Malcolm Gladwell, Again…

Being down for a few days with a minor illness has given me an opportunity to get through Malcolm Gladwell’s Outliers. After finishing the book, I went back and looked at the post I wrote here about his first book. It’s amazing how much of that post is as applicable to this latest book as it was to the first. The basic themes that seem to always apply are:

  • Gladwell latches on to an important insight, and expounds upon it in an enticing and insightful manner.
  • He makes beautiful use of engaging stories to make his points, though his pure reliance on those stories (and the inconvenient links between them that he carefully chooses not to address) do more damage to some of his arguments that I suspect he realizes.
  • His motivation to explore the topic at hand tends to be driven by belief in fantasies that undermine his ability to emerge with a better overall understanding of the world.
  • For all the flaws and infuriating tendencies, his work is still highly provocative, worth the effort and moving thought in a roughly positive manner.

In this particular book, the nice insight is the notion that success does not come from nowhere, and that context is as or more important than individual initiative in achieving it. It’s a case that I’ve wanted to make for years, but my take has always been too pedestrian (remember the “resume study” I wanted to do of the biotech industry?).  Gladwell is great at finding clever and sexy ways to bring forth his key points.   At first, I was impressed and enticed by the way he showed that some of the elements of that “context for success” were even more random than anything I would have ever considered. The stuff about birth order and cultural legacy seemed like pure genius. Until…

It occurred to me that the “randomness” of the contextual elements he was identifying underscored his fundamental belief in the Horatio Alger view of success. While there may be no such thing as a purely “self made man”, those who succeed need to acknowledge the heroics of others in getting them where they are. Gladwell ultimately does not acknowledge systematic advantages. Instead, success is individual initiative mixed in with a little dumb luck and some heroics from those who came before. Two steps forward, three steps back.

Gladwell tips his cap towards his delusions at the end of the second-to-last chapter. “We look at the young Bill Gates and marvel that our world allowed that thirteen-year-old to become a fabulously successful entrepreneur. But that’s the wrong lesson. Our world only allowed one thirteen-year-old access to a time-sharing terminal in 1968. If a million teenagers had been given the same opportunity, how many more Microsofts would we have today?” The answer, of course, is probably none, and Gladwell’s failure to understand that shows that he doesn’t truly grasp his own insights.

As you’ve heard me say a million times before, the reason that the answer to Gladwell’s question is near zero is because the social system will not allow that many newcomers to be successful at any one time. Too much entrepreneurial success would be too disruptive to the system, and would require too many more people or firms currently accumulating wealth to stop doing so at the rate to which they’ve become accustomed. All the individual initiative in the world is not going to stop that from happening. Newcomers will usually be undone by the efforts of established wealth to keep what they have. The key to understanding entrepreneurial success, then, has less to do with the success of the newcomers than it does with the failure of established firms to preserve what they have.

An interesting insight on this came to me from Robert W. McChesney’s Communication Revolution. While not a new idea, I was moved by how concisely he put it. McChesney warns his readers to beware of firms who obtain a disproportionate amount of their profit margin from the currying of political advantage rather than the inherent value of their products. He is speaking about media conglomerates, but the same notion applies to any other established ventures as well. Those who have will fight to keep – if they succeed, newcomers will be thwarted. If they fail, newcomers will step in. Failure of the old does as much (if not more) to explain entrepreneurial success than the victories of the new. Perhaps some of the more interesting entrepreneurial opportunities can be found in areas where established firms have to rely on political advantage to maintain their success. Of course, this may be a chicken-and-the-egg question; the shift of profitability from the inherent value of products or services to the currying of favor on behalf of those products is sometimes driven by modest successes from competitors. Clayton Christianson’s work speaks to this, and the recent debates on “net neutrality” provide an interesting example. There’s also all the stuff around the American automakers, but the barriers to entry in an industry like that are so high that it might be a different beast. Still worthy of understanding, but perhaps a different beast.

But maybe I’m too tough on Gladwell. Spectacular failure is frequently more valuable to forwarding thought than is modest success, and I love the fact that he seems willing to cross that line. We’re all the better for it…

 

5 thoughts on “Malcolm Gladwell, Again…

  1. I mostly agree with your analysis. One problem is, of course, that I am not sure what actionable steps can be suggested based on the (accurate, I believe) deduction that the failure of existing firms to control the market entry is more important to understand than the actions of the new entrants. If everything boils down to politics, this is still a useful conclusion, but then how do we untangle this? Go back to the old notion of political economy? Perhaps. There was an interesting attempt to bring the concepts fro political economy into my discipline of HRD lately, but it did not seem to pick up, since very few people here know what political economy is. But this is definitely something to think more about. So what would be your theory of entrepreneurial success?

