Paradigm shifts are for people too stupid to spot trends

I loved this line, it came from Redmonk's James Governor who says he heard it from an old Journalist. The context was that we were discussing a post from Hugh McLeod from his "Evil Plans" thoughts, entitled "don’t worry if you don’t know “absolutely everything” before starting out". I had opined to James that the risk with such heady stuff is that it may entice people to leap before they look.

I agree that it is far better to act than to do nothing, as otherwise nothing will happen. But in order to maximise the probability of success, it is a very good idea to prepare yourself and scout the ground. I thus thought that there was an opportunity to add some "Cunning" planning to one's Evil Plan.

To explain, using the main points in Hugh's post

i. Being an Outsi­der with too much Insi­der Know­ledge, makes it even more likely that you’ll make the same mis­ta­kes as every­body else.

When Goo­gle– the most suc­cess­ful adver­ti­sing busi­ness in the his­tory of the world– star­ted their com­pany, the knew prac­ti­cally nothing about Madi­son Ave­nue...... Which helps explain why, when the nor­mal, mains­tream, industry-obsessed kids of around the same age were just lan­ding their first East Coast internships or junior exe­cu­tive posi­tions at adver­ti­sing blue-chips like McCann’s, Lin­tas, DDB or Saatchi’s, Ser­gey and Larry were already well on their way to beco­ming billionaires.

Not So Fast, says I at this point - What Google actually did was to copy (to the point of being taken to court and forced to pay a licence in perpetuity) Overture's technology, Overture being the company that initiated online placement advertising (it was eventually bought by Yahoo).

Lesson (i) of the Cunning Plan Addendum is therefore: Its actually not ok to have no Insider Knowledge, but better instead to stand on the shoulders of those who have gone before - or, in the words of the Great Lobachevsky, "Plagiarize, plagiarize, plagiarize - only please to call it Research".

ii. It’s pretty much impos­si­ble to know what the big, bad world is going to do next.

If it’s almost impos­si­ble for the smar­test peo­ple in Govern­ment, Wall Street and Sili­con Valley to pre­dict what hap­pens glo­bally, what chance does a guy wan­ting to open a small, highly-specialized, hand-built bicycle ope­ra­tion have, from his small sto­re­front in Brooklyn?

......

To get some very lucid, hard­core pers­pec­tive on this, I recom­mend that you read Nassim’s Taleb’s exce­llent and highly rea­da­ble “Foo­led By Ran­dom­ness” (W. W. Nor­ton & Co., 2001). Nassim’s the­sis is chil­dishly sim­ple: That the big­ger the his­to­ri­cal event, the more ran­dom and unpre­dic­ta­ble the event was to begin with. Nobody saw 9/11, Pearl Har­bor, the assas­si­na­tions of JFK, Lin­coln or Arch­duke Franz Fer­di­nand, the Ato­mic Bombs being drop­ped on Japan, the 1923 collapse of the Ger­man Deutch­mark, the Bar­ba­rians sac­king Rome in 410 A.D., The Bubo­nic Pla­gue of the 1300’s, or Hitler’s 1941 inva­sion of the Soviet Union coming down the pike.

Hugh makes a good point here, ie there is no sense in trying to worry about far larger problems in a small business. But if I may add to this, there is also a lot of point in worrying about which way the wind is blowing, the current is flowing, the tide is turning etc - swimming against the flow is a lot harder than swimming with it. Also, while I am a fan of Taleb's book, I think that its incorrect to claim that all such big events are unpredictable. Of the above, I would argue that quite a few were being predicted at the time by people who knew the actual situation. This is where James' comment came in:

Paradigm shifts are for people too stupid to spot trends

So Lesson (ii) in the Cunning Plan Addendum is to make sure you understand the direction of the tides that surround the ship your dream is on, and to understand what the really smart people in the space are thinking. Some people are likely to be seeing the trends, its a question of finding them. In fact, I rather thought Hugh's approach was quite good illustrating for this:

So I just put the idea out there on my blog to see if any fish would bite. And they did. A lot of them even liked the idea enough to put up money in advance, before I had spent a sin­gle penny.

That's pretty cunning preparation - see if the kite flies first!

iii. Inte­res­ting des­ti­nies rarely come from just rea­ding the ins­truc­tion manual.

Yes, Louis Pas­teur did say, “For­tune favors the pre­pa­red.” On one level, he was right. That being said, the stuff you learn befo­rehand will never be one-tenth as use­ful as the stuff you learn the hard way, on the job. All the for­mer can do is help train you to deal with the rea­lity of the lat­ter. The real truth is always found in the moment, never in the future. Sadly, not every­body is cut out for thri­ving in the pre­sent tense. Life is unfair.

Which is true, experience is a great teacher - there are quite a few studies that show that a bad action is sometimes better than no action. Sadly, there are also examples that show a rash action is far worse than no action. For example, its a very unwise idea to go sailing around the world without learning how to swim and sail a boat first. You could do it without these skills and stay alive long enough to learn to be an old salt, but the probability of failure is far, far higher. And its probability of failure that the Cunning Planner is aiming to minimise. Let others do the headless chicken routine.

So Cunning Plan Addendum lesson (iii) is to do a bit of core preparation before leaving shore - if you can't swim or sail, get some lessons or hire an experienced crewman. In other words, what core skills do you need, and how can you get them?

iv. “Some­ti­mes Paranoia’s just having all the facts.” –William S. Burroughs.

(snip of businesses Hugh has been involved in)

Take it from me– if I had known ONE HALF about these busi­nes­ses that I know now, I doubt I would’ve bothe­red in the first place. Ins­tead, I would’ve just got­ten an MBA somewhere and lan­ded a mid-level posi­tion in a bank or a cor­po­ra­tion. Maybe joi­ned the local country club while I was at it. Or something. Lucky Me.

Which is true - unless entrepreneurs were extremely optimistic they would never do anything new - but some understanding of the founder's discount and calculation of the risk verses the reward is a very good idea for a Cunning Planner. Venture Capitalists always want to know the size of the market you are looking at, and its not an irrational view. There is also an old saw, that you get richer supplying to rich industries than poor ones.

So Cunning Plan lesson (iv) is to (as with robbing banks) go where the money is.

By the way, I agree totally with the heading of this post - Paradigm shifts are for people too stupid to spot trends - in that in much of the stuff we have looked at over the last 10 years or so since I've been doing projections of future trends, there are always signs that are there early, and it is nearly always possible to imagine the correct (enough) scenario albeit assigning probabilities early is very hard (it typically becomes clearer over time though). The really hard things are:

(i) predicting the when, not the what. There is a useful recent McKinsey paper in using game theory in scenario development that may be useful, I will comment on it in detail in a later post.

(ii) planning for very big, very low probability events (Taleb's "Black Swans"). Many are possible, but very, very improbable so in reality you just have to ignore them for all practical purposes or you'd either do nothing or spend a ludicrous amount mitigating very unlikely events.