Ray Kurzweil’s Mind-Boggling Predictions for the Next 25 Years

The above represent only a few of the predictions Ray has made.

While he hasn’t been precisely right, to the exact year, his track record is stunningly good.

Here are some of my favorite of Ray’s predictions for the next 25+ years.

 

If you are an entrepreneur, you need to be thinking about these. Specifically, how are you going to capitalize on them when they happen? How will they affect your business?

 

By the late 2010s, glasses will beam images directly onto the retina. Ten terabytes of computing power (roughly the same as the human brain) will cost about $1,000.

 

By the 2020s, most diseases will go away as nanobots become smarter than current medical technology. Normal human eating can be replaced by nanosystems. The Turing test begins to be passable. Self-driving cars begin to take over the roads, and people won’t be allowed to drive on highways.

 

By the 2030s, virtual reality will begin to feel 100% real. We will be able to upload our mind/consciousness by the end of the decade.

 

By the 2040s, non-biological intelligence will be a billion times more capable than biological intelligence (a.k.a. us). Nanotech foglets will be able to make food out of thin air and create any object in physical world at a whim.

 

By 2045, we will multiply our intelligence a billionfold by linking wirelessly from our neocortex to a synthetic neocortex in the cloud.

 

I want to make an important point.

It’s not about the predictions.

It’s about what the predictions represent.

Ray’s predictions are a byproduct of his (and my) understanding of the power of Moore’s Law, more specifically Ray’s “Law of Accelerating Returns” and of exponential technologies.

These technologies follow an exponential growth curve based on the principle that the computing power that enables them doubles every two years.

As humans, we are biased to think linearly.

As entrepreneurs, we need to think exponentially.

I often talk about the 6D’s of exponential thinking

Most of us can’t see the things Ray sees because the initial growth stages of exponential, DIGITIZED technologies are DECEPTIVE.

Before we know it, they are DISRUPTIVE—just look at the massive companies that have been disrupted by technological advances in AI, virtual reality, robotics, internet technology, mobile phones, OCR, translation software, and voice control technology.

Each of these technologies DEMATERIALIZED, DEMONETIZED, and DEMOCRATIZED access to services and products that used to be linear and non-scalable.

Now, these technologies power multibillion-dollar companies and affect billions

Smart Nation revs up startup ecosystem

ENTREPRENEURSHIP has officially "gone mainstream" in 2015, amid a significant volume of new venture capital, accelerator programmes and series funding for startups.

This vogue, observers tell The Business Times, is largely a result of Smart Nation - a nationwide initiative and an all-are-welcome rallying call for startups, researchers, government agencies and even corporates to huddle and co-create tech-powered innovations for improved urban living.

"The pivotal moment for me was seeing the prime minister endorse what so many people have been doing to build a startup ecosystem here," said Hugh Mason, chief executive of startup accelerator JFDI.

 

He was referring, of course, to Prime Minister Lee Hsien Loong's hosting of over 200 global founders, investors and corporate bigwigs at the launch of Founders Forum Smart Nation in April at the Istana. At the grandiose event (complete with a live dessert art demonstration by a local celebrity chef), Mr Lee had called on guests to join Singapore in discussions on Smart Nation challenges such as mobility and an ageing population.

Mr Mason said: "Smart Nation is much, much bigger than any of our largest enterprises. While the government can be an enabler, it's going to take the private sector working more closely together to find solutions to demographic and environmental challenges in all developed countries."

Making this work, however, will not be a walk in the park, he said, as Singapore has to identify not only a common approach to innovation that connects everyone's agendas, but also appropriate new legal frameworks and ways to harmonise the cultures of all participating organisations.

"We have begun something that I think could be very interesting," said Mr Mason. "So my prediction for 2016 is that of Singapore leading Asia in finding new methods to join the different elements of innovation in a way that could be very exciting and genuinely unique in Asia, if not the world."

Singapore has also deepened efforts to groom homegrown entrepreneurial talent this year, with local universities progressively "teaching entrepreneurship" and offering startup exchange programmes - formalising a new career path for graduates, said angel investor Leslie Loh.

To boot, IIPL (Infocomm Investments, the venture arm of the Infocomm Development Authority of Singapore) has rolled out a venture capital management associate programme to nurture talents "upstream of the ecosystem chain", in what is believed to be the region's first such talent development scheme.

But while savvy investors will add value to the ecosystem, software engineers and programmers are equally critical as they are scarce, said Isaac Tay, co-founder of on-demand grocery delivery service Honestbee. "I believe that the startup scene here can be better if more Singaporean engineers who are currently working in US-based startups, especially in San Francisco, return to work in startups here for the Asian market."

Honestbee, which in October bagged US$15 million in Series A funding, is one of over 300 Singapore startups that set out to raise funds in 2015 - making the year "stronger than ever" for entrepreneurship, said Vinnie Lauria, founding partner of venture capital firm Golden Gate Ventures. The best of these startups have gone as far as to "disrupt" traditional industries, even prompting incumbents to do better, he added.

NTUC FairPrice, for instance, has recently partnered Honestbee for the latter's grocery concierge service, in which an Honestbee personal shopper will pick out FairPrice items and deliver them to the Honestbee customer within an hour. Said NTUC FairPrice chief executive Seah Kian Peng: "We have been investing and will continue to invest more in the online channel as we expect this form of retailing to continue to gain traction and favour with customers young and old."

Online furniture stall HipVan, as well, is disrupting the IKEA model by delivering cheap designer furniture straight to one's home and doling out home decor inspiration. Interestingly, IKEA is now in business with delivery van startup GoGoVan to offer same-day delivery of its furniture.

Likewise, ride-booking app GrabTaxi (fresh from announcing an alliance with global players Didi Kuaidi, Ola and Lyft to take on Uber) continues to disrupt the taxi industry. Singapore's largest taxi operator Comfort has rolled out a vastly improved taxi-booking app, and is now partners with third-party ride-booking app Karhoo, which will launch here next year.

In truth, not all incumbents have been slow to innovate, said Wong Poh Kam, director of NUS Entrepreneurship Centre. "A large incumbent in a traditional industry that seems to have responded faster is SingPost, which has tied up with Alibaba to ride the growth of e-commerce delivery."

In May, the postal services firm became the first logistics partner of Alibaba's Merchant Delivery Scheme. In October, it announced that its Singapore Post Centre will be redeveloped into the first retail mall here that offers both brick-and-mortar shops and online shopping under one roof.

Corporate innovation has certainly caught on this year, JFDI's Mr Mason said, as more companies set aside funds for extracurricular innovation or investment in startups. Singapore Press Holdings (SPH) launched an accelerator programme to groom media startups. NUS Enterprise, with healthcare think-tank ACCESS Health International, partnered to develop businesses for ageing. Most recently, IIPL and Cisco teamed up to help corporates and startups jointly develop applications for Smart Nation.

Lim Chu Chong, head of SME banking at DBS, said corporates "have much to learn from startups" as they encourage staff to embrace the digital mindset. The bank conducted a total of 15 hackathons this year, resulting in 1,000 experiments involving founders and 250 senior bank staff. DBS also recently announced a S$10 million investment in programmes targeted at Singapore fintech startups.

