Summation

TPQ – Thought Provoking Questions

The best conversations are about non-obvious ideas.   Whether it be a dinner party, an interview, catching up with an old friend, family outing, etc.  We learn more, engage our mind, and are more drawn into conversations about ideas.

Unfortunately, most conversations are about something other than ideas.  They might be about others we know (gossip), others we don’t know (celebrities/sports), ourselves, logistics, business talk, etc.  And once a conversation moves, it often takes its own path (and often it is a banal and uninteresting path).

I have found that the best way to reinvigorate a conversation is to lob in a TPQ – a Thought Provoking Question.  

The goal of the TPQ is to get everyone engaged and thinking about something bigger than the group. Depending on the intellectual firepower of the discussants, your goal should be to come out of the discussion with a new take on a problem, issue, etc.

The best TPQs are ones where there is no obvious answer and, extra bonus, where you don’t feel you know the answer. 

Four examples Thought Provoking Questions (TPQs) that you can try:

1. To get people talking and really thinking, one of my favorite questions is:
When is it OK to lie?
This is a very interesting and difficult question.  It attacks the core of who we are and people will get to discussing omission, what is the best way to love another (white lie or tell the truth), and more.  

2. Peter Thiel’s favorite TPQ is:
What is something you believe that most people you know thinks is crazy?
This is a great question (especially for an interview or a dinner party) because it gets people thinking about how to think for themselves.  Encouraging non-conformity is really important in a TPQ.

3. If you are in a really nerdy group of engineers (which is often the group I am a part of), a question I like is:
When will computers beat humans at soccer?
I like this question because it often starts people thinking and takes the conversation to a new level.

4. If you are with entrepreneurs, you can borrow a question my friend Dan Rosenthal recently asked at a dinner party:
Do you think Steve Jobs would have been as successful if he was a nice person? 
There is obviously no right answer and it gets people talking about management styles, creativity, passion, and being good to others.

What are some TPQs that have worked for you?

Bad Bosses are Your Fault

Yes, bad bosses are the fault of their subordinates.  

Before we begin, I know this post is going to be controversial and that many will disagree.  I’d love your comments and feedback.

There are a lot of bad bosses in this world.  I don’t know the percentage of bosses that are “bad,” but it should be close to zero and it is not.   First, let me define a bad boss.   A bad boss isn’t someone that is imperfect or has flaws (we all do).  A bad boss is someone that is not growing their subordinates and does not have the respect from most of their subordinates. 

In a perfect world, bad bosses shouldn’t exist.  It is a market failure.  Most people think bad bosses exist because they suck-up to their supervisors.  That’s not entirely true.  The main reason bad bosses exist is because their subordinates tolerate them.

While “toleration” is often a good thing, we should be intolerant of bad bosses.  They are destructive on organizations, on people’s happiness, and they can sap creativity and productivity.

If you have a bad boss, it is your duty to make sure that he or she is either no longer bad or no longer a boss.  This is because most people who are not a subordinate will rarely be able to judge if someone is a bad boss.   As the subordinate, it is your job to make the change: for the good of the organization and the good of society.

Bad bosses shouldn’t exist.

If you have a bad boss, you should follow these three steps:

1. Try to make them a better boss.  Work with the boss to make him/her better.  Give them feedback and try to change them.  This is hard and most bad bosses are bad because they cannot improve (and likely do not take feedback well).
2. Get them demoted, reallocated, or fired.  Many bad bosses are bad because they are in over their head.  They got promoted to a role they should not have and they don’t feel comfortable there.  You should let a bad boss know they are in the wrong position and you are going to work within the organization to change their role.
3. Quit.  If you cannot change them or move them, your only remaining option is to quit.  That doesn’t mean you need to quit the company entirely (it could mean you get yourself transferred to a new boss), but you should never work for a bad boss (it will stifle your development).   And if everyone who works for a bad boss leaves, the bad boss would eventually get replaced.   

