Crop rotation and alternating career stages recharge the batteries

By George ILIEV
CorporateNature Metaphor Series, No 81

In the 16th century, farmers in Flanders (Belgium) discovered the four-field crop rotation. This led to an agricultural revolution in continental Europe and in copy-cat Britain. The discovery that planting wheat, turnip, barley and clover on the same plot over four consecutive years would not exhaust the soil led to a big increase in productivity, compared with the previous practice of leaving the land to lie fallow every third year.

Modern lives and careers are starting to look similarly compartmentalised: with the end result of recharging and reinvigorating the person. The four-field crop rotation in one's career can take the form of:
a) work for a company;
b) work for yourself or start up a company;
c) travel;
d) study.

Young people in Western Europe nowadays increasingly take a gap year after high school to travel the world. Mid-career people often do it as well. This corresponds to planting turnips on your field: as the Jewish saying goes "to the worm in a turnip, the whole world is a turnip." After all, it's not a bad idea to come out of your turnip and see what other turnips in the world look like. 

Studying no longer happens only in one's youth. People often do professional degrees after working for some time, e.g. an MBA in one's late 20s / early 30s, or an EMBA in late 30s and 40s. And even beyond that, to keep up with technology advances, many professionals choose to do shorter (e.g. 3-month) IT courses. This is the experience that recharges one's career the most, similar to the effect of clover and other legumes on the soil (enriching it with nitrogen that benefits the crops thereafter).

Entrepreneurship also comes at different stages in life: one may try out an idea in their 20s (what I call Type 1 or  "wolf-type" natural entrepreneurs), then work for a company to gain experience and contacts, and then start up a company again in their 40s or 50s, tapping their accumulated expertise (which I call Type 2 or "dog-type" corporate entrepreneur). In the farming analogy, this stands for planting barley - from which craft beers for the hipsters are made.

Working for a company is the remaining (most mainstream) piece of the sequence. Good old wheat is the bread (and butter) of the global economy after all.

Apart from the four-field rotation, there is another very productive agricultural technique which was developed by the Native Americans before the rise of modernity: planting maize (corn), beans and squash simultaneously, known as the Three Sisters. However, this simultaneous recharging of the soil by growing three different crops has a much rarer analogy in the human world. It can only be pulled off by the Rennaissance Man / Woman. It takes an entrepreneurial polymath to manage to juggle with study, travel, working for a company and launching a startup at the same time. 

Crop rotation (Source: Wikipedia)

Rice is a super crop; Sales is a super job

By George ILIEV
CorporateNature Metaphor Series, No 80

Sales people are not super human but their job is. The sales role lends itself to continuous returns on investment: the more time you put in sales activities, the more revenue you are likely to generate (even if the returns per additional unit of time may be declining). In this it resembles rice: a super crop that is similarly responsive to investment: the more labour a rice farmer puts in in weeding and watering the crop, the bigger the harvest.

Rice paddy (Source: Wikipedia)

Iterating startups are like falling cats: trying to land on their feet

By George ILIEV
CorporateNature Metaphor Series, No 79

Startups need to iterate in order to survive. In this they very much resemble falling cats. All successful startups have at some point been a falling cat that needed to orient itself downwards to land on its feet and survive. 

Entrepreneurs are often described as people who jump off a cliff and build wings on the way down. A falling cat might be an even better analogy: the cat has a solid "cat righting reflex" inside it from several weeks old. A height as little as 30 cm would give a cat enough runway to manage to turn itself and land on its paws. Startups often need a bit more runway but they also need multiple / sequential iterations.

An African proverb says: "If stretching were wealth, the cat would be rich." Cats are remarkably stretchable and flexible, which sets a good example for entrepreneurs: keep flexing.

Yawning cat (Source: Wikipedia)

Patents and campfires provide limited protection from predators

By George ILIEV
CorporateNature Metaphor Series, No 78

Registering a patent is like lighting a campfire in the wild. Campfires repel animals most of the time but attract wolves, bears and snakes sometimes. Similarly, a patent may protect your intellectual property most of the time, but in some cases it may simply alert the competition to the fact that there is something going on in the area and they should come over to sniff around.

Fire normally scares animals away from the immediate perimeter (several metres away) but beyond that everything is up for grabs. In a similar way, patents provide protection for that very discovery/invention but can often be circumvented a bit further afield. 

