Living in trouble

Investors have a lot of investments, but entrepreneurs have only one life

Recently, I've been talking to many people about possible projects and jobs. They are distressed when I tell them my hourly rate. They respond... so consider that you're hardly making anything now, wouldn't a lower rate be better than nothing??? Uh, no. (Explained below.)

VentureBeat: Why I turned down 500k, pissed off my investors and shut down my startup, 2016-Jun-9 by Tim Romero

I am not particularly risk-averse, but I pay attention to risk and reward. As an investor, I probably would have told me to take the money and try to make it work. But the risk-reward equation for investors is different than it is for founders.

I was deciding whether this venture was worth committing to another year of 70+ hour weeks. I need a higher level of certainty than investors do because my time is more valuable to me than their money is to them. Investors place bets in a portfolio of companies, but I only have one life.

Thinking of you, Orlando...

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Advice to heed before you give or take advice

Sharing our problems and challenges is a great way to build trust. Unfortunately, that behavior inspires many people to try and solve our problems. If you have that inclination please squelch it. And if you can't, consider these words. The whole article is highly recommended--learn the context of this advice!

First Round Review: Advice is Cheap--Context is Priceless, 2016-April by Hiten Shah

Good advice takes pattern recognition and selection, but with that, comes the tendency to rigidly categorize people alongside their situations.

So here’s the mantra of the advice giver: don’t react. Ask yourself how to advise in a way where you’re not judging, so others will remain open to what you’re going to say. That starts with you being open to what they’re saying, too.

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Ways to protect your price when negotiating a sale

Whenever we have to negotiate a sale, we confront the fact that sellers and buyers naturally disagree about price, based on the endowment effect. Science has demonstrated a bias among owners to over-estimate the value of any item they possess. This bias does not make the potential buyer correct, but it ought to give the seller pause. Your buyer is very unlikely to accept your initial offer, all other issues being equal. Fortunately, science is also showing us some ways to better protect the seller's price. 

Harvard Business Review: Why Buyers and Sellers Inherently Disagree on What Things Are Worth, 2016-May-13 by  Carey K. Morewedge

One effective tactic is to direct the attention of buyers and sellers to the information that they ignore. Asking buyers to first think about the valuable attributes of the good they might acquire leads them to value the good more. Asking sellers to first think about what else they might do with the money they would receive—the opportunity cost of owning the good—seems to also reduce the price they demand to give up what they own.

Another effective tactic is to change the reference price that people use to evaluate the good. When buying or acquiring a good, one might remind sellers of cheaper alternatives, like used versions of the same good or similar more economical goods. When selling or trading a good, one might remind buyers of more expensive alternatives to what one is offering.

A third tactic is to get buyers to touch, hold, or imagine owning the good. Experiences like interacting with a product through a touchscreen, receiving a coupon for it, or temporarily being the highest bidder for it in an auction all have the potential to induce the endowment effect for the product if they make us feel like we own it.

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With creating new things, beware the How overwhelming the What

Dave Owens at the Vanderbilt University business school agrees that everyone is creative, and he also notes that in many business, people who don't see themselves as creative professionals have major influence over how things are created. And that changes the what. So if we're planning a new product or process, we have to be self-conscious of what values and power structures we are serving. 

Ozy: A Design Expert on Maximizing Creativity in the Workplace, 2016-Mar-16 by Eugene S. Robinson

“My biggest insight was that you could look at a product as being the manifestation or outcome of a set of interpersonal and organizational ‘negotiations,’ or battles, over subjective decisions,” Owens says, looking much younger than his nearly 50 years. At Dell, “the operations people won most of the battles,” he says, leading to machines that were cheap, modular, efficiently produced and not much to look at. Contrast with Apple’s machines, “you could see that design and marketing had won quite a few more battles — their machines were expensive, hard to produce and beautiful.”

That realization led to certain recondite truths that stretched well beyond all of the laptop and tech making its way past him. Mostly, the ideas that how we build the building blocks affects what we build, and that we actually need the stuff we build to live. “Yeah, take away all the designed stuff and most of us wouldn’t last more than a month,” Owens says with a laugh.

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To lead our teams to greatness, we have to spend more time showing them how to work together

My experience over the years is that when managing a team, selecting the right members is much less important than creating the right conditions so they can work. In volunteer projects, we often have no control over the participants. What a relief to find that how people are allowed to behave matters more than anything they bring to the table.  

Only Dead Fish: On High Performance Teams, 2016-Mar-5 by Neil Perkin

This lengthy New York Times piece on the lessons that Google has learned from its lengthy quest to find out what makes an exceptional team [found...]

Team composition, longevity, degree of hierarchy, and the mix of personality, background, skills of the team members all made no difference. 

Instead, further research revealed that the group norms ('the traditions, behavioural standards and unwritten rules that govern how we function when we gather') that the team operated to seemed to play an important role in how successful a team was. Analysis of over a hundred groups for more than a year showed that the right norms could raise a group’s collective intelligence, and the wrong ones have the opposite effect (even when individual intelligence was high).

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Why employees are always in training

As a company grows, it's nearly impossible to control the quality of the people. If we plan to build a company, we have to plan on constant training. Otherwise, we'll follow Chipotle and General Motors into national scandal. 

Harvard Business Review: How one fast food chain keeps its turnover rates absurdly low, 2016-Jan-26 by Bill Taylor

“People go out of calibration just like machines go out of calibration,” CEO Crosby explains. “So we are always training, always teaching, always coaching. If you want people to succeed, you have to be willing to teach them.”

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Is targeted advertising a problem? Is signaling the solution?

I don't have the time to wade through everything Don Marti and others have written about the 'evilness' of targeted online advertising. However, I do think they are correct to worry about it. As a marketer, I'm most concerned with the plausible idea that it causes people to ignore advertising at a higher rate. As a human being, I'm concerned that it may reinforce problem behaviors such as gambling addictions.  Tq160219bd

Although it will never go away, mass advertising via broadcast media is NOT the answer for any EXCEPT the largest advertisers. However, there's another form of advertising which is not getting much attention is this discussion, and that's sponsorship. Not permanent sponsorship but temporary sponsorship and multiple sponsors who can keep a web site going. Someone still has to sell and maintain those sponsorships, but for niche web sites, this seems a much more useful approach than highly targeted advertising. I hope to see it flourish and slowly reduce the amount of mechanically targeted ads chasing us around. 

Don Marti blog: Targeted Advertising Considered Harmful, Updated 2015-May by Don Marti

In a market with asymmetric information, signaling is an action that sends a credible message to a potential counterparty.

Advertising spending is a form of signaling that shows that a seller has the money to advertise (which the seller presumably got from customers, or from investors who thought the product was worth investing in), and believes that the product will earn enough repeat sales to justify the ad spending.