Category: Innovation

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Fostering Innovation: Lessons from the Golden Age

Have you ever wondered about the profile of innovation and inventors between 1880 and 1940 in the US? A new working paper from the Harvard Business School attempts to draw conclusions about such inventors and innovation in that “Golden Age.” The paper is titled “The of American Ingenuity: Innovation and Inventors of the Golden Age.”

The authors propose in their article introducing the paper that “recent data suggests that innovation is getting harder and the pace of growth is slowing down.” They argue that a review of history might shed light on environments that are most conducive to innovation. Below are some of the conclusions drawn in the paper, many of which are intuitive:

1. More inventive states and sectors grew faster on average.
2. Densely-populated states were more inventive.
3. Financially-developed states were more inventive.
4. Geographically-connected states were more inventive.

…

6. Inventors were more educated on average and were most productive between the
age of 36 and 55.

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8. The patents of new inventors received more citations on average, and were
more likely to be in the top decile of the citations distribution.
9. Inventors delayed marriage and had fewer children.
10. Inventors were more likely to have migrated from their state of birth. They
moved to states that were more conducive to innovation.

…

16. Innovation was strongly positively correlated with social mobility.

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Invention is the Mother of Necessity

Inventions arise when there is an unmet market need. Inventors who perceive a unmet need are motivated to fulfill it due to economic rewards of inventing, such as money or fame. Some inventions fit this path, like the cotton gin and the steam engine. Necessity is the mother of invention–as they say–or is it?

What if the opposite is also true?

When Nikolaus Ott built his first gas engine, in 1866, horses had been supplying peoples land transportation needs for nearly 6,000 years, supplemented increasingly by steam-powered railroads for several decades. There was no crisis in the availability of horses, no dissatisfaction with railroads.

What if “many or most inventions were developed by people driven by curiosity or by a love of tinkering, in the absence of any initial demand for the product they had in mind?” This question is explored in Jared Diamond’s book Guns, Germs, and Steel: the Fates of Human Societies.

When invention is the mother of necessity, the inventor finds an application for the invention after it is invented. And, “only after it had been in use for a considerable time did consumers come to feel that they ‘needed’ it.” Also, a device may be invented for one purpose, but eventually it is adopted in wide use for other,unanticipated purposes. Diamond says:

It may come as a surprise to learn that these invention in search of a use include most of the major technological breakthroughs of modern times, ranging from the airplane and automobile, through the internal combustion engine and electric light bulb, to the phonograph and transistor. Thus, invention is often the mother of necessity, rather than vice versa.

In addition to the Ott engine example above, Diamond provides several other examples, one of which is Edison’s phonograph. When Edison created the phonograph in 1877, he published an article proposing ten uses for the invention, such as preserving the last words of dying people and recording books for blind people to hear. However, the invention was later adopted for playing music, which Edison objected to as a debasement from the serious uses he intended.

Early versions of inventions often are not ready for use. Ott’s first engine was “weak, heavy, and seven feet tall, [and] it did not recommend itself over horses.” As Diamond says, “Inventors often have to persist at their tinkering for a long time in the absence of public demand because early models perform too poorly to be useful.”

The view that invention is the mother of necessity aligns with the examples where significant inventions were develop by hobbyists and English clergy.  And, it fits with Chris Dixon’s assertion that “What the smartest people do on the weekends is what everyone else will do during the week in ten years.”

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What Galileo’s Pendulum Clock Teaches About Inventing

HowWeGottoNow_SixInnovationsThatMadetheModernWorld

Fifty-eight years in the making, his slow hunch about the pendulum’s “magical property” had finally begun to take shape. The idea lay at the intersection point of multiple disciplines and interests: …Physics, astronomy, maritime navigation, and the daydreams of a college student: all these different strains converged in Galileo’s mind.

“After experiencing a desire to invent a particular thing, I may go on for months or years with the idea in the back of my head,” said Nikola Tesla. Tesla calls this the incubation period, which precedes direct effort on the invention. Science writer, Steve Johnson, calls it a slow hunch; an idea that comes into focus over a long time.

Johnson discusses several examples of how slow hunches develop in his excellent book, Where Good Ideas Come From and again is his most recent book How We Got to Now: Six Innovations That Made the Modern World. Johnson shows how innovation is most often a product of slow hunches and not eureka moments.

One of the six innovations that made the modern world is the clock for keeping accurate time. In Johnson’s discussion of time, he recounts the events and circumstances that led up to Galileo invention of the pendulum clock.

The story shows the invention of the pendulum clock was not a product of a eureka moment, but of Galileo’s experiences and cross-disciplinary studies over 58 years. Johnson starts with Galileo’s experience at university.

 Suspended from the ceiling is a collection of altar lamps. They are motionless now, but legend has it that in 1583, a nineteen-year-old student at the University of Pisa attended prayers at the cathedral and, while daydreaming in the pews, noticed one of the altar lamps swaying back and forth. While his companions dutifully recited the Nicene Creed around him, the student became almost hypnotized by the lamp’s regular motion. No matter how large the arc, the lamp appeared to take the same amount of time to swing back and forth. As the arc decreased in length, the speed of the lamp decreased as well. To confirm his observations, the student measured the lamp’s swing against the only reliable clock he could find: his own pulse.

Galileo’s daydreaming about time could have been influenced by the fact that his father was a music theorist and played the lute. Twenty years later, after becoming a professor of mathematics, Galileo decided to build a pendulum that would recreate what he had observed at Pisa.

He discovered that the time it takes a pendulum to swing is not dependent on the size of the arc or the mass of the object swinging, but only on the length of the string. “The marvelous property of the pendulum,” he wrote to fellow scientist Giovanni Battista Baliani, “is that it makes all its vibrations, large or small, in equal times.”

