And one can only wonder why this same ambition, this same energy, this same sense of purpose seems all too often to be completely absent today. Why our leaders – in politics as in business – seem far too often to set the bar so remarkably low, rationalizing this lack of ambition as pragmatism. Just being “realistic”. Yes, there is a place in this world for pragmatism, for realism. But this does not excuse the apathy – or worse cynicism – of our society’s most fortunate and powerful in the face of great opportunity and risk (for these two are just different faces of the same coin.)
Preserve my job. My power. My capital. Nothing truly worthwhile in any domain of human achievement has ever been accomplished by people or societies that were ruled by this mindset. And yet it is pervasive.
As our global society and economy transitions from the industrial to the information age, the size and scope of the challenges we face are even bigger than those involved in putting a man on the moon. Every facet of our institutions (government, business, education, culture) will need to be re-configured over the next few decades if we are to survive and ultimately thrive in this new world. We need ambitious, passionate, energetic people to stand up and embrace this opportunity for re-invention. Leaders. Doers.
At Anthemis, I am tremendously fortunate to be able to work with dozens of such people who bring their talents and energy to bear each and every day working towards our big, important goal of re-inventing finance. Â They do this not because it is easy, but because it is hard. Not because success is assured, but because it is important for them to succeed. Sure, it’s easier to be cynical. To say it can’t be done.
We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too. Â – John F. Kennedy
We do have choices. The future is ours to invent. Join us.
Last week I was away with my family for a few days. In a location where there was no working internet connection and a very sketchy 3G signal. As a start-up founder with a never-ending to do list, this was quite disconcerting (especially as it was unexpected.) So aside from freaking out for a couple days, I had no choice but to catch up on both sleep (I hadn’t quite realized how big my sleep deficit had become!) and reading. Which ended up reminding me that disconnecting from time to time can pay dividends.
The Undercover Economist is a terrific account of how economics drives behaviors and his view on how a change in our underlying economic drivers is fundamentally undermining our existing (traditional) organizational and institutional frameworks particularly resonated with me:
…economists believe there’s an important difference between being in favor of markets and being in favor of business, especially particular businesses. A politician who is in favor of markets believes in the importance of competition and wants to prevent businesses from getting too much scarcity power. A politician who’s too influenced by corporate lobbyists will do exactly the reverse.
At the end of the book, he includes the introduction to a later book Adapt: Why Success Always Starts with Failure. He tells the story of a young Russian engineer Peter Palchinsky who challenged the top-down, hierarchical thinking of first Tsarist and then communist Russia over a hundred years ago:
What Palchinsky realized was that most real-world problems are more complex than we think…His method for dealing with this could be summarized as three “Palchinsky Principles”:
first, seek out new ideas and try new things;
second, when trying something new, do it on a scale where failure is survivable;
third, seek out feedback and learn from your mistakes as you go along
…Most organizations and most forms of politics have the same difficulty in carrying out the simple process of variation and selection…if we are to accept variation, we must also accept that some of these new approaches will not work well. That is not a tempting proposition for a politician or chief executive to try to sell…
…There is a limit to how much honest feedback most leaders really want to hear; and because we know this, most of us sugar-coat our opinions whenever we speak to a powerful person. In a deep hierarchy, that process is repeated many times, until the truth is utterly concealed inside a thick layer of sweet-talk…Traditional organizations are badly equipped to benefit from a decentralized process of trial and error…(yet) the more complex and elusive our problems are, the more effective trial and error becomes, relative to the alternatives. Yet it is an approach that runs counter to our instincts, and to the way in which traditional organizations work.
Building on these principles, he suggests the recipe for successfully adapting is comprise of three essential steps:
Try new things, in the expectation some will fail;
Make failure survivable, because it will be common;
Make sure you know when you’ve failed.
What you want to do as a company is maximize the number of experiments you can do per unit of time. -Jeff Bezos
Much as I enjoyed Tim’s book, I was blown away by The Connected Company. Simply stated, I suspect it will go down as one of the most important management books of the early 21st century. It is a remarkable treatise on the new optimal organizational framework for businesses of the Information Age. I’ll admit to some bias as I don’t think I could have written a more articulate or complete account of the philosophy and theory underlying our approach to building Anthemis.
We are reaching a complexity tipping point, beyond which organizations will not be able to succeed without a change in structure.
…And if the world is constantly changing, the only sustainable competitive advantage is to be the one most responsive to change. That means that the speed at which you can learn is the only thing that can give you a long-term sustainable advantage. The problem is that while today’s companies are very good at processing information and producing outputs, they don’t know how to learn.
