swombat.com

daily articles for founders

Here are 10 quality posts from the Founder's Library:

Antilogs: How To Draw The Right Lesson Learned

Bill Barnett at Stanford comments how so many startup pundits fail to learn when observing failures. Indeed, not only are the lessons learned often lost, but also the opportunity to use others' failures as one of the fastest sources of actionable information.

Unfortunately, most observers skip the logic part. It is mentally easier to jump to the “obvious” conclusion: If the business failed, the business model must be wrong. Full stop. You can easily tell when this skip happens. The person will name an example as if it were a reason. Is online grocery delivery a viable model? No: Webvan. Is internet search a viable business? No: Alta Vista.

These examples are data, not logical reasoning.

Wannabe investors and startup advisors are particularly villainous here, often heard retorting loudly against future billionaires in this way.

John Mullins has a more constructive approach to analyzing these failures. He separates them into analogs and antilogs:

There are companies before you who have done something like you want to do that you can copy from, and others who have also done something similar, but that you choose not to copy from. These are your analogs and antilogs respectively. The process of going from Plan A to a plan that will work is to begin with these.

For instance, when Steve Jobs of Apple decided to get into the music business that eventually completely changed Apple as a company, he had a whole range of analogs and antilogs he could refer to. Sony Walkman had sold over 300 million portable music players, so he knew there was a demand for portable music. Also, people were (illegally) downloading music from Napster, so he knew that they were open to downloading music online (as opposed to buying CDs). Jobs also had a key antilog, which was Rio, the first mp3 player that had a terrible interface and was rather clunky.

Not only does this mean you have a plethora of data available to analyse and learn from, but it also points you to better sources and advisors.

You'd be surprised how many of these founders are happy to share lessons learned from their failures with you, and how much faster this can be than talking to customers or running your own experiments at first.

Talk to 10 customers and run a few experiments, and you could still be barking up the wrong tree in the wrong forest. Talk to a founder who's been-there-done-that, and you'll be more like a bloodhound on the scent.


The Lean Canvas - wrong tool for the job?

Benjamin Kampmann, a reputable hacker and product manager, relays his experience with the Lean Canvas over the past few years, in particular how it removed his attention from the customers that actually wanted his product:

The likelihood of the end technology still being a great fit for the market you decided on at the beginning is rather small.

Lean Thinking emphasises the principle of minimizing waste. The common interpretation of Lean Startup assumes that the lead cause of waste is always a lack of commercially-viable demand. But research shows there's a wider range of causes of startup failure. In addition to customer demand, early-stage startups often die from team problems and a lack of connections. Later-stage startups from weak industry positions.

Benjamin goes further, explaining that even with a market-first, rather than product-first approach, assuming he knew his first customer segments, rather than researching them broadly, slowed him down.

Even worse, overly focussing on a [single] market creates a harmful narrowing of your focus: Deciding on how and to whom to sell a technology that hasn’t even been developed yet, leads to focusing on building something sellable rather than exploring the actual impact your technology could have.

Indeed, the Lean Startup approach is often misinterpreted as talk-to-customers-first, rather than find-the-right-market-first, and the way the Lean Canvas is taught re-inforces that.

It's worth looking at Lean's origins in Toyota. Their approach to early-stage product design is much closer to how Benjamin describes exploring needs and possibilities. Rather than picking a single market and determining their needs, there is a wide exploration phase, narrowing down on actual opportunities from multiple angles.

Customer conversations vs product experiments

Even though I’ve been in favour of taking potential markets into account from early on, the reality is that there is little point in doing that when you just started coding: This is an experimental stage, there is nothing to see, test or prove for weeks or months after you started your project.

This is true, but not in every case, which makes it dangerous advice to apply without consideration.

Depending on what you need to learn, another Lean Startup principle - iterating the product quickly - might give you regular and actionable learning faster. But if you start with tech, your experiments and releases need be fast enough. That's hard at first.

There are further issues. When building smaller products as experiments, there's more than the build time to take into account; you need a reasonable amount of time for the market to respond. You can fall prey to the Immediate Response Fallacy, where you don't leave the right amount of time for the market to respond, and incorrectly conclude the experiment failed.

Business model problems

Benjamin also considers his experience with multi-sided models, not just SaaS.

By narrowing your focus to build something you can sell, you can easily forget to make it attractive to the people actually using it – which aren’t your customers per se. This doesn’t only apply to ad-driven social networks, it is equally true for building a platform for fund-raising or petitions: if you don’t have active users, why would any “customer” ever want to run a campaign on your platform?

And lastly, he warns how using the Lean Canvas as his main de-risking tool led him away from noticing some fatal assumptions:

Ergo, instead of thinking of the “market” when building a tech venture, you should think about those who’ll ultimately benefit from the technology first.

Though the initial build is a vital part of a tech venture cycle, you have to hide it to make the Lean Startup Canvas work. Awkward.

Building a functional prototype gives you real data. You can actually observe user behaviour, rather than rely on people's descriptions of their behaviour. If you have an open mind, rather than a narrow focus on your idea of their stated "top 3" problems, that data can lead you in the right direction. In Benjamin's case, it's led him to completely new customers.

Choosing the right tool for the job

The key lesson I get from Benjamin that he chose the tool he liked better, but wasn't the right tool for the job. It's possible he didn't make himself aware enough of his options.

Often, the Lean Canvas is chosen because it covers keywords that people think are important at first, like "Problem" and "Metrics," or simply because it's called the Lean Canvas.

This reasoning doesn't answer: is this the right tool for the job I have?

My experience with a large number of startups in accelerators is that the Lean Canvas and Business Model Canvas are helpful in seeing key assumptions as a whole, and to spot gaps in thinking.

One problem is that both give the impression of being thorough and complete, but aren't. Other equally-important assumptions are covered in The Assumptions Exercise, Business Model Environment, and Seven Domains Framework.

In practice, canvases are also awful dashboards - you'll notice they're commonly abandoned when used that way - old post-its gathering dust on the wall.

For early-stage and market driven assumption spotting, I've found Giff Constable's Assumptions Exercise to be much faster and more effective.

The original Business Model Canvas is particularly useful in prototyping and exploring a range of options quickly. It's stood the test of time, for companies that have started and expanded in a range of directions. I've noticed more coherent and innovative business models from startups who use the BMC this way.

When considering the impact of trends, competition, and other aspects that investors scrutinise, the business model environment is effective.

A good tech creation canvas has to assists developers in thinking about their benefactors and user base early, without narrowing the focus of the technology to what can be sold only.

Alex Osterwalder, the creator of the Business Model Canvas, has also recognized the need for finding product / market fit - and from both directions. His new Value Proposition Canvas is actually designed to be split in two, product ideas and customer segments explored more independently of each-other, with customer problems and their jobs-to-be-done as the glue to finding the right match.

There are other great tools out there too, but as always, you need to look at your options.


Swombat.com: a new beginning

Every once in a while, I meet a startup founder who tells me that he or she spent time reading through the Founder's Library and got a lot of value out of it. It helped them get up to speed with many essential startup concepts, it gave them ideas, it helped them avoid mistakes, and so on.

This makes me feel great, obviously - every one of my blogging efforts has been to help people, and swombat.com was explicitly designed to help early founders to avoid the obvious mistakes that we all tend to make in the early days. I'm happy that it's done that for at least some people.

I am not, however, happy that I have frequently neglected the site.

I posted the first post on swombat.com on November 30th, 2010, a respectable 1283 days ago. Over this time, swombat.com has grown into a useful resource for new startup founders, but it has definitely had some extended dead periods. If it had had sustained attention for that period, it could be an order of magnitude more useful.

Time and success

Unfortunately, I have come to realise that it is entirely impossible for me to consistently spend time to update swombat.com, for months or years on end. No matter how many times I have deluded myself into thinking that, reality has ultimately won again: I just don't have the time, energy, attention to keep up the promise of this site all by myself.

I have good reasons for that: GrantTree is a successful, growing business. This is really awesome - it's fun, rewarding, interesting, challenging, etc. It's also a ginormous time-sink, and something that ultimately will continue to drain my time and energy on such a scale that I simply don't have the time to do this site justice.

Swombat.com is useful, but it's ultimately always been more of a hobby. As such, whenever there's been a time squeeze (and these days I feel like I'm always in a time squeeze), GrantTree wins and swombat.com loses.

To make this even worse, my interests in terms of writing topic have shifted somewhat (towards more advanced matters of culture-building, for example), and I don't read Hacker News nearly as much as I used to, so this all compounds to make swombat.com's future gloomy to say the least.

But this site is valuable and helpful to people, so I don't want to just let it languish, unupdated, uncared for, unloved, forgotten until the millennia pass and it is unearthed by archaeologists and... erm, I digress.

In short, I want swombat.com to continue - and perhaps even to do much better than it has under my spotty stewardship.

A plan for the future

There are two essential things that make swombat.com, and the Founder's Library, useful:

  1. A good selection of quality articles that provide useful, actionable insight, tools and techniques
  2. The additional insight of having an experienced startup founder comment on these articles to provide an additional perspective

I don't have the time to do both, but I do know people who can help. I've called on my good friends at FounderCentric, Rob Fitzpatrick, Salim Virani, Devin Hunt and Jordan Schlipf, to help with this noble task, and they've answered the call.

Each of them is an experienced serial entrepreneur, they're just as opinionated as I am about bad startup advice, and they in fact have even more insight than me to add, since they spend most of their time teaching and mentoring startups all over Europe, so they've had the chance to gather even more first-hand data about what advice is useful and what advice is harmful.

In short, I am opening up swombat.com to more contributors, and seeing if there's some merit in the idea of swombat.com being more than just my own platform.

Next steps

This isn't going to be an instant transition, of course!

The first step has been to, quite simply, build multi-user support into swombat.com, and rejig the site to support that better. That, I think (along with some housekeeping like getting Resque to actually, erm, work) is now done.

The second step is obviously to get the process of us posting collaboratively working. Please bear with me while I figure this out.

Eventually, this new beginning for swombat.com may open new opportunities that aren't visible yet.

As ever, if you have feedback, suggestions, or other comments, please feel free to email or tweet me - or Rob, Sal, Devin or Jordan!


Mutual Respect and the barking of dogs

Yesterday, I got involved in a little twitter spat where someone attacked Dave McClure to try and censor his company. The conversation is not important, nor is the person who was attacking him and 500 Startups. I won't link to them to give them greater attention, because they don't deserve it, but if you're very curious and you're reading this shortly after publication, you can look through Dave's tweet history and see parts of the sad excuse for a "discussion" that occurred.

In short, it involved someone getting terribly offended at what someone else was doing on the internet, and lashing out with all the verbal violence they could muster (which wasn't all that much, but was vitriolic enough to be quite sad to look upon). Swear words were used and reused and abused (on one side only), and there was a general lack of respect for Dave or his calm, measured, polite responses. Dave came out looking like a hero of good behaviour compared to his somewhat animalistic attackers.

