Editor’s note: We’re pleased to publish a note today by Luis Perez-Breva, author of Innovating: A Doer’s Manifesto (MIT Press: 2017), and MIT Faculty Director of Innovation Teams Enterprise. Luis holds a Ph.D. in artificial intelligence from MIT, as well as degrees in chemical engineering, physics and business. He is an inventor and entrepreneur. He is also, as of a few weeks ago, a brand new American citizen. If you’d like to connect with Luis, you can find him on Twitter at @lpbreva or via email at [email protected]
As with all articles we publish from our guest authors, this note may not represent the views of Epsilon Theory or Second Foundation Partners, and should not be construed as advice to purchase or sell any security.
We may have perfected the wrong economy; we’ve got one that struggles to protect the long-term survival of the species. But we can fix that.
We can move past Speculate-ship, allow ourselves to do well and good at the same time, and put energy into building a Society of Tinkerers … with just enough good ol’ American ingenuity to invent our way to an economy in which greed is once again aligned with survival.
Ok. There are some new terms in there. To explain, let me start at the beginning.
Whether it’s this pandemic, or inequality, or the opioid crisis, or climate change, or whatever comes next, the most important crises hit us when we’re almost ready to handle them. And it’s almost always the same big, invisible enemy: humans — who are (unknowingly?) laying waste to our own species.
As is often the case in these almost-ready moments, everyone’s in denial—just like we’re now talking about getting back to some “normal.” Sigh. Fast forward. I propose we seize the moment to make it harder, less fun, and definitely less rewarding for humans to bring the species down and with it the economy every time someone sneezes the wrong way.
There’s got to be a way to help humans help humans that’s compatible with making money, or we’re doomed.
Herein lies our chance to establish a different enterprising mindset.
- We need new ways to explore problems that matter.
- We need to share hands-on knowledge with society so that anyone who wants to tinker with problems can tinker with problems.
- We need an alternative to the zero-sum speculation that poses as celebration of entrepreneurship.
Letting go of speculate-ship and daring to create a Society of Tinkerers is not for the faint of heart. It’s about appreciating how true wealth, the idea of wealth itself, ought to be sustainable (you could ask Marie Antoinette what will happen to your wealth if we reach a point at which no one can afford anything).
But to thrive in this new mindset we may need to accept that we face a tremendous deficit of authenticity in investment, entrepreneurship, leadership, and generally education that has resulted in a genuine surplus of frivolity and waste.
These crises are so moronically “elitist” (epidemiology, climatology, socioeconomics) that it seems as if you need some kind of advanced degree just to read through the gobbledygook, let alone have any real understanding about what’s truly going on. We need to stop creating opportunities for any random idiot to call everything “fake news” and appear more believable than current events only because his/her stupidities can be understood and current events can’t.
We all hope entrepreneurs will get us out of this. After all, “Entrepreneurship” has been touted as the greatest invention of the late twentieth century. Along with the culture of “startups” it spawned, it was supposed to help us continually reinvent our economy for the better. Instead, beginning in the 1980s, we fell into a pattern of chasing after “solutions” to whatever next big emergency, bubble, or crisis comes along — and getting nowhere.
So here we are. The distraction of seemingly easy money got in the way of doing things that matter. It made us complacent. Bad slogans emerged in the entrepreneurship world: “Fail fast!” and “Pay it forward!” We accepted as just fine that 9 of 10 startups fail: “It’s okay! Here’s your participation trophy!”
That’s right: every year in the United States, we expend about $75 billion to back new venture formation, with odds of success hovering around 1 in 10. That’s quite a “death rate.”
By the way, every year nearly five times as much goes to philanthropy.
Hence, frivolous and wasteful. We grew content with mediocrity, inclined to rush the next “great” idea out the door — lately, that’s likely to be some app that spies on you. Not surprisingly, from the need to track a virus everyone came up with a “solution” to lapse into spying on people’s interactions—as the New York Times has reported.
The fact that so many thought this — the very essence of speculate-ship — could ever work reveals far too many of the defects in our thinking. Just as the “Spanish Inquisition” became the theme of the late Middle Ages’ resistance to any kind of science, the theme for our era’s resistance to addressing problems that truly matter could be: “Everything can be solved by ‘spying’ and ‘running ads’.” And so, the past two-plus decades may be remembered for crashes, deepening inequality, and putting humans on the verge of extinction.
Does anyone really believe that this kind of “entrepreneurship” can get us out of our current crisis? What good is the next “killer spy app” when a virus can close entire countries, climate can force refugee crises, and inequality drives opioid epidemics? At the other end of this pandemic may lie a veritable wasteland full of newly dead companies that will join the already huge pile of bad startup ideas, wasted “innovations,” and failed venture funds. What if this were salvageable?
