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Posts tagged with entrepreneurship

in 1999, [I] made craigslist into a real company for it to survive effectively.

decided I didn’t personally need to make lots of money. NOT altruistic, just knowing when enough is enough.

Craig Newmark

(Source: quora.com)




(Swype is the $100 million exit that makes it easier for Android smartphone havers to type)

  • hippie
  • wanted to be able to talk with dolphins
  • lives in Nevada City, CA. (So do Joanna Newsom, Mariee Sioux, and Terry Riley … what’s up with that?!)
  • meditates
  • once he had invented one thing it was easier for him to get financing for the next one
  • working alone for … 7 years?! … before he came to Swype

(Source: video.mitef.org)




Silicon Valley “maker” culture insists that if you don’t like something, it’s incumbent on you to do better. Bollocks. If we applied that logic to everything we’d say:

  • Marcovaldo’s paintings bore me. Maybe you should paint a better one!
    image
  • The seats on this bus are uncomfortable. Maybe you should engineer some better bus seats!
  • I’m so frustrated that this plane won’t take off for another two hours. Maybe you should re-figure the logistics for the Civil Aviation Authority so planes can get off the ground faster!
  • Sylvia Plath is obnoxious. Maybe you should write some better poetry yourself. I don’t see you writing any poetry!
  • I hate Palazzo Pants. They’re coming back and I can’t stand it. So don’t buy any!
  • Economic theory is wrong. Maybe you should come up with a better theory!
  • Star Trek is racist and paternalistic. Well, I don’t see you writing a hit TV show that’s not racist!
  • I don’t like that restaurant. So don’t go there.

How could it seem reasonable to obligate someone to years of reparations for a one-minute whinge?

 

Kvetching may be a waste of time, but it’s also a natural part of life. We are a verbal species.
image
Just as innate as it is to

  • angrily debate politics or
  • to make an ugly face when you ask someone what they do and they say “Mathematics”,

it’s very simple and natural to express delight or disgust at good or bad design, craft, or taste—even outside one’s expertise. How is it incumbent on a whiner to spend ten years learning how to write software, because they said they disliked what you made?

If I say I didn’t like that restaurant and you say So don’t go there again, what just happened is that I expressed how something made me feel, and you instructed me. Maybe it is rational to not go there again … ok, fine … maybe it’s also rational to have feelings and to want to express them, even if I’m not going to take any further action beyond expressing myself.

It’s of course possible to override the natural instinct to complain. I could if I really wanted to. But Rails programmers in San Francisco already get enough remuneration. I’m not also going to grant them the power to dictate culture as well.

  • Linux is still hard for most people.
  • Mathematics is still boring for most people.
  • If someone complains to you, a totally fine response is: “I see”.




Albert Wenger, one of the owners of tumblr

At minute 31:

  • Google did not invent keyword advertising
  • GoTo, later renamed Overture, out of IdeaLab, invented it
  • and were acquired by Yahoo
  • Google improved upon the keyword search idea, turning keyword search into a viable business model
  • They realised there needs to be such a thing as a quality score—i.e., you don’t myopically give the ad space to the highest bidder. Long-term revenue maximisation required asking what the users want, and not p***ing them off.




It’s strange to me when internet advice-givers tell you to "Just build something—anything. Get moving. Get going." It’s like they’re the same people who tell you that taking risks is costless—that it’s always worth it. There are a lot of failed businesses cluttering up the past. In the case of internet start-ups you can actually look them up on Crunchbase.

image

To say “analysis-paralysis” is bad is not to say that doing random stuff is good. Doing an inch-deep reflection of hype should be even worse.

http://store.metmuseum.org/content/ebiz/themetstore/invt/80010981/80010981_01_l.jpg

I’m not saying sitting on your duff is the same as thinking things through. Real thinking, real research, takes a lot of energy and time. But I think that can be a reasonable investment if it keeps you from wasting your life on a business that’s dead before it starts, or that will end up making your life something you don’t want it to be (e.g. if biz is a net evil, or your role in it is not how you want to spend your life).

I don’t know what’s a reasonable timeline to spend researching a business idea but if I were doing another business I wouldn’t go forward until certain bars had been cleared: basically similar bars to what an investor would want to see before putting their money in.




@bos31337 Running a startup (MailRank) on Haskell (por jasonofthel33t)

Even though this is an advanced talk, there’s still something here for business people who know very little about software but are interested in web startups.

Namely, at Minute 20 BOS ticks off the things that a web app needs to do, like:

  • load balancing requests,
  • proxying data off…
  • for his Haskell code to bang on…
  • in the cloud,
  • receive requests from a Windows desktop software written in C#
  • coördinate those with what he already had,
  • store the data (thus evaluate a database appropriate for their problem),
  • worry about server throughput,
  • connect (bind) his (main) Haskell code to the database, to the server, to the webapp,
  • evaluate server software,

This surveys the moving parts in an internet-based business.




