Occam's developing world

In the past I have written a few things about Occam's Razor and how, to paraphrase, it is stupid. Recently Rebound has been diving head first into our work in Mozambique. While we have been there a very striking example of Occam's Razor has manifested itself. In short, what has struck me is the way people developing and funding technology for the developing world tend to subconsciously oversimplify the issues the developing world face. In lieu of this oversimplification, we default to an Occam-style approach to tech development: make it simple, make it stand alone, and make it clever. Ironically, this approach often leads to technology that is inappropriate, expensive, hard to upkeep, and just down-right silly.

I will get to Rebound's experience in a second, but I want to highlight one example that has received a bunch of press in the developed world. Enter, the Soccket: a soccer ball that charges a small internal battery that can then be used to provide light at night. This solution defines the classic problem with developing world technology: it pre-supposes that the developing world is a blank slate where a technology must be developed from the ground up and handed out from the back of a truck.

The Lean VC

Today, nothing is hotter than a “Lean Startup”. The general concept goes something like this:

The runway of a startup is not defined by a period of time, but by a number of pivots. To be successful, the startup should therefore, aggressively pursue pivot opportunities through early commercial exposure through “minimum viable products” (the clougiest thing that the startup can get anybody to actually buy). In other words, guessing what technology is going to work in the market is hard, so it is better to setup your company so you can aggressively test your ideas. 

At Rebound we have tried (as difficult as it is in Cleantech) to adopt this strategy in each of our technologies. Still, we get a LOT of pressure to do things "leaner" and I think that we are reaching the point where, at the very least, every entrepreneur on the planet has at least heard of the "lean" concept. The next step is obvious, and will likely be significantly more difficult: create a lean VC process to accompany the lean startup. So, what would that look like? Lets figure it out!

Optimally Naive

It's never feels good to be called Naive. But when it comes to startups, I want to propose the idea of Optimal Naiveté. This idea has been cooking around in my head for a few months on two levels.

First, I think any person doing something that is actually disruptive has to be incredibly Naive about how easy it will be. I know this is true about myself. Even today, after spending 2 years running full speed into walls, I still feel like, if I just sprint a bit faster, I could really change the world. Every day it occurs to me how stupid this is, but I just can't shake the Naiveté. But this is just the obvious "startups are hard" kind of statement that everybody says. I don't think this Naiveté actually helps Rebound be more successful outside the fact that, if I was more down to earth, I would have just gotten another job after the first wall / Russell interaction.

The more important  way that Naiveté effect success is on the technical / idea level. I think for any industry, if you had an impossible amount of data, you could construct a plot that looked like this:

success or not, hard to tell...

Several months ago, I purposefully stopped writing in this blog due to my own frustrations with the difficulty of getting Rebound funded. This frustration stemmed from several consecutive failures in a period already filled with other, more personal and impacting failures. In the end I stopped writing in the middle of several posts (which now I will try to finish) because I no longer cared to try to improve such a terribly impossible system.

That feeling has now ebbed a bit. And as it passed, I wanted to capture one side of it: the realization that, due to our own human limits, it is hard to even imagine what success looks like.  

A great analogy for this observation is the way we think about evolution in nature. For even the minority (pathetic right) of Americans who understand evolution to be the way all current living things have come to be, we tend to think about it in terms that we can understand: “survival of the fittest”.

The blind helping the blind build our future

A blind man stands at the edge of a busy street clearly wanting to cross. Other pedestrians crossing stop and ask him if they can help. To each he asks "can you see?" and when the pedestrians answer that "yes, I can" he sends them on their way without crossing. Eventually, a pedestrian answers that "no, I can't see because I am also blind". The bind man quickly grabs the hand of this pedestrian and ushers them towards the road. "great, I feel much more comfortable crossing this road with someone who I have so much in common with!" 

