Stan M. Davis is widely recognized as a visionary on the information economy on the foundations of wealth, the new bio-economy, connectivity, emotional bandwidth and mass customization.
UBIQUITY: Tell us about your new book, Lessons from the Future.
STAN M. DAVIS: It's a sampling of my work, about two-thirds selections from my writings and one-third new material. The first part is an original essay for the book called, "How I Get My Ideas," which I wrote because people are always asking me that question. The other parts of the book are about the economy and business from macro/micro perspectives, with lessons from the past and lessons for the future. The lessons for the future section is focused on the economy after this one, which I believe will be a bioeconomy, based on biological technologies or more broadly on molecular technologies that are both organic and inorganic.
UBIQUITY: Who's going to make the money out of the next economy?
DAVIS: Early on the biggest applications will be in pharmaceuticals and medicine. There's still tremendous resistance to biotechnology in food and agriculture, mainly in Europe, which has set back the life sciences thrust in that area. The resistance will clearly last for a number of years, but it won't last forever. Who would have predicted back in the 1960s that computers would be used by every business? That's where we are now in terms of a bioeconomy and biotechnologies.
UBIQUITY: What will happen to the old economies?
DAVIS: If you look at the history of the agrarian, industrial and information economies, in each succeeding economy you retain the previous sectors. In other words, you still have an agrarian sector in the industrial economy. The consequence of using the technology of the next economy on the dominating sector of the previous one is that it changes the way in which it's done, and so you get the shift from family farms to large agribusiness. In the same way, in the information economy computers increasingly affect industrial manufacturing. Less and less of the value-added is in the steel and more and more of it is in the information.
UBIQUITY: And you're saying that the same thing will happen in the next economy?
DAVIS: Yes. Although we don't know how or what form it will take, the same thing will happen. In this past decade, we never would have had the advances in biotechnology had it not been for the ability of computers to crunch the information -- specifically, the decoding of the human genome. In the course of the next decade, there will be more parity between the two in which not only will biotechnology be relying on information technology to make its leaps, but slowly and increasingly, the reverse will also be true and information technology will begin to rely more on biotechnology. Moore's Law of a doubling of computer power every 18 months will reach its physical limits within the 10-to-15-year range. We're going to need a new computing platform. It's not clear what that platform will be, although one candidate is DNA computing.
UBIQUITY: Let's change gears now -- to use an industrial-strength metaphor -- and shift to the first chapter of your book, which deals with the question of how you get your ideas. How do you do it?
DAVIS: Well, there are three sources for ideas (I call them three flavors): reading, discussions and thinking. The longest part of the piece has to do with how to think. I say that sometimes thinking involves trying to solve a problem, and sometimes it means figuring out the right focus or question and how to know when you've got it. Sounds pretentious, but it is important. I'm always struck about the importance of how to think when I listen to really bright people. They always seem to zero in on basic and powerful approaches and avoid the trivial and derivative stuff. A business example is the difference between people with an original idea for a start-up and those who don't explore ideas for start-ups unless they're capable of serving over a billion-dollar marketplace.
UBIQUITY: Where do people tend to go wrong in formulating questions? What are the mistakes of thinking?
DAVIS: The wavelength I got onto when I was writing the chapter is that the trick is knowing how to go for the big idea. I do not pretend to have the answer. . . . In one of my first research interviews, I asked a senior executive what he worried about most on his job. I have never forgotten his answer: "What I worry about most is what we do not know that we do not know. What we know we don't know, we work very hard to get the answers and solutions to. But what we don't know we don't know we don't have a prayer or chance at. My job," he said, "is moving people from not knowing what they don't know, to knowing what they don't know, and then they take it from there." In today's lingo, we talk about creative ideas as content. Given the current pace of change, we would do well to be context creators like that executive. This happened to me as a teacher.
UBIQUITY: Where did you teach?
DAVIS: Mainly at the Harvard Business School and also at Columbia and Boston Universities. For 16 years, I focused on preparing my classes and on bringing the best content possible to my students. One day it struck me that I was approaching things from the wrong end and I switched from watching what I was teaching to watching what they were learning. In business, we know this as the difference between a product focus and a market focus. Whether on a speaking platform or alone at my keyboard, I find you will derive your best ideas when you strip away non-essentials and stay focused on the basics. Less is more.
UBIQUITY: Which of your books has given you the most pleasure?