 

Why I Don’t Invest in the U.S. Stock Market

Note: this article was originally written for Forbes 

It has been common wisdom for the last 50 years that if you are a long-term investor, your best return will be in stocks. Almost every financial advisor will tell a 30-year-old to put upwards of 90% of their portfolio in stocks.

Most people above median wealth have a substantial allocation of their liquid portfolio in stocks.  Some people pick stocks (Apple, GE, Wal-Mart, etc.) and some invest in managed mutual funds (Fidelity), while others invest in index funds (the S&P 500 from Vanguard).

Stocks are less than 10% of my portfolio.  This is a long article (read time is going to be at least 12 minutes) but I implore you to read it in full.

“Never invest in a business you cannot understand.”- Warren Buffett

That’s great advice from the Sage of Omaha. But we should take it a step further:  Never invest in a security you do not understand.

So the question is: do you actually understand the stock market?

Prices of stocks seem to be a mystery to even the most experienced investor.  There are often market swings of over 1% per day.

Supply and demand.   

Most investors argue that fundamentals (like expected earnings) drive price.  That doesn’t seem to be a complete explanation as we have had a market which has basically remained flat since the late 1990s.  

The best explanation, beyond “fundamentals,” for long-term market movements: supply and demand.  In this case, “supply” is the number of total stocks for sale and “demand” is the total dollars looking to buy these securities.

The key factor here is the demand. While supply (investible stocks) does change, its change is very small relative to the demand (amount of money looking to invest in the market). So as more money goes into the market, the market goes up. If money is coming out of the market, then the market goes down. It is basically that simple.  

To properly be a long-term stock market investor you need to read the mind of the public. You should only put your money in the stock market if you think everyone else will keep money there.  So to inform your portfolio allocation, we want to figure out if money is going to flow into the market or leave the market over the next thirty years. 

Let’s examine the six key factors why money might be leaving the U.S. stock market:

1. Retirement Savings
2. Globalization
3. Technology companies
4. Taxes
5. Interest Rates
6. You're over-correlated to the stock market

1. Retirement Savings

One of the biggest investors in public stocks is people through their retirement funds (401ks) or through pension funds. One of the big reasons the market has been flat over the last 15 years (and not collapsed), is because so much retirement money has come into the market. Most of that money is held by people who are close to retiring and will likely be coming out of the market, albeit slowly, over the next 30 years.

Asset allocation would suggest that people should allocate away from equities as they get closer to retirement.  I don’t have data on this, but I would guess that most boomers still have over 50% of their portfolio (excluding real estate) in equities (even after the 2000 and 2008 crashes).  This is way too high. Since many of these people are counting on the retirement income to live, they might flee from the volatility of the stock market and move to safer investments.  

Robert Arnott, chairman of Research Affilitates (and an asset manager at PIMCO), recently said: “the ratio of retirees to active workers in the U.S. will balloon. As retirees sell stocks and then bonds to support themselves, there will be fewer younger investors to buy those securities, keeping a lid on prices.”

2. Globalization

Globalization has been a huge boom to the market over the last 30 years. Today it is easy for anyone in the world to buy stocks in America, and America has historically been the safest place to put your money. Because of this, we’ve seen a massive influx of capital from all over the world, and especially from oil rich nations that need to invest their profits in an historically safe environment.   

But globalization is a two-way street. While the U.S. stock market has been a huge beneficiary of globalization over the last 30 years, it could be its biggest loser in the next 30.  Today, it is becoming much easier for Western investors to invest in high-growth countries like Brazil, China, South Africa, and India. And while I personally don’t invest in emerging markets funds (save that for another article), millions of investors will be drawn to the potential returns of these high-growth countries.

Globalization also means increased competition from old entrants as well as start-ups.  New companies are disrupting old but profitable businesses – sometimes by giving away core products for free.  We see that time and time again, the top companies are getting their lunch handed to them by new entrants.  In every major field (including software, computers, energy, retail, media, defense, and pharma), established players (those that had the highest market maps) are getting squeezed by the little guy.  All this means that the average time a company will be a member of the S&P 500 should drop significantly.