    On a related subject. The whole randomness argument makes less and less sense to me, the more I think about the chaos and complexity-based ideas. I guess we could say that both sides are right: randomness is there, but it is not there at the same time. While the probability theory is useful in predicting the outcomes of coin toss, I am not sure what the utility in anything related to human affairs. Nothing is really random in the world of social systems, since everything is impacted by the myriad of small decisions and actions we make/take, by political interests, by power struggles. And in this inter-connected world, the butterfly effect is not just a metaphor, it is a reality. So is the randomness argument as reductionist as the old-school linear causal relationship arguments?

    In Gladwell’s book there are some other things that were interesting to me (given my interest in cross-cultural research): his analysis of cultural influences on decision making (recall the Korea Air example). In my conversations with Korean students, who have more specific information on the described case, I got a confirmation that his interpretation is right. Another indication that he has useful insights and intuitions.

  2. You have asked a number of useful and intriguing questions. The main “actionable steps” on the failure of existing firms to control market entry probably involve identifying investment opportunities. The bold (and as yet unsubstantiated) hypothesis is that the more that a firm, industry or sector depends upon political positioning to maintain (or perhaps just enhance) profitability, the higher the probability that a viable alternative to their products or services is ripe for a successful entrance into the marketplace. My hunch is that these conditions do not improve the prospects for direct competitors (in fact, these are likely to be worse), but rather for those developing different products that folks may be inclined to use in place of the dominant products. Given the woes of the American automobile manufacturers, this is probably a real crappy time to try to get into the car business. But it might be a nice time to get into high-speed trains, other public transit options, urban planning and perhaps even light farm equipment (who might have some unique insights into rural transportation problems). One company or industry’s woes is another’s opportunity, if the problems are reframed properly.

    If there is any truth to this hypothesis, the prospects may be more intriguing for public investment than they are for the private sector. Imagine if all government bodies viewed requests for political favors as an indicator of the viability of investment in alternative products or services. Even as they granted the favors to an existing firm on one hand, they could plant the seeds for its undoing with the other. This might lead to some very interesting changes in the ways that the existing private infrastructure sought advantage from the public sector.

    Of course, the details involved in this line of thought are incredibly complicated. The multitude of tactics used to build political advantage (direct cash payouts from public funds, use of public lands or resources for private development, laws and tarriff structures to restrict competition or reduce labor costs, purchase of patents for the purpose of halting further development of potential competitors, etc.) would need to be identified, catalogued and assessed, as would the extent to which each of these indicated any degree of strength or weakness in any pariticular firm or sector. Any potential relationships would likely be clouded by public utilities, military contractors or firms who generate most of their sales from the public sector, and the like. While difficult, these problems are not insurmountable, and might lead to some nice theories of vulnerability for larger corporate concerns beyond traditional stuff like stock prices, debt portfolios and overhead costs. The resulting indicators may be less sporadic, unpredictable or as easy to manipulate than the traditional ones as well.

    From a research perspective, these ideas might help develop a fuller understanding of the full “life cycle” of firms, especially the vulnerabilities inherent in the end of life (which, in turn, opens the door for the birth of new ones). And let’s face it – this is an area that needs a mountain of work. To this day, most people still review firm success as a function of brilliance, and failure as incompetence. While each of these have their role, they are overly exaggerated in most accounts. One of the things I most appreciate about Clayton Christianson’s work is how he shows that it was perfectly rational for firms like Digital Equipment to not pursue the technologies that ultimately led to their undoing. It was not lack of foresight that put them out of business, but basic forces over which they were likely to have little control. The biological metaphors may be appropriate here – living things die, and not always through any fault of their own. So do firms. We need more work that seeks to develop this framework, and this line of thinking seems to have some promise in this regard.

    As a result, my theory of entrepreneurial success would, of course, be a systems theory. If we seek to maintain a focus on the new firms that emerge as big winners, we have to realize that success is more a result of the system’s ability to absorb new entrants than it is on the efforts or abilities of individual firms to become successful. I’ve been preaching this for years. What’s a bit more novel for me is the added sense that from a systems perspective, we can’t understand the success of new firms without a better grasp on the decline of old ones – specifically those old ones that met the grandest criteria of success sometime in the past (previous entrepreneurial “winners”). Because the number of firms that can reside “at the top” is clearly finite in most of our economic structures, older firm decline presents the opportunity structure that allows new firms to step in. It’s possible that this transition is the key structure in understanding what makes entrepreneurial success possible.

    What this implies is that the firm, industry or sector is really not the key driver in economic or social activity. What matters is the activity in which these firms engage, and the development of a priority structure for determining which activities we should engage in, and which we shouldn’t. The boundaries of organizations (both firms and states) are already blurring in our understanding of multinational markets, financial structures, terrorist organizations and any number of activities in which we are routinely engaged. Perhaps we need to continue that blurring still further in our understanding of economic success and failure. The goal is to move resources most efficiently to the structures most capable of addressing the needs that society develops and recognizes as important, without being too bogged down in preserving the organizations who do it. This is likely to be especially important in the coming years as we seek to address our declining supplies of fossil fuels and need to redesign our world around new forms of energy.

