JLabs LLC CEO Judy Estrin on Using Ecosystems to Understand Innovation | Seed To Harvest Ep33

Welcome back to Seed to Harvest, a podcast with founders, creators, and investors about their stories, frameworks, and tactics. Today, I'm joined by one of my investors and good friends, Judy Estrin, CEO of J Labs LLC and co-founder for 8 technology companies since 1981. In the 1970s, she helped create the internet, working with Vint Cerf to develop TCP/IP at Stanford. She's the author of Closing the Innovation Gap: Reigniting the Spark of Creativity in a Global Economy and is passionate about the impacts of technology and democracy in society. Judy has served on the boards of FedEx Corporation, Rockwell Automation, Sun Microsystems, The Median Company, KQED, as well as The Walt Disney Company, where she served for 15 years. Judy, thank you so much for joining us today. This is such a special treat for us. Thank you.

Are you going to tell them why we laughed when you said passionate?

Yes, I would love to tell them. Judy and I were chatting before the show and about our particular use of passionate in the show notes. I think, what was the phrase in French?

I said, I'm not passionate about the impacts of technology on democracy and society. I am worried or petrified or scared or concerned, but I was just joking about the use of passionate about everything.

So speaking of passionate, it is also a core aspect of our next question, which is what causes are you most passionate about regarding your work with nonprofits to set the stage for our conversation today?

So the areas that I tend to work with people on, and this'll set the tone of other things that I'll talk about, are varied because we have so many existential issues that that we're facing now. And you won't be surprised that climate change is one of them, but also very concerned about what I call the climate of our society, which is how we interact together or not in terms of working together to solve problems. I'm very concerned about the erosion of our democracy, and many of the people I work with are working on various aspects of that. And very concerned, I would probably say, under the guise of human rights. And that includes women's rights, women's reproductive rights, social justice, just equality types of issues. So that is a very broad set. I also, something that goes across all of those, which you alluded to in terms of the impacts of technology, is specific issues about how digital technology is impacting our information systems and how we get information and how we communicate. Because I think that's one of the things that is hurting a lot of these other issues. But I will say, you asked about nonprofits, and one of the things that I believe very strongly is that addressing any of these issues needs to be across a balance of the private sectors, philanthropy through nonprofits, and government. So when I do people I help and people I advise, I look, I, advise people in nonprofits, but also in the political spectrum, because to get change, we need both of those, as well as entrepreneurs in the private sector. And so in any of these issues, I don't just see them as nonprofit issues. I see them on these 3 legs of a stool.

I love that 3 legs of the stool analogy. And before we dive deeper into our conversation, can you clearly define what innovation means to you? Because we're going to be talking about it a lot today.

Yeah, and innovation, narrowly, is about coming up with new methods, new ideas, new products. And so innovation is important in solving problems because you often need new ideas, new techniques to solve some of these problems. But I also, when I talk about innovation in my book or generally, I think of innovation as a mindset. And innovation is having the capacity for change because that's what innovation is all about. And so I like some of the, some of the time when I'm thinking about innovation, it's not just about a new product, it's about a culture of an organization or a culture about an industry, or maybe we need to do personal innovation. So innovation at an individual level is having the capacity to change, to evolve, To adapt to different situations. So I like to, a lot of the concepts that I think about with innovation go across or broader than just product innovation or business innovation into other areas.

Yeah, I feel like that's one of your great strengths is your ability to apply various either like frameworks or techniques across disciplines, especially given that you work with so many different individuals in different contexts, but you apply similar frameworks that you have, have like worked on. And, and one of those in your book, Closing the Innovation Gap, which I have right here, it was, I would love to share this story. When we first met, it was so cute because we each had like, this book is signed by you and I gave you one of my, one of my signed books. And it was so, we were standing in a parking lot like trading signed books and it's just like a moment that lives Very special in my heart. In your book, you compare innovation to biological systems, which is ironic because my book also compares venture investing to biological systems. So much like plants need water, sunlight, and nutrients, innovation requires the necessary ingredients for sustainability. So can you elaborate on what key elements you believe are required for sustainable innovation?

