Apr 13th 2022

Experimental Entrepreneurs

by David Galenson

David W. Galenson is Professor of Economics at the University of Chicago; Academic Director of the Center for Creativity Economics at Universidad del CEMA, Buenos Aires; and a Research Associate of the National Bureau of Economic Research. His publications include Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity (Princeton University Press, 2006) and Conceptual Revolutions in Twentieth-Century Art (Cambridge University Press and NBER, 2009).

 

Steve Jobs dreaded turning 30, because he knew it would be fatal to his creativity: "It's rare that you see an artist in his 30s or 40s able to contribute something amazing." Mark Zuckenberg was even more blunt -- "young people are just smarter" -- and his Silicon Valley neigbor Vinod Khosia agreed: "People under 35 are the people who make it happen."

The economic historian Jonathan Hughes wrote that with the Model T, “Henry Ford and his men made a revolutionary machine and a revolution. They made a light, strong, powerful, efficient, simple, dependable and cheap automobile.” Hughes believed that the Model T made the automobile” perhaps the most powerful instrument of egalitarian American democracy,” and judged that “Ford liberated the common man on a greater scale than any hero in history”- surely a dent in the universe. Yet the Model T was not the product of a momentary stroke of genius, but rather the result of a painstaking process of more than 15 years in duration, that began when Ford, working nights after his day job as an engineer for the Detroit Electric Co., built a one-cylinder engine in his kitchen, then proceeded to construct a motor car by hand in the woodshed behind his home. When Ford introduced the Model T, he was 45 years old.

Henry Ford worked by trial and error, and never accepted any result as final: he declared that “We will rip out anything once we discover a better way,” and his workshops were marked by constant experimentation. His plan for personnel was perpetual ferment, with no formal titles or duties, but constant competition. A fellow mechanic early in Ford’s career recalled that “he always figured that there was some little improvement he could make,” and he maintained that attitude toward all his projects throughout his life.

Steve Jobs doubtless would have considered Henry Ford an anomaly, a rare case of an entrepreneur who innovated well past the first blush of youth. In fact, however, Ford was an archetypal experimental entrepreneur. Experimental entrepreneurship is often overlooked: experimentalists are less flamboyant than their conceptual peers, and their innovations arrive gradually and less conspicuously (even Ford’s Model T arrived only after a series of earlier cars – Models A, B, C, K, N, R, and S). Always uncertain, they work patiently to innovate, cautiously proceeding by trial and error in pursuit of ambitious but imprecise goals. They gain knowledge and judgment over the course of their careers, and often arrive at their greatest achievements late in their lives.

Many recent experimental entrepreneurs can be cited, in a wide range of activities. At the age of 52, Ray Kroc signed a contract with Mac and Dick McDonald that gave him the right to franchise copies of their California hamburger drive-in; he opened his own first McDonald’s a year later. Michael Young, who declared “I have never had an idea that I was sure about,” became the first chairman of England’s Consumers’ Association at 42, and founded the National Extension College, the forerunner of the Open University, at 48. Sam Walton opened Wal-Mart No. 1 in Rogers, Arkansas, at 44, and discovered “that there was much, much more business out there in small-town American than anybody, including me, had ever dreamed of.” At 53, Warren Buffett wrote in his annual letter to Berkshire Hathaway shareholders that “your chairman, always a quick study, required only 20 years to recognize how important it was to buy good businesses.” Managing radio stations with the philosophy “Try this, and if that doesn’t work, try something else,” Bill Siemering became National Public Radio’s first director of programming at 36, and founded Developing Radio Partners, to help independent radio stations in Africa and Asia, at 69. Later recalling that “I was walking blind and learning as I went along,” Muhammad Yunus reluctantly gave up an academic career to manage his Grameen Bank at the age of 39, and 27 years later shared the Nobel Peace Prize with the bank in recognition of microcredit as a tool in the fight against poverty. At 45, after making more than 5,000 prototypes over 14 years, James Dyson made his first fully functional cyclone vacuum. His formula for entrepreneurial success: “Patience, patience, patience.”