So don't be surprised if those picnic bags left lying around the campfire go missing by the morning.

Campfire (Source: Wikipedia)

The formation of the EU unleashed socio-economic competition similar to the evolution of animal species when tectonic plates collide

The linking of North and South America led to the Great American Interchange: successful species advanced and unsuccessful ones retreated. The formation of the EU led to similar movements in the "Great European Shortchange"

By George ILIEV
CorporateNature Metaphor Series, No 77


Until three million years ago, North America (including Mexico and Central America) was separated from South America by an ocean in the middle. Then around three million yeas ago the Isthmus of Panama rose up from the sea floor and created a land bridge linking the two continents: a phenomenon known as the Great American Interchange. 

The New World was never been the same again since: Many northern species, including jaguars, pumas, llamas and a tonne of other animals invaded the South and thrived. But only three South American species moved north and spread out in any large numbers (the armadillo, the opossum and the porcupine). The reason for this discrepancy was that northern animals had had millions of years to evolve and acclimatise to tropical conditions in Mexico and Central America, which had served as a nursery for their southern expansion. On the other hand, southern animals had only lived in the tropics so the northern plains and mountains were not a hospitable habitat for them.

The creation of the EU since the 1950s is a similar story of competition among economic and social species: a Great European Interchange. The Common Market served as a training ground for the global expansion of the most competitive European companies: Airbus, German car-makers, a few pharmaceutical firms and the banks and funds of the City of London. These companies became the jaguars and the pumas of the corporate world. 

On the other hand, freedom of movement for people exposed to trans-continental competition European blue-collar workers who hadn't acclimatised to globalisation. These workers, just like the South American species, became the losers from the Great European Interchange. Their sidelining ultimately led to Brexit and to other anti-EU social movements on the continent, as the EU for them felt more like "a Great European Shortchange." 

In Britain former prime minister Gordon Brown set up a short-lived Migration Impact Fund at the end of his rule in an attempt to mitigate the consequences of globalisation for manufacturing workers. Unfortunately, this fund was closed by the next British prime minister, David Cameron, who took over in 2010. Cameron didn't see the writing on the wall until it was too late - which cost him losing the ill-fated EU referendum in 2016.

There was one key difference between the Great American Interchange and the Great European Shortchange. Three million years ago, the different species in the Americas could only vote with their feet. In present-day Europe, all people can vote in elections and referendums, so leaving behind a large segment of the population feeling shortchanged was never going to be a successful recipe for cohesive political and economic development.

The Great American Interchange (Source: Wikipedia)

@GeorgeILIEV  
@CorporateNature

Megalodon was driven to extinction by giant white sharks; Airbus A380 to be phased out in favour of A350

By George ILIEV
CorporateNature Metaphor Series, No 76.

The prehistoric giant shark Megalodon may have been brought to extinction by the rise of its smaller cousin, the great white shark, some 6 to 4 million years ago, a new study claims.

On the same day, European plane maker Airbus announced it would stop production of the Airbus A380 superjumbo in 2021 because of lack of new orders and would focus instead on the smaller A350 and A330 models.

A smaller beast often happens to upend a bigger one in a typical David-and-Goliath fashion. However, extinction does not have to be brought about only by your own cousins: a giant can be outcompeted by species farther removed, like a Boeing 787 Dreamliner.

Fossilised Megalodon tooth and two great white shark teeth (Source: Wikipedia)

 

Airbus A380 (Source: Wikipedia)

Startup journeys take you across mountains; Corporate careers take you down river valleys

By George ILIEV
CorporateNature Metaphor Series, No 75.

Entrepreneurs discover "points of pain", tackle the uknown and overcome challenges that others often consider insurmountable. This makes the startup journey similar to climbing a mountain.

On the other hand, corporate employees tread a well-trodden path. This makes a corporate career resemble a trek down a river valley. The river has already eroded its bed through the rocks just like the company has established its policies, processes and territory; one only needs to go with the flow and follow the river downstream.

And then, occasionally, there are the canyons: rivers that have cut their bed deep across mountains. These are the unicorns: startups that headed up a mountain and on the way got big and created their own giant river valley.

