Illustration: Steven j. Moore audacious HBR’s List of HBR’s List of The newyear begins precariously. incremental, andnotably lackingin fresh ideas. that sparks every revolution: Why not? collapse. Businessesseemparalyzed. E economy vacillates betweensignsofrecovery andomensof they’re notquixotic. They represent real business conversation starters thatasktheonequestion opportunities. They aren’t lectures; they’re difficult problems while improving theeconomy and disciplines to propose audacious thatattackbig, ideas now more thanever. Nowisthetimeforaudacity, notausterity. sitting on$2trillionincash,they’re risk-averse, strategically society asawhole. Though are theseideas bold, T We thinkthisstinks. Theworld needsinvention anddaring o thatendwe’ve asked experts andleaders from many ideas F or solving thew ven though they’re

he global Theglobal orld’s Problems January–February 2012 Harvard BusinessR

HBR.orghbr.org eview 2

HBR’s List of Audacious Ideas

Time frame Before the economy tanks Degree of difficulty easier than inventing mortgage-backed securities Barrier political will growth versus 2.5% annual S&P 500 growth over the past half century), Trills might very Give People Shares of GDP well sell for a multiple higher than 50, too. The advantage of keeping shares equal We can solve the debt crisis by replacing to a perfect trillionth of the economy is that people will know exactly what they are get- T-bills with “Trills.” by Robert J. Shiller ting: One-trillionth of a country is real and easy to understand. That kind of clarity en- courages trust that governmental shenani- orporations use a combina- the U.S. government, for instance, would gans will not compromise the obligation. tion of debt and equity to have paid $13.22 in 2010, in four quarterly An investor who bought one Trill from finance their investments installments. The payoff in future years each country would have effectively in- and operations. Nations, in would vary, of course. If the economy sur- vested in the entire world for a perfectly contrast, rely exclusively on prised us on the upside, dividends would diversified portfolio. Moreover, Trills might Cdebt. When a nation’s economy stalls and go up; if it slumped, dividends would fall. plausibly appeal to international inves- its debt continues to grow—you may have The market would determine the price tors even more than corporate shares do noticed this happening a lot recently—di- of a Trill, which would be volatile. It would because Trills would avoid the problem of saster looms for the country’s taxpayers. depend not only on the most recent divi- moral hazard. Here’s why: If international This is why Europe is in turmoil right now. dend but also on investors’ expectations investors ever acquired a good fraction of But things don’t have to work this way. for the future, which can change minute to a country’s corporate shares, the country Here’s an audacious alternative: Coun- minute. There’s some evidence that a Trill would have an incentive to raise the corpo- tries should replace much of their existing might often be expensive relative to the rate profits tax on those shares or regulate national debt with shares of the “earnings” dividend, which would be good for the gov- them to lessen their value. If a country did of their economies. This would allow them ernment issuer. Shares of many U.S. cor- so, it would benefit without technically to better manage their financial obligations porations and 10-year U.S. Treasury notes breaking any promises. The issuance of and could help prevent future financial cri- now sell for over 50 times their annual Trills, however, would involve a clear and ses. It might even lower countries’ borrow- dividend. Since the growth rate of real U.S. unambiguous promise of share in value to ing costs in the long run. GDP has been higher than that of real S&P international investors. If the shares paid National shares would function much 500 earnings in the past (3.1% annual GDP dividends in the country’s domestic cur- like corporate shares traded on stock ex- changes. They would pay dividends regu- Trills Could be larly. Ideally, they’d be perpetual, although Attractive Investments 2010 a country could always buy its shares back total Suppose that in 2005, two people each Value on the open market. The price of a share $1,350.32 invested $1,000 in different portfolios of Trills would fluctuate from day to day as new from various countries. (Each Trill equals information about a country’s economy one-trillionth of a country’s GDP.) Here’s how Portfolio 1 came out. The opportunity to participate the portfolios would have fared. Amount Real GDP Invested Growth in the uncertain economic growth of the Mexico $300 9.71% issuer might well excite, rather than scare Turkey 500 36.43 Poland 200 38.29 off, investors—just as it does in the stock market. Mark Kamstra of York University and Portfolio 2 I have mapped out how these new national Amount Real GDP Invested Growth shares could work. We propose that they Japan $300 7.27% Ireland 300 −9.24 pay a quarterly dividend equal to exactly Greece 400 12.97 one-trillionth of a country’s quar- terly gross domestic product, the simplest measure of national $1,001.55 earnings. We could call 2005 Note accumulated GDP growth rates are real: these shares “Trills.” adjusted for exchange rate changes and inflation. A Trill issued by

