And speaking of perfect information and economic assumptions that make no sense, here’s one that’s ususally ignored altogether at the undergraduate level: symmetric information. This post discusses the problems of infrequent transactions (think a company going public, or a person buying a house) and how one side of this market has a clear advantage over the other.
This interview with Ray Dalio was great. His management philosophies are very controversial, but his success running Bridgewater speaks for itself. Describing the reasoning behind his book, Dalio discusses how he tries to boil everything down to pattern matching. Since most things have some similar precedent in the past, you can look at previous instances and act according to what history tells you will be the successful decision. Essentially, it’s real life Duck Typing. If you define ahead of time what your principles are, and how you’d behave in a certain situation based on your knowledge of previous experiences, then nothing is surprising. Importantly, you have to be a student of history for this strategy to work.
Dick Costolo is an unusual guy for Silicon Valley. This interview gives a window into his background in theatre and improv comedy, and how those experiences changed his management style for the better. About halfway through, he made a great remark: “As a leader, it’s not your job to prevent mistakes from happening, it’s your job to correct them when they happen.” I could not agree more. When you’re trying to prevent errors, everything slows down, and innovation stops. It’s the opposite of what you want.
One of the most interesting stories of the last year or two has been Amazon slowly going from a fully online store into various brick and mortar experiments. I have little sympathy for cashiers losing their jobs (as Matt Bruenig quipped on Twitter, what’s the difference between this and self checkout?), they’ll find new ones, but I am afraid of losing what Jane Jacobs calls “eyes on the street”. Those cashiers do more than just charge you when you check out, and that disappears with something like Amazon Go. There’s a story to be written there.
As an engineer working many layers away from the actual money-making part of the business, I have noticed I’ve almost fully stopped thinking about how sales work, and how people decide to spend their money. This is a problem, and I’m making an effort to read more about sales, marketing, and business development these days. This was a good start.
As usual, a great post by Sinofsky. Here he argues against the “end of history” idea that you can’t compete against the big platform companies. His piece focuses on Google, Apple, Amazon, Microsoft, and (perhaps strangely) Adobe, tearing apart each company’s business model and finding the opportunities a newcomer could leverage against them. Everyone’s read the book, and executives at these companies know how to defend against one’s own incentives benefitting newcomers, but there are still cracks for startups to get through.
And to keep going with the thread on platform companies, here’s one on Amazon enabling lots of new products to come to life. The whole thing is worth reading, but the last paragraph in the article was extremely sharp: “There is this erosion of what it means to be a traditional consumer product brand,” Mr. Wingo said. “In a way, Amazon is providing all this information that replaces what you’d normally get from a brand, like reputation and trust. Amazon is becoming something like the umbrella brand, the only brand that matters.” Amazing.
It seems like Evans took Farhad Manjoo’s article (the one right above this) and ran with it, taking it an extra few steps. Two pizza teams, and shipping the org chart are not new - I thought the new insight was Evans’ third consequence “those atomised teams don’t actually need to work for Amazon.” which totally resonates with Manjoo’s argument.
The reason cryptocurrencies, and the technology behind them, are exciting for me is not their insane returns, but the economic and political implications of creating totally new incentive systems. Matt Levine has a good summary of how these differ from the traditional VC backed company in yesterday’s Money Stuff, but Elad Gil’s post goes much more in depth into what kinds of corporate structures are enabled by crypto.
I initially thought this would go in another direction, i.e. money from different VC firms comes with different kinds of strings attached, giving different investment dollars different real values. However, Polovets pleasantly surprised me with a list of how changes in the various lines on your balance sheet have very different effects, and how startups could make better decisions by keeping that in mind.
Resource allocation is hard, and only gets harder with size. That’s why startups can carve themselves a niche and take over huge companies. Most projects are not worth pursuing, and not useful. Focus gets the win. Pretty related to this a16z episode on growth strategies and how to handle cash.
But coal! The Rust Belt! Our jobs!
