Loonshots

2019-10-29

“Loonshots” by Safi Bahcall

My Summary

• the loonshot phase, when taking risks is rewarded and ideal, is a separate phase from the franchise phase, when taking risks is less ideal and you want to be able to scale out and replicate existing products/ideas
• an organization(s) that can support both the loonshot and franchise phases at the same time has dynamic equilibrium — and each phases feeds into each other; you want ideas from the loonshot factory to spread over to the franchise factory and vice versa

My Notes

Introduction

• By applying the science of phase transitions (ice to water) to teams you can nurture the crazy, transformative ideas
• Awesome quote on how to win a Nobel Prize: “I know what to ignore.”
• Bahcall talks about looking at the structure (instead of culture) of companies, teams, etc as the reason for loonshot success or failure
• Nokia went from being the mobile darlings (touting culture as its key to success) to rejecting the idea for a smart phone 3 years before Apple unveiled its smart phone and left them in the dust
• Why do teams go from being spectacular to under performers? Phase change!
• If entropy and order are the two forces competing against each other in phase change (high entropy… water, low entropy… ice), then stake and “perks of rank” are loosely the forces associated with phase change in teams
• For example, when the stakes are high and the perks are low, risk is essential to survive. But once perks get better, risk aversion sets in. The team acts differently because the forces at play have caused a complete phase transitions in terms of how the team acts

Chapter 1 (How Loonshots Won a War)

• Radar experiment for detection of ships and planes ignored for years… SMH, why? The military was in the “franchise phase”, producing more of the same, and didn’t want to hear from scientists and engineers — they only spoke in terms of bayonets and rifles
• Bush, the focus at the beginning at Part 1, determined that the best way to make military/tech loonshots possible was to create a separate team which could operate in “loonshot phase” while the military operated in “franchise phase”; the two teams could operate in tandem like water/ice exists in dynamic equilibrium at 32 degrees
• The best scenario, like the one which benefited Bell Labs, is having a team in “loonshot phase” operating, but not overtaking, a team in “franchise phase” and vice versa
• The rules… (1) separate the phases, aka the artists and soldiers; another way to phrase it is make sure you have a loonshot nursery where ideas can grow without being dismissed to early and that you tailor the tools to the needs (i.e. artists don’t the 6-sigma system for their creativity to flourish)
• (2) love artists and soldiers equally
• (3) manage the transfer of ideas/feedback, but not the technology itself; the touch and balance between the two phases/teams is crucial; it’s “the gardening” that makes the loonshot grow into their full potential

Chapter 2 (Fragility of Loonshots)

• Loonshots must be able to survive multiple deaths on their way to becoming successful
• It is more often that loonshots have difficult, high-and-low journeys, than steady and the explosive growth and revisionist history may lead you to believe
• Many of the fails encountered by moonshots are “false fails”… as in, the idea didn’t really fail, but it encountered something that gave the impression that the idea was a failure
• To overcome the “false fails” you need someone who can champion the idea through the deaths, someone who doesn’t stop believing in the idea; champions are bilingual in artist-speak and solider-speak
• LSC: “Listening to the suck with curiosity” <— instead of just dismissing failure, try to understand why it happened; why isn’t it working; why is nobody buying it; why did it fail?

Chapter 3 (Two Types of Loonshots)

• There are two kinds of loonshots
  • P-type loonshots
    • There’s no way that will catch on, and then it does!
    • Disruptive new technology
    • Ex: Bell telephone company, Netflix (streaming video), Google (page rank), new radio equipment in Pan Am planes
  • S-type loonshots
    • No new, radical technologies, just a new way of doing something; a new strategy
    • Ex: Walmart, Facebook (social network), Google (search engine, it was one of like 18), American Airlines reservation system
• Great innovators learn how to be good at both types of loonshots
• If you only look at one type of loonshot, you can be blindsided by the other type like Pan Am missed S-type innovations and regulations that ultimately caused its demise
• If you keep following P-type loonshots, and begin ignoring the strategy, merit, or the communication between franchise phase (and/or S-type innovation) you can fall into the “Moses trap” a complex that ultimately creates the blind spot that weakened companies like Pan Am, IBM, and Polaroid

