Why Is Innovation So F*cking Difficult?
A Hypothetical Startup Story
(based on many, many real accounts)
You’re an engineer. Let’s say you’re charismatic enough to have the persuasion skills to pull other engineers to you. You decide to take the startup route, packaging yourself, your colleagues and an aspect of your research as ‘doing X for Y within a market’ where the market size is something in the X$billions. You hit up Silicon Valley investors, describing your technical approaches. Quickly you realize it’s time wasted because the only words the investors remembered were ‘Deep Learning’ (because they just invested in a food delivery company that uses it) and because they’re really just thinking about whether they will bump into Mindy (not their wife) at the Rosewood tonight.
You learn to compile together some buzzwords so that you’re able to raise a number of million dollars. You’re happy because you’ve finally closed your round and it’s time to focus on building out your company. After 12 months, (of which you spent the first 6 effectively building and managing your team), your investors start hankering you to show some sort of performance indicator. This is because Venture Capitalists are investing on behalf of their own investors (Limited Partners, or ‘LPs’) who are often a collection of traditional investment institutions like pension funds, university endowment pools or sovereign wealth funds. None of those LPs care about you or your company because they’re more focused on the $100 million dollars they committed to a Venture Capital fund and the returns they were promised within a certain time-frame (that’s the reality of having to pay people their pensions).
You begin warping your ideas and business models to fulfill strict indicators (high-teen returns within 10 years) to keep your investors happy so they can narrate back to their LPs benchmarks in a way that everyone understands ($$$). You bow down to the nearsightedness of VC entry and exits. Over the following years, you’re forced to get on your knees for the short-termism endemic to contemporary investment management. Instead of developing a business for long-term success and the creation of real value, you’re pushed to chase after headlines and benchmarks that your investors and their LPs can understand. Just as with the stock market, the perception of your company becomes the reality in terms of value.
At first you feel like a total impostor, but now it’s starting to feel OK because Forbes just profiled you and your girlfriend is sort of famous on Instagram. Your investors high-five you because apparently you’ve made it (just like they once did) and at Christmas, they give you a discount pass for NetJets.
You don’t even know what your company does anymore.
A few years later, over a MaiTai on your Hawaiian retreat you look back, realizing that the whole thing was an intense PR charade and that you didn’t really achieve anything, apart from playing a very weird game. The whole world thinks you’re a winner, but that’s the beauty of people observing from a distance. At some point the accolades you once cherished become boring and on your death-bed you wish you had done more with your time-slice of existence.
We live in a world corrupted by failed networks of misaligned incentives and short-term motivations. This is what hinders technical progress, and is why global challenges rage on.
Why We Need To Think More About The Incentive Problem
Society often makes the claim that ‘money rules the world’. In reality, money is just one of many numerous incentives that rule the world. This broad range of incentives dominate our entire existence and the ‘trending’ ones direct our cultures and societies. For some people, they fit into traditional desires for money and power. Some desire social recognition above all things. The spectrum of incentives is diverse. The interesting thing about modeling people’s desires is that they are often not binary. A person can desire X for Y and not even be aware of Y. For instance, the drive for money could really play part of a less-conscious but larger desire for social status. An interesting way to notice these internal discrepancies is when we witness someone fulfill their desire and still feel unfulfilled. Of course, we all have a broad range of desires interacting with each other, but it’s always telling when we attain something we desired and realize it wasn’t as fulfilling as we thought.
“I hope everybody could get rich and famous and will have everything they ever dreamed of, so they will know that it’s not the answer.” -Jim Carrey
The tech community needs to be hacked, hacked by incentives. Money will (and should always) be the main drive of business, that’s the necessary component of investment. But the social recognition and power aspects of the tech community have gotten out of control. Among all the tweets of Rumi poems and inspirational quotes, people have lost sense of the fact that our work is far from done. Social media makes Forbes 30 under 30 look like The Nobel Prize. People celebrate you becoming verified on Twitter. Facebook is full of humble-brags, as if we had just diverted a humanitarian crisis. We want to speak -not build- because it takes two minutes to write a tweet and an entire career to make an impact.
Of course, there are many great investors, entrepreneurs and start-ups. But under the hood, the tech industry is as much of a mess as everything else.
Don’t take it too seriously. Our work has just begun.