Said Mr Lim: "We see ourselves as their long-term business partner. In order for the entrepreneurial landscape in Singapore to thrive, we see large companies like DBS playing an important role, from providing financing to sharing knowledge, resources and connections."

With DBS's support, fintech looks set to dominate another year in entrepreneurship. Said JFDI's Mr Mason: "There are massive opportunities for Singapore fintech companies that think laterally about what they can do to leverage the good reputation of the Singapore brand for the hundreds of millions of South-east Asians who are only just beginning to engage with financial services."

The people that banks have "traditionally ignored", he said, will be a fantastic growth opportunity.

The Fourth Industrial Revolution: what it means, how to respond

We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before. We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive, involving all stakeholders of the global polity, from the public and private sectors to academia and civil society.

The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.

There are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope, and systems impact. The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.

The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.

Already, artificial intelligence is all around us, from self-driving cars and drones to virtual assistants and software that translate or invest. Impressive progress has been made in AI in recent years, driven by exponential increases in computing power and by the availability of vast amounts of data, from software used to discover new drugs to algorithms used to predict our cultural interests. Digital fabrication technologies, meanwhile, are interacting with the biological world on a daily basis. Engineers, designers, and architects are combining computational design, additive manufacturing, materials engineering, and synthetic biology to pioneer a symbiosis between microorganisms, our bodies, the products we consume, and even the buildings we inhabit.

Challenges and opportunities

Like the revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world. To date, those who have gained the most from it have been consumers able to afford and access the digital world; technology has made possible new products and services that increase the efficiency and pleasure of our personal lives. Ordering a cab, booking a flight, buying a product, making a payment, listening to music, watching a film, or playing a game—any of these can now be done remotely.

In the future, technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and productivity. Transportation and communication costs will drop, logistics and global supply chains will become more effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth.

At the same time, as the economists Erik Brynjolfsson and Andrew McAfee have pointed out, the revolution could yield greater inequality, particularly in its potential to disrupt labor markets. As automation substitutes for labor across the entire economy, the net displacement of workers by machines might exacerbate the gap between returns to capital and returns to labor. On the other hand, it is also possible that the displacement of workers by technology will, in aggregate, result in a net increase in safe and rewarding jobs.

We cannot foresee at this point which scenario is likely to emerge, and history suggests that the outcome is likely to be some combination of the two. However, I am convinced of one thing—that in the future, talent, more than capital, will represent the critical factor of production. This will give rise to a job market increasingly segregated into “low-skill/low-pay” and “high-skill/high-pay” segments, which in turn will lead to an increase in social tensions.

In addition to being a key economic concern, inequality represents the greatest societal concern associated with the Fourth Industrial Revolution. The largest beneficiaries of innovation tend to be the providers of intellectual and physical capital—the innovators, shareholders, and investors—which explains the rising gap in wealth between those dependent on capital versus labor. Technology is therefore one of the main reasons why incomes have stagnated, or even decreased, for a majority of the population in high-income countries: the demand for highly skilled workers has increased while the demand for workers with less education and lower skills has decreased. The result is a job market with a strong demand at the high and low ends, but a hollowing out of the middle.

This helps explain why so many workers are disillusioned and fearful that their own real incomes and those of their children will continue to stagnate. It also helps explain why middle classes around the world are increasingly experiencing a pervasive sense of dissatisfaction and unfairness. A winner-takes-all economy that offers only limited access to the middle class is a recipe for democratic malaise and dereliction.

Discontent can also be fueled by the pervasiveness of digital technologies and the dynamics of information sharing typified by social media. More than 30 percent of the global population now uses social media platforms to connect, learn, and share information. In an ideal world, these interactions would provide an opportunity for cross-cultural understanding and cohesion. However, they can also create and propagate unrealistic expectations as to what constitutes success for an individual or a group, as well as offer opportunities for extreme ideas and ideologies to spread.

The impact on business

An underlying theme in my conversations with global CEOs and senior business executives is that the acceleration of innovation and the velocity of disruption are hard to comprehend or anticipate and that these drivers constitute a source of constant surprise, even for the best connected and most well informed. Indeed, across all industries, there is clear evidence that the technologies that underpin the Fourth Industrial Revolution are having a major impact on businesses.

On the supply side, many industries are seeing the introduction of new technologies that create entirely new ways of serving existing needs and significantly disrupt existing industry value chains. Disruption is also flowing from agile, innovative competitors who, thanks to access to global digital platforms for research, development, marketing, sales, and distribution, can oust well-established incumbents faster than ever by improving the quality, speed, or price at which value is delivered.

Major shifts on the demand side are also occurring, as growing transparency, consumer engagement, and new patterns of consumer behavior (increasingly built upon access to mobile networks and data) force companies to adapt the way they design, market, and deliver products and services.

A key trend is the development of technology-enabled platforms that combine both demand and supply to disrupt existing industry structures, such as those we see within the “sharing” or “on demand” economy. These technology platforms, rendered easy to use by the smartphone, convene people, assets, and data—thus creating entirely new ways of consuming goods and services in the process. In addition, they lower the barriers for businesses and individuals to create wealth, altering the personal and professional environments of workers. These new platform businesses are rapidly multiplying into many new services, ranging from laundry to shopping, from chores to parking, from massages to travel.

On the whole, there are four main effects that the Fourth Industrial Revolution has on business—on customer expectations, on product enhancement, on collaborative innovation, and on organizational forms. Whether consumers or businesses, customers are increasingly at the epicenter of the economy, which is all about improving how customers are served. Physical products and services, moreover, can now be enhanced with digital capabilities that increase their value. New technologies make assets more durable and resilient, while data and analytics are transforming how they are maintained. A world of customer experiences, data-based services, and asset performance through analytics, meanwhile, requires new forms of collaboration, particularly given the speed at which innovation and disruption are taking place. And the emergence of global platforms and other new business models, finally, means that talent, culture, and organizational forms will have to be rethought.

Overall, the inexorable shift from simple digitization (the Third Industrial Revolution) to innovation based on combinations of technologies (the Fourth Industrial Revolution) is forcing companies to reexamine the way they do business. The bottom line, however, is the same: business leaders and senior executives need to understand their changing environment, challenge the assumptions of their operating teams, and relentlessly and continuously innovate.

The impact on government

As the physical, digital, and biological worlds continue to converge, new technologies and platforms will increasingly enable citizens to engage with governments, voice their opinions, coordinate their efforts, and even circumvent the supervision of public authorities. Simultaneously, governments will gain new technological powers to increase their control over populations, based on pervasive surveillance systems and the ability to control digital infrastructure. On the whole, however, governments will increasingly face pressure to change their current approach to public engagement and policymaking, as their central role of conducting policy diminishes owing to new sources of competition and the redistribution and decentralization of power that new technologies make possible.

Ultimately, the ability of government systems and public authorities to adapt will determine their survival. If they prove capable of embracing a world of disruptive change, subjecting their structures to the levels of transparency and efficiency that will enable them to maintain their competitive edge, they will endure. If they cannot evolve, they will face increasing trouble.

