“If you can’t learn, you can’t thrive.” –Cal Newport
Mind Tools – Silicon Valley Examined 14
On the Silicon Valley Examined podcast, Robert Hendershott and Don Watkins discuss the state and future of Artificial Intelligence. How can AI help us innovate? How will it help us innovate? And how do we manage the inevitable risks?
Investing like an Ingenuist
Robert Hendershott and Don Watkins
In many models of economic growth, investment is the key input that drives progress. In the Ingenuist framework, it’s ingenuity that drives progress.
People exercise ingenuity in the face of challenging work and demanding problems, which yields insights—new ideas about how things work and how they could work better. Through an exploratory, trial-and-error process, these insights lead to innovation—specific products and services that are new, better, faster, or cheaper than what came before. The result is value creation and progress.
Investment without ingenuity produces more of the same—and given decreasing returns, not that much more. But ingenuity plus investment—of time, effort, energy, money—changes the world.
Start with the obvious: explicit capital investments. You need capital investment to quickly turn insights into value creation. This is what Silicon Valley venture capitalists do: support entrepreneurs as they transform their insights and innovation into world-changing companies. VCs engage in a complex, sophisticated process to discover which of the many interesting insights out there are really the foundation for progress and make sure these efforts get the resources necessary for them to bear fruit.
Here’s what that looks like schematically:
Ingenuity + experience => Insights
+ exploration => Innovation
+ capital investment => Value and progress
But here’s the really interesting question: what about the earlier links in the chain? Where do the original insights come from and how can we get more of them? Can we invest in ways that produce more valuable new ideas?
The answer is yes but not in a simple, easy way. There is no “insight machine” analogous to a bubble gum machine where you put in money and out come insights. If insights come from ingenuity in the face of challenging work and demanding problems, then the investments that matter will be investments that foster ingenuity and provide the opportunity for challenging work and demanding problems.
Here’s one non-obvious investment strategy to drive home what we mean: treat insights as investments.
Ingenious insights grow in a soil made of experiences, ours and others. Education, training, and above all work create opportunities for insights to arise. Being connected allows us to learn from other peoples’ results and build on their ideas. Larry Page and Sergey Brin came up with the Google search engine while in a Ph.D. program working on the Digital Library Initiative, leveraging mathematics developed over the previous century. A ton of investment preceded the PageRank algorithm—but little if any of it was made with the intention of founding Google.
Exploration and discovery are the fertilizer that transform insights into innovation. Seeing the possibility of PageRank for library search is an insight. Extending it to a vastly improved way to search the web is an innovation. Seeing it as the first step to organizing the world’s information changes the course of humanity. But insights rarely translate this well into innovation and many insights will fail to take off despite our best intentions and efforts. Given that we all have limited time, energy, and attention, what is the most effective way to explore our insights?
The answer is to mimic Silicon Valley VCs. VCs believe each of their portfolio companies could be a world-shaking success—and they know most of these startups will fail. By investing small amounts initially and ongoingly revising each company’s odds of success based on the early results of these initial investment, VCs end up with many small losses and a handful of very large winners. This is exactly what we can hope to get from investing time and energy into exploring our insights.
Adroit exploration maximizes the benefits of discovery for entrepreneurs (both in start-ups and larger organizations). By investing time and passion (and, yes, often some money) to explore paths with 1) manageable downside, 2) significant upside, and 3) opportunities to learn quickly whether the path is likely to prove fruitful. Further, these expeditious lessons determine the next investments. Ideally a path to success is uncovered piece by piece. But the alternative outcome, quickly discovering that an effort is unlikely to succeed, is also valuable (at least compared to wasting more time and treasure on a doomed project).
There is a lot more to say about the role of ingenuity and investment. The key lesson here is that, to foster progress, we should not focus only on the last leg of the creative process—the move from innovation to value creation. We need to think about the entire chain that leads up to transformative products, services, and businesses.
We’re already good at making sure the next Apple or Google will get funded. We need to get better at generating more ideas that can evolve into the next Apple or Google.