Indeed the fractal (Dave uses the term “podular”) nature of how we are building Anthemis is a direct attempt to create a more adaptable – and ultimately more resilient – company fit for the challenges of the 21st century. By explicitly embracing a networked rather than hierarchical structure we have built in the ability to experiment and fail while at the same time giving us many more chances to succeed. Dave also highlights that this new type of organization is in essence a complex adaptive system and some of you might recall from previous posts and presentations that the work of Herbert Simon on this subject has had a profound impact on our thinking.
To design connected companies we must think of the company as a complex set of connections and potential connections, a distributed organism with brains, eyes and ears everywhere, whether they are employees, partners, customers or suppliers. Most importantly, a connected company must be able to respond dynamically to change, to learn and adapt in an uncertain, ambiguous and constantly evolving environment.
A connected company is a learning company.
We see Anthemis as a network, an ecosystem where our main responsibilities are (1) to articulate and evangelize a robust vision – re-inventing finance for the Information Age – and (2) to create a fertile environment where passionate, talented individuals, teams and companies pursuing various components of this vision are provided with the tools – capital, talent, connections – that materially improve their chances of succeeding. Anthemis as a city (as opposed to a traditional company) is another interesting metaphor for our approach that Dave also explores:
Taken together, agile teams, service contracts, composability and loose coupling allow the creation of complex service clusters and networks that operate in a peer-to-peer, citylike way. In fact, these kinds of “service cities” can sometimes be so complex that the only way to manage them is not to manage them. Instead, the company focuses on creating an environment within which they can thrive.
The key to creating a successful organization in an era of unrelenting (and often accelerating) change is to build for agility. However the traditional organizational structures that were so successful in the Industrial Age are fundamentally unable to respond to this challenge:
Many business systems are tightly coupled, like trains on a track, in order to maximize control and efficiency. But what the business environment requires today is not efficiency but flexibility. So we have these tightly coupled systems and the rails are not pointing in the right direction. And changing the rails, although we feel it is necessary, is complex and expensive to do. So we sit in these business meetings, setting goals and making our strategic plans, arguing about which way the rails should be pointing, when what we really need is to get off the train altogether and embrace a completely different system and approach.
Dave highlights Amazon.com as one of today’s leading companies that has already adopted many of the tenets of the connected company. He describes their approach as breaking big problems down into small ones; distributing authority, design, creativity and decision-making to the smallest possible units and setting them free to innovate. At Anthemis, we take this one step further as most of the teams focused on each of these “smaller” problems are actually companies in their own right with their initial connection into the Anthemis ecosystem being forged via a financial investment. Aside from our legal structure however, the important distinction between ourselves and a venture capital fund is our clear long-term vision of creating a new leader in financial services: the vision is the glue.
The way we think about it is, on those big things, we want to be stubborn on the vision and flexible about the details. -Jeff Bezos
Essentially our job (at the Anthemis Group node) in this context boils down to designing and building the structure and system that supports the people and businesses in our network and then operating that system. Further we have a key role in creating and supporting a broad and diverse portfolio of experiments in order to maximize our chances of discovering and building the best and most sustainable financial services businesses in a context of rapid technological change and an evolving competitive landscape.
And perhaps in a future updated edition of his book, Dave will be able to point to us as a great example of a successful “connected company”!
Power in networks comes from awareness and influence, not control. -Dave Gray
Update: In this video, Gary Hamel talks about many similar themes, highlighting that our existing management and organizational paradigms are 100 years old and increasingly anachronistic in a world of accelerating change.
I finally got around to reading the now infamous Netflix presentation on corporate culture. I had more than a dozen people point it out to me and must admit this actually raised my level of skepticism – “sure, ok another vapid corporate culture slideshow…”
I was wrong. I wish I had written this. These 9 values and how they should be implemented align entirely with my thinking and – my former colleagues will have to confirm / refute this – how I tried to run the businesses I was responsible for at DrKW, and how I tried to use my influence on the Management Committee to get the firm to adopt these values. In this latter goal I would have to say I failed miserably. As for the former, I think I was more successful but ultimately it was perhaps futile, surrounded as we were by a sea of culture that was strikingly different.
The sad thing is, I’m convinced had we adopted this culture – and as a relatively small investment bank it was within our control – I think the financial and business outcome for DrKW would have been quite different. I would go so far as to say it would continue to exist today and would have thrived as a nimble and unique competitor in the financial wreckage of the past two years. Instead, it was inevitably destined to disappear: to small to save, big enough to blow up.
But DrKW was unfortunately not unique in rejecting this positive culture. I can’t think of any investment banks that would entertain truly practicing even two or three of the Netflix values, let alone all nine. (I’ve only ever worked for three banks so maybe I’m wrong. Please correct me if you think this is the case.) And yet were they run along these lines, I am certain that the worst of the afflictions that beset the financial system would not have materialized. The crisis would not have been. I know that is a pretty strong statement. But I don’t think it is hyperbole.