DAVIS: Well, one's books are one's children, so the question is like asking which child gives me the most pleasure. The answer is that I get different kinds of pleasures from each book. I've done 11 books and I will say this: The first five were much more academic. Since then, I've written trade books. It was as though I found a different voice. That came from a book called Future Perfect which most people would consider my breakthrough book.
UBIQUITY: What kinds of comments do your hear about your books?
DAVIS: The most typical remark I get, whether it's from reading my books or on a speaker's platform, is "You make me think. And you make me think in different ways than I've thought before." Future Perfect really did that. The idea then was pursued through a number of other books. Each book -- except for Lessons from the Future, which is more of a sampling of my oeuvre -- has a big theme about it. Future Perfect and then 2020 Vision and then The Monster Under the Bed then Blur and then Future Wealth.
UBIQUITY: Take us through the themes of each book.
DAVIS: The big theme of Future Perfect was based on a syllogism. Time, space and mass are the fundamental dimensions of the universe, and since your business is also part of the universe, therefore time, space and mass must be fundamental dimensions of your business. Back in 1987, when that idea was first put forth, it was thought to be bizarre and "way out." Now, speed and anywhere-anytime real-time approaches are intrinsic parts of the business world -- but 14 or 15 years ago they certainly weren't. That's also the book where I coined the term "mass customizing."
UBIQUITY: Do most people remember that you're the one who coined it?
DAVIS: Oh, it's acknowledged, but the term is so ubiquitous now in the business world that clearly not everybody who uses the term knows who coined it any more than everybody knows that the word "bug" in computer lingo came from Grace Hopper. Somebody started it.
UBIQUITY: Say something now about 2020 Vision.
DAVIS: Clearly the title is a play on words, because it's not about your eyesight, it's about the year 2020. The major theme was that everything -- including an economy -- that has a beginning also has an ending, and therefore has a life cycle attached to it. We went from hunting and gathering economies of hundreds of thousands of years, to agrarian economies of ten thousand years. The industrial economy from the first-in to the first-out was 19 decades -- 1760s in Britain to the 1950s in the United States. So, the question about the information economy that began in the early 1950s is how long of an economy is it? I say it's going to be about a 75- to 80-year economy. It will end somewhere in the late 2020s. In 1991 I said, "We're just at the end of the first half of the information economy and on the cusp of shifting into the second half." Two years later, the Internet hit.
UBIQUITY: Did you predict the Internet?
DAVIS: To be honest, I didn't predict the Internet anymore than anybody else did. But I was correct in my assessment about the timing and still hold to the notion that the information economy is in it's third quarter, and has been for about seven or eight years. We've got another decade to go in the third quarter and then it will shift into the fourth quarter, at which point we'll start to see the take-off of the next life cycle curve in biotechnologies.
UBIQUITY: Who is the monster in your book The Monster Under the Bed?
DAVIS: That book came out in 1994, and opens with a short story of a little girl who writes a tale about a toe monster that lives under her bed. It's really cute. She solves the problem by getting it to live under her little brother's bed. It's all done with a software package for kids her age. Instead of cutting out with the scissors from a magazine, she uses clip art and things like that. She wrote the play, she starred in it, she produced, directed and even distributed it by posting it on an electronic bulletin board for kids her age to swap stories on. The moral of the tale is that she's learning more as a consumer at home than as a student at school, because she didn't learn how to do these things in school. This was written when the Internet was just beginning to get critical mass. The book is about the intersection of business and education. Here's the thesis in a sentence: Every time the foundation of the economy shifts, who bears the mantle of responsibility for education shifts. When we were agrarian it was the church and family. When we were industrial, it became government. That shift took a century. Now we're no longer an industrial economy, yet we still have an educational system built by and run by the government for an industrial era.
UBIQUITY: How will the educational system change as we move through the information economy?
DAVIS: The educational system is slowly going to shift. It will take the next two decades to do so but I think business will emerge as the major educating institution in our society. That does not mean it's going to take over the school systems. That's not what's going to happen. What it does mean is that the bandwidth of education will shift from ages seven to fourteen in the agrarian era, to kindergarten through college in the industrial era, to life-long learning in the information era. In the life-long learning model, you learn in schools for the first two decades, but for the next four plus you learn as an employee in the workplace and as a consumer at home. Basically the thesis of The Monster Under the Bed is that in a much-expanded pie, students become a mature and declining educational sector. Employees and adults become the major sector and the potential growth sector that is just beginning to be tapped is consumers. When you have products and services that have learning built into them -- the more you use them the smarter they get -- that's a whole different orientation toward learning and knowledge and education.
