Sophia Amoruso (part II)

This is part two of my notes from Sophia Amoruso’s conversation with Tim Ferriss. If you missed part one, you can find it here. There we answered:

– Why start small?

– Why have to have some skills and more importantly why to develop them?

– How to learn quickly?

– What is the most important thing?

These notes will pick up where we left off.

Ready?

 

5- Be different. Why was Nasty Gal named Nasty Gal? Because Windblown Lilies of the Valley was already taken. Or something like that.

Amoruso writes that there were other vintage clothing sellers on eBay, but they had names, “so bohemian it hurt.” “So the contrarian in me grabbed the keyboard and named my shop-to-be Nasty Gal Vintage.”

It’s entirely possible that Amoruso would have ended up like all the other vintage clothing stores if she wasn’t different – but she was, and her difference helped.

It wasn’t just a difference in name, but in attitude and quality. Amoruso writes in #Girlboss:

“The bin to my right had all of the vintage items that had just sold and needed to be shipped out. I’d grab an item and inspect it to make sure it was in good shape. I’d zip zippers, button buttons, and hook hooks, then fold it and slide it into a clear plastic bag that I sealed with a sticker. I’d print out a receipt and a Photoshop-hacked note reading “Thanks for shopping at Nasty Gal Vintage! We hope you love your new stuff as much as we do!”— even though “we” was just me. Then I’d put it in a box and slap a shipping label on. Only I didn’t slap anything— I took a lot of pride in how carefully I affixed those labels.”

A different name. A different attention to detail. A different brand too. Nasty Gal meant something. She recalls getting emails from fans who said that they looked at her pictures before going out at night as a way to get style ideas. Amoruso wasn’t just selling clothes.

She succeeded in the way that Peter Thiel suggests: “All happy companies are different: each on earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.”

Nasty Gal escaped the competition.

Note, you don’t need a lot to be different. Dan Ariely and James Altucher talked about the Significant Objects Project where people gave rich histories to objects on eBay and saw the scales skyrocket. Sometimes you can be different in one important one.

This is what Amoruso did. She was different because her brand told a story that people were eager for.

You have to be different. If you really want to succeed, you can’t be the 100th pizza place in town. Morgan Housel spoke about being different in investing. Judah Friedlander spoke about being different in comedy. Michael Mauboussin spoke about being different in business.

 

6- Push boundaries and grey areas until you get pushed out. Nasty Gal succeed despite breaking the rules of eBay. Before explaining what they did, let’s set the stage with a matrix of rule following:

 

Laws & Rules Follow spirit Break spirit
Follow letter No trouble Maybe trouble (could get off on technicality)
Break letter Maybe trouble (could get off on public support) Trouble

We move in and out of these boxes all the time. Follow the speed limit? No trouble box. Keep up with traffic? Maybe trouble box. This box – “I was just keeping up with traffic officer” – is where Amoruso operated on eBay. She writes:

“For example, it was against eBay policy to link to an outside website, social media or otherwise, from your listings. However, it was common practice among sellers to link to their MySpace pages— almost everyone did.”

For vintage clothings sellers on eBay, the letter and spirit of the law were two different lines. You could cross one but not both. Amoruso nudged the line, then the line moved.

That’s the thing with the spirit of the law, it can move on you. It’s one thing to keep up with traffic on I-95 on Labor Day weekend. It’s another to speed through a school zone. You can also get outed by others. This is what happened to Amoruso, someone in the vintage clothing community reported her to eBay, and she was gone.

This entire experience reminded me of bananas, specifically Philip Zemurray the Banana King. In the wonderful book, The Fish That Ate the Whale we see all the grey box things Zemurray did. One example of this type of thinking was when one of his competitors lobbied the government for bridge regulations that would keep Zemurray from getting his bananas from one side of a river to another. Zemurray circumvented the letter of the law (don’t build a bridge) by building building two (very) long barges.

 

7- Keep a low overhead. When you’re buying used clothing to sell on your eBay store it’s easy to keep overhead low. When you’re running a business with employees that’s one of the fastest growing in fashion it isn’t – but that’s exactly what Amoruso did.

Step by step, she slowly scaled up. First she lived in a pool house with no kitchen. “There was shit on top of shit,” Amoruso writes, “boxes balanced on top of a toaster oven on top of a mini-fridge like a game of household-object Jenga.”

From there she went to a 1,000 square foot loft, away from everything. The best parts were that the space was bigger and had the inherent advantage of being away away from her friends in the city. Amoruso doesn’t come out and say it, but it seems like the lack of distraction helped her work her butt off. Each upgrade in space was just big enough.

Finally Nasty Gal had made it and everyone got Herman Aeron chairs. This was it. They had arrived.  

WAIT WAIT WAIT. That’s not what happened.

“There was no way that I was going to have interns rolling around on these things!” Amoruso writes. “It sent the wrong message to the company to preach frugality while balling out on twelve grand worth of chairs. You can’t act like you’ve arrived when you’re only just receiving the invitation. We couldn’t return the Aeron chairs, but after we were settled in our new LA offices, our poor office manager, Francis, spent six months selling them . . . on Craigslist.”

The low overhead (Amoruso calls it frugality) mindset can be very helpful. Ezra Klein got a writing fellowship because he didn’t have bills to pay. Jerry Seinfeld, Jay Leno, and Sarah Silverman – as they said in Sick in The Head – each kept their expenses low so they could do the work they wanted.

Low overhead is a form of optionality.

 

8- Know thyself. Amoruso isn’t the CEO of Nasty Gal anymore. “The things I think I’m good at,” she says, “aren’t the skills a CEO needs.” But it wasn’t always this way.

Early on this mean that if she knew she didn’t know something, Amoruso had to learn it. Hence why she bought the book eBay for Dummies. She also recognized that while her modeling and photography skills were good – they weren’t great. She knew this and hired/bartered for people with those skills.

Michael Lombardi calls this “management of self” the most importance management there is. To know what we don’t know and to act wisely on that. How do we start to figure out this sort of thing? Experimentation.

Naval Ravikant, Scott Adams, and Gretchen Rubin all advocate for self experimentation with habits, foods, and even routes to work.

