Games of chance? Cause and effect in innovation ecosystems Part 2

Notes on the practice of innovation and technology commercialization

“That is why, according to Viktor Mayer-Schönberger and Kenneth Cukier’s book, Big Data, ‘causality won’t be discarded, but it is being knocked off its pedestal as the primary fountain of meaning’. But a theory-free analysis of mere correlations is inevitably fragile.”
Big data: are we making a big mistake? Financial Times, March 28, 2014

“You have on each table cardboard, drinking straws, glue, string, balloons, paper cups, and other bits and pieces. Use these materials to build a model your local innovation ecosystems.” These were the instructions given to multiple groups of five or six from among those of us who participated in the recent Global Innovation Summit in San Jose California. An undisclosed prize, based on unexplained criteria (a slice of innovation humor?) was to be given to the winner. This modeling game was a lot of fun, provided insight to some, and also raised the question of what kinds of models might represent innovation ecosystems?

We usually build system models to simplify the world around us in order to better understand it – and hope that in such simplified models we have included the important features of the actual system. For example, it is not possible to include what may be large numbers of possible causes producing observed outcomes.


A model may be a physical structure, as in the picture above of one team’s product from the Global Innovation Summit, or in the form of mathematical equations (in some cases this may have been the way an actual system was designed), computer simulations, or even a set of stories. Using narrative to understand the dynamics of innovation ecosystems will be explored in a future blog in this series.

One difficulty is that the more we expand and generalize models to take into account wider circumstances the more unmanageable they become and usually we have to make additional simplifying assumptions or model small subsets of a system.

At this point it’s important to make a distinction between complex and complicated systems. Complex (adaptive) systems are what we have been discussing in the past few blogs. We noted, for example, that in such systems the same inputs may not always yield the same outputs and the whole is more than the sum of its parts. Complicated systems may be broken down into smaller and smaller constituent parts (superposition principle); the whole is the sum of its parts and behaviour is completely predictable. An economy is complex. An modern passenger aircraft is complicated. Both systems are composed of a system elements connected in a system structure. Both kinds of system perform specific system functions in its system environment. Both systems may have a permeable system boundary allowing inputs from, and outputs to, the external environment.

The difference is that complicated systems can be fully modeled whereas complex systems are inherently resistant to modeling.

My colleague Henry Doss, is his series of Forbes blogs on leadership, put the issue well “We live and work in a world that wants specificity and predictability, but we live and work in systems that defy predictability…  A strong leader of complex systems knows this truth about systems, and understands that oftentimes judgment, intuition and commitment are more important than measurements, projections and predictions.  Knowing that systems are resistant to predictive models, and are rich in unforeseen, often positive, outcomes is a powerful foundation for effective leadership.  And it’s an awareness that will make for more informed and nuanced decision-making.” Does Synergy Really Mean Anything?

Do difficulties relating effects to causes mean that we cannot model complex adaptive ecosystems? In fact no, even without predictive capabilities progress can be achieved. Sharon Zivkovik at the University of Adelaide, Australia, in her article Addressing Society’s Most Pressing Problems by Combining the Heroic and Collective Forms of Social Entrepreneurship notes “According to complex adaptive systems theory, under certain conditions interactions between independent agents produce system-level order as agents interact and learn from each other, change their behavior, and adapt and evolve to increase their robustness. Empirical research has shown large complex systems such as communities require enabling conditions to be created in order to maintain the coordination required for emergence self-organization and adaptive capability.”

These communities may be said to be engaged in ‘collective entrepreneurship’ by integrating knowledge and resources from different, and sometimes diverse, parts of the ecosystem, capitalizing on properties of far-from-equilibrium complex adaptive systems such as self-organization, and using the resulting resources to address difficult problems.

Dr. Zivkovik further notes “The aim of interventions at the point of self-organization is to enable community system members and their resources to recombined into new patterns of interaction and working arrangements that improve the functioning and performance of the community system and displace the old way of thinking.”

