Crossing Over To The Other Side
Critical Threshold
Have you ever tried losing weight? Let me not ask you the next logical question concerning your success. But if you have succeeded even marginally, you know it is a challenging and arduous task. When you start dieting, running, weight lifting or any other form of training, there are no immediate results. Nothing. Zero weight loss, not even an ounce. Just effort, disillusionment, and futile thoughts of all the delectable food you have sacrificed and the physical and mental exertion you have suffered. I call this the ‘Death Chasm’ where you give up and yield to the lure of an easy life, eat all the junk food you can, and kiss goodbye to disciplined sleeping hours. However, if you have it in you to cross this chasm and push yourself beyond this threshold, you are in for an absolute delight as results start showing. You lose your first kilo, then a little more, and once this weight loss picks momentum, you reach your goal in no time. Sheer Delight. Ecstasy. All this by simply pushing yourself over a critical threshold.
When I studied Nuclear Physics in college, it amazed me to understand how fission, a reaction where the nucleus of an atom splits up, provides energy for a nuclear bomb and also a nuclear reactor. A thin line, a threshold, differentiates a very rapid and instantaneous release of energy (bomb) and a controlled and slow release that can power entire cities for years (reactor). Till the reaction reaches this critical threshold, it can be harnessed to provide energy (green, clean and sustainable), but as soon as you allow this reaction to cross the threshold, it results in a huge blast. Remember, Hiroshima, Nagasaki and the few that didn’t happen because better sense prevailed in the minds of powers that be.
Uprisings, revolts, revolutions and coups have been part of history since time immemorial. The recent Arab Spring remains etched in my mind as I found myself amid Tahrir Square, Cairo, in 2013. Hundreds of thousands of Egyptians converged at Tahrir Square, and all roads leading to the square were buzzing with chants, slogans, and protests against then-President Mohammad Morsi. Do such uprisings happen overnight, or have they been simmering under the hood for a long time until...until they cross a certain threshold and boil over. A significant percentage of the population wants change but fears the consequences if they voice out their opinions. A few initiative takers speak out and face the establishment’s wrath. Action against these brave hearts, primarily fatal, drives a certain critical mass of people to face their fears and speak up, eventually resulting in a revolution. As the number of people speaking up and against the establishment crosses a certain critical threshold, the movement gains power, and ordinary people end up overthrowing empires, tyrants, and governments. You live in a digital age and are familiar with content and products that go viral. You can think of a few examples right now. What makes some products viral while others perish is worth understanding but is a topic we will leave for another day. In this discussion, we will focus on the fact that there is a certain adoption level beyond which network effects kick in and induce virality. Something that appeared to be a fad turns into a trend beyond a certain critical threshold.
When you contemplate the success or failure of any new technology or innovation, let’s say Electric Vehicles (EV), you start focusing on consumer adoption levels. The blue curve depicts the Innovation Adoption Lifecycle representing different groups of users, from innovators to laggards, adopting EVs. At a certain point along this standard bell curve, EVs that started as an effort to save our planet from global warming will cross a critical threshold beyond which they become self-sustaining. Technological progress led by some of the best teams in the world and growing charging infrastructure is helping EVs reach this threshold quicker, helping us reduce our fossil fuel reliance. Beyond this threshold point, there is no need for government support or subsidies. The yellow curve plotted along the right axis is the total EV market share, which reaches 100% as adoption is complete.
We invest in early stage businesses and in this startup world, there is a perpetual race for survival. Each founding team wants their business to grow and reach a point where they become selfsustaining. Yes, there is a critical threshold that the company has to cross to achieve sustainability. Some businesses seek positive cash-flows, while others chase healthy margins or customer retention levels or brand engagement. No matter what metric you target, if you have to become widespread and achieve sustainability, there is a critical threshold your metric has to cross. As investors, we spend enormous time and effort helping startups cross this critical threshold as our destinies are tightly bound, and our success lies in founders achieving theirs.
By this time, you have surely noticed that whether you are trying to lose weight, spring up an uprising at home, your office or on a national scale, or save planet earth, you must somehow cross a certain critical threshold to prevail. Once you embrace this simple concept, it allows you to better understand the world around you. You can make sense of all the turbulence around you caused by a rapidly changing environment aided by technological disruptions. Most importantly, it allows you to make better decisions to understand your environment better and seek out significant trends and their respective threshold levels. In the investment world, it enables you to make better investments by making sense of the likely direction the future holds for your portfolio companies. In business, you are in an advantageous position as you understand business dynamics better, understand your customers better, and better judge the competitive environment in which you operate. It would be best if you had grit, persistence, perseverance, and doggedness in ample dose to cross critical thresholds.
Finally, can we quantify this critical threshold level? When does the switch flip from being controlled to spiralling out and spreading all around? It seems we have a wide range of 10% - 40% based on various studies that have tried finding this holy grail of critical threshold levels. Boleslaw Szymanski, Director, Network Science & Technology Centre, Rensselaer Polytechnic Institute, pegs this critical mass at 10% for any phenomena to become widespread. Another study by Damon, Joshua, Devon and Andrea, “Experimental Evidence for Tipping Points in Social Convention”, puts the threshold at 25%. The exact threshold and time to reach critical mass vary depending on what is under consideration - an industry, competition, diets, revolutions, etc.
“When the number of committed opinion holders is below 10 percent, there is no visible progress in the spread of ideas. It would literally take the amount of time comparable to the age of the universe for this size group to reach the majority. Once that number grows above 10 percent, the idea spreads like flame. ”
In conclusion, knowing that there is a critical threshold helps you focus and persevere till you achieve your goal. And yes, it also eggs you on not to give up exercising and dieting and ensures you lose weight and become the best version of yourself. Doesn’t this make you feel good already?