All indications is as the world gets more interconnected, it is also getting much more volatile.  We should see many more bubbles and more ups and downs as capital can zip around the world in nanoseconds.  This volatility could be the enemy of the buy-and-hold index investor who is at the whim of much more sophisticated global banks.  

3. Technology companies

In the 80s, 90s, and 2000s, tech companies drove a lot of the market growth.  Microsoft and Dell went public while they still were extremely fast-growing companies and public market investors were able to ride the growth upwards. Even recent IPOs like Google, Salesforce, and Amazon went public early enough so that investors were able to participate in substantial gains as the companies grew.  Remember that Amazon went public in 1997 but it wasn’t profitable until 2001.

Today, because of the abundance of private equity capital and regulations like Sarbanes-Oxley, tech companies are going public much later in their development.  Companies like LinkedIn and Facebook were able to delay their IPO by 2-3 years because they had access to late-stage private equity. And while biotech firms are still going public before they are profitable, we will likely see more and more companies waiting to list. In today’s world, public market investors do not get as much of the benefit of the company rise (most of that benefit will be going to private equity funds). So one of the biggest growth drivers of the market, hot tech companies, is being substantially reduced. 

4. Taxes

Stocks have been a very favorable investment because gains held over a year are taxed at the lower cap-gains rates and the taxable event only happens when you sell a stock (and many people can do tax arbitrage by selling their losers). 

Long term capital gains taxes in the U.S. are near an all-time low. In the 1990s and 2000s, we saw a substantial decrease in the rate of capital gains taxes while taxes on ordinary income have remained basically flat on upper-earners.  

One prediction we can confidently make: cap gains taxes are not going to go down further in the next 30 years (even though many of us would like them to). More than likely, we will see a rise in taxes on cap gains – especially on the upper-earners who control most of the money in the market.  When this happens, stock gains will look less favorable and it will be another reason for people to rebalance their portfolio away from public stocks.

5. Interest rates

Can interest rates be near zero forever?

Clearly the answer is “no.” At some point, the U.S. federal government will need to inflate itself out of its massive debt.  In any scenario, interest rates can’t get any lower.  When interest rates rise, future earnings of companies will suffer (and if that is not already factored into the price, stocks will fall).  

6. You are already over-correlated to the stock market

If you are reading this article (and you have gotten this far), you are probably part of the population whose job is over-correlated with the stock market.  If you are in technology, finance, real estate, law, consulting, or in most of the other top-earning professions, then your future income and job security is probably very tied to the stock market.

If you do invest in the stock market, you need to have the ability to ride it out for the long haul (ride the ups and downs).  If you are in a profession that is over-correlated with the stock market, you’ll have extra income (you’ll want to buy) mainly when the market is really high and you’ll need income (you’ll want to sell) mainly when the market is down.  You won’t be in a position to take advantage of the long-term market trends (and likely that others in the market will take advantage of you).  

All this is not to say that you can’t make money in the stock market. 

Some professional traders will be incredibly successful. But the traditional “buy and hold” strategy seems like it is going be “hold and lose.” When the stock market fails or remains flat over the next 30 years, our entire society’s savings strategy will need to be recalibrated.
You should only put your money in the stock market if you think everyone else will keep money there. If you think some people are going to start fleeing the market, then you should make sure you flee first.

But I want to make out-sized returns

The best way to get massive returns is to invest in yourself.  Start a business, join a fast-growing company, or become the newest singing sensation. If you believe in yourself and your talents, focus on things you can control rather than things, like the stock market, that you can’t.

While Auren Hoffman is CEO of Rapleaf and a Venture Partner at Founders Fund, his opinions are his own.  Follow him on Twitter (@auren) and Facebook (aurenh). 

Special thanks to Stephen Dodson, Jeremy Lizt, Travis May, Patrick McKenna, Ken Sawyer, and Michael Solana for their willingness to debate me on this issue.