It is this recombining into new patterns of interaction or moving from one ‘basin of stability’ to another in a Rainforest innovation ecosystem that allow us to build, if not complete ecosystem models, then at least some predictability around these stable regions. I use the word “moving” and this indicates what’s missing in our discussion so far; a model must be dynamic and include flows such as those of knowledge, and capital in the innovation ecosystem. These are relatively new ideas in the context of innovation ecosystems and present considerable challenges to the modeler. However, it does seem that we should be able to model such systems beyond string and Styrofoam™.

The first part of this Blog is at: Games of chance? Cause and effect in innovation ecosystems Part 1

Next month: A review of the 14 blogs so far in this series, their connections, and what I hope we have learned.

Rainforest Rev: Stable Teams and the eNetworked Ecosystem

What makes places like Silicon Valley tick? We take those lessons, and we apply them to drive sustainable growth and competitive advantage. We do this by designing the ecosystems that foster entrepreneurial innovation. We call them Rainforests. The Rainforest Architect Lab is a three-day, one-of-a-kind immersive design course that provides leaders with the insights, tools, and skills to build their own innovation ecosystems.  

June 1-4                         August 24-27                         November 2-5
Click here to find out more, and sign up today!


Unlocking the Power of Stable Teams with Twitter’s SVP of Engineering
Innovation Daily
The key to growing a company beyond the start-up stage is creating a structure in which modular teams become the unit of scale. Read more here.

IT – Revolutions in the Industry: From the Command Economy to the eNetworked Industrial Ecosystem
The Impact Institute
A position paper that examines the change from a top-down managerial approach used in the Industrial Revolution, to an emerging paradigm based on a bottom-up clustering of resources that leverages the power of initiative as a competitive advantage. Read more here.
Metro Startup Hubs And The University Factor
Recent research conducted with the Kauffman Foundation challenges conventional wisdom on the importance of universities to innovation hubs. Read more here.
An Interview with Bob Sharon – Green Global
The Switch Report
Bob Sharon, Founder and CEO of sustainable IT leader Green Global Solutions, describes how ‘rainforest’ concepts influence his business strategy and vision of sustainability. Read more here.
Innovation Lessons Down Under
Government Executive
The Australian Public Service’s approach to embedding innovation in its systems shows how government can incorporate the latest innovation tools and techniques in its operations. Read more here.

Next Silicon Valleys: Why Cambridge is a Start-up City
BBC News 
Academic research and startup technopreneurs can be strange bedfellows, but Cambridge is making the relationship flourish. Read more here.

Startup Guru Horowitt to Italy’s Young People: “You are important!”
An Italian language article about Greg Horowitt, T2 Venture Creation’s Chief Evangelist & Co-Founder, who visited Italy recently on a blockbuster tour promotion startup innovation. Read more here.

Rainforest Rev: The Significance of Synergy and Post-Launch Innovation

Only 5 spots left in next week’s Rainforest Architects Lab! Join the world’s first course on innovation ecosystem design.  It is an exclusive three-day course in Silicon Valley for leaders seeking to catalyze entrepreneurial culture in companies, communities, and countries. The lab will cover the spectrum of ecosystem design, including macro systems (environment), micro solutions (practical, real-world tools), leadership skills (behavior change), and workplace implementation (doing). 

Register now for one of four upcoming Rainforest Architect Labs:
April 6-8           June 1-4           August 24-27           November 2-5

Does Synergy Really Mean Anything?
Henry Doss, Chief Strategy Officer of T2 Venture Creation, from Forbes
Synergy is an appealing if malleable concept that is more often invoked than it is clearly understood. But it might just be the perfect way of describing the unpredictability of complex systems. Read more here.

Post-Launch Innovation: The Next Business Frontier
While most innovation investment is focused on pre-launch, front-end activities, it’s possible to stay nimbly flexible while in-market, even for businesses that make products with complex development cycles. Read more here.

