Business & Biology

The Noncompetitive Advantage

hunter_hunted

Have you ever been chased by a bear? Heart racing, adrenaline pumping, looking for the nearest tree to climb to avoid almost certain death? Yeah, me neither. And that fact—that lack of being chased or having natural predators or competition—is precisely why humans have such long lifespans, and why some companies dramatically outlive their peers.

For years, biologist have made the simple observations that “bigger animals live longer lives.” The idea is that the bigger an animal becomes the more efficient they become. It’s a fact of biology, which extends into the world of business, urban planning, and organizational ecology. As theoretical physicist, Geoffrey West, puts it, “This might also explain the drive for corporations to merge. Small may be beautiful but it is more efficient to be big.” As with all rules, however, there are exceptions. But before we discuss the anomalies, let’s examine our options for survival.

There are three main strategies for small animals, organizations, businesses, cities, or powerless individuals to survive in the world of Big: (1.) direct competition, (2.) indirect competition, and (3.) noncompetition.

Direct competition is the easiest to understand, but is also the least effective (lowest survival). This is like turning toward that grizzly we talked about earlier and fighting back. There’s a chance of survival, but it’s not great. And at what cost? In business, small companies that use this strategy are labeled sustaining entrants. They compete in an established market against powerful incumbents by making some improvement to mainstream products.

As Clayton Christensen noted when developing the theory of disruptive innovation back in 1995, in the case of “the disk drive industry, only 6% of sustaining entrants managed to succeed.” And this makes sense, right? To directly compete for high-end or mainstream customers in an established market is going to draw attention from much more established players who have the ability to either defend (kill us) or acquire (eat us). Either way, survival and longevity are limited.

Indirect competition is a different game. We can view this as the dog eating food scraps that have fallen from the dinner table. While direct competition between small, young entrants and large, established incumbents is inherently unfair, indirect competition serves customers that are of little interest to large incumbents. Young firms appeal to low-value customers by providing lower quality products outside the mainstream market. This type of business calls less attention to itself, because it serves customers that would be a “waste of time” to larger incumbents.

Noncompetition is the anomaly in our discussion. This strategy is exactly what it sounds like—not competing. It’s finding or creating a niche that insulates us from hazards and outside competition. In business, as you might have guessed, noncompetition is rare.

In biology, it’s extremely rare for small animals to live for long periods, but birds and bats seem to break all the rules when it comes to life expectancy. Despite being small and having rapid metabolic rates—both significant indicators of short lifespan—birds and bats live 3-3.5x longer than animals of a similar size. In a world where corporate life expectancy is decreasing, many in business would be happy with a three-fold increase in survival.

For birds and bats, it’s a matter of flying. They’ve taken themselves out of the terrestrial equation, out of reach of countless potential predators and hazards. They’ve developed a mechanism to explore the sky, a niche above us land-based creatures. Their competitive advantage is simply not competing. They just fly away.

When we look at businesses that have defied the odds of survival, our view turns east toward Japan, where a handful of companies are over 1,000 years old. Just as flying has insulated birds and bats from harm below, older Japanese companies benefit from insulation. They are often small, primarily serve Japanese markets, run on values beyond profit-at-all-costs, and operate in a culture where acquisitions and mergers are avoided (compared to the West’s seeming love of M&As). Thousand-year-old Japanese enterprises are much different than the S&P 500, like the difference between earth and sky or mammals and birds.

Google, Amazon, Apple—These are the big game animals, the predators, the bears chasing us up a tree. Perhaps we (and our businesses) can thrive for decades without becoming or competing with giants. Humans transcended the law of the jungle; birds and bats transcended the limitations of land. In order to be exceptional, we must strive to be an exception, no matter how small. Rather than competing head-on in an unfair fight, why not learn to fly?