Grand Canyon (Source: Wikipedia) 

Incentives can get the animal spirits out - even in the kindest of creatures

By George ILIEV
CorporateNature Metaphor Series, No 74.

Kelly the dolphin was an obedient and fast-learning mammal in a park on the Gulf of Mexico...until it all got out of whack. She was trained to bring pieces of rubbish from her pool and would receive a fish in reward. Then Kelly realised she could manipulate the system. First, as the reward did not depend on the size of the rubbish, Kelly started breaking up large pieces of paper into smaller pieces to get multiple rewards. Then, she figured out something even more sinister: if she used her reward fish as bait, a seagull would get tempted to fly into the water, Kelly would catch it, drown it and hand over the bird's body to get more rewards. Kelly also made sure to teach her child these tricks, who in turn taught other young dolphins.

Does this remind you of investment bankers before the 2008 global financial crisis? Just like Kelly the dolphin, they would chop up sub-prime mortgages into collateralised debt obligations (CDO) and got handsome rewards for doing it.

But who is to blame: the perpetrators, be they animals or humans? Or the human creators of the incentive systems?

Dolphin (Source: Wikipedia)

Entrepreneurs approach opportunities in two ways: like monkeys or like chimps

By George ILIEV
CorporateNature Metaphor Series, No 73.

Capuchin monkeys and chimpanzees both enjoy eating nuts (see documentary video below). Cracking a nut open is no rocket science but for a monkey (or even a human toddler) it can be quite a challenge.

Monkeys waste a lot of energy bashing rocks against the nut without seemingly learning much from each attempt. Chimps and other great apes, on the other hand, plan and execute the blow to the nut shell with precision learned from watching others in the family. Thus, chimps often manage to crack the nut with a single strike.

Some entrepreneurs adopt the monkey approach to tackling problems and opportunities. Others take after the chimps. Younger entrepreneurs are generally more likely to follow the "monkey way" of cracking nuts: multiple trials, multiple errors, slowly learning from their own mistakes and expending a lot of energy in the process. Mature entrepreneurs are more likely to resemble chimps: having observed others for a long time, they have learned from these observations which nuts to tackle and which to leave aside, and how best to crack the nut with the least amount of energy.

Yet, whether you are a monkey or a chimp, when you reach a nut (an opportunity), you'd better start cracking it as best as you can. Or else another species will eat it.

We count animals precisely but humans loosely to guarantee human responses

By George ILIEV
CorporateNature Metaphor Series, No 72

When we count the animals in a zoo, we count very precisely and in great detail. For example, the London Zoo counted 19,289 animals in 2018.

When we count humans in a census, we omit a lot of details. For example, the US census conducted every 10 years does not ask for the citizenship of the people who get counted.

The reason for this discrepancy is simply... complexity. Whereas it is us humans who do the counting of the animals, in a census the humans are supposed to count themselves. This may trigger a complex reaction of avoidance in case the incentives for declaring all details are misaligned.

Just like dogs and wolves roll in animal carcasses to mask their scent to be more successful in hunting their prey, so people may try to hide from the census to avoid disclosing information that they find sensitive. Thus, we end up counting humans not with a fine pen but with a broad brush.

Penguins at London Zoo (Source: Wikipedia)

China is a juvenile elephant: Vulnerable now but invincible in 10 years

By George ILIEV
CorporateNature Metaphor Series, No 71.

China is a juvenile elephant, in both economic, military and scientific terms. Elephants keep growing until they are 20 years old. China has at least a decade more to go until it reaches full size. Whereas the US is a full-grown tiger which has already reached the peak of its power.

The juvenile elephant is still vulnerable to predators but give it another 10 years and no rival (or predator) will dare to confront it. So Donald Trump, while generally lacking in strategic thinking, is for once acting strategically. He is aware that despite his "Make America Great Again" sloganeering, his country is an ageing tiger. He is playing hardball with China now because this is the last opportunity for the US to influence China. In 10 years, China will simply brush the US aside - not necessarily as an enemy but as a nuisance.

Juvenile elephant (Source: Wikipedia)

Idea generation is like skimming the water surface

By George ILIEV
CorporateNature Metaphor Series, No 70.

