Startup teams behave like packs of wolves. And that's a good thing!

George ILIEV's new TEDx talk explores what wolves, green bananas & bird shit can teach us about ourselves, human society and the corporate world:

In brief:

1. Wolves epitomise startup culture: teamwork and sharing. While dogs are a metaphor for corporate culture: hierarchy, domination and submission.

2. Fruit ripening is like lifelong learning. Some people keep learning new skills over their lifetime, just as some fruit (bananas, apples, mangoes) keep ripening after being picked. Others don't: oranges, strawberries and grapes can ripen no further once detached from the stalk.

3. Investment bankers have something in common with bird excrement. Seeds that go through a bird's digestive system are four times more likely to germinate. Similarly, high-pressure jobs make people resilient and release their full potential.

Think about it next time you have a cup of Kopi Luwak coffee.

For the full stories, watch the TED video.

Helpless human babies and pre-revenue startups make for clever parents

It takes clever parents to raise a helpless human baby to adulthood;
It takes clever entrepreneurs to make a pre-revenue startup a success.

By George ILIEV

All babies are vulnerable when they are born. Yet, many animals give birth to young who get on their feet in minutes. Why are human babies so helpless?

Research by Rochester University suggests an interesting hypothesis: humans have become so clever exactly because their babies are so helpless. Helpless babies need smart parents to be able to survive: the more helpless the baby, the smarter the parents need to be to raise them to adulthood. This creates an evolutionary loop which allows babies to be increasingly helpless, as long as their parents are getting increasingly smarter.

Now look at this analogy through the prism of the startup world. The Googles and the Facebooks of the last two decades were born as companies that didn't generate revenue. Many of them were moonshots that took many years to become self-sufficient. Yet, they had smart founders who managed to raise seed and VC capital to tide them over their first years.

At least this is the case in Silicon Valley, where venture capitalists will support a team of bright founders working on a promising idea. On the other hand, European investors are much more risk-averse. European VCs primarily tend to invest in startups that are already generating revenue or are close to that point.

This makes me wonder why the US startup ecosystem and Europe have diverged in their evolution and who bears the responsibility. If US startups are the human babies, are European startups the orangutans?

Photo Credit: Barry Bland

TEDx Kent talk on wolves, bananas and bird shit

By George ILIEV

The three stories in this 14-minute TED talk draw parallels between:

     1) Packs of wolves and startup culture (vs. dogs and corporate culture);
     2) Green bananas and lifelong learning;
     3) Bird excrement and investment bankers.

Metaphors helps us understand the world better because "only 1/6 of your eyeball faces the outside world."

Panda negotiations resemble interest-only mortgages

By George ILIEV

Pandas are China's national treasure: rare and precious. China used to send them as a diplomatic gift to other countries. The first recorded case was in the 7th century when a Chinese empress sent a pair of giant pandas to the Japanese emperor. Between the 1950s to the 1980s China shipped out 23 pandas in total, to great fanfare. However, since the 1980s, China has been giving giant pandas to other countries only under a 10-year loan and usually charging an annual interest of $1 million per animal. After that the panda has to be returned but usually the lease is renegotiated, resembling an interest-only mortgage.

Panda negotiations between a foreign zoo and the Chinese Government can take time. However, on the side, zoos also have to negotiate with domestic environmental campaigners and animal rights groups and convince them that the "panda loan interest" payments will be spent by China for panda conservation programmes. Other interests may get entangled in the negotiations as well, e.g. political and trade lobbying. So most panda negotiations start to resemble an iceberg or, even more aptly, a polar bear: part of it above water and part of it under the surface.



When a zoo finds the price of a giant panda too high to bear (no pun intended), it can resort to a favourite tool of the finance industry: hedging. The zoos in Toronto and Calgary decided to hedge their panda exposure by signing a 10-year contract for one specimen and then taking turns to host it for five years each.

I wonder why the zoos that cannot afford a giant panda don't settle for a lesser panda. They are even cuter and need much less bamboo.

