What’s The Unit of Analysis for Building Villages?

Quick, think of a village. What do you see? Each person’s mind creates a distinct picture. Perhaps you imagine storybook timbered houses clustered around a town square? Maybe you recall scenes from your childhood hometown? We each have a personalized notion of the concept of village.

But what if our brains are fooling us? What if the village of our minds—a physical place—is not the same as a village in an economic sense? Maybe “economic villages” should not be geographical places, but something else. When thinking of economic villages, I believe it helps to shift our unit of analysis from villages based on geography to villages based on ideas.

The thoughtful articles in this series from Wilson and Hessen, Witoszek, Richerson, and Trägårdh examine Norway and Denmark—physical places—as models for a global village. I’d like to offer a different perspective. I’m not a scientist like these talented scholars. Instead, I build startup companies tackling tough challenges, and I help dozens of cities and countries building their own “economic villages.”

What have I learned in my work? Simply this: all new economic value is created by human beings organizing around ideas. Every single product, service, solution, or organization today was originally birthed, shared, and brought to life by people based on a starting notion. That idea turned into a vision which increasing numbers of people rallied around, with their valuable contributions of talent, capital, resources, and complementary ideas. And that vision, through hard persistence and collaborative risk-taking, eventually became something useful and real. Entrepreneurs and innovators are like builders of “flash villages”—custom-built, organizational networks to turn ambitious ideas into useful reality.

Yet the process of turning ideas into villages is hard. Ideas take time to spread. Innovation is a form of socialization. Think of the entrepreneurial process itself, not in the abstract, but in the mundane tedium of day-to-day labor. It’s an entrepreneur pitching the hundredth investor to take a leap of faith. It’s a salesperson trying to persuade the fiftieth customer to take a chance on a new, untested product. It’s a team of engineers trying to invent a product to challenge a large company, but with only a thousandth of the resources. These are typical startup stories. Ask any veteran entrepreneur, and they’ll tell you that a huge amount of time is spent story-telling, pitching, recruiting, rallying, motivating, convincing, selling, encouraging, and arm-twisting others. In short, village-building.

Here’s a visual way to look at this process:

I call this the Rainforest Curve—it’s my attempt to unify what I’ve observed in my empirical work in a single diagram. As ideas grow into products, from left to right over time, their beneficial value increases. The process of value creation is driven by positive-sum behaviors, like love, openness, serendipity, play, and diversity. You see this work manifested in real life by entrepreneurs, designers, inventors, artists, and the like. As ideas grow, however, they confront the cost curve, which exerts constraints on the realization of ideas. The cost curve is driven by zero-sum behaviors, like competition, excellence, dependability, precision, and loyalty. The intersection, where the curves meet, is usually a brick wall. The norms are in conflict with one another. The resources are finite. Most new ideas die on the left. Most aging institutions die on the right. The crossover is the hardest part. That is where evolutionary fitness happens.

Entrepreneurs cannot build villages by leapfrogging the process from left to right. One has to go through the journey, heartaches and all. But fortunately, we know today that the process can be accelerated. There are more and more proven techniques—such as mentoring, design thinking, role modeling, startup incubation, prototyping methods, measurement tools, online communities, and leadership development—for accelerating the innovation curve.

But doesn’t geography matter? What about the Nordics? Yes, geography still matters, but not as an end in itself. Geography matters because physical proximity can breed trust, speed the adoption of norms, and accelerate the flow of resources. To build economic villages, we should focus on building those trust and norms, but not necessarily correlated to geographical units of analysis. Think of an economic network that has strong trust and norms without physical proximity. You already know many. For instance, when you step onto a United Airlines flight in a faraway land, have you actually built face-to-face trust with the hundreds of people to whom you have now entrusted your life? Countless thousands of people are working every day to provide you beneficial things, based on a collective idea of what you need, how to fulfill that need, and how to make the solution tangible and deliverable to you. That sounds like a global village to me. We should make new such villages easier to build.

So what’s the big deal with changing our unit of analysis, from geography to ideas? What are the implications?

One, it gives us a better angle of attack for interventions. Changing the culture of communities, cities, and countries is hard. But to start, creating a network of entrepreneurs and innovators with a shared culture and a collective desire to create new organizations to tackle big problems is definitely doable. Those networks can indeed be local, and they can grow quickly. It’s often more effective, say, to support entrepreneurs working to expand access to clean drinking water bottom-up than it is to change global water policy top-down.

Two, it provides clarity for understanding. Abstract concepts like village or country or company can get in the way. They are manifestations of human organization, but they are not the true thing that drives the creation of economic value. What really matters are the countless, invisible interactions every day consisting of people chatting, sharing, transacting, and building together that form an economic web across the human race. Entrepreneurs and innovators are the builders of new, valuable strands that strengthen the web.

Three, it tells us what to measure. If we know that economic value is generated at the level of human-to-human interactions, as individuals organize together to form firms that create products and services, then we need to measure those interactions better. The stronger the trust and norms that foster such interactions, the faster the innovation process, the faster the building of villages.

Finally, it changes the way we think of social good. Social good is not something to be imposed from above. Instead, different concepts of the social good can be decentralized, democratic, and allowed to rise up from below. What is definitely not socially good is a rigid system that won’t evolve to fit a changing world, one that kills good ideas trying to overcome the cost curve. We should strive to even the playing field so that entrepreneurs and innovators—driven by positive-sum norms, passion for solving big problems, and desire for leaving a legacy in the world—are allowed to flourish and turn their budding ideas into vibrant villages.