Monthly Archives: March 2017

The False Promise of Moonshots

After becoming a giant in the search and advertising industry, Google has set its sights on other more lofty endeavors. Determined to make an impact, they’ve organized Google into a larger umbrella company called Alphabet, under which they house smaller companies which are dedicated to what Google calls “moonshots”. A moonshot is a risky, exploratory project undertaken without regard to near-term success or profitability.  According to “X”, the company responsible for incubating Google’s moonshot efforts, the projects they undertake seek to solve big problems with groundbreaking technology and radical thinking. These projects certainly stir the imagination and inspire wonder, but in my opinion they also distract from the process that has historically been necessary to create sustainable long-term innovations which positively impact the quality of our lives.

Roughly implicit in the concept of the moonshot is the idea that what stands in the way of tremendous leaps and bounds in innovation are a lack of imagination and the adoption of innovation strategies that are too conservative. Proponents of moonshots as a method of innovation such as Peter Diamandis, founder of XPrize, are constantly suggesting that what’s really needed to push humanity forward is “10x” thinking, or imagining a solution or outcome that’s ten times as big as what you might normally imagine. I recently watched a lesson Diamandis gave on “exponential thinking” and he used Elon Musk as an example. In great detail Peter described Musk’s vision and mindset. Diamandis then suggested that young people should follow in Elon’s footsteps, eschewing economic activities that don’t ignite their “passion” and to focusing on solving problems that will have a massive impact.

My passing familiarity with Elon’s personal and professional history leads me to believe this conceptualization of his success is extremely disingenuous. There is no doubt that Elon carries an inspiring vision for the future of our species, and it’s undeniable that his vision has guided and motivated his activities, but the vision says nothing about the activities that carried him from point A to B; only about what he believes B should be.

In fact, if you follow the activities Musk engaged in after leaving South Africa, you begin to notice a pattern that looks decidedly opposed to what Peter Diamandis suggests is the recipe for creating massive impact. Following a double major in physics and economics, Musk moved to California where he intended to pursue PhD work centered around battery technology, an area which he felt was vital to his vision of the future. However, during this time the internet began to grow enormously and Musk left his degree program to pursue wealth in the internet boom. His first company Zip2 had nothing to do with space colonization or planet-wide green energy. It was simply something that filled a general market need and could produce a profit. From the “grand-vision” strategy posited by Diamandis and Moonshot proponents, this would seem to be a step backwards. This is 1x thinking; linear, not exponential. However, in the creation and sale of Zip2, we begin to see the secret star in Elon Musk’s career: capital resources.

Capital resources at their most fundamental are tools or processes that can be used to transform raw materials or inputs into items of greater value. For example, a paperboy’s bicycle, used as a capital resource to deliver paper around town, is more valuable than the steel tube and rubber sheets it used to be. The machines that bent and formed the steel and rubber to make the bike are capital resources as well. When you have chains of capital resources that feed into one another turning raw materials into outputs of greater and greater value, you have a capital structure. Capital structures are vitally important to not only enabling the innovation of new technology, but also shepherding those innovations to market maturity.

With this in mind, we can see as we continue to follow Musk’s career, a process of capital accumulation and the construction of larger and more capable capital structures. Following the sale of Zip2 for $22 million, Musk invested $10 million in another company which would later become PayPal. The sale of PayPal brought Musk $165 million in profit, $100 million of which he would later invest in starting SpaceX. And, to be clear, money isn’t the only component of his capital structure either. His knowledge, abilities and skills are capital resources as well, resources he’s been developing since he began programming video games as a small boy.

Moving through his personal and professional history it quickly becomes apparent that SpaceX is a value producing machine that has been many, many years in the making. Not only that, many of the the tools SpaceX uses to quickly prototype and design their machines at such low cost, tools like additive manufacturing, are just now starting to come into their own, themselves the fruit of a long development of increasingly complex capital structures.

And so, at this point we must ask if Musk’s genius lies in deciding that the colonization of space is goal worth pursuing, or whether it lies in the incredible, decades-long process of accumulating capital and stewarding it to a place and time in which it could be released in a brilliant display of awe-inspiring vision? I believe it’s the latter. The moonshot narrative would have us believe the former, however. It suggests that innovation and astounding technological progress are made by adopting the right mindset and selecting a “big enough” problem. However, this narrative shows a wanton disregard for the complexity of the kinds of capital structures that are essential for not only providing the tools of innovation, but also for developing markets for the products needed to sustain innovation.

Look past the glamorous post-success rationalizations of most companies and innovations and you’ll find either an accident or a long drawn out process of people trying to solve a “boring” (but real) problem. Before Uber was “The Ridesharing Economy”, it was just some entrepreneurs trying to figure out how to make the boring taxi experience better. Before Facebook was “The Global Social Network of the Future”, it was more or less an online, interactive version of Harvard’s already existing online directory system which was called, unsurprisingly, the facebook. Before AirBnB was “The Sharing Economy of Space”, it was a couple of broke entrepreneurs who realized they could rent out an air mattress on Craigslist for money; hence the name “Air Bed and Breakfast”. None of what I’m describing is to denigrate the hard work and effort put into building out these ideas and turning them into vast global markets, rather it is to point out that the innovators and entrepreneurs most lionized by our society put a lot more time and effort into building up their skills and resources and solving “boring” problems than into participating in moonshot thinking, and that is what must be done if we are to drive innovation forward in a sustainable way.

The future cannot be divorced from “boring”, small problems, because solving these problems creates value, and complex capital structures grow towards value like plants towards the sun. While moonshots tantalize us with the possibility that the future can be aggressively jerked into the present, we must recognize the fact that without capital structures of appropriate size and specialization, the present cannot support innovative solutions that are realized prematurely, especially when they are solutions to problems that only exist in our imaginations.