Tinkering = Optionality

I’ve been spending more time with the quality books that I’ve read. As opposed to reading them once and moving on to another, I’ve been going back to sections and re-reading them, thinking about them more, reconciling them with my own experiences and pre-conceptions, and generally trying to find a way to get them to stick in my mind with more conviction.

After all, the point isn’t reading. It’s reading so that you do something differently in the future. Or better yet, reading so that you can convince a group of people to behave together towards some meaningful end. 

A post on Farnam Street Blog quoting the philosopher Seneca stuck with me:

The primary indication, to my thinking, of a well-ordered mind is a man’s ability to remain in one place and linger in his own company. Be careful, however, lest this reading of many authors and books of every sort may tend to make you discursive and unsteady. You must linger among a limited number of master-thinkers, and digest their works, if you would derive ideas which shall win firm hold in your mind. Everywhere means nowhere. 

Antifragile and optionality

To that end, Nassim Taleb’s book Antifragile has stuck with me, not so much because I actively made the decision to go back and spend more time with it, but because very often I’ll see, read, or hear something that relates to his ideas. It’s had a dramatic impact on how I see the world.

Most recently, I find myself recalling Taleb’s idea that great advances tend to result more from random tinkering than systematic problem-solving.

The essential ideas in Book IV of Antifragile, ‘Optionality, Technology, and the Intelligence of Antifragility,’ are as follows:

• Optionality exists all over the place. An option is anything that has limited and small downside, with the potential for extreme upside. There are, of course, the explicit options that exist in financial markets, but hidden options exist in life everywhere. Example: show up to a party. If it’s horrible, you can leave. If it’s great, you stay. (This is probably the underlying idea in Woody Allen’s quote “Eighty percent of success is showing up.”) Limited downside, huge potential upside.

Taleb illustrates with the graph below, quoting Steve Jobs: “stay hungry, stay foolish.” He interprets that to mean “Be crazy but retain the rationality of choosing the upper bound when you see it.”

• You have to know it when you see it. Taleb describes an option as follows: Option = asymmetry + rationality. Taleb points out that almost always explicit options are overpriced “…much like insurance contracts…[and] because of the domain dependence of our minds, we don’t recognize [optionality] in other places, where these options tend to remain underpriced or not priced at all.”

• Don’t outsmart yourself. A key aspect of these ideas is that optionality trumps intelligence. The subtlety is that trying to bring too much linear intelligence is bad. You’ll take a linear approach, come up with a theory, implement an idea, and maybe meet with success. Rather, try a number of things. Place yourself in situations with low downside and huge upside, and then have enough intelligence to know when an upside is taking place. Taleb draws the distinction between the linear approach ‘Academia → Applied Science and Technology → Practice’ and the tinkering approach ‘Random Tinkering → Heuristics → Practice and Apprenticeship → Random Tinkering …’ as two different models of getting to breakthrough, with the latter being far more effective.

The story of Tide

This was all interesting to me but just a vague idea until I read about the story of Tide in a New York Magazine piece titled “Suds for Drugs” that highlighted the incredible market position of Tide detergent.

Shoppers have surprisingly strong feelings about laundry detergent. In a 2009 survey, Tide ranked in the top three brand names that consumers at all income levels were least likely to give up regardless of the recession, alongside Kraft and Coca-Cola. That loyalty has enabled its manufacturer, Procter & Gamble, to position the product in a way that defies economic trends. At upwards of $20 per 150-ounce bottle, Tide costs about 50 percent more than the average liquid detergent yet outsells Gain, the closest competitor by market share (and another P&G product), by more than two to one. According to research firm SymphonyIRI Group, Tide is now a $1.7 billion business representing more than 30 percent of the liquid-detergent market.

I thought that was mind blowing and was very curious how something that huge comes about. And the article talked about it a bit:

Before the advent of liquid detergent, the average American by one estimate owned fewer than ten outfits, wearing items multiple times (to keep them from getting threadbare too fast) before scrubbing them by hand using bars of soap or ground-up flakes. To come up with a less laborious way to do the laundry, executives at Procter & Gamble began tinkering with compounds called surfactants that penetrate dirt and unbond it from a garment while keeping a spot on a shirt elbow from resettling on the leg of a pant. When the company released Tide in 1946, it was greeted as revolutionary. “It took something that had been an age-old drudgery job and transformed it into something that was way easier and got better results,” says Davis Dyer, co-author of Rising Tide, which charts the origins of the brand. “It was cool, kind of like the iPod of the day.” Procter & Gamble, naturally, patented its formula, forcing competitors to develop their own surfactants. It took years for other companies to come up with effective alternatives.