I’m bored of #ff meaning follow Fridays. Let’s do Failure Friday instead and talk about things we’e failed at.

  • I failed an arithmetic test.
  • I failed judo class.
  • I failed to attract interest with my CV.
  • I failed to be married or have a stable job by my 30th birthday.
  • I failed an entrance exam.
  • I failed most of my writing assignments.
  • I lost an important contest.
  • I lost a race. Badly.
  • I lost a client I thought I had secured.
  • I failed a client I thought I could help.
  • I failed to get paid what I thought I was worth.
  • I failed to be honest in a romantic relationship.
  • I failed to do anything cool for a few years.
  • I couldn’t walk on a mountain because I was so out of shape.
  • I failed to wear sunscreen.
  • I failed to read the prospectus.
  • I failed to get into my preferred university.
  • I failed to get someone to fall for me.
  • I didn’t know what I wanted or how to get it.
  • I failed to keep in touch with old friends.
  • I failed to impress people.
  • I failed to advocate for myself.
  • I failed to do things on time.
  • I lost Other People’s Money.
  • I failed to come up with good ideas.
  • I failed to give it my all.
  • I failed to lose weight.
  • I failed to meet expectations.
  • I failed to look “put together”.
  • I failed to stay organised.
  • I failed to Get Things Done.
  • I failed to cook a good dinner.
  • I failed to recognise the obvious signs.
  • I failed to learn what I was trying to learn.
  • Things did not go according to plan.

NB: I don’t intend Failure Friday as a pity party. It just bugs me when people try to act flawless and successful. Infinitely wise with inerrant self-command. Even apparent failures are successes in disguise. Sorry stories modulate into major key as the lessons learned were invaluable rungs on the ladder of upward progress so in the end it all worked out for the best.

What is that? You’ll probably just make people who are already down feel worse by doing that. And not make anyone feel better.




Lucas’ “rational expectations” revolution in macroeconomics has been tied to the ending of stagflation in the world’s largest economy, and to the reintroduction of “psychology” into finance and economics. However, I never felt like the models of “expectation” I’ve seen in economics seem like my own personal experience of living in ignorance. I’d like to share the sketch of an idea that feels more lifelike to me.

http://www.olivierlanglois.net/images/voro2.jpg

First, let me disambiguate: the unfortunate term-overlap with “statistical expectation” (= mean = average = total over count = ∑ᵢᴺ•/N = a map from N dimensions to 1 dimension) indicates nothing psychological whatever. It doesn’t even correspond to “What you should expect”.

If I find out someone is a white non-Hispanic Estadounidense (somehow not getting any hints of which state, which race, which accent, which social class, which career track…so it’s an artificial scenario), I shouldn’t “expect” the family to be worth $630,000. I “expect” (if indeed my expectation is not a distribution but rather just one number) them to be worth $155,000. (scroll down to green)

Nor, if I go to a casino with 99% chance of losing €10,000 and 1% chance of winning €1,000,000 (remember the break-even point is €990,000). “On average” this is a great bet. But that ignores convergence to the average, which would be slow. I’d need to play this game a lot to get the statistics working in my favour, and I mightn’t stay solvent (I’d need to get tens of millions of AUM—with lockdown conditions—to even consider this game). No, the “statistical expectation” refers to a long-run or wide-space convergence number. Not “what’s typical”.

Not only is the statistical expectation quite reductive, it doesn’t resemble what I’ve introspected about uncertainty, information, disinformation, beliefs, and expectations in my life.

File:Coloured Voronoi 3D slice.svg

A better idea, I think, comes from the definition of Riemann integration over 2+ dimensions. Imagine covering a surface with a coarse mesh. The mesh partitions the surface. A scalar is assigned to each of the interior regions inscribed by the mesh. The mesh is then refined (no lines taken away, only some more added—so some regions get smaller/more precise and no regions get larger/less precise), new scalars are computed with more precise information about the scalar field on the surface.
a scalar field

NB: The usual Expectation operator 𝔼 is little more than an integral over “possibilities” (whatever that means!).

(In the definitions of Riemann integral I’ve seen the mesh is square, but Voronoi pictures look awesomer & more suggestive of topological generality. Plus I’m not going to be talking about infinitary convergence—no one ever becomes fully knowledgeable of everything—so why do I need the convenience of squares?)

I want to make two changes to the Riemannian-integral mesh.

image
image

 

First I’d like to replace the scalars with some more general kind of fibre. Let’s say a bundle of words and associations.

