The Nobel Prize in Startup Communities

As many of you know, I’m currently working with Brad Feld on a sequel to his 2012 paradigm-shifting book Startup Communities: Building an Entrepreneurial Ecosystem in Your City. Last week, I wrote about behavior and mindset in a startup community, and think one of the points we’re making—about cooperation and playing positive sum games—is worth sharing here.

Not only do cooperative strategies in startup communities make intuitive sense, but there is also a fair amount of supporting evidence. In fact, a Nobel Prize was awarded for ideas that support the central thesis behind startup communities.

Elinor Ostrom, an American political economist, was awarded the 2009 Nobel Prize in Economic Sciences for her work on cooperation and collective action. She challenged the notion that in the absence of a central governing authority, shared resources will be under-developed and over-utilized. Conventional thinking at the time was that our selfish human nature prevented us from cooperating in a way that would ensure sustainability of shared resources (like those in a startup community).

But Ostrom overturned this thinking. Through the use of experimental techniques and the observation of societies who relied on shared (scarce) natural resources, she demonstrated that under the right conditions, people are willing to cooperate for the greater good and engage with a positive sum mindset.

In her Nobel acceptance speech, she described her work in the following way:

“Carefully designed experimental studies in the lab have enabled us to test precise combinations of structural variables to find that isolated, anonymous individuals overharvest from common-pool resources. Simply allowing communication, or “cheap talk,” enables participants to reduce overharvesting and increase joint payoffs, contrary to game-theoretical predictions.”

Said differently, we tend to cooperate with people we know, trust, and frequently engage with. And, conversely, it’s easier to defect or play a zero sum game against people we don’t.

The central thinking behind Startup Communities is to do exactly that—to improve human relationships in a way that allows for collaboration, cooperation, and idea sharing to become second nature. This is why one of the four pillars of the Boulder Thesis—that the startup community must have continual activities—is so critical. Social cohesiveness and trust are essential for the sorts of norms and informal rules that allow collaboration to occur in a startup community. Frequent engagement allows that to develop.

I am not the first person to link Ostrom’s work with startup communities—Victor Hwang first put forward this idea in 2012. He leads entrepreneurship programs at the Kauffman Foundation, and is co-author of an excellent book The Rainforest: The Secret to Building the Next Silicon Valley. I highly recommend it to everyone. Victor’s ideas have been very influential in the development of my own thoughts around this topic, and I trust that they will be for you too.

So, thanks to Elinor, to Victor, and to Brad for collectively advancing thinking and providing a framework for startup community participants to coalesce around in the spirit of positive sum behavior. I hope that I was able to stitch together these ideas in a way that was beneficial to you, and that you’ll move forward confidently knowing there’s an unofficial Nobel Prize in Startup Communities out there.