Sokanu: The Blog

This is going to be a bit more of a technical/business focused post, and one just based on my observations over the past couple of months. I've been thinking a lot lately about what separates massive companies from smaller or mid-sized ones. While this may sound trite or anti-climactic, I think it's an interesting point to bring up. In the last year, we have seen web businesses such as Facebook, Groupon, Zynga, Twitter, LinkedIn, Palantir, Netflix, etc... have dramatic increases in both revenues and valuation. Add to those companies the older incumbants like Google, Amazon, eBay, Craigslist, Yahoo, etc... and you have an interesting collection of companies to observe from. 

I believe that much of the web is focused on what is "hot" right now. Last year it was location-based apps (think Foursquare, Gowalla, Loopt, etc...) and this year it seems to be Quora, Color, Path, Instagram, and a few other mobile apps. Will some of these companies become huge? Maybe, we don't know that yet. But one thing that many people are bad at is predicting what is going to happen in the future. If you ever want to understand this in full, watch CNBC for a day, listen to the "analysts" and "economists" predict earnings reports and market statistics, and see how many people got it right. Not many. The world is full of people who make a living based on predicting what is going to happen next. The world moves so quickly now that it is almost impossible to do this well.

There is a term in the financial world called "black swan theory", put forth by Nassim Taleb in his excellent book - The Black Swan. In short, events that happen as a surprise and have a major impact on the world are called Black Swans. They are very often extreme outliers. After the event has occurred, people may look back on it and say "we had data showing this could happen, but we did not use it properly". Back swan analysis is primarily used to help stop negative future events, and exploit current positive ones. Very little work is done in predicting future events, which makes sense considering the nature of the events themselves.

Black swan events change the course of history. Some examples can include: September 11, the rise of the Internet, World War One, etc... But the key point I want to focus on is that black swan events don't have to be limited to financial and political markets. I believe that the companies I mentioned above can be called "Black Swan Companies", only because their existence is both random in nature, yet they have a profound impact on the business world today. 

Venture capitalists make a living from trying to identify and accelerate black swan companies. Yet their success rate is very, very low, which is understandable considering the randomness and low probability of occurrence. But in the last few years, the information about what VC's and angel investors are looking for in investments has become very public, mostly in the tech space. We have the most powerful VC firm in the world telling us exactly what to put in our business plans, we have a quasi-crowdsourced model for raising angel investment, and we have unbelievable transparency from both investors and founders alike. Want to know what it is really like to pitch VC's and get rejected? Read this amazing post by Rand Fishkin. Want to know how to raise over one million dollars from the best investors in the world, mostly online? Not in the mood for raising outside capital? Read about why bootstrapping can be better. The amount of advice online for people is absolutely staggering. You can learn almost anything, down to which specific metrics to track for your company, how to calculate basic economics for your company, and how to design your UX to meet your customers psychological needs.

But something is missing. I'm not taking anything away from any of the people writing these posts. They are amazing and the work they have done is outstanding. Their transparency is helping the next generation of entrepreneurs in more ways than they know. It is an amazing funnel effect. But the problem from this advice is that it is not coming from black swan companies. Is this bad? No. But if our goal with VC-backed companies is to build the next Google, shouldn't we be trying to learn specifically how to do that?

"It's not that easy" you may be saying, and you are right. If we knew how to build the next Google, we would be doing it. But an interesting point of analysis is that most, if not all, black swan founders are incredibly quiet about their rise to the top. Have you ever seen a blog post from Jeff Bezos about how to build a massive ecommerce company? Does he ever blog? Tweet? Have a LinkedIn profile? How about Mark Zuckerberg? For all of the idolization that we give him, what have we learned? Do we know the recipe for building the next Facebook? What about Larry & Sergey? We know they are brilliant, we know they went to Stanford, what else? Reed Hastings? He's posted on Quora, yes, but do we have an idea of what it takes to build a massive company controlling 20% of internet bandwidth?

You may argue that these people simply don't have time to help other people. This is absolutely true. But why does today's generation of entrepreneur have the time? Are we simply more generous? Or is it that we care more about becoming internet celebrities more than we care about our companies? Do we care more about he number of Twitter followers we have or our Klout score rather than our market share? Most people will argue no, but this doesn't always seem to be the case. The fact of the matter is that we all of the same amount of hours in a day that Zuck, Sheryl Sandberg or Andrew Mason does. Where does the difference lie?

Without sounding too obvious, I believe that our internet culture should be more focused on creating black swan companies. And if you disagree with this, then we should stop writing about who gets funded, how much they get and who their investors are. People have to realize that when we raise money, we are entering into a mutual agreement that we are going to work towards a common goal - building a billion dollar business. VC is a shoot for the moon game, whether that is the right strategy or not. So if you want to play the game, then be focused on the goal. Here are some observations about what it may take to create a black swan company. Note these points are not based on hard data or facts, just observations of mine.

