Steve Jobs on learning to code

From Robert X. Cringley’s “Steve Jobs: The Lost Interview”:

When we were designing our blue box, we wrote a lot of custom programs to help us design it, you know, and to do a lot of the dog work for us in terms of calculating master frequencies with subdivisors to get other frequencies and things like that. We used the computer quite a bit to calculate, you know, to calculate how much error we would get in the frequencies and how much could be tolerated.

So we used them in our work, but much more importantly, it had nothing to do with using them for anything practical. It had to do with using them to be a mirror of your thought process; to actually learn how to think.

I think the greatest value of learning how to—I think everybody in this country should learn how to program a computer—should learn a computer language, because it teaches you how to think. It’s like going to law school. I don’t think anybody should be a lawyer, but I think going to law school would actually be useful, because it teaches you how to think in a certain way, in the same way that computer programming teaches you in a slightly different way how to think. And so I view computer science as a liberal art.

Google Glass and the Segway Paradox

Google Glass

The customer rearely buys what the company thinks it is selling him. — Peter Drucker

Google Glass was finally announced to the public yesterday.

Glass is a solution looking for problems. It’s too hard to say what jobs-to-be-done Glass will be hired to do at this stage, or how widely used it will be. We’ll only know after it’s released.

The lean startup way of thinking heavily emphasizes the reverse sequence: find a problem (job), think of a way(s) to solve that problem, test your hypothesis using a minimum viable product, repeat. This method should work for most startups. It worked well for companies like Microsoft (Problem: I need an Operating System to put on the computers I sell so people can use them. Solution: Build/Buy/Copy Basic/DOS/Windows).

But there are some innovations where the solution=>problem sequence is necessary — anything that requires a lot of R&D and isn’t easily demo’ed on a large scale. Google Glass, Tesla cars, Segway, iPad, Lytro, etc. These are physical, more capital intensive examples, but the same still holds for some smaller software projects. Sometimes you just need to build the full version to see what it’s best used for.

One of the problems of this method is what I call the “Segway Paradox“: a new technology with huge initial interest and possibilities turns out to only be used in a few niche cases.

This may happen for a number of reasons (see Paul Graham’s The Trouble with the Segway). I think Google Glass may fall prey to this problem.

There are a few use cases I can think of that may make Glass worth the cost:

  1. Hands-free sports — biking, skiing, football, climbing
  2. Search & rescue, emergency — alerting the user to visual/audio anomalies
  3. Jobs that require detailed visual instructions (“advanced checklists”)

But it seems from the videos that Google is focusing more on everyday consumer uses, competing more with smartphones.

Mistakes = information

Mistakes can help us learn

Re-posted from the Atlastory blog.

In Nassim Taleb’s new book “Antifragile,” there’s an interesting segment about how an entire system can be antifragile (benefiting from variability / disorder / stressors) precisely because its individual parts remain fragile (harmed by variability). A few examples:

The engineer and historian of engineering Henry Petroski presents a very elegant point. Had the Titanic not had that famous accident, as fatal as it was, we would have kept building larger and larger ocean liners and the next disaster would have been even more tragic. So the people who perished were sacrificed for the greater good; they unarguable save more lives than were lost. . . . Every plane crash brings us closer to safety, improves the system, and makes the next flight safer.

Thankfully the errors we encounter while developing Atlastory don’t involve anyone dying. But the same principle applies — every bug, problem, server crash, chokepoint, or design flaw we encounter leads to a better system. We want to run into problems, because that means we know about them and can now fix them — eventually making the user experience better as a result.

“Some businesses love their own mistakes,” Taleb continues. “Reinsurance companies, who focus on insuring catastrophic risks . . . manage to do well after a calamity . . . All they need is to keep their mistakes small enough so they can survive them.”

The more you benefit from low-downside mistakes, the more “antifragile” your business is. I see this as a function of both the industry you’re in and the internal culture of the company.

If everyday work and life is viewed as a science experiment (the circle of observe > guess > test > interpret), then any screw-ups or failures are a good thing in the end. You know something’s wrong, and you can work on fixing it. Taleb again: “…every attempt becomes more valuable, more like an expense than an error. And of course you make discoveries along the way.”

Continual improvement is everyday life in software development, but it is only just catching on for personal development.