(You can tell a lot about someone’s perspective fro the words they use. I’ll have to link up “Obverse Words”, which has been in my drafts folder for over a year, once I finish it—but you can imagine examples of people using words with opposite connotation to denote the same thing, indicating their attitude toward the thing.)

http://i780.photobucket.com/albums/yy90/AlexMLeo/felixsbrain.jpg

Second, I’d like to use the topology or covering maps to encode the ignorance somehow. In my example below: at a certain point I knew “Rails goes with Ruby” and “Django goes with Python” and “Git goes with Github” but didn’t really understand the lay of the land. I didn’t know about git’s competitors, that you can host your own github, that Github has competitors, the more complex relationship between ruby and python (it’s not just two disjoint sets), and so on.

When I didn’t know about Economics or Business or Accounting or Finance, I classed them all together. But now they’re so clearly very very different. I don’t even see Historical Economists or Bayesian Econometricians or Instrumental Econometricians or Dynamical Macroeconomists or Monetary Economists or Development Economists as being very alike. (Which must imply that my perspective has narrowed relative to everyone else! Like tattoo artists and yogi masters and poppy farmers must all be quite different to the entire class of Economists—and look even from my words how much coarse generalisation I use to describe the non-econ’s versus refinement among the econ’s.
image
These meshes can have a negative curvature (with, perhaps a memory) if you like. You know when you think that property actuaries are nothing at all like health actuaries that your frame-of-reference has become very refined among actuary-distinguishment. Which might mean a coarse partitioning of all the other people! Like Bobby Fischer’s use of the term “weakies” for any non-chess player—they must all be the same! Or at least they’re the same to me.)

image

Besides the natural embedding of negatively-curved judgment grids, here are some more pluses to the “refinement regions” view of ignorance:

  1. You could derive a natural “conservation law” using some combination of e.g. ability, difficulty, how good your teachers are, and time input to learning, how many “refinements” you get to make. No one can know everything.

    (Yet somehow we all are supposed to function in a global economy together—how do we figure out how to fit ourselves together efficiently?

    And what if people use your lack of perspective to suggest you should pay them to teach you something which “evaluates to valuable” from your coarse refinement, but upon closer inspection, doesn’t integrate to valuable?)
  2. Maybe this can relate to the story of Tony—how we’re always in a state of ignorance even as we choose what to become less ignorant about. It would be nice to be able to model the fact that one can’t escape one’s biases or context or history.
  3. And we could get a fairly nice representation of “incompatible perspectives”. If the topology of your covering maps is “very hard” to match up to mine because you speak dialectics and power structures but I speak equilibria and optima, that sounds like an accurate depiction. Or when you talk to someone who’s just so noobish in something you’re so expert in, it can feel like a very blanket statement over so many refinements that you don’t want to generalise over (and from “looking up to” an expert it can also feel like they “see” much more detail of the interesting landscape.)
  4. Ignorance of one’s own ignorance is already baked into the pie! As is the beginner’s luck. If I “integrate over the regions” to get my expected value of a certain coarse region, my uninformed answer may have a lot of correctness to it. At the same time, the topological restrictions mean that my information and my perspective on it aren’t “over there” in some L2-distance sense, rather they’re far away in a more appropriately incompatible-with-others sense.

In conclusion, I’m sure everyone on Earth can agree that this is a Really Nifty and Cool Idea.

File:ApproximateVoronoiDiagram.png

 

I’ll try to give a colourful example using computers and internet stuff since that’s an area I’ve learned a lot more about over the past couple years.

A tiny portion of Doug Hofstadter’s “semantic network”.  via jewcrew728, structure of entropy

First, what does ignorance sound like?

  • (someone who has never seen or interacted with a computer—let’s say from a non-technological society or a non-computery elderly rich person. I’ve never personally seen this)
  • "Sure, programming, I know a little about that. A little HMTL, sure!”
  • "Well, of course any programming you’re going to be doing, whether it’s for mobile or desktop, is going to use HTML. The question is how.

OK, but I wasn’t that bad. In workplaces I’ve been the person to ask about computers. I even briefly worked in I.T. But the distance from “normal people” (no computer knowledge) to me seems very small now compared to the distance between me and people who really know what’s up.

A few years ago, when I started seriously thinking about trying to make some kind of internet company (sorry, I refuse to use the word “startup” because it’s perverted), I considered myself a “power user” of computers. I used keyboard shortcuts, I downloaded and played with lots of programs, I had taken a C++ course in the 90’s, I knew about C:\progra~1 and how to get to the hidden files in the App packages on a Mac.