Amoruso has figured out her limits and abilities thanks to living and breathing (experimentation with what works and didn’t) Nasty Gal for the past decade (2006-2016).

 

9- Life’s natural state is hard. Now that Amoruso is not the CEO, she’s not off on a beach. “It doesn’t get easier,” she tells Ferriss, “it’s the same but with different stuff.” In essence, there’s no finish line.

You don’t feel content to be done if you’re doing things. There’s no permanent finish line.

Marcus Aurelius wrote: “People who love what they do wear themselves down doing it, they even forget to wash or eat.”

That’s where Amoruso is, she’s worn down because she loves what she’s doing. It seems right to end with this Casey Neistat video:

Thanks for reading, I’m @mikedariano on Twitter. If you want more from me, you can get updates on my Survivor’s Bias project here.

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Sophia Amoruso (part I)

Sophia Amoruso (@NastyGal) joined Tim Ferriss (@TFerriss) to talk business. Amoruso is the founder of Nasty Gal, author of #Girlboss, and host of the #girlboss radio podcast.

In the same way that we looked at Amy Schumer’s advice as a hero’s journey, Brian Koppelman and David Levien’s advice as creating a great television show, and Ramit Sethi’s advice as starting a business, we’ll follow a similar path for Amoruso.

How do you run a great business?

 

1- Start small. “eBay was not my way into the fashion industry,” Amoruso says, “that was not my intention.” She was just bored., Her job, checking ID’s at an art school, left her a lot of free time, and she started hanging out on eBay and Myspace. She started small.

When James Manos was writing on the Sopranos (College) he said that it wasn’t their intention to make something great, just to do good work. Everything great starts small.

Austin Kleon noted that it’s hard. You compare your work to the people you admire and your work stinks. That happens to everyone.

glassdesk.jpg

Amoruso had to start small. In listening to her interview and reading her book it sounds like she was/is barely holding on. Start small and you get a chance to strengthen your grip, to get stronger and hold on longer. 

Seth Rogen and Evan Goldberg started small when they wrote Superbad but wanted to be in Hollywood. Michael Lombardi started small when he worked at Hofstra but wanted to be in the NFL.  Chris Hadfield started small when he flew a glider before he flew in space. Ryan Holiday and Maria Popova both emailed friends before their lists grew to thousands.

 

2- Have some basic competencies you can build into career capital. In both her interview with Ferriss and in her book, Amoruso briefly explains:

“I had the photography experience. I had cute friends to model. I wore exclusively vintage and knew the ropes. And I was an expert scavenger.”

But she was really good at those things. Plus, Amoruso had skills as copywriter and was willing to learn – she bought the book, eBay for dummies.  She also had enough know-how to style a model. She had basic competencies that she built into career capital.

The good news to this template is that no one starts out as great at anything. The bad(ish) news is that you need to work really hard to be better than other people.

Ken Fisher is a best stelling author, but he wasn’t always that way.

Barry Ritholtz compliments Fisher’s work and says, “you’ve obviously inherited your dad’s writing skills.”

“Not true,” replies Fisher, “because if I had inherited them they would have come to me very naturally, but I worked hard to learn how to write.”

B.J. Novak‘s career show this too. Novak’s parents were both writers, which gave him some exposure to writing, but no inherited skill.

Instead Novak had to succeed in high school and get into Harvard. There, he had to apply 3 times to write for the Lampoon. Then he had to create his own show (“The BJ Show”) and come up with a variety capstone for it. Naturally he needed a headliner and so he had to call around and reach out to Bob Saget.

Only a few dozen steps later and he ends up working on The Office. Novak created careerp capital. Amoruso created career capital. We need to create career capital.

Amoruso built her capital as she built her business. She got better at taking photographs and trading (negotiating) headshots for hours of modeling. She was attuned to keywords, buzzwords, and tags. Her business and her personal skills (career capital) grew hand in hand.

Note that this isn’t an infinite reservoir. Amoruso couldn’t be good at everything – and we’ll see how she understood that in #8.

 

3- Learn quickly what works. Amoruso says she would put items up on Sunday nights (the best time) and see what sold. Then she would look for more of that. For the things that didn’t sell, she writes, “I wouldn’t touch anything like it with a ten-foot pole ever again.”

I’m researching failed startups via the repository of stories at autopsy.io and this failure to learn is a consistent feature for failed companies.

One founder wrote that rather than focus on growth they should have aimed for repurchase rates of a certain amount by a certain date. If that didn’t happen then they would know they had a big problem.

Another founder notes that they took a lot of time to build a physical prototype without figuring out what the customer really wanted. “In retrospect, this was a mistake. Instead, we should have released something far more lightweight, and as quickly as possible.”

Amoruso avoided this mistake because she “listened to the audience.” B.J. Novak told Ferriss, “there’s no one smarter than the audience.” When Novak worked on The Office he would test jokes with friends, colleagues, and in front of audiences.

Ezra Klein started Vox because he listened to his audience. Ryan Holiday writes that the best authors listen to their audience before they publish a book.

It’s devilishly hard to predict what people will want but paramount to learn. So how do we do this? We need to look at what people do, not what people say.

Economists define the difference as stated and revealed preferences.

  • Stated preferences are what we say we want; get fit, save more, write everyday.
  • Revealed preferences are what we actually do; go/not go to the gym, spend/save our paychecks, write/watch tv everyday.

Customers and audiences function the same way. A theme at autopsy.io is the number of founders who thought they had shut up and take my money clients but they didn’t.

One founder articulated it this way, “We kept hearing, I’d like to get it for my son/nephew/cousin,” instead of, “That’s super awesome, I want it now!!11!””

8830100398_eca5a61590_o (1)

To learn quickly you’ll need to see what people do, not what they say. Amoruso saw the dresses people bought, an actual manifestation of the meme.

 

4- Focus on THE MOST IMPORTANT THING. Two things mattered above all for an eBay fashion store, says Amoruso; silhouette thumbnails and item descriptions. As she leveled up her basic skills (#2) to core competencies she noticed that some things mattered more than others. Amoruso wrote:

“Silhouette was always the most important element in my photos. It was critical on eBay, because that was what stood out when potential customers were zooming through thumbnails, giving less than a microsecond’s thought to each item.”