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Audacity Works! Eradicate SmallPox Smallpox was still killing millions in 1967, two centuries after the invention of a vaccine for it. That year the World Health Organization decided to immunize everyone in the world. To do so it had to develop a vaccine that rency, it would eliminate another moral dangerous exten- required no refrigeration and a new needle hazard associated with conventional debt. that would simplify inoculation. Then came sion of financial Countries could not reduce their real obli- a seven-year program to contain outbreaks capitalism—a system through door-to-door surveillance. By 1979 gation by creating massive inflation, as they in some ill repute at the smallpox had disappeared from the planet. can today with conventional government moment. But in fact the en- debt, because their nominal GDP would in- thusiastic implementation of crease with the inflation. financial capitalism has been the Trills based on GDP have the great merit story of every successful nation on the of being simple. Other measures of national Markets for national shares would fun- planet. We should not shrink from having earnings might seem more accurate than damentally change the economic atmo- real markets for countries, which would GDP but would sacrifice simplicity. It might sphere. An immediate market response track countries’ successes much more ac- appear to be an improvement to calculate would accompany every new government curately than stock markets do. Stock mar- national earnings as GDP minus some na- plan affecting the future of the economy, kets represent only claims on corporate tional proxy for costs. This would have the generating a discussion of each country’s earnings after corporate taxes—an unreli- effect of leveraging Trills so that they would development plan, as well as a flow of in- able measure of a country’s success. We be more volatile and appeal to investors in ternational resources toward governments can do better. secondary markets. with plans that passed the market test. For instance, we might subtract some At the same time, with Trill prices gy- Robert J. Shiller is the Arthur M. Okun Professor of Economics at Yale University and the author of appropriate measure of interest on the con- rating up and down from minute to min- Finance and the Good Society (Princeton Univer- ventional national debt from GDP to arrive ute, national shares might seem to be a sity Press, forthcoming). at national earnings. After all, corporations subtract their interest costs when they cal- culate their earnings. It certainly would have helped Greece to have a Trill based on Time frame Next week degree of difficulty operationally easy, psychologically hard Barrier Greed, economic theory GDP minus interest during its recent crisis; as investors balked at efforts to roll over their debt, interest costs skyrocketed, mak- Stop Tying Pay to Performance ing a bad situation even more unmanage- able. On the other hand, adjusting for inter- The evidence is overwhelming: It doesn’t work. est costs adds a complication—and another by Bruno S. Frey and Margit Osterloh possible moral hazard, since it could tempt a government to play with interest rates. Speaking of Greece, what effect could e’ve talked about 40:1 in the 1970s to 325:1 in 2010. The ratio Trills have had during the Great Recession this since the finan- isn’t as extreme in most other countries, but and its aftermath? Greece’s real GDP fell cial meltdown. Now the trend is the same. Below the top level, 7.4% in 2010. If its Trills were leveraged it’s time to do it: Un- mismatches between pay and performance substantially—say, five to one—then the link pay from perfor- aren’t so acute. But all variable-pay-for- dividend paid on them would have fallen Wmance. The evidence keeps growing that performance schemes still suffer from four by about 40%. This would have done much pay for performance is ineffective. It also inescapable flaws: to mitigate the crisis, making it easier for may induce executives to take company- 1. In a modern economy, where new Greek taxpayers to bear. It would have killing risks. There are other ways to moti- challenges emerge constantly, it’s impossi- given Greece a bailout without any inter- vate employees that yield better results at ble to determine the tasks that will need to national hand-wringing or broken prom- lower cost. be done in the future precisely enough for ises. After the fact, investors in Greek Trills Thanks mainly to provisions linked to variable pay for performance to work well. would have been unhappy. But they still performance, CEO compensation has sky- 2. People subject to variable pay for per- might have been willing to purchase them, rocketed in recent decades, while its cor- formance don’t passively accept the criteria. considering the possible upside of such relation with actual corporate performance They spend a lot of time and energy trying a leveraged investment. Investors avidly has remained as weak as ever. This has to manipulate the criteria in their favor, pursue leveraged corporate stocks, so it’s been most true in the U.S., where among helped by the fact that they often know the plausible that they would buy leveraged the S&P 500 the ratio of average CEO pay to specifics of their work better than their su- Trills as well. average employee salary went from about periors do.

January–February 2012 Harvard Business Review 4 HBR’s List of Audacious Ideas

3. Variable pay for performance often Time frame Before Cod Disappear Degree of difficulty surprisingly easy barrier national and international bureaucracy leads employees to focus exclusively on ar- eas covered by the criteria and neglect other important tasks. This is known as the “mul- Declare 20% of the tiple tasking” problem. 4. Variable pay for performance tends Ocean Off-Limits to crowd out intrinsic motivation and thus the joy of fulfilling work. Such motivation Here’s one great way to save fish—and is of great importance to business, because the fishing industry.by Enric Sala it supports innovation and encourages beyond-the-ordinary contributions. The idea that people work only for e are consuming people living near marine reserves doubled money has been thrown overboard by fish faster than they within a decade. Reserves attract more leading scholars. Research has shown that can reproduce, de- tourists, too. The 345,400-square-­kilometer human beings are not interested solely in nuding the ocean. Great Barrier Reef Marine Park—of which material gain. They care for the well-being Conventional solu- 33% is a marine reserve—generates around of other individuals and value recognition Wtions, such as forcing reductions in fishing AU$5.5 billion a year in net economic ben- from coworkers. Many employees apply capacity, lowering industry subsidies, and efits and has created more than 50,000 full- themselves because they find their work imposing sustainable quotas on catches, time jobs. challenging and worthwhile. These non- have proved difficult to implement globally. Fish banks also help preserve ocean material motivations point to better ways Creating fish banks—marine reserves ecosystem benefits such as carbon seques- to get results from the members of an where no fishing can ever take place—cov- tration. In fact, “blue carbon” projects organization. ering at least 20% of the ocean is a bold way could generate additional revenues for lo- One way is to select employees more to tackle the problem. When areas of the carefully, hiring people who are truly in- ocean are left to recover from overfishing, terested in the work—not people whose the results are impressive. The number After marine primary goal is earning the highest pay. of marine species in fish banks increases reserves are created, Another approach is to pay fixed compen- by 21%, on average, and the fish grow to the number of species sation but adjust it on the basis of a com- be 28% bigger, according to data on 124 re- in them increases prehensive evaluation of employees’ work serves in 29 countries. The amount of fish by 21%. after some time. This avoids the multiple- per hectare increases 166%, on average, tasking problem. At the end of the year and fish biomass, or total weight, shoots up companies can also distribute part of their 446% over the next 10 years. In most cases, profits to employees according to their the fish biomass keeps rising for more than contribution to overall performance, rather 25 years. than preset criteria. Awards and recognition There are spillover effects, too. Because are effective motivators as well. Research of the higher biomass and higher repro- The fish grow to suggests that effort increases among both duction rates inside a fish bank, adjacent the winners and other employees when areas often get rejuvenated. The creation be 28% bigger. awards are given out. of the Columbretes Islands Marine Reserve Variable pay for performance, while it in Spain, for instance, increased catches in may seem attractive in theory, creates more surrounding fisheries by about 10% a year. problems than it solves. There’s no proof In the same way, after five small fish banks that it helps achieve its intended purposes, were established in St. Lucia, catches in and other approaches not only work better adjacent areas grew by 46% to 90%, de- but also strengthen employee loyalty. pending on the gear used, over a five-year The amount of period. fish per hectare increases Bruno S. Frey is the Distinguished Professor of These spillover effects more than offset 166%, and fish biomass Behavioural Science at the UK’s Warwick Business the financial losses to fishermen caused by School and a professor of economics at the Univer­ shoots up 446%. sity of Zurich. Margit Osterloh is a professor of the creation of no-fishing zones. In Kenya management science at Warwick Business School. and the Solomon Islands, the incomes of

