• Shawn's Eskimo

    In an episode of Boy Meets World, Shawn is in a competition of who can wait longest on a billboard suspended high up in the air in order to win tickets to the Super Bowl. He stays there until the only two people left on a cold night are him and an Eskimo eating ice cream.

    When Corey tries to talk him down (literally), Shawn tells him that he has to stay. All his life there was always something in his way, preventing him from what he wanted to achieve.

    Shawn finally gives up on the contest, but goes to San Diego on his own, eventually finding a way into the Super Bowl.

    While the lesson of the episode was that Corey can’t solve all of Shawn’s problems for him, I remember it differently—there will always be someone better than you no matter how hard you try, but that is not a reason to give up. There is more than one path.

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  • Getting Ready for AI

    The other day I noticed a tweet from Justin Duke which outlined a plan to get his company’s codebase ready for Devin—a programming focused generative AI product. While many are skeptical about AI taking over coding tasks, progress happening quickly and it seems likely that these tools will help software engineers, though maybe not replace the job outright).

    If we think AI can positively impact many domains, the question becomes, how can we position ourselves today to take advantage of it in the future?

    Writing more is almost certainly one way. Large language models operate on content. That content is mostly text. If you want to have a future co-pilot that can help you build useful and unique knowledge (and potentially avoid knowledge collapse), it’s reasonable to believe you need to be writing a heck of a lot so that AI can draw from what you already know. For example, in a video of Reid Hoffman interviewing himself as an AI, the AI was trained on every book Reid has written and every talk he’s given.

    When it comes to code, writing comments explaining what the code is doing and why that’s important seems like it would help generative AI make better contributions that need less supervision. After all, reading someone else’s code is hard enough! I would love to read some research on performance improvements not just on writing code but about comprehension of business logic and how documentation helps or hurts.

    Running a business, building a culture where writing is thinking and the primary way teams work asynchronously will amplify every future investment in AI. When Notion rolled out their AI-powered search, a new hire at Mosey started asking it questions about projects, tools, processes, and terms he didn’t understand—the responses helped him get up to speed quickly. FAQs don’t work, but being able to respond to almost any question however it’s formulated sure does!

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  • Net Magic Number

    Net magic number is a measurement of go-to-market (GTM) efficiency for SaaS businesses. A magic number less than 1.0 indicates the business will lose money on each customer. Top SaaS businesses making less than $25MM in revenue per year have a magic number of 1.7 according to benchmarks from Iconiq Capital as in their business returns 1.7x for every sales and marketing dollar they spent to acquire customers.

    Net magic number is calculated by taking the current quarter’s revenue less previous quarter’s revenue times 4 divided by the previous quarter’s sales and marketing spend.

    By looking at the previous quarter, net magic number accounts for the average sales cycle to complete which makes it a better measurement for enterprise SaaS that has a sales motion.

    See also:

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  • Benign Neglect

    Most managers, at best, are a form of benign neglect. Continual attention (micro management) usually results in the opposite of what a manager hopes for—less motivation from employees, learned helplessness, and worse performance. Benign neglect leaves room for employees to have agency to do their work but it’s kind of like the placebo effect, maybe most managers are better off doing nothing at all.

    If that’s good, that’s an awfully low bar. When I first heard about this, I agreed it’s not such a bad outcome but surely it can be better.

    I like to ask new hires who the best manager they’ve ever had in their career. No one described benign neglect.

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  • 43% of Companies See Compliance as Their Greatest Challenge

    A survey from Deloitte found that 43% of companies see compliance as their greatest challenge and several key trends. They found that having an overall data management approach and integrated systems are needed to address global tax compliance. They found that complying with constantly changing laws and regulations is a top priority, more than cost efficiency. They also found that 74% of companies are using outsourcing or managed services as their main approach strategy for tax compliance.

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  • Data Marketing

    When companies run surveys and industry analysis that they share with the media, they’re gaining exposure for themeselves. While data may be contained within a blog post or report, the unit of value is the data point that a journalist can extract into their article (with a mention of the source).