The 2x Rule

Rule: Everything you sell, including yourself, should deliver at least twice the price in value to the buyer.  

We’re all selling things every day.  It is important that the buyers of our products (including those employing us) are very satisfied with what they purchased.   If buyers feel like they got at least a 2x return, they will be happy and keep coming back for more.  If they get less than 2x, they’ll be skeptical of what they bought and start reconsidering their options.  

Let’s say I sell you a piece of software for $10,000.  After using it for a year, it is very important for me that you feel you got at least $20,000 in value.  If not, you are going to be upset.  In business, all people need to feel like they are getting a 100% return on their capital.

Similarly, let’s say you hire me for $80,000/year.  It is important that you feel you are getting at least $160,000 in value for that money.  If you are getting less, then my job is in jeopardy.  

This goes into price.  People inherently feel they get more value out of things they pay a higher price for.  We all know that.  But getting a 2x return on a $1000 meal is much harder than getting a 2x return on a $10 meal at In-N-Out.  So it is important you keep your prices low enough to ensure the buyer gets a great return.

Of course, if a buyer is getting a 10x return, then your prices are way too low.  In that case, you should raise your prices or ask for a raise.

Summation: Everything you sell, including yourself, should deliver at least twice the price in value to the buyer.  

(if you like this post, please share it with others)

CRM Retargeting

The next big wave in display media is going to be CRM Retargeting: taking lists of offline customers (like a car manufacturer's list of people's whose lease will expire in the next six months) and serving targeted display advertising to those people.

Great talk by Juan Enriquez on the fate of the U.S. and technological revolution

Hat tip to Fabrice Grinda who suggested I watch this video:

public stocks are terrible investments

i'll expand more on this in future posts, but turns out the U.S. public stocks have been terrible investments for the last 15 years and I expect they will be for the next 15 years.  

Check out the rise and fall of the S&P 500.

If you just take the last ten years (starting from a really low point in right after 9/11), S&P has only gained 8.32%.  whoa.  A random bond fund would have gained at least half of that in any given year during those ten years.

My advice (and will expand more in future posts): keep a really low percentage of your investments in public stocks.

A-Player Guide to Self-Improvement: Knowns and Unknowns

For a CEO of a fast moving company or anyone else in a fast-paced environment, self improvement is hard.  Really hard.  That’s because most smart people have improved all the easy stuff by the time they are 25.  The hard stuff is changing one’s personality ... and often that’s hard-wired into our brain and it takes extensive effort to both identify and change.

Becoming a better leader is NOT like losing weight.    

My definition of being overweight: you think you are fat and most of the people you know think you are fat.  If you satisfy that criteria, then you ARE overweight.  You KNOW you have a problem.  And the solution (eat healthier and get more exercise) is obvious.  Actually implementing the solution is really hard – it takes incredible discipline, resolve, and fortitude … but it will definitely work if you do it.

Becoming a better leader is much more challenging than losing weight.  When you are losing weight you have a known problem and a known solution (the easiest type of problem to solve).  To become a better leader, you often have an unknown problem and an unknown solution (the hardest type to address).   

Identifying the problem

If you want to grow, you need to figure out what your problems are.  This is actually really hard to do.  Your problems and deficiencies will be “obvious” to everyone you work with, but each person will have a different perspective that is colored by their own biases and where they sit in the organization.  Also, most of your employees will never tell the truth, the whole truth, and nothing but the truth.  People don’t like to deliver bad news.

You can try anonymous employee surveys.  I have found them to be pretty helpful to me.  But you need to take them with a grain of salt – especially when you receive conflicting feedback (a common survey result will get both “you are spending too much of your time on Product X” and “you are not spending enough of your time on Product X”).   And because anonymous surveys are anonymous, you cannot ask follow-up questions.