When one is facing a thinking task ahead, e.g. preparing a presentation or a talk, tunnel vision focuses the mind and commands it to collect talking points and ideas from diverse areas and walks of life. This process resembles the way a Black skimmer catches fish: by skimming the surface of the water in different directions until a fish enters its beak. Given that both ideas and little fishes are fleeting, time is of the essence: you need to record the ideas that occur to you promptly, while the bird has to snap its beak shut instantaneously when it touches a fish.

Socrates uses a similar metaphor by comparing the mind with an aviary in which the birds are pieces of knowledge. If you walk into the aviary and catch a bird, you are remembering an idea/thought from the past. It is important, though, to catch the right bird, just as it is important for the Black skimmer to catch fish rather than sticks floating in the water.

Black skimmer (Source: Wikipedia)

UK needs to choose its Brexit future: dog-into-wolf OR dog-into-dingo

By George ILIEV
CorporateNature Metaphor Series, No 69.

Brexit will need to unwind 45 years of economic and legal convergence between Britain and the EU. This is similar to unwinding the genetic evolution of the domesticated dog and turning it back into a wild wolf...or at least into a dingo (a feral dog). Britain's choice of divergence strategies (dog-into-wolf OR dog-into-dingo) is actually not much of a choice. Sadly both come with the stigma of being an outsider to the civilised human world.

The full text of this #BrexitMetaphors blog post can be found here: 

http://brexitmetaphors.blogspot.com/2018/12/dog-wolf-or-dingo.html

Dingo (Source: Wikipedia)

Swimming vs Splashing: in Water and in Management

A swimmer who makes big splashes in the water is not a good swimmer.

An executive who boasts about their management style is not a competent executive.

The birds that splash the most are pigeons and sparrows. They can't swim at all.

Executives who boast and swagger should brush up on the Dunning Kruger hypothesis. This will help them improve.

Yet, pigeons will never learn to swim.



@GeorgeILIEV  @CorporateNature

Ideas Are Photons of Light

In solar cells a photon of light dislodges an electron, which starts a chain reaction. This is electricity.

In business an idea comes to the entrepreneur and knocks them out of their sedentary state. This is the beginning of a startup journey.

The photon-electron collision is followed by many more knocks and particle interactions. That's the essence of electricity.

The original idea evolves into many more iterations, pivots and new ideas. That's the essence of the startup journey.

Electricity flows in any direction where it can find a conductor.

The first idea gives impetus but the direction is set by the obstacles along the way.

Electricity may flow afar but in the beginning there was light.

The startup journey may be winding and convoluted but in the beginning there was "a photon of an idea".

@GeorgeILIEV @CorporateNature

Newborn animals and newly-hired employees share a one-sided world view

Newborn animals imprint on the parent that raises them. New employees imprint on the boss who hires them.

By George ILIEV

The photo of the ducklings could have featured a bucket instead of the mother duck if a moving bucket had been around for the first 16 hours after the ducklings had hatched. Newly-hatched birds are known to imprint on all kinds of moving objects around them: rubber boots, hang-gliders, sets of plastic balls and even humans.

Similarly, newly-hired company employees will imprint on the boss who hires them or supervises them directly in their first days at the company. They will acquire skills and behaviours from their manager that will turn them into a miniature copy of that person. As a result, they will be more understanding, more forgiving and less critical of their boss, compared with veteran employees who have a new boss put in place (helicoptered in). How could one be too critical if this means being critical of themselves?

What's good for the gander must be good enough for the goose.

Humans: be kind to animals so that robots will be kind to us one day!

Improving humanity’s survival chances in a future world run by robots is a two-step process. 
Step 1: Be kind to animals. 
Step 2: Let robots learn from us, hopefully replicating our kindness to animals in their behaviour to humans.

By George ILIEV

We should treat animals kindly in the hope that robots will treat us kindly once they take over. History does not necessarily repeat itself but it rhymes, to paraphrase Mark Twain. Or you may recall the story of Roman general Scipio Aemilianus who wept when he destroyed Carthage in 146 BC, as he foresaw that the same fate would strike Rome one day. If we treat animals as enemies, we shouldn’t be surprised if we get similar treatment in the future.

1. Pattern recognition: monkey see, monkey do

We are already observing AI (artificial intelligence) developing racist and misogynistic tendencies based on analysis of people-to-people communication and human culture. It is likely that the robots of the future will take their cues from our behaviour, as humans will provide most of the data on which robots will train their AI.

