Tag: book

“Your Product Sucks”

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“Your product sucks,” said Steve Jobs.

It was 2010. Bob Iger and Jobs came together a few years earlier when Disney acquired Pixar. After years of a cantankerous relationship with Iger’s predecessor, the two titanic executives had become good friends.

But that didn’t spare him from Jobs’ biting criticism.

“Steve, you’re wrong,” replied Iger.

It wasn’t often that Steve Jobs was wrong about the consumer’s taste. But Iger had the research, experience, and authority to disagree.

With a budget of two-hundred million dollars, Iron Man 2 earned over six hundred million at the box office. Steve Jobs was definitely wrong.

These are huge numbers, from huge companies, but the lesson applies to entrepreneurs.

Your product is not for everyone. Steve Jobs was not the customer for Iron Man 2. When you listen to your customer make sure they are your customer.

This is a cross-post from the Daily Entrepreneur newsletter.

Real Advice

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Mary-Ellis Bunim and Jonathan Murray wanted to create a television show for MTV that capitalized on the 90s teen culture.

But they had a problem. 

Scripted shows like Beverly Hills, 90210, and Melrose Place were expensive. So the staffers looked to MTV’s roots for inspiration. 

Successful businesses deliver value to customers in a sustainable way. Apple doesn’t sell iPhones for less than the cost to make them. The local lawn care company won’t mow for less than the cost of labor. 

MTV’s original secret was just that. The musicians paid for their own videos. MTV got them for free. MTV sold advertising on the broadcast and the artists got attention. 

Bingo, thought Bunim and Murray. Find “free” content.

MTV’s Real World premiered on this day in 1992. 

Around the same time, Mike Reiss was writing for the Simpsons. In his book, Springfield Confidential, he writes that he’s not a religious man but he’s spiritual in the sense that there’s always a perfect joke. Every gag, prompt, and setup has a perfect punchline. They didn’t always find it, Reiss writes, but they always tried. 

That’s was Bunum’s and Murry’s mindset – find a way. 

When money is tight, when skills are scarce, when growth has stalled – find a way. 

This is part of the Daily Entrepreneur series, sign up here.

Domino’s Lesson

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Domino, a famous stallion, was buried in a grave with a worn marker just on the side of the road. Domino only produced nineteen foals yet is in the pedigree of the greatest horses that ever lived: Secretariat, Seattle Slew, Affirmed, Assault, Bold Ruler, Whirlaway, War Admiral, Gallant Fox, Omaha, Native Dancer, American Pharoah. Of the thirteen horses to win the Triple Crown, nine have Domino in their family tree. Now he was forgotten on the side of a road.

Wright Thompson, Pappyland

The Lego Story (book review)

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The LEGO Group was founded in 1932 by Ole Kirk Kristiansen and the story is told in The Lego Story by Jens Andersen.

The takeaway, like all successes, is to work hard and get lucky. Rather than a review, let’s tour history through industry.

1919, Denmark’s economy slows. “Farmers in Billund and other districts benefited from Denmark’s neutrality during the First World War, by selling grain and meat to the warring nations and earning some extra hard cash by producing peat.” When farmers have money they can pay carpenters like Ole Kristiansen. And if farmers don’t, they can’t.

1925, a fire in Ole’s woodshop. This will be a recurring theme.

1929, the depression. “For a while, the future looked promisingly bright, but shock waves from the Wall Street Crash in October 1929 that wiped out billions of dollars in wealth quickly spread to Europe. Germany and England, Denmark’s biggest trading partners, were badly affected, and the price of grain, butter, and pork crashed.”

1932, anything that sells. Though woodworking had been his trade, it was the 1931 Yo-Yo craze that inspired Ole to make toys. “By the 1930s, yo-yo-ing had become a nationwide fad,” writes Chat GPT, “with tournaments and competitions being held across the country.” Ole’s brothers and sisters want to know why a good carpenter would waste his time, “I think you’re much too good for that, Christiansen—why don’t you find something more useful to do!”

1933. “We worked like dogs, my wife, my children, and I, and gradually things began to pick up. Many days we were working from morning till midnight, and I bought a cart with rubber wheels so the neighbors wouldn’t be disturbed when I took the packages to the station late at night.”

1940, Germany invades Denmark. Though occupied (and part of the resistance group, running grenades to saboteurs in LEGO boxes) it was a good time for LEGO. Parents were “keen to protect their children from hardship,” and during the five years of occupation, LEGO’s revenue grew.

