Locavory and Entrepreneurship

I had a scintillating session with my undergraduate class in entrepreneurship today. We were using the HBS module on Market Segmentation, Target Marketing, and Positioning as an entry into constructing a venture plan. As we are nearly all food and ag sector folks, we discussed segmentation on such consumer benefits as nutrition, organic preference, food interest, and local food preference. It was particularly useful to note the overlaps (at least in common rhetoric) among these benefits as consumers perceive them: are locally produced foods more healthful, tasty, and have a better “story” to share over dinner?

We talked of DDDs (Distance-Delimited-Diets), such as the 100 mile diet. While no one in the group admitted to sharing in this peculiar form of crackpottery, we did discuss the opportunity for entrepreneurial rents to be earned in selling the benefit “locally-produced” to locavores, as well as people for whom nearby-production signals other (perhaps less valid) benefits: taste, uniqueness, nutritive value, environmental-friendship.

Locavory is complex, like many of the non-nutritive preferences sought in food markets. Attached to the construct local is a complicated set of credence attributes that include freshness, wholesomeness, tradition, and “connection to what we eat”. There are social benefits, as well. These include supporting family farms, supporting community members (i.e. the farmers), connecting to the growers and their families beyond the transaction, and being “green”.

As with any entrepreneurial opportunity, choosing a market position to serve locavores can be constructed with additional layers of differentiation to protect against competitive erosion of the entrepreneurial rents. Think of being a firm that produces and markets locally grown organic produce using heritage varieties. Or operating a catering firm based upon these consumer promises, overlaid with convenience. Like this one.

More on locavory in subsequent posts.

Driving on Friday afternoon

Don’t you think the state government should alert its citizens when they empty the insane asylums for the weekend … and let the inmates on the highways?

Tertius Iungens and creating entrepreneurial rents

I just re-read the 2005 paper by David Obstfeld entitled, “Social Networks, the Tertius Iungens Orientation, and Involvement in Innovation”, Administrative Science Quarterly, Vol. 50, No. 1  (Mar., 2005), pp. 100-130. The JSTOR stable URL is http://www.jstor.org/stable/30037177 . He introduces tertius iungens as a network position that differs from the commonly cited tertius gaudens. The former is “the third who joins (the other two)” and the latter is “the third who rejoices”. The agent who is tertius gaudens gains economic advantage because the other two agents in the network are in conflict. The agent who is tertius iungens gains economic advantage from bringing the other two parties together — a market-making entrepreneur, perhaps.

I haven’t found much follow-up to Obstfeld (even by himself) in regard to how this agent is compensated. The other form, tertius gaudens, appropriates rents directly from the market by stepping into the conflict and creating value from other agents in the network. This is clearly an entrepreneurial act. Ronald Burt, in Structural Holes (Harvard University Press, 1992), identifies a second form of entrepreneurship associated with tertius gaudens: the broker/negotiator between the conflicting parties. He says that the rents can be captured directly from the negotiations (both parties, presumably) or “to add value, strengthening the relations for later profit” (page 34.) This latter entrepreneurial behavior is hard to distinguish from tertius iungens, save for Ostfeld’s specific claim that Georg Simmel’s original distinction was whether the intervening tertius agent maintained the separation between the conflicting dyad (gaudens) or mediated/unified the dyad (iungens). Implicit in Ostfeld’s definition is that Burt conflates the two.

I like Ostfeld’s distinction as the basis for research into entrepreneurial behavior. While Ostfeld and Burt cast the problem squarely within social network analysis, I think that these peculiar forms of  entrepreneurial opportunity can be examined by an agent-based model, wherein the social networks need not be structurally defined. The interesting question is whether the mediator can capture any value from “closing the space” between the dyadic parties. It strikes me that this should be modeled by imbuing agents with either active adversarial (close, but antagonistic) dyadic relationships or passive (distant, indifferent) dyadic relationships. The tertius agent can be characterized as  having  brokering or mediating attributes. Finally, there needs to be some characterization of available rent-earning mechanisms from single-period interactions and across time steps (Burt’s “later profits”).