This will be particularly true in the realm of regulation. Current systems of public policy and decision-making evolved alongside the Second Industrial Revolution, when decision-makers had time to study a specific issue and develop the necessary response or appropriate regulatory framework. The whole process was designed to be linear and mechanistic, following a strict “top down” approach.

But such an approach is no longer feasible. Given the Fourth Industrial Revolution’s rapid pace of change and broad impacts, legislators and regulators are being challenged to an unprecedented degree and for the most part are proving unable to cope.

How, then, can they preserve the interest of the consumers and the public at large while continuing to support innovation and technological development? By embracing “agile” governance, just as the private sector has increasingly adopted agile responses to software development and business operations more generally. This means regulators must continuously adapt to a new, fast-changing environment, reinventing themselves so they can truly understand what it is they are regulating. To do so, governments and regulatory agencies will need to collaborate closely with business and civil society.

The Fourth Industrial Revolution will also profoundly impact the nature of national and international security, affecting both the probability and the nature of conflict. The history of warfare and international security is the history of technological innovation, and today is no exception. Modern conflicts involving states are increasingly “hybrid” in nature, combining traditional battlefield techniques with elements previously associated with nonstate actors. The distinction between war and peace, combatant and noncombatant, and even violence and nonviolence (think cyberwarfare) is becoming uncomfortably blurry.

As this process takes place and new technologies such as autonomous or biological weapons become easier to use, individuals and small groups will increasingly join states in being capable of causing mass harm. This new vulnerability will lead to new fears. But at the same time, advances in technology will create the potential to reduce the scale or impact of violence, through the development of new modes of protection, for example, or greater precision in targeting.

The impact on people

The Fourth Industrial Revolution, finally, will change not only what we do but also who we are. It will affect our identity and all the issues associated with it: our sense of privacy, our notions of ownership, our consumption patterns, the time we devote to work and leisure, and how we develop our careers, cultivate our skills, meet people, and nurture relationships. It is already changing our health and leading to a “quantified” self, and sooner than we think it may lead to human augmentation. The list is endless because it is bound only by our imagination.

I am a great enthusiast and early adopter of technology, but sometimes I wonder whether the inexorable integration of technology in our lives could diminish some of our quintessential human capacities, such as compassion and cooperation. Our relationship with our smartphones is a case in point. Constant connection may deprive us of one of life’s most important assets: the time to pause, reflect, and engage in meaningful conversation.

One of the greatest individual challenges posed by new information technologies is privacy. We instinctively understand why it is so essential, yet the tracking and sharing of information about us is a crucial part of the new connectivity. Debates about fundamental issues such as the impact on our inner lives of the loss of control over our data will only intensify in the years ahead. Similarly, the revolutions occurring in biotechnology and AI, which are redefining what it means to be human by pushing back the current thresholds of life span, health, cognition, and capabilities, will compel us to redefine our moral and ethical boundaries.

Shaping the future

Neither technology nor the disruption that comes with it is an exogenous force over which humans have no control. All of us are responsible for guiding its evolution, in the decisions we make on a daily basis as citizens, consumers, and investors. We should thus grasp the opportunity and power we have to shape the Fourth Industrial Revolution and direct it toward a future that reflects our common objectives and values.

To do this, however, we must develop a comprehensive and globally shared view of how technology is affecting our lives and reshaping our economic, social, cultural, and human environments. There has never been a time of greater promise, or one of greater potential peril. Today’s decision-makers, however, are too often trapped in traditional, linear thinking, or too absorbed by the multiple crises demanding their attention, to think strategically about the forces of disruption and innovation shaping our future.

In the end, it all comes down to people and values. We need to shape a future that works for all of us by putting people first and empowering them. In its most pessimistic, dehumanized form, the Fourth Industrial Revolution may indeed have the potential to “robotize” humanity and thus to deprive us of our heart and soul. But as a complement to the best parts of human nature—creativity, empathy, stewardship—it can also lift humanity into a new collective and moral consciousness based on a shared sense of destiny. It is incumbent on us all to make sure the latter prevails

Lure back startups before losing them to Singapore

New-age startups are making waves. Flipkart has redefined retail. Ola is changing how we travel by taxis. PayTm is at the threshold of disrupting banks. Forus Health is attacking blindness with gusto. Eko is bringing financial inclusion to millions. Team Indus is on its way to land a rover on the moon. Nowfloats is bringing lakhs of businesses online. Pick any sector, even agriculture, and you’ll find a newage startup gamely trying to bring about change.

These new-age startups are not like our traditional small businesses. They are peculiar in many respects. For one, they don’t play safe. They take on incumbents that are many times their size. They seek out David versus Goliath battles. They have a ‘panga’ mindset where our traditional small businessman was all about ‘dhanda.’ This craziness in their DNA makes them wonderful change agents. No wonder, these new startups are transforming India from within. They are scalable and that too rapidly. They can attract lots of capital globally and that makes them disruptive.

We are blessed to have these new-age startups. It turns out that this new species of small businesses thrives only in a few places in the world. The most famous locale is, of course, Silicon Valley. Europe, unfortunately, is a veritable desert. South America has only Chile as a small oasis. Asia, however, looks really promising. Israel became a startup hub first, then China and now India. We are now the third-largest startup ecosystem in the world and well on the way to becoming the second-largest.

But there is something dark about India’s startup boom. Six of the eight Unicorns have domiciled themselves outside India–in Singapore or US. In 2014, 54 per cent of all new-age startups raising money chose to domicile outside India. Last year this number grew. It is estimated to have crossed 75 per cent! This points to a big problem. India is driving away her best and brightest again!

You might wonder why it matters where Flipkart is domiciled. For starters, when Flipkart has its IPO, Indian citizens won’t get a chance to participate in it. Worse, the intellectual property of these redomiciled companies moves to their new home. But the worst is that the money that the founders and investors make at the time of an IPO or an M&A goes to their foreign bank accounts and tends to stay there. It stymies the creation of rupee risk-capital system in India. It makes are startups almost fully dependent on foreign capital leaving most of them starved and under-capitalized in their early years. It also inhibits Indian capital earning superior returns.

Startup India is an opportunity to stop the exodus. It turns out that only 34 issues, across Ministry of Finance, RBI, Ministry of Corporate Affairs and Ministry of Commerce, need to be tackled. Work has been underway on them since Oct 23 and 60 per cent of the issues seem to be on their way to a resolution. But this 60 per cent fix is a recipe for failure. Unless all the 34 items are resolved, the exodus will not abate. Just one friction point is enough to send the startup to Singapore, where, a welcome band awaits. Let us remember, over the next 10 years we expect 100,000 startups to come up, create $500 billion of value and employ 3.5 million people, the largest high-quality employment in any sector.

Anything that we do in Startup India without addressing the issues on the Stayin-India checklist is a gift to Singapore. The Modi government has made bold moves on the world stage. It’s now time to make one at home!

(Mohandas Pai was the CFO and then the head of HR at Infosys. He is now Chairman, Aarin Capital Partners. Sharad Sharma was the CEO of Yahoo India R&D. He is a co-founder of iSPIRT, a non-profit think tank that wants India to be a product nation.)

A neuroscientist says there’s a powerful benefit to exercise that is rarely discussed

When I was about to turn 40, I started working out regularly after years of inactivity. As I sweated my way through cardio, weights, and dance classes, I noticed that exercise wasn’t just changing my body. It was also profoundly transforming my brain—for the better.

