Business, Economics & Finance

Jeff Bezos on Day 1 vs Day 2

by Limbic on January 16, 2019

I love this letter from Jeff Bezos and wanted to quote it at length. The full letter is at Recode.

 2016 Letter to Shareholders

April 12, 2017

“Jeff, what does Day 2 look like?”

That’s a question I just got at our most recent all-hands meeting. I’ve been reminding people that it’s Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic.

“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”

To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come.

I’m interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization?

Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps. I don’t know the whole answer, but I may know bits of it. Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making.

True Customer Obsession

There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.

Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples.

Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture best creates the conditions where all of that can happen.

Resist Proxies

As companies get larger and more complex, there’s a tendency to manage to proxies. This comes in many shapes and sizes, and it’s dangerous, subtle, and very Day 2.

A common example is process as proxy. Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right. Gulp. It’s not that rare to hear a junior leader defend a bad outcome with something like, “Well, we followed the process.” A more experienced leader will use it as an opportunity to investigate and improve the process. The process is not the thing. It’s always worth asking, do we own the process or does the process own us? In a Day 2 company, you might find it’s the second.

…Good inventors and designers deeply understand their customer. They spend tremendous energy developing that intuition. They study and understand many anecdotes rather than only the averages you’ll find on surveys. They live with the design.

Embrace External Trends

The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind.

These big trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organizations to embrace. We’re in the middle of an obvious one right now: machine learning and artificial intelligence.

High-Velocity Decision Making

Day 2 companies make high-quality decisions, but they make high-quality decisions slowly. To keep the energy and dynamism of Day 1, you have to somehow make high-quality, high-velocity decisions. Easy for start-ups and very challenging for large organizations. The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business – plus a high-velocity decision making environment is more fun too. We don’t know all the answers, but here are some thoughts.

First, never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a light-weight process. For those, so what if you’re wrong?

Second, most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.

Third, use the phrase “disagree and commit.” This phrase will save a lot of time. If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, “Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?” By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes.

This isn’t one way. If you’re the boss, you should do this too. I disagree and commit all the time.

…Fourth, recognize true misalignment issues early and escalate them immediately. Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision.

“You’ve worn me down” is an awful decision-making process. It’s slow and de-energizing. Go for quick escalation instead – it’s better.

So, have you settled only for decision quality, or are you mindful of decision velocity too? Are the world’s trends tailwinds for you? Are you falling prey to proxies, or do they serve you? And most important of all, are you delighting customers? We can have the scope and capabilities of a large company and the spirit and heart of a small one. But we have to choose it.

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The Russel Conjugation

by Limbic on November 24, 2018

Eric R. Weinstein on The Russel Conjugation:

The basic principle of Russell Conjugation is that the human mind is constantly looking ahead well beyond what is true or false to ask “What is the social consequence of accepting the facts as they are?”  While this line of thinking is obviously self-serving, we are descended from social creatures who could not safely form opinions around pure facts so much as around how those facts are presented to us by those we ape, trust or fear. Thus, as listeners and readers our minds generally mirror the emotional state of the source, while in our roles as authoritative narrators presenting the facts, we maintain an arsenal of language to subliminally instruct our listeners and readers on how we expect them to color their perceptions. Russell discussed this by putting three such presentations of a common underlying fact in the form in which a verb is typically conjugated:

  • I am firm. [Positive empathy]
  • You are obstinate. [Neutral to mildly negative empathy]
  • He/She/It is pigheaded.  [Very negative empathy]

In all three cases, Russell was describing people who did not readily change their minds. Yet by putting these descriptions so close together and without further factual information to separate the individual cases, we were forced to confront the fact that most of us feel positively towards the steadfast narrator and negatively towards the pigheaded fool, all without any basis in fact.