I became more curious about Proctor & Gamble and the deeper story so I checked out the definitive book about P&G that’s referenced in the article, Rising Tide: Lessons From 165 Years of Brand Building at Proctor & Gamble. 

The article already mentioned that P&G was tinkering with compounds, which made me recall Taleb’s ideas. But the book, in Chapter Four, “Science in the Washing Machine,” went into more detail.

At the time, P&G was a good business, “profitable, but by no means comfortable.” It was “unable to achieve anything like breakout success against Colgate or Lever Brothers.”

The chapter echoes Taleb’s ideas right from the start, pointing out that “developing Tide was not a linear process.” In fact, at the heart of it was a renegade engineer, Dick Byerly. 

P&G had an inkling that the synthetic detergent market was interesting, but they weren’t able to crack the code on a compound that would work across the United States, with geographic regions that had different types of water, and would be strong enough to wash heavily soiled clothes without leaving a residue.

By 1939, after a few unsuccessful attempts, P&G had backed away from the area, but Dick Byerly, a researcher in the Product Research Department, just wouldn’t give up.

One of his supervisors described him as follows: “You’ve got to understand the man to understand what he did. He was moody at times, and obstinate as all get out. [His supervisors] had horrible times with Dick on occasion. Just tenacious as all hell.”

"We had a system at P&G that every week you wrote a weekly report," one of Byerly’s colleagues related years later. "Byerly had long since given up on putting this in his weekly report regularly since he had comments to the effect, "What in the hell is he working on that for?"

The whole story is fascinating, including details of how Byerly cautiously looped in his new boss into his research, how his boss was wary but intrigued, how they were pressured to stop diluting resources in an already-strapped research organization, how that pressure increased during World War II, how they stopped and then restarted, how they had to beg for expensive plant resources (and sometimes fly under the radar) to make the granules, and so on.

And then in the early 1940s, they had a breakthrough when Byerly reversed the typical ratio of the key components. All of a sudden, it worked. They didn’t know why (echoing Taleb’s ideas about tinkering trumping intelligence), but it worked. 

The chapter goes into incredible detail about what happened thereafter, but essentially, here’s what happened:

Voice

I’ve been spending time recently getting to know a technology company that helps companies succeed by allowing them to more effectively listen to their customers. Among many innovations, they do so by giving their client companies tools that give their customers a voice. 

Coincidentally, it happened that today I was reading Malcolm Gladwell’s excellent essay, "The Gift of Doubt," in the most recent issue of The New Yorker about the economist Albert O. Hirschman, and the idea of voice presented itself there as well. 

This happens often in my reading. I’m not sure it’s coincidental so much as me picking up on subtle aspects of what I’m reading that match what I’m thinking about. In this case, I’ve been thinking about organizations and dissatisfied constituents. 

In the broad sense, I’ve always been interested in the topic, particularly since, about a decage ago, I decided I wanted to focus on building great companies. I believe in the ability of a well-run company to improve this world—by hiring and training people, by delighting customers with great service and customers, and by generating returns for investors. At its core, the idea is powerful: groups of people come together to create something that creates value for sellers and buyers. There’s an honesty in the market, and (generally speaking) the better offerings and the better companies win.

As part of that exploration of what makes a company great, the idea of being connected to customers is a constant theme. It saddens me when a once-great company becomes obviously disconnected. I certainly acknowledge the difficulty of the problem. Large organizations are hard to manage and tougher to lead. Listening to customers is difficult. Reacting to that feedback is even tougher. The ability to give companies tools to solve this problem is why this company’s mission resonates with me so strongly. 

More recently and on a similar note, I’ve been affected by disenchantment with governments. As I wrote, the unrest bubbling to the surface with varying intensity in almost every major country is too significant to ignore. 

I hadn’t realized these ideas were connected until I read Gladwell’s essay. Gladwell mentions that Hirschman’s most famous book is Exit, Loyalty, and Voice: Responses to Decline in Firms, Organizations, and States. As Gladwell describes it:

The closest Hirschman ever came to explaining his motives [for fighting in the Spanish Civil War and World War II] was in his most famous work, “Exit, Voice, and Loyalty,” and even then it was only by implication. Hirschman was interested in contrasting the two strategies that people have for dealing with badly performing organizations and institutions. “Exit” is voting with your feet, expressing your displeasure by taking your business elsewhere. “Voice” is staying put and speaking up, choosing to fight for reform from within. There is no denying where his heart lay.

