The Virtual Economy

With all the turmoil in finanical markets, I recall an article written by Peter Drucker in the mid 1980s. Credited with coining the term 'knowledge worker' Drucker has been very perceptive on many management issues. He wrote back then that the financial economy was becoming too disconnected from the real economy in that the amount of trading of financial instruments (e.g. foreign currency) was 30x more than that of foreign trade itself. He said that some multiplier, say three times, was OK and needed for liquidity, but 30x he really questioned.

As I was returning from a day with a client in London yesterday, I read an article that trading in oil was running at 2 billion barrels a day, yet only 85 million barrels comes out of the ground - thus re-emphasising Drucker's point.

In my book Capitalizing on Knowledge (2001) I wrote that financial intruments were examples of knowledge products, being purely the fruits of human creativity. I even cited Enron as an example of creative innovation in knowledge products. But you can take creativity too far - especially in financial accounting - and we now know what happened to Enron! Even earlier in Knowledge Networking (1999) I wrote about the need for better knowledge ethics and governance. At that time Long-Term Capital Management had just collapsed, having traded heavily in financial derivatives. I asked:

"What value does such trading bring to furthering a true knowledge society where desirable outcomes are successful businesses of all sorts and quality of life for citizens? ... Intervention is needed in financial markets to halt computer trading when price swings get too violent. Will knowledge markets evolve in the same way, needing bodies to govern them, analagous to the Securities and Exchange Commission?"

The fact is that trading in such highly leveraged financial instrument is really just betting on future prices. Even betting on horses, it seems, is less risky! And who are the losers in such heavy derivatives trading? Usually those in the real economy - who trusted their hard earned money to banks in the first place!

Will the gap between the real and virtual economy identified as an issue over 20 years ago ever narrow to sensible levels, or will we keep repeating the mistakes of the past and present?

Where's the Oil?

I've just been reading an interesting article in Time Magazine by former UK Chancellor of the Exchequer (and before that Energy Minister), Nigel Lawson, entitled Darkness Looms. In it, he argues that all our concerns about getting environmentally-friendly energy sources come up against the practicalities of an energy short-fall in the coming decades. Most of Europe has not replaced its ageing (and dirty) coal-fired power stations, nor its (clean but problematic) nuclear power stations. And where is the oil? In parts of the world where security of supply depends heavily on political forces and the prevailing diplomatic moods, like the Middle East and Russia.

But in the KM context, the phrase "where's the oil?" reminds me of BP's approach to knowledge management. When he led the KM team, Kent Greenes, would always ask this quesiton of any planned initiative. If KM could not translate into helping BP find oil better, cheaper, faster, or the efficiency of its overall supply chain, then what is the point of KM. At the moment I am helping an organisation put into place a KM strategy and action plan. One of my starting points is the approved 5-year corporate plan. By examing each objective in turn, I am asking:

• what are the knowledge inputs (i.e. to achieve this objective what do need to know, and what information must be readily accessible?
• what are the tasks, business processes and core decisions that contribute to this objective, and as a consequence...
• what are the KM activities that support these processes, finally..
  
• what are the knowledge outputs, e.g. reports, guidance, database entries

Already it is clear that there are some recurring themes, such as a virtuous cycle of knowledge development, where new knowledge is created, evaluated, shared, refined and developed, applied and lessons learned, which in turn are fed into an evolving knowledge base. Many of these processes are generic, fine-tuned only for stakeholder / user needs and the categories of knowledge (by topic, format, usage etc.)

So, wherever you are in your KM action plan, think of your organisation's product or service, and keep asking this probling question:

"Where's the oil?" (or whatever product or service is your most valuable).

What Price Books?

I happened to be doing a search on Google yesterday, found a link I was interested in, and lo and behold - up pops a page of my book (Knowledge Networking) from Google Books. Two opposite immediate thoughts came to mind:

1. Why should people be able to read my book for free and deprive me of roylaties?
2. That's nice - I know it's difficult to get hold of now - so at least others can read it.

On the first, since it was published in 1999 I don't get many royalties now and anway I think it's out of print, since links on both Amazon and publisher's wesbite point to an expensive audio version. In any case, I don't think many readers will persevere with the media. It's not like a PDF you can download - you have to laboriously scroll from page to page. I found a chapter in someone else's book I was interested in and while fine for browsing a few pages, is not ideal for serious study. Further, it seems that books are incomplete and I think there are limits on the number of pages an individual can view (more on this in Google books FAQs).

On the second point, it's certainly useful to be able to point people at specific sections, without having to extract or risk violating the publisher's copyright. I was in the process of doing a 2nd edition a few years ago, but instead decided that writing books - unless you create a best seller - is not really very profitable, so I have focussed on packaging my knowledge in the form of shorter more specific guides and reports (see my K-Shop).

So how much is a book worth? It all depends on how you the reader values it. I get a lot of content from the web these days for free - and am quite happy to browse a long report on my notebook PC. Would I pay for such material? Yes - if I felt it really useful to me and I couldn't get the content anywhere else - but I would need to be convinced, typically by the comments of colleagues or independent reviewers. Certainly Google Books allows you to preview - as they say it is "designed to help you discvoer books, not read them from start to finish". That leads to my other point on value. There is nothing like the convenience of paper. So if there's a book I'm going to use a lot in different places, then its worth buying. Of course, I'm always looking for deals, and when I've finished with it and want it no more, there are many ways to recycle it - and not just in the recycle bin, but through others in my network, Amazon marketplace, book stalls at fetes and so on.

Talking of value what I do resent is paying very high prices - like $100 or more - not for unique in-depth research - but for books that because they are published through an academic imprint, cost three times more than what they should. Regrettably this has also happened to some peer reviewed KM journals, which when launched cost only a few hundred dollars a year subscription but are now over $1,000. But's that's another story (or blog!).