There are many talented and extraordinary people in the financial services industry who, fed up with the toxic cultures, leave it as soon as they can afford to. I’m sure you could build an incredibly successful company by attracting this talent with a cultural framework like this. Maybe we’ll be able to do it. I’m sure someone will. I can’t wait.
I then had the good fortune to see her speak again at TED Global in 2007, this time in Arusha, Tanzania.
And although there are many differences between Nauiokas Park and the Acumen Fund, I think it is fair to say that in shaping our vision for our firm, and even in planting the initial ideas as to the relevance of bringing a fresh approach to the business of investing in ideas and people, Acumen and Jacqueline have been an inspiration to Amy and I. And so it was great to see her get an excellent and well-deserved write up in the Economist recently. One passage in particular resonated with me as I sincerely hope one day as much can be said of Nauiokas Park in terms of having an impact that goes far beyond our capital resources and reflects a success in building an ideal and a community around the change we are trying to catalyze:
Her firm runs highly coveted fellowship and mentoring schemes, and its alumni are spreading its ideas throughout the development field. The firmâ€™s influence in poor countries is also bigger than it first appears. By leveraging Acumenâ€™s funds to obtain other financing, recipients are able to magnify their impact. Even more important, perhaps, is the firmâ€™s catalytic role in sparking entrepreneurship in developing countries. Acumen devotes much time and money to training local managers, rotating experts from the developed world through its recipient firms and disseminating successful ideas.
In case anyone on Wall Street or Westminster is interested, this is what a leader looks like. We need more people like her in our Board and State rooms.
My friend Alex wrote a great post on how the current UK government just doesn’t get it. And it’s not about policy per se – upon which intelligent people can disagree – but more fundamentally on how the whole socio-economic-institutional paradigm is shifting, massively, below their feet. And there’s not a damn thing they can do about it. And therein lies the rub. The fact that they are powerless to change this despite commanding the heights of power does not compute.
To be fair, they aren’t alone – the instincts of many (most) politicians is to try to stuff the genie back in the bottle. Just look at the surreal-if-it-wasn’t-real going ons in France as just one example. The same is true of many Fortune 1000 business leaders.
And when I look at this through a demographic prism – as I am wont to do 😉 – I see a distinct pattern. I suspect that a propensity to cling to the historical norms of power and control is a cultural pathology that is particularly acute in the Baby Boom generation. This is partly a coincidence of timing – ie the power paradigm is changing on their watch – and exacerbated by their generational self-image: they are not old and reactionary, they are not “the man”. They are the vibrant transformational free-spirited children of the 60s and 70s, they are the ones that “get it”. Sixty is the new thirty right? But they worked hard to climb up the greasy pole of success, to make it to the corner office, to the top of the hierarchy. And it was bloody hard work. And they deserve to now be able to wield the levers of power as their predecessors did for generations beforehand. Besides as a more enlightened generation they would do this with even more wisdom. So it is unsurprising that they are not bloody happy to see the rules change. They are in charge. They set the rules. It’s their turn. It’s only fair.
Spot the odd one out.
Gordon Brown: 58. Peter Mandelson: 55. Michael Martin: 63. Barrack Obama: 47.
Age at start of mobile phone/internet mass adoption (1995)
Gordon Brown: 44. Peter Mandelson: 41. Michael Martin: 49. Barrack Obama: 33.
Clearly this is a generalization. Not everyone over 50, not every baby boomer is at odds with the changing world. In fact there are a fair number (many of whom we have to thank for building the technological foundations of this new age) who are leaders – in their actions and thought – in this transformation. However – and this is completely anecdotal and a personal view – I suspect that they are rarely found and disproportionately under-represented in the halls of traditional power.
It’s time for a change. But it won’t be easy. And given increasing life expectancies these guys are going to be around and healthy for another 20 or 30 years so nature isn’t going to help because we don’t have that long. The funny thing is I think if they overcame their fears and actually “let go” many of these leaders would find it incredibly liberating and empowering at the same time. Interesting times indeed.
Watching this compelling TED Talk – by The Bottom Billion author Paul Collier – over the weekend reminded me how important transparency can be in fostering better governance, and aloowing better leaders to emerge. This is as true for companies as it is for nations. His call for (voluntary) international standards in ‘best practice’ governance is intelligent and, probably more importantly, pragmatic:
And it catalyzed me to rewatch Patrick Awuah’s talk from TED Africa, that for me was one of the highlights of a unforgettable gathering. He states:
The question of transformation in Africa is a question of leadership: Africa can only be transformed by enlightened leaders…but when I speak of leadership, I’m not talking about just political leaders…I’m talking about the ‘elite’: those who have been trained, who’s job it is to be the guardians of their society – the lawyers, the judges, the policemen, the doctors, the engineers, the civil servants. Those are the leaders, and we need to train them right.
