Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries


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Author: Safi Bahcall
Published: 3/19/2019
What do James Bond and Lipitor have in common? What can we learn about human nature and world history from a glass of water? In Loonshots, physicist and entrepreneur Safi Bahcall reveals a surprising new way of thinking about the mysteries of group behavior that challenges everything we thought we knew about nurturing radical breakthroughs.

Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries By. Safi Bahcall

Key Insights

‘Loonshots’ is another term for crazy risky ideas, which turn successful.

Loonshots are born from one person’s brain. However, in order for a loonshot to catch on, a team of people must be behind it supporting and encouraging it.

“Just because a theory might be a bit wacky, however, doesn’t mean there isn’t something to the observation.”- Safi Bahcall

In “Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries” by Safi Bahcall, you will learn what it takes to cultivate a crazy idea of your own and how loonshots can change the world, as well as make your company a market leader.

Key Points

  • The Tools You Need

Teams today can cultivate loonshots with these simple tools:

  1. Phase Separation: You must separate your team strategically. People working on simple projects should be apart from the people working on the risk-taking creative work.
  2. Dynamic Equilibrium: Both teams should still collaborate and communicate.
  3. Critical Mass: There needs to be a lot of organization as loonshot ideas often fail.
  4. The Magic Number: Smaller companies, under 150 people, usually are more successful at following a loonshot idea.
  5. Incentives: The magic number can be changed if you also change your team’s structure.
  6. The Moses Trap: Teams should make decisions rather than the leader.

 

  • Loonshots Win Wars

For teams to stay on top and be successful, they must have radical and innovative ideas. That’s where loonshots come in.

However, companies also must have their simple strategic staples that will keep their team running.

A great example of this is WWII. While fighting the Germans, the Allied forces were desperate for new technology. But, they had no time to sit and wait patiently while scientists experimented. So, they had to use what they had in order to stay afloat. Theses were their simple tools.

But, in order to beat the Germans, they needed new technology. New technology was developed under the Office of Scientific Research and Development (OSRD) created by President Roosevelt.

The OSRD worked with military men to determine the most common and threatening in-the-field problems so they could work to address them. This led to the OSRD developing the technology that ultimately won them the war!

This example also shows phase separation at its finest. It is two different structures of problem-solving working toward the same shared goal.

The military, in nature, has a very strict set of guidelines that they must adhere to. However, the OSRD had the freedom to think outside the box and get creative.

When these two structural puzzle pieces come together, dynamic equilibrium happens. This is when both the strict and creative pieces fit together to give each other equal support.

  • Loonshots Are Fragile

A lot of people think that since loonshots are so genius they tend to escape common obstacles. But, that’s simply not the case. Every idea must overcome barriers over and over again until they succeed.

For example, Akira Endo, a well-known Japanese researcher, developed statins, or lipid-lowering medications, by studying fungi that could actually block cholesterol.

The first barrier that Endo encountered was that the US believed that people needed cholesterol for their cells to function, so blocking it was seen as dangerous.

The second barrier was because of his research findings, which showed insignificant results.

And the third barrier was that cancer began in some of the animals that he tested on during his research.

The pharmaceutical company, Merck, worked with Endo to disprove that statins would cause cancer. The drug proved sufficient to help people with severely high-cholesterol.

Statins then were allowed into the market and since then have saved millions of lives.

The most common setback for a loonshot is a false failure. That’s when an idea seems to have failed, but really it hasn’t. To fight this false failure, you must investigate it.

“People may think of Endo and Folkman as great inventors, but arguably their greatest skill was investigating the failure. They learned to separate False Fails from true fails.”-Safi Bahcall

If you ask the right questions, you will learn why your idea seemed to fail, and it will open up new ideas in order for you to get the idea to succeed.

  • There Are Two Types of Loonshots

The two types of loonshots are:

  1. P-Type: An innovation of a product
  2. S-Type: Has to do with strategy and business

P-type failures are usually very quick. If a product doesn’t work, it simply doesn’t work.

S-type failures, however, happen gradually and you cannot always identify when they are happening.

“S-type loonshots are so difficult to spot and understand, even in hindsight, because they are so often masked by the complex behaviors of buyers, sellers, and markets. In science, complexities often mask deep truths: mountains of noise conceal a pebble of signal.”- Safi Bahcall

If you look at IBM and its failure in the 1990s, it looks like a P-type failure at first-glance because it innovated the computer to personal computers.

But, if you take a closer look IBM actually made an S-type mistake. They started developing PCs too early and instead of developing innovative software themselves, they enlisted Microsoft to help them. And this may not seem like a problem, except that every other computer company was using the same strategy.

Because of this business decision, IBM came crashing down and Microsoft flourished.