I have tried to avoid the discussion about the Google memo from last week, so I have read very few articles (and sadly way too many tweets) on the topic. I know I disagree with the author, and reading N think pieces won’t change that, so I’ve tried to shut it off. However, I read almost every post on Continuations, and Albert’s take seems like a sober response: we have overcome economic, historical and technological determinism, so it seems logical that even if the biological determinism implied by Damore (the memo’s author) were real, we could overcome them with… wait for it… technology!
Organizational behavior is insane. Moving thousands of people towards a common goal is hard, and I hadn’t thought about how insane this 10x personnel increase that Evans brings up is. You should listen to the related podcast, and if you haven’t read Sinofsky’s Functional versus Unit Organizations, you should probably do that first.
A short post on management. I like DHH’s and Basecamp’s view of people management. I don’t know how closely they follow what they preach, but they seem to assign value to the right things.
It is interesting to think about Apple products as part of a subscription model. M.G. makes good points, none of which I can comment on.
And speaking of Apple and things I can’t comment on, here’s some more interesting financial analysis on the company. When I read articles like this one I wish I had paid more attention in my corporate finance classes.
The episodes of a16z where people talk about the past are way better than those where they talk about the present or the future. “How did we get to now” says a lot more about where we are going than the latest and the shiniest.
Dealing with the trade offs between profits and growth is one of the toughest problems in business. Suster frames his article as “profits vs. growth,” but when he compares companies under different scenarios he’s really talking about the decision of raising VC money to fuel growth, not about picking a plowback ratio. The argument put forward in the post is that the calculus of “cash in hand today” vs. “debt today plus a promise of more cash tomorrow” is not a big question in high margin businesses with “winner takes most” outcomes.
The insanity of transforming the way we interact with technology a second time. “Apple had sold approximately 180M devices since being founded in 1976 (70M Macs and 110M iPods) […] Apple is on track to sell its two billionth iPhone at some point in 2020.”
While Noah lives in San Francisco, he’s not really a Silicon Valley insider, so seeing his reaction to Scott Alexander’s Reality Check was interesting. His take? “All in all, Silicon Valley represents one of the least objectionable, most rightfully respected institutions in America today.”
The writing has been on the wall for a while - is not a surprise - but the numbers are staggering: “42% of Chicago’s taxi fleet was not operating in the month of March […] The average monthly income per active medallion has dipped from $5,276 in January 2014 to $3,206 […] medallions hit a median sales peak of $357,000 in late 2013, just before Uber arrived on the scene in Chicago. In April, one medallion sold for just $35,000.”
A couple of years ago, right after my college graduation, I was very close to going the startup route, but ended up joining Apple instead. With hindsight, I can tell that financially the decision is a no-brainer: Cash is cash.
See also, The Squid.
Thinking about technical complexity as a moat is interesting, especially considering the initial discussion about “the shape of the cost-functionality curve.” I definitely believe that there are increasing costs to adding functionality, or as the author says “Features interact — intentionally — and that makes the cost of implementing the N+1 feature closer to N than 1.” This is exactly why a startup can come up with a simple product and blow a big co out of the water. They don’t have to worry about how all the other pieces in the business - and in the code! - interact with each other.
Good reads on the history of large well-known retailers are not usual, as most stories in the genre end up with a strong PR flavor. This article, by virtue of showing the origin stories of two seemingly rival companies at once, achieves a good balance.
It has been interesting to see Ben apply aggregation theory to politics more and more. I agree with the views presented in this article about centralization (or lack thereof), regulation (or lack thereof), and market solutions (or lack thereof).
Thinking about this on a personal level is interesting. I know what my goals for the year are, to a certain level, but what are things that I should specifically not focus on? After all, focus means “saying no to the hundred other good ideas that there are.”
Filing bugs sucks, every time, but few things are as satisfying as getting a message that says “this will be fixed in the next build!” and feeling like you’re helping improve a system that you actively use. Whether it is opening an issue on an open source project, or filing a Radar for a different team at Apple, the less I have to think about how to report a bug, the more likely it is that I will continue using your software, and helping you improve it.
This post has been making rounds on tech twitter, and several of the newsletters I follow shared it, too. I wholeheartedly disagree with Jessica here, which is exactly why I wanted to share this. I think Anil Dash’s response summarizes my thoughts well.
