That number, a near doubling in just four years, works out to 650 connections for every square mile of Earth’s inhabitable land, or roughly one every acre, everywhere. Cisco figures the connections will grow another 60% by 2020.

Instead of touching a relatively simple computer, a connected smartphone, laptop, car or sensor in some way touches a big cloud computing system. These include Amazon Web Services, Microsoft Azure or my employer, Google (which I joined from the New York Times earlier this year to write about cloud computing).

Over the decade since they started coming online, these big public clouds have moved from selling storage, network and computing at commodity prices to also offering higher-value applications. They host artificial intelligence software for companies that could never build their own and enable large-scale software development and management systems, such as Docker and Kubernetes. From anywhere, it’s also possible to reach and maintain the software on millions of devices at once.

For consumers, the new model isn’t too visible. They see an app update or a real-time map that shows traffic congestion based on reports from other phones. They might see a change in the way a thermostat heats a house, or a new layout on an auto dashboard. The new model doesn’t upend life.

For companies, though, there is an entirely new information loop, gathering and analyzing data and deploying its learning at increasing scale and sophistication.

Sometimes the information flows in one direction, from a sensor in the Internet of Things. More often, there is an interactive exchange: Connected devices at the edge of the system send information upstream, where it is merged in clouds with more data and analyzed. The results may be used for over-the-air software upgrades that substantially change the edge device. The process repeats, with businesses adjusting based on insights.

See also: ‘Core in the Cloud’ Reaches Tipping Point  

This cloud-based loop amounts to a new industrial model, according to Andrew McAfee, a professor at M.I.T. and, with Eric Brynjolfsson, the coauthor of “Machine, Platform, Crowd,” a new book on the rise of artificial intelligence. AI is an increasingly important part of the analysis. Seeing the dynamic as simply more computers in the world, McAfee says, is making the same kind of mistake that industrialists made with the first electric motors.

“They thought an electric engine was more efficient but basically like a steam engine,” he says. “Then they put smaller engines around and created conveyor belts, overhead cranes — they rethought what a factory was about, what the new routines were. Eventually, it didn’t matter what other strengths you had, you couldn’t compete if you didn’t figure that out.”

The new model is already changing how new companies operate. Startups like Snap, Spotify or Uber create business models that assume high levels of connectivity, data ingestion and analysis — a combination of tools at hand from a single source, rather than discrete functions. They assume their product will change rapidly in look, feel and function, based on new data.

The same dynamic is happening in industrial businesses that previously didn’t need lots of software.

Take Carbon, a Redwood City, CA maker of industrial 3D printers. More than 100 of its cloud-connected products are with customers, making resin-based items for sneakers, helmets and cloud computing parts, among other things.

Rather than sell machines, Carbon offers them like subscriptions. That way, it can observe what all of its machines are doing under different uses, derive conclusions from all of them on a continuous basis and upgrade the printers with monthly software downloads. A screen in the company’s front lobby shows total consumption of resins being collected on AWS, the basis for Carbon’s collective learning.

“The same way Google gets information to make searches better, we get millions of data points a day from what our machines are doing,” says Joe DeSimone, Carbon’s founder and CEO. “We can see what one industry does with the machine and share that with another.”

One recent improvement involved changing the mix of oxygen in a Carbon printer’s manufacturing chamber. That improved drying time by 20%. Building sneakers for Adidas, Carbon was able to design and manufacture 50 prototype shoes faster than it used to take to do half a dozen test models. It manufactures novel designs that were previously theoretical.

The cloud-based business dynamic raises a number of novel questions. If using a product is now also a form of programming a producer’s system, should a company’s avid data contributions be rewarded?

For Wall Street, which is the more interesting number: the revenue from sales of a product, or how much data is the company deriving from the product a month later?

Which matters more to a company, a data point about someone’s location, or its context with things like time and surroundings? Which is better: more data everywhere, or high-quality and reliable information on just a few things?

