A combination of passion and perseverance
Can theoretical,
scientific study of complex systems inform the hardscrabble world of start-ups?
Yes.
To see how, meet
the Santa Fe Institute (SFI). [1]
Founded 30 years ago in Santa Fe, NM by Nobel laureates in physics and
economics, SFI is the worldwide epicenter of complexity science. SFI
first recognized that the environment, the human brain, the economy, and other
complex systems have much in common:
· Order in them emerges not from top-down command and control but bottom-up from the interactions of large numbers of interconnected elements. These elements may be individual species creating sustainable ecosystems; neurons creating thought patterns; or buyers and sellers creating business cycles and wage and price levels.
· Those interconnected elements also form feedback loops that can produce unpredictable and often extreme results (e.g., peacocks’ tails, fads, best-sellers, cancer).
· Diversity tends to grow with the number of combinations of elements, that is, exponentially with the number of elements (e.g., the Cambrian explosion and the Industrial Revolution). Diversity tends to enhance robustness (e.g., genetically similar crops are more vulnerable to parasites; identical PC operating systems, to viruses).
· Unintended consequences arise if you try to control such systems top down (e.g., drug wars foster organized crime; draining of wetlands cause flash floods and droughts; rent control reduces the quantity and quality of housing and thus may drive up rents).
· The systems are dynamic and never at equilibrium.
1) Passion and perseverance form a feedback loop.
Whenever you see results or performance that is far above the norm – in
entrepreneurship, sports, the arts, science, innovation, business, or investing
– passion (an attitude) and perseverance (a behavior) are most likely
positively reinforcing each other.
Designing
sailboats, calling on customers, or writing specifications until you are so
good that you grow to love that activity are examples of perseverance driving
passion. As you improve, you more and more enjoy that activity, driving
you to greater proficiency and further building your perseverance.
Similarly, being so deeply engaged in fashion, aviation, or mastering Python
that you become unaware of the passage of time are examples of passion driving
perseverance. As you spend time in the activity, you refine your skills
and deepen your knowledge, further building your passion. For someone to
be willing to spend 10,000 hours in a discretionary activity, a figure often
cited as a threshold to achieve exceptional performance, a combination of
passion and perseverance is almost certainly at work.
2) Opportunities grow with every new product or
service on the market. Occasionally I hear it said that all the best
opportunities have already been addressed. Nonsense. Just the
opposite: every new solution introduced creates new opportunities – new needs –
in at least three ways:
1. The solutions themselves can be improved upon (e.g., laptops and smart phones can be made smaller, lighter, and more powerful; software can be made faster, easier to use, and more reliable)
2. The providers of those solutions have needs (e.g., sales, marketing, accounting, software, equipment, customer and competitive intelligence)
3. New solutions create new needs (e.g., cars need navigation systems, back-up cameras, and keyless entry systems; video games need virtual money; electric vehicles need re-charging stations; smart phones need bandwidth).
Think of solutions
as combinatorial: every new one can be combined with all others that already
exist to address potential new opportunities.[2] As technology advances at an
ever-increasing pace, new opportunities are being created and addressed ever
faster. For some of these opportunities, you are
almost certainly the best person in the world to satisfy them. The reason: the
number of opportunities exceeds by many orders of magnitude the number of
people in the world. Successful entrepreneurship is in large part a task of
finding the opportunities that you are best suited to satisfy.
3) Seek novel combinations of technologies. To find
opportunities, my business partner and Chief Technology Officer Dickey Singh
and I make lists of the new technologies either he or I know about. Examples
might include GPS, natural language processing, 3D printing, fluid mechanics,
polymerase chain reactions, image processing, and computer graphics. Then we
list all of the pairs of those technologies
and look for novel combinations. If I know three technologies and Dickey
knows seven we have ten total, of which there will be 45 unique pairs. Is
any combination novel, say GPS and 3D printing? If so, it might enable
new solutions that no one has considered before.
The total number of combinations grows exponentially with the number of
technologies. If you consider all combinations in this example, including
groups of three, four, and five technologies and so on up to ten, there are
over a thousand combinations. The vast majority of these will not be useful
today. But a few of them almost certainly will be.
4) Cognitive diversity trumps ability. Diversity in how members
think about problems and make decisions makes a team stronger. Some
people are abstract thinkers, others are concrete; some are high risk-reward
oriented, others risk averse; some are more relationship-oriented, others are
more transactional when interacting with others. Scott Page, professor of
complex systems at the University of Michigan, reports that teams with diverse
problem-solving perspectives and heuristics outperform more skilled teams who
rely on homogeneous perspectives and heuristics.[3] For each team member
who thinks much the same way you do, the value of adding someone who thinks
differently increases.[4]
5) Culture is emergent. As CEO, you hugely influence
company culture by how you treat people and make decisions, and many in your
company will look to your behavior and copy or adapt it. But you cannot control culture: it emerges from the actions of
everyone in the company. The first few team members that you hire are
critical; after you, they most influence
norms and behaviors of those who come after them. If your and others’
actions demonstrate a belief that employees are important, for example,
employees will recognize, appreciate, and respond to that; if not, they are
likely to resent and rebel against you, no matter what you officially announce
or promulgate. Influencing culture is more akin to tending orchids than running
machinery: trying to control it top down leads to unintended consequences.
6) Keep your options open. Customer needs, your resources, and
competition are always changing. Just as your product becomes a market hit,
customer needs may shift, your advantage disappears, and you suddenly have to
find a new market. Or you may be automating manufacturing when new,
improved components induce you to re-design products and processes.
Fine-tuning your
resources too closely to current circumstances leaves you vulnerable. Options that are
unattractive in an up market suddenly become more attractive than going out of
business in a down market. Those less-attractive options can also help
you leverage more desirable ones, if potential acquirers or customers know you
have multiple options. Despite its long and lofty role in strategy,
optimization is the enemy of resilience. Keep some of your resources
re-assignable to take advantage of unexpected changes and opportunities.
Products and
services are continually being introduced to and retired from the market;
people are constantly entering and leaving the workforce; and competition and
regulations are constantly changing. They lied to us in Econ 101. The truth is
that nothing in business or the economy is ever at
equilibrium.
# # #
[1] I have served
as trustee of SFI since 2010.
[2] See W. Brian
Arthur, The Nature of Technology (Simon & Schuster,
2009).
[3] Scott E.
Page, The Difference: How the Power of Diversity Creates Better Groups,
Firms, Schools and Societies (Princeton University Press,
2007). Page shows that physical and identity diversity (gender, age, race)
mainly drive team performance only to the limited extent that they indicate
cognitive diversity.
[4] See also Tom
Kelley and Jonathan Littman, The Ten Faces of Innovation (Doubleday,
2005), which describes ten roles such as anthropologist, experimenter, and
cross-pollinator that have fostered innovation at Ideo.
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