The then existing clocks did not keep accurate time. They could be off by tweenty minutes a day and had to be reset using a sundial. But no one needed accurate clocks in the sixteenth century for keeping daily schedules. The need for accurate time keeping arose from shipping navigation needs.

But sailors lacked any way to determine longitude at sea. Latitude you could gauge just by looking up at the sky. But before modern navigation technology, the only way to figure out a ship’s longitude involved two clocks. One clock was set to the exact time of your origin point (assuming you knew the longitude of that location). The other clock recorded the current time at your location at sea. The difference between the two times told your longitudinal position: every four minutes of difference translated to one degree of longitude, or sixty-eight miles at the equator.

The problem with this system was the accuracy of the clock at the point of origin.

With timekeeping technology losing or gaining up to twenty minutes a day, it was practically useless on day two of the journey. All across Europe, bounties were offered for anyone who could solve the problem of determining longitude at sea.

So, after years of working in various disciplines and influenced by the rise of a need for accurate time keeping, Galileo together with his son, drew up plans for the first pendulum clock.

Fifty-eight years in the making, his slow hunch about the pendulum’s “magical property” had finally begun to take shape. The idea lay at the intersection point of multiple disciplines and interests: Galileo’s memory of the altar lamp, his studies of motion and the moons of Jupiter, the rise of a global shipping industry, and its new demand for clocks that would be accurate to the second. Physics, astronomy, maritime navigation, and the daydreams of a college student: all these different strains converged in Galileo’s mind.

Owning to the improved accuracy of the pendulum clock it was in wide use by the end of the next century.

Galileo’s invention of the pendulum clock is just one example of many where the invention resulted from a long series of events and cross-disciplinary influences rather than a momentary flash of genius.

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Overcoming the Difficulty of Recognizing Good Ideas

Knowledge formation, even when theoretical, takes time, some boredom, and the freedom that comes from having another occupation, therefore allowing one to escape the journalistic-style pressure of modern publish-and-perish academia… –Nassim Talab.

Antifragile“The future is already here — it’s just not evenly distributed” is a quote often attributed to William Gibson. Nassiam Taleb, the author of Black Swan, and more recently Antifragile: Things That Gain from Disorder, asserts that in many cases you cannot predict the future. We have a hard time recognizing good ideas and implementing them. Having time and cultivating a capacity for boredom, as explained below, can contribute to one’s ability to recognize good ideas.

When a good idea succeeds, it can have a huge upside–a much greater upside than downside. Taleb says that anything that has more upside than downside from random events is antifragile. Further, antifragility describes “things that benefit from shocks; [] thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty.” Inventing can be an antifragile activity.

The Difficulty of Recognizing Good Ideas

Taleb points out we have a difficult time recognizing opportunities that are staring us in the face. This is the same vein as the Gibson quote above, which was repeated by Chris Anderson, editor of Wired Magazine. Taleb says:

It struck me how lacking in imagination we are: we had been putting out suitcase on top of a cart with wheels, but nobody thought of putting tiny wheels directly under the suitcase…Can you imagine that it took close to six thousand years between the invention of the wheel (by, we assume, the Mesopotamians) and this brilliant implementation (by some luggage maker in a drab industrial suburb)? And billions of hours spent by travelers like myself schlepping luggage through corridors full of rude customs officers. Worse, this took place three decades or so after we put a man on the moon….Indeed, though [the wheeled suitcase was] extremely consequential, we are talking about something trivial: a very simple technology.

…

This tells us something about the way we map the future. We humans lack imagination, to the point of not even knowing what tomorrow’s important things look like.

Although not the case with the wheeled suit case, sometimes the difficulty in recognizing good ideas is–as Peter Thiel notes–they often look like bad ideas.

As Steven Johnson asserted in his book Where Good Ideas Come From: The Natural History of Innovation, we need to cultivate opportunities where ideas can collide unpredictably. Taleb too asserts that we need randomness to stumble upon good ideas:

We are managed by small (or large) accidental changes, more accidental than we admit. We talk big but hardly have any imagination, except for a few visionaries who seem to recognize the optionality of things. We need some randomness to help us out–with a double dose of antifragility.

Implementation Does Not Always Follow Quickly From Invention

Even when you do stumble upon a good idea and develop it into an invention, there’s still the difficult road to implementation and commercial success. This is, in part, why there are many many uncommercialized inventions described in patents and patent applications, which you can’t find on the market.

…Implementation does not necessarily proceed from invention. It too, requires luck and circumstances. The history of medicine is littered with the strange sequence of discovery of a cure followed, much later, by the implementation—as if the two were completely separate ventures, the second harder, much harder, than the first. Just taking something to market requires struggling against a collection of naysayers, administrators, empty suits, formalists, mountains of details that invite you to drown, and one’s own discouraged mood on occasion. In other words, to identify the option (again, there is this option blindness). This is where all you need is the wisdom to realize what you have on your hands.

For there is a category of things that we can call half-invented, and taking the half-invented into the invented is often the real breakthrough. Sometimes you need a visionary to figure out what to do with a discovery, a vision that he and only he can have. For instance, take the computer mouse, or what is call the graphical interface: it took Steve Jobs to put it on your desk, then laptop–only he had a vision of the dialectic between images and humans–later adding sound to a trilectic. The things, as they say, that are “staring at us.”

The difficulty of recognizing good ideas, and the uncertainty of proceeding with an idea, contributes to huge upsides for those that do.

