Instagram

Instagram logo 2016

Note, this one runs a touch long. If you want to listen, there’s a podcast version called “Mike’s Notes.” If you want to buy the e-book of this post for ease of reading, or to support the blog, it’s available on Amazon.

NPR has a new podcast call How I Built This hosted by Guy Raz. Episode 2 was an interview with Instagram founders Kevin Systrom and Mike Krieger. It was good. One note before the notes, I wasn’t sure who was talking during the episode so some of these quotes go unattributed.

Our table of contents:

  1. Imitation is a fine place to start, but not stay.
  2. Keep a low overhead.
  3. Get lucky (like, really lucky)
  4. Hinge plays
  5. Timing matters
  6. You’ll never be ready for a trial by fire.

1/ Imitation is a fine place to start, but not stay. “At that time there were so many check-in apps. There was Foursquare and Gowalla and a bunch of others trying to make it. Of course, following the trend, I thought there was something here about the devices in everyone’s pockets being available to share new types of information.”

Instagram was born as a check-in app too, alias, Burbn. Good name, but a bad strategy, and one they soon moved away from. It’s okay to imitate so long as you soon relocate.

When Casey Neistat was asked how to create a great YouTube channel, he inverted the question and pointed out the best way NOT to succeed – imitate. Starting as an imitator is okay, continuing to success as one is not.

Stephen King writes that everyone imitates to start. Whether conscious or not, you don’t start from scratch.

“You may find yourself adopting a style you find particularly exciting, and there’s nothing wrong with that. When I read Ray Bradbury as a kid, I wrote like Ray Bradbury – everything green ad wondrous and seen through a lens smeared with the grease of nostalgia.”

King goes on to explain that the styles of his youthful imitation blended into “a kind of hilarious stew…a necessary part of developing ones own style.”

Seth Klarman said he imitated Warren Buffett, but moved on. “We always follow value principles but try to improve on them through in-depth fundamental analysis and detailed research.”

Jason Calacanis told Tim O’Reilly that he imitated everything he did early on.

In the domain of sports Anson Dorrance learned about coaching soccer practices from watching Dean Smith coach basketball practices. “Every elite coach is part innovator, part imitator,” Dorrance said. Football coaches like Bill Belichick and Pete Carroll both take then tweak too.

The Instagram guys note that Gowalla was an imitator, and founder Josh Williams wrote a great postmortem (parts of which were in my book on failed start-ups). Williams wanted to create an app “for people to see the world through the eyes of their friends.” Instead he got stuck in the “Check-in Wars” and that accidentally became the key metric people used to compare Gowalla and Foursquare.

Here’s Williams’s warning about imitation:

It turns out there was another app that shared a similar vision called Burbn. They were building yet another check-in type service loaded with every feature but the kitchen sink. But early user feedback, coupled with a desire to avoid the check-in battle shitshow already in progress, led them to drop everything to focus on one simple feature: photos.

They made the act of taking and sharing photos (many of which just happened to be location-tagged) fast, simple, and fun.

They made their own rules. They called it Instagram.

Gowalla got stuck in a battle they didn’t want to fight. Burbn/Instagram escaped the fray and found newly available beachfront property.

Imitate and relocate is a another way to express Howard Marks‘s idea of being different and being right. Imitation is a way to be right, following what has so far worked. Relocation is that you have to be different.

Janet Lowe wrote, “(Benjamin) Graham often told his students that there were two requirements for success on Wall Street: the first is to think correctly and the second is to think independently.” People from Charlie Munger and the Instagram founders have done just that.

2/ Keep a low overhead.  “That’s more money (the first $50K invested) than I had ever heard of in my entire life of a business getting… so here are two guys with a prototype, a couple of computers, and no office, who raised a half a million dollars who are looking at each other like, we think we can make this last. We were living on peanut butter and jelly sandwiches.”

Instagram needed time to figure out that they were a photo-sharing-social-network and not a check-in-game-social-network. That difference is the whole story. They had the time to figure this out because they kept a low overhead.

If a start-up doesn’t die, it was a good day. One way to die is to spend too much money. In my book there were four money mistakes:

  1. Hiring too fast.
  2. Expensive, low return marketing.
  3. Too much hardware or inventory.
  4. Sunk cost bias.

Instagram did none of these things. It was two guys, with some laptops and one server, flitting from one idea to another, and pitching over coffee meetings. In the book I compared these pitfalls to quicksand. Krieger and Systrom moved through the jungle like Tarzan.

