Category Archives: Must watch or read

Homo Deus : a Brief History of Tomorrow by Yuval Noah Harari (Part 2 – the Future)

I remember hesitating to buy Homo Deus. I never really appreciated people trying to analyze what the future might be. I have similar concerns with Harari’s book. I am not the only one as the New Yorker was not all positive: Then he announces his bald thesis: that “once technology enables us to re-engineer human minds, Homo sapiens will disappear, human history will come to an end, and a completely new process will begin, which people like you and me cannot comprehend.” Now, any big book on big ideas will inevitably turn out to have lots of little flaws in argument and detail along the way. No one can master every finicky footnote. As readers, we blow past the details of subjects in which we are inexpert, and don’t care if hominins get confused with hominids or the Jurassic with the Mesozoic. (The in-group readers do, and grouse all the way to the author’s next big advance.) Yet, with Harari’s move from mostly prehistoric cultural history to modern cultural history, even the most complacent reader becomes uneasy encountering historical and empirical claims so coarse, bizarre, or tendentious. […] Harari’s larger contention is that our homocentric creed, devoted to human liberty and happiness, will be destroyed by the approaching post-humanist horizon. Free will and individualism are, he says, illusions. We must reconceive ourselves as mere meat machines running algorithms, soon to be overtaken by metal machines running better ones.

If I feel the same unease, I still beleive Harari asks important questions and he might even have been misunderstood in his real motivation… I link this reading to my recent great readings of Piketty, Fleury and Stiegler.

Whatever some more extracts:

“Because science does not deal with questions of value, it cannot determine whether liberals are right in valuing liberty more than equality, or in valuing the individual more than the collective.” [Page 281]

A strange section is the following: The experiment changed Sally’s life. In the following days, she realised she has been through a ‘near-spiritual experience… what defined the experience was not feeling smarter or learning faster: the thing that made the earth drop out from under my feet was that for the first time in my life, everything in my head had finally shut up… My brain without self-doubt was a revelation. There was suddenly this incredible silence in my head… I hope you can sympathise with me when I tell you that the thing I wanted most acutely for the weeks following my experience was to go back and strap on those electrodes. I also started to have a lot of questions. Who was I apart the angry bitter gnomes that populate my mind and drive me to failure because I’m too scared to try? And where did the voices come from?’
Some of those voices repeat society’s prejudices, some echo our personal history, and some articulate our genetic legacy.
[Page 289] Again individual, society and evolution…

We see then that the self too is an imaginary story, just like nations, gods and money. Each of us has a sophisticated system that throws away most of our experiences, keeps only a few choice samples, mixes them up with bits from movies we saw, novels we read, speeches we heard, and from our own daydreams, and weaves out of all that jumble a seemingly coherent story about who I am, where I came from and where I am going. This story tells me what to love, whom to hate and what to do with myself. This story may even cause to sacrifice my life, if that’s what the plot requires. We all gave our genre. Some people live a tragedy, others inhabit a never-ending religious drama, some approach life as if it were an action film, and not a few act as in a comedy. But in the end, they are all just stories.
What, then, is the meaning of life? Liberalism maintains that we shouldn’t expect an external entity to provide us with some ready-made meaning. Rather, each individual voter, customer and viewer ought to use his or her free will in order to create meaning not just for his or her life, but for the entire universe.
The life sciences undermine liberalism, arguing that the free individual is just a fictional tale concocted by an assembly of biochemical algorithms. Every moment, the biochemical mechanisms of the brain create a flash of experience, which immediately disappears. The more flashes appear and fade, in quick succession. These momentary experiences do not add up to any enduring essence, The narrating self tries to impose order on this chaos by spinning a never-ending story, in which every such experience has its place, and hence every experience has some lasting meaning. But, as convincing and tempting as it may be, this story is a fiction.
[Pages 304-5]

At the beginning of the third millennium, liberalism is threatened not by the philosophical idea that ‘there are no free individuals’ but rather by concrete technologies. We are about to face a flood of extremely useful devices., tools and structures that make no allowance for the free will of individual humans. Can democracy, the free market and human rights survive this flood? [Page 306]

The great decoupling

The practical developments might make this belief [liberalism] obsolete:
1. Humans will lose their economic and military usefulness, hence the economic and political system will stop attaching much value to them.
2. The system will still find value in humans collectively, but not in unique individuals.
3. The system will still find value in some unique individuals, but these will be a new elite of upgraded superhumans rather than the mass of the population.
[page 307]

Humans are in danger of losing their value, because intelligence is decoupling from consciousness. [Page 311]

Intelligence is mandatory, but consciousness is optional. [Page 312]

The current scientific answer to this pipe dream can be summarized in three simple principles:
1. Organisms are algorithms. Every animal – including Homo Sapiens – is an assemblage of organic algorithms shaped by natural selection over millions of years of evolution.
2. Algorithmic calculations are not affected by the materials from which you build the calculator. Whether you build an abacus from wood, iron or plastic, two beads plus two beads equal four beads.
3. Hence there is not reason to think that organic algorithms can do things that non-organic algorithms will never be able to replicate or surpass.
[Page 319]

As algorithms push humans out of the job market, wealth might become concentrated in the hands of the tiny elite that owns the all-powerful algorithms creating unprecedented social inequality. [Page 323]

Is there too much story telling with Harari’s new book. Is the cashier replaced by a robot, or by the customer? What about the Google flu tool, that is mentioned page 335. Did it really work?

