I had the pleasure of attending Eric Ries's "Lean Startup Strategies" Skillshare talk
last night. I greatly enjoyed
, and seeing him in person highlight a lot of the key points and bring up many additional examples was really useful.
Below are some of main takeaways (some are highlights of his main book points and others are more supplementary).Intro
Part 1: Vision
- Started out as a programmer
- Programmed amazing technology that nobody was using
- Entrepreneurship is a domain of extreme uncertainty
Part 2: Steer
- Entrepreneurial management (photo montage that's usually skipped over in movies)
- Different from general management
- Lean manufacturing inspiration
- Difference between value and waste
- Whose eyes do you use to evaluate the product line (when don't know your customer yet)?
- Goal of a startup: figure out the right thing to build (what customers want and will pay for) as quickly as possible
- Was afraid to launch IMVU, but then no one even downloaded the product
- Even though used agile, had to throw away tons of code
- "Learning" is oldest excuse in book when fail
- Could've learned the same lesson with 1 landing page or 1 IM network connected instead of connecting to all 6
- Pivot = a change in strategy, not a change in vision
- Change in product = optimization
- Startup = human institution designed to create a new product or service under conditions of extreme uncertainty
- Validated learning vs. plain learning
- Reality distortion field (entrepreneurs and sociopaths)
- Cohort metrics
- Spent $5/day; bought traffic from Google at $0.05/click
- Consistently saw 1% conversion rate
- Value vs. waste: only things that contribute to learning are valuable
- Making money, press, awards: not valuable, just consequence of learning
- Audacity of zero: easier to get resources when never tried to get users
- From alchemy to science: experiment to test which strategy makes sense and which is crazy
- Scientific method vs. product astrology
- Eric's law of Google Analytics: no matter how bad you're destroying your company, there is at least one graph in Google Analytics that is up and to the right.
- Goal: not best analytics, but best product (and learning to get there)
- Split testing
- Rolling out lean to team: incubate in one small division then roll out to entire group
- Add "validated" column to scrum board
- Kanban: capacity constrain size of each bucket
- Will be painful because team will grind to a halt until everyone gets validated learning; will instill culture of only seeking validated learning
Part 3: Accelerate
- Build-measure-learn feedback loop
- 2 hypotheses: value hypothesis, growth hypothesis
- Beyond "the right place at the right time"
- Genchi gembutsu (go and see for yourself)
- Basing strategy decisions on firsthand understanding of customers
- Minimum viable product: not smallest product imaginable; just the fastest way to get through build-measure-learn loop
- Video MVP (took 2 years to build Dropbox's magic technology)
- Concierge MVP
- Little fear to launching MVP
- Try your best to get your idea stolen; no big company will do it
- innovation accounting
- It's better to have bad news that is true, than good news that we just made up.
- in general management, forecasts and operating plans work because they have long and stable operating history.
- 3 learning milestones: establish the baseline, tune the engine, pivot or persevere
- "10% of visitors signing up for free trial" should not be in 2 point font in Appendix B of business plan; it is a leap of faith assumption; it should be a red banner in the office saying, "If 10% of our visitors do not sign up, then our company will cease to exist."
- Metrics: actionable (showing cause and effect), accessible, auditable
- Innovation accounting leads to faster pivots
- Pivot = strategic hypothesis
- Small batches in entrepreneurship
- Sustainable growth: new customers come from actions of past customers; when you have to buy customers, you trade equity (permanent) for growth (transient)
- Growth through word of mouth
- Growth as a side effect of product usage (viral or publicly shown good)
- Engines of growth: sticky engine, viral engine, paid engine
- Product/market fit: binary; if you're asking if you have it, you don't
Less than a year after my grandfather Izya passed away, my grandmother Stasya followed her husband to be with him in the next life as well. I wanted to write a quick note in her memory and share what lessons (positive and negative) I learned from her.Bio
My grandmother was a "gold medalist" in school and became an economist and industrial engineer. When she was little, her whole family was sent to one of Stalin's concentration camps, where she suffered injuries that stayed with her all her life. After the war ended, she returned home to a small city in Ukraine and started her own family.
She was always proud of how she could stay home, cook, and provide a warm home for her family. In this way, she was very, very traditional (but had a very strong character). Talking to her was sometimes like answering a police deposition (though the daily subjects were what I ate and how many pieces, what clothing I was wearing and its thickness, and what time I would be home at the end of the day).
When she moved to the United States, she learned English, and while she tried to be as active as she could, her medical problems kept her mostly at home, and so I feel she never quite adjusted to American life. For example, she never really understood why people like to eat in restaurants (What, your food at home is bad or you don't like my food?).