…If we accept that Russell Conjugation keeps us from even seeing that we do not hold consistent opinions on facts, we see a possible new answer to a puzzle that dates from the birth of the web: “If the internet democratized information, why has its social impact been so much slower than many of us expected?” Assuming that our actions are based not on what we know but upon how we feel about what we know, we see that traditional media has all but lost control of gate-keeping our information, but not yet how it is emotively shaded. In fact, it is relatively simple to write a computer program to crawl factually accurate news stories against a look-up table of Russell conjugates to see the exact bias of every supposedly objective story.

Thus the answer to the puzzle of our inaction it seems may be that we built an information superhighway for all, but neglected to build an empathy network alongside it to democratize what we feel.”

https://www.edge.org/response-detail/27181

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Ryan Holiday on High Agency People

by Limbic on August 11, 2018

The mathematician and economist Eric Weinstein, has a category of individual he defines as a “high agency person”.  As Eric would elaborate on Tim Ferriss’ podcast:

“When you’re told that something is impossible, is that the end of the conversation, or does that start a second dialogue in your mind, how to get around whoever it is that’s just told you that you can’t do something? So, how am I going to get past this bouncer who told me that I can’t come into this nightclub? How am I going to start a business when my credit is terrible and I have no experience?”

It was Steve Jobs who once said that, “Life can be much broader once you discover one simple fact: Everything around you that you call life was made up by people that were no smarter than you and you can change it, you can influence it, you can build your own things that other people can use.”

Once you learn this, he said, you’ll never be the same again.

People have spoken of Jobs’ “reality distortion field” and this is really what it was. He believed more in his own agency – his own power to change and affect things – than he did in conventional wisdom or other people”s opinions.

But this idea of agency is a controversial one today. Most of discourse is marked with shibboleths that reveal our doubts about agency. We speak of privileges and systemic biases. We talk of our problems as if they are intractable, overwhelming and malevolently created. Even on the extreme right, there is an obsession with biological differences between sexes and races, about whether one gender or another is naturally better at this or that. Again, these are simply averages that have nothing to do with individuals. Our focus on it all, from either side, is a way of subtly erasing agency. We emphasise where we are disempowered rather than opportunities for empowerment.

The line from Hannibal when he was told that crossing the Alps was impossible: Aut inveniam viam aut faciam. I shall either find a way or make one.

This is what high agency individuals do. This is how they respond to bad odds, to big doubts, or frustrating situations.

https://journal.thriveglobal.com/are-you-a-high-agency-person-how-to-respond-when-you-hear-no-db3cafff6b1d

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Learn, Build, Share, Repeat

by Limbic on August 11, 2018

“In my office, on a wall converted to a massive whiteboard, I’ve written “Learn, Build, Share, Repeat” in large letters. I think of this as both a mission and as an operating manual.

Learn” means always keep pushing to understand what you don’t already know, because as Isaac Asimov wrote, past glories are poor feeding. The moment you feel like you’ve won, or that you’ve got it all figured out, you are dead.

Build” is a forcing function. Words like “write,” “create,” or “teach” work here as well. If you force yourself to transform what you’ve learned into something that is your own, then you’ve really learned. You’ve also made something that can serve others.

Share” means connection. Sharing openly and transparently creates a feedback loop which accelerates learning and improves whatever it is you are building. It also creates a community of like-minded people with similar values and curiosities.

Repeat” emphasizes that this is a game which is never complete. This isn’t about accomplishments, goals, or endpoints. It is a romance with the process itself.

Patrick O’Shaughnessy in his “Investor Field Guide” newsletter

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Blockchain property deeds and wealth liberation

by Limbic on February 4, 2018

In his under-appreciated classic “The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else“, Peruvian economist Hernando de Soto argues that the legal structure of property and property rights is a major determinant of the economic success of a country. “Every developed nation in the world at one time went through the transformation from predominantly informal, extralegal ownership to a formal, unified legal property system [and this] allowed people everywhere to leverage property into wealth.”

Trillions of dollars of economic value are trapped in informal assets that cannot, for example, be leveraged to secure loans or otherwise bootstrap wealth creation.