1942, another fire in the woodshop.

1946, plastics? Ole buys a plastic molding machine. Through the early 1950s executives at LEGO will say no no no, plastic toys will never take off.

1947, Ole sees his first plastic brick from an English toy manufacturer. This is the seed for LEGO but will prove a thorn in their intellectual property side for decades to come.

1951, the top-selling LEGO toy is the (plastic molded) Marshal Plan-delivered Ferguson tractor.

1955, LEGO bricks roll out to toy stores.

1956, LEGO bricks roll out to Germany. Andersen writes, “Selling toys in Germany would be like selling sand in the Sahara.” LEGO advertises in one city, Hamburg, creating a two-minute film to play before features. Word spreads.

1958, good news, LEGO invents the tube on the underside of the LEGO brick. Ole Kirk passes away and his son Godtfred takes over.

1962, the Scale Model Line. Godtfred grows up playing LEGO, so do other people. What if we make LEGO for professional adults? The Scale Model line is for engineers to design with LEGOs. Even the everyman could create his own house. The project fails but leads to the 1/3 size pieces ubiquitous in today’s sets.

1968 LEGOLAND Denmark opens. It’s a hit.

1976 oil crisis. “A significant part of LEGO’s challenges in the 1970s could be ascribed to two separate oil crises, a stagnating global economy, Denmark’s falling birth rate, and a declining toy market abroad.”

1978 minifig enters. Lego, Kjeld Kristiansen notes, has three phases: blocks, wheels, and mini-figures.

1989 LEGO pirates. But Gameboy too.

…

If there’s one consistent lesson through each decade of LEGO it’s the importance of sales. Every few years someone comes along and says the toys are good enough and every few years someone else reminds them but we have to sell these things. It’s just hard work.

Looking Stupid

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“As president,” David Brooks writes about Dwight Eisenhower, “he was personally willing to appear stupider than he really was if it would help him perform his assigned role.”

“I didn’t think you were that smart,” a friend told Bob Moesta, “because you ask all these, almost stupid questions. But those questions are how you understand contexts.”

We’ve looked at looking stupid before but it’s an idea worth repeating.

Is the goal progress or satisfaction?

These aren’t mutually exclusive. Often progress and satisfaction accompany one another.

But sometimes they don’t.

Arguments carry this tradeoff. Is the point to prove how smart you are, or something else?

It’s ego.

Annie Duke offers an alternative. When she coaches poker players they gripe that nothing is happening. Good players, Annie advises, sit out a lot of hands.

But, there’s still a lot going on! It’s in your head.

What’s happening is the decisions. Framing the ‘action’ as mental appeals to progressing players.

Looking stupid isn’t stupid. It’s a path to the destination, a choice even our ego can love.

The End of Average (book review)

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If markets have a limited supply but high demand then prices will be high. Disney vacations are one example. Human capital is another. Computer science majors earn the highest salary out of college and humanities majors earn the least. Employers distinguish students (supply) by their degrees.

But how do you distinguish among the computer science majors? The answer is included in Todd Rose’s 2017 book, The End of Average.

Rose’s big idea is economic – society overpays for talent!

Throughout the 1800s and 1900s, modernization has been an experience of measurement. At first, the outcomes were crude because the measures were crude. Take the twenty years of Moneyball progress and stretch that through two centuries. In the same way that baseball teams overpaid for home runs, society overpays for talent.

Rose offers three explanations for our mistake.

1/ Jaggedness. What makes a good first baseman? That depends. What makes a good leader? That depends too. Unfortunately, nuance is neglected in our day-to-day functions. We tend to use loss-aversion-based heuristics. When you evolve from mammals focused on danger, food, and sex there’s only so much digging our default allows.

Winston Churchill is an example of a jagged leader. He excelled in oration and “stature” but less in collaboration. During the war, certain skills were more important than others. This brings us to…

2/ Context. Brent Beshore’s people are messy comment summarizes Rose’s idea. Instead, think of people as complicated creatures who act using If/Then statements. Someone may be honest or careful or diligent based on the situation.

We miss this, Rose writes, because our samples of other people aren’t wide enough. Jessica from the office may act snooty or kind at work – the only place we see her. But does that encompass her at church, at home, and with her family?

3/ Paths. There are not a million ways to do something, Rose writes, but there’s also not one. Think of a situation like being lost in the forest. The goal is to get out. One option is to find the path and follow it. But one could forge their own as well. Too often the focus is on the path and not forging a way out.

