Constrained & Disloyal

September 9, 2014

Why Do Some Businesses Fail, and Others Succeed Against All Odds?##

On the last day of my microeconomics class, my professor asked us a question:

"If there are 1.333 trillion barrels of oil left on the planet and we use 6.89 billion barrels of oil each year, how long will it take for us to run out of oil?"

Pencils and calculators came out to solve what seemed like a math problem. I also started to do the long division, but then stepped back. It occurred to me that economics is a branch of sociology, not math. It's interested in the way groups of people behave in different situations. I then realized, and blurted out, the answer.

"Never," I said.

"How do you figure that?" asked the professor.

"People will innovate and find another solution before driving the society to ruin. As we realize that there's not enough oil, the demand for an alternative grows; supply rises to meet demand."

"Well, I suppose this course wasn't a complete loss after all." She responded.

I really believe this idea. People are creative. We innovate and solve problems. This is evidenced by the fact that we have not only survived so long but also increased the quality of life exponentially within the last 200 years. People will innovate and find another solution before driving themselves to ruin.

Why, then, do some previously productive companies fail? Just like the decreasing oil never runs completely out, revenue, even when decreasing, should also never run out. When a previously flourishing company sees that the current product or business model will not be able to sustain them, they should be able to innovate and find another solution. Why is this not always the case?

1) Creativity is constrained by structure.

Creativity is still a largely elusive phenomenon, but as we learn from[ Steven Johnson] (, creativity generally takes time and is more a synthesis of ideas than one totally novel insight. So if we want to be creative about how to stop the decreasing revenue, we need more people involved and more time allowed to solve each problem.

Good ideas are not limited by position, but they are limited by understanding. When understanding is constrained by position, creativity is constrained by structure. When there are only a few key people privy to the situation, the probability of failure goes up significantly. The more people you allow to understand the problem and contribute to a solution, the more likely you are to come up with something brilliant.

Consider a structure where problem-solving is crowdsourced within the organization. Many organizations have crowdsourced problem finding, but it's usually someone else's job to do the problem solving. There needs to be a system in place that allows everyone to contribute to a solution. Ideally this would include the following aspects:

  • An explanation of the problem(s) at hand

  • The known available resources

  • What has been tried so far to solve the problem, and

  • A way to collaborate about the possible solutions (e.g., comment threads).

The organization will still function largely in the same way, and there will still be specific individuals responsible for making decisions and executing plans. This internal crowdsourcing allows more collaboration and input from the members of the organization while maintaining the efficiency of structure. More ideas means more potential synthesis. More synthesis means more creative solutions.

One may argue that letting everyone know the ship is sinking would cause panic and chaos, or that maybe some people would jump ship. These are all very possible consequences, especially when problems are severe, but when an employee loves the work and loves the people involved, he'll work hard to save the organization. People come up with amazingly creative solutions when something they love is on the line as long as they have the freedom to do so.

This brings me to the other reason organizations fail:

2) The employees are not loyal.

Many times, people don't love the organization that's sinking, so they don't care to come up with creative solutions. How will it float then? It won't. Love is essential.

So what is love? As we learn from Meet Joe Black,

"Love is passion, obsession, something you can't live without."

To love your work is to be so engaged by the people and the problems there that you can't leave it alone. It's always on the back of your mind, because it has become a part of you. The problems of the organization are your problems, and its success is your success. When the job becomes the obsession of each employee, it will have the creativity necessary to solve any problem, because the problems will be in the back of their minds 24/7. This way there is more time devoted to solving the problems, and this leads to creativity.

One may object here and say that it's really not about love as much as it is about skill. I would agree that skill is important, but not as essential as love. Love will drive you to develop the skills you need, but skill won't drive you to love what you do. You can have the most qualified and skilled team out there, and still fail miserably if that team isn't in love with what they're doing, who they're doing it with, and the cause they're doing it for. It really doesn't matter what a person can do for your organization; it matters what they will do.

So what determines what people will do for an organization? Mostly, what the organization does for them. If the only thing employees are paid with is money, the organization is replaceable to them. They won't fight to keep it alive. The job itself must improve the quality of their lives before it will earn their loyalty.

According to Tony Robbins, we have 6 basic human needs that drive motivation. We need certainty, variety, significance, connection, growth, and contribution. When these 6 needs are satisfied by a single source, we will have motivation to give blood, sweat, and tears to keep it alive. We will be creative to solve problems and save the organization. We will be fiercely loyal.

The company I work for, Smarty (formerly SmartyStreets), is a good example of this. Back in 2011, the company split. The two owners just couldn't agree philosophically on how the business should be run. My boss's old business partner took the revenue-generating product, and our current Chief Smartypants, Jonathan Oliver, took the less-profitable USPS address verification product and the employees (a major expense). If things continued as they had been going, the new company would surely die. Everyone knew it.

But the company didn't fail.

In fact, it flourished. It did not fail because the team did not abandon ship. They were all in it together. They were loyal to each other, and they loved the freedom and respect that they got from the job. They believed that with their creativity and effort, they could save the company. So against all odds, they made it work,extremely well.

So, why do certain organizations survive while others fail? Because their employees are loyal and enabled. When people are motivated to be creative, and allowed to be creative, they will be creative. People will innovate and find another solution before driving themselves to ruin. That's what saves a sinking ship.

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