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02 Jun, 2011 – 5 comments

the big fail

When I was 18 years old, right around the year 2000, I was the lead (and mostly sole) developer for a venture capital funded internet start-up. I was also making what seemed to be an ungodly amount of money for a high school senior – all thanks to the web, and to my incredible good fortune of being thrown into it early in my life. I had my own little shop by the time I was 14 (Solace Media), designing sites and developing content management systems for a landscaping company, aikido dojo, and similarly important local businesses. At 16, I co-authored a book on Flash 4 that you could actually buy at Barnes & Noble. I was a huge internet nerd, and I thought I would probably always stay on the development side of things. I was even offerred a job at a hot tech company in lieu of going to college. But then the bubble popped and the start-up I was working for went belly up not much later. The hot tech company that offered me the job not to go to college folded six months after that. Reality had a way of proving it could change faster than I could comprehend.

For years, the fact that our start-up went bust bothered me. We had the classic web business model: build, build, build, monetize later. We had a global network of editors churning out content*, we had an online marketplace, community pages, display ad sales … We had everything and more that your average dot-com had in the year 2000, we were just lacking an actual market for our product and a business model that wasn’t predicated on millions of users. Ultimately, this failure haunted me enough that I quit coding and decided to learn more about running a successful business. I studied marketing and finance in college, and more importantly, I actually tried running a small business while still in school. The latter was far more worthwhile than the former.

It’s interesting now to think back and realize that I’m where I am today because that start-up fizzled. Without that failure, I would never had grown such an interest in how organizations work or how to turn a profit. I also wouldn’t have grown an obsession with small companies, which has put me in environments where I’ve been welcomed to tinker, test, and experiment with how things can be done.

And now I find myself taking another detour because of a failure, but this time it isn’t just my own, it’s much larger in fact.

It all started with a conversation I had with my father sometime in September 2008, just after the fourth largest investment bank in the world, Lehman Brothers, announced bankruptcy. My dad’s a general contractor in Houston – equal parts construction worker and entrepreneur. He was the one who first taught me how to use a computer but he’s also the parent I rarely saw most days because he was off pouring concrete or putting up some commercial building in the middle of the Texas summer heat. My dad has run his own business for decades, through all kinds of economic ups and downs. So, when Lehman collapsed, I asked my father whether he was concerned by what was happening on Wall Street, to which he replied (summarized),

“Our banks here aren’t being run like those banks on Wall Street, and because of that we’ll be fine, even if those banks do go bankrupt.”

This was the opinion he formed upon decades of experience in an economy that was relatively less connected. However, as he and I would come to find, the collapse of banks like Lehman Brothers would reverberate across the entire U.S. economy and then to economies across the world, bringing a cascade of wealth destruction and capital crisis unseen in his or my lifetime. For my dad, the last few years have been the worst he’s seen for his business in decades. Construction, across the country, refuses to show signs of resuscitation.

He’s not alone. My girlfriend’s father spent decades in the mortgage business before opening his own company around 2002. He not only lost his business with the housing market collapse, but much of his life savings, because the industry, the whole thing, changed faster than he could comprehend. And his story, and my father’s story, are far from unique or isolated – in this country and across the rest of the world.

That conversation with my dad in 2008 has troubled me ever since. Regardless of our age, nationality, or industry, we all seem to be struggling with the implications of connectedness. From toppling oppressive regimes, to destroying the world’s access to capital, to consumers suddenly having the power to muck about with our brands, to trying to invent the next big internet hit, connectedness defines the biggest events shaping our era and our culture. And out of connectedness arises complexity, a word we immediately don’t like to hear unless it’s being used to describe our own taste in alcohol, literature, fine art, or music. But it’s there, nonetheless. When consumers were given the ability to connect with one another in compelling ways, and to aggregate the data behind those connections, they were ensuring that brands and businesses faced a more complex market and cultural environment. The same story is true for networked economies. Now, control has been divvied up among everyone, which means no one has much of a monopoly over anyone else. It also means that we suddenly have an even shallower understanding of the potential outcomes of our own actions.

