Two Lessons From Iron Mike

Posted on by David Wright

Mike Tyson is my favorite boxer. Obviously this has something to do with his in-ring feats, sure, but everything that’s interesting about him comes from his mind. He has one of the most interesting and powerful minds on earth. Seriously.

All the more so because he agrees with one of my more ridiculous beliefs: there’s no such thing as the good ol’ days. Everything’s better today:

“They would be tough for anybody to fight. I know people hate to believe this but they’re tough for anybody. Sometimes we don’t want to believe it. We’re stuck on apple pie in our era. We like Chuck Berry; we like Elvis Presley. People get better as men from the cavemen to now. We are supposed to get better. From the 80s to now we’ve got better. We’ve got more technology, more people are made, we get more money, the world is bigger, and we become better. So these guys would be difficult to beat for anybody who came before them.”

And, next, knowledge and wisdom can sometimes be a burden:

Tyson is a changed man. Gone is the bristling machismo, and sparks of aggression. “I wasn’t ready to know all this back then [as champion of the world]. I am now. If I’d learnt all that then I probably would never had been a good fighter. I’d have been too docile and meek then. At that particular time it was suitable for me and now that’s not too suitable for me.”

I like that lesson. Sometimes a deep understanding hinders success. I would argue that’s because knowledge is often illusory. In other words, mostly we’re all full of shit. Stop talking. Do stuff.

Violence in America

Posted on by David Wright

I saw this interesting chart suggesting violence in the US is on the decline (original image here):

This is via Krugman who doesn’t hesitate to grind his political ax a bit:

And that’s one reason I find all these laments about declining values among non-elite Americans hard to take seriously. If things like single parenthood were as bad as they say, how can social pathologies have declined so much?

Ugh, I say, politics and sociology. What a mess!

So I thought I’d like to tickle a bias of mine with the graph, too. Notice that the trend is the same in all OECD countries? They’re dwarfed by the scale of the US data. Oh, the statistical tricks we can play!

For a quick and dirty analysis, let’s just see what the demographics of the era have looked like (source):

You’ll see that society is aging pretty remarkably since the 70s. Common to almost all OECD countries.

Angry youngsters killing each other!

What’s The Point of a Designation? (With a Venn Diagram!)

Posted on by David Wright

This is a fairly weak challenge to the pursuit of technical certification, but let’s start with it anyway:

I have come across a lot of my friends who aquired very nice percentage and received certificates though they have very minimal knowledge, or they have never worked on that particular technology. How crap is that, and now they are the proud owner of certificate, showcasing it proudly over their work desk. Ask them a very simple question on the technology that they have got certification, they would be for sure struggling to give answer to it. This is quite common, Certifications are being done only to get an extra point during their salary appraisals or job interviews. And I pity these corporate giants who would consider certification to be something remarkable.

How many out there would say, Yes certification is worth doing and it must be done to prove that you are good in a particular technology?

First point: if you’re an aspiring entrepreneur, stop right here. Stop reading, stop everything and go start building stuff. The longer you wait the harder it will be.

Second point: certifications are often required to work in a chosen field. That’s called occupational licensing and it’s often ridiculous. I’m going to concentrate on what real benefits certifications offer (in my experience) to the risk averse, hard working and ambitious. Doctors and lawyers need not read further.

I mentioned at the top the argument above is pretty easy to dismiss. Knocking something you haven’t actually tried? Striking down the straw man of heavily credentialed morons? Here’s a Venn diagram:

I did a fairly terrible job of scaling the image. The Red-only zone should be pretty tiny, the smallest of them all, really. Most people who spend the time and energy studying a topic do come away with some competence.

The deeper question is something anyone who spends a lot of time studying for tests should struggle with: is it worth your time? What does it get you?

Once upon a time I was at a dinner with a client who gave me some offhand advice: take some courses, they’ll teach you something, you’ll get an initialism for your business card and you’ll advance your career.

What terrible advice. I followed it, which I’ll get to later, but here’s what he should have said:

  1. Education is good, but remember its two functions: to teach you practical skills and signal your intelligence.
  2. Many certifications, unfortunately, are completely useless. By that I mean they teach you nothing useful and don’t signal a damn thing of any use to strangers.
  3. Most skills that will actually improve your job performance are best learned on the job. There is usually no good substitute for experience. Go help domain experts solve problems and effing pay attention. Study them.
  4. The most important skill of all? Check out this paper, which I’m actually reviewing for another blog post:

    In this study, measures of interpersonal and task-related skills were obtained from two groups of engineers: those nominated as “stars” by their managers and those nominated as “average”. Interestingly, the researchers found that the only distinguishing difference between the two was the stars’ interpersonal and affective skills. Specifically, the stars were better at developing rapport with coworkers and building extensive, loose networks of reliable problem solvers.