Is Facebook Just a Big Venture Capitalist?
Marketplace Public Radio
T2 Venture Creation’s Co-Founder and Managing Director Victor Hwang provides a Silicon Valley perspective on the social media giant’s $2 billion purchase of virtual reality pioneer Oculus VR. Read and hear more here.

Smart Cities: Opportunities for Startups
GIGAOM Research
The problems that urban centers are going to face in the coming decades are promising avenues of development for savvy entrepreneurs. Read more here.
When Does Establishing a Good Startup Culture Outweigh Being Cheap?
The inspiring story about the scrappy startup that bootstrapped its way out of a garage can lead to a “cheap at all costs” approach that can actually impede early-stage companies from advancing to the next level. Read more here.
Innovation Happens When Ideas Have Sex
La Opinion
A Spanish language article about T2 Venture Creation Co-Founder & Managing Director Greg Horowitt’s ideas for spurring innovation in the nation of Colombia. Read more here.

Looking For a Hot Startup? Have You Tried Chennai?
The capital city of the South Indian state of Tamil Nadu has the talent to follow in Bangalore’s footsteps. Read more here.

Study Cites Metro Detroit as High-tech Hotbed
The Detroit News
It might be hard to imagine, but Detroit’s technology industry is growing faster than Silicon Valley’s. Read more here.
Berkeley Staff Aims to Grow City’s ‘Innovation Ecosystem’
Hoping to quiet the siren song of nearby Silicon Valley, the City of Berkeley strives to slow its tech talent “brain drain.” Read morehere.
Liquidity Announces the Launch of Revolutionary Drinking Water Purification Product
We are proud to congratulate our friends and partners atLiquidity on this special announcement.
Liquidity, a company that has developed breakthrough water purification products based on membrane nanotechnology, announces the launch of its first generation purifier. The purifier is a revolutionary new tool for a world with declining clean water resources and a growing health crisis.

Launch: Silicon Valley 2014

We are proud to share this announcement from our friends and partners at SVForum on their upcoming event. 
Launch: Silicon Valley

The World Cup Tech Challenge
May 20,2014, Microsoft Campus
Silicon Valley

Rainforest Rev: Innovation Church and Supporting Start-Ups



The Rainforest Revolution
The latest news on growing innovation ecosystems in
companies, communities, and countries

How do you accelerate the innovation process? How do you create trust-based ecosystems of entrepreneurial creativity? The Rainforest Architect Lab is a three-day immersive design course in Silicon Valley that provides leaders with the tools they need to create their own innovation ecosystems. 

Register now for one of four upcoming Rainforest Architect courses:
April 6-8            June 1-4            August 24-27            November 2-5
Register today!


Innovation Church: The Tie That Binds
Henry Doss, Chief Strategy Officer of T2 Venture Creation, from Forbes
A participant in last month’s Global Innovation Summit described it as “innovation church.” While Silicon Valley’s secular denizens might reject the comparison, Henry Doss finds much about it that rings true, containing, “… the secret to building powerful cultures, moving experiences and a sense of purpose.” Read more here.

Supporting Start-Ups With Connections, Advice and Caffeine 
The New York Times
The Kauffman Foundation’s “1 Million Cups” program simulates Silicon Valley culture in small workshops held in 30 cities across the country. Read more here.

Innovation Is Messy: Navigating the Twists and Turns
The Huffington Post
Which is more important for innovation to occur: conflict or cooperation? The answer is certainly one of these choices, or both, or neither — depending on the chaotic, circular, highly iterative, and perhaps idiosyncratic process necessary for a system or organization to innovate. Read more here.

How to Build a Productive Tech Economy
The Atlantic
Creative Cities champion Richard Florida discusses a study highlighting social factors that are essential to building innovation economies. Read more here.

American-Style Start-Ups Take Root in India
The New York Times
Despite conventional wisdom about the difficulty of doing business on the subcontinent, U.S. investors are increasingly funding Indian startups. Read more here.

