 John's going to talk for 10, 15 minutes, something like that, give an overview of a long, complex work and tell us everything we need to know about it in 10 or 15 minutes, because authors love doing that. And then I'm going to ask some questions and then you're going to ask the rest of the questions. So why don't we begin? I'll go down here and John, won't you tell us about the book? I am not going to try to summarize the book in 10 to 15 minutes. I thought what I would do is, in fact, just to spur some discussion, really just focus on trying to present some provocative propositions, provoke everybody and hopefully get disagreement and get the debate going. So I'll just go through a series of provocative propositions that are in the book. I won't seek to support them with much evidence, but I mean there is more evidence in the book, but I'll throw in a tidbit here and there in terms of support. So the first provocative proposition that I would offer is that our basic management approaches and institutions are fundamentally broken. So I think that's a pretty basic observation and is a theme that runs throughout the book. So if you don't buy into that, you're probably not going to buy into the rest of the book. The one piece of evidence that I'll cite here to support that rather broad statement is some work we did actually that was published in what we called the Shift Index last year. And it was basically an attempt to look at long-term trends in the U.S. economy and how the business landscape is changing around us. One of the metrics, we had 25 metrics in the index. One of the metrics kind of got all the attention of the executives we deal with and the public policy folks. And it was a metric that looked at profitability for all public companies in the United States since 1965. We didn't take a sample. We looked at every single public company. And we looked at return on assets as the basic measure of profitability. Over that time period, return on assets has basically collapsed. Since 1965, return on assets has declined by 75%. It is a significant and sustained trend. There is no evidence of it leveling off, much less turning around. In executive boardrooms that I deal with, I often hear the metaphor, the image of the red queen. We run faster and faster, just say, in the same place. What we're seeing in the U.S. economy is something quite different and even worse than the red queen. We're running faster and faster and falling farther and farther behind. So I would suggest that that is perhaps evidence that something is fundamentally broken. This has been such a consistent trend over such a long period of time that it's worth stepping back and asking why is this happening. The second proposition I would offer is that basically it's not about intensifying competition, although that's certainly an element of it. It is, in our view, that the basis of competition is fundamentally changing. It's not just getting harder, it's different. Both in terms of the source of value creation and the means of value creation. So in terms of the source of value creation, we have a key proposition that value creation in the past century in the U.S. economy was around knowledge stocks. If you were able to get proprietary knowledge stocks and were able to protect that knowledge stock and then as efficiently as possible extract the value from it, you would make a fortune. In fact, fortunes were made around this proposition. All the major companies that emerged in the 20th century held that basic view. We would argue that given the changes that are going on at a fundamental level in the economy, if all you do is protect knowledge stocks, you're in a losing game because knowledge stocks are depreciating in value at an accelerating rate, with the possible exception of Coca-Cola's secret formula for their favorite soft drink. But in general, if you look at product life cycles compressing any proprietary knowledge you have around a particular product, shorter and shorter time periods extract the value from it. So the proposition is that we're moving to a world where the source of economic value becomes knowledge flows. It's about how do you participate in more diverse and relevant knowledge flows to refresh your knowledge stock. And the companies who do that most effectively will be the ones to win. And I would suggest that it also applies to us at the individual level, not just at the company level. It's about knowledge flows. Are you in the flow? The related proposition and it's kind of the core theme of the book is this notion that the means of value creation is shifting from what we call push to pull. Push models basically drive off the assumption that you can predict and forecast demand. Based on that prediction and forecast, you make sure that all the resources and people are in the right place at the right time to meet that demand. Work miracles in the 20th century. Again, great fortunes were created around push models of economic value creation. We suggest that because of the increasing uncertainty and change in the world, that model is increasingly challenged and that the real power now in terms of creating economic value has to do with mastering techniques of pull. Very different set of approaches and we developed in some detail the elements of pull that we think are going to become more and more important. Another question. I think that answers the question of one mystery is if you believe in markets and I certainly do, why has this continued deterioration and profitability occurred over such a long period? Surely with innovation in the economy, we would have figured out how to cope with the new world that's around us. Why are we continuing down this long slide? I would suggest it is because these basic assumptions about where and how value gets created are very deeply held. The mindsets that we bring to our business in terms of assumptions for what you need to do to be successful are still held very tightly by most senior executives. If we need innovation to change this worrisome trend, I'll lead to another provocative proposition which is that the center for innovation on a global basis is shifting from the United States to China and India. To support that proposition, I'll first redefine what I think most of you would immediately associate with innovation because my experience as most Western executives would say that innovation is about breakthrough product or technology innovation. It's all about the product and technology and it's really about breakthrough. Don't bother me if you're talking about this incremental stuff. So that's the narrow definition of innovation. We've broadened it over time to say process innovation is important. Gary Hamill has said now that management innovation is important by which he means the management approach within an enterprise. We go one step further and say the most valuable innovation going forward is what we call institutional innovation. It has to do with rethinking at a fundamental level the rationale, the roles and relationships across many independent entities, many independent enterprises. Now if you take our definition of institutional innovation and look for where that's occurring