Too Much Talent

Thursday, March 26th, 2015

Researchers looking at basketball, soccer, and baseball found that more talent can hurt the team:

In each sport, they calculated both the percentage of top talent on each team and the teams’ success over several years. For example, they identified top NBA talent using each player’s Estimated Wins Added (EWA), a statistic commonly employed to capture a player’s overall contribution to his team, along with selection for the All-star tournament. Once the researchers determined who the elite players were, they calculated top-talent percentage at the team level by dividing the number of star players on the team by the total number of players on that team. Finally, team performance was measured by the team’s win-loss record over 10 years.

For both basketball and soccer, they found that top talent did in fact predict team success, but only up to a point. Furthermore, there was not simply a point of diminishing returns with respect to top talent, there was in fact a cost. Basketball and soccer teams with the greatest proportion of elite athletes performed worse than those with more moderate proportions of top level players.

Why is too much talent a bad thing? Think teamwork. In many endeavors, success requires collaborative, cooperative work towards a goal that is beyond the capability of any one individual. Even Emmitt Smith needed effective blocking from the Cowboy offensive line to gain yardage. When a team roster is flooded with individual talent, pursuit of personal star status may prevent the attainment of team goals. The basketball player chasing a point record, for example, may cost the team by taking risky shots instead of passing to a teammate who is open and ready to score.

Two related findings by Swaab and colleagues indicate that there is in fact tradeoff between top talent and teamwork. First, Swaab and colleagues found that the percentage of top talent on a team affects intrateam coordination. For the basketball study, teams with the highest levels of top performers had fewer assists and defensive rebounds, and lower field-goal percentages. These failures in strategic, collaborative play undermined the team’s effectiveness. The second revealing finding is that extreme levels of top talent did not have the same negative effect in baseball, which experts have argued involves much less interdependent play. In the baseball study, increasing numbers of stars on a team never hindered overall performance. Together these findings suggest that high levels of top talent will be harmful in arenas that require coordinated, strategic efforts, as the quest for the spotlight may trump the teamwork needed to get the job done.

This also applies in business, they suggest.

One Woman’s Drive to Revolutionize Medical Testing

Saturday, March 21st, 2015

Elizabeth Holmes, the 30-year-old CEO of Theranos, is a driven young woman:

Her home is a two-bedroom condo in Palo Alto, and she lives an austere life. Although she can quote Jane Austen by heart, she no longer devotes time to novels or friends, doesn’t date, doesn’t own a television, and hasn’t taken a vacation in ten years. Her refrigerator is all but empty, as she eats most of her meals at the office. She is a vegan, and several times a day she drinks a pulverized concoction of cucumber, parsley, kale, spinach, romaine lettuce, and celery.

Growing up, Holmes was in constant motion. Her father, Chris, worked for government agencies, including, for much of his career, the U.S. Agency for International Development and the State Department, often travelling abroad, overseeing relief and disease-eradication efforts in developing nations; today, he is the global water coördinator for U.S.A.I.D. Her mother, Noel, worked for nearly a decade as a foreign-policy and defense aide on Capitol Hill, until Elizabeth and her brother Christian, two years younger, were born. The family moved several times, which meant there was little opportunity to develop lasting friendships. Holmes describes herself as a happy loner, collecting insects and fishing with her father.

“I was probably, definitely, not normal,” she said. “I was reading ‘Moby-Dick’ from start to finish when I was about nine. I read a ton of books. I still have a notebook with a complete design for a time machine that I designed when I must have been, like, seven. The wonderful thing about the way I was raised is that no one ever told me that I couldn’t do those things.”

Chris Holmes’s great-grandfather Christian Holmes emigrated from Denmark, studied engineering, settled in Cincinnati, and became a physician. When Elizabeth was eight, she was given a tour of the local hospital where he worked and which was named in his honor. He had married the daughter of a patient, Charles Fleischmann, who pioneered packaged yeast and built a baking empire around it. (A nephew, Raoul Fleischmann, started this magazine in 1925, with Harold Ross.) Not all of Fleischmann’s children shared his entrepreneurial drive, and this was a common subject of conversation in the Holmes household. “I grew up with those stories about greatness,” she said, “and about people deciding not to spend their lives on something purposeful, and what happens to them when they make that choice—the impact on character and quality of life.”

In 1993, when Elizabeth was nine, her father took a job in Houston, as executive assistant to the C.E.O. of Tenneco, which was then a manufacturing and energy conglomerate. She knew that her father felt guilty for uprooting the family, so she wrote a letter to console him: “What I really want out of life is to discover something new, something that mankind didn’t know was possible to do.” She reassured him that Texas suited her, because “it’s big on science.”

