January 11th, 2014 — business, design, economics, philosophy, trends
Much has been said about entrepreneurs and their oft-stated ambition to “change the world.” Making money is nice, they say, but they really want to “put a dent in the universe,” as Steve Jobs once said.
Some see this as high-minded conceit: Change the world? Through tweets and hashtags? Photo oversharing? A world where everyone is constantly staring at their phones? Is this change actually for the better? All valid questions, to be sure.
I’ve given this a lot of thought over the years, and while “changing the world” might be a bit of an overreach, one thing is true: Entrepreneurs are the people who get to decide which universe everyone else lives in.
And this has some other deeper implications.
The degree to which quantum physics has any impact on our everyday world is hotly debated by philosophers and physicists. But there are some ways we can interpret quantum effects as entrepreneurs that are interesting.
One theory is that there is an infinite number of parallel universes, and the world we live in is just one of many possible worlds. So who decides which universe the rest of us will live in? To be sure, political and military leaders do, but so do writers, musicians, scientists, inventors — and entrepreneurs.
When you think about it, we all have the power to propose something new. These proposals may be modest, or they may be starkly different from what has come before. Our ability to nurture these new proposals and steer our world into the universe where these new ideas take root is really the fundamental act of entrepreneurship.
So in some sense, entrepreneurs are quantum time travelers — able to steer the world into a new dimension that might not otherwise have existed.
Can you imagine the world we’d be living in if Steve Jobs hadn’t willed the iPhone and iPad into our universe before he passed on? It would be substantially different (and Microsoft’s stock price would certainly be higher).
Entrepreneurs aren’t the only people who have this power to shift us into a new universe: anyone can do it. Whether you’re a nonprofit worker, a lab scientist, a musician or just a rank-and-file employee in a company, there is almost always a way to start with what you have, what you know and who you know, and transform it into something that’s fundamentally new.
It is the collective output of those who dare to make these proposals that defines the shape, rhythm, texture and nature of the world we live in. That puts each of us in a position of incredible responsibility and power; for if each of us is capable of steering the planet in a new direction, then why aren’t we doing it?
Entrepreneurship researcher Dr. Saras Sarasvathy coined the idea of “effectuation,” a theory that states that entrepreneurs use a particular kind of logic in advancing their proposals.
Essentially, they gather up everything they are, have and know, and then they place a bet on a next step. That bet will typically have a higher upside than downside, and they can afford to continue if they lose the bet.
Following this continuously almost always means you can advance an agenda and make it grow. And Sarasvathy discovered that this is exactly how expert entrepreneurs operate. They don’t typically have a big master plan. They just execute a series of modest bets, and they’re aided by the people and experience they gather along the way. That’s it.
I find all this incredibly empowering; we have a simple recipe that enables us to continuously and collectively select a better universe than the one we are currently living in. And anyone can do it, just by thinking the way entrepreneurs think.
The money that comes from creating a positive change is a nice side benefit, but it’s hardly the point. Money’s just a tool to enable us to keep selecting a better world.
So can we change the world? Perhaps not. But we can each help to choose a better one. And that’s true power.
This piece originally appeared in the December 2013 issue of SmartCEO Magazine (Baltimore).
January 6th, 2014 — business, economics, software, trends
While I’m deeply involved in entrepreneurship, breathing it day in and day out, and actively follow many discussions around it, I tend to shy away from writing about it most of the time. Why? Because I’m generally too busy doing the entrepreneurship to talk about it. In the end, it’s the facts of our accomplishments that will speak far louder than some hollow words.
But every once in a while it can be helpful to take note of where one stands and what one has learned. This is one of those moments, and I’d like to take a moment to share a few thoughts on what it takes to start a product company. (Most recently, I’ve been hard at work building and launching Mailstrom through my company 410 Labs.)
- Building a sustainable business is the only thing that matters. Entrepreneurs get caught up worrying about all kinds of shiny objects: tech trends, investors, hot markets, compensation schemes, founder personalities, community — you name it. Those things are interesting, but there’s only one thing that matters: building a sustainable business. That means recurring revenue and controllable costs. Watch those two items and then maybe you’ll have something to talk about.