10 years ago, the earth got a lot less curious
October 5 was the 10th anniversary of Steve Jobs’ death. His long-time collaborator, Jony Ive, wrote a moving remembrance of him, highlighting the unique way Jobs’ mind worked. A selection:
He was without doubt the most inquisitive human I have ever met. His insatiable curiosity was not limited or distracted by his knowledge or expertise, nor was it casual or passive. It was ferocious, energetic and restless. His curiosity was practiced with intention and rigor. . . .
In larger groups our conversations gravitate towards the tangible, the measurable. It is more comfortable, far easier and more socially acceptable talking about what is known. Being curious and exploring tentative ideas were far more important to Steve than being socially acceptable.
Our curiosity begs that we learn. And for Steve, wanting to learn was far more important than wanting to be right.
Our curiosity united us. It formed the basis of our joyful and productive collaboration. I think it also tempered our fear of doing something terrifyingly new.
We get them coming or going
Man, not a good day to be a virus. Merck just announced at new oral COVID-19 treatment that reduces the risk of hospitalization and death by up to half.
The drug, molnupiravir, is administered orally and works by inhibiting the replication of the coronavirus inside the body.
An interim analysis of a phase 3 study found that 7.3% of patients treated with molnupiravir were hospitalized within 29 days. Of the patients who received a placebo, 14.1% were hospitalized or died by day 29. No deaths were reported in patients who were given molnupiravir within the 29-day period, while eight deaths were reported in placebo-treated patients.
It’s almost like Big Pharma isn’t a villainous cabal out to destroy mankind.
You’re terminated, cancer
For highly treatable cancers, early detection is everything. The good news: the FDA just gave clearance to an AI diagnostic tool for prostate cancer, developed by the startup Paige Prostate.
The FDA’s decision to grant De Novo clearance came in part after a clinical study in which 16 pathologists used the program to analyze tissue slides—both cancerous and benign—from more than 150 institutions in different regions.
Paige’s software helped improve cancer detection by more than 7%, Fierce Biotech reported—and decreased both false-negative diagnoses (by 70%) and false-positive diagnoses (by 24%).
The world of bits isn’t just revolutionizing the world of atoms. It’s revolutionizing the world of cells.
The worst year ever?
We’ve talked about the Great Stagnation hypothesis—basically, that innovation has slowed since the 1970s. What’s striking if you look at the data is that the turning point is extremely specific. Basically, 1973 arrives, and everything goes to hell. But why?
There are a lot of answers on the table. But James Pethokoukis raises an interesting question: what did economists think was happening at the time?
One fascinating document is a June 1981 analysis by the Congressional Budget Office, led at the time by Alice Rivlin, later a director of the Office of Management and Budget under President Clinton and a Federal Reserve governor. “The slowdown appears to be caused by major shifts in relative prices from, for example, oil price shocks, inflation, and regulation,” concluded the memorandum. But let me dig a bit deeper into the regulation piece of the explanation:
He quotes from the report:
The 1969-1972 period was one of intense regulatory proliferation in the United States, with new legislation concerning air emissions, discharges into waterways, noise pollution, and occupational safety. The industries most severely affected-mining, paper, chemicals, refining, and primary-metals-have suffered the sharpest decelerations in productivity growth since 1973. . . . In mining, for example, productivity declined at an annual average rate of 3.2 percent per year during 1973-1978, after growing at an annual rate of 2.8 percent during 1948-1965 and at 1.6 percent during 1965-1973. Some regulations, especially those concerning air pollution, retard productivity growth through the bias against new sources of pollution. That is, more stringent rules are imposed on new plants or substantial modifications of old ones than on existing facilities. The purpose is to minimize the impact of regulation on existing processes, jobs, and the value of capital. The policy may succeed on this score, but it also provides an incentive for firms to extend the life of older, more technologically-primitive facilities.
As James points out, this is only a “partial diagnosis,” but it’s an important one. Because it’s a factor that’s fully under our control.