Steve Jobs believed that an entrepreneur’s most valuable trait was a beginner’s mind. Jobs was a great entrepreneur, but a very bad scholar of entrepreneurship. He completely failed to recognize that successful entrepreneurship could be a result of wisdom gained from years of experience. Charlie Munger attributed Warren Buffett’s success to the fact that he is a “learning machine.” This may be an apt characterization of all the experimental entrepreneurs considered in this article. All immersed themselves in an industry and never stopped working to learn all they could about it. None ever stopped trying to improve their products, no matter how successful they became. And although all were learning machines, with time and experience all developed judgment and wisdom in their chosen trades that no machine has been able to match.

 

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More Essays

Sep 21st 2022
EXTRACTS: "It might seem like an obscure footnote among the history-making events of 2022, but the year of Queen Elizabeth II’s death coincides with the 300th anniversary of Adam Smith’s birth." ----- "As a committed Stoic, Smith had little patience for greed. The whole point of Roman Stoic philosophy was to use personal moral discipline to support the rule of law and constitutions, and to make society a better place." ----- "When we read Smith, we are better served to think of the example of Elizabeth II than of those driven by personal greed. It might sound archaic, but, as Britons’ response to her death suggests, these values still appeal to a great many people today."
Sep 14th 2022
EXTRACT: "On the day of Queen Elizabeth II’s death, the former Prince of Wales was proclaimed King Charles III. Although it’s been known for decades that Charles would succeed his mother, there were rumours that he might, once king, choose the name George due to the contentious legacies of Kings Charles I and Charles II."
Aug 25th 2022
EXTRACT: "An over-emphasis on looking for the chemical equation of depression may have distracted us from its social causes and solutions. We suggest that looking for depression in the brain may be similar to opening up the back of our computer when a piece of software crashes: we are making a category error and mistaking problems of the mind for problems in the brain. It would be wise to observe caution with drugs whose effectiveness is not certain, whose mode of action is unknown, and which have many side-effects, especially for use in the long term."
Jul 29th 2022
EXTRACTS: "China uses incarcerated prisoners of conscience as an organ donor pool to provide compatible transplants for patients. These prisoners or “donors” are executed and their organs harvested against their will, and used in a prolific and profitable transplant industry."
Jul 29th 2022
EXTRACT: "In the first episode of season three of The Kominsky Method (2021), there is a funeral service for Michael Douglas’ character’s lifelong friend Norman Newlander (played by Alan Arkin). By far the most inconsolable mourner to give a eulogy is Newlander’s personal assistant of 22 years who, amid a hyperbolical outpouring of grief, literally cannot bring herself to let go of the casket. It is a humorous scene, to be sure, but there is something else going on here that is characteristic of employer-employee relations in this era of neoliberal capitalism. “Making him happy made me happy,” she exclaims, “his welfare was my first thought in the morning, and my last thought before I went to sleep.” That isn’t sweet – it is pathological. ----- Employee happiness is becoming increasingly conditional on, or even equated with, the boss’ happiness. As Frédéric Lordon observes in his book, Willing Slaves of Capital (2014), “employees used to surrender to the master desire with a heavy heart…they had other things on their minds…ideally the present-day enterprise wants subjects who strive of their own accord according to its norms.” In a word, the employee is increasingly expected to internalize and identify with the desire of the master."
Jul 20th 2022
EXTRACT: "For three decades, people have been deluged with information suggesting that depression is caused by a “chemical imbalance” in the brain – namely an imbalance of a brain chemical called serotonin. However, our latest research review shows that the evidence does not support it."
Jul 13th 2022
"But is he “deluded”? " ---- "....we sometimes end up with deluded leaders because we ourselves can be somewhat delusional when we vote." ---- "David Collinson, a professor of leadership and organization at Lancaster University, associates this predicament with excessive positive thinking, or what he calls “Prozac leadership,” in reference to the famous antidepressant that promises to cheer people up without actually fixing what is wrong in their lives. “ ---- "In politics, Prozac leaders come to power by selling the electorate on wildly overoptimistic views of the future. When the public buys into a Prozac leader’s narrative, it is they who are already verging on the delusional." ----- "Another potential example is Vladimir Putin, who has conjured a kind of nostalgic dream world for his followers and the wider Russian public."