"Life after death" springs eternal in nature, science and the real economy

The death of an old tree leads to a spurt of growth of young saplings; The death of a leading scientist brings new names on stage.

"Science advances one death at a time" - Niels Bohr

By George ILIEV

The death of a tree in a forest opens up the canopy and allows young sapling access to sunlight.

A similar phenomenon has been proven to exist in the various branches of science, according to MIT research (In death, there is life: Big-name scientists may end up stifling progress in their fields, reported by The Economist). It turns out that "the death of a dominant mind in a field liberates others with different points of view to make their cases more freely". This positive effect is not the result of redistribution of research funding that may previously have been monopolised by the famous scientist. It is rather due to the attention of the scientific community that the established authority used to attract ("intellectual oxygen") and possibly the unwillingness of younger scientists to challenge the established authority. This supports a century-old quote by Physics Nobel Prize winner Niels Bohr: "Science advances one death at a time."

Thus, in the forests of science, it is not access to nutrients underground that spurs the outburst of new growth; it is the open space above.

A similar phenomenon exists in macroeconomics and was first observed by US economist Mancur Olson. He explained the post-war economic miracle in West Germany, Italy and Japan with the destruction of ossified socio-economic institutional hierarchies. A sharp institutional break (such as defeat in war and occupation by a foreign power) spurs economic growth by destroying the existing distribution coalitions, i.e. vested interests. But then several decades later, new distribution coalitions will have emerged and, in turn, would need to be reformed or destroyed to let the economy move forward.

The king is dead. Long live the king.

To make your startup a success, do not plant trees in the Arctic!

Lack of market kills companies; Lack of sunshine kills trees.
By George ILIEV

Millions of small companies and organisations lead a meagre existence: corner shops in the age of the supermarket, startups that grow old without making it big, charities with a handful of employees, street sellers making $3 a day. These are like the stunted trees (known as krummholz) that grow above the treeline in the Arctic and in high mountains.

The treeline separates the areas suitable for tree growth (with an average annual temperature of over 5 °C) from the areas too cold for trees (below 5 °C). Yet, it is not a sharp line but rather a band that may stretch up to 150 km wide in the forest-tundra transition zone in northern Canada. This is the zone where trees fade into krummholz.


Stunted trees cannot grow tall for one of two reasons:
1) lack of sufficient solar radiation and warmth, in the polar areas and high up in the mountains;
2) lack of rain in the transition zone around deserts.

In a similar way, many companies and organisations never make it big for two analogous reasons:
1) lack of a market for their products or services;
2) lack of investment.

"The Number 1 company-killer is lack of market," says US investor Marc Andreessen. Companies that only have a micro-market (e.g. a mom-and-pop store that caters to two streets) resemble the stunted trees that can only survive high in the mountains in a tiny ecological niche, usually sheltered by a rock.

 

If stunted trees are micro-companies, bonsai trees are our hobbies

The bonsai tree is an exceptional member of the stunted tree category. These miniature trees exist in this form because we, humans, want them to be like this and intentionally deny them nutrients.

In the human world of businesses and organisations, the bonsai trees are not companies. They are our hobbies. They are rarely meant to be businesses: they are the blogs that do not profit from advertisement or the flower gardens maintained for pleasure rather than for commercial use.

Sometimes bonsai trees and krummholz get confused in the startup world. Both arise from a personal passion and never make it big. However, there is a crucial difference. The bonsai is never meant to grow big: you don't need a 10 ha flower garden in your back yard. While a flower-growing business that produces cactus leaves to put in flower bunches is clearly making the wrong product for the wrong market and is unlikely to sell much for Valentine's Day (though it might be more successful in sales for April Fools' Day). A hobby can be pursued independently of the external environment because its practice is made possible by cross-subsidising, while a startup always has to start from a market need and can only draw resources from its market.