We are all blind to something. Nobody knows everything or has such a diverse set of skills that they can look at a problem from all the angles at once. This is why diverse (I will define exactly what I mean by that world in just a second) teams are more creative, adaptive, and successful than homogeneous ones.  But in the investment world, this homogeneous approach is what persists: The folks who must make the decisions assemble blindly homogeneous teams to help them make those decisions. The result is predictable... failure. 

Efficiency: to much of a good thing

Efficiency is a concept that all people, not just engineers, grasp onto: an increase in efficiency is always good. While I have no issue with the general concept, it is dangerous oversimplification that implies efficiency is somehow a better metric. In reality, efficiency is only the easy metric, not the best metric and an over reliance on efficiency to sort technology into good and bad ideas leads to higher overall cost solutions and extreme waste. The problem is one of path functions. When a technology is created it starts somewhere on its cost-efficiency curve based on the constraints of the day. It is improved from there, at an increased cost, until we have a large understood technical space built up around the technology. This works great when constraints stay the same, but when the constraints change, the technology is now up a curve without a paddle. 

Blind Decisions

The extent to which we fail to choose good companies to invest in is often understated. Instead, it seems to be accepted that VC, grant, angel, or any other type of funding method just can't do that much better then other markets. Sure, a hotshot VC may outperform the stock market, but they are not going to get a 10x return on every investment they make. On average, VCs only get that kind of return on 20% of their chosen companies and the rest given them more or less no return at all. So overall, most give boring returns in the 10% range. In cleantech especially, investments has really failed to return the types of returns LPs were expecting (see mass exodus of LP support for cleantech based VCs) 

However, the simple fact that some investments do give yield massive returns should still encourage us to pursue better ways of choosing the companies that are invested in. This should be even more compelling in the cleanteh space where the potential markets are well established and gigantinourmous. But before we can really invent a new investment decision mechanism we need to take the current method, stab it in the heart with a wooden stake and put it in the ground.

To that end, I have recently been experimenting with very simple model that illustrates just how bad the current decision mechanism is at picking companies that will go on to be successful. The model is based on an allegory for our decision mechanism based on the "blindness" of the people choosing which companies should be invested in and which should not. The model gives some interesting insights into how terrible the current system is at really finding good companies to fund. 

TEDx

Last month, I had the privilege of giving a talk at TEDx MileHigh. It was a blast and the whole TEDx MileHigh crew was astoundingly effective. 

I wanted to tell the story of my company without selling the company. Instead, my goal was to show how we have found that focusing on small, tailored solutions lets us achieve lower costs and most importantly, a good chance of having some type of positive climate impact. I hope you enjoy it. 

Do you even buy what you are making

Ever see something like this when you try to take the price tag off something you just bought to put on display? Ever try to open a product you just purchased to find the bag does not reseal or the box rips apart in your hands so it's tabs are useless?

On Arrogance and Success

Arrogance is the destroyer of all things creative, innovative, and good. It blinds us to both the mistakes we are making and the opportunities we are missing. This is by no means a new thought. The concept of hubris is older then most other parts of our culture. Why then, are arrogance and business success linked so strongly in our society?  When a CEO like Elon Musk goes off about how clearly superior he is, we all roll our eyes and phrases like "well you can't argue with success" get passed around. We all seem to have been conditioned somehow to accept that success and arrogance are linked.

I would like to propose an alternate theory: Arrogance is counterproductive to success and instead, we are victims of an optical illusion that makes the fictional link between the two seem intuitive.

Perspiration and Cookies all in One Post

I can't vouch for everywhere in the world, but if you grew up in the US I guarantee that you have heard the following quote:

"Success is 10% inspiration and 90% perspiration" - Thomas Edison

Let me start by saying that this statement is completely factual as has been demonstrated to me on numerous occasions over the course of REbound's first year. However, it recently occurred to me that this quote also sums up how we erroneously think about new technology and startups in general. We tend to focus more on the capability of a team to perspire instead of inspire. In other words "can this team accomplish this work" instead of "is this a good idea in the first place". This can be dangerous because when you get down to actually developing a technology, bad ideas take just as much effort to develop as good ones. That is, until they fail.