My knowledge of internet business was a scatty array of:

  • Mark Zuckerberg
  • "venture capital"
  • programer kid internet millionaires
  • Kayak.com — very nice interface!
  • perl.
    Regular Expressions
    11th Grade
  • mIRC
  • TechCrunch
  • There seem to be way more programming going on to impress other programmers than to make the stuff I wanted!
  • I had used Windows, Mac, and Linux (!! Linux! Dang I must be good)
  • I knew that “Java and Javascript are alike the way car and carpet are alike”—but didn’t know a bit of either language.
  • I used Alpine to check my gmail. That’s a lot of confusing settings to configure! And plus I’m checking email in text mode, which is not only faster but also way more cooly nerdy sexy screeny.
  • Object-Oriented, that’s some kind of important thing. Some languages are Object-Oriented and some aren’t.
  • "Python is for science; Ruby is for web"
  • sudo apt-get install
    Sandwich
  • I had run at least a few programs from the command line.
  • I had done a PHP tutorial at W3CSchools … that counts as “knowing a little PHP”, right?

So I knew I didn’t know everything, but it was very hard to quantify how much I did know, how far I had to go.

image

A mediocre picture of some things I knew about at various levels. It’s supposed to get across a more refined knowledge of, for example, econometrics, than of programming. Programming is lumped in with Linux and rich programmer kids and “that kind of stuff” (a coarse mesh). But statistical things have a much richer set of vocabulary and, if I could draw the topology better, refined “personal categories” those words belong to.

Which is why it’s easier to “quantify” my lack of knowledge by simply listing words from the neighbourhood of my state of knowledge.

Unfortunately, knowing how long a project should take and its chances of success or potential pitfalls, is crucial to making an organised plan to complete it. “If you have no port of destination, there is no favourable wind”. (Then again, no adverse wind either. But in an entropic environment—with more ways to screw up than to succeed—turning the Rubik’s cube randomly won’t help you at all. Your “ship” might run out of supplies, or the backers murder you, etc.)

File:2Ddim-L2norm-10site.png

Here are some of the words I learned early on (and many more refinements since then):

  • Rails
  • Django
  • IronPython
  • Jython
  • JSLint
  • MVC
  • Agile
  • STL
  • pointers
  • data structures
  • frameworks
  • SDK’s
  • Apache
  • /etc/.httpd
  • Hadoop
  • regex
  • nginx
  • memcached
  • JVM
  • RVM
  • vi, emacs
  • sed, awk
  • gdb
  • screen
  • tcl/tk, cocoa, gtk, ncurses
  • GPG keys
  • ppa’s
  • lspci
  • decorators
  • virtual functions
  • ~/.bashrc, ~/.bash_profile, ~/.profile
  • echo $SHELL, echo $PATH
  • "scripting languages"
  • "automagically"
  • sprintf
  • xargs
  • strptime, strftime
  • dynamic allocation
  • parser, linker, lexer
  • /env, /usr, /dev,/sbin
  • GRUB, LILO
  • virtual consoles
  • Xorg
  • cron
  • ssh, X forwarding
  • UDP
  • CNAME, A record
  • LLVM
  • curl.haxx.se
  • the difference between jQuery and JSON (they’re not even the same kind of thing, despite the “J” actually referring to Javascript in both cases)
  • OAuth2
  • XSALT, XPath, XML

http://www.financialiceberg.com/uploads/iceberg340.jpg
http://www.emeraldinsight.com/content_images/fig/1100190504002.png


http://www.preventa.ca/images/im_risk_anatomy.jpg

This is only—as they say—“the tip of the iceberg”. I didn’t know a ton of server admin stuff. I didn’t understand that libraries and frameworks are super crucial to real-world programming. (Imagine if you “knew English” but had a vocabulary of 1,000 words. Except libraries and frameworks are even better than a large vocabulary because they actually do work for you. You don’t need to “learn all the vocabulary” to use it—just enough words to call the library’s much larger program that, say, writes to the screen, or scrapes from the web, or does machine learning, for you.)

The path should go something like: at first knowing programming languages ⊃ ruby. Then knowing programming languages ⊃ ruby ⊃ rubinius, groovy, JRuby. At some point uncovering topological connections (neighbourhood relationships) to other things (a comparison to node.js; a comparison to perl; a lack of comparability to machine learning; etc.)