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Audacity Works! End War in Western Europe Western Europeans had fought over the same ground for thousands of years. After World War II, U.S. Time frame now degree of difficulty easy barrier risk aversion Secretary of State George Marshall wanted to break that endless cycle. The Marshall Plan doled out Double Down on Start-ups $13 billion—5% of U.S. GDP—to 16 nations to reindustrialize, recapi- talize, and create mutual depen- The most sensible VC investments are the dence through international trade. In four years European economies boldest. by Bruce Gibney and Ken Howery revived, and peace has persisted among all 16 nations to this day. he past decade has been an over long periods of time—and less like the embarrassing one for the ven- NIH, which prefers incremental, almost- ture capital industry. Seventy- sure advances. cal communities through global carbon five percent of funds made If this approach results in occasional markets. Fish banks aren’t the only answer, no money. Venture capital huge failures as well as huge successes, so of course, but they must be a key compo- Tchanged for the worse in many ways, be- be it. It’s time for VCs to return to boldness. nent of the portfolio of solutions needed to coming less entrepreneurial and less We must find and help build the revolution- tackle the current crisis. engineer-driven, and putting up less of ary start-ups that will generate transforma- Finally, fish banks are an inexpensive its own money. Today VC firms care more tional change and create billions in value. solution. The cost of creating and manag- about exploiting the next bubble than about That is where the returns lie. Here are three ing marine reserves that would close off investing in great technology companies steps we should take: 20% of the ocean is estimated to be as low with long-term goals and the potential for Learn patience. Real progress takes as $5 billion a year—just a small fraction major breakthroughs. Entrepreneurs re- time—and the discipline to refrain from ex- of the subsidies that governments offer spond accordingly, building low-tech clones iting at the first sign of success. Mark Zuck- the fishing industry, which were upwards with a high probability of being funded. erberg held fast to his belief that Facebook of $25 billion in 2003. Moreover, the ad- With the heyday of Bell Labs, Xerox should remain private and focus on growth ditional revenues the fish banks generate PARC, and their kind long over, we need rather than a quick sale, and as a result the should cover the cost of managing them, venture capitalists to help foster disruptive company created $70 billion in value it making fish banks self-sustaining busi- change. To do that, they’ll have to take real never would have seen if it had been sold ness opportunities—not resource sinks, risk and back companies they believe pas- early. And if Amazon had succumbed to the as people typically perceive conservation sionately in. VC firms must behave more shortsighted scrutiny that followed its IPO, proj­ects to be. like the Howard Hughes Medical Institute, it might never have become the Walmart Marine reserves could be easy to create which funds radical scientific innovations of the web. Meanwhile, companies like if instead of relying on governments and global negotiations, we empowered local communities to develop and manage them. Policy makers would need only to facilitate the process; they should be happy to do so. Public-private partnerships would be an effective way of getting this idea to scale quickly. Companies might be willing to invest in fish banks, covering short-term losses with long-term profits from larger catches, more tourism, and “blue carbon” projects. Creating fish banks would thus turn fishing populations from hunters into shepherds of the sea, who help protect Earth’s biggest asset, the ocean.

Enric Sala is an explorer-in-residence at the National Geographic Society, based in Washing- ton, DC. He is a coeditor of Shifting Baselines: The Past and the Future of Ocean Fisheries (Island Press, 2011).

January–February 2012 Harvard Business Review 6 HBR’s List of Audacious Ideas

Myspace, in their rush to find an exit for in- Stop consulting. Investments fail quietly. Ambitious companies attract vestors, ended up leaving the stage entirely. shouldn’t be a way for VCs to express their the best engineers; their vision inspires During longer periods before exits, inner McKinsey consultant. “Adult supervi- those engineers to work hard in a way that there may be uncomfortably few metrics sion” is a VC marketing gimmick that helps financial returns never could. By develop- to report to investors. SpaceX and Palantir nobody. Instead, VCs should work to pro- ing durable technological advantages, such took years to develop their transformative mote improvements that help all start-ups. companies can in time achieve the gigantic technologies and initially posted none of We should increase the mobility of labor by payoffs necessary to offset the failures in the rapidly rising, often flimsy metrics that lobbying for immigration reform, help re- the portfolio. excite VCs. Most VCs were unwilling to fund duce the burden of student debt, and battle For VCs, an audacious business model is them; the Groupons of Moldova beckoned patent trolls. a better one. It’s time for venture capital to instead. Clones and other bagatelles require Sensibly embrace risk. Companies be serious about its role in the world. tantalizingly little investment to demon- tackling big challenges may fail in spec- strate short-term value, but that just proves tacular ways, but as a portfolio they are Bruce Gibney and Ken Howery are partners at Founders Fund, a venture firm based in how simple—and generally irrelevant—the far less risky than an assortment of bland San Francisco, which invested in Facebook, problems they solve are. nonentities, whose chief merit is that they Palantir, SpaceX, Spotify, and ZocDoc.

Time frame by 2020 degree of difficulty Herculean Barrier big ag Grow More Apples and Less Corn A simple change to end obesity and hunger. by Ellen Gustafson

he modern food system is The Dominance of BiG AG failing. In the past three Most of the food supply is controlled % decades, an increase in in­ by a few agricultural giants. 82 of U.S. corn dustrial food processing, % exportS are made the divestment of small and 90 BY 3 companies of world coffee medium farms, and the overproduction exports are T controlled by of subsidized commodity crops like corn 3 companies % and soy have left us with an abundance 81 of beef packing in of the wrong foods. No wonder we’re now the U.S. is handled by 4 companies grappling with twin epidemics: hunger (in regions where food is scarce) and obe­ sity (in areas where the affordable food is need to regionalize the food supply. Lo­ care. Regionalization would also pro­ highly processed and lacking in nutrition). cal food producers can join forces to vide greater food security and lower the What can we do about this? First, we compete at a regional level, while multi­ carbon cost of shipping food. But those need to dismantle subsidies that favor nationals must pull regional and local arguments don’t seem to be enough to the overproduction of corn, soy, wheat, sourcing into their supply chains. spur change. So let’s focus on this: Re­ and cotton—and replace them with in­ Both shifts are already under way. In structuring the food system would spur centives that encourage more diverse, the U.S., an online service called Local robust economic development at the lo­ healthful agriculture. Today just 10% of Orbit lets customers order food from cal and regional levels everywhere. Our supermarket purchases in the U.S. are multiple local farmers and vendors at diet is tied to what we produce, and so fruits and vegetables; there’s no reason once. Meanwhile, Unilever plans to pull is our economy. If we change our dinners, we can’t raise that share to half by 2020, half a million small farmers into its sup­ we can change the world. consistent with USDA recommendations. ply chain by 2020—a smart strategy that To get there, we’ll also need to find a helps the company secure diverse, sus­ Ellen Gustafson is the founder and execu- middle ground between global, efficient, tainable sources of raw ingredients. tive director of the 30 Project. She cofounded FEED Projects and the FEED Foundation and yet frequently low-nutrition Big Food, Changing what we eat would make us formerly worked for the UN World Food and local, small-farm agriculture. We’ll healthier and thus save money on health Programme. phi c: Ian c h ong Infogra

