Apr 1, 2019 · 47m · a16z
a16z Podcast | Incenting Innovation Inside, Loonshots to Moonshots
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In this episode of the a16z Podcast, author Safi Bahcall joins hosts Sonal Chokshi and Vijay Pande to discuss how organizations can apply principles of theoretical physics to nurture crazy ideas ("loonshots") and design structures that sustain continuous innovation.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The host holds 19.6% of the talking time here. How this is scored →
The host as informed peer 4.8 Guest teaching 5.0 Guest disagreement 3.1 The host pushing back 3.8
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 9:58 Gas Pain of Disruptive Innovation
Safi forcefully denounces the popular term 'disruptive innovation', declaring that few phrases give him more gas pain and dismissing it as an armchair concept created by history professors.
Hardest push from the host ▶ 15:51 Challenging Project Termination DifficultySonal directly refutes Safi's statement on how easy it is to kill projects, asserting that in real organizations it is much harder to kill an effort than to keep a failing project alive.
Biggest teaching moment ▶ 22:00 Pfizer Manager Incentive BreakdownSafi educates the hosts by placing Sonal in a hypothetical role as a Pfizer manager, demonstrating how structural incentives shift behavior from championing ideas to playing politics.
The host holds their own ▶ 41:31 Product Management as Dynamic EquilibriumSonal displays deep tech domain mastery by synthesizing Safi's theoretical framework of dynamic equilibrium into the real-world operational role of product managers.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Historical Empires and the Scientific Method | 3 | 4 | 1 | 1 | Safi outlines the historical origins of the scientific method and compares ancient empires to modern pharma giants. Sonal and Vijay chime in constructively, connecting Indian mathematics and comparing small biotechs to startups without offering pushback. | |
| Distinguishing Loonshots from Moonshots | 5 | 4 | 2 | 4 | Sonal demonstrates solid background knowledge by citing Astro Teller's op-ed in Wired and framing how organizations must evaluate crazy ideas. She presses Safi on how companies can practically winnow down competing loonshots given limited resources. | |
| Deconstructing Disruptive Innovation and Market Projections | 5 | 6 | 6 | 5 | Safi forcefully attacks the popular concept of 'disruptive innovation', stating the phrase gives him 'gas pain' and dismissing market projections. Sonal counters by bringing up Brian Arthur's complexity theory and probing how to distinguish viable loonshots from bad ideas. | |
| The Three Deaths of a Loonshot and False Failures | 4 | 5 | 3 | 5 | Safi explains the 'three deaths of a loonshot' and false failures, using Facebook's early user retention data as an example. Sonal pushes back on Safi's claim about killing projects, arguing that in her experience it is actually harder to kill a project than to let it linger. | |
| Structure vs. Culture and Phase Transitions in Organizations | 5 | 5 | 4 | 3 | Safi dismisses squishy management literature about organizational culture, favoring physics-based phase transitions instead. Sonal displays expertise by introducing Kahneman and Tversky's prospect theory to probe how behavioral economics intersects with his framework. | |
| Control Parameters and Organizational Design | 4 | 5 | 2 | 4 | Safi uses a vivid thought experiment with Sonal as a Pfizer manager to illustrate perks of rank versus stake in outcome. Vijay tests the boundaries of the physics analogy, noting that individual personalities can also alter organizational behavior. | |
| Artists vs. Soldiers and the Perception of Talent | 6 | 5 | 4 | 3 | Vijay offers extensive venture capital insights regarding product-market fit and the transition of biology into engineering. Safi pushes back on tech industry consensus against hiring big company executives, explaining that structural incentives dictate behavior rather than intrinsic personality types. | |
| Dynamic Equilibrium and Leadership as Gardening | 7 | 6 | 5 | 5 | Safi challenges tech dogma surrounding product-centric founders and Steve Jobs, advocating for leadership as gardening and maintaining dynamic equilibrium. Vijay demonstrates physics expertise via supercooled beer hysteresis, while Sonal connects Safi's dynamic equilibrium concept directly to the modern role of product management. | |
| The Four Organizational Control Parameters and Conclusion | 4 | 5 | 1 | 4 | Vijay asks Safi for practical knobs that CEOs can turn to manage company scale. Safi breaks down equity fraction, return on politics, project-skill fit, and management span, while Sonal extends his point by comparing project-skill fit to founder-market fit. |
Statements from this episode (14)
Bahcall: Ancient empires stifled innovation much like modern big pharma
“China, India, and the Islamic empires were a lot like the Merck, Pfizer, and Novartis of today. They were global, everywhere, dominant. They're phenomenal at franchises. So in India, you've had the Taj Mahal. You know, in China, they built the Great Wall and j…”
NYT retracted its 1920 Robert Goddard mockery after Apollo 11 launched
“About 49 years after the Times printed that, the day after the successful Apollo 11 launch to the moon, the Times printed a retraction and said, apparently rocket flight does not violate the laws of physics and quote, the Times regrets the error.”