today, it's occurring the most sophisticated examples that we've been able to find are actually in China and India. They're occurring in a very broad array of industries, everything from motorcycles to apparel to financial services to agricultural products. It's a very diverse set of industries so it gives us some confidence that what's going on over there is broadly applicable. It's not just restricted to one or two industries. And this innovation is basically invisible to Western executives. Most Western executives have no idea of what's going on because they are looking for innovation in a very narrow frame. It's about product and technology innovation and breakthroughs. So if I don't see any breakthrough product or technology innovation going on, not to worry. There's no innovation. It's a very different form of innovation. So if I haven't provoked enough, let me go to another one which is that for the first time I would argue and we argue in the book that we have an opportunity to move from a diminishing returns business landscape to an increasing returns business landscape. What do I mean by that? I'll reveal my age by saying that I was actually started my career at Boston Consulting Group many, many years ago when they pioneered a key concept. It was called the experience curve. It's a very powerful concept that describes how performance improves in industry after industry. They started with semiconductors. They demonstrated it in everything from toilet paper to Japanese beer. It had a very consistent pattern. It was a diminishing returns pattern. The more experience you accumulated, the longer you had to wait for the next increment of performance improvement. We believe that for the first time, again, because of a set of technology infrastructures that are emerging and because of a set of management practices and institutional innovation, we for the first time have an opportunity to move to an increasing returns performance improvement curve. Where do we find evidence for that? Probably the most speculative part of our book. We actually look very far afield. We look at things like extreme sports. We spend a lot of time looking at big waves surfing in particular. We go online gaming to World of Warcraft. And then we look at a whole series of kind of initiatives in the open source software arena and related areas. And again, just to be provocative, I will make the assertion without support at this point. Actually, I'll support it very briefly if I'm allowed with a quick story. That one of the most powerful and fruitful places for management education today is World of Warcraft. Harvard Business School with apologies to my alma mater. World of Warcraft. And I'll just tell you a quick story. I met a guy 10 years ago. I was in a startup in Silicon Valley. He was just out of college. And he was basically the computer help desk person for our startup. He was the guy you went to. He was a computer geek. He loved computers. And very helpful. Ten years later, he was just named CIO of Starbucks. He's the youngest CIO of any Fortune 500 company. A remarkable rise in ten years. Basically, if you ask him the reason for his success and the rapid rise, it's because he was a guild leader in World of Warcraft. And he learned a set of management techniques that have been extraordinarily powerful in helping him to succeed and have impact in corporate environments. So then I'll just wrap with one final proposition, which is that if we're going to get to these increasing returns, performance curves, we need to resolve something that we describe as the Dilbert paradox. I love paradoxes, by the way. Hence the name of my research center called The Center for the Edge. The Dilbert paradox is this. If you go to any senior executive of any major U.S. western company and ask them what their top priorities are, inevitably, if it's not the top priority, it's within the top three. The priority is around talent. Got it? Talent's the most important priority. If that's the case, how do we explain the incredible popularity of these popular culture artifacts like Dilbert and The Office that describe in such compelling terms the stultifying effect on talent of our average work environment? How do we resolve that? I would suggest that part of the resolution has to do with a further question you could ask that senior executive, which is, okay, so talent's your most important priority. What are we doing to foster that? And they'll say largely, broad generalization, but to be provocative, they will say two things. One is we're focused on attracting world class talent wherever it is. We invest a huge amount of recruiting and getting the best people into this firm. And then on the other side, we're focused on retaining that talent. If there's any evidence that they're going to leave, we basically will do everything we can to hold them into our company. That's really powerful. I would suggest they're missing the key element around talent, which is that middle element of talent development. And that if you were really focused on talent development and became the best place to develop talent, you would attract all the talent you could possibly handle. Word of mouth would spread that this is the place to go. And you would hold on to that talent as long as you could, because why would they ever leave? They're developing more rapidly as part of your firm or institution. Why would they ever leave? So with that, maybe I'll just...thank you. Thank you very much. So we now have seven provocations, but I actually want to step back from the provocations for a moment and we'll see who is provoked about what. And ask you... I want to try to get a sense of the overall... because you've alluded to various elements of your world. How things fit together. So we have the shift index going back to 1965 in the historical view of business. We have the big shift, which figures prominently in the book and is related to the shift index. And we have pull. So can you... Sense that a little bit. Well, sure. What's the constellation? What's the world view? Great question. There is a basic structure to the book in the sense that part of it is a descriptive exercise. We believe and we try to support the proposition that we are in the middle of a big shift that is occurring, not just in the U.S., but globally. And so we try to describe what are the deep forces that are driving this big shift. And that's the shift index with our attempts to quantify key dimensions of that big shift and really, again, in a descriptive frame, really develop insight around what's going on in the world around us. Go beneath the surface events. Go beyond the immediate events that we all tend to focus on the newspaper headlines and go long-term, deep, and try to figure out what's going on. So that's the opening part of the book. I'd say the bulk of the book is really what we would call prescriptive. It's trying to answer the question, so what do you do about it? We may all understand there's a big shift out there, so what are the implications for change? And in that case, we basically organize largely around the theme of pull. We describe three levels of pull that are becoming more and more central