Historically the treatment of animals by humans has run along a gamut of mostly negative experiences: hunting; raising animals for slaughter; domestication to use as beasts of burden; and experiments on animals. Yet, recent history also shows signs of hope: the modern trends of taking care of pets with kindness and respect; or giving up animal-derived food and becoming vegetarian/vegan.

Our treatment of animals is a trend-setting pattern that robots will likely draw upon or even benchmark against when they fine-tune their policies and behaviour towards us.

2. Conformism is the old normal (Watch Zootopia!)

Our peaceful coexistence with robots rests on the assumption that robots will copy us when we are on our best behaviour. They may or may not do so (for better or worse) but either way we should strive to provide positive models to copy rather than ones that may harm humanity.

We can see in the evolution of animal culture and social learning (learning from others) that animals are conformist creatures. Experiments on various species of monkeys and apes demonstrate this clearly:

“Animals strive to act like others, especially others whom they trust and feel close to. Conformist biases shape society by promoting the absorption of habits and knowledge accumulated by previous generations.” 
(Frans de Waal, Are We Smart Enough to Know How Smart Animals Are?, P. 256-259)

If all creatures with a degree of consciousness are kind to one another, then robots will not find alternative models to observe and copy and will conform to our culture. In other words, we should be building a world modelled on peaceful coexistence with animals as in Zootopia (Zootropolis, the movie) before the robots have developed sufficiently to redesign the world on their own. If we build "Zootopia", all we would then need to do is ensure that robots have enough time to evolve around us and with us, so as to learn from our behaviour.



3. Predator vs Alien

The assumption that robots will copy our best selves may be invalidated if robots decided to copy patterns from human history (e.g. slavery) or existing predator-prey behaviour among animals. However, predators hunt their prey to survive, while the robots of the future are unlikely to need to eat flesh to charge up their batteries. This key metaphorical distinction is unlikely to be lost on machines that have evolved intelligence and consciousness.

The key question in the behavioural conformism hypothesis then is whether robots would feel as similar to us as we feel similar to other animals, or as alien to us as we feel alien to other animals. Humanity seems to be treading a fine line between the two at present. Would robots resist the metaphorical model of “predator” or "master", including holding back from playing with humans as an object of entertainment (e.g. as in fox hunting, or in the circus)? Or would they, while being aliens to us, evolve into benevolent aliens that take the best from humanity and disregard historical mistakes in our treatment of other human beings and other animals?

4. 100 Years of Biological Solitude

We will find out in the next 100 years or so which way the robotic cookie crumbles. Our solitude of living only with other biological species will be over when robots become able to reproduce. But if we are still cruel to animals when the first sentient robots come into being, we may run out of time to convince the next generations of robots that we ourselves are worth preserving.

Of Elephants and Baboons: Five Company Stakeholders in Animal Form

World Bank professional Eva Schiffer divides stakeholders into 5 categories:

Elephants: high influence, positive
Meercats: low influence, positive
Snakes: high influence, negative
Mosquitos: low influence, negative,
Baboons: high influence, undecided (sitting on the fence).

The full article can be read here:
https://www.linkedin.com/pulse/stakeholder-strategies-how-engage-elephants-avoid-snakes-eva-schiffer

There is another useful maxim in business organisations: When you are the boss and you are launching a new project, 20% of people will support you, 10% will be against you, and the remaining 70% won't care. However, the 70% will care how you treat the dissenting 10%.

In the world of elephants, snakes and baboons, the baboons are always watching out for elephants trampling on snakes, and for snakes biting elephants.

The plough was a double-edged sword for human society: economically productive but discriminatory to women

Positive technological advances sometimes lead to negative social change.
Discrimination against women stems from the invention of the plough.
By George ILIEV 

Some 8,000 years ago humans invented the plough. It was the perfect labour-saving device for efficiently bringing fresh nutrients to the surface from the soil layer below. Flipping the two layers not only buried the exhausted top layer of soil, but also covered weeds and the remains of previous crops, helping microorganisms to break down organic matter. Little did the early farmers know that, together with organic matter, this innovation was also breaking down their social structure.