The Need for Time to Allow Ideas to Percolate: The Clergy and Hobbyists

Chris Dixon said, “What the smartest people do on the weekends is what everyone else will do during the week in ten years.” Taleb makes a similar point.  Many significant inventions were developed by hobbyist and the English clergy. They had ample time to let ideas percolate and collide–in other words, to invent.

Knowledge formation, even when theoretical, takes time, some boredom, and the freedom that comes from having another occupation, therefore allowing one to escape the journalistic-style pressure of modern publish-and-perish academia to produce cosmetic knowledge…

There were two main sources of technical knowledge and innovation in the nineteenth and early twentieth centuries: the hobbyist and the English rector, both of whom were generally in barbell situations.

An extraordinary proportion of work came out of the rector, the English parish priest with no worries, erudition, a large or at least comfortable house, domestic help, a reliable supply of tea and scones with clotted cream, and an abundance of free time. And, of course, optionality. The Reverends Thomas Bayes (as in Bayesian probability) and Thomas Malthus (Malthusian overpopulation) are the most famous. But there are many more surprises, cataloged in Bill Bryson’s Home, in which the author found ten times more vicars and clergymen leaving recorded traces for posterity than scientists, physicists, economists, and even inventors. In addition to the previous two giants, I randomly list contributions by country clergymen: Edmund Cartwright invented the power loom, contributing to the Industrial Revolution; Rev. Jack Russell bred the terrier; Rev. William Buckland was the first authority on dinosaurs; Rev. William Greenwell invented modern archaeology; Rev. Octavius Pickard-Cambridge was the foremost authority on spiders; Rev. George Garrett invented the submarine; Rev. Gilbert White was the most esteemed naturalist of his day; Rev. M. J. Berkeley was the top expert on fungi; Rev. John Michell helped discover Uranus; and many more.

…

The Industrial Revolution, for a refresher, came from “technologists building technology,” or what he [Terence Kealey] calls “hobby science.” Take again the steam engine, the one artifact that more than anything else embodies the Industrial Revolution. As we saw, we had a blueprint of how to build it from Hero of Alexandria. Yet the theory didn’t interest anyone for about two millennia. So practice and rediscovery had to be the cause of the interest in Hero’s blueprint, not the other way around.

Having free time and cultivating a capacity for boredom allows ideas to percolate, even subconsciously. This appears to enhance the ability to recognize and implement good ideas and to possibly profit from the antifragile nature of inventing.

Antifragle is a thought provoking book in its entirety with possible wide ranging applicability.

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Is the Invention before Its Time? What iPods, Biology, and Computers Teach about Inventing in the Adjacent Possible

WhereGoodIdeasComeFromIn 1979, Kane Kramer invented a portable digital music player. He sought patents in numerous countries, including the United States where he was granted US Patent No. 4,667,088.

The Kramer portable digital music player used memory cards, the size of a standard credit card, which were each capable of holding 3.5 minutes of music (i.e. one song).  A record shop could store blank cards and load those cards on-demand from a digital music data store in the music shop at the time of sale.

A media outlet asserts that Kramer was the “inventor behind the iPod.” That statement probably goes too far in characterizing a reference that Apple made to Kramer’s patent and invention as prior art in a patent lawsuit.

Regardless, Kramer’s device was an early portable digital music player. The problem for Kramer was that his device did not become a commercial success. And later his patents lapsed because he was unable to pay the patent maintenance fees.

While we don’t know why Kramer’s device was not a commercial success, it might be that in 1979 the Internet did not exist that made electronic distribution of music easy–you don’t have to go to the physical music store. It might be that the electronic storage capacity of the memory card for the device could only hold one song. It might be that the elements helpful for commercial success did not exist in the 1980s when Kramer attempted to commercialize the invention.

Maybe Kramer’s music player was not within “the adjacent possible.” Stated another way, maybe it was before its time.

Steven Johnson discusses “the adjacent possible” in his book, Where Good Ideas Come From. The adjacent possible provides an outer boundary to how advanced your invention can be from the current state of the art. It is one factor to consider when evaluating the possible commercial success of your invention.

The Adjacent Possible from Evolutionary Biology

Johnson notes that scientist Stuart Kauffman coined the term “the adjacent possible” to describe the set of first-order combinations of molecules that were possible given the composition of the earth’s environment before life emerged:

The lifeless earth was dominated by a handful of basic molecules: ammonia, methane, water, carbon dioxide, a smattering of amino acids and other simple organic compounds… Think of all those initial molecules, and then imagine all the potential new combinations that they could form spontaneously… trigger all those combinations [and] you would end up with most of the building blocks of life: the proteins that form the boundaries of cells; sugar molecules crucial to the nucleic acids of our DNA.

…

But you would not be able to trigger chemical reactions that would build a mosquito, or a sunflower, or a human brain… The atomic elements that make up a sunflower are the very same ones available on earth before the emergency of life, but you can’t spontaneously create a sunflower in that environment, because it relies on a whole series of subsequent innovations that wouldn’t evolve on earth for billions of years: chloroplasts to capture the sun’s energy, vascular tissues to circulate resources though the plant, DNA molecules to pass on sunflower building instructions to the next generation.”

On the pre-life earth formaldehyde was within the adjacent possible but more complex organisms were not. The more complex organisms required intermediate building blocks that had not yet come into existence.

The Difference Engine and The Analytical Engine

The adjacent possible is not only applicable within evolutionary biology, but applies to human-made inventions.

Johnson notes two inventions of Charles Babbage–the Difference Engine and the Analytical Engine–to show when an invention is within the adjacent possible and when it is not. Babbage was a nineteenth-century British inventor, now known as the father of modern computing.