A good way to handle this is to make sure you are getting very honest feedback from your direct reports and from the people you report directly to (if you are a CEO, then you report to the board). If you get consistent answers, that could be a good place to start.  Doing this is hard and it sometimes requires building trust bonds with the people you work with that could take years to build.
Another tack is to assume you can’t fix everything, so focus on things you can measure like your company’s Key Performance Indicators (KPIs).  That way, you at least focus on the known problems (which is a great place to start).

Thank you, United Airlines

It is not often an airline does something special.  But I've noticed significantly better customer service on United Airlines in the last year.  The crew, staff, and operators have all been extremely helpful.  In contrast to some other airlines I fly, I have had a very good experience with United (though I admit you cannot draw conclusions from just my experience).

Case in point:
last week my wife and I took a short thanksgiving vacation to Sydney.  After the long flight from San Francisco to Sydney, tired and bleary, I forgot my Kindle on the plane.  I realized it after we went through security, bummed that I was so stupid to have left it on the plane, but counted it as a lost device and did not bother contacting anyone about it.

Then, a few hours later, I get an email:

Hi Mr. Hoffman

Did you leave a Kindle on board UA 863 when you arrived into Sydney today?
It is locked up in our high value locker.

Let me know if you wish to pick I up before you travel out of Sydney on the 28th November

Regards

Stuart Mann
Airport Operations Supervisor
United Airlines
Sydney

wow.  What great service.   Mr. Mann emailed me directly and, when I got to the airport leaving Sydney back to SFO, the Kindle was waiting for me at the check-in and I was able to enjoy it on the flight home. 

Thank you United Airlines!  Your service is really appreciated!

Fail to Succeed

“Success consists of going from failure to failure without loss of enthusiasm.”
- Winston Churchill

To truly succeed, you must fail.  And you must fail a lot.  We all know this, we have all heard this hundreds of times ... but failing is still incredibly emotionally difficult, hard to overcome, and daunting to confront.

 Encourage failure and you will increase large successes.  This article will cover:
-    Why one must fail often to really reach one’s potential
-    Why people who deal with rejection have 10x earning potential
-    Strategies for confronting and dealing with failure


Failing often will help you reach your potential
If you are not failing often enough, you are most surely settling. 

In most fields, a good success rate is about 25%.  If you are succeeding more than that, you are likely not innovating enough or you are settling.  It is likely that your fear of rejection is stifling your growth. 

The top salesperson in almost every organization also usually has one of the highest failure rates.  She takes more at-bats, she varies her pitch more, and she goes for bigger sales.  In short, she takes more chances, gets feedback, and iterates quickly. 

By contrast, often the lowest performing salespeople have the highest close rate.  I once met a salesperson who had an astonishing high 50% close rate.  Guess what?  This guy was selling only “safe” products, never iterating, and not taking chances.  

Salespeople with really high close rates are too afraid of rejection.  They need to be taught to fail more. 

Why do some guys date people way more beautiful/interesting/healthy than themselves?  What you don’t see is that this guy will often approach twice as many dating prospects; the only way for a “6” to date a “9” is by pursuing lots of 9s.  It is easy for a 6 to get a 4 – you will rarely be rejected if you set your sights low.  But if you want to go for that 9, you have to be ready for a lot of rejection. 

The good news is: if you learn from the rejection and really focus on iterating your approach, you’ll likely land that 9.  And you’ll also gain confidence in other areas, and soon you’ll actually be a 9 yourself (or at least better than a 6).

It is a bad sign if you are an entrepreneur and every investor you meet with wants to give you a term sheet on your terms.  Either you should be going after better investors or you should be insisting on better terms.  A lack of rejection is the surest sign that something is scarily wrong.

Let’s think about rejection in the context of building products.  If you are a software engineer and every test on your code passes, that means you are likely taking too much time before you run your code.  You could be thinking about every corner case.  This might be the right attitude if you are writing software for nuclear reactors—but it is death if you are focused on a consumer internet application. 

Lack of failure also often means lack of speed.  Speed inherently breeds mistakes.  Drivers are much more likely to get into accidents as they increase speed.  But you’ll never win the Indy 500 moving at 70 miles per hour.