to success. We've talked about it in a variety of contexts. And then what we do is, on a prescriptive note again, is we take three different levels of application. In a way, there is a way and opportunity for all of us as individuals to apply the techniques of pull in our personal professional lives. So what would that look like? And how do you make the start down a migration path from where you are today to where you need to be in this world of pull? And then we do it again for institutions. And we say, for institutions, what are the implications? How would you think about a migration path to get from here to there? And then probably our most ambitious effort, we'd take a focus on what we would describe as arenas, because we believe you can use the power of pull to basically reshape entire markets, industries, social arenas using these techniques. So you're not just moving an institution, you're moving a whole set of institutions in a fundamental way. First of all, can people hear, John? Because we made maybe a tragic decision about microphones. So you're okay in the back. And if not, you can move forward. You're all the way in the back. Okay, so since this is nominally a Berkman Center for Internet and Society meeting, let me ask at least one internet question. Which is, to what extent does the big shift correlate to the rise of the net? Or what role does the net play, is it both, first of all, and then I think what may be related to that is perhaps. Why the word pull? Can you say more about what pull as a metaphor does, why it works in this description? Because you use a variety of other metaphors. You've already used the edge, which figures very prominently, not only in your online presence, but also in the book. Frequent references to the edge in the center. And presumably, when I was reading, I thought it could have called it the edge, as well as the pull. So can you say more about the internet and pull? The internet and pull. The internet, not surprisingly, we would argue is actually central to what's going on. In the shift index and the big shift work we did, the descriptive side, we essentially ended up focusing on two key forces that are shaping this entire world economy. One of them is what we would describe as digital technology infrastructure, internet, and the key building blocks around computing, storage, and bandwidth. And what's particularly interesting to us in that context is unlike any other historical infrastructure. And here we draw heavily on the work of a woman by the name of Carlotta Perez, if any of you know her. The remarkable book on tracing out the patterns around deployment of infrastructures, having to do with electricity, the automobile, a whole set of major technology innovations. What the pattern in all of those was that you had a burst of innovation. And then, in a relatively short period of time, the core technology stabilized. You know, peripheral marginal improvement in price performance, but basically you had the element in place and relatively stable. And so a whole other set of people could come in and then innovate around the infrastructure. How do you deliver that technology to the rest of the world? And, well, on the whole, after burst of innovation around that, that stabilized. And then you had an opportunity for the rest of the world to figure out what to do with all this infrastructure. We did get PAX machines, so clearly there's still plenty of innovation in the telephone system, for example. Yes, no, for sure. I'm generalizing at a very high level. Please continue. So, but what's different here is all the core technology components, these three elements, computing storage and bandwidth, are continuing to increase at exponential rates in terms of price performance. There's no evidence of it slowing down, at least in the near term. Eventually exponential rates can't continue forever. But foreseeable future, we're facing a set of technologies that are driving exponential improvement. We are, in turn, seeing entire infrastructures being redefined. Right now, the key buzzword in the tech world is cloud computing. There are more words spilled around cloud computing, than if you actually look at how many people are actually using cloud computing, it's a tiny fraction, I think you have to round up to one or two percent. And so, in that context, we've got a whole way to go in terms of the adoption of cloud computing and rethinking based on cloud computing what we would do, and I guarantee that's not the end of the infrastructure innovations that we're going to see. So, internet key, and from an economic viewpoint, the key impact of digital technology infrastructure is to systematically reduce barriers to entry and barriers to movement on a global scale. And in economic terms, that means intensifying competition, which means greater economic pressure, which sets into motion this erosion and profitability. And then, so the second question, pull, pull, why do we pick pull? Well, the reason we didn't pick edge, although we love the term, we've adopted it as our name, is because it's a descriptive term. It basically is very effective in describing elements that are out there, but it's not very prescriptive in terms of, okay, so what do you do about it? We were looking to really focus on the prescriptive side, and we felt that pull was a very interesting kind of opposite to the conventional approach to organizing institutions and managing resources. So, let me ask you a question that actually reflects my own fears, not actually your book. That's sort of a great interview question. Here's what I'm worried about. Much of about the internet, and especially the stuff that glorifies it, which is something I spend a fair bit of my time doing. It looks at the best examples, but the best examples, excuse me, are frequently atypical examples. That's what makes them the best examples. So, in the writing about how wonderfully the net responded to the volcanic ash plume, people with lots of Twitter followers posted very happy reports about how well Twitter functioned. If systems, traditional institutions, failed, Twitter worked. Twitter worked really well. I want to make an exception to this in a second, but Twitter worked really well if you had thousands of followers and you could say anybody have a place I can stay in London, and yeah, there were. If you have a long tail of Twitter, then a lot of those services would not have worked. Now, the exception, which I'll put in parentheses, is the use of hashtags actually allows the long tail to participate. Nevertheless, the people who were exalting over the internet's capability seemed to me to be the special cases. And in the same way, because you're writing a book and you're an author, many of the examples that you pick, and which you talk about at some length in a sort of narrative style, you're telling their stories, are people who are at the extreme head, it's Joey Ito. And many of us are familiar with Joey Ito, and he is a person who literally, just that literally lives on planes and does wonderful work, but he's Joey Ito, and he's very well known. Or the surfing example is a bunch of... Yeah, who apparently is a big name. It's a very