There are perks to my job and one of them is to be able to have the opportunity to interview “vision rich” people. This is my third annual interview with Rich Karlgaard, Forbes publisher and it appeared on the Impact Blog a few weeks ago. I am posting it here as it deals with, you guessed it, change!
Rich Karlgaard is also an avid biker and the author of the weekly column Innovation Rules. He writes about technology, entrepreneurship, regional and economical development, and the future of business and work. He frequently lectures on these subjects and is a regular guest on Fox News Channel’s “Forbes on Fox.” In 2005, he began writing a daily blog, which appears on the homepage of Forbes.com. Rich joined Forbes in 1992 to start Forbes ASAP, a technology magazine, along with Forbes CEO and Editor-in-Chief Steve Forbes, and the futurist and writer George Gilder. At Forbes ASAP, he commissioned original works by Tom Wolfe, John Updike and other notable American writers. He co-founded two companies ( Garage Technology Ventures in 1997 and Upside Magazine in 1988) and one civic organization (the 5,500-member Churchill Club in 1985).
Shaku: Rich, it is great to have the Forbes leaders back at Impact 2012 and thank you for taking time for our third annual interview!
Rich: Yes, the Forbes Business Leadership Forum is a great event for business leaders and glad to be back.
Continuing our conversation about change and economic uncertainty, what is the new normal and what are your 2012 predicts?
This trend of this uneven recovery has certainly become even more dramatic. Large publicly traded companies continue to do well. That’s been recognized by the stock market, yet stocks on a price earnings ratio are still cheap. They’re cheap by a historical standard. They’re cheap when you look at the unprecedented low interest rates out there as an alternative investment vehicle.
But the good thing is that the overall economy, not just the large publicly traded companies but smaller companies are beginning to perk up. Bank lending is starting to occur again. There’s a general mood of optimism. The unemployment rate is lower than when we spoke a year ago. And here where I live in Silicon Valley it’s been an absolute boom.
Since I talked to you a year ago residential real estate prices are up 15% to 20%.
Definitely a relief after a long time.
Yes, that’s largely because technology companies are doing so well. But that figure is manifestly not true throughout the state of California or even 50 miles away from here. So it’s a reflection that there are just an incredible number of changes happening in technology right now, and investors and established organizations are jumping on business models built around mobile to cloud computing.
You have the pure startups that are exploiting the technologies, and then you have large companies that are transforming themselves very, very rapidly.
Though for all that’s happened, the changes that we’ve seen so far are about to be dwarfed by changes as the whole Silicon Valley model and the whole Moore’s Law pace of change escapes the traditional IT industries, and starts to transform in fundamental ways to older industries such as manufacturing, energy, transportation and so on.
It’s been predicted for a long time that things like robotics and more recently digital manufacturing are coming up. Sometimes you can make these predictions too far in advance, and by the time they actually begin gaining traction people are kind of bored and they’ve moved on.
That’s often when these technologies really pop up. So I am now fully convinced that over the next several years that 3D printing technologies and robotics are going to start gathering a lot of attention. They will be working from the power that’s available in the cloud.
You can anticipate that if computing power was free and unlimited and bandwidth was free and unlimited, how would you use them in a way that you don’t use them today?
We clearly see that with social networks, new modes of communication that are doing everything from creating companies like Facebook to reorienting the way more traditional businesses communicate with their employees and communicate with their vendors and their whole ecology.
You are beginning to see that the sheer pace of Moore’s Law is now enabling advances in robotics. I think surprises like 3D printing technology to really start making traction where you can have basically grains of plastic or metal or wood together or in combination and then send a 3D model to a printer. 3D printers five years ago cost over $100,000 and now they are in the $1000 to $10,000 range, about where laser printers were when they debuted in the mid-‘80s.
I think that when you look at a business process that’s going to be changed fundamentally, you know, people talk about the gamification of business.
Enterprise software will look more and more like a game as whole new generation of young, talented people may not be, sorry to say, as well read as we are. But their vocabulary or literacy is in images and moving images and manipulating images.
So you’re saying that the generation is going to be more accustomed to visual learning?
Yes and when they’re integrated inside of a corporation suddenly, the kid who’s a computer game addict today is in charge of managing the company’s supply chain maybe 20 years from now. I don’t have any doubt in the world that enterprise software of the future is going to be a simulation because the sheer processing power and graphics power needed to do that will be there.
The bandwidth needed to transmit it will be there, and it’s a more universally understood language than English for young people in the United States and more critically for people around the world. Everybody kind of gets those visual metaphors and visual icons.
That’s going to fundamentally change also education.
Absolutely. Let me give you two examples. Both are in Silicon Valley, so excuse my Silicon Valley bias. You have the Khan Academy which has opened up essentially free learning for almost anybody with the motivation to do so.
I was just at this program in Hollywood over the weekend. It was at Fox Studios in L.A. and it was brought by Singularity University and co-founded by Ray Kurzweil. The idea was to expose people in business, the arts and entertainment to these exponential technologies. Technologies that are moving along in an exponential rate, which would be processing power, bandwidth, you know, biological systems and even some technologies that are moving rapidly but at less than an exponential pace like solar, and just show people what’s on the cutting edge and then give a timeline of where it’s going.
