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

How to Minimize Politics in Your Company

Sunday, February 15th, 2015

Ben Horowitz, of Andreessen Horowitz, explains how to minimize politics in your company:

A CEO creates politics by encouraging and sometimes incenting political behavior—often accidentally. For a very simple example, let’s consider executive compensation. As CEO, senior employees will come to you from time to time and ask for an increase in compensation. They may suggest that you are paying them far less than their current market value. They may even have a competitive offer in hand. Faced with this confrontation, if the request is reasonable, you might investigate the situation. You might even give the employee a raise. This may sound innocent, but you have just created a strong incentive for political behavior.

Specifically, you will be rewarding behavior that has nothing to do with advancing your business. The employee will earn a raise by asking for one rather than you automatically rewarding them for outstanding performance. Why is this bad? Let me count the ways:

  1. The other ambitious members of your staff will immediately agitate for raises as well. Note that neither this campaign nor the prior one need be correlated with actual performance. You will now spend time dealing with the political issues rather than actual performance issues. Importantly, if you have a competent board, you will not be able to give them all out-of-cycle raises, so your company executive raises will occur on a first-come, first-serve basis.
  2. The less aggressive (but perhaps more competent) members of your team will be denied off-cycle raises simply by being apolitical.
  3. The object lesson for your staff and the company will be the squeaky wheel gets the grease and the political employee gets the raise. Get ready for a whole lot of squeaky wheels.

Now let’s move on to a more complicated example. Your CFO comes to you and says that he wants to continue developing as a manager. He says that he would like to eventually become a COO and would like to know what skills he must demonstrate in order to earn that position in your company. Being a positive leader, you would like to encourage him to pursue his dream. You tell him that you think that he’d be a fine COO some day and that he should work to develop a few more skills. In addition, you tell him that he’ll need to be a strong enough leader, such that other executives in the company will want to work for him. A week later, one of your other executives comes to you in a panic. She says that the CFO just asked her if she’d work for him. She says that he said that you are grooming him to be the COO and that’s his final step. Did that just happen? Welcome to the big time.

As he developed as a CEO, he found three key techniques to be extremely useful in minimizing politics:

  1. Hire people with the right kind of ambition.
  2. Build strict processes for potentially political issues and do not deviate.
  3. Be careful with “he said, she said.”

The last is the most interesting:

Once your organization grows to a significant size, members of your team will, from time to time, complain about each other. Sometimes this criticism will be extremely aggressive. Be very careful about how you listen and the message that it sends. Simply by hearing them out without defending the employee in question, you will send the message that you agree. If people in the company think that you agree that one of your executives is less than stellar, that information will spread quickly and without qualification. As a result, people will stop listening to the executive in question and they will soon become ineffective.

There are two distinct types of complaints that you will receive:

  1. Complaints about an executive’s behavior
  2. Complaints about an executive’s competency or performance

Generally, the best way to handle complaints of type 1 is to get the complaining executive and the targeted executive in the room together and have them explain themselves. Usually, simply having this meeting will resolve the conflict and correct the behavior (if it was actually broken). Do not attempt to address behavioral issues without both executives in the room. Doing so will invite manipulation and politics.

Complaints of type 2 are both more rare and more complex. If one of your executives summons the courage to complain about the competency of one of their peers, then there is a good chance that either the complainer or the targeted executive has a major problem. If you receive a type 2 complaint, you will generally have one of two reactions: a) they will be telling you something that you already know or b) they’ll be telling you shocking news.

If they are telling you something that you already know, then the big news is that you have let the situation go too far. Whatever your reasons for attempting to rehabilitate the wayward executive, you have taken too long and now your organization has turned on the executive in question. You must resolve the situation quickly. Almost always, this means firing the executive. While I’ve seen executives improve their performance and skill sets, I’ve never seen one lose the support of the organization then regain it.

