Foundations for Optimization

The Foundations for Optimization

In evolutionary systems, history matters; where you can go in the future depends on where you have been in the past.

—Eric D. Beinhocker[7]

You can only optimize based on your foundation. When trying to optimize your purchases, for example, you can only use the money you have to buy what's available. If you're currently employed in the service industry, and it collapses, you can't just go be a carpenter tomorrow to better optimize for the changing job market. Some training will be necessary, because you don't have the foundation for carpentry. Thus there are constraints on optimization.

In The Bare Bones, paleobiologist Matthew F. Bonnan charts vertebrate evolution. A critical point in the eventual evolution of humans was when vertebrates left the ocean to explore land. In order to be successful on land, extensive evolution of the vertebrate skeleton first had to take place. Consider that "water is eight hundred times denser than air…. On land, gravity is a much more powerful force…. Resisting gravity and moving under its force led to selection of fewer, sturdier bones and strengthening of the skeleton."[8] The changes were numerous. Some vertebrates developed longer snouts or more dexterous tongues, and necks evolved for the first time. New joints developed to support the spine, so it didn't get pulled down in the middle by gravity in animals walking on all fours. Eyes dry out on land, so evolution produced and selected for tear ducts and eyelids. There were changes for breathing in the atmosphere and to help creatures better cope with a greater daily range of temperatures.[9]

Evolution worked with structures already present in vertebrates. Animals slowly optimized to function on land, but that optimization was achieved by evolving from the foundation they had developed in the water.

For example, sound travels more slowly and over shorter distances, and loses intensity faster, on land. So for the vertebrate species coming out of the ocean, "a way must be found to convert the high-frequency vibrations of the eardrum into pieces strong enough to overcome the viscous fluid of the inner ear." Modern tetrapods (land vertebrates) solved the problem by adapting a part they already had, the hyomandibula, into a sound transducer through a complex process of adaptation in skull structure.[10]

The example shows how an existing structure can acquire a new function. Evolution modifies inherited structures rather than designing an auditory system from a blank slate.

The concept of being constrained by your existing foundation applies to companies as well. That doesn't mean that companies have to keep producing the same goods or services in perpetuity, but it does mean that they evolve from their existing infrastructure. A company that prints books today cannot make vaccines tomorrow. It can, however, look at what it currently has and identify what and how to evolve to optimize its business in a changing environment.

One company that has experienced and worked within the constraints of an existing foundation is Nintendo. Its history shows how existing capabilities can support some changes and complicate others.

Nintendo started in 1889 as a shop that manufactured and sold playing cards decorated with colorful flowers to gamblers. Within five years, writes Jeff Ryan, it "had craftily shifted over to the toy market to capitalize on [its] existing distribution route for cards."[11] When longtime president Hiroshi Yamauchi took over from his grandfather, in 1949, he "tried out various new business models—rice, taxicabs, 'love hotels' rentable by the hour. None clicked until he decided to utilize his network of card and toy shops."[12] Nintendo found it easier to optimize using the foundation it already had.

Later, Nintendo built on its gaming foundation. It developed arcade games and small, portable electronic games that could run off watch batteries. It was very successful in Japan in both of these endeavors. In the early 1980s, Nintendo wanted to grow further by breaking into the lucrative American market. It started with what it knew, what it was already good at: arcade games. Nintendo’s breakthrough arcade game in the United States was Donkey Kong. Early Donkey Kong arcade games were actually a rewire of a bunch of old shooter games that Nintendo couldn't sell, which were repurposed and reprogrammed. Donkey Kong was everywhere, and it gave Nintendo a solid presence in the United States.[13]

Donkey Kong is notable in the story of Nintendo for another reason, though. The game included the first appearance of the Mario character—albeit not with all the details that would come later. But Donkey Kong set the foundation, the beginning of Mario's becoming the Nintendo mascot. He began to appear as a side character in many Nintendo games and eventually became a critical component of its Nintendo Entertainment System (NES) console.

Going forward, Nintendo found it hard to break away from its foundation. For example, the company tried a couple of educational games, but "after swinging 0 for 2, Nintendo gave up on the NES being a learning machine."[14] The account emphasizes Nintendo’s "games as entertainment" identity: consumers expected entertainment, which could make an educational offering harder to sell. That interpretation does not establish the sole cause of the games’ failure.

In the quest to optimize, foundations can be both a burden and a source of opportunity. For Nintendo, its gaming identity supported new entertainment products while complicating attempts to sell something different. An existing foundation supplies capabilities as well as constraints.