This is called a “Moses trap” situation. This is when a leader essentially and unintentionally creates a blindspot in the loonshot. He or she does this by making rules or guidelines determining which loonshots will succeed for both the creative team and the in-the-field team.

If IBM had paid attention to what its customers wanted rather than relying on the previous success of their company, they might have not lost the $8.1 billion they lost in 1993.

  • The Moses Trap

This is how the Moses Trap process goes:

  1. P-type loonshots grow into a franchise, which in turn, leads to other P-type loonshots. The company, then, becomes famous for the products it develops.
  2. Then, the company relies heavily on their products and ignores S-type loonshots that are popping up in their market.
  3. And finally, the leader of the company makes a decision about which loonshots will succeed, ignoring the S-type loonshots. The leader continues this until one of their predictions fails and the rest of the market rises above them.

An example of this is the company Polaroid. Edwin Land and his company Polaroid were well-known for innovative new technology when it came to their products. But, Edwin started relying too much on the idea of “Polavision” which was an instant film developing technology. However, at the time, digital was popular in the market of film.

Although Edwin saw the power of digital film, he believed it wasn’t right for Polaroid’s customers because when their first digital camera premiered it was already so far behind what the competitors in the market were already doing.

If you want to get free of the Moses Trap, you must understand why your plan or product failed. And you must also understand the decision-making factor behind the failure.

With everything, you must look at what led to the failure, rather than just the failure itself. That way, you know what not to do again.

However, it must be noted that sometimes bad decisions do lead to positive outcomes. If you look at the whole picture, you can see if it was a decision or luck that allowed a win for you and your company.

  • Phase Transitions

As companies grow and foster, employee incentives also begin to grow and change.

In companies below 150 employees, the workers are focused primarily on the mission of the company and doing their part to help it succeed.

But when companies are over 150 employees, workers tend to begin to think of their individual career goals, rather than just the goals of the company.

“As teams and companies grow larger, the stakes in outcome decrease while the perks of rank increase. When the two cross, the system snaps. Incentives begin encouraging behavior no one wants. Those same groups—with the same people—begin rejecting loonshots.”-Safi Bahcall

In order to nurture and grow a loonshot, everyone has to have the same goal. So under 150 employees is ideal. However, if your company has more, the good news is you can change that!

Incentives and goals affect employee behavior. The two most simple employee incentives are salary and equity.

With a salary, your work is rewarded with things such as promotions or an increase in pay.

With equity, your work is rewarded with a stake in the outcomes of the project. This could in hard equity which would come in the form of a bonus or stock options. Or it could be in soft equity which would come in the form of recognition, a way to develop new skills or a sense of purpose.

If an employee is rewarded with pay, they tend to want to make their name known around the office, chatting with other employees, and become popular in office politics. And when they are rewarded with equity, they tend to spend more time on their work and projects.

Salary is important, but if a company focuses too much on giving promotions and raises to workers instead of equity, they risk creating a hostile work environment where loonshots cannot be nurtured.

This is because not a lot of employees would choose a risky route if succeeding is going to get them their reward. They would rather stick to a safer route and get a pay raise.

Lowering the salary associated with promotions and substituting with connecting pay with the hard work an employee puts in will encourage a company’s individuals to take risks.

Also by focusing on skill rather than popularity in the office when doling out projects to employees will encourage them to choose project-based work.

  • The Three Conditions

Three things need to happen in order for a company to nurture a loonshot:

  1. The company must be separated. People working on the loonshot must be separate from the people who are working with simple ideas and holding the company afloat.
  2. However, both of these groups need to collaborate and have proper communication.
  3. There must be a high level of organizational support for the loonshot group so that they can navigate and overcome multiple failures.

“People responsible for developing high-risk, early-stage ideas (call them “artists”) need to be sheltered from the “soldiers” responsible for the already-successful, steady-growth part of an organization. Early-stage projects are fragile.”- Safi Bahcall

A great example of a loonshot procedure is the film industry. In the film industry, there are two markets. There is one that consists of popular studios such as Disney, Paramount, and Fox. Then there is a group of small indie production companies, which often have more riskier or loonshot projects.

These two markets work together all the time. Big studios grab indie projects in order to distribute them after the small studios produce them.

Without big studios like Disney, the film industry would go financially bankrupt. And without small indie studios, film material would grow stale and uninteresting.

It’s true that a lot of indie movies fail, but big studios have picked up some notable indie films that have become cult films such as The Blair Witch Project and Clerks.

The Main Take-Away

Loonshots are risky ideas that can change the world. For a team to properly nurture a loon shot they must have a separated group dynamic, that communicates and collaborates, with optimal organizational support.

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