When is the Cavalry Showing Up?

Spoiler alert: Never.

If you want something to happen, you are going to have to make it happen.  Any time spent looking for the cavalry, looking for that perfect job, looking for someone to save you, is wasted.

As the generous folks at Rally Software say, "Create Your Own Reality".

Or as Seth Godin says, "Pick Yourself". (PDF he wrote here)

Wall Street Tries to Get What it Wants

Seth Godin wrote a post today titled Wall Street gets what it wants about what happens when a company goes public.  This brings several points to mind:

1. Founders never seem to understand that when they sell their company, they don't own it anymore.
1. After the sale, the founders have the money and the buyer has the company.  That's why they gave you that money.  Does the car dealership still own a car after they sell it?
2. The buyer will often say that they won't change anything after the sale.  They might even mean it.  There is usually a honeymoon period of stability, but things always change.
2. Public companies require growth to satisfy shareholders. But infinite growth is not sustainable. Therefore, investments in public companies are not sustainable and are suitable only for speculation.
3. In the search for growth, companies will often do stupid things that hasten their demise.
1. This is often because the best course of action is to "stay the course", but shareholders insist that you try something different.
4. Wall Street does not want reliable incremental growth.  Reliable incremental growth can be discounted to a present value and doesn't change.  You would be better off owning a bond.  People buy stocks because they are hoping for a surprise on the up side. Infinite up side surprises are not possible, let alone sustainable.
5. Over time, private or hybrid companies will replace public companies as investment vehicles.
1. We are already seeing the move to private equity.
2. Venture capitalists are extracting more the of the value from new companies.  This is demonstrated by the trend of large IPOs.
3. Hybrid companies such as Google have two classes of stock.  One class is for the founders who will continue to control the company, and one class is for investors who are allowed to come along for the ride.  These companies will outperform pure public companies because they can avoid much of the pressure from shareholders.
4. Further evidence is provided by Michael Dell taking his company private again.  He actually cares about the company.  That correlates well with success. He is now publicly commenting on the dumb things companies are forced to do by "activist investors".
6. Another variation of private companies is employee owned companies.  I really like this method of ownership because it aligns ownership with the people who have the most skin in the game (employees).
1. With liquid markets, shareholders can jump in and out of a company many times a minute.
2. Employees incur massive transaction costs in switching jobs.  Therefore, employees have much more skin in the game than the putative owners of the firm, which flips many of the theories of capitalism on their head.
3. Ownership of private companies is fairly illiquid, so owners of private firms do have skin in the game.  In fact, they may have higher switching costs than some percentage of their employees, which led to many of the theories of managing the firm, agency issues, etc.

Don't beat your goldfish because it won't fetch your slippers

Don't beat your goldfish because it won't fetch your slippers.

If someone is clearly not the right person for a certain task, don't keep punishing them for not performing.

Someone was asking me about a business situation where someone was neglecting something that I thought they should do.  She was surprised that I wasn't fighting this.  I responded that there was no point in fighting it, because the person didn't believe in it, wasn't equipped to do it, and wasn't interested in becoming able to do it.

Sometimes Bells and Whistles Aren't

People in product development will sometimes glibly refer to features as "Bells and Whistles", implying that they are not core features and can be removed from the product.

However, if you are designing a warning signal for a train crossing, the bells and whistles are fundamental to the proper functioning of the signal.  It's not always obvious which features are the bells and whistles.

Don't Do Anything That Would Make a Good Interview Question

Interview questions are designed to be tricky to separate the wheat from the chaff.  Doing things like this in your daily work probably indicates that you are being too clever.

If something would make a good interview question, it means that many people will not be able to maintain your code.

Is Your Company Driven by Speculators?

TL;DR
Speculators are not evil.  There is nothing wrong with speculation per se.  The problem is mixing incompatible financial objectives.

Speculation versus Investing
A good, first-order way to differentiate speculators from investors is that speculators are primarily interested in capital appreciation and investors are primarily interested in dividends.

Aligning Objectives
When thinking about whether a certain person or organization is a good fit for your company, alignment on speculation versus investing is fundamental.  Sometimes this discussion is framed in terms of a "lifestyle business".

Where Does Capital Appreciation Come From?
In order for capital appreciation to occur, there must be an upside surprise. A stable company must start growing.  A growing company must start growing faster.  A declining company must slow the rate of decline.  A company that is profitable, but appears to be on a steady trajectory, is not useful to a speculator, but can be very valuable to other stakeholders (employees, investors, customers, suppliers, the community).

A stable, profitable company will encounter problems when speculators are able to influence management decisions.  Of course, sometimes the speculators are the management team due to the incentives they have been given.  Sometimes they give these incentives to themselves 

A Startup is Speculation by Definition
A startup is an organization formed to search for a repeatable and scalable business model.