big name if you follow a big way of surfing. So, here's a case of somebody who did the pull thing and succeeded, but he's Dusty Payne. He's the Joey Ito of surfing, which he's probably never been called before. So, to what extent are you concerned that the picture that we have of the internet's effect is and the role that it plays in pull as well, depends upon looking at the special cases which may turn out to be so special if they're not typical of the phenomenon. No, it's a great question. I think that it reflects our whole technique. So, we are potentially at risk, not just in the book, but in all the research we do because the research approach we take, our charter was to identify emerging business opportunities that are not on the CEO's agenda and do the original research required to be persuasive why it should be on the agenda. Given that charter, you can't do rigorous statistical analysis of large databases because these are emerging opportunities. There aren't a lot of examples and what you have to do is find those extreme examples, those best examples and look for patterns across them to say, I mean one question is, are these just individuals who have unique circumstances and there's nothing comparable? One of our exercises to say what is consistent across all those are their patterns that we can look to to say maybe this isn't just the individuals. But at the end of the day, it is a challenge to say with confidence this will prevail throughout the entire world. I think what we have to do again is go back to the deep forces and say are these individuals doing things that actually demonstrate the power of what you could do and that the word will spread and other people will engage. The other thing which you didn't really ask about is obviously there's a dark side to the internet. People are using the internet for a horrible thing. Oh, sorry. I didn't get my communique. Go ahead. Lab it. It's definitely the case and we certainly haven't spent a lot of time in the Power of Poll talking about that. Our belief is that there's an inevitable lag time between the advent of new technologies and the social practices that evolve around those technologies and we're still at the early stages of figuring out what to do with all this stuff and we'll become a lot smarter, we'll become a lot more effective in dealing with the dark side in terms of coping with those uses although inevitably any technology ends up having a dark side. I was going to ask one more question but I'm going to ask two more. One of the oft-noticed problems with an internet such as one that we have in which poll in a particular sense is a dominant way in which people gather attention. Not only is there a certain type of obnoxious behavior that will gather attention but shy people may not do very well. It's not because they're not worthy but they're just shy on the internet. This is actually the leader of the next question but is that one of the concerns that you have that in this restructuring and this big shift it's shifting power it's getting more distributed but it's getting distributed to certain personality types that don't have the merit necessarily not the meritocracy that we all like? It's again a great question and probably the longer answer that Meredith my quick answer would be that I don't believe that's the case for a couple of reasons. One is I think that to us at least when we put a lot of emphasis on this I can go into the reasons if you want but the power of poll and the power of the internet has ultimately to do with the ability to build long term trust based relationships in a much more scalable way than you ever could in the past. The kind of personality that's just out there for the quick dollar and the very transactional kind of personality or mindset won't last very long or they'll have a burst and then they'll go out. The people who will create the most value, our belief is are those who figure out how to use this to build long term trust based relationships. Second issue and I'll use it as a hook to just bring in one of my favorite topics in the book which is the increasing importance of passion and for variety reasons we make a very strong case the passion is becoming more and more central economic success but one of the things that passion does on a personal level is it helps that shy person to overcome their inhibitions and I will say I actually speak from personal experience as a child I was extraordinarily introverted and shy I had a very hard time connecting my way out of that was by writing initially pre-internet writing books and it was an opportunity for me to connect with people to communicate to people without having to do the face to face interaction and the response I would get from that writing actually reinforced that maybe I had something worth saying and maybe I should make more effort to connect at the personal level I think on the internet we're seeing a lot of that very shy people in their personal lives actually becoming really great bloggers really great twitterers and facebook people because they have passion and speaking from the heart about their passion they're authentic, they're not there just to make the quick buck they're really deeply engaged around a particular theme or concept so I maybe should have qualified shy by saying internet shy because there are people shy on the real world and vice versa so I wonder whether you are underestimating the enormous power of shyness but maybe so one of the things that's really interesting about the book the power of the camera is that it talked and structured in an organized way from the personal to the largest institutional in some ways it's a theory of everything you don't see all that often so I want to ask you about the institutional and I'll stop what you did was one of your provocations I wonder to what how radical a change in not the way institutions work and how they're managed but in their very nature you foresee and the extent to which so you write about leadership, very interesting in this these are all reasons why William Jefferson Clinton and Newt Gingrich blurbed you the Clinton system being called William Jefferson Clinton instead of Bill Clinton that was our publisher anyway that's not the question I think it's the first book by the way to have been endorsed by both Wow so you talk about leadership and in the back of my mind I'll tell you honestly as a friend thinking they're talking about leadership to business leaders in this book and sort of holding back the thought that the very nature of leadership is eroding and the corner office and the whole deal just may not be exactly where you're going to be in 10, 15, 20 years when the big shift works through to what extent do you see institutions fundamentally changing their nature and thus the nature of leadership to be clear I mean we would argue that institutions will change at the most basic level even the rationale, what's the rationale I mean somebody made one of the Nobel prize in economics by saying that the rationale for firms was around reducing transaction costs and that absolutely, Ronald so and that was a very great description of the firms again of the 20th century and it was