What Silicon Valley can learn from Mother Russia
To get at whether all-broker or nonbroker teams fare better, Aven turned to data from late imperialist Russia, when both railroads and population were expanding and there was explosive growth in private enterprise and industrial output. To best tax this burgeoning economy, the czarist state began gathering data on all partnerships and joint-stock companies. Those contracts were later digitized by legal historian Thomas Owen, an independent scholar affiliated with Harvard University. These data included information on industry sector, including mining, manufacturing, finance, railroads, textiles, beets and malt. Contracts also revealed team size and membership, where the firm was located and how much capital it had raised.
Aven and Henning Hillmann of the University of Mannheim in Germany used this data gold mine to trace the relationships among team members for 2,053 Russian firms founded between 1869 and 1913. The teams that raised the most capital turned out to be functionally diverse — some members had connections with a lot of outside people, and some members were from networks that were cohesive and tight-knit.
“All things being equal, if I have two firms to choose between, I should go with the one with more diversity,” said Aven. People tend to think that brokers have all the advantages: They are very good at finding and using new stuff — and at making money, said Ron Burt, an expert in networks and behavioral science at the University of Chicago. “But once you are trying to get an operation running, closed can be better.”
By Rachel Ehrenberg