- Know your CAC/CPA and LTV. If you’re building a recurring revenue business, you need to know your customer acquisition cost and lifetime value of the customer. You need to understand this really, really well. To understand customer acquisition cost, you need to know all of the costs that go into acquiring a new, paying customer. To understand lifetime value, you need to understand your customer retention rates really well. If this makes your eyes glaze over, you’re not an entrepreneur.
- The hard part comes after the funding. It may seem like securing funding is a great milestone, and you’ll be tempted to pat yourself on the back. Do that for a minute, but get the hell back to work. You have real work to do now. If you don’t understand how to deploy that funding, and more importantly have a plan for what happens when (not if ) you run out, you’ll be out of options. Be humble. This stuff is hard.
- The Series A crunch is real. The funding environment today is quite brutal and you can expect to spend several months of your time working just on securing a “Series A” size funding round (for the sake of simplicity let’s define that as a post-seed round of $1M or more). Investors are looking for not only traction, but real revenues, social proof, and growth. They want to know why you are the entrepreneurial team that’s going to survive and thrive. There are thousands of other teams out there who won’t, so the odds are against you.
- My dog can raise a seed round in this climate. With the myriad startup funds, accelerators, and crowdfunding available today, it’s easier than ever to raise a seed round. While raising a seed or small angel round is definitely a validation that you may not be insane, it’s no validation that you’re sane either. Startups are hot and these days, everyone’s an “angel investor” (even me.) But just because you raise that seed round doesn’t mean you will have a clear path forward.
- You are responsible for your success — not your investors or advisors. It’s tempting to think that having a rockstar list of investors and advisors is going to catapult you to success. In fact, that’s just not the case. While having “name brand” people on your team can accelerate the growth and create additional options for your successful business, the onus is on you to deliver that successful business. They are not going to make it happen for you. It’s ALL on you.
- Building products is hard and requires tireless analysis and iteration. Building products is ridiculously hard work. Every day you need to devise new experiments and analyze the results. You need to continuously iterate and improve every aspect of your product. You have to make clear headed choices about what is important and what’s not, frequently leaving even good ideas unfinished. In short, if you’re not comfortable with scientific method, numeric and statistical analysis, and ambiguity (yes, ambiguity ALL THE TIME) then you have no business being a founder.
I hear new entrepreneurs talk all the time about how everything is going so great — they had a great pitch meeting or secured a funding commitment, just hired a new person, or setup some shiny new piece of technology. And those things are all great. But remember, until you have a product that is generating real recurring revenue and you fully understand the dynamics, you don’t have a business, you have a conjecture.
And don’t get me wrong, as a fellow entrepreneur, I love a good conjecture. But what is really impressive is when you can start to make make it sing and scale. That requires tons of hard work — hard work that’s not flashy, doesn’t let you write upbeat self-congratulatory status updates, or put out self-serving press releases.
All that matters is your customers, the value you’re creating for them, and the dollars and goodwill that value generates. Let’s talk about that, because the rest is noise.
December 4th, 2013 — baltimore, economics, geography, politics, trends
For Baltimore City to grow and prosper once again, several problems must be solved: jobs, crime, and education are chief among them. But these are mere symptoms of the decades of systematic disinvestment which has characterized much of urban America since 1960.
A return to prosperity is possible, and we’ve seen it happen in other American cities like Washington, DC and New York City. But this didn’t happen by accident. It happened through a combination of strong political leadership and outside and local investment.
It happened by creating a level playing field, and creating a fair, open, and equitable business climate that attracted outside investment. It happened by creating city governments that were open and accountable and in which citizens have some confidence.
In cities like Boston and San Francisco, it happened thanks to the lowering of property tax rates across the board, spurring not just Big Developer projects but investment by individual homeowners.
But in Baltimore, we have two distinct problems. One is qualitative: we can’t be trusted. The other is quantitative: we need to fix property taxes.
Baltimore is just not trustworthy. No one trusts Baltimore City government. Outside investors see the city as a parochial, pay-to-play backwater where insiders call the shots. Commercial developers correctly believe that you need to make significant investment in laying groundwork with specific politicians, developers, and contractors to get a project started here.
