Case Studies in the Collective Brain
The divergence of fortunes between Australia and Tasmania shows that while a society’s given Collective Brain can grow with expansion and integration with other tribes and societies, that Collective Brain can also shrink and stagnate. As Henrich puts it, “Groups can and will lose know-how and never get it back.” Therefore, if we fail to continue learning and disseminating knowledge over time, then we will fail to feed and build our Collective Brain. History has provided a wealth of examples of such cases.
Ancient Rome originated with the Roman Kingdom in 753 BC, culminating in the Roman Empire. A significant chunk of the Roman Empire, from 27 BC to AD 180, was the period called Pax Romana, a long period of relative peace and stability. During this period, the Roman Empire achieved its greatest territorial extent, and saw many advances, particularly in engineering and the arts. New roads and aqueducts were built, basilicas, baths, and the even the Roman Colosseum was built during the Pax Romana. Trade flourished and the people prospered, with Roman culture spreading throughout the Empire10. The Pax Romana ended with the death of Marcus Aurelius and the ascension of his son, Commodus, as emperor of Rome. The subsequent years saw Rome progressively decline, with the eventual end of the Western Roman Empire in AD 476. The fall of Rome marked the beginning of an unprecedented loss in Rome’s collective knowhow accumulated over a thousand years, including education, literacy, sophisticated architecture, advanced economic interaction, and the rule of written law11. Over generations, the loss of the Roman Empire’s Collective Brain plunged Europe into the “Dark Ages”, lasting close to a thousand years, before the Renaissance in the 14th century in Florence, just a short 300 kilometers away from Rome.
Closer to home, we can also observe the impact of a failure to learn on the declining fate of the Melaka Empire back in the early 1500s. For much of its existence, the Melaka Empire had a strong and steady relationship with China, both in terms of maritime trade, as well as on protection from China. Despite these strong relationships, and despite the fact that gunpowder and propelled rockets were already in military use in China since the 10th century12 and that, during the Ming Dynasty (1368 to 1450), China was a military superpower, the Melaka Empire never capitalised on and learned from China’s vast military knowledge and expertise13. As a result, when the Portuguese conquered Melaka in 1511, one of the most important reasons for Melaka’s defeat was its vastly inferior wartime technologies.
To be clear, it is not just nations or tribes that can lose their collective knowhow. The same is true of firms as well. There are several ways in which the Collective Brain of firms can shrink over time and they all relate to learning. How do Firms build and maintain their Collective Brain in the face of constant disruption? As product cycles become shorter and shorter, it is more imperative than ever for Firms to continue bridging the gap between transitions. However, as Firms grow larger, incumbent systems and processes make it challenging for Firms to respond quick enough to market changes. Learning stalls, innovation takes a back seat to bureaucracy and the growth of the Collective Brain stagnates. To what extent does a given firm learn from its past and plug that into its future? When employees leave the firm, how much of that employee’s knowledge and lessons stays with the firm, and how much leaves with the employee? What systems and processes do firms have to document and disseminate knowledge to all employees? How do Firms overcome cultural and bureaucratic obstacles to continue growing?
In this regard, the experience of Sony is instructive14. This Japanese behemoth once wowed the world with its cutting edge innovation in portable radio, transistor TV and video recorders, even developing iconic products such as its “Walkman” and “PlayStation.” By the 1990s, Sony became one of the world’s leading media conglomerate with its venture into music distribution and movie production. After the PC and Internet revolution in 2000s, Sony started to lose its competitive edge as Apple ushered in the new era of software integration in 2001 with the release of the iPod and later on in 2007 with the iPhone. Despite their meteoric rise, Sony’s organisational design and culture did not evolve, resulting in more rigidity, making it even harder to respond to disruption from Apple and Samsung. To make matters worse, Sony had already lost a substantial amount of its collective knowhow as many of its skilled engineers left the company after a major economic downturn in 1990s. Sony is an example of how organisational culture and inertia can become a deterrent to growing one’s Collective Brain.
Great learning organisations are not invulnerable either. General Electric (“GE”), with its strong learning culture, has always emphasised its corporate learning programmes, training scores and scores of executives out of its corporate university at Crotonville. Yet, it too was susceptible to a failure to learn. During his 17 year tenure as CEO at GE, Jeff Immelt undertook hundreds of Merger and Acquisition (“M&A”) deals, buying and selling over USD100 billion of businesses. There were some wildly successful deals including the purchase of Enron’s wind turbine manufacturing assets, and the sale of GE’s plastics business to Saudi Basic Industries. Yet, at the same time, a recent Fortune article15 writes that there was a pattern to Immelt’s M&A deals which has contributed to GE’s recent under-performance – “Immelt followed fads, [analysts and observers] say, paying top dollar to acquire the hot businesses of the moment.” From 2010 to 2014, with oil prices hovering around the $100 per barrel mark, GE bought at least nine businesses in the oil and gas industry. In 2004, as housing prices in the US were continuing to skyrocket, GE bought a subprime mortgage company called WMC for USD500 million16. Now, for a CEO and a company to have undertaken hundreds of deals and consistently made the same mistake in M&A, it is worth asking to what extent were the lessons from those hundreds of deals captured and disseminated? Could a significant chunk of GE’s current malaise have been avoided if GE simply developed its Collective Brain from its experience?
In the age of rapid technology disruption, Firms must not only grow their Collective Brain, but to also grow it faster than their competitors – and at times, hubris might cloud one’s foresight on business strategy. Take Yahoo! for example17. Founded in 1994, Yahoo was a pioneering web portal with search functions, message boards, email, news, and more. It was the internet as far as many early users were concerned. In 1998, two engineers approached Yahoo to offer them a search-ranking algorithm for US$1 million, which Yahoo turned down as they were comfortable with their current search engine capabilities, but that algorithm would later become Google. Just like many other tech companies, Yahoo didn’t survive the Dotcom Bubble unscathed, but they never seemed to recover as their net earnings hit -US$4.4bn in 2015. What happened? Yahoo’s competitors simply outmaneuvered them in all of their business areas – Google overtook Yahoo as a search engine, Yahoo Messenger was outdone by Whatsapp and WeChat, Yahoo news portals were replaced by social media platforms such as Facebook and Twitter. Yahoo failed to choose a focus area to develop, hence failing to establish a strong brand name in any of its business area. In 2017, Verizon bought over Yahoo at just US$4.48bn, a tenth of what Microsoft offered back in 2008. Yahoo acts as yet another painful reminder, just like Blackberry and Kodak, that even if a firm is in a fast-growing sector, it should not take anything for granted, and instead continue building new skillsets required to stay competitive.