What I find very interesting is that I got very upset at all this. I was clearly angered by part of this discussion. See, I find abhorrent the idea of a person trying to forbid another from doing something just because they find it offensive. It's deeply, deeply repugnant, scary, and ignominious. It brought to my mind this response by Philip Pullman about his book titled "The good man Jesus and the scoundrel Christ", where he responds to one critic who declares himself offended by the title:

No one has the right to live without being shocked. No one has the right to spend their life without being offended. Nobody has to read this book. Nobody has to pick it up. Nobody has to open it. And if they open it to read it they don't have to like it. And if you read it and you dislike it you don't have to remain silent about it. You can write to me. You can complain about it. You can write to the publisher. You can write to the papers. You can write your own book. You can do all those things, but there your rights stop.

That response made me buy and read the book (which was not all that amazing, though intriguing). I felt it was inspiring, and was a very measured and civilised response to a topic which, in me, provokes red, stupid anger. To me, the attempt by one person to censor another based on what they find offensive is a kind of intellectual violence akin to rape (yes, I use the word deliberately - bear with me) - why is it like rape? Because it is the (usually intellectual, but, in some parts of the world, frequently physical) violent imposition of your way of seeing the world on another person, and it is a violation of someone's mental integrity.

Some of you may think that my use of the word "rape" was excessive. In fact, I know that some people will react to this word emotionally, seeing red, feeling very angry that this is desensitising people to rape, and so on. If you feel like that, great - I apologise for making you feel this way, but this is exactly how I feel about the mob censorship described above. So now we understand each other, let me withdraw the misused word "rape", and please forgive me for using this device to rouse your feelings.

This kind of bigoted censorship is like someone stepping into your head, declaring ownership of your thoughts, and deciding what you're allowed to express, marking some kinds of thoughts as improper, others as allowable, and, fundamentally, imposing their way of thinking on someone who is not them, by force or by threat. To me, this is a straight path to the thought police and the kind of 1984-style world which I do not ever want to set foot in.

Here's the kicker then: because I really care about this topic, I found myself getting angry, and had to make a conscious effort not to devolve into the kind of uncivil, frothing-at-the-mouth nonsensical verbiage that I was deploring in these very attackers!

The line between man and beast is oh, so fine.

Thinking about this further, and looking back at my own history of posting and arguing with people (particularly on the internet, where intellectual violence comes easily since you do not typically get kicked out of internet circles for being an asshole like you would in real life), I have myself descended into this sort of behaviour. I can't even claim it was rare: I'm quite certain it was very frequent, and even recent. Some subjects just get my goat and manage to make me see red, and want to fight, with words, to hurt the other side. It's as deplorable to observe this in myself as in anyone else.

I think it takes supreme self-control to be civilised at all times, even in the face of a heinous lynch mob who wants your blood based on a misunderstanding (often deliberate) or downright fraudulent misstatement of facts. I take my own hat off to the man with 500 hats, for his impeccable behaviour in this particular instance.

Mutual respect

But there's a reason for writing this article beyond getting this off my chest and handing Dave a medal. There's a lesson for everyone here, I think, because I really doubt that I'm the only one who feels the lure of the beast in all of us from time to time.

Here's a thought: beyond the fairly advanced disagreement hierarchy proposed by Paul Graham, or beneath it, rather, there is a more fundamental principle at play: conversation between civilised individuals should always begin, proceed and end with mutual respect. Without this, there is no discussion, no argument - merely the noise of dogs barking at each other.

So here's my challenge, for myself and for any others who lack the buddha-like peacefulness of a still pond, which can never be disturbed by the barking of dogs or wolves nearby:

When someone challenges you by engaging you on a subject which really gets you, which makes you want to hurl words at them for no productive purpose other than getting your anger out - take a deep breath, calm down, and find a respectful way to proceed.

Even if the other side is not being respectful, you owe it to yourself to be so. After all, a gentleman remains a gentleman even in the gutter.

If I ever fail to do so in the future, please do call my attention to it.


Money and wealth

Money and wealth

First, a disclaimer: I am not an economist. However, most people misunderstand money and its purposes and uses so badly that I feel compelled to write out my understanding of it. Perhaps because I am not an economist, this might help some.

My context: I am running a successful, profitable company that I started with my wife. I spent a number of years broke, but I have never been poor. I've always had the safety net of a middle class family and a top education (provided and paid for by my parents) to fall back on. I've lived in not-so-great accommodations, but it always seemed temporary in my life. Now for the first time I have enough money that I don't need to worry about it. I can afford the things I want (though I typically don't buy them, because once I can afford them, they no longer seem so desirable, just wasteful). Perhaps this is temporary, but at this point in my life I have enough money.

Thirdly, I am in this article discussing material wealth. There are many other potential variations for the meaning of wealth in other contexts. I'm not talking about these. Just the good old fashioned material wealth that society keeps telling us to chase.

With all that in mind, let us begin…

Money is a medium of exchange

The first and perhaps most important mistake people make is to confuse money for wealth. This is not too surprising when the dictionary itself proposes this misleading definition of "wealth":

1 . a great quantity or store of money, valuable possessions, property, or other riches: the wealth of a city.

It's worth including the "Economic" definition on that page though, it does change things somewhat:

3 . Economics:

a. all things that have a monetary or exchange value.

b. anything that has utility and is capable of being appropriated or exchanged.

You'll notice the Economists don't define wealth directly as money, but as the ownership of things that are worth exchanging for other things of value or for money.

The more I earn, the more I realise that wealth is not money, but the ability to generate money (and other things of value). This is akin to the difference between saying "I am a dancer" (i.e. I have the ability to dance) and "I was a dancer" (i.e. I once had it but I no longer have it). Being wealthy is equivalent to the first statement, while having money is equivalent to the second.

Having money does not make you wealthy, but having the ability to make money, through net income generating assets such as businesses, investments, or even just your own skills, that makes you wealthy. This is perhaps why those with a solid education are never really poor, but merely broke: they have the potential to make money, even if they don't have money right now.

But surely, having a lot of money, say a billion dollars, is the same as being wealthy? In theory, perhaps. In practice, it seems people who know how to maintain wealth would never keep a large sum in cash around, but quickly turn it into net income generating assets, and those who do not (e.g. lottery winners) often quickly find that the seemingly infinite pile of cash has evaporated into nothing.

Having a lot of money is at best a very temporary form of wealth.

Wealth is measured in net income generating assets, in things that allow you to generate money: skills, stock investments (if they generate profits), profitable businesses you own, cash-flow positive lands and properties, etc.

Money is not a net income generating asset. Money is not wealth. Money is a medium of exchange. By reading about rich people, you'll notice they generally try to avoid having a load of cash lying around, because money is not a place to store wealth. It is and has always been, historically, a very, very poor store of wealth. Currency, since its invention, has been a fantastic tool to facilitate exchanges of things of wealth. That is what it is, nothing more, nothing less. Our economy could not function without money, but its value is not in the money. The relationship between value and money is like that between a community and a message board, or a bicycle and its tires. The first can exist without the other, but the second without the first is mostly useless.

Some people will perk up at this and say "aha, this is because of the evils of inflation, and a return to the gold standard or a switch to Bitcoin would solve that".

To which the only valid answer is: bullshit.

Those who think money used to be stable need to read the book Money: whence it came, where it went (if you can't find a copy, send me an email). It is very instructive to look at the history of money and realise just how unreliable it is as a store of wealth. Historically, every few decades, money used to lose all its value in some kind of disastrous bubble that affected currency itself. Any wealth that was stored in money simply evaporated into nothing at all. Even gold suffered enormous ups and downs - for example, the importation of large amounts of pillaged south-american gold into Portugal destroyed its economy through hyper-inflation; the difficulty of moving gold between central banks during the gold standard era caused massive deflation in some parts and massive inflation in others.

The deep irony is that all those people calling for an end to inflation (and usually a return to a gold-like standard) because of the evil erosion of money, have lived their entire lives in a period of unprecedented monetary stability. Money is so stable nowadays that it sort of looks like a store of wealth, enough so that people get incensed that the state would dare allow inflation to affect it. The reality is that the current system has resulted (in some parts of the world, by far not all) in fairly steady and predictable inflation for almost a century.

Given the perils of deflation, a small, steady, controlled inflation is really the ideal situation for a medium of exchange. Not only that, but a moderate rate of inflation is generally considered a very good property for a medium of exchange for wealth, since it encourages people not to treat money as wealth, and to instead look to store their wealth in things that actually have value (ideally investments that enable the economy to work better, putting the accumulated wealth to use as capital).

But enough about misguided gold-standard bitcoin purists. How does this affect you, dear reader?

To get wealthy, build net income generating assets, don't accumulate money

Robert Kiyosaki, author of Rich Dad, Poor Dad (worth reading along with its sequels), proposes that rich people get rich by building their net income generating assets column (i.e. things that generate positive cash flow each month, not "buy and pray" investments like most stocks or houses), and that middle class people fail to get rich because instead of buying or building net income generating assets, they buy loss-making assets (e.g. by buying a bigger house with larger mortgage payments, or a new car with monthly payments) that drag them down.

I won't try and summarise Robert's entire philosophy in a blog post, but a common misconception (and my misconception, earlier) about "getting rich" is that it involves accumulating money.

As I hope I've made the case, having piles of money may occasionally happen on the way to getting rich, but it's not the goal, nor a desirable thing.

To get rich, what you want is net income generating assets, including the skills to generate those net income generating assets. Learning how to turn business opportunities into functioning businesses is an invaluable net income generating asset: I believe you can exploit that net income generating asset in almost any economic context, even war. But, as a more generic category, the fundamental pillars of wealth seem to me to be health (including youth, energy, endurance), education (including work ethic, general knowledge, wisdom, self-knowledge), intelligence and relationships (connections to useful people, trust, reputation, power). If you have those (at least the first three), and you truly desire wealth, it is yours for the taking, in this world at least (so long as you don't let your own beliefs hold you back).

The key takeaway should be that instead on focusing on how to accumulate money, you should instead focus on how to turn money (or other things) into things that create more money. A wealthy person doesn't set a goal of saving up a million dollars, and if they find themselves with a million dollars in cash, they quickly set to work finding a better format to store that wealth into.

Instead, figure out how much income you want and create things that will generate that income for you.

Savings

In that context, saving large amounts of money seems very ill-advised. Of course, at age 33, my perspective on this is limited, and perhaps I'm getting it all wrong, but it seems to me that the idea that the best preparation for retirement is to save up a load of money is a horribly noxious lie that has likely led to the bitter disappointment of hundreds of millions if not billions of people.

In the distant past, people "saved up" for their retirement by creating net income generating assets - out of their loins. Grown children can create wealth to sustain you when you can no longer do so yourself. A similar approach seems sensible today: instead of saving piles of cash that can depreciate rapidly or even be lost when the stock market turns sour and the bank or government turns around and slashes your retirement fund, create net income generating assets that will generate the wealth you will need to live on.

Saving for your retirement instead of creating net income generating assets seems like piling up potatoes in your cellar instead of keeping the potato farm running. The potatoes will go bad over time, you'll almost certainly miscalculate the amount of potatoes required, and if you run out, you're really properly screwed, because you don't have a farm to grow new potatoes anymore.

