Wednesday, December 12, 2007

It's a marathon, not a sprint...

Contrary to our society's romanticized vision of an entrepreneur's life, success takes a long time to come (if it ever does). While there are famous counter-examples, in the overwhelming number of cases, success takes years and even decades of hard work.

I post on this topic today because it's a particularly important issue to me, because it's come up quite a bit in the last six months in talking with lots of other entrepreneurs, and because of an article in today's WSJ entitled The Other Tech CEO's Find It's Not Easy To Keep the Faith (subscription required).

Not so many years ago, I myself was sucked into the myth of "work fanatically, to the exclusion of everything else, and you'll strike it rich, and then be able to take it easy". Through the school of hard knocks I have been reformed, and I now realize that the time to live the life I want is now. In Dave Matthews' words, "the future is a terrible place to put your better days." Just to add a fourth cliche-containing sentence to this paragraph, I'll add that I now ascribe to the "the journey is the reward" approach.

I still enjoy being an entrepreneur, and I am still known for a strong work ethic, but I no longer do it to the exclusion of other things in life that are important to me (primarily family, friends and fitness). I aspire to be an entrepreneur for the duration, and, Allah willing, my duration will last for decades. Therefore my tenure as an entrepreneur has to coexist with my other life goals, as opposed to temporarily supplanting them.

Work-life balance is an extremely common challenge for passionate entrepreneurs. I've known quite a few entrepreneurs, and the vast majority struggle with this. It is extremely difficult to master the balance between an entrepreneur's passion to change the world, his responsibilities to the various constituencies of his company, and his other life goals and passions.

I've heard some say that it's not possible to have a balanced life while being CEO of a startup, and I've heard others say that balance leads to better (and longer-lasting) stewardship of a startup. I'm out to be a poster child for the latter.

Commensurate with the importance and difficulty of mastering this issue, I think about it often. I would enjoy your comments and perspectives.

PS - I think that I first heard phrase "it's a marathon, not a sprint" applied to entrepreneurialism and startups by Terry Gold. Thanks Terry!

The Significance of Voluntary Transactions

One of the fundamental underpinnings of modern capitalism is the voluntariness of the transactions that make up the commerce in a capitalistic society. My patronage of a coffee shop, and the subsequent exchange of $4.00 for an eggnog latte, is voluntary by both parties to the transaction: I didn’t have to buy the latte, and the coffee shop didn’t have to sell it to me.

If a transaction is voluntary, it follows that each of the parties to a transaction would have executed this transaction only if it was perceived to be beneficial to them. Furthermore, where there are multiple alternatives, the selected alternative can be inferred to be superior to all of the other available alternatives.

This is an amazingly profound point.

Before discussing why this is profound, let’s make sure there is clarity around the assumptions. By voluntary, there can be no coercion to transact, whether from laws (e.g. having to pay a parking ticket) or friends (e.g. please loan me $20), and there must be a conscious decision to transact. By perceived benefit, the transactor has to think it is beneficial to him (even if it in actuality is not).

Here are a few applications of the ramifications of voluntary transactions:

