Book: Loonshots

“How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries”

This book is essentially about innovation and how to sustain it. It draws parallels between the physics of phase transition and the innovation management theory.

The business realities are pulling big businesses/corporations in the direction of franchise improvements – producing more of the same, boring and tested products as before.

On the other hand, small shops and startups are incentivized to bet on crazy ideas, but they rarely have resources necessary to pull them off. The business realities pull them towards failure.

The key to success is dynamic equilibrium – fluid, permeable border between those 2 modes of operation, where groups working on innovative approaches can hand them off to improvement to franchise businesses.

Amazon Link

Vannevar-Vail rules

Vannevar Bush was responsible for creating National Defense Research Committee – a key institution that has helped turned the tide of war through innovation and first true “Loonshot factory”.

Theodore Vail was a president of Bell Labs. After he took over, the organization went on an amazing streak of mind-blowing discoveries, including the transistor, Digital photography chip and many others.

Both Bush and Vail put extra effort into nurturing innovation. Safi Bahcall calls these rules „Vannevar-Vail” rules:

  1. Separate the phases
    1. Separate your artists and soldiers
    2. Tailor the tools to the phase
    3. Watch your blind side: nurture both types of loonshots (product and strategy)
  2. Create dynamic equilibrium
    1. Love your artists and soldiers equally
    2. Manage the transfer, not the technology: be a gardener, not a Moses
    3. Appoint, and train, project champions to bridge the divide
  3. Spread a system mindset
    1. Keep asking why the organization made the choices that it did
    2. Keep asking how the decision-making process can be improved
    3. Identify teams with outcome mindsets, and help them adopt system mindsets

All this is very reminiscent of „Skunkworks” approach described in „Bold”

How to keep your organization innovative

Phase transition is a perfect lens for dissecting innovation. Just as water can turn to ice almost instantly, an innovative organization may loose its „spark”.

Sure, it will be able to survive for a while reliving past glory and selling their assets, but the sudden change from being on top of the world to a shadow of former self is not uncommon. Safi has isolated a few variables to explain why companies turn into „franchises”.

It all really boils down to tug of war between internal politics and desire to contribute to the product. The M in this equasion is the max amount of employees your organization will be able to sustain without transitioning into a “franchise”. So if you want to remain innovative:

  • Introduce Equity on top of salary. Keep in mind – that may be soft equity, like autonomy or recognition
  • Increase management span, by having more direct reports. See that this value is squared, so this will have the biggest impact.
  • Decrease salary growth rate in hierarchy – that way, contributing will be more important than getting promoted.

Twitter thread

While reading this book, I isolated the most interesting bits on Twitter – this is a new thing I am trying to better remember the book I am reading.