1. Acquisition Of Knowledge Is Your Most Competitive Asset

What separates George Soros from you as an independent investor? Besides the fact that George pays himself over a billion dollars a year in salary, the answer is knowledge. You both have access to real-time quotes, mountains of market news and the same technology. Whether you believe that he has insider knowledge or not, the fact is that he knows more about the market than you, knows more about the industry than you, and has probably read more books, magazines and newspapers than you. In fact, when it comes to financial trading, data analysis and knowledge acquisition are your most important assets. The same goes for tech companies. We call this "domain expertise", meaning we have a good grasp of our market and the movement of currents within it. 

Very often it's the people with the most knowledge that hold all of the cards. We all have access to the exact same people in the world, whether you think so or not. Whether or not you get to know them is a pure function of your effort and desire to succeed. Email addresses, Facebook accounts, Twitter profiles and LinkedIn resumes are merely a click away. We also have access to the same information as one another. Thanks to a little item called Google, we have a database of information about anything available at our fingertips. 

2. Very Often The Best Market Is The Human Market

Huh? It is common knowledge that we should be targeting markets that are least a billion dollars in size, since we need to take a chunk of that pie. But look at some of the black swan companies we talked about. Who is Facebook's market? Sure they started out with college students, but their market is everyone. Twitter? Everyone. Groupon? Every local person you talk to, whether technical or not, will know about Groupon. Anyone with an email address is their market. Do only tech people shop on Amazon? No, of course not. 

Does this mean that a market like the payments industry are unable to produce huge companies? Of course not, I believe that Square is going to be worth a billion dollars plus very soon. But a common theme you will notice with black swan companies is that whether it is intentional or not, they have no defined market. They are playing in the human market, where average, every day people know and use them. Can you "pivot" into a human market? Probably.

3. Black Swans Are Random Outliers

An extremely obvious point, but one worth mentioning. The rise of Google and Facebook have literally nothing in common, except for the fact that they both started out of universities. Facebook was a somewhat-accident - I don't think any of the founders intended to build a company with 600 million+ members. Twitter is well documented as being an afterthought or side project in Odeo. Groupon? An iteration on a crowd sourced voting model. Especially in the early stages of a company, there is no set path to success. Do certain things help? Of course. But the only rule here is that there are no rules. 

4. Keeping Strategy & Vision Quiet 

The tech media is almost getting as bad as Hollywood. We have our version of celebrities; we track what they do, where they eat and what phones they use. Techcrunch and Mashable will report on anything and everything. Once again, transparency is at an all time high. Except, once again, with these big companies. I can almost guarantee you that the next black swan company you know nothing about. Why? They haven't told you. This is on purpose. In business, no matter what the discipline, having a competitive advantage is very important. And when it comes to something as open as technology, that competitive advantage is very often nothing more than what is sitting inside the founder's head.

I think that out of all the points here, this is the one thing that separates average companies from massive ones. The reality is that for every blog post we read about how VC works, how to hire a technical person, how to track our metrics and how to hack our work schedules, we still know nothing about how to strategize. Building a black swan is like a huge chess game, and you don't play chess one move at a time. We have a tendency in the tech world to obsess over our short term goals: metrics, funding, hiring, traction, etc... These are of course of the utmost importance. But having this balanced with a long-term vision and strategy is what I think separates the big boys from the rest. Is there any empirical evidence of this? Not unless we can analyze the top CEO's brains. But their strategy is what lets them scale their companies, their people and their time.

--

While I am very under qualified to write a post about this, I thought it would be an interesting discussion to have. All of the points mentioned above are obvious to a certain degree. Nothing is proven based on analysis and regression of data collection. I'm sure I'm missing some key factors as well. What do you think?

Continuing the small mini-series from our last post, today I would like to talk about something that Mr. Christensen brought up the last page of the article, the importance of humility. This is a subject that I have thought about a lot, as it seems to be one of the most underused and under-appreciated topics on the Internet. The world is constantly focused on innovation, progress and speed. In order to be the most innovative, fastest or smartest we tend to forget that we are but a small part of the ecosystem that we call the world. 

One of the biggest causes for the lack of humility comes from the information age that we are living in. It used to be (back in the ancient Greek days) that those wanting to attain knowledge would go to places of learning (now universities) where they would sit and listen to those who knew more than them about a subject.  The invention of the printing press was one of the (if not the most) important innovations in history.  It allowed those who had attained knowledge to pass it on to generations that they would never get to see, just to leave the world a more intelligent place. Then came the other most important invention of all time, the Internet.

