Jobs in an Uncertain World

On September 10, 2011, in economic theory, by Jon Lewis

Little Bets: How Breakthrough Ideas Emerge from Small Discoveries. Peter Sims. Free Press, 2011, pp. 213, $25.00 With the dismal news about zero job growth in August 2011 and significant evidence that the United States might be entering another recession, it behooves policymakers to think critically about ways in which we might get the economy [...]

Little Bets: How Breakthrough Ideas Emerge from Small Discoveries. Peter Sims. Free Press, 2011, pp. 213, $25.00

With the dismal news about zero job growth in August 2011 and significant evidence that the United States might be entering another recession, it behooves policymakers to think critically about ways in which we might get the economy rolling again. While President Obama has called for payroll tax cuts and increased spending, the Federal Reserve has not yet signaled whether it will utilize any measures to stimulate the economy. The only certainty about the American economy, it would seem, would be that the future is increasingly uncertain for both businesses and households alike.

The immediate political concern in Washington is how to create jobs and get Americans working again. Often forgotten in the national discussion, however, is the fact that what the United States may really need is a new generation of risk-taking entrepreneurs who will be able to both create jobs and provide new goods and services that will enhance consumer welfare.

Although Peter Sims’s Little Bets is neither a political tome nor an work of political economy, it does provide a unique and welcome perspective on entrepreneurship that merits serious attention by both policymakers and those concerned about lagging job growth and America’s declining global competitiveness. Sims, a writer with an MBA from Stanford University and a career background in venture capital, challenges the reader’s assumptions about what successful entrepreneurship requires.

Sims, who acknowledges the inspiration and collaboration of George Kembel from Stanford’s d.school, draws upon contemporary academic scholarship and utilizes case studies. These include both the thinking and work of architect Frank Gehry, Amazon’s Jeff Bezos, and U.S. General McMaster, who developed the ‘clear and hold’ counterinsurgency strategy in Iraq, to make the case for experimental innovation. The author draws upon the concept of “little bets,” a phrase coined by former Hewlett-Packard Executive Vice President Ned Barnholt, to describe a way of thinking that embraces unpredictability, creativity, and nonlinear thinking in which entrepreneurs do not begin with a brilliant idea, but rather discover them through experimentation and an acceptance of failure.

The author describes Little Bets as being “based on the proposition that we can use a lot of little bets and certain creative methods to identify possibilities and build up to great outcomes. At the core of this experimental approach, little bets are concrete actions taken to discover, test, and develop ideas that are achievable and affordable.” He identifies the following as fundamental to the little bets approach to thinking: experimentation, playfulness, immersion in the world, defining specific problems and needs before solving them, reorientation and flexibility, and iteration. The methodology utilized by the comedian Chris Rock is of particular interest to Sims. To hone his craft, Rock regularly appears at a small comedy club in New Brunswick, New Jersey where he repeatedly tries out new jokes, many of which fail to resonate with the audience. It is through this repetitive process of experimentation, contends Sims, which makes Rock such a successful comedian.

One of the more important insights in Sims’s work is that rigid, linear thinking may no longer serve us well going forward in an uncertain, largely unpredictable era. Adaptability, rather than ideology or a reliance on the past to predict the future, may be the most useful skill. Although Sims is not a political writer, he does briefly reference how former Federal Chairman Greenspan had to rethink his ideological assumption in the wake of the financial crisis. “Just as former Chairman of the Federal Reserve Board Alan Greenspan acknowledged a ‘flaw’ in his understanding of markets during the 2008 economic crisis, we cannot rely on past assumptions to predict the future. In this era, being able to create, navigate amid uncertainty, and adapt increasingly be vital advantages.” If Sims is correct in his assessment, and there is no good reason to believe that he is not, the implication for formulating appropriate regulatory and tax policies is stark. It would seemingly imply that well-worn shibboleths about unfettered and deregulated free markets, spending, and taxation that harken back to the political debates of the 1980s are no longer workable in today’s complex, globalized world. Although he could have amplified upon this point further, Sims, referring to work of educational historians, rightly observes that the American system in its current form was designed for the industrial era and not for the knowledge economy.

In conclusion, creative types, entrepreneurs, and free thinkers who feel constrained by the rigidity that dominates much of the corporate world and federal bureaucracy today would likely agree wholeheartedly with Sims’s assessment that we are taught to be linear thinkers in a nonlinear world. Although he acknowledges that, “experimental innovation should not entirely replace linear thinking in our regular work processes,” Sims nevertheless does put forth a cogent argument as to why those individuals who are willing to think differently and persevere through likely failure have a distinct advantage in an ever-increasingly uncertain global economy. The future may no longer be so bright that we all have to wear shades; it may, however, be so uncertain and unknowable that we must learn to appreciate the merits of nonlinear thinking.

Jon Lewis (c) 2011

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