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).

—

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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Business & Biology

Between Growth & Maintenance

time_to_drankImagine a city with an infrastructure problem (I know, it’s hard to imagine). The problem is this: Roads are breaking down faster than they can be repaired. As the city’s population grows, road workers cannot work fast enough to compensate for the additional traffic. Each road closure for repairs means more traffic on alternative routes and, therefore, even faster decline. Eventually, the few alternative routes that are open no longer connect to one another; construction crews can no longer get to the roads that need to be repaired; and ultimately, the system shuts down. Death by growth.

This is the basic idea behind the classic S-curve of growth (below), which is said to be so ubiquitous. From cities to cellular biology to Fortune 500 companies, most systems follow a similar pattern. They must balance between growth and maintenance.

Understanding which phase we’re in—whether high-growth, high-maintenance, or transition—can be advantageous. It can help extend the life cycle of our products, businesses, bodies, personal lives, and relationships. But when we refuse to acknowledge this shift, that’s when problems arise.

In business, this refusal is called the denial phase. As one Harvard Business Review article puts it, “[R]etailers often go through a long, painful period of denial before they acknowledge that growth has ended and it’s time to switch strategies. […] Consequently, they keep expanding until their chains begin to collapse under their own weight.” The article is referring to a study of 37 U.S. retailers—all with over $1 billion in revenue, all with top-line growth rates slowed to single digits. But while several of these historic giants were collapsing “under their own weight,” many had found a solution to the stagnation.

Companies like Macy’s, Home Depot, and McDonald’s have extended their lifespans by focusing on the maintenance phase. They thrive by creating efficiencies in their existing stores rather than opening new ones. In other words, they transitioned from a strategy for rapid growth to one of maintaining their large size.

This is not to say that growth is negative. Pure growth and pure maintenance are not what creates life. It is the in-between where we exist. As the Harvard Business Review authors explain, “this is a low-growth, not a no-growth, strategy.” Where the successful companies grew was in bottom-line revenue rather than top—shifting their focus, in order to achieve life-bringing growth.

But when growth goes unchecked, it can be devastating. We call it cancer in the body. And before we can prescribe treatment, we must have a diagnosis. Whether we label it a midlife crisis, a corporate denial phase, or an infrastructure problem, we must acknowledge mismatched reality, in order to move forward. Otherwise, misalignment can accelerate decline.

With our imaginary city, it’s a balance between population growth and infrastructure maintenance; with our bodies, it’s a balance between biologic insults and cellular repair; in life, we shift from a growth-heavy childhood to a maintenance-heavy adulthood, including more doctors visits, taxes, and responsibility. It’s this transition from growth to maintenance that creates the S-shape of life, and it’s a delicate balance—easily misunderstood and mismanaged.

It may seem simplistic to minimize the life cycle of so many different topics into only two sides of the same coin. In fact, it is simplistic. While simple sometimes means limited understanding, it also can serve as a practical model for an exceedingly complex world. So take a moment and think: Am I spending too much time in growth phase? What about maintenance? Is this a transition? Where are we?

growth-maintenance graph—

Fisher, Marshall, Vishal Gaur, and Herb Kleinberger. “Curing the Addiction to Growth.” Harvard Business Review 95.1 (2017): 66-74. (Source)

Evans, David S. “Tests of Alternative Theories of Firm Growth.” Journal of Political Economy 95.4 (1987): 657-674. (Source)

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Business & Biology

Cavemen and Computers: A Success Story

fireThe reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.

—George Bernard Shaw, Man and Superman (1903)

Indeed, if the same mistake is repeated over and over again, what is the point of being persistent?

—Fang Wu & Bernardo Huberman, “Persistence and Success in the Attention Economy” (2009)

If nothing else, humans are two things: (1.) We are tool builders, constantly adapting to new environments by creating new dwellings, clothing, modes of transportation, and societies. And (2.) we are runners (yes, runners). It is our defining ability to run that is perhaps the most fundamental aspect of success. Rather than learning from contemporary masters or fighting through trial and error, perhaps the lessons of success can be best learned from the rise of the most successful species on earth—ourselves.

Excluding the use of man-made vehicles, Homo sapiens are still the fastest animals on earth (over long distances… on land… if it’s hot enough outside). Yes, we are natural born runners, and this extremely specialized skill is the reason we stand on two legs, are relatively hairless, perspire rather than pant, and why our butts look so darn good. But before our brains grew large and humans reigned supreme, our early hominid ancestors used their unique physiology to their advantage over their knuckle walking cousins.

Persistence hunting—chasing prey until sheer exhaustion—is thought to be the primary reason for our running abilities. Our prehistoric relatives (and even some indigenous peoples of modern day) weren’t faster or stronger than other creatures, but they would chase much quicker animals, such as wildebeest, zebra, and deer, for one or two days until the animals simply collapsed from exhaustion. It is even proposed that the rich protein diet afforded by persistence hunting is what allowed for developing larger brains in humans. Therefore, the first lesson in our story is that persistence is the key to success—a lesson as true in the digital age as it was back then.

Microsoft, arguably the most successful company of the 1990s, was such a juggernaut that at the turn of century federal judges felt obligated to break up the monopoly. What made Microsoft so successful? In a word, persistence. Steve Jobs, in a rare 1995 interview, emphasized Microsoft’s persistence, saying:

Microsoft took a big gamble to write for the Mac. And they came out with applications that were terrible. But they kept at it, and they made them better, and eventually they dominated the Macintosh application market, […] they’re like the Japanese; they just keep on coming.

