Why I would never have invested in Columbus
Why most businesses get it wrong
There was no justification for investing in Columbus' first voyage to the New World. Honestly, it was a terrible idea. Which is why it took the best part of forever for him to get funded. In a previous life, I used to recommend prospective projects on their business case - and I would never have funded the Columbus project. I am wondering what this implies, mostly about me.
As I said, some years ago I worked at the project 'gateway' for a large company. Every project of any appreciable size had to go through the project office to get approval and funding. And that meant technical analysis (hence me) and it meant a business case (often also me).
I had a theory - business cases should be scientific.. That is they should contain falsifiable assumptions and predictions. If you then failed to prove why it could not meet its own predictions, it might be worth a go. 
One day I heard the comment "Give that to Paul - if you want to know why a project won't work he can find a reason". Ouch. Double Ouch.
You see I was being negative. Just because the pet idea of the corporate darling is sure fire dog , does not make it acceptable to point out how much money it will lose. Doing so is a sure sign of evil and badness in most businesses, staffed as they are by the eternally optimistic.
Either way the idea is to distinguish between Wrong and Not Wrong. 
In short, I think business cases should be Science. Entreprenuers do the experimental stuff, business analysts do the review of literature.
Invest in Colombus? No Way.
In fourteen hundred and ninety-two Colombus sailed the Ocean blue.
And when he did he proved his critics wrong, the Earth was round not flat and discovered a new continent and riches for all.
Well, actually, thats not true. Well the bit about sailing across the Atlantic and discovering America is obviously. And let's face it. Doing it took skill and big balls. But the bit about proving the world was round, and his critics wrong. Well for that part we need to step back a bit.
It is the late 1400's, Western Europe is rediscovering trade and scientific links with the rest of Europe and the Middle East, and our own body of literature is beginning to expand past that left behind by Socrates and Aristole. (It was 'safe' to refer to Aristole, refering to great Muslim scientists like Al-hazen  brought you attention. And no-one had heard of Shen Kuo 
The Earth is round.
Science takes a while to build up a head of steam (literally and figuratively I guess), so the best estimates on the size of the planet Earth were based on two long dead scholars. Erastothenes (300BC) and Ptolemy (150AD). To cut a long story short they both used simple but clever means to estimate the size of the planet  and got two conflicting answers - between 24,000 km and 40,000 km (the latter about 24,000 miles - an amazingly accurate measure from Erastothenes.)
Now, Portugal and Spain are at the western most part of Europe, and to get goods from China, where all the acton is in the Middle Ages, you have to pass through, well, everyone, and everyone takes a cut.
Now if you could sail to China, all those spices and silks would not cost a fortune when they got back to court. So everyone in Spain wanted a good idea on getting to China, of which there were two. Sail down the coast of Africa, round the Cape and back up. Unfortunately no-one had done it and got back. Alive that is. Or you could sail west till you hit China. Simple, apart from the ocean in the way. The big, stormy ocean that was somewhere between 8 and 14,000 miles across, and ships averaged ohhh, about 5 miles an hour. No ship could carry enough provisions to last that long.
I envisage the conversation at the court of Ferdinand and Isabella something like this.
- Grand Advisor : Well, that went well.
- Not-So-Grand Advisor: What did?
- GA: defeating the Moors and throwing their Muslim ways out of Spain and across the waters to Africa.
- NGA: Yeah, very nice, think we might keep their Architecture and science though.
- GA: well of course, no point losing indoor plumbing is there, not at my age. But The Peace Dividend is going to go down well. The new Alhambra palace is looking very fine. Very Moorish too.
- NGA: Good plumbing, I believe.
- GA: True, True.
- NGA: And what about this Columbus guy? Still hanging around Queen Isabella is he?
- GA: Like a limpet. She does not mind, if you catch my drift.
- NGA: Aha, yes, wink wink. Say no more.
- GA: Luckily the man is as mad as a coot. Wants to sail to China, and if he discovers anything on the way wants to be made King of it.
- NGA: But China is miles away. He'll never make it.
- GA: Yes, the Navy is very definite on that point, you cannot sail 12,000 miles without reprovisioning. They would all be dead in weeks. However he has got an argument that Isabella thinks is a clincher.
- NGA: Oh?
- GA: The Bible says that 6/7ths of the earth is land and the rest ocean. So the astronomers and admirals must be wrong, the ocean west of us can only be a few hundred miles at all. Be like nipping down the road for some fags. Of course you cannot argue with the Bible.
- NGA: The Bishops make a very convincing case on that part. Often with sharp red hot debating tools. You could just let him go.
- GA: Are you crazy, throw away good ships and men, just to keep some smelly sea captain from bugging me.
- NGA: But if he persuades Isabella or the Bishops...