Pensions changed this somewhat - they were equivalent of handing the potato farm over to the state in exchange for a steady supply of potatoes until your death. In theory, this was a great idea. Unfortunately, history is showing that the state is a stingy, cruel, unfair and generally grossly incompetent manager of potato farms. Any people my age who, today, trust that the government will provide for them in their old age through pension schemes, are, in my opinion, delusional. Perhaps something else might change this situation, but who knows when such revolutionary ideas will actually take hold. In the meantime, Caveat Emptor.

The best kind of net income generating asset would be one that can adapt to changing circumstances, that has the lasting power to survive through dramatic world events (which no one can guarantee the future to be free of). The net income generating assets need not be imperishable: they merely need to have a very good chance of surviving you. Strangely enough, from this perspective, well educated, healthy, intelligent and loving children are probably still the best retirement net income generating asset you can possibly create, as they have been for thousands of years.

The purpose of wealth

Some people reading the above may think to make wealth their fundamental goal in life. I believe that's very misguided. As Paras Chopra said recently, the real use of money (or rather, wealth) is to buy freedom.

As Bob Dylan put it:

A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do.

Wealth can help with that, depending on what you want to do. Lack of wealth can definitely hurt that goal. I took some acting courses, and one acting teacher once declared that a "successful actor" earned about £5,000 a year from acting. The rest of their living costs came from odd jobs like being a waiter or working in a supermarket. I politely kept silent, but my thought was, this is not a successful actor, it is a successful minimum-wage worker with an acting hobby.

Wealth, to me, serves as a platform to enable you to do what you want without so many distractions. Fooling oneself into pursuing wealth as a fundamental objective is as limiting as failing to consider wealth at all.

Importantly, in this context, wealth is highly relative to the person. You are wealthy not if you exceed some social threshold, like being a millionaire or a billionaire, but simply if you have enough wealth to meet all your needs. This points to an obvious way to increase your wealth: reduce your needs. Some take this to the extreme. Some take this to even further extremes. The fact is, if you believe you need a castle and a ferrari to be happy, your bar for wealth will be much higher than if you are happy wherever you are and don't particularly care for owning cars.

Unfortunately, if you work surrounded by people who make lots of money, chances are they spend lots of money too, and by spending so much time with them you will learn to need to spend a lot to be satisfied too. This is why high-paying jobs seem, in practice, to fairly rarely result in creation of actual wealth. Instead, we end up reading stories in the New York Times of couples who earn $500k a year and feel poor. Those stories are usually made fun of as disconnected from reality - but there is no contradiction between earning money and being poor. Money is not wealth. Poverty in your mind cannot be cured with pay raises.

A final summary about money

If you want to avoid falling into some of the most devious traps that wrong-thinking about money can lead you into, keep the following principles in mind:

  • Money is a medium of exchange for wealth, it is not a store of wealth.
  • Money is transient and unreliable, and expecting it to display permanence will only lead to disappointment.
  • Wealth is not an accumulation of money, but the ability to generate it when you need it.
  • The fundamental building blocks of wealth are health, education and intelligence. Money is a side-effect of combining these building blocks with a wilful effort to create wealth.
  • Any aggregation of lots of money is a risk. Turn it into net income generating assets as soon as possible to reduce that risk.
  • Any aggregation of assets also is a risk! It can have maintenance costs, if they're not net income generating assets. Sometimes those costs outweigh the value of the assets in which case the assets are a net negative. Be careful what assets you invest in.

Investment increases your risk

It's no secret that I'm a fan of bootstrapping. I like to retain 100% founder control of a business that I'm in. There are some circumstances where I'd consider raising capital (as a springboard, not a cushion), for the right kind of business, but I think they apply only to a very small subset of businesses that are interesting (aka fun to run) or likely, and to a vanishingly small subset of businesses by first-time founders.

That said, I do regard both methods - bootstrapped and funded - as valid ways to build a business. It all depends on your objectives and your circumstances. You couldn't start Google without funding, nor could you grow it to be the success it was. Facebook needed to own the social networking space before it could generate money, so it needed funding too. Even Apple, the cash cow par excellence, needed funding to help jumpstart its manufacturing operations (though nowadays, they'd probably have used Kickstarter). Some businesses are just capital-intensive. Some have a winner-takes-all kind of market where you must be funded to win. Some just don't have an obvious business model upfront.

Every once a while, though, I speak to someone about funding, in the context of a business that should be cash-generating fairly early, or is already generating decent amounts of cash, and they mention that they're looking for funding to decrease their risk. That's a terrible misconception. Funding does not decrease your personal or your business risk - it increases both.

Risk profile

Taking funding makes your distribution of possible results more binary. By default, a business can be anything from a complete failure (0% or even negative ROI) to a roaring success, with all the options in between available. If you raise funding, however, it cuts out a number of the middle options. VCs will definitely want an exit, and if the exit is too low, this can turn a fairly decent success into a relative failure for the entrepreneur.

For example, building a business worth £20m is a pretty amazing achievement, but if you've raised £10m from a VC to get there, with 2x preferential rights you would be wiped out and result in very little money for you as a founder. In that scenario, not taking the funding and building a, say, £5m business instead, would have been a far better financial outcome for the founder.

Angels can be a bit more forgiving, but they're typically looking to exit too, and taking that first bit of funding will gently push you down the road towards taking more and more. Angel funding does not necessarily make the outcome entirely binary (angels are more forgiving if you decide to just run your business and pay dividends), but it can still make a great first business success seem like a failure.

Remember, the VCs, despite all the rosy-coloured articles out there, are not in business to help you. They're in business to make money for themselves and their limited partners. Some do so in more ethical and helpful ways than others, and that's to be commended, but the fundamental business model of the VC is to get a good return on a few superstar investment and limit the damage as much as possible on all the other "failures".

No pain no gain

If funding makes things so much more risky, why bother at all?

Funding is worth taking when you want to trade additional risk for potentially larger gains. Talking of the "startup lottery" is not so far off the mark. Investment is a bit like gambling. When you raise funds, you take on a larger risk, both personally and on behalf of the company, in exchange for a potentially larger return.

If there was any way to increase return without increasing risk, everyone would have done it already (and in fact there are many ways, like getting mentors, learning about the topic, etc).

With this perspective, it becomes obvious when funding is a good idea: you should only take additional risk when you can afford it.

Most first-time founders are broke. Not only that, but being first-time founders, they are already carrying enormous amounts of risk, because they don't know how to run any kind of business, let alone a mega-successful high-growth tech startup. This is as compared with, for example, someone who has run and profitably exited a couple of more traditional businesses in the past, and is now looking for a new challenge. That experienced entrepreneur may be willing to trade some additional risk for a chance of a much larger impact than her previous ventures.

Given these circumstances, I would argue that new founders should be looking to decrease their risk, not increase it. As a first-time founder, it is better to have a risk curve that gives you a 30%-ish chance of making a fair bit more money than you were making in your previous job, with a fairly smooth distribution of lower outcomes and little chance of zero return (not that unlikely in my opinion), than a risk curve that gives you a large chance of zero return and a slightly higher chance of a very large outcome.

And therefore, first-time founders should almost never take funding.


Developing a good culture takes constant vigilance

GrantTree now has twelve, soon thirteen employees. The culture is (currently) great, I believe. People are generally happy to be there, and they're beginning to function as a group rather than a collection of individuals.

One of the many things I learnt along the way - one of the few things which I'm certain enough of to be willing to write an article about it - is that building a good culture takes constant effort. It doesn't just happen. It takes consistent, deliberate effort, every day.

A good culture?

Perhaps it's worth defining what the hell a good culture is, before we go deeper. Every company will have its own definition of "good culture" that will be different, but we can make a useful first stab.

Here's a simple definition of a "good culture": a company with a "good culture" is not a shitty place to work.

By contrast, most companies are terrible places to work, for a lot of reasons. They have incompetent managers, rules and processes that don't make sense, arbitrary restrictions such as strict working times ("if you come in at 9:01 you're late and you will get a bollocking") or limits to what you're allowed to be working on ("You're an analyst programmer, you're not allowed to go and work on sales stuff"). A simple barometer: if working for a certain company would make you miserable, then at least from your point of view they have a bad culture. Perhaps one of the reasons entrepreneurs hate working for most other companies is because they have a very strong sense of culture.

Many people can put up with bad culture. They accept it as a given parameter of this thing called "work" which sucks anyway. But many entrepreneurs are likely to quit even their own successful businesses (or scale them down dramatically) when the culture goes bad.

Bad culture is the default

Unfortunately, despite this very strong sense of culture, the default company culture you end up with is still a bad one. As a couple of examples, I'll offer up the culture that Tony Hsieh, a master of culture-growing, ended up building in his first business, LinkExchange. From the sound of it, it was a bad place to work - and he no longer wanted to go to work in the morning. So he sold the company. This is not a rare story. Another way this occasionally unfolds is that the entrepreneur will wake up one day, realise the company they've created is not a place where they want to work, and start scaling it back down to just themselves in response. As a second example, GrantTree was on a path towards a bad culture this summer, and this was averted because one of our employees gave me a kick up the ass by pointing it out very bluntly. If not for her, we'd probably be even further down the path of building the kind of company that I don't want to work at.

The reason for that, I believe, is that by default, if you don't make an active choice to do something different, you will naturally end up doing what everyone else does. And as I mentioned earlier, most companies have a bad culture. If you don't make frequent, deliberate, often courageous efforts to push for the kind of culture you care about, you will build a company that's just like every other company out there.

That's what I mean by good culture requiring constant vigilance. It's not a case of "letting things slip once" - you can always take corrective action, as GrantTree did. But if you let things slip too far into the wrong direction, then you may find that the cultural inertia of your company makes it impossible or just too much effort to change. At a size of 12, of course, change is still possible, but what if we'd realised this only after we reached 100 staff and 2, 3 years of doing things the bad way?

How to avoid this trap

The most important thing, I feel, is to be aware of what kind of culture you want to build. This self-awareness is harder than it sounds. It takes a lot of introspection and courage. You need to be willing to accept that your vision for what kind of company is good to work in will generally be considered a bit crazy by most people ("What do you mean all salary information is transparent? You can't run a company like that!") or downright batshit insane ("Wait, what? You let employees decide on their own salaries???"). More experienced culture-builders will smile and nod and say "that sounds interesting", but those are few and far between. Most people will think you're crazy to want to run a company like that, differently from most other companies out there.

Luckily, as entrepreneurs, we're well used to enduring multitudes of concerned friends, family and other well-wishers telling us that we're insane, so perhaps the criticism is not so hard to take. However, before you can be criticised for your crazy ideas, you need to figure out what those ideas are.

There are all sorts of ways to do that, but the key is constant questioning of yourself. Keep asking: do I feel this is truly the right thing, or is this just a default way of running a company? What are the natural consequences of this decision a few months or years down the line? What kind of company makes this decision? Would I want to work there? That last question is particularly essential.

Through this constant questioning, you will over time develop an awareness of what values guide your decisions, and this will then strengthen your ability to make the right choices and make them more quickly. But you can't let up this constant vigilance at any point - otherwise the defaults will once again take over.

