Innovation and the Fear of Loss

In England we say that as you get older you become politically more Conservative. Winston Churchill said “If you’re not left wing when you’re 17, you’ve got no heart. If you’re not right wing by the time you’re 50 you’ve got no brain.” The reason? I used to think that it was because as you get older and more bitter you wanted to take the whole world down with you as well as blocking everyone else’s chances at happiness and a decent education.

I have changed my mind, a little bit. It seems to me that as you plod through your life you accumulate more money. Modern psychology tells us: “Most studies suggest that losses are twice as powerful, psychologically, as gains”. - This means if we are to remain as brave as we were, courage has to accumulate at the same rate as money. If it doesn’t, the fear of loss will take a hold of a man like a fever, leaving him a shadow of himself and clawing for anything to abait his angst - insurance policies, pensions, alcohol, the Conservative party. I am convinced this is why we say, “where wealth accumulates, men decay."

Fine. What has this got to do with innovation? When an innovative company breaks into a market, when it still has an appetite for risk and literally has nothing to lose, it appears both daring and radical. However, the same company, after its success, may fail to innovate because it’s scared to lose what it has gained. What happened to such a company’s courage? Nothing. It’s just that success has revealed it to be what it always was: a coward. So we can say, where success accumulates, companies decay.

I read an article in the Economist about someone called Albert Hirschman. He said that ‘timid ignorance’, what I think of as collective cowardice, relies on the three sorts of argument:

  • Jeopardy - the innovation will lead to the loss of previous gains.
  • Perversity - the innovation will lead to us harming the people we are supposed to help.
  • Futility - the innovations will be futile.

The article says, these arguments ‘certainly describes the current debates about global warming, illegal drugs and countless other topics’. These arguments also appear around me, too, especially around the boardrooms of companies who should be leading our industry. What will happen to them? They’ll fail. Great.

Can We Be More Courageous?
I read a blog today by Bryan over at Joyent. He said, “a tremendous advantage of open source is that the community can perform experiments that you might deem too risky or too expensive in terms of opportunity cost”!

A good point. So open source doesn’t necessarily make you more courageous but it does spread risk, which means we have less to be courageous about. So one trick to acting courageously then is to remove the need to be courageous.

There is one other trick we use. We conduct experiments with bounded downsides. That’s another way of saying we’ll assign some money, a known amount, and then let someone or a team carry out an experiment. We will ask about the experiment but we won’t critique it. This is essentially a process for avoiding timid ignorance.

A nice side effect of this is that we fill up the ‘fuck-it bucket’. Each experiment yields information, components, blogs, new relationships. When the experiment fails, we chuck it in the fuck-it bucket. However, it’s only a matter of time before we find ourselves back in the bucket rummaging around for something from earlier that can be valuable now.

The fuck-it bucket is a shared memory of our experiences, which is of course important when knowledge is your business. The process of bounded experiments, then, is one way in which we go about solving the most important riddle for all tech companies: how do you create, retain and exploit knowledge?

Human nature is a pain; it’s fearful, avoidant and contagious. It gives you the tools to create amazing things and, as soon of you have created them, it replaces your good ideas with the fear of loss. Leadership, the process by which one creates an organisation, is about structures, processes and heuristics for overcoming human nature. Seeing a business for what it is - a group of people - is a good start. Using bounded experiments is another useful step.

Finally, all companies have to, in spite of human nature, learn how to create, retain and exploit knowledge. This, in my opinion, is the central job of all CEOs.

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