    Interpersonal skills. No certifications for that.

  5. Depressed yet? Well you should be. There is no reliable way to accelerate your career except to experience more. The only other possibility is to perhaps the change the trajectory of your career by changing the what kind of experience you get and how you respond to it.

NOW let’s talk about certifications.

Certifications work best as an introduction to a body of knowledge. Your goal should be enough understanding to follow a conversation between experts. Doesn’t sound like much, but this is incredibly important.

Imagine your mind dragging a net along behind it everywhere you go in life. You actually don’t have enough knowledge to properly interpret a lot of the experiences that pass through the net. Think of a certification as a way of shrinking the mesh of your net.

The second thing certifications can offer is the opportunity to work your ass off. Some certifications are really challenging to complete. Following my client’s advice I took a softball course, which has proven useless. The last module in it, however, was an introduction to finance which I really enjoyed (I was shocked – I HATED finance in undergrad and nearly failed it).

So next I tackled the CFA exams, then moved onto the CAS exams. Some would look at the amount of time I spent on these (over years and years) and shudder. Good. This makes them a fantastic signal of all kinds of qualities employers love.

But even the most grueling course yields nothing in isolation. What you want is the holy grail: high-value experience. By that I mean working with and learning from the best.

You see, the skills of the most incredibly skilled have afforded them prestige (always), wealth (often) and an extraordinary demand for their skills (always). They need help. And who are they going to pick? Putting nepotism to one side, they’re probably going to pick the highest status recruits, which means those with the strongest signals of quality.

I’m pretty fortunate to have a challenging certification available I can sink my teeth into. But programmers have an enormous expanse of open source projects they can attach their names to. And writers can always write, artists can, um, create, etc.

Certifications are ideal in mature industries where innovation is slow and the canon of skills relatively stable. In others, go online, the Internet has enabled quality signaling in just about any worthwhile pursuit.

But remember the iron law of education: if you don’t have to work hard for it then it probably isn’t worth your time.

Entreprenempathy

Posted on by David Wright

Let’s start with this assumption: entrepreneurs are the best leaders/managers a company can have. Most importantly, the entrepreneur that founded a company is the best leader that company will ever have, probably. Why is that?

Entrepreneurs come up with things that sell, they’re product people. For some reason, large companies can often come to be run by people who are good at many of the other things large companies do other than sell products: raise money, deal with regulation, institute internal processes, fire people, hire people, etc. Sometimes these skills need to be the focus over some time horizon. But be not fooled: these are secondary functions.

At best, an entrepreneur is a product person that views the company as an extension of his/her personal self. It’s not just the financial alignment that investors spend all their time worrying about, but an alignment of identity. Because of that, many of the secondary functions simply fall into place: you run the company’s finances like you’d run your own, which makes you (more) risk averse, which is basically good. You run the brand like you run your personal relationships, which, assuming you’re mostly normal with your own quirks (which everyone is) makes the brand accessible yet interesting. Et cetera.

Seeing a company as an extension of your self seems to me to be a kind of empathy. You feel pain when the company is hurt, you feel joy when the company grows. The pressure of having to care for this thing you created, which includes its people (think about the word company), provides a motivating force unlike anything else in our society.

So that’s what an entrepreneur is to me: a person with deep empathy for his/her firm and relentless focus on the #1 priority of any business organization: customers’ needs. Which, of course, is another form of empathy.

One Last Pivot

Posted on by David Wright

The key question when trying to value Facebook’s stock is: can they find another business model that generates significantly more revenue per user without hurting the user experience?…

If they do that, the company is probably worth a lot more than the expected $100B IPO valuation. If they don’t, it’s probably worth a lot less.

That’s Chris Dixon.

I personally don’t like sponsored content in my feeds and Chris makes some good observations on those. GM isn’t convinced either.

My favorite test for a business’ viability is this: people only spend *real* money to make money. If your business isn’t better than your competitors at helping other people get rich, you don’t get rich.

