And Here It Is: The Next Major Technological Breakthrough

How It Will Transform Your Business and Your Life

We’ve all witnessed an amazing series of events in our lifetimes, and, hopefully, we’ve learned some important lessons over the years. In business, we’ve come to see that innovation is rarely the work of one person. When the crowd has the right tools and puts its mind to the task, nothing can stop it. We’re accordingly also learning the real truth of the fact that any firm’s greatest resource is its people—there is no more effective source of new efficiencies and whole new directions. Concern for social responsibility is no longer the exclusive domain of activists, since everyone is now attuned to the susceptibility of markets to unrestrained greed. And there are increasingly good reasons for thinking that perhaps we can reverse ongoing major environmental debacles and orient our systems to profits that are sustainable over the long term.

And in our personal lives, we’ve learned the vital importance of access to learning opportunities across the lifespan, access to health care, and caring relationships. Whether we call it spiritual or not, life is hardly worth living without a sense of wonder at the very existence of the universe and all the strange things inhabiting it.

We’ve learned a few things, then. Perhaps foremost among them is that we are going to have to adapt to the changes we ourselves bring about. And given the pace of change and the plain need to do better, we don’t hear anyone repeating Lord Kelvin’s famous opinion, from the end of the nineteenth century, that pretty much everything that can be discovered has been discovered. (Though isn’t there someone at Microsoft who could top the classics “No one will ever need more than 640k memory—or more than one browser tab”?) With everything that’s happened in the 100 years or so since Kelvin’s remark, one of the big lessons that has been learned is a certain humility, at least in that regard.

Change is in the air, that’s for sure, even if it doesn’t seem that there is any one particular form of it. But in fact there is an important new technology coming on line. It isn’t really new. Viewed narrowly, it has been taking shape for over 80 years, even though its root mathematical principles go back to Plato (like so many do). And, at least in retrospect, this new technology’s major features may seem very humdrum and mundane, they are so everyday.

So just what is going on? Speaking in Abu Dhabi on Monday, May 25, Nobel economist Paul Krugman suggested that economic recovery could come about in the wake of a new major technological breakthrough, one of the size and scope of the IT revolution of the 1990s. Other factors cited by Krugman as candidates for turning things around included more investment by major corporations, and new climate change regulations and policies.

Industry-wide systems of metrological reference standards for human, social, and natural capital fit the bill. They are a new technological breakthrough on the scale of the initial IT revolution. They would also be a natural outgrowth of existing IT systems and an extension of existing global trade standards. Such systems would also require large investments from major corporations, and would facilitate highly significant moves on climate change.

In addition, stepping beyond the solutions suggested by Krugman, systematic and objective methods of measuring living capital would help meet the widely recognized need for socially responsible and sustainable business practices. Better measurement will play a vital role in reducing transaction costs and making human, social, and natural capital markets more efficient. It will also be essential to fostering new forms of innovation, as the shared standards and common product definitions made possible by advanced measurement systems enable people to think and act together collectively in common languages.

Striking advances have been made in measurement practice in recent years. It is easy to assume that the assignment of numbers to observations suffices as measurement, and that there have been no developments worthy of note in measurement theory or practice for decades. Nothing could be further from the truth. You don’t know the first thing about what you don’t know about measurement.

I came into the study and use of mathematically rigorous measurement and instrument calibration methods from the history and philosophy of science. The principles that make rulers, weight scales, clocks, and thermometers as meaningful, convenient and practical as they are, and that drive engineering practices in high tech, for instance, are pretty well understood. What’s more, those principles have been successfully applied to tests, rating scales, and assessments for decades, primarily in high stakes graduation, admissions, and certification/licensure testing. Increasingly these principles are finding their way into health care and business.

The general public doesn’t know much about all of this because the math is pretty intense, the software is hard to use, and we have an ingrained cultural prejudice that says all we have to do is come up with numbers of some kind, and–voila!– we have measurement. Nothing could be further from the truth.

My goal in all of this is to figure out how to put tools that work in the hands of the people who need them. You don’t need a PhD in thermodynamics to read a thermometer, so we ought to be able to calibrate similar instruments for other things we want to measure. And the way transparency and accountability demands are converging with economics and technology, I think the time is ripe for new ideas properly presented.

A quick way to see the point is to recognize that fair and just measures have to represent something that adds up the way the numbers do. Numbers don’t just automatically do that. We invest huge resources in crafting good instruments in the natural sciences, but we assume anyone at all can put together a measure using counts of right answers or sums of ratings or percents of the time some event occurs. But none of these are measures. Numbers certainly always add up in the same way, but whether they are meaningful or not is a question that is rarely asked. The numbers we often take as measures of outcomes or results or processes almost never stand for something that adds up the way everyone thinks they do.

So, yes, I know we need metrics that are manageable, understandable, and relevant. And I know how quickly people’s eyes glaze over in face of what they think are irrelevant technicalities. But eyes also tend to glaze over when something unexpected and completely different is offered. True originality is not easily categorized or recognized for what it is. And when something is fundamentally different from what people are used to, it can be rejected just because it is more trouble to to make the transition to a new system than it is to remain with the existing system, no matter how dysfunctional it is.

And boy is the current way of developing and deploying business metrics dysfunctional! Do you know that the difference between 1 percent and 2 percent can represent 4-8 times the difference between 49 percent and 50 percent? Did you know that sometimes a 15% difference can stand for as much as or even a lot more than a 39% difference? Did you know that three markedly different percentage values—differences that vary by more than a standard error or even five—might actually stand for the same measured amount?

In my 25 years of experience in measurement, people often turn out to not understand what they think they understand. And they then also turn out to be amazed at what they learn when they take the trouble to put some time and care into crafting an instrument that really measures what they’re after.

For instance, did you know that there are mathematical ways of reducing data volume that not only involve no loss of information but that actually increase the amount of actionable value? Given the way we are swimming in seas of data that do not usually mean what we think they mean, being able to experimentally make sure things add up properly at the same time we reduce the volume of numbers we have to deal with seems to me to be an eminently practical aid to understanding and manageability.

Did you know that different sets of indicators or items can measure in a common metric? Or that a large bank of items can be adaptively administered, with the instrument individually tailored and customized for each respondent, organization, or situation, all without compromising the comparability of the measures?

These are highly practical things to be able to do. Markets live and die on shared product definitions and shared metrics. Innovation almost never happens as a result of one person’s efforts; it is almost always a result of activities coordinated through a network structured by a common language of reference standards. We are very far from having the markets and levels of innovation we need in large part because the quality of measurement in so many business applications is so poor. But that is going to change in very short order as those most banal of subjects, measurement and metrological systems, catch fire.

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One Response to “And Here It Is: The Next Major Technological Breakthrough”

  1. Crisis and Opportunity « Livingcapitalmetrics’s Blog Says:

    […] Crisis and Opportunity By livingcapitalmetrics Naomi Klein’s 2007 book, Shock doctrine: The rise of disaster capitalism (New York, Picador), provides a great way of framing how the shortcomings of capitalism might be corrected.  What I’m after is what might be called a reverse shock doctrine, though the reversal is not a simple mirror image. (This post assumes familiarity with some of my previously presented arguments, especially How bad…?, Reinventing…, and And here it is…) […]

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