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John’s Phone: Innovation by Subtraction

By Shlomo  Maital

 John’s Phone

    A friend and reader, Howard, drew my attention to this cellphone innovation.  It is called “John’s Phone”.  It isn’t cheap; it costs $100,  and $150 for the premium (gold) version.  It’s the world’s most basic cell phone. All you can do with it is make calls and receive them.  Nothing else.  Basic basic.  It was designed by the Dutch firm John Doe Amsterdam, and is especially good for kids, or elderly  people, or those who HATE technology.  It made  the top 12 of the Year’s Best Ideas in Interface Designs.   

   John’s Phone has a sense of humor.  John’s Phone features a 32-page paper address book kept on the back of the handset.   It includes an ink pen that resembles a stylus, a notepad, and a tongue-in-cheek “Games” section (for tic-tac-toe). The designers say that these features allow the phone to be used even when it is turned off.  Also included is “text messaging” which is done in the paper booklet.  The device is not locked, making it compatible with any SIM using the GSM system.   The keypad consists of only the numbers 0 to 9, an asterisk, a hash, and the call and end buttons.


    What does John’s Phone prove?   There is a constant inherent stubborn bias in innovation toward added complexity and additional features.  The result is often needlessly complex, unfriendly products and services.   The solution?  Take a familiar product or service.  Strip it down to the most basic elements.  What is the core function of the product, the thing most people use it for?  Eliminate everything else.  Subtraction, not addition, is the most powerful arithmetical operator for innovation.  Subtraction will give you user friendly, simple, cost-effective innovations. 

   Action learning exercise: Take another product that you like.  What is its #1 main use?  Eliminate everything else.  What do you get?  How could you market it?  How much could you charge?    

Screensart: An Intimate Glimpse into the Creative Mind

By Shlomo  Maital


 Dana Ruttenberg


Despite many volumes and articles on the creative process – how people come up with wonderful ideas – it remains largely a mystery.   That is why it is so keenly interesting when an articulate innovator describes the precise way a great idea was born and implemented.

    Dana Ruttenberg is an Israeli dancer and choreographer.  She and Oren Shkedy have created “Screensart – The art arena for digital screens: photography, paintings, videodance and videoart for your public digital screen.”    See

   Here is Dana’s idea and in her own words, how she came up with it and made it happen.

  1.  The “Trigger”:     “… the initial idea was actually my father’s (Arie Ruttenberg, founder of Kesher-Barel, a leading ad agency acquired by McCann Erickson, and Club 50).  . He was concerned with the  dissonance between how long and how much effort goes into creating a dance piece, and the resulting exposure available to it in terms of it existing only in the present, not available for proper duplication (a video recording of a dance performance never ever does justice to the live experience of it), it needing a stage, lighting, the presence of the cast and crew etc. etc….

 2.  The “Resource Base”:  Parallel to that he noticed the abundance of screens everywhere that had nothing interesting to fill them up. Banks and post offices were just then putting up screens to promote their business, and were limited to the soundless showcase of images, so that meant either subtitled news/ads, aquarium shots or ski shots.

 3. The Background:  My  earlier [dance] piece, NABA,  showcased silent [dance], with [each member of] the audience actually choosing the soundtrack on earphones connected to audio guides.   My father thus knew that dance does not require sound.  That was the first spark.

4. The opposition:  It  came from the idea, placing dance on screens,  being something that has never been done before. Although the idea of artwork being created for, and presented in public spaces, is as old as time, re-opening minds to this idea onceagain, and deeming it worthy for investment, was something businesses  were not yet ready for.  There is a misconception in Israel, which now is being contested by the “people”, that the “people” are, for a lack of a better word, dumb, not curious, and uninterested.  Recent social protests  have proved just the opposite.

   Man is as evolved as the challenges that come his way. When those challenges were hunting an animal down and cooking it for dinner – we learned how to do that and mastered it.  When we needed to calculate the square root of a number – we mastered that too, but forgot how to hunt when that wasn’t needed anymore. People might have forgotten how to FACE art, because they haven’t been faced with it. Put it in their path, and they WILL know what to do with it.  Some resistence is natural — the same resistence I might experience upon opening an algebra book now. But that doesn’t mean anything about my future capabilities of appreciating (even if not being able to “solve” or “create”) the beauty of math. Art, and especially dance, is not meant for the elite. If anything, it does not require words, vocabulary…it goes straight to the gut. I truly believe in that.