Chapter 4 (The Moses Trap)

• “Moses trap” when ideas advance only at the pleasure of a holy leader who acts for love of loonshots instead of judging ideas on merit and strategy
• With the “Moses trap” the leaders get a complex where they only listen to their ideas and the lose the dynamic equilibrium that needs to exist between the types of loonshots and the franchise/loonshot phases
• You must have PHASE SEPARATION and DYNAMIC EQUILIBRIUM

Chapter 5 (Escaping the Moses Trap)

• At NEXT, Steve Jobs did the same thing Polaroid did with NEXT computer… he built a loonshot-esk computer that nobody bought and brought NEXT to its demise
• Early in his career, Steve Jobs did not do a good job of balancing power and respect between the artists and soldiers — he called Macintosh workers “artists” and Apple II workers “bozos”
• The key to overcoming the “Moses trap” is “system mindset” over “outcome mindset”
• With system mindset you are asking not just why something happened, but what lead you to make the decision that resulted in that thing happening? What were the conditions involved in making the decision? What was the state of mind leading up to the decision? Etc
• Outcome mindset stops short of system mindset and simply asks why something happened
• You look at quality of decisions, not just quality of outcomes
• Summary of first half of book: You must have PHASE SEPARATION, DYNAMIC EQUILIBRIUM, and a SYSTEM MINDSET

Chapter 6 (Phase Transitions)

• Properties of phase transitions: (1) at their core it always a tug-of-war between two opposing forces and (2) small changes in properties called control parameters cause the balance between the forces to change
• Team size is a control parameter that effects when teams accept loonshots or begin rejecting them
• There is a certain magic number or threshold (which can vary depending on the team) where a control parameter breaks equilibrium and tips the scale in favor of a certain phase
• There are several categories of phase transitions… symmetry-breaking (water from liquid to solid), dynamic instability (traffic flow from smooth to congested), percolation on a static network (forest fires spreading or not), percolation on a small-world/dynamic network (an idea spreading through a community or not)

Chapter 7 (The Magic Number)

• At a certain size, an organization and the the people within it will favor killing loonshots and sticking with franchises; this is because the incentives (and their weight) change
• The incentives may favor politicking or the incentives may favor around making loonshots successful
• What is the magic number for your company? 150 is an example, but use the formula!
• By adjusting all the inputs into the formula you can sway the magic number

Chapter 8 (The Fourth Rule)

• DARPA revived the spirit of Bush’s organization from earlier in the book, fostering innovation by supporting loonshots and balancing them with the realistic expectations of the franchisers within the government and military
• DARPA doesn’t have a career ladder
• McKenzie reduces politics by making promotion decisions not by subjectivity, but by independent reviews conducted by people from across the company (someone considered for partner in SF, reviewed by someone in Brussels)
• Project-skill fit should be high, but not over compensated either; training can also help organizational fit and reduce politicking
• Compensation isn’t all about cash, high wage distribution and poorly designed incentives/goals can increase politicking and reduce your ability to nurture loonshots
• Use wide management spans for loonshot work; tight spans promote politics

The Mother of All Loonshots

• Loonshot factories need a catalyst to spur innovation and attract more risk taking; they need those early wins and a commitment to continue them and bring in more risk taking
• In the film industry you have an example of phase separation: the big Disney’s and Fox’s etc are the franchise factories and the small film making groups nurture and create loonshot films — together the two feed off each other in equilibrium; the big companies buying rights to distribute the loonshot films that end up becoming huge hits
• Pharma functioned much the same way until the discovery of insulin
• Loonshot nurseries cannot thrive in countries or organizations that are in the franchise phase. They need the phase separation, the nurturing, the equilibrium

Closing

• loonshots are not the same as disruptive technologies; they may become disruptive, but loonshots are ideas that people don’t think will do anything; they won’t matter, until they do. disruptive technologies are ideas that upend a market

The Bush-Vail Rules

1. Separate the phases
2. Create dynamic equilibrium
3. Spread a system mindset
4. Raise the magic number

• As you work on loonshots, continually protect and cultivate: spirit, relationships, and time