• Why what’s best for the person is ALWAYS what’s best for the company

    I often get asked, “What do you do, what’s best for the person or what’s best for the company?” Or, “What happens when what’s best for the employee isn’t best for the company?”

    In my mind, doing what’s best for each individual person in an organization is what’s best for the company at large. At least today. Here’s why.

    Times have changed

    If you think back in the days before America was discovered, on through the Industrial Revolution and when there was a boom in railroad construction and building skyscrapers in Manhattan this situation may have called for a different kind of thinking. Back then, maybe the kind of boat you had or the land you owned was the big differentiator.

    Today, we’re in a Knowledge Revolution where things are created based on knowledge and information. Brain power is the key generator. The business landscape is more complex than what it was because people are more complex and harder to manage. They have ambitions, hearts, minds, and families that are important. The brains you have can make or break your company’s success.

    It’s not a giant leap

    Since companies run on people, it follows that the best companies are going to have the best people. Therefore, the people within the company – its human resources – are the big differentiator.

    The performance of a company is often a lagging indicator of the quality of its people. Over time, you’ll start losing the quality of your product, culture, brand, and all the things that make a company strong if you don’t have good people.

    That’s why I believe that, in the end, what’s best for the person IS best for the company. You have to treat people like the most important asset they are. If someone says I’m moving to Timbuktu with my spouse because it’s what’s best for me, don’t fire them to protect yourself. And don’t throw more money at them hoping they’ll stay when you know their mind is made up. Life is too short for that. Instead, embrace what they need. Celebrate the work they did and the contributions they’ve made. Support them in whatever way you can in making the transition.

    What it all comes down to

    How you treat your people becomes part of your company’s DNA, part of your reputation. And that’s absolutely why you have to do the right thing by your people because your reputation is built on that. The future success of your company depends on a strong DNA and a stellar reputation. Companies who put their people first will have an edge on getting the best talent and will ultimately win because of it.

    What do you do when the interests of the company and the interests of your people seem at odds? I believe when you look at all the factors and weigh how important they are, you’ll come to the conclusion that what’s best for the employee is ALWAYS best for the company.

  • Why we don’t know what we want to be when we grow up

    Someone mentioned a research study to me that demonstrated people are terrible at predicting what makes them happy. If you survey them, they’ll list what they think would make them happy, but they don’t actually know.

    In fact, Daniel Gilbert, author of Stumbling on Happiness, talks about his research into what he calls ‘affective forecasting’ and how humans are so bad at it:

    “People make mistakes when they try to predict what will make them happy in the future—a process that Tim Wilson and I have called ‘affective forecasting.’ Anyone who has ever said ‘I think I’d prefer chocolate to vanilla’ or ‘I’d rather be a lawyer than a banjo player’ has made an affective forecast. And anyone who has made an affective forecast has found out the hard way that sometimes they are wrong…People dramatically and regularly mispredict the emotional consequences of future events, both large and small.”

    I’ve included a video of Gilbert’s presentation on his research at the end of this post. Although it’s a bit long, it’s very interesting and Gilbert has a knack for making his presentation entertaining, so it’s definitely worth the time.

    Why this makes transitions difficult

    As you think about, some of us get luckier than others. Right now, I feel like I’m doing exactly what makes me happy and I feel fortunate to have discovered my career happiness it at an early age. (I started my first company at the ripe old age of 14.)

    But all of us go through transition periods. As I talk to friends who are making transitions, I find that beneath the surface, despite what most of us say or think, a significant number of people don’t really know what they ‘want to be when they grow up.’

    You think the problem isn’t really that prevalent until you hear someone talk about what they want to do. A tell-tale sign of it is when someone lists a seemingly endless number of disparate options in response to the question of what they want to do. You start to think, “Those things aren’t necessarily related. What’s going on?”

    HCI provides a clue on how to overcome the problem

    The science of Human-Computer Interaction (HCI) provides a model for resolving this dilemma, and other aspects of product development have learned from it. In HCI, it’s widely known you’re not supposed to ask users what they want, you’re supposed to observe their actions to get an understanding of what they want or expect the application to do.

    If you come right out and directly ask users what features they want, they’ll say A,B and C, but until they use the software they won’t really know. You have to see them in action to know what’s really going to resonate.

    Humans just aren’t good at predicting what will make them happy.

    The reality is that we are only a product of our experiences. If you haven’t experienced what makes you happy yet, how could you possibly know?