The other MOST IMPORTANT THING is that you have a good product. “If you have something great,” Amoruso says, “people will talk about it.”

But another MOST IMPORTANT THING will be to own your own domain. Paul Graham wrote, “If you have a US startup called X and you don’t have x.com, you should probably change your name.” Amoruso says she had to buy NastyGal.com from a porn site for 8K$.

Here’s the deal with THE MOST IMPORTANT THING, it’s kinda hard to figure out, and impossible to prescribe. As time ticks and situations swirl, everything changes.

What do you do? We’ll finish with the advice from Penn Jillette: “the most important thing is everything.” Whatever it is that you’re working on, make sure it gets the attention, love, and effort it needs to be great.

If you wanted to plant a garden, you wouldn’t put seeds in the crack of a sidewalk. If you wanted to start a business you wouldn’t neglect customer emails (or whatever needs done).

Do great work and you’ll have people pounding down your door, yelling, “shut up and take my money.”

That’s all for part 1, part 2 about gray areas, low overhead, and the most important thing to know is coming soon…

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

The research I’m doing on Autopsy.io is about the survivor bias. The final output be 100% free, but you need to sign up via email to get it. Emails will be twice a month max, and at the end I’ll email you the final outcome.

 

How to solve ‘black box’ problems.

Today’s post is also available in podcast form on Soundcloud and iTunes:

New skills to pay new bills.

One of my favorite online thinkers is Penelope Trunk, entrepreneur and home-schooling mother.* She wrote “Search is the most important academic subject today,” and explained:

“So instead of wasting years teaching kids to memorize answers, why not move on to teaching kids to ask better questions? Because that’s what searching is, ultimately:  learning to phrase a smart question.”

This idea – teach skills not facts – has bubbled up elsewhere too. Cal Newport, Tyler Cowen, and  Peter Thiel all advocate for this approach in their respective books. Being able to use your brains and a computer’s brawn will be a good skill to have.

One way to do that is Fermi-izing.

 

Before we start.

Keep these 3 questions in mind:

  1. How much data does Google have?
  2. When will I die?
  3. Will the Cleveland Cavaliers win more than 57.5 games this year?

We’ll use these questions to apply Fermi-thinking.

 

Not Furby, Fermi.

Introduced to me in Superforecasting, Philip Tetlock explains Fermi-izing as technique to solve hard (black box) type problems. “What information,” Tetlock writes, “would allow me to answer the question?”

Questions about Google, death, and the Cleveland Cavaliers are all “black box” types of questions. The answers aren’t easily knowable. You can’t Google answers about Google’s data. That doesn’t mean we can’t answer these questions. We just need to work a little harder.

We need to take the lead bullet approach.

In his book, The Hard Thing About Hard Things, Ben Horowitz writes about facing the challenge of his company’s web server being too slow. It wasn’t like he could go to the Apple store and upgrade (a silver bullet/ non-black box type of problem.

Rather, Horowitz had to take a lead bullet approach and solve one small problem after another. He broke his big ugly problem into smaller ones.

Fermi-izing requires a similar approach. Another way to understand it is to apply Warren Buffett’s approach to investing, it’s simple but not easy.

It’s the same for breaking down black box problems, simple but not easy. Lots of lead bullets rather than silver ones.

 

Before we start, get in the right mindset.  

How much data Google has is a complicated problem. I keep 16GB of data with Google. But what about you? And schools? Plus Google Photos, plus data centers Ugh, this is getting complicated already. How do we figure this out?  We think of it like a puzzle.

A lot of really successful people do this. Chris Dixon says it’s like a maze. Ray Dalio imagines gems waiting for problems he solves. Griffin use the puzzle analogy. In Surely You’re Joking Mr. Feynman , Richard Feynman said he couldn’t “do” good physics. But when he decided to “play with physics,” “it was like uncorking a bottle.”

Think of black box problems like riddles to unravel. Rather than obstacles, think of them as opportunities.

 

How to start.

Tetlock writes “What (Enrico) Fermi understood is that by breaking down the question, we can better separate the knowable and the unknowable,” and “that’s a huge advantage.”

If something isn’t Googleable, then we need to figure out what parts of it are. The breaking down the question part is what will allow us to figure out what we can figure out.  

 

How much data does Google have?

Luckily we don’t have to do all the work, just search for someone else who did (remember that search is the most important academic subject).

In his 2014 TED Talk, Randall Munroe (creator of ‘what if?’ comics)* tried to figure out this question; how much data does Google have?

Munroe broke the problem down into knowable parts. Here’s part of his talk, emphasis is mine.

“There are a few things that I looked at here. I started with money. Google has to reveal how much they spend, in general, and that lets you put some caps on how many data centers could they be building, because a big data center costs a certain amount of money. And you can also then put a cap on how much of the world hard drive market are they taking up, which turns out, it’s pretty sizable. I read a calculation at one point, I think Google has a drive failure about every minute or two, and they just throw out the hard drive and swap in a new one. So they go through a huge number of them. And so by looking at money, you can get an idea of how many of these centers they have. You can also look at power.”

Munroe goes on to figure out how much square footage Google has, how many server racks fit into a square foot, and so on. He came up with an estimate of 15 exabytes of data. More he says, than the NSA.

We get an answer to a black box question once we break it down.

 

When will I die?

An impossible question. Maybe.

“In 1982, at age forty, I was diagnosed with abdominal mesothelioma, a rare and ‘invariably fatal’ form of cancer,” writes Stephen Jay Gould in Full House. As an academic Gould jumped into learning more

“All the literature contained the same brutal message: mesothelioma is incurable, with a median mortality of eight months following diagnosis.”

Gould had eight months to live, maybe.

Gould’s book precedes Munroe’s talk by a decade but he applies the same break-this-problem-down-into-smaller-parts.

Is 8 months a hard diagnosis, like the departure time for a flight, or something else? Gould thought it was something else. Emphasis again mine.