In his free e-book, Some More Things, Ben Horowitz writes about another way to avoid the money pit; positive cash flow (which is just enough revenue to cover the overhead):

“This wasn’t about strategy or tactics; this was about freedom. The freedom to build the company the way we thought was best. Over the next five years, investors wanted us to do lots of things. Some things they wanted were smart and some very stupid. We listened to what they had to say, but we always did what we thought was right and we never worried about the consequences. Investors did not control our destiny. Over those five years the company’s value grew 40-fold as a result of controlling our own destiny and being able to make our own decisions.”

Horowitz would have lost control of his company if he kept a higher overhead and needed investor’s money.

Before Yvon Chouinard started Patagonia, he had a small hardware climbing gear company. To keep the company running (and him fishing, skiing, climbing, and so on) Chouinard lived cheaply.  “I’d live on fifty cents to a dollar a day,” he wrote. “Before leaving for the Rockies one summer my friend and I bought a couple of cases of dented cat food cans from a damaged can food outlet in San Francisco we supplemented cat food with oatmeal, potatoes, ground squirrel, blue grouse, and porcupines.”

Chouinard needed time to figure out Patagonia.

Jay Leno told Judd Apatow that he kept a low overhead. “Well, I was also a Mercedes-Benz mechanic at the time. I didn’t have any expenses. I didn’t have any lifestyle to maintain. I liked doing it. I would drive hundreds and hundreds of miles to work for free for four or five minutes. I didn’t know if I would ever really make a living at it.”

Apatow remembered entering Jerry Seinfeld’s apartment early in his career and thinking, there’s not much here. “I was a minimalist from the beginning,” Seinfeld said, “I think that’s why I’ve done well as a comedian…If you always want less, in words as well as things, you’ll do well as a writer.”

Accidentally or not, both Leno and Seinfeld figured out that they needed to practice their act to get good at it. That meant sometimes working for free. You can’t do that kind of thing if you have bills to pay.

Ezra Klein found this out as he developed his career. Before Klein started Vox or wrote for the Washington Post he was a bored college student – until he found something called ‘blogging.’ Klein decided to give it a try.

He wasn’t great, but he didn’t need to be. Klein said publications saw ‘blogging’ and needed writers.  He got a fellowship at the American Prospect. It paid, “very little, but it taught you how to do magazine journalism.” If Klein hadn’t had a low overhead he couldn’t have taken this opportunity. “I was a college student, so I could reorient my career. It was not an opportunity that would have worked for someone with three kids.”

Sophia Amoruso saw interns rolling around on Herman Miller chairs. That’s not okay. Her assistant sold them on Craigslist. “We don’t have an isolated group [managers] surrounded by servants. Berkshire’s headquarters is a tiny little suite,” said Charlie Munger. Michael Ovitz built the most powerful agency in Hollywood with borrowed furniture, a gift of office supplies from his father, and his wife answering the phones.

The more time you have to figure something out, the better your chances of getting it right. Expenses truncates that time.

3/ Get lucky (like, really lucky). I think we’re going to focus on photos.”

The scene where Instagram pivoted to photos could have come from a movie. Systrom tells it:

“She (his girlfriend) said, ‘well I don’t think I’m going to post very much, my photos aren’t that good. They’re not as good as your friend Greg’s.’

Well Greg uses a bunch of filter apps to make them look nice.

She said, ‘well you should probably add filters.’

It doesn’t matter if you back-in accidentally or charge forward full throttle when you find yourself with a good idea. The luck of Instagram didn’t stop there.

“Before you knew it we had overloaded our system…to be clear, there is no reason we should have succeeded. The server was down every other hour and people just kind of forgave us. They came back and they would share their photos. At the time mobile networks weren’t that great either, so people would blame their connection and not us – which was great.”

The good fortune continues! In some ways I wonder if Netflix has this same advantage. When the streaming slows I rarely think negatively about Netflix, my ISP on the other hand….

The founders know they’ve been lucky. When Raz asks how much of it has been luck they say:

“50%. I have this thesis that the world runs on luck and the question is what you do with it. Everyone gets lucky for some part of their life, the question is; are you alert enough you know you are being lucky? Are you talented enough to take that advantage and run with it? Do you have enough grit to stay with it when it gets hard?’”