Ten years ago today, Steve Jobs unveiled two products that could change the world. One did. The other one was the Apple TV. Ben reminds us that how much he’s idolized, “it’s worth remembering that even Steve Jobs hedged his bets.”
While obviously biased, Fred has good points about the importance of having experienced venture capitalists backing your company. I knew that reserves, and follow-up rounds, were an important aspect of the business, but its always good to understand the mechanics in a deeper way.
A quick read. The idea of moving away from your comfort zone, and perpetually moving towards new things is definitely an appealing one to most entrepreneurs.
I have had an Echo for several months now, and I still see it as a gimmick, but I understand why the strategy behind the device has so much going for it. Amazon is building a platform that makes a lot of sense, but the technology isn’t quite there yet. It’ll be interesting to see this pan out.
History definitely rhymes! “…here’s the deal. Most people aren’t power users” is exactly what I’ve been thinking the past 5 days after the Mac release event. I am convinced that this generation of MBPs will sell well. Even if I am not buying one, the majority will.
The stories coming out of the Wells Fargo scandal are rough. Incentives in the financial markets are turned on their heads, and it is amazing that the extensive regulation can’t handle these issues. Golden parachutes and bail-outs aside, this is insanity.
Similar to the recent Bloomberg article. Amazon seems more and more serious about their last-mile effort, and the incumbents are still incredulous.
A few weeks have vindicated Ben’s comments. While everyone was thinking about the missing headphone jack, this article explained the latest iPhone release for what it most likely is: set up.
Not often do you get a VCs view on another fund. Suster gives us some great insights in his piece.
Amazon is an impressively interesting company (as an aside, the old timey look of the photos is great, too). The original bits and atoms startup, which somehow keeps innovating.
As software seeps into our daily lives, everything becomes “tech”. I don’t like that word, it is too broad, and somewhat meaningless. A truck is technology. So is a self-driving truck, but the latter does much more by leveraging software. Every “traditional” company in some capacity uses “tech”, and as time goes on more and more firms depend on software for their daily operations. This is at the root of the reality that McClure describes. AirBnB is considered a “tech” company, but it should be compared against Hilton and Marriott, not against Google and Apple. That’s their actual competition. The hedge is real, and it is only a symptom of the overall trend towards a fully software enabled industry.
The “PR angle” Fred talks about is true of the blogs of VCs, startups, programmers, journalists, and pretty much any other piece of content on the web, even including this curated set of links. We should cast wide nets, and get information from every possible source before making decisions. Remember other people are driven by incentives just as much as ourselves.
Whether penny auctions can be classified as gambling or not, they could be a source of really interesting decision theory/behavioral economics research. If you know of any studies particularly worth looking at, please send them my way.
Being on the inside, I can’t say much about this, other than: I’m still bullish.
Incentives rule all our decisions. If the mandate of fiduciary duty is to “maximize shareholder value,” that is what any board will do. Whether the “business decision” was correct or not is a question of short-term vs. long-term thinking, discount rates, and how much the company values its employees. When labor is interchangable, this is not a surprising decision. If the well-being of the employees were somehow baked in into the pricing model, there could be a different outcome.
I like to think of myself as a much more fox-ey than hedgehog-ey person, and I think success comes from getting a fox to surround themselves with hedgehogs. This is true in the AI context, as well as many others. “To think about tech now is to think about many things.”
Because who wouldn’t tip $3 on a cup of coffee?
In a recent post, I shared Charlie Warzel’s analysis on the future of payments. This episode of the a16z podcast takes a deeper dive.
An inside look at how Facebook runs. The content is a little wordy, but I’d like to read more about this story. Will probably end up buying the book.
HTML, Flash, Video, etc, are only a medium. Corporations today are working hard to exploit these new means of distribution.
Understanding that developing markets are fundamentally different beasts, and not just waiting for copies of what has already been done, is both challenging, and exciting. Makes me wonder what I could do if I went back home.
Yes, two posts by Evans today. It’s that good.
