Equipment Supply Shocks
How Steve Jobs, early hip-hop pioneers, and an MIT professor have used “tool dumping” to influence culture.

To hear Grandmaster Caz and DJ Disco Wiz tell the story, the blackout in New York City during the summer of 1977 was a critical moment for early hip-hop music and culture. From Yes, Yes, Y’all, an oral history of the genre's origins:

CAZ: It was panic everywhere in the streets. We’re trying to get our stuff home safe. This was a block off of one of the main shoppin’ areas in the Bronx, okay? Then I see this store called the Sound Room that was one of the first audio stores. There was like eighteen people on the metal gate. Boom. They pull down the gate and kick in the glass. People are crawling in there and running out with speakers and turntables. I was like, “Yo people breakin’ in there anyway — might as well run in and see about getting us a new mixer and turntables!”…

WIZ: It’s funny, ‘cause I have a theory. You know what? Before that blackout, you had about maybe five legitimate crews of DJs. After the blackout, you had a DJ on every block… That blackout made a big spark in the hip-hop revolution.

The blackout is an illicit example of what I've been calling an Equipment Supply Shock, or “tool dumping” more colloquially, which is a method of market-shaping designed to produce interesting and positive cultural outcomes. It's different than the usual style of subsidization, which remains in the realm of politicians and economists and has focused, quite reasonably, on economic outcomes: taxes, prices, supply, demand. An Equipment Supply Shock (ESS) is a targeted increase in the availability of (normally) expensive or hard-to-access tools with the anticipation that new users will discover productive new uses.

ESSs and their sibling idea of Advanced Market Commitments (AMCs), which can be understood as a type of finite demand shock, are woefully underutilized and misunderstood, despite proven effectiveness. We've used ESSs to good effect. Others have, too. I suspect they could be used more often, especially to improve the culture of science and technology, but only if we had a better understanding of these creative subsidies. First, it needs philanthropic legibility — a name and more anecdotes. I'll offer a few more examples, including our own, then add some notes from those experiments.

Steve Jobs employed the technique in the early years of Apple. He knew he was lucky to grow up in Silicon Valley with frequent exposure to new technology, and his experience instilled a belief that every kid should have access to computers. He was messianic about it. Eventually, he found an interesting tax-break angle that could accelerate his goals. From an interview with Smithsonian in 1995:

And I thought, looking at these statistics in 1979, I thought if there was just one computer in every school, some of the kids would find it. It will change their life.

We saw the rate at which this was happening and the rate at which the school bureaucracies were deciding to buy a computer for the school and it was real slow. We realized that a whole generation of kids was going to go through the school before they even got their first computer, so we thought: The kids can't wait. We wanted to donate a computer to every school in America.

It turns out that there are about a hundred thousand schools in America, about ten thousand high schools, about ninety thousand K through 8. We couldn't afford that as a company. But we studied the law and it turned out that there was a law already on the books, a national law that said that if you donated a piece of scientific instrumentation or computer to a university for educational and research purposes you can take an extra tax deduction. That basically means you don't make any money, you lose some but you don't lose too much. You lose about ten percent.

We thought that if we could apply that law, enhance it a little bit to extend it down to K through 8 and remove the research requirements so it was just educational, then we could give a hundred thousand computers away, one to each school in America and it would cost our company ten million dollars which was a lot of money to us at that time but it was less than a hundred million dollars if we didn't have that. We decided that we were willing to do that.

It was one of the most incredible things I've ever done. We found our local representative, Pete Stark over in East Bay and Pete and a few of us sat down an we wrote a bill. We literally drafted a bill to make these changes. We said "If this law changes we will donate a hundred thousand computers at a cost of ten million dollars to us."

It nearly worked, with Jobs spending weeks wandering the halls of congress pitching the value of the idea. Unfortunately, Bob Dole, then Speaker of the House, killed the bill before it could make it to the floor. Lucky for Jobs and Apple, the State of California loved the idea. Jobs again:

However, fortunately something unique happened. California thought this was such a good idea they came to us and said "You don't have to do a thing. We're going to pass a bill that says 'Since you operate in the State of California and pay California Tax, we're going to pass this bill that says that if the federal bill doesn't pass, then you get the tax break in California'. You can do it in California, which is ten thousand schools". So we did. We gave away ten thousand computers in the State of California. We got a whole bunch of the software companies to give away software. We trained teachers for free and monitored this thing over the next few years. It was phenomenal. One of my great experiences and one of my biggest regrets was that really tried to do this on a national level and got so close. I don't think Bob Dole even knew what he was doing but he really unfortunately screwed up here.

We ran a similar program with our underwater drones at OpenROV. Despite our goals of creating a low-cost tool for scientists and explorers, we noticed the $1,500 price tag was still too steep for some of the early-career researchers and conservation groups that wanted them. We partnered with philanthropists and NGOs to create the S.E.E. Iniative to donate the tools to these folks. Dollar for philanthropic dollar, the program has been wildly generative and productive. I'm still getting emails about new monitoring techniques and discoveries made thanks to these equipment donations.