the rationale and I believe all the structural and management practices derived from that basic insight I would say that the rationale for an institution today is much more around talent development if you cannot develop talent more rapidly than anybody else you will lose but will there still be institutions corporations and again a longer discussion we have a point of view that this is not about everything fragmenting it's not the elance economy or the independent contractor economy in aggregate we believe there will still be large institutions there will be a lot more of the contractor and the elance kind of activity but to the extent there are large institutions it's because they can demonstrate that scale actually provides more rapid talent development particularly around the network of relationships that they can aggregate on behalf of their participants and that those will will still be a significant force in the economy they will be very different from what we have today are you open to the argument are you open to the argument that in fact institutional forms of talent development are necessarily more limited than what one can get in an opener environment that no institution is going to be sufficient for no institution will be able to develop talent as well as the non-institutional environment on the same grounds that Bill Joy said famously the thing I don't remember more smart people outside your organization than inside yeah absolutely so a key part of our view is that the institutional architectures are going to be much more network oriented I don't mean internet oriented but business network oriented in terms of connecting in very large scalable networks of relationships specifically with the intent of connecting out to all those smart people and trying to build relationships with them besides can learn faster as a result of that relationship we have a belief that institutions could actually do that more effectively than any individual in their own right I should say too we're looking at a very different array of institutions I mean I believe an open source software initiative is an institutional arrangement it's not your traditional firm but it has a governance process and protocols and everything else so we'll start on that in that corner we'll repeat question he had the microphone so we'll do the microphone thing and if it gets in the way we'll repeat questions instead and why don't you stand by for the second question one of the follow up on that topic of institutions I completely agree that they will be more network not just for resources but for changing for cooperation in producing new products and also for producing new business models I think some of the boundaries that I see in organizations they can't survive unless they change the nature of the boundary with people next to them that maybe they've never paid attention to before to what extent do you see evidence of that more networking and changing of what it means to network already occurring in industries around the world but again I would say that it is occurring obviously I'm looking at the best examples trying to extrapolate from it but we've actually spent our research centers spent a lot of time in China and India looking at companies out there who are creating incredibly scalable networks on a global basis I mean one of the push backs we get when we talk about China and India is they've got a very unique culture it's culture specific you couldn't possibly do this in any other area many of these networks are truly global and most of the participants are actually no longer Chinese at all so they've managed to demonstrate I think the ability to take these practices and apply them but it's a completely different way of thinking about the business one of the key innovations that they have is a notion of redefining process management in modular loosely coupled forms so you're creating modules of activity and you're focusing a lot of time on specifying the interfaces of those activities and doing this by the way without technology I'm not talking about technology I'm talking about management practice and one of our propositions is imagine what would happen if you took those management practices loosely coupled modular approaches and combined them with loosely modular loosely coupled modular technology architectures which are now becoming available what did you do that pretty powerful oh I you are a medium okay I'm sorry we should say who we are as well my name is Rick Burns I work at a company called HubSpot in Kendall Square and I wanted to ask a question about the return on assets that you were talking about at the beginning so that's for big companies is it possible that there is a better return on assets for smaller companies because a lot of the things you're talking about are potentially things that are more likely to happen in small companies right we are limited by the data we for pragmatic reasons chose to look at just public companies although public companies of any size not just big public companies but any company that's publicly traded is part of our database we did do an analysis because we got pushback on this about size of company very based on size of company there's no meaningful pattern the very largest public companies are under the same pressure as the very smallest public companies now the argument still could be made that there's a whole private enterprise sector that's not publicly traded still privately owned and maybe there's huge innovation going on there and there ROA is through the roof I'm open to that argument I'd like to see the data I'd like to see the data for it I will say there is data showing that the rate of business failure among entrepreneurial ventures is increasing over time which suggests that by the most basic measure of performance survival the private companies are not doing too well in aggregate but are there more being started? more churn? on percentage basis not in absolute numbers but percentage basis failures in the private companies sure there are more businesses being started hi thanks hi David Brookline guy and working on Civic Express and this is going to sound odd but if you take all the trends that Boston Consulting Group believes in we're trying to prove that you could start a new enterprise almost overnight zero time, zero resources that you own if you have a passionate crowd obviously you have all the intellectual property you have and then you have access to all the resources because they're dormant and people are going what the hell they're getting dusty let's try it I'm wondering two things I heard you talk about talent what we're seeing is there's a lot of anti-talent behavior within organizations as a friend put it during a down economy big organizations beat up on the talent they go well where else are you going to go and there's a massive shift once there's an economic recovery they make this one different is as you fragment people from passion about their jobs and you have the internet in any time anywhere productivity the thing that comes together may actually be a new kind of stained glass window for lack of a better term where people don't have to be in a place at a