Saturday, July 27, 2013

Every Entrepreneur Should Have a Holding Tank for Ideas

Vera John-Steiner interviewed 70 living geniuses and studied the notebooks of 50 dead ones.  What she found was that all of these geniuses built their great ideas over time using sketches and notebooks:
"The one characteristic that all of these creatives shared— whether they were painters, actors, or scientists— was how often they put their early thoughts and inklings out into the world, in sketches, dashed-off phrases and observations, bits of dialogue, and quick prototypes. Instead of arriving in one giant leap, great creations emerged by zigs and zags as their creators engaged over and over again with these externalized images."
Based on these observations, Eric Barker extracted these five principles:

"Write all your ideas down as early as possible. (It’s no surprise so many of the geniuses kept notebooks.)

Stop discarding half-baked ideas. Those crappy ideas are the good ideas — they just need work.

Don’t think your first idea is the right one. And don’t think it’s perfect as-is.

Give it time. Deadlines don’t make you more creative.

Wrestle with your ideas. Dissect, combine, add, subtract, turn them upside down and shake them. Get ideas colliding."
Without knowing it, I've been following these principles for years.  I call it having a "holding tank" for your ideas.  Here's my system:

1) When an idea strikes, I summarize it in a single sentence or sentence fragment.  If I'm in the car, I use my trusty voice recorder to record a 5-second snippet, then later type the text into FetchNotes.  Otherwise, I access FetchNotes on my phone or laptop and enter the idea directly.

2) If the idea is a blog post, I end up writing it during one of my content creation binges.  If it's a business idea, I create a new page in PBworks and write up the idea.

3) Once an idea is in my holding tank, it tends to mix and collide with other ideas.  Follow-up thoughts occur, and I add them to the appropriate PBworks page.  I might also add links to relevant information or related resources.

By writing down your ideas, you can let your brain ruminate and enhance them over time.  You're also giving them a chance to intersect with other things you run across.

Learning Wisdom At The School of Hard Knocks

We believe that life experience confers wisdom.  Several of the most successful sales executives I know have told me that the most important thing they look for when interviewing job candidates is someone who has experienced a devastating blow...and recovered from it.

What's less clear is why this experience confers wisdom.  Is it the result of a greater knowledge of how the world works?  Does it come from stronger willpower?  More applicable skills?

As it turns out, science believes it knows the answer:
"Research has located the roots of wisdom as early as adolescence or early adulthood… wisdom often grew out of an exposure to adversity early in life. Many participants in the Berlin Aging Study who rated high on wisdom testing, according to coauthor Jacqui Smith, had lived through some of the twentieth century’s most tumultuous events as children and young adults.

Some theorists argue, however, that natural selection might care about cultivating a neural mechanism that could modulate and, in a sense, master the emotional experience of risk. Whether that mastery is partly acquired early in life, as the stress-inoculation research suggests, or later in life, as research by Carol Ryff and her colleagues at the University of Wisconsin has found, the end result is an enhanced form of emotional regulation that would clearly confer adaptive power on anyone who possesses it."
Exposure to adversity helps people develop their skills of emotional regulation.  Having overcome great obstacles, the wise can approach new challenges in a calm and productive emotional state, with confidence in their ability to handle whatever comes up.

What's interesting to me is that emotional regulation isn't emotional suppression.  Emotions are a powerful component of our decision-making process.  Studies have shown that subjects who lose the ability to feel emotions (either partially or wholly) don't become Spock-like geniuses, but rather struggle mightily to make any decisions.

As with many things, there is an optimal level of moderate emotion (enough to provide feedback on potential options, not enough to disrupt the thought processes or induce panic) that acts as a mark of wisdom.

As you evaluate employees, investors, or even co-founders for your startup, you should probably assess their wisdom as well as their degrees, past companies, and technical skills.