The Difference Engine was advanced mechanical calculator described as a very complex “fifteen-ton contraption, with over 25,000 mechanical parts, designed to calculate polynomial functions that were essential to creating the trigonometric tables crucial to navigation.” While Babbage did not build the Difference Engine during his lifetime, the Difference Engine was within the adjacent possible of the Victorian technology. Many improvements occurred within the field mechanical calculation during that time based on Babbage’s architecture, according to Johnson.

On the other hand, Babbage’s Analytical Engine was not within the adjacent possible. On paper, the Analytical Engine was the world’s first programmable computer. But it was so complicated most of it never got past the blueprint stage:

Babbage’s design for the engine computer anticipated the basic structure of all contemporary computers: “programs” were to be inputted via punch cards…; instructions and data were captured in a “store,” the equivalent of what were now call random access memory, or RAM; and calculations were executed via a system that Babbage called “the mill.” uniting industrial-era language to describe what were now call the central processing unit, or CPU.

Babbage had most of the system sketched out by 1837, but the first true computer to use this programmable architecture didn’t appear for more that a hundred years. While the Difference Engine engendered an immediate series of refinements and practical applications, the Analytical Engine effectively disappeared from the map. Many of the pioneering insights that Babbage had hit upon in 1830s had to be independently rediscovered by the visionaries of the World War II-era computer science.

Implementing the Analytical Engine with mechanical gears and switches would have been extremely complex and difficult to maintenance according to Johnson. On top of that it would have been slow. For the Analytical Engine to work or work well, the logic needed to be implemented with electronics and not mechanical gears. Therefore, the Analytical  Engine was not within the adjacent possible in the 1837.

YouTube

Johnson leaves us with one more modern example: Youtube. Johnson notes that if Youtube was created 10 years earlier in 1995 it would have failed. This is because in 1995 most web users were on slow dial-up connections and it could take an hour to download a standard Youtube clip. In 1995, Youtube’s innovation was not within the adjacent possible, but ten years later, with broadband Internet and Adobe’s Flash technology, it was.

Invention Evaluation Factor: Is it Within the Adjacent Possible?

One question you should answer when evaluating your invention is whether the invention is within the adjacent possible.

It is not enough to consider whether it is technically possible to create your invention. The Kramer portable digital music player was technically possible to create at the time. But the underlying infrastructure–the lack of the Internet–and the memory storage capacity available at the time could have constrained its ability to be a commercial success.

At least for human-made inventions, practical application of the adjacent possible principle must consider not only whether it is technically possible to manufacture/make, but whether the infrastructure and other elements helpful for commercial success exist at the time.

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Product Licensing Performance Guarantee: Make Sure Your License Has One

GuaranteeYou develop a useful product. Let’s say its a needle for performing biopsies. You file a patent application on your invention.

Then you approach a medical device company and enter into a license agreement where the company receives exclusive rights in the invention in exchange for a royalty on each product sold.

Years pass and the company still has not fully developed and marketed the invention. You sue the company for not doing enough to get your product to market. But you lose because the license agreement contained no performance guarantees requiring the company to meet minimum sales or use best efforts to make, market, and sell the product.

This is similar to what happened in the case of Beraha v. Baxter Health Care Corporation, 956 F. 2d 1436 (7th Cir. 1992).

Don’t Rely on Oral Assurance as a Substitute for a Performance Guarantee

The Beraha case demonstrates that one of the most important terms in licensing your invention or product is a performance guarantee. A performance guarantee protects you if the other party (the “licensee”) buries your invention or does not do enough to market or sell it.

In the Beraha case, Beraha originally proposed a license agreement that contained a guaranteed minimum annual royalty of $50,000 per year after the first year. However, Baxter responded with a proposal that eliminated the guaranteed minimum annual royalty and increased the royalty advance to offset the removal of the minimum guarantee.

At first Beraha refused to sign the revised proposal from Baxter because it did not contain a minimum guarantee or a best efforts clause. However, during a phone call with a Baxter Vice President and without committing to any specific level of effort, the VP said he would send Beraha a letter . On the basis of the assurance that a letter would be coming, Beraha signed the exclusive license with Baxter, which contained no performance  guarantees.

The letter Beraha later received said “…Although we work in an environment that is always subject to changing conditions, you can be assured that our present intent is to do our very best to make this project a success…” However, this letter had no effect on the license agreement that was already signed. This is due in part because the license had a merger clause. Most license agreements have a merger clause, which basically says that “no matter what I said before, the only terms that matter are the terms written in this license agreement.”

The court found that Beraha could not inject a best efforts clause into the agreement when it did not provide one and when the minimum sales provision was removed during negotiation.

The court left open a possibility that Beraha could recover if it could show that Baxter breached its obligation to act in good faith and fair dealing. But, there’s no surety that Beraha could recover under that theory because the court said, “the jury could find that Baxter did not breach the contract even if it exerted no efforts at all to develop the Beraha needle if Baxter can show that its decision to exert no effort was reasonable under the circumstances.”

You do not want this to happen to you. Therefore, your license agreements should have a performance guarantee. Performance guarantees come in several forms.

Minimum Sales Requirement

The best approach is to provide a clause that requires the other party (the licensee) to hit minimum sales in a defined period of time. For example, as in the first proposed agreement in the Beraha case, the minimum can be in the form of a guaranteed minimum annual royalty payment. This requires that no matter what the sales are during a given period, the other party must pay at least the minimum during that period. If the guarantee is $50,000 per year, then you are guaranteed at least that amount even if the unit sale royalties do not reach that amount.