Imagine if you had an inexpensive, fraud-proof way to register and regulate these assets? Could this finally be the breakthrough use of blockchain?

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Moral Foundations Theory

by Limbic on December 29, 2017

I was just reminded of Jonathan Haidt’s Moral Foundations Theory, something I first encountered in The Righteous Mind.

Moral Foundations Theory was created by a group of social and cultural psychologists to understand why morality varies so much across cultures yet still shows so many similarities and recurrent themes. In brief, the theory proposes that several innate and universally available psychological systems are the foundations of “intuitive ethics.” Each culture then constructs virtues, narratives, and institutions on top of these foundations, thereby creating the unique moralities we see around the world, and conflicting within nations too. The five foundations for which we think the evidence is best are:

1) Care/harm: This foundation is related to our long evolution as mammals with attachment systems and an ability to feel (and dislike) the pain of others. It underlies virtues of kindness, gentleness, and nurturance.

2) Fairness/cheating: This foundation is related to the evolutionary process of reciprocal altruism. It generates ideas of justice, rights, and autonomy. [Note: In our original conception, Fairness included concerns about equality, which are more strongly endorsed by political liberals. However, as we reformulated the theory in 2011 based on new data, we emphasize proportionality, which is endorsed by everyone, but is more strongly endorsed by conservatives]

3) Loyalty/betrayal: This foundation is related to our long history as tribal creatures able to form shifting coalitions. It underlies virtues of patriotism and self-sacrifice for the group. It is active anytime people feel that it’s “one for all, and all for one.”

4) Authority/subversion: This foundation was shaped by our long primate history of hierarchical social interactions. It underlies virtues of leadership and followership, including deference to legitimate authority and respect for traditions.

5) Sanctity/degradation: This foundation was shaped by the psychology of disgust and contamination. It underlies religious notions of striving to live in an elevated, less carnal, more noble way. It underlies the widespread idea that the body is a temple which can be desecrated by immoral activities and contaminants (an idea not unique to religious traditions).

We think there are several other very good candidates for “foundationhood,” especially:

6) Liberty/oppression: This foundation is about the feelings of reactance and resentment people feel toward those who dominate them and restrict their liberty. Its intuitions are often in tension with those of the authority foundation. The hatred of bullies and dominators motivates people to come together, in solidarity, to oppose or take down the oppressor. We report some preliminary work on this potential foundation in this paper, on the psychology of libertarianism and liberty.

See also https://en.wikipedia.org/wiki/Moral_foundations_theory

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From http://deloitte.wsj.com/cmo/2017/12/07/radically-open-tom-friedman-on-the-future-of-work:

I have five pieces of advice for my daughters. My first rule is: Always think like an immigrant, because we’re all new immigrants to the age of accelerations.

Second, always think like an artisan. Always do your job in a way that you bring so much empathy to it, so much unique, personal value-add that it cannot be automated, digitized, or outsourced, and you want to carve your initials into it at the end of the day.

Third, always be in beta. Always think of yourself as if you need to be re-engineered, retooled, relearned, and retaught constantly. Never think of yourself as finished—otherwise, you really will be finished.

Fourth, always remember that PQ (passion quotient) plus CQ (curiosity quotient) is greater than IQ (intelligence quotient). Give me a young person with a high PQ and a high CQ, and I will take that person over a kid with a high IQ seven days a week.

And last, whatever you do, whether you’re in the public sector or the private sector, whether you’re on the front lines or a manager, always think entrepreneurially. Always think, “Where can I fork off and start a new company over here, a new business over there?” Because a huge manufacturing company is not coming to your town with a 25,000-person factory. That factory is now 2,500 robots and 500 people. So we need three people starting jobs for six; six people starting jobs for 12; 12 people starting jobs for 20. That’s how we’re going to get all those jobs. We need everyone thinking entrepreneurially.

