Observing Innovation

The ever brilliant Grant McCracken of Culture Officer and Flock and Flow fame laid down some phenomenal thoughts in response to a great remarks from Gary Becker.

Becker states, “”People tend to impute good motives to government. And if you assume that government officials are well meaning, then you also tend to assume that government officials always act on behalf of the greater good. People understand that entrepreneurs and investors by contrast just try to make money, not act on behalf of the greater good. And they have trouble seeing how this pursuit of profits can lift the general standard of living. The idea is too counterintuitive. So we’re always up against a kind of in-built suspicion of markets. There’s always a temptation to believe that markets succeed by looting the unfortunate.”

McCracken picks it up and says that markets working efficiently are beautiful in and of themselves, if only because it allows people to do the things they care about. When the ‘invisible hands’ come together, we all arrive at a collective good.

My first confession is that I often live under the shadow of Becker’s remarks. I hope for the truth of McCracken’s, but my worst demons think ill of anyone pursuing a profit motive. Particularly as it relates to those who want to bring financial services, insurance included, to those in the developing world. Do they need savings? Yes. Do they need record keeping and a way to keep the money they earn free from theft? Yes.  Do I think there is a dangerous line nearby for those who wish to ‘loot’ the unfortunate? Absolutely.

So is it selfish to pursue profit? Going after my own wishes and desires has always felt that way a little bit. Except for one thing. There is a difference between selfishness, which places ones interests above other parties without concern for consequence, and self-interest, which allows for a solution that is advantageous for multiple parties. Self interest may mean that I am losing money (ahem, thru donations), but gaining a feeling of altruism. Selfishness would drive doing only what is good for me. Self interest means that I can think of myself and others simultaneously.

The person who helped me see that was Bruce Bueno de Mesquita in his book, “The Predictioneer’s Game.”

His book addresses the topics of game theory, international relations and political intrigue. In one of his early chapters, he creates a clear path for what game theory is, how it has developed and how it reacts. It isn’t that we are living in the period of an always perfectly rational economic man, but rather that we all act in our own sense of rationality. What may be rational to me and you may be different based on separate goals, but it is rational to each of us none the less.  As he admits, this applies to a wide berth of individuals from Mother Teresa to Hitler.

And it applies to entrepreneurs who are engaging with the world. They will have a certain rationality about them. Whether that rationality is selfish or not will determine on the view from others, but every action is buried within self-interest. Even if we thought we were doing something ENTIRELY self-sacrificing and only doing it because it was good, then doing good is our interest.  And therefore, selfishness and self-interest can lie worlds apart.

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Don’t tolerate discourtesy. Since the beginning of the world, young people have resented good manners as dishonesty. They think manners are substance. If you say “good morning” while it rains outside, you are a hypocrite. But there is a law nature that where moving bodies are in contact with one another, there is friction. And manners are the social lubricating oil that smoothes over friction. Young people always fail to see this. The only difference is that in my youth you got slapped if you were not courteous; but we didn’t feel like being courteous either. One learns to be courteous – it is needed to enable different people who don’t necessarily like each other to work together. Good causes do not excuse bad manners. Bad manners rub people raw; they do leave permanent scars. And good manners make a difference.

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-          Peter Drucker, writing in Managing the Non-Profit Organization (pg 115)

Why shouldn’t we hire the best in the business?

Because the difference between the best and the second best in the business very rarely is anything of substance.

Randall Collins describes intellectual networks among philosophers. To be the best in the business, you had to have strong networks among your peers. You had to have strong mentor networks.  You had to have your position honed, beaten out and defined.

The same thing goes with other knowledge networks.  Does the best database engineer have dramatically better skills than the second best database engineer? Not likely.

Instead, she probably has a better network of friends who helped her hone her thinking.  She had better mentors to make those connections. She had a relational and social network that improved if not magnified how great her skills were. Some of it may be real, some of it may be fluff. But when you are dealing with reputation, the social networks (upward and with peers) are what makes the difference.

So you can hire the second best and get what you need in terms of skills, but it may lose you some of the ‘buzz’. If you need the job done, but not to be well known for it – then go with the second best. It may save you on the price premium. It may also mean you have to look harder for them.  It may mean that even if you find them – you could also discover that the second best may also have personalities that drive away participation in the stronger networks.

Collins, Randall. Interaction Ritual Chains. 2004. Princeton, New Jersey.
Interaction Ritual Chains (Princeton Studies in Cultural Sociology)