In particular, this post focuses on questions to ask founders before you invest, but it also serves as a tutorial on how to ask better questions in life and in business.
A THOUSAND FIRST DATES
The life of an angel is all about managing a deal funnel, which includes three distinct steps: sourcing deals, evaluating deals, and, finally, picking which founders you’re going to fund.
Meeting with founders for an hour is the most frequent technique for angels to decide who to invest in, but certainly not the only one. There are some angels whose primary technique for selecting investments is to follow other smart investors, drafting off of their meetings and deal flow.
Another technique is simply to review the core metrics and decide based on those. This can be done by reviewing a deck or by checking public information sources, like the App Store rankings, and traffic monitoring services, like Alexa and Quantcast.
Some investors have a huge Rolodex and simply invest in the founders they already know, a technique that worked extremely well for investors who knew Elon Musk (Zip2 and PayPal before Tesla and SpaceX), Evan Williams (Blogger before Twitter), and Mark Pincus (Freeloader and Tribe before Zynga).
Of course, the “invest in who you know” approach would mean you missed the biggest startups in history: Mark Zuckerberg, Bill Gates, Evan Spiegel, and Larry Page, who all hit the ball out of the park on their first try—at the ages of nineteen, twenty, twenty-one, and twenty-five, respectively.
Meetings are important and free. You should take a lot of them. Ten one-hour meetings a week is a good target for a professional angel. Half that if you’re doing this part-time.
My best advice to you as you start dating is to be promiscuous with meetings—but a prude when it comes to writing checks. Don’t be a tramp like I was.
I’m going to take you through the four most important questions I ask all founders. The goal of asking these questions is not just for you to understand the business but also so you yourself can answer four critical investor questions:
Why has this founder chosen this business?
How committed is this founder?
What are this founder’s chances of succeeding in this business—and in life?
What does winning look like in terms of revenue and my return?
HOW TO ASK QUESTIONS
Your job in these meetings is to play Columbo, the unassuming and always underestimated detective from the classic TV show that started in the ’70s and ran for more than three decades. Your job is not to show off or demonstrate how smart you are by explaining to the founder what they’re doing wrong or by bragging about your heroics as an investor or, even worse, as a founder yourself.
You want to have big ears and a small mouth in these meetings. You want to ask concise questions that take no more than a couple of seconds and then listen deeply to the answers, considering them with every fiber of your consciousness as you write your notes on paper—just like Columbo.
Listening like this will serve two virtuous goals, the first being that the founder will feel heard and understood by you.
If people believe they are being deeply listened to, they will talk more.
This is why, when you talk to your therapist about your mom, they say “hmm…” while tilting their head and looking at you with sympathy. Then they add, “Tell me more about your mother,” or “Unpack that some more,” or simply “Your mother…”
There are six words, four words, and two words in those responses. The last one is the most powerful because it just hangs there, inviting you to build on the topic.
You want to be Dr. Melfi, Tony Soprano’s therapist, sitting patiently while the passion and pain pour out from the boss you’re meeting with. If you’re a great listener, you will be a great investor, as well as a great friend, a great parent, and a great human being.
Second, if you are hyper-present in the meeting, thinking deeply about the founder and why they are taking on the irrational pursuit of starting a company, which comes with a greater than 80 percent chance of failure and a 100 percent chance of suffering, then you will be able to make a better decision on whom to invest in.
Basically, if you shut your trap and listen like a detective or a therapist, you’ll be able to uncover the answers to those four questions better than other angel investors.
You’ll have more hits and fewer misses.
When you are starting a founder meeting, ask one icebreaker question to get your subject warmed up.
How do you know Jane?
If you were introduced to this founder by a mutual connection, you can quickly establish common ground by asking these five simple words. Listen to the answer you are given and construct a follow-up question based on their answer. So, if the founder said that they worked with Jane, your next move is to say, “You worked with Jane? What was that like?”
I have a game where I try to say things with as few words as possible because it reminds me that this meeting is not about me, it’s about them. It also makes me sound wise, like Obi-Wan or a Toshiro Mifune character.
These are the exact four questions I ask every founder. The answers to these questions will give you most of what you need to make your investment decision. We spend the first half of our hour-long meeting exclusively on them. Then we go deeper.
1. What are you working on?
The reason I phrase this question as “What are you working on?,” versus something more company-specific, like “What does Google do?” or “Why should I invest in Google?” or the supremely horrible “Why do you think Google is going to succeed after eleven search engines have already failed?,” is that it celebrates the founder (the “you”) and what founders do (the “work”). It shows that you have deep empathy and you recognize that this isn’t about what the thing does (Google helps you find stuff), but rather it’s about people (Larry and Sergey write software that helps people find information faster).
2. Why are you doing this?
Again, five simple words that are focused on the founder. When I ask these first two questions, I almost universally see founders melt into their chairs. They relax, let their guard down, and feel like I care about them, which I do. Just like Columbo cares deeply about the suspects he’s interviewing when he asks, “So, what do you do here?” when he walks into their office, as opposed to leading with “Where were you on the night of the murder?”
Just like Columbo, I’m looking for killers and I’m trying to eliminate suspects.
There are some really, really bad answers to the question “Why are you doing this?” The worst two answers, which you’ll hear often, are “To make money” and “Because INSERT-SUCCESSFUL-COMPANY-NAME-HERE doesn’t do it.” If folks are building a startup for money, they will eventually quit when they realize there are many better ways to make money faster and with more certainty. If you want to make a lot of money, you’re better off being a world-class programmer on a very esoteric and in-demand vertical and getting Google or Facebook to give you $1 million-plus a year in stock and cash for ten years in a row. You have no downside, you can work a couple of hours a day, and you get unlimited free food.
If you’re building something because another hugely successful company doesn’t already have that feature, well, you’re wildly naive or, more often than not, plain old stupid. For years people pitched me on startups that were supposedly going to be Google search for news, Google search for video, and Google search for books and magazines. We all know how that turned out.
More recently I’ve been pitched hard on “Uber for food,” “Uber for helicopters,” and “Uber for shopping.”
While there have been some successful startups built by running ahead of market leaders, in general, those kinds of startups get crushed or bought for small dollar amounts. Summize was a search engine for Twitter, back when Twitter was so technologically incompetent that they could barely keep the service online. They bought Summize to catch up, as well as TweetDeck, a more advanced client for reading multiple feeds at once, but the return to the investors in Summize and TweetDeck for these acquisitions were minor when compared to the returns of the company that bought them.
The big problem with “founders” who build a feature that a market leader will inevitably get to—and I use quotes here for a reason—is that they lack vision. The act of selecting a feature as their life’s work, as opposed to a full-blown product or a mission, disqualifies them from being a true founder.
Elon Musk didn’t build a battery pack: he built a car and eventually an energy solution that included solar, home batteries, and, perhaps when you read this, a ride-sharing service like Uber.
It’s okay to start small, but it’s not okay to be a small thinker.
The right answers to “Why are you building this?” tend to be personal. Travis Kalanick and Garrett Camp built Uber because they couldn’t get a cab in Paris at a technology conference. Elon Musk built SpaceX because he wanted a backup plan for humanity. Elon’s earlier idea, that no one knows about, was to put a series of greenhouses in space to back up the biosphere— just like the Bruce Dern movie Silent Running—which, as an interesting aside, came out five years before Star Wars and featured drones that were an inspiration for R2-D2.
Zuckerberg was awkward with the ladies, so he built a social network that would show him their relationship statuses.
Think about that for a second: Is there anything more important than procreation? Not according to Darwin or Freud, so Zuck’s lack of game led to the fastest-growing consumer product in the history of humanity, largely based on people needing to find a mate or to connect with previous lovers (as demonstrated by the number of divorces that mention Facebook in their filings).
3. Why now?
This question has been floating around the Valley for a while, and the first time I heard it was from my friend, Sequoia Capital’s Roelof Botha—the venture capitalist who convinced me to become a “Scout” for their firm, which led to my two greatest investments to date: Uber and Thumbtack.
If you unpack this question, you’re really asking, “Why will this idea succeed now?”
For Uber it was simple: mobile phones were becoming ubiquitous and they had GPS. In fact, another company had already tried to help you order a cab via SMS messages a year before Uber came on the scene. Their “why now” was simply “text messaging,” but that, frankly, wasn’t enough. Without advanced mobile CPUs (central processing units) to power big beautiful touch screens with military precision GPS (global positioning system), there would be no Uber.
For YouTube, which had Roelof Botha as its first investor, the “Why now?” was a confluence of factors and breakout successes that tend to be born during these perfect storms. First, bandwidth costs plummeted after the dot-com crash. Second, storage costs were dropping due to this new thing called cloud computing. Third, blogging was taking off. Millions of folks were writing tens of millions of posts every week and YouTube offered a clever way to embed their videos on other people’s sites—reaching a massive audience for free.
There were dozens of video companies before YouTube, but they all charged people for bandwidth and storage, which meant that if you wanted to post a video on the internet, your reward for going viral was a ten-thousand-dollar server bill. Instead, YouTube sends you a thousand-dollar check from the ads they run on your hit video.
Dropbox, which launched onstage at the first year of my LAUNCH Festival and was also funded by Sequoia Capital, had the same “Why now?” as YouTube: plummeting bandwidth and storage costs.
Founders tend to have these “Why now?” insights without recognizing how profound they are. When I started my blogging company, Weblogs, Inc., in 2004, I had a very simple thesis: I believed that great new writers publishing five short, unfiltered posts a day would get more readers than established journalists writing one story, edited by a half dozen people, once a week.
When I had this realization, it was perfectly clear to me, but even the New York Times journalists didn’t see it. I remember running into legendary tech journalist John Markoff at the Consumer Electronics Show in Vegas when our blog Engadget was covering it for the first time. He asked me how many people we had at the show and I said fifteen. His jaw dropped and he asked me how often they were filing, and I said four times.
He replied, “You’re going to do sixty stories at CES?”
I said, “Actually they’re posting four times a day. So sixty stories . . . per day. How often is your team filing?”
He said they had three journalists at the show and they would do two or three pieces each over the next month. So, they were doing six stories and we were doing sixty a day for five days— three hundred total.
In some ways, “Why now?” is the most important question about the business you can ask because there are so many folks constantly trying the same ideas over and over again in our business.
Google was the twelfth search engine. Facebook was the tenth social network. iPad was the twentieth tablet. It’s not who gets there first. It’s who gets there first when the market’s ready.
4. What’s your unfair advantage?
Founders with breakout startups often have an unfair advantage. Google had their Stanford connections, filled with talented algorithm-writing engineering geniuses. Facebook launched while Zuckerberg was still a student at Harvard, and they used their understanding of campus culture and directories to figure out the dynamics of building online social networks that scale. Mark Pincus launched Zynga with a multi-year cross-promotion deal with Facebook, which allowed Zynga to tag along with Facebook as it grew at an astounding rate. Mary Gates was on the board of United Way with the CEO of IBM, which led directly to IBM hiring her son Bill’s new company, Microsoft, to build the operating system for their first personal computer.
Said another way, this question is asking, in just four words, “What makes you uniquely qualified to pursue this business? What secrets do you know that will help you beat both the incumbents and your fast followers?”
Sometimes, founders will not have an answer for this question. And that’s okay. This is one you often end up answering while looking in the rearview mirror.
WHAT HAVE WE LEARNED?
After asking these four founder questions, which in total are sixteen words, you should have an excellent idea of what this person is building and why.
These four founder questions give you a great starting point for answering the four investor questions every angel needs to ask themselves before investing. Remember, we want to figure out:
Why has this founder chosen this business?
How committed is this founder?
What are this founder’s chances of succeeding in this business—and in life?
What does winning look like in terms of revenue and my return?
After thirty minutes and four questions, you’re going to have a strong sense of why the founder picked this business, why it might work right now, and, of course, what they are building.
What you probably won’t know are the tactical details of how they plan on executing on their vision, including their go-to-market strategy, what kind of team they have, the competitive landscape, and the nuances of their business model.
You are going to find out the answers to those questions in the second half of your meeting. But this is the foundation.
Note from the editor: The following is a guest post by Ryan Holiday.Ryan (FB/IG/TW: @RyanHoliday) is the bestselling author of six books, including The Obstacle Is the Way, Ego Is the Enemy and The Daily Stoic. His books are used by many NFL teams, including the Seahawks and Patriots, and was read by members of the Warriors on their way to NBA championship in 2017. His work has been translated into twenty-eight languages and has appeared everywhere from the Columbia Journalism Review to Fast Company. His company, Brass Check, has advised companies such as Google, TASER, and Complex, as well as multiplatinum musicians and some of the biggest authors in the world.
Nobody sits down to make something they hope will be immediately or quickly forgotten. Elon Musk compares starting a business to “eating glass and staring into the abyss of death,” and no one would willingly do all that if they thought their efforts were going to disappear with the wind.
The vast majority of creative work, sadly, is not only forgotten, it never had a chance to be anything but forgettable. In the United States alone some 300,000 books are published on average per year. Roughly 300 hours of video are uploaded to YouTube every minute. Since it launched in 1985, some 6,000 films have appeared at Sundance. How many of these products endured for years or decades? Not many.
But some people do figure it out. The publishing industry, the music industry, the movie industry, despite what you read in the newspapers, are successful not because of the hits that come out each week, but because of their library of content—what insiders call “perennial sellers.”
Perennial sellers are movies like the Shawshank Redemption, artists like Iron Maiden, startups like Craigslist, books like the 48 Laws of Power, (and The4-Hour Workweek, which is 10 years old and still sells more than 100,000 copies per year in the U.S. alone). Look at Craigslist, now 20 years old, which makes annual profits of over half a billion by monetizing just 2-3 categories of listings. These are the kind of products that customers return to more than once, and recommend to others, even if they’re no longer trendy or brand new. In this way, they are often timeless and unsung moneymakers, paying like annuities to their owners. Like gold or land, they increase in value over time because they are always of value to someone, somewhere.
All my life (and career) I have been studying these kinds of perennial sellers. Not just because it’s what I do for a living as an advisor to writers, musicians and entrepreneurs, but to incorporate them in my own writing. What follows in this post are some of the lessons we can learn from the creators who have made things that last—not for months but for years. I’ve split them into two distinct buckets, how to make something that lasts and the kind of marketing required to develop a loyal audience that lasts.