“I realized that all factors favored a potential location on the right tail – I was young, rarin’ to fight the bastard, located in a city offering the best possible medical treatments, blessed with a supportive family, and lucky that my disease had been discovered relatively early in its course.”

In the same way that Munroe collected variables like “money spent, drive market size, and power consumed,” Gould collected variables like age, location, and timing to update his answer. For someone with those variables the mortality timetable expanded. Gould lived for twenty more years.

 

How many games will the Cleveland Cavaliers win?

Before the 2015-2016 NBA season the betting number was 57.5 games. On his podcast Bill Simmons said it was a “lock” that they would win less than that. Why? Emphasis again, is mine.

“It scares me a little bit when guys in the NBA have bad shoulder injuries,” Simmons says about Cavalier Kevin Love. “I went under because of the injuries, because Lebron is now in year 13… what’s it going to take to get the #1 seed in the east, 52 wins?” “There were two straight years of his teams in the low to mid 50’s (wins) with Lebron playing like Lebron.”

Simmons breaks down the complicated problem to more manageable ones; will the team stay injury free, what does the competition look like, and what does the historical data say?

 

Don’t make predictions, find facts.

Each of the examples above, Munroe, Gould, and Simmons follow the same process.

First, they break black box problems down into smaller questions and they answer those questions with facts.

  • Munroe does computations with the dimensions of a server rack.
  • Gould reads medical journals about mortality rates.
  • Simmons finds past season win totals.

Charlie Munger said, “[Projections] are put together by people who have an interest in a particular outcome, have a subconscious bias, and its apparent precision makes it fallacios. They remind me of Mark Twain’s saying, “A mine is a hole in the ground owned by a liar.”

Tren Griffin writes in his book about Munger, “Effective (Benjamin) Graham value investors are like great detectives. They are constantly looking for bottom-up clues about what has happened in the past, and more importantly, what is happening now. Graham value investors like Munger stay away from making predictions…What Munger looks for is a business that has a significant track record.”

Mellody Hobson said that when her company bought Madison Square Garden some people undervalued it because the basketball team playing inside wasn’t good. That’s not finding facts. “There may be a perspective,” Hobson said,  “of ‘they’re winning or not winning’ but we can look at the data like season ticket holders buying every year.”

 

Summary: 3 steps summary to fermi-ize well

1- Don’t be overwhelmed by complexity, just take things one bite at a time. Imagine your problem is just a giant Lego castle and the pieces need sorted.

2- Filter out what is knowable and what is unknowable and focus on the former. Separate the two piles.

3- Find factual answers for questions in your knowable piles.

Thanks for reading, I’m @mikedariano on Twitter. If you liked this post you can donate a few bucks here.

* I hate giving titles like “entrepreneur and homeschooling mother” or “billionaire” but I don’t know a better way to share that a person is awesome.

 

 

Ezra Klein

Ezra Klein (@EzraKlein) joined Erik Torenberg (@ErikTorenberg) on the Product Hunt podcast to talk about new media, college graduates, and lady luck.

Rather than a storytelling post like Amy Schumer’s heroes journey or Brian Koppelman‘s advice on how to write a great TV show. This post will be a rapid fire, summary post.

Ready?

 

1- See it to believe it. Klein recalls reading Matt Yglesias’ blog and thinking, “if this college kid can do it, I can at least try.”

Penn Jillette said the same thing about going to clown college. Wow, Jillette felt, there are people who want to analyze jokes. This is amazing. B.J. Novak said, “the biggest advantage (to the Harvard Lampoon) is to not think it’s crazy to be a comedy writer or to be a writer at all.”

Even Michael Lombardi felt this when he saw Vince Lombardi coaching football. Although there’s no relation, it still made Michael believe that a career in the NFL was possible.

Sometimes we just need to see someone else doing it to believe that it’s possible.

 

2- Lady luck strikes again. We’ve seen lady luck bless (and curse) many people. Seth Godin and Mark Cuban both said they were lucky timing the stock market.

Neil Strauss and Morgan Housel were both unlucky with their timing (for a book release and job hunt).

Howard Marks said he was lucky to invest in high yield bonds before they became popular. Jason Zweig said that his writing career has been a string of lucky breaks. We will add Klein to the list.

“So much of my particular path is one lucky break after another,” Klein says. Part of it was his timing with blogs – like Marks’ with bonds. Early on there was no way that Klein – or anyone else – thought blogging would be a career. Now it is.

Why does luck come up so often in the interviews? I think it’s because admissions of luck are an antidote to the disease of hubris.

In the Greek myth, Icarus gets wax and feather wings and a warning – do not fly too close to the sun or ocean. Icarus, of course, does not.

Admitting luck – like the guests above do – is an admission of wax and feather wings. Chris Sacca articulated this when he said that being born male, white, and in the United States is an advantage. It’s good luck.

 

3- Low overhead. Besides getting lucky, Klein also says that he was able to take advantage of those lucky breaks because his overhead was low. When an internship opened up at the Washington Monthly, Klein was able to take it. He tells Torenberg that other people couldn’t because the pay was too low.  They couldn’t afford the opportunity.

Jay Leno told Judd Apatow that he took any job, no matter the pay. Leno could play anywhere and get experience rather aim for money because he required only a little and his day job (a mechanic) covered that. Sarah Silverman mentions the same idea in the same book. “I’ve always kept my overhead low so I could do whatever I wanted.”

This low overhead mindset is one of optionality. Sticking with Apatow’s book we can flip to Jerry Seinfeld’s section and see the same approach.

“Quality. That’s my only real consideration. It could be anything, as long as the people are trying to do something good. I don’t want to do a piece of junk. I’m not starving you know.”

Each of these comedians tells the same story that Ezra Klein advocates. “Trade prestige for opportunity,” Klein writes, and “letting someone pay you a bit of money to become a journalist, or even pay you nothing at all, is better than paying a j-school a lot of money to become a journalist.”

Tim Ferriss took this approach to getting his faux-MBA. Rather than follow in the footsteps of Scott Adams at the Haas School of Business, Ferriss began angel investing.

What if, Ferriss asked himself, I take the money I would have spent on an education and invested it. Either way, in two years I’ll have learned something, made connections, and am moving on to the next things. With investing I may hit it big.

