“Exploration is the engine that drives innovation. Innovation drives economic growth. So let's all go exploring.” –Edith Widder
MEDIA
The birth of Silicon Valley – Silicon Valley Examined 12
On the Silicon Valley Explored podcast, Robert Hendershott and Don Watkins discuss the origins of Silicon Valley. What can we learn from the early days of HP, Shockley, and Fairchild?
INSIGHT
Artificial Ingenuity: AI through the lens of Ingenuism
Robert Hendershott and Don Watkins
Popular conversations about Artificial Intelligence focus on dystopian scenarios where robots throw us out of work or apocalyptic scenarios where computers commit human genocide. It would be dumb to move ahead with a new technology without thinking about potential risks. But it would also be dumb to ignore the potential benefits.
First, some groundwork. What is AI? It’s a computer’s ability to perform tasks that historically require human intelligence and discernment. Intelligence is the ability to acquire and apply knowledge and skills. Discernment is the ability to exercise good judgment. The peak of human intelligence and discernment is ingenuity—the ability to identify and solve difficult problems in original, inventive, and clever ways.
Does a computer’s ability to play chess reflect intelligence or ingenuity?
Not in any complete sense. Computers are not commonly identifying difficult problems. But they are incredibly powerful tools with an extraordinary ability to help people explore possible solutions to interesting questions. Steve Jobs described the early personal computers as bicycles for the mind. Modern AI-driven computers are interstellar spaceships for the mind.
To grasp the role of AI in aiding innovation, consider this. Most of us have heard the adage that an infinite number of monkeys typing at an infinite number of typewriters will produce the works of Shakespeare. The more interesting corollary is that these infinite monkeys would also produce an infinite number of books superior to Shakespeare. Infinite monkeys typing on infinite computer keyboards would produce a database program and software beyond what we can imagine.
The bad news is that we don’t have infinite monkeys or infinite time. But when you combine chance, the law of large numbers, and a feedback mechanism, you get something not all too different from infinity. After all, a vast number of molecules over a vast time created actual monkeys here on planet Earth. And powerful computers can be programed as if they contained a near-infinite number of virtual monkeys working very, very quickly. And it can improve the monkeys so that they are not just monkeying around.
The right computer program, in fact, can enable monkeys to reproduce the works of Shakespeare. Wired sums up an experiment proposed by evolutionary biologist Richard Dawkins in his book The Blind Watchmaker:
In this example, the target text is the Shakespeare line “Methinks it is like a weasel.” The random typing of characters is considered to be analogous to the results of random mutation. But Dawkins adds a new step, analogous to natural selection: if any of the letters are right, they’re retained as “fit.” The rest get reshuffled and are tested again. Adding this selection step radically shortens the time it takes to arrive at the correct solution, since the monkey will never have to throw out any of its successful work and start over.
This is why we call evolution—random mutations combined with an inexorable feedback loop in which beneficial changes thrive and eventually dominate—the most potent force for progress. And this is a process designed perfectly for a computer.
Deep Blue became the planet’s best chess player (and then best Go player) by experimenting and learning to evolve the optimal strategies, some of which human experts found unexpected and ingenious.
In the Ingenuist framework, computers today have an extraordinary ability to explore possible approaches and discover creative solutions to many classes of problems. Artificial ingenuity is already a reality—and it is massively augmenting (not replacing) human ingenuity.
Google is a simple example of this kind of augmentation. Google provides an ingenious approach for discovering search solutions and becomes a potent force for connecting us to information and ideas, the raw material for ingenuity and insights. But Google alone is not enough. Human ingenuity arises out of curiosity—and computers aren’t curious.
What computers have given us and will continue to give us is Augmented Ingenuity—machines complementing and enhancing human ingenuity. Computers can solve very complex problems, even in inventive ways, through exploration and discovery—trying different approaches and building on what works. But coming up with the interesting problems remains a human endeavor. The monkeys can type out Shakespeare—they can’t decide that creating great literature is a worthwhile goal.
Ingenuity is asking important questions and coming up with clever insights into the answers. Computers can serve us in the former and more and more handle the latter. Computers are not just connecting us; they are providing a new playing field for exploration and discovery. Society’s “ingenuity potential” is mushrooming and what’s becoming possible stretches the imagination.
QUICK TAKES
How valuable is your watercooler?
The Atlantic’s Derek Thompson looks at the results of a new study on remote work, focused on the experience of Microsoft during the pandemic. Shorter version:
The study—from Berkeley and Microsoft—found that in the pandemic employees talked less to ppl outside their formal teams, while ties within teams (“clustering coefficient”) deepened.