For several years in the nineteen-eighties, Chris Holmes spent two weeks a month in China, helping American companies invest in large-scale development projects. Soon after the family moved to Houston, Elizabeth started studying Mandarin; by the summer following her sophomore year of high school, she was intent on taking summer classes in Mandarin at Stanford. She repeatedly called the admissions office for information, only to be told, each time, that the program did not enroll high-school students. One day, her father recalls, the head of the program became so annoyed that he grabbed the phone from the employee who was talking to Holmes. “You’ve been calling constantly,” he told her. “I just can’t take it anymore. I’m going to give you the test right now!” He asked questions in Mandarin; she answered fluently, and he accepted her on the spot. She completed three years of college Mandarin while still in high school.

In 2001, in her senior year, Holmes applied to Stanford, was accepted, and then was named a President’s Scholar, which came with a small stipend to select her own research project. Her parents sent her off with a copy of Marcus Aurelius’ “Meditations,” her father said, “to convey to her: Live a purposeful life.” Holmes elected to study chemical engineering. She was drawn to the work of Channing Robertson, the chemical engineer and, at the time, a dean at the engineering school. Robertson is seventy-one and fit, with thinning hair and a relaxed smile; I visited him in his home on campus. Holmes’s first class with him was a seminar on devices designed to control the release of drugs into the human body. One day, in her freshman year, Robertson said, she came to his office to ask if she could work in his lab with the Ph.D. students. He hesitated, but she persisted and he gave in. At the end of the spring term, she told him that she planned to spend the summer working at the Genome Institute, in Singapore. He warned her that prospective students had to speak Mandarin.

“I’m fluent in Mandarin,” she said.

“I’m thinking, What’s next? She’s already coming into the research group meetings at the end of her freshman year with my Ph.D. students. I find myself listening to her more than to them about the next experiments to be done and the progress that’s been made. I realized she’s different.”

That summer, at the Genome Institute, Holmes worked on testing for severe acute respiratory syndrome, or SARS, an often fatal virus that had broken out in China. Testing was done in the traditional manner, by collecting blood samples with syringes and mucus with nasal swabs. These methods could detect who was infected, but a separate system was needed to dispense medication, and still another system to monitor results. Holmes questioned the approach. At Stanford, she had been exploring what has become known as lab-on-a-chip technology, which allows multiple measurements to be taken from tiny amounts of liquid on a single microchip. “With the type of engineering work and systems I had been focussing on at Stanford, it was quite clear that there were much better ways to do it,” she said.

Before returning to Stanford, Holmes conceived of a way to perform multiple tests at once, using the same drop of blood, and to wirelessly deliver the resulting information to a doctor. That summer, she filed a patent for the idea; it was ultimately approved, in November of 2007. Once back on campus, she went to see Robertson in his office and announced that she wanted to start a company. Robertson was impressed by the idea but urged her to at least consider finishing her degree first.

“Why?” she responded. “I know what I want to do.”

Holmes was consumed by the idea of developing a company. “I got to a point where I was enrolled in all these courses, and my parents were spending all this money, and I wasn’t going to any of them,” she said. “I was doing this full time.” Her parents allowed her to take the money they had set aside for tuition and use it to seed her company. In March, 2004, she dropped out of Stanford; one month later, she incorporated Theranos (the name is a combination of “therapy” and “diagnosis”). She persuaded Robertson to spend one day a week as a technical adviser to the company and to serve as her first board member. Eventually, he retired from his tenured position, and began working at Theranos full time.

Robertson introduced Holmes to several venture capitalists. She insisted that they abide by her terms, which included an understanding that she would retain control and pour the profits back into the company. By December of 2004, she had raised six million dollars from an assortment of investors. As she and the chemists and engineers dug deeper, she became convinced that they could accomplish five objectives: extract blood without syringes, make a diagnosis from a few drops of blood, automate the tests to minimize human error, do the test and get the results more quickly, and do this more economically.

A key to the company’s success was the hiring of Sunny Balwani, a software engineer, now forty-nine, whom Holmes had met in Beijing the summer after her senior year of high school. At the time, he was getting an M.B.A. from Berkeley. He had worked at Lotus and at Microsoft and been a successful entrepreneur, and in 2004 he began graduate studies in computer science at Stanford. He and Holmes spoke often, and they shared a belief that software, not just chemistry or biology, mattered. If Theranos was going to be able to analyze a few drops of blood, engineers would have to develop the software to do it. In 2009, Balwani joined as C.O.O. and president. “Our platform is about automation,” he says. “We have automated the process from start to finish.”