The immediate effects of exercise on my mood and thought process proved to be a powerful motivational tool. And as a neuroscientist and workout devotee, I’ve come to believe that these neurological benefits could have profound implications for how we live, learn and age as a society.

Let’s start with one of the most practical immediate benefits of breaking a sweat: exercise combats stress. Exercise is a powerful way to combat feelings of stress because it causes immediate increases in levels of key neurotransmitters, including serotonin, noradrenalin, dopamine and endorphins, that are often depleted by anxiety and depression. That’s why going for a run or spending 30 minutes on the elliptical can boost our moods immediately—combatting the negative feelings we often associate with chronic stressors we deal with every day.

In my lab, we have also demonstrated that exercise improves our ability to shift and focus attention. Even casual exercisers will recognize this effect. It’s that heightened sense of focus that you feel right after you’ve gotten your blood flowing, whether it be a brisk walk with the dog or a full-on Crossfit workout. These findings suggest that if you have a big presentation or meeting where you need your focus and attention to be at its peak, you should get in a workout ahead of time to maximize those brain functions.

But my favorite neuroscience-based motivation for exercise relates to its effects on the hippocampus—a key brain structure that’s critical for long-term memory. We all have two hippocampi: one on the right side of the brain and the other on the left. The hippocampus is unique because it is one of only two brain areas where new brain cells continue to be generated throughout our lives, a process called adult hippocampal neurogenesis.

Studies in rodents demonstrated that increased levels of physical exercise can result in improved memory by enhancing both the birth rate and the survival of new hippocampal brain cells. Exercise encourages the long-term growth of hippocampal cells by immediately increasing levels of a key growth factor in the hippocampus called Brain Derived Neurotrophic Factor (BDNF. Now, when I exercise, I imagine BDNF levels surging in my hippocampi, encouraging all those new hippocampal cells to grow.

All this should serve as a powerful motivator for regular physical activity. But the immediate and long-term benefits of exercise on the brain have even bigger implications.

Just consider how the educational system might be altered if we acknowledge exercise’s ability to brighten our mood, decrease stress, and improve our attention span and memory. The growing evidence that exercise improves these key brain functions should encourage schools around the world to increase—not decrease—students’ physical activity. Not only would this help students to better absorb everything from history lessons to chemistry experiments, they’d be a lot happier too.

The positive brain-based effects of exercise for education are just as relevant for very young children. The growing popularity of outdoor preschools are a promising sign that this message is starting to get through.

These brain effects of exercise also have implications for our search for that magic “smart” pill we hope will make us more productive, successful, and—if you believe the Bradley Cooper film “Limitless”—a lot sexier as well. What if the real magic does not come in the form of a pill, but in the form of an exercise regime?

That’s exactly what the neuroscience research suggests. In fact, my lab is focusing on identifying how we can use exercise to optimize brain function for people of all ages, fitness levels and abilities. If regular exercise becomes routine for the vast majority of children and adults, we could have a population that’s not only healthier and less stressed, but also more productive.

The good news doesn’t end there. Recent findings have suggested that the brain’s hippocampus is also involved in giving people the ability to imagine new situations. Since we know that exercise enhances the birth of new hippocampal brain cells and can improve memory function, this discovery suggests that exercise might be able to improve the imaginative functions of the hippocampus as well.

This idea has not yet been tested in people. But the hypothesis raises the exciting possibility that exercise could make students more imaginative at school and adults more creative at work, with broad benefits for society as a whole.

It is also worth noting one of the most profound long-term benefits of exercise on the brain. That is, the longer and more regularly you exercise through your life, the lower your chances are of suffering from cognitive decline and dementia as you age. Part of this effect can be attributed to the build-up in the numbers of healthy young hippocampal cells as you exercise over the years.

Granted, this is a very long-term benefit that may not be seen for decades to come. But if more people were to join the gym this month and actually stick to it, more of us will be able to avoid debilitating cognitive decline, which could save society billions of dollars as we enter old age. This problem is even more relevant for countries with particularly large aging populations, including the US, Japan and Germany.

In these ways, neuroscience gives us a framework to understand exercise as a tool for better education, increased productivity in the workforce and combating cognitive decline. It’s time for us to stop using the looming prospect of beach season as the motivation for exercise—and instead shift the conversation to a discussion about how staying active can change the way we live.

Government to introduce startup blueprint this month

The government, in two weeks, will unveil a blueprint for startups to ease the process of setting up new ventures.

Prime Minister Narendra Modi will release the blueprint of ‘Start Up India’ programme which may include a Startups and Entrepreneurship Law to make it easier for setting up new ventures and closing unviable ones, besides clearing regulatory issues that hamper access to finance.

The government is also seeking to define a new category of business — ‘Innovative Start-ups’ — to distinguish them from micro, small, medium and large enterprises that are built on conventional business models. There would be a special support structure for such innovative start-ups, including funding from the government.

“In such start-ups, the government, through the domestic venture capital funds, could take a 25 per cent stake. We will leave the due diligence, mentoring and refining of business ideas to the professional venture capital (VC) and private equity (PE) funds,” a senior government official familiar with the policy formulation told The Hindu .

“As these start-ups gain in scale after two or three years, other investors, including PE and VC funds could buy back the government venture fund’s stake. This would help create a revolving fund to finance such ventures with transformative potential, as the government can deploy the proceeds from exiting these start-ups to fund other ideas,” the official said.

The Start Up India policy would attempt to address two key concerns the government wants to fix in India’s start-up ecosystem. Over 65 per cent of successful start-ups re-locate out of India owing to the difficulty of doing business, usually to Singapore. Secondly, 90 per cent of start-up funding presently comes from foreign VC and PE funds.

“There tends to be a bias among foreign funds for backing business models that have worked in the developed world or those that can be tried in India and replicated there. We feel that if Indian start-ups focus on the country’s unique problems, the models they build can be exported to the world,” the official said. The focus of the Start Up and Entrepreneurship Bill, that the government could announce on January 16, would be on making it easier to start, operate and close a business. The attempt would be to allow an unsuccessful venture to shut shop in a few days without risk to an entrepreneur’s personal property.

While these measures would facilitate general support for young entrepreneurs, there will be special incentives for the category of innovative start-ups that the government feels need additional support as the risks may be higher than a conventional business. At the same time, the returns from such ventures would be higher if the idea in question achieves its transformative potential.

Currently, the government-backed India Aspiration Fund, announced in the Union Budget with a first tranche of Rs.2,000 crore, acts as a fund that allocates money to different domestic venture funds which provides seed funds to innovators and entrepreneurs.

Nearly 90 per cent of the first tranche of funds have been allocated already, said another senior official, adding that another tranche would be considered once this is exhausted.

The government is trying to broad-base the methodology for identifying an ‘innovative startup.’ Officials are working out the modalities for this in the run-up to the policy and one of the options under consideration is to allow the heads of a government-backed incubator or technology development bodies in different sectors to certify or vet which start-ups are innovative.

The Prime Minister had announced the ‘Start Up India, Stand Up India’ initiative in his Independence Day address last year and is expected to announce the specifics of an action plan to back start-ups on January 16.