 5. Persistence:  When I think of persisting [with our idea] for two years, I think of 365 days x 2 x 24 hours of pushing, maintaining, considering, remembering….but, that is NOT the case.  It is important not to disappoint either oneself or the other (partner).  Persisting means having more burners besides the front or even back ones,  on which you can slow-cook. You forget about it, come back to it, try something else, want to throw it away, fall back in love with it and “save” it. Keeping it at arm’s length is what makes it alive.   And having your collaborator to talk to about it, really helps.

6.  Self-awareness:  The thing I lack most of all is patience. But I know see the power of it.  I intend to work on it, I am not yet very successful, because of my childish nature (which is wired to the artistic-creative side), but in my mind (that of the more mature, grownup self), I know that time makes things happen. Keep your ideas in the drawer.  Take them out from time to time. Put them back. Take them out again. …. 

  Thanks Dana!  I invite readers to visit Screensart and experience your dance videos for themselves.   Thanks for sharing your personal creative process. 

Why You Must Never Trust Economists – Including Me!

By Shlomo  Maital

   Have you ever noticed that the word ‘economics’ contains two shorter words?  First, the word ‘con’,  to swindle or cheat; and second, the word ‘comic’, which means, laughable, humorous, funny. 

   Two respected economists, Joshua Angrist and Jorn-Steffen Pischke, recently published a lead article in a respected journal, noting how nobody believes empirical results derived using ‘econometrics’ (the application of statistics and mathematics to data analysis).  *   They point out that things are slowly changing.  Economists are increasingly doing real experiments, or quasi-experiments (data analysis that simulates a true experiment, including a control group), and that this is increasingly becoming a requirement for research to be published or to be believed.  This ‘revolution’ is mainly happening, they note, in labor economics, public finance and development economics.  It is NOT happening, they note, in macroeconomics or in industrial organization – the two fields where new research and thinking is urgently needed, in view of the global macro crisis and the need to rethink regulation of markets.  Imagine what could be learned, they note, if we only did credible research in the latter two fields.    In macro – want to prove the key is money?  Easy. Want to prove the opposite?  Equally easy.  And both approaches have won Nobel Prizes.

    I’m afraid the ‘con’ and ‘comic’ will not leave economics, until we economists get out of our offices, dig our noses out of data tables, and get out into the field and talk to real people and real businesses.   I have a confession to make.  I once co-authored a paper in a leading journal, Econometrica.  It was an analysis of inflation expectations, based on a dataset supplied by a friend, Joe Livingston, of the Philadelphia Inquirer, who ran regular surveys about inflation and kindly provided me with the data.  It took seven full years for the paper to be accepted, running the gauntlet of referees’ criticisms.  What we did to massage those poor data was inhuman.  By the time our manipulations were done, well, nothing was left of the simple underlying data (“do you think prices will rise or fall?”).  None of this was crooked or dishonest.  It simply mangled the data using generalized least squares, Heckman corrections, heteroskedasticity, time-invariant blah blah, ….. beyond recognition. 

     Kudos to Angrist and Pischke for revealing the ‘con’ in economics.  The latest fad in economics is to pursue Dan Ariely-like experiments to understand behavior.  This is good.  There is very little ‘con’ in behavioral economics, when you study real live people first-hand. 

*  Joshua D. Angrist, Jorn-Steffen Pischke, “The credibility revolution in empirical economics:  How better research design istaking the ‘con’ out of econometrics’,  Journal of Economic Perspectives, Spring 2010, pp. 3-30.   

Wheels for Wheelchair People: The Stacy Zoern Story

By Shlomo  Maital     



 Stacy Zoern and “Kengaru”

This story was drawn to my attention by a former student, Maurice.

    Stacy Zoern is an Austin, TX attorney. She has been confined to a wheelchair almost from birth, being unable to walk.   As a teenager, she drove a costly $80,000 van modified for paraplegics.  But she “totaled it”…and hasn’t been able to drive since.

     One day she came across a little car company, based in Hungary, called Kengaru.  It made a clever small electric vehicle fully adapted for paraplegics – easy to get into, out of, etc.  But like many clever small ventures, Kengaru was going out of business. The bank had called its loan and it had run out of money. Bankruptcy loomed.

    How much money do you need?  Stacy asked.  The sum was large.  Rather than complain, gripe, or bitch about how unfair the world is, Stacy chose to act. (My student Maurice says:  Entrepreneurs need to act fast, that way “your fears cannot catch up with you!”.  Right on, Maurice!).  She raised the money.

   Today, in just two years, Kengaru is a thriving company making small electric cars perfectly suited for paraplegics, and enabling them to drive.  Her company has 10 employees.  Kengaru can drive 60 miles on one charge, and has two   two-kw. motors and rear wheel drive.  It has gotten fantastic reception from paraplegics.   The cost is  $25k.  But, that is reduced to $20k. or even to zero, in two ways. First as an electric vehicle it is eligible for many incentive programs run by American states.  Second, it can be part of a vocational rehabilitation program for paraplegics, hence eligible for state aid. 