Given the dismal success rate of venture investing and an obvious desire in America to put money into worthy causes, I can’t help but wonder why we separate the two. The short answer is “the tax code.” But the longer answer may be more telling, as the well-known investment advisor David Salem once pointed out to me: It’s the “cheap capital.” When capital is cheap, wasting money is less expensive than thinking through a long-term way out of a mess.
That’s why I wonder whether we perfected the wrong economy. What if we could resolve these contradictions and unite these forces — do good and do well — in a new way? What if we could reinvigorate American ingenuity while creating breathing room for a kind of entrepreneurship intent on solving problems that matter and building great companies rather than just selling startups?
About a year-and-a-half ago, I gave a talk to the Harvard Business School Entrepreneurship Club. I was asked: “How do I find an idea, even ONE to invest in?”. At the time, with daily articles about the opioid epidemic, weekly climate protests, and monthly articles detailing the rise of income inequality I sought to inspire these wannabe entrepreneurs to do something that truly matters.
That seems especially relevant today — and perhaps even easier to explain. There are now at least three ways to play “entrepreneur,” but not all lead to the economic progress we now need. I call them: industrialist or businessperson (let’s call it Entrepreneur 1.0); Speculate-ship, as I mentioned at the beginning; and Tinkerer—the newest one and the basis for the society of tinkerers. Tinkerer is only now emerging. It longs for entrepreneurship with meaning. It fulfills our ambition for wealth that is sustainable. It is the one I’m set to help prosper. But for me to explain why, I need to make sure we are all on the same page about the other options.
The likes of Henry Ford, Nikola Tesla, Thomas Edison, and other industrialists inspired an Entrepreneur 1.0 culture that includes today nearly everyone who dares launch a business—a technology company, restaurant, consulting firm, law firm, or whatever—or who evolves a work of art, movie, or book into a business.
The key characteristic these Entrepreneur 1.0 people share is that they are driven to work on something they are curious about, care about doing, or think they are good at. Extreme Entrepreneur 1.0 people are further defined by a problem they have an itch to solve — typically a problem that looks intractable to others. Even just working on the problem seems preposterous. Those who solve such problems are judged along the way by their idiosyncrasies and later revered for their successes. The Elon Musk who set out to ship a greenhouse to Mars and who ultimately founded a private company, SpaceX, that managed to take astronauts to the space station in the middle of the 2020 pandemic, falls in that category.
Entrepreneur 1.0-built organizations were built to last. Alnylam, Square, the Bill and Melinda Gates Foundation, as well as older examples such as Bloomberg, Hewlett-Packard, Intel, Apple, Oracle, Microsoft, Amazon, Berkshire Hathaway are all examples of the Entrepreneur 1.0 way—that is, starting a business without one of the trendy recipes, and keeping at it.
Today there are still great examples of individuals set on the ways of Entrepreneur 1.0: Leila Phirajhi of Revivemed; Mariana Matus of BioBot analytics; Harry Schechter of the IoT company TempAlert; Ferran Adrià, the Spanish chef; Alexandra Wright-Gladstein of Ayar Labs; David Brewster and Tim Healy of EnerNOC; the investment strategist and founder of Epsilon Theory Ben Hunt; and many others. Investors that go beyond simply speculating with startups and put their money and savvy at the service of problems worth solving fit the profile, too: Khosla Ventures’ Vinod Khosla; Noubar Afeyan of Flagship Pioneering; and DFJ’s John Fischer. They can all be Googled.
If you accept that the business of Entrepreneur 1.0 can truly be anything, it becomes possible to view the Star Wars or Harry Potter franchises, too, as examples, and find inspiration in the work of George Lucas, J.K. Rowling, will.i.am of the Black Eyed Peas, and countless others that started with a passion and grew a successful business out of it.
If you’re wondering why I had to say any of this at Harvard, then you may not be aware that elite universities have taken to popularizing another form of “entrepreneurship” over the last two decades. Because of that, the stories of Entrepreneur 1.0 rarely make it to entrepreneurship classes these days; they just don’t fit well with Speculate-ship—that is, the “pitch a minimum viable product” formulation and run with it that is all the rage.
Most prevalent in the past few decades has been doing a startup — or more accurately Speculate-ship.
The goal: found a startup born to be sold — and exit before it exits you.