Innovation Ecosystems, from Silicon Valley to the Kingdom of Saudi Arabia
Maria Douglass, a friend and collaborator of T2 Venture Creation (blog)
King Abdullah University of Science & Technology helps build a Rainforest innovation ecosystem from the ground up, contributing to the kind of information-sharing and mentorship culture that made Silicon Valley a success. Read more here

Next Silicon Valleys: Beijing’s Start-ups Show Stamina
BBC News
Despite the high-cost of living, stiff competition for university graduates, and other barriers for entrepreneurs to overcome, tech startups are clustering in Beijing, where they find community in places like the Garage Cafe, a site where investors and entrepreneurs can meet informally. Read more here.

UNM Wins Award for Aiding Development
Albuquerque Business First
According to the president and CEO of the University of New Mexico’s technology transfer and economic development agency, its success at building an innovation ecosystem can be attributed to the adoption of ideas from the book, “The Rainforest: The Secret to Building the Next Silicon Valley,” by T2 Venture Creation CEO and Co-Founder Victor Hwang. Read more here.
Atlanta’s “Innovations in City Hall” Report Released
A new report showcases the winners of Atlanta’s “CityIdeas” competition among City employees for ways to reduce waste, cut red tape and save money on operations. Read more here.

T2VC’s Money-Laundering Cartel Revealed In Debut Novel

We are extremely proud that Eliot Peper has just published his first book!  Eliot is a former associate and entrepreneur-in-residence at T2 Venture Creation.  His book is the world’s first “startup thriller,” a novel that combines the excitement of entrepreneurship with nail-biting mystery and action.  You can learn more about the book here.  Today, we feature a guest column from Eliot about the writing process and the inspiration that goes into it.  Needless to say, we were shocked, shocked to learn about the money-laundering activities happening at T2VC that were the inspiration for Mr. Peper’s book…


Sources of inspiration and innovation

By Eliot Peper

There’s always something behind a story. Maybe it’s a glowing light bulb of inspiration as the shampoo is sluicing down the drain. Maybe it’s a dream that left behind a particular flavor of emotional hangover. Maybe it’s the death of a loved one or the passion of a one-night-stand. Whatever it is, it leaves an indelible impression on the story. It sets the tone in terms of look and feel. It’s the well the author can return to whenever plot threads run thin or characters dry up.

No sacred muse hands out such experiences like mana from heaven. We all experience these moments in our everyday lives. They constitute the highlight reel of our living memory. Any of those peaks on our life’s graph has the potential to give shape, texture, and flair to a story.

While working on the first draft of Uncommon Stock, I discovered that those moments are just as relevant for the characters as they are for the author. Writing fiction is often an exercise in choosing what not to say. How do you decide which slices of your protagonists’ experiences deserve inclusion? Your characters are real people living real lives. If James Bond doesn’t brush his teeth, he’ll get cavities. If Frank Underwood doesn’t make his monthly payments, his credit rating will plummet. If Yoda doesn’t sweep out his Dagobah hut, well, he probably never has but may the Force be with him anyway!

At the end of the day you can only afford your readers staccato glimpses into your characters lives. Weaving these moments together into a compelling, cohesive whole is the craft of storytelling.

Uncommon Stock was born out of frustration. I’m a voracious reader and my work with Greg, Victor, and technology entrepreneurs gave me an inside view of the natural drama in the startup world. There are countless invaluable pieces of business nonfiction that detail the rigors of entrepreneurship. Nonfiction is a fantastic instrument for sharing experience and best practice.

Fiction is a different beast altogether. Fiction is a magical medium that gives readers an intimate view of the characters’ emotional journey from inside their own heads. I wanted to read a book that captured something from that ether. I wanted to sit on the shoulder of the protagonists and share their adventure through the startup world. But my frustration grew as I couldn’t find any entrepreneurial fiction to read. So instead, I decided to try my hand at writing it.