Jun 25th 2022
EXTRACT: "Many veterans, refugees and other people who have experienced trauma and have mental health issues spend little time thinking about the future. Instead, they are narrowly focused on the negative past. However, people who have experienced trauma and developed a healthy future perspective report being better at coping with life, having fewer negative thoughts about the past, and getting better sleep compared with those who have a negative future perspective. So, instead of dwelling on the past, people who have suffered trauma should be encouraged to think about the future and set goals that help them develop hope for a good life."
Jun 8th 2022
EXTRACT: " The devastation of war is a recurring theme in Turner’s work, and unlike his contemporaries Turner is willing to forego the occasion to bolster national pride or the patriotism of its fallen heroes. In “The Field of Waterloo” (1818), Turner’s great tragic vision of war, “The…  dead of both sides lay intertwined, nearly indistinguishable surrounded by the gloom of night.” Near the bottom center there are three women. The one farthest from us is bearing a child and in her right hand a torch which illumines the sea of mangled bodies. Beside her is another woman struggling to keep a third (also with child) from collapsing outright. Turner reflects not only on the dead and dying, but on the widows and orphans that war produces."
May 19th 2022
EXTRACTS: "Thus experimental creativity could be witnessed, but not verbalized.  When five leading Abstract Expressionist painters founded an art school in New York in the late 1940s, they offered no formal courses, because, as Robert Motherwell explained, "in a basic sense art cannot be taught." ------ "Conceptual artists are ...... more inclined to use written texts to accompany their works in other genres.  In 1883, Vincent van Gogh wrote to his brother, "One of these days I will write you a letter;  I shall write it carefully and try to make it short, but say everything I think necessary."
May 17th 2022
EXTRACT: "Unfortunately, it’s common for dark triad personalities to become leaders. ..... their ruthlessness and ability to manipulate means they attain positions of power quite easily. When a “dark” leader attains power, conscientious, moral people rapidly fall away. A government operating under these conditions soon becomes what the Polish psychologist Andrzej Lobaczewski called a “pathocracy” – an administration made up of ruthless individuals devoid of integrity and morality. This happened with Donald Trump’s presidency, as the “adults in the room” gradually headed for the exit, leaving no one but staffers defined by their personal allegiance to Trump. A similar decay in standards has occurred in the UK."
May 11th 2022
EXTRACT: "The proportion of US electricity deriving from wind and solar in the month of April climbed to 20%. Thus, the renewables total was 26.5 if we add in hydro. This statistic is unprecedented."
Apr 24th 2022
EXTRACT: "Every year, around 12,000 men in the UK die from prostate cancer, but many more die with prostate cancer than from it. So knowing whether the disease is going to advance rapidly or not is important for knowing who to treat." ...... "For some years, we have known that pathogens (bacteria and viruses) can cause cancer. We know, for example, that Helicobacter pylori is associated with stomach cancer and that the human papillomavirus (HPV) can cause cervical cancer." ....... "....we have identified five types (genera) of bacteria linked to aggressive prostate cancer." ...... "We examined prostate tissue and urine samples from over 600 men with and without prostate cancer," ..... "....men who had one or more of the bacteria were nearly three times more likely to see their early stage cancer progress to advanced disease, compared with men who had none of the bacteria in their urine or prostate."
Apr 13th 2022
EXTARCTS: "Steve Jobs dreaded turning 30, because he knew it would be fatal to his creativity: "It's rare that you see an artist in his 30s or 40s able to contribute something amazing." ....... "When Ford introduced the Model T, he was 45 years old" ...... "Ford’s Model T arrived only after a series of earlier cars – Models A, B, C, K, N, R, and S." .... "Sam Walton opened Wal-Mart No. 1 in Rogers, Arkansas, at 44, and discovered “that there was much, much more business out there in small-town American than anybody, including me, had ever dreamed of.” At 53, Warren Buffett wrote in his annual letter to Berkshire Hathaway shareholders that “your chairman, always a quick study, required only 20 years to recognize how important it was to buy good businesses.” "