Theranos has managed to keep its technology a secret for much of its decade of existence in part because it occupies a regulatory gray area. Most other diagnostic labs, including Quest and Laboratory Corporation of America, perform blood tests on equipment that they buy from outside manufacturers, like Siemens and Roche Diagnostics. Before those devices can be sold, they must be approved by the F.D.A., a process that makes their tests’ performances more visible to the public. But, since Theranos manufactures its own testing equipment, the F.D.A. doesn’t need to approve it, as long as the company doesn’t sell it or move it out of its labs.

The Retro Electric Moped That’s Taking Over Europe

Friday, March 20th, 2015

The Motorman electric moped offers simplicity in a retro design:

The Motorman may fit the legal definition of a moped, but it has no pedals. The drivetrain is fully electric. No human power required. Tech-wise, though, this is no Tesla. The 2kw engine won’t allow you to do burnouts or evade the polizia. There’s no iPhone charger, blind spot detection sensor, or autonomous driving mode. Not even a lousy cup holder for your macchiato.

What you will get, though, is brilliant industrial design. While other moped and scooter companies are striving to make all their models look like Tron light cycles, Mr. Meijs has gone full retro. The Motorman — with its balloon tires, low-slung gas tank, oversized headlight, and spring-mounted leather seat — looks like a cross between a Schwinn cruiser and a 1915 Harley-Davidson.

Motorman Electric Moped in Red

The ride isn’t bad either. At just 99 pounds (less than half the weight of a typical moped), the Motorman is easy to balance and maneuver through congested streets. “If you can ride a bike,” says Meijs. “You can ride a Motorman.”

[...]

That “fuel tank” holds a lithium polymer battery, the ideal choice for light EVs because of its high power density rating. That translates to some respectable specs. Range: 43 miles. Top speed: 28 mph. Charging time: 6 hours. Not road trip numbers, but ideal for office drones who like the idea of lowering their carbon footprint without breaking a sweat. The Motorman is also maintenance-free and economical to operate: less than two cents per mile. That may help soften the blow of the sticker price: $5,158 for the base model (available in Jet Black or Ruby Red). This being Europe, tack on another 21 percent for the V.A.T. Options, like Bauhaus paint jobs, leather saddlebags and custom logos, will pad the bill further. Which only proves that not every Dutch treat is cheap.

My first instinct is to drop the “fuel tank” to the lowest point on the frame.

Workforce Science

Friday, March 13th, 2015

Michael Housman, chief analytics officer for Evolv, discusses workforce science with Stephen Dubner (Think Like a Freak):

We looked specifically at pay in a research study that we just finished. We found, there is no question that pay enables people to stay longer, and they perform better. But the magnitude of the effects were actually not as big as we had expected. So for every 10 percent increase in pay, there’s a 5 percent reduction in quitting behavior. So it’s a less than one-for-one offset. And what’s more, is that when someone receives a raise, there are kind of these warm fuzzies that are associated with receiving the raise. There’s this halo effect. We found that that effect lasts longer than a week, but not as long as a month.

[...]

Your supervisor alone accounts for about as much variance in terms of longevity in these roles as everything else combined. The effects are staggering. Anecdotally, this seems to resonate with people because everyone has had a bad boss that made them leave the job. And we’ve really made understanding that supervisor/employee relationship a priority of ours because I came into this thinking that it was all about raw talent. You get the right person in the job and everything will work itself out, and that’s really the key decision. Our research has actually show that that’s actually a relatively small piece of the pie, something in the range of 10 to 15 percent.

[...]

What we found was that people who said they were honest actually were 33 percent more likely to be terminated for policy violations. So, learned our lesson, which is you don’t ask people if they’re honest because you tend not to get an honest answer.

[...]

We came up with a very creative way of measuring what we think is honesty and integrity, which is that we asked them upfront, early in the assessment, how are your computer skills, what’s your typing speed, do you feel comfortable with the keyboard and mouse, toggling between the screen and so on and so forth. And then guess what? About five or six screens later we tested them. We asked them what’s the shortcut for cutting and pasting text using a word processor. We actually measured their typing speed and accuracy. And what we found when we compared their self-assessed responses to their actual technical proficiency is that there were two groups of people that came out. One group was relatively honest. They were what they said they were in terms of the technical skills. And the other group we will call a little bit creative in that they claimed to be exceptional with the keyboard and mouse, but they couldn’t type more than 10 words a minute.

Evolv found that the honest employees tested better on just about every performance metric — except sales.

At Their Meets, the Audience Flips, Too

Wednesday, March 11th, 2015

Utah’s women’s gymnastics team has the highest average attendance in women’s college sports — and in pro sports, too:

The gymnastics team, ranked fourth this season, is averaging 14,682 through four meets. That is on pace to break the team record of 14,376 last year, when only 18 Division I men’s basketball teams regularly played in front of bigger crowds. (Utah was not one of them, and will not be again this year, despite a resurgence to national title contender.)

