Tuesday
Jan292013

The Path

When we look at our lives, we cannot help but notice that they form paths. The Path is simply defined by the things that happened to us in our lives: the decisions we made, the locations we visited, the people we met, the lessons we learned, and the habits we developed. It is only ever visible in retrospect, not while we are following and shaping it. It is when we look back at our lives that we start to connect the dots and tell a story.

Now, I don't know what it takes to live a meaningful life, but I know that it is easy to live a meaningless life. There are no "right" or "wrong" turns — since The Path is only visible in retrospect —, but there are many ways to get lost. It is far too easy not to do the things we love and are passionate about.

That also happens, by the way, to people who believe that they are by definition doing something meaningful. Entrepreneurs, in particular, often feel different simply because of the fact that they are entrepreneurs. But most newly created companies never create anything meaningful. And once you enter that echo chamber and read all the blogs, you start to follow the herd inside that little subculture, and all of a sudden you are building 10-slide pitch decks, organizing fundraising roadshows, doing senseless HR interviews — in short, being "busy", without making meaning.

Here are three simple truths about The Path which I like to remind myself of:

  1. Look far ahead. You can concentrate on three things: the past, the present, and the future. Of the three, I value the present the most. But whenever my thoughts leave the present, I direct them towards the future. Our past shapes us already more than we would ever admit. If it were not for our ability to imagine our future, we would be our past. Looking behind is invaluable to remember, but it does not help us widen our horizon beyond what we know.

    When you look far ahead and beyond the current moment, you will construct an identity of yourself and the things you want to bring to this world that will be consistent with how you imagine a good and meaningful life to be. It will help you avoid directions that are misaligned with your values, your talents, your passions, your ideas, your personality, your self.

    Imagine you are driving a car and constantly looking at the piece of the road right in front of your vehicle, not seeing the bigger picture, not thinking about where you are ultimately going. You could easily end up in an oasis, for sure. But it could also be a desert. Looking far ahead into the future helps you shape the direction of where you are going in your life. Micro-managing your daily duties does not.

  2. Choose your own path. This is maybe the most important piece of advice I know, and if you are not truly living the life you chose to live, please pause and think about it. Actually, to be honest, I don't think that anyone on Earth truly does that. Even the choosers of their own lives, and I consider myself one, follow so many addictive patterns and long-trained habits that it is incredibly hard to imagine how we might have truly and deliberately chosen the various aspects of our lives.

    Choosing your own path, however, means to understand that all people are different, and that My Path is not the same as Your Path. What makes sense for me might not make sense for you. A talent I have might not be a talent you have. A passion I care about might not be a passion you care about. We are truly different, and we need to use our own minds to imagine the future we want to shape for ourselves.

    The family you are starting, the organization you are building, the product you are creating — nobody has ever done that before. You, and you alone, need to digest all the information around you and all the input from other people — and then find your own way. It might be similar to what other people have done before, but it may be totally unique and special. As entrepreneurs, we create truly new things. And when we are changing the game, how can we do that while playing by the rules?

  3. Take step by step. The last truth about The Path is focus. It is "first things first". Following your path is only rewarding when you can concentrate on the most important thing at a time, and invest all your love and all your time and all your energy until you took that step whole-heartedly, fully, and passionately. It is then when you look back that you feel you did well.

    When you do a thousand things at once, however, you will never have that sense of reward. You will have done everyhing in an unsatisfactory way, and you will not have the feeling that you did anything at all with your full heart and passion. Also, the mediocre things you created will fade rapidly and disappear. The Path you are constructing will look brittle and bleak.

    Taking one step after another enables you to work on the truly important things in your life. It forces you to focus and stop worrying about all the unimportant things you could also do. Sometimes, the next step might be to spend time with your friends or your family, with no goal in mind, not worrying about anything else. That is beautiful, and whenever you do that, do it whole-heartedly, just like anything else.

It is when you feel that you cannot be passionate about what you are doing, whenever you sense that something is wrong because it feels devoid of meaning or purpose, that you are off the track.

Then pause. And change course.

Tuesday
Nov272012

Inverse Pyramids

I recently watched a video of Steve Jobs in 1987, documenting the first six months of him building NeXT, and while the whole documentary is very educative, this single quote really stood out to me:

Here was this machine that very few people designed, about four in the case of the Apple II, and then they gave it to some people that didn't know how to design it but they knew how to make it, to manufacture it, they could make a whole bunch of them, they gave it to some people who didn't know how to design it or manufacture it but they knew how to distribute it, and they gave it to some people who didn't know how to design it or manufacture it or distribute it but they knew how to write software for it, and gradually this sort of inverse pyramid grew, and when it finally got into the hands of a lot of people, it blossomed, out of this tiny little seed, and it seemed like an incredible amount of leverage, and it all started with just an idea. (...)