That frustration fueled me through countless bouts of writer’s block, frequent doubts, and revision after revision. I have no idea whether anyone will be interested in the result. I just hope there are a few people out there like me who will get a kick out of it. But that’s not the point. The point is that the creative process is an end in itself. It wears out your stamina, exhausts your mind, and drains your soul. But then, suddenly, there’s a story.

We interpret our lives in the form of stories. We link together our memories, that highlight reel, into a narrative that structures our own identity and understanding of self. We are all storytellers. Those moments of inspiration smolder inside every single one of us.


Rainforest Rev: Brand Innovators and Hidden Influencers

The game has changed in the knowledge economy. Today, value is created by trust-based networks that accelerate innovation, entrepreneurship, and creativity. We can teach you that game. The Rainforest Architect Lab is a three-day, one-of-a-kind immersive design course in Silicon Valley that provides leaders with the insights, tools, and skills to build their own innovation ecosystems.  Four new dates have just been added!
April 6-8   |   June 1-4   |   August 24-27   |   November 2-5
Click here to find out more, and sign up today – as enrollment is limited! 

The Latest News on Innovation Ecosystems – How Do We Create Innovative Environments in Companies, Communities and Countries?

Innovation is a Process, Not a Four-letter Word
University of Chicago’s Kilts Center for Marketing
Innovation does more than improve a company’s products, packaging, or pricing; it also creates a ripple effect that improves a business’ overall brand identity. Read more here.

Tapping the Power of Hidden Influencers
McKinsey & Company
A survey technique used by social scientists to study street gangs, drug users, and sex workers can help organizations identify influential employees who can lead others to be more innovative. Read more here.
What Inspires Me: Meet the Metro Innovators
Bruce Katz on LinkedIn
Cities across the country are taking their fate into their own hands, relying on local stakeholders to solve their issues rather than appealing for outside assistance. Read more here.
Innovation Ecosystems
Reflections and references incited by last month’s Global Innovation Summit. Read more here.
Is it Good for People to Fail Occasionally?
BBC News
While our competitive culture prizes success, there is also a benefit to failure. Taking the long view, it appears that, “…perfectionism is the enemy of achievement.” Read more here.

Study: Copycatting, Diverse Teams, And Transparency Are Keys To Innovation
Imitation is not only the highest form of flattery; it’s also beneficial to the one being imitated, helping them explore the variations and effects of their innovations. Read more here.

Tennessee: The Innovation State?
The Takeaway from Public Radio International (radio)
From education pricing to high-speed connectivity, leaders in Tennessee are taking chances on innovative approaches. Hear more here.

Bubbles, Unicorns, Outliers and Innovation in Silicon Valley and Austin
Silicon Hills
Pivotal changes in the democratization of business creation will keep Silicon Valley at the epicenter of innovation — as long as investors let entrepreneurs take the necessary risks to experiment, create, and collaborate so that, “…knowledge and ideas flow freely,” contends Greg Horowitt, Co-founder and Managing Director of T2 Venture Creation. Read more here.

Next Silicon Valleys: Seattle Lures in a New Generation
Young entrepreneurs are making their mark in a city known more for its tech heavyweights. Read more here.

Games of chance? Cause and effect in innovation ecosystems Part 1

Notes on the practice of innovation and technology commercialization

As cousin Zeb spreads his money on the table, ready to play poker with Cuthbert J. Twillie (played in the movie by W.C. Fields) he excitedly asks, “Is this a game of chance?”

“Not the way I play it, no,” comes Twillie’s reply.

My Little Chickadee (1940) movie starring W.C. Fields and Mae West.

Is poverty a cause of crime, did my forgetting to change the oil in my car cause the engine to seize, was the lack of funding for patenting inventions in my university the cause of low technology commercialization compared to peer institutions, what was the cause of sudden rise in value of my company stock? Chance, probability, cause and effect are so embedded in our daily lives that may give scant thought to the mechanisms of causality – what cause produces what effect, either immediately or at a later time. In this and the next blog we shall show that time is the critical feature of causality in both “plantation” and “rainforest” innovation ecosystems (The Rainforest: The Secret to Building the Next Silicon Valley ).