Plenty of other fans watch from home. Women’s gymnastics meets are, on average, the third most-viewed events on the Pac-12 Network, behind football and men’s basketball.

“And it’s not a distant third, either,” the network vice president Kirk Reynolds said. “It’s right in there with men’s basketball.”

[...]

And if Utah can sell 7,500 season tickets (ranging from $30 to $120), attract 15,000 fans to a two-hour meet, and essentially break even financially, why don’t more universities do the same thing?

Utah, like many other universities, was looking to fill a quota, not seats, in 1975, when it hired a former college diver to coach its women’s gymnastics team:

Marsden, who was paid $1,500, posted fliers around campus looking for would-be gymnasts. At the end of the first season, in 1976, Utah finished 10th in the country. Marsden saw opportunity.

[...]

“No one is going to care as much about your program as you are,” Greg Marsden said. “You can’t abdicate that responsibility.”

Which is why Marsden, now 64 and in his 40th season, still designs the team leotards, down to the placement of every sparkle. And why he knows where every outlet is in the team’s 18,000-square-foot practice facility, and the reason it was placed there.

And why, in the middle of Saturday’s meet with No. 16 Stanford, Marsden walked over to the Utah marketing director Jennifer White and whispered in her ear. He was annoyed that a scoreboard was not working properly. Even while coaching, he was concerned with marketing.

“It was his formula that turned this into an attendance dynasty,” said White, who is in her sixth year.

Marsden’s mantra is unchanged: Create a fast-moving event with no lulls, keep the audience informed of the score and let fans know that their enthusiasm creates an advantage. (Utah’s all-time home record is 431-26.)

The marketing model mirrors the N.B.A.’s. Utah’s gymnasts — nicknamed the Red Rocks, from a marketing campaign 20 years ago that stuck — are introduced with pyrotechnics, dramatic lighting and bass-heavy video production. (Among the introductory boasts: the nation’s leading grade-point average.)

Performances, done one at a time so the crowd’s attention is focused, move from one to another with little lag time. The warm-up minutes between the four events (vault, bars, beam and floor) are filled with contests on the floor and attention-grabbers on the video board. There are cheerleaders, a pep band and a student section.

[...]

“With how dialed in they are, and how structured their meets are, it’s almost like they were waiting for television to arrive,” said Will O’Toole, coordinating producer for the Pac-12 Network. “And that scene, with 15,000 people, the pyrotechnics, the video — I thought I was at a Knicks game.”

Marsden’s quest to streamline the meets has not always endeared him to other coaches. Utah is the only program to reach the national championships every year of its existence, but it frustrates Marsden that the finals are called the Super Six. He has argued that four teams, rotating through four events, would be much easier to follow for fans and better for television. The national championships will be shown live only on ESPN3, the network’s online platform, and will attract a far smaller audience than the likes of Utah see each week.

And why, Marsden wondered, do six gymnasts perform each event, if only the top five scores count? Make every routine matter, he said.

“A lot of sports have done what they can to make their events more friendly,” he said, citing basketball’s adoption of shot clocks and 3-point lines as an example. “Ours has not done that.”

[...]

Utah gymnastics, with a $750,000 budget, breaks even, the university said, thanks mostly to arena revenues from its meets and booster contributions that cover the 12 scholarships.

Steve Sailer notes that the biggest draw in women’s college sports is one where the girls don’t do what they boys do.

Management Theories of Roman Slave-Owners

Sunday, March 8th, 2015

Most Romans thought cruelty to slaves was shocking, Jerry Toner says:

They understood that slaves could not simply be terrified into being good at their job. Instead, the Romans used various techniques to encourage their slaves to work productively and willingly, from bonuses and long-term inducements, to acts designed to boost morale and generate team spirit. All of these say more than we might imagine about how employers manage people successfully in the modern world.

Above all, the story shows how comfortable the Romans were with leadership and command. They believed that there is a world of difference between having the organisational skills to run a unit and actually being able to lead it. By contrast modern managers are often uncomfortable with being promoted above their staff. I worked in a large corporation for a decade and I had numerous bosses who tried to be my friend. Raising yourself over others sits uneasily with democratic ideals of equality. Today’s managers have to pretend to be one of the team.

The Romans would have scoffed at such weakness. Did Julius Caesar take his legions off-site to get them to buy-in to his invasion of Gaul? Successful leaders had to stand out from the crowd and use their superior skills to inspire, cajole and sometimes force people to do what was necessary. Perhaps we would do well to learn from their blunt honesty.

Fraud Comes to Apple Pay

Thursday, March 5th, 2015

Apple has gone to great lengths to secure Apple Pay:

It uses a “secure element” within the latest iPhones to store the encrypted payment data separate from the rest of phone. It uses a fingerprint reader to assure that the phone’s owner is making the purchase and issues a one-time code so merchants don’t see customers’ credit card information.

