Imagine a world where there is no market friction or distortions. All resources have been allocated to their highest valued use. If for example, lumber has higher (market) value in the construction of new suburban homes than it its alternative use in the renovation of derelict urban structures, then the invisible hand of the market will have recognized this and so directed the use of the lumber accordingly. By imagining such a…resolved world, we can better understand both the meaning of “value creation” as well as the role both divergent and convergent thinking play in its creation.
For our purpose, we’ll define entrepreneurship as the identification and exploitation of opportunities to reallocate resources in such a way as to create greater social satisfaction, and therefore greater market value. But in the absence of some glaring market inefficiency, how does the entrepreneur identify such an opportunity? By imagining a different world. Or better, by initially imagining many possible different worlds. In our above world, lumber has two primary uses, both related to home construction. But perhaps there are alternative worlds where lumber is once again also valued in the construction of luxury yachts, or office furniture, or totems. But without this ability to see the world as different than it is, it is impossible for the entrepreneur to do any better than simply correct for the occasional deviation from some general market equilibrium.
The terms convergent and divergent thinking originated with the American psychologist JP Gildford in 1950. Convergent thinking, or problem solving, is application of critical thinking to discern from a set of possible solutions, the single one best solution. Divergent thinking, by contrast, is the effort to determine as many possible potential solutions as possible. So convergent thinking reflects our analytical, logical, verbal self. Divergent thinking our creative, non-linear, non-verbal self. Convergent thinking – a brick is used to build a building. Divergent thinking – a brick may also be used to break a window, hold down a stack of papers, etc.
If you want to live your life in a creative way, as an artist, you have to not look back too much. You have to be willing to take whatever you’ve done and whoever you were and throw them away. – Steve Jobs
Back to our example, the entrepreneur who is practiced at divergent thinking can see beyond the limits of our resolved market space and instead imagine many other potential allocations of resources, worlds, that might have higher overall social satisfaction. By redirecting resources from their current use to this now higher valued use, our entrepreneur “creates value” both for society and themself.
But divergent thinking alone is insufficient. Which of the many possible worlds is the best possible world. Which world creates the most exploitable value for our entrepreneur? Convergent thinking is the application of critical thinking in the form of analytical techniques to identify this one best outcome. It would be irresponsible, and likely ineffective, for our entrepreneur to simply begin operating a wooden yacht company, for example, without due diligence to determine whether such a product is really desired by the market.
I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things. – Steve Jobs
In the real world, there always exist market distortions in need of remedy. And so, many entrepreneurs are quite successful due solely to solid work habits and convergent thinking. But the most compelling and interesting examples, for example the original iPhone, represent the pairing of tremendous creativity, divergent thinking, and solid business acumen, convergent thinking.