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Time frame 20 years Degree of difficulty significant barrier scieNTIFIC kNOW-how could leapfrog hardwired electrification. Electrify the Bottom Imagine a photovoltaic panel and a high- capacity, low-cost battery in every home in Of the Pyramid every remote village. The U.S. Department of Energy’s Ad- A little energy will spark a lot of growth. vanced Research Projects Agency, ARPA-E, is making major investments in next- by Arun Majumdar generation battery research—targeting higher-efficiency batteries at significantly taggeringly, about 1.5 billion Emerging economies like India, China, lower costs. Though this research is driven people live without electric- and Brazil have aggressive rural electrifica- by developed economies’ concerns—chief ity. They’re off the grid liter- tion programs. They’ve discovered, though, among them, extending the range of elec- ally and figuratively, lacking that laying thousands of miles of wire or tric vehicles and grid-level storage—better a basic resource that’s so vital burning expensive diesel fuel to run inef- and cheaper batteries will help open up Sto economic development and well-being. ficient generators isn’t necessarily the best vast new markets at the bottom of the pyr- But extending the grid isn’t always practi- way to bring electricity to remote commu- amid. The challenge is more complicated, cal—in many cases logistical issues and nities. Stand-alone power generation sys- of course, than just getting the science of high costs make it all but impossible. The tems using local resources—particularly storing power right. There are huge eco- solution: creating local, self-contained, af- renewables such as solar, wind, biomass, nomic and technological hurdles to clear. fordable power generation and storage sys- tems that can provide electricity wherever HOW ELECTRICITY POWERS WELL-BEING it’s needed. 1.0 Norway United Canada The chart at right helps explain why it’s Australia States so important for businesses and govern- Argentina Poland Kuwait ment to invest in this goal. It correlates per capita electricity consumption with the hu- Brazil man development index, a broad measure When annual energy of well-being as gauged by life expectancy, consumption per capita South reaches just 2,500 kilowatt literacy, education, and standard of living. Africa hours, countries move India The greater a country’s electricity con- near the top of the human sumption, the greater the well-being of its Pakistan development index. people. Electricity doesn’t cause well-being,­ ( HD I SCORE ) of course. But it is a powerful enabler. When people have lights that allow them to study Zambia - be ing and work after dark, refrigeration to keep foods and medicine fresh, pumps and pu- W ell 12,500 25,000 rifiers to irrigate farmland and produce 0.3 2,500 Electricity consumption (kwh/person/year) Source UNDP, 2006 safe drinking water, and cell phones and computers to connect them with commer- cial, educational, and health care resources, and hydroelectric—increasingly look more But who would have imagined 20 years they can more fully participate in the social attractive in these circumstances. But with ago that billions of people in developing and economic activities that drive human renewables, there’s a catch. When the sun economies would join the global conver- development. sets or is hidden by clouds, or when the sation on their cell phones? There’s a good A little electricity goes a long way. Note wind stops blowing, the lights wink out. chance that 20 years from now, hundreds that when annual consumption rises from And when these systems produce more of millions of people living off the grid will 0 to just a few thousand kilowatt hours per electricity than is being used at a given mo- depend on local electricity generation with capita, countries move near the top of the ment, the surplus is lost. storage to reliably power lights, refrigera- HDI scale. Argentina, with per capita con- The solution is storage. Just as cellular tors, and phones—wirelessly joining the sumption of about 2,500 kWh, has an HDI technology leapfrogged landlines to bring electrified world. score approaching that of Canada, whose telecommunications to millions in remote Arun Majumdar is the director of the Advanced consumption is seven times higher. areas, battery-assisted stand-alone systems Research Projects Agency—Energy (ARPA-E).

January–February 2012 Harvard Business Review 8 HBR’s List of Audacious Ideas

Space: The Expensive Frontier The economics of rocket propulsion haven’t changed in half a century. Without an engineering breakthrough to make escaping Time frame open-ended DEGREE OF DIFFICULTY surprisingly hard gravity less costly, Mars will remain a trillion dollars away. barrier nasa itself

Getting objects into orbit Give NASA a Delivering one payload pound into orbit with the least-expensive rockets costs Real Mission $10,000. We’re throwing That’s a lot. How expensive is it? The three astronauts aboard the money at the International Space Station each drink two liters of water a day. Delivering just their daily supply Earth wrong stuff. of water costs by Gregg Easterbrook $125,000. The International Space station he National Aeronautics and Space Administration needs The ISS weighs 440 tons and cost $110 billion a new mission. The space to build, launch, and assemble, or shuttle program has ended. 1 The space station seems to be $250million per TON Thistory’s most expensive white elephant. Even NASA’s naming conventions lack vi- sion: “International Space Station” was the The Apollo space Program best the agency could think of. Its troubled advanced space-telescope project, whose In total the nine moon missions cost costs have increased sevenfold, is named not for a great astronaut, scientist, or ex- $140 billion. plorer but for former NASA administrator The longest moon mission, Apollo 17, lasted 13 days James Webb. He did a solid job, but an and had three crew members and a mass of 52 tons at organization that names a project after departure from Earth orbit, or MOON a bureaucrat is an organization without imagination. 1.3 tons per person/day. Couldn’t President Obama give NASA an inspirational new mission of sending peo- ple to Mars? Though technically possible, a mission to Mars travel to Mars would be insanely expen- Scientists estimate conservatively that getting to Mars sive right now. If there were an affordable would require a crew of six people and last 500 days. way to reach orbit, it might open countless X X ≈ business opportunities in space. At the mo- 6 500 1.3 4,000 ment those opportunities are few. SpaceX, crew days tons per ton spacecraft members person/ at departure a start-up run by PayPal founder Elon day from Earth Musk, is working on fully private rockets, but so far the sole customer is the govern- MARS X ment—which needs cargo delivery to the 4,000 equal to the $250 space station. Someday resources such as ton spacecraft displacement of million per ton a navy frigate helium-3 may be mined on the moon, but that day is many decades distant. Space tourism has gotten a lot of attention, but = $1 TRILLION to date all the projects in that realm seek to build flying machines that do no more than Note All dollar figures have been adjusted for inflation to their 2011 value.