I could make some analogies to maths as well. I think there are some identifiable points across some broad range of individuals’ progress in mathematics, such as:

  • when you learn about distributions and realise this is so much better than single numbers!

    a rug plot or carpet plot is like a barcode on the bottom of your plot to show the marginal (one-dimension only) distribution of data

    who is faster, men or women?
  • when you learn about Gaussians and see them everywhere
    Central Limit Theorem  A nice illustration of the Central Limit Theorem by convolution.in R:  Heaviside <- function(x) {      ifelse(x>0,1,0) }HH <- convolve( Heaviside(x), rev(Heaviside(x)),        type = "open"   )HHHH <- convolve(HH, rev(HH),   type = "open"   )HHHHHHHH <- convolve(HHHH, rev(HHHH),   type = "open"   )etc.  What I really like about this dimostrazione is that it’s not a proof, rather an experiment carried out on a computer.  This empiricism is especially cool since the Bell Curve, 80/20 Rule, etc, have become such a religion.NERD NOTE:  Which weapon is better, a 1d10 longsword, or a 2d4 oaken staff? Sometimes the damage is written as 1-10 longsword and 2-8 quarterstaff. However, these ranges disregard the greater likelihood of the quarterstaff scoring 4,5,6 damage than 1,2,7,8. The longsword’s distribution 1d10 ~Uniform[1,10], while 2d4 looks like a Λ.  (To see this another way, think of the combinatorics.)
  • when you learn that Gaussians are not actually everywhere
    kernel density plot of Oxford boys' heights.

    histogram of Oxford boys' heights, drawn with ggplot.A (bimodal) probability distribution with distinct mean, median, and mode.
  • in talking about probability and randomness, you get stuck on discussions of “what is true randomness?” “Does randomness come from quantum mechanics?” and such whilst ignorant of stochastic processes and probability distributions in general.
  • (not saying the more refined understanding is the better place to be!)
  • A brilliant fellow (who now works for Google) was describing his past ignorance to us one time. He remembered the moment he realised “Space could be discrete! Wait, what if spacetime is discrete?!?!?! I am a genius and the first person who has ever thought of this!!!!” Humility often comes with the refinement.
  • when you start understanding symbols like ∫ , ‖•‖, {x | p} — there might be a point at which chalkboards full of multiple integrals look like the pinnacle of mathematical smartness—
    http://www.niemanlab.org/images/math-formula-chalkboard.jpg
  • but then, notice how real mathematicians’ chalkboards in their offices never contain a restatement of Physics 103!
    Kirby topology 2012
    http://whatsonmyblackboard.files.wordpress.com/2011/06/21june2011.jpg
    A parsimonious statement like “a local ring is regular iff its  global dimension is finite” is so, so much higher on the maths ladder than a tortuous sequence of u-substitutions.
  • and so on … I’m sure I’ve tipped my hand well enough all over isomorphismes.tumblr.com that those who have a more refined knowledge can place me on the path. (eg it’s clear that I don’t understand sheaves or topoi but I expect they hold some awesome perspectives.) And it’s no judgment because everyone has to go through some “lower” levels to get to “higher” levels. It’s not a race and no one’s born with the infinite knowledge.
 

I think you’ll agree with me here: the more one learns, the more one finds out how little one knows. One can’t leave one’s context or have knowledge one doesn’t have. And all choices are embedded in this framework.




