Looney Orgcharts

Well! It's been a long time coming, but I've finally finished reading "Loonshots" by Safi Bahcall. My youngest brother recommended this book to me years ago after encountering it in a class. It gradually worked its way through my "to read" list, and I actually picked it up last year, but Life Stuff intervened and I had to return it to the library before finishing. I picked it back up again, refreshed some earlier chapters and rounded it off.

 

This is a pretty business-y book, which touches on a lot of different areas (history, military, politics, etc.) but primarily with an eye to succeeding in a business context. It reminds me a little of something like "Made to Stick": an interesting book that looks at history but with a primary focus on practical application. Sometimes these books feel like they're bending evidence to fit their theory, but they're pretty compelling in the arguments they make.

The "Loonshot" of the title refers to a left-field idea that is widely dismissed but that ultimately leads to transformational change. You can think of ideas like germ theory, airplanes, and the Internet: they were roundly mocked when first introduced, but ended up taking over the world. In the context of business, loonshots can open up lucrative new markets or cause revolutionary changes in existing markets. You can ride a loonshot into a new business, and if you have an existing successful business, you want to get the next loonshot before a competitor crushes you with it. But existing power structures will be very resistant to new ideas: they challenge existing business and seem to contradict the wisdom that has led to success in the past. The overall goal of this book is showing how to nurture loonshots in your business (or industry, government, or other group) to survive the changing of epochs, adapting and thriving over multiple generations of change.

Opposing Loonshots are "Franchises", established product lines that drive the day-to-day profitability of a business, the victories of a military branch, and so on. Franchises have been proven by their past successes and are easy to quantify, verify and support. Your business today depends on the efficient running of franchises, but that franchise could become obsolete from an upcoming loonshot. The loonshot of today becomes the franchise of tomorrow.

This book is filled with examples. Bahcall is most impressed with Vannvar Bush's Office of Scientific Research and Development, the transformational WW2-era program that shook the US military out of its stagnant complacency and enabled it to meet and eventually surpass Germany's military/industrial/scientific base. He also admires Theodore Vail's Bell Labs, which had a remarkable decades-long run of successful innovations that translated into business success. Bahcall has a background in biomedical research, and draws a lot of examples from innovative drugs and therapies as well.

Even more than these successes, the book shows numerous cautionary tales. Pan Am is a particularly striking one: they were a market-leading innovator for decades before getting crushed. Kodak is another interesting example; Kodak was eventually outdone by digital photography, even though digital photography was first invented at Kodak. And Steve Jobs makes multiple appearances, across both his tenures at Apple and his leadership at Pixar, and you can see how his past experiences caused him to change and become more successful over time.

Fortunately, this book isn't just a parade of anecdotes, and Bahcall presents some concrete models for success. He sees two important factors. First, you need to foster innovation, encouraging and rewarding out-of-the-box thinking. Without this commitment to research and experimentation your business will become stagnant. However, just pushing for innovation doesn't necessarily lead to success: it can produce chaos, as franchises are under-invested in, or turf battles break out between loonshots and franchises.

The second critical component is "phase separation": you want distinct groups, each with their own separate managers and incentives. "Soldiers" support franchises, while "Artists" support loonshots. Each role should be valued and respected, as soldiers allow you to survive in the present and artists allow you to survive in the future. Eventually, a successful loonshot (and not all loonshots are successful! most fail!) will need to become a franchise. This requires a "phase transfer", which is tricky to pull off: soldiers instinctively resist changes. So it's important that soldiers have buy-in and ownership of the new innovation, rather than giving them the power to kill it or forcing it down their throats. Bahcall recommends appointing project champions, who focus on the process of the transfer rather than the transfer itself, to increase the odds of successfully implementing the new idea.

A counter-example here is Xerox PARC, which came up with a ton of hugely innovative ideas, but never capitalized on any of them. Why? The old-school business units in Texas and the owners in New York thought those new ideas threatened their old business: if your bonus depends on selling a certain number of copiers, you won't want to build machines that make copiers obsolete. In the short term, killing the PARC ideas was perfectly logical. Over the long term, though, those cuts to copier sales would have happened anyways, and the bigger question should have been whether those dollars would move to other new divisions in Xerox or to their competitors. So in this case, Xerox came up with a great process for producing loonshots (fostering innovation and ensuring phase separation by setting up a separate high-quality R&D department), but still failed to reap the benefits due to their inability to ingest the new ideas.

Another partial failure is what Bahcall dubs the "Moses Trap." Many successful new companies became successful thanks to the brilliant ideas of their founders. A string of successes convince the founder, the employees and investors that they have a magic touch. But nobody has a perfect track record, and eventually that founder will bet the company on a dumb idea (or an idea that's before its time or otherwise not ready for success), or will fail to see the significance of a new innovation. In these cases, the soldiers will get their marching orders to go all-in on the new loonshot, and will follow their leader off a cliff. The early Steve Jobs is a great example here, as is Pan Am (pushing for bigger planes than the market wanted), Kodak (pushing for expensive single-use home film recorders), and many tech startups.

Bahcall also looks at two different types of Loonshots, which he confusingly calls "P type" and "S type". "P type" are product innovations, which are what we tend to think of when we imagine disruptive changes: the steam engine, the jumbo jet, or the World Wide Web. "S type" are what he calls "system innovations", but I'd call them "process innovations": more efficient or clever ways of doing existing things. These have more to do with organization, management and workflows than scientific or technological breakthroughs. System innovations include things like kaizen manufacturing, just-in-time supply chains, multi-line discounts, and pre-flight checklists.

System innovations are less exciting and less talked-about, but they tend to win out over product innovations. Pan Am was great at P-type innovations, but American Airlines crushed them with S-type innovations. This kind of makes sense; once you see a new product, and it's out of patent, you can just start making that product; but people may not notice when a new process is being adopted somewhere else, and it can be a lot harder to retrain an existing workforce to do things in a new way than it is to start making a new type of widget.

A couple of the examples he gives kind of rubbed me the wrong way. I first started reading this book around the same time as The House of Morgan, and noted the very different treatments they give of Charles Lindbergh. Bahcall tends to be very black-or-white in his writing, with people either heroic innovators or doomed losers (with only a handful of exceptions like Steve Jobs with both positive and negative traits highlighted). He wants Lindbergh to be a Good Innovator, and implies that he was unfairly smeared as a Nazi sympathizer when, uh, there are very good reasons he had that reputation! I was also a bit put out by the medical examples, which Bahcall seems to value in terms of the amount of sales produced rather than the harm reduced. Very expensive drugs are the problem, not the solution.

For the most part, though, his anecdotes ring true and are good, memorable, entertaining illustrations of the points he's making. I think that's just how this genre tends to work, with pithy examples lending legitimacy to ideas and not getting lost in the weeds of messy, actual reality.

All in all, this was a really good book that gives a very useful framework for thinking about structure and organization. Unlike most books I read, there's a good chance I'll be able to put some of these ideas to work in my own life, which is pretty cool. And it gives a useful lens for analyzing events in other industries - for example, I can't help but think of the Moses Trap now when I see Elon Musk's increasingly unhinged and desperate antics, or witness Google as a place where the ad-selling franchise has murdered the once world-leading loonshot factory for search; it's even interesting to think of, say, The Squad as a phase-separated loonshot factory, and the Democratic Party as a broader organization trying to evolve and compete. These tools are useful, but they're also kind of fun to play around with and use to make sense of the world.