If you want to have options (to make a show like Seinfeld, to angel invest, to write for the Washington Monthly) you have to have minimal resource (time and money) commitments.

 

4- Availability bias in education and podcasts. The conversation between Torenberg and Klein starts with a brief history of Klein’s schooling and it was great to hear that he wasn’t some tortured genius. He was a slacker.

When asked if he felt that education needed to change, Klein said “yes,” but not especially because of his experiences. If you wanted to get the most bang for your buck, says economist Bjorn Lomborg, “it needs to be something that we know how to do and we know how to do fairly cheaply and it will do a lot of good.”

That wasn’t Klein’s situation.

First, Klein said he was a slacker, but he didn’t think it was odd. Popular culture is full of slackers. Ferris Bueller, Jeff Spicoli, and the Breakfast Club could have all been influences for Klein. Lots of kids are like this, Klein thought.

Second, Klein notes that the people who come on podcasts may not be the most representative population for coming up with a consensus about how to fix education. “There are an unusual percentage of people who get to go on podcasts who have this particular schooling experience,” Klein says. To put it another way, smart kids that were bored with school are probably on a lot of these podcasts. Now we can dig into the availability bias.

We have a tendency to overestimate the frequency of things we easily see or remember.

We need to take active steps to avoid these biases. You can use Twitter well or read something you’ll disagre with.

The best advice comes from Richard Feynman:

feynmanfool

5- Path dependence (specific to newspapers and general for careers).

Klein talks about the ways that media has changed, most notably the medium change. For print the question was, “how do you pack the most information into this space,” says Klein. Paper and black ink were the cheapest combination to convey information – so that’s what we used.

With the internet the restrictions of space and cost are gone. The marginal cost for a Vox Snapchat explainer (what a description, eh?)  is nil. Plus, Vox gets to tell stories in the ways people prefer to learn – visually.

As we enter this new age of journalism Klein says that he’s hiring like crazy. “I’ve found that you can teach journalism,” Klein says, “but you can’t teach that kind of obsessive deep love of a subject.”

Our big idea in this section is about path dependence, one sequence of doing things is different from another. When you make a salad, it doesn’t matter what order you put on the tomatoes and onions. When you make nachos, it does matter what order you put down the chips and cheese. Knowing how path dependent a situation is can help explain how you got here and where you are headed. 

 

6- Listen to your audience. Klein says that the shift to Vox from the Washington Post was due in part to what he was hearing from his readers. “When I looked at reader email that (about the nitty gritty details) was very rarely the question they were asking, they wanted to know things that were much more fundamental,” Klein says.

B.J. Novak had a similar experience writing jokes for the office. He and Mindy Kaling would kick things around to see what was funny. They would try bits at local clubs. They asked friends. Nobody is smarter than the audience (even in music ).

Right now the identity oriented content blows up Klein says. To know that and create that content means that Klein is listening to his audience.

Thanks for reading. If you want more advice from Klein, check out his Advice to Young Journalists.

I’m @mikedariano on Twitter.

Want to catch up on the posts, The Waiter’s Pad: Volume 6 is available here. You can also donate a few bucks here.

Morgan Housel

Morgan Housel (@TMFHousel)  joined Aaron Watson (@AaronWatson59) on the Going Deep with Aaron podcast to talk about writing, forecasting, and how to get ahead in investing. Plus Housel predicts the perfect stock for 2016!

Wait a second, that last part isn’t true. There are no get rich quick tips for stocks – or anything, really.

Comedians are often interviewed because they need to promote something (or enjoy talking). They universally tell the story that great things are the formula of time and effort.*  Amy Schumer, Judd Apatow, and Phil Rosenthal all specifically mention long days and hard work as part of their careers.

Whether you want to pick winning stocks, write great jokes, or do anything in life, you have to do the work.

Housel’s interview with Watson was shorter than some other, but packed with a lot of good information. Ready?

 

Warning, your dreams warts.

Housel said that when he was in school at the University of Southern California he wanted to be an investment banker. That does sound good, except, investment banking stinks. “It was a crashing disappointment,” Housel says about his experience actually working at the bank. “It was the culture that turned me off.”

Housel isn’t the only one to experience this.

Austin Kleon  said “every job is still a job.” Jon Acuff said that even though he has his dream job, he does a lot of things that aren’t dreamy. Both Peter Thiel and Robert Kurson left their (well paying) careers in law.

This career analysis brings up the idea of inside/outside thinking. Some points on this blog get too esoteric (  like using Colonel Blotto game theory to explain the entertainment sector ) but this one you can immediately apply.

We make better decisions when we consider both the inside view (what we know) and the outside view (what others know). Bill Simmons is a superforecaster because he is both a “Boston sports homer” and “well connected analyst.” That’s inside and outside thinking.

Daniel Kahneman experienced it and experimented on it. In Thinking Fast and Slow he wrote that his research team failed to take both the inside and outside view.

We can apply inside/outside thinking to our careers. Rather than thinking if telecommuting or travel or a promotion really is better, we can talk to people who do it. We can combine our perception of the job (outside view of the job) to what someone else says about it (inside view of the job) and make a more complete decision.

 

You’ll be up all night and you won’t get lucky.

Butchering of Daft Punk lyrics aside, sometimes you won’t be lucky. Housel was unlucky. He says that he was looking for a banking job in 2007, and there weren’t that many. This happens. Neil Strauss released his book the same weekend that Hurrican Katrina landed. It crushed his promotion schedule.

When faced with a negative outcome, Michael Mauboussin suggests we figure out how much of the outcome was due to luck. He gave three criteria:

1- It could happen to you or your business.

2- It could be good or bad, but not necessarily equally.

3- Another thing could have happened.

When we look at luck that way we see that Housel and Strauss did indeed have bad luck. It’s easy to imagine the economy not tanking and Housel finding a job or Hurricane Katrina turning to see and Strauss promoting his book.

More often the case is that luck is harder to tease out.  Michael Lombardi said spoke to this difficulty in the NFL.