The 3-Step Secret To Boosting Your Performance 60%

Here's another fascinating article from Bakadesuyo:

If you're about to tackle an important challenge or task, there's a simple 3-step process you can follow that, in just 30 minutes, can boost your performance 60%:
"A recent study by Duckworth, Heidi Grant Halvorson, Benjamin Loew, Oettingen, and Gollwitzer asked a group of high school students preparing for the high-stakes, standardized Preliminary SAT (PSAT) to complete a thirty-minute written intervention that involved mental contrasting (vividly imagining the goal and writing down possible obstacles) with implementation intentions (coming up with two if-then contingency plans if an obstacle presents itself). They found that students undergoing the intervention completed more than 60 percent more practice questions on the PSAT compared to a placebo control group who were instead asked to write about an influential person or event in their life."
Eric Barker summarizes this in his post:
"Before a big challenge:
1. Imagine your goal.
2. Write down anything that might stop you from achieving it.
3. Come up with a few contingency plans to address those obstacles."
Imagining your goal helps you build a plan.  But building a plan to achieve success isn't enough.  As the noted philosopher Mike Tyson said, "Everyone has a plan 'til they get punched in the mouth."

That's where the last two steps come in.  By anticipating obstacles and developing contingency plans, you reduce the willpower and effort required to surmount them.  This has a huge impact, especially on a timed test like the PSAT.

This 3-step secret applies to just about any important, time-sensitive challenge.  If you're an entrepreneur getting ready to pitch a VC firm, the same steps apply:

1. Imagine what you want the VC to do, and what you need to do to achieve it.  Is the goal to get another meeting, or to ask for the investment?

2. Write down the possible objections the VC might raise.  Suppose they want to talk with a reference customer, for example...

3. You can address the objection by preparing a couple of your customers for reference calls.  It's much stronger to tell a VC, "You can talk to X, Y, and Z.  I'll send you an email introducing you so you can hear for yourself."  Compare the impression that conveys to saying, "Sure, I'll send you a couple of names after I get back to the office."  The former shows confidence and competence.

What other ways can you apply this secret?

Caring and Credible Leadership

I am a naturally friendly person.  As I've written before, I have a friendly face.  For example, older ladies love me (I assume I remind them of their grandkids).  But when I was younger, I worried that this warmth might work against me.

As it turns out, I was both wrong and right about this.

In her book, "The Silent Language of Leaders," Carol Kinsey Goman addresses this very paradox:
"When first introduced to a leader, we immediately and unconsciously assess him or her for warmth and authority. Obviously the most appealing leaders are seen to encompass both qualities, and the least effective leaders are those we regard as cold and inept. But as Harvard Business School professor Teresa Amabile described in an aptly titled article, “Brilliant but Cruel,” the problem is that we often see competence and warmth as being negatively related—warm leaders don’t appear as intelligent or skilled as those who are more negative and meaner, and tough leaders are judged far less likeable.

So the best leadership strategy is to embody both sets of traits—and to do so early and often. Let people see both sides of your leadership character. Let them know right from the beginning that you are caring and credible."
It almost seems like a cruel joke--warm leaders are perceived as less competent than leaders who are negative and critical.

Yet Goman's work also offers hope.  If you're a naturally warm person, this warmth will actually help you as a leader, if you are able to clearly demonstrate your competence.  People prefer a "caring and credible" leader to a high-achieving asshole.

A lot of young entrepreneurs seem to think that they need to be tough captains of industry to lead their startups.  After all, this toughness boosts their credibility.

But if they have actual credibility (and as always, the best way to earn credibility is to deliver results, i.e. traction), they're far better off allowing their natural warmth and caring to show through.

Investors also need to take responsibility for this; far too many VCs respond to tough times by firing the CEO and bringing in an ex-Oracle person to crack the whip--this may result in the illusion of competence, but is a far worse option than bringing in a leader who seems credible without the prop of egomania.

Why It's Hard To Find A Good Problem

A classic piece of startup advice is to focus on solving an important problem.  Here's the principle behind that advice, as stated in Dan Pink's "To Sell Is Human," by way of Bakadesuyo:
“The quality of the problem that is found is a forerunner of the quality of the solution that is attained…” Getzels concluded. “It is in fact the discovery and creation of problems rather than any superior knowledge, technical skill or craftsmanship that often sets the creative person apart from others in the field.”
This advice is easier said, than applied, however.