If a group undervalues these explanations then it restricts the possible outcomes. Imagine a rule that in order to start a business someone had to give up listening to podcasts. There are a lot of great business podcasts and the budding entrepreneur would be worse off – and so would we, missing out on the upside of their creation.

…

The End of Average is a Bob Moesta book suggestion and reading it from his point of view offers additional information.

Moesta is a product designer, researcher, and marketer. Put on that POV and we can see how products fit within Rose’s explanations as well. Our hunger is jagged, hence the difference between Snickers and Milky Way. Our purchases are context-based, Moesta comments that hot dogs and steaks are both the right meal for the right context. Lastly, consumers end up at a product in a variety of ways, there’s not a single sequence of “I need a new car”, but there’s not an infinite either.

My first impression of The End of Average was that I kinda already understood these topics and didn’t need to spend time on the macro-educational angle. Both impressions were true but there were deeper ideas too and giving names to jaggedness, context, and paths is and will be helpful.

Measure What Matters (book review)

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Measure what matters book review

There are two aspects – contents and context – to John Doerr’s 2018 book, Measure What Matters, a book about OKRs (Objectives and Key Results).

Content.

Objectives are “what is to be achieved, no more and no less.” Grow the blog, lose weight, or strengthen important relationships.

Key Results are ways to “benchmark and monitor how we get the objective.” List ways to grow the blog, lose weight or build relationships. “It’s not a key result,” Marissa Mayer would say, “unless it has a number.”

Straightforward enough. Is this a book that could have been a blog post?

Maybe, but Doerr offers a trio of cautions.

Warning 1: OKRs are not a way to show activity, they are to focus attention and weigh the opportunity cost. Organizational achievements, not ego appeasements.

Warning 2: Sometimes incentives hijack the Key Results (Goodhart’s Law). An antidote is paired counterparts. In the Wells Fargo cross-selling scandal the Key Result of open accounts could have been paired with monthly active accounts.

Warning 3: OKRs are a tool to use not a dogma to follow. If objectives change then OKRs change too.

Context.

Context is a Bob Moesta word encompassing who, what, when, where, why, and how? Steak and hot dogs are ‘good for dinner’ within the right context. The same goes for OKRs.

Doerr is a venture capitalist at Kleiner Perkins. OKR adopters include Intel – where Doerr learned from Andy Grove – and Google among other technology firms.

The OKR system, Doerr wrote, “was a great impedance match, a seamless gene transcription into Google’s messenger RNA. OKRs were an elastic, data-driven apparatus for a freewheeling, data-worshipping enterprise.”

Google was a perfect match. But your business may not be.

OKRs, as Doerr presents them, requires a certain culture. Part of their effect is to argue well. Andy Grove set the Intel culture for OKRs because Andy Grove was at Intel. Once he left the culture changed from bettering to bullying.

Doerr has many examples, one of which is Zume Pizza, but they’ve gone out of business. What’s the right lesson in that? What’s the context?

OKRs are lightweight, malleable tools. But their usefulness varies. Will OKRs be OK for you?

You stick your hand in shit…

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This is from a daily email I write with my friend Aaron.

Mr. Cohen was at his summer job, waiting for his delivery truck to be loaded up for the day.  

“Yeah college is fun,” he told a mechanic while the two waited, “but I’m dropping out.”  

“Why?” the mechanic inquired.  

“Well, I don’t like it,” said Cohen. 

“Ahh, you stick your hand in shit you wash it off,” offered the mechanic.  

Mr. Cohen created one of the greatest brands in the United States. You know it. You’ve probably bought it. We’ll get to that in a moment.  

Cohen didn’t immediately apply the mechanic’s advice. He quit college. He mopped floors for a bit, but quit. He worked as an ER clerk, but left. He drove a taxi for a while.  

It wasn’t until Cohen had a partner and a plan that he persevered.  

The duo’s first store was an abandoned gas station. They slept there. They couldn’t pay their contractors in cash, so they paid in kind. They couldn’t afford equipment. Instead, they reached out to their friends and family asking them to check the classified sections for going-out-of-business sales.  

They faced obstacles and found solutions.  

They persevered. 

They opened Ben & Jerry’s Homemade Ice Cream in Burlington, Vermont.  

You stick your hand in shit you wash it off.  

You get knocked down, you get back up.

Should you build *magic*?

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When talking about Jobs To Be Done, Bob Moesta notes that there are two ways to innovate. Supply-side innovation is internally driven. Organizations know their capabilities, limitations, and business model and build from that position. This type of innovation is more efficient, has limited scope (and costs!), and uses the language of the organization.