Also you can provide the guarantee in units of product. So you can say that the annual minimum unit sales is 50,000 units. If the royalty rate is three percent of the net sale price, and you know the net sale price, then you can calculate the annual minimum in dollars.

Consequences if Minimums are not Met

What happens if the minimums are not met?

If the license provides that you are paid the minimum no matter what the sales are maybe you don’t care if target sales are not met. However, if you want to see your product succeed in the marketplace you might want to provide a provision that cuts off some or all of the licensee’s rights if the minimums are not met.

One example is a license that provides for termination if the minimums are not met for one or more periods. When the license terminates you can approach other companies to make and/or sell your product. Another option, is that an exclusive license can be converted to a non-exclusive license if the minimums are not met. This means that the first licensee can continue to mark and/ sell your product, but that you can go to other companies and have them make or sell your product as well. When the agreement is non-exclusive you can cut deals with multiple companies to sell your product.

Best Efforts

One alternative to defining the minimum dollars or units per period, is a license that provides this: “the licensee agrees to use its best commercial efforts to make, market and sell the product.” Sometimes “reasonable” is substituted for “best”. Regardless, see how wishy-washy that phrase is? What does “best/reasonable commercial efforts” mean? How will it be measured? A best efforts clause is an invitation for a dispute (e.g. a lawsuit) because it is uncertain what best commercial efforts means.

It is better to specify what activities are desired, such as minimum sales, a list of marketing activities, and/or other requirements.

Do not rely on oral assurances that the licensee will use their best efforts to make, market, and sell your invention or product. Put concrete numbers and activity requirements in a product or invention license.

Photo credit to John Walker under this creative commons license. The image above is cropped in from the original photo here.

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Henry Ford: The Assembly Line, Entrepreneurship, and Bigotry

HenryFord_ThePeoplesTycoonNo successful boy ever saved any money . . . They spent it as fast as they could for things to improve themselves.
-Henry Ford

Henry Ford revolutionized manufacturing with the introduction of the assembly line. While many companies were selling expensive cars for the rich. Ford’s goal was to build a light weight affordable car for regular working people.

Since the assembly line might be the single most important invention in industrial history, I wanted to learn more about the man behind the company that put it to use and the circumstances around its invention. Steven Watts’ book The People’s Tycoon: Henry Ford and the American Century provides an interesting biography of Ford and history of his companies. Unfortunately, as explained below, the exact circumstances of the invention of the assembly line are not clear. But first….

Don’t be a Bigot

Ford revolutionized manufacturing not just in the automobile industry but across industries with the invention of the assembly line. I started reading this book with a desire to learn about Ford’s life and to write about the interesting entrepreneurship and business issues of Ford’s life.

But Ford espoused antisemitic bigotry and ignorance. As I wrote about the entrepreneurship and business issues, I kept thinking about how Ford’s antisemitism overshadowed all of his successes.

Watts’ has a chapter in the book entitled “Bigot,” which describes Ford’s anti-semitism. Among other instances, Ford owned a newspaper, the Independent, through which he waged a campaign against Jews. This eventually resulted in a libel suit being filed by Aaron Sapiro against Ford and the Independent in 1925. Rather an testify at trial, Ford shutdown the newspaper, publicly apologized, and paid a cash settlement.

But he continued to hold and privately express anti-Semitic views. When Ford was privately asked if the idle newspaper presses from the Independent should be sold, he is reported to have said, “I made a deal with these Jews and they haven’t lived up to their part of the agreement. I might have to go back back after the Jews again.”

Watts’ says, “…[Ford’s] mindless bigotry against Jews indelibly stained his reputation and raised questions about his moral and ideological character that would linger for the rest of his life.”

A stain that lingers after Ford is long dead. Rather than posting nothing about Ford, I think it is appropriate to lead off this post noting Ford’s bigotry. A bigotry that overshadows his business successes.

Invest in Yourself – The Gospel of Spending

Twenty years after Ford launched the car that made him famous, Ford started a controversy when he insisted that hard work was a good idea but thrift was fruitless. When asked about how to become successful in America, Ford said:

“No successful boy ever saved any money . . . They spent it as fast as they could for things to improve themselves.”

This was in contrast to the traditional advice at the time to work hard and save your money. Some denounced Ford’s “gospel of spending.” But according to Watt, the dissenters were overwhelmed by publications that supported Ford’s advice on spending, with one publication saying “He who nurses the nickels misses the knockouts.”

Ford followed his own advice while developing his first prototype automobile and while building his businesses. An employee of a tool company, said of Ford:

[he] would be in our place two or three times a week buying something that had to do with something he was making… Mr. Ford loved anything in the way of tools, any kind whatsoever. Anything new that came out in a tool, he wanted to see it…

As Ford was making his first automobile, the Quadricycle, his wife, Clara, was concerned about his purchases:

Clara Ford became concerned about the constant purchasing of materials. As Henry’s sister Margaret recalled, Clara ‘wondered many times if she would live to see the bank account restored.’

The key here is not just spending. But, the spending must a reasonable investment in yourself or your project.

Starting It On the Side

Countless inventors and company founders started their companies and invented their inventions while working a day job and then working on the side. Ford is no exception. Ford developed his first automobile while working as engineer at the Edison Illuminating Company. Ford eventually became Chief Engineer, which meant he was on call all day, but he had flexibility and free time to “tinker, to visit machines shops, to trade tips and shoptalk with mechanics, and to experiment with improving his little gasoline engine.” He also took a job teaching metal working class at the YMCA, which gave him access to the school shop to on work metal parts for this automobile. Ford said:

Every night and all of every Saturday night I worked on the new motor. I cannot say that it was hard work. No work with interest is ever hard.