    Some takeaways
    • Most of us have a habit of committing too soon in life, very similar to premature commitment bias.
    • Only by experiencing something can you truly know if it will make you happy. I think once you realize this it can create a lot of clarity. The more you try things out the more likely you are to find happiness. It seems obvious, but in some ways, the obvious things in life can be profound.
    • We don’t get to try before we buy as much as we should. Sure, college students might be able to land an internship or get into a co-op program to try out a career. But older workers who want to make a transition aren’t usually given that opportunity.
    • The problem is more widespread than most people realize. Trying things out to see what makes us happy applies not only to businesses and careers, but to hobbies and even food.
    • If you can structure your life in a way where you can try more things in a risk-free environment, you’ll be better off.
    • Don’t speculate. Don’t try to predict what’s going to make you happy. If you get out there and do as many things as you can, eventually you’ll find it, although it may well not be what you expected.

    In some ways, this is what the Kemists is going to be about: putting talented people into different situations to find something that really works.

    Dan Gilbert: Why are we happy? Why aren’t we happy?

    And now, the Dan Gilbert video I promised:

  • It’s a great time to start a company. Wrong!

    A lot of people liken the ability to raise money as a strong indicator of great timing to succeed as a startup. I can see the thinking behind that logic. At one time it was really hard to raise startup capital because the landscape was just so competitive. If you did succeed in getting funding, people thought, “Hey, you guys must be legit” because investors had their pick of the litter, so choosing you must be a very good sign of things to come.

    To a large extent, that mentality has carried over to today. The difference is that in today’s landscape, getting venture capital isn’t as difficult as it once was. Competing for investment capital is a little less competitive than it used to be because there’s more money going around today. But getting your hands on money from investors isn’t the only thing you need for a successful startup.

    The 3-legged stool of startup success

    Successful startups depend on more than just money. I see the need for 3 basic elements to succeed, of which money is just one:

    1. Traction
    2. Talent
    3. Money

    You might think of it as a three-legged stool:

    3-legged stool of startup success


    3-Legged Stool of Startup Success

    3-legged stool of startup success

    The thing about three-legged stools is that one weak or missing leg and you’re going to end up flat on your back.

    The Traction leg

    Traction is really important. In my mind, more important than money. To get traction you need to build something that people care about. The ability to get in front of people and get people to like your product – gaining traction – is critical. If nobody cares, where will your business be?

    Getting traction means bringing in revenue. To me, revenues are what matter first and foremost to determine if your company will succeed. Without revenues, you just don’t have a viable business model.

    Face it, the average person on the street is still making the same salary he or she’s always made (assuming they haven’t become unemployed). The pool of available money to be spent on your product or service hasn’t changed all that much. If anything, it’s gotten smaller with people scared about which direction the economy will take next.

    Because of the limited (and mostly dormant) supply of money you can take in as revenues, it’s not an especially good time to get traction for your business. I’m not saying that some new exceptional companies won’t succeed. It’s just tougher out there to succeed based on revenues right now.

    The Talent leg

    Besides traction, another factor that most people don’t consider is the availability of talent. The more money that goes to startups, the more the war heats up for strong talent. And there is a huge war for talent right now, with plenty of very good people going to startups that don’t yet have a proven business model.

    People don’t consider this either when saying it’s a good time to start a business, but it should be a major factor in making a smart go or no-go decision. Talent wars drive up the cost and restrict the availability of talent. That’s going to have a very serious impact on any revenues you might generate from the business.

    Reality check

    The investor capital or Money leg is what’s strong right now. But even if you have plenty of investor capital, it’s only a matter of time before your business will fail without adequate revenues. To grow revenues, you need traction and talent.

    So if you asked me if now is a good time to start a company, I’d have to say no. Now is a good time to raise investor capital. But now is certainly NOT a great time to get traction or talent. Startup money without traction and talent won’t get you anywhere in the end. And if raising seed money is your end goal, you need a reality check.

    So the next time somebody tells you it’s a great time to start a business, correct them.

  • The solution to premature commitment bias starts with a K

    As you may have noticed, I have recently found myself consumed by the problems facing technology entrepreneurship today.  In particular, it’s the amount of sheer waste that gets to me.  As I’ve mentioned before, the real tragedy here is all of the time that is wasted by really talented entrepreneurs and early employees.  Unlike money, time is non-renewable.  You don’t know how much you actually have, and you can’t make any more of it when you run out.

    As an entrepreneur about to embark on my next journey, this is something I think a lot about.  I want to avoid premature commitment bias like its a plague (which, by the way, it is.)   And I want to find myself on the right side of the disequilibrium of success!  I don’t want to bust my ass for 2-5 years just to chase a mediocre dream.  Not worth it.

