What is the worst nightmare of an innovator? We may think it is a fear that the innovation may not take off. But we are wrong. The worst nightmare of an innovator is blowing up big time. Losing not only the investment made towards the innovation but much more. Falling so hard that you don’t get up again, ever. Hence, guarding against a possible “blow-up” is a critical piece of systematic innovation.
Before understanding how to guard against a potential blow-up, let’s understand a “blow-up” through a story commonly known as Edison’s Folly (given step-wise below).
1. By 1887, Edison had grown increasing bored with his electricity business as the business model was proven, competition intensified and legal battles became a norm.
3. In 1889 he finds right kind of deposits on a mountaintop in the rural
4. Operation begins by fall of 1891. The mill and its machinery simply weren’t up to the task. The crushing rollers were not heavy or strong enough and often broke loose, endangering workers.
6. Plat shuts down due to depression in 1893.
7. By 1898 the machinery starts to run dependably at last. A thousand tons of ore a day were being shipped out; if this volume could be continued and ore prices remained stable, the first operating profits might be just around the corner.
8. By 1899 the process matures further and
9. In 1898, two brothers had stumbled onto the great Mesabi Range in the northern
Nassim Taleb refers to the event such as “finding of high-grade ore in Mesabi” a negative black-swan. You can lose a decade worth of work in no time. We saw earlier that humans are very poor at predicting black swans. Question is – Was Edison aware of the exposure he had to a negative black swan? We don’t know. But I believe it is important for innovators to understand this exposure.
Warren Buffett when asked “What are the fundamental qualities of your successor?” has said, “I hope he is aware that 25 x 23 x 17 x 20 x … x 0 = 0; you had better be aware of introducing a zero in a series. In other words, we need someone genetically programmed to recognize and avoid serious risks.” Question is – is this quality, like Buffett says, really part of your genes? or can it be learned?
Related article: Pre-mortem: Tell me where I’m going to die, so I don’t go there.