One of my top ten favorite books is the Pulitzer Prize-winning “Guns, Germs and Steel”. Author Jared Diamond systematically breaks down the various elements that came into play in the building of civilization as we know it, ranging from indigenous crops, access to tamable large mammals for tilling fields, availability of natural resources, and so on. It is a contentious, complex book that forces the reader to integrate all these variables (and many more) and their resultant impact on our environment. It doesn’t attempt to simplify the dominance of one culture or another by isolating a single variable as the prime factor; rather it shows the inter-relation between them.
In the business world, specifically in the study of entrepreneurialism and startups, we are one step behind these anthropologists. We are still gathering data on the individual factors, and have yet to integrate them meaningfully:
- New and ambitious efforts such as the Startup Genome project are attempting to quantify decisions and their resultant impacts across a statistically-significant selection of new ventures, in order to isolate best practices.
- There are ex-post-facto assessments of entrepreneurial mindsets, job creation, patent activity, and more.
- You can (and I have) go blind reading about ‘Traded Clusters’ from Harvard Business School’s Michael Porter, R&D tax incentives and their impact on job creation, and the United States declining international academic standing in Science, Technology, Engineering and Mathematics.
The study of these two disparate subject areas of anthropology and entrepreneurialism share a common theme in that they all concern themselves, as economists would say, with ‘trailing indicators’. They are studying the archeological artifacts of past performance of civilization or companies, with the assumption that within the fossil record of these previous efforts, we will divine clues on the present (‘coincident or concurrent indicators’) or the future (‘leading indicators’).
This is all well and good, if used for a specific purpose. If you read these histories within the framework that there are lessons in the past that can be integrated and synthesized into current decision-making, you are ‘Standing on the shoulders of giants’, as Sir Isaac Newton once said. If you, however, read these books or papers or sites as a blueprint for future success, to be replicated step by step, you (and the authors of said blueprints) fall prey to a post-hoc fallacy, assuming that because ‘B’ followed ‘A’, that ‘B’ occurred because of ‘A’.
As with Guns, Germs and Steel, there are a myriad of variables in the success of any business endeavor, and you would be insane to believe that you could capture all of the decisions and factors that went into the execution. You’d also have to assume that every idea was equal, and that execution and it’s component multitude of decisions were 100% of the secret sauce, which I can assure you (having lived through thousands of prospective idea pitches) is certainly NOT the case.
Most importantly, the current and future business climate (read ‘market’) is a fluid, dynamic environment, just like the world it is a subset of. I have seen ideas that were considered asinine in 2002 (aka the dot.com crash when everyone was saying ‘can you believe someone tried that in 2000?’) subsequently lauded for how revolutionary they were less than a decade later, first during the Web 2.0 and echo Social Media ‘revolutions’.
Like any other ecosystem, all these studies can do is to take a photograph of a static snapshot of time. In reality however, any ecosystem is in motion, and not static, and our world is based on the non-linear relationships between these variables. As I have written in previous blogposts, this mirrors a principle of physics in the relationship between two bodies and three bodies (think ‘pool balls’) in motion. Two moving objects are easy to track in relation to each other, but three? Much harder. Physics professors call this a ‘three-body problem’, and it’s synonymous with ‘really damn hard’. Extending that further, a chessboard has 32 pieces, and a chess game has 10^120 (a ten with 120 zeroes after it) possible moves, in an asynchronous sequential game on a discrete playing field.
Business, on the other hand, is simultaneously synchronous and asynchronous, sequential and simultaneous, with some perfect and some imperfect information, against more than three players, each of which has more than 32 pieces or their legal actions available to you, on an ever changing non-discrete playing field.
Ouch. My head hurts.
By all means, study the lessons of the past so you can inform your decisions of the future, but don’t underestimate the many variables that come in to play in growing a successful company. The best teams with the best ideas in the best ecosystems still fail, and poor teams with poor ideas in poor environments wildly succeed, and those of us in the industry shake our heads and throw up our hands and say ‘Well, I’ll be damned.”