TiB 165: When bankers become founders; the world's biggest risks; New Science; and more...

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It works in practice, but what about in theory?

Are entrepreneurs born or made? When we first started Entrepreneur First almost a decade ago one common critique was that it’s effectively impossible to increase the supply of (good) founders. In this view, more or less everyone who should be a founder becomes one. A more extreme version of the argument posits that such people almost can’t help it; they couldn’t do anything else. That never made sense to me: it seemed to ignore the role of culture in creating “default” career paths for ambitious people and the sheer unusualness of tech entrepreneurship outside Silicon Valley.

We’ve since built a lot of evidence that this critique is wrong - startups worth billions of dollars backed by some of the world’s best investors - but it was nice to see this new paper by Isaac Hacamo and Kristoph Kleiner (thanks Rob for the link) which provides supporting academic evidence. The authors look at graduate entrepreneurs in recession years, when entrepreneurship rates rise. Conventional wisdom says this should lower average company quality, but the paper finds that startups founded by "involuntary entrepreneurs" are “more likely to survive, innovate, and receive venture-backing”.

Why? Because (successful) entrepreneurship is a high-skill undertaking and, the paper finds that “labor shocks disproportionately impact high-earners” and these people are more likely to start successful companies. In short, in normal times, elite (and pro-cyclical) career paths in financial and professional services represent a giant talent suction machine that deprives the startup sector of potential founders. That said, as I’ve argued before, there’s a secular shift towards entrepreneurship among the most ambitious - but there’s still a long way to go.

New Science, new hope?

A core TiB thesis is that (a) long run economic growth requires scientific progress and (b) science today suffers from structural incentives problems that make such progress less likely. We've discussed this many times (see e.g. TiB 92, 103, 118 and 160), so I was interested to read about the launch of New Science by Alexey Guzey, Mark Lutter and Adam Marblestone (whose work on Focused Research Organisations we looked at in TiB 134).

New Science is an organisation that "will create a network of new scientific institutes pursuing basic research while not being dependent on ... traditional academia and, importantly, not being dominated culturally by academia". New Science therefore is concerned with things like the incentives for scientists to work on incremental work that can get published rather than the work they think is most important (see TiB 103 and 113 for more), but it's even more concerned with rebuilding the organisational culture of research. Guzey observes:

"I used to obsess over mechanism design and incentive structures but I’ve come to believe that we are Bob-Taylor-constrained much more than we are the-ideal-organizational-and-incentive-structure-for-a-basic-research-institution-constrained" [Do check out that Bob Taylor profile at the link]

I agree, but suspect that culture is downstream of incentives here. New Science's starting point - a fellowship for young scientists - is a sensible one. But if participants ultimately have to go back into mainstream academia, it's hard to change the way they think about careers (and worst case, if such people are more like to be "organ rejected" by the academy, it could make taking a different approach look even riskier). Figuring out the interface with a conventional academic career feels like an important part of the puzzle. It's a project we should all hope succeeds.

TiB podcast: Shashank Joshi on China, Russia and more

This week's TiB podcast episode is a conversation with Shashank Joshi. Shashank is Defence Editor at the Economist and has the most encyclopedic knowledge of international affairs of anyone I know. If you're looking for a whistle stop tour of the world's greatest security risks - from Vladimir Putin to the Senkaku Islands - this is the place to start.

We talk a lot about Taiwan's unique place in the world (see TiB 136, 158, 161) Shashank thinks the chance of direct Chinese intervention in Taiwan in the near future has risen appreciably, but is still low. More immediate is China's use of its economic interconnectedness to squeeze smaller geopolitical rivals (see TiB 86) - and the US's ambivalence in retaliating in kind. Shashank references this Economist piece on the battle over appointments to the Commerce Department's hitherto obscure Bureau of Industry and Security as a proxy for two schools of thought in US China policy)

Quick links

Not black and white. A skeptical thread on AI colourisation of old photos.
What the fireplace?! How (not) to create new, upsetting swear words.
Lions, tigers and bears. Oh my! People are extraordinarily over-confident about which animals they could beat in a fight.
Stubborn persistence of the physical, again. Why you can't buy a dishwasher right now. Or, indeed, lots of other things.
Popular things are popular. David Shor on the ads that tested most positively for Biden (part of this thread on elections and messaging, interesting throughout)

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Until next week,

Matt Clifford

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