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Christensen, Clayton M., Michael E. Raynor, and Rory McDonald. “Disruptive Innovation.” Harvard Business Review 93.12 (2015): 44-53. (Source)

Daepp, Madeleine I.G., et al. “The Mortality of Companies.” Journal of The Royal Society Interface 12.106 (2015): 20150120. (Source)

Munshi-South, Jason, and Gerald S. Wilkinson. “Bats and Birds: Exceptional Longevity Despite High Metabolic Rates.” Ageing Research Reviews 9.1 (2010): 12-19. (Source)

West, Geoffrey B., and James H. Brown. “Life’s Universal Scaling Laws.” Physics Today 57.9 (2004): 36-42. (Source)

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Uncategorized

Why Football?

go bucksTeam loyalty is kind of a hard thing to justify in the end. You know? I love the Giants, but when you think about it, who are the Giants? You know what I mean? I mean it’s different guys. Every year it’s different guys, right? The team will move from city to city.

You’re rooting for clothes when you get right down to it. […] I want my team’s clothes to beat the clothes from another city. […] Laundry. We’re rooting, we’re screaming about laundry here.

People will love a guy. You know what I mean? Then the guy will get traded. He’ll come back on another team. They hate him now. […] This is the same human being in a different shirt. “Boo! Get! We hate him now!” Different shirt […] “Boooooo!”

—Jerry Seinfeld, Late Show with David Letterman (1994)

We love football. In a country of over 320 million people, over one third of the population of United States watches the Super Bowl each year. That’s over 110 million Americans tuning in to a single game on single day. To put this in perspective, there were only 40 million viewers of the second most watched sporting event last year. It was game seven of the 2016 World Series—a storybook ending between two underdogs, Cleveland Indians and Chicago Cubs, fighting hard to claim a long-awaited title. It didn’t matter; it wasn’t football.

Of course, not everyone watches football. Two-thirds of the country miss the Super Bowl each year. And not everyone has the same reasons for watching. But then, what are the reasons? Why do so many of us care about this gridiron game? In short, it’s because football is an extremely efficient use of our time (seriously).

American football fulfills more human needs than nearly any other pastime; it checks more boxes at once than other forms of entertainment. Imagine you’re at a sports bar with friends, family, and fellow fans cheering on your favorite team as they majestically win a close game against their most hated rival. Everyone is cheering; you’re swept up in the excitement. Community, belonging, family time, self worth, gloating, escapism, positive stress, stress release, celebration, novelty, and awe-inspiring athleticism—all of this happening in just over three hours. And we’re just getting started.

Football also provides us a safe topic of conversation like entertainment news or the weather. Yet, in football, these conversations can become quite elaborate between people of differing opinions (unlike politics, which often leads to yelling, tears, and general destruction). Why? Because discussing coaching decisions or game strategy can be incredibly involved, but the speculation doesn’t change our lives. Whether you would have gone for two or kicked the extra point doesn’t matter. “It’s just a game,” we tell ourselves. Sure, the emotions are real; the devastation is real; the excitement and joy and comradery are real. But there are no lasting repercussions.

The paradox of football is that it is totally meaningless and incredibly meaningful at the same time. With our deep community ties, sense of self worth wrapped up in our favorite teams, and significant emotional investment spent year after year, it’s no wonder football is such a powerful force. But that could be said about any sport. What is it that makes football so unique?

For starters, our favorite football teams play only once per week. This is a stark contrast between baseball, basketball, soccer and hockey. The mid-week dry spell creates a level of anticipation with an almost Pavlovian response once the weekend comes around. Also, the shorter schedule means every game counts. In college, one fluke upset can mean a lost chance at the national title. And as fans know, a blocked field goal run back for a touchdown by an unranked opponent does happen.

Also, American football is unique in that it’s, well, American. We embrace our American exceptionalism with a national pastime that is rarely played outside of the country. It’s a game of territory that developed on the heels of westward expansion; a game where, unlike soccer, players line up as they march down the field, making it clear how much land has been claimed, never looking back. It’s an American story, unique to the United States, with ever-changing rules and regulations mimicking our innovative spirit. Football is America’s game because it embodies our history, our unique values, and our culture. It stands atop the pile of major global sports (above soccer), because it’s unique to who we are as a nation. We are unique, and therefore, we should have a unique pastime.

