The Disruption Machine: What the gospel of innovation gets wrong (2014) | Hacker News Reader

The Disruption Machine: What the gospel of innovation gets wrong (2014)

newyorker.com

51 pointsmakmanalp19 comments

I think there's a significant problem in SV culture that says you must disrupt all of the time, and that forming a stable business is not a goal.

Silicon Valley (the show) pretty much nailed this on a regular basis when shoddy-investor-guy warns against making money because you'll be worth less money because people know how much money you can make.

It's totally reasonable to eat a market while it exists, and then find a new market later -- or even decide that the shrinking market is actually ok, and you're content with your share of that market.

Unless you're the VC -- because you have a VERY high risk fund (almost by definition) and you'd like only 10-30% success but with 100x profits on those 30%.

This leads lots of tech companies to flame out, overstress, and build things people don't need, because the sane, logical ideas are the ones that are harder to find investment for (if they can't bootstrap them).

It's a weird space.

We're building a CRM for local governments (http://romulusapp.com) and have absolutely found this to be the case. Investors are not only terrified by government, but consistently talk about things like blockchains and GoPro + drones as things they are more interested in.

I'm all for experimentation, but it has been surreal to see the discount for solving an actual problem despite a massive market opportunity, little competition, and clear customer need + willingness to pay.

Off topic. Got to say that you have got quite an interesting system there.

You mean there's actually a sort of "business" case for saying "<random thing> ... ON THE BLOCKCHAIN!!"?

Yeah, I talked to a startup that had an existing product with a revenue stream, but they were aiming to take like 10m in investment in order to either grow exponentially or flame out early. That makes zero sense to me, why not bootstrap and build a real company rather than be a piece in somebody else's larger game?

More difficult if the startup can't yet support itself and just needs to get over a hump and get to a good growth point, because everybody wants a big exit. It should have bootstrapped before it got to that point, but can't get that money now when it needs it, or it's going to grow to be not-super-huge.

That being said, most wouldn't flame out if not for the crazy pressure of using it for explosive growth. There needs to be more "medium size / medium growth business investment" type VCs. I've never met any, but they might exist. $10M doesn't make you flame out, but how fast the VCs want you to spend it can, they only give you money for a year or two so they can get a larger percentage stake later, and that you are moving for an exit versus profitability.

The mentality is also reaching into public traded companies, invariably resulting in them overextending.

It all seems to come down to the chase of the growth curve. Anything thats not growing by x% per quarter is considered sick and on its death bed. Never mind that it may maintain its current place in the market for years and years, "investors" don't want to touch it.

The public trading companies worry me less than government. "We disrupted the shit out of that education system, left a smoking wreck, but we walked away with a cool billion, so who cares?"

In this day and age those are two sides of the same coin...

Clayton Christiansen's response: http://www.bloomberg.com/bw/articles/2014-06-20/clayton-chri...

| [Disruption] has never happened in the hotel industry, for example.

Clayton should try out AirBnB. An interesting article, though I found his use of the third person confusing/odd.

While the article is kind of weak and too long, the essential criticism is that Clayton Christensen's theory of disruptive innovation isn't a scientific "theory". It doesn't really make testable predictions and it's not falsifiable. There are too many confounding factors and no practical way to run a controlled experiment. (Much of modern economics has the same problem.)

But I still love Christensen's books for the way they provide a framework for discussing business strategy.

As always in these disputes perspectives are fought about as if they are facts.

Clayton Christensens theory provides a perspective, a lense to understand large parts of how the business world works. Of course there are all sorts of exceptions but that doesn't disprove the overall theory it just shows there are other ways to look at it too.

Well, I liked it... though I got the feeling I had read this before. Then I saw it was from a year ago and garnered almost no attention here back then.

https://news.ycombinator.com/item?id=8153457

Are we not talking about this because it's not relevant, or because everyone here is so invested in this disruption movement?

TL;DR: Read Nassim Nicolas Taleb, he has a lot to say on the likelihood and impact of highly improbably events (Black Swans)... like the successful of highly innovative products. Everything I say next is a rambling couching of the ideas of this article into his framework with the hope that someone else will engage with it.

Personally, I think the key point is here:

"Companies that were quick to release a new product but not skilled at tinkering have tended to flame out."

Which reminds me of the NNT's barbell approach to mitigating Black Swan's. Invest the majority of your energy conservatively in safe, non-risky ventures and then spread the rest of your energy across high-risk ventures (tinkering) with extremely high (or unlimited) potential upsides.

New technology has allowed the creation of many more Black Swans for businesses through innovation and they can be positive or negative depending on whether you are the disrupting company or the one being disrupted by this new innovation Black Swan.

Established companies that don't tinker, don't expose themselves to positive innovation Black Swans... while startups that ignore all established wisdom gambling on a single Black Swan innovation expose themselves to the reality that 9/10 innovations don't actually result in Black Swan level disruption.

For those that don't know what I'm talking about, I definitely recommend Nassim Nicolas Taleb's The Black Swan and Antifragile:

http://www.amazon.com/The-Black-Swan-Improbable-Fragility-eb...

http://www.amazon.com/Antifragile-Things-That-Disorder-Incer...

</rambling>

There was actually a more lively thread about it last year:

https://news.ycombinator.com/item?id=7901612

I can see this being reposted annually for the foreseeable future. Perhaps I should set up an IFTTT recipe to post this excellent rebuttal every time it appears on Hacker News: http://www.forbes.com/sites/forbesleadershipforum/2014/06/30...

I would call this is a pretty good take down of the religion of disruption.

Could perhaps use a (2014).

Thanks, updated.

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