That's an incredible feeling, to know that you had something to do with it, and to know it can be done, to know that you can plant something in the world and it'll grow and change the world ever so slightly.

I see these inverse pyramids everywhere. I believe that what enables them is technology. Infrastructures and platforms are at the bottom of the inverse pyramid and application ecosystems at the top.

No matter how powerful the technology, it always starts with a tiny seed.

Tuesday
Nov202012

Seamlessness

Wu is sweeping the ground and Yan says, “Too busy!”

Wu replies, “You should know there’s one who’s not busy.”

Yan says, “Oh, so there are two moons.”

Wu holds up the broom and says, “Which moon is this?”

— Zen koan

Startup founders are busy all the time. That's a problem. Being busy all the time can overwhelm us. It can lead us to a life full of distractions, losing sight of the important things in life. It can turn us into addicts of to-do lists ("What's the next item on my list?"), role definitions ("I'm the lead developer, I better write some code!"), and the streams of information that surround us ("Oh, a new email arrived! And there's a Twitter notification.").

The wrong way to deal with the problem of being too busy is to think of "busy time" and "leisure time" as two different and opposed modes in our lives. That mistaken duality is at the core of the idea of "work-life balance" which is in fact an oxymoron. Work and life are not two opposed concepts that we need to balance out. There's only life. And work is a part of it.

Living seamlessly

Many are familiar with the concept of "flow", the idea of being completely involved in an activity for its own sake: "The ego falls away. Time flies. Every action, movement, and thought follows inevitably from the previous one. Your whole being is involved, and you're using your skills to the utmost."

Turning life into one flow is the idea of inclusion expressed in the above koan. Yan challenges Wu because he looks too busy, contradicting the Zen ideal of mindfulness. Wu in turn asks Yan to recognize the fact that he is not busy. In fact, he is living one seamless life, transitioning from one activity to another smoothly, making no distinction between busy and not busy, always aware of the whole while narrowing and widening his focus at will.

Why is it that we cling to being busy?

Our society of consumption teaches us to divide our time into slots, filling the slots meticulously to avoid "wasting time". When the battery dies and the phone turns off, we suddenly feel alone and disconnected. We feel useless when we're not "doing anything". Our fear of nothingness drives us into mechanical habits and patterns devoid of any real value for our lives. We seek refuge in "being busy" because that is easier than to stop, think, and reflect. On the other hand, when our workload overwhelms us, we develop anxiety and panic.

Three principles can help us live a more seamless life that is not a sequence of interruptions, defined by the kind of multitasking that wants us to do everything at once, a life with less mechanical habits and less obsessive "busy" patterns, and a feeling of complete control over what our mind and body are doing. These principles are awareness, alignment, and focus.

Awareness

Awareness is the art of paying full attention to what we are doing at any particular moment. It needs to include both our mind and our body. Awareness can be learned with practice:

  • Awareness of the mind can be experienced and learned by conscious breathing and conscious talking. In order to breathe consiously, we sit down comfortably and concentrate on our breathing. We count every full breath, breathing both in and out. We follow our mind as it starts wandering. Where does it wander? The wandering mind reveals obsessive patterns and habits. We let it wander, then slowly guide it back, concentrating on our breathing again. The counting helps us notice whenever our mind starts wandering again. We can also be aware of our breathing, this time without counting, during conversions. By doing that, we practice conscious talking. Feeling our body breathe in and out will not distract us from the subject of our conversation. It will help us become fully aware of it.

  • Awareness of the body can be experienced and learned by conscious moving and conscious eating. In order to move consciously, we concentrate on our muscles and body parts, we understand whether they are feeling energized or tired, and we start moving them in isolation or together, fully aware of the feedback our body is giving our mind. We touch objects in order to become aware of our surroundings. Conscious eating extends that practice to our meals. By eating in full awareness of every bite, we slowly and consciously enjoy every part of the meal.

Alignment

Once we are aware of both our mind and our body, aligning the two is the next step. The key here is to understand that our mind and body are interconnected. One influences the other, and that influence is not a one-way street. Most people experience positive feelings as a direct consequence of physical activity. But the connection is much stronger than that. Our body language shapes who we are. Realizing that our body is not just mobile equipment designed to get us across the street opens up a whole new world.

