Innovation on the fringe

What do pirates, terrorists, computer hackers and inner city gangs have in common with Silicon Valley? A blog on the exploration of the hidden side of innovation.

The Misfit Economy is a book that explores stories of incredible human resilience, self-sufficiency and teeming innovation. It will be published by Simon & Schuster.

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The Economy of Punishment

We love hearing historical stories about Robin Hood-like men, about bank robbers, pirates and outlaws on the run. Criminals form part of our collective imagination and are part of our origin story. For many Americans, rogue individuals were instrumental in “how the West was won.” But in the present, our empathy for criminals is rarely piqued; unless, of course, we’re watching The Wire or reading about 18th century pirates (and imagining Johnny Depp).

In every day practice, many of us hold a deep fear of criminals — of drug dealers, terrorists and “others” that pose threats to our sense of security, violate our laws and transgress against our moral frameworks. If we look at a criminal from two hundred years ago, we can be blown away by their ingenuity, but if we face them in real life, we see their assets as societal deficits. Why is it that we can honor them when they are gone, but not make use of their talents while they are here?

Quite simply, our fear prevents us from recognizing and finding appropriate channels for the talents of our criminal population. As a result, we have institutionalized a simple formula for dealing with such individuals: capture, punish and isolate.

This formula has become a curse, resulting in an epidemic of incarceration across the United States. In the last thirty years, the U.S. prison population has grown by over 500 percent. Not only does the U.S. lead the world with the highest incarceration rate, nearly one-quarter of the entire world’s inmates have been incarcerated here. Worse, 70 percent of the formerly incarcerated end up back in jail. And the costs of mass incarceration are staggering. It can cost as much as $60,000 a year to house a prisoner, which means the annual cost to taxpayers exceeds $60 billion. Think about the repercussions of investing this money in incarceration instead in our education or healthcare systems.

So how, as a society, do we develop new instincts towards criminals and what strategies can be effectively employed to reduce the rate of incarceration and the rate of recidivism? And relatedly, how do we recognize a black-market innovator who may have all the talent of a Richard Branson or a Jay-Z, but lacks the opportunities for a leg-up in the formal economy? To solve this problem, we first need to recognize the talents of the gangster. A resume from the underground is full of hustle and street skills that aren’t acknowledged by employers. That is to say, given the applied “street smarts” and talent — the art of the hustle, the leadership and prowess of running a drug business — what is it all worth?

Many gangsters are natural born innovators with restricted economic opportunities. Nobody understands this better than Catherine (Cat) Rohr, who quit her job in private equity to become a champion for the incarcerated. As she told us, “Initially I had this attitude that people in prison were the scum of the earth, that they were a waste of tax dollars.” But in getting to know the prison population better, Cat’s position began to change. “I suddenly realized I was meeting entrepreneurs in prison. That these guys who had run drug businesses had all these entrepreneurial characteristics like scrappiness, charisma, and real skills in leadership and management.” With this realization, Cat began a life committed to honoring the talents and skills of those in prison.

As part of this journey, Cat launched a program called Defy Ventures, in New York, that provides a business incubator for ex-offenders who then have an opportunity to compete for $150,000 in seed capital for their businesses. At the core of Cat’s program is a powerful acknowledgement of the skills and talents that former drug dealers and gang leaders possess. From there it’s just a matter of pivoting these street skills into the world of formal entrepreneurship. For many ex-cons, who face discrimination from employers after getting out of prison, Cat’s program offers an MBA-like training matched with exposure to leading entrepreneurs, investors, and potential employers.

Of course, we also need to find ways to stop crimes before they happen. One of the most important interventions we can make on that score — that also relies on changing our stereotypes of criminals — is by treating violence as a contagion, not as an act done by some “bad guy.” One of the biggest plagues on our society is violence. Yet, we too often have discourse around violence where violent individuals are cast as deviants or bad people. Instead, what if we began to treat violence like a disease that is transmitted and spread, much like the common cold?

This is exactly what Dr. Gary Slutkin has been doing with his program Cure Violence. As Gary told us, “Usually problems are stuck, not because we don’t care or there’s not enough money, but because the diagnosis is wrong.” Having spent decades in the field of infectious disease treating things like malaria and tuberculosis, Gary’s journey into transforming violence began as a simple observation: the patterns around violence “outbreaks” are nearly identical to the way that infectious diseases spread. With this insight, Gary sought to transform how we go about treating violence. “The most critical thing is to disrupt the transmission of violence,” Gary told us.

In practice, this led Gary to develop something called “violence interrupters,” which are effectively outreach workers who are called into delicate situations where violence might occur. So, for example, if people in a particular neighborhood hear about a potential retaliatory shooting or a conflict that is brewing between gangs, they can call in violence interrupters who go into the neighborhood and attempt to prevent the violence from being transmitted.

These interrupters are often from the communities where the violent outbreaks are occurring and many of them have been in prison and/or have had their own experiences with violence. As a result, they have a trust and credibility with the communities they work in that allows them to be much more effective than the police force, which often has little ability to intervene in the prevention of violence.

Ultimately, in seeing violence as a public health issue that can be changed through behavioral norms, Cure Violence is throwing away the stigma that people who commit acts of violence are somehow bad or morally depraved. As Gary joked, “You can’t even see bad under the microscope. There is no place in science for the concept of bad or the concept of enemy.”