Perhaps we can steal the necessary behavioral rules for agents and their interactions from ecology: amensalism, commensalism, mutualism.

Time to dust off the simulation software.

Why I am involved with a graduate seminar in the philosophy of science

This semester, I am participating in a graduate seminar in the philosophy of science. The seminar is directed by André Ariew, who has a national reputation as a scholar in the philosophy of biology. The seminar meets weekly on such topics as modeling, explanation, causation, and game theory. The syllabus is here. As this is a learning experience, especially for me, there is a blog where we carry on the discourse between scheduled sessions. As philosophy of science blogs go, it is active.

So, why does a long-in-the-tooth professor of agricultural and applied economics participate in such a venture? Here is what I wrote to André to seek his help.

Why I Need Philosophy (and Philosophers) of Biology

12 October  2009

I am neither a biologist nor a philosopher. Thus, I cannot tell you the difference between ontogeny and ontology. I was trained as an applied economist, but my research and teaching since finishing in graduate school have caused me to delve into a number of methods, constructs, and theories from social psychology and sociology. This follows, in part, from fluttering among the professional (B-school) pigeonholes of organizational behavior, organizational theory, strategic management, and marketing. Each of these fields relies to some degree on economics, though rarely on High Theory and more often on some heterodoxy. The remaining drivers of research in these fields are the personal and interpersonal behaviors engendered by the other social sciences.

Let me tell the punchline here. I want to write a book on “biological models for strategic management”.  Long story short, strategic management is about competition – red (ink) in tooth and claw, cooperation/mutualism, resource dependence, systems, and system failures. The field has an explicit longitudinal aspect; industries and markets “evolve” dynamically. There is at present a strong flavor of evolutionary economics at the core of the field. Strategy scholars are explicitly adopting Nk  models from evolutionary genetics (Kaufmann), r-K models from population ecology (Lotka-Volterra), fitness landscapes (Wright), and the concept of reproductive isolation (Dobzhansky, Mayr). There are also examples of tacit or implicit adoption of biological concepts, and an even greater number of opportunities to make the biological metaphor more apt.

I am using metaphor, in part, as a dilettante would. The pages written on the differences among similes, analogies, and metaphors are as countless as the grains of sand on the beach. Even if I jettison the pages on literary metaphor in search of what I really want – scientific metaphor, I remain confused and intimidated. I like Max Black’s (1962) interactive metaphor as a way to make the transaction across the metaphorical divide between biology and management useful and precise. There are important limitations of the biological metaphor that need to be examined – both to critique the extant borrowings from biology, as well as to develop my “improved” paradigm. To do this well requires an understanding of the mechanisms, rhetoric, and epistemology (or what I really meant to say) of biology and how these can be ported across the metaphorical divide. I need your help. Obviously.

I am an autodidact with respect to biology. My pattern of learning is to enter through the portal of popular writing. I have read all of Stephen Jay Gould’s essays, then chased down the citations, biographies, and puzzles in the serious literature: Evolution, The American Naturalist, Bulletin of Mathematical Biology; Provine’s writings on Haldane, Fisher, and Wright; and Coyne and Orr on Speciation; etc.  I also read David Quammen’s essays and books, notably The Song of the Dodo and The Reluctant Mr. Darwin. Quammen caused me to jump into the scientific literatures on ecological modeling, metacommunities, landscape ecology, ecological niche theory, and trophic cascades.

Though I am a reluctant and incompetent mathematician, I have spent time on the mathematical modeling of ecological and evolutionary mechanisms and processes. In the last five years, much of this effort has been re-directed into agent-based models (individual-based models in biology) because I sense that Lewin was correct in his 1966 “Strategy of Model Building in Population Ecology” paper. The large models at the system level may be soluble, but they are usually constructed as a house of parametric cards. The small, general closed form analytical models in the MacArthur/Levins style are elegant but abstract. I believe that if nature is inherently self-organizing, why not model it as such, without imposing structure at the community or system level. Plus, so many of the interesting questions are about “local” behaviors, including niche establishment, mutualisms, and apparent competition.