The Ocean of Consciousness

The new religions are unlikely to emerge from the caves of Afghanistan or from the madrasas of the Middle East. Rather, they will emerge from research laboratories. Just as socialism took over the world by promising salvation through steam and electricity, so in the coming decades new techno-religions may conquer the world by promising salvation through algorithms and genes. Despite all the talk of radical Islam and Christian fundamentalism, the most interesting place in the world from a religious perspective is not the Islamic State or the Bible Belt, but Silicon Valley. [Page 351]

The humanist revolution caused modern Western culture to lose faith and interest in superior mental states, and to sanctify the mundane experiences of the average Joe. Modern Western culture is therefore unique in lacking a special class of people who seek to experience extraordinary mental states. It believes anyone attempting to do so is a drug addict, mental patient or charlatan. Consequently, though we have a detailed map of the mental landscape of Harvard psychology students, we know far less about the mental landscape of Native American shamans, Buddhist monks or Sufi mystics. And that is just the Sapiens mind. Fifty thousand years ago, we shared this planet with our Neanderthal cousins. They didn’t launch spaceships, build pyramids or establish empire. They obviously had very different mental abilities, and lacked many of our talents. Nevertheless, they had bigger brains than us Sapiens. What exactly did they do with all those neurons? We have absolutely no idea. But they might well have many mental states that no Sapiens had ever experienced. [Page 356]

Techno-humanism faces an impossible dilemma here. It considers the human will to be the most important thing in the universe, hence it pushes humankind to develop technologies that can control and redesign our will. After all, it’s tempting to gain control over the most important thing in the world. Yet once we have such control, techno-humanism would not know what to do with it, because the sacred human will would become just another designer product. We can never deal with such technologeis as long as we believe that the human will and the human experience are the supreme source of authority and meaning.[Page 366]

The Data Religion

[Dataism] is very attractive. It gives all scientists a common language, builds bridges over academic rifts and easily exports insights across disciplinary borders. Musicologists, political scientists and cell biologists can finally understand each other. […] Dataists are sceptical about human knowledge and wisdom, and prefer to put their trust in Big Data and computer algorithms. [Page 368]

Capitalism won the Cold War because distributed data processing works better than centralised data processing, at least in periods of accelerating technological changes. [Page 372] The Industrial Revolution unfolded slowly enough for politicians and voters to remain one step ahead. […] Technological revolutions now outpace political processes, causing MPs and voters alike to lose control. [See Stiegler again] […] The Internet is a free and lawless zone that erodes state sovereignty, ignores borders, abolishes privacy and poses perhaps the most formidable global security risk. [Here see Beaude] […] The NSA may be spying on your every word, but to judge by the repeated failures of American foreign policy, nobody in Washington knows what to do with all the data. [Page 374]

Dataism is also missionary. Its second commandment is to connect everything to the system, including heretics who don’t want to be connected. And ‘every-thing’ means more than just humans. It means every thing. My body, of course, but also the cars on the street, the refrigerators in the kitchen, the chickens in their coop and the trees in the jungle – all should be connected to the Internet-of-All-Things. […] Conversely, the greatest sin is to block the data flow. What is death, if not a situation when information doesn’t flow? […] Dataism is the first movement since 1789 that created a really novel value: freedom of information [Page 382] which has Harari correctly explains in neither freedom nor freedom of expression.

Humanism thought that experiences occur inside us. Dataists believe that experiences are valueless if they are not shared. Twenty years ago Japanese tourists were a universal laughing stock because they always carried cameras and took pictures of everything in sight. Now everyone is doing it. […] Writing a private diary sounds to many utterly pointless. The new moot says: ‘If you experience something – record it. If you record something – upload it. if you upload something – share it.’ [Page 386] Should I blog?

Dataism is neither liberal nor humanist. It isn’t anti-humanist. [Page 387] By equating the human experience with data patterns, Dataism undermines our main source of authority and meaning, and heralds a tremendous religious revolution. […] ‘Yes God is a product of the human imagination, but human imagination in turn is the product of biochemical algorithms.’ In the eighteenth century, humanism sidelined God by shifting from a deo-centric to a homo-centric world view. In the twenty-first century, Dataism may sideline humans by shifting from a homo-centric to a data-centric view. The Dataist revolution will probably take a few decades, if not a century or two. But then the humanist revolution too did not happen overnight. [Page 389]

A critical examination of the Dataist dogma is likely to be not only the greatest scientific challenge of the twenty-first century, but also the most urgent political and economic project. Scholars in the life sciences and social sciences should ask themselves whether we miss anything when we understand life as data processing and decision-making. Is there perhaps something in the universe that cannot be reduced to data? Suppose non-conscious algorithms could eventually outperform conscious intelligence in all known data-processing tasks – what, if anything, would be lost by replacing conscious intelligence with superior non-conscious algorithms? Of course, even if Dataism is wrong and organisms aren’t just algorithms, it won’t necessarily prevent Dataism from taking over the world. Many previous religions gained enormous popularity and power despite their factual mistakes. If Christianity and communism could do it, why not Dataism? [Page 394]

Humans relinquish authority to the free market, to crowd wisdom and to external algorithms partly because they cannot deal with the deluge of data. [Page 396]

As a conclusion, Harari ends his book with the 3 following questions:
1. Are organisms really just algorithms, and is life really just data processing?
2. What is more valuable – intelligence or consciousness?
3. What will happen to society, politics and daily life when non-conscious but highly intelligent algorithms know us better than we know ourselves?

If reading is not for you, you can still listen to Harari in a recent Ted Talk: Nationalism vs. globalism: the new political divide.

Homo Deus : a Brief History of Tomorrow by Yuval Noah Harari (Part 1 – the Past)

I wrote here how much I enjoyed reading Sapiens. Harari’s new book, Homo Deus: A Brief History of Tomorrow, is just as good.

In Death Is Optional, the exchange between Daniel Kahneman and the author, which summarizes many of Harari’s most original ideas, here is one of the most interesting ones – in relationship to start-ups: “in terms of history, the events in Middle East, of ISIS and all of that, is just a speed bump on history’s highway. The Middle East is not very important. Silicon Valley is much more important. It’s the world of the 21st century … I’m not speaking only about technology.” One may not like it, but it is interesting.