Moreover, products are now designed to create not just a type of experience but a type of data-gathering interaction. A Tesla’s door handles emerge as you approach it carrying a key. An iPhone or a Pixel phone comes out of its box fully charged. Google’s search page is a box awaiting your query. In every case, the object is yearning for you to learn from it immediately, welcoming its owner to interact, so it can begin to gather data and personalize itself. “Design for interaction” may become a new specialization.

 The cloud-based industrial model puts information-seeking responsive software closer to the center of general business processes. In this regard, the tradition of creating workflows is likely to change again.

See also: Strategist’s Guide to Artificial Intelligence  

A traditional organizational chart resembled a factory, assembling tasks into higher functions. Twenty-five years ago, client-server networks enabled easier information sharing, eliminating layers of middle management and encouraging open-plan offices. As naming data domains and rapidly interacting with new insights move to the center of corporate life, new management theories will doubtless arise as well.

“Clouds already interpenetrate everything,” says Tim O’Reilly, a noted technology publisher and author. “We’ll take for granted computation all around us, and our things talking with us. There is a coming generation of the workforce that is going to learn how we apply it.”

The Real Root of Innovation? Insurance

Humanity’s innate urge for creativity coupled, perhaps, with the promise of fame and riches have been important drivers of innovation throughout history. But what has served as the foundation for innovation? What has helped individuals make the leap from coming up with a great idea to executing it?

In one way, the answer is insurance. Insurance and risk transfer are key historical inventions that contributed to the rise of innovation around the Industrial Revolution. Legal and financial advancements, such as modern insurance policies, have been just as significant to innovation as technological breakthroughs. They have allowed humanity to view risky situations as opportunities to progress.

Before the Industrial Revolution, creative risks were, well, a lot riskier. In the days of hunter-gatherers and early agriculture, individuals or small family groups bore total responsibility for any consequences should a new crop be unsuccessful or sickness spread because an unproven concept failed. (Starvation and death are steep prices to pay.) As time progressed, hierarchical systems ensured the ruling classes quickly claimed and controlled any innovation devised by those low on the totem pole. Historically, oppression has rarely served to spark advancement at all, let alone at a decent pace.

When formalized insurance came along, in addition to stocks, bonds, patents and other financial tools, it allowed people to share the risks and rewards of their personal creativity. Because the downside of failure was no longer as excessive, people were empowered to take bigger leaps. Insurance and its associated analytics removed many of the unknowns from taking a chance on a risk.

Insurance and risk management are now so ingrained in the innovation process that we take it for granted as just another step on the way to progress. When you hear about modern space travel, for example, you don’t hear about the insurance policies that make it possible for entrepreneurs to launch ambitious new projects. Unfortunately, the only time we make the connection between insurance and innovative efforts is when something goes wrong. Case in point: It was only when an unmanned commercial rocket exploded last fall that many articles rushed to note it was insured for about $200 million.

Today, insurance is stepping in to lower innovators’ risks in other creative ways. One example is a firm that created insurance protection from “patent trolls.” While patents are supposed to protect inventors, some people have found ways to exploit the patent system to enrich themselves instead, while also limiting actual innovation. The high litigation price of defending a patent has caused many start-ups to stall out. Patent trolls have forced even established companies like Apple, Google and Samsung to spend massive quantities of capital addressing seemingly gratuitous patent claims. The new solution steps in to help organizations keep creating.

Recently, some insurance companies have begun to offer protection for the bitcoin business. The virtual currency has had its fair share of troubles in the last year or so, with cyber attacks and technical snafus costing investors millions upon millions of dollars. With the advent of protections similar to those offered by the long-established Federal Deposit Insurance Corporation, these organizations are making it possible for the bitcoin industry to mature, potentially ushering in a new, all-digital era for commerce.

The New York Times Magazine recently dedicated an entire issue to the subject of innovation. It cited prominent M.I.T. economist Daron Acemoglu directly linking the advancement of society to the necessity of insurance and risk management.

In other words, the better we manage risk, the more risks we take and the better off we may all be.

This article was originally published on IAmagazine.com.