Sante Fe Institute Operating Principles

Linked to from my earlier piece on how greatness cannot be planned, the Sante Fe Institute Operating Principles (PDF) by Cormac McCarthy are short and great. Even if you don't like PDFs, this is just one page, and it's fun to see the inline corrections and to read the note in its typewriter-like typeface.

I like the ending line.

Occasionally we find that an invited guest is insane. This generally cheers us all up. We know we're on the right track.

Slow innovation

But this system leaves a category of innovation stranded: new ideas based on new science. Self-fertilizing plants. Bacteria that can synthesize biofuels. Safe nuclear energy technology. Affordable desalination at scale. It takes time for new-science technologies to make the journey from lab to market, often including time to invent new manufacturing processes. It may take 10 years, which is longer than most venture capitalists can wait. The result? As a nation, we leave a lot of innovation ketchup in the bottle.
This is a relatively new situation. From the 1960s through the early 1990s, society’s investments in education and research produced smart people and brilliant ideas, and then big companies with big internal R&D operations would hire those people, develop those ideas and deliver them to the marketplace. When I joined MIT’s electrical engineering faculty in 1980, that model was working extremely well, translating discoveries from university labs across the country into innovations such as silicon-on-insulator technology (IBM) and strained silicon (Intel) — two advances indispensable to delivering on the promise of Moore’s Law , which since the ’60s has enabled the rapid advance of computing power. 
In the past two decades, and especially the past five years, the United States has undergone a profound shift in how it develops, adopts and capitalizes on innovation. Today, our highly optimized, venture-capital-driven innovation system is simply not structured to support complex, slower-growing concepts that could end up being hugely significant — the kind that might lead to disruptive solutions to existential challenges in sustainable energy, water and food security, and health.

From a call for the U.S. to come up with more ways to incubate and invest in slower forms of innovation, the types based on new science, which typically have longer gestation periods from conception to payoff.

A lot of green tech seems to fall into this category, requiring tons of capital and decade long time horizons, something most VC's aren't set up to handle.

Bitcoin feels a bit like something one could lump into this slow innovation category, minus the massive capital requirements of most green tech, though perhaps it's less because of scientific uncertainty and more on cultural and social inertia.

The no punt offense

This isn't a new topic, but I've been catching up on old old reading over the first day of my holiday break, and the Kevin Kelley's no-punt offense is a football strategy that rhymes with David Arseneault's basketball strategy The System which I wrote about recently.

Ask any stats geek about any sport and they'll tell you no team plays the optimal strategy as dictated by the numbers. In the NBA, teams don't take enough three pointers (though they are coming around on that one). In MLB, teams call for too many sacrifice bunts and often save their best relief pitcher, their closer, for the 9th inning when they could be used to greater leverage earlier in the game. In the NFL, teams don't go for it on 4th down often enough. Even the most innovative or bold of NFL teams, the Patriots, usually punt on 4th down.

But one football team, albeit a high school one, takes the numbers to heart. The Pulaski Academy Bruins, coached by Kevin Kelley, not only never punt on 4th down but also try for an onside kick on every kickoff (okay, they have punted four times in the past three seasons, I'm not sure what overcame him those four times).

Pulaski fans are accustomed to such play. Most enjoy the show, shake their heads and refer to the coach, Kevin Kelley, as a "mad scientist." But really, the coach isn't mad at all; his decisions are rooted not in whimsy or eccentricity but in cold, rational numbers. Ask him to defend his methods, and he revs up his Dell laptop and refers to his statistics.

Pulaski hasn't punted since 2007 (when it did so as a gesture of sportsmanship in a lopsided game), and here's why: "The average punt in high school nets you 30 yards, but we convert around half our fourth downs, so it doesn't make sense to give up the ball," Kelley says. "Besides, if your offense knows it has four downs instead of three, it totally changes the game. I don't believe in punting and really can't ever see doing it again."

He means ever. Consider the most extreme scenario, say, fourth-and-long near your own end zone. According to Kelley's data (much of which came from a documentary he saw), when a team punts from that deep, the opponents will take possession inside the 40-yard line and will then score a touchdown 77% of the time. If they recover on downs inside the 10, they'll score a touchdown 92% of the time. "So [forsaking] a punt, you give your offense a chance to stay on the field. And if you miss, the odds of the other team scoring only increase 15 percent. It's like someone said, '[Punting] is what you do on fourth down,' and everyone did it without asking why."

The onside kicks? According to Kelley's figures, after a kickoff the receiving team, on average, takes over at its own 33-yard line. After a failed onside kick the team assumes possession at its 48. Through the years Pulaski has recovered about a quarter of its onside kicks. "So you're giving up 15 yards for a one-in-four chance to get the ball back," says Kelley. "I'll take that every time!" Why not attempt to return punts? "Especially in high school, where the punts don't go so far," he says, "it's not worth the risk of fumbling or a penalty."

Here's a video of Kelley talking about his no punt philosophy, and here's another over at Grantland with some video of their crazy onside kick formations. The results bear out the math. This season the Bruins won their conference again, outscoring the next highest scoring team in their conference by over 15 points per game.

