Questioning Innovation and Shark Tank

Questioning Innovation and Shark Tank

By Roger Hunt

 

A Rosy Picture:

The Sharks are good TV. They are super cool, wicked smart, friendly, honest. They treat everyone who comes on the show like the friend that person needs. In fact, it would be awesome if every entrepreneur had a friend like one of the Sharks. Getting good advice from a reliable source is rare. People may think their family elders hold ancient wisdom, but sadly in most cases this simply isn’t true. Those who know us trample our strengths, ignore our weaknesses, aren’t there when we need them, and hover when we don’t. The Sharks, however, uncannily pick out exactly what these founders need, know what to do and when to do it, and most importantly are clear and definitive when something needs to end.

Any expert is able to do this in their field. A painter knows when to trash a canvas. A plumber can diagnose and address any number of…plumbing issues. Mechanics know what’s wrong just by hearing you make sounds over the phone (shout out, Car Talk!). Dentists can decipher mumbly jumbly from a Novocained jaw with a hose in it. The Sharks show the kind of wisdom everyone wishes they had. In many ways, business is life, so if someone is an expert at business, then in a sense they are an expert at life. Securing resources, organizing people, and capitalizing on opportunity. Business wisdom isn’t an impenetrable wisdom bogged down in jargon. It’s a judgment call: can this person get it done? Yes, I’ll take the risk with them. No, it’s not worth my time. Forget the examined life, all we have is time, and living/business is a matter of making the most of it. No one knows how to make those decisions better than the Sharks.

There’s my rosy picture.

Here’s the BUT:

The Sharks miserably fail to shoulder the moral responsibility associated with this wisdom.

Stepping back. Investors—whether they should be or not—are the Philosopher Monarchs of our society. They determine what philanthropy persists, what new inventions make it to market, what universities remain open, and who is elected to government. Yet, these people have no discernable ethics beyond self-determination. While there can be virtue in living by one’s own rules, the way investors do it does not obtain any morally defensible result.

Some of the best investments made by the Sharks include businesses selling socks, ugly sweaters, sponges, a bathroom stool, a flower shop, a sweater blanket, and lobster meals with just those representing roughly $1.5 million dollars invested. Goofy, low brow consumerism at best. Of course criticizing the Shark’s investments isn’t novel. Everyone knows that this isn’t an optimal use of capital. Yet, if it were only a few hucksters grinding out 10x returns, then all the best to them. Unfortunately, this behavior is not limited to the Sharks. Investors around the world chase the same nonsense. Even when they make seemingly virtuous choices such as vaccines or green energy, there remains an undercurrent of exploitation and “eating someone else’s lunch”—to quote Jill Lepore (historian) quoting Josh Linkner (investor).  And even though there are funds that focus on social innovation or impact investing, these initiatives barely make a dent in the surface of the vast majority of frivolous, exploitative businesses receiving the bulk of funding and credit which should be reserved for the visionaries and true innovators—whoever they may be—in our society.

Much has been written about what it takes to be an entrepreneur or founder of a company. In fact, the Sharks manage their investments more like a support network or even a founder factory based on their personal view of what it takes to succeed. The founders are their products. Beyond them, there is a whole industry focused on supporting founders from product development, to business management and even mental health services. Indeed, many of those who serve founders are probably better founders than the founders themselves! That is, our innovator class—brilliant software engineers, product designers, marketers, and managers—are hustling for fee based consulting gigs to serve a group of people with a fail rate above 90%. Imagine if the best, most brilliant surgeons in the world never made a single cut, but instead only gave advice to a group of surgeons who killed 90% of their patients! Our top minds serve the concept of innovation, rather than actually innovating, and the rest of us feed the beast when we respond to an abandoned cart email to complete our purchase of a new stress ball instead of addressing pressing issues around the world.