As usual, a few extracts:
“Most studies cite tool production and intelligence as particulararly important for the ascent of humankind. […] Humans nowadays completely dominate the planet not because the individual human is far smarter and more nimble-fingered than the individual chimp or wolf, but because Homo Sapiens is the only species on earth capable of co-operating flexibly in large numbers.” [Pages 130-1]

“Animals such as wolves and chimpanzees live in a dual reality. On the one hand, they are familiar with objective entities outside them, such as trees, rocks and rivers. On the other hand, they are aware of subjective experiences within them, such as fear, joy and desire. Sapiens, in contrast, live in triple-layered reality. In addition to trees, rivers, fears and desires, the Sapiens world also contains stories about money, gods, nations and corporations. As history unfolded, the impact of gods, nations and corporations grew at the expense of rivers, fears and desires. There are still many rivers in the world, and people are still motivated by their fears and wishes, but Jesus Christ, the French Republic and Apple Inc. have dammed and harnessed the rivers, and have learned to shape our deepest anxieties and yearnings.” [Page 156]

If we invest money in research, then scientific breakthroughs will accelerate technological progress. New technologies will fuel economic growth, and a growing economy could dedicate even more money to research. With each passing decade we will enjoy more food, faster vehicles and better medicines. One day our knowledge will be so vast and our technology so advanced that we could distill the elixir of eternal youth, the elixir of true happiness, and any other drug we might possibly desire – and no god will stop us. […] Modern life consists of a constant pursuit of power within a universe devoid of meaning. [Page 201]

Interesting comparison between the Scientific revolution, where Knowledge = Empirical Data X Mathematics, and the Humanist revolution led by Knowledge = Experiences X Sensitivity. In medieval Europe, Knowledge = Scriptures X Logic. [Pages 235-7]


Humanist revolution according to Harari [Pages 232-3]

Harari is sometimes too long in the development of his ideas, but it is worth following him. On pages 247-76, he explains how humanism is not a coherent view of the world. Three schisms have occurred: liberalism (where liberty is the most important value), socialism (where equality is first) and evolutionary humanism (where conflict is the raw material pushing evolution forward).

“By 1970 the world contained 130 independent countries, but only thirty of these were liberal. […] And then everything changed. The supermarket proved to be far stronger than the gulag. […] As of 2016, there is no serious alternative to the liberal package. […] China is the most promising ground for the new techno-religions emerging from Silicon Valley. […] God is dead. […] Religions that lose touch with the technological realities of the day lose their ability even to understand the questions being asked.” [Pages 264-8]

“Numbers alone don’t count for much in history. History is often shaped by small groups of forward-looking innovators. […] In 1881, Muhammad Ahmad bin Abdallah, […] meanwhile in 1875, Dayananda Saraswati in India, […] Pope Pius IX, in Europe […] or thirty years before, Hong Xiuquan […] Hundreds of millions clung to their religious dogmas. […] Hong led the deadliest war of the nineteenth century, the Taiping Rebellion. From 1850 to 1864, at least 20 million people lost their lives.” [Pages 270-1]

“Most societies failed to understand what was happening, and they therefore missed the train of progress”. [Page 273] Ask yourself what was the most influential discovery, invention or creation of the twentieth century? That’s a difficult question […] antibiotics, […] computers, […] feminism. […] What did religions bring? This is a difficult question too because there is so little to choose from. [Page 275]

And as a conclusion of chapter 7: “Since humanism has long sanctified the life, the emotions and the desires of human beings, it’s hardly surprising that a humanist civilisation will want to maximize human lifespans, human happiness and human power.” [Page 277]

Sapiens – A Brief History of Humankind by Yuval Noah Harari

Sapiens: A Brief History of Humankind is an extraordinary book. Very similar to Guns, Germs, and Steel: The Fates of Human Societies by Jared Diamond. It may not be directly related to innovation and start-ups, but below are some extracts I found striking. This is a must-read book…


By It is believed that the cover art can or could be obtained from the publisher.
Fair use, https://en.wikipedia.org/w/index.php?curid=48907980

“Consider the following quandary: two biologists from the same department, possessing the same professional skills, have both applied for a million-dollar grant to finance their current research projects. Professor Slughorn wants to study a disease that infects the udders of cows, causing a 10 percent decrease in their milk production. Professor Sprout wants to study whether cows suffer mentally when they are separated from their calves. Assuming that the amount of money is limited, and that it is impossible to finance both research projects, which should be funded?

There is no scientific answer to this question. There are only political, economic and religious answers. In today’s world, it is obvious that Slughorn has a better chance of getting the money. Not because udder diseases are scientifically more interesting than bovine mentality, but because the dairy industry which stands to benefit from the research, has more political and economic clout than the animal-rights lobby.

Perhaps in a strict Hindu society, where cows are sacred, or in a society committed to animal rights, Professor Sprout would have a better shot. But as long as she lives in a society that values the commercial potential of milk and the health of its human citizens over the feelings of cows, she’d best write up her research proposal so as to appeal to those assumptions. For example, she might write that ‘Depression leads to a decrease in milk production. IF we understand the mental world of dairy cows, we could develop psychiatric medication that will improve their mood, thus raising milk production by up to 10 percent. I estimate that there is a global market of $250 million for bovine psychiatric medication.’ […] In short, scientific research can flourish only in alliance with some religion or ideology.” [Pages 304-305]

So how science developed in apparently useless fields?

“The key factor was that the plant-seeking botanist and the colony-seeking naval officer shared a similar mindset. Both scientist and conqueror began by admitting ignorance – they both said ‘I don’t know what’s out there.’ They both felt compelled to go out and make new discoveries. And they both hoped the new knowledge thus acquired would make them master the world.

European imperialism was entirely unlike all other imperial projects in history. Previous seekers of empire tended to assume that they already understood the world. Conquest merely utilized and spread their views of the world. […] European imperialists set out distant shores in the hope of obtaining new knowledge along new territories.” [Page 317]

Ignoramus

[Page 279] “Modern science differs (mention Steve Weinberg here?) from all previous traditions of knowledge in three critical ways:
a. The willingness to admit ignorance. Modern science is based on the Latin injunction Ignoramus – ‘we don’t know’. It assumes that we don’t know everything. Even more critically, it assumes that the things we think we know could be proven wrong as we gain more knowledge. No concept, idea or theory is sacred and beyond challenge.
b. The centrality of observation and mathematics. Having admitted ignorance, modern science aims to obtain new knowledge. It does so by gathering observations and then using mathematical tools to connect these observations into comprehensive theories.
c. The acquisition of new powers. Modern science is not content with creating theories. It uses these theories in order to acquire new powers, and in particular to develop new technologies.”