Once you are aware of what it is you want to build, the next step is to hire the right people and guide the people you've already hired towards this vision. As a founder of the business, you have enormous influence over the people who work there - much more than you think. Don't let it go to your head - it doesn't make you some kind of company divinity. But it does give you a very deep store of credibility to make things happen, to cut through personal likes and dislikes, through politics, through apparently insurmountable problems, and make change happen. Use that. Use it every day, in countless little ways. Lead from the front: lead by example; be the culture you want to see. Explain your vision, over and over again, in one-to-one meetings, in emails, in group meetings, etc.

Every half-decent article about startup hiring suggests that culture fit is one of the most important hiring criteria - yet most startups ignore that at first, perhaps because they're not really aware of their culture. If you hire based on competence alone, each person will bring some random addition to the culture that doesn't pull in a specific direction. As a result, you will by default end up with an average culture, in the middle - a bad culture, in other words. If you keep hiring people who have the right culture, on the other hand, each hire will strengthen the culture you're trying to build and make an average, boring culture less likely.

Critically examine even little decisions. You can often undermine your own culture-building attempts by giving the wrong example. If you believe in transparency as a key value, for example, then don't hide in a corner and do stuff in secret. Each time you do that, you will undermine your own message and look like a hypocrite. Hypocrisy is a major feature of the average "bad culture".

As a final tip, don't try and force culture. You can show the example, but creating artificial culture artefacts (like "we have a fun afternoon every friday with beer and snacks at your desk" or "we play ping pong") just results in the superficial appearance of culture without the substance of it. You can't make your company fun by saying "we're a fun company". You need to create an environment that is conducive to people having fun, and then allow it to happen, and encourage it gently when you see it. If you want to encourage a culture where people can have a beer on friday afternoon, just keep a fridge stocked with beer, and crack one open yourself at your desk on that fateful day. Eventually people may follow. Or not - and that's ok too. I think one of the reasons that every company with great culture has its own unique expression of culture, its own unique set of "cultural artefacts", is because the ones worth anything grow organically, and that growth tends to be random.

And they all lived happily ever after...

I'm not far enough down this process to know what happens once you have built a solid, good culture. Discussions with people who are further along seem to indicate that even after investing many years into this, when the founders leave the culture tends to get worse, or at least to drift further and further away from what they initially envisioned.

Then again there appear to be counter-examples, like Semco. Perhaps there are certain features of culture which makes it more resilient to the departure of the founder (like a democratic approach). For obvious reasons, I can't comment on this yet. Check back in ten years or so for an update...

In summary

  • By default, your culture will be just like everyone else's: crap.
  • To avert that, you need to constantly question all your decisions and their impact on culture - always, forever.
  • Be prepared for people telling you you're crazy for the insane ideas you're trying to implement in your company.
  • Make an effort to become self-aware about what kind of culture you want to build.
  • Make culture fit your number one hiring criterion.
  • Don't try and force culture. Enforced fun is not.

Embrace the desire to make money

"If you want to make money, go into banking, not into startups."

"Only go into startups if you're really passionate about them, because you probably won't make any more money than from a good job, and probably a lot less."

"Startups are very risky, you'll probably fail to make any money."

"A startup's purpose should be to change the world for the better in a meaningful way."

Raise your hand if you've ever heard this. Raise your other hand if you've ever said this to others.

I have both hands up. If you searched through my voluminous HN posting history, you'd probably find at least the first statement in there word for word. What can I say, youth errs.

An alternative view

Having a good job in a high-wage industry can potentially result in having a relatively high wage. For example, being in finance (or indeed in software engineering in the Valley) can result in pretty high wages.

However, those wages are taxed very heavily. Of what remains, a lot goes into maintaining a certain lifestyle that goes with the job. Whether that's spending half your disposable income on rent in the Valley or having to go out to expensive bars all the time in the City, somehow, many if not most people working in these high-wage jobs don't accumulate all that much money.

Moreover, whilst those kinds of jobs used to be relatively steady, it can hardly be said that they are risk-free, especially in today's world. If you're working in a job, that means you're at the mercy of factors that you cannot see and which may drive you out of that job with little notice. And once the job is over, so's the money.

Finally, the kinds of jobs that pay well also have a tendency to require complete focus. They consume your attention, your life. You can't be an M&A banker earning hundreds of thousands of pounds a year without working incredibly long weeks that sap your life in exchange for all this money. When you work that kind of job, you have to be all-in.

I contend that a job, any job, is a very poor way to "get rich". It can be a good way to learn, but to get rich? Nope.

What about startups?

Startups in the Valley sense are also a pretty poor way to get rich, because they are like jobs with a high potential payoff on exit. If you sell your business for hundreds of millions, you will be rich. If you don't, however, you will just have collected a (probably not so great) salary for a few years, while pouring your entire life into the game. This is not that dissimilar to the banking world.

The quotes I started the article with are actually not so far off the truth, if you limit the word "startup" to the funded kind.

However, if you include all aggressively growing businesses in the word "startup", as per my definition from some time ago, then the picture changes. A rapidly growing business can definitely make you rich. In fact, one might say it's the best and most popular way to build a fortune.

However, no business will make you rich unless you actively want to make money. If you go into business with the mindset that you're in it to change the world and don't want any money, then guess what: you probably won't make much money. You probably won't change the world either, but that's another matter.

There are always exceptions, of course. However, it's never healthy to count on being one of the exceptions. A good plan, after all, doesn't just present one path to success - it sets things up so that all, or at least most, paths lead to success.

Embrace it

I meet far too many entrepreneurs who seem almost embarrassed to admit they want to make money. This is a very nasty side-effect of the Valley mentality of "it's about changing the world", a mentality that's contaminated the rest of the world (with both good and bad side-effects).

Wake up! If you're broke, it's perfectly ok, admirable even, to want to make more money. Society has little respect for the broke idealist waiting for his or her big break. If you're a student living with your parents (or about to once you leave university), or if you're beholden to a soul-sucking job because it pays your rent, or if you find yourself never able to afford the things you want, even though they are reasonable things like an up-to-date computer and a decent house to live in - then you absolutely should want to make money.

Money is not evil. It's a token of success in today's world. Wanting to make some money so you get the good things that go with it (like comfort and security) is a perfectly valid and admirable desire for anyone who's broke.

Of course, if all you ever want in life is money, then that's a different issue, but my guess is if you're still reading this article, that's not your problem.

A successful entrepreneur actively finds and uncovers opportunities for financial gain in the world around them. In order to find those, you need to be in the right mindset, and that mindset includes wanting to find these opportunities. If you've brainwashed yourself, or let others brainwash you, into not wanting money, you will not be a successful entrepreneur.

There will come a point in life where you have enough money, hopefully. At that point, you probably should start ventures that aren't about making money (though money-making businesses are a very robust way to change the world). However, that time is not when you're living off pot noodles and unable to afford a car.

In conclusion

Don't listen to people who tell you you shouldn't want to make money, that you should be "in the game" to change the world instead.

Until you've made enough money to at least be comfortable, you should be in the game to make money, explicitly, without any shame or hesitation about it.


Friends, Family and Fools: the worst investors

"If you're struggling to raise investment from angel investors, the next fallback is FFF funding - Friends, Family and Fools. You can always raise a few tens of thousands of pounds from this source no matter how early you are."

The above is a fairly standard bit of startup wisdom, dished out to all and sundry. It seems pretty sensible on the surface. If your idea is any good, if you're a smart person who can convince others that you'll do well, it ought to be possible to convince someone, anyone, to invest a few tens of thousands of pounds to help get you started.

And since your idea is really good and you are a brilliant new entrepreneur, this may be the best investment decision that those people make in their life. It could be their chance to become rich, piggy-backing on your hard work - but you don't mind that, after all, they're friends and family. And fools, but we'll leave those to later.

Yonder dark clouds

Unfortunately, it's a huge understatement to say that when it comes to startups, things don't always go as planned. In fact, as a first-time entrepreneur, there's a very high chance that your business will go tits-up. Entrepreneurship is a career, you see, and you're just taking your first steps up that ladder. You have no idea what you're doing, even if you wake up every day filled with the confidence to take on the world.

There are ways to decrease that risk, of course. Seeking revenues right away… Keeping costs low… Getting advice from experienced mentors… All those things will help reduce the risk of your first business, but still, chances are against you.

That's alright, in a way, because as long as you don't do anything really stupid and, for example, triple-mortgage your family house to fund your first business, you'll survive the demise of your first venture, and be in a position to take another, better swing at the magical piñata of startup success.

This is where FFF funding screws you over, though.

When can I have that money back?

You see, if you take investment from professional investors, or even other entrepreneurs, they know that it's risky. They know that there's a fair chance you'll screw up and lose the money. Of course, they want to convince themselves that you're different, but professional investors only invest money they can afford to lose, so if they do lose it, they won't cry a river over it. They'll draw a line and move on to the next thing - perhaps even invest in your next venture, who knows. Investors are, largely, rational beings who understand risk.

Friends and Family? Not so much. Friends and Family will often get very upset when they find out you lost their money. You might find yourself highly embarrassed as the story of how you pissed away £20k of Uncle George's retirement funds makes the rounds over, and over, and over again for the next two decades. Not only that, but since they're your friends and your family, you may well feel somewhat obligated to repay the money somehow, sometime, once you've made some more money. It's like a lifelong debt that you can never truly shrug off, unless you're the sort of ungrateful git who probably wouldn't be invited to family reunions anyway.

Friends and Family investments are like the reverse of a convertible note. If everything goes well, they remain an expensive, low-valuation share investment. If things go badly, they turn into a loan securitised by that most valuable of assets: your personal relationships.

One would do well to stay away from such dangerously sharp-edged financial instruments.

Fools

Who's the greater fool? The fool who invests or the fool who takes the fool's money?

"Fool" investment basically means taking investment from people who are not friends or family, and who are also not professional investors or entrepreneurs of any sort. In short, they know nothing about startups, but they buy your sweet talk and decide to invest their hard-earned cash anyway.

The problem with this sort of investment is similar but different to the Friends and Family sort. Fools will not impose an eternal personal debt on you. However, experience shows that when the business turns south, they too will suddenly consider that the money invested should now be withdrawn from the business as soon as possible, and remain deaf and dumb to your declaration that the money has been spent and cannot be recovered.

Unfortunately, this sort of behaviour seems to be the rule rather than the exception. In the midst of a startup failure, which is a depressing enough event to begin with, Fools will drag you down and drag it all out endlessly, until you finally break all communications with them, under unpleasant circumstances.

Whilst a Friends & Family investment is likely to turn into a lifelong debt, a Fool investment will probably turn into a lifelong enemy, someone who will curse you under their breath every time they think of you and all the money you lost them.

Who should you take investment from, then?

There are only two categories of people that I'd consider taking investment from - and this is true at any stage of any business.

The first is professional investors, in which I include people who make regular angel investments, as well as wealthy people who have invested in things that lost them a big chunk of cash before, and who therefore will be fairly rational about the whole process.

The second category is other entrepreneurs, particularly those who have both failed and succeeded, as they know what it takes, they know it's very hard, and they know that if the business is going down the drain, the best thing to do is to let it.

Another key point about investments is you should only ever take money from someone who can afford to lose it. If my advice above falls on deaf ears, at least never take money from someone who simply can't afford the failure. Be very careful about that: you don't want someone's personal ruin on your conscience.