The alignment I am talking about is between our attention (our "thoughts") and our motion (our "hands"). When we are reading a book, we make sure our hands are only touching the book. We are aware of the activity of reading the book, and we are aware of the fact that both our mind and body are aligned on that activity. Whenever we catch ourselves typing on our keyboard while simultaneously talking to a friend, we realize that we lost alignment and we can concentrate our efforts on regaining alignment. Alignment helps us avoid the habit of "multitasking" by concentrating our whole presence, mentally and physically, on the one task at hand.

Once our mind any body are aligned at any single moment, we can let our body drive our mind, and we can use our conscious body as a refuge whenever our mind gets anxious or tired. Most people let their minds dictate their bodies. Whenever the mind feels anxiety or is full of concerns, the body reacts by contracting muscles, crouching down, and increasing tension. That in turn re-enforces the feeling of restlessness. Mind and body are aligned on the negative.

If we can let our body empower our mind instead, we reach alignment on the positive. By stretching our muscles, feeling our blood pumping through our veins, assuming a comfortable and strong body posture and feeling alive and happy, we can help our mind feel fresh and powerful as well. By practicing alignment, we teach our mind to listen to our body, and we teach our body to talk to our mind.

Focus

The ability to control focus is the final step to achieving seamlessness. A seamless life is one where focus is always on the one thing we are doing at that very moment. A good metaphor to understand what kind of focus is meant here is the metaphor of the mental landscape.

When we let our eyes focus on an object in our physical landscape, that object becomes clear and all its detailed features become accessible. The surrounding landscape in turn becomes blurry and fades into the background. The more we let our eyes concentrate on the minute details of that object, the more we narrow our focus. Now, we can also widen our focus by trying to capture the entire landscape within our field of vision.

Now imagine the entirety of our thoughts as such a landscape — our mental landscape. Within that landscape, we can narrow and widen our focus. We can concentrate on one thing and one thing only, and we can step back in order to look at the big picture. Once we are aware of our mental landscape, we can train the skill of narrowing and widening focus ("zooming in and out") and the skill of moving focus from narrow to narrow.

Imagine our tasks and plans as objects within our mental landscape, being backlit by the unity of them all, the big picture of our life. Whenever we feel that we need to reflect on our priorities, we widen our focus and concentrate on the big picture. Whenever we feel the urge to do something, we narrow our focus and concentrate on that one thing and that one thing only. We are careful not to "multitask". Multitasking means focusing on what we are not doing. Instead, we focus on what we are doing, with our mind and body fully aligned, giving that one thing the full and unconditional attention it deserves.

After being able to narrow and widen focus consciously, we can gain confidence in moving focus. Once giving whatever we are currently doing our full and unconditional attention, moving focus to a different thing ceases to be an annoying interruption and instead becomes a conscious transition in our mental landscape, from one object of focus to another.

One who's not busy

Awareness (of both mind and body), alignment (of both mind and body) and focus (narrowing, widening, moving) may help us live a seamless life. A seamless life makes no distinction between "busy time" and "leisure time". The object of pleasure, beauty, and dedication is always the one thing we are doing at that very moment.

A seamless life does not need balance. It is a conscious life, a life with an expanded mental landscape. It is a life of mindful absorption in our actions and thoughts. At lunch, we eat lunch with the same kind of devotion we gave our paperwork during the morning hours. When we go home, we give our friends and family the same kind of attention we just paid to our movements during exercise.

Being able to control focus means mental flexibility. It means the flexibility to meet any stimulus and enjoy any moment. It transforms helplessness ("too busy") into fulfillment ("not busy").

This blog post was largely inspired by reading the book "The One Who Is Not Busy: Connecting with Work in a Deeply Satisfying Way".

Tuesday
Nov132012

Sustainability, or What We Can Learn From the Collapse of Groupon

In early June 2011, I wrote an article on the Grouponzi Scheme, assessing Groupon's sustainable advantage and concluding that it was a more than risky investment. That was at a time when the young company was seeing the most explosive growth ever witnessed in the history of early-stage global technology startups.

Now that Groupon is fighting for its life as its foundation is melting down, it is finally obvious that the bet its management made a little bit more than a year ago was wrong. And not everybody followed the hype. Andreessen Horowitz advised the company not to go public before it was more mature. When Groupon didn't listen, the VC firm sold their stake in June of last year.

I believe that there is something more to learn from the collapse of Groupon. Its breakdown wasn't merely bad luck. The reason wasn't just a lack of maturity. It was a lack of sustainable advantage built into the very foundation of the company and excessive scaling of an unsustainable model that made sure the company would never recover from it.