I like Chris’ perspective, which is that Facebook is an incomplete product at the moment. And you can’t predict pivots.

Big Fails

Posted on by David Wright

The economist has a list of ways to birth a megaflop, by which they appear to mean a strategically important investment that loses a company money, face and time. The basics:

  1. Don’t break something that works (“slaughter a sacred cow”)
  2. Don’t do something you’re not good at just because you can. (“mix oil and water”)
  3. Don’t produce a genuinely awful product.

I’m fascinated by organizational dysfunction. Not only from train wreck voyeurism, mind you, but because the only way to learn is through failure and I’d rather learn through others’ failure if I can. (btw, the only book I’ve seen in this vein, and it isn’t that great, is this one.)

Anyway, the most interesting kinds of failure happen when companies that get a lot right screw up. In that light, that list above isn’t too bad. But I’d add one:

4. Forgetting what the product is.

The Economist opens their article with a discussion about the recent film flop John Carter, which I wanted to see but skipped after checking reviews. I think Hollywood blockbusters are a better example of my point than any of theirs.

The problem is that ‘Hollywood’ is actually not in the content creation business, believe it or not. They’re in the distribution business, a business run by advertisers, marketers and salespeople. There are two really important challenges to overcome in sales driven businesses:

First, to quote Gordon Moore: “Every the salesmen thinks he’s management material”.

Second, salesfolk are quick to criticize products that they think might be a difficult sell.

Sales is tough. And when it doesn’t work it’s not always obvious where something went wrong.

Salespeople have two extremely powerful advantages that quickly turn into a disadvantage in tough times: they have outstanding communication skills (which they use to trick themselves and everyone else into thinking they know more than they do, see Gordon Moore above) and they’re the ones who are experts in sales. Shouldn’t they know what’s best?

Hollywood flops all the time. I think this happens when the sales department makes too many decisions on what they want to sell: the package becomes the product.

It’s easy to say “don’t give marketing too much control!” but remember that marketing is often a bigger part of the blockbuster budget than the film itself. They control the money!

I didn’t quite know where to link to it, but this is an awesome post on sales.

Whew

Posted on by David Wright

I ruminated on that Steve Jobs review for far longer than most blog posts. I desperately wanted to avoid contravening my New Years resolution to not be negative, but I honestly felt like I had to do it.

Anyway, Joel Spolsky (who is one of my online heroes and literally works in the building next to mine), makes me feel better today:

It is not, as it turns out, necessary to be a micromanaging psychopath with narcissistic personality disorder (or even to pretend to be one) if you just hire smart people and give them real authority. The saddest thing about the Steve Jobs hagiography is all the young “incubator twerps” strutting around Mountain View deliberately cultivating their worst personality traits because they imagine that’s what made Steve Jobs a design genius. Cum hoc ergo propter hoc, young twerp. Maybe try wearing a black turtleneck too.

For every Steve Jobs, there are a thousand leaders who learned to hire smart people and let them build great things in a nurturing environment of empowerment and it was AWESOME. That doesn’t mean lowering your standards. It doesn’t mean letting people do bad work. It means hiring smart people who get things done—and then getting the hell out of the way.

Joel is much more in the *Clever* school of talent management and so am I.

And yet:

The PC Is Dead. Big Whoop.

Posted on by David Wright

There’s always a Debbie Downer:

The PC is dead. Rising numbers of mobile, lightweight, cloud-centric devices don’t merely represent a change in form factor. Rather, we’re seeing an unprecedented shift of power from end users and software developers on the one hand, to operating system vendors on the other—and even those who keep their PCs are being swept along. This is a little for the better, and much for the worse.

Why?

The fact is that today’s developers are writing code with the notion not just of consumer acceptance, but also vendor acceptance… Both put the coder into a long-term relationship with the OS vendor. The user gets put in the same situation: if I switch from iPhone to Android, I can’t take my apps with me, and vice versa. And as content gets funneled through apps, it may mean I can’t take my content, either—or, if I can, it’s only because there’s yet another gatekeeper like Amazon running an app on more than one platform, aggregating content. The potentially suffocating relationship with Apple or Google or Microsoft is freed only by a new suitor like Amazon, which is structurally positioned to do the same thing.