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Warnings: Return of The Long Emergency

by Limbic on June 25, 2017

warnings

James Kunstler’s 2005 book “The Long Emergency” made a huge impression on me when I read it in 2006. In fact, it was one of the reasons I found myself pursuing a career in cloud computing in 2007. Partly thanks to this book and a former boss from British Telekom, my business partner and I were convinced that peak oil and climate change would create a huge demand for energy efficient, carbon neutral compute resources, and cloud computing was the future.

The Long Emergency was primarily concerned with America’s oil addiction and ill-preparedness for what looked at the time to be the coming energy (oil) shock, but it also examined other threats to civilization:

  • Climate Change
  • Infectious diseases (microbial resistance)
  • Water scarcity
  • Habitat destruction
  • Economic instability
  • Political extremism
  • War

Every one of those is still an enormous threat.

A new book by national security veteran Richard Clarke and R.P Eddy called “Warnings: Finding Cassandras to Stop Catastrophes” updates The Long Emergency with some new features of the threat landscape.

The book starts off by asking how we can reliably spot Cassandras – people who correctly predict disasters but who were not heeded – so that we can prevent future disasters.

They examine recent disasters – like 9/11, the Challenger space shuttle disaster and Hurricane Katrina, then examine the people who predicted these events, looking or patterns. They come up with some stable characteristics that allow us to score people on their Cassandra Quotient.

The second part of the book looks at current threats, and their doomsayers, to see if any have a high Cassandra Quotient and thus should be heeded.

The threats are:

  • Artificial Intelligence
  • Pandemic Disease
  • Sea-Level Rise
  • Nuclear Ice Age
  • The Internet of Everything
  • Meteor Strike
  • Gene Editing (CRISPR)

The bad news is that they all have high Cassandra Quotients and the scenarios in the book are plausible, science-backed and terrifying.

Artificial Intelligence as a threat hs been on my radar for a year or so thanks to Elon Musk, Bill Gates, Stephen Hawkins and Sam Harris warning of the risks of intelligent machines that can design and build ever moire intelligent machines.

Pandemic Disease has worried me since reading The Long Emergency, but I thought there had been better global awareness, especially since the world took the 2011 flu scare seriously, and Ebola and Zika.  Unfortunately, we are – as a planet – woefully ill-prepared for a global pandemic. A high fatality airborne flu could kill billions.

Sea-Level Rise genuinely surprised me, especially since the Cassandra in question – James Hansen – predicted the current melting and ice shelf break-offs we see in the Arctic today…30 years ago. I even googled how high my home is above sea level after being convinced we could see 7m rises within my lifetime.

As a child of the 70’s and 80’s, nuclear horror is deeply embedded in my psyche. But I thought the risk of a Nuclear Ice Age was a pretty low risk. It turns out you do not need a large-scale nuclear exchange between the US and Russia to cause global climate chaos. A limited exchange between India and Pakistan could be sufficient to kill billions though global starvation. I was also surprised to learn that Pakistan moves its nuclear arsenal around to thwart attacks my Indian commandos in the event of a war. This raises the risk of terrorists intercepting on of these weapons on the move, and using it for nuclear terrorism.

The book does a good job of examining the incredible fragility of out interconnected IT systems in the chapter on The Internet of Everything. As an IT professional I know the reality of how fragile these systems are and we are right to be scared of dire consequences of a serious cyber war.

I do not really think about Meteor Strikes, as there is little we can do about them and they are now part of popular culture.

The final worry in the book is about Gene Editing, especially CRISPR. CRISP has absolutely marvelous potential, but it also has many people worried. Daniel Saurez even has a new book on the topic called “Change Agent“. CRISPR is could be the mother of all second order effects. Take “off target events” for example:

Another serious concern arises from what are known as off-target events. After its discovery, researchers found that the CRISPR/Cas9 complex sometimes bonds to and cuts the target DNA at unintended locations. Particularly when dealing with human cells, they found that sometimes as many as five nucleotides were mismatched between the guide and target DNA. What might the consequences be if a DNA segment is improperly cut and put back together? What sorts of effects could this cause, both immediately and further down the road for heritable traits? Experimenting with plants or mouse bacteria in a controlled laboratory environment is one thing, but what is the acceptable level of error if and when researchers begin experimenting with a tool that cuts up a person’s DNA? If an error is in fact made, is there any potential way to fix the mistake?