specific time punching in and I'm wondering if it's massive freelancing to take a media model right that if this combined with what you talked about in China loosely coupled might result in incredibly flat production model where you almost have no company you have a firm you have three people who believe and they broadcast what they want and other people go what the heck I'm in because right now I'm not happy so leveraging the negative feelings as well as the positive in the any time anywhere in the loosely coupled model so I know this is throwing a lot of working on that and I'd love to stay in touch with you on this because I think we're all talking about the same diagonal it's not flat it's not vertical like an institution it's actually on the diagonal so just wondering a lot of questions embedded in that comment I'll just focus on a few that came to mind one is I agree completely most institutions I think the Dilbert and office representation of what goes on in most companies is dead on and that's the reason people love it talking about what happens to them on a daily basis and just as one anecdote around this I swear to God I was at a conference in Silicon Valley the center of talent creative talent and passion and there was a very senior executive of one of the largest technology companies in Silicon Valley who I will refrain from naming who described that they had really passionate people in their organization somebody asked them and he said we call them pizza people and somebody raised the hand and said well why do you call them pizza people and he said well because they're passionate they're so passionate that we couldn't possibly bring them in front of an executive team a senior executive team because they're so unpredictable they're loose cannons you don't know what they would say or do in front of these executives so we have to keep them behind locked doors in a separate area and every once in a while we'll slide a pizza underneath the door to keep them fed so this is the heart of creativity and passion speaking about how they treat passionate people in their organization yeah so I think that that's a key red flag that we're basically in a world that does not value passion I would say again and I think there are valid reasons most executives will say they want passionate workers they're very sincere about that statement what they mean is they want people who are passionate about doing the work that's assigned to them in a very predictable way and the problem is that passion is inherently unpredictable it leads off in all kinds of unexpected directions and if you are in an institution that is driven by scalable efficiency and predictability is an enemy so Tom Peters used to tell a story so this must be like in the 80s because he was all about the passion I think he may have been the first one to actually bring this to imagine that workers might actually be passionate about what they do I remember from one of his videos telling a story I think it must have been about FedEx or UPS or one of those the guy who it was supposed to get there that morning and there was a snow storm or whatever and the guy rented a helicopter and he flew it over the mountain and got it there that was an example of passion I always thought about what the manager must have thought when the bill came what were you thinking $40,000 how much pizza would you have bought I'm over budget now we'll also say one other trigger from your question when I talk about talent I want to be really clear that I think again there are all kinds of patterns I've dealt with senior executives for a long time there is a clear pattern when I talk about talent they immediately go to knowledge workers that's their talent in some cases they actually don't even believe it's knowledge workers they believe it's kind of the 100 high potential people in their organization that's really the talent to focus on but I would argue that that's a false distinction any worker is working knowledge and has talent that can be used to deliver even more value to the marketplace and one of our key problems is we have this segmentation if talent is all about knowledge workers the rest of the workforce they just do their job it's a skilled talent splitter thank you my colleague John Sealy Brown talks about the receptionist and the incredible creativity that an average receptionist has to show on a daily basis dealing with completely unexpected situations that there are no policies and procedures to cope with and frontline workers on assembly lines Toyota demonstrated that basically those routine workers could become incredibly passionate and creative around their job whereas traditionally the movement has been to de-skill traditionally meaning since the turn of the since the 1900s industrial age overall but sort of systematic, Taylorist de-skilling of workers was seen as the path to efficiency and return on assets and you're telling us that's not right that's not actually how well Justin Olson, two really quick questions the first is just sort of a follow up to the questions asked earlier about the start up the increasing rate of start up companies failing and I would at least posit that with the bar being lowered for entry that even with the increasing number you would actually expect an increasing rate of failure so I don't know that there's necessarily any positive correlation between an increasing rate of failure and a decreasing rate of innovation and the second question I wanted to ask is is it possible that ROA might not be the right metric for sort of analyzing at least the return to society out of these companies especially given that since 1970 give or take almost every kind of technological base has been following Moore's law fairly accurately and is increasing exponentially rather than giving an administrator return and I recognize that that doesn't necessarily take into account investment and the return from investment necessarily but overall those sectors at least are exponentially increasing so the first question around the private sector and the privately owned companies and increasing failure rates it is not an indication of return on assets for the entire private company sector I will just say I'd like to see the data I think we suffer in the privately owned company group from incredible opacity there's no data and we hear the success stories we hear the ones that made it great we never hear about the ones that are struggling just to make payroll and I believe return on assets analysis for private companies would probably show a significant deterioration in ROA over time but I'd like to see data I'd like to have it for them I'm sorry you asked the second question with respect to the tech companies following Moore's law and the third and almost exponentially increasing well tech companies have definitely benefited from you also asked the social issue and I want to be clear too I was just talking about one metric in the shift index other metrics looked at for example benefits to consumers and one element of the big shift is consumers are benefiting enormously they're getting far more value at far lower prices than they've ever gotten before so all of us in one