It's worth noting that with the recent advent of SEIS in the UK, investment by both professional investors and successful entrepreneurs is now much less risky than it used to be.

As I hope I've made the case above, taking investment from other types of investors, in particular FFF investors, will only result in trouble and pain further down the line, if the business doesn't succeed as easily as you might have expected.

If you can't raise the investment you need from proper investors, and you find yourself thinking of resorting to FFFs, I suggest you instead consider the idea to be out of your reach. It's better to work on another idea than to end up with the sort of nightmarish scenario that is all too common near the end of an FFF-funded startup.


Three kinds of games

This is just an arbitrary categorisation, but I find it useful. Obviously there are other ways to categorise games, and startups.

I love games. I have played games since I was a child. Computer games, board games, team sports (a bit less than the others), card games, dice games - any kind of game I could get my hands on. I am not Iain M Banks' mythical Player of Games, by far, but I do love the challenge that games pose.

And life itself is a game, as is business. These days I play less of the overly complex strategy game type (such as Civilization, of which I played every version except V), because I have come to the conclusion that those games feel too much like work, and I already have a game that feels like work, with the difference that when I earn gold coins in this game (my business) I actually get to trade them for Macs and summer hats in the appropriate shops.

Different games stretch you in different ways. With some thinking back over the long list of games I have played, these are the three ways they stretch you, and how they map to the entrepreneur's journey.

1. Games of mechanics

The first and most popular kind of game is the game of mechanics. This is a game where you win by application of your intelligence and insight. Most single-player computer games fall solely in this category, because that's all a computer can offer.

Games like the early, single-player Civilization games, or Dune 2, the original C&C, The Loom, Pinball, King's Quest, Trine or Super Mario, Donkey Kong and Battle Isle, most of the Black Isle Studios RPGs, Solitaire (physical or on the computer) or Backgammon are solely in this corner of the ring. Due to their very nature, they can only offer mechanics and so that's all they offer.

This is not to put their offering down. Games of mechanics are great fun. I still play them, though I tend to limit myself to the easy-to-pick-up-and-put-down iPad offerings, these days, due to lack of time.

What defines a game of mechanics is that it is won by analysing the situation "on the battlefield" and playing the right moves. Arguably, that's true of every game, but in a pure mechanical game, the battlefield is limited to the game.

Most startups start off as mechanical games. First, before anything else comes into it, you have to crack the mechanics of building something that makes money. This is a game where the battlefield is the product and the market, and I'm willing to go on a thick limb and say that if you're good at mechanical games, you will eventually figure out this game too. It might be the hardest mechanical game you've ever played, but it is just step 1 on the business journey.

2. Games of people

The second category of games, which some will argue is more interesting, but which is really just a matter of preference on the moment, is the game of people. In this game, the battlefield shifts from the board to the people around it.

To me, these have always been fascinating, because I used to be really bad at them, and therefore they were a constant challenge, something to learn and get better at. I don't like losing, but luckily for me that is coupled with a habit of, when I lose, trying again, and again, and again, until I win.

Most multiplayer games and board games touch on this dimension. Games like Warcraft 2-3, Settlers of Catan, Dominion or Dominant Species, look like they're people game (because, well, they involve people) but the game is not won by playing the people, so they're still fairly mechanical in the end.

Better examples of people games are No Limit Texas Hold'em Poker, some types of tabletop Role Playing Games (at least for the DM) and Diplomacy. In both cases, the game on the table in front of you is just an excuse for the game going on between your head and your opponents' heads. As the saying goes in Poker, don't play the cards, play the people.

Skill at the mechanics of the game is obviously necessary to play this. If you can't move your troops correctly (in Diplomacy), you will probably get eliminated no matter how well you play the people, simply because being weak paints a target on you that's hard to ignore. Same for Poker if you don't know the ranking and probabilities of various card combinations. But it is perfectly possible to get the mechanics of Diplomacy or Poker right and still lose over, and over, and over again, because they're people games.

In startups, people games become essential once you shift from building a product to building a company. Once you've got the basic machine that turns $1 of effort into $2 of revenues pinned down, the next step becomes to scale that up. No matter how technological your product might be, in the end, that will always end up involving other people. Maybe not hundreds of people, but at least dozens. And once you have people around, you have to play people games (avoiding office politics is a very tricky people game).

Much like playing mechanical games can teach you to play this second game, taking the time to play people games will improve your ability to play this part of the game, yet those games are much more rare than the mechanical type, so you have (in my experience, at least) to actively seek them out.

3. Games of self

The third type of game is the rarest and the commonest at the same time. This time, the battlefield is not on the board in front of you. It's not in the people around you. These are games where the battlefield is inside of you. It's you and your personal limitations. Arguably, all games have some element of this in them, at least at the very beginning, but I have yet to encounter an artificial game that is all or even mostly about the self. Perhaps the only such game we have at the moment is life itself.

What I mean by the battlefield being the self is that these games are about finding the limits inside of you and pushing against them. Games of the self open up new perspectives and unlock new skills that make you a better person.

I don't know of any artificial games that are purely of this kind, though many of the aforementioned games have some element of this, for at least a little while, but they abound in real life. I've argued before that successful people are successful, but the better way to phrase it might be that successful people make themselves successful, by winning at this game of self. They constantly find limitations within themselves and push against those.

The game of self becomes more visible as my business succeeds. Sure, success at the mechanics and the people aspects of the game of business is essential to even get there, and credit needs to be given to those games, but as the system that is GrantTree comes together, I find that many of the limitations of GrantTree's growth are not with either the people or the product, but with my own ability to observe and remove barriers.

The game of self is the meta-game. No one ever wins it fully, but every bit of progress you make on it increases your chance of success in all the other games. As such, it is always worth playing.

The only way I can think of to deliberately play this game is to play all games. Try many games, and pay attention to games that frustrate you, games which make you feel like a loser, games which force you to face uncomfortable truths. If you consistently lose at a game, it's a good sign that focusing on this game will make you progress in the game of self. If you're consistently winning, you're probably not learning as much.

Chess is perhaps the ultimate example of a game that rates highly on all three scales. No matter how much you play it and how good you are, you can always find someone who will beat you in novel and interesting ways and force you to think, and learn, and grow.

Life is a game of mechanics, people and self, and the multitude of artificial games humanity has concocted over the centuries can help teach you how to be better at all three dimensions.


Startup founders vs Entrepreneurs

There are more than a few falsehoods within the world of startups. Most are not worth worrying about, but some are very damaging. Some have side-effects that can ruin or kill people.

Every once in a while, the debate about "startups vs lifestyle businesses" recurs. It's one of those never-ending debates, with one side, let's call them the "scalable startups", bemoaning the lack of ambition of the "lifestyle businesses", and the other bemoaning the hare-brained, risk-it-all attitude of the startup crowd.

This is not the main contradiction I want to address in this article, but it's related.

The falsehood I want to address is exposed when you look at the terms in the title: startup founders, entrepreneurs. Pretty much all startup founders believe they are entrepreneurs. They consider themselves an exclusive, elite subset of entrepreneurs who start an elite subset of businesses: the scalable tech startup. They therefore naturally look down on the wider world of entrepreneurs, who do business in a less fashionable, sometimes less scalable manner.

However, that belief is a falsehood. Many startup founders are not entrepreneurs.

What is an entrepreneur?

It helps to start with a good definition for entrepreneurs. Here I am not concerned with the dictionary definition, which is based on usage. I want a useful definition.

An entrepreneur is someone who sets out to find business opportunities and create business systems to exploit those opportunities for financial gain.

I have deliberately excluded "internal entrepreneurs" at large corporations, and "social entrepreneurs" who aim for social good rather than financial gain. I believe those should be considered as separate categories. Although many successful businesses lead to social good, making social good the primary objective of a venture makes it a social venture rather than an entrepreneurial venture.

This definition is useful because it is broad enough to include anyone who genuinely tries to create viable businesses, but not so broad as to include anyone who does anything of their own initiative in the vague hope that maybe some day it might make some money, however unlikely. Creating a blog or site which perhaps some day could make you money through advertising does not make you an entrepreneur, neither do owning a good domain name, having ideas for cool products, or registering a dormant business. Those things may lead one to later becoming an entrepreneur, but they are not, of themselves, sufficient.

However, the definition does include anyone who tries to find business opportunities (through pot luck, determined research, personal connections, etc) and do useful work (themselves or via employees) that results in substantial enough amounts of money being made that the enterprise has a chance of becoming profitable at some point.

There are many tens of millions of entrepreneurs in the world, perhaps hundreds of millions, or even more. In poor countries, many people have to be entrepreneurs to survive. They spot business opportunities and exploit them to make a living. Because the opportunities tend to be small and conditions are very uncertain, they are never able to scale those businesses up, but the person who runs their own clothes shop in Liberia under incredibly difficult circumstances is every bit as much an entrepreneur as the one who starts a global fashion brand in New York.

Startup founders

Many startup founders are in fact entrepreneurs. I consider myself to be both, for example, though only since launching GrantTree.

Startup founders are, quite simply, people who found startups. They register a business (maybe) and create something that might turn into a business at some point, or even do turn it into a business successfully. So far, they sound a lot like entrepreneurs.

One difference is the goal. Entrepreneurship always has a financial motive. For startup founders, though, that motive is often secondary. They usually want to change the world, build cool products, become famous, have a big exit - oh, and perhaps, if it's socially acceptable at the time, enjoy the money that they've made as a side-effect of their chosen career. The money motive is often discouraged as a primary driver.

The even bigger difference comes when considering the concept of closing the loop. A business is not viable until the loop between creating value, delivering it to customers, and being paid for it, is closed. For entrepreneurs, closing the loop is essential, the main task on their task list until it is done. There is no business until the loop is closed. For startup founders, closing the loop is often secondary, perhaps even toxic (since if the loop does not generate large profits as soon as it's closed, funding will often dry up).

This is not to say that closing the loop is the only way to build a business. Erstwhile startups like Facebook, Google and Twitter, show that it is possible to build huge businesses, some of them very viable, without worrying about making money for years. Success stories like Instagram, Tumblr or Youtube show that it is possible to achieve a billion-dollar exit without having ever closed any viable loop whatsoever.

In Silicon Valley, it is even plausible to make "the loop" be the creation and acquihire of the startup itself. That is a valid model for investors, and even for some founders, though it presents a lot of downsides that I believe most first-time entrepreneurs wouldn't accept if they were fully aware of the alternatives.

The downside of being a startup founder

As I mentioned earlier, most startup founders believe they are entrepreneurs, even if their startups are completely divorced from the financial reality of business. Cushioned under a blanket of (relatively) easy VC money, surrounded by the hype bubble, drenched in startup articles from Hacker News, one could be forgiven for thinking this is the only way to do business in the 21st Century. Meanwhile, the rest of the entrepreneurial world looks on at this incredible machine that takes unviable businesses, pumps them full of venture money, and sells them on for stratospheric valuations.

It's a wonderful system for the savvy investors who know how to play it, but what about the founders?