[Pages 320-2] “The first modern man was Amerigo Vespucci.” [And not Columbus who contrarily to this lesser-known Italian sailor, was always convinced he had arrived in India and not on a new continent.] […] “Columbus stuck to this error for the rest of his life.” […] “There is poetic justice in the fact that a quarter of the world, and two of its seven continents, are named after a little-known Italian whose sole claim is that he had the courage to say, ‘We don’t know’. The discovery of America was the fundamental event of the Scientific Revolution.”

[This reminds me the day of my PhD oral presentation. A colleague of mine was surprised I dare answering ‘I don’t know’ to a question of a member of the jury. My colleague had also missed the point, I think…]

Chapters 14-16 describe how science, politics and economics are interconnected. They may be less surprising but are as convincing. Here is a disturbing extract: “Conversely, the history of capitalism is unintelligible without taking science into account. […] Over the last few years, banks and governments have been frenziedly printing money. Everybody is terrified that the current economic crisis may stop the growth of the economy. So they are creating trillions of dollars, euros and yen out of thin air, pumping cheap credit into the system, and hoping that the scientists, technicians and engineers will manage to come up with something really big, before the bubble bursts. Everything depends on the people in the labs. New discoveries in fields such as biotechnology and nanotechnology could create entire new industries, whose profits could back the trillions of make-believe money that the banks and governments have created since 2008. If the labs do not fulfill these expectations before the bubble bursts, we are heading towards very rough times.” [Page 352]

The Halo Effect by Phil Rosenzweig

When I read that Nassim Nicholas Taleb said this is “one of the most important management books of all time”, I was intrigued. Usually I do not like general business books. But here, not only is it a great book, but fun to read!

What is the halo effect? A tendency to make inferences about specific traits on the basis of a general impression [Page 50].

The author has a major question: Is management a science? Pages 12-17 cover that sensitive topic: “In other fields, from medicine to chemistry to aeronautical engineering, knowledge seems to march ahead relentlessly. What do these fields have in common? In a word, these fields move forward thanks to a form of inquiry we call science. Richard Feynman once defined science as “a method for trying to answer questions which can be put into the form: If I do this, what will happen?” Science isn’t about beauty or truth or justice or wisdom or ethics. It’s eminently practical. It asks, If I do something over here, what will happen over there? If I apply this much force, or that much heat, or if I mix these chemicals, what will happen? By this definition, What leads to sustained profitable growth? is a scientific question. It asks, If a company does this or that, what will happen to its revenues or profits or share price?” [Page 12]

“Our inability to capture the full complexity of the business world through scientific experiments has provided fodder for some critics of business schools. Management gurus Warren Bennis and James O’Toole, in 2005 Harvard Business Review article, criticized business schools for their reliance on the scientific method. They wrote: “This scientific model is predicated on the faulty assumption that business is an academic discipline like chemistry or geology when, in fact, business is a profession and business schools are professional schools – or should be”. The notion seems to be that since business will never be understood with the precision of the natural sciences, it’s best understood as a sort of humanity, a realm where the logic of scientific inquiry doesn’t apply. Well, yes and no.” [Page 14]

Rozenzweig concludes this 1st chapter with a beautiful story (page 16), again from Richard Feynman: In the South Seas, there is a cult of people. During the war they saw airplanes land with lots of materials, and they want the same thing to happen now. So they’ve arranged to make things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas – he’s the controller. And they wait for the airplanes to land. They’re doing everything right. The form is perfect. But it doesn’t work. No airplanes land. So I call these things Cargo Cult Science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land. He called that last section Science, Pseudoscience and Coconut Headsets.

Storytelling and science

His criticism in chapter 6 of famous bestsellers In Search of Excellence by Peters and Waterman [page 83] and then of Built to Last by Collins and Porras [page 94] are particularly striking. Stories and science are different and the author explains many delusions created by approximate science:
#1: The Hallo Effect
#2: The delusion of Correlation and Causality
#3: The Delusion of Single Explanations
#4: The Delusion of Connecting the Winning Dots
#5: The Delusion of Rigorous Research
#6: The Delusion of Lasting Success
#7: The Delusion of Absolute Performance
#8: The Delusion of the Wrong End of the Stick
#9: The Delusion of Organizational Physics.
(if you are too lazy to read this great book, have at least a look at https://en.wikipedia.org/wiki/The_Halo_Effect_(business_book))

Rosenzweig tries to explain the complexity of measuring company performance. What are the key elements that managers should take into account for excellence? And Rosenzweig shows that storytelling has been as important as research in that quest. He further claims that authors of bestsellers such as In Search of Excellence, Built to Last or From Good to Great who claim their results were based on research, indeed were more excellent story tellers than rigorous researchers.
“It’s not that the important elements are not right. In Search of Excellence gives eight best practice: a bias for action; staying close to the customer; autonomy and entrepreneurship; productivity through people; hands-on, value-driven; stick to the knitting; simple form, lean staff; and simultaneous loose-tight properties.” [Page 85]

“Whereas in Built to Last, Collins and Porras give their 5 timeless principles: having a strong core ideology; building a strong corporate culture; setting audacious goals; developing and promoting people; creating a spirit of experimentation and risk-taking; driving for excellence”. [Page 96]

“Several researchers have studied the rate at which company performance changes over time. Pankaj Ghemawat at Harvard Business School examined the return on investments (ROI) of a sample of 692 American companies over a ten-year period from 1971 to 1980. He put together one group of top performers, with an average ROI of 39 percent, and one group of low performers, with an average ROI of just 3 percent. Then he tracked the two groups over time. What would happen to their ROIS? Would the gap persist, would it grow, or would it diminish? After nine years, both groups converged together toward the middle, the top performers falling from 39 percent to 21 percent and the low performers rising from 3 percent to 18 percent.” [Page 104]

“These studies, and others like them, all point to the basic nature of competition in a market economy. Competitive advantage is hard to sustain. Sure, if you want to, you can look back over seventy years of business history and pick out a handful of companies that have endured, but that’s selection based on outcomes.” [Page 105]

“Interviews with managers, asking them to look back over the ten-year period and recount their experiences (…) these sort of retrospective interviews are likely to be full of halos, as people take cues from performance and make attributions accordingly.” [Page 108]

Again Rosenzwieg has nothing against interviews, he just warns the reader that they have to be meticulously prepared to avoid any bias and answers based on outcomes.
“Another famous study, the Evergreen project, identified eight practices: strategy; execution; culture; structure; talent; leadership; innovation; and mergers and partnerships (Page 110). Yet once we see that performance is relative, it becomes obvious that companies can never achieve success simply by following a given set of steps, no matter how well intended; their success will always be affected by what rivals do” [Page 116].

