What do gangsters and Google have in common?

Business,Community March 20, 2012 4:34 pm

Two young drug dealers marvel at the ingenuity of their Chicken McNuggets and imagine the innovator who must have become incredibly rich off his invention. An older, more experienced dealer, D’Angelo Barksdale, mocks their naiveté, explaining that the man who invented the McNugget is an unknown at the very bottom of the McDonald’s corporate ladder who dreamed up a moneymaking idea for those at the top. What does this story tell you? It’s essentially a debate on the provenance of innovation: is it driven from the top, by the big hitters? Or from the bottom, from the unknown, underground “misfits”?

This scene—one of the best in The Wire (if you could ever choose)—captures the essence of perhaps the most prevalent myth of innovation: that it comes only from those at the top, within the closed doors of corporate, Silicon Valley, and Ivy League labs across the globe. Most, like the young drug dealer, still believe the engine of the economy is fueled by innovators working in the formal world and on the pages of Harvard Business Review.

The Misfit Economy, an upcoming book and growing movement, is dispelling this myth. The “itch” to innovate also comes from the ships of pirates, the underground world of hackers, the havens of Mexican drug lords, and the enterprising underworld of Mumbai. Misfit innovators operating outside of the formal economy are a vital part of our economic history (consider how Johannes Guttenberg, Nikola Tesla, and even street peddlers shaped modern cities). And they are a part of our economic future: by 2050, one third of the world’s workers will be employed by the informal economy. If you combine the annual income of informal markets across the globe, it comes to a staggering USD 10 trillion. We must pay attention: underground innovators have been ignored and misunderstood for too long.

Let’s start with the Gangster. Gang life mystifies and arrests popular imagination, but it’s not all hip hop and Pimp My Ride. It’s also teeming with practical ingenuity. Sudhir Venkatesh brilliantly illustrated this in Gang Leader for a Day, which covered his seven-year study of a major Chicago crack-dealing gang, the Black Kings. JT, the leader of a large faction, offered Venkatesh the chance to run his gang for one day. “I don’t see what’s so difficult about your job,” Venkatesh responded. All he ever saw him do was “walk around and shake hands with people, spend money, drive nice cars, and party with his friends”.

Despite his fears, he accepts: “Did it really take a self-styled CEO to manage that?”

He quickly found that it did. Throughout the day, the young sociologist was faced with one problem after another. One particular issue: the sale of diluted crack.

One of JT’s informants relayed to him that Michael, a dealer, was selling diluted product to take a bigger cut. Venkatesh’s instinct: “Kick him out!”

JT explained it wasn’t that straightforward: “Most guys wouldn’t even think of these ways to make money,” he said. “I have hundreds of people working for me but only a few who think like that. You don’t want to lose people like that.” He had to quash Michael’s tactic but not the entrepreneurial spirit that drove it.

Does this dilemma sound familiar? Even if you’re not a crack dealer, you might have noticed how JT, like every forward-thinking manager, strived to create a culture of entrepreneurialism. Consider Google’s now-famous 20 percent rule. As the company grew more hierarchical, it sought to maintain its enterprising start-up feel. So it continued to encourage its employees to spend 20 percent of their time working on their own ventures, many of which became formal and indispensable Google products like Gmail and Google Talk.

In gang life, as in the corporate world, entrepreneurial spirit or the drive to “get ahead” can also threaten those in power. The pursuit of recognition and esteem drives progress yet can also be disruptive. But there are notable differences too. While whistle blowers in companies are often penalized, many within gangs constantly face opportunities to rat out colleagues. And the odds are, the bigger the gang, the higher probability there will be a rat. For this reason, gangs have had to radically downsize in recent years to ensure loyalty.

The art of loyalty is something Google knows well. In an effort to recruit and retain employees, Google is notorious for creating a “sticky” culture. The company is known for a culture of play and experimentation. Successful gangs are similar. They understand that culture is the number one value proposition. The US-based Latin Kings celebrate Hispanic culture and members pursue Enlightenment and participate in cultural education in addition to a range of criminal activities.

And in 1996, the Kings overhauled their vision and brand, transitioning from a “street gang” to a
“street organization” with a more mission-centric focus. The Kings involved themselves in political demonstrations while still maintaining its “sacred cows”: drug dealing, assault, money laundering, and identity theft.

Not convinced? We’re just getting started. Over the next year, we’ll post stories from innovators we meet in the black market. If you know of any great misfits, please write us at hello [at] misfiteconomy [dot] com.

The Misfit Economy is a column on black market innovation by Alexa Clay and Kyra Maya Phillips, co-authors of an upcoming book by the same name. You can support and learn more about their work through their Misfit Economy Kickstarter campaign.