The downside of this system for the founders is pretty simple: the risk and pressure are enormous. In order to succeed at this game, the game usually requires the founder to tie the startup to his identity. The failure of the startup and the founder's fate become closely tied. Importantly, the outcome, success or failure, is only known years into the venture. Youtube succeeded in a lightning-fast 1-2 years, but they are the exception, and even they must have been under enormous stresses approaching the exit event (Youtube was, I recall, being sued by content holders when Google acquired them). It could have gone very badly very quickly for them. Tumblr was running for 6 years before being acquired, and had, from the sound of it, a failing business model. Imagine the stresses David Karp was under.

Any startup where you're going to have to raise lots of money, make lots of promises, hire lots of people and generally tie your fate to the startup very publicly, for years, before you can find out if you're successful, is going to be a pressure cooker for the founders.

The result of such a game is tragedies like Jody Sherman and Ecomom. While tying the two together remains speculative since Jody left no note, it is fairly credible that the two were strongly linked.

Even if the outcome is not so dramatic as a suicide, such stresses take their toll. Binary outcomes that can change your life from heaven to (subjective) hell are always extremely stressful.

A funded startup always carries with it the possibility that you will exit as broke as you came in.

An alternative

Despite its apparent anti-startup stance, this article is actually not an attack on startups and startup founders. I believe that the startup game can be a valid way to create businesses. Some day, I will probably venture down that road too.

However, it should not be painted as the default or superior option. Choose the startup founder path if you want to, but choose it in full knowledge of what you're doing.

The alternative is to do business the way it's been successfully done for millenia: find business opportunities and exploit them to make money.

There is much less risk in this approach (you know whether the business is working out within months, if not sooner), and it is more rewarding emotionally and financially. The skills are also more transferrable. You can apply the skills of the entrepreneur anywhere in the world, whether there's war (Milo from Catch 22 and Oskar Schindler come to mind) or peace. The startup founder path is only truly viable in a few places in the world right now - most of them in or near Silicon Valley. It could close up quickly if the historically rare, 60+ year long period of peace we're experiencing comes to an end.

And lest someone thinks entrepreneurship is destined to create only smaller businesses, there are many giant companies out there that started as level-headed entrepreneurial ventures - including such Tech household names as Apple, Microsoft, HP and Cisco. There was no guarantee that any of those would become the behemoths they are today without additional capital, but even if they had ultimately failed, their founders would have retired wealthy.

Conclusion

Either path is viable, and if you're determined to go down one path or the other, no article is ever going to stop you.

But if the thoughts in this article are news to you, I urge you to consider which option is more suitable to you at this point of your life, and to remember that you don't have to restrict yourself to just one of those. You can be an entrepreneur today and a startup founder tomorrow, or both at the same time, or just a startup founder. Which of those three you pick will make a huge difference to the risks you take and the pressures you face.

My personal opinion is that if you're starting off from a position of weakness (i.e. you're poor and not famous), and especially if you're not in a startup hub like Silicon Valley, it makes a lot more sense to go down the entrepreneurial route than to go via the startup route.

And if you do, don't let anyone who's chosen the startup route tell you that your business is somehow less worthy than theirs. Both are viable approaches with different risk and pressure profiles.


How to learn to program without going on a £1,000 training course

Most of my colleagues in GrantTree do not know how to code.

That's fine. Their job does not involve programming computers, and although there are, I believe, always tangential benefits to knowing how to tell computers what to do, programming is not essential to their jobs and they can be brilliant without knowing how to program.

However, one of the side-effects of the explosion of startups all around the world is that several of these colleagues have already expressed some interest towards various courses that claim to teach someone "the basics of programming", whatever the hell that may be, for a nice round sum like £500 or £800 or thereabouts, in a single day.

The magic wand of bollocks

I know I won't raise any eyebrows in the actual tech scene with this article. Anyone who's learned how to program knows that there's no magic wand that will miraculously teach you how to program in a day, not for £500 or for any amount of money. You can't teach someone to program in a day any more than you can teach someone to ski or write or ride horses in a day. Those things take time. Lessons might help, but at £X00 a day you'll be broke long before you know how to program.

But there are a lot of people who don't know this. This article is for them. If you know someone who's thinking of spending a large chunk of hard-earned cash on the happy-shiny promise of learning to code in a day, please send them a link to this article.

Here's the simple, friendly, warm truth (it's not cold or hard, for once):

Learning to program doesn't cost any money.

Ok, let me qualify that - you might need some kind of programmable device. Any old laptop will do, no matter how decrepit. There are many people who learned to program on calculators. Even the cheapest netbook you can find will do. There is zero correlation between how powerful the machine you're learning on is, and how quickly you will learn. In fact, there might even be an argument to be made for learning to code on an older machine, one from the early 90s with MS-DOS on it. Back then, things were a lot simpler to understand.

Beyond that one programmable device, and a way to access the internet to read up articles about stuff, you don't need to buy anything at all.

Of course, there are many people who will happily try to sell you instant-programming-knowledge-in-a-pill, but they will not be able to deliver, because learning to program is a 10-year engagement and you will not get anywhere useful down that path if you feel you need other people to teach you stuff.

Ultimately, however, no one can teach you how to program in a day. And whatever sliver of tangential, programming-related knowledge they can teach in a day is, in my opinion, absolutely not worth the vast amounts of money requested. The reason is that the only point when you're really going to start to learn to program is when you start teaching yourself to program, and you can do that for free.

How to learn to program

There are many ways that you might teach yourself to program. The paragraphs below outline just one such way, which is the way I usually suggest to people who approach me and say they want to learn to program.

In my view, there is one factor that anyone who wants to learn how to program well must have: a sense of fascination at the idea that you can tell computers what to do.

Steve Jobs called computers a bicycle for the mind. If you can get yourself to the point where you find really awesome the idea of doing brain-work faster by telling a computer what to do, then you will learn how to program. Nothing will stop you, nothing can get in your way, not lack of hardware or lack of knowledge.

Once you have been bitten by the passion bug, you will learn how to program.

So, any early activity should be aimed at finding that bug and getting bitten.

How to get bitten

Each person will naturally be different, but here's a simple approach that should work for most people.

First, find someone in your entourage who does know how to program - ideally someone who's already quite good at it and who's reasonably people-friendly. These days, that's not so hard, as there are many of us "competent programmers" out and about.

Talk to them. Find out why they're fascinated by programming. Find out how the bug bit them. Find out more about why they care, in short. Get interested. Then, when you're starting to feel like what they say sounds pretty damn cool indeed, ask them what they'd suggest you do to get started doing that.

Chances are, whatever they just said is out of your reach, even if it's not particularly complicated for a competent programmer. But they should be able to suggest something you can work on now to get closer to being able to do that yourself. For example, if you want to build your own blog from scratch, someone might suggest that you first learn some basics of programming using one of the Learn X The Hard Way books, and then introduce you to a platform like Ruby/Rails, Python, JS/Node or some other similar thing, and then point you towards the appropriate tutorials and books about how those technologies actually end up producing a website you can deploy and then browse from any computer.

Your path will be entirely unique to you, but the starting point, the initial spark of interest, is what will propel you down that path.

That's all you need to learn to program. A spark. And it doesn't cost any money at all.


Taking the leap

I'm a pretty stern opponent of the idea that entrepreneurship is like jumping out of a plane. As an image, it has all sorts of incorrect implications (you only have one shot, you'll die if you fail, it's really scary, it can end in something horrible and violent, it's for thrill-seekers, etc) which mislead new entrepreneurs badly. For example, many will stake everything on that one startup and not realise that entrepreneurship is a career, and that it will probably take them years to get the hang of it.

That said, when you're sitting in your comfortable office chair in the office of a large corporation, earning a comfortable salary, working with comfortable, if slightly boring, colleagues, doing a job that comfortably stretches you a tiny little bit at a time, "taking the leap" does seem absolutely terrifying. It does feel like you're about to throw away your parachute and jump out of a plane.

I know, because I was there - six years ago, in 2007, and it was incredibly scary - though also very exciting, to be fair. I managed to concoct a deal that made it financially less daunting to me, although that deal was certainly a factor in the rapid death of my first startup, and a strain on my second, but psychologically it was still terrifying.

There's no way around it, I think. Either you take that jump before you even know what job security is (i.e. the "straight out of uni" approach, which has its own downsides), or you face this gaping, bottomless chasm and... jump.

You might get lucky. Your first startup might take off like a rocket, or at least like the Wright brothers' flying contraptions, and so you might come to the conclusion that it wasn't really worth being scared of in the first place. But that's pretty unlikely. Much more likely, you will face several years of failing, of barely keeping your head above the water financially, of every once in a while being sat down by your friends and family who will look at you with kindness and concern and ask in a reassuring but worried voice, "so, when are you getting a real job again?"

That being said, I believe there are several important things you can do to make those few years easier, and shorter. So, here's my advice to people who are about to leap into the chasm, or have just done so.

1. Cut (personal) costs to the minimum

Ultimately, your survival as an entrepreneur (not as a "startup" - you're a person, not a corporate entity) will depend on your personal runway. One day, you might find yourself facing rent and food costs with absolutely no money in the bank. You want to push back that day as far as possible, or even avoid it happening at all. The way to do that is to cut your costs.

How far should you cut down? Well, that will entirely depend on your personal circumstances, but chances are it's lower than you think. When I first left Accenture, I could barely live on £2,500 a month, net. By the time my involvement with Woobius ended and I started GrantTree, my personal, monthly costs were below £1,200 a month - that's living in central London, aged 29. Half of that was rent and bills, and the rest went on groceries, travel costs, and the odd beer. Mercifully, most startup events have free beer and sometimes pizza. Yay!

What you want to cut, in particular, are big, monthly costs. Have a car? Get rid of it. Big flat/house? Move into a single room in a shared flat or house. Daily Costa Coffee? Out. Anything that's regular and big or adds up should go.

You'll surprise yourself how low these costs can go.

The one thing you shouldn't do is move away from a startup hub (like London) to the middle of nowhere. Personal connections are hugely important in this new world you're entering. You must be at the centre of things.

2. Do not take funding

This is a controversial one, but here's a reality of being an entrepreneur: your job is to make money. As a new entrepreneur, your job is to learn to make money. Anything that delays that learning is really bad.

If you have a year's worth of funding in the bank, you won't feel that much pressure to either cut personal costs or make some money now. If you have just your personal savings and a business bank account that contains a big fat round £0, the pressure to make some cash flow is your daily companion, morning, day and night. This pressure is good - it's what makes you learn to spot opportunities for making money.

In addition, it means that any money you make is your money. You will probably choose to reinvest a lot of it in your learning and/or your business, but it's yours. No investors to report to. Did you just make £1,000? It's yours to spend. Don't forget about taxes though!

For most new entrepreneurs, investment is a cushion that delays their learning. If you're thinking of raising investment to cover your personal costs, don't - instead, learn to make money. It's really not that hard. Many people far less clever than you have figured it out. You can too.

3. Connect with mentors and peers and listen to them

The mistakes that killed or maimed Vocalix and Woobius, my previous two startups, were not very original. They were awfully predictable. In fact, I recall sitting with my cofounder in a great meeting with William Reeve, cofounder of ScreenSelect (which later acquired Lovefilm and took its name) and angel investor, a super-smart guy who explained to us in detail why Woobius didn't work as a business model.