Alternatively, demand-side innovation is externally driven. Jobs theory is demand side as is the Mom Test and IDEO’s invention through iteration. This type of innovation includes prototypes and feedback, lots of questions, and uses the language of the customers and consumers. 

“Any sufficiently advanced technology,” Arthur C. Clarke wrote in 1962, “is indistinguishable from magic”. 

That quote highlights this aspect. Technology users want it to feel like magic. Builders use advanced technologies.

Face ID is magic. 

“What Apple did with Face ID was take a really hard computer science problem, and using a lot of complicated technology, create something with a simple name. I intuitively know what Face ID is just from the name. It’s also intuitive to use. I looked at it and was in. There’s an opportunity to do something like that (for crypto). Multiparty computation is not the right marketing term for what the average person might use.”

Brian Armstrong to Ben Horowitz. 

Uber is magic. 

“At first glance Uber might just look like a simple app—after all, the premise was always to hit a button and get a ride. But underneath its deceptively basic user interface was a complex, global operation required to sustain the business. The app sat on a vast worldwide network of smaller networks, each one representing cities and countries. Each of these networks had to be started, scaled, and defended against competitors, at all hours of the day.”

Andrew Chen, The Cold Start Problem.

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The wrong lesson here is to think customers want magic. It’s situational! Shopping and buying are different. 

There is no best way to innovate, only trade offs. But Clarke gives us a nice framing for technology.

Crazy Russian incentives

MIKE

Around 1992 Russia privatized state companies. The government gave each citizen one voucher they could bring to an exchange for a share of that day’s company. A simple plan – until humans get involved.

Not all Russians wanted to own shares. Local markets emerged. A small fish bought all the vouchers in one neighborhood, a medium fish bought all the neighborhoods in a town, a large fish bought all the towns in a region. Eventually sacks of vouchers made it to the national exchanges.

Though unintended, these mini-markets worked. Free economies FTW. So far so good.

Each exchange had a schedule. A modern Monday might be 1,000 shares of Apple at nine, 200 of IBM at ten, 500 of Ford at eleven and so on. If only one person showed up Monday at nine they would get all the shares for their vouchers. It was the market mechanism at work. It’s cheaper (more valuable) to not bid against someone in an auction. When one companies shares went up they shut down the airport the day before their voucher offering. Another company ignited a tire fire on train tracks leading in and out of town.

Insiders were insistent on owning their companies because the valuations were way off. By one estimate, the voucher privatization program valued the entire Russian economy at ten billion dollars, or one sixth the market cap of Walmart. If you could buy a legitimate twenty dollar Amazon gift card for one dollar would you? Rather, how many? This economic transition was called a katastroika. A combination of the catastrophe and perestroika – Gorbachev’s politics.

George H. W. Bush has his last year as president, Achy Breaky Heart finishes the year as the fifteenth most played song, and there’s money to be made in Russia.

“I went to someone in the investment management division,” Bill Browder writes in Red Notice, “expecting him to hug me since I was sharing the most joyous jaw dropping investment opportunity he would ever see. Instead he looked at me as if I was suggesting the firm should invest in Mars.”
Russian privatization was a huge opportunity. Everyone at Salomon Brothers missed it. Why? Incentives.

On Browder’s first day, his first manager explained the system: generate five times your salary or you’re done.

“Nobody at Salomon Brothers could divorce themselves from their own narrow mindset. Perhaps if I had been more subtle and clever I could have pierced their myopia, but I wasn’t, I had no political skills. I presented my idea for weeks and weeks hoping that through repetition I would get through to someone.”

Incentives and culture form what people do when they’re not told what to do.

At the London office the formula – which worked wonderfully – was fees through consulting.

Eventually Browder’s repetition got through and he got a call from Bobby Ludwig in New York. Two days after a phone call with Ludwig, Browder pitched the idea. An hour later Ludwig delivered twenty-five million dollars and marching orders. At the New York office the formula for Bobby Ludwig was to make money.

When Browder returned to London he had to switch departments but couldn’t find a desk. “Bill, why are you bothering me with this?” Ludwig asked when Browder appealed to him, “If they won’t give you a desk just work from home, I don’t care where you work. This is about investing in Russia, not desks.”

…
There’s this idea that to understand what’s going on in the world someone has to know the history or stay on top of things. But sometimes we can come back to first principles. We’re all humans with incentives. Also, the Red Notice audiobook performance is amazing.