On the other hand, if the complaint is new news, then you must immediately stop the conversation and make clear to the complaining executive that you in no way agree with their assessment. You do not want to cripple the other executive before you re-evaluate their performance. You do not want the complaint to become a self-fulfilling prophecy. Once you’ve shut down the conversation, you must quickly re-assess the employee in question. If you find that they are doing an excellent job, then you must figure out the complaining executive’s motivations and resolve them. Do not let an accusation of this magnitude fester. If you find that the employee is doing a poor job, there will be time to go back and get the complaining employee’s input, but you should be on a track to remove the poor performer at that point.

The LEGO Super Friends Project

Saturday, February 14th, 2015

When LEGO introduced its girl-friendly Friends line, I immediately thought they should extend the brand beyond conventional, modern girls. In particular, I thought princesses were an obvious opportunity, and LEGO did make Friends-style Disney princesses.

I also thought they could do Wonder Woman and other superheroes. LEGO has not done that yet, but the LEGO Super Friends Project provides a proof of concept:

LEGO Super Friends Project Black Widow

LEGO Super Friends Project Batgirl

LEGO Super Friends Project Wonder Woman

LEGO Super Friends Project Supergirl

LEGO Super Friends Project Invisible Woman

LEGO Super Friends Project Hit-Girl

LEGO Super Friends Project Firestar

LEGO Super Friends Project Catwoman

Schwarzenegger on Psychological Warfare

Friday, February 6th, 2015

Tim Ferriss interviews Arnold Schwarzenegger on psychological warfare and more:

  • The Art of Psychological Warfare, and How Arnold Uses It to Win
  • How Twins Became His Most Lucrative Movie (?!?)
  • Mailing Cow Balls to Politicians
  • How Arnold Made Millions — Fresh Off The Boat — BEFORE His Acting Career Took Off
  • How Arnold Used Meditation For One Year To Reset His Brain
  • And Much More…

The Customer-Funded Business

Tuesday, February 3rd, 2015

John Mullins reviews ways to finance a company with customers’ cash:

Pay-in-advance models have been around practically forever and are the most straightforward of the five customer-funded models. Most service businesses run this way. Do you want to remodel your kitchen? You’ll pay at least part of the fees to your designer and builder in advance, to help them cover their costs for the project. Do you want to fly to Denver next Tuesday? You’ll pay for your airline ticket today.

Thus, implementing a pay-in-advance model is as simple as finding a good reason why a customer would be willing to pay in advance — at least in part — and having the courage to ask for the money.

Take Bangalore’s Vinay Gupta, who founded Via in 2006 and proceeded to build it into a giant in the Indian travel industry. How? By asking India’s mom-and-pop travel agents for a $5,000 deposit in return for real-time ticketing capability and better commissions than the airlines were giving them. Signing up 200 agents in the first few months gave Mr. Gupta $1 million in cash, his customers’ cash, with which to start and grow his business. Last year, Via generated a reported $500 million in revenue, serving travel agents in India, Indonesia and the Philippines.

Decades earlier, Mel and Patricia Ziegler got Banana Republic started by getting their customers’ money up front — $1 for the Banana Republic mail-order catalog, please — and setting up 30-day credit terms with suppliers. The business took off when media personalities, including WOR radio’s John Gambling, got intrigued enough by the merchandise, and Mel’s vivid and quirky prose, to talk about the new catalog on air.

[...]

Krishnan Ganesh started TutorVista in 2005 with three Indian teachers and a VOIP Internet connection reaching American teens who needed help with their homework. He quickly learned that $100-per-month subscriptions for “all you can learn” — paid monthly in advance — were just what the teens’ parents wanted. When renewal rates after the trial period quickly materialized at north of 50%, growing the business was simply a matter of adding more fuel. Venture-capital funds provided it, and the business took off.

[...]