Most of us are narcissists--we focus on the problems we know, rather than the problems that are the most valuable.  When I was a design student, I (and my instructors) saw endless projects dedicated to improving mountain bikes (hugely popular on campus at the time), skiing, and other such "problems" that privileged 20-year-olds encounter.

The same seems to be happening today.  I've long since stopped bothering to keep track of all the dating or nightlife apps that people pitch to me.

One alternative is to wait until you're older to start a company, but I suspect that's not popular advice.  The other is to really work at getting close to a particular market.  You ought to spend at least a solid week of living your customers' daily life to understand their real problems.

Even when you identify a problem, it's all too easy to jump straight into solutions.  Solving a problem that you've identified is like answering a question--it's instinctive and feels good.  Most of us are proficient at answering questions, thanks to a lifetime of education.

But the key to finding a good problem is finding a lot of problems, then narrowing down your focus to the most promising one.  Finding problems isn't instinctive or fun.  You have to do the opposite of your natural instincts.  This takes effort and willpower.  In contrast, once you've identified a problem, even if it isn't a good problem, our problem-solving brain will start churning out possible solutions.  It's a lot more fun to explore those than to focus on finding more problems.

As an entrepreneur, you can solve both of these issues by replacing willpower with rules.

Rule #1: Spend a solid week with your target customer and take copious notes.

Rule #2: Identify at least 10 different problems your target customer faces, then evaluate them to find the single best problem.

Friday, July 26, 2013

Everything I know, I learned from someone else

Here in Silicon Valley, we love "visionaries."  We admire people who "think different" and "invent the future."

It's a tough act to follow.  And it's not even true.

Everything I know, I learned from someone else.

Maybe I read about it on a blog, or in a book.

Maybe I learned it by working with someone.

Maybe I heard it from a speaker or a panel.

What I can tell you is that I can't think of any knowledge that sprang full-blown from my mind without any antecedents, like Athena from the skull of Zeus.

I meet entrepreneurs who desperately chase uniqueness.  Certainly part of this is the fault of us investors; we want people to tell us how they "differentiate" their startups from the competition.  A famous formula for elevator pitches focuses on being "the first" or "the only".

Originality is wonderful, but it is secondary to actually creating value, and tends to be appreciated only in hindsight.

I'd rather invest in someone who is awesome at learning from others, rather than someone who hides in a corner and spits out "unique" ideas.

Sunday, July 21, 2013

The Yeh Family in Washington DC, Day 4

For our final day in Washington DC, we took things easy.  Thanks to the good folks at the Holiday Inn Capitol, we had a late checkout time of 2 PM, which let us enjoy the morning before heading off to the airport.

After a big travel-day breakfast, we took a leisurely stroll to the United States Botanic Garden (USBG).  The USBG was actually the brainchild of George Washington, and has been operating since 1820.  I'm not sure when they added the giant bronze insects:

The first exhibit, which we toured before entering the main building, was the rose garden.  When we visited the Rose Test Garden in Portland over Spring Break, we missed out on the roses blooming.  We were able to make up for it on this trip.  Marissa busied herself taking photographs of seemingly every single flower in the place.

The USBG had an excellent exhibit on the various crops and spices from around the world.  For example, I enjoyed seeing and smelling the individual spices that go into a classic Indian curry.  We also got to see things like pineapples and artichokes growing on their actual plants.  It's pretty cool to see where these familiar foods come from.

The main attraction is a massive indoor greenhouse featuring a series of habitats, ranging from rainforest to desert, and including a "Jurassic Park" of plants that date back more than 150 million years.  Here are Jason and Marissa crossing a log bridge in the rainforest:

We finished our tour of the USBG by visiting the corpse flower (titan arum).  Unfortunately (or fortunately), it wasn't blooming--it supposedly smells like rotting flesh--but we did get this photo, which gives you some sense of its incredible size (it is the largest flower in the world):

Since the flower has bloomed yet, you might still be able to catch it live on Ustream.