So we have planet-scale problems, ingenious solutions. Instead of feeling paralysis or resignation we should accept Peter Thiel’s challenge to find the big breakthroughs, 0 to 1 intensive progress:

Progress comes in two flavors: horizontal/extensive and vertical/intensive. Horizontal or extensive progress basically means copying things that work. In one word, it means simply “globalization.” Consider what China will be like in 50 years. The safe bet is it will be a lot like the United States is now. Cities will be copied, cars will be copied, and rail systems will be copied. Maybe some steps will be skipped. But it’s copying all the same.

Vertical or intensive progress, by contrast, means doing new things. The single word for this is “technology.” Intensive progress involves going from 0 to 1 (not simply the 1 to n of globalization). We see much of our vertical progress come from places like California, and specifically Silicon Valley. But there is every reason to question whether we have enough of it. Indeed, most people seem to focus almost entirely on globalization instead of technology; speaking of “developed” versus “developing nations” is implicitly bearish about technology because it implies some convergence to the “developed” status quo. As a society, we seem to believe in a sort of technological end of history, almost by default.

It’s worth noting that globalization and technology do have some interplay; we shouldn’t falsely dichotomize them. Consider resource constraints as a 1 to n subproblem. Maybe not everyone can have a car because that would be environmentally catastrophic. If 1 to n is so blocked, only 0 to 1 solutions can help. Technological development is thus crucially important, even if all we really care about is globalization.

…Maybe we focus so much on going from 1 to because that’s easier to do. There’s little doubt that going from 0 to 1 is qualitatively different, and almost always harder, than copying something times. And even trying to achieve vertical, 0 to 1 progress presents the challenge of exceptionalism; any founder or inventor doing something new must wonder: am I sane? Or am I crazy?

From Blake Masters notes

 

 

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LARPing

by Limbic on June 25, 2017

“For employees (campaign staff), there is an opportunity for live-action roleplaying (LARPing) disruption instead of actually taking the existential risks of disrupting. LARPing disruption is fun..Don’t mistake LARPing disruption for the real thing.Venkatesh Rao on “Software Adoption Bullshit” via Ribbonfarm newsletter

“The High Modernists claimed to be about figuring out the most efficient and high-tech way of doing things, but most of them knew little relevant math or science and were basically just LARPing being rational by placing things in evenly-spaced rectangular grids.” Review of “Seeing Like A State” by Scott Alexander

I first internalized the meaning of this phrase when I saw it in the Ribbonfarm newsletter above.

LARPing suddenly crystallized and gave a name to a phenomenon I have witnessed my whole life: people playing roles as though they were in a solipsistic theater, rather than living their roles.

LARPing is common amongst the wealthy, where dilettantism is endemic. I know of entire companies that exist merely to provide a realistic LARPing set for someone to play CEO / Founder, with sometimes hundreds of employees cast as actors in their personal drama.

It reminds me of the old vituperative “poseur“, but LARPing is more collaborative. You need a cast to play along. It is group or collective posing.

 

 

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Amazon’s Leadership Principles

by Limbic on April 16, 2017

Jeff Bezos recent shareholder newsletter has received much praise in the tech press. Inc drew special attention to his principle of “Disagree and commit.”

When I read the article, this principle felt familiar to me, then I remembered where I had seen it before. It is the 13th Amazon Leadership Principle:

“Have Backbone; Disagree and Commit

Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.”

The rest of the principles are also well worth remembering.

See also:

Communication is Failure

 

 

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