Today’s matchmaker poster child is Airbnb. Brian Chesky and his co-founders put the site together in 2007 as a way to pay their rent, by offering up space in their own San Francisco apartment for local conference-goers. By narrowly focusing on events that were too big for the local hotel inventory, they built their business one step at a time until they landed a CNN interview at the Democratic National Convention in Denver in 2008. They won a spot in Y Combinator, and landed venture capital, allowing the fledgling business to ramp up its growth, and the rest is history: over 1 million listings in over 190 countries.

[...]

Consider vente-privee.com’s Jacques-Antoine Granjon and his partners, who created the flash-sales phenomenon in 1985, and then moved online in 2001. The company offered a limited quantity of goods — unwanted or overstocked inventory from Parisian designer-apparel makers — at discounted prices in three-to-five-day sales.

The business collected immediate credit-card payment from “members” but didn’t buy stock until it had already been purchased by members. That meant Mr. Granjon didn’t need any additional capital to grow what became France’s most popular fashion brand.

[...]

Bill Gates and Paul Allen got started by writing customized software for most of the early PC makers, which I would call a service business. Then they made the transition to a product business when they started selling Windows, Word, Excel and the rest in shrink-wrapped boxes. That’s when Microsoft’s value really took off, as selling millions of copies of software-in-a-box is far more scalable than writing operating systems one at a time. The cash earned from the original service business largely funded the development of the application software.

Claus Moseholm and Balder Olrik launched GoViral, a viral-video production company, in 2003. They funded their company’s startup and growth with the proceeds of one successful campaign after another. Two years later, a new partner, Jimmy Maymann, helped steer the company out of video creation and turned its attention to building the necessary technology platform to host such content and to effectively measure the reach each virally distributed video achieved. In 2011, GoViral was sold for $97 million.

Dr. Mullins, an associate professor at London Business School, is the author of The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers’ Cash.

Guntry Clubs

Monday, January 19th, 2015

The trend in shooting ranges is toward high-end guntry clubs:

The high-end ranges come as the $15 billion gun industry’s sales have more than doubled since 2005. Fears of regulations with a Democrat in the Oval Office have juiced much of that growth, which is now leveling out. But experts also say an industry shift away from hunting culture has helped spawn a new generation of firearms enthusiasts buying up sleekly designed handguns and AR-15 rifles for tactical shooting practice.

The average age of new target shooters is 33, while 47 percent live in urban or suburban areas, and 37 percent are female, according to the National Shooting Sports Foundation, a trade association for the firearms industry. Shooters spend $10 billion a year on target shooting, including the cost of firearms, ammunition and range fees.

Those demographics and economics are attracting investors without firearms industry backgrounds; they see ranges as a new place to employ their cash. Elite Shooting Sports, a nearly $14 million project, has investors from the electronics industry. Real estate, finance, hotel and auto industry executives have backed other new ranges.

Bluefin Tuna Sold for $37,500

Friday, January 9th, 2015

The Japanese treasure the rich red meat of hon-maguro, and a single bluefin tuna can sell for $1.5 million, or $3,000 a pound — as a publicity stunt. This year one sold for “just” $37,500:

A sushi restaurant chain owner paid ¥4.51 million ($37,500) for a 180 kilogram Bluefin tuna at the first auction of the year in Tokyo’s Tsukiji fish market.

Kiyoshi Kimura, president of Kiyomura Co., has won the year’s first bid for four consecutive years since 2012. He told reporters Monday after his purchase that it was cheaper than he had expected thanks to a successful haul of tuna near the Tsugaru strait this year.

While $37,500 may seem too much to pay for a fish, it is a bargain compared to what Mr. Kimura had to spend in 2013.

In January 2012, Mr. Kimura won the bid at the first tuna auction of the year for $736,700. He then paid $1.76 million for a 222 kilogram tuna in January 2013, which remains an all-time record.