So let me back up one minute before I talk about the environmental factors and say that when I describe the innovation ecosystem, there are 3 communities, 3 broad communities, because a biological ecosystem is made of diverse communities of organisms and then have these environmental factors that allow them to thrive.

Mm-hmm.

And I came up with that idea partly because biological ecosystems need to be in balance. for them to continue to have— be healthy. If those factors aren't in balance, then you end up not having a healthy ecosystem. And those communities in innovation are research, development, and application, certainly in innovation of technology. And so research is about discovery. Product is about turning those discoveries into products. And then application is The people who apply that technology. But the environmental factors are leadership, culture, policy, funding, and education. And those elements, you need the right leadership, you need the right resources in terms of funding, you need to apply that funding correctly. And that's usually the policy. And you need education. People need to understand. The cultural aspect is, I defined in my book, I summarized it and there's lots of different aspects of culture, but I summarized it in terms of 5 core values. Questioning. So curiosity and the ability to ask questions, the ability to question yourself and not always jump to an answer. Openness, openness to collaboration, openness to other people's ideas. Risk, being willing to fail, not wanting to fail, but taking the right risk. Patience, something none of us have these days. And patience is both tenacity, but as a funder, patience is to give it time to see what's going to happen and not scale too soon. And not— and know the right time to identify whether something's going to succeed. And last is trust. Without trust, trust in yourself, trust in people around you, innovation doesn't happen. Those 5 core values also need to be in balance. If you take risks, but you don't question, that's gambling. That's not innovation.

Mm-hmm.

If you have— if If you trust, but you don't have questioning, that is blind trust or blind faith. That also is not innovation. And so it really takes a combination of all of those things. You don't just get to pick the one that you like the best and say, I like to be patient, or I like to always ask questions. You need a combination of them, and that's where you get the innovation. The, the, the most, the healthiest or the most vibrant innovation.

And I think one of my favorite quotes from your book is, or maybe it was from the talk that you gave at Google about your book, is you need a green thumb and not a black belt. And I believe that that deeply roots your philosophy of innovation in scientific discovery rather than innovating or iterating on, or sorry, iterating on an already established process. Do you mind expanding this briefly? And this was in the context of Google's Six Sigma and an orientation around process.

So if you are talking about innovation, later scale, later stage innovation of a process in a factory, scaling a company, people talk about growth hacking as a certain type of innovation. Then it is about coming up with measurements and finely tuned metrics and measurements for figuring out how things are going to work and adjusting it.

Mm-hmm.

But if you're talking about early-stage innovation, whether it is discovery in science, whether it's early-stage companies, that is more like a greenhouse. That isn't a factory farm, or it isn't a an assembly line. And if you apply tight metrics or tight management, too tight management, à la Six Sigma, to early-stage companies, it, you may not recognize that something is not a weed, but is an artichoke or a flower or something that you may not expect. And unless you nurture that environment, you will actually stifle innovation as opposed to help create it. So that was my way of saying that you need different styles. You need nurturing. And then when you're looking to scale and when you're looking for homogeneous, everything to be the same, then you might use Six Sigma. So it wasn't saying that there's no place for Six Sigma, but in the world we're in, which is investing in entrepreneurs or for entrepreneurs who are building companies or in the research environment, it really takes a green thumb. And one of the reasons I talk about that is I think we've forgotten that. I think we are so fixated on very making sure we understand everybody's KPIs and metrics and scaling as quickly as you can that sometimes we actually kill the innovation that is there.

Yeah, I think it was a really interesting topic that we have spoken about before, but I think like the propensity to take risks and have failures within your business, like you said, some of those failures might result in the most dramatic shifts or pivots in companies, which then produce innovation. So it's innovation is not necessarily successes, but it might spring from the lessons that we learn failing. And I think one of the deepest aspects of this Is a concept that I didn't know that much about before I met you because of when I was born, which is how much impact the defense industry in World War II had on basic versus applied research. For context, like, I come from a back— a background where most research that I see in companies is applied and commercialized, but that was very different from the context that you grew up in where being a scientist was heavily encouraged and basic research was encouraged and funded. So can you explain more about how funding has shifted from basic to applied research over the years, and then what impact that shift will have on the future of innovation?