However, the weakness identified by Abraham occurs at an earlier stage, when a user is adding a credit card to Apple Pay. When a user adds a card, Apple says it sends information such as the type of phone, the last four digits of the user’s phone number and the user’s general location to the issuing bank, which decides whether to provision the card for Apple Pay.

Banks can ask for additional information if its information doesn’t match Apple’s. In those cases, a bank may ask a user to call in to answer additional security questions. Abraham says that some banks made it too easy for such customers to be approved, because they wanted to reduce the friction of adding their cards to Apple Pay. For example, he said some banks asked for the last four digits of a customer’s Social Security number, which is easy to answer if the fraudster knows that person’s credit history or personal information.

Warby Parker Sees the Future of Retail

Thursday, March 5th, 2015

Fast Company praises hyper-hipster eyewear-retailer Warby Parker for its fanatical focus on execution and brand:

By designing and manufacturing their own frames and selling directly to consumers over the Internet, they’re able to charge as little as $95 per frame, a fraction of what a similarly nice pair of glasses would cost at a typical optical shop. That price also includes prescription lenses, shipping, and a donation to a not-for-profit such as VisionSpring, where Blumenthal previously served as director.

[...]

Last July, just four years after their launch, Blumenthal and Gilboa announced that they had distributed their millionth pair of glasses, up from 500,000 just a year before. According to a person familiar with the company’s finances, annual revenue is “well over” $100 million. The fashion press has been impressed and so have investors, who have put in more than $115 million to date, which Blumenthal and Gilboa are investing in an expanded product line that includes progressive lenses and, of course, a fast-growing retail presence.

[...]

“A lot of subtleties go into a brand,” says Sasha Tulchin, the company’s director of creative services, who came to Warby by way of Tory Burch and Cole Haan. Tulchin invokes the dinner-guest metaphor as well, imagining the Warby Parker brand as “quick-witted, but wears her intelligence lightly. Looks sharp without planning to. Takes a dare. Always offers to help with the dishes.” Tulchin goes on to cover Warby Parker’s preferences in graphic design, color palette, and serif and sans serif fonts (Utopia and Proxima Nova). “The Warby Parker voice is witty, intelligent, informative, playful, delightful. We are not trite, pretentious, sarcastic, long-winded,” she says. “Every time we create a piece of copy, every time we create something new for marketing — every time it’s either in our office or externally projected — we do it with these filters.”

This carefully cultivated persona is at least in part Blumenthal himself, who still reads (and rereads) every written word that his company puts out into the world. “This is five years in, a 500-person company, and the CEO is approving every marketing message the company puts out,” Lerer says with awe. “Every CEO does that in the early days. You do it with 10 people, and if you’re good you do it with 25 people. You don’t do that when you have 500 people. Neil still does it.”

Behold our new aristocracy:

Blumenthal has long been the company’s public face, but it was Gilboa who first landed upon the idea that became Warby Parker. Born in Sweden to a pair of doctors, Gilboa is even-tempered, quiet, and analytical, speaking with an uninflected precision that can seem at once removed and intense. As a teenager growing up in San Diego, Gilboa tells me, he’d often accompany his father to the hospital, hoping to learn as much as he could about various medical specialties. “I was 100% convinced I was going to be a doctor, and I was just trying to decide which kind of doctor,” he recalls.

While he was a premed student at the University of California, Berkeley, Gilboa learned about HMOs, which convinced him that he might want to look for other options. He wound up in business, first at the consultancy Bain & Company and then the boutique investment bank Allen & Co., before returning to school to enroll simultaneously at Wharton and in a biomedical engineering master’s degree program at the University of Pennsylvania’s engineering school. (“He’s the smart one,” Blumenthal says, chuckling, as Gilboa tells his story.)

A few weeks before starting school, Gilboa left a pair of $700 Prada frames in an airplane seat-back pocket. “I’d just bought the iPhone for $200 and it did all these magical things that people wouldn’t have believed even a few years earlier,” he recalls. “Meanwhile, a pair of glasses: The technology has been around for 800 years. It didn’t make sense that I was going to have to pay that much for a new pair of glasses.” He complained about this to Andy Hunt, his study-group partner, who was, like Gilboa, a former finance guy and a glasses wearer. “We started talking about why glasses were so expensive,” Gilboa continues. “Then we learned a little bit about Luxottica.”