    Funny how this leads us back to the same line of thinking that we developed in that social impact of entrepreneurship paper we wrote several years ago, isn’t it?

    On to your question about randomness – is randomness really just a reductionist trick? Well, yes and no – but probably more no than yes. If you think about it, explanation is much more of a reductionist trick than randomness is. But I will concede that there may be some problems with definition of terms. Methinks that randomness is sometimes treated as a residual category where events with trivial explanation are combined with other events that are truly random. The question is the extent to which the distinction is important enough to reinstate in our understanding.

    For the purposes of this argument, let’s think of explanation as a basic reductionist technique. If we have 100 separate events, each has it’s own account, so we can have up to 100 explanations. But because we are incapable of keeping and using all of those accounts in all their detail all at once, we seek to group them around certain common dimensions that make the information more manageable. Explanation is largely our attempt to perform this grouping, and the more events that are adequately grouped by a single explanation, the more confidence we place in it. This is especially true as we add more and more events (beyond the original 100) into the mix. Of course, we’re probably dealing with a parabolic distribution in building the case for the strength of any particular explanation, because we are rightly skeptical of any grouping that seems to entail all cases – we begin to wonder if it is tautological.

    As a result, for any series of events we are likely to come up with series of groupings that explain them to our satisfaction. Intellectually, we probably get uncomfortable with more than 5 or 6 groupings to explain the events, so we would look for ways to get most of them into one of those groupings. Hence, if we did a Pareto chart of our work, we’d likely find most of our events falling into the first 5 or 6 groupings, but with a few cases that defied those characterizations and hence in groupings with smaller frequency (it’s probably obvious that this line of thought borrows heavily from Anderson’s The Long Tail, another book that I finally got around to reading and found more useful than I had anticipated). Chances are pretty good that we might characterize those groupings as “random” because they didn’t fit withn our comfortable set of explanatory groupings. In many instances, these are clearly not random – they have reasons and explanations, but not ones that occur frequently enough to fit within the frame we find important. Is the distinction between those and truly random events important in the way we make sense of the world? Chaos and complexity theory suggest that this is possible, but I struggle with their application to social systems. It’s been a while since I’ve read any of that stuff, so there may be some insights I don’t remember. But I suspect my forgetfulness may be telling. Please let me know how I’m wrong…

    The other way to think about this problem is to envision a study of truly random events. I’ve always thought it would be great fun to do a systematic study of people who have won big money in Powerball or other state lotteries. There is only one nonrandom event that led to their victory – they bought at least one ticket to be eligible for the prize. But you could collect enough data to come up with a convincing analysis to suggest that very little of the process was random – they would have “risk tolerance” profiles, attitudes toward winning, etc. that would sound very convincing, but all based on a random event. The reason I originally wanted to try this was to parody all the entrepreneurial characteristics studies that seem to fit the same mold. But there are lessons here as well – the problem is more likely to be due to the imperfections in the art of explanation than in anything about the inherent nature of randomness.

    As for the Koreans in Gladwell’s book, I thought it very interesting that Gladwell did not make a connection between the orientation that the Korean pilots had toward authority and the acceptance of regimentation that made it easier for Asians to exceed in mathematics. They come from the same authoritarian mindset, and produce similiar consequences. Funny how he could praise one and knock the other while remaining oblivious to the connection between them. Gladwell splashes around in some interesting pools, but he’s clearly in over his head.

    More later…

  3. Adapted from a post originally written on April 1, 2009:

    Reactions to some of the ideas in the previous comment…

    In response to the notion of needing to develop a fuller understanding of the full “life cycle” of firms, especially the vulnerabilities inherent in the end of life – This argument reminds me of Dick Cardozo’s organizational geriatrics idea. And I also think that your argument here is not taking into account your own elaboration later (on the need to concentrate on the activities, not on firms and organizations as entities).

    In response to the notion of a theory of entrepreneurial success as a systems theory – The problem with this argument is that you assume the existence of some static entity (system), consisting of multiple organizations. I would argue that your intuition elsewhere in this essay is more correct – instead of trying to understand the system’s ability to absorb the new entrants (and assuming that there is such a thing as a system that absorbs these), we should be more interested in understanding the patterns of interaction of multiple agents (in this case, firms) in a fluid and constantly changing nexus of relationships and power transactions.