Even Microsoft co-founder, Bill Gates, acknowledges persistence as the key to his personal and professional success. According to Gates, the best compliment he ever received was when a peer said to a group, “Bill is wrong, but Bill works harder than the rest of us. So even though it’s the wrong solution, he’s likely to succeed.” Just by keeping at it, Gates achieved an elite level of entrepreneurial accomplishment. But while persistence may be the key to success, it is not a panacea to cure all ills. Persistence can be misguided.

—

Being the best long-distance runners didn’t stop us from inventing the bicycle or the locomotive or the space shuttle. Humans separated themselves from other hominids through our ability to adapt—to build the tools we needed to thrive. At a certain point, our ancestors spread across the globe, adapting to changing environments. Early humans built clothes and dwellings to survive the polar ice; they developed agriculture to create stability where there was scarcity; and they developed civilizations and law and order to manage increasing tribal size. Therefore, the second lesson of our story is that we must adapt to an every-changing environment, in order to succeed. 

The two lessons of human success may seem contradictory—persist but always be changing; however, it’s a matter of balance. Peristence and adaptability are equally important, but persistence is broad; it’s goal-oriented. Adaptability is detailed; it relates to our behavior, the details of how we attain our goals. Finding a balance between the two is extremely difficult to achieve in practice. We often get caught in either the wrong goals or misunderstand right ones.

Warren Buffett once wrote to his shareholders, “When an industry’s underlying economics are crumbling, talented management may slow the rate of decline. Eventually, though, eroding fundamentals will overwhelm managerial brilliance.” He was talking about the newspaper industry back in 2006, and his comments serve as important distinction between productive persistence and blind stubbornness—a distinction that goes beyond newspapers.

Kodak was in the photography business, yet, they lost site of their true goal, confusing it for a film business, and failure followed. The modern world of healthcare is criticized to have the same problem—promoting health care where they should promote health. It is easy to write that we should persist in our goals, but much harder to clearly define them; however, we are all decedents of the most successful creatures in the history of earth. Therefore, perhaps we are all bred to be successful (one persistent, yet adaptable, step at a time).

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Asch, David A., and Kevin G. Volpp. “What Business Are We In? The Emergence of Health as the Business of Health Care.” New England Journal of Medicine 367.10 (2012): 888-889. (Source)

Carrier, David R., et al. “The Energetic Paradox of Human Running and Hominid Evolution.” Current Anthropology 25.4 (1984): 483-495. (Source)

Wilson, Edward O. The Social Conquest of Earth. WW Norton & Company, 2012.

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Uncategorized

The Cliff of Care

too muchImportance is the worst thing to put on art, comedy—creativity of any kind. […] If you think this is important, you’re screwed before you write the first word.

—Jerry Seinfeld, Comedians In Cars Getting Coffee with Lewis Black

What is the difference between caring too much and not enough? Sometimes it’s just one last straw—one final incident that pushes us over the edge. We see this at our workplaces, contrasting an excited intern with the embattled veteran clocking in and out like a robot. We see it with new parents who trade fashion for durability. And we see it in politics when the news creates such a piercing noise that we simply go deaf to the din.

Like eating or drinking too much, our care has a breaking point. A gluttonous night out can force our stomach from too full to completely empty in an instant, and it is this momentary purge that exemplifies the Cliff of Care. With so many names—outrage fatigue, clarity, burnout, calm, apathy, patience—it can be difficult to know whether the valley beyond the cliff is a safe place to be. As with any journey, it depends on how we got there and our attitude along the way.

Once we reach the cliff’s edge, we can either walk off gracefully, landing softly on the ground below, or get pushed, kicking and screaming, breaking bones on the way down. This is the difference between coming to peace with our situation or becoming apathetic in our resentment. The graceful among us land on their feet through the power of perspective. These are the people who after battling illness, divorce, violence, bankruptcy, discrimination, and many other hardships, still find the positive in each challenge, putting them into perspective. They are calm and kind despite every reason not to be. And they serve as inspiration to “get over” whatever small annoyances we face in life.

Unfortunately, the less gracious cliff jumpers—the ones who bitterly or hopelessly give up the will to care—also exist. Fortunately, the Cliff of Care is not a standalone phenomenon. We may tumble off the cliff and become apathetic to the politics of our world but safely detached at work, no longer wrapping our self-worth in what our boss thinks. This is where awareness can be helpful. Just by knowing about the difference between being on the cliff and being in the valley can help us safely navigate our way.

Detaching emotionally is not something we can will ourselves to do (at least, not immediately). Stepping off the cliff allows us to leave behind our emotional baggage, but first it requires a gradual climb of frustration. This is why telling someone they need to just “get over it” rarely works. Seeing the cliff for what it is can make us come across as callous or cold-hearted when dealing with those who have not yet moved on. Brushing off their emotional concerns as unimportant is seen as dismissive. Rather than pushing them off the cliff to a painful, bitter landing, we must try to remember what it was like to be atop the cliff, empathize, and help guide them down safely.

Conversely, when we’re stranded on the peak of care, pulling our hair out, and wondering why no one else gives a shit, it is difficult to see our position for what it is. We don’t have the perspective. Holding on to what feels important can be blinding. Whether it’s the cleanliness of the kitchen, quarterly sales at work, or death of a loved one, not everyone is going to understand our level of care. And while intense care can motivate us to act, we shouldn’t expect others to follow. When we find ourselves in isolation in a sea of seeming apathy, it may be time for self-reflection. It is immodest to think that we are the only sane people in a world full of crazies.

cliff of care_graph

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