The Law of the Lid vs. Test Equipment

Test equipment has to be higher quality than the item being tested.

Test software has to be more complex than the software being tested.

This is why the law of the lid by John C. Maxwell is true.  You can only be evaluated by someone who is better than you, whether it be as a musician, a horseman, or a software engineer.

At some level, you have to develop a system that does not require these sorts of evaluations, because there is no one who can evaluate your best people.

This is related to the law of unintended consequences.  Unintended consequences arise when a simple system is trying to control a more complex system.  For example, you couldn't fly an airplane if you could only control the pitch, but not the roll, yaw, or engines.  Adjusting the pitch will affect how the airplane flies, and you may think you are in control for a while, but eventually there will be behaviors that don't correlate with your attempts at control.

Another example of this is when the political system tries to control an economy.  Economies are the most complex systems in existence, which is why all attempts to control them fail.

Why Organizational Change is so Difficult

Organizations protect the status quo.  They want to improve without changing anything, which is logically inconsistent.

People exhibit this behavior as well.  I want to lose weight without changing who I am.  Can't I just take a pill?

If you want to lose weight, you have to become a skinnier person.  If you want to run faster, you have to become a faster runner.  You have to change to become who you want to be.

This is true for organizations as well.  If you want to improve, what are you willing to change? What is off the table? A new CEO?  A reorganization? A change in culture?

The usual approach is to not change anything, and if you have to change something, make sure it doesn't affect the decision maker.  The problem is that the decision maker is more concerned about themselves than about the organization--a classic problem of agency.

Perception versus Reality

Much of life is based on perception.  It is surprising how little is based on reality.

The applicant who is perceived to be the best is the one who gets the job, not necessarily the applicant who is the best.  This is part of what makes hiring extremely complex.

Markets move based on the perceptions of the participants, which can often diverge from reality for extended periods.  Getting a job is part of the labor market, and is therefore based on perception.

Most departments in most businesses function on perception.  Conflict arises at the interface between the perception departments and the reality departments.  Generally engineering and manufacturing have to be based in reality.  As you move further from these departments, you can depart further from reality.

Some functions, such as accounting, are anchored to reality to an extent, but still have significant discretion to diverge from reality when convenient.

Oxymoronic: Investing in a Secondary Market

If you aren't giving your money directly to the company, you are not investing, you are trading.

In secondary markets, such as the US stock market, you are buying shares from another owner, not from the company.  The money goes to the seller, not the company.  You are not investing.  The company does not benefit, except in an indirect manner (lowering their weighted average cost of capital if they choose to sell more stock to actual investors in the future).

If you think you are an investor because you hold your trades for a long time, you are just a long-term trader.

Using Radar to Find Your Future

This Jim Rogers talk presents some interesting, seemingly paradoxical, advice to young people about preparing for their futures.

He sings the praises of studying history and philosophy in college and denigrates business schools and the MBA degree in particular. But then he says that if an MBA is your passion, get there as soon as you can. He praises farming, but says not to do it if it is not your passion.

I see this as a parallel to the way that radar works.  Typically, radars have two modes: search and track.  In search mode they are sweeping the sky looking for anything of interest.  Once they find what they are looking for, they switch to track mode and all of their power is directed at that target.

Until you find your target, cast a wide net to see what interests you and learn about the world along the way. Sooner or later, you will find the precise thing that interests you and you can narrow your focus.

Made You Look vs. Made You Look Again

There are many tricks to make someone look at something.  The goal in business is to create something that people want to look at over and over again.

I saw a very heavy person wearing a t-shirt that said "Made You Look".  People might look once, but they are unlikely to look again.  An attractive person does not need to wear something special to get you to look again.

Shared Offices Inhibit Communication and Productivity

Advocates of shared offices believe they facilitate communication.  They do increase communication of all types, productive and unproductive, voluntary and involuntary, between the occupants. They do this at the cost of concentration and productivity.

Shared spaces also inhibit some valuable communication.  When someone from another office wants to talk to one of the office inhabitants, they have to weigh whether the communication is worth interrupting two or more people, perhaps for an extended period of time.  This acts to inhibit communication from thoughtful, shy, or junior personnel who may incorrectly feel that their need to talk is not worth the cost.

Knowledge workers need to control their environment for maximum productivity.  This implies private offices that are large enough for a couple of visitors, and a variety of other work spaces available for larger groups.

The topic of people with their own offices who insist on using the speaker phone with their door open is left as an exercise for the reader.

The Real Cost of Netflix

You might think that Netflix costs only $8 per month, but the real cost is the time you waste passively sitting in front of a screen.  Time that you could be working on your dream.  Time that you'll never get back.