- GA: Maybe a couple of ships, small ones.
A little later ...
- GA: Well that went badly.
- NGA: What did?
- GA: Letting Columbus sail off like that. Who knew he was going to bump into a damn great island in the middle of the Ocean.
- NGA: He says he made it to India.
- GA: My bottom. He was not gone long enough, and he brought back damn all silks. But now we are stuck with him preening round Court, and demanding to be made King of Wherever-island. King Ferdinand is more than a little put out by that.
- NGA: What are you going to do?
- GA: Firstly he ain't getting the mineral rights or any other damn rights. He can go and steal stuff like the rest of us. Which is what we are going to do now. I am hiring the best, the meanest, the hardest bastards the Admiralty can put together, go over there, take what they can and bring it back, alive or melted down.
- NGA: sounds like a plan.
- GA: Too right.. I need an advert sent out, so write this down,
"I want rustlers, cut-throats, murderers, bounty hunters, desperadoes, mugs, pugs, thugs, nitwits, halfwits, dimwits, vipers, snipers, con-men, Indian Agents, Mexican bandits, muggers, buggers, bushwackers, hornswagglers, train robbers, shitkickers and METHODISTS!!!
- NGA: Yes, sir.
I beleive these are verbatim transcripts from original diary sources. Honest.
But the general gist is true - Columbus was a (brave, crazy, skilled) nutter who just wanted to sail west, and he got incredibly lucky. But after he got lucky, everyone else got serious. However, no sane, informed person would invest in that original voyage. It was a suicide mission, and pretty much everyone knew it.
My idea of business investment analysis is rather like a review of literature. No new empirical evidence, but a clear attempt to break down the proposal using known facts. After the central premise has been shown to be not wrong should you start to think about fit, people, enthusiasm etc. I hope people like Warren Buffet take a similar approach - I call it scientific due diligence. But then, I might just be a negative git.
|||Some say it is easiy to be negative about business ideas. Thats because most business ideas are rubbish. Have you seen Dragon's Den?|
|||(ie you want to bring in 100 million in the first year, from small businesses, at a rough spend of 10/month. So thats pretty much every business in the UK, will sign up for your service in 12 months. Hmmm, perhaps we can look at the average launch figures for these well known services ...). And your marketing spend, oh organic growth. Seriously the number of bad ideas floating round the average large company is legendary. People are protected from the real world disproving their ideas, but they still feel they need a 'big idea' to carry around with them to prove they are thinking about the company in a positive, actionable manner. Its like armour. We are a little dysfunctional in our post-industrial society aren't we. I'm not bitter.|
|||Let me link to that later.|
|||Ibn Al-Hytham (Alhazen) - lived about 1000AD in Basra and Cairo. Was easily the Isaac Newton of his day (conincidentally doing pioneering work on optics, laid out scientific method (and is, like Newton, someone who historians look back on and say 'hey he did it first'. It does not quite work like that, but the guy was an amazing polymath.) He also has an amusing life story, which is basically turning up at the Caliphs palace, saying "Any decent engineer could regulate the Niles flooding", he was ordered to go do so. Ten minutes surveying the Nile and he realised he did not stand a chance, feigned madness and was put under house arrest for half his life, in the process focused on producing stunning new science, which the West promptly ignored for Aristotle, who thought Eagles had three testicles.|
|||Shen Kuo. Chinese Scientist, SOng dynasty, roughly contemporary with Alhazen. His main work was compasses, and the declension between pole star and magnetic north (making navigation sooo much easier). This guy had more political savvy and actually joined the Chinese government as a junior minister. I mention these two as examples of scientists at similar points in world history, but also to show that Europe still had to escape from the thrall of the Philosopher - the clever bloke who would be doing science if only a) the scientific method was there (empirical evidence to demonstrate a hypothesis is not wrong) b) there were other scientisits to argue with.|
|||Erastothenes and the Well in Syrene. Its a long story. He was a contempory of Alexander the Great, and he works out that as the sun shines directly down a well in Syrene (Aswan) and illuminates the bottom, the sun must be directly overhead. This is a common sight if you live in the Tropics. In Alexandria the sun hits the well at an angle, a quick measure with the calipers and he has the angle at the centre of the Earth, between Alexandria and Syrene - 7.2 degrees (a convenient 1/50th). Asks a camel driver, how far is it to Syrene, who says 5000 stadia. So the circumference of the earth is 250,000 stadia. Depending on which stadia is measured, Erastothenes got the Earth's circumference to within 1%. In 300BC. Of course everyone knew the Earth was round when Columbus sailed. The damn round moon is big clue. It was just how round is it that was the problem. And if there was any land out there undiscovered of course.|
|||With thanks (and apologies) to Mel Brooks, Blazing Saddles and the inestimable Harvey Korman.|