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by
Safi Bahcall
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December 4 - December 7, 2019
When groups are small, for example, everyone’s stake in the outcome of the group project is high. At a small biotech, if the drug works, everyone will be a hero and a millionaire. If it fails, everyone will be looking for a job. The perks of rank—job titles or the increase in salary from being promoted—are small compared to those high stakes. As teams and companies grow larger, the stakes in outcome decrease while the perks of rank increase. When the two cross, the system snaps. Incentives begin encouraging behavior no one wants. Those same groups—with the same people—begin rejecting
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The military and its supporters, as expected, objected. They told Bush his new group “was an end run, a grab by which a small company of scientists and engineers, acting outside established channels, got hold of the authority and money for the program of developing new weapons.” Bush’s answer: “That, in fact, is exactly what it was.”
Bush changed national research the same way Vail changed corporate research. Both recognized that 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. The magic of Bush and Vail was in engineering the forces of genius and serendipity to work for them rather than against them. Luck is the
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Listening to the Suck with Curiosity (LSC)—overcoming the urge to defend and dismiss when attacked and instead investigating failure with an open mind.*
LSC means not only listening for the Suck and acknowledging receipt but also probing beneath the surface, with genuine curiosity, why something isn’t working, why people are not buying. It’s hard to hear that no one likes your baby. It’s even harder to keep asking why.
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.
With S-type loonshots, people say, “There’s no way that could ever make money.” And then it does.
But the most crucial advantage from Sabre surprised Crandall and his team. They were soon flooded with data no one had ever seen before: years of bookings, as one analyst noted, “from which American could deduce how many days in advance vacationers tended to book to San Juan, how many days in advance business travelers booked to Detroit, in May as opposed to September, on Tuesday as opposed to Friday.” Thirty years before Big Data became a Silicon Valley buzzword, American discovered big data. Crandall set up a division to use that data to extract maximum dollars per seat. The technique, as
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In 1939, Lindbergh began publicly opposing any US intervention in Europe. He spoke at massive antiwar rallies and attacked Roosevelt. Crowds flocked to Lindbergh, shouting, “Our next president!” Roosevelt, who had a long memory, began a campaign to undermine Lindbergh. Publicly, he called Lindbergh a “defeatist and appeaser.” Privately, he vowed, “I’ll clip that young man’s wings.” Lindbergh was soon shunned: the press crucified him as a Nazi sympathizer and traitor; streets that had been named in his honor were renamed. One city threatened to burn Lindbergh’s books in a public square.
Land became known for a saying: “Do not undertake a program unless the goal is manifestly important and its achievement nearly impossible.”
Land’s 3D still images were soon converted for use in film, which turned into a craze. (At its peak, in 1953, Polaroid was making six million pairs of 3D glasses per week.) Although the novelty of early, low-quality 3D movies wore off, today’s 3D films use the same core science Land developed in 1940.
Land’s instructions to take on only those problems that are manifestly important and nearly impossible were his version of “It’s not a good drug unless it’s been killed three times.”
Let’s pause: this was the spring of 1971. The first papers describing CCDs had been published only months earlier. Sony (which produced the first commercial digital camera), Canon, and Nikon had not even begun to work on digital photography. Land was advocating for digital before all of them.
after founding what became Bell Labs, Theodore Vail said that no group “can be either ignored or favored at the expense of the others without unbalancing the whole.”
In an interview after Jobs’s death, Bill Gates said, “Steve and I will always get more credit than we deserve, because otherwise the story’s too complicated.” He added, “But the difference between him and the next thousand isn’t like, you know, God was born and he came down from the hill with the tablet.” I believe Gates may be mixing Jesus and Moses metaphors. But his point was clear.
Inventors or creatives championing loonshots are often tempted to ridicule franchises—as Steve Jobs 1.0 did with the “bozos” developing Apple II follow-ons. But both sides need each other. Without the certainties of franchises, the high failure rates of loonshots would bankrupt companies and industries. Without fresh loonshots, franchise developers would shrivel and die.
Like Vannevar Bush, who insisted, as described in chapter 1, that he “made no technical contribution whatever to the war effort,” Catmull saw his job as minding the system rather than managing the projects.
He had learned to be a gardener nurturing loonshots, rather than a Moses commanding them.
“The whole notion of how you build a company is fascinating,” Jobs told his biographer, Walter Isaacson. “I discovered that the best innovation is sometimes the company, the way you organize.”
The stories in part one illustrate the first three Bush-Vail rules: 1. Separate the phases • Separate your artists and soldiers • Tailor the tools to the phase • Watch your blind side: nurture both types of loonshots (product and strategy) 2. Create dynamic equilibrium • Love your artists and soldiers equally • Manage the transfer, not the technology: be a gardener, not a Moses • Appoint, and train, project champions to bridge the divide 3. Spread a system mindset • Keep asking why the organization made the choices that it did • Keep asking how the decision-making process can be improved •
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team size plays the same role in organizations that temperature does for liquids and solids. As team size crosses a “magic number,” the balance of incentives shifts from encouraging a focus on loonshots to a focus on careers.
Watts and Strogatz’s paper was published in June 1998. As of mid-2018, it has been cited 16,505 times. Of the 1.8 million papers published in scientific journals on the topic of networks, their small-world paper ranks #1. It has been cited more than Einstein’s papers on relativity, Dirac’s paper on the positron, or any paper in history published on “fundamental” physics.