sail briefly through the upper atmosphere. phi c: Ian c h ong Infogra

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Audacity Works! End flooding IN HOLLAND In the aftermath of the Great North Sea flood of 1953, Dutch engineers envisioned a new kind of barrier that would withstand a 10,000-year storm. The long view inspired massive solutions: giant floodplains propulsion could ter in Alabama developed the revolution- instead of flood walls, and technologically work—but only once ary engines and structure of the Saturn V sophisticated, centralized monitoring and in space. Getting ob- moon rocket. In recent decades, Marshall maintenance systems. Hurricanes continue to pound the Netherlands, but there has jects up the first 200 miles has mainly tinkered with existing designs. been no Watersnoodramp since. is still the issue. “Solar sails” NASA hasn’t made the search for propul- suffer from the same problem. sion breakthroughs a priority. Eccentric ideas have also been Right now the astronaut corps has little batted around. One is to use lasers to to do. Why not divert $1 billion or $2 billion a Essentially, they’re developing very high beam energy to an ascending rocket. The year from funding for manned space travel altitude aircraft. favorite of science fiction is the “skyhook”— to propulsion research—say, half the money The reason Mars and the space busi- a counterweight in high orbit, connected to NASA engineering centers and half to pri- ness are out of reach is that no one has yet to a cable that would pull objects into space. vate contractors? Astronaut training could solved a fundamental problem: the cost of You don’t happen to know what materials be put on hold or reduced to some minimal propelling weight into orbit. Engineers like could be used to manufacture a 23,000-mile- level to free up the money needed. to say that low Earth orbit is “halfway to long weight-bearing cable, do you? Any grand future in space will require any destination in the solar system.” The Still, just because propulsion’s a diffi- a more economical way to get there. Find- energy required to overcome Earth’s grav- cult scientific and engineering challenge ing fundamentally new ways to reach orbit ity and place an object 200 miles above sea does not mean NASA shouldn’t try. Since would put NASA on track toward a useful level is roughly the same as that required the shuttle program began, too much of the tomorrow. When the propulsion break- to send it from there to any of the planets. agency’s emphasis has been on maintain- through comes, the cosmos will still be But the cost of getting into orbit is extreme. ing subsidies to current contractors and there. We need a lower-cost form of propulsion to congressional districts. Too little emphasis Gregg Easterbrook is a contributing editor to make dreams like Mars travel a reality. has been placed on seeking new ideas. In the Atlantic and the New Republic. His most re- Rocket motors have changed surpris- the 1960s, the Marshall Space Flight Cen- cent book is Sonic Boom (Random House, 2009). ingly little since the 1960s. All current de- signs for space-bound craft employ propul- Time frame before customers revolt degree of difficulty easy sion methods much the same as those used barrier legacy investments in crm during the moon race. And the least-expen- sive existing rockets cost about $10,000 per Stop Collecting Customer Data payload pound delivered into orbit. Consider that the three astronauts now Let consumers control their personal profiles. aboard the space station each get two li- ters of fresh water a day. So it costs about by Doc Searls $125,000 to put the six liters of water the as- tronauts drink daily into orbit. Cheers! And endors have been amassing that’s just to move bottled water 200 miles. and mining customers’ per- A manned Mars mission could be a trillion- sonal data for years, armed dollar proposition. (See “Space: The Expen- with increasingly sophisti- sive Frontier.”) All presidents since Ronald cated and aggressive tech- Reagan have seen the numbers. It’s why not Vniques and dazzled by fantasies of “person- one has endorsed anything more than the alizing” marketing to the maximum extent study of Mars travel. possible. Customers naturally see this trend One caveat: It’s not clear that a funda- as a gross invasion of their privacy and are mentally new form of space propulsion can starting to resist providing accurate infor- be invented. Many ideas haven’t panned mation—or any information at all. out, including “densified” fuel and an But the main reason for vendors to quit “aerospike” engine that changes technical this practice is not that it’s bad manners. It’s properties at different altitudes. Attempts that businesses soon will no longer own the in the 1980s and 1990s to build “single data anyway—customers will. And when stage to orbit” vehicles that could fly into that happens, vendors will end up reaping space like aircraft yielded no fruit. Nuclear greater benefits than they do now.