Tim Ferriss also had a nebulous luck/skill situation. When his fully filmed TV show failed to be aired it was a bit of bad luck, but also a bit of skill. Ferriss admits to the bureaucracy at the network as stopping his show, something that was expected.

 

Writing the same thing over and over.

A lot of what Housel writes is the same thing over and over again. “Most professions get easier with time,” Housel says, “writing might be the opposite because you start running out of things to say.” Jason Zweig said the same thing:

“My job is to write the exact same thing 50-100 times a year in such a way that my editors and my readers will never think I’m repeating myself.”

What Housel and Zweig have done is try to find new ways to say the same thing, and I think this same story, new characters approach is more valuable than Housel conveys in the interview.

When Derek Sivers spoke with Tim Ferriss he said that he doesn’t review books as “good” or “bad” anymore because it matters when you read it. Certain books will change your life if they catch you at the right moment.

For me, I failed to read Nassim Taleb’s Antifragile on three separate occasions. It wasn’t the book, it was me. Eventually I finished (and loved it) after hearing an interview with Taleb and reading Fooled by Randomness.

 

Writing is a form of thinking.

Housel joins the list of other writers ( Michael Mauboussin, Maria Popova, Charlie Munger ) who note that writing is a form of thinking.

 

Finance is more than numbers.

Both Housel and Watson mention that finance is more than numbers and Housel paraphrases Dean Williams, explaining that finance is like physics. On the one hand we can predict how land a rocket on the moon. On the other hand we can’t know what the weather will be in four days.

It’s why we advocate for Garrett Hardin’s 3 questions as a way to look at complex situations.

1- What are the words and what do they mean?

2- What are the numbers and do they compute?

3- And then what will happen?

Finance, Housel and Watson note, fits this framework. Other things do too:

– In the Malcolm Gladwell and Bill Simmons post we used the 3 questions to evaluate the value of professional sports stadiums.

– In the Tyler Cowen post we used the 3 questions as a model applied to Jared Diamonds work.

– In the Nick Murray post we used the 3 questions to explain Murray’s investment philosphy.

 

Forecasting non-weather events.

Housel tells the story of being ready to go on the radio when the producer pulls him aside to ask if he has his forecasts ready. “I don’t really do that,” Housel explains. “That’s okay,” the producer grunts, “you have 10 minutes.”

What a joke. It reminded me of the story Lewis Howes tells about being on reality TV and the producer asking him to play scenes a certain way. Financial forecasts, reality TV, and candy. The triad of “limited quantity consumables.”

It takes a lot of work to be a good forecaster, but Philip Tetlock has explained how.

 

When you know enough to be dangerous.

Financial education is generally good, Housel says, but sometimes it can be bad. We can get into the know enough to be dangerous territory.

Housel says that some people take an introductory finance class and suddenly think they are George Soros. That’s not good (you don’t have Soros’ back). Luckily that won’t happen to you and I because we have a model for novel.

In Gut Feelings, Gerd Gigerenzer outlines a system for dealing with new and normal situations.

-In new situations we should go with our gut and favor simple solutions.

-In normal situations we should go with our brain and can have more complex solutions.

Gigerenzer writes: “An intuitive ‘shortcut’ will typically get them where they would like to be, and with a smaller chance of making grave errors.”

For example, conventional wisdom says not to spend more than 25% of your paycheck on mortgage payments. That’s a simple rule that works for people that don’t want to learn the nuances of real estate prices, the rollercoaster ride of flipping houses, or time-value of money calculations. If you are more enterprising (read: risk-taking) then that 25% figure wouldn’t apply. What you don’t want is to be someone that acts like they know a lot, when they don’t. Except that happens.

Housel cites resarch by Lauren Willis at Loyola University who wrote:

“Objective observers generally admit that research to date does not demonstrate a causal chain from financial education to higher financial literacy, to better financial behavior, to improved financial outcomes.”

Rephrased, unless you dive deep into something, use simple models.

 

How to get ahead in finance (or in anything).

“To get ahead in investing you have to do something other people can’t do or won’t do.” – Morgan Housel

We’ve seen the “be different” mantra applied other areas too.

Ken Fisher applied this mantra to investing.

Judah Friedlander applied it to comedy.

Michael Mauboussin applied it to business.

 

Bust your biases with books.

Watson asks each guest what challenge they have for other people and Housel says, “read things you know you’re going to disagree with.” It’s advice we’ve seen before. Remember, you’re not right about everything.

“A reasonable person believes each of his beliefs is true, and that some of them are false.” W.V.O. Quine

Some of the best thinkers have warned us about our biases well before Housel.

“The first principle is that you must not fool yourself — and you are the easiest person to fool.” said Richard Feynman in Surely You’re Joking Mr. Feynman.

You can use Twitter for this. You can also read things, like this post. Thank you.

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

* Time, effort, and luck.

Want to catch up on the posts, The Waiter’s Pad: Volume 6 is available here. You can also donate a few bucks here.

Malcolm Gladwell & Bill Simmons

Malcolm Gladwell (@Gladwell) joined Bill Simmons (@BillSimmons) on his podcast to talk about NFL stadiums, NFL owners, and Colonel Blotto game theory.

Whenever Gladwell and Simmons get together I’m reminded of the time in college when I saw a poster advertising Lewis Black coming to campus. “Wow, Lewis Black is coming here!?!?”  It was amazing to me that Black would stop at a small college in Northwest Ohio.

That’s how these Gladwell and Simmons conversations feel. It’s amazing that two great thinkers come together and we get to listen.

The podcast is good and is worth a listen. These notes will be a short(ish) summary of some deeper ideas that weren’t fully fleshed out.

If you want more, you can read why Bill Simmons is a superforecaster and Malcolm Gladwell’s advice to writers.

Ready to learn stuff via pop culture?

 

Power law distributions.

Power law distributions are everywhere. United States cities are explained by power laws.

uscitypowerlaw

Digital song downloads are explained by power laws.

songpowerlaw

Stadium concerts are explained by power laws, and this is where we jump into Simmons’ and Gladwell’s conversation.

stadiumpowerlaw

They’re talking about why it’s silly to build a football stadium and think you’ll have a bunch of stuff in it. Simmons asks, “Why build a stadium if you’re San Diego?” The simple answer is that you shouldn’t. But you won’t hear that. Instead there will be promises that it will REVITALIZE the area and BRING JOBS and PROVIDE A BOOM FOR THE ECONOMY. It will do nothing of those things.