   Way to go, Stacy!  Find a need (often, something you yourself need and want) and act to meet it.  In a previous blog I showed how Dr. Amit Goffer’s REWALK exoskeleton enabled paraplegics to walk.  Now Stacy Zoern enables them to drive.  This is truly capitalism as it should be. 

A New Golden Rule: “What’s In It For Me?”

By Shlomo  Maital      

 It would be nice if each of the world’s 7 billion people followed the Golden Rule (do unto others..) and acted selflessly like Mother Teresa.  But in reality most of us do what benefits us, our wallets, and our egos.  That’s life.

   Why then do so many policymakers screw up, by ignoring this simple fact of life?  Why do we fail to create incentives for people to do the right thing, instead of trying to create laws and regulations that try to force them to do so – laws that never work? 

  Here are some how-not-to examples of policies that do huge damage, by screwing up the incentive systems, in absurd stupid ways.

* By 2021 U.S. health spending will be 20 per cent of GDP!  At the same the standard of care will decline, because most of that increase will be health-cost inflation.  Why? In the present system, doctors and hospitals are reimbursed in large measure according to the procedures they carry out (tests, MRI’s, etc.).  Result: Numerous expensive tests and procedures, many of which are superfluous.  Some specialties like pediatrics are poorly paid, because procedures done on kids are cheaper than those for adults. (I heard this from a medical student, about to choose his specialty). 

   * The State of Lousiana pays local sheriffs per head, for each prisoner they incarcerate!  Guess which U.S. state has 26 per cent more prisoners than the next highest state (Mississippi)? 

   * The new Prime Minister of Thailand, Yingluck Shinawatra dramatically raised the salaries of teachers, after a campaign promise, and began giving students tablets. Yet the performance of Thai kids on international standard tests has fallen.  Why?  The added pay for teachers came with no type of performance or success measure.  They get the extra money, all of them, whether they’re good or bad.  Nice work, PM! 

   Teachers, doctors, police —  there are numerous examples.  Let’s rethink policy. Let’s ask two simple questions.  What do we want people to do?  What will get them to do it?  It’s that simple!

Natural Gas, Geopolitics and World Peace:

Toward a Better Future

By Shlomo  Maital



  Within a very short period of time, the geopolitical map of the world has been radically altered.  Most people haven’t really noticed.

   Here is why.   It’s called “fracking”.

   Suddenly, by inducing tiny fractures in natural gas deposits trapped in rock (through explosions and injection of huge amounts of water), engineers can now unlock massive deposits of natural gas underground.  There are massive environmental issues involved – fracking can pollute groundwater, and even cause small earthquakes.  Hopefully these problems can be overcome.

   But the key point is this:  The world consumes about 2.4 trillion cubic meters of natural gas yearly.  The estimated supply of natural gas, through fracking, is (by country):  U.S. 24.4 (trillion cu. meters), Argentina, 21.9; Europe, 18.1; Australia, 11.2; and China, 36.1.  Total:  111.7 trillion cubic meters. In other words:  50 YEARS  OF SUPPLY, AT CURRENT CONSUMPTION RATES.   If you assume that some of the natural gas will be converted to fuel to run cars and trucks, there is still at least 25 years worth of annual consumption. 

   What this means is the world can liberate itself from the tyranny of Mideast oil.  (And, by the way, help the environment; natural gas burns far more cleanly than petroleum).   America has already seen the light.  America’s Joint Chiefs of Staff head Raymond Odiorno has published a thoughtful essay in Foreign Affairs, in which he documents America’s new geopolitical strategy – shift its military power away from the Mideast (especially carrier task forces) and toward Asia. 

   The reason the decline of Mideast oil is good, is simple.  Vicious tyrannical governments in Saudi Arabia, Iran and elsewhere are kept afloat solely by petrodollars.  Leaders of oil-rich Mideast countries, and those in North Africa too, like Libya, utterly failed to build any semblance of a modern economy, because they did not have to – oil money lubricated their pockets and kept them in power.  Now there will be no choice.  Modernize or be swept away by hungry masses.  This is positive. When Iran joins the 21st C., and builds a real economy (today, Iran cannot even refine its own crude oil, and has to import gasoline), the ayatollahs’ reign will end. 