Before the invention of the plough human populations lived in relative gender equality, as both men and women were economically significant contributors to society through their gender-specific occupations: hunting, gathering and primitive land tilling. The idea that women ruled the roost in a matriarchy before the dawn of agriculture has now fallen out of favour with anthropologists and archaeologist, but at least there was equality. However, the plough changed everything, as a 2011 paper by Harvard and UCLA researchers demonstrates (On the Origins of Gender Roles: Women and the Plough).

Ploughing requires upper body strength and men have a natural advantage in this. Having stronger shoulders not only allows you to exert the pressure needed for efficient ploughing but also helps in maintaining control of the domesticated animals that pull the plough. So men made better ploughmen than women and over time this gave them higher socio-economic status.

We can see vestiges of the plough in modern day gender discrimination around the world: societies that relied heavily on the plough have higher rates of gender inequality.

The plough only has one cutting edge but it became a "double-edged sword" for humanity for several millennia. Should we let the plough continue to influence our world, now that we are moving on to driverless cars and artificial intelligence?

(Picture: Ploughman with Woman Planting Potatoes, by Vincent Van Gogh)

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.

Path-dependent ants and the dangers of the pheromone trail

Ants always follow other ants; Thank god humans sometimes stray from the beaten path
By George ILIEV

Ants are famous for following each other's pheromone trail. This is how ants find their way home or to a food source. If given two possible paths, the shorter path ends up winning because more ants will follow it in a given time and more of them will leave their pheromone trace. Thus the signalling on the shorter trail will become more pronounced and this route will trump the longer trail.

An interesting conundrum, however, is presented to ants when a new food source appears that is not on their path. The ants still keep following their old path and rarely manage to reach the new food source. This form of stigmergy leads to absurd situations known as an "ant mill" where ants that have lost their original pheromone trail end up marching in a circle following each other and eventually die of exhaustion.

Human organisations and societies are different thanks to the existence of dissenting groups. In feudal times these were called rebels. Nowadays they are called "inventors", "early adopters" or "divergent thinkers" - people who do things differently.

Many prominent thinkers, from George Bernard Shaw to Elon Musk, have encouraged people to be different and start new things. G. B. Shaw says: "Do not fear to be eccentric in opinion, for every opinion now accepted was once eccentric."

Yet, often times human society has found itself following the wrong pheromone trail. You may recall the VHS versus Betamax videotape format wars in the early 1980s, in which VHS won not because it was the superior standard but because more customers and producers had chosen it originally.

Another prominent case of path dependence in business is the establishment of the QWERTY standard of typewriters over another more modern standard.

We could even broaden the path dependence argument to religions. Once established they profoundly shape human culture and turn an area's population into conformist collaborators working towards the religion's objectives. Groupthink is not confined just to small groups but applies to entire societies.

So after all Kafka was right: at times we are human but there are times when we turn into insects. Beware of the pheromone trail.

Photo: Ant trail. Source: Wikipedia

Natural selection drove violin design in Renaissance Italy

Market pressure resembling natural selection forced unwitting Italian violin makers to lengthen their violin holes
By George ILIEV

Violin holes kept evolving in 16th-century northern Italy
Early Italian violin makers designed their instruments with a round hole in the middle. None of them knew that this was sub-optimal. Acoustics and sound resonance improve not by increasing the size of the hole but by lengthening the edge of the orifice, according to a study in the Proceedings of the Royal Society. Gradually, customer feedback influenced the workshops of the Stradivari and Guarneri families in Cremona during the Renaissance. Through trial and error they kept increasing the length of the hole's edge until we now have the optimal known design with a typical "f" shaped hole.

Market selection resembles natural selection
Interestingly, the feedback loop of the market closely resembled natural selection: a process entirely based on customers choosing violins that they perceived as having the best acoustics. This, rather than conscious R&D attempts by the makers to "fiddle" with the sound, made the producers prosperous and ensured that the successful designs would be passed down the next generation in the luthier's family.

Unwitting violin makers did not know the recipe for their own success
The producer of the violins with the best sound would simply be favoured by the buyers, even if the producers themselves didn't know why. Violin-making is a complex art of tweaking multiple variables, so the luthiers may have thought that the varnish or the strings they used made their product superb. Yet, in the end it all boiled down to the hole.
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Violin photo attribution: Wikimedia Commons

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