The Work Is What Matters
It was the great Cyril Connolly who would tell writers that, “the true function of a writer is to produce a masterpiece and that no other task is of any consequence.” This is true of anyone setting out to produce a perennial seller in any space in any era. Phil Libin, the founder of Evernote, has a quote I like to share: “People [who are] thinking about things other than making the best product never make the best product.” The legendary investor and Y Combinator founder Paul Graham explains why, “The best way to increase a startup’s growth rate is to make the product so good people recommend it to their friends.”
The point is: The first and most essential step of a perennial seller is creating something truly great. As my mentor Robert Greene put it, “It starts by wanting to create a classic.” If you’re sitting down to make something and thinking about how famous it’s going to make you, how rich you’re going to get, how fun it’s going to be, or all the people you’re going to prove wrong, you are thinking about the wrong thing.
Frank Darabont, the director and writer of The Shawshank Redemption, was offered $2.5 million to sell the rights so that Harrison Ford and Tom Cruise could be cast as the stars. He turned it down because he felt this was his “chance to do something really great” with his screenplay and the actors of his choosing. Turning down that kind of money couldn’t have been easy, but that’s the difference between what might have been a forgettable mid-level blockbuster to one of the most enduring and popular movies of all time.
Think Long Term, Don’t Chase Trends — What Doesn’t Change?
Darabont’s decision probably seemed crazy at the time. Hollywood says “We want to give you a bunch of money to put these two movie stars in your film,” and he rejects it? Why? He didn’t want to make a movie dependent on big names. He wanted to make a movie that captured the essences of Stephen King’s book, a movie that wasn’t about flash and marketing but rooted in something deeper.
Consider Amazon, now arguably the most valuable company in the world. Jeff Bezos’ dictum to his employees is not to focus on what will make the most money right now, he’s not rushing to capture every fad or opportunity. Instead, he has this surprising command: “Focus on the things that don’t change.”
Bezos isn’t rushed, and he is thinking long term. He knows that customers will, always prefer cheap prices, fast shipping and reliable service. That’s what he is optimizing for, not what’s trendy right now. The great writer Stefan Zweig once recounted a youthful conversation with an older and wiser friend. The friend was encouraging him to travel, believing that the experience would broaden and deepen Zweig’s writing. Zweig believed he had to write right now and he needed to finish his book as quickly as possible. “Literature is a wonderful profession,” the friend explained patiently, “because haste is no part of it. Whether a really good book is finished a year earlier or a year later makes no difference.”
It doesn’t make a difference because really good stuff is timeless. It doesn’t need to be rushed.
Who was rushed? All the people who started “businesses” right before the first dot-com bust, or apps for Myspace pages. Or Groupon clones. Or QR codes. Or gourmet cupcakes. Or published adult coloring books. Or people selling fidget spinners.
Take the Star Wars franchise. In one sense, the films were undoubtedly futuristic and took advantage of then cutting-edge special effects. But George Lucas borrowed far and wide…and new and old. He acknowledged that his initial conception of the movie was for a modern take on the Flash Gordon franchise, going as far as trying to buy the rights in order to do so. He also borrowed heavily from the 1958 Japanese movie The Hidden Fortress for the bickering relationship between R2‑D2 and C‑3PO. Yet for all these contemporary influences, Lucas’s most profound source material was the work of a then relatively obscure mythologist named Joseph Campbell and his concept of a “hero’s journey.” Despite the special effects, the story of Luke Skywalker is rooted in the same epic principles of Gilgamesh, of Homer, even the story of Jesus Christ. Lucas has referred to Campbell as “my Yoda” for the way he helped him tell “an old myth in a new way.” When you think about it, it’s those epic themes of humanity that are left when the newness of the special effects fall away. Why else would ten-year-olds—who weren’t even born when the second set of three movies were made, let alone the original trilogy—still be captivated by these films?
As Rick Rubin said on Tim’s podcast, he urges his bands not to listen to the radio while producing an album. He doesn’t want them thinking about what’s popular right now. “If you listen to the greatest music ever made, that would be a better way,” he says, “to find your own voice to matter today than listening to what’s on the radio and thinking: ‘I want to compete with this.’ It’s stepping back and looking at a bigger picture than what’s going on at the moment.” He also urges them not to constrain themselves simply to their medium for inspiration—you might be better off drawing inspiration from the world’s greatest museums than, say, finding it in the current Billboard charts.
As you are deciding what to make, it’s essential that you root it in what is timeless. Otherwise, it doesn’t matter how great it is in the moment—it won’t last.
Seek Out A Blue Ocean
Creators gravitate towards competition because it seems safe. If pop punk is popular, they re-tool their band because they think that’s what labels and fans are looking for. If venture capitalists are funding VR or drones, that’s the company they start. Unfortunately, this makes it harder to break through the noise.
An essential part of making perennial, lasting work is making sure that you’re pursuing the best of your ideas and that they are ideas that only you can have (otherwise, you’re dealing with a commodity and not a classic). Not only will this process be more creatively satisfying, it will be better for business. In 2005, business professors W. Chan Kim and Renée Mauborgne described a new concept that they called Blue Ocean Strategy. Instead of battling numerous competitors in a contested “red ocean,” their studies revealed that it was far better to seek fresh, uncontested “blue” water. Can you redefine or create a category, rather than compete in one?
To tell another Rick Rubin story: In 1986, he was signed on to produce the first major label album for Slayer, then a notoriously heavy but obscure metal band. The natural impulse for many would be to help the band make something more mainstream, more accessible. But Rubin knew that would be a bad choice both artistically and commercially. Instead, he helped them create their heaviest album ever—maybe one of the heaviest albums of all time: Reign in Blood.
As he recounted later, “I didn’t want to water down. The idea of watering things down for a mainstream audience, I don’t think it applies. People want things that are really passionate. Often the best version is not for everybody. The best art divides the audience. If you put out a record and half the people who hear it absolutely love it and half the people who hear it absolutely hate it, you’ve done well. Because it is pushing that boundary.”
In the short term, this choice almost certainly cost them some radio play. But when Rubin says that the best art divides the audience, he means that it divides the audience between people who don’t like it and people who really like it. Ultimately, it was the polarizing approach that turned Reign in Blood into a metal classic—an underground album that spent eighteen weeks on the charts and has sold well over two million copies to date.
When I decided to write a modern book that relied heavily on Stoic philosophy, I knew I didn’t want it to be like other books on the subject. First off, the originals like Seneca and Marcus Aurelius are so good that they are essentially impossible to beat. It would have been suicide to compete with them. Many of the subsequent books about stoicism seemed to be content to retread what these great thinkers had said and thus only reached a small niche of hardcore philosophy fans. I decided to take a different route entirely—I would illustrate Stoic principles through historical and business stories. This has angered many fundamentalists in the academic Stoic community—but that’s OK. They weren’t who I was trying to reach anyway. By creating something fresh and new I was able to find an audience that had never considered philosophy.
In the last three years, The Obstacle is the Way has sold more than 300,000 copies and is translated in more than a dozen languages. It sold more copies in 2017 than it did in 2016, and more in 2016 than it did in 2015 and 2014. That’s what can happen when you sidestep competition and create something new—while still basing it on timeless principles and ideas.
Know Your Audience
It’s important to “scratch your own itch” as the saying does, but are you actually sure people share your itch? I know you’re not going to be satisfied selling just one copy. Whatever you’re making is not for “everyone” either—not even the Bible is for everyone.
Paul Graham of startup incubator Y Combinator, which has funded over a thousand startups including Dropbox, Airbnb, and Reddit, says that “having no specific user in mind” is one of the eighteen major mistakes that kills startups: “A surprising number of founders seem willing to assume that someone—they’re not sure exactly who—will want what they’re building. Do the founders want it? No, they’re not the target market. Who is? Teenagers. People interested in local events (that one is a perennial tar pit). Or ‘business’ users. What business users? Gas stations? Movie studios? Defense contractors?”
It pays to be specific.
Think of Herb Kelleher of Southwest Airlines, who has an incredibly clear mission statement illustrated via one question: Will this help us be the lowest-cost airline? As he put it, “I can teach you the secret to running this airline in thirty seconds. This is it: We are THE low-cost airline. Once you understand that fact, you can make any decision about this company`s future as well as I can.” Because of this, his employees knew who their customers were and what those customers needed.
What to Expect When You’re Expecting is for soon-to-be parents. The person who sat down to write the song Happy Birthday was creating something for people at birthday parties (and created an incredibly valuable copyright in the process). When Susan Cain published her book about introversion, she had a very specific audience in mind: introverts. (Which has since sold over a million copies and launched a massive TED talk.) The Left Behind series is obviously for Christians. Its films, novels, graphic novels, video games, and albums are preaching with a very specific choir in mind.
The famous music promoter and later movie producer Jerry Weintraub (The Karate Kid and the Ocean’s series) has a good story in his memoir When I Stop Talking, You’ll Know I’m Dead. He once proposed renting out Yankee Stadium for a celebrity softball game with Elvis. On a day the stadium wasn’t in use, the owner of the Yankees took Weintraub out onto the field and forced him to look at all the empty seats—each one symbolizing someone who would have to be marketed to, sold, and serviced. It was a formative lesson, he said. “Whenever I am considering an idea, I picture the seats rising from second base at Yankee Stadium. Can I sell that many tickets? Half that many? Twice that many?”
What if you can identify a perennial problem and solve it? If you can create something for an audience that renews itself each year (like college grads or people turning 50)? Then you’ll have something that can last and sell by word of mouth.
The more important and perennial a problem (or, in the case of art, the more clearly it expresses some essential part of the human experience), the better chance the products that address it will be important and perennial. As Albert Brooks put it, “The subject of dying and getting old never gets old.” The filmmaker Jon Favreau, who created Swingers and Elf and directed Iron Man, has said that he aims to touch upon timeless problems and myths for specific groups of people in his work, and that all great filmmakers do as well. “The ones who get the closest to it,” he said, “last the longest.”
MARKETING A PERENNIAL SELLER
If You Don’t Care Enough To Market Your Work, Why Should An Audience Buy It?
Let’s stipulate that you have made something amazing. In some ways, now you have an even harder job ahead of you—because now you have to make people care. Art is a kind of a marathon where, when you cross the finish line, instead of a getting a medal placed around your neck, the volunteers roughly grab you by the shoulders and walk you over to the starting line of another marathon: marketing.
In a recent interview, the novelist Ian McEwan complained lightheartedly about what it was like to go out and market a book after spending all that time creating it: “I feel like the wretched employee of my former self. My former self, being the happily engaged novelist who now sends me, a kind of brush salesman or double glazing salesman, out on the road to hawk this book. He got all the fun writing it. I’m the poor bastard who has to go sell it.”
Fortunately, this is a learnable skill, and there is a process that greatly increases your likelihood of success. I’ve used this process with dozens of New York Times bestsellers, musicians whose work has been downloaded millions of times, and products and brands that have grossed hundreds of millions in sales.
Now, the bad news: no one “trick” will do the job. Marketing isn’t about hacks.
As renowned venture capitalist Ben Horowitz says: “There is no silver bullet. We’re going to have to use a whole lot of lead ones.”
What Do We Have To Work With?
The first thing you should do at the launch of any product is to sit down and look at your assets, and ask: What are we working with here? The first thing anyone planning a launch has to do is sit down and take inventory of everything they have at their disposal that might be used to get this product in people’s hands.
This asset assessment can also be used to make great products, and the process is similar, so let’s begin with an example. This was director Robert Rodriguez’s approach—now famous as the “Rodriguez List” approach—to making his award-winning movie El Mariachi. As he told Tim on their podcast together, “I just took stock of what I had. My friend Carlos, he’s got a ranch in Mexico. Okay, that’ll be where the bad guy is. His cousin owns a bar. The bar is where there’s going to be the first, initial shootout. It’s where all the bad guys hang out. His other cousin owns a bus line. Okay, there will be an action scene with the bus at some point, just a big action scene in the middle of the movie with a bus. He’s got a pitbull. Okay, he’s in the movie. His other friend had a turtle he found. Okay, the turtle’s in the movie because people will think we had an animal wrangler, and that will suddenly raise production value. I wrote everything around what we had, so you never had to go search, and you never had to spend anything on the movie. The movie cost, really, nothing.”
The point is: Not every launch is the same and every launch should be tailored around your specific needs. For instance, when we launched The 4-Hour Chef, Tim was looking at a tough retail situation because the book was published with Amazon. We put our heads together and thought about who we knew who could help. Matt Mason, then the CMO of Bittorrent was an old friend of mine. I connected him with Tim and bam—the first Bittorrent author bundle was born and was downloaded more than 2 million times. (Also see the “free” section below for more on this kind of approach.)
Without that brainstorming, one of the single best marketing strategies of that campaign never would have come together. So kick things off by doing a deep dive into:
Relationships (personal, professional, familial, or otherwise)
Research or information from past launches of similar products (what worked, what didn’t, what to do, what not to do.) (
Many of you have asked for the transcript of our conversation, so you can find it below. More accurately, it’s a draft script, so all words from Reid and other CEOs are accurate, but mine were modified substantially in the audio version. I added a lot of stories on the spot (maybe 20 minutes) that are likewise omitted.
The new 6-10 questions from me to Reid (e.g. “What book have you have reread the most?”) are not included below, but you can find them here.
Enjoy the notes and links!
TIM FERRISS: Expect rejection. But learn from every “No.” As a founder you have to be resilient, you have to learn to weather rejection. It is a universal experience. And this clip, from the Masters of Scale episode “Beauty of A Bad Idea” brings that to life. It also gives you a taste for the show’s sense of humor.
KATHRYN MINSHEW: I had been turned down 148 times.
REID HOFFMAN: That’s Kathryn Minshew, co-founder and CEO of The Muse, a career development website that she pitched to investors 148 times—not that she was counting.
MINSHEW: There were literally days where I had a “no” over breakfast, and “no” over a 10:30 AM coffee, a “no” over lunch. Disinterest at 2:00 pm, somebody who left a meeting early at 4:00. And then I would go to drinks and feel like I was being laughed out of the room.
And when we finally raised our seed round, I went back and counted. It was both painful and gratifying at the same time, looking at all those names, and thinking, “I remember that ‘no,’ I remember that ‘no,’ I remember that ‘no’”—and they sting; every one stings.
HOFFMAN: Today, the Muse serves users in the millions. Kathryn raised $16 million last year—and her tale is the origin story of most great startups. So if you’re hearing a chorus of “no”s, you should look for other signs that you’re onto something. I believe the best ideas often appear laughable at first glance.