As of yet, no college or NFL team has had the guts to try a similar strategy, though San Diego State made some noise about possibly going in this direction last season. The statistics for the NFL, while they might not support the exact same strategy as in high school or college football, still suggest more teams should go for it on 4th down and that more teams should try surprise onside kicks (the success rate of onside kicks in the NFL is 60% when the other team isn't expecting one). In so many situations in the NFL, the average punt only nets you 10 to 20 yards of field position, I would love to see some of the NFL's truly bad teams who are going to be underdogs in most games try a bolder strategy to increase the variance of their outcomes, just as any good underdog should.

NFL teams have dabbled with some of Kevin Kelley's tactics, but as with whether to hit on a 12 vs a 13 in blackjack, one should really just pick a strategy and commit to it. If your team knows it's going to go for it on 4th down, it can alter its play calls on 1st, 2nd, and 3rd down to ensure if it ends up in a short yardage situation when it does end up in 4th down. It also won't feel like such a tense situation when it does occur because it will be part of the team's regular strategy.

The role of government in innovation

When it comes to productivity, there is one set of rules, which economists have worked on since Adam Smith. Innovation has a different set of rules. Most economists seem barely aware that the two sets of rules often clash — what is good for productivity is bad for innovation. Let me sketch a few of the innovation rules. Innovation needs freedom, of course, and the ability to profit from your invention, which I’ll call benefit. It is also called self-interest. The importance of benefit/self-interest for innovation is the main point of Why Nations Fail by Acemoglu and Robinson. Innovation is also increased by resources, such as skills, knowledge, space, and equipment. After discussing this with Bryan Caplan, I believe many economists are well aware these three factors (freedom, benefit, resources) affect innovation. All three also increase productivity — for example, more resources, more productivity. Far fewer economists realize that two other things, which act against productivity, are also very helpful for innovation:

1. Pain. Not a lot — not debilitating or all-consuming pain — but enough to make you think hard. Necessity is the mother of invention is the aphorism, which isn’t quite right. Pain, not necessity. Government is useful here, as I said. So is war. Many innovations came from wars. A famous example is the greenback, which came from the Civil War.

2. Stability. To innovate, you need free time, which is different from freedom (ask any prisoner). Free time allows painless failure, very helpful for innovation. To have free time, you need a secure job. Government is useful here, too. So is tenure. Pain plus stability = peacetime military spending. The internet came from peacetime military spending. Professors were the first users. Stability also promotes innovation because it makes it easier to detect small improvements. The quieter it is, the better you can detect soft sounds.

More here from Seth Roberts. It's commonly accepted that constraints can spur creativity, but the idea of government as a useful irritant is not something I'd heard before. 

The tradeoff of freedom and pain with government plays out on a smaller scale with employees and companies. Early in your career, you run into more obstacles in a company given your generally lower position in the organization. Some of them are instructive, others are just friction or the usual coordination costs of an organization.

At some point, for some people, those costs become unbearable and they leave for a position higher up, where there are fewer obstacles, or they start their own company and trade one type of challenge for a different type.

Hierarchy of innovation

Nicholas Carr hypothesizes that we're seeing a stagnation in transformative innovation because we've shifted towards the top of a sort of Maslow's hierarchy of innovation.

As with Maslow’s hierarchy, you shouldn’t look at my hierarchy as a rigid one. Innovation today continues at all five levels. But the rewards, both monetary and reputational, are greatest at the highest level (Technologies of the Self), which has the effect of shunting investment, attention, and activity in that direction. We’re already physically comfortable, so getting a little more physically comfortable doesn’t seem particularly pressing. We’ve become inward looking, and what we crave are more powerful tools for modifying our internal state or projecting that state outward. An entrepreneur has a greater prospect of fame and riches if he creates, say, a popular social-networking tool than if he creates a faster, more efficient system for mass transit. The arc of innovation, to put a dark spin on it, is toward decadence.

One of the consequences is that, as we move to the top level of the innovation hierarchy, the inventions have less visible, less transformative effects. We’re no longer changing the shape of the physical world or even of society, as it manifests itself in the physical world. We’re altering internal states, transforming the invisible self. Not surprisingly, when you step back and take a broad view, it looks like stagnation – it looks like nothing is changing very much. That’s particularly true when you compare what’s happening today with what happened a hundred years ago, when our focus on Technologies of Prosperity was peaking and our focus on Technologies of Leisure was also rapidly increasing, bringing a highly visible transformation of our physical circumstances.

If the current state of progress disappoints you, don’t blame innovation. Blame yourself.

Need a blueprint for The Blueprint

Over a year ago I preordered a book titled The Blueprint, intrigued by its three accomplished co-authors: Peter Thiel, Max Levchin, and Garry Kasparov.  The subtitle of the book was Reviving Innovation, Rediscovering Risk, and Rescuing the Free Market.

The ship date on Amazon kept pushing back and pushing back, and finally I learned why in an aside in Why We Can't Solve Big Problems:

Levchin, Thiel, and Garry Kasparov, the former world chess champion, had planned a book, to be titled The Blueprint, that would “explain where the world’s innovation has gone.” Originally intended to be released in March of this year, it has been indefinitely postponed, according to Levchin, because the authors could not agree on a set of prescriptions.