Deadliest Jobs

Monday, January 5th, 2015

Four to five thousand American workers die from injuries on the job each year, with the most dangerous jobs in logging, fishing, and piloting:

Some occupations that seem dangerous, like firefighting and tractor operation, are actually relatively safe; both of those jobs, for example, are less dangerous than being a car mechanic. Some of the safest jobs of all, with less than 10 deaths among all full-time workers, include computer and mathematical professions, and legal occupations.

Forty-one percent of all fatal workplace injuries happened in transportation incidents, which include car accidents, overturned vehicles and plane crashes. More than half (58%) of the 1,789 fatal transportation-related incidents occurred on highways, and involved motorized land vehicles.

The second-highest cause of worker fatalities was assaults and violent acts, which accounted for 18% of deaths. The preliminary data shows that workplace suicides fell slightly in 2010 to 258 after climbing to a high of 263 the year before.

Violence took the lives of 767 workers last year; with 463 homicides and 225 suicides. (Work-related suicides declined by 10% from 2011 totals, but violence accounted for about 17% of all fatal work injuries in 2012.) Shootings were the most frequent manner of death in both.

Slips, falls and trips killed 668 workers in 2012–about 15% of all workplace injuries. A total of 509 workers were fatally injured after being struck by equipment or objects on the job.

There were 142 multiple-fatality incidents–incidents where more than one worker was killed–in 2012, in which 341 workers died.

Ninety-two percent, or 4,045 of all on-the-job fatalities were among men, and the remaining 8%, or 338, were women.

The New Wave of Graphic Novels

Sunday, January 4th, 2015

Graphic-novel sales are outpacing the overall trade-book market, and their audience has expanded to include more women and younger readers, the Wall Street Journal reports:

Graphic-novel sales increased 4% to $415 million in 2013, including comics stores, bookstores and online booksellers but excluding e-books. Preliminary data indicate that in 2014 graphic-novel sales grew at an even faster clip, according to Milton Griepp, a market analyst and CEO of the trade publication ICv2.

By contrast, overall print-book sales through retail stores and book clubs fell by 2.5% to 501.6 million units in 2013, following a blockbuster year in 2012, according to a Publisher’s Weekly analysis of data from Nielsen BookScan.

[...]

Graphic novels also lend themselves beautifully to being read on tablets such as iPads — and even smartphones. Digital sales for comics and graphic novels totaled $90 million in 2013 compared with $70 million in 2012.

Auftragstaktik

Friday, January 2nd, 2015

With Auftragstaktik, or “mission orders,” the leader disseminates his authority with the mission, David Grossman (On Killing) explains, and the piece of authority that is passed down with the mission empowers subordinates at all levels:

Patton understood this concept when he directed his subordinates to tell their men what to do but not how to do it, and then to “let them amaze you with their ingenuity.” A subordinate leader who is told precisely how to do something no longer has any obligation, accountability, or even legitimacy in accomplishing the task by an alternative method when the initial plan becomes impractical. Auftragstaktik empowers aggressive behavior by:

Increasing the proximity and number of authority figures. Ideally, under Auftragstaktik, every soldier becomes an obedience-demanding authority. The last line of the U.S. Army Ranger Creed is “I will go on to accomplish the mission, though I be the lone survivor.” That mentality, and the cultivation of subordinate leaders and soldiers who can make it come alive, is the ultimate objective of Auftragstaktik.

Increasing a subordinate’ subjective respect for the authority figure, since the authority and initiative of the highest commander have been passed to the lowest subordinate.

Increasing the authority figure’s demands for killing behavior. Since the subordinate
leader becomes the originator of his own set of mission orders, which are built upon the
framework of his superior’s mission orders (as opposed to being an errand boy simply passing down messages from on high), he accepts ownership of the mission and becomes strongly invested in demanding mission accomplishment from his subordinates.

Increasing the legitimacy of the authority and the demands of subordinate leaders by
institutionalizing a process in which it is the norm for subordinates to assume broad discretion and flexibility. Only then will you have a true, pervasive, mission orders environment.