FERRISS: Most entrepreneurs hear a chorus of “Nos” as they get started. You have to expect it. And Reid says it’s actually a good thing. You don’t WANT everyone to say yes. Here’s why:
HOFFMAN: The first truth of entrepreneurship and investing is that the very big ideas are contrarian because the contrarian is part of the reason why a bunch of large companies and competitors haven’t already done it, why a bunch of other entrepreneurs haven’t already succeeded at it. And so that leaves the space for the creation of something—and to create something big, you have to have that initial space. For example, in the early stages of Google, search was a terrible way of making money in advertising, because advertising is time-on-site. And what does search do? It shuffles you off the site as fast as you can go. That’s not a good business model. So at Airbnb it’s like, “Someone’s going to rent a couch or a room from someone else? Who are the freaks on both sides of that transaction?” So all of these things have this kind of similar quality—very smart people will tell you, there’s no there, there.
FERRISS: So it’s actually a good thing to hear a lot of “Nos.” But how do you interpret them? Reid has a great way of describing the kind of “no” you want. Apparently, you want a “squirmy” no. He explains this with help from Tristan Walker. Tristan’s company produces the Bevel razor, which is designed for men with coarse and curly hair.
HOFFMAN: So how can you tell a truly bad idea from a bad-sounding idea? How can you be sure your ugly duckling could become a swan? This is the key: You have to pay attention to the quality, not the quantity of rejections. You want to see at least a teeny minority of investors squirm. You don’t have to get them to a “yes,” but you should detect some friction, as they reason their way to a “no.”
Tristan has a keen ear for this quality in his conversations. He can pinpoint, down to the PowerPoint slide number, the moment his audience stops paying attention.
WALKER: I had a slide in there—I think it was like slide 14—where I talked about Proactiv—the acne system—as a good analogy to what we’re trying to do. It’s the difference between Gillette and Bevel, as Neutrogena and ProActiv—it’s a system that solves a very important issue. And this VC looked at me—and I’ll never forget this—he said, “Tristan, I’m not sure issues related to razor bumps, shaving or irritation are as profound and big an issue for people as acne.”
At which point, I said, “I kind of understand what you’re saying, but all you had to do was get on the phone with 10 black men, and eight of them would have said, ‘This is a permanent thing I have to deal with.’ All you had to do is get on the phone with 10 white men, four of them would have said the same thing. Could have done it for women too, and you would get the same ratios.” So it wasn’t that it was a bad idea, or not as important—it’s just that that person was unwilling to acquire the context necessary to understand what we’re working on. That’s just laziness—and at that point, I can’t fix that. So I just move on until I find somebody who understood it.
HOFFMAN: Notice how quickly Tristan’s mind moves on to the next investor. When the quality of the questions drops, he knows, mid-pitch, that the conversation is over—the rest is noise. Those half-hearted questions are like the elevator music of the pitch process. It’s meant to pacify entrepreneurs. In fact, it grates at them. It also wastes their time. Tristan will tell you he prefers a hard “no” to a comforting “maybe.”
WALKER: Silicon Valley investors will tell you all the time, “We want to invest in people who can execute with some semblance of pedigree, chasing a significant white space and a big opportunity.” For us, it was like “Check, check, check, check”—and we heard 99 percent “no”s. How much is bullshit, right? And you’re just trying to say something that I want to hear, as opposed to telling the truth. And I wish that Silicon Valley would tell the truth a little bit more.
As a partner at Greylock, I want to share what happens after an entrepreneur leaves the room, and an investor is left to mull over a crazy idea. It begins with the debrief of the investor’s partners.
If I’m presenting an idea to my partners at Greylock, and they all go, “That’s great! We should do that.” I’m like, “Shit. Here’s a bunch of hyper-smart people and no one’s saying, ‘Oh, watch out for this, or watch out for that.’” It’s too easy. The idea is so obviously good, I can already hear the stampede of competitors trampling over our hopeful little startup. On the other hand, you don’t want every person in the room to say, “Reid, you’re out of your fucking mind,” because then you’re wondering, “Hmmm, am I drinking the Kool-Aid in a very bad way?”
What you want is some people going, “You guys are out of your minds,” and some people going, “I see it.” You want a polarized reaction.
So take my decision to invest in Airbnb as an example. David Sze told me during the Airbnb de-brief:
Narrator: David Sze is a partner at Greylock Investment.
HOFFMAN: “Well, every venture capitalist has to have a deal that doesn’t work that they learn from. Airbnb can be yours.” And David Sze is a super smart VC; he invested in LinkedIn. He invested in Facebook. He invested in Pandora. He personally returned two-and-a-half billion dollars to Greylock’s funds. He’s as smart as smart money gets—and believe me, I weigh his objections carefully. If someone as smart as David disagrees with me, I worry.
But I also get excited—it’s an emotional roller coaster. And as this sort of emotional turmoil plays out in the background discussion, it’s hard to give an entrepreneur a hard “no.” The best ideas make you want to say “yes” and “no” in the same breath.
FERRISS: So you want to hear a “squirmy no.” Those are the kinds of “nos” that mean you’re on to something. But let’s be real: It’s never easy to hear “no”. In fact, it sucks. So Reid also asked a few entrepreneurs to talk about how they deal with rejection, and how they learn from rejection. This is from the Masters of Scale episode “Beauty of A Bad Idea.”
HOFFMAN: So you have to gird yourself for a string of rejections. Some entrepreneurs simply develop a thick skin. Others treat it like a normal part of their workday. You know, wake up, brush your teeth, listen to people crush your dreams. It’s a living.
But there’s another, more hopeful approach. Our producer, Dan Kedmey, talked with a number of entrepreneurs who pitched seemingly laughable ideas in all kinds of industries. Like Abby Falik, founder and CEO of Global Citizen Year. Her not-for-profit sends students abroad for a year of international service between high school and college. Back in 2008, she was struggling to get funding, and she turned to a leadership coach for advice. We asked her to share that advice.
ABBY FALIK: The “no”s are actually a gift.
HOFFMAN: You heard that right, a gift.
FALIK: And he said between now and when we talk two weeks from now, I want you to go out into the world and gather as many “no”s as you possibly can. It is your homework to be rejected over and over and over and over, and come back and report on it. And it ended up being the most important thing I could have ever done, and the most important advice I could have been given at that point.
HOFFMAN: The most successful entrepreneurs listen closely to the “no”s. They mine their rejections for clues. Kathryn Minshew, the founder of The Muse, got her share of rejections over the course of 148 “no”s she shared at the top of this episode. We asked her for the reasons that investors turned her down.
MINSHEW: “It’s a bit too early for us, but keep in touch.” “Once you hit 100,000 monthly active users, give me a call.” “This is a fool’s errand. It’s expensive. It doesn’t scale.” “That’s not very tech, that’s not a scalable platform.” “Aren’t you worried that you’re going to lose all your users once they turn 30 and have babies?” Or, “I get that women in New York and San Francisco love this product, but I think you’re going to really have a hard time finding women who care about their careers once you go outside of the coasts.” And I just remember looking at these people and thinking, “Do you know a lot of women?”
HOFFMAN: Kathryn is right to ask this question. She knows more about women than most investors, and she also knows more about her business. Entrepreneurs have to learn how to hold on to what they know through the arduous pitch process.
FERRISS: Airbnb’s Brian Chesky personally interviewed the company’s first 500 employees. It was time-consuming, painstaking work, but Brian wouldn’t have had it any other way. Patience, he says, pays dividends.
CHESKY: And one of the most important decisions a startup can make is who they hire. Because who they hire becomes them. And so we interviewed people for core values. What this ended up, and that meant we spent like four or five months to hire our first engineer. Back then a lot of people thought we were crazy because time is of the essence when you’re a startup. You’ve said it’s like jumping off a cliff and assembling the airplane on the way down. Imagine jumping off the cliff, trying to assemble the airplane on the way down, and someone’s there to help you with the airplane, and you spend five months debating whether they’ll fit the culture.
Meanwhile, the ground is coming. That takes like real patience and some courage. The reason we did that though was because we thought in the high-class event we are successful, do I want to work with 100 more people like this? Because if I hire someone, they are going to interview the new people. And so we thought of hiring as this mechanism where, do I want to, if I could hire anyone in the world, would I hire the person sitting across me, and do I want 10 or 100 more people like them?
FERRISS: But if you launch a truly successful company, eventually, the hiring process has to scale. Eric Schmidt had a lot to say about hiring quickly, but not hastily. When he was CEO of Google, the company quadrupled in size each year, while maintaining super-high standards. He told Reid how he did it:
SCHMIDT: So the company was getting very large, very quickly. And I had suggested to Larry and Sergey that there was a problem with what I called “glue people.” And glue people are very nice people who sit between functions, and help either side, but don’t themselves add a lot of value. And I thought, “These are nice people, but we don’t really need them. We can have these groups talking directly.” And Larry looked at me and says, “We could solve this problem, if you would just review all the hiring.” And I said, “Larry, we can’t look at all the hiring.” He said, “Sure we can.”
So the company, of course, invented a number of hiring algorithms, which are used throughout the industry today. Many of them include pretty aggressive hiring interviews from peers, asking people to do work, and so forth. Ultimately, the judgment has a lot to do with whether the person is interesting or not. And so we would, for example, take a position that we want to hire rocket scientists because rocket scientists are inherently interesting. And in sales, we love to hire Olympians. Or Super Bowl winners, or football players—because of the discipline that they had in their lives as young people—men and women—to get to that point indicated that an extra set of discipline.
HOFFMAN: I want to acknowledge that most companies don’t have the option of hiring rocket scientists, Olympic athletes, and Super Bowl winners. But Eric does have more pragmatic advice for companies that can’t set the bar at Himalayan heights.
SCHMIDT: So today I would suggest that—and this has since been confirmed by many studies—that persistence is the single biggest predictor of future success. And so we would look for persistence. And the second thing was curiosity. What do you care about? The combination of persistence and curiosity is a very good predictor of employee success in a knowledge economy.
ZUCKERBERG: So the single most important thing is to get the best people you can around you. When I look at my friends who were running other good companies, the single biggest difference that I see in whether the companies end up becoming really great and reaching their potential, or just pretty good, is whether they’re comfortable and really self-confident enough to have people who are stronger than them around them. I’ve adopted this hiring rule, which is that you should never hire someone to work for you, unless you would work for them in an alternate universe.
Which doesn’t mean that you should give them your job, but just if the tables were turned and you were looking for a job, would you be comfortable working for this person? I basically think that if the answer to that is “no,” then you’re doing something expedient by hiring them, but you’re not doing as well as you can on that.
There are all these things that Sheryl, for example, is just much stronger than me and that makes me better and makes Facebook better. And I am not afraid or threatened by that—I value that. That’s what makes Facebook good.
FERRISS: Of course Mark is talking about Sheryl Sandberg, COO of Facebook. And she has her own take on this rule …
SANDBERG: The lesson everyone talks about, but I really mean, is you really do want to hire people who are better than you are, and who are different than you are. This is where we talk about diversity. I don’t just mean racial, national, age, gender. All of that diversity is super important. In addition to that cognitive diversity, which you get from all those backgrounds, but also just personality diversity.
If you are a white male who likes to code and sci-fi movies, you probably don’t want your whole team to be that. I think about David Fischer. David Fischer and I have worked together at Treasury, at Google, and at Facebook. Personality types were just very different. I’m much more up and down. I will get nervous something’s not moving fast enough. I will be exuberant, and I will be down. Not David. David is absolutely calm. Over decades of working together, that balance has really been important, because sometimes I’ll look at David and say, “This is an emergency.” He’ll say, “No it’s not Sheryl, calm down.”
And sometimes I’ll say, “David, you’re not moving fast enough,” and he’ll say, “You’re right.” I think Mark and I have that too. We are very different. We are separated by—obviously, gender, 15 years, he’s my boss, he’s 15 years younger. Completely different personalities, completely different working styles—and I think’s that served Facebook well.
FERRISS: In order to scale, you have to do things that don’t scale.It may sound counter-intuitive. But in order to scale, you have to get your hands dirty. Hand-craft the core experience. Serve your customers one-by-one. And don’t stop until you know exactly what they want. That’s what Airbnb CEO Brian Chesky did.
On the first episode of Masters of Scale, Brian took Reid back to his lean years — when he went door-to-door, meeting Airbnb hosts in person. This clip we’re going to hear starts with Brian recalling a conversation he had in 2009 with Paul Graham, the founder of Y Combinator, who gave him some perplexing advice….
CHESKY: And he asked us, “Where’s your business?” And I go, “What do you mean?” “Where’s your traction?” And I go “We don’t have a lot of traction.” He goes, “People must be using it.” I said, “There are a few people in New York using it.” And he said something I’ll never forget. He said, “So your users are in New York and you’re still in Mountain View.” I said, “Yeah.” And he said, “What are you still doing here?” And I go, “What do you mean?” He said, “Go to your users. Get to know them. Get your customers one by one.” And I said, “But that won’t scale. If we’re huge and we have millions of customers we can’t meet every customer.” And he said, “That’s exactly why you should do it now because this is the only time you’ll ever be small enough that you can meet all your customers, get to know them, and make something directly for them.”
HOFFMAN: Brian and his co-founders followed his advice to the letter.
CHESKY: We literally commuted to New York from Mountain View. So we would be in Y Combinator for Tuesday night dinners and then Wednesday Joe and I would go to New York. We literally would knock on the doors of all of our hosts. We had their addresses and we say, “Knock knock. Hello. Hey, this is Brian, Joe, we’re founders and we just want to meet you.”
HOFFMAN: Now, it’s a little creepy to just knock on the door unannounced.
CHESKY: We needed an excuse to get into their home.
HOFFMAN: So they come up with an offer that hosts couldn’t refuse.
CHESKY: We’d send a professional photographer to your home and photograph your home. Of course, we didn’t have any money and we couldn’t employ photographers. So Joe and I, we’d show up at their door and they’re like “Wow. This company is pretty small.”
HOFFMAN: These home visits became Airbnb’s secret weapon. It’s how they learned what people loved.
CHESKY: It’s really hard to get even 10 people to love anything but it’s not hard if you spend a ton of time with them. If I want to make something amazing, I just spend time with you. And I’m like, “Well what if I did this, what if I did this, what if I did this?”
HOFFMAN: From those questions, a handcrafted experience is born.
CHESKY: We’d find out “Hey, I don’t feel comfortable with the guest. I don’t know who they are.” “Well what if we had profiles?” “Great!” “Well what do you want in your profile?” “Well I want a photo.” “Great. What else?” “I want to know where they work, where they went to school.” “OK.” So you add that stuff. And then you literally start designing touchpoint by touchpoint. The creation of the peer review system, customer support, all these things came from us literally—we didn’t just meet our users, we lived with them. And I used to joke that when you bought an iPhone Steve Jobs didn’t come sleep on your couch, but I..