  1. This was the first time I felt I actually did anythingin life. All the writing papers in school or doing problem sets was like performing rites to the rain gods: going through some motions that are supposed to be important and very held up by society, but actually are not. And even similarly with jobs I had had within organisations, entering with a CV (another cultural rite or ritual with perhaps little objective significance), acting within such a large bureaucracy that I was sheltered from the “rubber meeting the road” at the bottom line, once again felt like more of a rain dance than “no tree no shade” where
    • if you don’t insulate your house it gets cold in the winter;
    • if you don’t cover up your bike it rusts in the rain;
    • if you don’t cook then ∄ dinner;
    • if you get tired of packing up your things moving from flat to flat and take a nap, then when you wake up the stuff still hasn’t moved itself.
  2. So that changed my perspective very much on “They should have this”. I heard a customer say one time “I’ve been saying they should have this for so long!” I kept my composure outwardly but inside I was venomous. Oh, really? You've been saying that “they” should “have” that? How amazing of you to conceive of the concept that somebody should do something! I’ve got a lot of f***ing news for you: the only reason this exists is because of ME. If I stop rowing this boat at any time it’s going to sink. The rant went on but now "They should have that" has become my little personal keyword for ignorant people who think that the built world comes to them through some exogenous force rather than from people taking action. The positive flip side to hating that kind of behaviour is that I felt less distance between me and anybody who makes anything happen. (Although in reality there’s a lot of distance between someone running a micro cap business and the CEO of a billion dollar chemical company. But at least the distance was no longer magical or incomprehensible.)
  3. I wish I had known more about the law (just the different ways to incorporate, basically) and about accounting (tax accounting; a little QuickBooks).
  4. Spreadsheets and economic theory were mostly not-useful. They were a little bit useful but not on direct things I had to do. Also I got a lot of stupid ideas from economic theory and things didn’t work out like I thought they would based on what I thought were reasonable assumptions. I’m sure the spreadsheet would be more useful for people who have to communicate more, and accounting more useful in an org where someone has to keep track of more things. No maths to speak of. (For the business, that is. I did some OCW courses in my free time.)
  5. It does not take a genius to understand that £200 is better than £100. And on the cost side I’m not sure any formulas can tell you whether the £80 discount product is better for you than the £100 regular product. I think I was distracted by various “higher learning” ideas and it probably would have been worse if I had more degrees.
  6. One of my enduring difficulties was how to figure out what to do based on various people who knew more than me, but were giving me conflicting information, told me. There’s no way I could have known or learned (certainly not fast enough) all the stuff I needed to know. So I would just ask other people. But I always got different answers and I felt like this must be a central problem/necessary skill of management in general. You’re never going to know, so how do you combine these differing reports given what you know about the bias and the incentives and the knowledge exposure of the various people who know more than you but mutually disagree.
  7. For me, my management style was basically an extension of my personality. Flaws and all. There was no “second layer” of here’s what I’m going to say to get you to do something, versus here is what I mean. It was just: “Look, if you do this, I’m going to be f***ed. So please don’t do that.” No fake getting angry either, I would fume at home and kick stuff when an employee was not around if they did something that screwed me over (i.e., cost me money or time). I did, though, always keep my second layer around customers or journalists or people who basically had no clue what was up.
  8. Politicians’ work consists of spending all their time with f***ing idiots (the other side) and having to compromise over to their stupid and detestable views. Or just going over their inane and stupid opinion and listen to their egotistical blather night after night. I had to work with branches of various municipal governments, including putting forward new legislation in some local councils. Some of the people were legit. And watching politics in person was instructive. (Again, “it’s just people”. That’s a meaningless phrase but I’ll go into it some other time.) But there were some atrocious people (both elected officials and bureaucrats) that I couldn’t stand to work with on a daily basis. I would fly across the room and choke someone. Or at least yell. Definitely not respectfully and politely trim the sails and subtly guide them into my way of thinking whilst letting them think they came up with it themselves. So now I disrespect the view that “all politicians are bad” or whatever. No, politicians have to work with intolerable borderline-evil nincompoops = the people who disagree with me.
  9. A lot of other small businesspeople helped me a lot. Like they would just do free things for me. Or would always be nice if I called to ask for advice. Or they would tell me personal details about their past or what they really thought about things—as if by putting in all the effort I was doing, I had joined a club where people who live in the land where if the money stops flowing then everything sinks (as opposed to the way salary people think), where everything needs to be perfect because it’s your baby, and all the other associated things—I had gotten onto a same level with people who were much older.
  10. Speaking to those other people’s businesses, by the way, I had a lot of fun learning how they did their do, but there’s no freaking way I could have run or even worked for them in their lines of operation. So when various self-styled Entrepreneurs on the Web (probably just trying to get pageviews or “think aloud” through their own stuff) start saying “it’s like this”, and “you have to do that” or “business is this or that” or whatever, I’m like, you’re either fake or I have no clue how you could be so arrogant. Maybe I’m more credulous if it’s Pleased But Not Satisfied, but if it’s some 20- or 30-something trying to say how the world works … yeah…emphatically: shut up. (NB: This doesn’t apply to people who talk about their own line of business. Just those trying to generalise with no right to.)
  11. People gave me way too much authority or respect. (Converse of thinking that those who work in minimum wage jobs must be stupid or irresponsible.) Sort of like my first time standing at the front of a class and all of a sudden I (same me as always) am the teacher. Some would ask me for advice or questions on matters I had no clue about. But just because I was labelled a “boss” or “entrepreneur” when in fact I can’t tell them whether their idea is a good one or not. Maybe it was reasonable in that certain things did start to sound really stupid to me and that may have been based on being closer to “reality” if they were floating in their bureaucratic job.
  12. I wouldn’t say I was particularly happy. I felt respected, I felt like a fountainhead, and I was busy. But if people asked “Are you happy?” I would honestly say I didn’t consider happiness as an objective. My objectives were to accomplish A, B, C.
  13. You don’t merely need to be offering something that other people want. You also need to be able to extract dinero from them. People who view capitalism as the only necessary beneficent social force forget this. If my business generates a larger consumer surplus than yours, nobody cares. Very profitable businesses do not necessarily generate more total surplus than sort of profitable businesses, because the very profitable businesses might just be better at keeping more of the trade surplus for themselves. Then there’s an incentive for someone running the high-consumer-surplus business to get out of it and spend their life doing something that will reward them more for their work. A soup kitchen for the homeless seems like it could be an example. An almost infinite consumer surplus to give food to someone who is starving but they don’t have any money to give you, so it’s a bad business.
  14. It was completely not mysterious where wealth comes from. Economists debate about supply side versus demand side and it seemed very ethereal before I did this business. Value is created at every one of my transactions when one of my consumers paid me and experienced the utility bump from doing so. All of the people who supplied me contributed but did not create wealth per se. In this sense the “sure thing” businesses that one would want to lend to / invest in (selling pickaxes to miners) are not the value creating ones because they do not take the frontline of risk of will consumers actually want this. And most of my customers did not have a latent desire for what I was selling, I just thrust it in their face and they said yes/no to the deal.
  15. Related to that: the paint people mix together something like 25 kinds of paint. They make my specific colour of paint. This is more valuable to me than the price I pay (that’s my “consumer surplus”). But how do I notate it on my balance sheet? To me it’s worth much more than £100 because it’s exactly what I need to touch up my stuff and I can keep everything perfect (convex returns to approaching perfection—that’s a theme; notice the stores that mark up a lot always have everything else impeccable). But its resale value is nil because who wants my paint colours? Kind of interesting mathematically and maybe that observation is important to understanding where value comes from and how it flows through the economy?