“Perhaps the most interesting factor in Big Winners and Big Losers is mentioned as a brief aside but not examined closely: Marcus points out that large companies show up more frequently among the Big Losers, while almost all the Big Winners are small or midsize companies. This observation ought to spark one’s curiosity, because large companies got that way in the first place by doing things well – they didn’t grow by being Losers – yet something seemed to prevent them from maintaining that high performance. Extremer performance, for better and for worse, is more common among small companies”. [Page 132]

But a 10 percent difference in performance doesn’t say anything about what will happen at my company – the impact could be more or less or nothing at all. There’s no guarantee, no promise that inspires me to take action. Books, which provide simple and definitive advice and studies of organizational performance, stand in two very different worlds. The first world speaks to practicing managers and rewards speculations about how to improve performance. The second world demands and rewards adherence to rigorous standards of scholarship. Here science is paramount, storytelling less so. The result is a schizophrenic tour de force in which the demands of the roles of the consultant and teacher are disassociated form the demands of the researcher”. [Page 135]

“According to the Economist, Tom Peters can charge corporate clients up to $85,000 for a single appearance, and Jim Collins commands a fee of $150,000. There’s a lucrative market for spinning stories of corporate success. Will anyone hire (a researcher) at $85,000 or $150,000 a pop to talk about a statistically significant 4 percent difference in performance? Somehow it seems doubtful [page 136].

The test of a good story is not whether it is entirely, fully, scientifically accurate – by definition it won’t be. Rather, the test of a good story is whether it leads us toward valuable insights, if it is inspires towards helpful action, at least most of the time. [Page 137]

Strategy and execution

“Here’s how I like to think about company performance. According to Michael Porter of Harvard Business School, company performance is driven by two things: Strategy and execution.” [Page 144]

But both are full of uncertainties: “Strategy always involves risk because we don’t know for sure how our choices will turn out. […] A first reason has to do with customers. […] Sam Philips, the legendary Sun records producer, once cautioned, “Anytime we think you know what the public’s going to want that’s when you know you’re looking at a damn fool when you’re looking in the mirror”. Market reaction is always uncertain, and smart strategists know it. [Page 146]

“A second source of risk has to do with competitors. […] An entire branch of economics, game theory, has grown up around a simple form of competitive intelligence. […] A third source of risk comes from technological change. […] In his groundbreaking research Clayton Christensens at Harvard Business School showed that in a wide range of industries, from earth-moving equipment to disk drives to steel, successful companies were repeatedly dislodged by new technologies. [Page 147]

Jim Collins expressed surprised that [his] eleven Great companies came from ordinary, unspectacular industries. […] I suspect a different interpretation. These industries can be described as dowdy, but a better word might be stable. They were less subject to radical changes in technology, were less susceptible to shifts in customer demand, and may have had less intense competition. [Page 147]

As James March of Stanford and Zur Shapira of New York University explained, “Posthoc reconstruction permits history to be told in such a way that “chance”, either in the sense of genuinely probabilistic phenomena or in the senses of unexplained variation, is minimized as an explanation.” But chance does play a role, and the difference between a brilliant visionary and a foolish gambler is usually inferred after the fact, an attribution based on outcomes. [Page 150]

There are fewer unknowns […], yet execution still involves a number of uncertainties. [Page 151] And that brings us to the best answer I can provide to the question, What leads to high performance? If we set the usual suspects of leadership and culture and focus and so on – which are perhaps causes of performance – we’re left with two broad categories: strategic choice and execution. The former is inherently risky since it’s based on our best guesses about customers, about competitors, and technology, as well as about our internal capabilities. The latter is uncertain because best practices that work well on one company may not have the same effect in another. […] Wise managers know that business is about finding ways to improve the odds of success – but never imagine that success is certain. If a company makes strategic choices which are shrewd, works hard to operate effectively, and is favored by Lady Luck, it may put some distance between itself and its rivals, at least for a time. But even those profits will tend to erode over time. [Page 156]

The answer to the question what really works? is simple: Nothing really works. At least not all the time. […] So what can be done? A first step is to set aside the delusions that color so much of our thinking about business performance. To accept that few companies achieve lasting success. To admit that the margin between success and failure is often very narrow, and never quite as distinct or as enduring as it appears at a distance. And finally, to acknowledge that luck often plays a role in company success. [Page 158]

Rosenzweig finishes his book with examples of bold decisions from leaders at Goldman Sachs, Intel, BP, Logitech. Entrepreneurship inherently involves risks, but not doing anything would be much riskier.

HBO’s Silicon Valley is back – Season 3

What a pleasure to meet again the heroes of HBO’s Silicon Valley. Yet the first two episodes are quite caricatural. First all the hot technologies from the region are mentioned: robotics, virtual reality and artificial intelligence.

SV3-E1-tech

Failure is an important component, and does not have exactly the same consequences for everyone.

SV3-E1-bus

Of course, the episodes describe the extreme social situations: the problems of the wealthy (money) and the problems of the poor (money). Finally we also see the equally caricatureal opposition between engineers and sales people.

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But all in all, the pleasure is there, and that’s what matters!… Even if the last sentence of Episode 2 is “Every day things are getting worse…”

Alexander Grothendieck, 1928 – 2014

What link is there between Andrew Grove (the previous article) and Alexandre Grothendieck? Beyond their common initials, a similar youth – both were born in the communist Eastern Europe they left for a career in the West) and the fact they have become icons of their world, they just represent my two professional passions: startups and mathematics. The comparison stops there, no doubt, but I’ll get back to it.