Dr. Peter Diamandis (@PeterDiamandis) has been named one of “The World’s 50 Greatest Leaders” by Fortune magazine. In the field of innovation, Diamandis is Chairman and CEO of the XPRIZE Foundation, best known for its $10 million Ansari XPRIZE for private spaceflight. Today the XPRIZE leads the world in designing and operating large-scale global competitions to solve market failures.
Peter has been a guest on the podcast twice (once with Tony Robbins, and again solo), and in this guest post, he shares information he’s never discussed before. Specifically, Diamandis looks back at his XPRIZE experience and the strategic decisions that allowed the foundation to become a success.
Peter knows how to think and play big, and he can show you how to do the same. Enjoy!
The XPRIZE – which launched the private spaceflight industry – was an “overnight success” after 10 years of hard work.
During those 10 years, I recorded a number of “go-to” lessons that I learned and used over and over to help me succeed.
In all, I came up with a list of 28 of those lessons, and they became known as “Peter’s Laws.”
But 9 of them are my favorite, and in this post, I’ll outline them and detail the key takeaways. If you want to learn about all of the lessons, they are highlighted in the book, How To Make A Spaceship, written by Julian Guthrie, with a foreword by Richard Branson and an afterword by Steven Hawking.
One thing is clear from my XPRIZE story: attitude is the ball game. Mindset matters. It’s everything. It might be cliché, but whether you think you can or you can’t—well, you’re right.
Your mindset is more important than anything. It’s even more important than technology or income. I hope that these will clarify your vision and be useful to you.
Rule #1: When given a choice…take both!
Society teaches us that when you’re given a choice, you have to choose one. Why? Why do you have to choose?
But you should be asking, “Why choose?”
All throughout graduate school, I was told, “Go to school or start a company.”
For me, the answer was both. In fact, I started three companies while in grad school. Steve Jobs did the same with Apple and Pixar. Elon Musk is running Tesla and SpaceX; he’s also chairman of SolarCity. And Branson — well, Branson’s Virgin Group has started over 300 Virgin companies and built eight different billion-dollar companies in eight different industries.
So, I challenge you: When someone says choose vanilla or chocolate, say, “I’ll have them both, please.” Multiple projects lead to multiple successes.
Rule #2: “No” simply means begin again at one level higher.
When someone says “no” to your request, often it’s because that person isn’t empowered to say “yes,” and the only person who can say “yes” is the person at the top of the food chain.
This is one of the reasons it took me 10 years to get Zero Gravity Corporation, my commercial parabolic flight company, started. I had to battle an entire FAA bureaucracy that insisted it was not possible to operate large-scale zero gravity flight operations for the public, despite the fact that NASA had been doing it for 40 years.
Ultimately, because there was some risk, none of the mid-level bureaucrats had the power to say “yes.” At last, my request made it all the way up to the FAA Administrator, an amazing woman who told me, “Of course, you should be able to do this – let’s figure out how.”
Rule #3: Patience is a virtue, but persistence is a blessing.
If I had to name my superpower, it would be persistence – not giving up, even when everyone tells me it isn’t going to work.
My most important successes (companies like the Zero Gravity Corporation, XPRIZE, and Planetary Resources) have taken me 10 years or more to implement.
What good is patience without persistence? Doing anything big and bold in life is hard work, and learning to persist is fundamental to your success.
Another name for this superpower is ‘grit.’ This is your will to keep pushing, iterating, and taking the next step in the face of hardship.
Remember that failure is only inevitable when you give up.
Rule #4: The squeaky wheel gets replaced.
In this age of abundance, where you can access whatever you need, whenever you need it… don’t settle. Demand the best.
It used to be that the supply of talent, technology or treasure (i.e. money) was scarce. That is no longer the case.
If someone or something in your organization is a squeaky wheel, rather than tolerating or greasing them, you’re probably better off finding someone who fits your team’s ethos, vision and mindset.
Would you rather spend your time with your best performers helping them grow and get even better, or spend time with your squeakiest wheels dealing with their issues?
Your time as a leader is limited – use it to build an incredible team.
Rule #5: The best way to predict the future is to create it yourself.
The future is not written. It’s not preordained. It unfolds as a result of our actions… the choices we make and the risks we take.
This is actually the model for my life. I wanted to predict a future in which there would be private commercial spaceflight, so I launched the $10 million XPRIZE. Private spaceflight simply didn’t exist.
I’ve predicted a future in which we’ll have asteroid mining, so I cofounded Planetary Resources. I want to live a long and healthy life, so I cofounded Human Longevity, Inc.
Ultimately, isn’t this exactly what it means to be an entrepreneur? An entrepreneur clearly envisions the future and becomes so enamored with it that they turn their thoughts into reality and will the future they desire into existence.
Rule #6: An expert opinion is not the final word.
When I announced the XPRIZE, many of the “experts” in the aerospace industry explained to me why I was naive and wouldn’t succeed.
In 1714, when the Longitude Board (composed of the world’s greatest Royal Astronomers) saw a working clock built by watchmaker John Harrison meet all of the requirements of the Longitude Prize, they refused to pay him the purse because they were absolutely sure it would be won by an astronomer.
In a rather perverse twist, an expert is massively disincentivized to promote someone else’s radical and disruptive solution. This is because new inventions that result in wholesale change cause a shift where “experts” can be transformed into “has-beens.”
Some experts are therefore inspired and committed to keeping things exactly the way they are. That’s why it’s important to always think in terms of what can be done.
Rule #7: Most breakthroughs begin as a crazy idea.
I first heard a variation of this concept from Burt Rutan, the man who designed and built SpaceShipOne, the brilliant launch vehicle that won the $10M Ansari XPRIZE.
As Rutan explained it to me – as described in How to Make a Spaceship – a small incremental improvement is not a breakthrough.
For example, a computer that is 50% faster than last year’s model is predictable and expected. But going from computers based on vacuum tubes to computation based on silicon wafers is a breakthrough.
So my question to you is: Where in your organization do you allow for crazy ideas to be tried and tested? How are you creating space for yourself to imagine and experiment with crazy ideas?
If you don’t try this — if you are risk adverse and stick with safe, proven steps — then you’re ultimately stuck with incremental progress, not breakthroughs.
One more thing: Burt Rutan also likes to say he finds breakthroughs where others see nonsense. It’s no surprise that he has six first-of-a-kind planes in the Smithsonian Air and Space Museum.
Rule #8. If it were easy, it would have been done already.
Doing anything big and bold is hard work.
Going after an easy, quick win either means you’re not trying to change the world or you’ve got a false grip on reality.
With five billion connected people with access to Google and Amazon Web Services, you can expect that the easy stuff has been tried and conquered.
If you’re working on something you truly care about solving, it’s hard to do and you don’t see anyone else trying, that’s a pretty good indication that you’re on a path to solve something significant and worth pursuing.
Don’t fear hard work. Celebrate it as a measure of the size of the dent you are making in the universe!
Rule #9: The world’s most precious resource is a passionate mind.
I’m often struck by the ability of a single individual to change the world.
Think Thomas Edison, Henry Ford, Elon Musk, Larry Page, Richard Branson, Martin Luther King and Mahatma Gandhi, to name a few. They each started with no money or technological advantage, just passion and perseverance.
Ultimately, three things make anything possible: People, technology, and money. If you have the right people and enough money, you can create the technology — that’s called innovation. If you have the right people and the right technology, you can attract the funding — that’s called venture capital.
But money and technology alone, without the persistent and passionate human mind driving you forward, will never change the world.
Doing something big and bold — taking risks that benefit you and can benefit society — means overcoming extraordinary hurdles.
It means attacking a challenge with all of your energy and focus, and many times remaining motivated for a decade or more.
Such passion and commitment can only come when you are emotionally committed with all of your heart and soul. And this level of commitment only materializes when your goal is powered by intense emotional energy.
There is nothing more powerful in your life than a cause you would willingly die for, whether it is your family or a belief you hold fundamental to your existence.
Following this passion is how you create a world worth living, a life that wakes you up in the morning and gets you excited.
I was lucky to find one of my abiding passions in childhood. I watched the landing of Apollo 11 in July 1969 and knew I had to get to space and get my friends there too. Listen to your heart, and don’t let those dreams die.
Out of 300,000+ podcasts on iTunes, it’s generally the #1 business podcast and an overall top-25 podcast
Won “Podcast of the Year” in 2015 for the Jamie Foxx episode (via Product Hunt)
I’ve certainly stumbled a lot, but that’s how you figure things out.
I’ll share the first batch of big lessons in this post. If you like it, there’s a whole lot more to divulge (e.g. exactly how I get guests, etc.). If the response is a collective “meh,” I’ll play with my dog instead.
I’ve formatted this little ditty as a Q&A, based on the most common questions from readers, podcasters, and journalists.
Hope you find it useful!
The overarching principles explored apply to a whole lot more than podcasting…
QUESTION: Why did you start the podcast? How has it evolved over 150 episodes?
The podcast was never intended to be a business.
I was burned out after The 4-Hour Chef, which was nearly 700 pages, and I wanted a casual but creative break from big projects. Since I enjoyed being interviewed by Joe Rogan, Marc Maron, Nerdist, and other podcasting heavies who really move the needle, I decided to try long-form audio for six episodes. If I didn’t enjoy it, I would throw in the towel and walk.
My rationale: Worst-case scenario, the experience would help me improve my interviewing, which would help later book projects. This is a great example of what Scott Adams, creator of Dilbert, would call “systems” (win even if you lose) thinking. He discusses this at length with me here.
Flash forward to the current day, the podcast has found a nest in my “business,” but there is a clear hierarchy. Here are the pieces, in descending order of importance:
1) E-mail newsletter and “5-Bullet Friday” — Unlike, say, Facebook or Twitter, I own this communication directly and it’s less subject to the whims of algorithm changes (e.g. “Oops! Now you only reach 10% of your audience.”). Some people insist that e-mail is dead for younger generations, and they’re right… until those young people get jobs. E-mail will stick around for a while, despite attempts to kill it.
It’s still the most reliable delivery mechanism, although mobile push notifications are increasingly interesting to me. Though I use Slack for internal team communication, email is still #1 for external.
2) Blogand website — Based on WordPress VIP, ditto for the above. Even if Automattic goes out of business (disclosure: I’m an advisor, so I think this unlikely), WordPress is open source and I’ll survive. Video and audio are fantastic, but few things travel as well as text. Unlike video and audio, I feel there is a greater appreciation of page value with solid long-form, evergreen text content. The vast majority of my most popular posts are years old (e.g. Hacking Kickstarter: How to Raise $100,000 in 10 Days, Scientific Speed Reading). The best SEO is good, non-newsy content that remains relevant for years.
3) Podcast — This is the fastest growing piece of the puzzle, and I’m heavily investing here. Unlike the above two, audio can be a secondary activity. In other words, people can listen to my podcast when they commute, cook, walk the dog, work, etc. There’s also no degradation of experience when moving from laptop to mobile. Last but not least, I’m currently having the most fun with audio.
All that said, I put “business” in quotation marks in this answer because I don’t rely on my writing, etc. for money.
The majority of my finances come from early-stage startup investing, which I started in 2007 (portfolio) and stopped about six months ago. For this reason, I don’t feel pressured to monetize, per se. I put out what I want to put out, when I want to put it out, and that’s it.
Paradoxically, this seemingly lax approach appears to generate more revenue than if I focused on pushing product. My fan dedication (and occasional conversion) is high precisely because I don’t constantly bombard them with sales pitches and calls to action. Sure, I could make $5-10M additional per year for 1-3 years until I burned my audience out, but these people (you!) are worth far more to me than that. They’re a high-calibre bunch, people I want to be friends with rather than irritate.
QUESTION: Does the podcast make any money directly, though?
Yes. If I wanted to fully monetize the show at my current rates, I could make between $2-4M per year, depending on how many episodes (“eps”) and spots I offer.
So why “if I wanted to fully monetize?” Because “fully monetizing”–bleeding the stone for all it’s worth–is nearly always a mistake, in my opinion.
I want to convert casual listeners into die-hard, fervent listeners, and I want to convert casual sponsors into die-hard, fervent sponsors. This requires two things: 1) Playing the long game, and 2) Strategically leaving some chips on the table. As a mentor once told me, “You can shear a sheep many times, but you can skin him only once.”
So, don’t skin your fuckin’ sheep, kids. In practical terms…
The podcast over-delivers for sponsors (here’s one example), partially because I deliberately undersell downloads. If I hypothetically get 1M downloads per episode, I might only guarantee (and charge for) 750K downloads. This has attracted and kept sponsors ranging from Audible and Wealthfront to MeUndies and 99Designs.
I don’t have any sophisticated “funnel” or loss-leader campaign. I charge each sponsor per thousand downloads/listens that I guarantee. This cost per thousand (e.g. downloads, impressions, delivered email, etc.) is abbreviated as “CPM,” and the amount you charge per M (“thousand” in Roman numerals) is your “CPM rate.”
I’m not going to give my exact rates in this post, but I’ll give you something better: the bigger picture.
Premium podcasts tend to charge between $25-100 CPM. By “premium,” I mean high-converting, (often) single-host (due to Oprah-like sales impact), iTunes top-50 podcasts.
Let’s look at some numbers. If you can hypothetically guarantee 100,000 downloads per episode, as measured at six weeks post-publication (which seems standard for some odd reason), here is how the math shakes out at different CPM rates:
$50 CPM x 100,000 = 50 x 100 = $5,000 per sponsor per episode
$75 CPM x 100,000 = $7,500 per sponsor per episode
$100 CPM x 100,000 = $10,000 per sponsor per episode
Now, if a podcaster can guarantee 500,000 or 1M downloads/listens, you can see how the numbers add up.
To put these rates in context with other advertising, consider banner ads and email newsletters targeting high HHI (household income) demographics.
On the cheaper end, display/banner ads often cost less than $10 CPM, but a high-converting email newsletter can sell ads/sponsorship at $200-250+ CPM (with no guarantee of opening, only delivery). Premium podcasts currently fall in the middle.
Some podcasts charge $100 CPM or more and are worth it, but… I like setting numbers I can easily beat.
Any marginal short-term loss is made up for by repeat sponsors and larger, long-term purchase orders. I also rig the game to tilt ROI for sponsors by including blog posts (~2.5M uniques/month), e-mail newsletter (500K-1,000,000+ with sharing), and social (2M+) in the podcast sponsorship versus charging separately a la carte. That might change, but it currently guarantees that 90%+ of my sponsorships clobber competitors, as the cumulative CPM is probably 50% below market.