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  • What I Read Every Morning

    I try to be careful about what I read in the morning as that has a way of setting the tone for the day. I stick to things that are informative or entertaining but don’t need a lot of energy to get into like a long-form essay.

    • HackerNews: I read the comments first and then the linked article if it seems interesting. When I was first trying to get into tech many years ago, I thought the go-to places were mainstream outlets like TechCrunch and Mashable (at the time). Turns out, the best place to observe what’s going on is seeing what the people building the software are talking about.
    • Dealbook: Maybe the exact opposite is Dealbook. Being a founder makes me more sensitive to the macro market and political landscape because it drives the behavior of our customers, investors, and the industry. It doesn’t matter if consensus macro forecasts are useless, it’s what everyone else thinks (or thinks they think) which helps me avoid being too myopic.
    • NY Times: Headlines only—is there anything pressing going to be on everyone’s mind that we need to navigate today?
    • Money Stuff: I love Matt Levine’s writing so if there is a topic close to my areas of interest it’s well worth stretching my finance competence and reading it.
    • Other: Reddit for pure sugar, heavily curated to avoid rage-inducing content, when I just need to see some pictures of puppies to get the day going. During baseball season, checking updates of my fantasy baseball team (yes, it’s possible to be a code writing tech nerd and love baseball—there are dozens of us).
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  • HeLa Cells

    Henrietta Lacks passed away from cervical cancer in 1951, but her cells have been continuously used in medical tests due to their ability to replicate quickly. She might be the first immortal women as her lineage of cells have been used for the last 70 years.

    Her cells were extracted without her permission and given away freely for use in medical research.

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  • Proportional Decision Making

    The energy spent making a decision should be proportional to the consequences. The larger the consequences, the more energy should go into making the decision. The smaller the consequences, the less energy should go into them.

    While this is akin to Amazon’s type 1, type 2 decisions (trap door vs two-way door), proportional decision making describes a continuum which better matches the variety of decisions we see in reality (or at least I think so).

    What does this mean? We should be quick to make decisions that are inconsequential to avoid bike shedding. We should be rigorous and scruntinize decisions that deeply effect our interests. Mixing up the two would clearly be bad.

    From Dharmesh Shah on Lenny’s Podcast.

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  • Business Strategy Is an Explanation of How to Win

    Business strategy should concisely answer who the most import customers are, how to attract them, and what the entire company must work towards to win that market.

    From What makes a strategy great:

    Great strategies accomplish this with the following characteristics:

    • Simple: Reshapes complexity to be manageable and actionable.
    • Candid: Dares to spotlight the most difficult truths.
    • Decisive: Asserts clear decisions and accepts their consequences.
    • Leveraged: Magnifies strengths into durable competitive advantage.
    • Asymmetric: Defeats uncertainty with higher upside than downside.
    • Futuristic: Solves for the long-term.

    Putting this into practice is difficult so I find that it’s useful to write a draft and then ask the list above as questions:

    Is the strategy simple? People don’t expect much from simple ideas. Anything too complicated is a sign that a lot of things have to go right in order for it to work (execution risk). Elegance is a heuristic guide to truth.

    What difficult truths does it reveal? Confronting the most challenging parts of the market, the customer persona, and the state of the world is important—at some point contact with reality must be made—better to be considered now than when putting the strategy into practice.

    Is it decisive? If it sounds too wishy-washy it probably is. When will you decide if not now?

    Does it compound in an obvious way? Look for elements of the strategy that build on itself and compound for long periods of time keeping in mind most of the benefits occur at the end. There also should be room to make many bets that have out-sized rewards with small effort.

    Is it long-term and ambitious? Look for meaningful changes in the world if you are wildly successful and what must be true in order for that to happen. Build on that to take it one step further.

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  • Wood Wide Web

    A theory of how plants cooperate comes from research of how fungus connects tree roots together into common mycorrhizal networks (CMN). Scientists have found evidence that important nutrients are shared over CMN and can connect multiple species of plants together.