After a brief stop at the National Museum of the American Indian to catch a performance, we headed back to the hotel to pack and cabbed it to the airport.

It was there that our adventure really began.  Thanks to the thunderstorms covering much of the country, our flight to Nashville was delayed, which meant we'd miss our connection to Los Angeles.  Not wanting to spend a night in the Nashville airport, we got booked on an alternate route through Chicago.  Total projected delay: 1 hour 45 minutes.

Things started to look up when our flight to O'Hare actually left and arrived early.  Unfortunately, they were unable to book us seats on the flight right away; about 5 minutes before boarding, we got seats at the back of the plane.  Nonetheless, we were just happy to be headed back.

Once we got on the final plane of the trip, we settled in, started taxiing out to the runway...and then came to a dead stop.  As it turned out, a tornado warning had forced the air traffic controllers responsible for our route to evacuate their facility.  We ended up sitting on the tarmac for about an hour, waiting for air traffic control to come back on line.

By the time we landed in Los Angeles after a very turbulent flight, it was about 11:45 PM Los Angeles time, or 2:45 AM Washington time.  We had been delayed for a total of three hours.  Not a great ending to the vacation, but given all our adventures, it was just a small bump.

The Real Odds of VC-backed Success

I try to give entrepreneurs a realistic view of their chances of startup success.  Yet I've always relied on anecdote and example, rather than hard numbers.  Now I don't have to.  Here is a set of definitive numbers from across the entire industry:
"According to the data provided by Sand Hill, since 2003 only 6 percent of venture capital exits have been through an initial public offering. (1% go public via reverse merger)

41 percent of venture capital companies fail and are worthless.

For the 52 percent acquired, or roughly 3,500 companies, Sand Hill reports that only about half sell for an amount that is above the total amount they raise.

7.5 percent of the venture capital I.P.O.’s had exit values that were below the total venture capital investment. As for sales, the venture capital investors still need to be paid back their 8 percent accrued dividend. This probably puts the number of deals where the founder receives anything in the 20 percentile range.

Adjusted for risk, the payoff for an entrepreneur taking venture capital money was really no better, on average, than taking a salaried job for a person of similar background.

VC’s attraction is the 2.3% of deals where the payout is > $100 million and the 0.18% of deals where it is > $1 billion."
The good thing is that the classic 10% rule of thumb appears to apply--if 20% of entrepreneurs who take venture capital earn some return from their startup, 10% achieving significant success seems reasonable.

It also supports one of my sad conclusions, which is that if you want to make money, entrepreneurship isn't the best option.  On a risk-adjusted, the financial rewards of entrepreneurship are average at best.

Nonetheless, I'm reminded of the great line from "Dumb and Dumber."  After being told by his dream girl that the odds of her falling for him are one in a million, his eyes flash and he says, "So you're telling me there's a chance!"

You Always Need Luck (the lesson of JK Rowling & Robert Galbraith)

Harry Potter author JK Rowling provided an excellent illustration of why you always need luck with her most recent book, "The Cuckoo's Calling."  Here's a succinct Bloomberg article by Duncan Watts that explains the tale:

After finishing with the Potterverse, Rowling turned to adult fiction with her first non-Potter book, "The Casual Vacancy," which met with mixed reviews, though it still became a bestseller.  Tired of seeing her work compared to her Harry Potter novels, she published her next book, "The Cuckoo's Calling" under the pseudonym "Robert Galbraith."

This new book met with rave reviews...and sold 1,000 copies.  And that's where things might have stayed, if not for a very modern leak--the wife of a partner of Rowling's law firm told her best friend, who then accidentally tweeted the secret while intending to DM it.

Instantly, the book leaped to the top of the bestseller lists--a boon for the publisher, though Rowling mourned the loss of her secret identity.

