Resilience vs. Anticipation

The West is resilient and can roll with the shocks. The East copes through anticipation, the static planning that assumes perfect foresight.

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When exactly partnerships make for resilient companies is a deep question, one that goes to a very basic puzzle for economists: Why are there firms? Why doesn't Tom Henry just operate Henry.com and contract for everything? Clearly some integration is useful, and under some circumstances it may even make for corporate resilience. A century ago, meatpacking innovators Swift and Armour used vertical integration to build the resilience to face uncertainties of weather, animal sickness, transportation breakdowns, and other shocks.

There's no question, however, that over the past few decades Silicon Valley's open systems have proved more resilient than the old proprietary boxes. Venture capitalist Paul Koontz of Foundation Capital in Menlo Park points to Sun as the model: It started with off-the-shelf components and a public domain operating system, and it developed networking standards that allowed computers from many different manufacturers to swap files. "What a wild concept in the computer business back in the early days," says Koontz. But, he notes, "it was very comfortable for companies out here to think that way."

The contrast between Sun and Apollo Computer, its onetime rival in the workstation market, comes up again and again in these discussions. Apollo, which was based in Chelmsford, Massachusetts, built a traditional proprietary system and an equally traditional corporate culture. In a 1987 Wall Street Journal feature, Apollo chairman Thomas Vanderslice dismissed Sun's playful atmosphere with a contemptuous cliche: "In this country, everything loose rolls to the West Coast."

While Sun was slashing prices and going after every market that would have it, Apollo took a more cautious approach. "I'd like to consider ourselves good businessmen," Apollo president Roland Pampel told High Technology Business in 1987. "If we're going to go into a market, I'd hope that we would know how we're going to support it." Such careful anticipation had already made Apollo vulnerable to shocks, however: A 1984 slowdown in the semiconductor business, its base market, sent it scrambling to develop new customers--at the very time Sun was making inroads with its cheaper, Unix-based machines. Eventually, Apollo, too, had to cut prices and adopt Unix. But it still wound up in a downward spiral and was eventually acquired by Hewlett-Packard. In a rapidly changing technology environment, Apollo was never able to turn its desired "image of solid, long-term reliability," as the Journal summarized its 1987 strategy, into something for which customers would pay a premium.

Sun's initial strategy of off-the-shelf components, by contrast, allowed it to quickly incorporate technical advances, rapidly improving its price/performance ratio in its early days. And, echoing Wildavsky's notion that resilience "accommodates variability; one may not do so well in good times but learn to persist in the bad," CEO Scott McNealy emphasizes that the company's use of open interfaces gives other companies a stake in its success. Sun foregoes a chance to control the whole market--the ultimate goal of a strategy of anticipation--in exchange for spreading the risk and, of course, the reward.

Resilience, however, is less a guarantee of corporate success than it is a way of reducing the risk for individual careers and the regional economy. A strategy of resilience means not that companies won't fail but that resources--including human resources--are more likely to move to better uses more quickly, with less trauma. Indeed, the willingness to abandon losing projects is fundamental. The idea is to adjust quickly, on a small scale, rather than all at once: to be like grass bending before the wind, then springing back, rather than a solid oak that comes crashing down in a storm. In a resilient economy, employees have choices, and they move around.

JOB-HOPPING IS INEVITABLY what Easterners single out as Silicon Valley's most distinctive cultural trait. Employees there, notes Foundation Capital's Koontz, offer companies "transient loyalty": "When people are engaged with a company, they are passionately committed to it--as opposed to obligingly committed, as one might have been in a 30-year career at IBM." Inspired, they put their lives on hold and focus all their energies on their work. "Having said that," Koontz cautions, "people have demonstrated an ability to magically lose that loyalty on very short notice and go and rev up an equally passionate commitment to somebody else." For the valley's mobile professionals, employment is another partnership in a resilient network of relationships. It isn't a lifetime commitment on either side.

The valley of perfect skies and unstable ground does not inspire thoughts of permanence. Blending intense ambition and constant upheaval, it has created a carpe diem culture of transitory greatness: You achieve today because everything could change tomorrow. Boston is also a stimulating intellectual environment and still produces a steady stream of startups. But the regional culture of anticipation means technologists and entrepreneurs must struggle between its two extremes: too much control and too little closure. Hutchinson, the Boston technology-management consultant, draws the contrast between the hierarchy of Harvard--"a pecking order with a capital P"--and the openness of high tech ventures, such as Digital Equipment, that sprang from the MIT culture. That culture, he notes, is to say, "Everybody's interesting. Every thing is interesting. Every possibility is interesting. Let's discuss things. Let's have more conversations. Let's debate stuff. Because it's just interesting. Oh, we need to turn out a product. Gosh." That pure, impractical culture of visionary play may generate wonderful ideas, but someone else must turn them into realities.

Kimbo Mundy of Bidder's Edge illustrates the difference between the coasts with two technological heroes: Tim Berners-Lee, now at MIT, who invented the underlying structures of the World Wide Web, and Marc Andreessen, now in Silicon Valley, who created the good-enough integration of text and graphics that made it take off. Each migrated to the appropriate cultural milieu. "On the East Coast," says Mundy, "it;s the building of the thing that's most important. And on the West Coast, the sharing of it is relatively more important. Getting things out to the light of day seems more important there."

Once they hit the light, no one can anticipate just where innovations will lead--or whether they will in fact succeed. It is by trusting the search, permitting experiments whose results no one can know, that we allow advances to occur. In a 1979 paper, Wildavsky prefigured his discussion of anticipation and resilience with a meditation on the sources of progress. It depends, he suggested, on spontaneity and serendipity, on discoveries no one can predict or foresee: "Incessant search by many minds...produces more (and more valuable) knowledge than the attempt to program the paths to discovery by a single one....Not only markets rely on spontaneity; science and democracy do as well....Looking back over past performance, adherents of free science, politics, and markets argue that on average their results are better than alternatives, but they cannot say what these will be....The strength of spontaneity, its ability to seek out serendipity, is also its shortcoming--exactly what it will do, as well as precisely how it will do it, cannot be specified in advance."

Nowadays it seems that every place wants to be like Silicon Valley--to discover its secrets and copy them. Here, then, is a secret that can be copied, even in places with lousy weather and stable ground: Don't ask for answers in advance. Don't try to create a life without surprises. Trust serendipity.

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