On robotics, we saw a video of double amputees from the Iraq war being able to, with robotic artificial arms, peel a grape without crushing the grape and that’s an incredibly delicate operation. Or Google now has over 200,000 miles on its driverless car, you know. It’s got this sort of spinning contraption on the roof that’s constantly doing this 3D imaging. AI has gotten to the point where just not long ago, getting out of the parking lot was a challenge and now it goes up and down mountain roads.
And take IBM’s Watson . We saw a clip of Watson understanding the nuance of the language and it was beating the two best players that ever played the game.
I really think we’re on the cusp of some very, very interesting things and here’s a prediction that as soon as people get tired funding social networks and they will…all of a sudden this venture capital juggernaut is going to be on to something else, and some of them already are.
Kleiner Perkins has funded a very interesting company that makes a smart thermostat called NEST and it learns about your habits and patterns and puts it on autopilot for you. NEST is only the beginning of a whole bunch of household devices that will include smart refrigerators that will notice that you’re low on something that you frequently have.
I would love to have advance warning when milk runs low in my family! So you’re saying that we’re on the cusp of another revolution like the industrial?
Yes that’s exactly what I’m saying. Moore’s Law, ubiquitous high bandwidth, artificial intelligence are going to be transforming traditional industries in a more visible way taking away that argument that we haven’t had as much progress than people experienced in the first 50 years of the 20th Century.
What happens to the large enterprise and how will they thrive in a time when being agile is critical for success?
They will be successful if they don’t get wedded to the past and they don’t get wedded to what’s made them successful in the past. If you do that you will suffer the Kodak problem or, you know, or the near death experience that IBM had in the early 1990s.
I think large companies are still going to do well as they still have the brand clout. They still have the ability to integrate very complex problems. If you think about the world is going to go from 7 billion to 9 billion people by 2050 within the larger population there’s also this trend of urbanization. Companies like IBM and others recognize the opportunity in Smarter Cities. When you start talking about Smarter Cities, the scope of those projects cannot be fulfilled by a little company.
What about talent and new ways of working?
The challenge for large companies will be integrating that talent outside of its doors. The founder of Sun Microsystems, Bill Joy, came up with this observation 20 years ago that some people called Joy’s Law, that when everybody’s connected on the Internet at high bandwidth and instant communications etc, no company no matter how big is going to have even a double digit share of the talent within its industry. Any company is going to have to find a mechanism of being able to integrate talented people with great ideas into the organization.
But then the second thing you’re going to need is the entrepreneur matched with the company of scale and together they can change the world and do some good.
These are the new business models that we are seeing with unlikely partnerships across the world. How do you see them adapting to what is necessary for the next wave?
I think IBM, not to flatter the host excessively, has done a very good job because it’s really in many respects only a 20-year-old company, because it had to really face some huge problems that could’ve spelled the end of it. That was only two decades ago and that experience is forever imprinted on the brains of the people who are in leadership now. IBM understands the networked, distributed and cloud world. It gets that. So when you go to the IBM Impact conference you see a lot of space for companies outside of IBM.
The old “not invented here” was thrown overboard when it was seen that it didn’t do any good. Hollywood’s another example. In the ‘30s and ‘40s Hollywood had the actors under exclusive contract. The studios had the actors under exclusive contract. Now the actors are all free agents represented by agents, and the studios are vessels basically for raising money and producing the films. So the great studios have still survived and are thriving, but if you didn’t get rid of the fixed idea of control the actors then the studios would have suffered. It takes certain humility.
In the networked, distributed world, it’s not outsourcing talent anymore.
Yes, I think this stuff arbitrages out over time because of the speed with which talent can move across networks. Nobody talks about outsourcing anymore. They talk about building and manufacturing and designing where it’s most appropriate. That’s not outsourcing. That’s different. That’s following the talent rather than following the lowest cost, following the talent and the customers as opposed to, you know, a pure arithmetic of low cost. Plus the low cost equation is changing rather rapidly as rising nations are seeing their wage base go up. So whereas China might’ve been 10% of the cost of the U.S. in manufacturing, it’s now 20% and moving up. You have rising fuel costs, geopolitical tensions that may cause some companies to rethink where they were manufacturing before.
So you’re seeing some manufacturing actually moving back to the United States because of rising shipping costs and so forth. But in the end, companies will look for hot spots of talent and go after manufacturing talent over here, design talent over there, customer service talent over there.
It is a great time to be in enterprise software. You are going to see the whole supply chain concept being rethought once again to be more flexible to accommodate fluctuating fuel costs, movements in talent and something I mentioned earlier that it’s going to become more visually depicted.
Let’s talk mobile. There’ll be ten billion mobile devices in use by 2020. How do you see this changing business models? It has already. What is your prediction around mobile?
Two things. I think 4G bandwidth will become ubiquitous and very rapidly. And, I mean, the newest iPad accommodates 4G. Of course, in the developing world just the sheer low cost of the devices is a game changer that you’ll see. Africa had single digit cell phone penetration ten years ago. Now it’s got about 20% cell phone penetration and in another ten it’ll be 60%.
Thank you, Rich! I look forward to these annual interviews because the scope of the discussion always leaves me with more questions.