"We need to unlearn this imprisonment. Not disect and analayze it. Just completely unlearn it". - James Altucher, Choose Yourself
I’m reading James Altucher’s book, Choose Yourself. I’ve had the book for a couple months now, my Dad sent it over. He sends a lot of things over, some high quality and some low quality.
I picked up the book because this is one of those times our reading intersects. I’m a big fan of Altucher on Quora. Fact is, he writes in a compelling way. It’s conversational. It’s readable.
35 pages into the book and one message sticks: there are implicit societal rules that don’t exist. Well, they do exist, and most people follow them. 95% plus. But those rules don’t interest me. You don’t have to play by them. I’m certain this frustrates my Mom.
But I’ve learned that playing the same game as everyone else gets you where everyone else is going. Irking my mom isn’t intentional. It’s just that I’ve inherited a behavior from my father - her ex-husband. Mom, I’m a byproduct of both you; I’m a sinner and a saint.
The rule I’m most interested in breaking (avoiding) is having the wrong conversation. It’s not about challenging authority, it’s about choosing yourself.
Two weeks ago, I shipped a package overnight to Rhode Island via FedEx. The cost was $216 (and change). It arrived 15 minutes later than scheduled. I wagered a bet with our new hire that I’d get that money back. I was going to get a free lunch.
The process looks like this: * establish the dialogue * choose the conversation * reap your reward
You always need to hop on the first call. It’s where you address the issue. My cause was simple: I’m getting my money back. Twenty four hours after my shipment, I had this discussion:
FedEx Revenue Department: “But, there were weather delays. We can’t refund you” Me: “There weren’t weather delays in the states where I was shipping the package” FedEx: “I’m sorry sir, but we haven’t even cleared your payment yet”. Me: “Put in a request for refund anyways.” FedEx: “The best I can do is schedule an automatic refund one week from today.”
That’s about all you can get out of your first call. I’d dug in, and expected nothing more than a new case and logged call. My second call happened one week later. Lunch was still on the line!
Me: “Hi, have you refunded my payment for delayed service?” FedEx: “Sir, the package was 15 minutes late! We can’t refund your payment, we were experiencing winter weather. That’s our service agreement.” Me: “We’re having the wrong conversation. I’m not asking if you’ll refund me, I’m asking for the status of the refund. It sounds like you are starting the process, so create a refund and give me the transaction number.” FedEx: “Ok.” … Me: “I’m going to stay on the line while you enter this information. What is the transaction number?” FedEx: “I don’t usually stay on the line for this… … …but for you I will”.
They refunded $190 of the $216, that’s some 90% of the value. She’d given me the yes, and I was intent on closing it. I confirmed the deal a day later, and my bank account reflected the refund. The lesson is that my conversation was at odds with FedEx’s conversation. I chose the right conversation; I chose me. And, I’ll eat well for it.
Finding the right conversation is difficult. It’s also rewarding. This example demonstrated where both parties were at odds. My right conversation was their wrong conversation, and vice-versa. This example is effective as it highlights our ability to focus the dialogue. Often, though, you’ll realize that the most productive conversations are beneficial to both parties. Aligning goals and objectives is another, albeit important, topic.
Identify your conversation and choose yourself.
You start a new job at a startup. At first it’s great, there’s a high expectation of performance, you’re hustling, you’re bringing in new ideas and you feel yourself growing quickly as a professional. You work a lot of hours, often sticking around the office until 8-9 but that’s alright, you’re getting your shit done. You get a lot of emails, maybe 30-50 every day. You have anywhere from 5-10 different projects on your plate at any one time. You’ve been asked to manage a small team and so now you have 3 more people’s agendas to concern yourself with.
Slowly you become more responsive instead of proactive and reflective. You’re always on the move, trying to catch up. You fail to take the time to step back and formulate a system. You develop bad habits like constantly checking email, working long hours, eating lunch at your computer, focusing on 2 projects at once, etc… You sleep less, you stop working out, you don’t take breaks to clear your mind, you can’t separate your work from your personal time. Your energy levels start to fall, you feel on edge, you give off a negative energy and the people you work with and manage are feeding off that negative energy. Your performance starts to falter and you feel workloads and expectations piling up on top of you.”
As the book The Founder’s Dilemmas so aptly relates: there are knowns, unknowns, and unknown-unknowns. When sharing equity at a startup, or bringing on first hires, a thorough understand of this metaphor will pay long-term dividends.
Everything that you can clearly define is a term: capital investments, hours spent, patents, etc. You may even extend the definition a little bit: customers interviewed, sales made, research concluded, etc. The trick is to understand as concretely as possible what has been invested to this point by anyone and everyone.
How hard are you going to work to make this business a success? In the computer science world, a standard method for assessing performance of a component in the system is to consider how that component operates in terms of worst case, best case, and then average case. Metaphorically, let’s apply this to a human component (“worker”) in the system (“business”).