Did we listen? Sure. Did it worry us? Of course! We felt very deflated when we walked out of that meeting. Did we rebuild our reality distortion field within minutes of walking out and go merrily on our way, ignoring all that good advice, and hitting the wall he described? You betcha!

It's not enough to get good advice, you also have to listen to it.

The problem is, of course, how to tell which piece of advice is good, and which is bad. The solution to that is to know the context of the advice-giver, and consider that along with the advice. If you're building something that involves selling to businesses and someone who's been doing that for years gives you advice, that advice is golden, for example.

Most startups fail for boring and predictable reasons. Very few fail for reasons that were really specific to them. To avoid being one of those generic flops, surround yourself with mentors who have actual startup experience, and with peers who share your issues and concerns. Talk to them, and listen to them. Get rid of your startup gung-ho attitude, and actually share your problems. Their informed advice is worth a lot more than that elusive intro to an investor or potential customer.

4. Don't tie yourself to one idea

In the business model workshops I've given over the last few years, I make one point particularly often: there are many ways to implement your idea, and most of them are wrong. Your job as an entrepreneur is to figure out the right one.

Beyond that, though, you need to pick an idea space where there might be something worth doing. Too many startups declare that they're going to "revolutionise email" or some other random unattainable goal, and then fail hard because they picked a space that is incredibly difficult to crack profitably. Don't force yourself into that corner prematurely. Play with multiple ideas, in multiple markets, until you find a market that seems to stick, that seems to be both interesting and relevant to you, and profitable.

"I quit my day job yesterday. I'm starting a business to solve the problems of email tomorrow." is not something you want to either hear, or be saying.

5. Don't make plans or set deadlines

You may think it's sensible to "give it six months" and then go back to the corporate grind. It's not. If you've given it six months it will probably take you three years.

While I don't recommend taking risks that mean that you won't be able to pick yourself up and try again after your first startup bites the dust (such as mortgaging the house to pay for the startup), there is something to be said for burning the boats.

Don't look back. Your way forward is forward. If you do need to get a day job again, get it in a startup, not in a large company. Make sure enough people on the startup scene know you or know of you so that it won't be a problem. If you do need a job again before you finally make it as an entrepreneur, it should not be a job you have to interview for.

In conclusion

This is a pretty long article - and that's not counting all the articles it links to. If I'd read and applied all this advice back when I took the leap, it would have saved me a lot of pain.

If you've just quit your job, or are about to - do yourself a favour and save yourself all that pain.

You'll still be terrified of the leap. Nothing will change that except the feeling that actually, things aren't as bad as you had expected. But believe me - if you apply the advice in this article, your real chance of success will be vastly improved.

Good luck!


Three tiers of startup incubators and accelerators

retracted


Sales comes out of who you genuinely are

Have you seen Glengarry Glen Ross?

It's a pretty awesome movie based on a play by David Mamet. There's a scene in there that has been posted ad nauseam, the Always Be Closing speech where Alec Baldwin puts some serious pressure on the small sales team at some kind of real estate company that's never fully described.

A less well-known feature of that film is the sales pitch and approach followed by that company's star salesperson, Ricky Roma, played by Al Pacino. Ricky is shown spouting ten shades of bullshit in a bar with his "mark", convincing him to buy a product that's clearly not good for him (and very expensive), and then actually lying to his face to try and maintain the sale when his customer realises (after being told by his wife that she'll divorce and ruin him if he doesn't cancel the sale) that he made a really, really bad deal that's about to literally destroy his life and put him in the gutter.

What does Ricky Roma do in this situation? He lies and pretends the contract can be cancelled later, so that he can lock in this "customer" into this sale that will destroy him.

Ricky Roma is a complete asshole and a stain on the reputation of salespeople. David Mamet must not have known a lot of salespeople, to have this view of what a good salesperson is, because that is definitely not how great salespeople work.

Which brings me to real salespeople, the ones who actually make sales in the real world, rather than in fantasy plays. The kind that you need to become yourself, to an extent, in order to be a successful founder.

Win-win-win

Successful salespeople don't pressure or bullshit the prospect into a sale. They are persistent, but they are always focused on achieving a deal where it will benefit all parties.

This means that a great salesperson will never be selling something that they don't believe actually helps the customer. And that has to be the starting point of every conversation with a potential customer. How can I help you? Is there something that I sell or someone that I know that can make your life better?

For the last few months, I immersed myself deeply in the sales process for GrantTree, but over the last few years, I've observed quite a few competent salespeople at work, and been part of many sales, both successful and not, and the conversation, particularly when selling high-value, high-price items, always starts with how to best help the person sitting in front of you (or on the other side of the phone call).

How you can help someone always starts with who you are. I'm a serial entrepreneur, with a blog full of advice for startups, with connections and experience that come from 5, 6 years of doing this, and with a business that sells a product that can help tech startups. So my conversations always start with understanding where the person on the other side is at the moment, and how I can help them. The best situations for me to help most tangibly is if there is a match between the services GrantTree offers and the state their business is in, but if those services won't help them, I would never push them into deals that won't provide a clearly positive outcome for them.

For example, some clients are too small for GrantTree to be able to add much value. It's the nature of government incentives, which are based on how much you spend, that the more you spend, the more you can get back. And the more you can get back, the bigger the difference it makes to use a specialist. I regularly speak to founders whose businesses are too small or early to make the most out of GrantTree's services. In those cases, I try to help them anyway - even without getting anything out of it for GrantTree.

This is how I start. My cofounder, Paulina, approaches clients differently. Her strength includes a very wide network of people who might be great connections for the person she's talking to, so naturally she leverages that, rather than tech startup experience, to help the potential client. But again - the focus is on helping the other person, never on trying to squeeze a deal out of circumstances where we can't make a positive impact on their business.

How will you approach your potential customers? That entirely depends on who you are, what you bring to the table. But it always has to be first focused on helping the other person. Otherwise, you are not a salesperson, you are a scammer looking for a quick buck, like Ricky Roma.

Getting over the money hurdle

With that in mind, as a geek, I used to find it hard to get past the fact that ultimately, I was doing this to make some money. This is probably the greatest hurdle for anyone (even people who eventually become master salespeople): realising that it's ok to make money from a deal.

It sounds trite, cute almost, but it's a real problem. Most people who have not spent a considerable amount of time selling will feel that the whole process is made unwholesome because they are, ultimately, doing it out of self-interest too. Yes, I'm trying to help the other person, but I'm also trying to make some money, so I must be selfish, right?

This comes back to believing in your product. If you don't believe that your product genuinely adds to your customers' lives, genuinely makes things better, genuinely helps, then don't sell it until you do, because then you are selling a scam and you should indeed be ashamed of doing so.

However, if you do believe in your product, then focus on that and the issue will go away. Here are some examples:

Patrick McKenzie wrote about how he started charging a lot more for his services after a conversation with Thomas Ptacek, who pointed out the vast amounts of value he was creating for the client business. Charging more enabled him to focus on providing top quality advice to people who could really make use of it. He's since helped many other companies to multiply their revenues. He wouldn't be able to do that unless he charged a lot for it (he wouldn't have the time to do it properly, with the right amount of focus). Patrick believes in his product (and should). If Patrick tries to sell to a business that would be a good fit, I'm sure he has no doubt in his mind that if the sale goes through, both himself and the client will benefit greatly. Is that a product you can believe in? Absolutely.

George, one of our recent hires at GrantTree used to work for Point-Two, who sell air jackets for horse riders that inflate upon impact. These jackets can save your life. He showed me a video recently of a woman whose horse hesitated before a jump. She went over the obstacle. The horse came tumbling after, on top of her. The 600-kg beast landed squarely on top of her. The air jacket meant that she walked away with a few bruised ribs. That jacket saved her life. Is that a product you can believe in? Absolutely.

GrantTree sells help with getting government funding. For the right clients, we increase the amount of funding obtained substantially, through our knowledge of the rules, as well as reducing the amount of time spent preparing the filings and the risk of doing so. Many of our clients would not file, or would file much smaller claims, if it wasn't for us. We regularly take on clients who have lost all belief in UK government funding, and are very surprised when the funding does go through. Or we take on clients who are already making use of the funding schemes and we substantially increase the amount that they get. Is that a product you can believe in? Absolutely.

Given that these are all products that add very tangible amounts of value to the clients, is it reasonable to make money for them? Absolutely. Making money from his consulting services means that Patrick has been able to go around the world helping well targeted businesses with his knowledge. Making money from the jackets means that Point-two have been able to save lives. Making money from government funding services means that GrantTree has been able to grow and help even more businesses. None of those things would have happened if those businesses did not make money.

So don't feel bad about the fact that you'll get money out of the deal too. If you believe your product genuinely helps your customers, then making money from it is absolutely deserved and reasonable.

Focus on the win-win nature of every deal you make and, over time, the self-accusation of selfishness will fade away.

In conclusion

Mythological salesmen like Ricky Roma, who are really highly skilled scammers, have given the sales profession a bad name. If you want to be a successful founder, sales is one of the many skills you need to learn.

Get over your fear of making good money from selling good services by realising that every sale you make will benefit your customers (if your product is worth selling) far more than it will cost them, and start every sale from the point of view that you are trying to help the other person.

Good luck with it! Sales is damn hard, even without misconceived notions about whether it's ok to make money when selling something.


Dolphins, and the right side of history

Hacker News can be an amazing community. I witnessed it myself this weekend, when they came to the aid of a friend in need, helping us locate a competent lawyer on another continent on a Sunday - something which would probably have been unthinkable a mere decade ago. I was truly blown away.

Then, yesterday, an article was posted about a proposal to grant Cetaceans the right to life and liberty. The gist of it is that some visionary scientists at the "American Association for the Advancement of Science (AAAS) in Vancouver, Canada, the world's biggest science conference" have proposed a "Declaration of Rights for Cetaceans", in particular giving the the right to not being killed for no good reason, and to not being held in captivity and displayed to people for entertainment.

It was discussed on HN here. There, I'm afraid I was disappointed. Many comments were dismissive, ridiculing the proposal, suggesting dolphins need to pay taxes, sign an interspecies treaty or conduct an armed insurrection to earn these rights.

I don't disagree that the proposal seems ridiculous on the face of it. Grant rights to dolphins? Really?

And yet. And yet, can anyone intelligent seriously doubt that we will eventually reach a point where other intelligent species (and, in fact, perhaps even all animal species) will have rights?

I am not a vegetarian, and in fact I eat a lot of meat (shameful, considering I believe that it is in fact wrong). However, I have no doubt that some time in the future, be it 10, 50, or 200 years, assuming humanity lasts that long, we will look back at our treatment of animals for thousands of years and feel as deeply ashamed of it as we do of our treatment of our fellow human beings for those same thousands of years.

The proposal to give rights to Cetaceans, and indeed other animals, may be 10, 20 or 50 years early. But it will be passed eventually. Someone had to start somewhere, and an improbably brave collection of scientists and philosophers just did. They are heroes.

The golden rule of ethics, "do not do unto others as you would not have them do unto you", has been applied to an ever increasing circle since it was developed in the Axial age. Today, we are enlightened enough to apply it, more or less, to all of humanity, including such previously neglected groups as women, non-citizens, foreigners, gays, lesbians, transsexuals, ethnic minorities, and so on. It may not be applied perfectly everywhere, but at least civilised people do feel an appropriate amount of guilt and even indignation when they see a minority being mistreated in a way that they would not want to be subjected to.

