Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries

by Safi Bahcall

What matters for our purposes, in our simple-model organization, is the ratio between project–skill fit and return-on-politics. We will write that ratio, which is a measure of overall organizational “fitness,” as F.

At companies where employees receive very little training or are assigned to projects carelessly with little consideration of how well the projects suit their skills, this measure of project–skill fit will be low. At companies that invest heavily in training, in recruiting the most talented people, and in carefully managing assignments, it will be high. The return-on-politics can be defined in a similar way.

there is a critical size of organization, a magic number M, above which the balance flips from favoring project work to politics.

groups much larger than 150 people, which are stuck in the career politics phase (#2 in the diagram), can restore the focus on loonshots by adjusting their structure (#2 → #3).

The DARPA model is extreme: reduce career politics by eliminating careers. McKinsey approaches the same goal in a less extreme way. It retains careers but invests heavily in reducing the subjectivity of promotion decisions.

Most large or midsized companies not only rarely tap into the power of soft equity but they do a bad job of using ordinary (hard) equity: stock options or bonuses.

When the Dead Sea Scrolls were first discovered by Bedouin shepherds in a desert cave near the Dead Sea in modern-day Israel, archaeologists offered to pay the shepherds for each new scrap they found. That encouraged the shepherds to rip any scrolls they found into tiny scraps. The archaeologists had the right idea in theory but didn’t think through the perverse incentive in practice.

Imagine appointing a chief incentives officer, well trained in the subtleties of aligning value, who is solely focused on achieving a state-of-the-art incentive system. How much might politics decrease and creativity improve if rewards for teams and individuals were closely and skillfully matched to genuine measures of achievement?

Somewhere between simple one-person rewards and wasteful free-rider rewards given to everyone lies a valuable and critical sweet spot: rewarding teams for collective outcomes.

A good incentives officer will also seek the maximum return from a limited resource: the most motivated teams for a given compensation budget.

creative talent responds best to feedback from other creative talent. Peers, rather than authority.

Requiring equal pay for both C-sections and vaginal births does not tell physicians and patients which treatment to choose, unlike, for example, a seat-belt law, which tells you to put on your seat belt. But it eliminates a perverse incentive.

Loonshots flourish in loonshot nurseries, not in empires devoted to franchises. Being good at loonshots and good at franchises are phases of an organization—whether that organization is a team, a company, or a nation.