If you understand that a few get rewarded by a lot, in this case, a few stadiums get a lot of the concerts you can start to puncture erroneous stories. In the podcast Gladwell laughs at the fall off from most to second most popular.

A new stadium sounds good, but that’s deep enough thinking.

In his book, Filters Against Folly, Garrett Hardin writes that we should look at any situation with three filters:

1- What are the words?

2- What are the numbers?

3- And then what?

If we use these filters to the question about a new stadium, we get some interesting follow up questions.

1- What are the words? When someone says “revitalize” what does that mean? What does “inspiring a generation” mean? What does it mean if they say they are “committed?” Were the owners in Seattle or St. Louis “committed” before they moved the teams?

2- What are the numbers? How many concerts will there be? (see above to see the odds against anything more than a handful). How much will it cost? No, really, how much will it cost?

3- And then what? What happens after you build it? (Will people come?) What about in London which promised low income housing? Did that work?  Judge for yourself.

 

Colonel Blotto game theory as explained by television/Netflix.

Simmons and Gladwell note that it’s harder to create a stand out television show. “Even Game of Thrones is watched by a fraction of people who watched Melrose Place at its height,” Gladwell says. Thanks to Michael Mauboussin, we can explain why.

In his podcast with Shane Parrish, Mauboussin introduced Colonel Blotto. Wikipedia explains it like this:

“Blotto games (or Colonel Blotto games, or “Divide a Dollar” games) constitute a class of two-person zero-sum games in which the players are tasked to simultaneously distribute limited resources over several objects (or battlefields). In the classic version of the game, the player devoting the most resources to a battlefield wins that battlefield, and the gain (or payoff) is then equal to the total number of battlefields won.”

This YouTube video via Scott E. Page also explains Blotto well.

The conclusions from Blotto are:

– If you are in the stronger position (entrenched company, imperial power), you favor fewer battlefields.

– If you are in the weaker position (startup, guerillas), you favor more battlefields.

Peter Thiel hints at this framework as a business strategy in Zero to One.  Mark Cuban applies the strategy to how he chooses basketball players. We can look at it through the screen of TV.

Today’s entertainment environment has many more battlefields. In two generations we’ve gone from three networks to infinite options.

Blogs (including this one) is one battlefield. Podcasts are another. YouTube channels a third and on we go. Blotto theory predicts that the weaker position players (startups, guerillas) will gain a larger share of the overall when there are more places to compete.

We won’t see another Friends, much less another M.A.S.H.. When Friends ended 52.5 million people watched. Over 105 million tuned in to watch M.A.S.H. Today’s greatest hits (Simmons and Gladwell mention Serial (40M) and Game of Thrones (6M) and Book of Mormon and Hamilton) have too many battlefields to compete on. The most popular show for the 2014-2015 television season was The Big Bang with 21 million viewers.

Our screen time is dispersed (but still follows the power law mentioned above) and will continue to be.

As a final example, take Simmons’ former employer ESPN. For a long time the “competition” battlefield was owned by them. Then video games became popular, accessible, and available and kids could watch people play those games instead of other games. The battlefields have increased and ESPN numbers are falling.

 

Timing matters.

Timing matters a lot. Seth Godin and Mark Cuban both admit their luck timing stock sales. Amy Schumer said she was about to quit before she met a woman on a train who unlocked a great joke. B.J. Novak told Tim Ferriss that The Office was lucky because iTunes and iPods with video helped keep the show alive early on.

Simmons and Gladwell say that David Bowie and Dire Straits got their timing right too. Both groups, as compared to The Rolling Stones or Billy Squier, did MTV right.

“If MTV comes along 7 years later, it’s a completely different thing,” Simmons says. “It wouldn’t have caught this collection of unforgettable people at awesome points in their career.”

Thanks for reading, I’m @mikedariano on Twitter. Want to catch up on the posts, The Waiter’s Pad: Volume 6 is available here. You can also donate a few bucks here.

Want to hire me for work? Let me know.

Brian Koppelman & David Levien

Brian Koppelman (@BrianKoppelman) and David Levien(@DavidLevien) joined James Altucher (@JAltucher) to talk about the creative process, power lunches, and making Billions (their new Showtime show).

Not until I found myself taking notes did I realize how much I enjoyed Koppelman. He’s movies are good, but it’s his podcasts that I really like. He’s talked with Altucher twice before (here and here) but has also done some great interviews of his own like this one with Seth Godin and this one with Amy Schumer.

These notes will aim to answer: how do you write a great television show? Koppelman and Levien are on to promote their new show and talk about the creative process, so it makes sense that we approach it from that angle. Remember though, the point of the notes is never just literal. This isn’t about just making a great television show. It’s about making anything.

How you write a great television show is just a proxy for how you make a great anything.

Amanda Palmer wrote that we’re all creators of one kind or another. Your creation is similar to Koppelman’s and Levien’s in more ways than you know.

Ready?

1- Partner up.

Koppelman and Levien have been writing partners for a long time, and have worked together on Rounders, Ocean’s 13, and The Illusionist. Koppelman says that the partnership pays off when they’re writing and need to switch parts or challenge each other. Someone will be stuck on something, they’ll switch, and the problem gets worked.

This happened while writing Billions. One episode script came in that wasn’t as good as the duo hoped, and they had to punch it up at the last minute. The work wasn’t easy, but there’s a thrill in doing it with others. Other smart people also suggest a partner:

Philip Tetlock found that good forecasters were even better in groups.

Seymour Schulich wrote, “the key to a successful partnership is mutual veto power. If you cannot agree on a major proposition, you don’t do it.”

Charlie Munger said, “I hardly know anybody who’s done very well in life in terms of cognition that doesn’t have somebody trusted to talk to.”

Peter Thiel said, “a lot of these companies aren’t solo efforts of a god-like person that does everything.”

