Tuesday, December 1, 2009


For a dying man it is not a difficult decision [to agree to become the world's first heart transplant] ... because he knows he is at the end. If a lion chases you to the bank of a river filled with crocodiles, you will leap into the water convinced you have a chance to swim to the other side. But you would not accept such odds if there were no lion.

— Christiaan Barnard

Scientists suffer from an unfair reputation in America. They are considered to lack instinctual savvy. For this reason, nearly every physicist I know is deeply offended by the stereotypical characters in the CBS sitcom “The Big Bang Theory.” They are socially awkward and tend to quantify even the most banal details of life. What my colleagues miss about “The Big Bang Theory” though, is that hidden underneath all of the silliness these characters possess something that is unique, and apparently rather attractive about scientists. After all, even the Asbergian self-centered Sheldon is likeable , I actually think that there is something about the geekiness of “The Big Bang Theory” that is every bit as attractive as the coolness of the “Sex in The City” ladies. Though this is certainly a project for sociologists and not me, I have a hypothesis regarding television likeability and culture. I think that somehow we know that the common perception of cool is not really all that important, or even interesting. This is a significant, even if unconscious, realization for modern television viewers, because common wisdom takes a long time to become common. It is also interesting because it gives a defense for seeing the Universe and ourselves differently. In essence we think that everything Sheldon does is not intuitive. He is a classic clown in this way. He humiliates himself by creating friendship surveys so that he can create a mathematical model to see who would best qualify as a friend. Our instincts are the opposite of this. We become friends with people because they are attractive in some, sometimes superficial, way. They make us laugh, or they are handsome, or they are somehow dynamic in a way that we wish we were. For anyone who has had friends they ended up hating, or has been married and divorced, human instincts are exceptionally bad.

This is one area where a geeky physicist may have some insight on business that is different than everyone else. Physicists are used to the facts being different than the way they feel. The Copernican revolution is one of the first examples of this: it doesn’t feel right that the earth rotates around the sun. This is even truer of 20th century physics. Our instincts are absolutely insufficient to understand Einstein. General Relativity, with warped space-time, just isn’t in our normal arsenal of instinctual survival skills. Quantum mechanics is even less intuitive, so much so that one of its discoverers, the Danish Nobel Laureate Neils Bohr famously said, “If quantum mechanics hasn't profoundly shocked you, you haven't understood it yet.” So to be a good physicist or scientist in general, it is important to be at least a little “Sheldonesque.” We must not trust our instincts, but instead investigate the truth. In facts and friendships we need to consider quantitative data, not just attraction.

A field of science which is relatively new is called “evolutionary biology”. You would think that this would have started just after Darwin’s “Origin of the Species” was published in 1859, but it wasn’t. That revolutionary book was so well written, that it debunked all of recorded history’s various religious interpretations of biology without being all that difficult to understand. In fact, when you read “Origin of Species” the first thing that comes to mind is “why did it take so long to realize this?” Darwin just observed and recorded nature for many years, and made a leap which was incredibly obvious in retrospect; that there is a relation between species and that certain traits and species survive because of natural selection. This was, of course, controversial for all of the obvious reasons as well. Religion is both very personal and very political. Even though what Darwin was doing was science, it did step on some sacred beliefs. Still, to most people who read the book it made sense. Theodore Roosevelt read it when he was 14 years old and for the rest of his life claimed it was the most important book ever written. It is easy to see that Roosevelt’s love of nature shaped his decisions as president, and much of that can be traced back to his admiration for Darwin. So because of its apparently intuitive qualities, Natural Selection could be taught in biology classes, without there being a separate branch of the discipline devoted to it.

The surprising thing is that as much as Natural Selection made sense, it really wasn’t as intuitive as expected. What made most sense to humans about evolution was not the centuries it takes for species to transform themselves. This is hard to visualize. Instead it was an idea that humans could only prosper through a conscious survival of the fittest. The term Social Darwinism was coined in 1944 by the historian Richard Hofstedter to reference some rather disturbing contemporary human behavior that was carried out with the excuse of Darwinian naturalism. The most obvious during Hofsteder’s time was the eugenics programs of the Nazis. The concept of superior races, and linking human survival to the elimination of the unfit seemed like an extension of Darwin’s work. In fact, Darwin’s own cousin, Francis Galton, was the founder of Eugenics at the end of the 19th Century.