Two books (both in French) were published in January 2016 about the life of this genius: Alexander Grothendieck – in the footsteps of the last mathematical genius by Philippe Douroux and Algebra – elements of the life of Alexander Grothendieck by Yan Pradeau. If you like mathematics (I should say the mathematical science) or even if you do not like it, read these biographies.

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I knew as many others about the atypical route of this stateless citizen who became a great figure of mathematics – he received the Fields Medal in 1966 – and then decided to live in seclusion from the world for over 25 years in a small village close to the Pyrenees until his death in 2014. I also have to confess that I knew nothing of his work. Reading these two books shows me that I was not the only one, as Grothendieck had explored lands that few mathematicians could follow. I also found the following stories:
– At age 11, he calculated the circumference of the circle and deduced that π is equal to 3.
– Later, he reconstructed the theory of Lebesgue measure. He was not 20 years old.
– A prime number has his name, 57, who nevertheless is 3 x 19.
Yes, it is worth discovering the life of this illustrious mathematician.

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The reason for the connection I made between Grove and Grothendieck is actually quite tenuous. It comes from this quote: “There are only two true visionaries in the history of Silicon Valley. Jobs and Noyce. Their vision was to build great companies … Steve was twenty, un-degreed, some people said unwashed, and he looked like Ho Chi Minh. But he was a bright person then, and is a brighter man now … Phenomenal achievement done by somebody in his very early twenties … Bob was one of those people who could maintain perspective because he was inordinately bright. Steve could not. He was very, very passionate, highly competitive.” Grove was close Noyce in more ways than one, and extremely rational and according to Grove, Noyce was too lax! Grothendieck would be closer to Jobs. A hippie, a passionate individual and also somehow self-taught. Success can come from so diverse personalities.

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Last point in common or perhaps a difference. The migration. Grove became a pure American. Grothendieck was an eternal stateless, despite his French passport. But both show its importance. Silicon Valley is full of migrants. I often talk about this here. We know less that what is called “the French school of mathematics” also has its migrants. If you go to the French wikipedia page of the Fields Medal, you can read:

Ten “Fields medalists’ are former students of the Ecole Normale Superieure: Laurent Schwartz (1950), Jean-Pierre Serre (1954), René Thom (1958), Alain Connes (1982), Pierre-Louis Lions (1994) Jean-Christophe Yoccoz (1994), Laurent Lafforgue (2002), Wendelin Werner (2006), Cédric Villani (2010) and Ngo Bao Chau (2010). This would make “Ulm” the second institution after the ‘Princeton’ winners, if the ranking was the university of origin of the medal and not the place of production. Regarding the country of origin, we arrive at a total of fifteen Fields medalists from French laboratories, which could put France ahead as the formative nations of these eminent mathematicians.

But in addition to Grothendieck, the stateless, Pierre Deligne, Belgian, had his thesis with him, Wendelin Werner was naturalized at the age of 9 years, Ngo Bao Châu the year he received the Fields Medal, after doing all his graduate studies in France, and Artur Avila is Brazilian and French … One could speak of the International of Mathematics, which might not have displeased Alexander Grothendieck.

The business of biotech – Part 3: Genentech

I should have begun with Genentech this series of posts about Biotech (see part 1: Amgen or part 2 about more general stats). Genentech was not the first biotech start-up, it was Cetus, but Genentech was really the one which launched and defined this industry. All this really began with the Cohen Boyer collaboration. Genentech would have loved to get an exclusive license on their patent about recombinant DNA, but the universities could not agree for business as well as political reasons. Genentech was an unknown little start-up and genetic engineering a very sensitive topic at the time. Swanson had tried even to offer shares to Stanford and UCSF (the equivalent of 5% of the existing shares at the time).

Please note I already wrote about Genentech here in Bob Swanson & Herbert Boyer: Genentech. But this new post follows my reading of Genentech – The Beginnings of Biotech by Sally Smith Hughes.

Genentech-the_beginnings_of_biotech

Chronology
– November 1972 – Meeting of Cohen and Boyer at aconference in Hawaii
– March 1973: First joint lab. experiments
– November 1973: Scientific publication
– November 4, 1974: Patent filing
– May 1975: Cohen becomes an advisor for Cetus
– January 1976: Meeting between Swanson and Boyer
– April 7, 1976: Genentech foundation
– August 1878: first insulin produced
– Q2 1979: 4 research projects with Hoffmann – La Roche (interferon), Monsanto (animal growth hormone), Institut Mérieux (hepatitis B vaccine) and an internal one (thymosin).
– July 1979: first human growth hormone
– October 1982: FDA approval of Genentech insulin produced
– October 1985: FDA approval of human growth hormone

I have to admit I had never heard of the Bancroft Library’s website (http://bancroft.berkeley.edu/ROHO/projects/biosci) for the Program in Bioscience and Biotechnology Studies, “which centerpiece is a continually expanding oral history collection on bioscience and biotechnology [with ] in-depth, fully searchable interviews with basic biological scientists from numerous disciplines; with scientists, executives, attorneys, and others from the biotechnology industry.”

The invention of new research and business practices over a very short period

Swanson was captivated: “This idea [of genetic engineering] is absolutely fantastic; it is revolutionary; it will change the world; it’s the most important thing I have ever heard.” [… But Swanson was nearly alone.] “Cetus was not alone in its hesitation regarding the industrial application of recombinant DNA technology. Pharmaceutical and chemical corporations, conservative institutions at heart, also had reservations.” [Page 32] “Whatever practical applications I could see for recombinant DNA… were five to ten years away, and, therefore, there was no rush to get started, from a scientific point of view.” [Page 32] “I always maintain” Boyer reminisced, “that the best attribute we had was our naïveté… I think if we had known about all the problems we were going to encounter, we would have thought twice about starting… Naïveté was the extra added ingredient in biotechnology.” [Page 36]

The book shows the importance of scientific collaborations. Not just Boyer at UCSF but for example with a hospital in Los Angeles. A license was signed with City of Hope Hospital with a 2% royalty on sales on products based on the licensed technology. “[…] negotiated an agreement between Genentech and City of Hope that gave Genentech exclusive ownership of any and all patents based on the work and paid the medical center a 2 percent royalty on sales of products arising from the research.” [Page 57]

Even if in 2000, City of Hope had received $285M in royalties, it was not happy with the outcome. After many trials, the California Supreme Court in 2008 awarded another $300M to City of Hope. So the book shows that these collaborations gave also much legal litigation. [Page 58]

In a few years, Genentech could synthesize somatostatin, insulin, human growth hormone and interferon. It is fascinating to read how intense, uncertain, stressful these years were for Swanson, Perkins, Boyer and the small group of Genentech employees and academic partners (Goeddel, Kleid, Heyneker, Seeburg, Riggs, Itakura, Crea), in part because of the emerging competition from other start-ups (Biogen, Chiron) and academic labs (Harvard, UCSF).