Founded in 1961, the Milan-based company takes in about $9 billion a year, running the eyewear business for most major fashion houses, including Armani, Chanel, Prada, and Ralph Lauren. Luxottica markets its own frames too: Oakley, Oliver Peoples, Persol, and Ray-Ban are all Luxottica brands. Consumers find these frames for sale at LensCrafters, Pearle Vision, and Sunglass Hut, all of which are (you guessed it) Luxottica subsidiaries. Luxottica also happens to own one of the top vision-insurance companies, Eye-Med, which, if you have coverage from Aetna or Anthem Blue Cross Blue Shield, is your carrier.

Luxottica is in fact so powerful in the $65-billion-per-year eyewear industry that Gilboa and Hunt likely would have moved on to other ideas had they not heard about a kid in their MBA classes who knew more than pretty much anyone else in the world about how to work outside of the traditional eyeglass-supply chains. “There’s always a moment of serendipity in any startup,” Hunt says. “For us, it was meeting Neil. The company couldn’t have existed without him.” (The fourth cofounder, Jeffrey Raider, happened to be sitting in the computer lab next to Blumenthal when Gilboa and Hunt broached the idea. He worked at an private equity firm after Wharton and eventually cofounded Harry’s, the Warby Parker of men’s grooming.)

In person, Blumenthal cuts an unusual figure. He has a tendency to speak in the looping manner of Woody Allen dialogue, and he’s physically goofy with a geeky affect that is heightened by the (nonprescription) glasses he wears every day. Yet he is remarkably light-footed in social settings. The son of a tax consultant and a nurse, he grew up in Greenwich Village — a savvy New York City kid with an entrepreneurial streak. As an 8-year-old, Blumenthal persuaded his parents to order him an As-Seen-on-TV food dehydrator and attempted to start a dried-fruits stand on Mercer Street. By high school, he was taking advantage of the city’s lax attitude toward underage drinking and moonlighting as a club promoter. “You partied for free, you got paid — and you got to deliver this amazing service to your friends,” he says, flashing a sheepish smile. “So maybe that was my first triple-bottom-line business.” (Since 2011, Warby has been a certified B Corporation, considering its environmental and social impact in addition to its profitability.)

In college at Tufts, Blumenthal double-majored in international relations and history and dreamed of becoming secretary of state. He took the foreign-service exam and did well, but not well enough and, a few months after graduation, and wound up with a fellowship in El Salvador, where he helped shape VisionSpring’s now-famous market-based approach to philanthropy: Rather than simply give away free eyeglasses, the organization supplies frames to entrepreneurs to sell to their neighbors. (The strategy has won numerous accolades, including three Fast Company Social Capitalist awards, and has been adopted by organizations such as Toms Shoes and Matt Damon’s Water.org.) “That’s when the entrepreneurial thinking kicked in for me,” Blumenthal recalls. “I was trying to understand how we could get entrepreneurs to spend more time selling glasses, doing margin analysis, going over to China to try to source glasses at lower cost.” In other words, Blumenthal’s experience was a perfect match for Gilboa’s idea. When Warby Parker launched, it included a buy one, give one feature through a partnership with VisionSpring.

Although Blumenthal technically oversees Warby Parker’s stores and marketing while Gilboa tackles customer service and technology, the duo are, in fact, jointly responsible for all major decisions. The arrangement allows them to be more hands-on than might be possible in a typical high-growth startup, but it also means that both men must be constantly in sync, a feat that is particularly impressive given that they are, in some sense, polar opposites. “Dave and Neil are left brain, right brain,” says Hunt, who is now a venture capitalist with Highland Capital Partners.

The Most Insightful Management Training Film Ever Made

Wednesday, March 4th, 2015

Ben Horowitz was facing a particularly tricky management situation, where two excellent organizations within his company went to war with each other, when he happened to watch the most insightful management training film ever made:

The very next day I informed the head of Sales Engineering and the head of Customer Support that they would be switching jobs. I explained that, like Jodie Foster and Barbara Harris, they would keep their minds, but get new bodies.

However, after just one week walking in the other’s moccasins, both executives quickly diagnosed the core issues causing the conflict. They then swiftly acted to implement a simple set of processes that cleared up the combat and got the teams working harmoniously. From that day to the day we sold the company, the sales engineering and support organizations worked better together than any other major groups in the company.

When Smart People are Bad Employees

Tuesday, March 3rd, 2015

In tech, intelligence is an important quality, but it is not the only important quality, and this was a difficult lesson for Ben Horowitz to learn:

I felt that it was my job to create an environment where brilliant people of all backgrounds, personality types, and work styles would thrive. And I was right. That was my job. Companies where people with diverse backgrounds and work-styles can succeed have significant advantages in recruiting and retaining top talent over those that don’t. Still, you can take it too far. And I did.

For instance, you can’t allow the heretic to continue blaspheming:

Any sizable company produces some number of strategies, projects, processes, promotions, and other activities that don’t make sense. No large organization achieves perfection. As a result, a company needs lots of smart, super engaged employees who can identify its particular weaknesses and help it improve them.