It was a very micro cap business I started with a credit card and £1000 borrowed from a friend. I had just a few recurring expenses and one big initial investment. Ended up with about 8 part-time employees by the peak. A lot of people think I shut it down because of problems with the government. But actually it was because I took an unrelated outside risk—investing time in an Internet startup—which didn’t pay off and took too much time away from my main business, so I had to shut it down.

My three motivations or main reasons I started it were:

  • It seemed better than doing an MBA. I thought I would probably hire someone who had actually managed a company rather than someone who blew $150k on some classes about how to manage a company.
  • I was and still am into development economics. This is essentially trying to solve the problems of the world’s poor. After realising that there is less need for economic theorists than just for people who Actually Do Stuff (ag scientists, road builders) and for Money, I decided my best way to fight poverty would be to create well-paying jobs—even if it’s just a few.
  • The “piano lessons” theory of doing stuff. When I took piano lessons I was taught to practise songs slow at first or slow and isolating just one hand at a time. Then as my skill increased I could increase the speed. More or less the same idea: start in an insulated market, doing a small market cap, copying almost exactly a business I had worked at before, very low costs, very modest goals, and just make sure I could accomplish the small thing before dreaming big.

So I did not make a lot of money doing this business, which by definition makes it not a great business. But I did support myself, I did accomplish my goals (to learn, to not lose money, and to employ at least some people at a notably higher wage than they could make elsewhere), and I did make my community a more vibrant place, during the time I was working at it.

During the period I was doing that I definitely felt “Anybody could do something like this. Not necessarily make a lot of money but add something new to their community. Sure, it’s a lot of butt busting work, but at least I’m giving an effort." Maybe what I missed in that "lecture" was that most people in fact do not want to work their butts off for not so much money. It’s in fact much more attractive to have a guarantee that no matter how bad things get you will still get this much money traded for also fixed hours. And maybe that is amplified in rationality because mainly the companies offering variable pay are usually some startup that will fail and therefore they offer "sweat equity" i.e. unquantified ownership of a worthless company. Or maybe I was actually just quite lucky to have experience working at a company that I guessed I might be able to replicate without a lot of up-front capital. That was an assumption I was aware was flawing my "lecture" even at the time.

The other reason it’s probably not smart to encourage others to “Just do something” is that planning, thinking things through beforehand, and developing expertise that can shut down competitors must have more value in a more difficult market or a higher market cap.




One of my old jobs was at a private equity firm. One rule of thumb I learned there may be useful to would-be entrepreneurs. To myself, I call it the rule of "Just add water." Like one of those bath toys that grows to a larger size of the exact same thing when you add water, the perfect investment is a business that grows to a larger size of the exact same thing when you just add money.

This is not meant to deter anyone who’s already on a different path or to be some master theory of finance. I just think it’s an easy-to-remember model that a will-be entrepreneur can use to check ideas against when planning a new “growth business”. (i.e., not the vineyard you’re going to operate in retirement; not the splogs you run passively on the side to augment your regular income; not the community-enhancing business you’re doing less for money than to make the world a more interesting place. Just businesses that are hoping to get acquired by a large corp or else attract investment to grow to a medium-to-large size)

So. What does an ideal investment look like to an investor? It looks like “I put in money and get out more money later”. It doesn’t involve

  • taking chances,
  • having to run the business (unless they are actually great in that business area),
  • and especially not giving someone a chance because everyone deserves a chance.
  