part of our lives are hugely benefiting from this big shift second constituency we looked at was actually creative talent in companies and we said how is their total cash compensation changing over time they have benefited enormously by the way the gap between so-called creative talent and the rest of the workforce has been widening in the process but one way of thinking about the pressure on the corporation and again we're not saying this is society we're saying this is one significant part of society you can think about as a pincer move on the corporation on the one side you get more and more powerful customers who are demanding more value at lower price and then you have creative talent that's got more and more bargaining power and central role to play in terms of value creation they're getting more and more the companies caught in the middle being squeezed thank you again for coming my name is Ari and many of the things that you said about talent and passion really struck a chord and I was reading recently about teachers and they said what do you value in students and this was early elementary education they said oh creativity independence initiative and they found out that those were the students that they actually liked the least and that they helped the least and that they were pushing them away from those skills they liked them to be creative when they were doing in art class on that project and they liked them to have initiative independence when they wanted them to get up to do so but other than that they weren't very interested and that really struck a chord with how people want talent to work at their companies they wanted to do their projects well and I experienced that my bosses aren't watching but I feel very much the same way I was wondering oh should they should do this but I haven't actually heard about like what is my company to do the CEO of my company says we should really foster this what is he going to do to make all the managers feel that way about talent of the company great couple of questions your observation at first around schools so I'll be again more provocative and I'll state that from my experience and research I believe and apologies the institution I'm sitting in that the entire purpose of the educational system has been to squeeze out the passion that is naturally within us as we come into the school system and it's done because corporations can't handle passionate people and so they need to prepare people to go into the workforce and be productive one of the things we're taught is if you insist on holding on to passion go to a job to get a paycheck so that you can pursue your passion outside of work but don't bring it into the workforce into the workplace because that's bad that's disruptive, that's not predictable so again that's my provocation and I'm sorry the question after that I get oh what do corporate leaders do about all this so again we have a whole part of the book which is really focused on what we call pulling from the top institutional leadership the challenge for institutional leaders in this emerging era is they cannot do it themselves in the past in a hierarchical command and control organization you could mandate this is the way it's going to be done and you've got things done so what we focus on in the book is a notion of the function of a leader is first of all to identify really central performance challenges that the company is facing preferably on what we would describe as the edge of the company not in the core don't try to change the core go out to the edge these could be new markets you're trying to go into new products you're introducing new sets of customers but go to the edge with this aggressive performance challenge and then put out a call to identify people who are really passionate about that performance say what a performance challenge is a performance challenge could be we're addressing we're in this new market and we're experiencing nobody's buying the product and we actually believe it's a great product and let's take for this case it is a great product having a bunch of people to actually problem solve that okay where's the disconnect here how could we actually increase the adoption of this product but it's a notion of getting passionate people to surface putting out the challenge because passionate people actually respond to challenges they love challenges they seek them out and by the way most passionate people in companies they're often well camouflaged but if they're there and they are there to some degree they're typically on edges because that's where they're least controlled by the core and that's where they're the most interesting performance challenges I mean there's constant new reinvention that has to go on on these edges so they're instinctively there they're also risk takers by the way and so they're attracted again to edges so the function of an executive we believe is to mobilize these people with each other because often they don't know each other and demonstrate performance impact on that edge and then celebrate the hell out of it and make it clear that the reason it was achieved was because of the passion of the people and then don't dare pull those passionate people back into the core pull more people out to these edges and over time let the edge become the core because you'll never transform the core provocative problems now what in city square first a comment then a question the comment about the edge seems wow here it comes again I worked in manufacturing around 20 25 years and found that the rate of innovation for any practice was inversely proportional to the proximity of the plant to headquarters and so the I think that really bears out in your edge the second one actually goes to other studies in your same area you're quite familiar with the work of Mark Hucelut who for years has been gathering data on return against management practices I'm wondering if in fact your research has shown that there's a replacement of the practices that he'd been looking at for say 20 plus years is there a new set that's a great question I hadn't really thought about it in those terms but I think there is an interesting question of what kind of critical mass of these new practices do you need in order to turn this thing around and in the meantime as you're making transitions do you suffer through the transition good question sorry didn't mean to preempt actually I'm the founder of finalsclub.org non-profit open education website and actually all this talk about institutional ROA and thought leadership makes me think of higher education as a place that has some particular problems with rising costs and sort of diminishing returns I suppose and I wonder how you think open education is changing that so how a social entrepreneur like myself might try to pull from the edges to change this institution in a positive way I will say that education is not my particular specialty I would urge you to connect with my colleague John Sealy Brown who spent a lot of time looking at how to get change in educational institutions I do think this whole notion is a powerful concept again my particular bias and it comes from working with companies but