     My friend, the late economist Julian Simon, loved to point out that the world has never run out of a key natural resource. Long before this happens, something occurs to find a replacement or a new source.  This is true of hydrocarbons as well.  I believe the new sources of natural gas are a positive force for world peace and even for the environment, on balance (even though France and Bulgaria have banned fracking).  And for my own country, Israel, which discovered huge deposits of natural gas offshore, and with even larger deposits awaiting fracking beneath the Negev, a historical wrong has finally been corrected after 2,000 years… Moses’ wrong turn into Canaan, instead of Saudi Arabia, toward oranges, rather than toward oil, finally transforms into a plentiful source of energy.  As the saying goes, the wheels of G-d grind slowly but exceedingly fine…

Analysis of America’s Problem & Solution For Grade Four

By Shlomo  Maital   




 Will Smith’s 10-year-old son jaden

My fellow economists specialize in complicating what is essentially very simple. 

   Can we simplify America’s current slumping economy, and explain a solution, at a level that a 10-year-old (Grade Four student) can understand?

   Let’s try.   If you know a 10-year-old, try this on them.

   “So, some pretty smart people say they did a study and they found that ordinary American families have gotten a lot more poor between 2007 and 2010. (2007 was when you were five years old).  *  Why?  Well, about seven American families in every 10 own their own home.  Mostly their wealth is in their homes.  And lately, since you were 5, the price of those homes has gone down a whole lot.  So, if, say, your family had a $500,000 home in 2007, then just three years later, it would be worth about $300,000.   That’s a lot of money to lose. It’s like several years of your dad’s or mom’s salary.  So people feel poor, because of that, and they don’t spend and buy things and take trips and go shopping.  So, when they don’t spend, people can’t find jobs to make the things people would buy if they did spend.  That makes people even poorer…and we are on, say, a roller coaster, going down, and it never seems to go up.  So, how do you get the roller coaster to go up again?  Change direction. If people aren’t spending because they feel they are poor, make them feel rich again. How?  Make their houses worth more?  How?  Get banks to stop selling houses that they grab because the people living in the houses can’t pay the bank what they owe it.  How?  Well, make the banks sell the mortgages to the people who run the city.  And then, stop kicking people out of their homes and stop selling those homes, so the price of homes can go up again and everyone can feel richer.  It’s pretty simple, right?   So, if it’s so simple, why don’t all those smart people do something about it?  Well, Picasso (a great painter) once said it took him his whole life to learn to paint like a child.   It’s taking all those smart guys and gals a whole life, just to learn to think like a child…and they still haven’t figured it out yet.  Hope they figure it out soon!”

  •  The Federal Reserve released a study showing that the median net worth of AMERICAN FAMILIES fell by 39% between 2007 and 2010, to $77,000, a level last seen in 1992. This was except for the top 10% of earners, whose wealth rose slightly. Most of the decline was a result of the collapse in the  housing market.

The German Side of the Story

By Shlomo  Maital  



As a part-time journalist, blogger and columnist,  I try hard to present strong views, but at the same time offer fair and balanced analysis.  When it comes to Germany’s role in resolving the euro crisis, I fall far short of this goal. 

  Hans-Werner Sinn, president of the Ifo Institute and a Univ. of Munich economist, presents a powerful argument for more sympathy for Germany and Merkel, in an Op-Ed commentary in the Global New York Times today (Thursday June 14).  Taking a long historical perspective, he notes that when American Treasury Secretary Alexander Hamilton had the federal govt. take over the debt of the states, after the Revolutionary War,  “socializing the debt”, this caused the states to over-borrow, leading to bankruptcy of eight states and territories in the 1830s and 1840s and seriously threatening the very existence of the federal United States of America (they weren’t very united).  No-one will bail out California, notes Hans-Werner, today, even though it is nearly bankrupt; it has to find its own solutions. 

   We are in the fifth year of generous liquidity to help Europe’s deadbeats, he notes (he doesn’t call them deadbeats, only ‘uncompetitive members’).  Since 2007, the European Central Bank has given target credit, and Germany chipped in $874 b. worth.  Since May 2010 the ECB gouth over $250 b. in govt. bonds, with another $500 b. coming from emergency programs an the IMF.  Add to that two European rescue funds, “and you have a total of $2.63 trillion!”.  Should Ireland, Greece, Italy Portugal and Spain go bankrupt, he notes, Germany will lose over $1.35 trillion, more than 40 per cent of its GDP!  “Has the U.S. ever incurred a similar risk for helping other countries?” he asks.

   Germany got 0.5 % of its GDP, for four years, or 2% of one year’s GDP, from the American Marshall Plan, in 1947-8.  Greece has received $575 b. in assistance efforts, which amount to a staggering 115 Marshall plans, relative to Greece’s GDP.  And the situation still gets worse. 

