Tuesday, May 22, 2012

Money, Power + the Culture of Innovation

The concept of acquired situational narcissism has been in my head since 2001, when the New York Times Magazine included it in their annual "Year In Ideas" issue.

The phrase describes the lack of empathy -- and resulting self-serving behavior -- that the rich and powerful tend towards when they mistakenly interpret their own success as evidence of their innate superiority, and not just a happy confluence of of birth, luck, environment, hard work and timing.

Living in Seattle, I (thankfully) don't cross paths with many investment bankers, heads of state or Hollywood celebrities, and the per-capita incidence of the condition is probably lower here than in LA, DC or New York.

But as our culture increasingly looks to technology for its heroes (think Mark Zuckerberg or Steve Jobs) this pathology is starting to seep into in the nominally egalitarian world of software innovation.

This change is already visible in the national discussion -- tech founder stories that used to be told with a light-hearted "revenge of the nerds" angle now have a darker tone, lamenting the billion-dollar valuations ascribed to "trivial" companies like Facebook, Twitter and Instagram, and claiming that the current easy-money culture of Silicon Valley signals the death of innovation.

Unsurprisingly, the attacks are most often launched from the East Coast, long the center of American money and power. 

The New Yorker recently waded into this bi-coastal culture battle with Ken Auletta's piece on Stanford's abrupt withdrawal from the New York Tech Campus project, ominously titled "Get Rich U. : There are no walls between Stanford and Silicon Valley. Should there be?"

The tone of the article veered wildly, beginning with a celebration of Stanford's remarkable success as the intellectual heart of Silicon Valley, then shifting to a vague but unmistakably critical profile of Stanford President John Hennessy and his handling of the negotiation with Mayor Bloomberg's office over the project.

One particular pair of quotes from the article jumped out at me:
"Mayor Bloomberg, in a speech at M.I.T., in November, had said of two of the applicants, 'Stanford is desperate to do it. Cornell is desperate to do it. . . . We can go back and try to renegotiate with each' university. Out of the blue, Hennessy says, the city introduced the new demands. 
To Hennessy, these demands illustrated a shocking difference between the cultures of Silicon Valley and of the city. 'I’ve cut billion-dollar deals in the Valley with a handshake,' Hennessy says. 'It was a very different approach'—and, he says, the city was acting 'not exactly like a partner.'"
Taken together, Bloomberg's and Hennessy's comments cut to the heart of the massive cultural gap between the dominant values of the technology innovation community and those of traditional industries like financial services:

  • The "heroic" cultural action in the software innovation community is creating, making something from nothing, growing the pie, and giving everyone who helps a slice of the gains. In this mode, negotiations tend to be friendly, focused on achieving mutual gain and equitable outcomes.

  • By contrast, the "heroic" action in financial services (or politics, for that matter) is winning, "being on the right side of the trade". The pie is finite, the game is effectively zero sum, and each players' share of the gains tend to come at the expense of the other players.

Facebook's IPO this week offered an even starker example of this dichotomy, with commenters from the trading economy lamenting the "failure" of the offering, while those from the "maker" side celebrated the lack of trading gains delivered to Wall Street on the back of the maker's efforts.

The roots of this cultural difference aren't easy to pin down, but both the New Yorker article and a thoughtful recent book-length analysis (The Rainforest: The Secret to Building the Next Silicon Valley) see its historical antecedents in the egalitarian, cross-cultural and community-centric values of Western pioneer culture.  

But whatever its origins, the collaborative and gains-sharing ethos of the innovation community acts as critically important grease on the wheels of the system, reducing legal and deal-making overhead and fostering trust and agility among players at every layer.

From where I sit, it's not hard to read the current cultural moment as a long-cycle power shift from East to West -- from traders to makers. This is probably bad news for Wall Street, but good news for the long-term economic competitiveness of the U.S. as the driver of global technology innovation.

The single greatest risk to this this future isn't technological, but cultural -- allowing the short-term focus on wealth creation and extraction to erode the bedrock values of collaborative invention.

Steve Blank summed this up nicely with his recent (and widely-republished) article, "Why Facebook is Killing Silicon Valley":
"[W]hat’s great for making tons of money may not be the same as what’s great for innovation or for our country"
Acquired situational narcissism is the cultural cancer -- fed by wealth and power -- that kills empathy and celebrates extraction over creation.

The current frothy climate in Silicon Valley is tilting the table towards extraction once again, but I believe the culture of innovation is stronger than the culture of extraction -- and that even as the battle rages in Silicon Valley, maker culture is spreading too far and fast for the forces of extraction to catch it.