Complexity

Acceptance and The Narrative Fallacy in the Times of COVID-19

In the last week, I’m witnessing an acceleration in what I’ll call “The COVID Struggle,” or more simply, “The Struggle.” Many people are having a hard time dealing with and accepting the reality of life under a global pandemic, and are lashing out against this constrained way of living in ways big and small. They desperately want things to go back to the way they were before, so they pretend that everything is fine—that life as we knew it can resume with minimal further disruption.

But life is nowhere near returning to normal anytime soon. I’d say at best, we’re a quarter of the way through this thing. This is unsettling, which is why people are rejecting reality. Without strong leadership in place as a check on human impulses (selfish, short-term), the situation worsens and the whole episode drags on. The suffering elongates. It’s a self-reinforcing feedback loop.

The Measurement Trap

Mariana Mazzucato is one of my favorite economic thinkers. She’s an academic economist who rejects market orthodoxy and presents her arguments, persuasively, to the masses—a gift that many in her field don’t possess. Mazzucato’s overarching argument is that (a) the state’s role in driving innovation, and therefore economic growth, is much larger than is reflected by market reward mechanisms, and (b) a primary reason for this lopsided arrangement is the flawed way we value a range of inputs to production.

On this latter point, Mazzucato argues in a recent New York Times Op-Ed:

Essentially, only something with a price is valuable. This approach overvalues goods and services with a price tag — which in turn make up a country’s gross domestic product, the driver of public policy. This has perverse effects. A coal mine that spews carbon into the atmosphere increases G.D.P., and so is valued. (The pollution it causes is not taken into account.) But the care given to children by their parents at home doesn’t carry a price, and so is not valued.

Since I have the topic of entrepreneurial ecosystems at top of mind, I immediately went there after reading this quote. It reminds me that what gets valued in entrepreneurial ecosystems tends to be the tangible factors that can easily be counted, like the amount of investment capital or the number of startups, instead of the intangible factors that more fundamentally drive system value, such as social capital or tacit knowledge.

Then, All at Once

Last Sunday I hit send on my first book manuscript for review by the publisher. It’s been nearly three years in the making, full of twists and turns, a roundtrip Transatlantic move with my family, tens of thousands of discarded written words, and two hiatuses totaling twelve whole months in length. It’s been a long time coming and damn does it feel good to finally see the light at the end of the tunnel.

If you don’t know already, it’s a book on entrepreneurial ecosystems co-authored with Brad Feld. We use the concept of complex adaptive systems to explain the behavior of startup communities and entrepreneurial ecosystems. A defining characteristic of complex systems is a process known as emergence. This occurs when the “parts” of a system interact in a way that produces value in novel and unexpected ways. Nobody is in control and the ultimate outcome is difficult or impossible to predict in advance.

Robert Noyce, Mao Zedong and Lessons for Startup Communities

In 1957, a group of eight Silicon Valley executives lead by Robert Noyce resigned from famed Shockley Semiconductor to start a rival in Fairchild Semiconductor. This sort of thing happens all the time in Silicon Valley today, but at the time, it was a watershed moment that sent reverberations throughout the industry. The Traitorous Eight, as they became known, changed the course of innovation forever by injecting the region with an entrepreneurial ethos that continues to this day and has made Silicon Valley the envy of the world.

Around the same time, nearly 6,000 miles (~10,000 kilometers) away, a very different type of revolution was taking place in Communist China. In 1958, Communist Party Chairman Mao Zedong launched the Great Leap Forward—a wide-sweeping series of economic and political reforms aimed at transitioning China from an agricultural economy to an industrialized one, and at consolidating power around the socialist regime.

So, why on earth am I linking the Great Chinese Famine with the essence of Silicon Valley’s entrepreneurial spirit and with startup communities today?

The J-Curve of Startup Community Transition

In The Startup Community Way, my upcoming book with Brad Feld, we explain that startup communities must be viewed through the lens of complex adaptive systems. Such systems are characterized as having many elements (people and things), interdependencies (connections between them), feedback loops (actions lead to reactions), and as being in a constant state of evolution (never at rest).

We make the effort to explain the complex systems framework and tie it to startup communities because the nature of these systems requires a very different type of engagement than we are used to in most of our professional and civic lives. Complex systems require different skills (diversity v. expertise), mental processes (synthesis v. analysis), tactical approaches (experimentation v. planning), and goals (right conditions v. right outcome), among other factors we discuss in the book.

One of these prominent conditions in complex adaptive systems that I want to talk about today is Basins of Attraction. In neoclassical economics, it is assumed that the the economy (also a complex adaptive system) is moving towards a point of stability—an equilibrium. This is done for reasons of simplifying mathematics, but it also has the impact of making many economic predictions unreliable.

Instead of a single point of stability, Basins of Attraction takes the view that there are many such potential “resting places” and that a complex evolutionary process will determine which of these wins out. Basins of Attraction in complex systems—like startup communities—can be thought of as a sort of center of gravity where things can get stuck. Critically, they can get stuck in “good” or “bad” outcomes.

Startup Communities Are Not Like Recipes, They are Like Raising Children

I’ve often heard people say “building startup communities (or startup ecosystems) is not about the ingredients, it’s about the recipe.” What they mean is that a focus on the individual people, institutions, and resources will provide only limited insight or success, and that what matters most is how these things all come together. While integration versus elements is the right concept, a recipe is the wrong analogy.

The New York Yankees and Startup Communities

Startup communities are examples of complex adaptive systems. This means many things for understanding and influencing their behavior, but today I want to focus on two concepts: non-linearity (the sum is greater than the parts) and synergistic integration (interaction between the parts matters a lot). To make my point, I’ll draw on an example from my favorite sport.