Lack of innovation is often due to a fear of rejection.  People don’t want to seem unreasonable.  They want to get along socially.  That “don’t rock the boat” feeling is often manifested because people are afraid of being rejected by their colleagues, friends, and society.  This is often the case in any large bureaucracy that breeds extreme political correctness.  Fear of failure often means that people are too worried about putting their neck on the line.  They stop innovating and they focus on fitting in.  “Fitting in” is death – to paraphrase George Bernard Show, all progress comes from unreasonable people.

"I can accept failure, everyone fails at something. But I can't accept not trying."-- Michael Jordan

High rejection rates = higher earnings

People who get rejected more often earn more.  Much more.  Rewards often follow risks and people’s intolerance for rejection is one of society’s biggest perceived risks.

Why do marketers make about half what salespeople make?  Because when someone rejects a marketing message, it is a rejection of the product.  But when someone rejects a salesperson, it is felt as a personal rejection.  Personal rejection stings.  It hurts.  People actually cry when they are personally rejected.  We’ve all felt that sharp pain of rejection and we hope to avoid it whenever possible. 

Almost all the highest-paid writers have incredible stories of early manuscripts being rejected by hundreds of publishers.  Writers that shy from rejection often end up working for a marketing organization or a large news outlet and rarely have any type of lasting impact.

And this is true in almost every field: science, business, politics, arts, society, medicine, and more.  Those who can partially overcome their fear of rejection are the only ones that can change the world.

"In order to succeed, your desire for success should be greater than your fear of failure." -- Bill Cosby

Using benchmarks to cope with rejection

The number one way to cope with rejection is to normalize it so you can benchmark yourself against others.

Think about it from a sports perspective.  If you are a Double-A ball player, you have a benchmark you should be hitting against.  If you are hitting .300, you are doing really well (even though you are failing 70% of the time).  That’s because everyone’s stats are public so you have a good idea of what is good and what is not good.  If you are hitting .250, it probably means you need to work on your swing.  But if you are hitting .450, it does not mean you are amazing ... it means you need to start playing against better competition and move to Triple-A.  By being successful 45% of the time, you are, in fact, succeeding too often.

Benchmarks like these are helpful, because they give you an understanding of if you are getting rejected the right amount or outright failing.  If I were playing Double-A baseball, I’d have a batting average of approximately 0%. Failing too much would give me a lot of good information (to move to another profession, like becoming an Internet entrepreneur). 

In baseball, benchmarks are published and easy to come by.  Organizations can help their employees better deal with rejection (and, in turn, push themselves) by publishing failure rates and then explicitly telling employees they should aim to fail a bit more than the rate.

A software development organization could follow suit by publishing the rate at which tests break.  Sales orgs could publish the percentages of cold calls that turn into warm leads.  Companies could publish the rates at which employees accept their offers. 

Most individuals punish themselves every time they have a minor failure.  And while they might implicitly know that there is a high rate of failure in any task, they take each rejection as if that task had a 100% success rate, and they were just a dummy who could not succeed.  That is being too hard on oneself. 

With a benchmark, you can cope with rejection better.  Let’s say that you are a CEO and one of your employees leaves your company for a competitor (the ultimate rejection). You should understand the benchmark rate before you beat yourself up.  In fact, if none of your employees leave, you might not be pushing the envelope enough.  But a high rate of turnover might be a warning sign that you need to radically change your company’s culture. 

Similarly, if every prospect you offer a job to accepts, you’re doing something seriously wrong.  You’re likely not fully explaining the culture, the long hours, or the fact that the office dog Melvin takes random poops on employees’ chairs.  Or you are setting your sites too low.  In my experience, a good benchmark to follow: 30-60% of your offers should be rejected. 

In the absence of a failure rate to benchmark, make one up.  A good rule of thumb is: have a success rate of 25%.  About 75% of the ideas you propose, new initiatives you take, and client engagements should not go to the next step.  And that’s healthy.