Bouncing Back from Failure

Ford failed many times. But kept going. Ford spent $86,000 (more than $2 million in today’s dollars) developing and manufacturing a car at his first investor backed company, Henry Ford Company. But he failed to produce a working production vehicle. Many say this was due to the fact that he continually changed the design of the automobile and never stopped to commit to making a particular design. Only three months after forming the Henry Ford Company, Ford either resigned or was fired. That company was renamed Cadillac Automobile Company.

Ford resented control by his investors in the Henry Ford Company. Ford said “They were to stay by me to have the experimental work done…From here in, my shop is always going to be my shop…I’m not going to have a lot of rich people telling me what to do.” After gaining fame as a race car builder and driver, Ford would make another attempt at automobile manufacturing in the Ford Motor Company.

Knowing the Target Market

Ford famously wanted to build an inexpensive car for the masses. However, Alex Malcolmson, an investor in Ford Motor Company, wanted to make an expensive car for the wealthy with a higher profit margin. Many other car companies were making expensive cars.

For a time, Ford did reluctantly produced an expensive car. For example, before making the Model T, Ford made the Model N, which weighed 1,050 pounds and sold for $600, the model K weighed some eighteen hundred pounds and cost $2,800. Eventually Malcolmson was forced out of the Ford Motor Company and Ford was left to pursue an inexpensive car.

The implementation of the assembly line allowed Ford to sell the Model T for $500. Ford said, “There are a lot more poor people than wealthy people. We’ll just build one car for the poor people.”

Invention of the Assembly Line

The adoption of the assembly line may be the most revolutionary change in industrial history. The idea is that the work should be moved to the worker instead of the worker moving to the work.

Before the adoption of the assembly line the best time for assembling a car chassis at the Ford plant was 12 hours and 28 minutes. By 1914, the assembly line enable this to be accomplished in 1 hour and 33 minutes.

The exact details surrounding the invention and adoption of the assembly line are muddy and uncertain, at least according to the account in Watts book. There conflicting stories about the origins of the assembly line. Watts says:

Henry Ford’s own version of things changed. At one point, he declared that the inspiration came from observing the overhead trolley that Chicago packers used in dressing beef at the slaughterhouses. Another time, he claimed that he got the idea from observing a watch factory where parts sat on a moving belt and assemblers took them off as required.

Others offered different stories. William C. Klann, foreman of motor assembly at the Highland Park facility, asserted that the conveyors used to transport sand in the factory foundry inspired the idea of using a similar method in the assembly process.

Charles Sorensen, in a memoir written many years later, averred that as early as 1908 he and several subordinates had arranged stock parts sequentially on the floor of the old Piquette Avenue factory, put a tow rope onto a car chassis with wheels, and pulled it from pile to pile, attaching appropriate components one after another. “Over several weeks we developed it as well as we could,” Sorensen wrote. “Then we laid it away and put it on the shelf until we were ready to use it.”

Regarding the first use of the assembly line at Ford’s plant, Watts provides:

Evidence suggests that the first actual use of the assembly line came on April 1,1913, when workers in the flywheel-magneto department stood alongside a waist-high table with a smooth metal surface and were instructed by foremen to install one part and then slide the component along to the next worker, who would add something else.

This soon led to the idea of pulling the evolving component along at a set rate with a chain, a move that steadied the process by speeding up the slow workers and slowing down the speedy ones. By tweaking this system in various small ways over the next few months, Ford supervisors were able to cut the man-minutes required for assembling the flywheel magneto from twenty to five.

This quadrupling of productivity caught the attention of nearly all Ford production engineers, and they began to develop the technique in various areas.

The creation of the assembly line at Ford’s factory revolutionized manufacturing. However, Ford’s bigotry leaves a dark stain the part he played in this innovation.

 

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How to be a Disruptive Inventor: Lessons from Alexander Bell

TheMasterSwitch_TimWu[the inventor’s] significance is enormous…The inventors we remember are significant not so much as inventors, but as founders of “disruptive” industries, ones that shake up the technological status quo. Through circumstance or luck, they are exactly at the right distance both to imagine the future and to create an independent industry to exploit it.

On the same day in 1876 that Alexander Bell’s patent application on the telephone was filed, a patent application by Elisha Gray was filed on the same invention. Sixteen years before this, Johann Philip Reis of Germany presented a primitive telephone to a scientific group. And, Daniel Drawbaugh, a Pennsylvania electrician, claimed that by 1869 he had a working telephone in his house.

The story of the invention of the telephone is similar to other invention stories where multiple inventors independently invent the same or similar invention within a short period of time. Steve Johnson notes that this substantially simultaneous invention occurs because the invention becomes “an adjacent possible” once founding or necessary elements or parts are created, discovered, or otherwise available. Tim Wu, author of The Master Switch: The Rise and Fall of Information Empire, notes the same phenomenon. One might question whether a particular inventor’s act of inventing is ever significant, if the invention/discovery was bound to happen, by this or another inventor. Wu argues the inventor’s significant is very important for founding of disruptive information industries in a process he calls “the Cycle.”

In The Master Switch, Wu provides a look at the control and innovation in information industries, such as the industries involving the telegraph, telephone, entertainment, radio, TV, and the Internet. These information industries tend move from a freely accessible channel to a channel that is strictly controlled by one corporation or cartel.

Wu’s thesis is that the history of information industries shows that such industries oscillate from an open to closed state in what he calls, i.e. “the Cycle.” Based on this history, Wu predicts that the information industry of the Internet may move from an open platform (which it currently is) to a closed system. A separation principle is needed to protect the Internet from being turned into a closed system. The separations principle provides, in part, the following must be kept separate: those who develop information, those who own the network infrastructure on which it travels, and those who control the tools or venues of access.