However, sometimes really smart employees develop agendas other than improving the company. Rather than identifying weaknesses, so that he can fix them, he looks for faults to build his case. Specifically, he builds his case that the company is hopeless and run by a bunch of morons. The smarter the employee, the more destructive this type of behavior can be. Simply put, it takes a really smart person to be maximally destructive, because otherwise nobody else will listen to him.

Why would a smart person try to destroy the company that he works for?

  • He is disempowered.
  • He is fundamentally a rebel.
  • He is immature and naïve.

His example of the flake takes the archetype to another level:

Some brilliant people can be totally unreliable. At Opsware, we once hired an unequivocal genius—I’ll call him Roger (not his real name). Roger was an engineer in an area of the product where a typical new hire would take 3 months to become fully productive. Roger came fully up to speed in two days. On his third day, we gave him a project that was scheduled to take one month. Roger completed the project in 3 days with nearly flawless quality. More specifically, he completed the project in 72 hours. 72 non-stop hours: No stops, no sleep, no nothing but coding. In his first quarter on the job, he was the best employee that we had and we immediately promoted him.

Then Roger changed. He would miss days of work without calling in. Then he would miss weeks of work. When he finally showed up, he apologized profusely, but the behavior didn’t stop. His work product also degraded. He became sloppy and unfocused. I could not understand how such a stellar employee could go so haywire. His manager wanted to fire him, because the team could no longer count on Roger for anything. I resisted. I knew that the genius was still in him and I wanted us to find it. We never did. It turns out that Roger was bi-polar and had two significant drug problems: 1. He did not like taking his bi-polar medication and 2. He was addicted to cocaine. Ultimately, we had to fire Roger, but even now, it pains me to think about what might have been.

Management Debt

Monday, March 2nd, 2015

When you borrow time by writing quick and dirty code, you incur technical debt. When you borrow time by making easy management decisions — or none at all — you incur management debt. Ben Horowitz shares an example he calls putting two in the box:

What do you do when you have two outstanding employees who logically both fit in the exact same place on the organizational chart? Perhaps you have a world-class architect who is running engineering, but she does not have the experience to scale the organization to the next level. You also have an outstanding operational person who is not great technically. You want to keep both in the company, but you only have one position. So, you get the bright idea to put “two in the box” and take on a little management debt. The short-term benefits are clear: a) you keep both employees, b) you don’t have to develop either because they will theoretically help each other develop, c) you instantly close the skill set gap. Unfortunately, you will pay for those benefits with interest and at a very high interest rate.

For starters, by doing this you will make every engineer’s job more difficult. If an engineer needs a decision made, which boss should she go to? If that boss decides, will the other boss be able to override it? If it’s a complex decision that requires a meeting, does she have to schedule both heads of engineering for the meeting? Who sets the direction for the organization? Will the direction actually get set if doing so requires a series of meetings?

In addition, you have removed all accountability. If schedules slip, who is accountable? If engineering throughput becomes uncompetitive, who is responsible? If the operational head is responsible for the schedule slip and the technical head is responsible for throughput, what happens if the operational head thrashes the engineers to make the schedule and kills throughput? How would you know that she did that? The really expensive part about both of these things is that they tend to get worse over time. In the very short-term you might mitigate these effects with extra meetings or by attempting to carve up the job in a clear way. However, as things get busy the mitigation will fade and the organization will degenerate. Eventually, you’ll either make a lump sum payment by making the hard decision and putting one in the box or your engineering organization will suck forever.

His other examples are overcompensating a key employee, because she gets another job offer and having no performance-management or employee-feedback process.

The Unnatural Skill Set of Management

Sunday, March 1st, 2015

Giving feedback turns out to be the unnatural atomic building block atop which the unnatural skill set of management gets built, Ben Horowitz says:

Being CEO requires lots of unnatural motion. From an anthropological standpoint, it is natural to do things that make people like you. It enhances your chances for survival. Yet to be a good CEO, in order to be liked in the long run, you must do many things that will upset people in the short run. Unnatural things.

In fact, even the most basic CEO building blocks will feel unnatural at first. If your buddy tells you a funny story, it would feel quite weird to evaluate her performance. It would be totally unnatural to say: “Gee, I thought that story really sucked. It had potential, but you were underwhelming on the build up then you totally flubbed the punch line. I suggest that you go back, rework it and present it to me again tomorrow.” Doing so would be quite bizarre, but evaluating people’s performances and constantly giving feedback is precisely what a CEO must do. If she doesn’t, then the more complex motions such as writing reviews, taking away territory, handling politics, setting compensation and firing people will be either impossible or handled rather poorly.

