Hidden Evidence

TechCrunch posted an article discussing how to handle IP in failed startups, noting that it is frequently stuck in legal or financial limbo.  This is another of the problems related to hidden evidence.  Startups are probably going to fail.  So why is this not accounted for in a manner such that their IP is designed to live on and benefit people instead of getting stuck in a failure outcome?

If IP is open sourced from the beginning, it isn’t dragged down by failure of the company.  A number of startups are taking this path (SocialText for instance).  If done right, this can be used as a competitive advantage, scaring potential competitors from having to compete with you on a playing field where you give your software away free to those willing to make it work, while being in the perfect position to charge those who want their hands held.

I like that people are discussing these problems, I don’t like that they don’t recognize them as overall system failures but as cute questions.  The system should be designed to handle these probable outcomes better for the benefit of everyone.

What’s next on this blog?  A few foundational posts before getting into the meat of specific hidden evidence cases:

Discussion of Fooled by Randomness, The Black Swan anti-theories.

Discussion of cognitive failures in business writing (for instance, The Second Bounce of the Ball which claims failures are due to not trying hard enough).

Discussion of cognitive failures in humans (an enumerative list, how you can try to avoid them, and more).

Responses to a number of related blog posts at various entrepreneurs and venture capitalists blogs I have been earmarking.  Some seem to get it, others don’t, and I’ll have some fun pointing this out as well as helping my readers see who else is tackling these issues.

Once the above is complete, this blog will have a solid grounding in the hidden evidence problem.  I’ll then start work on the first hidden evidence “case”.  Stay tuned!

There are two quotes from Fooled by Randomness that are worth discussing:

Beyond that it is all randomness: either by taking enormous (and unconscious) risks, or by being extraordinarily lucky.  Mild success can be explainable by skills and labor.  Wild success is attributable to variance.

and

Clearly the quality of a decision cannot be solely judged based on its outcome, but such a point seems to be voiced only by people who fail (those who succeed attribute their success to the quality of their decision).

The first will frustrate many, but is worth highlighting because it challenges our basic assumptions.  Remember, as humans we are prone to cognitive failures that don’t permit us to recognize this as reality: hindsight bias, hidden evidence bias, and more (future blog post to come detailing these and other failings).

The second is more interesting, and also challenges our basic assumptions.  Just because somebody presided over a decision that worked out, doesn’t mean they made the right decision.  If they had to play that decision out a thousand times, what would the mean outcome have been?  This is how decisions should be judged.

Combine these thoughts: wild success is due to enormous risks (which if played out a thousand times would average in failure), and those who succeed don’t recognize the risks they took but think they did something right.

What does this mean?  We should take more enormous risks prone to failure!  Why?  Because the returns from a successful (though unexpected outcome) are non-linear vs. the losses from failure.  So the world benefits when we take insane risks and randomly succeed.  We should remember in doing so, that if 999 other people took these same risks and failed, they are a part of that success as well.

The failure outcomes are part of the process that enables the success outcomes.  But they aren’t lauded in the same way.  Why not?