"My reputation grows with every failure." - George Bernard Shaw

 Special thanks to Jared Kopf for his topic inspiration and to Gizem Orbey for her edits.  

This work is licensed under a Creative Commons Attribution 3.0 Unported License.

Many software developers (even back-end engineers) today spend more time on user-interface (UI) issues than on any other aspect of their jobs. Why? Because UI has no “right” answer (at least until significantly A|B testing) and can be tweaked 100 ways until Sunday. UI/UX is becoming the biggest source of time for most engineers.

what traits predict future success?

If you could bet on a 16 year old and get a percentage of their success for the rest of their life, what factors would you look at?

the factors that come to mind are:

1. have an intense ambition to be more successful then both parents

2. higher than average introspection

3. ability to be proactive (started a club, created a course of study for themselves, etc.)

4. be more concerned with understanding schoolwork than with grades

learning how to code is not going to be as important in the next 30 years as it has in the last 30 years

Unless you are awesome, you will be outsourced

We’re quickly moving to a new world where the wealth gap is compounding and increasing.  We’re moving to a world that is going to look a lot like Hollywood: a few people enjoying insane success ... and everyone else spends their days waiting tables.

The delta between A-players and B-players in companies has always been high.  A-players get promoted faster and they earn more.  My guess is that an A-player earns about 30% more than a B-player in that same position for most professions.  An A-player administrative assistant usually can earn about 30% more than a B-player in the same position.   That’s a significant difference and even more when you compound that difference in savings and lifestyle over the course of one’s career.

In some professions like sales and entertainment, an A-player might earn 300% more than a B-player and essentially live an entirely different lifestyle.   In the future, everyone’s jobs will look more like salespeople.

Let’s focus on the profession I am most familiar with: software engineers. 

Today, an A-player software engineer has a lot more job prospects than a B-player.  That seems obvious.  But there are plenty of B-player and C-player engineers that work at great companies and get paid well.  Their services are needed and important.  And while they don’t make the contributions that an A-player makes, they still are very valuable to a company and have a lot of importance to the success of an organization.

But things are changing (queue in the Darth Vader music).

There are three forces that will drastically change work, compensation, and our value to each other forever:

1. A productivity boom will automate B- and C-player work
2. Globalization will commoditize B- and C-player work
3. A-players can have much more impact

The productivity boom will automate your job.

Everyone is massively more productive today than they were just a few years ago.  A salesperson can use tools like Salesforce.com to track customers, LinkedIn to find prospects, and they can easily call and send documents from the road with their iPhones (unless they are on AT&T).  The Internet makes all of us extremely productive and automates parts of our jobs.

In the 1990s, I was a software developer and I remember writing a script to determine if a string was a valid email address.  It took about 12 hours for me to write.  First, I had to research what could and could not be in an email address (dashes are ok, commas are not, only one “@” symbol, etc.) and there were a bunch of corner cases that I had to guard against and test against.  After coding into the night, I finally came up with something I was proud of.

Today those 12 hours of work would take about 1.2 seconds.  There are hundreds of libraries that have been written by really smart people and tested by thousands of programs.  All one has to do is plug one of them in.  It is simple, easy, and effective.   Now I can spend the remaining 11 hours, 59 minutes, and 58.8 seconds on something more useful.

Thanks to the open source trend, even complex projects are free and quick to set up.   My company, Rapleaf, runs all of its systems on an open-source framework called Hadoop.  Hadoop is something that took hundreds of thousands of hours to build. And we get access to this software for free. 

All this means that it is faster than ever to implement good ideas.   Instead of investing resources in implementation, companies won’t need as many engineers to get a project done.  And if implementation is cheap, companies can spend more on ideas instead.

Globalization will commoditize your job.

There used to be a few people in your town competing for your job.  All you had to be was better than those few people and you were golden.  And even if you were not the best, you were still needed.