China: Scaling The World’s Highest Innovation Peaks

In a world of statistics, here’s a number that stands out: 71. That’s how many times the word “innovation” was mentioned in a communiqué issued after the Chinese Communist Party’s recent plenary meeting, which focused on China’s next five-year plan.

It’s clear why China is concentrating so many words — and so much energy and effort — on innovation. Indeed, as a recent McKinsey report points out, to keep its economic expansion on track, this nation of 1.3 billion people must generate two to three percentage points of annual GDP growth through innovation.

The return on this investment could be substantial. By 2025, these innovation opportunities could contribute as much as $1-$2.2 trillion a year to the overall Chinese economy.

After spending several weeks visiting legions of Chinese innovators — entrepreneurs, companies, educational institutions and government officials — I believe that these ambitious numbers will be reached.

And the reason is that China uses monumental scale and massive scaling to innovate, something that no region or country in the world — including the United States — can currently match or replicate.

With more than four times the population of the U.S., and more than one out of seven people on the planet, China has a tremendous advantage based on the sheer size of its rapidly urbanizing consumer market. This helps Chinese companies develop and deliver new products and services quickly and on a huge scale.

The world’s largest manufacturer, with 150 million factory workers, China also has a supplier network that is five times larger than Japan’s. This encourages and enables Chinese companies to trigger continuous cycles of widespread innovation.

China is leveraging the profound power of scale and scaling.

 

A good example is high-speed trains. Over the past seven years, a determined China — the private sector with help from the government — has built ever-improving next-generation technology in this vital global transportation sector. The result? A cutting-edge manufacturing product set that has accounted for nearly 90 percent of the worldwide growth in high-speed trains since 2008.

Aggressive and real breakthroughs like this contradict the long-held conventional wisdom that China is simply an innovation sponge that absorbs and re-purposes inventions and ideas from the U.S. and Europe.

The danger is that this traditional thinking is becoming increasingly outdated, obscuring the all-important fact that China is leveraging the profound power of scale and scaling to accelerate its bid for global innovation leadership.

To be sure, wherever you look in China today, there are gargantuan innovation processes and programs in progress and in place that require radically new approaches to technology product development, financing, manufacturing, marketing and logistics.

Without these groundbreaking systems, it’s impossible to grow 10x year after year, a goal that scores of Chinese companies set as the norm. And, unlike many technology enterprises in Silicon Valley, which are expanding their businesses virtually, a number of China’s fast movers are growing physically in the real world.

I’m not disparaging Silicon Valley’s innovation excellence in any way, but I am trying to put China’s significant advances in perspective. When we innovate, we create an idea and go (using venture capitalist Peter Thiel’s definition) from zero to 1.

When scaling happens in China, the assumption is that this is not real innovation, but, instead, a scale-out of technologies, 1 to n, using that same definition. My contrary observation is that true innovation is, in fact, growing in China, and, to achieve scale on many new technologies, there’s absolutely an element of zero to 1.

That’s a big difference, and an entirely different way of viewing innovation — one that we need to acknowledge and learn from. Put another way, if we want to compete with China in the rest of the world, especially in potentially giant markets like India, Africa and China itself, which represent three of the most fertile commercial opportunities of the 21st century, we need to start innovating at scale.

Innovating on this vast and sweeping level won’t be easy — because we haven’t done it yet, and because China has a new cadre of hungry and experienced entrepreneurs who want to innovate and scale quickly on just about every continent. These world-tested entrepreneurs don’t need permission to experiment, and they aren’t afraid to adapt or fail.

Alibaba’s transactions last year totaled nearly $250 billion, more than those of Amazon and eBay combined.

 

Last year, for example, Baidu, the Beijing-based technology giant that was once seen as China’s Google but has since expanded into hardware and software research in areas like natural language processing and image recognition, hired a new Chief Scientist named Andrew Ng. Born in the U.K., Ng was a Stanford University professor who launched Google’s artificial intelligence program and co-founded Coursera, a high-profile online education company.

Frank Wang, the 34-year-old founder of Dajiang Innovation Technology (DJI), which accounts for 70 percent of the consumer drone market, is another strong-willed new-breed Chinese entrepreneur who is intent on taking the world by storm.

Launched out of a Hong Kong dorm room nine years ago, DJI and its global workforce is expected to generate $1 billion in sales this year. But, more importantly, the company has dominated the worldwide consumer market in aerial photography, and recently released an innovative flying platform for third-party software developers to add new functionality, like thermal scanning.

When you’re talking about Chinese entrepreneurs like Wang, who use innovation at scale to command a market, the conversation also must include Pony Ma, the co-founder and CEO of Tencent Holdings, which now presides over a mobile texting service that is actively used by 600 million people (or approximately half the population) in China.

WeChat, as it’s known, isn’t just about texting, however. Functioning more like an extended operating system, it deftly blends elements of Twitter, Facebook, LinkedIn, Skype and PayPal, a combination that may ultimately make it onerous for those vaunted off-shore companies to truly penetrate the large and lucrative Chinese market.

Amazon also could possibly fall victim to muscular Chinese innovation at scale. The Seattle-based company appears to have achieved victory in the e-commerce markets of North America and Europe. And its sales are growing in India. But China is a different, and more difficult, challenge, because that’s the home base of Alibaba, the world’s largest e-commerce company in the world’s fastest growing e-commerce market.

Founded by high-profile Chinese entrepreneur Jack Ma, Alibaba’s transactions last year totaled nearly $250 billion, more than those of Amazon and eBay combined. And on Singles’ Day — November 11 — which celebrates the unmarried, Alibaba generated more than $14 billion in sales, more than all Americans spent online and offline over the post-Thanksgiving weekend.

Uber may run into the same type of roadblock in China, as a result of innovation at scale. This time, though, a mega-merger between China’s two biggest taxi apps — Kuaidi Dache (backed by Alibaba) and Didi Dache (backed by Tencent) — has created a formidable obstacle in China’s trillion-dollar car-sharing and taxi-hailing service market. The resulting entity, Didi Kuaidi, is currently doing 3 million rides a day in China, versus 1 million for Uber.

Looking beyond the numbers, Didi Kuaidi, led by president Jean Liu, a 12-year veteran of Goldman Sachs, is now rolling out a series of innovative new products and services designed to further distance China’s emerging transportation giant from vigorous foreign competition.

For its part, Chinese automaker BYD is innovating at global scale to thwart its rival, Tesla Motors, in the race to build the best — and most — batteries for electric vehicles around the world. Backed by Warren Buffet’s Berkshire Hathaway, BYD is more than tripling its capacity over the next four years.

China is creating sweeping new commerce models.

 

Most of the state-of-the-art production will be in China, but the company is also adding a major new factory in Brazil and will scale up manufacturing in the U.S., where Tesla is based. BYD, which has plants in Southern California that produce electric buses for public transportation, is also growing this cutting-edge investment.

In addition to developing new products and services and rolling them out at scale anywhere and everywhere in the world, China is creating sweeping new commerce models that have the potential to change the way global business is conducted. A good example is the Online-2-Offline model currently being championed by Alibaba’s Ma because it finds consumers online and brings them into real-world stores.