(Related: If you spend at least $100K per year in marketing and are interested in test sponsoring the podcast, click here for more. Minimum test spend is, at least, $50K-$100K. Seriously inquiries only, please, and pricing is non-negotiable.)
Note to everyone asking “How do I get sponsors?”: It’s critical to realize that I didn’t accept advertisers for the podcast until I had 100,000+ downloads per episode, as measured six weeks after publication.
Novice podcasters (which I was) and bloggers get too distracted in nascent stages with monetization. In the first 3-9 months, you should be honing your craft and putting out increasingly better work. Option A: you can waste 30-50% of your time to persuade a few small sponsors to commit early and stall at 30,000 downloads per episode because you’re neglecting creative. Option B: you can play the long game, wait 6-12 months until you have a critical mass, then you get to 300,000 downloads per ep and make 10x+ per ep with much larger brands. If you can afford it, don’t be in a rush. Haste makes waste; in this case, it can make the difference between $50,000 per year and $1,000,000+ per year. To reiterate a phrase more often used for blogging: “Good content is the best SEO.” Read The 22 Immutable Laws of Marketing to be different, not just incrementally better.
But…all this advertising talk is important to consider in the context of higher-level strategies. In podcasting, it’s easy to get stuck in the CPM and what-preamp-do-I-need? weeds. Decide on your larger framework and philosophy first.
Example — In general and across the board, I split my content in a very binary fashion: free or ultra-premium.
“Free” means that 99% of what I do is free to the world (e.g. podcast, blog) or nearly free (books). I write on topics A) that I enjoy and want to learn more about, and B) that I think will attract intelligent, driven, and/or accomplished people. This is what allows “ultra-premium.”
Once in a blue moon, I offer a high-priced and very limited product or opportunity, such as an event with 200 seats at $7,500-$10,000 per seat. I can sell out a scarce, ultra-premium opp within 48 hours with a single blog post.
I use the network and contacts I’ve built through “free” to find excellent non-content opportunities. I already mentioned one example: my early-stage tech investing. This came from the first book, blog, and social. I found Shopify, for instance, via my fans on Twitter while updating The 4-Hour Workweek. I started advising Shopify when they had ~10 employees. Now they have 1,000+ and are a publicly traded company (SHOP).
An openness to indirect paths means I don’t obsess over selling my content, and I never have. If the podcast sponsorship stuff turns into a headache, I’ll just drop it. Not to beat a dead horse, but let’s restate the most important takeaway — my network, built through writing, is my net worth. That travels with me. If you’d like more practice thinking laterally, try the work of Edward de Bono as an introduction.
Back to the money…
Whenever possible, I avoid what I consider the “blood-bath zone” — products or services priced from $20-100. This is where your customers will be at least 1/3 high-maintenance and cost-sensitive. For my minimalist preferences and operation, that’s too much customer service headache for the ROI, unless it’s automated like my book club with Audible.
[Afterword: I asked my Managing Editor to proofread this post, and he gave me the below comment. I’ve decided to simply copy and paste it.]
*** Tim: I think you should dig in more on just how much money you actually pass up. Including:
1) You don’t do more than 2 sponsors per ep (you could).
2) You vet [and use] all products and turn down >80% of advertisers.
3) You turn down sponsors that want you to do ridiculous reads. I’ve seen it multiple times where advertisers are like, “We need this to be longer” and you tell them to fuck off. This is important. You value your listener waaaaaaay more than they ever realize, and do it to the tune of legitimately millions “lost.” It’s not lost, but is worth mentioning and understanding.
4) You want the ads–like the content–to add value. You’re hoping when you hear it for the first time that you think it’s cool, new, different, or interesting. Otherwise, you wouldn’t share. When you hear it the 4th time, are you tired of it? Maybe. But your fourth time might be someone else’s first. It’s like complaining about shared content on social media. Just because you’ve experienced something before, that doesn’t mean everyone has, and your job is to best serve the audience. You do pre/post roll [instead of mid-roll] to make avoiding this easy: if you don’t like it, they can simply fast forward.
QUESTION: What’s your long-term revenue strategy with the podcast?
There is no long-term revenue strategy. I focus solely on making it as fun as possible for me to do. But — perhaps this itself is a solid strategy, not a lack of one. Simple can be effective. At least 50% of the venture capitalists I’ve met over the years laughed at my simplistic “scratch my own itch” investing approach. Net-net, I’ve now beaten most of their IRR. (Don’t get me wrong; many investors perennially kick my ass.)
For me, the moral of the story is this: Revenue opportunities often present themselves if you focus on creating something you’d pay for yourself. If you can easily sell it to 10 friends and do some basic market research on top of that, the odds improve.
Of course, “scratching your own itch” doesn’t always work, but I think of it as necessary but not sufficient. If you have enough at-bats, and if you know how to limit losses (knowing when to fold ’em and walk away, like my six-episode commitment), you’ll eventually hit the ball.
The recipe is straightforward — Study the craft like it’s your job (e.g. Find people like master interviewer Cal Fussman), make yourself smile, don’t rush, don’t whore yourself, test a lot of wacky ideas, and think laterally. If you want to increase your income 10x instead of 10%, the best opportunities are often seemingly out of left field (e.g. books → startups).
Just remember that, even in a golden age, podcasting is a squirrely opportunity and not a panacea on a silver platter. Even if you work smart, you still have to do the work and take your lumps.
Amelia Boone, the world’s top female obstacle racer, said on my podcast that she’d put the following on a billboard: “No one owes you anything.” I think that’s a good mantra for life.
Try your best, take notes, and do better the next time.
For post-production and editing, I used Garageband for the first 30-40 episodes, but I now outsource to people who use primarily Ableton and Hindenburg. The simplicity of the latter is very appealing to me, but as a pure editor, it doesn’t include sound effects, transitions, etc. as a Garageband does.
For free options, Audacity is also popular. My suggestion: use the simplest editing software you can, or pay someone to do it for you. If Garageband appears too amateur for your first 1-3 episodes, I’d bet money you quit before episode 5. Keep it simple.
I host episodes on Libsyn for reasons I can elaborate on in future posts.
Regarding consumption and promotion — I love Marco Arment’sOvercast, both as a listener (smart speed) and podcaster (can link to specific time stamps). My wish and ask for them: to embed a small player on my blog instead of having to link out.
QUESTION: Is it too late to start a podcast? Don’t you feel pressured by all the competition? it seems like thousands launch every week.
Competition makes you better.
Everyone should try podcasting for at least 3-6 episodes, even if just to get better at asking questions and eliminating verbal tics. Those gains transfer everywhere.
If someone ends up better than me (or ranking better than me), they deserve to beat me. I’ll be the first person to buy them a beer. Remember that podcasting isn’t a zero-sum game, and a rising tide raises all ships (Check out the “Serial effect”). There’s plenty of room for more good shows, and the pie is expanding. Bring your A game and the cream will rise to the top.
Of course, you don’t need to be perfect (and you won’t be), but you need to try your best. As Michael Gerber, author of The E-Myth Revisited, told me over coffee before I wrote
Ramit Sethi is on the short list of people I respect in the world of finance. In a space saturated by gurus who promote one method of investing and then follow another, Ramit has always been willing to share real numbers. And as a guest on the podcast, he also revealed many of his best successes and experiments.
Ramit built his personal finance blog up to more than 1 million+ readers per month, and has turned it into a revenue generating monster and a growing business with more than 30 employees.
I asked Ramit to dig into the specific details of his most recent success: a $5 million week. Here’s the blueprint he used to make it happen. Enjoy!
Real-World Blueprint for a $5-Million Week
In April 2014, our business generated $5,524,714 over the span of 6 days.
In this post, I’ll show you the launch formula and strategies I used to grow a blog from $0 in revenue to a multi-million-dollar business.
Quick caveat: I had no idea that my blog — which I started from my dorm room in 2004 as a hobby — would ever turn into a “real” business.
The first version of my site was focused on personal finance.
Notice the horrible design and lack of any business model. It was just a hobby!
Along the way, I learned that you can create a business using your own rules.
These are the lessons you won’t learn in any MBA program, but they can be the difference between launching a product that struggles…and one that generates millions of dollars, year after year.
This is the deeper side of business that’s not often talked about. Most of the advice I found when I started my business focused on tools and “hacks,” like A/B tests on headlines…but very little about what happens at higher levels of business. That’s why I decided to write up what I’ve learned.
Since I never expected this to become a real business, I experienced the journey with a blank canvas, in a sense. Everything was new. I didn’t know what I was “supposed” to do, so I tried it all. Over 11 years, we made some unconventional decisions in our business. Some were big mistakes. Others paid off.
Now let me show you how we got to a $5 million week.
* * *
“It’s Not Magic, it’s Math”
I used to look at other entrepreneurs who seemed to intuitively “know” what products to create, how much to charge, etc. Years later, I learned they actually used sophisticated models to help them make decisions. (Weird how they failed to mention that.)
Over time, I learned that it’s not magic — it’s math.
Let me show you a simple version of these models, which can help you understand where to spend your time and where to not waste it.
Take a look at what it takes to generate $1 million over five years:
Let’s ignore what the product actually is. We can figure that out later. For now, just focus on the numbers.
Here are a few things to notice and consider:
Isn’t it surprising how you can sell 30x more of the $50 product, but the $2,000 product still generates more revenue? (Of course, it’s much harder to sell a $2,000 product than a $50 product.)
These estimates are conservative: I chose 15 sales/month because anybody can achieve that with a little bit of work. I chose 5 years because — who knows? — maybe you’ll decide to move on and do something else. I like to be conservative in my projections.
QUESTION: Based on what you just read, would you create a $50 product or a $2,000 product? (Hint: There are successful businesses at either price point. Each has trade-offs. For instance, you could create a $50 product in a month or two, offer it for sale, and get market feedback FAST. A $2,000 product will take considerably longer — months, if not years. But the long-term rewards can be worth millions.)
Now here’s how we might get to $5 million:
Things to note:
Here, we have the exact same 3 products, but a higher number of sales. If you want more sales, there are two primary ways to do it: more traffic or higher conversions. Simple and straightforward.
If someone buys from you once and likes what they get, they are far more likely to buy again. In our own analysis, a customer is 2,300% more likely to buy from us than a non-customer.
QUESTION: Should you optimize for more customers or more revenue? Based on the numbers above, if you had to choose, what would you do? For instance, with a lower-priced product, you’ll need a lot of customers to make substantial revenue (the “McDonald’s model”). Alternatively, you could sell a higher-price product and profit from fewer customers — but those take longer to build and test (the “Rolls Royce model”).
Now let’s get even more sophisticated: Let’s say we wake up and realize that selling a $50 product is a lot of work for a small return, so we decide to add a subscription product.
This is starting to get really interesting.
Subscription revenue is considered “high-quality” revenue since it’s recurring. In other words, it really adds up, which is why businesses like Netflix are so amazing.
QUESTION: Can you spot which factors we’re leaving out to keep the model simple? (For example, retention, refund rates, cost of marketing, taxes…) That’s intentional. If this simplified model shows that you can’t realistically make a profit, none of that stuff matters. You only need to pay attention to these details if the model says the opportunity is worth pursuing.
What do you take away from the 3 examples above?
For me, seeing these numbers raised a lot of questions. Can an entrepreneur really survive selling a $5 or even $20 product? If you’re Procter & Gamble, sure. If you’re Alex The New Entrepreneur, that’s going to be tough. (Especially since low-price customers are lower quality, ask for refunds more often, and often make your life a living hell.)
Now let’s go one level deeper. Instead of just asking ourselves how many sales we need to make, we wanted to “stress test” our idea to see if it’s even realistic:
I don’t know about you, but I have no damn clue how to get 100,000,000 to visit my website. But I knew I could find a way to get 250,000 to find me.
By the way, this isn’t all-or-nothing. If you can’t find 250,000 visitors, you can start with 50,000 or even 5,000.
Let’s say instead of 250,000 visitors (which takes a lot of time to get) you have just 1,000 email subscribers. Also, instead of creating a $2,000 product (also tough when you’re starting out) you build a $250 product.
Using the same math above — a 1% conversion rate — you could earn $2,500 per month from just those 1,000 people.
Kevin Kelly calls this the 1,000 True Fans approach, where even 1,000 true fans can fund you for life:
A creator, such as an artist, musician, photographer, craftsperson, performer, animator, designer, videomaker, or author – in other words, anyone producing works of art – needs to acquire only 1,000 True Fans to make a living.
This is pretty amazing if you want to create something with impact. It means you don’t always need venture capital fundraising. It also means that 1,000 “true” fans are worth more than 100,000 vaguely interested readers.
We actually have data to support the “1,000 True Fans” idea. Take a look at the difference between a dedicated group of “true” fans vs. a larger group of onlookers.
Here, we got virtually identical sales from a small group of 10,422 customers vs. a larger group of 178,111 subscribers
We got more sales from a much smaller, focused list than a huge list of 178,711 subscribers! You don’t need everyone — you just need the right people.
And just like you don’t need 250,000 people on day one, you don’t need all 1,000 True Fans on day one. If I were starting from scratch today, here’s how I’d frame it:
“Yes, 1,000 fans would be amazing, but I can start with 1 fan. And if I can get 1 fan, I know I can get 10 fans. Then 100. And once I have 100, I know I’m onto something.”
Nobody builds a massive audience overnight. I wish I could go back in time and shake myself to stop comparing myself to people who’d been in business for years and years. Trust your models, put in the work, and your business will grow.
I used these simple models that told me some basic things:
How much could a $50 product generate vs. a $2,000 one
You don’t need $10 million in venture capital to start a business
In the beginning, you just need a few fans who love you instead of aiming for tons of people.
Were these models perfect? No. Later, when my business grew, I showed these models to more sophisticated entrepreneurs. They laughed.
But you don’t always need the fanciest tools to grow. These models were good enough to take me from idea, to launch, to sales. Leave perfection to losers. “Good enough” is the motto of every entrepreneur who lives to fight another day.
Once I started generating a little revenue, I noticed something I wouldn’t have expected.
The World Wants You to be Vanilla
Have you ever noticed how the minute you start trying something new, the entire damn world tells you what you should do?
“So you’re just one of those scammy ebook guys who writes those long sales pages?”
If you’re ever tried to change your diet, you know what happens: Your boss, your aunt, and your garbage man all start giving you their advice.