Speaking of the Great Stagnation, part of the evidence given for it was the state of modern kitchens. From the turn of the century to 1960, everyone agrees that kitchens were transformed by technology. But after 1960? Not so much.
But Nick Whitaker argues people who make this argument aren’t looking closely enough:
There is a lot of truth to this story, even if it neglects the value of home sous vide and the Instant Pot. But it misses another type of technological change that did happen and which might be even more important in determining the quality and deliciousness of the food we eat.
The change has come in the form of things we cannot touch or feel, but nevertheless matter: new ideas, recipes, and techniques. And that tells an equally important story: of how intangible capital has grown in importance in our lives and the wider economy—a less visible, but just as valuable, form of technological advancement as the advancements in tangible capital we made in the half-century before.
Whitaker talks about the development of modern food science and how it changed the way people cooked in their homes. For example:
By the 2000s, food science–oriented outlets were debunking dozens of common myths with the new approach. Pasta doesn’t need to be boiled in loads of water. That water doesn’t need to be “salty as the sea” either. Sea water is about 3.5% salt; 1% is probably plenty. And it doesn’t matter whether the salt is added before or after the water comes to a boil (both sides had proponents). You don’t need to rest steaks before you cook them. Nor do you need to worry about just flipping steak once. Searing doesn’t “lock in juices,” either, it creates the maillard reaction, and you can do it either before or after roasting a piece of meat for the same effect. Even the practice of marinating itself was called into question. The list goes on.
Innovation isn’t the same thing as technology. It’s new and better ways of doing things. And, as Whitaker observes, even though they don’t always show up in statistics, non-technological innovations make a big difference in our lives.
So home cooking won’t save the world, nor will it drive growth, nor will it even necessarily make us healthier or save us money. But for those who do enjoy cooking, Anton Howes’s “culture of innovation” is alive and well among internet chefs and the home cooks who watch and read them. That we innovate even without strong incentives is a testament to how strong the culture is. And it reminds us that each time we try to innovate, to do something a little bit better, we improve the world.
So Good They Can’t Ignore You by Cal Newport
Last week we talked about the importance of investing in your life, and of seeking life and career satisfaction through the same process of exploration that leads to innovation. Cal Newport’s So Good They Can’t Ignore You is a guide to how to explore your way to a career you love.
Newport believes that discovering a career you’re passionate about is important—but he thinks that the advice “pursue your passion” is usually bad. It’s bad because most people don’t start out with pre-existing passions.
[T]he conventional wisdom on career success—follow your passion—is seriously flawed. It not only fails to describe how most people actually end up with compelling careers, but for many people it can actually make things worse: leading to chronic job shifting and unrelenting angst when . . . one’s reality inevitably falls short of the dream.
So Newport asks us to lower the bar. Instead of trying to unearth some hidden passion inside us, we should find a job that seems interesting and presents us with a lot of learning opportunities and then focus on developing rare and valuable skills. Or, as Steve Martin said, on becoming “so good they can’t ignore you.”
As we develop rare and valuable skills, two things happen. First, we become more capable, which is one of the vital ingredients of a satisfying career. “[T]he happiest, most passionate employees are not those who followed their passion into a position, but instead those who have been around long enough to become good at what they do.”
And second, when we’ve cultivated rare and valuable skills, we can demand rare and valuable jobs.
Basic economic theory tells us that if you want something that’s both rare and valuable, you need something rare and valuable to offer in return—this is Supply and Demand 101. It follows that if you want a great job, you need something of great value to offer in return.
In other words, we can use our accumulating career capital to demand—not mainly monetary remuneration—but jobs that offer more learning, more autonomy, and a sense of mission.
This process, Newport argues, will allow us to evolve into a career that we love—which may turn out to be very different from what we would have chosen at the outset of our journey.
If you want to invest in yourself, and you don’t already have a career path in mind that fills you with passion, then a good way to start is to invest in Newport’s book.
Until next time,
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