Yeah. And before I do, let me say one thing about failure, because I think this ties into the, the whole area of basic research versus applied research and product development, which is You want to be able to, if you have the ability to experiment and fail, you will learn from that and be able to have more, be more innovative.

Mm-hmm.

The problem we have today is that we had, in the digital technology world, we go to, we experiment at scale. So you come up with a new feature. And you release it that day. We don't experiment in greenhouses or sandboxes like they do in other industries. So when Facebook decided early on to test whether or not they could manipulate people's moods by the information they were showing them, they didn't do that in a sandbox. They did it at scale.

Mm-hmm.

Or when you, uh, when you change an algorithm for information and it impacts democracy, it's because it's being done at scale. And the culture in the digital technology world is to take innovation that small companies do, which is try things, but we're doing it at a point where it's, it isn't, it isn't controlled in a sandbox. And I use Facebook as an example. But most companies in the digital technology space do that, and they're encouraged to do that. They're rewarded for doing that. So one of the things we have to figure out is how do you balance, how do you test things in the right environment so that once you get out at scale, you are not damaging people? And it used to be that digital technology was more or less benign because we didn't use it for so many things. And as we've gained power, we digital technologists, we have not adapted our mechanisms for how we deal with, with failure. Did that make sense?

Yes, absolutely. And, and I would, yeah, I would love to hear more about the, the basic to applied research trip because I think it ties very tightly into that concept as well.

Yes. So I was going to say that the whole idea is that Basic research is about discovery. It isn't— you're not starting with— you're starting with questions of how does this work or what might happen? You know, you might have some broad problem you want to solve. I want to get to the moon or I want to cure cancer.

Yeah.

But it isn't— you're not— the reason it's called basic Is you don't have a specific problem and a specific timeframe or a target for that innovation. It's, it is a broader set of, I wonder how this would work. And there's a whole scientific process around then coming up with a hypothesis and testing it. And in basic research labs, they are not, they historically were not funded.

Mm-hmm.

To a specific outcome. They were funded based on the quality of the people and communicating and reputation across time, but it wasn't, here's funding to get from A to B.

Mm-hmm.

And if you are not saying you're getting to B, but if you're trying to understand something, again, understanding how it works, understanding what could go wrong or why it works well. Then it is, you end up with a, you're not limiting the outcome. What happened is, as especially in computers, but it happens in other areas, as more and more funding became driven from the private sector, the philanthropic center, in addition to government, But it became very targeted. I want you to solve this problem. I want you to come up with patents that I can use. If you're driven by commercialization or even balanced community, some commercialization, some discovery, it automatically makes it more short-term focused. And we need applied research. It's all very important research. But we stopped funding basic research. And so we weren't planting the seeds for what would be needed in 10, 15, 20 years. And a perfect example of this is basic research in chemical science and other things that are now needed for alternative energy that is critical for climate. If you go back 20 years, That wasn't popular. So funding went into medical sciences or biology, went into digital sciences because technology, but everything around it ended up getting cut as a result.

Yeah, I think like one of the biggest things that we talked about was also the impact that government funding specifically had on basic research, where what happened was when private markets came in and started funding more of the commercial research. And the funding from the government ended up dropping off the basic research. There was this like massive funding gap for exploring broader problems and how they worked and also providing long-term time periods. So how do you believe that the ecosystem of innovation has evolved since your book was published?

So I wrote my book because I was concerned about the, the, that innovation had become too short-term and that I thought as a result, innovation was going to die. That was my, you know, would fade away.

Mm-hmm.

In the one positive that has happened is there has been some increases in government funding for various parts, very, that in, in basic research, not enough, But there has been some increase, and part of that is driven by climate. Part of it is driven by advances in discovery in, in, and various advances in biology. But what has actually happened to the innovation ecosystem is that it has grown, but it has grown dangerously.

Mm-hmm.

In that, and so I talk about it, it's metastasized. It's like a virus or cancer, which has grown and overtaken other things. And I, the problem I have with it is it's become very self-serving. Too much of innovation is innovation for innovation's sake, as opposed to innovation to serve humanity and the challenges that we need to face. Yeah.