In both recognizing the talents of these innovators, albeit working in society’s black markets, and transforming our attitude towards individuals who commit such acts of violence, we not only grow our empathy for those that we have cast out but we also begin to distance ourselves from an ineffective economy of punishment that has held sway for far too long.

Originally written for Harvard Business Review.

A buccaneering spirit is not piracy’s only gift to business

This piece originally appeared in Wired Magazine (September 2012). 

Recently we visited the office of a friend at a young Silicon Valley startup. It didn’t take long for us to spot the first pirate flag - the skull and bones that characterise the renegade attitude inherent in Silicon Valley’s tech disruptors. 

Steve Jobs’s now famous maxim, originally said to the Macintosh team in 1982, started it all: “It’s better to be a pirate than to join the navy.” This rebel spirit has since trickled into the rest of Silicon Valley. Mark Zuckerberg has continued the spirit with his own rebellious maxim: “Move fast and break things.” Silicon Valley - and its disruptors - run on rebellion, a low regard for risk, and phenomenal innovation. The pirates of Somalia happen to use the same exact recipe. 

Why has the term “pirate” come to characterise all that is admirable in an entrepreneur? Because behind modern piracy’s unrepentant criminality lie tremendously bright innovators. Piracy is far more sophisticated and complex than its media image, for pirates too must develop structures, streamline logistics and stay adaptable. 

Harardheere, a village on the northern coast of Somalia, established the world’s first pirate “stock exchange” in 2009, where locals can buy shares in pirate gangs planning hijacking missions. Although credible statistics are difficult to come by, sources point to an exchange that lists 70 “companies”.

And whereas the risks of undertaking a mission are great, the rewards can be plentiful: according to Paul Kearney, of the Royal Marines, the typical payoff is now 100 times what it was in 2005, and the number of attacks has sky-rocketed. Although a raid can cost $30,000, the reward for a successful mission (one in three) can be in the millions. 

Like startups, a piracy mission begins with a search for venture capital. “Pirate capitalists” court investors who will, according to J Peter Pham of the Atlantic Council, offer $250,000 or more in seed money. The capital is then spent on recruitment (gangsters, tech-savvy savants, caterers) intelligence (negotiators) and materials (speedboats). 

Once seed capital is raised, the startup gets built and the product (hijacking) heads to market. It sounds simple enough. But what can Silicon Valley really learn from the literal pirates? 

Stealth and surprise: key to the radical success of pirates is their stealth-and-surprise approach. David James of Henley Business School notes that the pirate’s decision to avoid “symmetrical” conflict helps him. Rather than challenging their targets head on, pirates surprise and attack their enemies at their weakest points, giving them no time to react. Consider peer-to-peer lending. It might be overwhelming and eventually unsuccessful for a small startup to battle a traditional bank head on for market share. Instead, startups such as Zopa pick a localised fight (inflexible lending policies) and unexpectedly attack before traditional banks can react. Indeed, the success of the collaborative consumption model depends on this strategy; car-lending firms such as Zipcar have forced car companies to reconsider their ownership-dependent business model. 

Pivot: Somalia was not always a hotbed of piracy. Following the government’s collapse in 1991, its territorial waters could not be enforced, so foreign fleets trawled Somalia’s waters, stealing its fishing stock and destroying livelihoods. At the same time, the Chinese began prolifically exporting to Europe via Suez, leaving Puntland’s ex-fishermen with billions of dollars in cargo floating past them. 

So they pivoted from fishermen to pirates. “Boya”, the most infamous pirate, tells of a small band of ten raiders who started attacking fleets, then grew into a large, well-run criminal organisation. Instragram did a similar thing - when Kevin Systrom and his team created Burbn, a check-in app which let you also add photos, they saw little engagement from customers, apart from the photo-sharing bit, which people used actively. So the Instagram team, in true pirate style, did what Eric Reis calls a “zoom-in pivot”: they built a simplistic photo app with filters. 

Innovation has long come from misfits. Historically, pirates - far from being economic anarchists - opened up internal trading markets. Historian Thomas Gallant argues that illegal networks of armed predators actually facilitated the spread of capitalism. In Gallant’s words: “Bandits helped make states and states helped make bandits.”

Pirates are ruthless criminals, yet their innovative and adaptable business model is not without its lessons. We do ourselves a disservice should we neglect to learn from those who innovate on the high seas. 

Here it is guys! The first video in a series that will explore what misfits can teach us about innovation. 

Bicycle hack

A Confession of Empathy

I have a confession to make. Meeting you and learning about your project with the Misfit Economy has resulted in a great lesson for me.  

Having grown up in Colombia very close to the misfit economy of Colombian druglords I was having a hard time accepting they could be a source of inspiration for innovation. Reading through some of the posts and the work you have done has provided me with a fresh perspective and I wanted to thank you for that. The timing couldn’t have been more perfect now that I’m passionately looking into empathy as they key to massive social change. 

Through my research so far I have learned that Empathy is about cultivating curiosity about strangers, their lives and what they choose to do with them. It’s about becoming more adventurous with who we choose to empathize with. It’s about challenging stereotypes and finding a way to see things from different and even uncomfortable perspectives and be better for it. This is exactly what you are doing!  

- Catalina 

Got to visit with this Temple Gong Sound Installation from Burning Man in San Francisco today! 

CAPITALISM BY GASLIGHT: Rogues and misfits from 19th century America

Misfits in training

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