January–February 2012 Harvard Business Review 10 HBR’s List of Audacious Ideas

Time frame now degree of difficulty easy barrier human nature

Audacity Works! Die the Way You Want To Bet Twice the Company on Your Future Fifty years ago, IBM bet the farm on the Taking charge of your last days eases development of its System/360 main- frames. Big Blue spent $5.2 billion, nearly everyone’s burden. by Ellen Goodman twice its revenues, at one point issuing a new round of stock just to meet payroll. But the high-stakes wager paid off. Introduced in 1964, the 360 made IBM f there is a condition that everyone in we want when, as they say, the time comes. the king of the computing industry for the this wide, contentious, diverse world The first place for these hard conversa- next 15 years. The system is the basis for shares, it is this one: mortality. We can tions is not in medical offices with doctors, every mainframe computer IBM has built since then. say with 100% certainty that all of us who are often uncomfortable with and un- are going to die. trained in initiating them, and it’s certainly IWe all know this, and yet we have been not in emergency rooms or intensive care immeasurably slow in recognizing that units. It’s at the kitchen table. There we can Here’s why: When customers own and many of the people we love are not dy- talk not only about the treatments we want control their own data, demand will drive ing the way they would choose. Consider and don’t want, about “extreme measures” supply more efficiently than supply cur- that in surveys 70% of people say they and comfort, but also about values, hopes, rently drives demand. Customers not only want to die at home, but 70% die in hos- and desires for our last days. We can share will collect and manage their own data but pitals or nursing homes. “Dying at home” our wishes with the people who matter and will be equipped with tools for declaring means not just where people want to die who may end up speaking for us. their intentions directly to the whole mar- but how: in comfort, among people who We have made huge cultural changes ketplace, without having to flit from store care about them, and doing what matters before. A generation ago, Americans trans- to store or website to website looking for for as long as possible. Too few of us have formed birth. That didn’t happen because what they want. seen our loved ones have what we would doctors urged women out of stirrups; hos- In this “intention economy,” customers call a “good death.” Instead, their deaths pitals didn’t put out the welcome mat for will determine the products they want, the often leave us guilty, depressed, and with dads and their video cameras. No institu- prices they pay, and the terms of engage- a sense of foreboding of what our own ex- tion promoted soft lights and doulas. In- ment they require. Those terms will include perience might be. stead, women recognized that there was a both permissions and restrictions regard- So, if we want to tackle a problem that ing the use of their data. As a result, market affects all of us, let’s think big. If we want conversations will be far more personal, to transform health care, let’s change substantive, and manipulation-free than the way we die. In surveys the coupons, traffic-building promotions, This is the goal of the Conver- and annoying “personalized” messages sation Project, which began with % consumers get now, based on readings of a group of caregivers, clergypeo- the data trails they leave behind. ple, journalists, and others shar- 70 of people say This shift will be scary to many. It will ing stories. We talked about the they want to strip the gears of marketing as we know it. trauma of dealing with a cascad- die at home But it will also improve marketing by foster- ing number of medical decisions but ing the design of new and better means of in the face of uncertainty about customer engagement—means that satisfy the wishes of our loved ones. Now, % real demand directly, inform product de- together with the Institute for Health- velopment, and build true loyalty that goes care Improvement, we’ve set a simple and 70die in hospitals both ways. transformative goal: to have every citizen’s or nursing end-of-life wishes expressed and respected. homes Doc Searls is an alumnus fellow of the Berkman We believe that the lever to begin Center for Internet and Society at Harvard Uni- this dramatic change is a willing- versity and the author of The Intention Economy: When Customers Take Charge (Harvard Business ness to talk as individuals, family Review Press, forthcoming). members, and a culture about what

11 Harvard Business Review January–February 2012 hbr.org

better way and insisted on changing their own experience. Today we’re recognizing how badly we are “doing” death and that we must change our experience with it, too. It won’t be easy to transform a norm. We still engage in a conspiracy of silence and denial. Parents are reluctant to worry their adult children; children are uncomfortable bringing up dying with their parents. In our attempts to protect one another we often end up alone and uncertain. The Conversation Project wants to cre- ate a movement that will make these talks Business easier, with a forum for sharing stories, a marketing campaign, and resources for conversation starters and guides to help people who don’t know where to begin. If our audacious idea were in a course Not As catalog, it would be listed under humani- ties, not economics. Nevertheless, we know that 25% of all Medicare expenses are incurred by the 5% of people who are in their last year of life. One study has shown Usual that simply having the conversation can cut end-of-life costs for cancer patients by 36%. Another study concluded that conversa- tions with cancer patients in their last week Harvard of life alone could make a difference of $304 million a year. Research also shows that people who have had these conversa- tions often choose less aggressive treat- ment—and yet live longer. Business Too often talking about death and money raises the specter of “death pan- els.” The public debate about health care is hbr.org framed in the language of cost cutting and The Revival of Smart rationing—as what health care reform will Review take away from you. But what if we could break out of that frame? This is one area in which letting patients’ choices drive deci- sions could result in lower costs—financial and emotional ones. We may even be able to rebuild trust in the medical system by re- specting people’s wishes. Most important, we can ensure more-humane deaths. So our audacious idea is a simple ques- tion: Have you had the conversation?

Ellen Goodman is a Pulitzer Prize–winning columnist and a cofounder of the Conversation Project.

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Time frame a decade Degree of DIFFICULTY Four-Dimensional Chess barrier mistrust and cultural differences Partner with China in Afghanistan It’s time for a grand strategy in South Asia. by Wayne Porter

en years ago, U.S. troops en- It’s time for the United States to look to entry for a road and rail system in and out tered Afghanistan to address the opportunities ahead rather than obsess of China. China is also intent on building a clear security threat. To- over the threat we fear will overtake us from oil and gas pipelines to the Persian Gulf— day our presence there is still behind. And one way to do this is to team which, like the roads and rails, would have heavily oriented toward se- up with a nation that already views Afghan- to pass through Afghanistan or Pakistan or Tcurity and trying to contain the factional istan mainly in terms of opportunities—the both. Finally, it is spending considerable violence that has long plagued the country. People’s Republic of China. sums in Afghanistan to secure mineral America’s approach to Afghanistan is reac- It is clear that China sees a strategic rights and the hydroelectric power needed tive and backward-looking. It’s as though imperative in South Asia. Over the past 30 to extract copper, iron, gold, and rare earth we were driving a Humvee down an unfa- years it has cultivated a close relationship elements for Chinese industry. Meanwhile, miliar, crowded street with our gaze fixed with the Pakistanis. It has worked with U.S. and NATO troops are providing de facto on the rearview mirror—repeatedly striking them to build a deepwater commercial port security for China’s investments in Afghani- parked cars and cursing at all the reckless in Gwadar that gives it access to the Indian stan without any tangible payback—and at drivers around us. Ocean and may eventually serve as a port of the cost of many lives and billions of dollars.