And speaking of addressing that, in your recent Medium article, out of whack. You said that we need innovation around how we think about innovation. Could you expand on what you meant by that statement?

So that was, that was my way of getting people to think about that it isn't that our innovation ecosystem is out of whack and that, that we need to innovate that ecosystem And I think that the core values, one of the reasons I brought up the core values earlier that, remember, was questioning, openness, risk, patience, trust. If you actually look at what is going on in digital technology, I would argue that the core values are dominance, disruption, and eliminating all friction in order to pull more and more. So it's basically Scale at speed, get as big as possible as fast as possible to dominate, disrupt without having any responsibility for who you disrupt, and remove all friction so that you can dominate and actually make it as easy as possible for people to use more and more of your product. So we've, we, have lost our way in terms of the goals and the way we think about innovation. And I think we need innovation around the way we think about innovation, not just, it's not just about funding. It's not, it's about those core cultural values.

So if it's not already clear to those of you listening, Judy has an incredible natural scientist perception of the world and a criticality and openness to face problems head on. Which I find quite rare in this industry and honed over many years of experience. For, for me in particular, you've been instrumental in how I've thought about communicating problems that I thought were obvious. And I say that in, in hand, hand quotes, air quotes in my business. And one of the anecdotes that you shared with me on a recent walk in the Bay Area involving you and David, who is your son who you run J Labs with. And a few ampersands. So I'd love if you could share that example around how not all problems are as obvious as you think they are based on your context.

Well, it's interesting that, that, that was both a great example of the context of how we understand things in that David had— David and I collaborate on lots of things, as you know. And within the course of a couple of days, there were 2 times he sent me something. One was updating his bio or something and something else that he was doing. And he just showed it to me. And I noticed that in both cases, everything was, he never spelled out the word and, he just used ampersands. And I'm a boomer and my, my reaction to things, if you have a formal communication with somebody, I would never put in an ampersand. I mean, I would use that in a casual thing or a text.

Right.

And so I, I, I, I ended up not saying anything then, but we were on a walk and I said, I just need to ask you a question. Are you not proofreading your documents? Are you not, you know, it was almost like I was thinking he was moving too fast.

Right.

And he looked at me and he said, Mom, it's cultural. It's— no, he said, it's generational. That's his way of telling me when I'm being old and explained to me that it was perfectly natural. And then went on, if you think about it, if you communicate via text all the time or read emails or text on a small screen, the fewer the characters, The better it is. And so that notion of abbreviation, it's the same thing of, I still, you know, I have finally learned when I text with anybody but people my age not to put periods at the ends of things or else they'll think I'm, you know, I'm mad at them. So that, that, that assumption about punctuation or things like that, this was just a great example of I would read something and interpret it one way. So this isn't so much about. big problems. It's about assuming everybody else does things the way you do them and really trying to, when something doesn't make sense to you, as opposed to immediately saying that's wrong and assuming it's a problem and assuming it's the other person's problem, maybe be open enough to say, what's the context? Tell me why you're doing it this way.

Mm-hmm.

Or is, am I the one that doesn't understand? And, and very often I am. And I, but I think that as we are going through such dramatic generational change, it's really important for not just boomers, but millennials to understand that Gen Z may do things differently. And take the time to understand. And I frankly think you need to understand that there's a reason why people react the way they do and not get too impatient. And, and we need to kind of come together to be able to understand the context of where we all come from.

I think it was such an incredible example for me because it was so small, like, and his 3 Letters, and ampersand is one character, but it had such a radically different meaning in you and David's heads. So I thought that that was a really great example of if that is the difference in context for something as small as 3 letters or one character, what dramatic consequences losing the nuance in our conversations can have in other ways. So I think you've really encouraged me to be more nuanced in the way that I communicate, and I really appreciate that. And definitely bringing to light things that are not as obvious as I think they are. And nuance is definitely something that we've talked a lot about, but I'm curious, what conversations do you think are necessary to provoke positive change as an entrepreneurial ecosystem?