This brings me to an urgent need for help in the philosophy of biology. Evidently, there is much ado about modeling and models in the field. I have problems with interpretation of this work. Some of my problems arise from differences in the rhetorics of economics and philosophy. When economists speak of “robustness”, they are remarking upon the stability of a statistical model with respect to alternative data sets, alternative solution algorithms, and, often, to outlier data points. One never speaks of the robustness of theory as a function of the number models that test it, which is how I have interpreted some recent papers that have been written as commentary on the original Levins paper (e.g. Orzack and Sober, 1993). Economists have been building large systems models longer that biologists have. One of the centers at MU – FAPRI, models the entire agri-food sector of the US with explicit links to other geopolitical areas. One assistant professor at McGill wrote a big chunk of the input-output model of the Canadian economy: mining and forestry to households. We obviously have, at least at the pragmatic level, different epistemologies. Or do we?  So, I need real help on how philosophers of biology speak of theory, models, modeling, etc.

Let me outline another problem I have. If we truly believe, as most undergraduate textbooks seem to do, that G. Evelyn Hutchinson was really on to something with The Ecological Theater and the Evolutionary Play (1965), then it is difficult to disassociate ecology from evolution when we speak of modeling. But most of what I have read manages to abstract one from other with adroitness. Even the Philosophy of Biology seems to do so. The preponderance of the literature is associated with “longitude” – evolution, and there is little work on “latitude” – ecology. In fact, at least half of the pieces that I have seen on the philosophy of ecology begin with a self-conscious statement that “nobody has paid attention to” the philosophy of ecological science.

But what of the massive time differences that must exist to make ecology cogent and evolution cogent? Hutchison’s theater falls to dust as the evolutionary play unfolds. While the theater is intact and the players are interacting, do we really see them evolve? Speciate? Is this a problem? Can I abstract entirely from evolutionary/ geologic time and describe longitudinal processes that are constrained by the environment, while I have a “timeless” ecological process with implicit evolutionary constraints? I believe that a better understanding of the time dimensions that are implicit in allopatric, parapatric, and sympatric speciation, and in drift and selection will help in dealing with this modeling question.

To make the metaphors work, the critical interaction involving the time dimensions of the principal (management) and subsidiary (biology) objects must be made explicit. Effectively, the management context may inform which of the elements of the biological theory/models must be, or may be, ignored to create a meaningful metaphor. In addition to time, we have questions about level of analysis (individual, species, firm, market) to sort out.

I see the time path toward my putative goal of writing the book on the biological bases for strategic management as having discernibly separate, but criss-crossing paths. One is to better understand what the philosophy of biology says about evolutionary and ecological theories. A second path is to understand the relationships of extant theories and models in the management literature that are “evolutionary” or “ecological” to their biological analogues. To do this properly, would one apply the methodologies of the philosophy of biology in this “parallel literature” to understand the internal epistemology and semantics before relating across the metaphorical divide?

A third path is the aforementioned study of models and modeling. This will directly support something that I am doing now: building agent-based models using a clever new software platform that permits complex modeling of agent attributes, agent interactions, and interactions with their environment. It also allows for modeling system-level phenomena that can constrain agent behavior. But I want to be sure that this effort, which is explicitly designed on the interactive metaphor between ecology and strategy, is grounded properly and executed “better” than extant models.

Tuesday 9 March 2010

I am on my way to a 3-hour seminar on the Philosophy of Science. The guest speaker is Dr. Jay Oldenbaugh of Lewis and Clark College in Portland, Oregon. I’ll reflect later (after dinner and requisite alcohol).