“On August 25, 1978 – four days after Goeddel’s insulin chain-joining feat – the two parties signed a multimillion-dollar, twenty-year research and development agreement. For an upfront licensing fee of $500,000, Lilly got what it wanted: exclusive worldwide rights to manufacture and market human insulin using Genentech’s technology. Genentech was to receive 6 percent royalties and City of Hope 2 percent royalties on product sales.” [Page 94] They managed to negotiate a contractual condition limiting Lilly’s use of Genentech’s engineered bacteria to the manufacture of recombinant insulin alone. The technology would remain Genentech’s property, or so they expected. As it turned out, the contract, and that clause in particular, became a basis for a prolonged litigation. In 1990, the courts awarded Genentech over $150 million in a decision determining that Lilly had violated the 1978 contract by using a component of Genentech’s insulin technology in making its own human growth hormone product. [Page 95] Perkins believed that the 8 percent royalty rate was unusually high, at a time when royalties on pharmaceutical products were along the lines of 3 or 4 percent. “It was kind of exorbitant royalty, but we agreed anyway – Lilly was anxious to be first (with human insulin)” […]The big company – small company template that Genentech and Lilly promulgated in molecular biology would become a prominent organizational form in a coming biotechnology industry. [Page 97]

The invention of a new culture

Young as Swanson was, he kept everyone focused on product-oriented research. He continued to have scant tolerance for spending time, effort, and money on research not tied directly to producing marketable products. “We were interested in making something usable that you could turn into a drug, inject in humans, take to clinical trials.” A few year before his premature death, Swanson remarked, “I think one of the things I did best in those days was to keep us very focused on making a product.“ His goal-directed management style differed markedly from that of Genentech’s close competitors. [Page 129]

But at the same time Boyer would guarantee a high quality research level by encouraging employees to write the best possible scientific articles. This guaranteed the reputation of Genentech in the academic world.

A culture was taking shape at Genentech that had no exact counterpart in industry or academia. The high-tech firms in Silicon Valley and along Route 128 in Massachusetts shared its emphasis on innovation, fast-moving research, and intellectual property creation and protection. But the electronics and computer industries, and every other industrial sector for that matter, lacked the close, significant, and sustained ties with university research that Genentech drew upon from the start and that continue to define the biotechnology industry of today. Virtually every element in the company’s research endeavor – from its scientists to its intellectual and technological foundations – had originated in decade upon decade of accumulated basic-science knowledge generated in academic labs. […] At Boyer’s insistence, the scientists were encouraged to publish and engage in the wide community of science. [Page 131]

But academic values had to accommodate corporate realities: at Swanson’s insistence, research was to lead to strong patents, marketable products, and profit. Genentech’s culture was in short a hybrid of academic values brought in line with commercial objectives and practices. [Page 132]

Swanson was the supportive but insistent slave driver, urging on employees beyond their perceived limits: “Bob wanted everything. He would say, If you don’t have more things on your plate than you can accomplish, then you’re not trying hard enough. He wanted you to have a large enough list that you couldn’t possibly get everything done, and yet he wanted you to try.” […] Fledging start-ups pitted against pharmaceutical giants could compete mainly by being more innovative, aggressive, and fleet of foot. Early Genentech had those attributes in spades. Swanson expected – demanded – a lot of everyone. His attitude was as Roberto Crea recalled: “Go get it; be there first; we have to beat everybody else… We were small, undercapitalized, and relatively unknown to the world. We had to perform better than anybody else to gain legitimacy in the new industry. Once we did, we wanted to maintain leadership.” […] As Perkins said “Bob would never be accused of lacking a sense of urgency. “ […] Even Ullrich, despite European discomfort with raucous American behavior, admitted to being seduced by Genentech’s unswervingly committed, can-do culture. [Page 133]

New exit strategies

Initially Kleiner thought Genentech would be acquired by a major pharma company. It was just a question of when. He approached Johnson and Johnson and “floated the idea of a purchase price of $80 million. The offer fell flat. Fred Middleton [Genentech’s VP of finance], present at the negotiations, speculated that J&J didn’t have “a clue about what to do with this [recombinant DNA] technology – certainly didn’t know what it was worth. They couldn’t fit it in a Band-Aid mold”. J&J executives were unsure how to value Genentech, there being no standard for comparison or history of earnings.” [Page 140]

Perkins and Swanson made one more attempt to sell Genentech. Late in 1979, Perkins, Swanson, Kiley and Middleton boarded a plane for Indianapolis to meet with Eli Lilly’s CEO and others in top management. Perkins suggested a selling price of $100 million. Middleton’s view is that Lilly was hamstrung by a conservative “not invented here” mentality, an opinion supported by the drug firm’s reputation for relying primarily on internal research and only reluctantly on outside contracts. The company’s technology was too novel, too experimental, too unconventional for a conservative pharmaceutical industry to adopt whole-heartedly. [Page 141]

When Genentech successfully developed interferon, a new opportunity happened. Interferon had been discovered in 1957 and thought to prevent virus infection. In November 1978, Swanson signed a confidential letter of intent with Hoffmann – La Roche and a formal agreement in January 1980. They were also lucky: “Heyneker and a colleague attended a scientific meeting in which the speaker – to everyone’s astonishment given the field’s intense competitiveness – projected a slide of a partial sequence of fibroblast interferon. They telephoned the information to Goeddel, who instantly relay the sequence order to Crea. […] Crea started to construct the required probes. […] Goeddel constructed a “library” of thousands upon thousands of bacterial cells, seeking ones with interferon gene. Using the partial sequence Pestka retrieved, Goeddel cloned full-length DNA sequences for both fibroblast and leukocyte interferon. […] In June 1980, after filing patent protection, Genentech announced the production in collaboration with Roche.” [Page 145] Genentech could consider going public and after another fight between Perkins and Swanson, Genentech decided to do so. Perkins had seen that the year 1980 was perfect for financing biotech companies through a public offering but Swanson saw the challenges this would mean for a young company with nearly no revenue or product.

