A Heterodox View

by: Michael J. Mastrangelo

Introduction

Heterodox views are unconventional views. In the history of economics and technology, heterodox groups have played a crucial role. Let’s look back at some of these groups for a moment to see how understanding heterodoxy might help us position our companies in the technological revolution that is going on today.

Historical Background

The first Industrial Revolution in Britain around 1780 was carried out by heterodox groups, including the Scots, and religious groups. Their world view was decidedly different from the traditional orthodox British power structure. What’s more, they were excluded from that power structure, and so they had to seek other means of expression rather than climbing through that orthodox structure. The first industrial revolution was a spontaneous event, but it was soon to be copied in other countries as a deliberate government action. Despite this government role–it was again heterodox groups that carried out the industrialization. Examples include: the Huguenots expelled from France, the Banyans in Indian from the middle castes, the displaced Samurai in the Meiji restoration. . .Orthodox people at the apex of society had nothing to gain from change, and therefore they were reluctant to participate. Heterodox groups had incentive for change: when the dust settled, they might displace the old groups.

When speaking of Innovation in economic history, the talk frequently is structured by referring to Kondratieff cycle. These are long period cycles (often half century cycles) that are associated in some way with new leading sectors and technology in industrial production. The cycles are named for a Russian economist who noted their existence but offered no explanation why they exist. Stalin was not particularly pleased with Kondratieff’s views and so he exiled Kondratieff to his ultimate death. The precise cause of Kondratieff cycles is still much debated. You can refer to economic historians such as Schumpeter and Rostow for more detailed explanations.

In the mid-seventies we entered the fourth Kondratieff cycle. This cycle is associated with the transilient effect on the market of new technologies such as computers, biotechnology, advanced materials, and opto-electronics. Just as the first industrial revolution was rooted in the epistemological shift (the change in the way of thinking) that was sparked by Newtonian science, the fourth cycle was sparked by an epistemological shift that occurred around the early decades of this century. For example: Einstein’s theories of relativity; Heisenberg’s Uncertainty Relationship; and Gödel’s work questioning the ability to formalize mathematics. The intuitions of the Newtonian world were inadequate for the quantum world we were about to enter. In the development of the semiconductor industry for example, a heterodox group played a key role. This group consisted of those outside of glamorous scientific pursuits and the Ivy League. At the time, government and defense subsidies were going to the vacuum tube manufacturers, not to semiconductor developments. In Japan, companies such as Tokyo Electron (outside the Keiretsu system) worked on semiconductors. In the U.S. many were immigrants, some could not speak English when they arrived. András Gróf, (Andy Grove) for example, literally escaped from communist Hungary, and as an immigrant attended City College in New York.

Today

I hope that this demonstrates the role that heterodox thinking has played in the evolution of technology. Now let’s try to apply it to entrepreneurial ventures. When we study practical entrepreneurship, we generally talk about how to start up an entrepreneurial company, and how to then grow that company into a going concern. I will assume that you are familiar with the basics of entrepreneurship. One thing that I have found missing when you read about or study entrepreneurship is that the process is the same regardless of where you are in the evolution of new economic/technology cycles. I believe that you must be aware of these cycles, because your success factors will certainly be different if say, you are starting up an auto parts supply business in 1950, rather than a Web based publishing venture in 1998.

We are on the verge of a new technological cycle (at a pregnant moment, as you would say in the study of literature). How do you apply basic entrepreneurship if you do not know which way the technology will go? People tell you everyday that nobody is making money on the net (Tell that to Dell !) There is a grain of truth in what they are saying–nobody is sure what business model will be successful on the Web. So how can you gain a competitive advantage? In basic entrepreneurship, we distinguish starting the company and then growing it. In the growth phase, we emphasize the need to be flexible and adapt. Your original vision of what the market need is–will need to be refined.

In a time when a new cycle is about to break, your company may gain the best advantage by positioning itself more skillfully than competitors. Sailors will readily recognize an analogy, because they do not begin their race from a dead stop. They have to be moving, and anticipate when the starting signal will go off, with hope, they will cross the starting line first, and in the process–steal wind from their competitors. Starting too early, and starting too late are equally sins.

If you want to start a Web based business, you need to be on the Web. If you do not have all the fine points of your business plan lined up–you need to be on the Web anyway. Rather than learning and then doing–today you need to do and then learn. By having a presence on the Web, you are positioning your company prior to the starting signal in the regatta. In the process, you are gaining specialized knowledge about the environment you are in, and specialized knowledge about the equipment you are using. By being there, your perspicacity (your ability to perceive) for opportunities will be sharpened. By having perspicacity and specialized knowledge of the environment and equipment, you will be better able to recognize and seize on entrepreneurial opportunities. You also want to surround yourself with smart and creative people. Initially, your new business may have to resemble an artists’ colony rather than a traditional business. You will have more eyes and minds to perceive the environment and adapt to it. When the starting signal for the regatta goes off . . . it is too late to start shopping around for a sailboat. When an opportunity presents itself. . . it is too late to start shopping for a server.

In Andrew Grove’s Only the Paranoid Survive, he talks about how Intel got out of the commodity chip business. He asked the question, what would we do if we were just now brought in as outsiders to take over the company. Grove answered by transforming Intel to a microprocessor company. This touches on heterodoxy. You need to examine orthodox views, find faults, and then try to turn the rules of the orthodox view on their head. In so doing, you may be able to break the orthodox power structure. Try to do this exercise with traditional thinking on entrepreneurship.

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