How to separate luck and skill

These are some of my notes from the book “The Success Equation” by Michael Mauboussin. This book was spotted on Warren Buffett’s desk in this tour of his office. There’s lots more interesting stuff in the book, but these notes in particular answer the question “How do you separate luck and skill?” We’ll start off with some definitions:

Luck is a chance occurrence that affects a person or a group (e.g., a sports team or a company). Luck can be good or bad. Furthermore, if it is reasonable to assume that another outcome was possible, then a certain amount of luck is involved. In this sense, luck is out of one’s control and unpredictable. Randomness and luck are related, but there is a useful distinction between the two. You can think of randomness as operating at the level of a system and luck operating at the level of the individual. Luck is a residual: it’s what is left over after you’ve subtracted skill from an outcome.

The definition of skill depends on how much luck there is in the activity. In activities allowing little luck, you acquire skill through practice of physical or cognitive tasks. In activities incorporating a large dose of luck, skill is best defined as a process of making decisions. Here, a good process will have a good outcome but only over time. Patience, persistence, and resilience are all elements of skill.

Separating luck and skill

Luck-Skill Continuum
At the heart of making this distinction lays the issue of feedback. On the skill side, feedback is clear and accurate, because there is a close relationship between cause and effect. Feedback on the luck side is often misleading because cause and effect are poorly correlated in the short run.

In most cases, characterizing what’s going on at the extremes is not too hard. As an example, you can’t predict the outcome of a specific fair coin toss or payoff from a slot machine. They are entirely dependent on chance. On the other hand, the fastest swimmer will almost always win the race. The outcome is determined by skill, with luck playing only a vanishingly small role.

Continue reading “How to separate luck and skill”

Instacart: analysis of a startup

InstacartInstacart is a seed-stage startup that delivers groceries and other basic items in a very short timeframe. They are the “ with a 1 hour delivery.” At the moment their current market is only San Francisco and the Silicon Valley area. Customers can place either a 3-hour order ($3.99) or a 1-hour order ($14.99).  Orders are routed to shoppers who work for Instacart, who then pick up the items at a local store and deliver them within the timeframe.

In October they raised $2.3 million from Canaan Partners and Khosla Ventures. Below is a  a very brief analysis if I were considering a potential investment in Instacart.

Quick analysis

So basically Instacart uses software (algorithms & data analysis on the back-end, with good UI design on the front-end) to connect “deliverers” in need of cash with “buyers” who need quick delivery of basic items.

Opportunity: arbitraging the demand for instant satisfaction and convenience, using software + crowdsourcing. This will be disrupting convenience stores on the low-end, and potentially grocery stores in the future. It is taking advantage of the trends in mobile computing, data analysis, and e-commerce (willingness to trust online vendors).

Potential moatsbrand habit developed through repeated purchases. Learning curve — should remain ahead of competition on the learning curve because of technology (software) advantage. This is a business where it pays to have lots of data on: customer habits, traffic, prices, store traffic, etc. It is a virtuous circle: the learning curve reinforces customer experience, which improves the brand. These advantages are all geographically local, so it will be best to roll out to new cities as quickly as possible once the kinks are worked out.

Management: with only doing minimal due diligence with public information on the founders, I didn’t see any red flags. Apoorva Mehta has worked on the Amazon supply chain, so he has some experience in the business. All founders on the surface seem to be very talented. What am I looking for? Amar Bhide found that the most important traits for the founders of a typical startup are the dichotomies of: (1) seeking uncertainty while being risk averse; and (2) persevering while being adaptable.

What could go wrong: (1) other cities are not as receptive to the concept; (2) Amazon or other grocery company catches on and preempts their growth in new cities.

Investment edge: structural (not very many participants at this early stage) and psychological (grocery delivery has failed many times in the past, sometimes spectacularly — Webvan — investors are turned off by the concept because of these past failures).

Final note

This seems like a company with a good future ahead of it. That usually makes it a good investment, especially at this stage. I’m not sure what the valuation of the company is at the moment. But for a startup at this stage, the precise valuation you invest at isn’t usually as important as how well the company does (within limits, of course — refer to the internet bubble).

Disclosure: I have no ownership in Instacart.