Bahcall: Prioritize innovative ideas that threaten your core belief system
“I think you want to find the ones that challenge your belief system, because those are the ones Which are most dangerous to you and your business.”
Bahcall: The transistor was originally an incremental innovation at Bell Labs
“It was developed at Bell Labs, although it was based on a lot of federal research, but it was developed at Bell Labs while they were looking for better switches. By every definition, it was an incremental innovation, not a quote disruptive.”
Bahcall: Market projections kill early-stage innovation, especially in drug discovery
“Nothing kills a great idea faster and has been more of a disaster to innovation, certainly in my industry in drug discovery, than the idea of market projections.”
Pande: a16z Bio invests when pure science transitions into engineering
“So, you know, for what we're looking for, especially on the bio side, I'm looking for things where they're right at that cusp between where the science has largely been done, where we're not investing in science projects, and that it's about to scale into engi…”
Bahcall: Leaders control company behavior through four structural design parameters
“It turns out when you work out the mathematics of this, of the incentives, the two forces, there are four control parameters inside organizations, elements of organizational design, and that the CEO, the executive team, the board has control over, just like yo…”
Bahcall: Company growth shifts employee incentives from innovation to corporate politics
“So somewhere between small and large, as you grow and you grow and you grow, all of a sudden the balance of incentives suddenly shift, and the same person, the same sonal, Would go from pounding the table, this is the most awesome idea, to kind of making fun o…”
Pande: Startup founders struggle transitioning from early creators to scale operators
“And this is one of the mistakes I see over and over again with startup founders, is that when they're small, it feels like they're all artists. They do a great job of building an org, And then suddenly the org is not what they're comfortable with or familiar w…”
Bahcall: Companies reliant on top-down visionary leaders eventually fail
“So all the companies across history that have done that have failed spectacularly. They may survive for a while, you know, when there's a Moses on the mountain with a staff anointing the next holy loon shot. They may survive for a while, that's the hysteresis …”
Bahcall: Corporate innovation fails in transferring ideas, not generating them
“Because where innovation fails is not in the supply of new idea. It's in the transfer of those new ideas to the field.”
Bahcall: Sustained tech success requires valuing operators and creators equally
“And only by evolving and learning to love his artists and shoulders equally, that's when Things really took off. And that's why Vannevar Bush succeeded, and so many scientists before him failed, because soldiers love soldiers, artists love artists. He not only…”
Bahcall: Google and McKinsey remove promotion decisions from direct managers
“Some companies, actually Google does this, and McKinsey does this, and others, they take the promotion decisions completely away from the manager.”
Bahcall: Innovation teams need wide management spans; operational teams need narrow spans
“If the group that's assembling planes, you want one kind of system, one kind of metric, you want narrow spans, you want high quality controls, the group that's creating crazy new technologies for those planes, you want those spans as wide as possible with very…”