How can there possibly be any doubt that this circle will, as we progress, be widened to increase other species, starting with those of them who are most like us in mind or in body?

For an enlightened, science-minded community like HN to dismiss this proposal as harshly as many commenters did, to stand so clearly and proudly on the wrong side of history, is shameful.

I propose a simple rule to HNers before commenting on such futuristic issues. Before ridiculing a visionary proposal to move the world forward, ask yourself whether you're on the right side of history, whether your view will still be sensible a hundred years from now, or whether you're just giving in to today's prejudices.

If you're dismissive of rights for dolphins today, where would you have stood on the issue of slavery three hundred years ago?


Doing more by doing less

An article today from Jeff Atwood bemoans the plethora of todo apps and presents an argument against todo lists:

Here's my challenge. If you can't wake up every day and, using your 100% original equipment God-given organic brain, come up with the three most important things you need to do that day – then you should seriously work on fixing that. I don't mean install another app, or read more productivity blogs and books. You have to figure out what's important to you and what motivates you; ask yourself why that stuff isn't gnawing at you enough to make you get it done. Fix that.

I'm a big fan of that idea, and in fact have been toying with it practically for a while now.

It started with the decision to implement a limited size todo list, using my iPad and the Bamboo app to write tasks manually (and manually copy them over onto future days if they don't get done). I started with 10 tasks per day at most, with the idea that if I have to add another task to a day that already has 10 tasks, I have to move one undone task to a future day.

It worked relatively well, but I still felt swamped. So I reduced my task count to 5. And, strangely enough, I felt more productive.

See, the reason why we're not productive most of the time isn't that we're not doing stuff. I spend my whole day doing stuff, but that doesn't make me productive. The reason why we're not productive is that we spend most of our time doing the wrong things.

The pareto rule applies to the task selection as well as to the work itself. In fact, it applies even more harshly: you're an incredibly productive person if 20% of all the tasks you do actually are the right things. But most of the tasks we do are "busywork" - whether that's answering emails, chasing people for unpaid invoices, or, irony of ironies, keeping track of the status of things.

I'm not saying these tasks (e.g. chasing invoices) are not important in some fashion. They need to happen, certainly. But chasing invoices is unlikely to be the most important thing you could do today to achieve your life's goals. And that's assuming you even have life goals. If you don't, then 100% of what you do is aimless busywork.

Jeff's article prompted me to write out my thoughts on this topic, and so I'll finish with this thought that I've been ruminating for a while:

If you can, every week, figure out and do the one most important thing that you can do to achieve your life's goals, you will be one of the most successful people on this planet.

And yes, that's true even if you forget to do some menial tasks like chasing invoices or renewing your driving licence.


The Fool on the Hill, with commentary

Disclaimer: I love this song.

Day after day,

The Fool appears to keep doing the same thing over and over again expecting different results.

Alone on a hill,

The Fool seems to like to place himself in a location where he's unlikely to have much of an impact.

The man with the foolish grin is keeping perfectly still

The Fool is not very proficient in proper use of body language or facial expressions, presumably on account of not spending enough time hanging around with other people.

But nobody wants to know him,
They can see that he's just a fool,
And he never gives an answer,

People have picked up on the fact that the Fool doesn't care about communicating with his fellows, and since he deliberately adds nothing to their lives, they are not interested in making time in their busy and (to them) important lives to sit next to a still, grinning mute.

But the fool on the hill,
Sees the sun going down,
And the eyes in his head,
See the world spinning 'round.

The Fool has some smart ideas (though, as it is unclear what century he lives in, and the idea that the Earth goes round the sun has been widely accepted since about 1700, they may not wholly be his ideas). He also seems to believe that having an idea is enough - you don't need to do anything with it after the idea occurs to you - and so he is content to sit on a hill with a potentially important idea locked in his head.

Well on the way,
Head in a cloud,
The man of a thousand voices talking perfectly loud

This is somewhat confusing, but it seems like the Fool is actually talking. However, if he believes he is speaking with a thousand voices simultaneously, then it is no surprise that:

But nobody ever hears him,
or the sound he appears to make,

Perhaps the Fool is not actually talking, but just having a discourse with himself in his head. This would certainly enable him to speak with a thousand voices, particularly if he is, as the song seems to hint, insane. Insanity would also explain why:

and he never seems to notice,

Most people who are speaking notice when people are not paying attention, let alone when they simply can't hear anything. Those who don't notice that are usually either dead or crazy.

But the fool on the hill,
Sees the sun going down,
And the eyes in his head,
See the world spinning 'round.

Execution is for inferior people. Ideas are everything.

And nobody seems to like him,

That's not very surprising, considering the Fool doesn't seem to like anybody either, and just thinks he is superior to all the others (as we'll find out later on in the song).

they can tell what he wants to do,

Perhaps the only puzzling line in this song. How can they tell what he wants to do? My best guess here is that people have noticed that all that the Fool appears to want to do is to sit quietly on the hill grinning to himself. That's why they can tell - by extrapolation from the fact that that's all he does.

and he never shows his feelings,

I think we've already established that the Fool has some severe communication issues. Therapy might be a good course of action at this point.

But the fool on the hill,
Sees the sun going down,
And the eyes in his head,
See the world spinning 'round.

This appears to be the only useful idea the Fool has come up with - assuming he did come up with it himself, rather than just read it in a widely available science textbook.

Ooh, ooh,
Round and round and round.

Yep.

And he never listens to them,
He knows that they're the fools

As mentioned earlier, the Fool clearly has a superiority complex (or perhaps an inferiority complex masquerading as arrogance). Intelligent, wholesome people don't regard everyone else as fools. In fact, the most intelligent people tend to be humble, friendly, open-minded, and so on.

There's a hint of bitterness in this, too. It seems that maybe the Fool would like to communicate his ideas to others, to make the world a better place, connect with his fellows, and so on, but he can't seem to understand why nobody recognises his natural genius, even though he hasn't bothered to try and communicate it.

They don't like him,

Let's face it, we wouldn't like him either.

The fool on the hill
Sees the sun going down,
And the eyes in his head,
See the world spinning 'round.

Ooh,
Round and round and round

Some practical advice to the Fool

Ideas are not everything. Everyone has millions of interesting ideas in their life, but most people do nothing with those ideas. To be exceptional and worthy of respect (if that's something you care about), you also need to do something with those ideas - at the very least make some effort to communicate them to others. Certainly, an idea that remains locked in your head until the day you die might as well not have occurred.

We are not superior to others merely because of our ideas. Actions speak louder than words, and words speak louder than ideas. Turn your ideas into realities, and you are a God among men, imprinting the reality in your head onto the physical world. One side-effect of doing that is also that you realise that all humans have this seed in them, and you respect them for it.

It's worth investing some time in learning how to understand people and communicate with them. Often, the tallest hurdle in changing the world is not physical impossibility or even the difficulty of getting the right insight, but the inertia of people's minds - ours included. Knowing how to influence people can turn a Fool into a Great Man who will be remembered by History.

In conclusion

Reading too much into popular songs can be an amusing exercise.


B2B is so unsexy?

Dan Shipper:

When I tell people I do B2B software I get some very interesting reactions.

“Why do B2B? It’s so unsexy.”

And that’s true. B2B is unsexy in that I don’t build things that my college friends want to use. But that doesn’t mean it’s unsatisfying, or somehow inherently less valuable than a social/consumer product. In fact, I’d argue that the opposite is true. Spending every day making someone’s life easier is awesome. Especially when that someone actually wants to pay you for it.

Just you wait till you tell them that you're helping businesses get government funding.

I'll take unsexy but profitable and making a tangible, quantifiable difference to people, over sexy and fluffy and bleeding money like it's going out of fashion, any day.


What's the use of stories that aren't even true?

In Salman Rushdie's excellent book Haroun and the Sea of Stories, there's a striking scene near the beginning where Haroun, the child of a famous storyteller, confronts his father by repeating a line that was previously parroted by a narrow-minded neighbour:

What's the use of stories that aren't even true?

Oh boy. What a scene. The question is a slap in the face of his father, of course, and Haroun spends much of the story (which I gather might be imagined rather than true) making up for this mistake, through fantastic adventures in a universe where two factions are at war: those who tell stories, and those who want all stories to end and silence to reign.

So, what's the use?

When it comes to the great written works of humanity, almost all of them are fictional. Whether you look deep into the past, to Gilgamesh, the Mahabharata or the Romance of the Three Kingdoms, or in the less distant past, to authors such as Herman Hesse, Gabriel Garcia Marques, Tolstoi, Dickens, Victor Hugo, and so on (the list is not endless, but is long), fiction dominates any sensible list of the Greatest Written Works of Humanity. Here or there, a work of non-fiction might peep in and even claim a rightful place, but few seem capable of comparison with the "stories that aren't even true" when it comes to telling eternal Truths.

For this is where fiction is so much better: at the telling not of factual truths that anyone can observe, but of greater Truths about life, about what it means, what it's about, how to live it, how to enjoy it and be happy and find a purpose. To observe these Truths, one needs very good eyes indeed, and telling them directly is almost impossible. Instead, a great author must tell a story that illustrates the Truth that they experienced and observed. If they do it extremely well, it becomes a kind of distilled life experience that the reader assimilates and which changes their understanding of life in subtle and important ways.

If you're looking for truth, then non-fiction is great. If you're looking for Truth, however, you have to look into stories that may not be true but are True.

Startup stories

Which brings me nicely to the subject of startup stories. In my writings on swombat.com, I've endeavoured to always be factually true when telling a story. I don't make things up. However, I am also a lover of fiction and, as argued above, I feel there can be more Truth worth telling in fiction than in fact.

So, this is a thought that I'm struggling with, as far as writing for swombat.com goes. Does fiction have a place in business writing?

Experience is very valuable in business, where many crucial decisions are made on hunches, based on incomplete data, and good fiction is very good at distilling experience that normally might take a lifetime to accumulate, and transmitting it in a few hours.

Clearly fiction is not the appropriate mode of writing for all startup advice. A "how to use LinkedIn" written as a suspense novel would most likely be a terrible idea (though rather original), but it seems to me there are many other valuable lessons of business that could be better illustrated by fictional stories than by factual articles. Those are the ones that you might capitalise as Lessons as opposed to lowercase lessons (I do like to play with capitalisation).

I'm very keen to hear what other people have to say about this. Please do let me know your thoughts - by replying to this if you've received this article by email, by emailing me directly, or by posting comments on Hacker News if this does get on HN (Update: here it is).

Some obvious disclaimers:

  • Fictional stories should be clearly advertised as such. Making up stories and presenting them as factual anecdotes is obviously misleading and wrong. Writing short fictional stories to explain business wisdoms, though, seems ethical.
  • Clearly verifiable theories should not be told as fictional stories - they should be verified and told as fact.
  • However, "profound truths" as Niels Bohr called them, which have the characteristic that their opposites are also true, are well suited to fictional story-telling.
  • "What's the point?" To partially transmit experience normally available only to those who have been running businesses for years, to those who haven't.

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