Hemingway wrote that “the dignity of movement of an iceberg is due to only one-eighth of it being above water.” He called it his Theory of Omission. The power of beautiful prose comes from what you leave out. In science, it’s the same. The power of a beautiful model comes from what you choose to omit.
One of the reasons that crazy projects like the Red Balloon Challenge can succeed inside DARPA is that there is no career ladder. Project managers are hired for fixed terms, typically between two and four years (their employee badges are printed with an expiration date). DARPA’s structure has eliminated the benefit of spending any time on politics, of trying to sound smart in meetings and put down your colleagues by highlighting the warts in their nutty loonshots so that you can curry favor and win promotions.
The importance of project–skill fit also changes how we should think about training. Managers usually invest in training employees with the end goal of better products or higher sales. Send a coffee machine designer to a workshop on product design and you will get better coffee machines. Send a sales manager to a marketing workshop and your sales may improve. But training employees has another benefit. A designer who has learned new techniques wants to practice them. A marketer with new skills wants to try them out. Training encourages spending time on projects, which reduces time spent on
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celebrating results not rank translates to increasing the equity fraction E and reducing the salary step-up G. Both of which raise the magic number. In other words, they will make large groups more likely to innovate well. Recent academic studies have come to a similar conclusion. One group noted that “increased [wage] dispersion is associated with lower productivity, less cooperation, and increased turnover.” Translation: a big G is a bad thing.
Even more common is a useless system, in which rewards are handed out that do nothing. I’m still amazed by how often large companies compensate junior or mid-level employees on company earnings. If your project can move earnings by no more than a tiny fraction of a percent, how does a company-earnings bonus motivate you? You might as well put your energy into twiddling your thumbs and fooling your boss into thinking you are indispensable while enjoying the free ride if earnings go up. (Economists call a similar issue in the use of public goods the “free-rider problem.”)
SUMMARY: RAISE THE MAGIC NUMBER • Reduce the return on politics: Make lobbying for compensation and promotion decisions difficult. Find ways to make those decisions less dependent on an employee’s manager and more independently assessed. • Use soft equity: Identify and apply the nonfinancial rewards that make a big difference. For example: peer recognition, intrinsic motivators. • Increase project–skill fit: Invest in the people and processes that will scan for a mismatch between employees’ skills and their assigned projects. Adjust roles or transfer employees between groups when mismatches
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“Kepler’s lifework was possible,” Einstein wrote, “only once he succeeded in freeing himself to a great extent of the intellectual traditions into which he was born.”
When a script is killed inside Paramount or Universal or any studio Major, it stays dead. When an early-stage drug project is killed inside a major global pharma, it stays dead. In China—or in the various outposts of the Islamic empire—when the supreme ruler quashed promising new ideas about astronomy, as the emperor quashed Shen Kuo’s ideas, they stayed dead.
If the transistor, Google, the iPhone, Uber, Walmart, IKEA, and American Airlines’ Big Data and other industry-transforming ideas were all initially sustaining innovations, and hundreds of “disruptive innovators” fail, perhaps the distinction between sustaining vs. disruptive, while interesting academically or in hindsight, is less critical for steering businesses in real time than other notions.
Perhaps everything that you are sure is true about your products or your business model is right, and the people telling you about some crazy idea that challenges your beliefs are wrong. But what if they aren’t? Wouldn’t you rather discover that in your own lab or pilot study, rather than read about it in a press release from one of your competitors? How much risk are you willing to take by dismissing their idea?
APPENDIX A SUMMARY: THE BUSH-VAIL RULES 1. Separate the phases • Separate your artists and soldiers • Tailor the tools to the phase • Watch your blind side: nurture both types of loonshots 2. Create dynamic equilibrium • Love your artists and soldiers equally • Manage the transfer, not the technology: be a gardener, not a Moses • Appoint and train project champions to bridge the divide 3. Spread a system mindset • Keep asking why the organization made the choices that it did • Keep asking how the decision-making process can be improved • Identify teams with outcome mindset and help them adopt
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1. Separate the phases • Separate your artists and soldiers: Create separate groups for inventors and operators: those who may invent the next transistor vs. those who answer the phone; those who design radically new weapons vs. those who assemble planes. You can’t ask the same group to do both, just like you can’t ask water to be liquid and solid at the same time. • Tailor the tools to the phase: Wide management spans, loose controls, and flexible (creative) metrics work best for loonshot groups. Narrow management spans, tight controls, and rigid (quantitative) metrics work best for franchise
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Listen to the Suck with Curiosity (LSC): When you have poured your soul into a project, you will be tempted to argue with critics and dismiss whoever challenges you. You will improve your odds of success by setting aside those urges and investigating, with genuine curiosity, the underlying reasons why an investor declines, a partner walks, or a customer chooses a competitor. It’s hard to hear no one likes your baby. It’s even harder to keep asking why. (Chapter 2)
Adopt a system rather than an outcome mindset: Everyone will make wrong turns in navigating the long, dark tunnel through which every loonshot travels. You will gain much more (and feel much better) by trying to understand the process by which you arrived at those decisions. How did you prepare? What influenced you? How might you improve your decision-making process? (Chapter 5) •
time is our most precious resource, just as relationships are our most precious source of joy and support.
