Biology, Not Economics, Explains America’s Startup Strength

We can look to mother nature for business innovation

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By Victor Hwang

What do honeybees and startup companies have in common?

Biologist Edward O. Wilson has spent a lifetime observing ants, bees, and other social critters, and how they function together in groups. In contrast, my own profession—as a practicing venture capitalist—seems to be worlds away. Surprisingly, I have found that the ideas of Wilson, my former college professor, are profoundly more relevant to my work than those of traditional fields like economics or business.

On the surface, biology and technological innovation seem distinctly different. But if we adjust our perspective slightly, it’s remarkable how useful Wilson’s ideas are to understanding Silicon Valley and America’s startup economy.

E.O. Wilson needs little introduction. A legendary professor at Harvard, he is a two-time winner of the Pulitzer Prize and considered by many to be the second most important biologist in history, after Charles Darwin. His new book, The Social Conquest of Earth, is considered his “magnum opus.”

In my work, people often describe communities like Silicon Valley by using the label “innovation ecosystems.” But they only do so metaphorically. Can the ideas of E.O. Wilson inspire us to push beyond mere metaphor? What happens when we think of highly innovative human networks as real biological systems? Human beings, after all, are animals, too. Shouldn’t human society count as a form of biological system?

Our recent book, The Rainforest, attempts this improbable fusion of ideas. If we view communities like Silicon Valley through a sociobiological lens, we discover an entirely new way to view human economic phenomena. The term “rainforest” then becomes more than an analogy: innovation ecosystems actually behave like real biological systems in many ways.

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So, let’s apply biology to tackle one of the world’s great challenges: why do certain communities like Silicon Valley generate such extraordinary and sustainable innovation and economic output, while the vast majority of places—even those with large helpings of smart people, clever ideas, and capital resources—fail to do so? To answer this, it helps to examine human nature.

This notion seems simple enough. In practice, however, we don’t usually think that way. The study of neoclassical economics has primarily drawn from cold-blooded concepts in fields like theoretical philosophy and Newtonian thermodynamics. The traditional MBA curriculum teaches students to aspire for numerical precision, as a way to overcome the randomness of human foibles.

In his new book, Wilson reverses decades of conventional thinking on evolutionary biology and human nature. Citing evidence that stretches across mathematics, neuroscience, anthropology, and other disciplines, he contends that while selfish individuals tend to win against other individuals, groups of altruists tend to win against other groups. It is this evolutionary tension—between individual needs and group interests—that explains why only a few species of animals, including bees, wasps, ants, termites, and human beings, have developed complex social instincts enabling them to take over much of the planet.

But how is Wilson’s lens useful in understanding Silicon Valley, not to mention the entire American startup economy? Does the connection between micro (single animal behavior) and macro (animal group behavior) in biology help bridge the gap in our understanding between, say, microeconomics and macroeconomics in human social systems? The emerging answer appears to be yes: the evolutionary tension between individual and tribe—and its implications—is a powerful puzzle piece for creating a new economic paradigm.

When it comes to human beings, our tribal tendencies are both our greatest strength (think of the complex social web and distribution of specialized labor it takes to build an iPhone) and our most dangerous Achilles’ heel (think of war throughout the ages). What, after all, is a startup company but the formation of a temporary tribe to address a new real-time problem?

Viewed through this lens, a key difference in social behavior between bees and humans is that bee tribes are static and hard-coded, while human tribes are dynamic and soft-coded. If a predator attacks a bee colony, that colony has to fend for its own survival. If a large corporation attacks a startup company, however, that startup can recruit needed talent from around the world.

In human society, unlike bee populations, the boundaries of tribes can be redrawn continuously to address evolving needs. Diverse human beings come together constantly to rally for common, temporary, pragmatic goals. That’s true everywhere. But what sets Silicon Valley apart is how relatively easy and inexpensive it is to assemble such diverse groups on a continuing basis.

My colleagues and I have worked with startup companies on every continent except Antarctica, and in most places, we easily observe how loyalty goes first to family, clan, or neighborhood. If evolution has wired us to work in groups, it has also wired us to distrust people from other groups. E.O. Wilson cites evidence that shows how our brains are tuned for tribal behavior based on race and other characteristics. With modern fMRI neuroscientific imaging techniques, we can actually watch tribalism happen in the human brain in real-time.

In most of the world, when building startup teams among people with diverse skill sets, one frequently finds that strangers have a tremendously hard time trusting one another. Either deals don’t get done, or when they do happen, they are lawyered in thick contracts. People have fully prepared for failure, which makes such a result even more likely to be self-fulfilling.

Contrast that to Silicon Valley, where loyalty is generally not to the employer, which is temporary, but to the game of innovation itself and to one’s fellow players in that game. Call it a meta-tribe. What makes Silicon Valley special is not just its rich resources of talent, ideas, and capital. It is that the process of organizing dynamic teams of people who control those resources happens so fluidly.

The microscopic, day-to-day, transaction costs of organizing highly diverse teams in Silicon Valley are arguably the lowest in the world. In other places, these cumulative micro-costs can make the difference between a deal that takes many months to close and one that takes a few days. Facebook’s billion-dollar acquisition of Instagram in less than a week is just one high-profile example of this culture in action, but think of the millions of micro-transactions happening every day, perhaps as seemingly insignificant as passing along an idea or a referral to a stranger.

