Monthly Archives: July 2011

Biggie and Dopamine

A recent post by a friend of mine plus a few other things inspired this post. Theirs explained Biggie’s (yes, the rapper’s) idea that when he was poor, he drank, smoked and wrote songs and now that he was rich, he drank, smoked and wrote songs. Most of the things he actually spent his time doing in life were very similar from when he was poor to when he was rich. My friend says you have to enjoy the process.

Put another way I say to myself once in a while; happiness is in the doing, not the done.

But I’d like to take this in a different direction, more towards the scientific realm. Some new neuroscience is proving that, for humans, happiness may truly be in the doing. This is based on how our dopamine levels react to certain stimuli.

A recent study took participants through work sessions that eventually led to a goal. And through these sessions, they measure the participant’s level of dopamine in the brain. Now, take a moment, what do you think will happen to the level of dopamine as the person begins the task, moves along towards the completion of the task and then actually completes the task?

Most people would expect that it would make evolutionary sense for the dopamine levels to peak as the goal of the task is completed. But, surprisingly, this is not what happens!! The peak dopamine levels occur BEFORE the participant finishes the goal.

This has major implications for life in general. It means that we are chemically hardwired to feel true satisfaction not from the completion of  a task, but from properly doing the task such that we eventually complete it.
So that means that to find happiness, we must find tasks that a) we enjoy doing and b) that we are good at such that we can complete them.

Once again, the sages of old, namely Biggie, and science have come together to provide us with wonderful tidbits of life-improving knowledge.

My buddies blog is pretty hilarious FYI, check it out! thewellsstreetjournal.tumblr.com/

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Burn It

Maybe you’ve heard the story before and maybe you haven’t. The greeks arrive at their destination, ready for battle. They’re outnumbered and very likely to lose. Then their commander burns their boats. He burns the only means they of retreating.

I’ve always found it interesting when I do this: I walk into some challenge and immediately my mind will rest on a very legitimate reason why, if I fail, it’s really OK. I say to myself, “If this entrepreneurial endeavor fails, it’s OK, starting a business is risky.”

This may very well be true. The probabilities behind success are factual. In any situation, there is always a probability of success and one of failure. BUT, what I will argue here is that though this may be true, humans do not work this way.

Humans, by acknowledging a probability of failure,  will increase that probability of failure.

Your mind seeks to always believe that failures are not your fault. This bias is well documented among behavioral economics. And think intrinsically for a moment, when something goes wrong in life, what is your immediate humanistic reaction? To seek an excuse, to seek an outside cause which you could not control.

To overcome this, when you enter something, you can imagine all the excuses for failure. Really try to think of all of them.  Accept that you have the power to overcome  these obstacles and that if you don’t, it is no one’s fault but your own. This idea that you are responsible for everything that happens, funnily enough, is only loosely true for most people. But whats interesting, is that the more you believe it, the more true it is.

What you are trying to do is give your mind no psychological ‘out’. You are trying to give it no reason to think failure is even possible. And this action, will actually increase the statistical probabilities of success.

This is an example of using the illogical pieces in the human mind to logically increase our chances of success.

Believing that you WILL succeed every time won’t make you succeed every time. But it will increase the chances of it.

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Make your business it’s own jungle

I’ve recently noticed an interesting connection between innovation and another organic process that changes the world on a moment by moment basis.

Innovation requires things to die. Innovative and game changing ideas are more likely to be ones people have never tried before. That’s because if they were obvious and had a high probability of success, than by definition, they would have been tried by someone before.
So for innovative ideas, we must look to the fringe where there is a higher volume of ideas, a lower probability of success and a higher probability of being a game changer.
After a business acknowledges this, it becomes necessary to set up a system within your organization that can filter and test these ideas such that you can see if the idea will work or not.

Sound familiar? Nature takes ideas (more accurately, random variation due to the combination of different DNA sets) and “tests” if they work. AKA, nature takes a new idea, puts it into the market and sees if it will live or die.

So if we imagine a species as a business, we see the similarities even more. The species doesn’t want to have its DNA go bananas (that’s b-a-n-a-n-a-s)  for every single member of the species in the same way every time two mates have sex and have offspring. You don’t want all ducks having offspring that look like alligators… Nor do you want your entire textile business reinventing itself this month as a chic coffee house. The specie’s strategy is to create  many differentiations in each round of offspring. And the ones that work, live. And the ones that don’t, die.

The difference between evolution and business, is that evolution is not intelligent. There is no high duck sitting atop his cloud pulling the strings of his duck populations DNA and saying “Hmmmmm lets try longer tails with this group and this with that group” and seeing what works. Evolution is done randomly and then “selected” based on what lives and dies.

Evolution admits it doesn’t know the future or what will work (because again, if it was obvious what would work.. someone would have tried it already). And business must do the same. As a species you must admit that you don’t know what will work, that you can’t predict the future. Then you can create DNA variations on many of your products and TEST TEST TEST.

That’s organic innovation.

Admittedly, we can be a little more intelligent than evolution in a sense. I know I probably shouldn’t offer poop flavored coffee at my coffee house (or should I… who would have thought the platapus was gonna work out?)… while nature does sometimes do some backassward things (and unfortunately those are the things don’t do well in the market). But we as businesses MUST open up to the fact that:

We do not know what will work. If we did, we would have already done it. So we must organically innovate. Make your species win.

 

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Everyone says Go

I’ve recently read some interesting anecdotes about times leading up to stock market crashes. They talk of things like even the milk delivery boy having a stock tip. Or the janitor who make his yearly salary in a week. Or the stay at home mom who made hundreds of thousands.

What I find so interesting about this is the idea that as soon as everyone in a market believes something is happening, it necessarily makes that belief untrue.
Example: If all people in a market believe that a company will go bankrupt, wouldn’t it’s stock price reflect that fact and therefore be close to zero?
Conversely, if all people in a market believe the market is in a “new era” of profitability and growth, shouldn’t the index reflect this at that moment.

Irrational exuberance (great book by the same title with related ideas) exacerbates this fact even farther.

It’s when everyone in the market believes the same thing is going to happen, that there’s no more room for money making on that side of the fence. When everyone says that the same thing, by DEFINITION, the market price reflects this and that’s when it’s time to bet the other way.

This idea not only applies to stocks and asset pricing in the financial world, but also to the world of ideas in general. If everyone holds the same idea, then that idea is likely well explored, while ideas or ways of doing things that are far from the original idea are likely unexplored. And though they may be unexplored for good reason, this is where risk enters the equation and idea experimentation begins.

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