I’m going to read that book after I finish the (admittedly daunting) one I just started: The Idea of Justice by Amartya Sen. I ordered Sen’s book and What Money Can’t Buy: The Moral Limits of Markets by Michael Sandel to try and come up with a framework for the role business, and in particular we in the technology industry, might play in the global events I’ve mentioned. 

In his book The Idea of Justice, Sen echoes some of Hirschman’s ideas. The central idea he puts forth is that we don’t need to agree on the exact shape of a perfectly just world. Rather, he argues, reasoned discussion and debate among parties with different views and philosophies can still lead to enough agreement about what sorts of actions and institutions increase or decrease justice that we can move forward.

It’s a subtle and beautifully argued idea within which is the same idea of debate…voice. People have to participate. They have to speak up. 

I’m still developing this idea, but at its core, the idea of voice is something that resonates within me deeply as does the related idea of participation, as opposed to exit. I’m going to write more about this later because I'm observing that some of the ideals that seem to be emerging in the Valley eschew participation. There seems to be a belief that government is so broken—so “90s-era enterprise software company”—that it can’t be fixed, that the best strategy is to avoid or marginalize it. 

I disagree. I argue we in the Valley have an incredible opportunity to improve government and, through it, the lot of many who are suffering. 

Discontent

This video, an amazing on-the-ground point of view compilation of the protests in Rio de Janeiro—one of many throughout Brazil—is making the rounds.

This footage affected me because the fact that these protests are taking place right alongside those in Turkey, another significant country, along with the fact that both are occurring shortly after the Arab Spring and various Occupy movements makes the trend too big to ignore. 

When I introduced this blog, I wrote about how we in the Valley can’t ignore the broader aspects of the society we live in—issues like inequality, justice, employment, and education. 

As I stated then as well, Steve Jobs was able to create Apple and its iconic products because he appreciated aspects of the arts and humanity in general beyond what was immediately applicable to technology. 

In his own words when he introduced the iPad 2:

It is in Apple’s DNA that technology alone is not enough—it’s technology married with liberal arts, married with the humanities, that yields us the results that make our heart sing.

And in his commencement speech at Stanford about dropping out of Reed College and auditing calligraphy classes:

I learned about serif and sans-serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can’t capture, and I found it fascinating.

None of this had even a hope of practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would never have had multiple typefaces or proportionally spaced fonts.

I don’t have a solution to offer, but at least we can start asking the questions and having the conversations that may ultimately lead to a solution. If we set the goal to improve the world as we build great technology and great companies, we’ll be able to do it. That’s the amazing thing about creativity—you don’t know when and where the solution will emerge. 

Daft Punk

In honor of Kanye releasing his latest (and very much anticipated) album Yeezus today, I thought I’d try out SquareSpace's SoundCloud music feature for another album that made a huge splash in 2013: Daft Punk’s Random Access Memories. Plus, Daft Punk and Kanye are frequent collaborators, and they make an appearance in Yeezus. The richness and creativity of this music is just amazing. 

A Tech Subculture

This weekend’s Financial Times had a great cover story on Bitcoin titled "The Bitcoin Believers". 

While I’ve been following Bitcoin’s developments closely and the article’s insights into the development (and continued struggles) of the currency were very interesting, what I found most fascinating was one description of the subculture of “Bitcoin believers” that I thought very elegantly captured a cultural theme that could describe a large and growing subculture of tech generally:

Around the world, a generation is growing up whose intellectual framework was forged in an economic conflagration which destroyed the reputations of government, finance and central banks alike. The only heroes in this landscape are the hoodie-wearing tech entrepreneurs with their billion-dollar businesses.

This is one of the topics touched upon in George Packer’s recent article in The New Yorker, "Can Silicon Valley embrace politics?".

The sentiment is certainly a driver of the outrage in the Valley (and certainly more broadly) over the NSA’s activities exposed by Edward Snowden. For periods of times in the days following Glenn Greenwald’s article on the matter in The Guardian, every single link on Hacker News was related to the issue. I’ve never seen anything like that happen.

I’ve heard similar sentiments in conversations with friends in the developer community related to issues like Bradley Manning, bank bailouts, taxi regulations affecting Uber, internet sales tax, and so forth. 

For these reasons, I do believe this is a very significant aspect of Silicon Valley. I’m going to weigh in with a more thoughtful post on whether or not I agree with the sentiments embodied in this subculture, but for now I just wanted to highlight it and the fact that more people broadly seem to be noticing as well.