    Some researches take this theory further. One idea is that a “Mother tree” supports it’s seedling kin by sending resources to them preferentially. Another idea is that plants cooperate, which conflicts with evolutionary biology which centers on competition.

    A recent article in Nature Vol 627 discussed a recent review of the research and calls into question several of these ideas, most notably doubting the explanation of a “mother tree”. Evidence for the wood-wide-web are not as clear as the headlines may make them appear.

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  • Double Buffering

    In a two party system you never want both party A and party B buffering at the same time because it creates artificial delays in the system.

    As an example, let’s take a common setup between two teams and a ticketing workflow.

    The ops team doesn’t want to bother the engineering team so they wait until they think there is a lull before reporting an issue. The eng team triages requests coming in into tickets and then the team prioritizes tickets before assigning and completing them.

    The two teams are both buffering and the time it takes to resolve an issue is now the sum of:

    • The time it takes to notice the issue
    • The time waiting to report it (buffer)
    • The time to make a ticket
    • The time to prioritize a ticket (buffer)
    • The time it takes to resolve the issue

    With both sides buffering, an unpredictable amount of time is introduced into the system causing delays. In this example, it would be much more efficient to report issues immediately.

    Now imagine several teams in a complicated system where tickets are passed and prioritized between them. Each stage is buffered, adding more time to the system, and decreasing throughput.

    (This is also why I don’t think teams should introduce ticketing too early because it’s too easy to double buffer!)

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  • What Founders Should Know About Interest Rates

    Between 2008 and 2021, the market was operating under zero-interest rate policy (ZIRP). That changed in 2022 back to historically normal interest rates (5-6%) set by the Federal Reserve.

    Interest rates drive investment behavior. Low interest rate periods lead to risk taking for long-dated returns (venture capital, moonshots). High interest rates lead to short-term decisions which value revenue over growth.

    For many founders, their entire career happened under ZIRP.

    What adjustments need to be made?

    Founders should probably not model or emulate the success of companies in the last 10 years. Many investments did not appear bad during ZIRP and malinvestment doesn’t become apparent until later. As Warren Buffett said, “Only when the tide goes out do you discover who’s been swimming naked.”

    For example, it’s very unlikely a company like Uber or WeWork would happen in our current economic environment. Blitz-scaling seems less viable when the cost of capital is much higher.

    Getting stuck between environments is existential for a startup. With the changing interest rate came suppresed valuations and founders might not clear the bar for their current stage and be unable to raise more capital. Many down rounds, layoffs, and closures happened as a result.

    Building a large durable business was always important, but it wasn’t always essential. It used to be easier to make a lot of money without building a business.

    Founders need to more tightly control expenses to keep up with expectations. Efficient growth with smaller teams is much more valuable now.

    Of course there are counter examples. AI founders and investors clearly feel AI businesses are different as evidenced by the enormous amount of investments being made in the space.

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  • One Question Survey

    I received a one question feature survey from Screen Studio and I thought it was the best survey I have ever received. I’m guessing the response rate was high because it was simple and relevant their user’s needs (which feature I want them to build).

    Here’s the email:

    To: me Subject: Future Screen Studio Features Body:

    Hello Screen Studio users!

    We would love to know which feature you would like to see next in Screen Studio. We value your time, so this survey has only ONE question.

    Click here to take the survey

    Your input will help us prioritize items on our roadmap.

    Thank you! Screen Studio Team

    The link goes to a Google form with one question (as promised), a list of features with a short description where you can only pick one option.

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  • Learned Helplessness

    When employees lose their sense of agency they start to look outwardly as the source of their problems and solutions.

    It’s easy to accidentally create and environment of learned helplessness. You can force people come to you for an answer rather than try to figure it out on their own first. You can recognize and reward people for status quo preserving behavior rather than solving important problems.

    This is dangerous to a business because it leads to a culture of cynicism, a feeling that nothing will change. Once people start believing that, it becomes true.

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