Accumulated Accidents

Unwinding society’s suboptimal defaults

The idea of accumulated accidents challenges traditions and asks whether they really do represent an “ideal expression of society” (i.e. sacred institutions) or whether they are simply a series of accidents that can be unwound in the right circumstances. The unwinding part gets my attention because it often presents a significant new opportunity: Creative destruction in other words.

Dave Bujnowski, How the Pandemic May Change Things

From home ownership to health care to how we communicate, the “accumulated accidents” that lock societies, companies, and individuals into their default behaviors are often overlooked, causing a misunderstanding of why things are the way they are as well as how we should think about forecasting change going forward.

Accumulated accidents, like those that dominate the U.S. health care system, are typically born out of situations where the resolution of one (often serious) issue spills over unexpectedly and creates perverse second order incentives that build on themselves over time.

In 1942, with so many eligible workers diverted to military service, the nation was facing a severe labor shortage. Economists feared that businesses would keep raising salaries to compete for workers, and that inflation would spiral out of control as the country came out of the Depression. To prevent this, President Roosevelt signed Executive Order 9250, establishing the Office of Economic Stabilization.

This froze wages. Businesses were not allowed to raise pay to attract workers.

Businesses were smart, though, and instead they began to use benefits to compete. Specifically, to offer more, and more generous, health care insurance.*

After 80 years of mounting costs and stagnating quality, Americans know that the health care system doesn't work but face a massive collective action problem in trying to solve it.


Power to the People

Over time, the power of defaults compound and vested interests become entrenched by hoarding knowledge and ramping up informational asymmetry.

Unwinding the accumulated accidents that power these default behaviors and incumbent institutions requires a significant catalyst — often multiple catalysts — that level the informational playing field and create new space for innovation to break through.

These informational catalysts tend to come in three forms and are layered on top of one another the more deeply entrenched default behaviors and institutions are in a given system.

1. Business Model Innovation

Significant breakdowns in the status quo occur when a novel way of capturing the emergence of a new "atomic unit" of economic value is identified. In some cases, incumbents dismiss the emerging pool of value as too small or otherwise economically unattractive.

In cases most often tied to the breakdown of accumulated accidents, incumbents are actually structurally inhibited from responding seriously to emerging competition, lest they invalidate the entire (false) narrative that their entrenchment depends on.

The companies founded by Rich Barton — Expedia, Zillow, and Glassoor — are prime examples of business model innovation driving transparency and the ultimate breakdown of accumulated accidents.

Kevin Kwok described this strategy in his deep dive into Barton's career and data content loop playbook:

Rich Barton’s companies became public Schelling Points. They create common knowledge in their industries from information only middlemen had access to before, from public-but-hard to aggregate data, or from information collected from users themselves. These intermediaries, whether brokers or travel agents were misaligned. They controlled what information was shared with the public, but has an interest in withholding it. Instead of pushing increasingly more and higher quality information to the public, they maintained the status quo.

2. Technological Shifts

Business model innovation layered on top of a technological platform shift has the potential to break down even more powerful defaults.

The most recent and well-known example of this might be the rise of Uber and Lyft. By riding the iPhone wave, which brought more accurate GPS and opened an entirely new addressable market, the companies were able to unlock unprecedented access to information (for both riders and drivers) via a marketplace and break down one of the most corrupt and regulatory protected industries on the planet.

Their emergence and eventual dominance even prompted many to reconsider their relationship with car ownership, perhaps one of the most deeply embedded defaults in American society.

3. Daily Active Crisis

But unwinding an accumulated accident as deeply embedded as personal car ownership takes more than just the emergence of new business models and technology platforms.

To truly break down the most entrenched societal narratives, we must go through a crisis. And not just any crisis. Only a full blown, Daily Active Crisis— coupled with go to market innovation and technological platform shifts — can truly catalyze turnarounds in areas where billions of life and trillions of dollars are at stake.

This partially explains why transformation as it relates to clean energy and climate conservation has been so slow to gain a global and pervasive foothold. The crisis created by climate change, while continuous and severe, rarely reaches the level where it dominates the daily conversation for more than a few news cycles in a row.

The pandemic situation, on the other hand, has overtaken the daily news cycle as well as every aspect of the economy and our daily lives.

It is, perhaps, the first Daily Active Crisis the world has ever faced.

As a result, the accumulated accidents that have held up narratives in areas like remote work, distance education, and urban infrastructure for decades are rapidly deteriorating even in lieu of new technological or business model innovation.


Our Largest Accidents

This brings us back to health care.

The deepening of our Daily Active Crisis has been met with amped up investment in technological innovation across the economy, most notably (unsurprisingly) in areas related to human health.

Until the onset of the pandemic, the arc of health care consumerization had been relatively fruitless. Technological progress brought us things like cheaper sensors and the ability to connect with health experts around the world while the internet made it possible for companies to go direct to consumer with certain medicines and therapeutics.

Still, this progress did little to bring any real power to the people.

Incumbents of all stripes were able to hide behind the complexity of a system gathering steam since WWII (possibly the only other global Daily Active Crisis on the scale of what we are facing down today) and lean on society’s status quo bias to build a seemingly insurmountable information advantage.

This has, of course, changed.

The narratives that made it possible for incumbents to limit interoperability, obfuscate true costs, and protect profits and growth at the expense of effectiveness have been abandoned by force.

With rapidly relaxing telehealth regulations and the realization that a material portion of what we were told had to be done within the health system can be tackled more effectively and less expensively by external innovators, new defaults are emerging.

The combination of these three forces — crisis spurring technological innovation and providing carte blanche for new business model development — creates what may be a once in a lifetime opportunity to unwind the most deeply embedded accumulated accidents holding back human health, happiness, and opportunity.


Thanks for reading! I’d love to discuss this post with you here in this thread on Twitter — disagreements, other ideas this prompts for you, etc.

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