It is only when you let go of this instinctual idea of survival of the fittest that you can really see the true scope of Evolutionary Biology. Genetic mutations are slow to occur, and happen because of natural means, but humans have removed themselves from the natural process. Technology, as wonderful as it is, is only 10,000 years old. Until that time there was not agriculture or architecture. There were no cities or writings. We call everything before this “prehistory,” because until that point history was not created by deliberate societal choices. Darwinism has been in progress since the beginning of life on earth, but social Darwinism exists only during those times we call “history”. Therefore most scientists feel that we as humans are effecting nature, while behaving as if they were outside of the natural process. This is not instinctual, and is not as easy as “Origin of The Species” initially seemed to be.

Social Darwinism is also evident when evaluating risk. The 2008 credit crisis and banking collapse can be seen in this light. The majority of the crisis was caused by misunderstanding risk. Was it riskier to give certain loans or not? Was it riskier to make certain credit swaps or not? There are two prevalent points of view about why this happened, and in such dramatic and drastic ways. Most people not working in finance see it as a case of greed. This viewpoint is an unconscious blaming of social Darwinism. It holds that the wealthy Wall Street Bankers wanted to be the strongest, therefore richest, so they pushed for larger profits at the expense of the weaker greater population. On the other hand, the banking industry blames poor financial modeling for the collapse. The claim has been that the models did not appropriately explain the risks associated with these transactions. Even the most famous economist and Federal Reserve chief of all time, Allen Greenspan, used this explanation saying “the models of finance that I have followed were not accurate in predicting this crisis”. When we look at these two explanations we see a huge contrast, while both ignore something that is probably more accurate. It was neither greed nor modeling alone that caused this. It was merely a deficiency in our ability to instinctually comprehend risk. The numbers were too big, our vision of history too limited, and our confidence too great. It seems that we were not as smart as we thought. Growth seemed inevitable. We thought that credit and finance in general were part of the evolutionary process, but in fact they were removed from it. Derivatives and credit default swaps just happened too fast for Natural Selection to catch up with them.

This applies also to the personal and professional risks associated with starting a technology company. The common wisdom on the risks of entrepreneurship are strangely opposed to the way we approach risk in our daily lives. Most people change their risk threshold based on how much money they have. When we have very little money we tend to risk all we have, because we feel there is not much to lose. This is why lottery lines are longest in poor neighborhoods, and why casinos are filled with people who can’t really afford to lose the money that they are gambling with. These people feel that the upside is much larger than the downside. It just feels right, but is completely wrong. The odds of a poor person winning the lottery are just as bad as the odds of a rich person winning the lottery, but the risks associated with the poor person playing are so much worse. This wrong instinct extends through the middle classes and even to the wealthy, not for lottery tickets but for ideas and the money it takes to pursue them. Someone who is worth 2 Billion Dollars is less likely to risk 1 Billion dollars on a single venture or idea, than someone worth $ 200,000 is to risk $100,000 Even though the billionaire may lose much more money he certainly is in better shape financially than the person who loses half of his $200,000 investment. Our instincts are just that bad.

Instinctively entrepreneurs often work by the motto “never spend your own money”. I have been told this many times, by everyone from the founder of Cirque Du Soleil, to the investor of the leveraged buyout concept in the 1980’s. These people have been undoubtedly following their instincts, and those instincts have made them a lot of money. The question I need to ask myself  is whether that would make me a lot of money too, and more importantly whether that would be the best thing for my company and the happiness. We have tended to answer no to that question. Seeking other people’s money presents a bigger risk for me than risking my own for reasons that seem completely unreasonable.