On some level, humans are rational creatures looking for efficient ways to spend our most valuable resource—time. Watching football is a way to spend time with friends and family; it’s a way to feel connected to something larger than ourselves, to feel included in a community, to talk with strangers without worrying that we will offend them. Football is an outlet to escape a reality that’s too stressful, too serious, too easy or hard or soft. It’s a sport of graceful human ability and athleticism where every game matters and anticipation builds up throughout the week. It is this broad appeal that makes it popular. We may intellectually agree with Jerry Seinfeld’s clothing comments, but deep down even Seinfeld knows that our teams are so much more than just laundry.

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Hirt, Edward R., and Joshua J. Clarkson. “The Psychology of Fandom: Understanding the Etiology, Motives, and Implications of Fanship.” Consumer Behavior Knowledge for Effective Sports and Event Marketing (2011): 59-85. (Source)

Paolantonio, Sal. How football explains America. Triumph Books, 2015.


*This essay is a paraphrased excerpt from a book I’m writing about my love/hate relationship with American football. The project is currently on pause.

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The Global Schoolhouse

Globalization University: Time to Pack Our Bags

moving up?

People can have several layers of loyalty. You can be loyal to your family and your community and your nation. So why can’t you also be loyal to humankind as a whole? Of course, there are occasions when it becomes difficult—what to put first—but, you know, life is difficult; handle it.

—Yuval Noah Harari, “Nationalism vs. Globalism: The New Political Divide” (2017)

The world is changing. It’s moving from a patchwork of individual nations to a collective mix of nations, corporations, and power brokers. It’s moving from nationalization to globalization. People may argue that this shift has been going on for decades, which it has, but now the excitement has worn off and the reality of change—that daunting task that underlies any big move—is setting in. We’re graduating from The Global Schoolhouse of the 20th Century and enrolling in the Globalization University of the 21st.

For some this transition is fraught with anxiety. Others see it as an exciting time full of opportunity and a better future. Regardless of our feelings, the actual transition can be painful. There are costs to change.

Think of the last time you moved: There was the time-consuming packing process, where we boxed everything up; the moving process, which left our backs sore and our muscles achy; followed by the unpacking process, which felt like deja vu after packing in the first place. Where do the boxes go? Where does the stuff inside the boxes go? Why do we have so much crap?! But possibly the hardest part of the whole moving process is the initial step: We must first decide what stays and what goes.

From my vantage point, this is where humanity finds itself today. We are trying to determine what to keep and what to throw out. This is an extremely difficult task for a world where we’ve accumulated enormous amounts of “stuff”—various different languages, religions, and cultural identities; unique customs, clothing, and holidays; separate currencies, laws, and governing bodies; and often differing political wills, motivations, and priorities. A global world requires that some of these historical accumulations are thrown out, some are kept, and most (if not all) are restructured, repurposed, and relocated.

The world is moving house. We’re going away to college. We’re moving into a crowded dorm with all sorts of people from all around the world. This is Globalization University, where navigating our own national heritage is just as awkward and messy as 18-year-old co-eds trying to “find themselves” at a Freshman kegger.

It is certainly an exciting time to be alive, but that doesn’t mean that it’s an easy time. We’re merely in the packing process—just getting started—and already there is global backlash. Much of this outcry comes from a combination of what psychologists call the endowment effect and loss aversion. Respectively, we put more value on things that are ours simply because they’re ours (endowment effect). And consequently, we perceive a more significant loss when our stuff is taken away. This includes ownership of concrete entities like factories and jobs becoming “redundant,” as well as abstract ownership like specific ways of life or cultural identity. When our way is in jeopardy, emotions run high, objections flow freely, and we fight like hell not to avoid loss.

It’s important to remember, however, that while packing and moving are difficult, we’re not alone. When we show up to Globalization University on move-in day and look around at all the other students unpacking in front of our dorm, we should remember that all those fresh faces went through the same process. They’re going through it now. Our global peers are struggling with this move too. Whatever nation we come from, global dorm life is something none of us have ever experienced. It’s not nations that solely cause globalization; technology stretches beyond political and geographic borders. We’re in this together (for better or for worse).

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Harari, Yuval Noah. “Nationalism vs. Globalism: The New Political Divide.” TED. Feb. 2017. Lecture. (Source)

*This essay is a follow up to the series, “The Global Schoolhouse,” originally published on December 2016. You can read Part 1 here.

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