    Why, Mr. Obama, asks Hans-Werner, is that not enough?   

Finally! Financial Innovation to Resolve Underwater Mortgages

By Shlomo  Maital

 underwater mortgage  

  What is the biggest problem facing America’s economy today? Well, of course, the economy’s utter inability to create meaningful jobs.  But underlying that problem is the ‘underwater mortgage’ problem.  Millions of American home-owners owe money borrowed to buy their homes, and their homes are worth less, often far less, than what they owe.  In principle, if you pay off your mortgage, you are paying much more than the asset you own.  If you fail to pay your mortgage, well, you’re a deadbeat and lose your home.  It is a bitter dilemma facing millions of Americans. 

      How widespread and severe is this problem?

   “CoreLogic recently estimated that about 22 percent of all of the homeowners in the US now owe more on their homes than what they are worth. In San Bernardino County alone, officials say that there are about 100,000 homeowners with underwater mortgages.”   

  One homeowner in every five (in fact, nearly one in four) owes more than their homes are worth. And there is little sign property values will rise soon.  In fact, as long as banks are seizing property and foreclosing after non-payment of mortgages, then selling properties, the supply pressure will keep property prices from rising.

   Where is the financial innovation that can cut through the problem and resolve it, so that homeowners can continue to live in their homes, and perhaps, feel secure enough to resume spending? 

  Here is a solution invented by  Mortgage Resolution Partners.  1. Local governments use funds raised on capital markets, and the law of ‘eminent domain’ (which permits them to buy assets they need to, for instance, build a road, at fair market prices), to buy mortgages now held by banks and other financial institutions.  2. The mortgages will then be restructured, to halve the monthly payment and allow homeowners to continue to pay the monthly payment, while living in their homes.  3. The newly restructured mortgages would then be sold to investors, hedge funds and pension funds, in order to pay back the money used to buy those mortgages. 

  Sounds complicated? It is, a bit.  And some are cynical about Mortgage Resolution Partners, a private investment firm that stands to make a tidy profit if the scheme goes through.  But so what?  If their innovation works, the benefit to America will be huge, far exceeding whatever profits MRP makes. Can local governments legally seize mortgages (force banks, etc., to accept fifty cents on the dollar for them)?  They can indeed.  The law of ‘eminent domain’ allows this.  It may be in the banks’ interest anyway. Right now they carry huge unrecognized losses on their books.  Why not recognize the losses, clean up the mess – and move on. 

    There has been a veritable desert of non-innovation in financial services, related to cleaning up the subprime mortgage mess. Finally some ideas are starting to emerge.  They deserve a try.  Any idea is better than no idea.  If they don’t work, try something else. But for heaven’s sake – try SOMETHING!

Can You Feel My Pain?  Germany: “No!”

 Shlomo  Maital  



One of the tools I teach aspiring entrepreneurs is that of empathy – becoming the person whose needs you seek to meet, feeling their pain, their discomfort, their needs.  Only through empathy can we design truly unique, world-changing goods and services that meet unmet needs, which people often are not able to articulate. We need to become like them, to serve them well.

  According to the latest issue of the Economist, Germany is sinking the world’s boats. The cover design, showing the “ship of the world” sinking, captures it well. 

   Why is Germany unable to take decisive action, to resolve the EU (and world) crisis?

   Because Germany is like the rich kid, who cannot fathom what it’s like to be poor.

   Here are the numbers.  Germany has a current account surplus (gap between money flowing in and money flowing out) of $202 b. (!), for the 12 months ending in March.  This is the largest in the world, bigger than even China ($197 b.) or Saudi Arabia ($174 b.).

   Why? Because Germany is benefiting from the falling euro, which makes German exports (to China, among others) very cheap.  German is profiting from the pain of Greece, Spain, and Italy, whose troubles (generating 25% unemployment in Greece and in Spain) are driving the euro down, making Germany rich. 

    The rate of unemployment in Germany?  6.7 per cent, in May.  No, friends, young Germans are not leaving Germany, bailing out to find jobs abroad.  But young Greeks and young Spaniards are. 

    So why is Germany unwilling to help nations in trouble?  Why is Angela Merkel talking about a two-tier Europe (have’s and have-not’s)?  Perhaps because, if I’m all right, and you’re not, it’s your fault and your problem.  Just because you’re having a crisis, Germany is saying to Greece and Spain, does not mean I have a problem.

    The point is, Germany DOES have a problem.  If the EU and euro group collapse, Germany will pay a huge price.   It will realize it too late.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
June 2012