Crunchbase: Instacart
Mobile first, desktop second…
I Trusted a Total Stranger to Buy My Groceries…
Instacart Bags $2.3M To Become Amazon of Groceries
How Instacart Hacked YC

Retail Numbers

Some interesting retail numbers from my archives:

Highest Single Store Revenues

Store City Year Sales (2010 $mm)
A. T. Stewart NYC 1873 217
Wanamaker Philadelphia 1902 442
Macy’s NYC 1906 403
Field’s Chicago 1906 610
Bon Marché Paris 1906 962
Macy’s NYC 1930 1,280
Hudson’s Detroit 1953 1,242
Field’s Chicago 1962 969
Hudson’s Northland 1962 538
Japanese stores Tokyo 1990s-2000s 2,500-3,000

(Data from Gary Hoover) Continue reading “Retail Numbers”

Book Notes: The Visible Hand

The Visible Hand: The Managerial Revolution in American Business was written by Alfred Chandler and released in 1977. It’s a great history and study on business and why it exists the way it does today. For some books I read, I transcribe and summarize my highlights/notes in order to better learn the material and for future reference. Below you’ll find my (very long) summary of The Visible Hand. Some passages are direct quotes and others are my own paraphrasing/summaries. So if you’re interested in this sort of topic, send this baby to Instapaper, plop down on the couch, and enjoy.

The Visible Hand

Modern business enterprise is easily defined, having two specific characteristics: (1) it contains many distinct operating units and (2) it is managed by a hierarchy of salaried executives. Each unit has its own administrative office, set of books and accounts. Each could theoretically operate as an independent business enterprise. Such enterprises did not exist in the U.S. in 1840. By World War I this type of firm had become the dominant business institution. It was the institutional response to the rapid pace of technological innovation and increasing consumer demand.

This study is a history, moving chronologically. Before entering the historical experience, here is a list of general propositions to make more precise the primary concerns of the study:

The initial appearance of modern business enterprise:

  1. Modern multiunit business enterprise replaced small traditional enterprise when administrative coordination permitted greater productivity, lower costs, and higher profits than coordination by marker mechanisms. [This was due to both corporate efficiency and economies of scale.]
  2. The advantages of internalizing the activities of many business units within a single enterprise could not be realized until a managerial hierarchy had been created. An enterprise without such managers remains little more than a federation of autonomous offices.
  3. Modern business enterprise appeared for the first time in history when the volume of economic activities reached a level that made administrative coordination more efficient and more profitable than market coordination. It came with new technology and expanding markets.

Growth of the modern business enterprise:

  1. The hierarchy itself became a source of permanence, power, and continued growth.
  2. The careers of the salaried managers who directed these hierarchies became increasingly technical and professional. Training became longer and more formalized.
  3. The management of the enterprise became separated from its ownership. Stockholders didn’t have the influence, knowledge, experience, or commitment to take part in the high command.
  4. Career managers preferred policies that favored the long-term stability and growth of their enterprises to those that maximized current profits. For salaried managers the continuing existence of their enterprises was essential to their lifetime careers.
  5. As the large enterprises grew and dominated major sectors of the economy, they altered the basic structure of these sectors and of the economy as a whole.

Continue reading “Book Notes: The Visible Hand”

Glotz Builds Starbucks

It is 1980: You’ve just inherited Starbucks, a small Seattle business that roasts and sells coffee beans in 4 locations. How would you build it into a company worth more than $30 billion in 30 years?

(Before continuing, make sure you’ve read the template to this post, the famous essay by Charlie Munger about Glotz building Coca-Cola.)

Start with big, no-brainer decisions

Coffee beans are a commodity, so we’d have to find a way to attach a brand name and get customers to repeatedly buy the brand even when similar alternatives are available. Seattle and the Northwest are too small to account for this size of coffee business, so we would have to sell our product to the rest of the country and likely in other first-world countries around the world. There is currently only a small percentage of people in the U.S. that desire to buy high-end, dark-roasted coffee.

So to increase the size of this niche we would have to make it more convenient by selling individual cups of fresh coffee that we brew in each store location. Stores would have to be plentiful with very conveniently accessed locations. This would make it easier for infrequent instant coffee drinkers to try us out and further develop their habit for coffee and Starbucks. Even if it’s higher quality, people still wouldn’t pay much for a simple cup of coffee, so we would have to also sell espresso and milk-based drinks like they do in Europe. These are higher margin and can be highly customized by the customer, which makes it more likely they’ll buy and be attached to the experience.

Numerical fluency

For the business to be worth $30 billion, it would have to be earning pre-tax at least $1.5 billion if the company was doing well. The worldwide potential market would perhaps be around one billion people — if we could achieve 25% market share that means 250 million customers. If each store served 15,000 people, our total store base would have to be about 16,500, which means opening 550 stores a year from now until 2010. This would be a difficult number to achieve so we’d likely have to franchise or sell licenses to increase locations.