Time frame before employees do it anyway Degree of difficulty moderate barrier bad managers Crowdsource Management Reviews And make them public, too. by Linda A. Hill and Kent Lineback

magine you’re a division head and to make a recommendation to the CEO,” leadership principles they espouse and you find a manager fuming in your Irene says. “Any thoughts?” the practices they condone day to day. office. He shoves into your hand a Our advice? Collaborate with em- Companies will be forced to take far collective assessment of him as a ployees on the site: Invite all staffers to more active steps to close that gap as boss that was done by his subor- weigh in on their bosses and then make employees make its presence painfully Idinates. “Who are they to rate me?” he the assessments public. and publicly obvious. More important, seethes. “I rate them!” In fact, even if your employees crowdsourcing evaluations can change You check with Irene, the HR director, haven’t set up such a site, your company the game by advancing the way manag- who tells you that a few employees have should consider creating one. Why? Be- ers learn to lead. developed SpeakTruthToBosses.com, cause the world is becoming more trans- Of course, organizations will need an independent site that allows any em- parent, and because crowdsourced, new processes and policies to do this. ployee to evaluate his or her manager, public reviews can significantly improve We expect some missteps along the way. with the results compiled in a collective the practice of management and, thus, Many thorny issues will need resolution. review, based on the company’s own the performance of organizations. Are the assessments for development leadership criteria. And each review is Now that the use of online collabo- or evaluation or both? Should access posted there for all to see. ration tools has become so widespread, be limited to those inside the company? You scan the evaluations on the site sites like SpeakTruthToBosses.com will Who makes sure assessments aren’t and note that some are quite positive. become common. When they do, it will used to vent or attack? What if bosses You also notice that there are no rants, be difficult for organizations to ignore try to retaliate? What recourse does no ad hominem attacks. “I’m supposed the often wide disparity between the a boss have when she feels unfairly

13 Harvard Business Review January–February 2012 Illustration/Photography: Name As companies gain experience, they may opportunities to help stabilize South Asia, opportunities Asia, to helpstabilize South stem theflow ofdangerous narcotics, ex and executive coach,Kent Linebackspent authors The theBoss: ofBeing 3Imperatives Harvard Now awriter Business School. Professor ofBusinessAdministration at even expand thiseffortto include the ees, notjustmanagers. eryone in the company—for all employ organizational leaders, thisapproach nying asafe haven to AlQaedaandother rarely, ifever, seenasanything beyond de- may hinge opportunities. onthesevery It withdrawal Afghanistan from military advantage of—the newtransparency agers would remain theprerogative of assessed? We knowalltoo wellthat Linda A pand alucrative market for U.S. investors, many years asamanager andanexecutive ness R for Becoming a Greatfor Becoming Leader (Harvard Busi - terrorists. Yet offers thecountry strategic the globe,andrestore America’s- credibil posting of360-degree feedbackforev prevented? be evaluated unfairly. Howcanthatbe should startpreparing for—and taking in powerformostfirms.Butinstead of that collaborative technology willbring. waiting foremployeeswaiting leaders to act, would represent afundamentalshift those inaminority are more likely to in businessandgovernment. They are the ity intheIslamicworld. Interestingly, U.S. balance thepower inavolatile region of dollar mediaempire born. was soon followed, andamultibillion- and24milliontunedin.Financing it, ketball championship, ESPNbroadcast Johnson inthe1979 men’s college bas pulls. ButwhenLarryBird facedMagic everything from Irishhurlingto tractor Its 24/7 oncefilled airtimewas with the history ofmasscommunications.” it “one ofthestrangest creations in ESPN; No onethought there amarket was for Spor Launch anAll A udaci America’s interest inAfghanistanis Though thefinal evaluation ofman- eview Press, 2011). even dubbed Sports Illustrated even dubbed . HillistheWallace Brett Donham ts TVNetw t y Wor y ks! ks! - ork - - - - Afghan jobmarket andeconomy. TheChi - Asia andprovide astabilizing economic develop atrainedlaborpoolinstead ofde- contributing to a stronger economy; local grams for Afghans. with those of the Unitedwith States on a grand scale. Byinvesting andscale. ininfrastructure AsiaandAfghanistanthrive.see South stan would give Pakistananothermajor suing economicinitiatives andcommercial street aheadrather thanfixate onthe road stan could promote amultimodaldétente at theNaval Postgraduate Theviews School. ex Department ofDefense. Department agriculture), theU.S.agriculture), might encourage the already well traveled. among nuclear-armed nations in South a U.S.-Chinese partnershipinAfghani- and U.S.-Pakistan strategic relationships, Islamist terrorism. ate Chinaasamore(andaf- predictable Asia—wouldally in South feel less sanguine arsenal. Though India—a key strategic U.S. fluent) neighborand anallyincountering mining inAfghanistan,theChineseare nese could, for instance,buymining and mineral extraction,alternative energy, and motivation to subsidize violentextrem - nuclear-armed allyto offsettheperceived Chinese to work it with to strengthen the policy orpositionof theU pressed are hisownand donotreflect theofficial pending onimported Chineselabor. Bypur- perhaps theycould bepersuadedto help provide theopportunity for usto seethe transportation equipment andservices than Pakistanaboutastronger Chinese threat India—thereby from reducingits the chairofSystemic Strategy andComplexity from U.S.from companies,whilecontributing to foothold inAfghanistan,it might- appreci in Afghanistan can beseenasconvergingin Afghanistancan interestsis inoureconomicandsecurity to internationally sponsored job-training pro investment (includingin Afghan industry ist groups and to maintain alarge nuclear Wayne Porter isacaptainintheU boost to theregion. That, andit justmight Astronger Chinesepresence inAfghani- Within thecontext ofstrong U.S.-India From thisperspective, China’s interests .S government orthe avy and .S Navy and hbr.org - -

16425_HBR_1third_vert.indd 3 Review Business Harvard The Revival ofSmart hbr.org Reader the Follow

12/3/10 1:16PM HBR’s List of Audacious Ideas For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org