Duncan Watts cuts to the heart of the issue in his article:

“The Cuckoo’s Calling” will now have a happy ending, and its success will only perpetuate the myth that talent is ultimately rewarded with success. What Rowling’s little experiment has actually demonstrated, however, is that quality and success are even more unrelated than we found in our experiment. It might be hard for a book to become a runaway bestseller if it’s unreadably bad (although one might argue that the Twilight series and “Fifty Shades of Grey” challenge this constraint), but it is also clear that being good, or even excellent, isn’t enough. As one of the hapless editors who turned down the Galbraith manuscript put it, “When the book came in, I thought it was perfectly good -- it was certainly well-written -- but it didn’t stand out.”

We like to believe in the inevitability of success, especially in the startup world, where we often say that we "bet on the entrepreneur."  But even a great entrepreneur needs luck.

The amazing thing is, this isn't even the first time this has happened.  In the 1970s and 80s, Stephen King (perhaps the only author in the world more successful than Rowling) wrote a series of books under the pseudonym Richard Bachman:

As with Galbraith, Bachman's books met with critical, but not commercial success.  "Thinner" sold 28,000 copies before Bachman's outing as King--and 10X as many afterwards.

To maximize your chances of success, the key is to keep trying, since every startup gives an entrepreneur an opportunity to benefit from luck.

3 steps to make your fight-or-flight reflex work for you, not against you

Here's another great insight I took away from James Altucher's book, "Choose Yourself"

James points out that humans evolved the fight-or-flight reflex for a reason.  Stress helped our ancestors survive.  When stress hit, cortisol surges through our systems, increasing heart rate and blood pressure, making us ready to either strike out or run away.

When we faced sabre-toothed tigers on a regular basis, this reflex made a ton of sense.  The people whose stress response was non-existent ended up getting eaten.

But in today's world, there are seldom immediate actions one can take.  If your boss criticizes you, striking him or her is unlikely to be a useful action.  Nor can you simply run away and leave the office.  Instead, you end up sitting at your desk, stewing in stress hormones, developing heart disease.

Even I, who can recall describing myself in a junior high writing class as "Calm Chris," have the fight-or-flight response.  But, I have learned how to harness it.

When a threat arises, I feel my heart pounding just like anyone else.  But I have a simple three step process that lets me deal with the stress:

1) Identify a plan of action.There is always something you can do...and if not, at least you can plan to hit the gym to work off the stress.

2) Write down all the steps in your plan.Just having a plan isn't enough; writing it down in detail lets you get it out of your head (where it would end up swirling around and around until it exhausted you) and onto paper/screen.

3) Execute the first step in your plan.It doesn't matter how small that step is; taking action lets you fulfill the requirements of the fight-or-flight reflex in a productive way.  Once this happens, your body calms down because it feels like its need for face-smashing and sprinting has been met.

When you're a startup entrepreneur, you face these kinds of "threats" every day.  Learn to follow the three steps, or your stress will consume you.

Wealth and dishonesty are correlated, but the arrow of causality isn't what you think

I was fascinated by a recent PBS video that covered research being done at UC Berkeley on wealth, privilege, and human behavior.  The upshot is that in controlled experiments, wealthy people tend to behave more selfishly and dishonestly than the poor:

Of course, people might think, that's how they got to be wealthy!  But if you draw that conclusion, you're committing the classic sin of mistaking correlation for causation.

The experimenters were able to disprove the "assholes become rich" hypothesis by running a simple experiment with the board game Monopoly.  They set up a rigged version, where one player gets to play normally, and the other player can only roll one die and only collects $100 when passing Go.  This gives the first player an enormous advantage, and makes his victory essentially inevitable.

The fact that the game is rigged should be apparent to anyone who has ever played it before.  Yet the "winners" showed classic a-hole behaviors--they became louder, more boisterous, started commanding other players, and more or less acting like junior-grade Donald Trumps.

It turns out that becoming wealthy--even in a rigged game of Monopoly in an experimental lab--tends to make you into a prick.

There are a couple of important conclusions I draw from this, which the aspiring startup entrepreneur should note:

1) If you think your wealthy investors can be dicks at times, you're probably right.