Mar 29th 2022
EXTRACT: ".... Christie's web site calls Shot Sage Blue Marilyn [1964], to be auctioned in May, 'among the most iconic paintings in history', " ------ "Andy Warhol's annus mirabilis was not 1964, but 1962. This is recognized both by the market and by scholars. Thus in a paper published in the Journal of Applied Economics, Simone Lenzu and I found that in all auctions held during 1965-2015, the average price of Warhol's paintings executed in 1964 was significantly lower than the average price of those he made in 1962. And in a survey of 61 textbooks of art history published during 1991- 2015, whose authors included such eminent scholars as Martin Kemp and Rosalind Krauss, we found that fully 45% of the total of 137 illustrations of Warhol's paintings were of works from 1962, compared to only 12% of works from 1964. Thus not only do collectors value Warhol's works of 1962 more highly than those of 1964, but so do scholars of art history,.... "
Mar 29th 2022
EXTRACTS:".....there is plenty of space to scale. For internet-based businesses, the addressable total market is often large. In many areas, such as software, it spans the globe. Chinese estimates indicate that the average distance between seller and buyer on e-commerce platforms is roughly 1,000 kilometers (621 miles), compared to five kilometers for a traditional retail or service business." ------- "While the internet has removed many geographical barriers, high-growth companies cannot emerge just anywhere. In fact, though such firms can be found in more countries than ever, they remain concentrated in entrepreneurial hotspots. For example, of the 24 unicorns in Germany (as of March 2022), 17 are based in Berlin and five in Munich. Of France’s top 24 unicorns, 19 are based in Paris and one in a Paris suburb." ------ "Tech entrepreneurship has become global, but its beating heart remains local."
Mar 27th 2022
EXTRACTS: " We are supposed to be living in a post-ideological era, where everyone one is a cynic, not so gullible as to believe in anything anymore, least of all in the quaint notion of objective truth. This rejection of truth as such is among the great disasters to have befallen our relations with each other and between nations.  We appear to be beyond truth’s demise – we are now witnessing its unpleasant putrefaction and decay." ------ " If we want to grasp how ideology functions in America today, there is no better place to look than at the phenomenon of Trumpism. While he may be only a symptom, Trump himself is the quintessential embodiment of America’s moral and epistemic decline. " ------ "By its disavowal of truth and perpetuation of lies for the sake of self-aggrandizement, Trumpism represents an existential threat to this country and to the future of the Republic. It is a cancer that threatens whatever is good and decent in American life. " ----- "All they know is negative freedom – freedom from – but ignore the need for positive freedom, the freedom to… as in the freedom to flourish, to realize oneself in the world; to make and re-make oneself and the world through action."
Feb 14th 2022
EXTRACT: "In the decades since its inception, there has been heavy criticism directed towards the War on Drugs. These complaints include the increased incarceration rates, the increase in the number of prisoners in jail due to nonviolent offenses, uneven sentencing guidelines often based on the drug type and race, and suggestions of a racist component in terms of who was targeted by law enforcement. Various studies show that instead of reducing crime, the strict sentencing guidelines created more criminals and undermined many of the communities most strictly targeted by law enforcement. Long sentences for non-violent offenses made it difficult for those released to find work and weakened their bonds with family and their broader community."
Feb 2nd 2022
EXTRACT: "......... there are countries that have had a relatively high number of infections but which have still managed to keep their death numbers low – countries like Japan. It’s had 17,612 infections per million people yet only 146 deaths per million. This is despite almost one in three people in Japan being over the age of 65 and so at greater risk of severe COVID (the average age of people dying from COVID is over 80). What has kept the death rate there down? A recent Japenese study has proposed an answer. It reports that the risk of people dying of COVID in Japan is related to the microbes present in their guts. "
Jan 26th 2022
EXTRACT: "Then there was a revolution. In 1964, Bob Dylan created a new kind of popular music. The simple, clear love songs ...... were replaced by complex and opaque lyrics, filled with literary allusions and symbolism. Dylan rejected the role of craftsman: "I'm an artist. I try to create art." Nor were his songs intended to be universal: "My songs were written with me in mind." "