This is all part of an unspoken, and even free-form, emergent strategy being embraced by so many Chinese companies today. Dexterously pursuing a host of different solutions and adding many seemingly disparate pieces, these intensely innovative enterprises are pulling ahead of their foreign competition as they integrate all the complex parts and forcefully scale in an effort to reach some of the highest business peaks in the world.

The challenge for many large-growth companies in the U.S. over the next few years will be climbing the same commercial mountains as the Chinese. Regardless of whether a trans-Pacific strategy of collaboration or competition is adopted, one of the best ways to do this is by learning how to innovate rapidly and at global scale.

Why is Einstein famous?

Albert Einstein announced his greatest achievement, the general theory of relativity, in Berlin a century ago, on November 25, 1915. For many years, hardly any physicist could understand it. But, since the 1960s, following decades of controversy, most cosmologists have regarded general relativity as the best available explanation, if not the complete description, of the observed structure of the universe, including black holes.

And yet, even today, hardly anyone apart from specialists understands general relativity – unlike, say, the theory of natural selection, the periodic table of the elements, and the wave/particle duality in quantum theory. So why is Einstein the world’s most famous and most quoted (and misquoted) scientist – far ahead of Isaac Newton or Stephen Hawking – as well as a universal byword for genius?

Einstein’s fame is indeed puzzling. When he gave lectures about general relativity at Oxford University in 1931, the academic audience packed the hall, only to ebb away, baffled by his mathematics and his German, leaving only a small core of experts. Afterward, a cleaner rubbed the equations off the blackboard (though thankfully one blackboard was saved and is on display in Oxford’s Museum of the History of Science).

Yet, when Einstein and his wife appeared as the personal guests of Charlie Chaplin at the 1931 premiere of Chaplin’s film City Lights in Los Angeles, they had to battle their way through frantically pressing and cheering crowds (on whom the police had earlier threatened to use tear gas). The entire movie theater rose in their honor. A somewhat baffled Einstein asked his host what it all meant. “They cheer me because they all understand me, and they cheer you because no one understands you,” quipped Chaplin.

In the 1940s, Einstein told a biographer: “I never understood why the theory of relativity with its concepts and problems so far removed from practical life should for so long have met with a lively, or indeed passionate, resonance among broad circles of the public… I have never yet heard a truly convincing answer to this question.” To a New York Times interviewer, he disarmingly remarked: “Why is it that nobody understands me, yet everybody likes me?”

Part of the reason for Einstein’s fame is surely that his earliest, and best known, achievement – the 1905 special theory of relativity –seemed to have come out of the blue, without any prior achievement. Like Newton (but unlike Charles Darwin), he did not have anyone of distinction in his family. He was not notably excellent at school and college (unlike Marie Curie); in fact, he failed to obtain a university position after graduation. He was not part of the scientific establishment, and worked mostly alone. In 1905, he was struggling as a mere patent clerk, with a newborn child. Regardless of whether we grasp relativity, his apparently sudden burst of genius inevitably intrigues everyone.

A further reason for Einstein’s fame is that he was active in many areas far afield from physics, notably politics and religion, including Zionism. He is best known in this regard for his open opposition to Nazi Germany from 1933, his private support for building the atomic bomb in 1939, and his public criticism of the hydrogen bomb and McCarthyism in the 1950s (J. Edgar Hoover’s FBI promptly launched a secret investigation of him). In 1952, he was offered the presidency of Israel.

Clearly, Einstein’s turbulent later life and courageous stands fascinate many people who are bemused by general relativity. According to Bertrand Russell: “Einstein was not only a great scientist, he was a great man.” Jacob Bronowski proposed that “Newton is the Old Testament god; it is Einstein who is the New Testament figure…full of humanity, pity, a sense of enormous sympathy.”

Arthur C. Clarke believed that it was “Einstein’s unique combination of genius, humanist, pacifist, and eccentric” that “made him accessible – and even lovable – to tens of millions of people.” Richard Dawkins calls himself “unworthy to lace Einstein’s sockless shoes….I gladly share his magnificently godless spirituality.”

Such a combination of solitary brilliance, personal integrity, and public activism is rare among intellectuals. When one adds Einstein’s lifelong gift for witty aphorism when dealing with the press and the public, his unique and enduring fame no longer seems so puzzling.

After all, who could fail to be charmed by his popular summary of relativity: “An hour sitting with a pretty girl on a park bench passes like a minute, but a minute sitting on a hot stove seems like an hour.” And then there is my own favorite: “To punish me for my contempt of authority, Fate has made me an authority myself.”

Unicorns and delusions in Silicon Valley’s tech bubble

Shortly after the late 1990s technology bubble burst, many cars in Northern California sported a bumper sticker pleading, “Please God, just one more bubble.”

Those prayers have been answered. The signs of a new tech bubble are everywhere: easy money, widespread exuberance, hidden leverage and mass participation by amateur investors. Many believe it’s different this time, insisting that valuations are reasonable and that Tech 2.0 companies have real business plans that will generate real profits

How did we get here? Broader economic forces are one reason. With interest rates at unprecedented lows even after the Federal Reserve’s recent hike, many investors have been forced to take on extra risk to generate returns. Fast-growing tech companies offer the prospect of tremendous rewards. “It only takes one,” the venture capital guys say. The collective valuation of the 142 unicorns — private companies valued at $1 billion or more — is around $500 billion.

Another phenomenon, the involvement of large mutual funds in private investments, is a contributor. T. Rowe Price, Blackrock, Fidelity and Wellington — four firms that offer open-ended investment products with daily liquidity — have pumped significant amounts of capital into late-stage private tech firms. Two thirds of unicorns have a mutual fund, hedge fund or bank as a major investor.

But as the music stops, retail mutual fund investors may find hard-to-value illiquid assets — that is, assets that cannot easily be sold without a substantial loss in value — getting rapidly marked down, possibly forcing indiscriminate selling of allegedly “safe” assets. As Warren Buffett put it, “It’s only when the tide goes out that you can see who’s been swimming naked.” Recent reluctance to go public and valuation markdowns suggest we’ve reached high tide — and we’re about to discover who’s most exposed.

Recent reluctance to go public and valuation markdowns suggest we’ve reached high tide — and we’re about to discover who’s most exposed.

For investors frustrated with the challenge of generating returns in today’s climate, the hopes offered by opaque private markets are more appealing than the reality presented by transparent public ones. Just consider two firms that operate in cloud storage: Box and Dropbox. Dropbox is private; Box is listed on the New York Stock Exchange. For no obvious reason, Dropbox garners a significant premium compared to its public peer. T. Rowe Price and BlackRock invested in Dropbox at a $10 billion valuation. But if it traded at the same revenue multiple as Box, the company would be worth $3 billion. What’s the difference? When reality isn’t sexy, investors throw money at potential.

Over the summer, BlackRock marked down its valuation of Dropbox by 24 percent. Then, this fall, Fidelity marked it down as well, along with its stake in Snapchat by 25 percent and its stake in Zenefits, a maker of online human resources software, by 48 percent. More recently, Fidelity marked up its stake in these three companies, but not enough to recover the losses of recent months, highlighting the radical uncertainty surrounding such valuations. Moreover, following its IPO, Square was trading around $12 per share, well below the $15.46 investors paid in the last private round in October. Gilt Groupe, once valued at over $1 billion, is now trying to sell itself for about a quarter of that. Valuation volatility is rightly leading many to question how many unicorns are overvalued.