Time frame 10 Years Degree of difficulty c+ barrier regulators Enroll the World in For-Profit Universities Growth and wealth will follow. by Parag Khanna and Karan Khemka

hroughout the world the pro- University funding by source taken stakes in new private universities portion of a country’s popula- In 2010 tuition made up the lion’s share of being developed in East Asia and Latin tion attending colleges and income at Asian private universities but a small America. share at U.S. schools. universities is directly cor- Still, overall awareness of this opportu- related with the country’s nity is low. There’s room for many more pri- TUITION TUITION Twealth. In emerging markets such as India FEES FEES vate investors to jump in, and governments and China, incomes and higher education ENDOWMENT could do far more to encourage the growth enrollment have been rising hand in hand INCOME of the industry. in recent years. Though correlation doesn’t In some countries, regulators have lim- necessarily imply causation, the rationale ited the expansion of private colleges and for the argument that higher education universities or the potential for invest- OTHER increases productivity and affluence is INCOME ment in them. That is counterproductive. clear: Education creates human capital, Private investment in higher education which enables economic growth. That’s RESEARCH leads to more enrollment in higher edu- why pouring much more money into GRANTS OTHER cation. In China for-profit operators have INCOME for-profit higher education could jump- been able to enter the education market start the global economy and deliver big since 2001. The Chinese government has returns. Stanford Asian PRIVATE created specific laws, tax structures, and Emerging economies do not require University University regulatory bodies that support both for- 12% from 75% from the sort of human capital that traditional tuition tuition eign and Chinese players in the market. Western universities produce; instead of From 2000 to 2008, enrollment in higher generalists, they need skilled graduates education in China grew 21%, while India with training relevant to their develop- (where for-profit higher education is tech- ing industries, typically in engineering 1. Negative working capital. Students nically not allowed, forcing entrepreneurs and management. Copying the Western pay up front, at the start of the semester or to adopt work-arounds in the form of model is a luxury that emerging markets, year. management companies serving universi- with limited resources, cannot afford. For- 2. Steady, predictable revenue. Stu- ties) saw only a 7% increase in the same profit universities first and foremost offer dents stay for the duration of the program, period. courses that enable students to fill skill often four years. Because education is traditionally shortages in the market. They are also de- 3. High barriers to entry. These include valued for its social good, it’s imperative signed to be sustainable and scalable. Pri- regulation, land, and capital. that educational institutions be account- vate colleges and universities in emerging 4. Prices that rise faster than inflation. able to both students and citizens. Yet the markets are able to fund their expansion 5. More demand than supply. economic necessity of expanding higher and invest in quality to compete with pub- In emerging markets, private sector education in the developing world makes lic institutions. They are the best way for education is already a growing and very it essential for political leaders, educators, emerging markets to build a skilled labor profitable industry, with several billion and the investment community to work to- force, create more jobs, broaden the con- dollars in turnover. In India, for example, gether to fill the great global education gap sumer base, and ultimately sustain eco- single campuses have revenues as high as with private, for-profit institutions. nomic growth. $150 million with 50% profit margins and At the same time, for-profit higher edu- 35% internal rates of return. In Malaysia Parag Khanna is a senior research fellow at the cation creates massive opportunities for private higher education is a market worth New America Foundation and author of How to investors that have only just begun to be $2.4 billion, or about 1% of the country’s Run the World (Random House, 2011). Karan Khemka is the Asia head of the Parthenon Group realized. The business has five characteris- GDP. Private equity funds such as Actis in and leads the firm’s Emerging Markets Education tics that are rarely found in one enterprise: China and GP Investments in Brazil have Practice.

15 Harvard Business Review January–February 2012 hbr.org

Last year the U.S. spent $68B Among nearly 300,000 on corrections, which is inmates released in 15 about 336% more than 2.3M states in 1994, it spent 25 years ago. Americans—more than 1% of all adults—are % behind bars. That’s 67. 5 about the size of the were rearrested within population of Houston. three years—and that rate has remained roughly constant. dropouts. The money raised would fund social programs. And if, after a meaningful pe- More than $ riod—say, five years—the program 22K– % showed that it had had a significant 80 positive impact (by, for instance, reduc- $25K of prison inmates Per year cost per in Texas never ing repeat offenses or raising graduation inmate to U.S. graduated from rates), investors would get their money taxpayer, on average high school. back with a premium. Small trials of social impact bonds are taking place in the UK, but they haven’t caught on in Amer- Time frame five years Degree of difficulty less than you’d imagine ica, despite a huge range of potential barrier public skepticism uses. If applied to the prison system, they could help provide much-needed insights Pay Businesses to Keep into the causes of crime and recidivism, because they’d force programs to mea- People Out of Prison sure results. Such data could inform bet- ter public policy. Reduce recidivism using the profit motive. Technology could play a role; e-learning by Eric Schmidt can provide affordable, accessible tools to institutions that lack a strong educational t’s hard to find a single metric showing social impact bonds, could change that infrastructure. Programs like the Khan that U.S. prisons are working. Right equation. Academy have shown that online learn- now 2.3 million Americans—about 1% Here’s how it would work: The govern- ing can quickly achieve impressive results. of all adults—are behind bars. That’s ment would float these bonds to investors— Technology could also help get nonviolent the world’s highest incarceration rate. typically foundations—who’d bet on the offenders out of jail faster, so they could IPrisons now cost taxpayers $68 billion a ability of companies, community groups, begin their reintegration into society. year—336% more than they did 25 years ago. and other qualified parties to provide Tamper-proof ankle bracelets that offer The United States imprisons more juveniles services like educating the many GPS tracking and constant monitoring than any other country. Three-year recidi- inmates who are high school are coming onto the market at prices vism rates hover around 68%. Research of $5 to $10. We could ensure that reveals that states that incarcerate more re- sentences are carried out but slash duce crime less. California spends more on the cost of keeping people locked up. Audacity Works! prisons than it does on education. Close the Hole in The existence of a mass incarcer- Instead of propping up a broken system, the Ozone Layer ated population is a failure of imagina- we should be thinking boldly about how to Instead of bickering over the evidence tion on the part of American society. It prevent people from committing crimes in for global warming, the two sides represents millions of wasted lives and the first place and how to decrease recidi- in the climate debate ought to look idle talent. America is blessed with up the 1987 Montreal Protocol— vism. To do both, we need corporate in- 24 countries’ agreement to ban all strong enterprise and a rich tapestry of tervention. I’m not proposing that private ozone-depleting substances—which civil society organizations. Shouldn’t companies run prisons. That’s been done, was enacted before there was even it harness them to create the dramatic proof that those chemicals caused that with uninspiring results—no surprise, big hole over Antarctica. The result: change we need? given that the incentives for private prison The ozone layer has stopped thinning, Eric Schmidt is the executive chairman operators have little to do with reducing and the hole is now expected to close of Google. up by 2075. crime or recidivism. But a new approach, HBR Reprint R1201B

16 Harvard Business Review January–February 2012