I think that one of the things I really think we need to think about is this whole issue of scale and the core values that we're operating around. I would like to see us as an ecosystem think about not just how we can address issues and make money, but the responsibility we have that goes along with that. I would like us to be thinking about our impact on people, societies, the planet when, when we do these things. I think that we should be talking about alternative ways to scale, that not everything needs to be homogeneous scaling. And I have a concept that I think about, which is interconnecting diversity.

Mm-hmm.

Which is you can have elements of the, as you grow, you can have, you could call them communities, you can call it scaling for trust that are all different that you can then interconnect to solve, to have collective power. And so I, I just think we look at scaling as too homogeneous. And when you try to scale fast, you work against diversity.

I love that. Okay. So following up on that question, what are you most fearful of in the future regarding trends, leadership, leadership, et cetera?

I think I am, I'm fearful about extremism. And what I mean that in every one of us, we're, we're obsessed or we're over it. We believe X or we believe Y. There's just so much extreme thinking. And that comes from when you lose nuance, you go to the extreme. And I think it's very hard for us all to communicate when we just are thinking in ones or zeros or extreme. I think that we, I'm worried about escapism. I'm worried about us all believing in a utopian view because the world is overwhelming. The problems are overwhelming.

Mm-hmm.

And whether it is into a video game Or into building a company or into whatever recreational way you want to escape. I think that there— I worry about too many people who could be helping to solve problems running away, escaping from them, understandably, because the world is somewhat overwhelming. And I think from a technology perspective, I'm fearful about It continuing to move so fast in areas of AI, in areas of misinformation, disinformation, that, that we, we can't, we can't get ahead of the problems.

And then to contrast, what are you most excited about for the future?

So, uh, the first one is you and the generation you represent. So I, I think that I am. Energized, excited by the fact that there's just so much new, great thinking coming into the world of innovation. And that I think that those who have grown up with some of the technological problems will be more savvy and be more careful about some of the consequences. I'm also very excited about a lot of the discoveries that are going on in, in the sciences broadly.

Mm-hmm.

And when we look at some of the, the, again, advances in medicine, the collaborative work that is going on in different areas to cure certain diseases, our ability to understand how we work and how different species work. I happen to be fascinated by all that we've learned about the octopus brain and how octopi— Okay.

We're going to have to chat about that.

I think there's just lots of incredible stuff going on in terms of understanding I just hope that as all that, that we continue to fund discovery and that as we think about applying discovery, that we do it responsibly. And, but, but there, there is a lot of very exciting stuff.

I love that. Okay. Well, we're definitely gonna have to touch on the octopus brain on our next talk. As we wrap up today's conversation, which I've so enjoyed, what advice would you have for the next generation regarding social and political change?

I think that I would, number one, don't run away. We need you. And please look up, like the movie says, look around, try to make sure that you are with not overwhelming yourself, but paying attention to the problems that are there. I think also I would go back to my core values. Questions, question, question, question, curiosity. A little bit of self-doubt, not too much, not, I'm not talking about not having confidence, but a little bit of self-doubt goes a long way. Openness, openness to thinking about how other people do things. Risk, being willing to, you know, take risk. Patience, patience, patience. And trust, trust yourselves, trust others. But trust also means mistrust, meaning. Don't just trust absolutely. Question. If you have the right kind of relationship, it means you can also question that relationship. And so I, I think all of those things and be careful of, how do I want to say this? Be careful about the, the, the loss of nuance in an attempt to simplify things. It's not that you don't want to do it, but we just, the problems we have in front of us. Can't be simplified. So defense of nuance.

I love that. Judy, thank you so much for joining Seed to Harvest today. I so enjoyed our conversation. And if you're listening and would like to connect with Judy, please feel free to email her at info@jlabsloc.com or visit jlabsloc.com for more information. And thank you so much for coming on. This was such a treat.

Thank you.

Thanks so much for tuning in today to Seed to Harvest. If you enjoyed this episode, be sure to subscribe wherever your favorite podcast listening platform is. I'll be releasing new episodes weekly, and if you have any questions or comments, feel free to let me know on Twitter. That's Paige Finn, Paige and then Finn with 3 N's. Thanks and see you again next week.