My Highlights

  • 1. The most important breakthroughs come from loonshots, widely dismissed ideas whose champions are often written off as crazy.
  • The most important breakthroughs rarely follow blaring trumpets and a red carpet, with central authorities offering overflowing pots of tools and money.
  • They pass through long dark tunnels of skepticism and uncertainty, crushed or neglected, their champions often dismissed as crazy
  • We can think of the two competing incentives, loosely, as stake and rank.
  • As teams and companies grow larger, the stakes in outcome decrease while the perks of rank increase. When the two cross, the system snaps. Incentives begin encouraging behavior no one wants. Those same groups—with the same people—begin rejecting loonshots.
  • We will identify the small changes in structure, rather than culture, that can transform a rigid team.
  • The idea that would turn the course of the war passed through a decade-long tunnel of neglect and skepticism.
  • One molecule can’t transform solid ice into liquid water by yelling at its neighbors to loosen up a little. Which is why Bush didn’t try to change military culture.
  • phase separation and dynamic equilibrium were the key ingredients in Bush’s recipe.
  • Although Bush didn’t know it, FDR was suffering from severe cardiac disease and possibly metastatic cancer.
  • The New York Times, however, questioned its conclusions and patiently explained the nature of science to Bush (and his 41 MD and PhD coauthors):
  • The magic of Bush and Vail was in engineering the forces of genius and serendipity to work for them rather than against them. Luck is the residue of design.
  • they are careful gardeners. They ensure that both loonshots and franchises are tended well, that neither side dominates the other, and that each side nurtures and supports the other.
  • Separate your artists and soldiers
  • Leaders of powerful franchises across every industry routinely dismiss early-stage projects by picking at their warts
  • Love your artists and soldiers equally
  • When Jobs returned twelve years later, he had learned to love his artists (Jony Ive) and soldiers (Tim Cook) equally.
  • Manage the transfer, not the technology
  • The next day, the chiefs of both the Army and Air Force found identical notes on their desks: I’ve seen the new radar equipment. Why haven’t you?
  • well-separated and equally strong loonshot and franchise groups
  • Note: Automattic should not pride itself in chaos but dynamic equilibrium
  • “Ah, my boy—it’s not a good drug unless it’s been killed at least three times.”
  • In the real world, ideas are ridiculed, experiments fail, budgets are cut, and good people are fired for stupid reasons.
  • Obesity was “disgusting,” he said. “Maybe if the idea got around again that obesity is immoral, the fat man would start to think.” Keys’s
  • The statins would grow into the most widely prescribed drug franchise in history, saving millions of lives. But first, Endo’s drug had to survive the Three Deaths.
  • Much later, scientists learned that rats have mostly HDL (“good cholesterol”) circulating in their blood, and very little LDL,
  • With Paula’s encouragement, which he later called “Spouse Activation Factor” (SAF),
  • Beware the False Fail
  • They train people for the project champion job—the Deak Parsons skill-set—and elevate their authority. It goes against the grain.
  • When someone challenges the project you’ve invested years in, do you defend with anger or investigate with genuine curiosity?
  • With P-type loonshots, people say, “There’s no way that could ever work” or “There’s no way that will ever catch on.” And then it does. Let’s
  • With S-type loonshots, people say, “There’s no way that could ever make money.” And then it does.
  • Deaths from P-type loonshots tend to be quick and dramatic. A flashy new technology appears (streaming video), it quickly displaces what came before (rentals), champions emerge (Netflix, Amazon), and the old guard crumbles (Blockbuster).
  • He was called Attila the Hun, Bob the Butcher, Darth Vader, and—in case the message was still not clear—Fang (he has prominent canine teeth). On weekends, he’d go to work and leave notes on desks: “I was here. Where were you?”
  • That’s pretty much what the major airlines faced in 1978. They were locked into long-term contracts, paying wages far higher than what brand-new competitors were paying.
  • Thirty years before Big Data became a Silicon Valley buzzword, American discovered big data.
  • At Trippe’s request, Lindbergh lobbied on behalf of Pan Am for its Latin America routes. Imagine you are a career Post Office bureaucrat, and the most worshipped young man on the planet walks into your drab, ten-by-ten-foot office. Pan Am won every US postal contract to the region.
  • Trippe went to the main branch on 42nd Street and Fifth Avenue. At the information desk, he asked for the logs of the nineteenth-century clipper ships that traded across the Pacific.
  • Buried in the old handwritten documents, Trippe found a reference to a deserted island midway between Honolulu and Shanghai, called Wake Island. An American expedition had claimed the island in 1899.
  • Soon the shovel hit a metal box. Lindbergh had the designs to Germany’s jet engines. When Lindbergh returned to the US, he filed his report, then immediately called on Trippe. Trippe rehired Lindbergh on the spot. It
  • Trippe had played possibly the highest-stakes game of business poker in corporate history up to that time—a $269 million order for 45 unprecedented commercial jet planes—and won.
  • Let’s call it the Moses Trap: When ideas advance only at the pleasure of a holy leader
  • “There’s a rule they don’t teach you at Harvard Business School: if anything is worth doing, it’s worth doing to excess.”
  • Sick dogs that were fed quinine to treat parasites showed an unusual type of crystal in their urine. Those microscopic crystals, called herapathite, turned out to be the highest-quality polarizers ever discovered.
  • In Washington, DC, shortly after his first meeting with FDR, Vannevar Bush heard about Land’s vectograph. Within a year, the Army and Navy were using 3D terrain maps to prepare for battles in Europe.
  • Land’s 3D still images were soon converted for use in film, which turned into a craze. (At its peak, in 1953, Polaroid was making six million pairs of 3D glasses per week.)
  • Couples realized their prints would not be seen by technicians at developer labs. And so was born what Polaroid delicately called “intimacy” pictures.
  • The familiar story of the decline of industry Goliaths begins with decades of success, after which the proud old company grows stale. It loses its hunger.
  • First: The dangerous, virtuous cycle builds momentum
  • Second: The franchise blinders harden
  • Hooke suggested some of the initial ideas, he did not have the skills to create a complete system. Newton did. Newton was a great synthesizer, just as Jobs was a great synthesizer.
  • Newton tried to crush Hooke and bury his contributions (including, allegedly, losing the only known portrait of him).