UBIQUITY: Now let's move along to Blur.
DAVIS: Blur is like the son of Future Perfect. It picks up where Future Perfect left off and says, "Translate time, space and mass, into speed, connectivity, and intangibles. Speeding up affects everything. If you measure more frequently, for example, measurement becomes continual rather than episodic. This means things like continual floating price points. Disregarding space, if everything is connected to everything and everybody to everybody, then space is not the issue so much as the connectivity between the spaces. With regard to mass being intangible, more and more of the economic value of the economy is shifting to intangible economic value. In the '50s and '60s, that shift was from manufacturing of services. In the '70s and '80s it was from hardware to software. In the '90s and this coming decade, it's a shift in focus on talent and human capital online. Blur is about the speed of change in the connected economy. It has simple notions -- like the distinction between products and services are blurring and you shouldn't offer a product without services or a service that isn't productized.
UBIQUITY: And what is the main idea then of Future Wealth?
DAVIS: Future Wealth says that when the foundation of an economy shifts, so does everything about wealth. We are going through a mid-level shift in the foundation of the economy from the first half to the second half of the information economy. I call the shift "from crunching to connecting." The infrastructure is based less on freestanding boxes than on connectivity. This is bringing about changes in wealth -- changes in how it is created, how it's accumulated, how it's distributed, how it's controlled. That is true for individuals as well as businesses and society, in general. The big footprint of Future Wealth is what those changes are like. One example is that control of wealth is shifting from institutions to individuals.
UBIQUITY: Give an example of how wealth is moving from institutions to individuals.
DAVIS: If you look at who controlled the wealth in the agrarian era, it was the landed gentry. If you look at who controlled the wealth in the early industrial era, it was robber barons. Then, in the late industrial era, it passed over to management. They didn't own the wealth, but they controlled it. In the early information era, the control of wealth shifted again and it shifted from management to the pension funds. Recently, I heard an extraordinary statistic with regard to 401(k)s. Because there's so much churn in terms of jobs where people don't stay with a job for life, they have to make a decision what to do about their pension funds. Sixty percent of people cash out their 401(k)s. Only 40 percent roll them over or reinvest in another 401(k) with their new employer or in IRAs.
UBIQUITY: That is an astounding statistic.
DAVIS: I agree with you in that judgment, but take one step back and deal with the descriptive statement. What you have is more evidence about the individual being responsible for how and where to make investments. That's part of the shift. We also make a distinction between real wealth and financial wealth and that financial wealth is growing faster than real wealth. Of course, the bubble burst but still financial wealth has become very important. It is particularly true in the United States where more than half the households have some investment in the stock market.
UBIQUITY: Were there any surprises where you said either, "I'd never gave that a thought" or "I was entirely wrong?"
DAVIS: Well, one that doesn't look like it's happening with the speed I thought it would happen is the monetization of people's future earnings, which is a fancy way of saying it. Each of us has a more or less predictable future earnings stream. Just look at the help wanted ads and you can know how much a chemical engineer with 10 years experience will earn in a given market. The ability to monetize that future stream manifests itself, for example, in your ability to get a mortgage. But it's never been made into a financial instrument itself. So what you saw in the venture capital and investment community is that it got more and more articulated through the decades, down to the angel investors and the my-rich-uncle types. You see this notion first in sports and entertainment, where well known people can get investment backers to invest in them and share in the rewards of their future earning streams. This has not really caught on very much in terms of spreading to larger numbers of people. I thought that it would, but it hasn't.
UBIQUITY: Looking ahead 20 or 30 years, you see a new kind of economy forming, what are you most optimistic about, and what do you fear most?
DAVIS: Let's start by looking at the greatest problems of the three economies, past, present and future. The greatest problem of the industrial economy is environmental degradation, pollution and the like. The greatest problem of the information economy is privacy. The greatest problem of the bioeconomy of the future will be ethics. When you compare those three, as serious as the privacy issues are, they pale in comparison with the other two. AS TO optimism, I think that the information economy has been incredibly democratizing, much more so than previous economic foundations. The benefits of it have spread to larger numbers of people, despite the digital divide. The major problem of the current information economy, privacy, when seen in an even larger historical perspective is, well, relatively not so bad. The biggest negative is going to be the problem of the bioeconomy. The ethical dilemmas involved are going to be enormous. So I would call it a very cautious optimism.