Here is my fantasy model of the perfect business to invest in. Let’s say the Six Flags corporation has built its first rollercoaster park in Ohio and it is doing very well. It cost $130 million to build and it nets $10 million in profits per year. If you do some annuity maths (from the geometric series) you’ll see that that’s a decent business. Let’s ignore all complications and say that that profit stream is worth a net $7.6mm today. (WolframAlpha’s number if I use 6% interest rate and just assume the theme park depreciates to zero after 30 years of constant profits) Which is a big number for one person but small when it’s divided 100 ways.

Nevertheless the value that’s been proved by the Six Flags team is not just a $7,600,000 net addition of wealth but $7,600,000 in that region of Ohio. In other words that number can be multiplied. All you have to do is: just add money.

Well me and my people, we have connections to people who already made it and now want their money to work for them. “Having the money work for them” means paying us a management fee to look for businesses like this Six Flags and then bet on sure things. If we have a sure thing like this to bet on, then we can subscribe as much funds as we need to.

So the initial cost of a Six Flags was $130mm and let’s say there are 19 other locations with the exact same stats (number of people with a certain income in a certain radius, competition, etc) where the management team has convinced us they can duplicate the exact same business with the exact same cash flows. It would take them >15 years to save up enough money to build a new Six Flags in just one of those locations, but here is an opportunity for capital to come in and speed up the business’ growth. Now we multiply $7.6mm of NPV by twenty = $152mm of present value.

Then we have to figure out how to actually structure this deal, that’s another complicated question. When do investors get their money and how? How much is the investors’ capital worth as a percentage of the growth? Does the management team get stretched too thin or can they hire and train enough people. (This is called “operations” = actually doing things like running a business, not just elocution and planning as the financiers do).

In reality there are going to be more factors like repair costs and risks, risk of lawsuits, interest rates, other opportunities, appropriate size of the investment, and much more. Anything that makes this business not just an annuity complicates things. That’s why I say this is a fantasy model.

But I think the basic story behind the duplication of Six Flagses is basically what investors love to see. Isn’t it what you would love to see if you were an investor; had made your fortune running paper mills; and just wanted to sit back, relax, and live off your massive dosh now?
Zhang Yin
Here is something that already works perfectly, all the kinks have been straightened out, it’s just a formula that’s been proven to work. All these Six Flags management people need is money, which I happen to have, and nothing else from me (I don’t know how to run a Six Flags), and then the investors can multiply out the Six Flags formula to all of our benefit.

  

The present zeitgeist notwithstanding, the driving force of capitalism is not solving social problems. Asking those questions can be a good way to look for ideas, but it is not sufficient for extracting dinero from customers/clients, which is the actual driving force. Social problem + investment = solution is a naïve way some beginning entrepreneurs think, and it essentially puts all of the risk and all of the work onto the investor—which is not a value proposition for them. (I.e., you are relying on your investment partner being a fool—so then how will you really feel after you’ve bilked him/her/them and living on ill-gotten wealth?)

So that’s the foolish way to think “Just add money”: I am going to make the next Groupon, all I need is some programmers and a million dollars and then we can get started doing this thing! Why is this going to work? Because people are stupid. They’ll buy anything. What, do the work without getting paid? You crazy! What I just described is not “Just add money”, it’s “Just add everything”. Some people deceive themselves, though, thinking they could be rich if only somebody gave them the million-dollar OK to pursue their “idea”. (Well, they would be rich, but it wouldn’t be from the idea succeeding. And business costs could eat a million in short order anyway.) One of your “jobs” as “the boss”—what you’re contributing to the situation, and what you’re getting paid for—is a plan that, with good execution and getting people on board with you and relationships and everything else, is going to add to the world a “machine” that causes people to hand over money, either in large amounts or many times, over decades-plus time period. That is, you’re creating new revenue streams that your investors (if you’re taking investors) are buying into. (There are some markets where it takes a lot of money to start up or where a huge advertising budget can make/break the business. I don’t pretend to understand those, though, so I can’t offer any useful advice there.)

I’ll grant there are other ways to win investors over—like, they are half in it for personal interest in a subject area, or they half just want to change the world like you do, or Instagram just sold for a $billion and they are gunning from the hip for the next big score, etc. To me, as an entrepreneur, you can hope for that kind of luck, but you can’t control luck. You do have it within your control to solve all of the problems down to the point where more money = multiplication and the multiplication will bring in enough returns for everyone to share and both parties walk away satisfied. If you offer people an obviously good deal you will get bites and you can use that goal to sieve your ideas at the outset.