    So here’s what I’m going to do

    I’ve decided that it’s time to take a new approach to building companies.  That approach involves assembling a team of the most talented people in the world.   Then we’re going to unearth really hard problems and solve them.

    Companies will be formed.

    Fun will be had.

    What about all the details?

    I don’t know them yet.  It makes sense to figure out the details of how this thing works after the right people are on the team.   Here’s what I do know, though: we’ll be calling ourselves the Kemists.

    And we’ll have a website that looks like this, and a logo that looks like this:

    Kemists Logo

    If you know remarkably talented people who like building companies, or are one yourself, send them to (or go to) the site and apply.

  • Sweat parity and the success disequilibrium

    Startups are a funny thing.  The amount you learn in the first 24 months after inception is enormous.  You discover all the best kept secrets about entrepreneurship that no one  teaches you about when you are first starting out.  One of my favorites is a thing I call ‘sweat parity.’  While some of us understand the concept intuitively, few of us ever talk about it.  So I’m setting out to change that.  Here goes:

    Do you know any dumb, lazy entrepreneurs?

    Entrepreneurship isn’t for the feint of heart.  It’s for people who have the guts (and irrational drive) to attempt the impossible.  The confidence, passion, and sheer determination that these people posses didn’t come from nowhere.  We spend years of our lives developing the core of who we are.  While each of us fire-starters has a different background, we are the products of an upbringing that breeds hunger.

    Hungry people aren’t lazy.  We work hard.  We get addicted to the problems we are solving, and as such, get accused of ‘working’ 18 hours a day.  But for the true-blooded entrepreneurs out there, we’re never really working.  We are just doing what we love.

    Not only are entrepreneurs passionate and hard-working, but we’re often smart.   Here’s why: the core competency of starting companies is learning.  Period.  The one thing you are guaranteed of when you start your company is this: it won’t go as planned.  You need to learn and adapt quickly or you won’t survive.  Dumb entrepreneurs don’t last long in this game.

    All sweat is created equal.

    What I’m getting at is this: Every founding team I meet is hard-working and smart (with very few exceptions)!

    Founding teams pour a ton of sweat equity into their startups.  We incept the idea, immediately start sketching it out together, and our energy multiplies.  We decide that our new concept needs to be made a reality.  Yesterday.  We start designing and coding right away.  And before we know it, we can’t stop.  The weeks to come are a flurry of interaction flows, wireframes, test cases, code, deployments, and private beta invitations.  It looks a little something like this:

    Here’s the thing: As much as we don’t want to admit it, other entrepreneurs are often just as smart and hard-working and we are.  What I’ve found in my experience is that, generally speaking, startups are in ‘sweat parity.’  That is to say that their sweat is roughly equivalent to the sweat of other startups.  (The incremental difference, when it exists, is often minor.)  Most of us that have a professional network of folks in the entrepreneurship game know this to hold true intuitively.

    Sweat parity looks something like this:

    But success isn’t.

    The cold cruel reality of startups is this: even though sweat is mostly created equal, success is not!  If we look at a random sample of a 100 startups that are 6 months old, we’ll most likely see the story unfold the same way.  The companies are in sweat parity.  But most companies will have a mediocre outcome, at best.  A majority of the group is likely to get no significant traction.  People just don’t care as much as the founding team thought they would.  Or maybe they do care, but the solution doesn’t actually alleviate the core pain point.

    One of these companies, however, will take off like a rocket ship.  Word spreads like wildfire, and people all over the internet begin to use the product.  Barring no major mistakes, things will continue to compound, and the company will continue it’s ascent to greatness.

    I call this the disequilibrium of success, and it looks kind of like this:

    I don’t have a great answer to why this happens, but a few things seem clear:

    • We can’t see the future.  And we must not be that good at predicting it.  If we were, there’d be more rocketships and fewer mediocre companies.
    • Clearly, some of the value of the opportunity or space is beyond our control.  There are things like market interest, market timing, and macroeconomic factors that are at play.

    Sweat equity + Disequilibrium of success ==  Waste

    This may seem obvious, but it’s worth noting anyway.  When most startups have really smart and passionate people and few of them will be successful, the net result is a lot of wasted potential.

    This is something I think a lot about because I really don’t like seeing it happen.  Perhaps more importantly, I know that I’m going to pour at least 2 years of blood, sweat, and tears into what I do next.  I don’t want that potential to be wasted.  I want to have a big impact.  I’m not the only one, am I?