I got this a lot. People would laugh at the name of my book (Tim and I both joke that we have the scammiest sounding book titles of all time). They told me my headshot sucked. And they had all kinds of tips for places I needed to advertise, including buying random people McDonald’s meals and talking to them about personal finance. Never ask the general public for marketing advice.
Here’s an unexpected lesson I learned: The world wants you to be vanilla. They want you to be the same as everyone else. But the minute you are, they abandon you.
They’ll try to get you to charge less. They’ll critique your design. But as soon as you conform…you look like everyone else. And in a world full of websites and ebooks and apps, if you look like everyone else, you’re dead.
When I started growing business, I realized something: I could choose. This was MY business. I didn’t have to follow someone else’s formula to be successful.
This post will attempt to teach you how to say “no” when it matters most.
At the very least, it will share my story of getting there. It’s a doozy.
Here’s the short version:
I’m taking a long break from investing in new startups. No more advising, either. Please don’t send me any pitches or introductions, as I sadly won’t be able to respond. Until further notice, I am done. I might do the same with interviews, conferences, and much more.
Now, the longer version for those interested:
This post will attempt to explain how I think about investing, overcoming “fear of missing out” (FOMO), and otherwise reducing anxiety.
It’s also about how to kill the golden goose, when the goose is no longer serving you.
I’ll dig into one specifically hard decision — to say “no” to startup investing, which is easily the most lucrative activity in my life. Even if you don’t view yourself as an “investor”—which you are, whether you realize it or not—the process I used to get to no should be useful…
[Warning: If you’re bored by investment stuff, skip the next two bulleted lists.]
Caveat for any investing pros reading this:
I realize there are exceptions to every “rule” I use. Most of this post is as subjective as the fears I felt.
My rules might be simplistic, but they’ve provided a good ROI and the ability to sleep. Every time I’ve tried to get “sophisticated,” the universe has kicked me in the nuts.
Many startup investors use diametrically opposed approaches and do very well.
There are later-stage investments I’ve made (2-4x return deals) that run counter to some of what’s below (e.g. aiming for 10x+), but those typically involve a discount to book value, due to distressed sellers or some atypical event.
Many concepts are simplified to avoid confusing a lay audience.
I will be returning all unallocated capital in my private Stealth Fund on AngelList. If you’re an investor in that fund, you’ll be getting your remaining money back. My public Syndicate will remain in place for later re-entry into the game.
So, why am I tapping out now and shifting gears?
Below are the key questions I asked to arrive at this cord-cutting conclusion. I revisit these questions often, usually every month.
I hope they help you remove noise and internal conflict from your life.
The Road to No
ARE YOU DOING WHAT YOU’RE UNIQUELY CAPABLE OF, WHAT YOU FEEL PLACED HERE ON EARTH TO DO? CAN YOU BE REPLACED?
Standing in a friend’s kitchen downing eggs, lox, and coffee, we spoke about our dreams, fears, obligations, and lives. Investing had become a big part of my net-worth and my identity. Listing out the options I saw for my next big moves, I asked him if I should raise a fund and become a full-time venture capitalist (VC), as I was already doing the work but trying to balance it with 5-10 other projects. He could sense my anxiety. It wasn’t a dream of mine; I simply felt I’d be stupid not to strike while the iron was hot.
He thought very carefully in silence and then said: “I’ve been at events where people come up to you crying because they’ve lost 100-plus pounds on the Slow-Carb Diet. You will never have that impact as a VC. If you don’t invest in a company, they’ll just find another VC. You’re totally replaceable.”
He paused again and ended with, “Please don’t stop writing.”
I’ve thought about that conversation every day since.
For some people, being a VC is their calling and they are the Michael Jordan-like MVPs of that world. They should cultivate that gift. But if I stop investing, no one will miss it. In 2015, that much is clear. There have never been more startup investors, and–right along with them–founders basing “fit” on highest valuation and previously unheard of terms. There are exceptions, of course, but it’s crowded. If I exit through the side door, the startup party will roll on uninterrupted.
Now, I’m certainly not the best writer in the world. I have no delusions otherwise. People like John McPhee and Michael Lewis make me want to cry into my pillow and brand “Poser” on my forehead.
BUT… if I stop writing, perhaps I’m squandering the biggest opportunity I have—created through much luck—to have a lasting impact on the greatest number of people. This feeling of urgency has been multiplied 100-fold in the last two months, as several close friends have died in accidents no one saw coming. Life is fucking short. Put another way: a long life is far from guaranteed. Nearly everyone dies before they’re ready.
I’m tired of being interchangeable, no matter how lucrative the game. Even if I’m wrong about the writing, I’d curse myself if I didn’t give it a shot.
Are you squandering your unique abilities? Or the chance to find them in the first place?
HOW OFTEN ARE YOU SAYING “HELL, YEAH!”?
Philosopher-programmer Derek Sivers is one of my favorite people.
Those of you who often over-commit or feel too scattered may appreciate a new philosophy I’m trying: If I’m not saying “HELL YEAH!” about something, then I say no.
Meaning: When deciding whether to commit to something, if I feel anything less than, “Wow! That would be amazing! Absolutely! Hell yeah!” – then my answer is no. When you say no to most things, you leave room in your life to really throw yourself completely into that rare thing that makes you say “HELL YEAH!”
We’re all busy. We’ve all taken on too much. Saying yes to less is the way out.
To become “successful,” you have to say “yes” to a lot of experiments. To learn what you’re best at, or what you’re most passionate about, you have to throw a lot against the wall.
Once your life shifts from pitching outbound to defending against inbound, however, you have to ruthlessly say “no” as your default. Instead of throwing spears, you’re holding the shield.
From 2007-2009 and again from 2012-2013, I said yes to way too many “cool” things. Would I like to go to a conference in South America? Write a time-consuming guest article for a well-known magazine? Invest in a start-up that five of my friends were in? “Sure, that sounds kinda cool,” I’d say, dropping it in the calendar. Later, I’d pay the price of massive distraction and overwhelm. My agenda became a list of everyone else’s agendas.
Saying yes to too much “cool” will bury you alive and render you a B-player, even if you have A-player skills. To develop your edge initially, you learn to set priorities; to maintain your edge, you need to defend against the priorities of others.
Once you reach a decent level of professional success, lack of opportunity won’t kill you. It’s drowning in 7-out-of-10 “cool” commitments that will sink the ship.
These days, I find myself saying “Hell, yes!” less and less with new startups. That’s my cue to exit stage left, especially when I can do work I love (e.g. writing) with 1/10th the energy expenditure.
I need to stop sowing the seeds of my own destruction.
HOW MUCH OF YOUR LIFE IS MAKING VERSUS MANAGING? HOW DO YOU FEEL ABOUT THE SPLIT?
As Brad Feld and many others have observed, great creative work isn’t possible if you’re trying to piece together 30 minutes here and 45 minutes there. Large, uninterrupted block of time — 3-5 hours minimum — create the space needed to find and connect the dots. And one block per week isn’t enough. There has to be enough slack in the system for multi-day CPU-intensive synthesis. For me, this means at least 3-4 mornings per week where I am in “maker” mode until at least 1pm.
If I’m in reactive mode, maker mode is all but impossible. Email and texts of “We’re overcommitted but might be able to squeeze you in for $25K. Closing tomorrow. Interested?” are creative kryptonite.
I miss writing, creating, and working on bigger projects. YES to that means NO to any games of whack-a-mole.
WHAT BLESSINGS IN EXCESS HAVE BECOME A CURSE? WHERE DO YOU HAVE TOO MUCH OF A GOOD THING?
In excess, most things take on the characteristics of their opposite. Thus:
Pacifists become militants.
Freedom fighters become tyrants.
Blessings become curses.
Help becomes hinderance.
More becomes less.
In my first 1-2 years of angel investing, 90%+ of my bets were in a tiny sub-set of startups. The criteria were simple:
Consumer-facing products or services
Products I could be a dedicated “power user” of, products that scratched a personal itch
Initial target demographic of 25-40-year old tech-savvy males in big US cities like SF, NYC, Chicago, LA, etc. (allowed me to accelerate growth/scaling with my audience)
<$10M pre-money valuation
Demonstrated traction and consistent growth (not doctored with paid acquisition).
No “party rounds”—crowded financing rounds with no clear lead investor. Party rounds often lead to poor due diligence and few people with enough skin in the game to really care.
Checking these boxes allowed me to add a lot of value quickly, even as relatively cheap labor (i.e. I took a tiny stake in the company). Shopify is a great example, which you can read about here (scroll down).
My ability to help spread via word of mouth, and I got what I wanted: great “deal flow.” Deals started flowing in en masse from other founders and investors.
Fast forward to 2015, and great deal flow is now paralyzing the rest of my life. I’m drowning in inbound.
Instead of making great things possible in my life, it’s preventing great things from happening.
I’m excited to go back to basics, and this requires cauterizing blessings that have become burdens.
WHY ARE YOU INVESTING, ANYWAY?
For me, the goal of “investing” has always been simple: to allocate resources (e.g. money, time, energy) to improve quality of life. This is a personal definition, as yours likely will be.
Some words are so overused as to have become meaningless. If you find yourself using nebulous terms like “success,” “happiness,” or “investing,” it pays to explicitly define them or stop using them. “What would it look like if I had (or won at) ___ ?” helps. Life favors the specific ask and punishes the vague wish.
So, here: to allocate resources (e.g. money, time, energy) to improve quality of life.
This applies to both the future and the present. I am willing to accept a mild and temporary 10% decrease in current quality of life (based on morale in journaling) for a high-probability 10x return, whether the ROI comes in the form of cash, time, energy, or otherwise. That could be a separate blog post, but conversely:
An investment that produces a massive financial ROI but makes me a complete nervous mess, or causes insomnia and temper tantrums for a long period of time, is NOT a good investment.
I don’t typically invest in public stocks for this reason, even when I know I’m leaving cash on the table. My stomach can’t take the ups and downs, but—like drivers rubbernecking to look at a wreck—I seem incapable of not looking. I will compulsively check Google News and Google Finance, despite knowing it’s self-sabotage. I become Benjamin Graham’s Mr. Market. As counter-examples, friends like Kevin Rose and Chris Sacca have different programming and are comfortable playing in that sandbox. They can be rational instead of reactive.
Suffice to say — For me, a large guaranteed decrease in present quality of life doesn’t justify a large speculative return.
One could argue that I should work on my reactivity instead of avoiding stocks. I’d agree on tempering reactivity, but I’d disagree on fixing weaknesses as a primary investment (or life) strategy.
All of my biggest wins have come from leveraging strengths instead of fixing weaknesses. Investing is hard enough without having to change your core behaviors. Don’t push a boulder up a hill just because you can.
Public market sharks will eat me alive in their world, but I’ll beat 99% of them in my little early-stage startup sandbox. I live in the middle of the informational switch box and know the operators.
From 2007 until recently, I paradoxically found start-up investing very low-stress. Ditto with some options trading. Though high-risk, I do well with binary decisions. In other words, I do a ton of homework and commit to an investment that I cannot reverse. That “what’s done is done” aspect allows me to sleep well at night, as there is no buy-sell choice for the foreseeable future. I’m protected from my lesser, flip-flopping self. That has produced more than a few 10-100x investments.
In the last two years, however, my quality of life has suffered.
As fair-weather investors and founders have flooded the “hot” tech scene, it’s become a deluge of noise. Where there were once a handful of micro VCs, for instance, there are now hundreds. Private equity firms and hedge funds are betting earlier and earlier. It’s become a crowded playing field. Here’s what that has meant for me personally:
I get 50-100 pitches per week. This creates an inbox problem, but it gets worse, as…
Many of these are unsolicited “cold intros,” where other investors will email me and CC 2-4 founders with “I’d love for you to meet A, B, and C” without asking if they can share my e-mail address
Those founders then “loop in” other people, and it cascades horribly from there. Before I know it 20-50 people I don’t know are emailing me questions and requests.
As a result, I’ve had to declare email bankruptcy twice in the last six months. It’s totally untenable.
Is there a tech bubble? That question is beyond my pay grade, and it’s also beside the point.
Even if I were guaranteed there would be no implosion for 3-5 years, I’d still exit now. Largely due to communication overload, I’ve lost my love for the game. On top of that, the marginal minute now matters more to me than the marginal dollar.
But why not cut back 50%, or even 90%, and be more selective? Good question. That’s next…
ARE YOU FOOLING YOURSELF WITH A PLAN FOR MODERATION?
The first principle is that you must not fool yourself and you are the easiest person to fool.
– Richard P. Feynman
Where in your life are you good at moderation? Where are you an all-or-nothing type? Where do you lack a shut-off switch? It pays to know thyself.
The Slow-Carb Diet succeeds where other diets fail for many reasons, but the biggest is this: It accepts default human behaviors versus trying to fix them. Rather than say “don’t cheat” or “you can no longer eat X,” we plan weekly “cheat days” (usually Saturdays) in advance. People on diets will cheat regardless, so we mitigate the damage by pre-scheduling it and limiting it to 24 hours.
Outside of cheat days, slow carbers keep “domino foods” out of their homes. What are domino foods? Foods that could be acceptable if humans had strict portion control, but that are disallowed because practically none of us do. Common domino foods include:
Domino triggers aren’t limited to food. For some people, if they play 15 minutes of World of Warcraft, they’ll play 15 hours. It’s zero or 15 hours.
For me, startups are a domino food.
In theory, “I’ll only do one deal a month” or “I’ll only do two deals a quarter” sound great, but I’ve literally NEVER seen it work for myself or any of my VC or angel friends. Sure, there are ways to winnow down the pitches. Yes, you can ask “Is this one of the top 1-2 entrepreneurs you know?” to any VC who intro’s a deal and reject any “no”s. But what if you commit to two deals a quarter and see two great ones the first week? What then? If you invest in those two, will you be able to ignore every incoming pitch for the next 10 weeks?
For me, it’s all or nothing. I can’t be half pregnant with startup investing. Whether choosing 2 or 20 startups per year, you have to filter them from the total incoming pool.
If I let even one startup through, another 50 seem to magically fill up my time (or at least my inbox). I don’t want to hire staff for vetting, so I’ve concluded I must ignore all new startup pitches and intros.
Know where you can moderate and where you can’t.
YOU SAY “HEALTH IS #1″…BUT IS IT REALLY?
After contracting Lyme disease and operating at ~10% capacity for nine months, I made health #1. Prior to Lyme, I’d worked out and eaten well, but when push came to shove, “health #1” was negotiable. Now, it’s literally #1. What does this mean?