Her biggest character trait of all was caring (sometimes to a frustratingly high degree of detail); she loved and cared for those around her and needed to know everything about them (and worried about every detail of their lives, even when she could do little about it).Lessons
I learned a number of things from grandma, both examples of behaviors I wanted to replicate and also examples where I wanted to be different. Even though I felt a generational and cultural gap between me and her, I knew that I could still learn a lot from her, even despite (or perhaps directly due to) these differences.
- Fearing the unknown or new things. This is logical given her experience with the camps. But for myself, I want to feel like I can face uncertainty and am open to new experiences.
- Huge value on physical warmth and food (she always asked what I ate). I agree with this but not with the same level of importance my grandma attributed to it.
- The importance of education (grades, tests). I definitely continue this focus.
- Lots of questioning and deep inquiry. She really cared and always wanted to know more. She had a very good memory for my friends' names and constant awareness of the locations and health status of everyone in the family. Sometimes her questions got to be too much, but I think I could learn to be a bit more like her in making sure I stay up to date with the critical details of those around me I care about.
- Tradition and careers. She definitely had a very narrow range of career choices in the Soviet Union and carried those over to the US in thinking that the only honorable professions are in medicine and law. Business and engineering didn't seem like "professions" ever to her, and I found myself explaining to her my work and what "entrepreneurship" and "computers" were all about almost every time we spoke.
- Little individuality or aspirations. I felt like my grandma was always "on the side" and had few hopes and desires for herself; she always focused on others and on family and almost never expressed her own wishes. I wonder how she was different growing up. Was this due to her decreased social interaction here? Was this due to her aging? I always felt bad about this and wanted to hear her own hopes and some spark of life there inside her. I hope I can maintain that in myself as I age.
My grandmother was a very special person, and I will miss her greatly.
Having enjoyed the author's previous books, I decided to check out Great by Choice
by Jim Collins. The audio edition was read by Jim, which I always enjoy, since I get to literally hear how the author intended the book to be read. The audio edition also included a nice FAQ section comparing this book to the others in the series. I personally found the overall style of the book (study looking at great companies against comparison set and picking out various character traits that help explain differences) very similar to the past books. The examples in this book and study were interesting, though I felt there was not enough justification given for the choices the authors made in coming up with their results or conclusions. I understood the methodology and company selection, but I didn't understand how they went from data to conclusions in picking out the behaviors they teach in this book.Ch. 1: Thriving in uncertainty
Ch. 2: The 10x companies
- Began research for book in 2002 after 9/11
- Some companies thrive by 10x better than index in uncertainty
- Southwest Airlines did better in past 30 years than any other stock in index
- Extreme environment
- In this book as compared to the others, the cases were selected by the extremity of environment (not just great companies in general)
- Must over prepare and practice for every emergency and train hard
- South pole adventure story
- Different behaviors between great company and comparison in same crazy environment
- Embrace control and non-control
- Formula: Fanatic discipline + empirical creativity + productive paranoia
- Level 5 ambition
- Progressive Insurance
- Progressive decided to not publish earnings guidance; instead just monthly financials
- Consistency of action and values
- Instead of looking to others, rely on your own observation and evidence (similar to lean's "get out of the building" and "see for yourself" principles)
Level 5 ambition
- Constantly believe events will turn against them when everything going well
Ch. 3: Twenty mile march
- Zany personalities
- Ferocity of will
- Not about themselves but about goal
Ch. 4: Fire bullets then cannon balls
- Stryker vs. USSC
- Discipline in sticking to one concrete plan in good and bad times instead of big shifts in energy
- Their goalw as 20% consistent growth no matter what (including never growing too much in any year)
- Need both lower and upper bound
- Hit step-wise performance markers consistently over time
- High performance in difficult conditions
- Hold back in good times
- Southwest: small deliberate steps out of initial TX geography
- Standard of consistent performance: profit every year
- Elements of good 20 mile march: 7 characteristics
- 1. Use performance markers of lower bound thresholds
- 2. Self-imposed constraints and upper bound
- 3. Tailored to the enterprise and environment
- 4. Lies within your control to achieve
- 5. Has a "goldilocks" timeframe (just right)
- 6. Designed and self imposed by the enterprise
- 7. Achieved with great consistency (not intentions)
- Progressive Insurance: "Combined Ratio" target for insurance
- Like a company law; rigorous standard to be achieved every year for many years
- Cannot abandon goal due to events
Ch. 5: Leading above the death line
- Southwest airlines literally copied PSA
- But PSA died
- No connection between innovation and 10x
- Need creativity and discipline to be 10x
- Fire bullets to figure out what will work
- Bullet = low cost + low risk + low distraction
- Just meant to find out if will work (sounds like lean...)