Imagine, a place where anyone in the world could go to access information, instantly and effortlessly, for free. The fact that you are reading this text on the screen in front of you is an incredible thing.  And to think that most of us did not contribute to this wonder, and yet we are still allowed to partake in its magic? It's a wonderful thing.  But it has created a new arena for many people, especially with the rise of social media.  How many "social media experts" do you know? I can guarantee at least a couple. Now, everyone can express their opinion and become an expert in their field.

Going back to humility, the first thing that we must understand is that there are no experts. There are some incredibly brilliant people alive on this earth, many of which are teaching at universities, running businesses and non-profits or investing their knowledge in making the world a better place. For video proof, take a walk over to TED and just browse through the videos. (Oh yes, the information is free)  Most of these people would never claim to be an expert, because they realize that at the rate that information is expanding (more info is created in two days then from the beginning of history all the way to 2003) and the sheer mass of information available, there is no way they could ever acquire all the knowledge to make them an expert.

So if there are no true experts, how can we tell if someone is truly humble?  Try describing the most humble person you know. What characteristics stand out?  

• They probably have a high level of self-esteem. 
• They know who they are, and they feel good about who they are.
• They treat others with a level of respect, regardless of the profession or credential from that other person.
• They realize that there is something to learn from everyone.

Humility is not defined not by self-deprecating behavior or attitudes, but by the esteem with which you regard others. Good behavior flows naturally from that kind of humility. For example, you would never steal from someone, because you respect that person too much. You’d never lie to someone, either.

If you are involved in the high-tech industry, have graduated from a top academic institution or are working in a highly scientific field, in most cases you will feel as if you are smarter than most people you meet.  Thus, you assume that you can't learn anything from that person. This is wrong and very immature.  I will write a future blog post on this, but I believe that the single most powerful word in the English language today is perspective.  People with a sense of humility try to understand the other persons point of view, or perspective. On an emotional level, this is called empathy.

One group of people that are generally very poor at this is entrepreneurs.  Most of them go throughout their life in stages. When they are first getting started, they try to lap up as much information as possible. Connections and meetings are of the utmost importance. Young entrepreneurs will tweet that they met X or Y person today and close A or B deal with C company. They are passionate, excited and ignorant (a good thing at this stage). The world is their oyster. As they progress and become more successful, they will often turn to "mentoring" or helping out younger versions of themselves.  The problem is that most of these mentors have been though one path and one path only. Very few are humble enough to understand that their way is not the only way to success and there is something they can learn from the "mentee".

It’s crucial to take a sense of humility into the world. To end, I will quote Mr. Christensen, as he wraps up this segment perfectly

If your attitude is that only smarter people have something to teach you, your learning opportunities will be very limited. But if you have a humble eagerness to learn something from everybody, your learning opportunities will be unlimited. Generally, you can be humble only if you feel really good about yourself—and you want to help those around you feel really good about themselves, too. When we see people acting in an abusive, arrogant, or demeaning manner toward others, their behavior almost always is a symptom of their lack of self-esteem. They need to put someone else down to feel good about themselves.

In reading Tony Hsieh's new book, Delivering Happiness, one thing becomes clear: this is not an average book.  Most business books are the same, sticking in a generic biography with some copied Think and Grow Rich principles.  They then sell the book as new and revolutionary. These are average books. What Tony has created is a simple book; easy to read, yet really big on new content. Even though the first two sections were really interesting and educational, I am going to focus on the third section of the book in this blog post.  

The third section of the book focuses on something called the science of happiness.  The scientific field of positive psychology is dedicated to researching and learning more about this science, which is a relatively new branch of psychology.  Some of the current researchers in positive psychology include:  Martin Seligman, Ed Diener, Mihaly Csikszentmihalyi, Christopher Peterson, Carol Dweck, Barbara Fredrickson, Sonja Lyubomirsky, Kennon Sheldon, Jonathan Haidt, Shelley Taylor, C. R. Snyder, Robert Biswas-Diener, Donald Clifton, Albert Bandura, Charles S. Carver, Michael F. Scheier, and Ilona Boniwell.

But what good is this research if we don't have a framework to apply it to?  How can we, as average humans that don't have a PhD in cognitive neuroscience, relate positive psychology to our everyday lives?  Well, there is a fantastic framework presented by Tony in the third section of his book that does a great job of explaining this.  While you will see that Martin explains the same theory in the video below, the method I will write about is a little easier to understand.

The system revolves around understanding that happiness is not a singular object.  It is not a carrot on the end of stick that we attain.  This is the mistake that most people make.  They assume that if they attain a ton of money, a beautiful wife (or rich husband) and a Ferrari (or Tesla for the tech crowd) then they will be happy.  We begin this process by getting the right grades in high school, picking the correct college and then transitioning into the best job.  This is the apparent correct path to happiness.  I wish I could say the path to happiness were that easy, but we know that this is not true.  

Instead, we need to research what truly makes us happy.  What makes us tick?  What makes us get out of bed in the morning?  Well, we can best explain this by dividing happiness into three types: pleasure, passion and then purpose.  Let's go through each one in order to get a better understanding of what each means.