Today there are millions of people competing for your job.  While there are very few amazing developers, there are millions of good ones.  There are tons of people that can write decent code, integrate with APIs, and get stuff done.  And they are all over the world and they want your job.

And globalization will continue to accelerate.  Historically, the biggest missing piece to stopping a world where you can be outsourced at any moment was the technology to collaborate.  Today it is massively easier to collaborate in person than through any other medium.  But that’s changing. 

Even simple tools like ubiquitous video conferencing via Skype, project management systems (like those developed by 37 Signals), and easy screen captures have made a world of difference. Many more communication solutions will be developed -- and once we can easily collaborate with someone 12 time zones away, then your job can be more easily outsourced.

A-players can have much more leverage.

Because of globalization and the productivity boom, implementations will be cheaper and easier.  B- and C-players will be commoditized and their salaries will fall.

At the same time, the value of A-players will rise exponentially.  The typical A-player spends 5% of her time today figuring out what needs to be done, and the other 95% executing it.  When I started working on my script to detect valid email addresses, it probably took me a few minutes to figure out what I wanted, and then hours to actually get it done.

But imagine a world where execution is cheap and fast.  An A-Player can implement dozens of ideas in the time it now takes to implement just one. 

That means the people who can figure out what needs to be done become much more valuable.

So, I can be outsourced.  Now what?

Over the next generation, we are moving to a world where most (like 90%) software developers will earn a decent wage (say $50k/year) and a few (like 10%) amazing developers will earn over $500k.  Yes, the income distribution for the same profession of people who went to the same university and had the same SAT scores could actually be that stark. 

I want to point out that I’m not advocating that this divergence in compensation happen.  I’m not.  It has the potential to fracture society.   And it seems like it will massively reward people that have lucky breaks.  But I’m worried that regardless of how we feel about this growing division between the A-players and B-players, it will happen anyway.

This stark division is already happening at companies like Google.  Most engineers there have similar backgrounds and all get paid well.  But a few of the amazing engineers earn compensation over ten times the average.  Yes, 10x.  One day, every company will look like Google.

So what do you do about it?

You must be the Jedi Master of your profession. 

Unless you are awesome, you will be commoditized. 

Here are some things that will be less valued in the future and some things that will be more valued:

Less-valued	More-valued	Why?
General knowledge	Judgment	Search engines will be attached to our brain
Knowing more than one major spoken language	Sales in any language	We’ll have universal translators
Coding	Art	Building things will be much easier.  Designing aesthetics will always be hard.
SAT scores	Combining left-brained and right-brained thinking	Systems-thinking will be easier to outsource
Majoring in business	Majoring in philosophy	Learning to “think” will be more valued that just learning

Special thanks to Jeremy Lizt, Paul Santinelli, and Travis May for their help in writing this.

 

In the future, there will be no models

As mass media dominated our culture in the 20th century, so did the advent and fame of models.  Now a person (both female and male) could make a very good living off of nothing but their looks.  They could pose for glamour shots in magazines, grace TV commercials, and ensure that motorists headed to work would see their faces on billboards hawking the most admired brands.

And models have been well-paid.  Yes, only a handful get paid like pro athletes, rock stars, and entertainers.  But that handful makes bank.  Real bank.  And people like Kate Moss, Tyra Banks, Heidi Klum, and others have become household brands and many people used their modeling careers to propel them to greater success.

But in the future, there will be no models.

We are almost at the point where there is no need for a human model.  Technology, animation, and design will soon replace humans.  Your products will actually look better being displayed by an avatar than by a real human being.  And that avatar won’t be moody, demand private jets, or be at risk of anorexia.  In fact, they won’t even demand overtime. 

Jobs for high-priced models will go extinct.  But don’t cry for those that are gorgeous -- they will always have a leg-up in every profession on the rest of us that are saddled with a big nose, love handles, and acne.  And, of course, beautiful people are far more likely to marry those with money and success.   But individual beauty in the 21st century will not be as important or marketable as it was in the last century.