If all 15,000 customers per store spent an average of $4 per month at Starbucks (1-2 drinks), that would give us $12 billion of revenue in 2010. Many people already drink coffee every day, so this shouldn’t be too much of a problem. We’d have to achieve a 12.5% operating margin at this level, which is 31 cents for a $2.50 drink. No supplier — other than coffee beans when supply is restricted — has bargaining power and we will be buying their product on a massive scale so minimizing cost of goods sold wont be an issue. Our biggest overhead cost will be rent and wages, though many associates will be part-time due to sales being concentrated in the morning hours as customers commute to work.

Psychological lollapalooza

The caffeine stimulus in coffee will aid habit formation in customers. Habit formation will also be increased by letting people customize their drinks and designing stores with local interests in mind (excessive self-regard tendency). By putting our logo on every cup, we’ll promote social proof.

If customers have a good feeling and good mental association with our brand, they will be more likely to buy and like the product (halo effect). So we must make sure their in-store experience is good, which means good design and paying employees well. We should make stores comfortable enough that people will want to go there regardless of the product. Promoting charitable causes and giving our brand a good environmental image will help as customers become more socially conscious.

What must be avoided?

Loss of brand name or trademark, slipping quality of product or consumer experience.

As we grow, our success will cause other companies to copy our strategy, especially in cities or areas where we aren’t. To minimize this, we will have to expand very quickly, first in major metropolitan areas and then outward from there. Word of mouth and some marketing should help spread brand association and make it easier for us to compete in new areas. If another similar coffee company has already established dominance in a certain region, we should attempt to buy them because it would likely be too costly to break local habit.

Found Quotes 2

If you want to build a ship, don’t drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea… — Antoine de Saint Exupery

The little dissatisfaction which every artist feels at the completion of a work forms the germ of a new work. — Berthold Auerbach

Whatever few awards are presented for risk control, they’re never given out in good times. The reason is that risk is covert, invisible. Risk–the possibility of loss–is not observable. — Howard Marks

Actually, all education is self-education. A teacher is only a guide, to point out the way, and no school, no matter how excellent, can give you education. What you receive is like the outlines in a child’s coloring book. You must fill in the colors yourself. — Louis L’Amour

I like nonsense, it wakes up the brain cells. Fantasy is a necessary ingredient in living, It’s a way of looking at life through the wrong end of a telescope. Which is what I do, And that enables you to laugh at life’s realities. — Dr. Seuss

There is no terror in the bang, only in the anticipation of it. — Alfred Hitchcock

It is much harder to become independent if you are wealthy than to become wealthy if you are independent. — Nassim Taleb

Nothing is original. Steal from anywhere that resonates with inspiration or fuels your imagination …  Authenticity is invaluable; originality is non-existent. And don’t bother concealing your thievery — celebrate it if you feel like it. — Jim Jarmusch (via Kirby Ferguson @ TED)

My favorite books on business, management, investing and design

Out of the many books I’ve read in different subjects, below is a list of some of my favorites with some brief commentary for some of them. There are a few other “Mental Model” categories (psychology, history, economics, ecology, etc.) that I left out — hopefull they’ll be the subject of another post.

Business theory

  • The Origin and Evolution of New Businesses, Amar Bhide — extensive study of startups of all kinds, how they grow, what makes them successful (this is not a “help” book it is mainly observational)
  • Innovation & Entrepreneurship, Peter Drucker — how companies should systematically innovate — lots of good startup/innovation strategies (it’s not random)
  • The Innovator’s Dilemma, Clayton Christensen — every businessperson or investor needs to read this (and the one below) — every industry’s value chain is disrupted at some point
  • The Innovator’s Solution, Clayton Christensen — expands on “Dilemma” with better explanations and examples — I think the “jobs to be done” concept is one of the most important in business
  • Competition Demystified, Greenwald + Kahn — how businesses capture value by building a moat, and what strategies to use if you have or don’t have one
  • The Halo Effect, Phil Rosonzweig — the anti-business-book — but still has great insights on how businesses work and how best to run them
  • Built to Last, Jim Collins — read this with The Halo Effect in mind — lots of good advice & stories (I like this much better than “Good to Great”)
  • The Strategy Paradox, Michael Raynor — dense at times but a great theory on why strategy is so hard
  • Hidden Champions, Hermann Simon

Continue reading “My favorite books on business, management, investing and design”