2) But, their dickery isn't a character flaw, at least not in the classical sense of an inborn trait; rather, they are simply acting like most humans would after achieving great success.

3) If you are lucky enough to achieve success, you need to be on your guard.  The fact that you're a humble, generous person now won't necessarily carry over.  Believing that you're the exception to the rule is the kind of hubris that makes a descent into jackassdom even more likely.

The Right Way To Handle Rejection

I'm reading the great James Altucher's book, "Choose Yourself."  It's a fun and inspiring read, full of James' trademark brutally honest yet whimsical writing style:

You really ought to buy the book, since James will actually reimburse you what you've paid (or donate the equivalent to charity) if you email him, so there's really no risk.

(I still haven't decided whether to have James refund my $5, or donate it to charity.  Something tells me I will end up choosing myself!)

One of the great points James makes is about how to handle rejection.  Essentially, James argues that there are three fundamental ways to deal with rejection:

1) Blame yourself ("I suck")
This is the pessimist's approach.  The problem is, it encourages you to stop trying.  Sure, you won't get rejected again, but you won't do anything worthwhile either.

Martin Seligmann's work on optimism and pessimism calls this "personalizing" a negative event.

2) Blame others ("They suck")
This is the bully's approach.  It's better in the sense that it doesn't encourage passivity, but it doesn't help you either.  This is the classic approach of the low-level salesman.  Customers who don't buy are "tire-kickers" who would never buy anything.  Sadly, many entrepreneurs also fall into this trap, labeling the investors that reject them, "idiots" or worse.

3) Try to learn something ("What can I do differently in the future?")
This is the right way to handle rejection.  Viewing rejection as a learning opportunity is very much the mark of Carol Dweck's "Growth Mindset".  You take something negative (rejection), and use it to get better.  When I reject an entrepreneur, I always try to give that entrepreneur a clear picture of why I'm rejecting him or her.  It's not easy to tell someone why you're saying no, but it is the kindest and most helpful option.

Note that you can't prevent an entrepreneur from blaming themself or blaming you; you can't control their reactions.  But you can make it easier for them to learn something.

The Curse of Originality

While we were on vacation in Washington DC, we spent a fair amount of time in art museums.  We visited the National Portrait Gallery and the National Museum of American Art twice, as well as the Sackler Gallery, which is part of the Smithsonian Castle complex.

One thing that struck me over and over was how hard modern artists had to work to find a unique voice.

Classical painters existed in a different world.  Without photography, simply capturing reality was a major triumph.  They were free to focus on simply producing beautiful paintings.  (This is a gross oversimplification, given the intersection of art and commerce.  Most paintings were commissioned, and artists thought carefully about how to portray their patrons.  Nonetheless, the focus on painting a beautiful version of reality seems valid).

In contrast, modern artists have to find ways to stand out.  A modern master of realistic landscape painting has no place in the world of high art, and is likely to end up as a scenery artist on Broadway (in Hollywood, I suspect everything is computer generated these days, including whatever production line creates people like Zac Efron).

The medium itself has to make a statement--a sculpture made out of 100 pounds of rice, or a still life assembled from garbage.  Only photography continues to adhere to realism.

In many ways, the dilemma of the modern artist is the dilemma of the modern entrepreneur.  There have been and are so many startups (Y Combinator alone has backed 567) that standing out is harder than ever.  Just witness my friend Dave Shen's thoughts on the sameness of Demo Days:

I call this the curse of originality.  The need to be original supersedes more important concerns like practicality or personal vision, simply because no one goes down in the history books for being the third or fourth person to do something.

Yet I still get a lot more pleasure out of marveling at realistic old-school paintings than I do from the more "challenging" works of modern art that I encounter.

As an entrepreneur, the biggest wins come from things that are sui generis.  No one from 2000 could imagine Twitter; no one from 2010 could imagine the world without it.  But for every Twitter, there are thousands of failed "experiments".  Don't be afraid to eschew originality in favor of building something that helps real customers, or which reflects your outlook on the world.