Thompson gives his own theory to explain the results:
We can divide white-collar work into two broad categories. There is Hard Work: The knowledge work—writing, researching, emailing, calling, Excel-ing—that most ppl are paid to do.
And Soft Work: the casual relationship-building that isn’t a *formal* part of the job.
Soft work is getting coffee with a co-worker. It’s catching up about the NFL on Monday morning. If networking, schmoozing, gossiping, and mildly annoying people on your floor with “Hey, does this idea suck?” are species of behavior, Soft Work is the genus that contains them.
Offices’ biggest advantage isn’t hard work. It’s soft work.
So what’s the value of soft work—the incidental, serendipitous connection that so many companies strive to foster? According to Thompson, that’s unclear.
Moreover, the closer you look at the collaboration research, the more caveats you find. Yes, collaboration in the office has seemed fundamental to solving big problems. This is in part because although casual conversations aren’t immediately productive, they build the trust necessary for groups to freely exchange ideas and feedback without making everybody hate one another. But a great deal of office-based collaboration turns out to have been pure wasted time. Other research suggests that we’ve been consumed by “collaboration overload” for years and that we might be better off clawing back up to 20 percent of collaboration time for ourselves to avoid burning out from an eternal purgatory of circling, circling, circling back.
Whatever the truth turns out to be, we’ll learn something important about connection.
Have they seen me drive?
Reading this story about Tesla’s autonomous driving technology, I’m struck by the fact that no one has offered a clear safety standard self-driving cars should have to meet. Or, rather, what seems abundantly clear is that they’re expected to meet a standard far higher than the safety record of freaking human beings.
Each year in the U.S., there are about 6 million accidents, 3 million injuries, 35,000 deaths from auto accidents. The question isn’t whether autonomous vehicles will be perfectly safe. The question is whether they can do better us.
How to destroy a city
Here’s a fascinating account of how Detroit went from one of the most prosperous cities in the U.S. to America’s leading source of “ruin porn.”
The automobile was largely a product of American commercial genius, wholeheartedly embraced by the American people as a tool for the advancement of personal, social, and economic welfare. Automobile culture quickly became American culture, and it remade the nation top to bottom without any involvement by the federal government beyond cheerleading and roadbuilding.
The automobilization of America continued until the wonders of driving grew familiar, automakers became huge and powerful, and the adverse consequences of car culture and the larger commercial economy to which it was central became more apparent. Critics of the automobile grew in number and eventually focused their criticisms not on the driving public or the national government that had funded the highways (and early in its history refused the role of regulator), but the greedy corporate entities purportedly harming the populace in a profit-driven project.
If that sounds familiar, it should. The author points out that we’re now seeing the same story play out in Silicon Valley.
There are plenty of enterprising congressmen, lawyers, and activists anxious to bring big tech to heel, heaping upon it blame for every ill associated with the Internet. As Facebook’s Mark Zuckerberg has demonstrated during his visits to Congress, today’s tech executives are often as easily tripped up by grandstanding politicians as were their auto-executive forebears. And in time, the fate of their enterprises may well follow the same downward arc that Ralph Nader and Abraham Ribicoff helped inflict on Detroit.
Let’s hope not.
Fail your way to success
Barry Ritholtz is one of my favorite finance podcasters. He recently shared the origin story of his firm, Ritholtz Wealth Management, and the key lessons he learned along the way. Two of them are particularly relevant here.
First, collaboration is key. If you build a team with complementary skills and empower people to focus on their comparative advantage, good things happen.
Ensemble Advantages: Everyone one of us has diverse work experiences, skillsets, and perspectives. Putting those to best use meant as we grew, the founding team was able to each gravitate towards doing what we indiviudally did best. Dividing oversight and management was crucial to improving our professional performance. This approach has allowed us to focus on our strongest and highest value work.
A team approach also means having faith in your partners and employees, delegating authority to them, and trusting their judgment. Giving people clear goals, the tools to do their jobs, and enough space to pursue those objectives as they thought best has been a core strength. The net result is each of us is more productive, creative, and valuable to the firm.
Second, intelligently embrace failure in order to innovate.
Be Willing to Fail: If you are not failing, then you are not taking chances, experimenting with new innovations, or venturing outside of your comfort zone. Some firms can get away with this for years, but eventually, newer entrants will eat their lunch. You must adapt, change your mind, admit error, and reverse yourself.
The key is quantifying the metrics of success or failure, understanding the costs involved, and having a stop loss where you can declare the experiment over; then, you move on. Faster/cheaper/smarter/better eventually comes for all business models. You may not be driving towards those qualities, but someone else is, and they will eventually take your market share.