Prospective residential buyers perceive Baltimore City government as bloated, inefficient, outdated, resistant to change, and focused more on working out deals with insider developers than on creating a solid residential base. And they have good reason to harbor this perception. While there are many good and dedicated people in city government who care deeply about residents and residential issues, the inefficiency and waste are undeniable. And they are everyday reality for city residents — many of whom share their horror stories with their friends and neighbors.
Many Baltimore City agencies have not been audited in decades. The audit of the Department of Recreation and Parks is now almost one year overdue — primarily because of lack of sufficient financial records. Baltimore City is preparing to return $7M to the federal government because it was unable to account for how Baltimore’s Homeless Services department spent any of those funds.
This is inexcusable. In any other setting, if money goes missing, heads roll. But the machine grinds on here with no firings, no outrage, just talking around the facts and playing down the mistakes. It’s no wonder no one trusts Baltimore City government, for it has proven itself not only untrustworthy but systemically incapable of correcting the problem.
Yes, we need to restructure property taxes. Boston and San Francisco both flourished after making changes to their property taxes. Every city is unique, and their fortunes were rising in many ways regardless. Our star is rising too. We are an incredibly well-located city in the richest state in the union. The future is bright — and we can accelerate our fortune dramatically.
Before we worry over fixing property taxes (a quantitative problem), let’s first prove that we’re capable of earning and actually worthy of people’s trust once again (a qualitative problem).
Let’s show that we care about financial accountability by rooting out waste, fraud, abuse, and inefficiency in every corner of Baltimore government. Let’s show we’re serious by pledging to:
- Perform annual audits of every city agency
- Discipline and fire people who oversee waste and abuse
- Prosecute cases of fraud, graft, and malfeasance
- Level the playing field for outside investors (both commercial and residential)
- Get serious about eliminating inefficiency and waste
- Open as much of the city’s records and data as possible
- Cultivate the perception that Baltimore government is fair, honest, open, and efficient
Mayor Stephanie Rawlings Blake is a smart, capable, and honest leader who has become entrenched in the culture of business-as-usual here in Baltimore — which simply must change. We need to call on the Mayor to lead this charge and demand accountability from all of the departments she oversees.
This isn’t going away. The next step in Baltimore’s return to prominence is to become — and be perceived as — a trusted and honest partner. Sweeping problems under the rug won’t get us there.
Instead, it’s time to start throwing some people — the people who allow waste, fraud, and abuse — under the bus. Comprehensive financial and performance audits of city government are the best way to begin.
November 25th, 2012 — geography, politics, trends, visualization
I wrote recently about population density and its relationship to voting behaviors. In the 2012 election, high population density correlated with votes for Obama, while low density correlated with votes for Romney.
Others observed that red states have more traffic fatalities than blue states. This is fairly easy to explain, as red states are lower density than blue states and people necessarily spend more time in cars than in the cities of blue states.
Some suggested that race is more important and proposed some version of “white people vote for white people, black people vote for black people” as the simpler explanation. But this notion has always struck me as simplistic.
So I decided to dig in to voting behaviors by examining racial composition and the 2012 election results at the county level.
(click to enlarge)
Any significant level of diversity seems to trigger liberal voting behavior. At 9% Hispanic population (or just 3% Asian population), people vote blue. Think about that for a second… if your county has just a 3% Asian population, it most likely voted Democratic.
So Do People Vote by Race?
The data show that when the percentage of black population exceeds 39%, Obama receives the bulk of the votes. This would indicate that yes, black people do often vote for black people, which by itself is not that informative. But Asians and Hispanics also apparently vote for black people as well.
Above about 55% white population, counties overwhelmingly voted for Romney. But up to 45% white population, votes went to Obama.
The real drivers seem to be density and diversity. Density (such as found in cities) corresponds with diversity. Diversity leads to progressive voting behavior.
It’s simplistic to think that it’s all about identity. White voters didn’t all vote for Romney, black voters didn’t all vote for Obama, and Hispanic and Asian candidates overwhelmingly supported Obama. There is no particular reason to think that an Hispanic Republican candidate can win by running on the same old platform.
To succeed, both parties need to run candidates that will appeal to the population in America’s increasingly diverse and dense cities.