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Peter Cochrane's Blog: Start-ups And Gold Miners
Written from Estes Park, Colorado, on a very thin dial-up pipe
I just hiked the 2.25km from Longs Peak Ranger Station (in Colorado) up to the long abandoned Eugena Mine at an altitude of just over 3000m on a bright and very hot summer's day.
Sometime around 1905 the Norwell family came here with their two daughters to set up camp and stake a claim for their very own gold mine. Today, the remains of their boiler, sluice supports and extensive spoil heaps (tailings) from over 300m of tunnelling into the mountain are still visible. So are the remains of their log cabin but all personal possessions including a grand piano are long gone. As far as I could ascertain, they never found any gold.
All over the Rockies and the Californian mountains there is ample evidence, in the form of abandoned mines, that the Norwell's were not alone in their ambitions. Some found gold and got by, some found handsome deposits and did well, while a very few became seriously rich. Of course, the vast majority found nothing or so little that they never even covered their travel, living and operating costs. It seems to me that the real winners here were the folks selling picks, shovels, mining equipment and general provisions.
Looking around this mountain I can only say that it is a beautiful location, with a fast running stream of ice-cold water and an abundance of trees and wildlife. But in the early 1900s what a cruel and hard place it must have been, as the family tried to eke out a living against all odds in climatic conditions that can be severe in winter and summer alike.
And to think that thousands tried to do the same all over these mountains! Were they dreamers, heroes, adventurers unreasonably optimistic, stupid or running away from an oppressive and even more difficult world back in Europe and back East? I suspect it was a percentage of all these factors.
Looking at the old Eugena workings I found myself musing on the modern equivalent - the start-up company. It seems to me that similar levels of unlikely characteristics apply. Most start-ups fail outright, a few struggle along at the border of failure, barely recovering their operating costs, while a few become reasonably successful and make money - and only a handful make the megabucks reported in the business news.
So what possesses people to push the boat out to do a start-up company? It seems that they get an idea, see an opportunity, while at the same time suffering the constraints of employment. More often than not they have had a moment of realisation when their regular job equates to wasting life. And so they make the decision and go for it. After all, just like the gold rush and the land grabs of the past, there are plenty of role models, and the really big winners provide an existence theorem. Clearly it can be done, they think, so why not me?
In the 1900s digging for gold was a black art and you needed a lot of luck. Today the state of our geological knowledge reduces the risk of failure considerably and success can be assured with a lot less luck. So you might think this would be even more the case in the start-up domain. After all, we have been conducting business for thousands of years. Not so, it seems, as evidenced by the thousands of starts that fail for a handful that succeed.
Luck still seems to be a big factor. How come? Technology continuously changes the business landscape, so quickly that a substantial portion of the regime is always new and unknown. The really smart people spot these differences and exploit them ahead of the field. And only a very few make megabucks.
I think luck in business is even more important now than it was in the 1900s. Making the right choices at the right time simultaneously across multiple business, operational and management fronts is increasingly a challenge for new and old, small and large companies, as rising failure rates imply. We seem to lack the business equivalent of the geological knowledge enjoyed by today's miners.
To my mind the subtle difference is that our planet formed over billions of years and has now become reasonably stable to the point that geological knowledge and models are well founded. Unfortunately this is not so for the business landscape, which is still evolving in concert with technological change. Commercial environments are far from stable and we lack the basic models and tools to consistently ensure success.
I think we will be seeing many more fruitless tailings in the start-up and general business landscape for some considerable time - until we see some technological stability. But then, the (near) certainty of modelling and prediction will remove the need for the start-up company and we will only see the big corporations.
Will this actually happen? On a micro-scale we already see this in the pharma, automotive and electronics industries, for example, but in the macro I don't think so! Why? Because there is no foreseeable end to the possibilities presented by new technologies. More science, technology and engineering beget even more on an exponential scale in a shorter and shorter timescale.
So I think we are going to see thousands of families like the Norwells climbing those new mountains. Most will fail but a few will make it - and we only need a few...