Wednesday, August 22, 2012

Building the Next Silicon Valley: Review of "The Rainforest" by Victor W. Hwang and Greg Horowitt

A few weeks ago, when  I reported on my attendance at the first annual Global Innovation Summit, I promised a review of the book that served as the launching pad for the conference: "The Rainforest" by Victor W. Hwang and Greg Horowitt.

In this fascinating book, subtitled "The Secret to Building the Next Silicon Valley," the authors employ to great effect the metaphor that a sustainable economic ecosystem is akin to a tropical rain forest in many dimensions.  There have been many attempts to replicate the signal success of Silicon Valley, and most have failed.  Early in the book, the authors share their opinion about why this is the case.

"To explain the differences between highly productive systems like Silicon Valley and most other places in the world, what is most important is not the ingredients of economic production, but the recipe - how the ingredients are combined together.  Human systems become more productive the faster that the key ingredients of innovation - talent, ideas and capital - are allowed to flow throughout the system." (Page 10)

Throughout the book, Hwang and Horowitt emphasize the key role that human interaction and relationships of trust play in overcoming the friction that would otherwise cause economic activity to grind to a halt.

"Leaders who can bridge between social networks to bind greater communities together for common action are essential to building and maintaining Rainforests.  Public subsidies of venture capital are ineffective when fund managers are not culturally attuned to foster symbiotic relationships between investors and investees.  Public attempts to foster innovation that do not focus on changing human behavior are doomed to fail.  To build Rainforests, we must transform culture.

The Rainforest model is more than a metaphor.  Innovation ecosystems are not merely like biological systems, they are biological systems.  Talent, ideas and capital are the nutrients moving through the biological system.  Measuring the velocity of such nutrients can provide us the tools with which to measure the health of an innovation ecosystem by observing dynamic activity over time, rather than static points in time.  When particular social behaviors allow the movement of talent, ideas and capital to be even freer  - as they are in Rainforests - we find that human networks can generate extraordinary patterns of self-organization.

The Rainforest model explains the largely invisible mechanisms that underlie innovation ecosystems like Silicon Valley.  It is not creative destruction alone that is sufficient.  Far more important is creative reassembly, the ability of humans to combine and recombine into ever-increasing patterns of efficiency and productivity." (Page 11)

During the Global Innovation Summit, there was much discussion of an aspect of the book that  I found intriguing.  In a Rainforest, some death must occur among the upper canopy growth in order for sunlight to reach the forest floor and enable new growth.  In ecosystems, some of the old bureaucratic ways of thinking and of doing business must die to allow sunlight to permeate the system to enable sustainable growth.

"Many people praise the notion of 'creative destruction' in the free market.  This is the term that economist Joseph Schumpeter used to describe the process in which new innovations destroy established companies.  In our experience, creative destruction is far from a complete answer.  After all, killing companies is easy compared to growing companies.  The mystery of innovation cannot be answered without understanding creative reassembly - how people interact in ways to generate innovation in the first place.  If creative destruction causes death, then we need creative reassembly to complete the cycle of rebirth." (Page 40)

Another concept that created a stir among the participants at the Global Innovation Summit is the provocative concept proffered by Matt Ridley, author of "The Rational Optimist":

"Innovation is simply a modern form of the Silk Road.  Instead of exchanging goods, we exchange ideas and skills.  Author Matt Ridley writes about 'ideas having sex' to explain the nature of human economic activity." (Page 95)

After presenting detailed examples of how the various Rainforest dynamic interact with each other, the authors distill the essence into Seven Rules of the Rainforest:

Rule #1: Thou shalt break rules and dream

Rule #2: Thou shalt open doors and listen

Rule #3: Thou shalt trust and be trusted

Rule #4: Thou shalt experiment and iterate together

Rule #5: Thou shalt seek fairness, not advantage

Rule #6: Thou shalt err, fail, and persist

Rule #7: Thou shalt pay it forward

(Page 156)

Throughout the book, Hwang and Horowitt emphasize the importance of cultural diversity as a necessary ingredient for growing a Rainforest.  Initially, the distrust that is common to all mankind of those who are different from us causes friction, but as trust grows, the diversity tends to dissipate friction and adds to efficiency and effectiveness of the organism.  One aspect of diversity that I found compelling was the concept of Diaspora:

"One of the most  powerful tools for generating diversity is diaspora.  We do not just mean ethnic diaspora, such as Jewish or Chinese people spread around the world.  We mean diaspora in the broadest sense, as in boundary-crossers -- people who have left one group to join another.  This might include immigrants, emigrants, university alumni, former co-workers, or former collaborators.

People who are boundary-crossers can simultaneously serve as role models, cultural translators, and trusted channels for cross-boundary relationships.  They can translate between the social norms of different cultures.  They can 'speak' the cultural language of people both inside and outside a network.  Wherever we have worked, people who are active in diaspora networks have always served as leaders to build Rainforests in their native communities." (Page 208)

Among the most interesting individuals I met at the Global Innovation Summit were a woman from Rwanda and a man from South Sudan - both of whom had lived in exile for 40 years as their respective countries suffered from a string of tumultuous disasters and conflicts.  As members of a diaspora, they traveled and interacted with a wide variety of cultures, and picked up skills that they are now employing to help create Rainforests in East Africa.  In the same way, my work in Haiti has led me to collaborate with members of the Haitian diaspora who bring to the task of rebuilding Haiti a broader perspective and fresher ideas than those who have known only life on the island of Hispaniola.

This book has served as a catalyst for dozens of fruitful conversations among friends of mine in the past month.  I encourage you to read it if you have any interest in innovation.  In  addition to offering much in the way of practical insight, the authors also bring a literary sensibility to their task that is rare among "business books."



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