Hypergrowth

What was formerly the 'N Sync of websites is now officially a fad. And Groupon is not alone in its experience. Zynga experienced a similar — if not worse — demise. And they had also skyrocketed on hypergrowth literally months before. In late 2010, investor John Doerr said that Zynga was "the most-profitable, fastest-growing, and has the happiest customers of any company that Kleiner Perkins has invested in". Today, the company is barely trading above its cash reserves.

Tadhg Kelly analyzed meticulously why Zynga was doomed to fail — at a time when the company was still everybody's darling. (You can read his recent follow-up article here.) Why did nobody listen? It seems that to many people, hypergrowth alone is an indicator for success. But that's simply not true. Hypergrowth can be disastrous for a company if its business model foundation is unsustainable. Just because your cash flow allows for next-to-infinite growth rates for a certain period of time does not mean that the business carried out will be sustainable in the long term.

I believe that the effect we are seeing here is merely caused by the unprecedented increase in speed due to massively lowered transaction costs over the internet. Everything is accelerated: transactions, communications, viral patterns, referrals, basically every digital interaction. Growth hacks can boost the overall speed even more — independent of whether that growth pattern has a sustainable foundation or not.

Paul Graham recently wrote a provocatively titled essay called "Startup = Growth". In it, he touches a lot of important points, in the usual insightful manner. The word sustainable, however, does not appear once in the essay. Neither does the word smart in the context of growth. I believe this to be a huge omission that could generate a lot of harm. He says, "startups are designed to grow fast". True. But so are Ponzi schemes. It is obvious that part of the truth is missing here.

Sustainable advantage

First and foremost, I believe that startups need to build sustainable advantage. Hypergrowth alone cannot be the sole aim. Startups need to be defensible, and they should be built to last. I just love the concept of castles and moats in order to understand this:

In business, I look for economic castles protected by unbreachable 'moats'.

— Warren Buffett

Ever wondered how Amazon could possibly trade at a P/E ratio of the order of 100+? (Most technology companies trade at a ratio of 10-30.) It is because Amazon built a hugely defensible business that is almost impossible to conquer. Amazon is a castle, and it is constantly widening its moat.

Groupon never had a moat. It believed so, but it didn't. Zynga never had one either. And they didn't invest in one. A castle without a moat is vulnerable, no matter how large its structure and no matter how high its towers. Sustainable advantage is independent of growth. These are two separate things.

Great technology companies know how to build and widen their moat. Why did Google introduce Android? In order to build smartphones and compete with Apple and Samsung? No. They introduced Android in order to protect their search engine business. Android is their mobile moat, designed to make sure that future mobile search queries will still hit google.com and no other search engine.

Losing mojo

Now, one could argue that hypergrowth isn't all that bad, even if a sustainable foundation is missing, because that foundation could be laid after the high-growth phase. The reasoning here could be that a big company with lots of cash at hand and lots of talented people on board would quickly figure out new business models in order to get the company on the right track. After all, that company would be able to move much faster, right? Wrong.

The breakdowns of Groupon, Zynga, & Co. show that failed hypergrowth companies are hit by yet another dooming disease: talent drain. Top people start to leave the sinking ship before it is too late. Executive turnover demoralizes the team. Euphoria is replaced with uncertainty. Downsizing hits and scares employees. Stock values plummet. That is not the right environment to pivot and search for new business models.

Which is also the reason why moving into the online gambling business won't save Zynga, now that people don't buy enough virtual sheep anymore. It's Game Over. A broken company culture can't be that easily restored. The mojo is gone. The uncertainty of a startup and the unsexiness of a large corporation don't go well together. The sustainable foundation needs to be laid before the company has become too large to be agile.

Let us hope that the startup community has learned its lesson and that more founders will now turn to building great castles, with impenetrable moats.

Sunday
Nov112012

Three Traps the Berlin Startup Ecosystem Has to Avoid

I have been living in Berlin for quite a while now. I chose the city as a home for myself and my startups because I could feel that something was in the making. The ecosystem is rapidly developing, and great things are going to come from here, for us to be witnessed. Berlin is very different from Silicon Valley and it is barely a second-generation startup ecosystem. Still, you can feel it. It is one of these things where you just know.

However, having been a part of that ecosystem for a while now and getting to know its constituents, I could not help but notice three major obstacles that will impair Berlin's ability to achieve true greatness as a technology hub.