If I sleep poorly and have an early morning meeting, I’ll cancel the meeting last-minute if needed and catch up on sleep. If I’ve missed a workout and have a con-call coming up in 30 minutes? Same. Late-night birthday party with a close friend? Not unless I can sleep in the next morning. In practice, strictly making health #1 has real social and business ramifications. That’s a price I’ve realized I MUST be fine paying, or I could lose weeks or months to sickness or fatigue.
Making health #1 50% of the time doesn’t work. It’s absolute — all or nothing. If it’s #1 50% of the time, you’ll compromise precisely when it’s most important.
The artificial urgency common to startups makes mental and physical health even more challenging. I’m tired of unwarranted last-minute “hurry up and sign” emergencies and related fire drills. It’s a culture of cortisol.
ARE YOU OVER-CORRELATED?
[NOTE: Two investors friends found this bullet slow, as they’re immersed in similar subjects. Feel free to skip if it drags on, but I think there are a few important novice concepts in here.]
“Correlated” means that investments tend to move up or down in value at the same time.
As legendary hedge fund manager Ray Dalio told Tony Robbins: “It’s almost certain that whatever you’re going to put your money in, there will come a day when you will lose 50 percent to 70 percent.” It pays to remember that if you lose 50%, you need a subsequent 100% return to get back to where you started. That math is tough.
So, how to de-risk your portfolio?
Many investors “rebalance” across asset classes to maintain certain ratios (e.g. X% in bonds, Y% in stocks, Z% in commodities, etc.). If one asset class jumps, they liquidate a part of it a buy more of lower performing classes. There are pros and cons to this, but it’s common practice.
Since I can’t sell, the simplest first step for lowering stress is to stop investing in illiquid assets.
I’ve sold large portions of liquid stocks—mostly early start-up investments in China–to help get me to “sleep at night” levels, even if they are lower than historical highs of the last 6-12 months. Beware of anchoring to former high prices (e.g. “I’ll sell when it gets back to X price per share…”). I only have 1-2 stock holdings remaining.
Some of you might suggest hedging with short positions, and I’d love to, but it’s not my forte. If you have ideas for doing so without huge exposure or getting into legal gray areas, please let me know in..
The following is a guest post by Breanden Beneschott, co-founder and COO of Toptal, a marketplace for top developers. I have no affiliation with the company, but I found Breanden’s story fascinating.
This post covers how he traveled through 20+ countries while building a company, experiencing the best the world had to offer. His how-to instructions include travel tools, shortcuts, and all the non-obvious systems you’d expect from a great engineer.
For context and to kick us off, an excerpt from Breanden’s email to me might be helpful. Edited down a bit, here it is:
We started Toptal 3.5 years ago from my dorm room at Princeton (I think a week after I met you briefly in Ed Zschau’s class [TIM: I guest lectured there], where I decided to do my final paper on the company). By the time I finished school six months later, Toptal was doing well with clients and engineers all over the world. We decided to move to Eastern Europe and keep practicing what we were preaching, in terms of scaling a company via a completely distributed team. Doing so allowed us to funnel nearly all profits back into growing the business (and live like kings for next to nothing). We are now approx 60 team members and 1000 engineers (e.g., top-100 Rails contributors, guys from CERN, university professors, etc.) working with thousands of clients (e.g., Beats, Zendesk, Artsy, JPMorgan, etc.) with virtually zero restrictions when it comes to location.
People constantly ask me how I manage to travel and work the way I do. I had always hoped outside (non-Toptal) people would see this post and be inspired to join us or pick up and travel while working on their own big ideas.
BTW, I do expect that comments will highlight the ambiguity of the “growing hundreds of percent year over year” statement. We’ve very deliberately avoided most press until now, as we didn’t want to build a company based on PR, and we’ve never publicly announced our revenue. Right now we are well north of XXM/yr [TIM: I replaced the actual number with XX but, suffice to say, they have 9-figure acquisition offers and term sheets] and growing like a weed, but few non-core people know that. So do you see any tactful way of preempting those sorts of comments?
Yep, I do. I could include your email like I just did.
[The following is based on my personal experience as a traveling engineer and founder. Feel free to contact me any time at breanden [at] toptal [dot] com.]
I’ve lived and worked remotely in approximately 29 countries since I finished school three years ago. I’ve been running Toptal, a venture funded company growing hundreds of percent year over year—all from my laptop, phone, and tablet.
Croatia · Bosnia · Italy · France · Switzerland · Germany · Austria · Georgia · Romania · Serbia · Slovenia · Spain · Ukraine · Morocco · Brazil · Canada · Paraguay · Argentina · Uruguay · New Zealand · Australia · Hong Kong · USA · England · Turkey · Chile · Slovakia · Czech Republic · Lebanon
I don’t have an apartment. I don’t have a house. I don’t have an office.
I hate the cold, so I summer hop.
Everywhere I go, I meet great engineers who end up becoming invaluable parts of Toptal.
I encourage everyone in Toptal to travel, and a lot of us do. Some of us travel for week long “breaks” throughout the year, and some of us live out of a suitcase like me. Few of us ever stop working for a full day.
I’m writing this because…
I was repeatedly asked if I had some sort of guide or checklist for traveling/working the way I do. Especially for first-timers, the idea of adventuring while working can be daunting. There are a lot of details to consider, and I’ve learned a lot from my own trial-and-error.
The more I thought about it, the more I realized a guide like this was actually missing.
The 4-Hour Workweek was great, and I like Tim Ferriss a lot. But what if you want to work more than 4 hours a week? I like working crazy hours. I don’t want a lifestyle company. I want to solve hard problems. I want to build something big and give it my all.
I want a book on how to create a billion-dollar company while becoming a fighter pilot. (I’m trying to build a world-changing company while becoming a professional polo player.) That would be inspiring. But until it comes, maybe this post will be helpful to a few people.
Because it’s unbelievably awesome. Now is the time: it’s feasible like never before. You can put in a full work day no matter where you are. If you’re standing in line for airport security, you can listen to The Changelog. If you’re in the Hungarian countryside, you can work perfectly via 4G. If you’re flying across the world, you can work from the moment you buckle in to the moment you stand up to get off the plane. The airport will have WiFi to push a commit if your plane didn’t. You can travel while producing some of the best work of your career, and you will grow with every new stamp in your passport.
The secret benefit: avoiding burnout. I don’t take vacations. I don’t want to work hard to build a company that makes lots of money so I can piss off and go on holiday. I’m at a start-up. I’m a part of it, and it’s a part of me. This is a marathon, and there will be a winner. Traveling and working allows you to go non-stop. There is no burnout. There’s no staring at a clock or calendar waiting for the EOD/weekend/break. You’re refreshed weekly, and you can hone your focus and structure your time so you are a cross functional superstar who never stops learning.
Playing polo (often with Toptal developers) in Argentina. Total cost for sponsorship: 400 pesos (~$40) for t-shirts.
Length of travel
I usually stay in places for ~3 months. Why?
It fits under the constraints of the typical tourist visa. More on that in a second.
It gives you time to relax and focus in between the stressful travel sessions. Power trips of 9 countries in 3 weeks are for students on holiday. You need to be able to stop traveling and focus on work.
It gives you time to really explore and get to know a place and people. There are almost certainly local tech meetups, and there are likely to be other Toptal engineers wherever you go now as well.
You can really try local culture. Learn to play polo in Argentina. Practice capoeira in Brazil. Go to trance festivals in Europe. If you don’t know where to start, join Internations and go to expat meetups.
It helps with costs. Trips of this duration help you negotiate special medium-term deals on apartments, cars, vespas, etc.
Who to go with
A close friend/colleague You can split costs for a lot of things like cars, hotels, etc. You can also split the research and push each other to do things you might not do yourself (like go out to new places, go on adventures, rent a boat, etc.).
Alone Not for the faint of heart, but not everyone has the flexibility you do as a software engineer. If you don’t have anyone to go with, don’t let it stop you. With Internations and a network like Toptal, you can almost certainly go anywhere and immediately find people with lots in common.
A girlfriend/boyfriend Can be by far the most expensive option, but it’s probably the most rewarding and fun. Nothing brings compatible people together like adventure. However, nothing drives incompatible people apart like stress, so be careful. The other thing to consider is whether your significant other will also be working during your travels. If so, that’s tremendous, and you are very lucky. If not, that can be very hard. The added costs of having a dependent aside, you don’t want to be in a position where someone resents you for constantly working during what they’ve misunderstood to be a vacation. Luckily there are many interesting careers in addition to software engineering that are now doable remotely (e.g., executive assistant, translator, designer, tutor, entrepreneur, etc.).
Unlocked Smartphone Get a local SIM card (usually a prepaid or pay-as-you-go for between $20-$50 at T-Mobile, Vodafone, etc., with a few GBs of data that you can top up as-needed) everywhere you go so you can always be online and never stress about what you’re missing. Don’t leave the store until you have the phone in your hands with working Internet. If you’re on an iPhone 5, you can almost always cut a micro SIM to fit the nano SIM and it will work just fine.
Tablet You’re an engineer. Use Airdisplay to enable your tablet as a second monitor. It also makes it much easier to work on planes: I used an iPad Mini to write this post on a flight from LAX to Auckland, New Zealand.
GPS I rent cars and explore places a lot, so this is key. I have a Garmin Nuvi. I try to download the maps before I leave to go to anywhere new.
Apple headphones For work, I use the ones that come with everything Apple. They never fail, and I live on Skype. I see lots of people with more expensive systems and they constantly have problems. It’s pointless.
Travel adapter You’ll use this everywhere. If you ever find yourself without one, ask the hotel if they have an extra.
New whiteboard marker It saves the day at least a couple times a year, whether it’s because you’re collaborating in a co-working space and all the markers are dead or you need to work out something John Nash-style.
Passport Take photos of this on your phone and also email them to yourself.
Insurance card Take photos of this on your phone and also email them to yourself.
Probiotics For digestion. Traveling can be stressful, and new foods do unexpected things.
Don’t let yourself expire. Like wearing boat shoes? Put a dab on your feet as well.
Checked on flights. Leave your Louis Vuitton luggage at home. It just makes you a target, and your stuff will get stolen. Some people swear by expensive luggage, but I’ve used a basic 5-piece luggage set since I graduated high school in 2004, and it’s worked fine.
Clothes. You can figure out the basics but I usually carry the following:
Running shoes. Running is a great way to explore places. [TIM: Bruce Lee had a similar philosophy while shooting films.]
Flip flops. For gyms, pools, and beaches.
Aka the “toy bag”; also checked on flights.
Snowboards, polo equipment, surf boards, or whatever you need for your specific trip. It sounds strange, but always make sure your stuff is clean. Some countries (like New Zealand) are very protective, and if there’s dirt, sand, grass, hair, etc. on your stuff, they may take everything and sanitize it for you (in God knows what) at the airport, or even confiscate it.
Where to stay
Try NomadList for selecting a city.
The data here does not match my own experience in many cases, but, overall, it gives a pretty good overview of some of the important aspects you’ll want to consider for each location you choose.
Airbnb is what I use most, but it’s a PITA [pain in the ass] for medium-term stays. I see a need in the market for medium-term rentals. If you know of a better solution, please let me know! Unless you’re booking far in advance (something I find impossible), you’ll find Airbnb places might be available for a month straight except for one or two weekends where you’ll have to either temporarily move out or find another place. Don’t get too comfortable. I’ve had success asking the Airbnb hosts if they have recommendations on medium-term housing. They often have friends with unlisted places or can make special arrangements for you (like getting an apartment ready that they weren’t renting at all before… and since you’re there, you can check it out before you commit). Once you’ve stayed with them via Airbnb, you’ve earned their trust a bit, and they’re usually very helpful.
You need great Internet. So, for now, Antarctica is out. But most places are totally fine (and often better than in the US). However, you have to do your homework. As a traveling software engineer, you can never be unavailable due to bad Internet. Buy a pay-as-you-go SIM first thing, but still be sure to explicitly ask every host/hotel/realtor etc. what the Internet speeds are.
Here’s my standard message when making an inquiry on Airbnb:
Your apartment looks amazing. Any chance it’s available tonight for two people?
Also, as engineers, we do a lot of our work online, so we really need stable and quick internet. Do you know the speed of your connection (e.g., 10Mbs/2Mbps)? If not, would you mind running a little test (just google “internet speed test” and click the first result) and letting me know?
Thank you so much for your consideration.
Every hotel will say their Internet is great, but you can usually find reviews about how good their Internet really is on
This post is adapted from his new book, SMARTCUTS, and it will teach you a few things:
How to use strategic “laziness” to dramatically accelerate progress
How “DHH” became a world-class car racer in record time, and how he revolutionized programming (they’re related)
A basic intro to computer programming abstraction
Note: the technical aspects of programming have been simplified for a lay audience. If you’d like to point out clarifications or subtleties, please share your thoughts in the comments! I’d love to read them, as I’m thinking of experimenting with programming soon.
Enter Shane Snow
The team was in third place by the time David Heinemeier Hansson leapt into the cockpit of the black-and-pink Le Mans Prototype 2 and accelerated to 120 miles per hour. A dozen drivers jostled for position at his tail. The lead car was pulling away from the pack—a full lap ahead.
This was the 6 Hours of Silverstone, a six-hour timed race held each year in Northamptonshire, UK, part of the World Endurance Championship. Heinemeier Hansson’s team, Oak Racing, hoped to place well enough here to keep them competitive in the standings for the upcoming 24 Hours of Le Mans, the Tour de France of automobile racing.
Heinemeier Hansson was the least experienced driver among his teammates, but the Oak team had placed a third of this important race in his hands.
Determined to close the gap left by his teammate, Heinemeier Hansson put pedal to floor, hugging the curves of the 3.7-mile track that would be his singular focus for the next two hours. But as three g’s of acceleration slammed into his body, he began to slide around the open cockpit. Left, then right, then left. Something was wrong with his seat.
In endurance racing, a first place car can win a six- or 12-hour race by five seconds or less. Winning comes down to two factors: the equipment and the driver. However, rules are established to ensure that every car is relatively matched, which means outcomes are determined almost entirely by the drivers’ ability to focus and optimize thousands of tiny decisions.
Shifting attention from the road to, say, a maladjusted driver’s seat for even a second could give another car the opportunity to pass. But at 120 miles per hour, a wrong move might mean worse than losing the trophy. As Heinemeier Hansson put it, “Either you think about the task at hand or you die.”
Turn by turn, he fought centrifugal force, attempting to keep from flying out while creeping up on the ADR-Delta car in front of him.
