I've been thinking for some years about how knowledge gets created and used. Where does knowledge come from? Why do things that have been known by some people for a long time sometimes remain unknown to the world at large? What could be done to make the process of knowledge creation more efficient?
One sub-theme in particular that keeps cropping up in my head is that of path dependence. I remember as a teen reading a novel by either Arthur C Clarke or Isaac Asimov where the author made a throwaway comment about how such-and-such imaginary civilisation never discovered fossil fuels and went directly from pre-Industrial Age technologies (as humans would think of them) to nuclear energy. That then led to consequences of its own, in terms of how much further that civilisation developed and in how much shorter a time period (both because of the compounding effects of powerful technologies and because of not needing to undo prior technologies and their associated consequences).
That's just an example of the theme.
Another completely different example could be in the area of politics and law. For instance, today's culture wars in America around gun ownership. If a couple of sentences in the US constitution had been written in a slightly different way, we would be seeing a very different environment today.
It's about how ideas that seem desirable, uncontroversial or even negligible in the current time sometimes end up becoming major influences on the future when examined in hindsight.
This may sound nebulous and irrelevant to the nuts-and-bolts of daily life so let me cite just two examples from the recent past which may illustrate the point better.
Singapore's train system has a reputation for being efficient and reliable. That reputation has lost some of its shine in recent years as this and other pieces have stated. What's interesting to me is the company's CEO's comments that
part of the operator’s troubles since 2011 had to do with “some deep-seated cultural issues”.
Let's take the comment at face value. This comment means that the culture that gave the company its good reputation in the past is the same culture that is now responsible for the company's current turmoils. Keep that thought in memory.
A better known example is that of Facebook, which has come under fire since last November and increasingly so in the last several weeks for its role in last year's US presidential elections. This piece brings up the path-dependent consequences that were invisible at the time certain policies and decisions were put in place:
What the public sees as Facebook’s failure to recognize the extent to which it could be manipulated for untoward ends, employees view as a flawed hindsight justification for circumstances that mostly fell well beyond their control. […] Today, the engineer’s anecdote reads as a missed opportunity — a warning of an impending storm of misinformation blithely dismissed. But inside Facebook in July 2015, it seemed a rational response.
You'll have to read the source article for further context. Notice that the conclusion I drew earlier is the same one popping up here, i.e., what worked in the past doesn't only not work any more, it actively impedes the company today.
The implications are relevant not just for businesses but also for areas as wide-ranging as parenting, energy policy, fashion, medical research, how felons are treated by the authorities, and many others. Pretty much any endeavour where early decisions set the direction of future developments and where effects of decisions compound over time. The compounding is key.
What is the implication for businesses in particular? Let's say you want to optimise for longevity and relevance. How would you do this? Is there even one magic formula? Here's what I suggest:
- Set the parameters of your culture (otherwise known as your values) early in the game. Make sure you as founders, managers and employees – but especially founders – scale these values across the company as it grows. I recognise that this is not a particularly controversial or even original idea. (How to do this has been covered by many thinkers I respect, including Patty McCord, Andy Grove, Brian Chesky and Lars Dalgaard. These are just a few names off the top of my head as I quickly bang my thoughts out, aren't in any particular order and certainly shouldn't be considered a comprehensive list.)
- Although that first suggestion isn't particularly novel, what might be somewhat new is the explicit recognition of the effects of path dependence. This is especially especially true for fast-growing startups. As your company grows from two founders and a pet octopus to 50 people, and again to 150, and then to 1,000 and beyond, you will need to re-evaluate whether the values and culture you laid out at your inception are still helping you with your eventual mission. And if they aren't, you may need to start from first principles as though you are starting a new company that happens to have 1,000 staff at its inception.
That second idea is a bit radical. "You're saying we should change our core values as we grow? Really?"
Hang on.
Everyone recognises that processes change with growth. The casual expense reimbursement process you followed when you were a 10-person firm no longer works when you are at 50. The algorithm (or gut feel!) on which you based your marketing expenditure when you were a 50-person firm certainly doesn't work when you are a serious 500-person company. It seems obvious that processes need to change. But do we need to re-evaluate values too?
If things around you are changing radically, yes, you do. That can mean a fast-growing startup as I said earlier. It can also mean a stable company that is having to cope with large changes impinging upon it from the outside, whether those be changes in customer behaviour, regulations, competition, technology, or anything else.
It can even mean simply that the character of the company has fundamentally changed and therefore its values must change too.
Facebook used to be known to tell its staff to "move fast and break things". That motto has long since been dropped. As a giant company that fairly quickly became an infrastructure provider and left behind its origins as a disruptive startup, it could not live by its old motto any more.
In fact, here is a counter-factual which makes the notion of sticking to one's founding values even seem slightly ridiculous: how can anyone prove that the folks who came up with those founding values were omniscients who knew exactly how the future would play out and designed those founding values to deal with all possible eventualities? When some Americans venerate their Founding Fathers (or some Indians venerate their ancient texts, or many other such examples), I always think to myself, "But even the people who came up with those ideas didn't think of themselves as omniscients. So why do we?"
Once you explicitly recognise that the choices you made early in the game and the path that those choices led you down to where you are today may not be relevant to your future (because they set the direction of future developments) and may even be harmful (because of compounding), then you have no choice but to start again.
I wrote a follow-up to this post here.