  • Sir Francis Bacon wrote, “As the births of living creatures are at first ill-shapen, so are all Innovations, which are the births of time.”
  • Franchise projects are easier to understand than loonshots, easier to quantify, and easier to sell up the chain of command in large companies.
  • You can analyze why you argued with your spouse. It was, let’s say, your comment about your spouse’s driving. But you may improve marital relations even more if you understand the process by which you decided it was a good idea to offer that comment.
  • System mindset means carefully examining the quality of decisions, not just the quality of outcomes. A failed outcome, for example, does not necessarily mean the decision or decision process behind it was bad.
  • Failing to analyze wins can reinforce a bad process or strategy. You may not be lucky next time.
  • 1. Separate the phases • Separate your artists and soldiers • Tailor the tools to the phase • Watch your blind side: nurture both types of loonshots (product and strategy) 2.
  • Create dynamic equilibrium • Love your artists and soldiers equally • Manage the transfer, not the technology: be a gardener, not a Moses • Appoint, and train, project champions to bridge the divide 3.
  • Spread a system mindset • Keep asking why the organization made the choices that it did • Keep asking how the decision-making process can be improved • Identify teams with outcome mindsets, and help them adopt system mindsets
  • “With notably rare exceptions, Germany remained largely at peace with its neighbors during the 20th century.”
  • 1. At the heart of every phase transition is a tug-of-war between two competing forces. 2. Phase transitions are triggered when small shifts in system properties—for example, density or temperature—cause the balance between those two forces to change.
  • A policy of banning trucks from passing other trucks (called a truck-overtaking ban) reduces the pileups behind trucks. Those pileups temporarily increase the density of cars and can push smooth traffic flow across the dashed line and into a jam.
  • A change in control parameters transforms one kind of motion (smoothly flowing cars) into a different kind of motion (jammed flow) by making the smooth flow very sensitive to small disruptions (driver tapping on his brakes).
  • The power of a beautiful model comes from what you choose to omit.
  • You need to decide if you will spend the final hour of the day on (a) work that might increase the value of your projects (polishing up the client presentation; researching coffee machine designs), or (b) networking and promoting yourself within the company (currying favor with your boss, your boss’s boss, or other influential managers).
  • If, however, promotions come with a 2 percent increase in pay, who cares? You might as well put your energy back into your project, where some extra effort could earn you a bigger bonus or increase the value of your stake in the company’s success.
  • chapter). Promotions happen so rarely that it’s not worth spending any time politicking. With a span of two, however, you are constantly in competition with your peer.
  • The greater your equity fraction, the more likely you are to choose project work over politics.
  • adjusting their structure (#2 → #3). When group size exceeds the
  • McElroy was an outsider. Unlike Bush, he had neither technical nor military experience. He began his career selling soap door-to-door for Procter & Gamble. Eventually he came up with the idea of shows that housewives could watch during the day, which P&G could use to deliver ads directly to their living rooms.
  • Use soft equity
  • They are granted authority to choose their projects, negotiate contracts, manage timelines, and assign goals. The combination of visibility and autonomy creates a powerful motivating force:
  • But every organization can find opportunities to increase autonomy, visibility, and soft equity.
  • One exception is a recent article, “Goals Gone Wild,” which traces a handful of famous business disasters to poorly constructed goals.
  • The analysis goes beyond the normal experience of a rubber-stamper payroll person. In other words, it requires a strategic chief incentives officer.
  • Which takes us to another reason a wide management span helps nurture loonshots: it encourages constructive feedback from peers.
  • Catmull designed a system for a group of peer film directors to regularly coalesce around a project and give its director advice—honest feedback from colleagues rather than marching orders from marketers or producers.
  • Creatives are suspicious of those outside their faith.
  • Reduce the return on politics: Make lobbying for compensation and promotion decisions difficult. Find ways to make those decisions less dependent on an employee’s manager and more independently assessed.
  • Use soft equity: Identify and apply the nonfinancial rewards that make a big difference. For example: peer recognition, intrinsic motivators.
  • Increase project–skill fit: Invest in the people and processes that will scan for a mismatch between employees’ skills and their assigned projects. Adjust roles or transfer employees between groups when mismatches are found. The goal is employees stretched neither too much nor too little by their roles. •
  • Fix the middle: Identify and fix perverse incentives, the unintended consequences of well-intentioned rewards. Pay special attention to the dangerous middle-manager levels, the weakest point in the battle between loonshots and politics. Shift away from incentives that encourage battles for promotion and toward incentives centered on outcomes. Celebrate results, not rank.
  • Bring a gun to a knife fight: Competitors in the battle for talent and loonshots may be using outmoded incentive systems. Bring in a specialist in the subtleties of the art—a chief incentives officer. •
  • Fine-tune the spans: Widen management spans in loonshot groups (but not in franchise groups) to encourage looser controls, more experiments, and peer-to-peer problem solving.
  • (painting a fly on urinals has been shown to reduce urinal spillage by 80 percent).
  • Both the film and the drug-discovery industries have separated into two markets—the market of the Majors, who trade in franchises, and the market of small specialists, who nurture loonshots.
  • The 1687 book was a sequel to his first book, on the invention of what is now called a pressure cooker, so Papin called it A Continuation of the New Digester of Bones. Buried in the back, after a section on how to cook cows’ horns and dried vipers, in what might be called the greatest example of burying the lead in history, was the answer to his puzzle on how to add a piston to Boyle’s air pump. It described the key components for a new invention: a steam engine.
  • So Kamprad went to Poland and discovered high-quality suppliers—for half the price. He passed the discounts on to customers.
  • and especially for delicately explaining to me, on occasion, why something I thought was funny was not quite so much.

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