Pleasure

Pleasure is the most common form of happiness.  We all know what this means.  Pleasure is actually measurable via our emotions. We are all aware of what makes us happy and what makes us sad. If we interchange the word happy for pleasure we know what apply our experiences to this section. Many people derive pleasure from eating good food, spending time with friends and going out on a Friday night. These things make us smile, laugh and show noticeable happiness to others.  

So what is the problem with pleasure?  If we put ourselves in situations where we are always smiling and having a good time, haven't we figured out the secret to life?  What is the point of even going through the rest of this post?  Well, the problem comes when we analyze what people are feeling with the rest of their time. Humans, in general, tend to follow a simple graph. The graph spikes Friday afternoon around 5:00 and seems to drop Sunday night.  We have long periods of mediocre happiness during the business week (school or work) followed by high points on the weekend.  And this is not sustainable.  So while pleasure is great for short term moments, it is not going to give us the happiness that we as humans require for the rest of our lives. 

So what can we do to make sure that the graph does not dip every week?  Well, we must learn to master the second form of happiness, passion.

Passion

Passion is a tough thing to explain since it is unique to each individual.  While pleasure is easy to both detect in other people and in ourselves, passion is unfortunately not the same.  And this is because passion is not measurable by emotion like we stated before. The form of happiness involving passion is a state, not an emotion.  Finding this medium of happiness can also be called finding flow or the zone. Mihaly Csikszentmihalyi wrote explaining this phenomenon is his excellent book Flow: The Psychology of Optimal Experience.  

Finding this state is the key to understanding this level of happiness.  And this involves finding your passion in life.  Sokanu's goal is to help people find their passion in life, in order to push people to achieve this second level of happiness.  Once you find something that you love to do, it doesn't feel like work anymore.  This is how you get the middle part of the graph to rise up to meet the level of the weekend.  If we can discover what we love to do as our career, life becomes much easier.  Finding the portion of happiness called passion is goal that most individuals work for a long time to achieve.  Unfortunately, most wait until too late to start discovering what makes them happy.  My advice?

While you are young, have no responsibilities and have time on your hands to figure out what you want to do (university), PLEASE find your passion. It doesn't matter if your friends think that it is not "cool" or lucrative.  If you know internally that the passion you have found is something that you love, start doing it.  And once you start doing it, work as hard as you possibly can in order to be the best in the world at it. Period. 

So how can there be a level past this?  Isn't finding your passion in life the ultimate goal?  Not only have you identified what makes your emotions happy with pleasure, but now you have found a career that you have a passion for.  What else can there be?  Well, we have been very selfish up until this point. In order to reach a point where we are truly and fully happy, we must find our purpose.

Purpose

Finding your purpose in life is a very personal subject.  I can't help you find this by giving you a guideline like we can with pleasure or passion. So where do we start?  Well, just remember this statement:

Finding your passion in life means that you are part of something bigger than yourself.

Something bigger than yourself can mean a variety of things.  Being involved with charity, politics or religion are the most common versions of this. Or it can be a part of a mission that involves a huge number of people, igniting a global movement.  

Some recent examples can be Al Gore advocating for the climate crisis, inspiring millions of people to make a change in their environmental lives.  In charity, Craig and Marc Keilburger and their charity Free The Children have done some amazing things trying to solve problems that are much bigger than themselves.  In religion, I can think of no-one happier than the Dalai Lama, Tenzin Gyatso. He understands that he is a part of something much bigger than himself.

Another example that we may not think of are scientists and researchers.  So many people work tirelessly to solve huge medical problems like disease, scientific problems like where the universe comes from and understanding how the brain works.  These people are working on problems that have existed since the beginning of civilization. One person can not possibly understand how the brain or universe works, yet they realize that they are a small part of a much greater purpose.

This is the reason that you see wealthy individuals turn to charity full time later in their lives. Some of them realize at one point or another that making all of their money and buying nice cars gives them pleasure, but does nothing for their legacy.  They then turn to themselves and say, "what impact have I made on the world?"  And very often that impact is very minimal as selfishness has dominated their life previously. They then work to be a part of something much bigger.

--

So through these three words we can begin to understand how to build a happiness framework for ourselves. It is not an easy task, but it is easily the most important one that we have in our lives.  After all, what is the point of living if we are not happy?

If you have made it down to the bottom of this post, thank you.  I have embedded a video below from positive psychologist Martin Seligman explaining the framework above in proper terms (I am no psychologist). It is a fantastic watch and gives interesting insight into the world and work of positive psychology.

There is a discussion going on in the entrepreneurial world about what makes a great entrepreneur.  Are they born that way?  Can a great entrepreneur be raised?  This is the debate that happens throughout the business world.  It's called Nature vs Nurture.