And consider the over-the-top confidence of Silicon Valley employees. They’re commanding ever increasing wages, with reports of $500,000 annual pay packages offered to recent college graduates. Interns are making $7,000 or more a month. Expectations for such sky-high pay have become both inevitable and unsustainable; they’re reminiscent of the $1 million pay packages promised to Wall Street associates in 1999. By 2000, once the party had ended, annual bonuses were being replaced by pink slips.

Financiers are so convinced that the good times are here to stay that they’ve begun lending money against overpriced and illiquid private stock or employee options. Paper-rich, but cash-poor employees are borrowing money (that they can’t repay without a company sale) from specialist funds that have arisen for just this purpose and even from banks. In effect, the “cash buyer” of a multi-million dollar property in San Francisco may actually be using 100 percent borrowed money.

So let’s get this straight: Higher valuations drive higher incomes that drive higher housing prices using lots of debt. Seems fair to assume that lower valuations will drive lower incomes and lower housing prices with — uh oh — under-collateralized loans. The dominoes are lining up.

One of the telltale signs the end of a bubble is near is popular obsession with get-rich-quick investing opportunities. Back in 1999, even taxicab drivers were doling out stock tips based on overheard conversations. And because the 1990s tech bubble was in publicly-traded stocks, and online brokerages made investing accessible to all, E*Trade and Schwab were opening accounts at dizzying rates. Today’s equivalents are the crowdfunding campaigns, like those on Kickstarter, that allow companies to raise equity from Joe and Jane Sixpack. Since September 2013, investors have used crowdfunding platforms to pump more than $700 million into over 1,700 private companies.

There’s no doubt that today’s resurgence of tech start-ups will generate world-changing companies. But with all the unicorns roaming in subprime valley, the fantasy grows more obvious by the day.

As with any proper bubble, there are rationalizations galore. Of course, it’s different this time — it always is. Uber is attempting to disrupt the entire global transportation system. Airbnb is permanently changing the way people procure temporary housing. And both companies are unlocking the productive potential of otherwise stranded capital in depreciating assets. Why have your car sit idle or your apartment empty when either (or both) can generate a return?

All of that may be true. But what happens when competitors enter the market and, say, do away with surge pricing? Or taxis respond with apps of their own, as they have in New York? Or states and countries start regulating Uber and Airbnb? Or the notoriously fickle millennials get bored of the platform and move on to the new new thing?

There’s no doubt that today’s resurgence of tech start-ups will generate world-changing companies. But with all the unicorns roaming in subprime valley, the fantasy grows more obvious by the day. As with all good fantasies, it’s easy to lose yourself in the story. But the story’s almost over.

Victim of Sucess: The rise and fall of Blackberry

Though BlackBerry has less than 1% of the smartphone market share today, it once had more than 50%. The question is how such a successful company could fall so far. Journalists Jacquie McNish and Sean Silcoff provide many of the answers in their book, Losing the Signal: The Untold Story Behind the Extraordinary Rise and Spectacular Fall of BlackBerry.

Wharton marketing professor Americus Reed recently had an opportunity to talk with McNish about what we can learn from the rise and fall of BlackBerry.

An edited transcript of the conversation follows.

  

Americus Reed: I want to start off with some questions about what drew you to this topic. Tell us a little bit about why you wrote this book, Jacquie.

Jacquie McNish: It started with an investigation I did when I worked at The Globe and Mail here in Canada with my colleague Sean Silcoff. The great untold story in Canada in the technology sector globally was how the maker of something that we loved so much and that we were so addicted to — the BlackBerry – could fail so quickly. It was an enduring mystery that was very hard for any business journalist to crack: [Research in Motion (RIM), was a] very, very insular company based in Waterloo, Ontario, outside of Toronto, [with] a very small business feel to it despite its global reach. We spent a lot of time trying to crack it.

We were finally able to talk to some of the principals and did an investigation for the Globe and Mail that led to a wonderful agent in Washington, Howard Yoon, calling up and saying, “You guys should write a book,” and that’s how it all began.

Reed: What do you think sets this book apart?… Tell us a little bit about why this particular book should be on people’s must-read lists.

McNish: We live in an era of constant disruption. No matter where you are, there’s an algorithm or a new way of doing something that’s more efficient, that challenges the old way of doing things. We will look back on this period as being as significant socially and economically as the industrial revolution.

“In this era of disruption, the mother of disruption stories is the BlackBerry story.”

In this era of disruption, the mother of disruption stories is the BlackBerry story. A company that introduced the BlackBerry in 1998 became a $20 billion company from nothing in less than a decade. Then four or five years later, it was back down to a $3 billion company, gasping for breath. It’s not only a disruption story; it is a story of the speed of the technology race today. There has not been a technology that has so quickly penetrated the consumer market as the smartphones did with the BlackBerry being the innovator. Not since the television in the 1950s. We’ve never gone from zero to more than 50% of the consumer market so quickly.

Reed: When I look back on the heyday of the BlackBerry brand, I’m reminded of those images of how deeply it was connected to the business community. In other words, it was seen as a symbol as those who had made it professionally. I remember very vividly our President at the time holding up his BlackBerry and saying, “I cannot live without my BlackBerry,” very much in line with what you were describing with respect to this iconic rise of such a great brand. Tell us a little bit about the genesis of this rise. What were the key business moments that precipitated this rise to greatness for that particular brand?

McNish: Timing is everything, and coming from an outside perspective is very important in innovation. At the time, in the 1990s, a lot of people were racing in the handheld device space. I remember when the Palm was the “It” thing. That only synced your calendars and your contacts with your desktop, but it was the hot thing then. The other hot thing was Motorola’s Tango, the one-way pager that you could [use to] send a few messages … but they were very distant and very unreliable because of their big network.

You had IBM trying to do stuff. You had Ericsson as well strapping … a very successful cell phone onto a very tiny keyboard. If you had fingers the size of a squirrel, you might be able to tap onto it. So all these people were racing to get into that space, essentially with products they already had. Even Apple tried with the Apple Newton with the stylus; that was a disaster because the software just wasn’t right.

BlackBerry looked at this market and came at it from a very different point of view, and this is the key thing about successful innovation. You’re not only offering new innovation, you’re changing the rules of the game. What none of the competitors, the big players, understood was that at that time in the 1990s, bandwidth was very limited for data transmissions. Mike Lazaridis, the founder of Research in Motion, which was BlackBerry’s founding name, understood … how limited the bandwidth was at that time. So he created an instrument that parceled out bits of data communications … so that it would not overtax the networks, whereas everyone else wanted to charge you $4,000 for something that the networks could barely function to transmit. They had that simplicity of design [and] the conservation of the data being transmitted.

The final wonderful thing was that everyone was using their little squirrel keyboards. He said, “What if we create this kind of arched keyboard where you could use opposable thumbs?” That was just one of those breakthrough moments he had one night. That’s the innovation side of the story.