The book provides a discussion of the development of the telephone industry as one example of (1) a birth of an information industry and (2) the characteristics of a disruptive inventor.

Inventor’s Enormous Value As Disruptor

Wu describes invention as making available the adjacent possible. The reality that there was no single inventors of the telephone “suggests that what we call invention, while not easy, is simply what happens once a technology’s development reaches a point where the next step become available to many people,” said Wu.  Wu notes that others had provided the tools for the adjacent possible telephone, e.g. others has invented wires, the telegraph, and discovered electricity and the basic principles of acoustics. Therefore the building blocks for the telephone were available and Bell had to put them together. Wu asserts, that “inventors are often more like craftsman than miracle workers.”

Given the regularity with which simultaneous discovery/invention occurs, should the lone inventor be accorded much significance? Wu says the inventor’s significance is still enormous:

…I would argue his significance is enormous; but not for the reasons usually imagined. The inventors we remember are significant not so much as inventors, but as founders of “disruptive” industries, ones that shake up the technological status quo. Through circumstance or luck, they are exactly at the right distance both to imagine the future and to create an independent industry to exploit it.

Bell build the telephone industry that eventually killed the prior communication industry, the telegraph industry dominated by Western Union. Bell’s patent turned out to be a critical asset for doing so.

Be an Outsider

Wu notes several conditions that help a disruptive innovator succeed. First, it is important for the inventor to be an outsider with some distance from the current industry:

Let’s focus, first, on the act of invention. The importance of the outsider here owes to his being at the right remove from the prevailing currents of thought about the problem at hand. That distance affords a perspective close enough to understand the problem, yet far enough for greater freedom of thought, freedom from, as it were, the cognitive distortion of what is as opposed to what could be. This innovative distance explains why so many of those who turn an industry upside down are outsiders, even outcasts.

Disruptive innovation supplants or destroys existing products or industries, and sustaining innovation provides incremental improvements. The outsider status of some inventors provides him/her the freedom of a disinterested party:

Another advantage of the outside inventor is less a matter of the imagination than of his being a disinterested party. Distance creates a freedom to develop inventions that might challenge or even destroy the business model of the dominant industry. The outsider is often the only one who can afford to scuttle a perfectly sound ship, to propose an industry that might challenge the business establishment or suggest a whole new business model. Those closer to—often at the trough of—existing industries face a remarkably constant pressure not to invent things that will ruin their employer. The outsider has nothing to lose.

Bell was an outsider. Bell was a professor, who taught the deaf, and amateur inventor. He worked out of the machine shop in his attic trying to transmit voice across wires. These early efforts are described by Wu as “mostly futile, and the bell company was little more than a typically hopeless startup.”

But not too Far Away

It is not any distance that will work. The right distance is needed because but too much distance from the industry or the adjacent possible puts you out of the game:

It may be that Daniel Drawbaugh actually did invent the telephone seven years before Bell. We may never know; but even if he did, it doesn’t really matter, because he didn’t do anything with it. He was doomed to remain an inventor, not a founder, for he was just too far away from the action to found a disruptive industry.

Wu credits Bell’s partnership with patent attorney, Gardiner Hubbard, a critic of the Telephgraph company, as placing Bell close enough to the industry. Hubbard formed Bell’s invention into a campaign to supplant Western Union as the dominate communications company. Here, like in the case of Telsa, the Bell brought on savvy partner to help with the commercialization efforts.

In contrast, Elisha Gray’s backer was Samuel White. White wanted Gray to focus on an acoustic telegraph. The acoustic telegraph appeared to be destined for large profits as compared to the unestablished telephone. Wu suggests that but for White’s opposition to Gray working on the telephone and Gray’s need to keep his work on the telephone secret, Gray might have developed a working telephone and patented it before Bell.

Don’t be Distracted by an Apparent Pot of Money for Incremental Invention 

Wu says, “The inability of Hubbard, White, and everyone else to recognize the promise of the telephone represented a pattern that recurs with a frequency embarrassing to the human race.” To a hammer, everything looks like a nail. Our minds are too lazy to seek out new ways of thinking when old ones will due.  “Nothing … concentrates the mind like piles of cash, and the obvious rewards awaiting any telegraph improver were a distraction for anyone even inclined to think about telephony, a fact that actually helped bell.” said Wu.

Conclusion

Wu says “through circumstance or luck” the disruptive inventor is at the right distance to disrupt an industry. However, you may be able to intentionally set yourself up for to be a disruptive inventor by exposing yourself to diverse ideas across disciplines to be in the position to recognize the adjacent possible, having some distance from the targeted industry, and not being distracted by the apparent financial gain available from incremental invention within the targeted industry.

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Childhood Hands-on Play an Indicator of Furture Creativity

Play_StuartBrown“Unlike their elders, the young engineers couldn’t spot the key flaw in one of the complex systems they were working on, toss the problem around, break it down, pick it apart, tease out its critical elements, and rearrange them in innovative ways that led to a solution.”

Scientists and engineers at Cal Tech’s Jet Propulsion Laboratory (JPL) have over the years invented and designed major components of manned and unmanned space missions. In the 1990’s, JPL began replacing retiring engineers and scientist that started in the 1960’s. However, while the new hires came from top engineering schools, the new hires were not very good at certain types of problems solving that involved taking theory to practice. What were the new engineers missing?

Stuart Brown’s book Play: How it Shapes the Brain, Opens the Imagination, and Invigorates the Soul explores the important effect that play has on our lives.