Reminds me a bit of the Michael Mandel paper (via) on how innovation requires large corporate investment. Here’s Mandel with his similar but sunnier version:

The second part of the Schumpeterian Hypothesis is the observation that companies with more market power might also be more willing to invest in innovation. The argument is that if a firm in an ultra-competitive market innovates, the new product or service is quickly copied by rivals, so that the gains from innovations are quickly competed away. Conversely, a firm with market power has the ability to hold onto some of its gains from innovation, so it may pay to invest in product or other improvements.

Back to the Harvard conclusion:

If we allow ourselves to be lulled into satisfaction with walled gardens, we’ll miss out on innovations to which the gardeners object, and we’ll set ourselves up for censorship of code and content that was previously impossible.

You can imagine how many articles like this were written about IBM in the 60s and 70s and Microsoft in the 80s and 90s.

Besides, both of choose to deemphasize the point that with each turn of the generational wheel, the real innovation (the programs we use every day) is being done in a progressively more distributed manner. Mainframes, PCs, mobile.

I could write an app on my own and sell it to the world. Couldn’t do that with a PC. DEFINITELY couldn’t do that with a mainframe.

Wishing it were even more distributed is fine, but put your whining in context, please.

ht

Paying College Athletes

Posted on by David Wright

Here’s a video of a top-ranked high school football player choosing his college on live tv. The upshot is that he is from Louisiana and his mom voices discontent of his choice of Alabama over LSU.

Ben Casnocha says: “pay the athletes”

I say that impossible:

To get paid, the players will immediately form a union. Here is going to be their list of demands:

1. Pay us (fine).
2. Don’t make us go to school (uhhhh).
3. Let us play longer than 4 years (what?)

Here’s the student body response:

1. These aren’t students
2. I want to play football (or basketball) for my alma mater
3. Set up a parallel system for me to play in

The problem with this system isn’t that student athletes aren’t getting paid. The problem is that the NBA and the NFL don’t have a feeder league system like every other major professional sport. This means that the NFL and NBA are less popular than they otherwise would be.

Think about the difference between fan followership of college football and basketball vs all the other lower-tier sports leagues on earth. Orders of magnitude larger. Why? Because they’re piggybacking on college support. These are fans that would otherwise pay more attention to the pros.

The winners in today’s arrangement are, first, sports administrators and, second, sports fans. The losers are the NFL, NBA and lower-tier college athletes.

One interesting possible externality of sports administrators winning so big is that sports administration and so sports itself probably wins. Gigantic sports facilities support more than football. I bet you that the quality of the US Olympic team would decline demonstrably if you killed the college sports money machine.

And paying the athletes would kill it.

Review of Review of 21 Books on the Financial Crisis

Posted on by David Wright

I had a 7 hour drive today back to the city so I was ready for the podcast firehose. I read about this paper this morning and experimented with some text-to-speech software and managed to listen to the whole paper in the car. Fun!

Anyway, I was hoping for more of an upshot than this:

There are several observations to be made from the number and variety of narratives that the authors in this review have proffered. The most obvious is that there is still significant disagreement as to what the underlying causes of the crisis were, and even less agreement as to what to do about it. But what may be more disconcerting for most economists is the fact that we can’t even agree on all the facts. Did CEOs take too much risk, or were they acting as they were incentivized to act? Was there too much leverage in the system? Did regulators do their jobs or was forbearance a significant factor? Was the Fed’s low interest-rate policy responsible for the housing bubble, or did other factors cause housing prices to skyrocket? Was liquidity the issue with respect to the run on the repo market, or was it more of a solvency issue among a handful of “problem” banks?

Apparently we still don’t know what the problem was, though leverage, regulatory capture/incompetence and ‘global imbalances’ show up a lot. Screaming for some mention is my favorite explanation, which is a Cowen-Sumner synthesis: we weren’t as rich as we thought we were and that realization was more painful than it should have been because the fed screwed up and continues to screw up. The rest is a bunch of banks that should have gone bust.

Lo goes on to finish the paper with a discussion of how economics is basically an irretrievably inexact science (ie we may never Know The Answer) and then, oddly, goes on to do a bit of primary journalistic research, suggesting some rule change by the SEC didn’t actually open the gate for increased leverage in 2004, contrary to many claims.

The real take-away for me is that the best academic and journalist books, respectively, on the crisis are “This Time It’s Different” and “Too Big to Fail“. I’ve read the second and will some day read the first, I think.

I’ve had just about enough financial crisis porn for a little while, though.