The main reason why technical entrepreneurs, like me and my family, may want to take relatively large risks compared to the Billionaire, but relatively small risks compared to the lottery addict is because it is a scale that we can relate to. There is an assumption that the risk taken is never so great that it will land us and our children on the street corner, but is none the less a risk that could alter our lifestyle. This is something a scientist can understand. A scientist knows he cannot appreciate in an instinctual way, those things which he cannot feel, and that further comprehension only comes through a deep knowledge of a subject. For a scientist starting a small company it isn’t always the most interesting use of his time to fully understand business, so he shouldn’t have to do it. The risk and reward factors change when this is considered. It becomes more risky to raise large sums of money because large sums of money may be out of the scientist/entrepreneur’s expertise. In order to gain that expertise he would have to sacrifice his true interests, which may very well be the riskiest choice of all.


  1. As the mother of the family I am concerned with providing safety and security. When John came home and suggested we start Tech Pro my first inclination was panic. How would we pay our bills without the surety of a monthly paycheck? And how could we possibly use every penny we had saved for a risky thing like buying used rheometers?
    We spent several days debating the intelligence of this decision. There was certainly no assurance of success if we started the company. Even our most optimistic projections did not include huge riches. We were in our early 30’s, college educated, hard-working, and not very thrilled with our present jobs. So we thought of what the very worst possibility could be if we pursued this endeavor. We could go broke, we could not be able to pay our mortgage, and we would lose our security of having money in the bank. But we also had the opportunity to build something from nothing and enjoy a life we created. I think the main reason we decided to take the risk involved with starting Tech Pro was that we knew we had the abilities to survive. If it all went sour we could still start over. After all, we were married while still in college and had absolutely nothing then. I had a great deal of confidence in John’s abilities and knowledge of the rubber industry also. So this security minded mother agreed to risk all we had on the hopes of having a viable business. Kay Putman

  2. Matthew, I'm not sure I am able to fully follow your thoughts when it comes to the link between Social Darwinism and evaluate risks...

    However, my first reflection is that I totally agree that the riskiest choise of all, is to sacrifice his true interest. I totally believe that the keyword to long-term success when it comes to serious entrepreneurship is CONTROL. Never make risks that will put you in the backseat, not being able to control the development of the product or the corporation.

    My 2nd reflection is that I just cant wait to watch the 'big bang theory'. //Susanne Lovgren

  3. Thanks Susanne. I may have been strething the anology with Darwinism a bit too far, but my point is, that while business is certainly a survival of the fittest, it doesnt need to be exclusive to one type of business species. That is, social Darwism claims to understand how to control superior populations. Common business wisdom does as well. I would say that both of these are missing the point, that sometimes the smaller species can survive as well, and are sometimes stronger.

  4. So much to comment on here, I could probably go for a thousand words on my love for the Big Bang Theory alone, but I'll move on to important stuff.
    As a small business owner myself, I feel like I'm making an "all-in" bet all the time. I have no venture capital, and no investment money other than my own, but I also haven't taken any bank loans. I've grown at my own pace, organically. Entrepreneurs would at best call this a waste of time and no way to make any real money, or at worst would dismiss my company as a "lifestyle" business.
    But the risk is still there, time, effort, energy, and yes money are all involved, but I often feel like the biggest risk is to my own love for my career. I'm a videographer, a filmmaker, but I spend more than half my time being a businessman, salesman, project manager, accountant, marketer, etc. Is that, "real" risk? I don't know. If my business fails, I'm not losing a billion dollars of my own or anyone else's money, but at the same time I have a condo payment to make every month, bills to pay, etc. I feel like I have a lot on the line and it dictates decisions I make for my life and for my business.
    Maybe some of those folks who lost all those billions of dollars in the banking crisis should have felt more at risk themselves. It may have improved their decision making.
    Gamblers know this better than anyone. You always play looser with house money, than when you're down to your last hundred.

