Channelling Bill Shockley

Cross posted from Open IT Strategies


Techstars (an incubator company) and various aerospace companies have announced plans to launch a space incubator in LA. As TechCrunch reported:

Already a major hub for the space and aerospace startup industry, with companies like SpaceX, Relativity Space, Virgin Orbit, Rocket Lab, Phase Four, and others calling Los Angeles home, the new accelerator will provide another booster for LA’s growing startup scene.

The new aerospace program, called the Techstars Starburst Space Accelerator, will be managed by longtime Techstars managing director, Matt Kozlov, who previously helmed Techstars’ efforts at its health-focused accelerator done in partnership with Cedars Sinai.

LA was the country’s major aerospace hub from the 1930s until the end of the Cold War. But with the end of the space race, the downsizing of missile and military aircraft procurement — and the death of Douglas Aircraft and Lockheed’s commercial aircraft division — jobs were cut drastically and others moved to cheaper parts of the country.

The anchor of the new LA space hub is SpaceX, which moved to Hawthorne in 2008. It had been the headquarters of the firm founded by Jack Northrup in 1937, where it built the B-35, F-89 and F-5 military aircraft. (Its B-2 bomber was built at a secret factory in nearby Pico Rivera).

SpaceX is such a tough place to work that it has encouraged its employees to game the Glassdoor employer rating system. Despite this, 1/3 of the 1,109 SpaceX reviews complain about long hours, as with the review that said “There are times I work very long hours including a few times working 60 straight hours”. Last month, SpaceX — celebrating record success in 2018 — rewarded its loyal workforce with a 10% layoff.

Elon Musk has often imagined himself the next Steve Jobs, although Steve Jobs didn’t think so. Musk clearly needs to grow up and at 47 is well past the age when Jobs did so. Jobs was certainly grown up by 1998 (age 43) when his youngest child was born and he took the reins of Apple once again. Jobs also made his money in the commercial marketplace rather than manipulating investors and government procurement.

Instead, I think Musk is the next Bill Shockley. Shockley is known for inventing the field effect and bipolar junction transistors, which won him a share of the Nobel Prize. Late in life, he was known for saying controversial things about political and social issues.

However, (given his Bell Labs colleagues probably would have invented the transistor without him) perhaps his greatest contribution to mankind was creating Silicon Valley. In 1956, he founded Shockley Semiconductor in Mountain View, California.

He was such an asshole as a boss that the next year eight of his leading employees (the “Tratorous Eight”) quit Shockley to form Fairchild Semiconductor — the first of thousands of spinoff companies to be formed in the Bay Area. The eight included Gordon Moore and Robert Noyce — cofounders of Intel — and Eugene Kleiner, cofounder of Kleiner Perkins.

So between his winning personality, stressful working conditions and past/future layoffs, Musk will be making thousands of skilled ex-SpaceX employees available to the LA aerospace labor market. As with Shockley, perhaps Musk’s greatest contribution will be attracting bright engineers to the region, who later take those skills to help get other startup companies off the ground.

Seeking a judicious decisiveness

Coming to the end of his second journal editorship, economist (and Yahoo researcher) Preston McAfee reflected on the thousands of decisions he had to make — rejected 90+% of the submissions.

His views on decision-making seem directly applicable to the core problem of an entrepreneur: making decisions quickly based on incomplete information:

When Paul Milgrom recommended me to replace him as a co-editor of the American Economic Review, a post I held over nine years [1993-2002], one of the attributes he gave as a justification for the recommendation was that I am opinionated. At the time, I considered “opinionated” to mean ‘holding opinions without regard to the facts,’ and indeed dictionary definitions suggest ‘stubborn adherence to preconceived notions.’

But there is another side to being opinionated, which means having a view. It is a management truism that having a vision based on false hypotheses is better than a lack of vision, and like all truisms it is probably false some of the time, but the same feature holds true in editing: the editor’s main job is to decide what is published, and what is not. Having some basis for deciding definitely dominates the absence of a basis. Even if I don’t like to think of myself as “obstinate, stubborn or bigoted,” it is valuable to have an opinion about everything.

In his resume, there’s little evidence of any entrepreneurial bent, and in fact he was the economist helping the Federal Trade Commission attack the creative (if controversial) Rambus business model.
I do see one problem in applying his model to a startup. The editor of an elite journal has hundreds of very bright minds to draw on. Yes, half of them may say “no” when asked, and some have personal agendas. But still, this is a tremendous pool of knowledge that can correct egregious errors by the leader.

No such pool of knowledge is available to the tech startup, which raises the risks of overconfidence by its leaders. Certainly scientists (and to some degree engineers) tend to have the view there is one “right” answer. When it comes to the merits of an idea, some overconfident leaders tend to assert “this idea is wrong” when really “this idea is wrong for us.”

Henry Chesbrough famously noted that in innovation, firms often control for false positives (Type I errors) and predictably end up creating too many false negatives (Type II errors). This is one of the reasons he came up with “open innovation” paradigm — both to remind firms to avoid Type II errors, and to suggest specific mechanisms for profiting from good ideas that don’t fit.

Still, a judicious decisiveness is essential for any entrepreneur or entrepreneurial management team. From my own experience, it’s clear that postponing decisions often makes the decision for you. The key is that if it’s important, the startup can’t afford to “watch and wait” but instead must aggressively investigate to obtain the missing information.

References
R. Preston McAfee, “Edifying Editing,” American Economist, 55, 1 (Spring): 1-8.

Hat tip: pointer to McAfee essay via blog of Greg Mankiw.