Most of us here work on behalf of other people, with the idea in mind that we can help them navigate modernity. But most of us still go about our business today just as it has been done for decades past, without respect for the growing complexity of our clients’ businesses or the world they inhabit. We still propose single solutions to complex problems (aka the big idea), we still portray ourselves as sooth-saying trend spotters in environments that fundamentally belie our expectations, and we still drub our clients for being slow, maladaptive slugs when we offer no real organizational solutions beyond speeches laden in platitudes.

I can’t help but feel that reality is once again proving it can change faster than we can comprehend.

That’s why I set out to write a book. And with the help of hundreds of supporters, I’ve spent the last year with my head in research, trying to suss out what connectedness means for organizational management and business strategy. Fundamentally, we have to re-define what strategy means when we’re navigating environments that confound our understanding of control, predictability, and reasoning.

Our job now is to navigate connectedness; to take a step back and examine how things and people and ideas are connected, and to learn how one tap on the corner of the spiderweb sends ripples across everywhere else. We also have to help our clients make new connections, to experiment with new forms of value, and to accept the simple strategic truth of connectedness: you gain insight by doing, not by planning. From there, we have to help our clients reshape their organizations, because experimentation can’t happen and agile is just a buzzword without a truly adaptive workforce. And finally, in a world that many consider increasingly leaderless, we have to inspire leadership – which in the age of connectedness means the willingness to collaborate, and the courage to respect complexity and not sweep it under the rug.

Since my conversation with my father, this is what my failure to comprehend a networked world (and economy) has caused me to chase. And in the last year, this is what The Bucket Brigade has come to mean to me – an interdisciplinary force armed with the understanding and the mission to comprehend reality as fast as it can change.

*Random fact: the Editor-in-Chief at our start-up, who sadly passed away this year, was kidnapped in Colombia by guerilla forces in 1994 and held for 11 months. His story formed the basis of the film Proof of Life, starring Russell Crowe.


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5 Comments

  1. Eric
    Eric June 2, 2011 at 8:51 am .

    Great read, as always.

    Two thoughts come to mind, related to both your stories about the mortgage crisis, and my own situation with mortgages – all adding back up to your point about connectedness.

    We just went through a bunch of bull to get a mortgage for our first home. We finally got a commitment letter yesterday after much insanity. The reason we couldn’t get one at first was because we were dealing with a federally-backed lender; i.e. someone beholden to our nationally-connected ass-hat step-parents, Fannie & Freddie. Despite strong income, a paperwork technicality blocked us from being able to use it all. I’m convinced that, pre-crisis, this would not have been a problem at all for Fannie & Freddie. So the fact that the rest of the country screws up, new, sound homeowners like ourselves take the heat. Which is not to say there are hundred of thousands of other honest mortgage holders that also got screwed, because they did. But point being, many many many one-on-one experiences across the country made waves across the world, impacting just about everyone individually. (There’s an entirely separate conversation to be had about democracy vs. republics, I suppose…)

    Secondly, the way we got out of our mortgage slump? We tried a credit union, who are not beholden to F&F. And sure enough, in less than 2 days, we got our commitment letter. One of the few un-connected (or at least, lesser-connected) organizations, generally isolated from the big connected crisis was able to help us out. And what is are credit unions? Co-ops. Small, interconnected groups on the local level.

    All of this gets to the point about scale. I agree completely with the Brigade and the book premise about complexity and connectivity. I’m very interested to read the chapter on scale, which IMO is really the heart of the discussion. 10 vs. 10 million. Credit unions vs. banks. Mom & Pop stores vs. WalMart. etc. etc.

  2. Tim Burley
    Tim Burley June 3, 2011 at 3:26 pm .

    Great post, thanks. One of the few useful things I learnt at college was a quote from a French mathematician / psychologist whose name I forget who said “everything is overdetermined”. As much as we spend our lives in pursuit of simplicity, reality is usually anything but.

  3. neilperkin
    neilperkin July 7, 2011 at 7:02 am .

    Great post Bud. Just to let you know it’s been shortlisted (another shortlisting!) in Post Of The Month http://bit.ly/ncEVGM

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