It’s easier not to go it alone – and you’ll do better work.

Once you find someone to work with, you both need to build career capital.

2- Build career capital.

“Career capital” comes from the Cal Newport book, So Good They Can’t Ignore You, and is the idea that rare and valuable jobs require rare and valuable skills.

Koppelman and Levien have the career capital to create a show like Billions. They’ve put in the time and effort to have the money and experience that allowed them to write the show. Koppelman notes that they’ve worked with Paul Giamatti on The Illusionist in 2006. If they didn’t do good work then, would Giamatti work with them now? That’s one unit of career capital.

This model for career capital is everywhere. B.J. Novak worked with Bob Saget and “stunk” at stand-up for 18 months before getting hired for The Office. He earned career capital. Casey Neistat made movies and tv shows before vlogging. He earned career capital.

Newport writes that once you get career capital you can spend it on career parts you want. More/less travel. Flexible hours. Location. Koppelman and Levien used their capital to write a TV show for Showtime.

If career capital is something you want, I’ve got good news. It only takes two things. Time and effort.

3- Start early because it takes time.

It takes time to create something, so you may as well start now.  Levien says that they started working on Billions in 2013 (which was only possible because of the years of career capital they built before that). It’s been three years of writing, filming, and – now – promoting and they still don’t know if more than one season will be made.

As the Tom Petty song goes, “the wait is the hardest part.”

“It feels brutal when you’re toiling away in obscurity,” David Levien said in his first interview with Altucher. Amy Schumer looked around and wondered why her friends were getting the good offers and she wasn’t. (James Corden had this exact same experience.)

Phil Rosenthal worked odd jobs around New York City before producuing Everybody Loves Raymond. Gary Vaynerchuk uses the metaphor jab, jab, jab, right hook to explain that it takes time. Give, give, give and then ask, explains Vaynerchuk.

Things take time, and you can’t rush that. Charlie Munger was once asked, “how can I become like you, except faster.” You can’t Munger replied. Instead you need to “slug it out.”

As you start this process, start to “write more than words.”

4- Write more than words.

“The struggle in the writing room, is getting people not to write just words.” – Garry Shandling.

“These are not just jokes.” – Steve Carell to B.J. Novak.

Consistently doing good work requires deep understanding. “(The story should) communicate the themes in every way,” Levien says about the different parts you see on screen.  

Altucher says he saw this when he was on the set. He noticed that the director was shooting a car scene over and over again and then it clicked. The director wanted the car to come out of the parking lot a certain way because the person driving it would do that. Ditto for how he shot wide or tight.  

Novak was surprised when Carell said, “these are just jokes.” “Yeah,” Novak told Tim Ferriss, “that’s what do, we write jokes.” Only later did he get it. It wasn’t just the jokes. It was more than that.

Stephen King addresses this (vis a vis authentic dialogue) in On Writing:

“The Legion of Decency might not like the word shit, and you might not like it much, either, but sometimes you’re just stuck with it – no kid ever ran to his mother and said that his little sister just defecated in the tub.”

That’s more than words. It’s the stuff below the surface.

There’s a great part (25:30) of the podcast where Koppelman and Levien tell Altucher about a dinner with a billionaire. They pick a restaurant and the guy changes it to his favorite place at the last minute. The place is pricy. Then they order wine, and it gets really pricey. Their dinner bill is over $2,000. “This was a guy smart enough not to do anything on accident,” Levien says. Koppelman adds, “for many of these people each exchange has a winner and a loser… most of us don’t think of winning a dinner.”

Their interviewee needed to “win dinner.” He felt (they speculate) that because he was giving access, he needed to get something in return, and it needed to be good.

This person, Koppelman adds, isn’t “bad” or “good.” They’re a person. They contain multitudes.

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Koppelman says, look at someone like Mark Cuban or Marcus Lemonis. Those guys are rich and take over businesses, but we don’t see them as “bad” – why? That’s the question Koppelman and Levien want to unearth.

Ideally as you write, “you want the people leaning left and go right,” Koppelman says. B.J. Novak said this too, that his goal is to have the punchline right in front of you the whole time.

To do good work you have to understand more than just the work. You have to know the why and how. The psychology of a person and macroeconomics of the economy.

If you can build valuable career capital by doing good work over a long period of time then you have an option about options.

5- If you can, keep your options.

Levien and Koppelman have career capital (#2), that means they can have optionality. For Billions they wrote the script on spec. They had two options.

  • Someone could buy it and make the pilot. or
  • No one would buy it.

In the interview the duo note that if they had even more career capital, they could have had actors attached to the script and then they could have a third option:

  • Someone could buy it and make an entire season.

This spectrum, (maybe, one episode, one season) is important to Koppelman. There’s the financial compensation and there’s the I made this, I said something compensation. “The work felt important and satisfying,” Levien explains.

It reminded me of what Marc Maron told Judd Apatow,  quoted in, Sick in the Head:

“When you see a movie that Sean Penn directed, you realize he’s not fucking around. It’s like listening to a Nirvana record or something. This is not a job. They have something to say. And in comedy, the people that we like the most, when they score they have something to say that’s important to them. And to me, that’s what I’m always looking for.”

If you have optionality in your career then you can have the financial and personal rewards.

But you don’t always get this option to say what you want to say. You have to work for some options.

Chris Dixon maintains optionality with prorata rights. Scott Adams keeps optionality with his friends. Ryan Holiday keeps optionality by not signing a book deal with a publishers. If you can, keeping your options open is good advice.

There’s one final step to make a great show.

6- Work (really) hard, and pray.

As with anything else, for Billions to succeed Levien and Koppelman need some luck. Altucher says the show is good, and Koppelman and Levien are proud of it, but luck matters.

Mellody Hobson was lucky with her purchase of Madison Square Garden. Cliff Asness never rules out the role of luck. Kevin O’Leary said, “life is very serendipitous.” 

That’s all it takes.

Thanks for reading, I’m @mikedariano on Twitter. Want to catch up on the posts, The Waiter’s Pad: Volume 6 is available for purchase here. You can also donate a few bucks here. Also, get in touch if you want to work together. I’m looking for some creative partners.