Silicon Valley is the result of a lucky historical accident—the opening of the American frontier—which created a community-based culture without traditional tribal structures, yet with extremely low transaction costs for assembling new tribes. Handshakes are much cheaper than contracts. Altruism is more efficient than selfishness. And trust matters. It streamlines the mechanics of day-to-day business, but more importantly it tilts the entire system away from bad tribalism (my startup versus yours) to good tribalism (we all belong to the meta-tribe of startups together).

E. O. Wilson has spent a lifetime trying to explain the inexplicable, but he may have done even better than he realized. His insights on biological systems may just have helped answer one of the great riddles of economics: what makes certain networks of homo sapiens so extraordinarily productive versus others?

8 August 2015

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  • Helga Vierich

    You write: “If evolution has wired us to work in groups, it has also wired us to distrust people from other groups. E.O. Wilson cites evidence that shows how our brains are tuned for tribal behavior based on race and other characteristics. With modern fMRI neuroscientific imaging techniques, we can actually watch tribalism happen in the human brain in real-time.”

    First, I assume that your use of the term “tribal” here must have a completely different definition that that used normally in anthropology? I assume you refer here simply to a bias towards people one knows and has some successful relationship history with, or who carry some kind of tag or label that marks them as belonging to and adhering to the general values and morals as oneself? It might be wise to define what you mean a bit more clearly,

    For me it is startling to see the term used so promiscuously when it has a very precise meaning in common usage: you can look it up online…. this is from Wikipedia:

    Anthropologist Elman Service presented a system of classification for societies in all human cultures based on the evolution of social inequality and the role of the state. This system of classification contains four categories:

    Hunter-gatherer bands, which are generally egalitarian.

    Tribal societies in which there are some limited instances of social rank and prestige.

    Stratified tribal societies led by chieftains (see Chiefdom).

    Civilizations, with complex social hierarchies and organized, institutional governments.

    In his 1975 study, The Notion of the Tribe, anthropologist Morton H. Fried provided numerous examples of tribes the members of which spoke different languages and practised different rituals, or that shared languages and rituals with members of other tribes. Similarly, he provided examples of tribes where people followed different political leaders, or followed the same leaders as members of other tribes. He concluded that tribes in general are characterized by fluid boundaries and heterogeneity, are not parochial, and are dynamic. (…Morton H. Fried 1972 The Notion of Tribe. Cummings Publishing Company..)

  • Helga Vierich

    I recently read “The Social Conquest of Earth” and found it extremely odd. For one thing, on page 243, we find the following statement, which completely misrepresents the “band” level organization of hunter-gatherers. As you may know, hunting and gathering economies are the earliest known kind of human economic system, and have been extensively studied, both archaeologically and among contemporary peoples who have this kind of economy. Wilson says, “…“Throughout prehistory, as humans evolved their cognitive prowess, the network of each individual was almost identical to that of the group to which he belonged. People lived in scattered bands of a hundred or fewer (thirty was probably a common number). They had knowledge of neighboring bands, and, judging from the lives of surviving hunter-gatherers, neighbors to some degree formed alliances. They participated in trade and exchanges of young women, but also in rivalries and vengeance raids. But the heart of each individual’s social existence was the band, and the cohesion of the band was kept tight by the binding force of the network it composed…. With the emergence of villages and then chiefdoms in the Neolithic period around 10,000 years ago, the nature of the networks changed dramatically. They grew in size and broke into fragments… in modern industrialized countries, networks grew to a complexity that proved bewildering to the Paleolithic mind we inherited…”

    Hunter-gatherer bands, the units referred to in Wilson’s work, do not correspond to his description at all. Bands are ephemeral and fluid. Bands do not raid each other, or “exchange young women”. They exchange gossip, stories, scandals, songs, technology, dance, art, tattoos, and jokes. Personnel of both sexes move frequently between different bands.

    Bands, in fact, are temporary camping groups, part of a much larger community that shares the same dialect or language, numbering in the many hundreds, or even thousands. Exchange of information, gifts and messages, circulated through networks, is material to individual reputations. Individual networks sometimes cross linguistic boundaries as well, and many people are multilingual and have friendships and even kin who speak completely different dialects or languages.

    Among the Kua, over 60% of the people in each indivdual’s network, at any one time, are located in other camps. People rarely had an identical networks, so that each camp was essentially a node in a system linked to dozens of surrounding other camping parties, some as much as a hundred kilometers distant. Marriage essentially recognizes a linkage of kinship networks, effectively almost doubling the field of potential contacts now jointly accessible to each household.

    I am not saying this to offend you or Dr.Wilson. I am saying it to suggest that there is a literature out there which can inform us on the way human beings networked and formed communities within our earliest known form of economic system, and that what this suggests is that we humans did NOT evolve the limited Palaeolithic mind that Dr.Wilson has conjured up. The truth of the matter is far more exciting and actually lends far more evolutionary clout to the model of Silicon Valley start up communities that you have described here.

  • Pingback: 2 – Biology, Not Economics, Explains America’s Startup Strength | Exploding Ads()

  • Applying a resource flow perspective to ‘micro’-transactions (i.e. social and/or economic exchange) seems promising. Comparisons of perspectives using ‘traditional’ aggregate economic measures, input-output matrices, social networks, ecological hierarchies and habitats could deliver interesting results on what each perspectives allows to see – and what it hides.