  • “Fair Trade Coffee” – "Fair Trade" is entirely superfluous. Assuming that there is no forced labor anywhere in the supply chain for my latte, each participant in the supply chain is acting beneficially, and thus is bettering themselves by the transaction. Furthermore, their participation in this supply chain is not just beneficial but is their optimal transaction for their circumstances, so it is not just “fair trade”, but it is superior to “fair", since it is optimal. “Fair Trade Coffee” can do nothing to improve an already optimized supply chain, and hence it can really be nothing but marketing to the coffee consumer to make them feel better about drinking their coffee. “Fair Trade” really is very clever marketing schlock because it is such an appealing improvement to the consumers' consumption experience, but in fact it is entirely misleading: it can do nothing to in fact improve the “fairness”, and any increase in consumer price really can only accrue to the “fair trade organization” itself.
  • Sweat Shop Labor – Nobody likes sweat shop labor; we would all agree that a third-world worker working 16 hour days under dismal conditions and insignificant pay is a tragic. However, perhaps it is the best available alternative for that person? Maybe the next best alternative is to be unemployed? If so, rather than punishing the employer and eliminating the employee’s current best alternative, a better approach would be to provide an even better alternative, such as providing a means to increase the value of their skill set, such as building a local school. And, as an extension, how much good does boycotting sweat-shop goods really do? It only eliminates those poor souls’ best alternative, with an end result of making their lives worse…
  • Gambling – Why do people voluntarily engage in what every rational person knows to be a losing proposition? After all, a gambler can expect to get back, in winnings, only a fraction of what he gambles, yet he still voluntarily places that bet. Perhaps it is because the gambler is doesn’t understand the game and therefore doesn’t really understand what he can expect to win; this is a misperception about his perceived benefits from the transaction. (It also suggests why gambling houses do not have a vested interest in having their gamblers understand the gamble well.) There is another interesting phenomenon, as well, which is that often people like risk and will pay for it. Gamblers are willing to pay for the experience of a gamble; that enjoyment is a benefit to them.
  • Smoking – The perceived benefit – pleasure, taste, or some other aspect of the experience of smoking - must be quite great to offset the tremendous long-term health impact and high likelihood of becoming addicted. Or, perhaps, the potential smoker does not accurate perceive of the costs of smoking. Of course, we can all see why tobacco companies market to the young: since the part of the human brain that evaluates risks is not fully developed until a person reaches their late 20’s, the potential smoker doesn’t and possibly can’t correctly weigh the perceived costs of this habit. By the time a person can accurately weigh the benefits and risks, they’re often addicted, and can no longer make a voluntary decision to light up. “Get’em while they’re young”…
There are of course countless other examples, and I would appreciate any interesting examples being posted in the comments below.

There is ample room for interesting discussion of the difference between actual benefits and perceived benefits. For instance, there is arguably a government role in protecting minors or incompetents when actual benefits deviate from perceived benefits. Or, how much should an individual, or in a larger sense society, spend on educating themselves on actual vs. perceived benefits? Should everybody get a PhD in economics before they can be assumed to be competent to responsibly undertake a transaction (by themselves, by their counterparty, or by the government)? Perhaps these topics will be the subject of future ruminations…

Wednesday, November 14, 2007

Why Blog?

Much as every new program's first task is to display, "hello, world!", every blog's first ruminations should be about why they should exist. So, let the runmination begin!

I recently asked a prominent blogger why he blogs. He has some obvious reasons for his own blogging, which include marketing and brand awareness, so while the question is not a difficult one for him to answer, he acknowledged that it is for many. His opinion was that it is important to know why you are blogging, and who your audience is (ie why is somebody spending time reading your blog). After all, it takes a fair bit of time to write, and why would one persist in spending time unless for some benefit? He mentioned that many blogs fail and/or get abandoned because the authors haven't thought about these things.

In a separate conversation, another prominent blogger suggested a reason to blog is because it was good for you: it made you make sure that you thought deeply about whatever you were posting about, thereby crystallizing your thoughts. As to what to blog about, his comment was that one should blog about whatever one is passionate about. For him, therefore, blogging was a of encouraging himself to think deeply about his passions. Of course, the resulting fame and fortune is just gravy for him.

Recently, I've come across a couple of subjects that I'm passionate about and would I would like stimulate the blogosphere into thinking about in order to deepen my own understanding. And, in that I would like to build my brand by letting the world know about the topics I think about, it's time to blog...so here goes!

I anticipate that mostly my blogs will be professional and not personal. This is not because personal is "personal", but rather because my personal blog would be worth quite a bit more than I could make here from AdWords. :)

So, with that, I announce that there may from time to time be occasional thoughts, comments, and rants found herein.

Unto The Breach...

I've been on the sidelines too long; the meek inherit nothing. It's time to re-engage. With a little Shakespeare, I hereby announce that I'm back!


Once more unto the breach, dear friends, once more,
Or close the wall up with our English dead!
In peace there's nothing so becomes a man
As modest stillness and humility;
But when the blast of war blows in our ears,
Then imitate the action of the tiger:
Stiffen the sinews, summon up the blood."
Henry V (5.3.44-51)