Speculate-ship is fueled by Lean Startup, Design Thinking, the 24 steps of Disciplined Entrepreneurship, and the Startup Owner’s Manual. It’s driven by evocative buzzwords (shown here in italics): have a product or service idea; talk to lots of relevant people to validate it; give the high growth speech; do some inexpensive experimentation about the features of a single would-be product of a single-product startup; and measure success by number of users, not dollars. If it doesn’t work out, start again with a new idea for a new product. A 2019 series of articles in the Economist magazine provided a litany of reasons for why the unicorn craze that follows Speculate-ship looks more like a scam than anything entrepreneurs should pursue.
Sure, Speculate-ship has worked well for some. But here we are, immersed in at least three deep crises, without any of these “ready-made” solutions to pitch as consumer products.
Back to the question Harvard students asked: “How do I find an idea?” It’s not really about “wealth” or “speed” — all approaches could lead to wealth, and speed is tremendously variable. Snap and Tesla Motors both went public about seven years after they were founded — the software startup required five times more investment than the car manufacturer.
The way to choose is to determine how you want to play it out. And that needs serious thinking today. Entrepreneur 1.0 is about building an organization; it means you have to play the game of scale, which means you need to use and invent technology (that’s what technology is actually for: to achieve more). Speculate-ship is about fundraising for a product, about getting investors; the game you play is one of perception, and for that you’ll need messaging.
But what about the crises we face today? What about the doing good and doing well option? That’s the path I’ve called Tinkerer. It’s only just beginning to reveal itself fully as a possibility now that frivolity and waste can no longer be an option. It can take us out of this vicious cycle of crises. It’s our future.
The people along this path are industrious and learn by doing. Tinkerers learn to home in on problems with intense practical experience, wielding technologies and knowledge of any kind —engineering, sciences, but also liberal arts, finance, whatever — to gain true insight. It is not about following recipes or doing startups, but solving true problems — the kind we don’t yet know how to solve. This talent grew in an economy that’s no longer defined by lifestyle jobs, as Sarah Kessler explains in her book Gigged, but could be defined by problems solved. These tinkerers seem able to hold on to the belief they can do well and good even after being told otherwise throughout their schooling. This new talent redefines what it can mean to be one’s own boss.
Tinkering comes first, before an idea gels. That’s how Thomas Edison worked. Tinkering precedes without expending even one iota of energy on developing the perfect pitch for investors or even deciding to start a company. It keeps one from rushing before an idea is really sound.
The tinkering I’m talking about is often predicated on simple yet seemingly incongruous premises. For example: What if there was a way to align greed with the saving the environment — the greedier you get, the more habitable the planet? Or: What if we brought back manufacturing, with new, good jobs, by decentralizing factories to outperform the ones that went overseas? Or: What if we could recycle all the innovation waste and put technologies that were left on the shelf in the hands of anyone who wants to tinker with them?
In fact, these are some of the hunches for new problem-solving organizations we’ve already begun to work on. So many of the enterprises we celebrate today began with touches of lunacy just like these. You can find some stories of these kinds of ideas in my book Innovating and Safi Bahcall’s Loonshots.
I’ve spent the better part of a decade training and guiding people who wanted to be involved in innovating and learning to use any technology (not just apps) to tackle real problems. I’ve witnessed the emergence of a growing number of talented industrious people who long for means to solve —sustainably, and at a profit — the most-challenging real-world problems that matter but that are going largely unaddressed. These are the new Tinkerers. To tackle the problems traditional approaches to venture finance or philanthropy have put out of reach, these new professionals are in need of a community, instruments, a method, and jobs in which to deploy their talents for problem solving.
This moment calls for exceptional talent and capital ready to embrace a simple principle: there’s more good and money to be made investing in organizations engaged in continually solving problems that matter than there is in splitting hairs over 9 in 10 odds of failure and scheming about who might be left that can be persuaded unicorns exist.
We don’t need more minimally viable products.
We need more maximally viable organizations attacking big problems with a tinkerer’s mindset and a capitalist’s goals.
In the face of the coronavirus pandemic and the changed world we will confront when it’s over, I’m feeling an intense urgency to help build that community in which Tinkerer 1.0 people and a new kind of forward-thinking investor can thrive.
I envision a new kind of investment and development firm set on exploring problems that matter, building bold organizations that fail to fail, recycling insights and technologies to arrest the innovation waste, and making instruments for problem-solving broadly available to propel a Society of Tinkerers committed to addressing problems that matter.
That’s the reimagination of development we need to get past this era of setting off crises and venture into the uncharted land of doing good and doing well that traditional venture and philanthropic thinking have so often put out of reach. These seem like the right next steps to make innovation “grassroots” again, super-powered by the American ingenuity still out there and waiting to be tapped, and thus restore the connection between work and economic progress for individuals and for the nation as a whole.