The Blind Watchmaker

Kevin recently wrote a post that really tickled my brain. It touches on the computational aspect of entrepreneurship. There are a couple points I’d like to follow up on.

First I’d argue that the uncertain entrepreneur is not the analog of the blind watchmaker. This is a minor quibble, but I think it’s good to keep our language tidy and that includes clarifying our metaphors. The Blind Watchmaker is a perfect metaphor for the emergent order in markets. But the watch is the market as a whole. Any one entrepreneur is just a tiny component of the system–potentially an ingenious component, but always dwarfed by the genius of the system as a whole. The watch maker in biology is the process of evolution. In markets, the closest idea we have is the invisible hand–also an evolutionary process.

Second and more importantly, I’d like to poke at the genetic component of the metaphor to show how much harder social evolution is than biological evolution.

Evolution is a process that acts on the substrate of “replicators”. DNA replicates (in genes) and so do ideas/jokes/norms/etc. (in memes). I guess we could just say “a business model is a type of meme!” and be done with it. But even thinking about what Internet jokes spread means stepping away from the abstract genetic alphabet of strings of A’s, T’s, C’s, and G’s.

The replicators of entrepreneurial evolution occur at more than one level (as I understand it, the idea of multi-level selection is controversial in biology, but inevitable here): little patterns of behavior make up larger patterns. A burger restaurant is sort of like a buffalo. And the business model (e.g. McDonald’s franchise) is sort of like the species as a whole or perhaps something even broader. All the various ways to market burgers compete across a range of niches, but we don’t have a literal genetic code to analyze. We might, hypothetically, be able to isolate the appropriate atomic unit of economic life, but I’m skeptical it would be terribly useful (at least for human understanding).

Still, what entrepreneurial and biological evolution have in common is that they are, fundamentally, complex sets of computations (in out-of-equilbrium systems) on a non-silicon medium. Entrepreneurs indeed face a different situation than genes, but that’s only because they’re dealing with multiple (tangled) layers of evolution spanning large scale things like:

human culture,
legal systems,
economic patterns and business models,

through medium-scale things like the particular landscape of a particular market at a given time and place, down to micro things like the particular ISO specifications of some particular size of bolt.

It’s true that “unlike evolution, you…are trying to achieve something beyond replication…” as an entrepreneur. But at the end of the day a) your apparently high minded goals are really just their own evolving and replicating memes, and b) your apparently high minded goals are really just setting the stage for the atomic unit of evolution that really matters: the proper size and shape of a paperclip. It’s like Dawkins wrote in The Selfish Gene: It’s not really the organism (entrepreneur) that matters, it’s the gene (atomic unit of whatever sort of evolution).

Entrepreneurs usually make decisions with incomplete information, in disciplines where we lack expertise, and where time is vital. How, then, can we be expected to make decisions that lead to our success, and how can other people judge our startups on our potential value? And even if there are heuristics for startup value, how can they cross fields?

The answer, to me, comes from a generalizable system for improvement and growth that has proven itself– the blind watchmaker of evolution. In this, the crucial method by which genes promulgate themselves is not by predicting their environments, but by promiscuity and opportunism in a random, dog-eat-dog-world. By this, I mean that successful genes free-ride on or resonate with other genes that promote reproductive success (promiscuity) and select winning strategies by experimenting in the environment and letting reality be the determinant of what gene-pairings to try more often (opportunism). Strategies that are either robust or anti-fragile usually outperform fragile and deleterious strategies, and strategies that exist within an evolutionary framework that enables rapid testing, learning, mixing, and sharing (such as sexual reproduction or lateral gene transfer paired with fast generations) outperform those that do not (such as cloning), as shown by the Red Queen hypothesis.

OK, so startups are survival/reproductive vehicles and startup traits/methods are genes (or memes, in the Selfish Gene paradigm). With analogies, we should throw out what is different and keep what is useful, so what do we need from evolution?

First, one quick note: we can’t borrow the payout calculator exactly. Reproductive success is where a gene makes more of itself, but startups dont make more of themselves. For startups the best metric is probably money. Other than that, what adaptations are best to adopt? Or, in the evolutionary frame, what memes should we imbue in our survival vehicles?

Traits to borrow:

Short lives: long generations mean the time between trial and error is too long. Short projects, short-term goals, and concrete exits.
Laziness: energy efficiency is far more important than #5 on your priority list.
Optionality: when all things are equal, more choices = more chances at success.
Evolutionarily Stable Strategies: also called “don’t be a sucker.”
React, don’t plan: prediction is difficult or even impossible, but being quick to jump into the breach has the same outcome. Could also be called “prepare, but don’t predict.”
Small and many: big investments take a lot of energy and effectively become walking targets. Make small and many bets on try-outs and then feed those that get traction. Note– this is also how to run a military!
Auftragstaktik: should be obvious, central planning never works. Entrepreneurs should probably not make any more decisions than they have to.
Resonance: I used to call this “endogenous positive feedback loops,” but that doesn’t roll off the tongue. In short, pick traits that make your other traits more powerful–and even better if all of your central traits magnify your other actions.
Taking is better than inventing: Its not a better startup if its all yours. Its a better startup if you ruthlessly pick the best idea.
Pareto distributions (or really, power laws): Most things don’t really matter. Things that matter, matter a lot.
Finite downside, infinite upside: Taleb calls this “convexity”. Whenever presented with a choice that has one finite and one infinite potential, forget about predicting what will happen– focus on the impact’s upper bound in both directions. It goes without saying– avoid infinite downsides!
Don’t fall behind (debt): The economy is a Red Queen, anyone carrying anything heavy will continually fall behind. Debt is also the most likely way companies die.
Pay it forward to your future self: squirrels bury nuts; you should build generic resources as well.
Don’t change things: Intervening takes energy and hurts diversity.
Survive: You can’t win if you’re not in the game. More important than being successful is being not-dead.

When following these guidelines, there are two other differences between entrepreneurs and genes: One, genes largely exist in an amoral state, whereas your business is vital to your own life, and if you picked a worthwhile idea, society. Two, unlike evolution, you actually have goals and are trying to achieve something beyond replication, beyond even money. Therefore, you do not need to take your values from evolution. However, if you ignore its lessons, you close your eyes to reality and are truly blind.

Our “blind” entrepreneur, then, can still pick goals and construct what she sees as her utility. But to achieve the highest utility, once defined, she will create unknowable and unpredictable risk of her idea’s demise if she does not learn to grow the way that the blind watchmaker does.