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by
Safi Bahcall
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April 20, 2019 - March 30, 2021
the wisdom of crowds becomes the tyranny of crowds when the stakes are high,
Massimo Curatella liked this
small changes in structure, rather than culture, can transform the behavior of groups, the same way a small change in temperature can transform rigid ice to flowing water.
1. The most important breakthroughs come from loonshots, widely dismissed ideas whose champions are often written off as crazy. 2. Large groups of people are needed to translate those breakthroughs into technologies that win wars, products that save lives, or strategies that change industries. 3. Applying the science of phase transitions to the behavior of teams, companies, or any group with a mission provides practical rules for nurturing loonshots faster and better.
Drugs that save lives, like technologies that transform industries, often begin with lone inventors championing crazy ideas. But large groups of people are needed to translate those ideas into products that work.
My resistance to after-the-fact analyses of culture comes from being trained as a physicist. In physics, you identify clues that reveal fundamental truths. You use those clues to build models that help explain the world around you.
more is different: “The whole becomes not only more than but very different from the sum of its parts.”
When people organize into a team, a company, or any kind of group with a mission they also create two competing forces—two forms of incentives. We can think of the two competing incentives, loosely, as stake and rank.
When groups are small, for example, everyone’s stake in the outcome of the group project is high.
As teams and companies grow larger, the stakes in outcome decrease while the perks of rank increase. When the two cross, the system snaps.
The bad news is that phase transitions are inevitable. All liquids freeze. The good news is that understanding the forces allows us to manage the transition.
identify the small changes in structure, rather than culture, that can transform a rigid team.
being good at loonshots (like original films) and being good at franchises (sequels) are phases of large-group behavior—distinct and separate phases. No group can do both at the same time, because no system can be in two phases at the same time.
the big ideas—the breakthroughs that change the course of science, business, and history—fail many times before they succeed. Sometimes they survive through the force of exceptional skill and personality. Sometimes they survive through sheer chance. In other words, the breakthroughs that change our world are born from the marriage of genius and serendipity.
Luck is the residue of design.
the key to life at 32 Fahrenheit: separate the phases (the groups working on loonshots and on franchises) and create dynamic equilibrium (ensure that projects and feedback travel easily between the two groups). Break apart while staying connected.
People responsible for developing high-risk, early-stage ideas (call them “artists”) need to be sheltered from the “soldiers” responsible for the already-successful, steady-growth part of an organization.
The goal of phase separation is to create a loonshot nursery. The nursery protects those embryonic projects. It allows caregivers to design a sheltered environment where those projects can grow, flourish, and shed their warts.
Efficiency systems such as Six Sigma or Total Quality Management might help franchise projects, but they will suffocate artists.
Maintaining balance so that neither phase overwhelms the other requires something that sounds soft and fuzzy but is very real and often overlooked. Artists working on loonshots and soldiers working on franchises have to feel equally loved.
When Jobs returned twelve years later, he had learned to love his artists (Jony Ive) and soldiers (Tim Cook) equally.
Many companies, however, especially when faced with a crisis, try to legislate creativity and innovation everywhere (“The CEO must be the CIO—the Chief Innovation Officer!”). This usually results in chaos, the top-left quadrant.
In the real world, ideas are ridiculed, experiments fail, budgets are cut, and good people are fired for stupid reasons. Companies fall apart and their best projects remain buried, sometimes forever.
failing to understand the surprising fragility of the loonshot—assuming that the best ideas will blast through barriers, fueled by the power of their brilliance—can be a very expensive mistake.
Let’s call a surprising breakthrough in product—a technology that was widely dismissed before ultimately triumphing—a P-type loonshot.
With P-type loonshots, people say, “There’s no way that could ever work” or “There’s no way that will ever catch on.” And then it does.
Let’s call a surprising breakthrough in strategy—a new way of doing business, or a new application of an existing product, which involves no new technologies—an S-type loonshot.
With S-type loonshots, people say, “There’s no way that could ever make money.” And then it does.
Deaths from P-type loonshots tend to be quick and dramatic.
Deaths from S-type loonshots tend to be more gradual and less obvious.
IBM soon discovered, however, that individual buyers care more about exchanging files with friends than the brand of their box. And to exchange files easily, what matters is the software and the microprocessor inside that box, not the logo of the company that assembled the box. IBM missed an S-type shift—a change in what customers care about.
the Moses Trap: When ideas advance only at the pleasure of a holy leader—rather than the balanced exchange of ideas and feedback between soldiers in the field and creatives at the bench selecting loonshots on merit—that is exactly when teams and companies get trapped.
Stories of great breakthroughs tend to coalesce around one person, one genius, and often one moment. Those stories are fun to tell and easy to digest. Occasionally they are true. More often, they contain a kernel of truth, but omit a much richer and more interesting picture.
the most interesting lesson that was readily visible at Pixar, key to escaping the Moses Trap, was the difference between two ways of leading, which I’ll call system mindset and outcome mindset.
The weakest teams don’t analyze failures at all. They just keep going. That’s zero strategy.
System mindset means carefully examining the quality of decisions, not just the quality of outcomes.
1. At the heart of every phase transition is a tug-of-war between two competing forces. 2. Phase transitions are triggered when small shifts in system properties—for example, density or temperature—cause the balance between those two forces to change.
we’ll set aside for a moment traffic flow, which can be complicated, and start with something much simpler: marriage.
LOL: who's to say marriage is simpler than traffic?!
The park managers’ policy of reducing the sparking rate, although well intentioned, had allowed the forest to grow dense with old trees. They had inadvertently pushed the forest across the dashed line in the diagram above. Their policy had made contagion—a massive outbreak like the 1988 fire—inevitable.
Today most forestry services recognize the “Yellowstone effect” of artificially low sparking rates. They allow small- or medium-sized fires to burn under watch, called a controlled-burn policy. In some cases, if the forest is getting too close to the contagion threshold (the dashed line in the phase diagram), fire managers will initiate small burns, called prescribed burns, to back the forest away from the threshold.
The percolation models predict something you would never guess through intuition, or experience, or microsimulations with different tree types and vegetation.
According to these models, as a forest gets dangerously close to a phase transition, to erupting, the frequency of fires should take a specific form. The frequency should vary in inverse proportion to size:
The pattern of many connections within one tight community, punctuated by occasional ties to distant communities, describes a vast range of systems.
So which do you choose? Do you pour your energy and ambition into Option #1, the loonshot with the seven-year slog, 1 percent return, and high chance of failure? Or into Option #2, the franchise project and politics with decent odds for a 30 percent bump in pay next year?
We can call that nonfinancial stake in the outcome soft equity.
As the small startup’s size gradually increases, it will eventually reach a breakeven point where the two incentives, pulling in opposing directions, are equal. Above that size, a behavior appears across the organization that favors killing loonshots and supporting franchises. Let’s call that behavior the Invisible Axe.
To keep things simple, we’ll assume that base salaries step up by the same percentage at each level. We’ll call that salary step-up G (for growth rate).
Span of control, which we will write as S, is a second design parameter.
The third design parameter is equity fraction, which we will write as E. Equity ties your pay directly to the quality of your work.
The greater your skill on the projects to which you have been assigned, which we can call project–skill fit, the more likely you are to choose project work. The lower your project–skill fit, the more likely you are to choose politics.
return-on-politics: how much politics matters in promotion decisions.