I think John Sealy Brown would share this working with educational institutions is don't go after the core find edges in terms of students who are not well served new kinds of areas of learning that aren't effectively being addressed by educational institutions and start to demonstrate impact in those areas and over time pull in more and more of the people from the traditional educational institutions into these alternative institutions how about down here waiting next Hugh I mentioned that you have two political figures that blurb on your book where do you think the edge is in our current political process again Paul there was one sort of boundary yeah yeah I you know this is a whole other topic area and I do have strong views on it and I reluctant to go down the path I do think that I'll just say at the highest level that I believe government institutions as much as companies are push institutions basically scalable efficiency was the way these institutions were defined the way they grew and I believe that model is increasingly challenged I actually think some of the most interesting government initiatives are actually on edges like Singapore Dubai very tiny entities that again almost by force have to figure out how to connect out in much more constructive ways and creative ways to broader sets of entities and participants so I think that there's some interesting stuff going on at that level I would say in public policy arena just a quick relative to the I was talking about corporations and talent development I think there's a very interesting exercise as we debate public policy options which is to say very explicitly how do we rate each of these public policy options in terms of their impact on talent development take that lens and say what policy option would accelerate talent development which policy options would decrease it and maybe we should be going for the ones that accelerate talent development I think too often when we talk about talent development in a public policy context we go to the educational system which again yes that's critical to talent development but I believe it's provocative proposition becoming increasingly marginal to talent development most of the valuable learning that we have is in our day to day lives is we go through our lives what public policies would accelerate that would enhance that promote that might reframe the debates and one place where I think it actually has been pretty explicitly framed this way which I assume would make you pretty happy is in the broadband yes yes whether they're doing it the right way is different but the notion that this is why we want absolutely access so there's been some great pockets of innovation one example has been the Xerox in the 70s with amazing work like Apple's advanced technology group Atari and a lot of these places did not have leaders with business school degrees so my question is do you think business schools are outdated or are they causing harm or are they just not is what they're teaching just not relevant anymore oh boy turn the video off thank you all for coming yeah I will say that business schools like companies are struggling to catch up to understand the nature of these fundamental changes that are playing out and to restructure how they approach education and learning given those kinds of changes so I do think there's a lot of opportunity and challenge I would say in aggregate I think degrees and credentials are going to diminish in importance and in that context I just can't resist another little story which is told by Chris Anderson who is the editor of Wired Magazine on his side he has a real passion which is around drone aircraft and he's actually created a startup for open source drone aircraft and he's very excited about it but he got more and more insecure as he got into the thing because he has no technology background himself and liberal arts guy and so he said I need a CTO for my startup if it's going to be successful so he went on a systematic search of all the logical targets MIT, Carnegie Mellon and other unusual places to find the CTO and he was very disappointed he just didn't find anybody who was really at the leading edge of what he was trying to do and so one day he was on a chat forum a discussion forum of people who were into drone aircraft technology and he struck up a conversation with this guy he'd never met before and the more they talked the more they interacted he said there was this stuff way ahead of anybody else and so he asked him where did you get your PhD the guy was very evasive on the other side he didn't really answer the question directly and it took him more time to build trust and engage with this guy finally found out he was 19 years old he was a high school dropout and he was in Tijuana, Mexico who would have thought to look so among high school dropouts to find your CTO he is now the CTO of his company extraordinarily successful and it illustrates one of the key principles of pull that we talk about in the book which is the notion of serendipity and enhancing serendipity shaping serendipity and I think it's a great example systematic search couldn't find anybody happened to be in a discussion forum and by choice he was in that discussion forum this person surfaced unexpectedly if I were a young person and I came to you and I said I want to enter the business world and I'm trying to decide would you recommend that I go for an MBA trying to pin you down on this you're not going to let up I won't tell you which school I got accepted to you know and I have two daughters who are just graduating finished college and I have the first time they could really engage on these kinds of things I just said one thing I said spend whatever time it takes to find your passion and follow that passion don't worry about your career if you're passionate you're going to be successful and I have actively helped them to pursue their passion in workplace in the broader workplace before thinking about business school and if they can convince themselves at some point in their development that business school would actually help accelerate their passion or intensify it or make them more successful great but don't just I'm very concerned too many young people that I see today are kind of going through check the box I got I now got my business MBA degree or my law degree and then I'm going to go get all the certificates I can and then I'm going to gain the career ladder if you believe there is mounting pressure in the world around us and I believe barring a major movement back to protection as kind of regime we will have mounting pressure if you have mounting pressure the only way you will succeed in mounting pressure is passion about what you are doing otherwise you will quickly burn out you will be marginalized you will not be successful and so I believe intensely that one of the key requirements for us as individuals is to figure out what our passion is and make the passion our profession and I think that can be done in many different ways but if you don't do that all this other stuff about pull the people who use pull most effectively are the ones who are really passionate John Eagle, thank you very much