Babak Bagheri

The line between stupid and brilliant innovation is blurred. People have tried to systematize and show the difference in dramatic ways. Guy Kawasaki has a graphical way to illustrate the difference in his “The Art of the Start” book. He points out two dimensions: how novel an innovation is and how much people like the innovation. Presumably, the stupid innovations are the ones that are novel, but nobody likes.

The Art of the Start

The problem with Guy’s illustration of stupid innovation is that it’s static. Both dimensions change over time, sometimes very quickly. We’re familiar with how fickle people’s tastes can be. But the other dimension, the novelty of an innovation, can also change rapidly. As you’ve guessed by now, the reason is our old friend subjectivity. What people consider novel today, they may consider old hat tomorrow.

So what are enterprising folks to do? Shooting a moving target is not easy. And the target is moving fairly quickly these days. A good answer, of course, is our old standby experimentation. The trick is to lower the cost of failure and do as many reasonable trials as possible as quickly as possible. I did sneak in a qualifier here: reasonable.  It’s probably best not to try patently silly things, but there are plenty of cases where patently silly things turn out to be exactly what’s needed. So the “reasonable” qualifier is a soft one.

The safe and usual solution has been to copy existing successes. It’s not an approach I like, but I don’t knock it. Empires have been built this way. The formula is: find something that’s been somewhat successful, then tweak and polish it. It’s safe if you can “execute,” hence all the recent spilling of ink about “execution.”

Do the constraints that markets put on innovation help or hurt? The reigning consensus has been that they help. The constraints help presumably because they force innovators to husband scarce resources properly. Trying to scratch every possible itch in every possible way would be just too expensive. But any set of constraints in a human setting has unintended consequences.

Joseph A. Schumpeter

Let’s look at market constraints related to how money is invested and how results are vetted. To allow enough exploration to go on, investments have to be spread among as many choices as possible. To be fairly sure that experiments aren’t stopped prematurely, the size of the investments need to be adequate. A tiered approach to investment has evolved to address these constraints: invest progressively larger amounts in a large enough sample of attempts. Going from one tier to the next is a gate-keeping event; each gate forces a kind of Schumpeterian destruction. This all sounds well and good, if the destruction is not, well, destructive.

The difficulties, like the devil, are in the details. In a social environment with real people, many human factors come into play at the investment gatekeeping events. These factors include, not surprisingly, those pointed out by Cialdini in his “Influence” book.

Every self-respecting entrepreneur, therefore, knows that influencing and selling to investors is even more important that selling to potential customers. Most entrepreneurs then train their itch-detecting X-Rays on investors. Sometimes this works out, especially when the investors’ view of the market is essentially accurate and they reflect those views faithfully. Often, the entrepreneur ends up with an offering that pleases the investors more than it does customers.

There are, of course, many other devilish details at work here.

If you ask the pundits about generating market frenzy (read madness) in your favor, they’ll give you various lists of things you need. One item is common on most of these lists: a great product or service. Of course, “great” here means anything that the crowd will love madly. So that item is not much help. The more interesting tip lists offer a number of psychological items.

Robert Cialdini

Robert Cialdini wrote a deservedly popular book called “Influence” that expounds on a list of crowd-influencing items:

• Reciprocation
• Commitment and Consistency
• Social Proof
• Liking
• Authority
• Scarcity

The most interesting aspect of this list is its pure subjectivity. There is no direct mention of the object (product, service, etc.) that one is trying to make popular. The only indirect reference is in “Scarcity,” but Cialdini makes it clear that he understands the scarcity doesn’t need to be real.

At this point, one may be skeptical. After all don’t popular people or companies create products and services that are great in some objective way? Aren’t Toyota’s cars better built? Aren’t Apple’s machines more elegant? Well, ask yourself this question: have the crowds always preferred cars that are better-built; have they always preferred machines that are more elegant?

The Leonardos of the Cinquecento had their patrons. That patronage system is long gone; we’ve replaced it with popularity contests on a grand scale. What does this mean for entrepreneurs? It means entrepreneurs need to understand “crowd psychology” more than ever.

Gustave Le Bon

The trail of interest in “crowd psychology” goes back to ancient Greece where there was a great deal of worry about the “tyranny of the masses (demos).” This trail of fascination with the madness of crowds has been meandering through the years. The trail reached a prominent point in the late nineteenth and early twentieth centuries. Gustave Le Bon’s “The Crowd: A Study of the Popular Mind” is a good popularization of the attitudes of the period.

We’ve now made it through the twentieth century, stopped worrying about the madness and started loving it. The madness of crowds can make us money.

Leonardo

It is high time that we update the old saying attributed to Andy Warhol: “Everyone will be famous for fifteen minutes.” We have created a world where “Everyone has to be famous for fifteen minutes.”

Why you ask? Because the world we’ve created is a look-at-me world. It’s a world where obscurity guarantees failure. To many who have grown up with MySpace and Facebook and now Twitter, this will actually be more than obvious, it will be a tautology. “How could it be otherwise?” Isn’t popularity what we mean by success? Well, it is now. But it hasn’t alway been this way.

Let’s look at a well-known example: Leonardo da Vinci. He compiled one of the most impressive collections of drawings and ideas. Not only did he not feel compelled to shout “look at my stuff” from the palazzo rooftops, but he went to great lengths to obscure his work. Yes, I know about the need he may have felt to protect himself from the authorities (especially the Church). But that’s not enough to explain his mindset. To a Leonardo, the work itself spelled success, not his ability to shine in public.

What does all this have to do with the title of this article? I’ll leave that as an exercise for the reader for now.