    In response to the idea that the firm, industry or sector is really not the key driver in economic or social activity. What matters is the activity in which these firms engage, and the development of a priority structure for determining which activities we should engage in, and which we shouldn’t – The above paragraph is in complete agreement with my current view. And, as I have indicated earlier, it is in some degree of disagreement with your own conceptualization in previous paragraphs.

    In response to the question about the role of chaos and complexity theory – Well, the applications of complexity theory have made a significant progress since the time when attempts were first made to directly apply it to social sciences fields. First, although there are still those who try to directly apply the rules from natural science and math – based complexity theory to social world, there are also those who have figured out that what is really useful are some general metaphors. This helped to move systems theory into a new realm, by extending it through the application of new metaphors from complexity. So when you are saying that your theory is based on systems theory, I would agree that it is necessary to base it on the systems theory, but I would prefer to use an extended version, which incorporates the complexity thinking. More on this later, since I am trying to write down my thoughts on this separately, and will post if I find what I come up with deserving your review.

    On the Koreans in Gladwell’s book – A very good observation. Is he over his head, or just selective in an attempt to make the most convincing argument?

  4. While the blurring of organizational boundaries may have extraordinary explanatory power, I think we have to be careful not to use that to completely discredit the definition of organizations as independent entities or of systems as the milieu in which organizations operate. Your suggestion that I see systems as static is incorrect, but there is definitely a system in which organizations operate. Its definable characteristics may be broad (basic property rights, legitimization laws, etc.), but they remain highly salient. While social systems are human creations, not subject to “natural laws” and fully capable of radical and immediate change, some (including the Western economic system) are capable of maintaining certain stable features long enough that there are some broad forms of flux that need not be of tremendous concern. Others do need attention, but some tend to remain consistently dormant.

    The notion of “system” remains important in this context because there are few (if any) economic systems in the modern world that are open. Most all are highly closed and have entry requirements that are not fully consistent with the most commonly stated and accepted (at least superficially) human values (merit, quality, perserverence, hard work, etc.). There remains a significant need to reconcile these values with the way we organize human activity, and the system perspective makes this possible. Hence, I stand by my argument that understanding how the system absorbs new entrants remains tremendously important. But the tools needed to do this are constantly changing, as your challenges to my thinking very astutely point out.

    Perhaps the key is in better understanding what makes modern organizational boundaries so porous and blurry without degenerating to the position that organizational distinctions are not important. At first glance, there are three elements that are particularly important to broadening this understanding:

    ***Characteristics of the organizations themselves. I find myself attracted to a notion of transience – the ways and extent to which organizations change shapes, objectives, membership and the like to attempt to thrive within the economic system. Just how transitory do we expect our modern organizations to be? History might suggest that these expectations have changed fairly radically over time, and the speed of that change continues to accelerate.

    ***Characteristics of the individuals that populate the organizations, especially those with significant decision-making power. Perhaps the most important characteristic is the fact that these individuals hold membership stakes in many different organizations. I wonder if our perspective on organizations has become a bit too Weberian, and we’ve lost track of the extent to which the people who hold the positions in the organizations matter – especially when they hold positions in multiple organizations. The important characteristic to understand here is membership patterns and individual stakes in each of the organizations in which an individual is a member. This should not be viewed as a plea to go back to the study of nonsense like personality traits or “what it takes to succeed.” The quicker that crap is relegated to the scrap heap, the better.

    ***Characteristics of the assets (both “real” and “projected”) that both organizations and the people that populate them hold. Methinks that a key concept here might be making a serious distinction between ownership and control. Some own assets they don’t control, while others control assets they don’t own. Plus, there’s always the continuing battle over how many assets someone should be allowed to own in exchange for controlling assets they don’t. This is compounded whenever someone places these owned assets into someone else’s control in another organization.

    I’ve got to guess that many of these elements are well studied, but to what extent have they been put into the “fluid and constantly changing nexus of relationships and power transactions” that comprise current economic activity. Maybe this is where some of the best opportunities lie…

    On a separate topic, I’m various anxious to hear your views on the advancement of complexity theories in the understanding of social systems. I was well read on many of these theories several years ago, but felt like I reached a point of diminishing returns with much of that material. This led me to eventually lose interest in it and then subsequently forget much of what I learned about it. Something tells me you’re on to something that will reignite my interest, so I’m looking forward to what you have to share.

    As always, more later…

  5. I like your three factors, explaining why the organizations are becoming especially transitory or permeable now (I suspect that they never were fully solid and impermeable, but I agree that now the process is accelerating). I suspect that all three factors have a significant role, and I think it would be really good to explore each in more depth.

    I also wonder what other factors could be at play. Some of these things have to do with changing patterns of identity development, and with the fact that postmodern notions of who we are and what our social systems are have taken hold in popular (folk) psychology (regardless of whether people realize this or not, and regardless of the fact that the majority has never thought about these things and never heard about modernism, postmodernism, and other labels.

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