So, what can we do about this? If the problem of today’s Philosopher Monarchs is that they walk to the beat of their own drum, then perhaps we should set out some other ideals for them to consider. Whether we can convince them to embrace these ideals is a practical, perhaps entrepreneurial matter in itself. Nevertheless, we could at least develop a coherent model for investors to follow so that they don’t act like venture capitalists act today. In fact, we may not even need to develop rules, but rather lay out a series of questions that any investor should answer. If we can’t hold them to account, then at least we should understand their vision of where they are taking the rest of us. After all, as the consumer we have given them the power to make these decisions by purchasing the goods and services they have invested in, and at the very least we deserve a thoughtful explanation and justification of their decisions beyond the feel good story-line.

The Character of Innovation

Plato gives us one kind of description of these leaders: “the true pilot must pay attention to the year and seasons and sky and stars and winds, and whatever else belongs to his art, if he intends to be really qualified for the command of a ship, and that he must and will be the steerer, whether other people like or not—the possibility of this union of authority with the steerer’s art has never seriously entered into their thoughts or been made part of their calling.” (The Republic, book 5) According to this view, strength and wisdom are critical, but remains vague and metaphorical, which is fitting given how most business people explain themselves. So, if we want something more crisp, we need to ask more direct questions. Here are some suggestions:

First, investors should be able to explain what they consider to be innovative. Despite being the buzz word of the last 20 years or more, innovation as a concept lacks definition. If an investor is claiming to invest in innovation, they should be clear about what that means. What counts as innovation? Of course the investor may not consider themselves someone who invests in innovation, in which case the point is moot. But if they do consider themselves to be spurring innovation, then they certainly should answer this question. Mark Cuban shared with ESPN why he thinks sports betting platforms are so innovative: “It will increase interest, it will add to what happens in our arena and in stadiums. It will increase the viewership for our biggest customers online and on TV. It helps traditional television because it’s much lower latency, whereas online, because of cachet, it’s much higher latency.” But what if we disagree with his view of innovation? Well, we can’t do much about it except boycott the product and services; though try cutting someone off from their sport betting app.

Second, investors should be cognizant of who they select as the next generation of innovators. All sorts of people have new ideas and businesses, but only those that receive the necessary funding have any hope of making it. Mark Zuckerberg and Facebook as we know it today wouldn’t have existed without Peter Thiel and other investors. They decided that Mark would be the symbol of innovation for the early 21st century. Did they select the right person? Well, I have a hunch the responsibility for that decision barely crossed their minds, but it should have. Who should be innovating? All investors love to talk about the character of the founder or have some other set of personal guidelines. Well, what are those? Are you only selecting white men from Harvard? Tell us the kind of person you believe should lead us into the future. Mr. Wonderful has shared his: “There’s an old adage: If you want something done, give it to a busy mother. There may be some merit to that. Their time management skills, their risk management, is clearly superior.” Noble or misogynistic?

Lastly, investors should explain how they value innovation, generally. That is, how important is innovation? Not all businesses are first and foremost innovative companies. Many just want to contribute to or serve their community, and don’t necessarily seek to disrupt the status quo. What role should innovation play in our world? Should we give the innovators – whoever they may be – all the resources and let them run wild, or should innovation be governed like any other department at a company? I love this quote from Lori Greiner, which implies that innovation isn’t always the most important factor, “I think you have to think of your business idea or product idea, ‘Is it something people need and want, something people truly need and want?” Do I agree with her that businesses should focus on what people truly need and want? Well, I want to know what she means by “truly”, “need”, and “want”, but I have a feeling I won’t be satisfied. Alas, at least I get a glimpse into her thinking.

As consumers we get the world we pay for. When startups, rather than legacy companies lead the way and a class of free-wheeling individualists decide which startups make it, we need to understand those investors beyond their tag lines and self-help quips. Asking them to answer these three questions – (1) what counts as innovation? (2) who should be innovating? (3) how should we value innovations? – is at least a jumping off point.

Roger Hunt is the Principal of Ideatrek, a private fund and startup incubator in Boston, MA. He is the author of Freud: A Mosaic, editor of It’s Always Sunny and Philosophy, and contributor to multiple pop-culture and philosophy collections including the upcoming Dave Chappelle and Philosophy. He is currently accepting abstracts for an edited collection on venture capital, entrepreneurship, and philosophy. Please contact him at roger.hunt@ideatrek.io to submit an abstract and to request an invitation to the Ideatrek community hosted on Slack.

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