The “best” is not always enough.
Culture is fascinating, but also really subjective, making it hard to quantify, or analyze. To make it worse, it is turtles all the way down: culture matters at the company, division, group, team and individual basis, and the larger the company the more culture solidifies as a “thing” that makes that company what it is.
If I am sharing an article by this guy, it must be good. Never thought I’d do that, but he does bring up good points.
As Marco says, “…the last thing we all need is for the ‘data’ economy to destroy another medium.” Implied, but not mentioned in the article, is the discoverability problem of podcasts. Finding 10 shows that you generally like is easy. Finding the best episode of those 10 shows is impossible.
While I understand the point of regulation, Opternative delivers exactly what it advertises: refractive eye exams. The incumbents are just using regulation to push their interests and avoid getting pushed out of the market. But, obviously, I am biased. I used to work there.
Possibly my favorite opening paragraph in a TechCrunch article, ever.
Extreme clarity on the future of journalism, media, and strategies for companies in the space to respond to change. TL;DR: create better content or disappear. The arguments fit perfectly with Aggregation Theory, and while the article is a bit too focused on politics, the analysis could apply to any other news covered by the media, from the Tech Bubble, to ISIS, or Millenials. Long, but worthwhile.</br>I have been reading Baekdal for years. I can’t even remember how I ran into his blog, but it must have been 7 or 8 years ago, and I am glad I did.
While I have read (…skimmed 🙄) Mary Meeker’s report several years in a row by now, I had never consciously noticed the acceleration of adoption rates of new technologies.
Possibly more interesting than the opt-in model championed by Blendle.
Evans has a knack for finding great analogies from history. In most cases, path dependence, network effects, consumer lock in, and feedback loops matter more than any one decision. I wonder if we can systematically figure out the decisions that matter more…
Ben sounds more bullish in this article than in the past few, especially Exponent.
Yet another bear case for Apple pinned on the cult of personality for Steve Jobs. While I disagree with the overall message, the writing is really good, and Lefsetz does have a point on the strategy of innovation, viz. Christensen’s disruptive innovation.
Most of modern economics is based on the idea that people make decisions with a clear understanding of the consequences. This couldn’t be further from the truth. Whether we’re talking of switching to a new job, moving to a different state, picking an insurance plan or making a donation, there are always economic consequences that people don’t understand. The complexity of our world, some of it designed, some of it emergent, makes rational decision-making almost impossible. These Uber employees were definitely not aware of how big of an issue this policy would be years after they joined the company. (For more on the topic, take a look at Zach Holman’s post.)
I don’t buy the bot craze. The technology is not there yet, and as the author well describes, the user experience feels just like calling a bank, or a telco, and being greeted by a distorted digital voice asking how one can be helped. Some day.
An oldie, but goodie. Someone should repeat this analysis and include 2015/2016 data. We’ve probably already crossed the 2x threshold.
This reminded me of the Planet Money episode on CEO pay and how hard it is to actually measure how employees are compensanted.
I have been on the other side of the table of many interviews since I started working at Apple. It is unbelievably hard to gauge the skills of a front-end engineer, even more so when more than half the people involved in the interview process do back-end work day to day.
As is mentioned toward the end, “the most effective monopoly killer is the next monopoly.”
Sometimes, free is a problem.
Long, but so worth it. As Paul Ford tweeted, this essay is “a great catalog of Silicon Valley self-deceptions.”
Everyone talks about “bots”, but “bots” are not new. Grover makes a great analogy between early iOS skeumorphism and the metaphors of “conversational UI” that have leaked into these new user experiences. He goes on to argue that the notification systems in modern operating systems are broken, which I fully agree with, and suggests the rise of meta-platforms like WeChat and Facebook Messenger as the path forward.
If you haven’t yet, go read Part 1.
I will steal a comment from Hacker News, because it was that good of an explanation of why this article, as interesting of a read as it is, says nothing: “To say that the technology is best when it’s ripe for replacement could just be flipped around. Technological advances happen when they happen and whatever gets replaced was the best we could do before then.”
Everyone is talking about bots.