Monthly Archives: June 2011

Innovation and risk

I recently saw a tweet (I still feel silly saying that word, haha) by someone asking whether innovation was about “small companies, having limited resources and limited time coming up with great ideas”.

I think there’s an enormous disconnect with the idea that innovation comes from these things.

Innovation is about coming up with ideas that disrupt the ways things are done or drastically improves a consumers life. And what they require BY DEFINITION is risk.

If an idea has a 100% probability of being a blockbuster, it is highly likely that that idea will have already been tried and will be in the market.
Conversely, if an idea has a 1% chance probability of being a blockbuster, it is highly UNlikely that someone will have tried this.

The ability to come up with an innovation (ground breaking, blockbuster, whatever you wanna call it), depends on how RISKY you’re willing to be.

Now for the good stuff. Small companies are naturally more risky. They HAVE to be, they have the leeway to be, they don’t have to the protocols in place to make them shy away from it, they don’t have shareholders to answer to or breathe down their neck.
Start-ups are risky. That’s why many do well extremely well and create innovative things. And that’s ALSO why many die.

Large companies are naturally less risky. They have incentive to be. They have figured out a way to win and any large deviation from that winning strategy could mean they lose their core business.

HOWEVER, large companies command the resources to make them innovative.  Innovation is about failure. It’s about trying all the new and good ideas you can imagine, expecting most to fail and some to be amazing breakthroughs. But companies are not setup like this to accept failure. They reward people who simply do well, so everyone at large companies has incentive not fail even a single time.

The best advice I’ve ever heard about running a company is to fire people for NOT failing… Take that with a grain of salt, but you get the idea. Put up a gambling fund, allow for pet projects that are crazy and expected to fail, have crazy leaders that foster free thinking, brain storm like its the wild-damn-west, built things up and don’t be afraid to smash them down. Whatever tactic you take, the strategy should be: Get 100 good ideas. Expect that most will fail. Enjoy the ones that hit big. And reward people for good process work, not necessarily pure results.

And so it’s the small companies that will usually bring about innovation. But it does not have to be this way. Big companies have an opportunity.

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Strong fingers

Imagine this:
3 groups of randomly selected people.

Everyone lays a hand flat and curls their index finger in a pumping motion against a tensor, measuring their index finger strength.

The first group is instructed to basically “work-out” their index finger with some typical strength related exercise regime for a month.
The second group is told to do nothing.
The third group is told to, at the same rate and for the same period of time as the first group, to simply imagine doing the exercises, to concentrate very hard and imagine their finger doing the exercises.

What happens?
The first group improves.
The second group stays the same (control).
The third group miraculously improves to 30% of what the first group did. So, if on average the first group went from 10kgs of pressure, to 20kgs, the third group would have gone from 10kgs to 13kgs.

What does this say about the human mind? It speaks to the incredible power just connecting certain neurons and pathways can have over our bodies. I think most people believe that whatever takes place in the mind has no effect over the body or the world around them. But science is providing us with evermore interesting evidence that this is not the case at all, that our minds can have physical effects not only on our bodies but also the quantum world.

Another experiment replicated many times in different formats has shown that a human mind can effect the quantum state of a particle (shielded in various ways, magnetically, etc. so no interference of different waves occurs). The particle usually has a perfect 50/50 chance of being observed in one state or its opposite, but when the human mind is introduced, that 50/50 changes to 47/53.

This evidence speaks great volumes about the idea of the importance and power of visualizing the future you want to occur. I could speak at length about this… and will likely one day.

And then there’s all the behavioural economic irrationalities that humans have, and we begin to see that we have very little coherence or ability to impartially observe/interpret the world around us. And we realize that science is ratifying what was known by certain sages intuitively (aka, it just felt right to them and they had anecdotal evidence of it) throughout much of ancient history. They didn’t know the science behind visualizing that which you want nor strengthening your mind muscle by meditation or other means, they just knew it worked. Now we are reaching a point where science is showing why it works… so let me be the (likely not, but maybe) first to say, holy sh*t that’s powerful.

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Cabbie wisdom

A cabbie once said to a friend of mine something along these lines: “I’ve been married a few times, and when you’re trying to figure out whether you love someone or not, what you have to do is find all the most terrible things about that person. And then ask yourself if you can live with those things for the rest of your life.”

I’ve always been intrigued by the black swan problem introduced to me by Taleb who references much of Poincare’s work. The idea is that we can never really know if something is true no matter how much positive evidence we have. I can see a million white swans… but seeing this massive amount of white swans doesn’t necessarily make me sure that there are no black swans out there. However, just a single instance of negative evidence (in this case, a black swan) will nullify my hypothesis that there are only whites swans in existence.

And the similarities with love are striking. A lover can find someone, and run through all the million things he or she loves about that person… all well and good. But all that positive evidence of love will be nullified by just a single instance of negative evidence, like if the beloved is an ax-murder.

And so the cabbie seems right, even in an epistemological sense.

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