And then it started to rain…
When Heinemeier Hansson walkedonto the racing scene in his early 30s, he was a virtual unknown, both older and less experienced than almost anyone in the leagues. A native of Denmark, he’s tall, with a defined jaw and dark spikey hair. At the time he raced 6 Hours of Silverstone, it had been about five years since he first drove any car at all.
That makes him one of the fastest risers in championship racing.
Despite that, Heinemeier Hansson is far better known among computer programmers—where he goes by the moniker DHH— than car enthusiasts. Though most of his fellow racers don’t know it, he’s indirectly responsible for the development of Twitter. And Hulu and Airbnb. And a host of other transformative technologies for which he receives no royalties. His work has contributed to revolutions, and lowered the barrier for thousands of tech companies to launch products.
All because David Heinemeier Hansson hates to do work he doesn’t have to do.
DHH lives and works by a philosophy that helps him do dramatically more with his time and effort. It’s a principle that’s fueled his underdog climbs in both racing and programming, and just might deliver a win for him as the cars slide around the rainslicked Silverstone course.
But to understand his smartcut, we must first learn a little bit about how computers work.
Think of the way a stretch of grass becomes a road. At first, the stretch is bumpy and difficult to drive over. A crew comes along and flattens the surface, making it easier to navigate. Then, someone pours gravel. Then tar. Then a layer of asphalt. A steamroller smooths it; someone paints lines. The final surface is something an automobile can traverse quickly. Gravel stabilizes, tar solidifies, asphalt reinforces, and now we don’t need to build our cars to drive over bumpy grass. And we can get from Philadelphia to Chicago in a single day.
That’s what computer programming is like. Like a highway, computers are layers on layers of code that make them increasingly easy to use. Computer scientists call this abstraction.
A microchip—the brain of a computer, if you will—is made of millions of little transistors, each of whose job is to turn on or off, either letting electricity flow or not. Like tiny light switches, a bunch of transistors in a computer might combine to say, “add these two numbers,” or “make this part of the screen glow.”
In the early days, scientists built giant boards of transistors, and manually switched them on and off as they experimented with making computers do interesting things. It was hard work (and one of the reasons early computers were enormous).
Eventually, scientists got sick of flipping switches and poured a layer of virtual gravel that let them control the transistors by typing in 1s and 0s. 1 meant “on” and 0 meant “off.” This abstracted the scientists from the physical switches. They called the 1s and 0s machine language.
Still, the work was agonizing. It took lots of 1s and 0s to do just about anything. And strings of numbers are really hard to stare at for hours. So, scientists created another abstraction layer, one that could translate more scrutable instructions into a lot of 1s and 0s.
This was called assembly language and it made it possible that a machine language instruction that looks like this:
could be written more like this:
MOV AL, 61h
which looks a little less robotic. Scientists could write this code more easily.
Though if you’re like me, it still doesn’t look fun. Soon, scientists engineered more layers, including a popular language called C, on top of assembly language, so they could type in instructions like this:
C translates that into assembly language, which translates into 1s and 0s, which translates into little transistors popping open and closed, which eventually turn on little dots on a computer screen to display the words, “Hello World.”
With abstraction, scientists built layers of road which made computer travel faster. It made the act of using computers faster. And new generations of computer programmers didn’t need to be actual scientists. They could use high-level language to make computers do interesting things.
When you fire up a computer, open up a web browser, and buy a copy of my book online for a friend (please do!), you’re working within a program, a layer that translates your actions into code that another layer, called an operating system (like Windows or Linux or MacOS), can interpret. That operating system is a probably built on something like C, which translates to Assembly, which translates to machine language (1s and 0s), which flips on and off a gaggle of transistors.
So, why am I telling you this? In the same way that driving on pavement makes a road trip faster, and layers of code let you work on a computer faster, hackers like DHH find and build layers of abstraction in business and life that allows them to multiply their effort.
I call these layers platforms.
At college in the early aughts, DHH was bored. Not that he couldn’t handle school intellectually. He just didn’t find very much of it useful.
He practiced the art of selective slacking. “Some of my proudest grades were my lowest grades,” he tells me.
We all know people in school and work with a masterful ability to maintain the status quo (John Bender on The Breakfast Club or the bald, coffee-swilling coworker from Dilbert), but there’s a difference between treading water and methodically searching for the least wasteful way to learn something or level up, which is what DHH did.
“My whole thing was, if I can put in 5 percent of the effort of somebody getting an A, and I can get a C minus, that’s amazing,” he explains. “It’s certainly good enough, right? [Then] I can take the other 95 percent of the time and invest it in something I really care about.”
DHH used this concept to breeze through the classes that bored him, so he could double his effort on things that mattered to him, like learning to build websites. With the time saved, he wrote code on the side.
One day, a small American web-design agency called 37signals asked DHH to build a project management tool to help organize its work. Hoping to save some time on this new project, he decided to try a relatively new programming language called Ruby, developed by a guy in Japan who liked simplicity. DHH started coding in earnest.
Despite several layers of abstraction, Ruby (and all other code languages) forces programmers to make countless unimportant decisions. What do you name your databases? How do you want to configure your server? Those little things added up. And many programs required repetitive coding of the same basic components every time.
That didn’t jibe with DHH’s selective slacking habit. “I hate repeating myself.” He almost spits on me when he says it.
But conventional coders considered such repetition a rite of passage, a barrier to entry for newbies who hadn’t paid their dues in programming. “A lot of programmers took pride in the Protestant work ethic, like it has to be hard otherwise it’s not right,” DHH says.
He thought that was stupid. “I could do a lot of other interesting things with my life,” he decided. “So if programming has to be it, it has to be awesome.”
So DHH built a layer on top of Ruby to automate all the repetitive tasks and arbitrary decisions he didn’t want taking up his time. (It didn’t really matter what he named his databases.) His new layer on top of programming’s pavement became a set of railroad tracks that made creating a Ruby application faster. He called it Ruby on Rails.
Rails helped DHH build his project—which 37signals named Basecamp—faster than he could have otherwise. But he wasn’t prepared for what happened next.
When he shared Ruby on Rails on the Internet, programmers fell in love with it. Rails was easier than regular programming, but just as powerful, so amateurs downloaded it by the thousands. Veteran coders murmured about “real programming,” but many made the switch because Rails allowed them to build their projects faster.
The mentality behind Rails caught on. People started building add-ons, so that others wouldn’t have to reinvent the process of coding common things like website sign-up forms or search tools. They called these gems and shared them around. Each contribution saved the next programmer work.
Suddenly, people were using Ruby on Rails to solve all sorts of problems they hadn’t previously tackled with programming. A toilet company in Minnesota revamped its accounting system with it. A couple in New Jersey built a social network for yarn enthusiasts. Rails was so nice that more people became programmers.
In 2006 a couple of guys at a podcasting startup had an idea for a side project. With Rails, they were able to build it in a few days—as an experiment—while running their business. They launched it to see what would happen. By spring 2007 the app had gotten popular enough that the team sold off the old company to pursue the side project full time. It was called Twitter.
A traditional software company might have built Twitter on a lower layer like C and taken months or years to polish it before even knowing if people would use it. Twitter—and many other successful companies—used the Rails platform to launch and validate a business idea in days. Rails translated what Twitter’s programmers wanted to tell all those computer transistors to do—with relatively little effort. And that allowed them to build a company fast. In the world of high tech—like in racing—a tiny time advantage can mean the difference between winning and getting passed.
Isaac Newton attributed his success as a scientist to “standing on the shoulders of giants”—building off of the work of great thinkers before him.
Platforms are tools and environments that let us do just that. It’s clear how using platforms applies in computer programming, but what if we wanted to apply platform thinking to something outside of tech startups?
Say, driving race cars?
David Heinemeier Hansson was in a deep hole. Halfway through his stint, the sprinkling rain had become a downpour. Curve after curve, he fishtailed at high speed, still in third place, pack of hungry competitors at his rear bumper.
LMP cars run on slick tires—with no tread—for speed. The maximum surface area of the tire is gripping the road at any moment. But there’s a reason street vehicles have grooves in them. Water on the road will send a slick tire drifting, as the smooth rubber can’t channel it away. Grooved tires push water between the tread, giving some rubber grip and preventing hydroplaning. The slicker the tires—and the faster the speed—the more likely a little water will cause a car to drift.
That’s exactly what was happening to the LMP racers. As the rain worsened, DHH found himself sliding around the inside of a car that was sliding all over the race track. Nearby, one driver lost grip, slamming into the wall.
Cars darted for the pits at the side of the track, so their teams could tear off the slick tires and attach rain tires. Rain tires are safer, but slower. And they take a precious 13-plus seconds to install. By the time the car has driven into the pits, stopped, replaced the tires, and started moving again, more than a minute can be lost.
DHH screamed into his radio to his engineer, Should I pit in for new tires?
Like I said, DHH wasn’t the most experienced racer. He had gotten into this race because he was skilled at hacking the ladder. A few years into 37signals’s success, and with Rails taking a life of its own, Hansson had started racing GT4—essentially souped-up street cars—in his spare time.
Initially, he finished in the middle of the pack with the other novices. But after studying videos of master drivers, he started placing higher. High enough that after six races, he was allowed to enter into GT3 races (the next level up), despite zero first-place wins. In GT3, he raced another six times, placing first once, third another time. He immediately parlayed up to GTE (the “E” is for “endurance”). While other racers duked it out the traditional way, spending a year in each league, and only advancing after becoming league champion, DHH “would spend exactly the shortest amount of time in any given series that I could before it was good enough to move up to the next thing.”
There’s no rule that says you have to win the championship to advance from GT4 to GT3. Nor is there a rule saying you have to spend a year in a given league before moving up. That’s just the way people did it. Instead, DHH compressed what normally takes five to seven years of hard work into 18 months of smart work. “Once you stop thinking you have to follow the path that’s laid out,” he says, “you can really turn up the speed.”
On the rainy Silverstone course, however, parlays couldn’t help him anymore, and slacking was not an option. DHH had to drive as fast as safely possible, and every microsecond counted. In such tight competition, the only edge a racer had was raw driving skill.
Or, as it turned out, a better platform.
SHOULD I PIT IN? The man who hates repeating himself repeated over the radio. I’m going to end up in the wall!
His engineer told him to tough it out. The rain is about to clear up.
G-force pounding his body, DHH cautiously hugged the curves for another lap, and sure enough, the downpour began to subside. By two laps the course was dry. Heinemeier Hansson’s slick tires gripped the track with more friction than his competitors’ newly fitted rain tires and he sped ahead. The other drivers now had to pit back in for slick tires, for a total of nearly two minutes’ delay that DHH entirely avoided.
At the end of his leg of the relay, DHH jumped from the car, having demolished the competition.
The slick tires provided DHH a platform advantage, more leverage to drive faster with the same pedal-to-floor effort. And though driving slick in the rain had been risky, his skill learned by imitating master racers kept him alive.
Reflecting on his rapid ascent in racing, DHH says, “You can accelerate your training if you know how to train properly, but you still don’t need to be that special. I don’t think I’m that special of a programmer or a businessperson or a race car driver. I just know how to train.”
DHH had proven he had the skill to race. Videos of master drivers had helped him to learn quickly. His tire advantage had pushed him ahead of equally skilled drivers, and propelled him to the next level. And the advanced racing leagues themselves became a platform that forced him to master the basics—and faster—than he would have at a lower level.
When DHH returned to visit his home race track in Chicago, the same set of drivers still dominated the lower leagues.
Dr. Peter H. Diamandis is the Chairman and CEO of the X PRIZE Foundation, and co-Founder and Chairman of the Singularity University, a Silicon Valley-based institution partnered with NASA, Google, Autodesk and Nokia. Dr. Diamandis attended MIT, where he received his degrees in molecular genetics and aerospace engineering, as well as Harvard Medical School where he received his M.D.
He’s no underachiever.
I’ve known Peter for many years, both as a friend and as advising faculty at Singularity University. He is known for being incredibly resourceful, but it’s his ability to teach and catalyze resourcefulness that impresses me most.
Here is a short essay from Peter on exactly this. Enjoy…
In 1997 Apple introduced its “Think Different” advertising campaign with the now famous declaration: “Here’s to the crazy ones”:
Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes . . . the ones who see things differently — they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world are the ones who do.
If you were to just hear these words, they’d seem like bravado — marketingspeak from a company not known for marketingspeak. But Apple coupled sight to sound. Accompanying those words were images: Bob Dylan as a misfit; Dr. Martin Luther King Jr. as a troublemaker; Thomas Edison as the one without respect for the status quo. Suddenly everything changes. Turns out this campaign is not all bluster. In fact, it seems to be a fairly accurate retelling of historical events.
The point, however obvious, is pretty fundamental: you need to be a little crazy to change the world, and you can’t really fake it.
If you don’t believe in the possibility, then you’ll never give it the 200 percent effort required. This can put experts in a tricky situation. Many have built their careers buttressing the status quo, reinforcing what they’ve already accomplished, and resisting the radical thinking that can topple their legacy — not exactly the attitude you want when trying to drive innovation forward.
Henry Ford agreed:
“None of our men are ‘experts.’ We have most unfortunately found it necessary to get rid of a man as soon as he thinks himself an expert because no one ever considers himself expert if he really knows his job . . . Thinking always ahead, thinking always of trying to do more, brings a state of mind in which nothing is impossible.”
So if you’re going after grand challenges, experts may not be your best co-conspirators. Instead, if you need a group of people who thrive on risk, are overflowing with crazy ideas, and don’t have a clue that there’s a “wrong way” to do things, there’s one particular place to look.
In the early 1960s, when President Kennedy launched the Apollo program, very few of the necessary technologies existed at the time. We had to invent almost everything. And we did, with one of the main reasons being that those engineers involved didn’t know they were trying to do the impossible, because they were too young to know. The engineers who got us to the Moon were in their mid to late twenties. Fast-forward thirty years, and once again it was a group of twentysomethings driving a revolution, this time in the dot-com world. This is not a coincidence: youth (and youthful attitudes) drives innovation — always has and always will.
So if we’re serious about creating an age of abundance, then we’re going to have to learn to think differently, think young, roll the dice, and perhaps most importantly, get comfortable with failure.
Editor’s note: The above is adapted from Peter’s book Abundance, which I wholeheartedly recommend you check out. But let’s talk to you…
What other examples of “crazy” innovators can you think of?
If you’ve been in a job for a long time, how can you generate novel/crazy ideas?
Who has done the so-called “impossible” or shaken up the status quo in a way you respect?
Please share your thoughts in the comments!
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