Neil Gershenfeld, a professor at the MIT Media Lab, tells another good tool dumping story. Gershenfeld's research lives at the intersection of computing and fabrication — of bits and atoms. He and his colleagues have focused on building machines that make more machines. He is perhaps most famous for offering a popular class on the basics of invention at MIT — "How to Make (almost) Anything" — and opening the door to the Maker Movement. His class surprised everyone, including Gershenfeld, when students from a variety of backgrounds and disciplines showed up with dreams and creative ideas: "I've always wanted to make ..."

In the class, Gershenfeld and his students stumbled into a future where personal fabrication tools could enable people to creatively use technology to solve local problems. Using a creative interpretation of the NSF grant’s educational outreach component, they created "fab labs" — a collection of tools needed to build even more tools: laser cutters, CNC milling machines, tools for programming microcontrollers, etc —and sent them off into the world. The first batch went to India, Costa Rica, Norway, Ghana, and across town in Boston. The surprising stories of creative invention and problem-solving started rolling in immediately. It worked. Gershenfeld documented those initial stories in his 2005 book FAB, and the Fab Foundation has grown to a network of more than 1,500 fab labs in more than 90 countries.

Here are my notes from studying and managing these programs:

Coordination across organizations is hard and required. For ESSs to work, there needs to be a funder (or many), a tool-builder (or many), and a distributing organization (or many). This is always some combination of companies, non-profits, philanthropic foundations, or government organizations. This tripartite matchmaking can be complicated, with any weak link capable of derailing the process. I suspect a need for a boutique consulting organization to help facilitate and guide these arrangements. Perhaps Tyler and Alex could nudge a few of their Marginal Revolutionaries into doing something. Imagine it: Precision Subsidies Inc, matchmaking and coordinating for AMCs and ESSs.

Start small. Advanced Market Commitments work surprisingly well, but the technique is hindered by the origin story of Gates and GAVI's billion-dollar purchase order. The ten-digit price anchoring seems to have limited the broader philanthropic imagination, even though Stripe has now proven that even smaller commitments ($1M) can be enough to spur new industries (CDR) into action. ESSs should aspire to many smaller trial runs to learn lessons and build momentum. Gershenfeld's first fab labs cost ~$20k in materials. That's a lot of learning for a relatively modest philanthropic outlay.

Make it an open process. There's a simple solution to the daunting problem of deciding who should actually get the tools: require applicants to ask in public. I've been shouting about the benefits of Open Grant Proposals for a few years without much luck. I'll reiterate it here. Crowdfunding sites like Kickstarter, Experiment, and DonorsChoose have built-in dynamics that make them perfect for implementing these types of projects. Instead of trying to convene expert panels to serve as reviewers and gatekeepers (they eventually get burnt out and slow down the process), make the application process itself a filtering mechanism. When Bre Pettis, a former high-school teacher turned entrepreneur, wanted to pull his own Jobs-like stunt to get more MakerBot Replicator II 3D printers into classrooms, he didn't have to lobby congress. He partnered with philanthropists, like-minded corporations like Autodesk, and the education-funding website DonorsChoose to send 3D printers to classrooms across the country.

By requiring folks to crowdfund for a portion of the cost — to apply in public — the potential for unserious, uncommitted, or fraudulent players is greatly reduced. More importantly, the window for determined and enthusiastic folks from unorthodox backgrounds remains wide open. Openness helps with documentation, too. It's difficult to keep tabs on the positive ripple effects of ESSs — a challenge similar to trying to measure the impact of public libraries or the national park system. Tying the grant proposal and reporting together in one format, and in one shareable place, makes capturing the proliferation of stories and outcomes more likely. For example, here are 300+ ecstatic teachers who got MakerBot 3D printers.

Create a social dynamic. It helps if the tool recipients can share learnings and lessons with each other. All the better if the individual recipients are themselves groups and communities. Gershenfeld learned this lesson early with fab labs, too:

The final surprise was how these students learned to do what they did: the class turned out to be something of an intellectual pyramid scheme... Once students mastered a new capability, such as waterjet cutting or micro-controller programming, they had a near-evangelical interest in showing others how to use it. As students needed new skills for their projects they would learn from their peers and then in turn pass them on.

There's a caveat to this lesson: be wary of giving tools to organizations. In our experience, donating to organizations turned out to mean sitting on a shelf, collecting dust, and being guarded by a cumbersome check-out process. Give to individuals or teams: this is your tool, please use it, take care of it, and share it with others when possible.

In-The-Field Experiments > Charisma Machines. There's a danger in designing these programs in board rooms or the ivory tower of academia. It's easy to wind up with Charisma Machines, a term coined by Morgan Ames in her book about the troubled One Laptop Per Child project (OLPC). The sweeping vision of a $100 laptop to enable digital literacy across the planet was enough to gather technical talent and millions in philanthropic support, but the project failed to deliver. It was too ambitious. The better route turned out to be Sugata Mitra's "Hole in the Wall" experiment, which set up computer kiosks in rural India and allowed students to teach each other how to use the devices. Mitra called the process Minimally Invasive Education and ended up winning numerous prestigious awards for the idea and implementation.

I have more notes and ideas, but I’ll stop here and let you fill in the rest with your imagination. Better yet: fill it in with a specific ESS to test in the wild.

I plan to follow this with a Part II: interesting Equipment Supply Shocks we could run ASAP. What ideas do you have? Send them my way: david@experiment.com