New role models

The 1980-81 period would see the creation of a fleet of entrepreneurial biology-based companies – Amgen, Chiron, Calgene, Molecular Genetics, Integrated Genetics, and firms of a lesser note – all inspired by Genentech’s example of a new organizational model for biological and pharmaceutical research. Before the IPO window closed in 1983, eleven biotech companies in addition to Genentech and Cetus, had gone public*. […] But not only institutions were transformed. Genentech’s IPO transformed Herb Boyer, the small-town guy of blue-collar origins, into molecular biology’s first industrial multimillionaire. For admiring scientists laboring at meager academic salaries in relative obscurity, he became a conspicuous inspiration for their own research might be reoriented and their reputation enhanced. If unassuming Herb – just a guy from Pittsburgh, as a colleague observed – could found a successful company with all the rewards and renown that entailed, why couldn’t they? [Page 161]

*: According to one source, the companies staging IPO were Genetic Systems, Ribi Immunochem, Genome Therapeutics, Centocor, Bio-Technology General, California Biotechnology, Immunex, Amgen, Biogen, Chiron, and Immunomedics. (Robbins-Roth, From Alchemy To Ipo: The Business Of Biotechnology)

Following these three posts, I might write a fourth one about academic licenses in the biotechnology if and when I find some time…

Elon Musk and the Secret Sauce of Entrepreneurship (according to Tim Urban)

A student of mine (thanks 🙂 ) just sent me a link to amazingly great blog articles about Elon Musk. I had never of heard of the author, Tim Urban, and his blog Wait But Why but I will certainly follow his work from now on.

Tim Urban has written four articles about “the world’s most remarkable living entrepreneur.”
Part 1: Elon Musk: The World’s Raddest Man.
Part 2: How Tesla Will Change the World.
Part 3: How (and Why) SpaceX Will Colonize Mars.
Part 4: The Chef and the Cook: Musk’s Secret Sauce.
These 4 posts represent hundreds of pages if you print them. No kidding. I’ve read part 4 and it was a real (positive) shock. Tim Urban explains Musk’s entrepreneurial strengths. I just give some extracts but if must read it all (if you find the time).

“I think generally people’s thinking process is too bound by convention or analogy to prior experiences. It’s rare that people try to think of something on a first principles basis. They’ll say, “We’ll do that because it’s always been done that way.” Or they’ll not do it because “Well, nobody’s ever done that, so it must not be good.” But that’s just a ridiculous way to think. You have to build up the reasoning from the ground up —“from the first principles” is the phrase that’s used in physics. You look at the fundamentals and construct your reasoning from that, and then you see if you have a conclusion that works or doesn’t work, and it may or may not be different from what people have done in the past.” […] Musk is an impressive chef for sure, but what makes him such an extreme standout isn’t that he’s impressive — it’s that most of us aren’t chefs at all. […] “When I was a little kid, I was really scared of the dark. But then I came to understand, dark just means the absence of photons in the visible wavelength—400 to 700 nanometers. Then I thought, well it’s really silly to be afraid of a lack of photons. Then I wasn’t afraid of the dark anymore after that.” That’s just a kid chef assessing the actual facts of a situation and deciding that his fear was misplaced. As an adult, Musk said this: “Sometimes people fear starting a company too much. Really, what’s the worst that could go wrong? You’re not gonna starve to death, you’re not gonna die of exposure—what’s the worst that could go wrong?” Same quote, right? […] That’s Elon Musk’s secret sauce. Which is why the real story here isn’t Musk. It’s us. […] People believe thinking outside the box takes intelligence and creativity, but it’s mostly about independence. When you simply ignore the box and build your reasoning from scratch, whether you’re brilliant or not, you end up with a unique conclusion—one that may or may not fall within the box.

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Then Tim Urban quotes Steve Jobs from his famous speech at Stanford in 2005 (I think): “When you grow up, you tend to get told the world is the way it is and your life is just to live your life inside the world. Try not to bash into the walls too much. Try to have a nice family life, have fun, save a little money. That’s a very limited life. Life can be much broader once you discover one simple fact. And that is: Everything around you that you call life was made up by people that were no smarter than you. And you can change it, you can influence it, you can build your own things that other people can use. Once you learn that, you’ll never be the same again.”

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And all this reminds me about an essay I mentioned in the conclusion of my book, an essay by Wilhelm Reich, the great psychoanalyst, who he wrote in 1945: “Listen, Little Man”. A small essay by the number of pages, a big one in the impact it creates. “I want to tell you something, Little Man; you lost the meaning of what is best inside yourself. You strangled it. You kill it wherever you find it inside others, inside your children, inside your wife, inside your husband, inside your father and inside your mother. You are little and you want to remain little.” The Little Man, it’s you, it’s me. The Little Man is afraid, he only dreams of normality; it is inside all of us. We hide under the umbrella of authority and do not see our freedom anymore. Nothing comes without effort, without risk, without failure sometimes. “You look for happiness, but you prefer security, even at the cost of your spinal cord, even at the cost of your life”.

Tim Urban is absolutely right and you need to read his piece about dogma and tribes. He made me think again of my readings of the great French philosopher Cynthia Fleury and how we need to balance the individuals and the groups and why democracy is a fragile jewel of societies…

PS: I totally forgot to mention a video that a colleague of mine (thanks to her now 🙂 ) mentioned a few days ago. BY one of these nice coincidences of life, it is precisely one of the arguments of Tim Urban about why some people are “cooks” (followers or incremental innovators) and others “chefs” (disruptive innovators). Enjoy!