If, in building ecosystems, we propose interventions that adjust the ecosystem’s sub-systems and, especially their connections, we need to know what the effect of these actions are likely to be. For example, in one case, improving communications and shared goals among universities, incubators and accelerators, resulted in improved efficiency and ‘fitness’ of the innovation landscape  (see February 2014 blog The Gardener’s Dilemma for the concept of fitness).

Philosophers have been debating cause and effect for millennia. Aristotle identified four basic causes and stated that “we do not have knowledge of a thing until we have grasped its why, that is to say, its cause.” David Hume, whom we met in the January blog, made his readers think about whether we are justified in using inductive reasoning to understand events. Ludwig Wittgenstein’s, quoted in the March 2013 blog in this series, with his usual ability to both enlighten and confuse, dropped in the idea that “outside logic everything is accidental.”

Causality would seem to imply that we can create simple models such as event A causes B and in turn action B may be the cause of an effect C. For example the diagram below depicts a causal model relating price and demand, for which algebraic equations can be written. Q is the quantity of household demand for a product, P is the unit price, I is household income, W is the wage rate for producing the product, and U1, U2 are unmodeled error factors effecting quantity and price.


From Causality by Judea Pearl, Cambridge
University Press, 2000.

But wait a moment. In previous blogs we discussed how innovation ecosystems are non-linear complex adaptive systems where the same inputs don’t always produce the same outputs,  where the behavior of a system is not the sum of its individual parts, where there are disruptions and emergence, and where effects occur in far-from-equilibrium states. Surely then, complex adaptive systems make a mockery of simple causation?  So, what should we do to get a hold of cause and effect in complex adaptive innovation ecosystems? If we cannot, then we have lost our way completely.  It is to these questions we shall now turn our attention.

Writers in several disciplines including biology, physics, economics, and sociology continue to add to theories and applications. However, it’s clear that there is much still to be explained. The remainder of this blog and the next will survey and summarize what is known about solving practical problems of cause and effect in complex adaptive innovation ecosystems. Much of what is discussed next is taken from the thought provoking work of David Byrne and Emma Uprichard.

Deterministic equations cannot be written for complex systems as they can for the linear system diagramed above. Other means are needed. A valuable concept is the ‘causal narrative’ – descriptions or cases, which may contain both text and numbers, that help to explain why some event happened in a complex system and how the state of the system came about. Such narratives are reconstructions of events similar to case examples and studies familiar from education, although here we are typically talking about short narratives and maybe reusable knowledge facets as introduced in the October 2013 blog in this series Create early, use often: Lego™ blocks, learning objects, and ecosystems. Part 2

In practice preparation of a roadmap for an innovation ecosystem demands an understanding of causality. A roadmap is a trajectory over time which might show what actions or projects are recommended and when they should begin and when they should be completed. In this situation causality means causality by comparison – comparison with the trajectories of systems which have similarities, or in the language of complexity those which are ‘near neighbors.’  Knowledge of what happened to produce an existing state can enable choices to be made of which actions – causes – can produce future expected results – effects. The late Fritz Ringer, professor emeritus of history at the University of Pittsburgh, described this as “the kind of causal analysis that will explain why the course of historical development ultimately led to the explanandum* in question, rather than to some other outcome.”

In this introduction to cause and effect in complex systems I have a feeling of having laid myself open to charges of either over simplifying issues or making them vague. Part 2 will attempt to correct either situation and look at the practical consequences of trajectories in complex innovative ecosystems and all their component parts. W.C. Fields was correct, it’s not a game of chance.

* “explanandum”  is not a familiar word to many of us, but quite a handy one. An explanandum is a phenomenon that needs to be explained, and its explanans is the explanation of that phenomenon.

Next time: Cause and effect in innovation ecosystems Part 2


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