Stop your pitching

Recently over at REbound we had yet another experience where we were told that we needed to make a <5 minute pitch. I have written about this idiotic carry-over from the tech world a few times, but I wanted to take this opportunity to dedicate a full post to the topic.

Now, its important early on to define what I mean by pitch because some people call any presentation a pitch, and that is confusing.  To us, a pitch means a short <30min presentation that is given explicitly so that investors (or members of the public unlucky enough to be subjected to it) can make a quick up or down decision on weather they want to hear more. The idea being that these people are so busy being bombarded with other pitches, that you have to make your idea stick with a grand slam 3 minute pitch. 

For the savvy cleantech entrepreneur, pitches are rather benign. It takes a lot of time, but eventually you will make a pitch presentation that is sufficiently impressive to get you to a longer meeting. At REbound we have dedicated a huge amount of time to our pitch and the way people are first introduced to our system. We have learned through many failed attempts, that people just don't want to learn about a technology in a pitch. They want to know what you are replacing, how much better your system is, and how big the market is for the thing you are replacing. It is very clear that a "proper" pitch has almost no technical discussion.

where did the money for basic research go?

If you like free time and available funding to develop technology, this graph should make you very happy! It represents the hourly productive output of each person in the United States. In other words, it shows how good we are at making the food, houses, freezers, toothbrushes and everything else we all need to survive. Looking at that slope we are clearly getting more efficient at making the things we need each year which means we have more time and money to spend developing new technologies. For incremental sustaining research this is absolutely what has happened over the last 60 years. Unfortunately this graph has actually made it more difficult to find funding for basic research. 

Saying yes to mean no

Recently, I had two similar conversations with two similar people that ended up with very different outcomes. Both conversations started the same way: I brought up an idea I had that I wanted feedback on. In both cases I was talking with people smarter then me who had experience I thought would shed light on the idea I was trying to refine. After I explained the basic idea, both people thought the same thing: "that is going to be really really really hard to make work". But the end result of the conversations were very different. In one case, the conversation lasted about 10 minutes and then the subject was courteously changed to something else. In the other case,  the conversation turned into an hour+ discussion about the idea full of new insights, new potential, and eventually a significant improvement on the original idea. 

Why were the outcomes so different if the initial response from folks I was talking to was so similar? Because the first person said no and the other person said yes but meant no and that approach made all the difference.

"but why hasn't it been done before"

In past posts I have talked about a few types of arguments we currently use when developing technologies that I like to call "biased 3rd party arguments". These arguments rely on a non-existant 3rd party to "help" us judge what technologies we should develop and what technologies we should put on the shelf. A perfect example is the devil's advocate. When someone invokes the devils advocate, they are not themselves making an argument against an idea, they are bringing in a 3rd party (the devil's advocate) in order to make an argument they may or may not believe in. Occam's razor is the same way, it invokes a 3rd party to come and make an argument. The problem with these arguments is that they are inherently biased toward the status quo by allowing people who dont have a valid argument to substantiate the claims they are making.

Adding to this list, lets talk about the question "why hasn't this been done before". If you have every worked on a project that is even a little bit different then the status quo, I guarantee someone (probably a manager or investor) has asked you this. Just like Occam's razor and the devil advocate, this argument invokes a 3rd party, All Of Time, to enter the room and pass judgement on your idea and, just like Occam and the devil's advocate, All Of Time is much more biased then we think.

Orders of Magnitude

Like most people in the energy world, I constantly find myself trying to explain numbers with large orders of magnitude. This is an issue when trying to describe any kind of energy technology: “This system has 600kWh of storage” or “This power plant  capacity is 250MW”. Clearly, and unapologetically so, a random person on the street is not going to “get” those values. At first, this looks like a units problem. Joe Smith does not have any idea what a MW is or how it relates to his life.

In the energy industry, the common thing to do is to convert this unit into something that everybody can relate too, like number of homes powered. This is a great first step, but I think it leaves out the other side of the problem: orders of magnitude. Humans, in general, are terrible at grasping and comparing large numbers. So simply converting the number is not enough.