Humans have one advantage over trees. We pick where to plant them, while the trees have no choice where they happen to be. So, if you want to grow your tree tall, do not plant it in the Arctic. And if you want your company to succeed, find a market first.

Shakespeare might have used this last sentence to wish success to all budding entrepreneurs with the following piece of advice: "Neither a stunted tree, not a bonsai be!"

When stars collide, teamwork suffers. Why teams with many stars often lose?

Stars in some sports compete among themselves, rather than against their opponents
By George ILIEV

Research published in Psychological Science finds a satiation threshold of stardom in various sports: having too many stars on a team often hampers the overall success of the team. In a sport like football (soccer), having more than 75% stars on the team turns out to be counter-productive. In basketball the threshold is even lower, at 60%.

When individual stardom turns into collective martyrdom

Having too many stars become a hindrance when the roles in a given sport are not highly specialised. Ten of the 11 players in a football (soccer) team run and kick the ball pretty much the same way. All five basketball players dribble and pass similarly.

On the other hand, in sports with highly specialised roles such as baseball (where one is using a bat and the other a glove), there is no harm in piling on more and more stars… until they fill up the night sky.


Game Theory explains internal competition within "zero-sum" games

When the roles in a team are not highly specific, as in basketball and football (soccer), play degenerates into an individualistic performance where each player views their activity within the team as a zero-sum game. This gives them an incentive to keep the ball longer, to the detriment of fellow team-mates who might be in a better position to score a goal. As a result, instead of competing against the “competition”, the team starts to compete within itself, leading to the poorer performance of "star-spangled teams".

On the other hand, in baseball the players have an incentive to cooperate all the time as each player’s success is a win-win for all team-mates (i.e. a non-zero sum game).

Competition trumps cooperation in the corporate tug-of-war

This sports analogy is directly observed in the business world. Consulting and investment banking teams composed of multiple star performers often fail when the team roles are homogeneous in design and start to overlap. This means a degree of hierarchy may actually make a team more productive: a team composed of a director, a manager, executives and coordinators divides the responsibilities and focus on different tasks, so the team members do not compete against each other. Otherwise, in a high-pressure environment, you end up hearing stories about one flight attendant hitting another with a tray in front of all passengers.

Two key take-aways:

1) To achieve team success, it is plainly not enough to have diversity of backgrounds; diversity of roles needs to complement team design.

2) When stars collide some teams lose out. And I am not talking astrology here. Rooney and Gerrard: take note!

To make the best use of exec education, eat snow like a camel

Executive Education is an expensive resource. So is snow as a source of water for Asian camels.
By George ILIEV

Snow and camels don't usually go together in our mind. Yet they do in the real world. The two-humped Bactrian camels in western China and Central Asia regularly eat snow in the winter or at high altitudes to satisfy their water needs. This is largely true of all animals living above the snowline, as the only water that exists there is in the form of snow and ice. However, the problem of eating snow is that, once ingested, it takes a lot of food calories to melt and heat up the water to body temperature, as the latent heat of snow and ice is very high. This energy sacrifice requires that camels pace themselves and eat only small amounts of snow at a time.

Education and training have a role in the corporate world analogous to the physiological role of water in an animal's body. Without knowledge and skills, it would be impossible for organisations to function. And while mainstream universities provide "liquid education" below the snowline (i.e. for young employees), after a certain age Executive Education remains the primary source of new knowledge and skills that is available and suited to the needs of a busy professional. 

Executive Education courses are delivered by both the leading business schools and the in-house corporate universities of large multinationals (where they exist). Yet, these courses are a very expensive resource irrespective of the channel in which they are delivered. This is why business units pace themselves and use them sparingly, within the limits of their employee development budgets. Getting your company to sponsor you for an Advanced Management Programme is invariably a very competitive process, as the programme fee can be up to $80,000 for this 50-day course at Harvard.

Whether you are a Bactrian camel or a corporate workhorse, you would probably enjoy equally eating snow and taking courses at Harvard. But that's life above the snowline.