Indicator of Future Creativity

One area that play positively effects is creativity. As Brown explains regarding JPL, the new hires had excellent grades from the best schools, but that was not enough. Nate Jones, owner of a machine shop specializing in racing tires, encountered the same problems as JPL did in hiring. Jones found that employees that had “worked and played with their hands as they were growing up were able to ‘see solutions’ that those who had not work with their hands could not.”

The managers at JPL found as similar pattern. They found the older employees, in their youth, had taken a part clock to see how they work, or made soapbox derby racers, build hi-fi stereos, or fixed appliances. The young engineers that had done the same thing–worked with their hands in their youth–were good at problem solving, but those who had not, were generally not. After making this discovery, JPL managers changed their interview process for new hires to ask applicants about projects and play they engaged in during their childhood.

In view of this Brown states, “The engineers that JPL found to be so adept were the one who had played [using] their hands in their youth…They performed well as adult engineers not because they had lots of practice working on watches, but because in a sense they were doing for work what they had always done for pure enjoyment.” This is along the same lines as  Paul Graham’s advice to hire programmers that write software in their free time.

Brown continues: “..there is a kind of magic in play. What might seem like a frivolous or even a childish pursuit is ultimately beneficial. It’s paradoxical that a little bit of ‘nonproductive’ activity can make one enormously more productive and invigorated in other aspects of life.”

Defining Play

Brown asserts that it is difficult to provide an all-inclusive definition of play, but provides that play generally has the following properties: (1) it is apparently purposeless and done for its own sake, (2)  it is done voluntary, (3) it has inherent attraction, (4) it provides freedom from time in that we can loose track of time in a state of flow, (5) it provides diminished self-consciousness, (6) it creates potential for improvisation, and (7) it creates a desire to continue doing it.

The examples provided by Brown may be anecdotal, but Brown is not the only one drawing the connection between childhood play and creativity.  If childhood hands-on play is, in fact, an indicator of future creativity, business owners and hiring managers may like to consider this factor when choosing employees or business partners.

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Fending Off Competitors with Barriers to Entry: Hard Problems and Networks

BarriersToEntry_HardProblems“If you can develop technology that’s simply too hard for competitors to duplicate, you don’t need to rely on other defenses. Start by picking a hard problem, and then at every decision point, take the harder choice.” – Paul Graham

Patents are not the only barriers to entry. Sometimes the technology can’t be patented, sometimes patent deadlines are missed, sometimes there’s not yet enough money to pursue a patent, sometimes you’re not sufficiently certain whether the invention will be the next big thing so as to justify pursuing a patent. Sometimes your looking for protection instead of or in addition to patents and you already explored the legal alternatives to patenting. What other barriers are there?

Barriers to entry provide a competitive advantage in the market place. If it is too hard for your competitors to enter a market or solve the problems you are solving, then you will have less competition. With less competition, you will be able to charge a premium for your solution. Financial backers, such as venture capitalist, are often interested in barriers to entry related to your solution because those barriers protect the financer’s investment. Barriers to entry come in many forms. Below I look at the strategy of picking hard problems and building networks, among the many others that might apply.

Pick Hard Problems

Paul Graham explains why it is important to pick hard problems to solve.

Use difficulty as a guide not just in selecting the overall aim of your company, but also at decision points along the way. At Viaweb one of our rules of thumb was run upstairs. Suppose you are a little, nimble guy being chased by a big, fat, bully. You open a door and find yourself in a staircase. Do you go up or down? I say up. The bully can probably run downstairs as fast as you can. Going upstairs his bulk will be more of a disadvantage. Running upstairs is hard for you but even harder for him.

What this meant in practice was that we deliberately sought hard problems. If there were two features we could add to our software, both equally valuable in proportion to their difficulty, we’d always take the harder one. Not just because it was more valuable, but because it was harder. … I can remember times when we were just exhausted after wrestling all day with some horrible technical problem. And I’d be delighted, because something that was hard for us would be impossible for our competitors.

Seth Godin notes Ford’s advantage by taking on hard problems:

Henry Ford did the same thing [take on hard problems] with the relentless scale and efficiency he built at Ford. Others couldn’t imagine raising their own sheep to make their own wool to make their own seat fabric…

“How do we do something so difficult that others can’t imagine doing it?” is a fine question to ask today.

Build-in Network Effects

VC, Fred Wilson, notes another way to create a barrier to entry is to develop a product or service that features a network effect. Fred provides an illustrative story–read the whole story here–involving the dentist industry where the first entrant provides high priced software for managing a dental office. A second entrant run by two entrepreneurs develops a low priced version of the software with mobile apps which eat away at the first entrant’s market. Then an open source version of the software is developed, which kills the first and second entrant’s businesses. Fred concludes:

…software alone is a commodity. There is nothing stopping anyone from copying the feature set, making it better, cheaper, and faster. And they will do that. … we asked ourselves, ‘what will provide defensibility’ and the answer we came to was networks of users, transactions, or data inside the software. We felt that if an entrepreneur could include something other than features and functions in their software, something that was not a commodity, then their software would be more defensible. That led us to social media, to Delicious, Tumblr, and Twitter. And marketplaces like Etsy, Lending Club, and Kickstarter. And enterprise oriented networks like Workmarket, C2FO, and SiftScience….
[emphasis added]

Conclusion

When you build technology that requires a network of users and you gain a user base, it is hard for competitors to be successful because simply copying the software is not enough. The competitor needs users too. Getting users is (or at least can be) hard. So the “network effects” barrier to entry may simply be one type of “pick hard problems” barrier to entry.

Photo credit to flickr user Anton Steiner under this creative commons license.