Next year will mark the 50th anniversary of the publication of The Population Bomb. Written by American biologist Paul R Ehrlich, the book caused a major stir in its day – and one of the many vignettes that resulted from the fallout still serves as an interesting lesson for small businesses.
Ehrlich was cut from much the same cloth as Thomas Malthus, whose An Essay on the Principle of Population first raised the prospect of humanity reaching a point at which demand would outstrip supply. Malthus’s basic message, was greeted with horror in 1798 and a recurring source of doubt and discomfort ever since, was that one day there would simply be too many mouths to feed.
Not one to beat about the bush, Ehrlich echoed this sentiment thus: “The battle to feed all of humanity is over. Hundreds of millions of people are going to starve to death, in spite of any crash programmes embarked upon now.”
Somewhat boldly, Ehrlich predicted that his prophecy of doom would be realised during the 1970s. The fact that no such global catastrophe occurred did little to dent his conviction that a critical and utterly devastating depletion of resources could not be avoided. His unwavering belief in his argument would eventually lead to one of the most acrimonious disputes in modern academic history.
Economist Julian Simon, a professor of business administration at the University of Maryland, challenged Ehrlich to a wager. To cut a long story short, the terms were essentially as follows: Ehrlich bet that the prices of copper, chrome, nickel, tin and tungsten would go up over the course of the next decade – reflecting his unshakable vision of diminishing reserves – while Simon, much of whose work was focused on the power of human ingenuity, bet they would fall.
Famously, Simon won. For a while it seemed Ehrlich would prevail – the prices of those five metals did go up at first – but in the end it was his opponent who claimed the $10,000 stake. Overall, the prices went down. And it is what Simon appreciated – and what Ehrlich, like Malthus before him, failed to see – that is still relevant to small businesses today.
The power of creative problem-solving
What Simon wisely took into account – and what Ehrlich completely neglected to consider – was innovation’s ability to keep us ahead of the curve. When the prices of those metals rose, briefly suggesting Ehrlich might be right, it was the inventiveness of innovators that sent them tumbling again.
Generally speaking, it was the same in Malthus’s day. Moreover, it was the same before Malthus’s day. And it will very likely be the same for a long time yet. We identify problems and, through innovation, we overcome them.
This response may be more widespread and important now more than ever, because the way in which businesses think is itself in the midst of a significant transformation. The “traditional” forms of strategic thinking that were for so long central to the cause of innovation are being superseded by something dramatically different.
Most businesses will be familiar with SWOT – strengths, weakness, opportunities and threats. For decades businesses were encouraged to adopt this approach – to assess their own pros and cons, to weigh up potential rewards and risks, to assemble all the resulting information and to plot an appropriate course.
Many still follow this path. It represents an adversarial, military-based model that is firmly rooted in analysis and rational planning. Historically, the managers of corporate multinationals have done very well out of it. But times have changed.
Beyond existing practice
Today the lumbering goliaths that once reigned supreme no longer dominate the sphere of innovation. Instead the new masters are likely to be smaller and more fleet-footed enterprises that work in unfamiliar ways. This is because SWOT counts for little in a world in which the slow and the predictable have surrendered to the swift and the uncertain.
Not least since the global financial crisis, traditional models have crumbled in the face of internal and external environments defined by sheer pace and capriciousness. In short, conventional wisdom just doesn’t cut it any more.
And this is exactly where Ehrlich got it wrong. His wager with Simon was in many ways an age-old question of opportunities and threats, but no amount of SWOT analysis could predict the ingenuity of the creative responses that settled the bet.
Then as now, the lesson is straightforward enough: genuine innovations very rarely emerge from historical data or accepted thought. There may well have been a time when resorting to familiar decisions and concepts based on a mix of experience and even instinct was enough for a company to survive and even thrive; but today’s business landscape requires something more than quick fixes, one-dimension inferences and knee-jerk solutions. As more and more enterprises are recognising, the best and most transformative answers may very well lie outside existing practice.
Erratic consumer preferences, near-incessant technological disruption, even unstable political and economic systems – everything points to a growing need for flexibility, ingenuity and creative problem-solving. With the sprawling leviathans of old still in transition, these are skills that small businesses are well placed to cultivate and employ to ever-greater effect
Simon Mosey is a Professor of Entrepreneurship and Innovation at Nottingham University Business School, Director of its Haydn Green Institute for Innovation and Entrepreneurship (HGIIE) and co-author of ‘Building an Entrepreneurial Organisation’