The other side of the story is staying alive because then you’re a small company from Waterloo, Ontario, that’s struggling to make it. You get something right like the BlackBerry, and the big players want it. Some of the big players were there from the beginning. Palm tried to buy them. US Robotics, when it was making modems for mobile data communications, placed a big order and then withdrew it, nearly killing the company because they took on debt to meet that order…. That was managed by Jim Balsillie, a Canadian businessman who went to Harvard, who came back and decided that technology was going to be the key to his success. The two of them were a powerful combination in the early days….

Reed: Can you speak a little bit about the particular strategies that were being pursued at that time by the company?…

McNish: [RIM] did something very innovative. They created these guerilla marketing teams…. They threw boxes of BlackBerrys in the back of their cars, and they went to conferences, they went to airports. They specifically looked at airports for people who were carrying back then the big, heavy laptop computers with the large modems that may or may not have worked, and said “Here, try this.”

“Everyone was using their little squirrel keyboards. He said, ‘What if we create this kind of arched keyboard where you could use opposable thumbs?’”

They called it the Puppy Dog Routine. They said, “Give us your card. You can have this free for a month. Let us know what you think of it.” They were so successful at it, and they had such a small back office that for years, people were using their BlackBerrys for free because they couldn’t figure out who their clients were because they were handing so many of them out spontaneously.

Reed: They had that much faith in the power of the technology that they were literally willing to let people just try it to form an impression.

McNish: That’s right…. Word of mouth was very key. Early adopters were Michael Dell and Jack Welch. Just as you described, the CEO of your company says, “Wow, I love this thing, I’m addicted to it,” and everyone wants to have it … and it ripples down the organization….

Reed: Talk a little bit about the BlackBerry brand and how it was part of this calculus associated with the business strategy.

McNish: This company grew so fast that I don’t think they even thought about brand. That’s the amazing thing, and they could do that as long as they had the technology…. Their main clients, and the people who mattered the most, were the carriers. They had to convince the carriers to sell it, and then they entered this new world where they’d be offering discounts on the smartphones, which really sort of juiced sales and put them in the hands of a lot of consumers.

That was an advantage in the early days, and then later as things started to fall apart, a lot of people believed that one of their biggest problems was they didn’t fully understand who their consumers were because they had to spend so much time making the carriers happy.

It was a very limiting relationship because, again, back in the days of limited bandwidth on the networks, the carriers were very rigorous about what they would allow, and Steve Jobs said for years, “I will never make a smartphone.” He called the carriers the “four orifices”; you couldn’t get anything down their pipeline without their permission. Only when he saw the success of BlackBerry, which leapt to control right away, 58% of the smartphone market, did they set their sights on that market, and then they reinvented it on their terms….

Reed: You talked to some extent about this notion of this rise to greatness and its equally iconic fall, if you will. Can you talk a little bit about that? What was it that was behind this kind of deceleration? Was it a series of events? Was it death by a thousand cuts? Was it something foreseeable? Give us some insight into that.

McNish: The pivotal moment is January 2007 when Steve Jobs walks onto the stage in San Francisco and holds up that shiny glass object that we all [now] know and love so much, and says, “This is an iPhone.” It brings you computing, it brings you the Internet and it brings you email — three things. The interesting thing is that he not only brought on the prototype for the iPhone, and said “I’m going to change the world,” he also brought on stage the head of AT&T Mobility. This is where he changed the rules of the game because really the iPhone is just an iteration of the smartphone that BlackBerry started, only they added more.

“The race is faster than ever. It never ends, and the people who are the leaders today will most likely be the followers tomorrow because it’s very, very difficult to stay ahead.”

They brought the AT&T executive onstage, announced a five-year exclusive contract, and that did two things. It gave AT&T the incentive to spend billions of dollars on upgrading its network, and it made every other carrier nuts because they wanted to have the same thing, and they all went out looking for an antidote to the iPhone. The really compelling part of the BlackBerry story is how they reacted that day. Over in Mountain View, California, you had the folks at Google under a secret project. One was for a new keyboard phone and the other was for a touch screen phone that was going to be run on Android. The minute they watched that live, streaming on the internet, they realized that their project keyboard was dead, and they immediately shifted everything to the touch screen phone….

Mike Lazaridis looked at this announcement, looked at what Steve Jobs was offering, and said, “This is an impossibility.” Again, the conservative engineer brought up on conservation said, “The networks won’t be able to carry this. It’s an impossibility. It’s illogical that anyone would even propose this.” He was right for the first two years. Remember all the dropped calls, all the frustrations, all the lawsuits against Apple and the carriers. It didn’t work….

But then it did, and RIM got it wrong. Two years is a lifetime at a technology rate, and by the time they realized what a serious threat it was, they were at that point followers.

Reed: What do you think is the public’s greatest misconception about the BlackBerry story?

McNish: A lot of people think that Mike and Jim and the folks at the senior offices in BlackBerry were arrogant and didn’t understand iPhone and just focused only on BlackBerry. There is an element of truth to all of that. Yes, they missed the turn, but they were missing the turn at a time when they were going from zero to $20 billion. They were growing at a rate of 25% every quarter. You talk to any business person, that’s an impossibility.

They were expanding in Indonesia and India, in other parts of the world. They were huge. They couldn’t keep up with the demand, and they were coproducing new factories everywhere to keep up with it. So imagine going to your board of directors or your shareholders because you’re a publicly traded company and saying, “You know this BlackBerry thing? It’s probably going to be history in a couple of years. We’re going to stop making it, and we’re going to regroup and move into something we know nothing about.” When you have that kind of momentum, it’s really hard.

Reed: It’s hard. You become a victim of your own success in some senses.

McNish: Exactly, exactly…. When you’re a publicly traded company, your options are pretty limited. What I would layer on top of that is they had a series of really unfortunate events. Everything from a horrific and badly managed patent battle in the United States [to] the three-day outage of 2009, which made everyone question their faith in the BlackBerry. We all remember where we were for those three days….

Then there was the Playbook, and then there were other phones. There was just one disaster after another, and this is how businesses fail. At first it’s slow, and then it’s very fast.

Reed: John Chen is now charged with the difficult task of turning this thing around. What are some of the broader takeaways and learnings that you think are critical from having written the book?

McNish: The thing that I take away, and we conclude with, is that the race is faster than ever. It never ends, and the people who are the leaders today will most likely be the followers tomorrow Twitter  because it’s very, very difficult to stay ahead. It is so easy today to innovate…. In the old days when you were a GE factory or an auto factory or a parts supplier, there were huge barriers to entry because you were spending hundreds of millions of dollars on plants. You were pretty well assured that there wouldn’t be an excess of competitors.

Today, that’s disappeared. There are groups of kids coming out of Stanford, out of Waterloo University, all these technology companies. All they have to do if they’ve got a Visa card is rent server time, set up an office, get some people with code experience…. Those barriers don’t exist anymore….

These days you’re an algorithm away from some pretty serious competition. Look at what Apple is trying to do with payment system. I wouldn’t want to be a bank right now. It’s a lot of disruption, and the worst mistake you can make is think that we’re better, we can out-muscle them or we can buy them or handle that competition. I don’t think you can.