I like that concept of a “stop loss” where you’ll end an experiment. It’s so easy to fall prey to the sunk cost fallacy, and keep pursuing a dead end “just a little longer” in the hopes that it will turn around. But people go broke trying to make the unworkable work. The more you can define at the outset when you’ll decide an experiment has failed, the better you’ll be able to learn rapidly from failure.
Selling the future versus selling snake oil
I’ve been following the Theranos story since it broke in 2015. To me, it’s the perfect illustration of the difference between creators and fakers. Creators acknowledge reality so they can learn from failure and solve hard problems. Fakers just want to be celebrated as innovators—regardless of their actual achievements.
One of my biggest frustrations in this whole mess is the way that Elizabeth Holmes’s epic fraud has been portrayed as an extension of the Silicon Valley entrepreneur whose bold vision sometimes races beyond the reality of what they’ve currently achieved.
Scott Kupar, a managing partner at Andreessen Horowitz, hit the nail on the head when he said:
This narrative that Silicon Valley “culture” is on trial along with Theranos is silly. (Alleged) fraud is not the same as willful suspension of disbelief when you have full access to the data and teams required to perform diligence.
By all the evidence I’ve seen, Theranos didn’t simply promise a future they couldn’t yet deliver. They manufactured documents, hid information from and outright lied to investors and board members, and ran medical tests they knew were faulty for patients who relied on that information to make vital health decisions.
That has nothing to do with the Silicon Valley ethos.
RECOMMENDATIONS
The Up Side of Down: Why Failing Well Is the Key to Success by Megan McArdle
Failure is the partner of innovation. When we try something new, it’s almost inevitable that we’ll fail, and success comes from maximizing what we learn from failure. In The Up Side of Down, journalist Megan McArdle shows how this basic insight impacts, not just technology and business, but all of life.
We tend to assume that failure happens because someone, somewhere, did something wrong. In fact, often failure is the result of doing something very right: trying something that you’ve never done before, maybe something that no one’s ever done before.
But this poses a big problem because, as McArdle points out:
Most of us fear failure more than almost anything else.” As a result, we “spend an enormous amount of time trying to engineer failure out of our lives, and out of our society. We are devoting ever more of our lives to seeking out what P. J. O’Rourke dubbed the Whiffle Life: the life in which nothing can ever go seriously awry.
But avoiding the possibility of failure doesn’t create success. It creates stagnation. Take the case of how many children are raised today. They are, McArdle observes, “practically encased in Bubble Wrap before they are allowed to step outside—never without copious adult supervision.” As a result, “We have made it impossible for children to fall very far—and in so doing, we have robbed them of the joys of climbing high.”
McArdle’s conclusion is that we should embrace failure, but we should embrace it intelligently. “We should encourage people to fail early and often—by making sure that their failures are learning opportunities, not catastrophes.”
Take the case of bankruptcy:
European bankruptcy laws treat failure as if it were a simple function of effort and personal virtue. As a result, they end up punishing people whose only sin was to take a chance on starting a business. And they inadvertently punish themselves, when potential innovators decide it’s not worth the risk. Compare the United States to France: we have twice the rate of new business ownership, twice the rate of early-stage entrepreneurial activity—and consequently, three times the rate of established business ownership.
Or take crime. McArdle argues that whereas the U.S. bankruptcy system encourages learning from failure, the U.S. criminal system does not. Petty criminals, especially if they are young, will get off with essentially zero punishment time and time again—and then, when their behavior doesn’t change, they’ll be hit with draconian sentences. This makes punishment seem random and arbitrary. She argues for a different approach. “The best way to fight crime is not harsher punishment; it’s inevitable punishment.” You shoplift? Three days in jail—not zero days, then zero days, then zero days, then five years.
One of McArdle’s most important insights is that it matters a lot why people fail. For example, why is it that people stay unemployed? One popular answer is there aren’t sufficient job opportunities available. Another popular answer is that people prefer to sit around and gather unemployment than work hard. But what if the real problem is that looking for a job and facing rejection after rejection is simply deeply unpleasant? Each answer implies a dramatically different solution to the problem of unemployment.
The Up Side of Down is not a systematic analysis of failure. Instead, it’s a fascinating walk through human life through the lens of failure. It provokes fascinating questions and often supplies intriguing answers.
The biggest lesson, for anyone interested in human progress, is this: we should not detach questions of ingenuity and innovation from human nature and human institutions. Just as creative thinking isn’t something alien from more familiar mental processes, inventing a product or launching a business isn’t something alien the more familiar processes of setting goals and trying to achieve them. If we ignore that wider context in the pursuit of a theory of progress, chances are our theory will, well, fail.
Until next time,
Don Watkins
P.S. Want to support our efforts? Forward this email to a friend and encourage them to sign up at ingenuism.com.