Horowitz’s keys to effective feedback:

  • Be authentic.
  • Come from the right place.
  • Don’t get personal
  • Don’t clown people in front of their peers.
  • Feedback is not one size fits all.
  • Be direct, but not mean.

Bold

Wednesday, February 25th, 2015

Just when you think Silicon Valley is like the rest of us, you read a book like Bold: How to Go Big, Create Wealth and Impact the World and are reminded that, no, these people are different, Philip Delves Broughton says:

Not just superficially different, but profoundly so. As different as the silent Maine lobsterman from the loquacious Californian Reiki healer. A favorable spin is that, if you view the world as a technologist, its potential seems boundless. Science advances quickly; technology is fundamentally benign. No problems seem insuperable, and you don’t hear voices in your head yelling “Whoa!” in response to all your helter-skelter techno-optimism.

[...]

It starts out by contrasting “exponential entrepreneurs” against the “linear-thinking executives” who work in major corporations. The exponential entrepreneurs are “paving the way for a new world of abundance” by finding big problems and exploiting the “Six D’s”: digitalization, deception, disruption, demonetization, dematerialization, democratization.

Peter H. Diamandis recently spoke with Tim Ferriss.

Japan’s Oldest Businesses Have Survived for More Than 1,000 Years

Monday, February 23rd, 2015

Japan’s oldest businesses have survived for more than 1,000 years:

Century-old American companies like General Electric and Ford appear ancient when viewed alongside modern upstarts like Google and Facebook. But there are a number of Japanese firms — some of which have been around for more than a millennium — that exist on another scale of time entirely. Japan is home to some of the oldest continuously operating businesses in the world, among them a 1,300-year-old inn and a 900-year-old sake brewer.

While this longevity is not confined to East Asia — the Italian gun manufacturer Beretta has operated since at least 1526 and the cymbal maker Zildjian was founded in 1623 in Turkey — these Sequoia-like firms are relatively common in Japan. The country is currently home to more than 50,000 businesses that are over 100 years old. Of those, 3,886 have been around for more than 200 years. As a point of comparison, only one in every four U.S. companies founded in 1994 was still operating in 2004, according to the Bureau of Labor Statistics.

But in the past decade, some of Japan’s oldest businesses have finally shut their doors. Last month, the roughly 465-year-old seafood seller Minoya Kichibee filed for bankruptcy, which came after the news last year that the 533-year-old confectioner Surugaya met a similar fate. In 2007 — after 1,429 years in business — the temple-construction company Kongo Gumi ran out of money and was absorbed by a larger company. Three companies going bust doesn’t quite make a trend, but it seems like there has to be something larger going on if a company that’s been around for more than a millennium suddenly blinks out of existence.

The first question to ask about a company like Kongo Gumi is why it stuck around so long in the first place. For one thing, these companies tend to be clustered in industries that never really go out of style. Kongo Gumi specialized in building Buddhist temples — a pretty dependable bet in nation with a strong Buddhist history. The company’s first temple, near Osaka, was completed in 593, and has been rebuilt six times since then (by Kongo Gumi, of course). “There’s a pattern,” William O’Hara, the author of Centuries of Success, told The Wall Street Journal in 1999. “The oldest family businesses often are involved in basic human activities: drink, shipping, construction, food, guns.”

The other reason these companies proliferate in Japan is because of how the country’s family-run businesses have been passed down through generations. Japanese business owners typically bequeathed entire companies to their eldest sons, and there’s a 10-foot-long 17th-century scroll tracing all of Kongo Gumi’s previous owners. But what fostered corporate longevity was that owners were permitted some leeway if they didn’t trust their offspring to take the helm: They could adopt a son, who would often marry into the family and go on to run the business.

Japan has recently moved away from its traditional banking culture, where banks were supposed to bail out such companies, and many traditional products have lost their allure, too.

(Hat tip to T. Greer.)

Martin Luther Playmobil Toy is Fastest-Selling of All Time

Sunday, February 22nd, 2015

The fastest-selling Playmobil figure of all time depicts the founding father of the Protestant Reformation in Germany, Martin Luther:

The German toy manufacturer announced this week that the first edition of 34,000 pieces sold out in less than 72 hours, forcing the company to urgently request its factory in Malta to produce more of the so-called “little Luthers”. Fans have been warned that the next batch will not be available until the end of April.

Playmobil Martin Luther

The plastic toy, complete with a quill, German-language bible and cheery grin, was produced for the German and Nuremberg tourist boards and the Evangelical Lutheran Church in Bavaria, as Germany gears up to celebrate the 500th anniversary of the Protestant Reformation in 2017.

Their Albrecht Dürer figure also sold well.

Playmobil Albrecht Duerer