Bill Gurley had a similar experience. He had been hired to write about the technology sector when a row of people above him left the company. Gurley says he took advantage:

“I got very lucky that CS First Boston gave me an opportunity. Then two weeks after I joined, Charlie Wolfe was there and covering PCs and he announced that he wanted to resign and back off and so I went into my tiny little apartment and wrote a 20 page assessment of the PC industry. I went in and begged for Charlie’s job…It couldn’t have been more fortunate because I moved through the ranks very quickly.”

The job opened up (a lucky break), but Gurley had to hustle to take advantage of it. uiqg24ih

Before Gene Kranz was played by Ed Harris in Apollo 13 he was like many other high schoolers before him – bagging groceries. Kranz was a bright kid, earning scholarships to Notre Dame and the Naval Academy. He was going to do big things.

Then he had a physical examination. His blood sugar level  was too high (one of the perks of the grocery store was the candy). His scholarships were revoked.

Kranz’s bad luck was offset by a kind teacher (Sister Mary) who helped him earn a $500 scholarship to Parks Air College in St. Louis.

We see Kranz at a fork in the road just like the Instagram founders. He’s just had a bit of good luck and it’s up to him to take advantage of it. Kranz does, and goes on to lead the Apollo 11 lunar landing.

“There’s always luck involved,” Jack Schwager said about investing. Soccer is a 50/50 game. Football has a high amount of luck too. Coach Pete Carroll tries to get his players to focus on the parts that aren’t prone to luck:

“The winning/losing thing. The judgment at the end of it. You can’t focus on that. If you focus on that you’re missing all the things that happen in the meantime. What really gets you there are the good plays, one after another. One step at a time. One thought at a time. If you believe and trust in that, the outcome will turn out the way you want it to.”

World Series of Poker champion Annie Duke told Charles Duhigg, “all we can do is learn how to make the best decisions that are in front of us, and trust, over time, the odds will be in our favor.”

Life will have good luck and it will have bad luck.  If you can recognize when an obscurely good opportunity presents itself, that can really help your company, career, or team.

4/ Hinge plays. “We sat down very early on in the product design process and asked ourselves, do we want to be a place where you send a friend a request and you have to accept it in order to see those photos or do we want to be open and anyone can follow anyone. I’m so glad we ended up choosing the open model.”

Bill Belichick calls these moments of a football game “hinge plays.” During one Super Bowl he told assistant coach Romeo Crennel, “we can’t give up this play. We can’t give up a first down on third-and-25. I mean that will kill us.” I didn’t start to think about hinge plays until I started thinking about alternative histories/possible outcomes.

Tic-tac-toe-game-tree.svg

By Traced by User:Stannered, original by en:User:Gdr – Traced from en:Image:Tic-tac-toe-game-tree.png, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=1877696

Tic tac toe has 255,168  histories/outcomes. The image’s bottom row shows 12 possible starts. Football has a tree like this too. Even a ‘game’ like tossing a coin demonstrates this.

tree-diagram11

Belichick believes that there are certain plays in the game, hinge plays, that swing from one outcome to another. In coin tossing it might be that you win only when you get two of the same (heads & heads or tails & tails). Toss one tail and you’ll need another to come up. Tossing a coin is a game of  randomness, football and technology companies less so, but the hinge plays exist in both.

The hinge for Belichick’s football teams are 3rd down plays. Part of the reason Belichick admired linebacker Lawrence Taylor was because “he was a monster on third down.”

If we can identify these hinge plays, we can improve our odds for success. Peter Thiel wrote that a hinge play for him was whether or not to take a Supreme Court clerkship. “With the benefit of hindsight, we know that winning that ultimate competition would have changed my life for the worse.”

Once we start to think of possible histories we can identify hinge plays that lead us to the desired goals. This is easier said than done.  Economists Chris Anderson and David Sally looked at soccer and found that defense really does win championships. Not allowing a goal leads to a better outcome than scoring a goal. This is hard to see. If you watch a soccer game and see a great crossing pass into the box, header, or corner kick it’s clear those kinds of offensive plays affected the course of the game. It’s much harder to identify when a defender makes a sharp pass, steals the ball, or is in the right spot at the right time.

Naval Ravikant put it this way:

Think about all the outcomes. Think about the desired ones. Focus on hinge plays that get you closer.