- Then fire calibrated cannonballs
- Empirical validation
- Apple getting on track
- Increased discipline and testing
- Not about innovation or predictive genius
- Just need to be above innovation threshold
Ch. 6: SMaC
- Productive paranoia
- Pack extra supplies
- Don't break protocol/discipline
- Build cash reserves and buffers to prepare for bad events
- Large ratio of cash to revenue, assets to liabilities
- Bound risk
- Death line risk: could kill
- Asymmetric risk: downside bigger than upside
- Uncontrollable risk
- Time risk
- Zoom out then zoom in
- Not all time in life is equal
- Some moments critical
- 10x people respond in those moments
- Prepare for black swans
Ch. 7: Return on what
- Southwest's 10 Points by Putnam
- Very few changes over 20 years to recipe
- Apple fell behind when changed from original recipe; when came back, company turned around
- Durable operating practices
- Role of luck (first study to examine this scientifically)
- Luck event: 3 tests
- 1. Some significant aspect independent of key actors
- 2. Significant consequence
- 3. Unpredictable
- Luck comes in form of "who"
- Authors coded 230 luck events for data
- "Return on Luck"
- Taking advantage of luck events based on triangle of behaviors
- 4 combos
- Good luck, good behavior = Return on luck (Bill Gates)
- Good luck, bad behavior = Squandering of luck (AMD's poor execution)
- Bad luck, good behavior = Great returns on bad luck (Progressive Insurance turnaround from bad law/Prop 103)
- Bad luck, bad behavior = Poor returns
- 10x companies credit luck for success, themselves for failure
- Focus on what you do and keeping discipline, not hopeless resignation that outcomes just about luck
- Greatness is a matter of choice, not circumstance
I recently read the book Games People Play
by Eric Berne, which was originally published almost 50 years ago. It has to do with the social/psychological "transactions" that are so common in everyday interactions in personal and business settings. Though some of the example dialogue and situations were dated, almost every single "game" described is still "played" today in some form.Introduction
- Transaction analysis
- Stroking: recognition one person gives another, essential for physical and psychological health
- Ego states: Parent, Child, Adult
- Game analysis: con + gimmick = response -> switch -> payoff
- Complementary vs. crossed transactions (ego state combos)
- Advantages: internal psychological, external psychological, internal social, external social, biological, existential
- Alcoholic (how bad I've been, self-castigation)
- Debtor, Try and Collect, Creditor, Try and Get Away With It (Why Does This Always Happen To Me)
- Kick Me
- Now I've Got You, You SOB
- See What You Made Me Do
- Frigid Woman
- Harried (Housewife)
- If It Weren't For You
- Look How Hard I've Tried
- Ain't It Awful (gossip)
- Why Don't You -- Yes But
- Let's You And Him Fight
- Rapo/Kiss Off
- The Stocking Game
Consulting room games
- Cops and Robbers
- How Do You Get Out Of Here
- Let's Pull A Fast One On Joey
- Greenhouse (psychiatry)
- I'm Only Trying To Help You
- Wooden Leg (plea of insanity)
Significance of games
- (Benefits outweigh costs of complexity of motivations.)
- Busman's Holiday
- Happy To Help
- Homely Sage
- They'll Be Glad They Knew Me
- Passed on from generation to generation
- Raising children = teaching them what games to play
- People pick as friends people who play the same games.
- Though they serve various functions, better to communicate in Adult-Adult ego states and avoid games (though very difficult)
- Autonomy: awareness, spontaneity, intimacy (hard to escape patterns learned in childhood from interactions with parents and games but can be liberating)
- Aspiration statements
- Work vs. family
- CEO must be role model of values; CEO who would put his own stamps on personal mail sent from the company.
- Environmental regulation/company stance issues
- TV/advertising/press ethical issues
- Moods affect stock market (clouds, weather, lunar phases, festive occasions, degree of coldness)
- Cloudy days, cold days, DST transition and coming back to dark house all give negative results
- Weekend effect (markets down Monday; people upset coming in to work after weekend)
- People behave weird around full moon days (lunatic): negative effect across all international exchanges
- Reversal of large stock price decreases over next 3-4 days
- Sell in may and go away; Halloween indicator; November to May has stronger growth; huge discrepancy between winter and summer months returns; upward momentum starts in October (Winter bonuses; gone fishing/summer vacation/kids distracting)
- If a nation loses World Cup game, the day after the stock market goes down.