We might expect that at the very worst case, Timmy will contribute 15 hours/week to answering 50 customer service requests. However, the possibility exists that Timmy steps up, and in addition to his named duties, spends additional time building leads (Timmy recognizes that support begets sales; he’s actually a lead generator). However, it’s most probable that Timmy puts in the required time for customer service, and perhaps passively pursues leads (he brings attention to sales when a customer explicitly declares they want to spend money).
Timmy should be held accountable to this performance.
The Dunning-Kruger Effect states that an unskilled individual will likely overestimate their ability and competence (the Wikipedia article describes how to assess a candidate against their cognitive bias). The only way to work through unknown unknowns in contract negotiation is to have a framework in place for dealing with these situations as they arise.
Communication, understanding of the other person’s value system, adversity to risk, and other soft factors will come into play. More concisely: establish predictability by discussing the elephants in the room and the what-if questions.
So now we have a static picture that characterizes our past involvement and forthcoming investments. We can improve the system a bit more by making it dynamic: reconsider everything negotiated again in six months. In addition, protect your company from you and your partners by vesting against time and/or milestone cliffs. Fred Wilson goes into more detail in this post.
Your negotiating a long-term contract, so shortsightedness will significantly decrease the long-term viability of the operation. Remember, 100% ownership of a $0 business is worth less than 20% ownership of a $100 million dollar business. Your contract’s contingencies should reflect expected contributions, and the contract should be designed to motivate both parties. Consider realistic possibilities and put systems in place - what If a party leaves leaves or is terminated?
Build on terms and contingencies, plan for trust.
Marketing isn’t understanding who your customer is, but how to specialize your message to meet everyone’s needs. The question is not, “who is my customer?”, but rather how can I sell this product to a new customer segment.
Establishing a “needs matrix” is one approach (through a microeconomics lens) that can help you identify how to sell to a particular customer. An example of understanding feature/value (header column) and customer type (header row) for the iPhone 5 follows:
If you’re unimpressed by that quick-and-dirty analysis, that’s understandable. Actually, that’s expected. The width and depth to which you could build this matrix underscores the brilliance of Apple’s marketing department. The iPhone’s features provide different solutions to different people. This is the realized promise software provides.
Let’s consider a practical example of this approach. Local Music Inc. is our business and we’re going-to-market. Our premise is that we’ll rent CDs of local musicians for 99¢/mo. If you want to buy the CD, just pay $5 and you can keep it. Also, LMI isn’t concerned about piracy (a creative railing we’ll use to structure this study against an obvious edge case). We’ll need to choose business to business (B2B) sales or business to consumer (B2C) sales. The former is a harder sale but nets a great contract. Let’s go with that one ->
LMI targets the local Marriott saying, “your occupants want to wake up in the morning to the sounds of Austin”. In this contrived example, Marriott understands that playing local music is kitschy, but provides local-credibility (a technique lending to its consumers’ natural supposition of high-end establishments). Also, Marriott obviously has zero interest in selling these $5 CDs to it’s clientele: netting $1 in revenue sharing wouldn’t even pay for the overhead of sending a maid up to replace the CD. We can say that Marriott is biased towards rentals and away from sales.
Naively, LMI believes it has found its niche, and it’s sales team has a repeatable sales template and reusable marketing materials to work with. Unfortunately, the artist won’t get a payout from sales with LMI’s strategy. We must focus on diversifying our customer base to increase the benefit for the musicians.
We’ll go ahead and conclude the study. In conclusion, LMI should consider multiple customer segments. A local record store, for instance, is incentivized towards sales but wouldn’t add much to the branding or broad-exposure needs of LMI’s artists. Fitting your solution around alternative customer problems lays a pathway for growth and protection.
Remain vigilant against human’s natural lazy bias, or be content exploiting a temporary arbitrage opportunity.
If you are in an accelerator, don’t be afraid of mentor whiplash. Don’t view it as a negative. Embrace it. Build muscle around it. Learn to process it. Filter out the noise. Run experiments on the stuff that seems valid to confirm or deny it. Make your own decisions!
I think Brad is close, here. However, building a company isn’t about fitting the curve, or managing a differential equation. Entrepreneurs, especially when starting out, are encouraged to maintain a huge bias towards a/b testing; a means to an end but in no way will this strategy move you from the hill you’re on to the mountain of success you seek. As Paul Graham put it:
A lot of would-be founders believe that startups either take off or don’t. You build something, make it available, and if you’ve made a better mousetrap, people beat a path to your door as promised. Or they don’t, in which case the market must not exist.
I call this enigma the reference blind spot.
If building a company were a science, like a scholar of econometrics would have you believe, you’d certainly miss the forest for the trees. The art of management is the ability to comprehend and roll up large amounts of information to see through your bias into reality. That requires reflection not projection. Put another way, you need the mental framework to assess decisions in an instant, and the confidence to execute through your version of reality.
Your investors, partners, or bosses have a bias, and no startup has the capacity to strategically test seven alternative theories. Applying a mechanical processes to strategic input is guaranteed failure.
Your business is a canvas; playing out valid mentor strategies is analagous to Mozart letting the second chair french horn, and second chair piccolo write their parts to a symphony.