More Brains

We all know the current VC structure used to fund cleantech companies is broken. One major aspect of this is the more rigorous technical challenges of the cleantech world. The VC structure, formed by funding tech companies, places very little emphasis on the idea and, as such, just isn't capable of accurately assessing the technological challenges and potential of cleantech companies.

If this is true, biotech VCs should face the same challenge as biotech startups face at least similar levels of scientific and engineering intricacies. Looking into the status of biotech VC funding, the trend is starkly similar to cleantech. Looking to move their model into new areas, VCs went crazy in the biotech field and now are scaling back as their startups fail to meet returns under the tech paradigm.

How can VCs change their structure to accommodate cleantech and biotech? The best place to start is at the beginning: pick better companies to fund. To do this VCs need to re-prioritize what they look for in startups. But even with a higher priority on the idea VCs will be in a tight spot. When being exposed to  hundreds or even thousands of ideas a year, how can a VC with possibly no technical background make the right call?

The failure of Cleantech VC

For those looking for VC Cleantech funding, these are rather dark days. While sad, there is a reason VCs are jumping the Cleantech ship: the returns over the past 10 years have really sucked really bad. The question is why? Why have VC IRRs dropped from 40 during the days of tech to <10 in the days of Cleantech?

Although nobody knows the right answer, two things are clear: Cleantech does not appear to be capable of producing the explosive returns that tech companies can and something is fundamentally wrong with the process that VCs are using to decide what companies to fund and what companies to reject. Lets look at both these issues.

Why don't we site Wikipedia

Wikipedia, weather you will admit it or not, it is probably the first place you go when you want to learn something about a new topic you are unfamiliar with. It is hands down the most useful site on the Internet for people looking for knowledge. And as the 6^th most popular website in existence, it is clearly everyone’s go to site for learning. So why is there still a taboo about siting Wikipedia as a source of information?

In short, I think the reason is that people believe that, given Wikipedia’s nature, some of the information on the site may be wrong. Since the site is technically not peer-reviewed, mistakes may carelessly slip through the cracks and be portrayed as truth. This clearly is possible, but I think, as usual, human perception is holding us back. Wikipedia, from my own anecdotal standpoint, is significantly more trustworthy then peer-reviewed journals.

Occam's Razor Examples Part 2: The Jet Engine

Part two: Occam's Razor and the jet engine

Part one of this two part series focused on the idea that some of the central tenants of the "simple is better" mantra are not always correct. Part two will hopefully get back to the heart of why Occam's Razor is an inappropriate way of deciding what technology is "good" or "bad". Through the post we will look at a technology that today, is the standard to wich all new energy technologies are compared against: the jet engine. Weather it is used for propulsion (jet engine) and energy production (natural gas turbine), the well understood simplicity of this technology makes it a tempting target to compare new systems against. 

If you are a thermal engineer (and who isn't), you are probably very familiar with the Brayton Cycle and the idea of the jet engine. If you are not a thermal engineer (and who is) then you may only be casually familiar with them. They are, in simple terms, the things that propel airplanes. They do this by first compressing a gas, heating it up by burning kerosene, extracting some of the energy to run the compressor and then letting the remaining hot high pressure gas shoot out the back through a nozzle. If you have never read through the entire jet engine wikipedia page then you are in for a real treat. 

Today jet engine technology is used not only to provide power for nearly all commercial air traffic, but it also provides 20% of our electrical energy via natural gas plants. In other words, this technology has been a great success. It has transformed the way we produce energy both in the air and on the ground.  Today, the simplicity of the system is well understood: air is compressed, fuel is burned, exhaust is expanded, exhaust is expelled. The straight shot, once through, one major moving part construction of modern turbines is especially compelling. It is tempting to use this technology as an example the power of Occam's Razor. It would appear that the simplest technology has won.  However, the history of the technology tells a very different and compelling story.