- Content analysis for investor mood; investor overreaction and rebound
- Zero predictive content in Cramer's recommendations; his role in society: validates people's opinions; people like to think their environment is predictable.
- Bad ticker symbol or name (.com in name increased market cap when was in fashion; if take out of name when out of fashion, market cap goes up); names matter (in efficient market, shouldn't matter).
- Wrong/right MCI/MCIC; wrong MCI moving with right MCI
- Socionomics: social mood determines social events (not other way around)
- Correlation between stock market and fashion (hemline indicator, music genres moving stock market up)
- Joint venture deals
- Equal footing important
- Trust but verify
- Use milestones
- Non-competition clauses
- Negotiate buy-sell, default provisions up front
- Information rights
When I was young, I enjoyed the Harry Potter
books (as did most people), and so I had heard about Lev Grossman's magic-related series and decided to give it a try. It was the first two books of fiction I've read in several months, and it was a welcome break from my normal flurry of business, technology, psychology, and philosophy books.
From my reading, the books are similar to Harry Potter
in that they involve people learning and doing magic, but they involve a much more modern setting and delve a lot more deeply into the human relationship issues involved with growing up as a magic-learning teenager in the US. I'd say the book was way more about people and relationships than magic. (I was honestly more interested in action and magic, but the relationship stuff at least made me feel like I was learning something valuable rather than simply being entertained.)
The first book in the series by Lev Grossman was The Magicians.
I was irked that it literally talked about Harry Potter in the text; it's like it was make a commentary on itself in-line. At least it was acknowledging something that should be explicit. While the book was enjoyable overall, I didn't care too much for the modern, teenager-type language, certain jokes and swear words, and at times the general levity with which it's written. Maybe I'm getting too old, but I guess I'm used to "books" using proper, nice language that elevates the rest of the language we use elsewhere; if books fall to match colloquial language patterns, that seems like it can cause a bad downward spiral and lessens the educational value of reading.
While I would've wanted way more magic and adventure (the story didn't feature as much as I expected), I did enjoy the human sides of the story, including the lessons related to trying to run from yourself for some external goal and the problems that creates.
The second book in the story, The Magician King,
was honestly more of the same (including literally repeating certain plot elements). I believe the second book had better fame recently, so perhaps this was on purpose to attract a wider audience and get them up to speed.
I didn't particularly enjoy certain plot twists that seemed quite random and repetitive (like moving between worlds and coming back for little reason and little plot movement forward). I also didn't like the random introduction deities and all-powerful beings that completely change the plot; it was too much deus ex machina
for my taste.
The ending was abrupt and didn't really provide answers (maybe this leaves room for another sequel?).
Overall, I did enjoy reading the books and can recommend them, especially if you're at all interested in magic or fantasy. I guess I had different expectations for them, but that's fine too.
The high holydays this year have passed, and it was a time of deep introspection and re-thinking of life for me and my family.
I particularly enjoyed hearing my rabbi
's sermon this year, and I wanted to share it with anyone interested. It's a lot more wisdom than religion, and I think it has something for everyone. Below are my main takeaways from it; the full speech can be read here
- Life isn't always fair.
- Whatever befalls us, life is still good.
- Life is short; cut your losses earlier.
- Let go of your desire to accommodate difficult people or situations.
- Only do what enhances you spiritually and morally.
- The time to plan for retirement is when you're young.
- Develop your passions and interests.
- Make peace with your past so it won't confound your present.
- One doesn't have to win every argument.
- Love the people close to you.
- Don't compare your life to anyone else's. You already have all you need.
- Who is happy? One who is content with his own portion.
- If you can't publish what you want to say or do, don't say or do it.
- You don't need to publish all your thoughts -- no need to over-share.
- Don't gossip. Guard your tongue.
- Speak the truth but only when you know you can be effective and only when it won't do harm; otherwise, stay quiet.
- Don't procrastinate seeing your doctor. Eat less and better; exercise more.
- Carpe diem
- Joy and happiness come from humility, gratitude, and generosity.
- Breathe deeply as it calms the heart, mind, and soul.
- Take your shoes off wherever you are.
- Too much alcohol dulls the mind.
- To know the purest and sweetest love, get a dog.
- When it comes to chocolate, resistance is futile.
- Over-prepare, strive for excellence, and then go with the flow.
- Loosen up more to release yourself from entrenched habits.
- It's not what you say, it's how you say it.
- Stand up to bullies, wherever they are.
- Time does heal all wounds.
- Change is natural, necessary, and an opportunity for growth.
- Being outdoors is always better.