5/ Timing matters. “We started the company right at the moment where the quality of those (smart phone) cameras just kind of met up with point and shoots, and because of that everyone started taking pictures with their phone, but they had no place to put them, or it was hard.”

Good timing allows good ideas to become great.

Jim Miller said, “Ovitz and Meyer were lucky they were in the movie business back then because they had much more influence and many more clients working. It’s a tougher business now.” Tony Hawk got great at skateboarding right before it started to get big. Barbara Corcoran said, “my asset was terrible years for New York…I had the luckiest timing of any kid in the world because I happened to land in New York at its darkest hour.” Milton Hershey built out his distribution on Civil War reconstruction efforts and creeping railroads.

However, timing cuts both ways.

Mark Cuban tried to start a streaming media company, but the ISP speeds weren’t fast enough.Casey Neistat was (probably) too late with his tech company, Beme. Percy Fawcett had bad timing because a world war broke out. Trip Adler was too early for a ride sharing service. Chamath Palihapitiya was too early pitching the Facebook phone.

What helps for the right timing is a certain amount of patience. It’s an ability to pass on okay ideas and then seize great ones.

Louis C.K.  did this when he created Horace and Pete. Louis was scheduled to make a movie during the same time but there was something about his idea for Horace and Pete that tugged at him.

Louis started writing episodes and thinking about how he could make it and who would be in it. Steve Buscemi came to mind. He’s be great, Louis thought, and he was available because his show – Boardwalk Empire – had just ended. Louis called around to other actors he liked and almost all of his first choices said yes.

Louis had good timing but he also took advantage of the skills he had built up in the same way that Bill Gurley saw a chance and took it and that the Instagram guys suggest you have the talent to seize the moment. Louis told Charlie Rose it’s like that scene in the Matrix:

When there is a helicopter and he says to her, you know how to play helicopter. And she goes wait a minute and she loads the program. Now I do. Well, anyone can do that. It just takes longer. You can just load a program. So, now I know how to create a multicamera drama and mount it the same week that I shot it. And how to direct many great actors which I had never done before.

Certain conditions lead to better outcomes than others, and central this is timing. In the same way a backyard gardener plants tomatoes at one time in the year and not another, creating any kind of company is influenced by the timing too.

Business though has no “final frost.” There are no signs to go, and none to wait. As we pointed out in #3, you sometimes need to be lucky – and build up some skills along the way.

6/ You’ll never be ready for a trial by fire. “Those initial weeks it was trial by fire. We had to learn everything on the job and we had so many chances to fail, but we just kept at it. We kept working. We pulled a bunch of all nighters. The amount we learned in that first year was just crazy. It was like five years of college all in one.”

Though the Instagram story is told in a shiny, tiny podcast episode, there is so much more. One thing to emphasize here is that Systrom and Krieger weren’t prepared. They couldn’t be, no one is.

When Gene Kranz showed up at NASA control for the first Mercury mission an astronaut gave him a ride from the airport. This figure-it-out-as-you-go ethos wasn’t only in the early days. Throughout his book, Failure to Launch, Kranz notes that they figured out stuff as they went:

“Without knowing much about anything, I was telling people how to do everything, writing the rules for the control team that would support the Mercury-Redstone launch.”

“Since there were no books written on the actual methodology of space flight, we had to write them as we went along.”

“Such was flight control in the final year before the lunar landing. Assignments and opportunities came like a lightning flash. There were no precedents, no guidelines. All of a sudden you were given a job and you did it – whatever it took.”

When I was an adjunct instructor, I taught in the education department and prepared student teachers to lead a classroom. Their most frequent complaint was that they weren’t ready. I told them that they would never be ready. There’s no “Very Official: Complete Training Manual” sitting on a shelf somewhere. You just get out there and figure things out.

Angela Duckworth (author of Grit) started  Breakthrough Greater Boston, and wrote, “As anyone who has started an organization from scratch can tell you, there are a million tasks, big and small, and no instruction manual for any of them.”

In Nike’s early days, Phil Knight needed someone to go figure out why one of their factories wasn’t running as efficiently as it could have been. Knight chose one of his first hires, Jeff  Johnson. Johnson was a retail guy. He told Knight he didn’t think he knew what to do, and felt over his head.

“Over your head!” Knight wrote, “We’re all in over our heads! Way over!”

Thanks for reading, I’m @mikedariano on Twitter.

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