  5. Matthew, I agree that we cannot make business decisions on instinct or intuition alone, but I see risk management a bit differently. Risk versus confidence versus naivety – somehow this seems to be the critical combination to me. Risk: the chance of success or failure. Generally, in business, failure is black or white or, in this case, red. A company that repeatedly losses money is a failure. But is a break-even company a failure? Is a company’s success based on the amount of profit it makes? So, in starting a business it is a) necessary to define the terms of success and b) have the confidence that these terms can be met. Knowledge of the product or service, customers’ requirements, tax law, human resource issues, insurance needs, procurement, manufacturing, domestic and global participation - all can be accessed ahead of time. The economy, availability of capital, existence of employees with critical skills, new competition, product or service obsolescence, international business atmosphere – all are in flux. Certainly we must have the confidence that we can evaluate these variables, but maybe a healthy naivety is also necessary. Maybe we just have to be naïve enough to jump into the water and know that we can swim to shore regardless of known currents and unknown storms. Perhaps my naivety is intuition in disguise. John Putman

  6. What is intuition? I think about the classic question: which is more accurate, an analog clock that is broken, or a digital clock that eternally loses one second every day? The answer is that the analog clock is EXACTLY correct twice each day, and the digital clock will only be correct once every 236 years (or something like that). The intuitive answer is the digital clock because it provides an approximation of truth. From a literal, Sheldonesque sense (or Data from Star Trek TNG), perhaps it is the analog clock that is more correct. Sometimes intuition leads us into a better “truth” than relying on cold, hard, literal interpretations.

    It is true that Hofstadter wrote Social Darwinism in American Thought in 1944, but “social Darwinism” is most closely associated with Herbert Spencer. And it is Spencer and not Darwin who coined “survival of the fittest.” He tried to separate his ideas from the social realm and focus only on the biological. Evolutionary biology with intent, meaning that the idea that giraffes grew long necks because they wanted the fruit that was higher on the tree, was what Darwin fought against. Even Erasmus Darwin, Charles’ grandfather, was a Lamarckian and a proponent of evolution. Looking at this another way, acquired characteristics, cannot be passed on genetically. If I worked out and got huge muscles, I could not pass these along to my offspring. So if you are keeping score, “inheritance of acquired characteristics” is 0, and natural selection is 1. It did take decades though for scientists to come to an agreement about natural selection (I believe the 1930s) even though they agreed with evolution almost immediately. This demonstrates how long it can take even for revolutionary ideas to be accepted. (Disclaimer: I am a simple historian so don’t quote me on the science).

    While Darwin sought to avoid social implications, he could not escape them. Many have suggested that the social stigma of evolutionary theory was one of the reasons that Darwin sought to withhold his findings, until he had ample scientific proof (and when a co-discoverer contacted him, hot on similar ideas).

    Was Darwin a risk taker then? Eventually, but a conservative one.

    Risk is a relative thing, and changes over time. I actually have done some research on the changing nature of risk at NASA. In the pre-Challenger days there was an amazing liquid hydrogen project that was essentially completed and was to launch in the flight after Challenger returned. But then Challenger exploded, NASA was in turmoil, and the agency that emerged was more risk averse, and cancelled the project. The cancellation was due not to any technical reason at all. It was canceled only because “risk tolerance” changed.

    Time for my rambling to come to an end. My broken analog clock is about to approach a moment when it speaks the truth, and I want to celebrate.

    Mark Bowles

  7. The whole relationship between Social Darwinism and risk is quite fascinating on multiple levels. As we have seen from the financial crisis, the Greenhouse Effect, the war in Iraq, and Macdonalds (just to name a few), survival of the fittest in the short term might lead to absolute social and personal disaster in the longer term. Even when people adequately evaluate personal risk, they rarely if ever factor in social risk; that is, how do my choices affect others both in the short and long term. We live in a culture driven by greed and fear, and even when choices are made that evaluate risk, benefit individuals and seem "rational" from a risk-reward perspective, they may prove to be ultimately the most irrational and destructive choices on a social/political level. This is a serious problem inherent in Social Darwinism, Capitalism, and, perhaps, human nature.


Please feel free to comment. It helps me with ideas, and to start a discussion.