- Be modest.
- Be forgiving.
- Be kind.
- Be generous.
- Be grateful.
- Corporation can have a conscience. Maximizing profit not always right or sufficient.
- Written beliefs + implementation
- Responsible use of bankruptcy as a tool in business
- You can get rich trading on irrational signals by simply being lucky and trading before others to whom you sell out to later (and who are more naive than you).
- Behavioral corporate finance perspectives: biased managers/rational markets or sophisticated managers/emotional markets
- Overconfident CEOs (as measured by holders/non-exercisers of options whose price is 167% in the money) prefer to finance corporate investment with internal cash.
- After a CEO wins an award, the recognition distracts from their jobs (e.g., writing books) and do poorly thereafter (and are more likely to manipulate earnings).
- Overconfident CEOs initiate too many mergers, and most mergers fail to produce synergies. Ego battles lead to overpayment.
- Medical device acquisition by lower middle market PE firm
- Securities Purchase Agreement vs. Asset Purchase Agreement (Reps & Warranties, Indemnification, Dispute Resolution)
- Earnouts: pros and cons
- Be skeptical of management financial statements
- Rollover equity: pros and cons
- LOIs, exclusivity, control
- The role of the corporation in community issues
- The role of the corporation in choosing locations, making decisions that affect workers in various cities (where to build a plant, where to shut down a plant)
- Law, morals, and ethics. Is it always right to obey the law? Who decides?
- Investors overestimate precision of private info.
- People attribute investment profits to their own abilities, losses to external noise.
- Market underreacts to Seasoned Equity Offerings; prices drift over 90 days.
- Private opinions are overweighted, so public info is underweighted, implying underreaction to public info.
- Private info overweighting explains why BM forecasts return.
- Public info underweighting explains return drift.
- People extrapolate from small sequences but shouldn't (no law of small numbers).
- Trend chasing is bad.
- Don't buy or sell on news without looking at the price.
- Regress returns on past intangible component of return (that which is unexplained by accounting performance) rather than tangible component; intangible component is high when price has risen due to something other than fundamentals, so it's a contrarian indicator (like share issuance/IPO).
- Momentum strategies work best for smaller firms, lower analyst coverage, past losers.
- Optimist analysts do more buys than pessimists do sells (upward price pressure).
- Investor sentiment does affect individual stocks that are hard to value and hard to arb (small, young, no profit, no dividends, high growth, distressed, volatile stock returns).
- Economics of alternative energy deals
- Large economies of scale; in large scale projects, get better execution and support from bigger bank financing.
- Put together right management team.
- License proven technology.
- Partner with the right people.
- Finance with maximal debt and government guarantees and programs.
- Banks are willing to accept risk when have big technology partners with prior experience.
- Could finance next development phase with others’ money; ask future partners/investors whether if they owned some technology, would they invest and at what pricing (tested this before did deal).
- Truly unique part of what investor got in this deal: access to exclusive license and knowledge to really build the thing; both really blocking things.
- Risk: figure out what is really new versus what now new.
- Assign risk to the parties to lay off as much risk as possible.
- Focused their time on how to lay off as much of the new technology risk to others as possible
- Get others to guarantee their work. If they don’t, they have the right to go to other people.
- Pit the bank against the tech provider; bank won’t lend unless tech provider will guarantee (via liquidated damages); always say bank is asking for more (even if not).
- Get some very large names around table as quickly as possible because large utilities like talking to big names only.
- For banks, reliability is more important than newness.
- Struggle with tech vendors for “good” while vendor wants “perfect.”
- Large companies driven by earnings; if they spend money and it doesn’t create earnings, then it’s a negative EPS potential.
- When they were negotiating with big companies, they knew big companies wouldn’t be willing to put up development risk and didn't want income flowing through to consolidated income statement so actually preferred smaller ownership stake.
- They knew they could mark the deal up because put together critical components (license, management team, relationship with tech provider to get it built).
- Take in investor money only when need at last possible minute so don’t need to pay interest out and maximize IRR.
- The way to get large corporation to do something you want is to withhold payment until end of quarter.
- Utilized milestone concept
- When people would miss milestones, they would renegotiate the contract and push them.
- If you’re not as big as they are, you must manage them.
- Figure out structure and assign liability throughout the chain.
- Key to getting financing: many years operating history and knowing that the technology works.
- Use and ask for liquidated damages whenever possible.
- Deal is pretty much like specialized real estate.
- Power plant is like someone who rented the entire building (power utility they’re selling the power to); if you deliver the power, they’ll pay.
- Single tenant is rated as lower risk.