Watch this video and tell me it doesn’t make you want to do better. Appreciate more. Your parents. Your schooling. Your good fortune. Your leaders (however imperfect they may seem.)
I’ve often been asked why I am interested in developing nations, and Africa in particular. And, more to the point, how it fits in with the other main themes that define my blog. I guess it comes from an intense curiosity to on the one hand study, understand and learn from failure, and an fundamental belief that in failure and distress lies great opportunity. At the risk of sounding politically incorrect, it is not driven so much by compassion or the desire to ‘do good’ (although I would hope that I have at least the median amount of these attributes), but by a deep frustration and impatience with the wasted potential too often associated with these countries. It is also – and I hope you don’t think this makes me a bad person – driven by an enlightened self-interest. I am convinced that through gaining a better understanding of the failings and challenges faced in these societies, I will be smarter in the face of understanding any market, society or economy. I guess you could say it is part of the “you-learn-more-from-failure-than-success” canon.
One of the other primary themes I address on these pages is the power of traded markets. As regular readers would probably know, I have deep-seated conviction of the usefulness of markets in creating wealth and building stronger (more transparent) economies and societies. I also believe that some of the power of markets arises because they are fundamental to human culture and cognitive processes. Now I’m no anthropologist, nor sociologist, but (without any experimental robustness) I find that the emergence of fundamental market mechanisms in the most anarchic or chaotic societies – too often found in Africa, as proof that markets are fundamental to building working (even if pathological) human societies.
By becoming more knowledgeable about these markets and how to adapt products and services to be successful in what – a priori – are extremely hostile economic environments, I believe will generate many investment opportunities, primarily along two vectors: most obviously, within these developing markets themselves and, less obviously (but probably financially even more significant), by bringing learnings from operating in these markets back to developed markets and economies. Yes, I firmly belief that knowledge transfer can be a two-way street, not just one way from developed to developing economy. A good example is a company I recently discovered called Obopay:
Go mobile with your money. That’s the simple yet powerful idea behind Obopay.
Obopay is the first truly comprehensive mobile payment service in the United States. That means we’re the only service that lets you instantly get, send and spend money anywhere, anytime with anyone. With Obopay you can instantly pay back a friend, split a dinner bill, get money from your parents, get quick cash, pay up or collect on a friendly wager, track purchases, check your balance, and much, much more. And, you can do it all from your phone; anywhere, anytime with anyone.
The Obopay Story
Obopay is not your ordinary brainchild. It didn’t happen in a conference room or during a grueling brainstorming session. The concept for Obopay happened while Carol Realini, Obopay’s founder and CEO, was doing volunteer work in Africa. It was there she observed an interesting phenomenon: people living in some of the most remote corners of the world carried a mobile phone even if they didn’t carry a wallet. Combining the two seemed like an ideal marriage of empowerment and convenience. And that’s when the idea for Obopay was born. Returning to the U. S. she saw incredible opportunities within the ever-growing mobile youth market. Although Carol had not planned on rejoining the work force after a three decade run as a successful entrepreneur, her passion for this new idea changed her mind. She pulled together an all-star team of seasoned mobile and financial professionals, raised venture capital and successfully launched Obopay in 2005.
I believe in the Wisdom of Crowds. And I also believe in the value and importance of leaders and leadership. In fact in many contexts good leadership is what allows the crowd to be wise (as opposed to idiotic; see JP’s critique of Freedman’s article here.) The problem is a paucity of good leaders, or at least good leaders who can be bothered to wade through the venal and cynical thicket that all to often surrounds positions of power or influence. History is littered with disastrous outcomes due to poor leadership, we’re not just talking about a bad quarter or a bottom decile share price performance…
Throughout recorded history, actions or inactions by self-absorbed kings, chiefs, and polticians have been a regular cause of societal collapses…Tuchman put it succintly: “Chief among the forces affecting political folly is lust for power, named by Tacitus as ‘the most flagrant of all passions.’ ” As a result of lust for power, Easter Island chiefs and Maya kings acted so as to accelerate deforestation rather than to prevent it: their status depended on their putting up bigger statues and monuments than their rivals. They were trapped in a competitive spiral, such that any chief or king who put up smaller statues or monuments to spare the forests would have been scorned and lost his job. That’s a regular problem with competitions for prestige, which are judged on a short time frame.
These are leaders that got caught up in their own press – that believed that the sun rose and set because of their genius and charisma. Leaders that eliminate dissent and fear change. Leaders that end up breeding a madness of crowds, crushing the wisdom under their iron determination.
I’m just in the process of re-reading Surowieki. And I can tell you I don’t really see him expounding on the virtues of blindly, and in all circumstances and contexts, trusting the ‘crowd’; and explicitly he underlines the fact that the wisdom arising from a crowd is not the same (indeed often just the opposite) as consensus.