Let me share these obstacles so that we may become aware of them and, hopefully, work together to overcome them. I call them

  1. The Trap of Thinking Small
  2. The Trap of Talent Fragmentation
  3. The Trap of Slow Motion

Let me explain each of the traps, and how they affect Berlin's odds for success as a startup ecosystem.

The Trap of Thinking Small

Many of the fellow entrepreneurs I meet in Berlin don't think big enough. They just don't think big enough. How can you shoot for the stars when you don't even aim high?

I know that many great organizations have grown out of simple ideas for small audiences with little ambition. But that does not mean in reverse that you build great organizations by thinking small. If you restrict yourself to the smallest possible outcome, you are guaranteed to achieve it. Somewhere along the road, every disproportionately successful founder had to think big.

I believe that if your goal is to make money, you better think small. You better specialize. You better tame your ambition. It will increase your odds of making money. But if your goal is to put a dent in the universe, how can you ever work on something that is not frighteningly ambitious?

For the ecosystem as a whole, thinking small is a disease. If every constituent thinks small all the time, nothing will ever happen. If nobody takes the most insane risks, there will be no upside to be witnessed. No inspiration without sacrifice, no greatness without the daring ability to work against all odds.

The Trap of Talent Fragmentation

Every startup community has lots of different groups of stakeholders. For the sake of simplicity, let's think of the community as a two-sided market with only two constituents: founders and non-founders. Together, the two groups form startups. Depending on how they form, we will see different distributions and different averages for the size of the resulting startups.

The smaller the average startup, the more talent is fragmented. And here's what I deeply, deeply believe: The more talent is fragmented, the smaller the odds that the ecosystem will produce something of world-changing value. It is much better to have a handful of great teams who shoot for the stars than it is to have lots and lots of solo entrepreneurs and two-men shops.

And I'm not just talking about group outcomes here. Less talent fragmentation does not mean that only a few individuals, the founders, will have greater outcomes while the rest isn't left anything from the pie. That's not how The Pie works. Less talent fragmentation means that everybody will be better off. A billion-dollar company with 1,000 employees produces many more millionaires than a ten-million-dollar company with two employees.

Of course, in reality, it's even worse. Most startups never make it. Most startups are failures. Most startups never produce any returns and leave all or almost all stakeholders with nothing. More talent fragmentation means that each individual startup has even less of a chance to succeed.

Every good entrepreneur knows that you can't do it alone. You just can't do it. You need great people to work with, and you need people who are much better than you are. It is just not going to work otherwise. There is no successful one-person company. It doesn't exist, and it never will.

A great startup ecosystem is able to gather and concentrate enough outstanding talent in a few highly ambitious and well-structured startups. That way, everybody will be better off.

The Trap of Slow Motion

Outside of the Samwer Bros. and Team Europe empires, I feel that the Berlin ecosystem still happens in slow motion. I see too little sacrifice and too little speed in daily interactions and transactions. Fundraising takes too long. Hiring takes too long. Deals happen too slowly. Partnerships form too slowly. Startups don't die fast enough.

Whenever I go to Silicon Valley, I admire the local founders, entrepreneurs, hackers, and investors for the speed at which they make things happen. You're 24 and you've already started four companies, planning your fifth. You go into a cafe and everyone around you is pitching or signing a deal. You walk out of the cafe and you have a job, a co-founder, or a new investor.

That's the heartbeat of a great startup ecosystem. Without that heartbeat, things can't happen fast enough for great organizations to come into existence, to form and thrive. Berlin has that heartbeat, but it's not yet strong enough. There are too many distractions, too many side shows.

Of course, speed comes with evolution. The first great successes will fuel ambition and enable new generations of founders and investors. But speed is needed now, in the early stages, more than ever. People have to pay forward and expect rewards much later. We have to give before we can take. That's how we gain momentum.

Building Berlin

The three obstacles can be overcome. But it's not going to be easy. Mindsets will have to change. Behaviors will have to change. These things are never easy. Awareness of the problems is the first step towards resolving them. If you are an investor, invest. If you are a founder, think about whether you want to lead a two-person company or join a ten-person company. If you are a hacker, don't join the first startup you find. Join the best.

Each trap in itself is bad. But together, the three traps are fatal. A few startups thinking small can still make it. Lots of startups thinking big can still produce a couple of them which will ultimately succeed and make it. A great startup with a great vision that is initially slow can still learn fast enough to catch up with the great ones.

But lots of startups being small, thinking small, and acting slow — they won't make it. That's what we need to avoid in Berlin.